Duplex BRRRRed to Perfection

[Jake Moran]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Lodi, California.

Purchase price: $360,000
Cash invested: $30,000

40% cash-on-cash returns after refinance.

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

My good friend found the deal on the MLS and was going to buy it himself, but when it looked like his financing might fall through (the lender wouldn't count his 1099 income), we started talking and decided to go in on the deal 50-50.

How did you finance this deal?

Conventional loan, 20% down ($90k)

How did you add value to the deal?

Since I live out of town, my buddy, his wife, and his father-in-law put in some sweat equity to clean up the two units. Bathrooms got new flooring, tile, vanities and fixtures. Kitchens got new countertops (laminate), sinks and fixtures. Everything got new paint. The only thing we hired out was the installation of 10 new windows. All in all, total rehab was under $13k.

What was the outcome?

The two units are bringing in $3,050 monthly rent (and could still be higher - the Central Valley in northern California has extreme rental demand right now). Original mortgage was $1,650, other costs include lawn, water, and maintenance reserves. Total monthly cashflow of $1,200/month, or 13.7% cash-on-cash returns.

But the best part is that we are now in the process of refinancing. Based on current comps, we are expecting it to appraise for at least $480k. We can only get a 70% LTV. When all is said and done, we should cash out $70-80k, so our total cash invested will be about $30k. And our mortgage will be $200 higher, so our monthly cashflow will be about $1,000.

Which puts our cash-on-cash returns at 40%.