6 months into value-add 13-unit project!

[Jessie Dillon]

Hi guys! I've been working on a value-add multifamily project long-distance (~1000 miles away) since July, and had the pleasure of sharing an AWESOME update with my capital partner earlier this week. Wanted to share it here as well for inspiration, & to invite anyone looking into similar projects to message me if I can help in any way!

“MARKET VALUE: Big news here! We paid an effective price of $1,015,000 (purchase price minus seller credit) for this property just 6 months ago. It was appraised at $1,100,000. Right now we have 2 units that are vacant, ready, and being marketed, and with the 'asking rent' reductions we just did to try to fill them faster (it's offseason for leasing), the estimated market value of the building based on net operating income is now $1,542,500. We owe about $840,000, so we now have a total of ~$702,500 in equity, we are now only about 54% leveraged with our commercial loan, and we have a "machine" that cashflows a total of ~$3649/mo (once those two vacant units are filled). We have not yet reached our full cashflow or market value potential, and likely will not for another year (as most tenants are now in 1y leases expiring again in Dec), but we are in amazing shape with this value-add process.”

For context, the ‘day one’ true net cashflow for this property was about $800/mo, and the full true net cashflow potential with market rents is just over $6,000/mo. We got one of those two vacant units rented out a few days after I sent this email as well. All of this said, my partner has seen a ~41% internal rate of return on her investment, excluding tax benefits, in just the 6 months we have owned this property. This is strictly based on equity as we have not pulled out any cashflow from the property yet. Super pleased with how this project is going & I continue to be extra grateful for our property manager for staying on top of things! I stand by saying that having an AWESOME property manager in place makes or breaks a long-distance investment. I did interview ~30 companies during the closing process, and funny enough, ended up going with the very first one I talked to. What stood out to me was that the owner is a real estate attorney of 20+ years, which in a tenant-friendly state, was comforting. Plus, they manage ~1500-1800 units, and ~80% are owned internally, so their team is trained to treat every property as if it's their own. The owner also shared a ton of value with me on our first call, which he really didn't have to, so that stuck with me. 

Anyway, just wanted to share this win with the community, and if you're doing similar projects and I can help in any way, please feel free to reach out! Always happy to collaborate and help others reach their goals. Thanks for reading!

[Jessie Dillon]

@Matthew K Poer thank you! 

@Melanie P. we have one unit that's vacant and being marketed right now, it's not an ideal season for leasing especially in a colder area. i have sold investment property. i wouldn't personally consider tracking my net worth to be 'mental masturbation,' but potato/potato. i always appreciate others' perspectives. :)

@Timothy Hero @Stephen Akindona thank you!