New 4 Unit Purchase in the Greater Milwaukee Area

[Sam Domach]

Investment Info:

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

Purchase price: $330,000
Cash invested: $84,000

Recently updated 4 unit. New furnaces and water heaters and a new roof. This was an interesting one as the appraisal came back lower than the purchase price which was a shock with how updated and cash flowing the property was. Needed to bring a little more to the closing table, but the CoC return is still at 9%.

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

I love small multifamily. It provides fantastic debt to use especially today where rates are as low as they are.

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

Found this deal on Realtor.com and got the MLS as well. The list price started at 384K in the hot market. Waited until this sat on the market for a month and a half and the price reduced 5K. Offered 350K. Previous owner just wanted the property off their books, so wanted a waive of appraisal and inspection. Had an inspection report on file from an inspector I have worked with a lot in the past so got good information there. With taking more risk removing contingencies, offered 330Kto compensate

How did you finance this deal?

I financed through a traditional mortgage lender. I put down 25% with a rate of 3.375% on an investment property loan.

How did you add value to the deal?

Will be updating the exterior/landscaping a bit. Large mechanicals are all solid.

What was the outcome?

Current cash flow is $620/mo with below market rents for the area. Current rent around $850/unit. Market rent near $1000/unit. As renters leave, will be renting out higher and cashflowing around $1200 per month.

Lessons learned? Challenges?

Be flexible with sellers to get great deals. That's not to say you should do anything dumb, but there are a lot of ways to move prices based on how the seller is feeling and what they want/need to do. Always trust the numbers. This also taught me that you can buy property site unseen. That comes with many other obstacles and risks, but there are ways in which you can do it without putting too much risk on your plate with a agent or property manager that you can trust.

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

Austin Maly - ReMAX Realtors out of Madison, WI - realtor
Wes Kane - Thompson & Kane out of Madison, WI - lending