I'm a long distance investor, living in Reno, NV and (before this apartment) invest in northwest Missouri.  I've wanted to buy in southwest Missouri, but nothing ever came to fruition.  @Brit Hale and I built a great relationship in 2+ years of him sharing deals, trying to make something work, us bouncing ideas, and generating a solid working relationship.  

In May 2020 I drove from Reno to Missouri  (I drove to avoid COVID) to meet with my partner @Matt Crawford and underwrite a large apartment in Northwest Missouri.  While there, @Brit Hale shared a pocket listing for a 64 unit building.  We put in a strong offer, the sellers went with someone else, and that was that.  

Fast forward a month.  The bank tells the buyer with the contract something to the effect of "your divorce is too long and nasty, we won't loan to you till it's over."  @Brit Hale gets the call from the listing agent "if you offer 2.2 million and have a pre-approval letter the sellers will accept".

I'll take a moment to elaborate on @Matt Crawford and myself.  We aren't high rollers.  We work w-2 jobs, have never been interviewed on a podcast, and do real estate on the side.  We've done a 6 unit and 8 unit together, and a few smaller projects alone or with others.  We just listen to podcasts and webinars and "fail forward".  In fact, we have never put an apartment under contract and known how the financing would work or exactly where the down payment would come from.  

We contact our local bank for a letter, and this is what they provide:

"This letter is to introduce our customers, Matt Crawford and Pat Jackson.  They have been customers since 2017.  All deposits and loan accounts have been handled in a satisfactory manner and are in good standing.  They are reputable and conduct themselves in a professional manner."

We send the 2.2 million dollar offer and the "pre-approval letter" in.  I'm pretty sure I said YOLO.  And under contract we went. 

Henceforth started due diligence.  Inspection.  Sewer scoping.  Roof and HVAC did their thing.  Termites, there are some termites.  There are some issues, but they were all surmountable.  

It's worth noting the sellers agent had a terrible disposition.  He always acted like the sky was falling.  Glass was always half empty.  This disposition, combined with the fact I really hit it off with the seller when we did an initial walk through in June, really fostered a fun and productive working relationship.  At one point I had a fairly contentious conversation with the seller, discussing the inspection findings.  His agent had frankly made a fair amount of stuff up, all of it was negative.  I walked the seller back from the edge.  He made the point that his agent needed to get an ocular-anal surgery.  Not knowing what that was, I asked.  He replied "my agent needs to get the nerve that connects his eyes to his anus disconnected so he stops having such a poopy outlook"  (he didn't say poopy, you get it).  We may not have closed if it hadn't been for this relationship with the seller.  

A little about this apartment.  Built in 1975, it's 6 buildings on 3.4 acres.  A somewhat unique mix of bedroom count:

11 1-bedroom units

29 2-bedroom units

21 3-bedroom units

4 4-bedroom units (4 bedroom apartments, weird right?)

Based on due diligence these are at least $100 a door under market as is.  Rents can likely be raised $200 a door after cosmetic rehabs.  

We ended up using a local bank who only requires 15% down.  We agreed to do a bridge type loan, 18 months of interest only payments at 4.5%.  At the end of 18 months if the bank likes us and how we've improved the apartment, the loan will transition over to a long term principal and interest loan.  We may also refinance.  

I've skipped a lot of the ups and downs, twists and turns. This was a lot more complicated than a small apartment. At times it seemed like all was lost. But, we did it. We closed last Friday (November 20). We ended up doing a joint venture with a third investor, all brought funds to the table, and each own 1/3 of the property. We own this property in a standalone LLC, with our 1/3 interest being held in a cell of our own series LLC.

On a positive note, we conservatively underwrote this at a 9 cap, optimistically at an 8 cap.  Our appraisal came back using a 7.5 cap.

Outside of one of the buildings

Unit that owner rehabbed while we were under contract.  I would have scrapped the popcorn ceilings, and gone stainless appliances....but since he didn't have to do any of this I'm OK with it!