Value Add 3-Unit, Long Beach CA

[Cody Charnell]

Investment Info:

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

Purchase price: $630,000
Cash invested: $100,000

Value add 3-unit property in Long Beach, CA. I purchased the property with FHA financing in October of 2020 during covid-19. There is a 3bed/1bath house in the front and a two story duplex in the back with 2bed/1bath upstairs and a 1bed/1bath + 1car garage downstairs. The property needs a full rehab ($100K est.). ARV is $800K-$825K. Once the rehab is complete I plan to refinance into conventional financing and purchase another value-add deal using FHA financing.

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

I like the forced appreciation and the ability to hold the property after the rehab is complete.

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

The property was listed on MLS. It was a trust sale and I was able to negotiate a $100K price reduction and a $25K credit because of the property condition and market timing with covid-19

How did you finance this deal?

I used an owner occupied FHA loan to purchase the property.

How did you add value to the deal?

Rehabbing all units and increasing rents. Replacing roofs and plumbing on both structures.

What was the outcome?

Still in progress...

Lessons learned? Challenges?

Still in progress...

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

I am a real estate professional and I specialize in this property type in the Los Angeles and Orange County market.

[Cody Charnell]

@Rory Coyle - Thanks! I think house hacking in Los Angeles is a great strategy. I like the markets that you mentioned, especially Long Beach because it isn't subject to LARSO. It would be great to keep in contact. I always need people to send deals to.

@Jared Bigman - Thanks Jared! 

@David Featherstone - Thanks David! Hopefully I will have some insights to share as I go through the rehab process on this property.

@Trenton Miller - I am using Borba Property Group to manage this property. They manage another triplex for me in Long Beach and they do a great job. 

@Jonathan Taylor - Thanks Jonathan. My strategy is to refinance into a conventional loan and hold this property long term. I will use FHA financing to purchase another 3-4 unit property next year. Because of the credits and my commission I actually got money back in my pocket at closing and I currently have no money invested in this deal. I set aside $100K to give the property a full rehab (I think I can get away with less). I will come close to doubling my investment on this deal (which I think is pretty good!). Also, because I am a real estate professional I can use bonus depreciation and cost segregation to save a significant amount on my 2020 federal income taxes. I am not pulling cash out of this deal with a refinance, but when you consider the tax savings I am actually keeping a lot of money in my pocket which I can use to purchase more real estate.