BRRRR on 15 Unit Building - Section 8 Edition

[Jonathan Surak]

Investment Info:

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

Purchase price: $1,050,000
Cash invested: $250,000

Acquired this 15-unit property in 2021 for $1,050,000, followed by a $500,000 renovation encompassing upgrades such as brand-new kitchens and bathrooms in each unit, updated flooring, a new roof, three additional rear porches, upgraded windows, and the establishment of a new laundry room. Subsequently, in 2022, refinanced the property, leveraging increased valuation at $1.9 million to access additional equity. The building is fully leased, with 90% of the tenants participating in Section 8 housing programs.

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

While I've tackled numerous flips in the past, I hadn't ventured into renovating a multifamily property until now. Seeing it as a challenge, I drew upon my expertise gained from single-family projects to navigate this new territory.

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

Initially, I served as the loan officer overseeing this deal, but the client opted to withdraw. Their partners preferred to invest funds in Crypto, anticipating a greater ROI and perhaps right in the short term. Yet, the property held substantial potential for value addition and appreciation, situated in an opportunity zone. The current owner's management was poor, resulting in significant deferred maintenance, offering ample opportunity to raise rents.

How did you finance this deal?

I secured financing for this project through RCD Capital, utilizing a bridge loan that covered 80% of the purchase price and 100% of the rehab costs. Upon completing the renovations, I refinanced the property with RCD Capital into a 30-year DSCR loan at 70% LTV, enabling a cash-out option.

How did you add value to the deal?

A $500,000 renovation project involved comprehensive upgrades, including the installation of brand-new kitchens and bathrooms in every unit, updated flooring, a newly replaced roof, the addition of three rear porches, upgraded windows, and the creation of a modern laundry facility. The building was purchased for $1,050,000 and the building is now valued at $1.9M.

What was the outcome?

The property has full occupancy, with 90% of tenants involved in Section 8 housing programs. Presently, it generates approximately $21,000 in gross income.

Lessons learned? Challenges?

In 2021 for $1,050,000, followed by a $500,000 renovation encompassing upgrades such as brand-new kitchens and bathrooms in each unit, updated flooring, a new roof, three additional rear porches, upgraded windows, and the establishment of a new laundry room. Subsequently, in 2022, refinanced the property, leveraging increased valuation at $1.9 million to access additional equity.

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

RCD Capital for funding & RRGG Construction Limited for the construction.