I've been posting some updates lately about my personal portfolio – well I sold a 14 unit that I bought. Let's get into it.
This was a 14 unit mixed use building. 4
three beds, 4 two beds, 4 one beds, 2 commercial
Purchase Price – $375k (Jan 21)
Renovations/capex – $105k
SALE PRICE – $560k (Feb 24)C
Net profit – $70k
Distributions – $15k
Net gains = $85k
Neighborhood: C-
Very blighted neighborhood, result from steel factory plant closing in late 90's Average income was about $32k/year. Great mix of sec 8 and workforce housing. This meant some evictions + unqualified tenants
Rent roll:
Upon acquisition, it was about $3500/month. 4 units vacant. Upon sale, it was about $5k/month with 6 units vacant. At peak, it was about $9k/month
Commercial tenants: $750 + $500 One commercial tenant didn't renew 1 bed – $600 2 bed – $750 3 bed – $925 (!!!) Even at 57% occupancy, our top line was $5k while cost basis was $480k.
Was cash flowing $1-3k/month depending vacancy + renovation schedule
R&M:
-Roof was old and spongy, had to patch up a few holes
-New washing machine + dryer
-Some units were full gut jobs (cost $12k for 3 bed turn)
Capital stack:
$200k of equity ($200k down)
$175k hard money
$105k credit card bills
=$480k cost basis
Refi'd $250k out after some value add @ 50% LTV ($500k value)
Used $250k to roll into my 22 unit (HML lender was a GP for 22 unit)
Numbers:
Numbers: $560k sale price
$480k cost basis
Commission + selling expenses = $10k
Net profit = $70k
Distributions = $15k
Net proceeds = $85k
Equity = $210k
Hold period = ~3 years
IRR: 40.5% over 3 years or 13.5% annually
Hope you guys find some value from posts like these.
Based on the highest ranked content on WSO, sharing personal portfolio updates and the journey of real estate deals can be incredibly valuable for the community. It offers practical insights and real-world outcomes from investment strategies, which can be educational for both new and seasoned investors. Here's a breakdown of the key points from your update:
Property Details and Financials:
Location and Tenant Mix:
Performance Metrics:
Repairs and Maintenance (R&M):
Capital Stack:
Final Numbers and IRR:
Sharing such detailed experiences provides a wealth of knowledge for the WSO community, illustrating the complexities, challenges, and rewards of real estate investing. It's these real-life examples that enrich the learning experience for everyone involved.
Sources: What is the most clever, profitable RE deal you've witnessed?, Q&A: Home Run Deal/Project - ~$3mm Profit, ~6.42x EM, ~18 Month Investment Horizon, HOW DO YOU DETERMINE YOUR UNIT MIX?, Great Deals You've Recently Done, From Real Estate Finance to Founder of Development Company - Q&A
Yeah this is super cool. Note sure you have posted elsewhere but can you comment on the rationale behind buying this one vs some other property at purchase and why selling this one?
really cool post and thanks for the detailed breakdown!
Jack Nicholson Gif. How did you source the deal?
Broker!
Would love to see more of these. Just wondering what made you sell rather than hold? Sounds like a great investment with lots of upside + stable cashflows.
Had to sell, too small and kind of a pain in the ass to manage. Needed cash for other investments & wanted to go bigger and in better areas. 1960's build also means lot of deferred capex that we would have had to address.
That’s awesome! congrats! What was your annual cash on cash? Trying to see how 80k in appreciation over 3 years equates to a 40% IRR? I’m assuming you must’ve had great cash on cash numbers?
Distributions were only $15k/3 years on $200k so not great. Lot of deferred R&M. Bulk of the proceeds were from appreciation.
How did you go about market selection? Were you local to the property?
Nope, property is 2000 miles away from where I am. Had great boots on the ground.
Great stuff! What's one assumption you made going into this one that you got wrong? And/or, what was your biggest surprise during this deal?
I underestimated capex for this type of building and tenant quality. Had to put more $ into the building than I wanted to and vacancy was high. Sold it for $560k at 43% vacant...
Rent roll could have been $8-9k/month but had shitty tenants.
Congrats on the sale! Curious as to what your professional background is. Are you working a full-time job as well and if so how many hours are dedicated to your personal RE investing? How much cash should you have saved to start investing in RE at this scale? Looking to do something similar in the future.
My background: Was in CRe brokerage in college + a large vertically integrated company after college doing PM. Started buying 4 years ago and still work full-time in an unrelated industry.
Time? Really depends week to week. During acquisitions it's quite hefty but once you acquire it and have good PM, then it's very chill.
Cash – have about $50-100k liquid including down payment + reserves depending on how much you're spending on a property.
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