Southern California-based Nelson Brothers Professional Real Estate recently closed on the sale of Chateau Sera and Tropicana, two student housing apartment complexes acquired in 2012 near the University of Southern California.
The initial total offering price to investors for the two properties was $8,055,000, of which approximately $3.85 million came from investor equity. The buildings were completely renovated; exteriors were completed in 2004, and interiors and design upgrades were finished in 2014. On July 1, 2015, the property sold for $10,100,000—over $2 million in profit. Since the property had amortized over $600,000 in that time frame, the capital gains on investor equity of the total return to investors following the sale was over 62%, culminating in just over three years of ownership. When factoring in income that had been paid out during their investment, the total return for TIC investors was close to 90%, which was an unexpected piece of good news.
“We’re really pleased with how the strategy played out with Chateau Sera and its sister property, Tropicana,” stated co-owner and Chief Marketing Officer Brian Nelson. “In just over three years of ownership, the team was able to upgrade and renovate unit interiors with a new, modern décor. We accomplished this with minimal impact on occupancy, at which time we were able to maintain 100% leasing in unaffected units. For the last two years, we distributed over 8% income on a California property in a major city while providing over 100% tax shelter without any vacancy.”
Mr. Nelson further discussed his belief in student housing as a possibly advantageous investment model. “We were pleased to be able to add as much as 60% appreciation in such a short time on the back end,” he stated. “Of course, not all of our investments will turn out this way, but this is why we like student housing and our own niche business model. We have historically had the ability to keep rent demand steady with little impact from market fluctuations and with upside potential as we add value.”
