Mentor & Student Team Close 104-unit in Virginia

[Paul Wilcox]

Investment Info:

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

Purchase price: $9,250,000

104-unit multifamily, mix of 1, 2, & 3 bed, completing 60 unit renovations over next 3 years

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

I'm on a mission to achieve financial freedom and nothing beats multifamily.

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

My mentor Phil Capron, through the Michael Blank mentorship program, found and negotiated this deal. Phil is an established investor in this market. He brought a few of his students in on his deal to gain experience and help close it.

How did you finance this deal?

Bridge loan, 3 yrs I/O, 80% LTC, 100% Cap Ex, Floating Rate Libor + 295 bps

How did you add value to the deal?

Raised capital, assisted in all aspects of investor relations, created a pitch deck

[Jay Hinrichs]

given the refi climate do you have any worries about what happens in 3 years ?  

[Michael Noto]

@Jay Hinrichs No risk it, no biscuit I guess, right?

[Stephanie P.]

@Paul Wilcox

While that's a lot of units, that's a HUGE price tag for Chesapeake, VA. Rents are not like NJ down there.

Best of luck though.

Stephanie

[Paul Wilcox]

Conservative underwriting and excess capital reserves puts us in a comfortable position to execute the business plan despite the current situation.  We have the option for two 1-year extensions on our bridge loan and have purchased a cap on the floating rate.  The lead sponsor on this deal, Phil Capron, is established in this area already and knows the market well.

[Caleb Heimsoth]

@Stephanie P.do you find 89k a door in your market to be a lot? That seems like pre-corona pricing, which is out the window now as we know it

[Stephanie P.]

@Caleb Heimsoth

I'm physically in the DC market, so 89K is a steal in this market. Chesapeake and VA Beach and Norfolk are their own market and very different from mine. At the top of the market down there, I would say 89K is high.

Example:

I closed a 3 unit in Portsmouth (not far from Chesapeake) in late 2018.  I would said that was the top of the most recent market.

Value came in at $240,000.  Each unit brought in $850 monthly.  The appraiser used gross rent multiplier of 80 and brought the income approach in at $204,000.  Because they're in the same market, if I use the same gross rent multiplier and assume the same rents and a 5% vacancy amount, the value per the income approach would be $6,732,000.  Sales approach doesn't matter on those and  the cost approach may be a bit more, but I don't see it coming close to the OP's valuation-especially in the post Corona world.

[Caleb Heimsoth]

@Stephanie P. Yeah that’s about what I figured. My local market was 90k plus a door for C class Inventory pre-corona. Maybe that’ll go down some now, or at least slow it down

[Erica Osborn]

@Stephanie P. I know you have a property here locally and personally I LOVE Portsmouth for it's cash flow ability and have an 8 unit there myself, but Portsmouth even though close, is drastically different from the Chesapeake market and certainly in the eyes of the renter! I believe there were a few other things about this deal that brought the $/unit up as well.....Paul didn't it have water access?

@Paul Wilcox I know Phil, Anthony and Darren who are all in on this deal, I believe. He certainly does know this market and creative ways to get into and appreciate deals. Nice work!

[Stephanie P.]

Originally posted by @Erica Osborn:

@Stephanie P. I know you have a property here locally and personally I LOVE Portsmouth for it's cash flow ability and have an 8 unit there myself, but Portsmouth even though close, is drastically different from the Chesapeake market and certainly in the eyes of the renter! I believe there were a few other things about this deal that brought the $/unit up as well.....Paul didn't it have water access?

@Paul Wilcox I know Phil, Anthony and Darren who are all in on this deal, I believe. He certainly does know this market and creative ways to get into and appreciate deals. Nice work!

Erica

I absolutely love Portsmouth, Newport News, Hampton, Va Bch etc.., down there for cash flow; certainly better than the DC market and I agree that the each have their differences.  Most areas are like that.  Could be the property is on the water and a tremendous buy; I hope it is.  Generally speaking, I still think that's a lot of money for the market but if they got a loan on it (the lender must be happy) and it cash flows (making the buyers happy)  God bless 'em.

Stephanie

[Paul Wilcox]

Yes @Erica Osborn, that's the deal.  We have a great team including Anthony.  Phil and Darren are quite the duo in that market and I'm honored to be a partner.  Phil is actually living in the complex right now to oversee everything on a daily basis.