Investment Info:
Large multi-family (5+ units) commercial investment investment.
Purchase price: $2,050,000
Cash invested: $750,000
We purchased this 32 unit complex for $64K a unit when they trade for $80-100K. Market rents are around $1,025 a month, currently they are about 40% under market. Once stabilized, this will increase the equity in the property by 50% and we will look to complete a cash out refinance or sale.
What made you interested in investing in this type of deal?
I am always interested in larger multifamily properties for the value growth potential. This can be executed by increasing rents, lowering expenses and managing the property all around better. As you increase the overall NOI of the property it increases the value, therefor allowing excellent opportunity for equity growth and cash flow.
How did you find this deal and how did you negotiate it?
I found this deal through a wholesaler I met through my Facebook group that I created focused in the NC/SC area (Charlotte metro). I negotiated the property/contract with the wholesaler with my team. I have built a good relationship with this wholesaler now and am looking to work with them more often.
How did you finance this deal?
My team and I are acting as the general partners/managers/operators of this deal and we formed an LLC JV partnership with numerous other investors. We put some money into the deal to get it under contract and then raised the rest for the down payment, closing costs and reserves through additional investors. The investors will get excellent returns. We then found a local credit union with favorable terms to then finance the rest of the money to purchase the property.
How did you add value to the deal?
Current rents are approximately 40% below market. It is a well maintained property where the units just need some TLC to get them to great condition. As is, a lot of the units could get market rent right away. With all the tenants month to month we will systematically raise the rents to market therefor increasing the NOI of the property and increasing it's overall worth. We are expecting to increase the total value of the property once stabilized by 50% and increase cashflow exponentially.
What was the outcome?
We are currently in the stabilization stage of the property, but it is going very smoothly so far as we have great property managers in place that are executing our plan effectively.
Lessons learned? Challenges?
We had a hard time finding good financing in this market, but we were able to find a great lender last minute. We probably should have reached out to a ton of lenders before to have less stress as we were on a tight timeline to close. Since this was a newer market to us, we lacked a local network and had to build it as we were in the process of completing the purchase. It all worked out, but we could have facilitated that process better.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
We did work with a great attorney, lender and are currently working with a great property management company. If anyone invests in the Lancaster, SC or close to that area I can definitely connect you with some great people that we used, please reach out!
