Investment Info:
Large multi-family (5+ units) commercial investment investment in Branson.
Purchase price: $2,795,000
Cash invested: $150,000
The Majestic is a mixed-use commercial building. At 67,000 square feet, this four-story monster was once the largest steak-house in Missouri. When the owner died it sat vacant for 13 years. It was purchased three years ago and the gentleman go it up to about 65% occupancy (ish). There is a lot of room to grow with this building, just needs some better management, and leasing!
What made you interested in investing in this type of deal?
Economies of scale, forced appreciation, value-add opportunities...multi-family is fun!
How did you find this deal and how did you negotiate it?
Honestly, it was off-market, brought to me by my team. They heard "seller-financing available" and immediately thought of me! Negotiations took a while due to a private lender backing out on me so we had to restructure the entire purchase and extend the closing date.
How did you finance this deal?
Purchased as a lease-option. 5.2% down, with 4% interest for the first 3 years, then 5% interest until year 5. From year 5-10 it will be paid back at prime (market interest rate)...but we plan to refinance, or sell at year 4.
How did you add value to the deal?
Still a work in progress. So far we have fired the live-in maintenance man, and leasing agent (combined they were costing $27.5 an hour, and not doing a good job). We hired a live-in maintenance man (who can handle leasing as well) for $14 an hour! We plan to give him a raise at Christmas, and then every 6 months after until we get him to $20/hour...still saving money over original employees! We have purchased (not leased) coin-laundry, and are Working on lowering utilities/Updating leases too.
What was the outcome?
We shall see! (Fingers Crossed)...we just need to stay afloat until other spaces are leased, but once we have this building at 85% occupancy (or higher) it will be a huge asset!
Lessons learned? Challenges?
screen onsite employees thoroughly! Poor Management by the seller can result in miscommunicated income/expense, and I need to screen better in the future (a couple small things he thought were done, that weren't). Lease-option is great because bankruptcy and foreclosure aren't a threat, but it also means the seller may want to be more involved than he should be, which adds a layer of stress all around.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Tiffanie Strode at Mossy Oak Properties in Branson, MO has been my agent for 3 years, and she is amazing! If you want her info I can refer you over and potentially even get you a reduced commission expense rate!
