Unlocking the Potential of Distressed Multifamily with Brendan Chisholm
Are you looking to break away from the Wall Street Casino and invest in Main Street? In this episode, Taylor interviews Brendan Chisholm about his strategy for investing in distressed multi-family properties in Virginia, Georgia, and South Carolina. They discuss how to do due diligence on a property, including job and population growth, income growth, adjusting debt, and considering the cost of renovations. Brendan shares his story of transitioning into real estate after college and how he found more control over money than trying to “game” the stock market. He then dives into two specific deals that he was involved with and discusses in detail the process he used to give notice to tenants, renovate multiple units at once, and finance the deals. They also talk about using vacant units as storage instead of purchasing trailers within their cost analysis. Lastly, they share their thoughts on debt financing in today’s market and how having a relationship with a debt broker was beneficial for them. Tune in now to learn more about how to make successful investments in distressed multi-family properties!
[00:01 – 07:12] Investing in Distressed Multi-Family Properties
- Distressed multi-family properties are defined as those with below 85% occupancy and need renovations
- The three properties owned by Brendan and his business partners are between 45 and 70 units in size
- They focus on value-add, distressed multi-family deals in the Southeast Mid-Atlantic area
- Deals are acquired off-market or through a broken sales process
[07:13 – 16:39] Refining the Process of Distressed Multi-Family Investing: Quantifying Renovations and Assessing Market Demand
- Adding features such as granite countertops, new cabinets, stainless steel appliances, painting, milling, asphalt, barbecues, dog parks, and playgrounds
- Following macro and micro trends such as job growth, population growth, and income growth
- Quantifying the cost of renovations through the understanding price of cabinets, granite, and floorings
- Using rent comp analysis to determine if there is a large enough delta between current rent and what can be achieved after renovation
- Brendan’s deal was an apartment complex surrounded by single-family residential homes
- Using Capax and Construction Trackers to match invoices to underwriting
[16:40 – 24:24] Navigating the Financing Challenges of Distressed Real Estate Deals
- Providing notice to tenants for units that need fixing up
- Making decisions when buying a property with distressed units
- Giving move-out specials to tenants
- Grouping units together to save on construction costs
- Using vacant units as storage instead of purchasing additional trailers
- Doing exterior work first to make interior decisions
[24:25 – 28:55] Closing Segment
- Connect with Brendan through the links below
- The most important lesson learned: work the numbers
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“You gotta work the numbers but you also gotta have, you also need to understand that a spreadsheet won’t tell you the true numbers based on where you purchased the property.” – Brendan Chisholm
About our Guest
Brendan Chisholm is the founding member of BKC Holding, LLC. A private equity real estate firm focused on acquiring distressed and value-add multifamily and mixed-use communities with asymmetric risk-return profiles.
Brendan has made multiple podcast appearances with high profile real estate professionals, coaches, authors and thought leaders to share his insights to their listeners that is both educational and inspirational.