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Updated over 4 years ago, 05/19/2020
CLOSED on a 98-unit TODAY!
So, we had another thread going for a couple of weeks here. And this is not yet a success story, since a lot of work needs to be done to make it a success.
But, today, @Sam Grooms and I closed on this 98-unit in Phoenix.
This is a syndicated private placement acquisition. @Jillian Sidoti and her firm, whom I highly recommend, helped with the PPM-related docs.
The unit mix includes studio, 1x1, 2x1, and 2x2 lay-outs. The asset was constructed in 1984, and has by and large been un-touched on the interior of the units. However, the bones are very good, the unit sizes are attractive within the sub-market, and the location is experiencing very significant gentrification.
This was a mom-an-pop owned property. Rents are low even for as-is condition. Our Cap Rate on the way in is a bit under 5%. Our expected Cap Rate after the re-positioning in Y3 is 8.3%. Obviously we feel that there is a lot of upside on the rents.
We have a $1.4M renovation budget, which includes complete reno of the interiors, as well as close to $500,000 in the common areas.
I could talk for hours, but I won't. I have a feeling me talking for hours might happen on the blog :)
But, feel free to ask questions - I won't tell you everything, but I'll do my best to paint the bug picture.
Congrats to you guys. In a market like we’re in this sure sounds like a real nice deal. Best of luck to you in the implementation of the business plan.
@Ben Leybovich @Sam Grooms Congrats you guys!!!
WOW congrats! #GOALS
Congrats!
Awesome! Inspirational!
@Ben Leybovich @Sam Grooms You mentioned the seller was not very sophisticated. He bought the property for 1.645M in 07/2013 and sold it to you guys for 8.15M 5 years later. 500% increase for an unsophisticated seller is pretty good.
Originally posted by @Aaron R.:
@Ben Leybovich @Sam Grooms You mentioned the seller was not very sophisticated. He bought the property for 1.645M in 07/2013 and sold it to you guys for 8.15M 5 years later. 500% increase for an unsophisticated seller is pretty good.
He bought the property for $2.9M in 2013. But, yes, I disagreed with Sam's assessment of "not sophisticated. You can't argue with success.
I will say that he may not have been the most sophisticated seller, but on the other hand - he did not need to be. He did well enough on the front end. And while we can term someone as not sophisticated to do what we do, the reality is that he was plenty sophisticated to call the cap rate compression game, and had the balls to deploy when many did not.
Bottom line, I agree with you - @Sam Grooms should not have characterized the seller this way.
I'd argue that its 10x harder to build value now, than in 2013. How could you not build value by buying in 2013?
If the seller was given the property today for free, and you told him he could have any increase in value on the property over the next three years, I don't think he'd change a thing.
When I said he was not sophisticated, I meant in the sense that I don't think he could do what it takes to build value in today's market. That's not an insult. I'd happily switch places with him. Hats off to him for the tremendous gain he just realized.
Originally posted by @Sam Grooms:
I'd argue that its 10x harder to build value now, than in 2013. How could you not build value by buying in 2013?
If the seller was given the property today for free, and you told him he could have any increase in value on the property over the next three years, I don't think he'd change a thing.
When I said he was not sophisticated, I meant in the sense that I don't think he could do what it takes to build value in today's market. That's not an insult. I'd happily switch places with him. Hats off to him for the tremendous gain he just realized.
Haha you can argue, but you would lose. It is harder to build value, of course, it is. And yet - he was the smart one to get in when he did - we are the schmucks having to do the heavy lifting. Wouldn't you rather be him? And isn't part of the reason we are doing what we are doing so that in the next cycle we can indeed be him?!
Originally posted by @Ramon Grullon:
Thank you for your service, Ramon! And - baby steps...
@Ben Leybovich and @Sam Grooms. Thanks for sharing your experience in taking down this 98 unit deal. Very helpful to those of us with similar aspirations for the future. Thanks for taking high road and focusing on the big picture in the process.
Originally posted by @Obi I.:
@Ben Leybovich and @Sam Grooms. Thanks for sharing your experience in taking down this 98 unit deal. Very helpful to those of us with similar aspirations for the future. Thanks for taking high road and focusing on the big picture in the process.
It is our pleasure to help, Obinna!
And, @Sam Grooms - note how people enjoy the high road, big picture, broad strokes...Ben Leybovich's liberal arts approach to teaching :)
Originally posted by @Ben Leybovich:
Originally posted by @Sam Grooms:
I'd argue that its 10x harder to build value now, than in 2013. How could you not build value by buying in 2013?
If the seller was given the property today for free, and you told him he could have any increase in value on the property over the next three years, I don't think he'd change a thing.
When I said he was not sophisticated, I meant in the sense that I don't think he could do what it takes to build value in today's market. That's not an insult. I'd happily switch places with him. Hats off to him for the tremendous gain he just realized.
Haha you can argue, but you would lose. It is harder to build value, of course, it is. And yet - he was the smart one to get in when he did - we are the schmucks having to do the heavy lifting. Wouldn't you rather be him? And isn't part of the reason we are doing what we are doing so that in the next cycle we can indeed be him?!
I get the sense you didn't read my entire post :)
That is so awesome!! Ccongratulations!
Originally posted by @Obi I.:
@Ben Leybovich and @Sam Grooms. Thanks for sharing your experience in taking down this 98 unit deal. Very helpful to those of us with similar aspirations for the future. Thanks for taking high road and focusing on the big picture in the process.
It is our pleasure to help, Obinna!
And, @Sam Grooms - note how people enjoy the high road, big picture, broad strokes...Ben Leybovich's liberal arts approach to teaching :)
But, guys - Sam just yelled at me to fully read his comments before arguing... Sam is still having trouble coming around to the reality that I am always right lol
Originally posted by @Noah Ryan:
Noah - I love Phoenix too. And when I say this, I mean I love living here.
I've always been a gut buyer. Yes, the numbers have to make sense, but I don't ever want the very difficult job of selling to people something they don't want. So, the question I ask is always - will they like it?
The thing is - I am not so different from most people I'd want to work with. All of us more or less want the same things in life. This means, we like the same things in life. So - if I like it, other people will likely like it too!
I like Phoenix. I like this asset. The location, grounds, mechanical set-up - I like it. So - they'll probably like it too... That's why I bought it!
This is very exciting. I'm just starting out in RE and am interested in the whole aspect of syndications, finding deals, and getting a group together.
I am just about to finish college and am wondering... what is the best way to start towards this kind of process?
I am not saying in reference to lock up deal like this (although a dream!) but, how can one start the foundation to get to where you guys are?
I am currently starting to familiarize myself with vocab and their importance in RE. What would you say are some steps someone beginner can take.
Thank you both and awesome property!
