Park Street Apartments, Pinckney, MI

[Derek Gibbs]

Investment Info:

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

We purchased two, 8 unit buildings and are working hard to get them updated and get the property stabilized. The plan is to upgrade units as they turn over and get rents up to market. We hope to refi our cash out in a year and get into a bigger deal next time.

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

We were looking for a value add property that was owned by mom and pop and had the potential for big improvements in both the asset and the management of it. This deal was exactly that.

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

Luck! We were in our attorney's office and mentioned that we were looking for an apartment building. Her husband, also an attorney, overheard and told us of his client that had two buildings for sale. After 14 months of courtship, we finally closed the deal.

How did you finance this deal?

Through a local bank that we have had a relationship with for 20 years.

How did you add value to the deal?

We are rehabbing the units to bring them up to date, as they are original 1970's.
We have also implemented management software and several other systems to make the operation more efficient.

What was the outcome?

We have only had the buildings for two months but, the rents are up by $100, we have fixed some maintenance items that were stealing from the bottom line and its added a ton to the NOI already. We should have no trouble with the refi.

Lessons learned? Challenges?

So many lessons learned. We almost blew it right away by not communicating enough with the sellers. There were a couple misunderstandings that caused some anxiety and delays. We switched lenders twice because we tried to save a few bucks and that almost cost us the deal when we faced another delay. Being cheap never pays.

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

I can't recommend Mike and Brandy at MBC in Michigan enough. They worked super hard for us and came through in a pinch even after we tried to use another lender to save a few bucks.