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

124Reply
1,101 views

Most Popular Reply

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

278 Replies

Jump to latestLatest
  • Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    6y
    Originally posted by @Terry Ellis:

    @Michael Ealy

    Yeah since I’m new, it’s like I don’t want to partner because it’s like a marriage. Probably worse than a marriage. But the more I network the more I see the benefit. You partner often? Is it always the same people? Thanks for your input if you decide to answer.

     Terry,

    Partnering does NOT have to be long term. You can do joint ventures on certain deals where someone else has the expertise you either don't have, or work on something you rather not work on. For example, I realize after doing this for 20 years that my "highest and best use" is sourcing and analyzing deals. I can see the property's potential better than someone else and because of my track record and reputation, I get really good deals. Even though I can be a good property manager, I would rather NOT devote any time to it. SO, I joint venture recently with a group of young guys who are great apartment operators. Will it be a long term arrangement? Maybe. Or maybe not.

    You can do the same. And again, it does not have to be long term. You can start small and it can be a simple JV that is short term. Once each of the partners prove themselves and you like the synergy, you can decide whether to JV some more or "tie the knot" and have a long term partnership.

    Here's my post on Joint Ventures:

    https://www.biggerpockets.com/forums/432/topics/744841-joint-venture-and-how-to-buy-more-apartments-actual-experience

  • New Orleans, LA · Member since 2019 · 1 post · 0 votes
    6y

    @George Yu

    Thanks for the back story . I’am just breaking in to real estate and still searching my first buy. I was originally contemplating a duplex property, but finding much better deals on the singles. My vision was to ultimately create exactly what you have done already. Looking forward to staying in touch as I start my journey. Thanks again .

  • Rental Property Investor · Newburgh, NY · Member since 2018 · 160 posts · 117 votes
    6y

    @Linda D.

    New York landlord/tenant laws and regulations are extremely favorable to tenants.

    Eviction timeline,

    Rent deposit regulations,

    Rent control,

    Impermissible to use eviction records to screen,

    All across the board, tenants are favored over landlords.

  • Member since 2019 · 4 posts · 3 votes
    6y

    George that's so great, congratulations. You are very inspiring.

  • Bronx, NY · Member since 2014 · 148 posts · 34 votes
    6y

    @Bill O'Donnell Thank you. I live in NY but needed a reality check. Looking to buy rental properties down the line but thinking not in NY.

  • West Palm Beach, FL · Member since 2015 · 27 posts · 6 votes
    6y

    Did you know you were going to be assessed impact feed before you started? Or did they simply come out to more than you expected?

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

    @Mike Dymski thank you. Yes the units are 400sqft 1br/1ba built with stick frame. We will be experimenting with SIPs next development. 

  • Indianapolis, IN · Member since 2015 · 7 posts · 2 votes
    6y

    Considering investing in a mobile home as rental property. Any thoughts?

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

    @Terry Ellis glad you like them! 

    1) No we had a local bank refi us out at 80% LTV so we cashed out 1.52million and paid off the construction loan and got our owners equity outas well.

    2) well according to our appraisal itcame out to 52k perdoor so roughly around 10k but we arent looking to sell at this time. only hold and collect cash flow!!! Also the appraisal was lower because they overestimated the vacancy rate and also the gross income. 

    3) of course.

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

    @Joe Lawrence glad i was able to privide some value. 

    1) selected it be what was available on the market under $25k/acre, closest to shopping, grocery, gyms, restaurants. Spoke to local agents and PM and they told us the best neightborhoods to be at for highest rents and best tenants. 

    2) Spoke to a few property management in the city first to see available inventory and asked around. As well as calling other apartment complexes found out no vacancy. 

    3) Hold

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

    @Yaakov Mirman thats great! we didn't really use any accounting program besides excel and never let subs get ahead on their draws.. the banks helped with that as well. our contractor built out the pricing on a cost plus basis and we had worked with him numerous times before. Although we use buildium to manage our rentals. 

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

    @Trin Nagireddy nice to meet you. Moultrie GA

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

    @Linda D. From hear other investors in NYC the courts are generally tenant friendly when it comes to disputes between them and landlords. They pick the tenants sides.

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

    @Gabriel F. thanks! check out yale locks. We pay about $175/lock. The windpouch was the coolest thing I ever came up with haha. Hope i can one day repeat that kind of innovation.

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

    @Gary Clark please do. we need affordable units everywhere! 

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

    @Bradley Kesselman we had met with the city commissioners before the devlopment and no mention of a large impact fee. We werent charged any impact fees in the other cities that we built in so this one came as LARGE surprise. 

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

    @Eric Slaughter sorry not experienced with mobile homes. Wouldn't be the best person to answer that for you on this forum

  • sydney, NEW SOUTH WALES · Member since 2017 · 5 posts · 1 vote
    6y

    Hey George - great effort on getting this done! 

    It is one recession proof strategy! What are the rental numbers on this? How much is each unit going for, i believe you mentioned earlier ~$600 per unit? Hope it it stays 100% occupied all the time! 

  • Bronx, NY · Member since 2014 · 148 posts · 34 votes
    6y

    Thanks George. Could you say how much money you out into the deal -I think you said $100K? Was that everything you put in?

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

    @Boyan L. we started renting them at $650 and then asthey were filled up we rented last few for $695 so average is about $675/unit

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

    @Linda D. yes three partners put in about 270k total so 90k each

  • Rental Property Investor · Newburgh, NY · Member since 2018 · 160 posts · 117 votes
    6y

    @Linda D.

    Im from the Bronx. I have rental properties in Fishkill and Newburgh. You can make it work, but it is uphill.

    Best of luck wherever you go.

  • Bronx, NY · Member since 2014 · 148 posts · 34 votes
    6y

    Thank you. So put in $90K and got $600K+ in equity and cash depending what you can get as loan to value. Then own the amount you borrowed as a mortgage that becomes one of the rental expense lines? (If that abbreviated sentence makes sense). Then reinvest some of the cash back? Have I got that muddled?

  • Bronx, NY · Member since 2014 · 148 posts · 34 votes
    6y
    Originally posted by @Bill O'Donnell:

    @Linda D.

    New York landlord/tenant laws and regulations are extremely favorable to tenants.

    Eviction timeline,

    Rent deposit regulations,

    Rent control,

    Impermissible to use eviction records to screen,

    All across the board, tenants are favored over landlords.

    Thanks Bill. I lived in Riverdale Bx for 15 years. Moved to the Lower Hudson Valley 3 years ago. Where are you in the Bx?

  • Rental Property Investor · Newburgh, NY · Member since 2018 · 160 posts · 117 votes
    6y

    @Linda D.

    I lived off Fordham at Decatur.

    Off Broadway at w251,

    And at the city line at w262.

    I live in fishkill now.

    Invest in newburgh, and fishkill.

    Looking at poughkeepsie.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.