4-plex Purchased during Quarantine - How it's going...

[Bobby Hosmer]

Investment Info:

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

Purchase price: $490,000
Cash invested: $40,000

4-plex consists of four 2 bed/1 bath units.
- Two are one story, and are 800 sq. ft
- Two are two stories, about 1300 sq. ft

The area is in North Tucson, about 2 miles from the University of Arizona, and a half mile from the University Medical Center. Currently, the area may look rough, however, it is developing in a direction that was appealing to me and my criteria.

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

Background:
This unit is close to a University and even closer to a Medical Center (two economic engines). While this property did not meet the 1% rule upon purchase, I saw a lot of long term growth in the area. This includes upscale restaurant development in the neighborhood (think Starbucks and other chains). Since I plan to own the property over 10+ years, it fit my criteria to add it to my portfolio.

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

A family friend was the listing agent on the deal, and she sent it to my attention before it came on market. Originally, I was beat out by a cash buyer. But, after they pulled out of the deal, I didn't need to negotiate much. One thing I did to separate myself from other buyers was to increase my escrow deposit, and decrease my Inspection time frame to show how serious I was.

How did you finance this deal?

Traditional Financing with an Investment Loan through a Mortgage Broker I've used in the past. I also took on a partner to fund part of the down payment with a line of credit.

How did you add value to the deal?

This part of the process is ongoing, and has been delayed, but I am still plugging away to get it done. Here is a summary of my inital projections:
Plan is to renovate all four units to modernize the living spaces and add square footage. This will be done by:
- Removing the original carpet flooring, and replacing it with faux porcelain tile
- Updating counter tops and adding a tile backsplash
- Updating lighting and lighting fixtures
- Adding sq footage by moving the entry way

What was the outcome?

I have finished renovating the first unit and will be putting it on market for rent this week...

Lessons learned? Challenges?

I would have delayed my renovations until 2021 if I had to do this over again. Covid-19 has caused problems with finding contractors, getting materials, and has severely delayed my renovation timeframe. It also has reduced current rents in my area. So, I have shifted my goal for this property to be about capital preservation (getting tenants into the property to help with mortgage paydown) and will worry about adding value next year.

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

I worked with James Igbinovia from VIP Mortgage in Scottsdale. VIP is a bit more expensive when it comes to closing costs, but the level of service and attention to detail which James provides to me and my property business is awesome, and it is why I stick with him. I have used him for all of my deals.