All Forum Posts by: Eric Van Deman

@Arthur P. The 12-unit is a combination student housing/traditional housing opportunity in Mississippi. Going in CAP rate will be in the mid-7% range with some opportunities to drive it significantly higher.

@Raymond J. Rodrigues Thank you.

Congratulations!  I hope it becomes a great deal for you.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $265,000
Cash invested: $79,500
Sale price: $375,000

6th buy & hold - Triplex in Palm Harbor, FL.

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

At the time CAP rates had decreased significantly in our home market in Denver. As we planned to use a property manager for our next investment, we broadened our search to Florida. I was intrigued by the Tampa market in that values had recovered slower from the economic downturn in this core market and rent-to-price ratios as well as CAP rates were still providing great returns.

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

We found the property through the property manager we wanted to work with. It was an on-market deal that was a new listing. Our property manager was a big proponent of the area and the potential for appreciation, so we went ahead with the deal after a small amount of back and forth with the seller.

How did you finance this deal?

Conventional investor financing. As we held more than 4 mortgages at the time of the acquisition, we were required to put 30% down as opposed to 25%.

How did you add value to the deal?

Our property manager was able to drive rental increases on turnover/lease renewal through some leasing inefficiencies that we inherited upon purchase. The property itself was in good shape, so we didn't do anything to substantial to get it rent ready.

What was the outcome?

We held the property for approximately 4.5 years and upon exit realized a mid-20% IRR on our initial investment. We are in the process of utilizing the proceeds through a 1031 to purchase a 12-unit property.

Lessons learned? Challenges?

While the great condition of the property made for an easy out of state investment for both us and our property manager, we likely would've been a little better served to look for something with a greater value-add component to drive even higher returns.

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

Brenda Bianchi and Jon Figueroa with Bianchi Realty & Property Management

Congratulations!

@Michael Randle  There are a number of discussion topics, but you can normally get a good feel for someone pretty quickly how well they know their market/business.  I typically ask questions along the lines of:

- How many units and what type of properties do you manage?  How long have you been managing properties?

- How many of your units are currently vacant?  What is your historical vacancy across your portfolio?

- What is your process for advertising and screening tenants?

- How long does it typically take for you to make a unit rent ready and get a new tenant in the unit?

- Can you manage significant renovation projects?  What type of renovations have you managed in the past?

- What system do you use to report financials?  How often?  Web access via a portal?

- Do you have in-house maintenance team vs. using contractors?

You should be able to get a good feel for their experience and knowledge by asking these basic questions with maybe some follow-up depending on their answers, but most importantly trust your gut.

@Kelly Sennholz I definitely agree about the storms.  I've googled "hurricane path" a few too many times over the past couple years, but we held adequate insurance in case of disasters, such that we felt like we could reasonably walk away with just some remaining land value if worst came to worst.

@Nathan Gesner Yes, no problem.  It was right around a 4 year hold, we bought in October of 2014, put in on the market in the summer of 2018 and closed mid-October 2018.

Investment Info:

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

Purchase price: $980,000
Cash invested: $160,000
Sale price: $1,545,000

We bought 4 four-plex properties that shared a large lot, parking lot, etc. for a total of 16 units.

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

Opportunity to get into a larger multi-family deal, but given the legal titling of the buildings we were able to obtain long term residential financing on each building separately.

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

The deal was listed through Loopnet and we found it through our residential broker. On our first trip to the property, I wasn't fond of the neighborhood, but we decided to put in what we considered a low ball offer, which was accepted by the seller without a counter.

How did you finance this deal?

We utilized conventional financing for two of the fourplexes, putting 25% and 30% down, respectively, while using a private lender for the other two at 5% down each as the private lender was happy with the project's financials overall and was able to look at the combined LTV as opposed to just his two buildings.

How did you add value to the deal?

We hired an excellent property manager who was able to drive up both the rents and quality of the tenants. We started billing utilities back to the tenants, and fixed up units during vacancies.

What was the outcome?

Realized a nice IRR upon exit, and was able to perform a 1031 exchange to roll the proceeds into a larger investment.

Lessons learned? Challenges?

Adjoining four-plexes can be a great way to break into the larger multi-family market, while still maintaining the ease of residential financing.

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

Rosie Smith at RS Property Management

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $295,000
Cash invested: $88,500
Sale price: $442,000

4th Buy & Hold investment - Two adjoining duplexes in beach communities near Tampa, FL.

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

Cap rates were getting compressed in my local market, and with the intention to utilize a professional property manager, I expanded my search area to other markets.

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

Through Loopnet, I came across a number of interesting listings around Tampa, so I started reaching out to property managers in the area. We found a great one who was very helpful in our search and steered us towards the beach communities near Tampa as a blend of cash flow and potential appreciation. This deal was a pocket listing of a property she managed from another investor who was looking to sell and cash out.

How did you finance this deal?

Conventional financing with 30% down. The down payment originated via a 1031 exchange property that we had sold in Denver, CO.

How did you add value to the deal?

Believed we were buying in an area that hadn't yet fully recovered from the housing bubble and would have potential for above average appreciation. We installed new roofs, and continued to maintain the property, but did not do any substantial renovations.

What was the outcome?

We sold the property within 4 years of our purchase for ~50% more than our purchase price, generating a very positive IRR. We then rolled the proceeds via a 1031 into eight student housing units in Florida.

Lessons learned? Challenges?

We faced the same challenges as any other out of state investor, and were forced to find a trustworthy property manager to act as our eyes and ears on the ground. Initially this was very challenging, but over time our property manager earned our trust and her recommendations helped us in the long run.

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

Brenda Bianchi with Brenda Bianchi Realty & Property Management

Good luck Kristen.  I'm also a student housing investor.  There are some additional management issues with more turnover than a traditional rental, but I've found the benefits of co-signing parents have so far made it a worthwhile experience for me.