Episode 017: The Midas Touch?

The Midas Touch? Listen to David Lindahl interview Dan and Chuck who work at the Pentagon describe a deal that took an $11 Million Property and make it worth $30 Million! Listen to how they tell you that you can learn how to do this type of deal too – maybe not with the exact same results, but hey! Not bad! Right?

Speaker 1: Stay tuned for a special edition of the multifamily deal and podcast. Welcome to the multifamily deal lab podcast, where we dissect a deal before your eyes and ears. So you can discover the strategies and tactics that got each deal to the finish line strategies and tactics that you can put in your own toolbox to get you to the closing table from sourcing the deal, raising due diligence to the property takeover, multifamily deal lab shows how you too can get the deal done. And now here’s your host, David Lindahl,

Everybody welcome to multi-family deal lab. I’m your host, Dave Lindahl. And with me is Dan and Chuck. And now they’re going to tell you exactly who they are and where they’re from. And, and then we’re gonna talk about a Deal They did. So guys tell everybody who you are and where are you from Yeah, my name is Daniel Woodford. I live in the Northern Virginia area, DC area. and, Chuck Truska also live in the Northern Virginia area. I work right next to Daniel in the same office. And, we met about three years ago and, I, got interested in real estate because of Daniel’s keen interest in real estate. And here we are together three years later, working some deals. So you guys are partners. Now, you guys are both now behind you. You’re a dance home, I assume. That’s great. And, we had talked earlier and Dan’s, family’s behind as well.

Speaker 2: And the American flags behind you also, and you guys are both military. You want, wanna explain that connection Yeah, I’m actually active duty military stationed at the Pentagon and Chuck is a retired air force. he’s also, he’s a, he’s a government contractor there, and we sit next to each other and Pentagon. Awesome. all right, so let’s talk about the latest deal that you’ve done. First of all, what was it, where was it and how did you find it Well, it was a, it was a 40 unit, apartment building and it was in Richmond, Richmond, Virginia. we found it actually through, just kind of searching for a broker, searching for a broker bond, a really good broker who gave us a basically a pocket listing. Okay. So before you go any further, let’s talk about the brokers. Like how did you find the really good broker, you know, and what did you do to establish that relationship and how long did it take them to get you a, a good deal

Speaker 2: Well, we, it really, to be honest, it didn’t take that long to, to, to get this deal. we, we called him and, you know, he really was, you know, responsive to what we wanted to do. The, a lot of it, I think, stems from the competence that we gained from, you know, just kind of understanding the process and in the materials that you present and that type of thing. So, we went down there, we saw the, we saw the building and, and, and the rest of us pretty much goes from there. Well, let me fill in a little bit more Daniel called seven or eight brokers. And this guy we selected was the, that was leaning forward for us. And it seemed really interested in doing some deals with us. The others were kind of laid back, didn’t call back, or didn’t seem too interested.

Speaker 2: So I think the key is finding a guidance interested in doing deals. Yeah. And not everybody you meet is going to be interested. As a matter of fact, you know, it’s a numbers game, but eventually the cream will rise to the top and you create some sort of, relationships I’m trying to commonality. And then you move forward. We went down there, established rapport with him, used a lot of the, the knowledge and techniques that you’d given us in the July conference in March. You got the broker, the broker sent to the deal, from, there. Okay. So you analyze the deal, you decide you’re going to put it off, or how much, how much did they ask for and how much did you eventually settle for How much did you actually get the property for They asked at 1.6 million for it, and we actually settled on 1.1 million.

Speaker 2: That’s pretty good discount. 500,000. How did you get such a big discount We figured we used the liquid that we use, the technique we saw that it was under-managed and the occupancy was right around, you know, low eighties. But we, when we noticed other properties in the area were in the nineties, you know, mid to high nineties. So we thought it was, you know, under managed there. and so we kind of made a, made an offer based on that. We knew they were motivated. Oh, why were they motivated Didn’t fit their property mix. They had about a thousand other doors. It was a nonprofit and this was the black sheet. Okay. So how did you find out that information from the broker Oh, from the broker. Did he give you some good information Yes, he did. All right. That’s good. That’s good. All right.

Speaker 2: So when you’re going through the process of buying this well, first of all, it was, you got it for a 1.1. How much was the raise of where did you get the money the race was, $250,000. and we, we got it from friends and family basically, and ourselves. Okay. So you put some money in yourselves and then you went to friends and family for the rest of the money. Okay, good. and then going through the deal, as you’re doing your due diligence, and you’re putting everything together, what were the obstacles in the deal What were the ups What were the difficulties It went very smoothly. We didn’t seem to have any difficulties. I recall, I can’t think of a think of one off the top. All the due diligence came back. okay. The financial and the physical, we did everything you recommend and it looked like a green line all the way.

Speaker 2: Oh, sweet. Okay. So then you, you get to the closing, you close the deal and then it’s time for takeover. What, what are you doing for management Have a property manager, it’s, that’s taken care of it. And he pretty much changed over from what the other, the other property man. And how did you choose that particular property management company And why didn’t you stay with the existing property management company Kind of interesting. The existing alas existing management was done through the non-profits. So that really wasn’t an option. So we, so we, we looked around for property management and this person, was referred to us by our broker and we met with him and then we called, it was interesting when we called our bank and told him who our property manager was, he was excited about that because he knew the guy and he needed it.

Speaker 2: So basically we had multiple references for this person. Did you take your phone through the broker The broker recommended them Yes. All right. So it sounds like it’s pretty smooth deal. It wasn’t, yeah, it was pretty smooth. Right. And, how much does a afford a unit property grow up and cash flow each month Net nets. This is a, I think right around 6,000 after mortgage-free as a Mormon. So it’s about 6,000 after the moment. What about after all the other expenses as well By the 6,000, you’re going to be putting 6,000 in your pocket each month. Yeah, we can. Yes. We were given a pretty sweet deal for 40 units, that we spotted and we want to, we are raising the rents and the processes that cause they’re low and we got some money back from the bank to do those repairs. So you’re taking that money.

Speaker 2: You’re putting it in and you’re doing some repairs on the property, but it has a value play of low rent. So what was the occupancy going into the property it was right at 82%. Ooh, 82. So now you have another opportunity to raise the occupancy, raise the rent and a dam. So what’s that 6,000 going to turn into when you get the rents in the occupancy rates vacation to look at it. I don’t have the exact number, I guess. Yeah, but you’re going to, I mean, you increase that occupancy by at least 10% because you’re going to get into the nineties and then you increase the rents by how much per door or you increase the rent by some of the one bedrooms go. We were able to create $60 a door. Oh, that’s pretty good. So you’re looking at at least probably another thousand to 2000 per month, an additional of up and above the six.

Speaker 2: That is a, that’s a pretty smoking deal, you know, has that, broker turned around and ready to give you another one Actually he has he’s yeah, it pretty much the open the doorway for us, or, several other different deals and they’re much larger deals. And, the broker knows of the cashflow off of this one. And we’re in the little circle of friends that we’ve made down there. the attorneys, the bankers, and what have you, we can leverage what we’re getting off of this into bigger views. Oh, absolutely. That’s how that is exactly how the game is playing. So one of the deals that, he offered us is, is, is, it’s a 110 unit apartment building. It’s a historic tax credit deal in the Richmond Petersburg area, 110 units apartments and 160,000 square feet of commercial space.

Speaker 2: And that was going to be about incredible $19 million deal. That’s a pretty big jump that’s going in. And when it’s finished out approximately 30 million, the profits are going to be 30 million. Yes. Wow. How much are you going to have to put into that to make that profit margins 1.3 million. That’s not much 0.3 to get it back. 11 million. That’s pretty, how many, how many doors is that It’s a hundred. It’s 110 apartments. Yeah. And, it’s a, it’s 160 square feet, a thousand square feet. It’s amazing what opportunities come your way when you do business properly, you know, you do what you say you’re going to do, you know, how to paint in the bot, you perform all of a sudden, all the doors start opening for you. Those were keys to building the competence with this broker and we used this offering or opening doors for more and more deals, two or three more that are in the worst.

Speaker 2: That’s awesome. give some advice for anybody who’s either just starting out or maybe hit a plateau, give some advice to how to move forward in this business. Well, I would just say, you know, just keep going, you know, you had, you had a good point. I anticipated that question. I think it’s just overcoming your own personal inertia. you have to have the will to go forward Africa to keep working there little by little, but don’t wait too long. You’ve got to, you’ve got to take what, what you’ve given us, have the confidence that you can do it and go out and start using those tools. Daniel’s done that and it’s paid off with that. That is a great deal. Well, we, we, we are leapfrogging from one deal to another. We, we got the 1.1 million unit and then it was a 2.5 million unit.

Speaker 2: it’s commercial space and apartments. And shortly after that, this $19 million pop, was presented to us. And for a very small amount, we were able to buy a large portion of that. We’re raising the money for that. And of course, using genes, skills. we’re going to have to do a syndication for that to raise the money, but that’s coming along that we’re doing the paperwork as we speak this afternoon. that’s awesome. What, what challenges did you have at the beginning I should have asked that question, but what challenges did you have before you get into that first deal I think a lot of it was just finding the, finding the market. Cause originally we were looking at Dallas and, and you know, some more in Florida, but we found that, you know, with our work schedule, that kind of thing, we weren’t sure how out that we were going to be able to be, you know, as far as due diligence and getting there and, and kind of evaluating properties. So we chose a market that was close and we chose Richmond and, and North Carolina Raleigh-Durham area. Good stuff. All right. Well, great. Well, I appreciate you coming on to this and doing this interview. Thank you guys. Have a great immigrate time.

Speaker 2: Take care. You too. Thanks.

Speaker 1: You’ve been listening to the multifamily deal lab podcast, where the deals get done. If you’d like to learn more visit Dave’s free book.com and don’t forget to leave a five-star rating and review and hit that subscribe button. So you don’t miss an episode. Thanks for listening.