Buy and Hold Rental (First Deal)

[James McCormick]

Investment Info:

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

Purchase price: $191,000
Sale price: $197,000

My first deal was a severe rehab duplex where I lived in one side/fixed it up, then moved to the other side doing the same thing. While renovating each unit I had a renter in the other unit, now I have been able to increase rent prices and live cheaper than any apartment I could have been renting while building equity.

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

My primary drive was reducing my personal living expenses as well as long term ROI.

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

My deal criteria was quite narrow in terms of inexpensive multi unit building. The only way to get something inexpensive was to find something that needed significant work. I had very little capital build up so I used a seller contribution to cover 3% of 3.5% of my down payment.

How did you finance this deal?

Traditional FHA loan with 3.5% down but I used a seller contribution to cover 3% of 3.5% of my down payment.

How did you add value to the deal?

This property required significant renovations. I rebuild the bathroom and kitchen with greenboard vs sheetrock, updated sinks, shower, cabinets, flooring.

What was the outcome?

I currently have the other unit rented within $100 of covering my mortgage and now live without paying rent.

Lessons learned? Challenges?

I replaced sewer PVC and hot/cold water lines with pex from the meter to every fixture in 2 units and now am skilled with plumbing. I have replaced electric wires throughout one unit from the breaker box to every receptacle. I have also been forced to make structural improvements to the floor joists and various other carpentry. With these enhanced skills I will now be moving forward conducting my own property inspections and waiving that part of the deal.