Multifamily 3 year hold and sale

[John Lenhart]

Investment Info:

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

Purchase price: $1,130,000
Cash invested: $245,000
Sale price: $2,100,000

38 Unit apartment building in Cincinnati, Ohio. Strong value add opportunity. An example of finding an underperforming asset and putting renovation dollars into the building to improve the units and raise rents.

In 3 years we renovated the units, raised the rents and sold to another investor for a cash out after 3 years.

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

It was a good neighborhood that was on the rebound. The building needed a lot of maintenance but the opportunity was there to really push rents given the size of the units and location. Downside was minimal because in the event I was wrong it still cash flowed.

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

Through a local broker that I had developed a good relationship with

How did you finance this deal?

Bank financing. 80/20 loan.

How did you add value to the deal?

Renovated 50% of the units. Raised rent on the renovated units by $300 per door. Non renovated units saw modest rent increases along the way as well.

What was the outcome?

We were able to get an annual return on our cash over a 3 year term of over 100%.

Lessons learned? Challenges?

Certain maintenance aspects like flat roofs were not given the consideration I should have. We tried to patch it for a couple years but it did not really help much and we eventually had to replace. Flat roofs are difficult to do piecemeal fixes.