Why a South Side purchase will be this investor's last — for now
The author is discussing a recent acquisition and saying that he doesn't plan to acquire anything else for the next 6-12 months.
Mauricio RAMOS, like many other investors, is having difficulty getting access to capital.
Ramos has about 1,000 doors under management. He said Riverbend, a 200 unit complex on South Flores Street, which he acquired under contract in November 20,22, will be his final acquisition for the 6-12 month period.
Ramos and Adrian Salazar, who is one of the leading investors in TwoTen Management in San Antonio, raised $7 million for the acquisition in April.
"Our capital stack includes a debt capital with a [loan to value ratio] of 65%, then we raise the remainder of the capital through a pool equity partners. Ramos explained that equity is used for down payments, capital expenditures and operating costs.
The Riverbend, built in 1984, was owned by an investor from California who was looking to invest in Class A multifamily property. Ramos says that he usually purchases Class B and C properties from mom-and pop operations or other real estate syndications.
He said that some people may have 1,000 or 2,000 door and were selling them. Some of them may have loans that are coming to maturity and be looking to sell as now is not a good time for refinancing.
Ramos noted that the timing of a deal is difficult at this time. Ramos said that the debt-service ratio, which is a measure of cash flow for commercial properties must indicate stability in order for a deal be worth it. This means, in general, 85-90% of the property is occupied. Offices and retail power centres, two asset classes of commercial real estate that have struggled to maintain these numbers, are examples.
Ramos stated that this is not the norm for multifamily housing, especially in Texas where there's a large in-migration rate.
He acknowledged that it is becoming more difficult to raise funds. Prior to the Federal Reserve's hike in interest rates last year, it was possible to amass $10 million of equity in just two months. He said that it would take between 4-5 months.
Ramos stated that many investors with whom he has invested in the past have said they will hold onto their money, as fears of a possible recession would push risk levels beyond what most investors are comfortable with.
"Things are different." Ramos stated that he was not interested in signing any contracts at this time. However, if an attractive deal comes his way, he will take a closer look.
Ramos: "There is a saying that investors use." "Survive until '25."