3 Yr Case Study: How a Real Estate Deal destroyed the S&P 500

In October of 2017, Two Waters Capital purchased Reserve at Stockbridge — 88 units in Stockbridge, Georgia for $6.7 million. The news at the time was terrifying. Trump had just been inaugurated. Harvey Weinstein was all over every channel. A mass shooter had just killed 60 people in Las Vegas. Colin Kaepernick was kneeling for the national anthem and dividing the country.

Brian and Sam bought anyway. And they blocked out the noise.

In this episode of Lessons the Hard Way, Brian and Sam do a full deal autopsy on the Reserve at Stockbridge. They break down the proforma versus the actual numbers side by side — the rent growth they underwrote at 2.5% that came in at 28%, the seven-year exit goal they hit in three years, the NOI that climbed from a projected $450,000 to an actual $530,000, and the 40% investor return they produced in the same window that the S&P 500 returned 13.8%.

Then they apply every lesson directly to the market right now.

In this episode:
• The Reserve at Stockbridge: 88 units, $6.7M purchase, $76,100 per door in 2017
• The news cycle in mid-2017: Trump, Weinstein, Vegas, Kaepernick — and why none of it mattered
• Why blocking out the noise and focusing on fundamentals is the only real strategy
• Proforma vs. actual: underwrote 2.5% rent growth, achieved 28%
• NOI proforma of $450K vs. actual of $530K — what drove the gap
• Hit the seven-year exit target in three years — when to ring the bell and sell
• $6.7M in, $8.5M out — the full return story including tax and insurance headwinds
• 40% investor return vs. the S&P 500's 13.8% in the same period
• The one thing that went wrong: a sump pump warranty that did not transfer
• Always check if warranties transfer — the lesson that cost them and the fix going forward
• The current market looks a lot like 2017: prices rolling back, conservative underwriting working
• Two Waters took a four year hiatus and is back buying now — and why the timing feels right

Subscribe for weekly episodes. New deal autopsies every week.

Two Waters Capital: 2waterscapital.com

#lessonsthehardway #twowaterscapital #realestatepodcast #multifamilyinvesting #realestatecasestudy #dealautopsy #accreditedinvestor #commercialrealestate #realestateinvesting #realestatelessons


0:00 Cold open: there is always something in the news to be scared of
0:32 Today's format: a case study, dissected piece by piece
0:56 Setting the scene: what was happening in mid-2017
1:22 Trump, Weinstein, Vegas, Kaepernick — the headlines when we bought
1:50 Reserve at Stockbridge: October 2017 through March 2021
2:23 S&P 500 returned 13.8% in that same window — here is what we did
2:53 Two Waters produced a 40% investor return in the same period
3:13 The deal: 88 units, $6.7M, $76,100 per door
3:43 Proforma underwrite: 2.5% rent growth, $800 to $850
4:08 The due diligence process: rent surveys, comps, market analysis
4:29 Actual result: 28% rent growth, $800 to $1,000
4:54 Why rents went so far beyond proforma — and what the team saw in real time
5:43 We do not want to be the most expensive — we want to be the value leader
6:16 Conservative underwriting plus great onsite execution equals outperformance
6:41 The same noise is always there — block it out and focus on fundamentals
7:34 What matters: asset quality, diligence, conservative rent growth, the right area
8:07 NOI proforma $450K vs. actual $530K — the gap explained
12:30 Bought for $6.7M, proforma exit $8.6M at year seven
12:55 Actual exit: $8.5M — but in three years, not seven
13:12 When to ring the bell: execute the plan, hit the number, sell
13:34 Hit the seven-year goal in three years with tax and insurance headwinds
14:05 Coming out of the GFC: why people were still hesitant in 2016 and 2017
14:40 Taxes and insurance: flat then, rising then, now coming back down
15:01 Why that tailwind matters for deals being underwritten right now
15:22 NOI is the only thing you can control — maximize collections, minimize expenses
16:32 NOI and cap rate are directly correlated with value — focus there
17:00 What surprised Brian looking back: the sump pump and the warranty lesson
18:26 Always check if warranties transfer — lesson learned the hard way
18:49 This market feels like 2017: prices coming back, time to buy
19:16 Two Waters is buying again — conservatively underwritten, the right assets
Subscribe for weekly episodes. New deal autopsies every week.

Two Waters Capital: 2waterscapital.com

#lessonsthehardway #twowaterscapital #realestatepodcast #multifamilyinvesting #realestatecasestudy #dealautopsy #accreditedinvestor #commercialrealestate #realestateinvesting #realestatelessons

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