3rd 4 unit I bought

[Anne Keenan]

Investment Info:

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

Purchase price: $164,000
Cash invested: $18,000
Sale price: $500,000

4 unit with 3 BR 1 Bath, separately metered utilities. Came with deed beach rights on Lake Champlain. Owned by a realtor who was mismanaging the property and just wanted out. Went in with friends on this one. built in 1928.

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

It was being mismanaged so I saw the opportunity for value add and shifting the utilities to the tenants. I like that the units were 3 BR so I could have higher rents and lower expenses.

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

I was in MLS. I offered full price because it was under priced she literally just wanted to dump it.

How did you finance this deal?

10% down conventional. Back in 2000 all you had to do was declare your gross income- which in rental property is significantly higher than net.

How did you add value to the deal?

Shifted all utilities to tenants including water and sewer. Raised rent. Rented to Section 8 tenants so 80-90% of rent was direct deposited into my account on the 1st of each month. Guaranteed I could pay the mortgage while I learned what it was to be a landlord. Got the tenants to sign up for weatherization and got the building fixed up for very little out of pocket.

What was the outcome?

I cashed out refied 3 years later and pulled $100K out and sent $50 K to my partners. They were then able to buy their first home. Sold it 4 years after than for $500K.

Lessons learned? Challenges?

Inspections don't show how may roofs there really are. Sign a contract with the roofer that is binding. Iraq war hit and plywood went from $11 a sheet to $35 in a day. The roofer had already agreed to install 95 sheets @$35 a sheet on 2 roofs. He lost money because the cost of the sheets had skyrocketed but he had to keep the price in the contracts. He also estimated 2 roof layers and accounted for 3 ton of waste to haul away. 4 roofs later it was 12 ton he hauled away.

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

Myself. I recommend today Brian Armstrong of Keller Williams in S. Burlington, Vt. He has many rental apts he owns and is a very effective professional.