Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $385,000
Cash invested: $90,000
Contributors:
AJ Shepard
Two partners and I bought a four unit rehab project at the beginning of 2020. We bought the property for $385,000, invested about $90,000 into the rehab, refinanced seven months later, and the property appraised at $708,500! We increased the annual revenue from $24,000 to $54,000. Our scope of work included a new roof, gutters, siding repair/replacement, stairs/deck repairs, remodel two units and landscaping. This is a BRRRR "homerun" for the Portland Metro Area!
What made you interested in investing in this type of deal?
This property is located in a great part of North Portland and had a lot of potential to increase in value after repairs were completed. It is also a great long-term hold because of the location and ability to rent the units quickly.
How did you find this deal and how did you negotiate it?
It was listed on the local MLS and was listed for $450,000. After our inspection, I negotiated a price reduction and ended up not taking a commission to reduce the purchase price even lower.
How did you finance this deal?
Hard money loan for the purchase and construction costs.
How did you add value to the deal?
- Repaired/replaced siding
- New roof and gutters
- Exterior paint
- Landscaping
- Remodeled two units
- Brought rents up to market value
- Reduced monthly expenses
What was the outcome?
We added $323,500 of value according to the appraisal that was performed for our refinance.
Lessons learned? Challenges?
"Construction is a jigsaw puzzle and you just have to solve it."
Not everything is going to go according to plan when performing a rehab project on a house that is over 120 years old. Always get multiple bids from contractors and if all the estimates still seem too expensive, buy materials and find labor. I saved $4000 on the roof and $37,000 on siding repairs/replacement because I bought the materials and paid a crew to do the work.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Aside from recommending myself, a Realtor, Merchants Mortgage is by far my favorite hard money lender to work with. Adam Hartfeil and Bob Thomas do a great job for us.
