Ep #187 – David Sweeney a Seattle Police Lieutenant, Recently Purchased 24 Multifamily Units
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
David Sweeney can be reached at:
www.DavidSweeney.com
Full Transcript Below:
Ep #187 – David Sweeney a Seattle Police Lieutenant, Recently Purchased 24 Multifamily Units
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. I know you are going to enjoy the gentleman we’re interviewing today.
Salt-of-the-Earth, down-to-Earth guy, his name is David Sweeney. He’s been in the Seattle Police Department for 30 years. He’s a lieutenant now. And I’m gonna let him tell his story, I’m not gonna steal his thunder. But it’s a very compelling story that I think is gonna resonate with a lot of you guys, so listen up. David, welcome to the show, buddy.
David Sweeney: Thanks so much for having me Rod, I appreciate your time.
Rod: Absolutely. Talk about 30 years with the police department. Great job. You’re a lieutenant. You’re ready to retire. Why are we having a conversation?
David Sweeney: Well when I turned 53 last December, as you said, I’d done 30 years with the police department, in a variety of different assignments. When I turned 53, that’s the minimum retirement age for the state of Washington.
As I looked at my life and I thought about that, I could retire but I really couldn’t retire. I had an 11, a 13 and a 15 year old and a wife who may or may not want to work. So how can I really pull the pin at that place and just go on with my life and kick back and do nothing? It couldn’t happen.
I think you might equate me more to the Poor Dad, in Kiyosaki’s book. I had a government job. My home was my greatest investment. I had some savings but I wasn’t really ready to provide for my family in the way that I wanted to.
As I took stock of my life, and my finances, and where I wanted to be in life, and how I wanted to provide any college they wanted to go to. How I wanted to travel the world with my wife. How I wanted to live in a nicer house. I realized, “Hey, this is great life of 30 years of public service.” But I wasn’t really ready to move on to that next phase.
I started to evaluate what I need to do in order to be where I wanted to be. I looked at syndication of owning Subway Sandwich shops, and things like that.
Rod: Franchises. Okay.
David Sweeney: Yeah, franchises, I looked at direct marketing, and things like that. Sales of health products, and I said, “No. Real estate is where I wanna be.”
When I get into a topic, I become a voracious learner. I read all the books. I read all of the articles. I read the blogs. I listen to all the podcasts and that, in fact, you’re very easy to find on the web. That’s how I found your podcast and I became an avid listener of the Lifetime Cash Flow podcast.
Rod: Oh, thank you. I appreciate that, buddy.
David Sweeney: Absolutely. And as I got into this…
Rod: I’ll slip you your check later…
David Sweeney: Okay. Thank you.
[laughter]
David Sweeney: As I got into this… I determined that this is what I wanted to do. And my wife was very supportive. I said, “Here’s what I’m gonna do… What I you found, there seemed to be a lack of real estate agents out there that really knew how to find multi-family deals for their clients.
I said, “Okay, if this is difficult for them, why don’t I become my own real estate agent?” So last December I started studying for the real estate exam, and I got my license in April.
It was like the door opened up for me. I got to peek behind the curtain as they say. When I had access to the MLS then I could start evaluating properties. And of course, like most first time investors I started looking at duplexes and triplex, and fourplexes, but the numbers weren’t exactly where I want to be.
I knew I did not have enough cash to make a really large purchase. I could have bought a duplex, or triplex, or something…
Rod: And this is in the Seattle area?
David Sweeney: Here in the Seattle area or Western Washington. It’s so hard to buy in Seattle.
Rod: It’s an insane market up there.
David Sweeney: It’s crazy. So I was looking for cash flow and some appreciation but most products in Seattle are not gonna pay for your mortgage.
Rod: Right.
David Sweeney: As I continued to listen to podcasts and get more information, it seemed that apartment building is where I wanted to go. I took a refinance out of my house, and I took $380,000 out, and it just sat there in the bank. And it just sat there, and it just sat there because I knew had to be smart.
This is my first purchase. It’s my only purchase. I had to do it right.
Rod: Sure.
David Sweeney: I took some time, and this was a good news and bad news story. The bad new was, in July of this year, I tore my patellar tendon and I went off the diving board. I was at the swimming pool with my kids. It pretty much laid me up for the whole summer. That’s the bad news.
The good news is I was laid up for the whole summer, what could I do but evaluate day after day after day. I probably evaluated about 400 different properties.
So finally, in august, I finally found my deal and it really excited me. I was so jazzed to find this property. Do you want me to tell you about it?
Rod: Absolutely. But I wanna flag a couple of things.
David Sweeney: Sure.
Rod: Guys, he’s already given you a couple of great tips. The first one is evaluate deals like crazy. Now, he was forced to ‘cause he was laid up, but you’ve got to force yourselves too. Okay, repetition is the mother of skill. You need to evaluate as many deals as you possibly can because, correct me if I’m wrong, David, it got to a point where it was pretty probably much quicker, much easier for you to discard ones that didn’t make any sense and hone in on the ones that had a chance.
David Sweeney: Absolutely.
Rod: I’m sure you speeded up.Okay.
David Sweeney: Absolutely.
Rod: That’s what this business takes, is repetition and you need to be evaluating tons of deals. Okay. Go ahead. Let’s talk about your deal.
David Sweeney: Okay, so I found in a little a little town in Western Washington, it’s along i-5. It’s called Centralia. It lives up to its name, it’s centrally located between Portland and Seattle.
This is not the hottest market in Washington. It’s definitely not Seattle, Tacoma, Everett area but it’s about 120 miles south of Seattle and it was a great community. So I liked… It reminded me of where I grew up.
As I went and visited the property, and looked at it, and evaluated it, I thought, “Do I wanna live here? Would I wanna live here in this area?” That was really important me, to find a property that would be similar to something that I might live in if I were an apartment renter.
Rod: Okay.
David Sweeney: The deal was listed. It’s an interesting deal. It was listed for 1.325 million.
Rod: Hey, can I stop you again?
David Sweeney: Sure.
Rod: And I apologize but I wanna flag things as you say them because I think they’ll add value to the listeners. The first one is, as you said, it’s a 120 miles south of you. So a couple of hour drive. Maybe an hour 40 or an hour 30-minute drive. Correct?
David Sweeney: Right.
Rod: Okay. Guys, your backyard is two-hours in a circle around you. So this is absolutely a good distance yet because you can go there in the morning, you could do what you need to do, and still make it back in time for dinner, or as little after dinner.
Guys, when I say the four areas that you should consider first, and the first is your backyard. I’m talking about the two-hours circle around you. And then the other three areas to consider let me throw them in there while I’m on it.
David Sweeney: Sure.
Rod: Is somewhere you grew up, or you know very well. The third choice would be somewhere you have boots on the ground or your family that can help you with the property. And the fourth choice would be somewhere you want to retire, or you really enjoy visiting.
David Sweeney: Right.
Rod: Okay. That was point number one, 120 miles away. Point number two, you mentioned, “Would I like to live there?” Which is a high bar. I wanna tell you that. And so I wanna tell my listeners, that is a great way to go, and you’re going to find a very nice property when you when you set the bar that high.
My framework and I don’t wanna take anything away from your framework, my framework is it’s gotta be clean, safe and comfortable.
David Sweeney: Yes.
Rod: And would I wanna live there? Maybe. Maybe not. So let me just interject my opinion on top of yours if you don’t mind.
David Sweeney: No, that’s fine. Because as a police officer, I’m not gonna live in a warzone.
Rod: Right.
David Sweeney: I need to have a nice, safe community.
Rod: Right.
David Sweeney: There needs to be nice streets, nice houses, a nice apartment building like this. It’s a grand old apartment building. It’s building. It’s build in 1920.
Rod: Wow. Wow, that’s an old one. Okay.
David Sweeney: It is an old one but it’s brick, and it’s solid and it was a great buy. Here’s why. It came with three tax parcels all in one deal. So there’s 24-unit apartment building, a 15-unit storage building, a single family residence and a parking lot. So kind of on three tax parcels.
I kinda like that idea. It was listed at 1.325 million and that’s what’s kind of fun being my own real estate agent because I can do my own negotiations. And that’s something I specialize in, I’m a professional mediator is well. I do work… [overlap talk]
Rod: Oh, I saw that on your resume. That’s awesome… [overlap talk]
David Sweeney: Yeah. I could use some of those skills in negotiating my deals.
Rod: Sure.
David Sweeney: I offered 1.1 million and I asked them to pay 1% of the closing cost and I’d also get my real estate commission on top of that.
They countered at 1.14 and apparently there was another bidder but I wrote them a nice little love letter, and I explained how I was a Seattle police officer. I’ve been on for 30 years, and I love their community. All the things I told you, Rod. I love the community, the neighborhood, the building. And even though the other offer was more, they trusted me more. They wanted to do…
Rod: I want you to stop there, again. You’re giving us such fantastic nuggets, here. Guys, in this highly competitive marketplace, doing what he did, will set you apart. Writing a letter, telling them why you like the property, why you like the area, who you are.
[00:10:02]
Rod: For example, I’ve got a little website when I do a mailer, you guys could check it out, thekhleif.com. On that website, that’s got a picture my wife and I, and we wanna buy property… Or is it the Khleif family… Might be thekhleiffamily.com. Actually, I think it’s both of them. Actually, one’s for apartments and ones for mobile home parks.
But again the sets you apart, let them see who you are.
David Sweeney: Right.
Rod: Tell them about your family, and it worked for you, obviously… You’re in service for 30 years, good Lord. That’s huge. So if you’ve been in the military or you have something like that to share, make sure you let people know.
Alright, I apologize…
David Sweeney: No, it’s okay.
Rod: I’m gonna get some hate mail for interrupting again but I just wanna hammer these points home.
David Sweeney: No. I like how you do that. I’ve listened to you enough, Rod, that I knew it’s coming…
Rod: [chuckles]
David Sweeney: I just wait and smile ‘cause I know you… Because you take things… I just tell a story, and you pick it, and you hit the points that you know that your listeners are gonna get some value from.
Rod: I try.
David Sweeney: So I appreciate that experience. And I know what you’re doing and I don’t mind that at all.
Rod: Alright. Alright, so please continue, so 1920s building, 24 units…
David Sweeney: Right.
Rod: I mean, in Washington State, for one million, plus the storage, plus the parking lot, plus a single-family house, that’s a screaming deal.
David Sweeney: I thought it was.
Rod: Yeah, I know. I mean, just based on what little I know…
David Sweeney: I was really happy.
Rod: Yeah. That’s a screaming deal. Now, what condition was it in?
David Sweeney: So I took my inspector through, and I was really happy with my inspector. He had looked at some other properties for me, that I didn’t end up buying, some smaller properties. I said, “Hey, I got an apartment building, let’s do the inspection.
It’s really important, obviously, to go with your inspector.We delved in every nook and cranny. We went underneath. We went on top. We went inside and we inspected ever unit. So once you have that accept offer then I let the other agent know, “Hey, here’s my date of inspection. Let the tenants know.”
We obviously have to give them notice because you can’t buy an apartment building without looking in every unit. I feel that’s really important.
Rod: No question. Let me hammer a little thing there too. Guys, I use a building inspector, and I’ve owned thousands of units. I built homes. And I did major remodels. I’ve very, very versed on construction and I still bring a building inspector.
David Sweeney: Absolutely.
Rod: Guys, always use an inspector, because they’ll see things that you can utilize to potentially re-trade or they’ll identify things that could cause you not to buy the property.
David Sweeney: Right.
Rod: When you’ve got a property under contract you put the hat on that says, “Why do I not want to do this deal?” And it’s a mindset shift, and an inspector will help with that mandatory mindset shift so you don’t make a mistake. Alright, please continue.
David Sweeney: Right. Absolutely.
Rod: Okay.
David Sweeney: We went through every unit and they told me, this is a really solid place. It’s had regular maintenance. It had some roof issues but they replaced the roof, a year and a half ago, so I got a new roof out of the deal.
The apartments, they’re not super fancy. But they were well painted and well maintained, and taken care of. The counters, they’re not super fancy, but in this market, it’s not gonna pay off for me to put a $3,000 into each unit and bring it up to some fancy standard that I know I’m not gonna get the returns on the rents for. That didn’t make sense.
Rod: Fantastic.
David Sweeney: The pro forma numbers, what was listed by the agent was that it would gross 133,000 a year. And the NOI, they estimated to be 91,000 a year. So as I got into that, it seemed to me that market trends for underneath.
I hired a property manager. I did probably three interviews before I finally found one that I was comfortable with. The property manager looked at it, and that’s the great thing about using a property manager because number one, they know the market and what the rent should be because they got thousands of doors that they’re running out people.
Number two, I love that they know the contractors to use when there’s work to be done and places to hire at. If it were me, I’d be calling all these different people, and getting all these different bids, and stuff like that. But they said, “Dave, if you need new carpets in these units, here’s the carpet guy you go to.” “Great. Fantastic.” “Here’s the plumber we use.” “Fantastic. I like that.”
I wanna be semi passive in this investment, but I also wanna know what’s going on. So they call me any time they spend over a couple hundred dollars…
Rod: That’s the way it should be. Let me interject something here as well.
David Sweeney: Sure.
Rod: As it relates to property management companies. Now… and this is something I tell people, I tell my coaching students, and that is, there are two things that I always look for with the property management company. In fact, I did a Facebook Live episode on this if you guys really wanna dig in. Just search it and you’ll find it.
I mentioned these two things. When you’re evaluating a property management company, there are two things that I target. One is, how they handle maintenance because maintenance can be a profit center for property management company, specially if you’re dealing with units under say, 50 units. If you’re 50, 60, 70 units, you typically have your own on-site guy or one guy that’s full time with the property.
But under 50 units, you’re gonna rely on their maintenance infrastructure, so you really wanna dig in. ‘Cause sometimes, they’ll hire somebody at 20 bucks an hour and bill them out at 75. So you wanna find out, do they have their own maintenance staff or do they use contractors? Do they up charge the contractors?
So just dig in so you’re not taken advantage of. That’s number one.
David Sweeney: Sure.
Rod: Number two point while were on property managers, is always check out their online presence, make sure they’re not a digital dinosaur. See what they look like on a mobile website because if they don’t have a presence, they’re gonna eliminate 50% of the population. Millennials and numerous other people as well that will pull up in front of your property, and look on their phone and… they should be able to see an inside layout of a unit, the tour of the unit. Ideally, they should be able to apply for the unit, right there on their phone, things of that nature.
Those are a couple of things I didn’t put in my book. I don’t believe. So be sure that you double check that.
David Sweeney: Yeah. Those are excellent tips. Excellent tips. Where are we going next?
Rod: So you got a good property management company, they call you if it’s over $200. You should always set a limit. That’s where you were.
David Sweeney: Right. Yeah, exactly. So he said, “Yes, the market there is low. The rent there is low. Let’s have a plan to raise it. So I love that he spent plenty of time with me. I did an analysis of every apartment in there, when did the contracts start, when did it end, are they on a month-to-month, etcetera, etcetera. Were there any Section 8 tenants? It turned out I had two.
Then we evaluated that and I said, “Okay, here’s where I want the rent to be.” Generally, they were renting for 475 for studio, and 575 for one-bedroom. He said, “Your market should be 525 for studio and 625 for a one-bedroom.”
Rod: Fantastic.
David Sweeney: I said, “Great. How do we get there?” He spent some time with me, and we plotted it out and worked out how we can get those rent raise because that has really improved, I think, the value of the property because if I can improve my net operating income… That’s what I love about multi-family, like a larger apartment building, a $25 or a $50 raise, and then you multiply it times the number of units, man, you just raised your NOI quite a bit, which raises the value of the property.
Rod: If you raise your rents on your 24-unit apartment building, $50 you just increased the value $250,000.
David Sweeney: I know. Isn’t it great! I love that.
Rod: That’s a beautiful thing. That’s why I’m here. [chuckles]
David Sweeney: Yes. I love that. That’s why… I’ve bought plenty of stocks and bonds before in companies that I believe in, but I have no control over whether the products they produce, or the service they provide, is something that people are gonna want to pay for.
This I have some control over. I have the ability to make changes. I have the ability to make investments, and to control my business. I love that about real estate. I feel like I got some control out of it.
Rod: No question. Let’s talk about the fact that you’re licensed, for a minute.
David Sweeney: Sure.
Rod: Which I… I got a license when I was 18 years old and I believe in it. One thing that I’m gonna suggest to you guys listening, there are a lot of commercial multi-family properties that actually show up on the MLS, because a residential realtor list them. And a residential realtor is not that familiar with or utilizes LoopNet. They’ll just put it on there, their local MLS system.
Guys wherever you are targeting, make sure you align yourself with a residential real estate agent or broker, and let them know you’re interested in multi-family, and have them put alerts on, so when one of those pops up they contact you, because, again, that’s kind of a little secret; because some of these commercial properties can sit on a local MLS because the commercial investors aren’t looking there.
David Sweeney: That’s right.
Rod: So there’s a little tip for you.
David Sweeney: Yeah. This property was listed in April, and I found it in August. So it’s still there.
Rod: There you go.
David Sweeney: It’s a fantastic deal. In fact, I presented it at my local real estate meet-up. I did a PowerPoint show and everything, and some of the experienced investors there said, “Man, this is the best deal I’ve seen in 10 years.”
Rod: That’s my point. And it probably sat there and nobody saw it.
David Sweeney: Right.
Rod: So guys, please pay attention to what I just said.Align yourself with the local “residential”, in quotation marks, agent or broker, in the market that you’re interested in.
[00:20:00]
Rod: Then have them look for commercial multi-family that… A residential agent or broker listed didn’t know that they should put it in LoopNet. It happens all the time because this is a relationship business. Maybe they got a relationship with the seller, seller wanted to use them, didn’t realize that they really weren’t versed in commercial marketing and so they sit there and they languish. Those listings languish in a residential system, and they’re ripe for the plucking.
David Sweeney: Yeah. They do. There’s about 75 multi-family, meaning five or more units, commercial properties in Western Washington right now. I think deals get done there, but I like that look behind the scenes.
There’s a variety of ways that many people can find properties. Some do direct mail, some drive for dollars. So I’ve been able to use the MLS to help me find my deal, and I’d love to help other people who are watching, find that deal.
Rod: Yeah, sure… If you guys are interested in properties in his area in Western Washington, his website is DavidSweeney.com, S-W-E-E-N-E-Y.com. Reach out to him. He’s licensed and he has access to the MLS. And if you’re not in that area, just align yourself with the residential agent or broker in your area because they’ll look on the MLS for you and if they see you’re serious and you nurture that relationship, and you’re consistently communicating with them. They know, “Hey,” you’re calling them, “Have you got anything? I’m still very anxious to find something”, and you’re rightfully communicating, you’re gonna get those deals.
David Sweeney: Yeah.
Rod: Okay. Fantastic.
David Sweeney: Absolutely.
Rod: Let’s talk about your psychology.
David Sweeney: Sure.
Rod: What’s motivating you right now? Tell me about that.
David Sweeney: I think, what really motivates me is I want a few things. One, I want my kids, again, they’re 11,13, and 15. I want them to be able to go to college anywhere they can get into. Anywhere in the United States… Well, frankly, the world. But most likely the United States.
I want them to be able to go to college wherever they want, and come out with zero college loans. I want them to get started right. And I’ve listened to enough people out there in the marketplace. When they become of age when they’re old enough, I wanna help them get started real estate.
Rod: That’s nice. That’s great. I love where you’re heart’s at.
David Sweeney: Yeah. If they wanna house hack and kinda get them started in the business that way, I can help buy them their first duplex or triplex or something like that. They can rent it out to maybe another college student so they get a… Again, to get them out of the mindset that… Not that I did do it wrong, I didn’t do anything wrong, by having a 30 year career but I look at…
Could I have done something different earlier in my life? Would it make a difference now?
Rod: Could have started earlier. Yeah.
David Sweeney: And then my wife, she’s got a great job. She’s an attorney, and, but does she wanna work? I’m not sure. There’s she’s really has a heart of service. She really likes to help others. Maybe there’s something that would provide her more value in her life. And maybe it becomes optional as to whether she wants to work or not.
Then again as the kids move in to college years… They’re 11, 13, and 15 as they move on, she and I’d love to travel. I wanna live in different places in the world.
Rod: Same here.
David Sweeney: I wanna go to a place and I just wanna live there for a year and experience that culture, France or Spain, or South America, or maybe even different parts of the United States, who knows? But I do wanna see more of the world.
As I looked at these things, I said, “Okay, here’s what I want, how do I get there?” That’s my motivation. I really wanna help my family. I wanna help my kids get started right in life. I don’t wanna be behind the 8-ball. I wanna give them every advantage that I can give them. I love them so much and that’s what I owe to them.
My dear sweet wife, who’s been so supportive of this, she was looking at that money just sitting there in the bank, and it just sat there, and just sat there. I said, “Sweetie, don’t worry, I will find the right property. And when I know it, I’m gonna buy it. It’s gonna be great.”
Rod: So she was just looking at the money in the bank instead of the fact that you borrowed that money that went in the bank.
David Sweeney: Yeah.
[laughter]
David Sweeney: It raised our payment a little bit, but not so much that it became unwieldy.
Rod: Okay. Okay.
David Sweeney: That’s one way I know that not all your listeners can do that. But that worked for me. Having a house in Seattle, and using that appreciation, the market’s gone so crazy the lately, that I thought, “Wow, if my house is really valued at this much, why don’t I take 400,000 or 380 out and use it for this purchase.”
That’s part of my motivation. Use that, what I’ve been blessed with, in order to give back to my family. And then my wife and I have plans of giving back to our church and some of the things that we believe in, as far as charity work and things too.
Rod: That’s awesome.
David Sweeney: I said, “If we do so this, we can make a big difference of some of the things that we believe in.”
Rod: I love it. Yeah. That’s dear to my heart. We’re actually giving, I think… We’re feeding 1200 families this Saturday, that’s before Christmas…
David Sweeney: That’s fantastic. That’s great, Rod.
Rod: Yeah. I’m not sure when this interview will air but yeah, it’s this Saturday, the 17th.
David Sweeney: Right. Right.
Rod: Okay. So any speed bumps on this first purchase?
David Sweeney: Yeah. I had a couple of speed bumps.
Rod: Yeah. Talk about that.
David Sweeney: The first one was, finding a commercial lender who will lend to a first time investor. I found that that was more of a challenge than I thought it would be. I’ve never done a commercial loan before. I’ve done several residential loans and re-fis and things like that. That’s just a different marketplace. It’s a much different market so you…
Rod: Yeah. You were right at that limit with 25 units, where you know, where they’re gonna start scratching their head and say, “Hey”. So how did you over come that?
David Sweeney: Well, it just became a matter of getting on the phone, and calling everyone I could until I found a bank that said, “Yes. We will move with you on this.” That was kinda nice.
Well let me go back to the challenge and then I’ll… The value I got out of that as well. The challenge in finding those banks, I had to get through a lot of ‘Nos’.
I had five years as a property manager in college. I managed an apartment building for…
Rod: Oh, yeah. That’s great help. Okay. Sure.
David Sweeney: Yeah. So I added that. I added that I had my real estate license, of course, I couldn’t claim years and years of experience but when I put those two things together I finally found a regional bank that said, “Okay, yes. We will work with you on a deal.” The blessing of that was that I had a second set of eyes looking at this deal. They’re not gonna finance something that’s not a money maker. And they’re not gonna finance for a poorly maintained property. They’re not gonna finance a warzone.
Rod: Right.
David Sweeney: So when I bring them a nice clean property… It’s older, yes. But when I bring them a nice clean property that has a good profit margin in it and I evaluate that with them. They said, “Yes, this looks great.” They provide me with a letter of financing, “We intend to finance Mr Sweeney at this amount…” My loan amount turned out to be…
Rod: It’s called a loan commitment letter.
David Sweeney: Yeah. Exactly. Turned out to be about 800 grand on the loan, and that helped with the negotiation as well, so they could say yes. We looked at…
Rod: Oh, so you got that in advance of the offer.
David Sweeney: Yes.
Rod: Good for you that’s a smart way to do it ‘cause you’ve been looking at this place for a while.
David Sweeney: That’s right.
Rod: Sometimes you don’t have that time luxury, but that’s fantastic.
David Sweeney: That’s right. So that was one challenge…
Rod: By the way, guys…
David Sweeney: Again, I’ve heard from a few people…
Rod: Hold on one second. Let me interject something on that…
David Sweeney: Go ahead, Rod.
Rod: Particular challenge. Guys, sometimes you can supplement that challenge with a property management company. You can bring in a property management company, say, here they are, this is what they do, they are going to manage this property for at least the first year. I’m gonna commit to that and you can make it a loan requirement and sometimes that’s enough to push it over the edge.
Okay, so keep that in mind as an alternative. Please continue.
David Sweeney: Great idea. In fact, that became a little bit of a factor later. They liked that I had a professional management company lined up to help manage this.
Rod: Right.
David Sweeney: In other words, I wasn’t getting in over my head or something I’d never done before. I had people there alongside with me. The numbers made sense. The professional management company made sense and there was still enough profit built in that I could give them their property management commission, and still have a profitable business out of it.
That was a challenge. It just took a lot of time to find the right lender and one that would say, “Yes, we’ll commit to you David on this project.”Now, I like this because as I move to my next deal, it’ll be great to have this experience under my belt, and I’ll say, “Well, yes, I have these properties under my belt that I’ve successfully owned for, let’s say a year whatever the case might be. That was one challenge.
The second challenge, I did not get my insurance lined up in time.
Rod: Hmm.
David Sweeney: So what happened was, I talked to the owner, and I said, “ Do you mind if I get the name of your insurance agent?” I figured they’re already… they had a policy covering the property and that would be nice easy transition. They said, “Sure”.They gave me the woman’s name and phone number, and I call her up, we had a great conversation. She said, “Yes, I’m sure that we can just set up a similar policy for you.” Gave me the limits etcetera, etcetera.
I kinda took it for granted that that policy would be…[overlap talk]
Rod: You took it at face value.
David Sweeney: I did. I did.
Rod: Right.
David Sweeney: And as we got closer to closing date, now I’m about a week out, and I thought… and my bank says, “Okay, well we need your insurance binder”. “Oh, great.” So I call her up and wouldn’t you know it, of course, she’s off of work that week. They can’t find her. No one knows what’s going on, and it was really frustrating for me.
In fact, I had to delay closing by two days. I still went with their company, but I had to get new people involved, that had never seen the building before…
[00: 30:01]
David Sweeney: That didn’t know anything about my prior. Again, it was just a verbal phone commitment.
Rod: Sure.
David Sweeney: They didn’t know anything about that. Now, I’m having to call… I was dialing for anyone else that would insure this property. So now I’m getting bids all across the board and that pretty much took up my last week of closing.
Rod: Sure.
David Sweeney: Is just trying to get this insurance ready and so that would be my value add for your listeners.
Rod: Now, that’s really good. It’s really important that you have a closing checklist and a due diligence checklist.
By the way, I’ve got a live event coming up in LA, April 5th, 6th, and 7th. We’ll be announcing it… Well, I’m just announced it. This is the first time I mentioned it in LA.
And that’s one of the things that we provide, is a closing checklist and of course, probably the most comprehensive due diligence checklist on the market. Another thing that I wanna mention, if you wanna connect with David I’m gonna suggest David that you get on the community on our Facebook group. We’ve got like 4600 people on there. It’s only been around for two months.
Those of you listening, go to multifamilycommunity.com and it’s a direct link to the Facebook group. There are groups connecting all over the country. In fact, I was in LA picking the hotel for this live event and I met with five guys that met on that site. They’ve already started a meet-up group, and I think they just had their first real meeting a couple days ago.
It’s a great resource for all of you listening around the country to connect with other investors and like-minded people and share notes, and learn from each other, and make connections, and meet great guys like David here. So I highly recommend that you do that. I know that Dave is gonna go there ‘cause he said he would earlier.
David Sweeney: I absolutely will and I’m glad you brought that up because I was not aware of that. so I’m gonna check that out immediately.
Rod: It’s a great resource and we don’t allow any promotion. We get them that they try to promote, we delete them right away and block them.
David Sweeney: Right.
Rod: It’s mostly just people connecting, and asking questions, and really, really developing their own groups around the country. There’s so much strength and power in having a few people you can bounce things off. Because this is a scary thing for some people to spend half a million dollars, or a million dollars, or even more, and it really is a team sport. Commercial real estate is a team sport.
David Sweeney: Absolutely.
Rod: Sometimes you have to find the experience, like you almost needed with your deal. Sometimes you have to find the net worth income, liquidity and it’s just a great way to connect with other people. So highly recommend you guys do that.
Any last little bit of advice do you wanna share with my listeners?
David Sweeney: I would say…
Rod: Yeah. What would you tell them? Somebody that hasn’t taken any action yet…
David Sweeney: Right.
Rod: That’s always a question I’d love to hear the answer to.
David Sweeney: Sure. I’ve listened to enough people that were in the case like I am. That when you get your mind set on something, don’t take no for an answer. Always push ahead. There is someone who will say yes to you.
Now, it doesn’t mean that you can buy 180 units with no money in the bank, and no experience. That’s not gonna happen.
Rod: Right.
David Sweeney: But everyone’s career has to start somewhere. Now, for some people, maybe a duplex or a triplex investment is the great way to get started for them. And then they move up to apartment buildings.
Me, I want to skip that step, and go right to apartment building. It was lucky that I had some money that I could refinance out of my house. But, hey, if my monthly payment went up a little bit on my house payment, that’s okay. The monthly rent checks are more than covering that.
They cover the mortgage on the apartment. I’m letting someone else pay for that.
Rod: Right.
David Sweeney: I love that.
Rod: Right. Right.
David Sweeney: And it still covers the increase in mortgage on my house, so it’s just a fantastic deal. I think, if, for your listeners, someone that wants to get started on this, they really have to just set their mind and say, “This is what I’m gonna do, and I’m not gonna take no for an answer.”
Rod: They have to commit. They have to commit.
David Sweeney: Absolutely. You need to… [overlap talk]
Rod: In fact, that’s funny. I’m doing a Driving Force episode on the power of total commitment.
David Sweeney: Right.
Rod: And you know what, I wanna make sure it goes hand-in-hand with your episode so that…
David Sweeney: I love your Driving Force episodes.
Rod: Thank you.
David Sweeney: Because things like that get people motivated. That’s sometimes what they need to do. If they’re listening to podcasts, and their not evaluating deals, nothing’s gonna happen. Take a first step. If the first step is listening to a podcast, great, then you need to take action. Whether you’re calling friends and neighbors, “Hey, anyone know any properties for sale?” Whether you’re driving for dollars. Whether you’re getting on the MLS. Whether you’re contracting a real estate broker. Whether you’re evaluating your own properties. Whether you’re going to LoopNet, or Windermere, or Zillow, or any other website. Whatever you’re doing…
Rod: Take action. Take action.
David Sweeney: Yeah. You’re doing something. You’re doing something.
Rod: Take action. Yes, sir.
David Sweeney: Absolutely.
Rod: That’s it. Great advice my friend.
David Sweeney: If you’re doing a little bit more today, than you were yesterday, you’ve made progress. Now, some people take giant steps, and some people take small steps, but whatever you do…
Rod: Again, progress equals happiness.
David Sweeney: Yes.
Rod: Now, I’m really gonna get hate mail for interrupting you on that one.
David Sweeney: [chuckles]
Rod: But progress equals happiness, guys. Make progress. Little steps are all it takes. If you celebrate that progress, look back on the past week, where did you go, where did you get done?
David Sweeney: Right.
Rod: If the goal itself feels good for a little while, but it goes away.
David Sweeney: Yes.
Rod: The sustained happiness comes from progress, so take action…
David Sweeney: And maybe keep a log. Keep a log. If you’ve done something, what did you do today? What did you do tomorrow? What are you gonna do next week, and next month?
Rod: Love it.
David Sweeney: Make those goals out, write them down, and follow that plan. If you’re just listening to podcasts, and just reading books, that’s great but at some point, education never stops, but some point action needs to start. So that I would encourage your listeners, to do whatever they need to do to take action.
I’ve heard from enough people on podcast that say, “Hey, yeah, I volunteer with maybe an organization in order to get next to people that have money and eventually tell them about deals.” If you haven’t done a deal, grab a deal that might work, and say, “Hey, this is the type of product that I’m going to do. Here’s something that might make money, and this might be profitable for you. Would you be interested in something like this in the future?”… [overlap talk]
Rod: That’s how you do it. That’s how you do it. That’s how you do it. Love it. Great advice in taking action, fantastic advice, celebrating your progress and making some progress, and not beating yourself up if you don’t get to the home run in your first week, and evaluating deals. You just keep plugging away. Eventually, it’s gonna come together, like it did for you.
How long, by the way, my last question. How long were you studying and looking for deals before you pulled the trigger on that? You said you looked at 400 of them. How long were you actually looking?
David Sweeney: Well I got my license in April. And I’ll bet from April through August, I evaluated 400 deals.
Rod: Wow. Four months. Wow.
David Sweeney: Yeah.
Rod: So it was full-time then, okay.
David Sweeney: Yeah. I took a long time. And I found plenty that would make money.
Rod: Right.
David Sweeney: And plenty that wouldn’t but finally I found the deal that excited me, that had the profits that I was looking for, and the ability to increase the value by making sure that expenses are low, and rents are raised. That’s how I’ve increased value in this property.
It’ll be exciting, at some point, my bank has a, if I pay off my loan this year, it’s a 5% penalty. Next year, it a 4%, 3% etcetera, etcetera through five years, so it’ll be interesting what happens in five years. The mortgage stays the same, but the rents keep going up. Whether I do a … [overlap talk]
Rod: What was your term? What was your amortization?
David Sweeney: 4.25
Rod: Now, that’s the rate. What was the length or the loan? The amortization… [overlap talk]
David Sweeney: It’s a 10-year balloon.
Rod: Okay. 10-year, good. I recommend, people, do not do five-year balloons right now ‘cause you could be in the depth of the contraction.
David Sweeney: Exactly.
Rod: So okay. Fantastic.
David Sweeney: Yep.
Rod: Thanks for being on the show my friend. [overlap talk]
David Sweeney: Absolutely, Rod. I enjoyed it.
Rod: You know, it was a lot of fun. And I know you’re really add a lot of value to people today. So I really appreciate you. Thank you. Thank you for your service.
David Sweeney: I’ll be seeing you in April then.
Rod: Awesome.
David Sweeney: April 5, 6, and 7. Right?
Rod: Yes, sir, 5th, 6th and 7th, Hyatt by LAX. Yeah, we just signed the contract. Thank you for your service for the people of Seattle, my friend.
David Sweeney: Oh, sure.
Rod: They’re lucky to have you. Alright, brother, well listen, thank you, take care and we will talk again.
David Sweeney: Sounds great, Rod. Thanks for everything.
Rod: Alright. Bye-bye.
David Sweeney: Bye.
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