Being in a relatively expensive market I know how discouraging it can be to try and break into real estate scene, particularly the multifamily space. We're in Portland, Oregon and very few cases can you hit the 1% "rule", and if you do you have to be creative.

I wanted to share a win today that has been in the making for the past 10 months because I think it is a good example of what a low cap environment looks like and what a solid base hit looks like for those that want to invest in small multifamily deals.

Here are the details on the property:

9-units in an up-and-coming neighborhood

Purchase price: $1,550,000

Cap rate: 4.5%

Average rent was ~$995 and Owner was paying for garbage and water/sewer

When we took over we immediately had a couple units turn over, which was great because we wanted to get in there to do some upgrades (we do a lot on the sustainability side that include reducing hazardous building materials, energy efficiency upgrades, bike storage, decreasing utility consumption, etc). Tenants moving on their own volition also saves lots of money on relocation fees.

The gross income last August was $6,100.

We then started to fix up the units, made private decks, put in heat pumps in the upstairs units and radiant heating in downstairs units, re-did the landscape, put in covered and secure bike parking, fixed some plumbing issues, and took out a bunch of carpet. Internet was installed for the complex that is now a free amenity for the tenants, and we also put in storage lockers into the basement that are separately rented.

We didn't get to all the units because the tenants opted to stay in them and instead just pay closer to market rent. These units are still below market by about $150/month and in the future when they move they will get turned.

This week marks full stabilization with gross rents at $11,625---90.5% higher than when we took it over (there was a couple vacancies so it makes that number look great). Even better is that the water is now being billed back to the tenants on a pro-rata basis and eliminates a huge water bill each month.

After it's all said it done the property went from a 4.5% cap to a 6% cap when you factor in the amount of money that went into the rehab. It still sounds low, but the increase in performance has led to a $330,000 increase in value in ten months.

It's not a deal to retire off of, but the rents are between $1,250 - $1,400 for two-bedroom units so there is a huge demand for these units and will continue to be so, it's in a great up-and-coming area, and it will be a great property to manage.

So the lessen is...don't be discouraged! It can be done!

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Boosting apartment values...nice win to share

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