First, I'll start off by giving an update on Multi-Family property #2. I know it's been a few months since I've posted so I'll sum it up.
We purchased MFR #2 in December 2016 and just finished renovations. We had a goal of $25k in Renovations and $35k as a budget. Well, that didn't work out. In the end, we were just shy of $50k in renovation costs. As we got into it, we found a lot of things that you just can't see until you get into it. We found roof problems, old pipes that had to be replaced, and a leak we found only after we got everything done and turned the water on. It destroyed some walls and we had to rip it all out and do it again after fixing the pipe that busted. However, all is well now and we are looking for renters.
There is some good news. While we are going to have to borrow a little more than anticipated to get our money back out of it (100% of it), we will be able to finance enough to pull all of our money out and be in it for $0. When we ran the numbers initially, we used conservative numbers. The good news is the rents are going to be $400/month more than we anticipated. We have 1 of the 3 units rented already and the other 2 have applicants. We should have full capacity here shortly. Our expenses are also slightly less (although not much) than we anticipated, plus we don't foresee many (if any) maintenance costs since almost everything is brand new. Even though we factor the normal maintenance into our numbers, it *should* be much less as time goes on. The short of it is we have a 3-unit MFR that we have $0 left in that will cash flow us conservatively about $700/month. Not bad. The level of effort was about what we expected along the way so no big surprises there for our first BRRRR property. If anything changes or even if it doesn't, I may post more on this one later.
Now on to MFR #3. We're in the early stages of it but it's a much larger property. It's a 12-unit apartment complex. There is a lot to it and I hope to have a post in a few months detailing our progress on that one. We're scheduled to close April 1st (give or take a few days). We got it for a pretty good deal. There is a lot of work to be done on this one. Not necessarily $ or renovation wise. We are expecting $25-$30k in renovations. It's 90% cosmetic so we don't expect many unexpected complications. With that being said, we've set a budget of $50k to be safe AND we have some capital above and beyond that just in case. Running our conservative numbers, we are expecting quite a large return. In fact, we've already got our insurance quote back and it's $3,500/year LESS than we were expecting. So right off the bat, we're looking at $300/month more than projected. I'm sure along the way we'll find something that will cancel that out, but even if we come it at our conservative projections, we should be in great shape.
Just to give an idea of the things we have planned:
-- 5 of the 12 units are rented so it's some cash flow up front. About $1000/month in the hole.
-- Our first real goal is to get units 6-11 ready to rent. It shouldn't take much. It's all cosmetic so we should be ready to start renting those a month or 2 after we have it.
-- Unit 12 is currently being used as a storage unit, so our next goal is to get unit 12 ready to rent.
-- Along the way, there is some outside and common area items to take care of (again, all cosmetic). This will happen in tandem with getting the other units ready
-- The current owner has some furnished units and we don't plan on doing furnished so we'll be converting those to unfurnished before we rent. Also, a couple of renters rent furnished apartments, so we'll take care of those as tenants switch over.
-- The current owner is currently paying all utilities. Water will remain ours, but all the other utilities we will put on the tenants. As leases expire we'll convert and for unrented units, we'll rent them with the responsibility on the tenant. Everything is already metered separately so there is nothing to do but let the tenants know it's their responsibility.
-- We need to add some outdoor lighting and gravel over a small lot we plan on purchasing so parking is adequate.
So as you can see, we have our work cut out for us. I'm sure there will be several items not mentioned we will have to take care of along the way as well. Now that #2 is completely done, we're ready for #3 to start. We are eyeing a couple of other projects but it's VERY early in those stages and we don't plan on making any more moves until we feel we have #3 well underway and under control. Nothing worth writing about yet. We're excited about #3 and getting that up to it's potential. We've given ourselves until Jan 2018 to get it all done which we feel is VERY conservative. Hopefully, we're much faster than that but until we get into it, the timeline is all speculation at this point.
Stay tuned. There should be more to write about in the near future.
