Boutique 5 Unit in Bucktown

[Daniel Cullen]

Investment Info:

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

Purchase price: $560,000
Cash invested: $175,000

5 unit wood frame building which was constructed in the early 1900's. It has great bones and has been fully modernized. The area (Bucktown) has perfect demographics and great tenants are easy to recruit and retain.

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

This old gal has great bones and the previous owner, a concrete contractor, had done extensive modernization including; lifting the building and installing a new concrete foundation, new 1 1/4" copper water service, new electrical services and branch circuits throughout, new siding, new windows, etc. I bought it about 10 years ago and pumped nearly $200k into it in add'l improvements. I plan on leaving this to my children and I hope it provides them with income for many years to come.

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

I try never to work with buyer's agents since doing so weakens the buyer's position imho. A listing agent who gets 'double bubble' will work much harder to make a deal happen and may contribute a bit of their double commission windfall to help the deal go forward.

How did you finance this deal?

It was a 4 unit when I bought it so I took out a HELOC on a 2 flat I own and used much of that money for my down payment for a conventional 30 year mortgage from US Bank.

How did you add value to the deal?

I added an interior stairway to the basement washer/dryer area so my tenants can stay in the house slippers and jammies when doing laundry. I added a studio unit in the front half of the basement. I 'duplexed up' the top floor apartments by finishing the large attic space and connecting them to the top floor units as loft/storage. I installed custom closet organizers in the huge walk-in closets. And on and on and on!

What was the outcome?

The property needs very little intervention now. The apartments have new condo quality kitchens and baths which help attract quality tenants. I have a 50 year roof, commercial grade aluminum thermal windows, and vinyl siding with aluminum trim over all exterior wood. My monthly rents are $6385/month and I have a $260k balance on the 15 year mortgage after refinancing a few years ago and making add'l principal payments along the way.

Lessons learned? Challenges?

Ooohh....a couple nightmare tenants taught me to be much more careful in screening potential renters. Ugh...did you have to remind me?