Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $480,000
Cash invested: $500,000
4 unit building in Roy, Utah. Roy is home to Hill Air Force Base and close to major employers like the IRS, Autoliv among a few. The area is clean and the building features central heat and air and laundry in every unit with off street parking and assigned spots. The units all feature 2 bedrooms, 1 bathrooms
What made you interested in investing in this type of deal?
I was looking for cash flow, I searched aged listing in Ogden, Utah and surrounding cities and found one that had been listed for over 90 days. Since I grew up in Ogden, Utah I knew some of the fundamentals of the area and I was interested in purchasing and bringing the rents up to market value.
How did you find this deal and how did you negotiate it?
I searched the Utah Real Estate App, an interface with the MLS that is available for all non-agents looking for a home in Utah. The listing agent was someone I knew from High School, I recognized the name and we chatted about opinions of the market there and the market rents. I ultimately wrote a full price offer.
How did you finance this deal?
I paid cash, funds that I had from other investments. I later added this property to a portfolio loan and wrapped 12 other properties I owned free and clear in the area. The loan product is the portfolio DSCR loan, easy to qualify and at the time a phenomenal rate!
How did you add value to the deal?
I had planned to manage the property myself, but I ultimately decided to hire a property manager who handled turn over repairs and re-leasing the units to the existing tenants and gradually increasing the rents to market. I figured my proforma on $750 a door, legacy tenants were paying $550 to $675 a door. Once the units all turned over the rents exceed by proforma. There were maintenance issues like new asphalt in the parking lot and replacement furnaces, etc. Repairs I'm happy to make!
What was the outcome?
The property is consistently fully leased, the market and in-place rents are $1,295 per door and all the units have new counter tops, blinds, flooring and are well maintained by the 3rd party property manager. I had expected to see the a 5.23% cash on cash and with the new leverage in place I'm well over 11% cash on cash.
Lessons learned? Challenges?
I only wish I had bought more, the agent who helped me on this deal and a couple of others cold called other 4 plex owners in the area and lined up the sale on 3 more. I got cold feet on two of those, so I own two of these on the same street. I wish I knew what I know now and bought them all!
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
yes, local agent Delaney Stevens, I believe he is with a different brokerage now.
