4 Family, First investment, Many lessons learned

[Brooks Gagnon]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $279,000

4 family in a rougher neighborhood, purchased from a family member, way over paid

What made you interested in investing in this type of deal?

This was my first property I ever purchased. It was owned by a distant uncle who had taken me under his wing as a mentor, really teaching me the ins and outs of being a landlord at 20 years old, and employing me as his property manager for his 4 different properties.

How did you find this deal and how did you negotiate it?

Unfortunately, I put full faith in the person I was purchasing this from and paid far too much for this property (see lessons learned)

How did you finance this deal?

The owner was willing to hold the note, and my father put up his interest in a different property as a 10% down payment.

What was the outcome?

In the end, it was a struggle for years to just break even, especially when there were empties, but I was able to renegotiate eventually and lowered the note to a much more realistic amount, at which point I was able to refinance into a bank loan, and now it cash flowing great and has decent equity.

Lessons learned? Challenges?

Lessons learned. Always do your due diligence, and don't just put full faith in anyone, especially the owner of the property, no matter who they are. I should have had an appraisal and inspection done. It also taught me that I want to stay in better neighborhoods, where the rents are higher and the tenants are better. This building still requires a disproportionate amount of attention, but at least it cash flows well now.

[Brooks Gagnon]

Quote from @Scott Mac:

So your distant uncle/mentor/employer smoked you on the price.

Because you trusted him, because you were young.

Have you ever talked to him about this?

Do you still interact with him?

 Unfortunately, I never got the chance. He passed away a couple of years after the purchase, which ultimately played a part in being able to renegotiate the note. He was a great guy, but like most property owners he thought the property was worth far more than it was, and I was too trusting to even think to question it. But in the end it worked out great as an investment, not to mention the lessons gained.