Case Study: 32 Door Apartment Breakdown with my Contractor
Justin, Rody and Anthony discussed strategies for successful real estate investing, including budgeting, due diligence, and cash flow management. They also shared insights on redeveloping multifamily properties and renovating burned-down buildings. The importance of understanding the local market and working with experienced professionals was emphasized. They highlighted the potential for higher rents and increased revenue, as well as the need for accurate budgets and reallocation of funds based on project progress.
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Justin: What’s up everybody? All those on Facebook The Science of Flipping fam, go ahead and let us know you’re here you are with the head of my construction team. Mr. Rody. He is running, how many deals are you running for us at this point, not including the apartments 23-28.
Rody: Something just shy of 30.
Justin: Just shy of 30. So he’s running about 30 deals for us. He is the man I rely on to essentially run all of our deals, including the apartments, we just bought two separate apartments in Birmingham, Alabama, one is a 22 door apartment, the other is a 32 door apartment. And today’s training is about the 32 door apartment. He and my general manager Anthony Persiano went in flew out there last week, right dude? Flew out there last week, to go walk it to make sure all of our numbers were aligned. Alignment, we already had a pre built knowing we were going to be funding. And so I’m going to take the time today to work with Rody and show you guys exactly why the deal makes sense what we’re going to be doing into the deal. You know, all the things that you guys want to know why and how I’d be buying apartment buildings sight unseen, is because I have someone like Rody that can watch my back and make sure we’re making the right decisions. So, we don’t go, you know, there’s always some fluctuation in budget, but we don’t go, you know, 20% over budget, right. So let’s talk about as going through space to land to me. Talk to me about how that went walking the property with Anthony to start.
Rody: Alright, so you know, usually when we’re looking at stuff like this, we obviously are looking at online first, and we’re looking at pictures and videos and I just from experience, and just everybody listening from experience, I don’t really listen to but a wholesaler is gonna tell me or an agent has to tell me or whoever is selling the property as a seller, because I know at the end of the day I know half of it, right? The other half of it unknow. So, I just look at what I get what I’m provided, and then make a decision like, okay, from what I see it’s rehabable. But you’ve always got to see something that big, right. So, Anthony, and I did go down there and look at it, we walked the building. And I’m glad we did because to and Anthony testify to this like to see the grandeur the scope of these buildings to the separate buildings, and then to be able to walk them because they’re completely vacant. And the way we got there, it was very complex, right? We’re in a rough neighborhood, you know, dogs running through the neighborhoods, that kind of neighborhood. So it was me, Anthony, and one of our agents, Hannah, we’re having we do, we do have a good time. And you know, we walked the property, but it was good to actually be in the house, it’s good to feel what the floors look like, you know, a bunch of those buildings have been framed, which saves big time money, you can’t see that sort of pictures. In fact, some of the things that were sent to me didn’t show any frame, right? All they talked about is fire damage building, which of course is a concern for us right off the bat. But what they didn’t say is three of the buildings are still framed up pretty good. Where we can salvage 90% of that, which is huge. That’s a huge budget, right? It’s a huge cost. So I was happy about that. And I got to walk the fire building to determine what we could salvage at the end of the day, the only thing we could salvage is the shell, everything is gonna get gutted from the inside out. It’s that simple. The beauty of the fire damage was it was so significant that it demoed out everything anyway, right, it got rid of everything. And the brick was basically what’s last standing, there’s a few floors that are kind of like, you know falling we’ll just knock those down to get rid of it. So, you know, in this part of our case study that helps us determine what’s our plan of attack. But it also helps us determine while we’re walking, each building what the budget is going to be. And as we go over budget, in our mind, how are we going to attack each building, you know, what comes first, second, third, and fourth because there’s four buildings. And in multifamily redevelopment, you’re not building for structure to see the difference in new construction is that these are new construction buildings, you’re going to be pouring concrete and footings at the same time for four different developments in rehabbing because of budget because a ton of different strategy, you want to attack each building one by one. So our strategy again, is we’re walking the building, and I’m talking with Hannah and Anthony was talking as well, you know, what if we rehab one building, and then rents start collecting the cash flow, attack the next building, we already have the budget. So it’s just a matter of dissecting it building by building and we’re gonna leave the fire building, which needs the most work, which is basically new construction, we’re gonna leave that for last. Right? So we don’t want to be stuck on the big project of the project for months on end, when we can rehab these ones, right? And have them rented. And that’s kind of the idea and it’s in our in our case study. But yeah, I mean, at the end of the day, I would advise any investor and I don’t even care how experienced you are, you can be the best investor you can be you’re done thousands of flips, go walk these houses, you know, if you’re gonna put the kind of money in here or you’re going to syndicate it or you’re going to raise capital, somebody on your team has to go look at these any day that’s like somebody on your team has to really be looking at these types of properties. Um, you know what I can do, if you share the screen with me, I can open up my system. And then I can share the pictures from my box. Because I took pictures and videos on the site so that people can see the size and grandeur. So this is the, this is a picture from one of the buildings up top looking down at the fire building. Clearly you see everything is gone gives you kind of perspective that nothing salvageable but it’s better that way. We want to be able to kind of do our own thing, right? This picture gives you perspective of the other buildings behind it. So you see the condition of building one, which is obviously above it. The brick on the exterior that is perfect. You see, there’s no windows, but the roofs are all brand new, right? But then you see the building two, which is the one I’m looking at with the fire, you can see from the inside that everything’s gotta go. But more importantly, look at the brick on the inside and see that it’s burned so bad. But brick is Brick, right? So we can use that because the bottom right corner of this picture, you’ll see how good condition the brick still is it was missing a lot of bricks, but we’re gonna paint the buildings anyway. So as long as we could match the size and type of brick, it doesn’t matter what color the brick is, right? So we’re so we have a bonus there. If it was like all we gotta go back to this kind of Firestone brick, that’d be hard to find a lot of that brick and robins brick is 100 years old. You know? they don’t make brick like this anymore. That’s why brick doesn’t match up. Same thing with two by fours. 100 year old homes, right that our grandparents and great grandparents lived in, they actually weren’t two by fours, they’re smaller. Now, they’re not really two by fours anymore. So you can’t fit a modern day being into 100 year old pocket or choice, they’re not the same size. So the good thing about this, we can get that keep keep the remaining shell and then build off what’s existing. And I know Anthony and I were kind of laughing about this too, you’ll realize the ground. Like the whole the whole development of ground. I’m talking about like not even buildings is so hilly, these buildings are not even the same height at certain times. Like building two is lower than building one, you can kind of tell that already. And then you walk across the parking lot, let us see this more, you walk across the parking lot, which shows video on the way we’ll play. We want this parking lot. I mean, this gives you perspective of this is the building three, which is right across from the fire building. And you can kind of see that structurally, everything’s in good shape, you can see new framing on the inside. You know, Jack and I jacks our sub walked it, we’re gonna walk it again, of course, and we’re gonna determine if you like the footprint as is if we’re gonna do some modifications, obviously, we’ll talk with Anthony about that too, because we want to make sure we get the best bang for the buck, obviously. But you know, all that is still on the outside that used to be a steel stair column. Obviously, the stairs are gone. So everything will be redeveloped of wood. It’s cheaper anyway, we don’t need any welding, all the good stuff. But it kind of gives you perspective. I wish I had to upload more pictures, go and talk a little bit just not upload more pictures from my phone to maxes. So, I can share some more.
Justin: Yeah. So one of the things I wanted to do for you guys is I’m going to share my screen real quick, or I guess. Yeah, while you’re doing that, I’m going to share my screen. Stop the screen share my screen. Yes. Yes. So here is so this is the proforma very quickly to go over because it’s not going to be a total exact science, but I’ll give you kind of our capital stack is we needed to buy it for 260. And we’re going to need to put in roughly 900,000. So if you look here, you know, C3 and G23. Those are your gross amounts that are coming in, right? So, we need to be able to fund you know, give or take, you know 1.5 million, right? And here’s the number right here 1.45. You can see the ARV after we complete this entire project, we’re going to have somewhere north of 200 or 2.5 million is going to be the value of the home. Why does this mean so much to me, because I’m not necessarily doing any type of buying holds at any extent, whether it’s a single family home or an apartment without having a massive amount of equity. So I’m having roughly 30% equity when we finished this now we are very conservative. We actually believe it’s going to be north of this right so we have about another 10% that we believe that it’s going to be valued at so I think this values. My own belief says it values somewhere 2.7 to three, but we want to be conservative to make sure all the economics are going to work. But you will see here kitchens, we’re going to spend 150 grand baths 50 windows 35,000 plumbing 50. So Rody has done a great job building this all out giving us as close as he can. There’s no perfect world. And with a certain amount of margin. I forget what you adjust for Rody do you go a 5% margin of error? Or 10?
Rody: I go 10% Because especially the larger Obviously, the larger the project, the more margin I give. However, I do believe that this one’s not going to be as challenging in terms of construction is, as most would look at this, we got the blessing from the city to myself, Anthony, Jack and Hannah went to the city met with the city, they gave us blessings on that. They’re fully aware of what we’re doing. And you know, people like that’s not a big deal, it’s an absolutely monster deal, because as long as the cities find us, they’re gonna give us what we need in a timely manner, which means our files matter, our permits will be processed faster, if we have any questions that need the inspector to come out and look at some things are going to do it because to them, we did it right, we met with them, they know this is a big development. And at the end of the day, the city is all about this type of stuff right now. This area for this type of building is gonna blow up, it’s just outside the stadiums. You know, there’s, there’s a colleges around the corner in that downtown area, it was actually nice and I went to a coffee shop, I was like, thinking this is, it’s actually really nice. So there’s a lot of redevelopment going on around this area. So this is a good time to get in, it’s a good time to get in with the city. Because if this goes as well, as we hope that it’s going to go and I’m sure it’s going to. Now the city’s gonna love us and say buy us more crap. And hopefully we can get some grants, you know, they’re going to help us by providing us grants and providing us maybe possibly loans to do more rehab, who’s gonna say no to that? Nobody.
Justin: Nobody. And so just briefly, again, these are all going to be, you know, pretty conservative, but you can see the numbers here in terms of operating revenue, you can see the cashflow essentially, is $63,000 a month, you have the debt of 145, you have the operating income at 209. And then so you have the income minus debt 63,000. But then you also have all the other costs, taxes, management, etc. Right? So we account for all of that the expenses of 76, we have the income at 209, debt 145, right? So, there’s your net operating income, you have, these are the Met, these are the makeup of the units. Okay. And so we actually believe we’re going to be able to get much higher rents for these, but we wanted to make sure that we could, we could essentially, you know, model it conservatively, so that we knew like we might be able to get this to 950. When we’re done with all these and you can imagine, I don’t want to play with our spreadsheet. But you can imagine 950 In what that will do to our bottom line. So our total revenue comes in here. Well, our total comes in here. Vacancy is just 6%, you have all the expenses at 76,000, which gives you the net operating income, you subtract the debt servicing, and you wind up with $63,000 in net profit. So this deal makes sense just on an economic cash flow. Cool. But again, if you guys have ever really followed me, you know, when I buy rentals, I don’t care if it’s a single family home, or if it’s going to be a an apartment like this 32 doors, I want to make sure I have the equity. So as cool as this is, you must make sure the property cash flows at the model you perform it at not at projected we might be able to raise rents to 900-950 or even a thousand. What is more important for me in this property is going to be this it’s going to be the fact that we are going to be where was it? We’re gonna have a value of 2.5 million, and we’re going to be into it for give or take 1.5 right that 30% equity is everything to me beyond just the fact that it cash flows. So I’m looking at three things everybody when I’m buying any type of cash flowing assets, single family home or apartment. Does it cash flow on the conservative Performa? Does it cash flow right now the way that it’s built? So if that is a yes, in this obviously does that is part number one. The other part will be how much equity do I have in this property because I want to have a minimum I mean bare bones minimum 20% equity, really I want 20 to 30, somewhere on 25. This also hits that mark as well. Right? And so I want to make sure those two functions really, really work. And then also, is there an opportunity to do a depreciation. So in commercial, the cost segregation study that we’re going to be able to run on this. And if we get an evaluation at $2.5 million or more, which I expect we will, we’re going to have multiple six figures of tax write offs for me as the owner based around a cost segregation study that will help me in taxes so not only am I getting an asset that has a bunch of equity that allows me to go I’ll get bankable, that I’m making money each and every month profitable in terms of expenses and costs. And then also I don’t have to go pay taxes. So I can rinse and repeat and do it again. And I can leverage the equity in this apartment to go get a bank loan to go buy another apartment. So I can do it again next year. It is the business model. Everyone should be in. Rody, I’ll shut up now because I know you uploaded some videos.
Rody: Good. I think I think he’s trying to get any in. He said can you let him in?
And then by the way, if you’re watching this on Facebook, or even here on Zoom, ask your questions. I’ll hopefully write your questions in the thread. Or even if you just like what I just showed you guys, make sure you say hell yeah, give this post some love. Everyone needs to see this, because they’re always asking me, what’s your Buy Box? Why are you buying? What does it look like? This is it. This is why I’m doing a case study. We’ve just bought this literally funded. I think last week Monday. And Anthony and Rody have already been out. They’ve already done all this. We’ve already taken the pictures. But those economics are why I buy this. So you guys understand the economics behind this isn’t just about cash flow. I just want to echo this one last time. Cash flow is great. There’s no doubt I like having income. But what really is the biggest cherry on top that I actually kind of focus more on is what kind of tax write offs can I get alongside of the income. Because if I can go in and I can get a year worth of work and not have to pay any taxes, and this tax write off of the cost segue is going to be so big, I’ll likely be able to push that into 2025. And save taxes then to then this is a typical rinse and repeat how many of these can I buy each and every year? So I no longer have to cut a check to the IRS. That’s a big thing I know many of you on here are W2 employees. How cool would it be if you didn’t have to cut a check to the IRS every year, it’d be pretty darn cool. And by the way, if I’m calling you guys out, I apologize. But if you’re not paying taxes, you’re not making enough money, period, end of story. No one can fight with that. Now, if you’re not paying taxes, because you buy a property like this, now that that is a different story. Right? Go ahead, bro. And then ask your question, the thread in Facebook guys.
Rody: Yeah, so just more pictures just to give the scope of the layout here. So more shots in the middle building really number two, here’s a long run of it. So it kind of gives you an idea what the hills look like in the houses. Which brings me to another point. You know, being in this area developing this entire. This is a corner piece. There’s a lot of houses around here, you can see over the top of here, and see if I can annotate. So you’ll see there’s a house up here, right? There’s houses over here. But all this is a hill. So it’s kind of like I guess sunken down, if you will, into the land, there’s a house this way that you can buy there’s a house this way you can buy. So I was gonna tell you guys, Justin Anthony, like consider buying the block, right? Because if you’ve got the idea that we’re going to put all these buildings together, we’re going to change the landscape of that entire neighborhood. So why not start looking at buying those single families around there, the only time I’d ever say buy single family, Birmingham, but if you’re gonna buy the block, there’s your opportunity, if that makes sense. This gives you a perfect idea of what these buildings look like they all look like this. So you’ll see new roofs were great. They’re metal awesome. They actually did a very good job. I checked all the trimmings. They had the flashing were good there. And it’s so cookie cutter, you can literally say how many windows we need. It is absolutely right. All of the brick is in great condition. I mean, there was no we call staircasing meeting where there was no tuckpointing issues, there weren’t any cracks in the side, which means that there’s no sagging or settling in the wrong way structurally. So we liked that. This obviously is garbage. But it is what it is. It’s your parking lot. I just said to get a get a guy out there with a hot weed whacker. And then you can you can tar this, you just patch it. This doesn’t need a lot of love. It just needs landscaping, if you will. But we’re gonna get rid of that we’re gonna get rid of these, right, you see that we already got the stem for electric. So a lot of the goods are still on this house. This gives us perspective from the street, this is the main street. Okay, then it goes up that way. So this is actually building one, right? That’s a single family home, I’ll tell you about they’re small you can buy. Small you can buy them. But again, just looking from the street. Imagine all of this painted. Right? All this is one color painted. It’s gonna look beautiful. It’s gonna have a wooden staircase that comes down. All of this will be a two tone, right? So this thing is honestly it’s cookie cutter and these aren’t that large. You’re talking 7,800 square feet per unit. And when you run the plumbing, you’re running the shitter north and south everything’s gonna be in the same location. We are in the electrical, it is what it is. Again, we’ll work on this this find the worst one in terms of parking lot where there’s some work done and you can see where they use asphalt before this one I might just have them cut out and repave just so it’s smooth going up. But it kind of gives you the grandeur. That’s a huge truck that Jack drives, obviously that’s Hannah’s, we’re behind her. So here’s your perspective how big the buildings are in comparison to vehicles. And then again, another shot from the street to see how they start, right. So this is building one, building two, it keeps going. This is the fire damage building, as you could tell, and you can see here. So the good thing about fire damage homes, especially when there’s other ones comparison, next tape, like next door next door neighbors, you can see how they were built. Therefore you have an idea like by Oh, by being able to sit on top of this and look down I can I know exactly how this is exactly how this is built. So when we go redevelop this cooking, does that make sense?
Justin: Yeah, it’s funny that you said that I was going to ask you right away because I know you and Anthony talking more than I am. It’s fun, guys. For all of you watching this. This is fun for me, because Anthony, my general manager quite literally runs the entire business, right? So I don’t get to engage with Rody barely at all. I mean, obviously, we’re friends. But I you know, Anthony really runs this from head to tail. So a question I have, because I don’t know the answer. Are you just going to cut out that front part of the driveway? Or do we want to go repave the whole thing to really make it feel good when everyone went all the tenants come in? Or it’s actually
Rody: That’s a great question. So find the budget. What I usually do here is what I usually do, you guys.
Justin: You guys are learning about our deal. The same time I’m learning about our deal, guys. I’m asking questions, even though I just bought it. Because I don’t have all the answers to some of these things. And so this is fun for me, too.
Rody: You guys see my budget sheet, right?
Justin: Yep. Are you just using like an iPad or some sort of note or something?
I’m on I’m on to today. Right now. I’m on three things. I got my phone, I got my laptop, and I got my iPad right now. I’m on my iPad. That’s awesome. My app works better with the 10 when I can, like annotate and stuff. So here’s here’s how we broke down that actual project, right? So in certain line items, we can manipulate it. I’m not worried about it. Remember, as long as this number right here, it’s 893 for us doesn’t change, right? That’s the hope is that that number doesn’t change. But I can go in there and reallocate that line item, I can reallocate this line, if we’re short somewhere, right.
Justin: Is there a way for you to zoom in a little bit Roddy? Like? Are you able to remain on the budget?
Rody: So again, our goal is to make sure that but that number doesn’t change. However, if it changes, we don’t want it to be a million dollars, we’d like to stay around 900 to 950. That’s our that’s our thought process. But you see how we look at certain things. These are just preliminary budgets. They’re fairly close and accurate, but their preliminary budgets based on again, this is before we walked it. Now that we’ve walked it, I’m going to reallocate line. That was what you can do that for a lot of you guys who don’t know that the lenders don’t give a crap how many times you allocate your budget, as long as you get this before you ask for a draw, right? So I’ll just say, Hey, I am going to do this, I am going to take line 26 and 27 and 28. And I’m going to add some more money, but I’m gonna take some money from somewhere else in the budget. Right? So I just want to make sure the right line items are heavy, and the right line items are small. So to answer your question, we’re talking about, you know, 12 grand just for the parking lot. That’s what grand would be just for that front end that I was talking about? Do you want to redo the entire parking lot, I’d have to borrow money from other line items. But before we do that, I want to make sure that the budget at hand is actually fully operational. Meaning before I start borrowing, and I’m not done, but if you’ve ever looked at all of our budgets, Antony knows this and Carson knows this. I always make line 19 heavy as hell. Because if I say a pentacle house, the roof is 6500 because 9500 I’m not gonna argue I’m just gonna borrow that four G’s from line 19. Right. So we absolved all the money if a roof in line 20. I’m just gonna take the difference out of line 19 labor and carpentry, that’s why I do it that way. So this, this number is going to be heavy, it’s gonna probably match your number that’s on your spreadsheet about 110-111 something like that. But while I’m doing is sharing with you and sharing with the viewers that I can move these numbers around at will, anytime I need you based on how the project is going. You know?
Justin: Is that would be a last the driveway would probably be one of the last if not the very last thing we would do correct?
Rody: Or Dude that landscaping be the last thing we do, yeah.
Justin: Okay, because I mean, so we have time to make a decision.
Rody: Oh, yeah. And the reality is if you were going to be the one like let’s say you were selling this then our goal would be get the exterior painted to get the windows and build the stairs and get the parking lot and landscaping this but obviously like Ana Capri list. In this case, we’re not listing anything we’re renting. So we just want to get the interior done building by building rent them out go to the the next building, rent them out go to the next building, rented out go the next building, right? It’s very strategic on that level. So yeah, the parking lot is gonna be somewhat one of the last things we do. I might have them weed whack the out of it just to get out a ll of the weeds out of there and clean it up first. But we won’t actually do any paving or repairing till months from now. So this kind of gives you perspective on how the framing on the inside was. This is the fire once obviously all that’s gonna go no matter what. And here’s a lesson on this, I get this question all the time in my private group too, is oh, you know, just look salvageable. But but you don’t understand that the heat warps all of this, you can paint over that yeah you can paint over that. Yeah, we know that. But this may not be longer be flush and plum. Flush and plum means 90 degrees. Everything warps with heat, metal warps, right, so the integrity of the structure has got to go regardless, because you could see how bad the fire was, all of this will not be able to hold. I didn’t bother standing on 250 pounds. I’m like, I’m not standing on that. And there’s no point I don’t know what’s gonna give. So a lot of people don’t see, they think like, oh, they’re still permanent, we can use it. No, by all means, do not use anything existing in a pre firehouse. Get rid of it. Plan to get rid of it. More perspective on the entranceway kind of coming in, you kind of coming in this way. So you kind of see the difference in space between there. So you’re gonna have a couple cars, but not many. I mean, these aren’t large lots. I think the one over here has a bigger parking lot than this. But this is Building One, two. So again, it’s just the same thing. There’s not much to look at.
Justin: Fruciano are you there, bro? (Fruciano: I am) Hey, baller
Rody: All time you guys should together bro. We’re missing you.
Justin: Yeah, goodness gracious. You made me run the numbers. So we found this one. I want to be clear on where we found it right? Because everyone’s gonna say “how do you find them. So we found this where through another investor, local to Birmingham, another wholesaler.
Anthony: This is one of the wholesalers that is from our own Science of Flipping network.
Justin: Our boy Adam found it right. (Anthony: That’s him) Our guy. He’s on this call right now. And so this is exciting. Because I tell you guys, it’s always well, a large part of success in our real estate space is going to be people. Right? So I met Rody, for example, about a year ago in Tampa now we met but prior to that over the phone, I was introduced to Rody through a friend of ours bring it in. Within a month or two we meet in Tampa and now he essentially has 30 rehab projects for us. And it’s because we hit it off and he just came across as a no crap Chicagoan. That’s even how you say that. So. But I like that, right? where he’ll just be raw and real. And he’ll take his, you know, he doesn’t over promise to under deliver. And if it’s not right, he accounts for it and says, my bad I’ll make it happen. And so I say that to say Adam brought us to do he’s a member of Science Flipping Community has been for over a year. He knows I’m looking to get into small multifamily. How does he know that because I start talking about it. So he goes out and finds it. So he had a pay day. And you know, the other investor, essentially my understanding Anthony, this was an investor who bought it initially, and just got ahead of their skis. They didn’t have a Rody to help them with this. Is that pretty accurate?
Anthony: Yeah, he bought maybe five different apartments in Birmingham, and just overwhelmed themselves. He actually we bought another one from them. Two weeks before this, we got two from this investor and we’re still gonna look at a couple more.
Justin: I Like it. Well, good. Well, you know.
Rody: Sometimes in this game, somebody else has lost your game, you know, and that’s that’s the beauty of having the ability to look at numbers fast, right? On the investment said you got to look at the numbers super-fast. But on the construction side, you got to be also equally as fast if at all possible, and a lot of guys just aren’t. They need time. And sometimes you don’t need an exact number you see the ballpark? Should I do the deal? Should I not? You know and a lot of these guys, um, for all the listeners, you’ll find more deals from other investors who obviously like you said, get ahead of their skis. More often than they’ll ever admit but those are good deals. If you look at them real quick they’re great deals because they screwed up. I don’t know this can be your win.
Justin: So one quick question for Anthony. But before I get there Rottier union opera Hall where are you?
Rody: So, I made it’s called the Palmer House it’s a beautiful hotel. And I like this. It’s quite 150 year old hotels, one of the most beautiful hotels in Chicago. The size and scope of this place. Anyway, now me my girl came down for a staycation for Valentine’s day. We Stay at the hotel, we were down it’s SDK down the street, so I’m like this is perfect. I love it. It’s like a huge workspace to me. It’s nice.
Justin: Well I appreciate you jumping on dude. And I know you are with your love one bro. So Anthony? In terms of the numbers, I showed this spreadsheet. Do you want me to re show it and you want to review it? I mean, I, you know, we bought it for 620 is. We’re gonna have roughly $900,000 you know, renovation, we bugetted $775 per unit, although I think we are being very conservative there. And we have a conservative $2.4 million, ARV when we’re done. And we have roughly a conservative $63,000 net monthly income after expenses after debt servicing, etc. Do you want to see that? Or is there anything? Do you maybe want to say where we actually really end up believing where we’re going to be even though those numbers are conservative?
Anthony: Yeah, we think we can get 800 per unit 825, maybe 850. If the neighborhood gets where it’s headed on time. I don’t know if you talk about the neighborhood before I get on I jumped over from another.
Rody: I talked about it a little bit. But I didn’t get into the details. We just talked about the possibility to acquire some single families around it. We can buy the block. There’s a lot of been happening in the area in general over the next couple of years, it’s going to be a good place to be. That’s as far as I went.
Justin: And if I change this Anthony with this, like, ruin everyone, like with this, I don’t want to do it, but I’m going to do it. And then I want to take this all the way down. Is that do that. How do you do that? Yeah, yeah. Yeah, like I mean, you work technology. Come on. I learned English at UCLA. And I didn’t, I don’t even know if I learned that either.
Anthony: King’s speech English, The King’s Speech.
Justin: I just call it I don’t even think it’s English. I don’t know what UCLA I learned how to make sure I got a diploma at the end of it. That’s how that’s all I learned. But you guys can see that number was 24,000. It’s now going to be 27,000, that’s an extra $33,000 a month, you guys can see it went from $63,000 net cash flow to $888,000 cash flow by it.
So by adding $75 a month in rent. And so you can see how quickly like if you run a conservative any cash flows, it just looks that much better when you come to reality. Right. And so that’s really, really important. And I might have misspoke. This is annual everybody, I apologize. This was not monthly. I was saying monthly the whole time. But if you look, this is all the annual. And so my apologies for everybody. But again, does $88,000 a year, make or break my financial world it doesn’t make or break my financial world or Anthony’s financial world. I like the $88,000 a year but I didn’t buy this or we didn’t buy this. Because of that. We bought it for the three main principles, which is the well, there’s there’s four really, I want to make sure it cash flow is great. We have the income, I want to make sure that we have tax write offs. I want to make sure we’re in a market that appreciates, right? These are the big four that I want to make sure that we do are big three, sorry, income tax write off and appreciation. Because if we just ride the appreciation over the next five years in a marketing market like Birmingham, Alabama, I think we’re going to have, again, total guesstimate, you know, but I think this valuation turns into closer to 3.5. And now the numbers start to get a little silly, right? So I had a tax write off of sitting multiple, six figures. I have income every month and then there’s an exit north into seven figures all within five years. And I believe Birmingham, Alabama to be that market that’s going to have that type of appreciation. That is also why I don’t invest in Cleveland, Ohio. I don’t dislike Cleveland. I just there’s no appreciation in Cleveland. Right.
Anthony: But the fun part now that you bumped the rent up, take the new NOI. What you got 234?
Justin: Where am I? What are you looking at.
Anthony: Just down a hair to get net operating income. Now the new rent is 234. Divide that by .08, which is the cap rate that the appraiser told us we’re using in town and we go to 2.9 instead of 2.4 million for the ARV.
Justin: So, you take this.
Anthony: That $75 between the 775 which was a conservative number for rent And where really could be, come fall when we start renting these is half a million dollars in valuation on the back end.
Justin: Isn’t that crazy just by bumping it $75 a month. Anthony I’m not an Excel spreadsheet wizard, so I want to do that over here, but whatever. But you take this, you divide it by how much? .08
Anthony: Yep, divided by .08
Justin: 8.08. And then it will spit out a number that’s closer to point nine. So this becomes 2.9. And we made $500,000 in evaluation without the appreciation part without just by bumping rent $75 a month. That’s where it gets really fun. gets really fun. But you also want to have the opportunity to buy a property that you have an upside like that, right? If it rents conservatively and looks good, then have enough upside to maximize rents makes it that much better. We have a ton of questions flowing through and we do not have time. Roddy has to
Rody: I have an idea I have I have totally no, honestly, I’m here to help everybody on the call. So here’s what we can do. I’m going to give I’m going to type in the participants in the messages. I’ll type my email, okay, and my cell number, text or email me your questions. I’m going to be sitting here for the next couple of hours anyway working and I’ll get to those. Let me just post this somewhere. For you guys.
Justin: You want to just put it in zoom.
Rody: Yeah, if you guys want to take my number and take my cell I can give it to you right now. Q&A. I’m just gonna give it right. Ready. Here goes everybody get a pen. A phone number 8478995713. Text me for my email. Simple. ryan@therehabdepot.com. Send me all your questions. Brother, everybody. I’ll help you.
Justin: There you go. Anthony, any last parting words?
Yeah, we’ve talked about Birmingham being appreciating market. And it is obviously especially this neighborhood. People know we’ve bought in these two there and started sending me more things in Birmingham. Not every neighborhood in Birmingham, I promise is on the up like this one is. So they put it. Justin, you talked a little bit about it, I’m sure. Just two blocks south of here. They have built a new stadium for like the United States Football League team. There’s a convention center. There is something Hall of Fame. There are high end condos, there’s restaurants on the ground floor, kind of a hipster. They call it uptown that they renamed a town revitalized it. The public transportation comes through and they put cool little parks in there with all sorts of stuff for people to hang out and do. Top Golf is right there already. They’re tearing down in old hops. Little on the corner of that block they’re putting in a 9000 out seat outdoor concert venue. Like it is becoming the district, the Uptown, the spot where everything is coming to not every single neighborhood in Birmingham is. So, I always take a look around I get on Google Google streets up drive up and down. Look for the 10 closest businesses those will give you a clue if that neighborhood is ready to turn over. This one is not all of them are
Yeah, I mean listen. Last thing I want you guys to do is watch a case study like this and just whimsically go out and buy something in Alabama or Birmingham or inner I mean there’s you know, Rody has a stronghold there and it sounds like he’s done a lot of business there over the years. So he felt comfortable he has a team there. We know markets like that we’ve bought a lot over in Oklahoma, in Tulsa. We’re familiar with Florida so we already have a general sense of construction budget based around all the deals that we’ve done. So I don’t want you to take this case study and then say oh I’m just gonna go buy an apartment because Justin, right like and or even a single family home for that matter. Make sure you’re doing it right make sure. Again, this is this would be a soft sell for you guys. If you really want to learn my process on what I do and how I do it, how we’re buying two to five homes a week, how Rody runs our construction? How we’re finding them? What marketing we’re using? How we’re underwriting apartments? If you really want the A to Z process of what we do. I encourage all of you to talk to me, right? We can talk about me coaching you go to justincolbycoaching.com. And let’s have an honest discussion. You know, a 32 door apartment one of the buildings, fire damage is probably not for the newbie, but doesn’t mean you can’t go get a fire damage single family home and wholesale it and go make 5,10,15, $20,000. You can do that. But there’s a process behind what we do. I’ve done these 16 years, right? Anthony has now run my company for nine of those years. Don’t be short sighted. Make sure you get with me if you have interest in actually understanding the processes and the strategies to get here. I’ll just, you know, condense your learning curve. I’ll help you avoid a lot, a lot of the losses that I’ve had to take over 16 years. So if you want to directly talk to me, go to justincolbycoaching.com, fill out an application. And I personally will reach out to you to talk to you about what it’s like to be a part of The Science Of Flipping Community, be a student of mine and a member we have nine calls a week is very engaging, very interactive. Anthony’s a heavy part of that we do a lot of deals with our members I buy from my members, I want to teach you how to go find deals so I can buy them so you can get your first check fast. Again, justincolbycoaching.com. Hit me up send application. We’ll go from there. Rody, I appreciate you. Knock it out DudeI. I’m Sure you an Anthony will be talking shortly. Anthony I appreciate you dude. And that’s all.
Rody: Everybody I put my contact info in the chat. So, if anybody needs to message me, my email, my phone number is there.
Justin: Thank you, guys.
