CLOSED on a 98-unit TODAY!

[Ben Leybovich]

So, we had another thread going for a couple of weeks here. And this is not yet a success story, since a lot of work needs to be done to make it a success. 

But, today, @Sam Grooms and I closed on this 98-unit in Phoenix.

This is a syndicated private placement acquisition. @Jillian Sidoti and her firm, whom I highly recommend, helped with the PPM-related docs. 

The unit mix includes studio, 1x1, 2x1, and 2x2 lay-outs. The asset was constructed in 1984, and has by and large been un-touched on the interior of the units. However, the bones are very good, the unit sizes are attractive within the sub-market, and the location is experiencing very significant gentrification.

This was a mom-an-pop owned property. Rents are low even for as-is condition. Our Cap Rate on the way in is a bit under 5%. Our expected Cap Rate after the re-positioning in Y3 is 8.3%. Obviously we feel that there is a lot of upside on the rents. 

We have a $1.4M renovation budget, which includes complete reno of the interiors, as well as close to $500,000 in the common areas.

I could talk for hours, but I won't. I have a feeling me talking for hours might happen on the blog :) 

But, feel free to ask questions - I won't tell you everything, but I'll do my best to paint the bug picture.

[Ben Leybovich]

Originally posted by @Alex J.:

@Ben Leybovich

First off congratulations on the deal very impressive 

But I have to say This peaks my interest ..... I always thought of you as the guy who has said all the smart money has already made the big moves back in 2013 or whenever it was in your original few podcasts 

Why are you going so big this late in the cycle esp with mf which many have said is very overheated... also if there is a previous post on this I apologize for redundancy I have not read it

Maybe it’s an add value force equity play or something?  I personally don’t do large mf but I am very interested and will possibly be working with a lot more capital this time next year so I’d love to hear your thoughts 

Alex - good question.

I tend to learn in real time, and since 2013 I've seen people making money hand over fist. I mean, there I was saying - you are buying at 8 cap - what? Are you stupid?! And then, they weren't so stupid...

So I started asking myself questions, and doing research. Doing my best to get into the heads of smart folks.

I've come to several realizations:

What we experienced in 2010 - 2013 was brilliant, but also a once in a lifetime opportunity. That's likely to never, ever, ever happen again. Just based on this, if you are waiting for those conditions to occur again, you'll not be a buyer ever in your lifetime.

Additionally, the economics today are more favorable in so many ways for multifamily than ever before, from cost of new construction, to home-ownership levels, to mortgage financing, to attitudes, to pure and simple demographics.

I don't look at real estate in the same way I did in 2012. I've evolved. Am I wrong? Could be, but I don't think so, and I believe my desire to buy large-scale assets is rational.