At this point in our series, our investing network found us an opportunity to purchase a distressed 18 Unit building . Once we confirmed our interest, we were able to negotiate a win-win deal that required zero down payment at a 5% interest rate. We provided the seller with additional security to insure our joint comfort level with the deal structure.
While the first two steps were important, it can all fall a part if you don’t execute on the final step of our series.
Quite simply: it is time to get to work.
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A Four Point Plan for Fixing Up Our Newest Property
At closing we had an 18 unit building with 6 Paying tenants, 2 tenants required evictions and 10 vacancies in very rough shape. Given this we created the following plan:
- Taking Out the Trash: First, we needed to start evictions on the two problem tenants. In my market it will take 45-60 Days to get them out so the sooner we start this the better.
- Taking Inventory of the Rented Units: Second, we went through the units of the paying tenants and created a punch list for all safety items, required fixes and then “nice-to-haves.” We fixed all the safety items immediately and all the required work was finish in the first week. We will tackled the “nice-to-haves” at the end of the process.
- Maximizing Curb Appeal: Third, as I have shared before – I believe the most important thing to do is get potential tenants to stop the car and check out a unit is clean up the curb appeal. This means we will repair the carport, fix all the exterior trim and paint the entire building to show a new owner is in charge. After the paint we agreed to put in sprinklers and layout new sod plus trim the bushes and trees to better show off the building. The last thing we are doing on the outside is installing a couple of sections of iron gates to insure separation from parking and grass areas where kids can play safely and cars will not destroy our new grass.
- Taking Inventory of the “Ugly” Units: Fourth we have gone through all the vacant units and created a list of cheapest to most expensive to repair. The go-forward plan is to turn the cheapest two units first and then continue with remodels as the units are rented always having at least 1 ready to go. In my market, I expect this process to take 3-4 months and I wouldn’t be surprised if we lose 2 or more of the current tenants as we will need to raise their rent at some point (as the current rent is at least $100 under market.)
So there you have it – the three part series about how we landed our “white whale” of property investing. The zero down apartment deal is certainly rare but you never know what you can find and create in this business when you work at it every day.
Three Fundamental Lessons about Real Estate Investing
- Your investing network is key, as the more people you can leverage to help find deals – the better. I would have never found this opportunity if a past agent I did a deal with didn’t understand our model and what type of deals we liked.
- When you are negotiating you need to listen more than talk and if you negotiate in good faith, with the aim of win-win, you will create profitable deals.
- The most important part of deal starts the day you close. You better have a plan and starting working your plan immediately.