All Forum Posts by: Ryan Lewis

My firm, Western Edge, is looking to build relationships with capital companies looking for deals with the following characteristics:

   - Multifamily investments in West Texas and Houston. Opportunistic nationwide, but these are our areas of focus.

- JV or partnership structures where capital partner has appropriate oversight; we welcome outside input.

- Assets requiring limited major CapEx on systems (HVAC, plumbing, etc.) and a light to moderate renovation component.

- Quality tenant bases in underperforming or undervalued properties. Our firm specializes in operational optimization to drive NOI improvements without major disruptions to the tenant experience.

Our portfolio is small but growing, and includes a 22-unit complex in West TX. We have dropped the expense ratio from 69% to ~46%-48% and only raised rents by a small 6%. We have successfully implemented a mid-term rental (MTR) strategy, and intend to expand it. Based on conservative projections, we anticipate a 46% NOI increase by the end of year one.

If our investment strategies align, I'd welcome the opportunity to connect and build a relationship. I'm happy to travel to meet the right partners in person and discuss opportunities further.

Hey @Matt Giacinto.

Just closed a property in West TX using an MLA. Pretty interesting, and those who like creative deals would be interested to hear the process, I’m sure.

I’m curious, though, what’s your preferred way to raise capital? How do you generate leads to find potential investors? I’m having to get back into acquisitions mode with this first deal being done, and trying to scale to a slightly bigger property. Needing to get back into that mindset. The equity need will be a bit closer to the $1M mark, which is a lot for the stage my company is in. 

Second, as a developer, do you feel that redevelopment/renovation is a good play in this market? Seems like you can avoid some of the issues new builds run into as far as financing and material costs. I will add, I spent 7 years at a large GC firm doing renovations, so I’m acutely aware that renovations rarely go as planned. Just haven’t been on the developer side.

Always looking for advice from experienced folks in this space! Thanks in advance.

Appreciate the response! I'll answer each question in order just to keep it clear.

We actually put this property under a Master Lease Agreement. It allowed us to keep a 4.1% rate in place for 24-months as I stabilize it prior to a refi.

Agreed on hands-on management. I elected to compensate my PM a little higher for this, and projected a pretty high maintenance/repair and turnover cost. Also collecting a small cleaning fee for MTR's to offset a bit.

Currently one unit is furnished as an MTR. The original owners "furnished" some units for a $150-$200 premium, but their furnishings were subpar at best, and not targeted enough to generate worthwhile rents. Also, each unit has an attached garage and in-unit washers/dryers, which helps bump rents a bit.

Many of the current leases rolled over at some point pre-acquisition and are on month-to-month now (I'd say 60%). Planning to notify tenants the 1st of April, but changes will not go into effect until June 1st, providing a 60-day notice.

We actually just decided to provide managed internet, but still elected to eliminate cable. That said, we're offering to facilitate setup for those that want to keep it.

As far as batches, that's certainly the idea. Also, if we find that the market doesn't have demand for it as expected, we can pivot to pump capital into rehabbing base units for higher rents, or just return it and lower the initial investment cost. It appears there's good demand based on metrics from FurnishedFinder.com. Also, my PM has another property under management using this model and it's been very successful even with subpar furnishings.

I also intend to list it as a short-term rental to fill in vacancy gaps between MTR renters. We'll see how that goes. Luckily, I didn't write that into the business plan, so if it doesn't work it doesn't affect my numbers.

I have recently purchased a 22-unit multifamily property; Class B- in a market with a lot of transient workers.

To keep it brief, the business plan calls for the following:

   1.) Over 8 months, furnish 6 units as MTR's at premium rent (still a bit below market for local MTR's for year 1).

   2.) Transition tenants to paying their own power, cable, and internet. Property covers water/sewer and trash (market standard).

   3.) Raise low rents to market.

   4.) Minor exterior renovation to update space.

I created a schedule showing increases to rents, estimated move-outs due to changes, swapping those vacant units to MTR's, and reducing the property's utility obligations. I intend to turn units to MTR's in small batches of 2's every other month, which means I actually need some vacancies. For reference, average rents for the primary types (20 of 22) need to come up about $50. Regarding utilities, the property is currently paying cable and internet for all units, and needs to only cover internet for the 6 MTR's. It is also currently covering power for at least 11, which needs to become 6 as well for MTR's.

Obviously, there is a delicate line between needing vacant units for MTR turns, needing to maintain low overall vacancies, and needing to adjust rent and utilities to market numbers. Looking to others for experience in how to implement large scale changes strategically in a way that doesn't become self-defeating and hurt bottom lines unnecessarily.

Thoughts?