My first mixed use muli-unit BRRR recap

[Jeremy S.]

Hi,

I’m 29 years old and have been investing in real estate for almost two years.I have done a successful flip, wholesale deal and I own 6 other rental properties but this was my first time with a multi-unit building and my first time with a commercial property.

I liked this building because I knew it was a great opportunity to add value with renovations and it was located close to my home in Mechanicsburg, just across the river from Harrisburg, PA. I purchased the building in May 2015 for 94k using a loan from a private lender. I had to pay the tenants in apartment 3 to leave so I could begin the major renovations which included a complete re-wiring and re-plumbing of the entire building as well as separating out the single heat and hot water source that was all the previous owner’s responsibility to pay.

By June, the plans had all been approved and the renovations were underway. I did all of the demo and electrical work myself while working my fulltime nightshift job and helping my wife take care of our new baby.I had about half of the electrical work complete when I decided to take an evening off and go play a game of softball.This proved to be a bad decision when I broke my ankle and had to spend the next few weeks doing what work I could while rolling around on a mechanic’s creeper and trying to instruct my helpers on how to do the wiring.

The next big challenge came during my “rough electrical” inspection when the inspector informed me that all of the drywall we busted out for electrical and plumbing would have to be brought up to current fire separation standards of 2 hours between commercial and residential units.This required a lot of research and I had to submit new plans which set my timeline back a few weeks and added some additional costs I wasn’t expecting.

I was able to work through all of the set-backs and we had the first residential unit complete by August and all of the units were occupied by new tenants in October.All of the units turned out exceptionally well and I applied for my cash out refinance a few weeks ago. I met the bank’s appraiser at the property and he was very impressed with the extensive renovations we did and he answered an all of my questions about the valuation of commercial properties.I never miss the opportunity to learn from an expert and I feel that conversation will help me better evaluate my next deal.

A week later my appraisal came back and the new value of my property is 180k.I will be taking out a new loan of 144k at 80% LTV at 5% fixed for five years with a 20 year amortization period. My total cost of this project, including interest to my private lender was 128k, meaning after my refi I will put roughly 16k in my pocket, have $550/mo in positive cash flow and have 36k in equity.Not too bad for 6 months of part time work.

I'm expecting to settle my refi in mid November and I'm currently looking for my next deal.I would really like to do the same type of project but I'm looking for a building that is at least 20 units.I'm wondering if anyone has done larger projects and how that process compares to my 4-unit? I would also like to try my first JV deal if anyone is looking for a similar project.

Thanks for reading my story and feel free to ask any questions you may have or advice for me on my next project.