Ep #185 – Edward Lowell Podcast Listener, Bought the Multifamily Course, and Quickly Took Action Buying 2 Multifamily Properties!
Here’s some of what you will learn
- How to get out of the regular job and into the business for long term cash flow.
- Tips on how to stop analyzing deals and actually take action.
- Tips on analyzing properties to make sure you’re getting a deal.
- The benefits of purchasing from a seller who lacks information and records on a property.
- The benefits of getting an inspection prior to purchase.
- The benefits of having a motivated seller in order to secure a good deal.
- Reasons for re negotiating due to property issues.
- How to evaluate cash flow amounts and percentages.
- Tips on how to change your mindset to finally take action.
- The importance of goal setting before beginning.
- The distance from your home that is considered a good area to look for deals.
- Factors to weigh when determining increases in rent prices on your properties.
- Tips on choosing a property management company and using them as a resource.
- The benefits of buying smaller unit count properties.
- The importance of motivation in order to stay focused and be successful.
Our Guest
Edward Lowell can be reached via LinkedIn or at:
Edward@blackforestlimited.com
Full Transcript Below:
Ep #185 – Edward Lowell bought the Multifamily Course and bought 2 Multifamily Properties!
Rod Khleif: Welcome to another edition of How to Build Lifetime CashFlow Through Real Estate Investing. I’m Rod Khleif and I am thrilled you’re here. We have kind of an unusual guest today. Unusual in the fact that, as you know, most of the guests I interview have hundreds of units, or thousands of units; very infrequently do I bring somebody in that just got started.
This one’s kinda unique because I think I may have played a small role in him taking action on this deal. I’m excited to hear about that. His name is Edward Lowell, and I’ll just leave it at that. Welcome to the show, buddy.
Edward Lowell: Thank you. Glad to be here.
Rod Khleif: Yeah. Absolutely. I appreciate you taking the time to be on. Take a minute and tell the people who you are and maybe how you got started in real estate.
Edward Lowell: Well, I went through the, I guess, what Robert Kiyosaki would say, the wrong path. I started going through college getting my MBA, going through the corporate side of the world, which I’m still in. I haven’t left my job yet.
But I started looking at what do I wanna do long term, and how do I get out of this rat race?
Rod Khleif: Right.
Edward Lowell: I’ve looked at other businesses. I’ve done small investing in like commodities and stocks, and things like that. But then, more and more I started reading and studying, I found out, real estate is probably the best way to go for what I wanna do and accomplish my goals, which is obviously stop working 9:00 to 5:00. That’s my main focus.
Rod Khleif: Right.
Edward Lowell: I got in to it after really, actually, listening to your podcast; one of the first ones that I had started with.
Rod Khleif: Oh, thank you.
Edward Lowell: I also listened to other podcasts, as well, Get Rich Education, Robert Kiyosaki’s…
Rod Khleif: Yeah. That’s an awesome one. Yeah.
Edward Lowell: I started out, again, just looking at properties, just doing basic analysis. Started looking at, okay, cash flow deals. Looking at the numbers themselves. Just to make sure they sort of make sense in my head, ‘cause I’m kind of a numbers guy.
Then I actually got to the point of I wasn’t actually doing anything. I was just analyzing deals. That’s when your book came out. And you kind of give it to us for free.
Rod Khleif: Right.
Edward Lowell: And that actually gave me a road map. That really sort of laid it out for me step by step, which is kinda what I was needing.
Rod Khleif: That’s awesome to hear. That was my intent and it’s great to hear it publicly. I’ve gotten a lot of great feedback on the side but I have never had anybody in the show really give it a testimonial. I appreciate that. Thank you.
Edward Lowell: Then the last thing I did was actually purchase your course. And that was sort of the one thing that pushed me over. As I said, I got skin in the game at that point.
Rod Khleif: You bought the course and now that you actually spend some money…
Edward Lowell: Yeah.
Rod Khleif: No more analysis paralysis. It’s time to actually take action. Now, your day job, is it fairly analytical? Is that something you do… What do you do in your day job?
Edward Lowell: Actually, I’m a vice-president of a supply chain. I handle basically the raw material purchasing, the planning of product and the shipping of products. Basically, the management of materials and information flow is kinda what I do.
Rod Khleif: Okay. Okay. Okay.
Edward Lowell: So yes, there’s some technical aspects, there’s also a lot of people.
Rod Khleif: Is there? Okay, good. Which is perfect. Okay. Good. So you got my course, you got skin in the game. It’s time to put up or shut up. So tell us what happened?
Edward Lowell: I had been looking at this one particular property, which was a four-plex for about three months, to be honest with you. It’s been on the market for a little while. It was an older gentleman that owned it. Again, some mom-and-pop. He also had a triplex with it, that was sort of a package deal, which we’ll get into, but…
Rod Khleif: Okay.
Edward Lowell: I was really interested in the four-plex at the time. The location was very good. It sits on an acre and a half of land…
Rod Khleif: What state was it in? What area was it in?
Edward Lowell: It’s in North Carolina. It’s between Greensboro and Raleigh.
Rod Khleif: Okay. Great area.
Edward Lowell: It’s basically, the I85 I40 quarter there.
Rod Khleif: Love it. Okay. It’s a four-plex. What was the… Tell us about the unit mix and then describe the place a little bit.
Edward Lowell: It’s all two-bedroom, one-bath; it’s all in one location.
Rod Khleif: Perfect. Okay. Is it two-storey or single-storey units?
Edward Lowell: It’s a two-storey unit.
Rod Khleif: Two-storey. So like a townhouse? Like a row of townhouses basically?
Edward Lowell: Yeah, it’s just one building, but yes.
Rod Khleif: Yeah. But so like four next to each other.
Edward Lowell: It’s one, on top of each other.
Rod Khleif: Oh, on top of each other. Okay. Got it.
Edward Lowell: Two on top and two on the bottom.
Rod Khleif: Got it. Got it. Okay. Okay. It was fully occupied when you were looking at it?
Edward Lowell: Yes, 100% occupied. Still is.
Rod Khleif: Okay, and what were the rents?
Edward Lowell: The rents are 550.
Rod Khleif: Okay.
Edward Lowell: They’re below the market to be honest with you.
Rod Khleif: Yeah. They really are. In fact…
Edward Lowell: The building itself…
Rod Khleif: Probably significantly below market actually. But you left him alone when you bought it? You just went ahead and…
Edward Lowell: Yes, ‘cause I literally have just closed at the beginning of this month.
Rod Khleif: Oh! Fantastic. Okay. Congratulations! That’s awesome. That’s awesome. Okay.
Edward Lowell: Yeah. So it was owned by a mom-and-pop, an older gentleman.
Rod Khleif: Okay.
Edward Lowell: I think he’d been on the market, to be honest with you, because he didn’t really keep records. He wrote things on the back of napkins… So when I started inquiring, he just didn’t have any numbers.
Rod Khleif: Okay. Okay. I have to stop you. Guys, that is the ideal scenario. That’s probably why it was on the market for so long, because he couldn’t provide information to anybody. And this happens all the time. When you come across a deal where you’ve got an old seller, and I’ve been to sellers’ homes where literally the desk is a foot high with receipts and bills because they’re horrible accounting and horrible bookkeepers.
You have to make sense of what they’ve got. Those can be phenomenal deals because people that… Buyers want certainty. They wanna know what they’re buying. I just wanna flag that because that can be an incredible opportunity when you get that because a lot of people could have looked over it because they couldn’t get the information they needed. That’s probably why it was on the market a while. Continue.
Edward Lowell: Yeah… I agree with you. I believe that was the case. I obviously, walked the property and looked at it, and thought it had the potential.
The next step for me was actually getting an inspection done because he didn’t really have any records. So I had to get some kind of inspection on it.
Rod Khleif: Well, that’s always smart. I mean, unless you’re a contractor and you know about everything about everything relating to mechanical, and plumbing, and electrical, and structure and all that. You’re really dumb not to get it inspected.
Guys, I mean that for any purchase. Period. Get it inspected, unless you’re super confident in your ability to evaluate a property.
Edward Lowell: I guess I jumped a little bit ahead. I did a letter of intent [bad audio]
Rod Khleif: Oh, you did? Okay. Alright. Good.
Edward Lowell: Did that, and that started the negotiation process, really. He was asking 464, I believe it was, for both properties, the four-plexes and the triplex.
Rod Khleif: Okay.
Edward Lowell: And we settled at 300.
Rod Khleif: Holy cow! Good work brother. Holy cow! 464 to 300, that’s fantastic. So he was motivated.
Edward Lowell: He was motivated. And I think, by the end, he was really motivated, because once I had… I’ll just bring this up. Once I had an inspection done, we found out that the roofs really needed to be repaired.
Rod Khleif: Okay.
Edward Lowell: We were really sitting at 315. We renegotiated back to 300.
Rod Khleif: No kidding. Wow. So you were at 315, you had it inspected, and the roofs need to be redone, and you got another 15 grand. You re-traded.
Edward Lowell: Yep.
Rod Khleif: Fantastic.
Edward Lowell: Everything else was just minor, you know, a few minor things.
Rod Khleif: Sure. Sure. Sure. Sure. And you got… and guys, don’t re-trade if it’s minor. I mean, renegotiate. That’s re-trade equals renegotiate. Don’t renegotiate if it’s minor ‘cause you can get a bad reputation but roofs is not minor. If it wasn’t disclosed or wasn’t obvious, then it’s absolutely okay to renegotiate.
You got it for 300, how did you finance it?
Edward Lowell: Conventional financing.
Rod Khleif: Okay. So 20, 25% down, how much down?
Edward Lowell: 25% down.
Rod Khleif: 25% down.
Edward Lowell: Two different loans; one for the four-plex, one for the triplex.
Rod Khleif: Okay. Okay. What do you anticipate your cash flow to be when you’re all set and done here?
Edward Lowell: Right around 17%.
Rod Khleif: Fantastic.
Edward Lowell: Cash on cash return.
Rod Khleif: Fantastic. Fantastic. Alright. You’re not even giving me a dollar amount, you’re just gonna give me the cash on cash return which is the way you guys should evaluate these deals. Good for you. Good for you. That is fantastic.
So the duplex, what’s this story there? Is it same unit mix or they’re ones and twos?
Edward Lowell: The other one was a triplex, and it was…
Rod Khleif: Oh, triplex, that’s right.
Edward Lowell: It’s just one storey, and just three units. It’s like an L-shape.
Rod Khleif: Okay. Okay.
Edward Lowell: It’s a little bit older. Again, I wasn’t really looking at that property but it was a package deal and he wanted to get rid of both of these. He was actually was the maintenance person for these properties for the original owner and he bought it from them.
Rod Khleif: [chuckles] No kidding. That’s crazy. Wow. Let me ask you this, did you have to do a mindset shift to actually take action? Was it the fact that you had skin in the game that was the mindset shift? Or was there any other piece of any other insights or any other reason that you decided to actually pull the trigger?
Edward Lowell: Well, I did, as I said, I’ve taken your course and part of it is the vision boards and sitting down and writing down your goals. That was a very important step for me.
I started visualizing what I wanted. What I want to accomplish in life. And the only way to get there is to start somewhere.
Rod Khleif: Right.
Edward Lowell: I did have skin in the game, which is important to me, and so I just felt it was time. I just took the next step.
Rod Khleif: No kidding. So you sat down. You did your goals. You did your vision boards. You wrote down why they’re a must and that drove you to take action. That’s beautiful. I love hearing this stuff and actually taking place. It just validates why I do what I do. You really made my day with that.
Edward Lowell: One of the things I wrote down at the very bottom was to be on your podcast.
Rod Khleif: [chuckles] Ha! Did you really? Look at that. See how this works guys? I mean, “As you say it, so shall it be.”
[00:10:02]
Rod Khleif: You just have to declare it. Then you start working towards it. And here you are, and adding value, for sure because I promise you, there are people listening that are right were you were. They’re in their job. They know they want this. They know they need to take action and it’s just a matter of doing it. You know, like Nike says, “Just do it”.
Now, that was the hard part. You know you can do it now.
Edward Lowell: Right.
Rod Khleif: There’s nothing to stop you now. Are you still looking? What are you up…
Edward Lowell: Yes. I am.
Rod Khleif: Okay.
Edward Lowell: I actually expanded my area a little bit. I’m basically within an hour’s drive of where I live. I’m looking at properties…
Rod Khleif: That’s… and I tell you, you could go two hours. Just so you know, comfortably. I go as far as Orlando, which is two hours from me. You draw a circle two hours around where you live, guys. That absolutely is your backyard. And you can definitely logistically handle that because you can do it in day travel quite easily.
I’m really glad to hear you doing that because that really opens it up for you, and has a lot more secondary and tertiary towns that are low-hanging fruit. Fantastic. Is your plan to just leave the rents consistent so you don’t have to deal with turnover? Or are you gonna bump the rents?
Edward Lowell: I’m gonna bump the rents. On only the triplex, I’ll probably gonna leave them. It’s just an older building.
Rod Khleif: Okay.
Edward Lowell: They’ve got some tenants there that have been there 20 years.
Rod Khleif: Oh, yeah. Okay. That guys, you have to weigh that. You have to weigh the amount of brain damage you wanna go through. I mean you’re doing this to make money, for sure, but sometimes, it’s okay to make decent money instead of making extraordinary money if it’s easier, if it’s less brain damage.
If you’ve got somebody who’s lived there 20 years, at the very least, you bump them slowly, if you can. I mean if the numbers don’t make sense, otherwise, you got to do what you got to do. But that is definitely a factor.
Edward Lowell: Yeah. On the four-plex, they’re definitely too far below current market.
Rod Khleif: Right.
Edward Lowell: So I’m gonna move those but I’m not gonna do it right this second. I’m gonna sort of… I’ve got a property management company, we’ve gone through…
Rod Khleif: Oh, you do?
Edward Lowell: Yeah.
Rod Khleif: Okay. Okay, so how’d you pick the property management company? Tell us about that.
Edward Lowell: I obviously, speaking to brokers. That’s what I got [overlap talk]
Rod Khleif: Okay. Good. Good.
Edward Lowell: [bad audio]
Rod Khleif: You got referrals.
Edward Lowell: We got referrals and I actually met with them and sat down. Talked to them about their philosophies. I picked this particular one, I’d say they’re small to medium-sized so they fit for what I wanna do.
Rod Khleif: Good.
Edward Lowell: They probably have 500 doors total.
Rod Khleif: Okay.
Edward Lowell: A good mix of apartments, single-family homes and [overlap talk]
Rod Khleif: Perfect. Perfect for plexes. Perfect for plexes, good. Good.
Edward Lowell: Yeah. We fit well together for what they wanna do and what I wanna do and my growth plans.
Rod Khleif: Great.
Edward Lowell: That’s how I picked them.
Rod Khleif: Okay. Great. I would hit them up regularly to ask them if they know anybody that wants to sell.
Edward Lowell: Yes.
Rod Khleif: That’s a resource that you wanna capitalize on if you’re using a management company. Okay. Fantastic.
Edward Lowell: Yeah. I have regular calls with them
Rod Khleif: Good. Good. Guys, and I talk about this, when you’re evaluating property management companies, a couple of high-level things that I’ll mention to you real quickly. I talked about one of them in my book but not both of them.
One of them is be very cognizant of how they handle maintenance, ‘cause maintenance can be a real profit center for a management company. They’ll hire some kid at 15 bucks an hour and bill them out at 60 or 70. So you wanna ask questions about that.
Do they use their own employees? Do they use contractors? Do they up-charge? How do they handle that? When do they call you? What sort of a dollar amendment have you placed on your approval process for them to do work? That’s number one, dig in there too so that you don’t get screwed.
Number two, ask them or take a look… I’m sorry, not ask them. Take a look at their online presence because there’s some great management companies that haven’t embraced technology. If they don’t have a great mobile website, and you can’t sit in front of their unit, a tenant can’t sit in front of the unit and apply or reach out, or see the inside because they haven’t taken pictures or done virtual tours, things of that nature. I would recommend you pass because you don’t want to do business with a digital dinosaur in the management space. Because with Millennials, I mean, you’re cutting out 40% of the available tenant base if they haven’t embraced technology.
Those are two things that… I haven’t really talked about the second one very often, and I’m really glad that I mentioned that because if you guys are thinking about hiring a management company those are two things that I would do. I’ve got a lot more stuff in the book about management companies as well. Feel free to get that if you haven’t gotten it.
So you’re full up?
Edward Lowell: Yes.
Rod Khleif: Okay. Alright. And you’re looking. Are you gonna go bigger or are you gonna stick with the same size? What are your thoughts?
Edward Lowell: Right now, my plan is to stay in that two to 20 units, to be honest.
Rod Khleif: Okay. Fantastic. That’s the sweet spot. I mean, you’re dealing with mom-and-pop sellers. There’s opportunities for seller financing, you can do direct to seller if you want to, you can do mailers, and if you really like a particular area, I highly recommend that you consider that because that can just really open up the opportunity for off-market deals. So that’s super.
Well, what haven’t I asked you that I should?
Edward Lowell: I don’t know, Rod.
Rod Khleif: Okay.
[chuckles]
Edward Lowell: It’s a good question.
Rod Khleif: What motivates you now? What is it? Is it to get out of the rat race? Tell us what it is?
Edward Lowell: It’s definitely to get out of the rat race, but it’s also my two girls. They motivate me.
Rod Khleif: Yeah.
Edward Lowell: That’s what I get up for everyday. I love them.
Rod Khleif: Awesome.
Edward Lowell: They’re 14 and 12 years old.
Rod Khleif: Awesome.
Edward Lowell: They definitely are my motivation.
Rod Khleif: Awesome. Once you reached that level where you don’t have to go to work, you’ve got more time with what’s important. You’ve got more time to spend on what’s important. That’s the whole reason people want this. I hope you keep taking action my friend.
Edward Lowell: Yes.
Rod Khleif: Because…
Edward Lowell: I already told my daughter that my goal was for her to take it over when I’m…
Rod Khleif: I love it. Start a legacy. Guys, that’s beautiful. Start a legacy and create a legacy. It doesn’t get any better than that.
Well, thanks for being on the show my friend. I really appreciate your valuable time and definitely let me know how things go as you move forward.
Edward Lowell: I will. Thank you, Rod.
Rod Khleif: Alright buddy, take care.
Edward Lowell: Bye.
[music]
Thank you for listening to the Lifetime CashFlow Through Real Estate Investing Podcast. If you’ve enjoyed the show, please subscribe, and then take a moment to visit iTunes and leave a five star rating and review. For more resources to connect with us further, please visit our website at lifetimecashflowpodcast.com. Tune in next week for our next show.
[music]
