How to Turn 2 Houses into 34 Unit Apartment Building

is it possible that you can sell your one single family home and purchase a fourplex of course it is happens all the time i personally recommend it what can you do with two single family homes maybe two four plexes yes but how about 34 apartment units that's exactly what one of our beginning commercial students just did he sold his two single family home rentals and purchased 34 apartments i believe that life should always be played at a bigger game continually now once you purchase your first single family home that's a great thing that's a big deal but don't stop there right i wish i could rename this video how to play a bigger game because that's what i want to talk about how to take your smaller single family home and play a bigger game in commercial real estate now to play a bigger game in anything right in life and business three things must happen number one is uh you must get someone's you must get with someone who is already playing the bigger game that you wish to play perhaps that's why you're watching this video number two is you need to get out of your comfort zone if you want something that you don't have now you have to do something that we never done before correct and number three you must take bold action life rewards action if you want to if you want a big change your life or accomplish something great it's going to take a little bit of risk in our company we take educated or calculated risk right measured risk that's the difference and that's the key so in this video i will share with you how wonder by students sold his two single family houses with some equity but he had very very little cash flow one or two hundred dollars a month very very minimal but he had decent equity and he traded that into 34 apartment units for more cash flow not only more cash flow but 14 times more cash flow and a ton more equity what did those two things give him it brought him closer to his goal of financial freedom hi i'm peter harris with commercial property advisors i am the author of my best-selling book commercial real estate investing for dummies also my other best seller called the commercial real estate investing for beginners and also we can probably now say that we have the number one rated youtube channel on commercial real estate investing and that's because of all of you watching so thank you so much for that now in this video i'm going to share with you how to take your single family home right with equity maybe a little bit of cash flow maybe zero cash flow could be negative it doesn't matter but how to play a bigger game in commercial all right to produce more cash flow more equity and get you closer to your goals of financial freedom let's do that next let's start off with the problem this is our student's problem in this case and as i go through this problem see if you can relate to his problem maybe this is you too right so the problems were twofold number one he held a bunch of single family home rentals they most of them had uh equity and but very little cash flow all right so lots of equity very little cash flow if that's you listen up his second problem is he felt stuck in buying single family home rentals because he had the equity but very little cash flow and it wasn't helping him achieve his goals of working less in his professional job and doing more commercial later right so uh he was kind of stuck in these single family homes and stuff what to do does he buy more that what does he do next so uh he came to us with these two problems and by the way i i don't recommend uh books very much in my videos but there was a great book and i would share with you uh it's gonna help you if you're stuck in in your business right so it's go it's called how to get unstuck by matt perman it's an awesome book and it really helps you identify where the barriers are mental barriers and habits and helps you get unstuck so check it out when you get a chance all right okay so now back to these two problems single family homes lots of equity little cash flow he felt stuck because his program of buying single family rentals we're not helping him uh get financially free just wasn't right does he buy more or what's not so that's when he came in as his advisors and as his uh as his mentor all right so why is having this problem acknowledging this problem so important right the reason why it's so important is called opportunity cost okay opportunity cost which is the benefit an investor our student in this case misses out on when choosing another investment over another right so basically uh what was it what was his single family home rentals costing him in opportunities so as he chooses to invest more and more in single family what was he missing out on i can tell he was missing out on right so after nine months of focus and hard work he discovered that he was missing out on increased cash flow increased equity increased net worth and and playing a bigger game that's exactly what he was missing out on right now there is a solution to these two problems i am going to model the solution for you in this next part of the video see you there here we are at the solution now this solution is a working model for you if you have a single family home with equity maybe negative or no or zero or small cash flow this is what you can do this is a working model this is exactly what our student did now uh the first part is to prepare and sell your single family homes let's stop there what do i mean by prepare what i mean by repair is on your single family home you just can't sell it you have to get it ready so if it's raggedy looking or nice repairs or it needs some type of attention take care of that so you can it can show the best hire an agent do your research on sales comes and lastly get help get an advisor someone who's experienced uh with these type of things that could be us but it does not get someone you you trust and knows what they're doing and the reason why is because this next step from the single family home into a commercial deal most likely is your biggest investment ever in your life don't do it by yourself get help all right and then sell your single family homes number two is you're gonna sell using a 1031 exchange 1031 tax deferred exchange strategy i want you to google that look it up later right but basically the 1031 is an irs tax code that us real estate investors really really like and here's why we like it uh whatever profit we make from the sale of our property if we take all that profit all the equity and we move it into the into the next property a larger property we can do that and and not have to pay capital gains taxes we can actually defer it and use all of that to grow our portfolio so so long as we take all the equity at close we won't have to pay capital gains we can just trade it up and continue trading up to the next larger and larger larger larger property over the years so it's the phenomenal way of increasing your wealth phenomenal way of building your portfolio of commercial real estate so look it up okay so this is what we had our student do now next is i'm going to give you a before and after illustration of what would happen okay so this this row here pertains to the single family homes this row here pertains to his 34 units all right so here's what happened he bought his two single-family homes for 360 000 right he sold it for 625 seven years later right and he made 265 000 roughly okay and then at the time he was cash flowing about uh one to two hundred dollars per month so very very small okay so that's the before here's the after so once he sold it with a 10 to an exchange property he founded 34 units i ended up buying a property 34 units for 1.225 million he used the entire 265 thousand that that was about twenty percent down payment to buy the thirty four units all right now so you can follow me here over the next nine months he increased the noi by twenty two thousand dollars all right roughly over the next year or so he increased their rents uh overall by fifty dollars a month per unit so not not a stretch pretty reasonable right and as you know in commercial real estate you seen as my other videos as the noi goes up guess what else goes up the property value right that's why the noi is very very powerful so watch this so this 22 thousand dollar noi net operating income increase you'd be divided by the market cap rate in this case in this case those eight percent so 22 000 divided by eight percent equals 275 thousand dollars in increased property value and increased equity so what he did when he forced the equity upward you can't do that with single family homes only with commercial right so that's the power of the noi so a 275 000 increase in nine months compared to a 265 000 increase in the single family homes in seven years so you see the difference you see the power of the noi uh what it can do for your for your cash flow for your net worth and for the property value all right that's exactly what it can do now the last thing i want to share with you here was what happened to the cash flow before he was making one to two dollars per month now he's making 2 000 eight hundred seventy seven dollars per month almost a 14 times increase in cash flow going from his two single family homes into 34 apartment units right so now i'm going to show you a picture of his uh of his apartment all right so on the screen you see a picture apartment so you can take a look at it and see there's nothing special about it it's pretty nice looking but it sure uh performs a lot better than its two single-family homes all right okay now how i want to summarize this is if any of you out there are sitting on single family homes with equity right maybe it's not performing well cash flow right and the reason why you should consider selling is is it bringing you closer to your financial goals financial freedom working less at the job having security just in case you lose your job uh what if you're a downsized are your single-family homes going to help you pay the bills all right so i want you to consider all that if you're sitting on single-family homes one two or three doesn't matter how many all right consider this as the solution all right okay thank you for joining me today if you want more videos like this go on to our website commercialpropertyadvisors.com or simply subscribe to this youtube channel thank you very much everyone and i'll see you at the next video

Channel: Commercial Property Advisors

Views: 50,785

Keywords: Commercial Property Advisors, Peter Harris Real Estate, Peter Harris Protege Program, Apartment Investing, Commercial Real Estate Investing, Multi Family Investing, 1031 Exchange

Id: jl9XJ5rczKY

Length: 12min 10sec (730 seconds)

Published: Wed Sep 19 2018