My First Deal - Duplex in Cedar City, UT

[Brandon Day]

Investment Info:

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

Purchase price: $175,000
Cash invested: $60,000

This was my first house and investment property. I had owned it for 6 months before I learned about Bigger Pockets. It is amazing how little I knew when we purchased it. This was a single family home near the local university. Minor updates to the upstairs, gut and full renovation for the basement. Updated landscaping for lower maintenance. Split electrical service and turned into a duplex. 2B/1B upstairs, 3B/1B downstairs (adjusted layout to add 3rd bedroom).

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

I had often been advised to buy a duplex for my first home. I did not know you could use a traditional loan for anything more than a single family home, so I looked for a place that I could convert. We lived in the renovations for two years doing nearly all the work ourselves, but it's worth it now to have rent come in every month.

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

Our market was heating up and homes were getting multiple cash offers within the first day (and this was well before Covid-19). As a first time home buyer with $40k in the bank, my wife and I wanted to put 20% down and knew we could not keep up with the investors. So I started knocking on doors in the area and met a couple that was ready to sale and did not want to use a realtor. The price they wanted seemed fair and was within our budget. We negotiated timing of close and a leaseback option.

How did you finance this deal?

Conventional loan with 20% down.

How did you add value to the deal?

Renovations throughout (paint, windows, cleaning, conveniences added like switches to lights instead of string pulls). Basement was largely unfinished - we completed the demo, adjusted the layout to add a 3rd bedroom, and finished. Replaced the roof from sheathing to shingles. Updated the landscaping and curb appeal.

What was the outcome?

We did a cash-out-refinance as we finished renovations for $262,000 (selling price could have been close to $300k). Both units were rented with top-tier tenants within days of posting.

Lessons learned? Challenges?

There is a lot of work that I determined is not worth my time going forward (sheetrock, tile flooring, installing cabinets, most licensed trade work etc.) Stretching renovations out 2 years while living in the house was tough for my wife's motivation, but it does not take many months of rent checks for excitement to rebuild. This was a great entry into RE, off-market deals, renovations, property management, and house hacking.

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

Mountain View Title (Title Company), Pillar to Post (Home Inspector)