The Deal:
There’s something to say about “momentum” in real estate investing. I don’t believe our portfolio would have scaled the way it did if we didn’t say “yes” to every opportunity. Grant Cardone says “Commit first, and figure it out later.” That’s the exact approach we had with this 16-unit monster.
Shortly after closing on Deal #8, a wholesaler approached our business partner about purchasing an off-market fourplex. Our partner asked “what else you got?” and by asking this question we found out the fourplex was just one of four fourplexes (totalling 16 units) the seller was attempting to offload. After talking amongst the team, determining our cash position, and doing quick napkin math, we proposed to the wholesaler that instead of buying one fourplex for $300k cash, we’d offer them $300k at closing and let us finance the rest to buy ALL the fourplexes. One transaction to rule them all! After a bunch of back-and-forth negotiations we landed on those terms!
Deal Source: Local Huntsville Wholesaler; Due to our team closing numerous deals in the past, we were recommended as a buyer for this deal.
Property Details:
– 4 Fourplexes (16 Units Total).
– Each 4,000+ Sq Ft.
– Each 2 bedroom 1+ bath.
– ¾ properties on the same street, all in the same zip code.
Strategy: Value-add multifamily; Keep the good tenants, work with the bad ones, repair the empty/old units, and increase the rents to the current market value.
Financing:
Partnerships & Portfolio Loan: As the BiggerPockets Gods would say, “find the deal and the money will come.” Our team did not have all of the capital or bankability to make this deal happen on our own, so we reached out to a passive partner that we’ve worked with before and solidified an agreement around this deal. We worked out an equity split and capital contribution that worked for everyone and got a portfolio lender to fund the rest of the deal. So between all the partners we funded the 25% down payment, and the portfolio loan funded the rest. So by using leverage and partnerships we were able to acquire 16 units in one deal! I cannot express enough gratitude for our partners in this deal, because without their knowledge, hustle, and capital this would not have been possible. Learned so much from this transaction!
Rehab & Renting:
Here’s my one-sentence summary of ‘value-add multifamily investing’: Buy something that is not performing well, fix the issue(s), and make it perform better. Value-add multifamily is almost like BRRRR’ing a SFR but on a larger scale and longer timeline.
We kept renting the property to the good tenants at their current rents, we rehabbed the empty units, we fixed-up the units when tenants left, we increased the rents (to reflect all the upgrades), and we improved property management by switching everyone to our property manager. We actually cash-flowed from the start, but there were definitely some months we needed to invest more more money into the property for repairs. However, after a year of owning the property everything is cash-flowing great and most of the units are up-to-date! It’s a long-term play, but totally worth it once everything is up-to-date!
End Result (16 Unit Summary)
Purchase: $1,200,000 ($300k each)
ARV: $1,400,000 ($350k each)
Rent: $10,625 / month (all 16 units)
Lessons Learned:
- Find the deal and the money will come (with plenty of education and networking of course).
- If you come across a deal, ask the deal finder what else they have. You never know what the full story is unless you ask.
- Get creative with financing; There is always a partnership structure and/or lending strategy that can work if the deal is a good deal.
- Think long-term with multifamily and have plenty of cash reserves.
