Multifamily BRRR strategy that created 4.5m of value in 12 months

[James Kandasamy]

We are happy to report about the recent cash-out refinance of our 174 Units Apartment Complex in San Antonio, TX.  This property won the San Antonio Apartment Association Property of the Year award for 2017. We did a post about the deal when we bought it. You can read it here. https://www.biggerpockets.com/forums/223/topics/408271-achieve-investment-group-closed-on-174-units-in-san-antonio

We pullout out 117% of equity (cash out of pocket 3.76m) within 12 months. The deal was bought at 6.9m and we added rehab of 1.3m. The property appraised at 12.7m creating a value of 4.5m within 1 year. Furthermore, we are only 50% done with interior unit rehab. We efficiently used BRRRR strategy to create this massive value. Below is the outline of strategy

Buy

We bought these deal at deep discount of 39K per door. This was a direct buyer-seller transaction. The deal was done with a Freddie mac loan assumption with 4 more years left on the loan. 

Reposition

Interior

We rehabbed 50% of interior units by spending 5K per door. We increase rents by $173 per door on average. We painted exterior/interior, installed Stainless Steel Appliances, New kitchen/bathroom/light/door fixtures, crown Molding and Kitchen Backsplash.

Exterior

New Exterior paint, carpentry/masonry repairs, new community/gym room, New landscaping, driveway fixes, plumbing leaks repairs, new pool resurfacing, new roofs where needed, water heater replacements, new water softeners and security systems.

Property Management

Upon takeover, the property occupancy dropped from 89% to 77% within 2 months. We were evicting tenants that were not paying or they simply leave because of better property management. We brought back the occupancy from 77% to 90% within 6 months.

The property was managed by our in-house property management company

Refinancing

We assumed the 7 year Freddie Mac loan with a strategy of refinancing it quickly to a longer-term debt of 10 years. The prepayment penalty came up to almost 400K. That's ok since we are making more than 4.5m and getting into a long-term debt.

Rent

Currently, the property is stabilized with occupancy above 95%. We plan to let it cash flow and continue to for another 30-40% of interior unit rehab whenever the unit turn.

Turning around a huge 174 units apartment complex within this short time frame has been challenging. There was a lot of hard work, determination, and persistence in this project.

Rehab Budget

Row Labels	Sum of Amount	Details of Rehab
Exterior Improvements	$367,020	1) All Exterior Carpentry, Brick and Painting Work 2) Tree Trimming 3) Foundation repair work for 2 building 4) French Drain to reduce soil movements
HVACs	$146,307	New HVACS replaced as needed
Interior Unit Rehab	$502,094	1) 5K Budget on average for a unit interior. 2) Total 81 units remodeled including new painting, crown molding, new vinyl flooring, new stainless steel appliances, new fixtures, resurfaced countertops, new light fixtures, new ceiling fans
Landscaping	$30,000	1) Landscaping near Office area and Villa
Lighting	$6,932	3) Exterior porch lights and critical building lights
Maintenance Tools	$10,653	4) Maintenance tools such as HVACs Gauges
Office/Laundry/Community	$76,718	1) Office were renovated completely. New equipment/Office Supplies 2) We bought 8 new Washer and Dryer 100% ownership. The laundry room was completely renovated 3) New Community room was remodeled and installed 4) New Gym room was remodeled/installed
Parking Lot	$18,583	1) Patch and repair 4K sqft of Asphalt all around the property
Playground	$30,131	1) New Playground at Villa and New safety area for old playground
Plumbing improvements	$44,704	1) New PRV (Pressure Reducing Valve) for main line 2) New Water Softener for the main line 3) Major plumbing section replacements as needed.
Pool Renovation	$17,302	1) Pools resurfacing for 1 pool at Villa
Roof replacements	$47,525	1) New Roof for Westers 2) Roof improvement for Cumberland to eliminate stagnant water
Security Systems	$9,458	1) Camera monitoring systems - 16 Channels
Signs	$10,000	1) Temporary Signage for the property
Water Heater replacements	$31,314	1) 3-4 Water Heater replacement for the property
Grand Total	$1,348,741

See below pictures to see before and after.