Multifamily properties can seem daunting to invest in. Don’t be afraid to invest, as these properties offer a multitude of benefits that don’t present themselves in single-family properties. In this episode, Sam Wilson talks to sales professional and real estate investor Lauryn Meadows about multifamily, flipping houses, and rehabbing homes. Lauryn talks about getting into the real estate space, her first multifamily investment, and what she learned from her time as an investor. Tune in to learn more about multifamily investments, only here.
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Rehabbing Multifamily Homes: Things You Need To Know With Lauryn Meadows
Lauryn Meadows is an active real estate investor in small multifamily and single-family homes. She has scaled her portfolio to fifteen doors utilizing the BRRRR strategy. She is also a licensed realtor in the State of Ohio, and flips houses in Southern Ohio and Northeastern Kentucky. Lauryn, welcome to the show.
Thank you so much for having me.
The pleasure is mine. It’s the same questions I ask everybody who comes to the show. Where did you start? Where are you now? How did you get there?
We started with our first flip with a house we bought for $2,500 in Southern Ohio. You can’t do that anymore. Now, we have fifteen rental properties and we’ve done some flips out through the past several years. We’ve all utilized that through the BRRRR strategy. Personally, I’m like most other people. I went to school, graduated with a Bachelor’s Degree from Marshall University, and quickly wound up in Corporate America.
What was the transition from Corporate America to full-time real estate?
I am still in Corporate America but my husband got to transition out of his W-2 job in 2018.
Going in and doing all of the work upfront will give a good turnkey product, be good for your tenants, and make the community look better.
Your bio here says you have some small multifamily as well as single-family homes. Have you built this incrementally one project at a time? Was there ever a point where all of a sudden, you’re like, “We’re taking out a bunch of these at once?”
The first rental property we purchased was a mixed portfolio of eight different units. We dove in there with that one.
Talk to us about that experience or that process. What were some of the things that you learned that maybe you did right and maybe that you would want to do a little bit differently?
With that particular deal, we were completely new to the rental but we knew we wanted to get into that and do the buy-and-hold. We had a family friend that owned these eight doors. It was some duplexes, single-families and that type of thing. We said, “We wanted $250,000 for these eight doors. We don’t have $50,000 to put down. Would you owner-finance it,” and he did. That was our first go at creative financing. We knew that they all needed substantial work done to them.
We had $80,000 of cash in reserves and we were like, “We got to make $80,000 work to spread across all of these properties.” What we found and what our strategy and part of our philosophy are going in and do all of the work upfront. That way, you had a good turnkey product that’s good for your tenants and it makes the community look better too. That $80,000 did not extrapolate through all of those rehabs. That was what we quickly found out.
Especially if these are single-family homes and/or small multis, that’s $10,000 a unit. That’s not going very far.
It did not go far at all. We found ourselves where we needed to raise another $50,000. We have a small circle here. We hadn’t branched out into the private money or anything like that. We used a mix of credit cards. We finally did find a private investor that would come on and give us an unsecured loan. It was a family and friends, so somebody that trusted us. We were able to do that and we refinanced it after thirteen months. We finished all those rehabs and repositioned them. In that process, we inherited tenants that either weren’t paying or whatever the case may be because there were some bad properties. We repositioned that and refinanced it. We paid off all of the debt, the private money and owner finance. We hold that now.
You said your husband was able to step out in 2018. Is that right?
Yes. He was in the Ironworkers. He did that for twelve years before that. He got to step out in 2018. Now, he focuses mostly on the renovation side and manages crews.
What was the freedom number? Maybe not necessarily the actual number, but what was the number of units at which point you said, “This is enough for us to where you don’t have to go back to that W-2 job?”
We did it with the eight units plus with my W-2 income. It certainly allowed him that flexibility. What we found was between having 2-under-2, both of us working full-time, and trying to scale our rental portfolio, it was not manageable.
Talk to us about the second phase of this. You picked up eight on the front end, which finding eight properties that somebody wants to owner-finance. It sounds like you need a lot of work but still, that’s a pretty good go in the beginning. What were the next seven? Where do you want to go from here?
We did a duplex in there. That one was pretty easy. We used our own capital and BRRRR-ed it. Nobody was living in it at that time. It was a quick and easy renovation and get the tenants’ place refinanced. We did a four-unit and a single-family house. That’s the one that we repositioned in 2020. It was a little bit more creative. We knew an individual that had an insurance claim essentially, where they had a property that had BRRRR-ed down. They needed to purchase a property in order to get those funds from the claim.
It’s safer to utilize private money or go in with partnerships because you’re not going to be strapped for cash.
It’s a whole thing. I’m sure that there were other ways to go about it, but this is what their policy and the insurance agent were telling them. They partnered with us on purchasing these. It was a construction type of loan for them or a phase-out in order to get those funds. We utilized that and then we gave them a return on that investment, as well as some of our personal capital lease for that.
When I say the word tenant, what comes to mind and what lessons have you learned?
It all comes down to screening. I’ve not had to evict any of my tenants back. I personally had a place. If you get inherited tenants, you didn’t get to screen those tenants. A lot of times, if you’re purchasing the ones that are value-add, sometimes you will get those inherited tenants. It might be a little bit more difficult to deal with or they might have an economic vacancy in those units where they’re not paying. It’s important to figure out where that tenant is in their place. We’ve utilized Cash for Keys a lot whenever it’s not working out for either side and that has been very effective.
How active are you on the side of being a licensed realtor?
What I use my license for is I’ll list our flips. If we get an off-market deal that comes in and it’s not something that we can tackle or it doesn’t align with the seller’s interests as maybe they need more than what we’re able to give, at that point, I’ll list it on the MLS for them.
What’s that conversation like as a realtor when you go to make an offer on a property and say, “I can’t buy it.” A lot of times, people want out pretty quickly/ I would imagine that situation. How does that conversation transition from, “I can’t buy it, but I can list it for you?”
I’m just honest. If you come from the point of authenticity to people, everybody will understand you. I’ll say, “I have a lot more expenses with this. The renovation and holding costs are going to add up. I’m not going to be able to purchase it for what you’re needing out of it. I would have to be more like this number.” If the numbers are too far, there’s no way.
I’ll be honest, and I’ve said this on more than one deal, “You can probably get more out of it if you sell it to somebody else than me because I’m going to go in and do everything with this property. I’m going to make sure that if I go to resell it, it’s going to pass all of the inspections. It’s going to be ready for FHA or VA type of loan because that’s what we see a lot in our market.” I’m very upfront with them.
The duplex that I talked about earlier that we purchased was another conversation where I said, “You can probably get more out of this from somebody else.” They were like, “No, we love what you do. We know that you do great work. You bring the community back when you do this. We want you all to buy it.” It’s being honest with them. I’ll say, “I can’t buy it for this but certainly, I’ll list it for you on the MLS. I’m a licensed agent,” which I’m required to disclose to them anytime that I’m talking to a potential seller so they know that I’m a realtor already.
The next question I would have for the properties that you do acquire is, why do you flip versus turn everything into long-term holds?
We use a lot of that capital to reinvest it. We want to build up our capital reserves essentially. You can do that with flips but most of them, I wish I would have kept.
Why do you say that?
The first flip that we did in 2017, we purchased that for $2,500. We had $45,000 in it as a done deal. That would have been a perfect BRRRR deal if I would have known what I knew now, if I would have done that then. We flipped it and sold it for $20,000 on profit.
What’s that property worth now?
It would go for $90,000 to $100,000. We live in a great cashflow property. Honestly, we could have done a cash-out refi on that because the appraisals were even a little bit higher than what we sold for because the market wasn’t as hot in 2017. We could have done a cash-out refi, got the same amount of cash, and then had rental income and all the other benefits.
It’s funny how that works out, especially in the single-family side of things. If there are ways when you learn more about what your business is and what it is that you could have done with it, it’s always like, “If I had thought through that a little bit better.” That’s just a part of it. Talk to us about that. What are some mistakes that you have made in this journey? What did you do to overcome those?
There are two mistakes that I like to tell everybody about. One is that eight-unit that we bought where we were looking for capital, we were strapped for cash. Something that people don’t talk about very often is that you can go cash broke pretty quickly whenever you’re buying real estate. It was funny. I was playing the CASHFLOW Game, the Robert Kiyosaki game, with my son. We were buying the assets and I was like, “This is why you see mommy and daddy are always buying the assets.”
In that situation, we used a lot of our own capital and it got a little tight there at the end. That was something I told everybody. It’s safer if you utilize private money or go in with partnerships because you’re not going to be strapped for cash. One bad thing could have gone wrong and could have put us in a pickle. Lots of reserves and plan for extra on your rehab.
That’s true in any real estate. That’s true whether or not you’re doing a $200,000 flip or $100 million apartment complex. It’s amazing. You would think that the bigger the outfits and the more minds there are inside of those outfits, people would have said, “We’re going to need CapEx reserves of X plus 20%.” That lesson has bitten more people, even on the large commercial side of things.
It’s easy to say just to try to get the number’s door for you, you want to tackle the deal and do that. The eight-plex, I could have done it differently because the purchase price was good. I probably could have got that down much more. I could have planned it more for the rehab and had a better plan in place for the money part of it.
In the end, you were able to get private money on it. You learned the lesson but it didn’t bite you entirely.
No, it didn’t but it was uncomfortable enough to be like, “I don’t want to use my own money anymore. I want to use private money.”
That’s tough, especially if you have capital sitting in a bank account doing nothing. It’s tough not to dig in there and use all that. You never know when that dry powder will be exactly what you need to weather the storm, whatever that storm is.
You might need that liquidity for another deal to bridge you until you’re able to get financing on another deal. It’s good to stay liquid as much as you can, in my opinion.
Talk to me about the future. What do you want to build your company into and why?
We want to scale into larger assets with the five units that I talked to you about. What happened with that one, it was a BRRRR property and the ARV came in under what we had expected. We went over what we had anticipated on the rehab yet again. We were in a new municipality. We didn’t know about all the zoning and different code enforcement. We didn’t do our due diligence there. We went a little over on our renovation. Plus, the ARV didn’t come out quite as we had hoped for.
One thing in our market specifically is that the dollar per square foot is much less on small multifamily than what it is for a single-family house. It’s very difficult to rehab this because we know that the cost per square foot to rehab is similar to a single-family house, if not potentially more if you’re having to go through commercial zoning and those types of things.
What we found was that those small multifamilies would then be difficult to continue to BRRRR and then do our renovations, which is nothing spectacular compared to other markets but we’re bringing a good product to people in our area. Now, we’re looking at more of those commercial assets, those five-plus units that the value is going to be looked at more for the net operating income rather than just comps.
Plan for reserves. Plan for that extra on your renovation because they always go over.
That’s a challenge that many people have run into singles to quadplexes. They are valued on comps, not on NOI.
You lose control.
That’s a great way to put it. Moving forward, you are going five-plus?
Ideally, we would like to be even more than that like a ten-plus. We’re looking in that 15, 20 or 30-unit range in our market and we’re starting to explore some other markets. We’ll see where that takes us.
The nice thing about scaling in with those smaller-unit sizes, the 10, 20 or 30-unit sizes, you’re not facing a lot of the competition from institutional players. You’re not buying a 300-unit. It’s 30 and that’s a great way, especially if you can self-manage and you already have the systems and processes in place. That’s a great one.
It will be a sweet spot for the next phase, and then who knows what comes from there?
I love the vision and foresight on where you want to take it. I also love the measured approach to it. It’s not, “We’re going out for 100,000 units in the next ten years,” or whatever some absurd number is. It’s like, “This is it. We can accomplish this.” This is how you move the ball down the field. Before we jump here into the final questions, is there anything else that you would love to share with our readers that you felt has been relevant or important to you in your real estate journey?
You have to not be afraid to fail. Have the measurements in place but get out of your comfort zone. I was having this conversation with my son again. He was super competitive almost to probably an unhealthy level. I was like, “Knox, you have to be okay with failing. Mommy has failed so many things in my career, athletics and school. It’s okay to fail.” I have to remind myself of that too. I don’t want to go into bankruptcy but I have to remind myself, “It’s okay to get out of your comfort zone and stumble as long as you’re moving forward.”
The final questions for you are these. If you could help our readers avoid one mistake in real estate, what would it be and how would you avoid it?
It goes back to what we were talking about. As far as your cash reserves, make sure you plan for that because of bankruptcy. You don’t want to have to get into that spot. Plan for reserves and that extra on your renovation. I have only done one project where it has come in at the budget. They always go over somehow in some way. Always allot for that in your numbers.
Have you ever done a study and figured out the average percentage of overages for all of your projects?
Yes. Ours is about 10%. I try to underwrite for that. It’s not terrible. For my market, I feel like I’ve got the renovation costs down a little bit. At this point, we’ve done several renovations. I feel like I have it down. It’s not like the HGTV, “We know we go with this paint color, cabinet, and countertop every single time.” It becomes more predictable, which then you get into a safer investment.
Budget plus 10% sounds like a very reasonable thing to build into your proformas. The next question for you is this. When it comes to investing in the world, what’s one thing you’re doing now to make the world a better place?
Now, I’m focusing on my two little ones, Knox and Skylar. I’m trying to raise two good humans so they can go off and do better things in the world. Another thing that I’ve had on my heart for a long time and I’ve reached out to a few different group homes and places like that, is I want to start some type of philanthropy. I haven’t put my legs on it yet. I would like to start something that teaches financial literacy to kids in my community that are either underprivileged or maybe middle-class people that need financial literacy.
Financial literacy as you’re well-aware of playing the Robert Kiyosaki game. You can graduate high school and be able to do Calculus but I guarantee you that 99% of those kids graduating high school have no idea what a HELOC is or even the basic terms of a mortgage.
That’s on my heart. I want to be able to do that. You can transform lives with financial literacy. I’ve reached out to some people and I haven’t got a lot of feedback. I don’t know if it’s that big of a problem in our area or maybe all around the world but it’s needed.
Best of luck to you as you undertake that. Lauryn, if our readers want to get in touch with you, what is the best way to do that?
You can go to my Instagram, @Lauryn.Buy.Sell.Invest.
Lauryn, thank you so much for your time. I do appreciate it.
Thank you so much. I’ve enjoyed it.
Important Links:
- Lauryn Meadows – LinkedIn
- @Lauryn.Buy.Sell.Invest – Instagram
- CASHFLOW Game
About Lauryn Meadows
Lauryn Meadows is an active real estate investor in small multi family, and single family homes. She has scaled her portfolio to 15 doors utilizing the BRRRR strategy. Lauryn is also a licensed Realtor in the state of OH, and flips houses in Southern, OH and Northeastern, KY.
