Massive Value Add - 20 Unit Apartment Building - Completed.

[Brian Green]

Investment Info:

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

Purchase price: $1,265,000

Update Oct '20: Construction is now complete and 15 of the 20 units have been leased thus far. Lease rates of $1195 - $1345 depending on layout and location. ARV based on realized financials projected to be $3.1 million which is substantially higher than our original proforma projections due to increased revenue and decreased operating expenses. Property will be refinanced with agency debt at 90% occupancy at the end of the year.

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

Massive value add opportunity based on the condition of the property and the rental rates in the market.

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

Originally contact was from a mailer we sent the owner. Communicated for almost a year before the owner decided to list the property with a broker. Given the long term nature of our relationship with the owner, he was kind enough to allow us to view the listing before it went public and given we had already completed an enormous amount of research into the project we were able to offer full asking price.

How did you finance this deal?

The deal was financed through a local credit union at 80% LTC with our company funding the remaining 20% .

How did you add value to the deal?

Value was added via forced appreciation as we invested 50-55,000 per unit into the property. Almost every portion of the property has not been updated or replaced aside from the framing, foundation, and drywall.

What was the outcome?

ARV value that exceeded our projections and we plan to refinance at year's end with long term agency debt. This refinance will allow our company to receive 50% of our initial equity back as proceeds and subsequently boosting our investment returns. The property will be self managed by our company.

Lessons learned? Challenges?

We had a good amount of delays and disruption to our renovation schedule due to Covid-19 construction restrictions. This pushed our project completion date back about 3 months which ultimately has done the same for our leasing efforts. But we managed through it and completed the project successfully.
We also underestimated the environmental component of the renovations leading us to have to expense testing we had not budgeted for and amend the project's final sow to work around those challenges

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

Brian Sheldrick @ Capital Communications FCU - Cap Com is a outstanding lending partner that we have and will continue to work with for all our acquisitions.