1031 Exchange of SFR in PDX leads to 7 more units in KCMO

[Jeff Hamlin]

We're gaining momentum. We made a conscience decision two years ago to begin building a portfolio in KC. A hot Portland market led us to sell our little 900 sf bungalow rental in exchange for a six plex and another SFR in KCMO. This brings us to 10 units and a lot of learning opportunity. While I think we did ok with this six unit, I know we'll do better on the next as a result of our experiences here. For instance, I won't ever plan to fund cap ex projects out of cashflow. Certainly with an older building that has been mom and pop managed for 30 years, there are plenty of opportunities for improvements that don't necessarily equate to added value (hot water heaters, French drains, new electrical service, etc). On the flip side, rents are $90 below market, the garage building is unrented and I anticipate some laundry income, once service is set up.

After two full months of ownership and our own accounting, it appears we're proving our anticipated, yet modest 8% cash on cash return and a 7.5% cap rate. There's enough in this deal to cover some mistakes but more importantly, we remain on track to reach our goals in the next two years. In the next year or so, we expect to sell off two SFR's and a duplex in Independence, MO to 1031 exchange into another smaller multifamily. Cheers to the BP Community for offering referrals when I've inquired. They've been much appreciated.