Fixer upper in beat up neighborhood. NOI 50k

[Milind Shastri]

Hello everyone!

I'm looking at a 10 unit row of apartments in Baytown, TX which I drove through. I am currently building my mental model of understanding the investment property well so that I can close the deal if it does seem like an opportunity. Here are my observations based on the listing and drive-through:

• Selling price is 300k+ and estimated ARV is 600k+ as per seller (rapid equity building opportunity)
• current NOI is ~40k. After repair NOI ~60k. (great cash flow!)
• rehab costs are not known (but perhaps much 100-150k; I have not invested or fixed yet so this is a total guesstimate)
• The neighborhood looked quite beat-up and about 10% houses in a quarter mile radius have broken walls, plywood patched windows, and/or rusted cars parked. Again 10-20% are well kept (the kind that has well-kept gardens and potted plants outside).
• It's the corner row of houses next to a railroad (fixing the properties will make the road much more livable and appear safer)
• trees/bushes/grass is overgrown; seems like a cheap fix
• current tenants have kept the property quite bad: trash outside, broken windows and from the looks of it, perhaps, trashed the place inside too. Looks like a drug friendly block.
• it looked like a 4plex+3plex+3plex
• I live 5 hours away from the property

I am going to find a hard money lender to purchase and rehab; the seller is also providing hard money financing for the purchase and rehab.

I am looking for advice on how I can successfully proceed in this investment journey and things l will need to look out for as a first-time investor. I am sure I have missed out information here and will be more than happy to provide it!

Cheers and thanks!

Milind

[Chinmay J.]

Originally posted by @Milind Shastri:

Hello everyone!

I'm looking at a 10 unit row of apartments in Baytown, TX which I drove through. I am currently building my mental model of understanding the investment property well so that I can close the deal if it does seem like an opportunity. Here are my observations based on the listing and drive-through:

• Selling price is 300k+ and estimated ARV is 600k+ as per seller (rapid equity building opportunity)
• current NOI is ~40k. After repair NOI ~60k. (great cash flow!)
• rehab costs are not known (but perhaps much 100-150k; I have not invested or fixed yet so this is a total guesstimate)
• The neighborhood looked quite beat-up and about 10% houses in a quarter mile radius have broken walls, plywood patched windows, and/or rusted cars parked. Again 10-20% are well kept (the kind that has well-kept gardens and potted plants outside).
• It's the corner row of houses next to a railroad (fixing the properties will make the road much more livable and appear safer)
• trees/bushes/grass is overgrown; seems like a cheap fix
• current tenants have kept the property quite bad: trash outside, broken windows and from the looks of it, perhaps, trashed the place inside too. Looks like a drug friendly block.
• it looked like a 4plex+3plex+3plex
• I live 5 hours away from the property

I am going to find a hard money lender to purchase and rehab; the seller is also providing hard money financing for the purchase and rehab.

I am looking for advice on how I can successfully proceed in this investment journey and things l will need to look out for as a first-time investor. I am sure I have missed out information here and will be more than happy to provide it!

Cheers and thanks!

Milind

Hate to sound like a negative Nancy, but if you are a first time investor, its a very big project for you to take on. Who is going to manage these properties. You will have to find a really good PM and then able to manage the PM. 

If you want to get involved in this, I would suggest a JV of some kind with a seasoned investor. Also, need to ask if these are Section 8 or just regular tenants?