Looking to Invest in an Apartment Complex in Houston

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

3y

Hey there BP,

I'm a wholesaler out in San Diego and through cold calling I came across a motivated seller who owns an apartment complex in Houston. My end goal is to own multi-family/apartments, although I own nothing yet. Since I have never owned property before, it seems crazy, but as I move forward with this buyer I'm weighing the options between wholesaling it to an investor, holding it by myself, or JVing it so I can begin building my portfolio. I'm wondering if it is an outlandish idea to think I could own it myself.

Additionally, in case I am able to get it under contract and decide to wholesale it, are any of you interested in possibly JVing or being the end buyer?

What are some things I should be thinking about as I move forward? For those investors out there who do own apartments, what sort of due diligence should I be doing, specific to purchasing an apt? Any good resources?

18 Units

I have yet to get the financials on it.

Thanks!

What is not clear to me is what you know about Residential commercial properties. Do you understand the valuation (market cap rate, NOI, etc)? Also not clear to me is your knowledge of Houston RE.

I would be leery of tackling this on your own if you do not have decent understanding of residential commercial Properties and the Houston market. If you have the necessary knowledge, I still have some concerns related to going from 0 to 18 units, but at least you have a chance to succeed.

Wholesaling commercial properties is rare. There are less buyers and the buyers are often more sophisticated.

I think your best option is to partner with someone who has what you require to make this work.

What to look out for? First make sure you understand how to value the property. Use actual NOI and not projected NOI. In less than 5 units, I often see properties that indicate a cap rate on projected rents. In commercial, such a cap rate typically has no bearing in valuation.

Good luck

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Lauren CutchenBusiness Member

Real Estate Agent · The Woodlands, TX · Member since 2019 · 185 posts · 79 votes

3y

I'd be interested in taking a look at the deal. I have someone in mind looking to rehab an apartment complex. Location is everything with Houston. So it truly depends.

[email protected]832-406-4239

Lauren Cutchen 513 Reviews

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Arthur Cook

OP

Member since 2022 · 6 posts · 2 votes

3y

Thanks for the reply, Dan.

I just got off a call with someone who is walking me through the steps of valuation and information I need. Right now what I need to get from the seller is the T12 and Rent Roll. I'm also going to look into the Houston market and see what cap rate commercial multi-family properties are trading for.

Thanks for the note there about actual NOI rather than projected. I'll make sure to focus on that.

Thanks Dan!

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Tony Guarino

Member since 2021 · 27 posts · 17 votes

3y

Hey @Arthur Cook, congrats!

Margins are slim right now for multifamily. Depending on your financial position, or partners financial position, it might be awhile for you all to realize any returns.

In addition, I do see cap rates increasing because the cost of debt increased. Therefore your exit cap will be more than your purchase cap, which can decrease expected returns.

This all can be mitigated by seller financing. If you can secure debt at 4% ish, you can pay a 6 cap and be alright for a long term hold.

To answer your question directly, if you are flush with cash, take down the property. If you are not flush with cash, wholesale the property, and do it again and again until you can take one down yourself!

I'd be happy to help you underwrite the property, negotiate seller financing, put it all in a financial model, and raise capital for a JV. Shoot me a connection!

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Cody L.

Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes

3y

I'm a very active buyer in Houston. I've closed two multifamily deals already this year (one of the deals included 5 properties). I'm happy to share my thoughts on the 18 unit if you want to send me the info. You don't need to worry about my jacking the property as 1) I'm not really looking for smaller properties, and 2) I likely know about the deal already.

But honestly, please don't do that to a owner where you put a property under contract that you don't plan to close, and don't have a group of buyers ready to take it on. It's not fair to them.

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Alex Ramirez

Rental Property Investor · Houston, TX · Member since 2019 · 184 posts · 147 votes

3y

I’m a multifamily investor in the Houston area. The best deals to wholesale are value add deals, where you can come increase the income And reduce expenses after executing your business plan (I.e. remodel the units and bring the rents to market value). What you need to be looking at is the financials of the deal (rent roll and t12). An end buyer will be asking for those to see how much they will be willing to offer for the property. Let me know if you have any questions. I can help you underwrite your deal if you need someone

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Chris Tighe

Contractor · Greater Houston and Greater Seattle · Member since 2023 · 22 posts · 9 votes

3y

Hi @Arthur Cook!

I am a fellow investor and a contractor in the Houston area (and the Greater Seattle area as well). We specialize in apartment complex transformations. We've helped several investors get into several apartment complexes over the years. I see that you aren't local. If you get close to the decision mark and would like someone to take a look at it, I'd be happy to. I can also give you some pointers if this happens to be a value add project for you.

Good luck!

Chris

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Looking to Invest in an Apartment Complex in Houston

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