Buy & Hold Duplex In Eastern Pennsylvania

[Nate Brown]

Investment Info:

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

Purchase price: $84,000
Cash invested: $150,000

The property is a 1,568 sq ft. detached duplex, built in 1900. It sits on a corner lot, has a large back yard and separate entrances for each unit. Both units are currently occupied, with a combined rent roll of $1,500 per month. The tenants are responsible for their electricity usage. The landlord pays water/sewage, gas (for hot water), and trash collection. I paid $84K cash for the property and will use cash for the construction costs, so I have no capital costs.

The property and both units has significant physical distress due to neglect from the previous landlord. As such, the property is in need of significant repairs and updating. I anticipate $45K-55K in renovation costs. I expect the timeline to be 6-12 months (taking COVID-19's impact into account). Construction will occur in three Phases.

Phase 1 - Exterior
Phase 2 - Unit 1
Phase 3 - Unit 2
I anticipate 2-3 months total vacancy as I improve the units.

The value add opportunities for this property are, higher rents (28% increase), shifting the cost of water/sewage & gas to the tenants, include a coin laundry service and collecting pet fees/rents. The current expense percentage (including set-a-sides for vacancy, repairs/maintenance, property management, CapEx, insurance & taxes) is 49%, giving us an initial CoC ROI of 7.7%. When the property is repaired, optimized and fully tenanted I will refi into the best loan possible. Conservatively, I anticipate the new CoC ROI to be at 12%, cash flowing $262 per month (after all the expenses mentioned above) as I leave $26,400 in the deal.

Despite everything going on in the world today, I'm super excited to have my first buy & hold property. To all the wonderful Podcast hosts and authors at BP (such as Brandon, Josh, David, & Mindy, Scott, Matt & Amanda, just to name a few), you guys gave me the knowledge base and confidence to make this happen! I may never get the chance to say it to you in person, so I'll say it here....THANK YOU, THANK YOU & THANK YOU again.

To everyone reading this, Take care & I hope you and your family stays healthy & safe!

Nate Brown.

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

The price per-door and the value add opportunity

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

I found this on the MLS and I made what I felt was a fair offer based on the current cash flow and physical condition of the property.

How did you finance this deal?

Cash from myself and my partner.

How did you add value to the deal?

By being able to offer cash, close quickly and absorb the significant cost of repairs because I do not have to pay for capital.

What was the outcome?

The offer was accepted in less than 48 hours.

Lessons learned? Challenges?

Lesson Learned: The city's Building & Code Department can be an ally and an asset
Challenges: Showing the very talented members of my team how technology can be leveraged to improve and enhance efficiency

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

I worked with a great team, but this is my first deal. It would be irresponsible of me to make a recommendation at this time. If all goes well on the next 2 or 3, I'll be screaming their praises.