All Forum Posts by: Bill Spell

My partner and I have completed renovation on The Enid St Apartments (1009 Enid, Houston, TX 77007).  It is a two story, apartment community located in the Heights submarket of Houston,Texas. The Heights is a gentrifying neighborhood in near north Houston. Rents in the area for heavily rehabbed properties are very strong, as high at $1.80/ft!

We started leasing early May, 2018.  Currently we have 8 of the 10 units leased.  Four of them are occupied.  The other four are moving in this month.  We just started marketing the final two units (studios) and anticipate they will be leased before the end of the weekend.

One buliding is all brick, the other two are Hardie Plank.  The property recently underwent a major rehab which included replacing all mechanicals (electrical, plumbing and HVAC), new pitched shingle roofs, perimeter gate, exterior paint, washer and dryers  in all units, individual hot water heaters, mini split A/C, hard surface flooring, controlled access gates, new appliances and new thermal pane windows.

We have the property listed with KET Enterprises but I wanted to share the listing with my BiggerPockets family as well.  I can answer questions about the property but I don't want to step on the broker's toes either so please direct all serious inquiries through Tom at KET.  

You can find the Offering Memorandum KET's site here:  http://www.ketent.com/properties/enid-st-apartments

If it is in Harris County there is no "zoning" that I'm aware of.  Everything is regulated through deed restrictions.  If HCAD has it listed as residential, then it's currently residential but there is no reason it couldn't be converted to something else provided the deed restrictions don't disallow it.  I have run across some properties like this where it is in an area of town that is sort or rural pockets next to standard neighborhoods and had no luck finding any comps.  If that is what you are dealing with, short of talking to the neighbors that have been in the area for years and seem to know everybody elses business, I'm not sure how you would go about comping it out.  

I'm in the middle of 2 flood rehabs and have completed two others.  The two i'm doing now were extensive.  Full re-pipe and re-wire, full sheetrock downstairs (ceilings too), upstairs just new texture, all doors replaced, all cabinets replaced (upper and lower), all new flooring (enigineered wood, tile and carpet upstairs), etc.  I am GC for clients on these and both those estimates came in at $80/SF.  Another I did where we only replaced half the flooring, half the sheetrock, all the cabinets but did no mechanicals came in at $57/SF.  The first one I did where we just did flooring, lower cabinets, sheetrock 2 feet up and paint came in at $27/SF.  All four of these were estimated when the labor costs were at peak.  Those costs have come back down to realistic numbers now too.

Every situation will be different but i hope that helps some. 

I think your thought about driving around and figuring out just how rough is a good one.  if you are just thinking flip, then just check how much inventory is on the market currently and DOM for those that have sold recently.  If you are thinking hold then you need to consider collections and time spent in the area.  Chasing money is terrible and evictions are no fun.  Almost every time I had to chase money, it was from an inherited tenant that I didn't screen so screen wisely.  If you do your own maintenance, would you be willing to drive over there at night when there is a water leak?

The other thing to consider is that this is essentially for all intents and purposes apartment living for the tenant. But you, on the other hand, don't own all the units and can't control the screening of the other tenants. At least in SFR, there is some space between neighbors.

The best thing to do is what Vijaianand Thirunageswaram said in his comment.  Get it under contract, have the seller sign the memorandum of contract (that might not be the official document title, can't remember), take that down to the courthouse and file it then follow through with all the provisions of the contract on your side.  The TREC definitely has some provisions that prevent the seller from opting out without penalty and I know it has language in it that would allow a lawsuit for specific performance.  

It is a relationship business and if you have a good relationship with the seller, most won't take calls from anyone else.  Same goes for buyers.  Surely some day someone will do you wrong but buyers who do that won't last long because their reputation will precede them.  

If he owns it free and clear or has very little owed on it still, you guys could set up a partnership then he contributes the land to the partnership.  You would have to determine a going in value for the land.  Then you could develop it however the two of you see fit.  You could oversee the development yourself (sweat equity) or go out and find a fee developer and oversee that relationship.  In any event, I would propose you split the gain over and above the pre-established value of the contributed land.  My old partner and I did a couple of deals like this so if you have any specific questions, give me a call and we can talk through it.

Agree with Thomas S.  If it's not going to get you a rent increase (unlikely) and the rest of the rentals in the area have standard baths, do that.

All good advice from David above but after reading your post the first question I had was whether it was even a good deal or not.  

San Antonio market and Houston market are not very different.  Your proforma metrics are fine.  I might be able to suggest a broker or two depending on what size / class deals you are looking for.

Appraiser might have to get creative with the comps.  The very first deal we did in the Heights we had the owner carry back the construction note then when we refied him out, we had to use a much larger property and a condo deal for comps.  After that one was done, it became a comp for our second, third etc.  You will want to look into smaller regional banks for financing and as long as your proforma caps aren't ridiculous and you can show a cap rate reduction from going in to coming out or refi, you should be fine.  Might have to knock on a lot of doors though.  We had luck with Prosperity Bank, Green Bank and Mint Bank.