Multifamily UH/TSU Numbers

12 Replies | Houston, Texas

I would love to get some opinions about a property I have under contract. The property address is 2701 Isabella St. and has two duplexes on one lot.

https://www.redfin.com/TX/Hous...

It seems the agent listed the property according to only the square footage of the front building. However, HCAD lists the total square footage as 3,762 (2,178 sq/ft for the front and 1,584 sq/ft for the back) and lists the full square footage as "living area".

If I take all of the multifamily properties sold on that block within the last year, select only the renovated properties, then average them after dropping the highest and lowest - I get about $180/sq/ft. That would put the property at around $680k ARV.

Also, I'm thinking that the property would be able to get ~$1350 for rent if fixed up and renovated. The property is in pretty rough shape and would need lots of repair so before going down that path I want to see if my numbers check out.

Any thoughts?

2 duplexes, nice! So technically like a fourplex. I see a renovated 5 plex nearby that sold for $725k. I didn't go through all the average price per sq ft as you did but just prelim, that sounds like a legit ARV. Make sure you mail your rehab numbers, which would make it break your deal, but does sounds promising. Are you planning on BRRRRing and cashout out the max LTV allowed? Just make sure cashflow is still good!

Originally posted by @Carla Gordon :

2 duplexes, nice! So technically like a fourplex. I see a renovated 5 plex nearby that sold for $725k. I didn't go through all the average price per sq ft as you did but just prelim, that sounds like a legit ARV. Make sure you mail your rehab numbers, which would make it break your deal, but does sounds promising. Are you planning on BRRRRing and cashout out the max LTV allowed? Just make sure cashflow is still good!


Thanks for the reply, Carla. My goal is that if I can make each unit at least 2/2 in renovation then it will rent for $1350 per unit. If this is correct and I can get at least $100 profit per door - I would keep it and BRRRR to pull out cash. If I am wrong about the amount of rent I could get after renovation and the profit is below $100 per door, then I would flip it.

Also, if you’re looking for more cashflow. Try putting it up on Airbnb after Reno. You will definitely get way more but it will come with a lot more management. Congrats! 

First off congrats on getting it under contract! $1350 does sound about right for the area the property is at. I would by all means try to BRRRR this property as it extremely well located and not only will it appreciate in value if you hold but rents in that area have been steadily going up as well with it. Do keep in mind if you do plan on renting to college students try not to go all out on renovations as they tend to not take care of things as much as others would, just some food for thought. Definitely keep us posted on the journey!

@Uche Okoroha

I own property on that street and the next street over. When you rehab these older buildings you will find a lot of issues behind the walls so make sure to have a good contractor and rehab budget. The third ward has gone through the roof. I bought mine for under $90k but that was years and years ago. Airbnb is doing well there given its location to med center, downtown, etc.

Best of luck

Thanks for the replies, everyone! I decided to let this one go. I had an inspector go through it and the repairs it needed would have really thrown the budget off. Both units are quite literally falling apart. Foundation issues, plumbing, evidence of past termite damage. On top of that - two units have been sitting vacant for well over a year. Out of the other two - they are currently taking one tenant to court to evict them, and the other is occupied by an undocumented immigrant. If the seller was willing to price in the risk, I might have taken on the challenge - but it seems like my time is better spent elsewhere.

@Uche Okoroha : I walked around 3rd ward in-person yesterday and it is indeed a very mixed area with run down properties with broken windows next door to nicely kept properties. I was the only non-black minority person walking around in 3rd ward on a cloudy afternoon. I'm not surprised by the quality of the tenants living at 2701 Isabella. I doubt any of the airbnb units are doing well in 3rd ward because there are broken damaged sidewalks that flood and bad areas that make the area not very safe to walk at night.

3rd Ward/South Central Houston is nowhere near the late stages of gentrification that Montrose has gone through.

@Susan Tan I disagree. I know many Airbnb’s that are doing very well in the third ward area after doing a large Reno. I’m seeing investors pick up properties like this one and doing a 6 figure Reno. One of the main key drivers is just the proximity to midtown/downtown. Buying right though is key. 

@Stanley Ezeadi I think that if you have the funds to do a 6-figure full gut rehab on a Third Ward property AND then spend money on all the furniture, you're already better off buying the $500-$600k retail price for a 3bed/2bath townhouse in luxury Midtown Houston WITHOUT all the hassle of managing contractors.

@Susan Tan

Correct that 3rd Ward and SC Houston has not reached the same gentrification as Montrose but that is the point. Buying in Montrose makes no cash flow right now unless you but large down payment. Montrose has already gone to major gentrification. I have bought in 3rd ward since 2010. The rents have more than doubled. The properties have appraised 3x more. I would not suggest anyone buy retail prices just because they have money. If you buy right and after rehab, you are able to create equity from the deal then you are better off than buying in Midtown at retail price.

I see you too are from CA. I moved out here back in 2008. So I have seen areas that changed since then. Montrose was not what it is now. The same thing goes for the Heights, EADO, etc. If you can catch a neighborhood right as it is gentrifying that is when you will see great values. Coming in at the tail end is not where you will get good values unless you buy a major fixer. As a builder, I don't get scared of fixers. 

I would not buy a property in the Third Ward, Montrose, Fifth Ward, EADO unless I can get a great price and after rehab still have equity in the deal. I don't rehab to have a property appraise at market value. I am not a non-profit lol. 

If you are suggesting someone who has money and they want to park in a property that is safe and will not likely lose value then I agree, some established areas like Midtown would be a good place but I think most people are wanting cashflow and appreciation. 

Just my thoughts, not looking to disrespect anyone and how they want to invest.

Best