Our first "Physical" investment

[Mark Whitted]

Investment Info:

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

Purchase price: $411,050
Cash invested: $20,350

3BR, 2BA, 2 car garage / 3 BR, 2.5 BA, 2 car garage duplex built in 1983. House hacking. $25 "cashflow" is PITI - tenant's rent - our last rent. (Our monthly housing cost decreased $25/month.) This will improve over the two year lease. We have built in $100/month rent increases at 9 and 18 months.

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

House hacking, found here on BP, sounded like a great way to get started with REI. We had been tenants in a house for 10 years when the landlady decided she wanted to sell the house. We couldn't agree on a deal to buy that house (for a live-in flip) so we started looking for a 2-4 unit to house hack. Quads in our region are difficult to find in an area where we would want to live. Triplexes are nearly non-existent. So we settled on a duplex.

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

We were looking with the help of our agent and over a weekend had found a few properties that we wanted to view. Monday morning I received a Zillow email alert for this new listing. We had information that the seller wanted a quick sale and we knew there were others interested. So we went with our "highest and best" offer first as we didn't know how the seller would handle multiple offers. Our offer was accepted within 3 1/2 hours. We negotiated some post-inspection repairs and closed in 30 days

How did you finance this deal?

FHA 3.5% down with a distribution from my IRA for the down payment and closing costs.

How did you add value to the deal?

Although our side had just been renovated, there is still room for value add in windows, insulation, and HVAC improvement. At the end of the lease, we will incorporate the same flooring, paint, kitchen, and bath improvements to the other side.

What was the outcome?

In progress. We plan on staying in our side for about two years. At that time the tenants will probably be leaving. After rehabbing that side and "turning" our side we will analyze whether it makes sense to keep it with new market rate tenants in both sides or sell. Either way, the plan is for us to find another 2-4 unit and house hack again.

Lessons learned? Challenges?

We haven't found anything that would have made us not do this deal. There are small challenges with things like HVAC (our side is COLD in the winter!) but we're pleased.

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

Our agent: Rick Nelson with Re/Max Town & Country in Allen, TX
Lender: Homeside Financial