Small Duplex, Big Return

[Steven Kassel]

Investment Info:

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

Purchase price: $47,000
Cash invested: $7,500

This cheap little duplex was our first investment. In 2014 it was listed on the MLS. Traditional financing with a 20 year note.
After negotiations and a few closing credits we purchased with about $7,500 all in.
1 bed, 1 bath currently $500/month. 2 bed, 1 bath currently $550/month. Total Rents = $1,050
PITI = $350/month. Avg Expenses over 12 months = $200.
NOI = $500/month

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

This was my introduction into Real Estate. I was looking for something that my partner and I could purchase and each earn a 20% cash-on-cash return. I knew going in that these types of properties weren't going to be in the most desirable location or condition. Say what you want about a 2% property; that was my goal ;).

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

This property was listed on the MLS in 2014. It didn't have a very good marketing presence and the sign in the yard was knocked over. With the owner living out of state, it didn't seem they were getting much interest and were ready to sell. They originally asked $50K for the property. We negotiated $3K off the purchase price and about $2K in closing credits to further reduce our cash out of pocket.

How did you finance this deal?

I brought this deal to my partner and agreed that if he invested the down payment, I would handle the management. We financed 80% through a traditional 20yr loan.

How did you add value to the deal?

Upon purchasing the property, historical rents were around $450/unit. We increased both units' rents to $500 and $550 as soon as we could.

What was the outcome?

1 bed, 1 bath $500/month. 2 bed, 1 bath $550/month. Total Rents = $1,050
PITI = $350/month. Avg Expenses over 12 months = $200/month.
NOI = $500/month ($6000 annually)

Lessons learned? Challenges?

This property has had plenty of challenges. My biggest learning curve was in finding good tenants and consistent rent collection. I initially didn't earn the full returns from this property due to high vacancy and my own failure to hold tenants accountable. Once I learned how to make "The Lease" the center of each difficult conversation, my property management abilities improved dramatically. This investment was very forgiving while I learned these lessons but now has excellent ROI.