Real Estate Investors buy odd holiday gifts

My 2019 present to myself was a 6 unit multifamily in Ypsilanti MI just outside Ann Arbor

It& #39;s an "A" location for Eastern Michigan University Students but could attract U of M students too

But COVID was around the corner https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Pfeil nach unten" aria-label="Emoji: Pfeil nach unten">https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Pfeil nach unten" aria-label="Emoji: Pfeil nach unten"> 1/8

Deal Summary

https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔹" title="Kleine blaue Raute" aria-label="Emoji: Kleine blaue Raute">Four 3 bedroom units
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔹" title="Kleine blaue Raute" aria-label="Emoji: Kleine blaue Raute">Two 2 bedroom units
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔹" title="Kleine blaue Raute" aria-label="Emoji: Kleine blaue Raute">33% occupied
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔹" title="Kleine blaue Raute" aria-label="Emoji: Kleine blaue Raute">Asking ~$360K

I thought the seller had mispriced the asset & I knew lenders would be reluctant to lend much against it as only 2 of the 6 units were occupied. 2/8

The seller had let units go vacant prior to listing it--big mistake

The two occupied units were each a couple hundred dollars below market

My cash was tied up in other real estate deals but some of my LPs gave me a private money loan for $330K allowing for a fast close. 3/8

The seller got a LOT of offers. My bet was that no one came in well above ask because NOTHING had gone well above asking in Ypsi

When a deal is great why trip over nickels getting to dollars?

I offered ~$10K above ask but made it clear it was my best & final. They accepted 4/8

Right after we closed, Wuhan COVID images began emerging. I was scared.

My student rental business plan was out the window.

I asked our manager to make our asking rents the most competitive in the market & to find section 8 tenants. 5/8

We added washer dryer hookups & machines. We also added new flooring in kitchens & baths. Easy value add.

Michigan& #39;s COVID lockdowns & evictions moratoriums have been hard on tenants & landlords alike. 6/8

In the trailing 12 months we did $36K of NOI vs. my original pre-COVID estimates of $42K

But when your margin of safety is large enough you& #39;re fine

15 months later the property just appraised for $570K against my cost basis of $400K

The refi will be complete next week. 7/8

Know your edge

https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔹" title="Kleine blaue Raute" aria-label="Emoji: Kleine blaue Raute">Behavioral: I knew other bidders would be greedy & offer a bit under ask
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔹" title="Kleine blaue Raute" aria-label="Emoji: Kleine blaue Raute">Operational: fast close, no appraisal, no fussing over with roof inspections etc

Price created my margin of safety

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