Buy and hold duplex renovation

[Chip Larson]

Investment Info:

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

Purchase price: $127,000
Cash invested: $143,000

This did turn into a beautiful duplex after our 10 month renovation. It was also a great learning experience. We were considerably over-budget and behind schedule and, for that reason, it will take quite a bit of time to get a return on investment with this property. Additionally, I learned a lot more about managing a partnership during this project and will learn from the mistakes made. However, I feel good about turning a vacant, distressed property into a beautiful duplex again and improving the community. After this renovation I've decided to shift my focus to larger multi-family properties as I've come to understand that cash flowing a duplex in our area is quite challenging.

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

It presented as a good opportunity to renovate a property in the community where I live and was an attractive buy and hold deal from an investment perspective at purchase.

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

foreclosure.com. It was an REO and we became involved in a bidding war. I used the BP calculator to run my numbers several times to know what our max allowable offer would be.

How did you finance this deal?

Through a HELOC. We need to complete the garage renovation at this property and then plan to roll this into a commercial loan through my portfolio lender.

How did you add value to the deal?

This was a complete renovation of a duplex, interior and exterior.

What was the outcome?

It's a beautiful place. It was a very sought after property for renters as it stands out in the community.

Lessons learned? Challenges?

I learned a lot about partnerships and the importance of communication within them. We ended up being considerably over-budget and, therefore, the ROI will take longer. I partnered with a contractor who had a ton of experience as a sub-contractor, but not as a GC. Needless to say, we took our lumps with this being his first renovation as the GC. As a result of this experience, I've decided to invest more in larger multi-families moving forward.

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

Suzanne Walsh of Century 21 (Epsom, NH). She has been my buyer's agent for all of our real estate purchases since 2011.