Christian Osgood breaks down the stabilization phase of multifamily real estate: fix deferred maintenance, get units to market rent, and hit 95%+ occupancy. Once you hit these marks, cash flow becomes predictable month to month.
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When you can predict your income every month and your property is consistently cash flowing every month, you've answered the "how do I never lose it" part of our "how do I buy it, how do I never lose it." Hello YouTube, it's Christian Osgood and I am here this week to talk about the stabilization phase. Now previously we did a video on our 4 phases, link is down below if you haven't seen that yet, but we're deep diving each of the sections. When you're building your business, this is critical. So first we did the build phase, we set up our business, Cody just covered that. I will probably drop a link to that video below as well. However, today we're talking about phase 2, stabilization. Now, what is stabilization and how is it different than the next phase, which is optimization? Stabilization means that the asset that you have without any major improvement is doing what it should be doing. So let's say I just bought a sixplex. The roof, it's a 15-year roof and I'm on year 12. I'm not calling this a stable asset, asset. Unless I have built a brand new roof. And now that's not a piece of deferred maintenance. Let's say the water heaters are 5 years past their usable life. Well, we need to get new water heaters before it's stabilized. We don't want any major piece of deferred maintenance holding us back. Next thing we need to do is make sure that the tenant base is set correctly. On real estate, you want to make sure that the income that we're bringing in is about what it should be. So the first thing in that is What is market rent and how close are we to market rent? Now, this doesn't mean you need to be all the way to market rent. You're not maximizing everything. It means you're within striking distance of where the property should be given the properties around you. In addition, we're looking at the vacancy. On the 6-unit example, you should have zero vacancy. All 6 units should be filled. On our 38-plex, if we have 36, 37 units leased, That's basically fully occupied. On a big building, you're going to have some vacancy, but it's within the average. You're looking at 95+ percent occupancy is what's considered a stable building in our market. So all we're doing with stability is simply going, what is the asset? What would I expect it to do reasonably without major upgrade? And are there any ticking time bombs on the maintenance? Once we've got that all done, we are stable. What stabilization allows you to do is have consistency in your portfolio. What you bring in this month should look like next month, which should look like next month. Now I want to be clear, things happen in real estate. Not that long ago, we actually had someone drive a truck into our building, and when we repaired the building, someone drove a truck into our building again. Things like this do happen, especially when you have a lot of buildings. You're going to have things happen. However, you are preventing all the things that predictably could or should happen to the building. I cannot prevent a truck. That's not part of stabilization. Things will happen, but all of your major capital expenditures and repairs should be done. Appliances should be up to date. And that's when you have a stable asset, when you can predict your income every month and your property is consistently cash flowing every month. You've answered the how do I never lose it part of our how do I buy it, how do I never lose it. You're now ready to move to the optimization phase. We're going to have Cody cover optimization here in the next video, which is going to be phenomenal because that's taking your portfolio to the next level. But first thing you have to do is you got to build, then you got to stabilize. More on this is also in our course, multifamilystrategy.com. If you haven't yet, take a look, check it out. Would love to see you there.
