The Fastest Way To Build A Six Or Even… Seven Figure Real Estate EMPIRE!
In this episode, I want to share a great strategy to get your CapEx team rolling and get those vacant units filled quickly.
For context, we recently purchased the Forest Ridge Apartments–a 220 unit development on Chevrolet Boulevard in Parma, Ohio.
This building had 39 units being turned over by our capital improvements team, which updated the flooring, kitchens, hardware, bathrooms, paint, and more. We wanted them not just finished but leased.
So, what did we do? We hosted a leasing event, which is essentially an open house. In addition to helping your units turn a profit faster, a leasing event also forces your capital improvement and construction teams to get those units completed and ready for viewing.
In today’s episode, I explain why we took this approach and created a hard deadline and everything we accomplished because of it. You’ll learn how to deploy this strategy to accelerate the turnaround on your projects, get those vacancies filled, and create positive cash flow now instead of weeks from now.
Key Takeaways with Josh Cantwell
- How leasing events force your teams to put in the hours to get your units ready to turn a profit.
- When to set a leasing event date for a building you’re in the process of stabilizing.
- When to drop advertising rates on certain units and why it has only a minimal impact on your bottom line.
- Why it’s more important to fill vacancies than to lease at the top of the market.
- How we dealt with a brutal snowstorm hitting us 24 hours before the event–and how the importance of building great connections and relationships.
Josh Cantwell Tweetables
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Click Here to Read the Transcript with Josh Cantwell
Josh Cantwell: So, hey, guys. It’s Josh. Listen, I wanted to pop on and talk to you today a little bit about the strategy that we’re deploying this weekend in one of our buildings. So, we bought 220 Chevy. You can look this building up online. It’s called Forest Ridge Apartments. It’s on Chevy Boulevard, Chevrolet Boulevard in Parma, Ohio. So, we call it 220 Chevy. It’s 220 units on Chevy Boulevard. So, what we decided to do was announce to our team and announce to prospective residents that we were going to be hosting a leasing event this weekend. And that leasing event is important for many reasons, but primarily because it creates a significant deadline. So, we have 39 units at this building that were recently turned over and that we improve through our capital improvement team. We did all new flooring, all new kitchens, black-minted hardware, tub surrounds, tub tile, flooring trim, you name it. We painted all the units. They look amazing, right? They’re freshly updated. It’s got a gray-white color scheme and white shaker cabinets and gray and white granite countertops, and it looks amazing.
And so, about two weeks ago, we deployed this leasing event strategy and we actually leased up 15 units in two weeks. So, we decided to do the same thing at 220 Chevy. So, the leasing event is going on tomorrow. All that simply means is basically like an open house from 10 a.m. to 1 p.m. That’s the ideal time to do it and to do it on a Saturday. What this does, however, is really forces the rest of our team to make sure that the building is absolutely operated at the highest level, meaning all of our units that were previously under our capital improvement team and our construction team, they’ve got to get all those wrapped up basically by the end of the day today so that they’re ready for tomorrow. So, the first benefit to this, of course, is the leasing, the eyeballs, the traffic and new leases, new income. That’s the main goal. But the second thing is that the CapEx team now knows that there’s a hard deadline and they’ve got to get those units completed. They’ve got to stay late, work extra hours, and absolutely get out of there by the end of the day today so those units can be cleaned tonight and tomorrow and so they’re rent ready by the leasing event.
The third thing is we had Lowe’s coming out and doing carpet squares in all of the common spaces. We had LED lights going into all the common spaces. And we had all the laundry rooms, which when you’re in the middle of a heavy CapEx program, you’ve got to find somewhere to put all this construction material. So, some of the construction material was actually sitting in the laundry rooms and the laundry room’s kind of messy, kind of sloppy so if I’m a resident there, I want to do my laundry. Unfortunately, there’s construction material debris, old appliances, paint cans, trim, stuff in these laundry areas, and they’re also the storage areas. So, we were able to force our team to say, “Look, you’ve got to get the CapEx done so we can get the construction materials out of those areas.” So, now not only are we having the leasing event tomorrow, we’ve also added photos and pictures to our leasing office, really designed and added some really nice features of Cleveland and Parma and the surrounding areas that really went well in the leasing office. And so, just in the last two weeks, here’s what we’ve accomplished because of this deadline.
So, if you buy a new building and you’re in the process of stabilization and you’ve got, let’s say, 10 units or five units or, in our case, 25 units that are about rent ready, my suggestion to you is, about three weeks out, identify a leasing event date. And of course, if you get leases, if you get people coming in, people want to lease out units between now and the leasing event, go ahead and lease units out. No big deal but identify a leasing event. Let’s say it’s three weeks out from now and then you’ve got a reverse engineer to make sure that everything is done by that date. So, here’s everything that we got finished. Number one, we had an electrician crew. Actually, my friend, Jason Krauss, who’s a certified electrician, licensed electrician, he brought his crew out, and he put in LED lights into 20 buildings, into all the commons, all the landings, and all the laundries. So, it was hundreds of LED lights that he installed in four days. So, that got done. Number two, the carpet squares got done. We’re really focused during this leasing event on leasing nine units in particular that are in two buildings. So, we’re really focused on showing these two buildings. So, the carpet squares got done, the new treads went in on the stairs. That got finished.
The laundry areas got painted, so all that construction debris was thrown away. We had all the appliances, some of them that were working well, we sold those off, had them moved off-site and the ones that were trash, we trashed those out. We sent those out to a bulk company that picked them up, got those out. Our team went in and brooms swept all of those laundries, got all the debris out of the old trim, all the old shoe mold, all of it’s gone. And then Kevin came in, our painter, and finished up all the paintings. So, that got done. Then on top of that, those 25 units that are rent ready, guess what? Those are finished and they’re ready to show tomorrow. The contractors are out of those units and the cleaning company is coming in this afternoon to clean them all and to make sure that by tomorrow morning, they’re rent-ready that we can show them. The other thing we did is actually our pro forma on 220 Chevy was that we needed to rent the two bedrooms out for $865. That’s $865 two years from now when we’re at stabilization and we’re at pro forma. Well, we’re currently getting between 925 to 975 for those leases. So, we’re already leasing, in some cases, $50 to $100 over pro forma and it’s $300 to $350 over what the previous rents used to be.
Okay. So, the fact that now that we’re leasing our $50 to $100 over pro forma, what I decided to do this weekend is I made the executive decision to drop the advertising rent rates on the two bedrooms. Again, remember pro forma is $865. We’re currently getting around $950. I decided for this weekend, only to drop the rate down to $900. Okay. Still above pro forma. It’s not as high as we could get but what I’m hoping is that this triggers a massive lease-up. Then on the one-bedrooms, also at this property on Chevy, that the pro forma for those is $775. Well, we’re currently marketing and filling units at 825 to 850. So, again, I told my property management team and my leasing agent, “Go ahead and drop the asking rent down to 800.” Again, it’s already over pro forma, which we don’t even have to hit for two years from now and it gives us the opportunity over the next two years to renew at a higher rate. And the reason why this has been so important is because when I look back at our books, we’ve owned this building now for about eight months and the building is actually cash positive for the life of the deal after we paid the expenses, after we paid the real estate taxes, the insurance, the utilities, property management fees, after we paid the debt service and even after we pay our preferred return to investors, it’s still cash positive.
So, I’m thinking, “Look, if we can fill up these 39 vacancies and really 25 of them we’re really focused on this weekend, if we can lease out 25 of them at roughly $900 a pop, that’s over $20,000 a month of gross income, our expenses are not going to go up at all. So, that becomes an additional $20,000 of net-free positive cash flow. And we just leave that in the kitty for the next two years and just grow that up. It grows our operating income. It grows our bank account. So, why fight to lease every single unit out at the top of the market when we know that we’ve got this vacancy here? We can add $20,000 to $30,000 a month of income. It’s all going to hit the bottom line, go directly to the bottom line, the top and the bottom. There’s no additional expense involved. And that will also allow us to also get more laundry income, more late fee income as these units are filled and as they’re using the amenities, and as there in some cases paying late, they have late fee income that comes in. So, we’re super excited about this. So, my suggestion to you, my advice to you in this quick little podcast is use this as an example. Use this as a way to say, “Okay. Next time I’ve got a 20-unit or a 200-unit or a 500-unit to plunk down right now.”
Choose a date that you’re going to have a leasing event, then mobilize your team, your property management team that do all the marketing, right? Mobilize your CapEx team to get all the CapEx done. Mobilize your CapEx team to get all the commons done. Mobilize your landscape crews and snowplow crews to make sure that the exteriors look absolutely gorgeous. And then if you can, if you’ve been marketing the rents at a certain price, see if you can drop the price down by $50 and do a this-weekend-only special. And then after the weekend’s over, raise the price back up. So, people start to get conditioned to know that this is a special for this weekend only. It’s not like something that you’re going to advertise it as this weekend only, but you’re actually going to just leave it at the lower price. You have to actually drop the price and then raise the price back up so people know that you’re legitimate in your advertising this weekend only. Then when they come in and they come in after the fact and like, “I saw the old price at 800.” “Well, now it’s back to 850.” “I saw the old price at 900.” “Sorry. It’s back up to 950. You missed the leasing event.” And then a month later, two months later, hold another leasing event.
So, I was just on-site at this building this morning and it’s amazing to see what’s been done. And in the middle of it, we’ve just absolutely gotten pummeled with snow. So, we actually had to call my buddy who was actually one of my football coaches in college. His name is John Snell. He’s the athletic director. He’s involved in the athletic department at Baldwin Wallace University. I called up John and said, “John, football team just ended their season. I’m sure you’ve got some football players or some wrestlers at the college. You could send them over to help us get all the snow moved, get it all shoveled, get rid of the ice, move these appliances, just get the whole thing mobilized.” We got these college kids come over for $15 an hour, and they slammed it all out in the last week, got our CapEx team rolling, our property management team rolling, and we’re ready for it tomorrow. Now, we’re supposed to get a sh*tload of snow in the next 24 hours. So, who knows if this leasing of that’s actually going to work because of the weather? But a month ago, we did this at a different property of ours, called 52 Lake, and we leased out almost 20 units in less than a month using this strategy when the weather was good. So, we can’t control the weather. That’s up to God. But we know it works.
And so, use this in your own business. Create this amazing deadline. Mobilize your property management team, your CapEx team. Reduce the rent, if you can, for this weekend only and watch your building fill up.