In October of 2015, a client purchased a 40 unit multifamily building in the Northridge area. In order to take advantage of a forward loan commitment, our client had to achieve a specific rent level within a six month period.
Due to the lack of knowledge about the local rental market, the previous management company was charging tenants below market rent. We knew that in order to achieve our client’s goal, the property would need a copious amount of renovations. Despite these pre-existing conditions our client was confident, with Yale Management Services capabilities, that they would see a positive return on investment (ROI) and attain their sought after loan commitment.
Thus, Yale Management Services set forth a strategic plan based on a rigorous underwriting and due diligence process. From October 2015 to April 2016, we established what we sensed were the market rents by incrementally increasing rent until we attained our desired rent level. As intended, some of the units became vacant enabling us to renovate 20 units in the six-month period. Therefore, we had the opportunity to verify our assumptions and were even able to exceed our projected market rent level. Rental income increased by 30% from $40,000 to $52,000 a month and property value increased by an estimated 1.5 million dollars.
The ability to weigh rental rates against our own portfolio and even test them on other vacant units in the surrounding area illustrates one of many strategic capabilities Yale has to offer.
As of May 2016, the building is at 100% occupancy and no new move out notices have been issued. Due to our strategic pricing method we were able to accomplish our client’s goals within the six month period and get him his desired forward loan commitment. Understanding regional and local markets is one of the many ways Yale Management Services delivers “experienced” management.