How a $100 Rent Increase Can Create $2 MILLION in Apartment Value

going. So, welcome everybody to Transformational Tuesday. Today is September the 8th. Um, can't believe it's September already. Where in the world is time going? It's just going so fast. So, I am going to start by sharing my screen and I can see it act sharing it. So today we are going to talk about creating value in multif family investment through rent increase. Now I am going to spend most of my time talking about rent and the reason I'm going to do that is because rent is one of the most noticeable le. So there are lots

of way to create and in fact we'll talk to you about one of our deals where we're actually not creating a lot of value through rent. We have three other ways to create value, but it is still that you really want to make sure that you understand all of the ways that you can create value in multif family and what you can do. So again, for those of you that I haven't met or don't remember who I am, my name is Trevor and I started passive investing in two well, excuse me, 2018 and then I

switched over to be an active sponsor. So later on we're going to talk about the differences between general partners and limited partners. But for now you just understand that and coaching and mentoring and being part of a strong team has changed my life. You cannot do commercial real estate on you need to be part of a team. And so I've been a limited partner passive investor in 20 syndications and I've been a general partner sponsor in 20 syndications. So for a total of 40 syndications and this is of course given me a deep hands on

perspective from both sides of the deal. So again my mission is to help a 100,000 people reach financial independence through commercial real estate investing. I am going to put my contact in the chat if we haven't talked or if we haven't talked in a while. I love talking to people about commercial real estate. So, please feel free to book a call with me um and to be able to. So, again, the last few months talked a lot about kind of the stress stress that's in the multif family space, right? There's a lot of distress. So,

a lot of folks bought real estate at the peak of the prices. They bought it on lower debt levels and then all of a sudden, we all know what happened. Interest rates went crazy and they're still kind of crazy. So again, one of the things that you have to remember, Baron Rothschild said it really well, that you need to buy when there's blood in the street, even if the blood is your own blood. So again, if you stop after a down cycle or some changes, you guarantee you lost the you need to be continuing the

game. And I believe that we're going to be able to reach a new perspective where we're going to be getting some really good values that are happening because of this agenda. So again a disclaimer all investors should do their own due diligence before investing understanding risk projected returns cash on cash yields return models are strictly the spons best estimate and one of the things I always like to mention on we sponsors get paid when limited partners get paid if the deal is structured correctly so if they're lying or mis misrepresenting it they're misrepresenting it to

themselves so you want to make sure that you're with people you know like and trust you may lose part or all of your investment. I am not giving you legal, financial or tax advice. Now, I do give lots of advice, but I am not e one of those profound. And you also need to remember if you're going to invest in a commercial real estate syndication, your funds will be locked up for 3 to 7 years. So again, the power of real estate as an investment mechanism. We all know that real estate can cash flow. We

all know that real estate has leverage. Leverage is super important for real estate. If you haven't read Rich Dad Poor Dad, read it. If you have, read it, read, read it, read it, read it again because it's a powerful book that talks about the power debt and the power of leverage. And again, another thing that's really important with real estate investing is you are investing in real assets. So again, I'm multif family. We're buying a business, but that business is based on real assets. If there's no apartments, no real estate, there is no business, right?

And then tax advantage. Commercial real estate has some of the best tax advantages that you can have from any type of in. And again, love him or hate him. When Donald Trump was debating Hillary Clinton and he said he pays no taxes, do you know why he pays no taxes? Because he was a real estate professional. He knows. And again, remember, it's not always how much you make, it's how much you keep that's important. And again, stocks, there is some cash flow and you can use leverage, but it's not real assets or tax advantage. Bonds,

you get some cash flow and there are some tax advantages in bonds. And of course, savings get X's all the way through. Now, I'm not saying you should never have any safe, but I'm talking about using your cash create wealth. So again, we're going to talk a little bit about multifamily real estate and how small sustain, excuse me, sustainable increases in rent can create significant increases in property value. How does this happen? Multif family properties are generally valued based on the net operating income. That's called NOI and the market capitalization. So the basic principle is

increase the NOI, increase the property value. Sounds somewhat simplistic, right? It's a very big different thing and we're going to talk a little quite a bit about it as we get going through this presentation. And for those that joined late, don't worry, we do send out a re. So, what I'm going to talk about here and I'm going to talk about a 100 units. And the reason I talk about 100 units is it makes the math easy for easy to do things in a hundreds and you can do the estimates based on what size property

you would be buying. So, just think of this. This is crazy. A $1 increase in unit rent. $1 time $100 time 12 months creates $1,200 annual incremental NOI. Think about that. $1 creates $1,200 NOI. Now, if you look at it at a I did a couple of scenario. If you look at at a 7% cap rate and again this $1,200 at 7% cap rate, you've added $17,000 with it. At a 6% cap rate, you've added $20,000. At a 5% cap rate, you've added $24,000. So again, this is a very oversimplified version, but you can see

powerful it is. We are talking about increasing the rent $1, and $1 can produce roughly between 17,000 and $24,000 in property value. Now, of course, we're probably not going to do an investment where we're only increasing the rent $1, right? We want to make sure that we're more and we go through all of the different scenarios here. So, again, the core formula value created annualiz annual incremental NOI divided by mark market cap rate. And again, I'm using a couple of cap rates and then I kind of settle at 6%. Your market may be different. you're

different. I'm just using it there because you had to pick one number to reg. So pure rent increase with no added operating. So again probably may have some added expense and we talk about that a little bit later but generally these increases go to the top line with minimal bottom line increase. So annual incremental N. So again the monthly rent increases per unit for 100 units for 12 months. It's pretty powerful. The fundamental math behind how you increase the NOI can translate into increases in multifamily value. So, I've never been a single family investor, but

I know some of you on the call have been single family investors. If you could put the rent up on your single family house, $100, how much more is that house worth? It may cash flow a little better, but it's not worth any more money. And again, that's the difference between commercial real estate and residential real. And it's also, as we talk about doing this in multifamily, you're adding this layer of it. In commercial real estate, you're increasing it at a much greater rate, right? A $100 increase can add significant value even on one particular

unit. Again, multif family is more than life, but I'm trying to sort of get the idea that commercial real estate is a amplifier of being able to increase your expense. So, here's another one to get some real insight. If you could increase rents $25, that's an annual increase of $300 at a five 6% cap rate. That's about $5,000. and and add a 6% cap rate, you have added a half a million to a 300 unit apartment by increasing the rents $50. Now again, gets even more exciting, right? It's $25, pardon me. $50, you're increasing it

up to a million. $75, you're increasing up to a million and a half. $100, you're increasing it to $2 million. Again, let that sink in. as small as a $25 rent increase, which is pretty nominal, right? It's not a very big N. And in fact, I had 125 150 down here. And I thought, let's keep it simple because right now, we're not in a big rent growth market, right? If we were doing this presentation back in 2021, we'd be talking about $150, $175 rent increases, but right now, we're really not able to do those kind

of things. So, think of this again. If you can increase the rent on a 100 units, $100, you're adding $12,000 to the NOI. That add $2 million to the total value of a property. So again, let's do the math. We're going to buy a $10 million apartment complex. We're going to pull one lever in one year. And we're going to be fantul. Okay. Again, that is f. It probably won't happen in real life, but I really want you to understand the power of what you can do. By increasing the rents $100, that $10 million apartment

complex is now worth 12 million. You have created 20% value. That is absolutely mind-boggling when you think about it. When you just sit back and you think, okay, how do they really do value add multif family? And I'm only talking about one trigger. I'm only talking about one trigger. And I'm talking about a trigger that also has no incremental expense, right? Super powerful. And again, let's say we're only able to get 25 or $50. Even at $50 on a 100 unit, we're creating a million in value. And I'm not saying you're only going to do

this once and then live with it for five, right? You'll probably be able to. Maybe you could get different increases all through the period. And it could be two $300 rent increases over a fiveyear period. Even 150 to$250 when you're just doing them incrementally as you go along, right? So again, super super powerful way to look at. So again, $100 renting, how can you kind of get a $100? Number one, and I I I didn't even put this in here, and I should have. I I realized this before I started tonight. Sometimes you buy them

and you're just below market rent, right? So, you're going to buy a property and market rents are $1,000 and they're only charging and why would they only be charging 9? They kind of given up, right? They've been running it for a long time. They've already made a lot of money on it. So, sometimes you can get rent increases with minimal value. Now, you normally are going to be doing some value pride. So, again, when you're doing value add to a property, you're doing renovations. And let's talk a little bit about renovation. How much value does

fixing the roofs bring to the How much value does fixing the parking lot? Maybe because it's aesthetic, you're going to be able to make it a nicer place and a place to go. But how much value are you going to get if you could increase the look and the feel of the back of the kitchen, of some of the fixtures, some of the things that don't cost a lot of money to fix. Okay? You can do improved amenities. Okay? So sometimes you come to an apartment complex and they're tired and they're run down and they

need some improved amenities, right? So you can add barbecue. You can add playscape. You can add just I mean we bought an apartment complex in San Antonio. It had two pools with zero pool furniture. Like you had to stand there if your kids were going to swim and watch your kids swim. It was ludicrous. Right? You can obviously do some things with better property. You can do some things with revenue, right? You can do some things with improved resident experience. Now, improved resident experience isn't going to maybe get you more rent from a new tenant,

but all of these things could get you new more rent from an existing, right? And again, stronger marketing position. So, that's why on a lot of the improvements that we're going to do, we're going to focus on the aesthetic of the properties. We're going to do a lot of things about adding different things to the property and doing different things and we're going to see what will bring value. And again, $100 time 100 time 12 is 12 $1,200 at a 6% cap rate. Kind of regurgitating oursel here again at a 6% cap rate you have

added $2 million in value. So again, let's just make sure we understand this. If you could get a 100 unit apartment complex and you could increase the rent $100 across all of the units, you're going to increase the property value $2 million. And for those of you that just joined, don't worry, we do send out a recording. You didn't miss all my great stuff I already said. So again, what happens when we account for real? Okay, I've been talking in big fanciful terms, right? So there is some reality, right? The simple formula assumes that every

additional dollar become NOI doesn't always become completely NOI. You may have some increased expense. So when you are looking at a multif family deal, you want to make sure that they have some sort of vacancy in there. Right? I've said we have a 100 units. All 100 units are full and all 100 units get $100. Going to be honest, that's pretty f right. But we may be able to do it over a period of time, but it is somewhat fantasiful. But I try to make sure that you get the big picture of the we're going

to have collection losses. Somebody's not going to pay their rent and we're going to have to evict them and we're going to have some bad debt. We're going to have some concessions. Let's say we bought a property that was in poor condition. And so now I want Max and Jacqueline to move in. So I'm going to spend some money making the place look nicer. I'm going to add some lights to the property so at night it looks good. I'm going to refresh the sign. I may pave and stripe the parking. I'm going to fix up

the pool area and put some things in there. I may do a barbecue pit. I may do some things to refresh the property, right? And get different things. But I'm going to say, "Hey, Max, if you come in and get in my apartment, I'm going to give you a deal." This is called a concession. So, what we're going to say is, "Okay, we're going to have depends on the apartment, right? Sort of deep value ad apartment. You may do something like a month's free rent. You may do um what we call a movein special. So,

hey, you pay us $300 and that's your first month and that takes care of all your those are called concessions, right? And the beautiful thing about concessions is they burn off and they don't stay. So, if I give you a deal to come into the property, so let's say rents are $1,000 and I say, "Hey, I'm going to give you $300 off for the first month. Come in. I'm going to give you $300 discount." Well, next month rent is a,000. or sometimes we've said one month free but the one month free might come over the

third month that you move in or something then these are called concess and again in Texas not all markets but when you increase the value of the property you got to know that you're going to increase your property taxes at some point you're going to have some insurance that you got to make sure that you're watching your utilities right if you're an all bills paid place and everybody moves in well guess what your bills are going to go up u because now there's somebody flushing the toilet, taking a shower, running the AC. If you're up

in Philadelphia, you're running the heat in the winter, doing different things. You're going to have some more maintenance, right? Because again, those units were sitting empty. You may have some management, but probably not on a 100 unit. You're not going to have to add very many people. You're just maybe have to be more efficient how you manage them, and you're going to have some other operating expense. So again, let's say we could make $120,000, but we really only made $114,000 considering we're going to drop NOI to 5%. So again, the difference is not significant, but

it is significant, right? It we went from $2 million to 1.9 million. And if we have some more, we may go down to 1.8 million, even 1.6 million. Depends how you're going to do it. Now again, remember we're only talking about one improvement metric. We're not talking about any other improvement. All we're saying is we're going to increase the rent and we're really going to watch the expense. That's all we're really saying today. Doing all of those things to do it. So again, super powerful for you to understand what can happen, right? So again, the

value add formula, right? Small rent increases, increase the revenue, you get a higher NOI. You take that by the capitalization rate. We'll talk a little bit about the capital capitalization for those that don't understand it. It's basically a cap rate. What do you do if you paid cash for the but to make sure you understand the lower the cap rate is the more valuable the property. It's kind of counterintuitive. The higher the cap rate is, the lower the value is. So if you remember, I showed you the six, six and 1/2 and a sevens. So

six is a better number than 6 and a half if you're selling. Um seven is a better number if you're buying. So you want to make sure you're looking right and again increase. So the basic economic engine behind many value ad strategy is not to simply charge more rent but you need to create additional income that the market will support that can be sustained. So again to date to today so far this call we've been talking a lot about rent cuz I'm going to be honest rent is one of the biggest trigger but it's not

the only trigger and for those that just joined recently this whole thing is recorded so you'll get a copy of the recording tomorrow. So again where additional rent come from right successful value ad strategies may create additional revenue through renovated kitchen updated bathroom flooring fixture exterior improvements. So again, if you come on, if you're in Texas and you can join us on our property tours, we show you some of the things that we do that creates value within an apartment. I wish I should have pro probably put some pictures of before and after in here.

I didn't, but if you're interested, we can talk later and I can do that. So again, what we're trying to do is we're trying to spend money on things that will increase. Now, at some point, you're going to have to spend money on things that don't add value because they have, in other words, I've got to replace an air condition. I don't get any more rent for replacement. Now, I may keep the tenant happier. I may reduce my long-term maintenance and a different thing. We toured an apartment complex with some folks, and I said, "Who

loves popcorn ceiling?" Nobody raised their hand. And I said, "Why did we leave popcorn ceiling in?" because we're going to get zero rent for not having popcorn ceiling unless we're really trying to reclassify and rebrand. If we're taking a Bminus property and we really think by making it look really substantial to a B+ property and somehow taking those popcorn ceilings off and adding stainless steel appliances and maybe upgrading to solid surface cabinets or different things, but you can do so much with adding fresh countertops, nicer sink, and to be honest, nicer faucet. You can buy

a faucet for 200 bucks that looks like a million bucks. Crazy. And when someone walks into that apartment, they go, "Oo, that looks nice." Same thing within a bathroom, right? We had an apartment complex and we basically just replaced all the fixtures with nice black fixtures. And we, this was just a resurface. We didn't put new fixtures in or anything. We just resurfaced so nice and bright white with nice and black fixtures. And we put black fixtures on the sink. We did a new top on the sink and it looked like whole different plate and

that can add value to the apartment, right? And it can add a lot of things that will make it more rentable. And again, operational improvements are better management, right? Obviously, having better management is great. Reducing expenses is super important, right? Because if we increase the NOI or increase the rents but increase the expenses, we're eating up all of the work that we're doing, right? Improve collections, right? So, making sure that you're talking to your tenants, saying, "Listen, if you could do this, you know, how can I help you get caught up on your rent? What

can we do? How can I get this caught up?" And just constantly talking to them so that you don't get it. And then lower vacancy, right? So, you're going to want to do it. Let's say Max and Jacqueline, sorry, you guys have moved into my apartment complex cuz you're first. I can see you guys here. And I say, "Hey, Mac, I got a deal. I'm going to give you 500 bucks off your rent if you could get somebody to move in." And he goes and does it. That would go up on the concessions thing, but

it's not a concession to him or to his friend. It's a concession to him. And is he going to be a happier tenant because I just gave him 500 bucks off his rent, or is he going to be a different thing to do different things? And yes, you can definitely test the units and we'll talk a little bit about that and that's where you're going to go to the next level. That's a great question, Mark. You can definitely do that, right? You can just keep pushing the envelope. And in fact, once you get up to

95 plus% occupancy, you're always want to be going to push the and you're going to be wanting and then again lower vacancy, right? By just having referral program, doing different marketing, doing events where people will come and get things. We did a thing once where a lot of folks were really struggling to get a bank account. So again, the world's changed a little bit, but there was a lot of people with questionable documentation and they really struggled to get accounts. We actually had a bank that came and hosted a barbecue and we invited people from

the neighborhood saying, "Are you struggling to get a bank account? Come here and we'll open you a bank account right here. You don't have to go to and not do different things." And we got we got two tenants out of that. It was a crazy I didn't think we'd get anybody. It was more of community service. And again, market race ben rents. Now, another big lever to pull is paid parking, right? Assigned parking or you could be doing covered parking. Can you have storage? Do you have storage? Pet feed. I had a friend, very creative

way to get the pet feed. He gave away free pet treats and Max would come in with his little dog to get his biscuit and Max didn't have a pet on his lease and we went, "Max, little Joey's not on the lease. We're gonna have to add little Joey on the lease, but here's a free bone form. Thanks for coming. Or just going to the dog park and talking to people that have dogs there, right? A proactive property manager is going to talk to people when they do their unit inspections. They're going to be looking

for dog bulls or signs of a pet and different things. Pet fees again are huge, right? You can do really well. And then other ancillary income. There's lots of different ways, right? You can put in tech packages. You can do lots of different things, right? But the strongest opportunity combines rent revenue growth with operational efficiency. Right? If you don't combine them together, if you only earn more but you spend more, we're not creating the value for our invest. So again, bigger investment lessons, right? The power of multif family isn't just the number of the units,

the ability to multiply improvements across many units, right? We talked about this. If you have a house and you can increase the rent by $25, it's not getting anything there, right? So again, we've said here that if you can increase it by $100 or $25, you're going to increase your NOI by $30,000 at a 6% cap rate. That's a half a million. And for those that came late, if you could increase a hundred units by $100, you're creating $2 million of NOI, assuming you've collected the whole $100 on all 100 units and you've not increased

your your operating efficiency, right? So, you can see it's super powerful. So, again, what investors should be asking, right, is the market supporting higher rent? I'd been to more webinars than I could ever count. And I remember going to webinars and they would show the income in the area and what the rents were going to be. And I know that you need to be about a third, right? So if rents are $1,000, you need to make $3,000. And this was a place where people were making $36,000 a year annually. Their rents were at $1,000 and

they were telling us they're putting rents up to 1,400. Well, nobody's going to qualify. So again do some simple maths on looking at to see can can it support it right? what improvements are required to justify and again you know what Mark talked about testing different units so you can do lots of testing right a lot of people think oh I have to have everything looking this you do not have to have everything looking the same right you want to be constantly test so let's say we take an apartment and we say okay on this

particular apartment we're going to go from white appliances to black appliance oh we got a nice rent bump with that people walked in and they really like this unit and our $1,000 unit all a sudden went for $1,100 $1. Well, maybe stainless steel applied, right? Cuz everybody's fixated with stainless steel. And if you could get it, but if you don't get it, stop buying stainless steel things, right? And looking at the different things. So many people renovate apartments thinking they live your tenants. And while we want to create clean, safe place to live, it doesn't

have to be where we would live. Most of our apartments that we're buying, they're workforced housing and we may not live there. Don't underwrite the story, underwrite the numbers. So again, as a passive investor, when you're looking at these things, look at the stress tests of what people are saying. Look at the market. And it's pretty easy to go on rent.com and just look at some comprehensible. Now, most of the time when somebody's doing a presentation, they will show you competing rent. And again, you can do some testing just by you don't have to call

apartment units, just by going on the internet and looking for things or just go going on that particular property's website and seeing what you can get. Again, the real power value ad, the goal isn't to simply raise the the goal is to create value, prove the property, improve the resident experience, increase sustainable NOI. So big difference, right? Sustainable NOI. You don't want to have year one popping and year two drop, right? I I should make a song that year one popping and year two drop. I could be a rap sing. Um you want to increase

the sustainable increase the value of the asset, right? Super important. Again, remember when we're buying these opportunities or when we're investing these opportunities, these are five-year play. They don't all have to achieve the full play in year one. And in fact, when you're looking at investing and if they tell you, "We're going to increase the rents $100 on 100 units in year one." Turn and run cuz they can't because those people have lease those you cannot increase the rent until their lease is done and or until they move out and you redo the lease. And

a lot of people will just never account for that. They'll never account. You have vacancy just by unit turns, right? Max moves out, Jacqueline's going to move in. I got to clean up after Max's dog in there, paint the apartment, do some things, and then Jacqueline can move in. It may take me five days, may take me 10 days, may take me three weeks, and Jacqueline may not be able to move in till week four, but she's going to sign a lease and pay now. So again, you've got to make sure that whatever you're looking

at on these deals that they're underwriting for all of these conditions, right? So the biggest opportunity in multif family isn't finding more property but really realizing how much value can be already yeah can already be created within the properties you own. Um so again multif family investing power isn't always in making one big change right I'm talking about small changes $25 $50 $75 $100. It's making small improvements that compound across every unit. Right? So again, my favorite saying here, Mr. Warren Buffett says, "If you don't find a way to make money in your sleep, you

are going to work and die." I did a Labor Day video on this yesterday. By the way, I'm Canadian. We spell labor L A B O R. I have to make sure I don't spell it Canadian. So now we're talking about making money. So again, this is about compounding your So we've talked about what we're going to do on return. And what I like to talk to you about is the power of compounding. So this is a very simplistic chart again. Now this is the investor return. Normally when you're looking at investing in a in

a deal, they'll normally tell you we're going to double your So I've shown they're going to double your money in 5 years. I've shown this happening over 25 years. And I've also not included tax. You will be if if you have taxes taxes, you may be paying taxes. If you were smarter than me and you converted this to a Roth IRA, then you would be earning $3.1 million tax-free. And again, this assumes your money is always moving. So again, you invest $100,000, grow it to two. You take the original 100 you made, you grow it

to four, you grow the four to eight, 8 to 16, 1.6 to 3.2 million. Again, this is one investment continually reinvested, continually invested in doubling without tax implication. So again, even if you happen Oh, do you guys still hear me? Someone said the sound wasn't good. They can still hear me. So if you can think of this, you're going to do multiple investments during your lifetime, right? This is just putting one thing together. So again, a lot of people, a lot of people say to me, "Well, Trevor, I want to quit my job and I

want to live off my passive." And I understand. And I always tell them, okay, but think about it this way. If you invest a 100, earn 100, live off a 100, reinvest 100, earn 100, live off the 100. First of all, you're not living really good. That's 20,000 a year on average. But where are you going to be in 25 years? 200. Do you want to be a millionaire or do you want to just have 100,000 20,000 extra cash flow? I think most of the folks on this call want to be millionaires. Now, at some

point, you're going to have to disrupt it, right? You're going to do different things. But if you can keep this growing and keep some of the base money growing, this is where true wealth happens. So again, how do we do these? We do these with syndicate. Syndication is a group of investors who pull money to buy or develop real estate. Syndications are ways for investors to invest in larger properties they couldn't afford on their own. And to the passive investor, the syndications are complete. So how does it work? Sponsors, general partners. If you remember at

the beginning, I was that on 20 deals. They're a group of experienced real estate professionals who organize the syndication, secure the funding, and implement the business plan. And all 20 of my deals have 20 different teammates. A lot of them are similar, but they're always different. Okay? So, for example, we have a value ad multi and Celely we just closed. I would not want Shyu running my assisted living. We closed on Tommy and Jenna. They're operators of assisted living. Been doing it for eight years, very successful at it. they operate the senior assisted living and

if we were to switch those two people I don't think the deals would do as well because certain people are good at certain things right so again when you're looking at a team you want to look at of the team so then again limited partners they help fund the project and they own a portion of the asset if you remember on our check you're investing in asset now again we've talked about the power of leverage so we're going to buy a $10 million apartment complex we're going to get a 70% loan this $7 million loan

and this is going to be secured by the general partners. They're going to have to have a net worth of 7 million. They're going to have to have a liquidity of about $7,000 and they're going to have to have the experience to run a unit apartment or whatever asset class it is. And that's what the banks look at. So now we need these passive investors to fill the gap. And again, simplified. We're going to buy a $10 million apartment complex. We need 3 million. We really need more, but I like to keep my math simple.

So, these passive investors are going to put $3 million into the deal so we can buy it. And here is the real magic. Again, we've talked about the power of leverage, right? We got 70% of the bank. People put in 30% of the capital, but check this out. They own 70% of the asset. They get 70%. So when we make a dollar, 70 cents of that dollar gets passed on to the passive investor and 30 cents of that dollar gets passed on to us as the general partners. Super super powerful way to be able to

do it. So again, we always start our opportunities with a 506b. So if we're not connected and you're not accredited, you're going to want to make sure that you book a call with me so you don't miss out. The greatest risk in investing in real estate is allowing fear keep you from the opportunity you never took time to stand. So I hope I've made you be able to understand it. So again, we always start our deals as a 506b. And to invest in a 506b, we must have a relationship base. Think of the B is

my buddy. Okay? Jacqueline's my buddy because we talked about cheese states. Okay? So you got to remember and you got to document it. Look at your calls and do different things. So we can talk because we have a relationship. I can't generally talk about a 506b deal on this particular call because I don't know everybody. Plus, this call goes out to YouTube and it's not private, it's public. And again, you're allowed 35 nonacredited investors and they need to be considered sophisticated. Sophisticated does not mean you know every it means you understand the risk that I

talked about at the beginning. You need to understand what are the metrics, what's the riskreward, what are the things you need to be able at some point understand what you're doing and you we must have a previous existing relationship. Now accredited investors can invest while it's a 506 and in fact I encourage them to because they can self- select their accredited they don't need the third party verification. So again and we're only allowed 35 spots for nonacredited investor. So, if it's a large capital, the chances are these spots will fill up. And then what we'll

do is we're going to switch our deal to a 506c. And when it's a 506 C, only credited investors can invest. And that's a net worth of a million dollar or personal income of 200 or family income of 300. And you must verify that you're an investor. So, you can't invest unless you can ver. But I can tell post it on my LinkedIn. I can talk about it. I can do all the different things. And the reason we switch it is so we have a bigger audience be able and that's how we work all of

our so again real quickly to understand some of the returns when you're looking at a deal. My favorite one is IRR and it's the time value of money and it's unique because it factors in the timing and magnitude of all cash flows and it assumes that a dollar received sooner is worth more than a dollar later. So the higher your IRRa, the more dollars you're receiving early. Equity multiple is really important. So remember, I keep talking about 2x your So 2x your money means we're going to double your money period of time. So again, where

it starts to make sense though a little bit is when you start looking at some time. So let's say I could have a deal go in 3 years and I doubled your money. These are all assuming your IR is going to be like between 26 and 30%. And I'm going to be honest with you, these deals are not h I think they'll happen again in the future. I had one deal, they tripled my 20 months. That was a 56%. I'd like to get a few more. This is much more typical. Five years to double your

money and it's going to be about a 15 to 19% IRA. 15 means there's not much cash flow during the deal. Most of the money is made on the sale and 19 means that about 30% of the money is made out of cash flow and 70% of the money is made at the end of the deal selling. So, this is pretty typical 5-year deal. You get between a 15 and 19%. And then, let's say right now it's not a good time to sell. So, we got to hang on to the property. Your IRRa really starts

to take a hit, but again, you're still doubling here, right? It's still a good investment. And a 10% IRRa is nothing to sneeze at. Um, and again, you want to make sure that you're selling at the right time. Other things that are super important are cash on cash. The cash on cash is often where I talk about you're going to get some cash through it, right? Cash flow. We talked about that on the first slide, the check. And again, you're normally going to get some of it. I estimate about 30% on most deals is going

to come the returns is going to come in cash flow and about 70%. But there are some deals where you may have a refinance and you're going to more in cash flow. There's lots of different scenarios how that can change the then there's this thing called a preferred return. I love a preferred return. It's a priority profit share paid to investors, LPS, the limited partners before the GPS earn a performance bonus. Again, our deals usually have a baseline of 7%. So, what that means is until the LP makes 7% on their money. The GPS are

not eligible for their split. So, it really aligns and puts the investor interest first. So, let's say a deal is just not going as well as we'd hope and we're not being able to pay the 7% and it keeps acrewing until it's acred and caught up. So, if you put in 100,000 and you're supposed to get seven in year one and you got four and this until maybe in year three all of a sudden you're caught up to the 21,000 that and that's the 7% 3 years. Then now we start getting the split. Some deals

have different scenarios to it and you just need to understand this. A lot of investors think, "Oh, I'm going to make 7%." It does not mean. You need to look and most sponsors will produce a chart that says this year is this percent, this year is that percent. Um, and again, it's their best estimate to make sure you understand. And then ARR basically just looks at the whole opportunity. So if I double, excuse me, if I doubled your money in 5 years, that's a 20%. So little bit about that. So light in there twice. Oh,

when be fearful when others are greedy and be greedy when others are fearful. I know I can't see all your hands. How many people are afraid in America? A lot of people are fearful. A lot of people are thinking what's not what are we doing? It's the land of craziness. You know, I have never seen things so polarized for so long, but it's going to create some really good opportunities for us because certain people are not buying properties. It was interesting. I saw a report today that submarkets, so smaller markets, not main city markets. The

sales are usually about 35% of all real estate sales are in subm markets. It's now 50 because again, a lot of people are relocating. A lot of people are kind of a little bit nervous on some of the urban cities and some places like Austin and San Antonio did over. So again, we do all of our deals with our massive masters. You hang out with successful people. they'll brainwash you into believing in yourself and thinking you can achieve anything. Um, eight years ago, my first investment was with Sanjay. So, we've been together for the longest.

He's been my longest in my career. Um, these folks are all my mentors and a lot of the folks on this call. When you're investing, always analyze risk, reward, time, think about different asset classes. And again, I've shown this slide before, but I think it's super important talking about multif family. Americans can't buy houses in. Look at this chart. This is rent and this is America wide. This [clears throat] isn't just Texas. Rent went from here to an average of $1,800. Mortgages. You can see they were pretty close here in 20 started to bid a

big gap in 2123 and now look it is almost a $1,200 delta between your mortgage and your rent. So for those of you that got kids, they're not moving out. Another scary. For the last 10 years, 48% of Americans qualified for currently 20. So again, why am I so bullish on multif family? Because people can't afford to buy a house. They're going to have to. So it's super important that you understand this, right? And again, we talked about over supply. This is what happened when the over supply came in certain markets, right? New multif family

starts where 156,000. It's dropped 76%. And when these start building again, it's going to take like 5 years to get up into here. And again, apartment center construction from over a million to just over half a million, 53% drop. So again, we're going to start balancing out and we're going to have a huge demand for our multif family. Again, first-time home buyers, average age used to be 30, now it's 40 year old. Again, got anybody 30 year old, they're living in your house or they're getting an apartment, right? So, we do have one current investment

open. I'm not going to spend a lot of time because we're near the end. Only have one spot left. Um, I actually filled my allocation and somebody else team dropped out. So, this is 136 unit B-class in Celely, Texas. It's for credited investors only. This will be you if you miss out. This one has a 2.2x multiple, 19% irr 7%. I'm not going to go through this too much other than I'm going to talk about this slide. This one uses a little bit different metrics, right? So, we've shown that we're going to increase our rents

on this particular property only by about 2%. So, our rent's going to go from 11 1,137 to 1,250. But where we're going to add the value ad here is very important for this call. So, there's this thing called rubs recovery and that's basically a bill back for water and electricity cuz these apartments are not individually me right now. Now they're billing 45% of the cost. So less than half. Our goal is to increase the rubs up to 75. We'll probably take 2 years to. So what we're doing is we're not increasing the rent, but we're

increasing their bills for being. Another thing we were able to do is survey of the residents and we're going to install 80 washerdryer connections in out of the 136 units and we're going to install some car ports. There's a lot of nice cars in the parking lot and no car ports and so we're going to strategically start building some of them and we'll be able to charge rent for those. One other thing that we're going to do is we expense ratio right now is about 52%. So remember that was one of the levers. We're going

to bring that down to 47%. Um for those of you that are geeks we have a 2.0 DSCR. That is like one of the most amazing DSCRs I have ever seen. And in fact, by the end of the five years, we'll be at 3.0, which is incredible. And I just want to talk about how do we think we can do that? Well, we own a property 2 minutes away, and we've already increased occupancy from 92 to 98%. We've reduced expenses from 52 to 46%. And remember, this is 60 units. We have 136. So now we

have 196 in the marketplace. A lot more economies of scale. So we went from 52 to 46. We did increase the DSCR from 1.65 to 1.85 reduced the delinquency down 0.5% and it was already only four which is an amazing we've reached our year 2 NOI mark and we budgeted only 2% rent increases and three and we've been paying our prep payments from day one and because this is such a good deal it really helps with the cash flow. We got a loan locked at 5.65% 65% a 10-year loan advertised over 30 years, but all

five years interest only. So, it frees up a lot of cash flow to be able to have payments to our investors. We're going to get cost segregation. I'm running out of time here. So, again, you are one decision away from a new life. Decide to take massive action. Massive dreams need action. And again, I want to have a 100,000 people reach financial independence through real estate investing with me. Hopefully, the sound came back for Denise. [laughter] Otherwise, she's very patient. She's watching my lips move. Anybody have any questions? You can feel free to unmute yourself.

Any thoughts? Good to see everybody. And again, if you were brought to this meeting by somebody, um, you would want to invest here to edit. Any question? Nothing. I did such a good job. Awesome. Very good. Well, listen, I appreciate you guys coming. If you enjoyed anything, please invite somebody. We do these the second Tuesdays. Um, I did one webinar with one person kind of it was like this. I was sad. [laughter] This is great turnout tonight. So, I really appreciate this. I recognize a bunch of the names on here. really do. Um, and it's

super I my goal is to try to give you good clean information that's easy to understand. So, um, any last minute for questions and then I'm going to let you enjoy your evening. >> There is a question. It's in the, uh, chat. There is no question box. >> Oh, I didn't even look at question box. Sorry. >> No, there is no question box. It's the chat. >> Oh, what question? >> They want to know who the J the GP team was. Oh, that is Shyu is the lead GP and Sanjay's the cake, but it's not

a big team. I think he has a couple other folks that are investor relations. I've been I've been just working on my own. That's a great It was a It was pretty easy one to raise good cap. Actually, my biggest date. So, I was very excited about that. I like setting right. I like even numbers and I like setting. Awesome. Very good. Well, everybody enjoy the rest of your month. Appreciate you being here. We will see you ne and again feel free to book a call with me if you ever have any questions. Happy to

just to chat. Thank you. Take care. Have a good evening.