Now we’re making headway on ESU! The rehab has started. It’s certainly a lot of work managing all these moving pieces, especially as the big ones are infrastructure related instead of simpler “get this unit rent ready” type work. We’ve identified a few more new problems, as will usually happen, but also are finding that some of the solutions are going to be easier and cheaper than projected, too. That’s less common, but certainly a plus!
It’s always exciting to make good progress and start knocking off goals and milestones. I’m into the value-add part of investing because that value created becomes yours, but unfortunately my long term planning and perspective conflicts with my short-term impatience. I know that this is only a minor irritant though, and the results do come with time. Budgeting and allocating for those leaner times makes them survivable, and the rewards that come with it make it worth it.
I’m pleased to announce that we’ve now closed on our second property, a 96 unit complex with 12 buildings in Emporia, Kansas. Formerly married student housing for Emporia State University, we will be rehabbing and bringing this online to serve the whole Emporia community, both university students and locals. At only a few minutes walk from the university, of course we expect to have a sizable student population.
Since this was an auction of state property and not a traditional sale brokered on the commercial market, there were fewer eyes on it and as a result we were able to get it for an extremely competitive price per unit. Given the strict time frame, we were unable to close the construction loan at the same time as closing, so there will be a small delay between acquisition and the beginning of the renovation. Though the majority of the units themselves are in quite good condition, there will be a significant amount of infrastructure work necessary to get everything up to modern code, since it will no longer be grandfathered in with the shutdown and change of ownership. I spoke of this in the ESU inspection post a few months back. Even so, we expect to be all in for roughly half of what the projected stabilized value will be, so it’s overall a pretty good deal.
We had a good project this weekend. We spent a day doing an inspection tour of our next project, ESU apartments. (name subject to change) This is a 96 unit, 12 building complex that was formerly married student housing for Emporia State University. It was shut down due to changing demographics – married student housing also is simply not looked at the way it was in the past. I happened to see this property when we were doing a property trip to our Courtyard property. It is just up the street, and externally appeared to be in very good condition. My immediate thought was “hey, let’s buy this one, too!” I can’t take full credit of course, as my partner had already seen it and had the exact same thought. Great minds think alike, you know.
We had planned for a full day, walking each individual unit plus a couple of basements and support buildings that are part of the property. Luckily, we were able to move faster than anticipated and not spend as much time in the July Kansas heat. It’s certainly not the South where I grew up or the middle eastern deserts where I spent too much time, but it still makes for a long day. We were pleasantly surprised to find that most units were in excellent condition, needing only minimal cleaning to be rent-ready. This sped things up tremendously. The flipside is that a small number of units had pretty bad problems from the humidity, lack of airflow, and a few broken pipes to boot. Overall the infrastructure is going to need some work, primarily due to lack of maintenance and that fact that the utilities shutdown means that the property will no longer be grandfathered in and must be brought up to current code. If we can get the property for a good price, the large amount of rehab shouldn’t be a factor except for time, and this will be a good earner of a property to add to our portfolio.
It was very educational to see what sort of maintenance concerns can exist in a property and how to spot them. We learned an awful lot about the complex, both from the actual inspection and in talking with the ESU maintenance staff who were on hand to unlock and later re-secure all the doors, most of whom had actually worked on the apartments before they were shutdown, as well as the minor maintenance that was performed afterwards. It’s vitally important to walk and get to know your property. Take every opportunity to do so!