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.

See this reply in the discussion

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  • Realtor · Bakersfield, CA · Member since 2018 · 9 posts · 3 votes
    6y

    @George Yu

    George, Thanks for your inspiring story.

    Please can you elaborate further regarding being able to refinance all your equity. I had an idea that we could only refinance 65% of the constt cost with permanent financing with new builds.

    Thanks again.

  • Rental Property Investor · Baton Rouge, LA · Member since 2017 · 78 posts · 26 votes
    6y

    @George Yu Congrats on your build!! This is super motivational and inspiring. The post was a little lengthy but i took my time to read it and it was worth it!!

  • Rental Property Investor · Chicago, IL · Member since 2019 · 5 posts · 22 votes
    6y

    @George Yu congratulations... enjoyed the details of your story. The Pictures is how perfect and smooth everything went. lol but from the story I see so much hard work went into the process. Awesome!

  • Member since 2019 · 16 posts · 2 votes
    6y

    What’s best market in USA to buy an apartment building in 4 mil range... low vacancy low taxes steady population growth?

  • Investor · Simsbury, CT · Member since 2015 · 46 posts · 31 votes
    6y

    @George Yu

    Love the pictures. Great job man

  • Gabriel F.Pro Member
    Rental Property Investor · Fort Myers, FL · Member since 2014 · 22 posts · 7 votes
    6y

    @George Yu

    Hi George!

    Very inspirational to read your post! It looks like you've been through a long journey and it's going to pay off for you just as long as you stay the course! I do have some questions as I myself have been doing research into the multifamily space specifically building my own concept of construction for a housing model that has worked for me very well and existing properties that I do presently for affordable housing and I want to build from scratch something that will really help the community out keep the affordable housing intact while also maintaining quality!

    How difficult has it been to find banks that are willing to do land loans for you based on an LLC assuming that your structured that way?

    How much down do you have to put percent wise to get the loans?

    Is there anything you suggest that I bring forward for a bank or private money investors to consider with what I have planned for a build-out that could help the process of getting approved quicker so that I'm prepared when I start inquiring?

    What kind of construction did you decide to go with (CBS, Wood-frame, Modular, etc)?

    I noticed you mentioned that you guys got screwed with the internet cable provider.. I'm just curious but what actually occurred? Anything you took a wave that I could use so I don't make the same mistake?

    I appreciate you so much for posting your experiences thus far and I wish you nothing but continued success!

  • Member since 2018 · 80 posts · 21 votes
    6y

    @George Yu congratulations George!How much did it cost to build this?

  • Member since 2019 · 8 posts · 4 votes
    6y

    @George Yu. Did you finance your self? If not how did you finance

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y

    great story and is America not a great country ?  

    I love the fact you invented that air coach we have some of those.. little tricky to inflate but great concept.

    and that's were the money is made by so many in the USA its selling products and inventing things that others need.

    Also brought me back to my early days of flying i actually went on my check ride for my PVT license in a Cherokee 140 talk about an un powered dog  LOL.. did yours have the brake handle on the Roof of the cockpit.. ??? 

    AS to you building your MF GA is a great place to do that for sure.. Keep at it.. We build in the Carolinas SFR stuff not MF but same process build sell make a few bucks repeat and scale. I bought lots around ATL back about 7 years ago for next to nothing we made 10X on them by just holding them 24 months.. that was a great play.

  • Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    6y

    Congratulations on your new build, best of luck!. Nice work too, having no elevators is a huge savings!!  I agree that there is a strong need of new build affordable housing. Have you considered working with an established non-profit housing group that provides services for the poor?  New build construction with a % of apartments for homeless transition, % of people of income below poverty level, etc?. I understand that it can be very profitable and there are lots of tax breaks, waived fees, government incentives...In the end it gets turned over and managed by the non-profit organization and the investor(s) are partners. You make the money in the development and rentals.

  • Rental Property Investor · Houston, TX · Member since 2017 · 144 posts · 42 votes
    6y

    @George Yu

    CONGRATS!

    what was your out of pocket costs?

    And if other invested with you, what was their total out of pocket costs!

    Keep living the american dream!

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y

    Great story and congrats on a great project!

    I've had a long shot development plan in the works for a few years.  Put it on hold because of the sewer district.  Hookup fees are per fixture and sky high.  Fingers crosed the new mayor and commissioner will lower the fee to per line given our lack of rental supply. 

    Thank you for affirming my idea of townhome style vs 2 story walk-up.  No sprinklers needed and no 'the neighbors upstairs are being loud' complaints.  I have a small townhome community now and it's by far my favorite property.  Did you review other floor plan types like townhomes before settling on walk-up? 

    Anyway, thanks for sharing and for the reminder that building your own is an option. Bonus building housing affordable for the working class.  Part of my mission statement and why as well👍

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

    @Eddie T. For this development yes. No amenities unless you count parking! This is need based housing. We’re not gonna give them anything they can’t afford. Soon as we start doing pools and gyms that Has to be priced into the rent and they just can’t afford that

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

    @Timothy Winfield thanks! I need to get better at getting top points across shorter messages!

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

    @Mahavir Gill not all only 80% LTV. Do you have a great relationship with our small local bank that Linh asked for the construction loan. They were willing to give us in in-house conversion to a longer loan but we found a better interest rate and LTV at another local bank 30 minutes away. We have good financials and balance sheets and most importantly a good relation with all of those individual bankers. I think that's what it really comes down to. My partners have been working for them over the last 10 years. I think the banker came twice in 14 months to check on the construction. Typically bankers will need to come out at least once a month but that just shows you that they have a deep relationship

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

    @Dawanna Parks absolutely LOL I like to definitely give the downsides as much as the upsides. Overall it was absolutely worth it. Couple times in the process were a little bit scary but I think it comes down to do we lose it all or push forward

  • Real Estate Broker · Chicago, IL · Member since 2019 · 44 posts · 12 votes
    6y

    @George Yu

    Awesome, and inspiring story George. This is literally my goal, building rental properties from the ground up. It would be great if you can share the financials with us. Otherwise, nice work!

  • Real Estate Broker · Chicago, IL · Member since 2019 · 44 posts · 12 votes
    6y

    @Thalia Mena

    George, apologies I have read thru the entire forum, and see that you have discussed that already. Nice!

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

    @Scott Lang I built my own because didn’t know that answer!

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

    @Gabriel F. we didnt have good luck with big banks. We go to small local banks in the city that we built in and shoped the loan around. We had to take a personal guarantee as well as the LLC. We put 20% which included the cost of the land that we already purchased. Be repared when you walk into a bank. We know from experience that they like all their paperwork in a row to make their job easier and it makes you look seasoned. Also we purchased the land already and had it rezone and cleared to show them that we were serious. Also recommendations from the city manager as well as few members of the commissioners. We went with traditional stick frame with spray foam insulation and extra wall insulation. Cable got us by agreeing to a rate 8 months earlier then stating that the account manager that made the rate was no longer there and had to reneegotiate a higher rate

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

    @Thalia Mena around 1.6 million

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

    @Jay Hinrichs america really is. I do a lot of work in manufacturing in China primarily so i'm over there once ever 4 months. China is a sleeping giant we all need to be aware of becuase they are coming for us! No brakes on the roof haha. Mine was on the floor. Didn't have toe brakes either like my 182 now. 

    Jay it sounds like you buy and hold and then sell. It hasnt yet occurred to us partners why we should sell. All three of us want the cashflow more so that the lump sum and 1031. Can you share why you chose to sell sometimes? Is it dependent on where yo are in the cycle? We thought about that too but came to the conclusion that by nature of who we were building for, we should do even better in times of recession. Thanks!

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

    @Anthony Rosa honestly thats a world that we are not familiar with. We do have an interest in going that route in the future. We figured that if we can make it work without any help then its only UP from here! You have any suggestions on where to start for tax incentives and partnering with NP? 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @George Y.:

    @Jay Hinrichs america really is. I do a lot of work in manufacturing in China primarily so i'm over there once ever 4 months. China is a sleeping giant we all need to be aware of becuase they are coming for us! No brakes on the roof haha. Mine was on the floor. Didn't have toe brakes either like my 182 now. 

    Jay it sounds like you buy and hold and then sell. It hasnt yet occurred to us partners why we should sell. All three of us want the cashflow more so that the lump sum and 1031. Can you share why you chose to sell sometimes? Is it dependent on where yo are in the cycle? We thought about that too but came to the conclusion that by nature of who we were building for, we should do even better in times of recession. Thanks!

    Cant recall the model that I flew that had hand break right below the power quadrant..  We fly an SR 22 these days I bought it new in 2004.. have you been in a Cirrus ?   

    As for why we sell because that's our business.. we build new construction homes and or remodel homes that get sold to investors or New home owners.. I retired from owning rentals about 5 years ago now.. bought a few MHP s in the mean time and repositioned those.. then sold.   

    but will probably jump back into landlording sometime in the future but only with  B class and above with professional 3p management and on site managers  TRUE passive income..  when I had 350 sfr's that was simply way too much work and drama. 

  • Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    6y

    @George Y. - Look for the non-profits that own & manage real estate and offer social services to people with mental illness, homelessness, youth & adult educational services, HIV/Aids, transitional housing, etc...  Once you speak with the President of the NP and tell them your housing development plan (you need to present and shine), and if they like you, they will set up meetings with their board and again you have to shine on presentation...The NP will know Exactly about who/where/what/how to help with funding, tax incentives, government rebates, etc....  That is how someone i know got started and said its worth it because its recession proof. Made money on the development end and gets a piece of the rentals.

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