The Capital Stack
Our most recent acquisition, The Village Court Apartments, was officially purchased on July 18th for $1,490,000. This 16-unit property is located in Ortonville, MI, and consists of four buildings surrounded by well-kept grounds. The area has a median household income of $92,000 and an average home value of $368,000, both of which exceed our buying criteria. Built in 1970, the property offers spacious two-bedroom units, each approximately 880 sq ft.
How We Found It
I have a saved search and auto email set up with CoStar to notify me whenever a new deal comes to market in our target areas. On April 4th at 8 AM, I received an email about Village Court being advertised for sale. After reviewing the brief numbers, I immediately called the listing agent, introduced myself, and told him I was interested in buying it.
What We Like About It
Proven Value Add
The in-place rents average just over $1,000, with the highest at $1,155. With a proven rent of $1,155, we knew we could achieve at least that much across the remaining 15 units. We are confident that with our marketing and proactive leasing strategy, we can sign new leases at $1,250.
Unique Unit Mix
Village Court offers the only two-bedroom units in the market, giving us a unique leasing advantage. With no direct competition for two-bedroom apartments, demand stays high. Potential tenants have no other options, allowing us to capitalize on this scarcity to maintain high occupancy rates and command higher rental prices.
Well Maintained Property
Built in 1970, the property has very little deferred maintenance and looks great from the outside. The interiors need light renovations to increase rent across all 16 units. The units benefit from abundant natural light and spacious living areas. Originally condos, converted to apartments, they feature many updated elements, such as eight-foot ceilings and can lighting throughout the units. The 16 units are distributed across four buildings situated on 2.5 acres, providing ample space and well-maintained grounds in front of and between each building for residents to enjoy.
Our Business Plan
The scope of work for Village Court is minimal compared to some of our other properties. Interior renovations will involve painting, replacing flooring as needed, and updating fixtures in the common areas. Exterior renovations will include power washing the building, trimming the landscaping, and improving the usability of the back of the property by removing brush and trees. We will also paint the new decks to match the building’s siding. Our goal is to secure new leases at $1,250 and manage the property with the same efficiency as our other assets.
The Capital Stack
We secured a loan of $1,117,500 from a regional bank at a 6.73% fixed interest rate for 5 years, with a 0.05% fee. The equity portion was funded with $550,000 of LP capital.
How It’s Going Today
The day after closing, we were on-site with our management company to review the plan for the property. This week, our in-house contractors are finishing touch-ups on three vacant units. We instructed the seller not to lease these units while we were under contract so we could control the tenant-sourcing process. The contractors have already completed work on one of the vacant units, and professional photos are scheduled for Monday. Marketing for the unit will begin next week.
Major Market News
Notable Leaders in Commercial Real Estate
In case you missed last week’s newsletter Emmie Sheffer our Director of Asset Management, was selected by Crain’s Detroit Business as a Notable Leader in Commercial Real Estate. Emmie is responsible for operations at our properties. For more details on her scope of work check out last week’s newsletter or the Crain’s article linked below.
Source: Crain’sDetroitBusiness. (2024, July 15th) Meet Crain’s Notable Leaders in Commercial Real Estate for 2024. https://www.crainsdetroit.com/awards/emmie-sheffer-notable-commercial-real-estate-leaders-2024
Tips and Tricks
Terms-
Deferred Maintenance: Deferred maintenance refers to the postponement of routine or necessary repairs and upkeep on a property. This delay can result from budget constraints, oversight, or strategic decisions to allocate funds elsewhere. Deferred maintenance often leads to a gradual deterioration of the property’s physical condition
