Investment Info:
Small multi-family (2-4 units) buy & hold investment in Savannah.
Purchase price: $318,000
Cash invested: $3,500
4 Unit Quad ripe for BRRRR strategy. Currently each tenant is month-to-month paying $650/mo. Market rent for a fixed up unit in that neighborhood ranges between $1200 - $1400 per month! Will apply the BRRRR strategy to force appreciation into the building and raise its overall value. We will then refinance and use the proceeds to purchase another similar property.
What made you interested in investing in this type of deal?
I was in the middle of completing rehabs on my first Quad when this one popped up on the MLS in the same neighborhood. It was a no-brainer!
How did you find this deal and how did you negotiate it?
Initially, I found this while I was checking out the MLS. We had to act fast - the next day we submitted 3 offers and ended up losing out. 90 days later, we got word that the initial buyer couldn't secure financing so we had a second chance. We jumped at it with a full list offer of $318,000 knowing full well that the property was grossly mismanaged and under-rented.
How did you finance this deal?
I was able to raise $85K in private capital from a college friend of mine. I then negotiated a "7 Press" or private loan structure with my partner that pays him 7% interest with a 3 year balloon payment. My partner will also get 25% equity of the LLC that holds the property upon refinance. All principle and interest payments are deferred until the refinance and I will be funding the estimated $78,000 in rehabs from the cash flow of the building. We are estimating an ARV of $485,000.
How did you add value to the deal?
We will be doing significant cosmetic updates to each unit including tile kitchen floors, updated HVAC, updated electrical, wood-look vinyl flooring, fresh paint, and W/D hookups. These renovations will bring in about $1200-$1400 per month in rent (twice what they are getting now).
What was the outcome?
Still working on this one, but we expect similar returns from our first deal down the block. Once stabilized, we are projecting cash flow after all PITI and variable expenses to float between $1,400 and $1,800 per month.
Lessons learned? Challenges?
This is my first deal using Private Capital. I've learned so much about negotiating and deal structuring. We are still getting our legal paperwork together, but all in all, this deal will make my partner around $19,000 in profit - pretty good for a completely passive investment!
