64 Unit Apartment Building in East Peoria, IL

[Brad Stegall]

Investment Info:

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

Purchase price: $2,500,000

Contributors:
Michael Gudat

This property is a very nice building in a great community, but rents were way under market. There are 8 buildings that each have 8 units in them.

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

We knew that this property was in a great part of town and it had good bones. It had been taken care but rents had never been increased over time.

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

We found the deal through a mutual friend that was their insurance agent. They ordered an appraisal and we bought it for $100K less than the appraised amount at the time since no agents were involved.

How did you finance this deal?

We bought this 64 unit complex using a 1031 exchange. The 1031 allowed us to consume another 48 units as well. The 1031 came from a deal that we bought with $70K as a downpayment in 2020. We sold in July 2021. So we ended up with 112 units after investing $70K in 2020 on a 24 unit deal. No additional cash was invested to get the deal done. Pretty incredible.

How did you add value to the deal?

This property is a very nice building in a great community, but rents were way under market. Fortunate for us, 2/3 of the units were month to month. We were able to grow rents by over $4,000 per month in the first 90 days. Now when units come open we are updating the kitchens and flooring and pushing rents by another $250 per month.

What was the outcome?

For now, the outcome is that we have grown the value of this property tremendously. There is a good chance that we will be looking to sell it once we have owned it for 12 months. Gotta avoid the short term capital gains tax!

Lessons learned? Challenges?

I don't think we have had any major challenges on this one....yet. The biggest challenge is that we can't find deals like this more often!!

[Tracy Morris]

@Brad Stegall Fantastic!  Love seeing deals like this!