5% Down Owner Financed 4-plex

[Joseph Back]

Investment Info:

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

Purchase price: $210,000
Cash invested: $10,000

Purchased a 4-plex consisting of four 2BD/1.5BA units renting for ~$600 each for $210,000. Current owner had taken care of property somewhat but was charging well below market rents, market rent is $750. Since seller was getting older I negotiated with him such that he owner financed $200,000 of the purchase price at a 6.0% interest rate one a 30 year amortization with a 5 year balloon. The deal worked great for both of us as he got a completely passive monthly income stream, and I was able to purchase a cash-flowing apartment building for very low money down. Current plan is to make some upgrades to the property to get rents up and then refinance it on a 30 year fixed Fannie/Freddie loan and hopefully be able to pull all of my original investment out.

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

The ability to only put 5% down and avoid having to get approved for bank financing.

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

Cold called multi-family property owners in some areas of town I liked.

How did you finance this deal?

5% down cash of my own funds and the rest was owner financed.

How did you add value to the deal?

Upgrading exterior windows and siding to be able to raise rents.

What was the outcome?

Cashflowing 4-unit apartment building with only $10,000 invested total.

Lessons learned? Challenges?

It never hurts to ask.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

No