From Panic Attacks to Profit, a Tri-Plex Turns Terrific

[James B Ballance]

Investment Info:

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

Purchase price: $47,500
Cash invested: $37,500

A tri-plex we purchased from what I would politely call a slumlord, over the course of 2 years we gutted and renovated a 2 bedroom unit, completely rewired, re-plumbed, and redesigned the other two 1 bedroom units. Now we're positioned to convert the 1 bed units both into 2 bedroom units, increasing our monthly cashflow by approximately $100 per unit after a cash-out refi which will keep our payments neutral and recover our cash investment since purchase.

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

After buying our first investment property (before our personal home), my wife agreed to let her crazy husband purchase our first multi-family property. Having done renovations on larger homes with my family for around a decade, I was excited about the financial prospects and what we could make the home into.

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

We found the property through the MLS and used a real estate agent we'd known for years to help us negotiate the price

How did you finance this deal?

Conventional financing

How did you add value to the deal?

Gutted the lower level unit and completely redesigned it. We rewired the property, put a new roof on it, new plumbing, and improved the layout of the lower level unit. The upper units saw HV/AC updates, new water heaters, and one unit has had new flooring (LVP), cabinets, and because of connections actually has granite counters.

What was the outcome?

This was intended as a Buy-and-Hold, and we continue to cashflow on this property $250 per door.

Lessons learned? Challenges?

As the subject line implies, gutting and renovating the lower level became far more of a monster than we'd anticipated. This was amplified by a terrible GC we were using at the time who we unfortunately were committed to due to naively believing he would finish the job with the payment setup we had.
Summary, never hire the cheapest contractor, and test them out on smaller projects before letting them run a full-scale renovation.