Neighborhood eye sore to clean and safe living conditions.

[Gabe Belloli]

Investment Info:

Large multi-family (5+ units) fix & flip investment in San Diego.

Purchase price: $1,250,000
Cash invested: $400,000

We bought a mixed use property that had 1,000 sq ft of empty un-used space, 1000 sq ft of retail being used as an illegal massage parlor and the 6 apartment units with poor tenants. The property was poorly managed or not managed at all. Rents if collected were all done with cash with no records for anything. Property was purchased with hard money, old tenants were evicted and property management placed solid tenants. We are in escrow on an unsolicited offer that should close first week of Jan 2022. Once closed it will put us at roughly a 34% annualized return.

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

It was a very run down mixed use in a strong apartment rental market. It was going to be very challenging to do a zone change, make affordable housing units and add 4 additional living apartments.

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

Loopnet. We came in all cash and paid asking even though asking was high based on condition and rents, we knew the upside was huge. we didn't ask for anything special or extra.

How did you finance this deal?

Hard Money

How did you add value to the deal?

We evicted may tenants that did not meet the new screening requirements, we did light rehab to those existing units and got them re-rented at higher amounts, we did immediate rents raise to rest of tenants that stayed. Additionally, we evicted the commercial element which was running an illegal massage parlor and then got a zone deviation. This allowed us to make two additional apartments in the old commercial space. We went from 6 to 10 units and increased rents.

What was the outcome?

We are in escrow to sell and stand to make 34% annualized return.

Lessons learned? Challenges?

The more things your are doing to increase the value, the more money you need in reserves. Working with city government to get permits

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

Agent: Aperture Real Estate
GC: Meram Building