All Forum Posts by: Elijah Vo

Hey gang, 

Spoiler...it didn't burn down entirely, but we had a fire in the Spring of 2021. Here's how we turned a negative into a positive...

The backstory...

My partners & I acquired a 267-unit portfolio in Fort Smith, AR at the end of 2020. At the time, it was a C- asset located in a great part of town...our plan was to infuse approx. $1M+ into the property's interiors & exteriors, push rents, reduce expenses, and increase the additional other income...our typical "value add" strategy.

For those who want a deeper dive into the capex, we had approx. $632k into the exteriors and a $388k into the interiors (reach out if you want more...)

Anyhow, we closed in Dec 2020 and immediately implemented our business plan. Things were going well, but late night in mid-March our property manager notified us that there was a grease fire in one of the 2nd floor units. Additionally, the fire activated the sprinklers and substantially damaged two more units downstairs (pictured below).

Luckily, the fire department arrived onsite under 5mins and extinguished the fire, so hats off to the real heroes who mitigated the damage and saved lives!

We reacted immediately...

Early the next morning we:

1. Hired contractors to secure and board up the units. They also worked on quotes for renovation.

2. Ensured the residents were ok and relocated them to different units.

3. Notified the insurance and walked through the process and next steps.

4. Notified the lender and let them know that there were no injuries, we were collecting repair estimates, and a claim was filed. 

5. After a few days and every was situated, we sent the investors an update.

Essentially, it was a total loss in the upstairs unit and significant water damage in the two bottom units. Luckily, the fire didn't reach into other units or the attic...thanks to fire fighters. The total cost of repair was approx. $50k and the insurance agreed to send $19k to start and the rest afterwards. 

After the renovation, we were able to increase the rents from $395 to $565 and collect back rent from the insurance for the down units. 

Overall...you've heard it 1,000 times but the team is everything. Your partners, the insurance, the contractors, your property manager...even the local community is critical to your success. Staying calm and surrounding yourself with a strong team won't stop obstacles, but it'll turn them into opportunities!

Take care and good luck on your journey,

Eli

@Suzette Williams I loved serving, so you're very welcome!

@Andrew Garcia thanks bud! Just grinding out deals the best I can!

21yrs ago, I was jumping out of airplanes as a paratrooper in the Army. Now I land multimillion dollar commercial real estate deals...

Your life accomplishments are about perspective...

Think about that.

@Nathan McIntire Thanks bud, but this wasn't too recent...we purchased this property about 2yrs ago...I just wanted to show how we brought some value to it. 

@Alex Ramirez IKR?! People are drawn to primary markets, but there's value in secondary and tertiary markets too. 

⚠️$350?! That's a hellava a deal!!!⚠️

Why do we buy assets in secondary & tertiary markets?

First off, we can find true value-adds. That is, assets that have been owned by the same mom-and-pops for 10-20yrs and not been updated.

Second, substantial rent increases. This picture was a sign that was posted at a property we acquired in a small, but growing city in AR.

The comps around it supported $600-700, but this one had $350-$400 rents.

There are many flavors to this game, but don't let smaller markets scare you away from investing in these diamonds.

✔️Look at the team's experience & track record.
✔️Dig into their business plan.
✔️Ask tons of questions.

@Shane H. Yeah, our plan is to upgrade the interiors but maintain the historical character...it's a really cool project! 

@Ike Hobbs Absolutely! This property is located right in front of the city's arena and in between the arts and business district. It'll be a great project pushing this to an A class.

@Dmitriy Fomichenko Thanks bud!

Investment Info:

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

Purchase price: $14,200,000

Sterling Chase is a 1983 built-asset that is well-located, and highly occupied property with strong in-place cash flow. Residents also enjoy easy access to I-285 204,000 vehicles per day), which facilitates quick commutes to major metro employers. In addition to being located on a major internal thoroughfare, the property provides easy access to numerous amenities nearby including grocery, gas stations, and restaurants.

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

The previous ownership had renovated several units and leased them at a $100 premium, which allowed us the opportunity to continue interior value add, upgrade amenity package, and push rents to match existing markets.

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

Broker relationships

How did you finance this deal?

Agency debt

How did you add value to the deal?

We infused approximately $950K into interiors/exteriors, which allowed us to finish out the existing value-add package. By doing this, we were able to hit our 6yr proforma in under 3yrs, returning nearly 100% back to investors.