Ep 103 - 48 Unit - Creating The Business Plan

Hey, everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies, and welcome to another episode of our.

Podcast, which is called Freedom through Passive Income.

That's right. And today's episode is called the 48 unit creating the business Plan.

That's right. So we told you before that we're trying to teach you different things, and whenever we can teach you something that actually aligns with a case study, meaning we're working on it right this second for a property, we're going to do that. And so that's what today's episode is about. And I think we're going to do one or two more of those here back to back for the series. So this one is the business plan. So I've been working on this. Well, first of all, Della worked on it, and she compiled a bunch of information, threw it in this document, and. And then Flip and I started pouring into it this weekend, and so I printed it out, and Flip's got the other side of it that he's going to talk about in a second as well. But for the business plan, this is just a draft, but some of the things that we put in there are like the underwriting projections. Right. Because we want to be able to say, this is what we said we were going to do. And then when it's all done, how did we do and ultimately hold ourselves accountable and see how good we did or how bad we did, and. And that way we can learn lessons based on if we didn't hit some benchmarks, then we went through. And I called Steve yesterday and talked to him about the renovations and said, how many can he do per week? So he's like, hey, we can easily do three units every two weeks. And two weeks was like. He thinks that's, like, long. Like, it's probably gonna be like a week, week And a half, 10 days. Three units. Yeah. And then after it's done, the property manager will come in and walk the property with them so they can create a final punch list before it goes to rent. We talked about the H vac and water heaters and whether it was necessary to replace them right away. Right. Do you want to talk about that?

Well, yeah, because, I mean, there's. There's 48 units. And when you look at the 48. We'll just talk about the furnaces. When you look at the 48 furnaces, 40 of them look. Wow, those look like. Those are pretty old. And so then is it replace all 40 of those, or do you let them go until they die? You Know, and my. My personal stance is that some of those, they could look old, but you can't judge a book by its color by its cover, you know, so it's. A lot of them could last another 10, 15 years, you know, just with good, proper maintenance, you know, so it's. Why. Why waste $4,000 or $5,000 or whatever it costs to get our team in there to replace a complete furnace and throw that one away when it still had 10 years on it that we didn't know about?

Yes.

So, so therefore we're not trying to replace everything right away.

Yes. Yeah. And there's two schools of thought, right? Because we were talking to our underwriter, and we started evaluating both ideas. Do we just replace them all? So that way we don't have maintenance calls or anything like that. Or like you said, do we just go ahead and wait and let them hang on? And so we asked Steve, hey, on our 56 unit, how many times do you actually go out there and fix it? And he goes, oh, not very much at all. We're like, ding, ding, ding, ding. Found our answer. So that was really good. Okay, so then after that top section, we've got a layout of units. The units that are vacant right now, the units that are being evicted right now. The property management team would actually be filling a lot of these and solving a lot of the problems. But we've actually asked them and gained permission from the seller to leave them alone. We want as many vacant units as possible when we close. That means we can go in and remodel all of them, as opposed to putting somebody in there now and at a significantly lower rent, because we're. It's like 200 between what they're at now and what we're going to be renting them for. But they would be throwing people in significantly lower, and we'd have to wait for a year to be able to renovate and actually get the rents up. So strategically, we said, hey, Mr. Seller, would you mind if we just go ahead and keep those units vacant so that way we can just swing in? He said, yes. So we told property management, do not rent them. So we've got a list of all those. And we were using some strategy behind how we actually renovate them. So we have a section for vacants. We have a second section for units under eviction. We have a section of occupied units that, when we toured the property, we had a tenant rating scale. So we would walk in in 1 to 10, 10. Keep this tenant. One meant get rid of this tenant as fast as possible. And so we took that rating scale and said, here's the occupied units that we said, if they're like one to four, I would even go up to six. But we're just. We're being strategic at the moment. One to four, we're going to go ahead and move them out, so they're on that next list. And then there's a following list of we'll get. We'll further strategize as we get there. So you want to talk about this sheet here on how if Bulldog is going to be able to do three units every two weeks, we're just going to assume there's an average of four weeks in every single month. So we put 6. 6. 6 in all of these months. And then you can talk about this column and how they play together in terms of renovation versus leasing.

Yeah. So she basically went through and we. We went through together yesterday to figure out when people are. Which ones are vacant, which ones are going through eviction.

Yes.

And all the. All the other ones. And which ones are their leases coming up.

Yes.

And so. And so then this is. This is. These six will be done in May and then in June. Because by that. By the time. May, because there's four weeks in.

Yeah.

But. But anyway, by June, it'll be ready to be leased.

Yes.

You know, and so that just moves them over to there. And so this is just a layout of how many units we're going to do in which month, and then all the way through. Gosh. To 20. 20, 23.

Yep.

And so it's. It's. It's laying it out so that way we can go, you know, boom, these are the ones we want to do this month. These are the ones we're going to do next month. What's the schedule on these? These six? So we know where we're going. It's not just, oh, hey, it's May. Which ones are we doing this month?

Exactly.

So we're always making sure that we're on top of every single unit.

That's right. And this may change. Right. The goal is just to have a plan. Yeah, we just wanted a plan, something strategic that we spent some time thinking through and talking about. And from there, as soon as we close, we'll update the list based on any new vacancies or any new issues that have arisen, and then we're just going to go. And every single time we enter into a new. Hey, we're ready to go to the next pile again. What are our current issues? Who Are our current evictions, what does everything look like? Does this plan still look good? Do we want to shift anything? And it's all going to be like you said, it's going to be fluid. It's a live document. But at least we put the thought in beforehand. That's really what the business plan is about, is that you take time to be strategic about your plan in order to renovate, increase rents, do all the forced appreciation items that you want to do in order to bring the income up and bring the expenses down. So I don't know, I'm going to fly through this, just see if there. We're running out of time, so I'm going to see if there's anything else there. I just want to point out, while we're talking about this, I will mention that we are going to be creating one of the very first units that we renovate. We're actually going to use that as a show unit. And that way the leasing agent can be able to very strategically show, create a waiting list so that by the time the renovations are done, boom, it's rented. We're not waiting another two weeks to get somebody in there. So that was something that we brainstormed. We started brainstorming amenity packages and rent increases. And if somebody wants to do a month to month or a short term lease, what does that look like in terms of a premium? Let's see, anything else? Pet fees. Brainstorming. We're going to do some comparison shopping, make sure that we know exactly what's going on, what other units look like, what they're renting for, and that way we can use that to our advantage as we're renting ours. These are insurance quotes, things like that. So it's a lot of work to go into something like this. But being prepared is incredibly important when you're dealing with multiple units. This is only 48. Imagine doing this on a 384 unit in Daytona Beach, Florida. All right, I think that summarizes everything pretty good. Do we think we've missed anything?

No, no, I don't think so at all. You know, it goes back to line. Fail to prepare, prepare to fail.

Yep.

Prepare to fail, fail to prepare.

Whichever way you want to say it.

You can say it either way you want. It doesn't matter. It works.

Yep.

So, yeah. So this is great. I'm super excited.

Awesome. Cool.

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