All Forum Posts by: Tony Castronovo

Hi @Vijaianand Thirunageswaram and Happy New Year!  Well, given that it's already 21 days in and I saved your message when you posted it you might be able to tell life has been busy.

As you probably recall, last year I made the transition from single to multi-family. The prior year I was on track to acquire 10 SFH's, when I made the decision to change direction in order to scale more quickly. In March of 2018 we sold our portfolio to a single investor and 1031'd into a 20-unit apartment complex, which we closed in August.

As Yoda says, "Win or learn, no failures there are" (I might have made that up).  In 2018, one of our "learnings" came when a deal we had worked on for a couple months went south and we terminated the contract.  It was discouraging, but it was great practice for our next deal that we ultimately closed on in Aug 2018.

Fall of 2018 was like drinking from a fire hose as we had to quickly learn the ropes on this new property.  It's been a heck of a project....complete repositioning when I thought I was getting into a "modest value-add"....another learning.  

My only goal for 2019 is to make this property a success and get it stabilized!  We plan to have all of the interior renovations complete by the end of March.  Exterior capital improvements are complete, except for a laundry facility we are planning to add.  Should have this done in Q1.  Big focus right now is filling vacancies.  I'm pleased that we were able to fill 3 units during December given the slow time of year. But we are turning up the marketing engines to keep driving occupancy so we can keep up the pace on renovations.

@Bryan we did not inherit PM.  This property was owned by an elderly gentleman in his 80's that had self-managed for over 40 years.

Thanks @Hunter Hassebrock.  No, actually we do not have any college students.  We are certainly open to college students but we are not trying to compete with the plethora of student housing that has flooded the market. 

Please excuse my ignorance, but could you implement a RUBS program rather than physically splitting the meters? Some disadvantages but maybe easier and more economical if there is any out of pocket cost.

Thanks @Brian Alfaro.  I have learned so much since starting on the MF journey, from deal search, negotiations, due diligence, underwriting, property management, operations, and so on.  

I'm not very patient, but I started with SFH and did a little flipping, but mainly buy & holds. It was a solid foundation both financially and educationally (is that a word?). But knowing what I know now, I don't think it's a pre-requisite.

Investment Info:

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

20-unit multi-family apartment complex. Successfully transitioned out of SFH portfolio and used a 1031 Exchange to help purchase this investment. Closed August 2, 2018 (my birthday...no coincidence). Value-add project (really more of a total repositioning deal). Currently in transition and stabilization phase. Performing capital improvements with interior renovations scheduled to complete in March 2019.

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

Scalability. My SFH portfolio was growing slow and steady, but I'm trying to scale my business and take on bigger challenges.

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

My broker found it. Was a rebound deal as we were falling out of another contract and needed to meet our 1031 timeline (we didn't settle though just to fulfill the 1031 timeline...it checked all the boxes).

How did you finance this deal?

Local bank found through referral. 80% LTV including first year construction costs. Rolled in 1031 exchange funds from sale of SFH portfolio.

How did you add value to the deal?

Still in-progress. This property needed a lot of improvements, including a new roof, new HVAC systems, new balconies/landings, and full interior renovations.

What was the outcome?

We've renovated 65% of the units to date and have begun lease up. While we believe we can achieve a 50% increase in rents once we hit Spring/Summer we have currently been seeing a 40% increase through the holiday months. It's too difficult right now to gauge expenses as we have had very little repairs and maintenance since we are renovating. And we are really just revising our operations. Should have a better answer to this question in 4-6 months.

Lessons learned? Challenges?

- Everything costs more than you expect (as investors I think we see things through rose-colored glasses). Build in budget contingency.
- Best to move quickly when taking over a property with pent up repairs. We had a situation where all tenants were M2M and we planned to keep occupancy high, renovating two units at a time. Between the flood of repairs and the quality of the tenant base we took a much more aggressive approach and removed half the tenants within the first two months.

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

Of course! PM me for recommendations. If you are looking for a great local lender in the Bryan / College Station area or a commercial broker (Houston and surrounding areas) or a local real estate agent please let me know.

These are a little hard to find in the burbs. But maybe you can connect with some of the local wholesalers or agents to help your search. I know old Katy has some small MF properties.

Hi @Marcel Galega. Welcome to Texas! I’m from the Katy area and have invested there, Cypress, and Tomball areas. Sugarland is a great place to live, but seems like deals are harder to find. Depends what you are looking for.

Hi Jonathan. Welcome to Houston. What are you looking to invest in? Single family, Multi family, commercial? Not sure your price point and other parameters. In general, you will find homes at reasonable costs here in the area. But taxes can eat up your cash flow. Still, a great place to invest in RE.

@Andrew Shen I used to have homes in Cypress and Katy. One of my properties was over in a nice neighborhood east of 249, north of the Beltway. I’m pretty familiar with the area. I have a good source for flooring...picking up a pallet of vinyl plank on Monday as a matter of fact. PM me if you want more info.

@Joe Guzman we should talk if you go to BCS. I have a multi-family property there and may have some upcoming work.