Just got back from checking out the work at our 80 unit property that we bought with 3 other partners about a month ago. I started looking into REI around the beginning of 2013, decided to jump into apartments after a few months considering niches, got myself initially educated and went looking for deals. Found a good partner and mentor who is great about helping out and explaining while listening to input - who knows or thinks of everything, right? We had a couple of deals fall apart in the due diligence phase due to issues with deferred maintenance. Price cures all, but only if your seller cares what a value-based price is. Those deals were still educational in and of themselves. I learned to be even more skeptical than my natural sense, since it seems like almost nothing the broker or seller tells you is accurate or complete. (Or worse!)
So, after a nearly 8 month long process, we closed on an 80 unit property in Kansas that was poorly maintained and managed even worse. The owner was making money, which seemed to be ok with them, even if they were leaving an awful lot of money on the table by not going to much effort to do a good job. Ultimately, of course, this is fine with me because by spending some time and effort that value becomes ours instead. It's a win-win! I feel pretty comfortable with the project, having seen what's been accomplished already and knowing what's still to come in the near future. It's a nice thing that the town is big enough for a full pool of tenants but small enough for talk about a changing reputation for the property to get around quickly.
I'm just glad it's all very definitely real now, and not some theoretical thing in a planning stage that I very certainly intend to do. Now it's time to go look for a few more!
Where-a-bouts in Kansas?
80 units! Congrats. That's a lot of tenants sending checks every month. That sure does put a smile on my face.
Congrats @Robert Blake !!! And to future endeavors!
@Seth Wilson It's down in Emporia.
Account Closed Yes, our task now is to make sure that more and more of those tenants send in checks. :) They'd been running almost 23% economic vacancy last year. More evidence of the mismanagement? Not only too many units empty, but several actually used for junk storage. Crazy, considering there was already one shed on the property and ample room for more, if needed. Never mind that, there's ample storage places (literally one next door, but it looks small)...no reason to close off income like that. Storage is real cheap in comparison. And competitor properties are nearly full up, too.
It's been real educational into how people can do things that don't make any sense.
Congratulations! Great first property and just the right size for on-site PM. What cap rate did you end up buying at? Any other details?
Congrats, @Robert Blake . To go from just starting with REI in early 2013 to an 80-unit first purchase is an impressive accomplishment. That's something not a lot of people would have the gumption to tackle, since 80 units is a healthy-sized property to take on.
It'd be instructive for all of us to hear more details on how you found the deal, how you structured your partnership and any other details you'd like to share, if you're so inclined.
Best of luck in the future!
We bought at about an 8 CAP, which frankly was too much, however we still think it's worth it, expecting to raise the value almost 50% due to renovations and modernization, getting the rents up to (but you know, just a bit under) market, actually getting them all filled and paying, etc.
My main partner actually found it on LoopNet. We're more or less at roughly equal percentages, but he's bringing his experience and managing the project overall instead of cash or credit. It's a lot of work on the front end, but will come back to him at around a year. We're forestalling any profit-taking short term and reinvesting that into the property while it's being renovated and leased up fully, but by the end of the year should be flowing back to us instead. I've done well several times in my life so far by sacrificing a little today for a better tomorrow, so I'm fine with this. And tomorrow's not that far away.
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