3 property package (first deal

[David J Lepard]

Investment Info:

Other buy & hold investment in Milwaukee.

Purchase price: $272,500
Cash invested: $72,000

This was our first residential property purchase. Two SFRs and a duplex, all negotiated, inspected, financed, and closed from out of state. All three were previously in our manager's portfolio with owners who wanted to sell off-market. They were each operating at the 1.2-1.4% rule.

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

We negotiated slightly but as they were off-market deals, the prices seemed pretty good as they were. The best choice we made was performing full inspections, and asking the owners to fix the items discovered. We ended up getting nearly 4k of work done by the sellers which added value for our renters.

How did you finance this deal?

Our initial financing fell through and we had to scramble to secure backup financing. In the future I'll either work with a lender I know can close or have a backup lender on hand.

Lessons learned? Challenges?

One thing I would do differently: we took a big hit when our initial financing fell through (sellers wouldn't provide their schedule Es which the bank wanted to substantiate the rent figures), we had to rush to secure backup financing. As a result we overpaid in interest and the appraisal came in so late that, when it was inaccurate in a number of ways (sq ft. was wrong, rents were wrong, comps very far off). In retrospect, we should have considered delaying the closing to contest the appraisal.