I wanted to share my latest syndication, a "build to rent" development deal, with TexAgs.
The Neighborhood
Some of you know that I live in Oak Forest, in Houston (77018, just north of the Heights and outside loop 610). Oak Forest was developed in the post war period in the late 1940s and early 1950s by Frank Sharp, who was notable (among other things, you can look them up...there should seriously be a movie about this guy) because he was one of the first, if not the first developer to subcontract individual trades in order to reduce costs associated with development. Fast forward to today, Oak Forest Elementary (OFE) is known as one of the top elementary schools in HISD, with suburban sized lots and street layouts that can hold a 4,000 to 5,000 SF home, and still have room for a back yard or pool, and still be close enough to the "action" of the city. The latest lot comps are in the $500,000 range and new builds are being offered between $1.2 and $1.6 million.
The Story
About 9 months ago, a lot came up for sale at 2212 Lou Ellen Ln (literally across the railroad tracks but still zoned OFE), and I brought the deal to an investor who made a solid offer, which was rejected because the tenant at the location had a ROFR on the property. Fast forward to early January, and the owner/broker emailed me to say that the tenant couldn't secure financing and had vacated, and asked if I had an interest in making an offer. After speaking with a handful of investors, some who had invested with me before and some who had not, I made a good offer, and we closed last week with the intention of building 6 single family homes on the site and renting them.
The Plan
The investment thesis is that we will develop and instead of selling individual homes, we will hold and rent them long term (this is typically called "Build for Rent"). Our basis will be low enough that we should be able to cash flow well (maybe even hit the 1% rule which some of you may be familiar with), and someday, potentially build up a portfolio of these such that we can sell to an institutional aggregator. Our downside protection is that we can sell one or more units if the partnership decides to do that, and make a good profit for the partnership. Currently, homes on this street (quickly turning from industrial and low density residential to high density residential) are comping to approximately $500,000, which is a great basis for a new home compared to lot value in the neighborhood proper.
Some pics of our site:
Closing day!
Aerial / existing and future developments along Lou Ellen
More of a birds eye view (facing the Oak Forest neighborhood)
More of a birds eye view (facing Downtown)
Margaret is done taking pics, Evelyn wants to show you her dress, and girl #3 will be here tomorrow!
I'll post updates from time to time as we go along.
The Neighborhood
Some of you know that I live in Oak Forest, in Houston (77018, just north of the Heights and outside loop 610). Oak Forest was developed in the post war period in the late 1940s and early 1950s by Frank Sharp, who was notable (among other things, you can look them up...there should seriously be a movie about this guy) because he was one of the first, if not the first developer to subcontract individual trades in order to reduce costs associated with development. Fast forward to today, Oak Forest Elementary (OFE) is known as one of the top elementary schools in HISD, with suburban sized lots and street layouts that can hold a 4,000 to 5,000 SF home, and still have room for a back yard or pool, and still be close enough to the "action" of the city. The latest lot comps are in the $500,000 range and new builds are being offered between $1.2 and $1.6 million.
The Story
About 9 months ago, a lot came up for sale at 2212 Lou Ellen Ln (literally across the railroad tracks but still zoned OFE), and I brought the deal to an investor who made a solid offer, which was rejected because the tenant at the location had a ROFR on the property. Fast forward to early January, and the owner/broker emailed me to say that the tenant couldn't secure financing and had vacated, and asked if I had an interest in making an offer. After speaking with a handful of investors, some who had invested with me before and some who had not, I made a good offer, and we closed last week with the intention of building 6 single family homes on the site and renting them.
The Plan
The investment thesis is that we will develop and instead of selling individual homes, we will hold and rent them long term (this is typically called "Build for Rent"). Our basis will be low enough that we should be able to cash flow well (maybe even hit the 1% rule which some of you may be familiar with), and someday, potentially build up a portfolio of these such that we can sell to an institutional aggregator. Our downside protection is that we can sell one or more units if the partnership decides to do that, and make a good profit for the partnership. Currently, homes on this street (quickly turning from industrial and low density residential to high density residential) are comping to approximately $500,000, which is a great basis for a new home compared to lot value in the neighborhood proper.
Some pics of our site:
Closing day!
Aerial / existing and future developments along Lou Ellen
More of a birds eye view (facing the Oak Forest neighborhood)
More of a birds eye view (facing Downtown)
Margaret is done taking pics, Evelyn wants to show you her dress, and girl #3 will be here tomorrow!
I'll post updates from time to time as we go along.
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