Starting my journey in the world of multifamily real estate, I'd like to take you back to where it all began, with a triplex on Minnehaha Avenue that holds a special place in my heart. My name is Justin, and I am one of the two co-founding partners behind BLVD Ventures. This triplex, tucked away in Minneapolis's Longfellow neighborhood, served as the cornerstone of my real estate journey. I purchased the property in July 2016 for $307,000, it consists of two units in the front and one unit in the rear. After investing $25,000 in renovations to enhance its appeal, I ultimately sold the property in September 2020 for $475,000. The triplex featured a variety of unit sizes, including a 1-bedroom, a 2-bedroom, and a 3-bedroom with a single bathroom. After this initial acquisition, I continued to grow my portfolio and formed a partnership with Dan Bonne creating BLVD Ventures. Our current portfolio totals 443 units and is valued at approximately $45 Million.

Before we explore the specifics of the Minnehaha Avenue acquisition Dan and I are eager to get to know our current subscribers a bit better. We kindly request a few minutes of your time to participate in our survey. As a token of our appreciation for your participation, one respondent will win a $150 gift card. Your contribution is greatly valued, and we thank you in advance for taking part.

How I Found It

I discovered the triplex on Minnehaha Ave through a local real estate agent. After reaching out to the listing agent and scheduling a property tour, it became evident that marketing this property would be a challenge due to the poor condition of the rear unit. Neglect from the tenants had left it in dire need of extensive repairs. Equipped with this knowledge, I made an initial offer of $300,000, $50,000 below the asking price. Following some negotiation back and forth, the seller and I settled on a purchase price of $307,000.

One valuable strategy I have picked up when purchasing 2 to 4-unit properties is to engage directly with the listing agent instead of hiring my own. This approach enables the listing agent to earn double commissions and puts me in a better position to win the deal. 

Why I Liked It

The property not only offered a strong return on investment (ROI) but also surpassed the criteria set by the "1% rule" analysis. According to this rule, if the monthly rental income from a property is at least 1% of its purchase price, the investment is considered financially worthwhile. In this case, with a purchase price of $307,000, the 1% rule would require a minimum monthly rental income of $3,070 for the deal to make sense.

My complete analysis included conducting a comprehensive rental comparison study, it became evident that the combined rental income from all three units had the potential to reach $3,500 per month. This discovery indicated that the investment had even greater income potential than initially anticipated, further solidifying its attractiveness as a sound real estate opportunity.

My Business Plan

To attain my targeted rental income, I crafted a strategic renovation plan that allocated $25,000 toward property enhancements. The primary emphasis of this budget was on renovating the rear unit due to its subpar condition. While the upper front unit required new carpeting, the lower unit was move-in ready, having recently undergone a renovation with contemporary finishes.

Right after the property acquisition, I wasted no time in replacing the carpet in the upper unit. Simultaneously, I initiated the leasing process. I successfully signed two leases which provided valuable income to offset operational expenses while I tackled the renovation of the back unit. Though I did end up exceeding my budget by approximately $5,000, the result was a beautifully upgraded property.

How I Financed It

My financing strategy for this property was a creative approach that involved utilizing a bank product with a 75% loan-to-value ratio, featuring a fixed interest rate of 5.5% for a five-year term. Additionally, I leveraged a Home Equity Line of Credit (HELOC) against my personal residence to cover the entire purchase price, amounting to 100% financing. I used cash to fund the $25,000 needed for the property's renovation.

How It’s Going Today

This project marked an excellent beginning for me. It generated consistent cash flow throughout the holding period, allowing me to gain valuable experience as a landlord while also offering affordable and quality housing for the local community. In 2020, I successfully sold the property to an owner-occupant for $475,000, achieving a strong overall return on my investment. Of course, like any real estate venture, it had its share of challenges and successes along the way.

Cutting My Teeth As A Landlord

This property was a tremendous learning experience for me, and it taught me valuable lessons, both in terms of what to do and what to avoid. One significant lesson was the importance of selecting a property manager with a strong pet policy; unfortunately, the property manager I initially hired lacked this. Their lax policy led to the presence of an inappropriate dog, which tragically resulted in an incident where the dog escaped and fatally harmed a neighbor's cat. Additionally, I encountered my first eviction process at this property, which was a challenging experience.

These trials ultimately provided me with invaluable hands-on experience and inspired me to develop my own systems and methods for conducting business more effectively. This experience deepened my enthusiasm for the entire real estate investment process, and the sale of the property served as a catalyst for future growth.

Furthermore, this experience highlighted the potential benefits of offering passive investment opportunities to investors. I realized that enabling investors to participate in real estate without the day-to-day ownership responsibilities could provide them with the upside of real estate investing while sparing them from the difficulties and complications associated with active ownership.

Insights & Perspectives

As of 9/26/2023 we have reviewed and analyzed 13 multifamily investment opportunities since the first of the month. Our primary focus remains on multifamily value-add properties. We continue to proactively engage with local brokers and sellers to expand our network, while also nurturing existing relationships to ensure that we are at the forefront of any promising deals that come onto the market.

In addition to our traditional approach to sourcing deals through established relationships, we have initiated a comprehensive strategy for off-market deal sourcing. This strategy involves strengthening our partnerships with third-party property managers in our target markets. This not only provides us with an expert property manager for potential acquisitions but also grants us invaluable on-the-ground market insights and access to potential off-market opportunities.

As we evaluate opportunities in this evolving market landscape, we have implemented a multi-faceted approach. While we continue to assess deals using traditional methods, we have also explored creative avenues such as seller-carry financing. We firmly believe that this diverse approach is key to maintaining a competitive edge in today’s market.

This month, we have submitted two offers one of those offers was local to the Twins Cities where we made it to the best and final stage of negotiation. The second offer was placed on a property in Des Moines IA where we have a great 3rd property management company in place.

Notably, we have observed a trend where sellers are adjusting their asking prices to align with the evolving debt environment.

Prospective Acquisition Opportunities:

• Assumable Debt = ~3,000 properties

• Acquisitions since 2020 with 2–3-year durations = ~2,500 properties

• Floating Rate Loans = ~3,000 properties

• Construction loans maturing until 7/24 = ~400 properties

• Loans of GSE Watch List = ~300 properties

• Low estimated DSCRs (<1.05) = ~2,500

• Source: Yardi Matrix Multifamily National Outlook Fall of 2023

Thank you for reading and your interest in BLVD Ventures. We look forward to having you follow along. Feel free to reach out anytime with questions and connect with us further using the button below.