Buy and Hold in an Opportunity Zone

[Dan Rivers]

Investment Info:

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

Purchase price: $125,000
Cash invested: $28,000

My business partner and I purchased this 2 separate building 2 family for $140,000 in an area that is up and coming in North Charleston and is in an Opportunity Zone. Due to work needed, while under contract we got the sale price down to $125,000. The previous owner had been paying a manager who wasted a lot of money on the same repairs over and over. She was also paying the water/sewer bill which is about $1800/year. We came in, fixed a few items under a loan of $6,000 we took to use less cash. We replaced the roof, added a dehumidifier in one back unit and replaced an oven. We also added a submeter and updated the leases so the tenants pay water/sewer. She was losing about $2000/year and we have it turned around with an estimated $5-$6500/year income which is about 20% cash on cash return.

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

To start receiving passive income.

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

It was on the MLS. I saw it, looked at it and put in a full price offer the same day. I then had it inspected during DD and when we found work needed, I negotiated $15K off due to the repairs. The seller just wanted to get rid of it so she agreed.

How did you finance this deal?

Since it was two separate homes on one TMS#, Frannie and Freddie wouldn't back it so we had to get a commercial loan. It is a 5 year loan amortized over 20 years.

How did you add value to the deal?

We submetered the homes and updated the leases to have the tenants pay for the water/sewer. This saves us around $1800/year.

What was the outcome?

We have a solid, income producing home in an area that has a lot of talks of being turned around. So we have a good cash flowing property with great future potential.

Lessons learned? Challenges?

Don't hesitate, analyze then make an offer. Use your DD to verify numbers and research expense reports, rent rolls, maintenance needed, etc..

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

I am a licensed agent.