Best Deal Ever Show: The Perfect Multifamily Syndication

Meet Anna Myers from the San Francisco Bay, right in the center of the tech world. Anna has a background in technology, programming, and systems architecture. She is all about the data. Anna spends a great deal of time managing and processing data, which led to her success in real estate investing.

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How This Investor Uses Data to Pinpoint High-ROI Real Estate

Anna co-owns Grocapitus, a group of technology-focused syndicators. They approach real estate with a data science lens. The data pulled by her team is the result of very specific searches. They’ve created trackers to generate charts and trend lines to predict where properties are heading.

They don’t just look at markets! Her formulas pull data so specific she can determine potential in micro-neighborhoods within a few blocks.

What does she learn from these results?

Well, the best potential is in areas where poverty levels are well below 10%. Unemployment needs to be no more than 2% above the city’s unemployment rate. Tenants who have $40K or above in income are more likely to stay on top of rent—below $40K equates to a lower success rate.

And that’s just the surface! The data goes even deeper than that.

More specifically, when considering investment opportunities, Anna looks at population growth, job growth, landlord-friendliness by state/county, and job diversity. She focuses on specifics for each county because it differs from the city.

For instance, take Dekalb County and Dalton, Georgia. In Dekalb, it could take 6-9 months to evict. Dalton takes about 2 weeks!

Anna says this is all public data that the government has to produce in the cities and counties, usually on a regular basis. You can find it on City-Data.com for free or on sites such as Neighborhood Scout, which is a paid service. And LocalMarketMonitor.com, ran by Ingo Winsor, allows you to look at—you guessed it—local market data.

This Investor’s Best Deal Ever

Anna’s best deal ever was scored in Dalton, Georgia. Dalton is considered the carpet capital of the world.

According to recent data, there is a market shift happening right now. Manufacturing is decreasing, and healthcare and construction are increasing.

Dalton is between Chattanooga, Tennessee, and Atlanta, Georgia—just at the foothills of the Appalachian Mountains in North Georgia. Because it’s located between two powerhouse cities, it’s experiencing compression. It’s also landlocked, which limits how far it can expand.

There’s been a spike in growth due to the nearby Appalachian Regional Port, which was dug out recently for receipt/pick-up of super containers from the Port of Savannah. It’s one of only a few in the nation. It connects to Savannah via railroad and happens to go through Dalton. This is really supporting and increasing the growth in the triangle between Chattanooga, Huntsville, and Savannah.

Because of this, and the increase in healthcare and construction, Dalton is experiencing a boom. And as Anna says, “The pie chart is diversifying.”

As a syndicator, Anna takes on deals as a team. Her partner on this deal was Gary, who is actually located in Atlanta and used to be a broker. He had just successfully closed on an on-market deal in Gainesville, so the broker brought this deal to him, as well.

No one had looked at the property yet. The sellers knew what they wanted for it, and after Gary ran the numbers, he and Anna decided the deal made sense.

The Property

The property was a Class B building built in 1988. It was located right next to Dalton State College. It originally consisted of 171 units, but after a student left his dinner cooking unattended on the kitchen stove in December 2017, it became 151 units.

Other than that little mishap, it was owned and run by the Inman family for 20 years and kept in immaculate condition. After the fire, they got the insurance money and decided to sell.

The best part of the deal was that the financials were based on 171 units, which showed the owners had a high number of vacancies. The sales price (and underwriting) also played in Anna’s favor by not calculating the potential rebuild of 20 units—and the sellers only charged for 151 units.

Anna and her team ended up paying $68K per door, roughly $10.7 million all-in once said and done. There was a very similar vintage building down the road that was selling at the same time for $72K per door, so they knew they were in a good spot with numbers.

The property appraised at $450K higher, so they also got instant equity.

The Rehab Plan

The property was a perfect fit, because her company has experience in not only remodeling but also new construction. First things first, they ended up bringing in an architect to design the rebuild of the 20 units lost in the fire.

The Twist and Turns

It was time to get started, so they began working on designing those 20 units with the architect. The risky parts like permits, zoning, pouring foundation, etc. were in place already—so it should’ve been a simple design.

Well… when inspectors came in to test the water pressure for the building, the pressure tested low. They were told it would cost $100,000-$125,000 to put in a new water line.

They originally planned on building just the 20 units at around $2 million. This new expense could kill the deal! So, they put on their thinking caps and decided why not build even more units?

They already had to add more water, so they decided instead of building only 20 units, they’d build 29! They would now have 180 units. The new units were to consist of both 2-bed/2-bath and 1-bed/1-bath layouts. Once complete, they estimated each would pull in over $900/month in rent.

With some extra funding, the new units will be built and the property will spin off a TON of income. In fact, current projections show that investors will achieve a 30% yearly ROI on this project!

That’s what I call turning lemons into lemonade.

What was your best deal ever or the best deal you’ve ever heard about?

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.