4 plex in small town VA

[April Vogt]

Investment Info:

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

Purchase price: $209,000
Cash invested: $37,500

Contributors:
Amanda McKane

This well taken care of 4 plex was purchased with 2 partners in the beginning of 2021 through owner finance, terms of 17.5% down, amortized over 30 years at 6% with an 8 year balloon. We were actively offering in the area on potential properties to be used as Airbnbs or other STR, & found this a stable property to complement our more risky endeavors. Projected cash on cash return was slightly above 14%, now 6 months into ownership we will be able to run more concrete numbers-however this is holding true. We inherited all 4 tenants and are converting them to our leases as their previous leases expire-so far we've had some headaches but nothing more major than any of our local holdings. In the future, as a more desirable unit becomes available-this was an original Sears Roebuck home, converted to multi-family over the years. It has good curb appeal and walkable to a cute downtown-we may convert to an airbnb. A refinance is planned within the next 3 years but will be secondary to refinances we hope to complete on our airbnb properties in the region, which are value-add

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

We had some riskier investments in the same partnership and wanted to complement those with a more stable investment

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

We found this property had been on market for quite some time, yet the numbers made sense. Upon speaking to the realtor, he indicated seller financing was a possibility and the owner was liquidating several properties in the area and moving away. We decided to offer a few options to the seller and met in the middle

How did you finance this deal?

Cash from 3 partners, spilt equally. I personally used a Heloc for my portion

How did you add value to the deal?

We haven't added any value to the property ourselves (yet). The previous owner was a master electrician and had upgraded all electrical systems and the property over the years-the clearly had a pride of ownership. The value was in the contacts we received from him, and our home inspector, who also runs a handy person team in the area.

What was the outcome?

Closed in April & are now 6 months in! We had a larger capital expense (coin washer) early on but should have our reserves in place within 4 months from now.

Lessons learned? Challenges?

Potentially choose a bank local to the area you are investing in-we made this harder on ourselves by not having a branch nearby. We also learned to lean heavily on the government assistance program that we contract with (2/4 of our units) Once we learned the ins & outs of their program it made communicating with our inherited tenants much easier