Updated: Jun 3
In the time it took to write this update I got under contract for another property! Both are outside of the radius that I've invested in so far - within an hour of Charlotte. These are in and around Fayetteville, NC, home of Fort Bragg and the 82nd Airborne
Property 1 - Two Duplexes to BRRRR
These two duplexes were found off market through a wholesaler who operates in and around Fayetteville. All four units are rented out and are actually in pretty good shape with only minor repairs / updates needed!
Rent is a little below market value so there is certainly room for rent and cash flow growth; the property was advertised by the wholesaler for $125,000 and was put under contract for $120,000, and current rent is $1,780. Definitely exceeds the 1% rule!
I'm acquiring the property with the same partner I had on the Kernersville Fourplex that ultimately fell apart due to the inspection; he's a fellow investor in the area and we're splitting the deal 50/50.
Goal - in the next 6-12 months (depending on Covid and the market) we will increase rent to nearly $2,000 across all four units and then refinance into long term debt to pull our cash back out. The currently projected ARV of $160k will result in a near perfect BRRRR, pulling all of our money back out and providing around $100/door in cash flow!!
Property 2 - Buy and hold fourplex
Who says there aren't good deals anymore?? Within a little over a week of getting under contract for the first property, a broker and fellow investor from Five Pillars Realty Group in Fayetteville (find them in the Investor Resources page) reached out with a multifamily property he was getting ready to list. He asked if I was interested and I quickly realized it was a great deal.
With a lot of capital tied up in other deals, the only way I could take down this deal is to partner with someone. In this case it worked out to be with a fellow investor I met at one of the meetups I host who lives in California! Cap rates are so compressed out there that he and his family are looking for a better return in other places such as North Carolina.
The broker was planning to list the property at $159,000. I made a verbal offer of $150,000 which the seller accepted, and then my partner and I asked to add $3,000 to the purchase price in order to account for $3,000 in seller concessions on the back end (2% was the limit from our lender). This allows us to bring less cash to the closing table and finance a portion of the down payment!
All 4 units are occupied, and the total rent roll is $2,100/mo. It will produce fantastic cash flow and be a great start to our partnership! And speaking of partnership, we pulled one additional lever in a partnership that I had not considered before. In order to minimize my capital contribution up front I'm giving up my share of depreciation and mortgage interest. This provides him with a significant advantage in that he can use the deductions to offset his other income in his portfolio as well as some of his wife's W2 income; my portfolio is not large enough yet for that to be a major factor (I'll make it up in other deals), and as a result I can secure a larger portion of the deal for less capital up front. It's truly a win-win!
Goal - this is a true buy and hold property, and one that will hopefully be the start of a fruitful partnership between us!