First Multi-Family Rental in Kentucky

[Paul Savage]

About 2 months ago I purchased my very first rental property.  I researched for a while until finally deciding to go with a 4-plex right outside the Louisville, Ky area.  The property was in good condition and was already occupied with long term tenants (4 year tenant, 6 year tenant, 8 year tenant, and a 12 year tenant) which was good for me because I had no prior experience fixing up properties or finding and screening tenants.  I also realized the rents were considerably below the market rents so that was attractive as well. 

The property was originally listed for $289k and after a little negotiation, I was able to get it under contract for $265k.  However, when the final appraisal came back, it only appraised for $240k.  I was not going to be able to come up with the difference out of pocket so I thought I was going to have to back out.  Fortunately, the seller was motivated and agreed to the lower price.  There were plenty of issues during the due diligence period, but in the end the deal ended up working out very well in my favor.  

The property currently rents for $2600 and after PITI and all expenses, it is cash-flowing around $200 per door. I am working with a property manager and talking about raising rents slowly over the next couple years to get them to the correct market rents while also retaining my current tenants.

All together, this was a great first property to buy however I do think I made a few mistakes along the way.  I think my biggest mistake was using the majority of my working capital to close on my first property.  While it is a great cash-flowing property, I now have limited options when it comes to purchasing future properties until I save up some more cash.  Because of this, I am most likely going to need a partner for my next deal or I'm going to have to wait a lot longer than I want. 

Any feedback on this deal or advice moving forward is appreciated.