Q1 Activity Report

Progress Logs

Q1 Activity Report

Posted by Unknown Member on April 24, 2021 at 2:00 pm

The first quarter of 2021 brought the closing of our syndication in Witchita (Mulvane) Kansas. That project took a long time to close, mainly because the seller did not continue to manage the property at the level needed to maintain the occupancy that we went under contract at. It did not vary by a percentage or two, we realize and can tolerate some variance as a normal course of business, however a drop from 95% to 85% necessitated the need for extensions to allow the seller to get back on track. This was not just an objection from us as buyers, it also began to negatively affect our lending. The seller ultimately took charge of the problem and restored occupancy. We closed in mid March and currently the property is 97% occupied with an economic occupancy over 95%. Patience pays off.

We also have some activity on the disposition side. Our 62 unit project in Johnson city is under contract to sell. This has been a difficult project that included 100% vacancy, contractor problems (twice), and delays with permitting (related to substandard work and deviations from architectural drawings) by one of the already mentioned contractors. Although it would have been nice to see this through to completion, a team decision by our partners concluded our best financial decision is to sell. We are currently in the due diligence phase and are on track for a closing in late May. 

Also keeping us busy is a flip in Kingsport Tennessee. We expect it to be market ready in early May, just in time for summer buying season. A local wholesaler has been doing a great job finding deals and we were able to purchase this bread and butter flip in a great neighborhood. The local residential market is extremely competitive with less than a months worth of inventory available. Most home are receiving multiple bids and many are selling higher than the asking price. The same is true for multifamily in the immediate area: there is very little inventory and recent news reports about migration to Tennessee, Florida and Texas has revealed the area to whole new group of investors. Although this has effectively lowered the local cap rates, rent growth and demand appears to justify some increase in values. Throughout the pandemic we have had good demand and have exceeded our proforma rent increase projections, so from our experience the rental market remains strong. I would not say that people are overpaying, I do think that money is moving to the area that has different returns expectations. We continue to be cash flow/value add minded, which means we want higher returns for the risk adjusted aspect of value add investing. If someone is willing to earn a 6% average and take the depreciation and tax benefits, then we will often be out bid. They did not over pay, we just cannot meet our returns expectations with the same purchase price.
We are going to start of the second quarter by touring some property, and expanding our reach into new markets where we have reliable boots on the ground relationships. These markets include Savannah Georgia and Virginia Beach Virginia. We are striving for significant growth in 2021, so we are focusing on strategic relationships to expand our market knowledge and deal flow. I expect some road trips and regional travel will pick up over the summer. If you see we’re going to be in your area, let’s catch up over coffee.

We have submitted th paperwork to take over management of our 49 unit in Johnson City. This project was the main reason I got involved in the Matrix. The resources have been fantastic and will be vital to taking on managent for the first time. Six months ago I would have been hesitant to self manage. Now I’m certain we have the knowledge, network and resources to be successful.

NOTE: This is the same update we sent in our newsletter to our subscribers and posted it as a blog to our website. Whenever possible we try to use information in as many platforms as possible.

How is your progress going? Regardless of your experience, be proud of and celebrate your progress. Every move gets you one step closer to your goal!

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