Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $60,000
Cash invested: $5,000
Sale price: $92,500
This was a duplex in a rough area with tenants in place. It was in relatively good shape with only a little work needed.
What made you interested in investing in this type of deal?
The duplex was on a street that was quite rough, but the area around it was showing signs of gentrification. I generally don't buy in this part of town or in areas this rough, but I saw potential in it turning around within 5 years.
How did you find this deal and how did you negotiate it?
The deal was on the MLS. There was 3 bids. I ended up going up to ask when they asked for highest and best. My realtor has worked with me since 2008 and let the seller's agent know I had never not closed on a deal once it was under contract.
How did you finance this deal?
At this point I had done about 6 or 7 loans with my preferred lender. The loan would only be for $48k (20% down), which is generally under their loan limit but with my track record and knowing I would continue to bring in more business, they had no issue with the loan.
The loan was a business loan with a 20 year am/ 5 year balloon at 5.25%.
How did you add value to the deal?
This was a rough D area. One of the benefits is that high end materials are not needed. A suitable floor is all that is expected. I did a lot of the work myself. I laid value priced laminate plank flooring myself. My husband fixed the porch railing which looked like it was falling down, but the inspection showed was just cosmetic the supports where fine. All in we were about $5k including an HVAC.
What was the outcome?
I expected to wait 5 years for things to turn around. I saw on Realtor.com that a duplex in the neighborhood sold for $86k. I called my realtor who assured me mine would sell for at least that. We had 4 offers in 24 hours with the best being $7500 over ask. We closed in 3 weeks. We made over $30k in only 18 months including rent and appreciation.
Lessons learned? Challenges?
While I happy to say this turned out to be a huge success, managing lower income tenants is not for the faint of heart. Not just rent challenges but often they don't report maintenance issues for some reason.
Once a tenant moved out and I was at the unit showing side A. I left around 8pm. The side B tenant came out as I was leaving and said, "Does your husband know you are here this time of night?" There was a murder on that street many years ago. Everyone liked to tell me about it.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Samantha Taylor is a great realtor. I have used her for many deals over the course of 12 years.
CARO FCU is my preferred SC lender.
