Single family to duplex conversion update

[Isaac Larson]

Investment Info:

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

Purchase price: $317,000
Cash invested: $90,000

The legal conversion is finished and the remodeled unit has been rented out. Final product is a legal duplex with two 3 bed 2 bath units. Remodel costs with permit and architecture fees was roughly $110,000. Main 3 bed 2 bath unit is currently rented for $2400/month with the tenant paying electric, heat, and internet. I still plan to do some light cosmetic updates to the upper unit and plan to rent it out for roughly $1950/month. Cash flow once fully rented will be $1600/month

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

I saw a lot of potential to add bedrooms to the main level and there is a lot of square footage in the home (2600 above ground square feet). I also really liked the 4 car garage :)

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

The home was listed as a duplex for a few hours and I saw it. It was cancelled and then moved to a single family listing. After about 30 days on market it was still there and I went to tour it. Prior to inspection I negotiated the price from $350k down to $323k. During inspection I further negotiated the price down to $317,300 with an additional $10k in closing costs. Most of this was due to multiple plumbing issues, electrical issues, and roof leak problems.

How did you finance this deal?

Commercial construction loan with Bank Cherokee. Down payment was 20% of the purchase plus the rehab and the other 80% was financed.

How did you add value to the deal?

Legally converted the home to a duplex from a single family with a potentially illegal accessory dwelling unit. Added a second furnace to the home, split the electric, added fire and sound separation between the units, and a complete main floor remodel plus floorplan rework to add two bedrooms.

What was the outcome?

Legal duplex appraised for $490,000 and I was able to cash out $56k while maintaining 25% down on the refinance.

Lessons learned? Challenges?

Happy to discuss further on the phone. Too much to write down!

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

I represented myself. Roger Hamilton with Bank Cherokee was my lender. I worked with several contractors for the rehab as well.