Four Partnership Structures Behind 171 Units in Stephenville, TX

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0:00 Hey, it's Christian. We're getting ready to head out to Stevenville, Texas. I'm going to take you with me on the road and we're going to see four properties with four different structures, over 150
0:10 units that we put together in less than 2 years. The fun thing is every single partnership structure is completely different. Now, multif family strategy,
0:18 we love to talk about creative finance, but today we're talking about the creative partnership structures. In fact, only one of these four deals used creative finance. However, all of them
0:26 were purchased $0 out of pocket. Let's go.
0:32 [music]
0:37 [music]
0:39 Now, while we drive out to these properties, we actually purchased these an hour and a half away from where I live. This is just like how I got
0:46 started in Washington State. I found properties that were about 3 hours away from where I live. They're over the Cascade Mountains. So, [music] I do this drive, but instead of investing in big
0:55 cities like Dallas or Seattle, you drive a little further out and you can do multiple transactions. Absolutely take over [music] a town. I did this originally central Washington State.
1:04 Went from no money, no experience to owning over a 100 rentals there, moved back to the coast, bought in Mason County, Washington. When I moved to Texas, these same strategies worked.
1:14 We're out in Stevenville today. We're almost at the properties. Once we arrive, hop out, see all the buildings,
1:21 drive on back. But I do this drive maybe once a month for the amount of money that we make doing this much work. It's insane. By the way, these are the same strategies that worked in Abalene,
1:30 Texas, and how we scale to 225 units there in 3 months. And how do you select these towns? Well, Steamville is a perfect example. You want multiple
1:38 employers and you want to invest in a place where population is consistently going [music] up and that you would want to live in too if you were in the same
1:46 situation as your tenants. So for me, I found this amazing town. We visit the town. It's absolutely the type of place that we want to invest to provide
1:54 housing. And then we look for the opportunities. This first building we're going to the 25 unit was seller finance only has one partner. I'm going to talk
2:03 about how we actually put together this deal and most importantly, how we raised the capital to close deal number one.
2:08 We're here at the 25plex that started it all. Seller finance Stevenville, Texas.
2:12 This was a $2 million purchase and yes, it was seller financed. But today's episode on how we actually raise the capital. So seller finance, the deal is 15% down. So we have $300,000 to raise.
2:24 Where does that come from? Well, first we found this opportunity. The seller's willing to carry the contract. So we have 85% of the money already figured
2:31 out. So the actual play here for all of these apartments was just finding one person who also wants to make money on a fantastic deal. We have an awesome debt product. 85% of the money is already in.
2:42 We found one investor. The crazy [music] thing is this one investor who agreed, turns out their entire business was illegal. They go to jail 3 days before
2:50 close. I'm on a plane flying in to sign, we still hadn't found the investor. I did one of my favorite things that we get to do in the portfolio. I pull up my
2:57 phone and we do what we call the last minute scramble. Go through the contacts rapidly on F. I was like, "Oh my gosh, they might fund this deal." I call them.
3:05 I ask for help. They're like, "Hey, we would love to do the whole thing. How good of a deal is it?" I'm like, "Dude, it's an amazing deal. Here's the crazy ask. I need you to trust me and I need to close this later today at 11:00.
3:16 [music]
3:17 I go into signing, I sign, they wire the funds, fantastic deal, amazing partnership. This still cash flows every
3:24 single month today and it was all possible because we had the right deal and we found the right person. But I just want to point out this was a random
3:31 person in my phone list who actually ended up doing this and we did it while on the plane to go sign for the deal.
3:42 [music]
3:48 All right, welcome to the 26 unit. This property we funded over a game of pickle ball. I'm going to explain how this came up, but guys, 26 units uh bought for
3:56 $1.6 million, so [music] we killed this on price. Really good condition. These are actually fairly new build apartments. Super simple entry-le
4:05 housing, which is, by the way, my favorite. A local bank [music] on this one decided to fund 80% of the deal. So, we needed to find the last 20% of $1.6
4:13 million. There were about five units that needed to be turned. So, a little bit of reserve needed as well. We came to one investor. We asked for $400,000 total and over one game of pickle ball.
4:23 So, we found the deal. We put it under contract. We talked to the bank. They were in. So, that took all of like 2 days to get there. The day after that, 3
4:32 days into this deal, game of [music] pickle ball, we're talking about the deal. an investor who owns a business out of California said, "Hey, that sounds like what I'm trying to do. Would you guys be open to partnering?" I'm
4:40 like, "It's going to be about $400,000 to finish the project." Now, our agreement with him. He gets 60% of this deal and we get 40 until we refinance
4:48 the property and return his original capital. When his original capital is back, we switch to Caleb and I owning 60% and he owns 40. So, we flip-flop the
4:56 equities after his money's back. Super simple structure, but basically it says, "Hey, you're taking a majority of the risk, and while we found the deal and lined up the project, we'll give you
5:05 more of the deal. Once you have no money remaining in the deal, however, we're going to flip it back to our side since we put in all the work and none of us
5:12 have any remaining capital." Very simple. Now, this is a longerterm partnership. This is one of the only deals that I've done where we don't have a designated way to buy them out. They
5:21 actually wants to do multiple deals with us. I don't usually recommend doing that, but this fell into our laps so nicely and I really like that investor.
5:28 I'm excited to do more projects with them in the future. So, it's an option.
5:33 If you can get it so that your property just buys your partners out, essentially the burr method, you can do that again and again and again and is actually a
5:40 better practice. However, if you have a property where the refinance doesn't quite buy them out, but returns their capital, this can be a way to play a longerterm partnership where they give
5:48 you money temporarily. You increase the value of the property. You own a lot day one, but then you own even more when you successfully finish the project.
5:57 Compensates them for risk and gets you cash flow and equity today. Uh once again, purchased $0 out of pocket, which was in budget for me.
6:07 [music]
6:15 All right, we just pulled up at the 44 unit. This was actually the third deal I bought in Steamville, Texas, but the partnership structure was absolutely awesome. This was conventionally
6:22 financed. We bought this for only $1.8 million. So, we started with a fantastic deal. The bank left 80% of the money.
6:28 So, when we were doing our capital raise, we were only really looking for the last 20% of the money, which makes this a whole lot easier. So, this one actually needed a little bit of repair.
6:37 We had a fantastic property, but it wasn't quite set up exactly the [music] way we wanted it. So, we had some maintenance, repair, we needed a reserve. So, we were going to raise $500,000.
6:46 We decided to do this over three investors and what we call a JV or a joint venture. We don't need a ton of people. We didn't need a ton of money, but we had to find about half a million on an amazing deal that makes money.
6:57 Now, 55 plus is very passive. Come with me through here, by the I'll tour you through the office as we go, but it's
7:04 very passive, but the initial setup was pretty intense on here. We had to turn some units. We had to get the renovations in. We had to figure out our leasing, and it was a new asset class
7:12 for us. So, 55 plus. It's senior living, not assisted living. Uh, but we host events in here. We have bingo nights,
7:19 Bible studies, Thanksgiving, all of the fun stuff. One of my favorite parts about being a real estate investor is that you actually get to invest in your communities and give people a space that
7:28 they want to live. Not only does it make you more money, but you feel a lot better about what you do. Now, on to the investors. Three people gave an even dollar amount. We took 500,000, divided
7:36 it by three. We did a different model on this. We did [music] what's called first in first out. So, on our original capital raise, we were just partners.
7:44 Standard partnership. They bought in, we brought the deal on this deal. First in, first out. They raise the money. We have to finish the project. And out of the
7:52 cash flow and the future refinance, the investors have to be paid back. Now, we're stuck with a deal that has no money from anyone. I have no money in it. My buddy Caleb has no money in it.
8:02 None of our capital partners have any money in it. We've returned their money and made an amazing return for everyone.
8:08 This is a way you can land free real estate, free to you, that looks exactly like this. Joint ventures are actually one of my favorite way to do deals. You
8:15 do not want to get more complicated. You want to do every deal you can with the least amount of partners possible, but making sure that you completely fund your deal for renovation and reserve.
8:25 Biggest mistake I see new investors make is they raise just enough capital to close. Now they're stuck with an empty account every single month. And if anything unexpected happens, which I
8:33 promise you it will, you're out of money and you have to go find more money from your partners or bring in new people.
8:38 It's a total mess. This property, we did it right and I'm super glad we did. By the way, investors all over the country are buying deals just like this. It could be a joint venture. It could be a
8:47 syndication. Sometimes they're even 100% creative finance. But if you want to buy deals like this without saving up hundreds of thousands of dollars of your
8:55 own money, I want you to click the link below. This 10-minute video will go over not how just me, but how other investors have done deals that have allowed them to escape the 9 to5, replace their
9:03 income. Many people getting 10 to $20,000 a month of passive income through multif family real estate.
9:09 However, it all starts with the video below. So, check out that link. If you want to check out multif family strategy and you're looking for the coaching and the community to do this, the link's
9:18 below. Back to the video. All
9:22 [music]
9:29 right, we made it to the 76 unit. This is the largest purchase that I had ever made. When we closed this, we used a different partnership structure than we'd ever tried before. It's called
9:37 syndication. It's not my favorite strategy. You want to always close with the least people possible, but on a larger transaction, this is how you can get paid to buy bigger deals and structure these low to no money down.
9:48 Here's how we did it. Well, you have general partners, which is what I am. We own 30% of this entire apartment complex. Me and my buddy Caleb found this deal. It came up after we bought
9:56 our 44 unit building. So, how do we close this with syndication? Why that method? First of all, my favorite rule for real estate is we want to do this with the least amount of partners
10:04 possible. However, this was our first multi-million dollar raise. So, you're standing right now in the middle courtyard of 76 units, all forplexes.
10:12 Property is gorgeous. We bought this for $6.2 million. Fanny May, it's called agency debt, came in [music] with a
10:20 lowinterest debt product for us to own this because we structured a great deal.
10:23 However, it still cost [music] a couple million dollars to close this. So, how do we structure this? With GPS and LPS.
10:28 So, in syndication, you actually file with the SEC. So, there's about a $25,000 filing. This only works on bigger deals if you're doing a larger raise cuz it has to make sense. You're
10:36 as a general partner, we own 30% of this entity. And then our limited partners own 70%. They get a whole different set of returns. in this case, what's called
10:44 an 8% preferred return. So, [music] we pay them every month. The GPS only get paid after the LPS get paid. This
10:51 allowed us to raise capital. We get paid what's called an acquisition fee. So, an acquisition fee was a couple hundred,000 for us to buy this campus. The investors
11:00 get the majority of the upfront returns, but we get ownership, monthly cash flow, and an upfront fee to buy deals like
11:07 this. 30% of an entire deal is a lot more than 0% of a deal that you didn't buy. But this was our first multi-million dollar raise. We have a
11:15 little over a dozen partners on this. We make distributions every single month and have done so since the second month we acquired it.
11:27 [music]
11:50 Heat. Heat.