INVESTING IN MULTI-UNIT PROPERTIES

Multiple oddball configurations are the kind of properties that I preach about because they offer a wide range of opportunities. These are mostly older non-conforming type real estate. For example; "cluster houses" like my Haywood and Cherry Creek properties. I call them "challenged properties", meaning most investors don't want to touch them. I own many properties with various building combinations such as a three-unit apartment building, surrounded by 4 cottages and a duplex. My Oregon Street property was an older 4 bedroom family house and a large 2-story duplex with a garage. The property was easy to convert to 5 rental units by making the garage into a 1 bedroom apartment and splitting off a bedroom and bath ­from the 4-bedroom house. A rear door entrance made the house conversion fairly inexpensive and of course created 5 separate rental units and of course more income.

Obviously, my basic idea was to purchase three rental units at the regular 3-unit price, knowing all along I would be able to modify them and quickly start earning 5 units worth of income. Oregon Street was an extra special money-maker because the property was rundown and rents were abnormally low when I acquired it. With the conversion to 5 units plus my fix-up work, I was able to increase rents from $1000 monthly to $1900. The total job took me just over a year to complete. A short time later I sold the property for more than double the price I had paid.

From an income standpoint, which I care most about; oddball units command the same rents as newer apartments, sometimes more because they generally offer more privacy. Another very important common attraction is that older challenged units have long been paid for! They have no bank mortgage to mess with. More often than not owners can finance the sale. That means no credit applications, tax forms, loan fees, appraisals and variable rate bank loans. In summary, lower purchase prices, less competition and long-term owner financing are commonplace with these types of properties. If cash flow turns you on, my advice is start looking for my kind of "challenged" properties today.