Long Distance - First Duplex in the Books!

[Cory O'Dell]

Investment Info:

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

6 bed 2 bath, 2062 square feet side-by-side duplex built in 1920 and updated in 2011. Two inherited tenants, one side paying $500 for a 2 bed 1 bath and the other paying $550 for 3 bed 1 bath. Current market values for 2 bed are around $600-$650 and 3 bed roughly $100 more. The property was very poorly managed before...the tenants moved in with trash in the yard, things broken inside, and the leases are pretty subpar (one doesn't even define the term!). To us, it's an opportunity for value-add.

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

We've always wanted our focus to be small multifamily properties, but we were previously unable to find one where the numbers work in the area we want.

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

This duplex had been on the MLS for 6 months (overpriced at $85k), and finally went under contract in February of this year. In March, it came back on the market but at a lower price. The new price was still over what we believed we could pay for it, so we simply offered a little below what what would work for us. A couple counter offers later and we had it under contract for $72,500.

How did you finance this deal?

Conventional financing with 75% LTV, 30 year amortization at 4.99%.

How did you add value to the deal?

This is still ongoing. As we introduced ourselves to the new tenants and began "training" them on our way of doing business, the tenants were mostly just glad they had a new landlord that cared about the property. When these tenants leave, we will do some minor rehab and re-rent it at market value. The "bones" of the house were updated in 2011, but cosmetically it could use some TLC.

What was the outcome?

Current cash flow after mortgage (and setting aside 25% for management/maintenance/vacancy/repair/cap-ex etc) is about $260 per month. When we have tenant turnover and can update and increase to market rents, we estimate between $400-$450 after accounting for everything listed previously.