17-Unit/35-Bed Student Apartment Investment

[Account Closed]

Investment Info:

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

Purchase price: $1,065,000
Cash invested: $266,250

17-Unit/35-Bed, Value-Add Student Apartment Complex. Adjacent to Illinois State University Campus.

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

I am an "MAI" commercial real estate appraiser turned investor. My specialty practice while appraising was in the student apartment sector. During my career, I developed a number of key relationships in the niche. These relationships have resulted in access to a pipeline of off-market deals and a rock-solid operational team who truly understands student apartment management.

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

Off-market deal. Brought to us by our property management (PM) company who also is an equity investor in the deal. Partnering with our PM further aligns the interests on this project and acts to mitigate the risk to the deal's other investors.

How did you finance this deal?

Financed by local bank. The principal of our property management company has a significant amount of leverage in the local banking community which resulted in six (6) very competitive bids.

How did you add value to the deal?

We closed Jan. 3, 2020. For this asset, we are re-configuring a 4BR1BA unit to an easier to lease and higher rent generating 3BR2BA unit. We are also completing traditional value-add type renovations initiated by Seller in remaining units. We secured permission from Seller to begin re-configuration work prior to closing. This will allow us to put this unit back into rental circulation in time for the Spring 2020 semester. Significantly, this unit was not underwritten in our projections.

What was the outcome?

TBD

Lessons learned? Challenges?

Raising the equity went considerably quicker than anticipated. Not only were the metrics on this particular deal compelling, but what the investors loved was our experience in the student apartment space and our property management team's involvement in all aspects of the project (deal sourcing, equity/debt, value-add execution, and day-to-day operations). We truly have a "rock-star" team put together and it was readily apparent to the investors on this project.