Learn how we achieved a 365% return by investing in Apartments!

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Today’s Topic: [CASE STUDY] learn how we achieved a 365% return to our investors on one of our class c+ apartment syndications!

VIDEO TRANSCRIPTION

00:00
because we don’t know what the lays look
00:01
like but
00:03
welcome everybody to uh what do we call
00:05
a show then money monday
00:07
mondays it is monday a little better
00:09
than other mondays right i don’t know it
00:11
doesn’t
00:12
maybe it’s been we’ve our mondays are
00:14
always really packed but at least this
00:15
this week feels like good productive
00:17
packs oh well yeah it’s definitely
00:18
because
00:19
yeah it’s definitely got some good
00:20
meetings right yeah good meetings kind
00:22
of you know trying to set initiative and
00:24
goals but
00:24
i was about to say i only had like 20
00:26
minutes no we didn’t have throughout the
00:27
whole entire day since 8 o’clock
00:29
a little better than the others where i
00:30
feel like we’re bombed and i
00:32
come in here exhausted whereas this time
00:33
i feel like you know the we’ll work
00:35
through some things again
00:36
starbucks might have a little bit extra
00:37
sugar i got my starbucks like for those
00:39
of you that know me i got my sweet and
00:40
low as well
00:41
yes but i was literally keeps you know
00:44
he’s always prepared
00:45
absolutely you know i gotta crack a joke
00:48
then so um
00:49
you know i want to say your hair is
00:51
looking very nice today
00:52
yeah yeah nice and long i’m growing it
00:54
out man as people can see actually i did
00:55
get a haircut yesterday you know i
00:57
finally trimmed this down a little bit
00:58
um
00:59
you know i just got back from vacation i
01:00
should have cut my hair before
01:02
looking like you got a little picture
01:04
yeah a little bit of sun a little bit
01:05
more tan
01:06
went down to padre where the good one is
01:09
texas south padres
01:10
two hours past corpus christi but much
01:13
much nicer ocean yeah
01:14
corpus christi is really not that much
01:16
better in my mind usually than
01:18
than galveston but south padre is pretty
01:20
much where you start to get some of
01:21
those mexico style beaches right where
01:23
yeah no it’s got the white sands blue
01:25
blue you know blue ocean we don’t get
01:27
any of that in galveston
01:29
it’s all murky we got it like i think
01:30
one day it was the last
01:32
it was everyone was surprised that it
01:34
was crystal clear it was an anomaly
01:36
you know the the scientists came out
01:38
because they were just they’re confused
01:39
as to why it was christopher
01:41
but monday mondays right we basically do
01:44
it every monday 3 30 central yeah we
01:45
like to talk about a bunch of different
01:46
topics usually real estate specific
01:49
each time we have a different topic this
01:50
time we’re going to talk about actually
01:51
a deal that
01:52
did what two years ago so real case
01:54
study on an actual deal
01:56
start to finish you know we try to keep
01:57
this 30 minutes all in so we’re going to
01:59
be pretty quick
02:00
but the idea really is this is for you
02:02
guys ask questions we will answer your
02:04
questions live q a here on
02:06
you know on air i’ll read them so
02:07
definitely if you have questions go
02:08
ahead and ask them but
02:10
you know let’s go so just get started
02:12
right so this week he’s talking about a
02:13
deal called huntington park
02:14
in beaumont texas which is the opposite
02:16
side of south padre so south park is
02:18
southwest whereas this one’s east
02:20
and really is going to go through this
02:21
case story of kind of what happened in
02:23
the deal
02:23
start to finish right yeah so just as
02:25
people can see up on
02:26
on the screen right now that was actual
02:28
picture it looks like it’s a little bit
02:29
photoshopped but it’s actually
02:31
that was what it looked like after our
02:33
second rehash we got cleaned up
02:34
yeah after the second rehab number two
02:36
is what we like to call it right
02:37
so um this was you know obviously
02:40
disclaimer folks
02:41
this was a deal that you know uh went
02:43
very very well
02:44
but past performance is not indicative
02:46
of future performance right and
02:48
any any deal that you see you obviously
02:50
need to talk to your cpa
02:51
lawyer financial advisor make sure that
02:53
it’s in line with uh with your risk
02:55
profile so
02:56
anyway having said that let’s get into
02:59
the details
03:00
beaumont man so why do we love beaumont
03:02
we like beaumont because it’s uh
03:03
convenient to get to so i do tell people
03:05
invest in a market that you can get to
03:06
fairly easily right i mean i love
03:09
reno and actually i do want to do a deal
03:10
in reno but reno is not a day trip for
03:12
me
03:12
no it’s not maybe i will buy in reno and
03:14
i’m going to take the bat back but you
03:15
want to be somewhere that you can
03:16
especially if you’re getting started you
03:18
don’t have a team you don’t have systems
03:19
right we love atlanta because we day
03:21
trip to atlanta literally 6 a.m flight
03:23
out
03:23
7 pm fly back boom wake up in my bed
03:25
sleep in my same bed right yep
03:27
that’s convenient beaumont same thing we
03:28
do day trips out there it’s about an
03:30
hour
03:30
hour and a half east of houston easy to
03:32
get to but ultimately people don’t
03:33
realize that it’s a very big city the
03:36
beaumont msa has
03:37
you know four hundred thousand people
03:38
150 000 right yep and so
03:40
it’s not a tiny market and it’s you know
03:42
while it is
03:43
it does have a lot of oil it’s got a lot
03:45
of chemical as well so it actually is
03:47
fairly robust not a one
03:48
shot pony well it’s got logistics too
03:50
it’s got the port yeah so one of the
03:51
largest ports in the country in terms of
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just
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imported tonnage it’s got the military
03:55
presence and so it’s a good market but
03:57
ultimately
03:58
you know we look for good things in a
04:00
market right job growth population
04:01
growth which beaumont had
04:02
but also we’re looking at price points
04:04
where can we buy in places that i can
04:06
buy
04:06
cheap enough that we can cash flow
04:08
really well so that’s why
04:09
we like beaumont right and you know
04:11
we’ve had three deals to date in
04:12
beaumont
04:13
yep we still got one we still own 265
04:15
units there so
04:16
but we’ve exited successfully too yeah
04:19
um you know and a lot of folks here in
04:21
houston really like that market because
04:22
of the same reason that we talked about
04:23
right it’s close
04:25
you know you get a good price per pound
04:27
and you ultimately it’s a cash flow
04:28
market right you’re not
04:29
you’re not going to get the uber
04:30
appreciation folks that you’re going to
04:32
get in say a dfw
04:33
or you know maybe in austin or something
04:36
like that right we’re buying in that
04:37
market for specific reasons right and
04:39
that is cash flow
04:40
and we’ll kind of get around to that but
04:42
some of the reasons why we like it right
04:43
it’s stable
04:44
not attractive but hey that’s equal it’s
04:47
not a sexy market but it’s a cash
04:49
flowing market
04:50
absolutely so huntington park like we
04:52
said 92 units
04:54
garden style 1974 build flat roofs with
04:57
manzards
04:58
so what just and i always always say
05:00
that but people are like what the heck
05:01
is a manzard
05:02
right so if you guys can see on the
05:04
picture here if we want to go back to
05:05
the picture
05:06
you know that that little facade on the
05:08
on the side of it right that kind of
05:09
comes down
05:10
there used to be wood we actually ended
05:12
up shingling it over
05:13
because the wood’s just a fire hazard
05:15
but that’s what a manzard is so it’s
05:17
that kind of style
05:18
back from the 60s and 70s kind of that
05:20
old english style
05:22
that’s what a manzard is right so we
05:23
purchased this in spring 2016.
05:26
um you know and like we said there’s two
05:28
deals two other deals that we ended up
05:29
buying
05:30
both one was right across the street we
05:32
still own
05:34
and then the other one was right up the
05:35
road so all of our stuff was on the west
05:37
end
05:38
which is the best end in most cities for
05:40
some weird reason
05:41
and beaumont is no different right so
05:44
the story right all right wait now let’s
05:46
see if ben can tell this story and i’m
05:48
going to give you
05:50
six 90 seconds all right because this is
05:51
about a you know 15 minute story usually
05:54
all right i’m gonna i’m gonna give you
05:55
the truncated version right so
05:57
the story is this was a local broker
06:00
that did a lot of residential
06:01
right he knew the owners these were
06:03
out-of-state owners that had owned
06:04
huntington park since they developed it
06:06
back in the 70s
06:07
right so the local broker was also they
06:10
also did property management they also
06:11
property managed this deal
06:12
right so it’s an out-of-state owner
06:14
local broker
06:15
long-term owner right because they owned
06:17
it since the 70s right so their basis
06:19
was
06:20
pretty much nothing at this point
06:21
because they’ve refined it 20 different
06:23
times
06:23
and then the financials were poorly
06:25
positioned if you ever buy a deal
06:27
through say an ara or marcus and miller
06:28
chap they’re recasting the financials
06:31
to put those financials in the best
06:33
possible light right
06:34
this gentleman just gave me a pdf they
06:36
had not been recasted they had not done
06:38
anything so they looked really really
06:39
bad
06:40
in comparison to what they wanted right
06:42
when i looked at it
06:43
it was a hundred thousand dollars in noi
06:45
and they wanted three million
06:47
right so the cap rate on that is pretty
06:49
pretty bad
06:50
especially for a beaumont deal right but
06:53
when i started
06:54
doing my adjustments and kind of
06:55
rethinking things and
06:57
you know okay hey their insurance looks
06:59
a little high let’s go ahead and get our
07:00
insurance quote from dan kadurka
07:02
and you know ultimately he was able to
07:04
save us 40 grand on this deal
07:05
so once all those adjustments were made
07:08
now they wanted three million
07:10
and there’s 300 thousand dollars in noi
07:12
so as anybody we’ve talked about cap
07:14
rates hundred thousand over three
07:15
million
07:16
is a three point three three percent cap
07:17
rate so you do three hundred thousand
07:19
over three million ten percent it’s a
07:21
ten cap deal so even back in 2016
07:24
this was pretty good right so before you
07:27
keep going
07:28
so for those of you tuning in monday
07:29
mondays with this every monday 3 30
07:31
central on the dot
07:32
typically run 20 to 30 minutes and kind
07:34
of go through a bunch of different
07:35
topics real estate
07:36
usually real estate focused next week
07:39
we’re going to talk about real estate
07:40
versus stocks and kind of the benefits
07:41
of
07:42
pros and cons of each there right this
07:43
week we’re talking about a real case
07:45
study i know a lot of people want to
07:46
understand how to do a deal the life
07:47
cycle the deal
07:48
start to finish so we figured we’d kind
07:50
of go through that and on a real deal
07:51
that
07:52
that we did you know last year actually
07:54
is kind of when it sold and so um
07:56
you know uh for those of you tuning in
07:58
right we’d like to do q a at the end so
08:00
definitely if you have questions go
08:01
ahead and drop them we will answer them
08:02
live here on the show
08:04
and yeah continue on ben man i was i
08:06
wasn’t i was you know
08:07
i wanted to interrupt you right at the
08:08
minute all right now let’s see if you
08:10
can pick up so the acquisition process
08:12
so
08:12
we ultimately once we once we did our
08:14
adjustments we found out that’s a great
08:16
deal
08:16
right so what were we gonna do we made
08:18
an offer we didn’t even negotiate we
08:19
said okay you want your three million
08:21
we’ll
08:21
we’ll take it at three million that’s a
08:22
great deal so we negotiated
08:24
the life tip i tell ben always
08:26
negotiating well we ended up doing it a
08:28
little bit right we ended up getting
08:29
90-day close
08:30
45-day inspection period which for
08:33
people that are familiar with the
08:34
process you don’t get that you don’t get
08:35
that length of time on these
08:36
negotiations so that was
08:38
we got good price and good terms we
08:41
ultimately got under contract did our
08:42
due diligence right what
08:43
what have we said about due diligence in
08:45
the past right it’s you’re you’re doing
08:47
financial audits with your property
08:48
management company you’re doing
08:50
the unit walks and then you’re also
08:51
inspecting the property with your
08:52
general contractor right
08:54
simultaneously to that right you know
08:56
you’re working with your legal team
08:57
right you’re drafting the ppm the
08:59
subscription agreement everything that
09:00
goes along with having to raise money
09:03
parallel to all this right you’re also
09:04
working with your lender to get the best
09:06
terms that you can the best loan amount
09:08
interest rate what have you right and
09:10
then after that
09:11
you’re going to get into your equity
09:12
rates right because you want to make
09:13
sure that all that stuff’s buttoned up
09:14
before you go out and start raising
09:16
money from people right
09:17
so we were autumn we were ago the
09:19
property looked great it was funny
09:20
you know a third party i won’t name any
09:22
names but they’re like this is the best
09:24
uh class c property that we had ever
09:26
inspected you know the
09:28
the property manager who’s still there
09:29
names janice she’s a great gal
09:31
she had had records that had dated back
09:33
20 years
09:34
um you know just meticulous and a
09:36
record-keeping right
09:37
and and so even though it was a little
09:39
bit antiquated she had done a great job
09:41
so from the raise right we’re ultimately
09:43
going to try to close it right because
09:44
that’s what you’re looking for
09:45
so that’s kind of the acquisition
09:47
process at a very very high level
09:48
there’s a
09:49
thousand different ways to to figure
09:51
this out but go to investoracademy.net
09:53
and
09:53
yeah we we we talk about that guys on
09:55
kind of investor academy.net so we kind
09:57
of put together a bunch of deep dive
09:58
courses on all these specifics and kind
10:00
of how those work but
10:01
yeah let’s keep going down the so stills
10:03
bought
10:04
what is forcing appreciation so you know
10:06
as we’ve talked about the past folks
10:08
right you there’s there’s
10:09
there’s market appreciation which is
10:10
just hey cap rates
10:12
are going down down down which means
10:14
things are going up in value
10:16
or you can count you should have gotten
10:19
the laughter now okay all right that
10:21
wasn’t that funny though
10:24
we’re trying to see if you’re paying
10:25
attention uh so you’re for you’re
10:27
forcing appreciation
10:29
right you’re you’re putting money into
10:30
the property to make
10:32
it perform better or drive value right
10:35
so this was our actual rehab plan from
10:37
the property you know and i won’t go
10:38
down line by line but
10:39
as you can see the majority of that was
10:41
roof replacements a lot of stuff
10:43
was pretty pretty old you know hadn’t
10:44
been replaced in 10-15 years and in
10:46
beaumont
10:47
along the coast you need to have good
10:49
roofs right so
10:50
what i always tell people is whenever
10:52
you’re working with your lender about
10:53
your rehab budget try to be vague
10:55
right instead of saying i want to do 127
10:58
you know interiors and each interior is
11:00
going to have granite backsplash this
11:02
it’s going to have brown flooring and
11:04
being very very specific
11:05
just say i want unit upgrade you know or
11:08
i’m going to do
11:09
interior upgrades right you know keep it
11:10
as vague as possible because that allows
11:12
you to adjust
11:13
along the way whenever you kind of get
11:14
into the actual work building a buffer
11:16
right
11:17
have some contingency in there when you
11:18
can right that’s that’s important when
11:20
you’re doing a value add because things
11:22
pop
11:22
up we’re big proponents of outside in
11:24
right so
11:25
we’re usually gonna go do new signage
11:27
new paint you know just to show the
11:29
you know the people that are driving by
11:30
the property that things are changing
11:32
right
11:32
new management new ownership we’re
11:34
putting money into the property and then
11:36
from there right
11:36
you can you can also be doing the inside
11:38
stuff the interior upgrades
11:40
but ultimately tenants don’t care about
11:43
roofs no
11:43
so you know ultimately look at it
11:45
through the lens of what’s going to be
11:46
the best return on our investment
11:48
you know and roofs paying me to pay 127
11:52
000
11:52
but they had to get done right but i
11:54
wasn’t able to increase the value
11:56
anyway last week at a deal that probably
11:58
had about eight hundred thousand dollars
11:59
of roof work that needs to happen yeah
12:01
that sucks but you guys you gotta do you
12:03
still gotta build a good
12:04
quality environment in a non-leaking
12:06
unit yeah
12:07
that’s that’s you know so you’re if you
12:08
want to talk about tenant you know
12:10
retention right that’s important right
12:11
but you’re not you’re never going to be
12:13
able to oh that roof looks new let me go
12:14
ahead and see if i can if i can rent
12:16
that out
12:17
and i’ll pay an extra 50 bucks for that
12:19
so you have to kind of weigh all those
12:20
things when you’re doing your rehab so
12:22
that is forcing appreciation i am
12:24
putting money into the property to
12:25
improve it and therefore improve the
12:27
bottom line right
12:28
so we got through the whole entire rehab
12:31
that was rehab number one
12:33
then as some folks are familiar with a
12:34
little thing called hurricane harvey
12:36
happened
12:37
that happened in august 2017 and you
12:40
know shannon if you could bring up the
12:41
pictures here
12:42
these are actual photos from the
12:43
property you know we had about a foot
12:46
foot and a half of water depending on
12:47
where we were on the property
12:49
throughout pretty much the whole entire
12:50
property everybody’s car that was parked
12:52
there that night ended up flooding
12:54
um and 32 of the units
12:57
out of the 92 ended up you know flooding
13:01
pretty bad and we had to end up
13:02
terminating those people’s leases and
13:04
and we ended up having to gut those
13:05
units so luckily
13:08
you know being that me and ferris are
13:09
from houston we understand how floods
13:11
are
13:12
and how they can really affect this part
13:14
of the country we have to be an expert
13:15
in floods unfortunately we are though
13:17
right you know and so we had flood
13:19
insurance through fema on this deal
13:22
thankfully right because obviously you
13:24
as you can tell
13:25
here’s another photo here a ton
13:28
of water just you know throughout the
13:30
property so what do you need to do right
13:32
first and foremost you need to make sure
13:33
your tenants are you know i always call
13:34
this rehab number two
13:36
you have to make sure that your tenants
13:37
are safe right we had some elderly folks
13:40
we had to make sure that they could be
13:41
relocated
13:42
you know obviously nobody had their cars
13:44
so and it ended up getting very very hot
13:46
right after hurricane harvey so it was a
13:47
pretty tough time so you need to assist
13:49
your tenants with
13:50
relief and give them options right and
13:52
then you got to go through the fema
13:53
grind
13:53
right you got to file your claim asap
13:56
realize that
13:57
i was one of a million or two million
13:59
people trying to file a claim with fema
14:00
at the same time right so
14:02
you have to get in there you have to get
14:03
in there soon you have to get in there
14:04
early right
14:05
uh ask for one adjuster right they’re
14:07
usually the way that these fema
14:09
policies are written they’re written by
14:11
building so we had
14:13
you know 10 buildings there i didn’t
14:15
want 10 different adjusters
14:16
they ultimately wanted to send 10 guys
14:18
out there but i didn’t want to do that
14:20
so i ultimately asked them to give me as
14:22
little as they could and we got three
14:24
right so quick for uh push for a quick
14:26
inspections
14:27
right you want to go give me the money
14:29
come on cause i got work to do
14:31
and leverage your insurance broker like
14:33
i said i use dan kadurka strategic
14:34
insurance
14:35
he’s a great guy he really bailed us out
14:37
on this one can’t say enough about that
14:40
uh pick your gc wisely right the the gcs
14:43
they had a heck of a year that year
14:44
they they could they could hit a golf
14:46
ball and they’d have 20 different jobs
14:48
so you have to pick yours wisely or
14:50
they’re going to go to the next bigger
14:52
job
14:52
right and luckily because we’ve been in
14:54
the business even if you do pick them
14:55
lines
14:56
they will still go to the next bigger
15:00
really really close close eye on them or
15:02
they will obviously jump jobs or just
15:04
delay things in general um you know we
15:07
had picked the guy that we had used
15:08
prior to this and so
15:10
he already knew the property he had he
15:11
had um vendors in the location and he
15:14
was able to kind of get out there so
15:15
that happened i think sunday night by
15:18
thursday we were
15:19
rema remediating so we had a cruise out
15:21
there and he was he was pulling
15:22
sheetrock and getting that
15:24
because there’s a lot of fly by night
15:25
gcs out there
15:27
all right and i know i’m going pretty
15:28
quick you know don’t want to if
15:30
anybody’s got any questions i cannot
15:32
except for those of you tuning in right
15:33
monday mondays do this every monday 3 30
15:35
central
15:37
right our goal is really going through a
15:38
bunch of different topics i’m usually
15:40
real estate focused
15:41
and at the end kind of doing an open q a
15:43
so if you have any questions feel free
15:44
to ask we’re happy to talk about
15:45
anything
15:46
regardless if it’s something we
15:47
presented or not right if you have other
15:49
questions on your mind
15:50
regardless if it’s real estate or not
15:51
we’re happy to talk through just about
15:53
it yeah and i always
15:54
i always describe this deal as one of
15:55
the deals that could have gone very very
15:57
badly
15:58
one of the deals that you know if it
15:59
hadn’t have gone the way that it did i
16:01
probably wouldn’t be on the screen right
16:02
now
16:03
you know because you know probably had
16:05
to come out of pocket there was people
16:06
that we knew in this part of the state
16:08
that didn’t have flood insurance and
16:09
they had to come out of pocket hundreds
16:11
of thousands of dollars right it can it
16:12
can bankrupt somebody
16:14
so that’s that’s the importance of
16:15
insurance right but the lease up right
16:17
so we got through
16:19
um you know all the work so ultimately
16:22
in summary 32 leases had to be
16:24
terminated
16:25
we did not get forbearance from our
16:27
lender forbearance is just
16:29
pretty much a delay in your payment um
16:31
you know this happened at the end of
16:32
august
16:33
september’s payment rolls around about a
16:35
week later i asked them hey can you at
16:36
least give us a month and they said no
16:38
luckily this deal had been doing very
16:40
very well we had a lot of cash reserves
16:42
so it didn’t really hurt us too much but
16:44
you can imagine folks we went from 99
16:46
occupied down to the 60s overnight so if
16:49
you don’t have those reserves set aside
16:52
who’s going to come up with that money
16:53
to pay that note because the lender
16:54
wasn’t giving us a delay on it right
16:56
that would have been
16:57
you the sen this indicator or you would
16:58
have to go back to your to your uh
17:00
investors which is even worse so we had
17:03
a 2.1 million dollar insurance claim
17:05
that we ended up getting from fema
17:06
on an 8500 policy so it would cost us 8
17:10
500
17:10
a year and they paid out 2.1
17:14
so 32 units completely updated new
17:16
office new pool area all new acs all new
17:19
laundries
17:19
pretty much the whole shebang you know
17:22
20 of the tenants came back
17:24
can you believe that you know so of the
17:26
32 units
17:27
you know they had lost their cars they
17:29
had lost all their belongings but they
17:30
still loved the property so
17:32
much that 20 of them came back you know
17:34
so the rehab was done and we were fully
17:36
leased back up by march
17:37
this happened at the end of august so
17:40
you know that kind of gives everybody a
17:41
little bit of a timeline
17:42
but let’s keep going let’s talk about
17:43
the fun stuff now this is the fun stuff
17:45
so let’s talk about the the numbers
17:46
right
17:47
so bro broke her opinion of value so we
17:49
knew uh
17:50
of the price point that we bought it at
17:52
right we had three million we’d already
17:53
put 500k into it now we’re putting
17:55
another 2.1 so we’re 2-6
17:57
into a 3 million deal we’re sitting on a
17:58
ton of equity so we went back to the
18:01
brokers that were in houston and said
18:03
hey can you size this deal up can you
18:04
give us a proposal on how much you’d
18:06
sell it for right so they review the
18:07
financials they review all the
18:08
renovations that you do
18:09
and then they pretty much come up with
18:11
you know a price range right
18:13
you know and down below at the bottom
18:15
there you kind of see these were the
18:16
actual numbers that we were provided by
18:18
one of the brokers
18:19
um you know as people remember i bought
18:21
it at
18:22
less than three million actually and
18:23
we’ll get through the numbers here in a
18:24
minute
18:25
so the disposition you start don’t start
18:27
buying stuff just yet
18:29
you know it’s a little bit of a process
18:31
the brokers know you’re kicking it
18:32
around
18:33
so now they know who’s hot for deals in
18:35
the area and can close and then they
18:36
start shopping it to these buyers right
18:38
and it’s usually going to be a 30-day
18:41
you know maybe 60-day process
18:43
even if it’s on market or off-market
18:45
doesn’t really matter it’s still about
18:46
the same amount of time
18:48
offers are submitted uh winner is chosen
18:50
and then you ultimately
18:52
um you know you go with the person that
18:53
you chose it was a gentleman that was
18:55
out of houston
18:56
um he liked the deal and i’ll show you
18:57
why so final returns
19:00
so the left hand column here um you know
19:04
you can kind of see what was projected
19:05
in 2016. this is what we talked to our
19:07
investors about right purchase price
19:09
ended up being 10.1 cap on actuals we
19:12
bought it at 10
19:12
297. note was 2816.
19:15
equity rate was 800k our year one cash
19:18
on cash returns that we projected were
19:20
17.7
19:21
you know now for anybody that’s
19:22
underwriting deals these days you don’t
19:24
see these types of returns anymore
19:25
right it’s going to be closer to the 10
19:28
8 to 10
19:28
range our year two cash on cash returns
19:31
are still 13.8 so obviously we burned
19:33
off that year of interest-only payments
19:35
to our lender
19:36
and that’s ultimately why it uh fell
19:39
back a little bit
19:40
average annualized returns were supposed
19:42
to be 25.5
19:43
in year two and our irr uh in
19:46
year two was 24.6 which is still pretty
19:49
healthy
19:50
year two total return 51 percent
19:53
right reversion cap rate 8.5 so the
19:56
actuals
19:57
what we ended up selling in fall 2008 or
19:59
18
20:00
right yeah so it feels like it was last
20:02
year that was actually a couple
20:04
yeah yeah you know just 20 20 is it’s
20:05
going to work it’s been a freaking long
20:08
it’s been a long year right you know so
20:09
anyway the sales price
20:11
was 7 million flat right which was a 7.1
20:14
cap on actuals
20:15
so for anybody that’s looking at deals
20:17
right now would you buy a seven cap on
20:19
actuals most people would look pretty
20:21
strongly at that deal yeah
20:22
right you know so the gentleman he
20:24
thought he got a great deal
20:26
and i still to this day think that he
20:27
did and obviously we got a good deal on
20:29
the cell
20:30
right so the loan payoff which included
20:33
a prepayment penalty and so won’t get
20:35
into the
20:35
the particulars of that but there’s a
20:37
little bit of a penalty for selling it
20:39
early
20:39
uh we had to pay off 2988 equity we had
20:42
to pay off for equity of 801.
20:45
so the watered-down cash returns that we
20:47
had for year one were 17.2
20:49
i could have paid 30 if i wanted to but
20:51
we we
20:52
saved that delta and set it to the side
20:54
and i’m glad that we did because we
20:55
needed it whenever
20:56
the flood happened uh year two cash on
20:59
cash returns was actually 76.24
21:02
that includes you know additional
21:03
insurance proceeds plus all the cash
21:04
flow that we had so it was pretty
21:06
healthy here too
21:07
average annualized return was 182.5
21:11
right and the irr a lot of people always
21:14
question this number but i’ll show them
21:16
the math
21:16
140.9 so you’re not going to get much
21:19
better than that show me the math
21:21
not right now but i can on a spreadsheet
21:24
because that’s what helps that’s what
21:25
helps me along with these math problems
21:27
right so total return
21:29
you know which is the topic of today was
21:31
365 percent right net proceeds on sale
21:33
was 3711.
21:35
so what does 365 total return mean means
21:38
if you invested 100k
21:40
into this deal i was going to give you
21:41
your 100k back and i was going to give
21:43
you 365 000
21:45
right that includes cash flow plus the
21:48
net proceeds from the sale
21:50
so pretty good uh this is one of the
21:52
deals my parents did invest in so
21:54
they were pretty happy about this i was
21:56
invited back to thanksgiving dinner
21:58
after this deal um you know but yeah
22:01
once again
22:02
couldn’t have asked for a better home
22:04
run first deal
22:05
um you know and it makes for a great
22:07
case study because it’s one of those
22:08
deals that could have gone the other way
22:09
right
22:10
so i blew through that that must have
22:12
been the fastest time that i’ve ever
22:14
told that case study this time i didn’t
22:15
fall asleep
22:16
usually you know kind of been talks
22:19
through some of that stuff but uh
22:21
no so for those of you tuning in money
22:22
mondays you do to every monday 3 30
22:24
central
22:25
you’d like to go over all sorts of
22:26
different topics usually real estate
22:27
specific but
22:28
we’re in the q and a portion yeah q a q
22:31
a yeah and this doesn’t have to be
22:33
about the case still free to ask them so
22:35
we’re happy to kind of talk through
22:36
anything you guys want regardless if
22:38
it’s uh
22:38
you know the specifics of something we
22:40
presented or something else
22:42
so you know let’s kind of go through the
22:44
questions now so ronnie says what’s up
22:46
guys
22:46
hey ronnie how’s it going what’s up
22:48
buddy um
22:50
let’s see i said how many cups of coffee
22:52
did you have today this is my second cup
22:54
yeah that’s my second chance
22:56
we’re just naturally energetic people
22:57
man no we just love talking about
22:59
multi-family it makes it easy
23:00
yeah um let’s see ronnie
23:04
also says home run deal he says that’s
23:05
the longest i’ve seen ben talk
23:07
clearly you do not know ben that well if
23:09
that’s the longest you’ve seen him talk
23:10
because
23:11
i you know unfortunately i have to be
23:13
the bad guy and just kind of say hey ben
23:15
look over there all right let’s
23:17
talk about something else and cat is
23:19
shocking but no good job rolling with
23:21
that ben
23:22
um oh also for those of you uh
23:25
watching we did put together basically a
23:27
multi-family cheat sheet so yeah
23:29
you want that www.disruptequity.com
23:33
right
23:33
we’re kind of going through a lot of
23:34
just tips and tricks and things about
23:36
multi-family investing things to keep in
23:37
mind so
23:38
definitely check that out
23:39
disrepectory.com mf cheat cheat
23:42
but if anyone has any more questions we
23:44
will go through them here live so
23:45
it didn’t have to be about the case
23:47
study doesn’t have to be necessarily
23:48
about multi-family right you know just
23:50
you know maybe about why we’re both
23:51
wearing white because we’re both
23:52
paranoid that ronnie’s going to call us
23:54
out
23:54
on plaid shirts and so now we’re both
23:56
very conscious of our monday stripes
23:58
by the way ronnie not it’s not
24:01
plaid i wanted to match with my
24:03
starbucks there you go there you go
24:06
all right let’s see so uh hey let’s see
24:10
so
24:10
how did you pick beaumont as a market
24:12
question came in so
24:13
well i think you know we we talked about
24:15
that a little bit earlier um
24:16
you know some of the reasons that we
24:18
pick the markets that we are is
24:20
logistics right
24:21
you know can we get there in a day in a
24:23
day trip right we either buy
24:24
a flight we always we always talk about
24:26
atlanta we love atlanta because
24:28
you can literally take a 6 a.m flight be
24:30
there by nine
24:31
be at all of our properties all day long
24:33
take the eight pm flight back
24:35
right so i’m back sleeping in my same
24:36
bed the same day and i’m able to hit all
24:38
of our properties beaumont’s the same
24:40
thing it’s an hour and a half
24:41
east of houston on i-10 and so if
24:44
there’s a problem i can get out there
24:45
the next day i can spend the whole day
24:46
there and i can come back
24:48
right so that’s one of the reasons why
24:50
the other reason was we’re kind of
24:51
getting priced out already in houston
24:53
so we’re looking for better returns
24:56
and also to be within that logistics box
24:59
too
25:00
so beaumont was one of those markets
25:02
that we had identified as okay hey it’s
25:03
within our bubble
25:05
right and it was going to have a higher
25:06
return for us and our investors so
25:09
we started kind of focusing on that and
25:11
we knew some people in the market too
25:12
that had said some really good things
25:13
about it
25:14
yeah so let’s see so anyone has any more
25:18
questions we will take them here live so
25:20
monday mondays do this every monday 3 30
25:22
central feel free to ask questions we
25:24
will answer them here live
25:25
yeah and we want people to you know
25:27
chime in if there’s a certain topic that
25:29
you want to hear
25:30
right you know if there’s something that
25:31
you want to talk about right we’re
25:33
we’re just coming up with some of these
25:34
ideas on a fly yeah right what we think
25:36
that we can add value by talking to
25:38
people about
25:39
but you know obviously hit us up offline
25:41
and we’re happy to see if we can
25:42
incorporate it into one of the future
25:44
money mondays as well all right so we
25:45
got another one so i appreciate the
25:46
story what process does disrupt
25:48
management
25:49
have in place to prepare your deals for
25:51
hurricanes yeah that’s actually a good
25:52
question right
25:53
you know we weren’t we we hadn’t started
25:55
disrupt management yet
25:56
on this deal so we were using a third
25:58
party on it but
26:00
you know ultimately there’s a lot of
26:01
things that you have to do from
26:02
informing your tenants to
26:04
battening the hatches down right you
26:06
know um to making sure that you have the
26:08
proper insurance in place yeah the big
26:10
thing make sure you have the right
26:11
insurance making sure your staff have
26:12
the right supplies that they might need
26:14
right
26:14
do you have a generator do you have
26:16
other things that you know are probably
26:18
that might need it in case something
26:19
does go wrong at the property right and
26:21
ultimately just you know taking care of
26:22
the tenants right and figuring out you
26:24
know i mean
26:25
unfortunately i think with hurricanes a
26:26
lot of it is reactionary there’s not as
26:28
much that you could do to be pro
26:30
active i’d say right but in general just
26:32
making sure your staff
26:33
know how to do the various reports who
26:35
to call if this happens what happens and
26:37
so
26:38
our our company as a whole on the
26:39
management side is very connected i like
26:41
to say and so
26:42
you know technology is in our dna and so
26:44
we i feel like we have a good pulse and
26:46
kind of good visibility to what’s going
26:47
on but
26:48
you know it’s keeping staff informed and
26:50
making sure that they know what to do
26:51
with things
26:52
keep attendance informed too right you
26:54
sometimes you’re gonna have older
26:54
tenants right
26:55
and and they might be scared or maybe
26:57
they don’t have family that’s close
26:59
right
26:59
and so if the if the power’s out go
27:01
check on them right
27:02
you know you really have to be careful
27:04
with the tenants too because especially
27:05
in a place like beaumont where
27:07
literally two days after harvey it was
27:09
102 degrees
27:10
and they didn’t have any water the water
27:11
had been uh the water
27:14
power station had been knocked offline
27:16
and so they didn’t have water for a
27:17
whole week
27:17
ben was going to go out there with a big
27:18
palm leaf to waste
27:22
we were literally gonna go out there
27:23
with water and ice and stuff but we were
27:25
told not to do it by a property
27:26
management company because
27:28
you know i mean it could have gotten a
27:29
little tense if they found out that we
27:30
were the owners so
27:32
you have to trust in your property
27:33
management company that that they’re
27:34
going to be able to
27:35
inform the tenants make sure that the
27:37
property is being taken care of and make
27:38
sure
27:39
ultimately folks that you have the right
27:40
level of insurance on these things
27:42
that’s the most important thing so we’ve
27:43
got one more question so for those of
27:45
you tuning in monday mondays every
27:46
monday 3 30 central
27:48
we’re about to wrap it up so if you have
27:49
any questions feel free to drop it
27:51
typically we’re talking about different
27:52
topics this week we’re talking about a
27:53
real case study that kind of had done a
27:54
few years ago
27:56
and um you know we’re now in the q a
27:58
portion so q as to me the best value
27:59
part you can ask about anything you want
28:00
doesn’t have to be about the case
28:02
study yep so jerry asks do you prefer
28:04
monthly distributions to investors or
28:06
quarterly
28:07
i’ll answer that for us we both like
28:09
monthly now
28:10
right i think monthly makes a lot more
28:11
sense for two reasons people think that
28:14
on the operation side monthly is
28:15
actually harder to do because
28:16
now you’re doing something once a month
28:18
instead of once every three months but
28:19
really as you grow it gets easier
28:21
because the problem is you buy all these
28:23
properties they’re in different
28:24
really about different months and
28:25
they’re on different schedules so so you
28:27
end up getting the situation having
28:29
remember okay this month we should do
28:30
property a
28:31
next month we should do c and d the
28:33
third month we should property b and it
28:34
gets really hard to track so
28:36
you know for us just once a month it’s
28:38
you know the same system the same
28:40
process
28:40
we do it for every property that’s
28:42
paying distributions and it gets easier
28:43
for our side
28:44
for the investor side it turns it more
28:45
into mailbox money right yeah as an
28:47
investor you want to you know we we
28:49
buy cash flowing assets that’s our bread
28:51
and butter that’s what we focus on
28:52
and being able to turn it into
28:54
consistent mailbox money to investors
28:56
rather than quarterly is a lot better so
28:58
i think our investors have found it a
28:59
lot more attractive
29:00
you know once you move to monthly people
29:01
we’re definitely a lot more appreciative
29:02
of that
29:03
no i agree i agree all right come on no
29:06
more questions about things or
29:08
questions people if you have questions
29:09
feel free to ask or otherwise we’re
29:10
going to wrap it up here in the next
29:12
i’d say 30 seconds all right before we
29:15
do that
29:16
right we went through the the cheat
29:17
sheet disrupt equity.com
29:19
mf cheat cheat dot all right and then
29:22
what’s coming up next man what’s up next
29:24
talking about
29:24
real estate and stocks right and kind of
29:27
pros and cons and really
29:28
to that to reits writing kind of what
29:30
their role is yeah because there seems
29:32
yeah there’s a little bit of you know um
29:34
where people think that reit
29:35
is real estate and or that reit
29:38
is a stock and it’s just there’s a lot
29:40
of misconception about what it is right
29:42
and so we’ll talk about that
29:44
but yeah come with your questions on
29:45
that that’s an important topic that i
29:46
think a lot of people getting into
29:48
investing
29:49
have a lot of questions on absolutely no
29:51
no yeah otherwise
29:52
we will call it a wrap guys thank you
29:54
all for tuning in and we’ll see you guys
29:56
next time
29:56
all right

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