Update on Houston Apartment #1

It’s been 2 months since the hurricane in Houston and Apartment #1 has been repaired and it looks like its back on track again.  To recap on this apartment, this building is a 125 unit complex that was built in 1969.  The purchase price of the building was $4.8 million, we got a $4 million load at 7.7% interest only.  The plan was to put in $200,000 worth of capital improvements, increase the rents, increase the occupancy, refinance to a lower rate and sell.

It has been 12 months since we’ve closed on this apartment.  Based on the monthly reports and some quick calculations, here is where I see this investment.

At this point we are still running negative every month due to the capital improvements however, that should end soon.  We are over the $200,000 budget on capital improvements.  Once capital improvements end, the apartment will cashflow +$1500 with October numbers.  It should cashflow +$3000 with projected November numbers.  We expect to be able to refinance our loan and lower our rate at least 1%, maybe even 1.5%.  A 1% reduction in loan rate would increase the cashflow by $3000.  Running at these projected levels brings us to +$6,000/mo cashflow. 

Using November net operating income and a 6.5% cap rate, this apartment building would be worth $5,670,000.  This is close to the initial projections.  I don’t think its a good time to be selling apartments now anyway.

This apartment is coming along but it is behind schedule slightly and the hurricane did not help our capital improvments budget.

About Kenric

My blog about living life to the fullest by generating passive income through real estate, business and online investments.
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