10-Unit Multifamily Acquisition

[Brandon Sturgill]

Investment Info:

Large multi-family (5+ units) commercial investment investment.

Purchase price: $260,000
Cash invested: $56,000

This is our latest acquisition of a C-class, 10-unit, 7,000+sq. ft. multifamily property. The configuration is all 2BR units and it's at 80% occupancy with an appraised value of $310,000. Contract purchase price was $260,000 from a "mom-and-pop" seller, so, we're at a $50,000 equity position on day 1. Current rents are well below market at $525...market is $650 or higher. We'll be renovating the 2 open units and other units as they become available. We can drive the operating income from $63,000 annually to $78,000 annually...resulting in significant value add. We should be able to reduce operating expenses with diligent management and exit at a valuation closer to $500,000. ROI on this one is hard to believe...12 CAP, 2% rents-to-purchase, 25% Cash-on-Cash and an IRR hovering around 40%...

What made you interested in investing in this type of deal?

This is a typical C-Class value-add acquisition

How did you find this deal and how did you negotiate it?

Off-market opportunity from a private seller

How did you finance this deal?

Bank funded at 75% LTV.

How did you add value to the deal?

Renovating to force rents higher and diligent management to reduce operating expenses.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

This was a private off-market transaction structured as a joint venture.