Why Small Multifamily beats Single Family Hands Down

[William Bratrud]

Investment Info:

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

Purchase price: $325,000
Cash invested: $6,000

Brick fourplex consisting of four 2 bedroom 1 bathroom 850 SQFT units in a central location 20 minutes from downtown Knoxville

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

I have always wanted to buy a fourplex it was one of those investments on my bucket list for multiple reasons. I liked this one in particular as all units were rented out and although two of them were well under market it still had cashflow from day 1. I saw this as a simple value add with minimal work and in a market as hot as east Tennessee I knew this would likely become a great equity by appreciation move as well.

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

I watched the market everyday I knew my magic number and as soon as I saw this baby go live I booked the showing. After walking the units and giving a halfhearted visual inspection I made an offer on the spot. Knowing that this thing would disappear if i hesitated, I offered all cash with a 15 day escrow and no contingencies. I did ask for a 5 day due diligence and the seller accepted my offer.

How did you finance this deal?

Cash. I put 125K of my own money and got a private loan at 4% with 30yr amortized and due in 10. this gave me the 325K needed to close.

How did you add value to the deal?

I raised the rent on the under market month to month tenants knowing that in the process i would lose at least one low paying tenant. This opened up one unit for rehab which was basically just paint. That unit was easily brought up to market rent and theres one more to go.

What was the outcome?

After its all said and done this property cashflows around $2100/mo. After I Refi to get the rest of my money out and pay off the private loan the property should cashflow around $1400/mo. and thats with leaving absolutely no money in the deal.

Lessons learned? Challenges?

It made me a little sick to know that the seller picked this thing up for 100K less only about 6 months before i bought it but I purchased anyway because if Ive learned anything as an investor it is to run by numbers and not emotions. If i would have walked away because the seller was making a disgusting profit I would have lost out on one of my best ROI's to date.

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

I did use an agent. I wasn't licensed at the time so i had the help of a great young investor minded agent who I had previously closed a few deals with. I'd recommend Carlton Hackney any day, but now that Im licensed you could also connect with me if your looking to buy in east Tennessee.