104-Unit Multifamily Oklahoma City

This complex along with another complex we did was very unique. This 104-unit was completely vacant. It was previously mismanaged and neglected until all of the tenants moved out due to inhabitability. This complex sat so long that the water pipes froze and busted due to the harsh winters that Oklahoma sometimes gets. This created massive water damage and the repairs were extensive. We acquired the complex for $750K.  We then performed over $1M in rehab. This brought our costs to $1.75M. The market occupancy in Oklahoma City was 90%. We rehabbed the common area first. We then rehabbed the unit one by one and then leased them as they were ready. This took us a total of 3 years to do. 

Here's how this deal worked out:

At the end of the 3rd year, we had this asset fully leased. We still allow for vacancies as no multifamily will be leased 100%, 100% of the time. The occupancy rate in Oklahoma City was a staggering 95%. That brings the total number of units rented to 99. The average rent collected was $600. This brings the monthly total to $59.4K. Multiplying $59.4K by 12 months totals $713K. Multiply the monthly income by .50 (a 50% expense ratio). This brings the net operating income (NOI) to $356K. The market cap rate in Oklahoma City is actually at around 10% bringing the value to $3.56M. We sold the building for $3.2M.

In Conclusion:

A deal is not a good deal unless everyone feels like they have gained something (a win / win scenario). We had a partner invest $1.75M (Acquisition and rehab).  He earned 15% for the 3 years we held it. After rehab and lease up, we sold the building for $3.2M. We paid the investor 3 years of interest totaling $787K. We then paid him a 15% premium totaling $262.5K for a total to the investing partner of $1.05M. The end buyer got a building with $356K in equity and a net income of $356K. $400K was earned by the company.