I don’t just help sell real estate to and for our clients. I invest in it as well, and I LOVE owning rental properties.
Currently we own our office space for Brandon Nelson Partners Realtors, two single family rentals (one in Sudden Valley, one in my hometown in Michigan), and two duplexes in the Roosevelt neighborhood.
I’ve self-managed them all, and don’t have any plans to change that — at this point.
The two duplexes are favorites of mine for a number of reasons, and in this series of blog posts I’m going to share the “360-degree view” of my ownership, management, accounting, maintaining, highs and lows, adventures and mis-adventures, lessons learned, ups and down of being a small multi-family investor.
Let’s kick it off with how it all began: The acquisition.
It was summer of 2018 and Heather, Hayden, Jazzy and I had just moved to our dream property on Squalicum Mountain. We were leaving a home in the Silver Beach neighborhood that we had also loved… and there was talk of keeping it as a rental.
We’d updated it inside and out, it had a nice lake view, a big, fenced back yard, great neighbors, and trails across the street. But it also had a lot of brand new (delicate) Douglas Fir inside. the kitchen cabinets, all the doors and trim, a huge built-in shelf-and-cabinet set in the living room. That is NOT tenant-friendly material.
Another aspect that didn’t sit right with me was that it was basically a $600K house, in which we had about $250K in equity… but it was only one unit. How much money could we realistically rent it for… maybe $2600 in the summer of 2018? That wouldn’t come close to the Cap Rate I wanted to see on that kind of money.
So Heather and I talked, and we agreed to free up that equity by selling the property, and re-invest it into more units. Ideally FOUR units.
At about that same time, Jacson at our firm had listed a set of duplexes on Moore St. Built in the early 1980’s, the two buildings were mirror images of each other, both of them consisting of two, 2-bedroom 1-bath apartments each with their own laundry, covered carports, a nice lawn front and back, and a greenbelt on the north side giving an extra measure of privacy. They were set at the end of a dead-end road, too. Their list price: $349,000 each.
It was a hot investors market in 2018 and right off the bat they were busy with buyers going through them every day. About a week into the listing, they’d accepted an offer and appeared to be sold.
But after the home inspection, the buyer backed out. Too much deferred maintenance, too long since they’d been updated, rents too low… it was a list of reasons. Back to “Active” on the MLS.
6 days later, they went pending again. Then, again, back to Active. The buyers were not liking what they were seeing there.
I hadn’t seriously looked at them for myself at that point, and for another couple weeks they rolled along, no new buyers in site.
The seller, though, had a time constraint. He was trying to buy some farm land and he needed the money from these duplexes to seal that deal. He was motivated, said Jacson, and I should really go have a look.
I went through two or three of the apartments and right away I liked what I was seeing. Yeah, they were outdated and showed wear and tear, but I like the vaulted ceilings and open layouts. I liked that the 80’s construction meant they had copper and ABS plumbing, 3-wire grounded electrical system and modern circuit breakers… basic, easy materials and systems to own and work on.
I went under them, through the crawl spaces, and Yeah, they’d seen some water and they were due for clean-outs and new insulation and vapor barriers… but the framing was solid and clean.
The rents were low — well below market — but all 4 tenants were on month-to-month rental agreements (versus leases) so I could ramp them up to where they should be within 60 days of closing.
Listings like this that had been sitting on the market in an otherwise HOT market, had “all the right things wrong with them” as I like to say. It’s the perfect set of scary looking stuff to scare most of the market away, but I saw easy elbow-grease stuff. I saw potential! Now… if we could just get the price down from $349K.
I went back and talked to Jacson. “Tell me how motivated this seller is.”
To which Jacson said, “It’s about time, not money, for him. If you can bring him clean offers and close in less than 30 days, you can get a great deal on the price.”
I wrote the offers at $300K each, handed them to Jacson, and waited.
Later that same day: Mutual Acceptance. We were Pending, on our way to closing the deal and taking ownership by mid-June.
We would be moving a big chunk of the equity from our Silver Beach single family house that we’d just sold, into two, side-by-side, 2-unit-each buildings that were built to be rentals!
I was stoked! And yet I had NO IDEA what adventures lay ahead…