EP173: Our $145 Million Shopping Spree
We just embarked on an EPIC real estate shopping spree…
That’s right. ⭐
What we did will make our investors (and us too!) millions of dollars. 😍😍
So we had to make this episode about it because any real estate investor who uses these lessons will blow up their real estate game faster and easier!
But here’s a thing: it’s not about nailing the market timing, snagging cheap properties, investing in rough areas, or having millions of dollars in your bank account.
In fact, it’s probably the opposite of all those things.
Today, we’ll dive into the top 10 things we picked up during our latest shopping spree!
But before we do that, we need to discuss our little shopping habits first.
Have you guys seen the new Barbie movie? 🎬
Even if you haven’t you’re probably aware on some level of the Mattel mania that has swept the country. Pink is the color of the summer, and Barbie is making a comeback like never before.
And man, does Barbie have some cool outfits. If you want to imitate some of the Barbie merch, you could be spending over a grand just to mimic a similar outfit.
We love a good fashion moment, so the thought of vintage Chanel and a completely custom wardrobe has us seeing pink stars.
👉 In less than 12 months, we went on a little shopping spree of our own, to the tune of $145 million. And no, before you think we are totally irresponsible, it wasn’t at the Gucci store.
Nope, our retail shopping spree didn’t involve designer handbags, fancy sunglasses, or high-fashion belts, although we would have loved that.
Instead, we chose to fill our bags and hearts with the perfectly sized investment‼️
You see friends, when we think of shopping, we think big – in the most literal sense. It’s not about what we can wear, it’s about what can wear us, lift us, and benefit us financially and emotionally. During our extensive year-long shopping expedition, we not only checked off all these criteria, but we also surpassed them!
Our 🏢 apartment investments not only enriched our beloved investors but also had a profound positive influence on the world, which was incredibly fulfilling.
To start this process, take a step back in time with us to July 2022, which is when our shopping spree began.
Though it seems like a distant memory now, it was during that momentous time when we embarked on the pursuit of an exquisite $71 million property.
This sophisticated real estate gem, nestled in one of Houston’s prime markets, was under contract for $71 million.
The buying process was filled with unexpected twists, and one of the most notable was the surprising rise in inflation and interest rates – a change that the authorities had hinted at but had caught us somewhat off guard.
Navigating through this abrupt financial turbulence was undoubtedly challenging, but then again, nobody said a shopping spree would be a breeze! 😬😬
Now, you might think that discount shopping is the way to go, but just like Barbie, our vintage Chanel Houston property came at a pretty penny.
And in the world of multifamily properties, negotiating an already agreed-upon contract is generally looked down upon.
So imagine our surprise when our lender insisted on a 10% discount on the property that originally contracted at $71 million.
When you’re dealing with numbers that high, even what sounds like a meager 10% actually equates to around $7.1 million – no laughing matter!
Despite our anxiety, our lender assured us that a discount of $1-2 million was not only recommended, it was totally doable!
As you might imagine, the thought of potential repercussions with the seller and broker left us feeling extremely nervous. It’s a situation no buyer would ever wish to encounter.
But at the end of the day, the viability of the loan was on the line, leaving us with no other choice but to request a discount.
To handle this situation with tact, we arranged a conference call involving our broker, who was representing both us and the seller, along with our lender. The primary objective of the call was for our lender to explain the situation and the reasons behind our request.
The crucial message we needed to convey was that our enthusiasm for this request was minimal; rather, we felt compelled into this course of action, as it stood as the sole means for the loan to progress.
Much to our surprise, in response to our request, the seller extended a $2 million discount but with a condition: we had to raise our earnest deposit to demonstrate our genuine intent to buy the property.
This ‘hard money’ deposit is non-refundable and serves as a testament to our unwavering commitment to the deal.
In the unfortunate event that the deal did not materialize for any reason, we would forfeit that amount.
That might not sound like a big deal, but our initial earnest deposit was a little over a million dollars, and they asked us to double it. At this point, we were in deep, and we had already completed our capital raising. 😵😵
We had successfully raised $34 million for the deal, the money was in the bank, and we were ready to proceed. ✨
You see, typically, the purchase price is settled upon during the signing of the purchase and sale contract, while the loan terms are finalized in the last two weeks leading up to the closing.
However, our circumstances forced this conventional process to shift direction.
Because of our lender’s demand for a discount, we found ourselves in the position of renegotiating the purchase price after the contract had been signed, introducing a challenging aspect and an additional layer of complexity to the deal.
➡️ Thanks to a round of nerve-racking negotiations, we managed to secure a $3 million discount on the property, which coincidentally had an appraisal value of $78 million.
Talk about an epic start to our shopping spree! 😎😎
Fast forward 11 months later in June 2023, we find ourselves celebrating the successful acquisition of yet another property.
This time, our focus led us to an astonishing $77 million property in the unexpectedly thriving market of Northwest Arkansas.
We bet Arkansas doesn’t immediately come to mind when you think about thriving real estate markets.
The purchase of this impressive property, boasting a mixed-use component, was made possible through our unique insight into an undervalued market, our capacity to raise an impressive $38 million in private capital, and our strategic decision to take on a substantial loan at a fixed 3.49% interest rate.
This move proved to be a lifesaver, considering the state of the capital market during that period.
And we are SO grateful for the remarkable opportunities that arose from our $145 million shopping spree. Throughout this journey, we have not only established credibility with brokers and sellers but also provided our investors with high-value investment prospects.
It has been a path adorned with professional growth, learning, and an abundance of excitement.
But we aren’t going to stop there! 👻
In true entrepreneurial fashion, as we set our sights on the future, we are filled with eagerness to embark on our upcoming adventure. This journey may look like forging strategic partnerships or venturing into uncharted territories for further growth, and we are thrilled to discover where the currents of finance will lead us.
And who knows?
Maybe in the coming year or years, our $145 million shopping spree will appear as a mere routine compared to our new achievements.
For the Kitti Sisters, there are no bounds to what we can achieve! The sky’s the limit!
Keep in mind that our June 2023 shopping spree was definitely more of an adventure than a simple errand. And we love it that way!
By keeping an open mind, we found ourselves venturing into the promising, yet somewhat overlooked, territory of Northwest Arkansas.
Imagine our surprise to discover a thriving metropolis, brimming with economic vitality and potential growth.
And this magnificent $77 million property is no ordinary apartment complex, but a beautiful fusion of residential and commercial spaces.
The state-of-the-art marvel, completed in 2021, had barely even had a chance to thrive when we set our sights upon it.
To seasoned investors like us, the mixture of 18 retail spaces mixed with the traditional residential setting provides a unique commerce opportunity within its very foundation.
Even better, the property has this idea of live-work units—a unique concept that envisions living and working within the same building, blending the two seamlessly.
This innovative approach proves invaluable to small business owners, law firms, psychiatry practices, startups, and various ventures, offering a flexible space that caters to both their professional and personal requirements. And we can’t wait to be on the cutting edge of this movement!
Finally, what really sealed the deal for us was location, location, location. Nestled in a highly desirable area, the property attracts the eyes and wallets of those who appreciate a perfect blend of convenience, luxury, and style.
So you can see why we didn’t want to miss out on this gem.
An unforeseen stroke of fortune came with this purchase – the opportunity to assume an existing loan, and not just any loan, but a coveted Housing Urban Development (HUD) loan.
This property boasted a remarkably low fixed interest rate of 3.49%, with a substantial 38 years remaining (fully amortized, no less). In an era where interest rates soared to 6 or 7 percent, this loan really had it all. 😘😘
So you can see why it’s so important to have a loan assumption strategy, so you can avoid the high interest rates that deterred many investors from the market.
Keep in mind too that any time we make a business decision, it’s about more than just numbers and spreadsheets.
This one showcased not only our dedication to our incredible passive investors but also our unshakable belief in the untapped potential of overlooked markets.
We transformed a missed opportunity into the gateway to an even more remarkable one, scripting a new chapter of boundless growth in our narrative.
Yeah, and this acquisition extended far beyond just an addition to our multifamily apartment portfolio; it represented the forging of a new path, the cultivation of invaluable relationships, and the broadening of our horizons.
And of course, it was another stop along the way in our already exciting shopping spree!
As we close out today’s episode, we want to take a moment of reflection and gratitude. Sharing these stories with you is deeply personal for us, but we never want to take for granted the opportunities that have come our way, whether they are $77 million properties or $145 million or any number in-between.
We wouldn’t be where we are today without our investors, the moments of professional growth we’ve had, or the opportunities for learning.
As we look forward to what’s next, we’re eagerly looking forward to our next adventure. 😌😌
Whether it involves pursuing partnerships or exploring new avenues for growth, we’re excited to see where the winds of finance take us. And who knows?
Maybe, next year, our $145 million spree will seem like just another day at the mall.
But right now, we are going to pause for today, enjoy the moment, and wrap up today’s episode.
Maybe we’ll even go see Barbie and get some outfit inspiration!
Until next time, keep thriving on your journey to success!
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