Killeen, TX 8% Cap 46 Unit Apartment Buildings Class D+

12 Replies

Hello BP Community! 

I have recently gotten 2 offers accepted for 2 apartment buildings in Killeen Texas zip 76549. 

As part of our market analysis, I wanted to get feedback from locals or seasoned investors. I am trying to understand the demographics, market rents, crime rates and overall market appreciation or opinion. Is this an up and coming area or too big a hassle for long-distance investors? Am I in the right zip code or should look elsewhere. 

We are purchasing these buildings long-distance thus our minimal knowledge of the area. Everything we know is directly from online resources. 

Break Down: 

8% Cap 

35% Vacancy

46 Units total

14% COC with leverage

39% ROI no leverage

No property management in place 

Units need to be updated  

Close to Military Base 

Looks like a high crime area

Potential for 50% + returns at 100% occupancy 

Hey @Christopher Hunter we do a thorough market analysis prior to making our offer. As mentioned we have a lot of statistical information on the town and the market trend. I have gotten market rent figures from realtors and local property managers other apartment buildings within a 5 mile radius. We have established consistent appreciation and multiple projects in place to increase development and improvements. 

I am looking for insight from local investors or realtors or property managers. Information that's only seen and understood by individuals who live and do business in the area. 

I would not be comfortable with this type of asset without a local partner or reputable management company that is willing to take this in and can advise you properly.

@Angelica M Garzon

You can actually use bigger pockets to search for and reach out to community members of interest. It's under Networking/Members. This way you can find some people (agents, etc) in the area directly who can give you some boots on the ground insight.

Mind sharing how you do your market research, what resources you use to get what information?

@Angelica M Garzon you do a "thorough market analysis" and then ask about the market and if it's even a good zip code?

If it's truly a D- neighborhood, it's too risky for me to even consider an 8 CAP property....

You need boots on the ground for these types of investments, there are too many ways for it to go south on you in a hurry.

Hey @Jason D.  No, we actually do a through market analysis and in addition reach out to locals to get their insight. This is actually the first time I use BP for that, I thought it would be an easier outlet to get in touch with other investors that are already doing business in our desired zip code. 

Thank you for your insight on the cap. I always though the same but in Miami there's class D and C- apartment buildings selling at 5-6 % caps so I guess it depends on the overall market too. 

@Steve W. thank you I am going to look into. 

We look at census information, 5 years of property tax appraisal history, google maps, call a minimum 4 local property management companies, call a minimum 5 local commercial realtors, we also have our local realtor who has a lot of experience and great network in the area, we also call neighboring apartment buildings (market rents) most of the time their willing to share what a day to day looks like which is extremely valuable, and of course we look into the financials of the buildings and their performance within the last 12-24 months. 

@Angelica M Garzon congrats on the eagerness and getting the LOIs accepted. 

I am a syndicator in San Antonio TX, a few hours south of Killeen, and i know several investors that own property in DFW and the surrounding areas. 

I agree with @Jennifer Brown , high vacancy and no PM are red flags. Typically, in a small town like this, there are one or two PMs in town, so if they know where the trouble makers live, they will not want to manage the property. 

Another challenge that you will face is that you wont be able to get conventional/agency debt at 65% occupied, you will need to find a bridge loan or seller finance, which will cost you at least 9% interest.

I see that you are forecasting an optimistic return at 100%. That will never happen. If you are 100% occupied, then your rents are too low. I suggest to project your returns at 90% (that is what the lenders and buyers will do)

That said, the town is good because of the military base and proximity to the i35 corridor.

If you REALLY wanted to get on this deal (after you do more research), i would recommend that you allocate for a large vacancy during the first 18 months, clean house, offer incentives (super low rent) to a few law enforcement agents and do all your rehab and completely rebrand the property.

Remember, you can change almost everything about the property, except the location. If its in a war zone location, might as well leave it alone.

Invest Differently,


@Angelica M Garzon I can't speak for your numbers or how they specifically will work for the property you are looking at because I don't know which one it is I do know Killeen because I live here. I just bought a duplex here and I'm in the process of doing the rehab now and I am military so I can speak pretty well to what soldiers will and won't be willing to live in if that's your target market. One of my goals in the next couple years is to acquire complex the size of the one you're looking at so if there's anything I can do here to help you, IE: help you get a better understanding of the neighborhood you're looking in, help you find local property management if that's the route you're going, or anything else for that matter just so I can see the processes that you're going through I will be glad to help so I can learn from your experiences.

@Angelica M Garzon

I don't know much about Killeen other than the reason why those properties are so great looking on paper is because Killeen is a military town and subject to alot of restrictions as it relates to it. Landlords buy them and sell them just a few years later due to the difficulty in managing them like you really want to. There's price restrictions, eviction restrictions etc. That's WAAAYYY outta my wheel house and I'm sure someone more local and more experienced with military tenants and rentals can give you a better lay of the land and what you should be looking out for.

@Wes Johnson

Not really any restrictions with military. I've been in the army for 13 years and have owned several properties and rented to other military and haven't had any issues with any restrictions. As far as a landlord is concerned, treat them like anyone else. Only catch is deployment or PCS orders can get them out of a lease.