All Forum Posts by: Michael Swan

@Joel Fine

You bring up a strong point.  In 2015, 2016, and 2017 when I did those 1031 exchanges of 8 Condos for 8 apartment complexes, those condos all doubled in value in a 3 year period.  I would never have bought them at those doubled values for rental properties at those inflated prices.  Originally, I put 20-25% down and wanted $400-$600.00 cash flow on each condo.  That would not have been possible at the doubled values.  I would have lost money every month.  

That would be speculating.  I could do that In the stock market or go to Vegas and gamble.  No way!!!

Swanny

Hi @Kevin Moules and @Shan Vincent

You may want to listen to podcast 238.  I traded in 1031 exchange Condos I owned in San Diego that doubled in value from 2012-2016 for Apartment Complexes in NE Ohio and went from $50,000 cash flow a year to right now $180,000 cash flow and rising.  We should be at $200,000 cash flow by Summer of 2020.  We are now principals in 200 units on our way to 1000 units in the next 10 years.  If a lowly paid PE teacher can do this, anyone can.  My apartment complexes now have about 4 million in equity and about $10 million in market value and rising.  When I traded my condos they had about 1 million in equity.

I really love how apartment complexes are valued primarily based on NOI too and every dollar we increase the NOI of our apartment complexes, the banks say it is worth 10 dollars more than we paid. We are insulated somewhat from the 1-4 unit Comparative values trap if values decrease.

Also, I like how at my rental rates in the area I invest, if someone needs to downsize, my 2br and 1 br units are perfect size.  Also, where I invest there are lots of my tenants with machining and manufacturing jobs that have dramatically become the norm renting from me in solid C+ and B class neighborhoods.  I recently purchased a 57 unit in a B class neighborhood for $2,000,000 or about $35,000 a door and a 24 unit for $760,000 or about $33,000 a door.

You could refi, take money out tax free or if you are truly worried about comps, like I am, you could 1031 exchange for true Multifamily.  

Either way, lots of equity is a good problem to have.  Feel free to reach out to me.  I leave my phones available to talk to BP members 3:15-6:15pm. PST most afternoons.  Message me.  I love this stuff.

Swanny

Hi @Greg Wa

You did not mention you have the Niagara Stealth, elongated bowl .80 GPF installed.  I have noticed the sewer is where the money is really lost.  On a duplex, with water saving features installed, you should be at no more than $100.00 a month total.  Maybe $150.00 on the high side.  That’s another reason I prefer side by side duplexes, so you have seperate water meters and gas and electric too and the tenants pay those bills.  Plus they pay for snow removal and landscape it themselves.

Swanny

Hi @Zoran M.

Feel free to message me anytime here.  I have 164 units (8 apartment complexes) in Lake County. Plus, I have a 12 unit in Euclid (close to the new Amazon Fulfillment Center) and a 24 unit in Akron.  I invested in my first apartment complex in NE Ohio, 2015.  

My RE Attorney, RE CPA, PM, etc... are all local there.  

Reach out to me ASAP.  

Swanny

Thank you @Sunny D.

Great to hear you are making smart choices after talking to me.  I love helping people on BP to see through all the fake news out there and to understand the angles that people have on BP.  Only take financial advice from people that have more than you have.  Also, ONLY talk to investors that have invested in the same are you have geographically, and don’t have an angle to sell you something.  

I also feel that if it was really a great deal, somebody living in that area would buy it.  Why are people marketing to people in Cali, Washington, Hawaii, New York, New Jersey etc..  My latest deal I am working on I found myself.  I just placed 3 craigslist ads that said I WILL PAY YOU TOP DOLLAR FOR YOUR APARTMENT COMPLEX.  The seller called me directly and no commercial agents are involved at all in the deal. Only the RE Attorneys are handling the sale from PSA to closing.

Buyer beware!!!

Swanny

Hi Jonathan, 

On Podcast 238 I described how I did 1031exchanges of one little rental property at a time for apartment complexes.  I started with 10 little rental condos in 2011 and traded them all in, one at a time for apartment complexes.  Now I am a principal owner in 143 units and if this 57 unit complex closes in the next week or so I will be at 200 units.

I always leave my phones available for BP members.  Especially during the summer, when I am off my day job as a P.E. teacher.  Go to my profile and reach out to me.

I love this stuff!!

Swanny

Thank you @Brian Garlington

I just talked to one investor today that lives in Ohio and talked to him on the phone for about 30 minutes today too, giving him advice.  I always leave my phone available to talk RE.

I love this stuff,

Swanny

Hi@Kevin Manz,

What we do is we follow David Lindahl’s Multifamily Millions Book.  He uses proven methods to reposition Apartment complexes.

We find troubled Multifamily Apartment complexes that are in C+ or B class neighborhoods, but look like they are C- or D looking properties, with a lower class tenant base.  Most of these sellers we buy from have the Apartment complexes paid down significantly and are not watching the properties and setting it up to be sold.  Also, most of the seller’s were in advanced ages.  The seller’s were in their 70’s or 80’s   

We ONLY buy Value plays that current rents are at least $100.00-$150.00 under Market rents per unit. The process takes about 18 months-to 3 years to reposition a value play, increasing NOI dramatically.

Apartment complexes are primarily valued based on the income or NOI approach by lenders.

Get the book and study it well!! I have it next to my chair and as I Reposition these Value (increase NOI) plays, I pick the book up often to read and follow a proven path.

The lenders say, if I increase the NOI 1$ then the property is worth $10.00 more than I paid. It is at least a 10-1 rule. Some of these Apartment complexes after 18 months to 3 years of ownership I have increased the NOI $25,000-$40,000 so far. That means these Apartment complexes are worth $250,000-$400,000 more than I paid. Not to mention the cash flow is much greater due to rents being much higher now too. We could Refi or 1031 Exchange them for larger complexes and do it again.

This September, one complex we have owned for 4 years now has cash flow consistently about -$30,000 a year. Based on the NOI moving forward, we have increased the NOI (total money coming in minus expenses not including Cap Ex or debt service) has been increased about $20,000. Also, we have a 20 year Amortization and have paid down over $70,000 of the loan balance and have the loan down to $440,000 and we purchased the property for $592,500. So as of right now the property is worth about $800,000.

So, debt now is about 55% of current value, we have increased value significantly with repositioning the property, increased the cash flow too.  

To think we only put about $144,000 down and about $56,000 to fix up the place.  $30,000 primarily tax deferred income is sweet and we have also paid down the loan and forced appreciation through repositioning the complex at the same time.

There you go!!

Swanny

@Kevin Abihiderundefined

Be careful out there people. I now have $180,000 cash flow and rising. Not to mention these value plays have been increasing NOI dramatically, increasing the value of each complex.

Value added plays is where it is at.  I did sell when all those Condos were double what I paid.  Buy low and sell high and with the power of the 1031 Exchange allow you to defer those capital gains.  

That cash flow will hit $200,000 in no time at all.  Would I do the same again?  Heck yes!!

I go to work as a teacher during the school year and I don’t have to do so. 

Finally, as I Reposition these value plays, my net worth continues to rise!!

Don’t look back people!! Keep  buying low, with 25-30% down, leveraged debt to decrease the bottom line taxes too.  The money I make from my RE is primarily tax deferred.

Swanny

Hi @Syed H.,

Be careful!!  A wolf wears a clever disguise!! Just tired of people critiquing my plan when they have NEVER walked a mile in my shoes.  Why would they do this and what do they hope to gain?

Swanny