Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast.
Josh: So, hey, welcome back to Accelerated Investor. I want to thank all of you guys and tell you how privileged I am that you’re listening to this podcast. You’re spending time with me, whether you’re in your car, you’re in the gym, you’re going for a walk. Your social distancing and you’re going for walks in your neighborhood, whatever you’re doing. However, you’re an engaging with accelerated industrial and with me and my gas. I just want to say thank you. I’m so privileged for all the readings and reviews that we’ve gotten. Thanks for sharing this on social media. I hope your stay and safe. I hope you’re taking care of your families and enjoying some of this extra time that we have had with our families while we’re sheltering in place. What I’ve done is I asked my good friend Jack Patrick. Jack’s been on our podcast before it, hop back on to teach you guys and talk, he has a little bit of some of our apartment deals. So, Jack, welcome back to Accelerate Investor. Thanks for jumping on.
Jack: Thanks for having me. Appreciate it.
Josh: Yeah. You bet. Give you guys some framework, some background on Jack? Jack and I met over five years ago. Our daughters played a little league soccer together when they were just five or six years old. They’re on the same team. Jack and I coached a team, had a great, great time. My daughter, Juliana, Jack’s daughter Emma are great friends. My son Dominic and Jackson Cole are really close buddies. Matter of fact, I think they’re upstairs right now talking on their iPads, couple of knuckleheads. Jack is also an amazing real estate investor. I met Jack when he was a full-time firefighter and he owned about 15 or 20 single family rentals. Today, Jack is a full-time real estate investor, owns over six hundred and forty units of multifamily and single family and apartment buildings, over six hundred and forty units and has raised over six million dollars. And so, Jack, just for our audience, that hasn’t met you before. Just give us a little bit of background, foundation about you and about your kind of pivot from being a firefighter to real estate and your passion for real estate. And then we’re going to introduce everybody. Jack and I already recorded a call for our investors. Jack and I own a hundred and sixty forty units together, an apartment building in Shaker Heights and Cleveland Heights. And we’re going to give you guys, we’re gonna peel back the onion and give you guys a listen into an actual investor update that we did for our investors that invested. We raised about 2.2 million dollars for this deal together. And we’ll give you guys insider access to that recording. So, Jack, again, just tell our audience if they don’t know you a little bit about your background, your history as a firefighter and a real estate investor.
Jack: Absolutely. So I became a firefighter paramedic shortly out of high school, came across the book, Rich Dad and Poor Dad. And it just really just spun in my head. So I initially had an interest building custom homes. It was not the cash flow model. We did that for a number of years up until 2008. And then I got to witness every large builder, developer that had been around for multi-generations just get wiped out. And in that time, single family houses had completely collapsed. So I started transitioning to single family rentals. Thankfully, the construction back home that acquired was very handy in that time as we’re buying extremely distressed properties. Houses that sold four hundred twenty thousand or buying homes was four thousand hours and then doing a full rebuilt to them. But that experience allowed me to build that. So I spent quite a few years without mentors. I honestly didn’t know they existed, and I knew nothing about private capital. So just one house after another after another and kept on doing that. I was a Full-Time firefighter paramedic in the city of Tromso, which is a suburb of Cleveland. And I also thought that success was doing as many different things as possible. So we did an MLM business during that time.
Josh: Fitness, you guys sold wine? I bought wine from you guys.
Jack: It was great. I learned a lot through the experiences, but not from the business itself. But it was all part of the different layers of building who I am today. So it’s funny looking back. But my wife’s a nurse practitioner. We started another NP business. We also homeschool our kids. We’re doing like five things. And then initially when my wife is trying to get my daughter into soccer, I’m like, we don’t have time for this. She went around my back, met Josh like he really was. So, you know, Josh invited me to come along and to just track into his masterminds. And that’s really when I started getting the very first mentoring and learning about focusing and looking at what’s distraction, what’s an opportunity. Understanding the first thing of my private capital. And that was the first of many other things I got at home. I got involved in some other masterminds, but a lot of lot of honorable books. And yeah, I’m not sure I count for a little bit, too. Yeah. Yeah.
Josh: I remember when you bought your first apartment training, you’re like, I think I want to get into apartments. And I didn’t have a lot of experience in apartments at that time, but I was really good at raising money. And you were all fired up about that. That was a couple years ago and you went from again, your portfolio, maybe 40 roughly single families to now six hundred and forty total units really focusing on apartments. I’ve been one of Jack’s primary private lenders within a lot of first mortgage senior debt on a number of buildings. And then we also have raised capital together on a couple of buildings for actually the down payment and raising private money through private placements and things like that. So it’s been an amazing journey for both of us over the last five years or so. I think the event we did in Cleveland, like the first mastermind that I had that you were at that was done at the Doubletree in Cleveland. It was I want it. It was like the summer of 2015, I think. So it’s almost five years or almost five years.
Jack: It was a long time ago. Yeah. I didn’t know how to dress for the event. I came in my t shirt and shorts. Everyone else was in really nice business apparel. I was so out of place. Whatever of your masterminds you said something that I will never forget. And it was what I actually did. Two different things. The first one was in it. We were talking next to our friend Darren. And we’re seeing that your job. It’s not a life jacket. It’s an anchor around your neck. And at the time, being a firefighter like it was inconceivable to lead at fifteen years. You know, you always speak at 25, 30, 35 years. You’ve got a pension. You’ve got health care. Well, my laundry income is more than my pension and health care right now.
Jack: Today, laundry, income from washers and dryers in quarters and the quarters. But it just it it was hard. It took a lot of time to, a lot of masterminds, a lot of discussions, a lot of personal development, which I learned a lot about personally. You are filled multi-level marketing businesses. But it’s changing the programing of our mind. And that was in all of these were pieces and layers that kind of helped make the transition. And then once I really started doing more apartment training and really started to understand it. And after I spent over a year on it, it’s as simple as this, how dumb it down to this commercial real estate sells. It is valued based upon that happening and how much income minus expenses. So what we’re trying to look for are properties that have an effect of net income in low rents, low occupancy, deferred maintenance, absentee owners or terrible third party managers. And those scenarios are everywhere around this. And another thing that you had said, this is with your brother, Mark. But, you know, if we’re not finding enough deal flow, we have to expand, expand our market or marketing. And every time that I’m like, I can’t find enough properties, enough deals or there’s not enough, I’ll look elsewhere. The problem came to I if I were honest, how many deals that I look for, how much money that I spent, what did I do? We weren’t putting the time in. Right. So those are two huge takeaways that I’ll never forget from being a part of being a part of Shrek.
Josh: That’s awesome, Jack. I appreciate that. And so, you know, Jack’s been building his portfolio on the owner operator side and really building his portfolio. I’ve been primarily focused on getting access to capital and partnering with Jack, partnering with our other frontier and partnering with another friend, George. And now, obviously, this virus stuff is is exacerbating this recession that we knew was probably coming in the next six months to 24 months. And so we’ve been kind of preparing for this over the past couple years. And now you’re going to see a lot of apartment buildings and single family portfolios, people that fall into distress because they overpaid. They paid not a wholesale price like we pay, but they paid a retail price for these properties, hoping that they would cash flow or hoping that they would appreciate even more. And they’re not going to have the cash flow or they’re not going to have the liquidity to keep these buildings and they’re going to lose them. And so Jack and I are really going to be active over the next, let’s say, three months to 18 months looking for assets to buy and looking for deals. And the thing that I’m excited for is that we’ve over the past year, we’ve pivoted away from lending and private lending and hard money lending and getting liquid so that we have the cash available to now go pounce on these opportunities that might be 10 or 20 or 30 percent off of where they were just 30 days ago. It’s really amazing. And so, Jack, I know you’re positioning herself to buy up a lot of assets as well as we are. We’ll partner on a bunch of stuff. And so we’re excited for that. I want to let our audience kind of peek behind the curtain here of this investor call that we did again to frame this up. I’m going to have Jack give you the details about this building that does 160 for a unit building that Jack found off market. Jack and I partnered on it. I helped bring in some capital, do some deal evaluation, some underwriting and investor relations. And we just did, we’ve owned the building now for about nine months or so. And we just did an investor update that we’re going to send to our investors. What I wanted to do was actually add that to this recording and let you guys hear it. Real time how Jack and I are talking to our investors, but before we turn on that piece of the recording and add it to this intro, Jack, when you just frame up the deal, tell us a little bit about how you found it. Well, we bought it for what the plan was for stabilization, actually.
Jack: So we are on the property through our Marcus Amila champ broker relations. We essentially. And this is kind of important. So I’ll just talk about this briefly. We made the introductions and now chart a certain relationship. But at the time I had not close the deal with them at this point. So, you know, showed up, communicated well, returned phone calls, text messages. And now we had a deal that we were close to getting where we were basically the top two offers and we have losing that property instead of getting upset and frustrated. Man, which is things I’ve done 10 years ago. Oh, it’s the last deal I’ll ever find. There’s another one. There’s always another one that came round and closed on. It had a hiccup at the end, but we were able to work through it and now really use that to create a really good relationship. And ever since I was able to close on that deal, it’s opened the floodgates to bring an off-market deals. But you’re not going to get off market deals until you close the deal and you prove yourself because that that that that broker is putting their reputation and their commission on the line when they go back to the seller and say, I’ve got an offer for you. It’s not like residential. It’s a whole different animal. So you have you have to prove yourself. You have to show your personal integrity that can close. So basically, though, I got a phone call, a winning deal hit the market off market property in Chicago, Cleveland Heights. Hundred sixty-four units, purchase price at nine point two million hours, we had about 2.2 million. Our categories. We had a look at immediately, you know, if we like it, we had to put fifty thousand dollars of nonrefundable earnest money. Day one with a mother, one hundred thousand behind there. And just to frame this up previously to these deals, I had been closing smaller deals. This was, this capital raise was six times larger than what I was normally doing. And the down payment of a hundred fifty thousand dollars was a pretty big bite just to take a bite off that with fifty thousand being nonrefundable, they won. So it definitely, took, it was a lot of growth property. I remember when we were when the offer accepted the offer. We’re at a coffee shop. I’m like, great. And like, you know, it was the pressure. Josh:The pressure got to have some stones. Got to have some stones to do that deal.
Jack: I got to see like really took me to the next level because the size is still nine point two million. I had to bring in, you know, investors help build a balance sheet. We had 2.2 million terrains with one hundred fifty thousand. That was going to be going hard shortly. This was a deal that really stressed me out significantly because it really stretched me. But because we executed because we were able to get the capital together, it really leveled me to the next level. It basically advanced me five years over the summer of last summer.
Josh: Yeah. Phenomenal. So let’s peel back the curtain. We’re gonna to close out this intro and we’ll we’re going to attach the investor update right here. I think you’ll love it for all of our audience. Take a listen. This is an actual investor update about six to seven, eight months into this project. And right in the middle of this Coronavirus scare, you’ll hear Jack and I talking about a real deal. That’s a real update with real people with real money on the line. Take a listen. I think gonna really love it.
Josh: So hey everybody, all of our investors, how are you? This is Josh Cantwell here with Jack Petrick. Wanted to give you guys a quick update on the Height’s Point 164 unit project in Shaker Heights. Cleveland Heights. Jack and I wanted to pop on the phone. I know a lot of you guys have questions about the progress in the project as well as obviously any kind of impact that we’re seeing regarding the virus. So Jack and I just thought we’d hop on and give you guys a personal update here and shoot you out this video. So, Jack, welcome. Thanks. Thanks for hopping on front. How are you doing?
Jack: Thank you very much for having me. Thank you, everyone, for not only investing in the project, but just taking a moment to listen to us for a quick update.
Josh: Yeah, you bet. So, first of all, one thing I want to talk about, Jack, real quick is, is just mentally like psychologically, give everybody a little bit of some peace of mind. I just wanna remind everybody, we bought this building for nine point two million. Had planned on putting about four or five hundred thousand of renovations into it. Closing costs all in for about nine point eight million based on the improvements that we’re gonna do over time. The rent bumps, things like that. Property should appraise around 14, 14 and a half million and then be able to refinance. Many people are going to ask, well, you know, what’s going on with rent? What’s going on with collecting rents and things like that. I just want to reassure everybody that, you know, buildings like this, we’re able to buy we’re able to buy them at a discount. And your principal is not at risk. I think that’s the first question people are going to ask, Jack, is what about my equity investment? Are we going to lose the building? What’s going on there? Typically, we’re into these buildings for about 65 to 70 cents on the dollar, meaning to take all the income, subtract the expenses and the debt service. And, you know, we could have 20, 25, 30 percent vacancy before we’re upside down. So just talk to that for a minute, Jack, about the the model. Just remind everybody about our model for investing and how we protect them by buying deals at a wholesale price. And we have, you know, this big cushion, if you will, for a vacancy before the building would ever be at risk.
Jack: Exactly. We bought the property at a substantial discount. So just a reminder of backstory on this project. This was an off-market deal. There was a New York buyer that was coming in to buy the project. And our Marcus Miller champ, Cleveland franchise franchisee Dan actually came in contact this information. And he already had an established relationship with the sellers and he got a little bit fired up about it and said, hey, let me bring somebody to the table. And that’s when we came in to take this project down. So, you know, they were looking to exit the property. They had all the property for 20 years. It did not go to market. So we were able to buy the property and its substantial discount. So we bought the property somewhere in the mid 50s. And right now, we have comps of just recently with last few weeks of some deals that were similar. That’s still an eighty-three thousand dollars. Similar condition, same location. So we already went into the property with equity. We also had some minor accounting adjustments too that have been beneficial for us. So like the previous owner was only claiming around 5500 of laundry or running of the laundry income from the washer and dryers. And we’re running close to north of 25000 now. It’s because we’re just cleaning all the one brides. If you take that that discrepancy, you divide it by a six and a half cap. It’s over a $300000 valuation bar or doing anything. Then we’re going through the units, doing our upgrades in our kitchens or bathrooms, getting rents bumped up, doing our water conservation program, lowering expenses. So I think always what’s worked for me and I know it’s worked for Josh is not buying at retail, buying at wholesale, buying at a discount, bringing operational efficiencies, increasing income on a property that provides safety for us on top of having great management too. Because in this business operation as where the money is made. You got buyer, right and still screw it all up. But if you buy right, you operate right. You manage it right. You treat the tenants well, you know, and you have you bought at the right property, at the right location, the right price. Typically, that’s where it provides a lot more safety for us.
Josh: Yeah. Fantastic. So close on the building, in the beginning, if you remember, was already, you know, I think was a hundred fifty seven out of one hundred sixty four units were occupied when we bought it. So very little turnover in that first four to six months. We gave you guys all an investor update in January and obviously it’s been three months and now we’re in a kind of whole new world with this, you know, Coronavirus, COVID-19 virus stuff. The good news is, is as we record this, it looks like the virus is peaking or peaked in a lot of areas and we’re talking about reopening our economy. So let’s just talk, Jack. Before this virus, why don’t we just give everybody an update as far as like how many units were painted, how much of the renovation was done? There were some point of sale violations when we inherited. We got some concessions from the seller to cover those point of sale violations, just tell us what’s happened really since January, maybe leading up to about mid-March or late March before this whole virus thing broke out. What were some of the improvements that were done? What was the condition of the property at that point?
Jack: Perfect. So let’s just start off with numbers. So right now we have again, we have one hundred and sixty four units. Our goal was to roughly do about half of that. It might end up being a bit more, but that was kind of like where we are just penciling out. So right now we have a total of 94 units that have been painted. So again, we actually want to push a little bit past that 82. So 94 have been painted. So we’d be pretty much or check the box on that. And right now we have a total of 94 units that have been renovated. So we’re approaching two thirds at this point, which is exactly where we want it to be at. We’ve got 24 additional units that are scheduled right now to continue the renovation. What I mean by that, when we started the project golf, we were initially we’re bringing in crews that they would take on the whole job. They would come in. They would take care of the painting, caulking. Then they would proceed for countertops, flooring, cabinets, resetting the vanity toilet and all those items. And what really has worked out for us a lot better, a lot more efficiently. We found a number of painting crews. They go. They start off in the unit. And all they do is paint. They paint the cabinets, the walls, coat around ceilings in the bathroom and kitchen. If it’s an occupied unit, if it’s a vacant unit, we’re doing a full body paint. But that way they’re working far ahead of us. Then we’re bringing our crews and now they don’t have the touch painting and drywall work. They’re just focused on the build out. And that man has been working out a lot more efficiently. And we’ve went through some crews which was natural to kind of get really dialed in. Norm, right now we have an Amish remodeling crew coming in and they’re getting, you know, once a unit of paint and they’re getting it done anywhere between a day to a day and a half. So they’re turning wanted to work quickly. The quality is there. And now it’s been going, the turnovers have been going well.
Josh: Yeah, well, it will include some pitchers for all of you guys. We’re going to send out a PowerPoint with this. Should be attached to the email since a pitcher looks kind of some before and after photos. You can see what’s been renovated, the kitchens, the bathrooms, the flooring, the difference and what the units use to look. I remember when we bought it, the units were in really good shape, but there were very like 1990s ish lot of gold and white, you know, really, really clean, very well kept. But yeah, but old cabinets, old and just not kind of modernized, if you will, for 2020. So that’s the 94 units that that Jack has already been working on, turning those over and getting those updated, because the whole goal then is to bump the rents. So, Jack, there was some point of sale violations that, you know, exterior tuck pointing some of those kind of things that we had to get done. Majority of that stuff’s been completed. Right. Jack:So we have interior and exterior point of sales. The majority of the interior violations have been done, the very lengthy, extensive list. But most of it is just small, loose ends like a skeptical cover adjuster or a striker in the city we’re in. We have very high rents because it’s definitely it’s a more affluent community. But because of it, the billing department is definitely a little bit more, a little bit more picky with the work. Just a little bit. Exactly. So the interior work, we still got a little bit more to go, but we punched through most of it at this point and we’re now just going on the exterior. You know, Ohio is funny for those who don’t live here. We were cutting out a grass, we know. And now we’re sitting under the snow. So, yeah, with the weather breaking right now, we’re going to start taking crews outside and try to get those worked out and now working on that with the interior unit turn. So also, let me see what comes out to go ahead, I’m adding to your statement. Josh:So what will part of the plan? Let’s talk about the larger plan, right. So we’ll talk about the 94 units that have been painted renovated. There’s another 24 units that are scheduled for renovations. And we’ll talk a little bit about the virus and what’s that’s done, because a lot of a lot of the tenants that are there, obviously we’re all in this sort of shelter in place order. People don’t really want to have crews and strangers and contractors coming into their units to be turning them over. Everyone’s just obviously fearful for their health right now. So just talk about this last now. Well, before we go there, let’s talk about May, June and July. Right. So we started turning these units over. A lot of them are scheduled. So the plan was to really do a lot of the improvements while the tenants were in place doing these improvements also so they could see like, wow, I got a brand new unit. This is amazing. And I’m paying the same price. Then when their unit was up for turnover and renewal, then we would kind of spring on them that the price was going to go up. You know, definitely kind of let them know something’s coming. But now they would know if they want to stay. The units been renovated. We’re going to increase the rent when they do their renewal. So just talk to that for a. We got a bunch of renewals coming up in May, June and July.
Jack: Exactly. So the property manager there on Sheree, she actually carried over from the previous property and she’s actually a part of the family that sold the property to us. They strategically set all the leases to begin in springtime. Basically the most part and in August, because we have a lot of med students that come into like Case Western University and a lot of professions. So it just that really was the window where people were coming in and out. So right now, in the month of May, we have a total of forty-seven lease renewals. In the month of June, we have thirty-nine. And then we’re going to wrap up in July at about twelve. And once we hit the end of July there’s less than 10 renewals that happen and that’s majority of that is happening in this time right now. So you know right now we’ve had a pretty high, relatively high rate of tenants renewing leases with us with bumping the rents. But with these upcoming months, you know, we will be losing some tenants and that’s totally normal. And we’re just planning once that happens, if those units did not start the renovation, we would be adding those renovation. So, again, that’s why there’s a good chance we’ll probably be going north maybe to renovated units, starting out, fresh in those and just moving on with. So right now. But it just this really is our ideal leasing period. Even with my properties, I really try to have that property managers not have lease renewals and December, January, February. And those months when it’s cold and snowing, a lot of people are just not wanting to to locate. And make that decision to move. Josh:So let’s talk a little bit about the virus. We were getting into the season where we’re expecting a lot of units to renew our turnover. And we’re we want people to stay and obviously see the improved unit and just pay the increased rent. So talking about in kind of real time here, what’s happening now in April, what do we expect to maybe see in May? Are people seeing the rent bumps, the increases in the rent and staying and resigning? That’s for the most part what’s happening. A lot people don’t want to move right now. Just because of the virus. Sotell us about what their mindsets are about signing, paying the increased rent, staying, sheltering in place versus moving up.
Jack: Absolutely. So for the most part, most of tenants are staying. We have had a handful that have left. But again, with one hundred sixty-four units, that that’s completely normal. Right now, we do have 31 tenants where their apartments have been painted. But right now, they don’t want to have any contractors come in to, you know, to come in and wrap up the last part of renovation. So I really feel that way. Not that I feel, we actually have had some conversations and some news article briefings from our governor that would just start to reopen here in May. And as we’re seeing things kind of calm now, I’m seeing that tenants are starting to relax a little bit more. And then another thing that’s been really beneficial during this time is we’ve been actually very aggressive at leasing. So once things started getting a little bit shaky with COVID coming out of the stand, homeowners and who’s essential? Who’s not essential? We had to really make a decision. Do we continue on the remodeling or do we look for a moment to conserve cash? Not really knowing what was going to happen because we’d never been to this before. So we actually went the opposite direction, really pushed hard with market. And I’ve been really surprised that our leasing has been going better than ever. And what we found out to some extent is some other properties and property managers, they are holding off on these. They’re not wanting to bring people in the property. And we are taking this seriously. We are taking precautions. But at the same time, you know, somebody comes in, you know, to empty hallway to go to our vacant apartment building. We’re not having the same risk exposure as bringing someone into a nursing home with 150 people. Right. And we’re also being diligent, cleaning door handles and things of that nature. So because we’ve been pushing on the leasing, we’ve been generating a lot of traffic that has indicated to me. They want to continue moving forward with the remodeling, not just here, but my other projects as well.
Josh: Fantastic. That’s great. So I think the question on everybody’s mind is, are rents getting bumped? And do we see any additional vacancy because of COVID-19? Look it right now. And obviously, this is a very short term. Again, a health scare in the short run. This is not going to impact the long-term play with the building over the next five, 10, 30 years. It’s a very short term. So it’s we’re treating it like a natural disaster or something that we have to take care of in the short run, almost like a hurricane or a tornado. And it’s something that might impact the building for the next one to three months. But long term is not going to impact. So if anything. Worst case scenario, if we go to refinance and that refinance gets delayed a little bit, OK? But the building’s not at risk of losing the building necessarily. So in the short run, what is happening? Are we able to bump rents on those people that are renewing? Are we seeing any kind of additional significant vacancy or as things kind of status quo?
Jack: So the vacancy we’re not seeing anything other than what’s been a usual vacancy. We actually have four eviction notices that went out right now out of hundreds and sixty-four units. That’s a completely normal pretty darn good. Yeah. Higher than that. And that that’s just normal collections and operations and things that nature with those four tenants right now. The courts have been frozen, pushing that all bets. So might be an extra month or two before get them out. But again, that’s not going to affect or change anything on our end. What those units turning over, you know, we’re going to do the same same remodel on those things and those units and then, you know, continue to bump rent, you know, the rent increases on those. So my goal is actually to try to, again, go north of 82 units. You know, trying to get somewhere north that. So, again, just to kind of help out, just to bring the income up a little bit further.
Josh: Yeah, just insulates the cash flow. The higher the income, the bigger the building’s value. And then when it comes to the refinance, you know, getting the highest value possible based on the net income is obviously the goal and the approach. So certainly, hope as we kind of wrap this up, certainly kind of hope by, let’s say July 1st, a lot of people are back to work. A lot of things are normal. Again, this is why you buy a, you know, a really stable class A building and a you know, class B or class-A area. This is not luxury. Still kind of you can consider workforce housing, a lot of doctors, nurses, you know, students, things like that. But we’re not in a in a C class environment where, you know, people are losing jobs and can’t pay the rent. We’re also not in class A luxury where people are losing jobs and can’t afford a huge, you know, a huge rent payment, if anything. You know, those people that are in luxury who maybe lose our jobs would, quote unquote, I guess, downgrade, if you would, into a building like this. Even though this is still an amazing building because they maybe can’t afford three thousand a month for rent anymore. Downtown Cleveland. But they can afford a thousand or twelve hundred or fifteen hundred dollars in a building like this. This is why you buy the product that we buy. So, Jack, as we kind of wrap this up, any kind of final thoughts about what you think’s going to happen over the next month or two or six and then, you know, if anything on the refinance kind of worst case scenario, maybe things get pushed back a little bit, affects the investors return a little bit. But, you know, again, not something we can really project right now, because if things hockey stick back, things could go back right to normal, but certainly not at risk of losing a building or not having cash flow to support the mortgage.
Jack: Exactly. And that’s. And just let me just go off that real quick for just a moment. With all the investors that you have and that I currently have. And this project and other projects, it’s been really nice to be able to continue to be able to make distributions during this time. There are other apartment owners that are holding off on distributions, but more importantly, there’s a lot of people that have lost a lot of money in the market and in other investments. So to be able to preserve that principle and still provide a return in a time like this, I think it just proves the business plan of what we’re doing here and what we’re investing in. Right. I’m definitely very optimistic with how everything is going. You know, there was a number of weeks here where almost you just kind of scratch your head. What’s going to happen?
Josh: Well, the news that was coming out was so confusing, we would hear one thing here. Another, there was conflicting information. What was real, what was not? You know, social media has an impact on what you’re hearing. And then, you know, you and I are on the phone talking about what I just heard this. And you’re like, wow, I heard that, you know what’s real? What’s not talking to attorneys getting interpretations. That’s all for the most part, calm down, which has been nice. And now at least we know what kind of environment we’re operating in for a week or two. Was all the new stuff coming on with, you know, Governor DeWine. He was very proactive in Ohio as far as going in to shelter in place very early compared to other states. So we were really proactive in getting in that. But it was confusing for a week or two, as everyone should expect. But now things are you know, we know what kind of environment we’re working in. Hopefully the state is going to open up here in the next two weeks, and we haven’t seen any kind of significant downturn, if anything, people are still moving. Jack’s being aggressive with the marketing, the fill up units, which has been great. So, yes. Any other thoughts, final thoughts of words, of encouragement, ideas, anything else we want our investors to know, Jack?
Jack: I know no other updates at the moment and we’re definitely happy the progress where we’re going. Right. The team, the communications within our team members are supplied materials been coming in well. We haven’t seen any disruption from that. And I was thinking there was a possibility we could experience that, but we were kind of be very proactive with that. We’ve been very proactive with a property manager, with all the guys that we have on staff for their 1099 contractors. I just feel that a real big piece of this is being active, knowing where our chip’s are at, where our strengths, where our weaknesses, how do we protect, where we’re vulnerable at. And we just have really been doing you know, I think we’ve been very proactive in doing that. And also just tenant communication as well and also communication with investors and just trying to keep everybody on the same page because, you know, it’s been a wonderful experience as property. And we just want to see this time get to the finish line and hit the refinance and then move on to the next one.
Josh: Yeah. And relative to the refinance, just to add some color to that, you know, banking’s obviously very different today than it was three weeks ago. And so a lot of the multi-family bridge lenders that were giving bridge loans even a month ago are no longer in that space. And Jack and I talked about this is not really it’s not really meaningful to speculate where lending and banking will be because we’re not really set to refinance this building til the end of the year, beginning of next year. And we think a lot of things sort to normalize. So although like, some lenders are totally out of the business, other lenders have tightened up some of their guidelines. But on some of the new purchases that we’ve done, we’ve gotten the best financing terms we’ve ever gotten. So there’s benefits to some and negatives to other. But it’s not really even meaningful to speculate because we’re not really set to refinance this thing for about nine months from now. It’s not really meaningful to speculate what rates in terms will look like. We expect them to pretty much normalize. And at that time we kind of see what the market’s going to give us as far as refinance percentages, cash out refi proceeds if we have to put money in escrow. We’ll obviously just get the best financing terms we can to put on the building for the very long term. We’ll make that decision when we get there. And obviously, there’s a lot of upheaval in the banking industry right now. Liquidity issues, Federal Reserve pumping money into the system. And it’s created some unknowns. But we’re not set to refinance this building today anyhow. It’s going to happen not right now but nine months from now. So let’s see. We’ll see what happens over the next quarter with banking. And then talk about what does me things look like in maybe Q4, Q1 of twenty-one, then it’ll be meaningful right now would be purely speculation anyway. So I think that’s important to say.
Jack: One of the advantages though that’s going on is interest rates are the lowest they’ve ever been so we’re taking advantage of that. So you know, I guess what I think that the message I just had to investors that I work with and all my private properties is like when things are uncertain. Unknown. This is oftentimes when the most money is made. Like I remember, Josh, we were getting together years ago and I was in single family space and houses that used to sell for 120000 dollars. I was buying for $4000. People thought I was crazy. Today I’m a genius, but it’s because I was able to see the value of what it was and ignore and just like plug my ears and all the here to see on social media cons everybody’s opinion on everything and know what a solid investment was. And I focused on that and it paid really well. More money is made on down markets then up markets. Right. You can buy everything at a price point or discount that you couldn’t buy when the market’s doing well. So even with everything that’s going on, just don’t get distracted with all the noise of what could happen. Should have, could have would a worst-case scenarios. And everybody’s fighting on Facebook and what they think they know, what factors like focus on the opportunities and look at that solid assets are going to survive this situation.
Josh: That’s fantastic, Jack. Thanks so much for hopping on to look forward to getting this investor update out to our people and our members and, you know, look forward to doing more deals with you, of course, as always, in the future.
Jack: Awesome. Thank you, guys. Appreciate it.
Josh: So, guys, there you have it. That was our investor update on the four unit Heights Point property. I hope you really enjoyed hearing that live update on, you know, in real time from Jack and I. And Jack, as we kind of wrap up this particular podcast and investor update, I know there’s lots of listeners who might want to reach out, maybe joint venture on a deal. Have some questions about multi-family investing, working people, reach out to you, touch base with you to learn a little bit more about your business.
Jack: Josh, thank you. If anybody would be able to a website, which is PetrickPropertyGroup.com. And now just the spelling, it’s P-E-T-R-I-C-K PropertyGroup.com. Fantastic. That is awesome.
Josh: And if you guys enjoyed this interview, definitely share it on social media, share it on all the different, you know, podcasting networks, i-Tunes, of course, YouTube. Let us know how we did. Leave us comments and questions, ratings and reviews. Thank you so much for taking a listen today and we’ll talk to you soon. Take care.
You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.
This virus stuff is exacerbating the recession that we knew was coming in the next six to 24 months. What you’re going to see is a lot of people losing the apartment or single family rentals that they paid retail prices for. So Jack Petrick from Petrick Property Group and I are going to be aggressively looking for assets to buy because we’ve been getting liquid for just this moment.
Jack and I closed on a building last year, and we’ve been slowly working through the renovations. We share how we do an investor update in this episode by reminding investors of our plans for this building, letting them know where we’re currently at, and indicating how COVID-19 is impacting our plans.
In our investor update, Jack and I do a little educating with our investors to give them some peace of mind. Jack reminds them of the model that we follow that allows us a 20-30% vacancy before we’re upside down on a loan. This piece of education frames for our investors the solid foundation their investment is resting on.
Jack and I go over the renovations that we planned for these apartments, starting with what we had planned and ending with what we’ve actually accomplished. We talk about how many apartments are up for lease renewal, and when we plan on increasing the rent. And of course, the virus and shelter in place order have slowed us down somewhat, so we just let our investors know how that’s impacted us.
We give our investors a real time view into where we’re at with our tenants, COVID-19, and new leases. We talk about the refinance and any potential surprises we might see about the refinance (spoiler alert: we don’t anticipate anything). We hold nothing back, sharing the good and the bad with our investors, and by doing so, we know they’ll trust us.
- If you’re not finding enough deal flow, then you need to expand your market or your marketing.
- Jack’s secret to finding off market deals with brokers.
- Our aggressive approach to leasing during the COVID-19 situation.
- We talk about where we see lending and banking going in the next year.
- Why choosing a solid class A or B building is protecting our investment.