BP Podcast 170: The Journey From Flipping Houses to Owning 1,470 Units with Andrew Cushman

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On this inspiring episode of the BiggerPockets Podcast, we sit down with real estate entrepreneur Andrew Cushman to learn how he went from a full-time job as a chemical engineer to a house flipper and finally a real estate syndicator, buying over 1400 units in less than a decade. You’ll learn how Andrew finds deals, manages the rehabs on a large scale, raises money for large apartment purchases, and more. Don’t miss a moment of this powerful show!

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In This Episode We Cover:

  • How Andrew started as a chemical engineer — then got into investing
  • Why he trusted his mentor from the outset
  • How many flips he has done so far
  • Tips for scaling from 0 to 24 flips in 5 years
  • The details of his first flip
  • A discussion on buying pre-foreclosure properties
  • The story of making 4,575 phone calls before getting his first deal
  • The importance of believing in yourself and believing in the system
  • How Andrew has flipped 24 properties and 1,470 apartments
  • How he made money on the first flip
  • How to scale by building a system
  • How to find pre-foreclosed deals
  • The best flip he’s ever completed
  • Tips on weird houses
  • His first apartment deal
  • Why he doesn’t recommend a heavily distressed deal
  • The difference between single family and multifamily properties
  • How to become a “sophisticated investor
  • How he find apartment deals
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “This system will work so I’m going to make it work.” (Tweet This!)

Connect with Andrew

Windy Hill Manor Deal

windyhillmanor

Acquisition

  • Purchase Price: $1,300,000
  • Units: 94
  • Financing: 100% equity
  • Investor Equity: $1,675,000
  • Acquisition Date: June 2012

Cash out Refinance

  • Loan Amount: $1,400,000
  • Original Investor Equity Returned: $1,340,000 (80%)
  • Loan Date: December 2013

Current Valuation Based on 12 Month Net Operating Income

  • At an 8% Cap Rate: $2,989,763
  • At a 7% Cap Rate: $3,416,871

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

44 Comments

    • Andrew Cushman

      Jordan,

      I’ve been acquiring apartments full time for the last 5 years, so it’s been that long since we were in the business of getting phone numbers, and a lot has changed since then. Many of the websites we used are changed, no longer free, or gone altogether. Also, my partner was the person doing that part! So I’m probably not the best person to answer that question today.

      What I can tell you is by far the most effective way of getting deals for us was door knocking. ace to face is always the best way to build trust, and I got to talk to all the people who were hiding from the phone. If the person I was looking for wasn’t there, I could almost always get phone numbers from whoever did answer (and that was often a number all my competitors didn’t have).

      Good luck!

      Andrew

  1. Elizabeth Blazina

    ?Hi Andrew, Josh and Brandon,

    Great Podcast! My husband and I are very much in sync with this type of investment. We currently have 4 rentals and I just got my license, so really looking to hone in on what to do next.

    Andrew I am not sure if this was mentioned so I apologize if it was, but who was your mentor early on? and now?

    Could you tell me how the investor returns ( via accredited or sophisticated) work.. For example you mention that you essentially implement the BRRR Method. So for example If an investor puts in $100,000. and after 18 months you do a refi and repay $80,000(80%) and 20% is still remaining in the pool for 5 years and then you sell , what would be a typical return.. Or specifically the cash amount earned total on all fronts of the transaction( monthly cashflow, appreciation etc..)
    Thanks
    Liz

    • Andrew Cushman

      Hi Liz, glad you liked the podcast!

      My early mentors were both private individuals. The first one (for flipping) has moved on to other businesses. The second one is still very active and I believe has acquired roughly 3,000 apartment units. He does some mentoring still, however it’s very limited and only by referral. Now, my mentors consist of successful individuals in the business who I have connected well with and formed ongoing relationships with. That’s one of the secrets to it: get out there and start doing it, and you will meet potential mentors! I really think that is the best way.

      Recently, we’ve started buying apartments with loans, meaning we don’t need nearly as much equity. That of course also means the refinance isn’t as big of a capital event, so the return of initial capital likely won’t be as has as 80%. If you were to use the same structure, it would look like this:

      1. Investors put in equity and you acquire the property.
      2. You reposition the property, do a refi or supplemental loan, and return some of the original capital.
      3. During the entire time you have the property, you send out distribution checks to the investors for their portion of the operating profits. It’s usually best to have a preferred return (meaning investors get their profit before you as the sponsor do).
      4. Investors (and you as sponsor) get an additional distribution check from the profit upon selling the property.
      5. Most investors seem to be looking for cash-on-cash returns in the high single digits to low teens and/or a IRR (internal rate of return) of roughly 15%. Others I have met look to have their money double in roughly 5 years. Those are reasonable targets to hit with apartments.

      I hope this helps. Our deals have all been done privately with people I have connected with over the years, which means the SEC doesn’t allow me to discuss actual returns publicly. Believe me I wish I could though!

      Andrew

      • Elizabeth Blazina

        Thanks Andrew! and yes this does help. Good to note about the SEC. I wish you could too:)

        Is there a book that you recommend and /or found instrumental for assessing ” the numbers” involved in the acquisition of apartment buildings.. Essentially helping you weed out the lemons from the potential cash cows? Other than those mentioned in the Podcast?

        Liz

        • Andrew Cushman

          Liz,

          There might be a book out there for that but I am not aware of it. You might want to poke around the BP forums, Google, or Amazon.com. I use a rather extensive spreadsheet I originally got from my mentor and have modified over the years for underwriting.

          Andrew

        • Saj Shah

          Elizabeth,

          I highly suggest you take a look at Michael Blank and The Syndicated Deal Analyzer.

          He has done a podcast on BP, and his website offers this spreadsheet. I believe it costs roughly $100, but it includes the analyzer spreadsheet and training videos on how to use it and how to put a deal package together in order to present to possible investors.

          I’ve done a few deals, and am currently raising money for my next deal, all based on the info I learned from Michael’s Syndicated Deal Analyzer..

          I don’t receive any compensation or anything like that (I doubt Michael even knows I am referring him right now), but since the tool has helped me so much, I thought it’s only fair to tell more people about it

  2. david brown

    Great podcast…I’m a recovering professional podcast listener and self help researcher (and a RE agent!). I total agree with Andrew’s approach to go out and find (and Vet) a mentor who is compatible with your style or approach. Then PAY them to teach you what you are missing. Its got to speed up your investing. (I am looking for a mentor now).
    Thanks Andrew and Josh and Brandon for another great podcast/interview!

    Dave

  3. Doug Compton

    WOW! Not only did Andrew take action but he never gave up. 4575 calls? I would have assumed (obviously incorrectly) that I was doing something wrong and given up long before then. But it proves that persistence pays. And if Andrew hadn’t made call 4576 he may still be a chemical engineer not a highly successful real estate investor. Everyone can learn from this podcast. I am going back and listening a second time because there were so many nuggets in here I can use as an upstart investor.

  4. Jonathan Makovsky

    Andrew, think of it this way it took you less than half the tries to find a real estate deal than it took Albert Einstein to invent the lightbulb (10K).

    I really enjoyed hearing your journey and the podcast – it was very real. Keep on doing great things and hope to hear about your next set of deals.

  5. Samuel Kesten

    Andrew, thank you for the excellent podcast!

    I’ve been listening to biggerpockets for the last few months, but haven’t yet set hard goals or participated in the forums. Your podcast was the real kick in the pants I needed to set deadlines and daily action items for myself.

    Your approach really resonated with me. I have a significant physical disability that makes consistent work difficult, sometimes I’m healthy and sometimes I’m not. When I’m healthy I’ll work anyone under the table, when I’m sick I watch netflix like it’s my job. Your persistence and offset timelines seems like an approach I could replicate, if not the consistency.

    Also, I took your advice and set three daily tasks real estate tasks that I now have to complete before I leave work (self employed): (1) participate in BP; (2) vet three properties; (3) learn something. I also set a deadline of June to start making offers on my first investment property.

    Thanks again,
    Sam

    • Andrew Cushman

      Sam,

      That is awesome and I’m glad to hear you are taking charge of your life regardless of your challenges! I love the three goals you set and you are headed in the right direction. If you have any specific questions feel free to message me on BP.

      Also check out 1Life Fully Lived. One of their main goals is to help people dream what they want their life to be like and then make the plan and set the goals to make it happen. It’s a great community and you will likely find some like minded people, and perhaps an accountability partner. That last thing can be a huge factor in your success, so I would recommend you do that regardless (find someone local, or on BP, etc.).

      Andrew

      • Samuel Kesten

        Andrew,

        Thank you for the reply. I’m with you on having an accountability partner, I’ll look into finding one on BP or 1Life, my group of friends are generally a bit too laid back for staying on top of anything professional.

        After work I found out the house next to the one I grew up in is in foreclosure. I went and chatted with the neighbors and will hopefully be in touch with the current homeowners soon. It’s in a fantastic location, top notch schools, 3 bed 2 bath, and it’s in serious need of a mostly cosmetic rehab (current owner tried/ failed a bunch of projects).

        Thanks again,
        Sam

  6. Myo Thein

    Great podcast, Andrew! And what a persistence. I am wondering how did you get started about which location where you want to invest in for your apartment deals? Did you do research on locations or did you start from people (referral) you know you can trust like brokers?

    Thanks in advance!
    Myo

    • Andrew Cushman

      Myo,

      Frankly, in the beginning I just went where I ended up getting a good deal!

      Now I do a fair amount of research to choose our markets. Once i determine those markets, i then start building my network in those markets – brokers, managers, contractors, etc. Start with the high volume people, keep getting referrals, and branch out from there.

      Andrew

      • gurinder singh

        Hi Andrew, great podcast and great job by Brandon and josh for asking really good questions.

        Please provide details how did you decided that Georgia is the state where you can invest in millions. Why not other states apart from Florida and Texas ? Thanks.

        • Andrew Cushman

          Gurinder,

          There are other states and metros that are good places to invest outside of the areas I invest of course, however part of it comes down to a business decision about how much ground to cover. So, I’ve decided to become an expert in certain areas rather than cover too much ground that I end up not knowing well.

          For the states you mentioned, primarily I like the long term demographic trends. People – and jobs – are generally moving from northern states to southern states. GA in particular is very business friendly, as evidenced by the large number of recent corporate relocations to Altanta. Also, as more and more commerce moves online, warehouse and distribution is booming, and this favors GA and the southeastern ports.

          Andrew

  7. Jeremy Jones

    Hey Andrew, I enjoyed your podcast very much. My experience is in partnering with my brother to buy multi-family rental properties near Seattle, WA, which we own 50/50. I’m looking toward syndication and I appreciated all the details you shared. Keep up the great work

  8. Anish Patel

    Hi Andrew, enjoyed the podcast. Two questions. You mentioned you had a good lawyer that helps with the syndication, could you share that contact and is there a good rule of thumb as to how much the syndication setup costs? Second Question, any good recommendations on resources for doing apartment complex due diligence.
    Thanks!

    • Andrew Cushman

      Anish,

      Here is the website for the attorney I have used for probably 8 properties or so. He is fairly well known and in my opinion does a great job:

      http://www.syndicationlawyers.com/about-us/gene-trowbridge-esq/

      Cost can depend on the size of the raise but plan for $10k-$15k for the docs. I’ve seen it as high as $30k with some other attorneys.

      There’s a lot that goes into the due diligence process. A good place to start on a macro level are the annual reports/forecasts put out by Berkadia and Marcus & Millichap that give a brief synopsis of about 50 metro areas. The reports can be obtained for free from the website or a broker.

      Andrew

  9. Brian L.

    Good interview. I remember that preforclosure program (a.mcgee I assume). I currently manage/own lot single family but I really like idea of large multifamily. I live in area where cap rates are sub-5% even for mediocre building because everyone want apartment buildings it seems(Most single family barely meet the 1% gross rent rule where I am). I looked through all your properties on your site and like your method of finding c/low B buildings and doing value add/forced appreciation to them if area can accomodate it as everyone (especially institutional) have been focused on High B/A class…. I cant believe how cheap midwest/south is vs. West coast but nervous understanding and taking on a large multifamily out of state especially if needs work and having good property manager. How did you come up with your process initially?

    • Andrew Cushman

      Brian,

      Yes, it was A. McGee 🙂

      When I started I didn’t have a real process and kind of figured it out as I went. What I would do now though is pick some good MSA’s to work in, use loopnet to figure out who the high volume brokers are, and start talking to them about deals and who they would recommend for management, contractors, etc. Also, part of the reason my first deal was 92 units was because a property that size will support full-time onsite management, which you absolutely want.

      Andrew

  10. Tyler Sherman

    Andrew:
    Having been out of the process industry for over a decade, do you find yourself missing any of that atmosphere? The ability to work on advanced and expensive equipment; solving highly technical problems? Is that engineering hunger fulfilled with building the systems and scoping, implementing, and sustaining the streamlined processes you eluded to in the podcast? I wonder if after 7 1/2 years those interests were satisfied and it was more easy to move on from that career.

    Being a recent Chemical Engineering graduate, this episode heavily resonated with me. Having a starting salary of 70k fresh out of college in a market like Phoenix is a great way to build up capital to move on my first deal this year. I loved the reference to “steady state.” I have definitely noticed I apply that ChemE vocab to explain Real Estate phenomena.

    Looking forward to hearing from ya!

    • Andrew Cushman

      Tyler,

      Congrats on the degree and what sounds like a great starting job!

      While it was fun to work on and in some cases build multi-million dollar machines and systems, I do not miss it one bit. The freedom afforded by real estate is far more exhilarating, not to mention the thrill of putting together an awesome deal. Of course, for me engineering was always meant to be just a place holder until I figured out my true calling, which turned out to be apartments! But a lot of the principals from chem-e apply surprisingly well to RE.

      Now that you have a great apying job – keep your expenses low like you are still in college and invest all that extra money!

      Andrew

  11. Colin McCarthy

    This podcast was brilliant…just what I needed to hear. I’m a civil engineer, 8-5/40 per week and if I could map out a journey that spelled success for myself it would follow your path closely. I’m abroad at the moment working for the US Government and will return home with my family in 2019…I am saving now and educating myself so I can start flipping, learn, succeed and replicate. Thanks for a great podcast.

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