Transcription
After talking with the Real Estate Guys and being featured on their radio show a couple of times, we felt it was important to put together a short 12-minute explanation of what FIG is all about (our history and business model)—our process—and where we invest.
If you feel that investing in new construction fourplexes might be a good fit for you, feel free to browse around on our site and be sure to write down my contact info at the end of this video.
My name is Steve Olson I’m with the Fourplex Investment Group. We love working with the real estate guys, and we’ve been talking with them a lot lately about what it is we’re doing over here.
They felt like we should go a little bit deeper and give those who want the chance to look a little bit more into what it is that we’re doing. So to my knowledge figure is the only company in the country that really builds fourplexes in mass. I know that there are one or two builders in Texas that do this here and there, and I’ve heard of a few others. But no one has the footprint that FIG does.
We started this whole concept back in 2010, here in our home market of Utah, the Wasatch Front area, Salt Lake City, Provo, or Ogden, but at the time, you could get land for almost nothing and there’s a lot of cash on the sidelines. And so we figured, hey, we got to, we got to try to build or create a product that investors want that can be recession-resistant because that’s what was on everybody’s minds them. And I think actually, that’s what’s on a lot of people’s minds now. But we’re talking about recession-resistant, something that can allow you to weather the storm.
Until we come out on the other side, we think fourplexes do that really well, for two reasons principally number one, when you invest in commercial real estate, nothing wrong with it, right. But you typically have a commercial loan that’s gonna have a balloon payment in seven or 10 years, sometimes it’s a little more flexible than that. But when you have a balloon payment in seven or 10 years, you’ve got to pay off you got to refinance. So you got to sell that asset that’s attached to the commercial financing. If there’s a recession going on when you’re supposed to pay off that mortgage, that can be a problem. We don’t know what the market looks like. We don’t know what the financing terms are, that are available. So 4plex is great because you can take advantage of that conventional, true 30-year fixed-rate financing, where you don’t have alone, make your payment every month for 30 years. No one’s coming and telling you you gotta pay this thing off. It’s truly recession resistant because of that you can weather that storm. Another reason is, you’ve got four tenants and only one mortgage. Not much
Course not just talking about fig properties here, this would apply to any fourplex triplex something like that. But when we have four tenants that are helping us service our debt, we’re spread out, we’re a little bit more diversified, we get some of those positive effects that come from owning an apartment building where lots of people are paying us, not just one, having our faith depends on whether that one is paying us or not. So fig itself actually is not a company. It’s a marketing brand. But underneath that umbrella are the four fig companies, they all have common ownership. And they all have a specific role in this process that gets you what you came looking for, which is a new construction four Plex. So we’ve got the developer, they’re the ones that go find the land, negotiate with the farmers, fight with the City Council, get the projects approved, go through entitlement, right, that whole development side of things. We’ve got the builder, right, the builder’s name is Vollkommen construction
They build in all the states that we operate in. They’re the ones that had this idea of, hey, let’s, let’s do four townhomes in a row. Each fourplex having their own tax ID, that’s going to be, that’s probably going to be better than a normal fourplex, which is kind of that boxy, two up two down, non-managed community type investment. You’ve also got the brokerage, right, that’s me. We’re the ones that work with you, the investors take you all the way through the process. And you’ve also got the property manager. They’re the ones that do all the lease-up rent collections, tenant qualification, all those kinds of things. It’s designed to be a relatively passive asset. Let’s talk about how purchasing a big deal is different. And once again, I want to stress the fact that the previous model, right a traditional purchase. That’s great, right, that might be exactly what you need, and we can assist in something like that. But if you’re thinking, hey, I need to take a little bit of time, right? I’m willing to put in some time or some risk or some funds
In order to get a little bit above average return, let’s see how fig could assist in something like that. So in a big purchase, and I’ll really dial this in for you in just a minute as to how it works, you’re going to select a lot, you’re going to put down a deposit or an earnest money deposit like you would in a normal transaction, then you’re going to close on it, but now you go through construction and that could take 10 to 12 months, then you got to go through lease-up. you’re targeting some forced appreciation there, right? Anytime that we take that raw chunk of dirt, and we turn it into an income-producing asset, we’re getting some forced appreciation because we gave him the market something that he likes. This comes with some cons though. Number one is, unless you have all cash, you’re going to need to get construction financing and it’s not free, you’re gonna end up borrowing somewhere a little bit north of half a million dollars. You’re gonna pay the points on originating that loan and you’ve got construction interest that accrues during that construction process right.
Another question is you’ve kind of got this window of exposure between when you close on your construction loan. And when it’s done and you go through the lease-up, in theory, things can change. Could rents change or interest rates or, or overall market conditions? You bet they could. So you have to get really comfortable with the submarket overall economy to go, okay. If I’m playing between these two sidelines here, if I’m kind of I’m good here. But if to you if your risk tolerance is that this could go outside of it, you know, my, my, my stress tests, if you will, and we can help you do that, then maybe this isn’t for you. And then another con is your money is technically on the sidelines. It’s not sitting in an account earning interest for you somewhere else. Although, one could argue that that forced appreciation that you get, means your money technically isn’t sidelined. I’ve heard all kinds of opinions on that matter. Okay. So there are some pros to this. Like I said, if that forced appreciation if market appreciation is happening in the meantime, that thing
might be worth more just because of what the markets doing. I was talking to a builder the other day we talked about when the market crashed, you know, eight. So many homes such an excess supply of homes in some of these markets were there that you could literally buy them for much cheaper than it would have cost you to go buy the materials to build them, right. But the cost of those materials actually didn’t really even go down. It’s only gone up since them, right. So we do have that going for us and the fact that sticks and bricks and lumber and concrete and all those things. They just cost more over time they tend to inflate being the hard asset that they are.
Another pro is you are going to get a brand new fourplex that’s under builder warranty. So even though it’s new, you can imagine you move some tenants in there, you really don’t know what you have until you’ve been flushing the toilet for a couple of months and really kind of using and living in that four Plex. So there will inevitably be some repairs and the great thing is most of the time unless their attendance
negligence or just do the damage. Those fall under the builder warranty, you shouldn’t have a clogged faucet or, you know, dripping bathtub, you know, maybe the vinyl wasn’t installed correctly, I don’t know. But those are builder warranty items. And through the integrated property management that we have, you just see that on your statement is maybe a charge for 150 bucks, but then it’s zeroed out because of a builder warranty items. So you’ve got that first year to work the bugs out of the fourplex due to that. You’re going to get a clean slate on your lease-up. Right, you know what the tenant standards are, you know what those people have are going to have to adhere to from the very beginning. I’ll talk about this later, but you get year one bonus depreciation. That one is awesome. It’s going to save me a lot of money this year. And the bottom line is you get a better cap rate, which equals better cash flow. Okay, so this is really how an armchair investor can use new construction to beat the market a little bit
You can go to the other approach, you can pay the market price. Consequently, you can eliminate some of the risks that come with new construction. But you’re saying I’m willing to push a little bit here, I need a little bit better deal in these markets. You could go new, you can do that with us. You could do it on your own. It’s not as easy as you think. But you could do that it’s not, it’s not as difficult as you think. So you’re probably going to get something like this, right, a brand new fourplex or the exterior is all maintained where the lawns and flower beds are taken care of the sidewalks are shoveled, the roofs are maintained. Right, you know that in 2030 years, that this community holds its value really well because somebody is minding the store. That’s what we’re after here. Let’s talk about where we do this. They say the Houston Metro is grown substantially over the past cycle adding new households at nearly tripled the national pace since 2010. We like that we like population growth. Is the market expanded demand increase for healthcare education?
Professional Services adding even more job creation. Okay, so we got people and those people have money even better, okay, fewer units, meaning fewer coming online or supporting triple-digit vacancy declines across multiple submarkets, such as in Baytown and Cyprus. Right. So we really love this be continued fast population growth. Harris County is consistently in the top 10, if not in the top five fastest counties in the country. So that’s one of the projects coming up. We have another one in Boise, Idaho Metro, specifically Nampa There are three main cities to the Boise Metro but Nampa we’ve got 300 doors total, or a little out there on construction. It won’t start until this spring and summer in Nampa or going through all the horizontal work right now. Getting the roads and underground in place. We’ll see when that construction starts there in May. And we have a similar amenities package there with pool clubhouse playgrounds, dog parks, these kinds of things that the tenants like.
So those are two that I wanted to dig into with some specifics. But there’s some other stuff out there. For example, we actually had a fourplex fall out of contract and Magna Utah that can start construction within the next 30 to 45 days. So if you really want to get into something in Utah, that’s going to give it up really quick. definitely reach out to me because that could be a good fit for you. We just announced a new project in place in Utah, just go to fig.us and click on the now selling button. That’s kind of a stack flat apartment-style four Plex community right there on the south side of Utah County, which is one of only two directions that the growth can go right now. We’re going to be announcing very, very soon a project in Provo, Utah. Also, we’re making our initial foray into the Phoenix metro. We’ve had land under contract there for a while. Going through all the initial due diligence, getting everything set up getting our people on the ground. Look for us to announce the first one of those in the next 30 days. We
Got more second phases coming up in projects in Meridian, Idaho, and Nampa, Idaho. And if you are somebody that needs existing inventory, then contact us because a lot of times we have clients who may be willing to sell a fourplex they’re going to exchange into more. Or maybe you need something that just now for whatever reason, we can typically drum up existing inventory if you’d like to talk to us about this if you’re saying okay, I think that sounds pretty good. You know, you’ve shown me how this works for a new construction value as these markets. I want to learn more about it, shoot me a message at solson@fig.us. Or you can give me a call that’s actually my cell phone. So you can call me there and we can set up a time to chat or, or at least visit for a few minutes.
Learn more about us at www.fig.us and I hope to be able to chat with you soon if you feel like a visit with us is going to be beneficial for you and your investing goals.