Investment Info:

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

Purchase price: $1,340,000
Cash invested: $300,000

This was our 1st value-add project in the neighborhood. It's a 27 unit with 4 retail and 23 apartments ranging from studio size through 3 beds. The rent roll at closing was just under $19K per month and we've been able to raise that to $27K per month within 6 months of aquisition.

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

This was a high yield play. We wanted to generate passive income and have the ability to force appreciation.

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

This was found through a local agent in the area. I let him know the price range and type of cash-on-cash returns we were looking for.

How did you finance this deal?

Financed conventionally through US Bank. 80 LTV with a 5 year balloon. We plan to cash out refinance next year into agency debt for the long term.

How did you add value to the deal?

We were able to renovate the vacant units right away after purchase and a couple others during normal turnover. We spend approx. $6-$7k per door on new kitchens, baths, paint and refinishing the hardwood floors. We plan to add laundry next year.

What was the outcome?

The value of the building as a 10 CAP has already increased by about $450K. It was a 'mom and pop' ownership previously. We have been able to modernize some of the units and manage it more professionally. We're getting better and higher paying tenants. And it's lead to another opportunity in the neighborhood for a 50 unit portfolio. We're now under contract for those properties after the listing agent reached out to me.

Lessons learned? Challenges?

It's high risk and high reward when taking over a 'mom and pop' property. There were no bank statements or professional P&L reports to underwrite with. Some tenants challenged our property manager with slow/late payments. We're slowly turning those units over. Overall it's been a great deal.

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

Jack Cassin from Apartment Investment Advisors
Namit Bammi from the Bammi Law Group
Paragon Property Management.