Commercial Investment - 6 Unit Apartment Building

[Reed Rickenbach]

Investment Info:

6-Unit Value-Add Apartment Building in East Memphis. 2 One Bedrooms, 4 Two Bedrooms. 1965 Build. 

Purchase price: $400,000
Cash invested: $71k to close, $72k proforma renovations (interior & exterior). 

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

After 4 years of investing in single-family homes, I wanted to take the leap to value-add multifamily. I work full-time as an Asset Manager for an apartment operator, so I was ready to put some knowledge to use with a personal investment. 

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

I had previously sent this owner a hand-written letter after driving by this property, however a wholesaler beat me to getting it under contract. A wholesaler I was familiar with sent me the deal. 

How did you finance this deal?

15% down from a local lender I have had a relationship with since 2019. Had cash from liquidating most of my single-family homes in 2022. 

How did you add value to the deal?

Taking average rents from $475 to $900 via interior & exterior improvement. Seller had not raised rents since 1995. Property will undergo exterior paint, new roof, new fence, & full interior renovations (adding laundry). 

What was the outcome?

Proforma outcome is to increase NOI from ~$27k (current) to ~$48k over 2-3 years. Depending on cap rates in 2024-2026 the property could trade or appraise for $650-850k.

Lessons learned? Challenges?

To be determined!