Nice duplex, no work needed

[Cole Bennett]

Investment Info:

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

Purchase price: $150,000

Duplex that had been recently renovated. Nice place, but we bought it in part to help a friend make another investment.

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

We had bought a 4-plex in the area 6 years prior. We knew this wasn't the same "cash cow", but didn't think it looked bad. Not the most savvy decision on our part, but we were helping someone we knew and respected try to move into the area.

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

Some folks we knew and liked had bought the house next to ours and were renovating it when the market fell out in '08. They were 80% done, and couldn't get any more money to finish. They had been investing serious money into our neighboring property, one which just the year before had been a straight-up crack house. They had bought, renovated, and held several properties in the area. They asked if we were interested in buying this recently-renovated duplex. We thought we'd help out.

How did you finance this deal?

Standard 20% down bank loan.

How did you add value to the deal?

It was nice and stabilized already, not much to do but manage it. We've kept it running smoothly. Just put a new roof on it (they took off four layers of shingles and had to install sheathing, since there was none to begin with!).

What was the outcome?

A decent property that pays for itself. Nothing amazing. We are talking with lenders right now to do a cash out refi between this one and our 4-plex, and pay this one off.

Lessons learned? Challenges?

We were doing a favor, and should have still treated it like a business decision. We should have negotiated the seller down more. Or just found another property owned by people we didn't know. With the $150k we paid for this one, we probably could have gotten 150% of the house we did at the time if we had really hunted.