My exchange closed finally. This was huge!

[Steve Vaughan]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $930,000
Cash invested: $207,000

Completely FSBO exchange from a 114 year-old rural mixed--use building 35 miles away into a 1970s 11 unit on 3 separate parcels 4 minutes away. Purchased below assessed value from a private seller I sent a postcard to a long time ago.
Manager already plugged in so giving a PM a try for first time. 60-day cancellation and no fill-fees, but I will handle most license-required repair work. Those were the largest expenses.
Gross rents are $9,000 / mo with 4 under market by about $100/mo. Estimate market value at $1.1M. Kudos and thanks to my long-time private lender that loaned on one quad 76% of PP with no hassles and no fees at 6%. Appraisals alone here are taking 6--8 weeks.

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

Commercial scale without commercial financing. I can separate the parcels for easy financing or exit.

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

This is right across from the park. While taking my son to youth baseball, I saw them tucked in re corner and sent the out of state owmer a postcard. He had it on his desk a long ti me before he was ready and called me.

How did you finance this deal?

2 buildings were exchanged from a long-time commercial asset hold. One was privately financed from a couple that has been lending to us for years.

How did you add value to the deal?

By limiting middle fat. The seller sold for 90% of market value minus commissions he didn't have to pay selling directly to me. On the sale/relinquish side of my exchange, same thing. They paid more closing costs than normal to boot. The savings doing things myself were about $120,000. The savings by it not hitting the market were another $100,000. Would have been a competitive bidding war no doubt.

What was the outcome?

A managed newer building close to home with both cash-flow and appreciation potential!

Lessons learned? Challenges?

The 1031 exchange process sucks. Next time I will seller-finance as an exit from a large appreciated asset.

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

Absolutely not. The value was in the cost savings.