84 Unit with value add components

[Steven Libman]

Investment Info:

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

Purchase price: $3,175,000
Cash invested: $1,915,000

National Road is an 84-unit complex developed in 1963 and includes a simple mix of 79 one-bedroom apartments and 5 two-bedroom apartments. There is an on-site office, which can be converted back into a two-unit, making the count 78 and 6. National Road offers affordable living with a home-style feel. The floorplans are all identical, and with tenants paying all utilities, are hassle-free and easy to maintain.
National is poised for new ownership with a value-add mentality. There are 28 units (14 on each ground floor) that are down to the studs. Estimated rehab cost is $15,000 per unit. The remaining 56 units are all occupied and could use some rehab. Currently, the average rental rate is $465 per month. Upon completion of rehab, National will rent for about $625-675 per month for one bedroom units and $675-750 for two-bedroom units. Note that current in-place gross income is approximately $315,000.
National Road is outfitted with tenant-paid gas forced air furnaces, electric through the wall A/C units, and individual, gas hot water tanks for each unit. All units have their own water meter. There are 4 water main bills. LL pays this, and tenants pay their own metered share to LL. There are two common area laundry facilities on site (one in each building).

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

28 down units makes for great immediate upside for renovation and market rents, while the other 56 units are below market rents by 25%

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

Broker

How did you finance this deal?

Bridge loan, 3 year IO to perm

How did you add value to the deal?

• Down Units – 28 Units
o $532,000.00
• Hallways and Stairwells
o $24,000.00
• Upgrade Existing Units – 56 Units
o $582,400.00
• Exterior Building
o $43,000.00
• General Property
o $55,700.00
Overall Budget $1,237,100.00

What was the outcome?

executing capex plan now

Lessons learned? Challenges?

We had owner financing in place for 850k. Last minute the bank would not allow subordinate financing, so we negotiated 850k as an LP position. Seller did not like this so pulled his 850k- we had to scramble to raise 850k in 3 days