32 Unit Apartment Complex in Houston TX

[Omar Ruiz]

Investment Info:

Large multi-family (5+ units) commercial investment investment.

Purchase price: $650,000
Cash invested: $225,000

We purchased a 32 unit apartment complex just outside the down town area of Houston Texas - down the freeway from the Minute Maid Stadium. We had investors participate through a syndication structure (pool of investors). All units are 2 bedrooms with good square footage and layouts. We replaced all roofs and removed all gas lines and replaced with all electrical appliances. We improved interior kitchens and bathrooms as well as filled holes in the asphalt. We refinanced the property in 2018 from Wells Fargo to Freddie Mac, which allowed us to pull all our investors capital and have infinite rate or return.

What made you interested in investing in this type of deal?

We like multifamily and apartment complexes because of the cashflow they produce and the ability to hire staff to run operations. These type of investments are preferred by our investors because it allows them to share in the cashflow due to the price point and economies of scale.

How did you find this deal and how did you negotiate it?

I spent a good amount of time building a relationship with the broker. I consistently submitted offers, provided feedback and flew down to meet personally face-to-face and prove I was a serious buyer. The previous buyer couldn't perform, so the broker came back to us. He asked us to submit our highest and best offer, so we submitted the same original offer. The broker called us back saying "I can't believe he accepted your offer". It seems this was a motivated seller.

How did you finance this deal?

We originally purchased it with a loan from Wells Fargo bank. After the 5 year term came up, we refinanced it with a Freddie Mac loan at $1 million dollar valuation. The cash-out refinance allowed us the pay back all of our investors original capital invested and we all continue to get cash flow at an infinite rate of return.

How did you add value to the deal?

We improved the interiors at $3k-$4k per door with allowed us to increase rents. We replaced all the roofs and fixed deferred maintenance on the asphalt.

What was the outcome?

We increased the net operating income and cash flow, which allowed for the cash out refinance 5 years later when the Wells Fargo loan was due.

Lessons learned? Challenges?

Working with the city of Houston to make improvements by removing the gas lines and fixing electrical was a challenge dealing with the city inspectors and the utility company.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Doug Solether at CREFCOA is a great loan broker to work with.