203k fha redevelopment from duplex to 4 plex project

[Jeremy Curran]

Investment Info:

Small multi-family (2-4 units) other investment in San Diego.

Purchase price: $500,000
Cash invested: $100,000

This is our first adaptive re-use project turning our duplex into a 4 plex using the 203k fha home renovation loan. A lot of people do not understand that you can add up to 4 units with these low money down 3% fha loans as long as you are willing to move into the property. We are looking to begin our redevelopment company slowly this way and then bridge into building bigger 10-15 unit mixed used solar power developments.

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

I wanted to start a development company or redevelopment company that focused on taking older run down buildings and adding units to them. Strive to include solar power for the entire building, loaner bikes for the tenants to encourage them to walk and bike places more.

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

We originally bought the duplex to live in one and rent the other. I thought the lot was maybe zoned for 3 or we could add a granny flat over the back garage. once we found out the lot was zoned for 4 units it was a no-brainer to redevelop the property to its highest and best use of my own design.

How did you finance this deal?

203k fha home rehab loan

How did you add value to the deal?

we added 2 additional units over the existing units. 1 2bed 2bath units and 1 2 story 2bd 2bath unit with a 300 sq ft office and roof top deck for my family to live in.

What was the outcome?

We built the 4 plex for 1.3 million its worth 1.8-1.9 million now. After rents my familys new home and my really nice home based offices cost us $500-1,000 a month out of pocket. Once we move into the next 203k project this 4 plex will cash flow $2,000 a month or more net.

Lessons learned? Challenges?

This is maybe not the easiest way to acquire units but like the BRRR strategy everything is nice and new when done. Also you get to use your architectural creativity to design and add units to existing buildings which is really fun and challenging.

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

not at this point. i will be driving for dollars to find other run down properties we can do the same thing to next in the coming year.

[Tim G.]

Sounds like a sweet deal, can you share more details like the area its in, I'm a little confused on the financials? If it cost $1.3M and you put $100k in does that mean you financed $1.2M with an FHA203k loan?