On the show today we have Augustus Bukowski who has built his development and lending business from zero to well respected in just a few short years.
Notes from the show
The Vantastic Life is…
– in Corpus Christi TX
Here are the show notes with Augustus Bukowski
Augie is doing a bunch of cool things.
Seattle native on Phinney Ridge, which was a high crime area at that time, but they were in a very family area.
He saw a few house flippers on his street in his middle school years. People just talked to everyone to see what’s up
In elementary school they did a project where they had a fake portfolio to practice investing, and they won an award for doing the best. This was during the dot com bubble.
But it gave him an interest in making money without having to “do” anything.
Went to WSU and was never really a studious guy, but took to finance, and was a really good student in math and science.
He thought that after college he’d go to Wall Street or work for a bank. But when he graduated he couldn’t find a job because of the financial down turn.
He needed to get a job, an finally found one in 2008 in the mortgage industry.
He learned about FHA deals, and was crushing it with those loans.
Over the years he focused more and more on mortgage, and opened his own branch.
Every once in a while he’d get a rich client and being on the mortgage side he got to ask them any questions that he wanted. And he did.
Saved up a little money in 08-13, and wanted to get active. And saw that the people who where making money were building stuff, so he started building town houses.
But, still can’t swing a hammer! He can switch a light switch though.
What was your first property?
Everything outside of one transaction he’s bought off the MLS, and they’ve been crazy profitable.
It was 2 lots for $85,000, and thought that it had to be a deal. He asked a builder to look at the lot with him, and within 30 days they were under contract on the lot and getting permits for town houses.
We are still partners today, and have a goal of 500 doors.
My partner is a builder. He’s 36, and I’m 34. It aligned and we had the same goals.
The mission statement for their company was to make money without taking any risk.
* Take 100% of cash out within a year.
* Withstand 25% drop in rental income.
* Withstand a 25% drop in value.
We don’t buy everything. We are patient and wait for things that people pass on.
Do you have some special sauce?
It’s always competitive.
I don’t care where the deal comes from, it just has to meet our metrics, and we stick to that. Don’t compromise.
I found that in 2018 I wanted to compromise. I couldn’t buy anything, but I wanted to. In 2018 we only bought one property.
I agree with what Adrian Chu said on your podcast… keep you day job. Https://seattleinvestorsclub.com/64
If you have a day job, keep it because you’re going to use that income to leverage when you find an opportunity.
How do you get a conventional loan on a construction project?
A lot of buyers get caught up in getting the “best” deal.
When I talk about conventional financing… I’m talking about commercial lending. I’m in the business and have only gotten the best deal once.
I want to make sure that my lenders can actually close.
When you’re buying you have options if you’re going to live in the property.
If you don’t have good credit… look at FHA. You can’t do a lot of add ons or anything, but you can buy a nice big property.
What would be a typical development deal?
Craziest story about financing for us…
2013, we bought a town home site, I had $60k saved up.
The lot was $85k. I took a $25k advance on my credit card, put that together with my cash, and bought the land.
Then I found another deal. It was an off market property that was a great property, but I had no money.
So, I went to some private lenders and asked for some money against the land.
I used hard money as the down payment, and got a conventional loan.
The property ended up being worth way more than I thought. Then I got a HELOC and got myself $150k. Then the value went up again, and I got another HELOC, and used that to finish the renovating the property, and started earning over $9k in monthly rental income.
Everyone focuses on they real estate education in a backwards way.
I completely agree!
Everyone looks at a fancy house and then they realize that they need to qualify for a loan.
I think that people get focused on the wrong things.
Go out and understand you capacity as a borrower. What is your exact situation and what’s your bandwidth…
Then figure out what you want.
It’s interesting that the investing world doesn’t’ seem to work that way.
I’d like to create a panel where people can learn the right way from the part.
You’re so right. People get into investing and go for really risky transactions.
I think that in the next 6 months we’re going to see people that didn’t account for the Seattle area market pull back.
I always tell people that I don’t think you should do it yourself.
I want to assist the new investors.
People see the lifestyle of the real estate investor and then they go out and flip a property, and don’t realize that’s not what the rich investors are doing.
Only buy houses that meet the metrics, and you can become a multi millionaire from passive income.
Real estate is a long term sport.
When you’re doing a ton of deals… you don’t have the work life balance that you want.
We are working on a LOT of units, and that’s on top of what we already own.
I would say we are working 60 hours a week, and my goal isn’t as cool as before I did it.
What do you like the most?
Oh my gosh… putting the deal together! I love this!!!
People focus too much on what’s the best rate they can get. You shouldn’t care if the metrics work.
Let’s jump into deveopment. What are the first things you do?
It depends on the municipality.
All you really need to do is find a property that is zoned correctly. Seattle is pretty easy. They made these PDF’s that tell you what you can build and where.
Google: Seattle multi family zoning chart
If something looks like it works, tie it up for feasibility, and do a massing study to see how many units I can put on the property.
Then do an intake meeting with the city to see what they have to say.
Earnest money due and payable upon the approval of the feasibility contingency?
If you’re going fast.. you need to be careful with street improvement plans. And if you’re not careful you can lose you profit.
What’s up with parking?
Seattle hates cars.
The micro housing market isn’t too strong, so we liquidated all of our micro housing units.
Apartment projects are usually 3-4 years.
People fun across properties all the time… lets say it’s a standard site… back in the day I say that builders would pay… do you have any kind of mini scenario…
I would say that the metric I would use is… factor a little risk into profit.
Starting price of 850k for exit price. Back out 8% for sale.
Let’s say it’s going to take 300k to build the property. They could pay up to 350k. About 125k per door. At 3 or less town houses… 150k per door.
At the cheapest we can get 150k per lot.
How can people reach you?
Google Augustus Bukowski and I look at 100’s of projects every year, and would love to see yours!
If someone brings you a deal, but they have money would you partner?
Yes, we are currently looking at our first joint venture. We are looking at 40 units or more.
Do you buy any value add deals?
Yes, we will buy anything where the metrics work.