Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Real Estate Deal Analysis & Advice
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 4 years ago, 05/19/2020

User Stats

4,456
Posts
4,294
Votes
Ben Leybovich
  • Rental Property Investor
  • Phoenix/Lima, Arizona/OH
4,294
Votes |
4,456
Posts

CLOSED on a 98-unit TODAY!

Ben Leybovich
  • Rental Property Investor
  • Phoenix/Lima, Arizona/OH
Posted

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.

User Stats

151
Posts
101
Votes
Billie Miller
  • Real Estate Agent
  • Denver, CO
101
Votes |
151
Posts
Billie Miller
  • Real Estate Agent
  • Denver, CO
Replied

Congratulations! My husband just quit his job to syndicate apartments (and by that I mean underwrite deals all day every day...).

Would you be willing to share your thoughts on your exit cap rate? Not so much the specific numbers but your assumptions in forecasting it? I realize that the entry cap rate on a value add doesn't really mean much. But since you're looking out 24-46 months, how did you do that?

Our method (not all that scientific) has been to look at what similar, stabilized properties are trading at and inflate that.5-1% (depending on the market) just to be safe.

User Stats

10
Posts
6
Votes
Shaun Morgan
  • Windham, NH
6
Votes |
10
Posts
Shaun Morgan
  • Windham, NH
Replied

Great details on everything about the property, process and expectations  @Ben Leybovich and @Sam Grooms ! Very informative. Thank you for sharing, sounds like a great find. Wish you both continued success! 

Steadily logo
Steadily
|
Sponsored
America’s best-rated landlord insurance nationwide Quotes online in minutes. Single-family, fix n’ flips, short-term rentals, and more. Great prices.

User Stats

316
Posts
130
Votes
Calvin Lipscomb
  • Brooklyn, NY
130
Votes |
316
Posts
Calvin Lipscomb
  • Brooklyn, NY
Replied
Originally posted by @Ben Leybovich:
Originally posted by @Nik S.:
@Ben Leybovich @Sam Grooms Congratulations!! By you being able to have your offer accepted prior to the call for offers is everything!! How were you able to do so? Recently, when I tried to do that the broker suggested I give a non-refundable deposit of $10-20k to get it under contract prior to any other offers.

In hindsight, I definitely should have done it but lesson learned.

Hick - this was $100,000 EMD with NO FINANCE CONTINGENCY.

$50,000 good faith to lender to begin the app. 

$15,000 to the securities attorney.

$7,000 to RE Attorney

If my math is right, I think this is about $172,000 hot on Day 1.

Freaking crazy, but such are the big boys club rules.

Is that about right, @Sam Grooms?

 If you are afraid of deep and you have to stay in the shallow waters.  Congrats on your move. @Calvin Lipscomb Jr

User Stats

8
Posts
4
Votes
Carl Ebsen
  • Investor
  • Toronto, Ontario
4
Votes |
8
Posts
Carl Ebsen
  • Investor
  • Toronto, Ontario
Replied

Hey Ben thanks for the great post. Happy you are getting into bigger deals, doing it up Sam Zell style, and appreciate your knowledge. I'm not sure if you posted this earlier but I take it since it's a 5 cap you have around 400K net income on this deal? I've read some of your work so I imagine the roofs are not flat ;). Will you be sharing before and after pictures with us? Does it also follow your 2 bedroom "heaven on earth" criteria? Curious if having the majority of units as 2 bedrooms still matters to you at this scale. I read your website and it says that you buy below replacement cost. How many square feet is this 98 unit and what did you pay per square foot? What's the replacement cost in Arizona now? Many thanks, Carl

@Ben Leybovich

User Stats

171
Posts
56
Votes
Charles M.
  • Montgomery, AL Investor
56
Votes |
171
Posts
Charles M.
  • Montgomery, AL Investor
Replied

And I thought I was smart.. 👀

I would ask a question but I'm thinking NO SELF promotion Chuck... No self promotion! +the cold & flu meds are kicking in 😷..

Great thread ...great thread. 

User Stats

26
Posts
9
Votes
Saverio Nestico
  • Rental Property Investor
  • Philadelphia, PA
9
Votes |
26
Posts
Saverio Nestico
  • Rental Property Investor
  • Philadelphia, PA
Replied

This is a great deal. Awesome! I’ve read through several of the comments and i was able to gather a few pieces of information but i want to get a specific answer directly from you regarding the financing structure. I am very interested in sourcing andsyndicating my investments and i am wrapping up my private equity investment model before i begin to pursue investors. So i am curious, can you break down the structure of your financing including any conventional, creative and any private financing? Thanks for your time. I hope we can talk soon

User Stats

1,129
Posts
1,044
Votes
John Casmon
Pro Member
  • Cincinnati, OH
1,044
Votes |
1,129
Posts
John Casmon
Pro Member
  • Cincinnati, OH
Replied

Congrats on this one @Ben Leybovich and @Sam Grooms! I love the location of the deal and think your investors will be pleased with this project. 

  • John Casmon
  • User Stats

    5
    Posts
    4
    Votes
    Adam Mauck
    • Investor
    • Phoenix, AZ
    4
    Votes |
    5
    Posts
    Adam Mauck
    • Investor
    • Phoenix, AZ
    Replied

    Hi Ben,

    Thanks for the reply.  I seem to be very interested in price per unit, it helps me make sense of some deals.  You made a great purchase. Keep up the good work.

    Adam

    User Stats

    33
    Posts
    37
    Votes
    Jason Lawrence
    Pro Member
    • Real Estate Agent
    • Indianapolis, IN
    37
    Votes |
    33
    Posts
    Jason Lawrence
    Pro Member
    • Real Estate Agent
    • Indianapolis, IN
    Replied

    Love it Congrats Ben!

  • Jason Lawrence
  • User Stats

    12
    Posts
    28
    Votes
    Caleb Culver
    • Rental Property Investor
    • Kalamazoo, MI
    28
    Votes |
    12
    Posts
    Caleb Culver
    • Rental Property Investor
    • Kalamazoo, MI
    Replied

    Congrats! Looks like you guys have done the legwork and landed a fantastic deal. Well done and good luck! 

    User Stats

    4,456
    Posts
    4,294
    Votes
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    4,294
    Votes |
    4,456
    Posts
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    Replied
    Originally posted by @Billie Miller:

    Congratulations! My husband just quit his job to syndicate apartments (and by that I mean underwrite deals all day every day...).

    Would you be willing to share your thoughts on your exit cap rate? Not so much the specific numbers but your assumptions in forecasting it? I realize that the entry cap rate on a value add doesn't really mean much. But since you're looking out 24-46 months, how did you do that?

    Our method (not all that scientific) has been to look at what similar, stabilized properties are trading at and inflate that.5-1% (depending on the market) just to be safe.

     Hah Billie, my method may be a little more scientific but essentially leads me to the same 1% inflation of Cap Rate. Thought, this is not market-specific.

    User Stats

    5
    Posts
    3
    Votes
    Gregory Kuhn
    • New York, NY
    3
    Votes |
    5
    Posts
    Gregory Kuhn
    • New York, NY
    Replied
    @Ben Leybovich congrats!
    CV3 Financial logo
    CV3 Financial
    |
    Sponsored
    Fix & Flip | DSCR | Construction Loans Up to 90% LTV - Up to 80% Cash Out - No Income Verification - No Seasoning Requirements

    User Stats

    4,456
    Posts
    4,294
    Votes
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    4,294
    Votes |
    4,456
    Posts
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    Replied

    @Carl Ebsen

    "I'm not sure if you posted this earlier but I take it since it's a 5 cap you have around 400K net income on this deal?" BL: in-place, yes.

    " I've read some of your work so I imagine the roofs are not flat ;). "BL: you better believe it lol 

    "Will you be sharing before and after pictures with us?" BL: Sure, why not. Might do it on the blog, though 

    "Does it also follow your 2 bedroom "heaven on earth" criteria?" Yes, not too large, but large enough.  

    "Curious if having the majority of units as 2 bedrooms still matters to you at this scale." BL: Actually, two bed is my favorite layout. Not quite 50% of the units here are 2s.

    "I read your website and it says that you buy below replacement cost. How many square feet is this 98 unit and what did you pay per square foot?" BL: We paid $83,000 per unit. Works out to about $138 per sq.ft. Foks are paying for Class A $150,000 per unit - I suppose because it costs more than that to replace :)

    User Stats

    4,456
    Posts
    4,294
    Votes
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    4,294
    Votes |
    4,456
    Posts
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    Replied
    Originally posted by @Saverio Nestico:

    This is a great deal. Awesome! I’ve read through several of the comments and i was able to gather a few pieces of information but i want to get a specific answer directly from you regarding the financing structure. I am very interested in sourcing andsyndicating my investments and i am wrapping up my private equity investment model before i begin to pursue investors. So i am curious, can you break down the structure of your financing including any conventional, creative and any private financing? Thanks for your time. I hope we can talk soon

     Nothing creative here, I suppose. A bridge loan for purchase and rehab that works out to about 75% LTC. after the re-positioning we will see - most likely GSE fixed, but there are options.

    User Stats

    4,456
    Posts
    4,294
    Votes
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    4,294
    Votes |
    4,456
    Posts
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    Replied
    Originally posted by @Adam Mauck:

    Hi Ben,

    Thanks for the reply.  I seem to be very interested in price per unit, it helps me make sense of some deals.  You made a great purchase. Keep up the good work.

    Adam

     I would not get overly stuck on the price per door. If you want to make a 50% margin on the exit, you can do it at $140,000 per door just as well as at $80,000 per door. The profit is in the delta - just need to pay a function of the delta!

    User Stats

    62
    Posts
    18
    Votes
    Sam M.
    • Rental Property Investor
    • Los Angeles, CA
    18
    Votes |
    62
    Posts
    Sam M.
    • Rental Property Investor
    • Los Angeles, CA
    Replied

    Congratulations on the acquisition. What submarket within Phoenix is this located in? 

    User Stats

    8
    Posts
    2
    Votes
    Matthew Cain
    • Investor
    • San Diego, CA
    2
    Votes |
    8
    Posts
    Matthew Cain
    • Investor
    • San Diego, CA
    Replied

    @Ben Leybovich That is awesome! I'm from Phoenix area and love the market. What books or resources would you recommend for newbies who are interested in investing in multi-family?

    User Stats

    11
    Posts
    6
    Votes
    John Schinner
    • Rental Property Investor
    • Cincinnati, OH
    6
    Votes |
    11
    Posts
    John Schinner
    • Rental Property Investor
    • Cincinnati, OH
    Replied
    @Ben LeybovichWow!! Best of luck. Keep us posted.

    User Stats

    4,456
    Posts
    4,294
    Votes
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    4,294
    Votes |
    4,456
    Posts
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    Replied
    Originally posted by @Sam M.:

    Congratulations on the acquisition. What submarket within Phoenix is this located in? 

    Sam - we are within a stone's throw from the GCU :) 

    User Stats

    4,456
    Posts
    4,294
    Votes
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    4,294
    Votes |
    4,456
    Posts
    Ben Leybovich
    • Rental Property Investor
    • Phoenix/Lima, Arizona/OH
    Replied
    Originally posted by @Matthew Cain:

    @Ben Leybovich That is awesome! I'm from Phoenix area and love the market. What books or resources would you recommend for newbies who are interested in investing in multi-family?

     Matt, I've heard of two books. I've not tried them myself, but a lot of folks reference them so they must be good. @Frank Gallinelli 's book and Dave Lindahl's book. 

    There is also a lot of information on my website.

    Good luck!

    User Stats

    268
    Posts
    247
    Votes
    Vinay H.
    • Cambridge, MA
    247
    Votes |
    268
    Posts
    Vinay H.
    • Cambridge, MA
    Replied

    Looks and feels like an amazing opportunity!!! Keep us posted.

    User Stats

    14
    Posts
    4
    Votes
    Adam Bonoff
    • Investor
    • Easton, CT
    4
    Votes |
    14
    Posts
    Adam Bonoff
    • Investor
    • Easton, CT
    Replied

    was curious about the actual numbers on a deal like this.  How much was the capital raise and what was put down, interest rate, etc.  can you share the deal the investors get.

    Thank you 

    Adam 

    Rent To Retirement logo
    Rent To Retirement
    |
    Sponsored
    Turnkey Rentals 12+ States. SFR, MF & New Builds, High ROI! 3.99% rates, 5% down loans, below market prices across the US! Txt REI to 33777

    User Stats

    583
    Posts
    918
    Votes
    Sam Grooms
    Pro Member
    • Investor
    • Phoenix, AZ
    918
    Votes |
    583
    Posts
    Sam Grooms
    Pro Member
    • Investor
    • Phoenix, AZ
    Replied
    Originally posted by @Scott Dawson:

    @Sam Grooms @Ben Leybovich I'm in the Phoenix Metro area. Let me know if there are any meet up / Masterminds to attend locally. Currently sourcing Multi Fam here in PHX and Indianapolis. Congrats on the deal and  Keep rockin!

     Scott, definitely come to @Shiloh Lundahl's meetup next month. We're actually very interested in Indianapolis, as well. Ben and I flew there a couple months ago to start building relationships. We were just in best and final on a property there. 

    User Stats

    583
    Posts
    918
    Votes
    Sam Grooms
    Pro Member
    • Investor
    • Phoenix, AZ
    918
    Votes |
    583
    Posts
    Sam Grooms
    Pro Member
    • Investor
    • Phoenix, AZ
    Replied
    Originally posted by @Rhonda Wilson:

    @Ben Leybovich You wrote "Jay, statistically it costs on the average about $1,000 per door per annum less to run multifamily in the South-West than Mid-West."

    I'm really intrigued by this. Do you happen to have a study or reference? I'm not doubting it. Up in the Washington and Oregon I get really tired of dealing with mold in apartments. It's difficult to prevent and expensive to fix. It also seems that roofs will last longer in a dry climate. 

    We are thinking of investing with the southwest next go around and would love to know that our costs will go down on these line items.

    Rhonda, Ben mentioned the IREM report, but I thought I'd give you some specifics. 

    So the IREM report surveys property managers all over the country (thousands of them), and they produce reports each year based on those surveys. You can get very detailed average operating statements from these reports. For example, I can see that they surveyed over 1,200 garden style apartments in Cincinnati last year. The average operating expenses were $5,173. That's really high. They surveyed over 4,200 garden style apartments in Chicago last year. The average operating expenses were $5,661! Compare those to Phoenix, where average operating expenses were $4,076. That's the $1,000+ difference Ben was talking about. 

    Note that the report breaks it down to the detail you'd get in a T12, but with how expensive these reports are, I don't think IREM would be happy if I posted them.

    User Stats

    583
    Posts
    918
    Votes
    Sam Grooms
    Pro Member
    • Investor
    • Phoenix, AZ
    918
    Votes |
    583
    Posts
    Sam Grooms
    Pro Member
    • Investor
    • Phoenix, AZ
    Replied
    Originally posted by @Manuel Angeles:

    @Ben Leybovich

     This is awesome !

    Congratulations !

    #Goals !

    What was acquisition price ?

    What is projected disposition value ?

    Was 100% of acquisition and improvement costs coming from raised capital?

    Or did you have a lender provide lion's share of costs as debt, then raise the remaining capital as equity ?

    Manuel, you probably saw some of this information after your post, but in case you didn't:

    Acquisition price was $8.15M. Our all in basis after the renovation will be about $10M. We should have around a $15M property on our hands after the reposition. 

    No, only 25% was coming from raised capital. 75% LTC on the loan.