Mike Swenson - Our New 24 Unit Apartment Purchase

In this episode, you will be able to:

• Learn how you can invest in real estate syndication investment opportunities for financial growth.
• Hear how we had to overcome challenges in getting this 24 unit investment opportunity to the closing table.
• See how you can implement effective strategies for increasing rental property income and maximizing returns.
• Explore the unique benefits of investing in southeastern Minnesota real estate for long-term wealth accumulation.
• Navigate property management with expert insights for achieving investment success in real estate.

The key moments in this episode are:
00:00:00 - The Importance of Alignment in Real Estate Investing
00:08:23 - Criteria for Choosing Real Estate Deals
00:09:53 - Passion for Helping Investors with Low Barriers
00:11:30 - Done-for-You Real Estate Investment
00:13:38 - Challenges in Raising Capital
00:18:02 - Increasing Income and Reducing Expenses
00:21:50 - Property Management and Future Opportunities
00:22:53 - Finding Off-Market Deals

Follow REL Freedom 👇
http://FreedomThroughRealEstate.com
https://www.relfreedom.com/invest
http://RELFreedom.TV

SUBSCRIBE IF YOU'RE LOOKING TO BUILD WEALTH THROUGH OPPORTUNITIES IN THE REAL ESTATE INDUSTRY 

✅ http://relfreedom.tv  

GET STARTED INVESTING TODAY AND ACCESS OUR DEAL LIST! 

📈 http://investwithelite.com  

PARTNER WITH US ON BIG DEALS! 

💵 https://eliteadvantagepropertieshq.com  

BUILD YOUR REAL ESTATE AGENT CAREER WORKING WITH INVESTORS 

👨‍👩‍👧‍👦 http://eliteadvantageagent.com  

LEARN ABOUT REL FREEDOM & HEAR MORE REAL LIFE STORIES 

🎙️ http://www.relfreedom.com   

FREEBIES: DOWNLOAD YOUR FREE FREEDOM FOUNDATION BLUEPRINT 

💵 https://www.relfreedom.com/blueprint  

LOOKING FOR A REAL ESTATE AGENT ANYWHERE IN THE US? FIND A TOP AGENT IN YOUR COMMUNITY 

🏠 http://www.eliteagentreferral.com  

JOIN OUR FACEBOOK COMMUNITY 

👨‍👩‍👧‍👦 https://www.facebook.com/groups/relfr...  

SUBSCRIBE TO THE REL FREEDOM PODCAST 

🎧 Apple Podcasts: https://podcasts.apple.com/us/podcast... 

🎧 Google Podcasts: https://podcasts.google.com/feed/aHR0... 

🎧 Spotify: https://open.spotify.com/show/5nXA5hL...  

LET'S CONNECT 

👉 Facebook: https://www.facebook.com/mswenson13 

👉 Instagram: https://www.instagram.com/getrelfreedom/ 

👉 TikTok: https://www.tiktok.com/@relfreedom 

🏠 Minnesota Real Estate: https://www.eliteadvantageteam.com

Full Transcript:

00:00:00
So it's not about convincing, it's about alignment. Is this something that you're looking to do? Are you somebody that is getting frustrated with what's happening in the stock market, maybe frustrated with what's happening with the economy at large and want to take control of your finances, maybe take control of your savings and put your money to good use here in terms of investing in these opportunities backed by real estate. And so that's the type of conversation that we have with an investor. Welcome to the Real Freedom show where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate.

00:00:31
I'm your host, Mike Swenson. Let's get some real freedom together.

00:00:43
Hello everybody. Welcome to another episode of Real Freedom where we talk about different ways you can build time and financial freedom through opportunities in real estate. I am your host, Mike Swenson. If you want to get started on your real estate investing journey, check out our website and freedom through realestate.com that's freedom through realestate.com lots of great content, our past interviews and episodes and then episodes like today we're going to talk about a specific deal that we just closed on to give you guys valuable insight and information to help you get started or take the next step in your real estate investing journey. Today we've got a super exciting time for you.

00:01:20
We're covering the deal that we just closed on. So we are talking about this deal now. The episode will be released in May. This is April of 2025 and we just closed on a 24 unit property with some of our investors. And so we want to be able to help you guys understand how we structure these deals, what we're looking for and when we decide to move forward.

00:01:41
So as of right now, we're sitting at about 229 units total. So we were just over the 200 unit mark and now we've added another 24 to put us at 229. So we're excited to be able to talk about it with you. So kind of the backstory here of this Property, it's a 24 unit apartment building. It is in southeastern Minnesota.

00:02:00
And we'll talk about more why the market and that sort of thing had a purchase price of $2.1 million. The rents, as of right now, it's about $24,000 a month in rents. We're projected to get them to about $27,000 here, just bringing them up to market rents and then we've got some additional value add opportunities and so the way that we've structured this one is we've done with other deals in the past. We want to help people have as low of barrier to invest in real estate as possible. And so we set up a syndication.

00:02:29
We do this as a 506 base BE. So these are people that we know and have had past relationships with. And so we're not publicly marketing these deals. You know, might be something we look at in the future, but as of right now, it's all privately done with friends, family and other connections that we have. And so we had about 2020 investors that invested in this deal.

00:02:48
Total capital raise was $650,000. So those are the nuts and bolts of the deal. And I will dig into more of this as we go, but just want to give a general outline of what this deal looks like. So first things first, how did we find the deal? So our is to try to find about three or four great investment properties every year.

00:03:07
We don't want to do deals just to do deals. We want to do deals where we think they're significant enough and kind of worth our time and worth our investors time to move forward. And so we had closed on our last property was actually July of 2024. And at that time we had had this deal lined up potentially to close in November or December of 2024. And so we were thinking, okay, great, this is just our next deal, we'll have another one closed up.

00:03:32
And then that actually would have put us at four deals for. And so the timing of this one just got delayed a bit. The owner just had some personal stuff going on in his life, some health stuff for him and relatives. And so it got pushed back. So the original thought was, let's see if we can close this by the end of 2024.

00:03:47
Then I think it changed to maybe February of 25. And then we officially closed it here kind of mid to late April 2025. And so this is an off market deal. We have a investor or a wholesale partner of ours that we've done many, many deals with, have a great relationship built up with him, trust built up with him. And so he kind of knows our parameters of what we're looking for.

00:04:09
And he does a good job of finding these deals and building relationships with apartment owners. And so he, you know, had a relationship with this guy they've talked for for quite some time and kind of understood the horizon of what he was looking to do when he was looking to sell. And then actually this seller is looking to move to Florida. And so looking to get out and move down to Florida and take the next step in his life. And so that's where kind of the of this just worked out.

00:04:34
Now I will say originally we were looking to have this closed in 2024. We didn't find another deal that, that really fit the criteria of what we were looking for. And so going from July 24 to now, April of 25, without having done a deal, that's quite a long time. And so I think that speaks to hopefully the criteria that we set of wanting to have good quality deals that we bring before our investors. And like I said, not just do deals to do deals, but to hopefully do deals that are going to add value and help our investors build wealth.

00:05:02
And so it just took from, from July find that right deal. And in terms of the market, you know, we kind of accumulated a few properties in southeastern Minnesota. We feel like that's a good area. It's kind of the small enough yet large enough type opportunity. So you know, Minneapolis and St.

00:05:19
Paul for us, we're open to deals there. We're not quite sure what that's going to look like. We're not quite sure kind of what rental regulations and rent control requirements and things like that will happen. And frankly, we're looking for deals that present a little bit more cash flow opportunity, perhaps maybe not quite as much equity gain opportunity. But you know, as we're looking on that scale, our investors are going to want to have some cash flow payments that come during the hold period.

00:05:43
And so we're looking for opportunities that have a little bit stronger cash flow. Now I will say cash flow opportunities are super hard to come by. And so it's kind of like we're looking for a needle in a haystack and we have to find that needle. And so we've looked at lots and lots of deals in the meantime and felt like this is the one that made the most sense. So off market southeast Minnesota, we like having Rochester, you know, proximity to Rochester, proximity to the Mayo Clinic, which those that are listening, it's the number one hospital in the world.

00:06:09
And so you have a, you know, kind of small to mid sized town which is really built around having this wonderful world class hospital and health care. And so people from, you know, lots of different countries all over the world come here to work, get treatment. But Mayo has been just a staple of Rochester, Minnesota for a long, long time. And so we like that economy boost that it brings. And there's lots of kind of smaller to mid sized cities outside of Rochester that present Good opportunities.

00:06:36
And so we're looking for kind of that general area. You know, our radius around there is really kind of where our target is. And there's not a lot that's there. And so this is where it came, you know, off market opportunity. It's a 2006 build.

00:06:49
So we really like the idea that it was a newer property. This is actually the newest property that we have in our portfolio, so less than 20 years old, hopefully better quality. So what I will say is there's not a ton of value add. This isn't going to be a heavy lift renovation or update. It's going to be kind of continue to maintain, continue to do well, hopefully improve the quality of the management, improve the quality of the tenant experience and provide a great opportunity for them.

00:07:14
So in terms of kind of why we decided to do this deal, like I said, it's kind of the combination of, you know, kind of price point for us as we continue to raise capital. We have to look at our base because we're doing this as, as 506B because we have to have past relationships with these folks. We can't just go publicly market these deals. So we kind of have to look at the, the investor base that we have and see, okay, what's kind of a price point that we think we can raise capital for. And we'll talk challenges of that a little bit later in the episode.

00:07:41
So we kind of have to look for the right size. You know, we want to find the right size deal that we think provides a good economies of scale over what somebody could do on their own. And yet at the same point, we can't get too big and overstretch ourselves. And so we felt like location was great, price point was great. The price point that we're getting it at in terms of the rent, we used a DSCR loan here.

00:08:00
And so for those folks that don't know that's debt service coverage ratio. So essentially you're looking at kind of the, the income coming in to meet the expenses. And banks and lenders look at that rat. So it was a good combination there where we found a lender that was going to loan to us and then from there, like I said, just a newer property. And then for us, I really feel strongly that our competitive advantage is good quality management.

00:08:21
And so we're happy with the management that we have. We're happy with kind of the direction that we can take things. And so kind of all those criteria together really felt like this is going to be a deal that was worth Our time and worth pursuing and ultimately worth waiting for for these past few months while we've waited for it to come to fruition. So that's why we chose the deal. Going through the due diligence period didn't really have a lot of changes, didn't really a lot of surprises.

00:08:43
The inspection went well, there wasn't anything super concerning that came up on the inspection for us at that point as it relates to the building. And so it went relatively smooth. So I think as things changed over the last few months, we just continued to get updated rents, continued to get updated expense statements to make sure that everything was continuing to track and we still like the deal. So as I mentioned then, kind of the breakdown purchase price 2.1 million 24 units, the cap rate was believe about 7.8. And so this will cash flow right out of the gate.

00:09:14
We don't have to increase revenue, decrease expenses to be able to get it to cash flow. It does cash flow right out of the gate. And so we did do a DSCR loan with a lender with a five year term. And so interest rate, we were in the low to mid sevens. And we've got a couple of things that we're going to possibly tweak and kind of recalculate that here.

00:09:31
But for as of right now, that's where we stand on the financing structure. So we do this as a syndication. I'm very passionate about helping people invest in real estate with low barriers. And so a lot of people ask me, you know, about how do I do this, how do I get into doing these types of properties and why, frankly don't we go with larger investors? And for me it's really about my passion.

00:09:51
This is, this is a passion to help people. You know, if you're working a W2 job, if you've got some savings set up, if you have a 401k sitting at a past employer and you want to know what can I do with it and you're really interested in getting started in real estate. I want to provide good opportunities for you to be able to have deals to invest in. And so you know, this deal, like I said, the only criteria is we have to have a past relationship. For those of you that can look up kind of what a 506B investment opportunity is, we have to have a past relationship with the person.

00:10:22
And so if we have that then we can move forward with them and have them become an investor. Now we do have a minimum minimum investment amount for each deal. Mainly that's because we can only take on about 30 investors for every deal. I think it's 30, 34, 35 investors that we can take on this deal. We got it done in, you know, 18 to 20 investors.

00:10:41
And so in terms of, we're kind of looking at the total capital raised, how many people we're going to need may some kind of chunks that we think we already have for some larger people. And then we look at, okay, can we get people into the deal? And so these are people that are real estate agents on our team, these are friends and family, These are past business relationships that we've had and just people that have been in our sphere for a long time. And so we want to help them. Right.

00:11:04
You know, what holds people up from investing in real estate? I don't necessarily know what I want to do. I don't know if I can find a deal, I don't know if I can find a deal off market that's going to do what I want it to do. I don't know how to set up financing, I don't know what a good deal looks like. I don't know how to get a loan.

00:11:20
How do we go through that due diligence period? And then after I close on the property, what am I going to do to management? What does that plan look like? And so this is really kind of done for you. Real estate investment.

00:11:30
We find the deal, we do the due diligence, we put together the financing. In this case, we're guarantors on the loan. So we're putting our assets on the line to be able to make sure that these deals close. And then we put together a plan. So here's what we think is going to happen in three years, five years.

00:11:47
If we do hold longer than five, five years, we put together that plan, we put together year by year projections and then we talk about, here's what we're looking to do, here's what we think, you know, the projections look like and what does this mean for you financially? And if this is something that you want to do, great, here's how you invest. And if it's not something that's a fit for you, that's okay. We'll keep you in the loop on future deals. And so it's pretty hands off.

00:12:10
You know, we don't have to, you know, convince people, nor should we be trying to convince people to put their hard earned twenty, thirty, fifty thousand, a hundred thousand dollars into a deal. It's just looking for alignment. So it's not about convincing. It's about alignment. Is this something that you're looking to do?

00:12:26
Are you somebody that is getting frustrated with what's happening in the stock market, maybe frustrated with what's happening with the economy at large and want to take control of your finances, maybe take control of your savings and put your money to good use here in terms of investing in these opportunities backed by real estate? And so that's the type of conversation that we have with an investor, is here's the deal, here's the plan. Really, it's just for them, they don't have to qualify for the loan, right? It's just, do you have the capital to put in? If so, here's how you wire the money and here's the documents that you sign to go through that.

00:12:58
And so we have a, you know, a PPM document, a private placement memorandum, where it explains everything about the investment. And so for these investors, they, they read that over, decide this is a risk that we're willing to take, and essentially wire the funds and sign the documents. And so the nice thing is for them is it's simple for them to execute. We don't have to worry about excuses of, I don't know about the deal, I don't know how to qualify all of that stuff it's done for you. For them, it's just, is this an opportunity that I want to invest in or not?

00:13:27
And if so, they invest. If not, they don't. And in terms of challenges, that really is the biggest challenge that we face is finding the right people that are aligned in the right time of their life. And so, you know, what almost blew this deal up in some ways, kind of the economy as a whole. So we started raising for this deal end of March, early April.

00:13:47
And for those that may remember, the stock market tanked. And so, you know, people that are investing in real estate probably have funds in the stock market and maybe are looking to liquidate funds from the stock market to put into real estate investments. Well, what ended up happening is the Dow Jones went from 42,000 ish down to 37,000 ish right smack dab in the middle of when we were looking to raise funds. And so people that thought just for clean numbers, if I had $42,000 that I was looking to put into the deal, now I only have $37,000 to put into the deal. And so I've lost over 10% of my funds.

00:14:23
And then when you, you go to invest, right, you're going to have to sell and lock in those losses. And so for some People, they're okay, they want the loss, you know, the potential tax write off, whatever that might be. For some people, it's then kind of the admitting defeat of where you were in the stock market and pulling that. And so frankly, we had a lot of people that just said not right time. You know, because of that, we also have a few people that run into kind of some administrative challenges.

00:14:45
And so we have folks that invest self directed IRAs into these properties. And so they're taking money from an old IRA account that they have, transferring it over into these deals. And that sometimes takes time, sometimes where their funds are at, the people aren't super excited to allow them to release those funds. And so we run into some administrative hiccups at times that come up. And so it's, it's not super easy to move some of those funds.

00:15:11
When it goes well, it goes well, and when it doesn't, it doesn't. And so, you know, some of those timing delays had funds where they, they weren't available to us at a time where it worked for us. Us. Some people were maybe looking to sell some properties and do 1031 exchange. There's a process for that and a timeline for that.

00:15:28
People were looking to acquire, you know, other businesses or other real estate opportunities where their financials were going to be scrutinized. And to be able to have big chunks of money being wired over raises questions from lenders and auditors and things like that. And so for some people, they just realized, you know, not the right time, but we were able to get enough funds to close. We're just kind of completing the raise. You know, we have about a year actually after to be able to complete that raise.

00:15:54
And so we're just kind of waiting for the last investors to get their funds in and have all that wired over. But we were able to close. And so it isn't easy to raise capital. And you know, people that are putting their trust into these deals, they put their trust into these deals to hit send on a wire for $30,000 and have it, you know, just sitting out there until I confirm that the wire comes in. Right, that's, that's a little bit intimidating for some people.

00:16:20
And so I totally get it. And you're busy doing life. You've, you've got your own happening. And while this deal is, you know, one of the most important things in my life at this time to get it to close, you've got families, jobs, you know, other life stuff that happens, health concerns that come up and your timeline may not fit with the timeline of this deal. And so in terms of challenges, that's, that really is the challenge of raising capital.

00:16:42
And so we have to, you know, kind of assess those challenges and decide, you know, in spite of all of this, can we get this deal closed. And in this case, we decided to move forward and got the deal closed. But it's, it's not simple to be able to pull it off. And you know, this raises, you know, we've had smaller raises, we've had one that was a little bit larger. And this one certainly presented a challenge.

00:17:03
And so it's just, you know, following up with people, making sure you're staying in front of them, like, hey, is this the right time for you to invest in the deal or not? If not, no worries. You know, we're not going to make you feel bad for not investing in a deal that's you're not interested in investing in. We'll move on to the next person. However, we do want to make sure we get in front of you and give you an opportunity to say no or say yes to that.

00:17:24
And so there's a lot of work and the following up with people, you know, we have our investor database that I kind of comb through and say, okay, have we heard back from this person? Have we not heard back from this person? You know, kind of, where's this person at? Not the right time, that sort of thing. And so it is, it is a lot of work to kind of follow through, get that paperwork signed and get those wires taken care of and making sure that those wires are confirmed so those people can sleep easy at night knowing that their hard earned money that was transferred over is put to good use.

00:17:51
So those are some of the challenges that I think we faced in this particular deal. And then kind of plan moving forward. You know, typically with these real estate investment purchases, it comes down to two things. Increase income, reduce expenses. So how can we do that?

00:18:06
There's an art and a science to it. I, as I explained to investors kind of what our plan is, we're also human beings. We also recognize that affordable housing is difficult to come by. And you know, in a perfect world, it's easy to just say, okay, we're just going to raise rents and, you know, get more income. But these are real people.

00:18:23
These are people with jobs, jobs that, you know, are having a hard time maybe sometimes paying rent. Maybe they're great tenants, maybe they're not great tenants. And so there's, there's an art and a science to it. And that's where having a good property manager really helps to be able to navigate that. And so we present a plan of, yes, over time, rents will increase.

00:18:40
Yes, we will take advantages of opportunities. With this deal, we'll work to reduce expenses. However, it's not an inhuman opportunity. We are looking to treat the tenants well, create great relationships with them, earn trust with them, them, and want to keep them around. And so we, we look at that rent roll and we see, okay, where can we make some changes?

00:18:59
In this particular case, there actually is 24 garages on the property that are included with the rent, but they don't necessarily get a ton of use. And so we saw that as an opportunity. Whether it's, you know, something that we can have an additional charge for, whether it's a, an opportunity within the local market to offer some storage for people that are looking for some storage, we could potentially do that. Another opportunity is, it's called a RUBS program ratio u billback. And so in that case, what it is, is taking the utility expenses and putting it back on the tenants.

00:19:31
And now I realize it's, you know, if, if we're asking a tenant to have an increased rent and pay for utilities, then that's 2 increases, right? And so that's where it's. There's the art and the science of balancing that out where respect to the utilities, the importance of having the tenants feel the responsibility of the utilities is, then we're not just blasting heat, running water at all hours of the day, but we're trying to be. Be smart with how we're using those utilities. And so really, you know, if we're trading kind of dollar for dollar, the utility piece is key because we want them to, to feel the responsibility of managing those resources.

00:20:06
You know, I remember, I always give the example back to my days in college and, you know, we would just, hey, we're cold. Turn the heat up. Well, sometimes these college dorms, the heat's really high anyhow. So then what are we doing? We're opening the window.

00:20:18
And so we'd have the, the boilers blasting the heat heat, and then we'd have our windows wide open when it's like zero degrees outside because it was too hot because the boilers were working too hard. Right. And so that's not a great use of anybody's resource as it relates to utilities. So it's kind of that example, wanting the tenants to have that responsibility of being wise with the resources that they have. And really that tends to work better, better for all because they're going to be better stewards of those resources.

00:20:44
And so those are some different options of what we're going to do. We don't have, or we don't necessarily need to have a ton of updating of units. It's really of okay at tenant turns. Do we need a new vanity, do we need some new countertops? Maybe we need some new carpet here.

00:20:58
But there's not a plan to just go in and just every time a tenant turns, we're going to increase it because the units are in pretty good shape because we are, you know, just under 20 years old. So there's not a heavy lift in terms of value add, but it's really just kind of as those needs come up, executing on them, doing great management, increasing that revenue, looking for places where we can add, like those garages, looking for places where we can do some utility shared with the 10 tenants and then really just continue to do that over the course of a couple of years for our investors. What does that mean? We'd look to do distributions to them, hopefully within a few months, kind of get in, establish those reserves, make sure that we're hitting the requirements of our lender, and then be able to have some distributions back to the investors. And then ultimately, at the end of the day, once we sell, you know, they get, based on the portion of the money that they invested, they get the proceeds from that.

00:21:48
So that's pretty much how the deal went. And so now, you know, our property management team is doing the heavy lifting, getting in, getting people set up on rents, sharing with them, kind of the ticketing process for reporting issues, building that rapport, learning and understanding the needs of the tenants, making sure we're being responsive to them. And so right now it's. It's kind of, you know, we've gotten the deal closed. The property management team really takes over and runs with it.

00:22:12
And so we're really excited about who we have running that, and they're going to continue to do that. And then for us, you know, we kind of look up and go look for the next deal. And so we've been in conversations on a few deals, looking for some future opportunities that fit those criteria that we're looking for. And so that's where we are looking, looking for that next deal. Are you looking to get started or scale in real estate investing but don't know your next step?

00:22:33
Are you overwhelmed thinking about finding deals, analyzing deals, doing due diligence, and managing properties on top of it? Go ahead and push the easy button and invest with us Real estate Investing is what we do full time. We've done dozens of deals with hundreds of doors. We have the knowledge and experience to hand pick the best deals that most investors can't find. We've at large off market deals all the time where you can hopefully find returns and economies of scale that you just can't find on your own.

00:22:59
The best thing is it's 100% passive to you for less capital than you put down trying to acquire a property on your own. Don't let this year go by where you don't make the leap add to your portfolio or you just sit in analysis by paralysis. To find out more, visit freedom through real estate.com and click on Invest. You can book a call and learn more there. So get to scaling your portfolio now with us by your side.

00:23:24
So I will say this, if, if you're interested in, you know, kind of learning more about this process or you want to get on our list and invest in deals with us, depending on how that works. Like I said, we have to have kind of a relationship with the folks we know. So we'd love to jump on a call with you, talk about what are you looking for, how can we help. But like I said, go to our Website freedom through realestate.com once you get there, there's a menu item where you can click on for invest and there's opportun. Get a hold of me, Mike Swenson and we can talk about, you know, your investment goals.

00:23:53
If we could be a part of that and work together, that's fantastic and how we can help you guys build wealth in the future. So there you have it. Our 24 unit deal. $2.1 million bringing us up to 229 units as of this recording. Excited to share those details with you.

00:24:07
The success we had, the challenges we went through and hopefully gives you guys clarity on structuring your deals. If you want to reach out to me too and just talk about deal structure and analysis, you know, I love walking through those things with people. So there you have it. Great episode. On to the next deal.

00:24:21
You guys have a great day.