Sand Point - Million Dollar BRRRR

[Augustus Bukowski]

Investment Info:

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

Purchase price: $525,000

Cash invested: $1

Sale price: $1,690,000

Make a Million dollars with ZERO invested! Convert existing tri-plex into a 4-plex, renovate the entire structure, raise rents, hold and sell.

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

The property was located up the street from Children's hospital smack dab in the middle of some of the most expensive homes in Seattle, and a short walk to the University of Washington. The units were large consisting of 2 X 950 SQFT 2 bed 1 bath units and a 1 X 2700 SQFT 5 bed 2.5 bath unit. I realized I could easily convert the large unit into a 3 bed 1.5 bath unit and 3 bed 1 bath unit, and renovate the building to increase rent.

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

An attorney reached out and asked if I could value a property. A real estate investor was trying to purchase it, and was making it over complicated. I asked the attorney what the seller wanted, they wanted a simple 30 day close with no contingencies and 25 K more than the other investor. I had no money at all, but told the attorney to write it up at 525 K with 30 day close and no contingencies and I would sign within the hour. I moved quick, aggressive, and pushed for mutual.

How did you finance this deal?

I took a 125 K hard money loan out secured against our North Northgate construction site with a promise to cross-collateralize the note down the road against the tri-plex itself. I used the 125 K secured hard money loan as down payment on a conventional Fannie Mae loan to purchase the property. Once I closed, I got a Home Equity line of credit against the equity of the Tri-plex to remodel the existing units, refinanced and paid off hard money and HELOC, then got another HELOC to add 4th unit

How did you add value to the deal?

I renovated the property increasing the rents, and added a unit to the existing property.

What was the outcome?

We held the property as a cash flowing asset generating roughly 4000 per month cash flow, and building about 1100 per month in principal pay down. When we felt the market cap rates were at their low, we liquidated the asset resulting in a nearly 1 million of long term capital gains.

Lessons learned? Challenges?

Never make a deal complicated. Determine what a seller is looking for, be open with them. Tell them exactly what you are willing to do, and work with them to execute on your closing.

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