Hey Everyone! I'm a fairly newer beginner in commercial type brrr units. Have done multiple brrr single family, but fairly newbie on commercial.
I'm looking at a 80unit complex in a small town of 20k. Previously a 120 motel, converted to mix of 1,2, and 3 br units consisting of kitchenes in each. The reputation on the property is not good and is known for having bugs, a death(stabbing 2 years ago) police and drugs involved. It's currently 40% occupied and being horribly managed. The remaining rooms need flooring, paint, or similar efforts to become rentable. They seem to be in decent shape.
I'm worried about the changing the image on this property, which I'm projecting to input 150k for part of a new roof, revamping the exterior and new signs(name).
any input or suggestions would be great! The cops and everyone on Facebook says it rough and the cops think I'll always grt this clientele.
Lender · PA · Member since 2019 · 533 posts · 461 votes
3y
Why would you want to buy someone else's headache. Unless you intend to employ full time security you are fighting a uphill battle. Sounds like the nightmare trifecta, drugs, prostitutes and deadbeats. Hard pass brother.
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
3y
Ignoring the building's issues, how is the area and town overall? Thr converted motel will likely always appeal to a certain demographic that can't rent a home or traditinal apartment, so you're likely fighting a battle there. But if the area is decent and this is the one building with issues then maybe it's able to be rebranded. If it's the area as well, then you'll definitely have an almost impossible time of making it anything better.
Raleigh, NC · Member since 2019 · 17 posts · 6 votes
3y
@John Robert Kinsella not that you don’t know, you can change everything except your nieghbhour hood. Is the surrounding area is also as bad as the property then it is not at all a good deal. Check the crime report.
Lender · PA · Member since 2019 · 533 posts · 461 votes
3y
Why would you want to buy someone else's headache. Unless you intend to employ full time security you are fighting a uphill battle. Sounds like the nightmare trifecta, drugs, prostitutes and deadbeats. Hard pass brother.
Real Estate Agent · SD · Member since 2020 · 137 posts · 65 votes
3y
My 2 cents- I think the best advice here is to evaluate the neighborhood. Is this the worst part of an otherwise good/decent neighborhood? Or is it on par with everything else going on in a given area? It's a bigger skill than I have to determine the direction of a neighborhood, but maybe you can see if it is trending better or trending same or worse. I wouldn't be interested in the negative directions.
Hey Everyone! I'm a fairly newer beginner in commercial type brrr units. Have done multiple brrr single family, but fairly newbie on commercial.
I'm looking at a 80unit complex in a small town of 20k. Previously a 120 motel, converted to mix of 1,2, and 3 br units consisting of kitchenes in each. The reputation on the property is not good and is known for having bugs, a death(stabbing 2 years ago) police and drugs involved. It's currently 40% occupied and being horribly managed. The remaining rooms need flooring, paint, or similar efforts to become rentable. They seem to be in decent shape.
I'm worried about the changing the image on this property, which I'm projecting to input 150k for part of a new roof, revamping the exterior and new signs(name).
any input or suggestions would be great! The cops and everyone on Facebook says it rough and the cops think I'll always grt this clientele.
Sounds like the chance to be a contrarian and really make your mark on the area. I love projects like this and the idea of totally turning a property around and doing so with good and pure intentions to make it better. if you have not read Brian Murray's crushing it in apartments and commercial real estate it would be a great read for what you are trying to do. He dives deep into a similar project in that book.
I owned a building just like this back in 2018-2020. Just like what you described.
I ended up making money on it when I sold it, but I would not do it again. It was not worth the stress.
The police basically had a unit assigned to the building because of the amount of drugs going through there. I had roaches and bed bugs that I paid thousands upon thousands of dollars to get rid of and still struggled. I had a tenant die of an overdose in a unit. I had several good tenants move in, but they stayed for maybe a month or two before realizing they don't belong here.
These types of properties are very, VERY management intensive and you need to have the right people in place.
I can tell you now, you can turn around a property BUT you have to have the knowledge and the right people in place. Ken McElroy talks about how he turned a terrible, crime ridden property into a completely different place.
The business that bought the apt complex I owned knew what they were doing. At the time I did not.
Evict everyone and start from scratch. Renovate all the units. Clean up the property on the outside and make it look brand new. Put a gate around it that needs a passcode or keycard to access.
You need to have tons of reserves in place for something like this. Don't go in over leveraged. You will be investing a LOT of money into turning it around. You will be investing a LOT of time into getting it turned around.
The potential is there, but don't under estimate the amount of time, effort and dollars it's going to take.
Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
3y
We personally don't invest in D class neighborhoods, which are quite difficult to force appreciation and notoriously management intensive. As others here have said, you can't change the neighborhood. If you see this as an area that's in the path to progress, that's one thing but you also have to take into account how long it could take for the area to improve. This is not to say there isn't money to be made investing in assets of this type but this seems like a heavy lift for even the most experienced operators.
I owned a building just like this back in 2018-2020. Just like what you described.
I ended up making money on it when I sold it, but I would not do it again. It was not worth the stress.
The police basically had a unit assigned to the building because of the amount of drugs going through there. I had roaches and bed bugs that I paid thousands upon thousands of dollars to get rid of and still struggled. I had a tenant die of an overdose in a unit. I had several good tenants move in, but they stayed for maybe a month or two before realizing they don't belong here.
These types of properties are very, VERY management intensive and you need to have the right people in place.
I can tell you now, you can turn around a property BUT you have to have the knowledge and the right people in place. Ken McElroy talks about how he turned a terrible, crime ridden property into a completely different place.
The business that bought the apt complex I owned knew what they were doing. At the time I did not.
Evict everyone and start from scratch. Renovate all the units. Clean up the property on the outside and make it look brand new. Put a gate around it that needs a passcode or keycard to access.
You need to have tons of reserves in place for something like this. Don't go in over leveraged. You will be investing a LOT of money into turning it around. You will be investing a LOT of time into getting it turned around.
The potential is there, but don't under estimate the amount of time, effort and dollars it's going to take.
I Think there may be some mis understanding. This is the state capital of SD. In a good location and good neighborhood. It's a lower income property and there is drug activity. With it being a small town, the perception of it can easily go down hill.
its known for meth presence, but its probably 5-10 individuals that are causing it. It had 50 calls to the police dept last year. One stabbing 2 years ago(only murder in town for past 10 years).
Its not the big city full of drugs that people think of. Its just got a bad image for a small town of country living folks. Changing that perception is what worries me.