Hey there, it’s Amelia again! 👋

Ready for round two? I’m diving right into the nitty-gritty of what happened after we closed on our 11-unit apartment building and the real lessons I learned along the way. Spoiler alert: things didn’t always go as planned. 😅 Grace and I always joke that real estate is frequently two steps forward, one step back...and the last 3.5 years with this property are no different!

If you remember from last week’s email, I closed on the property in August 2021, and I was so excited to partner up and be the boots on the ground.

But, like all real estate deals, there were bumps in the road, and today, I’m giving you an inside look at those challenges and the lessons I wish I’d known sooner.

Lesson 1: Money is the Easiest Part of the Partnership 💸

When I first started out, I thought raising capital was the hard part. It turns out, it’s not. The real challenge is being the boots on the ground and managing the property. And I’ll be the first to admit - I wish I’d fought harder for a larger equity split when negotiating with my partners.

As the boots-on-the-ground person, I put in the work to make sure the property performed well. While my partners were bringing in the capital (which is obviously valuable), the true value add came from the day-to-day operations and my ability to keep the property running smoothly.*

Experienced me knows now that if you’re the one doing the heavy lifting, don’t be afraid to ask for more equity in the deal. It’s not just about finding the money — it’s about running the business, and that’s where the real value lies.

*All of this for me to still add that I am immensely grateful to my partners because this opportunity would have never happened for me otherwise. I just want to share my learnings with others in case it helps someone in the future!

Lesson 2: The MTR Strategy Doesn't Add As Much Value As You Expect When You Sell 🤔

This one was a big shocker.

At first, I thought having multiple furnished units would only add value to the property. And in many ways, it did. The Midterm Rental strategy played a huge role in increasing the property’s value. For commercial properties, the value is often calculated using a formula of Net Operating Income (NOI) ÷ Cap Rate = Property Value. By converting more units into MTRs and consistently increasing our NOI, we effectively boosted the value of the property.

You’d think that, with all that increased cash flow, the property’s value would be nearly double what we bought it for, right? Well, that’s where things get tricky. The formula might suggest a high valuation, but selling a building that’s operating using the MTR strategy isn’t as straightforward as it seems.

The reason? Not every buyer is looking to manage a hospitality-based business. Even though we were able to show a strong cash flow, a lot of buyers simply didn’t understand how the MTR model worked or weren’t interested in managing multiple furnished units.

Additionally, when it came time to value the property for sale, we had to adjust our expectations. Since the property was operating under the MTR strategy, we couldn’t just use the increased NOI to price it. Instead, we had to value it as if all the units were long-term rentals, which is the traditional way commercial properties are appraised. This created a kind of middle ground valuation - not quite the value we'd get with the MTR cash flow, but not as low as a standard long-term rental either.

So, while we had increased the property’s value substantially through our MTR strategy, it took a unique buyer to see the value in running that kind of operation. If you’re thinking about going down the MTR path, just remember: it’s important to think long-term about the potential resale value and be ready for a narrower pool of buyers when the time comes to sell, as well as the need to come up with a blended property valuation.

Lesson 3: Negotiate a Property Management Fee! 👩🏼‍⚖️

When I say I was doing everything in this deal, I mean it - and I truly wish I had been compensated for my time. From bookkeeping to tenant management, paying taxes, getting insurance, managing contractors, handling evictions, maintaining the property, dealing with the day-to-day emergencies (you know, all the fun stuff 🛠️)...and even cleaning the MTR units when we first started. I was wearing all the hats. 🧢

As the boots-on-the-ground operator, I was the one keeping everything running smoothly. And while I was grateful to have a strong partnership, in hindsight, I should’ve negotiated a property management fee. Managing the property and doing all the operational work is a time consuming job.

I highly encourage other investors in similar situations to fight for this. You deserve to be compensated for the hours you put into managing the property, especially if you’re the one handling everything from A to Z. Don’t underestimate the value of your time and effort - it’s worth negotiating for!

Lesson 4: Get Rid of Bad Tenants ASAP

This one was a tough lesson learned. 😬

We all have that one tenant we know isn’t a great fit, but we keep them around anyway, hoping they’ll turn it around. And in this case, that was exactly what I did for far too long. There was one long-term tenant that I battled with for three out of the 3.5 years I owned the property. He always paid his rent (albeit sometimes late), but he had an aggressive dog and was just rude and mean to other tenants.

Here’s the kicker: I kept him around way longer than I should have because I didn’t want to “poke the bear.” I figured, “Hey, at least he pays rent,” and hoped that things would get better over time. But in reality, he ended up costing me a few good tenants because they couldn’t stand the tension he created.

The truth is, keeping a bad tenant around not only affects you but also impacts the rest of your tenants and your reputation. Trust me, acting fast and addressing issues head-on is always the better option. It might be uncomfortable at first, but the peace of mind and stability that follows is totally worth it.

And here's the big reveal... Next week, I’m sharing exactly how much I made from this deal! 🎉

In the meantime, if you’re looking for a community to help you level up your property management skills and gain more insight into deals like this one, join the waitlist for The WIIRE Community. Our doors open in March, and trust me - this is a space you want to be a part of.

Talk soon! 💗
Amelia

P.S. As an experienced self-manager, take it from me - you need property management software that handles the heavy lifting. Too many investors are still letting tenants pay via Venmo or even picking up rent in person! 🤯 If you want to streamline your process, check out TurboTenant and use code WIIRE50 for 50% off your first year!

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