Is it possible to earn more than $400,000 net profits on just one small 6 unit apartment deal? Absolutely! In fact, you're about to discover how it was done, not once, but twice, on a beginners first two deals! In this inspiring case study, we'll show you how we mentored Ivan to $843,000 in net profits on his first two commercial investments. Plus, you'll learn our 6 step investing formula that he followed to make it happen.
Ivan works fulltime in online e-commerce and retail and as a web designer. He admits that he never considered commercial real estate as an investment vehicle, instead he invested in stocks and mutual funds. In fact, he just stumbled on real estate, and began learning about real estate investing from online forums and podcasts. Most of his research was about flipping houses, but it never really attracted him because it was a time-consuming process. With his job he didn’t have time for that, but he was still interested in real estate investing. One day, he heard someone saying that most people start in residential, and then graduate to commercial after years of doing flips. At that point he thought, "Why not just jump straight into commercial?" That’s when he found my free Video Course, Commercial Real Estate Investing for Beginners.
Here’s what Ivan had to say it,
“I binge watched it for two days. Morning through night, I just watched you because everything you said made sense to me. I come from a math and computer background, so anything that has logic in it, not emotions, is what I like. So after spending two days watching your videos and absorbing the content, I told my wife right away, "Hey, I'm signing up." Then, I made a call, and then the rest is history.”
6 Step Formula to Huge Profits
Ivan purchased two 6 unit apartments. He renovated and raised the rents, forcing the appreciation, held for a couple years to cashflow and then sold for a huge profit. He used the creative strategies he learned in our Protege Program and executed them perfectly!
Step 1: Money
Ivan used a HELOC (Home Equity Line of Credit) to purchase his first 6 unit apartment deal. He learned to do that from this training on How to Unleash Your HELOC Power. Do you have a line of credit on your home. If so, what have you done with it? If not, why not? You can use debt wisely to create massive wealth for yourself and future generations.
Step 2: Buy Multi Family / Apartments
The second step is to buy multi family / apartments. Everyone will always need a place to live so as long as you buy right, you can't make a big mistake investing in multi unit apartment deals. Plus, in today's market, there is an affordable housing crisis that is driving more and more would-be home buyers into renting apartments. Here's how Ivan acquired his first two apartment deals...
Contacting the Sellers: When Ivan contacted the owners of the first 6-unit apartment, they weren’t necessarily motivated to sell, but they were ready to listen. They were an older couple managing the property themselves and the property was somewhat distressed. As they talked with Ivan, they realized they were getting tired of dealing with it and were ready to exit. During the negotiations, they disclosed that they owned another 6-unit property, which they were considering selling so they could retire. Ivan jumped at the chance of purchasing both properties and the negotiations to purchase both 6-unit apartments began.
Financing the Deals: Originally the sellers wanted $350,000 for the first property and $300,000 for the second. However, Ivan was able to negotiate the price down to $275,000 each. Ivan structured the deal using both traditional and creative financing strategies. He purchased the first apartment with a conventional loan, putting 20% down towards the mortgage. The second property was purchased using seller financing. Ivan paid $1,000 down for the property, and the rest was a loan at 4% that the seller carried for the next 10 years with fixed monthly payments. It was a win-win for everyone because the sellers didn't have to pay capital gains on two sales at once and Ivan purchased a six-unit apartment for a $1,000, while providing retirement income to the sellers.
When the time came to finance the properties, Ivan requested that they shift the prices to $250,000 for the property with bank financing and $300,000 for the 6-unit with seller financing. It was the same sum of money for them, plus they had less profit in year one, so they didn't have to pay as much capital gains. In the end the deal looked like this:
6-unit Apt Deal #1
- Bank financed with 20% down ($50,000) from his HELOC
- Purchased Price: $250,000
6-unit Apt Deal #2
- Purchase Price: $300,000
- Seller Financed with only $1,000 down
Step 3: Renovate and Raise the Rents
The next step for Ivan was to renovate the units and raise the rents. The properties were distressed and needed maintenance, so because Ivan wasn’t relying on the cashflow for income, he used the cashflow the properties were producing to do all the renovations. Also, the rents were below market, so he was able to raise the rents. The seller financed property was cash flowing $6,000/month and after renovations and raising the rents it cash flowed $9,000/month.
Step 4: Force the Appreciation
By raising the rents, it forces appreciation (the value of the property increases). In Ivan’s deals, he forced the appreciation and multiplied his initial investment of $50,000 by eight times when it came time to exit the deal!
Step 5: Cashflow and Hold
Ivan continued working fulltime, never relying on the cash flow coming from the properties as income, even though the seller financed property cash flowed really well from day one. Instead he kept all the cash flow from both properties in accounts. For the duration of the hold, he treated those accounts like a 401K. Ivan sees this as the key to growing your commercial real estate portfolio. He feels initially you should keep your job the primary source of income and use the cashflow to maintain the properties and invest in new properties.
Step 6: Sell and 1031 Exchange
Finally, you sell the property and roll the profits into a larger commercial property using a 1031 exchange. A 1031 exchange is a tax tool that enables you to defer any capital gains taxes if you take the profits from the sale of one property and use them to purchase a larger commercial property.
Bank Financed 6-Unit Apartment: Ivan purchased the first apartment for $250,000 using a conventional loan. Three years later he sold it for $650,000. Again, another reason why commercial real estate is a great investment vehicle. The 20% down payment controls the asset, and after a few years of cashflow that $50,000 turned into $445,000. That's almost nine times the money!
Seller Financed 6-Unit Apartment: The second six-unit apartment Ivan purchase for $1,000. Once the property was stabilized it was cash flowing $9,000/month. Ivan’s investment into the property was only $1,000, so it was unlimited returns. He sold the property for $675,000 (netted $665,000). After paying off the seller Ivan made a profit of about $398,000 in three years.
For the two 6-unit apartments Ivan made a total profit of $843,000
1031 Exchange: Ivan's plan is to defer the taxes and roll the profits into other properties using a 1031 Exchange. If he had to pay taxes, he would pay $200,000 to $300,000 on that profit. When he does a 1031 exchange, that amount gets deferred. If he keeps doing exchanges, he'll never pay taxes. Then, when he dies, that amount gets written off. That's how wealthy people gain generational wealth. They transfer all the wealth to the next generation and all the taxes that they owe get written off. Learn more from this 1031 Exchange Step By Step Case Study. Just like Ivan, you can use this powerful tool to build wealth in real estate and increase your net worth and cash flow.
Here’s what Ivan had to say about traditional retirement plans:
“Back in the day, when I worked with a financial advisor, the goal was to have a million in your retirement account. Now, in just a few short years, a million dollars in your 401K will no longer give you a comfortable retirement. Instead, you need to own commercial real estate because it generates cash flow. Cash flow is key! With real estate, your assets continue to grow in value while you live off the cash flow. You are basically set for life. You have income coming in while your portfolio grows exponentially. And at the end, you can always give it to your heirs.”
Lessons Ivan Learned
Don't Overthink It: “I spent half a year to a year just listening to podcasts, and reading books and forums, thinking that I need to spend a lot more time learning before I can execute. But once I signed up for your program [the Commercial Property Advisors Protege Program], it was just like you gave all the information that I needed to know. How to talk to realtors and property managers, how to find the deals, how to work with all these people and the way they do business. I just had to go and do exactly what you told me to do, and it worked! Your program is what pushed me to execute them because I was overthinking.
So my first advice is don't overthink it and just get started. You’ll have full support, and it's a truly amazing program because it forces you to go do it. Once you do it and you do enough of it, it becomes a second nature, but you need that initial push.”
Keep Your Day Job: Ivan suggests having a primary source of income while building your real estate portfolio. He believes it's safer. And I do, too. Keep working because you need the income to be able invest and you need the credit to apply for loans. Another consideration is that your family needs to feel safe while your commercial investing business is growing.
Don’t Buy a Tesla with Your HELOC: Instead use your HELOC wisely and invest in commercial real estate. Use it as seed money that grows and multiplies into huge profits. Use your HELOC to buy apartments, and use your apartments to buy your Tesla.
Through our mentorship, Ivan was able to generate huge profits investing in commercial real estate, giving him a new path to building wealth. You too can create generational wealth with our Protege Program. Apply to be my next Protege here: Protege Program Application
Alan Olson says
Great lesson with Ivan deal I am a retired federal bank real estate appraiser of Sfrs and 2 to 12 unit props how can I get your free book ? Thanks for your info great stuff Alan
Peter Harris says
Get a free copy of my book here, Commercial Real Estate Investing for Beginners
Thank you for sharing Peter.
Good Job Ivan! Your story tells me to a put a seed now, and harvest in 3 – 5 years. Wonderful story! And a good lesson!!
Rhonda White-Raub says
I am looking for a mentor!
Peter Harris says
Get your mentor here! Apply to our Protege Program
Vladimir Blokh says
Lovely, Peter! What year and state was this case in? How long did it take to Ivan to stabilise these properties and why he didn’t hold them and used cash out at refinancing to purchase larger properties?
Peter Harris says
He acquired the properties in 2017, did a full cash out refinance a year later so that he had no cash tied up into those properties after a year of ownership, and then at the end of 2022, he sold them. His proceeds went into a 1031 exchange and that’s what he is finalizing now…the acquisition of a larger property.
Michael Diodati says
Ivon thank you I needed the empowerment. Peter is great teacher.
Thank You for Sharing your Knowledge and Wisdom 🕊🙏🏽
Good encouragement to take action, as always!
Avery Gilmer says
Good stuff Ivan!
Chris Rouse says
Thanks again I
Ken Karimian says
Thank you for sharing your experience.
Terri S. says
Great job Ivan! Much more success in the future is in store for you!
Judith Parsons says
Hi, thank you for sharing your inspirational reading and knowledge. I have been looking for a breakthrough. I would like a mentor or guide someone to help me find a way. If you can help me I am ready to talk to you
Peter Harris says
Apply to be our next Protege here: Protege Program Application
1.) Did you coach Ivan throughout the 3 year process to add value to these 2 properties?
2.) Did Ivan self-manage these 6-unit properties or was a 3rd party property manager involved?
3.) Did Ivan renovate the units when tenants moved out? Or did he have to terminate their leases in order to do the renovations? Were the other 5 units occupied while one unit was being renovated or did it occur simultaneously?
Peter Harris says
(2) No. He hired a property manager that we helped him choose (and manage).
(3) He had each of the units improved as the original leases expired and then raised rents. By the end of the first year of ownership of each of the properties, he did a cash out refinance so to pull all of his original investments out of the properties and then they still cash flowed thereafter until he sold them in order to buy a bigger property through a 1031 exchange.
Clyde Lane says
I have been working towards getting into apartment ownership.
My biggest deterrent has been enough money.
TERRY HOPKINS says
YOUR COMMENTS ARE OUTSTANDING..THANKS FOR YOUR HONESTY…..
Jack Burton says
Way to go Ivan!!!
You have your head in the right place. Keep your focus and be sure to keep “smelling the roses” along the way.
Michael Ross says
I’d like to construct new apartment housing maybe 40 or so studio or 1 br for Veterans in Louisville, KY. There is some funding available with the city. I don’t have any experience with building or owning property, can you help someone like me?
Peter Harris says
Don’t build. Buy existing.