Knoxville cash cow

[Cassy Trask]

Investment Info:

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

Purchase price: $160,000
Cash invested: $265000

Purchased this fixer upper that needed new roof, windows, siding, HVAC, updated electrical panel, all new decks and a big update inside. By doing a lot of the minor demo and work myself, I kept the costs down to $85k for remodel. Due to the timing (COVID) it took 9 months to do this 3400 sq ft home into a triplex.

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

I moved to Knoxville and was looking for a house hack. I preferred a duplex, but the market was too hot for me to compete so I bought a big house and converted it to multiple units so I can live in one and rent the rest.

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

I found a realtor on Biggerpockets. He is an investor himself and was great help finding me a property I could hack. Due to market conditions, we had to come in at asking price. Since I was buying all cash I could waive my appraisal, however did do my inspection.

How did you finance this deal?

I paid all cash for the purchase and renovations. I then did a DSCR cash refi out.

How did you add value to the deal?

Due to location, I turned a large SFH into a triplex. It was already perfectly set up for it with almost all water hook-ups in place already (wet bars, previous basement kitchens, etc.) and I mainly just had to remodel and put a few exterior doors in place to separate areas. The home had phenomenal parking already and 3 - 200 amp panels to it. It was meant to be more!

What was the outcome?

Overall, I put $265k into the purchase and renovation (cash) and then did a DSCR refi at 70% LTV (my first time with this bank) at 4.25%. I gained an appraisal of $475k and thus was given all my cash invested back, plus some. I own this own now for almost 4 years and it grosses almost $6k/mo. with around $2000-$2500 in cash flow.

Lessons learned? Challenges?

Have people inspect other contractors work if you cannot (I did not have a GC). I was taken for $7k on a bad roof install that had to immediately be ripped off and replaced.

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

I had an agent who helped me find the deal. I had a great lender who was able to brainstorm options with me being newly self employed to get me a DSCR loan. Sonya West with Citizen Bank in Knoxville, TN is amazing!