Multi- Family - Pointer?!?

[Jacob Heckford]

Looking for Pointers on Multi Family "Dos and Don'ts"?!?

My business partner and I are in the process of closing on a 16 unit apartment complex. I believe that the biggest problem with this property is the potential of tenant turnover. The rent per unit currently are way to low for what the properties can get. The Units are 1bed/1bath units that are currently renting for $450 a month and we know that they could rent for $600.00 easy.

Our plan is to raise rent slowly over time to max the potential of this complex. Meaning Empty units currently will be rented out at $600 immediately and existing tenants will have their rents raised over time according to current leases. It will be a constant battle but a battle that I know will have a greener pasture on the other side.

[Michael Swan]

I purchased a similar product in Akron Ohio in Aug of 2017.  Average rents for the 24 one bed 1 bath units were sitting at $450.00 average rents.  We had 14 out of 24 that were on section 8 at purchase.  Fast forward, over 4 years later and through covid, we were lucky we had those Section 8 residents and kept pushing the rents along the way.  Now the section 8 rents are hitting $655 and that is what we are charging new non-section 8 residents too.  Our inherited residents have gone up a little slower over time and they sit at about $600 average right now in their way up in the next 6 months to those $650.00 a unit rents.

Please feel free to message me and we can talk.  I told my story on Podcast 238 and I am now in the period I call the harvest period for my 9 apartment complexes.  This property will be the next one I refi.  We purchased about 4 yrs ago that 24 unit in Akron for $635,000 and with downpayment we are all in at $180,000.  The current valuation is hovering between 1.4 and 1.5 million.  We have about $380,000 debt on the property.  Our cash flow averages about $4,000-$5,000 a month currently.  We have been repositioning it and after all rents are over $625.00 average for the entire complex we will pull the trigger on the refi for a Freddie non-recourse and take out at least $700,000 cash back tax free and be on a non-recourse 10 year fixed loan at about 4%.   We may or may not decide to do the first 2-3 yrs of that loan interest only.  The last two we refinanced ant too out a ton of cash, one we did first 3 yrs interest Only and the other we chose not to do any interest only period.  One was fixed for 10 years at 3.6% and the other 3.9%.

I can’t wait to talk to you!!  I could also talk to you about what I do at takeover with the tenants too and that plan you have to raise those rents at takeover.  Why reinvent the wheel!!

Swanny

BP Podcast Guest 238