Investment Info:
Large multi-family (5+ units) buy & hold investment.
Purchase price: $3,750,000
Cash invested: $850,000
Value-add, three property portfolio.
69 units
$3.75M
80% LTC bridge loan with a $450k of rehab escrowed to complete upgrades and CAPEX.
What made you interested in investing in this type of deal?
We completed a 1031 exchange from a higher equity market to a higher yield market. We were looking for a larger unit count given the amount we had to exchange.
How did you find this deal and how did you negotiate it?
LOOPNET! The original listing was only one of the three properties, not all three we ended up purchasing. As always, we used our underwriting sheet, modeled out the project and determined whether the return would fit our criteria. We submitted an LOI and after a few back and forth responses on terms, we came to an agreement.
How did you finance this deal?
We used a mortgage broker who got us great bridge terms through a small community bank.
How did you add value to the deal?
The bank loaned us an additional $450k to do CAPEX work on the property. The tenant base needed a stronger property management group to enforce our leases and get our rents closer to market.
1. Necessary CAPEX
2. Emergency maintenance and repair - the seller left certain maintenance items untouched for years
3. Landscaping + on site amenities like a dog park
4. In unit upgrades
5. Tenant turnover to house a better tenant
6. Rent bumps + other income
7. Utility reduction
What was the outcome?
Still in progress. But occupancy dropped to 71% throughout our first few months but is anticipated to be at 94% starting in June 2022. All our other metrics are heading in the right direction. Will look to refinance this property in 2023 or as soon as rates drop again.
Lessons learned? Challenges?
1. Always ask an agent/broker if their seller or they have other properties to sell. You never know what they'll bring to you.
2. Always be flexible. COVID was still a huge issue in this market, then supply chain, then labor costs, then labor force. There is always something that will go against what you planned. Find a new solution but don't complain about the current situation.
3. Community banks are amazing. Develop those relationship.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Yes! DM me for any large multifamily broker recommendations in Oklahoma.
