28 Unit Student Rental BRRRR @ University of Cincinnati

[Joseph Cornwell]

Investment Info:

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

Purchase price: $1,650,000
Cash invested: $440,000

I have been buying small multifamily 2-8 units buy and hold for the past 5 years, and I wanted to shift into mid sized multifamily to scale up faster about 3 years ago and I found myself in the most competitive market in our history. I am based in Cincinnati and invest locally, and I tried everything I could. Cold calling, direct mail, all the local brokers, networking, and I found a few deals that made sense and made offers but never won a single contract for 3 years. I was often told we had 20+ offers, some of them going for 100k per door or more, no inspections, no financing contingency were common. Finally in June, I had a listing broker send me a deal that made sense. We had a slight dip in competition when rates jumped up 2% in June. Which allowed me to FINALLY get a deal under contract.
28 Units, 1 and 2 beds.
PP: 1,650,000.00 @7% cap
ARV: 2,500,000.00+
I will be renovating most of the interiors, and some exterior cap ex work. We will be marketing strictly to students, this property is very close to the University of Cincinnati. Moving to market rents for the student market, making interiors much nicer, reserved parking, etc. Average rents should move 300-400 per door within 24 months.
So for anyone who is looking for your first or next deal to scale up, keep trying, do not give up. Sometimes your next call, email, search will lead to success. I wanted to give up on this asset class many many times, but I keep swinging at it. I am looking forward to this projects turn around, and many more to come!

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

I have been trying to get into midsized multifamily 20+ units for several years. I also recently moved in student rentals, so this combined both of those!

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

Listing broker sent it to me, we originally went into contract at 1.85MM but we found some cap ex items such as roof, plumbing, that needed repairs and negotiated a 200k reduction. With rates jumping up 2% I had much less competition at the time.

How did you finance this deal?

Commercial Bank 80% LTV on total project costs, 2.2MM with rehab funding.

How did you add value to the deal?

We will be renovating most of the interiors and doing cap ex repairs, raising rents to market and marketing to students.

What was the outcome?

Just started but we have an as complete appraisal of 2.5MM.

Lessons learned? Challenges?

Keep going until you get what you want, stay consistent and persistent. I am so glad I never gave up, and hopefully this will lead me to scaling up faster with more deals.