SENSIBLE COASTAL REHAB FOR CASHFLOW

[Don Pearson]

Investment Info:

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

Purchase price: $700,000

Identified and acquired a low-risk bank owned duplex in San Clemente for a long-term hold period. At $230 per foot, the property was acquired at a significant discount to replacement cost.

With an improvement budget of approximately $85,000, we completed:
-New Interior / Exterior Paint
-New Windows
-New Flooring
-Fully renovated lower unit Kitchen and 2 Bathrooms
-New Forced Air Units
-Sustainable landscaping including installation of new water-saving irrigation and drought tolerant plants
-Significantly enhanced the look and feel of the property through strategic renovations, delivering additional value to the property.

The duplex currently projects high-end curb and interior appeal which provided for an increase in rental rates of nearly 40%. The building continues to generate strong, stable cashflow, while nearly eliminating R&M and CapEx costs.

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

-REO purchased during a very favorable time in the market (not favorable according to the naysayers of the time...).
-I knew the area and economic drivers.
-Path-of-progress opportunity.
-Purchased below replacement cost.

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

-Had an offer in the day it hit the MLS.
-Gave up the buy-side commission and gave it to the Listing Agent as incentive.

How did you finance this deal?

Combination of cash and debt.

How did you add value to the deal?

-Improved curb-appeal.
-Thoughtful improvements/upgrades and paint scheme in the top unit.
-Full gut-and-redo of the downstairs unit.

What was the outcome?

Long term hold with strong positive cashflow. BRRRR deal.

Lessons learned? Challenges?

I should have purchased 10 more...