Podcast episode (conversation between founders Flip and Danny of Freedom Real Estate Group) recounting the acquisition and early management crisis of a 56-unit portfolio purchased Oct 15, 2020. The hosts describe complex bundled purchase terms, a problematic on-site supervisor running a racketeering scheme, COVID-era eviction complications, repeated break-ins, infestations, failed in-house rehab/crews, and upcoming follow-up episodes that will cover leasing strategies and refinancing numbers.
Hey, everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies. Yo. And welcome to another episode of our.
Podcast, which is called Freedom through Passive Income.
That's right. And today, our episode. This has been one that we've talked about quite a bit over the last year and a half. Our 56 unit horror story, part one. Yeah. This is part uno.
Yes.
Because it deserves more than one part.
Yes. There's gonna end up, I think, to be three.
I figured. Yeah, I figured. Figured as much. So we'll start with the acquisition. So we got this seller and he had, what is it, 13 single family, two duplexes, right? 12 single family, 12 single family, three duplexes, and then a 48 unit and an eight unit.
That's right.
But he wouldn't sell us the 48 unit and eight unit without selling the single family duplexes, and he wouldn't sell us a single family duplexes without the two apartments, so we couldn't break it up. So. Well, at this point, we weren't interested in multifamily rethinking. And so we immediately went out and looked for a buyer, found a buyer, and that started the process. And we just knew that once that closed, we could close on the other 15 properties is what we wanted for turnkey. And so we're gonna talk about this here in a second. But right when we found the buyer, dun dun dun Covid hit.
Yes.
Shut everything down. Everyone got all paranoid about even walking in the property. So it took him a couple months to get his lender out there and to do an inspection. And then that lender fell through. And so then it took him a few more months to find another lender. And then after he found that lender, then. Well, then he started playing around with us about price. And that was when we said, you know what, Sorry, we're done with you. We're gonna buy it.
That's right.
And that's when this one said, I'll buy it in two weeks. And everyone went and. Well, and you did.
Yes.
And so we bought. That was the beginning of October. We closed the middle of October, right?
Yes. October 15, 2020.
Yep. And so. And so then we closed on the 48 unit, the 8 unit, and the 12 single family and three duplexes all at one time. Obviously, that was the most we've ever bought in one day.
Yes.
So. So it happened on one day and we go to the title company to close.
Yes. Is this where I take over?
This is where you jump in.
So we get keys Guess what? The keys don't work.
All 15 properties here and all 56 units here.
Yes. Yeah. Total, total mess. But we don't understand exactly what's going on. We're like, this is weird, this sucks. But we didn't realize what was to come.
We just thought we were still riding the high that we just bought all these properties.
Yes, yes, exactly Right.
Well, the keys don't work. Oh, okay. Well, we'll figure it out. Hahahaha.
And as we start exploring, we start learning that the supervisor for these properties.
Yes, there is a supervisor, which is a very. Probably a very poor term to be.
Used for this particular person.
And so this guy was handling everything. He was like the property manager for the previous owner. This guy was handling everything. But come to find out, well, he's a drug addict and a drug dealer.
Yes.
Yeah. And so what he was doing is he was getting people. He was actually signing leases and getting people to move in. And then when they moved in, he would get people. Well, I'll actually touch on this. He was getting them to sign over their Section 8 and Social Security checks.
Yes.
Right. To him.
Yes.
And so we're not actually sure what money actually made it to the previous owner, but this guy had. He had a racket.
Yes.
And not only of those 56, but also of those single family.
Yeah. And the duplexes. That's right.
He was running everything and he had such a racket. And that's when we came in.
He was even pulling in, pulling people out of the rehab. Yeah. Program. I can't remember what it was called.
It's like the next step. You know, they get out of drug rehab and they go to, like a safe house.
Yeah.
You know, where they can, where they can rehabilitate still.
Yeah.
And continue to stay off drugs.
And those people would help with the rent payments.
Right.
And he would pull them through, take those rent payments, get them hooked back up on drugs like it was. That place is a mess. So we're gonna, we're gonna go fast now before we actually keep on going.
Yes.
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Yeah, that's right.
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Okay. Now we're gonna Keep on going. So this was in the middle of COVID It was a racket like he was telling you about. And we're gonna fly through the rest of it. We were trying to do evictions, but it was in a Covid environment. So we had all these kinds of rules and delays and everything. Eventually we were able to evict some of them and then evict another section. And it's like we just ended up doing them in phases and it ended up getting anybody who's tying us up for whatever reasons due. Covid got shifted to phase two and then phase three. So it was crazy. We had a ton of break ins.
Oh, break ins. We put Simplisafes in all the units. Well, they just went in and stole all the Simplisafe. I can't even count how many simple safe units we actually went. Yes, but they were breaking windows. They were going in through the attic. In through the attic, down into rooms.
In order to avoid our simple safe.
Yeah, it was.
We're like, how are they getting in there? We've got. And a Simplisafe is an alarm system, by the way.
Yes.
We couldn't figure it out. One of our crews said they're getting into the attic.
Yeah. And the amount of times that we've had the police over there was more than we could count.
Yes.
I mean, they, they. Actually I'm. I think I was on speed dial. I talked to the police like, like three, four times a week.
We even hired a patrol car.
We hired patrol cars to sit out there. We put out cameras.
Yes.
On the units. There was guns.
Yeah.
Every day. The dumpsters were full of crap.
Yes.
I don't know where this stuff came.
Yeah.
It's just like they'd empty out the dumpster the next morning. It's full.
Yes. There was also bedbugs and cockroaches. And every time we did an inspection, if there's people still occupied and they wouldn't let us in, it was like the whole thing was just worthless. It was crazy. So we started the rehab, we started the rebranding. We tested an in house crew that failed miserably. So that was part of the nice horror story we had leasing. We started doing new rates. That's what we're going to go into the part two. This is why we had to do part one. And this part one we could have done in two because, man, we're just flying. But when we started leasing, it was at new rates because they were completely rehabbed. But it was hard because we were still getting people out, but we are ready to move people in. But who wants to move in when they see everything that's going on and it's nonsense and there's trash and there's horrible people screaming, high as a kite. It's nuts. And then the third video is probably where we're going to talk about the refinance. We're going to give you real results of exactly what happened. But our next video is going to talk about the numbers as we know them right now.
Right?
That's the horror story. And as fast as we could possibly make it for under eight minutes.
Well, awesome. Again, Hulk, smash that like and love button. Let us know what we're doing, though. Leave us comments. Again, if you're out driving, obviously don't leave us comments while you're driving, but go back to YouTube, go back to Facebook, LinkedIn, whatever it is that you're watching on leave us comments. Let us know how we're doing. But again, we like to keep these short and sweet. We always end with invest smart, live happy. Bye, everybody. Okay, Dani got really long winded on these episodes, so she wanted to let you know something.
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