My 22 unit went live!

[Matt Popilek]

I thought some of the Multifamily Investors would be interested in the last deal I finished on.

Purchase price: $190,000

Cash invested: $625,000

The 22 unit that took me for a interesting ride! The moral of the story is BUY IT RIGHT! When I took this down I thought I would be some were around a 20% cap rate...it ended up being a 15% cap rate which is an estimate based off estimated expenses since we just started housing people in Dec. 2018. At the end of the day if you buy the property with wiggle room you can walk away with a great property, and a great return.

The cool part is this started as my five year old daughter drew a very interesting blue print of the house she wanted to build for the homeless...That started our interest, and we closed on this building March 16th, 2018 which just happens to be her B-Day!

This is a great project we are helping with transitional housing for the homeless. We master leased the building to a NFP who will lease the entire building back from us and house their clients as they prepare them to re-enter the work force and normal housing.

I was able to use private money to finance the deal. I paid a flat 10% for all the money invested, and I rolled the interest payments into the loan so that there was $0 out of pocket. Since it was private money I didn't have to pay any points which made the financing much more manageable.

We did a total renovation - New TPO roof, New Windows, New Plumbing, New Electrical, New Base Board Heat, New Window Units, LVP flooring in the common area, Sanded and Painted Hardwood floors in the units, New Kitchens and bath for each unit.

The Deal by the Numbers -

Purchased for $190k
Spent $435k on renovation costs
All in at $625k which included paying the investors 10% on their money during the renovation period! (No money out of pocket)
$14,256/month gross rent (master lease so 1 rent check a month)
Estimated Monthly Net $7840/month
Estimated NOI $94,089
Cap Rate of 15% give or take a little
Initial Cap Rate prior to the plumbing issues would have been 17% Cap Rate - Did I say But It Right?

Lessons learned? Challenges?

Make sure your GC is getting valid bids from valid subs! I took his bid as reality when in actuality it was way off. I needed to validate he got bids from licensed electricians, and plumbers prior to closing on this deal. I would still have taken it down, but I would have had better expectations with the final result had I been closer to the final budget. Our plumbing budget of $10k ended up being $81k once the licensed plumber fixed everything!