Lincoln Investor- Deal 1

[Mahendra Karthik Vepuri]

Investment Info:

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

Purchase price: $75,000
Cash invested: $20,000

It is a small multi family. A typical Midwest 4 bedroom home, that was converted in to a duplex. Its a 100 year old property, which was well kept up. A management company was running this place when I took over.

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

I have probably looked at 40 properties before this, but the biggest problem is I did not like the way the house was kept up. I also ran into meth heads. This was the first place I felt like I can live in, if I have to. Moreover its a duplex so even if one of the unit is vacant the other unit can pay for the basics (Mortgage+ Insurance + Taxes + Water). So I was interested in this property.

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

My realtor forwarded it to me through MLS. She also sent me the details of the rent it is bringing in. The list price was $ 85,000 and it was bringing in $1,025 per month. it was a 1.2% deal based on asking price. I looked up the rents on Rentometer.com and average rents are almost $300 higher. Anyways, I went in to this expecting not to raise the rents too much and my criteria with the numbers is at least 1.5 %. I asked it for $72,500 and seller countered for $80,000 and we settled at $75,000.

How did you finance this deal?

Put 25 % down. Financed it through a local bank.

How did you add value to the deal?

I knew that the owner is from out of state through county website. A simple google search gave out a little bit of information about him. He owned quite a few properties here and is trying to sell them off as soon as possible. I was able to negotiate and close with in a month at $10,000 below asking price. Win win for everyone involved.

What was the outcome?

Inspection revealed a few issues like Joist damage etc. Which was fixed for $600 and I had to pay for it. Rest of the house was in a good shape cosmetically and structurally. But I anticipate having a roof issue in a year or so. So I will be saving up all the money for that for now.

Lessons learned? Challenges?

Its very important to lookup the information about the house on county website. It will give you a lot of information regarding the motivation of the seller. Its a challenge when you adopt tenants, but its important to choose the properties with good tenants in them if you have to adopt them.

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

I would recommend working with a local bank, they are way easy to work. Also Find an agent who is an investor. They can understand your way of thinking easily.