In December 2019, I stumbled upon a diamond in the rough and what would become my first out-of-province investment—purchasing a distressed six-plex for just $115,000. Today, I’m thrilled to share that this property has been appraised at $388,000, a testament to the potential hidden in overlooked real estate deals.

The Discovery

This wasn’t just any real estate transaction; it was a hidden gem—a rare off-market opportunity uncovered through trusted local connections in New Brunswick, despite the fact that I was over 3,100 km away. In my previous discussions about managing properties from afar, I’ve highlighted the importance of building strong, reliable local teams to successfully transform and manage distant investments.

Finding this six-plex was no accident. It was the result of a deliberate effort to seek out off-market deals, which often remain inaccessible to the general public but can present unique challenges and rewarding opportunities. I discovered this property through a combination of local real estate networks and word-of-mouth referrals. Located in a region with promising growth potential, the property itself told a different story—one of neglect. Mismanagement had taken its toll, leaving the building in a state of disrepair with half the units vacant due to poor upkeep and high tenant turnover.

Alt text Front of the building

The Purchase

Negotiating with a distressed seller was key. The owner was motivated to sell due to financial strain and the ongoing burden of an unprofitable property. This situation allowed me to secure the property at a price well below market value, but with the understanding that significant work was needed.

The Transformation

Upon acquisition, the building was a fixer-upper. Here’s how we turned it around with a $50k budget:

Investments in Upgrades

  • Energy Efficiency: Upgraded to LED lighting, installed low-flow faucets, replaced old windows with energy-efficient ones, and added new insulation to reduce energy costs dramatically.
  • Demo & Junk Removal: Demolished old kitchen and bathrooms, removed old flooring, and removed all the junk left behind by the previous tenants.
  • Cosmetic Upgrades: Renovated kitchens and bathrooms, laid new flooring, and refreshed the units with modern paint, significantly enhancing the perceived value of each unit.

Expense Management

  • Property Taxes: Appealed the property taxes based on the previous condition of the building, resulting in a temporary reduction until improvements increased its assessed value.
  • Operational Efficiencies: Cut unnecessary expenses and optimized utility usage.

Leasing Strategy

  • Leased out units at market rents, reflecting the new quality of the units.

Professional Management

  • Established professional property management to ensure consistent maintenance and tenant satisfaction, reducing vacancies and turnover.

Alt text Alt text Before

The Financial Strategy

My primary reason for purchasing this property was the recognition of its potential. I knew from the outset that the asset was mismanaged, and the current net operating income (NOI) presented an opportunity. The strategy was to:

  • Force Appreciation: Increased the NOI through better management and upgrades, forcing equity in the property.
  • Refinance and Recycle: After the property’s value increased, refinanced to pull out equity for investing in another property while holding onto this one for long-term appreciation.
  • Focus on Cosmetics: Kitchens, bathrooms, flooring, and paint offered the highest returns. These upgrades significantly increased the property’s appeal to potential tenants.

Alt text Alt text After repairs

The Outcome

Within two years, the property was completely turned around. The recent appraisal at $388,000 is not just a number—it’s a validation of the strategy, hard work, and vision invested in this project.

This journey from distress to success underscores the potential in real estate when approached with diligence, strategic investment, and a clear vision for the future. It’s a reminder that sometimes, the best investments are those that others might overlook, waiting for someone to see beyond the current state to what could be.

Alt text Back of the building