My partners and I just closed on 6 more units in Worcester MA! We found a great off-market deal, with the building appraising 15% over our purchase price! This acquisition did come with some major challenges, however...

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

Got an amazing deal on this latest project, snagging it for just over a mil! It appraised for $1.17 mil. Once it's stabilized, we're expecting over $13K in monthly revenue with a sweet 10%+ cash on cash return!

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

Through a wholesaler. I have estabalished a brand in the Worcester market that I am a multifamily investor and was brought this deal by my network.

How did you finance this deal?

Through a small local bank. Two weeks before closing, our lender came back and drastically changed the loan terms compared to what was initially agreed upon. Both the rate AND the amount they were willing to lend was changed including the loan-to-value which went from 75% to 50%! This resulted in us nearly having to double our down payment to get the deal done, with little options due to the tight timeline. We got it done, but it wasn't fun.

How did you add value to the deal?

The building is in fantastic shape (was gutted 20 years ago) and is over 8300 square feet. Each unit is about 1400 square feet allowing us to rent each of the units for over $2200. At a price of 1 mil with only about $50-100k of make ready costs, this property will be stabalized at around the 1.2% to 1.3% rule producing a solid return.

What was the outcome?

Just closed and still in progress.

Lessons learned? Challenges?

1) Lending relationships matter – I was allured by an attractive term sheet from a bank I’ve done little work with thinking I would be better off. Next time, we will do more vetting of the term sheet with lenders to better ensure they can deliver on what they are offering.

2) Banks are getting skittish – Banks are tightening up their lending criteria. I’ve heard similar tales from other investors. You want to be sure you are working with a lender & loan officer you can trust.

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

No, I am an investor focused agent and represented myself and my partners.