16 Townhome styled apartment complex

[Ashton Levarek]

Investment Info:

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

Purchase price: $950,000
Cash invested: $25,000

Contributors:
Ryan Daigle, Chris Levarek

16 Townhome style apartments, 2 bed/2.5 bathrooms. Purchased at $950,000, raised the capital from private investors. Current rents average $620/unit, market supports $800+/unit. Plan in place to spend $3,000/door in rehab in order to raise rents to market value.

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

The strong renter market, the price of course and the value add opportunity.

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

Working with a local multifamily broker that we had developed relationship with. Once we got the property under contract we had our contractor and our PM walk the property with us, after discovering quite a bit of deferred maintenance we showed the seller how much repairs were going to be in order to get his up to market value, at which point he lowered the price and mades ome repairs him self. To include adding 4 new HVAC units.

How did you finance this deal?

We raised the capital through a 504 offering.

How did you add value to the deal?

We employed a professional management company as well as began rehabbing each unit as they became available, i.e. as leases expired. Plan is to spend approximately 3k/door in rehab costs, which will allow us to raise rents from $620/door to $825/door.

What was the outcome?

Rehab and value add plan is currently underway. But by year 2 rehab should be finished and all rents should be at market value.

Lessons learned? Challenges?

Everything must go on the HUD. EH-very-thing! To include rental deposits - seller is currently disputing whether we are due the rental deposits or not.

Also if you are going to syndicate, do not use a 504 offering, even if the lawyer advises it. In a 504 offering they have to research and verify the laws of each state that each investor has residency in. And if your investors are military, they probably all come from different states, which can get pricy. - recommend a 506b instead.

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

Michael Glaspie from Five Pillars Realty and Spoat Jackson Brown Property Management.