$1500/mo Triplex acquired for only $2300 from buyer

[Sam Barr]

Investment Info:

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

Purchase price: $100,000
Cash invested: $2,300

Triplex with two 2/1s and a 3/1. 2/3 units occupied at sale. Seller agreed to carry a 2nd mortgage of 31% at 0% for 7 yrs. Original rents are 430, 530, 630. When the units turn over, I expect 600, 650, and 750.

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

This was my first deal. I was trying to get into it for as little out of pocket as possible. The contract was signed 7/31 and didn't close until 12/10 because two of my loans fell through.

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

This property was sitting on the MLS for almost a year before I found it. At first I wanted to FHA into it and live in the vacant unit, but the lease on the house I was renting wasn't up for more than 6 months and that killed my DTI. I finally went with a local bank and did a business loan for 20 yrs at 5.85%. The seller agreed to carry what the bank wouldn't at $400/mo (0% interest!)

How did you add value to the deal?

Seller was a poor landlord, didn't screen tenants at all and had some poor tenants in the property who weren't paying. I got them back on track with twice a month rent payments and did paint and floors to the vacant unit. It was renting for $430/mo, but I've got a tenant scheduled to move in next month at $600, and she's going to pay $2k before move in to add a washer and dryer to the unit.

What was the outcome?

The 0% second makes for some very quick principle reduction. Once units are turned over, property will cashflow $100/door despite essentially an 11.5 year amortization. Should be able to get all my cash out in year 4 and still get $450/mo net.

Lessons learned? Challenges?

Ask if the seller will carry a second! I had to look around a bit for an attorney who would let me do both loans in one closing, but the bank got their first position and I got in for almost nothing.