#194: 220 Chevy Case Study

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Hey, guys, welcome back to Accelerated Real Estate Investor. Hey, it’s Josh, and in this solo cast, I’m going to step you through my brand-new acquisition of a two-hundred-and-twenty-unit apartment complex in Parma, Ohio. Parma, Ohio, is a fantastic, very B class suburb of Cleveland, Ohio. I’m actually going to bring up my investor deck that I use to recruit and present to passive investors so I can give you some of the detail around this and give you an idea of what we paid for it. And it’s going to be just an awesome, awesome deal to give you an idea. Let me talk you through this real quick. The two hundred twenty-unit Chevy portfolio, we bought it for eleven point six, five million. Our plan is to put one point three million into it. That one point three million is made up of about one point two million. In unit terms, this is a mixture. There’s two hundred twenty units. A third of the units have already been improved. So we’ve got one hundred ninety units left to improve. The former owner was way busy, was not able to improve a lot of the units. Some of the units, frankly, have been down for six months a year, two years, three years. They’ve never been fixed up. 

And so it’s time for us to step in and finish off these 30 vacancies, as well as turn another one hundred and sixty units on top of that to give an idea, there are one hundred and sixty two bedrooms in this portfolio and sixty one bedrooms. It’s a perfect unit mix for us. We love the two bed, one bath and the one bed, one bath mix. And so we’re going to turn one hundred and ninety units on the one bed, one bath. We allocated five thousand dollars of capital improvements per unit, very cosmetic flooring, paint, trim, cord around kitchens, bathrooms, a very quick turn. Five thousand dollars a unit. And there is about 40 of those. 

On the two bedrooms, there is one hundred and fifty of those, and we budgeted seven thousand to seventy-two hundred per unit added up, it’s about one point two million dollars of renovations. The rest of the money is going to go into the exterior. So we’re going to put in a dog park. Some of the roofs need to be patched. We’re going to put in new landscaping at the front. There’s a beautiful flagpole, big, you know, Stars and Stripes flag out in front along with a brand-new brick facade and a sign out in front. We’re going to add a playground. We’re going to seal and strip the parking lot. We have to add some new security doors and we’re going to put another about two hundred thousand dollars into all of that. All told will be into this thing for about 13 and a half million by the time we’re done. Purchase price, eleven point six five. Soft costs, about three hundred and forty thousand. And we took a three percent acquisition fee, which is another three hundred and fifty thousand. 

So all in for thirteen point four or five million, based off the stabilized net operating income of one point one four million and a six cap, that puts the stabilized value at 19 million. We are not speculating on appreciation. We are not speculating on growth. We simply bought this property at about sixty five percent of its actual real value based off of its just leasing it up, turning the units and bringing it up to market price if we get any sort of organic value increase in the rents. Fantastic, great. If we don’t, we don’t. We don’t really care. The plan is we’re going to stabilize value of around 19 million. We’re going to refinance at seventy five percent loan to value. That will put a new loan on it of fourteen point three million. We’re all in, remember, for about thirteen point five million. So we’re going to have about eight hundred thousand dollars of refinance proceeds before fees and about six to seven hundred thousand dollars of RE5 proceeds after closing costs. It’s a fantastic deal. We’re paying ourself three hundred fifty grand when we buy it. We’re going to another six to seven hundred thousand when we refinance it. 

And the net free cash flow when we refinance it about thirty to thirty-six months from now, the net free cash flow is going to be three hundred and seventy-three thousand dollars per year on a 30-yearloan. We’re also could do a three-year interest only loan in a three-year interest only loan, we’re going to make six hundred and forty-three thousand dollars per year for the first three years. If we do an IO loan. That also leaves us four point seven million of equity in the building for us and for our passive investors. So we’re super, super excited about this project. Frankly, the property has been managed. It went from probably a C class C property to a B property under the previous ownership. We’re going to really improve it, bring it to like a B plus and also raise the rents. 

The current rents are at a blended rent of six hundred and eighty-two dollars per month. The market rents are eight fifty a month, so we’re going to get them up to eight fifty a month. We’re going to add the dog park, we’re going to pave the driveways, we’re going to turn and upgrade one hundred ninety units, add the brick signage, increase the revenues, decrease the expenses. And when we do that, this deal is going to pay us seven or eight different ways. We’re going get the acquisition fee, the five proceeds, the equity, the cash flow, the appreciation, the depreciation, the cost segregation, the principal pay down. It’s just a phenomenal, phenomenal opportunity. But we also love about it is that it’s right in the middle of Parma, Ohio. This is a city that I grew up in and Parma, Ohio. I went to high school here, so I know the area well. My girls play volleyball one block over at a volleyball club called Maverick Volleyball Club. I coached our coach club volleyball. So there’s manufacturing nearby. There’s auto manufacturing. There’s a GM plant across the street. 

So we affectionately call this portfolio the 220 Chevy portfolio because it’s across the street from a Chevy plant. It’s on Chevy Boulevard. You can actually look the property up if you want. The address is 5531 Chevrolet Boulevard. It’s called Forest Ridge Apartments. Go ahead, check it out. But there is nursing tenants, there’s professional tenants. And when we bought it, it was ninety percent occupied. All right. So lots and lots of amazing things to love about this building. The other thing we love about it is it’s got full time, in-house leasing, full time, in-house maintenance, full time, in-house property management. There’s onsite laundry in every building. You can walk to shops and restaurants and businesses. Plus it’s two minute drive to Home Depot, Lowe’s, Walmart and Menard’s. And it’s a 12-minute drive to downtown Cleveland. It’s also across the street from a brand-new pit, Ohio trucking facility. It’s across the street from the Chevy plant. It’s across the street from the city of Parma Maintenance Department and across the street from ABF Freight. Another trucking. 

Also the city of Parma. We love the city of Parma. It’s the seventh largest city in Ohio. It’s the second largest city in Cleveland, outside of Cleveland proper. It’s got five high schools. The median income is sixty-one thousand dollars. It’s popular for Pink Flamingos, KarbasiPirogies and polka dancing. Right. Who doesn’t love that? I went to high school here at Petawawa Franciscan High School, a private Catholic high school. And it’s also one city over from where I went to college. I went to college at Baldwin Wallace University, played Division three college football, and it’s really one city over from there. So this deal just has all of the traits, characteristics, all the things that we want. 

Here’s how we structured the deal for investors. Past investors came in and we did a three hundred thousand dollar minimum, so we asked investors to bring at least 300 thousand dollars to the table and they did. What happened was that I called some of our top investors in advance about two weeks before we did the actual cap raise webinar. And what I said to these investors is that, hey, we’re coming out with an opportunity. We’re going to raise about three point six million dollars. What I’d like to do is raise three hundred thousand dollars from about 12 or 13 investors. Instead of raising Olin fifty thousand hundred-thousand-dollar increments, I’d rather get three thousand from 12 investors and raise three point six million and I explained the deal, we’re going to pay them a 10 percent preferred return. 

And for each three hundred thousand dollars, they’re going to get one point five percent equity. OK. So the plan over 30 months. Assuming we can stabilize the building. And refinance at around 30 to thirty-six months. The plan is that they would get thirty thousand dollars of preferred return in year one. Thirty thousand dollars a year two. And if we refinance at month 30, they’re adding another fifteen thousand dollars, so a total of seventy-five thousand dollars, a pref return. Then assuming we get six hundred thousand dollars of reify proceeds, they’re going to get one point five percent of that, that’s another nine grand. 

OK, then we’re going to have about four point seven million of equity, they already have one point five percent of that, which is seventy-two thousand bucks. OK, so all told, between the return, the cash out refi proceeds and the equity they retain, they’re going to make about one hundred and fifty-one thousand dollars over 30 months. And that does not include the cash flow in perpetuity, that does not include principal pay down appreciation depreciation. It does not include the fact that this deal is highly tax advantaged. OK? So one hundred and fifty two thousand dollars. In 30 months is a twenty-point seven five percent annualized return on investment, including the equity. Twenty-point seventy five percent, and it’s highly tax advantaged. It’s essentially a fifty-point five percent total return in 30 months. It’s an amazing deal and it’s also something that we’re super comfortable with. It’s in my own backyard. We’ve got lots of contractors, we’ve got our property management team, our leasing team. We’ve got lots of contractors in this area who can help us with all the unit terms. 

So what we decide to do is also bring on a site supervisor whose name is Dave. And Dave is our site supervisor, who’s worked on lots of different new builds, new construction. And Dave is vetting out all the contractors to handle the dog park, to handle the landscaping, to handle the roofing, to handle sealing and stripping the driveway, to handle the unit turns. So Dave is on to handle all of that. So we are ecstatic about this opportunity. We’re ecstatic about this deal. And in less than three years. OK. In less than three years, most people slave and save, slave and save for thirty-five years from the time they’re 20 until the time they’re fifty-five, sixty, sixty-five years old. Ah. You know, and they finally retire. That’s actually forty-five years of working right from age 20 to age. Sixty-five is forty-five years of work and they hope to save a million bucks, get a seven percent return and live on seventy thousand dollars a year. Really fifty thousand dollars a year after taxes. 

For us, we bought this building for eleven point six, five million, and within three years, our net walk away profit is throwing fifty thousand dollars acquisition fee, six hundred thousand dollars every five proceeds and four point seven million of equity plus three hundred seventy-five thousand dollars per year of net free cash flow. So let me ask you, which one would you rather do? Would you rather slave and save for forty-five years, or would you rather do one deal with seven or eight streams of income? It’s kind of a stupid question, I think you get what I’m saying right. So really check it out. You can go to our website, Freelon Ventures Dotcom to learn more about this deal and the rest of the properties that we own. We now own over three thousand five hundred units of apartments and we’re super excited about it. 

The other thing I would ask you to give us some feedback on is if you can you can just email the office at support at Freeland Ventures Dotcom. Com, you can leave a comment on our podcast, a review. You can leave a comment on our YouTube channel. We are most likely going to be launching a new mastermind. I’ve been doing live events and mastermind events since 2006. We took 2019 and 2020 off partially because of covid and partially because we wanted to take a break from masterminds. But we are really considering putting together one of the world’s best masterminds of multifamily owner operators and investors, guys that are doing mobile home park, self-storage, residential assisted living and apartments, active investors, passive investors and also guys that are owning and operating other businesses. 

I would love to hear from you if you would be interested in participating in that mastermind. It is not going to be free, but it’s also going to be pretty affordable. We’re thinking somewhere around two thousand dollars a month or two thousand dollars down in two thousand dollars a month. And we are excited to launch that and start that. Right now, we don’t really have all the details. We’re not really ready to make any sales or anything like that. But I would love to hear from you if you’d be interested in something. Like that, we’re going to go into our group, go to the accelerated real estate investor inside of Facebook, and if you could make a comment, give us some feedback, some sort of review, let us know if you’d like to do deals like this, if you’re already doing deals like this. We’re really looking for experienced owner operators and investors to mastermind with. 

This really isn’t a coaching program. But certainly, you know, we’ve bought thirty-five hundred units. We’ve raised about 80 million dollars. Our portfolio is about three hundred million. So we’ve got some stuff to share. We’d like to share it with some other ballers, some other guys that are, you know, having a good time, guys that really know how to operate things. I can learn from them, they can learn from us. So if that’s you, let us know. All right. So to learn more information about our company, go to Freelon Ventures dot com. You can check out our portfolio. You can watch our YouTube videos. You can join our free Facebook group. You can buy a copy of our book and just engage with us, have fun with us and let us know if the mastermind is for you. All right. 

So thank you for joining me on this episode of Accelerated Real Estate Investor. Guys, don’t forget to subscribe, whether it’s on YouTube, whether it’s in podcast, whether it’s on iTunes or wherever you get your podcasts, make sure you subscribe so that you never, never, never miss another episode of this, which is bring amazing guests and solo casts. And we do it just to kind of pay it forward. We don’t really make any money from it. It’s just an idea. It’s a way for us to share with the universe all the amazing things that we’re learning. So you can learn it, too. I hope you love it. I hope you engage with it. Thanks for sharing with it. Thanks for listening. Join the Facebook group, subscribe. We’ll talk to you next time. 

You were just listening to the Accelerated Investor podcast with Josh Cantwell. If you enjoyed this episode and learned something new, help us build the A.I. community by leaving a review and five-star rating on our iTunes podcast channel. Also, don’t forget to subscribe so you never miss another episode. To see passive investing opportunities, visit FreelandVentures.com/passive. To start your journey toward the lifestyle you’ve always dreamed of with multifamily apartments, apply for one-on-one coaching with Josh at www.JoshCantwellCoaching.com

I am so thrilled about my latest acquisition not only because it’s a killer, but also because it’s located in my hometown of Parma, Ohio. I’m going to give you the breakdown of the purchase price, what we’re putting into, and what we expect it to refinance at. Our cash flow is going to be fantastic, but the best part might just be how much money our investors are going to make.

You can check this 220-unit property out yourself at 5531 Chevrolet Boulevard. Some of the units have been down for anywhere from 6 months to 2 years, and have never been fixed up. But 30 of them have been recently refinished. Our plans for the rest of the property include:

  • $1.1-$1.2 million in interior renovation costs
  • New landscaping in the front
  • New dog park
  • New playground
  • New security doors
  • Repairing roof damage

With a purchase price of $11.65 million, we’re looking at an all-in cost of $13.5 million once we’ve got the property fixed up. There’s ample room for a rent bump to get it up to market prices. Once it’s stabilized, we anticipate the value to be $19 million.

For the first three years, our profit will be $643,000 a year. And then after 36 months, we anticipate $375,000/yr. net free cash flow. We decided to concentrate our investors on this deal, and asked 12 investors to buy in at $300,000. In return, they’ll make $152,000 over 30 months, or a 50.5% return on their investment. This is a truly amazing deal.

After a break from live events in 2019 and 2020, we’re considering opening a mastermind. Our portfolio is currently valued at over $300 million, we own 3500 units of apartments and we’ve raised $80 million dollars. We know what we’re doing and we’d love to share it with you. Email us support@freelandventures.com or leave us a comment if you’re interested in retiring early on passive income.

What’s Inside:

  • We are not speculating on appreciation or on growth; we simply purchased this property at 65% of its value.
  • Would you rather slave and save for 45 years, or do one deal with five streams of income?
  • The structure of my newest deal was a larger buy-in for fewer investors, but they’ll get a 50% return after 30 months.
  • If you’re not interested in working until you’re 65, come talk to me about how we can make that happen.

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