It was late summer when our office received the call about a distressed investor and property that needed to be sold quick. We needed to set up a time to tour the property and gather any available financial data and see if this was a deal worth pursuing and it meant dropping everything and moving right away.
After taking a look at the property we noted numerous items that had been deferred and a laundry list of red flags such as a shady on-site manager and sketchy repairs made throughout the property by the “do-it-yourself” property owner. These items would no doubt cause a lot of headaches at best and at worst cost a lot to rectify. Taking all the risks and costs into account and doing a fresh market analysis to determine what the units could rent for we came up with what we thought would be a fair price range to begin the negotiations. After giving our offices feedback to the investor and potential buyer he had the information he needed to forge ahead in the back and forth negotiations with the other parties involved on the selling side.
After some hard-fought negotiating back and forth, the investor reached a purchase price he was happy about and that both parties could agree upon. There was a lot of groundwork to take care of still not too mention that the owner was moving quickly to sell another property in order to 1031 into this larger property.
Jumping ahead to the closing and take-over of the new property, we hit the ground running at full speed. However, we certainly hit several abrupt speed bumps along the way. One of the big challenges was dealing with removing the old on-site manager who had turned out to be lying about a great many things. This was a long drawn out process that ended in court with our company winning and yet the owner was very magnanimous in letting them go without pursuing legal charges...what a drama that was - another story in and of itself.
At the time of this writing, it has been a little less than a year that the investor closed on the property and we took over management. We contracted with several vendors and invested countless office hours and maintenance technician staff hours to fixing deficiencies, rehabbing units, making things safe and improving the overall curb appeal of the property.
At the time of the takeover, the gross expected rents were $29,395. Currently, the gross expected rents are solidly above $36,000/month. We are able to manage the property for slightly less than the previous onsite manager was being paid, and have cut out a few redundant expense items and overall improved the bottom line of the asset. In terms of value add - the property has an increased market value of between $600,000 - $800,000. It was a LOT of work upfront and required a solid capital investment from the investors, but the return for the risk and hard work has really paid off.