Owner Financing First Apartment Building

[Paul Barbeau]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $1,150,000
Cash invested: $115,000

32 unit apartment complex purchased with 10% down with a combination of owner and bank financing.

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

The owner financing option and value add component.

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

A broker brought it to me off market. The price was non-negotiable but the terms were. The owner financing term helped me have less of a down payment, and that was important to me. The property needed repairs, but I didn't beat the seller up about them to try to reduce the sale price. I feel like the owner liked the way I treated him and offered me a chance to buy one of his other properties, which I did (57 units).

How did you finance this deal?

10% down, 35% owner financing and 55% local bank financing.

How did you add value to the deal?

I'm making cosmetic improvements to the interiors of the units and achieving a $75-100 rent premiums on the renovated units.

What was the outcome?

To be seen, but I'll be increasing the NOI by approximately 20-30% and the goal is to refinance, pull out cash and hold for several years.

Lessons learned? Challenges?

I would borrow rehab funds or try to get an interest only period on the loan so I wouldn't have to rehab the units out of the cash flow.