1st Duplex property now in Operation!

[Francois Frigon]

Investment Info:

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

Purchase price: $317,000
Cash invested: $64,000

Through my LLC, we recently bought a new construction duplex in New Braunfels Texas near San Antonio.
The original Proforma looked great, but the reality is somewhat different when you factor all expenses (but we remain positive).
The bottom line numbers on this duplex won't look good this year (2019) due to 2 main factors:
1) The rent I'm charging is too low at $1350 (market just went down significantly in the last 6 months). To make my numbers look better, the rent has to increase to $1450 next year
2) My commercial loan on this property is 6.5% over 20 years (not the best). To help though, the bank offered me 6 months only interest

One somewhat good news is the purchase price of $317k is great when comparing to the appraisal of $378k

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

Apparently good market to be in.
Purchase price a good 20% below market value

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

I found this deal 2 years ago when looking to invest in new construction properties (duplex / triplex) in the greater San Antonio area. After 2 years of construction, we finally closed in mid March and both units are now rented.

How did you finance this deal?

My LLC put 20% of the sell price, and the bank financed 80% (20 year term at 6.5% yearly)

Lessons learned? Challenges?

The Proforma advertised by the seller was based on personal loan terms. When you buy through a LLC, not only it is very hard to find a bank willing to do Commercial loans, but the terms are not that great (30yr term VS 20yr, Int Rate higher).

My challenge now is to find a way to increase the rent by around 7% in 2020 to improve my bottom line numbers