What's Your Most Successful Apartment Deal Ever

[Michael Ealy]

What's your most successful apartment deal?

How much money did you make?

What are the problems you've encountered?

What are the lessons you've learned?

Here's mine:

The Deal

The apartment community is called Wyoming Crossing - it has 96-units, acquired in April 2014 for only $1 Million (we bought it so cheap because it has only 20% occupancy and 24 units have no water and heat as someone stole all the pipes and wires in those units!). We spent about $1.2 Million to renovate the property. So we are "all in" for $2.2 Million.

Sold it in Feb. 2017 (we actually did the entity transfer in Dec 2016 but got the cash in early Feb) for $3.7 Million for a profit at sale of $1.5 Million (not including the cashflow we pocketed during the time we held it).

Challenges Encountered

One challenge we encountered is that NO bank wanted to finance it due to the low occupancy. This actually turned out to be good for us since it became a reason for us to negotiate and get owner financing. We put down $150,000 and the seller financed the rest at 4.5% interest only, 5 year balloon.

Another challenge is crime in the area. We were able to address it by putting CCTV cameras and getting the tenants to participate in a neighborhood crime watch.

Another challenge was we found the previous owner did not install some of the roofs properly so we had to replace some of them.

Lessons Learned:

1. Don't shy away from problems. We made more than $1.5 Million on this deal because it has a lot of problems. Real estate investors who are able to solve the most problems profitably, will make the most money.

2. Be Hands on. You can't invest in real estate from behind the desk. You gotta get your hands dirty and be at the property to trouble shoot issues, brainstorm solutions with your people and implement them.

3. Turn around problems into "stepping stones". I used the difficulty in getting bank financing to negotiate owner financing and we actually used less of our investors' money (and got more equity in the deal). Other investors would have given up. 

You need some creativity, a lot of diligence and hard work...and a little bit of luck to succeed in this business.

Come on BP -specially those experienced apartment investors: share your success here on BP so together, we can inspire each other!

[Spencer Gray]

This is a deal we did a few years ago and while it's still in progress we're still pretty excited.

The Deal : 200 unit C+ class asset in Bloomington, IN

Acquired in 2016 for just over $10MM

$1,000,000 ($5k/door) value add program including: leasing office remodel, adding W+D hookups , new laminate countertops, new flooring, cabinet upgrades, new door hardware, lights, paint.

Targeted $150/m rent bumps. The average now is more around $200/m.

Just recently appraised for $18MM with our current NOI. ($8,000,000 in value creation!)

In the process of adding a supplemental mezzanine loan to return 100% of capital + profit. 

The property should still cash flow around 7% cash on cash while we (and our LPs) take our capital and reinvest into another deal to realize the wonders of compounding. The property has essentially been de-risked while we still retain ownership.

Challenges Encountered: Our team had to get the right onsite team in place that believed in the vision. Our first onsite PM didn't like change. This property suffered relatively low occupancy for some time during renovation and cash on cash dropped. PM team was able to dial in rehab expenses. Glad we hung on.

Lessons Learned: People are everything. It took putting the right team in place who were on board with the objectives and the business plan.

Now let me give a nice knock on this hotel desk while before we close on the mezz!