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

    @Cody Trammell I would carve our your niche. What is the current market missing or something it could be doing better in your views. the only way to really understand that is to understand your audience that you will be catering to. Nope focused on Georgia first and then proving the concept here before going further! We are still improving on almost every end of our process.  

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

    @Ryan Ford it is a catch 22 in a way. I was there until I met my partners. I guess thats the luck factor. But the skill factor was that I knew that I had the funds or the ability to raise my portion of the equity split. Plus i bring to the table for the team aspects that they didn't have. We all work our butts off. No one slacks and we could all see that in each other. Give what value only you can give.. you. 

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

    @Chad McIver let me know how it goes!!!

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

    @Caleb Korzenowski sure thing. Send me a DM

  • Atlanta, GA · Member since 2019 · 8 posts · 0 votes
    6y

    you're truly an inspiration for someone that's new to REI in the Atlanta markets! congrats to you, sir!

  • Rental Property Investor · Chattanooga, TN · Member since 2018 · 74 posts · 19 votes
    6y

    Way to go George Yu! That is inspiring!

    I am totally with you on the having a hard time justifying a 6 cap apartment...it’s nuts out there!

    I have been mulling over the idea of building for a few months now, I have an engineer on my team and we believe we can build at half the cost per square foot of conventional builds. I feel like this gave me the inspiration to go for it!

    My question is what did you do to get the construction loan? Did you raise the capital? You mentioned Cardone, who famously raises others capital. I am nearing completion of my first multifamily deal using investor capital, did you just scale up on this concept?

    Thanks again for the post!

  • Specialist · Dallas, TX · Member since 2010 · 511 posts · 252 votes
    6y

    @George Y.

    Thank you very much for sharing your story and actively giving all answers...

    Few Questions From my side...

    1. 48.5 per door is very low even below cost, how were you able to get this? Did contractor build at cost and you gave him additional incentive money? 

    2. Did you use traditional financing? What were the terms?

    3. What was land price and you paid all cash for land.

    4. Your property is within Atlanta metro? 

    5. What is sweet spot for first time construction guy, 32 unit or higher number of units can be possible following your plan.

    6. Land you purchased was already multifamily zoned or you gone through zoning change?

    Thanks,

    Shital Thakkar

  • Property Manager · NJ · Member since 2017 · 786 posts · 396 votes
    6y

    @George Y. Congrats! and thanks for sharing this inspiring story you've accomplished a ton in such a short time. Please continue to update us as you grow your portfolio

  • Real Estate Agent · FL · Member since 2019 · 4 posts · 1 vote
    6y

    @George Yu wow what an amazing story. The complex looks beautiful congratulations

  • Hayward, CA · Member since 2017 · 133 posts · 12 votes
    6y

    @George Y. - this is amazing and inspiring story. It is unbelievable how you managed to get this project under budget and on time. Construction, esp ground up, no everyone's cup of tea.

    I am exploring to convert an existing hospital into apartments. Can you share more experience with construction loan ? how much interest reserve you had to give and how much city costs you had to take care? Any recommendation how to shop for construction loan and modeling you used to project after repair value ? 

    thx !

  • Investor · Tyler, TX · Member since 2019 · 32 posts · 9 votes
    6y

    @George Yu

    Great project!  What is % operating expenses? 

  • Member since 2019 · 1 post · 0 votes
    6y

    Hi, where are the answers of de previous questions??

  • Investor · Bowie, MD · Member since 2016 · 143 posts · 51 votes
    6y

    @George Yu

    Congratulations, I am thinking of building my first house. This definitely just motivated me.

  • Coral Springs, FL · Member since 2019 · 16 posts · 13 votes
    6y

    That is really great George!! I love the story mann and I'm really inspired. Thanks for sharing!

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

    @Ricky Bass we use Mitsubishi half ton wall units. Gas water heater. Let me find a floor plan and also ok with the guys!

  • Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    @George Y., 

    I love your story! I can't wait to watch as the empire progresses. 

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

    @Brock Thomas land was 40000 2.25 acres. site work was about another 175k. looking forward minimum we look now is 3.5 acres to build 48-60 units. 

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

    @Clyde Coleman This my personal bread and butter. First is to call a local brokers native of the town. I try to find older agents. See if there is anything on market or pocket listings. After that then we go to local qpublic and with recommendations from locals pick lots that fit our criteria and skiptkace and call them. This is usually long process so start this months before. Cities in my experience can be good or terrible. Its good to meet with key members like city manager, commissioner, zoning admin etc to get a feel for the political climate and ask for someone to help navigate the political climate there. Thats worked for us. If anyone knows of a better way please do tell!!!!

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

    @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

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

    @Shital Thakkar 

    1) we bought into the land at a good cost.

    2) construction loan was 1.165 at 6.25% 

    3) land 40k

    4) no south goeriga near florida. 

    5) depends on the amount or site work needed and land cost as well as building design. There is economies of scale but not much at 32 units. 

    6) needed to rezone. Entire process took 4months. Depends on if city is willing to help or not. 

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

    @Vaughn Smith thank you and absolutely! will be breaking ground in a couple more cities this year. Will post better pictures and take better notes 

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

    @Gary B.thanks! construction loan was straight forward. They wanted a PFS as well as two years tax returns. they wanted 20% down. besides impactt fees of about 75k can't think of anything else we did for the city. I would recommend going with a smaller local bank. Find out what their portfolio max is. Banks have a sweet spot for types of loans they do. If yours falls in it then your ahead. Also its all about the relationship. Know his wife name and kids. plan to work with him on more than just this one deal.

  • Hayward, CA · Member since 2017 · 133 posts · 12 votes
    6y

    @George Y. thanks for your advise. Was land acquisition cost also part of construction loan ? Curious 20% of what they asked for.

  • Rental Property Investor · Toronto ON, Canada · Member since 2015 · 58 posts · 11 votes
    6y
    @George Y.: George, impressing story! We're building a six-unit mixed-used complex, good timing to see your post!  You are very inspiring! 

    If you don't mind me asking, what do you find most challenging during the process? And what is the top 3 mistakes you made during the process? And what are your top 3 learning from this project? I look forward to your reply!
  • Rental Property Investor · Jacksonville, FL · Member since 2013 · 43 posts · 20 votes
    6y

    Hi George, way to move through the challenges and accomplish something remarkable.  I am currently building 3 sfr to rent and manage a portfolio of lower income apt and sfr. I read through the posts and didn't see this question.   I'm curious why you opted to go with an all-utilities-included model vs the alt?  Is this what the market there requires or did you gain enough of a competitive edge to make it worthwhile?  I know you had many questions already.  Josh

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