How I Bought a Cash-Flow Machine with $0 of My Own Money

So we bought this 88 unit apartment complex for $4 million and use zero of our own money. And today we are walking it together as I show you exactly how you can acquire one of these to retire or quit your 9 to 5 or replace your single family portfolio. Now, this is actually one of the first times I've been here in a while. And we are also in the middle of refinancing this property. So you're coming with me on the journey. I'm going to show you exactly how we found this deal off market, how we structured it with investors so we didn't use any of our own cash. And what we're doing right now to force, appreciate and increase the cash flow. By the end of this video, you'll see that deals like this aren't out of reach. You just need to know the process. Let's go. What if I told you that deals like this can be done with no money down, using other people's capital, and without needing some special license or credentials? All right, here's the truth. When you buy an apartment complex, you're not buying a house, you're buying a business. And the investors who partner with us, they want to put money into deals just like this. All right? They're typically making a great W2 income, $2000-003000-00500,000 a year. And they're getting crushed by taxes. Right? They need somewhere to deploy capital that gives them the returns and tax advantages that they are looking for. Alright, so let me show you this property. We bought it for $4 million when we took it over, doing about $60,000 a month in gross income and around $25,000 in net operating income. So after expenses today, it's doing significantly more. All right, I'm going to show you the exact numbers, but first let me explain why the previous owner was willing to sell this property and how we structured this with $0 of our own money. All right, so let's check out this unit right here. And here's the thing. There's only one vacant unit here in the entire place. All right? 88 units. It stays over 98% occupied at all times. All right, so this is a three bedroom, two bath unit right here. When we bought it, the rents were over $200 below market rent. All right? So all we had to do is come in and buy it and be able to get improvement, put improvements in place. The owner hadn't done any improvements in years because he was living off every dollar that came in. So we came in and we said Let us take this over. We'll give you a great price. We'll handle all the operations, and you get to retire.

Right.

So the way the numbers broke down on this property was we purchased the property for $4 million. When we took over, the gross income was about $60,000 a month. Today, the gross income is about $70,000 a month. All right, so that's a $10,000 a month increase just from increasing the rents to market rate, improving operations, reducing VAC impressively, the net operating income. All right, which is the profit after expenses. Your income minus your expenses gives you your NOI. Now, that was around $25,000 a month when we bought it. Now it's over $33,000 a month. So this means we added about 1.5 to $2 million in equity within 24 months, which really, I think it was around 12 months. But we didn't entertain any offers on the property, so I can't say for sure. All right, so how do we actually buy this property? First off, we found it off market, and that's very critical. A lot of newer investors are going to LoopNet and CREXI to find these deals. They don't realize it, but they're wasting a lot of their time. The reality is, by the time it hits LoopNet and Crexi, it's. It's been passed on by thousands of investors. Right, because before it hits the public platform, the brokers are sending it out to their list of people that they've already transacted with or people that they already know, like and trust. So we found it off market. That means going direct to seller and then pocket listings with brokers. Okay, that's very critical. And then we brought on limited partners to fund the deals. Okay. So we funded the whole deal with limited partners investing the down payment to improve the property, the down payment to actually purchase the property, and then we had the bank finance the rest. Okay, so we actually offered our limited partners 8% preferred returns on their money. So someone invested 100 grand, they get $8,000 per year on prefer returns. So we pay that out quarterly. So $8,000 divided up by four quarters, and that's what they get. Q1 after we buy the deal. All right, now there's limited partners are waiting for opportunities just like this. Okay, 8% plus we gave them 24% ownership on this specific deal. Now, we do many different types of offerings for all of our properties. So some people get 10%, some people up to 40, 50%. But this specific property, 24% ownership and I think raise was around $1.2 million. So for the entire 1.2 million, we gave 24% ownership. All right? So. And they get that in perpetuity as long as we own this property. So that's why it's such a beautiful deal. So why would we bring on limited partners to put the down payment into this property versus use our own cash? Let's break that down for a second. Because if I had a million dollars in the bank and I were to put that million dollars into this property, all of a sudden I have trapped equity. I have that money that's just gone until we can refinance the property, to sell the property. All right? Versus bring on a who are hungry to get into deals like this, have limited partners come in, put up their money, and then I could use that million dollars for a bunch of other properties or do whatever I want with it. Right. And still maintain 100% or 90% ownership in the deal, or in this case, about 76% ownership of the deal. Okay. That's the value of being able to bring on capital partners and spread your money out to be able to leverage your money better. Right. So it's not just about financial leverage. It's about relationship leverage. And the best part about this is we don't have to manage this property. We have a team in place that manages it for us. So let's go meet the team. All right, so we have the amazing Ashley here. She is the property manager. She basically runs the whole place. So how are you?

I'm great. Awesome.

So I just want to ask, what do you feel like has changed since we've taken over and since you've been here?

It's a lot of things that has changed since the name of it switched from Summerhill to the Grove. A lot of tenants told me there used to be a lot of crime. We have the grounds looking really good now. It was a lot of vacancies here, a lot of work orders. So right now we're at 99% occupied. We have one vacant unit. So I think that is a big, big difference. I'm about to redo all the shutters and the breezeways of every unit here. The tenants, they love it. They tell me, like, this wasn't done before, that wasn't done before, and now a lot of things are being done. I think when you show the tenants that you appreciate them like we're doing now, we'll have a good turnout that we do. Like, our waiting list right now is super long. I cannot even take Any more applications.

At the moment, if you had to just improve income, whether that's decreasing expenses or whether that's improving efficiency, what, what do you think could be done?

The real tax credit, property. So depending on how many people in the household, they cannot exceed a certain income limit. So that aspect I, I couldn't change because that's state regulated. This probably helps a lot of people that doesn't have much income and they can still get in a two bedroom, two full bath. These units come with microwave built in, dishwasher, laundry room, patio, garbage disposal. They have all of those things in, in these units over here. So a lot of places right now you cannot rent a two bedroom for 760amonth. This is a great place to stay. It's very quiet and the price is really low in here.

So what about other income like your washer and dryer we used to have back here? What do you think about all that?

So we don't, we, we do have it, right?

Yeah.

So if a person does not have washer and dryer in their unit, they can go around there and use the laundry room 247 secondary. They do have to pay for it, but it is, you know, open to them.

Yeah. Some good thoughts. Appreciate you sharing. All right, so as you can see, guys, this is what you want. The reason we don't have to be here every day or hardly at all is because have a team in place that's treating this like a business. So here's what we've actually done in order to increase the value. Number one, operational efficiency. So we brought property management in house instead of using third party. Right. So we're saving because of that one move, we're saving about $3,000 a month right there. More importantly, we improve the response time of issues. We took care of deferred maintenance. And we actually are listening to the tenants. We renegotiated vendor contracts, landscaping, trash, pest control, all of that kind of stuff actually ended up increasing another $1500 per month in saved expenses. Number three, reduced vacancy. When we took over, vacancy was around 90%. Now it's at 98%. How? Better marketing, faster unit turns responsive maintenance. That's $41,000 more in annual income from increasing the vacancy. All right. Which to the bottom line is about $22,000. It means about $340,000 in added value to the property. All right, so when you add it all up, rent increases was $14,000 per month. Added expense reductions was about another $4,500 a month in increased income. And then we've increased the NOI by over $10,000 per month since we took over. And here's why that matters. In multifamily, properties are valued based on income. Every dollar increase in monthly NOI increases the property value by about 150 to $180, depending on the cap rate. So $10,000 per month in increase equals about $276,000 a year increase in NOI. At a 6.5% cap rate, that's nearly $2 million in forced appreciation. We bought this for $4 million based on the current NOI, it's worth around $6 million today. Alright, so here's a few lessons I've learned from owning many properties just like this. Okay, number one is don't wait to buy multifam. Look, I didn't have $4 million in my bank account waiting to purchase this property, all right? We used limited partners and capital investors to put the money down. If I had waited, I would still be waiting today, right? You know, I forget who said it, but you don't wait to buy real estate. You buy real estate and wait. It's the famous saying. Okay, number two is forced appreciation, alright? We're not hoping for appreciation. We didn't make $2 million in two years on this property because of market appreciation. For appreciation is key. And what that simply means is we bought this property below market rents. It was being mismanaged. And so we came in increased income, improved efficiency, decreased expenses. So we increase our noi, we were able to create forced appreciation, all right? That is the key. You've got to be able to get in there and create value. And then third point is, you don't have to manage it yourself. All right? We put people in place. I hear a lot of time people talk about, I don't want to have to deal with tenants, toilets and trash, right? We don't deal with that.

Right?

We put people in place. And if you have the right systems, you have the right property management team we have in house. But there's plenty of third party that you can also get involved if you have the right systems. You as the business owner should be thinking about strategy, you should be thinking about growth, hitting your targets and just overall growing the asset, growing your portfolio. All right? If you have property management in place and they're doing a good job, ideally you're scaling your portfolio. And lastly, one deal can replace your income. We net $16,000 a month after expenses, after investors, after the bank is paid $16,000 a month. Plus we created $2 million in equity within two years. For most Americans, that could change your Life. All right? One or two deals max. You don't need 100 deals, you just need one. So here's the big takeaways from today, okay? Most people think you need to be rich to do deals like this. You don't. Most people think you need perfect credit or years of experience. You don't. All right? What you need is the ability to find deals, structure them correctly and raise capital from people who actually want to invest. Okay? From capital partners. And that's a learnable skill. All right? This property right here, 88 units, it's not special. There's thousands of properties just like this across the country owned by tired landlords who want to retire. Right? They're waiting for someone like you or me to come and take it off their hands. Now look, you may be watching this thinking, okay, that's great for you, but I don't know how to find these deals. I don't know how to raise capital. I don't know where to start. That's exactly why we created REI Accelerator.

Okay?

We'll help you find off market deals just like this. Fund the deal so you don't have to use your own money and we'll help you close on that deal in the next six to nine months. Just like Janil, who was a guy we helped acquire a 48 unit apartment deal with $0 of his own money. He was a pizza restaurant own and very little time. Newborn. All right, Or Josh, he went from 0 to 250 units in 15 months or even Orlando. He raised $4.5 million in four days using our capital raising system. So if that's interesting to you, click the link in the description and speak with our team. We'll put you on with one of our multi family specialists and we'll walk you through exactly how we can help you close your first deal. And if you got value from this walkthrough, drop a comment below, let me know what your biggest takeaway was. Subscribe for more property tours, deal breakdowns and real world multifamily content. All right, God bless.