Fourplex in Georgetown, Texas, one of my worst deals

[Deepak Malhotra]

Investment Info:

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

Purchase price: $199,900
Sale price: $212,000

Fourplex north of Austin. It turned out to be a bit too far.

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

Austin was appreciating faster than non-tech cities.

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

I sent a friend down there to look at various listings. I believe that there were four fourclosures in a row. This was in 2004.

How did you finance this deal?

Conventional non-owner occupied. 25% down.

What was the outcome?

What a disaster this deal was. I was happy to exit quickly without losing too much.

Lessons learned? Challenges?

I had found and vetted a great property manager. I sent a friend down there and he met a property manager on the plane and, I think, took a shine to her. He hired her on my behalf and I was quite surprised. I was just starting in 2005 and didn't have the heart to veto him. Well, that property manager wasn't so great. They put their son in one of my units. They eventually declared bankruptcy. I was originally thinking about purchasing all four but am so glad I started small with one.