#200: Rowley Case Study

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Hey, guys, welcome back to Accelerated Real Estate Investor podcast with Josh Cantwell. I’m excited to bring you a quick case study of a property that we just sold and closed and made a nice profit on. I want to walk you through a multifamily deal. Now, this is a property. You can look it up if you want on the Internet. It’s 1924 Rowley Avenue. Rowley Avenue in Cleveland, Ohio. This is a two family, a duplex that got brought to us by a wholesaler. And last year during the middle of covid, we stopped lending. We stopped lending. And being a private lender, we started doing more and more and more of our own investments in multifamily investments instead of lending to other people. We’ve done hundreds of flips, hundreds of wholesale deals and hundreds of private lender loans. We really kind of pulled the plug on being a private lender. So this is just a little deal that kind of fell in our lap from a wholesaler that we thought we would keep. But what’s actually happened over the last twelve months is that we’ve bought and close a number of apartment deals. We bought an eighty unit. We bought a sixteen unit. We bought a five hundred and fifty-two unit. We bought a two hundred and twenty unit, a fifty-four unit and a fifty two unit. So we’ve added almost a thousand doors to our portfolio in the middle of covid. So we thought, hey, let’s just sell these little duplexes they’re maybe more headache than they’re worth. Also the inventory on the MLS is very thin. If you catch some of my recent episodes on the podcast with Daren Blomquist, who’s the vice president of Market Economics at Auction.com, he’s essentially their economist. You will hear that right now, according to the National Association of Realtors, they only have a million properties on the market. It’s the lowest amount of properties that they’ve ever had in their history of tracking residential real estate. So all that means is that inventory is at an all-time low. And so we thought, hey, let’s just go ahead and sell our singles, our duplexes, our quads, anything that’s residential, let’s sell it. The market’s hot, prices are going up. Let’s get rid of it. So on the Raleigh property, we bought this property for sixty five thousand dollars. We originally scheduled a thirty-thousand-dollar rehab budget. We originally scheduled seven thousand dollars in holding costs. We scheduled a five-thousand-dollar project management fee to my partner, Tyler, who’s also our VP of acquisitions, but also did the stabilization on this property. We bought this property back in May of 2020, so it was about ten months from start to finish. We originally budgeted a total budget of one hundred and twelve thousand seven hundred fifty dollars. What actually happened is that we were going to renovate it. We were going to fix it up and we were going to then refinance it using a refi lender and we were going to cash flow it. When everything started happening with covid, there’s no inventory. We called one of our realtors, guy named Steve Joncour with Remax and said, hey, Steve, why don’t you go out and do a C.M.A on this property or current market analysis and let us know, like, what do you think you could sell it for? Steve comes back, he’s like, I probably would list a four one eight nine nine. I’m OK, well we’re only into this thing for like one fifteen, one twenty because we went over budget bought for one twenty, it’s going to be worth one ninety. Sounds like an amazing opportunity to sell it, get rid of it and make up thirty, forty thousand dollars, net walk away profit. This is exactly what we did. Once the property was done and for those of you that are on YouTube, you can see the Zillo pictures that I’m bringing up here on YouTube through the Zoom recording. So this little duplex is in the Tremont neighborhood. And you can see the kitchen, you can see the luxury vinyl plank flooring, the used appliances we bought used appliances. Many people were very quick to point out that the refrigerator looks like it had bullet holes in it. There were used appliances, but it was in a great part of town. We did a great job renovating the property, hardwood floors. We’ve refinished those the fireplace refinished that. We put in all new HVAC with forced air on luxury vinyl plank, new kitchen. Again, it was a duplex. The buyer is actually moving into one of the units and renting out the other side. Did a beautiful job of renovating it. And finally, when we were done, we put it up for sale for one eighty-nine nine and it sold for over asking price. For one ninety-four in a bidding war. So you could see the properties again here on YouTube. You can see the pictures of the property staged, the kitchen, the bathrooms. Looks just fantastic. So what we actually ended up happening is when we got to closing sold the property, there was a little bit of a discrepancy in the not the accounting, but just in the tracking of everything. So we bought the property for sixty five. We paid the wholesaler five thousand dollars in the assignment fees an hour and over seventy we paid Tylor five thousand to manage it. So that’s seventy-five and we added up all the expenses the seller paid closing costs, the commissions to the realtors when we sold it we. We ended up paying instead of a budget of thirty thousand dollars for rehab, we ended up spending fifty-three thousand dollars for rehab because we had a contractor that basically walked off the job and we ended up netting net away profit on the property of thirty-eight thousand bucks. 

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One of the things I loved about this is that we were able to stabilize it. We could have rented it out and we should have rented it out because that would have been additional income to us. That was just pure profit, because we already had our expenses. We already had our holding costs. We already had the private lender loan, who was my friend Andy, who lent us the money. And with all of that being said. If we had rented it, let’s say we rented it out for eight hundred dollars per month per unit, that’s sixteen hundred dollars for rent it out, we would have made an additional sixteen hundred dollars a month. That would have all been pure profit on top of our flip profit. So walk away. End of the day. Thirty-eight thousand dollars. I went to the property maybe five times, help manage the contractors, the roof, the exterior, paint the driveway, the windows, the clean-up, the cabinets, going to Home Depot, Lowe’s, all that stuff. And we’re excited to walk away with that profit on this flip. Now, again, why did we sell it then? This is my advice to you. Why did we sell it? Well, number one, we’re focused on bigger things. OK, I just closed one hundred-million-dollar apartment deal in Houston. So we need to kind of outsource and move on from these little deals and but they’re still super profitable deals. The second thing is that, again, if you invest in the Midwest and the Southeast, there’s a lot more, the economics make a lot more sense than the West Coast and the Northeast, where things price wise or just out of control, things don’t cash flow. So we invest in the Midwest. I happen to live in Cleveland. So that’s fantastic. It’s easy for me to invest here because I live here. Number three, we were able to get this property from the wholesaler, even though he had higher offers because he knew we would close cash and because he knows we’re very reliable when we close. Now, I didn’t close with my cash. I close with a private lender. Lesson number four the private lender on this deal Andy, when we sold this property, he immediately took that hundred and thirty thousand dollars is about one hundred twenty two thousand dollars immediately invested in one of my apartments. So when you do good on a small deal, guys will invest in larger deals with you as well. And lesson number five is if you can locate and find the neighborhoods in the Midwest, the South and the Southeast, but locate the neighborhoods that are also regentrifying. This is an area of Tremont that’s been gentrifying now for fifteen years. Property values have gone from one hundred thousand to two hundred thousand to five hundred thousand to seven hundred thousand. They’re literally building new homes now that are selling for a million bucks because it’s close to downtown and it’s close to art galleries. It’s close to, you know, churches and schools and restaurants and bars. It’s amazing what’s happened in this neighborhood. And so those are just some of my takeaways, some of my lessons I learned on this property. At the end of the day, funding equals freedom. Funding equals freedom. Funding is what allowed us to buy this property, get the deal. It allowed us to do the deal with not a lot of pressure. We defer to all the interest to the end. So had no cash flow obligations to pay cash every month. And we were able to give the private investor over a 10 percent return to over ten thousand dollar’s worth of interest, which he reinvested into our next deal. OK, so if you’re interested, check this property out on Zillow. The pictures are still up online,1924 Raleigh Avenue bought it for sixty-five thousand, sold it for one ninety-four, walked away with a thirty-eight-thousand-dollar profit. I hope you enjoyed this episode of Accelerated Real Estate Investor. If you did, if you’d like to learn more and if you’re looking for a mentor, somebody who can help you along your journey. Investing in multifamily properties and apartments, go visit JoshCantwellcoaching.com. 

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According to the National Association of Realtors, there are currently only a million properties on the market. This is the lowest number EVER in the history of tracking residential real estate. Inventory is the lowest it’s ever been. Today we are going to talk about what we are doing differently in this climate, as well as what we have stopped doing.

Over the last year, we’ve done several flips and wholesale deals but decided to stop lending privately. We’ve acquired several multiunit properties, including a smaller duplex in Cleveland, Ohio, at 1924 Rowley Avenue, that we flipped and sold. This was a deal that fell into our lap from a wholesaler.

We could have fixed the property up and rented it out to keep that cashflow, so why did we sell? We could sell it for a good profit, and we are focused on bigger things. These smaller deals are still profitable, although they can be more of a headache than they are worth sometimes. We are focused on working with bigger investments at the moment. We were able to get this property directly from a wholesaler because he knew who we were and that we would close cash and we are reliable. We borrowed from a private lender on this property as well. When you do well on a small deal, people are more likely to make bigger deals with you. We were able to give the private lender a 10 percent return, which he invested into our next deal, which is a win for everyone.

The bottom line is finding properties that work for you. This may be hard in a market like this, where the inventory is so low, but find properties that fit your investment needs and what you are willing to work with.

What’s Inside:

  • What parts of the country are easiest to cashflow multifamily properties?
  • The benefits of having a relationship with wholesalers and lenders.
  • How is the market looking from an investment standpoint?

Mentioned in this episode​

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