5 Cottages -Value Add

[Bryan Mitchell]

Investment Info:

Large multi-family (5+ units) buy & hold investment in Salem.

Purchase price: $155,000
Cash invested: $53,000

2.7 acres with 4 occupied 1/1 cottages and one .25 acre empty (previously a mobile home on it). The featured unit was uninhabitable so we rehabbed for $20k and three months later, we have 5 units. Plenty of land to build more, so we’ll need to make some decisions in the future

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

Portfolio of 4 homes on same lot with a 5th unit for a value add play. Good area with very few rentals.

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

I was working with my real estate agent looking at MLS. Nothing worked and coincidentally, the property that she had under contract fell through, so it be became available and I jumped on it.

How did you finance this deal?

Commercial loan, 75% LTV

How did you add value to the deal?

Rehabbed a 5th house that was uninhabitable

What was the outcome?

Additional cash flow in top of an already cash flowing property.

Lessons learned? Challenges?

There are septic tanks which I don’t care for. I think there were issues with the septic 5th unit and that is why they didn’t bother to bring it back online. A year plus after rehabbing, I ran into some septic issues and had to spend some money. In the end, if I’d known of the septic issues, I would have fixed them up front.

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

No