Latest / Own More Doors / #73 How I Turned $200K Into $572K—Then Traded Up to a 10-Unit Apartment Building

Transcript

#73 How I Turned $200K Into $572K—Then Traded Up to a 10-Unit Apartment Building · Own More Doors

• 0:00
  SPEAKER_00: I'm going to show you how I took a$200,000 investment and in six years I grew it into$572,000.
• 0:06
  SPEAKER_00: I went from a four unit and I'm about to buy a 10-unit building.
• 0:09
  SPEAKER_00: Stay tuned while I show you how to build wealth, cash flow, and own more doors.
• 0:15
  SPEAKER_00: Hey, I'm Juan Weezar.
• 0:16
  SPEAKER_00: Thanks for tuning in today.
• 0:17
  SPEAKER_00: So my channel since the very beginning, I've been doing this for close to seven years now, is about dedicating teaching people how to build wealth through apartment ownership.
• 0:24
  SPEAKER_00: Okay.
• 0:25
  SPEAKER_00: And some people call it multifamily, that's what I call it.
• 0:27
  SPEAKER_00: Some people call it house hack, which I already told you, I hate that term, but apartment ownership, um, housing provider, all of those are good with me.
• 0:35
  SPEAKER_00: So I'm gonna show you guys a few things.
• 0:37
  SPEAKER_00: Back in 2020, November of 2020, I bought a four-unit building with two of my friends, okay?
• 0:43
  SPEAKER_00: And we bought it for$1 million.
• 0:48
  SPEAKER_00: Now here's what I want you to know.
• 0:49
  SPEAKER_00: At that moment, that was a lot of money.
• 0:52
  SPEAKER_00: And the and the income that that property generated wasn't positive cash flow, but I believed in the future.
• 0:59
  SPEAKER_00: And so here's the beautiful things about owning real estate is that the income of today is not the income of tomorrow.
• 1:05
  SPEAKER_00: I could have looked at this investment back then and said, why would I buy it?
• 1:09
  SPEAKER_00: The income is too low.
• 1:10
  SPEAKER_00: The numbers aren't great, but I knew more than that.
• 1:14
  SPEAKER_00: My mentors have taught me better than that.
• 1:16
  SPEAKER_00: They taught me, hey, this building is just being underutilized.
• 1:20
  SPEAKER_00: The manager wasn't managing it properly.
• 1:22
  SPEAKER_00: And so what did we do?
• 1:24
  SPEAKER_00: We bought it, we did some painting, we did some remodel inside, and we brought in a better product.
• 1:29
  SPEAKER_00: We delivered a better product.
• 1:31
  SPEAKER_00: And within a short period of time, 2026, we just sold it for 1,325,000.
• 1:37
  SPEAKER_00: Okay.
• 1:38
  SPEAKER_00: Here's what I want you guys to know.
• 1:41
  SPEAKER_00: That investment that I had started off at 200,000.
• 1:44
  SPEAKER_00: That was the initial investment, and it has since grown in six years.
• 1:49
  SPEAKER_00: This is what we've netted from the property:$572,000.
• 1:53
  SPEAKER_00: Okay.
• 1:54
  SPEAKER_00: So now I have this much in what's known within an exchange accommodator.
• 2:00
  SPEAKER_00: So we've already sold the property.
• 2:02
  SPEAKER_00: Six years.
• 2:03
  SPEAKER_00: I think most of you would certainly do the investment if this was a guarantee.
• 2:07
  SPEAKER_00: Now, guys, when I bought this, did I realize this is what was going to happen?
• 2:11
  SPEAKER_00: Probably not.
• 2:12
  SPEAKER_00: Did I believe it was a good investment and that I was gonna, I was, I was gonna look back and say, I'm glad I took the risk at that time.
• 2:20
  SPEAKER_00: Anyone who is an investor, anyone who's out there buying properties, they're risk takers.
• 2:26
  SPEAKER_00: And every time that I meet someone who does this over and over again, I commend them.
• 2:30
  SPEAKER_00: I say kudos because I know what it takes.
• 2:32
  SPEAKER_00: And sometimes people say things like, I got lucky.
• 2:34
  SPEAKER_00: You didn't get lucky, you took risk and you put yourself in a situation where you're risking your money and now you have to do some work.
• 2:42
  SPEAKER_00: And so, anyhow, now we're in a position where I have$572,000 that we made from that property.
• 2:49
  SPEAKER_00: And now I've decided to buy a 10-unit building, and I'm gonna show you guys why.
• 2:54
  SPEAKER_00: Okay, so one of the concerns that I always hear from a lot of my clients is they were in the same situation that I was.
• 3:00
  SPEAKER_00: So if you're an owner of an apartment building, right now there's a lot of security.
• 3:03
  SPEAKER_00: So with that four-unit building that we had, there was a lot of security.
• 3:07
  SPEAKER_00: We had an interest rate of 3.875.
• 3:13
  SPEAKER_00: That's security.
• 3:14
  SPEAKER_00: Why would I mess with this?
• 3:16
  SPEAKER_00: On top of that, we were making over$4,000 in cash flow.
• 3:24
  SPEAKER_00: Now there's going to be different strategies in investing.
• 3:26
  SPEAKER_00: A lot of people want to get to this point and then they check it and they say, I'm done, I did it.
• 3:32
  SPEAKER_00: Then there was equity.
• 3:33
  SPEAKER_00: I just showed you that we went from$200,000 to$572,000.
• 3:38
  SPEAKER_00: So from an appreciation perspective, we did that as well.
• 3:42
  SPEAKER_00: On top of that, our tenant base was great.
• 3:46
  SPEAKER_00: I personally handpicked every single tenant that was there.
• 3:49
  SPEAKER_00: They respected me, I respected them.
• 3:51
  SPEAKER_00: I was a good housing provider.
• 3:53
  SPEAKER_00: Anything broke, we took care of it.
• 3:55
  SPEAKER_00: So everything was good.
• 3:56
  SPEAKER_00: So even from a management perspective, everything was fine.
• 4:01
  SPEAKER_00: Now, why would I go and turn this investment upside down and sell it, get rid of the interest rate, get rid of the cash flow to take on more risk.
• 4:12
  SPEAKER_00: Why would I do that?
• 4:14
  SPEAKER_00: Well, I'm gonna tell you why, because you might be thinking this yourself.
• 4:18
  SPEAKER_00: The reason why I wanted to do this was I had already maximized this property.
• 4:24
  SPEAKER_00: I had already stabilized this property.
• 4:27
  SPEAKER_00: If you've been watching my channel, you know that in the three and four unit market here in Southern California, it's still very strong.
• 4:34
  SPEAKER_00: They have not been hit with a massive discount or price reductions in the four-unit building.
• 4:39
  SPEAKER_00: So this is the perfect time that you could sell an investment condo, an investment house, a duplex, a triplex, or a fourplex.
• 4:48
  SPEAKER_00: You could still sell it at the top of the market.
• 4:51
  SPEAKER_00: And on the flip side, you could buy an eight-unit, a 10 unit at the bottom of the market.
• 4:57
  SPEAKER_00: Okay.
• 4:57
  SPEAKER_00: So very rarely do you get to sell at the top and buy at the bottom.
• 5:01
  SPEAKER_00: And that's why I've been trying to like stress to everyone, anyone who will listen to me, this is what you should be doing.
• 5:06
  SPEAKER_00: Whether you're using me here at Sage Real Estate or someone else who knows how to do this, this is what you should be doing.
• 5:13
  SPEAKER_00: So it's risky because I had to convince my two buddies, hey, long, we got to say goodbye to that interest rate because our new interest rate is probably gonna be close to double.
• 5:23
  SPEAKER_00: The cash flow that may not be repeatable at first, okay.
• 5:29
  SPEAKER_00: The appreciation, now that's where I that's where I'm gonna show them, guys, there's more appreciation potential with this new building because there's more levers to pull on the property.
• 5:39
  SPEAKER_00: And from a management perspective, well, listen, there's gonna be risk.
• 5:42
  SPEAKER_00: I don't know what we're stepping into.
• 5:44
  SPEAKER_00: How are the tenants?
• 5:45
  SPEAKER_00: I didn't select those 10 tenants.
• 5:47
  SPEAKER_00: And you know, a lot of times when there's a new owner, there's tenants want to move or they don't open up or they have something against the new owner.
• 5:54
  SPEAKER_00: So there's some risk involved.
• 5:56
  SPEAKER_00: I'm gonna show you guys the numbers and show you guys why I decided to do this.
• 5:59
  SPEAKER_00: So here are the numbers.
• 6:01
  SPEAKER_00: When I sold the four-unit building, and it's on San Antonio Avenue, just right outside of it's in Bigsby Knowles, but just on the border of Bigsby Knowles.
• 6:08
  SPEAKER_00: This is a neighborhood in Long Beach.
• 6:10
  SPEAKER_00: When I sold it, it was$300 per square foot.
• 6:14
  SPEAKER_00: Okay, that's what I sold.
• 6:17
  SPEAKER_00: I'm buying the 10-unit building now at$295 a square foot.
• 6:25
  SPEAKER_00: So essentially, I'm winning in the square foot comparison.
• 6:31
  SPEAKER_00: It doesn't stop there.
• 6:33
  SPEAKER_00: From a price per door, a price per unit, the fourplex.
• 6:38
  SPEAKER_00: We sold it, and that was sold at$475,000 a unit.
• 6:44
  SPEAKER_00: So let's go four unit and ten unit.
• 6:51
  SPEAKER_00: My price per door?
• 6:54
  SPEAKER_00: So look at that.
• 6:56
  SPEAKER_00: I'm selling price per unit$475,000, and I'm acquiring 10 units, but I'm only paying$177,000.
• 7:05
  SPEAKER_00: But here's where it gets good.
• 7:06
  SPEAKER_00: If you know the market, if you're in this business, you have to know the market, so you have to do your homework, okay?
• 7:11
  SPEAKER_00: Or be working with someone who knows this.
• 7:14
  SPEAKER_00: The average price per unit in Long Beach is not$177,000.
• 7:18
  SPEAKER_00: It's not, it's above$230,000.
• 7:22
  SPEAKER_00: So what I want to show you is I already know that I'm getting a discount.
• 7:26
  SPEAKER_00: If I stopped here, I'd be fine.
• 7:29
  SPEAKER_00: Now I'm not just gonna stop you, I'm gonna show you a few other numbers.
• 7:32
  SPEAKER_00: So from a price per square foot, from a price per door, I'm gonna tell you that I'm ahead.
• 7:38
  SPEAKER_00: Let's keep going.
• 7:38
  SPEAKER_00: From a gross rent multiplier, so what we call GRM, when we sold, when we sold the the four-unit building, we sold at a 12.71 gross rent multiplier.
• 7:56
  SPEAKER_00: Typically, if you're a buyer, if you're a buyer, what you want to do is you want to buy at a lower gross rent multiplier.
• 8:03
  SPEAKER_00: If you're a seller, you want to sell at the top, but ultimately the market's gonna decide where it's gonna trade.
• 8:08
  SPEAKER_00: So we were able to get 12.71.
• 8:10
  SPEAKER_00: So from a seller perspective, this is good.
• 8:13
  SPEAKER_00: And from the buying perspective, I'm at 10.63 GRM.
• 8:18
  SPEAKER_00: So even from a gross rent multiplier perspective, I'm winning, right?
• 8:23
  SPEAKER_00: Doesn't stop there.
• 8:24
  SPEAKER_00: Let's talk about cap rates.
• 8:25
  SPEAKER_00: Cap rate is another way to say essentially rate of return, but it's a ratio between net operating income and the sales price.
• 8:32
  SPEAKER_00: I've done a lot of videos on cap rates, so make sure you guys watch those.
• 8:35
  SPEAKER_00: I've done two of them where I do a deep dive on that.
• 8:38
  SPEAKER_00: So from a cap rate perspective, this property sold at 5.4 cap rate, and the new one that I'm buying is 5.7 cap, okay?
• 8:47
  SPEAKER_00: So on all four benchmarks, measurements, the 10-unit building is better.
• 8:56
  SPEAKER_00: Doesn't stop there.
• 8:58
  SPEAKER_00: The income, the income on the fourplex, we were getting$104,000 a year, and the income on the 10 unit, we're gonna be it's it's$170,000 gross income.
• 9:12
  SPEAKER_00: Okay.
• 9:13
  SPEAKER_00: Actually, the income is$60, uh,$165,000.
• 9:15
  SPEAKER_00: So from all important metrics, I'm getting a much better deal on a 10-unit.
• 9:20
  SPEAKER_00: What's the catch?
• 9:21
  SPEAKER_00: Well, there's a couple things.
• 9:22
  SPEAKER_00: The interest rate's gonna be much higher.
• 9:24
  SPEAKER_00: So the cash flow at first is not gonna be where it needs to be, but that's perfectly fine.
• 9:29
  SPEAKER_00: That doesn't need, again, this the same reason why I bought the four unit when it wasn't being maximized, is the same reason I'm buying the 10-unit building.
• 9:39
  SPEAKER_00: You know, Cody in our office, who's another broker, he talks about levers.
• 9:42
  SPEAKER_00: As I look at the 10-unit building, I see opportunity.
• 9:45
  SPEAKER_00: Right now it's it has eight units that are residential that are original condition.
• 9:51
  SPEAKER_00: So what does that mean?
• 9:52
  SPEAKER_00: That means that there's potential for me, as tenants move out, I could remodel the kitchens, the bathrooms, and establish a new market rent, being what I call just a better housing provider.
• 10:03
  SPEAKER_00: So that's one of the levers that I can pull.
• 10:05
  SPEAKER_00: The other lever that I could pull that I'm really excited about, there's two commercial units, small office spaces.
• 10:10
  SPEAKER_00: Right now, the city of Long Beach most likely will allow us to convert those into actual residential units, which is a huge plus.
• 10:18
  SPEAKER_00: The income being that that those units are bringing in is significantly low.
• 10:22
  SPEAKER_00: And so there's lots of upside in that type of situation.
• 10:25
  SPEAKER_00: The other part that I like is that the owner has already gone through some major renovations.
• 10:30
  SPEAKER_00: They redid all the electrical and the roof.
• 10:33
  SPEAKER_00: Now, I don't know the plumbing because on Monday is when I have the inspection, but I will be looking at that.
• 10:37
  SPEAKER_00: So if you're like me and you're currently sitting on a property where you're happy with the property, you've done some improvements, you drive by it, you're excited to own it, you have good tenants, good cash flow.
• 10:47
  SPEAKER_00: Is that property working hard enough for you?
• 10:50
  SPEAKER_00: You know, a lot of things that I've spoken about in the past is about lazy money, is how much income is being derived by the by the investment that you originally put into the property.
• 10:59
  SPEAKER_00: But we have to do a little more.
• 11:01
  SPEAKER_00: It's not just the original money.
• 11:02
  SPEAKER_00: Like in my situation, I could look at my fourplex, the one that we just sold, and say, you know what?
• 11:07
  SPEAKER_00: I start off with 200,000, therefore it's bringing in a good amount of income now.
• 11:11
  SPEAKER_00: But that's wrong.
• 11:13
  SPEAKER_00: You need to add the new equity that you've built through the years.
• 11:16
  SPEAKER_00: In our case, now it had more than doubled.
• 11:19
  SPEAKER_00: We were now at 572,000, not 200,000.
• 11:23
  SPEAKER_00: And that's the analysis.
• 11:24
  SPEAKER_00: Is my money working hard enough?
• 11:26
  SPEAKER_00: And we believe that it will be working hard enough on the 10-unit building.
• 11:31
  SPEAKER_00: So today we're in the office, but pretty soon, once once we get into um, we're now into escrow on this new property.
• 11:38
  SPEAKER_00: I'm gonna give you guys a behind-the-scene tours and I'm gonna show you what we're gonna do from an investment perspective so that you could learn from us.
• 11:44
  SPEAKER_00: So if you're in a situation where you currently have a property and maybe in your mind it's performing well, and you're and you feel like you're handcuffed because the because the interest rate's really low or because you're making tremendous cash flow, there is more to that equation than just, hey, that one's doing well, I would never touch it.
• 12:03
  SPEAKER_00: What I want you to think of is how much equity is is in that property and what can we do with that equity.
• 12:10
  SPEAKER_00: So there you have it.
• 12:11
  SPEAKER_00: If you're someone who's in this situation, please feel free to reach out to me.
• 12:15
  SPEAKER_00: I would love to let you know the return that you're currently getting on your property, so your return on equity, and what we could do if we were to use that same equity to buy a bigger asset.
• 12:25
  SPEAKER_00: Make sure to like, comment, and subscribe.
• 12:27
  SPEAKER_00: Until next time.