Two Family Investment that I started out with

[Jennifer Hoover]

Investment Info:

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

Purchase price: $72,000
Cash invested: $14,000

Two Family rental property. Steady performer for 11 years.

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

Because I was young, poor, a single mom working two jobs and had no credit! I knew I needed another way (besides working my tail off for others) to get ahead. This deal stuck out to me mostly because no one wanted it. Which meant that the seller probably would work with me on owner financing. I didn't look hard at any of the numbers I analyze deeply now; it was all about getting that foot in the door, getting a hold on a property, and creating some opportunity and hope for myself.

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

I found this on the MLS. I negotiated the deal down slightly, but because the seller agreed to owner finance, I was willing to pay a higher amount since he was taking a lot of risk. This is something I tell my own clients now as a Realtor - you probably aren't going to get a killer price AND owner financing... killer prices are for cash, owner financing means some compromise and some compensation for a seller's risk.

How did you finance this deal?

I got the seller (who owned the property outright) to sell to me for $42,000 with $1,000 down with a term of two years, and interest only payments (at like 7%) for the first year. The property title transferred to me, and he held a first lien. So, I was responsible for all the costs from insurance to taxes to water, which was attractive to him to be rid of.

How did you add value to the deal?

It was a very distressed property. So, I rehabbed the building to the best standard I could on my limited income at the time, in about 8 months.

What was the outcome?

After the property was rehabbed and rented, I did a cash out refinance at $72,000 on a 15 year mortgage. I used the cash out to make some additional improvements, and used the money to fund another deal on a larger multifamily property.

Lessons learned? Challenges?

This was 12 years ago, so I didn't have access to things like Bigger Pockets. I didn't know that what I was doing had a name (BRRRR). I still had a flip phone! So, it was all a challenge, and I had no road map. I had to really THINK and scheme through everything with no real guidance. Which was a fantastic opportunity- there was nothing but grit and persistence (and poverty and stubbornness!) driving it all, so I got the opportunity to prove to myself that I could do it. And then I was addicted!