Investment Info:
Small multi-family (2-4 units) buy & hold investment in Boston.
Purchase price: $530,000
Cash invested: $39,000
A duplex I house-hacked after doing a lot of renovations myself with the help of a friend. Used an FHA loan. I didn't know what I was doing at first but learned a ton. 2006 was a tough year and it lost money at first. With time, both the property value and rents have appreciated a lot. Recently (late 2020) I took out a large line of credit on this property to do renovations and purchase more properties.
What made you interested in investing in this type of deal?
I was young, single, and motivated. I wish BP had existed then, I would have made far fewer mistakes!
How did you find this deal and how did you negotiate it?
My agent, who was a friend and my former Landlord had purchased the house from a distressed seller two years earlier. He started having financial trouble and I bought the house from him. No real negotiation - we agreed on a price that was reasonable and then both did a lot of work to it.
How did you finance this deal?
I financed it with a traditional mortgage. 20% down, owner occupy.
How did you add value to the deal?
Sweat equity. The place was neglected. Terrible tiny kitchens that didn’t take advantage of a nice view were changed for the better. Fortunately this neighborhood, and all of Boston, have been rising steadily for more than a decade now. It’s rentable but still needs cosmetics, especially the exterior.
I also rent this by the room. The area is very popular with singles in their 20s and 30s. There are pros and cons to renting this way but overall it works well in this neighborhood.
What was the outcome?
I still own it. Usually very easy to rent and I raise the rents every year. This is the first year (2020) I’ve had trouble finding a tenant when one moves out. This is absolutely due to Covid and the flight from the city (And high rents) while people work from home - I had to reduce rents to get someone in.
Lessons learned? Challenges?
Initially I (we) did the renovations ourselves. This was out of financial necessity. Now i would never do that again, never mind that I don’t have the time. My skills were enough to get it “rentable” but I would be able to get higher rents if it were renovated to a higher level. It also needs a large retaining wall in the back that will be extremely expensive.
