Every investor’s story has a beginning. Everyone starts their portfolio with a first deal.
In this First Deal series, we dive into the very first commercial real estate acquisition made by successful real estate investors across multiple asset classes and strategies.
Jamie has several claims to fame in the Multifamily world, without mentioning keeping up with fitness, family, and other business endeavors.
Jamie closed his first multifamily deal as a GP in December of 2018. We asked him to share about his first deal.
How did you get into multifamily investment?
I was an accidental landlord of a single family home in New York that I couldn’t sell when I moved to Boston. In learning how to manage that property, I got bit by the real estate investing bug. My wife and I decided to buy two distressed duplexes and BRRR them which was a lot of work for 4 units with two tax bills, two addresses and mortgages, etc. It became clear that buying more units at the same time would be more efficient and effective for us to scale and build our real estate business. We decided to join a mastermind which is where I met my partner Benoit and learned all I could about investing in commercial multifamily and I was hooked!! Income valuation approach vs. comps, value add strategies, increasing unit count and cash flow — all were very attractive attributes!
Tell us about that first Multifamily acquisition in December of ‘18
This was a 16 unit mom and pop distressed property in a bedroom community outside of Ann Arbor Michigan. It’s two 8 unit buildings that are two blocks apart. The property was presented to us off market from a married couple that found it and was under contract on 8 of the 16 units and was looking to partner with us to buy all 16. We saw opportunity with increasing rents, improving the condition of the property and loved the C+ asset being in a B+ market. Rents were $578 on average with 14 1 bedrooms and two 2 bedrooms.
The prior owner was older and unfortunately in poor health. He had a resident manager on site who didn’t pay rent and was also responsible for maintenance. The property was run poorly and maintenance work was rough. There was also heavy smoking in both buildings that hit you when you walked in. The owner’s interest was to get older, ‘low maintenance’ tenants in the building and never raise rents. One tenant was there since 1999 with no rent increases! The leases were all month to month. The owner would sign three month leases with new tenants, and then let them go month to month after. He wouldn’t advertise the 2 beds as such because he didn’t want kids in the building making noise or doing damage. No kids, no pets. This town had very few comps to consider — most rentals were duplexes or single family houses.
What was the business plan?
Our plan was to go in, meet the tenants, fix minor maintenance issues, and then install leases at a standard rate for existing tenants that was reasonable, but still below full market price. On units we could turn, we would do so and then charge full market rent. We projected to go from $578 average rent to $700. We also budgeted to replace a roof, update common areas, outlaw smoking, allow pets for a fee, and trim some expenses.
We ended up achieving average rents to $714 and had some tough conversations to remove tenants — including the former manager. We helped him find a new place and did everything we could to assist. We wanted to refinance in 36–48 months and apply the refinance funds to another project. We had the opportunity to refinance much earlier in year 2, but the original partners wanted out. So Benoit and I applied the refinance proceeds to buy their shares.
What is one critical lesson from your first deal?
You need management. Better to bring in professional management up front instead of managing yourself. We took longer on turns, spent more time with the tenants, and allowed things we shouldn’t because we’re human and felt compassion. Management up front is the way to go. It’s worth it!
What is your ultimate goal in Multifamily investing?
We want to acquire enough property to cover our personal expenses monthly with passive income. We aim to do so by leaning into our Multifamily and More core values: Give More, Be More, Do More.
Why did you decide to start the Multifamily & More community? How many people are involved today?
We have 10,000 members with 22 chapters nationally, all with their own local leadership. We started the brand and meetup group model initially because brokers wouldn’t take us seriously and bring us deals. So we thought we would become known in the Michigan market to secure deals and capital — and it worked! Then others saw what we were doing and wanted help with a local meetup in their market — so we helped and made them part of the brand. Now we seek to deliver value in the multifamily community — period. We believe that we’ll realize the return from our efforts but focus on “Give More” first!
Jamie and Benoit are clearly on their way up as multifamily investors. If you’re in Michigan or another market with a Multifamily & More meetup group, they are an amazing resource, especially for investors scaling up their efforts in Multifamily.
Oh and that refinance he mentions? Here are the details on that sweet 2.99% fixed loan: