In a previous article, I wrote about a dilapidated 12 unit studio apartment building I sold to a couple last year. The new owners tastefully renovated the interior and exterior, professionally landscaped the half acre grounds and put the units on the rental market. The story of how this full-time working-couple successfully purchased and literally transformed this derelict apartment block into a stately gated community, is the subject of this article.
Meryl and Donald (their real names are withheld upon their request) are a young professional couple with a one year old daughter and a five year old son. Meryl enjoys a comfortable income as a director of a large company in Kingston, but she has always been fascinated with owning property. At the age of 23 years she bought her first lot of land. Years later she read the book, “Rich Dad, Poor Dad” by Robert T. Kiyosaki and became smitten by Kiyosaki ‘s entreaty to cultivate various sources of income especially through cash flow from real estate investments. Donald, a draughtsman by profession, drew the building plans for the couple’s first house – a palatial four bedroom house in a suburb of the corporate area – and built it from scratch. Meryl and Donald have invested in single-family apartment units before, but the decision to purchase an apartment block was however a different matter altogether.
Built in 1986, the weathered concrete walls of this two story corrugated zinc roof apartments, and the two abandoned motor vehicles in the front yard, were the most visible signs of neglect and dereliction of the property Meryl and Donald decided to purchase. ”I would not touch this property with a long stick”, was the opinion the couple received from a contractor who warned them against purchasing the property. Ignoring the “expert” advice, Donald made the drawings for renovation while Meryl calculated the financial projections. “My aim”, said Meryl, “was to add to our investment so that we can retire early from our full time jobs”. Though the couple offered a purchase price of JA$6 million below the vendor’s asking price, the offer was accepted.
Mortgage Application Refused
Meryl and Donald presented their financial plan to their Credit Union loans officer for mortgage financing. Although they both receive high salaries from their jobs, and the financial projections showed a surplus after expenses, their mortgage application was refused. It took weeks of arm-twisting and negotiations to get the Credit Union to finally agree to the loan. “In the long run”, said Meryl in retrospect, “it was my longstanding good relationship with the Credit Union and my excellent credit rating that clinched the deal for us” .
Renovation in Motion
At first, the plan was to upgrade the structure of each of the 400 square-foot units, repair the electric wiring and plumbing and rent to college students. Donald supervised the contractor while Meryl kept a tight rein on expenses. As the renovation proceeded they discovered that all the electrical wires had to be replaced at a cost far greater than the sum projected. Fortunately an extra large buffer of projected expenses was built in so they were able to afford the unexpected cost.
While talking to friends, Meryl got a hunch that the renters market for single professionals might be bigger than the market for college students. The renovation plan was changed instantly to modernize the fixtures, beautify the grounds and increase the projected rental. Keeping an eye on costs, demanding quality workmanship and working seven days a week, the property was completed finally, five months after commencement, within budget.
Meryl carefully screened over 60 rental applicants for the 12 available units after the advertisement appeared in the newspaper. All units were taken after the appearance of the first advertisement. The once dilapidated apartment block was now an attractive residential community. With the success of this property renovation, Meryl and Donald are now looking for similar properties to renovate and do it all over again.
About the Author
Sydney Davis is the Managing Director of Sydney Davis and Associates. He is a member of the Realtors Association of Jamaica and licensed by the Real Estate Board of Jamaica as a dealer, and property manager. His office is located at 80 Constant Spring Road, Kingston 10, Jamaica.