4th Buy & Hold Investment - Long distance investing

[Eric Van Deman]

Investment Info:

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

Purchase price: $295,000
Cash invested: $88,500
Sale price: $442,000

4th Buy & Hold investment - Two adjoining duplexes in beach communities near Tampa, FL.

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

Cap rates were getting compressed in my local market, and with the intention to utilize a professional property manager, I expanded my search area to other markets.

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

Through Loopnet, I came across a number of interesting listings around Tampa, so I started reaching out to property managers in the area. We found a great one who was very helpful in our search and steered us towards the beach communities near Tampa as a blend of cash flow and potential appreciation. This deal was a pocket listing of a property she managed from another investor who was looking to sell and cash out.

How did you finance this deal?

Conventional financing with 30% down. The down payment originated via a 1031 exchange property that we had sold in Denver, CO.

How did you add value to the deal?

Believed we were buying in an area that hadn't yet fully recovered from the housing bubble and would have potential for above average appreciation. We installed new roofs, and continued to maintain the property, but did not do any substantial renovations.

What was the outcome?

We sold the property within 4 years of our purchase for ~50% more than our purchase price, generating a very positive IRR. We then rolled the proceeds via a 1031 into eight student housing units in Florida.

Lessons learned? Challenges?

We faced the same challenges as any other out of state investor, and were forced to find a trustworthy property manager to act as our eyes and ears on the ground. Initially this was very challenging, but over time our property manager earned our trust and her recommendations helped us in the long run.

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

Brenda Bianchi with Brenda Bianchi Realty & Property Management

[Eric Van Deman]

@Michael Randle  There are a number of discussion topics, but you can normally get a good feel for someone pretty quickly how well they know their market/business.  I typically ask questions along the lines of:

- How many units and what type of properties do you manage?  How long have you been managing properties?

- How many of your units are currently vacant?  What is your historical vacancy across your portfolio?

- What is your process for advertising and screening tenants?

- How long does it typically take for you to make a unit rent ready and get a new tenant in the unit?

- Can you manage significant renovation projects?  What type of renovations have you managed in the past?

- What system do you use to report financials?  How often?  Web access via a portal?

- Do you have in-house maintenance team vs. using contractors?

You should be able to get a good feel for their experience and knowledge by asking these basic questions with maybe some follow-up depending on their answers, but most importantly trust your gut.