4-unit - 2x mid-term and 2x long-term leases

[Zach Scherschel]

Investment Info:

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

Purchase price: $415,000
Cash invested: $97,000

4-unit house purchased using commercial lending at 7.86% int for $415k with 25% down. Off-market, 4 blocks from hospital, perfect conversion into 2 mid-term furnished rentals (furnishedfinder) and 2 long-term annual leases. Furnished units up from $600-650 to $1,800 and $2,000/mo and long-term leases up from $700-750 to $1,150 and $975. 1 vacant unit converted upon purchase and 3 other leases ending 7/31 for conversion or increase.

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

Off-market deal brought to me by my broker/property manager that I work with. He immediately flagged what a great building it was and how far under market rate the rents were.

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

Off-market, was going to list for $430k, offered $405k and met at $415k. Fully in-house deal at my agents brokerage between him and another agent.

How did you finance this deal?

Commercial loan at 7.86% and 25% down.

How did you add value to the deal?

Worked with the selling/buying agents directly to understand the sellers needs/wants, worked with both agents to negotiate down the commission considering it was essentially the flick of a couple pens for them to get it done without marketing or back and forth.

What was the outcome?

Purchased the property at $415,000 and had it fully leased at new rent levels within 4 days.

Lessons learned? Challenges?

Furnishing a 1 bedroom in 3 days is a lot of work. Prep and give yourself a bit more lead time if you're thinking of taking on a fully furnished unit project. Also, expect issues with old buildings, like internet/cable lines that are dead and need to be fixed by the companies.