Ep #123 – Sterling White and Jacob Blackett recently purchased 46 units after wholesaling single family homes.
- From a large flipping seminar to a successful multifamily business.
- What is wholesaling?
- Rod’s Multifamily/Wholesaling course.
- Why you should bring deals to experienced investors.
- What to find first when wholesaling.
- How and why you should find a mentor.
- From single family to multifamily.
- Why Google is your best friend.
- Motivated sellers
- Why driving for dollars is important.
- What is a T12? (TTM) (Trailing 12)
- Why is a T12 the most important thing to look at?
- What is gentrification?
- Why you should build rapport with the owner.
- Reasons you should let the owner talk.
- Why you should be careful of renegotiation, aka re-trade.
- Why you should market utility bill back.
- Why you should communicate with your competitor neighbors.
- Mandatory things you need when marketing your property.
- How outbound call campaigns landed them a 50 unit deal.
- What to do when a seller is not flexible on the price.
- Book recommendation: ” How to Win Friends and Influence People” by Dale Carnegie
- Learn more www.holdfolio.com
- Connect with me on Facebook at Rod Khleif.
- Text Rod to 41411 or visit RodKhleif.com for a FREE copy of my book, “How to Create Lifetime Cash Flow Through Multifamily Properties.”
Watch on YouTube!
Do you want to learn more about Multifamily Real Estate Investing? Work with Rod in the Lifetime CashFlow Academy's Multifamily Course & Coaching Program
Full Transcript Below:
Ep #123 – Sterling White and Jacob Blackett recently purchased 46 units
Welcome. This is the Lifetime CashFlow Through Real Estate Investing Podcast. This is where you’ll learn strategies to help you achieve lifetime financial freedom through real estate investment. Your host, Rod Khleif, has owned over 2,000 homes and apartments. And he brings experts in all aspects of real estate investment and management on to the show. Now, here’s your host, Rod Khleif.
Rod Khleif: So I have a couple of housekeeping things for you guys. If you haven’t heard, we are now at 1.2 million downloads for this podcast. I’m so grateful for you guys listening and the positive feedback that we get from you. Over the last year, I’ve spoken with or communicated with, literally, almost a thousand of you and it has been awesome.
Now lots of you have asked me for coaching or mentoring, or to create a course, or some training materials, and I had no plans to do that when I started this podcast. But finally, after so many of you have asked, I finally decided to go ahead and do it. I will tell you, close to launching, an incredible course and coaching program, and I wanna help you guys crush it in this business, and build lifetime cash flow quickly.
If you wanna get information on this, text the word Crush to 41411 and we’ll be sure to send you information when it becomes available. If any of you have read my book, you’d realize I don’t do things halfway so when I tell you that it’s awesome, it really is awesome. So, excited to get that out.
Also wanna mention, the book is still free. I’m finalizing at Amazon. I was waiting for some testimonials from some other luminaries in the in the real estate space, and I’ve gotten them. I’m just putting the finishing touches on it. Every review I’ve gotten for that book has been great. If you haven’t gotten your free copy make sure you do that, text ROD to 41411, or go to rodkhleif.com. Alright, let’s get to it.
Rod Khleif: Welcome to another edition of How to Build Lifetime Cash Flow Through Real Estate Investing. I’m Rod Khleif , and I am thrilled you’re here. You guys are gonna really enjoy the two gentlemen we’re interviewing today. Their names are Sterling White and Jacob Blackett, and they have taken down a 46 unit, they’ve done a ton of business in the single-family space. Now they’ve come over from the dark side to the light side, and they’re in multi-family. I don’t know why I threw that Star Wars reference in there, but anyway…
They have 46 units, they’ve got 50 unit under contract, and we are gonna dissect those deals and we’re gonna find out what makes these guys tick. Welcome to the show guys.
Jacob Blackett: Thanks, Rod.
Sterling White: Thank you so much. Welcome world, to the most interesting podcast.
Rod Khleif: Okay. Thank you for that. Let’s start with Jacob, and maybe you can tell us your story as to why you got in to real estate, and then Sterling, you’ll get your chance, and really, how you got where you’re at.
Jacob Blackett: Yeah, I’d love to. I was studying Finance and Economics at the University of Nevada. It was my freshman year, late one night, I saw an infomercial, “Real estate, make millions…” And they’re having a free seminar. That was really what turned my head towards real estate. Of course, with college, there’s no formal real estate classes, and so I decided to check out that free seminar. That led to purchasing some education and what eventually led to a couple flips that I did my sophomore year of college.
Rod Khleif: Where at?
Jacob Blackett: So those flips are down on the San Bernardino area.
Rod Khleif: Okay, California. Okay.
Jacob Blackett: Yeah, down in Southern California. And got polished up pretty good on those first couple of deals. Unfortunately, didn’t quite put the pieces together. There was a lot of hype that was translated through the seminar process. And just really it’s an accumulation of little things. Not really getting the after repair value down, the realtor kind of inflated what he was thinking we could sell these things for, and then some construction mayhem led to some… We spent twice as much in construction costs.
So yeah, after those first couple of flips, when all was said and done, I found myself about $110,000 in the hole.
Rod Khleif: Wow. Wow.
Jacob Blackett: So that was…
Rod Khleif: When was that? What year was that?
Jacob Blackett: I was 19 years old, sophomore year in college, and that would have been 2009, 2010.
Rod Khleif: Oh. Okay. So you got caught in the crash.
Jacob Blackett: Yeah, a little bit. A little bit.
Rod Khleif: Okay, so that was right at the down side of the crash, ’09. Maybe, did that impact your ability to sell those properties? Was that the issue? I mean why did you lose that large amount of money? I have to know the answer of that.
Jacob Blackett: The biggest reason is that, I had taken a $100,000 and I used hard money lenders.
Rod Khleif: Okay.
Jacob Blackett: I used the $100,000 to do two deals, and so I was paying very high interest and the $20,000 rehabs turns of 30 and $40,000 rehabs. I was penciled out of a 25 to $30,000 profit margin, and so the deals took a long time, which accumulated tons of interest every single month. So it’s just that over-leverage, took way long, and then we sold them for 20, $30,000 less than what we had projected.
Rod Khleif: Wow, oh, that’s a painful seminar. I’m surprised that didn’t sour you on real estate in general. That says a lot about you that you kept persevering, pushing forward because a lot of people, if they had lost that kind of money on their first deal, wouldn’t have gone forward. So what happened after that? What prompted you to continue staying in real estate?
Jacob Blackett: I kept my full time job, working in college. I was actually working at a Walmart Distribution Center, on the weekends, pay my rent. I just kept learning about real estate because I met people who are doing good things, who are making money, and I knew that was possible.
My other part of me is, I needed to repay. I ended up loaning that money, well lending that money from my… I’m sorry loaning that money…
Rod Khleif: Borrowing the money. You borrowed the money from people you knew?
Jacob Blackett: Yeah, from my grandma.
Rod Khleif: Oh, oh geez… Okay, well there you go.
Jacob Blackett: So I knew that getting into a financial career wasn’t gonna pay that120,000 back very soon. And I wanted… I was desperate to get that back to her so it just fueled the fire.
Rod Khleif: Okay, so what’d you do keep flipping?
Jacob Blackett: I put my head down, and just kept learning, and kept growing my knowledge base, and meeting people, getting ready for the game plan which turned into moving to Indianapolis, Indiana where I was able to… My senior year of college, I maxed out my student loans so that I could get some working capital, which is about $30,000 of my own capital.
I move to Indianapolis where there were these 15, $20,000 homes, and so I started there. I took my time and within a few months I bought my first $15,000 home, and sold it for $20,000. Just rinse and repeat. Met some people…
Rod Khleif: Okay, so you were flipping, you weren’t wholesaling. You were actually flipping these houses. You’d close on them…
Jacob Blackett: Yeah, I was wholesaling in a way, except I would close on them, and…
Rod Khleif: Okay. For those of you who are listening and don’t know the difference, wholesaling is where you’re selling the contract. You tie up the property, you put it under contract, and you sell the contract to a flipper or a person that is gonna hold to it and rent it. That’s a great business, in fact, one of the bonuses of my course that’s coming out before too long, as a full-blown 12 module, it’s called The World’s Greatest Wholesaling Course on wholesaling single-family and multifamily. It’s just a bonus to the other course so it’s adding a ton of value.
Jacob Blackett: And you know what happened, Rod? This may be applicable to anyone looking to get started and who maybe listening to this podcast, is that I went out there and I found these deals, and I ended up selling these deals to this one individual, his name was Aaron Adams. He was purchasing everything else, finding.
That got me directly involved in his organization. I was bringing value to him by finding these deals. His operation, he’d buy a100 to 200 homes a year and so I was able to take a step right in to his organization. That’s a good pointer for anyone looking to get started; is just bringing deals to experienced investors and riding their coats.
Rod Khleif: Sure. Sure. No, you’re absolutely right. You go to your local REA meetings. You find your… In the course that I was just talking about, the way you do wholesaling is you actually, and we’ll get back on track here in just a second. But the way you do wholesaling is you actually find your buyers first. You build your buyer’s list and you find them by going to your real estate meetings or advertising that you’ve got a phenomenal deal to make the phone ring.
There are a number of ways that you’ll learn, but those ultimate buyers are going to be experienced real estate entrepreneurs. So you used this Adams fellow in Indianapolis to learn the business, which is fantastic. It’s a great way to do it. If you’re almost finished, we’ll let Sterling tell his story.
Jacob Blackett: Yeah, absolutely.
Rod Khleif: Yeah, okay. Alright, Sterling, you’re up, brother.
Sterling White: Alright. Perfect. So I would say, me getting started in the real estate industry was partially the universe and basically falling into it. I got started with a friend of mine on the construction side of things, doing construction on commercial projects, fire stations, and got into the inner workings of that. Got my hands dirty, didn’t like the construction side so much. I was actually working out at a CrossFit gym at the same time where I had met my mentor.
At that time, he was always discussing real estate. At that time, he was looking to get into single families. I approached that individual and said… He was he was older very knowledgeable, and I mentioned I will work for you for free to basically gain the knowledge that you have in this industry. What do I need to do to bring you value, and also solve the problems that you’re currently experiencing.
At that time, he brought me on board. I got into the inner workings of, not only his management company but he was doing development on historic apartment buildings downtown. As I stated, he was looking to get into single family, that’s when I then found a property for him. Instead of taking a simple wholesale fee, him buying it outright from me, I partnered on them for equity in that deal. That’s one thing.
Rod Khleif: So you were working for free for how long, for this guy?
Sterling White: I’d say about a year and a half.
Rod Khleif: How did you survive financially?
Sterling White: He allowed me to live at his apartment building.
Rod Khleif: Okay. So you didn’t have to pay rent.
Sterling White: Correct. Well I…
Rod Khleif: You got free rent out of the deal?
Sterling White: I paid about $200 per month.
Rod Khleif: Wow.
Sterling White: To live in a prime location.
Rod Khleif: Guys, this is a clue, okay. I mean, this is a big one, and you’ve heard in on the show before. Guys that have done this, you find a mentor, you work with them for free, and look where you are. You guys are approaching 100 units at this point. Fantastic. I love hearing that story.
Sterling White: Yeah.
Rod Khleif: So you guys… And then you were smart enough not to wholesale a deal. You partnered on a deal, so what’s the benefits of that? I’m gonna let you tell it because I know what they are but let’s let the listeners hear.
Sterling White: Yeah. Instead of taking the wholesale route, and there’s that surplus that is highly taxable or taxed at a higher rate, I decided to take with… He brought the capital. He had 85% equity in the deal and I had the remaining 15%. Just based upon the monthly cash flow that came in, I took a piece of that.
Rod Khleif: Okay. And you learned, and you continue to learn.
Sterling White: Oh yeah, I ran with basically everything from finding the contractors, to doing the leasing, and really gotten to the trenches. So that’s… yeah.
Rod Khleif: Invaluable knowledge and valuable knowledge. Then you guys met each other; you teamed up. You’ve done a bunch of single-family stuff together. Jacob, tell my listeners about the call we had last year.
Jacob Blackett: Yeah, it was probably middle to the first half of last year that I got a hold of your podcast because I was trying to shift the knowledge towards multi-family and get a… Both, Sterling and I knew that it’s something we wanted to do.
So I got a hold of you podcast and just loved the content.
Rod Khleif: Oh, thank you.
Jacob Blackett: I couldn’t compare it to any other podcast at that time. And still today, I listen to the podcast every week. But I ended up getting… Go ahead and scheduling a call with you after I listened to all these podcasts that I hadn’t listened to before. We had a conversation about our current infrastructure, and where we’re at with all the single-families, and you had said, “Well you set yourself up perfectly now, just stop racking your head with these single-families, and go buy some multi-family apartments. And so that…
Rod Khleif: And look at you now. [chuckles]
Jacob Blackett: Yeah.
Sterling White: Got it done.
Rod Khleif: Awesome. Awesome. Between emails and phones, I talked to almost a thousand of you guys listening. Unfortunately, I’ve had to cut that back because of the… I’m instituting the course and the coaching now but it made me feel good. I’d forgotten that Jacob reminded me when we started recording here, that we had that call and so it made me feel real good.
So let’s talk about that 46 units and that’s exciting. You guys, you did syndication; you’ve got a platform called Holdfolio, holdfolio.com. It’ll be in the show notes. You guys pulled the money together. You’ve pulled together, what did you say? $685,000 to take down this 46 units. Let’s talk about that deal first. Let’s talk about how you found it, and then let’s dig in to it.
Sterling White: Yeah, so one thing is we not only, Jacob and I were shifting from the single-family to multi-family, we were educating ourselves heavily on multi-family. We were making contacts with brokers, establishing the distressed multi-family units that were in Indianapolis.
For the specific one that we’re referring to, the 46 units, I’ve actually driven past this derelict area, for I’d say four or five years. There’s two multi-families right across from each other. The one we currently have, 46 units, and the other that’s 100 units. The 100 unit has always been vacant, but recently a developer purchased it and is doing a completely new renovation. Then I drove back in the back pocket, and noticed that the other one was in distressed condition.
In my head, I went, pulled the… I went to this excellent website called Google, and did some researching and noticed that it was previously listed but then the broker took it off the market. And I further started looking and saw that the current seller was shifting to be a debt collector, which was a sign of motivation, in my head…
Rod Khleif: I’m sorry. I’m sorry. I’m sorry. I’m not tracking you there. But I wanna stop you and I wanna get back to that debt collector comment. For those of you who are listening, you guys, you’re driving around every single day, if you’re not looking around to see what’s available, you’re making a huge mistake. I can’t tell you how many properties I purchased because I noticed them on the side of the road like this.
Look at this. This is how you found a 46 unit. Please don’t discount the importance of driving around your area, and looking for problem properties, and you saw an opportunity, the guys developing the property across the street. Naturally, that’s gonna bring the whole area up so you started doing your research. But what do you mean, that you saw that he’d become a debt collector? I don’t understand that.
Sterling White: Yeah, I saw he was shifting and this was from my understanding that he owned other properties as well, and this was actually his last property.
Rod Khleif: Okay.
Sterling White: He owned about four or five other multi-family properties, and he was just basically liquidating everything.
Rod Khleif: Okay.
Sterling White: So making a shift from being a landlord to a debt collector.
Rod Khleif: Oh, I see. I see. So he was taking paper on these other properties and selling them with financing so that’s what you mean by debt collector.
Sterling White: I meant he owned all those other multi-family properties, and he was a landlord but he was looking to shift from being a landlord, to a debt collector full time. That’s his current business.
Rod Khleif: Okay. So he owns a debt collection company.
Sterling White: That’s right.
Rod Khleif: Okay. I’m sorry. I wasn’t tracking the correlation between that and how that correlated to an opportunity. I was missing something. So he wanted to get out of being a landlord, is the bottom line.
Sterling White: That is correct.
Rod Khleif: Okay. Got it. Okay, got it… So what happened then? Did you contact him directly?
Sterling White: Yeah, so I contacted him directly through his collection agency. We spoke on the phone. He mentioned that, “If you are not willing to put down $200,000 for earnest money this conversation is no longer gonna go further.
Rod Khleif: [chuckles]
Sterling White: So…
Rod Khleif: One of those, huh…
Sterling White: Yeah, one of those.
Rod Khleif: Okay.
Sterling White: At that time I knew that we had enough capital if we wanted to move quickly that we would be able to go that route. He gave me a little bit more details about the property saying that it was under contract so, out of contract if you want any additional details, contact this broker, which happens to be his sister.
Rod Khleif: Oh, okay. Okay.
Sterling White: Then that’s when we obtained the rent roll and also the T12, which was a trailing 12 months of financials.
Rod Khleif: Right, and that’s, by the way guys, when you’re looking at a deal, the T12 is the most important thing to look at. Don’t pay any attention to the brokers pro forma. I mean certainly you can look at it but that’s pie-in-the-sky. What you are interested in is what the property has actually done. Was it occupied?
Sterling White: It was about at 50% occupancy.
Rod Khleif: Why was that?
Sterling White: There was eight units that went through a recent fire damage.
Rod Khleif: Okay.
Sterling White: And also, it was just poorly mismanaged.
Rod Khleif: Is this a C area or D area?
Sterling White: It is a C area.
Rod Khleif: C area, okay.
Sterling White: Correct.
Rod Khleif: And it’s gentrifying just a little bit, yeah, certainly; they’re redeveloping across the street or any other gentrification going on?
Sterling White: There is an area by the name of Fountain Square, where it’s really odd when you’re driving through it you’ll see a house that’s $40,000, and then you’ll see a completely new build that’s…
Rod Khleif: Okay. That’s gentrification exactly what you’re describing there is, and you will see some rough characters walking down the street. Then you’ll see houses that have been completely redone or rebuilt that are in great shape. That is the process of gentrification. That is an incredible opportunity. I’ve seen it happen in other markets, and capitalized on it.
You guys got the trailing 12, and you saw an opportunity to… and that’s probably why you raised 685 ‘cause you guys had to do a lot of CapEx there, right? You had to do a lot of renovation.
Sterling White: Correct.
Rod Khleif: Is that… Right. Are you in the middle of that now?
Sterling White: Did you want to tackle that, Jacob?
Jacob Blackett: Yeah, we are, and I just wanna just take one step back…
Rod Khleif: Sure.
Jacob Blackett: And talk about… Sterling had noticed that it was listed but he chose to chase down the owner, and talked with the owner. That’s one thing we always try to do; is if we can, if we can ever talk to an owner, just to try to build some rapport, we’d do it.
Rod Khleif: No question. I’m really glad you brought that up, ‘cause the rapport is critical. Okay.
Jacob Blackett: This seller, he was putting the broker in between us. He was trying to insert the broker. What we did, I remember Sterling, when we actually went down and met a maintenance guy to go check out some units one day. Sterling brought a thank you card with him and I was like, “What are you doing with that thank you card?” He’s like, “We’re gonna take this to the seller’s office and just get an opportunity to see him face to face.
So we drove out to his office, his gatekeeper comes out, kinda an asking who we are? Do you have an appointment? I said, “We just have a thank you card for Chris and so, Chris, the seller let us in and we sat there. We just asked him some questions and just let him talk. We sat there for an hour. He was just spewing about how he wants to get out of rentals and focus on his business. We just ate it up.
We got him to carry back $700,000 it’s about 70% of the purchase price. I think it will not have happened if we did not take the time to get in front of him.
Rod Khleif: I have to agree, and I have to add some emphasis to what you just said. Brilliant, Sterling… Number one, okay? The other thing that you guys did; you’re dealing with a guy that’s in debt collection. I don’t know if you’ve ever had a debt collector call you. There are no uglier people on the frigging planet, and I’m sure I’ll get some hate mail from some debt collectors but I don’t care. Screw you. I don’t care ‘cause they’re typically ugly. I mean ugly as a personality.
So the fact that you got in to see him, number one, is impressive. Number two, the fact that you were smart enough to sit and let him talk. The book, How to Win Friends and Influence People is all about letting people talk. If you’re in a conversation with someone and you let them; you ask them questions, just let them talk. They’re gonna think it’s the greatest conversation ever because they’re the ones talking. Brilliant.
The other thing that I’m really… and I’m glad you brought emphasis to this, because seller bonding is so important. Particularly when you’re dealing with people that have been beat up in the process, or elderly people, that can make all the difference in the world. So very, very smart move for you guys to go meet the seller.
Certainly, those of you listening, if you’re interested in a property, there’s no issue with you going around a realtor and talking to the seller directly. They will ultimately direct you to the broker but as long as you’re not licensed, CPA licensed obviously you cant. As long as you’re not licensed, you can talk to anybody you want. And I have no issue talking to a seller and just saying, “Hey, saw you got a for sale. I’m happy to work through your broker but I just thought I’d say hello and see what you can tell me about the place,” and starting that relationship. Brilliant. Great job.
You got 700 grand in financing, now let’s talk about, you’ve taken it down. When’d you close?
Jacob Blackett: We closed the first to second week of February.
Rod Khleif: Okay. You’ve been in it for three months now. Is that settled? March, April, May… Yeah. Three months, is that right? Or two months, three months?
Jacob Blackett: Two and a half.
Rod Khleif: Two and a half months, alright.
Sterling White: One thing to say is, well Rod, the process took about five to six months from initial contact with the seller, to actually closing on the property.
Rod Khleif: Why? Why?
Sterling White: One was the deal was contingent up on one of the roofs being completely…
Jacob Blackett: Replaced.
Rod Khleif: Replaced.
Sterling White: Replaced.
Rod Khleif: Okay, that was on the seller to do that?
Sterling White: Correct. That was the seller.
Rod Khleif: Okay. Good job on that too. What else?
Sterling White: And we had a rough winter so that was the biggest…
Rod Khleif: That’s what slowed it down. Getting that roof done. Yeah. You’re gonna get that up north.
Sterling White: And a little bit of the negotiations as well, that certainly slowed the process.
Rod Khleif: Okay.
Jacob Blackett: We tried hard on several occasions so
Rod Khleif: Did you re-trade? Did you come up with a deal and have to go on a re-trade because you found stuff that wasn’t quite what was disclosed to be?
Jacob Blackett: Yeah. Yeah.
Rod Khleif: Okay.
Jacob Blackett: Just in general, we always like to see what we can get in. You lose every shot you don’t take…
Rod Khleif: Agree. Agree, but the caveat there… I wanna give you a caveat. The caveat is, you don’t wanna get a reputation for renegotiating deals and be that person because it is a small market.
Jacob Blackett: Yeah.
Sterling White: Yeah.
Rod Khleif: But you’re dealing directly with the seller, as it sounds like, so the potential damage of that is not as great. But do be careful of that guys, you don’t wanna get a reputation as going in there and renegotiating every deal you do or you’re not gonna get deals from brokers. It’ll piss brokers off for sure.
But hey, if something’s not what they said it was, by all means, go in and renegotiate. Re-trade means renegotiate, for you guys that don’t know what that means. It it’s not what was disclosed in the broker’s package or what was given to you in documentation, or you discover things that maybe the seller did even know about, by all means, renegotiate or re-trade.
So it took six months to get it closed; you closed in February. Where you at with the deal now?
Jacob Blackett: Right now, we’re completing our improvements, and so we went into all common areas. We’re putting new flooring, two tone paint scheme, new numbers on the doors, new light fixtures. On the exterior of the home, we’re doing landscaping, some shutters. It’s all brick building so just putting new shutters, and painting the decks and putting new signage, and redoing the parking lot. Really giving a whole makeover there.
Rod Khleif: Yeah, it’s pretty extensive exterior makeover. What are you doing inside the units?
Jacob Blackett: Inside the units, we’re doing a two-tone paint scheme. We typically… A lot of the units have hardwood floors so we’re going ahead and refinishing those rather than putting a cheap carpet over it.
Rod Khleif: That’s smart. It’s smart. Don’t cover up beautiful hardwood floors if you can re-finish them. By the way, what he means by two-tone paint’s, for those of you that haven’t done that before, typically, and one that we love is like a taupe color on the walls or very light taupe with off white. Not off white, I’m sorry, like a light beige with white trim looks really, really nice. Is that what your guys are doing?
Jacob Blackett: Yeah, we have a kind of a modern gray scheme…
Rod Khleif: Yeah, gray is great too. Sure. Absolutely. With white trim is beautiful.
Jacob Blackett: Yeah. So all these units are getting refreshed up to standards. We’ll have all these common areas, exterior up. Next Friday, we’re having a grand opening. Right now, the average rental per unit; they’re all two-bedroom, one-baths, so the average rent is 515 per month
Rod Khleif: Okay.
Jacob Blackett: Our new rate is 635 per month.
Rod Khleif: Wow.
Sterling White: And it’s 605 with a $30 bill back.
Jacob Blackett: Correct.
Rod Khleif: I’m sorry what does that mean?
Jacob Blackett: So we’re marketing the unit at 605 per month and then…
Rod Khleif: Okay, but the utility bill back, you mean?
Sterling White: Correct.
Rod Khleif: Okay, got it. So you’re making them pay for the utilities. That’s fantastic and that’s a great way to market it too because anybody else that’s marketing is not gonna have typically, the utilities included in the rent. And that’s a very smart move that you guys are marketing it, and then you let them know when they come in and apply, “The rent 605 but here is what you pay for utilities. It’s a flat fee and it’s cheaper than you’d pay, if you had it yourself.” Then you can sell that.
Sterling White: And we had the heat all paid by us, and the parking as well.
Rod Khleif: Okay.
Sterling White: So they pay for the sewer and…
Jacob Blackett: It’s on a boiler system.
Rod Khleif: Okay. Okay. Well that’s great. How does that compare in your market? Are you at the top end at that rate, or where you at as far as other competitors?
Jacob Blackett: It’s pretty in line with updated units. The real comparable and through conversations with the 100 units being renovated across the street, that owner, Sterling chased them down and was adamant that we get on the phone. When we actually got on the phone with them so we could discuss. He’s doing a little bit higher end renovation than us and he’s shooting for a high 600, right around 700 for his two beds.
Rod Khleif: Perfect. Perfect. Good call on that one too. You guys should align yourselves with your neighbors and you can send people to him and he can send people that you. If they can’t afford their rent across the street they can send them to you, and if they want a little nicer unit you reciprocate. That’s how you work together and accomplish your goals. How many vacancies do you have there now?
Jacob Blackett: Currently about 25…
Rod Khleif: Okay that’s a bunch so you guys are gonna have to really kick ass and get those rented. What are your strategies for making that happen?
Sterling White: We just started the open houses on Monday.
Rod Khleif: Okay.
Sterling White: To get the process going. I believe we have between six to eight, that we are marketing at this present time.
Rod Khleif: Okay, now do you have a website?
Sterling White: For the… ?
Rod Khleif: For the property?
Sterling White: Right now, we’re using… No. We do not.
Rod Khleif: Okay, well you need to make that happen. That’s number one. You also need to have floor plans and interior pictures, and videos on that website so you can direct people to that when… You can market that way. You definitely wanna do that.
I had an episode, oh gosh, if I can remember her name… That we talked about some guerrilla marketing techniques that the might add value to you guys. I will email it to you, and I’ll put in the show notes guys, for those of you listening. With that many vacancies you really wanna be all over this.
Sterling White: We have it syndicated on apartments.com, Apartment Guide…
Rod Khleif: Perfect.
Sterling White: We also have a Facebook page as well that we…
Rod Khleif: Perfect. Perfect. Yeah, that’s all great and I would do some guerilla marketing. If I were you guys, I’d do some fliers, I’d go hit the local… If you’re not already, hit the local schools near you, if there’s any hospitals near you, I would guerilla market this thing and… I wish I could remember her name, she was a ball of fire. It was a real great podcast. There’s a couple of them that had some guerilla marketing ideas. But definitely want the website. Definitely want video of the interior, the exterior, the street, pictures, amenities nearby, the nearest schools, the nearest shopping, all of that stuff on the website, so people can just you… Boom they can see it.
Great, well that’s awesome, how exciting. So now you’ve, got let’s talk about the next one. You’ve got to 50 unit under contract let’s talk about that one.
Jacob Blackett: Yeah, we do. It’s a 50 unit property about two or three miles away from this current one.
Rod Khleif: Perfect.
Jacob Blackett: It’s probably a little bit nicer school district.
Rod Khleif: Okay.
Jacob Blackett: It consists of mostly of two-bedroom units with some one-bedroom mixes.
Rod Khleif: Okay.
Jacob Blackett: Then it also has six townhomes that are…
Rod Khleif: How’d you find it?
Jacob Blackett: Basically, direct marketing to owners. So calling up the leasing numbers and chasing down…
Rod Khleif: Outbound call campaign.
Jacob Blackett: Yeah.
Rod Khleif: Fantastic guys. That’s absolutely awesome. You tell people this stuff and it’s so great… I mean, that’s in my course, that’s one method and people are like, “What do you mean? Actually call somebody who’s got a place for rent, and boom! You guys got a 50 unit by doing it. Thank you for hammering home what I know works, so good for you, fantastic.
Sterling White: Some of these owners have their direct numbers on these leasing signs.
Rod Khleif: Sure they do, and if not, you can find them and say, “Hey, are you tired of dealing with this property, and I see you got it for rent.” You can contact, go to eviction court and see who’s doing evictions. You’d wanna talk about unhappy people. That’s how you find these deals. That’s fantastic.
What’s your per unit cost on this one? How much CapEx do you think you’re going to have in it?
Jacob Blackett: I think the per unit comes out to about 28,000. CapEx will be right around, I think we’re looking at about 3,000 a door for improvements.
Rod Khleif: Okay, it’s not bad.
Sterling White: Properties are trading per per unit in that very same area, around 33, 35.
Rod Khleif: Okay. I’m going to tell you that is completely irrelevant, with respect, with respect, okay. That is completely irrelevant, what’s relevant is you NOI. What’s relevant is you cash flow.
Sterling White: Oh, yeah.
Rod Khleif: Doesn’t matter. I get people to comment, say, “Yeah, I’d buy in this place for X, and last year, or the year before, it sold for Y. I don’t care. What’s the NOI? What’s the potential NOI? What are the market rents and what can you do to build it? So that’s where the focus has to be.
Sterling White: I agree.
Rod Khleif: And 3,000 a door, that’s not bad. You’re just gonna do some exterior clean up, make it look good, so you can bump the rents a little bit.
Jacob Blackett: Yeah. We’re expecting a couple of the roofs are going to be a little older on the buildings. We’re waiting for our formal inspection so …
Rod Khleif: Yeah, so you’re gonna allocate for that, which the bank… Now, how are you financing this one?
Jacob Blackett: This one, because it’s currently 90% occupied or more, we are working with a …
Rod Khleif: A broker?
Jacob Blackett: Yeah, Freddie…
Rod Khleif: You’re gonna get Freddie Small Balance Loan. Yeah, those are fantastic. You’ll have non-recourse debt on it. Awesome. Awesome, that’s fantastic.
Jacob Blackett: I will mention, working with this, when we got in touch with this seller, he’s a very old gentleman. Travels a lot, really doesn’t spend a lot of time managing the property, has an onsite manager. Really, honestly, kinda off the… not really involved or like in touch of what’s going on.
Rod Khleif: Sure.
Jacob Blackett: When we started talking price, he said, “I’ll sell it for 1.4 million and that’s it. We tried to go a couple of ways at it to see if it’s flexible. The price works well assuming that we don’t have a huge amount of improvements.
Rod Khleif: Right.
Jacob Blackett: But we’re working with this very stiff asking price from the seller, and so what we said is it’s very obvious that the parking lot needs to be resurfaced and restriped. It’s obvious.
Rod Khleif: Right.
Jacob Blackett: So we put it out to him, “Would you go ahead and take care of that before closing?” He took about 1 second to think about it and said, “Yeah, I’ll do that.” It was like an instant… you know, just the way you ask sometimes.
Rod Khleif: Oh, that’s a fantastic tip. So you knew he was inflexible on the price, so you went at it from another direction, brilliant. Brilliant. You guys are really adding value today. That’s fantastic.
I hope you guys are taking notes on this because, yeah, if somebody is firm on one thing, it doesn’t mean they’re firm on everything. Sometimes it’s not price, believe it or not. You guys need to… I wanna get it out there to you guys, it’s that sometimes, it’s not price. It can just be a quick closing. If you can find out what is really driving them, and meet their needs. It’s not always price. For this guy, it wasn’t price, and you had to come in with an end-run, which is really, really great.
Well I can’t wait to hear how that deal goes for you guys, that’s fantastic. Are you raising money for that right now, or are you already fully funded or what’s… Where you at on that?
Jacob Blackett: We have not introduced this to our network of investors.
Rod Khleif: Okay. Alright, it’s brand new. Okay. Well congratulations on that one. I know Sterling, that you mentioned in your bio that you are exposed to Tony, read his book. So you guys are into self-actualization and motivation, and pushing. What’s driving you guys right now? What is it? Why are you pushing so hard and making things happen?
Sterling White: The secret to living is giving; one of my all-time favorite quotes by Tony. But it’s not only about creating a legacy but I was born in the rougher parts here in Indianapolis. I just wanna show the people, and I don’t wanna get teary eyed or anything, but just wanna show people who are raising those settings that you don’t have to take this path you. You can take the current path that I’m on, or take a better route, and you can still succeed.
Rod Khleif: That’s awesome. I noticed you’re a Big Brothers and Big Brothers Big Sisters is my wife. I was just mentioning to you earlier, she’s a Big now. She’s got her Little that she takes care of, and that’s a beautiful organization. I want to do a shout out to them. They are fantastic.
You’re absolutely right, life is about giving back; it’s not just success. It’s success and fulfillment. There’s so many people I know that are very wealthy but they are unhappy because they don’t give back.
So coming from guys as young as you that’s really, warms my heart to hear you say that. Well guys thank you for being on the show. You’ve added a ton of value. Unfortunately, I am out of time. I have a little back to back today. I may wanna get you guys back on the show, and hear how that 50 unit went. And very impressed with what you guys are doing. Keep up the good work.
Jacob Blackett: We’ll have 1,000 units by the time we circle around so…
Rod Khleif: Okay, I can’t wait for that. That’ll be absolutely magnificent great job guys thanks for being on the show.
Jacob Blackett: Thanks, Rod.
Sterling White: Thank you.
Rod Khleif: Absolutely.
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