6th investment deal - first BRRRR

[Max T.]

Investment Info:

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

Purchase price: $160,000
Cash invested: $80,000

Duplex in Germantown.

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

Had capital saved up and moved to this neighborhood earlier in the year. Prices are lower here but the neighborhood is improving so decided to invest. Mechanicals were in good working order but cosmetics were a mess.

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

MLS. Listed at 275k. Price dropped a few months later to 225k. Went to check it out - needed a lot of work. Got it under contact for 180k. After the inspection closed at 160k. The seller was motivated. She is a RE agent who was owner occupying this property for about 20 years. Was not good at maintaining the property or managing tenants, and probably had a good amount of personal debt she wanted to pay off.

How did you finance this deal?

Conventional 25% down. Borrowed 50k for the DP from Pops. Used my cash plus cash from a refi on deal #1 for the renovations.

How did you add value to the deal?

Renovated everything:
2 new kitchens.
2 new bathrooms.
Flooring and paint throughout.
New and resurfaced roofs.
New roof deck.
New concrete, new exterior stairs.
Replaced exterior rotted carpentry.

What was the outcome?

Appraised for 275k after the rehab.
Rented the units for 1100 and 1360.
Refi'ed out 65k and paid it back to Pops. He got a 30% return in 6 months.
Left my rehab costs in the deal, but I'm enjoying the cash flow and peace of mind from having 2 renovated units.

Lessons learned? Challenges?

Pops influenced me to renovate better than I would have. The units are better for it and rent easier, but I spent a lot more doing it his way. I'm not sure which way would have been better for the bottom line. This is a long term hold play.
Also went a little out of order regarding building permits. Now I know how important this is to do correctly, even if it means a delay to the work.

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

I was my agent but worked well with the home inspector and lender @Upen Patel. Upen is active on BP and has been my lender for multiple projects.