Latest / The Academy Presents podcast / Maximizing Multifamily Value: Creative Income Strategies and more with Jason Yarusi

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Maximizing Multifamily Value: Creative Income Strategies and more with Jason Yarusi · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  Academy Presents Real Estate Investing Rocks,
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  your piece of that pie. Are you new? Are you
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  dreamed of all through real estate investing.
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  You're already taking the first step. just by
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  joining us here today. Yeah I know and that's
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  awesome and I know one of the things that we've
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  looked at too is adding in like vending in the
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  laundry area and not like sodas and snacks. We're
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  talking like the laundry detergent, dryer sheets,
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  bleach. We even thought about adding cleaning
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  supplies and doing a vending machine like that
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  and having our 15 year old run the company for
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  the vending machines. So it'd be experience for
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  her. because we're the ones that are on site.
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  We are the boots in the ground of our team and
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  so it'd be a way to give our our child experience
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  in a business setting with something that could
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  potentially be another income driver for the
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  property because we're we're not of that mindset
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  of the only way you make money is to bump rents
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  because I don't think that's the only way to
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  increase value of your property. I think there's
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  lots of other methodologies and if you're you're
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  focusing mainly on bumping rents you're you can
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  be hurting some of your residents, which is,
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  I think of my residents as my past students,
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  which is, I probably shouldn't think of them
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  that way, but I think of the apartments as housing
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  some of my past students, and I wouldn't want
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  to hurt those families by just. blanket rent
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  mumping. Well, you're absolutely right. If you
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  think about it here, what is the tenant's first
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  worry when a new new buyer comes on? Oh, they're
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  going to increase my rents, right? But if you
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  can create value in the property, which has worked
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  very well for us and make it a better place to
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  live, then when you do that rental increase,
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  it is something that can be justified because
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  listen, like, this was not the ideal place for
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  you to live before. Now, you're creating value
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  for you for the property. So for us to raise
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  rents, it's because there's been a cost for us
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  to do so. And so it's going to be more costly,
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  right? And so It's not just a, hey, we're here,
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  same thing, same old nature, give you more money.
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  Yeah. Now, and we've got a, the first property
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  was really a class B, practically turnkey. Second
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  property, definitely class C, 62 build, so older
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  vintage, and it has a lot of room for growth.
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  But we're looking at adding in security cameras,
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  making sure that the laundry facility is up to
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  par. Because we already think there's people
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  coming in and using the facility that are offsite.
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  So we want to make sure that number one, they
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  have a reason to not trash trash that area. Number
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  two, like you said, to make sure we're covered
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  because the umbrella covers that you're going
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  to get for your property covers like what happens
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  in your property to your residence. But I don't
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  know if it covers the outside outside usage.
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  So that's definitely one of those things you
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  have to consider. I was also thinking when you
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  said like. is there anything else that could
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  be turned into rentable space? So I know that
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  in in our first property we've got a big clubhouse
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  area and I'm wondering if it wouldn't be smarter
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  to have what do they call those movable offices
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  where they like the office moves to whatever
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  unit happens to be empty at that point in time
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  and so the office will move and creating another
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  unit out of what's considered the office right
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  now. because there's like a front area that could
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  probably be like the living area and then the
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  big area that could be like a studio kind of
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  setup because there's a kitchen in that area
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  and then there's like a big room right off of
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  the pool. Interesting. I don't know if if it
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  would make sense to make that a rentable area.
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  You may want to, the only hard thing here is
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  for the mailman and for your tenants, the unpredictability
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  of where the unit is may cause disruption. And
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  so I would see if you could just reshape the,
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  we'll say the common area where you can make
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  a smaller office and get an extra unit. Cause
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  then at least it stays in one location. Okay.
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  So we could potentially move or make the first
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  smaller piece, like put in like a solid wall.
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  and make that smaller piece the office and then
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  turn the back piece that has the studio and it
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  has a rest hold on hey Jason on the common club
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  area at thousand mary is there a restroom in
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  that area so we might have to figure out a way
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  to add in a restroom into that but i think it
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  could be made into a studio apartment Yeah well
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  if you're gonna have the office you'll need two
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  restrooms so as long as you can get to the point
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  here just so you have one for the office as well
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  then you'll be in a really awesome spot. Yeah
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  so we were lucky my husband came in here. That's
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  good. And then at our other property like the
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  office area it has like a small area but it has
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  like a lot of windows that go out to the pool.
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  It would be harder to turn into a usable space
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  because just the square footage is so much smaller.
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  yeah cool it could potentially be moved in also
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  as additional rental space you get out there
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  with a contractor because you think about it
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  like i don't know what it would it cost you for
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  a unit when you brought it I'm so thousand Mary
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  was like 70 ,000 500 and got it. So you think
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  about that just just easy enough. Like if you
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  can come somewhere in that Delta there, like
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  say it's $30 ,000, right? Well, if you just picked
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  up and it's not easy clean math, but you picked
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  up about 40 K in additional upside potential,
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  not not even including the revenue, right? Because
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  you've added an additional additional unit there,
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  which is amazing. Yeah, we've also looked at.
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  Excuse me. We've looked at building another building.
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  The second property doesn't have the space, but
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  the first property over 1000 Mary has a lot of
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  green space in front. And we've talked about
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  potentially putting in just a commercial building
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  like a triple net lease building, maybe storage.
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  And then we talked about putting a whole nother
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  building in that front area, maybe eight units.
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  And doing a secondary construction loan. and
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  adding in up in front of that there's thousand
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  mary has a lot of options as far as what we could
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  do construction wise yeah you want to be careful
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  what you're looking at your conditions you're
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  alone to see what's allowed and you make sure
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  it doesn't take out the valuation for your loan
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  to value of what's included in that land also
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  your cost to build At times, right? So the one
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  where we showed you the land here with the pergola
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  and the pool, right? We have two additional acres
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  here that we can build on. But the cost to build
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  does not make it where it makes sense for us
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  to do that. in a nature where getting getting
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  those units back online are going to benefit
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  the property in a way that the the just the sale
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  or the profit that we can make in the building
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  now it's not going to create enough value for
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  us to do so so make sure right so if it's you're
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  going to get 72 ,000 a unit and ideally it's
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  going to cost you you know 130k a unit are you
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  going to be brought down for those units because
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  where you may be able to sell those units at
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  170, but because they're next to the 72K unit,
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  the delta is, is it going to bring down your
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  overall property valuation and squeeze your margins?
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  Oh, wow. Yeah, I hadn't thought about it that
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  way. We were just thinking about the income potential.
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  Yeah, it depends. If it's long -term hold, then
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  it doesn't matter on the future sale. But if
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  it's a shorter -term hold there, it might not
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  have the impact that you want. Yeah. When I think
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  part of that too is, I mean, we come from the
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  residential world. We're, we're buy and hold
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  people. Um, so it's, and, and for those of you
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  out there that are residential moving into commercial
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  is a totally different way of thinking about
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  things. Like you just heard me, I was like, well,
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  we come from the buy and hold world. So when
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  I was considering what can we build on that square
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  of property, I was only considering the income.
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  I wasn't really considering income to cost. Yeah.
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  But if you look forward here, if you're going
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  to hold it for forever, then it's just a cash
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  and cash play. So it's our return on our capital.
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  And how long does it take us to get our capital
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  expended out? And what's our yearly gross? So
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  it really comes down to business plan. If the
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  business plan is one way, then you can treat
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  it one way. If it's another way, then you have
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  to look at it proactively the other way. Yeah,
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  well, that's how we thought about when we put
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  in the covered parking. It was, how many years
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  does it take to pay it off? Um, so listening
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  to our GP team, I understood that we were, while
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  we were doing it that way, but I hadn't thought
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  about the full new build in the front being that
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  we should be considering it and thinking about
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  it the same way. Yeah. Wow. You know, Jason,
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  thank you for being here and just talking to
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  us about your experiences and your knowledge.
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  And you definitely got my mind thinking, cause
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  I wouldn't even, I wouldn't even considering
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  it that way before I wasn't. thinking, hey, well,
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  how many years is it gonna take to pay that off?
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  What's it gonna do to the value of our other
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  units? Correct. And some of that science and
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  some of that's art, right? Because in that fact,
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  it's not gonna give it like a true read, but
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  it's gonna be nature and perception. and to make
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  sure the nature of perception. So if you put
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  in brand new buildings up there, you're going
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  to get that kind of tenant because right behind
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  them is a different kind of tenant. So you have
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  to think of all sides of it. Does it fit the
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  neighborhood? Does a brand new building fit the
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  neighborhood? So a lot of those things can give
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  you a true indication of what's going to be best
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  for your project, where sometimes there's lots
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  of things that could sound good, but ideally,
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  is it the best use of our time too? Yeah. Well,
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  I mean, it's definitely what I would consider
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  a class B neighborhood for that area. but putting
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  in brand new stuff is theoretically class A,
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  but it would only be garnering class B prices.
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  Yeah. Well, that's, you know what it is. It's
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  like you can, yeah, you know, you could have
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  a class D neighborhood and put a class A building,
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  right? And so ideally it's not going to have
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  the value of the impact until the rest of the
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  area comes around it and has the support of it.
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  Gosh, absolutely. Man, thank you so much. You
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  gave me a perspective on it. Maybe not the perspective
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  I wanted, but definitely perspective that was
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  necessary. Well, hopefully it will save you time
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  and get you the value you want one way or the
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  other. Well, and it will. And that's the beauty
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  of experience. You know, Jason and I have been
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  in residential for 20 years, but we've been in
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  multifamily for like four or five. And we were
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  passive investors before we ever went active.
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  So even just going passive to active is totally
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  different. because, I mean, you learn as a passive
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  investor, but when you're active, holy night,
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  you know, it's like, hold onto your pants because
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  it's wild. Um, and, and we, we had the benefit
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  of, we were the lead sponsors in our first deal.
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  Um, so we have been, what we learned was insane.
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  But if you have any questions, you want to talk
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  to Jason about asset management. I am not your
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  asset management person. I have a hard time with
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  those hard conversations. So you probably don't
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  want to talk to me about asset management. But
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  Jason gave us his contact info. So if you want
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  to reach out to him, I'm sure he's open to that.
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  And he's got other employees that could help
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  out too. So again, Jason, thank you so much.
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  I'm so glad you and Peely are part of our circle.
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  We're excited to be here too. So you guys are
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  doing something awesome here. So congrats. Can't
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  wait to see the results of this one around. Awesome.
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  Thank you so much. And guys, hang around because
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  there is more to come. So until next time.