Louisiana – Turbo Turnkeys

We like deals with multiple baked-in upsides, so when this holiday treat came along we just had to jump.

Situation

A friend asked for help buying 18 discounted REO duplex-style condos in Baton Rouge. She said she could rent some units to corporate clients for short-term rentals, and net much higher rents than regular long-term rentals. They were bank-owned and a previous purchase attempt had failed due to vacancy – but most due diligence was complete and at a price near $50k they even had granite counters.

Aproach

We convinced the bank to apply the previous deal’s earnest money towards making units ready and leasing them, then signed a short-fuse purchase contract at the prior deal’s discounted price – but requiring 80% occupancy to close. We also obtained a loan commitment with very attractive terms, all within one week - from the same bank!

Results

Contract was signed the day before Thanksgiving 2014, and we closed the day before NYE. Since then, we acquired a 19th unit out of zombie foreclosure and brought it online. We now have 10 units as tastefully furnished short-term corporate & AirBnB rentals – these net us far above local “market rents” at only slightly elevated costs. We may convert more of these little houses to furnished rentals as units turn and corporate clientele grows.

We think the cap rate & yield in our short-term rentals is great and will end up unreasonably high. Once they are seasoned, we might sell some individual Baton Rouge condos as “Turbo-Turnkeys”. These would be rent-ready, nicely furnished, tenanted, and professionally managed real properties like other turnkeys, but with a turbo-charged top-line. Stay tuned!