$2M purchase of a furnished corporate housing building in Odessa, Texas.
Cash flow from day 1 of acquisition is $14k+/ mo. ( $168k/yr) with 100% occupancy and very strong demand for the property.
The value-add is the raising rent in two stages to market rates of $2500-$3200 - about double what they are being rented for now. Some cosmetic enhancements will be needed to keep up the property. As well as solar installation to reduce electricity costs
. The rough cost to do all that is $100k.
With the annual costs remaining close to the same, the NOI now becomes $336k/ yr !
In total, these steps create a
conservative ARV of $3M . The total cost out lay with purchase and improvements would be about $2M, making the profit potential about $1M in a year’s time!
The deal is in the Permian Basin (NW Texas and SE New Mexico) where contractors are building the infrastructure for new oil extraction. Contractors have been forced to rent space with RV parks because there is no housing left anywhere close enough to rent. That makes this property very desirable, despite the higher rent. This trend should continue for some time until developers and the surrounding towns' utility providers catch up to the demand.
We plan to sell for $3m at a 12% cap rate to take profits on the value added to the property as soon as possible. To show 100% occupancy over time and for tax purposes, we will wait to sell for 12 mos.
I'm offering a strong return on $2M invested which is completely secured by the property.
Background info:
https://www.forbes.com/sites/rrapier/2018/12/27/why-the-permian-basin-may-become-the-worlds-most-productive-oil-field/#cb048d5ccb3d