24 Unit RD 515 IA

24-unit Rural Development (RD 515) project in Iowa we took over as the General Partner. Being in the RD 515 program we had to take over the existing entity,  rather than a traditional purchase. This was our first RD 515 project we successfully closed on, getting to the closing table on this project involved getting approval from Rural Development for us to take over as the General Partner. This involved a ton of paperwork, and was a several month long approval process. We have looked at several RD 515 projects in the past, and are excited to finally have the first one under our belt!

Ownership has owned this project for over 35 years, and were not involved with the project at all anymore. Property had an extremly poor class of tenants (worse we have taken over up to this point), and a very poor reputation in the town. Physically the property was in okay shape, newer roof, siding, sidewalks, and a handful of the units had completed remodels, but still had a lot of rehab for us to finish.

This project needed a lot of effort from our team to stabilize the property. Here are some highlights:

• 1. Evict a few poor tenants (several tenants that were hoarders, unacceptable living conditions, lease violations, etc)
  2. New pest control vendor/program to fix pest infiltration
  3. Renegotation onsite maintenance/cleaning contracts
  4. Remodel vacant units with quality/cost effective products
  5. Converted hallway and exterior lighting to LED
  6. Put in place our management with immediate marketing, and filling vacant units with quality tenants

Project plan:

This property is locked into the RD 515 program for a handful more years, while in the project the return to owner distributions are limited. However, once the property exists the program it will be 100% debt free,  we can convert it to market rate. At this point its value will over quadruple from what we purchased it for. This gives us a lot of flexability to either sell or refinance the property to pay back our investors to make up for a few years of smaller distributions. Being that we purchased this project at a massive discount, and have a few years to perform all the necessary updates and CapEx repairs this will give us a fully remodeled property that is debt free in a few years, with massive equity generated for our investors.

Hold duration: Long term hold 10+ years.

Purchase Details:

Price: $250,000 ($74,000 inherited RD debt)

Occupancy: 70%

Monthly Revenue: $13,000

Projected Financials:

Occupancy: 95+%

Monthly Revenue: $22,000+

NOI: $108,000

Valuation at 9 cap rate: $1,200,000+

Equity generated: $900,000+