SFH with Detached MIL Apartment

[Brady Potts]

Investment Info:

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

Purchase price: $295,000

4 BD, 3 BA - SFH with detached 2 car garage and 1 Bed, 1 BA apartment.

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

This was a house hack that allowed my wife and I to purchase our first rental properties. The SFH was already rented with a long term tenant. We moved into the 1 BD 1 BA apartment.

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

I found this deal online with a Zillow notification - listed at $305,000. As soon as it hit the market I called my agent to get us in for a showing. I ran the numbers through my calculator and found that I could make it work at $290,000. My agent knew what the other houses next door went for (by the same seller) so he was confident they would accept the offer. We made the offer that morning and it was accepted.

How did you finance this deal?

VA, 0 Down, with 5k in seller credit to pay off other debt.

How did you add value to the deal?

The SFH rent is significantly below market value. It was rented in 2014 for $1,100/month and hasn't changed since. Comps in the area are going for $1,400-1,500.

What was the outcome?

We purchased the house and rent out the SFH while living in the apartment. After we increase the SFH rent to market value and rent out the apartment, we will cashflow $150 after all expenses, capx, and reserves. We are also looking at refinancing to take advantage of lower rates which would add another $140/month in cash flow.

Lessons learned? Challenges?

The property management company was the party that arranged for certain repairs to be completed per the VA appraisal. They had unqualified and unskilled workers perform several repairs that were both dangerous and ineffective.

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

Realtor
Mortgage Broker
Inspector
Appraiser
Property Management Company