Just bought a 140 unit property. Here’s how I financed it (thanks BP!)

[Brian Burke]

It’s always exciting to buy an off-market multifamily property, and even more exciting when the Houston Business Journal runs a story on it!

The property is a 140 unit class-C apartment complex in the Houston Texas market. The deal was financed with a $4 million loan from a national CMBS lender, and $2.3 million raised from a private offering (Reg D 506). I've got to give credit where credit is due, some of this money originated from contacts I met right here on BiggerPockets. If anyone doubts that BP can help you accomplish your goals, I hope you are a believer now!

I got the deal off-market from a broker that I’ve worked with before. He knew a seller that needed to sell right away and wanted a buyer that they knew would perform. This is why I’ve always stressed that track record means a lot in this business. It is your track record that will get you deals, and it is your track record that will help you raise money to pay for those deals.

I frequently get asked about the costs to purchase a deal of this size. Many newer investors underestimate the capital required to do a deal like this and get caught short. Since running out of cash is very unforgiving, here is a synopsis of what to expect (using figures specific to this deal but at least it gives you a general idea):

$10,000 entity formation, operating agreement, PPM and subscription agreement
$40,000 loan fee
$21,000 closing costs
$16,000 in due diligence costs (reports, etc)
$17,500 legal fees for the lender
$5,000 legal fees for the buyer
$20,000 utility account deposits
$45,000 prepay first year’s insurance premium
$40,000 fund lender’s impound account
$600,000 for capital improvements
In addition to the above, don’t forget cash reserves!

Thank you everyone for allowing me to be a part of the BP community. I look forward to sharing more success stories in the future, and I’m sure that this forum will continue to play a role in that success.

[Brian Burke]

Thanks everyone!

@Darren Sager , amen!

@Joshua Dorkin , I had to raise quite a bit of money for this one, and there were a number of investors. What is unique about this deal, however, is that one investor in this opportunity was someone that I met some time ago as a result of my posts on BP. It proves that when you put yourself out there and help others by answering their questions, people take notice. If you say something smart once in a while, people seek you out. I must have said something smart once.

That's not the end, however. I had a number of other BP members that were seriously interested in participating. That means that I have an interest list going for the next opportunity. It's a great way to start the hunt.