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!