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🏚️ Deep dive

Deal breakdown: 1233-35 East 21st Ave

Context on the deal

I bought this Duplex in March of 2021.

I had just sold a SFH in North Linden for $159,500, ~$145,000 after commissions and closing costs.

I knew I wanted to reinvest those funds into more real estate.

Folks who invest in Columbus will know the hot neighborhoods were all south (Southern Orchards, Merion Village, Oldtown East, etc.).

But, they were crazy expensive ($100k+ per door).

And I didn’t believe those neighborhoods would keep appreciating.

Spoiler: I was wrong.

More importantly, I wanted cash flow, so I began to look at South Linden where prices were still $50-80k per door.

Sourcing + closing

I found a cute little duplex on the MLS, near where I grew up.

The seller agreed to a $135k purchase price.

Now, I knew I wouldn’t pay $135k for this property.

But I needed us to get into the house to inspect + receive an estimate from my contractor.

Why is that important?

If you’re modeling your RE returns, the three items with the biggest impact on your ROI are:

• Renovation cost

• After-renovation rent

• Purchase price

I knew the after-renovation rent would be $800-900 (based on Rentometer)

If I could get a renovation estimate from my GC, I could 100% back into what I could afford to pay.

Here’s our original inspection report (for those of you looking for your first property - this report cost me $500).

We knew the biggest repair items would be:

• Installing a furnace / AC

• Drywall repair

• Gutting a kitchen

My GC’s estimate came out to $50,000.

I decided the most I could pay in that case was $118,000.

How? I modeled it.

Here is the actual model and assumptions I used to close the deal.

Tap to see a zoomed-in image here.

You can see in the left-most scenario analysis that a $50k renovation and $118k price yields a cash-on-cash return of 11%.

With some extra room for costs to be higher than our estimates.

That felt right, so we closed at $118k.

Biggest Lessons:

#1 Weather impacts renovations and sales

You can get a 5-10% discount on properties by waiting until the winter to buy.

Sales are slower and all properties look worse in the winter.

But make sure you’re baking in the reality of how houses work.

In my case, the pipes weren’t winterized and this house had no furnace.

If those pipes froze and burst, that would be an extra $5-10k+ expense I didn’t budget for.

I knew this, so the moment we closed we got an HVAC guy in.

#2 Make sure your utilities are submetered

A submeter is a device that enables you to measure utilities in each unit so that you can split them among tenants fairly.

It’s VERY hard to split utilities without this.

This house had one electric box. Yikes.

While we did develop a fixed-fee system to recover electric costs, it was a HUGE pain.

It also impacted the property price when I sold in February ‘24.

#3 Cash offers are king

One of the reasons I was able to negotiate the seller down to $118k was via a cash offer.

Mortgages fall through all the time - because I could close in 10 days, the seller had more confidence my offer was the strongest.

But here’s a sneaky lil’ trick.

You do not have to actually have $100k+ in your bank to close a deal.

With some creative financing, I only put $40k into the deal (I could have gone as low as $10k if I wanted).

There are plenty of financing strategies you can use to grab a property with only $10-20k down.

I sent an email on that a few days ago. If you missed it, shoot me a reply and I’ll send it over to you.

Would you do the deal again?

No.

The grass is always green on the other side, but I’m increasingly convinced that appreciation is king.

I should’ve invested in one of the hotter Columbus neighborhoods with less cash flow.

Plus, low-income tenants are much tougher to manage.

I got lucky with Columbus rent relief funds paying 10+ months of rent for my tenants.

If that fund didn’t exist, this property would’ve been a disaster.

📊 Chart of the Week

Wondering how much you should expect to put down for your next property?

Chances are it’s not as much as you think! The National Association of Realtors surveyed ~7,000 recent home buyers. More folks are using FHA loans and other mechanisms to put down less than the traditional 20-25%.

🐤 Real Estate Rizz

#1

If you’ve never heard of seller financing, stop what you’re doing and open this tweet.

#2

There’s a 6th - using a pledged asset line (PAL), which I’ve written about before.

These are tools - each of them is useful in different situations, so save them down and know when to use them.

🔥 Want everything you need to buy 1-5 units this year?

Check out the Duplexx Blueprint and get all of these goodies:

Note: If you’ve joined in the past 2 weeks, you’ll automatically be taken to a special page to receive 80% off. 

• Cash-on-cash returns calculator

• Guide with 75+ items for your next rehab

• PM/Contractor interview guide

• 30-minute mini-course on finding deals