Just Closed this 76 Unit Property in Stephenville TX - Deal Walkthrough

We just closed on another 76 units. This is in Stephenville, Texas. This is the property right here. Also, this is me trying to learn how to fly a drone, uh, not my main thing, so pardon the poor camera work. But what we're going to do on today's video is I'm actually going to show you the property, a walkthrough in the office, the units, the playground, how you actually take out deals like this, the details of the deal, and more. Stay tuned. I'm Christian Osgood, this is Multifamily Strategy. Here we go. We did it again! We closed on a 76-unit deal, $6.4 million. The loan $5.2 million. $5.2 million loan. I still can't believe I qualify for those. Not long ago I was just buying a couple duplexes, and, uh, you know, 4 years later here we are. Who would have guessed? I'll show you guys the clubhouse. This office comes with the building as well as some of the staff who I'll try not to bother. But we'll cruise through here, the main space. I'll keep a few people back there off camera. This is one of our main areas. This is where the kids will do their after-school programs. We have a few nonprofits that run out of here, so this is something that we definitely want to keep going. The prior owner actually owned the nonprofit, so we're gonna have to start some of our own systems. We're figuring out the donations, figuring out the scheduling. We're trying to get this up and running as fast as possible. There's Bible studies, after-school programs, snacks, arts and crafts. These are 3 and 4 bedroom units. There's a lot of families here. It's something that we really want to make sure we do a good job stewarding. The computer lab right here, so any of our tenants can come in here. We have internet access ported into the building. People can use the computers. Oh, we have a gym down the hallway, maintenance, spare restrooms, the whole nine yards. Pool's right out back. Let's talk property details here. 76 units, 3 and 4 beds, LIHTC, which means we have some limitations on the rent temporarily. Now, our goal is not to remove tenants and not to jack the rent on everyone. In fact, we love the people here, we love the community here, so we're going to try to keep this as awesome as possible. We are going to do a better job on the actual maintenance and repair of the property. There's a few things that need tweaking. I would give the owners, the prior owners, a B-. It's not bad. I've seen a lot of bad management. This is not bad management. It needs some tweaking. There's a lot of work orders unanswered, 58 of them to be exact. When we do the 58, I'm expecting another 58 to come in from everyone else. When they realize we actually do the work orders, what almost always happens is we get more work orders, which is fine. We want it. We want to set the tone for this is what new management looks like. So we're going to be doing some exterior repairs. I'll walk you through those. I'll walk you through one of the units that is currently vacant so you can see one of our 3 beds and the current layout and what we're actually purchasing and looking at. But this is the type of real estate that I like to buy. The loan was $5.2-something million. It was direct through Fannie, so this is called agency debt. 80% loan to value. The remainder of this was a syndicated structure. I like JVs, joint ventures, a lot more than syndication. Why do we do syndication on this deal? Well, I syndicated this deal, which means we bring in more than 5 partners, and there's general partners and limited partners. It's, it's more legally intensive. The reason we did it is because if you have more than 5 partners, every partner needs to be active. $2 million raise. I just didn't have 2 people who wanted to toss $1 million at it. I had a lot of people who wanted to toss $200,000 at it. So just because of the size of the capital raise and the structure of the deal, that's what we went with. Uh, general partners own 30% of this deal, and we have an option at the end of this, uh, to actually be the end buyer when we end our project here. So when we finish fixing it up, we go through our 5-year hold period, me and possibly some of the other investors who are already on the deal can now take this out in a JV later. So we're putting a pin in the map to have all the equity, taking 30% now. That is our structure for this deal. Cash flow is about $10,000 per month. Upside on this is millions of dollars, like quite a few million dollars. It's not all about the money though. This project also gave me some of the staff that I needed. To make my property management company better. It got us to the right size in Stephenville, just under 200 units, which is fantastic. We actually have some influence on how we manage, and we can really have enough income into the PM company to start to cherry-pick our staff and build the best possible company in our own base as we expand more third-party to other people in the neighboring properties. Let me show you one of the units. Come join me in Unit 13 here. There's 13 C, 19 buildings here on campus, uh, not including the clubhouse and other amenities. This is the main living area here as you walk in. This unit is almost ready, needs to be cleaned, and there's still some maintenance, but this was a recent move out. They did a great job of keeping this pretty clean, just needs to get tidied up. There's a lot of just general debris on the floor. Carpets need to be cleaned or replaced, one of the two. A little back living area, and it looks out on this awesome campus. Look at this, this back door, this is what you look out on. Come in, wide open spaces, get the best of Texas out there. I think it's awesome. This is a 3-bed, 2-bath unit on the deal that again we purchased $0 out of pocket. Uh, the structure on this was awesome and the deal is just absolutely amazing. But one of the things I look at in units is what, uh, what quality is it? Are there bugs walking around? I'm not seeing too much. I found like one bug in one unit so far, but looks pretty good. Carpet's a bit gross, and I always try to eliminate carpet. We do have carpet here on the upstairs. We're not going to change it immediately, but as we renovate and get a little further through the project, we'll probably start swapping it out. Again, 3-bed, 2-bath unit. Here's our starting point for bathrooms. Toilet needs a clean. Shower needs a clean, but I don't see anything that expressly needs to be replaced. Might redo that sink. Bedroom number 2 and bedroom number 3. Now remember, this is an affordable housing project, so the steel is Litec, the rents are capped. I like providing great housing to great people. These are huge units. This is somewhere in an awesome town. In a safe area, large units where I'd be willing to live here myself. Doesn't mean that I'm going to live here myself, but in the same situation as any of my tenants, this would be an awesome place to live. The overall communication I've had from all the tenants on this property is they love the community, they feel safe here, they want to make sure there's no sweeping changes. A few little maintenance things on the exterior that we're going to get cleaned up, but this is what I like to see in the unit when I'm buying buildings. No major projects, simple TLC. Get it cleaned, get it prepped, get it online. As far as you can see back there, fourplex after fourplex after fourplex after fourplex. Uh, this is the outer loop, 13.5-acre campus. So I'm walking this. I'm still blown away that I own this, by the way. I mean, we just closed. Uh, when I'm filming this, we closed about 12 hours ago. No, 24 hours ago, that's bad math. About 24 hours ago we closed on this property. So I've owned this for just under 1 day. But the thing just keeps going and going and going. Everything back there, all the way up the hill. See this thing on aerial view driving in, little Tesla map. Crazy. One thing that I also noticed about this campus, while it's affordable housing, everyone sticks to their parking spot. There's no beater cars, there's no commercial vehicles just hanging about. You end up with a really clean campus, well landscaped. This is the type of stuff where it tells me that owners did a pretty good job managing. Now there is stuff to clean up, especially in the front of the building. I'll show you guys the playground, the tattered flag that I'm all pissed about, the broken gutters. It's not perfect. They didn't do a perfect job, but they did a really good job. We picked this up, it's probably at about a 7.5 out of 10 for where it should be maintenance-wise. 7.5 out of 10 is pretty darn good for me. I'm very excited about this. Uh, how this deal actually came up, by the way, we bought a Lytec property, 44 units, uh, senior living, but almost the same thing. Uh, big campus, all fourplexes, big clubhouse in the middle, gym, computer lab, all the normal stuff. Being an older folk home, the 44-unit has a bingo hall. This one instead has childcare services and event space. A pool and a busted up playground that we're going to be replacing. But just walking the grounds here, you guys can hopefully get a little feel for just how big this is. I want to point out that 4 years ago I had 4 duplexes. It was almost 5 years, but a little less than 5 years ago I had— sorry, 4 units, 2 duplexes. Over 400 units today. This is how fast you can scale at a reasonable pace. I do 3 to 5 transactions a year, basically a transaction a quarter, and it only took that long. Scale to buildings like this. I don't think there's anything special about me at all because a ton of people have done this in Multifamily Strategies mentorship too. But deals like this, they do come up and they're usually relationship-based. This one just happened to come off the back of a transaction that I did that was a little smaller than this $1.8 million purchase, which opened up the way to do a $6.4 million purchase. It's just baby steps though. I bought a 38-plex, I bought some 12s, I bought some 10s. I moved to Texas, I did the same strategy in another market, bought a 25, 26, 44, the 76 here. These were all little steps though. It didn't take a long time to get here. It just took a minute. It just took a few transactions. I think for most of you, if you are getting started or you have your first few rentals, this can feel— 76, I think this is the first one I've done where it's like this starts to feel unattainable to a few people. And it would have felt unattainable to me not that long ago. So my encouragement to everyone, this isn't the biggest deal you could do. It starts to feel pretty cool this size. I'm still in awe that we own this particular building. So that's the exterior of the campus, that's the courtyard. Let me walk you guys over, I'll see you guys at the playground. Welcome to my least favorite part of this project, the playground. This little beater playground here, they finally got the bricks out of the out of the, uh, the main area here. What's covered in bricks? That slide. I'm not thinking that's a good angle. In fact, I tried going down that in the rain. Uh, very painful. This is a liability. It's an accident waiting to happen. And this is going to become a dog park right here. We're going to take a much bigger playground and build it in the middle of that courtyard. Those are our big tattered flags. Here's the main problems with this campus. There's no advertising. You come in, you see an ugly playground, ugly slides. The ugliest stuff in the whole entire campus is right there in front of the leasing office, which is insane. You come back, you have this beautiful pool, you have a great setup, you have a beautiful campus, you have ready-to-go units. There's no for lease sign, there's no number to call in front of the property, there's nothing that clearly states that you can rent here on a marketing list property that stays almost fully occupied all the time. This could be doing so much better and it can look so much prettier. So replacing those flags today, period, that is happening. I'm not leaving Stephenville without that done 'cause just general respect for our country's flag. That thing is terrible back there. I don't know how well you can see that, but it is just like, it's dead. We're gonna get that cleaned up, on with the project.