Beautiful 10 Unit Cash Flow Machine With Value Add Potential

[Nicholas Baker Wood]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $765,000
Cash invested: $120,000

This Mixed-Use Short term and long term apartment building was a rare find! It's right on the outskirts of the growing "South on Main Arts District" near downtown Little Rock. As the area continues to develop, and crime + decrepit properties diminish, the rents and resale value will increase exponentially. After purchasing, we have re-arranged some leases, and are working on improving the AirBnB Units in order to maximize Cash Flow.

What made you interested in investing in this type of deal?

I acted as the buyer's agent on this off market deal. After getting my buyer under contract to purchase it, the buyer asked me if I would like to co-invest into the property, to which I replied "yes!" I had, to date, not invested personally in something that large; however, I knew that this property was going to generate passive income from day one, and that our equity stance would have a lot of room to grow as the area, inevitably, improves.

How did you find this deal and how did you negotiate it?

This deal was found by an acquisition agent on our team who specializes in finding off-market Real Estate investment opportunities. The buyer agreed to the seller's asking price, since it was reasonable, and the numbers checked out.

How did you finance this deal?

Commercial loan with 15% down.

How did you add value to the deal?

Currently, the units are leased for $100-$200 lower than they should be per unit per month. We will begin by billing water back to the tenants, and increasing rent to market values when turnover occurs. There are 8 renovated units, and 2 that remain un-renovated. We will shift tenants out of un-renovated units in order to bring them up to par with the others, or above the standard of other units, and attempt for $850/unit per month. Additionally, we will improve AirBnB Income.

What was the outcome?

So far, so good. We have had to evict one tenant already, since they had guests loitering and making noise at late hours, which was disturbing AirBnB guests, resulting in a few negative reviews. The property is performing as expected, if not better. and after a couple months, we are realizing positive cash flow.

Lessons learned? Challenges?

When purchasing AirBnB Properties, be sure to look at reviews posted by guests who stayed under the seller's ownership/jurisdiction. This can be telling of how the property will be reviewed once you purchase it, and it can allow for changes to be made early on, if possible, to remedy potential negative situations.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Dawn Johnson, with Partners Bank in Conway, was really helpful in executing this deal. Bryan Dearasaugh with Rock Solid Home Inspections made sure that we knew exactly what we were purchasing.