All Forum Posts by: Roy Assaf

Hey, BiggerPockets community,
I’m back with yet another success story from my company, NHD Capital.

We normally don't buy deals off the MLS, but this one made sense for a couple of reasons. One, it's located in one of the areas where we acquire our investment properties. And two, it falls under one of our business models—buying two to 30 units, fully rehabbing them, leasing them out, and selling within a few years.

We bought this duplex for $95,000. After negotiating with the owner to carry a note, we came to an agreement that we would put down $30,000 and the owner would finance $65,000 for 18 months at 5.5% interest, with quarterly payments. We decided to use our own money, and we invested $35,000. That’s $30,000 for the down payment and a $5,000 real estate commission for the agent who brought us the deal, since the seller didn’t agree to pay any commission after we negotiated the price down.

We closed in late February 2020. The property was vacant, had major termite issues, and required a gut renovation. We brought in our main general contractor and offered him a joint venture where he took on the rehab costs and would get paid when we sell, plus a percentage from the profit. He agreed, we signed rehab and JV agreements, and he and his team went full steam ahead.

Unfortunately COVID-19 began a few weeks later, and he had to pause the work. He resumed in early May, got everything done on time (as he always does), and by mid-June we had a beautifully renovated duplex ready for rent. We prepared a before-and-after time-lapse video for our marketing materials and signed an agreement with one of our property management companies in the area. They had so much demand for rental units at the time, especially newly renovated ones, that they leased out both units in a week for $975 each.

We wanted to have six months' seasoning to show a buyer a stabilized P&L. We did that and put it on the MLS with our in-house brokerage. The same real estate agent who found us the deal (and is part of our team now) also brought us a cash buyer for $160,000. After paying off our note, our contractor, the closing costs, and a $4,000 commission, we netted $23,913. Our initial investment was $35,000, so our cash-on-cash return was 68.3%.

We enjoy these types of deals because we have built the right team on the ground, primarily our contractors and property management companies, which makes the process effortless and enables us to work on several deals at the same time.

Similar to this deal, we are now working on six units and 14 units that we acquired vacant last year and fully rehabbed them. We are stabilizing as we speak in order to sell them later this year. I’ll keep you posted on those soon.

I hope this deal can motivate investors out there to negotiate with sellers to carry notes and with joint venture contractors. You can then execute deals with not much money out of pocket.

Thanks for reading,

Roy

Hey all,

One of our company’s niches is acquiring vacant 2- to 20-unit properties for a significant discount, fully rehabilitating them, leasing them out, and selling them. It works well for us because we have built reliable teams (consisting of a professional general contractor, a property manager, an appraiser, and an inspector) in our markets.

We have several ways of finding these discounted deals, primarily off-market. This one is located in the Myrtle Beach MSA, and one of our boots on the ground, who was born and raised in the area, specializes in sourcing residential and commercial deals directly from sellers or banks.

He called us in October 2019 to inform us of a vacant quad in the suburbs of Myrtle Beach, an area we are very familiar with. Within 24 hours, we put it under contract for $161,500.

The property was in probate court, so we added a clause to the PSA stating that our 21-day DD period begins only once our attorney receives a clear title. Since the seller was eager to sell and had multiple interested buyers, even though she knew it may take a while due to the probate court's backed-up cases, we offered a short DD period, $2,500 EMD once the PSA was ratified, and as soon as the title was clear, another nonrefundable $12,500. We didn't have an issue offering the nonrefundable $12,500 because we knew that by the time the title would be clear, we would have completed our initial underwriting and would know if this deal was for us or not.

Fast forward nine months. Early in June 2020, the title was finally clean, and we officially started our DD. By that time, we had:

1. - completed inspection,

1. - completed a walkthrough with our general contractor and had a detailed SOW,

1. - conducted appraisal,

1. - completed our five-year financial analysis and prepared the OM, and

1. - started our new fund with a $1.5M budget to buy residential and multifamily.

We quickly closed on the property in mid-June, and our contractor started rehabbing the property on the day of closing. (We signed a rehab agreement prior to closing.) The rehab’s estimated completion date was November 1; but our contractor, with whom we have worked for over five years, completed it in mid-September—which is always good news.

The intention was to lease out the property and start collecting rental income, but in August, one of our colleagues approached us to purchase it from the fund, as he wanted to own it. Instead of selling him the property, we decided to sell the entity that owns the property and included the insurance policy and rehab agreement. We ended up selling him the entity in mid-August, and we introduced him to one of our property managers in the area to manage the quad once the rehab is completed.

In the end, the numbers worked well for us:

• Purchase price – $161,500
• Closing costs – $2,000
• Finders fee – $1,500 (our colleague received most of his fee from the seller)
• Rehab – $48,000
• Total cost – $213,000
• Sales price – $280,000
• Closing costs – $2,000
• Profit – $65,000

The buyer reimbursed us the holding costs.

Our takeaways from this deal are as follows:

1. - Having a fund with access to cash makes it easier and quicker for us to close deals.

1. - Having a reliable contractor with an agreement that protects us makes a big difference.

1. - It is crucial to always be open to changing exit strategies if it makes sense financially.

1. - Knowing our market trends, as well as the area cap rate, rental rates, absorption rate, and operating expenses, makes underwriting more efficient.

1. - With the right system and the right team on the ground, we have added this strategy of buying 2–20 units (mostly vacant), fully rehabbing, renting, and selling as one of our primary niches for 2021.

1. - Relatively smaller deals can be done in a shorter period and can produce great profits for both investors and us.

I will be sharing more of my company’s stories in 2021 to keep encouraging investors out there to jump in and enjoy the fun world of real estate.

Roy

@Douglas Wilson appreciate that!

@Canesha Edwards thanks!

Hey everyone,

Roy Assaf here from New York City. I want to share a recent success story from one of the markets in which our company is heavily invested, Myrtle Beach, SC.

First, a quick background. I’ve been an out-of-state investor since 2015. Beginning in the Myrtle Beach market, I would travel one week each month to establish my company by building relationships with strong and reliable real estate professionals, and through systemizing the operation. I started out by flipping houses, wholesaling mobile homes, and purchasing small multifamily units for buy-and-hold.

As my network grew in other markets throughout the South East, so did my business. I partnered with several highly experienced individuals, each one bringing their unique expertise and background to the table. Over the last few years, our primary focus has been value-add multifamily, primarily C class. We’ve built a strong presence on the ground, enabling us to source off-market deals, usually at 30% or more below market value.

This deal I want to share with you is in the Myrtle Beach MSA, and consists of 48 units over 10 acres. In March 2019, we put it under contract for $1.7M. The property was 100% occupied with an average rent of $550, all month-to-month tenants. We knew immediately this was a great value-add opportunity; both for cash flow as the market rent for two beds in the area started at $750, and on the appreciation side where the average unit price in the area was $75,000 at the time, and we purchased it for $35,416.

Having a very limited window to close, we quickly compiled all the DD items and ordered an appraisal. For us, having a third-party appraisal report always helps in raising equity. The appraisal came back at $2.5M As-Is (we had $800K of equity on day one) and, upon stabilization at an average rent of $700, the value would be $3M. We raised the $500K equity and took a hard money loan.

Now, the fun part would begin! I love operational challenges and bringing properties to their full potential. We brought in our main property management in the area to take over. Their first action item was to offer tenants annual leases at $725. We wanted to be reasonable and not charge market rent of $795+, knowing it would be a significant increase from the existing $550. In total, 13 tenants decided to stay at $725 each while 35 moved out. With 35 vacant units, our property management brought in their rehab team and quickly started renovating several units at a time, allowing us to rent each one at an average of $795. Using the cash flow coming in to rehab the units, we didn’t need additional equity upfront for rehab.

Fast forward a year, when another partner and I were doing the asset management and working daily with property management on operations, marketing, and rehab. By March 2020, with 35 units completely renovated, we were at 90% occupancy with an average rent now of $770.

We wanted to have 4 to 6 months of consecutive rent at over 90% occupancy in the event we chose to refinance. Accomplishing this, we soon received an attractive offer to sell at $2,875,000 from a reputable multifamily buyer so we decided to put it under contract. The buyer took an agency loan and we closed in mid-October. We settled the hard money loan and our limited partner received their initial investment back plus an incredible profit.

My company takeaways from this deal were:

1. We strengthened the relationship with our equity investors as a result of them earning 66% cash-on-cash return within 19 months.

2. By establishing strong ground presence in the Myrtle Beach market, we have become better at sourcing ongoing off-market deals at 30% or more below market value.

3. We were able to take another multifamily property that was under-performing and bring it to operational value, strengthening our asset management skills.

4. Understanding vacancy loss and absorption rates in our markets and conservatively underwriting deals enabled us to know how to use the cash flow to rehab the property.

5. Knowing the income approach and price per unit approach for this MSA helped us to understand the value at stabilization from the beginning. We had a few potential exit strategies, making it easier for us to take a hard money loan at a high interest rate.

6. We left some meat on the bone for the buyer. Now, the market rent in the area starts at $850 and the appraised value of the property is north of $3,500,000.

7. With no money out-of-pocket, our GP profit was $600,000. 

I truly hope this story helps encourage investors out there, especially during these turbulent times.

Thanks for reading!

Roy

Hi @Pete Schmidt I just DM you

Hi guys, 

We recently purchased a 32-acre land in South Carolina. Before we start the development, we have some digging to do and I was wondering if anyone knows who we should approach about finding if there is natural gas, sand or coquina underground. 

Any help will be much appreciated!

Roy

Hi @Linda Napier, my company invest in the Myrtle Beach area and we would love to help. Feel free to PM

@Joey Budka I like your strategy and appreciate the feedback! It sounds like it may work better in a market like BK. However, I since then changed market (SC), partner and team and off to much better results.

Hi @Chris Kavanagh sent you DM