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Podcast Hard Money Lenders Books Washington
BlogArrowReal Estate Deal Analysis & AdviceArrowBest Deal Ever Show: $4.7M Profit on Very First Multifamily Investment
Real Estate Deal Analysis & Advice Jun 05, 2020

Best Deal Ever Show: $4.7M Profit on Very First Multifamily Investment

Ken Corsini
Expertise: Real Estate Investing Basics, Landlording & Rental Properties, Real Estate News & Commentary, Mortgages & Creative Financing, Real Estate Wholesaling, Personal Development, Flipping Houses, Business Management, Real Estate Deal Analysis & Advice
190 Articles Written
exterior of large apartment building with black and orange brick and white trim

On this episode, we talk with Corey Peterson. Corey lives in Phoenix, Arizona, but works the markets in the Midwest, South, and East. He’s bought apartments from Ohio to Georgia to Louisiana.

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Corey started flipping single-family homes in 2005 but transitioned into multifamily roughly eight years ago. He became really good at raising money, and when the market changed, he found a new way to spend it—buying apartments. He started studying multifamily investing, took some courses, and even went to events to dive deeper into multi-unit strategies.

This Investor’s Best Deal Ever

Being good at raising money, Corey ended up with a healthy amount of cash and wanted to make some big investments. And so, at his first multifamily event, he decided to stand up and announce he “had a crap ton of money and was looking for deals.”

He spent the next four days being approached by everyone and listening to pitches. He finally found a deal from two guys who had $150K tied up in a deal. They needed another $1.4 million and to close in 30 days. The property was in Greenville, South Carolina—so, Corey hopped on a plane and flew there to check it out.

Related: Best Deal Ever Show: The Perfect Multifamily Syndication

The property had serious problems but was in a great area, just three miles from nice shopping centers. It was a C-class property built in 1970. Corey ran the numbers, and they made sense. He made a deal with his two new partners and ended up with 75% ownership of the project.

He operated the property for five years. During that time, he spent roughly $700K fixing it up—and eventually bought his partners out.

Class C when he bought it, Corey had to deal with a fairly extensive drug problem at the property. He knew he had to clean the place up. So, Corey made friends with a local patrol officer and offered the location as a training site for drug-sniffing K-9s.

You can imagine the shock on tenants’ faces after receiving letters on their doors that their apartment complex had just become part of the local K-9 drug search training program!

Needless to say, two tenants moved out overnight. Other residents were grateful, and this was the turning point for the apartment complex to become a more desirable community.

The Rehab

Corey originally estimated around $650K in rehab expenses but ended up putting in closer to $700K. Once the drugs were gone, he started working on the property, updating the exterior and interiors, repaving and striping the parking lot, etc.

During the rehab, Corey realized the roof appeared to have damage from storms. The project manager said there was insurance on the property during the time of the storms, and they were able to open a claim, pay the deductible, and obtain $300K worth of new roofing from the payout.

(Talk about luck striking!)

Vintage business desk of engineer contractor with equipment, blueprint, safety helm and object.

Related: Best Deal Ever Show: No Money, All Hustle—Deal No. 1 With Zero Invested

Occupancy, when purchased, was around 79%, but it was not comprised of the best tenants. Corey managed to get it to 98% over two-and-a-half years. Rents went from $475/month to $625/month.

This is what Corey is really good at. He focuses on building a community, resulting in more stable, longer-term tenants. This means lower turnover, as well as less cost going into fixing and repairing units.

Why? When tenants see landlords repairing and updating the property, removing drugs, etc., they are willing to pay more because they love living there.

All in all, Corey held the property for five years, with $95K income per month. After that, he listed it for $8.8 million.

The Numbers

  • Purchase: $3.2 million
  • Rehab: $700K
  • Other: $200K
  • Sold: $8.8 million
  • PROFIT: $4.7 million

Corey reinvested the money from this deal with a 1031 exchange: He turned around and bought a $12.7 million deal, which now provides him with $450K in cash flow annually. Talk about leveraging a monster deal into passive income!

Lessons Learned

“Know the operating agreement!” Corey says.

Unfortunately, he ended up buying out his partners early on because of the dishonest way they changed the operating agreement at the 11th hour. Unbeknownst to Corey, even though he owned 75% of the business, his cohorts changed the voting rights to reflect 33% for each member (rather than voting weight based on ownership percentage). When Corey found out, he was understandably upset and set in motion his plan to buy them out.

Corey says it’s imperative to work closely with an attorney on any partnership and make sure the operating agreement is looked at carefully before signing anything.

What was your best deal ever or the best deal you’ve ever heard about?

Share in the comment section below. 

By Ken Corsini
Ken Corsini is a seasoned real estate investor and business owner based in Woodstock, Georgia. Ken is best known for his role on HGTV’s hit show “Flip or Flop Atlanta,” and has flipped over 800 hou...
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Ken Corsini is a seasoned real estate investor and business owner based in Woodstock, Georgia. Ken is best known for his role on HGTV’s hit show “Flip or Flop Atlanta,” and has flipped over 800 houses in Metro Atlanta since 2005. With over 15 years of experience in the real estate industry, Ken has expanded his original flipping business into multiple independent real estate businesses, including Red Barn Real Estate, with over 180 agents in Metro Atlanta across four offices; Red Barn Construction, a custom home-building company specializing in modern farmhouses across North Atlanta; Red Barn Renovations, a full-service renovation company; Black Oak Mortgage, a direct lending company based in Woodstock, Georgia; and InvestorSumo, a technology company focusing on CRM and data needs for real estate investors.
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8 Replies
    Don Spafford Investor from Idaho Falls, ID
    Replied 8 months ago
    Awesome! That is a life changing deal.

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    Cesar Gamarra Rental Property Investor from Miami, FL
    Replied 7 months ago
    This is an awesome story. Congrats Don for your vision!

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    Lee Johnson Rental Property Investor from Sterling, VA
    Replied 7 months ago
    I find inspiration in your success. Thanks for sharing!

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    Kevin E Hall from Buford, GA
    Replied 7 months ago
    Thanks for sharing. Congrats to Corey

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    Jason Mitchell Investor from Enola, Pennsylvania
    Replied 7 months ago
    How much of his own cash did Corey have in the deal? You say he generated $450k per month in passive income but if he raised all the cash to get into the first deal, aren't all those investors realty the ones getting the cash flow? Add if Corey had no money in the deal bc he's raised it all from investors, how's HE making money? Not asking to be a jerk - these are the details I am really interested in!
    Amanda Davidson
    Replied 7 months ago
    Yes, I have the same questions! The article talks about Corey raising money but doesn't explain how that factored into his end result.

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    Janel York Investor from Minneapolis, MN
    Replied 7 months ago
    I agree with Jason and Amanda - I think Jason's questions are helpful and their answers can provide helpful insight.

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    Kevin Cross from Anchorage, Alaska
    Replied 7 months ago
    Offering the property as a K9 training ground is just mad genius.

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