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.
Congratulations Kent! I'm working toward a similar goal, but need to get the first one done.
Thanks for documenting this for us. Interested to see how it goes.
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.
Congrats, @Kent Leach on getting your LOI accepted. Can you share some quick points on the deal and business plan?
Hoping the PSA negotiations go smoothly!
Congrats. Because its a 506(c), be sure to run all your marketing materials, language, tweets, posts, whatever through your securities attorney. The devil is always in the details around wording things properly.
244 units is a nice size. I'm sure it will be a great investment for you.
@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.
@Kent Leach Congrats!! Numbers sound great, can’t wait to hear more on the progress of it all! It’s very much appreciated
Do you plan on utilizing a mortgage loan for the balance? If so, will you, as sponsor have to personally guarantee the loan? In our syndications, we utilize 50% LTV because that is threshold for the bank lending not requiring a personal guarantee.
@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.
@Kent Leach fantastic idea. I will live vicariously on this one and look forward to reading more 🤓
@Kent Leach seeing is sometimes believing,and I will keep watching for the inspiration, knock em dead!!!
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.
Good luck! Is your securities attorney the same as your operational guy?
@Kent Leach best of luck, if you have any specific question, please reach me out.