37-Unit - HUD Section8 HAP Multifamily

[Lucas Miles]

Investment Info:

Large multi-family (5+ units) commercial investment investment.

Purchase price: $814,000

37-Unit - HUD Section8 HAP Multifamily

Overall the project was situated decently well at closing, occupancy was mid ~85%, and overall the property was in very nice condition. Little to no rehab/capex spending was needed. Current ownership was not local, and didn't have a presence anymore. Expenses at the property were were getting out of hand, and needed to be corrected.

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

This was found off market, we have developed a process to find off market deals.

How did you finance this deal?

Lending was another challenge, lending restrictions were starting to tighten up, and we had to get a bit creative with our lenders to get the financing we needed to close. We used one of our existing local lenders to provide the majority of the purchase, and the rest was provided from our investors.

How did you add value to the deal?

To decrease expenses, we are 1. Bringing in different management 2. Installing thermostats with regulated heat control (we pay heat) 3. Removing some of the on-site staffing that is not needed 4. Renegotiating some utility contracts (garbage and removing some on site office paid internet/phone bills) 5. Change all lighting to LED

To increase revenue: 1. Turn one of the units that is an office back into an apartment. 2. Increase occupancy 3. RCS (Rent Comparability Study) to increase rents

What was the outcome?

The property appraised for 1.4M the day of closing. We will quickly correct the excess spending, and fill the vacant units with quality residents. Our investors benefit from immediate equity creation, and long term predictable cash flow, overall a great investment for us!

Lessons learned? Challenges?

Being a Section8 HUD building, there was an immense amount of paperwork and due diligence that was required. HUD performed extensive due diligence on us, and had to approve us as buyer's and our management company and mangers. Approval process took about 4 months. We learned a lot about project based Section8 buildings, but are now actively pursing more projects like this.