First Deal - Major Rehab to Owner Occupied Duplex

[Julie Coleman]

Investment Info:

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

Purchase price: $690,000
Cash invested: $80,000

We purchased an underutilized duplex in Glendale, California in May 2018. Glendale is a metropolitan community, 15 minutes from downtown Los Angeles. The previous owners of the property converted the 2 bed/ 2 bath duplex into a 3 bed / 2 bath SFR. Since this property would be our first owner occupied property, we invested the capital for a 6 month rehab to convert the SFR into a high end market rental. We are using the following biggerpockets' strategies: buy and hold, live in renovation, house hacking and soon to be BRRR.

Lessons learned:

1) LIVING ON SITE
We were lucky enough to be able to demolish the entire house down to studs, while living on site in the garage.
Pro: It allowed us to have daily eyes on site and keep the contractor and the subs honest.
Con: Living on site is a mental commitment. Make your project your number one priority so the lifestyle adjustments are worth every sacrifice.

2) MARKET THE RENTAL TO MAKE YOU WANT TO LIVE THERE TOO
We were renters in Los Angeles for over 10 years before becoming landlords. We understand how difficult and stressful it can be a tenant looking for a place. As part of our mission as landlords, we strive to make it a seamless process. By marketing with a professional website, obtaining service requests and rent online, our easy landlord interface trains our tenants to be the best versions of themselves.
Pro: Streamlined property management, appealing marketing to grade A tenants
Con: Takes time to set up website (1 hour or less!)

3) STICK TO THE NUMBERS
We submitted 20, "emotionally invested" offers before getting our offer accepted on the duplex. Let's face it, this deal was our first time obtaining a mortgage and buying a home, not to mention signing up for a rehab rental project. Every offer we submitted, we analyzed over and over again, put our hearts into it, and was let down too many times.
Pro: Lesson learned. We were successful buying a property only when we submitted an offer based on numbers. We offered on the duplex sight unseen with little contingencies. They accepted our offer less than 48 hours later. We can't be happier with how seamless the deal closed.
Con: Wasteful heartbreak falling in love with properties, instead of the numbers. Next time, it won't be our first deal.

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

We were renters in Los Angeles and kept having our rent raised beyond our means. If you can't beat landlords- join them! We then saved capital so we could invest in our first owner occupied investment property. Our goal as previous tenants ourselves is to offer high end rentals to tenants who were just like us. Grade A tenants looking for an apartment worthy to call their new place home.

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

After working with an agent for months without success, we decided to switch to the agent who kept beating us on deals. The competing agent presented offers in the best way, had a great reputation in the area and knew how to close deals for her clients. We knew we had to make a change and working with the competing agent was the best move we made during our search.

How did you finance this deal?

Saved capital for many years. Invested our roth retirement earnings as well.

How did you add value to the deal?

We converted the property previously used as a single family home into an operational duplex. We spent $80,000 on a full gut rehab to make it into a high end rental marketed to grade A tenants.

What was the outcome?

We call it a success! We are no longer renters and are house hacking our first owner occupied duplex. We are anxious to move onto our second deal soon.

Lessons learned? Challenges?

See description above.

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

Real Estate Agent = Keely Meyers of Tracy King Team and Compass (Rockstars!)