The Tony Stephan Show · Episode #014
Teaching Our Clients How To Manage Their 10 Unit Small Multifamily Deal
Tony opens up an in person coaching day with Nick and Kaylnn Riley, a husband and wife from Arizona who joined the mentorship and have already closed on a 10 unit apartment. The due diligence, financing and closing are behind them. This session is about management and operations, which Tony says is where the money is made.
The Rileys explain why they chose Tony and Andrea: a more personal, one on one program with owners who share their own mistakes. Their goal is generational wealth, about 200 units, and a 10 unit for each of their kids someday.
Tony tells them to treat 10 units like 100, because the standards they set now will carry into every property. Andrea explains how she took a 56 unit to market rent in eight months with month to month leases, 30 day notices, visible improvements and honest conversations with residents. They cover leasing as sales, why delinquency and occupancy are the two numbers that matter, how changing listing photos filled a 12 unit, and how to prepare the story for a refinance planned in their business plan for 2028.
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Key takeaways
- Buying the deal is the fun part. Management and operations are where the money is made.
- Treat 10 units like 100. The standards you set now become the standards for every future manager.
- When raising rents to market, start with the residents closest to market and make visible improvements at the same time.
- Management is sales: you sell people to move in, to pay, to stay and to renew.
- Tours with no leases is a leasing problem. No tours is a marketing problem, sometimes fixed with better photos.
- Document everything for the refinance: the original rent roll and leases, and before and after photos.
Guest: Nick and Kaylnn Riley
Nick and Kaylnn Riley are a husband and wife team from Arizona in Tony and Andrea Stephan's mentorship program. They have closed on their first 10 unit apartment and are working toward about 200 units, with a goal of passing properties down to their children. Nick shares his full story in his own episode of the show.
Chapters
- 0:00 Inside a Coaching Day
- 0:58 Why the Rileys Chose Mentorship
- 2:10 Why Multifamily: Generational Wealth
- 2:45 Treat 10 Units Like 100
- 3:50 How Andrea Turned 56 Units in 8 Months
- 5:50 Leasing Is Sales
- 6:46 Delinquency and Occupancy
- 7:38 Leasing Problems vs Marketing Problems
- 9:00 The Business Plan and the Refinance
- 10:00 Telling the Story to the Lender
- 11:20 Recap
FAQ
Why did the Rileys choose Tony and Andrea's mentorship?
They wanted to learn from people who have done it and made the mistakes already. They say the program is more personal, with a smaller group and one on one attention, and that they work directly with Tony and Andrea.
How did Andrea take a 56 unit to market rent in eight months?
Everyone was on month to month leases, so she could serve 30 day notices. She started with the residents already closest to market, raised rents in batches, improved the property at the same time so residents could see it, and talked through finances with residents who were worried.
What should you do if units are not filling?
Look at the numbers. If people tour and do not lease, it is a leasing problem. If nobody tours, it is a marketing problem. Andrea filled a 12 unit that had no leases by changing only the photos on the listing, not the rent.
How do you prepare for a cash out refinance?
Start building the story now. A refinance is a new loan, and the lender will question you as if you were buying again. Keep the original rent roll and leases, document changes like bill backs and upgrades with before and after photos, and show clearly where the property was and where it is now.
Inside a Coaching Day: Managing a New 10 Unit
Pulling back the curtain
"Transparency is everything," Tony says. In this video he shows what an in person coaching day looks like. The Rileys have already bought and closed on a 10 unit apartment. Due diligence, financing and the closing table are done. Now comes the part where, Tony says, the money is made: management and operations. He wants viewers who are considering a mentor to see what it is like to work with him and Andrea.
Why the Rileys chose this program
The Rileys say they hired Tony and Andrea to use their experience, their contacts and the lessons from their past failures. They like that the program is personal, a smaller group with more one on one attention. They also share that he first went with another program against his own judgment, regretted it, and then chose Tony.
Their reason for multifamily is generational wealth. The goal is about 200 units, and one day a 10 unit for each of their kids, to own, manage and learn from. Tony loves it: it teaches entrepreneurship and financial control.
Treat 10 units like 100
Tony's main message: treat this 10 unit like 100 units. At 100 units a property can support two full time people, and the owners manage the managers. When he and Andrea bought their first 56 unit, it came with an on site manager, and it changed their lives. But the standards the Rileys set now, with their on site helper Bradley, will carry into every future property and every future hire.
56 units in eight months
Andrea explains how she took the 56 unit to market rent. Residents were paying around $600, and the owners paid water and gas. Everyone was month to month, so she could serve 30 day notices. She started with the residents closest to market and worked through the building. At the same time, they made visible improvements, starting with landscaping as spring arrived. Some residents came to the office in tears, and she talked through their finances with them. New owners' costs go up, she explains, and the rent covers the cost of the building.
Leasing is sales
"Listen, we're a sales company," Andrea used to tell her team. You sell people to move in, to pay, to stay and to renew. Tony says the two numbers he cares about are delinquency and occupancy, because that is what NOI is. Even with properties across the country, the numbers show where the problem is. If there were 15 tours and no applications, it is a leasing problem, so do sales training: have Bradley lease the unit to you over Zoom. If nobody tours, it is a marketing problem. Andrea once had a 12 unit in a great area with no leases on a listing site; they changed only the photos, and it filled that week.
With 10 units, the Rileys can be picky. It is mid February, leasing is picking up, and they should not lower their standards out of urgency. Year one is always the hardest year.
The refinance story
The business plan phases in utility bill backs and reaches full bill backs and market rent in 2027, with a refinance in 2028 at a value of about $1.77 million and 65% loan to value. They stress that a cash out refinance is a new loan, and the lender will question them like a new purchase. Start preparing the narrative now: keep the original rent roll and leases, record every change, take before and after photos, and give the mortgage broker overwhelming evidence of what they did. Refinance proceeds are debt, so Tony says it is the one time you can take money out without it being taxed.
Tony closes by describing who this is for: families who want to invest in themselves and learn from people who already made the mistakes, directly with him and Andrea.
Transcript
0:00 Transparency is everything. What I want to show you today is behind the scenes look of an in-person coaching day with my two clients, the Rileys. I just got done with their coaching session. While we're pulling back the curtain today, I'm letting you be a fly on the wall of a coaching session where Andrea and I are coaching our clients. They've already bought a deal. They've already closed on the deal. We've already gone through the due diligence. We've already gone through the financing. We've gotten them to the closing table. But now is where the money is made. It's in the management and the operations. And I know when I'm looking to hire a mentor, I want to see, "Hey, show me what it's like if I'm going to work with you. If I'm going to shell out the big bucks to invest in this coaching program." So, that's exactly what we're doing today. So, sit back, relax. You get to be a fly on the wall. You get to see all the things we're deep diving into the management and operations. How we're going to help the Rileys turn their 10-unit apartment deal into a massive success because I believe every single family in America needs to own one small multifamily apartment and one deal will change your life.
0:58 Decided to hire Tony and Andrea to use their expertise, their experience in the field, and to be able to use their contacts, their connections, and their learning experience, and to learn from their failures in the past, and from just their experience with multifamily. They really they want you to be successful. And that is shown time and time again with how much input they give to you. Yeah. So, what So, what I like about their program is a little more personal. And so, you get, you know, more personal, more one-on-one. It's more smaller a smaller group, and I feel that you get more of the attention that you should get for your, you know, you personally or the group. Oh, it's definitely personal, for sure.
1:46 It's personal, for sure. You would I would think I've listened to his talks with other people trying to find out who he wanted to go with. And he knew he wanted to go with Tony. He listened to other people. He went with someone else against his own What would you call it? Goodwill? Judgment. Judgment. And then Kind of backfired on him. He's like, "No, I knew I shouldn't have." And he went with Tony, and it was solid. It is solid. Yeah. It's a very solid experience. What like why multifamily? Obviously, I know like why, but like Yeah, and it's you know, generational wealth is, you know, the idea and something to pass down. I would like to reach a point to where we have, you know, 200 units. I love it. Love it. And it'd be kind of awesome to have each of my kids have their own little 10-unit.
2:35 You know, just It's like their name on that unit that we're able to pass down to them. Give them a property. Yeah. You know, give them a property and be like, "Here, it's yours. You can own it, manage it, cash flow it. You can sell it." Like power and teaches them like a level of like entrepreneurship and like financial control, you know what I mean? The big thing with this 10-unit is we want to like really instill in you guys today, treat it like a 100 units. Once you get to 100 units, the game completely changes. Because you have enough for two full-time people. That's when you guys aren't dealing with anything. You're dealing with managing the managers. Like when we bought our first 56-unit and there was a manager there. His name was Darnell. You know, I was a little nervous at first cuz I'm like, "Dude, he's taking a unit. You know, it's kind of it's kind of similar to what you've got here, but he wasn't paying any rent." You know, but oh my god, our life changed.
3:27 Because this was the first time he's like, "Hey, they paid me. Hey, they're late. I'm going to go knock on their door. Hey, they're I'm like, "Oh my god." But what we learn here and what we do here at this 10-unit will set the precipice for that. Because it's your standards now. Your standards for operations, right? That will carry over as you guys get bigger and bigger. And whether you hire a manager or not, they're going to follow your standards as owners and operators. She did 56 units in 8 months. Like no BS. Can you Can you walk through like cuz even to me, I'm still like, "I don't know how you did that." You know, like walk through like you did eight at a time. What was their feedback? Cuz it was a substantial job. I mean, they were renting like 600 bucks. You know, now their rent's at like a thousand. At that property, they were the very low rents, and they didn't pay any utilities.
4:16 They just had electric in their name, too. So, then we were paying water and gas. So, the first ones I did, I went by the people that were like closest to market right now. They were all month-to-month, so I could serve just a 30-day notice. And I went who was closest to that. And then I just served that the 30-day notice. But then they all start talking, right? Like what's my rent going to go up to? But as we were doing that, we were also making improvements to the property. So, I would also do since like we're our coming up to spring, just like have Bradley or your landscaping team like really like pay attention and focus on that. So, they're not like, "Okay, like it might not seem like that big of a difference, but if your property's taken care of really well, they will see that difference that you care about that." So, you that is that is super important.
5:10 And then too, just like I mean, I just I listened to a lot of people. Like I mean, I had people coming into the office crying like, "This is my home. I want to stay here." And then just like really talking them through their finances of like, "Can you afford this? Like we are going up to market rent." We are we were slightly below market rent, but we're going up to market rent. Like as new owners, our costs go goes up. And see, what tenants don't understand is like we don't make the money from them. Right. We just break even. They cover the cost of that building, essentially. Same thing on a home, dude. You're covering the mortgage, you know? We make money from the bank and from the next buyer. That's how we make our money. People who don't raise rent then don't take care of the property. It's sales. At the end of the day, like always like when I used to be involved in the property management, I was like, "Listen, we're a sales company.
6:01 You are selling. You are selling them to stay. You're selling them to pay. You're selling them to renew, and you're selling them to move in. You're not a property manager. You're sales, you know what I mean? So, hey, we want to go to 200 units." Well, that's four full-time team members. And that's throwing off enough money like it's throwing off a lot of money for you guys, you know what I mean? So, it's learning it today with what's-his-name? Bradley. I was going to say Darnell. Bradley. Working with Bradley. Cuz how you coach and train up Bradley is then how you do the next person and the next person and the next person. So, you know what I mean? View it as this is your baby business right now. But the more you can like dial it in with him and while you've got her, you know what I mean? Be like, "Hey, we're doing it we're doing a sales training. How do we do this? What are things you go over in your sales training?" That's what she does all day long.
6:46 It's delinquency and occupancy. It's the two things we care about. I don't care about your weekend. I don't care about that. I care about delinquency and occupancy. Cuz that's what NOI is, right? So, like that and that's what I really wanted to express before, you know, we get into like tactical building things. This business plan looks beautiful. But it now solely comes down to you both as operators, right? Which is great because you put your money in something you can control. And you guys can do this. You can totally do this. Like this is not rocket science. It is a science, though, right? So, it's taking what we're talking about today, making sure like you're writing things down, like you're implementing it. I know, it's not it's not as sexy as buying the deal. That's the fun part. But this is where all your guys' money's made, your family's financial future's made, the ability to get your money out and do it again and again and again.
7:38 It's taking these numbers, which is theory, and turning it into real-world application by doing these tactical things we're talking about. Yeah, it's like doing some quick sales training. Saying, "Bradley, lease me the unit." Like via Zoom. I mean, dude, we're running 377 units from literally across the country. Not even like a down the street across the country. It doesn't matter because the numbers don't lie. You can see, "Hey, Bradley, you did 15 tours and no one filled out a lease." It's not a That's not a rent problem. That's a leasing problem. They're showing up, They're Nobody shows up to an apartment building without the intention to rent. Now, if nobody's showing up, then we have a then we have a either a marketing problem, which could be as stupid as changing photos.
8:24 We have a 12-unit on apartments.com. No leases. No nothing. No nothing. Great area. Great area. Like what the what the f? She gets on it with apartments.com, and they're like, "Let's change some photos around." She They change photos around, it's filled that week. Only thing we changed was the photos. Not the rent. So, it's leasing first and foremost. Sales first and foremost. The beautiful part with 10 units is you can be picky. Be picky, right? Like don't just feel urgency cuz remember, it's just mid-February. So, leasing's now picking up. It's just now starting to like lower your standards just to get somebody in there, you know what I mean? That's why we always say year one's the worst year, right? So, like if we're just looking at this projection, we do half of the bill back here, and I'll send this to you, too. And then we do full bill back, full market rent in 2027, market rent today.
9:14 Dude, there's so much upside on this deal. I mean, it is just freaking phenomenal. So, if we go the slow and steady route, I'm showing we would go for a refi in 2028 if we took the value of 1.77 million. I did 65% loan-to-value. So, you understand when you go to do a cash-out refinance, it's a new loan. They are going to pepper you just like you were buying the building. Start preparing the narrative now, you know what I mean? Start thinking ahead now of like when you go to the refinance, like you got to tell the story. They want the story of why are we giving you more money? And now we know you're putting a lot of money in your pocket. They'll do it, but I'm telling you, Nick, that is so important you tell the story. You tell the story of these years. So, you keep the original rent roll, keep the original leases.
10:02 Cuz when you go to refi, you submit all of that. You say, "Look at where we were. Now look at where we're at. Look at these leases that had no bill backs, no anything. Look at where we're at." You do anything to these units. You If you like upgrade one or do whatever, you take all these before and after photos. So, you submit all this overwhelming, almost like overwhelming evidence, right? To the to the mortgage broker, who's Carl, who then goes to his committee and says, "Look at what they've done." Because no matter what, even if you are going to sell in 5 years, always get your money on the refi cuz it's tax-free. It is your only time in your life you can make tax-free money. Everything else is taxed. When the lottery's taxed, cash flow's taxed, income's taxed, grandma gives you money, it's taxed, right? Inheritance, right?
10:49 You know what I mean? Like at a certain point, right? So, it is like 100% legal, like tax-free. Like it's not taxed, it's what's debt, right? So, always do that. Put money That's like your only time to put money in your pocket cuz if you cost seg it, remember you go to 1031 exchange, it will recapture. Capture it. So, it's a good benefit if you stay in real estate. So, you just got to see behind the scenes of a VIP coaching day with the Rileys where we broke down everything. We talked about turning the business plan into reality. We took the spreadsheet that we created during their due diligence period, during their underwriting period, and we actually talked about the management, the operations, everything from lease renewals, new leases, rent increases, NOI increases, problems, struggles, challenges, obstacles, all those things.
11:36 We broke it down from in for them here in our half-day coaching session, and I was super excited you got to see part of it. This is what it looks like when families take their financial future in their own hands. When husband and wife's come together, they choose to bet on themselves, invest in themselves, invest in coaching and mentorship, and most importantly, invest into small multifamily real estate because one small apartment deal will change you and your family's life if you learn the BRRRR strategy that we talked about here. So, the big thing that the Rileys did that makes them set up for success is they didn't want to learn all the mistakes on their own. They wanted to pay other people who've already gone first, who have already made all the mistakes, who have already made all the mess-ups, who have already lost money, lost time, energy, and frustration. They just want to pay for that and profit from it.
12:22 So, if you're watching this, you're a high-income earner, you make over 250k a year, you've got money, you're ready to invest in yourself, maybe you're a husband-wife team like the Rileys here, and you know small multifamily real estate is the path for you, but you want proven coaching. You want mentorship. You want to work with owners and operators who have really done it, and you want to get in the weeds like this. Look, this isn't a big seminar. This isn't a big coaching program. There's no assistant coaches in here. You are sitting directly with my wife and I. We are getting in the weeds, we are getting in the trenches, we are teaching you from our real-world experience of owning 377 multifamily units, how we've done five 100% cash-out refis, and we're giving that to you. So, what I want you to do now is if this resonates with you, somewhere around this video, there'll be an application page for our mentorship program. Click the link, fill it out.
13:07 If you're a high-income earner, you're serious about investing yourself, you want to work with us directly, and you're ready to buy your first small multifamily apartment, click the link in the description, fill out the coaching program. Maybe we'll have you here for one of our next in-person coaching days. Till next time, we'll talk soon. Thanks.
Topics: Coaching Day, Property Management, 10+ Units, BRRRR
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