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The good, the bad, and the ugly
Of an 80-unit value add property in Louisville that I’m a passive investor in.
I repeat: I have no control over this investment/syndication because I’m a Limited Partner (LP) in this particular deal.
A THREAD
Of an 80-unit value add property in Louisville that I’m a passive investor in.
I repeat: I have no control over this investment/syndication because I’m a Limited Partner (LP) in this particular deal.
A THREAD
The good:
-80/80 units are occupied. That’s 100% occupancy. We’ll take it. Although some may also see that as our rent is too low (supply/demand).
But I’m not complaining in times like these.
-Had 5 move-outs in Q1 that were quickly renovated and new were found swiftly.
-80/80 units are occupied. That’s 100% occupancy. We’ll take it. Although some may also see that as our rent is too low (supply/demand).
But I’m not complaining in times like these.
-Had 5 move-outs in Q1 that were quickly renovated and new were found swiftly.
The bad:
-Investment start date: October of 2018
-Annualized ROI (for LPs) since inception: 1.02%
-Distributions during the 1st 12 months are usually slim in these types of value add projects. But, distributions are lower than expected + they're being suspended due to COVID
-Investment start date: October of 2018
-Annualized ROI (for LPs) since inception: 1.02%
-Distributions during the 1st 12 months are usually slim in these types of value add projects. But, distributions are lower than expected + they're being suspended due to COVID
The ugly:
-This project has expended all of its $1.05M budget for improvements. Among many CapX projects that have been completed, only 60 of the 80 units have been renovated. The plan was to renovate all 80.
Factors that were not planned for and have been challenges
-This project has expended all of its $1.05M budget for improvements. Among many CapX projects that have been completed, only 60 of the 80 units have been renovated. The plan was to renovate all 80.
Factors that were not planned for and have been challenges
Challenges:
-The property has had 5+ water main breaks
- units have needed $2k more per unit than budgeted. Unit budgets escalated due to subfloor issues, mold behind shower surrounds, defective plumbing, and other items that were not foreseen
-The property has had 5+ water main breaks
- units have needed $2k more per unit than budgeted. Unit budgets escalated due to subfloor issues, mold behind shower surrounds, defective plumbing, and other items that were not foreseen
Challenges continued:
-replaced commercial water heater for $25k
-insurance premium increased by $19k
LESSONS HERE:
-didn't factor in a big enough contingency fund / raise enough
for contingencies
-poor job assessing the scope of work for renovation
-replaced commercial water heater for $25k
-insurance premium increased by $19k
LESSONS HERE:
-didn't factor in a big enough contingency fund / raise enough
for contingencies-poor job assessing the scope of work for renovation
Next Steps/Conclusion:
-asking bank for additional improvement funds
-my partners have extended the cash needed, which has been $38,000 to date
-still have a low investment basis at $41k per unit
-selling at $50k per unit still realistic
- April collections are normal so far
-asking bank for additional improvement funds
-my partners have extended the cash needed, which has been $38,000 to date
-still have a low investment basis at $41k per unit
-selling at $50k per unit still realistic
- April collections are normal so far
REAL ESTATE IS A LONG GAME.
I repeat.
REAL ESTATE IS A LONG GAME.
I repeat.
REAL ESTATE IS A LONG GAME.
1.5 years into this project, and yes, there have been some challenges...
It's been very enlightening watching this deal from afar as a passive investor. This was my first tip-toe into the large multifamily space 1.5 years ago as a passive investor
It's been very enlightening watching this deal from afar as a passive investor. This was my first tip-toe into the large multifamily space 1.5 years ago as a passive investor
Since investing in this deal, I've gone on and invested passively in another deal + become a General Partner on a deal after that.
Crazy looking back at this experience (which is ongoing), but challenges make you stronger.
Crazy looking back at this experience (which is ongoing), but challenges make you stronger.
My favorite saying:
There’s no such thing as losing. You either WIN or you LEARN.
And the first step to success is
to take action.
#JumpIn
There’s no such thing as losing. You either WIN or you LEARN.
And the first step to success is
to take action.
#JumpIn
