Houston 14-Unit – Investors: Underwriting

[Donald Lee Reed]

I’m analyzing a 14-unit apartment deal in Houston (77016 area) and trying to dial in the numbers before submitting an offer.

Curious where experienced multifamily investors would need to be price-wise.

Here are the basics:

• 14 units (2 bed / 1 bath)

• Built around 1960

• 13 occupied

• Avg rents about $1,108/mo

• Market rents estimated ~$1,350+

• Gross scheduled rent: $186k

• NOI: ~$135k (per T12)

Expenses roughly:

• Taxes ~ $14k

• Insurance ~ $25k

• Water ~ $6k (owner pays)

• Other operating expenses bring total to ~$51k

Other notes:

• Roof reportedly <5 years old

• Tenants pay electric

• Landlord pays water

• Some units lightly updated

Seems like there is rent upside if brought to market rents.

For investors who buy smaller multifamily in Houston:

Where would you need the price to be for this to make sense?

Trying to understand how buyers are underwriting deals like this right now.

[Richard F.]

Being built around 1960, you need to look hard at the mechanicals. Unless systems have had a complete replacement, maintenance and repairs will be ongoing, and costly. It's great that the roof is less than 5, but how many layers are there? Have you, or will you, prior to commitment, closely inspected every unit for any signs of water intrusion or wood destroying insects?

Time and time again on these forums we see investors that did not budget properly. I'm guessing you have the same 20/20 vision as most, the difference is, YOU are the one that has to close the budget gap if something is missed.