Second duplex/multifamily property

[Dan Maegli]

Investment Info:

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

Purchase price: $118,500
Cash invested: $22,500

My second property, the most expensive, the most work needed, the worst layout, probably my most regrettable purchase.

So at the time I bought this one I was living off the grid and on the road throughout Northern California & into Oregon.

I had left my job a few months prior and was convinced nobody was going to give me a loan after this so it's buy something or nothing and I opted for something 🤷‍♀️

I will start that I bought this house more for my personal comfort in mind. I had planned to buy in a far more desirable area that I could not afford when I bought my first home.

Unfortunately this more desirable area had had a 50-70% price increase in the five years from the time I bought my first property and despite me being able to afford more I could once again no longer afford there.

I bought in a terrible rental market, in a seemingly one of a kind property. I even used an inspector this time dwspite having not on the first one.

This house was purchased back around 2007 for $188,000, it was then "won" in a divorce at a valuation of $144,000 in maybe 2014 and now in my hands at $118,500.

Here's everything else I've done wrong on this property. It needs far more work and updates then I ever realized, I only looked at it once in person and started the purchase while out of state.

It needs new windows throughout, it is not insulated, it had knob and tube electrical behind plaster and lathe walls, the layout leaves a lot of poorly utilized space, the garage roof was trash and required a new rubber roof over a really weird layout, it has a single steam boiler for the entire building 😣😣😣

Did I mention terrible rental market?

Despite all of these set backs I have been doing some serious remodelling and a bit over the top in my unit for personal comfort.

I wanted the nice middle class home I couldn't afford.

Refinished floors, bew paint everywhere, brand new bathroom and stunning, brand new kitchen soon to come.

Thus far I think I'm $145,000 into this property, still need all new windows throughout, and have asbestos wrapped pipes to remove in basement in conjunction with my plan to remove the steam boiler entirely and throw a furnace in attic for upper amd one in basement for the lower, and hopefully to do a full attic remodel.

At the end of the day I will probably be into this property for the $190,000 it was once purchased for but have little confidence the local market will value it that high.

Here's the good stuff...

Dispite so many negatives and the local market offering damn near full houses for $700/mo I have tenants who pay $1025 a month plus full water bill to stay in the lower and they seem happy here. They are not the most trustworthy financially but her father sogned something stating he would cover rent if they had any problems and he has made good on this once so far.

This place will be stunning once I'm done, I figure all I need are two families willing to spend bigger money to rent a beautiful place or one family willing to one day buy it for what I've got into it.

I have LEARNED SOOOO MUCH HERE, and not only that I have been building an amazing network of laborers who help and teach me so so so much, it's been one of the largest learning experiences of my life!!

Despite all of the work my labor is cheap, skilled, connected, and people I care about who care about me and they go so far out of their way not to only work for me but to teach me what they know and help me grow.

As many of you could probably agree in your own endevours, I would be nothing without these amazing people in my life and I owe them so much.

This house has been such a blunder but it taught me what to look for in my future purchases, the cost and scope of large multifaceted projects, it does pay for itself no problem not factoring in the work I put into it, gives me a free place to stay, and hopefully one day I can refinance and find the right tenants who can justify paying what I need for rents on it.

This house has also built my network and confidence to a point that I have no problem taking on larger scale projects anymore and ever look forward to them.

I've bought two more since and the most recent was a full scale remodel flip and hold.

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

Felt like it was my only option before my ability to finance window closed.

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

MLS, it was actually listed for $145,000 originally and I offered $100,000 to start purchasing at $118,500 but still needing a massive amount of work.

How did you finance this deal?

Conventional bank financing

How did you add value to the deal?

Rwmodelling the absolute crap out of this house

What was the outcome?

I pull good rents on my lower and live in a beautiful upper unit

Lessons learned? Challenges?

I like fixer uppers but do not want anything else with asbestos, boilers, or knob and tube wiring.

Nor do I want anything else in poor rental markets.

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

Yes, my lender I really like, she's always been awesome.

My rates seem a little higher through her but she is happy to look past my unconventional lifestyle and figure out financing for me despite a lot of challenges.

She is currently working on a cash out refinance on another property I own outright but hold a lot of debt I purchased it with. My income for last year was only $3,600 for the year after all of my write offs, I am stacked with debt and she is still pulling this together for me!!