fbpx
Global Investors Podcast
GI61: Single Family Rentals to Over 1,000 Apartments with Jack Aduwo
August 19, 2020
0

Jack Aduwo is an experienced real estate investor and sponsor with about 1,000 units spanning across four different states (TX, AZ, UT, ID). His investing skills and experience span over 10+ years performing various real estate investment activities.

Watch The Episode Here:

Listen To The Podcast Here:

Transcript:

Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast. I’m your host Charles Carillo. Today we have Jack Aduwo. Jack is a real estate syndicator with 1,000 units across 4 states. He started investing in real estate over 10 years ago with single family properties and has since transitioned to multifamily real estate. So thanks so much for being on the show.

Jack:
Yeah. Thank you. Thank you too.

Charles:
So what was your professional background prior to starting a real estate investing 10, 12 years ago?

Jack:
So actually, so I’ve been in the IT industry like a lot of, you know, for some odd reason of people in the multifamily space. A lot of them always have some kind of IT background. So I have an IT background I’m actually, I still have my nine to five job. I’ve been in IT about 15 years now. You know, it’s been a good run can’t complain. Yes.

Charles:
And then why did you choose to get into real estate years ago?

Jack:
So this like about around 2009, me and my wife, we just got married. I got a job with HP as a software developer in Idaho. And so we moved to Boise, Idaho, and, you know, we moved from LA. So as you can imagine, moving from LA to Idaho, all of a sudden, you know, house houses were like pennies on the dollar. You know, we bought our single family, our five primary home that is, and you know after we bought it, you know, the, I remember clearly there was a house we wanted to buy and we had put an alpha and the decline of some, and that’s after we bought our primary home, you know, you came back on market and in back even at a lower price than what we doing in other put off at all. And with some money leftover, you know, from the wedding and just savings. And then we decided to invest that money into the to buy that single family. And I remember the price was about 80,000 and there was a tenant on it already paying about 900. And so, you know, coming in new experience, your experience, I just saw that there was an opportunity to buy it because it was so cheap. And if somebody can pay that much, you know, my, I think my net profit was about 400. I think mortgage was coming about 500. And so I was like, Holy smoke from day one, we bought as a short sale and the day we bought it I just went to the property and give the tenants notice, Hey, I’m the new landlord. So please send all the payment to me and everything. I did not even ask for a deposit, you know, cause I was kind of learning on the road lining on the go. So she started sending me money from next month and it was the best feeling ever, all of a sudden, you know, have this $400 coming to my account and I’m not having to do much. And I was like, Holy smoke. Yeah, I got to invest more on this. So around that time we basically, you know, we don’t know any of the financing strategy, how to acquire more property with different financing. So the only thing we know was save and buy the next house, save and buy the next house. We didn’t have any kids at that time. So it was pretty much, you know trying to live a frugal life and save as much as we can and use that money to buy the next house. So basically every quarter we were buying a house, you know, on average, every quarter wine house. And as we bought more than 10, then all of a sudden, you know the time is you get a Fannie Mae and Freddie it out. So we couldn’t get any more, the sweet government back loan. So, and this like over five years ago, so all the financing market was still a little how do you call it, the financing market was still, was still frozen or strict. So any land that I was going to give us a loan was basically gonna give us loan on their books. And they all said, you know, basically demanding for more money. The, basically I remember talking to one lender based in Idaho, one of those regional lenders and the one at 12 months cash way, South for every single house we did, we had, we had to basically assuming that we can easily go 12 months straight with all the houses being empty and not a single person paying for, and I mean, it was just crazy boy. He was still growing, even though through that time, Boise has always been growing and it was like kind of ridiculous. And in addition to that, they also require like 30% down payment and interest rate was well above the 200 basis point above the going rate at the time. So it was like, you know, a five something. And I was like, Oh, forget that looking into other ways to finance deal. And that’s when a land into multi-family that if you buy bigger, then all of a sudden the financing strategy changes. So I started looking into multi-family.

Charles:
Yeah. So before going into multifamily, what were you doing with those properties? I know you were renting them out at the end. Were you flipping any of them? Were you rehabbing any or were you buying these pretty much turnkey and then just renting them out for cashflow?

Speaker 3:
I think that would make it very attractive. So this Idaho, so this is like early 2000, right? No, not Alabama 2010. Right. So I would buy a house that was built in 2005 and that bought in 2014. So it’s little less than 10 years old. It’s basically a turnkey. So I’m a buy and hold. I’ve never sold anywhere property. My goal was to buy a house because I mean, as part of my job, so I’m at my nine to five jobs, so I’m not trying to be a flavor. I mean, that can be a flavor, but it’s just going to be another extra work in addition to my nine to five. So if I got to get something and just buy and hold it and just let it cash flow and grow in equity, I mean a lot, so that’s always been my goal. I’ve never sold any of my houses. I don’t plan on selling them anytime soon. Cause I believe they just good cash cow and I can hold them forever and it’s a generational wealth, you know, I can, you know, give them to my kids, you know, down the line. And so just, I have noticed, had seen a need to sell them.

Charles:
So you, you mentioned financing was a determining factor for switching your focus to multifamily. Were there any other determining factors? Cause I think with real estate investors, obviously the financial part of it is a main factor, whether it’s having enough equity or having enough, or having, being able to acquire debt to move their, their investing career ahead. But what else, other than the financing attracted you to multifamily?

Jack:
So at that time I did not know much about multifamily. Like a lot of people, I thought it was meant for them, the big boys with the big money, you know, and not for people like me. And so to me it was more or less like, you know being caught up in a position whereby you know, I got to look for alternatives. So I do not know much about all the benefits that most of my family has. So it doesn’t matter if you’re starting to research on, okay, I can get any better financing success. So what basically stopped me from single family, it was purely financing factor. And then of course, when I get into multi family, I found all the other great benefits, you know, you know, like for sure when I started looking into multifamily family, finding that, now all of a sudden you can get a nonrecourse, can I get a bigger loan, you know? And all of a sudden I can get a loan where they don’t care how much I’m awning. And it was just like, Whoa, where have I been all the years? You know, I wish a new idea this way back then. I mean, I don’t know how much boy your apartment we’re going on at that time. But if I knew, you know the multifamily financing I would have definitely gone to multi-family way back then. Yeah, no doubt.

Charles:
Yeah. So the financing definitely the major thing, because once you lot, all your, all your available mortgages, you’re kind of tapped out and now you have to figure out a different way of financing your next property. So what is your what is your current investing strategy right now within multifamily? And I know you’re in some other asset classes as well.

Jack:
Yeah. So with multifamily I’m basically having two approaches. One is being a passive investor. So I’m looking for deals to be passive investor on some IRA money to invest in those amount of cash to invest, but also do syndication. I’m more focusing on syndication, but of course I know a lot of great multifamily sponsors out there and you know, whenever they have a good deal with the numbers working and look really great, I will jump on it. But the focus, you know, that I spent on my family multifamily investment time on is, you know, acquiring more deals and looking for models, you know, take a lot of time, a lot of effort to, you know, look out for deals and get deals for sure.

Charles:
So, what is your role within your company throughout the acquisition and asset management kind of stages of it? Are you finding the deals? Are you finding the equity? Are you performing asset management, project management after the required?

Jack:
So I’ve been kind of a Jack of all trades, to be honest with you get to multifamily syndication. So basically playing all those roles, you know my first deal, I know, I know for example, I knew the broker walk with it broke up soft, the deal basically brought my partners into the deal. And we did deal acquisition process, wasting money, doing everything. And now we are all doing the asset management, you know, basically weekly call with the property manager and doing everything as time progress and definitely asset management, no doubt texts, a lot of effort in, cause it’s, you know, initial thought like, Oh, property management company is going to, you know, run the show and we just, we just going to check in and make sure that everything’s being done. But no, I said management is a work by itself, you know, and actually when you, when you walk in the value added space that we do, like the one we do you know, you cannot just come in and, you know acquire the property and say, Oh, I’m going to asset manage and not do much every single day. There’s something to be done with asset. So more and more my approach going forward is to work with partners whereby cause I’m never going to be able to reality. I’m never going to be able to do a hundred percent of the asset management. If when I play a more proper, because this one’s a technique more and more of my time. So he’s a marrow, you know, working with partners, you know, and make sure that we strike it like that. You know, I don’t have the same. Oh, Oh. In other words, one of the key partners, you know, one of the key partners kind of help, you know, do a little bit of extra work with the asset management with that regards.

Charles:
Yeah. No, I agree too. Yeah.

Jack:
So that, so that I can be able to spend more time, you know, acquiring properties.

Charles:
Yeah. Everybody has their, their specialty within the whole process. And when you focus on that, it it benefits everybody because you know, it’s just everybody, some people are better at asset management. Some are better underwriting. And speaking with brokers some are better at raising the equity portion of the deal. So it’s just, everybody has to play, to play to the strengths and also play to their available time. Obviously, if you’re still working full time, it’s something where you know, asset management being very time consuming pretty much you’re managing the business. You have, you know, a manager for your business, but you’re actually managing them. So it’s a very special, we have the projects going on. Cause none of these properties we’re buying are really turnkey. These are all, like you said, value, add properties. So there’s an ongoing project for possibly two years, you know, in this time right now, maybe more, but

Jack:
Yes.

Charles:
So speaking about this time right now and what we’re going through, how has your business change because of COVID maybe like what you’re buying has changed how you’re buying it, how you’re managing it.

Jack:
So you know as Warren Buffet always say, you know, when they ran to the Hills or no, that’s a when time to get deals or when people are less greedy, the serving can be greedy. So I believe anybody who is selling right now is a motivated seller. Let’s face it. So I’m looking for deals. I’m looking for deals right now. My underwriting has definitely catering to reflect the market. For example, all my, all my new deals. I am assuming zero income year one. And would that be your income increase income? So in other words, what I’m basically saying is I come in and I’m not going to raise a single penny on that deal. Can the numbers to work from another based on the [inaudible] the way it’s been operating the last 12 months and assuming you’re not able to increase on annual the income, can I still get the numbers to work and to meet us one of the way I’m checking if the property works, of course also still doing, you know, COVID-19 stress testing the deal and all that stuff, but the underwriting underwriting right now assume none of that. And also typically only a two. I usually like, for example, in a market like Dallas, I would assume 3% increase on YouTube right now I’m using a 0% increase in year two, or maybe in some cases, 1% or 2% depending on the area. But basically two is also extremely limited. Overall income only two is solidly below a 10%, no more than say for example, 7% on YouTube. So I try to give myself rooms like that just in case it goes beyond year one. We’re not fully covered. I don’t have expectations. That’s not achievable on year two.

Charles:
Yeah, no, I totally agree with that. We’re doing the same thing. We’re not writing any increases for the rest of 2020 for our underwriting. And then we’re very, very bearish, I guess you would say on increases for 2021 until we’ve started actually bringing some of the new apartments on and turning over and stuff like that. But we’re also getting longer interest only terms used to be just two years now, we’re going for four years interest only just gives us more of a buffer when we’re buying it. So how has managing your business changed during, during all of this, all your properties?

Jack:
Yeah, so we definitely having to pay more close attention to the rental income. I mean, I think everybody was completely freaking out back in March. I was one of them too. And I think, I don’t think I fit as much as everybody, some people do, but you know I was more or less on the positive side cause it will be in the, when you have a sound. So one of the things we tested initially was stressed as in our property, see how they would perform. Right. And we definitely put, you know, all the CapEx on hold for a little bit. I know one of our proper, we did not. Cause when we stress that we could get up to 45% occupancy and still get the numbers to work. So we’re like, okay. I mean, how will you get 45% occupancy. So we will, we will feel very, very confident that no reason to, you know, put any of the CapEx and holes. So we’ve been actually continue the CapEx and that property we acquired in February of this year. So we still have a lot of, we still have basically I bought initial CapEx. It’s not like we have, you know, on the tail end of the deal whereby you know, we have very little money left on the CapEx. We still have a huge amount of CapEx who gave us ease of mind that, Hey, if anything stays down the line, yeah, we can reassess it, but we can continue one. That’s how my, the properties, we basically decided that, okay, let’s just put everything on hold a little bit to see where things are. But we, we, we, we are this month we’ve decided to restart some of those CapEx in TV upgrade you know XTB innovations that we restarted cause we had, no, we did not see any reason to hold back. All my properties I’ve been doing great. You know, I know for example, one of them we decided we just gonna, we were initially planning on implementing internet package on the property for $89 per though. And we kind of delayed it a little, but just the way things have been that property has constantly stayed at 98%. As a matter of fact, back in March, it was like 94%. And throughout all this time, you get 90%. I mean, there’s no reason to delay. We can take the chance. So we just gonna next month we just gonna proceed with the implementation next month in July. That is, and, you know, cause we’re not just to concern another property. This one is for example, Phoenix. I mean, we just, we still get a huge topic of people coming in and our rent have been low that we decided we just going to start increasing rent. We’re not going to wait anymore. Cause you know it’s a matter of seeing what’s on the ground, talking to the management company, seeing what they see and you know, if there’s a strong interest, the traffic’s still there and people still interested in you try one unit with a rate increase and nobody’s saying, no, then we’re like, Hey, let’s have at it. So I think my lack is all the property that is just, we’ve been very fortunate to have them in locations. And I’m a strong believer in locations. In trying to buy property at the right location in growing areas that you can be able to easily in a way of the storm, like, you know, in this case COVID-19

Charles:
Yeah, no for sure. And we were reviewing some of our vacancies, we went from 94% economic occupancy. So people paying rent prior to Cove it to on one of our properties to 98%. So you have a lot more people staying in the properties, obviously we’ve paused a lot of interior renovations on that one project, but we are still, like you said, we’re still doing our exterior project renovations and stuff like that. Cause that’s all part of the business plan. And that doesn’t even really affect the rent because no one’s going to pay for, for them to have a, not pay more for a non leaking roof, for example, but right. What so what do you see, we talked about your properties. What do you see as all for 12/24 months, let’s say for multifamily what’s your kind of your 30,000 foot view?

Jack:
So I think I have mobile most family cause I was feel like I mean, and the industry data show is when you look at all the all the reports out there, right. I think there was a time, was it real page or one of the, one of the marketing? One of the industry reports out there. I was actually looking at one of the Neil Bowers presentation and it shows our different industry we’re going to be affected by COVID-19 and mostly familiar was on the bottom add there’s another lowest we can make sense. Cause I think the lowest was like self storage, you know, cause in a way to lose their home, they still have to store their staff somewhere. Plus just operational point of view. And you know, COVID-19, nobody’s going to get, I mean, nobody’s going to, but you have a less likely chance of getting COVID-19 at self story, you know, compared to getting at in their apartment. So I’m very bullish. I think there’s, there’s going to be slow, slow down, which from a buyer point of view is really good. I think there’s gonna be some markets that are gonna fill it really bad. The most obvious one of course is Vegas and Orlando. And you know, I think this is the best time to look into those markets that, you know, that are affective overwhelmingly affected by this market. I definitely not going to fail it. I was just looking at which report was guy, was it for? So one of the reports showing for example, you know, salt Lake city and the Boise has some of the markets that are going to easily weather the storm, just because of the way they are, you know a lot of market like Austin, for example, that, you know our law technology presence, you know, if there’s one industry who is never going to save a lot of this is technology because it’s one job that a lot of you can easily do without coming to the office. I have been working from home since March because I mean, the, it, even though my company is now an it company, but with me being in the it, I can easily go a lot too long. I don’t have to go to the office. I can stay in their own basically forever. Cause all I need to just do things, my laptop and the internet and that’s it. So it makes it very easy. So I think if you’re wearing two hats, if you’re wearing hats of a sailor yeah. If you have a loan deal, definitely, you know, you have a little bit, you might be expecting to give some kind of discount. If you’re a buyer, I think there might be some discounts, some markets I don’t expect my discount around, you know, Austin, salt Lake city, for example, I don’t expect my discount at all. But if you sat in market like Eastern, you know, you, I would expect some kind of discount.

Charles:
Yeah, no, I agree. And I like how I think the same way we were talking about Nevada and Orlando and I’m based in Florida, we’re really bullish in certain areas. We don’t have any holdings in Orlando though, but it’s something where stuff that comes in from there, from brokers we review and we take a look at and you know, I don’t think you can just say it’s a no go in these areas. You always have to kind of see what people are a little bit. Yeah. It’s all deal by deal. Every area is a little different different classes differ in these areas with not as diversified employment, whether, you know, like Las Vegas and Orlando, for example, they’re not the most employer diversified kind of places. But I think, you know, what we’re looking for too, is that if we’re looking in, I think places are going to be a much more stable where you have a diversified workforce where you have and then you’ve had the consistent population growth as well. Like the places even you mentioned there as well. I don’t think you’re going to see too much, too much change in that in those areas. But what mistakes do you have you made in real estate investing and what would you highlight to a new investor?

Jack:
So you know, yeah, there’s definitely always you know, learning lessons. I’ve made both mistakes, both as a passive investor and also as a syndicator, you know well syndicate is more, not more or less my mistake. It’s just, you know, a learning lesson. So I add a deal, you know, we were acquiring the deal this, my first deal and the deal had a chiller. And about two weeks before, you know, we close the deal. Sheila caught fire. The seller was selling to us at a good price because they didn’t want to deal with the chiller. And because it caught fire before we closed the deal, they now had to replace it. And you know, of course, all of a sudden and new chiller, the property value is significant. It goes high because of that. And the turn around, they basically decide to walk away from us from the deal. So, you know, we spent like five months the deals drag on for five months, I ended up walking away because, you know, they didn’t want to sell to us so not we lost money, but none of the passive investors lost money. You know, we refunded every single penny to alpha plus investors is one of those ways. Your attack as a syndicator is if the deal go South, you know, you want to be, be in on the game, you know, for the long run, right? Number one is protecting the rest is money. So if the deal goes out, get them all the money back. So every single investor got their money back on that deal. Me and my other partners, they were just two of us, you know as the lead sponsor on that deal. So we basically know lost the soft cost. I mean, the celebrity, the honest money to us, because it already went ad buy because they are the one walking away from the deal, the return, the money to us. But of course, as you know, there’s always have a soft cost, like, you know, syndication attorney, you know, the appraisal and all those other soft costs, lender fees, all those are non-refundable. So we basically lost all those and from passive investments, my first passive investment deal, basically, you know, so all the, all the nice things about the property, but do not do a good job in bearing the location in, I think the syndicator might have been a little bit too aggressive with the assumption and as a result, you know the property did not perform and that’s, that’s one of the lesson I learned in invoking on all my ideal, for example, I’m going to tell my, my my, my pastor, like, Hey, we’re going to get a hundred thousand dollars in other income on this deal. That’s what we’re projecting. And these example, why, for example, going to install the washer and dryer when I do this and that, but on the underwriting, I’m not going to fuck with that rain or a very small fraction of that in, you know, you know into, into the underwriting. So that just so that, you know, if that ended up not being achievable, actually, you know, there’s a difference between an obvious thing. It was something that you think can keep, I think the most common for example is washer and dryer, right? He can easily show the numbers look really, really well if you had it into the underwriting, but the question is, what if you cannot achieve that, right. Cause a good chance. You might not. There’s a good chance, you know, give to achieve it. So what is going to achieve it and the numbers to work and as the syndicators will always what you want to show the investors that, Hey, even though we’re going to shoot for this let’s assume is not achievable, or let’s only assume a very, very small fraction of it is achievable so that, you know, it ended up not being achievable. You don’t end up being caught up in the marrow.

Charles:
Right. Nice. Yeah. No, it makes perfect sense. It’s definitely, you know, you have your estimates and then you also have kind of when you’re speaking to your investor, you give them the realistic view of something happens. You know what I mean, Learn more about you and your business.

Jack:
Yes. So I have website Kendu-Bay Properties, Kendu-Bay that’s K E N D as in dog, U Y no key N D U B as in boy, a Y properties. So KenduBayProperties.com. They can easily come there and see some of the, you know, some of our assets, not everything is listed there, but cause we are forever, always adding more things and it’s being constantly updated, but they can always come and see, you know, some of our assets there. They can also reach out to me directly, you know through the website or call me on my cell phone (818) 635-4289. With any question I’m always, you know, available any time to talk to anybody and they can also connect with us on Facebook. So just Facebook.com/KenduBayProperties and then you can easily find us there.

Charles:
Okay. Awesome. I’ll put all those links into the the show notes. And I want to thank you so much, Jack, for being on the show today.

Jack:
Thank you too. Thank you so much. I appreciate it.

Charles:
Talk to you soon.

Jack:
Yes. Thanks.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

Announcer:
Thank you for listening to the Global Investors Podcast. If you’d like to show, be sure to subscribe on iTunes or Google play to get new weekly episodes. For more resources and to receive our newsletter, please visit global investor podcast.com and don’t forget to join us next week for another episode.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of harborside partners incorporated exclusively.

Links and Contact Information Mentioned In The Episode:

About Jack Aduwo

Jack Aduwo is an experienced real estate investor and sponsor with about 1,000 units spanning across four different states (TX, AZ, UT, ID). His investing skills and experience span over 10+ years performing various real estate investment activities. Started with single family Investment then transitioned to multifamily real estate investments with emphasis on value-add opportunities. Excellent reputation working with brokers, rehabbers and vendors. Excellent financing history with no bankruptcy and perfect credit score. Puts great amount of effort in building a team to acquire & operate properties. Dedicated to providing safe, comfortable & livable properties to his tenants.

0

About author

Admin

Related items

Obtaining Financing for Your Deals Even as a Foreign Investor with Eric Johnson (Youtube)

GI75: Obtaining Financing for Your Deals; Even as a Foreign Investor with Eric Johnson

Read more
Youtube Thumbnail

GI74: Acquiring Over 500 Multifamily Units with Joseph Gozlan

Read more
Using Retirement Funds to Invest in Real Estate Tax-Free with Scott Maurer (Youtube)

GI73: Using Retirement Funds to Invest in Real Estate Tax-Free w/Scott Maurer

Read more

There are 0 comments

%d bloggers like this: