Making Multifamily Money - Jan 3rd 2024

Real Estate Updates

My 26 unit apartment complex finally finished renovations.  I just need to touch up the exterior wood and repaint some areas royal blue.  Why royal blue? Because my property manager said that is the most popular color right now.

How much did all my renovations cost over the past 18 months? $315,000.  I am waiting for a full breakdown of the expenses, but this includes a new roof, at least 14 brand new units, and moderate renovations on the remaining 12 units.  All 26 units are rented out so I am at 100% occupancy.  This means that the units are nice and my rents are slightly below market which is good.

I spoke with my property manager who served as my general contractor to discuss the general contracting fee.  The general contractor is the project manager who coordinates all the sub-contractors (i.e - floor guy, kitchen guy, paint guy, etc) and does quality control over the units.  I live over 1,000 miles away so I can’t manage the day to day, nor do I want to manage the day to day renovations.

Typically, general contracting fees cost 10-20% of the gross renovation budget.  According to the contractor we signed, the fee was going to be 10% ($32,000).  My general contractor actually called me to tell me he was going to lower the fee to $25,000 (8% fee) which was amazing for me.

A good general contractor should save you more money than the fee you are paying.  I think on just the roof alone I save $25,000.  I remember getting 3 quotes and all were around $50,000.  My general contractor had a connection so I was able to get a brand new roof for $30,000 which was a $20,000 savings off the bat. 

How am I going to pay my general contractor?  I want to pay my general contractor using the positive cash flow of the 26 units over 6-12 months.  I am cash flowing around $8,000/month on this unit and they have access to my bank account so I just told them to break up the payments over 6-12 months based on the excess cash flow at the end of the month.

If you have a good general contractor, make sure to pay them timely.

What I Learned

To grow exponentially, you need to remove 80% of your identity and keep the 20% that best serves you.

Weekly Self-Reflections

Mistakes I’ve made over the past 10 years

• Not self educating myself sooner about personal finance.  I started self-education in 2018, but graduated in 2013

• Paying off my student loans first instead of buying real estate.  In 2015, real estate was significantly cheaper in the Bay Area, CA.  I could have bought some real estate in 2015 and all would have appreciated significantly over the next few years.

• Falling victim to shiny object syndrome and losing $120,000.  I was juggling too many balls and as a result dropped a lot of balls.  I lost money and was stressed

• Investing in a high crime area and blinded by the huge upside potential.  No amount of money can fix a high crime area.

Despite making all of these mistakes, the key is to be able to survive each mistake.  Don’t let 1 single mistake wipe you out completely

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