Chestnut Commons
Location – Emmaus, Pennsylvania
Purchase Date – September, 2020
About The Project
Chestnut Commons consists of 48, 1 bedroom, 1 bathroom units located in Emmaus, Pennsylvania. The property was acquired through a local broker who we had a relationship with. The property was owned by a large local investment company. They hadn’t kept up with market rents and we saw an opportunity to increase them through rebranding and cleaning up the property interiors/exteriors.
The Challenge
The investment company that owned Chestnut Commons had taken a somewhat “hands off” approach to the property. This led to a troubled tenant base, significant deferred maintenance, crime issues and a bad reputation in the town.
What We Did
We negotiated a $5.1mm purchase price to buy Chestnut Commons. Upon acquisition, we removed the troubled tenants, renovated all the common areas, renovated the interiors of vacant units with new fixtures & vinyl flooring and fixed the deferred maintenance. Once this work was done, we started to lease units to good tenants who were willing to pay well above the previous owner’s rental amounts.
The Outcome
With the higher rental rates, we were able to grow the net operating income substantially. After 14 months of ownership, we were able to execute a cash-out refinance and return 100% of the original investor capital. After that, we continued to cash flow the property providing great quarterly income for our investors.
In August of 2022, we accepted an offer to sell Chestnut Commons for $7.825mm. We were able to execute our business plan and achieve far better returns than we originally anticipated.
Investor Returns for The Bethlehem Portfolio
Cash on Cash – 11%
Average Annual Return – 20%+
Internal Rate of Return – 31.88%