Killeen, TX 8% Cap 46 Unit Apartment Buildings Class D+

[Angelica M Garzon]

Hello BP Community! 

I have recently gotten 2 offers accepted for 2 apartment buildings in Killeen Texas zip 76549. 

As part of our market analysis, I wanted to get feedback from locals or seasoned investors. I am trying to understand the demographics, market rents, crime rates and overall market appreciation or opinion. Is this an up and coming area or too big a hassle for long-distance investors? Am I in the right zip code or should look elsewhere. 

We are purchasing these buildings long-distance thus our minimal knowledge of the area. Everything we know is directly from online resources. 

Break Down: 

8% Cap 

35% Vacancy

46 Units total

14% COC with leverage

39% ROI no leverage

No property management in place 

Units need to be updated  

Close to Military Base 

Looks like a high crime area

Potential for 50% + returns at 100% occupancy 

[Mauricio Ramos]

@Angelica M Garzon congrats on the eagerness and getting the LOIs accepted. 

I am a syndicator in San Antonio TX, a few hours south of Killeen, and i know several investors that own property in DFW and the surrounding areas. 

I agree with @Jennifer Brown, high vacancy and no PM are red flags. Typically, in a small town like this, there are one or two PMs in town, so if they know where the trouble makers live, they will not want to manage the property. 

Another challenge that you will face is that you wont be able to get conventional/agency debt at 65% occupied, you will need to find a bridge loan or seller finance, which will cost you at least 9% interest.

I see that you are forecasting an optimistic return at 100%. That will never happen. If you are 100% occupied, then your rents are too low. I suggest to project your returns at 90% (that is what the lenders and buyers will do)

That said, the town is good because of the military base and proximity to the i35 corridor.

If you REALLY wanted to get on this deal (after you do more research), i would recommend that you allocate for a large vacancy during the first 18 months, clean house, offer incentives (super low rent) to a few law enforcement agents and do all your rehab and completely rebrand the property.

Remember, you can change almost everything about the property, except the location. If its in a war zone location, might as well leave it alone.

Invest Differently,

Mauricio