When Jake and I purchased Park Place apartments, we knew that the property was underperforming and we had a terrific opportunity to “force” the appreciation on the asset. The property was grossing only $53,000 per month due mainly to poor management. Our goal was to implement our three-step repositioning framework, increase the Net Operating Income significantly over the next twelve months, and with some luck, refinance the property.
The next twelve months proved challenging, but with determination and hard work, we were able to increase the revenue to over $80,000 per month. We implemented RUBS (ratio utility billing), began to charge all types of fees (late, pet, application), and raised the rents to market.
We drove the income on all different fronts, while focusing on reducing expenses.
At the end of eight months, we began to shop around different lenders to refinance the property. We received our first appraisal in December from a CMBS lender, a disappointing $5.7 million. (We purchased the property at $4.075 million, but we felt the appraisal still came in light) The lender just could not comprehend how we turned around an asset within eight months, and delivered a very low appraisal.
We then approached another CMBS lender, and as you can see on the picture above, we were met with more resistance. At this point, we were losing faith in getting a deal done. This is where our mantra kicked in: Patient, Persistent, but Willing to Walk Away. We decided to seek out another lender who would give us the best terms.
Finally, almost a year after...