Imagine acquiring a trophy property that cash flows from day one. Yes, you heard that right! This is the kind of deal most people only dream about, but with our help, Darryl turned this dream into a reality. This 12-unit multifamily property doesn’t just offer top-tier aesthetics and a fantastic location—it’s a financial powerhouse from the start with potential for even more growth.
Interview Overview:
The Beginning: Why Multifamily Investment?
Darryl’s journey into multifamily investment began over nine years ago when his family lived in Philadelphia. Initially, he ventured into single-family home flipping but quickly realized the margins were too thin. After backing away to reassess his strategy, Darryl discovered commercial real estate and began absorbing knowledge about multifamily investments. That’s when he first connected with Commercial Property Advisors.
From Flipping Homes to Multifamily
After a move to Virginia and diving into our resources, Darryl joined our team and shifted focus from single-family homes to more lucrative multifamily deals. He started actively seeking opportunities and eventually closed a deal on a four-unit property before embarking on his more ambitious project—acquiring a 12-unit multifamily property.
The Deal: Securing a 12-Unit Trophy Property
This transformative property was found through an off-market lead. Initially, Darryl faced numerous financing challenges due to the property’s income not meeting conventional loan requirements. However, through persistence and creative financing approaches, like pitching a master lease agreement and exploring seller financing options, he managed to keep the deal alive.
Facing Challenges and Finding Creative Solutions
After several months of negotiations and developing a relationship with the sellers, Darryl finally secured a bank willing to finance the deal. The bank offered an 80% loan-to-value with favorable terms below 7%, making the property cash flow from the start. The property itself had significant development potential, with the possibility to expand by utilizing adjacent land zoned for additional units.
Success Through Relationships and Perseverance
Darryl’s experience exemplifies the importance of nurturing relationships, persistence, and creativity in real estate. He maintained regular communication with the sellers, overcoming numerous obstacles while fostering trust and rapport, ultimately resulting in the seller solely wanting to transact with him due to their positive relationship.
The Future: Expansion and Growth
Now with two multifamily properties under his belt, Darryl plans to explore further expansion of the land adjacent to his 12-unit property. He and his partner are considering options like subdividing the land or entering into a partnership with a developer to maximize its potential.
Key Takeaways for Aspiring Investors
For aspiring real estate investors looking to replicate Darryl’s success, two pieces of advice stand out:
- Stay Persistent: Despite setbacks, maintain confidence in the potential of a good deal.
- Build a Strong Team: Surround yourself with experienced mentors and partners who can provide valuable insights and support throughout the process.
Join us as Darryl shares his incredible journey. From finding this rare gem off-market to securing the deal with an unbelievable strategy, his story is one you won’t want to miss. We’ll also delve into the exceptional bank financing he secured, which transformed this property into a true cash flow machine. And lastly, we’ll explore his plans for taking this trophy property to the next level.
Meet Darryl: The Persistent Investor
Peter: Welcome, everybody! Hey, I have a special guest here. His name is Darryl, one of our students who stood the test of time and was so persistent on this deal. He’s here to share the entire story. Thank you for joining us today, Darryl.
Darryl: Thank you for having me, Peter. Glad to be here.
Peter: All right, you are welcome. Let’s jump straight into it. Tell us a little bit about yourself.
Darryl: I’ve been in multifamily real estate investing for just over a year. My nine-to-five job is as an IT consultant. I have my own IT consulting business and specialize in the financial sector. I’ve been doing that for about 20 plus years now. I also have two kids and have been married for about 15 years.
Why Commercial Real Estate?
Peter: Awesome. Well, let’s jump into your why, Darryl. Why commercial real estate? Why did you pick up the phone and call us for help? What are some of the motivating factors behind your decision to buy commercial, particularly multifamily?
Darryl: Yeah, that’s a good question. I originally got into real estate investing about 9-10 years ago when my family and I were living in the Philadelphia area and had gotten into flipping single-family homes. I quickly found out that the margins are very thin in that arena. My first property broke even, and my second flip deal actually ended up losing money due to a series of events involving contractors and delays. The carrying costs pretty much wiped out any profits from that deal. After that, I decided to reevaluate and started looking at commercial properties.
The Journey to Multifamily
Darryl: I found you on the internet, signed up for your email updates, and started watching your videos. But I didn’t actually go back and look at your emails for about two years because that was right before Covid hit. We had our second child during that period as well. A couple of years went by, and then my family relocated to Virginia. I went back to thinking about real estate investing, found all your emails, started watching your videos again, did your online course, and eventually signed up with you and your team.
Peter: Thank you for sharing that. Let’s dive into the deals now. People love this. You bought two properties with us. You bought a smaller property and then a 12-unit, which is our focus.
Finding the Deals
First Deal: 4-Unit Multifamily
Darryl: Both of these properties, I came into contact with the sellers using your methods. About a month after signing on with you, I found the 4-unit property through an older gentleman who was retired. He lived about 30 minutes away and had multiple properties in my town. This was his last property, and he wanted to sell it to buy something closer to where he lived. He wanted to do a 1031 exchange and had identified the property he wanted but faced delays in getting financial information. It took about eight months from initial contact to closing the deal.
Securing the 12-Unit Trophy Property
Peter: Thank you for sharing that. And let’s talk about the larger property, the trophy property. That has an amazing story of its own.
Darryl: Yes, so that’s a 12-unit trophy property. The sellers contacted me at about the same time as the seller of the four-unit property, almost a similar situation. The sellers are in their sixties, they’re self-employed, and have a consulting business. The wife had already retired, and the husband was still managing the 12-unit property himself. The wife wanted him to give up the property so they could start enjoying their retirement. She reached out to me and gave me some preliminary details about the property. This was early March of last year, and she mentioned that her husband would probably agree to sell the property for $1.4 million.
We set up a conference call, and they gave me more information about the property and its location. It turns out the property is located not far from where I grew up originally. I was very familiar with the area—great location. They were very upfront from the beginning that they had kept the rents lower than the market because they prioritized keeping good tenants over keeping up with market rents. So, early on, I had a good idea that the low income on the property could pose a challenge.
Financing Challenges
Darryl: I did some number crunching and spoke to you about the property. We concluded that a master lease agreement would be a good alternative to conventional financing due to the income challenge. At this point, I hadn’t toured the property yet, but I had driven past it. I spoke to the owners about the challenges, and they understood. I brought up the master lease agreement option, which they considered for a few days but eventually declined. They felt that an all-cash buyer would be better for the property. I stayed in touch with them and, after a month, checked in to see if they had found a cash buyer. They hadn’t been actively looking, so I made an offer.
Persistence Pays Off
Darryl: I toured the property and was amazed at its condition. After some back and forth, I offered $1.37 million, a number that would have worked with conventional financing at the time. They considered it but decided to pursue a condo conversion instead. By the summer of 2023, I was busy with another deal but still calling lenders to see if there was a way to make this deal work. I spoke to dozens of lenders without success due to the income situation.
Darryl: In September, the sellers reached out again, and I told them I was still interested but busy closing another deal. They weren’t in a hurry, so I got back to them after closing the four-unit deal. The husband had evaluated the property again and felt that $1.5 million was a fair price due to its development potential. The property sits on 2.8 acres of land, with room for additional development. I approached them with seller financing options, but they declined due to their emotional attachment to the property. The seller didn’t want to have anything to do with the property after he sold it because of that emotional attachment.
The Final Stretch: Securing Financing and Closing the Deal
Darryl: I thought the deal might be dead, but then I found a small local bank willing to finance the deal. It was nothing short of a miracle. I continued speaking with the lender, who was crunching the numbers and seemed optimistic. I decided to take on a partner, a friend from my church with a banking background in commercial lending. This added valuable knowledge to our team. In January, we went back to the seller with a commitment letter from our lender, and after some back and forth, we finally got the property under contract for $1.5 million.
Peter: And that was about 12 months from the day you met the seller until getting under contract. So, an entire year. Let me say this, everyone out there, this only happens when you do off-market deals. If this was a real estate agent-controlled deal, Darryl would have never gotten this close to the seller, never gotten this much time, and never gotten such a good price because of the deal dynamics. And then, we got the approval, and I was amazed, Darryl, that you were able to get 80 percent LTV, 20 percent down on a commercial property on a 12-unit. Amazing. And your rate was below 7%. Another amazing thing.
Darryl: Yes, it turns out this lender had the best terms of any of the lenders that I spoke to, and it’s great.
Rent Upside
Peter: And that’s what caused this trophy property to cash flow. It was the terms, right? And also, this deal from day one, you also have room to raise the rents as well, right?
Darryl: Correct. The rents were anywhere from 20 to 30 percent under market. So you can see why it was so difficult to finance. From day one, we went in and decided to raise the rents incrementally. We started with three tenants, and we’re doing three tenants each quarter, which was a good recommendation from your team. The rationale behind that is so that we don’t have all the leases coming due at the same time, potentially having a lot of turnover at the same time. We’re getting into our second group of rent increases right now, and we’re just going to keep going from there.
Peter: Great. And I recall the time you and I met when you did your inspection. I review inspections almost every week from our students that are under contract, and you were correct. There were some things that probably weren’t perfect, but I couldn’t find anything that was really wrong. Everything looked pretty good for a property of that age. I was quite amazed at how the utilities, systems, windows, parking lot, siding—the units were in great shape.
Darryl: Yes, that was a pleasant surprise. You never know what’s going to be found in an inspection, and when we got that inspection report back, we were incredibly pleased. There were a few cosmetic things.
The Power of Relationships
Peter: That is so rare. Another thing before I forget, Darryl, is I recall you and I having a conversation about the seller being so attached to the property and to you and your wife, and you all met. He would only sell to you. Is that right?
Darryl: Yeah, that’s correct. He had some bad experiences with property managers before and resorted to managing the property himself. Because of his care for his tenants and the property, he mentioned that he only wanted to sell it to someone he knew would take as good care of the property as he did. There was a lot of time invested in getting to know him and his wife. We had a number of phone calls, a lot of meetings in person over coffee and lunch. It was really a lot of personal relationship building that helped get the deal done. That’s a big part of real estate investing—investing the time to get to know people. It really does pay off. I can honestly say I’ve made two new friends from those sellers.
Peter: It reminds me of this quote: “Good things take time, but great things take a little longer.”
Darryl: That’s very true in this case.
Expansion and Growth
Peter: Yeah, it sure is. The other thing is now that you have these two deals under your belt that you’re self-managing, and the 12-unit was conditioned on you self-managing because of the seller’s bad experience with property managers. So, what’s next? What are your plans in terms of your commercial real estate investing?
Darryl: My partner and I are looking at how to best leverage the land to maximize potential. We’re going to have a feasibility study done to figure out whether we should subdivide the land and sell it off or potentially partner with a developer and have it developed ourselves. We’re also looking at growing our real estate business with additional properties. We had a great offsite meeting earlier this week and came up with a great plan moving forward. With our combined teamwork, I think the sky’s the limit. We’re looking forward to our future in real estate investing.
Advice for Aspiring Investors
Peter: That’s great. Lastly, Darryl, our channel here helps people like yourselves—novices, beginners, intermediates—take it to the next level. Do you have any advice for those wanting to do what you just did?
Darryl: Certainly. With my first two deals, the main thing that jumped out was to remain persistent. If a deal looks good, don’t give up on it. There were so many challenges with the first deal, the four-unit, and even more with the 12-unit trophy property. But the numbers continuously looked good, and the growth potential was great. I didn’t want to give up and just kept after it, and eventually, the deals worked out. The second thing is to put together a great team. You guys were essential to getting these deals done. The expertise and knowledge you have, both from developing your own deals and working with students, are invaluable. Having a knowledgeable team is tremendous, and it helped get these two deals closed.
Peter: Awesome. Darryl, I appreciate your patience, persistence, and tenacity. This business requires all three if you want to be successful. Can you imagine, with your 12-unit, it was probably a 17-month span from meeting the seller to actually closing and taking control. That’s the power of relationships, nurturing them, multiple visits, getting to know the seller, and becoming friends. That’s how great deals are done. Congratulations.
Darryl: Thank you, Peter.
Peter: You’re welcome. All right, Darryl. Again, thank you for spending your time. I appreciate you taking time out of your day to share such an inspiring story with all of us.
Questions or Comments? Text PETER to 833-942-4516.
Every Successful Multifamily Millionaire Has a Mentor
Darryl’s journey reminds us that with the right approach and team, remarkable investment opportunities can be uncovered and transformed into profitable ventures. If you’re looking to achieve similar success in real estate, consider our Protégé Program, where we guide you through the complexities of commercial real estate. Apply here and get mentored by me and my team: Commercial Property Advisors Protege Program
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