Hibbing, MN… an unlikely area for successful real estate investments.
In this blog post, we're going to run through a case study on our 18-unit mixed-use building in Hibbing, MN.
Property Overview
Property Name: The Nasi
Location: Hibbing, Minnesota
Purchase Price: $350,000
Financing: Seller Financed 51%, Bank Loan 49%
Initial Challenges
When Crowley Capital Group acquired the Nasi, an 18-unit mixed-use property, it represented a classic value-add opportunity in the heart of Hibbing, Minnesota. The property was purchased at a price of $350,000, with a financing arrangement that allowed for minimal upfront capital expenditure. While the property showed promise, several challenges needed to be addressed:
Low Commercial Occupancy: Upon acquisition, only 4 out of 8 commercial spaces were rented, limiting the income potential from this segment of the property.
Room for Rent Growth: The residential segment of the property had full occupancy, but rents were below market rates. Rents for 2-bedroom units averaged $792, while 1-bedroom units were averaging $643 per month.
Property Upgrades: The property required upgrades to enhance both security and aesthetics, including common area lighting, security cameras, window replacements, and electrical upgrades.
Strategic Solutions
Crowley Capital Group swiftly implemented a strategic plan to unlock the property's potential:
Commercial Space Optimization: To address the underutilized commercial spaces, the team utilized the property manager's local knowledge and contacts to draw up interest in vacant office spaces.
Rent Adjustment: Recognizing the potential for higher rents in the market, the management raised the rent rates for residential units. The increase in rental income was achieved while still maintaining affordability for tenants.
Capital Improvements: Investments in property upgrades, including common area lighting, security camera installation, and window replacements, enhanced both security and the overall appearance of the building. Leveraging a government grant program, which covered a significant portion of the cost, helped mitigate the financial impact of these improvements.
Results and Achievements
The transformation of the Nasi yielded impressive results:
Increased Monthly Rent Roll: Monthly rental income rose from an initial $7,743 to a robust $8,818 in six months. The optimization of commercial spaces and rent adjustments for residential units significantly contributed to this growth.
Improved Property Aesthetics and Security: Upgrades to common area lighting and the addition of security cameras not only enhanced the property's appearance but also boosted tenant satisfaction and retention.
Strategic Financing: The creative financing arrangement, with 51% seller financing and a 49% bank loan, allowed the acquisition of the property with minimal initial capital investment.
Market Rent Attainment: Despite Hibbing's status as a smaller town, the property achieved competitive rents, with our 2-bedroom units now commanding an average of $920.
The Nasi stands as a compelling case study in value-add real estate investment. Through strategic management, creative financing, and property improvements, Crowley Capital Group transformed this asset into a thriving investment. The property now generates increased rental income, enjoys higher occupancy rates, and boasts enhanced security and aesthetics. This case study underscores the potential for value creation in smaller markets when a thoughtful and comprehensive approach to real estate investment is employed.
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