067: Double Your Money with these Five Investment Strategies
APPLE PODCASTS | SPOTIFY
Hello, friends of the Cashflow Multipliers pod! We’re so stoked you’re here and we can’t wait to dive right into today’s episode.
Things have been moving and groovin’ here in the Kitti Kingdom and we have hit some incredible milestones recently.
As we previously shared, On July 15th, we closed our biggest deal yet in the birthplace of Queen Beyonce Knowles Carter, Houston Texas baby. The property is a 312-unit Class A property built-in 2016! 🤩🤩
This was a massive W for us– and our passive investors! We were under contract for $71M and the appraisal came back at $78M in value, so we bought it for $68M. Yep, that’s 10 million dollars in value we created for our passive investors even before we took over the property.
Oh, and did we mention the average median household income was $136k? In the previous episodes, you’ll know why this figure is so crucial when selecting your investment properties.
We have been building some incredible momentum, and what’s most exciting about this is taking this property to the next level. You know us, we aren’t stopping any time soon!
Palm, if someone would have told our 2018 selves that we would have over 5,000+ units and over $200 million in assets under management, would you have believed them?
Absolutely not. I think we both would have had a good laugh at that one!
This is why it’s wild to think about where we are today compared to where we were just a few short years ago. This episode, heck, this podcast isn’t for us to brag about our accomplishments, but to let you in and show you what’s possible!
We’re all about putting good vibes, mantras, and prayers out into the universe because we know it’s always listening. 🙏🙏
As Ralph Waldo Emerson once said, “Once you make a decision, the universe conspires it to happen.”
Okay, I think we’re getting a little ahead of ourselves. Before the 5,000 units, the millions in assets, and this podcast– all we had was each other, a dream, and our eyes set on a Class C property in Phoenix, Arizona.
Yep, the 76-unit property in Phoenix was our very first purchase. At the beginning of our journey, we heavily invested in workforce housing– Class C apartments. We’ve been slowly working our way up to investing in some pretty nice Class A and Class B apartments ever since!
And yes, when you’re first starting out as a general partner, you really don’t have much of a choice in the opportunities being thrown your way. But you can think through crucial insights that can help you make your decision.
Through trial and lots and lots of error, we were able to move up to Class A and B complexes!
Our goal here is always the same– to help you level up! 🙌 We’ve been in this game as general partners for 4 years, and 9 years total as real estate investors. So when we talk about strategy and best practices, we’re not coming from a place of “been there, done that” but rather “been there, and want others to go above and beyond!”
Today, we’re going to share specific strategies we focus on. Whether you’re new to passive investing in apartment syndication or you’re one of our beloved repeat passive investors, guaranteed there’s something for everyone!
So today, focus on what you need and leave what you don’t, for now. But above all, commit to putting your heart and soul into whatever you do to step up your game, and by all means, stand on our shoulders to get there! 🧐🧐
Before we move into specifics, we can’t talk about moving up without the experience of getting knocked down, right? And no other time illustrates that more perfectly than the year 2020. We all remember Covid-19 and the havoc it created on so many lives and families.
We have to admit, we were just about ready to give up because nothing was listed, no one wanted to put out any properties, and the looming threat of rent freezes did not sound ideal. But we knew we had to keep moving forward.
We made a huge decision that year that actually impacted us for the better. That decision was to purchase a 100-unit in Fort Worth, Texas. At the time, people thought we were insane, but a short 20 months later of ownership, we delivered 1.50X equity multiple to our passive investors.
And that decision has only created a ripple effect. Earlier this year we closed what we thought was going to be our biggest deal to date– a $40.5 million dollar deal in Atlanta, Georgia. Buuuut it turns out we were just getting started!
3-4 months later we closed that Houston Texas $68 million dollar deal– a short amount of time from the $40.5 million we were blown away by!
And before either of those deals, in November 2021 we closed a deal with a purchase price of $29.5 million dollars. In November we were stoked and celebrating big time– so you can imagine how the closing of the $68 million dollar deal blew our minds!
What do all of these deals have in common? A clear and effective strategy. So let’s go through what we focused on so you can pivot your next deal to be your biggest yet! ✨✨
Focus on Income
Our first focus is on newer assets with a strong household income. The higher the median income, the better quality tenant base.
Yes, we’re all about attracting credit-worthy tenants.
When you have a strong tenant base, lightbulbs 💡 should go off in your head about other positive qualities such as more affluent residents, significantly lower delinquency, higher affordability, and long-standing residents.
Plus, the newer the asset, the less–if any– deferred maintenance will be required on the property. Big-ticket repair items such as roof, foundation, plumbing, and electrical tend to still be in very good condition for newer properties and provide massive savings on CAPEX expenses!
Focus on Risk Mitigation
The next strategy is we focus on risk mitigation. We’re big fans of the term calculated risk because we know just like in life– apartment investing has its fair share of risk involved.
We learned how to pull the trigger on deals through a combination of competence and confidence because we learned how to manage risk.
So what does “managing risk” look like? By doing effective and conservative underwriting and focusing on locations that have high barriers to entry.
Another thing to consider is how close proximity to major thoroughfares is, and if the location has a healthy supply of well-paying jobs.
Yes, All of the factors can help you weigh the cost of risk. 🤓🤓
Another way to mitigate risk is by Your proforma should always be below your competitors, meaning we don’t need to hit a home run to deliver the total. Before taking over any properties– and even after ownership, we continue to perform a rigorous stress test for all the potential worst-case scenarios.
Focus on Your Business Plan
The next focus is our simple, yet effective business plan. Here, you want to think “easy to implement, and max return.” You don’t need an MBA to know these basic business model strategies.
Simple and effective strategies can include charging ports for electric vehicles on your property, covered parking, valet trash, etc. These seemingly small amenities offer your tenants the convenience they’re willing to pay for.
The key here is to not overthink 🤔 this because any business plan where there are too many steps is an automatic red flag for us since there are too many variables that can go wrong!
Focus on Investors’ Profit
This next focus is all about you passive investors. If you’re an apartment syndicator, thinking through your investors’ returns should always be top of mind. By focusing on a better asset, we will be able to achieve a higher rent growth which means more profit for our investors.
At the same time, we can be more selective in which submarket we invest in that is under-supplied. This is why we highly recommend active investors to also be passive investors. And yes, we’re actually both ourselves. We don’t just walk the walk, but talk the talk. 😊😊
We would never put others money where we wouldn’t ourselves first. Wealth preservation is at the core of what we do.
Focus on Multiple Exit Strategies
The final focus we’re bringing to the table today is focusing on multiple exit strategies. Have you ever been to the movies, or a restaurant, and noticed the other exits other than the main door you left from? Not only is this a good habit to have, but it’s also a safe one in case of emergencies.
The same can be said for yourself and the sponsorship team. Focusing on exit strategies and asking if they make sense will help you think through every scenario of your asset. Newer asset classes have a larger pool of buyers, as they are more attracted to Class A/B Assets. 😇😇
And who can blame them? From institutional buyers to private equity groups, to syndicators. The higher in demand for an asset, the drive up in value. So make sure you’re protected on all accounts.
Kitti Backed Strategies
Well, friends, that’s all we have for now! We hope you learned a thing or two today, and want to share the knowledge with your friends and fellow passive investors.
We’ll be back in a few days, but in the meantime don’t forget to rate and review this podcast wherever you’re streaming from, and keep up with our adventures on Instagram @thekittisisters or thekittisisters.com
Until next time, Cashflow Multipliers! 👋
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