Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $200,000
Pair of duplexes purchased with 1031 proceeds from a previous sale with about 75% financing. Rents were $575 per door. Currently, it is generating about $4,000 in monthly rent when fully occupied.
These buildings needed a lot of work. They had central heat only. Tenants provided their own window units. New central AC with heat was installed in all four units each time an existing tenant moved out. At the same time, all the single pane aluminum framed windows were replaced for double pane vinyl windows. New LVP flooring throughout. Exterior/Interior Paint, fixtures, etc.
These buildings were constructed in the 1960s with steel pipes and much of the plumbing has been replaced as needed including new supply lines in the ground and new sewer pipes under the slabs.
Ongoing maintenance costs have been pretty consistently high on this project, but the rise in rent over the holding time has been a saving grace. Now, very profitable with $4,000 rents and low monthly payments.
Passively considering a sale to do another 1031 exchange. Whatcha got?
What made you interested in investing in this type of deal?
The price was right for cash flow
How did you find this deal and how did you negotiate it?
This was in the MLS starting in October 2016. It was pending after 133 days on the market and fell out at 170 DOM. I made an offer within a few days of it coming back online and closed 4/21/2017 at $44,000 below the original listing price in less than 30 days.
How did you finance this deal?
Twelve month interest only commercial loan at a local bank. Cash out refinanced a year later into a 5 year balloon on a 20 year amortization. Refinanced the $185k balance in 2023
How did you add value to the deal?
Central AC, new windows, paint, fixtures, landscaping, roofing, flooring, major plumbing improvements, and more
What was the outcome?
Holding still with steady cash flow
Lessons learned? Challenges?
I may never buy a building with iron pipes again
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Sonny Delgado at Integrity First Bank was very helpful. Unfortunately, that bank was acquired by Farmers and Merchants Bank of Stuttgart (aka Bank of Fayetteville) and is no longer easy to work with.
