In installment No. 3 of our series on how real estate investors got their first deals, we hear from Alex Franks, a full-time real estate investor who went from personal trainer to single-family home wholesaler to buyer of 100+ unit multifamily deals backed by foreign investors who teaches real estate investment to others. An inspiring story!
An Incredible Story
My story has taken me on a incredible journey in the last 16 years. I never thought I would be in multiple states and countries teaching real estate education. I was involved in single family investing, building credit, fixing individual’s financial picture, and building real estate portfolios one house at time.
So here we go. Back in 2000, I was going to be a wholesaler learning the ropes, including the ins and outs of real estate. A friend I met at the gym (I was personal trainer at the time) got me interested in real estate. The first six (6) years was nothing but wholesaling properties. It really was the easiest money to make back then. My wholesaling career took off. I wanted to be the best and that what I set out to do. Finding the deals and learning to farm areas. Making sure any deal that was out or coming out- I wanted to be the first one to know.
This was going great until I got the bug to start rehabbing homes myself. My goal was to buy 4 at time, flip 3 of the homes and keep one free and clear as a rental. Man, I was heading to the big time now or so I thought.
I then made the leap to the million dollar homes. Now I had made it! I got my self into the right group and this was it. I was making 1% of the deal up front and 20% on the backend. I was set and after 2 years of this I should be good to go. Then, in 2007 and 2008 things started to crash and burn along with my business. I was stuck in loans and could not get out. I owed on mortgages because we refinanced everything at 90%. At the time the banks had told me it was okay to do this.
In 2009 I took a job for a very short term. I sat in a chair working for a debt collection agency, trying to shake down college kids for money they owed. I had to be in my seat at 8 am and ready to work. That lasted all but 2 days before I came home and told my wife, “I can go and make real estate work again. I know I can.”
Now we had lost every rental we owned from 2008 -2009 . No one was paying and I could not make the payments. There was something that told me never again. But I guess something in you tells you that you either believe in yourself or you don’t. And I was not going to accept the 8 to 5 gig. It was just not in my blood, or chemical make up. I wanted more and more for my wife and family.
Still in 2009 we were rebuilding. I took on a partner who was my main competitor in town. We slowly climbed back and starting buying cash flow rentals again. I have always been good at speaking just did not know that the seminars would be some thing I would be doing. Totally by accident how that came about.
In 2009, we finally got back to flipping 3 to 4 houses month. A radio show in LA contacted us back and asked if we could provide turn key properties to their investors. So we started with one seminar in the Anaheim stadium press area. After that the wheels were greased and things started moving again. We are buying up to 20 houses a month in Atlanta, Ga.; Sarasota, Florida; and Charlotte, NC.
Between 2010 and 2013 we were one of the largest turnkey groups in Charlotte. We were doing seminar in LA, San Francisco, Singapore, and Malaysia. We were raising money from international hedge funds. Our office had 21 people working for us. Our construction company had over 20 people at the time.
Pivoting In Response to New Competition in the Market
Then, when we could not get any bigger and things were going great, the hedge funds came to town. Overnight, the Blackstone fund Invitation Homes destroyed the single family flip market. They took over the market, purchasing over 7,000 homes in Charlotte alone. We survived on a few flips to clients, but they were few and far between. The money hose now was just a trickle, barely enough to pay the bills.
Right around that time, we found a 102-unit apartment shell in Gaffney, SC on an auction site. We decided to try and buy it. No idea why we did it, because I was totally against it. Lo and behold, one of our international investors had a friend who was looking for projects in the U.S. So he came on board. We took from December 2013 to August 2014 to complete the project. What a learning experience that was! We then leased the units to Limestone College in Gaffney.
Things started to make much more sense to me. Why flip 200 houses? Why not just buy one 200 unit apartment? We build up a good network. It was just a matter of finding the projects. We then went on to purchase a 55-unit deal in Gaffney, and we are bulldozing that to build 122 condo units. Then we picked up 136-unit property in Gastonia, NC., which was purchased for $1.2 million and flipped for $2m in 6 months. (We did gut the units and get everything ready for the new buyer, with contractors lined up and such.) So, from 2013 to 2015, that kept us busy. Our profit off the 136 unit was $400k — much better then flipping turn key for about $8k to $10k a deal!
What the Future Holds for Alex Franks
So after that, I decided my 2016 goal is to not partner on another apartment deal, but to buy my next deal for my company. So today I am working on my financial picture, getting ready to buy 100 or 200 unit in either NC and SC. If we can afford more, we will buy more. My goal is to acquire 500 units. I know some people want more, but I don’t. I want roughly $30k a month free and clear, with a few apartments that are paid off and will stay in my family for years to come. I can see the light at the end of the tunnel now, where before I was blinded by what I thought was being busy. It’s a simple concept: why buy 250 homes, and have 250 headaches, when I can buy 250 units apartment and be close to being done?
I know it won’t be that easy and will be a lot more work. There are not that many good deals out there. Just like I taught single family investors how to buy SFH, I am using that knowledge to help market and make offers on apartment buildings close to where I live.
That my story. I hope it helps people understand that apartment investing is a much better route to success than single family rentals.
If you’re interested in contacting Alex and learning more about his story, you can find him here.