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.