Ralston 20 Unit Apartment Complex - 1031 Exchange

[Owen Dashner]

Investment Info:

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

Purchase price: $1,300,000
Cash invested: $250,000

My first ever 1031 exchange completion was a result of selling two of my 4 plexes in Omaha that I owned for about 4 years, resulting in a little over $200K in profits. I rolled that money into this 20 unit apartment complex in Ralston with no additional money of my own.

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

Multifamily is my favorite type of long term hold. I was able to close this deal without the need for any additional downpayment outside of my 1031 funds.

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

The same broker who sold my two 4 plexes ended up finding this off market deal and brought it to me to consider for my 1031. I negotiated the purchase price along with a $30,000 repair credit for replacing the back retaining wall. The seller dropped his price $100K plus the $30K credit because he was motivated to do his own 1031 exchange into a larger property.

How did you finance this deal?

I got a loan from a small town lender, Malvern Bank. 4.75% rate, 25 year amortization (5 year fixed), 80% LTV. I could have gotten 85% LTV if I would have needed it.

How did you add value to the deal?

I will be replacing a retaining wall on the back side of the property, and doing unit remodels to increase monthly rents, plus implementing RUBS to increase the NOI.

What was the outcome?

No money down, good financing terms, cashflow from day one with upside potential on rents and utility billbacks.

Lessons learned? Challenges?

I literally was down to the last day of the 45 day 1031 identification period to find 3 potential replacement properties. 2 of the ones I had identified ended up falling apart, so this was fortunate that I was able to land this property, otherwise I would have had significant capital gains to pay.

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

I worked with Stephen Ward, owner/broker of Exceptional Properties Group in both selling the front end of the 1031 as well as sourcing the replacement property. He knows his stuff.

[Owen Dashner]

Thanks Nick! Not gonna lie, it was a little stressful during that last week of the identification period.  I had this property identified, but it wasn't my first choice.  I actually had 2 properties (an 11 unit and an 8 unit property) on the list that I wanted to combine to buy so that they exceeded the minimum price threshold of the 1031.  One week after the 45 day period ended, the 8 unit owner decided to keep his property, so he ended up backing out of the deal, which basically negated the 11 unit because the purchase price was below what I needed.

So this was actually plan B, but it ended up working out great.