We utilized the same 5 Steps we outline HERE when we were on-site last week for our own DD inspections at a 12-unit we have under contract. See HERE for a 360 view we recorded of the property. The asset sits right behind our existing 32-unit property in Louisville, KY. This was an off-market deal that was brought to us by our local market Property Manager. This highlights the importance of keeping in open communication with your team of service partners and letting them know your needs. Besides brokers, you should be letting your attorneys, PM’s, lenders, and other local investors know that you’re actively seeking properties (and the characteristics of assets you’re most interested in). You simply never know where the next deal will come from. While we like this deal for a number of reasons, there’s one that sometimes gets overlooked by investors…
As mentioned, we own 32 units right next door. Adding these 12 units to the portfolio means we can potentially get some economies of scale on operating them. For example, property managers usually charge fees that tier down as they get larger and larger properties to spread their fixed costs over. So we could potentially save money on our management agreement. Also, we’re already approaching our vendors to re-quote our contract services (things like landscaping, pest control, and waste removal not to mention insurance) for more units. Finally, bolting units onto existing complexes allows you to control more of the safety and cleanliness of the community. Basically, you have more influence over that sub-market: you can set the tone for the area.
While 12-units is below the asset size we’re targeting, we felt that it will help us truly get a foothold in our community and potentially deliver a better experience to our residents. We continue to underwrite and make offers on 30-100 unit, 1960’s or newer assets in our target markets of Louisville, KY and Charlotte, NC.
