Manvel, TX · Member since 2017 · 21 posts · 7 votes
A friend of mine is sitting on a lump of ~$1M+ and is interested in investing in Houston real estate. He's not looking to put much work, sweat or effort into the deal, so this is where I come in. Although he lacks experience, he is looking for Multifamily only and is wanting cash flow from the deal.
How can I capitalize on this opportunity in this market? I am basically looking at this as a birddog deal. What would a deal structure look like when the market is bearing small cap rates, but high appreciation? I am currently working on a separate partnership for my own personal investments, and I would hate to lose out on an opportunity for experience and some extra capital for my own investments. My concerns are finding a win-win for all parties involved with tight margins.
Are you/he looking to use the $1m to buy a $1m property or use the $1m to put down on a 4-5m property?
And if a 4-5m property, who's planning on getting the loan?
But either way, in that range there are a tremendous amount of deals to be had on multifamily in Houston. Start with what's on loopnet to see what's a fit. Figure out who the "moves and shakers" are and tell them what you're looking for.
You can try cold calling owned but every owner has already been called 10000000 times. I know as I get the calls all the time.
Good luck!
Are you/he looking to use the $1m to buy a $1m property or use the $1m to put down on a 4-5m property?
And if a 4-5m property, who's planning on getting the loan?
But either way, in that range there are a tremendous amount of deals to be had on multifamily in Houston. Start with what's on loopnet to see what's a fit. Figure out who the "moves and shakers" are and tell them what you're looking for.
You can try cold calling owned but every owner has already been called 10000000 times. I know as I get the calls all the time.
Good luck!
Joseph Ali , assuming you find a small MF property, who is going to manage the property?
Just how passive does your friend expect the investment to be?
For a very passive investment, I would recommend investing in a syndicate who is investing in a 150-300 unit complex.
Even these are not easy to find good deals on, we have been looking for a while.
I agree with Cody L. I think you have an advantage (your friend is the buyer) in this situation. You may have to consider finding someone who's experienced to do the deal with you, which could be a priceless learning experience for you and of great benefit in the future. Good luck...
Birddog it, get some cash to start your own, and have the deal under your belt. Going through the deal will be your bullet for the next deals. I'd say split the fund 2-3 ways, that way it's not 1 basket and you could piggyback on the first deal and rinse/repeat on the 2nd onwards.
Hadar Orkibi imo. Stay in the loop. East of downtown. Still values. U of H. SE inner loop (where most my stuff is now). 3rd ward. EaDo.
I still like midtown/Montrose the best. Easiest to rent. But now you have dumb California type pricing. I've seen prices double while rents increased 10%. No idea who's laying those prices or why. You can buy for 75% less per door and a small 20% rent hit.
Yes @Cody L. Californian money paying to much is as bad in the US as we have from Chines in NZ.
They pay to much to level that doesn't make any financial sense.... but unlike the Chines point-of-view, long term holds and land banking. The Californian view that 6%-7% is great and great deal.
I can understand that point of view when you come from 2%-4% caps but its still ridicules and unprofessional. hey, what is "EaDo"?
Yes @Cody L. Californian money paying to much is as bad in the US as we have from Chines in NZ.
They pay to much to level that doesn't make any financial sense.... but unlike the Chines point-of-view, long term holds and land banking. The Californian view that 6%-7% is great and great deal.
I can understand that point of view when you come from 2%-4% caps but its still ridicules and unprofessional. hey, what is "EaDo"?
EaDo is a silly name for property just east of downtown. I only have 1 property I'd consider to be in that area. Look at the corner of Bryan/Brady to see where I'm talking about (at least that's the general area of the one property I have there)
@Cody L. I've confirmed with him that he would prefer to leverage the deal with financing. FWIW, I have no interest in personally syndicating this deal, as we are friends and wouldn't want to particularly mix long term investments in the relationship. Depending on the numbers and deal, I think going in with some other investors may be a good way to limit any short term losses.
From what I've noticed in the Houston market, rent is not scaling with the prices of property and larger luxury apartments are offering great amenities and new construction at market prices.
He is only interested in the Houston market at the moment, inside the loop. I'm finding there is absolutely next to nothing to find through HAR or loopnet. Perhaps, I would need to listsource or start cold calling.
From our conversations, it doesn't look like he really wants to learn all the ins and outs of real estate, but likes the investment vessel more than some others at the moment. I would be sourcing the lead and setting up a property management deal so he can keep doing what he's doing now instead of picking up a second job.
Would anyone recommend finding a unit with or without tenants? For his needs, my gut tells me turnkey would be more appropriate than value-add.
@Cody L. would you mind showing me some of your multi-families in Montrose? I'd like to get a feel for what the extent of remodeling would be needed to be competitive. Forgive me if that is inappropriate. My rationing is if we do a rehab, we can share the benefits of removing eye sores.
I don't live in Houston but I can tell you the insides of my units are nothing special. in fact, they're likely below average. They're just "meh". We keep them clean and comfortable but it's the location that 'sells' our units, not a lush interior.
My holman units are pretty nice given they're 1930's built
@Cody L. Thanks! How comfortable were you taking on a building built in the 30s? I hear so many horror stories of knobs and tubes, shotty handyman specials, etc. What kind of vacancy rates are you seeing? I understand from some of your previous posts that you are invested in Montrose and some of the wards. Are you noticing any difference in the type of tenants you're attracting?
I've been directed by some REs to look into EaDo, but I'm having a difficult time seeing that area turn to something like the inner loop areas like the Heights or Montrose. It's all commercial spaces and a few condos along a train track.
I would strongly suggest that you contact me. I have an associate that is from Houston and invests in multi units in Houston and in other cities and states as well. He is very successful at it. He lives in Houston.
Exxon is about to move close to 1000 families to Houston from Fort Worth + a Dallas developer and Chinese developer just made major purchases in Greenspoint. Everyone in Houston is looking midtown, EADO, Energy Corridor, but there's a very soft market north of 610 that is ripe for an influx of money. Might not be a bad area for potential cash flow with the added value of appreciation and you won't have to pay the Midtown prices. Also, the GOOF, my neighborhood, just north of the Heights, is in heavy growth mode.
@Cody L. Thanks! How comfortable were you taking on a building built in the 30s? I hear so many horror stories of knobs and tubes, shotty handyman specials, etc. What kind of vacancy rates are you seeing? I understand from some of your previous posts that you are invested in Montrose and some of the wards. Are you noticing any difference in the type of tenants you're attracting?
I've been directed by some REs to look into EaDo, but I'm having a difficult time seeing that area turn to something like the inner loop areas like the Heights or Montrose. It's all commercial spaces and a few condos along a train track.
Na, I'm not worried about that. I'm seeing high 90s in Montrose and near by. But the places JUST close to Montrose but not in Montrose are more challenging. Some are as low as 60-70% (our stuff on Southmore) but others like our stuff in 3rd ward and U of H still stay 90+%
Sorry to join this conversation so late, been a little pre-occupied with Hurricane Harvey. Luckily none of our 10 multifamily properties sustained any major damage.
I would recommend you partner with a syndicator in the houston area with your $1M investment. They would be able to combine your investment with other investors, thus spreading the risk across multiple people and then purchase a larger property. Larger properties are less risky and more profitable than smaller properties because they can spread the expenses over more units and afford to take better care of the property (better management of deferred maintenance).