First Multifamily (Long Distance BRRRR Gone Sideways)

[Stefan D.]

Investment Info:

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

Purchase price: $91,200
Cash invested: $70,500

The nightmare scenario they warned me about on the BP forums!

I own four houses and decided to make the jump to my first multi-family with a small up-down duplex in the Pittsburgh ‘burbs. It was a long-distance BRRRR deal, my first deal in the pandemic world. I'd spent months trying to find something and even backed out of one deal, losing my $3k EMD, before finding this one. This was late 2020, and the market was HOT.

This duplex was a bank foreclosure, listed at $96,200, I haggled them down to $91,200. The closing process was a two-month nightmare, and my realtor ended up breaking up with me (ok, she moved on to bigger and better things). My contractor estimated $35k (I guess he never checked the basement), and I was hoping for $165k for the appraisal. I figured I'd sink at least $40k in and leave a bit of cash in the deal - little did I know how this deal would screw me.

During close the bank had told us they would not turn the utilities on. “Could not” would have been more accurate, since every utility was broken! The house had been vacant for at least two years, so the electric panel was rusted through, the gas lines had been disconnected and the water pipes had frozen and burst. I ended up working with seven different contractors - and spending countless hours on the phone trying to corral contractors into doing work for me. I ended up putting LVP over the beautiful hardwood floors because so many hardwood floor refinishers bailed on me. Contractors are not struggling for work right now, and I need to get better at convincing them to work with me. It took five months from close to getting the first unit rented.

I sunk $162k into this project, and had an appraisal of $172k - meaning I left $40k in the deal and lost my f---ing shirt.

Real estate investors are an annoyingly optimistic bunch, so I’ll try to put positive spin on this; Rent is $1795 total, so the cash flow should be decent. If I sold the duplex now I think I’d get at least $180k, so I’d break even (after fees). It’s basically the same as if I had put a 20% down payment and bought the duplex turnkey.

But, if you factor in the blood, sweat and tears I put into this place, was it still worth it? Probably not – but I’ll keep my chin up, learn the lessons, and do better next time.

[Bryan Danger]

Sounds all too familiar, but glad to hear we aren't alone!

We bought a 4plex (also our first) in UT that turned out to not be the "up and coming" neighborhood we thought, and soon after moving in learned that it was the town drug house and brothel! 

Took us buying the one next door that shared the driveway and another full rehab to clean up the neighbrhood (both full of squatters and both with all utilities also broken/burst), spent several times over our budget and then made far less than planned on rents. 

We eventually just sold it to break even after several years and try not to think about the blood, sweat and tears aspect.
We feel your pain, but the lessons will stick with you! ;)
Better luck on the next one!!