Value-Add Opportunity in University-Anchored Market

[Account Closed]

Investment Info:

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

Purchase price: $700,000
Cash invested: $210,000

28-Unit, Class C apartment complex

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

This property's entry-point pricing was compelling considering the site-specific location and the overall market

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

Local broker relationship & CoStar

How did you finance this deal?

Traditional financing via local bank

How did you add value to the deal?

Value-add so far has been on the collection of rent side and improving the overall quality of the property via professional management, parking lot re-surfacing/paving, major overall clean-up/painting and a near-100% turnover in tenancy. We will replace all roofs in 2020 and then turn our attention to interior renovations and appliance replacements.

What was the outcome?

Work in progress...So far, the overall average rent for the property has been increased by about 15% in 22-months and all but two (2) of the units have been re-tenanted with better credit residents.

Lessons learned? Challenges?

Look deeper in the due diligence process for warning signs of problems. On this one, we missed tell-tale signs of foundation issues. There was water leakage and damage in property's past which we 100% attributed to the roofs. Turns out, roof leakage was only part of the problem. What we missed were foundation issues. Fortunately, they were not too severe nor widespread, but they did set back our turnaround schedule.