Built a 56 Unit Passive House Apartment Complex in Georgia. AMA!

[George Yu]

Hey guys my name is George and about a year ago I posted on BP in regards to a 36 unit development that we finished in Moultrie GA. We built it for around 1.5 million, post construction Refi appraisal came out to 2 million(~500k net) and today it has sold for 2.7 million(another ~700k net). Since the post over a year ago there's lots that I have learned. In the last couple years we've only done one complex per year. Typically around the 36 to 48 unit size. But this year we are 90% completed on a largest to date: 56 unit development in Bainbridge Georgia. It's been a really busy year and I haven't really had time to post any thing else on BP because as soon as we finished site work on our 56 units.. we purchased 4 other lots to build on in Dublin(80 units), Americus(80units) and Cairo Georgia(48units). We spent the last year applying for rezoning, variances, city/community meetings, back and forth with engineering etc and finally today everything is ready to build. 

The 56 unit apartment complex that we built this year we used passive House design where we used to buy six on the exterior walls with 6 inches of open cell spray foam insulation. As well as 14 inches in the roof to create an airtight thermal envelope. This theoretically this will help us reduce our HVAC needs by up to 70%. This is important because we include all utilities in our base rents. All electricity, water, gas, trash/sewer and high speed internet is included. The more we save the more we earn. We want to take the responsibility out of the residents hands to get all of this done since we think economies of scale wise it should be a top down effort. At the end of the day hopefully to put some more time and $$ back into the hands of our residents so they can spend it on their families, careers and giving back to the communities around them. 

There is so much I learned about developing. I mean the actual building part is what most think about but thats just one task in a sea of tasks and probably the most straight forward.. Other things from how to have banking relationships, what they ask and look for, what kind of draw headache do they have. How to properly present to a city/community meeting. What areas to purchase in and others to avoid. How much can we afford to pay for the land? Wow all four lots we bought are in federal opportunity zones.. What are those and how to take max advantage of that? 18 or 24 months construction loan? As projects get larger we need more cash. Mezzanine debt model or equity model? What rates to borrow the money at? We want to keep these for cashflow but damn we can sell at such a profit! What do we do now? We want 10,000 units but how can we get there if we have to keep selling existing to build more? Its just a hamster wheel... Prices of lumber are skyrocketing should be buy now and tie up cash for our upcoming devs, ocean freight pricing tripled should we continue ordering from overseas vendors? Our GC is stretched too thin and cant do all of our projects we have to find another shop but everyones so busy! List goes on....

For myself I am nostalgic sometimes and like to look back at photos and videos of my own journey. Sometimes I forget what things that have been done because i'm constantly looking at the future so this way I can look back and see the ideas that i had during that period of my life(right or wrong) and see how far I have come. I also have had lot of interest in the process for developments from my own circle of friends as well as people that have found us online. When I was getting started, there wasn't anyone that I could find online that could really answer my questions or had some videos about it. So i'll be documenting our journey here for anyone that comes after us there will be some bread crumbs. My first mentor said that success leaves clues if you look closely enough. Hopefully a good google or youtube search is all thats needed. Affordability is going to be a huge topic soon so the world needs a much help as it can get since Elon Musk isn't solving that one for us we have to do it ourselves... dang it!

I'll try and update more on BP blog style on the progress and answer any questions that can help anyone who's curious!

ok its 12:33am now and so time to wrap this up...

[George Yu]

Yes haha we sold those 24 units about 6 months ago and we still retain management! Great deal for us. But ya i started dwith SFR in college 2012 and amassed 7 of them by 2017 until i wanted 50 under one roof then i met some guys that were doing MF and approached them and they ended up liking me and invited me to join them on their next venture and today those two are still my partners. We have grown from 36 unit apartment in Moultrie Georgia to now five properties in five cities totaling over 250 units. Big things do have small beginnings. crazy only few years ago.

In the beginning the funds came from us. We put in $300,000 of our own equity in the first deal and finance the rest with a community bank. Then we refinanced our cash out plus a little bit more profit on top and put it into two more cities. Today since we're doing five cities at a time we had to take out outside investors through a mezzanine debt model as well as a equity model. Basically you're looking at waterfalls distributions that's a whole conversation in itself maybe google or youtube it :). But yeah in the beginning you're more than likely not going to be able to get that kind of investment you have to put your own money forward the first one is definitely the hardest after you get the product done and completed the money sort of just gravitates to you. 

The only regret I have is not doing this 10 years ago. Or maybe just coming out the womb building apartments. No the partnership is great I have really great partners and we make a really good team. A lot of going into business is doing it with people that make you better as a person and challenge you and push you. And I think that's what we did for each other. I wouldn't be here without them and they wouldn't learn any of my millennial tricks if it wasn't for me :) They are 10+ years older than me. 

well holding them current cash flow was the original goal. Until we found out how much cash it takes to hold deals. If you only want to build one then yes you don't really need more cash. But if you want to build to you need to pull your cash out the first one to do the second one. And then if you do more like four developments at the same time you need four times the initial capital. Then these projects start getting larger like 80 units each that's close to $1.6 million in capital per development. The first one remember we only put $300,000. 100 per person. There's no way the three of us can finance that all the way to the top we need some backing so we do need to sell some or find a partner investor who has the cash and that's what we did so now we are starting to keep them.