Washington state buy and hold in Skagit Valley

[Sam Denny]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $555
Cash invested: $103,000

Purchased 6 plex unit. Seller agreed to replace siding with hardy board before purchase. I replaced windows, roof, and painted exterior. Remodeled the two vacant units and raised the rents on other units with tenants deciding to stay. Planning on remodeling other units as tenants move out. The rents at purchase were in the 800-900 range and now at 1200 for non remodeled units and 1300 for remodeled units with room to grow based on demand so far.

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

My goal is build a portfolio of cash flowing properties with goals of building enough passive income to replace my full time job.

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

I found the deal on the mls. Used an agent for purchase. I had to pay 40K over asking price with 3 other bidders the same day it hit the market. Good deals don't last long, so need to make sure you know the rents in your area and have a good idea of rehab costs.

How did you finance this deal?

Used local bank for commercial loan with 25% down. Asked on BP for local bank recommendations.

How did you add value to the deal?

I used the rental property calculator on BP adding in cost of estimated rehab and increased rents. Plus added in other costs like utilities, taxes, insurance, vacancy, repairs, management, etc

What was the outcome?

I have hit my goals with rents with running over budget in rehab costs. Overall achieved the 1% in rent to value for my goals of minimum of 7% cap and 10% Cash on cash

Lessons learned? Challenges?

Rehab costs are always more than anticipated and its had to find good contractors. I don't have a construction background so may be why I underestimated. I built in a large cushion at my purchase price so I'm ok. I knew the rental market very well and was dead on with rent demand. I decided to use a property manager because I didn't have the heart myself to raise the tenants rents so drastically.

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

Yes! my agent Lawton Coursey is honest and very personable. Built a great relationship with the seller. Would recommend Community coastal as a great local bank and my property manager Eric Olson if you need management in Skagit Valley.

[Sam Denny]

Update:  I had an opportunity to buy a larger apartment complex in Mount vernon and decided to 1031 this property into the new deal.  I sold the property for 1,100,00, exactly double what I paid for the property in 2019.  Even with the 125K invested into updating the property, it was a great return!  It was a rough property when I inspected it but I'm glad I went through with the deal.