Multifamily Value Add Project

[William Walker]

Fellow RE Connoisseurs,

In an effort to provide value, produce content, and give back, I am documenting a 4M Capital multifamily project from acquisition to stabilization. For those of you who are eager to learn and get into the multifamily business, this will provide a close look into a heavy renovation. I will update this journal periodically and at key milestones throughout the investment life-cycle.

Story:

We became aware of the "Subject" through a long-standing broker relationship in Atlanta. We were brought the deal because we have earned the reputation for being easy to work and are CLOSERS!

The financials and operations were a mess; the property was barely breaking even. The going-in numbers looked terrible. 

(Many people put a lot of emphasis in their analysis on going-in cap rate, I would argue that this number can be irrelevant. In this case, if we had of relied on going-in cap rate, we would not have done the deal.) 

The asset was hairy. We ran into deed and insurance hurdles that almost derailed the closing, but after four long months of hard work, problem solving and perseverance, we successfully closed an amazing deal (average closing time 59 days).

With a large influx of capital, efficient management, and a little time the stabilized figures will look much different than going in. We are estimating NOI increases of 300k+

Property Details:

Investment Strategy:

Our goal is to provide a safe, clean and well-maintained community for our residents. If you do these three things, sustainable profits will follow. I do not recommend taking on a project like this without ample experience and liquidity. We have a strong team and proven track record of turning troubled properties into well-performing assets, but it did not and does not happen over-night.

The Subject is suffering from physical and operational deficiencies. At takeover, the economic and physical vacancy was 23.5%, we had 12 hard down units, 33 residents with outstanding balances and a mess of deferred maintenance.

This asset is extremely well located within the sub-market and performing well below its potential. The symptoms above provide the opportunity to create value through curing deferred maintenance, raising the occupancy, and ultimately increasing NOI.

Our investment strategy includes a full management overhaul, deferred maintenance remediation and capital improvements. Over the next 12 months, we will be implementing financial and operational procedures, on-boarding the asset to 4M Capital’s platform, and carrying out capital improvements.

Major Deficiencies:

-8 down units (demo'd to studs)

-High vacancy and delinquency

-Poor management

-Deferred maintenance 

Upgrades / Capital Improvements

-Bring down units online

-Install new heat and air systems

-Install new doors / windows

-Add amenity package

-Upgrade kitchen / bathroom / appliances

-Landscaping

Deal Economics 

Construction Budget

A few cool shots with the drone.. don't let the dreary weather fool you, this is a great property on a fantastic piece of land, just needs a lot of elbow grease and a little TLC.

Financing

All members at 4M Capital work extremely hard to produce excellent returns for our investors. We take a hands-on approach and have a broad range of experience, including: accounting, construction, finance, operations, and property management. We are willing to do whatever it takes to get the job done – even if that means lacing up the work boots or sleeping on the leasing office couch.

Equity Raised: Individual Accredited Investors

-$2,100,000

Debt: Bridge-loan

-Term: 24-month interest only

-LTC: 80%

Appreciate comments, thank you for reading and check back for project updates

For more information on 4M Capital visit www.4mrei.com and subscribe to our mailing list.

https://www.facebook.com/4Mrei/

[Jaysen Medhurst]

Looks like a very cool deal, @William Walker. What are the current rents? Where do you think they'll end up after you stabilize the property? How long do you expect to hold the property? Can you share the syndication details-fees, preferred returns, etc.?

Keep us updated. Would love to see how it all plays out.