Mar 12 in General discussion
Why We Bought This 368 Unit Apartment Community
Here's the DEAL
Number of units: 368 units
Class B property in solid B area
Built in 2000-01
Purchase price: $39,475,000
Capex + other costs: $10,800,000
"All in Costs": $50,275,000
Why It's a Great Deal?
Rents are under market (we're converting it from LIHTC to market rates). Current rents are between $700-$1,000/month.
Market rents are $1,400-$1,600/month.
Moreover, we're getting this using a combination of owner financing and an assumable loan:
- Owner financing: $15,775,000 at 5% interest only for 42 months, 7 yr term, 35 year-amortization
- Assumable loan: $6,200,000 at 3.6% interest
"Downside" of this Deal
The only "downside" or difficulty of this deal is the fact the significant amount of capital needed to do the deal. I prefer to do deals with 25% equity or less (meaning, 25% or less downpayment).
For this deal, the amount of capital needed is $28,300,000 - which is 53.6% equity.
We did the deal anyway because the interest rates on the financing are quite low and this resulted in great cashflow which, when stabilized, deliver a 7% cash on cash return for our investors.
Over-all, we project this is a 1.72x equity multiple (for our investors) over a 3 to 5 year hold despite the higher than normal % equity.
How Did We Get This Deal?
Answer: relationships. We're buying this directly from the original builder and found him through our broker relationships.
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Why We Bought This 368 Unit Apartment Community
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