Mult-family Unit in Gentrifying Neighborhood

[James Cecere]

Investment Info:

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

Purchase price: $795,000
Cash invested: $60,000

6 Unit building in an up and coming area; existing renters and cash flow-positive. Close to great shopping and transportation,. Converting one unit to a short-term rental. Multiple repair issues as the building is old and was mismanaged. Already received an unsolicited offer for $1.2MM (cash). This location will continue to evolve, and increase in value. Cash flow will improve with enhancements to units and common area, as well as new s/t rental strategy for one of the units.

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

This is all about the location and opportunity to develop the property further. The location is awesome - two major developments have brought more residents and new shopping (Target, Liquor Store, Starbucks, Grocery Store, etc). Another development is on the cusp of starting. Great restaurants and nightlight also within walking distance. Good renters live in the building, and it's easy to get new ones.

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

A real estate agent brought this to me. I brought in another investor for a 50/50 split.

How did you finance this deal?

Conventional business loan with 25% down.

How did you add value to the deal?

Upgraded common areas and each unit as they are vacated. Repaired entire roof and upgrading electric. Added landscaping to improve visual appeal.

What was the outcome?

We are at 100% occupancy, with one unit converting to a s/t rental. It's estimated we will double the income from that unit.

Lessons learned? Challenges?

When purchasing, the engineering report and other investigations did not reveal the extent of the poor quality that went into the plumbing, electric and other core areas. We've been dealing with a lot of repairs and upgrade, which hurt out profitability over the last two years. We are upgrading everything to ensure it's in code and high quality, to prevent future issues. The investment now will pay off in the l/t.