Upgrading An Asset!

[Andrew Postell]

Investment Info:

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

Purchase price: $350,000
Cash invested: $83,334

Purchased this duplex through a 1031 Exchange. Leverage a lower valued home that had equity to purchase this property. Proceeds from that sale are tax deferred and it made buying up on an asset easier.

Why would I sell a property rather than just do a cash out refinance? The property that I sold was out of state. It was also in a HOA. It was also just a 2bedroom 2bath home. When I purchased that property it was the best deal I had in front of me.

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

Because the previous property was in an HOA, because it was only a 2 bedroom, it would never really be maximized on the rents or cashflow. So, I choose to sell it, take ALL the equity from it, to buy an BETTER rental property. This duplex isn't in an HOA. The duplex is also a 3bedroom, 2 bath on each side.

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

Since I used a 1031 Exchange I needed to work on finding a property within that 45 day window. I used a real estate agent to locate this property. Seller even provided concessions to help pay for some of the closing costs as well.

How did you finance this deal?

Traditional, conventional, 30 year fixed rate loan.

How did you add value to the deal?

No value add here. This was a "turn key" property.

What was the outcome?

Very happy with owning this home. The potential here is significantly higher and since the price point is higher, now my 5% appreciation is more as well. After 5 years, if I have 5% appreciation each year, this property will be worth $446,000. Then I can choose to leverage this property for more as well. Or just keep it. But this is how you leverage properties to upgrade your existing portfolio.

Lessons learned? Challenges?

Learned that the 45 day window on a 1031 Exchange goes quickly!

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

Yes, worked with John Steffen on this property.