House-hacking a fourplex

[Randy Mattila]

Investment Info:

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

Purchase price: $335,000
Cash invested: $20,000
Sale price: $485,000

My wife and I purchased this (C class) property in 2017 and house hacked for 3.5 years while self-managing. We did some light rehab while we owned the property and sold in spring of 2021 to do a 1031 exchange and buy two more (B class) fourplexes.

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

I wanted to save as much money as I possible could to invest in real estate. This allowed me to save a huge portion of my income for the next deal and get my foot in the door!

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

I found this deal through a local realtor that I built a relationship with. The property was listed on the MLS. We submitted our offer at full asking price with an escalation clause of $20,000 to sweeten the deal. The sellers accepted our offer without needing to use the escalation clause.

How did you finance this deal?

FHA financing at 3.5% down. 3.75% interest rate.

How did you add value to the deal?

The property was poorly managed by a farmer who didn't have time to focus on the management of the property. We came in and significantly improved the management and quality of our residents. After we removed a few bad tenants which we inherited we did some light rehab in each unit and put in some really great residents. We learned property management from a local investors association which proved invaluable to our success!

What was the outcome?

Our property increased in value significantly in the three and a half years that we owned it. We also brought the rents up an average of $150 per unit in that time. We sold the property in the spring of 2021 with a gain of $150,000 to do a 1031 exchange and buy two more fourplexes in a much better area of town.

Lessons learned? Challenges?

We learned that location is KEY to being successful in real estate. I doubt I will ever buy another property in a C class area of town. We had to deal with vandalism, police activity and difficulty finding good residents that wanted to live in our neighborhood. It usually took us 6-8 weeks to find a good tenant because we were VERY careful who we put in our rentals. We also had to deal with neighboring landlords who didn't care about their properties like we did.

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

If anyone is investing in the Tri-Cities area of WA I would recommend they contact Randy Hubbs with Investment Housing Specialists. They are a broker and property management company. I HIGHLY recommend their services!