We have an opportunity for someone to invest with us as an equity partner. Here are the deal particulars.
- Purchase Price: $6.8 Million
- Underwritten Value by Lender: $9 Million
- Total Down Payment needed: $950,000
- Our Contribution: $400,000
- Amount still needed: $550,000
The upside to the deal: The property needs some rehab work (about $200,000). One of our partners currently owns 1100 units and he specializes in rehab of apartment buildings. The property will be managed by Centra Asset Partners who specializes in rehab and turn around projects. Julie and I currently have an interest in 680+ apartment units as well. When we got it under contract when the occupancy was around 60%. Now it is close to 85% occupancy. Our target occupancy is 93% because this is where the rest of the market is operating. This property is located about 10 minutes outside of Fort Worth, TX in Haltom City. The market in Texas is very strong because of the oil economy and job growth around that. This is a B class property and is suitable for blue collar workers.
The potential downside: The economy could change directions and rental rates could drop. The later is unlikely because of the renters that are coming back into the market because of the housing market softening.
Our strategy is to refinance the property in 9-12 months after the rehab is completed and the rents are stabilized. We have already been approved for the financing by Prudential once we have 3 months of occupancy above 85%. Once we refinance the property you would receive your initial investment back and retain your ownership. You would also receive cash flow as it becomes available and as an investor you would get a preferred return (meaning that you would get paid before we get paid). If you invest the entire $550,000 you will get 25% of the equity ownership in the deal. If you invest less ($110,000 minimum) you will receive a prorated amount of ownership.
If you have more questions please let me know. I would be happy to discuss them with you via e-mail or over the telephone.
This can be a great deal to park your money for a little while and then get it returned to you but you will still keep all the benefits of owning the property.
