4th Buy & Hold Investment - 16 units

[Eric Van Deman]

Investment Info:

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

Purchase price: $980,000
Cash invested: $160,000
Sale price: $1,545,000

We bought 4 four-plex properties that shared a large lot, parking lot, etc. for a total of 16 units.

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

Opportunity to get into a larger multi-family deal, but given the legal titling of the buildings we were able to obtain long term residential financing on each building separately.

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

The deal was listed through Loopnet and we found it through our residential broker. On our first trip to the property, I wasn't fond of the neighborhood, but we decided to put in what we considered a low ball offer, which was accepted by the seller without a counter.

How did you finance this deal?

We utilized conventional financing for two of the fourplexes, putting 25% and 30% down, respectively, while using a private lender for the other two at 5% down each as the private lender was happy with the project's financials overall and was able to look at the combined LTV as opposed to just his two buildings.

How did you add value to the deal?

We hired an excellent property manager who was able to drive up both the rents and quality of the tenants. We started billing utilities back to the tenants, and fixed up units during vacancies.

What was the outcome?

Realized a nice IRR upon exit, and was able to perform a 1031 exchange to roll the proceeds into a larger investment.

Lessons learned? Challenges?

Adjoining four-plexes can be a great way to break into the larger multi-family market, while still maintaining the ease of residential financing.

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

Rosie Smith at RS Property Management