Doubled the worth of apartment complex in CO Springs in 1 year!
We took over management on a distressed apartment building in Colorado Springs last year from a company that didn’t have a tight handle on it and were able to double the value of the property in one year with only using the proceeds of the building for expenses and repairs!
A lot of tenants were not paying rent, the building was in poor shape, and as a result, the rents were depressed. We knew the owner did not have the funds to come out of pocket on this, so we had to keep the buildings earnings in the black while using that money to pay for the repairs. We never dipped into the red.
The first 8 months consisted of slowly and systematically evicting the non-paying tenants and troublemakers while simultaneously remodeling and replacing them with a better tenant basis. (In our experience, when the owner has some cash to sink into the building, you can often do this in three months but will run the building financially in the red, so since we had to keep it in budget, we systematically worked through a host of tenant problems.)
Fortunately, due to having great relationships with long term vendors, we were able to get a lot of the work done at a fraction of the cost some vendors would charge us and were able to really spread out the cost of these repairs.
The next four months were spent upgrading small parts of the property to bring the building up to its earning potential. Being that this was a class C building, it needed some work. During this time, we continued to swap out some of the tenant basis. We raised the average rents from around $600 to about $785 (this includes a RUBS system), and brought the building to fully leased as well as fully performing in this time period.
The monthly gross income for the property went from around $14,000 to $23,500. This is a 1.5x improvement in gross income.
The best measure of success though is the worth of the building. When we took it over, based on the monthly gross income and the normalized expenses, the building was worth about $1,448,000. Now, it is worth $3,117,859. (Both values are based on a 6% cap rate, which is normal in the area right now). This is all value add taken from the profit on the building and reinvested back into it in one year! One year doubled the value of the building and essentially earned the owner a value add of $1.5million! This will definitely help our Colorado Springs owner with his retirement.
Property management isn't always the easiest job, but we love doing it. It is really rewarding to see how we can help to actualize people’s dreams and capture a building's potential. Even if you get frustrated, we advise you to stick with it!