Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $660,000
Cash invested: $50,000
Closed on new construction that I house hack, triplex, under VA 30 year fixed financing. $0 down to close deal. Spent about $50k in upgrades mainly external capital expenditures (yard, privacy fence, dirt work, drainage, rain gutters, etc.), rented property on upper-end of projections, and am cash flowing off rental income on 2/3 units while living rent-free in the third . This is my first deal and goal is to expand out and scale up with more multi-families.
What made you interested in investing in this type of deal?
Been following Bigger Pockets for about 6 years while PCSing across the country for the Army. With the amount of volatility and moving around, I was always a little hesitant taking on so much leverage and got stuck in a bit of an analysis paralysis rut. Having recently deciding to seperate from the Army I finally decided to pull the trigger. I think what really gave me the confidence was when interest rates hit historic lows and I was able to get such competitive financing.
How did you find this deal and how did you negotiate it?
Found on the MLS myself and negotiated through an agent.
How did you finance this deal?
VA 30 year fixed rate.
How did you add value to the deal?
Multi-family moves pretty fast in Alaska, and from my perspective, always seems to be under supplied. I knew I needed to pull the trigger fast. I offered full price and tried to make up the difference on comps. We negotiated to have an asphalt driveway put in and a few other appliance upgrades to make the property more marketable and allow for easier snow removal.
What was the outcome?
We closed, but experienced significant construction delays (90+ days). I had to, embarrassingly, turn away my initial set of tenants due to the property not being move-in ready. Luckily, I at least suspected this was a possibility and had not taken Deposits to Hold at that time. We also experienced appliance shortages and sub-contractor delays. The dust settled, everything is rented on the upper end of my forecasting.
Lessons learned? Challenges?
Yes, 100%. I should have vetted my agent better and went with an agent who thinks more like an investor. New constructions don't come with everything to make them rent-ready, and I under-estimated the start up costs were about 3x my initial projections. Rent, marketing, and vetting all went much better than anticipated (thanks Bigger Pockets). My BS filter is now more calibrated for what is and is not a realistic timeline for new construction.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
No, I forced this deal through, and the numbers were good enough that I was not willing to blow up the deal to change my agent or lender. But neither were a good fit. But you fight with the Army you have, so that's what I did. I will be going with a different agent and lender for subsequent deals (hopefully, someone from Bigger Pockets).
