Case Study: Spending $2M to Scale CapEx – EP 351

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One of the things that I’m most proud of is how we’re doing with deep value-add for our properties. And today, I want to walk you through what we’ve done since purchasing the property at 296 Triskett.

As a refresher, this is a 296-unit, all-garden-style complex in the Lakewood submarket of Cleveland. Over the course of eight months, we invested $2 million in the property and scaled with massive success. We managed to avoid labor issues, we didn’t get clobbered by supply chain shortages, and we were able to increase rent by over $300 in over 140 units. 

Today’s episode will be a bit of a case study on how we did it. You’ll learn how we financed the deal and our CapEx, how we managed our construction budget so effectively, avoided the typical snags and obstacles, and created massive value along the way.

Key Takeaways with Josh Cantwell

  • Why we bought a 296-unit building with over 43 unoccupied units, low rents, pests, unhappy tenants, and an unsafe parking lot–and how we solved all of these problems.
  • How the deal required us to get our CapEx done within two years–and how we spent our money to reduce our long-term overhead.
  • Why delivering a quality tenant experience makes it so much easier to bump rents and increase profits.
  • How due diligence, good oversight, great vendors, reliable crews, and good data give you the power to massively scale your CapEx.

Josh Cantwell Tweetables

“The P&L is all that really matters when you value a building. The net operating income is all that matters.”

“Value-add and deep value-add is absolutely how you force the appreciation and create the most value, and you do that by scaling your CapEx.”


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Josh Cantwell: So, hey, guys. Welcome back to Accelerated Investor. Hey, it’s Josh, your host. And today what we’re going to talk a little bit about is some updates to one of our properties where I hold my home office called 296 Triskett and exactly how we spent over $2 million in the last eight months avoiding labor problems, supply chain problems, and turning over 140 units in bumping rents over $300. That’s what we’re going to talk about today on Accelerated Investor.




Josh Cantwell: So, hey, guys. Welcome back. I’m excited to be with you today. Just me on a solocast and I want to use one of my ideals as an example on exactly how to manage capital improvements. A lot of people have talked about value add or deep value add, and I don’t think there’s frankly a better company operating, doing value at a deep value-add anywhere that’s doing it better than we are. But I don’t say that’s a brag. I just say that because I think we’re doing a really, really good job for investors and for shareholders, for general partners, limited partners. And so, there’s multiple things that we’ve done since we acquired this building. To refresh your memory, we bought 296 Triskett. It’s a 296-unit, all-garden style all-in-one campus in the Lakewood submarket of Cleveland. We bought it for 16.3 million. Our plan is to put about $2.75 million into it. We’ll be all in for about 19.5, a little over 19.5 when we’re done. The existing rents when we bought it were blended out to just over $600 because the former owner had owned the property for a long time. He had a very low basis and he didn’t push rents at all. And so, we were able to acquire the building for about 55,000 a door and the rents were about $600 a door, firmly B-class area, but managed like a C-minus or even a D-plus type of building.


When we bought it, there were a lot of units that were down. There were over 43 units that had not been occupied for a long time, a year to five years some of them. Rents were super low. There were problems with bugs and mice and there were problems with leasing and there were problems with the parking lot. The residents weren’t happy. The property managers that worked there were not happy. The maintenance guys were not happy because essentially the owner had just let the property go. So, we buy it knowing that it’s got tons of upside. And also, we pro forma this thing out where the two-bedrooms would give $1,000 a month and the one-bedrooms would get $800 a month. So, that became our goal. We secured a loan from a local regional bank called Premier Bank, and they funded 75% of the purchase price and 100% of the CapEx through a draw. So, we have to spend the money when they reimburse, spend the money, and then they reimburse, spend the money and they reimburse. And I’m very proud to kind of report back to you. And some of you guys might be actual limited partners in this deal, report back to you that we’ve processed now five draws totaling $2,063,151.34. And we did that in less than eight months. The first draw was 450,000. The second draw, 587,000. The third draw, 433,000. The fourth draw, 129,000. And the latest draw, $455,000. So, how do you spend $2 million in eight months and avoid labor problems, labor shortages, supply chain issues? How do you get all your materials on site to do that? How do you spend $2 million when everybody else is complaining about labor problems and supply chain issues? How do you actually do that? That’s what we’re going to talk about today.


Now, if you look at what we’ve done, we have a budget here of 2.75 million, we’ve already spent $2 million. One of the reasons for the urgency is that when we bought the property, we secured a loan and one of the loan covenants was that we had two years of interest only and then it would turn into fully amortizing. So, we have a two-year deadline to jump the rents so we can afford the amortizing loan payment. That’s one sense of urgency. The second sense of urgency is that there is a loan covenant what’s called a completion guarantee that says that we will complete the renovations within two years. And at the end of that two-year period, if we don’t have the renovations done, they’re basically going to take any money left over in that $3 million worth of Capex. They’re going to set it aside in a construction reserve escrow account but we’re then going to start to pay a fully amortizing loan payment on the full amount of the loan, which is 15.2 million. So, we want to nail down all of this CapEx within two years because we want to push the runs up so that the property will perform and then be able to afford not only the interest-only payment but the amortizing payment. So, that is why we have such a high sense of urgency.


So, what have you done? “Question, Josh, is, well, what did you guys accomplish in the last eight months and actually spend the $2 million on?” Well, the first thing is that we turned 140 units. We bought it. It was 87% occupied. We let the occupancy dip down all the way to about 80% occupied in order to turn a lot of units. So, at 80% occupied and a 300-unit building, that’s about 50 to 60 vacancies. With that kind of vacancy, new vacancy coming, turning units, filling them up, new units coming, turning them, filling them up, we had about 60 units to turn at all times. Wasn’t that normally 60? It was more like 50. But with those 50 units, we were able to knock those out as whatever they needed either a full turn, a half turn, a quarter turn, or a make-ready. We were able to do whatever that unit needed. So, out of those 140 units, we’ve used $1.3 million on the units themselves. And so, that averages out to about 9,000 a unit. In addition, now, the units, you guys can go maybe we’ll put this in the show notes. If you go to Stuart House Apartments online in West Cleveland, the address is 14411 Triskett Road. You can look this up. Go to the listing.


If you look at the listing, there’s like 15, 20 photos there then you’ll see what we did to the units, white shaker cabinets, black matted hardware, black matted pull cabinet handles, long gooseneck faucets, white subway tile backsplash, new sinks. We did butcher block countertops. We did LVP flooring, new AC units, painted the units, painted the trim, glazed the tubs. In some cases, we put a new tub surround, new low-flow toilet, new low-flow showerhead, new faucets, new vanities, new mirrors, new LED lights. And so, this is not only allowing us to charge an incredibly large rent bump. It’s also a tremendous amount of energy savings. Because when you do LVP flooring, we’re not going to have to change the carpets out every 3 to 5 years. This flooring is going to last 10 to 15 years. So, we harden the asset. The LED lights is going to reduce our electrical budget over time. The low-flow toilets, showerheads, and faucets are also going to reduce our water and sewer consumption over time. So, the capital improvements, which is a balance sheet item, is then helping us to operate better on the P&L. And as we all know, the P&L is all that really matters when you value a building. The net operating income is all that matters.


So, by improving the units, not only can we increase the rent tremendously. So, in a two-bedroom that they used to charge maybe 650 for, now our pro forma is to get 1,000 a month. Guess what we’re getting for rent? $995 per rent. So, we have dozens and dozens and dozens of these units on the rent roll that are now matching the pro forma. Now, that $1,000 a month for rent, that was after three or four years and we’re hitting those rents now after just nine months. So, way ahead of schedule with that. And so, how do you do that? Like, how does that actually work? Well, first of all, some of the things that you have to know about managing a large construction budget is, number one, is your due diligence. Your due diligence, when you are walking the building, when you are walking through the commons, the boilers, you’re walking through the units, you’re looking at windows, you’re looking at if there’s any leaks, you’re looking at the condition of each unit, all of these types, you’re camera-ing the sewers, you’re walking the roofs, all of that was put together in our due diligence budget. So, our budget after due diligence was 2.55 million and then when we took over the building, it went up about by about $200,000. It went up to 2.75 million. And most of that was actually just to cover salaries. So, 2.55 was the actual cost of labor and material. The extra $200,000 is pretty much our internal staff that’s managing the capital improvements.


And so, due diligence has to be tight. When we walk units, we’re looking for leaks. We’re looking to see if the resident is somebody that we want to keep. Is that a renewal or is that a kick out, somebody that we’re going to let them run the gamut of their lease and then not renew them because their unit’s dirty or it needs to be improved. So, we’re going to look at those kind of things. We’re going to jot that down. We’re also going to look at all the windows. We walk through the windows. We noticed there were a lot of windows that were fogged or that were cracked or that had a draft. We ended up replacing over 400 windows. The boilers, we had all the boilers inspected during due diligence, and we found out that a number of the boilers were actually a fire hazard like they actually could break out into a fire. So, we obviously had to put that into the budget. And we ended up working through that and getting reports back from certified HVAC guys and we ended up spending, let’s see, I have the budget right here in front of me. We ended up spending $214,000 on replacing, I believe it was ten boilers plus maintaining and servicing the other roughly ten boilers so that all the buildings had efficient heat. So, that was a big part of it.


Also, all the commons, walking the commons, we need to paint the commons, the flooring in the commons, led lights in the commons, also painting and flooring in the laundry, in the storage rooms. So, we ended up spending there about $139,000 turning all of the commons. Now, this building has 26 buildings. Actually, there’s 25. They’re labeled A through Z. It stops at Y, A through Y. There’s 25 buildings and about 20 to 22 of those buildings have a boiler. So, that was another thing we looked at during due diligence. Obviously, new signage and rebranding of the property. We’re going to spend about $9,000 on signs and about $35,000 on exterior paint. We’ve spent about $18,000 on roofs. So, all of these kinds of things are things that we need to inspect during due diligence. I’m going to quickly rip through all of the line items that we look at for due diligence. You’re probably going to want to replay this back and then you’re going to want to take notes on this so you can actually use this during your due diligence period. Also, by the way, I cover all of this during our three-day live events that we do. We do live events, virtual live events once a quarter, and you can get a ticket for a couple hundred bucks at And so, go grab a ticket. We’re going to be doing another live event very soon. And I’ll teach you this over a three-day period, our entire real estate investing in apartments from A to Z. So, write this down. Here we go.


There’s actually 24 line items that we look at in due diligence when we look at the building. Number one, roofs. Number two, parking. Number three, tuckpointing or exterior maintenance. Number four, exterior paint. Number five, exterior lighting. Number six, landscaping. Number seven, hardscaping. Number eight, signage. Number nine, windows. Number ten, awnings. Number 11, common paint. Number 12, common flooring. Number 13, common lighting. Number 14, laundry and storage paint. Number 15, laundry and storage flooring. Number 16, HVAC. Number 17, boilers. Number 18, electrical. Number 19, plumbing. Number 20, garage. Number 21, security doors. Number whatever number I’m on, I think 22, cameras. Number 23, dumpsters or storage containers that we’re going to need. And finally, lastly, is miscellaneous, which could include a leasing office, renovating a leasing office, maybe you have a clubhouse, maybe you have a pool. Some of those types of things all fall into what we call maintenance. So, those are 24 items that we have on our chart of accounts that we look at when we’re taking over a building.


So, number one, the first thing you have to do is really detailed due diligence. So, we walk a building at least once or twice during our 30-day due diligence period, and then we also walk the building one more time, about 5 to 7 days before we close. So, we walk a building typically three times. And by the time we’re closing on it, we know exactly what we’re going to be doing into it. So, the day we buy it, we can move the dumpsters and the storage containers and get our first shipment of material. So, that is the critical first step for how you turn 140 units and spend $2 million inside of eight months. Number two, you’ve got to have an owner’s rep or an internal vice president of construction, someone on your team that’s an absolute expert at commercial construction and being basically the air traffic control man, somebody that knows how to deal with the vendors like Lowe’s, Home Depot, Menards, National, all these different companies that we’ve used, Famous Supply, all these different companies that we’ve used and how to get things ordered ahead of time and get it stored. Also, somebody who’s got to work through and order those materials and negotiate prices.


And also, that owner’s rep or Internal VP of Construction, somebody that’s also going to plan out all your labor. So, we buy all of our own material. We buy the cost. Not only that, but we buy it through Lowe’s, a lot of it through Lowe’s and Lowe’s gives us an amazing rewards program where they give us kickbacks and rewards dollars for free. So, in any one year, it could be six figures or more that we’re making in free money, free rewards. Now, a lot of that time we can either take that out as a distribution or it can be reinvested back into a property. It’s basically free money. Number two, Lowe’s also dealing with these different vendors, Lowe’s, Home Depot, Menards, Famous. They’ll all usually have 30-day terms. Well, some of them will actually offer you a line of credit where that line of credit will allow you to buy the material using their line of credit, then that line of credit could have 30, 60, 90-day terms. So, you’re not actually spending your own cash. Then by the time you’re done spending the money, the materials are sitting on their line of credit, you turn these units, let’s say, over a month to three months. Then you apply to your bank for your construction draw and then the draw comes in from the bank, which pays off the line of credit.


So, in that scenario, how much money actually did you actually cut out of your own pocket or out of your budget? The answer is only the labor. So, the money went from buying the materials and getting them delivered but going on to the Lowes line of credit, sitting there for 36 to 90 days, applying for a bank draw. The bank then reimburses us, which pays off the Lowe’s line of credit. So, the second most important thing that I just mentioned is the owner’s rep or the VP, the guy that’s an expert, that’s their swim lane. Number three, as I mentioned, is the supply house. You have to have a supply house like a Lowe’s, like a Home Depot, Menards, Famous, etcetera, etcetera, National that is not only willing to offer you the materials on time, on budget, discounted prices for volume, but also someone who is going to work with you because you’re such a big player, you’re such a big customer that they’re willing to offer you a line of credit and rewards. It’s a huge, huge benefit when you’re spending a lot of money. Number four, you’ve got to have the labor. Right now, talking about this country having a massive labor shortage, sure, a lot of people are having trouble with labor.


Do you think if we spent $2 million inside of eight months that we’re having trouble with labor? Yeah, not really. Guess there’s another reason why buying these larger complexes actually makes things easier is because when you buy a larger complex and one of your contractors or subcontractors, maybe they have a crew of two or four or six people on a crew, they can assign a crew to your building and they never have to leave because there’s always a lot of work. So, the fourth key to being able to really scale your CapEx and spend $2 million inside of eight months is to make sure that you have enough work for your crews. We currently have four crews that work on our portfolio in the greater Cleveland area. We have about 1,300 units just in this area. We’ve got another 800 units in Houston, another thousand units in Atlanta. But just in the Cleveland area, we’ve got four crews. Those crews, each crew is made up of two to six guys. And they’re all pretty much subcontractors. One of the crews work for us full-time. They’re actually on our payroll. They’re our W-2 employees and those two guys are part of one crew and they turn units together. Then the second crew, they turn units together. The third crew, they have a group of units. The fourth crew, they have a group of units.


When they do the whole unit from A to Z, they do the demo, they do the flooring, they do the paint, they do the pack out, the install of the kitchen, the bathrooms, they do plumbing, and they do the punch list. So, that’s really the fourth major item that you’ve got to square away in order to be able to spend that kind of money. Now, the last thing I’m going to mention in this particular recording, in this particular training is that you’ve got to, on a quarterly basis, possibly even a monthly basis is you have to take inventory of where the hell you’re at. So, we call those KPIs. Most people call them KPIs, key performance indicators. And our KPIs tell us, are we on time on budget? Are we ahead of schedule? Are we ahead of time? Ahead of budget? Where are we at? So, to give you an idea on Stuart House, after spending this $2 million, we were able to specifically raise the rent. And this is a really kind of a cool metric if I can find it here on my sheet. Let’s see. I’ve got it right here. Let me just find it. So, when we bought Stuart House and we were in the process of buying it and putting together our goals, we were going to take the blended rent from about 650 and bump that up to about $1,000 on the two beds and about $800 on the one beds, and the pro forma is not about, it’s an exact number, we were able to bump the rents on our portfolio big time.


And so, when I looked at our various goals, I thought, “Okay. Well, what can we bump the rent to? How can we really push that rent up?” And I took inventory. I said, “Okay. We’ve owned the building now at the end of 2022. How far did we push the rent on our various properties?” So, now if you look at you’re buying it blended rent, about 600. I think it was $606, if my memory serves me right. Now, when I look at our rent roll, our latest rent roll, we’re now collecting over $210,000 on our rent roll. Okay. So, let’s do the math. $210,000 on the rent roll divided by 296 units. That’s $709 of blended rent. Now, at that time, with the $210,000 of collectible income on the books, we also only had about 85% occupancy. So, we’re really not dividing the 210,000 by 296 units. If you take 296 and you take 15% of that off because we were really only at about 85% occupied so that’s about 45 units. So, 296 minus 45, you have 251 occupied units. So, if you take now 210,000 divided by 251, we’ve bumped the rent from $650 on average to $836 on average in less than nine months. And when I look at our pro forma and our goals of where we want to be, I know we’re getting really, really close to our pro forma.


I know we want to collect when we’re at stabilization and every unit’s turned and every unit’s been bumped up to their pro forma rent, we want to be able to be in a position where we’re collecting up about $260,000 a month. And that’s our pro forma number where we want to get to. But on our two bedrooms, we want to average $1,025 and on our one-bedrooms, we want to average $804. You blend all that together and it’s $956, $956 blended rent. Well, within nine months we’ve jumped the blended rent from just a hair under 650 up to 836. So, we’ve already achieved about 60% of our rent bump goal. Our goal is to get to 957 a month blended. We’re at 836 a month blended. And the reason why you can have such a big rent jump is because the quality of the building, the quality of the units, the full terms, the laundries, the commons, the boilers, the windows, the signage, the landscaping, it’s all been improved. So, while a lot of other people are saying, “Wow. There’s a 7% jump in rent. There’s a 15% jump in rent.” Yeah. Great. That’s amazing. If you’re in Dallas or you’re in Phoenix or you’re in Orlando and you’ve got these 10% to 15% jumps in rent, that’s because it was market-driven, not value-add driven. So, if I take $650 divided by 836, that’s a 28% jump in the rent in less than nine months. So, if I take 28 divided by nine and then multiply times 12, it’s a 37% annualized rent increase. So, that, my friends, is the end result.


And so, let’s just recap as we kind of wrap this one up. So, the keys to be able to scale your CapEx, number one, due diligence. Three walkthroughs. Number two, an owner’s rep or an internal VP who can oversee your labor and your materials. Number three, working with one supply house that will provide lines of credit and rewards and timely materials. Our preferred vendor is Lowe’s. Number four are the crews, making sure that you have 3 to 4 crews with 2 to 6 guys each and having multiple subs and knowing that you have work for them. Number five, your KPIs, reviewing your KPIs on a monthly, at least quarterly basis, to determine how your rent roll is growing. What’s the result of the CapEx that you’re doing? How close are you to pro forma? What kind of rents are you getting on your rent roll? Now, finally for us, our final step here over the next basically 14 months, because again, as I mentioned at the beginning of this podcast, we have 24 months of CapEx. We have a completion guarantee and we have the loan pivoting from interest only to amortizing. We’ve got 14 months to go. Now, in that next four months, we’re going to be doing a lot more make-readys. We’re going to be doing a lot more quarter turns. We’re going to be doing a lot more half-turns. We’re going to be doing a lot more renewals, bumping people up. And they’re going to take those renewals because the building is in such better condition.


The bug problems are gone, the boilers are operating perfectly, the windows are new, the units are new, the laundries, the commons are new, the management is tight, the portal is tight, the laundry systems are tight. And so, now somebody that was paying 650, if we try to bump up to $850 or $900, they might second guess that and say, “Wow. That’s a big jump,” but where else are they going to go and get that kind of value? Where else they’re going to go and get that kind of value for their money? You see in the Midwest, we love buying these kind of buildings because there’s not a ton of new construction in the Midwest. So much of the construction is done in the Sunbelt. And so, now we have the same impact of buying new construction but we can buy it at such lower cost. Like, our basis in these units is like $65,000 to $70,000 versus the basis of building something brand new might be $200,000 a unit. And we’re doing some of that, too. We’re doing some new construction. But value-add and deep value-add is absolutely how you force the appreciation and create the most value, and you do that by scaling your CapEx.




Josh Cantwell: Now, if you enjoyed this episode, guys, a couple of things. Number one, rate, review, like, subscribe. Thank you so much when you do that. It means a ton. We’ve got a bunch of ratings, reviews, subscriptions here over the last six months. So, I know this is having an impact and I hope this content is really, really good for you. Number two, live events, right? We decided not just to have our mastermind program, what we call the Forever Passive Income Maverick Mastermind. Those mastermind members meet three times a year. We also meet twice a week online on Zoom and we mastermind about best practices. And I do some coaching and we talk a lot about deals and we’re doing deals together. So, if you’re interested in going directly into our mastermind and you’re an intermediate to advanced investor, go apply for that mastermind coaching and partnering program at You can join our 75 members and be part of the crew. That’ll be fun.


Secondly, if you’re not quite ready for the mastermind but you want to learn about investing in multifamily, go to There you can grab a ticket to our upcoming live event. It’s a two-and-a-half-day live event and I’ll teach everything that I know after doing over 19 syndications and acquiring 4,500 units. Everything that we’ve done right, everything that we’ve done wrong, I’ll teach you in three days so that you can go scale your real estate investment portfolio through commercial multifamily. So, that’s what you need to do. Go do those things and we’ll see you next time on Accelerated Investor.

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