Happy new year! A question for you.

2018 was extremely productive as the commercial real estate market continued its hot streak.  Prices have steadily increased, as has occupancy at all our properties.  Now in 2019, deals are challenging to find as sellers seem to thinkthey’re properties are worth more than their numbers show, but that’s why I focus on conservative underwriting and look for great deals that are supported by numbers (not just ok deals that seem shiny).

I wanted to start off this year by asking you a quick question, and I’d love to hear your thoughts.

ARE YOU TOO BUSY “WORKING” TO SUCCEED?

Obviously, “success means something different to every one of you, but to me, success means living the life you truly want to live, not just the life you’ve ended up with.

You see, I talk to people almost daily who seem to have no real goals, no plan when it comes to their financial lives, they’re too busy working!  They seem to just think ‘it will all be ok somehow” as long as they go to that job and do what they’ve been doing year after year. Heck, they may even get a small raise every few years!  Congrats!

But think about it, is all that work actually lining you up for success in the long term?

In my opinion, if you truly want success, you cannot simply take what life hands you and “do what everyone else does.”  You have to make the time to focus, educate yourself, make long-term plans and commitments, and take charge of your finances.

So my challenge for you in 2019, is not to simply make small, short-sighted resolutions to stay off Instagram or eat fewer carbs.  Instead, take a long, hard look at your life and see if it has a direction, a plan to take care of yourself and your family in a big way – to SUCCEED.

My plan is to not just work for work’s sake, but work towards a goal of financial freedom.  I will continue to add streams of income through investment real estate and to help as many of my friends do the same.  If that sounds like something you’d like to do in 2019, now is a great time to get in touch, and let’s talk more seriously about your future.

There are many paths up the mountain, but what’s yours?

For this blog, I’m going to assume that the proverbial ‘top of the mountain’ is WEALTH.  Wealth meaning “I don’t worry about money anymore.”  Wealth meaning, “money comes in no matter what I do today.”  Wealth meaning “I live in abundance and enjoy a full life.”Let’s face it, there are many ways to build that kind of wealth.  I’m sure each and every one of us can even rattle off a handful:  Stocks! Investment real estate!  Buy a franchise! Start a side hustle! Start multiple side hustles!  Etc.

However, I think the problem is that too many of us sit by and simply watch ‘the other people’ getting theirs.  

But what about you?   How are you getting YOUR money?  Have you made a plan? Have you taken the first step on a beginner trail?  Or maybe you’re already on a dedicated path, following a guide?  Or maybe you’re well on your way towards the top of the mountain?

Or maybe… you haven’t even thought about the mountain that lies ahead of you?

If that last one is you, that’s ok, don’t beat yourself up… just realize what you’re setting yourself up for long-term.  Realize that you will continue to work your 9-5 to earn your income, and hopefully saving enough will indeed be ‘enough.’

Me? As you probably know by now, I choose to invest in cash flowing real estate.  I cashed 4 checks last week from houses and apartments that are being rented by tenants, where the profits ultimately end up in my pocket.  And that’s in addition to my check from my 9-5!  And guess what will come in the mail next month…

I am headed up the mountain.  How about you?  Please! Shoot me a quick email, let me know what you’re doing. I’d love to hear and be encouraged by each other.

If you’re interested in the path to wealth that investment real estate provides, my partners and I are constantly sourcing new deals to get you going.  I’m happy to answer any questions, talk about your goals, and any opportunities that I have available.  Just reach out!

Today Is Pay Day?

Is your MONEY employed?  Or unemployed?

Hey! It’s Friday! For many of us who earn weekly paychecks, that means PAYDAY.

But what about your MONEY? Is your money earning a paycheck?

That’s right, take a second and picture your money as a little worker bee.  When it wakes up in the morning, does it have a full time job? Or even a part-time job?  Or (gasp) is it unemployed?

If it does have a job, what kind of job does it have?

A minimum wage job, where the paycheck barely covers living expenses?

A mid-level job, wearing business casual and eating lunch in the break room?

Or has it reached baller status? With a 6-figure income, driving a fancy car, going out to nice dinners, the rich life?

This is a great analogy that came to my attention while reading Gary Keller’s book “The Millionaire Real Estate Investor.”   I have always said to my wife “I want our money to be working harder for me, than I do for it!”  A long time ago, I literally walked into my Fidelity investments team and told them ‘Team, we have got to get our money working harder!’  I just never thought of it in such tangible terms as ‘a job for my money.’  Because what this helped me realize, is that when my money is in a bank account, it’s unemployed, doing nothing with itself.  When it’s in the stock market, it’s more like a worker who takes his paycheck to the casino, sits down at the table, and gambles.  Sure it may win sometimes, but sometimes, it loses too!  That’s not a ‘job’ per se.  At a job, your money would be working for an agreed upon wage, that it earns, week after week, month after month, year after year.

So I want my money to go to work, and earn that kind of paycheck.

These days, I put my money to work buying and owning real estate. Its job is to buy the properties, pay property management teams, pay maintenence teams to keep up the properties, and advertising units as they come available, and many other daily duties.  And in turn, my money’s ’employer’ pays it back with rent checks every month.  My money is working pretty damn hard, not quite that ‘baller status’ yet, but it’s my goal.

How about you? Is your money working every day? Does it have a job that pays out every month?  Or is it unemployed? Sitting stagnant in a bank account or gambling on the stock market?

Feel free to respond, I read every email and would love to hear how you’ve put your money to work.

If you’re interested, my partners and I are constantly sourcing new real estate deals to put your money to work.  I’m happy to talk about what opportunities I have available.

The Joseph, a 153 unit case study

Before & After at The Joseph
A case study of our apartment community in San Antonio, TX

I love investing in real estate.  Seeing a property transform from a dated apartment complex to a fresh, modern and welcoming community is a unique experience.  And knowing that you’re a part owner in the process? Is an incredible feeling and fills me with pride.

Let’s take a look at some of the work that was done to transform one of our investments in San Antonio.

BEFORE: The community began as The Gables, a 1980’s vintage apartment community that welcomed guests with this dated sign…

AFTER: …and was rebranded as The Joseph @ Huebner – with a fresh and welcoming sign that screams ‘this is a modern apt community, check us out!’

BEFORE: The exterior of the buildings were transformed from this dated look…

AFTER: …to this sharp and modern color scheme with bold accents.

BEFORE: The Leasing Center underwent a complete overhaul.

AFTER: …to this sharp color scheme with modern lighting, new flooring, paint, and fresh decor.

BEFORE: For the apartment remodels, the living and dining areas went from this dated look…

AFTER: …to this fresh and modern take with painted cabinets, resurfaced counters, new flooring, new appliance package, modern lighting, new faucets, and a modern but neutral paint scheme.

BEFORE: The master bedrooms also received a much-needed update…

AFTER: …to this fresh and modern master suite with new flooring, ceiling fan, painted cabinets with resurfaced vanity, and new closets.

The end goal in all of this was to create a fresh and vibrant community for our residents, along with more profitable returns to investors as the rents rise with the economy and our newly repositioned asset.

Good Deals Gone Bad

When Good Deals Go Bad

You know that saying, “know when to hold em, know when to fold em?”
That was me, and this property in Cincinnati I wrote about recently.  This was a great looking property from the numbers, it had an extra space in the ‘attic’ that was the size of a complete 2 br apartment (can you say free cash flow?!), the units commanded high dollar rents that shocked property managers in the area…

I had everything lined up, from the lending to professional management.  I even had the names of the neighbors in the area that watch over this street like they own it.

But then I got the property inspector’s report back.
*Pro Tip: ALWAYS get a property inspection done.

And as it turned out, that there was a lot of negatives on this property.  The beautiful remodel done to the penthouse unit? The floors were made with a ‘wall covering’ soft wood, that would scratch very quickly and need to be replaced down the road.

The electrical panels? Needed to be upgraded to modern standards to get insurance on the property.

Down in the guts of the property, inspecting the joists that HOLD UP THE BUILDING, there was some shotty work done where a ‘contractor’ sawed notches in the bottom of the 2×6’s in order to run wiring, causing them to be structurally unsound and downright dangerous.  I’ll repeat, these were HOLDING UP THE BUILDING and he sawed notches out of the bottom of them.

Now, none of these items scare me per se, but if you’ve read my earlier posts, in my business I simply stick to my numbers.  Structural issues can be fixed, flooring can be replaced, cracks in buildings can be sealed up and made whole again… BUT, the numbers must support it.   The expense must be offset by either the rents, or the seller needs to lower the price, or bring some money to the table to fix these issues before I’ll take control of an asset.  This is an investment, after all.  I want cash flowing in every month, at a higher rate of return than some stock market account.

The seller in this instance was unwilling to bring any money to the table in negotiations, and decided they’d rather keep the building in its current condition.

So I passed.  I folded my hand.  This good deal, turned bad.

And it was a great decision.

What does this mean for you?  Why does it matter?  I guess I just wanted to give you a live example and let you know that I’m not simply bringing you ‘any deal’ that comes up.  Yes, it cost me money to put this property under contract and perform inspections and other due diligence, but that won’t impact my decision if the numbers simply don’t work anymore.   My partners and I are constantly sourcing new deals, let me know when you’re ready to invest and we can talk about what opportunities I have available.

Active vs Passive: Which investor are you?

What kind of investor are you?

I know I’ve been somewhat MIA lately.  To be honest, I had some pretty tough life circumstances that have taken all my time and energy.  However, it brings up a good topic for this week.  How much time and energy are you willing and able to put into your investments?

As an ACTIVE investor, let me describe my day yesterday:
I’m under contract on a property in Cincinnati at the moment (that means I found this off-market deal, submitted an offer that was accepted and am now in the due diligence phase).  I was up at 7am to be on a call with my broker who was on-site, overseeing the property inspector and termite inspector who I hired last week to go out and inspect the property for me this morning.  I was also on call with a property manager that I sent over to the property to look at the property from a management perspective.

After the inspection, I had follow-up calls with my broker and property manager to get their reports on the property.  Then I went to work at my day job. 

On my lunch break, I had a call with my lender to discuss the details of the loan that I was agreeing to, as well as his take on the findings from the morning (he’s a local to the area and I always value local perspectives on any and all things real estate).  We also discussed a few other potential opportunities, as well as added a few contacts to my list for the area based on referrals from him.

I had a call with Andrew, the city building inspector regarding the newly required fire escape inspections on this property (turns out the inspections are so new that only about 50% of owners have turned them in, so there’s no rush, as long as their done ‘some time’).

All these people I have developed relationships with over the past 10 months that I’ve been actively looking at Cincinnati.

After work, I came home, signed a stack of loan docs, sent a few more emails, and here I am writing this article to connect with you.

As a PASSIVE investor, let me describe a typical day for me:
I wake up, play with my son, eat breakfast as a family, go to work, go to lunch with my friends, work some more, go to the gym, come home to my wife and son, watch some TV and go to sleep.

All the while, in Lexington, Kentucky, where I have a passive investment on an 84 unit property, the team has been busy replacing air conditioning units, remodeling entryways for 5 buildings, continuing work on landscaping, leasing units to new tenants, renewing leases and ending leases with others, replacing select windows that were noted during inspections, renovating the current vacant units with all new vinyl plank flooring, new appliance packages and refinished cabinetry, the list goes on.

All that work that went on? Made ME money.  And how much work did I do on that property that day as a passive investor? ZERO.

In a nutshell, that is the difference between active and passive investments.  Either you are doing the work, or someone else is doing the work.  Both paths can make you a return on your money, you just need to know what you’re looking for work-wise.  For some people, active is the way to go, but for many others, passive investing is ideal.  How much time do you have that you’re willing to put into your investments?

When you invest passively in large multifamily deals like we provide here at Amity Cash Flow, you don’t have to worry about the day to day ‘stuff.’ Your main goal is to look at deals that we open to investors, invest your money, and then collect quarterly distribution checks.   Let me know when you’re ready to invest and we can talk about what opportunities I have available.

Single-Family vs Multifamily Part 4: Selling A Property

A quick primer: Single-family rentals (SFR) are a single house with one tenant and one lease.  Multifamily properties are apartments, with many tenants and many leases.  I personally have invested in both and see pros and cons of each that I’ll be discussing over the coming weeks.

We’ve talked about the time it takes to buy a property, as well as the costsinvolved, and even what it’s like to own a property, but eventually, you may sellyour property. Today let’s discuss how properties are valued and why multifamily has an edge.  

Single Family Rentals (houses) are valued based on comparable sales in the neighborhood, aka “comps.”  A 3 bed 2 bath house that sold for $200k down the street, will give your 3 bed 2 bath house a comparable value of $200k as a good starting point.  Buyers then look at whether your kitchen has been upgraded compared to the recently sold house, how is your landscaping, your finishes throughout, etc.  All these items can add and subtract from the value of your house, and the price it may fetch on the market.
But there’s also a highly emotional element to these sales.  If the market is hot right now, your house may be worth more, since comparable sales are most likely higher and buyers feel a sense of urgency, but the same goes if the market is down, and buyers feel like ‘its not a great time to buy our dream house…let’s just wait.’ Or ‘We don’t love the paint color in here…We’ll pass.” 

What does NOT necessarily play into the sales price, is the ‘income’ this property produces, since it’s a home after all, not a business.

Multifamily properties (apartments), on the other hand, are valued as businesses.  Buyers are looking at the numbers, not emotions.  They want to know how much income does the property bring in? What are the expenses? And finally, what’s left over as a profit?  
A multifamily property’s value is based on that profit margin.  What can a buyer pay that will still yield a strong return on their investment?  This is a much less emotional purchase, and while it ‘kind of’ matters what other properties sold for in the area, the majority of the value is in the current performance of the property, as well as the potential for future performance of this business. 

Now, the beauty here is that you the owner can actually control your performance (to a degree). Raise rents $25/month per unit.  Offer covered/reserved parking for a $20/month fee.  Change your cable providers for the complex and save yourself $10/month per unit.  Install water conserving plumbing throughout the complex and lower your water bill.  Fill in that pool that doesn’t get used (and costs you money to maintain) and cut that expense completely.  In its place, add a dog park and charge tenants a pet fee, that they’ll be happy to pay since you now offer a dog park! Add coin operated laundry facilities and collect the profit, etc. etc.

As you raise your income and lower your expenses you turn a higher profit margin, and remember, buyers are offering based on what kind of profit the property can give them.  So they can now offer you more for your property since it is performing better based on your business decisions (not comparable sales or emotional buyers).

This is one of my favorite advantages of multifamily properties.  I don’t want to be dependant on comparable sales in the area when my property is running efficiently and kicking off a large profit! 

When you invest passively in large multifamily deals, you don’t have to worry about this on a daily basis, but it is something you want to understand so you can judge an offering based on their business plan.  Will they be able to raise rents, lower expenses, and ultimately raise the value of the property?  If you believe in the business plan and the team executing it, that will turn into a high-valued property that will put solid and dependable returns into your pocket.  

Single-Family vs Multifamily Part 3: Owning A Property

A quick primer: Single-family rentals (SFR) are a single house with one tenant and one lease.  Multifamily properties are apartments, with many tenants and many leases.  I personally have invested in both and see pros and cons of each that I’ll be discussing over the coming weeks.

We’ve talked about the time it takes to buy a property, as well as the costsinvolved. But what about owning and running your property?  Let me introduce you to one of my favorite terms, “Economies of Scale.”  Defined as: a proportionate saving in costs gained by an increased level of production.   As in, the more units you have under one roof, the more cost savings you achieve.

Tenants and Turnover
With a single family rental, you have 1 tenant at a time.  The minute they leave, your property is 100% vacant, costing you 100% of the mortgage while the house sits vacant.
With a 100 unit multifamily property, you have 100 tenants.  But the minute 1 tenant leaves, your property is only 1% vacant.  You can still easily pay the mortgage with the other 99 tenants’ rents that month.

Management and Maintenance
With a single family rental, professional property management will generally cost you 8-12% of monthly rents collected.
With a larger multifamily property, management can be as low as 4-6% of monthly rents collected.

With a single family rental, every maintenance request will generally cost you a bit more, since management will have to send someone out to the property, who checks out what the issue is, then they head over to home depot to get the specific supplies, then back to the house to fix the issue.  This costs more time and more individualized/full priced expenses.

With a multifamily property, this all gets streamlined, as the property now has 100 units that are all exactly the same.  When there’s a maintenance issue, management radios the maintenance person, who walks over to the unit to assess the situation, walks back to the supply closet to pick the piece that has been purchased in bulk at a discount, then fixes the issue quickly, and for less money than a single family house.

This continues in basically every aspect…
Say you need a new roof.  With a single family rental, you pay full price for 1 roof, covering 1 door.
With a multifamily property, 1 roof covers many doors, not just 1.
Landscaping? A single family rental has 1 lawn for 1 door, but that same 1 lawn can cover an entire multifamily property.
Need to repave the driveway? 1 driveway for 1 house, vs 1 driveway for 100 tenants entering the property.
Need to paint the exterior of the building? Of course, a multifamily property is a larger job, but again, you get significantly more bang for your buck as the painter paints 1 exterior wall that covers many units of that building vs just the 1 unit of a single family rental

I think you get the point.  Economies of scale work heavily in your favor as you invest in larger multifamily properties.

When you invest passively in large multifamily deals, you don’t have to worry much about your tenants, turnover or any maintenance issues, but you do get to enjoy the benefits of being invested in a  large property that is running more efficiently due to economies of scale, which ultimately puts more stable returns into your pocket.

Next week…Part 4: SELLING YOUR PROPERTY – How properties are valued.

Investment Update 4/20/18 – We Closed On The Lila @ Oakgate!

253 Units in San Antonio, TX

I am very excited to announce that Amity Cash Flow, in partnership with Wildhorn Capital, has closed on The Lila @ Oakgate (formerly known as Woodbridge Apartments) in San Antonio, TX.  We have big plans for this property and can’t wait to get to work!

Our investors are elated with the level of returns in the booming market of San Antonio, TX.

The property will be repositioned over the next 12-18 months, increasing the NOI and driving up the value. The process will begin immediately with vacant units being renovated and rents increased.

To find out how to get involved with our next deal shoot me an email at chris@amitycashflow.com.

Just Got Back…

Just completed 3 days of training. Here’s what I learned.

Hi Everyone!

I just got back from 3 days of multifamily training at Rod Khleif’s Multifamily Bootcamp.  It was great to be able to meet so many of my peers in the investing space and I wanted to share some of my takeaways with all of you.  Don’t worry, I won’t go into all the technical jargon about agency debt, cap rates, NOI, market research, SEC regulations, or any of the other countless acronyms.  🙂