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Creating Value in Multifamily Real Estate Without Major Renovations 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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  and I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  new to this and you just don't know where to
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  start? It's okay. Are you someone that has invested,
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  but you feel stuck, you feel like you've lost
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  momentum, you don't know where to really head
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  from here? Are you a seasoned real estate investor
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  who is doing great but maybe you just want to
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  hone a few skills here and there? This is the
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  place for you. The Academy Presents Real Estate
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  Investing Rocks podcast will connect you with
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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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. So some of the things
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  we've done before, conservation packages by changing
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  out toilets, faucets into the aerators, it's
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  able to have a substantial impact, right? So
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  here's one estimated investment of 27 ,000, estimated
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  annual utility savings is striking 22 ,000. So
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  almost 80 % saved or a little over 80 % saved
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  in year one, estimated property value increase.
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  based on the cap rate for this market could be
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  as high as giving that to the bottom line, an
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  increase in valuation of almost $350 ,000 just
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  by doing things that are now changing the operations
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  of the property, but not having an effect onto
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  the tenants, right? So if you can look at this,
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  this is a great way that you can come in. and
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  actually add value. Now, you know, pro tip here,
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  make sure that you're not going to add on low
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  flow toilets on a very old property that may
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  have a withered sewer lines, because you may
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  do one thing just to create other things that
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  will be a problem for you in the future, right?
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  So if you have a very old building, a sewer lines
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  that are not up to date, you know, could be something
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  to affect that you may find that you're creating
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  a result that you want on the front end, however,
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  is going to have ramifications on the back ends.
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  So again, some of these are things AC tune up.
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  winterizing right, you can go in there and do
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  everything from winterizing could be this of
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  just a lot of your utilities is the tenants are
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  not going to tell you if there's no sweeps on
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  all the doors and so a lot of the heat is going
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  out underneath the door, or the windows are not
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  to the R value and the R value is gone so the
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  heat is going out the window or you don't have
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  the attic insulated so you're having a lot of
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  that energy being lost through the roof right
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  so there's a lot of easy things you can do here
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  to create value that does not have an effect
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  on it. and actually provides them more comfort
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  in the long run by doing small things like this
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  that can also add a ton of value to your property.
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  So here's some things that we did to add to the
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  user experience, right? So we had a pool that
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  had been down for two years, took in this property,
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  put out all new pool furniture, got hit on with
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  a new pool pump. We added out this pergola. It
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  also has a grilling station here to get a lot
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  of tins to bring more community to the property
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  because we basically, of 93 units here, changed
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  over the entire property. We've actually turned
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  92 of 93 units, complete makeover to the entire
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  property. This was a property with weekly rentals.
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  which anybody did not have to have any background
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  check or any of that could come to this property.
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  We've changed this property dramatically. The
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  overall change out in lease rate is now about
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  $525 from where we started to where we are today.
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  So a massive improvement in income, but also
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  a whole different change to the quality of the
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  tenant. And so the dog park, just a lot of things
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  to bring community to this property. So these
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  things, right, although there are costs to us,
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  right, you can't really perceive the value, create
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  the community effect to where we are trying.
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  to go with the nature and feeling of the property.
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  Another one here of value view apartments, right?
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  So we basically changed over onsite management.
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  We were able to raise rent about $100 to $200
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  based on the market comparables. We began to
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  build back tenants. It's $30. It actually is
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  $35 now. Did energy saving programs, right? So
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  it changed out all the light bulbs to LED savings.
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  We are eligible for tax credits because it's
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  an historical neighborhood. We turned month to
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  month leases, two year long leases to give them
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  more predictability. the nature of the building
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  here. And we've made strategic improvements to
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  the exterior property just to bring it up to
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  meet the market conditions. Some of the top expense
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  drivers, management efficiencies. So if you have
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  multiple properties, right? So, so we're just
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  talking two properties she has in her backyard,
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  right? That may be underserved to the market
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  just as one by themselves compared to employees,
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  they now can be combined. So she's getting the
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  nature of the times of scale by having two good
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  -sized properties that are side by side so they
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  can make use of different employee sets to be
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  able to treat both properties. You also look
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  at marketing to drive the both properties. So
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  a lot of things can get driven by creating your
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  own economies of scale, reviewing your contracts
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  to make sure that you're meeting market contract
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  rates, looking at the utility efficiencies we
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  spoke about, and also tenant training. So predictability
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  here, if you get your tenants to understand how
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  payment structures work, is that it's not paying
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  as they may have had a ideal situation with the
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  prior seller, where maybe the seller was allowing
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  them to pay any time throughout the month. So
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  setting up a predictable tenant training pattern
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  could be one. Also calling for the proper maintenance
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  request. They may have had a bad experience with
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  proper. prior ownership or management that when
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  they called nothing got fixed. So installing
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  that you will fix stuff can save you a ton in
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  the future because the tenants may not let you
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  know if there's leaks or other things where you're
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  spending a lot of money down the drain because
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  you're not aware of current conditions on the
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  property here. So next piece, the puzzle here
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  is closing day. We of course walk units at our
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  inspection. We're also gonna re -walk every unit.
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  So you may do an inspection. 30 to 60 days, depending
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  prior to your closing. So a lot can happen. Think
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  of anything in life within those one to two month
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  scenarios here. So we are going to walk every
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  unit. We're going to inspect units for, of course,
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  people not no longer being there or other things
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  that may have changed for the nature of the property.
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  Right. So conditions of carpets, smoke detectors,
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  appliances, we're going to deliver to resident
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  takeover letters, whether it's us or a property
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  management company, depending on how the property
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  is set up and begin our business plan. Right.
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  So the plan that we have set forth, whether it
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  be utility billbacks and new marketing plan,
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  or our day one construction process here, we're
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  going to start putting that in order. Next is
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  have a high order for addressing outstanding
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  maintenance items. It can be a lot for a tenant
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  to have a new management or buyer come on place.
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  We do want to make sure that we're fully in line,
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  that we're creating a transition plan that is
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  going to benefit the tenant base so they understand
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  that new, we'll call it sheriffs are in town
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  and we're going to do things in a different way
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  to improve the property. Lastly, of course, rekey
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  office, rekey common areas just going forward.
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  We have a new, fresh approach on the property.
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  So here was the first deal we closed 2017, 94
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  unit, $2 .3 million, had substantial value at
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  upside. We had an interesting seven, six arm
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  through Fannie Mae. This is a program that's
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  specialized for small balance lending for BNC
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  assets. We raised the capital, right? We raised
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  about 700 ,000, but this property, we were able
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  to do a lot in this property because there was
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  so much value, but the building itself was in
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  great condition. So we transitioned management,
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  we were able to turn about 65. of the units completed
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  all of our six and 12 month lender required repairs
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  in 12 and five months beyond your program. the
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  lender is going to give you a number of items
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  that they are going to want you to do. Six -month
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  repairs are required because they're called urgent,
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  I can get blanking on the word, and the 12 -month
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  repairs are necessary repairs that are not deemed
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  urgent. We created a tenant referral program
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  that allowed great new tenants to, of course,
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  refer their friends, right? So one of our three
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  new leases is coming this way, and put in a move
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  -in fee that replaced deposit, secure deposits,
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  which also directs We went to our bottom line
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  at day one. It sold a water savings program.
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  It was highly just like the one we spoke of earlier,
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  almost a between fixing the leaks and doing this
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  water program, our water bill dramatically decreased
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  by about 30%, creating about 325 ,000 of value
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  to the property. We instituted pet fees and that
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  was another income driver for us. Now, not everything
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  goes right. Just as you take on properties, a
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  hundred people there, not everything is going
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  to go perfect. We had three deaths, all natural
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  causes, right? So new property and when you have
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  people that are just elderly and two actually
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  died in one week, just very interesting scenario,
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  all natural causes, but having the right management
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  partner who understands how to deal with that
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  proactively here is one way that you can make
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  sure you're set up for success because noting
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  this, this was not something I thought of, you
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  know, going into our business plan. What happens
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  if, now we know, right, that's having the right
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  team on board. 15 HVAC replacements beyond our
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  scope of work, right, so unexpected HVAC replacements.
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  drug and gun activity on a neighboring city -owned
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  building, right? So you do not control the neighborhood.
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  You have a property within the neighborhood.
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  Neighborhood does not have a ton of violence.
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  It's a safe neighborhood. And it was one party
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  that was being proper, one property that was
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  being improperly run by the city caused a lot
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  of effect to our buildings. We're able to rectify
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  this. However, in the initial caused a lot of
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  havoc for our tenant base. had a problem with
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  the gas line on a building that evacuated a building
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  for one day. This came back to the utility company.
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  Some of the work they were doing was not in effect
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  of anything we were doing, direct effect of somebody
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  else. However, having the right team in place,
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  again, allowed us to handle this in the most
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  proficient way. OK, so what else went right?
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  That bad building, we were able to get Louisville
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  Metro to come and use one of our units that was
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  being renovated as a stakeout. And they were
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  able to arrest a number of people from the other
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  building and curb that. So it was an interesting
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  way that we could all benefit in the meantime
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  to make this a safer place to live. We put the
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  two laundry rooms back online. We were the only
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  laundry rooms in the area. They were both down.
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  So we got a laundry contract, which added additional
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  income, put them both back online, and opened
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  them up to the neighborhood. There was about
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  300. surrounding units for which there was no
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  laundry. So we opened this up to the neighboring
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  buildings, gave us additional income, increased
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  rent above former rent across the board. And
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  that was just doing the classic turns. And after
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  the one year sold or actually refinance, this
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  property returned 75 % capital. after two years
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  was able to sell this property doubling the investor's
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  money while exceeding our five -year projections.
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  So great one out of the gate, something of a
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  very nice, we'll say, calling card for our first
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  property, but to engage our business plan. And
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  this business plan has been something we've continued
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  to implement for the duration of us going forward.
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  So. We had a quick run here on Asim Anjoui covered
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  a lot of ground, but ideally you are creating
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  a process for which you can implement. And beyond
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  you having the plan, what is most important is
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  that you are having a team around you that one
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  believes in your plan and believes it can be
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  implemented, but are also able to support you
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  and your team with making sure that that plan
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  that you have put together is able to be conducted
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  in an orderly fashion with the property. So I'm
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  Jason Urussi. Find out more about us at EurysiaHoldings
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  .com. My wife, Peely, and myself, we are partners
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  here at Eurysia Holdings. We have another six
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  employees on our team. We'd love to speak to
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  you if you want to learn more about our process
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  investments. Happy to be, and you can find my
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  email right here. That was awesome. So much information.
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  I really like that y 'all opened up laundry facilities
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  to the area. um because like one of one of our
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  properties is i want to say it's like the only
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  bigger apartments in the entire city um which
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  you might be saying what um so we invested it's
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  a tertiary we're a tertiary already and we invested
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  like a suburb of our city um so it's actually
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  in our park which is like 34 3900 people um but
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  for whatever reason they just got a starbucks
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  so starbucks knows something i don't know that's
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  cool Yeah, I'll throw one caveat to that is that
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  so of course, many years ago right so so looking
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  forward right from from an insurance perspective.
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  I would speak with my insurance partner because
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  we could, you know, you think when you have people
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  that aren't living there coming into one of your
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  rooms, how to make sure we're properly insured.
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  So that would be the question going forward to
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  make sure that if something came in, there was
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  an incident, where would it fall since we had
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  opened this up? So that would be one thing I
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  would set up for the future. You know, hindsight
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  is 20 -20, right? However, at that point, it
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  worked for what it was without incident. But
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  if an incident came up from an insurance standpoint,
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  I would have to make sure I was clean on what
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  we were doing there, whether it was, you know,
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  posting a right signage or having some kind of
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  additional insured. But that said, it was another
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  way that we could just add income to the property.