Investment Info:
Large multi-family (5+ units) commercial investment investment.
Purchase price: $232,000
Cash invested: $43,000
Our first investment property is a six unit multi family property. We plan to fix it up, raise rents, decreases expenses, refi and buy more! It's that easy...right? ;)
What made you interested in investing in this type of deal?
After reading a lot of books and listing to many podcasts, I decided to go for 5+ units, vs single family or smaller. We want to be able to utilize caps rates to raise rents and lower expenses to get our capital back. Based on current NOI, expenses and estimated cap rate, the property based on our calculations should be worth $339,000 out of the gate. I think/hope we got as much of a steal that it looks like on paper.
How did you find this deal and how did you negotiate it?
I found it on the MLS. We were able to negotiate $12,000 off of the purchase price.
How did you finance this deal?
We are using a commercial loan with a 25% down payment.
How did you add value to the deal?
Rents are currently about $200 below market rent per unit. We plan to fix up units (some are fairly dated), raise rents as tenants move out and then refinance once our seasoning period is over. Most of the tenants are on a month to month lease.
Lessons learned? Challenges?
We had a lot of documents in our contingencies and heard crickets from the seller initially in getting them. We opted to get a lawyer because we were fearful there was a reason for the crickets and didn't want to lose our earnest money.
After we received the rent rolls and leases, we found out they were $15,000 behind on rents. We almost got cold feet, but after sleeping on it realized the purpose is to add value and this could end up working in our favor. We will see how it goes!!!
