Just closed: a 12-unit apartment complex

Just closed: a 12-unit apartment complex

Syracuse, NY · Member since 2015 · 100 posts · 87 votes

I got interested in real estate last summer and joined BiggerPockets. My goal at the time was to own a 5-unit apartment complex "one day," but it came sooner than I expected. We closed on a 12-unit last Friday!

I learned I will be moving to Rochester (NY) this fall, back in February. I was excited about the new position at the University of Rochester, but even more about the prospect of growing our real-estate business. Our first deal was a rehab in Norfolk, VA, but I wanted to get into the rental property/multifamily space. I started analyzing properties, reaching out to brokers, and in the process found the 12-unit on which we eventually closed.

We bought a recently-rehabbed building, all studios. Our investors put down the out-of-pocket costs, while we secured the mortgage. Purchase Price was $353000, with $3000 as credit towards a new boiler. CAP rate, 11.5%. The property appraised for the purchase price.

I am very excited about this, and would like to thank all those whose stories inspired and encouraged us to move forward. It was a parachute jump, in faith. I also want to thank those who answered my questions and made recommendations along the way - your time spent on the forums produced results!

My goal is to own "200 units by the end of 2017...or its equivalent in flips." So far we're 2 deals down, 13 doors - only by the grace of God. 

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Syndicator of Large Apartment Buildings · Glen Mills, PA · Member since 2009 · 1k+ posts · 1k+ votes
10y

@Chiagozie Fawole, I am so proud of you, way to take action!!!

I buy 100 to 400 unit deals and now that you have a 12 unit under your belt, you will most likely want to go bigger - FASTER!! 

Your goal of 200 units by 12/31/17 is reasonable. What you need to do now is use this 12 unit as massive leverage with your brokers. Call as many as you can and share with them your good news. 

When you now say you own product, brokers will really listen to you as you are proven. Be ready for when the broker asks you "What types of deals are you looking for?"

Have a clear and concise answer ready to go...

Big High Five coming your way!!

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  • Developer · Austin, TX · Member since 2015 · 3 posts · 0 votes
    9y

    Congrats Chiagozie! More questions from me later on.

  • Levi T.Pro Member
    Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
    9y
    Originally posted by @Chiagozie Fawole:

    thanks everyone 

    @Denise Pauzano my investors were mostly friends/friends of friends/people from church. Whenever anyone came on board I asked if they knew anyone else who might be interested. 

    @John Casmon we retained 16.6% equity (one-sixth, if that number seems random) and gave the investors a total equity of 83.3%. Each individual's portion of the 83.3% was then proportional to their contribution to the out of pocket costs. We were initially going to do 70/30, but when we got our interest rate from the bank we adjusted our equity to keep the investors' returns palatable. I manage the LLC and deal with the property manager, but we have voting rights for major decisions. Votes will be weighted based on equity. The plan is for monthly distributions of cash flow, with quarterly financial statements.

    Congrats;
     
    Did your investors have to guarantee the loan as well, or just you all. Also did you build in a clawback right on that equity position? Sounds like one heck of a deal for the investors. 

  • Syracuse, NY · Member since 2015 · 100 posts · 87 votes
    9y

    thanks @Account Closed

    The investors didn't have to guarantee the loan on this deal. 

    On the equity, I wouldn't call it a clawback,  but we stipulated that if anyone wanted to sell their rights of ownership, members of the original group had rights of first refusal - and that new members would need to approved by the group. (Since everyone had voting rights, that was a way to ensure any new member would be someone we would Get along with).

  • Granger, IN · Member since 2015 · 3 posts · 1 vote
    9y

    Congrats. I am a newbie, and this is very inspiring to me. 

  • Rental Property Investor · San Francisco Bay Area · Member since 2019 · 5 posts · 2 votes
    6y

    Hello @Chiagozie Fawole.  Was just looking around to estimate accounting and legal fees for 12 unit apartment complexes and came upon this thread.  We are currently negotiating on one now, and the seller has 0 listed for these 2 line items.  Just wondering if you have a ballpark figure for your complex.

    I'd love to hear about how you are doing now too.  3-4 years later, do you still own the property?  Have you moved up?

    Thanks in advance for taking the time to respond,

    Allen

  • Syracuse, NY · Member since 2015 · 100 posts · 87 votes
    6y

    @Allen Nan

    Congrats on your current deal. Funny you should find this post today.. an update is due - we are signing documents for the sale today :)

    The property is in Rochester, NY, so keep that in mind. Our prices may be different.

    We only used an accountant at tax time, and our bill was usually ~$1200

    Outside of the transactional legal fees for the purchase and sale, evictions were somewhere around $300 whenever they happened...

    Depending on where you are, my approach would be to ask a few property managers who they use for evictions, and what they cost... may also ask how many evictions to expect for your unit type and neighborhood.

  • Member since 2018 · 2 posts · 1 vote
    5y

    @Chiagozie Fawole that is great!! I just bought a duplex zoned for residential 4. Plan on renting then building and renting. I was referred to by a good friend Miss Bolden! Keep it up I’m right behind you taking notes!

  • Syracuse, NY · Member since 2015 · 100 posts · 87 votes
    5y
    Originally posted by @Aaron Hall:

    @Chiagozie Fawole that is great!! I just bought a duplex zoned for residential 4. Plan on renting then building and renting. I was referred to by a good friend Miss Bolden! Keep it up I’m right behind you taking notes!

    Oh wow, that’s awesome! Small world. Congrats! 

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