we closed in October on a $950,000 9-unit building with $50,000 down and 6% mortgage amortized over 30 years with a 15 yr cash out. In addition, owner loaned us $100,000 at 6% simple interest for one year to make major repairs (installed heat pumps, replaced boiler (for heating water only), replaced some siding and major roof repairs.)
We were very clear with each other what we each wanted out of the deal. Owner didnt need a lot of cash out (he had recently sold a CA home) and is now getting same monthly income he had previously without the headache of maintenance and management.
Building was poorly managed and rents waaaay below market, which is where we saw value. We didnt have a lot of cash to invest (2 partners, each put in $30,000 at closing) and wanted to leverage as much as possible. We raised rents almost 100% (on average). 30% upon closing and 70% 3 months later (all were on month to month leases and we gave legal notice). We used the notebook method with everyone and most suggested a new rent higher than the one we had in mind. We also offered annual leases which most were glad to get. We asked one tenant to leave (5 pets--we told them they could stay if they found homes for the pets, as it is a no pet building), and we had it rented by the time they moved out.
We will have to repay $100,000 loan (+ $6000) in September and probably will each put in another $40,000 to 50,000 to do so. But with all major repairs done and a cash flow of $4000/month (with healthy allowances for maintenance and cap ex) we hope to start taking a monthly cash out in a year or so....
