All Forum Posts by: Sam Denny

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $3,000,000
Cash invested: $750,000

Off market opportunity to purchase four separate 4-plexes that are all identical and next to each other from the original builder. The rents were below market rates and mostly on month to month leases. The total rents were $17,400 at time of purchase with units rents between 1000-1200. The buildings/unit did not need any major upgrades and had been well maintained.

What made you interested in investing in this type of deal?

I've been buying small multifamily in skagit valley for the past five years. I grew up in the area so know the rent market well.

How did you find this deal and how did you negotiate it?

My property manager knew the selling agent and heard it was being shopped off market. I was able to convince the sellers to allow for a 1031 exchange and longer closing period since the sellers were not in a rush to close.

How did you finance this deal?

Conventional financing with 25% down with a 1031 exchange for the downpayment with some additional funding. Four separate loans for each property.

How did you add value to the deal?

The current rents were well below market rate but still able to cover the mortgage. I knew there was opportunity to raise rents quickly with month to month leases but knew it could take a year or two with Covid.

What was the outcome?

My property manager was able to raise rents to $1500 a unit within 3 months with little turnover and no evictions. My current cash on cash is around 9% which met my investment goal.

Lessons learned? Challenges?

I had a little sticker shock at first with the price of each fourplex compared to what I've paid in the past but the numbers worked. Always important to do the numbers on every deal because lower interest rates can make a deal work that doesn't seem like it at first glance. I didn't have the initial down payment at first and tried looking for investors through friends and family. It was difficult to get a fast commitment so decided to was worth selling one of my properties to do a 1031.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

lender David Ells (easiest closing I've ever done), PK woolcock agent (knows skagit valley very well)

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $3,000,000
Cash invested: $750,000

I was presented with an off market opportunity to purchase four separate 4-plexes that are all identical and next to each other. The seller built them in the 90's and had self managed since. The rents were below market rates and mostly on month to month leases. The seller agreed to allow me to do a 1031 exchange, selling one of my other properties to come up with the downpayment. I was able to use conventional financing with four separate loans for each fourplex. The total rents were $17,400 with units rents between 1000-1200. My property manager has been able to increase all the rents now 1,500 a unit with less turnover over than predicted and no evictions. The units have only required minimal upgrades on the tenant turnovers (painting, flooring in one unit). My cash on cash is around 9% which met my investment goal. Initial asking price seemed high but with low interest rates and rapid rent growth in the area the numbers ended up working out.

What made you interested in investing in this type of deal?

I've been buying small multifamily in skagit valley for the past five years. I grew up in the area so know the rent market well.

How did you find this deal and how did you negotiate it?

My property manager knew the selling agent and heard it was being shopped off market. I was able to convince the sellers to allow for a 1031 exchange and longer clsoing time since the sellers were not in a rush to close.

How did you finance this deal?

Conventional financing with 25% down with a 1031 exchange for the downpayment with some additional funding

How did you add value to the deal?

The current rents were well below market rate but still able to cover the mortgage. I knew there was opportunity to raise rents quickly with month to month leases but knew it could take a year or two with Covid.

What was the outcome?

My property manager was able to raise rents with little turnover and no evictions in 3 months. I kept on the old maintenance person who was doing a good job at an affordable price. He was the uncle of the sellers.

Lessons learned? Challenges?

I had a little sticker shock at first with the price of each fourplex compared to what I've paid in the past but the numbers worked. Always important to do the numbers on every deal because lower interest rates can make a deal work that doesn't seem like it at first glance. I didn't have the initial down payment at first and tried looking for investors through friends and family. It was difficult to get a fast commitment so decided to was worth selling one of my properties to do a 1031.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

lender David Ells (easiest closing I've ever done), PK woolcock agent (knows skagit valley)

@Eric Jun Yuen  There are multiple factors for the appreciation up north including lack of housing supply and people wanting to leave urban Seattle but still stay in state.  Here is a link to an article about the amazon distribution center.  $355 million investment and 1000 new jobs.

https://www.heraldnet.com/busi...

Update:  I had an opportunity to buy a larger apartment complex in Mount vernon and decided to 1031 this property into the new deal.  I sold the property for 1,100,00, exactly double what I paid for the property in 2019.  Even with the 125K invested into updating the property, it was a great return!  It was a rough property when I inspected it but I'm glad I went through with the deal.

I would agree with the range of 1600-1800 for a large 2 bedroom.  I have quite a few two bedrooms units in Mount vernon and rent ranges from 1400-1750 for new available units depending on how nice/big the units are.  I think Marysville is a little more expensive but not much.  I tend to agree Marysville is a little rough but there are nicer parts.  Have you looked a little further north in Arlington, Stanwood, Mt vernon, Burlington and Sedro Woolley?  Rental demand is high in all those areas.  The new Amazon distribution center going into Arlington has really driven demand for rental properties in Arlington.    

I'll try to make it if I can!  Thanks for putting together a meet up in Skagit valley.

I agree with Lisa, there always high demand and few places to stay by Crystal.  Finding good property management and contractors can be tough up there.  I own a commercial property close to Stevens pass and its been a pain finding contractors.

@Paul DeSilva I'm closing on a 4 plex a hour north of Seattle on Friday.  I got presented with an off market deal that was too good to pass up.  I'm prepared not to be able to raise rents in the near term but long term has great potential post eviction memorandum.  There is always a reason to pass but you have to trust your numbers.

@Julie Marquez looks great! Awesome job. I just got under contract for a four plex in mt vernon that includes a vacant identical lot next door zoned Multifamily 2-4. Im researching if I want to build another 4 plex or sell the land. I have so many questions, haha. I’ll reach out soon if the inspection goes ok.  Keep on crushing it!

@Robert Freeborn I was thinking they were asking for cash invested after purchase.  I purchased with 25% down using a commercial loan from a local bank.