day 10 of the 200 unit

And hello and welcome back to Multifamily Strategy Live. I'm Christian, your channel host. Uh, today, giving some updates from the field. There's a ton of stuff to learn when you are operating real estate, and, uh, we are doing it live. The coolest challenge I think we've ever done, and we're documenting the whole thing on YouTube. So in addition to today's live, you're gonna see this. We just, uh, finished filming episode 3. Episode 2 is already live. 200 units. 75, actually 74% occupied, going to fully stabilized in 90 days, taking a failing real estate project for $12.2 million and getting it all the way to stabilization in 90 days. A personal challenge for me and my team. I'm going to share how we're doing it, where we're at on day 10, and you guys will see videos coming out for this series on YouTube as we document the whole thing. So if you haven't yet, Check those out on the YouTube channel. You can actually see the walkthrough of the project. You can see what we're actually doing for unit terms. But I'm going to give you guys the playbook because developing this is going to make us unbelievably outsized returns. And how we did this, I'm super proud of. So let's dive right in. So we closed 200 units. We did it $371,000 down. I've shared the actual closing statement so you guys can see that that is accurate on episode 1. So check that out on YouTube. It's like a 10-minute video, and I think we actually did a pretty good job. Production team knocked it out of the park. This deal, $12.2 million purchase, whether that's like what, like 1.7% down-ish? Ballparking it. Ultra low down because there's a ton of project to do. It does cash flow day one, but not by a ton. We need to get the leasing going. Problem A. There's 46 units that are not online. We walk through every single one of them. Some of them have leaks, some of them have bugs, but most of them just have junk in them. They're not available to put online. Uh, so what do we do? I drove down with Caleb. We started the trash out of units. We got that done. You can actually watch that on episode 2 of us actually going through and just doing the actual labor. Uh, our rough pay for the hours that we spent there is going to translate to like thousands of dollars an hour. Which is definitely worth my time and cost an $8 pair of gloves. So that's a really super fun episode. You can actually see us do the thing and what it looks like to be active. More importantly, we took what we learned on that trip and hired 2 full-time junk-out teams from a local staffing company. So at $21 an hour, we filled— we put together 2 teams of 2 to junk out units. In week 1, we got 18 units completely cleared out, which means the renovation teams are in there now. Getting them ready. So what have we done in the first 10 days officially? Uh, one, we have hired who we need to hire. So I have an annoying thing in the middle of my screen and I don't know how to make it stop. So we will, uh, we'll figure that out later. But we figured out, uh, we figured out what needed to be done on units. We got the work going, which is the main thing. We have to identify the bottleneck. So if the goal is to get to 95% occupancy in 90 days and we're currently sitting at 74, We have to fill a majority of these units. Like, we have like 40-ish units that we need to fill. So first thing you need to do is you may need to make them able to be filled. Uh, we have a few online. We signed 2 leases this week. So by the end of this week, we'll be at, uh, 2 out of however many of the, uh, uh, 2 out of— it's roughly 2 out of 40 that we need to get to to finish our goal. We have those teams going next week. Uh, there are 2 sets of contractors that will start working for us also full-time, uh, that are gonna break into 2 teams. So the junkout team is almost done. They have one more unit to do. We have 12 fridges that have been delivered, 4 stoves that have been delivered, and a handful of dishwashers. I forget how many. They're all on site ready to be installed. The contracting team's gonna come in. They're going to paint and touch up the units. We're going to replace flooring where needed. I believe we have 30 units that we're going to be doing some amount of flooring on. That is going to be happening in 2 teams simultaneously around the clock until it's done. As units come online, photos are taken and sent to our ops team. We have created relationships with Zillow's management as well as the management of a site called Hem Lane, which I use in Washington. Both of them can help us advertise listings. We're going to be boosting posts on Zillow. Boosting posts on Hem Lane. We're gonna use their premium, uh, listing program. We're gonna be boosting posts on Facebook Marketplace. We have a leasing team on site, and we are giving one more staff member as a part-time so that we can have 2 people showing units while we drive leads there. We have signs on the way to the property, so there'll be big flags that say for lease down the road. And we are adding the phone number for the office on the existing sign, as no one knows where to call if they actually want to lease. lease the building because there's no marketing being done whatsoever up to this point. We're also getting the website made as fast as we can, but that will happen at the speed that it happens. So on a normal person taking over a 200-unit project and leasing one quarter of the building, you'd allocate for about a year to get through it. You'd phase it out. What we have done instead is we raised the capital to get the deal going, and we are getting the building all the way to its occupancy as fast as humanly possible. The challenge is 90 days. We're 10 days in. Uh, we currently have 5 available units. Uh, 2 of those are already leased, so we have 3 that are left that are totally available. By the end of next week, I would like us to open up another 6 to 10 units, and we are simultaneously doing the leasing as we go. Now, at some point here, once the units are turned and rent ready, we'll start replacing decks, of which we have about 100 of the 200 that we're going to replace. So the carpenter will be going around. However, the goal is not to finish every deck in 90 days. The goal is to fully stabilize the building. Then we'll continue. to improve it. It's a super fun model. I'm really excited to execute it. Basically, we took a 1-year business plan, we broke it down, and we said, hey, what would need to happen if we were to do this in 90 days? How could it happen? Which was a super fun meeting to engineer. Also, some of the partners that I have on this deal are actual engineers, so that makes this really fun. But we broke out the whiteboards, the Zoom meetings, we got together, we brainstormed, and we identified, here are the hurdles we're going to Face, what things can be done simultaneously. If this goes to plan, we would be able to turn most buildings around— a failing building in the state of Texas— with the team that we built, 4 times faster than your average excellent institutional operator who would come in and start turning these. Most groups cannot do this in 90 days. If and when we pull this off, we are going to make Unbelievably outsized returns. Now, as a note, I've done some other projects in Texas. Our 76-unit, we are right at where we expected to be rent-wise on year 3. We just finished year 1.5, so we're going about twice as fast on that project as we projected in Abilene. After we got more practice in Stephenville, Texas, both deals are right at where we should be at year 3. One of them I've owned for 9 months. One of them I've owned for 1 year. So we're going about 3 to 4 times as fast as expected on those deals. If you can operate like that, you start getting the attention of other banks. If they have failing operators, people start reaching out saying, hey, we got an operational problem. I'm also getting some owners reaching out saying like, hey, would you guys replace one of my partners? Can we have equity partnerships? But people are getting creative and people want to work with people who can operate. 2026 and 2027, I've been saying this online forever, but like, this is the sweet spot. It's an operator's haven. If you know how to run the business, it's no longer the kingdom of the capital raisers. That was 2022, or that was 2020 and 2021, where anyone who could market could put together the money to buy a deal because everyone was all excited about real estate and it was like, yay, low interest rates, prices are really high. It was why people are losing the real estate to me today. Today, operators are rewarded. If you are someone who wants to run a real estate business, Rates are up a little bit. All of these things are good. It's pressure on people who bought wrong. It's opportunity for you. And only operators, true operators, survive and thrive in these environments. If you load up right now on real estate, when we get another real sexy real estate market, you're the one who owns all the stuff. When you see that next big push of appreciation, when things lighten up and interest rates drop and prices rise, You get in now as an operator so you can reap all of the benefits when everyone else is fighting to get in. This is a plus plus plus plus plus plus plus for buying as an operator in this market. That's what we're doing on that, and that's the update from the 200 unit. Now, as always, we answer questions from the chat, and I have a few. It looks like common stand questions. Also, I ran out of contacts today, so if I'm looking squinty, I apologize. I can't see all that well. Jordan says, "Great job! Amazing deal!" Yes, it is, and. We raised enough to start the project. So if you happen to be an accredited investor, I can market this because it's a 506 and we have filed it. There is still room on this deal. So if you're an accredited investor and you are interested, let me know in the comments and we'll follow up with you because this is on YouTube. It's the best way I know to do it. But let us know if this is a deal that you are interested in. Returns on this are looking sweet. We originally projected about a 21.5% IRR. Um, it's looking like we're going to surpass that by quite a bit. What are your requirements on screening tenants? Uh, screen tenant is going to vary a little bit by what the project is, because I do do some 55+ and some LIHTC properties and some properties that are LIHTC and 55+. Uh, so it will vary a little bit based on how much Section 8 we're working with. If it's low income or market rate, Class C, B, we'll put the requirements based on what the property wants to be, uh, but within reason. So I want to see a reasonable credit score in some areas. 550 is a reasonable credit score for some entry-level housing. In a lot of other areas, I really like to see 625 or higher, like minimum. That's not our target, that's the minimum. Um, I don't want to see any criminal background record, um, of note. If you committed— if you had like a petty theft 10 years ago, I don't really care. Uh, if you recently committed a felony, um, or if you've ever, uh, been a sex offender, you're just not going to rent in our buildings. We have family in our buildings and Sorry, I know people can recover and turn their lives around, just not a risk that we are willing to take. Uh, so those are all requirements. You need to make 3 times the monthly rent if you're Section 8 and you have government assistance. You just need to make 3 times your portion. Uh, but those are the basic parameters that we'll look at. And we're looking at income and ability to pay. We're looking at their criminal background and we're looking at credit score. Those are the main things. And in many states, that's the most that you can actually do. Great question though. What do you think about New York? Too hectic of a market to start? Uh, my main thing with New York, and I have some people in Multifamily Strategy, uh, who I mentor who are successfully buying in New York, New Jersey, Rhode Island, some of these hard areas in the Northeast. Um, you need to have a very solid why for when you're doing that. General thoughts on New York, they actively publicly hate you. Your government literally hates you. Why you would do that when you can just invest someone else where they want housing? I don't know. I just saw this is not a political channel. This is just commentary on things that are actually happening in New York. So disclaimer: I don't care how you vote. This is just a thing that's happening. New York under Mondani is building a whole bunch of affordable housing and getting a whole bunch of credit for it. However, publicly, so I'm not like this isn't like a conspiracy theory. This is literally what they've said: they want to move housing from private landlords to government housing, which is generally speaking pretty bad for everyone. But that is up to you whether that's something you like or not. I don't care. When they rent freeze the landlords, they force landlords out of business, and then they come in and build new housing that's government controlled. I don't know that I want to compete in that market with that. Thing going on personally. When I can go to a neighboring state like Pennsylvania that's relatively landlord-friendly, has lots of cash flow opportunities, and doesn't have the same restrictions, I would rather do that personally. So I always give everyone my 2 cents, and this is true when people join Multifamily Strategy. If you live in New York and you want to invest in New York, look around in New York. There's a boatload of buildings someone owns Every single one of those buildings, and I guarantee you they're not losing money. You can make this strategy work in any market. You can— these strategies work everywhere. How hard you want to play the game. You have a specific reason on why New York. Non-recourse versus recourse loans, refinance into non-recourse after stabilization. Here's my thing with non-recourse. If you are buying low money down, so you don't personally have a lot of money in the deal, even if it's raised capital, you cannot take tax benefits beyond your basis. Your basis, if you have recourse debt, is the debt plus the cash you have in the deal. If it's non-recourse, your basis is the amount of cash you have in the deal. So depending on if you're an active or passive real estate investor, there is actually a huge potential advantage of having recourse debt. I have had years and transactions where we had an option for non-recourse and I opted for a recourse loan specifically because of the difference in write-offs that I would get on that deal. This is not tax advice. This is just something that I have done. Non-recourse simply means that if you default and they sell the property and it doesn't cover what they lent on the property. So basically if you massively overpaid for the property and the market turned, They could come after you personally on your other assets to be made whole. You would have to do a tremendously bad deal. It's the— there's a lot of things that happen before that actually comes into play. So it's not as risky as it sounds, but non-recourse just says like, hey, the deal is its own collateral. That's it. I have non-recourse loans. I have recourse loans. There's reasons that you would and wouldn't do each of them. One is not better than the other. Online marketers love to tell you non-recourse is the best ever. It's a different flavor and has its own sets of advantages and disadvantages. Know that going in. It's really easy to market on non-recourse. There's no risk. Non-recourse does not mean no risk. It means a different risk profile, a different reward profile. That's all it means. I'm in upstate New York. Upstate is different than New York City, New York, and I have investors who have successfully bought in upstate New York. I have investors who have bought successfully in New York, New York, like the boroughs. Um, so statewide, you're not landlord friendly. Much, much, much easier to do upstate New York than it is, uh, New York City right now. That being said, you can make money anywhere in real estate. It's about the individual deal, not just the market environment. But know going in, in New York, your government is not Uh, not friendly towards landlords. They, they— you will have difficulties. You're gonna have more expensive evictions. Um, raising rent will be harder. Um, and you, when you have political environments like this, and I, I've invested heavily in Washington State, which is a very blue state. When you have policies that are expressly anti-landlord, what you will find is that the people who live in those areas are also anti-landlords. You're going to have tenants who feel entitled. They will do things that they literally wouldn't attempt to do in other states where they actually have a penalty for being— I try not to curse on this channel— for being dumb. From Jordan, at what point— I put my camera right in front of this. I need to come up with a better setup for that. At what point do you elect to become an escort in the LLC that's holding the wealth? Don't become an escort. Uh, but, uh, in the LLC that's holding the real estate, I think, I think it was supposed to be, uh, an S corp as the LLC would be my guess. Um, educated guess, but we'll find out. Uh, obviously, uh, speak with the CPA. Uh, so S corp, I usually would not do an S corporation as a real estate holding. I'd usually do them as a general partnership. S corp, if you have a master holding company that holds a lot of them and you're going to start drawing a salary. you don't want to get double taxed. So it depends on how you're taking draws. The right answer is speak to your lawyer and your CPA on how you want to structure it. But generally speaking, S corps I look at for, um, real estate companies like my PM company would be filed as an S corp. Multifamily Strategy is an S corp. Um, I take salaries, uh, for my positions in those companies. They're all companies that make multiple 6 figures a year, um, or 7 figures or More. Uh, but as we're building these companies out, um, when you have a company that's making a lot of money and you have a salary in that company, uh, that's usually when you would S corp. Um, if you are doing occasional draws and normal distributions, uh, from an LLC, often your depreciation on a real estate, uh, transaction offsets that income anyway. So it's not a taxable event. Now you still pay Property tax and sales tax on all your maintenance. You pay a lot of taxes, but actual income is usually offset by the property itself. So often you don't see a lot of S corporations specifically in, in real estate. And I figured you meant S corp, but I had to say it out loud. I was like, become an escort. I don't think that's what we want to do. But yeah, you gotta make money somehow. You might as well do it in your own LLC. No, S corporation, great for active businesses that have salaries that has taxable income. Generally speaking, that's how I use it. Not a lawyer, I'm not a tax professional, but I do process a lot of money through our accounts and I do get paid multiple ways. So I have salaries and draws and cash out events and they're 1099 income and W-2 income and All of the things that go in, there is a time that you want to S corp, but almost always that's a business where you have active earned recurring income. Fun set of questions today, by the way, guys. Thank you for participating. I appreciate that. Everyone's always invited to participate in the comment sections here. One of these days I'll do a better job of marketing Whiteboard Wednesday, our Wednesday lives. You guys can ask as many questions as you want. I just don't push it as hard. I love being here and love the topics, but we get way more views after I post the live video than actually on the live, which I've always found amusing. But appreciate you guys a lot. If no one has any other questions, we'll go ahead and call that a live. But the 200 is doing fantastic. Look out for that next episode of the 200-unit building. I'm very, very excited as we go through this. We'll have updates on that every week as we go through the 90-day turnaround. Let's see if we can actually save this. Deal and not only save it but completely stabilize it in 90 days. I believe we can. We are technically ahead of schedule by about a week, uh, from the 90-day schedule that I put together to actually pull this off. So we will see if we can stay ahead of pace and absolutely knock this out of the park. If you guys haven't had a chance yet, you guys can check out our school community. There's a link on any of the normal YouTube videos, not this live, but anywhere else. S-K-O-O-L. Whole community of people I'm investing a ton of time into it. I've noticed it's getting a lot more active. So we're seeing deals— saw a couple deals get posted there today. Uh, people are partnering actively, people are finding deals, your questions get answered. There's a whole community of people doing this, and it's like $2 a month. It is the best $2 you'll ever spend, S-K-O-O-L. You guys can check that out, Multifamily Strategy on Skool. That is, uh, I host the mentorship in the classroom section of that, but you can be a part of the fun Even if you're not a part of the full mentorship, you can participate in that same community for significantly less than a cup of coffee, which is funny 'cause the next comment is join the school community. How can I join the VIP section? Well, that is the mentorship. Book a call with my team. What's really important to me, we are not a group that sells to anyone and I wanna make sure that people who are in the program, what we have is about 80% of people who join the mentorship buy a deal within 6 months, like fully closed cash flowing deal. And if you go beyond 6 months, basically everyone will. You know, there's always a couple of people who decide like halfway through, hey, I want to buy a laundromat instead or something stupid. But generally speaking, ludicrous success rate. We literally will not let you join if you're not a good fit. So if you are like, hey, I would like mentorship, it's a program that costs a little less than $10,000. You will get a ton of time, ton of attention. We'll meet 3 times a week. The structure is awesome. coaching this for over 5 years. Success rate is unmatched in the industry, but you have to legitimately want mentorship. So if you're looking for the community, check out school. It's a great place to start learning. If you wanna dive all the way in, join the full mentorship. It's an option. This isn't a sales pitch for it, but you guys are always welcome to join us there. And with that, that is what we have for today's episode. Fantastic seeing you guys, and I will talk to you guys again. I'll see you on the next episode. We'll be back on Wednesday.