Moorhead MN 4 Plex, Erik's 1st True Investment Property

[Erik Stewart]

Investment Info:

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

Purchase price: $220,000
Cash invested: $55,000

1978 4 unit apartment building with (2) three bedroom units and (2) efficiency units. 2 Garage stalls and 2 parking pads.

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

There were a few things that attracted me to this property. The location is great, next to a school, jobs, and in a nice quiet area of Moorhead. Long term tenants in place, room for adding value, electric baseboard heat (tenant paid), 4 plex over a SFR helps with vacancy risk.

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

I found the deal on craigslist. Negotiations were done over about 6 months or so. The seller was unsure if they wanted to sell, took the ad down, and I followed up every month until they were ready to sell. The other buyers who were interested did not pursue or follow up so I didn't have much competition.

How did you finance this deal?

This was conventional financing with 25% down.

How did you add value to the deal?

I have done the normal repairs/maintenance however not a value add play. I believed at the time to be getting a good price that was about 10% under market value, and that was my value add. I can also update a couple units to increase rents as tenants turn over.

What was the outcome?

So far this has been a good investment. I have owned for 1.5 years and in 2018 the CoC return was ~4%. I chalk this up to "Stabilizing" the property during the first 18 months I have had it.

Lessons learned? Challenges?

Tons more lessons here as well. I have a section 8 tenant, so I learned a lot about all the regulations and rules surrounding that. Renting out 1 and 2 bedrooms in West Fargo is very different compared to finding tenants for eff. and 3 bedrooms in North Moorhead. Many many more!

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

Nope, directly with the seller. I would say the title company here in town. Otherwise, I have been building relationships with industry professionals over the last 10 years in general for my real estate investing endeavors.