7th investment property

[Anne Keenan]

Investment Info:

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

Purchase price: $400,000
Cash invested: $115,000

4 unit owned by a 76 year old man who didn't have the energy to care for it. Rented to anyone who came along so was evicting monthly. Place was neglected and unsafe (in my opinion). Stucco siding was only 6 years old and roof 2-3 years old. Exterior in good shape. Electric heat. Separately metered including W/S. Owner was paying Water/Sewer .

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

I was doing a 1031 Tax deferred exchange and had 45 days to find something to buy. There were only 3 MF properties on the market and I made offers on all of them. They all failed on structural grounds. I saw these for several years - not on the market. I called the owner and asked if he wanted to sell. He said yes but jacked the price for this 4 unit plus the one that abuts it $100K per building. At the time it was overly high for the market but I felt I could get them to cashflow in 2 yrs.

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

I drove by them alot. Used the realtor from my previous deal and she turned out to be dishonest. Both seller and we were NOT happy with her double dealing and lying. We ended up getting one property for $385K because it came in at that price. The Seller was angry.

How did you finance this deal?

Bank Financing 25% down.

How did you add value to the deal?

shifted water/sewer to tenants in 1st 30 days. Then raised rents $200 the following month. Tenants were angry until we told them how we would improve things. 2 eventually left. 1 Moved out of state the other we did not renew their lease. Rents are now $1400-$1600 with many improvement including new bathrooms, windows, flooring, appliances and energy efficiency items added.

What was the outcome?

Stable happy tenants that refer friends and family to us. They don't want to move.

Lessons learned? Challenges?

Low E-Glass windows make a huge difference in Tenants utility bills. Solar screens too. Making tenants feel safe (motion detector lights, fire ext in unit, peep holes in door, smoke detectors with battery back up in all BR's and hallway, renovated baths, extra storage and off street parking all help tenants feel cared for, safe and secure.)

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

Myself now. I got my license after the agent was so bad.