Jonathan Cronin closed an 88-unit apartment deal using investor money by making consistent offers, locking in 6.5% financing, and offering investors 8.5% preferred returns plus 24% ownership. Planned rent increases of $150-200 per unit should add $150-200k annually to NOI and create roughly $2.5-3M in immediate equity gains.
Questions this video answers
88 units
About 6.5% interest
First-year interest-only
Around 8.5% preferred return
24% ownership (perpetual while the sponsor owns the property)
Hey, what's up guys? So it's Jonathan. Right now I am at an 88 unit apartment complex that our team literally just took down within the past few weeks. Okay, super exciting close on the deal. But I want to walk you through a few details of this deal that I believe is going to really help you and three key takeaways that you need to implement in your real estate business or your investing strategy or, or whatever that is. And you need to know about taking deals down like this. Okay? We used other people's money investors to take this deal down and I kind of want to walk you through this. Okay. We did a further, a really in depth underwriting video when we were actually analyzing this before we actually took it down. So if you haven't seen that, I'll link that in the description and you can check that out. But really quickly, number one, okay, that you need to remember and let me just preference it with this, this deal. My partner made an offer on this deal back in December, right. And then it was beat out by an, by another group or whatever. Well, that group didn't come through. They ended up falling through with their, the money or whatever it was. Okay, January we get back in, okay, My partner gets notified, hey, you know, they're still back on the table. You know, other group didn't come through. So right there out of the gate. I want to talk to you about that because number one thing you need to know if you're wanting to get into apartments, value add apartments and create, you know, if you've been following us for any sort of time, you understand why. But you need to remember, make a lot of offers, okay? And be consistent at making offers. We're not trying to just make any mediocre deal work. We're trying to just submit offers and get them out there on the table and we submit a good enough discount and then if they want to buy, great, okay. But we just make a lot of offers and be consistent with offers. All right, so that's number one. Number two, second thing you need to know, okay, this deal was found and the investing, the financing strategy you need to remember, focus on shopping around, getting the best financing. And this is a quick point, but just to give you understanding, this deal was financed for about six and a half interest rate, 6.5% interest and first year interest only. Okay. Now we have great connections there, but at the same time there's a lot of investors that are a lot of lenders that are going to be way higher than that. And you need to look around, shop your options. This is a financing game, right? People in apartments, it said a lot. It's really all about the financing. And so the, and so with that, you know, if the third and last point is simply make it a no brainer offer and really that is going to come. No brainer offer, especially for the investors is what I mean. Okay, so what that means is, and it really comes back to step number one, which is make a lot of offers. We're not trying to just bring decent deals, we're trying to bring killer deals to the table so that we can offer investors something that is remarkable. Right? And so make it a no brainer offer means look for deals where you can, you can get the funds quickly, right? So in this deal, very much time at all, right? I mean, I can't imagine more than a few weeks. The deal was funded, okay. Probably a lot less. Right. As far as investors coming in, putting up the money to take it down. Right? Because what we're offering is around 8 and a half percent preferred returns plus 24% ownership of the deal, which is perpetual as long as we own the property. And so the way, and then on top of that, the way this deal is going to play out, and I'm just going to throw out numbers again, you can go back and check out the underwriting portion where we actually did an in depth video of this property. But the way this deal is going to play out is we're probably around 150 to $200 a month under market rents right now. So we're going to increase the property or improve the property, do a few things there. It's already over 96% occupied. Right. So that's good. But what we're going to do is increase the rates between six and 12 months. Right. And within that time what's going to happen is the way apartments are valued is basically the noi, your net operating income, your profit divided by your cap rate equals your value of the property. So if we increase an extra 150 bucks a month times 88 times 12 divided by, that's your NOI. You're just adding an extra, just say 150, 200k a year to the NOI to the net operating income. Okay? And so what you do with that, you divide that by the 6% cap rate and what you have is an immediate, an addition of around two and a half to $3 million in equity. Okay. So that's why we do value add apartments. Okay. And so anyway, number one, you need to submit offers, make a lot of offers consistently. Number two, you need to make sure you put get their best financing. And number three, you need to make it a no brainer for investors. Okay. So I hope that helps. And if you have any questions, let me know. Sorry, I'm a little winded. It's pretty hot out here today. But yeah, let me know what you think. If you are looking to take down deals and want to scale your portfolio and want to join a group of. We actually have a faith based group of investors that are highly focused on apartments. So let us know if that's something you'd like to be a part of. All right, guys.
