How to buy a 350-unit apartment

0:00My bread and butter is residential for units and Below long-term I just love those in fact when I started getting investing in 2006 there wasn't short-term property managers now there were a little bit of short-terms here and there but people would have to do it themselves it wasn't really until like 2020 into 2021 that property managers really started exploding maybe a little before that like 2019 but before that there weren't any property managers and I am a passive income type of guy I didn't want to buy a house that I would have to manage to make money I I just wanted long term so now short terms are great because there are so many amazing property management the systems known now people know how to do it and property managers are out there so started single family home buying property after property lived in California at the time in 2006 but bought in Ohio because C prices

0:48In California were just crazy you couldn't rent to make passive income bought in Ohio and since then now invest in Ohio Texas Arizona Indiana and Tennessee I think there's one more state but I that's let's just stick with those but yeah 30 plus rental properties right now single family homes I only have one short-term property because I was always like I just love long term because in long term it's so little headaches and I make money but then I thought you know what let's look at doing a short-term Pro because Kirby's doing a fantastic job he's got 30 over 30 listic which is just mind-blowing to me I was like Kirby's making a crapload more money than me I better start working on my short-term game but so 30 plus longterm then I have one one short-term property which is doing amazing by the way I

1:37It's like so I'm in Murphy's Boro right out of Nashville about 30 minutes away from Nashville but it's doing really really well and then so 30 plus Properties Plus the short-term one property then I've invested in some hotels so I have some hotels which I've always loved Monopoly growing up and so this was a chance to play Monopoly in real life getting all the way to Hotel so I checked and got that and and then oh remember the very first thing that I said was getting around the awesome people and helping all of us helping each other out so because of my conference the real State Wealth Builders conference which you've spoken out all the time I mean I don't think it would be the same if you weren't there every year but thank you U I also met some friends there they've spoke spoken every year and they it was about a year ago they said hey Dustin we think that you would be great at

2:25Being a partner on these multif family big apartment complexes I was like yeah that'd be great as long as there's a good deal because I'm not a syndicator and so for everybody listening a syndicator what they basically are is their salesman that's they're not going to like that I said that but this is the absolute truth because I'm not a syndicator they are salesmen somebody else an investor like me or Kirby gets a deal and these people they're good people don't get me wrong I'm not saying they're bad at all but they just want you know understand the perspective what the syndicators do they then go out take that deal that Kirby or I have and they go find other people to invest in that deal and they the syndicator get a portion of it it's not a bad business model at all it's not but at the same time that's what they are a Salesman and I decided because I'm an investor I I if I'm going to invest in something I better believe in

3:13It wholehearted be believe in it and I'm going to be buying into it so fast forward friends of mine who are only in the multif family space they love multif familyart huge apartment complex I think they have like 2,000 units all together they approached me and say hey Dustin we want you to be a part of the asset management which means ongoing just making sure the property's you know manager is doing great we're fixing it up the property getting better Insurance all that sort of stuff and we want you to help raise Capital which is the number one thing that any big deal needs is access to Capital to buy the property and so I was really blessed to be a part of it 355 units in the same city literally a five minute drive one one and a half miles away from the Airbnb I bought so it's I'm fully bought into this prop this area beautiful area yeah Middle Tennessee state is there but anyways 355 units I raised

4:021.5 million from just my podcast and sending out a couple emails which was really I was excited I was like man that's great but it was because I was around awesome people these awesome people that are my general partners with me they are known as buyers of real estate buyers of apartment complexes so there was a distressed seller in in Tennessee they were distressed they had another property that they needed to offload or this property they needed to offload because they had another project they needed money for well we bought it for 60 cents on the dollar basically 60% of the market value because they needed to close quick and they went to the realtor and said who do you know that closes properties really quick that can raise this much money well they went to my partners the Friends by mine that spoke at rcon they brought to them then they brought me on fast forward it's all about being around the right people and

4:50Having the right people look at you as somebody they want to either potentially work with or help out that's the reason why for me I just love how how do we get as many people together because we all win when we all work together but yes so that's my big port or a big picture of my portfolio three 30 plus properties one shortterm hotels and now 355 unit apartment complex wow wow yeah one thing you're like really good at is is getting people together and and I think a lot of people get ideas like oh it'd be great to have a conference you know where all my friends come together and speak and you know there's all this learning opportunity but then they're like the next breath or the next thought is like well that's a lot of work and what if it doesn't work and all that you tend to not have that second thought it feels like to me U you're

5:39Just like yeah there's probably going to be problems but we'll just figure it out as we go and you know you put it together and and it I mean it's worked out amazingly but a deal like that that you just described is a result of bringing people together being in that room with other really smart people who have access to Deals like that and so I guess what what about that deal I mean obviously the numbers made sense but you said you're you're you've bought into Murphy's bro what why why do you think that's a good Market great question so number one the friends of mine that I'm investing with I met them through rcon the real estate wealth builds conference they're a part of me with as I'm doing the rcon multif family which is all about commercial

6:27Real estate investing so they live there live in that they actually moved from New York to Tennessee because they were building a big portfolio there and they started buying there and they really loved it so they moved out to New York and then then they they said Dustin you need to move out here this place is fantastic I'm like okay we'll see so I anyways I went and visit it which was a lot of fun but then I saw how terrific it is out there just down toe people which I love I moved from California to Arizona lived in Arizona for about seven years now moving to Tennessee eventually but all that to say the reason why Murphy's Burrow is because outside of a huge area which is Nashville new huge city which is Nashville I mean oh my goodness if you want to buy a short-term property there like an Airbnb a condo I mean you're GNA be spending 600 Grand maybe more for for that and it's not going to be making you that

7:15Much money but 25 minutes out of Nashville is Murphy's Boro we get booked up all month long basically because we are in a great area very few like the inventory or amount of short term properties are much lower so for my short-term property doing great and the apartment complex too it's because my friends who already own I think 1500 in that area they also have other apartments in other cities but they have 1500 units in Murphysboro so economies of scale is really really huge they have one property manager that's only charging like three maybe three and a half percent per unit to manage all the properties so that's the big reason why Murphy's burough is they've been in there for last I don't know seven or eight years and then with me seeing it's outside of Nashville people still

8:04Like you you always say hey people still have weddings people still have deaths and funerals and they have graduations and vacations like people travel everywhere so if you're able to find a good property then it's going to do well as opposed to Orlando you're going to pay up way overprice and still if you buy in these better areas you're still going to make good good money now one quick last thing I'll say the reason also why I picked Murphy's buror for my short-term Prof property is eventually my wife and I want to move out to Tennessee from Arizona so I thought I want to move to Tennessee but I I'm a West Coast guy I've never lived on the East Coast I might not like it you know it's my like Southern Southern East area I might not like it so I'm going to leave my house we're going to do midterm rental in my house in Arizona move to Tennessee and see if I like it but I knew I was not going to

8:52buy a home that's going to be a permanent house I said I might not like it so I bought in an area that I know would be a good investment property so the house we bought is an Airbnb in end of November after our conference in November my family and I we're going to move all the way to Tennessee and live in Tennessee for at least a year see if we like it we might find another a better area that we're going to buy another house and build or something I get you get a lot of land I love having land or I want to have land but then leave this property the new one in Tennessee as a short-term property so I bought it as an investment to move there to see if I like it and if I don't I'll move back to Arizona and go back to the house I lived in or we will like it and then we'll find and buy another house and then keep this but the idea was test it out see if I like Tennessee then move into it but I already know it's

9:40a producing asset this short-term property because it's already making me money that's so smart yeah so many people think with their emotions first and then they're they they don't think about the actual numbers and so you know you can still check the boxes on all the things that you want and need personally in a home but then Ju Just you know kind of qualify that into a property that that works you know from from a investment standpoint as well so that way you're never in a position where all a sudden you know I'm I'm in this house I can't afford or anything like that you know it's always going to be a great investment long term so that's super smart so I guess if you could kind of share a little bit more about this 355 unit deal

10:30What I guess what is the the metrics that you were looking at there to see like or or to decide yeah this is a deal that I want to do like what you guys buy it for what what are you projecting on it and that sort of thing yeah so there are a few criteria for me to become a I guess a partner in any large apartment complex and a number of different key criterias I'm going to give you the big principles and there there's a lot of underwriting things which is like the numbers I'm not a numbers person at all I see spreadsheets and I run I'm like okay just give me the bottom line but there are principles that I use when I buy any property even a 355 unit apartment complex so just like you Kirby I try to make sure that I make money when I buy the property well what does that mean capturing Equity

11:19So this one property they like I said the sellers had a project that they needed money for so they need to sell this one they bought it they've had it for like 15 years so they doubled their money and we got it for 60% of what the market value was now they could go to market and make more money but they didn't have the time so I love buying distressed properties not like dilapidated that those are fine too don't get me wrong but when I say distressed the seller is motivated to sell at what a price that they normally wouldn't so this property was 60% of the market value so the total purchase price was 32 million we raised $12 million for it the three partners and myself and so that's one is we capture Equity when we bought it so we captured 40% Equity right I mean if we had to fire sale it we'd like okay let's just get out under

12:07We're going to make money so that's number one number two cash flow so we don't get into a property unless we make money but then we also don't buy the property unless we're making cash flow we're making money right when we start buying it now if it's rented already like this apartment complex is then that's fantastic so I look at am I going to be making money and on this 355 unit apartment complex we so the property and so here's a little bit Nuance too when it comes to commercial properties more to learn that's why we have the Rubicon multif family because it's not as simple as a single family home that's so simple it's really really simple there's other things like as you know if you're having short-term properties occupancy is it occupied more than it's not so I look at the occupancy of this property well is is there also a value ad so when I look at occupancy I'm

12:56Looking at is it rented like all all the units is it like 90% or above if it's below 90% then there's a value add which means we fix it up we make it better and we make it worth more this property itself there was two things number one they were about 96 to 97% occupied which they were really really good that's that's a really good yeah that's a really good occupancy we will try to get up to 98% like just a little bit more which would be great but you never really want to be 100% because then you're not charging Market rents like people are just staying in there and you're not making money you should so occupancy you want to make sure that's up but then also value ad I like and same thing with a short-term property or single family home Force depreciation that's what value ad basically means is you put money into it let's say you put single family

13:45Home let's say you B you put in $20,000 to fix it up and but then it's worth $50,000 more total so you made 30 grand by fixing it up same exact thing so these are remember these are principles that for any property you just have to have a little Nuance for each type of property that you're going to be buying so I that's what I also look for can we put money into it to make the property worth more but can we also get the rents up can we increase the rents so so far if you track with everything I've shared this one property check check check all these different things that are in my brain of what I need we're checking off and then here's another ex excellent thing on top of that was two other last quick things the loan or the the debt that we're going to take on the property and the other one expens so I'll get to the debt in just a second but quickly say the expenses I

14:33Knew that we could lower the expenses on the property because my partners already had a great Property Management we're going to go from like they were paying 4% we're going to go down like I think three three and a half percent which is great we also have a lot of other ways to decrease the expenses so that's going to increase our income and then the last one is debt now when you have a single family home that's totally different type of debt or loan loans than a commercial property commercial properties they are only three to five maybe sevene loans and then you have to refinance or sell it because it's a business loan now a 30-year fixed single family home is the by far the absolute my favorite the best because your mortgage doesn't go up and after 30 years it's paid off commercial loans are not so here's

15:21One thing that I will say and finish on on the debt or the loan part A lot of people that are syndicators remember the syic as a Salesman I told you about they're actually having a lot of problems right now because the way the syndication works is it's a model where they buy it at a certain price and then they hope another syndicator is going to come on top and buy it for more three years later so they make money then another syndicator come on top and buy it for more three years later and then another and eventually somebody's left holding the bag so there's a guy named Brandon Turner he was formerly a bger pockets on a podcast or doing the podcast well he has literally stopped all distributions on his syndications you know people invest their money let's say somebody puts $100,000 they're hoping to get 7 or 8% return a year well he's literally stopped that and this he's not the only one lots of syndicators have stopped distributions

16:10Which means they're not paying out Investments and a lot of them are doing Capital calls which means they're going back to their investors and say hey investor if you want to stay at your same Equity you got to put more money in here's the reason why they're losing money just like if you started a business selling candy bars and all of a sudden your expenses are too high and you're not making money well you got you got to put money into the business to make sure it keeps running same thing with syndications and so I'm seeing like Brandon Turner stopping distributions lots of companies doing Capital calls I wanted to make sure because remember I'm not a syndicator this is an investment for me I want to check off every single one of these boxes so anytime I get into a deal for myself or if I'm partnering with somebody else I make sure these boxes are checked off because the last thing I want is money coming out of my pocket we don't get Investments for that so when I boil everything down this was liter

16:59Like if if I would say that there was like in baseball a base hits great just like if you get a single family home you do a Airbnb and you're making $500 a month that's a good single you know four four $500 a month a good single then a double you know gets better and better so for the multif family 355 units this is literally a grand slam I I was that's why I was like I'm so on board because it checked off every single I mean 32 million that we're buying it for we captured 40% Equity that's a lot of money also one quick on the debt we got ayear loan normally it's 3 to 5 years we have a sevene Fanny May loan which is really really good we underwrote it which means we ran all the numbers at 6.81 no 6.18% interest rate on $32 million that's a lot of money we actually closed and we got a better interest rate 5.81

17:49At $32 million that's a lot of money saved so like I said exactly it's a grand slam oh