If you’re keeping up with us, you know we’ve traditionally purchased SFR and small MFRs, but through some hard work, late nights and leveraging relationships, we were able to step into the Apartment Complex realm and the anticipated return on this turnaround project is better than any personal acquisition yet.
Here’s how we did it…
Relationships. Without relationships this would not have been possible. Relationships with brokers, relationships with bankers, relationships with like minded partners, relationships with potential investors, and most importantly, my relationship with my wife (for accepting the early mornings, late nights, and weekends this took and will take away from our family).
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Strenuously Looked, Got Lucky and Revisited the Patience Virtue. I talk about being patient for a great deal in the Purchasing Our First Duplex post. Same concept applies here, my excitement almost led us to a bad deal but with some luck we side stepped it. My first partnership on this trek was with Tim Kelly, at Kelly Housing Group. Starting close to home in Pensacola, we searched w/in a 100 mile radius looking for any property that fit our like-minded criteria. We found an opportunity that almost hit all the marks… almost but not all. With both of us being extremely excited to dive into the apartment complex world, we made an offer anyway (mistake!). Our LOI was accepted and with a little luck we never reached an executed sales agreement (nor did we lose any due diligence monies). Continuing the search, just a few months later we are under contract and eventually closed on an asset we renamed as Citronelle Square. It took about 6 months from the time Tim and I started working together until we closed on this 42 unit apartment complex. Many steps along the way but in the end we brought on 2 more experienced partners, Robert Preston and Jeremy Hans and a total of 9 investors. Without all of these guys we would not have closed the deal and for that, I am truly grateful.
- Purchase Price: $700,000
- Cost per Unit (42 Units): $16,667
- Renovation Budget: $200,000
- Capital Raised: $330,000
- Return: Anticipated 20% over 5 Years
The Turn Around Plan. One of our acquisition criteria requirements calls for a value-add play. Basically, we were (and still are for our next one) looking for a run down, tired, needing some TLC property. And we’ve found it. At 55% occupancy, this property has suffered from a tired owner/operator for way too long and we acquired it at a bargain. Our renovation plan includes the interior of the units, uplift to the buildings’ exterior, repave/re-stripe the parking lot and renovating the laundry facility and playground. While these things are in motion, we are staying in contact with the cities Economic Development team to keep them aware of our progress.Next Acquisition. Citronelle Square was just the start and while we are focused on the stabilization and renovation of Citronelle Square, we have our sites on recreating the process and in search of our next acquisition. I have personally submitted three LOIs in the last month – none have stuck but I’m making offers that meet all of our criteria. Practicing patience and making sure our next opportunity hits all of our investing criteria is a must!
I look forward to updating everyone on our progress with this turn around project.
That is awesome! Keep it up, I love reading updates on your journey. It keeps me inspired to keep pursuing my own goals!
Thanks Andrew! I apologize for the delayed response. How are you doing on your REI journey?
If I can ask a couple questions
What are typical closing costs.
What does a LOI typically say
And how do you negotiate rehab credits
Hey Robert. To answer your questions:
-Closing Costs are all negotiable, but I typically underwrite as a 7% of the purchase price.
-I have an example LOI I can send you. Email me jay@helmsREI.com .
-Can you ask me your rehab negotiation credit question a different way to help me understand it better?