8 unit distressed property purchase

[Ryan Marrs]

Investment Info:

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

Contributors:
Will Karstetter

My business partner Will and I just purchased our first property using an equity money partner. This deal was a distressed 8-plex that was just down the street from one of my first properties (a 4 unit with a 2 bedroom house on the same abstract). It turns out the 8-plex was extremely distressed and the seller was highly motivated. We managed to get this and a 10 unit we are looking to pass on to another investor since we can do both rehabs at once. 

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

We've been looking to purchase distressed multifamily deals 4-50 unit using an equity money partner that would have high enough cash flow to make sense. This was our first equity partner deal and the numbers look great. I also have a very compatible 4 unit that is down the street that has been a great property, so I know what the property should be doing.

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

We found it while looking at my 4 unit down the street. There was a for sale sign in the front yard. Negotiated over the phone, and after first walk through and seeing the distressed condition got the seller to come down a bit more.

How did you finance this deal?

Used an equity cash partner with a preferred return and bought with cash. Using a bank ARV loan for the rehab.

How did you add value to the deal?

I was able to bring confidence to the deal with my 4 units property history. I also had a great relationship with a property manager that worked in this city and was able to get them to take on the project and rehab for a very good rate since they would manage it later.

What was the outcome?

In process now. have nearly all of the tenants out and starting demo on the vacant units. Plan on finishing up within 4 months and under budget.

Lessons learned? Challenges?

always get two quotes on any big line items before considering it a secure estimate to be used on purchasing decisions. We got a repair quote for the roof, which turned out to be not accurate. Increased the repair budget a bit. Luckily we have a lot of equity left in the deal.