In the late 1990’s, an opportunity was presented to us to purchase a block of 20 town homes in Fredericksburg by simply taking over the developer’s interest in the partnership.  The ability to assume an interest in 20 homes with effectively no money down was not something we felt we could pass up.

The sun setting over the Currituck Sound as seen from the porch of 165 Salt House Road in Corolla NC

The properties were a collection of the unsold townhomes in a large development off Route 3 in Spotsylvania County called Salem Station.  The deal really had no equity (the value of the properties was basically equal to the debt) and the rents basically covered the mortgage.  One of the metrics that we use to judge purchases is how much cash is required to achieve a break even scenario.  For the most part, this deal was ‘net zero’ deal where no cash was needed but none made, which indicates that the deal is a pretty good one.

We bought it, or perhaps more accurately, we assumed it.

Initially, we managed the properties ourselves, knowing that any repair and/or any vacancy loss came directly out of our pocket in the form of cash.  Writing checks is highly motivational when managing property and owning these with such a thin margin for error taught us many lessons about the fundamentals of PM.  Over the first few years, we were able to gradually increase rents and see moderate pricing gains in the properties.  While we were not getting rich, we were beginning to see the benefit of owning them.

The run started in early 2000’s in Fredericksburg (before it really hit Richmond) and we began to see sales prices escalate in the complex at a rapid rate.  After refinancing the properties multiple times to extract equity to acquire other assets, we decided to consolidate our holdings into a more manageable property and elected to package the properties in a bulk sale.  By packaging the assets, we were able to use the 1031 Tax Exchange technique to roll the proceeds into a property in the Outer Banks that we still own, use and enjoy today.

And if you would like to rent 165 Salt House Road, Corolla NC…

 

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