1st Multifamily Investment

[Brandon Wells]

Investment Info:

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

Purchase price: $315,000
Cash invested: $110,000
Sale price: $550,000

Asset was owned and ran by a mom & pop who held it as their 1st investment. I was familiar with the area from being a Regional Manager for a 180 unit asset for 4 years prior. I was able to immediately recognize the rents were significantly under market and that there was some ancillary income opportunities to be had.

My partner and I held it for 16 months and in that time we took the average rent from $415 per unit up to $650 plus $25 water bill back. We did standard unit turns on 8 of the units in that time and one full upgrade. On the full upgrade we did, we received a $200 monthly rental premium. Benefited from taking some things I learned running multimillion dollar investment grade assets down to the small multifamily asset.

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

I worked for a regional management company who had over 20,000 units under management. I had a front seat to see what type of advantages the owners had in investing in multifamily.

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

It was publicly listed in an outlying market. It was listed at $350,000 and we negotiated giving up our commission (my partner and I are brokers) and got the property for $315,000. My partner fronted the purchase money and I used my experience and expertise to operate it.

How did you finance this deal?

Traditional financing. 5 year term amortized over 25 years with 20% down.

How did you add value to the deal?

Forced appreciation by immediately improving operations by increasing rent/ancillary income and then stabilizing the expenses.

Increased the rents by $200 at takeover. Added in pet fee's and water reimbursement fee's. Was able to leverage contractor/supplier relationships to lower the expenses.

What was the outcome?

Held for 16 months, stabilized and recently sold for 550k cash, as-is.

Lessons learned? Challenges?

12 units is more time consuming than any 250 unit+ property I was responsible for.

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

M & M held the listing. We did our financing through First Bank of Richmond.