Cash Flow Duplex in Arkansas!

[Ryan Williams]

Investment Info:

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

Purchase price: $188,500
Cash invested: $23,000

We just closed on this off-market turn-key duplex in my hometown of Searcy, Arkansas. My father in law partnered with me on it. $500-1000 a month cash flow and 10-20% cash on cash return depending on if we do a 15 or 30 year loan.  Just a few blocks away from the local college and town square. So excited to get this one closed and start managing it!

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

I have a couple homes in Denver but wanted to get a multifamily property in a cash flow market. My real estate philosophy is to have a diversified portfolio of cash flow and appreciation properties that I buy and hold over the long term.

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

It was originally on the market with a budget broker who supplied the sellers info to me directly. As soon as I got their info they took it off the market and we were able to negotiate off market.

How did you finance this deal?

We originally were going to do a 15 year conventional loan with 20% down with my father-in-law partnering with me. Because of some circumstances we switched over to a 30 year 20% down DSCR loan. The underwriting process was way easier after that since the property qualified based off income. We would have probably refinanced in a year or two anyway. We will still cash flow now , but hopefully we can refinance after a year to a much better rate.

How did you add value to the deal?

I was able to negotiate a $11,500 price reduction, $3500 seller concession, new sump pumps and french drains, and a new coat of paint for vacant side of duplex.

What was the outcome?

A deal that will cash flow now (which is hard to find where I'm at in Denver) and for the long term. Because it's at a lower price point we hope that we could even pay it off sooner and collect $2K+ a month in pure cash flow. We will cash flow about $400-500 a month once vacant side is rented and then cash flow $500-1000 depending on loan term we refinance to.

Lessons learned? Challenges?

This was my first off market deal, first out of state deal, first deal with a family member partner, first DSCR loan so there was A LOT to learn. I'm based out of Denver and I'm a real estate agent full time so there was a lot I knew how to do, but, because I didn't have my usual system and partners, this took so much more work. It's actually the most time I've spent on a single deal. Ultimately I took each problem one at a time and worked towards solutions and it worked out, but it was a lot!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

D'Lornn McMullen with Houz Mortgage saved the day with a quick turn around on a DSCR loan after our first conventional loan fell through. No agents were involved (I'm not licensed in Arkansas) and we used a local title company there in Arkansas.