First Duplex is in the books

[Thomas Magill]

Investment Info:

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

Purchase price: $10,000
Cash invested: $310,000

I bought this land as a part of a package of 4 lots that were turned into 7. I attempted to subdivide this land as well but it did not meet the requirements so in an effort to maximize returns, I decided to make it a duplex.

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

I love the build-to-rent model for the lack of maintenance issues. Your renting out a home you built, so you know, at least for the most part, that it was done correctly.

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

My business partner found this deal from a guy who got sick and wanted to sell off some land he owned. I bought the land (4 lots) and divided them into 7. This lot could not be subdivided so we decided to build a duplex.

How did you finance this deal?

I used my own money to purchase the land (10K) and institutional money to fund the construction.

How did you add value to the deal?

As mentioned above, the land was zoned for one single family home, but in order to maximize the lands value, because its on a corner, we decided to build a duplex. There are some economies of scale with having two properties on one site, and being able to charge roughly the same amount of rent as a single family home.

What was the outcome?

We will be putting long term financing on the property and renting it out. The idea is to refi the property once the mortgage rates come down, but even if they don't, the project still works in its current financing.

Lessons learned? Challenges?

Firewalls are more expensive than you might think. We significantly saved on the insulation of the home which basically paid for the firewall budget hit we took.

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

iFundCities is our lender.