Richardson Court Apartments — Q3 2026
Dear Partners,
Richardson Court is full. Every apartment and the new commercial suite has been leased since August 29, eight of nine residents renewed at an average increase of 4.9%, and the third quarter produced $56,321 of net operating income — enough to cover the mortgage at 1.11x for the first time this year. A lender-ordered appraisal valued the property at $4.28 million.
I want to be direct about the cost side, because it explains why the year-to-date numbers look the way they do. When we took over in December, we inherited a building with three or four vacant apartments, bad debt on the books, and vendor bills the prior manager had not paid; with fewer rent-paying units, the backlog grew into the spring, and our trash-hauling balance alone reached $10,749 by May. On top of that, last winter’s leaks required roof repairs and professional water and mold remediation. We have spent this year paying those bills down from operating cash. Payables are now $31.4K, and a third of that is owed to our own management company, which has stepped to the back of the line.
The Catching Up and Leak Remediation tabs lay out every inherited bill and every dollar of water-intrusion cost, along with what we are doing to keep it from happening again this winter. Operating shows the quarter month by month, and Valuation & Equity lets you mark your own position at the appraised value or on trailing income.
In September we engaged HFO Investment Real Estate to take Richardson Court to market, and we are working with them to present the building on how it runs today rather than on the year we inherited. The loan’s fixed rate ends January 1, 2027, and a sale or refinance before then remains the plan. Thank you for your patience through a difficult first year — the building has turned, and we intend to finish the job.
Full, Earning Its Debt Service, and Clearing the Backlog
Q3 operating income rose 17% to $105,298 and NOI rose 59% to $56,321 as the building filled. Debt service was covered at 1.11x, against 0.70x in Q2.
The improvement came while we continued to pay down bills inherited from the prior manager and the costs of last winter’s leaks. Those catch-up payments are concentrated in June and September; July and August show the building’s earning power when it is full and current.
What went right this quarter
All four July vacancies leased; the building has been fully leased since August 29. Renewals came in at 0% to +9.5%, Unit 4 re-leased 24.8% higher, and a 1,670 SF commercial suite created from unused space was leased to Heilig Development ($1,050/month, full cash rent from November). Current residents closed the quarter with no balances over 60 days.What we are managing
September NOI fell to $13.8K as we paid four months of advertising, a 2025–26 property tax installment with late interest, and unit-turn repairs. Remediation financing for last winter’s leaks continues monthly and $4.1K remains payable to Voda. The January 1, 2027 rate adjustment is the decisive date.Paying Down What We Inherited
Payables peaked at $38,675 on August 31 and closed the quarter at $31,408. The backlog has two sources: bills the prior management company left unpaid, and a year of catching up after inheriting a building with low occupancy and bad debt.
A. Bills carried over from the transition
When we took over in December 2025, vendors were owed money the previous management company had not paid, and with the building under-occupied those balances kept growing into the spring. The largest was trash hauling: Waste Solution Services was owed $10,749 at May 31. We have paid that down to $3,469, essentially current. A tree-service balance of $4,500 is down to $3,850, and small balances (locksmith, software, screening) remain.B. Catching up in general
We inherited the building with three to four vacant apartments and bad debt in place — fewer rent-paying units to cover the same bills. Until the building filled, some routine bills ran late: four months of Zillow advertising (May–August, $2,231) were paid in one go in September, and the 2025–26 property tax has been paid in monthly installments through 2026 ($37,874 year to date, plus $253 of late interest).| Vendor | Amount | What it is |
|---|---|---|
| Voda Cleaning & Restoration | $4,109 | Water-damage remediation, winter 2025–26 |
| Rich's Tree Service | $3,850 | Tree work (from $4,500) |
| Candido's Carpet Cleaning | $895 | Unit-turn cleaning |
| Locksmith Plus, HelloData, Landlord Solutions | $381 | Small vendor balances |
| Total third-party over 90 days | $9,234 |
Why our own management company is last in line
Of the $31.4K payable, $10.6K is owed to Lombard Management Group — fees and maintenance labor it has billed but not collected, $6.4K of it more than 90 days old. We are deliberately paying outside vendors first. In-house management exists to protect investor returns, not to earn an outside manager's margin, and carrying our own receivable is part of that.Last Winter’s Leaks, and This Winter’s Prevention
We have identified $12,600 of water-intrusion cost in 2026 — $8,490 paid and $4,109 still payable — across roof repairs, weatherproofing and professional remediation. The roof was repaired, not replaced, for about $3,900.
| Item | When | Paid | Payable |
|---|---|---|---|
| Roof leak repair | Jan 2026 | $750 | — |
| Roof repair & improvement, Units 15 & 16 (Angi's Roofing; Flow Roofing) | May 2026 | $3,137 | — |
| Voda remediation — first financing, 8 installments of $495 (incl. interest) | Mar–Sep 2026 | $3,961 | ongoing |
| Voda remediation — second financing, first installment | Sep 2026 | $230 | ongoing |
| Weatherstripping, mildew washing, repainting | Jun 2026 | $412 | — |
| Voda balance in accounts payable | since early 2026 | — | $4,109 |
| Total identified | $8,490 | $4,109 |
What happened last winter
Water came into the building in several places last winter — through roof sections over Units 15 and 16, and through the exterior after an old canopy was removed. Water damage required professional drying and mold remediation by Voda Cleaning & Restoration. Rather than draw down the property's thin cash, we financed Voda's work through monthly installments, which is why remediation shows up as a steady charge every month rather than one large bill.What we fixed, and how cheaply
The roof was repaired by targeted work for about $3,900 against a quote of roughly $30,000 to replace it. Weatherstripping and mildew treatment followed in June, and gutters were cleaned and overhanging trees removed in June and September so leaves and branches stop backing up the drains.Ahead of this winter
The goal this season is that the remediation line does not repeat. Before the heavy rains we are re-inspecting the repaired roof sections, clearing roofs, gutters and downspouts, checking the exterior envelope where the canopy came off, and sealing windows and doors where weatherstripping has failed. Any active leak is treated as an emergency work order — the cost of drying a wall is a fraction of remediating one.The First Quarter Above Debt Service
Year to date NOI is $134,774 (0.88x debt service). Q3 alone was $56,321 (1.11x) — the first half carried three to four vacant apartments and the prior manager’s arrears.
| Q1 2026 | Q2 2026 | Q3 2026 | YTD | |
|---|---|---|---|---|
| Residential rent (incl. pet) | $81,765 | $85,014 | $95,710 | $262,489 |
| Commercial rent | $0 | $0 | $5,250 | $5,250 |
| Concessions | ($2,306) | ($890) | ($4,019) | ($7,214) |
| Utility reimbursement (RUBS) | $5,723 | $4,514 | $6,861 | $17,098 |
| Fees, laundry, parking, other | $5,913 | $1,103 | $1,496 | $8,512 |
| Total operating income | $91,096 | $89,741 | $105,298 | $286,135 |
| Property tax | $9,872 | $16,504 | $11,498 | $37,874 |
| Utilities | $12,191 | $12,588 | $11,273 | $36,052 |
| Insurance | $14,882 | $1,688 | $3,468 | $20,038 |
| Management fees | $6,669 | $7,552 | $6,163 | $20,385 |
| Repairs, maintenance, turnover | $3,312 | $14,170 | $12,500 | $29,981 |
| Advertising, admin, professional, bank | $1,095 | $1,860 | $4,074 | $7,030 |
| Total operating expense | $48,021 | $54,363 | $48,977 | $151,361 |
| Net operating income | $43,075 | $35,378 | $56,321 | $134,774 |
Full, and Re-Priced Lease by Lease
Eight renewals added $525 a month of rent with no vacancy or turn cost, and in-place residential rent rose from $27,235 on July 1 to $33,323 on October 1.
| Unit | Type | Effective | Prior | Renewal | Change |
|---|---|---|---|---|---|
| 10 | 2BR | Aug 1 | $1,500 | $1,642 | +9.5% |
| 21 | 1BR | Sep 1 | $895 | $980 | +9.5% |
| 3 | 2BR | Aug 1 | $1,495 | $1,584 | +6.0% |
| 22 | 2BR | Aug 1 | $1,495 | $1,584 | +6.0% |
| 14 | 1BR | Sep 1 | $1,010 | $1,070 | +5.9% |
| 2 | 2BR | Sep 1 | $1,411 | $1,440 | +2.1% |
| 8 | 2BR | Oct 1 | $1,595 | $1,626 | +1.9% |
| 17 | 1BR | Oct 1 | $1,412 | $1,412 | flat |
| Total | $10,813 | $11,338 | +4.9% |
New leases
Units 6 and 7 (1BR) leased at $1,295 and Unit 9 (2BR) at $1,595 in July. Unit 4, vacated by a resident of twelve years, re-leased within a week at $1,425 versus $1,142 (+24.8%). The commercial suite began its lease July 1; rent for September and October is offset by build-out credits, and full rent begins in November.The miss
Unit 24 leased July 4 to a resident who left August 7. We re-leased it August 29 at the same $1,095 — below its $1,199 advertised rent — rather than carry it vacant into the fall.Your Position — A Moment-in-Time Mark
The May 2026 appraisal gives the first independent mark on the building. This tab flows a building value down through the loan to total equity and to your own stake. Choose an income basis and a cap rate.
| Source | Amount | % of total |
|---|---|---|
| Senior loan — Pacific West Bank (balance Sep 30, 2026) | $3,429,724 | 72.5% |
| Common equity invested | ~$1,300,000* | 27.5% |
| Preferred equity | $0 | 0% |
| Total capitalization | ~$4,729,724 | 100% |
| NOI basis | 5.75% cap | 6.00% cap | 6.50% cap |
|---|---|---|---|
| Trailing $180K | below loan (−$305K) | below loan (−$435K) | below loan (−$665K) |
| Q3 run-rate $225K | $488K | $325K | $36K |
| Appraisal $254K | $995K | $811K | $484K |
How the split works
Sale proceeds after the loan payoff flow under the operating agreement: limited partners receive their capital and accrued preferred return before any sponsor promote. This calculator shows total equity before that waterfall, so it is a ceiling for your stake, not a distribution estimate.The Path From Here
The operating recovery is visible; the remaining work is financial and seasonal. Three things decide the next quarter: the sale process, the January rate adjustment, and keeping water out of the building this winter.
Commercial suite to full cash rent
Build-out credits to Heilig Development end and $1,050/month cash rent begins.
Take the building to market with HFO
Separate one-time and inherited costs from the run-rate, add the income the trailing statements understate (commercial lease, parking on 14 spaces, a full rent roll), set pricing and launch marketing. We will report pricing and offers as they arrive.
Watch List
Loan rate adjustment
The $3.43M Pacific West Bank loan is fixed at 3.39% through December 31. At market rates interest cost rises materially. As noted last quarter, a capital call remains possible if we refinance rather than sell.
Water intrusion and the payables backlog
Pre-winter roof, gutter and envelope work is underway so remediation does not repeat. Third-party payables of $20.8K, Voda installments and the November 2026–27 property tax installment are the near-term cash demands.