The client had two 4-plexes in Riverside County that he had owned for over 30 years.
The properties had significant deferred maintenance and rents were 40-50% below market. They were underleveraged and completely out of depreciation. Their blended return on equity was about 2%. The management company that the owner had been using neglected to communicate clearly, or make any attempt to create operational efficiencies.
We visited the properties and reviewed the numbers from two different perspectives. First, we looked at how the client was operating his properties. We immediately noticed that we could help him improve his financial situation and his quality of life by completing a simple 1031 exchange into a better asset. We also looked at the numbers from a new buyer’s perspective and devised a plan to articulate how someone could turn the properties into a good investment.
Ultimately, we achieved 98% of list price on both assets that the client was selling. We closed both escrows on the downleg properties within two weeks of each other and had sourced a replacement property before the second downleg escrow even closed.
We’re now under contact on an immaculately maintained 70’s construction apartment building in Huntington Beach. The replacement property nets $10,000 more per year than the two properties the client sold combined. The client is ecstatic to be moving his equity to a newer building in a more resilient location and has a clear path to adding significant value to the property in the future.