How Kevin bought 56 unit apartment deal from ZERO - step by step

Hey, what's up, guys? So welcome to the show today. So look, we have a guy today that I'm really excited to introduce you to. It's a guy named Kevin. And he has been able to go from two single family rentals to now crossing 58 units in a very short amount of time. 5Xing his portfolio. And we have him here today to break down exactly how he did it, where he started, and how the process looked like so that you watching can do the same thing and we can scale together. So. And I'll welcome the team. We have Randy here. Larry, as always, you know, together with our group, we have over $500 million in assets under management represented. And so mostly in multifamily. We believe strongly multifamily. If you are just tuning in, this is your first time. But we also have a recurring guest here, Mr. Tim Crowder on the line.

Tim's in the house.

Let's go, man. Good to have you back. But look, before we jump in, Kevin, thank you for being here. I appreciate you joining. I know that when the deal's underway, when you're in contract, when you're about to close, things get hectic and crazy. So I appreciate you joining to share about your story, encourage some people out there. So before we break down the deal, why don't you share a little bit about where you're at, where you were at before, and about your story, how you came into this.

Yeah, I appreciate you having me join. I mean, it's been a journey. God is so good. He's. He's blessed us with just so many learning experiences along the way. And, you know, we're looking to close on our. Our first multifamily deal here at the end of the month. And so we're just, we're super excited. My background, like you had mentioned, I mainly came from the single family rental space, and we had two single family rentals. And about 18 months ago, my older brother and I, we started Everflow Capital with the purpose of leveraging real estate to make an impact for. For Jesus Christ. And as we were sitting there analyzing how do we scale, how do we grow as a business, we knew that a single family, you can do that, but, man, it's going to take a long time to scale. And so we started thinking about other creative ways on what that would look like for us. And around the same time, we started to hear things about REI accelerator. And so with our mission, our purpose, our goals set in place, it aligns so well with what you all do at rei. Accelerator. We knew it was a perfect marriage, so we started to dig a little bit deeper. We wanted to get involved, and that's what really brought us to you all in the first place was, you know, the faith based component and seeing our mission and our vision align. We knew that, you know, this was God really telling us, hey, here, here's an open door and let's go and explore it and see what he can do through all the goodness that you guys are teaching.

Amen. That's awesome, man. Well, I'm glad you made the leap. And look at you now.

You're.

You're on the way, so let's break the deal down, man. Have you ever raised capital before?

So this would be my first time raising capital for, you know, single family, multifamily. Right. And so this would be my first time, so I'll be honest.

All right.

Was definitely a eye opening experience. There's definitely a lot of emotions. I. I will honestly say my prayer life definitely increased. But the Lord provides.

That's right. Yeah, that's good, man. Well, never raised capital before. I mean, look, everything about your story is inspiring, man. So let's break it down and, and give me a little bit, you know. Why multifamily? What was it about multifamily that caused you to want to take that leap?

Yeah, I think just two. Two main components that really stood out in terms of why multifamily. I think being able to scale was one of the things that we wanted to do. You know, cash flow, generational wealth is something that we thought about from day one. And to do that through single family, it would just take a long, long time. So being able to acquire a property that has 5,000 doors is just more, much more scalable. So I think that's one. But then the ministry side of things, the impact that we can have into these communities and being able to own a property to where you can bring different ministries to impact the tenants there. Those are some of the things that really got us excited that, you know, we can have more of an impact as we go and acquire more properties.

Yeah. So good. Yeah, I know we got some friends, you know, whenever, whatever, Whenever we found out about multifamily, you know, you could not have to travel everywhere. You have a bunch of houses spread out, you realize, oh, I could just do the same amount in one roof, sell everything and go into multifamily, you know, so. Well, look, awesome. Why don't you give us a lowdown? Let's start with finding deals. How did you find the deal. And what was imperative about your processes in finding deals? What was the thing that was just critical for you when it comes to finding deals? Because obviously these deals don't just land in our laps, right? I mean, you know, you're not just finding these go deals like this that can make a million, $2 million in 15 months, 24 months, just laying out in the streets, right. It takes some effort, it takes some intentionality, it takes some focus and determination. So talk to me about your process in finding this deal and what do you feel like was the big learning lessons in that?

Yeah, so I mean, I think to that point, right, there's, there's a lot of different and creative ways that you can find deals. Right. The list goes on and on and on. And I think just my background is more of a relational background. Prior to getting full time into real estate, you know, I was a client success director where I, you know, had to develop relationships with a lot of people at corporations. And so that's kind of the relational side to me. And so when I was looking for deals, I knew that me being able to leverage my client relationship side was something that was a strength for me. And so this deal primarily came through broker relationships. So very early on in my process at REI Accelerator, there's a point when you need to jump in the deep end and start making calls to brokers, start making calls to sellers and start getting deal flow coming to you rather than you having to go and search out for the deal itself. So that was one thing that I think I learned very quickly, that in order for us to scale as a business, you know, it's gotta be a two way street, right? You can go and put the, put forth the effort to find the deals yourself, but when deals are coming to you, those are the deals that oftentimes will pencil out better. And so this deal particularly was through a broker relationship.

That's good just to jump into and comment on some of the areas that folks aren't talking about. With the challenges that have took place over the last several years in the commercial space, with interest rates, with inflation, with insurance, these things have put various pressures in to the marketplace. It has also opened up the doors of opportunity, even with respect to brokers. Because with sellers, a lot of times, you know, transaction volume's been down the last three and a half years, probably 70% because of those metrics. And so then that creates a window of opportunity and a door of opportunity. Whereas probably in 21 or 2020 on a newer, you know, person that's in multifamily investing, the broker's like, ah, you know, who are you? But in this current moment, they're like, yeah, who are you? Let's talk. And so, you know, to Kevin's credit, he was willing to just jump in and go and, you know, take the information, take the learning, take the understanding, and then begin to make those connections. Because then, you know, you don't know that those connections can start then producing a fruitful flow of opportunity. Not, I mean, there's going to be a lot that's not fruitful, but then the one that is is like this deal we're going to talk about here today. And so kudos to you, Kevin. And for those of you guys listening, I mean, now is a moment in time that maybe didn't exist three years ago. And the opportunity is right here.

Good word, right there. So look, why don't you break down the deal, share a little bit about what were the highlights of this deal, what made it so attractive, you know, when it came across your table, how did that process go? When did you get, when did you come lose your mind and get Tim involved on this deal? No, I'm just kidding. I mean, what, what, how did that partnership form? Tim's, you know, I'm glad you did that. He's won. No, I mean, talk to me about that partnership. How did that, how did that come about? So just break it all down for us, take us through it.

Yeah, so a lot there. So let me, let me start with first saying, you know, there's so many roles, so many different components to getting a deal across the finish line. I think without having the right team in place, I mean, it is very, very, very challenging. And so one thing that I've been super grateful for within this group was being able to make a lot of connections with like minded people who have the same mission, have the same vision, have the same goals to acquire multifamily, you know, create impact. And those are things that, I mean, as we're scaling our business, those are the people that we want to partner with. So very early on, I knew I needed to get people who were smarter than me involved that can help me get this deal across the finish line. And so when I was analyzing deals and working with my coach and you know, digging into the underwriting, we finally came across this deal in particular, and I'll share more details on that here in a second. But through conversation with him, you know, when we finally were able to get it under contract, he actually made the recommendation, hey, you need to have a conversation with Tim. I think you and Tim would get along. You have a lot of similar strengths and personality, and Tim is just a natural at what he does. And, and I think that that was something that, you know, I didn't really understand what he was talking about. But as soon as we had conversations, I mean, we hit it off from day one. And Tim has been super, super helpful to help set up webinars and help on the invest the capital raising side. And he's been super, tremendously helpful with getting the deal to the point it is today. So, yeah, I mean, and just to dig a little bit more into the deal. So the deal, when we initially had it come across our table from the broker relationship I mentioned it was initially on the market for 4.6 million. We were introduced to it at 4.4 million. And the interesting thing is we were interested in a completely different property at the time, but the seller at the other property ended up taking a different offer. And the broker was like, hey, I think you need to check out this deal. Now. When we checked out this deal, it was 4.4 million. And looking at the pictures in plain sight, it appeared that the current seller had already done some renovations to it. And so right off the bat we were kind of like, well, maybe there's not enough meat on the bone here for us to even consider, but let's entertain a conversation, let's go do a property tour. Let's just give it a shot. Let's just be open minded and see where this leads. And this was one of the deals that just continued to get better and better and better. The more we learned about the property, the more we went there. And after our initial visit, the, the the seller had told us 30 units have already been renovated. And to us and our team, that kind of turned us off. But when we toured the property, what we realized is his classification of 30 renovated units was a simple unit turn. So that gave us more confidence that there's much more meat on the bones, especially from an interior perspective, that we can come in there, pump some capex dollars into, increase the rents and be able to have, you know, turn a good profit very quickly on this. On this deal, we went under contract. We submitted an LOI at 3.8 million. And then through our due diligence, we were able to renegotiate the price down to $3.625 million. So almost a million dollars off the initial asking price.

Wow.

So we're getting it at a pretty good discount. So we're pretty Pumped about that.

Let me just comment or interject here. I mean, he just slid right past it. But you're starting off at 4, 4 and LOI and acceptance at 3, 8, you know what I mean? So it's like that is a reflection of kind of not everywhere, every time. But there is that opportunity in the marketplace, you know, for certain reasons. You know, maybe Kevin knows more, but the seller had a level of motivation. Maybe they'd owned it for a period of time. You know, maybe their basis was much lower. Maybe they're looking to move on to something else. But again, I mean, the metrics on that number 4, 4 to, you know, to 3, 8, 600K on 4, 4. That's, you know, you're talking about a 15% discount off of that pricing right there. Not inclusive of the discount after dd. So, I mean, that's, you know, good negotiation. Kudos to you and Kevin.

What do you project this will be worth when you complete your value add strategy?

Yeah.

So. Good question. So we anticipate that we can, we can get it to a stabilized value. About 4.3 million is what we're anticipating. I mean, sorry. 5.3 million.

Wow. Oh, I'm glad you're correcting yourself. I was about to leave.

Yeah, 5.3 million. Yeah.

That will work. I'm glad we can bring proof that there are still deals out there. $5.3 million in how long?

Yeah, so that's what I wanted to dig into a little bit. So we were able to. Because the deal is cash flowing day one, we were able to get a good.

That's what I'm talking about.

Right. There's a good debt service coverage ratio on the property. So we were able to go agency loan. We have a 10 year, 6.33 interest rate. 3 year interest only. And so our plan is, you know, we can do all of the renovations within that three year window. And the, the goal for us would be to, to sell at the end of year three where we can hit that stabilized value at that 5.3 mark. That's our goal.

That's exciting, man. So talk to me about the capital raise process. You know, Tim, are you involved in. I'm sure you played a major part in that. What were some of the strategies around raising capital? How did you guys approach that? I'm glad you stayed sane through the process, but I mean, be realistic. What actually took place and how did you raise oversubscribe by $500,000? I mean, what a, what a exciting thing, right?

We, we went all hands on Deck on this, guys. We, we spared nothing given that we were searching for accredited investors online this time, not just our own personal networks. I joined a number of different other capital raising methods and I employed quite a few different companies that did my outreach and professional funnels, CRM management, the whole nine. And we blasted out ads. What we learned is a lot through this process. Of course, I learned that ads can be effective, absolutely. But you're still dealing with a significant amount of no shows to the appointments or people that just responded to the ad and they're not even accredited or whatever the case. So we learned a lot of lessons through that. And honestly, I would say my most lucrative for this particular round of capital raising was LinkedIn outreach and then again, a little bit of our personal network. Kevin wound up being the superstar here again, and a little bit of his network and stuff really came through. And as you guys know, you know, you grind away at capital raising for months and months, and then the last, you know, five weeks or so is when it all just kind of falls together. Four weeks, things just kind of fall on top of each other. And then we went from basically a few hundred K in soft commitments to a full raise with hard commitment. And then in a matter of around that same week is I was just messaging Kevin earlier today. I've got groups and investors that are still fighting to get in on it now, and we're having to now replace them on other deals. So. So Kevin and I are working together, potentially looking towards the fund of funds model now because we are overraising and we're positioned well for the current timing to scoop up these apartment complexes that are a 9.8 cap like this, where we're picking this up at a steal.

That's exciting. So that's what it's about right there.

That was probably the most accurate description of the whole thing right there. Like a 9.8 cap in the present moment, you're picking up a steal. It's like that's, you know, a lot of. A lot of hard work and it's like that's a reality. But yeah, man, praise God. That's awesome, man. Like, I mean, I'm, I'm super impressed with both of you guys. You guys are just, you know, taking, taking the, taking the, the information. I don't even say information, but taking the wisdom and the knowledge through the group and then begin to implement it. You know, there's a great quote, it says, faith without works is dead. Like, so you could sit there and get all the wisdom and connections and all that. But if you don't like wham, go for it, man. It doesn't yield anything.

So, yeah, the big thing is you guys took action on, I mean, like I said, these deals aren't, aren't in the middle of the street waiting for somebody to pick them up, right? You got out there, you, you found this deal. You put the consistency in, you know, even if people are time constrained, right, and have little time, it's really the fact that you gotta be consistent and you've gotta make sure that you have dedicated, focused time and you're actually progressing. Cause that's one thing about that we talk about a lot is actually being able to get out there and, and put yourself out there. Even if you don't know what the heck you're talking about, just build those relationships and start putting in the script, you know, putting in the advice. And I think that you guys are shining examples of the fact that you took what we talked about and built relationships, growing the credibility in the market, right? Because what you did was you built a brand in the market and you're continuing to build that brand. And now you've got more capital than you know what to do with. And you've got people that are going to be coming back for the next deal, right? All those cold calls, all those people that you generated from ads and maybe they're not investing on this deal. Well, guess what, you got another deal coming, right? You got another, and they're going to be wanting to be a part of that. So guys, you're doing a great job. Let's talk really quickly about financing. You guys did a pretty incredible job at getting this deal financed. And at this scale, for those watching, this is, you're in the financing game, right? I mean you, you gotta have a good deal, but it's, it's about the financing at this scale and when you're doing deals like this. So talk to us about that. It was a 10 year term. What, what was the, what was the deal?

Yeah, so it was a 10 year term. We were able to, because it had good cash flowing on day one, we were able to get 80% loan to value on an agency loan for 6.33% interest. Three years interest only. So that's from the debt side and then the equity side, we're looking to raise 1.5 million that would incorporate some of the capex that we, we plan to do on the property. And I think just one, one thing that I wanted to maybe drill down that Tim mentioned was through the, the webinar that we held. I think that was one other area that we were able to see a lot of success that helped us with raising capital for this deal.

Yeah, you did one webinar and you raised what, 250k on the spot?

Yeah, on the spot. Yeah. I mean, I have to give Tim a lot of credit. I mean, Tim was a natural at putting on this webinar. I think his energy that he brought, his experience that he brought, I mean, you could tell he's done it before. And I think that helped bring a lot of confidence to the investors that were there. And so right on the spot, after going through our investor deck, our underwriting, I think people were convinced that, hey, numbers add up. This is a good deal, I want in. And immediately after that call, we got $250,000 in commitments from that one webinar. So, I mean, they work. I know you all preach that. And we took a shot and this was my first time doing the webinar. And we saw some great success.

We did a follow up webinar as well, because we started getting. I've got an IRA custodian, a self directed custodian that was wanting to bring opportunity to their people that were rolling over IRAs and stuff as well. So we did a follow up with that and we're just expanding and expanding. But one thing I really want to drive home is we followed REI directions, all right? We, it's, it's more than just hard work. We paid for your coaching and your expertise and your experience, guys. And we have followed your directions to a T from the very beginning, all the way through. And so I want to give credit to the education that we've received from rei. And then again, of course, we wouldn't have this partnership without meeting in the group of rei.

Just to comment on that. And I know, Kevin, you said a couple times, you know, Tim's a natural. And I appreciate Tim, you saying that. It's the experience that he gained through the process and now he's sharing that experience with you as a partner in working together. And it's. And that's really the truth. So you guys out there that are watching, you don't have to worry, hey, you're not a natural. No, it's like you're connecting together with a group that's mentoring you down the road. And it's just like, you know, like, good Lord, you go back to Jesus days, right? Like, it's the mentorship model, you know what I mean? And it's like, that's the truth. Of what it is. And, like, if you were to ask Larry, Jonathan, or myself, it's like, hey, were you a natural when you first started? It's like, no, I. I learned, and somebody helped me. You know what I mean? And so, like, that's the truth. And so, you know, that's awesome, Tim, to. To share that and. And then to see you sharing it with Kevin, and then now Kevin's on here sharing it with the listeners. It's like, that's really. It's like how. That's kind of the Jesus model, if you think about it.

Kevin, can you talk more about how you structured this for the limited partners and what. What you think appealed to them the most about getting in on this deal?

Yeah, so I think. I think just to simplify our structure, it was a 6040 split for our LPs and GPS. So LPs got 60% of our deal. And then we introduced a waterfall structure for them. So we had one sizable investor come in, and one of the things that he was challenging us on is, hey, if I'm bringing in a little bit more capital to the table, I want to have a little bit more incentives here. And so we were able to create a waterfall structure that aligned with his needs, but also aligned with ours. Right. If the property's gonna perform and we're gonna meet our IRR hurdles, well, we should be compensated for that, too. So we did a. Any excess cash flow after, you know, the debt service has been paid, after preferred returns have been paid, it's a 7030 split, and then that drops to a 6040 split when we hit our 20% IRR hurdle.

That's awesome. And last thing, you had tax benefits that you're already getting off the ground. You've got. You're projecting the preliminary modeling from your cost SEG team is looking at potentially having 862,000 of bonus depreciation, thanks to the big, beautiful bill in year one of 2025. So on a $3.6 million deal, guys are looking at potentially having 862,000. And is that going to the limited partners or what? How's that. How's that being done?

Yeah. And, you know, when I talked about this deal just getting better and better, I think with Trump's big, beautiful bill, I think this definitely helped, especially when we're talking to our investors. And this was probably the cherry on top for some of them who were looking to either do some tax shielding or needed to place money somewhere. And, you know, we were working with our cost segregation team, our Accountant. And we are able to drill down, right. $862,000 in year one since we're closing at the end of the month, and then an additional 200,000 in 2026 through an improvement study. The renovations that we're going to do. So collectively as a group, it's over a million dollars that, you know, our team, through general partners and limited partners will be able to benefit from. And the way that we're doing that split is based on the equity split. So It'll be the 60, 40 split on where things shape out.

Got you. Oh, man, that's huge. I appreciate you guys sharing that. One last thing. If you are talking to those that may be looking to do what you would be doing or want to level up in real estate in their portfolio, what's some last advice? Biggest things that you would give them right now?

Yeah, I mean, I think if this is something that you're looking to do, you got to take that next step. I think Jesus asked us to have faith the size of a mustard seed. And I think if you have that faith and you want to take that step, God is going to lead you to good things. I think for us, yeah, it was a step of faith for us to go down this route. But God has been faithful. We've been, we've learned a lot. I didn't know anything before I joined the group. The group helped educate me and we just took what they taught us and applied it and they were able to coach us throughout the whole process. And so I would just challenge you if you're on the fence. Take that step, take that step of faith and let God do the rest.

Amen.

Awesome.

Thank you guys. You guys are rock stars, man, and we're praying for you however we can help. Let's also, if you're watching this, I put a link to connect with Kevin in the description. So his capital group, you've got to check it out. It's just amazing. A little bit. Give you a synopsis or a little snippet from his mission here. Everflow Capital, it's a faith based real estate investment firm Inspired by Psalms 1:3. Company's mission is to leverage real estate to create impactful, purpose driven investments that align with biblical principles. So they're acquiring, managing, developing properties multifamily in particular to create generational long term financial growth. So you gotta check them out. They're. They're doing a very good job and I would definitely connect with them and partner with them however you possibly can. So we put that in there. And appreciate you guys being here.

Well, we'll have you on next week with the next deal. Praise God.

Yeah, we'll be visiting the 70 unit deal next.

Right there.

All right, guys. God bless. Thank you guys for watching.