Large Multifamily Acquisition - 236 Units

Real Estate Deal Analysis & Advice
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Large Multifamily Acquisition - 236 Units

Account Closed
Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes

Investment Info:

Large multi-family (5+ units) commercial investment investment in Lubbock.

Contributors:
Tracy Hubbard

236 Units / Class B / Value-Add

What made you interested in investing in this type of deal?

Recently Appraised (Jan 2021) with $3.64M Built-In Equity - Based Solely on Stabilization / Rents are $119 Under Market / Opportunity to Convert 64 Studios to 1 BR Units / Seller is Already Achieving 10%+ Bump in Rents on Renovated Units / Very Light Interior Rehab Needed / Roof is 2 Years New /Addtl. Income Opportunity through Internet Upgrade & Covered Parking / Seller is Undercapitalized - Allowing Us to purchase at $800K less than seller paid 1.5 yrs ago

How did you find this deal and how did you negotiate it?

Sourced through Broker relationship

How did you finance this deal?

Non-Recourse Bridge to Agency - 75% LTC / 3 Years IO @ 4.65%

How did you add value to the deal?

Light Rehab of Units, Raise Rents, Covered Parking & Internet Upgrades - 3 Year Refinance

What was the outcome?

Just closed and starting major renovations this coming week (3/31/21)

Lessons learned? Challenges?

Patience is the name of the game! Started speaking with the seller in February 2020, took many months to come to terms on price - went under contract in October 2020 . Never compromise your underwriting to get a deal done - wait for the right deals for your investors. Make sure you have plenty of contingencies in place - Bridge loans bring some unknowns at closing and can swing 6-figures

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Definitely - make sure you have a solid team!

Mortgage Broker: Brandi Shotwell with Reno Capital
Attorney: Dugan Kelley
Insurance: Matt Sutika
Cost Segregation: Brian Bigham with Madison Specs

12Reply
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Most Popular Reply

Bruce Lynn
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
5y

Awesome....deal done.....or started perhaps....hope it all runs smoothly from here on out.

If it was easy, everyone would be doing it.

1Reply
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  • Jackson Babcock
    Investor · Charleston, SC · Member since 2021 · 120 posts · 108 votes
    5y

    @Account Closed

    Congratulations on the Deal!  Can you tell me more about the unknowns of these Bridge Loans that can swing 6 figures? 

    1Reply
  • Account Closed
    OP
    Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
    5y

    Hi @Jackson Babcock - thank you! It's definitely a team effort and we're grateful to have a solid team.

    Here's what happened near closing - 

    Our bridge lender wanted to change the loan amount 2 days prior to closing (reducing it by $325K) which would require raising the additional amount and diluting existing investor equity - fortunately we were able to sell them on why this would create too much of a risk for us and them.

    Interest Rate Cap Insurance - came in at $60K vs $20K because of interest rate environment & bond market volatility within the last month 

    On our first acquisition we also had some surprises at closing - 

    Insurance came in 3X the budget - for both our underwriting and the lender's (this is more of an issue specific to Texas)

      Lender required $100K more of CapEx expenses the week of closing

      Additional unexpected insurance challenge - the corner of one of the buildings was incorrectly designated as being in a flood plain.  We had to purchase the flood insurance to get it closed and then have it resurveyed and recategorized as not being in a flood plain - that was not easy and was an extra expense.

      In summary...term sheets from lenders are "flexible" and they can ultimately change and do whatever they want. :) But they are the biggest investor... so you really have no choice. 

      Feel free to reach out if you have more questions - best of luck with your acquisitions!  

      0Reply
    • Bruce Lynn
      Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
      5y

      Awesome....deal done.....or started perhaps....hope it all runs smoothly from here on out.

      If it was easy, everyone would be doing it.

      1Reply
    • Dmitriy Fomichenko
      Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
      5y

      @Account Closed seems to be nice investment, congratulations!

      1Reply
    • Melissa Bains
      Member since 2020 · 16 posts · 2 votes
      5y

      Fantastic. I live in Lubbock

      1Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Bruce Lynn Thank you and yes you're correct - now the real work begins! :) 

      0Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Melissa Bains Awesome!!

      0Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Dmitriy Fomichenko Thank you! We're certainly excited about it as well.

      0Reply
    • Travis Hanson
      Rental Property Investor · Lubbock, TX · Member since 2017 · 39 posts · 52 votes
      5y

      Congrats!  Lubbock is a great place to invest.

      1Reply
    • Randy Connolly
      Contractor · Braintree, MA · Member since 2015 · 8 posts · 1 vote
      5y

      Congratulations, That is awesome !!

      1Reply
    • Mason Moreland
      Specialist · Midland, TX · Member since 2018 · 198 posts · 148 votes
      5y

      “Flexible” is right! Good grief. Glad y’all rolled with the punches and got it done, it’s in a great location. 

      1Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Randy Connolly thank you so much!

      0Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Mason Moreland thanks Mason! So looking forward to the new venture with you and the team! I have a feeling the lending will be less challenging 😄

      0Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Travis Hanson thank you! Looks like you definitely know it’s a great market too 😉

      0Reply
    • Beyazid Yunus
      Realtor · Houston, TX · Member since 2020 · 1 post · 0 votes
      5y

      @Keeley Hubbard

      Hi Keeley,

      Amazing work you’ve done and congratulations on your big purchase.

      I’m from the Houston area and currently diving into the investment side of real estate. If I may, could you please share some tips on how you started searching for brokers to build a relationship with?

      Much Appreciated.

      Thank You.

      0Reply
    • Mallikarjun Reddy Pateel
      Investor · NJ · Member since 2021 · 121 posts · 33 votes
      5y

      @Keeley Hubbard

      Congrats, if the rents are lower than market value in a Rent stabilized building how can you raise the Rents?

      Asking because i find this deal rents are almost 50% lower than the market value. It’s a rent stabilized building in Brooklyn.

      0Reply
    • Kaelyn Motzel
      Property Manager · Houston, TX · Member since 2018 · 100 posts · 41 votes
      5y

      @Account Closed Congrats, sounds like an awesome deal! 

      0Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Kaelyn Motzel Thank you so much!

      1Reply
    • Andy Crooks
      Real Estate Broker · Verona, WI · Member since 2017 · 44 posts · 34 votes
      5y

      @Keeley Hubbard what type of lender did you source this deal through? Bank? Insurance company? Other?

      You are right about the term sheets. If you want the money and haven’t signed yet it’s all fluid!

      Congrats on the deal. Good luck!

      0Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Beyazid Yunus

      Thank you for your kind words! 

      There are a lot of factors to consider when picking the right market before you reach out to brokers, but I'll add one of the most important tips here - there are plenty of listings out there for large MF deals - but they are typically overpriced and/or you'll end up in a bidding war and won't be able to make the numbers work.  The harsh truth - commercial brokers won't give you the time of day on pocket listings unless they are confident you have the ability to raise the funds to close the deal.  We realized early on it made sense to find a coach who had a big portfolio and was willing to partner and coach us through the process so we could gain access to solid deal flow.  Before we had a big player as a partner we would even lose the deal to someone who offered less but the seller was confident in their track record and ability to close.  The good news is once you get your first couple of deals done and are building a track record, you'll have brokers calling you with listings (<-- this is the sweet spot!). Hope this helps - feel free to PM me if you have more questions or need clarity on what I said above.

      0Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

       @Mallikarjun Reddy Pateel

      @Mallikarjun Reddy Pateel

      0Reply
    • Account Closed
      OP
      Investor · Fort Worth, TX · Member since 2019 · 120 posts · 147 votes
      5y

      @Andy Crooks Thank you! 

      It's a bridge lender - we typically use these on properties that aren't stabilized.  We'll refi into an agency loan in the next 18-24 months.

      Sounds like you have some experience with the closing cost rollercoaster :)

      0Reply
    • Tucker Cummings
      Investor · Raleigh, NC · Member since 2019 · 433 posts · 743 votes
      5y

      So awesome and inspiring. Hope to be making these kinds of deals happen soon too!

      0Reply
    • Brian Adams
      Syndicator of Large Apartment Buildings · Glen Mills, PA · Member since 2009 · 1k+ posts · 1k+ votes
      5y

      @Account Closed great job!!

      I like that you were patient to wait for the right opportunity instead of forcing the numbers to make the deal work.

      0Reply
    • Jai Reddy
      Edmond, OK · Member since 2012 · 456 posts · 270 votes
      5y

      @Keeley Hubbard

      Cost Segregation with Madison Specs👍

      0Reply
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