In October 2010, Fund 3 purchased an 18-unit condo converted apartment building with an equity partner, Pathfinder Partners, for $2,065,000 cash as an REO in a 20 day all cash escrow. The property was built in 1989 and renovated substantially in 2008 prior to the previous owner losing the property to foreclosure. At the time of the purchase the property had been in receivership from the bank and had a 50% occupancy rate with under-market rents. The on-site manager was leasing units for $1,150 while showing the units only twice a week. Once we implemented a new marketing strategy, the venture was able to achieve rents of over $1,400 per unit. Our pro forma originally underwrote a 2–year hold to sell at a $2,500,000. We ended up selling at $2,895,000 after 18 months providing a 30% IRR.
