Deal Deep Dive: 2415 HarrietJune 7, 2021 by Paul Begich
I’ve come to believe that if you want to progress towards your goals and dreams it takes letting go of first establishing the “perfect plan.” It takes dedication, perseverance and an unwavering commitment towards the journey – but it doesn’t take a 100% ironed out, bullet proof plan. The right plan will show itself through consistent, daily action.
Within the first few months of dating Emily back in 2019 I knew I was going to spend the rest of my life with her. We immediately began having conversations about what we wanted our life to look like, together. We chatted about family, business, real estate, financial freedom, and everything in between. Very quickly we realized we wanted to create a life of financial freedom through real estate. The plan? It didn’t exist. But we were committed to making that happen!
We decided to make the COMMITMENT in early 2020 that we were going to buy our first investment property. We had no idea how to renovate properties, talk to contractors, manage tenants, review legal leases, or ANYTHING that went into real estate investing.
We simply set a goal, and knew we’d figure the rest out down the line.
The goal? Purchase a four-plex in S. MPLS by the end of 2020.
I’m sharing the above, because I want to share with you the ins and outs of this particular property but also pull back the curtain on some of the fears, set backs, triumphs, and wins that will hopefully help YOU take down your first (or next!) real estate investment.
So here it goes… a deal deep dive into 2415 Harriet Avenue, a four-plex in the Whittier neighborhood of Minneapolis.
Our search started in January 2020. I had set up an MLS auto search for all four plexes in a very specific area of Minneapolis. ANYTIME a four-plex came to market, we toured it. It didn’t matter the day or time, we were booking a showing! I’m pretty sure for a good six month stretch we were the first people to tour any four-plex coming to market!
The search was… interesting, to say the least. Most of these four-plexes in MPLS are operated by mom and pop individuals and the upkeep and cleanliness isn’t always the best. We toured one property SO DAMN SCARY that once we got into the first hallway we immediately ran out of the building at full speed scared for our lives – we felt like we were straight up in the movie The Exorcist!
After seven long months of searching, countless showings, and numerous offers submitted we closed on 2415 Harriet Avenue for $625,000.
The property was in ROUGH shape! Which is actually kind of what we wanted as we were looking to do a sizable renovation so we could pull equity out of this property to use as the down payment for the next property.
Prior to closing, we had a couple contractors walk the property to provide bids on what it would cost to completely renovate the property. Our intention here was to renovate and bring the units up to market rent, as the units were significantly under market value.
The bids came back between $100k – $150k.
We then took the scope of work and bids to a local bank in the hopes of financing the renovation – given we had ZERO DOLLARS in the bank to complete such a hefty renovation. The bank had a third party professional appraiser look over the scope of work and issue a new valuation for the property based on the work being completed. That value came in at $875k.
Given the drastic difference between the ARV (after repair value) of $875k and the purchase price of $625k the bank allowed us to take out a construction loan in the form of a HELOC (home equity line of credit).
We officially had all the funds needed to complete a full property renovation!
Since July of 2020, we’ve completely renovated all four units of the property – thanks to Emily, the renovation is GORGEOUS! We’ve released all of the units and Emily and I moved into one of the units.
With the rent from the other three units all of the property’s expenses are covered, and then some! When we move out, the property will gross us over $2,000/month in positive cash flow.
I hope this peels back the curtain a bit and shows you more of the ins and outs of our first investment property purchase. But I also hope this shows YOU that you don’t always need a PERFECT plan in place to achieve a goal. Sometimes it takes diving in head first and figuring it out alone the way – like us – we had no idea what a construction loan was when we first bought the property!
Now, go out there and dive head first into attacking your goals and dreams! The plan will come, I promise.
As always, if you ever want to connect about multi-family investing or real estate in general grab time with me here: https://meetings.hubspot.com/paul314/chat-w-paul
Paul Begich, Urban Realtor