Finding Off-Market Deals With Tremendous Value-Add Opportunity | Summer 2021

Challenge:

The Runner Fund (TRF), was looking for higher than average investment returns in the Asheville MSA. TRF was familiar with all existing investment inventory actively listed in the market and felt that none of those properties met their acquisition criteria. After exhausting searches for on-market properties, TRF decided that they would only be able to reach their investment goals by pursuing off-market deals that had not been scrutinized by other investors. TRF had high liquidity and were cash buyers, with additional capital available to support improvements that would increase cash flow and equity.

Action:

TRF reached out to Karl Nelson with the directive to find properties with a 12%+ cap rate or an underperforming asset with potential for significant value-add opportunity. Having strong local market knowledge, Karl was able to tap into community contacts and service providers to find two off-market underperforming mobile home parks with below market rents and considerable deferred maintenance. Due to Karl’s understanding of cash flow modeling, market rents, and returns on investment for capital expenditures, TRF was able to quickly purchase the parks for cash to capitalize on the opportunity.

Result:

While under contract, Karl assisted in the construction of pro forma projections of cash flow, expenses, and capital improvements. Within 18 months, the Runner Fund:

• Rehabbed units to command higher rents

• Increased rents by 31%

• Increased net operating income by 28%

• Increased property value (equity) by 47%

A true success story!