Purchase of 10 unit apartment building

[Joshua Watts]

Investment Info:

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

Purchase price: $360,000
Cash invested: $36,000

Was able to purchase this 10 unit apartment building, 2 bedroom 1 bath, built in 2007 for $360,000 all cash. (We had to close the deal fast or the seller was going to sell to someone else) The seller broke one of my oldest rules in owning rentals properties and that was not to pay for any tenant utilities. We were able to add value by installing water lines to each apartment building for the cost of $26,000.00, in turn saving us $1,500.00/$1,800.00 per month on the monthly water bills. With this new increased net income we refinanced our capital back out of the property. The bank appraisal came in right at $600,000 which means we were able to add $200,000 in valve by seeing that this complex would be better off having water ran to each apartment unit.

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

We invest in apartment buildings and self storage so this apartment building folds right into our portfolio.

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

One of our real estate agents called while we were on vacation and we made the offer all cash while we were still on vacation. There was no negotiations the price was right we paid asking price.

How did you finance this deal?

All cash then cash out refinance

How did you add value to the deal?

Where the value was in this deal was the fact that the seller was paying for the water for the tenants. As soon as we purchased the apartment we had 10 meters installed buy the city and had water lines ran to each unit.

What was the outcome?

Now we have increased net income removing the water bill, over time the next 12 months we will start pushing rent up being the rents are below market.

Lessons learned? Challenges?

We have learned that we can increase value of properties by finding mistakes that other sellers have made. In the last 5 to 7 years this has been our go to reason for buying a property. We find mistakes that sellers are making and correct them in tun adding value.