Building &amp; Selling a Multifamily Project for $12m Gain After 3 Years
Hello fellow CRE enthusiasts! I bring you a development sale of a multifamily deal that officially closed and funds have now cleared as well. I took these screenshots ([https://imgur.com/a/g4PIpbv](https://imgur.com/a/g4PIpbv)) of the bank account with the incoming wire and the second page of my closing statement. We don’t own the project entirely (we have passive partners in the deal for 50% who put the money in the project for covering some of the site work and the soft costs to get the project going). So half of what I’ve received here in my bank account from this sale will be going to this equity partner. It took a year of planning/permitting and then two years of construction and building of these 160+ units of apartments. Selling it itself was another nightmare. It began many months ago and took multiple extensions to the PSA. The covid market did not help, obviously. More details on the project: So I helped securing the equity for the deal ($6m), we put a bit of money of our own ($2m) then I closed the construction loan ($24m) with a lender which I had a previous relationship with having done deals with them before. I oversaw about 24 draws and monthly inspections of this ground up construction myself. Since the project has multiple buildings on different tax parcels, I was able to refi these multifamily buildings that finished earlier and get cheaper bridge loans on them (cheaper than the construction loan we had but still more expensive than a perm would have been). Now that the last building (the largest of them all) was completed, we were able to sell all the buildings at once. The project overall appraised (MAI appraiser) at a 4.75% cap for +$50m based on a projected stabilized NOI in year 3. And we were able to sell it for $44m!! With a project cost of $32m, we had a 75% LTC loan. I was able to perform the GC functions in addition to the developer with my project manager and the site superintendent (we collected project management fees, general conditions for site worker salaries, overhead for the back office, and then profit for the GC function too!). Overall, this was quite the model project! It was built as a mid-level luxury product too.

If anyone has questions for me, please let me know. I’m happy to help, share any insight, and answer any questions.
[{"id": "glbaus9", "text": "Great success story. Thanks for sharing the details!", "replies": [{"id": "glbhxls", "text": "Thanks!  I appreciate it!", "replies": [], "depth": 2}], "depth": 1}, {"id": "glbfboz", "text": "Where was it?", "replies": [{"id": "glbhwbf", "text": "Western side of the US.", "replies": [{"id": "glbo33f", "text": "lol, ok", "replies": [{"id": "gldl34d", "text": "Part of me always wonder too, but I've stopped asking on account of the fact that if I found an area working for me, why would I invite more conpetition?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "glbg4eq", "text": "Awesome job!!! Any lessons learned from this project??", "replies": [{"id": "glbhzbw", "text": "Great question!  I'll think about this and try to share some soon!\n\nEDIT: OK! I got it.  Document everything.  EVERYTHING.  Really, any agreement or expectation, send an email after to make sure you memorizable it.  Speaking of documentation, be organized.  People laugh at me when I share how I organize files (with a prefix to the folder so it's organized neatly, same with the files within).  But guess what?  It's so easy for me to find things. Other people just keep all the files for a project in a single folder and it's a mess.  Not me!  I take a little time and make sure to store it properly and it saves so much time later on.", "replies": [{"id": "glbkgu4", "text": "&gt;(with a prefix to the folder so it's organized neatly, same with the files within).\n\nCan you give an example?  I wish I was organized.  I surround myself with that type but, for whatever reason, I didn't get that gene. I constantly get incredible \"aha\" moments around these people (thank god I know inherently how to make money), but for the life of me, none of these things naturally occur to me.", "replies": [{"id": "glbocq7", "text": "Sure.  So here's my file system (part of it...the whole thing is too long to list).  I may make a whole post on this, if it might help others, but here's the gist of it:\n\nKeep a folder of empty folders as your templates.  Have them be all the names of the folders like this in the list below.  Then, create a new empty folder for your project.   When you're working on that project and you get an appraisal, copy the empty folder A.3 - Appraisals and add it to the project folder then place the appraisal in it.  In your project folder, you should only have folders that have files in them (those with prefixes but only if they have content to store).  That is, only when you have content to add for your project, should you have a folder.  Never copy paste all the empty folders into a new project (because then you won't know what you do or don't have in those empty folders).  But if you have folders with this sort of prefix, it will take seconds to find what you need. \n\nI created this system for myself, so it may or may not work for you.  But it really makes me super efficient.  And, keep things on a secure cloud server and you can access them super fast on your phone too.  It takes me almost no time to get someone something they request because I have it all ready to go!  Let m know if you have any questions. \n\n&amp;#x200B;\n\n* A.1 - Executive Summaries\n* A.2 - BOVs\n* A.3 - Appraisals\n* B.1 - Equity Investors\n* B.2 - Debt Lenders\n* B.3 - Draws\n* B.4 - Reports\n* B.5 - PayApps &amp; Constr.\n* C.1 - Proforma\n* C.2 - Dev Budgets\n* C.3 - Construction Budget\n* C.4 - General Conditions\n* C.5 - Timelines Schedules\n* C.6 - FF&amp;E Detail\n* D.1 - Architect Contract\n* D.2 - Contractor Contract\n* D.3 - Management Contract\n* D.4 - Entity PSA\n* D.5 - Land PSA\n* D.6 - Building PSA", "replies": [{"id": "glbojr5", "text": "Genius.", "replies": [{"id": "glbpqxv", "text": "Thanks!!", "replies": [], "depth": 6}], "depth": 5}, {"id": "glbsx9u", "text": "Please create a separate post for this. This is really beneficial for everyone", "replies": [{"id": "glbuewe", "text": "Absolutely!! I will def do this!!  do you think it needs anything else?  Or could I just post it essentially  as-is?  I want to make sure it isn't confusing!", "replies": [{"id": "glbzqa0", "text": "It\u2019s great as is", "replies": [{"id": "glc1og3", "text": "Thank you!!  Also, do you lend for CRE development?  Saw your banker flair.  Just curious!!", "replies": [{"id": "glc1v1g", "text": "Only a few billion", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "h3snldu", "text": "It\u2019s amazing how ordered lists and consistent naming can make or break a project.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "glbggyi", "text": "Any advice in terms of passive partners or private/relationship money? Also, the first time you did your first multi family deal did you have a mentor or did the supervising contractor put all the pieces together for you reasonably well?", "replies": [{"id": "glbj2y0", "text": "I had some help throughout the way but really, it was learning and reading books on development and trying to get as much information in my head as possible.  If you'd like a couple books on development, there are many and I'd even send you some. PM me.\n\nAlso, we're the GC also.  So I get to play owner/developer/GC all in one go...and in some of my projects, I'm representing 50-60% of the tenant as well!! lol. \n\nIf you have any specific questions on the advice for passive partners, feel free to ask.  I would say, get to know as much of the deal as you can.  And really make sure you document EVERYTHING.  I really mean, everything.  We still have some verbal agreements and I always follow-up with an email memorializing it.  Not everyone on my team does though... which is frustrating for me.  They forget, then they argue, and then it's a skip and a hope to a lawsuit or legal battle...", "replies": [{"id": "glbpp1f", "text": "Thank you for taking time sharing your success so others can  learn. I do have questions or any advice you have for passive partners. I was recently approached for opportunity to be a passive partner for a similar luxury apartments development project. What's considered fair play? How is it different from hard money loan? Risks? Any tips to protect my investment? Thanks!", "replies": [], "depth": 3}, {"id": "glcuduz", "text": "That\u2019s awesome. Mind sharing some of the books for the folks at home? I haven\u2019t found many that were super helpful once I actually got out of the ground and started building", "replies": [{"id": "glffi8w", "text": "I'll send you some.  PM me.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "glbh7iq", "text": "That\u2019s very cool, would love to see more things posted like this on the sub", "replies": [{"id": "glbi3rw", "text": "Thank you!! I'll try and post more about my other projects too!  I've got 4 others under construction and 6 under pre-dev.  So more coming up soon!", "replies": [], "depth": 2}], "depth": 1}, {"id": "glbhk0x", "text": "Wonderful. Congratulations on the gain. What part of the country is your development in?", "replies": [{"id": "glbi56v", "text": "Thank you!  I'm on the western half of the US.", "replies": [], "depth": 2}], "depth": 1}, {"id": "glbhw49", "text": "How did you start from the very beginning? I just started getting involved in residential construction and getting into commercial is a dream. Any insights will be helpful. And Congratulations!", "replies": [{"id": "glbinl2", "text": "I started off in private equity as a low level guy.  I took an almost  70% pay cut after getting my MBA to work at that PE firm.  We mostly purchased RE for foreign investors.  Then I had the opportunity to fund the equity for a couple development deals for my firm.  The firm had tried to do a deal with this developer for almost 4 years but had no success.  I put something together, a little executive summary and I was successful in my first attempt to raise the equity needed for those hotels.  \"Development\" just clicked with me. After that, I quit and told my boss I was going to go into development. I spent a year learning and reading as much as I could, planning my own projects (without necessarily expecting they would go through - I wanted the exercise, the practice of putting a deal together and analyzing it. Over time, from my network, I was poached to come work for a developer and that's where I started to get even more experience.  Read, learn, and get experience. If you can get the latter on someone else's dime, you'll be more ready for your own projects and you'll reduce the risk component. Development has a lot of risk inherently. It's the nature of the business and it's also justifies the higher level of reward too. But you can minimize that risk the more educated and experienced you are.\n\nFeel free to ask any other questions! \n\nBest,\n\n\\-HYD-", "replies": [{"id": "gldnd40", "text": "What was your job title at the PE firm? Been trying to find jobs within PE. I did a internship with private placements, cool and all, but I would like something more out of the debt side. Thanks!", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "glbk6mq", "text": "Congrats!!!! Awesome story!!!", "replies": [{"id": "glbnmef", "text": "Thank you so much!!", "replies": [], "depth": 2}], "depth": 1}, {"id": "glbld1g", "text": "Congrats! Is this your first CRE deal on your own? Doesn\u2019t sound like you were in the business before this?", "replies": [{"id": "glbmgmw", "text": "Thanks!  I work for a family office as a developer for them.  I form our entities, I'm the manger on them and sign the docs, raise the equity, close the loans, oversee the draws and construction, and then get them leased up.  I manage bank accounts, etc.  This project was the first where I was overseeing the whole project and got it to sale (others I've completed we've kept in our portfolio).  \n\nDoes that answer your question?", "replies": [{"id": "glbrr57", "text": "That\u2019s great experience. I work for an institutional developer and only see a slice of that.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "glblrwt", "text": "This is an inspiring deal. The level of your involvement and knowledge of the aspects from financing, equity control, and development are the reason the deals will succeed. Currently managing a two hotel and 7 SFR site on the West Coast that seems perfect for this kind of set up. Owners unsure whether to sell or fund the development opportunity.", "replies": [{"id": "glbnlgq", "text": "Thank you so much!  And neat!  You could always have the owners of the land contribute it to a developer for a piece of the action with someone else, if they don't want to develop the project.  If they have more money to put in the deal, then they could also keep more of the deal too.  Do you have a simple back of the napkin pro forma on the dev costs and what you would expect the values to be?  I love those exercises!  I'd do it with you if you wanted.  Let me know! PM me!", "replies": [], "depth": 2}], "depth": 1}, {"id": "glblt68", "text": "Is 6M used for land acquisition?  and 2M for soft cost?", "replies": [{"id": "glbndlo", "text": "The $2m  covered mostly site work improvements and for getting the site shovel ready.  This did also included some soft costs like abstract/planning, plans, permits, etc.  Really, once you get the equity invested also, your costs and theirs all kind of start blending in and it's not 100% exactly clear what money went to what...but in general, the deals I work on, we take equity in to secure the site and start spending on soft costs.  From the $6m, we did have a good amount of that go towards soft costs as well.  Soft costs were not just $2m...I wish!! But that's too little..", "replies": [], "depth": 2}], "depth": 1}, {"id": "glbmtin", "text": "My man, nice gain.  Find a 1031, don't let Uncle Sam take a bite out of your hard earned profit.", "replies": [], "depth": 1}, {"id": "glbqszb", "text": "Great story, I\u2019m sure that\u2019s an incredible feeling. Out of curiosity, why did you elect to sell as opposed to pulling out a good chunk of your equity tax free through a perm refi?", "replies": [{"id": "gmnh6o1", "text": "We had an interested buyer and it was covid. We also don't seem to be able to get all of our funds out in a perm refi (if we have booked shareholder loans, those get repaid just fine to us but I don't see lenders generally allowing us to pullout funds though a perm refi.   Might have to revisit this though!  Thanks!", "replies": [], "depth": 2}], "depth": 1}, {"id": "glbr1b8", "text": "Did you lease out the units to tenants as the buildings were completed and if so, did you get the last bldg leased out before you sold?", "replies": [{"id": "gmngwm7", "text": "No, last building was not being leased out just yet when we were closing.  But we got CofO on it and it is now!", "replies": [], "depth": 2}], "depth": 1}, {"id": "glbtr97", "text": "How did you find your partners?", "replies": [{"id": "gmngswf", "text": "Broker introduced them to us.  They had money they wanted to place and our broker liked us.  This is why you should always take care of your broker (Thank you John McNellis! - he talks about this in his book.)  He's absolutely correct.  Always take care of your brokers and do right by them.", "replies": [], "depth": 2}], "depth": 1}, {"id": "glcf35h", "text": "Right now I\u2019m on break working a job that Im thankful to have. I\u2019m studying for my license and aiming to tap into CRE. Thank  you so much for this burst of motivation and congratulations!", "replies": [{"id": "gmngkeq", "text": "Good luck!!  Happy to share it!", "replies": [], "depth": 2}], "depth": 1}, {"id": "gldfgrl", "text": "Nice job!\n\nI'm 23 and want to get into CRE investing. I currently own a duplex and live in one side, rent out the other side, and rent by the room on my side. I'm trying to figure out the best track to get into CRE. I'm thinking I would need a lot more money than I have right now &amp; work up a track record of successful smaller CRE ventures. I could save up, BRRRR, and then sell all of the houses to move into CRE, or I could just save up for a while and then get into CRE but I don't like the idea of just having a large amount that I'm saving &amp; not investing for a long time.\n\nI'm currently a software developer, but I would like to also get more experience in CRE before investing.\n\nI appreciate any suggestions you might have!", "replies": [{"id": "gmngilv", "text": "So in some ways, it's nice to have one CRE rather than a bunch of SFR, right?  You have one tenant in a CRE (or a few) and to compare that with like 9-20 single family residences that you would need to bring in the same income.  And the maintenance with a single CRE building is going to be much less than trying to juggle all the single family residences.  But on the other hand, you're now just exposed to one building with the CRE.  If you have many properties, your income is less consolidated and the risk is moved around (IMHO).  I still would prefer a corporate guaranteed 20 year lease from a A+ credit tenant...\n\nPM me with any question and let me know if you I can help with anything!", "replies": [], "depth": 2}], "depth": 1}, {"id": "gldhlsy", "text": "Excellent post yet again! I am really enjoying these and congrats on all of it!\n\nI\u2019d love to become a developer some day as well. I currently work as a Project Manager with a General Contractor and would like to make the switch soon. Any general advice you have? I\u2019ve been trying to educate myself (books, podcasts, videos, etc.) and network with anyone in the industry as much as possible, but that can be difficult with Covid.", "replies": [{"id": "gmng49o", "text": "Thanks!!  If you're working as a PM for a GC, then you're well on your way.  PM me.  I'll send you material to read that's split up into development, construction, and design for CRE related material.  Try to learn as much as you can on someone else's dollar before you make your switch!   You will also have made more connections in the industry and grown your network.  When the time comes, you'll be very prepared.  Good Luck!", "replies": [{"id": "gnnbx11", "text": "Can you post some of the book suggestions? Would love to read up on this too!", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gldodba", "text": "Thanks for sharing this and congrats! Two questions:\n\n1. What\u2019s next for you? It sounds like you could probably scale this fairly easily, but maybe this project was more stressful than im giving it credit for. \n\n2. What element was most challenging for you?", "replies": [{"id": "gmnfnx5", "text": "Sorry for the delayed reply.  I have other projects that are still in the pipeline.  I'm about to close a construction loan for a 141 unit apartment project and I have 6 other projects under construction...so I'm keeping very busy! \n\nI think the lease-up during this Covid environment had to be the most challenging part..and working with a buyer that constantly let the PSA expire and came back and tried to do their best to put a deal together.  We had like 5 extensions to the PSA.", "replies": [{"id": "gmnv3m2", "text": "Very much appreciate the answer. Not a developer but active in the real estate field professionally in major HCOL metro and I\u2019ve seen similar difficulties with leasing for new construction condos although it is picking up now.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gldoe0k", "text": "As an aspiring developer(I\u2019ve done repositioning of existing assets), would you recommend going for larger projects, or starting small? It seems like you have a high level of experience, what were some of your past projects? \n\nCongrats!", "replies": [{"id": "gmne54n", "text": "This was only 1 of 6 other construction projects with 5 others that are in pre-construction development.  I would recommend getting some CRE experience in some capacity, working for a developer as a PM, securing equity/financing, or securing the construction debt.  Doing so will get you experience in the industry.  I began with a private equity firm where I was buying CRE (like Best Buys) for foreign investors.  Then I had the opportunity to raise the equity for two hotel deals, which I put a package together and got funded. This is how I got my start.  When you are ready to start developing, I would consider starting mid size projects.  Small projects can take the same amount of effort as a mid or large project but yield smaller returns.", "replies": [], "depth": 2}], "depth": 1}, {"id": "glhupai", "text": "Congratulations on a job well done.  I run a development business too.  Curious what kind of buyer you found and what was their motivation to invest at a 5 cap.  I can't understand that side of the market these days and what gain they see coming from that investment.", "replies": [{"id": "gm5k4m1", "text": "It was a fund that purchases CRE.  PM me.", "replies": [], "depth": 2}], "depth": 1}, {"id": "glozp7x", "text": "Very happy to hear a success story on this sub. I think it\u2019s important we post recent transactions and closings on this sub, it lights a fire for everyone! Your project seems like a slam dunk and a great learning experience. I hope to get one like this under my belt soon!", "replies": [{"id": "gmndcah", "text": "Thank you!  It was quite an adventure!", "replies": [], "depth": 2}], "depth": 1}, {"id": "gm2u64m", "text": "Development has always attracted me because of the equity upside but I\u2019ve never been able to quite stomach the risk and gap in cash flow. Very cool case study.", "replies": [{"id": "gmndakj", "text": "Thanks!  There is def a lot of risk but I would say development is perfect if you've already got a passive income producing asset and you can take  that additional risk, consider it!", "replies": [], "depth": 2}], "depth": 1}, {"id": "gmznm7m", "text": "Wow. Just wow. This is amazing and very inspiring.\n\nDo you think working in PE helped you begin? What did your first deal look like?\n\nI\u2019m currently working for a REIT in the UK at a low level and this is exactly what I\u2019m hoping to do one day. I don\u2019t have any exposure to money markets so have thought about a career change to PE or real estate debt. Do you think this is worth it? Or maybe stick with what I\u2019m doing until I get more experience as I\u2019m getting exposure to development and project management, and then try to raise cash on my own? \n\nThanks for any advice!", "replies": [{"id": "goeejh4", "text": "Working in PE was instrumental for me.  I got a solid education in learning how to evaluate Commerical real estate, and then after a few failed attempts to do a development deal, the PE firm put me on a hotel deal.  The material I put together for the offering sealed the deal to the first investors we showed it to.  Then, there was a near identical deal the developer had and I used almost the same material to secure the second equity raise for him on that hotel.  So I would say yes, PE was amazing. REIT will be fine too.  More than anything, you should read CRE books like Peter Linneman's as it will allow you to even understand your own REIT better.  If you can move to a developer, that would be the progression I would consider.  You come from a good background and as long as you understand real estate, you'll be valuable.  You may have to learn a bit about development but that can be done with books.  PM me and I'll send you everything you need. \n\nAfter working at a developer for a bit, then I think you can start raising and doing your own developments (or partnering with a developer if you want to skip to the head of the line a bit sooner).  But you need to show a solid understanding and be able to demonstrate a value add.  What is your value you're bringing to the company, partnership, or to your investors?  Do you have the skillset and aptitude, the experience, and the right ambition/cultural fit?  That's how I judge who I Want to work with.  I need all three.  IF someone doesn't have one of those three, that's ok and I'll keep my eye on them, but I need to see that someone has the ability to understand what needs to be done, has a proven track record, and ultimately is going to play ball in the team environment.", "replies": [], "depth": 2}], "depth": 1}, {"id": "go08yyb", "text": "With your gain are you reqiured to reinvest to avoid hefty taxes?", "replies": [{"id": "goedh6b", "text": "We paid the taxes on it.  We didn't 1031 or anything like that.", "replies": [], "depth": 2}], "depth": 1}, {"id": "goog3fj", "text": "Hello. First and foremost, I would like to congratulate you on your deal. I can only imagine the blood sweat and tears out into a wonderful deal like that. The reason I am contacting you today is because I had a few questions. I would like to know what was required of you to get approved for lending. I am currently a college student with very little income. I am interested in become an investor/developer and would like to know if it\u2019s possible to receive lending m. If so, how? Thank you for your response in advance.", "replies": [{"id": "goqqyyb", "text": "PM me and I will share even more with you, if you like.  But keep in mind, I represent a family office that has millions.  The construction loan was PG'd by us and on top of that, we had raised the necessary equity and put in our own funds as well (demonstrated proof to the lender) which allowed us to get the loan.  The perm then was done based on the property itself, they are an asset based perm lender.  Hope that helps!", "replies": [], "depth": 2}], "depth": 1}, {"id": "gtfodtl", "text": "What city was this located in?", "replies": [], "depth": 1}, {"id": "gy1oe8i", "text": "Can you get me a job in CRE?", "replies": [{"id": "gyhz0ez", "text": "Sending you a PM shortly.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i7ydg3d", "text": "This is badass. I noticed you have a list of books you\u2019ve sent people in the comments, any chance I can get that list? I love reading about real estate and anything that can prepare me for the future. Just started a career in CRE and plan on transitioning to development by the end of it.", "replies": [{"id": "i828qtk", "text": "DM me.  I\u2019ll send it to you!", "replies": [], "depth": 2}], "depth": 1}, {"id": "j25igjk", "text": "I am super late to this thread but loved to read on this story - sounds like by now, you should have finished all 6 of your projects and should be a professional by now! Congrats!! \n\n&amp;#x200B;\n\nI was a GC for the last 4 years and have just recently swapped over to the Owner's rep side of the business, looking to end up on the developer side one day. I read through the comments and learned your roadmap but would love to get some of your book recommendations and your top skills you think is critical for the role. Thank you in advance!", "replies": [], "depth": 1}]