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FranCiscan apartments

Levered IRR - 58% | Equity Multiple - 2.61x

Building Description

Unit Mix:  2 BR, 2 BA (15) and 3 BR, 2 BA (1)

Number of Units:  16
Building Size: 15, 250 SqFt
 

Lot Size: 1.17
Acre Year Built: 1969

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Opportunity

  • Moderate risk, strong cash flow asset – no renovation was needed, supporting diversity and cash flow needs of a value-add portfolio owner
  • Well-maintained property features appealing landscaping and extra-large units with 2 bathrooms, a rarity in the area
  • Remote previous owner overpaid local property managers, creating inefficiencies
  • Listed asking price reflected a low Capital Return in relation to the product type and location

 

 
 

Strategy

  • Purchase already-stabilized property to maintain strong cash flow
  • Take over management and let go of staff and expensive service providers to reduce cost base
  • Use funds to support renovation costs for 2 other properties in the owner’s portfolio that were bought as extreme value-adds

 

 

Results

 

Expenses were reduced by 32% in the first month, and cash flow from the property fully supported the renovation of two other properties in the owner’s portfolio. The property sold within less than 30 months, delivering a levered IRR of 52% to the investor.

 
 
 

Deal Metrics

 

At Purchase

Purchased March 2013
Purchase Price $900,000

Price per Door $56,250
Price per SqFt $59.02

Avg. Rent at Purchase $673/Mo.
Occupancy Rate 87.5%

Capital Expenses $0
Total Investment $270,000

 

At Sale

Sold in August 2015
Sale Price $1,110,000

Rent Increased to $781/Mo. (highest)
Occupancy Increased to 100%

Unlevered IRR 58%
Trailing 12 prior to sale, Cash-on-Cash 22.16%