Best Deal Ever Show #20: $6.5M Purchase with Zero Out of Pocket

Anna Kelley lives in central Pennsylvania, only five minutes away from the famous Hershey factory, currently owning and managing five different businesses. Anna began flipping single family homes and then eventually migrated to keeping some of her flips as rentals.

To give you some background, the Hershey market is quite diverse with lots of opportunity. Single family starter homes range from $150,000-$175,000 while new builds sell close to $400,000. Luxury homes sell anywhere from $450,000-$700,000.

Ranging from singles, duplexes, vacation rentals, and now more recently, apartment complexes, Anna is no stranger to diversifying her portfolio. When a deal is the right fit and makes cash, she doesn’t hesitate to act. While most of her properties are in Pennsylvania, she also recently bought two apartment complexes in Atlanta and has big plans on making deals across the country.

The Importance of Paying Attention, Being Flexible, and Building Relationships

Anna’s recently changed gears, primarily focusing on multifamily investing. Her primary model is purchasing properties to renovate and raising a property’s value through interior and exterior upgrades.

In Hershey, Anna states that there hasn’t been an overwhelming amount of competition. But in recent years, that’s changed. There is more… and in order to get a really good deal, one needs to be willing to take on some of the more challenging properties.

Her primary way of finding leads has been through word of mouth and building relationships with various attorneys, local brokers, and Realtors. By building these relationships, she’s been able to come across deals before they’ve hit the market.

Occasionally, she’ll also stumble across properties through auction websites and the local MLS.

This Investor’s Best Deal Ever

Anna’s best deal ever was the first apartment complex that she purchased. After hearing about it through an acquaintance, she immediately drove to find a 73-unit property with four storage units. The most incredible part was that the property was in excellent condition—just outdated. The interiors were clean, and to sweeten the pot, the roof, patios, and parking lot were new.

To purchase the property, Anna would need to find a way to piece together $6.5 million. She was able to source $2.2 million in equity—with only two JV partners bringing all of the cash required into the deal.

With her partners, Anna was able to begin renovations and over the course of time, raise monthly rent to increase cash flow—all while increasing the property’s value and lowering operating expenses. To hear how Anna was able to keep 95 percent of tenants, raise rent, and meet her year 3 projections, watch the video above starting at the 15:25 mark.

Anna also talked a little about financing, saying that she doesn’t recommend using bridge debt unless absolutely necessary for a few months. For this property, she was able to get 30-year fixed interest financing, with a rate at just over 5 percent with 25 percent down.

For those interested in how Anna structured a JV in the multifamily space, she talked about these key factors to keep in mind:

Figure out what’s a win-win for everyone and be willing to swallow your pride.
Understand the power of creating relationships and partnerships with others and understand that these partnerships can also mean you may have the opportunity to do another deal together in the future.
Realize that you don’t always have to be a “Lone Ranger” and that having partnerships also allows for others to bring their strengths to the table. This can help take some of the stress off the purchasing/flipping process.
Partnership opportunities also can bring larger potential returns.
Be creative, flexible, and willing to negotiate your deal because of key factor No. 1.

Have you considered partnerships while investing? What interests you about apartment complex investing?

Let us know below!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.