Just closed 52 units for 1.9 mill ... some info ... and getting cash at close

TangoWhiskey

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One thing we should encourage in REIN is the sharing of actual market info on real MF deals - so here goes.

This purchase is East Coast in a small community of 8000 that is the regional shopping and gov't center, and one with an strong rental market.

Its a portfolio purchase I have worked on for a long time as my next jump - identifying and targeting portfolios rather than single buildings. 52 units, 3 bldgs (2 X 18, 1 X 16) - 36 500 per door. 20 % vacant; current rent roll 23 K. Out of country owner with buildings facing 20 years accumulated deferred maintenance. But although ugly the units are large in very solid buildings, all co-located, great unit mix with five 3 bed units and five 1 beds that can be converted to 10 2 beds, plus chance to add balconies to 16 apts to get a big rent jump. Super efficient to manage. Most importantly, all units are separately metered with very low complex utility cost.

Most current rents 530 - 550 plus power; market rents after renos 750 plus power - goal of take-out rent roll of 39K per month.

General concept is to take 2 years moving the rents to 750 $ and refinance to take out the investor raised downpayment.

And a springboard for something larger.

The cash at close - if there is a sudden renegotiation to lower the price in the last few days after the mortgage has been finalized, if the bank likes you they may allow the mortgage to stay the same, resulting in a surplus at close. This netted us 15K in cash :)

Good luck.
 
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TangoWhiskey

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The Alberta resource driven upside definitely not here, but 85 % CMHC valuations still exist ... in a few places ... and then its a matter of finding the growing demographic ... and serving it ... and that is low to middle income people 55-65 in this area. Economical apartments in clean warm safe buildings that make tenants feel like they are part of a community are probably about as safe as it gets. Divorced ladies in their 50's making 18 $ an hour in a restaurant may indeed be a tenant you keep for life.

And thanks.
 
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CorySperle

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Great post and thank you for sharing! You are absolutely correct as more members should post details of their purchases, hence I will do just that right now under success stories.
 

Tina Myrvang

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One thing I hate about REIN is the scarcity of actual market info on MF deals - people should share their purchase deets here to let people have a national view of markets all over. This purchase is East Coast in a small community of 8000 that is the regional shopping and gov't center, and one with an strong rental market - we have operated at 98.5 % to 100 % annual occupancy for 8 years in our existing building.
Hello Tango Whiskey, you hate REIN for the lack of information. I noticed you aren't a member, if you were, you would have access to not only education but experts to help you work through any issues. Strong statement I feel when you don't have anything to compare it to.
 
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kfort

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He may be comparing it to something like BiggerPockets where posting numbers on multi’s is common.


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Martin1968

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He may be comparing it to something like BiggerPockets where posting numbers on multi’s is common.


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In any case, from a cashflow and appreciation perspective it’s a great buy. Out west you won’t find anything like it. Congrats!
 
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Rickson9

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TangoWhiskey

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Congrats!

The description reminded me of these buildings that I looked at in Chicago and Memphis

https://www.loopnet.com/Listing/6116-6134-S-King-Dr-Chicago-IL/12947507/

https://www.loopnet.com/Listing/13059663

A few questions if you don’t mind: what is the debt underwriting? Could you show us your underwriting?

What did it last trade for?

How would you rate the location from 1-100?

Ok ... Debt underwriting - 75 % standard conventional financing, bank loan not brokered (broker will do the take out).

Three separate legal properties - two year fixed loans on the two best bldgs - and a construction interest only loan of the worst which had a roof leak that resulted in the entire top floor of one 18 unit bldg going vacant. So most of my vacancy is there and the construction loan should deal with that. Total monthly debt cost is 7848 which on a 23 K intake is ok. Very low utility cost as tenants pay electricity for heat hot water and lights. The separate metering was a big draw.

Background - I got an 85 % CMHC financing in this community years ago and then again at a refinancing of that loan in 2016 giving a per apt value of 73 k door ...

I know I can get the 750 rents plus power there so hopefully I also get the 73 K per door at refi .... if refi at 73 and buy at 38, hopefully don't have to invest more than 20-22 per unit to get to 73K per door. Plus the low CMHC rates, its incredible when you realise you pay more down on principal that interesn on day one of your mortgage.

No idea what it last traded for, probably like 20K per doorm it was 25 years ago.

I would rate location 75 or so ... a big call center 400 yards away, solid middle class neighbourhood half owner occupier, complex is 700 meters either way between two big malls that serve about a 40K region. Plus a 1200 person job factory about 2 km away. Great town for rentals, I think the right small town (with the right research) is an amazing place to find both cashflow and very accessible forced appreciation situations without the competition of the investors in big cities. You want a small town that is the gov't, service and shopping center for a healthy region connected by good highways to a much larger regional center an hour away or so.
 
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TangoWhiskey

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He may be comparing it to something like BiggerPockets where posting numbers on multi’s is common.


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Nope, wasn't comparing it to Bigger Pockets, I just don't understand why people don't post multifamily numbers to help others out. As a national network, surely this is one of the goals. Not sharing numbers hurts us all.
 
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TangoWhiskey

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Changes made :) Sorry, genuinely no offense intended, REIN is a major major resource for so many. We need to do a better job sharing MF deals and helping people get there.
 

Rickson9

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Sounds exciting! $276k gross, $94k debt service, assuming 50% expenses while things get fixed up is $44k NOI (7.25% cap). $475k down (25%) gives a 9+% cash on cash. Very nice

Boost all rents by $200/door/mo increases annual gross by $120k or $400k total annual gross. If you price this at a 6 cap, it would sell for $3.3+m for a solid triple. If priced at a 7.25% cap it would be a double

A sweet exit after a only couple years

Congrats again. Now get to work! ;)
 

Rickson9

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Definitely don't need to sell

Or trade your equity position out to another investor tax free and do it again
 
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TangoWhiskey

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Definitely don't need to sell

Or trade your equity position out to another investor tax free and do it again
I don't plan trading equity out, just refinancing and doing it again. But the deal does have a lot of work with it - its 52 crap units that need serious re-investment into them to get the rent roll moved from 23K to 39K/month, and that's a two year process for someone who also needs to get paid. But a great springboard to more deals.
 

Rickson9

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You also don't need to renovate it all

You could renovate 10-20% of the units to show proof of concept (ie. $200/door/mo bump), and leave something for the next investor's imagination

The price would be lower than if all units were turned, but the time and $ investment would be lower and you can move on sooner

Grant Cardone talks about it @3:50:
 
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ThomasBeyer

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You also don't need to renovate it all

You could renovate 10-20% of the units to show proof of concept (ie. $200/door/mo bump), and leave something for the next investor's imagination

The price would be lower than if all units were turned, but the time and $ investment would be lower and you can move on sooner

Grant Cardone talks about it @3:50:
It’s a very small market with thin investor interest. Best to renovate as planed and refi with cheap CMHC money as that is what CMHC is good for: high leverage 75%+ LTV refi in smaller markets.

TW on right tack here. Congrats.


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com