Emma Powell employed a strategy she refers to as the “slow flip.”
- Emma Powell, the owner of Highrise Group, naturally gravitated towards real estate after watching her childhood home be built from the ground up.
- In order to build her empire, Powell employed a strategy she refers to as the “slow flip.”
- Today, Powell owns 93 units spread across Arkansas, Idaho, and Utah, and has another 122 units under contract in Kentucky.
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“They built the whole thing, a 5,000 square foot — my mom’s dream home,” she told Business Insider. “And I realized that was the source of my interest in real estate.”
Still, Powell’s journey into the real-estate investing arena wasn’t a clear-cut path.
Years before she pulled the trigger on her first purchase, Powell worked as a photographer and graphic design teacher. It was during this time she learned that the best profit margins for photography were embedded within photos of residential and commercial properties. After years of putting real estate on the back burner, she found herself infatuated with the space again.
In her spare time, Powell began networking with investors, attending real-estate investment conferences, and scouring YouTube to increase her education. During this period, Powell scooped up a few single-family rentals to test the waters.
But it wasn’t until later on that she’d learn about the benefits of multifamily investing.
“So when I came to the REIA [Real Estate Investor Association] — the second REIA that I ever went to — I was sitting there listening to them talking about how they were raising capital and how they found their first apartment deal,” she said. “And he said he was basically walking through this process and he said, ‘If you can just go straight to commercial, skip the residential.'”
That advice was all Powell needed. From that point on, her attention would focus around multifamily apartment buildings.
Shortly after Powell received that advice, a 50-unit apartment deal fell into her lap via a connection on Facebook. After thoroughly vetting the deal and bringing in partners to help finance the property, Powell pulled the trigger on her first multifamily investment.
It was the first of many.
Fast forward to today and Powell is the proud owner of 93 units spread across Arkansas, Idaho, and Utah, with another 122 units under contract in Kentucky. Her portfolio is comprised of single-family rentals, duplexes, and multifamily apartment buildings.
Here’s how she’s doing it.
The “slow flip”
“I call it a slow flip, or if you’re familiar with the term BRRRR,” she said.
For the uninitiated, “BRRRR” is a common real-estate investing strategy that stands for buy, rehab, rent, refinance, and repeat.
Since Powell is aiming for high returns — generally to the tune of a 14% to 16% internal rate of return and between 8% to 10% in cash-on-cash returns — her main focus centers around value-add properties. Put differently, Powell is looking for buildings erected in the 1980’s and 1990’s that are in need of some serious TLC.
Her analysis starts with the value-add component, moves to financials, shifts to property management, and then to negotiations. It’s a methodology she’s used to build the bulk of her portfolio.
Flooring, cabinets, and countertops top the list of components she’s vetting to see if a deal is worth her while. If she sees a value-add opportunity — meaning she can force equity into the property through renovations — she’ll move onto the financials.
Powell will pull the trailing 12-month financials on a building to forecast a property’s net operating income. From there, she can breakdown current rents and forecast future rent increases. That gives her a better grasp of a deal’s feasibility and profitability.
“I think a good ballpark starting number and in a secondary market in a class C property is probably about $6,500 per unit for the interiors and another $1500, $2000 per unit for the exterior — paint roof, full resurfacing, all of those things that’s done on the outside,” she said.
But that’s not where her analysis stops.
Once Powell has vetted the market, building, financials, and renovation costs, she shifts gears to focus on property management. It’s a crucial component of her vetting process that needs to be properly accounted for. As a general rule of thumb, Powell aims to keep costs for management around 3% to 5% of gross income. To ensure her estimates have a margin of safety, she’ll usually apply a “vacancy factor” of 10% to her calculations.
“If the owner agrees, you go back and forth, you negotiate, you put it under contract, and that’s when the real work starts because now you have to go prove every single assumption that you’ve put into your spreadsheet: inspectors, appraisers going and checking all of the structural stuff,” she said. “It’s like a forensic job to go through all of this.”
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