3-Family Plainville, CT BRRRR Project

[Michael Noto]

Here are the basic details of the project:

• Closed on the deal on December 18th of last year
• Location: Plainville, Connecticut
• Purchase price: $120,000.00
• Rehab amount: $22,000
• ARV: $210,000
• Property type: 3-family
• Taxes: $3830
• Sq ft: 2534
• Unit breakdown: All 2 BR units
• Projected rent roll: 1st floor $1100, 2nd floor $1000, 3rd floor $875 = $2975 total
• Area: Solid B area (largely a solid residential middle class town, only 1 other 3-family has sold in this town in the last 2+ years)
• Exit strategy: BRRRR project, the plan is to cash out refi

We are a little delayed in posting this diary so in the coming posts we will detail what went into purchasing the property and where we are in the rehab phase of the project. From there we will try and keep up with posting updates regularly.

[Michael Noto]

Plainville, Connecticut 3-Family BRRRR Project Update

The Negotiation

Our initial offer on the property was $117,500. We knew when we made the offer that low that it wouldn't be accepted. Remember, the last MLS listed price was 188k before the listing expired more than a year before. Our offer details a 3 week close, no inspection, and a 10k earnest money deposit.

After thinking for a couple days the seller came back at 157k.  While we were still far apart this was the first inkling we got that he wanted to compromise.  If he countered at let's say 185k we probably wouldn't have even wasted ours or his time any further. 

The landlords biggest headaches over there had been the tenants.  The second floor tenant had moved out 3 months prior and the unit was still destroyed and all of their trash was literally in the front yard.  The other 2 tenants were renting at significantly below market rents, were at minimum 1 month behind on payments, and were on month to month leases.  This is not an area where a landlord has to deal with nonsense from tenants, again this is a solid class B area.

Since we knew the tenants were his pressure point and thus we countered his 157k with one of two options

• Option 1: We will pay 127k with the contingency that the house be vacant upon sale.  So basically that would leave him to deal with the tenants and getting them out which we got the feeling he wanted no part of.
• Option 2: We will pay 120k and take on the building as is with tenants and all.  No inspection, 10k earnest money, 3 week close

Long story short the owner ended up taking the 120k.  I guess we were right in reading that he did not want to deal with the tenants.  So in the end we felt like we got a good deal on this one and we closed right before the end

Next post  will document how we dealt with and are currently dealing with the tenants we inherited and how the project from a rehab project is progressing as well.