The Story Of A Multifamily Investment Winner

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The story of a multifamily investment winner by Vinney Chopra

This story of a multifamily investment winner began with discussions about buying an apartment complex that had suffered extensive fire damage in one of the 16-unit buildings in a 156-unit apartment complex in Freeport, Texas in 2014.

By Vinney Chopra

The fire, at the Sienna Villas Apartment Homes, was caused by two kids playing with match sticks in the closet in the upstairs of a middle apartment. It quickly got out of hand. Fortunately no one died and everyone got out quickly. The complex was originally built in 1978 and had no sprinkler system.

The owners of the complex, who lived in the San Francisco Bay Area, decided after collecting the insurance money that they would like to consider selling the complex to us, and they dropped the price. They explained there had been poor management of the complex and they would like to not own this asset as it required extensive rehab.

 “Napkin Listings” can lead to great multifamily investment deals

Many times with the network of brokers that I have relationships with, and constantly keep in touch with, I ask them for pocket listings. Pocket listings are a common term.

But, I have invented my own name for this term which I call "Napkin Listings" because I found many brokers meet with potential sellers of commercial real estate at breakfast, lunch or dinner to discuss the terms and  timing of a potential sale.  They don't have anything in writing on a broker agreement yet, so frequently sketch out the terms on a napkin.

This stage is the very best spot to look at the rent roll and the profit and loss statement from the broker. This gets the research and due diligence, along with underwriting work, started quickly to help decide if this is a winner to syndicate!

I make decisions fast with my quick number crunching techniques and with the detailed analysis tool that I have developed over the 10 years.

One fine morning I received a call from my brokers, after their talk with the sellers, that this apartment community was on sale. I was in the car and offered $3 million for this burned complex.  The seller countered within 20 minutes at $3.5 million and I accepted in one minute. I gave $50,000 extra later.

Vinney’s points to remember in doing a multifamily investment winner

  1. In investing one should make good quick decisions if a pocket listing is shared by a broker.
  2. Don’t over analyze the deal which can lose time and essence of the purchase. Be objective. Do research fast and take “massive action.”
  3. Get your team informed (attorney, loan broker, underwriter) as soon as an opportunity comes to you. Vinney has been able to close on all 26 syndications, 100% closings, after the Letter of Intent was accepted.
  4. The value-add functions implementation is huge in the equity gains just like in Sienna Villas. It was about $3,625,000 in profit as it is being sold now after 2.5 years after the purchase.

Renovations began to move it up from a “C” property to a “B” property

The story of a multifamily investment winner by Vinney Chopra

The restored 16-unit apartment building that had been badly damaged in the fire. Photo copyright Vinney Chopra.

We had to largely gut the building where the fire happened, but we were able to save some lower units. We replaced charred structures, built everything with new international safety codes, and spent $721,000 in repairs and upgrades.

We rebuilt the 16 units to bring them back to be ready for lease by doing an “A” class rebuild. We added granite counter tops, tiled bath tubs, all steel appliances, moldings, upgraded carpet and coloring, fire sprinklers and more.

We also lightly upgraded the rest of the 140 units with new interior lighting, cabinets, and celling fans in master bedrooms. We repaired the swimming pool and put in new fencing. We also renovated the interior of the leasing office and built a café area and a media center desk for the residents. We do that in every community we purchase. Our emphasis is to bring greater value to our valued residents and make them feel proud to live in Moneil Investment Group and Moneil Management Group- managed communities.

Then we also repaired and repainted the exterior of the whole complex. We also fixed the staircases, walkways, railings and foundations in two buildings.

How did the deal work out?

Actual Performance: The returns to investors have been better than projected. The job market was and is very strong.

We were able to increase rents as the leases came due for renewal. By bringing in our strong management team and our standards of operation, we were able to get the asset performing very well. As for it being a momentum play, the job growth has caused more demand, which, in turn, has pushed the rents higher. We did minor landscaping upgrades, upgraded parking, and small upgrades in a few units. We are now 95% occupied, with almost $300 increase in rent per month per apartment.

Cash Flow Distributions: We are very excited that the asset is managed by a top community manger with a strong staff under our supervision. The investors have been getting regular quarterly cash flow checks since the purchase.

Renovations: Since we bought the asset, the renovations have been going on constantly to make it an excellent community to live in. 

Story of a multifamily investment winner by Vinney Chopra

Here is another building in the complex before the rehab. And below after the rehab. Photos copyright Vinney Chopra.

The story of a multifamily investment winner by Vinney Chopra

Multifamily investing summary:

I have purchased 10 complexes, ranging from 60 units to 192 units in last 2.5 years -- all “Napkin Listings” in this emerging local area about 40 miles south of Houston. I like to do thorough research to decide on an emerging market and then purchase four or five assets to harness the economies of scale in the area.

Fact Box:

Sienna Villas Apartment Homes

Number of Units: 156             

Purchase Price: $3,550,000 Plus Renovations: $1,225,000   

Sale Offer: $8,400,000 on Aug 8, 2017; in Escrow.

Purchase Date: December 22, 2014   City: Freeport, TX.   Area: B

Date Sold: Sale Pending     Equity Gain: $3,625,000   Pref. Rate Class A Investors: 9% per year

The story of a multifamily investment winner

The story of a multifamily investment winner by Vinney Chopra

The renovated leasing office in the complex where the 16-unit building burned. Photo copyright Vinney Chopra.

Website: http://siennavillasliving.com/

About the author:

The story of a multifamily investment winner by Vinney Chopra

Vinney Chopra is the Founder and CEO of Moneil Investment Group and President of Ideal Investments Group. His latest accomplishments include acquiring 12 multifamily investment assets in the last 28 months worth $132 million. His last two syndications were sold out in just a few hours, and one in 36 hours raising $4.7 million and another one $6 million in eight hours. Between the two syndication companies he founded, Vinney’s team acquired and managed over $236 million worth of assets. He is a mechanical engineer. After graduating from The George Washington University and finishing his Master’s in Business Administration in Marketing, he shifted his focus to marketing and motivation. He was a professional fundraising consultant and motivational speaker for more than 35 years. He is a CA Real Estate broker also. He believes in total transparency of his businesses for the investors and holds quarterly investors meetings for his valued friend investors. Vinney and his wife started their real estate investments in 1983. He currently owns single-family homes and multifamily units in Texas, California, Atlanta, Arizona and India. Many times, people call him “Mr. Enthusiasm” or “Mr. Smiles.” He likes to bring great value to everyone he comes in touch with.

 

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