Hey there BiggerPockets, it's Matt Faircloth. We're doing another video blog for you guys
because we want to talk to you about this row of apartment buildings that we own, for
today anyway, because we're selling them today. Today is the day of closing, I'm actually
leaving this site right now to drive to closing after this, but before we left I wanted to
tell you just a brief story about this deal and some lessons I learned, and hopefully
I can convey that to you too. So here's how this apartment complex came about, when my
wife, girlfriend at the time, and I both lived in Philadelphia we started real estate investing
while we were dating. We bought a duplex, and we bought it, put tenants in, made repairs
to it and increased the value to the point where it was worth a good bit more than what
we had bought it for.
Then we got married, and very quickly learned that it kind of stinks self managing a unit
that's really far away. When we got married, we moved to New Jersey, about an hour or so
away from that duplex. So very quickly we learned we got to sell this thing because
we just lived too far away from it to have to run down there and do showings, if any
maintenance issues come up, or whatever. It's just too far away for us to self manage. So
we sold it, and we had a nice spread of value in there so we did a 1031 Exchange. For those
of you that don't know what a 1031 Exchange is, briefly, it's something where you take
the proceeds of a sale and instead of putting those proceeds in your pocket and having to
pay tax on that, which can be a significant amount of tax, you roll it into another project.
There's a lot of rules and regulations around it and there is a ton of stuff on BiggerPockets
about 1031 Exchanges, so look that up if you want to learn more. We did a 1031 into these
two buildings. This is 350 and then 352 Concord Avenue. We bought these two buildings with
a 1031 Exchange, some more of our own equity, and obviously a mortgage that went into it
as well. Just these two, so this is a four unit and a four unit, is what these are. So
for about a year we owned these buildings, they did well, we were happy. We get a call
from a building owner across the street in 359 Concord, and they said, "Hey, we see that
you bought those buildings, would you like to buy ours too?" And we said, "Absolutely."
So we bought that one as well, structured some things with another investor that came
in with us and everything on it and we put that deal together and closed that one.
The rents were low, we increased rents, we did what we could to increase the income on
the buildings and that, and for a while we owned 12 units on this building. Now if you
notice they're separate tax parcels, they're not actually a 12 unit apartment complex,
they're separate tax parcels on the same block. We treat them as one big building, and the
tenants do, and our books through that way. And I'll get to why it's really important
down the road here. So fast forward to a few years later, there was a bankruptcy sale on
one of the buildings on the block when the market started to tank and everything like
that. If I haven't mentioned, we've owned these buildings for 10 years. We're selling
them today and we've owned them, these two anyway, for 10 years and then the other ones
for less than that of course.
But when the market started to tank, one of the buildings on this block went into bankruptcy,
it was for sale for less than half what we paid for these two, of course we jumped on
that right. Pulled in some more investors that came alongside us and we bought the building,
rehabbed it, put tenants in, everybody's happy, we make money. So now we're up to 16 units.
Again, it's four separate tax parcels, but it looks like one big building to anyone that's
going to look at it because it's all the same, all the units are the same, everything's the
same in the buildings. We treated it like a 16 unit, people viewed it that way as well.
Then one more building comes up, that was another distress sale after the shakeout from
the downturn in the real estate market.
So of course what am I going to do? I jumped on that one. That building we bought for half
of what we bought for the discounted one. So we bought that one for a little under a
quarter what we paid for these two. So hey we're doing well. Needed quite a bit of work,
needed a full gut rehab, it was completely vacant, we tore it apart and put it back together.
It's in great condition now, but that brings us up to 20 units, and for about a year we've
managed these 20 units on the block and it just started to make sense for some goals
that my wife and I have for paying down some money that we borrowed when we first, first
got started 10 years ago. We took out some lines of credit and things like that with
people that partner with us and everything and it's just time to make those lines of
credit and some of that debt that we have that's just lingering go away.
It made sense to sell these buildings. We actually really, really like these properties,
but for our longterm vision, it makes sense to sell. Here's the lesson to you guys. If
you are looking for multifamily, you don't necessarily have to go out and buy a 20 unit
apartment building. You can go and buy a building that's on a strip, a row of apartment buildings
if it's a good location, and if the buildings are all identical or the same like these are,
these are exactly identical. You walk through one, you've seen them all. So find a site
like that and own it, get to know the neighbors. You never know, eventually they may look to
sell it. Before you know it, you could turn a four unit investment into 20 units, even
more, sorry just way more than the four units that you bought by just slowly assembling
properties on the block.
You already know how to maintain them, you already have management in place for the one
that you own, you already have leasing strategies in place and everything like that. You already
know what they rent for. Why not buy more of them? So if you seek out deals like that,
you can slowly over time, 10 years, build up an investment that's much, much more than
what you originally started with. So we're really excited about this sale and I'm really
excited about the story on how we assembled this. I hope it was of value to you guys.
So if you'd like to get some banter going, some conversations about doing assemblage
of a small multis like this to make a bigger multi, 1031 Exchanges, self-management, anything
like that. Let's get some convo going, so leave a comment below, I'd love to hear from
you guys and hope you have a great, great investing day out there. Make it a profitable
one, and I hope to hear from you soon.