Private Loan to Former Landlord

[Kate Barry]

Investment Info:

Small multi-family (2-4 units) private money loan investment.

Purchase price: $300,000
Cash invested: $25,000

4 Unit Multi family and we live in one of the units.

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

Our former landlord wanted to sell but didn't want to deal with a realtor. He offered to have us buy it and in lieu of realtor fees he would pay for the closing costs and also write us a check for $15,000 at closing to cover the cost of some necessary repairs.

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

My landlord approached us, we always paid rent on time and kept everything clean and he noted that he thought we were extremely hard-working and would be good at property management. It ended up sparking my love of real estate and I got my license the next year. Been pretty successful at it, $2mil in sales my first year and on track for $4.5mil this year!

How did you finance this deal?

We weren't able to get a mortgage this way so I did some research and learned about owner financing. I pitched the idea and then brokered the deal, we ended up with a 15 year fixed rate mortgage at 5%. We put no money down, then put $15,000 into repairs (electric, plumbing, pool deck) and over the past two years put another $10,000 into it (insulation, heating system, new windows)

How did you add value to the deal?

I did most of the legwork - I organized the home inspection, the attorneys (necessary for a closing in VT), researched the financing options and wrote all of the terms

What was the outcome?

We closed and its been going really well. All of our expenses are covered along with the mortgage, and we are able to put any additional income that we can into further upgrading it. We are hoping to refinance once we have 20% equity, hopefully in the next 2-3 years.

Lessons learned? Challenges?

Learned a GC lesson the hard way, and on our first big project. Got burned really badly and lost $6,000 out of the $15,000 we were given at closing because we trusted a friend who took advantage of us. My husband took it upon himself to learn how to finish the rest of the deck and he completed the project. Luckily we already had the materials and now it looks fantastic

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

Yes, me!