October 29, 2024 • 20 mins
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hey, what's going on YouTube?
(00:01):
My name is Gabe Bowling and welcome back to another YouTube video.
We're going to be doing a performance update on Daytona Palms, a 55 unit deal
that we bought in June of 2022.
It was actually my first deal after I quit working for billionaire Grant Cardone.
I bought it last year with a partner in June.
We paid $8.2 million for it, 55 units over in Daytona Beach, Florida.
And so now we're approaching June of 2023.
(00:22):
And I felt the need to do a performance update because of one, I'm very,
very, very, very happy with the performance overall.
But more importantly, nobody ever talks about operations and performance.
Everybody always talks about the acquisition, how cool it was and how much
they got in their acquisition fee and all this madness.
But I really wanted to pull back the curtain.
I wanted to show you the inside of the operations, how am I tracking the performance
(00:44):
and overall, how the hell are we actually going to make money on this deal
for the investors and ourselves.
So with that being said, let's go ahead and let's jump right in.
Really quick before we jump in, if you don't know who I am, my name is Gabe
Bowling. I'm a 25 year old real estate entrepreneur.
And like I said, I did work for the billionaire Grant Cardone and Cardone
Capital for about three years and I raised over $100 million working there.
And so I got a lot of exposure to the private equity space that we're playing.
(01:07):
And I went through a ton of transactions, billions of dollars of transactions
to be specific.
And I broke off in February of 2022.
So it's officially been over a year and a couple of months.
And since then, we control a little over $10 million of real estate and we're
helping hundreds of people all throughout the country, by apartment deals as well.
And so we're very active all throughout the country on this deal, specifically
and on multiple deals in multiple markets.
(01:29):
And I share that with you, not necessarily just a brag.
I want you guys to completely understand this, what I'm doing every single day
of the week of all sizes of deals from 16 to 32 to 100 to 200 plus unit deals
all throughout the entire country.
And so now with that being said, let's go ahead, let's jump in.
Let's check out Daytona Palms.
What's happened over the last year.
And so I'm outlining two components of the deal when we bought it and what we've
(01:51):
done. And really, there's there's multiple ways to track performance.
And there's different metrics that you can look at.
You can track an UI, you can track occupancy, you can track all these different metrics.
Right. The thing that I'm tracking all the time is the red roll to give you a
baseline of what we bought, whatever we bought the deal last year in June.
Really, how you should look at this when looking at performance of multifamily
(02:13):
assets is it's all return driven.
Right. So the business is you're raising money from investors.
You're going and you're deploying the capital into businesses or multifamily
apartment complexes, right produces income.
And you'll you have a five year or a 10 year projection to buy an asset and do
something to it and be able to sell it for more in the future.
(02:35):
So it's all creative, right?
You buy it for act.
You think you can do why to it to achieve Z, which is the result of the returns
that you're looking for.
So that's how you should judge and you should look at multifamily investing
in general, really, that's private equity investing in general.
We bought this property.
913 Catherine have I'll put a screenshot of the property right here.
(02:55):
That's the most beautiful part about real estate.
You cannot fake it.
913 Catherine have in Daytona Beach, Florida, beautiful townhome deal.
Fifty five units.
They're all two, one and a half bedroom townhomes.
They walk inside through the front.
They go through the back door.
There's a ton of greenery like it's an amazing deal with a ton of character.
And it's the only one.
It's the only townhome apartment deal in that area.
(03:17):
So we have a lot of pricing advantage to that.
And it all correlates to what I'm about to show you.
So we brought the property in June of 2022.
We paid eight point two million dollars for it.
And our debt, just so everybody knows right now, there's a lot of variable
rate debt that's hurting a lot of people.
We put we closed that deal at 58 percent leverage.
So we bought it for eight point two.
(03:38):
Our loan was four point eight, almost a five million dollar loan.
And it was fixed for the next five years, interest only for one year.
And we're fixed at three point eight, seven percent, which is phenomenal.
Looking back today, what you see interest rates are at.
So we're actually doing really, really, really well.
Our interest payment is the exact same every month when other people are going
(04:01):
skyrocket like through the roof, doubling and tripling just because interest rate movement.
So that's huge.
It's a huge win for our investors.
We're currently paying out six and a half percent net to the investors, which is incredible.
So we bought the deal in June, right?
And just so you know, if you invested in that deal, if you had a conversation
(04:23):
with me about that deal, I told you, hey, I think we're between five to six percent
for cash flow in the first year.
Our first distribution was six percent to the investor, and now we're at six and a half.
And it's clearly going up because the business plan is going well.
And so our projections, our business plan, just so you can have the baseline of what
we expected and the way that we manage our expectations going into a deal is we bought
(04:48):
an average rent of a thousand and eight dollars.
So now I'm going to move over to the whiteboard just so you can see the picture.
So we bought the property for eight point two million dollars, fifty five units.
And the average in place rent was a thousand and eight dollars.
And our projection was to take it to fourteen hundred over the next five years.
(05:12):
Right.
That's our projection.
And then this is another metric that we track very, very, very closely.
The rent roll that we purchased was fifty five thousand dollars a month.
And we are roughly, I think by June on the prelease right now, I think we're at sixty
seven, I got a fact check this, but I'm pretty sure at sixty seven thousand dollars, very
(05:37):
close to it. And that's literally 12 months after that's one way that we track the performance.
So this is current the rent roll.
This is the projections of what we thought we would be able to take the rents to a thousand
and eight dollars to fourteen hundred over that five year period.
I am happy to report that the first lease that we actually signed on the property
(05:57):
after we took over was fourteen hundred dollars and then the next lease was fifteen hundred.
And so now we're at fifteen hundred dollars for all of the leases that are new,
which is incredible, just so you can understand that when I talk to an investor,
I said, hey, Mr. Investor, we target fifteen percent return, right?
And in order for us to achieve that fifteen percent, we have to be able to take
(06:20):
rents from a thousand and eight to fourteen hundred over the next five years.
And so you can only imagine the phone call and how happy everybody is when the next
like the next week after we close, I say, hey, we already got a lease at fourteen
hundred dollars. And then now we're a hundred dollars above that to simplify that.
There's new leases that come in.
So somebody moves to give you a notice to vacate and then they elect not to renew
(06:44):
that person moves out and then we fill the building or we fill that unit up with a new lease.
Those new leases are fifteen hundred dollars.
And then the majority of the tenants, just so you know, another metric for the
operational side is the renewal rate.
So if you take over how many of those tenants that you're buying the you're
buying the lease, right, how many of those tenants renew with you?
(07:06):
And so our renewal rate is seventy five percent of all of the leases close to seventy
five, I think it's seventy three or seventy four percent of all the leases that have
come up over the last eleven or twelve months, seventy five percent of the people
have renewed. And so we're not taking them all the way to fifteen hundred.
We're taking them halfway.
So we'll go half on the first year and half on the second year.
(07:29):
That's typically what you see on the operation side.
And so moving on really just to show you kind of, you know, the money,
which I'm imagining a lot of you guys are like, OK, well, that's cool.
You're doing really well on the performance.
But like, what does that mean for the deal?
What does that mean for the investors in the return and the value that you're
creating to the property?
(07:49):
Number one, we're getting cash flows.
We invested four million dollars of equity.
What's six and a half percent of
four million dollars, right?
Because this is what we're paying out in cash distributions.
Not many people think about this whenever you're in the value ad space,
you think about what you can sell it for.
But with my criteria, I buy cash flow to I mean, my deals have to cash flow day one
(08:15):
immediately, like immediately.
So if you take six and a half percent for the cash flow,
that's two hundred and sixty grand, call it two fifty a year in cash flow that
you're receiving every year to own the building.
And then really the big nut where you make the most of your money in value
and multi-family deals is the upside.
(08:36):
And so keep in mind, this is a five year business plan.
We are less than one year total of owning this property.
I'm just going to show you the difference.
And this is where the rent roll starts to come in.
Now, remember, I just want to remind you when we bought it,
the rent roll, let's call it P U R C purchase.
All right, cool.
(08:56):
The rent roll when purchased was fifty five thousand dollars.
Right.
This was what we bought.
Now, accretively to it, we've owned it for less than a year.
I'm going to use June's rent roll because we're filling up a few units right now.
June of twenty three should be sixty seven thousand dollars of total rent
(09:19):
being collected every single month.
This is a 12.
What is it, 12 or 13,000?
Yeah, 13. No, 12.
Twelve thousand dollar difference.
This is where the money is made.
Moving the rent roll, twelve thousand dollars a month granted is fifty five units.
That's what number of doors matter.
Fifty five units is a lot.
(09:40):
If you think fifty five units a lot, think of two hundred and fifty or two hundred
and seventy five or three hundred and twelve or five hundred and thirty.
Like these deals get massive, the bigger that you go.
And so let's do the math.
I want to show you guys the math behind, you know, we're really truly millionaires
and billionaires are created in this business.
And so the math behind it is keep in mind, we moved the rent roll twelve thousand
(10:04):
dollars per month, which is annualized all numbers really in multifamily and just
commercial real estate is always going to be annualized for values.
One hundred and forty four thousand dollars of new additional income.
And keep in mind, this is about, I'd say, 60 percent renewal, right?
So we're going to get another chunk, I'd say, next year after we've turned the
(10:26):
rent roll again and gotten all of the second renewals.
So I think this number is probably closer to 300 grand once everything's all said
and done. So just keep this in mind.
One hundred and forty four thousand dollars of new income.
All I'm going to do to figure out for new value is I'm going to take it and I'm
going to divide it by called a market cap rate.
Cap rates are all it cap rates made up based on the cost of the debt and the
(10:49):
spread in which the borrowers going to borrow the money over.
But let's just say cost of debt today is five and a half going to six percent
with all this craziness that's going on.
So let's just call it a six cap.
We're going to take one hundred and forty four grand, one hundred and forty four,
divided by point zero six to figure for our new value.
And I think this is let's do the math.
I'll do it with you guys.
(11:11):
So one hundred and forty four thousand bucks,
one second, one four four hundred and forty four thousand dollars divided by point zero
six, two point four million dollars of additional value.
In layman terms, if you're not up to speed with multi family, you don't understand the
lingo, basically we've added one hundred and forty four thousand dollars of new
(11:34):
additional income. And so who you sell these deals to and who invests in apartment
complexes are investors that are looking for yield,
people that are looking for returns on their cash invested.
And so because we increase the amount of income that the property generates,
we increase the value that somebody or we increase the value of the property
because people are willing to pay for the income that a property generates.
(11:59):
You know, that's really the biggest difference between commercial real estate
and residential like nobody cares about the backsplashes or the tile or the or
the size of the backyard for their kids in commercial real estate.
It's all how much income does this asset produce?
And what if if we do this backsplash, how much new income can we get?
That's the biggest difference.
(12:19):
There is very, very, very little emotion tied to commercial real estate and a ton
of emotion tied to residential real estate.
I'm going to show you guys what this actually does to the investors and really
returns because as a multifamily investor, if you're going to do this business
actively, if you're just in your main gig, you own a business, you're making money,
somehow you're happy with your current lifestyle.
(12:41):
Just invest passively, like make more money and invest passively with guys like me
in two deals.
You retain 80 percent of the ownership as a passive investor and you do no work.
You're going to kind of have an insight to overall returns of what is what's
possible in the space as a passive investor.
So just keep in mind this four million dollars is the total equity
(13:04):
that we invested into the deal.
And so as an investor, how to solve for returns is you invest a dollar.
How much do you get back over what period of time?
Right.
So if you invest a dollar and you get back two dollars over two year period,
well, that's a hundred percent return because you invested a dollar and you got
a hundred, you got another dollar back.
(13:26):
So a dollar in, two dollars out, that's a hundred percent return.
And it took you two years to do that.
And so if you take a hundred percent and divide it by two years,
that is a 50 percent return per year.
That is like this most simplest way to understand returns.
We invested four million dollars into this property and we have called a five.
(13:47):
We have a much longer time horizon.
We don't have to exit the deal until year 10.
But we want to get in and out between years three and five.
That's our motto.
If we can turn the money every three to five years, we love it.
Keep in mind this is only one year of ownership.
We've increased the value theoretically, right?
We're not selling it.
We're not doing a refile.
We're not doing anything right now other than just continuing to perform and continue
(14:10):
to operate as is.
But if we look at the difference between the rent rule that we bought in June of 2022
and then now of 2023, we think we've added close to two point four million
dollars of value to the asset.
That's at a six, maybe five and a half.
It could be more.
All I'm going to do to solve for a high level,
(14:31):
you know, equity growth or potential equity growth is I'm just going to divide
the two point four divided by the four million dollars.
Like, OK, well, immediately, if I just scratch the four,
let's just say it's two million dollars of upside.
Well, that's a 50 percent increase on the equity invested in less than a year.
Now, we can't realize that, right?
(14:52):
Because we have the loan, we have prepayment penalty of maybe three or four percent.
And honestly, we're not, we don't want to sell right now.
Today is a terrible time to sell as a seller.
And there's still so much more that we have to do, but we are leaving a
significant amount of money on the table if we exit right now.
And so by no means are we going to exit, even though we have this
(15:14):
gain right here, but it's good to know about it, right?
What we're going to do is we're going to continue the business plan.
Let's say the hundred and fifty or hundred and forty four turns to the three hundred
and this two point four million turns to five.
Now you can see five million dollars of upside or increased value over the next
what, another twelve, another eighteen, maybe twenty four months total.
(15:36):
So within 36 months of purchasing the asset,
we invested four million dollars and we increased the value of the property by five million.
That is a double up and some on just the upside, the appreciation.
And we get the cash flow while we're waiting.
We're getting we started at six, we're at six and a half.
I'm sure that's going to go up to seven, maybe even more.
(15:59):
Like who knows, that's seven percent a year.
So you can start to understand where average industry
returns as a passive investor, passive investor, not active.
What I do is active.
I help people learn the business to become active investors or syndicators.
(16:19):
Most people will start in smaller deals and work up.
Most people that are happy with their job or their business,
they're making a bunch of money in their main profession, they become passive
investors and 15 to 20 percent annualized returns are very average industry standard
for great operators.
(16:41):
Very, very, very large statement.
Take it with a grain of salt.
Apologize for the ugliness.
Take it with a grain of salt.
Fifteen to 20 percent returns with great operators that have been doing it for some time.
Like even myself, I shoot myself in the foot by saying that I would be skeptical
to invest with myself until I learned who I am.
Right. I have complete confidence in my ability to produce these returns because
(17:04):
of the exposure to the game that we've had.
I've gone through 19 transactions of 50 million up to 750 million dollars.
And I've done this deal and we're performing.
This is real data.
This is pulled directly from the rent roll on the property today.
And so we're very open about it in order.
Let's put it like this.
In order to be this confident, you have to be very open and very honest and very
(17:25):
ethical about what you're doing.
And you just show you don't tell.
And so I show everything that we're doing.
All of every single investor in the deal, every single quarter, I send out updates
with the books.
I share the books.
I share the rent roll and I share the T12 with every investor in the deal.
I don't know where that even came up.
If you're past investor, make sure you're vetting out the operator.
(17:46):
But once you do find good operators that are reputable and have done this before
and can consistently hit good returns, they typically should be between 15 to 20
to the investors.
And then for the active investors, it's just like you become a business owner.
You can make a ton of money doing it and becoming the active investor.
(18:06):
But there's so like there's such a large learning curve that you have to go
through and you have to put in tons of reps to even find the first deal.
It is very, very, very, very rewarding and you can make a ton of money doing it.
You just have to grip into the education.
You have to find somebody who's done it and somebody who can help pull you up
through your first deal and get you started.
Because once you get started, you do not stop.
(18:28):
And so as of a year later, that is what we've successfully done to the property.
As you can tell, we are very happy with the performance of it.
We're paying cash flow.
One of the very few operators that are still paying out distributions,
which we're very happy about, we're getting our rent increases.
We projected that it would take us five years.
I think we hit the total within the first 24 to 36 months because of the way that we
(18:51):
projected and how conservative and how disciplined we are with understanding the business plan.
And so all in all, to say the least, guys, we are going to do phenomenal for the investors
on that deal.
It's a great first one out of the gate.
And now we're prepping for the next deals to come over the next 12 to 24 months because
there are, I'm seeing as of literally right this second, deals are truly coming out.
(19:15):
Now I'm starting to see a ton of distress in the marketplace and it's good.
The people that are prepared are going to be able to take advantage of buying deals for
30, some 40% of a discount comparison to where they were at literally 12 months ago.
So it's going to be great.
My goal is to take you guys along the ride and show you guys every single part of the
(19:36):
business, pull the curtain back and give you guys the truth behind getting into and starting
and launching a successful real estate business.
And I'm going to bring you guys along the entire thing.
If you guys found any value in today's video, all I ask that you guys like, comment and
subscribe most importantly, subscribe, help me get this information out there to everybody
who needs to see it.
And then secondly, if you guys are interested in learning the business and becoming more
(19:58):
active and going through learning all in the terminology, learning how to underwrite deals,
learning how to raise capital, everything, I do have a ton of educational products going
on.
We have a completely free two hour long course.
I'll put all the links below in the description.
We have a completely free two hour long course.
We just launched the deal room university, which is literally like if the free course
is just dipping your toe in the water, the deal room university is 15 hours of extremely
(20:24):
detailed education.
That's like jumping into like the middle ground, maybe the, maybe the six foot or eight foot
deep end.
And then the deal room is a 12 month long coaching program that I run.
We meet twice a week and that is literally jumping into the deep end.
So that's only four people that want to become active investors and going out finding the
deals and putting everything together.
(20:45):
Stay close here.
I'm going to be coming with new YouTube videos all the time going over multifamily deals.
And so with that being said, I appreciate you guys and I will see you guys next time.
Hey, what's going on YouTube?
(00:01):
My name is Gabe Bowling and welcome back to another YouTube video.
We're going to be doing a performance update on Daytona Palms, a 55 unit deal
that we bought in June of 2022.
It was actually my first deal after I quit working for billionaire Grant Cardone.
I bought it last year with a partner in June.
We paid $8.2 million for it, 55 units over in Daytona Beach, Florida.
And so now we're approaching June of 2023.
(00:22):
And I felt the need to do a performance update because of one, I'm very,
very, very, very happy with the performance overall.
But more importantly, nobody ever talks about operations and performance.
Everybody always talks about the acquisition, how cool it was and how much
they got in their acquisition fee and all this madness.
But I really wanted to pull back the curtain.
I wanted to show you the inside of the operations, how am I tracking the performance
(00:44):
and overall, how the hell are we actually going to make money on this deal
for the investors and ourselves.
So with that being said, let's go ahead and let's jump right in.
Really quick before we jump in, if you don't know who I am, my name is Gabe
Bowling. I'm a 25 year old real estate entrepreneur.
And like I said, I did work for the billionaire Grant Cardone and Cardone
Capital for about three years and I raised over $100 million working there.
And so I got a lot of exposure to the private equity space that we're playing.
(01:07):
And I went through a ton of transactions, billions of dollars of transactions
to be specific.
And I broke off in February of 2022.
So it's officially been over a year and a couple of months.
And since then, we control a little over $10 million of real estate and we're
helping hundreds of people all throughout the country, by apartment deals as well.
And so we're very active all throughout the country on this deal, specifically
and on multiple deals in multiple markets.
(01:29):
And I share that with you, not necessarily just a brag.
I want you guys to completely understand this, what I'm doing every single day
of the week of all sizes of deals from 16 to 32 to 100 to 200 plus unit deals
all throughout the entire country.
And so now with that being said, let's go ahead, let's jump in.
Let's check out Daytona Palms.
What's happened over the last year.
And so I'm outlining two components of the deal when we bought it and what we've
(01:51):
done. And really, there's there's multiple ways to track performance.
And there's different metrics that you can look at.
You can track an UI, you can track occupancy, you can track all these different metrics.
Right. The thing that I'm tracking all the time is the red roll to give you a
baseline of what we bought, whatever we bought the deal last year in June.
Really, how you should look at this when looking at performance of multifamily
(02:13):
assets is it's all return driven.
Right. So the business is you're raising money from investors.
You're going and you're deploying the capital into businesses or multifamily
apartment complexes, right produces income.
And you'll you have a five year or a 10 year projection to buy an asset and do
something to it and be able to sell it for more in the future.
(02:35):
So it's all creative, right?
You buy it for act.
You think you can do why to it to achieve Z, which is the result of the returns
that you're looking for.
So that's how you should judge and you should look at multifamily investing
in general, really, that's private equity investing in general.
We bought this property.
913 Catherine have I'll put a screenshot of the property right here.
(02:55):
That's the most beautiful part about real estate.
You cannot fake it.
913 Catherine have in Daytona Beach, Florida, beautiful townhome deal.
Fifty five units.
They're all two, one and a half bedroom townhomes.
They walk inside through the front.
They go through the back door.
There's a ton of greenery like it's an amazing deal with a ton of character.
And it's the only one.
It's the only townhome apartment deal in that area.
(03:17):
So we have a lot of pricing advantage to that.
And it all correlates to what I'm about to show you.
So we brought the property in June of 2022.
We paid eight point two million dollars for it.
And our debt, just so everybody knows right now, there's a lot of variable
rate debt that's hurting a lot of people.
We put we closed that deal at 58 percent leverage.
So we bought it for eight point two.
(03:38):
Our loan was four point eight, almost a five million dollar loan.
And it was fixed for the next five years, interest only for one year.
And we're fixed at three point eight, seven percent, which is phenomenal.
Looking back today, what you see interest rates are at.
So we're actually doing really, really, really well.
Our interest payment is the exact same every month when other people are going
(04:01):
skyrocket like through the roof, doubling and tripling just because interest rate movement.
So that's huge.
It's a huge win for our investors.
We're currently paying out six and a half percent net to the investors, which is incredible.
So we bought the deal in June, right?
And just so you know, if you invested in that deal, if you had a conversation
(04:23):
with me about that deal, I told you, hey, I think we're between five to six percent
for cash flow in the first year.
Our first distribution was six percent to the investor, and now we're at six and a half.
And it's clearly going up because the business plan is going well.
And so our projections, our business plan, just so you can have the baseline of what
we expected and the way that we manage our expectations going into a deal is we bought
(04:48):
an average rent of a thousand and eight dollars.
So now I'm going to move over to the whiteboard just so you can see the picture.
So we bought the property for eight point two million dollars, fifty five units.
And the average in place rent was a thousand and eight dollars.
And our projection was to take it to fourteen hundred over the next five years.
(05:12):
Right.
That's our projection.
And then this is another metric that we track very, very, very closely.
The rent roll that we purchased was fifty five thousand dollars a month.
And we are roughly, I think by June on the prelease right now, I think we're at sixty
seven, I got a fact check this, but I'm pretty sure at sixty seven thousand dollars, very
(05:37):
close to it. And that's literally 12 months after that's one way that we track the performance.
So this is current the rent roll.
This is the projections of what we thought we would be able to take the rents to a thousand
and eight dollars to fourteen hundred over that five year period.
I am happy to report that the first lease that we actually signed on the property
(05:57):
after we took over was fourteen hundred dollars and then the next lease was fifteen hundred.
And so now we're at fifteen hundred dollars for all of the leases that are new,
which is incredible, just so you can understand that when I talk to an investor,
I said, hey, Mr. Investor, we target fifteen percent return, right?
And in order for us to achieve that fifteen percent, we have to be able to take
(06:20):
rents from a thousand and eight to fourteen hundred over the next five years.
And so you can only imagine the phone call and how happy everybody is when the next
like the next week after we close, I say, hey, we already got a lease at fourteen
hundred dollars. And then now we're a hundred dollars above that to simplify that.
There's new leases that come in.
So somebody moves to give you a notice to vacate and then they elect not to renew
(06:44):
that person moves out and then we fill the building or we fill that unit up with a new lease.
Those new leases are fifteen hundred dollars.
And then the majority of the tenants, just so you know, another metric for the
operational side is the renewal rate.
So if you take over how many of those tenants that you're buying the you're
buying the lease, right, how many of those tenants renew with you?
(07:06):
And so our renewal rate is seventy five percent of all of the leases close to seventy
five, I think it's seventy three or seventy four percent of all the leases that have
come up over the last eleven or twelve months, seventy five percent of the people
have renewed. And so we're not taking them all the way to fifteen hundred.
We're taking them halfway.
So we'll go half on the first year and half on the second year.
(07:29):
That's typically what you see on the operation side.
And so moving on really just to show you kind of, you know, the money,
which I'm imagining a lot of you guys are like, OK, well, that's cool.
You're doing really well on the performance.
But like, what does that mean for the deal?
What does that mean for the investors in the return and the value that you're
creating to the property?
(07:49):
Number one, we're getting cash flows.
We invested four million dollars of equity.
What's six and a half percent of
four million dollars, right?
Because this is what we're paying out in cash distributions.
Not many people think about this whenever you're in the value ad space,
you think about what you can sell it for.
But with my criteria, I buy cash flow to I mean, my deals have to cash flow day one
(08:15):
immediately, like immediately.
So if you take six and a half percent for the cash flow,
that's two hundred and sixty grand, call it two fifty a year in cash flow that
you're receiving every year to own the building.
And then really the big nut where you make the most of your money in value
and multi-family deals is the upside.
(08:36):
And so keep in mind, this is a five year business plan.
We are less than one year total of owning this property.
I'm just going to show you the difference.
And this is where the rent roll starts to come in.
Now, remember, I just want to remind you when we bought it,
the rent roll, let's call it P U R C purchase.
All right, cool.
(08:56):
The rent roll when purchased was fifty five thousand dollars.
Right.
This was what we bought.
Now, accretively to it, we've owned it for less than a year.
I'm going to use June's rent roll because we're filling up a few units right now.
June of twenty three should be sixty seven thousand dollars of total rent
(09:19):
being collected every single month.
This is a 12.
What is it, 12 or 13,000?
Yeah, 13. No, 12.
Twelve thousand dollar difference.
This is where the money is made.
Moving the rent roll, twelve thousand dollars a month granted is fifty five units.
That's what number of doors matter.
Fifty five units is a lot.
(09:40):
If you think fifty five units a lot, think of two hundred and fifty or two hundred
and seventy five or three hundred and twelve or five hundred and thirty.
Like these deals get massive, the bigger that you go.
And so let's do the math.
I want to show you guys the math behind, you know, we're really truly millionaires
and billionaires are created in this business.
And so the math behind it is keep in mind, we moved the rent roll twelve thousand
(10:04):
dollars per month, which is annualized all numbers really in multifamily and just
commercial real estate is always going to be annualized for values.
One hundred and forty four thousand dollars of new additional income.
And keep in mind, this is about, I'd say, 60 percent renewal, right?
So we're going to get another chunk, I'd say, next year after we've turned the
(10:26):
rent roll again and gotten all of the second renewals.
So I think this number is probably closer to 300 grand once everything's all said
and done. So just keep this in mind.
One hundred and forty four thousand dollars of new income.
All I'm going to do to figure out for new value is I'm going to take it and I'm
going to divide it by called a market cap rate.
Cap rates are all it cap rates made up based on the cost of the debt and the
(10:49):
spread in which the borrowers going to borrow the money over.
But let's just say cost of debt today is five and a half going to six percent
with all this craziness that's going on.
So let's just call it a six cap.
We're going to take one hundred and forty four grand, one hundred and forty four,
divided by point zero six to figure for our new value.
And I think this is let's do the math.
I'll do it with you guys.
(11:11):
So one hundred and forty four thousand bucks,
one second, one four four hundred and forty four thousand dollars divided by point zero
six, two point four million dollars of additional value.
In layman terms, if you're not up to speed with multi family, you don't understand the
lingo, basically we've added one hundred and forty four thousand dollars of new
(11:34):
additional income. And so who you sell these deals to and who invests in apartment
complexes are investors that are looking for yield,
people that are looking for returns on their cash invested.
And so because we increase the amount of income that the property generates,
we increase the value that somebody or we increase the value of the property
because people are willing to pay for the income that a property generates.
(11:59):
You know, that's really the biggest difference between commercial real estate
and residential like nobody cares about the backsplashes or the tile or the or
the size of the backyard for their kids in commercial real estate.
It's all how much income does this asset produce?
And what if if we do this backsplash, how much new income can we get?
That's the biggest difference.
(12:19):
There is very, very, very little emotion tied to commercial real estate and a ton
of emotion tied to residential real estate.
I'm going to show you guys what this actually does to the investors and really
returns because as a multifamily investor, if you're going to do this business
actively, if you're just in your main gig, you own a business, you're making money,
somehow you're happy with your current lifestyle.
(12:41):
Just invest passively, like make more money and invest passively with guys like me
in two deals.
You retain 80 percent of the ownership as a passive investor and you do no work.
You're going to kind of have an insight to overall returns of what is what's
possible in the space as a passive investor.
So just keep in mind this four million dollars is the total equity
(13:04):
that we invested into the deal.
And so as an investor, how to solve for returns is you invest a dollar.
How much do you get back over what period of time?
Right.
So if you invest a dollar and you get back two dollars over two year period,
well, that's a hundred percent return because you invested a dollar and you got
a hundred, you got another dollar back.
(13:26):
So a dollar in, two dollars out, that's a hundred percent return.
And it took you two years to do that.
And so if you take a hundred percent and divide it by two years,
that is a 50 percent return per year.
That is like this most simplest way to understand returns.
We invested four million dollars into this property and we have called a five.
(13:47):
We have a much longer time horizon.
We don't have to exit the deal until year 10.
But we want to get in and out between years three and five.
That's our motto.
If we can turn the money every three to five years, we love it.
Keep in mind this is only one year of ownership.
We've increased the value theoretically, right?
We're not selling it.
We're not doing a refile.
We're not doing anything right now other than just continuing to perform and continue
(14:10):
to operate as is.
But if we look at the difference between the rent rule that we bought in June of 2022
and then now of 2023, we think we've added close to two point four million
dollars of value to the asset.
That's at a six, maybe five and a half.
It could be more.
All I'm going to do to solve for a high level,
(14:31):
you know, equity growth or potential equity growth is I'm just going to divide
the two point four divided by the four million dollars.
Like, OK, well, immediately, if I just scratch the four,
let's just say it's two million dollars of upside.
Well, that's a 50 percent increase on the equity invested in less than a year.
Now, we can't realize that, right?
(14:52):
Because we have the loan, we have prepayment penalty of maybe three or four percent.
And honestly, we're not, we don't want to sell right now.
Today is a terrible time to sell as a seller.
And there's still so much more that we have to do, but we are leaving a
significant amount of money on the table if we exit right now.
And so by no means are we going to exit, even though we have this
(15:14):
gain right here, but it's good to know about it, right?
What we're going to do is we're going to continue the business plan.
Let's say the hundred and fifty or hundred and forty four turns to the three hundred
and this two point four million turns to five.
Now you can see five million dollars of upside or increased value over the next
what, another twelve, another eighteen, maybe twenty four months total.
(15:36):
So within 36 months of purchasing the asset,
we invested four million dollars and we increased the value of the property by five million.
That is a double up and some on just the upside, the appreciation.
And we get the cash flow while we're waiting.
We're getting we started at six, we're at six and a half.
I'm sure that's going to go up to seven, maybe even more.
(15:59):
Like who knows, that's seven percent a year.
So you can start to understand where average industry
returns as a passive investor, passive investor, not active.
What I do is active.
I help people learn the business to become active investors or syndicators.
(16:19):
Most people will start in smaller deals and work up.
Most people that are happy with their job or their business,
they're making a bunch of money in their main profession, they become passive
investors and 15 to 20 percent annualized returns are very average industry standard
for great operators.
(16:41):
Very, very, very large statement.
Take it with a grain of salt.
Apologize for the ugliness.
Take it with a grain of salt.
Fifteen to 20 percent returns with great operators that have been doing it for some time.
Like even myself, I shoot myself in the foot by saying that I would be skeptical
to invest with myself until I learned who I am.
Right. I have complete confidence in my ability to produce these returns because
(17:04):
of the exposure to the game that we've had.
I've gone through 19 transactions of 50 million up to 750 million dollars.
And I've done this deal and we're performing.
This is real data.
This is pulled directly from the rent roll on the property today.
And so we're very open about it in order.
Let's put it like this.
In order to be this confident, you have to be very open and very honest and very
(17:25):
ethical about what you're doing.
And you just show you don't tell.
And so I show everything that we're doing.
All of every single investor in the deal, every single quarter, I send out updates
with the books.
I share the books.
I share the rent roll and I share the T12 with every investor in the deal.
I don't know where that even came up.
If you're past investor, make sure you're vetting out the operator.
(17:46):
But once you do find good operators that are reputable and have done this before
and can consistently hit good returns, they typically should be between 15 to 20
to the investors.
And then for the active investors, it's just like you become a business owner.
You can make a ton of money doing it and becoming the active investor.
(18:06):
But there's so like there's such a large learning curve that you have to go
through and you have to put in tons of reps to even find the first deal.
It is very, very, very, very rewarding and you can make a ton of money doing it.
You just have to grip into the education.
You have to find somebody who's done it and somebody who can help pull you up
through your first deal and get you started.
Because once you get started, you do not stop.
(18:28):
And so as of a year later, that is what we've successfully done to the property.
As you can tell, we are very happy with the performance of it.
We're paying cash flow.
One of the very few operators that are still paying out distributions,
which we're very happy about, we're getting our rent increases.
We projected that it would take us five years.
I think we hit the total within the first 24 to 36 months because of the way that we
(18:51):
projected and how conservative and how disciplined we are with understanding the business plan.
And so all in all, to say the least, guys, we are going to do phenomenal for the investors
on that deal.
It's a great first one out of the gate.
And now we're prepping for the next deals to come over the next 12 to 24 months because
there are, I'm seeing as of literally right this second, deals are truly coming out.
(19:15):
Now I'm starting to see a ton of distress in the marketplace and it's good.
The people that are prepared are going to be able to take advantage of buying deals for
30, some 40% of a discount comparison to where they were at literally 12 months ago.
So it's going to be great.
My goal is to take you guys along the ride and show you guys every single part of the
(19:36):
business, pull the curtain back and give you guys the truth behind getting into and starting
and launching a successful real estate business.
And I'm going to bring you guys along the entire thing.
If you guys found any value in today's video, all I ask that you guys like, comment and
subscribe most importantly, subscribe, help me get this information out there to everybody
who needs to see it.
And then secondly, if you guys are interested in learning the business and becoming more
(19:58):
active and going through learning all in the terminology, learning how to underwrite deals,
learning how to raise capital, everything, I do have a ton of educational products going
on.
We have a completely free two hour long course.
I'll put all the links below in the description.
We have a completely free two hour long course.
We just launched the deal room university, which is literally like if the free course
is just dipping your toe in the water, the deal room university is 15 hours of extremely
(20:24):
detailed education.
That's like jumping into like the middle ground, maybe the, maybe the six foot or eight foot
deep end.
And then the deal room is a 12 month long coaching program that I run.
We meet twice a week and that is literally jumping into the deep end.
So that's only four people that want to become active investors and going out finding the
deals and putting everything together.
(20:45):
Stay close here.
I'm going to be coming with new YouTube videos all the time going over multifamily deals.
And so with that being said, I appreciate you guys and I will see you guys next time.
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