The Fastest Way To Build A Six Or Even… Seven Figure Real Estate EMPIRE!
As the saying goes, it’s the little things that can make a big difference!
In this episode, I’m going to walk you through 10 very simple techniques and strategies that will help you drive income, increase your profits, reduce your expenses and improve your bottom line, when purchasing a new multifamily property.
There is a general understanding that in order to make money you have to renovate and increase the rents. But if you want to truly maximize your profits, there is more work to be done.
A lot of the tips that I’m going to share might sound like no-brainers, but you’d be amazed at how often we see other property owners make incredibly simple mistakes that end up costing them a ton of money. If you could save 25-35% on your water bill and thousands of dollars every year on utilities, why wouldn’t you do that? Spending $300-400 per unit on plumbing upgrades can literally save you tens of thousands each year.
Today, you’ll learn the exact system our team has in place to make sure that we’re taking advantage of every opportunity to make money and turn a profit on every unit.
Key Takeaways with Josh Cantwell
- Improve the resident experience and upgrade the units. People will pay more for a better experience.
- Raise the rents and consider using dynamic pricing by changing the rent prices by month or by season to take advantage of peak moving times of the year.
- Lower the utility costs by upgrading to LED lights wherever possible.
- Include a partial amount of the utilities on the tenants bill. These are all benefits and features that you’re offering, so bill it back to them.
- Run a segregation study on the building by having an accounting team come in and segregate the soft and hard costs of the property.
- Eliminate poor management. So many properties have third party management companies with a terrible expense ratio.
- Quickly turn the units and fill them. Have a plan to turn vacant units into rented units within a few weeks.
- Find one cable and internet provider to wire the entire building, lock in the contact and resell cable and internet to the tenants for a profit.
- Water conservation is huge. We install low-flow systems on everything like toilets, shower heads and faucets. This can often help reduce the water and sewer bill by 25-35% each year. And be sure to look out for slow leaks as they literally flush your profits down the drain.
- Get multiple quotes from contractors for your CapEx items like paving, landscaping, trash and snow removal. You can save thousands of dollars just by shopping around.
We have $20 million in private capital that we are looking to use in the next 3-6 months so please contact us at Freeland Ventures if you’re looking to partner up on a deal.
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Josh Cantwell: So, hey there, guys. Welcome back. Hey, it’s Josh Cantwell, and welcome back to Accelerated Real Estate Investor. Today, I have a special treat for you. Today, we’re going to talk specifically about ways to do true value-add apartment deals and multifamily deals and 10 specific techniques and strategies to drive income and reduce expenses. Welcome to the next episode of Accelerated Real Estate Investor. Here we go.
Josh Cantwell: Okay, so let’s jump into some of these new strategies. I thought I would share this with you today because I actually just did a webinar yesterday, had a few hundred people on a webinar. We were specifically discussing a new 250-unit apartment deal that we have under a letter of intent. We are about to get under PSA and we’re about to go into our due diligence phase. And I was inviting a number of our investors onto a webinar to talk about some of our specific strategies for how we drive income, how we reduce expenses, and talk about some of these high-level details of this 250-unit that we’re buying.
And I thought, like, hey, let me just re-record this and share this with all of our audience, not just the folks on our email marketing list and our webinars, I thought I would share this with you as well. So, these are the specific things that we’re going to do to this building, this 250-unit, and the other buildings that we own to add value, drive income, reduce expenses. There are 10 specific strategies that we have and that we use. Let’s jump into those.
The very first strategy to drive additional income is to improve the resident experience, improve the actual building structure and upgrade the units. So, when you think about income, you think about your apartment buildings and how you’re going to make more money, people will always pay a premium for a great experience, like you can go to any casino in Vegas, but you’re going to pay $400 a night for the room at the Wynn or $400 a room for a night at a class five amazing casino, or you can spend 50 bucks a night or even get a free room at some dumpy old casino down the strip. People will pay more for a better experience.
You can buy a suit, you can buy a suit for 50 bucks, or you could buy a suit for $2,000 because of the way it’s made, but also because of the experience. When you walk into the suit shop like I have and put on a thousand-dollar suit, it’s how you’re treated in the store that is part of the reason why you’re willing to pay more. So, in our apartment complexes, we have to improve the resident experience, meaning the staff has to be prepped and ready to answer questions. Maintenance tickets and trouble calls have to be answered and taken care of within 24 hours. The staff has to be available, friendly, dressed up in a uniform, and they have to know when the office hours are. The resident, the staff, the property management team need to know people by their name, by their first name. Different ways to improve the grounds with amenities, dog parks, playgrounds, laundry, covered parking, how can we improve the resident experience? That’s number 1.
Number 2, how can we improve the building? So, fixing leaks, again, adding amenities, maybe changing some of the layout of the buildings or the layout of the parking lot, sealing and striping driveways, and then finally, of course, upgrading units and just flat out having nicer, better units than all of our competition. This is our number 1 strategy for driving income that allows us to raise the rent. So, how do you drive income? Well, look, the second way that we drive income is by simply raising rents. You’ll be surprised by how many buildings I look at and how many buildings we offer on, where the rents are simply below market value. They’re just not raising rents.
So, a number of our property management companies that we work with, they have what’s called dynamic pricing. Dynamic pricing simply means that they actually change the pricing of the unit on a daily basis or a monthly basis or a seasonal basis to match up with what people are willing to pay. So, if it’s in the summertime, a lot of people move in the summertime, the weather’s nicer, maybe they’re in between jobs or schools and they have more time to move while the kids are not in school or they’re not in school, that’s a time to raise the rents based on seasonal rent rates. You look at what’s happening right now, especially in the Texas market. Rents are up 20% year over year. Even in my area of Cleveland, Ohio, and other areas that we operate in, rents are up 3% to 7%. So, we drive income by simply raising rents and paying attention to the seasonal time of the market and also when there’s an inflationary period like there is now.
Number 3, lower utility costs with things like LED lights. Actually, I had a meeting this week with a gentleman whose name is also Josh, and Josh actually owns his own consulting company where he looks at the cost of electricity, the cost of gas, and the costs of Wi-Fi Internet, and cable. He has a specific consulting business where he comes in and works with multifamily and apartment owners to reduce the cost of electricity, reduce the cost of gas. He locks in bulk contracts and he marks up those contracts slightly, offers those contracts to us. He also locks in Wi-Fi Internet for the entire building, then we essentially resell the Internet access to the residents.
So, instead of them having just Internet access in their unit, they have Internet access in their unit, but also in the hallways, in the common spaces, in the dog parks, outside, and even in the parking lots. The Internet covers the entire complex. So, we’re able to lower utility costs, gas, electric, LED lights, lithium-ion batteries, also negotiating better contracts and then charging those back to the residents. So, that’s number 4, is bill back utility expenses back to the residents. Again, so many different ways that you can say, okay, bill back part of the water and sewer, bill back part of the electric, part of the gas, again, the Internet, back to the residents. These are all benefits and features that you’re offering, bill it back. That’s number 4.
Number 5, run a cost segregation study. Cost segregation study simply means an accounting function where you have a special accounting team, a firm comes in and looks at segregating the costs of the building. Within the costs of the building, you have true hard costs of the building, the actual structure itself, the parking lot. Then you have all of the soft parts of the building, maybe it’s your laundry, maybe it’s your management office, maybe it’s the common spaces. These are soft costs that can be written off much, much faster. And so, as we segregate the costs of the building that we bought, we can actually depreciate and write off more of the building much faster. So, that’s a fifth way to drive income and reduce expenses and taxes.
Number 6 is eliminate poor management. I can’t even tell you almost every building I’ve bought ever has had poor management. It was either a mom and pop owner trying to figure things out and managing it themselves, or they hired a third-party manager and they were just getting raked over the coals by a third-party management company with 60%, 70%, 80% expense ratio, eliminate poor management.
Number 7, quickly turn units and fill them. I bought a building a couple of months ago. It was 220 units. We paid $11.65 million for it. And when we took over the building, I was baffled to find out that there were units that had been sitting vacant for two or three years. Two or three years. And we’ve got guys that can turn a unit in 10 business days, like literally demo it out, rip out the kitchen, rip out the bathroom, all the flooring, completely replace the kitchen with white sugar cabinets, black-matted hardware, new appliances, new LVP flooring, new trim, new cord around, a new electrical panel in the entire bathroom, all the lighting, paint, carpet, trim, flooring, you name it, 10 business days. This guy, we bought the building had these units vacant for two and three years, right? So, the seventh way to drive income and reduce expenses is quickly turn units as soon as the resident moves out.
Number 8, cable and internet bill backs. I kind of already covered this one when I was talking about billing back utility expenses, but specifically, cable and Internet, right? Everybody, especially in a COVID environment, especially in a work-from-home environment, a school-from-home environment, very good, fast Internet is super, super important. So, there are ways to bring in one Internet provider to cover your entire building, and maybe all your residents are paying $80 a month, $100 a month for Internet on their own. You lock in a contract where you’re getting the Internet for, let’s say, 40 bucks a month per unit, maybe 50 bucks a month, and you resell it back to all of the people on your campus for, let’s say, $70 or $75 per unit.
Number 9, water conservation program. So, on every building that we buy, we institute a low-flow everything game plan, low-flow everything, low-flow toilets, low-flow showerheads, low-flow faucets. We institute a low-flow everything program. It costs us about $300 to $400 a unit, and that allows us to drastically reduce the water and sewer usage, typically allowing us to reduce the water and sewer bill by about 25%. I have a building that we just offered on. The water and sewer bill alone was 400 grand. If we’re able to get that building and institute a water conservation program and reduce the bill by 25%, that means we’re going to reduce the water and sewer bill down to 300 grand. That $100,000 of extra income at a six cap is worth $1.66 million.
Also, in our water conservation program, fix leaks quickly. I’ll give you another example. We bought an 80-unit building. This is going on about a year ago. And as we did our water conservation program, we realized that almost half, 40 of the 80 units, had leaks in the bathtubs that were constant. They were leaking all day, all the time, for months or years. So, of course, fixing those kind of leaks, getting our arms around it, again, good property management, identifying leaks, fixing them permanently. So, what we did is we went back into the back of the showers and changed the diverters. We chopped out the old cast iron plumbing. We put in PVC. We changed the diverter, fixed the leak permanently.
Finally, number 10, is to get multiple quotes from third-party contractors. I baffled at the difference in pricing for some things. We just sealed and striped one of our driveways at a 200-unit that we own. We set out kind of requests for quotes or requests for proposals. And we had about five or six different proposals come back to seal and stripe all the driveways. There are about 250 parking spots on this campus, 250 parking spots. And we got quotes back for $50,000, $60,000, $75,000 from third-party contractors to seal and stripe and mark all the parking spots. Guess what we ended up paying. We sealed and striped 20 buildings. It’s a seven-acre campus, 20 buildings, 250 parking spots for $17,000. Instead of paying 60, 70 grand, we paid $17,000. We saved a tremendous amount of money, a tremendous amount of time because we got multiple quotes from third-party contractors.
So, there you have it. There are 10 true ways to add value to your buildings, drive income, and reduce expenses. 1, improve the resident experience. 2, raise the rents organically. 3, lower utility costs for gas and electric. 4, bill back the utility expenses back to the residents. 5, run a cost segregation study. 6, eliminate poor management. 7, quickly turn units and fill them. 8, cable and Internet bill backs. 9, institute a water conservation program, save about 25% to 35% with that one. And 10, get multiple quotes from third-party contractors for all your trash, all of your landscaping, snow removal, and some of your CapEx items. You’re going to save hundreds of thousands of dollars instituting these ten strategies.
Josh Cantwell: So, there you have it, guys. I hope you enjoyed that quick solocast on our 10 strategies for adding true value, driving income, and reducing expenses. I want to tell you, if you have a question, if you’re looking to do a multifamily deal and maybe you need a joint venture partner, maybe that’s us. Maybe you need a key person in your business to either sponsor loans or raise capital or do a value-add construction or help institute property management or sign for a loan. If you need help with any of those, we’re looking for joint venture partners. We’re looking for more deal flow.
As I record this, I’ve got $20 million of private capital that has to get placed with my own investors and my own money and needs to get placed into deals in the next three to six months or less, $20 million dollars, and I’ve got to spend. So, if that’s you, if you’re looking for deals, if you’ve got deals, you’re looking for a JV partner or a key person to help you with some of your deals, please reach out to us. Go to FreelandVentures.com, FreelandVentures.com/passive. Visit one of those websites and make sure you reach out to our customer service department. And let’s get on the phone and let’s talk. Let’s JV on a deal. Let’s make some money. Alright. Also, don’t forget to leave us a rating, review time, five-star rating, five-star review. Finally, don’t forget to subscribe to the podcast and the YouTube channel so you never miss another episode of Accelerated Real Estate Investor. We’ll talk to you next time. Take care.