30 unit building in San Diego

[Krystle Moore]

Investment Info:

Large multi-family (5+ units) buy & hold investment in National City.

Purchase price: $5,700,000
Cash invested: $2,000,000

29 unit apartment building with one unpermitted unit. Currently in the process of getting the unpermitted unit approved as an ADU.

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

My goal is to own large multifamily projects (50+ unit buildings). We were able to sell a 7 and 9 unit building that we rehabbed and trade into this deal which gets us closer to our goal. We would like to own 100 units within the next 1.5 years.

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

We found this deal through our broker. This deal had been on the market for a while. There is a hillside issue that we are actively working to find the most cost effective solution to fix. We were able to negotiate a reduced price and satisfy our 1031 without bringing any extra cash into the deal.

How did you finance this deal?

We financed it through a bank with 5 years interest only which has allowed us to reinvest our cashflow into adding value to the building.

How did you add value to the deal?

There are 2/1 townhomes which are a bit awkward - the only bathroom is upstairs. As units turn, we are adding a 1/2 bath under the stairs on the main level and also adding laundry upstairs where the existing linen closet is. We are getting about $200 more rent and charging RUBS. We are also getting the unpermitted unit approved as an ADU and increasing rents annually as the market allows.

What was the outcome?

Our cashflow was about $8,500 per month when we closed, we are now getting over $11K per month in cashflow and have increased the value over $900K in 17 months.

Lessons learned? Challenges?

The property is on a hillside and it seems like it may end up being more expensive than we thought. One of the buildings is settling so we need to address it soon. Additionally, if we want to sell the building in the future to trade up, we will need to address this for any potential buyers.

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

Dave Plutner is our real estate broker and he is just amazing. He doesn't work with just anyone, he really works as an advisor and helps you grow your portfolio.

Constellation Management is our property manager and they are just great at what they do. I used to own a property management company and managed over 1,000 units so I have experience in management. They operate like owners and I appreciate that.