From 0 to 670 Apartment Units in 18 Months - Apartment Real Estate Investing
With Ed Rogan, Co-Founder
I spent like probably two years learning about the ins and outs of of valuating property, and I was comfortable with the fact that I could instinctually tel I would be able to tell if there's value there.
And then, the idea to me of having over 100 units where you can implement professional third party property management to run the day to day is a no brainer, because I feel like as long as I can do the high level, deal sourcing and evaluating of the deal, then I can hand it off to our property management team, who has 30, 60, probably 200 years of combined experience. That's what they've been doing their whole lives and they're experts. And I feel like, to me that I'm comfortable with that because they know how to operate a property. They know how to deal with tenants. They know how to deal with leasing and qualifying tenants and dealing with maintenance issues and work orders.
So all I needed to feel comfortable with was my ability to evaluate a deal and then and then finance and then put the money together to buy it. That was probably the biggest challenge to overcome.
Yeah. So Percy actually does more of the operations. So he has provided financing himself to the startup of a lot of these deals and to our initial down payments and deposits, he's put the bulk of that up. So when we first got started, he had a lot more money than I did, obviously. So he has, the value that he brought in, a lot of it was tied to the financial backing. And then I put the sweat equity in. So that's really where, the financial backing, kind of like the seed capital came into play. So when we refined a deal, a lot of people don't learn about this. When they follow the guru network in bigger pockets, they don't tell you that. Yeah, you can finance a deal with leverage 80 percent and raise the other 20 percent sure all day long. But to get the deal under contract, you need a couple hundred thousand dollars cash, day one. And no investors are gonna give you money to put a deal under contract because you don't own it yet. It's at risk. So when you put a deposit down for two hundred thousand dollars to buy a property, it's just that, it's at risk because you don't own the property yet. So if you default, if you can't close on the loan or you can't raise all the equity, that money, once it goes, goes hard, once it becomes nonrefundable with some of our deals is day one. That money's gone. You lose it. So it's not easy to raise the money for the risk capital to put down.
And you don't ever learn about that. No one tells you about that and the guru networks. That's kind of like one of those things you have to learn as you go. But it is very real aspect that you have that has to be over come for us and a few of our deals. I mean, we had to pay half a million dollars before we closed just for some extensions. And the loan deposit itself could be a hundred thousand dollars just to get the loan to go through their underwriting process, all the due diligence costs. Now, these are all costs that get reimbursed, or go in as equity. But you still need to have the money upfront, you know, to move it, move it forward. So that was probably the most valuable situation we could have had somebody to provide seed capital for. Because like I said, I did the sweat equity and found the deals and then found, the financing with the lender. He put the seed capital in it and then brought some of our early stage investors in. So a lot of our early investors were his contacts. And then as we branched out, we met more more folks. And we did find find investors who were willing to invest in the general partnership, if you will, and provide us with that risk capital. Now, it cost us a lot of money to do that. It was very expensive capital.
But it's, it's one of the one of the tools you have, to get over the hurdle like that.
Restructure, to be honest with you, we structure our deals very unique. Like we give we we have a typical pref that we give the investors and then if you invest over a certain amount of money, we give you a sidecar kicker, like a profit sharing kicker. So we share some of our GP promote with those investors. So there's a lot of different ways to skin a cat with the way you structured deals. Really just depends on what your needs are, because there's always somebody out there who's willing to fulfill the need. It's just a matter of how much is it going to cost.
Bringing Tech to Apartment Investing – Best Tools for Real Estate Investors With Percy Nikora, Co-Founder Transcript We’re actually…Watch here >>