I currently have an opportunity to purchase 96 multifamily units, 16 of which are newly renovated leaving 80 that need MAJOR rehab. We are talking full gut to the studs rehab. I am a General Contractor and I am comfortable with the construction side of things, but this deal is quite a bit larger than my other investments I've made in the past. So the problems or roadblocks that come with properties of this magnitude I am unaware of.
I am looking to connect with someone, that either can affirm my thoughts and underwriting or poke holes in it, that has experience in deals of this size. We are looking to scale into larger projects so though this is the current deal I am looking at we seek to have more opportunities of this size come across our desk. With that said I am also looking for financing partners that have experience in these types of deals as well as any other people that feel like they could offer guidance. I feel like I am at the point where "you don't know what you don't know". Looking forward to any input you guys may have on the matter. Thanks
I currently have an opportunity to purchase 96 multifamily units, 16 of which are newly renovated leaving 80 that need MAJOR rehab. We are talking full gut to the studs rehab. I am a General Contractor and I am comfortable with the construction side of things, but this deal is quite a bit larger than my other investments I've made in the past. So the problems or roadblocks that come with properties of this magnitude I am unaware of.
I am looking to connect with someone, that either can affirm my thoughts and underwriting or poke holes in it, that has experience in deals of this size. We are looking to scale into larger projects so though this is the current deal I am looking at we seek to have more opportunities of this size come across our desk. With that said I am also looking for financing partners that have experience in these types of deals as well as any other people that feel like they could offer guidance. I feel like I am at the point where "you don't know what you don't know". Looking forward to any input you guys may have on the matter. Thanks
Hi Ryan,
I like the units with the skylights, those should be very popular with astonomists.
Just some rhetorical questions that come to mind.
Are these A, B, C or D renters who will occupy the units when finished?
Do you know how to attract the different renter classes, unit mix, overall offering, etc.. to not overspend or underspend.
Can you get supplies and labor in time to finish as required by your lender.
You will most likely need to come up to current code for your area...
Will you need security onsite to keep materials from being stolen, will they need to be armed (for their own safety) (different price points here).
Have you talked to an Architect who does larger multi-family re floor plans, and etc...?
Have you talked to a leasing agent/broker about unit mix, and popular features for your intended renter class?
What will the taxes be when it's finished.
Have you talked to an electrician to make sure enough electricity is available a the drop(s)/(service lateral(s)), for the new code requirements.
A Sewer Cam inspection is always a good idea on older real estate--being there during this inspection with your own site map to make notes might be helpful...ask them how long it will take, and ask the to check if backflow prevention devices are in the sewer lines--they can prevent one units sewer backup from coming up into another unit.
Lender · Atlanta, GA · Member since 2015 · 1k+ posts · 200 votes
3y
An experienced MF investor can help you with the ins/outs of a project of this scale. On the financing side, the debt piece is in out wheelhouse - 80-85% LTC.
I currently have an opportunity to purchase 96 multifamily units, 16 of which are newly renovated leaving 80 that need MAJOR rehab. We are talking full gut to the studs rehab. I am a General Contractor and I am comfortable with the construction side of things, but this deal is quite a bit larger than my other investments I've made in the past. So the problems or roadblocks that come with properties of this magnitude I am unaware of.
I am looking to connect with someone, that either can affirm my thoughts and underwriting or poke holes in it, that has experience in deals of this size. We are looking to scale into larger projects so though this is the current deal I am looking at we seek to have more opportunities of this size come across our desk. With that said I am also looking for financing partners that have experience in these types of deals as well as any other people that feel like they could offer guidance. I feel like I am at the point where "you don't know what you don't know". Looking forward to any input you guys may have on the matter. Thanks
Hi Ryan,
I like the units with the skylights, those should be very popular with astonomists.
Just some rhetorical questions that come to mind.
Are these A, B, C or D renters who will occupy the units when finished?
Do you know how to attract the different renter classes, unit mix, overall offering, etc.. to not overspend or underspend.
Can you get supplies and labor in time to finish as required by your lender.
You will most likely need to come up to current code for your area...
Will you need security onsite to keep materials from being stolen, will they need to be armed (for their own safety) (different price points here).
Have you talked to an Architect who does larger multi-family re floor plans, and etc...?
Have you talked to a leasing agent/broker about unit mix, and popular features for your intended renter class?
What will the taxes be when it's finished.
Have you talked to an electrician to make sure enough electricity is available a the drop(s)/(service lateral(s)), for the new code requirements.
A Sewer Cam inspection is always a good idea on older real estate--being there during this inspection with your own site map to make notes might be helpful...ask them how long it will take, and ask the to check if backflow prevention devices are in the sewer lines--they can prevent one units sewer backup from coming up into another unit.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
3y
Awesome questions and pointers from @Scott Mac. The sewer situation bit us in the past on a deal. It was scoped but they didn't do the best job on the inspection & didn't uncover some issues. If the sewers aren't quite up to snuff they are very expensive and disruptive to repair/update. That experience had a huge impact on the type of assets I invest in, with a big focus on the build year.
I currently have an opportunity to purchase 96 multifamily units, 16 of which are newly renovated leaving 80 that need MAJOR rehab. We are talking full gut to the studs rehab. I am a General Contractor and I am comfortable with the construction side of things, but this deal is quite a bit larger than my other investments I've made in the past. So the problems or roadblocks that come with properties of this magnitude I am unaware of.
I am looking to connect with someone, that either can affirm my thoughts and underwriting or poke holes in it, that has experience in deals of this size. We are looking to scale into larger projects so though this is the current deal I am looking at we seek to have more opportunities of this size come across our desk. With that said I am also looking for financing partners that have experience in these types of deals as well as any other people that feel like they could offer guidance. I feel like I am at the point where "you don't know what you don't know". Looking forward to any input you guys may have on the matter. Thanks
Hi Ryan,
I like the units with the skylights, those should be very popular with astonomists.
Just some rhetorical questions that come to mind.
Are these A, B, C or D renters who will occupy the units when finished?
Do you know how to attract the different renter classes, unit mix, overall offering, etc.. to not overspend or underspend.
Can you get supplies and labor in time to finish as required by your lender.
You will most likely need to come up to current code for your area...
Will you need security onsite to keep materials from being stolen, will they need to be armed (for their own safety) (different price points here).
Have you talked to an Architect who does larger multi-family re floor plans, and etc...?
Have you talked to a leasing agent/broker about unit mix, and popular features for your intended renter class?
What will the taxes be when it's finished.
Have you talked to an electrician to make sure enough electricity is available a the drop(s)/(service lateral(s)), for the new code requirements.
A Sewer Cam inspection is always a good idea on older real estate--being there during this inspection with your own site map to make notes might be helpful...ask them how long it will take, and ask the to check if backflow prevention devices are in the sewer lines--they can prevent one units sewer backup from coming up into another unit.
Good Luck!
The current mix is heavy on the 1/1 but our intentions would be to make a couple small changes to convert a lot of them into 2's and 3's.
The units are across the street from student housing at the local University. Also a 5 minute drive to the 3 hospitals in our area. Supplies shouldnt be an issue.
Though they look like they are in a "run down" area the damage is from a hurricane and the owner I believe has just had a enough as far as being in suit with insurance or whatever.
Code wont be a problem as far as general construction is concerned because we will be gutting everything to stud and all rough ins will be redone. Now as far as things like parking or stuff like that I don't know if anything will need to be brought to code there.
I have not spoken with an architect, I feel like the redesign is something that we can handle in my office since building new construction is what we do day in and day out. Although with that said I don't know what I don't know so if there is something an architect can help with that I'm not thinking about, please advise.
We have spoken with a couple brokers in generalities about the units but not yet anything specific as this has only been on our desk for about 72 hours at this point.
Taxes is a good question. I dont have an answer for that but it is definitely something we know to check in to. I feel like there is a way I can calculate this on my own but I am drawing a blank on where to get the information. Any Ideas?
There will be service changes made.
Sewer has been my number one concern as an item that can be detrimental to cost. My thoughts were to see about getting our numbers close to where we believe they should be for a purchase price before putting money into those inspections and then of course reevaluate the price if there are problems with the sewer.
I really appreciate the feedback. Keep it coming!
Any thoughts on who or what type of financing is desirable for a project like this?
Awesome questions and pointers from @Scott Mac. The sewer situation bit us in the past on a deal. It was scoped but they didn't do the best job on the inspection & didn't uncover some issues. If the sewers aren't quite up to snuff they are very expensive and disruptive to repair/update. That experience had a huge impact on the type of assets I invest in, with a big focus on the build year.
Yes this has been a concern of mine as well. What kinds of things are you saying are "No Go" now that this has happened? Also what is the build year you like to stick to or at least stay away from?
Based on the picture you've shown and that you are completely gutting most the units, I can tell you that you will need an architect for this. You are now in the realm of commercial architecture and all commercial construction needs a licensed architect to draw the construction documents that the city will want to see. You will have to bring everything up to current code with this level of renovation. Depending on a lot of different factors you could be forced to sprinkler all your units even if it doesnt currently have any.
Start looking around for an architect and get them on your team. You don't want to do all the work yourself (or via a drafter) and get to the permit counter for them to reject it. Then you'd have to wait another 6-12 months to get on someones schedule and for them to do the work.
[2] The units are across the street from student housing at the local University.
[3] I have not spoken with an architect,... please advise.
[4] Taxes is a good question..... Any Ideas?
[5] Any thoughts on who or what type of financing is desirable for a project like this?
======================
[1] & [2] What is trending in student housing right now as popular--maybe base your plans on that (unit mix, colors, amenities, etc...).
[3] Spending that kind of money (almost full construction) without a multi-family architect's suggestions might be pound foolish penny wise. I (and you and many others can tell an architect designed home from one that is not. And while you can pull it off from a hammer swinging point, the overall design sometimes looks, blah, or cheap, or we used stucco in a Hardie board neighborhood, or the overhangs do not fit in with the rest of the area, or a cheaper method was used and it shows (to the detriment of the desirability of the building on resale. (Because you are also the asset manager regarding its value upon resale).
[4] Call the tax authority and get a SOLID answer to this. It will probably be new construction market value (as it technically is new construction).
[5] You will probably need a construction loan until you stabilize the property and can mortgage it. Some lenders are far more "Controlling" of the draws than others (too tight fisted with tons of small draws will be a PITA), and you will need to be occupancy stabilized (by the construction loan end date) to get a good interest rate mortgage. So working with a good large scale apartment manager who can fill your units, and deciding on how to renovate buildings so as to be as rented as possible is important.
A property manager is also a good source of info about what is trending in popular for student housing, if you go that direction. Use their knowledge early on in the planning process.
You need to know what the competition is offering as well, size, unit mix, polarity of floor plans, distance from the school, etc..
If you have never run an apartment complex of this size, you are at a disadvantage and adding more risk to the construction spending process, which is why it seems logical to use consultants (architect, property manger, etc...) Because at the end of the construction process you wan to have market rate desirability--compared to your close in competitors. A section-8 property manager will probable not be as effective for you as a student housing property manager, same with all consultants).
If the competition has tan sun benches, semi-mature trees, and tan salt finished concrete, are those things needed by your complex; or would that money be more effectively spent on better insulation to lower the unity bills and save the kids parents money; or must you do both(???)
Architects can think about sun benches (and many other things, lighting, window size, closet size, etc...) and the finish on the concrete and propose it to you; to decide if that is going to be needed to make THIS complex competitive enough against it's close in competitors to draw market rents.
Know your customers, and know what they want. For example, look at that boy on the bench in shorts, probably his girlfriend next to him, (probably on the college Football Team--Big Man on Campus), he is not going to fit into a closet with a 24" door very easily, and may vote with his feet and move to your competitor with a wider closet doors.
Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
3y
Ryan,
From the Insurance side, see if you can get "Loss Runs" (claims for the past 5 years or more) for the current coverage. On this size property, the underwriters will want to see what has impacted the property recently. The Hurricane damage will probably be classified as a Catastrophe loss, but other losses may indicate long term issues. The underwriters will want to see what has been done to mitigate those issues. Being that you would be extensively remodeling the structure you can address them in the project. I would also talk to you agent about other factors that may impact your insurance cost. Things like, Knob & Tube wiring, Fuses, Asbestos siding or insulation, flat roof type, etc. Some of those would be cheaper to address during the rehab than after.
