Turning a 4-plex into a 5-plex

[Reece Stanley]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $355,000
Cash invested: $70,000

Purchased with funds from a 1031 Exchange. We bought this building as a 4-plex and added another unit in the basement. Seller needed to sell quickly and we were able to talk him down $25,000.

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

We sold our duplex and were looking to use a 1031 Exchange into a larger multifamily property.

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

This deal was found on the MLS. We put in an offer at list price. However the appraisal came back low and allowed us to get the deal for $25,000 cheaper.

How did you finance this deal?

We used a 1031 exchange and because it was a 4-plex at time of purchase we used Conventional Financing.

How did you add value to the deal?

We have added a new unit in the basement and made improvements to other units upon turnover.

What was the outcome?

Still holding strong. Considering the possibility of selling and repeating the 1031 Exchange into a larger multifamily deal??

Lessons learned? Challenges?

Learning how to screen tenants more thoroughly as well as how to develop a professional relationship with inherited tenants.