Deal #3 - Vacant duplex with a minor rehab!

[Patrick Menefee]

Investment Info:

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

Purchase price: $92,000
Cash invested: $8,500

The duplex was vacant but partially updated. The smaller unit (2br/1ba) needed updates inside, the larger (3br/1ba) was almost completely updated with a couple minor exceptions

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

My focus thus far in my investing career has been multifamily properties. I owned a fourplex and 3 duplexes (for a total of 10 units so you don't have to do the math) prior to this purchase, so I had alerts on my phone when a multifamily property came on the market. I saw this one and immediately realized it had potential

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

Who says you can't find good deals on the MLS?? That's where I found this duplex listed for $105,000.
We went under contract for $100,000, the appraisal came in low at $92,000, and after some pushback from the seller he acquiesced and we closed at $92,000. Unknown to me at the time, the underwriter found an error in the appraisal so shortly after agreeing to the adjusted price we were notified that the appraisal was revised up to $97,000! Not upset about an added $5k in equity

How did you finance this deal?

A partner and I split this deal, and we went into it with a conventional 25% down mortgage

How did you add value to the deal?

Unit 1 - Painted throughout, installed new floors throughout the downstairs, replaced appliances, kitchen cabinets, the bathroom vanity, the majority of the light fixtures, and the old dirty light switches and outlets.
Unit 2 - Replaced water heater and range
Other - Repaired roof, added some foundation supports, and added curb appeal by painting the patios/doors, replacing porch lights, and putting new house numbers on top of the paint

What was the outcome?

The all in cost after purchase, closing costs, and rehab was around $106,000 and the units are currently listed for a combined $1,675! Not bad at all. While there are no immediate plans to refinance, the plan is to continue collecting the great cash flow and refinance if/when it makes sense and the market picks up in the town the duplex is in. Overall, very happy with the property thus far as well as the lessons learned!

Lessons learned? Challenges?

There were too many lessons to count, but I'll hit 2 big ones:
1. Get hands on experience yourself, even if you don't know what you're doing. Even if it's only once, you'll figure out what you do and don't like, where you can save $$, and you'll know what to expect from your contractors
2. Recognize the value of your time and your skills. It might take #1 to learn this, it did for me...some things were exhausting and I sucked at it. I'll now hire those all out, but do ones I like and can save $$

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

Bottom Line Property Management was a game changer, and a complete 180 from my property manager on another property. They were incredibly professional, communicate regularly, and produce results. Contact Chad Carter and Kevin Stringari (both on BP)