top of page

Blog

Steven Fletcher

Camelback additions can be very hard to execute in certain markets but also present opportunities to dig out value with the right cost basis.


A camelback is a partial second story built on the back of a home, usually a shotgun house, to create more space.


They gained popularity across historic cities because many property sites have main buildings with accessory structures on the same lot.


Over time, the one-story main structure and the accessory were merged into a single building.


Or, as more space was needed in a shotgun-style house, a second story was added.


When executed properly (and legally), they allow operators to acquire a higher (future) unit count at a discounted basis.


Still very tough to make the numbers work (and secure permit approvals), but an avenue that opens up more possibilities for the operator.


Below is a picture of one of our New Orleans properties that was once a duplex and later converted into 4 units with the use of a camelback.



Steven Fletcher

Asset and property management verticals heavily influence bottom line returns but are some of the most overlooked components of real estate investing.

 

In this email, we'll detail the processes we use to ensure all operations are streamlined and producing the results we need.

 

Property Management

 

Real estate is a game of details, so we continually seek out the best avenues to monitor profitability and provide great experiences for our residents.

 

Before any tenant is accepted for one of our apartments, they’re required to submit background, credit, and employment verification documents.

 

We then request 2 references for former property managers, verify these contacts online, and call them to inquire about the prospective tenant.

 

Should all the above check out- they’re accepted, execute their lease agreement, and are provided with a tenant move-in packet that details everything from taking over utilities to air filter dimensions.

 

We seek to tier our leases so that many aren’t expiring on the same month.

 

By offering 12- and 18-month options, we can hedge ourselves and provide more price stability for a tenant who is willing to rent for a longer duration.

 

Keys are not exchanged until deposits, rents, and pet fees have cleared in the respective operating account.

 

Next, all residents are required to sign up on our management platform where they will process rental payments and submit maintenance requests.

 

The platform maintains all records of communication/repairs and is integrated with our accounting software.

 

We execute preventative maintenance bi-annually and have all HVAC, plumbing, and electrical components serviced to prevent unforeseen issues. 

 

Should we have a problem with a leaky faucet, our plumbers are instantly notified and set-up a time to execute the repair (our contractors can access apartments with or without the tenants being there).

 

We shoot to have all repairs done within 24 hours of contact, 48 hours at the most.

 

Why?

 

Through making repairs quickly, we prevent further damage and show our tenants that we care about their residences.

 

If we have an upcoming vacancy, we advertise the apartment 30 days prior (at minimum) to move-out and seek to have at least 3 property tours a week.

 

Empty units are a tapeworm that will slowly eat away at cash flow if not immediately addressed.

 

With that said, our lease renewal rates continue to climb across the portfolio with zero evictions to date.

 

An embedded sense of urgency is a contributing factor to the above and what differentiates us from the sub-par management (put nicely) we see throughout our markets.

 

Asset Management

 

Moving into the operations side- each property has it's own management entity and operating account, through which all income and expenses flow.

 

These accounts are checked daily and all transactions are categorized weekly through a shared portal with our CPA (who issues K1’s each February).

 

We carefully review monthly statements to source any discrepancies or opportunities to save money.

 

If we’ve had 3 maintenance requests for an appliance- it might be time to replace it and avoid future recurring costs.

 

Next, dwelling/liability insurance policies are processed by our brokerage who executes payments 1 day before due dates and notifies us in writing 3 weeks prior to any expirations.

 

This ensures we have ample time to shop around policies and are receiving the best coverage.

 

Lastly, we distribute net incomes and operating reports monthly.

 

These include P&L and bank statements for the respective property in addition to a write-up that details any repairs made, performance, and comparable sales in the area.

 

We’re not ones to send you a calendar link to set up a call in 2 weeks- if our partners want to discuss anything, they know they can reach us at any time during any day of the week.

 

Given our long-term thesis, we seek to build relationships that will last for many years (hopefully forever) and transparent communication is the cornerstone of that reality.

 

Through these partnerships, we will continue to acquire great assets in Class A locations, execute quality renovations, and dig out strong risk-adjusted returns over the course of many years.

Steven Fletcher

Today we’re going to dig into our acquisition and what metrics we expect for the projects we take on.


As you know, our buying criteria is relatively narrow and encompasses the following:


1.) We only buy sub-institutional apartment buildings between 4-15 units.


2.) We seek out walkable, class A urban cores with supply constraints.


3.) We need angles to create value through operations or construction, allowing us to “make money” on the buy.


4.) The assets must exhibit the potential to be architecturally defining if they’re not already.


With that said, there’s specific metrics we need to achieve to move forward with a purchase and ultimately take on risk.


After collecting due-diligence materials (rent rolls, maintenance reports, capital improvements schedule, etc.), we verify all numbers and then assess how we would approach the building.


When analyzing the current rent and projecting the market rent, brokers will compare units by the number of bedrooms but don’t account for differences in square footage, what floor units are on, views, etc.


We pay no mind to the current rent rolls given we’re largely buying from generational owners who aren’t optimizing.


Are they leaving money on the table, yes.


Do they have less headaches and tenants that have never sent a maintenance request, yes.


These situations largely work in our favor and are a contributing factor to why we focus on the “forgotten middle tier” of these multifamily assets. 


We’re always careful to analyze the floor plan of each unit, square footage, lighting, etc. to get the full picture of how much we could charge upon the completion of renovations (a studio with a balcony will achieve higher rents than one without).


Next, we gauge renovation costs through our inspection reports/estimates that are executed during the due-diligence period and formulate our contingency budget- we target a minimum of a 25% return on our renovation expenses.


We then model out downside, base, and upside case scenarios.


If the property can’t withstand a ~20% decrease in income (ie. rents don't cover overhead), we need to make an adjustment. 


If the property doesn’t perform well without the assumption of rent growth (which we don’t underwrite), we need to make an adjustment.


It all comes down to having a refined process and accounting for the uncertainties that every project has.

bottom of page