Historic Mixed-Use Apartment Project

[Travis Dillard]

Investment Info:

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

Purchase price: $1,800,000
Cash invested: $500,000

We purchased a historical 30,000 SF Building built in 1910. The first floor has 4 retail spaces, the upstairs housed apartments abandoned in the 1930's. We renovated two of the retail spaces and completely gutted and constructed 9 class A loft-style apartments upstairs. We took advantage of many public / private programs, including vertical housing tax credits, federal grants through the Urban Renewal Agency, and energy credits all totaling over $250K in benefit.

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

This was my first larger multi-family project. The area is in the scenic Columbia River Gorge, an hour east of Portland, Oregon. I was intrigued with the public programs that make this project make economic sense. The project has also been a catalyst in attracting other investors, leading to a downtown revitalization movement.

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

A local broker. There were personal reasons forcing the sale and I offered lower than asking price. It was accepted.

How did you finance this deal?

I acquired the building via a primary commercial note and the seller financing a second. Later, I financed the seller out with a second construction note, accompanied by gap financing through the Mid Columbia Economic Development District (MCEDD) which exists to assists local businesses and projects like this.

How did you add value to the deal?

Renovated two commercial spaces and built 9 Class A loft-style apartments on the second floor. I plan on adding 12 storage units on a mezzanine level to add income in the future.

What was the outcome?

All commercial spaces are leased. We started leasing the apartments in Jan. 2020. Even with COVID-19, we have 7 of the 9 apartments rented as of April of 2020.

Lessons learned? Challenges?

Construction projects = twice as long and 25% - 45% more cost than expected! Plan on carrying costs. Also, remember that your cash-on-cash / IRR is significantly altered when your cash is tied up for two years without income!

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

Columbia Bank. The Main street Commission. Urban Renewal Agency. Mid Columbia Economic Development District (MCEDD).