Why the Ground Team Matters

Why I liked it

The numbers!

I knew about the attractiveness and the goodness of the BRRRR strategy before, but I’d never considered that you could do it for a multifamily property. Turns out, it’s a way to supercharge cashflow.

The 20-unit property in particular was extra-attractive from the rental standpoint — the units that were leased were all well below market rents, and a lot of them were Section 8 tenants. We felt the Section 8 designations would reduce our risk in the uncertainty of the pandemic, because if a tenant lost their job we’d still get paid rent.

Deal structure

This was technically two different deals with different partnership structures, but I employed the same strategy and purchased them at the same time, using the same ground team.

I purchased each one with a hard money loan, with a plan to rehab and stabilize in 6-9 months before refinancing into long-term debt.

Deal outcome

The first 4-6 months of this project were dreadful. I received basically no documentation from the previous owners (part of the reason the properties were at a discount), but I figured I could overcome that.

The property manager I had chosen was unable to uncover basic information, like who lives in each unit and how much their rent was. I replaced that PM immediately (before I even started rehab), but it still took about 5 months before I had a good idea of the occupancy and rent details for each property.

Once I did finally have that information, I were able to tailor the rehab plan and cut out a lot of waste. My new projected rents would be slightly lower, but at the end of the project I’d be able to pull out more of our cash than initially planned.

Property 1: One 11-unit building

Property 2: Two 10-unit buildings