All Forum Posts by: Brian Adams

@Austin Weber

Here is what the IRR Sensititvity analysis would look like depending on your holding period, at 7.5% interest rates and $25/mo in utilities instead of $400. I left in the 10% management fee because, even if not hiring a pro, your time is worth something!:

Despite the positive IRR, you actually would not be positive cash flow monthly until Year 7.

Whether that is okay for you or not is up to you, but it is very common to be negative cash flow, given that it is not accounting for what you are gaining in illiquid equity via amortization or appreciation. 

7.5% is probably about right if that is what your lender was saying. I think I was indeed leaving in the owner occupied estimated rate.

@Mary Conrad

What kind of acquisitions?

Are you talking about someone who does all the deal sourcing, closing, and transaction management? Someone like Entera who underwrites deals off the MLS and sends them to you for purchase? A marketing company who does direct mail or something to generate seller leads?

Single family or multi-family?

I've done Acquisitions with several institutional investors and have thought about this very concept - Acquisitions-as-a-service (or asset-management-AAS, or revenue-management-AAS). But still not sure what exactly you are envisioning.

Per @Bruce Lynn, 2-4 units are actually pretty rare in DFW, despite the size of the metro. 

For context, there are nearly half as many active fourplexes in the Killeen, TX market (pop 250,000) as there are in all of DFW area (pop 6M). (20 in Killeen, 44 in all of DFW as of this moment). 

FILTER CRITERIA

Obviously depends if you want to do a value add or not. If looking for stability, I would look at buildings built in the 1980s or newer, ideally townhome style instead of apartment style if a 4-plex, minimum 2 bedroom units.

LEARNING RESOURCES

I am going to try to keep up my blog here on Bigger Pockets specifically with 2-4 family units in mind. I've published my guide to Killeen-Temple MSA and am working on my DFW one.

I'm not sure if there is another good resource that focuses specifically on 2-4 family units (most people are talking about apartments when they say multi-family. 2-4 unit buildings are a different category because you can use conforming owner-occupant financing on such buildings). 

LOCATION FOCUS

Most fourplexes are in Fort Worth. Duplexes are more scattered but also relatively scarce. There are a few new construction duplex areas if you are looking for something stable but low returns. 

INVESTING WITH A FRIEND and LOAN TYPE AND LIABILITY

I am not an expert or helpful on either of these questions. 

Are you asking about all buyers/sellers or just investors?

Either way, I suppose it's a good idea. 

I haven't yet, but my next deal, I think I will get my investors a wood etching of their home (based on the photography) and maybe "My First Flip" or maybe the sale $ or something investor-y. Something to remember their successes.

If 2-4 units is interesting, I just updated my Bigger Pockets articles with an update on fourplexes and duplexes in the Killeen-Temple market just north of Austin. https://www.biggerpockets.com/member-blogs/10185/103223-kill...

I will also publish one for the DFW market shortly, though fourplexes and duplexes are a lot less prevalent in DFW than they are in Central Texas, interestingly. 

The bottom line is that, fourplexes especially, can still get you some return in a landlord friendly state with upside due to the economic growth projections for the next decades. 

@Austin Weber I just finished my DFW Duplex/Quadplex report if curious to see what folks are up to in the 2-4 family market up here!

I also did a quick underwriting on what you described and the building I assume you are talking about. As you say, it looks like pro forma rents are $1200/mo so you could push a little next year! 

The MLS rental listings for surrounding quadplexes all show the utilities as tenant responsibility, including water. That would make a major difference on the underwriting.

You didn't mention property management; are you going to manage it yourself? 

Assuming the repairs come of their current asking price and are ~$40,000, I did a quick underwriting and come up with a 5.7% levered IRR at a 10 year hold period and 6.5% interest rate.

But if the water are tenant paid, that jumps to a 10.8% levered IRR.

Either outcome is cash flow negative in Year 1, but that is not uncommon.

I think their price is probably pretty reasonable depending on the scope of repairs and deferred maintenance?

Welcome to BP and Killeen! I'm a local agent who works with quite a few investors and multi-family properties. I've written a blog post here about what to look for in some multi-families, though the market for them at the moment has gotten quite hot in the past 12 months. 

There is a local Meetup that meets at Lil Tex in Copperas Cove for lunch the first and third Thursdays, though it's been about a month since I've been. That might be worth checking out. There is another one that meets in the evenings in Temple and is a little bigger.

There are a lot of multi-families in the area and it is a great strategy that I am very fond of, but you still need to be careful about the building you buy. There are some that look great on paper but are a handful to manage and likely not worth the squeeze. 

So I ride to Killeen's rescue!

Actually, I agree with most of what has been said here. Rents have not risen significantly in a decade (although I think that will change as prices most certainly have, and interest rates are going up). I would not invest in Killeen with appreciation in mind. And it is the opposite market to Austin (although I have no vacancy issues - there are 10,000s of renters - keep your rental in average or above average and you should be able to get 5% or under).

Regarding appreciation, I recently took a look at the Killeen market since 2009. As of 2017, the Killeen price trends have actually been beating Case Shiller in spite of not suffering nearly as badly during the recession.

https://www.hoodhomesblog.com/market/killeen-home-...

Yes, moderator, I am linking to my own site, but how else am I supposed to share this information and graph?

My take on the area is that it is great for buy-and-hold (although you absolutely do want to be particular about the area) and a nice inflation-resistant asset that can actually cash flow unlike what I hear from Austin. Killeen is the biggest town between Austin and Dallas, and part of the Texas Triangle that I don't see a lot of instability in anytime soon.

I love the strategy of buying a multi-family with the VA loan, btw. I bought mine in 2012 the same way (though FHA loan because I had already used my VA loan twice) and now have $70k in equity and been cash flowing the entire time.

Might have done better had I bought in Austin in 2012, but hey, I'm not going to complain. Killeen has done well for me. And I didn't want a commute like that.

Most sub $1M apartments in Killeen are in 76541, and there are quite a few. And indeed, in my opinion, they are more likely to be on the nightmare side rather than the other way around.

$800,000 is about right if everything else checked out - I looked at MLS complex sales in 76541 the past two years and median $/unit is just under $23,000.

I don't know if Fort Hood keeps an active blacklist anymore. 

But yes, you would want to get right with whatever property management solution you are going to be using, because this one is going to consume a lot of time and attention if it does work out.

@Pete Harper - Harker Heights is pretty much good to go anywhere. It has some older areas, but nowhere I wouldn't be happy owning a multi-family for the right price and condition.