Investment Info:
Large multi-family (5+ units) buy & hold investment in Ogden.
Purchase price: $1,050,000
Cash invested: $180,000
18-Unit Apartment Complex currently being completed renovated.
This is an 18 Unit Historic complex located in the downtown core. This has the Section 8 HAP Contract for 15 of the units, which provides high occupancy and guaranteed rents. They will also provide vacancy rent for 2 months on each turn, and up to $5,000.00 per tenant to repair tenant caused damages. It is a 16 Unit, four story complex with a side by side duplex in the back. We will need to fix the water heaters, replace the heating with heat pump AC/Furnace HVAC systems, replace the roof, redo the back stairs, install cameras, redo the landscaping, redo the asphalt, and install security doors. Here are the details on the property:
Sq Ftg 19,212 sq ft
Acres .1 Acres
Units 16, 2
Year Built 1916
Historic Registry Yes
Parking 10 Stalls
Unit Types 17 – 2 Bed
1 – 1 Bed
1 – Commercial Shop
Here is how the deal is structured:
Loan $960,000.00
Rate 12%
Term 6 Months
Points 2%
Cost of Loan $70,992.00
Construction $200,000.00
Value $2,100,000.00
Buy In $180,000
Ownership 50%
Sales Option
Profit $422,008.00
Sales Cost $147,000.00
ROI 70.33%
Long Term Hold
NOI $125,180.00
75% Loan $1,575,000.00
Cash Milled $172,004.00
Remaining Cash Invested $127,996.00
Payment $91,161.75
Cashflow $26,018.24
Cash on Cash Return 10.16%
These numbers have changed a bit due to original buy in was $300,000 but I was able to negotiate it lower. Also due to the condition of the building we are losing the HAP contract and are having to do a more extensive remodel. When complete it will be a B grade property with increased rents.
What made you interested in investing in this type of deal?
The most interesting part of this investment is the opportunity to do a cash out refinance and get most of my investment back tax free while keeping the property. We did a 1031 into this property to avoid taxes and now if everything goes to plan we will get our money back.
How did you find this deal and how did you negotiate it?
We sold a small Bed and Breakfast my wife and I ran and a Single family home we had rented out for 3 years. I started working with an investor in my area and he had this deal he was looking for a partner on.
How did you finance this deal?
The investor I purchased it with has many lenders who focus on these kind of properties.
How did you add value to the deal?
The property will be completely remodeled down to the studs and mechanical. Once complete we will be able to raise rents to market value.
Lessons learned? Challenges?
I am finding I like doing deals where I am in charge of the decisions. This one has been great to learn how to handle city inspectors and historic registry's. This property has a lot of needed repairs and I will probably try to get a property that is more stable next time. This one has massive value add potential, but I like to having cash flow sooner
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
No we did this deal off-market
