First Deal Episode with Todd Bowen

 A discussion with Todd Bowen  as he talks about closing on a 48-unit  apartment complex in Ankeny, Iowa.

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Todd Bowen
Todd is the Owner/Founder of Trinity Investment Group
Email trinitygroup88@gmail.com
Connect with him on LinkedIn https://www.linkedin.com/in/todd-bowen-a45a51a4/ 

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Your host, Brian Briscoe, is a co-founder and principal in the real estate investing firm Four Oaks Capital.  He and his team currently have 629 units worth $36 million in assets under management and are continuing to grow.  He will retire as a Lieutenant Colonel in the United States Marine Corps in 2021. Learn more about him and the Four Oaks team at www.fouroakscapital.com  or contact him at brianbriscoe@fouroakscapital.com - be sure to let him know where you found him.

Connect with him on LinkedIn or Facebook.

Transcript

Brian Briscoe: 0:00

What advice would you give an aspiring investor that's six to 12 months behind you.

Todd Bowen: 0:04

Educate yourself as much as you can. Don't be afraid to get on the phone and call the people that are doing what you want to do. If if you're listening to podcasts like this, you will run across those folks that have recently been where you want to be, and reach out to them because there is no better way to learn than to talk to someone who's done it.

Brian Briscoe: 0:39

Welcome to the diary of an apartment investor podcast with your host Brian Briscoe. In this podcast we bring some of the top professionals in the apartment investment field to discuss various aspects of the apartment investing journey with the sole purpose of educating listeners to make wise investment decisions. The Diary of an apartment investor podcast is sponsored by four oaks capital bringing you high yield returns through apartment complex investing. Welcome to the diary and apartment investor podcast. I'm your host, Brian Briscoe with four oaks capital. Got another great show for you queued up today. It's one of our first deal series episodes. And we have Todd bone on the line with us and Todd and his partners recently closed on a 48 unit apartment complex Plex in Anthony, Iowa, a suburb of Des Moines for a $3 million purchase price. So that said, Todd, welcome to the show.

Todd Bowen: 1:29

Hey, thanks, Brian. Glad to be here. And looking forward to it. Yeah,

Brian Briscoe: 1:32

it's gonna be a fun conversation. And we're gonna Todd's bio and how to contact him in the show notes. So if you're interested in that, you know, check it out. But that said, Todd, why don't you go ahead and introduce yourself?

Todd Bowen: 1:43

Alright, so yeah, my name is Todd going. And I'm in the West Michigan market. Up, we're up here where we have about three months of summer and nine months of winter. So we're, we're just about into winter. So yeah, I'm married and have two young ones and started investing in real estate about four and a half years ago now.

Brian Briscoe: 2:07

Okay. All right, what what prompted the first real estate investment.

Todd Bowen: 2:11

So initially, it was just that lack of confidence in the market had a typical w two job and was maxing out the 401 Ks. And just the volatility that we were seeing really led me to diversify our investments as a as a household. You know, real estate, kept coming up in searches, and was always kind of on the back backburner back in my mind started to pursue that further.

Brian Briscoe: 2:46

Yeah. Something that I've recently found. And I recently realized, and I now find funny is, you know, real estate has traditionally been the original investment. I mean, for hundreds and hundreds of years before our stock markets and everything else. Real estate was how people invested. And I think it's kind of funny how we've, we've turned in societies turned where, you know, real estate is now an alternative investment, you know, to help people diversify from the stock market. But anyway, I, yeah, I did the same thing, you know, looking to diversify. That's what got me jumping into real estate as well. So, so tell us a little bit about, you know, your background before that, you know, what, what do you do for a job and, and, you know, basically paint the picture into, you know, the decisions you made to get into real estate.

Todd Bowen: 3:36

Sure. So, I was a project manager at an engineering company. And I was there for 13 years. And I figured that my project management skills would crossover nicely into the real estate world after studying and learning about real estate. So I did use some of those skills. But ultimately, I did not want to be in an office every day, and I did not want to be working for another company, as a lot of people can relate them the money. I just felt somewhere deep down inside that entrepreneurial spirit, kind of calling. And, you know, needing to express that and see, you know, if I could do it on my own and real estate was was that direction that I wanted to go? Yeah,

Brian Briscoe: 4:43

yeah, I think that's similar to what a lot of people feel, you know, I don't like to be cooped up in an office myself. And I think part of my career choice was based around, you know, not being in an office as much as possible. But like I said, a lot of people go through kind of the same same progression. where it's thought I'd like my job, or I do like my job, but it's not quite fulfilling. So,

Todd Bowen: 5:06

yeah, I just didn't see myself being there for the next, you know, 2030 years and doing the same thing. So change.

Brian Briscoe: 5:15

And then something else you brought up that I'd like to point out is you said that you thought your project management skills would translate well to real estate. Most people in whatever their their profession is there typically something from their prevent profession that will translate well, to, you know, real estate investing, especially apartment investing. So, you know, for a lot of people, when they're making the transition from the W two to, you know, real estate investing, they can rely on the skills they've built in their, their previous profession to help them out in investing, and find, and then find partners to kind of help them out, help help them find, you know, the skill sets they may not have. So, we'll talk a little bit more about that in a second. But before we get there, you also mentioned, you know, learning about the real estate space, what did you do to, you know, learn about real estate in general, and then more specifically about multifamily?

Todd Bowen: 6:11

Yeah, so once my mind was made up to pursue real estate, and that's the direction I wanted to go. And when I say we, I'm talking about my family, my wife and I, it was all about reading anything I could get my hands on. And it was utilizing all of my windshield time, at my job driving to and from work to gain an education by listening to podcasts, such as this one. Anytime I could. So I completely stopped listening to the radio. I would listen to him on one and a half speed. And I would skip all the advertisement all the ads. Yep. And I would just consume as much information as I could. Yeah. And so that just kind of confirmed the feeling I had for wanting to get into real estate. A little confirmation bias there. Definitely. That's that's what we wanted to do. We believed in it. And so yeah, we set out to go down that path. And I to your point on multifamily. I was looking for cash flow immediately. So, you know, in my studying and reading and conclusion, it was we needed to go multifamily to increase the number of units and have cash flow as soon as possible. Can we sustain, you know, this business that starting from scratch? And, you know, start that snowball, so to speak?

Brian Briscoe: 7:51

Yeah, yeah. And I agree wholeheartedly with that sentiment, I mean, multifamily, you know, it's a lot easier to scale with multifamily. And it's a lot easier to have more consistent cash flow with multifamily. You know, and I'm comparing multifamily to single family when I say that, just because, you know, you have one single family home and one renter moves out, you know, you have zero income coming in, you know, with a multi family property, you know, with a similar upfront investment, you can have three, four, or five or 10, or, in your case 48 renters, which basically mitigates a lot of the risk there. So a lot of good points there. So one thing that I always say, and a lot of people will say the same thing, you know, multifamily investing is a team sport. And I know you have a team, you know, in this deal yourself. Can you tell us about how your team came together and how you guys divide, divided and conquered this this particular deal?

Todd Bowen: 8:47

Yeah, sure thing, Brian. And if I could just take a step back. I've covered three and a half years in a few sentences. And I think just for context, I need to go back to you know, we started in 2017. And so we built as a side hustle a portfolio of small multi families. And during that time, and the continued education and listening to podcasts and reading, my mind shifted to larger multifamily. That was going to be the catalyst to eventually get me out of that w two job. That was the original goal when real estate side awesome. So that being said, through all of that I learned real estate as a team sport. When I started, I thought it was the me sport. And, you know, maybe that works for the first one to three deals, and that's okay. But as you start to look at larger multifamily deals, you recognize how much of a team effort is involved. So yes, we have a team, an amazing team that I was just grateful to be asked to join. And that's how we were able to take this deal down.

Brian Briscoe: 10:10

Nice. Nice. So yeah, I appreciate that, you know, the context definitely helps, you know, so I went through the same process, you know, it was it was a me sport for a while individual sport and found a couple of single family homes I didn't get into small multifamily before I found multifamily. But I think a lot of people make the same progression. You know, a lot of people start with, you know, a couple of single family, maybe the small multifamily and they they all come to the same realization at some point where, you know, in order to scale, you've got to start doing bigger deals. And in order to do big, do bigger deals, you know, you typically need a team around you. So you it looks like you went through the same progression that a lot of other people who've sat in the same seat as you on this, this another podcast have have done. So let's talk about where you met your team now and how you guys came together.

Todd Bowen: 11:01

So yeah, starting the year, in 2021, two of my written goals were to become part of a mastermind, and to participate in my first syndication. So it was tough at first to look at the cost of a mastermind and think it was beneficial. However, when I changed my mindset about a cost at an expense versus an investment. That's when I did go ahead and join a real estate mastermind. And throughout the first month of the mastermind, I was able to meet my future partners on this 48 unit deal. And built a relationship over the phone and over zoom meetings. And eventually they invited me to become part of the general partnership team for this deal that we're talking about.

Brian Briscoe: 11:55

Yeah, yeah, I love that. I'm gonna highlight a couple of areas. You know, you talk about the expense getting into the masterminds, and a lot of people look at the expense, myself included, and you look at that expense and thought, okay, I can probably do better using that money somewhere else. But, you know, I've learned the power of your network is is huge, you know, the better your network, you know, the better off you're going to be. And I don't necessarily like the the equip your network is your net worth. But it's, it's true. You know, I think I think you you're a good case study of that, where you got into the mastermind, you put yourself around people who have similar interests, similar goals, and they helped you get your syndication goal, you know, they they invited you into the fold on that one. So, let's talk a little bit about the deal specifically Ken, can you tell us about the deal? Or who found it, how it came to pass how you got into the deal? And tell you what, let's just go to that point. And then we'll dive back into it.

Todd Bowen: 12:54

Yeah, sounds good. So my partner's found the deal that was brought to them by a broker. And it like you mentioned earlier, it's a 48 unit apartment complex in Anthony, Iowa. And it happens to be a single storey. So units are ground level. And yeah, one of the nice things about it, that we really enjoyed, were that you can park right outside your door. So it's very well suited for an elderly population with not having stairs and being able to park very close to your front door. It was 100% occupied. And we we knew that kind of alluded to that the rent was a bit under market. And after some market research, that was the fact indeed, where it was close to$200 per door, and there was no major capex issues. But the units were dated, this current owner was just looking to retire and like what happens a lot when they get to that stage. They they want to hold on to that money, and they stopped pumping it back into the process. Yeah. So we just saw an opportunity as a value add property.

Brian Briscoe: 14:19

Alright. Alright. So I think I think the story's been been told dozens of times before, you know, when you get into a property that hasn't been maintained, it's 100% occupied, there's a couple of things that are almost always present. You know, being behind the market on rents is almost always there. I mean, typically, any property that's 100% occupied, is probably not pushing rents as much as they can. And you know, I think I think in your case, this makes for a perfect, you know, storybook ending I guess, because you guys will be able to come in, update the unit slightly and bring rents back up to what the market you know, dictates and go from there, so. So let's talk a little bit, you know, it was a $3 million purchase price. Let's talk a little bit about the the capital raise, if we can, you know, tell us about, you know what, what you did as far as that goes. And you know how that turned out?

Todd Bowen: 15:18

Absolutely. So yeah, we're set to raise 1.1 million to cover the downpayment and the rehab. And when I was brought into the deal, we hadn't started the raise yet. And it was a fairly new concept to me, I understood that that's what people do. But I never actually physically attempted to raise capital, myself. All the deals we did in the past were self funded. And this is the first time using other people's money. So they asked, they didn't expect, but they did ask my partners I'm referring to asked me if I would, you know, go out and try to raise some capital. And I said, Sure, no problem. How hard can it be? Right? Right. So yeah, when it came time to raise the capital, I went to the friends and family. And this was a 501. C. So it was accredited investors only. Okay, though, there were some limitations there. But, so yeah, I had to think through, you know, who that I knew, may want to invest in real estate. The minimum investment is 50,000. So, you know, I'm thinking, Okay, who has 50,000 sitting around to dump into real estate?

Brian Briscoe: 16:55

And that's also accredited, which, you know, for some people's friends and family, that's, that's a little more difficult. Yep.

Todd Bowen: 17:01

And then, you know, you get to the question of who's gonna trust me? You know, how? How are they going to trust me, when this is my first deal? My first big deal? You know, am I gonna say the right things? Are they gonna ask me questions that I don't know the answer to? Am I gonna look like a fool. So a lot of those kind of creeping doubts started creeping in. And it was a struggle in the, Brian, my attempt to raise, even get one investor at 50,000 felt space, and the deal without raising any capital. So it was, in theory, I've heard many, many times, that if you go and find the deal, is a good deal. The money will come, you know, that that may be true. And money did eventually come. Didn't come through my hands than than I initially thought,

Brian Briscoe: 18:03

you I appreciate you, you know, being being so open and honest about that. Parks, I think a lot of people, you know, a lot of people who are listening to this decade help prevent them from making a similar mistake. You know, I also disagree with that statement, you know, if you have a good deal, the money will come, you know, you have to, you have to be positioned for that to happen, you know, you have to have something set up prior to and you went through a lot of the the same, I guess, self doubts that I had, you know, why are people going to listen to me, and in my case, you know, on our first deal, I didn't raise a whole lot of money. But those self doubts a lot of times plagued me and kept me from raising a lot of money. So, you know, lesson learned that I had an our first capital raise was, you know, I need to prepare a lot better for the next one. And I think it ended up working, but yes, excellent point. Yeah. So a lot, a lot of lessons learned there. And, you know, I'm assuming that that might come out in the very last question that we always ask at the end, but, you know, we'll we'll get there. I'm not trying to, you know, you know, steer you in one direction or another, but Right, so we talked about the deal slightly, your business plan, you know, funding the deal with a capital raise. I know, you guys have a loan on it at some point, but talk about the overall business plan. I mean, besides the the value add, bring rents up, you know, what else is in that business plan?

Todd Bowen: 19:28

Yeah, so it's a classic value add, we discussed that there's going to light rehab on each unit. So in turn with those will raise rents. And we're going to force that appreciation in July and the whole period is projected between five and seven years, okay. And you know, the investors are looking to get 15 to 17% IRR, internal rate of return nice and there they will also receive Have a 7% preferred return nice on their on their investment. So all right, looking at a 2.25 multiplier,

Brian Briscoe: 20:09

nice, yeah, those, those are some good good solid numbers on there. So, five to seven year hold, that gives you plenty of time to do your value add to to stabilize the property and then take advantage of some of the cash flow comes off at later. So, you know, sound sounds like a pretty, pretty good deal there. So let's talk about closing, getting the deal across the finish line. Were there any big hitches, you know, getting the deal to the closing table and actually closing on it? Yeah,

Todd Bowen: 20:36

so this was a little different than closing on a duplex or four unit? Yeah. Yeah, where you can close in 10 days, and you never have an issue? Yeah, unfortunately, we did have a couple hiccups. We had a couple extensions, where it's never fun to go back to the seller and ask for an extension. But they, they allow that. And the whole reason for that was a survey issue. Something that we had not foreseen coming. But it was one of those situations where there's a week before closing, and the lender reaches out and asks for a new survey. You know, it kind of puts you in panic mode, you're already stressed out, because you're raising capital and first deal, and you're trying to do all the things, and then you get the call. And so it just you know, stress on top of stress. But we were able to navigate through that, that survey. Again, that was an additional expense that wasn't before. But we were able to get that done. And with the extension, close, after that was all all wrapped up.

Brian Briscoe: 22:00

And we had a similar issue on one of our properties where the exact same thing happened to us. You know, we had talked to the lender, you know, early on in the process, and we had the the last survey that the previous owner had in place. And our lender initially told us, yep, that survey is good enough, we're not going to need a new one. And then same story, as you you just mentioned, you know, a couple of days, you know, maybe a week before we were supposed to close blender came back and said we need a new survey done, you know, so, yeah, I've been there literally been there before jumping through hoops trying to find somebody who can get out to the property and do a survey, you know, really, really quick. expedite it. Yeah, you pay an expedition expedition fee. That doesn't sound right. You know, you pay a fee to expedite it and cost you a little bit more but end of the day, you know, at that point you're you're in so yeah, you know, it's it's, it's jumped through hoops and pay that extra fee or potentially fall out of the deal and lose your earnest money and all your your risk capital. So, you know, at that point, you know, the extra the extra cost is typically a drop in the bucket. You're like, yeah, we got to do it. You got to do it. So right. That's right. All right, lesson learn. Yep, lesson learned. Alright, so you guys close, early September. So you know, at the time of recording, by the time this is released, it'll be two months that you guys have owned it. But the right now we're probably sitting at month, month and a half. Tell us about the steps after closing, you know, and what you guys have done so far.

Todd Bowen: 23:29

Yeah, so the first thing after closing, we took a huge sigh of relief, a huge breath we have where you are foreigners that were just, you know, kind of the celebratory, we did it kind of discussions. And shortly after that, it doesn't take long before the thought creeps in. Okay, now we have to go make a business plan. Yeah, no, we got executed. Yeah, we just got across hurdle one, and not to go do the work. So it's, you know, it's a quickly back to the plan. And that plan. And as we spoke about earlier, the plan on this is to get in and do the light rehab as they become available. And it was shortly after closing, we did have one unit for you become available. And through the use of the local property management company, who is in owns the construction company. They were able to get into that first unit and are currently doing the rehab as we speak.

Brian Briscoe: 24:43

Yep. Awesome. Awesome. Glad you guys were able to get that started so quickly. You know, and obviously, obviously, you know when you look at the rehabs, you have to have people move out to renovate units. You know, sometimes it takes a while to start those interior renovations because people don't move out and it's kind of hard to kickout paying tenants, you know when you don't have to. So

Todd Bowen: 25:03

another fact about getting that first one done is we'll be able to take the photos and maybe even stage it, but get some marketing material out of that. And then also, we can use that to show existing tenants. Hey, here's what we would like to do to your unit, you know, would you be willing to move down a couple doors? Or is there something we can do with you living there? You know, that would, you know, improve, because we're not just about going in and milking every penny out of this property, selling it and moving on, you know, part of our mission is to make an impact on the community and the lives of our tenants, yes, very human aspects of this. This is their, their home, their place where they reside in raise families, and do all the things. So that's definitely we don't want to skip over that part of the business plan.

Brian Briscoe: 26:03

Yeah, I guess, that's important to note, you know, a lot of people when they live somewhere, you're right, some people are long term tenants, you know, it sounds like the the type of property you have, you're more inclined to have, you know, the older couples that are going to stay there for a long, long time. So, you know, whatever you can do to create a sense of community and, you know, make sure they know that you're going to take care of the property and take care of them, it ends up being good business, too. You know, it's, it's kind of counterintuitive, like catering to some of your tenants ends up being really good business. Because those types of tenants tend to be stickier, they tend to pay their rent on time a lot more frequently, because they know that you're going to be, you know, taking care of them. So a lot of good things in there. I've said many times before, you know, the golden rule is golden, you help other people out, and it ends up helping you out in the long run. Alright, so I couldn't agree more. What's next for you?

Todd Bowen: 26:56

So yeah, the partnership that we've developed with this deal, we still communicate weekly, and we are continuing to look for more properties in the at&t market, we have a goal to reach the 200 unit mark. And ironically enough, shortly after closing, we were presented with a 52 unit, and 40 unit in the market. And we are currently analyzing those doing some pre underwriting on those. And the competition has heated up even since we got this deal under contract. But yeah, the sounds like the general partnership team is going to stick together, and we're going to continue to grow in the ankling market.

Brian Briscoe: 27:55

Alright, that sounds awesome. I think that happens with a lot of people. I should have asked this question earlier, but you know, out of out of your group, I mean, you didn't have any experience in syndications, but of your other partners, did anybody else have experience in syndications?

Todd Bowen: 28:10

So the asset manager, their previous experience was on the passive side. They were they are limited partners, and the three deals and the the operators that they invested with, came in to kind of mentor and be no GP on this deal. So yeah, there's a there's a little experience, I have the least and then the actually the ask the operator, the manager, they are kind of in the middle, and then their partner have had the most experience and they're kind of you know that mentor to us.

Brian Briscoe: 28:55

Yeah, a lot of people and I highly recommend that, you know, we did the same thing on our first deal. You have to have experience to get experience in this in this market kind of a conundrum. Best way to do that is to partner up with somebody with experience. But anyway, what I was going to say on that one, a lot of times, you know, one of my mentors always talks about the law of the first deal where once you get one under contract, it's a lot easier to get your second and subsequent to your subsequent deal. Because you have that experience. And it seems like that's that's the case with you guys right now, too. So, almost last question, but one of my favorites on this episode. What advice would you give an aspiring investor that's six to 12 months behind you?

Todd Bowen: 29:36

This could last really long but I will try not to do that. So educate yourself as much as you can. Don't be afraid to get on the phone and call the people that are doing what you want to do. If if you're listening to podcasts like this, you will run across those folks that have recently been where you want to be, and reach out to them, because there is no better way to learn than to talk to someone who's done it. And, you know, there's so many things We've even talked about today, Brian, that if I would have made a call six months ago, to you or to one of your other guests, I potentially could have mitigated that survey problem that we had that pushed our closing back. Yeah. It's, you know, it's the unforeseen thing that you might get a heads up on capital raising, you know, if I would have reached out to you and said, Hey, I'm gonna be raising capital here pretty soon, it's gonna be pretty easy. I bet you would have laughed. Yes, laughed and given me a quick lesson that Hey, brother, you better think that. And here's some things that you might run into. Yeah. And then take that advice and process it. And then move forward. I think you will avoid that to step back. You'll just plugging away.

Brian Briscoe: 31:14

All right. And last question. Before we end, how can listeners learn more about you?

Todd Bowen: 31:20

Yeah, so they can reach out on email, it's probably the best way to get me. That is Trinity. Group. 80 eight@gmail.com. All right. And if you search my name up on LinkedIn, sure, we could connect on LinkedIn.

Brian Briscoe: 31:39

Alright. And we'll put a link to your LinkedIn profile and your email address in the show notes for anybody who's interested in reaching out. That said, Todd, thanks for coming on the show. Thanks for sharing your experience and very much appreciate your time today.

Todd Bowen: 31:53

Thanks, Brian. It's been fun. All right.

Brian Briscoe: 32:02

Thank you for listening to the diary of an apartment investor podcast today brought to you by four oaks capital. If you'd like to know more about how to invest in apartment buildings or want to be a guest in our show, visit our website at four oaks capital comm slash podcast or email us directly. If you're still listening, you obviously like the show. So pull out your phone app, subscribe, and leave us a five star rating on your favorite podcast app. And we'll see you again next week.