8 Plex renovation to hold. My First MultiFamily.

[Russ Green]

Hello, My name is Russ and I bought an 8 door apartment in Willits, CA that I've been renovating to hold for income. Well its actually two 4plexes with a common drive. It had sec 8 tenants that I didn't find out about until after escrow and was a total mess with bad(some dangerous) tenants and 10+ years of deferred maintenance when i picked it up in february. The landlord was mostly absentee and the location isn't exactly in the best neighborhood, and it was probably the most run down on the block. I wouldn't take my kid down there when we first started.

I went through the whole unlawful detainer process with one guy and ended up with the sheriff kicking him out and storing his things for 2 weeks until he finally came and got it all. I ended up in court with another guy and ended up settling at a full deposit refund for vacating the premises in 7 days. The third turned in his keys and said keep the deposit(unit was current). I ended up with 3 vacant units in all with the rest of the tenants being marginal, no one was underwritten. Those units are redone and are rented at 895 (from 750) starting today. Everyone else got a raise to 825 effective the 1st of sept, well see how that goes but the rates were under market.

I bought the property at what we thought was a reasonable deal at 544k and was expecting most of this but it really put me in a cashflow crunch to revamp the property right after buying it. Two units were in default since day 1(this was unexpected). This property has been cashflow neutral with the vacancies(not accounting CAPEX). I felt like BAC, insolvent as hell for a minute. Each unit was over 20k to redo plus at least that per deck (funded with earned income, UGH). This was my first endeavor into MF and I am really liking it. Its not for those with a weak stomach though, the capital required can be daunting. I started out managing this property myself until it was cleaned up quite a bit and safe then turned it over to a property manager for a competitive rate. It was a hard process to get through but at the end i'll be hard pressed to find a better asset for my family, and my landlording / investing skills are greatly improved. We hardened these units as rentals to hold. We put in acrylic counter tops with built in sinks, 2 piece fiberglass shower, no garbage disposal, no W/D, etc etc. Once this project is over i'll have the income from this and my time back to work on the next purchase... Amazing.

Things I like about MF

1. fiduciary asset

2. tax advantaged asset

3. stable un-earned income

4. conventional or competitive commercial financing

5. you can force equity and rent roll appreciation

6. you can sweat equity your way out of an uncomfortable situation if you have skills.

7. Control

Thank you all, I've gained a lot of information to complete this project at this site and figured I should contribute my story. I am just beginning my real estate journey so i don't know if this is exactly a success story but this project is looking like a cashflowing success for me.

You guys convinced me that a good property manager was worth it, to focus on what skill is actually making me money, and to harden your units and underwrite your tenants. I got to start out my MF career going through the complete process to evict a bad tenant, so those lessons were reinforced.

For me, the 50% rule wasn't too far off.

Disclaimer: Im 28, my family has been in real estate my whole life and already has commercial self storage properties much larger then this one. I had some quantitative easement from a parent, help negotiating, a preferred construction crew, one prior sfr rental, one prior note receivable, and a reasonable day job, or i would have never been able to pull off an 8 plex flip to hold from a sfr. 

If anyone here is in to Mendocino county real estate, I'd be interested in more contacts.