Houston Apartment #1 update
February 5th, 2008 by KenricThe first apartment complex in Houston will now be called Houston Apartment #1 on here. I just realized I had never really disclosed any detailed information about it until now.
Houston Apartment #1
The apartment building is a 125 unit complex that was built in 1969. It’s comprised of a mix of studios, 1br/1bath, 2br/1bath and 2br/2bath with half of the units 1br/1bath.
The purchase price of the building was $4.8 million, making the price per unit around $38,400. The plan is to put in $200,000 worth of capital improvements during the first 3 months.
Financing for this project included raising $1.1 million for the downpayment and obtaining a $4,000,000 loan at about 7.7% for 2 years. Permanent financing will be obtained thereafter.
The strategy of this project was to increase the complexes value by making capital improvements and raising rents up to market. The interior of the units were in good shape, however its exterior was in need of an overhaul.
Among the capital improvements were resurfacing the parking lot, repairing the covered parking spaces, overhaul of the landscaping, new exterior paint, new exterior street facing windows and some interior recarpeting. The purpose of the capital improvements was to give the building a new modern look specifically along its major street facing side. This face lift would make the complex look comparable or even better than its neighboring competitors.
In addition to the capital improvements, a new management team was installed to oversee all aspects of operations.
Projected proforma showed an increase in value of approximately $600,000 by end of year 1 and $2.6 million by the end of year 2. Investors do not expect to receive any cashflow during year 1.
1st month operations
This complex closed in the first week of October 2007. Occupancy was at 82% at close of escrow. However, our management was able to lease enough units in the first month to bring us to 92% occupied at the end of the month.
First phase of landscape improvements were completed along the main busy street. The bids for resurfacing the parking lot came in under budget. All the other capital improvement projects were in the bidding stage.
2nd month operations
Even with rent increases we were able to increase occupancy to 94% for the month of November. All other improvements were coming along. Parking lot resurfacing to start in December.
3rd month operations
Parking lot was completed and exterior paint colors were selected. Pro-forma revenue is around $82,000/mo for the complex and we are at about $66,000/mo. This represents an 11% increase in monthly revenue since closing.
Going forward
We continue to increase rents as lease terms expire. Once the capital improvement have been completed, we will have a much better picture of what the cashflow picture will look like.
(Houston Apartment #2 details tomorrow)
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