I just built a 36 unit apartment complex.

I just built a 36 unit apartment complex.

Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes

Hey guys my name is George Yu and I love passive real estate. The idea of investing into something and then collecting mailbox money whether you feel like working or not is like having your own golden chicken as long as you take care of it. I bought my first single family home in 2011 while I was a freshman in college for $32,000 move in ready from my uncle and it has been consistently rented out since for about $650/month. Fast forward till now, I have a total of 6 single family rental properties....and now a 36 unit apartment complex. Maybe your asking how did he go from single to constructing 36 units. Honestly it wasn't that easy or quick lol.

My last single family purchase was in 2017 so I had been roughly buying one property a year. While the income was great and I was making passively per year what an average American makes actively. I was searching for more. Enter: Grant Cardone. I love Grant and his high energy. He really had me sold on the "single door is death" mindset since late 2017 so around that time I made up my mind that no longer was I going to buy these "measly" single family home that afforded me my relaxed living up until that point. I was going to be a Multi Family Syndicator!! Well that would have been the case but none of the deals I could find excited me. I couldn't find anything over a true 6 cap (once I dug behind the brokers inflated numbers). I get the concept of more doors under one roof and management but I was collecting around 15-18% cash on cash from my single family. I didn’t expect 15% returns but I just thought that 6% was too low.

Now I am a salesman and I like to sell people what they want. My day to day work since 2012 was in product manufacturing and importing. I can speak fluent mandarin and everyone knows China is where everything is made. I started importing and selling anything that made a profit while in school. I didn't do too bad. I guess well enough to quit pharmacy school in mid application my senior year of undergraduate at University of Georgia. I was projected to make about 80k a year when finished with school and I was making over that working on my own. Didn't make sense to go into debt and another 3-4 years of school. Around 2015 I had began experimenting in developing my own product because everyone was selling on amazon by this time and margins were slim as a private label guy. I had to invent my own product to stay ahead. Well what to invent?? No idea. Not until I found myself in a cockpit of a 1969 Piper Cherokee 140 with my flight instructor coming down from a cross wind landing when I saw a windsock and had a bright idea. What if I could create a product that that inflated with just the wind and created a lounging device or even an air mattress? WindPouch was born. We a had a couple viral youtube videos one by Casey Neistat that really opened up a world of craziness for the next 16 months. We went from 0 in sales to a little over 4 million in revenue before being acquired in 2018 but not before getting a call to pitch on ABC's Shark Tank and landing a deal with Mark Cuban himself (the episode never aired unfortunately). That’s a crazy story for another time.

Back to being a salesman. I took a step back during that 2017-2018 time and figured if everyone is fighting over these 6 cap deals and buying them up before I could even get my hands on one then if I could build something better than a 6 cap with these low interest rates then i'm pretty sure I could just sell them back to the investors and do it again. Or rent it out for cashflow...or both. I didn't have a clue about new construction until I met my now partner Jeremiah. By random chance I was talking to a friend about my ambitions to build new product specifically for workforce/affordable tenants. I like staying in the NEED category rather than the WANT when it comes to living arrangements. There’s plenty of money building for WANT these days anyways. You see them coming up in every big city and Atlanta is no different. Literally we have 10+ high rises coming up at the same time while there is vacancy in the completed ones right next door! Bubble? I have no idea and wont to pretend I have an idea about how to time market cycles. What I do have an idea of is that there is a great NEED in affordable housing everywhere we look. My friend met a guy in his hometown that was an entrepreneur like us but decade older and had been building for about 15 years...and he was also building affordable housing. One phone call later I was in my car driving 4 hours away to meet him and see his products. I was hooked. Simple and yet much needed. He was focusing on the forgotten tenants. The ones that no one is building for. Most make minimum wage and are either divorced, widowed, elderly or post graduates just not wanting to move back in with mom and dad while looking for a job. Most product if you could find any in that price range were dilapidated. Often the poor insulation could cause the electricity to cost almost as much as the rent itself. We are building for them. I know what you are thinking. Section 8? Are they good tenants? Do they tear up your place? Here to report that so far so good. We build market rate so no government subsidies and we don't take section 8 vouchers. We just don't think the government's help is needed here at this time. Pure capitalism should drive this.

Jeremiah was just finishing up another one of his developments and he had located a piece of land where another potential development could go and he wanted help taking it on and then taking this long term and eventually nationwide. It was in that moment we agreed to partner up. From the beginning I was there on every phone call, email, variance/zoning/permitting meeting, numerous investor/bank meeting, contractor/subcontractor meeting, code enforcement and closely watching money from our million plus dollar loan account slowly being drawn out every week from contractors and subs. It wasn't a walk in the park by any means and we had our share of surprises. We got hit with substantial impact fees from the city, local cable/internet company screwed us over, few raining weeks slowed us down a little and of course a fair share of contractor issues. But overall it was a surreal experience to see the land transform from trees to completely built out with our first tenants moved in. We have set a goal for 2020 to build another 200 units spread over 4 cities in our home state of Georgia. We have empty lots selected in 3/4 of those cities. We have already had meetings with city officials, investors and land owners.

The point of this long post was to give people an idea of my journey as someone with little to no experience being able to take part in a multifamily development by believing you can, teaming up with right people, having a willingness to learn, and a healthy bit of luck. If I did this on my own it probably wouldn't have happened this quickly for sure. It's also a great feeling help create homes for people in need while making great passive income. We are so excited to be breaking ground on our next development in December. I would like to answer any questions about anything to help people who are interested in learning. There’s a lot that I didn't cover such as financials. I can say that we are above a 10% Cap Rate after refinancing our construction loan into a longer term loan and the demand is good enough that we have a waiting list.

Finally i’m taking all questions so please........ Ask away!

Here are some dropbox photos of our journey from Parcel to Passive income:

https://www.dropbox.com/sh/tyk44xnpc0mev8z/AACQSjHK1IskpaDnt4VHLxpMa?dl=0

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Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
6y

@George Y. Congratualtions on your first Ground Up! It would be very helpful if you also share the financials with everyone. Land and development costs as well as rents.

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  • Property Manager · Los Angeles, CA · Member since 2019 · 11 posts · 4 votes
    6y

    @George Yu Congratulations on your first multi-family project. A few questions:

    1. What can one expect to net per month after building and renting out a project like this (i.e., monthly net profit from rental income after all expenses including loan payments)?

    2. What was the timeline on the project from the moment you started looking for a site to fully or near fully occupied?

    3. What does your pre-offer due diligence look like?

    Thank you

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Gary B. yes land we purchased and that counted towards our 20%. we projected the total buildout cost to be around 1.5 million and they wanted us to essentially put down 300k or 20% just like a mortgage

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Minna Hu great questions! The most challenging is a combination of finding suitable land to build on with our strict criteria. Combined with working with cities. City officials are sometimes like a high school clique in these small towns that we go to and its tough to know if they will help you or not. We have gone to cities where they didn't seem that interested and then rolled out the red carpet once we moved further along. There are other cities that we went to that loved the project from the beginning but refuse to offer any support in terms of getting the deal done. One city wanted us to spend 500k to improve existing city infrastructure which was clearly the city's job. They think that developers are set to make a ton of money so they sometimes try to push responsibility off. 

    Top three mistakes: Not negotiating the utility rates with the city before starting. Pre leasing the units too early and the move in date was pushed back about 45 days because developer went over scheulde. Not building more units! 

    Sprinkler system greatly reduced insurance for us

    hire an exterior designer to help with paint choices. I picked the colors and they didn't turn out like i thought it would to save couple thousand $$. 

    change design to decrease cost and increase efficiency.

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Josh Rowley congrats on the build! That was more of a heart decision with us partners. We could easily not include the utilities and we would be fine. We believe that is where the future of affordable housing should go. One bill each month because people are busy. No need to have multiple to keep track of. Plus it places pressure on us as developers to build them more efficiently which is something all three of us are passionate about. Passive house standards, solar, geothermal, wind etc. We just want to push the envelope. We are experimental and its what makes every build exciting. We add new materials, processes, tech and it keeps getting better. 

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Hedi B. thank you! hard to tell for this one since we haven't gotten through our first month so not all bills have come in. but we projected no less than $10,000/month. 

    said it somewhere but 14 months

    Survey, topo, utilities, sewer verification, flood plain, zoning, variance, etc

  • Property Manager · Los Angeles, CA · Member since 2019 · 11 posts · 4 votes
    6y
    Thanks George. A few follow up questions:

    What was your final cost per buildable sq ft (hard and soft costs)?
    Where did you get financing, at what rate and how much cash did you and your partner have to personally invest?

    Originally posted by @George Y.:

    @Hedi B. thank you! hard to tell for this one since we haven't gotten through our first month so not all bills have come in. but we projected no less than $10,000/month. 

    said it somewhere but 14 months

    Survey, topo, utilities, sewer verification, flood plain, zoning, variance, etc

  • Member since 2018 · 1 post · 0 votes
    6y

     Nice job would really like to know the financials down here in Southwest Florida where in big need of affordable housing 

  • Rental Property Investor · Columbia, SC · Member since 2018 · 54 posts · 12 votes
    6y

    @George Yu that’s awesome man! Congrats. Very inspiring and motivating.

  • Silver Spring, MD · Member since 2017 · 1 post · 0 votes
    6y

    George.  Tnx for sharing, this inspired me.  What would your advice for someone who has a couple properties that wants to leap to multi-unit?

    Tnx - Ricardo

  • Rental Property Investor · Chattanooga, TN · Member since 2018 · 74 posts · 19 votes
    6y
    Originally posted by @George Y.:

    @John Stewart no we went with a local bank in the city and got it. Wasn't that hard for us we had the balance sheet and relationship. We have never raised capital before. We would like to at some pointt but would like see how far we can get with just our own blancesheet. so far after this last refi we pulled out our initial 20% equity and more

    Thank you for the response!  That is amazing!  Always looking for that infinite return, bravo!

    You have actually inspired me to keep going after development.  Thank you.

  • Rental Property Investor · Stephenville, TX · Member since 2019 · 20 posts · 6 votes
    6y

    That's awesome!  I love reading success stories like this.  It gives us little guys hope!!  I can't wait to be able to build. That sounds like an exciting adventure!

    I have a situation, any direction or resources on how to handle this would be great.  

    I've come across a listed rental property, listed at $540,000 and nets $1,250/month; it could use some upgrades so as tenants move out, upgrade and increase rents. Pretty sure it would sell for less. I've got $0 starting out toward real-estate, so supplying the down payment is a no-go, same with closing costs, and can't get a conventional loan for that amount due to DTI ratio and only have decent credit, not perfect credit. It sounds like the cards are stacked against me, and that's highly discouraging. There must be an avenue I can travel down, some sort of creative financing or partnering that could put me in the position to acquire this.

    I wish I had a question about your endeavor, but I'm still learning. So maybe later I can pick your brain about the bigger projects.

  • Real Estate Investor · Roswell, GA · Member since 2015 · 30 posts · 7 votes
    6y

    @George Yu

    What amount of cash do you need to build a 36 unit apartment? Just curious what the entrance fee is

  • Julie MarquezPro Member
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    6y

    Very cool project! I didn't see any rains in the time lapse! How was the design phase? Did you have to deal with a lot of add ADA requirements? 

    I work in commercial construction and I'm personally building a duplex right now, so I love these stories!

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Ricardo Kreyhsig they way I did it was to find someone already doing it and provide some relational capital with the pre intention to be active. I wanted to learn. You could also go the the permit office and ask to see who has pulled permits in the last 90 days or ask them who are the local developers. Then call them and see how to help you develop what you want or see if there is a partnership.

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Malcolm Jarrell looks like your going to have to raise capital. Usually if the deal is good its not hard to find someone to lend money. There are lots of investors in your local area you can go to REIA meetings or try to see some investors on BP. Money is always the problem starting out. Everyone will need to figure that out on their own.

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Andrew Lackey it depends on size, build, location a lot of things. For the project we needed about 300k cash and balance sheet. 

  • Member since 2018 · 4 posts · 0 votes
    6y

    @George Y. super cool! So how you were sure you’ll be able to rezone the land before buying it?

  • Roswell, GA · Member since 2017 · 26 posts · 10 votes
    6y

    Thanks

    @George Y.

    Pretty exciting that it didn’t take an excessive amount of capital to enter into This project. Now is time I should consider building and not just buying for cash flow and appreciation like I’ve been doing. I think I really need to assess building!!

  • Lititz, PA · Member since 2013 · 595 posts · 272 votes
    6y
    Originally posted by @George Y.:

    @Ricardo Kreyhsig they way I did it was to find someone already doing it and provide some relational capital with the pre intention to be active. I wanted to learn. You could also go the the permit office and ask to see who has pulled permits in the last 90 days or ask them who are the local developers. Then call them and see how to help you develop what you want or see if there is a partnership.

    Hello George,

    Can you elaborate on what "relational capital" is and how you expressed your pre-intention to be active to your future partners?

    Again, congrats on the completion of the project!

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Julie Marquez the rain was there haha. not a lot of ADA. According to local codes we build every unit to be ADA modified. So it has the infrastructure behind the walls to add the railings later if needed but we weren't required to install them if that is what you are referring to. Keep in mind we are building in smaller towns which is where we want to be. 

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Gurveer Khang we spoke to the city officials before hand. We always like to introduce ourselves to the manager, zoning board and any other key officials. Try to find out who holds the power. its sometimes not the appointed positions.

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Andrew Lackey its not an easy thing to do. there multiple steps but if you do find a way you will be doing something that 99% of people aren't doing. 

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @William Coet  if you want to get a piece of the pie with guys that have been doing it then invest a sizable amount with them on their next development and its ok if you take a smaller percentage because your doing it for experience. Also bring something more to the table like your time. I was able to learn quickly and now we are in three cities this year compared to one city when Jeremiah was doing it himself. I bring the young tech side that he didn't have as well as my network of investors and other skills. Its a partnership. very few people will give their time without something that equally benefits them. Think about your strengths and how it can help someone in their position. Everyone has a problem to be solved. 

  • Member since 2018 · 4 posts · 0 votes
    6y

    @george 

    @George Y. lucky you that the efforts payed back! Keep it up man!

  • Financial Advisor · USA · Member since 2017 · 151 posts · 379 votes
    6y

    @Gurveer Khang thank you sir

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