Posts By: Justin Richards
EP199 Surprises After Closing on a 144-Unit Apartment Complex with Justin Richards & Aaron Lenartz
When Justin Richards and Aaron Lenartz were last on this show, they shared everything they’d just gone through in finding, negotiating, syndicating, and closing on a 144-unit apartment complex in Memphis, Tennessee. You can check out episode #140 to hear that story. In this episode, you’re going to find out what happened after the close and how it has affected their outlook and decision making process ever since.
Justin and Aaron share some of the challenges they faced and how they came up with the solutions to solve them. We discuss the engineering report and the cash shortfall that can occur when the lender reserves funds from the closing to make immediate repairs, but doesn’t release that money until after the repairs have been completed. We’ll learn about some difficult partnerships that Justin and Aaron have had to walk away from, as well as the key members they’ve since added to their team.
Justin and Aaron share some painful experiences of the acquisitions that have fallen through since then, and the uncomfortable news they had to share with their investors. You’ll learn why some of those deals didn’t happen, and the physical inspection at one property that revealed over $7 million in deferred maintenance the owner failed to disclose.
Justin and Aaron also discuss the 600 units they currently have under contract, and how they’re laying the groundwork to have plenty of capital throughout the next financial downturn.
There’s a lot for any investor to learn in this episode, and Justin and Aaron don’t hold back from sharing the challenges they’ve overcome this past year. You can find out more about them by visiting them at greysoncapitalgroup.com
Justin is a partner in Greyson Capital Group LLC, a value add multifamily investing firm that buys apartment complexes in the sunbelt of the United States. Greyson Capital Group LLC has just finished an incredible month where they close on 3 properties in 1 month.
Key Points From This Episode
- Justin talks about how to change your mind set to that of an investor
- Justin talks about how he got his “feet in the game.”
- The importance of attraction partners and people in the industry
- Beware of people who claim they have a flawless record
- The Real Estate Industry is an industry that challenge and force personal growth
- Justin talks about his partners and first deal
- Greyson Capital Group invests in Memphis and Florida.
- Be a life style investor
- Greyson Capital invests in Memphis B & C properties from German Town to the airport. Memphis has a Pilot Program which is a Tax Deferment Program where if you put 50% of the value of the bulding into renovation the city will cut your taxes in half for 10 to 15 years.
- Memphis is the cash flow market of the East
- Florida has popluation growth and a great climate
Hello investors! We’re so glad you’re here with us and our guest, Aaron Lenartz, former Navy officer and now Principal at Greyson Capital Group, as he talks partnerships, brokers, and transitioning from single to multifamily. Aaron divulges his biggest challenges, lessons learned, and why multifamily made it all worth it.
You’re listening to the Think Multifamily podcast, Episode #009
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Hey guys! Check this out! I had a great experience recently, being on the NEW Think Multifamily Podcast!
I talked about Finding a Mentor, Overcoming Rejections and Doing Your First Deal.
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And that’s why scale is the Holy Grail in real estate.
Why do real estate investors like Donald Trump, Grant Cardone, and Sam Zell have real estate portfolios with thousands of units under management? Like them or hate them, when it comes to real estate, these are men to be respected. In addition, these men know the power of what scaling can do for a business.
The smaller the deal, the more of a liability if you ask me. Now let me clarify, everyone that invests in real estate doesn’t have the same goals. Not everyone wants to scale and grow, and acquire 10s and 100s of millions of dollars in assets overtime. Some investors are content with making $200 of passive income a month, and using that to save over time into retirement, and that’s ok.
10-unit Scenario: Priced at 100k a door at an 8% cap rate (return on investment based on the income a property is projected to create) for $1,000,000.
- Purchase Price: $1,000,000
- Down Payment: $250,000
- Debt: $37,500/yr. Assuming buyer financed 750k at 5%.
- Monthly Rent Per Unit: $1000
- Net Operating Income (Income minus Expenses) : $48,000 (120k – 50% expenses, minus 10% management fee = 48k )
What happens if a tenant moves out?
Well as the owner of the property you now are responsible for $1000 for the month and have to scramble to find a new tenant. Not to mention you just went from 100% occupancy to 90%, imagine if two or three other tenants decide to move out. Your Net Operating Income for the month plummets tremendously, and there goes the deal.
What happens if something breaks and needs to be replaced?
The property manager will handle that if you decide to hire one, which comes at a hefty fee on smaller properties at 10% of the gross income a year. Not to mention small property management companies are notoriously known for stealing. Now if you manage it yourself, you save the 10%, but just be prepared to receive phone calls about the typical tenants, termites, and toilets that landlords get.
100 Unit Scenario: Priced at 100k a door at an 8%cap rate
- Purchase Price: $10,000,000
- Down payment is $250,000
- Debt: $37,500/yr. Assuming buyer financed $7,500,000 at 5% interest
- Monthly Rent Per Unit: $1000
- Net Operating Income: $600,000
Isn’t property management still going to be an issue?
As the owner of a deal this size, the property manager in place will typically be an investor of yours as well. Once you have an established relationship with a property management group, your percentage gets sliced to around 4% opposed to the 10% of gross income.
Tenants will still move out?
Of course tenants will still move out. Imagine if 5 tenants move out, the property will still be at 95% occupancy, opposed to 50% on a 10 unit. The deal has more legs, due to the number of units it has.
Not to mention, it is going to be less of a headache for the owner and the passive investors involved in the deal. An asset like this is stronger, and will be able to handle all kinds of swings in an economic cycle.
Another strength on bigger deals comes from not overleveraging on your asset. Simply allowing the asset to take a relative hit from the market and still maintain solid numbers is a huge plus in the midst of a down turn. Which in fact is what we saw in the last swing, people overleveraged and weren’t able to take a 10 to 15% hit on their assets. This is why you see small deals get crushed in corrections and recessions.
Once again, this isn’t to say money can’t be made on smaller deals, and that smaller deals are a terrible investment. But if you want to make money in all cycles, and know no matter what happens your investment is safe, bigger is the way to go.
Released 17 September 2018
By the time you listen to this episode, Justin Richards and Aaron Lenartz will have closed on a 144-unit Class C Apartment Building in Memphis Tennessee. And they’ll have raised $1.3 Million from investors to do so. I thought it would be interesting to sit down & talk with them about what they went through to find, inspect, and acquire this property while its fresh in their minds. What you’re about to hear is the nuts & bolts process from two investors and syndicators who have learned a great deal from the experience of closing their first large apartment syndication. We’ll talk about the importance of broker relationships, Best & Final offers, what it means to be a lifestyle investor, working with attorneys, and securing a bridge loan to complete necessary repairs. You’ll also learn how Justin and Aaron were able to be taken seriously as investors even though they’d never closed a deal this large. They also share the process they went through to raise $1.3 Million from qualified investors, as well as the amount of their own money they had to put up along the way. Justin and Aaron host a meetup group every third Wednesday of the month at the Buffalo Wild Wings in Wyoming, MI on 44th Street. Their next meetup is this Wednesday, September 19th, 2018 at 5:45. You can find out more information by going to https://www.meetup.com/Think-Multifamily-Real-Estate-Investing/events/253982654/ And you can contact Justin and Aaron through their website: https://greysoncapitalgroup.com/ Enjoy!
Memphis 144 Unit
Evanoff: Downtown building boom could surpass $2.9B
New investment in Downtown Memphis real estate could surpass $2.9 billion over the next few years if all the plans proceed.
It would add up to the largest investment boom Downtown since the center city commercial district emptied out following the 1968 assassination of Martin Luther King Jr.
Over the last decade, investors have pushed back at Downtown blight one building at a time. The new wave promises something larger. Each project would energize a wider swath than the block the building stands on.
Six significant deals are on the books including One Beale, the on-again, off-again real estate development first outlined 15 years ago.
On Tuesday morning, officials of Memphis-based Carlisle Corp. announced One Beale’s first phase will proceed. Carlisle would redevelop the former Ellis Machine Shop, a historic site at 245 South Front, leading the way for an upscale hotel and luxury apartments.
Since the One Beale idea first surfaced, other real estate investors have stepped in, spending more than $500 million in total.
They’ve renovated old warehouses, the shuttered Chisca hotel, the closed 19th century Tennessee Brewery and turned old retail stores into fresh condo and apartment developments.
Taken together, all the projects brought new life to a forlorn end of the old center city; particularly along Main south of Beale near the Central Station railroad terminal. Central stands two blocks from MLK’s assassination site at the Lorraine Motel.
While these projects have spruced up old buildings, few of the real estate deals have been transformational like the Lorraine’s redevelopment in 1991 into the National Civil Rights Museum. It brought in tourists and paved the way for new restaurants and nightlife.
For the first time in a century, the old center city became a desirable living area for well-to-do baby boomers and men and women in their 20s and 30s. That, in turn, spurred the $55 million renovation now underway of Central Station’s office tower into a boutique hotel.
Now a string of similarly transformational projects is on the books. Most of them tie into the city’s science and medicine industry or the growing tourism and hospitality sector.
Here’s a look:
While plans for a 30-story tower have been shelved, One Beale backer Carlisle Corp. estimates the investment will range between $60 million and $100 million. One Beale would encompass 5.5 acres.
Brooks Museum of Art
Brooks’ proposed move would relocate the museum to the site of the Front Street fire station. This would bring a fresh inflow of tourists. Proposed pricetag: $110 million. It could mesh with other talks of putting an aquarium on nearby Mud Island.
100 North Main
New York developers plan a convention hotel, apartments, restaurants and offices on the site of 100 North Main. The investment could near an estimated $1 billion and cover three acres.
Memphis Cook Convention Center
The new hotel would support Memphis Cook and its $175 million renovation. Both the hotel and the renovated Cook are intended to draw more and larger conventions.
Wonder Bread Bakery
The $73 million project would bring apartments, restaurants and a museum to a former bread factory near the Memphis Medical District, where officials have provided incentives to encourage employees to relocate near the hospitals and schools. While new residents in the Wonder Bread area technically would not live in the center city, 100 North Main is visible a few blocks away and accessible by trolley, bus and sidewalk.
St. Jude Children’s Research Hospital is beginning the widely reported $1.2 billion expansion of its campus into Downtown’s old Pinch District near Memphis Cook.
Besides this slate of proposed projects, the $250 million South City residential project is under way on the south edge of Downtown, along with the $16 million renovation of the Hickman office building. A $6.2 million renovation has been completed on the landmark Universal Life building.
In the past, major buildings have gone up, such as the First Tennessee Bank tower in the 1960s. But there has never been this volume of ambitious real estate investments.
Add it all up, and Downtown is on the edge of a significant transformation.
Ted Evanoff, business columnist of The Commercial Appeal, can be reached at firstname.lastname@example.org and (901) 529-2292.
By the time you listen to this episode, Justin Richards and Aaron Lenartz will have closed on a 144-unit Class C Apartment Building in Memphis Tennessee. And they’ll have raised $1.3 Million from investors to do so. I thought it would be interesting to sit down & talk with them about what they went through to find, inspect, and acquire this property while its fresh in their minds.
What you’re about to hear is the nuts & bolts process from two investors and syndicators who have learned a great deal from the experience of closing their first large apartment syndication. We’ll talk about the importance of broker relationships, Best & Final offers, what it means to be a lifestyle investor, working with attorneys, and securing a bridge loan to complete necessary repairs.
You’ll also learn how Justin and Aaron were able to be taken seriously as investors even though they’d never closed a deal this large. They also share the process they went through to raise $1.3 Million from qualified investors, as well as the amount of their own money they had to put up along the way.
Justin and Aaron host a meetup group every third Wednesday of the month at the Buffalo Wild Wings in Wyoming, MI on 44th Street. Their next meetup is this Wednesday, September 19th, 2018 at 5:45. You can find out more information by going to https://www.meetup.com/Think-Multifamily-Real-Estate-Investing/events/253982654/
Right now it is available on itunes, and here is a link:
If you’d rather access through a different method, the podcast is also available on stitcher:
You can also access it online at:
We are pleased to announce Greyson Capital Group closed on 144 unit apartment community in Memphis, Tennessee this was truly a great experience. We would like to thank everyone who was involved in getting this deal together. Mark Kenney from Think Multifamily for guidance through this complex deal. Our PM David shores from Multi-South and his team did an amazing job with everything. Also a big shout out to Sean Na, Rafi Mizrahi,Kishan Golla,Ed Myrick we had a tight window and you guys pulled through, thank you. Finally Dugan Kelley our amazing lawyer out of Dallas who worked tirelessly getting this deal done. To all thank you!! We couldn’t of asked for a better group to work with.