Turn-Key Multi-Family Available In Houston, TX (17%+ Cap. Rate)

2 Replies

Please contact me directly at (405) 361-1341 if you have any interest in this opportunity.

We have a unique off-market multi-family property package available in North Houston, TX (77032).

The package consists of 13 fully rented turn-key townhouses.

These townhouses all sit within a larger community of townhouses.

All 13 sit within two different "buildings" or rows of townhouses.

Each unit has at least a two-car carport; two units have two-car garages.

**Rents have not been adjusted since 2009 and most are under-market.

Here are the basics:

Cost: $550,000.00

Gross annual rents: $117,300
- Total annual taxes: $9,045.17
- Total annual insurance: $6,342.89
- Total annual HOA dues: $4,468.80
= Net annual rents: $97,443.14

Net annual rents ($97,443.14) / Cost ($550,000.00) = 17.72% cap. rate.

Rents / Lease / Monthly HOA Dues / Annual Taxes / Annual Insurance / Square Footage / Bedrooms / Bathrooms

I. $740 / Month-to-month / $19 / $659.86 / $607 / 1564 / 2 / 2.5
II. $850 / 6-Month / $19 / $730.56 / $660.89 / 1786 / 2 / 2.5
III. $750 / Month-to-month / $19 / $659.49 / $469 / 1564 / 2 / 2.5
IV. $925 / Month-to-month / $19 / $720.79 / $398 / 1786 / 4 / 3
V. $850 / 1-Year / $19 / $660.38 / $421 / 1564 / 2 / 2.5
VI. $750 / Month-to-month / $19 / $660.38 / $421 / 1564 / 2 / 2.5
VII. $700 / Month-to-month / $144.40 / $650.69 / $430 / 1405 / 2 / 2
VIII. $695 / Month-to-month / $19 / $785.92 / $467 / 1564 / 2 / 2.5
IX. $750 / Month-to-month / $19 / $780.21 / $533 / 1564 / 2 / 2.5
X. $750 / Month-to-month / $19 / $669.85 / $527 / 1564 / 2 / 2.5
XI. $900 / Month-to-month / $19 / $919.87 / $543 / 2543 / 4 / 3
XII. $540 / 6-Month / $19 / $538.58 / $339 / 969 / 1 / 1
XIII. $575 / Month-to-month / $19 / $538.49 / $360 / 1024 / 1 / 1.5

Totals: $9,775 / N/A / $372.40 / $9,045.17 / $6,342.89 / 21,380 / 29 / 26 Full & 9 Half

Cap rate is calculated after all expenses, not just taxes, insurance and HOA dues. Expenses need to include repairs, maintenance, depreciation, vacancy factor, accounting, property management, leasing fees, security, etc. I have looked at over 500 multi family projects, purchased 4, financed 35, and I can tell you that actual expenses are always between 40 and 60% of gross rents. Applying an average of 50% to your gross annual rents leaves a net of 58,650 or a cap rate of prox 10.5%, still quite attractive depending on condition of property, location, deferred maintenance, etc.

@Don Konipol Hey Don, thanks for your post. I actually addressed this directly with another member, but here's my reply to them:

My understanding of these particular properties is that the units with the $19 / month HOA fees only have access to the community pool and tennis courts. Whereas, the property with the $144.40 monthly HOA fee has coverage of all exterior maintenance including the lawn care, roof, etc. That said, if you were to convert all units to the higher monthly HOA dues, you'd probably be looking at a maximum of $500 / year maintenance per unit.

The units are currently self-managed by the owner. Any respectable property management company would gladly give you a preferred rate on services if you brought them 13 new contracts. You'd probably be able to get someone solid in the 6-8% range.

So if we do some calculations based on the numbers above, you'd have something like this:

Gross Annual Rent: $117,300.00
- Annual Taxes: $9,045.17
- Annual HOA: $22,526.40
- Annual Insurance: $6,342.89
- Max. Annual Maintenance: $6,500.00
- Property Management (8%): $9,384.00
= Net Annual Rent: $63,501.54

Net annual rent ($63,501.54) / Cost ($550,000.00) = Cap. Rate of 11.55%

**This assumes that rent remains constant (rents haven't been adjusted on these units since '09)

If you run the same numbers with a 10% increase in monthly rents, it looks something like this:

Gross annual rents: $129,030
- Annual Taxes: $9,045.17
- Annual HOA: $22,526.40
- Annual Insurance: $6,342.89
- Max. Annual Maintenance: $6,500.00
- Property Management (8%): $10,322.40
= Net Annual Rent: $74,293.14

Net Annual Rent ($74,293.14) / Cost ($550,000) = 13.5% Cap. Rate.

Please let me know if you have any other specific questions or if you're interested in pursuing this package for your own portfolio.