On the show today we talk… Multi Family Cash Flow with Drew Kniffin!
Listen on: iTunes | Stitcher | Google Play
Show Links:
– nighthawkequity.com
– Deal Maker Live Event
Here are the show notes
The Vantastic Life is…
– in Tucson Arizona
Drew Kniffin and Julie Clark are in Seattle.
Let’s do this!
Nighthawk Equity
Julie’s dream home heat went out, and super expensive boiler failed, and she had to cut into the roof to fix it. $15k later, she’s feeling much better.
Welcoming Drew Kniffin with Night Hawk Equity helps you grow your cash flow through generational wealth, and is partnered with Michael Blank
Over 2000 performing investments, and ultra conservative when they underwrite their deals.
Joe
What’s your background?
Drew
I grew up in Chicago and we to school out there. After getting a job I realized that I was making others rich.
We had a condo that turned into a rental, and we realized that was making us money, and we really didn’t have to do anything.
So I realized that if I could do that with 100 of those rentals that would be awesome.
Then I started buying bigger and bigger apartment buildings?
Julie
Do you have any local real estate mentors?
Drew
I actually went to Seattle Investors Club and met Jacob Weaver, who is an awesome person.
Julie
Shout out to Jacob Weaver!
Looking back on it… did you quit your day job at the right time?
Drew
That’s a great question.
From a high level you need to make sure that you’re going to have cash flow to live.
I would be pretty conservative about that.
If you’re in the commercial sector the loans are based on the building and not on your personal situation.
All of our deals are non recourse.
Julie
Learn plus invest equals freedom. How does Night Hawk Equity work?
Drew
We partner with people to buy investment deals.
You can bring us a deal, and we will partner from a-z.
It’s a great way for people to get into commercial real estate (multi family).
Julie
Multi family was 98 percent less delinquent than single family during the recession.
Drew
Apartment buildings perform way better than single family during a recession because people have no where to go.
Julie
If people fail on apartments… where do they fail?
Drew
Underwriting is too optimistic. You have your happy ears on!
The other thing is that they hire bad property managers.
Single family property managers are around 3 times as expensive as multi family.
Julie
What’s the process when people want to start sending you deals?
Drew
It has to be thorough.
We have an analyzer that is phenomenal!
It needs to come in through our deal analyzer.
It needs to be conservatively underwritten.
It has to be 80 plus units and 2 million in debt or more.
We don’t do ground up.
Julie
Does Night Hawk do a rehab?
Drew
We do, but not huge rehabs.
Julie
What’s the typical rehab look like?
Drew
I was just down in Texas…
We haven’t done a building where we put in washer and dryers.
Usually $5-7k per unit on the inside.
Julie
I can’t even walk out the door for $5k in Seattle.
Drew
That’s one reason why we don’t do business in Seattle. It’s too expensive.
Julie
What I love about what you guys are about, is that you’re conservative.
Everybody is a coach, and has a website, but conservative underwriting is the most important thing.
What is the definition of conservative. You include the replace reserves above the line.
Drew
Every property is going to wear down over time, and you’re doing to sock away money every month.
Do you count that to your cash flow or not? We call that above or below the line.
We put ours above the line, so they impact our cash flow.
BUT not all investors do!
At some time those are going to be real costs, so those should be above the line.
Julie
You also build in other things to make the investment safer.
All of the people that you invest with should be using the word conservative.
Drew
You need to have extensions in your bridge loans.
Julie
Why doesn’t everyone think this way..?
Drew
We get deal fever to get a deal done. And a lot of us haven’t been through multiple recessions. So, we haven’t felt the pain.
Julie
What are the banks wanting for replacement reserves these days?
Drew
About 250
Debt service coverage is 1.25. I haven’t really seen this lower.
Cost segregation. The building is going to last for 27 years, but things inside of the building don’t last that long.
You can actually have a specialist that can cost seg out all of the things in your building.
Our investors will have less of a tax burden because of this. It’s awesome!
Engineered Tax Services is the company we use.
Julie
What do you use for rent rolling?
Drew
If you’re trailing 12 month rent roll, I want to see that.
I also want to see what others in the area have done.
I want to hear what the property management company says, not the realtor. Because the property manager has to live with what they say.
I have a PM that manages most of our properties at Night Hawk and they do a pretty darn good job of maintaining the budget.
Julie
I used to have a cash flow forecast, and I would project the cash flow for the year.
Drew
We are looking at budget to actuals every month.
Julie
I would put my checkbook into that. I’d like to buy you a beer and geek out on that sometime.
Drew
We are paying out money to our investors every month, so I’m always thinking about that.
Julie
Where do you find most of your deals?
Drew
Usually from our students.
A lot of our deals have a wholesale background, and can get to those off market deals.
Most of our student create relationships with brokers and find deals that way.
Julie
Are they using personal name or LLC?
Drew
LLC>
Julie
What are your returns like?
Drew
80/20 or 75/25, or something like that?
Julie
Do you and Michael have any cash in these deals?
Drew
Most of them we do. It gives us skin in the game, and it looks good to our investors. It’s also good for tax benefits.
Julie
You label deals inside of your dashboard as class a, what does that mean?
Drew
There are a units and b units, and they are kind of like stock.
Julie
Is there any preference given to investors in deals?
Drew
If you own too much of the deal, the bank might want you to guarantee it, so you wouldn’t want to do that.
The threshold is usually 20%
We require people to invest either $50k or $100k.
Julie
Does anyone get preference.
Drew
No. We have our webinar, and it’s a first come first serve into escrow. Once we meet our cap, we close the fund.
Julie
Wow, so it’s up to the investor.
Drew
Not anyone can invest. You don’t have to be an accredited investor. But we need to make sure that we are a match.
Julie
Do you have any deals available right now?
Drew
We do! It’s in Memphis TN, and it’s a great deal.
Julie
Where can people find you?
Drew
Nighthawkequity.com and you can find everything that we are doing?
Julie
What is the challenge and hardest part of this for you?
Drew
Building systems and doing everything well, without trying to build the business too fast.
Making sure that you look at everything.
There are 5 people on our team.
Julie
What are you most excited about for the future?
Drew
A lot of our deals are exciting. I’m excited about delivering on our promises.
Julie
How did you come about meeting Michael Blank?
Drew
I actually bought has product and loved it, then I became coach number 1 for him, and it was very organic.
Julie
What is deal maker live?
Drew
It’s our big convention that we do every year! It’s in Dallas this year on July 25th to 27th.
Julie
Any podcast or books that you like?
Drew
Rich Dad Poor Dad
The Millionaire Real Estate Investor
The Michael Blank Podcast
Julie
Where do you buy deals?
Drew
Mostly in the south east. Memphis, Alabama, Texas. Demographic and job growth in the area. Must have a good story to sell to investors.
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