I have used the Syndicated Deal Analyzer and everything that Michael taught me to analyze over 20 deals. It has cut down on the time it takes to come up with an offer price so that I can make more offers. I just closed on my first large apartment building deal, a 32-unit, and am confident that I can do another one or two deals this year. And I’m happy to report that two weeks ago I quit my job! A dream come true. Thanks, Michael for all your help!
Please help me congratulate Drew Kniffin, who closed on his first big apartment building deal (a 32-unit in the Twin Cities) and then promptly quit his job. It is such an inspiring story that I wanted to share it with all of you here because it's stories like that that keep us going.
He started out small, buying a couple of single family houses, then duplexes and quads. He partnered early on with a more experienced investor.
You, too, should consider partnering with an experienced investor. That person can help you raise money, succeed faster, and avoid expensive mistakes. I would be happy to be that more experienced person. Please check out my coaching options here.
Drew's a perfect example for us to emulate: He just takes small action each and every day, doesn't dream outlandish dreams, and hits a bunch of base hits. In early 2015, Drew purchased the Syndicated Deal Analyzer, and he says it's helped him analyze dozens of deals more quickly and accurately so that he could make more offers more confidently.
Are YOU using the Syndicated Deal Analyzer to help you with analyzing deals and making offers? If not, you need to check it out now. It's amazing to me that you don't have this in your tool box yet.
Just to be clear: Drew didn't quit his job overnight – in fact, it took him nearly 6 years of consistently taking action and hitting base hits. This positioned him to do his first 32-unit deal. In the process, he built a pipeline of deals, a team of people, and investors, and that gave him the confidence to quit his job and become a full-time investor.
It ain't easy, but this apartment building investing works!
Drew Tells His Story
While I was in college, my friend picked up a few houses in the area, and he was getting cash flow and equity appreciation. I saw him do it. I could ask him all kinds of questions. I told myself that as soon as I had some capital I would do the same.
Before the recession, my wife and I bought a condo and couldn't sell it. So we decided to rent it out. That's when I realized how powerful real estate was. Powerful because the cost of capital is low. You're getting the depreciation. The tenant is paying down your mortgage. And you're getting cash flow in good scenarios.
That's when I decided that I wanted do more real estate on the side. It was the perfect side business to complement my full time job. That was my initial goal: to complement my income, not necessarily to quit my job.
I began looking at distressed properties. I would surf the MLS and day dream about real estate.
One day in 2013, my nanny was looking for a place, and that forced me to focus on finding her a place. I came across a bank-owned house close to my home. The numbers looked pretty good, and I decided to go for it.
I bought the house for $110K, fixed a structural issue and got it appraised for $152K several months later. It's been rented for $1,350 per month, and I've had no trouble keeping it rented.
I had a friend who was also day-dreaming about retiring early with real estate. So we decided to do something together, and we bought a 4-plex and then a 6-plex. Later we added one of his friends to the partnership because he created his own property management company. And the three of us bought a triplex.
It was a great partnership because we pooled our money, time, and experience.
I felt that we had the experience TOGETHER to do bigger deals. Especially with the property manager as a partner, we felt we should look for larger properties.
Another reason I felt that we should look at larger multifamily buildings was because I had listened to one of Michael's podcasts that talked about raising the rents just by $50, and you can create tremendous value.
It was the property manager who brought us the 32-unit building. We re-financed the triplex that we had purchased and rehabbed together, each put in some extra capital, and together we came up with the $300K we needed to buy this 32-unit building.
About the 32-Unit Deal
The building is in the Twin Cities. We bought it at a 7.25% cap and it was listed at $1.7M. We walked through the property and found that some work needed to be done. We bought it for $1.6M or just about $50K per door. We felt it was a fair price, and the vacancy was low. The business plan was to rehabilitate a building that has been neglected, and in the process charge higher rents for an improved building. We're not taking any distributions. We're upgrading the units when a tenant turns over and we're also improving the common areas. We added some laundry facilities that are generating extra income. The rents were under market, about $50 per unit. So $50 x 32 units x 12 months at a 7% cap rate- we created about $275K in value.
I Finally Quit My Job!
I've been toying with the idea of quitting my job when we started buying those small apartment buildings. Shortly after closing on this 32-unit building, I decided to quit my job. I did that for several reasons:
- I felt like I could make more progress and scale the business faster if I did it full time;
- I was getting more and more confident in what I was doing. I was analyzing more deals and making more offers (thanks to your Syndicated Deal Analyzer!) and had a good pipeline going.
- My wife is still working full-time. Her support is critical, and I couldn't do it without her. She is giving us a good 6-9 month runway, and I know that we can do 1-2 more deals in that time to get us over the hump.
- You have to push yourself out of your nest to learn to fly. I felt like I shouldn't give myself a Plan B, an escape route, if it didn't work out. Quitting my job meant that I had to be successful with real estate.
I want to build a platform business, meaning that I want a business I can scale as large as I want it to be. I want that business to produce cash flow and long-term wealth for me and my family.
Initially I want to focus on 20-40 unit buildings both in the Seattle and Twin Cities metro areas. I want to learn how to raise money and grow the deals I'm looking for.
I would encourage everyone to continue pursuing your dream of early retirement with real estate. Even if it starts off as a part-time thing, once you're in it, you realize you really CAN quit your job and do whatever you want. It might take some time, but it's worth it.
Please help me congratulate Drew by posting a comment below!