244 Units, starting contract negotiations!

19 Replies

I have an accepted NOI and just signed the engagement letter for attorney to start putting together PA to purchase 2 properties in Lawton Oklahoma totaling 244 units. I've enjoyed reading the posts of many of you as you take down deals and decided to try and document as much of the process as I'm able to for the benefit of others who are trying to accomplish the same goals.

We have a purchase price of $7.65 M and will be raising 3.25M from verified accredited investors through a 506c.  I'm sure it will be a long, tiring process with sleepless nights and long days.  I hope to bring some value to the board during this process and look forward to many conversations.

@Kent Leach

Best of luck with your raise!

For many new sponsors, the fundraise is the primary focus. However - the "fun" part is building an operating team and implemented processes to run the property.

Keep us posted.

@David Acosta   Sure.  This was an off market deal sourced through a property management company.  The properties are family owned and managed.  There is a an 11% combined vacancy issue.  Rents are 20-25% below what we could ask once the units receive a $2,000 refresh.  Total capex is $3,450 per door.  RUBS will be implemented as well over a 3 year period.  We will implement a 10% rent raise year 2 from $563 to $619 leaving us still conservatively below market rent. The PM company has implemented this exact plan in similar secondary markets

So the business plan includes everything above with exterior upgrades as well, filling vacancies, improved management and enforcement of policies. This 5 year plan drives the NOI from 472k Trailing to 811k by year 5.

Average annual COC is 9%. IRR 16.75% and average annual return 19.44% at a cap rate 1 point higher than current.

@Don Konipol We plan to use 75% LTV agency debt on one property and a bridge to agency on the other property which has the vacancy issue. We will not have to personally guarantee the debt. My partners have multiple lending relationships that they have used to purchase over 4,000 doors. I'm certainly benefitting from their experience.

Very exciting to hear that your LOI was accepted @Kent Leach ! The numbers sound great, and obviously the off-market deal, and below market rents make it a great opportunity.  You mentioned that your partners have acquired more than 4,000 doors, out of curiosity, is this your first deal? If not, what was your experience before this? This is very relevant question for me, as I am looking to make the leap as well.

Great job! On deals like this, it makes the whole process much easier when you work with seasoned partners. Looking forward to hearing more about this journey.

@Yonah Weiss I have been a limited partner before but this is my first time as a GP member.  I am familiar with you from LinkedIn and would like to discuss a cost segregation on this deal.

I'll admit this deal is about twice the size I was looking for. I felt comfortable raising 1.2M.  So much for comfort zones. It came as a package deal so it made sense to go after both.  Myself and other GP members have about 500k in the deal.  We have another 500k soft commitment but we all know how those go.  I'm anxious to raise this money and get it across the finish line.

@Kent Leach wow that is a great find. I am currently looking for duplexes and triplexes in Lawton and the surrounding area. I have also been analyzing many properties in that area to get my feet wet in this game. I hope to follow your foot steps in some time. That is good news to hear that there are good properties in the Lawton area.