All Forum Posts by: Blake McWilliams

 Hey Robert!  This is a tough one! I'm assuming by adding 2 en suites your referencing adding two full bathrooms, rather than one larger master bathroom?  

 Of course!  I'll start with the largest learning curve.  In Illinois for commercial property, property disclosures are not required.  During the due diligence time frame a lot of my conversations with the owner were had over the phone rather than in writing, via email and text.  I've since built a more detailed email procedure on questions regarding general conditions/ known problems.  Some things that went wrong were rather unpredictable, like an improperly buried wire for a sewer pump that the ground and hot wires began touching throwing the breaker. (This was right out of the gate) Other things were a furnace, AC, Water heater.  However a couple larger items that should have been discussed: the pipes would freeze every winter (we've since found a fix), no water shutoff exists in each unit, the well pump has to be turned off and cut water to all 18 units, no pest control was ever done on the property, there was a unit that would take on exceptional water during rain due to improper prep and installation of a new concrete slab. I could keep going I believe we've received 50 maintenance requests since April on this unit.  Most things could have been avoided with proper maintenance from the previous land lord.  

It seems we have started to round the corner at this particular property but it came with much more work than anticipated.  

 Hey Ron!  Motel's being converted into LTRs can be a creative way to improve vacancy and cash-flow overall.  My advice is going to be more generalized but comes from personal experience.  

We recently purchased an 18 unit in April of 2024.  The vacancy was low and rents were fair based on comps.  With initial projections we were expecting to NET 60k/year.  This was assuming 10% for maintenance and 10% for vacancy.  My prior experience was in small multifamily.  Seemed like a home-run.  

Fast forward to today. Our maintenance each month ran 30% until December zapping cash-flow and our expectations.  What we learned, through quite frankly our own difficult times, was that no one sells a well performing property if it comes without a headache.  We now underwrite our deals with higher maintenance and are ok with lower cash flow for the first few years while we play catch-up with deferred maintenance.  

I mention all this to in short say, expect very high maintenance on the front end.  If you're prepared for that and you can still see some form of upside in the deal, take your shot!

Cheers!

 As an investor a crucial member to your investment team should be a great attorney.   Looking at your question the proper guidance will greatly vary based on the contract your current PM and you have.  In my experience, the law is never truly black and white there are typically grey areas in contracts.  In the event you don't have an attorney, maybe the second PM can give you a referral to one that can look over your agreement.  

Hope this helps!

Cheers!

 Hey Michael! I grew up in Wilmington IL, small world. While at BPCON last year I connected with an investor and agent in your area. I'd be happy to connect you both. I'm also still friends with a great investor friendly agent in the area I'm sure he'd be happy to help. Happy to help anyway I can!

-Cheers

Hey @Ted O'Grady!  First of all, welcome!  You've found the right group to be a part of.  I spend most of my investment time in the rehab space.  Mostly on a long term scheduled with deferred maintenance.  I personally put them on a schedule, long term, because I do not have the time to do the work myself and contracting it out all in one shot comes with a large bill.  

That being said it seems you are in the prime position to remove the largest variable expense from your equation.  By doing your work in house, you eliminate quite a large portion of the expense category.  

If I could re-frame, and put myself in your shoes, I would look for a money partner to help secure rehab properties.  With myself as an operator I would offer the following: underwriting the deals, a detailed scope of work, a detailed material list, the labor, and the management.  

If you find the right partner you also can forgo the refi.  The refi, worth current rates will severely inhibit your cash flow.  Use the partner to scale, not the refi, split the cash flow according to shares dictate in your operating agreement.

There's multiple ways you can approach your situation; I just wanted to provide some fresh eyes from the outside looking in!

Cheers!

Hey @Ryan Raven! Krystyna answered your question perfectly.  I'm actually jumping on here to let you know that am also an investor around the Champaign area, I'd love to connect!

 Hey Koffi! I invest in Danville, Mattoon, and Effingham IL.  I'd love to connect and discuss how we can help grow each other's businesses.  

Cheers!