First Duplex with Inherited Tenants

[Nathan Zierer]

Investment Info:

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

Purchase price: $230,000
Cash invested: $56,000

Contributors:
Sarah Zierer

Solid duplex in South St. Louis City that came with one unit occupied by tenants that had been there 26 years. The other unit need some minor repairs updates roughly $1,500 worth. We did this with conventional financing and are looking at this with a decent cashflow but also build of equity base, maybe for a future 1031. This property sits in a B+/A- neighborhood, and this is probably a solid B property. Now that property #2 is in the bank I feel like we are picking up steam and hopefully we can get moving faster this year.

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

We are looking to get our cash flow up and this happened to be in great stable/growing neighborhood. Also was first stab at what it was like to have inherited tenants.

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

Found this deal on Redfin and called up our realtor to make an offer. We also said we made it contigent on inspections but would take it as is so long as no major issues came up.

How did you finance this deal?

We utilized our HELOC to make a cash offer to make sure we could get it under contract, but then we financed in tandem with a 75% LTV.

How did you add value to the deal?

We purchased it below market rate because we went in with cash offer, I think the property is really worth about another 5-8% more than we paid for it. Also there were some minor issues that needed to be address and we personal fixed them so we have some sweat equity in it.

What was the outcome?

We have the property up and operating, we used Dion's (BP Ep 448) "Binder Method" to up the rent on the current tenants - who actually ended up a little higher than we were planning. We are even considering selling our single family home and moving into this to lower our house expenses and capitalize on our equity position in our current home.

Lessons learned? Challenges?

One thing is we should have gone back and negotiated lower, I feel like there was still more meat on the bone and should have just gone for it. The worst they could have said was no, but we could have picked up another 5k-10k.