The First Multifamily Deal
On this episode of Next Level American Dream, Abigail and Sean are joined by David Rosenbaum. David is a seasoned investor and has first-hand experience with both single-family and multifamily real estate. Today he explains how he got into multifamily real estate and the highs and lows of acquiring his first deal.
Key Topics
How is your first deal going?
What does the leasing process look like?
How are you marketing those units?
Connect with David:
www.investorygroup.com
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SUMMARY KEYWORDS
property, deal, multifamily, American Dream, lease, folks, Tulsa, people, called, single, Patti, partner, vacancy, investing, knew, ran, money, talk, construction, bit
SPEAKERS
Sean Thomson, Abigail Thomson, David Rosenbaum
Abigail Thomson 00:00
Welcome to the Next Level American Dream Podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail and Sean, will discuss how you can take your American Dream to the next level through real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish our goal of financial freedom. We hope you learn more about how to define and achieve your American Dream. Here's another episode of Next Level American Dream. On this episode of Next Level American Dream, Sean got the chance to talk to David Rosenbaum. David is a seasoned real estate investor and has firsthand experience with both single family and multifamily real estate. Today he explains how he got into multifamily real estate and the highs and lows of acquiring his first deal. If you're interested in learning more about multifamily investing, visit our website at www.thomsonmultifamilygroup.com.
Sean Thomson 01:06
Hi, David. Welcome to The Next Level American Dream Podcast. Thanks for being on!
David Rosenbaum 01:10
I'm honored! Thanks for having me.
Sean Thomson 01:12
Good, good. Let's let's start off by just telling everybody a little bit about where you came from and how where you are today and how you got here.
David Rosenbaum 01:22
My background is really single-family fixing flip, and a few single-family buying homes. I've been in this business. Gosh, I think it's a little bit going on 10 years now on and off with a partner of mine, we did a lot of fixing flips. And I think we were talking earlier; I've lost more money in the single-family business that I made. And so that's really my background has been that single family. And it's kind of what's gotten me to the to the multifamily space of today. I really, it opened my eyes on if I really wanted to get to I wanted to be I needed to kind of change my thought process. Not that single family is a bad thing at all. I just wasn't good at it. I wasn't good at it. I know it wasn't going to be our future. So my transition myself into getting into the multifamily space. But that's my that's my background is the single family side.
Sean Thomson 02:09
Yeah. And we you know, we talked to your partners on your first deal, the oysters back in May. We had them on the show, and we went through the deal with them. But let's talk a little bit about your experience within that first deal. You you purchased a property in Tulsa kind of run us through. So yeah, you made a decision to go from single family, multi family run us through kind of how that that took place. You you and how you ended up with that deal?
David Rosenbaum 02:33
Maybe? Sure, sure. So probably about two years ago, as I was just saying, we were looking at how do we get out of what we're doing into the multifamily space, it's all we heard, get in the mouth, that family, you know, rather than owning a single rental property, you get into multiple doors, that's where, you know, that's where the legacy wealth is built. So we did a lot of self teaching, we were into podcasts, reading books, talking to folks like yourself, just folks that have been in the multifamily space, right went to a lot of seminars prior to COVID. But about I think last January, I made a decision with me and my partner that we were going to get a mentor, and I believe everybody should have a mentor, whether it's spiritually financially relationally, anything you have, I think we all need mentors, so and it's paved the way or has been there prior to that's done it. And so we ran across Corey Peterson, his program, which I know you're very familiar with his program, and we put up some money to go out for three days into Arizona to learn what Cory had and what he's been doing. And I'll tell you what, Shawn, when I was out there, like just getting out there. My mindset was, I hate to sound this way. It was really this is it. Like for me, I'm 50. Back then I was getting ready to be 50. It's what I had, I had no savings had done very well in single family. I knew this was going to be the next eight to 10 years. This is what I had to do wasn't a question of when I had to do it. And I'll never forget, it's a 22 of us sitting in this UC U shaped meeting room with Cory. And I looked at him as on the corner and he'll tell the story too. I looked at him and said, Hey, we're going to do business together someday. I don't know when it is what we're going to do business. I just knew I was gonna get a multifamily deal. Now prior to going to the to the class, I had had put my feelers out there with some brokers and a few folks that I knew, telling him I was getting into the multifamily space, didn't know what I was talking about, but I kind of knew some of the verbiage that you know, send me some deals, send me what you got. So I got to the class and I went to the class, which was phenomenal. And as I was going through that a friend of mine was an acquaintance brought an off market deal, Wasn't there a broker in Tulsa, Oklahoma, and after I left chorus class, I took all of his his his tools and systems and I took this deal. And I went through the process, I analyzed the Dr. Lowe the deal, that everything I was taught, I didn't skip a step, because I, I've been known to sometimes, you know, skip some stuff. And I told myself, I'm gonna follow this to the tee. And I went through and I was like, hey, this this deal, still kind of works. And so the management company that we have today through a buy some of these folks, some investors that he had some partners and they liked it. Like this is great to put an offer on the property, got an Li letter of intent was accepted. And we went up there and we did due diligence, we started our due diligence, I'm blown away here at this point thinking this is great. I mean, everything. I don't really know what I'm doing. I'm just hair on fire going through the process. But what I learned in Corey's is class...
Sean Thomson 05:44
This is really the first deal you've ever looked at really, right?
David Rosenbaum 05:48
Yeah, this is the first the first one I've ever looked at other deals with the first one on site. Right? So it was actually surreal. I was like, well, they accepted it. I guess I'm doing something right. We had had some talks with Cory a little bit on it. So I think he had seen it and kind of put a little bit of a blessing on it. And I think it took a deep dive into it at this point. But he rolled the dice and, you know, put some earnest money up and went out there. What could we lose? Go through due diligence. Everybody loved it. Okay, now you have to understand this property is rundown. It's got a lot of Section A, they called Oklahoma housing on it, probably, I'd say 50%. I just say that the owner was in very bad health. And so I know they had to get rid of it. But believe it or not, this property was situated in between million dollar homes. And it literally sits right next to Southern hills Country Club in Tulsa, Oklahoma, which is a very prestigious Country Club, they actually have major PGA tours, their events there. Anyhow, walk the property, everybody loves it, we come back together, we start going through the process of getting ready to close on this property and start our capital raise. For whatever reason, I won't dive too much into whatever reason that the other partners they just didn't go forward. They didn't want to go forward with it or whatever it was, everything was fine was okay. Well, I remember the feeling of my stomach, my stomach just sank because I knew I me and my partner were at a point ourselves and didn't have the full race to take this property down. But I just knew in the back of my mind is like we're buying this property. I don't know what's going to happen. I physically got to the point on the last day when we due diligence was going to end I called the seller myself the guy who gave me the number I called him I said look we want the property here's what happened. Can you give us some more time? I think God was watching out for Shawn be honest with you and he gave us a second chance. So at that time, kind of as this is going on I'm a bit bit pieces together. But David Patty Royster. Were at the same class I was at with Corey had invested passively in some of these deals. I remember we left there Patty's like, hey, let's stay in contact, let's kind of have like an accountability call each week, let's let's just keep ourselves. So we're doing the right things, which we did. It was only us on the call each week. So I tossed the deal their way. And they loved it. They liked it. They loved this point, they liked it. And they brought in their brother in law and Patty's brother Chris camp, and they had to look at this deal. So we got another LLR together, same one got accepted with a new group redid due diligence again, believe it or not, I have already it's my second time around. So it's like an expert. And we all loved it. We knew it needed work had a heavy lift to it, at some cleanup we needed to do. And we now had to go raise about a million dollars to take this property down. So now I'm just super excited because we're going through property, this process of closing this property. And I'll tell you what it was unless you those that have never done a property. And I know some goes smoother than others. This was probably one of the most challenging things I've ever had to go through. Now. You can go to class, you can read a book, you can be on a podcast, or listen to podcasts. But until you go through it, you know, it's like anything else you don't know what you don't know. And there's a lot of moving pieces and a lot of moving parts. And we didn't do a very good job raising money. Because we didn't know any better. We really didn't know what we were doing. If you look at us now, it's a lot different scenario. But back then you just didn't know. We didn't know. You know what to go through. So the race was a little short on this property, but we were able to get it done. We got the property closed on December 10 of last year. So I went to Korea in March, I had the property contracted. It went out of contract and then the oysters and myself and my partner went back into contract and we closed December 10 of last year. Crazy!
Sean Thomson 10:05
That is crazy. Your first your first deal you really looked at. And you ended up ended up buying it. You know, that's that's that it's almost unheard of Really? Yeah. Yeah. You know, the numbers we hear all the time is that you've got to underwrite 100 properties for you. Yeah. No for you and get a contract set out, you know? Yeah. That's amazing. So how is the property doing today? Let's I guess maybe we will skip forward a little bit to to Yeah, that's that's the story of how you acquired it. But now you've owned it for a little while, I guess. What do you get? It's been nine months now. Right?
David Rosenbaum 10:35
Right. 9 months, months, yep. 10 months.
Sean Thomson 10:38
So you've got a little bit of a snapshot you've gone through, you've gone through a lot of your construction, your lease stuff is happening, I guess, in the last few months, kind of give it give us a progress report on how things are sure.
David Rosenbaum 10:49
So we closed December 10. And because it was the end of the year, we made sure we had our contractor lined up and nothing was going to start till January just because of the holidays. It just it probably wouldn't recommend closing in December, anybody but that was our experience. So January, we get ready to kick things off living four hours, four and a half hours from Tulsa. Other two partners, Dave, Patti, and Chris, they live in Utah. So it's more challenging for me to get here. So I was up there a couple of times to get to get things kicked off. And then they came in huge. They were they're they're very, they're very good on the construction side out of the number side, but they have a construction background. Especially Chris, he knows more than I do. I don't claim to ever know that. But he's a lot better than I am. And we had this plan in place at our capital expenditure budget place, but a contractor setup and the work began. Well, after it got going, we weren't happy with some of the work they were doing on some of the painting of the exterior started. So we fired him, because it wasn't working out. And we had I would never recommend it. We basically brought it all in house to ourselves. We found the contractors, the painters were negotiated pricing, all of our materials, I was integral part of what I was doing. And so rather than just turning it over to a contractor, which typically what you're going to do, right, we took that on and we became the GC, which I would never recommend for anybody. But we had to do it right. We had limited time. We're already a month into the closing. So we went ahead and did that. And Chris de Patti, myself and Chad, we ran the construction. We weren't and believe it or not, Shawn, Dave, Patti and Chris, they were doing repairs and work on this property. Like, you know, this is your baby, right. So things are going along, we're getting our we're implementing our program, our construction program. So last February, going along, we started out at 32 vacancies when we got in there, and because folks weren't paying and as you peel the onion back, when you get into a property, it went to about 46 vacancies to about 49% occupancy. That was a huge blow to us because we thought, Well, here we are, we've got to do 32 units, get it going and ramp it up. Well, then as you're going through, your vacancy kicks up now we were on plan a little bit with that. And then COVID hits. And so here we are brand new investors. First property that almost never purchased, not just invested in but purchased. Not knowing too much. But we have to do and COVID comes along. And I'll be honest with you, I think all of us inside and one of us even said we need to sell this property, like what do you do? Like we're going to be done? I think the good Lord had a different plan for us. And I can honestly say today, as of about an hour ago, I talked to our leasing agent, we are at 92.5% occupancy. And we will we are pre leased at about 97. By the end of October, we could be 100% occupied. So and we've got about $50,000 remaining of our money just to put into the pavement restriping some exterior stuff, we're just finishing up. But we I couldn't be more happy. Like now we're now we're in that phase of starting to tweak things right let's start getting our control our costs in line and get some things going. Our rents have gone up. I think a one bedroom was 475 when we bought it, we're getting 640 now. Yeah, yeah, it's just been insane.
Sean Thomson 14:30
So during your construction, you had you had a lot of your party, probably a lot of your lease problems fell out does like your occupancy went way up or your occupation went down, your vacancy went way up. Yep, a lot of those things you would have had to deal with at some point anyway, probably it's they sort of fixed themselves, but it was it kind of compounded the stress or the problems that you had, because it all happened simultaneously. Then you've joined COVID as a as a third unknown right now which which creates a whole different level of what's going to happen. Right.
David Rosenbaum 15:00
Yeah.
Sean Thomson 15:02
So how do you think so you guys are done with your construction now? And it's you're in full lease up mode?
David Rosenbaum 15:08
We've been in full lease, we never ever dip during COVID. I mean, we probably did five to six a month, and we continue to do our remodel. We're just now read, we got about seven more units to remodel and will be 100%. So we're still doing that. We've got to, like I said, a couple things in the exterior need to be done the parking lot. Just some I say some touch up stuff. And it's turned out. It's beautiful, man. I mean, it's a beautiful property. I'm not kidding. Yeah, it almost sounds like that property, people were waiting for that property to kind of get turned around, or it's almost like they were waiting to live there. They were because of the location. And they were just waiting for someone to come in and turn it around. So that that read your lease up even even easier. It's what did this I mean, that's as you're talking, that's what I'm thinking, I'm thinking, Man, that must have just been a choice location, that once you did the one or two right things for that, that property, people were there for you to take those and lease them, you know, from you. I think when you own an apartment complex, and I might be wrong in saying this, but when you take when you are having referrals, referring your, your property to their friends and family, you know, you're doing something right. And so our our referral business from what I'm understanding has been very good. I handled with Patti the majority of the lease up. I'm a little bit OCD. And I like that kind of a control guy, but it's okay. I handled a lot of the marketing. And all we did was Facebook, we literally put a video ad of a gorgeous model that Patti and Dave transformed into this. And it was just awesome. And it was staged. And we did a video of it. And I put it on the Facebook marketplace. And we ran ads 25 bucks a week max. But we expand chunks we've been killing with that I get probably eight to 10 people a day just messaged me and I have a standard like robot response. I copy it, paste it, which says, Give me your number. And then every morning at 830, I sent it off to our leasing agent because she is so busy. I wanted to take that off her plate because of all the things she was doing. Right. That is Lisa, I give it to her. She goes through calling on handles it from there. So it's worked really well for us. I wouldn't recommend you do that on every property. But you know, this was our baby and I've got people's money on the line. You know, that's something I wanted to really involve myself in.
Sean Thomson 17:26
Yeah, you just have to do what you have to do to get it done. Well talk about that's awesome that you I mean, that's. So you're it's it sounds like you're charged on your first deal. Honestly, you rather get your first deal. You had some struggles, but you've overcome them. And you've you've had a tremendous amount of success because of that. And now, you know, you can just sort of let this property do its thing would tell us about a little bit about what you're what you're doing what you're focused on. Now. Are you are you trying to buy more properties? Or what are you working on right now?
David Rosenbaum 17:57
Yeah, so we'll continue to this is our baby, we'll continue to maintain this property, you know, trim costs, you know, refine things there and keep it going. So we can continue to cash flow on it. We're looking to refi it out. probably in the next six months, five months, you got to go 12 months with our loan, December and we'll do a cash out refinance, pay our investors back. They've been paid the entire time through COVID and whatnot, which has been great. Get them their money back. But in the interim as well, you're right. I am I like to run. So I am like you I'm looking for the next deal. The next deal. The next deal, as Cory says opportunities. And so yeah, every I spend the majority of my day probably underwriting analyzing deals, talking to brokers. But the most important thing, I think, and Cory says this, if you have the money, the deals will be there. So we've really focused lately on raising money or meeting folks that have money that want to invest with us. And we've had some success. Nothing's happened yet. But we have we have some success now lined up with some folks that are very interested in finding future deals with us. So that's that's what I've been focused on big time.
Sean Thomson 19:05
So we've been able to put together some capital that is going to support you with now you're going into the acquisitions phase, I guess, looking for properties to deploy that capital into right, correct?
David Rosenbaum 19:16
Correct.
Sean Thomson 19:16
Yep. So that's good. Yeah. That's awesome. I really wanted to hear your story about that first property, from your perspective. And we talked to Dave and Patti, they kind of gave us some technical things. And they talked about management stuff, but I wanted to hear how you kind of because I knew you were the one on what role that is exactly the bus. You were the kind of the kind of the one putting that together. And the tip of the spear on that project, I guess you could say. So I wanted to hear kind of how you came about that stuff. Yeah, one of the things about our podcast is it's called Next Level American Dream. So we always like to ask people, I think you're, I think you're on the path towards your American Dream and kind of living part of it now. But I want just to ask you, you know, what is the American Dream to you? And then if you don't mind, maybe share with everybody the one or two things that you've done. Think you're doing that maybe are helping you kind of take your American Dream to the next level?
David Rosenbaum 20:05
Sure, sure. I mean American Dream to me, I think it always has been always will be is just, you know, time, I don't have enough of it like I don't, you know, we all go to bed at night at least idea and I pray that I, I do wake up tomorrow so I can be a better person, a better father, a better husband just live my life according to the values that I think I have. And the American Dream is to be able to spend all the time that I have my kids were younger, and even when they're older time, I just I want time. And that's the American Dream. To me. It's not a Learjet, and a big house, all those those things are great. And I have vision boards with those on there, which drives me. But the biggest thing I have is time. And that's what I want. And the other thing is I tend to corner pilot five years ago on a spiritual side and whatnot. But I want to give back like I want to help other folks. Because I know where I've been. And I know the struggles that I've gone through from everything, marriage, children, just life, I want to give back to folks and I want to bring people with us to achieve their American Dream, as you say, right to achieve their goals and dreams, because they're not mine. So the two things I want, I want time and I want to give back. And I do that every day, whether it's an extra tip to somebody on a drink or a beverage or tell somebody how great they are, or just speak positivity into somebody. That's really what I try and do on a daily basis, which I believe has me where I am at, and has me working with the folks that are being presented to me that are coming into my life and my network now. That's why that's happening. And so for folks out there, if you just put yourself out there honest, transparent, and you're a good person, I'm telling you, good things are gonna happen for you. I just believe that I know. You know that.
Sean Thomson 21:49
So yeah, that's a good that's a good life philosophy, though to have really. Yeah, you're kind of doing the pay it forward. That could be very easily why you're so charged on that first deal. Maybe what do you think?
David Rosenbaum 22:00
Yeah, I think so. Honestly, do I not? I'll never forget it. It's It's, it's, it's where it's, I am where I am today, because of the folks that are in my life now. And that got me to where I am today. So I got to humble myself. So I will ask you one last question that. So are you are you finding it? So I mean, you might be a little spoiled by coming out of the gate, so strong getting that first deal put together and having such good success with it, even though you had to struggle through it. But now you're winning? Are you finding the next deal just as easily? Or is it or is it a little bit more difficult? I'd say both. I mean, I've got my my feelers out there. I mean, I think there's a lot of opportunities out there, and they're not all deals. So I think I'm having a good flow of deals coming through. I think the raising the capital has come a little bit, I would say easy, but it's been a little bit better this time around. So I think it's it's been about the same. And I'm like you I'm pushing it, though. So if you're not pushing it, and just relying on you know, it's not gonna happen, because like you said, they're gone like that. If you don't, if you don't move on something, you're dead in the water. So I play it as if it's the next fairway or it's the next deal.
Sean Thomson 23:09
So, you're not finding it as difficult. But it's just just going through the process hitting right deal.
David Rosenbaum 23:18
People know, you've closed a deal, and you can close now they want to give you opportunities. That's what I think it comes down to.
Sean Thomson 23:25
So it's actually in some ways, maybe a little, maybe a little easier, or more streamlined, I guess you could say, acquiring that next lead or whatever it is to find the next property.
David Rosenbaum 23:35
Correct. I agree with that.
Sean Thomson 23:38
Well, David, I'd like to have you back on you know, we should we did this says, you know, this 30 minute podcast, but there's so much more to talk to you about I think. So if you can, we'll figure out some way to get you back on the show for sure.
David Rosenbaum 23:49
Absolutely. Yeah, I'm honored man.
Sean Thomson 23:52
So, tell people how they can find you, David Rosenbaum, and what you have and and you know, if they want to talk about investing or learn more about real estate investing or kind of your story, how can people find you're getting involved?
David Rosenbaum 24:06
So you can go to my website. I have my own website I put together it's www.investorygroup.com. Vestry is our company. And basically every investment has a story is where we came up with that. Or you can reach me you can text me or call me at (817) 876-5628 I'm an open book. I have no secrets. There are no secrets.
Sean Thomson 24:35
It's good. That's a good way to be anyway. So
David Rosenbaum 24:38
yeah, yeah. Well, yeah. Thanks for coming on the show. I really appreciate I want to hear about that how you kind of came up with that first deal. I think that's an interesting story for everybody to hear. And I appreciate you sharing that with everybody. we'll have you back on and talk about some of the some of your progress that you're making now. Absolutely. Thank you so much for having me on!
Sean Thomson 24:53
Yeah. Thanks!
David Rosenbaum 24:54
Take care, man.
Abigail Thomson 24:56
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact the team directly, or are interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamilygroup.com. Before you go, please leave a review! Your comments help us create more episodes for you to enjoy.