32 Unit Apartment Complex Purchase! Value Add

[Cassidy Burns]

Investment Info:

Large multi-family (5+ units) buy & hold investment in White Sulphur Springs.

Purchase price: $550,000
Cash invested: $50,000

32 Unit Apartment Complex 1 Mile from Greenbrier Resort
-24: 2 bed/ 1 bath units (Current rents = $400-$495 ; Projected Rents: $650-700)
-8: 1 bed/ 1 bath units (Current rents= $300-$400 ; Projected Rents: $550-600)
-Purchased at 7.76% Cap Rate
-Current NOI = $32,500/year
-Mom & Pop Managed
-Owner Paying Water ($28,000 Bill in 2018)
-Laundry Mat on Site = Not functional
-Purchase Price: $550,000
-Appraised Value on purchase = $700,000

Big Value Add Opportunity
-Renovate units to bring to market rents
-Repair plumbing leaks to reduce water bill
-Bill back tenants on $50/monthly water bill
-Get Laundry Mat up and running
-Area CAP Rates 9%
-Even at current 2018 expenses (we will have these reduced after Cap Ex repairs on units and exterior) we will be at value of $1.7million+

Plan is to bring NOI up, perform cash out refinance in 24 months maximum. Lots of work ahead of us but once this asset is stabilized it will be a great cash flow generating asset.

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

Scaling my business. Until I purchased this building I owned quite a few smaller multifamily investments (13 total doors- buy and hold) (2- renovation projects). I want to be able to scale to larger deals!

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

Broker that I have worked for in the past brought this to me off market. Original Price: $690,000 . Negotiated to $550,000

How did you finance this deal?

Bank Financing: 20 year AMM ; 10/1 ARM ; 5.5% interest 20% Down
Raised $100,000 for Debt
Contributed $50,000 of my own capital for the remaining debt

How did you add value to the deal?

CapEX on all units. Rents are extremely undervalued ($200/unit), utility bill extremely high ($28,000/year in water bill alone), get laundry mat up and running.

What was the outcome?

TBD

Lessons learned? Challenges?

-Don't change what you know just because it is a larger asset.
-Don't be afraid to raise $$$ (this was my largest challenge). If you have a good opportunity, present as a good opportunity and allow the investors to make their own educated decision.
-Systems, systems, systems