Commercial Real Estate Investing with Don and Eden

  On today’s episode, our guest Carlos Gutierrez is based out of South Carolina. He started flipping homes and eventually made his move to commercial real estate. He started with a 20 unit deal and since then has doubled his success with recent deals. He has an avid passion for motorcycles and he owned a shop Deltona, FL.    In today’s episode, Carlos discusses how he entered the real estate game, details on his first house flips, how he found his first 20 unit deal and his future plans. He also shares with us, his goal with multifamily properties and how he found his formula to success.    Episode Highlights: Details on His 1st Deal Recent Deals on Multifamily Properties What Book Motivated to Enter the Multifamily Sector His Future Plans   Connect with Carlos: Email: cg4properties@gmail.com  Facebook: @CG4propertiesllc Office #: 843-934-4250 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - TRANSCRIPTION Intro: Hey guys, and welcome back. Today I am interviewing Carlos Gutierrez. I think Carlos and I share a similar path as well as so many other real estate investors. We both started in flipping homes and ended up deciding we want to scale up and start doing something bigger, hence getting involved in commercial real estate. So, I think this is the standard evolutionary process and progress of the typical real estate investor. And I'm sure many of you guys are either in this position or have been in this position in the past, which is why I think this episode is super important. So have fun, and let's get started.   Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies.   Don: Hey, Carlos, it's nice to have you here. How are you doing today?   Carlos: Good. How are you guys doing?   Don: I'm doing just fine. I just got back from North Carolina looking at a property that is close to South Carolina, obviously, which is where you're based off. How are things in South Carolina? I can tell you that when I went to Charlotte right now when I was on the flight, there were a few tornadoes that just hit the city. So, when I landed in Charlotte, everything was like a mess.    Carlos: I've lived here in Charleston probably for almost five years. We've had experiences with some close tornadoes in the area. When I mean close, I mean, like two or three miles down the road.    Don: Wow.    Carlos: Yeah, so we had one real bad one, think that September of 18. Took the roof off of the DMV building, a place that sells trailers and cars, flip trailers upside down. It was destroyed like Main Street, which is Machs Corner, which is five to 10 minutes up the street from where I live. I've lived through a lot of hurricanes because I'm originally from Puerto Rico and then grew up in Florida, so hurricanes don't bother me as much and you have time to prepare. And I tell you what, man, those tornadoes are scary. I was telling my wife the other day I was going to build one of those doomsday bunkers underneath our house. You literally have no time. And by the time they said there's a tornado on top of that you got less than a couple of minutes.   Don: Yeah, to get in right? So, I know you flip a lot of homes in South Carolina. Did you ever have any situation where you had one of your homes get impacts from any type of bad weather whatsoever?   Carlos: I've been fortunate enough to have any disasters hit any of our houses or any of our commercial property. We've been through hurricanes, we've been through tornadoes, we've been through some flooding and I haven't had anything major other than maybe a couple of our units getting flooded.   Don: That's a good thing. I know you flipped a lot of homes. So, you've done like over 20 flips, right?   Carlos: Yeah, yeah.   Don: So how about you tell us a little bit about that and how it started. How did you get into real estate and what was your first deal and how did they go?   Carlos: I lived in Florida for about 20 years and before my real estate career, I had a big passion for motorcycles, and I own a small motorcycle shop in Florida in a place called Deltona, Florida. So, it was a really good solid mom and pop shop business. We did great for about three to four years. And then, of course, the '08 recession happened. '09, I started seeing the wave of revenue was split in half the landlord of that we were in a retail shop and the landlord was, there are people closing up left and right. So, going through that recession, I learned that I was in the 'want' business and not the 'need' business, which taught us a real valuable lesson. You might want the motorcycle, you might want a jet ski or a boat but when it comes time to a bad recession or anything like that, you usually have to let go of all of it. I wasn't in the real estate business then but I did see it. I saw people that were living in $75,000 houses, which is kind of normal in that area, and selling it and buying a $200,000 still having the same job. I was just like this doesn't make sense.    Sure enough, the recession hit '08 '09 and those same houses that were selling for $200,000 are now selling back to $75,000 and even less in some instances. So, I met my wife in Florida and we moved to Northern Virginia. She's from Northern Virginia. She wanted it to raise kids there. The economy was really bad in Florida so we moved up to the Northern Virginia/ DC area. I saw the real estate market being dilapidated in Florida. I was like when I get to Northern Virginia, I'm just going to start looking. I started looking with some realtors. They walked me away from a lot of houses, probably three or four houses that I could have made some good money, so I decided to get my real estate license. I said, if I'm going to do this, I'm going to do this myself, having that small mentality at that time, but I saw opportunity out there. I bought a HUD home for $68,000, put about 24 to 25 grand into it because I was doing a little bit of the work myself, which I don't recommend, but since it was my first I had more time than money, right?    Don: And you wanted to learn.    Carlos: And I wanted to learn. Yeah. And I knew a little bit about construction because I had done some construction before.   Don't: You invested $92,000 in the property, right?   Carlos: Correct. Yeah, I was able to actually talk to a broker that was like a hard money lender at the time. So, she did the loan and we worked everything out, was $92,000 into the property maybe a little bit more with some holding costs. And it took us about a month and a half to do all the renovations. Three days before Christmas, I put her on the market. And I had two or three offers within a couple of days. I ended up selling it for $142,000.   Don: $142,000. So, you cleared about $30,000 closing costs. Yeah, so that's a decent return. You can't get that done easily today.   Carlos: No. Back then, if I would have known what I had in my hand, I could throw a dart and hit a good deal back then. They were throwing houses. I didn't have enough money to buy them all.   Don: Yeah, didn't we all I mean, we're talking about a time where you could pick up a house for literally cents on the dollar. And I was thinking that if I lived this era all over again, I would have never sold anything. My biggest regret is selling real estate. Everything that I ever did in real estate that's one thing that I'm truly sorry about, the one mistake is I sold real estate. I should have never done that, I should always keep it. I don't believe in selling it. I started as a wholesaler. And so, at these times, we were making good money.    And now in 2017 and 2016 people started hearing there's a lot of money in wholesale. And, and so they got into it. And there's also podcasts and audible and so people can get information. Very easy way. So, then it got saturated. I know what a flip is. So, you're averaging between $40 and, and $50,000 if you're doing well. So, you're making $200,000 a year, but that's the point where you realize that essentially you have a job and that's not going to get you anywhere. So then move up the ladder and start investing in some bigger things. That's when things change and you move up to commercial real estate, right?   Carlos: Correct. Yeah. So, my whole mentality from the beginning is kind of the same thing that you were just talking about is holding for the long term. But I wanted to flip houses to get a big nest egg to start putting it down on bigger properties and holding them for longer. I didn't want to hold single families for a long time, but I wanted to buy and hold multifamily. So that was the goal from the beginning. I read a book, a real good book back in probably '09. Dave Lindell's 'Multifamily Million.'    Don: I went to a seminar.    Carlos: Yeah, me too. He's from the New Jersey, Philadelphia kind of area. So, I went to one of his three-day boot camps up in Maryland.   Don: I went to his three-day boot camp in Tampa. Yeah, well, let's get back to the topic. So, you read Dave Lindell's book 2009, multi-family millions and then that makes an impact and you decide to start investing in multifamily right?   Carlos: Correct. Like I said, I've always wanted to invest in multifamily. I was never one of raising money from other investors. Obviously, I learned later that that's probably the best and easiest way to do it. But starting from the beginning, that's kind of how I was. So, there was a transition around our lives back then in '15, where we wanted to move out of DC. Because my wife was from DC as from Florida, I was tired of the snow, she didn’t want to be in Florida. So, I said, Let's pick somewhere in the middle.  So, we ended up in a little town called Summerville, South Carolina, which is a market of Charles place that's growing leaps and bounds. While we were here visiting, I came across a building that was empty. So, I wrote it down on my phone, and I said, when I get back home, send the owner a letter, and he called me back like two or three weeks later, so I said, that's kind of where I made the transition from single-family to multifamily.   Don: So, did you buy that?   Carlos: Yeah, so I sent the guy a letter. He called me back about two weeks later. So, he's like, "You sent me a letter, you were interested in the 8-plex?" And I said, "Yes." He actually owns 20 units on the street. "Are you interested in buying the eight, or do you want to buy 20?" I said, "Hey, we can come to an agreement on all 20." So, this is a very slow process. So, it took about six months, but we ended up buying the 20 units.   Don: I want to get the numbers from you because I think that that helps the audience here that listen to this show to basically feel like they're inside your shoes when making the decision of pulling the trigger. And that's what I want to get.   Carlos: And what I like about these podcasts is it opens people's minds and it gives them hope to be like, Hey, listen, this guy did it.    Don: I can do it. Yeah, exactly. That's what happened to me. That's how I started.    Carlos: Yeah, that's what happened to me. I was reading books and looking at podcasts and going to seminars, and finally, I was like, there's not that much of a difference between that guy doing 200 units and me, all I've got to do is just go after it.   Don: Exactly, exactly because sometimes we feel like real estate investors are superhuman and they have natural powers, but we don't, we just try.    Carlos: I agree.    Don: It happens to be that the potential of success in this industry is humongous. If you make money here in real estate, then you make a lot of money. The fact of the matter is that some people work harder than us, make less money than us and they're smarter than us.    Carlos: That is correct. And I still put on my old dirty jeans and still go to work. I'm no different than anybody else. I remember reading Robert Kiyosaki's ‘Rich Dad, Poor Dad,' he knows the difference between successful people and not successful people is action. Some take action and some don't take any action.   Don: Some just talk. It's not enough to talk. You also need to do something about it, right?   Carlos: You gotta do it. Right. The 20 units were all on one street. It was a six-plex and eight plex and two triplexes, that 20 units. So, we were able to purchase that for $750,000.    Don: Okay, so question. these units, they're all adjacent to each other?   Carlos: No, they're all right next to each other.   Don: But they have different addresses.    Carlos: Correct. They all have different addresses. This building has a TMS number.    Don: Wow, that's cheap. For my audience, if you guys want to know if looking at something that's cheap, so it's very easy to understand that. So, what you need to do is with this number you go to any website like BetterPlaces or like City.com and you can just find out about the median house value. So, try to understand how much your house is worth, right? And then despite the fact this is not a house, this is somewhat of an apartment, but it still gives you a ballpark. So, you could see that a house in Charleston is going to be worth about $150,000-$140,000 right?   Carlos: Yeah, 150 the median household income and some of them are like 186.   Don: Yeah. You can see that if you're getting anything or you're getting a door, right condo or an apartment for $37,500. Doesn't matter what the situation is, even if it's completely distressed right and you got to put $10,000 at CapX to each one of them. You have a lot of equity, you're just getting something that's worth a lot more money, right?   Carlos: I was modest at my value and I thought they were worth about 50 grand a door. I get called literally every week to sell these things for $1.3, $1.4 million. But I wanted to stay conservative. So even if they were worth $50 grand a door, I got 13 five of equity built into our door, got two $300,000 worth of equity. When we estimated the rehab obviously the eight plex was going to take everything of $80-100 grand to get it renovated because it needed about $10 grand a door and needed a roof and they needed some brickwork and they needed some asphalt work. So that right there took most of the, if not all the renovation because the other 14 units just needed some carpet paint and just TLC.   Don: You'd say that we closing costs nothing you got in for $900,000 including renovations?   Carlos: Give or take. Yeah.    Don: So how much time did it take you to stabilize it and get tenants in?   Carlos: Take the eight plex out of its 12 units that were available on day one. Out of those 12 units, six of them were rented. Those other six units, we got up and running within the first three months. So, what we did was a combination of some equity and some cash flow to get the rest of the renovations done.   Don: Nice. And so how much did you raise?   Carlos: We actually got a local bank to give us a loan of 80%. So, we had to just come up with 20%. $150,000 and when we raised $50 more for the renovation.   Don: Okay, okay. So as far as the loan, what kind of bank did you go to?   Carlos: So, we went with a local credit union actually, and we've actually developed a great relationship with them now. So, all I've got to do is call them, "Hey, I got this deal. I got this." "Okay, how much do you need?" type of thing.    Don: That's exactly why the rich are getting richer.    Carlos: Correct.    Don: You really duplicate that success into two other deals, right? So, you bought another 41 units, right?   Carlos: Yes, we had the major three on this deal, so, we were able to pay the investors back, I was able to keep a property for the long term. Property cash flows about a hundred to $110, a door. 2-$3,000 comes in a month. I get a ton of depreciation on taxes, and I get mortgage-paying down.    Don: And you get appreciation.   Carlos: And I get appreciation. Yeah, because I get calls all the time for $1.4-$1.5 million.   Don: Yeah, real estate appreciates all the time. You can go through a crisis, you can go through any ordeal really in the market, as long as it's not Doomsday, real estate is going to appreciate because at the end of the day, there are more people that are inhabiting the planet every year, so they'll need somewhere to live. And that's what I will say is always appreciating. And people always ask me, "You're heavily invested in real estate, what if there the market crashes? Do my properties cash flow?" They cash flow. So that's it, I'm protected. I don't realize the loss unless I sold it. And if I'm not selling it, then I already know that there's a crisis.    What I wanted to say before was that It took you six months to get that deal from being in the works to being finalized. And now, you have managed to duplicate that success into two other deals of 41 units and 64 units. And so, what I want to ask you is how easy was it to duplicate the success in relation to the first deal?   Carlos: Very easy. So, once you get a deal under your belt, getting the experience and the deal under your belt and getting it done, is what gives you that momentum and gives you that confidence to know that you can do it. Once we got this deal done, and we refinanced everyone out and the investors were just waiting for us to find another deal, it was so easy. There were no hiccups. I was almost like afraid. I'm like, "why is this going so easy? I'm waiting for the hiccups. I'm waiting for the phone call. I'm waiting for the deal to fall through" and then never did. I remember one investor telling me one time it's like I invest in multifamily because it takes the same amount of effort to flip a house and it is to buy 100 units.   Don: It's exactly that. You have knowledge. Knowledge is really what is worth money here. The actual knowledge is acquired when you do a deal. People ask you how come it's so easy for you to make money? It's not so easy. It's just that knowledge is critical. The knowledge is a goldmine.   Carlos: Right. It's like anything, once you've gone through it, you know what to expect and you have the confidence to know that you can do it. Before you do it, you're like, oh, maybe I can do it, maybe I'll fail. Once you do it once and if you fail again, it doesn't matter. Because you know, eventually you're winning. So, it gives you the confidence to go through the bad times as well.   Don: Exactly. I love that. So, what's your plans for the future now that you've done a few deals and you already have a decent portfolio?   Carlos: I keep rinsing and repeating. I keep doing the same thing until the market tells me otherwise. Now it's just a little bit harder to get these types of deals. They're out there, don't get me wrong, but there's a lot more competition. But there's still deals out there to be made.   Don: There's always is. I agree.   Carlos: So, we went from that 20 unit and we bought 41 units. We purchased that one for 1.3 million. They were selling it for, it'd been on the market for a while. We're just back and forth with the broker and we ended up at 1.3 million.   Don: Nice sounds like a good deal too.   Carlos: I'm still in a, what I like to call a small town. The other deal that we bought was in Hampton, South Carolina, which is even a smaller town, but they're all growing. So, we bought that deal for 1.3 million about $31,000 a door and deals around it were $45-55 grand. So, I was very surprised that the investor was selling it because he bought it at a good deal because he bought it and the foreclosure. He bought the note as a foreclosure.   Don: Okay, so I mean, I think you're doing obviously awesome and so I'm sure there are a lot of investors trying to get in touch with you. So, what would be the best way for anybody to do that in case they want to learn from you, or invest with you?   Carlos: So, the best way to get in touch with us is probably by email or by phone, cg4properties@gmail.com or you can call our office at 843 934 4250. And we have Facebook or things like that.   Don: Awesome. Okay, Carlos. So, thank you very much for being on the show today. I appreciate you coming and sharing all your insights and knowledge with us. And I hope you have great success and whatever it is that you're going to do in your real estate career. And good luck in the future. Stay in touch.    I appreciate it. Thank you very much for the opportunity. Have a good day.   Don: You too. Thank you. Bye-bye.   Carlos: All right. Bye. Bye.   Lady: Thanks for listening to the real estate investing podcast with Don and Ed. Stay tuned for more episodes. Till next time.

DE 37: Good Research = Smart Investing with Scott Price   Today’s guest has sharpened his skill sets through key roles in various companies as a team manager, program manager, and marketing manager- Scott Price. In 2005, he purchased his first apartment complex of 29 units. He used the full‐time broker status to immerse himself in real‐world real estate, investing and applied education. After being approached by some people, Scott began to provide professional coaching for aspiring real estate investors.   In this episode, Scott shares with us the details of his first deal- what he learned and what he’d do differently, how he managed a full-time W2 job & real estate investing on the weekends, how he became financially free and his current deals.    Episode Highlights: Real Estate Beginnings Scott’s Retirement Plan Advantages of Real Estate A Memorable Deal 1:1 Coaching   Connect with Scott: Website: bonvolo.com - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  TRANSCRIPTION  Intro: Hey guys, welcome to the show. Today, I'm very excited to host Scott Price. Scott is a real estate investor. He's also a hard money lender. He's an active investor. He's a passive investor. And he's also a coach. Now, if you're asking yourself, how is it possible that you can do all these things, then I guess it's just a type of business that real estate is. It's just being diverse, being able to think long term. I think what I like about Scott is his long term vision. And that is a key feature that you got to have. It's something in your mindset, you got to understand that real estate is a long play. So, you got to be patient, and you got to keep working, you gotta keep grinding, and you have your way of doing this. So, Scott's way of doing this is working a W2 job as he's investing in real estate. That's a safe way and that's a very nice way to do things. So yeah, I think Scott has a lot of value to give. So, without further ado, let's get started.   Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies.   Don: Hey, Scott, welcome to the show.   Scott: Hey, Don, thanks. I'm looking forward to being here and talking to you.   Don: Yes, I'm also looking forward to having you here because I know this interview was rescheduled so many times just out of coincidence, and I really wanted to have you on the show. I think what you're doing is truly phenomenal. And I know you've been listening to the show also, as well. So, you've been there on the side of the audience and listener and also now as somebody who's being interviewed, so I'm very happy to have you here. And yeah, let's get started. Tell us a little bit about your career, your real estate career and how you got started in real estate.   Scott: Sure. I would say it first started many years ago, was looking at what am I going to do with my life and how am I going to become independent in terms of financial lifestyle and not dependent upon the winds of a company. And even going back to before college, I was thinking those kinds of things, certainly did during college as well and I kind of started on the usual approach of most people who have got a good job, go to a good school and things like that. But from all the research that I did, the thing that kept coming up over and over again was that people who maybe we're not household names, but they were people who developed a combination of recurring income as well as net worth. It kept coming back to real estate that some people would win the lottery by great IPO or their stock or something like that but it tended to be a smaller percentage, and it was a real roll of the dice as to whether or not you happen to be in the right company or not, or things like that.    I didn't want my life to be a chance, I wanted to be something that I could control and expand on. And to me real estate was that thing after looking at a lot of different options because it is doable, it's something you have to work out but at the same time, if you are diligent about it, get educated and don't rely on excuses but take action, it is something that can get you there both in terms of recurring income and net worth. What I did was I worked a regular W2 job primarily in high tech and usually in program management and team management positions. And at the same time, in the evenings and weekends, I was working on real estate. For one time back in 2005, I was a full-time real estate broker, but I just did that for a few years and was just to get into real estate investing to immerse myself. I still have my license right now, but I don't represent clients. I currently have it purely for investing purposes.   Don: So, you started back in 2005 right, and then you quit for a few years. I guess you quit because of the crisis?   Scott: I'm giving an approximate from 2003 to 2007. I was a full-time broker and I primarily got out of it because I was doing some commercial, which interested me, but I was doing mostly residential. And frankly, I got kind of tired of all the tire kickers. It's such a numbers game kind of job, some people love it. And that's all great. But I want to get paid for my efforts and for the clients I had, who were good to work with. But the people who would waste my time driving around for six months and then decided not to buy it got a little old.   Don: Yeah.    Scott: So, I decided to go back to W2 actually to work for good companies, good jobs and make a good income with that and not have to worry about all that kind of stuff. But at the same time on the side, again, in the evenings and weekends, I was actively working on my real estate investing. And my general approach was, all of my expenses for me and my family were taken care of by my job, as well as the benefits that I got and the ability to say It's a lot easier, especially for smaller loans to get a loan, if you have a W2 then if you don't if you're self-employed, things like that. So, I use that all to my advantage. I was very strategic and intentional about that. And by doing that, then all of my income, as well as profits from building up equity, doing a cash-out refinance, things like that, as I went along, I could directly roll that back into more real estate.    Again, it was part of a larger plan of not going to work W2 forever, didn't want to do that. But I was using the W2 job as a way to help me expand my real estate portfolio even more. And everything that I own right now is I own myself or myself and the bank, as they say, if I've got a loan on it, but had a need for co-investors, although I have worked with debt investors, and so that allowed me to build up a portfolio. I stayed with it for quite a long time until a couple of years ago. And then I got well past where I needed to be, but I wanted to be again very conservative. And then I had both income and net worth enough to just say, Okay, I'm going full time. So, I did that a couple of years ago.   Don: Okay, so yeah, that's very interesting. So, you decided to go full time two years ago, right or a couple of years ago, excuse me for asking it so bluntly, but how old are you?    Scott: I am 52.   Don: 52. So most people would retire when they are 64. And what I like about what you're doing, is the fact that you saw real estate as a long term investment for your life, for the way that you vision your life, right? So, you wanted to take all the money that you make from your W2, your good paying job, I know you were doing a high tech and you did team management for big companies. And so, you got paid well, I assume. And then you got that money and you paid the bill with that money, but the equity that you generated to real estate investing that you just rolled on, and that's how you got bigger and bigger and bigger.    And by the age of 52, you are financially free, which is a lot sooner than most people, I mean, you went down the road of the safer option, because I see a lot of people that are doing this, that they have a good-paying job but they know that they don't want to do this forever, and they want to retire earlier than most people. And so, they take the money and they live with it. And the money they make in real estate, they don't take anything out, you just push it back into the business, whereas a real estate investor, you have to also take money outside of your business so that you could live and pay your bills. Right?   Scott: Absolutely. And, of course, actually did two years ago, so that was at 50. And then on top of that, I could have easily done it earlier. Just to be clear. I mean, I've been building enough that easily five years earlier, and that if I wanted to, I could have done that 45 or probably earlier. So, it was just a matter of saying well, I want to be even more comfortable. In other words, I want to have a little bit more properties, I want to have a little more income coming in and things like that. And then finally got to the point where I felt comfortable enough with it.   Don: There's another thing that I want to talk about from something that you mentioned at the beginning. You said that you noticed that it all leads up to the real estate. It doesn't matter who you are, what you do. At the end of the day, the majority of them are in real estate. And the question is, why is it so? So I had a guest on the show, that guests were making a lot of money from his business, he noticed that his father was a real estate investor, but he did not want to be anything like his father, because his father was not doing it right, didn't see the way this business could be passive.    So, it was a lot of work for him. And then he said, I would never be like my father. And then he made a lot of money in a different business. But he found out that he's paying so much in taxes, and he's not financially free regarding the fact that he's successful. So, he ended up investing in real estate. And that's exactly what's going to happen with anybody successful. If you're not investing in real estate, then you're not in the game in my opinion, unless you're investing in something else but what's better than real estate it's real. It's not fake. It has value, it has a use, people use it, right?   Scott: Yeah, real estate has several advantages over other businesses. Real estate is a business but it covers other businesses or things like stocks and other ways to make money. One of them is it's an imperfect market that is not always available to everyone in terms of information, what's the best approach, things like that. So, because you can look for deals, and you can control certain aspects of it more so than like, for instance, investing in stocks, you can tend to increase your gains significantly more than you could necessarily in a stock, it may go up and may go down a little bit of roller dice for something like a stock.   Don: It's in your control, you control it. Yeah.   Scott: Yeah, I mean, nothing's completely under anybody's control, there always are some externalities, but at the same time, you can plan for those risks. And the other thing is that you can create systems and you can create a team that works around that business to help increase it. And then the other big thing is that you can use OPM-other people's money to leverage and expand upon so when you combine all three of those aspects, it's what can create a snowball effect, which is what I been working on of buying one, it goes to two, it goes to four, it goes to eight, that kind of thing. And then constantly snowballing because of leveraging all three of those aspects that other businesses don't necessarily have.   Don: That's terrific. Yeah. So, tell us a little bit about what you're doing in real estate right now. More specifically, so which asset classes you're investing at and where do you see your future in the real estate space?   Scott: We currently own a portfolio of multifamily, singles, office, retail, and land. So, multiple asset classes there, our primary interest is multifamily.   Don: If I could pick one asset class that I could put a million dollars and I gotta put that money for 100 years, then I pick multifamily because I do think that over a long period of time, it's probably the best investment you can make. But over a short period of time, I'm not that sure that this is the case right now, as far as the cap rates are so compressed when you're looking at multi-families. And so, I want to ask you since you say you prefer multifamily, but you are looking at other directions?   Scott: Actually, last year, I built a custom home. And that was kind of my main job, I guess you could say. So, I started thinking, Well, I have some money to deploy here, let me go on to do plus the market is a bit overheated in terms of prices. I tend to be a cash on cash buyer. In other words, I'm buying for income and the net worth kind of comes along as a cherry on top over time. And it's obviously just as a generalization. It's not much of a cash flow market nowadays. So yeah, I started looking at other areas to temporarily expand into. One of them is I've gotten into hard money lending and that's been good because it allows me to utilize some of my available funds, get a return on them.    That's a good return, pretty steady and also pretty safe. But at the same time, it's usually at most locked up for a year. And I figure if there is a big swing in the market and where there are some good opportunities, then I can have my money back. It's not locked up for a really long period of time. So, I started getting into that. That was one thing. And the other thing that I've done, which I've never done before, but I've started doing over the past year is investing in other people's deals. And primarily because our entire portfolio is in Washington State spread out across a number of markets in the state. And I am interested in investing in other states and I have in the past, but at the same time, there is an advantage to going to some of these better cash flowing markets in other states and if somebody can get me a good return and I believe in the sponsor and believe in their jewelry and the property, hey, then I'll do some passive investing. So, I started experimenting with that and I've invested enough people's deals.   Don: So, when you invest in other people's deals are you investing as a limited partner or as part of the GP?   Scot: As a limited partner.   Don: I think it's a great idea for you because you haven't done that before as far as syndication, you haven't syndicated a deal before. So, I think it's a great move that you're doing because you're going to be able to see it from the perspective of investors that are going to work with you when you're going to syndicate in the future. And you're going to see what you like less but you like more. So, this way, you'd be able to give your investors value since you had the experience.   Scott: Exactly. I completely agree. And because that is a future area that we're going to get into is syndication. I worked with debt investors and some of my prior properties. But I have not specifically done equity investors, feel very comfortable with it, certainly been doing it for 15 years as far as on the asset management and fulfilling a business plan approach. And I have my team in place for doing syndication and the biggest problem right now is of course, like for everybody finding good deals in the current market, and things that cash flow well enough to make it interesting for the investor as well as interesting enough for me to participate in.   Don: There's a way that I found that enables you to get really good deals, even in today's market, and I don't mind sharing it with you and with my audience, of course. It's terrific when you're able to get to the seller. Because when you do that, then you cut the broker and not that I have anything against brokers, I love brokers, I work with brokers, they send deals my way, close on deals, and it's all good. But you got to remember that brokers, they have fiduciaries towards their clients, which is the setters and they are going to try to get the best price for them. So, when the deal hits the broker, in most cases, it's going to drive the price up. And sometimes you're able to find a seller and it's a numbers game. You got to try in various ways to get to these people and you got to do some marketing to get to them.    But I found out that when you do that, it's very likely that you find a good deal because the sellers, first of all, I'm not paying the commissions for the broker. So that saves a little bit of money right there. Also, the price is not driven up by people that are offering numbers that you cannot afford. People that are buying for low cap rates and people that are just looking to park money somewhere or people that are trying to 1031 exchange into that property. So, there are many reasons why people would overpay right, even if it's not a good buy. So, I have found out that working directly with the setters is extremely beneficial in today's market and it works for me and could work for you as well. Let's think about this deal that you have in the back of your mind that whenever people ask you about a certain deal, that's the one that you really want to talk about. Want to hear about that deal, in the course of your career in real estate.   Scott: When I first started getting into multifamily, the first one I purchased was a 29 unit, and that was back in 2005. And the thing to me that makes that an important property for me among all my other properties, being an older building, I certainly had a professional inspection done had every unit looked at. So, I was prudent on that. Nonetheless, some of the longer-term capital expenses, I really went in were not familiar with how much they would actually cost. And as an example, within a couple of years for that property, it was just 29 units, it's not huge to replace the roofs on it, it cost me out of my personal savings, about $100,000.    Don: Wow! It was back in 2005 also, right?    Scott: Yeah, exactly.    Don: That's a lot of money.   Scott: Yeah, yeah, exactly. And learning about plumbing and electrical and what aluminum wiring means or let's say rusted, galvanized, or all these kinds of things, but what all that really means in terms of the impact to the bottom line on a monthly basis, and then the idea of coming up with reserves. Also, other things like economic occupancy versus physical occupancy, meaning basically I learned that they had stuffed the building prior to listing so, they looked all filled but then I got their bad tenants that they had quickly stuffed into the various units and not all of them were well-qualified tenants. So, I had to go through the eviction processes on some of them and things like that. And then also just about overall property management because going from a single to multifamily is a whole different deal.   Don: Apples and oranges.   Scott: Exactly. So, things like that and it was all for the better in the long run. Over the years, I've obviously learned quite a bit on that and many other properties and I still own that property.    Don: I think what's beautiful about what you're saying is the fact that your mindset is right and even back then at the end of the day, it's not just about how much money you make it's about also what you learn because knowledge is infinite. Now you've experienced dealing with 29 units and so now you know how to do it and now we know about galvanized plumbing and you know aluminum plumbing and electric panels and you know about property management. So, even if it was difficult and even if you lost me, you still learn some valuable lessons that would be there infinitely, because knowledge is infinite. Money comes and goes but knowledge once you acquire it, it's going to be there until the day you die. So, that is what I find beautiful in your story, because it was one of your first deals and you weather the storm and you managed to make it happen for yourself.   Scott: Yeah, that was the biggest thing I was pushing through and then also applying that knowledge for my future criteria. So, in terms of would, I do it again with that same property? Probably not. With what I know today, I probably would not have you know that I would have bought something else. However, here we are 14 years later, and I still own it and it's making nice cash flow for me and it's allowed me to buy the property. So, it's like okay, well push through and keep it in the portfolio. There you go, inflation will help you out.   Don: Definitely. So, let's talk about that deal that you've just done with investing your money as a limited partner. Tell me a little bit about the experience and how you felt about that, the size of the deal may be and where it's at so we can get more information about that.   Scott: Sure. Well, I've done a number of them and I've done it through different sources. I've done it through people that I know, I've done it through online marketplaces and others, not people I know, but that have a lot of good information and I can least research and I've done probably 10 or so different investments in other people's deals as an LP. It's been good for several reasons. Number one, it is, of course, passive investing. That's kind of nice.    Especially since I'm an active owner on everything else. It's nice to have part of my income stream be just classic mailbox money and it's kind of nice to be part of the portfolio. The other thing is it gives me exposure to markets that I don't know well, I only invest in other people's deals in markets that I like. So, I'm not just randomly saying, ‘Oh, this one says it's going to have a high return. So, I'm going to go with that one.’ No, I always start just like I invest with the market and the team and the property and go through a similar evaluation process as if I was buying it directly.   Don: What kind of markets would you say are the trending markets right now that you're looking at and you like?   Scott: There are a lot. I have some that I can mention that I like, I wouldn't say they're the only ones. But there are some that I'm particularly looking at and that I've invested in. Examples include Atlanta, couple Midwest ones, like Columbus and Indianapolis. I'm interested in Pittsburgh, although I have not yet invested there. But a lot of these you have to be very clear on what submarket that you're working in. You can't just say whatever.    Don: And how do you filter the sponsor when you decide to go on and deal with somebody because you got to trust that person and their ability to make something happen with that deal, right?   Scott: Yeah, so I'm going to be looking at the track record. And that'll be the first thing I'll start with just to see what they've done in the past, how they have been able to follow and implement and hopefully go full cycle on a particular business plan, and at least achieve if not exceed the original business plan, and looking at their team, and then I get down to the documentation they're providing. I somewhat give it the sniff test meaning does this come across to me as an experienced investor as more marketing than reality, and if I get anything like that where I think they're blowing smoke, then they get tossed pretty quickly. So, there's all that and then on top of that, that's about the sponsor. Then on top of that, I'm going to do my due diligence on the property itself and the market as well so that both aspects.   Don: Nice. That's very, very interesting. I think what I like about your persona as an investor is that you're very diversified. I know you also got into coaching recently. So how did that go?    Scott: About a year ago, some people started approaching me. I've been somewhat involved in the local scene and also done some public speaking and things like that. And people started approaching me about the potential to do some direct coaching. And it wasn't even part of my plan. And I said, Yeah, that could be interesting because the thing I find about coaching is that it's interesting and fun working with somebody serious enough to want to get into coaching, not just somebody who wants some information, disappears and never does anything with it, somebody who wants to apply and do something. I like working with that kind of person.    Yeah, that's one thing. The other thing is that I found that being a coach keeps me sharp. Usually, I am able to address most of the things that come up for most people, but at the same time, even if I already know it, or think I know it, I've still got to be very clear in my mind about what's the most important thing to communicate, what's the best process behind this, that's the best way to approach it? And that helps me as well. So, it's a mutual benefit.   Don: There's a saying for that, "Teaching is the best teacher."   Scott: Exactly. I didn't want to start some guru program or something like that. That wasn't my interest, never has been. And what I did was somewhat unique actually, in the coaching world. I do it purely hourly.   Don: Sorry for cutting you but I've seen people trying to get into commercial real estate, and I'm going to mention names, but people in the industry know, you know what I'm talking about and who I'm talking about, and I've seen people that are maxing out their credit card in a seminar. These are people that have nothing, they have no way to pay the bills, but this guru or this mentor is selling them on a dream. And then I saw it firsthand. I've seen a seminar where I've been there. And I've seen how these mentors charge older people $40,000 on their credit card, and if the credit card doesn't go through, then they're going to try five others. And that's mean, that's something you don't do.    Yeah, you could think you could help that person achieve success but what if you don't? It's also entirely on the person as well. I mean, they gotta want it and they got to be qualified to do that. So, it's not illegal, but it's just not moral in my opinion. I think it gives a ton of value to a person who's trying to get into that industry. If you offer mentoring by the hour, I think that there is a huge clientele for that. There's a lot of people trying to get into that and just don't have the straight-up $10,000, $20,000. So, whatever it is, you're charging, I'm sure it's reasonable. I'm sure if it's by the hour.   Scott: It's a lot less than hiring an attorney, that's for sure.   Don: Okay, so I know it's less than 200 to 300 bucks. That's fair enough. It sounds to me like a lot of people check that out. So yes, Scott, tell me what would be the best way to connect with you if anybody wants to learn from you, go through coaching or just to talk?   Scott: Sure. Yeah, the easiest way is to go to my website, which is bonvolo.com, that's spelled B O N V O L O .com. And on there, I have my phone number and my email and contact form and whatever works well for you. That's all there.   Don: All right, Scott. So, I want to say, first of all, thank you for coming to the show. I know it's been a long time coming, but it was sure worth it. One of the most interesting interviews I've had in a while and I'm sure people are going to contact you and get to know you a little bit. So yeah, thanks a lot, and we'll be in touch.   Scott: Thank you, Don. It was fun.   Don: Okay, Scott, you have a great day.   Outro: Hey, guys, I hope you enjoyed the episode. Scott is amazing, and he's one of my favorite guests so far. I just wanted to remind you that you could get a 30-minute phone call conversation with me and Eden if you give us a review on our podcasts on iTunes, it's very simple. Just get in rate and give us a review and then just shoot us an email at Hello@DonandEden.com and just copy the body of your review. And you will get scheduled for a 30-minute phone call conversation with us where we could talk about real estate, we can talk about investments, or we can just network and get to know each other. So, until the next time, you guys have a good one.   Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time!  

Joining us today is Brie Schmidt, a Chicago based real estate investor. She began her career in corporate sales while always holding her real estate license current. In 2011, she decided to leave the corporate world to become a full-time real estate investor. Since then, she has bought several properties in the Windy City and Milwaukee. In 2014, she started a brokerage company and in 2017 she started a conference business. Brie makes use of her extensive knowledge of constructing and managing a portfolio to teach clients about all aspects of buying and holding investments. In this episode, she talks about her career as an investor, how she started and how she got to where she is today. Brie discusses how and why she decided to focus on the Chicago & Milwaukee markets, criteria she looks for when deciding on a property and her plans for the future.  Episode Highlights: Brie’s Start as a Real Estate Investor Cap Rate Criteria for Properties Work-Life Balance Her Future Plans Connect with Brie: Website: Second City Real Estate  Social Media: BiggerPockets or LinkedIn Join Brie @ the Midwest Real Estate Networking Summit - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  - TRANSCRIPTION    Intro: Hey guys, today Don with interview Brie Schmidt. Brie is the first female investor on our show, so we are very excited to have her here. We really hope this episode will inspire other female investors to jump right in the arena of real estate investing. After listening to the interview, I have learned from Brie that this type of profession actually enables a future mom to enjoy both worlds have a very successful career and the ability to take as much time needed for recovery and raising your newly born child. Don and Brie will also discuss the best strategy of choosing a market which is going there and seeing it firsthand. I hope you guys will enjoy this show.   Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies.   Don: Hey Brie, welcome to the show.   Brie: Thank you for having me.   Don: Yes, of course. I'm very excited to have you as you know, you are the first female investor on the show. I've been trying to get a female investor for quite a while. And I know we've wanted to do this interview for a long time.   Brie: Yeah, I just had a baby. So, scheduling has been a little bit difficult for me.   Don: I could only imagine how difficult it would be to be a real estate investor and also being pregnant and taking care of babies. That must be requiring a lot of toll from you, right?   Brie: You learn to prioritize your time, right, and what's important and it's been something that I've been considering a personal mission of mine for a few years. When I started this business, I quit my corporate job back in 2014. So, I started real estate investing in 2011. I bought another property in 2012. I bought another property in 2013. And then I decided to quit my job and do this full time. 2014, I bought another 10 properties, and then in 2015, I bought another 12 and then bought a couple more in 2016. So, at the time when I quit my job, I used to work in corporate advertising sales. I'm like this is going to be great like I'm going from 50 hours a week and traveling all over the country. Now I'm going to be chill and I work from home and I'm self-employed. And for the first few years, I was working more hours than I was when I had a W2 job.    It wasn't until about 2017 that I was really like, wow, like I have started a couple of other businesses, I'm the Managing Broker of Second City real estate, which is an investment, boutique investment firm for agents. I also started a website business and it was like, well, what was the point of me leaving my solid W2 jobs to get 'financial freedom' if I'm working from the moment I get up to the moment I go to bed and weekends. So, when I knew that we were going to start planning for a family I made it a really big objective of mine to kind of reevaluate my position in the business and reevaluate what I was doing and spending my time on and work to shift it. So, I'm very happy to report that even before we got pregnant, I was down to about 30 hours a week, and I'm able to take a nine-month maternity leave, where I'm pretty much only working 10 to 15 hours a week currently.   Don: Nice, yeah. So, you get a lot of flexibility. And that's the advantage of being self-employed. And especially in the type of business that we are in, which during the years generates passive income for us. So, it enables us to really take a break when we need to take a break with anything that we go through in life. So yeah, I'm sure that that's been terrific for you and your family. And speaking of which, I want to ask you about the dynamics. So, you're doing your own thing as a real estate investor and your husband, what does he do? Does he spend more time with the kids or does he have a W2? Or how does it look like?   Brie: Luckily, we're both off work still. So, we did not get an easy child. She turned four months yesterday. I'm back to work maybe 10-15 hours a week, and I don't plan on going back for another probably four or five months. He's self-employed as well. So, he's taking off work as well. And I don't see him going back in the near future. When people tell you that raising a child is hard like I don't think I fully grasp that concept. But I mean, it takes both of us all day long, tag-teaming things to have your own sanity. Because we both need our own personal time. So that's how we work at currently. But we'll see when she gets older, hopefully, fingers out of this fussy phase.   Don: Yeah. Beautiful. So that's very exciting to hear that you guys are doing it right. So, tell us about your first deal. You said 2011. So how did you basically come up with the idea of quitting your job and start investing in real estate? And also, what were the difficulties back in a day for you when you were just trying to get into that market?   Brie: Well, in the beginning, I really had no intention of being a real estate investor. So, I've been licensed as a real estate agent for 15 years. I spent the first six months in the business absolutely hated it, quit and went into the corporate world. So, I always maintained my license, though, as a backup. That was kind of my plan. I always had a passion for real estate, but I started when I was 21, was really difficult to get people to trust your opinion and rely on you for advice when you're a 21 year old. Like, why would they listen to you when buying a house. So, it wasn't until let's see, I was 28 when I bought my first property.    We bought a three-flat in Chicago. And really the intentions weren't to be real estate investors, it was mainly purely out of convenience that the Chicago market is quite unique to understand that. So, Chicago is what we, I would consider to be a dense urban environment. There's almost 300,000 2-4 unit properties and just the city of Chicago. So, in a lot of the Northside neighborhoods where I was living, and where I've worked, some of them are between 30% and 60% of the housing stock is two to four units. So, it's very common, if you look at any block of neighborhoods, over half the house is pretty much our two to four-unit properties. But at the time, we had a really low housing stock of single-family houses. So, while my husband and I wanted to buy a single-family house because the housing stock was so low, they only represent about at the time, 15% to 20% of the housing stock.    The prices were very high, and it was very, very competitive. So, we thought to ourselves, yes, we would want a single-family house. They're about 3000 square feet here, but we're not even married yet, we don't have planning kids for a few years, we don't need a 3000 square foot house. So, let's buy this three-unit and then eventually, when we need more space, we can just deconvert the staircase and then make two units and the one and then keep renting out the other unit. And then eventually when we need more space, we can just deconvert the staircase again and now we've got a single-family house that we've grown into as time needed. So that was the original plan. There was really no plan to keep buying any more units either.    So, we did, because we were owner-occupied, we did our three and a half percent down FHA property. I had no idea what I was doing. Like I just looked at it as okay, my mortgage is 2200 and it rents for 2250. like boom, I'm profitable, right? Like, that was all I really how looked at it. I didn't know anything about vacancy repairs, cap-like nothing. We bought it vacant, we got it rented out right away and things were fine and dandy. And this was like great, we live for free now we can start saving for we were planning our wedding so, we were saving for this grand wedding. A few months after we bought the property, my father got sick. He was 60 years old, he was diagnosed with non-small cell lung cancer, which is a very aggressive form of cancer and went through 10 rounds of radiation, 13 rounds of chemo and in nine months and passed away.    Don: I'm sorry to hear that.   Brie: It was lightning quick, right? And that was with treatment. But the real kicker was he died one day before he was both to retire. So, he died before his 61st birthday. That one part really stuck with me. Like, I've watched my dad worked his ass off to provide for his family and he had been offered early retirement before and he always like, oh, well, after your brother graduates college or after you get married or after this, then I'll then I'm going to go do all these things, I'm going to go here and I'm going to go do that. And for him to get so sick so quickly, and I'll happen so fast. So, it really messed with me. It took me a while, maybe like six months of really thinking about it. But I sat down with my husband at the time it was like okay, we need to figure it out something out because I'm not doing 30 more years of the corporate, 50 hours/week stuff to just die and not be able to do anything with my life. So, we looked at a couple of different options.    We looked at real estate investing, obviously, because we've owned the property for about a year at that point, it was pretty easy. Like this could be something that we can do. We looked at learning to code so we could code from across the world and decided that real estate was the avenue we're going to take. So about three months later, I bought a second property. And then two months later, I bought a third. And then I really started getting into like reading books and listening to podcasts. I got involved with the bigger pockets community, and that's when I started researching other markets, and we ended up in the Milwaukee market.   Don: Yeah, so how many units do you own currently and how much time did it take to get to that portfolio?   Brie: So, we've got 97 units, 31 properties. The Chicago market is more of an expensive market. The average unit is about to let's say $150,000. So, while I love Chicago and think it's a great investment opportunity, you can't scale very quickly when it's $150,000 a unit like I'm not made of that kind of money versus the Milwaukee market when I was buying there was more like $30,000 a unit. So, to get there when I decided that we wanted to look at other markets, I looked at Indianapolis, Kansas City, and Milwaukee, only because those three markets are within driving distance. So, I'm a total control freak. If something went down, I wanted to be able to be there within a day.    So that's why I kind of chose those markets. And I, researched agents, I didn't know anything about any of these markets. And I found three 'investor agents' at each market and called them up and said, "Hey, I'm looking to invest half a million dollars. I'm coming into town, and I would go out with one agent Friday, one agent Saturday, one agent Sunday." And said, "I want to spend the day looking at properties. I'm not going to give you any criteria. I just want to see like if you were to spend $500,000, where would you spend it and why." So, it was a very interesting experience. I did that in every market to see where they were taking me, what neighborhoods what property conditions, and I sell them the Milwaukee market, really because of that market housing stock wise very similar to Chicago. It's a very dense urban environment. So, I understood that aspect of things versus Kansas City and Indianapolis for more like suburban, sprawling, single-family markets.    Once I got focused on Milwaukee, that was probably I started going up there every other weekend to get to learn the neighborhoods, because a lot of the areas where they took me, because that's where the investors go, I didn't like. They were what I would consider the D class. I wasn't comfortable walking into the apartments, I wouldn't have been comfortable going there by myself at night. So, I didn't want to choose that market. So I started exploring other neighborhoods myself. I probably looked until I found a neighborhood that I really liked. It was on the outskirts of some really cool hip areas, those only have maybe half a mile from like the cool scene. That numbers worked well, while they weren't as high as the 'investor areas,' they were still good returns, and I just felt comfortable. I saw a lot of promising things going on in the neighborhoods, a lot of gentrification, a lot of development that was going on, I felt comfortable walking around at night. So, once we focused on that area, that was probably May, we bought our first set of properties in July, we bought five properties. Then I bought another five properties in December of 2014. Then I bought another five properties in February of 2015. And I bought another three properties in May of 2015.    Don: So, when you're buying these properties, you're buying them with mortgages, or you're using other people's money?   Brie: Mortgages. So, we were doing just a standard commercial loan, but because the price points were so low at $30,000 a unit, if I'm going to a commercial bank or buying a duplex like what's he going to do with 60 grand, that's not worth their time. So, when I had met my commercial lender, one of the things he had told me was, if you could bundle them together, and then buy every couple of months, that makes it a lot easier for us from an underwriting perspective. You're planning on doing a property a month and they're all two-three units. We're really not going to be very excited about doing that.    So that's why I worked to bulk them up, I would find one or two anchor properties, and set the closing 60 days out. Once I got my one or two anchor properties, then I was able to look around for like, secondary properties. So, if only I bought the one or two, I was cool with that, because I really liked those ones and that's what I did. So, then it gave me another 30 days to find more properties to buy. I did direct mail campaigns, a lot of the properties I actually bought from the same sellers. So, every time I bought a property, I would send a letter to the seller, saying, "Hey, I'm glad we closed this. This is what I'm looking to do. Do you know of anyone or do you have other properties that you're willing to sell?" So, of the 18 properties I bought myself, I think four where maybe on the MLS, the rest I all got through networking, direct mail or buying from one guy bought like five properties from them.   Don: That's nice. So yeah, I mean, what I like is the fact that you actually did so much work in pursuit of a new market and that's something that not a lot of people do because a lot of people ask me, "How do I find the right market? How do I know where to invest?" And nobody's going to tell you that because markets change constantly. And you can hear that Orlando is a great market, but you hear it in a podcast, and that's two years old. So maybe now things have changed. So, the best way to pick a market is doing the legwork, which is exactly what you did. You just went there and you grind it. You just met people and you saw properties and you saw yourself and that's the best way to do things. And I think that's what led you to that success, isn't it?   Brie: Yeah, I agree. 100% People always ask me, "Where do you invest, because I want to invest there." And my response is always, "Are you going to buy the same car that I have? That's just stupid? Are you just going to follow what I'm doing?" Because that's what you think about how you get this...   Don: A lot of people don't understand that when you're a real estate investor, then you are the investor. So, it's basically your decision to make the decision.    Brie: Everyone's got different goals. One deal might, I might think it's awful, you might think it's great for completely different reasons. Neither of us is right or wrong. So really, it comes down to I always tell people, you got to sleep at night. That's how I judge pretty much everything I've done in my life is, if it keeps me up at night worried about it, then I know it's not the right decision. So, I would have been fine investing in Kansas City or Indianapolis as well. But for some reason, Milwaukee clicked with me and that wasn't based on anyone else's information. And I know a lot of investors to look at the stats, right? You look at population growth, you look at economic growth.    Chicago, which is an obviously major city, Milwaukee is a secondary city, but it's still 170,000 residents. If you look at a stat like oh, population growth is x, that's not true for the whole market. And so you can't just take these stats about income job and employment, whatever economic growth, and then assume that the whole city is like that, because I can tell you at least with both Chicago and Milwaukee, there are some areas that have 20% declining population and there are some areas that have 40% year over year increasing population. Some areas where the average income is $20,000 a year, some areas of the average income is $500,000 a year. So, it's so much more involved than just looking at a stat and each city and saying, "Oh, well, that applies the whole city, I can invest there.'' It doesn't work like that.   Don: Sometimes he does. Like, I'll give you an example. I was looking at this county, this property in Florida. And then it was very interesting. So, the population of the county was increasing, which is Florida. I mean, everything's increasing a property that I was looking at, in this specific city, that city was declining in population, and that's very unusual for Florida like you wouldn't see it. So, I started to research the county. And then I noticed that all the cities are declining in population besides this one city. And what I noticed was that the villages so that city, this entire area, back in the 2000 census, there were 8000 people there. And 2010 there were 54,000 people there and that's an enormous growth, right, and then 2018 there's 80,000 people in this city. So, what I figured out was that small cities in the county everybody was leaving for that big city that just emerged, right? So, every case is different, you can't really look at stats and think that, well, if the population is not growing, then I'm not investing. That's too easy, right? I mean, you can just go to Best Basis or City Data, and you can find that data over there and you would know what's going on with the city. But every market has submarkets...   Brie: And giving your scenario, if you were just to take that information and say, "Okay, I'm investing this county, right, because it's got an increasing population," but you invested outside of the villages, which has a rapidly declining population.   Don: Then I will be investing in a declining market. Yeah. Exactly.   Brie: Yeah. Well, you're not paying attention and actually getting down to the nitty-gritty of it and looking at the 'why', then you just made a bad investment.    Don: Exactly. And the best way to get to the nitty-gritty is just going there physically, which is what you did and I admire that because you spent three, four months in research, and people don't understand that, that when you're investing in real estate is when preparation meets opportunity. That's not me, that's Tony Robbins right there. And that's really true. Because you have to do your research, you have to do your homework and then investing becomes really easy because the opportunity just pops up. And I believe that's what happened to you with the Milwaukee market. Another thing that I wanted to ask you about these deals, so, you said you had an aggressive growth strategy which I always like to hear about that. So, what I want to know, is basically, when you started investing in these properties, what were the cap rates that you were looking for? Were you just buying off at market value, or you were trying to get a discount?   Brie: So, I was buying off of cap rate, but I wanted a minimum of 11% cap rate. I would rather pay retail and get a property that has stabilized with long term tenant versus doing what people call the BRR strategy, the buy-rent-rehab-resell or rent out strategy. I don't like doing rehabs. And I'll tell you this is a story. So, there was a duplex I was looking at. It was super cheap. It was like $35,000 and the rents were $1300. So, if you think about it, my God, I started $1,000 duplex that runs for $1300 and it was fully rented at the time and I passed on it. And it sounds crazy, those numbers are astronomical, but the basement foundation had been caving in.    So, it needed about $20,000 of basement foundation work. So even at $55,000 at $1300 dollars rent, but the way I look at it is that it is $20,000 of capital that if I deployed as a downpayment only, I could buy $100,000 of house. I could buy two duplexes essentially for the same price I deploy that capital differently. So, instead of putting 20% down on the 35 and then putting 20k into it, I said turned around and bought two duplexes for $50,000 each that were already rent ready. And instead of getting $1300 a month in rent, I got $2500 a month in rent. So, I use my capital, to me like the repairs on like doing major repairs on properties, A) it's time-consuming, B) it completely stresses me out, that keeps me up at night worried, like is this going to come in on budget, whatever. I've done a few times, every single time it stresses me out and I just almost doubled my investment by doing it the easy way. That's how I see it. So, I don't care if market value was $50,000 those duplexes or not, I still at the end of the day got a better return.   Don: Yeah, but I also think you were a little bit lucky when it came to the timing. You are investing in 2014 you said right? You started like buying these duplexes and you started really investing seriously, I would say in 2013, right? That's what you said.   Brie: Yeah, my Chicago properties, I bought 2011 - 2013 and then Milwaukee was like 2014 to early 2016.   Don: Yeah. So, if you look at Milwaukee and your investments there, I think it's safe to say that you invested at the best timing for multi-family because there were just picking up.   Brie: Absolutely.    Don: And that's why for you, you didn't even have to buy it at a discount because you had a natural appreciation. Of course, we never buy for appreciation, but it just happens to be the case in these specific investments. And so sometimes, it's just best to buy. People always ask when to buy, is this a good time? It's always a good time to buy. You should just buy because it's going to be fine. Whatever it is you're going to do, you're going to have a natural appreciation, you're going to have cash flow, and you're going to make money in equity. So, I think you realize that and you had the nerves and the guts to do it, to just go ahead and pull the trigger. And that's the difference between people that make it in real estate and people that don't, because, at the end of the day, there's just so much you can learn on theory. You got to learn by taking action and that's what you did. And I love that I think the way that you do things with just going there yourself and seeing it yourself and talking to people yourself and pulling the trigger is really the best way that you can get ahead in life. So yeah, I absolutely love that.   Brie: Well, I touch on a few points there. So first, I mean yeah, obviously taking action, right. So, the good part of it is, on my story at least, I spent about six months before I bought my first property. We started looking at Milwaukee in January and closing my first property right around the Fourth of July. So, I spent a lot of time up there. I probably saw 100 properties while I was up there and then continue to go up there from we did July was our first buy round, our second buy round, we closed early December. So as soon as we closed, I started going up there, again, looking at more properties. So, by about October, it was at the point where I could walk into a property and in five minutes tell you what I paid for it. But it was getting like that intuition was really important, right? So, you don't want to just go, like, "Hey, I'm going to buy 20 properties this year" and just go do that. You definitely want to get to a point where you're trusting your intuition, you're able to, estimate runs off the top of your head, you're able to go into a property and say, "Hey, if I, do new cabinets and new countertops and change out the flooring, it's going to cost me x and it's going to increase my rents to x." You won't be able to do all that off the top of your head so that you're sure that you're making an investment decision now.    On the flip side of that, my first year in Milwaukee, I probably lost $20,000 in just mistakes because I went so fast. So, I was really cocky, which I'm just a cocky, arrogant person. Like the first properties that we bought five properties on one of the properties that we bought, they were actually all owned by a family. So, the one guy owned one property, and then his mother in law owns the other four. And he'd been helping manage the whole portfolio they had like 20 properties total as a family. So, I brought him on as a property manager, because he was familiar with the properties had been for years knew all the tenants. So that was a really easy transition. So, I just went right ahead and started buying more. And then I went ahead and started buying more.    Well, what I didn't do and what I should have done was I wasn't really paying attention to his performance, right. And he was great at certain things. He was phenomenal with tenants, knew all their names, their kids, soccer games, whatever. But it got to the point like he had no experience with any sort of accounting, the business side of things. So, it wasn't until about a year later, after I'd already bought all my properties that I heard a horror story from another investor friend of mine with their property manager, and I decided to go in and do an audit because I was going up there once a month. He’d go deposit like 10 grand in my checking account, I'm like, well, who's this for? He's like, I've got the receipts in my pocket.    So, I'd go up there like once a month, and he'd hand me handfuls of crumpled up receipts of who paid rent. I'd go to my hotel room with a wine bottle and sit through them all and be like, Okay, well, so and so wasn't paying rent for two months, and he's like, Oh, really? No, there was no one tracking this stuff. Secondly, we had like 20 people that weren't even unleashed it. No, he was like, Well, like I know them from school or they know them from my church, they're fine. I'm like we have to have leases, something has to be in writing. So, I end up having to fire him after a little over a year because of these things. Because again, he was really great at half the business but not great the other half and I needed someone that was great at all of it. So got through the stakes, vacancies again, tenants that didn't pay for like two months and no one was paying attention. So, we probably lost 20 grand our first year and just those sorts of mistakes because I went so fast.   Don: Yeah, but you've learned that a bad manager is probably one of the things that would drown your property. Basically, I mean, I would say a bad manager and utilities would be the things to really affect your NOI at the end of the day. But these are things that you learn by taking action and sometimes it's okay to lose some money to learn these lessons. What would be your plans for the future now that you're already a serious investor and you have a very decent sized portfolio? So, what would be the plans for the future now?   Brie: By the way, if I would say, I have not bought a property since 2016. Just because again, I was really working 60 hours a week, I knew that we were going to be starting a family. I also mentioned I started a couple of other businesses. So, I started a brokerage company in 2014 in the Chicago land market. We're a boutique brokerage company that works with investors. And then I also started a conference business in 2017. It's a two-day conference in the Chicago market. Because I found good management A that I can trust with my properties, I'm really not involved with the day to day management of them anymore. I get looped in on the big stuff, strategy stuff. But that really took off 20 hours a week from my plate once I hired out reputable management, and let me focus on my other businesses. So that's really been my focus is doing that and that now that I'm taking nine-month maternity leave, making it easy for the next few years, essentially.   Don: That's great. So, what would be the best ways to connect with you in case anybody wants to get in touch or maybe get some tips from you on a real estate career?   Brie: Absolutely. I'm always on BiggerPockets. And you can probably find me on LinkedIn. And then if you're interested in attending our event in spring, it's MidwestRESummit.com.   Don: Nice. Okay, that's great. So, thank you very much, Brie, for coming on the show today. As I mentioned, I'm really excited to have a female investor on the show. And as I thought your story is just phenomenal. So, I want to wish you good luck in the future as well.   Brie: Thank you so much. Thanks for having me.   Don: Okay, you have a great day.   Brie: You too.   Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.  

In today’s episode, our guest Andrew Cushman was a chemical engineer for more than seven years. In 2007, he and his wife decided to follow their entrepreneurial spirit and entered the world of real estate. Their journey began in flipping single-family homes, in which he completed 23 transactions- purchase, rehab & sell. A few years later, he made the transition into the acquisition and repositioning of multifamily properties. Today, he continues his success in the nation’s SE market.  Andrew discusses how he went through the recession of 2008, his strategy for buying single families and multi-family properties, why he chose the Southeast market. Andrew also shares the pricing strategy he used as well as how he decided to get into the mobile home park asset. Episode Highlights: Learning the Business & Becoming an Entrepreneur 2 Categories within Mobile Home Parks Bad Market or Bad Strategy? His insight on the Next Recession  Connect with Andrew: Website:  Vantage Point Acquisitions   - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - TRANSCRIPTION   Intro: Hey guys, today I am interviewing Andrew Cushman. And I'm in a very good mood for various reasons. Number one is because I'm very happy to interview such an amazing individual. Andrew is really a professional and I had the chance to talk to him a little bit before the show and kind of understand how he thinks. It really brings me to the point of understanding again and again, that it's all about the mindset, it's about faith or fear. If you're afraid, then you're going to be paralyzed, and you'll never succeed in accomplishing your goals. Cause with no risk, there's no reward, it's as simple as that. You'll also hear during the interview, how Andrew is a thinker and he goes against the herd, which is something I personally believe in.    I think it's always important and smart to go against the herd and analyze your own life and environment with total faith in yourself and your abilities. I think really, Andrew is that kind of person, which is why I enjoyed the conversation with him so much. The second reason why I'm in a good mood is that me and Eden are getting close to this mobile home park deal that has 70 units. I had a great time underwriting the deal and learning more about the specific market, where it's located. I guess I'm grateful. I'm just truly grateful for doing what I love, really being able to do something that is big and invest in real estate.    Sometimes I think about it, and I can't believe it, that I'm doing these things. And I really want to help others achieve the same goals and change their lives. So, I guess this is an opportunity for me to say that I'm grateful for you guys as well as our listeners, and I hope you are learning what you need here. And that in the future, when you are successful in real estate or in a future deal, then you think about us and the stuff you learned here. I think that's about it. Without further ado, let's get started. Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies.   Don: Hey Andrew, welcome to the show.   Andrew: Hey, how are you doing? Glad to be here.    Don: I'm doing just fine. Actually, we just had a conversation before the episode started. And I got to say, I had a lot of fun talking to you about what you do and your outlook. And also, I found out that we have a lot in common, right?    Andrew: Yep.    Don: Yeah. But before we get into that, how about you tell us a little bit about your background and how you got into real estate, to begin with?   Andrew: Yeah, I took the standard path into real estate and went and got a chemical engineering degree. But I always knew that was just a placeholder. It was just something that I could earn a decent income. So, I figured out what I would really want to do because I knew I wanted to be an entrepreneur. I worked as an engineer for seven and a half years, married a wonderful woman who had the same ideas I had about trying to be an entrepreneur. And so, we tried a variety of things. And they were fun and minorly successful, but they weren't something that could really accomplish her financial goals. And then, I think in 2007, we found, we discovered home flipping and we started doing that here in Southern California. We did our first one and then I said, "You know what, this is our best shot." So, went to quit my job. She did the same thing two years later.   Don: That's in 2007. So that's right before the crisis.   Andrew: We're at one of the epicenters of it Southern California, there were condo complexes here that dropped 70% in value. It was a great time to get into real estate because everyone was terrified. We had no competition. We'd go buy stuff at 50 cents on the dollar, fix it up and sell it at 80 cents on the dollar. So, whoever's buying it was getting the best deal around. And so even though the whole thing was collapsing, we were still making thick margins.   Don: Wait, wait, wait, let me figure this out. So, you were buying at 50 cents on the dollar 30 cents on the dollar you said in some cases, and you were selling it for 80 cents? How come? I mean, I know nobody was buying anything back in 2008.    Andrew: There's no such thing as a bad market only a bad strategy, right? And single-family houses, there are always some people who have to move for some reason. Their job gets relocated, family changes, whatever right? So, what we would do is let's say a house is worth 400. We'd say we buy it for 300 or 325. We've renovated for 25,000-50,000 whatever required but instead of listing it for 400, we list it for like 375. So that we were the cheapest and nicest house on the block. So whatever rare buyer was out there, they'd always come pick our house. It never took us even in the worst of the crash, it never took us more than 30 days to sell a house once we listed it.   Don: That is just a terrific thing. And you know what, I'm interviewing a lot of investors and entrepreneurs here in the show, I haven't yet found somebody that did that kind of strategy back in 2008. And that's very interesting. And now that I'm thinking about it, it really makes sense to me because I spoke to you a little bit before the show. And I also see how you think right now as an entrepreneur, and I can see the similarity in how you were thinking back then, right?    Andrew: We listed with a local realtor who was really really good. And I remember walking and deal with his office and another realtor sitting at a desk. He literally looked at us and said, "You're flipping a house, are you crazy?" And I was like, everyone else is creating, this is like the biggest opportunity we've seen in forever. So, we did that for about four years and then after three-four years, everyone else started to figure it out. And then also there wasn't that much equity left, it was still a good business, but it wasn't nearly as good. And we kind of said, well, what's the next big thing?    Now all these people losing their house, they can't buy another one for 7-10 years so they got to live somewhere. And the people who still could buy a house, they're scared of it. They don't want to buy a house. So, they still got to live somewhere. We're in a big recession. So that means we're eventually going to be coming into an expansion. So, if we add those three things together, apartments are probably going to do really well sometime soon. And so, we went and found a mentor, a guy who had done 800 units, we hired him to teach us the business.   Don: How much you paid him?    Andrew: I don't remember it wasn't cheap, but it was worth it.   Don: I love it that you had like an itch of doing something bigger. I feel the same thing as an investor. Like no matter what I accomplished in real estate, there's always room to grow as an investor, there's always something bigger you can do. And that's just amazing because you were doing single families, you're doing great back in the recession. So, you were making money when everybody else was losing money, right? And then you're starting to think about how I can make even more money? So how many single families have you flipped up until you made that decision to move up the ladder of commercial real estate?    Andrew: We were being very careful to only buy deep margin deals so we didn't do a ton. I think when we switched to multifamily, I think we had done like 25 flips in those couple of years. Nowadays, you hear guys are like does 70 a month right? But it's also much, much, much smaller margin. So, we did that full time for four years. And then our first apartment complex was mostly vacant c minus property on the other side of the country out in Macon, Georgia. That was 92 units. We syndicated that which course means we pulled investors money.   Don: What year was it?    Andrew: That was 2011.   Don: So back in 2011, you're signed to thinking to get into multifamily and commercial real estate and you're looking at Georgia when you're living in Southern California. So basically four and a half hours flight.    Andrew: Yep.    Don: So why did you choose Georgia- Atlanta?   Andrew: Idaho and Utah are getting overrun from people fleeing California. And then in the southeast, it's not just baby boomers because like Atlanta, for example, they're becoming a tech hub. They're also becoming an entertainment hub. Atlanta did or Georgia did more dollar business in the state of Georgia than it did in Hollywood last year.    Don: No kidding.    Andrew: Yeah. Well, for example, Stranger Things filmed in Georgia and a lot of the Marvel movies filmed in Georgia. There are tons of these huge sprawling film studios. Basically, what it boils down to is, is there are tons of people and jobs moving to the southeast. And to me, that's Florida, Georgia, and the Carolinas. And those are the two things that drive long term apartment performance and rent growth in jobs and population growth. And we're still not building enough apartments. We're still not building enough houses. So, there's the long term shortage. They'll be dips along the way but the big picture is very strong for multifamily, even single-family rentals, I would say, for probably at least 2030.   Don: You and I have a few things in common. As I mentioned, we're both started in single families, and we've ladder to doing some multifamily and commercial real estate. Also, we have another thing that we share, which is mobile home parks. So, I know that you just bought a mobile home park. I'm just looking at a seven-unit mobile home park deal right now that I'm probably about to close on. Let me ask you about your deal. You said you bought a mobile home park for the first time in the past year, right?   Andrew: Yeah, it was last December.   Don: I want to ask you why and where if you don't mind.   Andrew: It's up in a small market outside of Augusta, Georgia. And we didn't buy it because we necessarily want to be mobile home park operators. Not that there's anything necessarily wrong with that asset class. I know a handful of guys are doing tremendously well in the mobile home community space. But the reason we purchased it is it's very much in the path of growth. We also already own 100 apartment units, literally a half-mile down the street so we know that market very well. Really, it's a development opportunity. So, we purchased it to consider changing it into an apartment complex or developing new apartments there. But the beauty of it being a mobile home park is not just buying a piece of land... Don: It cash flows.   Andrew: You buy a chunk of land, you gotta pay the taxes, you've got holding costs, you might even have financing and then it's purely speculative. For this if for some reason the development doesn't pencil out, we've got cash flowing bubble I think happened at this point, we could sell it for more than we bought it, it was almost as close to a no-lose situation.   Don: So, you can buy a mobile home park based on two categories. So, you can either buy it for the land value, because remember, mobile home parks are big. They sit on six acres, seven acres, eight acres, sometimes in the middle of the city, especially if it's a growing city that had experienced significant population growth in the past decade. You'd still be able to find mobile home parks closer to downtown. And the beauty of it is that this is cash flowing opportunity to maybe develop something bigger like apartments and so we know right now apartments are basically sold for I would say low cap rates, so 5.5. So, when it's that low, then it makes sense to develop, right? And that's why I'm doing it. And that is why you're looking into it. How many acres is that park, what are you going to develop on it?    Andrew: Three acres, but as you said, part of the appeal of it is it's very close to downtown, you can literally walk to the Main Street. Due to the topography and the zoning restrictions and like the code that they have, they're probably only going to be able to put 20 to 30 units on it. As I said, it will be centrally located and actually the road that it's on is going to be widened in the next 5 to 10 years because the city's expecting that road basically becomes the new main road through town. We've got a set of drawings right now for 24 units. So, I'm probably going to look something like that.   Don: Nice. If you're looking to buy a mobile home park in Miami, for instance, you're not going to find anything based on income. Everybody's going to ask for 20 million bucks for that piece of land. So, you bought it based on what approach, based on the value or based on the income approach?   Andrew: It was bought more on the income approach, knowing that we can improve the income on it and if we decide not to develop it, then we can just hold it or it'll be worth a lot more than we paid for it just because we've increased the income. So that was part of the risk mitigation is we budgeted to do a little bit of cleanup improve the NOI on the mobile home park itself. Just that way, if for some reason we decided we want to get out or don't want to do the development, and we can still make a profit on it.    Don: You've syndicated over 1800 units. You're very passionate about real estate. And that's why I think it's important to understand real estate and the income approach as a more of an idea, rather than always focusing on one thing and not even hearing about the rest. Because you are able to do that being creative because you are able to look at a different type of deal to get to where you want. And I love that, I think that's something that is truly admirable.   Andrew: There's no such thing as a bad market, just a bad strategy. In today's market, we're having to adjust our strategy a little bit. Much harder to buy stuff that makes sense. And I see a lot of deals getting done because people can do them not because they should do them. You're going to pay $70 a square foot for C class property that you have to put another $10 A square foot into the end up at 80, or you can build something that's brand new for 100 or 105. It's like, "Well, wait for a second, why am I messing with this 40-year-old property when I get a brand new one for just a little bit more?"   Don: Yeah, definitely. You know what, I heard from one of my guests on the show, Bill Ham and he said something about the next crisis in multifamily being the properties that our C/ C Minus because these properties are old, they consist of galvanized plumbing. And then what really happens is that this entire plumbing system is about to collapse. And then people are buying these properties for very low cap rates because of supply and demand and everything has been going in the market.    So, it's very, very likely that these properties are the ones that are going to drive the next crisis in multifamily. And then they will be dropping in their price and people will default on their loans. I researched that strategy and I thought that it was genius, the way he thinks about it. And then I'm thinking by the time I get back to multifamily, it's either going to be developing which I'm doing, I'm developing also a 30 unit or it's going to be purchasing these properties are older but only after they drop.   Andrew: It's funny. When you're comparing an A-asset to a C-asset or B-asset to a C- asset, you have the C-asset will always look better on a spreadsheet. But they also never perform in the real world as they do on the spreadsheet.    Don: Exactly.    Andrew: The expenses are always higher, the economic vacancy is always higher, the headache factor is always higher. And then like you said, it's funny, everyone just looks at the net operating income and all the CapX stuff is put below the line. Well, guess what, when you own a property, it doesn't matter where on the p&l that CapX is, it's still coming out of your bank account. And if you've got pipes breaking underground, and all kinds of capital expenses going on, it might not technically affect your NOI, but it will affect your ability to make investor distributions.    What I like to say about those is if you're comparing as an A to a C or B to a C, you say, well man, returns on the C looking a lot better, is you know, the grass is always greener over the septic tank. And I do agree that the risk with those going forward is greater than with A and B not only for the mechanical issues that you just mentioned but also whenever we do get a recession, the next recession is unlike the last one is not likely to be real estate driven. And whenever we get into a recession, typically the people that suffer the most are the lower-income hourly wage workers. They don't have to lose their job, they get their hours cut back by 20%, they can't make rent. And that's typically your low C renter. And so those C properties will be the first to suffer and they'll also suffer the hardest where B and A stuff based on our housing shortages will probably do just fine. In fact, if you even look back at past recessions, typically A and B class apartments as a whole rent kind of many cases hold steady. May come down a little but you're typically not looking at a huge collapse.   Don: Interesting. Okay. So, in that case, I got to ask you, what do you think is going to drive the next crisis? Andrew: Well, what's going to drive the next crisis will be something out of the left field that no one's expecting. That's typically what drives the crisis right. Now long term big, big picture Robert Kiyosaki-ish type viewpoint, where we've got a huge problem with student loan debt and with federal debt. It's what we're currently doing as a country, both as individuals and as a whole. It's just not sustainable. And there's going to be a reckoning at some point. But we're really good at kicking the can down the road. So, who knows when that's going to be. In the short term, we could inflict damage on ourselves, right? If we take the whole trade war thing too far, poor legislation, for example, back in 1986, they changed the tax rules, and that created a big problem in real estate, right?    So, they're self-inflicted wounds, and then there's external. So, if things are looking actually a little bit better right now, but I wouldn't say good. If Europe goes into a recession, well, that affects us. Can't say exactly what's going to drive it. And keep in mind expansions don't die of old age. Australia has been without a recession for something like 26 or 28 years, but it's been almost three decades. Nothing that says, "Oh, we have to have a recession because it's been too long." It just doesn't work that way. right?    Don: It typically works this way.    Andrew: It typically does. Yeah. But the thing is, is our economy does no longer look like what it did from about World War II, up until maybe the early 90s. Right, where we were kind of our own insulated standalone economy. Globalization and IT and tech have really changed everything. I know other apartment operators that have 20 employees and 15 of them are in the Philippines and they're paying and $5 an hour. There are cycles that definitely can predict the future to some degree. We're looking at the past, but the world is a very different place really just in the last 15 to 20 years. And it has been for I'd say battling a world war two up until the year 2000. So, I think it's a little more difficult to say. We're all a lot more interconnected than we used to be.   Don: Yeah. But you know, it's kind of weird that you're saying that the C/ C Minus properties are going to suffer the most because what I hear from other people, they're saying just the opposite. They're saying that once there's a recession, then the rents are going to compress. And that's going to come off from the top. Which means that A-class properties are the ones that people aren't going to be able to afford any more. So what I'm thinking is that you're putting the assumption and I understand where you're coming from, but you putting the assumption from the premises, that it's going to be the lower class population that's going to suffer.   Andrew: I would say that is probably one of the most popular myths or half-truths in the multifamily world that is taught to everybody. It is not true. Reality is half of it is true. In a recession, yes, people leave the high priced luxury A plus apartments and they move down to an A-minus or B or something like that. And then where it starts to go wrong is then people say, oh, yeah, and then everyone from the Bs moves down to the Cs and then no one wants to go past the C and so the Cs do really well.    The reality is the people in that C demographic, they are already at the limits of affordability and when their hours get or they lose a job or the car breaks down, they have no margin for error or recession or drops in income. If you go look back at previous recessions, those C properties have the highest vacancy, the highest delinquency and then the most amount of problems. So yes, it's true that it comes off the top. The top-end suffers, but so does the very bottom in many cases, even more so.   Don: Yeah. And I'm thinking about a strategy. Maybe you should be looking for newer apartment buildings or maybe like if you're an apartment operator, right now trying to buy a property, maybe it's best for you to look for a new building that you could rent for not a whole lot of money. So that people could afford it no matter what happens with the economy and the numbers still work. And these deals are out there. You can definitely find them. It's not easy, but it's definitely there. Would you agree?    Andrew: There's always deals. It's just like you said right now, not only is it harder to find them, but there are far more people looking for them.    Don: Definitely. Yeah, I would say what I think happens is that a lot of people were very successful in the past few years with multifamily, because multifamily really performed well, especially during the crisis too. So, a lot of people made a lot of money. And when you make a lot of money from something, then it becomes something you're very knowledgeable at. And so, then you go ahead and you try to teach it to other people. But you teach something that is not really accurate because you're teaching a student to do something that you did, or you started doing five years ago. But then the market was different.    So maybe you're teaching them something that is not really up to date. You see a lot of students coming off from the streets and trying to make millions in an industry that it had changed, right? And so, I think like a real estate investor, you should always try to examine the current situation because real estate is not just about picking the right asset class, it is also about picking the right asset class at the right timing. People miss that point. And I see that a lot because I talked to a lot of people. It's about timing. It's about figuring out what the economy is doing, figuring out what you believe in as an investor, right?    When you become a commercial real estate investor, then this is the point where you need to start-stop listening to other people and you need to start listening to what you think and what you believe in and make your decisions based on that. And I think that's going to be a great way to conclude this episode. I want to ask you, Andrew, what would be the best way to connect with you who wants to invest with you or learn from you?   Andrew: Yeah, you can always connect on BiggerPockets or on LinkedIn. But if you actually want to really connect or possibly have a conversation, then there's a Contact Us form on our website. So, you can just google Vantage Point Acquisitions. Or it's just, the initials of that vpacq.com. And, yeah, that's an easy way to reach out and connect.    Don: Wonderful. So, Andrew, I want to thank you for coming to the show. I really had a lot of fun and also talking to you before the show, and I wish you to be successful in whatever it is you're going to do in the future and stay in touch.   Andrew: Alright, likewise, take care.    Don: All right, thank you very much.   Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.

Kevin Amolsch, based in Denver, Colorado, is a very passionate real estate investor. He served 4 years in the US Army right out of high school and worked as a mortgage bond analyst for several large Wall Street firms. In 2008, he started his own financial institute, ‘Pine Financial Group’ which is a nationally known hard money lending company. Kevin is the author of The 45 Day Investor and is recognized as an expert in real estate finance.    In today’s episode, Kevin talks about his start as a real estate investor, raising funds & hard money loans and his 13 unit deal on an assembled lot. He discusses his plans for the future and why keeping your focus is essential.    Episode Highlights: Kevin’s Portfolio Details Process of Assembling Lots His Business Ethics Future Plans for Pine Financial Group   Connect with Kevin: Website: pinefinancialgroup.com YouTube: Pine Financial Group Channel  - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - TRANSCRIPTION   Intro: Hey guys! Today Don will interview Kevin Amolsch. Kevin is a single-family investor who is based out of Colorado and also does hard money lending. Nowadays, Kevin is in the midst of a 12 townhouse development. What I find interesting is how diversified Kevin is and the commonalities we share. Me and Don also started at single families, moved up to commercial and we are currently developing a 30 unit multifamily in Hollywood, Florida. One of the most interesting things we have learned from Kevin is the process of assembling two lots and approving it with the city. I hope you guys will find the interview interesting and enjoy the episode.   Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies.   Don: Hey, Kevin, welcome to the show.   Kevin: Hey, Don, thank you so much for having me.   Don: Yes, you're welcome. I know you're a single-family investor and a multifamily investor and you also focus on raising funds and then doing some hard money loans and that's the type of income that you generate. So that you do a lot of things and for that reason, you're on the show, because I bet my audience and our listeners have a lot to learn from you. So, the first thing that I would like to ask you is that the first time that you start to look into real estate.   Kevin: Right out of high school, I got into the Army and in the Army what you find is that you don't make a lot of money but you don't spend it either. So, I was growing a little bank account, I was trying to figure out what to do with it. So, I started reading books and one of the ones that I read it most of your listeners probably know is 'Rich Dad, Poor Dad.'   Don: Yeah, the famous purple book. Okay, guys, if you haven't read it, then please do yourself a favor and get on with it.   Kevin: Yeah, I mean, that's got to be a staple. I don't know if I know any successful real estate investor that has not read that book. Kiyosaki favors real estate. So, I was attracted to it and I started reading more and more and more and I ended up buying my first house. I was just turning 21 at the time. I got out of the Army, moved into the house, moved into some roommates to pay my mortgage for me. And then two years later, I moved out of it and kept it as a rental. I was cash flowing 300 or 400 bucks a month. I saw the value going up. And I knew that real estate is what was going to make me rich. So, I started focusing on it, and I turned it into a career as I was working my way through college.   Don: Amazing. So, what did you study in college?   Kevin: Yeah, I got a degree in finance, which does help. You don't necessarily need a degree to be successful in this business.   Don: Definitely. I always say that on the show that I never went to college. And I don't think in today's world, it's a necessity. I think it's something that you want to do if you want to become a professional if you want to become a lawyer or a doctor, and I think it's definitely for you. If you want to become a successful real estate investor, I don't think it's going to hurt you but I don't think it's something that you need. Because information and gathering knowledge is so easy today with podcasts and books and everything. You did go to college and you studied financials and you became the president of a company that does financial some hard money loans. I'm sure that must have helped you.   Kevin: Oh absolutely. But what you learn in college is more like you said, Don, it's more about the corporations and corporate finance. And small businesses are all very different. I mainly went to college because I was getting it paid for and I had the GI Bill paying me every month to go. So now I need a lot of sense for me. I was using student loans to buy houses at the time, it was a good fit for me. I'm not discouraging people from going. Don't get me wrong. I do agree with you, it is a positive thing, but you don't necessarily need it.   Don: A lot of people go to college and I see that from my home country. I'm from Israel. When you live in Israel, you go to the Army, it's mandatory. So, for us, we don't have a choice. So, we got to go for three years and then women go too, they go for two years. So, by the time we get out of the Army, we're already 21 so some of us you know, after the experiences we've had, we want to go and travel, get to see the world a little bit. And then by the time we get back, we're 22, women 21. So, a lot of people are very stressed. As a reality check, and they're starting their lives, but they're 21. So, they feel that they have to go and learn something so that they can have a degree so that they can feel safe about themselves and good about themselves. I know here in the United States kind of different because you're fresh out of high school, you can go to college, you're doing that when you're 18. So, then you finished by the time in 21-22, and then you have a lot of time to do things with the things you've learned. So, I know it's different. Maybe it's not my place to talk about this. But I think, still, wasting time or investing time incorrectly is a very big problem. And I think if you're investing it in something that you don't know what you'd want to be dealing with in the future could be more of a liability than an asset, even if you finished by the time of 21. Don't you agree?   Kevin: I totally agree.    Don: Yeah. Okay. Let's talk more about real estate. So, I know now you own 20 units. So, you have 20 doors, some of them single families, some of them multi-families, and you're based out of Colorado, Denver, right?    Kevin: The western side of Denver.    Don: Yeah, so the Denver I must say, so Metropolis area. Your properties, are you holding primarily in Colorado?   Kevin: I got eight properties in Memphis and the rest of everything I own is in Colorado. Looked at other areas, but it's difficult to have properties outside your own backyard. So, it's been my preference to try to stay close.   Don: Yeah, definitely. So, these units, you said few of them single families and then some of them are duplexes or triplexes?   Kevin: Yes, some small multies but let me give you an idea. I am shrinking my portfolio right now. I had a fourplex that I had a lease option on and my option was about to expire, I ended up exercising the option on that and combining it with the next-door neighbor's lot. And now we're building 13 units. Those 13 units are going to be for sale. So, it's a for-sale product.   Don: That's very interesting. Let's talk about that. So, you basically had an option to buy, right? So, it was a lease option. And then you exercise the option and then you purchase a duplex, right there was a duplex you said?   Kevin: It was a four-unit and I had a 10-year option on it. And so, I exercised it after 10 years, so I already had a pretty low basis in it.   Don: How much consideration did you put when you put the agreement?   Kevin: Oh, I've never put the consideration down.    Don: Okay, nice. So, you bought those four units for whatever price that you had on the option to buy it. And then you've basically combined the other lot next to it, right? So, you basically did a folio combination.   Kevin: Yeah, we just did a little assemblage. Tracking down that neighbor was an interesting story. But I ended up finding him on Facebook. Messaging him on Facebook, because he would never answer his door when I knocked on it. He was nervous. So, we hired a real estate broker. So, the real estate broker and we spoke and he got a full price offer on that property. But you know what, it added more value to me since I own a lot next door than it was who was willing to pay for it. And then we put the two together and created a nice little project that's going to make a bunch of money. But that's just one example. So now I'm going to be down four doors because I converted my for rent product into a for-sale product.  Don: Yeah, but you're going to be up 13 doors when finishing the development and then you could sell them or you can hold them in, that's up to you right? But I want to ask you about the assemblage. So, you assemble the two lots and so you paid a premium for the lot, obviously, because it makes sense to you. But when you assembled the two lots, what was the process of doing that with the city?   Kevin: What I did was hired a consultant to walk me through that process. That's not my niche. So, I would rather hire someone that's much better at that. I hired somebody and we had an architect involved. And we came up with a plan based on the Denver Code of what we could build. And then we do a pre-development meeting with the city to make sure that they're on board. And then we push it through the process after that meeting.   Don: Nice. So first of all, you went to the architect and you came up with the plans because I'm also developing right now with 30 units here in Hollywood. So, I know that's the first step. So, you went to the architect, you develop the plans, and then you go to the city and try to assemble the two lots?   Kevin: Yes, you get the second lot under contract. And so, you have control before you spend any money on your diligence or your architect. And then they're going to layout a footprint and you know, with the height restrictions, setbacks, all of that and then you can use that information to determine how many units you can build. Then you pull your comps, you find out what each unit will sell for, and you just do a pro forma, starting from the value working your way, all the way down to your profit. And assuming that makes sense, then you go to the city and work towards approval and an assemblage. If it doesn't make sense, and I would have let that second lot go.   Don: So, when you did a contract with the other guy, you probably had the contract for a long due diligence period or inspection period.   Kevin: Yeah, we do like six-month diligence.   Don: Nice. So, you took that six months to figure everything out with the architects, but you did have to come up with some money down to the architect, right?   Kevin: Yeah, yeah, there's a little risk there because you're paying the architect. That's right.    Don: So, what would you say that risk was like 10,000?    Kevin: I don't remember that number, but it's probably close to that.   Don: Okay. So, I know that you have a company that generates one income stream for you, and then the income you make from your company, you invest in real estate, is that correct?   Kevin: Yeah. Let me give you expand on that just a tad. I don't want to spend too much time on this but my passion is finding and structuring real estate deals. And what I've learned about that is the deal structure and the negotiation with the seller always comes down to the financing. So, I migrated to the financing side of this business. Pine Financial raises private money, lends it out to other real estate investors. Because I want to be involved in deals on that side of it. Then I use the profit to either reinvest back into the company, which I do quite a bit. And then you and I spoke earlier too that I also pull some money and distributions out so I can invest in real estate for my own personal portfolio.   Don: Yes, definitely. So how many times did it happen that you lend money to a borrower, and then they defaulted, and you took the property and that became part of your portfolio? Did it ever happen to you?    Kevin: I don't do that because it's not my money that I'm lending to them necessarily. And I invest in my own mortgage funds. So, I guess technically I have a piece of it. But let's say I have one mortgage fund that's about $25 million. So, let's say that fund invests in a deal and that deal defaults, well the fund owns it, not me, per se...   Don: You’re going to foreclose on it? So, you're a money middleman?   Kevin: You can look at it that way. Yes.    Don: Yeah. Interesting. Okay. So, when is this project of 13 town wholesale's going to be completed?   Kevin: It's delivering probably next week or waiting on our certificate of occupancy. We already have eight of them under contract to sell. So, we're expecting closings in the next week to two weeks.   Don: Wow! You must be very excited. I know I'm developing right now, together with my partner 30 units, as I mentioned. And I've done a lot of things in my real estate career but that is definitely one of the most exciting things that I've done because it's like something that you see coming from scratch from a lot, or it's something that you see from your mind because you've been thinking about it and then you see it becomes a reality. And that's super exciting. It's so fulfilling, right?   Kevin: I totally agree. And it's profitable.   Don: Which is the most important thing. So, what's the plans for the future now that you've tasted the forbidden fruit of development? Are you going to keep doing that or you're going to get back to the financial part of things?   Kevin: Now I'm going to stick to Pine Financial and in fact, we're refocusing on it, my team and I, and we're going to see some growth there. So, I'm going to focus on that. The markets got to shift at some point, no one has a crystal ball, but everyone's talking about it. I don't know when but I do think that will see some type of correction. At that point, I think would create some good buying opportunities. So, I might increase my portfolio size at that point. But I'm not in a hurry, I'm going to focus on helping other investors get their fix and flip new construction projects done.   Don: I'll ask you that question because I want to know why you're investing in single families where you could invest in some commercial properties and have you thought about that?   Kevin: I have, and I'm attracted to it. But I'm telling you, there's a learning curve there. I understand it enough to be dangerous, and I can keep my money safe if I'm lending on it, but I'm not an operator of multi-family or commercial. And so, what I do know is single-family and I've done well with that. Warren Buffett says, "If you don't understand it, don't invest in it." I kind of life by that.   Don: I'll tell you something. I've been doing very well single families as well and especially down here in Miami, the market here is a different type of market because the single families here are not cheap, but also not expensive. So, they're just on the sweet spot where you could buy, or you could wholesale a deal and make $50,000 in profit in two weeks. So, if you do that many times, then you could create a very nice income. And you could also invest in very good deals. And as much as it was very, very good and it was a great time for me to invest and we've managed to create a portfolio.    I've been attracted to commercial real estate forever. And when I started doing commercial real estate, if its development, or if it's mobile home parks or multi-families, I realized it's the same thing. They differ in a few things, you got to understand the numbers a little bit better in commercial properties, and you got to know what you're doing and there's always finance and leverage involved. But at the end of the day, if you know real estate, then you know real estate and that is what I think about this and what I would suggest to our audiences, if you know single families, then you should also check commercial properties and see how you feel about that as well. So, I hope it's something that maybe you're going to do in the future?   Kevin: Yeah. And I'm not going to disagree with you. And there's a lot more money in Commercial. The numbers are bigger, which magnifies the risk as well. But yeah, absolutely, I'll be looking at commercial at some point. But man, I'm just doing well with what I'm doing. I haven't done this for a long time. I've been doing it for almost 20 years. And whenever I start chasing that shiny object, which entrepreneurs naturally want to do, that's when you start making less money, at least in my case. The more I stay focused, the more money I make.   Don: Nice. I think that's probably going to be the headline of this episode. 'The more you're focused, the more money you're going to make' right? What do you think about that?    Kevin: I think it's great. And I think it's true.   Don: All right, Kevin. So, what are the best ways to connect with you in case anybody wants to get in touch?   Kevin: Yeah, we started doing a YouTube channel and I'm proud of it. It's not huge right now. But I would encourage your listeners if they want to connect with me to check that out first. It's just YouTube.com/pinefinancial. And we just do one little short video, maybe it's always less than 10 minutes, one per week. Otherwise, you go to our website and that's pinefinancialgroup.com.   Don: Okay, wonderful. So, I want to thank you, Kevin, for coming to the show today and dedicating your time. I wish you'd have a beautiful rest of your day.   Kevin: All right, Don, I appreciate everything.   Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time!

Bill Manassero is proof that it’s never too late to invest in real estate. Bill made his first deal at the great age of 60! Based in Irvine, California, he has worked in offices, worked as a musician, and operated his own businesses all his life. His music led him to take part on a mission in Haiti, where he started his organization named ‘Child Hope International’ which helps the children of Haiti. After a few years on the mission, he and his family moved back to the states and hit the ground running in the world of real estate.    In this episode, Bill talks about his life in Haiti, how he came up with the idea of helping orphaned and abandoned children. He also discusses why & how he jumped into real estate, about his first deals, his lessons learned from it, and how he made the transition into a 22 unit deal.  Episode Highlights:   Bill’s Mission in Haiti His Start In Real Estate Paralysis of Analysis Hiring Property Managers Connect with Bill:   Website:  OldDawgsREINetwork.com   - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - -   TRANSCRIPTION   Intro: Hey guys, and welcome to the show. Today, I'm very excited to host Bill Manassero. And Bill's story is very inspiring, particularly because of the fact that he started investing in real estate when he was 60 years old. A lot of people say that they're afraid of jumping in because they feel like that ship has already sailed, or they're too young and many other excuses why not getting into real estate. But how about being 60 years old, not having enough money to retire or thinking about retirement and getting into real estate at that particular point? I think that's inspiring, and it doesn't matter the situation, I think it's something that we should learn from. So, without further ado, let's have Bill Manassero.   Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies.   Don: Hey, Bill, welcome to the show, and happy Thanksgiving.   Bill: Hey, it's great to join you here today. This is Happy Thanksgiving to you too.   Don: Thank you for much. I'm actually Israeli. I know Thanksgiving is an American holiday or like an American event and I have been in this country for eight years. And it's my favorite holiday here, I guess because it reminds me of home. As Israeli people, we assemble every Friday for a Friday dinner with our families.    Bill: Shabbat   Don: Yes, Shabbat dinner. And that is the closest that we got here. So, I love it. I love this holiday and I love the atmosphere and I love the fact that Florida is getting a little bit colder. That's amazing.   Bill: How cold, down to 70 now or something?   Don: Oh it's 75.   Bill: Oh, man, you must have big down coats on.   Don: Yeah I'm wearing a jacket, don't ask. How's the situation in California, right, you're based off California?   Bill: Yeah, I'm in Southern California. It's called South Orange County which borders San Diego County. A very nice area here. Just love it. The beautiful and yeah, I think we're down in the 60s and 50s here lately, so we're getting really cold. And the people, of course, listening and Michigan and places like that are just saying. Yeah, right. What are you guys talking about? Don: That's right. Yeah. Okay. So, Bill, how about you tell us a little bit about yourself in your real estate career? I know you're a very accomplished man, and you've done a lot in your career. So, tell us about yourself, what you're doing right now, what you've done in the past. Let's hear all about it.   Bill: Oh, you bet. Sure. Well, I don't know how far back you want me to go. It'd be a long show here but I'll just try to give you an overview. Mainly grew up in Southern California, started off early in the banking industry, or at that time, what they called savings and loans, and learned a lot about just the financial transactions that occur and how funds are taken in and dispersed in the way of mortgage loans and so forth and did that for a number of years. And then I opened my own consulting firm, mainly in marketing and public relations. Did that for a long time. Work with the automotive industry. Moved into the technology area. Eventually got involved with a new tech startup, an internet company that was started by a group of Harvard MBAs, one of the persons who was who started eBay and Meg Whitman. Everything is going great, exciting, we're just kind of watching our stock options grow and then boom, the internet bubble burst. And so, I kind of got my first...   Don: Talking about '99 right?   Bill: Yeah, exactly. And then I went into a sort of a totally different direction. I felt like I was called into the ministry and actually started, I've been a musician. I earned my way through college, playing in clubs and doing all that kind of stuff.    Don: It sounds like a very Californian life. you're a musician, you stumble upon the founder of eBay, like across the street.   Bill: Kind of like that. Yeah, a little bit more complicated, how it all came together, trying to rush through here so I won't give you a four-hour version. But that was it. I have been playing guitar since I was a kid. So yeah. And then we started a little rock band for kids and it was wild and we just traveled around the US and played at festivals and churches.   Don: What about real estate??   Bill: Okay, I'm getting there. Okay. So, anyway, so this kind of brought me into old-time mission opportunity in Haiti, specifically, it's in the Caribbean. And Haiti is one of the poorest, if not the poorest country in the Western Hemisphere.    Don: I know much about it actually. It was just a matter of who occupied the country. The Dominican Republic was occupied by I think it was France?   Bill: That was Spain.   Don: Spain and France occupied the Haitian people. And so what happened was that the French people and excuse me if your French guy listening or friends you're listening, sorry about that but they were known to exploit the land so much that the land is just, it doesn't have any vegetation that grows. There was no advantage in raising crops when you compare it with the Dominican Republic and up until this day, If you ever look on this island, which is the exact same terrain both these nations have, if you look at this island from an aerial perspective, then you will see that Haiti is like barren and kind of brown from satellite pictures, whereas the Dominican Republic is all green and forest.   Bill: That's true. It looks exactly like that. Of course, there are different versions of the story. The island initially was founded by Christopher Columbus and it right before he came to America, and it was called Hispaniola so it was all owned by Spain. And, of course, Napoleon and the Spanish were fighting and negotiated basically this island and they split off into smaller third was Haiti which became the French-owned part of it. And that's where the majority, in fact, all of the coffee and I believe the sugar at that time was supplied to Europe through Haiti. It was extremely productive. Also, all the slaves rose up.   Don: Yeah. The people stayed poor. What were you doing there though, I mean, how does it do it real estate?   Bill: Well, it's part of the story. I had been 20 years in business and corporate had been an entrepreneurial side, just a full run a business. So, when I got over to Haiti, I think was coming into my 50s. And we set up a mission over there. And we worked primarily with the street kids in Haiti. We set up vocational training programs and micro businesses for them. They had orphanage for girls and four boys and a guest house and a medical clinic and a school and all these different things primarily because there are 300,000 orphans on the street. So, it's a big problem over there. We spent about 12 years there. It was kind of getting near the end of our mission time and getting older and it's just a tough place to survive and live.  We were prepared to stay, for the duration, but at the same time, my kids are growing up and going back to the States. I have seven kids, a lot of activities going on. And so, we prayed about it. We said this thinks what we want to do is prepare for retirement in the states and so my going to try to get a job with somebody. I thought 60 who's going to hire you, realistically. And then I'd run businesses, I thought that's probably more likely, it makes more sense to me, maybe starting my own business. I'm looking at all kinds of things. I started venturing while I was in Haiti into online businesses and started, generate some income with that. And I thought, wow, this is too much work and I want something that would be passive. And so, I got an unexpected inheritance check in the mail. And I was heavily invested in the stock market and thought I just don't want to take this and put it into the market because that one, it was pretty volatile at that time. And so, I'm looking at what options, maybe as an alternative.    Don: Okay, tell us what you got.   Bill: Okay. I have a board of directors, a nonprofit organization called Child Hope International. That's the organization that funds Haiti and so forth. A couple of guys on my board were heavily into real estate. We had a developer, we had a guy that just invested. They did well and I was going well, that could be something for me. So, I just started digging into books and I started researching. I went online, YouTube, went to webinars, I read tons and tons of books, just trying to get an idea of what's real estate investing all about and order people's programs, I had flipping programs, I had programs. I would order these programs in the mail and was trying to learn what I'd want to do.    At first, I thought I was going to flip and I thought that'd be good, but I'd go like that's another full-time job. I don't want to do that, moving into my retirement years, right. So, looked at rental housing and it's in it seemed to make sense to me and it's it seemed to be the thing that I thought would be the best move. And so, I started researching, I started looking at where good markets to invest because I knew California real estate is way too overpriced. So, I looked at some of the emerging markets and I decided Atlanta and Memphis were good markets and this is back around 2014.   Don: This is a pretty accurate guess. Because of these two markets, in particular, I hear a lot of people that have made a fortune in these years. So yeah, Go ahead.   Bill: Basically, researched that and I found a turnkey company that was based out of Singapore and they had a number of properties there. I was looking at their properties and weighing out which one would I want to invest in and eventually I narrowed it down to a number of them in each market. So, I hopped on a plane from Port-au-Prince, flew into Atlanta, checked out the properties, visited them, boom, bought a single-family home in Atlanta. Hopped on a plane went to Memphis, did the same thing except that there I got a single-family in a duplex.   Don: So, you are buying these properties with that check you got in the mail right?    Bill: Exactly.    Don: Okay, so I don't want to get into your business, but it sounds like a pretty big check. So, did you use any leverage or did you buy cash?    Bill: I paid cash. I'm definitely a newbie. And so, I learned a lot. And I'll tell you a lot about turnkey...   Don: For my audiences, you guys don't have to do this right? Even if you have savings like $100,000 and you want to start in real estate and you can just put down 20% and leverage the rest of it. And just make sure that your debt is less than your income. So, you'd be able to pay the debt and still make some cash flow. So yeah, go ahead.   Bill: Yeah, exactly. And so, I hopped on a plane flew back to Port-au-Prince and next month I was making income. They had tenants already, and they had been rehabbed already. I thought this was great, I mean, I don't have to do anything. I got money, what they call mailbox money, right?    Don: It used to be a mailbox, but now... We used to call it a mailbox.   Bill: Right. And so, I'm going this is great. And at first, I was just thinking, well, I'm just diversifying my portfolio right? And as thinking yeah, I real estate, I got precious metals, I got stocks and bonds and so forth. This is just another one of those things. But then I started thinking gee, I should have started this a long time ago. Okay, I like this, let me do the same.    So, I started, went into another market and Indianapolis. The first day bought a duplex because one thing I'd found out very quickly and it was only after a few months of getting these checks and also you get experience also when you get vacancies and I had plenty of those and so forth. But it made so much more sense to get a duplex as opposed to single-family because, again, the economies of scale, I paid about the same price for all three properties that I purchased. But I was making twice as much in income from the duplex. I had a vacancy, it's only a 50% vacancy, in a single-family home it's 100% vacancy. So, it just made more sense to me. And then I started thinking beyond that. I said, “Why limit yourself? Why not go for larger multifamily?”   Don: It's a great idea because I think what happened to you, if I'm analyzing that correctly, was that since you had no experience in real estate, then you were buying the first single families that you were buying, you paid market value for them. And so that is why you can't see the advantage of buying a single-family versus a duplex because as an investor, I've been doing that all of my adult life so I know that the typical seller, it could be anybody. Be somebody that inherited a property and they live in California, but they have a property in Florida or vice versa.    So, they're not as knowledgeable as the investor that buys a duplex. Because a duplex is typically an investment property. So, the person you're dealing with is more sophisticated. Therefore, it's going to be a little bit more difficult to get a good deal. Right? So, the advantage of buying single families versus duplexes is that you can get a better deal. But as far as equity, so you can buy at 50 or 60 cents on the dollar if you're looking for the right properties, but with a duplex, it's going to be a little more difficult, you're going to pay 80 cents on the dollar, if you got a good discount, or sometimes going to pay market value. The advantage is the fact you have one roof sometimes, one AC unit and so it's easier to maintain it right?   Bill: Right, depends on the market and that's another thing I learned about too is that these were all in “C” markets and some markets are better than others. And so that's where I started to see some of the differences. The duplex I bought an Indianapolis for example, okay, I paid roughly $55,000 for it. That was getting at that time $650 per side and there were three, one on each side.   Don: And your tenants were good?   Bill: Tenants were in place. Yeah, tenants were good. But what happened is over a very short period of time, within a year's time went from $55,000. I bought it, it was another turnkey. So, it was already for the most part rehabbed. I saw that the value goes from $55,000 to about $200,000.   Don: Yeah, and you got lucky there because you got into the market exactly where it was going up, especially multi-families. They were just booming. If you got a property in 2014-2015, there could be very, very little things you can do to not make money, if you bought multi-family because they appreciate it to the point where now, people pay five and a half cap rates for multi-families, which is unheard of.   Bill: Crazy. It's changed a lot and that's affected a lot of where we're looking now on the type of investing we're doing now. But you're seeing that happen and being able to increase the rents and the value of that little $55,000 investment was phenomenal. There's also another sort of a major thing going on as well in real estate in downtown areas to where there's just a lot of millennials being drawn to downtown, there's gentrification, there are all these various things going on.   Don: They work on walkability right now.   Bill: That's what they want. They want to live there almost as you do in Manhattan. You don't have to own a car and the real estate in those areas is going just crazy. And there's still a lot of cities that are in that early stage. And that's where Indianapolis was when I invested in this one downtown area or close to the downtown area. It just took off. So, that sparked a lot and got me very motivated to move for larger multis.   Don: Yeah, you got into real estate at the right time. Donald Trump got the presidency back in 2016 and everything has changed. People don't watch for that, but they don't notice what was done but everything was changed. Regulations, the market itself, unemployment, job growth, everything had changed. And so, multifamily is appreciated dramatically because of the improvement of the economy as well. So, it's a win-win and what happened to you. So how did you get from buying a duplex into 22 units in Indianapolis? How did that transition happen?   Bill: I knew at that point that I loved Indianapolis. Just seeing what it was doing a lot of good stuff going on there. So, I was looking more for like a four-plex, eight-plex something along that line didn't expect to go into 22 unit but I was looking at all places, on Loopnet which usually while we're most of...   Don: It is where deals go to die.   Bill: That's where they go to die. That's their motto, right? And I was just looking through it, just start making broker contacts and maybe kind of look at what markets were offering and so forth. And I came across this property that was 22 units. They were mostly studio. They were like five one-bedrooms, but I think 17 studio, and it was located in a good place between a place called Irvington and Downtown. And both areas were growing, both areas had a lot of positive things going for them as well as real estate values were rising.   Don: What about students? Is there any university or college nearby?   Bill: The location of it is about 10 minutes from almost everything. So, it's convenient. Some of the major hospitals, downtown is 10 minutes away. Most of the universities are in a different area, although some are probably about 20 minutes away that isn't that far. But yeah, it didn't necessarily appeal to the college crowd, but a lot of working-class people. So, I looked at it and this is where I started to freeze up. This is where I had a sort of analysis paralysis.    My first major multi-family and I'm just looking at all the numbers, I'm trying to understand the market. I'm looking at everything I could look at because I wanted to make a good decision that had cold feet and as had or know if I should do this. And so, what I did is this is where I started to leverages. I had those three properties that I had initially first purchased for cash, and I did a cash-out refi to get the down payment for this property. And I finally just said, "I'm going to do it." So, I knew where I was going to get the money, I was going to do it, boom, I made the offer and it was already under contract. So, I was just ah, and it's just so upset. It's going to take me all this time to analyze this and to look at it. Yeah, I even flew out there and looked at the market, walk around, did everything.   Don: There's something I got to say about the paralysis of analysis. And that's something that I've encountered myself when I got into the commercial properties. And so, I guess there are a lot of people listening to this episode right now and thinking the same. How do I overcome this struggle of the paralysis of analysis, I have come up with a few ideas to get you through.    So, the first thing that I understood that I need to do to get over this is to understand that I'm underwriting twice, right? One is based on the actual on the turnkey on how I'm getting the property. And the second is underwriting what I think it could do, not what the broker says it could do, right, what I think it could do, based on the market research in the market study that I'm able to do. And then what I need to think about is whether the lifting of the property from the first analysis and the numbers is doing currently, how heavy is that lifting? Is it very heavy? Is it difficult to get it to where I want it to be? And the way to understand that is, first of all, understanding the condition of the property of the improvement itself, whatever asset class you're looking at. And the second way to do that is understanding your market which is not that complicated. All you need to do is go on a few websites and do some reading. So, when you get over that struggle, everything becomes more clear. Do you agree with me, Bill?   Bill: Yeah, I do. But I also learned, at least in this process being in three different cities, is that the markets vary from street to street to street literally. I can't even say the neighborhood.   Don: But Memphis is known for that.   Bill: Yes, you can buy in a generally good neighborhood. But you are on the wrong street. You got this dog property. So, it's not as easy sometimes to know the market is. The numbers are all there, you can get all the data you want.   Don: It's the same in Houston, Texas.   Bill: Yeah.    Don: I know the market. You gotta understand exactly what you're buying, at what street and the best way to do that is by going there and checking yourself and asking people. But in Memphis, and Houston, Texas, these are cities that you know, everybody's aware of that. Even if you don't know about that, you could do some research and you would find out   Bill: Yeah, I think you're right there is property management team is critical. If you're looking at a good company, be in multiple areas that know the area well, they know what rents are, they know what demand is, they're working on a day today. So, getting into communication with a property manager, maybe it could be the potential property management company you would hire. That is the key, I think, for these markets and just understanding the dynamics as well. So that's a good point.    Don: Yeah. But I mean, if you're investing in Florida, for instance, it's difficult to pick up deals because everybody wants to invest here because of its most growing state in the country. So, if you're investing here and you got a good deal, then most likely you're going to be good because of population growth. So even if it's a little bit overpriced, you're going to be good, because people are coming into the state always. And that's going to keep happening. And so, you are always going to have demand, which is at the end of the day, it's the number one rule of supply and demand. If you got the demand, there is still supply then you'll be fine.   Bill: Exactly. And just to finish the story about the 22 units. Like I said it was under contract, but I did something I hadn't done in previous deals, and that was I let the broker know, I said, "Look, if this falls through for any reason whatsoever, call me" and boom, you'll have a check on your desk the same day. I said I'd like the property, I want to invest in it. And yeah, I just said it and I'm going about looking at other properties and so forth. Three months later, this deal fell through, the guy didn't get the funding. And he calls me up and I said, Okay, we're in it. But let's talk about the price. I was able because he was desperate, the seller had gone through back to you. And that's exactly. One deal went bad so I was able to reduce things down. After inspection, I was able to reduce things down even further.   Don: That's super cool. There's something I want to say about that. I heard from a very smart man, a very beautiful sentence, "You always got to be a flame, not the moth in the negotiations." You got to let the other person come to you because when they come to you, then you control the negotiations. Right?   Bill: Exactly. They negotiated not only the deal I wanted, but it was about 20% under market. So that worked out good. And close the deal and a relatively short period of time.   Don: Nice. So, tell us a little bit about the numbers of that deal. So, I'm curious about how much you paid for it.   Bill: Well, believe it or not, I paid $350,000 for 22 units. You can't buy a tool shed out here in Southern California.    Don: We're talking about almost 16,000 units; a door right? What was the renovation prior?    Bill: That was a trick on this one. I had allocated about $50,000 for renovation. It wasn't enough. But basically, what I was able to do is I was able to come in, rents were $395 on an average for the studios. And by going in there and doing some common area renovations and just upgraded significantly and some exterior stuff before we even touched the apartments, we demonstrated to the tenants that we were doing good things that allowed us to bump it up. And we were able to bump it up to about $450.   Don: Were you always fully occupied there?   Bill: We were in the early stages. And then later, we started moving into some sort of major renovation. And when we start getting into the units, which brought our occupancy numbers down. But to get it to that place, and I bought this in ‘16, we're currently averaging about 650 per unit now.   Don: Wow. So, let me just go with the number. So almost $119,000 right? That's your gross with $450 in rent. Right?   Bill: Right.    Don: And so how long have you had the property since 2016? So, your gross income is $171,600. Right?    Bill: Yeah.    Don: What would you say your expenses are?   Bill: Expenses are roughly around probably about 48%.   Don: So almost $90,000 right. So that's your NOI right now. That's after three years of holding the property, right? Now, you said something about the Cap X that you calculated the repairs for each property at $50,000 like that the entire thing. What was it at the end? You said it was more.   Bill: Yeah, I ended up putting quite a bit more into it. It was different here. The first three homes that I had purchased were all more within the criteria that I had initially established and that was looking for homes roughly around the 80s, 1980s and above, newer homes that wouldn't require a lot. Well, the first duplex I bought there was built in 1900. In that area, they're all old like that, but that's what's kind of funky about it, where people like it, it's these Victorian houses and people fix them up, renovate them nice and they look great. The duplex I didn't have any issues with for the most part. Everything was upgraded. They did a good job on the rehab. But this one 22 units was built in 1925. One of the things that I knew I played a lot more in Cap X.   Bill: Yeah, a lot more and that was my fault going into it because all I was looking to do is cosmetics. Primarily in the units, they were all gas stove and I switched them all out to electric. I've had a rewire to 22 each unit to get electric stoves, electric heating, everything. They operate on a boiler is time. For years it was very efficient, it worked great, but it didn't make any sense for me. Then plus the one that was there was going to have to be replaced and that's could be like $20,000 or more. So, they said it's going to get rid of the boiler, I'm going to go all-electric and so on our renovations, that was probably the costliest thing that I had allocated for was electric.   Don: Let's say you ended up investing about $80,000 - $90,000. Right?   Bill: Probably around that. I might have to look over the three years but yeah, it's probably a little bit more than that.   Don: Well, you're buying that in cash so at least you were not paying any interest and your debt was not non-existent. So, it's possible to do these things when you have cash in your hands and you can get and invest and do some work into it. But I'm impressed by the NOI that you got because you're getting $90,000 right now and used to gross $104 when you bought it. What kind of cap rate you'd say you bought it for? Was a 10 cap or 8 caps?    Bill: Greater than 10. It might have been even 11.   Don: And now this thing is worth probably a six and a half?   Bill: Yeah, I think the market cap is right around seven.   Don: So just in comparison, if you're bringing $90,000 home, NOI on a yearly basis, and we're looking at it from a seven cap respective, then we're talking about a new value of $1,295,000.   Bill: Yeah, that's what it looks like just by numbers here, right.   Don: Yep. If we're looking at numbers only. Even if your expenses would increase, so you have a major ticket item in front of you of repairs, let's say you make $85,000 in NOI, and we divide it into seven and a half cap, which is going to hurt the value. The more the cap rate is high. So that's a $1.13 million valuation, which is outstanding. So, you've tripled your money in three years. That's a phenomenal return.   Bill: Yeah, it was an education for me for sure. Especially not having any experience in jumping into that.   Don: Yeah. This is why it's always best to jump into real estate even if you don't know anything because even if you're going to lose money, it's somehow going to be alright. Because you've learned things that are going to be useful in the future, even if you're 60, right? That's what I'm getting from you, Bill.   Bill: But one thing I learned without a doubt, and I studied a lot of reads a lot of books, a lot of things. But I realized that the real education begins after you sign your first set of escrow.   Don: When you take action.   Bill: That's it, that's when the real education begins. When you purchase that first property.   Don: You can only know so much in theory. Yeah. So that's an amazing story. And I'm very happy that we had the chance to break it down here for people to see that the amounts of money that you can make as a real estate investor. I think that's terrific and I think it's good that you've discovered it now. Better late than never right?   Bill: You got it.   Don: And what are the best ways to connect with you if anybody wants to get in touch and get to know you a little bit more?   Bill: Yeah, well, we have a podcast also. It's called the Old Dawgs REInetwork, and it's geared for people 50 years of age and older. They want to get started. There's a lot of people approaching retirement or in retirement that want that extra cash flow or they want to create a legacy, they can leave their kids and stuff. So that's all we talked about. And we have a lot of younger people listening, but we try to focus on those folks that are sort of in that latter stage. So, it's called OldDawgsREINetwork.com. And dogs have spelled DAWGS.   Don: Okay, Bill on that note, I'm going to thank you for coming to the show today. We appreciate it and of course, Happy Thanksgiving.   Bill: Well same to you Don. It's been a pleasure.   Don: Thank you very much. Bye-bye.   Bill: Bye.    Lady: Thanks for listening to the real estate investing podcasts with Don and Eden. Stay tuned for more episodes. Till next time.

Scott Meyers is a real estate investor based in Indianapolis. It all began in 2005 and since then he has grown in the self-storage industry as a developer, owner, syndicator, and operator. He has several multi-million dollar businesses under his belt but his favorite is self-storage and today he is in control of over 7,500 units. Scott started ‘The Self-Storage Mastermind’ to teach others about the self-storage business.  In today’s episode, he discusses how he entered the real estate industry, why he’s chosen to grow with self-storage, and what one should keep in mind before investing in a facility. He gives us insight on one of his memorable deals over the years- what happened, what he learned and what’s going on with it today.  Some Of The Episode Highlights: His Self-Storage Business His ‘Why’ in Self-Storage The ‘Boomerang Property’ Special Gift for Our Listeners    Connect with Scott: Website: selfstorageinvesting.com   - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  TRANSCRIPTION Intro: Hey guys, this is Don, your host. In today's episode, I will interview Scott Myers. Scott is an amazing investor and he specializes in one of the most interesting asset classes, self-storage facilities. Today, me and Scott will discuss the nature of this market. Also, as previously mentioned, I want to remind you that you have an opportunity to get a free 30-minute phone call with me and Eden if you review our podcast on iTunes. Simply rate the podcast and write a review of how you feel about the content and the show. To redeem, email us the content of the review to Hello@donandeden.com. You will then be contacted and scheduled for a 30-minute phone call with me and Eden, where you could ask questions or network about any subject or project that you would like. So, let's get started and I hope you guys will enjoy the interview. Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies. Don: Scott, welcome to the show. How are you doing today? Scott: Hey, Don, I am fantastic. How about yourself? Don: I'm great. How's the weather up in Indiana? Scott: Well, that depends. We had our first snowfall of the year last night. It had about three inches, which is a little bit more than we normally get this time of year. So, I think I'd rather be down next to you conducting this interview right now. Don: Yeah, I mean, we just got the best weather right now in Florida. It's been very muggy for November, 75 degrees all throughout. I used to live in the Midwest, and I know it kind of gets cold in that period of time of the year, right? Scott: Sure can. Yep. Don: Yes. You've been living in Indiana, all of your life, born and raised? Scott: Born and raised in Michigan. I went to the University of Michigan and after I graduated, I moved down to Indianapolis where I took a job. I was working in the telecommunications industry before I got involved in real estate. Don: Wow. Okay, so that's a pretty sharp transition. What made you move into real estate? Scott: When I began looking in investment books on ways to I guess diversify my retirement rather than relying on our 401k stocks and bonds and mutual funds ran across several books, one of which was Robert Kiyosaki's book terms in real estate and the more I looked at more I realized that I didn't want to put my money into the stock market as the poor dad did in Robert Kiyosaki's book 'Rich Dad, Poor Dad.' And so, I began investing in single-family homes and then it took off after that. Don: Yeah, let's talk about your initial investments in the single-family space. What did you do, fix and flip? Scott: Began to buy single-family homes, and then fix them up, refinance them and rent them out. And I did that for a number of years until holding. It's kind of a tough gig holding on as a landlord unless you're flipping some as well. So once the economy began to turn in 1999 and 2000 during that downturn, shortly after the government came out with the Community Reinvestment Act, and made it easy, a little too easy for anybody to own a home and so we began then turning around our houses to sell them. So, we became retailers in addition to landlords. Don: Nice. I know right now you're focusing primarily on self-storage. Tell us about the first time you got to learn about this asset class and this market in general. Scott: Began looking into self-storage because of, well, that wasn't the cash flow that I wanted to have in single-family homes and apartments on like I had intended. And then when I went back and looked at the business model, I realized that most of my expenses were a result of a related to tenants and toilets and trash. And so, we all love real estate and we love running real estate if it weren't for that. So, I began looking into what are the other asset classes in real estate that has the benefits of real estate, but without all the hassles of the three T's. And it's either parking lots or self-storage. And so, the more I begin to look into self-storage in the business model, yeah, I really liked what I saw. And began attending some industry trade shows, then dip my toe in the water by getting into a partnership with someone in a self-storage facility. And the rest they say is history. Don: Yeah. So, there is a question that I want to ask you. I know now that you're very big on the self-storage space and you own or you're in control of over 7500 units, I’m guessing in self-storage just since 2005. So, you've been a longtime player in that space, but I want to ask you more about the beginning because I remember I just recently did a transition from residential wholesale real estate into commercial real estate. And even then, being an experienced investor and owning a lot of properties and having capital, it's not easy. So, you said something about going to shows and learning about... So, tell us a little bit about that period of time where you did not make your first deal in self-storage yet, but very attracted to that asset class and what you did in that time period, how much time did it take for you to get your first deal? Scott: There weren't any resources. You found me, Don because we have an education company as well. We teach people how to go about and do this business and we've been doing that since 2008. But prior to that, that company was really born as a result of that. There wasn't a resource, there wasn't a Scott Meyers out there to learn from it. So, I attended the industry trade shows and those shows are primarily for the folks that are already in the business.  So, I begin talking to the attendees and just asking them, "What do you like best about self-storage and what don't you like about self-storage?" just to get an understanding from several folks that before me and how to get into it. There still wasn't any way to learn the nuts and bolts, the A to Z or how to get into it. When I came home as I began to do more research on my own, I reached out to a consultant in the industry and I spent a day with him and drove around and taking notes and asking about it.  He owned a management company as well. And he managed several facilities for other folks. I asked him as many questions as I possibly could to fill in the gaps and I filled up three notebooks full of paper, just answering the questions that I had about the business and I, like you, been in multifamily and apartments and I understood commercial real estate. But all the nuances and all the intricacies of self-storage to bridge that gap and fill in the gaps took me all day and a bunch of notes and even then there was no way to get it all but that's how I started. And then just sort of trial by the fire going out and talking to other owners and brokers and begin exploring and looking at several facilities to buy. Don: Okay, tell us a little bit about the market itself. So, what are the biggest players, what is considered a big property? I know so when you're looking at multifamily anything over 200 units is considered very big. Mobile home parks, anything over 150 is considered institutional. So, what would you say is a big deal when you talk about self-storages? Scott: Yeah, we're in that 400 to 450 unit range and which equates to roughly greater than 60,000 square feet. Those facilities that are larger than those are the ones that are going to be typically institutional, so those are the ones are going to be held by Public Storage or Extra Space or Bridge or CubeSmart number of the big players or reads in the marketplace. Now not all the time we own several facilities that are that size as well with the goal and the intention of eventually off to the reeds and that's what we're developing and building now. That's really what's considered the big boys. And so the reeds are the institutional properties and facilities that size you know, that only accounts for about nine to 10% of all the units and all the square footage of self-storage are below that and are owned by some regional players that own you know, 1, 2, 5, 7 properties. Some national players that aren't considered and then a lot of the mom and pops that we buy our facilities from that can go all the way down to as low as 15 between units per facility. Don: Okay. So, mom and pop are always good because you can get a pretty good deal. Somebody that owned the property for quite a while, they have a lot of equity typically and there is a lot of value-added. So, I would assume that the value adds basically comes to play when talking about raising up the rents, right? So, they're just not fulfilling their potential. Scott: Yeah, that's absolutely one of the ways that we look at. We're always looking at turnarounds and value adds and the first of which is usually what you just mentioned is usually poor management. They haven't raised rents in a while because they like to stay full, they have fallen behind on technology and we do utilize software and kiosks to manage these facilities or at least help to manage these facilities, which reduces our payroll, which is our second highest expense, line-item expense next to property taxes. In many cases, not all the cases many of the mom and pops didn't understand how to market their facility, therefore they suffer from a lower occupancy than if they were running very well and had a better website and then a means for people to rent a unit or reserve units online. Don: Yeah, what would you say are the biggest minds or the things you should be careful when you're buying a self-storage, especially when underwriting a deal? Scott: Well, the normal due diligence that we go through first the physical side, we hire an inspector, we do our site visits and we hire an inspector to look at all the physical aspects with the underwriting. As you know Don, that some in commercial real estate, you make a $10,000 mistake and underwriting and just at a 10 cap is $100,000 valuation mistake that you've made. But in today's seven or six cap environment, we're talking about $120,000 - $130,000 mistake. So, it's making sure that if we're buying it from a seller and individual seller, or if we're buying from a broker, we need to get the seller's numbers, and all of the expenses. So, it has an art and a science to it. But the science part is just knowing exactly what to ask for. And in self-storage versus apartments versus mobile home parks, there are expenses that are associated with each one of those asset classes.  So it's important to know what are the expenses of running a self-storage facility and making sure that your account for that. And as I'm sure you're used to and telling your folks as well but just because the seller and the broker don’t include it has zero alongside an expense sentiment doesn't mean it's going to be zero for you. So, management of lawn care and landscaping and snow removal, if that manager does that, or their employer does that, well, they're not going to do it for you so you need to add those expenses in. So, I think that's one of the places where people get tripped. Another is the change in property taxes.  If you run it for a million dollars, and the last time it was assessed was at $500,000 and in this county, they assess based upon a sale, you can expect your property taxes to double roughly and so you need to account for that and underwriting that you're different set of expenses when you buy it versus what is given to you by the seller. So you know, we can go through each and every one of those but just making sure that you pull all the bills and you all of the information in terms of all the income coming into the facility, as well as all the expenses of that underwriting based upon that to give your valuation and your offer. But then we always have two sets of numbers that we use afterward, which is how we're going to run it today meaning 30 days after we bought and then what does it look like in the next one to five years down the road once we have stabilized it and added more value. Don: Okay, and what does it look like as far as the demand and the supply for self-storage facilities across the United States when we're talking about late 2019? I know that people are buying and we're consuming a lot more than what we used to, especially those you can buy everything online right now. And I know people have a lot of things that they want to store. What is your take on this industry and the direction in which it's going in the future for 5 or 10 years? Scott: What we're seeing right now is a demand for self-storage. We always look at supply; supply and demand for a particular market. And the good news is that we draw a ring around a particular site if we have developed for an existing facility of about three miles, five miles as if it's rural or one mile if you’re in downtown Miami. But then we're looking at the amount of self-storage square footage already in that market in a three-mile radius, compared to the population in our industry is considered somewhere between six and a half to seven and a half square person. And it depends upon the market and there are some areas that are quite a bit different than that. But that's kind of a round number. And so, that alone gives us an idea of what the demand is. So, then we visit those facilities and determine if that truly is the case, if they have waiting lists, the rental rates in the market will also be an indicator of what the demand is, obviously. And so, then we base it upon that, but there's only four square foot of storage per person in this market, and the rates are considerably higher than we see around the rest of the country and all the facilities are full and have waiting lists, then there's probably a need for some storage there. In the case of development, we're also going to get a feasibility study on just like you do Don when your billing departments often saying, "Yeah, we think it's going to work, we have to get a feasibility study before the bank will give us money and private equity partners as well." But that's how we look at it in today, in real-time for looking at a facility to develop or even to turn around.  Now in terms of moving forward or looking forward, we don't see a whole lot of changes being the demand for self-storage. And we don't have a crystal ball that is perfect, but we keep an eye on trends and we've seen in the past, we've seen that the baby boomers have created a huge demand for self-storage as they've been downsizing and moving into assisted living and then passing on. Their kids store their items in storage for the future.  But then the concerned about the millennials that perhaps they wouldn't have the same demand and self overseeing just the opposite. Yeah, they're minimalists, they have smaller homes or apartments because they want to give them up and go travel instead of having a house or they want to live in a smaller home. But they like adventures and experiences and adventures and experiences require skis and gear and mountain bikes and camping gear and kayaks and all those other things. And they don't fit in in their tiny houses or apartments or condos. And so we've seen an even greater surge in demand for self-storage, and we see that happening in the foreseeable future. Don: So, you wouldn't think there are any major disruptors coming in the form of let's say, multi families that are being built with storage facilities inside them. Would you say that this is a disrupter? Scott: I don't think so. Because sometimes they are done either on the grounds and in the basement in some of those areas. For they're doing that to a degree but we haven't seen that effect because if you're going to build apartment and you already have construction crew on-site, you're going to maximize the living space because you're going to generate a heck of a lot more revenue per square foot in living space, and you are for storage. So it's an amenity that they can put in place, but not to the degree that it meets the demand for the entire area or the market. So, we may lose a few of those clients in a three-mile radius, but it certainly doesn't speak to the entire market that we're marketing to if that makes sense. Don: Yeah, it makes sense. So where are you focusing on buying these self-storage facilities? Are you buying across the country or you're looking at particular markets and then when you're looking into a market? I know when I'm looking for mobile home parks or multi-families, that I'm looking for job growth and population growth and understanding the environment of the market. Are you doing anything different when you're looking into a self-storage facility, are there different stats that you got to understand before moving in? Scott: When I was also in homes and apartments and we're always looking for the emerging markets that were always a buzzword and some of the guru's had created. And you always want to see where there's growth in those markets. And that's always like that as well. Because if you see, you see self-storage facilities going up. Typically, they're going out not too far from apartments in a growing market, we're not too far away, they go hand in hand or in step with one another. But the good news about self-storage, unlike apartments and single-family rentals is that in a downturn in the economy, or even in a market that is experiencing a little bit of a decline in population or maybe some job loss in self-storage, we're in the trauma and transition business.  If there's trauma, people losing their jobs are having to move they need storage, and they're downsizing and moving back with their parents are moving in with somebody else. And so that creates a need for storage. We've seen during the last recession and everyone prior to that self-storage does extremely well because businesses are downsizing. So, as we head into a changing economy, we feel that we're in good shape. When we're in a growing market or growing economy, people buy more stuff or there are more people to store things therefore there's a need for storage. But even if there's a downturn in a particular market that is losing jobs, there's a need for storage and self-storage does extremely well.  Now doesn't mean that we do great in every single market in every single economy. The one caveat or the one market in which we wouldn't do well, and as those in which there's just a new extreme blight or a flight. So, if there are several manufacturers are leaving, and there are thousands of jobs that are leaving a market. That there are some instances that we've seen that or even New Orleans when Katrina came through and wipe them out, there's lots of areas within a three-mile radius that the population is so low that self-storage facilities are struggling, same in Detroit and Flint, Michigan, exited as the auto industry has left, the same thing. So, we do have to be careful that there is an extreme blight in those markets but we like just about every market and every economy for storage. Don: Yeah, but I would think that whenever there's an extreme blight in the market, then it's not going to be just self-storage is not going to be affected. It's going to be all types of real estate... Scott: Exactly. And you're right. Don: It doesn't really matter. So, I want to ask you about a specific deal. One that you remember, one for the ages is what we call it. So that you can intrigue everybody that's listening to this episode about self-storages and is considering to get into space, something that you bought, made good money and it was interesting and intriguing. So, tell us about one of those. Scott: Yeah. So, this is a property, it was a larger property that I bought back in 2007, so just prior to the Great Recession. I bought the property for $1.5 million with no money down, I used seller financing and a bank and bank debt on it. And it was an industrial building that had offices in it and warehousing, but we converted a large portion of it to outdoor parking for storage is the indoor self-storage. So, we put about $400,000 with a bank loan into the project and we had $1.9 into it. Then in 2007, at the end of it, so about two and a half years later, we sold it prior to the recession of 2008 and we sold about a $2 million profit on that one.  Then came the recession and the buyer went bankrupt because he was a developer out of California and had lost his portfolio, retain the rights to market some of those properties, this being one of them. So, he offered it to me several times over the next several years, and the price kept coming down, down and down and then finally I was able to buy it back for $545,000. And so that's when we get good at syndicating as we mentioned Don when you run out of cash. We've leased it back up again and we've rehabbed them and renovated several areas, leased up the storage, added more storage to it. And it's under contract to sell right now for just a little shy of $3 million. Don: So, you made $2 million the first time and then a little bit over $2 million the second time. It is coming back to you giving you $2 million whenever you work with it. Scott: We affectionately call it 'The Boomerang Property,' so yeah. Don: That is just great, that's phenomenal. Okay, that's beautiful. You bought the property, that was luck also buying it right on time and selling it just before the recession, won't you say? Scott: We had that thing leased up so that we really couldn't create much more value in it. It was at the top, it would have just been through some minor rate increases. And so, we didn't foresee the recession coming and certainly not the magnitude that it was. So, I absolutely will not pretend that I knew what was happening. So yes, we were fortunate enough to be able to sell it at that time when financing was plentiful, and he was able to buy it and that was really good timing. And boy, we learned a lot of lessons through that recession. Fortunately, we weren't holding that one during that time. Don: Okay. What market was it? Scott: That was here in Indianapolis. Don: Nice. Great. That's very interesting. And I'm sure everybody that's listening could see that you could make $2 million on a self-storage facility, one that you bought for $2 million or was in for $2 million. That's amazing! That's a 100% return on your investment. That's great. What book would you recommend for somebody to read in case they already read 'Think And Grow Rich' and 'Rich Dad Poor Dad?' Scott: Wow, let me see here. Don: Difficult question, huh? Scott: It is. I'm just looking at my bookshelf of the many things we’re utilizing our company right now as we scale and grow just depending upon where folks are at is 'Traction'. So, it's more than just a book. It's where Gino Whitman talks about the entrepreneur operating system and really how we as entrepreneurs need to handle and run our business and treat it as a business no matter what the size is. So, I would strongly recommend 'Traction' by Gino Wickman. That is the one that's probably had the biggest impact on us recently. This is for yourself as well as any staff that you may be bringing on are the Four Disciplines of Execution or 4DX all about just getting things done. Bestseller on our wall street journal number one, and again loads of information on how to, well, just how to get things done and how to not make excuses or procrastinate and move the ball forward in your business. Don: Yeah, it seems that procrastinating is always one of the keys to failure. Everybody's saying to never procrastinate, always take action and get things done. Amazing. Yeah. So Scott, what's the best way to connect with you in case anybody wants to learn more about self-storage is or invest with you or anything of that nature? Scott: Sure. Well, selfstorageinvesting.com is our website with all things self-storage, and lots of freebies to download and some videos. But I got a little something that I want to give to your folks done specifically for being on this podcast. If you want the beginning a roadmap or what we call the blueprint into self-storage, you'll go to that same site http://selfstorageinvesting.com/blueprint1/ the numeral one behind it. It’ll show you the steps that you need to follow to get involved in this incredible business that we call self-storage. Don: Well Scott, thank you very much for sharing that with our audience and I hope that you're going to have a great day and thank you for being on the show today. Scott: My pleasure. Thank you, Don. Don: Yes, you're welcome. You have a great rest of your day Scott: You too. Lady: Thanks for listening to the real estate investing podcast with Don and Ethan. Stay tuned for more episodes. Till next time.

Brian Burke, based in Santa Rosa, California, is a real estate investor and the President and CEO of Praxis Capital, which is a vertically integrated private equity investment firm. He established this firm back in 2001. He began his career in 1989, buying his first rental property which led him into the world of multi-family then commercial investing.  Brian is a successful entrepreneur and syndicator - today he shares how he started his real estate career and giving back to his community after the wildfire in California. He also discusses his investing strategy, where he’s looking to invest, what to expect from an investment and his future plans. Some Of The Highlights: His First Real Estate Investment and His Business Today His Work Strategy and Advice For a ‘Rainy Day’ In Business Brian’s Retirement Plan What is the preferred return?    Connect with Brian: Website: PRAXCAP.COM - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  TRANSCRIPTION Intro: Hey guys, this is Eden and today is a very special episode because we are going to host Brian Burke, who is one of the biggest investors on this show to date. Brian had completed half a billion in real estate purchases this year alone after a long and beautiful career that lasted for 30 years and still counting. When listening to this episode, I was personally amazed by how humble Brian is and the sheer perspectives and mindset real estate investors to have despite the fact that they never met before. Also, today we would like to ask you guys for a favor. If you love our content and feel like you're learning from this podcast, please go on iTunes and give us a five-star review. This helps the podcast to rank higher and the best, part if you give us five-star review, shoot us an email at Hello@donandeden.com with the content of the review and your phone number, and you'll get scheduled for 30 minutes phone call with me and Don where you can talk about real estate and get answers for the questions you always had. So, without further ado, let's get started. Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies. Don: Hey Brian, welcome to the show. Brian: Thanks for having me on Don. Don: How's the weather in Santa Rosa, California? Brian: Oh, it's a beautiful day today, almost 80 degrees this afternoon and in November, which is a little unusual, but I'll take it. Don: I like to skate. It's like my hobby. So, I went to L.A., I went to Venice. I took a month off, just wanted to skate, took my skates with me and went there. Some people said it's the best place for anything that has wheels. And so, when I got there, that was late May and it was raining. It was like rain in L.A. and people told me it's very rare. That never happens. And it was kind of cold. And so, one of my friends that lives in California said that the weather over there was pretty unusual this year. Would you agree? Brian: Yeah, it was unusual. A lot of rain this spring and a lot of heat this fall. So, it's been a little bit unusual. But I would say the best weather in California is probably September and October. Those are usually some of the nicest months and people think that summer is probably the nicest, but it's not always the case. Don: Yeah not always the case. Is it still burning over there? I know you guys had the wildfires. Brian: There's a large fire. The largest fire in our country's history just got fully contained yesterday. And that was about a couple miles up the road from our office. So, we were under mandatory evacuation last week. And this week, we're back in action here in the office. Don: As sad it is to say that, I'm sure that these wildfires pose some great opportunities for real estate investors. Am I right? Brian: Well, once in a while they do and we had a fire in our city two years ago that wiped out 5000 homes in our city. We raised a fund last year to rebuild homes and our city and we raised about $8 million and we've been building single-family homes on burned-out home sites where the owners decided not to rebuild and elected instead to sell or move to a different area, put their lots up for sale and we're putting spec homes on those lots and got a couple of dozen homes under construction right now. So certainly it does breed some opportunity. Don: Not only opportunity, in this case, also give back to the community that is your city. Eventually, you want people to live in it and feel happy about it. Because that's home for you. Right? Brian: Yeah, people want the city to be put back the way it was. And we're doing our part to help do that and at the same time provide much-needed housing. When you lose 5000 homes in a city of 250,000 people it makes a real impact on housing demand, and there's a need for housing here. And we're helping to provide that which is pretty exciting. Don: That's beautiful. So, I know your real estate career is a very long one. You're one of the most successful entrepreneurs and syndicators on the show to date. I know you've amassed a portfolio of 250 to 300 million if my numbers are right and you've completed your half a billion in purchases of properties this year, am I right? Brian: Yeah. 2019 is a banner year for us. We crossed the half a billion-dollar mark and real estate purchase, which is an incredible accomplishment for me to even say that it is weird. I never imagined that in my lifetime I would do something like that. But we managed to pull it off. Now we've got a portfolio consisting mostly of multifamily properties. Our business focuses primarily a hundred units and up multifamily all across the US and we've got about 3000 units that we've done. Our portfolio now is about 250-300 million of value. We still do some single-family here and there. Of course, our fund where we're building homes in our city, so we're kind of a multidisciplinary real estate firm that started in single-family migrated to multifamily, but once you have developed roots and single-family, it's hard to lose those. Don: Yes. I started single families too, and let's be honest, it's fun. Even when you're doing commercial, it's still fun to do some projects there as well. So, let's talk about how it all started. When did you make your first steps in real estate? What was it back then? Because I know you've been doing real estate for 30 years, right? Brian: Yeah, my first real estate investment was a little over 30 years ago. In 1989 was my first real estate investment. Don: Just a side note. I was born in 1989. Brian: You were born? Yes. So, when you were busy being born, I was busy trying to find a house to buy and I made my first real estate investment. I didn't even own my own home but I bought a rental and fixed it up a little bit and a couple of years later sold that and I started doing some house flips, one house at a time and I was still working at the time and this enabled me to make a living on my job and then invest in real estate to build my future. Don: What a smart decision! So, one thing led to another and now you are in control of over 500 million worth of property in multifamily which is amazing. So, tell us a little bit about the first deal in multifamily. When was the first time you decided to buy a commercial property? Brian: My first multifamily was about 16 or 17 years ago. And it was here in California, it was a 16 unit apartment building. And what I was doing is I trying to figure out how to invest in commercial real estate, but I just didn't understand it very well. I didn't understand what the numbers meant or how to value it or how to evaluate it. Two rental houses that I accumulated through my house flipping business and flip one, keep one flip one, keep one. So, I had a couple of rentals I wanted to sell and I wanted to do a 1031 exchange and exchange up into an apartment building. It just seemed like it was an interesting way to grow the business and have more economies of scale and cash flow and all that.  So, I reached out to the real estate agent that was helping me sell my flips because he was a CCIM which is a certified commercial broker. And I said, "Hey, I don't understand any of this and will you teach me?" and he did. He taught me how to read an income statement and what to look for and all kinds of different things. And then not long after that, he's told me my first apartment building. I did a 1031 exchange and never looked back. Don: How was the first investment? Was it a good investment, a bad investment? Brian: Funny story is I just sold that property like two years ago. So, I kept it for a long time and I was able to do a 1031 exchange into an oceanfront condo in Hawaii where I rent that out and, maybe one day I'll even be able to move into it. Who knows? Don: We all have dreams. Being busy in real estate, you never stopped working. So, I know we talked a little bit before the show started. I asked you about the ways that you make money when you own such a massive portfolio, but most of it you syndicated. So, most of it, you had to raise money. And you had to structure a deal in which your investors are being paid first because I know you care about your investors. So how do you make money? How much money do you make on these types of deals that you're acquiring? What are your goals for the future as far as your financials? Brian: I started just entirely doing things with many of the resources that I could collect together. My first single-family investment was done with seller financing and then after that, I was like cash advance credit cards and getting signature lines of credit and all crazy kinds of things. I always tried to learn by putting my own money at risk. Then once I figured out how to do it right, I would go to investors and have investors invest. It took me about 12 years to start raising money from investors. And I did it for my single-family business.  First, I raised a blind pool fund and I split the profits 50-50 with my investors while we were flipping homes, and then when we move into multifamily, we're seeing a lot of money from investors. If you're going to buy half a billion dollars in real estate, it takes a lot of capital to do that. We were fortunate that a lot of investors were interested in partnering with us and putting up capital. So generally, the way we work it is the investors provide most of the capital for any multifamily acquisitions that we acquire. And in exchange, the investors get all of the profits until they've received a certain rate of return. Turn, once they've received that specific rate of return, then we start splitting in the profits and our splits usually start around 30% of the profits as the return goes up, then our split can get a little bit higher than that.  But generally, our investors always get the majority of the profits, and they always get paid first. So, this isn't a big cash flow business for us. I know a lot of syndicators out there, who'll just have a profit split day one where every dollar that comes in some goes to the investors and some go to the sponsor. Ours doesn't work that way, the investors get a preferred return where they get all of the cash flow until they've received a threshold return and then we start to share. So, we keep the lights on here by doing house flips and having other multiple streams of income. For example, us building homes here in our community and the fire damage lots is another source of income and we have a lending company which is another source of income.  Occasionally we sell our multifamily properties and that's when we get paid. We get a payday, not a paycheck. It's not quite as lucrative as many people would think, but eventually, you get there and profit potential is enormous but you never realized that until you start performing for your investors. Don: Okay, so let's talk about the way that you structure your deals with your investors. So, they're getting a preferred return. I guess it's 8% right that's the classic return that they get? Brian: Yeah, ours is 8% general. Don: 8% and then that's going to be a preferred return which means they get that right away as they invested the funds or a little bit after right it could be two or three months after, right? Brian: It doesn't mean anything, they may never receive it. If the dealer loses money and never makes money from day one, they never see a dime. But the way of preferred return works is that the investors get 100% of the cash flow until they've reached that threshold return and that's a cumulative return. So, if you invest today, in the first year, the deal throws off no cash flow, you get no cash flow. But if the second year it throws off 4% you get 4%. In the third year, throws off 8% you get 8%. In the fourth year it throws off 12%, you get all 12 because we still owe you 4% from year two and 8% from year one. So, if for two more years after that it still produces 12%, those two years, you're still getting 12% that makes up the 8% from the first year. And then after that, dropped to 8%, we'd start splitting the difference of what goes over 8%.  So, a preferred return is often confused with a dividend and it's they're not the same. A preferred return just means that you're first in line for all cash flow until you receive your hurdle rate. It doesn't mean that you're going to get distributions right away equal to the preferred return. It just depends on what the property is throwing off cash flow wise. Don: Yes, thank you for clarifying that. Now, I know the investors are putting all the down payment and the capital expenses for repairing the properties and improving the properties. And so, they also get a share of the profits of the entire purchase. So, you're offering your investor 70% 30%? Brian: First, they get 100% until you reach that 8%. So, if they haven't been distributed the full 8% through cash flow during the ownership period, then that's where you catch it up. As you take your sales proceeds, you catch up on your preferred return first. After your preferred return is fully caught up, then any sales proceeds remaining after that are split according to whatever the waterfall is. And if it's 70-30, 70% goes to the investor 30% goes to the sponsor. In our case, we have a couple of different hurdle thresholds where it's 70-30, typically to a 12. And then after a 12% return, anything that goes above a 12% return is then split 60-40. And anything that goes above a 15% return if you actually can ever get above a 15% return, if we do then whatever a little amount goes over would be split 50-50. That's the way at least three quarters to 80% of our deals are structured that way and of course, every once in a while there are slight variations on that theme. Don: So, at the end of the entire purchase in the cycle of purchasing a property, renovating the property, stabilizing it, and then you refinancing the properties or you're selling them? Brian: If we're going to hold over three years we like to refinance and return capital to investors. But if we can sell, we will. I always like to say that we're a buy and watch investor, we don't necessarily buy to flip and we don't necessarily buy to hold. What we do is we buy the asset we watch, we improve the asset, and we watch the market for the most optimal exit point. And generally speaking, the most optimal time to exit is going to be right around year two and a half, two year three and a half, right around that point after you've fixed up units and fixed up the outside, you've increased the income, you've pumped the value.  That's the inflection point where now the business plan would switch from things we physically do to just simply relying on the market for anything additional after that point. And when we reached that inflection point, that's usually when we like to sell. But if the market isn't cooperating and we don't think it's the right time to sell then we won’t sell. We can refinance, return some capital investors, sit on it for another year or two or three until the market is ripe for a sale, and then we could sell at that point. Don: What would you say you're typically improving the property like as far as the value goes? So, let's say you purchase a property for 10 million. After all the renovations and after improving the property, what would you say, percentage-wise, is the new value that you guys can bring the property to? Brian: On stabilization, we're looking for at least a 20% lift that includes, over and above the renovation. So, if we bought a property for 10 million, and then we put 2 million into it, or 12, then you'd be looking for somewhere around a $2.4 million increase. So, you'd be like 14.5, maybe 15 million to exit. So, we're looking for the kind of like that 20% or more lift within that stabilize period. Don: Of course, we got 2.4 million in profit, 30% of that is going to go to the sponsor or is considered profit for the sponsor after the deal is completed, right? Brian: First, you have to catch up with your 8% preferred return. So, let's say you distributed no cash flow during that period. For example, let's say it was a real deep value add and wasn't throwing off any cash. Now the first thing you'd have to do is give 100% of it to your investors until they got an 8% return. If it was three years' worth of time, then that's 8% times three. That goes off first, and then after that, whatever cash is left is what goes into the split here. Don: So, assuming you were cash flowing, and you managed to pay the preferred return during the entire process, and they always got the 8%, right? Hypothetically speaking, so you would be making 30%. Brian: That's right Don: Of the amount that you generated, which is 2.4 million in case of buying a property for around 10 million. Brian: And yeah, so you're looking at maybe $750,000. Could be your potential payday for the value created. That's right. Don: Yeah. So, it's just a matter of being able to get into a few deals like that every year, and then the profit as a sponsor, right as an indicator, the product It is down the line, a few years down the road. Brian: Yeah, that's exactly it. Like I said investors want to see their sponsor is getting a payday, not a paycheck. If you perform for them, then you do well. And if you don't perform for them, then you don't do so well. So certainly assuming you did your job right, the profit potential is pretty substantial. Don: But, something Robert Kiyosaki changed my life twice. Once was when he wrote 'Rich Dad, Poor Dad.' We all did read this book and got influenced by it. And if you didn't, then you should, because it's like I would consider that the Bible for real estate investing and investing in general. The second time he changed my life was actually when he wrote his book 'Fake,' which he talks about how money is not real and how money is a depreciating asset and why you should never have it, why you should never hold any money. And that's so true when you are trying to get wealthy and I think it's something you understand once you've made some money in your life because you realize that it's not real. But the things that money can buy, it just pays the bills. But if you try to get rich, then the only way to do that is to equity, which is what you're doing right? Brian: That's exactly right. Don: I think once this light bulb goes off and you get that principle, then you're okay with putting all the work and assembling a deal and improving the deal and stabilizing these properties that you're buying, just so you can get wealthier down the road. Because in theory, you are already wealthier because you have equity in the property. So, it doesn't matter. Brian: Yeah, you've got the equity and assuming that the market doesn't turn against you and take the equity back from you, that's happened before too. You saw what happened in 2005 through 2007. Equity is fleeting, so it's 100% true, everything you just said. But there is something to be said for keeping some cash for a rainy day and always having reserves and kind of living a little bit of a low leverage lifestyle. The people with the most leverage were the ones that got hurt the most. And it's funny when you live through an economic downturn like I have and managed to survive it, you see the risk that leverage ads and so you have to strike a good balance and you want equity and you want to use debt smartly to help improve your position.  But at the same time, you don't want to over-leverage and you want to keep a safety net. You get it, you guys have built your business completely with equity without debt here so far and seeing what that's enabled you to do. And now you can use debt smartly, to help grow your portfolio. And I think everybody needs to watch that as an example of how to do it the right way, and the safe way. Don: Yeah, I think the main reason why we were able to pull this off was that we were making money in two streams, right. So, one stream was our business, our wholesale business, which created nice paychecks and nice paydays the way you call it before. And it's an accurate way to call it because when you make paydays, then you're able to buy properties and create wealth. And so that was the second way that we've created the portfolio that we own right now, through equity. The equity is the transactions that we made. We never live a lavish lifestyle. And it's different than most people here, Miami because, I don't know if you've been here but if you drive in the streets here, then you're going to see a Ferrari or a Lambo everyday second turn. And that's a lifestyle in Miami.  Being a successful investor here in South Florida, we were able to resist that temptation, to invest the money where it should be parked, which is, in my opinion, real estate and stocks and property and equity. There's a beautiful saying that affected me tremendously, "Rich people are busy making money while poor people are busy showing off money that they don't have." Brian: Right. Yeah, you could certainly see a lot of evidence of that around, that's for sure. Don: Definitely. And especially today with social media, everybody's trying to show off, everybody's trying to faking it till they're making it. You're not going to make it, you're going to blow your first 10K on a Rolex. You should be blowing it on education. That's not even blowing it, that's investing and that's the difference, right? So that's what I think like an investor as I'm growing. Of course, I still have a lot to learn and I interview people like you, people that have made it bigger than me, the people that come to the show they have the same perspectives and the same lifestyle as well. Brian: It's just a matter of prioritizing and realizing that the first thing you've got to do is invest for your future. And it's like I spent almost every dime I had investing in more real estate and more real estate. And so, it's enabled me to accumulate a fairly large portfolio of rental homes just for my own, basically, my retirement plan. I don't get any cash flow off of them because I had them all financed on 15-year loans. So that way, they'll be completely paid off when I'm ready to step back and slow down. And it's a sacrifice now because if the property needs to be repaired, I'm probably pulling that repair out of my pocket and kind of negative cash flow, but I look at it as like a deposit into that savings account, right? And then eventually I'm going to have 40 or some rental units that will be completely paid for and cash flowing for me with no debt and right at the time, I would need it the most. So, it's sacrifice now, but it's a payoff later. Don: Definitely. So, let's talk about the future that a bit since we're already talking about it. What would your thoughts on the multi-family market right now and where it's going because I know it's a little bit overheated, a lot of people want to buy multifamily? And I know people buying properties for five and a half cap rate, which is pretty expensive in my opinion. What do you think about the market and where it's going? Brian: Yeah, you're right, the cap rates are low. And we're buying stuff at five and a half and six caps too. So, I get it, it's where the market is right now. And certainly, real estate is desirable, but it's desirable for a reason. And then, the reason is supported by fundamentals. And that's why pricing is so high right now. And one of the most common questions I get is, what inning are we in and everybody wants me to say that we're in the eighth or ninth inning and this is all going to change soon there's going to be a big downturn, you're going to be able to come in and scoop up properties at a big discount. I just don't believe any of that's about to happen, and doesn't matter what anymore because anybody knows that a game can go into overtime and a game can be rained out early, and can't just say that every game nine innings.  So, we're not at the bottom of the cycle. And if we are at the top, what does the top look like? I think that a top when we reach one if we haven't already, it just looks like a plateau in pricing where we take a pause and the economy catches up to where we are and valuations are still fully supported with incomes right now, even where they stand today. So, I don't think there's going to be a big downturn or a big buying opportunity anytime soon like some people are holding off for. When that does happen, maybe prices have gone up another 20% then they fall 10%. And if they would have got in today, they would have made 10%. But instead, they're going to buy them and gain nothing. So, we're still buying and I think one of my defense mechanisms is to buy in strong markets that have population growth, job growth, and income growth and that gives me a hedge against the downside. I think it's important to do that. It's tough out there. We have to look at about a thousand deals to buy one. Don: It looks like a shiny market. Everything's growing. The population is growing. The jobs are growing and so yeah, everybody would probably want to buy it there. But we're already talking about that, what would you say that market is? Where are you looking right now for properties? Brian: We're looking in Phoenix, Arizona, Las Vegas, Nevada, Atlanta, Georgia, northern and central Florida, specifically Tampa, Orlando, North Carolina, such as the Research Triangle market, Charlotte, a little bit here and there of Texas. But I think Texas is way overbought. So, we're kind of scaling back in Texas. We still own there, but we're net sellers in Texas. I love to find something in Nashville, but there's very little product coming out of that area. So primarily, I think, Arizona and Nevada, Georgia and Florida are primary markets. Don: So, you're looking at a lot of markets, and how do you analyze all the deals that are coming your way? I guess you got to have some help, right? Brian: Yeah, we've got a fairly robust team here. I've got two other guys on the acquisition side and one analyst. So, we've, every time a new opportunity comes to us, my chief investment officer will do a quick prescreen. If it passes a certain series of tests, it goes to our analysts to build a financial model. And then it goes back to our chief investment officer or our CFO who is like a co-Chief Investment Officer. And then they review the deal and tour it and talk to the brokers and run the comps and tour the comps and do all those other tasks. Our businesses grown pretty substantially, we're vertically integrated. So, we have our own management company and we manage our assets, which means we have employees on the ground, in all the areas where we operate.  So for example, we toured a couple of assets the other day, and it just turns out that we had our manager go with our acquisitions guy and manager knows the manager of one of the properties because they used to work together at one of our properties actually, and so, we have kind of a little bit of good rapport there and can learn more about the property because those relationships. So, we've well ingrained in the markets that we're in, we have people on the ground and the markets that we're in, and we have full control over the whole process. So I'm lucky that between me and my CIO, my CFO and the CEO of my property management company, between the four of us, we have 100,000 units of multifamily experience going back as long as 40 years and it gives us a good leg up on being able to stay on top of the markets in the assets. Don: That's not something you can easily find as an investor or a passive investor who's looking to invest with a sponsor. I mean, your team sounds very professional and experienced and you guys are exploring many markets and have years of experience. So, if I was looking to invest as a limited partner, I would give you guys a call. And speaking of which, if anybody wants to connect with you and get to know a little bit more about what you're doing and your projects and your future deals, what would be the best way to do that Brian: Probably the best way to reach us is through our website. Which is PRAXCAP.COM or a company's Praxis Capital and our website is P R A X C A P. C O M and on there, there are contact forms and you can fill out and our senior vice president and investor relations will set up phone calls. And we'll get to know you and establish your relationship before we start talking about deals. That's probably the best way. You can also find me on biggerpockets.com which is a real estate forum website where people ask questions and get answers about all kinds of real estate topics. I'm pretty active there and love to answer people's questions on that website when they post in the forum. So those are probably the best two ways. Don: All right, Brian, awesome. Thank you so much for that. And thank you so much for the insights that you gave us today. And of course, most importantly, time is the most valuable asset and therefore I want to thank you for investing the time to come to the show today. We appreciate it. I hope you're going to have a great day. Brian: Thanks, Don. I appreciate you having me on the show. I had a great time and humbled and appreciative to be a part of it. Thank you for having me on. Don: You're welcome. Thank you very much, Brian. Brian: Sure thing. Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time!

In today’s episode, we have the pleasure of featuring a well known & respected mobile home park guru, Kevin Bupp. He entered the real estate world at the young age of 19 where he started with single-family residential real estate. As time went on, he learned about commercial real estate and grew his portfolio- right before the crash of 2008. Like everything, you live and learn- and that’s what Kevin did. He did some soul searching and wanted to focus on his hobbies of health and fitness. He took some time off of real estate and built a company around custom cycling clothes and ran a social club 'Running For Brews.’ However, Kevin still had that real estate fire in him and his vision changed after a lunch meeting. Kevin became intrigued in mobile home parks and he owns several of them throughout the US. In today’s episode, he discusses how and why he chose mobile home parks in this second round of his career, the factors of a good deal & how to find them, and the importance of being in a good headspace.  Episode Highlights: How Things Affected His Business In The Early 2000s 2012 Tragedy And Onwards The World of Mobile Home Parks Where To Learn About Investing In Mobile Home Parks   Connect with Kevin Website: Kevinbupp.com Company Website: sunrisecapitalinvestors.com Podcast: Real Estate Investing for Cash Flow  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  TRANSCRIPTION  Intro: Hey guys, today I'm very excited to discuss one of the most intriguing asset classes and one that is known to have caught my attention at least. And of course, I'm talking about mobile home parks. Mobile home parks are one of my primary targets as an investor because I truly believe that to create long term wealth, there is nothing better than buying a piece of land. And if that land also happens to be a cash cow, then I'm all in. I think mobile home parks are just that. So, in today's episode, I'm going to host Kevin Bupp who has a truly remarkable story and is considered a guru when it comes to mobile home parks. So, let's get going. Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies. Don: Alright, hey, Kevin. Welcome to the show. Kevin: Hey, Don, thanks for having me. I'm looking forward to it. Don: Of course I was looking forward to it as well because I know you're one of the best mobile home park investors out there. So, I'm very happy to have you on the show because it's not a secret that I'm very interested in mobile home parks. But first, I'm going to ask you a little bit about your career and how you got started so my audience could get to know you a little bit better. Kevin: Sure. Mobile home parks have been our focus for the past seven years. However, it's not really where I got started. Like a lot of folks, I got started in single-family residential real estate. It was introduced to me or I was introduced to it back when I was 19 years old. Ultimately took me about a year and a half to buy my first property and spent the next couple of years following that introduction to residential focusing on building a single-family rental portfolio. And that's the direction of my mentor at that time. That's exactly what his business model was. So, I just followed it to a tee. We would only ever wholesale or flip a home when we needed to build up capital reserves. But the long term intent was to always build a portfolio for long term cash flow. At some point during the first couple of years, I was introduced to the world of commercial real estate more specifically multifamily property and so we started diving into the multifamily space as well. This is back pre-2008. This is back in 2002-2007, leading up to '08. So, we had built quite a large portfolio of single-family properties and instead of acquiring apartment complexes as well, along with other miscellaneous commercial real estate. Don: Sounds risky build up a big portfolio just before 2008. So, did it end well? Kevin: Well, if I had a crystal ball, I surely would have planned slightly differently, right? No, it didn't end well at all. We're down in Southwest Florida pretty much ground zero, one of the ground zeroes for the real estate crash and crisis. It was a very challenging time. The single-family market down here suffered greatly, not just from a value perspective, all of our properties have a lot of equity. We had a very low leverage point we thought was a very conservative leverage point in our single-family properties. But what we found is within a year period of time slightly less, most, if not all of them were upside down in value. Don: It's like the worst nightmare for every investor. What happened to you? You were investing in single families in Florida before 2008. That's the worst-case scenario. Kevin: Yeah, and it wasn't just the values it was a rental, the occupancy got affected, a lot of people are leaving Florida back then there weren't jobs, a lot of the jobs, were heavily relying on real estate, the growth of real estate, you know, building and development practices. So we had to hit to our rental premiums that were charged, and we had to start offering concessions, and your rents don't always continually go up, there are certain points in times where rents can be affected, and you might have a little more of a challenging time occupying your units will take longer than usual, you might have to give some concessions away, couple free months of rent or a discounted rent for the first couple of months. So, we had to do that, we had to do all the above.  It just was very, very hard to maintain the status quo when we had a portfolio that was underwater. In addition to that, it was negative cash flow, and it went from positive to a negative cash flow standpoint, you can't sustain that for very long least we couldn't. I didn't have $20 million sitting in the bank that could just keep feeding this beast and so we hung on for as long as we could. But ultimately, we were forced to essentially give back a lot of our portfolio to the banks. At that point, the banks didn't have the loss mitigation departments. This was very fresh. Most banks were forced to create those departments within their company to do workouts and loan modifications. However, that did not exist. The first year when things started going completely haywire, and so none of the banks were willing to work with us whatsoever. That's the last thing they wanted to discuss was that loan workout. We really did what we had to do and we tried to hold on as long as we could and ultimately had to get back a lot of what we had built over the years. Don: Okay, so when you say give back, I assume it was a deed in lieu? Foreclosure, right? Kevin: We had hundreds of properties. So, deed in lieu, some of the banks were so in disorganization at that point that they just didn't, there was a way we could speak with just ultimately went through the judicial process and went through foreclosure. We would short sell whatever we could just that we tried to work with the banks as much as possible. We were here, we were open, we're open-minded and willing to work with them. And so, some of the banks worked with us through short sales, we did that.  Others again, there was no communication, there was no dialogue and so, those ultimately went through the judicial foreclosure process somewhere deed in lieu or willing to do whatever we could to ease the process on both sides. But again, there wasn't much organization with a lot of banks in the first couple of years of the crash. Now every bank has a loss mitigation department. There are people, there's a dedicated department to deal with loan modifications and doing reworks with borrowers. That didn't exist. It just didn't exist back then. Don: Of course. Going a little bit forward, then it's 2012. I know you made your first mobile home park deal, right? Kevin: That's correct. Yeah, took a couple of years off a real estate. Well, I shouldn't have I kind of kicked myself in the butt now. But it was damage control for a number of years. It was very hard to see the light at the end of the tunnel. And it's not a sob story. I've learned a lot from it. I lost my personal residence and got bank accounts got garnished. It was a very ugly personal time for me. I'm still young at heart today but I mean, I was in my 20s. And I'd never gone through something like this before. I've only ever experienced the positives of real estate. It was a lot to consume and to digest. I knew that I needed to focus on my health and fitness. And so, I started a few other businesses that were directly related to the health and fitness industry and that allowed me to number one, create some revenue and income for myself because I was broke. I mean, I'd have anything and my bank account got garnished.  Don: What kind of business? Kevin: I started two different companies. One was a custom clothing company. I was a big runner, and I'm a cyclist, triathlete. And so, I was already ingrained in that community. And there was a huge need for custom cycling clothes and also running clothes for big events that we got into the sublimation business. I knew nothing about it before just watch some YouTube videos and did a bunch of my research and ultimately built a printing company. In addition to that, I love craft beer, and I love running as well. I thought there might be a great marriage. This is back again in like 2009 craft beer was kicking off. It wasn't as big as what it is today, but it was on a roll.  So, I started a social running club that was called 'Running For Brews', and once a week and a set location, we meet for a social run. And afterward we have been at a local brewery and we ultimately ended up opening up 45 locations throughout the country. The bars we charge them for basically bringing people every week to the bar so we get paid based on the amount of attendance we had. It was a fun business. It was one allowed me to be in direct alignment with my interest and also stay healthy and fit as well. Because again, every week we were meeting and going for social runs, 5K's, 10 K's, what have you. And so, it didn't kill the world. We weren't making millions of dollars with it but it was a fun revenue-generating business for us. And then the printing company as well. So those two things allowed me to really tie together my hobbies, health, and fitness and also generate income while I was trying to work through the mess that I had been experiencing with the real estate downturn. Don: Nice. Yeah, I think it's very important to do things you love. I've had some rough times as well. And then I found out that my hobbies are the ones that really saved me and got me back to become a lucid person again. I like to skate, you would never know if you see me dressed up work, you'd never know. But if I need to clear my mind, I just go out and skate and do something. I'm sure you've done that and that helped you a lot with mood and willpower, right? Kevin: That's the one thing that I realized is that everything else was out of my control. My credit was shot, I was getting calls every day from creditors. There were a lot of things that were outside of my control. The one thing I could control was how I felt and how I dealt with these challenging times these days and months that were lying ahead. Being in peak shape, both mentally and physically surely helped me get through those times. I mean, if I had just sat around and ate a bunch of cupcakes and drank a bunch of beer and got overweight and lazy, I'm sure my mental fitness surely would not be in tip-top shape. Don: Let's talk about 2012, where you got back to real estate after the trauma that you've been through with establishing a very serious portfolio and then losing most of it in the crisis. Then you got back to real estate, which is I believe, you know, once you do real estate and you're successful, it doesn't matter what happened, you going to get back to it, right? Kevin: Yeah, that fire was inside me. I tried to pull out or once in a while during those tough years, and I wish I would have looked at it differently. I think if it ever happened again, I would have a different perspective. And everyone knows the old saying of ‘buy when there's blood in the street’, it's just really hard to put that theory to work when its blood that's out in the street, right? It's really hard to think about it when you're inside that bubble. But I think looking back I did the best I could. And I had that fire burning, things were looking better. I was in a better situation all around. I've gotten married to the love of my life, still married to her today, she dealt with me through those downtimes. We got married in 2010. So, she was with me during some really hard times. Life was looking great, didn't have good credit yet. Still, we're working through some financial challenges, everything else was just lining up perfectly.  I knew I would get back into real estate, I knew I wanted to get that fire just glowing again. I look back and reflect on what I would have done differently or what mistakes I might have made back during my earlier years prior to the crash. What would the second round look like? Was it going to look the same or am I going to change my business model a little bit? What I realized is that I put a lot of time and energy into buying 120 plus single-family properties for the rental portfolio. I wasn't married, enjoyed what I did, but I put a lot of long hours and which is fine. I mean, you got to work your butt off.  However, I knew there was a more efficient way kind of reflected back and I compared to my apartment complexes that we owned to the single-family properties and realize that we didn't put nearly as much effort into acquiring 500 doors, apartment doors as we did acquiring 120 single-family rentals and those apartments to seem to kind of chug along, whereas the rentals were scattered amongst three different counties. They were inefficient to operate. I just knew that moving forward, I didn't want to have to rebuild a single-family home portfolio. It wasn't a good fit. It wouldn't allow me to scale fast. I wanted to regrow things or rebuild things much faster than I had done it before. I knew that multifamily is a way to do that. I understood residential real estate.  I knew that apartments were going to be a good fit for me and during that kind of journey of learning how the landscape has changed even the apartment space, I got introduced to a guy by the name of Randy. Randy owns mobile home parks here in Florida. He owned three of them had been a banker for his entire life, did a lot of lending on mobile home parks here in Florida and ultimately retired from the bank and went out and bought three fairly large mobile home communities and had lunch with Randy were introduced by a mutual friend. I had lunch with Randy one day just not interested in mobile home parks, but just really to meet someone new and I left that two-hour lunch meeting with Randy with a newfound interest in the mobile home park.  He piqued my interest in many different ways that I had never even thought about as it relates to investing in parks and I left that meeting confirming that I was going to give the next 12 months of my life to learning everything I could about mobile home parks, not just learning it, but going on actually putting the use of buying a park. So, I was going to buy a park and either prove or disprove all the great things that Randy had said about the niche. So that's what I did. I went out and did that. So, this was like 2011 when I met Randy, and so in late 2012, bought our first Park up in Atlanta, Georgia still owns it today.  The smaller community, it's the smallest thing that we own. However, we bought it at the right price, it's a great location. And the thing kicks out money every month without fail, bought that one, really enjoyed how it went. Bought the second one, which up in North Carolina bought a third one bought the fourth one and the story evolves forward seven years later, got communities and 11 different states right now and this has been our core business for the last seven years. So really, it has been very lucrative for us, it has been a lot of fun. It's a phenomenal niche. You've come into it, Don. I know you're looking to buy your first park so there's been a lot of things that have piqued your interest in this niche. Same things that probably peaked mine seven years ago. And we just took it and ran with it. So that's where we're at today. Don: I could tell you what I'm thinking about mobile home parks and where I'm coming from, I'm coming from owning a single-family portfolio as well. I'm also developing 30 units here in Hollywood, Florida. I'm developing the entire thing from the ground, it's going to be in A-class building, it’s going to be great, close to the beach. So, it's a great area. But somebody had a discussion with me, which also piqued my interest in mobile home parks for a few reasons. I can tell you what I'm thinking, and I want to know what you're thinking about this because I know you're the expert of them. So, here's what I'm thinking. I'm thinking that there are a few reasons why I'm interested in them. The first one is because they're not zoning for them anymore. So, it's just a fundamental of supply and demand. That's like the most basic thing in the universe. Supply, demand. If you have something that has more demand than supply, then you should try to get that thing for a good deal. So, they don't zone for them because they don't make as well as an income for the cities, as much as the multifamily would as far as property taxes from what I understand, maybe there are other reasons. So that's one reason.  The second reason is that it's just not getting any cheaper and it's not getting any easier to find affordable housing in America. Some so many people have section eight vouchers but can't find homes and the population is growing. So, I don't see any stop to that, I just see how you know, we keep growing as far as that number and the gap between the rich and poor, that's not going anywhere as well. So, when rents are going to get compressed, how compressed are they going to get so that mobile home parks are going to go down in the price? That's the reason. The last reason is that its land. So, it's God's money. When bitcoins replace dollars and when the currency changes in the next 10 years or 20 years, the land is always going to be worth a lot of money. I think buying a mobile home park, close to downtown is a long term investment. It's the best investment you could make, because in cash flows and it's going to appreciate in a tremendous way. If somebody who owns a car dealership is going to want to buy our lot because there is no other land to buy it and they could pay you $15 million in 20 years in today's money. That's what I'm thinking. Am I right? Kevin: I think you hit all relevant points. And it's a great covered land play. We're not a speculative buyer. So, we don't buy our mobile home parks with the intent that there's going to be a higher and better use in 10 or 15, 20 years, we buy it for the income that's being generated as a mobile home community. However, we look at the higher and better use as icing on the cake. If you're within the path of progress or anywhere in its path, even if it takes 15, 20, 30 years to get to you, that land at some point in time should have a higher value than what it does today.  Having a mobile home or mobile homes on that site paying you lot rent. People need a roof over their heads. It's a great way to cover the cost of owning that land and generate some income until that higher and better use comes along. So now, I wholeheartedly agree. I mean, it's a parking lot. It's kind of the same idea behind investing a parking lots like you see parking lots is urban core districts, downtown business districts. What a great covered land play. You've got basically a demand for parking, you got a prime piece of real estate at some point in time or another, those surface parking lots are going to have a much higher better using that could be high rise office building apartment complex, what have you, and I feel mobile home parks are very similar nature. Don: Okay, so let's talk about your criteria and your experience. So, what have you learned about investing in mobile home parks? What is it that you're looking for? Like when you see a deal, how do you know it's a good deal? Kevin: A good deal has a different definition for everybody. A lot of it depends on Is it a long term strategy, is it a short term strategy. For us, we like to look at things as though we're going to own them for 7 to 10 years if not longer than that, ideally longer than that, right? We have bought and sold things in the past. However, going into them, we pretty much decided that, that is that type of deal. Like we're going to get in here turn around, and we're not going to keep it for whatever reason that is we're going to look to flip it here in the next year or two. But as far as long term strategy, we know number one, speaking about the demographics, we want to be an area that is economically sound, that doesn't have a diminishing population to it, we want to be an area that has a strong median home price, strong median rental price as well, so that we know there's a demand for affordable housing.  You know, we wouldn't have been an area that's got a diverse employment base as well. We want to know there are jobs available for our workers. Generally speaking, that's the demographics that we're seeking. As far as the deal itself, there are certain targets we have investors that we have to meet the demands of and so for us, we look at what kind of cash on cash return in this park generate, not just from day one, but look at year one, year three, year five, you know, what does the long term projection look like in this community? Where can we get it to go, where's the value add components and what's realistic of what we truly achieve in that given time, and our target then between year one and year two, is to be somewhere in the 12% to 13% cash on cash range, so that number is kind of changed over time.  I could tell you that things have gotten a lot tighter, cap rates are going to press quite a great deal in our space, and the types of deals we were buying four years ago, you're not seeing as much of anymore back then we could easily be getting 15%, 16%, 17% cash on cash returns, sometimes upwards of 20% cash on cash returns quite often. It's getting a lot tighter lot harder to find those types of opportunities today, however, we still like to hit those lower double-digit cash on cash returns between year one and year two, and sometimes sooner, sometimes it might take a little longer. But that's really what the target is that we're reaching for. And that's a leveraged return, that's assuming that we're going to put some type of debt in place. The normal debt that we underwrite with is 70% loan to value 20-year amortization. Unless we know that it absolutely from day one will go either with CMBS or a Fannie or Freddie loan. In that case, typically, it's going to be in the 75% loan to value range in a 30-year amortization. Right now the rates are somewhere in the low foursome are actually below four, depending on what rate of an asset it is. So I'm not sure if that answers your question, Don, but what we're kind of looking for it doesn't mean that folks are out there hunting if it doesn't meet the criteria I just gave you, it's not a good deal because that just means it's a good deal for us and that actually fits our buying criteria.  As far as like quality of assets, I say the one big thing that's changed for us over the last couple of years, not that we would ever buy low-quality assets, however, we're much more picky with the great asset that will buy today than what it might have been maybe five years ago. It's one of those things from a bandwidth perspective, you're always you're buying or dogs wanting to start parks. it's manageable when you're small when you've got a few communities, but just know that those dogs, if they're in a primary that might be different because you can always change the tenant base if you've got just a phenomenal location area. But if you're an okay area, but you got a low demographic that you're serving in your park, it might not ever be more than what it is there today, you know, and so you might just have a little bit more of a challenging demographic that you're serving. And it gets to a certain point where that's just not scalable. At least that's what we found when you're putting out a million fires left and right because you got an older park, it's kind of got a rougher tenant base that is just very demanding.  You're always fighting them to get your payments on time. It's got a really old infrastructure that you're always repairing. Your bandwidth gets stretched very thin very quickly if you tried to own 10, 20, 30 of those parks, and so we're very particular nowadays with not just the quality the park itself above the ground, but also below the ground. What does that infrastructure look like, be very particular about what's the useful life that's there is there 10 years left in the water and sewer lines? Are there five years or 20 years? When was the park built? How about the roads themselves? What condition they're in? And how are they going to hold up over time? So we really put a lot emphasis on that, because we want to know that, number one, the tenant base that we're serving isn't going to be overwhelming for us that they're going to be just a good solid tenant base, but also the park itself, the infrastructure that we're not going to get surprised 10 years down the road with some major infrastructure improvements that we hadn't planned for. Lots of parks out there were built 60-70 years ago. Pipes don't last forever, sewer systems don't last forever, wastewater treatment plants don't last forever, and they're incredibly expensive to replace. Anyway, that's just some of the things that we look for out there searching. Don: I want to ask you a few questions about that. Because from the way you say it, it looks like you guys are looking to buy parks that are already established, occupied, are in good shape, but how could you get like that? Kevin: Yeah, give you an example. We got a parking contract right now, this is probably a perfect example for us. There's a park down in Texas, we're not closed yet, we're in contract for some I'm not going to mention the actual city and state or I'm not going to mention the city but it's in Texas. It's 204 lots and total. Still, this is a good example to use. So, this park, it's got 151 mobile home pads and then the remainder is RV pads, which is kind of a hybrid so it's not 100% mobile home. However, the RV-ers are long term. There are some folks that live there for like three, four years, it's very much a permanent type establishment. The mobile home lots of 149 of 151 are occupied and 26 of the RV lots of the 51 are occupied.  From a revenue perspective, the park is fairly stable, the lot rents are at 375 they could easily go to probably 450 so it's got some move to run on the rents already. It's got city water and sewer it's already being built back so there's not a lot of recapture or revenue to be had thereby building back the water and sewer. They do have some recapture issues but not big ones, you know, things that are fairly easy for us to go in and fix probably a couple of water leaks and a few people that aren't paying their bills as they should be. But generally speaking, that upside has been kind of removed as well. However, where the upside in this park lies, is it looks like crap. The infrastructure is good. The water and sewer are good. It was built to the right specs. It's laid out well, however, the family that's owned it for the past 40 plus years, they just haven't enforced any rules at all. These are all 10 own homes.  There are no park own homes here. I'd say maybe only a handful of homes have actual skirting and so the park looks loud. Hell, it looks horrible. The roads aren't in great shape against got good infrastructure there it was planned out well as far as layouts are concerned. All the lots are a big enough size to where they can fit. newer model single-wide some double-wide. It's got paved two car parking in each home. However, there are cars all over the place. It's more of a cosmetic type deal for us to go and improve other than raising the rents themselves. So, our intent with that one we're buying it for $5.65 million. More than likely what the first 12-18 months will look like there is trying to fix the minor water recapture issues that are going on.  There's about $65,000 of water and sewer that's going somewhere and it's not getting recaptured. I don't know if it's a big water leak or what but we're going to fix that. Normally, it's pretty easy to kind of narrow down what the issue is there either if people aren't paying it, or there's a water leak in the water is going into the ground, one of those two things. We're going to do that we're going to go in and skirt every single home. It's going to cost us $150,000 to do it, but it's going to make that park look like a completely different part just by doing that every home will have a new skirting unit the home itself looks kind of like crap. It will look a million times better with skirting around it. We're going to do a massive community cleanup. There's lots of untagged vehicles, lots of crap around the houses, we're probably going to spend upwards of $50,000 just by buying renting 30, 40 yard dumpsters to get in there, get some labor in there to help people clean your mess up that they've created over the past 10, 15, 20 years.  We're going to fix the roads by about $150,000 worth of road repair that is needed in that park and then the RV lots there's 25 that are empty right now all the hookups are there. I did some test ads to see what the demand was for a one-bedroom, one-bath park model home they'll park miles like one of the small little 99 square foot homes. Within 24 hours we had like 55 inquiries on Facebook so there's a great demand for that type of product in that marketplace. So, we're going to go by 26 park model homes and fill in those remainder of RV pads or if any of the other RV lots turn in the meantime we'll bring in a park model home. That way it looks more like a mobile home park then it does a mobile home park with an RV section with like fifth wheels and travel campers and things like that. So, we'll do that over this period of the first 12-18 months. We'll get rents up. I don't know if we're going to push them to $450 relegate but we'll get them over $400.  Now here's the best part about this. It's in the best part of town it's a right down the road from a Country Club. It's right behind. It's probably one of the nice neighborhoods in the area. All the major retailers are within a block away so if you got a good arm you can throw a stone that far. It's very close by so it's in the best part of town however it looks like death. But the revenues coming in such a desirable area and the schools are so good right there that the park is full the vans full however it looks horrible, and so it had been on the market for a while for a much higher price and it just hadn't sold because it looks scares people away. However, I can see the underlying beauty because I know that the location in the market changes everything. I can easily take what's there now because I know there's enough people that are banging at the door to get in saying, ''Hey, I would love to live here and raise my family here because it's such a great part of town and great schools," that if I lose some of the bad people that are there, I know I'll fill those places right back in with good people.  However, this park was in like the other side of town, it wouldn't be a good deal to me at all, I would never be able to make it look better than what it does today. Even if I put money into it, it would revert to its old self very quickly, and it would never be a strong operator. Collections are phenomenal revenues high, we can get the rents to $450 within the first two years will bail turn around and sell this market we choose to pry for slightly over $10 million is what the evaluation will come in at. If we fill in the park models, get the lot rents up to $450, fix the water recapture problem and aesthetically improve the park which will help drive down that cap rate on the sales side that it becomes all day every day at $10 million parks. Don: So okay, so let's talk about the numbers. So right now you're buying it based on the income I assume, right? Kevin: Yeah, it's about a seven cap. Now we're buying it out. Don: It's a seven cap. What would you say right now is the renovations that it requires as far as the dollar amount. Kevin: About a half-million dollars. Don: Half a million. So, you're buying it for 5.56? Right? Kevin: We're buying a 5.65. And then we got about a half million. Yeah. Don: Okay. You got to be a little bit over 6 million, right? Kevin: Correct. Don: Okay, so how are you going to bring the park into a valuation of 10 million? Is that because you're going to sell it on a lower cap rate? It's almost an institutional park. Right. The buyer for that is institutional. Kevin: So, it would it will be when we're done with it. Yeah, right now, not even close. But it will be when we're done with it. We evaluated a six and a half cap was where we ran it at. Don: That's your exit point? Kevin: Yeah, that'd be the exit point. Things in Texas right now in this market are trading for like five and a half cap. So, but we were low conservative with the exit there in case it fluctuates. Six and a half cap is what we used. Don: What's the NOI of the park if I may ask you right now. Kevin: Yeah, I don't know. Don, I couldn't do that. I'd be lying if I gave you a number right now. Don: But you're saying you could increase the NOI by roughly 35%? Kevin: That's correct. From a rent increase from a, there's like $120,000 worth of payroll in this park. So, there are lots of family members working there, there's a lot of expense line items that can be shaved down as well. Payroll being one big one. As I said, there's about a $65,000 water recapture issue that's happening. I'm not sure where it's going. It's either people aren't being charged, or there's a pretty massive leak.  Just between that and payroll alone, there's $100,000 of additional revenue to be had. Filling in the remainder of the RV lots that are there with park model homes is a major boom, thinking assuming that you're in the 450 range as far as lot rents are concerned. Adding those 26 homes there is a major boom for that park as far as revenue and then if you raise the rents on the remainder of the park, and you get to that $450 mark, which is $75 above where it's at today. Let's just say that on all 200 lots in that park that we were able to achieve another $75 of revenue so that's another $180,000 a year of annual income that doesn't have any costs associated with it other than a rent letter increase going out. There are no additional costs associated with achieving that additional revenue. So just between that and shaving off some of the lifetime expenses, there's $280,000 of additional revenue there to be had. Don: Okay, so I want to ask you a question regarding buying a park that is currently in such a bad situation and condition that it doesn't cash flow, or it does, but not enough. So, it could be, you know, sometimes don't have negative cash flow. So, is that something that you recommend if there's a solid value on them, or that's something you would never do? You always want to buy something that cash flows right now. And so, when you buy it from day one, you already make money? Kevin: This one will cash flow. So, this one will support itself. We're not going to pay for all these improvements out of the cash flow. That's just a bad plan altogether. So, we're going to put up all this capX money as of right from the get-go. This is going to be funded right in the beginning. So, this one, not that situation. This one supports itself. Would we get into it if it didn't support itself? Probably not. It's just there's a lot of risks there on that size of a deal. If it truly is a negative cash flow. I feel very confident about it, but the timing gets Off relatively quickly, when you have such a major renovation project, just lining up crews and contractors. Missing a year off deadline on a big project like this is not unheard of, it could be very commonplace.  So, it gets very expensive if you're truly losing money on a monthly basis, and you missed the target by a year of when these parks ready. So, if we're off by six months or a year, the park still makes money and still makes sense. It's still generating good levered cash on cash return while we're making these improvements. Now, there's a park we got in Georgia. Going into it, we knew number one, we didn't want to be in that marketplace. I didn't like the market all that well. However, what we're buying the park for, it was kind of like, there's no way we can lose here, especially based on the time that we can get the timing right of getting this place cleaned up and renovated, some of these homes so that we should be able to get in and get out and should have little to no risk associated with it. That's what we did took us about 18 months to get in and clean the place up.  We did it with the intent of not taking any cash flow out the place didn't pay for itself. I guess we probably could have taken some cash flow at some point or we just put it all back in property and got it cleaned up, got it stabilized, and then turned around and sold it to a cash buyer and moved on to the next. So that one, we felt confident we had such a low basis in it. However, it's your first deal, and you gotta make it work, I will probably move away from something like that, man, there's just so many things that can go wrong. And it's like you've got all your life savings sunken into this thing or if you got your money and your investors money, but yet, you've never actually done a deal like that before, and you don't have a plan B, then I think it's incredibly risky. I think there's easier ways to make money than to do that, the model I just shared with you. However, I've got experience doing it, I've done it before and allow the money than deal with my own money in a wouldn't have sunk me if that deal wouldn't have gone as planned. And again, our basis was so low that it would have been very hard for us to lose. Don: I understand. Okay, so let's talk about how you find these deals because I know that's a big deal. That's 200 and some spaces, it's more of the institutional buyers typically the people are going to look for that. So how do you find these deals? Kevin: We got a lot of relationships with brokers, but I will say that the majority of the deals that we own today and that we have in our pipeline are due to our efforts. And that is direct mail, pick up the phone and cold call owners. And we take on the role of a broker. I mean, we identify parks in certain markets that we like, and we try to build a rapport with the owner or someone in the family that has ownership of that property. And this particular deal in Texas I gave you, you say it's an institutional it will be. However, it's not today, no institution, the right mind would touch this thing in the current condition that it's in. However, I know that it will be an institutional play once we're done with it. So that's where we hope to get it but that one was found via cold call, it was listed when we called on it.  However, it was not listed on like loop net or any of the big commercial side that had a local commercial broker that had it marketed. I don't know where the heck he was marketing and Don, I'd never seen it before and normally I see pretty much everything that gets on the market. He had been asking, I think over $8 million for I think eight and a half million or something like that. He's not a mobile home park broker. He didn't understand the business. A lot of development happening right in this immediate area. I think that he's a little off what that lands worth. However, that's how he was marketing and it was like eight and a half million dollars. And we made a number of offers over the last six months and finally really took our offer knew we could execute on it. So that was a cold call.  We get a lot from the cold calls, we get a lot from direct mail. But our goal is to really build relationships with owners, not just send them a piece of mail saying, "Hey, we buy mobile home parks, you'll call us." That doesn't work all that well. You know, our goal with the letter is a very personalized letter. And then we typically follow up with a phone call and just say hi, say hello, go to the relationship. You get to meet these folks at industry events that they're going to be attending. If I'm going to be in the local area, if I'm visiting another property, I get on our spreadsheet, I see who else has a park in that area, how we communicate with them. So, I try to get together coffee, try to grab lunch, what have you. Just build these relationships doing the same things a lot of brokers do, but we do it on our behalf. The goal of doing that is that remove competition because as soon as it gets into a broker's hand, it's their fiduciary responsibility to get the highest dollar amount for it right even if it's a pocket listing, per se. More than likely that pocket listing is going to get handed off to a number of potential buyers. We've never sold a property directly to the owner we've always used the broker. I get their capacity and where they fit in. I just don't like being the guy on the buy-side that has to bid against five other people for the same property. So, we typically go right to the owners. Don: When you get into a mobile home park and you see that it needs a lot of work, what would you say the price per pad? Of course, I know it depends on many factors that condition but what would you say is the dollar amount you have to renovate in case you have to put roads, in case you have to work on electricity and work on the septic tanks? Kevin: I can tell you what we do as far as like setting reserves aside on an annual basis per lot per year, we set aside a certain amount of money for ongoing capital reserve items, right but as far as like day one, what's needed. It's all across the board. This park here in Texas is going to be half a million dollars, we closed on the park just a couple of months ago up in Indiana. Its pristine man. It's so nice. We're kind of joking with where do we spend 10 thousand dollars. There's not much to do at all and all the water and sewers directly built by the city, public utilities built by the city, the roads are the perfect shape, all the structures are in good shape. So, we are not putting hardly any money into and it's not because we don't want to because there's nothing to do to it, there are no improvements that make. Now that was a good deal. It's probably one of the nicest parks we own. It's gorgeous. It's an 85 lot park, 42 the lots are occupied. It's all double wides. Hundred percent double wides. We paid 750 for it. Lot rents are $317 a month in direct build city, water, city sewer. All the 85 lots are developed, all the infrastructure hookups are there for 85 homes.  However, there's only 42 in there. I'm not sure the story behind why it never really truly got off the ground, but it's a very high-end community. In fact, despite one of the nicer neighborhoods in this area to live even nicer than some stick-built homes. Some people just don't know what the heck they're doing. I mean, the guy was nice, the seller. He had known for seven years. There were three vacant double wides and then a fourth vacant double, which is the office. They have a nice office there, which will keep it as an office but it's a big double-wide so that came with the sales probably $50,000 home. And three other vacant double wides had over the last seven years, people had just abandoned. This guy never did anything with them. They have just been sitting there locked up, kind of preserved, you know, they all need some rehab. But we just got done rehabbing the first one couple weeks ago, we sold it for $23,900. Put about $9000 into it, and we got it for free. We're renovating the second one right now or I'll put about 10 or 11 into it and total renovation. And it'll probably sell for $24900. And then the third one about the same price point. So, the guy never does anything. He's double eyes. They just sat there money going down the drain. Yeah, yeah, that was a cold call effort. Don: You're going to fill out all the lots, right? Kevin: We haven't fully decided yet. I don't know what we're trying to wait and see. We bought it with the intent that it made sense even without infilling lots because it's a small town. So, we didn't run the performer based on Hey, we got to fill in X amount of loss per year because I just don't know what the demand. I'm not sure yet as to what that demand looks like and how many homes we could sell a year.  So, what we're trying to use as a determining factor is how fast he's used mobile homes will sell the ones that we acquired through the sale. As we renovate them, if I got people showing up left and right on these next couple of deals with $25,000 cash in hand, they'll tell me that there's at least a market for probably $25,000 to $35,000 homes. However, I'm still not dead set on that there's a market for $60,000 or $70,000 homes. So anyway, the next couple of months will tell us a lot as to what kind of money people have that live there. And then that will help us decide what the next steps are as far as in filling that community. So that's the plan. I just don't know how many homes a year will be that we bring in. Don: I also don't like specifically on mobile home parks talking to brokers. So, I'm also calling and doing cold calls and talking directly with sellers and I have found out that it's probably the best way to do this in this space. I don't know why, I mean in multifamily, it wasn't working quite well for me when I was trying to call the owners directly but in mobile home parks, it does. For some reason, you call people and they're nice. Why do you think that is? Kevin: I don't like being cold-called. I hate being cold-called. However, one of my business partners that I own some of my private portfolio with, he picks up the phone, anyone calls. He also talked about a lot of the owners are still of the older generation, like our parent's generation. They're nicer, they're friendlier. They're used to having conversations in person, not just on a text message. Back in their day, how they communicated, right, they spoke with each other, they had an open line of dialogue. So I think that's why 15 years from now, I think that you might find that a completely different story, as far as mobile home parks are concerned, like who the owners are on the other side and are you able to have good quality conversations with them or is it just going to be in order to take on the other side, and you will never be able to get to the decision-maker. Don: So, what do you think is the best way for somebody who's trying to learn that asset class? What do you think they should do? Is it listening to podcasts and reading books? Where do you think it is the best information? Kevin: Education is the start with everything right? Thank God today we have podcasts. There's so much free information out there. We've got a mobile home park-specific podcasts, we've got 100 plus episodes. Lots of our earlier episodes are very granular. They go into like the operational side, we go into very deep intricacies on the finding the value and underwriting a park. Go listen to, you know, the hundreds of hours where the podcasts that are out there ours and there are other ones as well that are good. There are places like bigger pockets that have a dedicated mobile home park section of their forum. There's another dedicated mobile home park forum out there, you know, so there are lots of places to get free information.  However, at some point in time, it's a matter of actively doing something. And sometimes it doesn't mean by yourself. I've always had partnerships, I enjoy it. I know what my strengths are, I know my weaknesses are. No one's good at everything. So being able to identify someone who's out there already doing it can help fast track your success in the space, find out what their weaknesses are. And maybe that's where your strengths lie, and your team up with something that's already got a little bit of traction, and has already done some deals or they're doing deals currently. You can kind of dive in and help them grow their business. That's a much faster way to do it then going at it all by yourself. However, some people don't want to partner they want to go at themselves, but you gotta take action some point of time. I'm going to buy a deal and everything that you've learned in theory, you know, will come into play. However, you'll learn things that don't pan out exactly how they did theoretically right? You learned by being in the trenches and doing a deal. Don: Of course. So, in case anybody wants to get in touch with you and kind of do something together, what is the best way to connect with you? Kevin: They can find me on my website. It's Kevinbupp.com. I do two weekly podcasts. One's real estate investing for cash flow. It's a commercial real estate investing podcast, you can find that on the kevinbupp.com website, or company website is sunrisecapitalinvestors.com. So if you want to see what we got going on the mobile home park space, that's where you can find that. And then we also have a mobile home park investing podcast. You can find any of our podcasts on iTunes, you just search my name, or search mobile home parks or real estate investing, you'll find it there. I'm not too hard to track down, Don. So, between a couple of those ways, yeah, they can't find me then they're not looking hard enough. Don: Okay. Well, Kevin, I want to thank you for being on the show today. And we appreciate all the insights you gave us. Kevin: Yeah. Thanks, Don. Thanks for having it's been a lot of fun. Don: All right. Thank you. Have a great day. Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.  

Andrew Syrios has been in the real estate business for over 10 years. Born in a real estate investing family, he was mentored by his father, Bill Syrios, who is also a real estate investor. His father started investing in the early 80s. Andrew is based in Kansas City, MO. He joined the family business straight out of college. He is the owner of more than 500 units in Missouri and manages own portfolio. His real estate preference is to buy and hold for cash flow.   In this episode, both Andrew and Don discuss their experience in real estate investing. Andrew gives a lot of details about how, when and where to invest. Andrew discusses his thoughts on a possible recession along with possible factors to look for.  Also the importance of standardizing certain tasks in order to streamline your business, get more done and have everyone on the same page.     Episode Highlights:  When and How He Started Investing Tenant vs. the Landlord Friendly States His Criteria For Choosing a Property Importance of Having Systems & Policies in Place Connect with Andrew: Website:  Andrewsyrios.com Podcast: The Good Stewards Podcast   - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  TRANSCRIPTION   Intro: Hey guys. On today's episode, we're going to have Andrew Syrios. Andrew had been investing in real estate for the past 10 years. He does mostly single families and some small multi-families in Kansas City, Missouri. I like the fact that he's scaling a business that most people say is unscalable, which proves time and time again that there are many ways to become a successful real estate investor. So stay tuned and enjoy the interview.   Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies.   Don: Hey, Andrew, welcome to the show.   Andrew: Hey, thank you for having me.   Don: Yes. You're welcome. I know you're based off Kansas City, Missouri?   Andrew: Yes. Good old Kansas City.   Don: Yeah. And we just had a lovely conversation about Kansas City is one of the only cities that are two cities divided into two states. So, we were talking about how it is to be a real estate investor in an area like that. So, I guess I would want to ask you that again so that you could clarify to our audience a little bit about that.   Andrew: Put it on the record. Yeah, I mean, it is interesting. I mean, we call it KC Mo and KC K, we're based on the Missouri side. Every city's got different pockets, good areas, bad areas, areas that are too expensive for buy and hold and rentals and whatnot. I'd say the biggest issue is kind of there are some hard breaks particularly like Kansas City, Missouri has the main part of downtown Kansas City is in KC Mo. And when you go across the river there and the KC K, it shifts pretty drastically. So, you have some pretty drastic changes in some parts. In some areas, you go across the state line, and it's like nothing changed at all. That's some of it but also there are some law changes. That's also true. The county, they're six counties in the Kansas City, Missouri metro area. The laws are a little bit different. For example, in Jackson County, Missouri, the evictions can take substantially longer than they take Johnson County or Wyandotte county is what has Kansas City, Kansas. But at the same time when you evict someone, you have to store their stuff for a little while on the Kansas side. Missouri said they just tell you to throw them on the lawn.   Don: Is it a tenant-friendly state?   Andrew: I would say both Kansas and Missouri are pretty in the middle. But I think Kansas is probably a little bit more so on the tenant-friendly side.   Don: I know a lot of investors that would steer away from tenant-friendly states, and it's understandable. It's difficult.   Andrew: Yeah, well, if they put in something like California, and I think Oregon just put in rent control, and New York has a long history of that. And that can make it very difficult to make margin especially in these expensive places where you know, it's it takes so much money to buy a property and then you can't rent it up to the market. There's something in Kansas City they're trying to push for like the Kansas City tenant Bill of Rights. This would only be for Kansas City, Missouri, won't even be for other cities in Missouri, but it has some weird language. I'm not a lawyer, so I won't try to parse it out. But stuff like trying to restrict your ability to do tenant screening, and that's been sort of a thing throughout the country as well, which makes it particularly risky, especially if you either can't do it or can't do as many banks can do it stuff like that. I think it's just something that a lot of buying hold investors need to take into account when they're looking at an area. Generally, it's going to be probably trickier than that. It's not going to be impossible, but it's going to be more difficult something you need to be more prepared for.   Don: Yeah, most definitely. I just had a very interesting conversation with somebody that I did some networking with. And he's coming from New York, he's a nice guy, made some fortunate in real estate. And now he's telling me he's got a situation with one of the buildings that he owns. The building, he's trying to sell it and the building is worth around $2,000,000, but since it has tenants inside, it's worth around $1,200,000. Because in New York, you can't raise the rent unless you have renovated 75% of the building. And I'm sorry if I'm wrong about this, I'm not sure that's what I heard from him. And this is a true story. He's saying that the tenants hired attorneys, and they're asking him for $100,000 each to leave.   Andrew: I've heard of stuff like that where they're trying to do developments and there is that one guy like I'm not leaving no matter what.   Don: One tenant he said he's asking for $200,000. That was a point where I figured out that I'm done with this and he took his stuff, his family, everything and he just moved to Florida. I'm based out of Florida, Florida is very, very friendly with the landlords. It's very easy to do things here. And that's why you got a lot of investors. So, I would not even be able to fathom the idea of investing in a tenant-friendly state. But I know a lot of people do that.   Andrew: Obviously, tenants do need some protection. I despise slumlords as much as the next guy. And I don't think these things help that I think what they do is drive investment money out of the real estate, which is if you want to reduce the cost of housing and you want to make housing more affordable, the biggest thing you need to do is push investment into real estate. And so, it's completely counterproductive. Although I think it is important to recognize that tenants do need some protections they absolutely You know, there are slumlords out there and we especially I think as real estate investors should do our part to try to shame those slumlords into basically changing their ways because although I think a lot of them either incompetence or they ran out of money. Real Estate Investors go bankrupt too. So that's part of the equation. You can't raise rents. You can't do tenant screening. The biggest complaint we get from tenants like properties we're looking at is don't let anybody in here. That's not pro-tenant that's an extremely anti tenant. So...   Don: I want to talk a little bit about yourself and your career. So, I know that you've been investing in real estate in the past 10 years. I know that in Kansas City, Missouri alone, you own over 500 units. You're also managing your own portfolio, which is very, very interesting. Also, there's another interesting fact about you, Andrew, and that is the fact that you had your father as a figure, as a real estate investor in your life, and you're kind of stepping into his shoes. So, I want to ask you about that in particular, and how that affected your real estate career.   Andrew: My father got started real estate in Oregon back in the late 80s. And I was kind of when I was growing up and he bought a lot of student housing at the University of Oregon, which turned out to be a very good investment at that time. When I graduated from college, we were flipping houses. And eventually got kind of sick of that because basically, student housing got too expensive to buy and hold with anymore. Eventually variety reasons we came out to the Midwest, whereas housing prices are less expensive. It's easier to cash flow and my brother into joining me out here but my father is still in real estate.    We have a podcast that we do the ‘Good Stewards Podcast’, it's a weekly thing on real estate, we just go over real estate topics and he's still very involved in the company focuses on Oregon. The way we like real estate is to buy and hold for cash flow. I like that Midwest markets that peaks and valleys aren't as high low in the Midwest, the South kind of those cash flow areas. And we want properties that can cash flow well. Some people are a little bit more into the vine, an area that's improving in one of these coastal markets that have a lot of upward potentials. There's upward potential here, but I just personally stress if the property cash flows with the appreciations are great, that's kind of the cherry on top.   Don: We can buy for appreciation. We always have to buy for cash flow. You can do whatever you like, right? But I guess when you buy for cash flow, then it's kind of mitigating the risk. You know that you're going to make money on this, you know that you're going to be able to pay your annual debt service, which is I think the biggest fear for an investor is not being able to pay their debt service. Right?   Andrew: Yeah, I think the way I've always looked at it is Warren Buffett's first and second rule of investing, ‘don't lose your principal’ and ‘don't lose your investment’. And the security you have one is your equity in the property, which is why extremely important to buy properties under market, buy properties of the value add that you can have that built-in equity, that's your cushion. You even if you finance it fully, or almost fully, you still have that equity cushion. That's your first level is the same as if it brings in positive cash flow each month, then that's extremely important. There is a difference. It's not just speculation to buy in a market where you're not cash flow. That's not speculation myself if you have a good reason to think that markets going up the path of progress in that city, you know, have some major developments coming, okay.    But I would only do that with a very small percentage of your portfolio. You know, it's like if you're going to buy in an area that you know, it is like the cash flow, you think got a lot of potentials that should be a small percentage. Little bit your small piece that you can take a bigger risk with, I think it's a much bigger risk to invest in if you don't believe we're going to have any cash flow, or if it's going to have a slightly negative cash flow until you're investing predominantly for appreciation.   Don: I agree with everything you said. So, let's talk a little bit about your criteria. So, when you're looking into a property, what are the things that you're looking for? What is the value add that you're looking for? You said buying under the market, which I couldn't agree more because I've been doing that pretty much all my real estate career. So how would you recognize these properties?   Andrew: Most of what we buy our single-family and the main thing I'm looking for is the value of basically doing a comparative market analysis. And we're aiming for 75% because we're trying to refinance all of our investment. And so that's the main thing I'm looking at. I'm comparing it to the properties nearby. Secondly, I'm looking at is what cash flow and it's a little trickier with houses or even small multis because if the property is rented for the full year, you better cash flow but if you have one bad turnover than maybe it won't. One house is all or nothing, then apartment complex. But we're looking like on average if I'm taking these taxes insurance, it's average what I expected to rehab or its maintenance to be and it is the turnover cost to be on average and does it cash flow.    If it doesn't cash flow, it doesn't mean you shouldn't buy it but that probably a flip property that's probably that you should buy and turn around and sell and make a profit on if you can get it low enough. And you know, there's ways kind of shorthand for that like rent to cost. I am looking for how well cash flows are certainly looking for that with regards to apartments because basically cap rates are how you compare apartments and cap rates are a way of telling how well the property will cash flow more or less.    I go in like three levels. The first one I'm always looking what is its value today or if I can do something to make its value like if it's a house going to add a bathroom or something like that or bathroom and a bedroom or convert this garage or something like that to make this house worth x and is that hit my 75% criteria. The second one is cash flow but doesn't cash flow it all then usually it will be like okay, that's when we should flip. And then the third one is just kind of what's the area. We generally invest and kind of working-class and middle-class areas. I recommend any new investors kind of stay out of the tough areas because those are good places to lose your shirt if you don't know what you're doing. You can make money, they're good tenants there. You just got to be a specialist and you got to be very careful, because it's very easy to buy cheap property, and then rehab all your equity. And that happens all the time.    Then you turn over costs are too much to maintain it and you end up losing the house, I've seen that multiple times. And then if you go into the two high ends, there's no cash flow there. And so, we're kind of in the middle and I want to have kind of a spread of that and also see, you know, like where the jobs coming in, and I want to invest in this particular area. So, I'm taking that into account. But that's kind of like when I'm looking, are we going to do a marketing campaign? I'm going to send out letters or something like that, or I'm going to try to focus on a particular area of town. Okay, well, let's focus like, for example, in Kansas City, there's this area where they're putting this new office complexes adding like 10,000 jobs and that process mostly complete now. So, buying around that area, that's a major target point. In that area, we would be more interested in the other. So, it's kind of a stacked with houses and small multies, you know, what's the value? What's the cash flow? Is this an area we want to invest in? Is it we think it's growing or is it stagnant? That sort of points our marketing and our interest, but also kind of make tip the scales in certain instances. And of course, you're getting into multifamily or commercial, then you're looking more at the net operating income, the cap rate and comparing that and sort of the value and the cash will be kind of becoming the same thing.   Don: Definitely. So out of the 500 units that you have, how many of them are single families and how many of them are apartments?   Andrew: Little over 60% are houses and about 40% are apartments or small multies.   Don: You’re saying small multies, that would be 1 to 4?   Andrew: Yeah, duplex or above. Was funny, we originally came to Kansas City think we'd focus predominantly on large apartment complexes trying to get up 200 units stuff. We went the opposite direction, just kind of the way our financing worked, getting the private lenders we develop relationships with. It made more sense to do these houses and there was just a ton of inventory. I mean, this was right after the crash and there were just a lot of bank-owned properties and that's what we mostly start with buying dilapidated bank on properties and fixing them up.   Don: It's a great idea.   Andrew: There's not much of that around anymore. But there's always a new angle.   Don: You got to know how to adjust, especially in real estate, you have to understand that it's also about timing. So, you can do what everybody else is doing. You also got to stop, think and recalculate and make some changes and adjustments. It's the nature of the beast. It's just the way that real estate is. But I do want to ask you. You got 60% houses out of 500, that's 300 houses give or take. How do you manage that?   Andrew: It takes some energy. We have a centralized office, and we do prefer properties that are closer to our office. We don't have time to go into all the systems and stuff but I will say the more systems and policies you can put in place, the better, the less time you have to reinvent the wheel, the better. That's something we've been very, very big on. We use property management software called ‘rent manager’ and we're very much sticklers in our policies. If it's not in the rent manager, it didn't happen. We want everything to be recorded. We have a maintenance staff, we have a management staff, we started using Trello, Mojo, lease lockboxes that for leasing for showings more. We still have leasing agents we also use those lockboxes as well which makes it a little bit easier on some of the properties especially ones that are further away we get showings in. A lot of just standardize as much as possible, standardized the lease don't offer a thousand, one lease and we have one payment policy plan. If somebody's late on the rent, we don't make an individualized plan with them, this is our plan we set a date with you and if you don't have it then we have to pick a time to move out or something like that. We don't have like okay well if you will give two chances to in this particular way.   Don: There are no cutting corners.   Andrew: Had the same paint colors. We've added one exterior one because our website started to look the same, every house was having the same exterior color, so we added a second one. But we standardize paint colors. We standardized our carpet. We standardize our materials, standardize our policies standardize as much as possible. That way you don't have to reinvent the wheel and you can do this.   Don: How many things work under you?   Andrew: We have 15 employees right now.   Don: 15 employees. So, I guess one of them has to be a GC right?   Andrew: We have a guy who oversees our construction. We mostly hire subcontractors and contractors and stuff like that.   Don: And then two or three property deal with management, because that's a lot of work.   Andrew: Yeah, we have a handful, man, a couple of accounting, and then its maintenance guys. We’re going around and doing that kind of stuff. It's a decent-sized operation.   Don: Yeah, pretty decent. So, I can also tell you that you're young...   Andrew: I like to think so.   Don: Maybe 30’s -What is that?   Andrew: Mid 30s yeah.   Don: Mid 30s. Okay, so I was going on the safe one.   Andrew: I appreciate that.   Don: So, what's the plan for the future for you? Because you're already investing in real estate at that age. I'm 30 years old too. So, what are you planning? What's the goal? You're going to retire early or you're going to move up and do some bigger things in the future? What are you thinking?   Andrew: I think I'd get bored if I retired or tried to. And yeah, probably moving towards larger properties. We've had some interest in moving towards more commercial real estate regardless, it's been harder for us because the market is hot and it feels like especially given where prices were not too long ago like things are mostly overpriced or there might be a recession coming up in the next year or something. There's a temptation like okay, as soon as that happens, we'll jump in right now we'll stick with houses and small multies unless we find a great one. But I do think regardless of the timeline, I've kind of gone back and forth that I don't want to give any advice. I don't want to tell people like to sit on the sidelines and wait for a recession.    It's just like, yeah, we're probably nearing one the next two years. I was thinking that in 2016. So, you know, who knows, but I would say regardless, make sure you get good deals, make sure you bought well enough that if there is a recession, you're insulated from it. So, if you bought a 25% margin and there's a recession, real estate goes down 20% you still 5% equity. Whereas real estate continues to go up, you just do all that better. So, the only thing that stresses to me is that the importance of getting good deals is all the more so since farmers have a recession coming.   Don: So, what I think about this is when you're trying to make the move from residential real estate into the commercial space, then you're going to find that the people that you're competing against are sophisticated. They are the biggest fish in that tank. Think about it. And we're talking about properties that are cash flowing and producing. I know is in the hundreds of thousands a year. So, these properties are worth millions. And who buys properties that are worth that much? It's very, very sophisticated investors.    So, I think to look at it from the sideline thinking there might be a recession, so I might not get in, is not necessarily a good idea. I think a good idea would be to start underwriting, to start looking at the performance of properties to start understanding them and understanding how they operate and then when the recession is going to hit, you're going to be ready for basically pulling the trigger, right? Because you don't want to get started when the recession is here, but now you got to go through the learning curve of understanding commercial real estate because it's a different animal. It's very different.    I've done the move and it takes a while for you to understand exactly what it is that you're going after. For you, you're listening to somebody talking to you about a deal over the phone, and you could just pick up the number, what's the ARV? You know, what's the square footage, and you already know how much you have to do any repairs, right? I never had to think about what I got to do and repair it. So, I was like, what's the square footage on this house? And where is it at, okay, that's $30,000, $40,000 right there. It was built back then. I could already do the math. In commercial real estate, it's kind of different. I would think that there is a learning curve. So, I would say to anybody that's listening to that, there's no better time to get into real estate than now or yesterday.   Andrew: I think I would agree with that. Yeah, I think that's a good way to put it. I've heard of people who in 2015 were convinced that there was going to be a recession coming up in the next little bit and they sat on the sidelines because of that. I think that mindset is sort of the someday maybe kind of mindset of someday maybe I'll try to do what I want to get you got it. But at the same time, even if I thought the market was going to be taking off, I still tell people you got to be diligent, you gotta get good deals, you can't just buy stuff and wait unless you're just loaded and in which case you don't need to be listening to a podcast just by whatever. I think it's sitting on the sidelines and waiting is not a good approach but being cognizant that you need to be more diligent and be demanding to get those good deals is central.   Don: Wonderful. Andrew, what would be the best way to connect with you in case anybody wants to learn anything from you or get in touch?   Andrew: I blog at BiggerPockets on a weekly basis, more or less, so if you go to BiggerPockets, my articles are there. You can also see my own personal blog Andrewsyrios.com. S Y R I O S. Just post whatever comes to mind on basically. And then we have a podcast, my father and I, along with colleagues Ryan Dossie, and Amanda Perkins. Go to the 'The Good Stewards Podcast' you can find that. Those are the best places is to keep in touch with me.   Don: Awesome, Andrew. So, thank you very much for dedicating the time to come on the show today and wish you'd have a beautiful day.   Andrew: Absolutely. Thank you for having me. Appreciate it.   Don: All right. Thank you.   Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.

Joe Bodek is born and raised outside of Philadelphia, PA. After his grandfather and father, he is a third-generation real estate entrepreneur. He received the guidance of his father, one of the largest developers and builders in the country at that time. He continued in the real estate business up until 2012. After that, he became a mentor because he wanted to solve other people's problems and share his knowledge of real estate. He created a revolutionary mentoring system called the 'Earn While You Learn Lease Option Mentoring Program.' The most important factor of this program is that it costs a whole lot less money in comparison to other courses in the market. This course is for everyone who is facing financial problems but are eager to take real estate courses and make a living out of it. Episode Highlights: Joe Bodek’s Family History And How He Became An Investor Leasing A House Types Of Lease Options: Sandwich And Wholesale Mastering Lease Options In Commercial Properties Future Goals Of Joe Bodek How He Became A Real Estate Mentor.   Connect with Joe: Website: realestatementoringUSA.com Email: JBODEK1@gmail.com   - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - TRANSCRIPTION Intro: Hey guys, today I'm excited to talk about a subject that many people always ask me about. And to talk about that subject, I'm going to host Joe Bodek. Joe is a lease option mentor. And despite the fact that it has to do a lot with residential real estate, I think it's a super interesting subject nonetheless. And you could also apply these powerful techniques in commercial real estate, in what would be known as a master lease option. So, let's start and don't forget to check us out at DonandEden.com and remember you can always shoot us an email at Hello@Donaneden.com.   Lady: Welcome to the commercial real estate investing podcast with Don and Eden, where we cover all aspects of real estate investing with special attention to off-market strategies.   Don: Hey, Joe, how are you doing today? Welcome to the show.   Joe: Oh, good, Don, how are you? I appreciate you having me on.   Don: Yes, of course. I think it's important to have somebody like you because you're dealing with lease options, which is a very interesting subject, and I haven't had anybody in the show that is doing that up until now. So, I would like to hear everything there is to know about it. And I'm sure that the audience would appreciate that as well. But first of all, I want you to tell us a little bit about yourself and your background and how you got into real estate, to begin with.   Joe: Don, I'm not the usual story that you hear about the individual that was working in the cubicle, hated his job, hated his boss, saw the infomercial at three o'clock in the morning and went and signed up for it, got into real estate and of course, the rest is history. You hear that a lot out there these days. I'm not of that area. I was birthed into real estate. I'm the third generation. My grandfather was a developer, builder. My father was one of the biggest developers and builders in the country back in the 50s and 60s and early 70s. By way of explanation, if anybody lives in that split level, or knows what a split-level home is, my dad's want to make them famous. He claims he invented them. I'm not quite sure he did that but he made it kind of famous, he's got thousands of them. So, I was mentored by him for a number of years, work with him running about 3000 apartment units for him and learn to build houses and develop ground. So, I have a fairly decent background in conventional real estate. And then back in the 80s, he decided he wanted to retire, everything got sold off. And I went out on my own eventually got into creative real estate, dealing with wholesaling and lease options and subject to and those kinds of deals, and did that for about 25 years. And for the last, I think it was about 8 or 10 years, I'm not exactly sure, I started mentoring people and found that I was pretty good at coaching. And over the last 8 or 10 years, that's what I've been doing, mentoring and coaching people at least options and wholesaling. And that brings us pretty much up to today.   Don: Wow. So yeah, I got a lot of questions about this story. First of all, I want to say that you're very lucky to be born into a family that is dealing with real estate because you absorb things from an early age and you understand the potential of that business right on. It's something that I'm sure you're grateful for and appreciate right?   Joe: To have my dad is my first mentor was pretty phenomenal. His background was pretty amazing. It gave me a look at both sides of the coin because I got to do conventional real estate which is going out and buying properties and building apartments and all that and go building houses and developing ground. And then they got me the ability to go into creative real estate, which is a lot of fun to do. And of course, you don't have to work with banks as much and all the stuff that I did it was completely the opposite. I had to relearn real estate when I went into creative real estate because it was the opposite of everything I had learned. So yeah, it's been a good career. I've had a good time at it. I've been lucky. I've been around a lot of people that knew what they were doing.   Don: Yeah, we started doing creative real estate in the beginning. So that's how we started and that's how I feel a lot of people are getting started today. Because today you're able to start with creative real estate with no money and no knowledge, no college degree, and for me it was perfect. I'm sure it's very interesting that you got to see all types of real estate during your career. You're focusing right now in coaching and helping others, which I'm sure is very gratifying, right?   Joe: To be perfectly honest with you, I was getting ready to retire. I had done hundreds and hundreds of deals in the last 25 years, and I'm not a spring chicken anymore. And then, you know, what was I going to do sit around click coupons? That didn't make much sense to me. And people kept asking me, how do you do a lease option? How do you do this and coaching all these people? And somebody eventually said to me, why don't you open up a company and do this because you're pretty good at it. And that's how it all came about. So, I decided, well, I'm not going to retire, I'm going to keep doing it. And to be perfectly honest with you, I get way more of a thrill at a coach and a student to get them through their first deal or get them to expand their business and get it flying than I ever did build a house.   Don: You know, when you're in real estate for so long, then the money is no longer the main purpose if you ask for my opinion. I mean, of course, it is the thing I mean, you still want to make money, but it's not just money, it's also the impact, it's also the ability to affect people. And I feel the same when people talk to me about real estate wholesale, which is how I got started in the residential real estate wholesale. The first time you tell people about this, then they go crazy. They don't believe that you can even do things like that. Lease options are pretty much the same as wholesale. The first time you hear it, it's kind of hard to grasp, but then you realize how ingenious this is, right?   Joe: A lot of people, as you just said, they're kind of taken aback when they hear the word lease option. They think it's very difficult, got to go to night school to learn how to do this type of thing, and it's not. The best way I can explain it to your listeners would be if they're familiar with a car lease and how that works. This is the same thing. In a car lease, you go ahead and you lease your car for a period of time, usually it's three years on a car lease, and at the end of that lease period, you have the opportunity to either go ahead, you have the option to purchase that vehicle, or you can give it back and go get another one from the dealer or go somewhere else and get a car. Same thing here. You're going to lease property for a period of time, which you're going to establish with the seller. And then at the end of that lease period, you have the opportunity to go ahead and purchase the house at a predetermined set price, or you can say no, I'm want to move out and go find another place to live. So, the easiest way to look at it is it works just like a car lease, you just substitute a house.    Don: Yeah. But then it gets a little bit trickier because you assign the lease to an end buyer, and you still able to make money on all the ends on the front end, back end, and the rent money. So, let's talk a little bit about that and how you make money as the investor or the entrepreneur and a lease option.   Joe: Okay, now, first and foremost, there are two types of lease options. We'll talk about this one first, which is called a sandwich lease option. And then if you'll permit me after we've done that, we can talk about the wholesale lease option. Sandwich lease option has three paydays to it, which is kind of unique. So, what happens is, you're going to go ahead and you're going to enter into a lease option agreement with the seller and you have the right at this point, to sublease the property. You are now the tenant of the seller, of the owner. And you have the right to put a tenant in that house and sublease the property. So, what you do is you find a tenant-buyer, a buyer that's interested in purchasing a house, a tenant-buyer wants to live in it for a little while, and then purchase it at the end of the lease just like a car lease. And what you have at this point is three paydays.    The first Payday is called ‘Option Consideration’. That's the money that the tenant-buyer gives you upfront before they ever move into the house. That's called an Option Consideration. And that will go towards the sale price of the property when he settles on it. And that's nonrefundable. So, if they decide they don't want to live in the house, they want to move out, they do forfeit that amount that they put down upfront.    The second payday that you have is called the ‘Rent Spread.’ That's the difference between what you're paying the seller that you agreed to pay the seller every month, and what you're going to collect from your tenant buyers. So, if you're paying the seller $1000 a month and you're collecting $1500, that $500 goes into your pocket every month.    The third, and that's ‘Residual Income’, by the way, and if you have a bunch of these properties, let me tell you something that residual income is nice, it comes in every month. The third Payday is backend money. That occurs when you settle on the property a year or so down the road when the buyer goes and buys it title transfers. So, if you had, let's say, $20,000 in the deal, that's what the difference between what you were saying you were going to buy the house for, and what you were selling it to the tenant-buyer for. So, let's say that's $20,000, just to use a number, and you took $10,000 as that upfront money, which I just alluded to, which is the option consideration that you get upfront. Well, when you go to settlement a year or so down the road, there's still about $10,000 in the deal. So that's when you get that backend money when you settle and title transfer. So, you have three paydays with the sandwich lease option and you're in that deal from beginning to end. That's why they call it a sandwich because you're right in the middle between the buyer and the seller.   Don: Before we move on to the wholesaling lease option, I want to ask a few questions about that. When you're doing an option consideration, so you're taking the money from the end tenant, the one that you have found, right?   Joe: Right.   Don: Aren't you doing the same with the original seller? So, doesn't he want the option consideration as well? And if you are doing this, it's typically going to be smaller than what you're asking from the tenant you found, right?   Joe: Yeah, that's right. It all depends on Don because there are two types of sellers out there. Some people need to sell and people that want to sell. Generally, when you're dealing with the person that wants to sell, you know, they're looking to downsize or move closer to their kids or something of that nature. They don't have any kind of a problem because we're problem solvers. Most of the people that we deal with can't get rid of the property conventionally, for some odd reason. We come in and do a lease option if they can't do it conventionally. So, if you're dealing with somebody that wants to sell, usually they do want money upfront, and as you say, you're going to negotiate that, you need to collect more from your tenant-buyer than you have to pay your seller, you're correct there. However, on the other end of this thing, you have the people that need to sell. These are people that own another house, couldn't get rid of their house eventually quick enough, they can't afford to mortgages, you have people that lost their jobs, unfortunately, can't afford their house, they got to get out of it right now, things, where people have to move quickly and can't get the property, moved conventionally. Most of these people never asked for upfront money, they want debt relief, they need to get out from under a problem. And in most of those instances, you're usually just giving them a month's rent. It's not a security deposit, but you don't treat it that way. But you're giving them a month's rent or some very low money, maybe a little bit of move out money, something of that nature. So, you don't run into the upfront money when you're dealing with people that need to sell it need to get out of the house. They just want to get out from under the problem. But you are correct. You're going to take less money upfront, then you're going to collect in your ten and five. Don: OK, so the other question that I have is how do you find these people that need to sell and aren't these people are going to look for somebody who's going to be a cash buyer like in wholesaling? For instance, as a wholesaler, I know that when people need to sell right away, they'll make a cash offer for a lower price. And that's where we make money as wholesalers. So why would that seller lease the property to you, instead of just selling it to somebody else for cash? And also, when you find that person, what if the property is distressed, and you need to fix it? So, you got to work with properties that are good, right, that are habitable?   Joe: Great question. Let me answer the first one. These people want to get cash for the property as everyone does okay, that's a given. However, they run into a couple of problems. One is that there's not enough equity in the deal for a wholesaler to make it work. Because there's just not enough money in the deal. If you're going to do a wholesale deal, it has to be equity rich.   Don: Yeah.   Joe: In order to make it work.   Don: Definitely.   Joe: So that's one problem they run into. The other problem is that the seller won't take the low offer that usually offered by the wholesaler because they have to work on a 60 or 50, or whatever it is a percentage to make this work. So, the two reasons that they can't do a cash deal is the absence of equity, or the seller not taking the low offer. So, these are the type of people that we work with. And the way that you find them is numbers. This is a numbers game.   Don: Yeah.   Joe: So, you know, however, you're doing your marketing, whether it's through email or texting, or direct mail, you're working the numbers to find these individuals. But I will tell you that there are plenty of them out there. There's an awful lot of properties that not only don't have enough equity in him, but you can work with underwater properties. When you're working with lease options, you just have to have a longer lease to make it work so that the equity builds back up in the property. So those are the two reasons that they would work with you on a lease option. They simply can't do a cash deal.   Don: Okay. So how do you find the end tenant? I mean, you're looking for a rental, they're not real estate investors, they have no idea what you're doing. So to put it on the end of something or Zillow, right?   Joe: Yeah, you're looking for end-users, you're not going to deal with cash buyers. When you're doing lease options, you're going to have to deal with end-users. You're correct. And the way you find them is very simple. A Craigslist ad, Zillow, all the different classified sites on the internet and to tell you the truth, the single biggest thing that finds some free is a nice sign ‘Rent to Own’ in front of the house. When we put rent own property available for rent to own or lease option, the phone rings off the hook simply because as you know, I'm sure there's an awful lot of people out there today that can't get qualified for a mortgage for one reason or another. They're good people, but they have a thing on their credit, they got to get cleared up or they don't have enough money for a down payment. So, a lease option affords them the ability to move into a property that they want to buy and live there while they're correcting the credit problem or saving the money that they need. So, there's no lack of people that will call you and you put that when they see that ad.   Don: Interesting. This is when we talk about residential real estate. Now, I know You haven't done a master lease option, in commercial- but I know you know something about it. So, what do you know about master lease options in commercial properties? And how do you do that?   Joe: A master lease option works just pretty much the same way as a lease option works, again, you know, use your car lease as a guide. And the only difference is that when you're dealing with a multi-unit property of any sort, your due diligence has to be way, way, way more because you know, you're dealing with a lot more numbers, a lot more things that affect the property and so forth. So, your due diligence has to be a whole lot more when you're dealing with a commercial property, as you know because I know you deal with commercial properties. Now, the master lease itself, it's just got more in it to get all this information that you need about this commercial property in there. But otherwise, it works pretty much the same way.   Don: You lease the property, right, from the owner? So, let's say it's a warehouse, or let's say it's a self-storage, so you're going to lease the property, but you got to have the option to sublease the property which a lot of commercial owners don't like. Because when you lease it, then they would always say that if you want to sublease, then you gotta have the approval in writing of the owner, right? There are ways to get over it. Like I know that there's a way to get over everything in real estate. And I'm sure the people that are specializing in that they know exactly how to do that.   Joe: I wish I could agree with you, Don. But I don't do them. I know how they work, I just have never done them. I like working with single families. They're a lot simpler.   Don: Yeah. So, what are your goals right now, when you have already retired, you've made hundreds of deals. What is the goal right now to teach as many people as you can, how to do this right, and how to wholesale also lease options?   Joe: Yeah, and I'll tell you about wholesale lease options in a second. The goal is pretty simple. What I've found out there a lot of people want to learn how their work and creative real estate. The problem was and is and I'm not objecting to this, but if you go out and look for a lot of these coaches out there and look at what they're charging, it's a lot of money. I'm not going to say they're not worth it or whatever, I'm just going to say it's a lot of money. There's an awful lot of people who want to learn about this. So, what I did was I purposely set up a program that's very, very inexpensive. You get my program for less than you ate at the dinner witch your significant other in a movie. And I set it up that way specifically so that I can do what you just mentioned, that I can teach as many people out there that want to learn this as absolutely possible. And I did it because it's not about the money for me at this point. It's really about giving back and teaching all these people out there that would like to learn how to do this, but I don't want them to have to go and remortgage their house to pay the fee. That's why I set the program up the way I did. And that's my goal to teach as many people as I possibly can.   Don: That's amazing, especially because now everybody's trying to learn. If you're trying to get into real estate, I know a lot of people would just think about wholesale and residential as the main gateway, because it's simple, you can start with no money down. So, I see a lot of people that have no education and are coming from distressed families where they didn't have any food on the table. So, they're trying to make it in life. And they're trying to get into real estate wholesale. The problem with that is that when you're getting into wholesale, there's a lot of competition. Yeah, I'm a successful wholesaler in Miami, me and my partner. And sometimes I see the things we do. And I think about these people that are getting started, and that they have to compete with us. I'm thinking, well, they got some fierce competition. It's not just me, it's a lot of wholesalers here, a lot of strong and smart players that you meet and you know. So, I agree that starting with something like that with the lease option, which I'm sure is that saturated, I just know. I see the market, I see what's going on, I see how many people are trying to wholesale deals and I don't hear much about people are trying to do a lease option.    Joe: Lease options are not saturated. As I say, a lot of people seem to think they're difficult but they're not and they're not saturated and you can start there, it doesn't require any money just like wholesaling. It's okay if I talk to you about the wholesale lease options too?    Don: Go ahead.   Joe: It is really important here is the wholesale lease option and I'll tell you why. First and foremost, wholesale lease options work very much like traditional wholesaling, where you get the property under contract and you assign it out to a buyer. The big difference is you're not working with a cash buyer, you're working with a usual. One of the things that I teach is that, as a wholesaler you know this I'm sure, you throw away an awful lot of leads to find that deal that you can do.    Don: I was just thinking about that right now. And you said that people that don't have enough equity right are the people that you work with? I was like okay, just going to talk to my acquisition manager after the show and be like ''Hey, listen, we need to do lease options and that's what you're doing from now on" because of I through a bunch of leads just for that, yeah, a hundred percent.   Joe: So, if you like wholesaling okay, you can wholesale lease option pretty much just like that. But here's the kicker that I like. You guys, wholesalers already have a built-in lead machine because here's what happens. You've got... when I was doing a lot of wholesaling personally, usually around 20, 25 to one and leads to five in the field. Your numbers may be different. Make a long story short, what happens is you have all these leads that you worked hard for, and because there was no equity in the house seller wouldn't take your loan number, you wind up throwing them in the trash. But with a wholesale lease option, if you know how to do them, you don't have to do that anymore because you can take properties that don't have any equity in them and do a wholesale lease option on it. You can take properties that people won't take your low number because your lease option, you can get pretty close to what the buyer wants, and still make money on the deal. So, you don't have to worry about making lowball offers. So, you can take these dead leads that you have and you can now use for some of them, not all obviously because you don't want to deal with junk properties. You had asked me about that before when you're doing the lease option, you want a nice property in a nice area. You don't want to have to do repairs on it because you don't want to fix up somebody else's house with your money. You know, but some of those leads that you get as a wholesaler are nice houses in decent areas.   Don: Exactly they want a market value.   Joe: Yeah, what you can now do with them is to do a wholesale lease option on them. So, in other words, let's just suppose that you had out of all the leads you get, you get one a month, you could do a wholesale lease option, one that you would normally have been thrown away. Let's say you're throwing away 50 of them, and one of them works out as a lease option. And it's a $10,000 deal, which it should be, okay? Do your maths, that's over $100,000 a year that you've been thrown in the trash.   Don: And that's the only consideration you're not even talking about the rental...   Joe: On a wholesale lease option is only one Pay Day. Now if you sandwich lease option, you're correct. You can do a sandwich lease option as well. It depends on which way you want to go.   Don: So, give us an example of the wholesale lease option, yeah, so we know more about it.   Joe: Well, a wholesale lease option works just like a wholesale deal. You want to find your seller. You're going to get the property under a lease option agreement, you're then going to find your buyer and you're going to put him into a lease option agreement, okay, between you and the buyer, okay? And then what you do is you assign that agreement that you have with the buyer back to the seller. Now, you could do it, either way, you could take the sellers agreement that you have with the seller and assign it to the tenant-buyer and be done with it. But I like to do it the way I suggest so that you have an equitable interest on both sides of the deal, but nobody can say that you did a fraudulent conversion or something of that nature.   Don: What if the seller doesn't want to sign it when you assign it to him?   Joe: If he doesn't want to do it that way, you can do a sandwich lease option, you can do it either way. Most sellers, you don't have a problem. I've never had a problem. Either way, they're going to still be one to one with the buyers. Would it be between the buyer and the seller, when all is said and done.   Don: When I wholesale properties, my acquisition managers, they go meet the sellers and they tell them that they're going to buy the property. Are you going to disclose the fact that you're trying to do a lease option here? Or you're going to say no, I'm your tenant?   Joe: No, I teach my students full disclosure right upfront. "Hello, Mr. seller. I'm an investor. Here's what we want to do," and you tell him everything up front. So, he knows exactly what's going on. And he'll make the choice and then you move forward. We don't have many instances where they don't want to do it. Because again, most of the people we deal with want to get the debt relief they want to get out from under this house, which was like a perfectly good solution.   Don: So, you go there, actually to the sellers, and you tell them, "Hey, listen, I'm going to lease the property from you and then I'm going to find somebody else to lease the property from me for more money, and that's my fee."   Joe: That's what we tell them. We tell them the exact truth, exactly what we're going to do and you gotta understand, the majority of the people that we work with are the people that need to sell, they want to get out from under their mortgage, they want to get away from this house for whatever reason and they're not concerned about how they do it, as long as it's not going to cost them any money or get them in any trouble. Neither of which happens when you're doing this properly. Yes, I believe in full disclosure, we tell them exactly what's going to happen right from the very beginning.   Don: Yeah, so they keep the title to the property and then the money made by the tenant. So, the rent money is paying off the mortgage.   Joe: Yes. So, it's a win-win for the seller.   Don: Makes sense.   Joe: They're out from under their problem, their mortgage is being paid down. They don't have to worry about the property. So, it's a complete win for them.   Don: That's just amazing information and I'm so happy that you shared it on the show today. So, let's say somebody is listening to this episode, and they want to get in touch with you and learn more about that, and your system and your program. How would they do that?   Joe: Well, it's very easy. They can go to my site, which is realestatementoringUSA.com or my email is JBODEK1@gmail.com.   Don: Awesome. Alright, guys. So, if you want to learn more about lease options, definitely get in touch with Joe. I want to thank you very much for being on the show today and giving us these beautiful insights.   Joe: Thanks, Don. It was a pleasure and I hope everybody got a little something out of it.   Don: All right, you have a great day.   Joe: You do the same.   Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time!  

Douglas Skipworth has had an entrepreneurial heart from a young age. He began his journey in community banking and worked on earning his CPA and CFA certifications. Since then, he has been in the residential real estate industry for about 20 years and is passionate about partnering with others to develop thriving real estate businesses. He currently co-owns CrestCore Realty, which manages 2,500 properties in Memphis, TN. Along with his partner, they have built several real estate companies in brokerage, management, lending, and construction.  In this episode, he discusses his life and business, the advantages of community banks, ideal criteria for investing in a new deal, the importance of connecting with others and shares helpful advice on education for today’s world. Listen in as he shows us hows real estate and adding value to others tie it all together.  Episode Highlights: How Much It Helps Your Business If You Connect With More People Effects Of Borrowing Too Much Money For Education How Local Banks Help In Real Estate Investing Importance Of Establishing A Relationship With Local Community Banks Douglas’ Interest In Helping Certain Types Of People Via His Businesses   Connect with Douglas: Website: crestcore.com Email: Douglas@crestcore.com - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  TRANSCRIPTION  Intro: Hey guys, this is Eden your co-host. Welcome to the show where we talk about all aspects of commercial real estate investing. Today, Don is interviewing Douglas Skipworth. Doug has been investing in real estate in the past 20 years. And today he'll cover a lot of subjects including community banks, relationships in real estate and some philosophical issues like college and financial freedom through self-educating yourself with the tools that are available to us nowadays. I want to mention, again, our new website that's forming a decent shape you can visit us at DonandEden.com. Also, remember you can always reach out to us I answer all emails personally: Hello@donandeden.com. So, let's get started guys. Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies. Don: All right. Hey, Douglas. Welcome to the show. Douglas: Hey, Don. Great to be here. Don: Yes, I think you deserve it because you've been doing real estate since 2001. Right? Douglas: That's correct. My partner started in 2001. And I started in real estate in 2002. Between the two of us, we're going on 20 years. Don: Wow. So, you guys have been through a lot, right? So, you started, the market was going up, then there was a bubble, and then everything changed. And then you guys probably had to make some adjustments and change business models. Now, when the markets have been going up for a few good years. Douglas: Yeah, it's so funny, because I don't know when you always talk about the good old days. I don't know if the good old days were when things were running up, or the good old days, because we were, you know, we were buying and refinancing and things were great or when things kind of went bust, because that was a huge opportunity for us personally to add to our portfolio as other investors busted in community banks had deals to give away and then rates have been so low for the past 10 years that that's been a good time. So, if you kind of look back at the past 20 years it has been the good old days. Don: Yeah, I don't know who said it. I'm pretty sure it's Warren Buffett. "When there's blood on the street, buy real estate." Douglas: So true. Don: Yeah. So, tell us about the early stages of your career. How did you get started? What did you do? How did you even hear about real estate? And what were your goals at the time? Douglas: Great question. After college, I knew I wanted to start a business. So I kind of jumped into commercial banking and accounting, got my CPA and my CFA certifications to learn all I could about business and then I was working in New York City at the time and I had an opportunity to come to Memphis to work with an owner-operator of a real estate business when he was ginning up a tech company. It was kind of like a proprietary Zillow back in the early 2000s. It was a great chance for me to get on the owner-operator side of the business because I kind of knew from my first few years I wanted to be a business owner. So, I just kind of jumped in real estate tech and was learning a lot about real estate and I moved into a neighborhood and bumped into a guy who was a jogger. So, he and I started jogging together. He was in manufacturing, managing plants across the country mechanical engineer by training and he had in high school, a mentor who owned real estate and so he was building wealth through real estate while working his full-time corporate job. And I was working in real estate on a data in business side working with realtors and appraisers on the residential side. So, we had a lot of commonalities, shared some interest, but he kind of told me about what he was doing with his investing portfolio of properties, both multifamily and single-family, I got interested. So, I started doing the same thing on my own. And we would jog together and share war stories and share best practices and really developed a friendship and almost a partnership. So, we decided we wanted to try and do a deal together that neither of us had done. So, to kind of share the risk. We ended up doing a tax sale because we had never bought a tax sale, either of us. And so, we just kind of shared the risk on that and it went well. Then we shared the risk on another one and another one and then we bought a little portfolio together and then we bought a few more together then we started doing some third party management together and fast forward to today we've got several hundred units together, we manage several thousand units together, we've got a brokerage and property management and maintenance company would do some hard money lending. So, we've enjoyed our friendship and business relationship. Don: That's truly amazing. I mean, I think, you know, going on a jog, and then meeting your future business partner that you're going to do so many things with, it's just outstanding. And that's why people always say that when you are trying to get into real estate, then you should always say that this is what you're doing to people. Because people are going to tell you something back and they're going to tell you, hey, you should talk to this guy or I've heard about somebody who does that does this and then you get ideas. So, you always gotta talk to people. And that's a great example of how talking to people, getting to know them, listening to them, changes your life in a good way. Douglas: That's a great point. Especially I was laughing about This was somebody the other day, because when I was working in banking when I was working in accounting when I was working in real estate technology, I would tell people that and nobody seemed interested or knew what to talk about. But as soon as I started investing in residential and small multifamily properties, and I would mention that everybody had either thought of it or had a friend or a family member who had been an investor at one time, or were thinking about doing it themselves or just buying a house. So, to your point, it just opens up a wealth of conversations and connections, that being a real estate investor and talking about it highly encourage people to do that. Don: Definitely. Now, there's another thing that I want to talk to you about because I just had this conversation with my friend and you just mentioned it that you went to college back in '01 he said, right? Douglas: I wish and I graduated in '96. So, I'm a little older than that. Don: Yeah, so a little bit older. So, this is exactly the time where you're growing up, I believe. I don't know how old you are. If you want to share it. Douglas: I'll be 46 in two weeks. Don: 46. Happy birthday! Here's my question. So, you are growing up at the times where your parents must have told you for the people that were close to you to go to college, right? Get a degree if you want to be successful in life, right? Now, my generation, I'm 30 years old, and I never went to college. So... Douglas: Awesome.  Don: I've been investing in real estate since I'm 23 years old. My background is kind of different because I wasn't growing up in an environment that tells me that I have to go to college because we had the internet so we could hear other people talking. And so, there is the age of information where you could get a book for 10 bucks so you can listen to a podcast for free, right and get all the education you need. So, my question to you, would you recommend going to college in modern times or just jumping right in and just getting an education from a different source? Douglas: If you're entrepreneurial enough, and you have a plan and you have a determination, then yeah, you can do it on your own. There is a lifelong learning component that podcasts, books, resources now are at our fingertips as well. Well, it's just meeting people's mentors and connections. So clearly have learned more since I've been at a school then I learned in school. But for the right person, so for example, I got a master's in accounting. When I was out of school, I worked full time went to school at night, and I got scholarships and the company paid a little bit. So, to get that degree to get that knowledge and earned that credential at a private university cost me $2,000 of my hard-earned money. All the rest of that money came from somewhere else, which was, which was a good lesson that I learned how to do real estate as well. You don't have to go out and spend all your hard-earned money and borrow. There're ways if you can get creative, you use other people's money. So, what I wouldn't suggest for 99.9% of the people is to go borrow $70,000 a year to get an education, an undergraduate... Don: Exactly what I see. I mean, I see the age doing that. And I'm thinking you guys are taking debt for so long and you're also investing time. So, you're taking debt and investing time and I don't like doing one of them. I don't like investing my time for a long term period when I don't know if it's going to bear any fruits. And when you invest your time and your money, it kind of sets you back so much. Douglas: It's applicable in this because education is so important, whether you're learning through podcasts or books. Yeah, one of my mentors, he owns 5200 unit multi-family, mostly low income that they do a phenomenal job across the Southeast. And he told me many years ago, "Never borrow unless you're borrowing against an income-producing asset." That's where I was like, man, I can't borrow to go to school' I can't borrow for a car. I got to borrow against an income-producing asset, whether it's a business or a real estate piece of property. So that's a valuable lesson that a super successful multifamily investor gave me 20 years ago and I've never forgotten. So, very much on point to not borrow for that education, not borrow significantly for that education. Because it's going to put you back. Don: Yeah, I agree. And I think what I'm going to do, you just gave me an idea. I'm just going to record an episode later on that will talk about that subject specifically. I want to get back to borrowing money because I know you have a way of borrowing money. You're borrowing money from community banks. Douglas: Yes. Don: So, tell us a little bit about that. I know it's different now, you can make things happen when you work with the community bank. Douglas: Yeah, so we've worked with community banks since 2001. Part of the reason we like working with, some of the benefits is their local that you can go to church with them, to school, kids playing on sports teams, living in the same neighborhood. So, there's more of a story relationship aspect, and then there's also the local component to it. So, they're going to work with you and get behind you and understand that and then they're going to be a lot more interested in that relationship and kind of support you. They can't do as big a deal. They got lending limits, but they also have access to other local investors and kind of keep you in mind. So, for us, it's just been a great relationship. The Real coup for us was when the bad times hit for other investors and those banks had property, they were taken back. And they were looking to get it off of their balance sheet because they did not want to own real estate. And they didn't give it away. But there they created a win-win. It was kind of a "your price, my terms" situation, whereas they would say, "Hey, we want it at this price. We need to get it off at this price." And we say, "Okay, these are our terms." And if they said, "Hey, here, the terms we need," then we'd say, "Well, this is the price that we need." And we picked up hundreds of units during that '08 to 2014 probably working with community banks and borrowing and all the money from them on those deals. Don: Yeah, that's amazing. I know, multifamily was doing pretty well in '08 relatively. So, it's very smart to buy them at that time. I wish I was investing in real estate at that time, life would have been different. So, I want to ask you about your relationship with this bank. So, when you establish your relationship with the community bank, how do you do that? So how do you choose the bank? Is it more personal? Are they looking into your financials in a more personal way, not as strict of a guideline is what I'm asking. Douglas: There's no doubt to have guidelines. But you're right. It is a relationship. If someone were to look for a relationship with a community bank in their location, start with friends, family, mentors, anybody who knows somebody who was either sympathetic to you personally some way or to the real estate property investing or learning on real estate. So that's how we've established those relationships. There are plenty of local community banks that don't want to have anything to do with what we're doing. They don't like lending on real estate, they've got too much real estate, whatever. But some lots are in it's through those relationships where you develop a business strategic partnership with the banks. Don: Would you say that these loans are typically more expensive than what you would get with a regular loan? Douglas: So, for us, we kind of looked at loans and there's the traditional mortgage market where you can price things pretty cheap, but you got to have good credit. And then there's the community bank. And there are private loans. There's hard money lending. So, there are several different routes. Community bank financing is pretty cheap. It's got some strings attached, because they want you to jump through some hoops more so than a private lender would, more so than a hard money lender would. It will be things they're going to review past couple years of tax returns, they might run a credit check on you, they're going to ask for you sign a personal guarantee. So, they're going to be some things that some other lenders aren't going to have. But again, they're going to look out for you and they're going to keep you in mind when they're talking to other investors. Other investors want to get out of deals, they're going to say, "Hey, we're going to talk to Don and Eden they're doing this'' or "sell your properties to Don Eden, and we'll finance it" where they can just assume your mortgage or assume your loan. So, we've done that with banks and through relationships, which is a lot harder to do with national lenders as you know. Don: They lend for properties that are in their area, or they could lend for properties anywhere in the US? Douglas: Primarily they'll lend to either properties that are in their area or borrowers that are domiciled or headquartered or located in the area. Don: Yeah. Douglas: So, they will do deals outside of the state if it's somebody they know locally. Don: Yeah, that's very interesting. Yeah Douglas: It's great. And it becomes a network and they become part of your network, and they become one of your strategic partners. And you can develop relationships with multiple community banks and work with all of them. And it's a great mutually beneficial relationship. Don: Terrific. Yeah, I think that's critical information for somebody who's listening to that show. And they want to get a loan for a property that they want to buy and they don't know who to talk to. I guess that's just an option that you got to consider. Go talk to your community bank, establish a relationship and get to know the people there because real estate is a long play. You do something where you plant seeds right now, and you wait for the seeds to sprout in the future. So, I guess that's one seed that you got to plant right? The community. Got to go and talk to people when you want to do deals. Douglas: It's been everything from helping you find new deals to financing deals to providing opportunities for other lines of business. So, they can help you finance because you built up a track record with them and they understand who you are and how you operate. So, they become a champion for you within their organization and the community. I couldn't recommend it highly enough. It's been one of the keys to the foundation of our real estate business. You've got deals, financing, and management when it comes to investing and finding deals, financing or paying for those deals and then manage them after the fact. So that financing piece is huge, whether it's your cash or somebody else's cash. Most real estate investors use somebody else's cash. So, a community bank is a great option. Don: Awesome. You manage over 3000 units and you also invest in real estate. So, you bought together with your partner over 800 units and you haven't had any money partners or equity partner so you've done this by yourself, complete with both of your hands. And that's amazing. I gotta say, I host a lot of people here on the show. Most of the people that try to syndicate, try to get to raise funds, and then buy their deals. You've been investing for better of two decades right now, and you've been doing that on your own. But I want to ask you if you've been investing in real estate and creating your wealth, why do you still want to do property management? Is it because of your investments? Or is it just because that's your core business? Douglas: Probably all of the above. And we feel like part of what we're here to do is to serve people profitably, you know, so we're in business to serve. Because we have our rental properties, we have to do property management, and we'd like to have our rental properties for the duration. So, we need to do property management and then managing properties for others is a skill that we have developed so we can get paid for it, we can get better at it and we can use it to serve others. So, it's kind of a mutually virtuous cycle of things going around where we get better, it helps us manage our properties better but helps us serve our clients better. So... Don: Win-win-win-win-win. That's many things in real estate. Douglas: Absolutely all the way around. And that's why we've expanded to Jackson, Tennessee, and Dyersburg, Tennessee and you know, hopes to expand into Eastern Arkansas, Central Arkansas, North Mississippi, Central Mississippi over time because it benefits all of us to do that. Don: It's what I like about real estate that you could find so many things to do in real estate that creates a win-win-win-win in different types of businesses. It's not the way that it is in real estate. You can create a business that creates wealth for you, that helps you with taxes that appreciate that cash flows, and that is being managed by you as another business. It's just amazing. So, we've been doing all that. It leads me to ask you, what would be the criteria for buying a new deal? Douglas: We've kind of bootstrapped it on our own. So, we're limited because we don't have equity partners and we don't syndicate. We usually have to have the financing in place. So that's assuming a loan, or some type of owner financing, or working directly with a bank that can provide the purchase money. We're super limited on what we do, which just leads to more deals for everybody else clients and that's great, but we're super selective at this at least we have been for the past 20 years we look forward to someday where we can just go out bad things all cash and not worry about it. But so, we're selected looking for different things, whether it's a single-family home, small multifamily or small commercial building. The recent thing we bought a property management company and bought the building. So, we're now an owner occupant of our office in that building. So that's a great win-win. Don: You buy the tenant and the building and you're the owner of both. Douglas: Exactly. So that's the most recent that was a month and a half ago. So that's been great. Don: You've been working with your partner surely but slowly, right? You've been managing properties, investing, buying them one by one with your money, creating long-term wealth, going to stay in your family forever. What would be the next step? Douglas: One thing we've been very fortunate on it's just building and surround yourself with some great people and building a good team. We've got folks who help run the businesses and operate the day today. And that's been awesome for us. So, continuing to develop those folks and grow opportunities for them as well as for ourselves. So, with the businesses we have now, which are really real estate services, brokerage, property management, maintenance, like said financing, then we have some business services, we provide some virtual assistants and some business back end support to our businesses and a few others. Just growing those real estate service lines and business service lines in this geographic area is our next focus personally for the next five years. Don: Awesome. So, what kind of areas are you guys going to focus on it in case anybody wants a property manager or wants to consult with you on a few things that have to do with real estate? Douglas: Yeah, so we help folks like ourselves, people who are wanting to build wealth, people who are wanting financial freedom, people who are looking to create an income or buy something to pay it down over time in resident real estate, small commercial real estate, multifamily real estate in kind of this MidSouth Mississippi, Tennessee Arkansas area around Memphis, Little Rock, Jackson, Mississippi. So, anything related to that brokerage, property management, maintenance, construction, lending, helping people fix and flip, helping people bridge loans into a long term loan. And then we provide virtual assistant services for folks who are doing real estate services, whether it's just somebody operating on their own or a brokerage or property management company, we're happy to help that because we've got a lot of experience. We got about 120 virtual assistants right now in the Philippines that work for 18 companies. Again, we feel our calling is to help people succeed through business and real estate. That's what we're trying to do and we're trying to help other people do it too. Don: Try and make an impact when you’re already wealthy. That's the next thing is to try to make an impact and help other people and that's truly a remarkable goal. So, what would be the best way to contact you Doug in case anybody wants to get in touch? Douglas: I love to talk to anybody. Easy to send me an email at Douglas@crestcore.com or find me on LinkedIn or find me on BiggerPockets. Those are probably the three best ways to get in touch. Don: Right. So, I want to thank you very much for being on the show today, Doug. Douglas: Love that, Don. Thanks for having me. Lady: Thanks for listening to the Real Estate Investing podcast with Don and Eden. Stay tuned for more episodes. Till next time!

DE 26: Tax Strategies and Real Estate Investments with Thomas Castelli   Thomas Castelli is a licensed Certified Public Accountant (CPA) in New York. He is certified in Real Estate Financial Modeling and Tax Strategist. He comprehends that putting resources into real estate, joined with tax strategies and arranging are critical to limiting the taxes and building long term riches. He holds equity positions in several multifamily properties and participated in the syndication of an 82 unit apartment complex as a general partner. All his experience in investing and tax strategies are really helping him in finances. Highlights: Difference Between GP and LP Thomas’ First Investment How Much Money Is Needed To Invest In Real Estate How Many Partners A Partnership Should Contain And How Should The Partnership Split Be.   Connect with Thomas: Email: ThomasCastelli@NewBabyloncapital.com or Thomas.Castelli@WholeCPALLC.com Podcast: Real Estate CPA   - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  TRANSCRIPTION Intro: Hey guys! Today I'm going to interview Thomas Castelli, Thomas is a real estate investor. And I think the most interesting thing about him is that he invested in his first real estate deal as a limited partner and that is something that we haven't discussed yet. A lot of people here don't know the difference between a limited partner and a general partner, also known as the sponsor or the syndicator. And today we're going to talk a lot about the difference between these two types of investments and how you can get into real estate as a passive investor with not a whole lot of money and learn a lot about real estate in the process also, while you make money, so that's a great opportunity. And I think it's a very important episode for everybody who is considering to invest in real estate. So, let's get started. Lady: Welcome to the Commercial Real Estate Investing podcast with Don and Eden, where we cover all aspects of real estate investing with special attention to off-market strategies. Don: Hey, Thomas, welcome to the show. Thomas: Hey, Don, thanks so much for having me on today. Happy to be here.  Don: Of course. How's your day going so far? Thomas: It's going great. The weather's not too great here in New York. It's been raining for the last few days. But other than that, I can't complain. It's a good day. Don: Yeah. Well, you know, it's only going to get colder from now on, right? Thomas: Yeah, yeah, yeah, this the one bad thing about living in New York is it could be really hot in the summer and the nineties, and then go all the way down to the teens if not lower, when you move into the winter months.  Don: Well, you know, I live in Florida, we have warm weather all year round. But then in the summer, you got the hurricanes and you got the rain. That's just non stop, and you can't plan anything. And so, you can't go out and do anything because whatever it is you're trying to do. There's going to be rain, and there's going to be sun and there's going to be rain and there's going to be Sun. It's just super annoying. But yeah, I'll take that over New York every day of the week.  Don: Yeah, well, I would too. I don't blame me. Okay, so, tell us a little bit about who you are, how you got into real estate and then what you're doing currently. Thomas: My name is Tom Castelli. I'm a CPA. I work for a company called the Real Estate CPA as a tax strategist and I primarily do tax consulting for real estate investors. So, I help them come up with a plan to minimize their tax liability each year. The super exciting job keeps me really in touch with real estate investors and what's currently going on. Outside of that, I am an investor myself. I got started as an investor on the LP side back in 2015 when I started to make a few Limited Partnership investments with someone who basically would become my mentor. I made my first LP investment in a 48 unit apartment building Class D apartment building and got full renovation in Columbus, Ohio. That was pretty exciting. And from there, I started learning more and more about syndications. That ultimately culminated in me participating as a general partner in the syndication of an 82 unit apartment complex in Jacksonville, Florida, actually down in your state.  On the Investment side what led me to syndication though was when I was in college, I was pretty much saying, ‘Oh, I don't want to like live the normal nine to five life.’ I need a way out of this and start researching real estate, you know, the Rich Dad, Poor Dad, all that. And then eventually it led me to a meeting of RIA meeting out here on Long Island, and I met a syndication group and I went to their three-day seminar where they went through syndication A to Z, and I fell in love with syndication. That's where I met my mentor. And that's the person who I started investing with on the LP side, and it all led up to that eight units GP. Since that point, I haven't been too active. I've made a few investments in LP since then, but at this point, just kind of waiting for us to be putting this property on the market. Don: I know we already discussed that on previous shows. You know the difference between LP and GP, but I'm sure some people are going to listen to that, and they're not going to understand really what we're talking about if they're new to all the terms. First of all, I like it that your first deal was an LP so you invested with somebody else, and then we're going to talk about that, but first, how about you give us a brief explanation about the difference between limited partner and a general partner and then the way that a syndication process works. Thomas: Yeah. So, the limited partner and investment, you're the passive investor, you're the silent partner or the money partner some different terms people say. You're investing with the general partner, and you're not taking an active role in the business or the investment. You're just kind of sitting back and collecting your check. I think the biggest aspect for a limited partner when you are investing is to understand who the general partner is, what their track record is, do they have experience with the assets and just have an overall idea of what market you're investing in that can be pretty important. But for the general partner side, the general partner to deal they are responsible for putting the entire deal together from A to Z.  So, it's finding the property, going through the acquisition process, including due diligence, and then ultimately overseeing the property management than any renovation plans you have for the property, that entire processes and ultimately selling it. They're also responsible for raising the capital from investors, the LP’s and making sure that they are handling Investor Relations properly communicating with their investors. They're also responsible for getting the debt financing working with a bank or perhaps to Fannie/Freddie or mortgage brokers, however, we're going to go about getting that loan, that is their role. They're pretty much responsible for the entire thing, which is why as a limited partner, when you don't have that control when you don't have that management, say, it's very important to know who you're dealing with on the general partnership side. Don: Yeah. And I would like to add a few things. So as a limited partner, the advantage is that you're passive and so you don't have to worry about too many things. So, the only time you have to worry about is when you're getting into the deal. You have to do some research, you have to know the market, just like you said, that's pretty much it. You invest the money and you should be getting some nice returns. I always say that if I wanted to retire, I would just invest all my money as a limited partner with other people that I trust and just go to a cruise or something and just have fun forever because you get good returns. You could get, I would say 15%. It's pretty normal to get on a yearly basis. If you know who you're investing with, and you have experienced and you could even get a 20% return on an IRR based on for five years. So that's the advantage as a limited partner.  The advantage for the general partners, also known as the sponsors of the deal, is that essentially, they collect money from investors. So, they raise capital, just like you said. Typically, they have to raise about 30% of the purchase price of 20% for a down payment, and then 10%, for CapX, what is known as the repairs, or the implementing of the value add plants or the property. And so, what happens is that they raise the 30% from other people, and they get a split of 30% of the entire deal. So, let's say that they improve the building that's worth 10 million to a point where it's worth 13 million, so they would make 1 million in profit if they get 30%, roughly 1 million, so 900,000. Yeah, you are a CPA. And then that is the reason why you decided to invest as a limited partner because you wanted to keep your day job, right? You wanted to be a passive investor. And you also wanted to get into investing in syndications, right? And learn as much as you can. Thomas: Yeah. One of the things is like when you're first I guess, taking on this investing adventure that some investors go on is it's good to have the experience on the LP side first, because you kind of get to see it from the back end angle, and you experience the entire process from A to Z as an investor from the investor's perspective and you ultimately learn a lot about how to do it if you're looking to be a general partner. So, that's one of the reasons why I started there. Don: Okay, great. So, let's talk about your first investment. The LP. So, the limited partner investment. So how much money did you invest in that deal and how many units was it? Thomas: 48 units in Columbus, Ohio. As an LP, I invested about $10,000 into a deal. It wasn't all that much, my parents invested a lot more but that was just the point where I got my foot in the door. On that deal got a lot of behind the scenes looks at what was going on. I was on a lot of property management calls. So, the property needed a gut renovation. I remember seeing pictures of this thing. It was like we went in there when we first acquired it. And there was, there's a lot of needles on the ground, bad things going on in there. So, pretty much had to vacate the majority of the property and go in there and do significant renovations to both the interior and the exterior of the property as well as new signage, print to reposition the property, and then leased it back up. And it was overall an exciting deal. We had some issues with the property manager, had to get rid of him and replace them. But overall, great deal, great return, I think we did 32% over 18 months.  Don: Wow!  Thomas: It was pretty solid. Don: Wow, that's nice. What I like about that is that you can get into a real estate deal with $10,000. So that's for everybody out there. Right? So, it's exactly what the message that all the internet gurus are trying to say like Grant Cardone and people trying to say just invest in real estate. It's that easy. So, all you need to have is $10,000 in savings. Even though I know a lot of our sponsors and general partners are trying to raise at least 25,000 typically. So that's what I see most of the time. Thomas: Yeah, you know, that's accurate. You know, at this point, I think it was the relationships I developed with the sponsor that allowed me to get into the deal at that level. I guess it partly depends on the relationships you have. You can build a relationship with people they might allow you to get in at a lower level. I could also look at crowdfunding. I think in crowdfunding thing with the Reg A offerings it is you can get in like with as low as $1,000 into some of these properties. Don: So, you invested in that LP you made some good money. And then how did you proceed with investing in real estate? Did you invest in it in another LP before you became a sponsor yourself? Thomas: Yeah, after that I invested in another Limited Partnership investment. It was eight units in Covington, Kentucky. That I was through a coaching program or a mock coaching program like the beta version of it. By investing in that property, I was able to go through the mock coaching program. And that's where I learned a lot about market research, learned a lot about the acquisitions process, how to underwrite deals, that side of things. And also, we worked very closely together after that, looking for new properties in that market. It was an exciting time building relationships with brokers. So that was my second LP investment. From there, I made another one. And that was in 17 units in Covington, Kentucky. We currently have a duplex left where we're looking to sell from now on. But then there was the general partnership was next. Don: Okay, so let's talk about that phase. I'm sure it's the most exciting phase of your life being a sponsor of a deal for the first time. So, I know you worked on the acquisition side, which means that you were the one who created the relationship with a broker, you were the one to do all the due diligence and get the deal. So, you got to deal with those are your part right? And that was in Jacksonville in Florida, which is an emerging market. Everybody's talking about Jacksonville for a while. I've looked in that market also myself. I was looking at 80 units over there at a time but then the numbers did not work. I know you did that back in '17, where it was a little bit easier to find something good in Jacksonville. So that's about, First of all, I want to know why you chose that market. So that's the most important thing. Because I know that everybody always says, the first thing you have to do is pick your market. So why, why Jacksonville? Thomas: There's a lot of reasons. It was at the time, it was one of the top growing cities. If you look at employment, which is pretty much one of the most important aspects. It had growing employment. It also had diverse employment through multiple sectors. So, it was not really at risk of anyone sector being damaged in the outlook for that was pretty strong. So that's one of the reasons why I wanted and we looked down there was for that, you know, that reason alone. The second reason was we had a contact with a very, very good property manager who's already in that market. It was a natural fit to start looking down there. This property manager was great at helping us on the due diligence side and connecting us with brokers. So those are some of the reasons that we started looking down there was primarily for those two reasons I'd say. Don: Okay, so you're looking into the deal and then you decide to create connections with brokers right in Jacksonville? So how did you go about that? How did you do that from New York? Thomas: At this point, I was pretty experienced that cold calling or cold calling basically brokers and sellers directly for other deals we're looking for in Covington, Kentucky prior, I called the property manager way to contact with and I said, ‘Hey, you know, we'd love to hear about what are the top brokers you're currently working within the market? Who should I contact if I'm looking to pick up some properties in Jacksonville?’ And she provided me with contact information. So, brokers and I contacted pretty much all of them and one of them we struck up a really good relationship right off the bat. And he started sending me a handful of properties. And from there a lot of the properties were not really what we're looking for. One of them was all right, but the value add component was completed already. So, it wasn't much meat on the bone but so he sent me one good property and that was the property with a pursuing. Don: Okay. So, what made you feel like this property was good? How did you see that? Thomas: So, the first thing was that it was being managed by this property manager already. So that was the first aspect because we felt very comfortable with this property manager and the level of expertise they had in the market. And because they already managing it, it was just favorable right off the bat to us.  Don: We also saw that they could tell you all the insights and tell you exactly what they see from the inside, right?  Thomas: 100%. That was one of the I would say, if not the primary reason for us going forward on the value add. So, I did see opportunities to fix up some of the exteriors of the property. There's some curb appeal, that could have been some re-signage and curb appeal that needed to be upgraded on the exteriors. The interiors, weren't all renovated to the same level at this point. So, there's a lot of opportunities to go in there. And as the units were turning naturally, it was already stabilized. Think it was 90% or 92% when we purchased it, so it was pretty much as units turned, we were able to go in there and renovate the units to the market standard raise the rents. And that was ultimately LOI driver for us. And one of the reasons why we liked it, we liked the upside potential. Don: Okay, so you renovated the entire 80 units? Thomas: Not the entire 80 units. I think it was about half the units needed the interior upgrades, the other half is already in pretty good shape. I walked about half the units on the due diligence side, one of the partners in the deal walked the other half. And overall, some of us were nice. The other ones not so much. So, the ones that weren't up to standards were the ones we renovated. I believe it was about half. Don: Okay, so you renovated about 40 units. How much money did you invest after you did all the work in every unit? Thomas: That is a great question. I don't have that number offhand. I think it came into a bit around for the unit very, because not all the units need. Don: You can say roughly. Nobody's going to check that. Thomas: Yeah, yeah. I think it was roughly between $3000 and $12,000 per unit. It just depends on how much work that particular unit needed. Don: Okay, so let's say that you invested $8000 in each unit. So that would bring us to around $320,000 in CapEx. Thomas: Yeah, that's very accurate for the number. Don: Okay, so you bought the property for how much? What was the purchase price? Thomas: The purchase price was $3,850,000. Don: Okay, and then you invest another $320,000. Right? Thomas: Correct. I think we're coming under budget with that. We have some CapEx, some money sitting in our CapEx account that we may end up just distributing back to our investors at this point. Don: Okay. And so, did you reduce the expenses too or just increase the NOI by raising the rents for these improved units? Thomas: The property on the expense side was pretty much being run pretty efficiently already.  Don: Your managers pretty good over there, right? Thomas: Yeah, there wasn't much to lower on the expense side, it was more or less work we did on the upside.  Don: Okay. So how much were you able to push the rents with improvements of the units? Thomas: Some were one unit, some that were two units, we had three units. Two units to the ones I know offhand was $650 when we got into it and were able to raise them anywhere from $750 to $825 is what we’re pushing right now.  Don: Wow. Okay. So, if you improve to $800, you improve 40 units by $150 Premium per unit, right? Thomas: Yeah, give or take. Don: Okay, so that would be $6,000 a month. Thomas: Okay. Don: Okay, so a year that would be $72,000 increase to the NOI. Now if you divide that just for the listeners to understand the value add here if you buy $6000 every month, that's the rent premium $150 for 40 units that they improved, times 12. That would be $72000. And then if you divide $72,000 by the cap rate, which is the formula to understand the value, you divide NOI, by the cap rate. So let's divide the NOI premium here which is $72,000, by the cap rate that you would buy a multifamily market cap rate, I would say 6%. Right? So that would bring an increase of about $1,200,000 to the property. So let's take out the CapEx, which we improve the property at $320. So, you got an increase of about $880,000, to the property, give or take, am I right? Thomas: Yeah, give or take. I think that the property being valued right now, around $6,000,000 is what we're getting some offers on. Don: Wow. Wow. How is that even possible? That's even more than... Thomas: Yeah, yeah. I think you know, what it comes down to is that the markets just so hot down there. Don: Yeah. Thomas: That people are willing, perhaps maybe overpay a little bit to get into some of these assets, which is, I guess, a horse of another color. Don: You know, when I think about that, I can say what I think about that because I've had this conversation with one of my friends just recently. So, I think something is going on because there are all these baby boomers now retiring, right, and then you have all these trusts and all these funds and all these institutions are just trying to preserve capital, and they just want to park money anywhere they can. They don't want to have dollars, they just want to have something real. Don: So Something is going to happen. But you must have heard it before. So that's why I think the cap rates are getting so compressed. And I think people are just, the larger institutions and the larger trusts are just buying everything for ridiculous prices. You said you bought this property for how much? Thomas: We bought it for $3.85. $3,850,000. Don: Somebody's overpaying you about $600,000. If you get offers for $6 million. Thomas: Yeah, yeah, I'd have to go back and check the exact numbers to see exactly where the rents are and everything where the NOI is today. Yeah, I know that we are getting offers that are right now above valuation would be so I just think it's because of the popularity of the Jacksonville market. Yeah, I mean, I when we're looking at these assets, we're looking at cap rates at 6.5% to 7%. Now the cap rates down there like 5% like 5.5%. Don: Oh it's 5%, that's why Yeah, that's why that makes sense. So, if you increase the NOI by $72,000, right, that's another $240,000. Yeah, I mean, that's crazy. But you know what, I think what you did right was the fact that you picked the right market at the right time. Thomas: Exactly. Don: That was the home run for you. Because when I heard about Jacksonville, and how much is booming that was already 2018, late 2018. And you picked it up in 2017. And so that's why you were able to strike such a good deal because it's just exploding over there. Thomas: Yeah. And you know, it's interesting. One of the reasons why Jacksonville is also our focus is some of our partners had investments in Jacksonville already from 2013. So, they were riding the market up since back then. So, they got in even earlier. And some people were saying that we at that point in 2017, had missed a big run-up, but that's not the case. It says continue to move up. Don: Nice. So as a general partner, how much money do you think you're going to be making on that deal? So just for somebody who's trying to get into that field, being a limited partner or a general partner, I want our listeners to understand how much money you could be made from just one deal. What're your estimates? Thomas: On the front end of the acquisition fee, we had a 1% acquisition fee. So, the acquisition fee came out to be $30,500 roughly, which wasn't all that much. But in this industry, I've always been told that the acquisition fee keeps the lights on, it's your fee for putting a deal together. But really where you make the most money is absolute pays the bills. And then on the back end is really where you make the most money and were projected, the deal is 80-20. So, we have 20%, the general partners of 20% of the profits on the back end. Don: So, investors must be very, very happy. Thomas: Oh, yeah, no, they are. So we had to use crowdfunding we use the crowdfunding site called Realty Shares. And they raised about 90% of the equity for the property. So, their investors are getting should be very happy with what they're getting from this property and at the act and we'll sell our management chunk is going to be anywhere from $350,000 to a little bit over $400,000 just estimating how much will be making as a general partnership team on the back end. Don: So how many partners are you? Thomas: Five partners. All roughly split the management side equally, so give or take there are some differences in there, but I mean, just for the sake of argument is roughly the same. So, let's just say we use a round number we make $400,000 each partner that we walk around with roughly $80,000 from one transaction. Don: Yeah. And that's at 20% split, which is below what a general partner is typically making. So right now, I know that it used to be 70-30. Those are the general split. So, 30% for the GP and then 70% for the LPs. And it's even going to the place where it's going to be 65-35 and 60-40 is what I'm hearing right now because the market is a little bit tighter. So, the sponsors of the deals, they want to make sure that they're making money because it's difficult. It's not easy to find a deal. It's not easy to find money. So yeah, they want to get paid. And so, I think if you were to do the same deal on a 65-35% you'd be making around 150,000. Right? Thomas: Sounds about right. Don: Nice. So that's great. I'm very happy for you that you struck your first deal. You were able to make a decent amount of money like that. Also, you had partners. Sometimes in a GP, you'd have two partners, three partners but five is a lot, I'll say. Thomas: Yeah, you know, the reason why we have along with this one, this is a big learning experience. So, one of the partners does this full time that has a very good business out of it. And the rest of the other four partners, myself included, were mostly in it for the learning experience. So that's why we were happy taking the lower amount on the general partnership side, just to make sure we saw the entire experience from A to Z, and that we'd be better equipped to do ones ourselves going forward with likely a smaller partnership, because like you said, when you're splitting that amount of money between five people, it's still a decent chunk of change, but it's nowhere near the amount of money you could be making two $300 off of one transaction. Yeah, a group with two people doing a deal. Don: Yeah, it gets two people doing that kind of deal and today's market on a 35% 65% split, I'd say that they'd be making about $300,000 each.  Thomas: That's significant. One of the things my mentor always says just do one of these deals a year, you're going to set yourself up nicely. Don: Good. Yeah, yeah, that's very nice. What are your plans for the future as far as your CPA in a Real Estate company, are you going to keep doing syndications or you're going to just keep your job and I know you're 28 years old, which is very young, so you got a whole lot of time. Thomas: That's a great question. After I did that deal, I was pretty much planning to go right back into syndication and do another one. But I decided it makes more sense for me to focus on as a CPA, I work directly with real estate investors. So, keeps me very in tune with what's going on, give me a chance to rebuild my savings basically, to invest in more syndications. And at this point, once we liquidate this building, once this building goes to market, it's closed down, I'm going to take whatever money I get from it, essentially, and start looking for another syndication. I'll probably do something smaller with one or two partners or I'm even open to doing JV with no investors if we find the right deal. So that's pretty much the future and be focused on that in 2020 & 2021. Don: Nice. So yeah, if you want to JV you're going to need to have some connections. So, what if people want to connect with you and get to know you, what would be the best way to do that? Thomas: The best way to get in touch with me would be to shoot me an email. You could reach me at ThomasCastelli@NewBabyloncapital.com -that's for the real estate side of things. If you're interested in connecting talking about the services of a CPA or real estate accounting and tax services, you can reach me by checking out the ‘Real Estate CPA’ podcast actually has a great podcast for real estate investors and then also can reach me at Thomas.Castelli@WholeCPALLC.com again, it's Thomas.Castelli@WholeCPALLC.com. Don: Nice. Okay, Tom. So, thank you very much for coming to the show today. I hope you're going to have a great day and good luck in the future. Thomas: Thanks. Lady: Thanks for listening to the Real Estate Investing Podcast with Don and Eden. Stay tuned for more episodes. Till next time!

In today’s episode of “Commercial Real Estate Investing with Don & Eden” we have guest John Casmon. He’s founded Casmon Capital Group where he primarily invests in Chicago & Cincinnati. Together, he and his business partner/wife have helped families invest in multifamily apartments to create a passive income stream and tax benefits without the hassles of becoming landlords.    In today’s episode, John discusses his partnership and business goals, his big deal in Texas, shares a variety of resources to learn your market & discusses important factors when analyzing a deal. He also explains why multifamily apartments are the main focus of his business strategy, his different types of value adds & views on the mobile home parks asset class.   Highlights:  Importance of Building Relationships How to Analyze Unfamiliar Markets Data Points to Focus On Knowing When to Scale Up   Connect with John: Website: casmoncapital.com Email: john@casmoncapital.com   - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - TRANSCRIPTION   00:00 Hey guys, this is Don and my guest today on the show is John Casmon. John is a real estate investor and he's investing primarily in Chicago and Cincinnati and he's in control of over 920 units, which is quite a lot of units. So I'm very excited to have him on the show today because he's one of the most experienced investors out there and I'm also, John was kind enough to share his resources with us. So at the end of the episode I'm going to read a few websites that you want to check out in case you want to do some research and find out some more information about the multifamily deal you're looking at. So we're always happy to give you guys that information. So stay tuned. 00:46 Welcome to the Commercial Real Estate Investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies. 01:03 Hey John, welcome to the show. Thank you for having me on. 01:07 Of course. I think you deserve it. I heard you own or in control of over 920 units. 01:14 Yeah. Were general partners of 920 units across the country, primarily in Texas, Florida, South Carolina and Cincinnati. And continue to grow that and working with investors. So excited about everything. 01:27 That's great. But I know when you started it wasn't always this way, so now you're a full time real estate investor, but when you started, you were doing that part time. I know you're investing since 2012 if my records are right. 01:41 Yeah, absolutely. We started off part time. I started with the house hack. We had a two unit property, lived in one unit, rented out the other and you know, from there we bought a three unit building. A couple of years later we bought an eight unit building the next year and just continued to build the portfolio. And eventually it got to the point where we were running out of our own money and we're talking to a lot of people who were interested in investing in real estate but didn't have the time to really learn everything that we had learned in the us on their own. And at that moment we kind of realized, Hey, there might be a great opportunity to partner with these people where we can bring them in along side of us on deals. They can be passive, they can, get all the, you know, the income that comes from being an investor without having to actually be the landlord and take care of the property themselves. So that kind of really opened us up to different ways of expanding and growing our portfolio. Yeah. So when you say we, who exactly are you talking about? Oh, my wife. You know, I don't make any decisions without checking in with the boss. 02:41 Yeah. Just checking in with the boss. That's, that's true. So when you, when you first made the transition to real estate, I know you were working in a different job, a day job and then how, how did your wife take it? So how, how was she with, with that idea? 02:57 Yeah, I mean it's the, it was truly a partnership thing. So it wasn't like I had to convince her or anything like that. I know some folks go to those situations, but you know, we were always aligned on the lifestyle we wanted to create a lifestyle, we wanted to live the environment we went to raise our kids in. So as we had conversations about how to create it, real estate was a big part of it. So that first property, I mean we lived in that property, lived in one unit. We lived in our property for seven years. So I mean we lived basically in an apartment for seven years in and built equity and continue to grow. So that was something we were always aligned on. And I think that's really important. If you're going to invest in real estate you want to make sure your partner is on board with that. 03:38 So she was completely aligned with it. We had our roles in the business, so she did certain things. I did certain things and we kind of use that to grow the portfolio. So we were both, you know, doing it kind of on the side and we have a smaller portfolio, you can do that. I think when you get to the point where you really want to scale and you want to start working with other people, that's where you start to have to shift roles, responsibilities and dedicate more time into the business. Yeah. So when did you feel that things are getting bigger and that you, you're, you just scaled up a little bit? You know, we bought the eight unit building and that was our first commercial property. We hired a professional management company to over see it and we're still pretty involved in the process from an asset management standpoint. 04:22 But going through that process gave me the confidence and, you know, the readiness to start moving forward into some of the larger properties. So I think for me, you know, cutting the teeth on something that was commercial but not overwhelming, that gave us a chance to learn to work with property management companies, understand the way they work, the way they underwrite, the way they manage and just really take that experience and they use that to kind of build and take the next step into kind of larger commercial properties. Okay. So yeah, let's talk about that. So when you're saying large commercial properties- I'm assuming you're talking about multifamily units over 80 units or 90 units, right? Apartment buildings. That's right. Yeah. So tell us about the first deal that you had of, of that scale. Yeah, so I mean, we were looking for properties for awhile and knew just like now the market's been kinda tight and we were looking for properties where we could deliver strong returns for our investors and we're having a hard time finding it. 05:23 So we ended up partnering with a friend, a gentleman that I had met and he was in a similar boat, but we just kinda had a conversation and I expressed that if he found something that made sense, wanting to love to review it, and if the deal looked good, we'd be interested in coming on as partners and maybe bringing some of our partners on as well. Because at that point point we had been talking to investors for a little bit of time and you know, they were kind of getting itchy and wanted to get in on a deal that all the great things we have been telling them about multifamily investing and we were struggling to find that deal. So we ended up partnering with that investor and that was 192 units out in San Antonio, Texas. Oh, that's a big, that's a big property. Yeah. Yeah, exactly. So it was a win, win situation because that was the big property for them as well. Right. So that was their first very large apartment deal where they kind of word the, the leads. So we came in as general partners and we help them with you know, kind of some of the marketing from the investor relations and you know, that was kind of our foray into the larger commercial apartment space. 06:29 Okay. So do you feel like you got into the deal because your investors got itchy or did you actually spot the opportunity there? 06:37 Well, I mean I think it comes down to building relationships first of all. Right. So for us, we would not have done this with just anyone. This was an individual that we had gotten to know over the course of probably about nine months. And you know, we've met him in person, we've sat, we've had dinner with them. We've had various conversations at that time. I had just launched our podcast “Target Market Insights” and he was one of the early guests on this show and it actually came up while we were talking right after we recorded the episode. So, you know, he was someone that we respected, we, we understood how he was looking at deals. He had been a general partner and other deals as well. In a large space. So he had experienced that. He knew what he was doing from that perspective. So I think we, there was a level of comfort with with that individual that gave us comfort and moving forward and, and being a partner there that I don't think we would have had no matter what our investors were thinking or looking for. 07:33 Okay. So let's talk about the numbers for that deal. So what was the purchase price? Find my ask and, and what was the value at plan and everything there? 07:41 Yeah, 16 point $1 million purchase price. We invested a little more than a million bucks into renovations. Value adds a couple things. Interior innovations on that property. We changed up the exterior landscape changed out the siding. There was a who's that? There was a, a second area that was kind of like a hot tub at one point. I, I don't know why, but it was a hot tub and we actually fill that in and made a kind of a barbecue pit area. So looking at different amenities that we can add. We added in private fenced in yards for the first floor units and then we added some technology packages as well. 08:24 I see. Okay. So basically you focused on improving the lifestyle and the, comfortability and the feeling of, of the people that are going to live in that, 08:33 The apartment, right? Yeah, yeah. A combination of interior renovations too. You know, just have a more attractive home, a more premium home, and also adding amenities and improving the amenities of the property. And then also just the aesthetics. Right. So from the exterior, just improving the aesthetics with a scheme of brand colors that really popped in, allow the property to stand out and photos and in person and felt more warm. It felt like a great home environment. 09:01 Yeah. So when you guys bought the property at $16.1, what was the, the vacancy rate roughly? If you don't remember? That's fine. 09:11 Yeah. I mean, I believe it was 92% occupied, so we're on a 7% or 8% vacancy rate. 09:16 Okay. And so the, the rents where they, where they maxed up or there were still some space? 09:22 Well, I'll tell you, this is the great thing about our strategy. So we do value add investing, right? So I just talked about all the stuff we did to it, but the beauty is you can buy the property based on its current operations. So it was making money and it was doing okay for what it was and what we saw was an opportunity for the property to perform even better. So almost like a private equity firm coming into it, looking at the current operations, but knowing that if we inject this some capital into the right things, we could really drive the returns. And that's kind of what we did. So it was for the vintage of the property, it was achieving pretty good rinse, but there was an opportunity to improve those units and take it from being a 1983 product and actually upfitting the countertops and appliances and the flooring and the fixtures and updating all of these things where we could compete with some of the class A properties and some of the 2015 & 2016 builds. Now we have something that's a bit more attractive and because it is still a little bit of an older property it can't quite achieve the rents of those new construction projects. But it's certainly gonna stand above the properties that were its like a B-class class. 10:40 That's exactly it. That's exactly it. So it's a nice sweet spot for us to play in where it's a better property than the other, you know, 1980 construction properties that are there, but it's going to be more affordable than the new construction. So for a renter, what they really care about, they don't care about the year of property was built, they care about what my apartment looks like, you know, does it have nice countertops? Does it have a washer dryer in unit, does it have a stainless steel appliances? Those kinds of things is what they care about. And then also what other amenities are there. Right. So that's what we, that's what we did with our business plan and that's worked out really well for us. 11:15 Very interesting. So let, let me, let me dig a little bit deeper on that deal specifically. Cause it's, it's very interesting the things you were saying. So as far as the rents, the 1983 product that was out there in the market, what was it by the way, that deal, you said, where was it? Yeah, San Antonio. Oh, San Antonio Okay. So the, the, the other products are the B class, in that market at the time. How much were they renting for roughly? And so where did you put your property in comparison with the A class property? So you, you were right in the middle, you're saying, right? 11:48 Yeah, I mean, so I think what we'd like to do, right, and for your listeners here don't understand part, what you want to do is you never want to have the most expensive property out there. So we were very conscious to manage our renovation schedule and understanding what kind of rents we could get. So we looked at those class a project properties and said, okay, if they're charging, and I'm just going to throw rough numbers here, they're charging $1,300 in rent or $1,400 in rent. If we fit, have our property with similar finishes. If we do units with similar finishes to this class A property, then we can expect to get something a little less than that. Now again, because that's the class A they knew, bill knew everything. Maybe you get $1100, maybe you get $1200, but take a couple, take 100 bucks off to, you know, 10- 20%, something like that. 12:36 Take that off of the class, but you also have to compare that to class B because again, you want to make sure you're not above the market to the point where you're in no man's land. So you wanna make sure that you're providing something of value and that value is ‘Hey, if you can get a class a product at a class B price’, that's how you know you've hit the sweet spot. So you want to make sure that you're still able to compete with those other properties and it's okay to be at a premium to some of them as long as your renovations and the property itself is above is above kind of the offerings that those properties have.  13:12 What would you say the price of the other B properties was? The same price, like $1100, $1200 13:18 A more the, thousand dollar range rights. I mean they kind of depends on where you start your property. So in this scenario, let's say that they're all getting similar rents, but there are a couple of comp properties that I've seen some upgrades and those properties that have been upgraded are seeing rent premiums of a $100-$150. That lets you know that Hey, if we were to do certain renovations, we can improve the rents, we let them this property. 13:42 Yeah. And so when you got into the deal, what was the rent that was charged by the, by the previous owner? 13:48 I don't know. I'd have to look back on that one, man. 13:50 Yeah. Okay. Yeah, of course. You can't remember everything. But that's very interesting. So I think the, the ability to really look at a deal and see the small things you can do, but still looking at it objectively. Cause sometimes, you know, when I look at deals, I want them to work, you know, cause I want to close on the deal and I want the deal to work. So I'm not really looking at it objectively when I give it to somebody else that I know and I have them look at it then, you know, they look at it in a different way. And so I think looking at a deal and knowing that you could get what it is you're trying to get, you know, and add the extra value and still make good profit. I think it's great. And you guys really noticed that on that specific property. And I think that's, that's amazing. That's beautiful. 14:33 Yeah, absolutely. I mean, I think ultimately when you talk about underwriting, right? And when you're looking at these numbers, I mean, you have to allow the numbers to tell the story, right? You can't get too fixated on, you know, what you want to happen on that deal in particular, you know, like th the numbers they made sense and sometimes you have to tweak it, right? I mean, it's not say that, ‘Hey, if you underwrite a deal and the numbers don't work, run away.’ I think what it means is you have to rethink your business plan. Sometimes you step back and say, okay, well what will happen if we did this? Or what will happen if we, if we didn't upgrade every unit, what if we only did these units? So I think you can play around with scenarios, but the numbers are the numbers that you don't want to force the numbers to work. That's where you get into a lot of trouble. So you definitely wanna make sure you stay diligent to the numbers. But you can stay somewhat open-minded in your business plan as long as the numbers are dictating the proof points of what your business plan actually is. 15:28 Definitely. Okay. So let's talk about your other deals that you've done since that big deal over there. So have you changed your strategies, you know, during the years with looking at properties differently and doing other things that, you know, you, you haven't done in that specific deal? 15:46 Ah, I mean I think generally speaking, value add is our approach. So we're always looking to buy a property that is cash flowing day one. That's, that's a core principle of ours. We like cash flowing assets day one. And what we want to do is want to find ways to add value. So that is a core principle of our business and the way we operate. So some of the things that have changed since then is we, we look at our loans. So the loan kind of is a deal by deal thing. So we're always balancing the loan product that we want to put on there and the exit strategy that we place. And we're always looking at the market, you know, the market dynamics, you know, how much room is there to improve rents you know, what can the market take, what will be too much, what's the story of the asset and how do we come up with the business plan that best matches the property itself, the community, and then what renters in the area are looking for. 16:39 Yeah. So when you're looking at a new market or a market that you don't know, where would you look or what is the data that you're trying to get? 16:46 Yeah, there's a ton of data that you're looking for, but ultimately the main thing that you're looking for is you want to understand where demand is, not just today, but tomorrow. You want to know how future demand compares to current demand and the, the more recent realities. So a lot of people will tell you, ‘Hey, you know, I'm, you know, this market saw 5% rent growth last year.’ That's great. It does not mean it's going to see 5% rent growth in the future, which is what you really care about. So we try to look at the different data points to figure out what's demand currently and what can we realistically expect it to be in the near future through life of our business plan. Now, none of us have a crystal ball, but we try to look at different data points to determine that. So what are some of those points? 17:31 Look at population. So you want to understand population population growth in particular. Are people leaving an area or are they moving into an area? Jobs, job growth. We're looking at, you know, what jobs are there, are they growing? Are there more jobs being added to an area or people, you know, more companies leaving the area. Job diversification. So, you know, I lived in Detroit for four and a half years and I worked in the automotive industry. So I can tell you how important it is to have a diverse industry from a, from a jobs perspective, you never want to have one city or one market solely dependent on one industry because if something happens to that industry, you know, obviously you can suffer the consequences of it. Outside of that, you are looking at the ease of doing business and you're looking at landlord, tenant friendliness. 18:20 So how easy is it to evict or to, you know, get a tenant out of if they're not paying their rent. So you want to understand those different components. So we look at all of that, but ultimately, you know, we're trying to figure out demand. So the last factor we look at there is more in the multifamily space. We'll look at as supply and demand. New construction is new construction coming on board. You know, what is the absorption rate for that? So absorption rate is essentially the, the frequency or the amount of demand for the new apartments that are coming on board. So you want to make sure that there's more demand than properties being built because there's more properties, more units being built, then demand, then that's going to force everyone's rent to go down. So you may not be able to actually implement your business plan if you are trying to raise rents. 19:09 Yeah. So where do you gather all the data on? I know that you, you probably gathered from many, many places like I know CoStar, you can look at things over there, you can look at things that Reonomy. You can look at best basis. There are so many, you know, things you could look at and report. So you could read. So for our listeners, people that are trying to get into real estate investing and they want to know where you gather the data, what would you say are the best places to do that? 19:33 Yeah, so there's a lot of different resources out there. I just did a presentation. I've put a whole list together. I'd be happy to email this to you or share with your audience as a download. But a handful that I'll go off the top of my head. You mentioned bus places. That's a great one. Best places done that is a, is a great resource there. The US census census.gov it's a great website, great forum for understanding both population and job growth. So it does have that information on there. On the jobs, it's more, I think it's a Bureau of Labor is the website to go check out for, for the jobs there. And yeah, I mean, unfortunately there's not like one site that's going to just give you all of those things in a pretty package. What I will say is that brokers to now this information available. 20:20 So if you're talking to brokers, that's something that you can ask them. Typically they'll, you'll see some of this information in their offering memorandum. The other places you know, talking to, to local officials, but also reach out to any kind of Economic Development Council. So if you're looking at a specific market, a great resource is going to be that Local Economic Development Council, Chamber Of Commerce. And you can just flat out ask them, Hey you know, trying to get some information in regards to population growth and job growth in this market, new construction and what developments are being planned and they can have some of that information available to you as well. Nice. These are some great tips. So what is your focus for the future? I know that multifamily market is kind of tight right now that, you know, the way you said it before. 21:11 So what are you doing in this type market? Are you still looking at multifamily deals or, you're looking at different asset classes? No, we stay focused on multifamily. You know, I know a lot of people are looking at other asset classes and there's certainly opportunities in different asset classes and I think that's the beauty of real estate is there's always going to be some opportunities, but multifamily from a fundamental standpoint is something we really like. And I'll tell you why. First of all, it's housing. So everyone's always going to need a place to live. That's something that technology can't replace. It's pretty straight forward. You know, you need a place to stay. Two- Affordable housing is getting tough in this country. You know, prices are going up, rents are going up, home ownership is going down. You know, they're trying to increase salaries and wages, but between the debt that most people have, whether it be called student loan debt or other debt, it's really difficult for, for your average person to come up with 20%- 25% down for a have to buy a new home. 22:09 So many people are saving. The other thing is people are getting married later in life. So young people are not getting married in their thirties. They're having children later in life and no one wants to own a ranch home when there's 24 years old live in by themselves. So most of them want to be in the city. They won't be downtown. They would be close to the action. So you're seeing more people choose to rent out a lifestyle. Same thing on the flip side of that equation, you have more older renters now where they don't want the burden of being a homeowner. They'd rather rent call the main has got it fixed, whatever they need, fixed, live, close to the city, close to colleges, universities, things like that. And they're happy to, to rent as opposed to owning a home. So I think the view of what home ownership means has changed significantly in this country where he used to be kind of a, the goal for many people. 22:58 Now it's almost a burden, you know, to, to be a homeowner. You can't move around the country, you can't take a new job, you can't do the different things. So people actually prefer a lot of people prefer to rent. So because of all those things, I still think multifamily is a strong place to be. The core for us is we, we buy based off our fundamentals. So if you're buying based off of fundamentals, you're a little less concerned with the economy. Because I could sell whenever I want to sell for the most part, as long as I put a loan product on the proper property, that gives me flexibility on the exit. We're buying cash flowing assets day one. So I'm not trying to flip a project or, you know, do all these other things to try to figure out how to make my money. 23:38 It's not new construction or development. You know, so we're going in and we are particularly investing capital into the property when and where it makes sense. We have the ability to slow down or rev up that process as we see fit. So I still think multifamily is a great place to be. You need to be smart and you need to be diligent as you're going through the process. But if you're buying cash flow that properties and you have proper reserves and you put the proper loan on it, that gives you flexibility and I think you'll still do fine even in an economic downturn. 24:11 Yeah, definitely. And I think a lot of things you discussed before are so interesting and so true because the people that rent today are primarily millennials. And then we were exposed to, and that's what happened to me. We were exposed to the purple book or, or you know, some other people call it ‘Rich Dad, Poor Dad’. I just call it the purple book because people just know what I'm talking about and then that book describes that owning a home in America and in general is more of a liability than, than an asset. And so you see the impact of, of Robert Kiyosaki's words, you know, to the people where you'd see that everybody would prefer to rent and not to own. And you're, you're so right about the things you said. Cause I had the same, the same concept right now when I was debating where I'm going to move if I was gonna move to another, a condo or an apartment or a, or a single family house in Miami, that's, that's where I'm from. 25:04 And then I was thinking the exact same thing I was thinking about. Do I? I'm single. So I, I'm, I'm not married, I don't have kids. So I was thinking, you know, the exact same thing even though I'm 30 I, I still don't want to, don't want to live in, in a, in a single family house, you know, when I can live downtown, close to everything and, and close to my friends and close to young people, you know. So, so the things you mentioned are, are very true. But despite that, I'm going to ask a question regarding what she said about the affordable housing. So since the crisis of affordable housing is not going anywhere anytime soon, what do you think about, I see a lot of, a lot of chatter on a mobile home parks and  the affordability of, of basically living in a mobile home in comparison to other things. And so a lot of investors and trust and funds are buying them right now. So what do you think about that asset class? So have you ever looked into it? 26:03 Yeah, I mean, you know, we, we interview a lot of people and we have talked to multiple people who are focused on mobile home parks and we know a lot of other city caters and operators and investors who, who are in that space. We get it, we understand it at a high level. It's just, you know, for us, when I think about mobile home parks I think that it makes sense for certain people. I just, I personally haven't seen a reason for us to pivot our strategy. You know I think that there are a couple of different types of people here and I'm not saying one is right, but we like to try to focus on one thing and really get great at it and spend a lot of time and energy to excel and get as great as we can be on something. 26:51 And at that point then we would consider other approaches, other asset classes or whatever. But for us, I just don't like I'm concerned about the shiny object syndrome for us. So we just prefer to focus in on what we're doing and not try to chase yields. Cause I think unless you truly want to be in a mobile home parks or you know, still a self storage or some of these other things, I think what's happening is people are chasing yields are chasing deals as opposed to really trying to lock in on what they do. And I'm not saying one is right or one is wrong. If you have the ability to do that, the great for us, you know, I think we prefer to just kind of focus in one asset class as opposed to trying to be a Jack of all trades. 27:35 Yeah. And that makes sense because you're already in that asset class and you have the connections, you have the knowledge and you've done it before the investors been brokers, everything is at your hand. So what would you, what would you think about a person who's trying to get into multifamily investing right now at this market at this point? Yeah, I will tell you the same thing I tell everybody. So if you want to get into it wonky clarity on what you want to do if you want to kind of buy large apartment buildings or things like that, then or if you just want to, you just heard of all commercial investing and you want to get into the space. What I would say is the best thing to do is find someone who's doing it and see if you can be a limited partner. 28:20 Because being a limited partner is going to allow you to learn more real time. You, you have money in the deal. So you've got skin in the game and you can ask the questions that come up and you can gain experience, confidence and credibility that's gonna make it much easier to grow. And that's something that will put you in position to be very successful. So we talk a lot about the kind of how to grow into the space and do it where you don't have so many things pushing against you with the learning curve is very high. And I think ultimately what will happen is, you know, people get into this, they read a book and they get excited and you know, it just becomes very tough. It's very difficult to go out and just buy a property in a very competitive market. 29:04 And you don't want to be the person who inadvertently overpays for something and you know, not be in a position to make that money back or implement your business plan. So I would say trying to find a deal where you can come in is a great way to start from there. You can become a general partner or become an operator yourself. But then also think about what you really want to do. Because for many people, they want to invest in real estate, especially commercial real estate because they want the benefits that come with it. You want the passive income, you want the tax benefits, you want to diversify your portfolio. What you don't want is a second job. You want to be chasing down tenants for rent. You don't want to be, you know, fixing toilets that are leaking in the night. So, you know, just make sure you're clear on what you're signing up for and what you're going to get out of it. The larger properties give you the ability to be an investor and the smaller properties, you know, give you a chance to be a landlord. 30:01 Yeah. But I guess a lot of people would say that you also learn a lot when you deal with the small properties. You learn what you don't want to do. 30:09 I think many people can learn from me telling you, you don't want to change toilets though. So you can, there's a lot of ways to learn, right? You can learn by getting punched in the face or you can learn from someone saying, Hey, that probably hurts. You just don't walk into it. Right. Yeah. It's up to you about how you want to learn. 30:23 Yeah, definitely. That's very smart. Okay. So John Casmon, what are the best ways to connect with you in case anybody wants to get in touch? 30:31 Yeah. So if you're interested in multifamily or you want to grow kind of from a marketing standpoint, whether it be finding deals or you want to learn more about how to find deals, how to analyze deals, how to learn more about markets or even just growing your personal brand, check out our podcast is called “Target Market Insights” and sites and it's available anywhere podcasts are, and you can also go to our website. We have a free download, you go to casmoncapital.com/sampledeal. We have a free sample deals to get a sense of what a deal package looks like. And then if you have any questions or you want to connect with me further, you can email me at john@casmoncapital.com. 31:10 Alright John, thank you very much. 31:13 Thank you. Appreciate you having me on the show. 31:15 Yup. Have a great day. Hey guys, so yes, as promised courtesy of John casmon. Here are some resources in case you want to check some critical information on multifamily deals or the market that you're looking into. So if you want to know more about economic trends in the market, you can check out the US Census. You could check out the Bureau of Labor statistics, the Local Economic Development Council, and there's a website called areavibes.com. So it's area vibes.com. Okay. So if you want to know more about multifamily trends check out Colliers International Marcus and Millichap, C. B. R. E. you can always use CoStar. You could use REI reports, ALN Data, Integra Realty resources, also known as IRR. WeAreApartments.org and justicemap.org. So these are all the resources that John shared with us. I hope this is very helpful to anybody who's trying to get into multifamily and learn more. It's always good to know as much as you can about the market. I hope that helps. So thank you very much and I hope you enjoy the episode. 32:30 Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes till next time.

In today’s episode, we have the pleasure of having Benjamin Inman, founder of Inman Equities. Benjamin brings over 20 years of experience and has become successful via hard work and strategy. He has a really good reputation in the real estate market due to hard work, consistency, and persistence.  Benjamin touches on his beginnings into the wonderful world of real estate, his lesson on how important it is to have deals in writing and the difference between the two markets he’s involved in like buying a property of over 200 units and buying properties on a smaller scale. He also discusses the importance of being involved from start to finish with the deal on the table along with the other partners or investors involved.    Highlights: Benjamin’s Career Briefs And An Unexpected Experience About His Very First Deal His Tips And Tricks On How To Become Successful How He Grew His Reputation Within The Southeast And Beyond. Details About How, When And Who To Chose As A Business Partner Never Miss Any Details In The Contract Agreement   Connect with Benjamin: Email: binman@inmanequities.com Phone: 615-513-3088 Linkedin: @inmanequities Facebook: @inmanequities Instagram: @inmanequities Twitter: @inmanequities   ------------------------------------------------------- TRANSCRIPTION: Intro: Hey guys! I hope you’re ready for today’s episode. Today I’m going to host Benjamin Inman. Benjamin had been involved in multi-family in the past 20 years and worked and learned under the famous real-estate guru and tycoon Grant Cardone. In this episode, we will talk about the process of understanding that you can do this by yourself and use your connections and knowledge that you’ve acquired during the years. And also, for the first time on the show, we’ll have an investor that invests in institutional properties that are over 200 units. So, these are the bigger deals out there. Today’s episode is very informative, so stay tuned. And on another note, I’d like to remind you to check our website donandeden.com where you can find ways to contact us and connect with us and learn more about who we are, our deals and so on. So yeah, let’s get started and we have a lot to talk about.    Intro: Welcome to the Real Estate Investing Podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies. Don: Hey Benjamin! Welcome to the show. How’re you doing today?   Benjamin: I’m good. How are you doing?   Don: I’m doing just fine. So, I know you’ve been doing a lot of work, you’ve been buying properties in the market that everybody’s saying that it’s hard to buy but you’re still finding good deals, and I know you’re buying institutional properties over 200 units. So, I would like for you to tell our audience a little bit about who you are, what you do and how you got into real estate.   Benjamin: To start, I appreciate you for having me on. Always enjoy doing this type of thing. I started my career 18 years ago. Really starting to ground up I was so eager just to get in the business that I actually started as a landscape architect, doing single-family homes and then really just put myself out there because I was always interested in the multi-family space and got introduced to a developer down the Miami, offered a job to me as his corporate landscape architect and I was off to the races. Once I was there, I knew that it was a good opportunity for me. I was always asking a bunch of questions and surrounded myself with the right people in the firm and, so really just utilized that to the best of my abilities just kept growing and building on that from the time I left there until I went to the next shop and then from there just kept building and adding on. Just about all knowledge-based and then 2 years ago I left the last two investors I was working for and started my shop and never looked back. So, we typically have two different focuses. All the stuff that we buy, they are all in the multi-family space. So we have an institutional arm and we have a smaller bucket that we acquire 50, 76 units, 44 unit properties in and we have the institutional side bucket to where we buy 450 unit portfolios at one time and I do each of those with different partners so I have a partner for the big stuff and have partners for the smaller stuff. That’s our way of diversifying. The big deals are good in their way, the small deals, they are good in their way. The small deal’s cash load typically a little bit better than the big stuff. So that’s really in a nutshell, our focus and we pretty much focus throughout the southeast.   Don: So, I know you are buying large properties and small properties and you’ve been doing that for the past two years but your career had spawned for a lot more. So, I would think that you working with big investors, I know you’ve worked with Grant Cardone, Cardone Capital and I’m from Florida so it’s impossible not to know who Grant Cardone is if you live in. So, I know you’ve worked with these investors. So how does working with people of that caliber helped you understand the market and got you to the place where you are at right now?   Benjamin: You have to understand their way of thinking because you can ask ten investors what the criteria are and you may get ten very different answers. Each deal that you decide that identified to take down, you pretty much know which of those deals or you should know which of those deals fit the personality box for your potential partner or partners. And so, I kind of cherry-pick which deals I want to share to which partners based on that knowledge and it’s worked out well. I think the challenge a lot of people have is, they have a database of, let’s just say they give you a deal flow, but they aren’t successful on either how to start or if they do know where to start, they are having trouble executing because I don’t think they put that strategy to work because I think that’s a very standard not only what your partner’s personality type is as it relates to, you know, in the investment criteria in the properties that look for but also, knowing what their individual bandwidth is. For me, I’ve had different partners that I use for different properties because I know that this partner A actually get so many deals done in the time and if I have another deal come across my plate that makes sense, I have to find another partner that’s similar in personality type and criteria wise as well but then I’ve got to do the deal with them just because I don’t want to overload anyone partner including myself and not be able to take a deal down. And so, really just being very strategic about which partner I chose to bring in to which deal is just as important as knowing the investor types that come into the deals from the LP standpoint. I know what their personality types are because you have some 50,000 and some 25,000 check writers and then I have guys that are 500 and million dollars check writers on every deal that I put in front of them. So, different people and it depends on overall equity sides of the deal and what their percentage ends up being allocated out to. So, there’s a lot of those variables that come into play when making a decision, of course, but yeah, it just really comes down to knowing your individual investors.   Don: Yeah. So, when you say you’re partnering up with people on different deals, so I assume that you’re getting the deal so the process works in a way that you’re talking to the brokers, outsourcing your deals and then you find a good deal and so you raise the money already you know your investors. And so, you want to partner up with people in the local market where the deal is at so that these people would implement the value add a plan or what exactly is the other partner doing in each one of your deals?   Benjamin: Yeah so it's a good question. So, most of my partners are either in south Florida or in Texas or Charlotte, North Carolina. So, you know the partners that I’ve had deals with aren’t necessarily in the local market where a specific asset is located. I wouldn’t say it’s a bad strategy, that’s just not our strategy. Mainly because all the markets that we’re currently in, I’m knowledgeable of those markets and already have boots on the ground in many cases whether that’s construction companies or just different vendors like flooring vendors, paint vendors, roofing vendors you name it. We already have those relationships resources in place. I don’t look at that way with having a particular partner being based in a specific geographic area and that’s not what I use to base my decision on but, for a different person like me, that’s not a bad strategy, that just hasn’t been our strategy.   Don: Yeah. So, what is your strategy, how do you choose your partners?   Benjamin: It’s just based on their criteria, as well as balancing that with knowing what their internal bandwidth is, meaning that, when we do a deal together with a partner, we hopefully would share roles 50-50. That’s just an ideal way of doing it. But if that partner has a one-person or two-person staff, there are only so many properties that I can deal with that particular partner, maybe one at a time. So, if I have another deal that comes across my plate while I’m working on a particular deal at the current moment, then I’ve got to find a different partner to do that deal with because I don’t want to slow down the process or progress of the other partner. They have got their stable of investors. I have my stable investors. Some partners, their investors can only invest in one deal at the time and they need a 30 or 60-day break thereafter to replenish their stock capital. So, that’s really how I look at it, just knowing my particular partners and what their bandwidth is and really what their stapled investors look like.    Don: I see. Okay, so let me ask you this; what kind of processes are undergoing in your business right now, so, what exactly do you guys do? Your source for deals that’s one thing that I know everybody does, and so, you raise money. I’m sure you’re doing that as well. What other things do you do besides it? Do you manage your own portfolio or you have a management company? So, how many people work in your office, for instance, working with you or underneath?    Benjamin: So, we’re a staff of two. We are very lean and streamlined. So, what we do is we identify a property, identify my partner on that particular deal pretty much right away. I’ll go ahead and get the deal sourced, get it tied up, together we’ll go and start doing the due diligence on the asset. I handle a lot of the underwriting on our side so I know exactly how things are going to pencil. And then, from the due diligence standpoint, my partner on the deal will actually split that effort and then we’ll also bring in the third-party whoever we’re going to have to manage the property is who we’re going to have to conduct the unit-by-unit walkthrough and the audits on every property. And they will then send their service reports. We’ll review those reports and see two or three standards. At that point, you’ll know, for us, during that on-site visit with the unit-by-unit walkthrough, and even the lease audit, we are even going to show up on those days as well. I’m just not the person to walk 100% of the unit, but the teams we have in place that do walk those units. They take pictures, they make reports. As soon as the reports are reviewed, and then together, during that time me and my particular partner on that deal will start raising the capital together from our individual databases, and sometimes there’s overlap there, meaning that sometime we’ll have the same investors in our database. We’ll try to raise that together, we’ll go through the process of dealing with the lender and getting all the paperwork together for the lender. During that time we’ll have decided on who we’re going to have to manage the property because we do third party management at this point. So, at that point in time, we’ll focus on closing once closing takes place. Then we’ll have the business plan execution which involves the value add program which since the property management has staff on site. They’ll obviously be there, boots on the ground to have any type of face time with the particular vendors that are being sourced at a particular moment. But we oversee it, we drive that process just because we’ve been down that road many times. We’re very very hands-on with the employee and the business plan, we don’t just rely on the on-site staff or even the third-party management company to oversee that because we are so involved.   Don: Yeah, that’s amazing. So, you are working mainly on getting the deal and then doing the numbers because you have so much experience and you know what kind of deal you want to get into and then you partner-up with the right person, people you’ve partnered-on before with and they’ve done a good thing with you or people that have a good reputation and that’s basically how you scale it up, because this way you could work with various people. You can do many deals at a time because some on-site staff or the value add plans and everything, am I right?   Benjamin: That’s correct. So, you have a very good point and that point is, I can have multiple deals going on at the same time with multiple different partners and that’s one way I’ve been able to scale out so quickly the past two years. As of this past Friday, I just closed on my 22nd property in the past 24 months. The only way that I’ve been able to do that is because I’m very strategically selected which partners I want to do different deals with versus doing all the deals with only one group. Because at some point there is going to be some breathing room that is needed. And so, to keep that from happening, I’ve just been focused on taking down deals with different partners. That’s the way we’ve done it. That strategy may not be for everybody but that’s the way we’ve been successful.   Don: I have two questions about that strategy. The first question is: how do you split the profit on the GP side? Is it 50-50? Let’s say it’s a 30-70 so you guys get 15% and your on-site partner would get 15%?   Benjamin: Yeah correct. So, let’s just say it’s a typical LP/ GP structure with syndication. So, let’s just say there’s an 8% preferred return, and then after that, the cash will get split 70-30 between the LP and the GP partners, 70% going to the LPs, 30% going to the GPs; and then my partner and I would split the GP profit 50-50 assuming that’s a 50-50 deal between us.   Don: Yeah, I understand. And so, the second question I had was, did you ever have a bad partner, somebody that did not do what you expected and then the deal was not that successful?    Benjamin: No, most of the deals that we have done have been very successful. Nothing really went sideways. But I will say this and I can’t really go into too much detail of it this moment but, my very first deal that I did, I did with a partner and I allowed that partner to run with the contract and the creation of the operating agreement just so, I can focus on finding more properties and getting more properties into our pipeline. I trusted this individual because I’ve known him for three or four years. The closer we got to closing, I think it was like a month before closing, I realized that I was not written into the operating agreement. So, I had to go to the other partner that was brought into the deal to have him step in and fight for me, basically because of that point of time, I was written out of the operating agreement. And the second partner never knew that I was supposed to be written in the operating agreement because my main partner at the time didn’t communicate that. You can imagine how big of a mess that was and the interesting conversation that took place. But shame on me for being too trusting because it’s just the way I grew up. Experiences like that cause you to open your eyes. So, my very first deal was the deal where my main partner tried to cut me out of it. I am grateful I’ve learned that on the first deal and not now, cause I’ll be able to get through that and move on and gone and get 22 deals in. But that partner, put it this way, I don’t think he’ll ever see a deal just because of his reputation in the market is known for doing that at this point in time. But I learned that very early on. So, my suggestion is, just know the people, I mean you have to have a certain level of trust. But when it comes to the legal documents, that certainly needs to be a 50-50 shared responsibility for all partners in the deal just to make sure that all checks and balances are in place. Because the last thing you want is to have a surprise like that. No hard feelings. It helped me learn a very valuable lesson which I’m grateful for. Hopefully, somebody hears this, can avoid the same mistake.   Don: One of the most famous books of real estate is the ‘A B C of Real Estate Investing’ written by Ken McElroy. One of my favorite investors. I think he’s based off Phoenix or Scottsdale, Arizona. That was the first real estate investing book that I read. He said something very interesting in that book he said, “in real estate, you have to trust, but you also have to verify”. So, he says trust, then verify. And I guess that’s a lesson that you’ve learned by yourself because I could only imagine your first deal being cut off the operating agreement is the worst-case scenario. It’s something you wouldn’t expect.    Benjamin: Right. But I agree, trust then verify is a very important thing. And that goes for people that you’ve just met maybe a couple of months ago. It also goes for people you have known for quite some time. And it also applies to family and friends. I learned that a long time ago. I always heard that even if it’s family-related, you still needed in writing. Because people are human, people make mistakes, people forget things or so they claim. So, if It’s in writing, you can’t deny. That’s one thing that I would highly recommend is to have everything in writing. That’s one of the processes that I would 100% highly encourage to do 50-50 on and that is to co-manage the creation of the operating agreement.   Don: that’s a very valuable lesson. Okay so, let’s move on to another thing that I wanted to ask you because I know you’re buying these institutional deals of over 200 units. I want to ask you about the difference between the two markets, between buying a property of over 200 units and you’re sort of competition so, who are you competing against and then buying properties of a smaller scale like 70 units or 100 units or 50 units. What is the difference between the two?   Benjamin: It’s a very good question. I’ll start off by saying only the larger stuff, the larger institutional size product, that’s what’s driving a lot of the cap rate to the market. Because you are going to have so much competition on those bigger deals, people are looking for you, they are looking for a place to put the capital on. A lot of groups out there have a minimum check size of 5,000,000 if they want to write, and sometimes higher. So, these larger deals you’re going to have a lot more competition with bigger groups. We bought 475 units last year. We got 457 units and we got that off-market. We were introduced to a family in New York that happened to own these portfolios so, we closed on the 475 units portfolio with this family and they were so pleased with the transaction that they end up giving us their second portfolio 457 units. We took those down both off-market. We never promoted through a broker. After that transaction took place about six to nine months later, that same family brought us another 214 unit property that stayed nicely within the portfolio that we already have with them. We’ve stayed below the radar without having to get into these bidding wars with these larger groups because it was an off-market transaction. And the smaller stuff, you still have a lot of competition on those deals. The competition is a little bit different and the reason why it’s different is that these smaller properties, these 50 units, these 76 units, 44 units whatever, fall below the radar of the large institutional groups just because they are too small to worry with. And some of these properties even fall above what the local investor would be able to acquire deal at. So, you kind of fall into that regional player bandwidth and in that you just don’t have a whole lot of competition. So, on these middle-sized deals I’ll refer it to them as you still have thirty people going after that deal, you may have five, seven, maybe eight groups that are going after that deal, obviously that it comes down to this. Most of those sellers, they are obviously looking for price, but more than anything, they are looking for the ability to close. Because they don’t want to go down that road with someone that offers a higher price. But gets them a week before closing and can’t get the deals on and had to back out of the contract, they would rather take a lesser price with a proven group that they know are going to be no complications with and they are absolutely going to close that deal with. And thankfully that’s the relationship or the reputation that we’ve developed from the marketplace. And while we’re able to get deals awarded to us so quickly because we have that reputation. We have the reputation of closing deals, we are not known for re-trading on price. That word gets around among the brokerage shops that are out there. And it also trickles down to the sellers in the market. So, those are very important things that people should know is to know who your competition is on the deal. Are you up against the local player, are you up against a regional player or you’re up against the national institutional sized player? It’s almost like the David and Goliath thing, right? You’ve got to know your competition and you got to know if you are going to go up against the big boys. You better have your ducks in a row and you better know what you’re doing because these guys can come in, put down a $100,000 hard money day one, and smaller syndicators are not in that position for the most part.   Don: Definitely, I see what you’re saying. There are a few things that I want to ask you about this. So the first thing that you’re saying is that, for somebody who’s trying to syndicate their first deal in today’s market with the fierce competition for deals, you’d say that the best asset class is a multi-family of around 50 units, between 50 to 100 if I got you right. Is that right?   Benjamin: I do recommend and the reason why I recommend that is because, if you are somebody who has that capital, you just don’t have that track record yet, this is kind of the chicken and the egg thing, right. Because the lenders, don’t want to jump in bed with you until they know you have some experience on your own as a principal. And then there’s a lot of equity groups out there that know the same way and even some smaller investors, and the way I know this is because, if you go out and try to tie up a deal, the lender’s going to say, “Okay, what’s your RES schedule.'' If you don’t have anything to produce, they are going to be a little bit nervous about doing a deal with you because unfortunately, it doesn’t matter if you have 5, 10, 15, 20 years experience in the industry working for another company. That experience doesn’t exactly translate over how you think that it would in the eyes of a lender and equity partner when it comes time to do your own deal as the principle so, the reason that I recommend doing these smaller deals, at least start out because it helps you get a transaction done faster. Because, you are going to find that when you are out raising capital for your first property, some investors, are not really going to ultimately write you a check because their going to get cold feet, they are going to want to monitor your progress from a distance just to see if you are able to do what you claim that you can do on your own. So, on the smaller deals, it just solves two things. Number one, it helps you to raise equity faster because it’s a smaller amount of equity to raise. And number two, it helps you to get a deal done faster because the faster you can get a deal done, and you add another, and then another, and then another, next thing you know you have a handful of properties in your portfolio and now you have a good story to tell to equity partners and lenders that say, “Hey, I'm now proven” and this goes back to my story of why I focused on this two year window. When I started out, I was in that situation. And now, I can go to any lender, any equity partner and there is not one person on the planet that could ever look at my RES schedule of where it is today, the portfolio we’ve been able to acquire and say I don’t have the experience or the track record, because now I’ve proven that I can do this. I know it sounds kind of cliché to say “if I can do this, anybody can do this” but the reality of it is, it’s true. As long as you have a database and you know how to work your database, you can accomplish the same thing. If somebody else has accomplished it, then you can accomplish it as well. It’s just down to finding the right deals and the right investors.    Don: Interesting, yeah. I agree with everything you said. So, the other thing I wanted to ask you regarding the brokers and their position on who you are in the market. So, you were saying that you are not known to be a re-trader, so somebody that asks for a discount after the contracts are already signed. And so, you are saying that brokers know the kind of reputation that you have. So, my question to you is, why would a broker speak to another broker and tell them about their client and how they behave because I mean, I would think that a broker doesn’t really want to disclose their clients and their investors, right?   Benjamin: So, you have like Kushman, JLL, ARA, Marcus & Millichap, big brokerages and the main competition that they have is getting listings. In the brokerage world, the holy grail is getting listings for selling an asset for an owner, right? A lot of those brokers have a lot of the same buyers that buy different properties so they can’t really stop that but, what I’ve been able to do is a particular brokerage shop, it’s a national company, that I’m one of the top buyers in the SouthEast. And, I’m known within that brokerage farm to have a very strong reputation throughout the SouthEast. What that allows me is, not only can I get deals in the south-east awarded to me relatively quickly, but it also serves to, look, things in the south-east have been hot for a while and let’s just say I wanted to start looking in Arizona or Oklahoma. So now, I’m in a position where I can have the brokerage shop in the south-east contact their office, the midwest and put in a good word for me that pretty much leveraged my reputation in the south-east. To enter a new market with the same brokerage firm even though it’s a completely different group, but they’ll still put in calls for you so, they were to leverage that reputation and really spread it out country-wide if that’s what it came out to. Furthermore, I just got a deal awarded to me in Florida about 30 or 45 days ago and the way I was able to do that is this was a completely different farm, another national farm that I’ve known for a while. And what I was able to do even though I never closed a deal with this broker, he knew who I was, he knew my reputation in the market. But I had this big brokerage firm that I’ve closed a lot of deals with, I had them write a letter of recommendation to this other brokerage firm, verifying and vouching for me that I am a buyer, I have never had any hiccups in my closings, I’ve always closed deals that I’ve locked up, I’ve never re-traded. So really, from one brokerage firm to the next, I was able to leverage that reputation to now build a relationship with another group. And that’s a very, very, very important thing to understand and really leverage it for your benefit. Because if you have the experience and reputation, why not leverage that? So, it’s one brokerage shop, vouching for me as a buyer to another brokerage shop, they are not losing anything. Now they wouldn’t do that on the sales side. They would say, “Hey! Here’s a seller I’ve done a lot of deals with. Maybe you should go get some of his listings” because they know that they have the power by locking up these deals. A broker recommending to another broker about a buyer, there’s no harm in that. They’re not taking away any food from their own table really when they do that.   Don: These are some great valuable lessons and I think you know you’re emphasizing the fact that real estate is about people, it’s a relationship business. You have to have relationships in order to be able to accomplish anything. Speaking of which, what if one of our listeners wants to connect with you and create a relationship with you, what would be the best way to do that?   Benjamin: Happy to give out that information here. My email is binman@inmanequities.com or they can text me, they can even call me. My personal cell number is 615-513-3088. And I’m on all the social media channels and my username on most social media channels are @inmanequities. Linkedin or Facebook or Twitter or Instagram, you’ll find me @inmanequities.   Don: Nice, great. It’s so beautiful that you give out your phone number. So yeah, if anybody wants to connect with you, to connect with Benjamin, you guys are more than welcome. I can assure that he’s a great guy. Thank you very much for coming to this show.   Benjamin: Yeah thanks for having me. Really appreciate it.    Don: Of course. You have a great rest of the day.   Benjamin: You too. Thank you.

Today’s episode guest is Bill Ham- a real estate guru & mentor with 14 years of commercial real estate experience based in Atlanta, GA. He owns and operates Phoenix Residential Group, LLC and Phoenix Residential Management, LLC. Learn how Bill walked away from being a corporate pilot to create a large portfolio of multifamily assets.  Bill discusses how he started his journey into the world of real estate, how he sourced for his first deal, and how he was able to switch from the single-family apartment to the multi-family sector. Learn what to look out for when sourcing for deals and how he teaches his students to read the profit & loss statement.  Highlights: Benefits Of A Multi-family Over Single-family Apartments? Key Points when Sourcing a Deal Thoughts on the Future of the ‘C’ space Predictions for the Real Estate Market   Connect with Bill: Email: Bill@phoenixresgroup.com   ----------------------------------------------------- TRANSCRIPTION   Don: Hello, dear listeners. I hope you guys are enjoying the episodes and the content we give. Remember if you want to get in touch with us, you’re always welcome to do so and send us an email at hello@donandeden.com. So please do, we want to know how you feel and always appreciate the feedback. Today, I’m going to interview Bill Ham. Bill is a multifamily investor and mentor and one of the people I consider a multi-family guru. I would say his strength is his ability to see the hidden things most people are going to miss while underwriting and his profound understanding of the real estate market that enables him to predict market trends and shifts. Also, on a personal note, Bill and I have already established a relationship in the past, and I’m very happy to have him on the show. So without further ado, let’s start. Intro: Welcome to the real estate investing podcast with Don and Eden, where we cover all aspects of real estate investing with underwriting attention to multi-family apartment buildings and off Market strategies.  Don: Hey Bill, welcome to the show. It's so good to have you here.  Bill Ham: Thank you, good to be here.  Don: Yes, so, I know you're one of the best deal analysts that out there, So you can analyze a deal better than most people that I've ever met.  Bill Ham: I appreciate that.  Don: We've had a few conversations in the past where you've helped me analyze deals.  Bill Ham: Yeah A few of them.  Don:  I know your ability and how good you are; And so I would appreciate it if you could talk a little bit about yourself and your background and how you started your real estate career. Bill Ham: I have been in this business for about fifteen years now, and I was a corporate pilot by trade, and one of my very first deal was a duplex, and the duplex was making $300 a month cash flow. I had saved up $10,000 from my career, and I walked away from Aviation one duplex ten thousand bucks in $300 a month in cash flow; this was in ‘05. So headed into the hundred-year recession that was so bad, but I survived it, and I don't recommend everyone do that. By the way, I was 28 years old at the time, you know, no family, no children, and so it was a little bit easier for me to make that sort of commitment, but that's what I realized I needed to do is commit and focus and that has been the number one success trait that I think I have and have noticed in other successful people; the ability to focus. That's how I got started, and then just kind of climb the ladder, flip houses for a while and then I did a 9 unit and then a 27 units and a 20 units and a 44 unit then a 152, so I grew I didn't go from  2 to 100, I mean, I started from the smaller assets and then built out of it a pretty big portfolio over the years. Don:  Let’s talk about that transition from doing single families and flipping homes, which is how a lot of people start, and it's how I started in real estate and then the transition into multifamily, you said something about nine units, please tell us more about that transition. Bill Ham: I went in and heard someone speak about multi-family, someone who is no longer in the business. I listen to a lecture by this individual and I was hooked on it when he started talking about the economy of scale and know so much easier to manage and to have more units under one roof and I knew from a business perspective that was the future and that you can flip houses and do single-family and that’s great, but you're never going to get the zeros behind that model, then you're going to get in larger commercial especially multi-family. That was my thought, I needed to go bigger out more, and I did, and I did a lot of creative financing at the beginning, lots of seller financing, a lot of lease options after I had built a small portfolio. That's when I got into syndication, which is bringing on partners and raising down payment money from other investors, that’s how I made the transition, nice and slow. Don: that’s exactly how I feel about this, When you flip homes, you make good money and you have a very good lifestyle, you can travel the world, you could buy fancy cars, and you can make a really good money, money that most people don’t make, but the problem about this is that you don't really create a passive income or a steady passive income that you can retire when you're 35 or 40, and that's very achievable with Multi-Family. Was that the mindset was that what guided you to move forward from flipping houses? Bill Ham: It was ultimately, I looked at all of the large commercial investors and owners, and none of them own houses, and so I thought, why do the big people not own lots of houses? You know, why do they own commercial as supposed to single-family and the reason is because it's a business and it's easier if you're trying to grow and operate a business, your product really should be in a commercial space, but If you're trying to do a side business, you know a little bit extra money here and there, then single families are a great way to go.  But if you're really trying to build a big portfolio, for example i can manage a   Hundred Apartments at the same time you can manage 10 houses, the time in the economy of scale is just not in the single-family market and then I always use a sentence that multifamily was built to be an investment model, houses were built to be someone's home.  So multifamily makes money by Design, houses make money when you steal. You gotta go out and steal the value on a house for the numbers to work out for it to be a rental property because it was never built to be so, but multi-family is. Don: Yeah, that’s exactly how I started, me and my partner, you know, we got that Steal's on single families, and then we were able to acquire them and great wealth, but we noticed as we scaled up at that it's not scalable, that’s exactly the difference, it going to create nice passive income for us, but it's not going to be quiet and like free really because we still have a lot to do with during which includes fixing and in doing some other things, maintenance  especially; it's not scalable. So, what I realized recently is that it's not just about an apartment, it’s more about units. It doesn't matter what type of commercial property you buy, you could buy self storages and have a hundred units there, or you could buy a mobile home park and have 50 units there, or you could buy a multi-family and have a hundred Apartments. It's all the same thing. You were right; you buy a business, I agree completely.  Bill Ham: Yeah, it's whatever asset class makes sense to you, whatever you enjoy, what you know your investors want, That's the model. So mobile homes are great, storage is great; I just do apartments. It's not because apartments are better than one of the others, it's just what I do, and I have a lot of friends that make money on mobile home parks, have a lot of friends make money in storage but I don't and that doesn’t mean all of those aren’t assets. Don: Definitely, you got to choose and become the best at what you do. So when you are at your peak as far as your multifamily portfolio, what was the biggest amount of properties that you held? As a general partner [a GP]? Bill Ham: yeah, have held over a thousand units, 1000 unit at the peak of my career, and I have actually been selling off Over the last two years and am down now to about 400 units that am holding currently. Don: Okay, so you sold 600 units in the past three years.  Bill Ham: Yes roughly. Don: so let's dig into that, Why are you selling properties right now? Is it about the economy, the recession, or the overheated Market?  Bill Ham: Not really. It's not about the economy or Market. It's more about Market cycle and understanding the rise and the fall of the market cycle and what Market cycle you're in; this is a question I get a lot of times , are we going into a recession or are we going into a down cycle, so we shouldn’t buy real estate; No no, that's  a complete misunderstanding of Market Cycles. If everybody only bought real estate in a recession and never buy real estate any other time, then everyone would go home for 5 years, and the whole real estate industry would collapse, and that obviously doesn’t really occur, and that's one of the greatest things about multi-family, and that it's a cash flow model.  The value only matters twice, when the time you buy and when you sell. So as long we get the debt, that allows us an Exit strategy on the other side of the upcycle. You can hang onto multifamily through a recession as long as you pay the right price, and you get long-term debt.  I have sold over the last couple years is because we were going through an upcycle and in an  upcycle you make more money using a different strategy than a buy and hold strategy, and in an up circle, as the values are rising quickly, that's when you want to go in and make renovations, your value-added props; That's what I've been doing over the last couple years, buying a distressed asset, going in there stabilizing the apartment complex, doing renovation, getting the rents and revenue up and then selling it and taking that cash and going on just like flipping houses. I've been flipping apartment complexes The last few years, and now that I believe we're getting up to the top of the market, I'm going to shift my strategy now and going to more of a long-term hold. So now I'm planning on 5 to 7 years hold on almost everything I buy. So again that the cash circle as we go into a down circle and then when we Go back up on the other side, I'm betting seven to eight years, and we will be back up on the other side trying to sell, and that's when you go back into the flipping, So it's just about changing your hold strategy. You don't get in and out of the market, you just adjust. Don: yes, so you would buy these apartment buildings, and you fix them up, and then you sell them right away. So how much time would the entire process take about a year or two years?  Bill Ham: a year and a half to two years, flipping an apartment complex can be a Year to three-year process; a flipping a house, it can be 90 days of six months something like that. Apartments usually have an 18-month window to renovate, stabilize, occupy, and then you probably should add another 90 days to 180 days for your exit strategy, and that's taking it to Market, let the realtor show it, getting the offers and then that person going under contract. The sale process in multi-family is about 90 days on average, from the offer to the close is usually about 90 days.  Don: so what about the taxes because you're being taxed for more because you held it for a short amount of time. So you're just 1031 exchange to the next property, from one property to another.  Bill Ham: Yes, correct, you can just 1031 exchange. You can just pay the taxes, you know, some of the deals I used to fund life, you know, pay off all the debt and all the old credit cards and get out of debt “out of the Rat Race as they say in life.” So those deals I took the cash, and I got free and clear in my life and some of the deals We roll the money forward, so I have done both. Don:  I also know you have a property management company with 16 employees. So this company is the company that manages your properties, is that's how you save money on property management.  Bill Ham: Well, I don't save money because most of my apartment deals are syndicated deals; meaning I've got partners and I've got investors, So my management company is a completely separate entity and it makes money, so I am still charging the apartment complex 3 to 4% management fee. So I'm double-dipping it. I'm making money on the ownership side from cash flow, but I'm also making money from the management side as the management, so they pay twice.  Don: But as a general partner, you're the one who has the right to choose to the management company.  Bill Ham: Correct, the general Partners,  I usually have one to three General Partners depending on the size of the deal in the net worth requirements, that’s what the general partners before they bring the balance sheet some of the cash. So yes, the general partners have the right to hire and fire the management company, which is why my management division is completely separate, so if for some reason we were not pro- forma as the management company, Neither partner would fire me the management. Don:  How do you know how your investors feel about the fact that you're double-dipping? Because on the one hand, you could do better because this is your management company and you know how to run an apartment building better than anybody else since you've been doing that all your life. That's an advantage, but the disadvantage is that maybe you could find a different property manager that will charge the apartment building less. Bill Ham: We charge 3 to 4%, which is about the bottom of the rate. So I don't know that you would get an apartment management coming to charge less, what we found is that we are extremely good at mitigating expenses because I am motivated to keep the expenses as low as possible to manage that property as accurately as possible because that affects me the owner and my cash flow as an owner.   If you hire a third-party management company just off the street, there only incentivized to collect rent because they are paid only on Gross Collections and leasing that's it. You might give bonuses or something like that for keeping expenses at a low, but they don’t care, but I care because that affects the other side of cash flow, so I think we do a better job than the average management company. Don: Knowing you, i know you are doing a better job than most management company, So as far as finding deals at today's market, everybody talks about the deals and that it's harder to find so you're obviously looking into different types of deals you looking for what, Heavy value add or extremely distressed where you could actually flip it. So what are you looking for Right now?   Bill Ham: I'm looking for everything right now,  if something is a heavy lift or value add, I am interested, but the problem right now is that the prices are up. So you're not always finding the best price on those, so if I can find a value add of a property with the right price, Yes. I'm interested. But what I am looking for and what I sort of recommended everyone else starts looking for are newer Assets in really good areas to tolerate a downturn in the economy. So now is the time you want to start buying and holding but if you want to buy and hold, you need to be in a good area, and you need to be on a property that is not going to have a lot of surprise maintenance issues or Capital expense issues in the next 3 to 5 years. So for me, a property built in the sixties in the seventies, I'm a little cautious with those assets because they're getting aged, plumbing is a big one right now.  If anybody knows me and they know I always bring up plumbing, the sixties and 70s built apartment complexes which plumbing has never been replaced and is really getting to the end of its viable life span, I mean the other galvanized plumbing, you know it's collapsing in most cases, and it's a really big-ticket item and its really expensive to go in and just replace all the plumbing in an apartment complex. And if you don't then you just get put on tour of the capital expense treadmill, you're just constantly spinning money, patching & patching and patching them and you never actually get the cash flow you thought you were going to get, that's not fun real estate, especially if you syndicated the deal and your investors were expecting a certain return, and they're not getting it because you just gotta be fixing every little thing on that property because it's old; so my model now is C ++ to the A – range, I'm really going to try and stay in this world of the B space in good locations though they have less cash flow, they have a good safe model, and I think that's the model for the downtime. Don: So let’s talk about that model, you are going to buy a B class property that was built from 1985 to 1995, so that's what you're looking for; And then the size you're always looking for, the bigger, the better, right?  Bill Ham: yeah, the bigger, the better, I am currently working on a project in Atlanta, it's only 8.65 million, but it's only 60 units. So physically it's not as big as I typically go, I try and stay over a hundred units, but price-wise it's $144,000 a door. So it's big on price but not a big size, but it's in a really good location and its 1987 construction. So we don't expect any large Capital expense surprises, it's going to have a good steady income, though it is a little mismanaged at the moment. So there's some value add in the management and decompressing the cap rate and It should be good hold for a recession.  Don: So what the ROI that you are offering your investors with a property that doesn't have much value-added and is as you know, something that you're planning to hold for about seven years  Bill Ham: I will answer that question carefully for Security and Exchange laws. Let me state I am not offering anyone here listening to this any form of security, and now I'm good with a lawyer. As an example, we typically shoot for properties that have an ROI in the low twenties. That's what I go for, its low twenties.  Don: Okay. So what are you thinking that is going to happen with that property? That's the property built-in 1985 or 1987, and then you're buying it and holding it for seven years. What's the projection for what's going to happen with the appreciation to cash flow Hope for the next few years.  Bill Ham: Yes, the cash flow in year one is pretty low. But we're going to get it upwards of 9% within the first year. What’s going on right now is the economic occupancy is a little low, but the management company has been giving away one-month free rent when they are 97% occupancy, we don't know why they're doing that though it’s not a good idea. So we're going to burn off the concessions. We are going to do some light renovations to the units about an $8,000 renovation to the unit, and we believe we are going to raise the rent to a few hundred bucks, about $200, the long-time hold in that area, in that part of Atlanta show is going to be good, it's going to have high appreciation; we are going to decompress the cap rate and just hang on to it and cash flow.  Don: So you say that your understanding of the deal is because you know the market very, well, you know exactly how good the location is and if you hadn't known then that deal with probably not catch your attention right, would you say that? Bill Ham: correct, and in Atlanta, if this deal were in Texas or California? I wouldn't have looked at it as much, because I would have less of an ability to manage and decompress that cap rate, so being here in Atlanta, right here in my management footprint, I will be very interested, but if it were a thousand miles away, I would not. Don: I know you're an expert in getting deals, and I appreciate the things you know how to do. I have spoken to a lot of people. You know I have a podcast for multi-family real estate investing, so you speak with people that underwrite deals all the time. I haven't talked to a lot of people at your level. So I want to ask you about a scenario that is more complicated but could also be very profitable and lucrative, and that's scenario is buying a losing property because right now I'm looking at a property that's losing money and I know it has a lot of value add, but something in me feel afraid. You know because everybody says to buy something is cash fund, but something in me feels afraid; I'm afraid of pulling the trigger even though I know that I have an opportunity. So what do you think about buying deals that are losing currently but have a major heavyweight?  Bill Ham: Yeah. I think your concern is valid and if anyone listening here is inexperienced in the real estate space or certainly in multifamily, I would go with the average advice of probably find something that's already making money and already has cash flowing because you're adding risk. You are learning the business as well as taking on a risky asset, but I think you're doubling down on the risk, but that aside I think negative cash flow properties can be some of the best assets out there, but it depends on why are they not cash flowing or why are they not hitting the return station as it ought to.   This is what I call forensic analysis, and I always teach each of my students how to look at a profit and loss and in reading it like a mystery novel, that that set of data is telling you a story; what story is it telling you? So you want to be able to go to a profit and loss and see value, mismanagement, expenses that are too high, occupancy that's too low, rents that too low, things of this nature and you ask yourself. Okay, you create a pro- forma, and you ask yourself if I renovate it, raise rents, do this and do that at today's purchase price- Is it going to make sense? The way you do that take the purchase price and create a pro- forma. You analyze the property as if it were at stabilization And if those numbers work, then you have to ask yourself is the journey worth, is this a real heavy lift, is it a light lift. I have found properties that were negative cash flow or low cash flow, and the value add was all, from going in there and in tearing out walls and doing heavy renovation down to the owner to stop just stealing money. Stop stealing, and the apartments were making plenty of money, I have seen at all levels.  Some of the best deals I did were those where an owner was embezzling money from the property, and I caught it in the profit and loss, nobody else saw it, but I saw it. What the employer was doing was sharing employee cost, he had several properties in the area. He had one set of employees that works on all the properties, but he took the full salary and placed the full salary on each property or as the expenses were concerned. I knew he had a different set of partners for each property but the partners never saw the other property and they would get the profit and loss and they would say five employees work here and that made sense, but the five employees didn’t work there, but they worked on all the property. I was buying the entire portfolio at once, and I checked the different profits and losses and the payroll was absurd, and I go out and do a property, and I asked the property manager and asked how many employees work here and he said five and I said so all five people manage all of these assets and he said, yeah. The owner must have been stealing the money, so he is paying five employees, but there are fifteen employees worth of salary on the book. So what I did was, say okay if we normalize those expenses if we take that extra expense and put it back on the revenue and reanalyze the deal with the purchase price; Is this a good deal and the answer was yes, all of a sudden the numbers are wonderful. So all I had to do is buy the property and stop stealing. So the value add was evaluated and that’s don't steal, It was a great deal.  You never know what kind of hidden story is inside that profit-loss; what I tell a lot of my students is that deals are often created and rarely found. I think everybody today is expecting to make a profit and loss and put data into a template, and all of the lights turn green, and it says it a great deal! Purchase me right now, sometimes that happens. The majority of the time is like what you're looking at right now, you are looking at a deal, and it's giving you a little heartburn. You're not sure. Those are the ones you want to stop and pay attention to you, because there may be something very big.  Don: I'll tell you when I see, I see something that is interesting because I know the owner, first of all, the way that I do marketing, I don't talk to Brokers necessarily. I don't like doing what everybody else is doing. I like to do things differently, so I source my deals, and I do that with you know my abilities, I have the tools, I can send a lot of text to a lot of people, and I have the abilities to get a lot of data. You know, the broker's are sourcing for deals all the time, and they have their connections, and I do what the brokers do, it's just that it's for myself,  I'm not a broker, I'm a buyer. And so when you get to a seller, and you tell, then I am a buyer and not a broker, and I want to buy a property. If the property is mismanaged, then they would want to sell you the property because they would also be able to save some money on that Broker's commissions.  That's what I do, and then I got to this owner that owns 40 units somewhere in Florida. He lives in New York, and he tells me the minute we start a conversation, I tell them that I want to buy the property and he tells me to listen, I live in New York, and to be honest the property is not managed correctly. I got my cousin there, taking care of things for me. So I know it's a family member that manages the property, one good thing that I see already and then I know that the owner is an absentee owner and he wants to sell it and so I started seeing the story works in my favor, because there's a mismanagement there, it's not like the property could not do better; It could, right. It's just somebody that is not on top of things and that is what I'm looking for when I'm sourcing, and that's why I am not that scared of buying a deal that’s losing money because you could easily see why it loses money. Its 8% management fee, for instance, I'm looking at the rent roll right now and so I can see that in June of 2019, that person makes $15,000 in rent and then he has 10 vacant units out of 40, That's a 25% vacancy, and it is 8% management fee, so somebody's not doing you their job, the manager is not able to find tenants, and they're still getting paid 8% which you know, it's exactly what you could improve. So that's the thing that I'm looking at, this story just like what you mention. That makes me feel good that we talked about it. Bill Ham: its value add, not value present, there is a misunderstanding people have, if you are adding value, it means it not there presently. If it's not a present value, it means it's probably a distressed asset. People want to get value-add and have it make a lot of money immediately. Don: But what happens when you are buying based on an income approach, so this is what doesn't work for me. So you're buying based on income approach in it. If somebody is losing money, if the property is losing money, then allegedly, they owe you money. So how do you know how to set the price?  Bill Ham: correct pro- forma, a lot of people say you don't buy on a pro- forma and I agree, you don't buy on the Realtor's pro- forma. You do buy on your own pro- forma. You have to create a pro- forma for every property. You buy, meaning you got to have a business model for the future for your property, and in that case, you are going to have to decide how much to go ahead and reward the seller for your future value. That all depends on the market, so if the market is way down, You can reward the seller little to nothing, but if the Market's up that's what I call a pay-to-play market. You may have to pay that seller a little more than you wanted, even though they don't deserve it because the assets are distressed, and because of the operation is distressed. You just got to make a decision.  Is it worth going ahead and rewarding the sellar some for the ability to go in there and capitalize on that opportunity and that’s just the way it works?  Don: Definitely and you know what else I found out, that when you are talking to a seller that sells you a distressed property to that level where it's actually losing money, then it's not like the seller has a lot of options because if they try to sell the property on the market, then it's not really financeable. So you could get a good deal as far as seller financing asking the seller to hold the paper in that specific situation.  Bill Ham: Absolutely.  Don: So that is very critical because you could get a good deal just because of the finance sometimes.  Bill Ham: in the recession, I did my first 400 units, I never went to a bank and borrowed money to buy them, not one time. So 400 units of the lease option, seller financing, private jet, you know stuff like that and I would come in with that private money or seller financing, stabilize the Asset, get it up and running and then refinancing the bank and cash out the original seller or the hard money lender or whatever. So it's easier to do that a down cycle, But yeah, you're right. I created a 400 unit portfolio without actually walking into a bank, so It certainly possible. Don:  So what is your speculation? That's it for the future as far as the economy in the market and the recession, and what do you think is going to happen?  Bill Ham: it not if it is when we are going into recession, we always do eventually, so it is not a problem, we  survived every other recession we've ever been through including the last recession, which was a hundred year recession, I expected a cool off in the markets, and I'm inviting it so that it'll be easier for me to start buying property again. I think we're going to have some value decline, little not tremendous. Now what I am predicting and then you can say you heard it here first; I'm predicting the collapse in the values of the ‘C’ space, and it has nothing to do with interest rates and has nothing to do with the economy.  What I think is going to happen over the next ten years is that the C assets are going to get physically obsolete. There is going to be too much Capital expense needed on those properties and the lender's especially Fannie, and Freddie are going to start for single Capital expense injection into those assets and it’s going to affect the prices, because there's no way you can go in and buy up a C assets at the prices today and go ahead and replace all the plumbing and go ahead and replace all the roofs than take care of the wiring, an upgrade to the unit, your cost basis, which is purchase price plus renovation would be absurdly high. So I think the ‘C’ space is inflated artificially at the moment and we don't really need to be worried about a recession; We need to be worried about aging assets. That's where I think you're going to see a big downturn in the multi-family space in The next five to seven years is in that C space just becoming way too old and that value is going to collapse in that market. Don:  I see that can be an opportunity.  Bill Ham: It could be a double-edged sword, you know if you come in and buy it at the right price with enough money to capitalize it. Yes, it's just like humans as we get older we consume, more health care more and more and more, in an apartment complex does the same thing as it gets older. It consumes more and more and more Capital expense until it's just not worth repairing anymore, and it needs to be torn down. See what we got is after the Baby Boomers in the sixties and the seventies, post nineteen forties and fifties. There was a massive amount of Apartments built, So I would say ninety percent of the ‘C’ space was all built later than 1960. So it's never been a problem before, it is now; that where I'm getting concerned in the C spaces. It's going to be just too old to bring it back, which now, I think, could inflate the value in the B space. So that's my prediction is that you're going to get a big collapse in the value of C’s, all real estate goes from new to Old from A to D, or as I say, it goes from A to D from an A-class to a Section 8. That's just the life cycle of an apartment complex. When you're looking at an asset, you have to ask yourself how far along that process are you?                                                                                      Don: Yeah. So what do you think is going to happen with the big B class and the A classes while the C-Class collapse?  Bill Ham: I think that everyone will have a full call flight to Quality. I think everybody's going to abandon the ‘C’ space. I think the politicians are getting very liberal, you know, right or wrong,  I'm not making any political comment, but we see a lot of Control conversation coming, and so I think the government is going to start disabling our ability to raise rents at the at a high rate. But at the same time, the government is not going to give us a break on repaired. So you got the government stopping your increase of Revenue while the same time is sending code enforcement around the other side to tell you. Oh, fix this, fix that, you know, you got to take care of the tenants down. This is where I think the ‘C’ space is going to get compressed between me the city forcing the repairs and like in the upper-level government, stopping the revenue production and it's going to collapse the C space as those properties start to need big Capital injection dollars into them, that's a prediction on my part very interesting.  Don: Okay, so I want to thank you for coming to the show today and the pleasure of giving us your truly remarkable insights. I want to ask you is how other people could connect with you if they want to chat or if they want to invest or anything like that?  Bill Ham: Absolutely if you want any more information on the business that I'm doing or you have some general questions. Let me give you my email: Bill@phoenixresgroup.com

In today’s packed episode of ‘Multifamily Real Estate Investments with Don and Eden’, we’re joined by Dave Zook- a successful business owner and an active real estate investor in sectors such as multifamily apartments, self-storage, and ATMs. He’s also written a book on syndication “8 Real-Life Lessons for Syndicators and Their Investors.”  In today’s episode, Don & Dave discuss the secrets to success, the do’s and don’t of the business, and the steps needed to have a strong foundation & longevity. Dave also touches on how a tax problem led to him dive deeper and deeper into the world of real estate, what he learned from watching his father and gives us an insight on this family modular storage sheds and garage business.  Highlights: -Discusses his focus on Multifamily Apartments, Self-Storage, and ATMs -Explains how he was ‘Chased into Real Estate.’ -What’s the Modular Storage & Garage Business? -Current Projects & plans for the future   Contact Dave: Email:  info@therealassetinvestor.com  His Book: “8 Real-Life Lessons for Syndicators and Their Investors” ----------------------------------- TRANSCRIPTION    [00:00:08] Hello, everybody. I hope you guys are excited for another episode where you learn a lot about commercial real estate and real estate in general. I want to say personally that we are so grateful to have you guys as listeners and we work hard on these shows and try our best to give you quality content with as little fluff as possible. Doing this isn't always easy and it requires a lot of time and energy. I'd like to ask you to give back by checking our new Website, which is being developed by my partner Eden. He's the best at it. You can find ways to connect with us, learn about us and see what kind of properties we invest in. So the Web site address is DonandEden.com. Again, that's DonandEden.com. No shocker there. And you can always send us an email at hello@donandedend.com. It's Hello@donandeden.com. So thank you very much. We appreciate the feedback and you can take the time to do that. Our guest today on the show is Dave Zook. Dave invests in many asset classes as well. And his main focus is multifamily and self-storage assets, which is an asset class that picked up tremendously. So let's hear more about it.    [00:01:33] Welcome to the Real Estate Investing Podcast with Don. Any time where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.    [00:01:51] Hey, Dave, welcome to the show.    [00:01:53] Hey, it's good to be on your show.    [00:01:56] Thank you very much. How's your day been going so far?    [00:01:58] So far, so good. It's been very busy. But looking forward to talking to you and your listeners.    [00:02:06] Yeah. Thank you. So, yeah, busy is always good. So does first of all, so that we get to know you. I know a little bit about you, but our listeners don't. So give us some background and tell us a little bit about yourself.    [00:02:18] So I was born into a very successful entrepreneurial family, very fortunate there. I grew up in our family business. It was a modular building business, still active in that business, along with my three brothers and my dad.    [00:02:34] I saw my dad invest in real estate as I was growing up and I saw him taking the capital that he was making from his business and put them in real estate. He was buying arms and land and as single-family homes, I saw him sort of self manage some of the single-family homes. And I just realized at an early age that I was not a path that I was interested in being on. So I started investing in businesses and started a couple of businesses.    [00:03:06] I partnered in a couple of businesses.    [00:03:08] I sold a few and got to the point number of years ago where I was doing well and I had to pay a big, big tax bill.    [00:03:21] At that point, I realized after doing some studies and reading a lot of Robert Kiyosaki his content, I realized that real estate not only can be a real wealth-building tool in the form of cash flow and appreciation, but it can also be a real tax protection vehicle. And that caught my attention. So I went from not wanting to have any real estate to want and all I could get my hands on. And the timing just so sort of aligned that the timing was great to be a buyer. And that was coming out in 2009. It started to allow timely real estate in 2010, 11. And so the timing was great and got myself in a position where I went from paying a half a million dollars a year in tax to pay zero federal tax and not so that was sort of the start. People asked me how I got and I got involved in real estate. I always tell em I got chased into it for tax reasons.    [00:04:20] That's very interesting. So I already have a lot of questions to ask you about what you said. So the first question I have is what exactly is that modular business? So what does your company do? What do you guys do?    [00:04:30] So we build modular outbuildings, modular garages, and not necessarily homes.    [00:04:36] But think about this. So you as our customer, you're getting up in the morning, going to work. We put in with a modular two-bay, two-story garage and we get to work. And when you come home from work, you're ready to pull a car into your brand new car to the bay, two-story modular garage, which is a ton of them all over the country.    [00:05:03] Nice to see you guys also. You manufacture them and you deliver them.    [00:05:06] We do. So we're one of the few companies here in Lancaster, Pennsylvania, that kind of focus on retail. We've got some other. This is kind of the hub of the modular storage sheds and garage business, Lancaster County, Pennsylvania. And so there's a bunch of different builders in this area. But we sort of found our niche and that is we build. But we're also the retail retailer. So most of the other builders in the county are, you know, primarily wholesale sell into and that network of dealers. And they may have 5 or 10 percent of their business may be local or retail. Yeah, we're just the opposite. We're 90 percent retail and 10 percent wholesale.    [00:05:52] So you're able to offer better prices, better prices.    [00:05:56] We control the service quality. We're the only person you're dealing with. So you come into our facility, you get to tour the plant, you get to see firsthand where the more the buildings get built. You're dealing with our salespeople and we bring the building out to you. And it's a one-stop-shop.    [00:06:15] It's very understandable why you guys are so successful because you have a great model. And it brings me to talk about the next thing that I wanted to ask you or not even ask more of a statement. So, you know, I talked with my friends and we always talk about business. And so we figured out that it doesn't matter what you do, if you're going to be successful, you're going to end up in the real estate. So we're all becoming real estate investors.    [00:06:39] We have no choice but to interact with real estate at some level.    [00:06:44] Yeah. If you are successful, then that's what I figured out. You have no choice whether you made your money in retailing. You made your money in. I don't know. Developing something or like like a patent or an idea. You're going to end up making, you know, investing or parking that money in real estate. And I think that's what your father understood.    [00:07:00] But he probably didn't understand how to scale it up or how to make it work for you instead of working in it. So tell us a little bit more about your father's experience and what was going on there.    [00:07:12] You know, it worked out quite well for him. I mean, he bought farms and land and single-family homes and, you know, 18, 15, 18, 20, 25 years later, I helped him transfer some of those farms that he bought and ten thirty-one, you know, ten thirty-one. Those farms there were kind of sitting there not making any sense, but they did have a ton of appreciation and you know, 15, 20 years in land value, in land value.    [00:07:39] So I then helped him rule those farms into multifamily apartments back soon after the recession. And we're in the process now of selling one of those apartment buildings. We're supposed to close tomorrow. Wow. And it's going to work out quite well for him.    [00:07:58] So, you know, being able to get in, you know, the ground level on the front end and then seeing all that appreciation and turnaround into and rolling into an apartment building at the right time and to realize some more appreciation, it's gonna work out well for him.    [00:08:12] Yeah. I haven't met a lot of people that invest in real estate for the long term, and we're not successful. I mean, maybe before the crash, people that, you know, we're buying a lot of properties, right, Dan? But, you know, and any other scenario, I don't see how, you know, where the compounding interest and the appreciation of real estate. I don't see how you could lose long term. So what exactly you're doing right now in real estate?    [00:08:38] So we've done we've bought a ton of multifamily over the last couple of years. We've accumulated well over 3000 units. I've syndicated most of those. I started out buying multi-family apartments on my own because I had a tax problem. Turns out there are a lot more people like myself that have tax problems that we're looking to place capital and didn't have the connections to do it. So what a lot of multi-family apartments, I haven't bought any for the last 12 months, the very last apartment building we bought up and I believe last November. So, yeah, it hasn't been real busy on an on the multi-family apartment stage, but we have accumulated quite a lot of self-storage in the last two or three years and still are OK.    [00:09:30] So.    [00:09:31] So between the apartments, self-storage, and A.T.M. machines, that's kept us quite busy. We're now the sixth-largest A.T.M operator in the country.    [00:09:42] OK. So I'm writing notes, as you can see because I always like to follow up on everything you say. So you're also an A.T.M. investor, which is interesting. I would like to talk about that soon.    [00:09:52] But what I want to talk about first is your realization that multifamily is overheated and your shift to self is. So a lot of people make a shift, some sort of shift, and I've made a shift as well. I'm looking into mobile home parks, you know, besides multi-families. So let's talk about that. Why haven't you bought anything in the past twelve, twelve months? What are you doing with your investors? You guys bought three thousand units. I bet you have a lot of investors that you want to park their money somewhere. What? What are you telling them?    [00:10:28] So, as you know, there's been a lot of cap rate compression. The low hanging fruit has been picked. Had we known exactly what was going on back in 2009, we should have you know, we should have bought a lot more real estate back then.    [00:10:42] Yeah, I bought as much as I thought I could at the time but had I known what was going to happen, I would have figured out a way to buy more. But no, I mean, I'm not saying there's no more opportunity in the space. There certainly is. It's just that it's a lot harder. And the low hanging fruits, not there like it was a few years ago. So I'd never liked to chase an asset class. I never liked to. You know, it's the numbers don't make sense. I don't want to go after it.    [00:11:09] And so I just decided to stop for now. I believe at some point I'll be a multifamily investor again just now. It doesn't seem to be right at the right time. I'm selling a few this year.    [00:11:21] Yeah, of course. You got to take advantage of the cycle of the market. If you have a multi-family that stabilizes and very operational, then you could sell it for retail. It's an opportunity. You know, it's something that you could do right now. I agree.    [00:11:33] It's nice when you have the opportunity to buy and hold for the long term. What's the matter with that strategy? At the same time, if you feel like you're well at you know, maybe not at the top of the market, but high in the. The market cycle there nothing a matter of taking some profits.    [00:11:53] OK, so let's talk about self-storage and in that space. So what have you found out over there?    [00:12:00] So over the last couple of years I've been talking to my ask my investor network has been growing. I kept hearing the name of this group over and over again and all I ever heard about them was good stuff.    [00:12:13] And it typically catches my attention. I'm much more interested when other people say good things about you. Then when you say good things about yourself.    [00:12:22] So I kept hearing this name and I eventually ran into this group and we called a meeting and one of the principals flew up to see me and I ended up taking him to a good friend of mine who's sort of the Lancaster self-storage guy. And he was the chairman of the board of the National Self-Storage Association. And so I brought one of the principals up and took him to my friend's office. And then they ended up knowing a lot of the same folks.    [00:12:58] And we interrogated him for a whole hour and a half. And then I ended up flying down to see their operation, meet the team, did background checks on him, but we ended up doing a deal with them, liked working with them, and liked the deal. We ended up in the last two years, two on eight different deals with them. And we're right now we're raising money in a self-storage fund where there's going to be twelve assets in the fund.    [00:13:25] They're all located and under some form of contract. But we're raising around 50 million dollars. We're well into the race where we're heading for 40 million or somewhere between 30 and 40 million in the race. But it's a great game. It's a great asset class. I love the asset class. I like the asset class for a long time. It's a recession-resistant asset class. The best performing is the best performing commercial asset class in the last decade. So there's a lot to like about self-storage. And we've been very active in the space for the last couple of years.    [00:14:04] Yeah. I've been looking at them as well. You know, I've also looked at mobile home parks, as I mentioned. I haven't done a lot of research on cell service, but I've heard a lot of good things from people. So I'm going to ask you a few questions about that. I've been inclined to invest in the mobile home park space for a few reasons. And the first reason is, as you mentioned, it is recession-resistant. And that's because you can't compress rents that much. I mean, that's as low as you get.    [00:14:28] You know, a mobile home kind of venue. when you get kicked out of your mobile home building. The next stop is the street. Right.    [00:14:36] Or your car. So you can't compress much of it. And the other reason is that as much as it's bad to say that I believe the gaps between rich and poor is not going anywhere, it's only increasing angry. Yeah. And they don't make them anymore so they don't zone for them anymore. And so you have a lot of manufactured homes. You being a manufacturer of modular spaces, you know, you have a lot of manufactured homes looking to park their home somewhere. And so the biggest benefit in mind, that's the first time I talk about it here on the show, because I had people ask me why, why mobile home parks? What's it what's the point where you want to be a trailer park owner? And so I think the last thing that I want to talk about and we're going to compare the two asset classes, is that mobile home parks when you buy them if you're young. Right. And you have time, which I'm 30 years old. So at one point, the city is engulfing them all around them. And so you have on your right-hand side like a car dealership and then you're on your left-hand side.    [00:15:38] You have a mall and you're a mobile home park stuck in the middle. So you have these big guys coming over and offering you 20 million, you know, 4 like six acres because you're in the city now. But when you bought it, you were in the suburbs. So that's the appreciation that I'm looking forward to as far as the long term investment.    [00:15:55] I'm looking at the calls. And the cool thing about that is you're not sitting there idly waiting for that to happen. You're cash flow lives and making money.    [00:16:04] Well, that's while that's going on your cash flowing and not only your cash flowing, you're going to get to a point where the homes that you've brought in, you're selling them as part of the contract for the land. So you have already there. So you let the people hold the title to the home. So you have no maintenance whatsoever. You're just selling or you're renting like a slab. And that's what's so amazing about it.    [00:16:31] But I've been debating, you know what to look after right now when the mobile multi-family is so overheated. And I chose the mobile home park space. But I want to know why you chose or why you're investing in self-storage and why do you think this is the best asset class right now?    [00:16:48] For a  number of reasons. Number one.    [00:16:51] If I can invest in an asset class that does very well, much like mobile home parks, it does very well and good times do even it can.    [00:16:58] It can be even better at performing in bad times. I like it. I'm always worried about the asset class that does very well in bad times and then it falls on its face and then it kind of time of recession or pullbacks in the economy. I mean, that's fresh on our minds being only eleven, ten, ten, eleven, twelve years behind us.    [00:17:19] So anytime I can get in an asset class, it does well in bad times. I like it. Same as our A.T.M. machines. You know them.    [00:17:29] These our customers are the same kind of people that live in your mobile home parks. I mean they are you know, there's a large portion of our A.T.M. machines were EBT cards, welfare is more than 50 percent of the activity in our A.T.M machines.    [00:17:49] So that tells you who our customer is and those customers, the US. That's the fastest-growing. That's one of the fastest-growing demographics in the country, sadly, but no reality. I like serving that asset class or that that that demographic.    [00:18:06] So you think that's the same demographics that are in the space of their self-storage is not necessarily.    [00:18:12] I mean, self-storage is pretty broad. I mean, you can get super nice class self-storage facilities and then you can get, you know, class C, class D, self-storage facilities that serve a total other demographic.    [00:18:29] So, I mean, that's kind of all over the board. I mean, there's some of our prime location self-storage facilities were renting a 10 by 10 space for 350 dollars a month. And I just shared that with a seasoned self-storage investor here locally. And, you know, he was having trouble getting his mind around that, how you could do that. But, you know, it's supply-demand, it's the location. So you serve a pretty broad demographic. I mean, you know, most people don't know that it would be a mobile home park resident who would be a heavy user of self-storage.    [00:19:10] But I'm sure there's some.    [00:19:13] Yeah. So what would you say are the features of self-storage of that asset class? So what's good about it? How is it recession-resistant and what makes it so good in your opinion?    [00:19:26] Anytime you have a disruption in the market, divorce, slowdown in the economy, job changes, people relocating, people moving out of their big house and moving into small place companies downsize and need to move, move and store documents. Any time you have any kind of disruption in the marketplace, self-storage shines.    [00:19:49] I see. And so what would you say? The expenses are the average expense, of course. Every property is different. But how much of an expense you have from your gross income when you're dealing with an asset class?    [00:20:02] Very little. I mean, you've got electric. You've got, you know, a little bit of maintenance. Not much if it's a manned facility, which all of ours are. You've got, you know, payroll typically know one person. That's about it. I mean, the electric with, you know, through lighting, if you've got property tax, climate-controlled, if you got climate-controlled facilities, you got more. But that's pretty much it. I mean, you know that in property taxes and insurance.    [00:20:35] And so let's say that somebody would buy a self-storage facility. What would be the value add that they're looking for? Would you say it's the rents or is it something else?    [00:20:47] You're selling a business. I mean, you're selling based on an NOI the same as an apartment building. Yeah, you're you know, there are different business models.    [00:20:55] I was at a conference last night and, you know, the guy that was presenting his model was buying hold, never sell.    [00:21:04] That can work great. You know, my. Our model is such that we'll go in and buy an underperforming asset. We'll get that asset to the point where it's a read target, you know. And how do you get it to be a read target? Maybe add some square footage. We have a lot of our facilities.    [00:21:22] We have. We bought them at 50, 60, 70, five thousand square feet and added 25, 30, 50 thousand square feet to the project. And when you add scale and when you add some life into the project and when you get the work on an NOI and squeeze profits, raise rents, those kinds of things, you get that NOI up. And you and you know what the rates are looking for.    [00:21:46] You know, we're buying properties at a six and three-quarter cap. We're going in adding square footage. We're going in and squeezing, you know, working on the NOI. You know getting the NOI up, I turn around and sell to a read a four and a half cap. That's a little that's a lot of margins.    [00:22:04] That is a lot of margins. And I don't think you get the opportunity in multi-family right now, at least not as easy. So when you said properties are underperforming, what exactly how would you define that? So 80 percent occupancy or what?    [00:22:19] So we're buying a lot of mom and pop assets. And when I say underperforming, the property is not in bad shape, but it may be owned by a mom and pop for the last 15 years. And I'll just give you an example.    [00:22:33] One of the properties that we bought in the fund was owned by the same sort of manager that that, you know, they built to project, you know, whatever, 10, 15, 15, 20 years ago. He proudly told us that the tenants, the resident or the tenant said that came in when they first built the project. He never raised the rents on those tenants. While that does is it sounds like music to them because we're raising our rents every six months. And, you know, on an annual basis, we're getting double-digit rent increases, something that's free and, you know, something that would be hard to do in the apartment space. But we're raising rents, double-digit rent increases every year. And so to be able to go into a mom and pop owned assets, that they sort of fell asleep at the wheel or they're just not operating at. Most of these self-storage assets are owned by an individual and it's their only self through asset. And so the knowledge of the industry professionally manages it, learning how to, you know, get that NOI  number up. You know, that's all the things that we kind of specialize in and often things that the mom and pop investors or owners ignore.    [00:23:54] Yeah. So let's talk a little bit about buying this self-storage. I know I live in Fort Lauderdale. So the Miami metro area. And so here there's been a lot of chatter about the fact that you want to buy somewhere close to the ports. If it's the airports or if it's the port itself because a lot of products are being sent from overseas and then Amazon and then you went out.    [00:24:21] You want to be able to hold facilities where, you know, you have storage and self-storage spaces.    [00:24:27] So how would you say that Amazon affects the demand for self-storage is or that the fact that we're able to buy everything with a click of a button, you think that affects the economy and that asset specifically?    [00:24:45] That's a good question and one that I haven't thought of before.    [00:24:50] I think Amazon affects probably would affect more the industrial warehouse space and not so much self-storage units, although you could make the argument that, you know, with the click of a mouse, with a click of a mouse, you can buy more junk.    [00:25:12] Yeah. But you don't need it. And that's how we do it, which you driving in and which you're gonna have to store.    [00:25:17] Yeah. So yeah. You could make that argument. I don't know. I don't have data behind that to say. Well yeah, that's true.    [00:25:25] But I do know that it's easier than ever to buy stuff and you know, that's what we specialize in storage space to store your stuff.    [00:25:35] Yeah. So how big of self-storage facilities are you guys buying? I'm sure there are. There are some sites that you're not interested in too small or too big.    [00:25:46] So it's all over the board.    [00:25:47] But typically, we're not too interested in anything that's much less than fifty thousand square feet. Normally we're purchasing fifty thousand and up to one of the very first ones we did a couple of years ago with this team was a seventy-five thousand square foot facility.    [00:26:03] And then we turned around and added another fifty thousand square feet onto it. We're now in the stabilization phase where we're we're in the lease-up.    [00:26:10] So normally north of 50000 square feet.    [00:26:14] Yeah. So when you're saying a team so you have a team of investors that you partner up with and you become the equity partner and they're the experienced investors that had done this before. And so that's why your team up with them. Am I right?    [00:26:27] Yes. I like to do business with people to have their 10000 hours and who do it. You know, guys, guys who have a reputation for delivering and doing it. Well, OK.    [00:26:37] So, Dave, thank you very much for all that knowledge and participating in the show today. We appreciate your time and coming here. And I want to wish you success in your future ventures.    [00:26:48] Thanks for having me on the show. I enjoyed the conversation.    [00:26:52] And if you would like, I have a little book that I wrote up has to do with syndication. “8 Real-Life Lessons for Syndicators and Their Investors”   [00:27:04] And if your listeners would like a copy of that, I'd be happy to send it. All they gotta do is reach out to us at info@therealassetinvestor.com and we'll make sure that they get a copy of that.    [00:27:19] worth a read. OK. So thank you very much. And you have a great rest of your day.    [00:27:24] All right. You, too. Thanks. All right. Bye-bye.    [00:27:30] Thanks for listening to the Real Estate Investing podcast with Don and Eden. Stay tuned for more episodes. Till next time. 

After successfully having a career in the restaurant industry, Gino Barbaro became increasingly interested in the opportunities that investing in multi-family units could bring and the financial freedom one could attain. After conversations with his friend, Jake Stenziano, Gino and him decided to form a business partnership founding their real estate education company, Jake & Gino. Gino Barbaro is an author, real estate investor, and entrepreneur who is the co-founder of the real estate company Jake & Gino. Currently, they are in control of 1,400 units and are passionate about mentoring others to follow their long-term wealth strategies.   In this episode of Multifamily Real Estate Investments with Don and Eden, Gino will share his unique story and path that led him to multifamily real estate investing. He also will talk about the importance of the right mindset into becoming involved in real estate syndications and why having the right mindset is so important.     Highlights:  Gino’s Beginnings in Real Estate  Why Gino Decided to Not Only have a Career in the Restaurant Industry Forming a Partnership Importance of Mindset  Current Projects and Future Outlook   How to Connect with Gino Website: https://jakeandgino.com/ Facebook: https://www.facebook.com/jakeandgino Instagram: https://www.instagram.com/jakeandgino/ ----------------------------------------------------------------------------- Transcription Hey guys, I'm very excited to tell you about our new website DonandEden.com. We have put a lot of hours into making the website very accessible, beautiful, and comfortable. You could find ways to contact us for a variety of options if you would like to network, we always want to hear new stories and get to know you better. We would displace some of the past deals we were involved with, you could learn from each of those deals. The important lessons we have also experienced on the website, you would be able to invest with us on our future deals if passive investors, and even as general partners. Today, Don will interview a person who is very dear to both of us, and his name is Gino Barbaro. Gino is the part of the famous duo Jake and Gino who is in control of over fourteen hundred units. Gino will share his story and the path that led him to real estate investing as well as the right mindset you need to be able to do this. Also at the end of the episode, Don and Gino will discuss one of our deals that are coming up, and we are very excited about the development of 28 units in Hollywood, Florida.  So stay tuned and enjoy the episode.  Welcome to the real estate investing podcast with Don and Eden, where we cover all aspects of real estate investing with special attention to multifamily apartment buildings and off-market strategies.  Hey, Gino welcome to the show. How are you doing today? I'm doing really good. Thanks for having me on. Of course, I'm honored. If anybody, I'm honored to have you on the show it's going to be you the person that helped me so much in my career and developing myself as a real estate investor. I've learned so much from you. So I'm very honored as I mentioned. Thank you for putting the time to do this. Thank you. Yes. So you are a very accomplished man, and it seems like your whole life is about doing and creating. So I want you to tell us a little bit about your career how it started and what currently drives you.  Well, my biggest accomplishment, I think, is being a father of six children.  That is by far the most important thing to me, and that's the reason, believe or not why I got into real estate because I was in a tough business. I was in the restaurant business, and it just took a lot of time.  It took a lot of energy, a lot of effort, a lot of long hours and a lot of long weekends working on the holidays- it was difficult, and I was the son of an immigrant. So that's what I thought everyone did. I mean, I was working hard, but I didn't feel fulfilled, and I seemed like I was always away missing those important things with my family. So I was back in 2008, the Great Recession came in, and I was making pretty good money. The restaurant and everything changed, and I said to myself I need to go on a different path. I need to find something different, and I already had a job. So I didn't get into a residential real estate. I didn't get into fixing flips. I tried to get to the multifamily, and I think that was the saving grace me.  Try and get into a multifamily business, buy properties still have the restaurant, but do this on the side and make some extra money because as to have a large family it's a lot of mouths to feed. That was my priority to do something where I can get a little bit of extra passive income on site. And over the years from 2008 to this point continue to buy. Continue to grow. I just got fortunate enough that back in 2016 of March I left the restaurant and I dedicated my life full time to real estate.     That's beautiful. So you decided to focus on multifamily whereas other investors typically when they start they try to focus on single families because they have the conception that this is the safest thing to do and that was our conception when we started doing business in real estate.   But you challenged that and so you tackled multifamily right from the beginning. So tell us a little bit about that? How was it? How difficult was it to get into that arena?   Well,  in the beginning, everyone believes what they think. If you believe it's easier to get into single families, that's what you're going to believe. It's a self-fulfilling prophecy. Everyone knows how to buy a home so they think, hey single family's easy I can get into it I've done it before.  Everyone hears the word multifamily commercial, and they start shaking their boots, and they think of commercial financing, and real estate is a team sport. And for me, I didn't want to have another job. I didn't want to fix and flip a home. I mean, I love that process, it's a lot of fun. But once you think about all the hours and the time that you need to do a house, the capital gains, the risk factor, and where you are in the market cycle. All of a sudden you've done all that work, and then you've got to go and repeat it; it didn't seem like it was a really good strategy for me. I wanted something that would have at least residual income. I wanted something more I built long term wealth. Yeah, I wanted something where I could have the capital gains to avoid tax benefits there. I want something where I could build a business where it was scalable. So if you're thinking about buying single-family homes take a step back and say to yourself, how is it going to be when I have ten or eleven or twelve houses spread out all over the city. They're all different. It's going to be harder to manage every single one of them if I've got ten homes and three of them are vacant. That's a big vacancy. As Jake and I started on our twenty-five-year property they were all in one location. I was working full time. I could manage these part-time at the very beginning, and it was easier because they're all in one location. There was one landscaping bill. There was one garbage bill. There was one utility bill. There was one roof there. So it was just easier for me. There was an economy a scale thing. There were scalability factors and all those other factors that I've mentioned. It just made more sense.  Yeah. Also when you flip a home it feels like a job.   you make good money. I mean I've done that before, and you make good money. I get a good day you're placing your time so that you can earn money. So it's a good job, but essentially it's a job. It doesn't create residual income for you as far as multifamily does. And also I mean you could get there it’s not scalable, but it's possible. I mean it's possible to hold 20 single families and make residual income, and welfare. But it's not as easy and as convenient so I can relate.  Well, I think the problem is most people like that don't mean effect. It's so much more rewarding to actually buy a house fix it and then flip it three months later and get paid. It's a great feeling right, that's a transaction. It's a lot harder.  using my immigrant background to be a farmer plant the seed water the seed weed the garden take care of it let it grow and wait six months and pray that it doesn't rain hardly ever hail. There's a lot of risks involved that's an entrepreneur's journey because you're holding on and you're delaying the gratification.  Whereas I think single-family homes you're fixing the flipping it's a different process it's a different mindset. You're going to get into multifamily think of yourself as an entrepreneur. You think of yourself as someone who's solving problems for tenants. And the more tenants and problems you can solve the bigger portfolio, the more money you are going to make and the more as you scale bigger and gains the more property and more units the more cost savings you're going to have the more revenue generator rate are you going to have and that's how you start becoming really successful in this business.  Yeah, I agree. So you've entered the multifamily business. I mean a few years back so it's not like you've been doing that for 30 years while you were in the restaurant business. So how did your life change ever since you got into multifamily.  Well I mean for me, the best thing was I went to coaching school. I became a life coach because I didn't know what I wanted right.  I mean, I think the most important thing that everyone on this call has to figure out is to keep becoming clear with our lives, what is the clarity in your life? I didn't want to work twelve hours a day doing more at a job that I didn't like anymore. Now I'm working just as hard, but I'm doing something that I feel fulfilled in, and to me, it's not a job.   I don't even know what day it is today, to be honest with you. I mean the weekends to me are just like any other day or whenever I want to. For me, it was hard because I was working and it was like you said every week the week is over you get paid you start the next week, and it was just boring, and it was not fulfilling. Also when we bought our first property it was exciting because it felt like we did something different. Then three months after that first property we bought our second property. So we had 60 units within the first three months of buying the first deal. It took us 18 months to get our first deal. I mean it was hard out there I had done some coaching I had gotten together with mentors I had gotten together with Jake as a partner. So Jake and I took 18 months to get that first deal. But that second deal came right after the first because we had the credibility. We had met the broker we had understood the market. We had chosen the market and focused, and we had built a team. And I mean things are changing. I started seeing real estate as a business which is what it is whether you're going to fix a flip whether you're going to wholesale whether you're going to master lease whether you going to buy commercially. It has to be treated as a business. And you want to take yourself out of the day to day operations and think more long term and think bigger picture and build a business. And if you can't if you're out there trying to buy a business you can't scale that business then it's not a business, it becomes a job. That's why when you're buying a couple of single-family homes that can't be scaled if that model can't be scaled and you can't pull yourself out of it then it's not a business it's a job.  Here’s some that I learned from you, is the famous scent as you always say that transactions pay equity bill make you rich. That's right. I've learned that pretty well, and that's what we are trying to establish as well. So I know you wrote two books two of which bestsellers. So let's talk about these books a little.  I know the first one is we'll get our profits, and then the other one is family food and the fairs. So just from the titles, I could understand that these are two completely different books. So what's special about these books for you? And how has the experience of writing them?   Well, the great thing about it was back in 2008, I was trying to do something in the restaurant that we call multifaceted.  I had seen back then it was a shift. I mean all of a sudden you have to see trends you have to see what's going on with demographics, and it's exploding now. If you understand the new demographics now we're where people are not going out to eat they want to have delivery they want to have stuff brought into their house. Whole Foods is taking over a lot of it. Trader Joe's a lot of prepackaged foods. I said to my brother we need to do something different here at the restaurant we need to create other streams of revenue whether that is writing a cookbook which is what I did. I wrote a cookbook called family food in the fryers, and I wrote it for a bunch of Catholic brothers where I would go down and do a lot of mission work for and they were terrible cooks. So I said that was the mission, I said let me write a cookbook for them. And I ended up branding the restaurant then we created the company called Geno's family where I wanted to have my family teach other families how to garden, how to grow vegetables, and how to bring it into the house how to cook with them and then what I did with that company as I was sourcing physical products from China where there was cutlery whether it was vertical garden bags whether it was e-books and all that kind of information. And I was creating a little business within the restaurant and career multiple brands or multiple revenue streams. I was also joined tomato sauce selling it.  Unfortunately, as I'm doing that, Jake and I find out while this real estate is pretty cool and my brother was not ready at the time to start transitioning; he didn't see what I saw so since my brother Mark I'm surprised it's real estate. So Jake and I start buying these properties and about at about a year and a half after we start buying. We wrote this book with all our profits. And the reason why I wrote the book is it makes you go in there and research and learn and become a much better investor because even though you're learning you never stop learning is always things changing in the market and I electric let's write this book just for fun. We sat down, and it took us about a year to write the book believe right. I mean we're not good writers, and we're not that smart. So it took us a lot longer than what it should have. But I mean it gave us the clarity on what our strategy was we were buying these deals from mom and pop owners, and we were using the simple buy right manage right and finance. That was our three-legged framework on how to buy a multifamily property. So it gave the clarity, OK this is it let's put it down on paper. And then from there, we said what. Let's start coaching people and teaching people how to do what we're doing. So from that book, came up the Jay congenial program.  Beautiful. So tell us about how you met Jay and the other half of the famous duo Jake and Gino? Well  I mean sometimes people they gravitate towards you. He was a pharmaceutical rep back in 2010-2011, and he was using a restaurant, and he was good friends with my brother.  My brother is handling all the outside of the restaurant his deal dealing with the pharmaceutical reps that he was getting catering from our restaurant going to doctor's offices and selling pharmaceuticals. And when the sunshine came in that all changed the whole health care model changed and he saw that as a threat. So he decided to move down to Knoxville Tennessee, and I said Jake when you get down there let me know, we'll start looking at deals.  I know what kind of person he is, and for anybody out there looking to get into partnership with other people, you have to stop and think of why you want to in partnership with people.  I saw Jake as someone similar to me; he works. Rick is a super hard worker; he's always working. He's always thinking about the next step. He's got value-based decision making where he's got a great core belief; core values are really powerful. He's got a lot of integrity. He's got a lot of ethics, and he does the right thing. So I gravitated towards all of that, and I liked the way he worked because I worked just as hard. So if you're going to partner with other people make sure you look at that make sure you look at the background make sure you look at them saying what. It's not my job, It's not in our vocabulary, It's all about helping each other out. So I met him he went down and like I said from 2011 to 2013 we're looking to buy a property. He ended up buying a house because his wife moved down and then we bought that first property. He is the property manager because he was in the market, so he brought value that way by managing the property. And I was the one who had the experience the education I knew how to read the deals I don't want to raise the money. So I had that experience between the two of us. We just hit it off. We had a great partnership, and we just decided to stick with it. And like I said once you started growing we're like what let's start a podcast. What's the worst they can have. We've just started the podcast, started meeting people, talking to people and just really learning the industry from the inside out.  That's beautiful. So how do you guys currently divide the workload between you two now that you've been in a partnership for quite a while?  each other well.   Well, what ends up happening is there are certain inflection points, in any business, I think after we got off two-hundred units all of sudden Jake said I need to property manager and I need to hire some property managers we had 60 units the third deal was one hundred thirty-six units. So when we had that third deal we started hiring full-time property managers full-time maintenance. So we did that. That was the first step. And then when we hit about six hundred fifty units we decided to hire a regional manager. We just needed more staff. As you start staffing up and at that point, I was doing. I was sold to the restaurant I left the restaurant. Jake was doing day to day in the property management, and I was pitching in.  I was helping out filling out quick books and doing all the reporting. And then when I said Jake I'm going to do the education day in a day full time, there's a lot of stuff involved in the very beginning creating lessons creating videos getting people to come on the podcast. The date you do day to day with the property management. And then from there, those were the two streams of revenue on top of the investment which was the third stream of revenue, so those three streams. A year and a half ago, we decided we've got about 900 investors on our database. Jake, I can't reach out to them and set up thirty-minute meetings and you can either one, or we create a syndication company gets another partner for that which we hired Dillon Obama. He's our third partner. We have another partner Mike on that so let's do that. You have these symbiotic relationships between a syndication company that is raising money in an education company that is teaching people and also fulfilling them over to our syndication company. If they have extra money they can they can invest with us a property management company that runs these investments and the investments themselves.  So as we started scaling up we saw that we'd rather share the pie with other people who felt our core beliefs then try to keep for ourselves because it's hard to start scaling up and picking out what you do what you don't like. I love the education aspect of it. Jake loves the property management aspect of it. Our partner loves to speak to investors. He loves to underwrite deals, so if we can all work on our strengths and grow the business and try to keep it as a multifaceted business where each entity is helping the other entity it works well, and you'll figure that as you start scaling.  That's the hardest thing for an entrepreneur when do you hire somebody else. I mean we hired our first sales guy for Jacob Gino about two years ago 18 months ago and then only three to four months ago we hired an operations manager. We should have hired sooner; we just didn't know you'll figure that out. As you see, you start yourself growing and, you start doing tasks that aren't necessary if you aren't there to generate revenue. That's why you say to yourself OK, I have to pull myself out of this task and hire somebody to do that. Does that make sense?  It does make a lot of sense especially because I'm also in a partnership and I know exactly how important that is to have a mastermind, and sometimes you're not sure about things, and you could talk to somebody about the way you say things, and then they see things differently. And then you come up with the best solution. So it only makes sense to me, and I think it's beautiful that you guys are so symbiotic as you mentioned and that's amazing.  So I'm going to see you be doing that very soon. Trust me because once you have a great system and a great business it's all a communication right. We have something that we call Level 10 meetings every week.  We are on meetings with every single one of our entities and then might take up five or six hours a week, but it's really important to have her be on board. We've done something called scaling up with Patrick coaches because as you start growing if you're going to be an educator you have to believe in your product. You have to go out there and invest in yourself and invest in your company. So for you to grow and you're doing something new you've never done it before you really to go out there and invest in yourself and invest in your company, so that's first and foremost.  But I see you guys doing the same thing? You've got a beautiful model. You already employ virtual assistants amazingly you have a system set up. You are going to be teaching your process and then from that money make what you do the money you make. You replicating put into other investments and you start multifaceted, and I can see the picture already being painted with you guys as well.  Yeah. I mean I think it's what's special about our motto is that we came from the background of being a residential wholesaler. So as a residential wholesaler, you like a multifamily investor on steroids.  That's the way I like it because you're able to do some things that other people are not doing since it's just not a part of the industry.  a lot of people say, hey talk to the brokers and an established broker they should ship which we're doing, and we're doing everything, but the off-market strategies that we are implying are getting us ahead. And I can already see that we're getting to sellers that otherwise, we have never sold the property because they never had even that idea. So you're essentially the broker when you're addressing the sellers directly then you're essentially the broker because you're getting them before other brokers do. And then you're also saving the commissions that they would pay for brokers.  So it makes sense, and that's the best so much value. You guys have so much value that model and what's great about it is that you're in a tough market right now.  Can you imagine when the market cycle resets, and you're going back to the buyer's market you guys are going to clean up? So continue to do what you're doing because everyone always says now's not the right time to get in the market. It's never the right time to get into the market. It's never the right time to have a child. It's never the right time to leave your job. It's never the right time to get married. It's only the right time when you decide is the right time and what you need to do is learn what strategy to employ in that specific market cycle. I mean the real estate comes out three pillars it comes down the market cycle, it comes out to debt, and it comes down to exit strategy. If you can employ all three of those who make a wise decision on all three of those you can buy in any market, you just need to know. So as you'll see as the market resets you guys are going to you're poised to crush it as this market is going down because you've created the relationships you've already spoken to the sellers three or four times so when they're ready what are they going to call they're going to call you because you're already in touch with them a couple of times.  Exactly. I could always see that coming, and what else. When we started doing residential wholesale then a lot of people told us not to do it in Miami. The Fort Lauderdale Miami area because this market is very competitive, and it's very difficult for beginners.  So it was competitive, and it was difficult to get in, but it was very rewarding when not the first deal. So it's the same thing, and in today's market and multifamily, it's hot. But if you get a deal then it's good for you because you couldn't so easily. So there are advantages to this as to every market. And if we're already talking about the market I wanted to ask you a question which I've already preferred. So what do you think are the adjustments that the investors that are trying to get into multifamily or investors that have already done a deal or two in multifamily? What do you think are the adjustments that they should make in today's market?  I have a couple of different ways to look at that question. The first thing is when Jake and I started all I knew was that I'm going to buy a deal on myself.  That's not the only way you need to buy multifamily nowadays. If you have a strong balance sheet and you can be a sponsor on a deal, you can get it into multifamily. If you have sweat equity and you live in a property you live in a market, and you find a deal you can run day to day you can get a deal that way. If you want to find a partner and partner up with somebody you can get a deal that way. If you want a syndicated deal and raise funds for your deal you can get the deal that way. If you want to raise funds for somebody else's deal you can get into a deal that way. There are so many different ways to get into multifamily as I said; it's a business, and everyone that's out there sees these hundred unique properties in two hundred unique properties, and you see all these syndicators out there saying I'm closing two-hundred-fifty units. Yes, they closed, but they had a lot of help from a lot of people raising money. It wasn't just them for the majority of the people. Jake and I raise our funds for our own deal we've had a couple of key people bringing down payments, or we've given them a little part of the general partnership, or for the most part, they are our investors. If we had problems raising the money we would go out and ask you or someone else, hey can you bring money toward deal raise money? You are compensating. That's one way for you to start. I think what people need to do more than anything else is they need to decide that multifamily is for them.  I think once they understand it multiplies for them. And that is the right business model to employ going forward. Because, I guess food water shelter, and those are three basic needs.  You can buy it on the internet yet it's very hard actually to replicate it; there's not enough affordable housing coming online. The demographics going forward whether it's the immigrant population, the millennials or the baby boomers, they're all going to rent more. That's just a fact. Read the book Big shift, a great book about demographics and what's going on if you can understand that you can see what's going on in the rest of the world as far as having negative interest rates as far as people wanting to park their capital in a viable asset. That's why multifold is hot right now, and I think going forward in the next five to 10 years you're going to see that trend continue. Now the important thing is I think you need to focus on a market and you should South Florida is very competitive red hot. Why is that? It's because there's a lot of jobs down there. There's job growth down there. People are moving to Florida I think a thousand people a day relocate to Florida all the baby boomers. That's right. It's the baby boomers coming down, and they're actually selling their houses in New York and California, and cashing out and coming down here buying a small condo or renting an apartment right. And jobs are coming down here that's why. So it's the quality of life. It's the actual tax savings. There's no state income tax, and it's just a great place to live. The people here are great. I moved from here two years ago from New York. I love it. I cut my tax property taxes in less than half — no state income tax. I love the weather. People are visiting me now. This is not the Florida that I knew ten years ago. It's not.  It's going to reach a different conclusion completely, and I think the other thing to finish that point, focus on a market.  That's why the Southeast is competitive because that's where people are flowing. Texas is going to continue for the next five to 10 years because they're leaving California they're going to Boise Idaho, they're going to Salt Lake City, they're going to Nevada, they're coming to Texas because of the tax savings and the quality of life. So focus on a market that you like that U.S. population and job growth continuing on and if we do get into recession those people are not going to buy homes they're going to have to rent. So if you can play buying a place that has enough supply and demand there you're going to have better chances of withstanding any recession.  Yes. So assuming there is a recession you think that the eight class properties are the first ones to get the impact by the big class and the secrets are safer? I think so.  it's really weird, my mom used to have a condo in Deerfield about four or five years ago, we're still going down there every year.  I was amazed at Boca on a ten; there all the new builds that were going on there; the old builds were vacant, and they were putting up new stuff like you couldn't believe especially the commercial. My fear is as we get a slowing down a recession will rebuild us continue to do. They continue to build through the slowdown because they have the permits and that's what they do. So any new stuff coming online. Just be careful in your market take a look at concessions as you see a concession is basically, hey let me give you microwave for free let me give you a month's rent for free. As you can see those concessions going up, that's when you're going to see that there can be softening made in the space. Now what might happen in that a space, it may trickle down into space and say,  what I can get an apartment and be a lot cheaper. I can be where we play in the B and C space, they're not going to be as effective as much because those tenants never really buy homes, and they're not really you can't compete with the 1970s and 1980s build with a brand new 2018 build that has a pool, clubhouse, café, and a fitness center. It doesn't they won't compete there's no competition with mine. So the strategy of buying right, if you can buy those assets right and you can weather the recession the downturn. The only thing that I want to that would worry about in a recession is you're hoping that rents don't decrease a lot. I mean you think occupancy is going to stay in the low to mid-90s but if your rents start decreasing and there's a lot of competition a lot of people fleeing that's where you're going to have problems. But I think space is the first one is going to get affected in the recession.  I agree.  I wanted to tell you about the deal that we've done in Hollywood since the area so well. So everybody is saying that it's so difficult to get a good deal in multifamily. So then there is another very efficient strategy, and we've started to implement it which is to buy lots that are zoned for multifamily based on the city that you live in.  Right, they currently have a single-family on them. Now what happens in that scenario is that it's not multifamily like syndication like the classic syndication, but your dancing with the developers. What happens is that a developer would come over and give you a quote to develop the land for you, and the land becomes the equity. So you bring in the equity, so if you could syndicate the money to buy the land. Right. It's sometimes expensive because some multifamily land that you could work with the developer to develop. That's another strategy that we are implementing currently we're going to build. I believe it's twenty-eight units, but some people say 36. We don't know yet, in Hollywood a lot that we bought. So we bought this thought. We bought it for I would say half the price than what it's worth. Even less so 30 cents on the dollar. And then now developers are coming over, and they want to develop it because the multifamily market is hot. So that's another strategy that I know is good for the market that we are at right now. So I know we've already discussed that, but I wanted to mention it since I love that strategy. So why? Because you're going to have a brand new building that has no deferred maintenance that's going to have nice rents and you're basically in it.  I don't want to see it for no money down, but you're basically in it for a little bit of money down, and your equity is that property, so you've created a ton of value. You're not the classic entrepreneur, or that is taking something you repurposed it; you've taken something, and you've made what we classically call a higher and better use. You've done that. You attract a lot of values from that. And it's market, that's worth something maybe ten years ago. It wasn't worth it because the land was a lot cheaper back five, six years ago but now the land is at a premium. These builders are looking for that so that they come in and they need to split some of the profits with you, but they get that land at a decent price per door they're willing to do that. So any author listening listens to that stretch don't do in Hollywood, don't do it in Miami. You can do it anywhere else in the country, but that's an awesome strategy. Great. Great idea.  Love it. So one of the best ways to connect with you in case anybody wants to invest with you or listen to your podcast go onto our website.  Jake and Gino come on there; we have all the podcasts we do for weekly podcasts.  We have the multifamily zone podcast with my wife and me, just talking about working with your spouse growing the family how to teach kids about money and all that. We do a ramp partner syndication podcast, and we do a movers and shakers podcast with our students highlighting students. We closed the deal, and we have our flagship will our profits podcast and just gone. You can do your outcome. Reach out close there, and just ITunes we are on. We have an Instagram page or a Facebook page, and you can reach out to me. Jake & Gino and general if you have any questions I'd love to talk to people.  Wonderful thank you so much for being on the show today. I appreciate it. And it's always nice and a pleasure to talk to you.  The pleasure is all mine. Thanks for having me on. All right.  Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes till next time.

Todd Dexheimer is a multifamily investor and syndicator and has been investing in multi-family units since 2012. A former high school industrial tech teacher, he began investing in real estate as well during the recession of 2008-2009. Due to the hardship to acquire loans, he began to flip homes - acquiring a solid rental portfolio before becoming involved in real estate syndications.  In this episode of Multifamily Real Estate Investments with Don and Eden, Todd will discuss his first deal to transitioning from a single-family to multifamily investor. He also will outline his perceptions of the state of the market due to the talk of a looming recession. Todd also discusses what exactly he looks for in markets when investing in real estate and the types of real estate he chooses to invest in depending on what the current market outlook is.     Highlights:  Todd’s Beginnings in Real Estate  Transitioning from One Career to Real Estate -Making the Jump Full time  Are We Headed for a Recession? Where to Invest Current Projects and Future Outlook   How to Connect with Todd W: VentureDProperties.com E: Todd@venturedproperies.com Coaching & Mastermind: coachwithdex.com ---------------------------------------------------------Transcription Hey guys. Today I'm hosting Todd Dexheimer. Todd is a multifamily investor and syndicator and he had been investing in multi-family since 2012. Today we're going to talk about Todd's first deal to transition from a single-family to multifamily investor and the state of the market due to chatter of a looming recession.  Welcome to the Real Estate Investing Podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.  Hey Todd, welcome to the show. How are you doing today?  I'm doing well. Thanks for having me.  Of course. Yes, so tell us a little bit about your day what are your plans for the near future.  Well for the day or the future that's a big difference.  Right. How about we start from there and then we take it to the future I know you say you're going to be traveling to Europe right.  Yeah. So, today I've got a couple of things I've got - I'm in the third round of a property we're looking at purchasing. And so I've got the call with the seller. So we'll see how that goes. I'm very hopeful to be getting this property and then I'm also redlining a contract that I've got an office building under contract. So we're doing the redlining which redlining means you're just going back and forth with the seller and making changes and trying to get the contract.  So it's good for both parties so very busy before I go to Europe, but then tomorrow we fly to Germany and spend two weeks with the wife and kids traveling around Europe.  That's nice. I've been to Germany and I'm going to go to Germany in September for personal reasons. So that's nice that you can travel and work and stay busy when you travel. I guess that's the kind of lifestyle that you get when you work in real estate and you work for yourself. Is that right?  Well yeah I mean the benefit of owning your own business and doing real estate as I do, is that I've got time flexibility right? I can do this trip and it's not extremely disruptive and I probably on this trip will have to do some work just because of these properties and hopefully, I get this other property and so hopefully I'll be having two properties that were redlining but can be done from everywhere, I’ve got a computer. So that's a benefit. And again it's time flexibility. We can go when we want to go.  Yes. That's nice. So, tell us a little bit about your real estate business. I know that you have been doing real estate for quite a while now and you've done residential and commercial. You've gone back to commercial, you've gone back to residential, which is kind of different most people they either do this or they do that once they do to transition from residential to commercial then they stay there. I know you had a different story so tell us a little bit about your background and career.  Yeah. So real quick I was a high school industrial tech teacher and started doing real estate while I was teaching full time. I was buying single-family homes and duplexes keeping those as rentals and then kind of ran out of money and availability because at that time at the time in 2008-2009 at the time it was really hard to get loans and especially get them in your personal name you can only get a few and so I could only qualify for about four loans including my house and so I ran out of credit availability I ran out of money and so I started flipping houses. And that allowed me to then buy more rentals and continue on that journey doing flips as well. I finally was able to quit my job and do it full time and just continue doing the flipping and buying - so I was always buying rentals. I was always wanting to build that rental portfolio. The goal from day one when I first started was to get a thousand units thousand multi-family units and of course find one to four-family units would have taken an eternity but I had a business partner at the time and we really focused on these flips and I think definitely over-focused on the flip side and I think he kind of let us towards that which is fine, but that transition just took a little bit longer.  When you say it started with multi-family and went back to single-family and then went back to multi-family we bought a 15 unit building that was a good opportunity that purchased and renovated and capped and the deal went okay. But it wasn't great. And so I think it kind of made us go well let's just keep on doing these smaller deals that are simple and we're comfortable with them. So, we transition back to kind of doing those smaller deals and quite frankly we do the smaller deals while we're doing the multifamily still. And then finally in 2015 my business partner I split up and I took a step back and decided what I want to do and where do I want to take this business, what makes the most amount of sense.  The multifamily made the most sense of building my rental portfolio made a lot of sense. I looked at the numbers quite frankly I looked at the returns on the flips versus the returns on the rentals and the returns on the rentals especially when you take into consideration the principal pay down and the equity that you're building those returns made as much or more. Sounds financially as the returns on the flips and there are a heck of a lot less work way less head damage and way more control. So, the rentals just made way more sense to continue down so that that's that was the transition that was a reason for it. Now again that was in 2015 when I decided all right, this is actually what I'm going to focus on and stop doing the flips.  Yeah, I mean, I hear a lot of people say that when they're doing anything transactional or flipping properties or wholesaling properties then that's good for paying the bills. It's good for saving some capital, but it doesn't make you rich. What makes you rich is equity and that you only get when you are getting into the bigger deals and you buy and hold.  So that's yeah that's my perception. Yeah, flipping can be a good business. I don't want a discount and say it was a bad business and I regret doing it because I don't I mean it was good business and I enjoyed doing it and made a lot of good money doing it was able to get me to where I'm at today.  I wish I would've transitioned out of it may be a little sooner, but it's just a hard business to scale and repeat and you're always counting on needing another deal to make money and if that's what you're counting on all of that, a lot more challenging business. Not that it can't be done and you can't do well and it's just very transactional.  Yeah definitely. So, I want to talk a little bit about everything that you've been doing so you've been focusing on multi-family ever since. So you said 2015 and I can't ignore hearing about   all the talk and chatter on recession and the coming recession and so we've been we've been living in the perfect environment so far in 2019 where unemployment is very low, historically low and people can pay rent and people can live in A-class buildings and everything's good and there are no vacancies, but now everybody keeps talking about a recession. And so how does it affect the multifamily investor especially somebody like you that you've been in the business for quite a while and so how does it affect your acquisitions you're still doing deals you still getting in. I do count on that recession to consider it when you underwrite them.  It is pretty funny. You brought this topic up because I just wrote an article about this and the recession is coming. I don't know well I promise you the recession will have some sort of downturn within the next 20 to 30 years I promise you that, we don't know when the recession is coming. Here are the things everybody since, I got and I got into real estate in  2008 and in 2008 the economy, I mean just crashed right? In 2006, everything was beautiful. In 2008, the stock had fallen and it was still falling. And look in 2008-2009 people said it's going to keep on getting worse we're going into this deep deep recession we're never going to dig out of it. I remember being in, I got my real estate license in 2009 and I remember people saying we will never recover our prices for housing we'll never get back up to where they were in 2006 which is just crazy, ignorant if you think about it. But at the same time, people thought I was going to get worse. Once it started getting better and let's call 2011-2012 things started picking out. It was we're going to see a double-dip recession. The recession is coming we're seeing a double-dip that never happened. In 2015, people said we're going to see a recession in the next 18 months. I remember sitting in a conference in 2015 and that kind of question was brought up when are we going to see a recession time which had been good for a long time. Once a recession coming. Well, the recession is coming within the next 18 months we're in the ninth inning maybe even extra innings right now. Well, I got news for 2019, halfway through it more than halfway through it and we don't have a recession yet. But guess what? Everybody's saying the recession is going to happen in 12 to 18 months. So, we still got the same thing happening it's always going to be and eventually somebody is going to be right and they're going to say they're super smart and they predicted it. But here's the thing. Trees don't grow to the sky, right? Eventually, we're going to have a recession. So, what do I do? I prepare for a recession. In 2008, I plan for a recession in 2010. I plan for a recession in 2015. I planned for a recession. Today I still plan for a recession. I always plan on a recession. I'm not being negative. I'm being realistic. So that's I think the key is anytime I buy a property I'm just being very intentional and understanding look times are good. There could be a recession even when times are bad. But we could see it get even worse. So, we always have to plan for things to be not as good as they are today and if you can plan and still buy then it's worth it.  Yes. So how exactly do you do that? So you mean to go out on a different cap rate on what you're buying today? So give us an example like a numeric example.  So a numeric example haha to give you an exact numeric example because every situation is different I look at kind of the overall what's going on in the market and all that kind of stuff. And I look at historicals as well so a couple of things that I do. First of all, when I when I'm underwriting, I’m underwriting an exit and typically that exit let's call it five to eight years from now and I'm going to underwrite that I'm going to exit at a lower. Sorry, a higher cap rate than it is today. That cap rate isn't necessarily formula based it's more based on my research. So if historically that area holds that a 7 cap and today it's trading at a five and a half cap I'm going to underwrite an exit closer to that 7 caps. I'm not going to just go up by 10 basis points a year as most people do. That doesn't make any sense. That doesn't bring me back to anything to reality so I try to be realistic about it and base it on what's going on. Now maybe that market has totally shifted and it was a C class market and now it's trending towards it sn A-class, that's different that I have to look at. OK. What's going on in the area but if it's an apple to apples then yeah it's more based on historic. So, I look back at what it was.  The other thing that I do as I look at again historically and I go what happened during the last recession what did rents do? Did rents go down? Likely they did. And by how much? Where did concession go? Concessions will likely end up by how much. And then what happened to my overall vacancy and my economic vacancy? They can see where did those go. And I stress test my properties based on those numbers and we can find those numbers fairly easily Most brokers have those numbers co-star has those numbers. So, we can get those numbers and we can figure out OK where can this property go? If a downturn happens how negative can it get. And can I stress test my building and still be OK. Still, tread water is above water or is it a sinking ship if just a little tiny thing starts to go wrong. And so a lot of people right now in my opinion are buying to where if just a little thing goes wrong, they're screwed. Right they've got nothing. They're planning on everything going right. So, make sure that you just plan on reality. Buy for cash flow you'll have good cash reserves, have a good budget and do know the solid expense and income projecting meaning your expenses are going up every single year to 3 percent. Your income shouldn't be going up more than 2 percent or so a year as well.  Yeah, that makes total sense. I think a lot of people are underwriting the way you said it. So that if everything goes right and everything is good then they make money, but they don't consider what would happen if things go wrong.  And I think the reason for that is because it's a little bit more difficult to find a good deal. So, you have to underwrite so many deals to find the right one so maybe people get a little bit frustrated. And that's why they just jump on to a deal that they see as the best. I'm going to get it. So, I think that's one reason. And speaking about that I know you live in Minneapolis which I've lived before I lived in Minnesota for three years. And it's a beautiful place. But I know you're investing in Tennessee, in Kentucky, and Ohio. So, I want to ask you about how did you pick these markets? What exactly in these markets was attractive to you that you decided to invest in these markets? Yeah. So what I'm looking at markets, I look for a couple of things I look for good job growth, population growth, the type of job growth, I want good diversity in the industries, I want to make sure that is still trending upwards I want to make sure that the city, the counties, the Chamber of Commerce, and so on are doing things that are actually driving businesses to want to come in and the types of businesses I want. So that's all-important. I look for trends too of what's happening with the multifamily and ending in a single-family because they're very well tied together, what the building permits are, what the occupancy is, where the rents are, and where they've been.  So I'm looking at a lot again back at historically and then at current data training projections to find the markets than a couple of the things I look at. One of the bigger things actually that I was looking at when I was choosing the markets were rent affordability and the reason being is in today's market. One of the probably the biggest things that you're hearing about that's stressing people out is the fact that there is no affordable housing. So if you're in a market that has a very big lack of affordable housing and the economy takes a dive what's going to happen to your housing the prices are going to go down, the occupancy is going to go down, and you're going to be hurting, but if you're in a market that has good affordability and has. Again not overbuilding and so on. You're going to be able to withstand in my opinion a recession a lot better. So, I looked at markets that have just really good solid rental affordability and the last thing is the opportunity. I want to make sure there's some opportunity. I don't want to go on the market and have zero opportunity to be looking at, some market sells a lot of properties and others just don't sell properties. Minneapolis, for instance, we don't sell properties here. We keep them. Eighty-seven percent of all properties are owned by local owners.  And I don't know the statistics on how long they're held but my guess is the average property held well over 20 years. Where markets like Dallas, Texas for instance which I don't invest in but those properties are turning every three to five years. People don't hold onto those properties and my guess is less than 50 percent are owned by local people.  That's great. So, I know your first deal was up 50 units in multifamily in Minneapolis. Was that right? Yes.  Yeah. And that was back in 2012. And I know a lot of time had passed and that deal did not go as expected. And I know right now you're doing two hundred and twenty-four units so that's a bigger deal and things I hope you are going to go better for you. So, could you tell us about that first deal back in 2012? What went wrong? What could you have done better with the knowledge you have today? And so how does how do the lessons that you've learned affect the deal that you are doing right now? The two hundred and twenty-four units.  What would I have done differently is not bought the property or bought the property for a lot less or to be able to change the things that needed to be changed. The biggest problem with the property is because it was built in 1880 and it had old cast iron piping, galvanized piping, it had an old steam boiler, that had all the electric knob and tube all brick it was just an old tired building.  And the biggest thing was mechanical, so mechanicals were always things were always going wrong and by mechanicals I mean the plumbing electric and stuff was always going wrong there and so we always had problems with that we could never cashflow because on just maintaining that building. So what I've done definitely if I could have bought that building again and I could have got it for the price that I would've needed I would've ripped out all the plumbing systems and redone it from ground up and I would have taken out the steam boiler and redone that I would've taken a lot of capital but if I could do it again and could buy the bill for the right price that would've been what to do. Awesome. That's great. Overall that investment worked out. I mean overall we didn't cash full during the whole period but I sold it and made some pretty good chunk of money so the market definitely appreciated nicely for it and probably still made a 25 percent return on investment on an annualized basis but I had zero cash flow. So it was a pain to deal with.   That's nice. So, what are your plans for the future as far as your career and your business? Where do you plan to be in the far future?  Yeah. So, it's just to continue to purchase multi-family properties. In the far future, I'd like to have over 10000 multifamily units to create a business impact.  My goal is to create a business that creates impact. I want to create a positive impact. So, if I can create a business that has a lot of positive impacts then at the end of the day I'm happy. And so right now I'm working on building more multifamily or buying options and building because I'm not constructing them but buying more multifamily units and growing.  And like I said I've got an office building so I'm looking at some diversification as well. I just continue to move my company along the needle there. I'm also doing some mentoring some different coaching stuff, some mastermind groups so I am enjoying that and doing that aspect of the business and enjoying the impact the positive impact that makes as well. So, for me right now it's what can I do to kind of make sure I'm following my vision, following my goals and part of that is creating a lot of positive impacts.  My core message, my core belief is being able to give back and be able to leave this world a better place than what I came in. So, everything I do is built around that. So, what are the best ways to connect with you in case anybody wants to get in touch maybe invest with you on one to one of your future deals or get some mentoring?  Yeah. So, if anybody wants to invest with me they can reach out to me. It's VentureDProperties.com so it's a venture, D as in dog, properties dot com my email is Todd@venturedproperies.com. For coaching, they can go on venturedproperties.com or coachwithdex.com as well and reach out to me on coaching or mastermind stuff.  Awesome. Ok so Todd, thank you very much for participating in the show today. We appreciate you coming and putting your time to make an impact, as you mentioned and I want to wish you the best of luck and also have fun in Europe.  Appreciate that. Thank you very much. Thanks for having me on. And hopefully, your listeners took something from it and feel free to reach out to me.  All right. You have a great day. Thanks.  Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time. 

Eddie Lorin has twenty years of experience in real estate investing and developing. With a unique approach to investing that focuses more on the tenant rather than the cash flow of the deal, Eddie has successfully been able to invest in real estate and purchase over 15,000 units in more than seventy real estate transactions.  In this episode of Multifamily Real Estate Investments with Don and Eden, Don and Eddie are going to discuss opportunity zones and a different approach of multifamily investing called impact investing. This type of investing is putting the focus on the tenant instead of the profit and the profit usually follows as the tenants tend to stay in the community. Therefore, there are fewer turnovers which are the biggest single expense we could have. Eddie will also discuss shelter and affordable housing development.   Highlights:  Eddie’s Beginnings in Real Estate  Impact Investing  Opportunity Zones Putting the Focus on the Tenant Current Projects and Future Outlook   How to Connect with Eddie W: StrategicRealtyHoldings.com E:  elorin@strategicrh.com -------------------------------------------------------------------- TRANSCRIPTION Hey guys. This is Eden and in today's episode, Don will interview Eddie Lorin. Eddie has 20 years of experience in real estate investing and developing - Don and Eddie are going to discuss opportunity zones and a different approach of multifamily investing called impact investing. This type of investing is putting the focus on the tenant instead of the profit and the profit usually follows as the tenant tends to stay in the community. Therefore, they are fewer turnovers which are the biggest single expense we could have. Eddie will also speak shelter and affordable housing development so I hope you guys enjoy the show.  Welcome to the Real Estate Investing Podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.  Hey Eddie, how are you doing? Welcome to the show.  Pleasure. Nice to be here.  Thank you for participating. So how about you start by telling our viewers and listeners a little bit about yourself and who you are what you've done in your career in real estate.  Well, I've been in the apartment business for over 25 years and I've done over 40,000 units of working for others and working for myself. I specialize in the lower end more low-income housing development and purchasing and rehabbing existing properties and then doing it for a long time. We try to give people a clean safe affordable place to live. Treat them with respect and dignity they stay, they pay and they refer their friends. That's it. Very simple business. We do the right thing all the time over and over again consistently.  Yes, I know that you are an impact investor and also the name of your company. So tell us more about where you're based, where you're doing business, where are you’ve acquired properties and developing properties?  We are based in Southern California in the San Fernando Valley. We're building four projects here locally. And we also have a funding opportunity zones that we're funding others across the nation to build their opportunity zone workforce housing. We define workforce housing as people making between 80 and 120 percent of area median income. That's what they can afford to pay. And we only have rents that are tagged to that structure.  I see. So, I know opportunity zones are a pretty new subject. And a lot of people are very curious about it. I know it offers a lot of tax benefits. So, what could you tell us about Opportunity Zones? Briefly provide your input on that.  There are three basic benefits. One is the deferral of taxes. It's basically 1031 on steroids. So, if you have gains in Apple stock or you sell a business it's not just a 1031 exchange anymore; you can sell the stock, sell interests in LLCs, you can exchange you any capital gain into opportunity zone investments. What's the benefit? Let's say you sell and you have one main dollar gain. That's let's say in round numbers federally it's 20 percent or 200 grand. That two hundred grand can be deferred until 2026. As you put it into an opportunity zone fund that purchases into one of eighty-seven hundred census tracts across the United States that are low-income census tracts designated by each governor across the country. So the first benefit again is a deferral of taxes. You don't pay that 200 grand until 2026.  The second benefit is that two hundred grand is going to be less if you purchase into an opportunity zone before now. So within seven years 2026, you get a 15 percent discount off of that tax base. So, in essence, you are paying one hundred seven thousand dollars in taxes so you got a free loan from the government for one hundred seventy thousand with that discount of 30 grand. So that's the number two but the really most important thing is if you hold that new investment into an opportunity zone that's invested in these eighty-seven hundred census tracts across the country hold it for 10 years and let's say that million dollars become worth four million dollars that three million dollar gain is tax free.  Wow. That's amazing and very interesting. So how is that changing the apartment building business? And in general, the investing business in the United States as far as you see it.  Well it hasn't yet because this Treasury has been very slow to come out with final regulations is just now getting going it's almost two years since the top tax act. Jobs Act of 2017 passed. So, the frustration for all of us who are on these panels and trying to get things going. We had a second set of regulations come out now we're waiting for a third set. So that's a challenge to get things moving. And the problem is that it was written by two senators that it was a bipartisan law which is a good thing, but it wasn't very heavy on details. And as a result, the accountants and lawyers and they're all wondering. How do we fill in the gaps of these uncertainties and so, we're almost there?  But it has not changed things much. To answer your question yes. But it will.  Ok. That's great. So, tell us more about what you're doing in the apartment building business, so I know you're focusing on C properties and B properties you're investing more in the quality of life of the tenants. So, tell us more about that business model and how is it different from other real estate investors.  Well, it's all about who's paying your bills. The tenant pays your bills. And if you don't have a happy tenant, they're not going to stay for their friends. So that's the basic tenet of what we do. We try to give everyone value and value can come and giving people amenities, even though they're in a little less expensive environment. And that's very simple we give her. It's like a fake Gucci bag. He likes to have a feeling of that Gucci bag. But it may not be real, but it still makes him feel good. And so we give people well-appointed interiors, beautiful paint jobs, the resort-style pools, State of the art fitness centers, social areas to thrive in. And we just give people that nice sense of community because you can smell it when you walk into the leasing office that just it feels good feels like home. It's very simple, but very few people care about the resident. And that's the problem. Yes, people care about maximizing cash flow.  Yes, I agree because I've been interviewing a lot of investors and it's typically about money not about the resident. So how about you tell us about a deal that was structured this way. So, what are the changes that you've made it improve the quality of life for the tenant? So, give us an example that details so you can understand more about what it is exactly what you're trying.  We bought a high rise in Maryland called Waterford tower. We got sniped by the county because they wanted to buy it out from under us and we said hey, wait why would you want to buy it out from under us. This thing's neglected it needs TLC. Why don't we work together so we got a loan structured by the county in exchange for putting affordability which we would have put on anyway based on 70 and 80 percent of area median income residents?  So, we've spent three million dollars in the process of renovating all the interiors, all the common areas. And this place was neglected and it was very sad how this major institution allowed this property to get in such disarray. So, we closed on it, we’re cleaning it up. Residents are happy were 96 percent leased and we're renting to people that only make a certain level of income. Not all of it.  It's a mixed-income property so half the property is fully market rate and the other is based on income restrictions so people can live together and work together as long as there's a common sense of community. And that said, its very simple, it's not rocket science.  So how many units is that property in Maryland? One hundred and forty-five. I see. And when you're saying that there are income restrictions what are the income restrictions 70 percent and 80 percent of area median income, let's say area median income is one hundred thousand dollars. Seventy percent and is seventy thousand dollars. Rents are going to be capped at 30 percent of that 70 percent because no one should pay more than 30 percent for rent in a year. So, 30 percent times – I have a calculator in front of me.  Quickly, but I'm 70 that's the twenty-one thousand. Okay. So that's the max we can charge for rent.  I see. And so when you're improving the property how do you make sure you're not over improving the property as you're investing in C class buildings and you typically people always say you don't want to over-improve the property because you might be losing money.  Well, you can do it right the first time we could limp along and pay later the bottom line is you have to buy it right. And if you buy a right and you have the right comps and you give people the value they'll give you the rent and it's there's no right answer It depends on the deal and you've got to be smart about how you buy if you overpay. That's the real problem.  Yeah. So, what are your plans for the future as far as the apartment building investing because I know right now the market is a little bit? It's hot. So, it's very difficult to come across a good deal that you could get for a good price. And so how do you prevent yourself from overpaying in today's market?  We're building new. That's one of my focuses. There's such a need for product and these opportunity zones are one of the greatest things that have happened to our generation. And when they start getting moving I think that's the greatest opportunity. No pun intended to build new if you're buying a five cap or four cap, you can build to a five and a half or six and you have a brand new product. And as long as it works between 80 and 120 percent of area median income we're not building luxury. We're building value-driven apartments and that's where I think the opportunities are because we have a shortage of seven million units today and it's only getting worse. The problem with housing. And we've got to figure out creative ways to buy land, to restructure, to build decent safe clean affordable housing. Because if you're buying an old product. I added that that low of a return and it's tight. There's not much juice.  Yes, I agree and I also think it's safer when you're focusing on that kind of income with your residents it's safer because you're more immune to a recession because people would always need these kinds of apartments affordable housing. So that's great. And I think you're doing a terrific job. So how could other people connect with you in case they want to know more about your projects.  Just reach out on my website which is StrategicRealtyHoldings.com That's the best way to find us. My email is elorin@strategicrh.com. Wonderful. So, I want to thank you for participating in the show today. Really. Gave us some beautiful insights. Thank you very much. Good to talk to you.  Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time. 

Currently, in control of 4,300 Multi-Family Units, Mark Kenney- a real estate investor, entrepreneur, and founder of ThinkMultifamily has an incredible amount of impact as an investor and businessman. Only starting to acquire larger deals five years ago, his ability to implement successful strategies when investing is apparent. With over twenty years in the real estate industry, his passion for the business has allowed him to gain an extensive amount of knowledge and insight into the valuation, acquisition, and operations behind a real estate deal.    In this episode of Multifamily Real Estate Investments with Don and Eden, Mark Kenney discusses his beginnings as an IT entrepreneur and what exactly led him to move into the real estate arena and assisting investors with buying multi-family units. He also discusses the importance of partnering on deals in order to bring different skill sets to the table to make a deal successful and a good investment. Lastly, Mark advocates for the importance of giving back to others through different methods such as coaching, mentoring, and charity.    Highlights:  Mark’s Beginnings In Real Estate  His IT Background (How It Is Applicable To The Real Estate World) How He Finds The Right Deal For Investors The Importance Of Giving Back   Current Projects And Future Outlook   How to Connect with Mark W: Think Multifamily E: Mark@thinkmulti-family.com ---------------------------------------- Transcription   Hey guys, thank you for tuning in today. I'm going to host Mark Kenney. Mark is in control of forty-three hundred units. Think about that number for a second — the type of impact you have as an investor when you are affecting forty-three households. Well, not if you including vacancies. Okay, I think I'm losing it. So anyway what's even more amazing about that is that Mark only started to buy bigger deals five years ago. Potential of becoming extremely wealthy in a very short time is more than possible when you're dealing with multi-families, and that is what excites me so much about this. Also, Mark and I are going to talk about how important it is to partner up; especially on your first deal because people have different skill sets. You can't be good at everything, and there is a lot to do. Now don't get me wrong I'm not saying for a second it's impossible to do this on your own. Everything is possible if you have the will and determination, but I'm just saying it's probably easier to do it when you have the right partner or partners. Okay, so without further ado Mark Kenney.  Welcome to the real estate investing podcast with Don and Eden, where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.  Hey Mark, how are you doing today?  Welcome to the show.  I'm doing well, thanks for having me.  Yes, you're welcome. I believe you deserve it. I heard that now you're in control of forty-three hundred units, so that's amazing.  Yeah, we didn't do it by ourselves, but it's been a journey. It's been fairly quick overall, but it's been fun.  So I know that you started buying multi-families. I would say five years ago was it right?  Yeah, I started buying a small multi-family twenty-five years ago, two to four units. Yeah. Then about five years ago started syndicating larger deals.  Okay. So you were buying properties ever since you were out of college? If I'm correct, right?  I was a senior in college, yes. Oh man. So tell us about that, that's interesting. Yeah.   people are like, was your dad in real estate or someone else you knew? The reality was, no we didn't have anyone in our family or anyone that was an entrepreneur or anything. But I have an identical twin brother, and we were both like, man there has to be a better way for both. Kind of analytical, and I had no accounting background or I.T. background.  At the time we were going to school for accounting, and we're like everyone needs a place to live. So why don't we look at real estate? We liked real estate ever since we were little, and just started buying small properties like two to four units, and it was a lot of properties. My dad kind of liked going on tours with us, and I don't think there's any property on the planet that my dad thought was a good enough deal to buy. So he kind of talked us out of a lot of deals and had a deal, talked us out of the contract. He talked us out of that deal. Quickly after that, I was getting a deal and didn't include him till after we closed. Don’t listen to your Dad, that's it, you say. I'd say well that your dad's qualified. My dad, in this case, wasn't qualified; he was doing whatever he thought to protect us. But the reality is, he's eighty-two. He's never bought a rental property his entire life and never will. So let's listen in the wrong person.  Okay, so you were buying properties ever since you were very young. Did you continue doing that, or did you end up like just following your career of going to college and all that?  We have, both. I ended up graduating in the CPA for a while at I.T. consulting but continued to buy small properties. We were buying them on our own. We didn't have any other people providing any equity to the deals; so my brother and I every couple of years would buy another property. We had several properties, but they were all a two to four-unit size.  Okay. So when was that moment that you decided that you wanted to focus primarily on real estate, and not do anything else besides that?  Yeah, so I had started an IT company in 2013. People where like, oh my gosh you started at the wrong time, but actually, it was all right, I mean 2008 ended up going well, but I had projects all over the place. I mean it was all of the world and things like that. I didn't sleep much, and I’d ignore my wife a lot.  And again this is 2008  when I started doing it, and I just would take any project any deadline, didn't matter, I would make it happen. It caused a lot of problems in marriage because I was never available, and I just figured well that's the way I grew up. I just support the family that's my job. And so it came to a head, where my life to me was kind of like, yeah this isn't like working, something needs to change, and we both knew she liked real estate too. We got married young, and so she was pretty much there right after the first deal, where we bought over, twenty plus, twenty-two.  So we said well if we're going to try to do something, there's no way we can replace my income at my own I.T. business. I can replace that with buying two to four-units every couple of years to happen. A friend of mine was syndicating in a deal. I didn't know what syndication was at the time, I invest passively with him, and I'm like huh. This seems like a good way, maybe to kind of get involved in deals to start my larger deals. I just told my wife, Camille, if we’re going to do this, we can do it together. I was on little sleep, and three hours a night, consistently doing IT, it was kind of hard for me. I need to do something different now. Did it have to be multi-family? No. I looked at, invested more in the stock market. It didn't do well there. I look at starting several different franchises, storage units, look at everything you possibly could think of pretty much and end up with multi-family. And that's kind of where we've started. We've been doing that since 2013; I guess it is when we first started investing in a multi larger multi-family.  Okay, so let me see that I'm getting this right. So you're graduating out of college, and then you're starting to work in I.T. You're an I.T. consultant, and you're making, I know it's good money. So then you work very hard, right? You barely sleep, and you keep buying multi-families, but just smaller multi-family like, duplexes and triplexes? Then there is the point where you decide that you want to go for the bigger apartment complexes, and so that's when you choose to focus primarily on that using syndication. So I know your first big deal was sixty-four units. Am I right? That's the number right? That's correct. Yes. Yes, I did my homework. Good. So it was sixty-four units, and then that was syndication, right? It was about a million-dollar raise on a three-point nine on a million-dollar purchase price.  Okay, So tell us more about that. How did you find a deal? Or did you bring the money? What was your part in the syndication?  Yeah. So there was one other guy and me that were sponsors or leads on the deal. There was nobody else involved from a general partnership sponsorship team. And we kind of both found the deal, I mean we were on a broker list, and it was listed, but it was two different thirty-two units, and one of the thirteen was listed in the other. One wasn't even, though it's like three hundred feet away — the same seller. So we looked at the property was in a nicer mid 80s construction, built as condos originally. So a little bit nicer for development as well. And kind of like the deal it didn't require a lot of rehabs, it was maybe twenty-one hundred. Three thousand dollars a unit rehab, occupancy was in the low to mid-90s percentage-wise. It was just kind of a really good first deal, but it was really through broker relationships. My partner at the time had done more deals than I did, as far as larger. And really if I applied without him, I would've had a tough time getting that deal frankly.  Okay so let's focus on that. So your partner he had done a lot of deals, but still he would take you onboard for a sixty-four-year deal which is very nice. So how did you create that relationship with that partner?  He didn't do a lot. He had done two deals kind of before that, but I met him at a meetup. We kind of had similar goals. As far as what we're trying to do and decided to kind of look at some deals together. We looked at a number of deals. Know from my perspective, I was bringing in more analytical. My background was decent analyzing deals, and then also I  was raising most of the capital.  Okay. So how much time do you take from the moment that you decided you want to do real estate syndication and get into the bigger pool with the bigger properties to the moment that you ended up purchasing that property? Yeah, unfortunately, it took us about a year. Oh wow, that's a lot of time, and you get discouraged at that time. I still had my I.T. business. So it was, in fairness, I wasn't able to devote as much as probably some other people that maybe work forty to fifty hours.  I was working so much, but I made it work. I probably could've got something quicker, and I think in reality I was over-analyzing things to the point where I was nervous and scared to submit a letter of intent. I had every answer to every question, and at the end of the day, you're never going to have ever answered every question. So I got more comfortable where I know you engage experts in certain areas in a letter of intent, is the beginning point. And if it moves forward from there, you're going to gather more information. A deal might continue to work or it might not.  But I got more comfortable submitting a letter of intent to brokers for more deals and that's the first, probably half a year I was nervous about doing that and didn't submit very many. Now I don't have a well-defined criterion. I looked at everything from say from eight units eight hundred units, and I wasn't going to buy either of those number wise. So I don't know if I wasted my time doing that. Frankly. It’s important to get a concrete defined criterion for what you're looking for, and it can change over time, but when you're talking to brokers and investors, it's important to have that.  Yeah, I would agree, but what I think back in a day when you started doing these deals then, I think it would, it was, maybe a little bit easier to find a deal. Now for somebody to get started investing syndication and finding a deal, the first two I'm not talking about your second third, when you already have the relationship the connections, the expertise and the knowledge talking about the first deal now. I don't think a year in today's market is that much of a time to act and it's not. Yeah, it's in my first deal, right. It's not a lot, right? It's pretty reasonable; I think, right? Yeah, I think we have a great coaching group and stuff like that too, but we have many people that have gotten in, six months or less into a deal. But in fairness, if they do try to do it on their own with no partner that has no track record, you go try to a broker with your experience and say well I'm just new, you're trying to buy one hundred unit deal. It's going to be challenging for someone to do that. If they can find someone that they partner with that they know they need to add value to each other and things like that, you'll get quicker for sure. But you see a year it's like you said it's a long time. But once you get your first one, generally speaking, it does go faster to get future deals definitely, and you've already talked about that.  So you made your first deal five years ago six-four units, and now you're holding forty-three hundred units, or you're in control for three hundred units which are a lot.  I don't think I've ever heard about somebody that had, increased a portfolio that fast. So first of all, what I want to ask is, how did you do it so fast? I mean that's very impressive.  And yeah, I mean there are. I think it's, I tell people we didn't do it alone and I believe there are a couple of key things. One, you have to have something you can offer people. So for me, I've analyzed twelve thousand deals, kind of just the way I'm wired I can analyze deals thoroughly, this is the way I'm built, and my background, and then I've raised a lot of capital. Those are two really good, kind of skill sets to have. As you see more deals, your net worth gets higher and higher, share more attractive people from signing loans and things like that. So I would tell people that you don't have to be an expert in every area of the syndication. But for me, I was able to add value as I said, the partner I first had wasn't as strong as I am in analyzing deals, and wasn't as strong in raising capital. So that's the value I brought. He had a lot higher net worth than I did at the time for sure. He had the experience with the agencies to Fannie and Freddie and things that help. Yeah, I mean easy to work with. Right. I mean if people want to work with people that they know, like, and trust, and people think that they underestimate the part about liking somebody just because somebody is smart. I've been I.T. for example, at a guy that he was like sixty-ninth employee at a company called S&P, which is a huge company; this was over 20 years ago, and yeah I mean, he knew a ton, but he really was brash, and people didn't necessarily get along with well. So didn't matter how smart he was, you still have to be comfortable with to work. Don't be a pushover and getting deals as brokers learn that you're for say a man or a woman of your word, and you're going to do what you say you're going to do, and do not change things up just for the sake of changing things. You get a reputation where you're closer, and you get more and more deals, and that's how we get a lot of off-market deal right now.  That's nice. So tell me how it feels, to change your life thus drastically even though you were making good money before. If you were employed in I.T., and I know it's a good career but still, I mean forty-three hundred units is a lot, and I could only imagine your life with your family. Everything changed so much in the past few years for you. I want to know how it feels. How does it feel to feel like you made it, look back, and you think like, oh my God I've made it in real estate? I became very successful as an investor. I'm in a position where most people would want to be. Yeah.  I mean I think we've done a decent amount. We don't really, both my wife and I aren't very good at celebrating if we want to have victories or anything like; that which we need to do a better job. But for me, it's been life-changing in a lot of respect. So when I had my I.T. company, I slept three hours a night, I wasn't working out, and I would eat maybe twelve to fifteen calories a day. I just sat separately, and you wouldn't know it by looking at me at the time, but that's not healthy. Now there are other aspects of my life that, I work out six days a week, I eat, five meals a day. So my health is a lot better now. I sleep more than three hours a night; I have more freedom, more time to spend with my wife and the kids. And saying, do you ever feel like I made it or not. No, probably not. You're always striving to improve, not necessarily just financial, but to balance your life better in certain aspects. That's the kind of ongoing type of thing where I'd tell you, you probably never balanced your scene.  One aspect of your life is going to be probably a bit short somewhere, but you just kind of put systems and processes in place, and a business process in place. You are having people help you where you can and look after your entire life, and get your brain back. We would love to get back to, orphanages, and the sex trafficking industry. So those we've been able to donate to charities way more than we ever had before. We get people to help you get started in orphanages, and that to me is way more important than anything else. Because I never knew how I would react as they did get more income because growing up, we didn't have any real income, and sometimes people the more they get, the greedier they get, and that's a sad state frankly. So I love the fact that we've been able to change from the time we spend with each other from flexibility, I don't travel all the time anymore. I don't have people working, and people working in Australia and this is I.T. Australia, India, Switzerland, all over the world. I don't have to contend with that anymore. So I would say yeah if you look at, and say life is so much better than what it was before, but we're always striving to make it better. Better not just for us but our kids and for people that we coach, and for less fortunate people. That's more my focus now than I get. I like closing deals, but I'd much rather see someone close or first hundred-year deal than the close another hundred unit deal.  We're going to talk more about that soon. So yeah I want to say that I could sympathize with what you're saying because I felt the same when I first started making good money in life, then it was, I felt euphoric.  It was amazing, it was an amazing feeling, but after a while when you get used to it, there comes the void of feeling like your life is not complete, that there is something that is missing.  And I talked to a lot of people; you could only assume I have a podcast. I have investors and a lot of successful people, and sometimes I stay on the line with people after we've done a recording and they all say the same thing. That once they make it, then they figure out there is something more to it than success in a financial way. So people are looking for the impact on other people helping other people, donating to charities, volunteering to do some good things, becoming good people, and there is this stereotype.  On this successful real estate investor or developer or whatever the successful person that, all we think about is money, and we're greedy, but it's not true because I see it firsthand. The minute we become successful all human beings, we start thinking about what we can do for others.  It's okay that you talk about that. I just had a conversation with my partner, exactly on that, that's why I'm trying to get better. So I find that amazing. So first off I want to ask you regarding that subject. How is it you would like to improve your life on that aspect in the future, and what are your plans for the future as well? As far as the financial way, I think you're getting more people in our group that we can help and set in making sure that we still always have a strong group. People are always able to gain access to the right people to get deals and things like that. I think other aspects that are, as you start a business and you're doing it, you get consumed, and there are a lot of things that you do that is a low value, and activities, that's the way everyone kind of starts out. So I need to get better frankly with my time management. I'm very accessible. I get through everything I need daily, but I haven't done a very good job with time management. We just hired a business coach two weeks ago who is pinning me downright and making me do things that I should be doing, and putting things on paper and just living, going on vacation, a lot of the time we travel, usually for events we attend and that's okay but a little bit more of the travel, that's not just work-related. The more money you make you initially think you do. In fairness for me, it was about the money, and when I first started, I didn't know how he's going to react. But like you mentioned as you start getting better with finances things are like that. Now I look at other ways to be generous frankly there are a lot of things I do right now, and I'm going all the details or people available to help on certain aspects that I didn't know if I was going to be the person that would be generous. And it's nice to be able to feel like hey, and I'm not looking for credit, and we donate a lot of things, and people say, oh we're going to put your name on this. I'm like I don't want my name on it, not because whatever I just put my name on it. I'm doing it because I want to give to the cause. I can do that and be able to change people's lives. Friends of ours live in the Philippines, they just started an orphanage. We were their significant contributors to that last year. They have ten, at least ten kids there now, that they're these kids' lives are going to change forever because we're playing a small part of that.  So the more things I can find like that to help in orphanages in like I said sex trafficking industry, the two in general, that we gravitate too. And then just giving back to the kids more.  I have a big desire, and we haven't done anything with it. Keep talking about it. We need to do something about trying to help educate kids about entrepreneurship and doesn't have to be real estate but trying to allow them to know there are other avenues. You don't have to follow the typical path.  Now with that said, you shouldn't be lazy either like a lot of the people here right now, frankly. Right, you still need to work but you can work in different ways and smarter, and I underestimated the whole thing around networking, and that's so critical. So I think for me it's more giving back. When people do their deal in the first deal or second deal or it might be a big deal, in helping them change your life and then spend more time with family, whether it's a vacation or different aspects like that.  So I have a hard time shutting things off sometimes, or I'm always kind of on or thinking about work, and that's something I just need to work on.  So are you when you're saying you're trying to help people to make their first deal?  Are you mentoring? Do you have any mentorship program?  We do, we have a coaching program. We started eighteen months ago. Never would've thought we'd even be doing education. We kind of fell into some circumstances, and both my wife and I fell in love with it. We did twenty deals in our first year, which was like one hundred and eighty million dollars. It was a good first year and this year is going well too. And we have a big desire to help people and some people have different mixed messages about coaches and mentors and things like that, and that's fine.  I understand that, but the reality is we've had a lot of successes, and whether you need a coach or not, you need a partner probably if you're going to be in the business. If you're starting, you need a partner that has been there, done it. It doesn't have to be a coach but you need somebody to help you get through it and people that think they can listen to a podcast, read books, which is great. Don't get me wrong that knowledge, you don't have any credibility yet. So find somebody that has credibility, provide some value to them, and that's how it starts so much faster, and you get bigger.  Yeah, I agree. So Mark, what best ways to connect with you for anybody that wants to get started or wants to hear more about your coaching program.  My email is Mark@thinkmulti-family.com. More than happy to the people who reach out to me and chat and help any way I can.  Alright sounds good. So I want to thank you very much for participating in the show today. I know you're a busy man and I thank you. Keep on doing these great things that you're doing, contributing, donating, teaching other people how to be successful. That's very inspirational. So thank you very much.  Thank you for having me. I appreciate it and enjoyed it. Of course. Thank you have a great day. You too.  Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes, till next time. 

Andy Vaughan from an early age knew that he wanted to attain financial freedom as an adult. After working in the insurance industry for about 25 years, he knew he wanted to make some new changes in his life and decided to start investing in real estate. From his connections in the insurance industry, he noticed he had quite a few high net-worth clients that were interested in investing in real estate but had no desire to be a landlord. So he transitioned to helping those connections/clients to invest in multi-family units to generate passive income.    In this episode of Multifamily Real Estate Investments with Don and Eden, Andy discusses everything that happened since that decision to transition into real estate took place in 2016. Andy also shares his strategies behind the number of units he typically looks for to invest in. He will also go over his take on the Southeast real estate market, where he primarily invests and the outlook for the current market today.    Highlights:  Andy’s Beginnings in Real Estate  Southeast Current Market How He Helps Investors Create Passive Income Number Of Units He Typically Looks For In A Deal   Current Projects and Future Outlook   How to Connect with Andy Website: backnineinvestors.com  Email: Andy@backnineinvestors.com  Phone #: 318- 614-0681 -------------------------------------------------------------- Transcription  Hey guys. Today I'm going to host real estate investor and syndicator Andy Vaughan. Andy was working in the insurance industry, but wanted to make a few changes in his life and decided to start investing in real estate. Today we're going to discuss everything that has happened since that decision took place back in late 2016. What I like about this episode is that it is very inspirational in regards to the fact that Andy had no experience whatsoever in real estate, but his persistence and determination paid out. So stay tuned and let's get started.  Welcome to the Real Estate Investing Podcast With Don And Eden, where we cover all aspects of real estate investing with special attention to multifamily apartment buildings and off-market strategies.  Hello Andy and welcome to the show. Thanks. Glad to be here. All right, tell us about your day. What are you up to? Well, I'm in sunny Louisiana. Hot, humid Sunny Louisiana in August. So it's very uncomfortable outside, but yes it's at least clear here - you should see the weather in Florida. I mean we've had a lot of rain, but fortunately, there are no hurricanes at all. I'm not going to be surprised if there is one on the way. Yes, so tell us a little bit about your real estate background; how you got exposed to real estate in your story so the audience here can get to know you a little bit.  Well probably like many people I mean I just, through the years all going back to college were always interested in real estate interested in things that could produce. Some people call it passive income and some people call it residual income, but always intrigued with the business itself in general, and I can't dunk a basketball or write a song or sing a song, so I figured I needed to find another way to produce that. Also, the two things that made sense to me in college was insurance, real estate, and background golf. I played on the golf team in high school and college and then worked at golf courses. I would see these grown men there in the middle of the day at the golf course and being inquisitive I would always ask them, what kind of career did they have that allowed them to do that? So the vast majority of those guys were either in insurance, real estate, or sales of some sort. So that's what, being the deep soul that I am has wanted to play golf all day, when I'm in my 40s, so that's what got me interested in it. So it started going down the road, I guess back in 1993, I graduated from college, got in the insurance business, and then insured business now for 26 years. However, as far as real estate, I was one of those that back and forth for years, I would get interested and wanted to do it but didn't know how to do it.  I looked at like vacation rentals, condos at the beach one year, get excited about that and didn't do anything with that.  I thought I needed to get into long-term rental houses, and kind of felt that everybody had to start as a slumlord, and I didn't want to do that. I liked to play golf, I can’t imagine getting a call; I was on the back nine, and ‘hey man air conditioner went out’ whatever, so I would always talk myself out of it. So   I would say fast forward to 2016, so whatever that is. Twenty-three years after the insurance, having been in the insurance business, I was frustrated with the insurance business because in church companies changing rules, you get set up to where you're pretty successful and they change the rules on you at another agency where we did a lot of group health insurance through the Affordable Care Act coming down in 2010, then finally getting implemented in 2014. All those rules changed in sizing the groups and all those sorts of things changed, which affects the income. So I was looking, I mean I was looking for something else; I didn't know it would be real estate. However, started going down that road, I've been involved in several coachings, like just business coaching programs through the years and I was a part of one in 2015 in Atlanta. One of the guys in there was a syndicator, so it was the first time that he didn't call it a syndicator. He just said that he bought apartments and flipped them. He said he did. But that's the first time I looked at it. So then you start researching things and of course, I think everybody comes through a Bigger Pocket. I think to do things that everybody has in common, and this is either Bigger Pocket or ‘Rich Dad, Poor Dad’ right? Yeah I read it   years ago when it first came out I guess early 2000s and all that made sense, but still I didn't know how to how to get involved, and   through the years I had a number of clients that invested in real estate; several different forms from single-family housing to flips to commercial warehouse space and kind of everything in between. I had this one particular client that he had a single-family house that he had torn down, and he was going to build duplexes, he's going to be late duplexes of 16 units had the plans all drawn up and everything ready to go. Then he decided to retire and move to the beach. So he was back in town one day and one of his grandkids ball games, who happens to play the same team as my daughter. We were just in the stands talking. I ask him where he was on it, and he said that he had decided not to do it; he's like ‘you oughta do it, buy the lot from me, I've got everything ready to go, plans are drawn you need to look at doing it’. So that got me interested again. That was the fall of 2016. That's what kind of started me down this road to use the general term real estate investing.  Still didn't know which direction I wanted to do, but multifamily duplex, all that sort of thing made sense to me.   The more units you have under one roof, it just, it made so much more sense. So by not having any experience in looking at all the cost and carrying costs of development. That scared me. So I spent four months evaluating that deal and come to the realization of how much it would cost, which was how long I have to carry that cost without having any tenants paying rent. Then I kind of got scared and didn't want to do that. But, through that process, one of the guys that I reached out to help me evaluate that he was aware of Bigger Pockets. So, of‌ ‌course, get on there and start looking around and listen to podcasts. This led me to another month or so down the road, and I heard a gentleman on podcasts one day mention the term real estate syndication and they just closed some apartments. So they got me interested in going down that path doing some research with syndication, was how it worked and all those sorts of things.  So that's what I landed on as far as a strategy. There are so many different strategies out there that you can focus on. No, I don't think it is necessarily better than the other one; it's just what's better for you. What kind of fits your skillset what you're looking to do. So for me, multifamily and in syndication the way I look at it is you have lots of different tools in the tool chest right? Syndication- I think, I'm not going to say it's the end all be all, I think it's one tool. So that's where I chose to get started in learning the business of real estate, long term real estate investing.  Yeah, I mean I remember the first time that I heard about syndication I was like my eyes lit up and I was thinking to myself, Aha. That was like that moment that I realized that you could buy apartment buildings without actually having the money, right? Yeah. Which is not surprising because it looks like in America you can do whatever you want. You could buy anything if you don't have anything. So I mean I think that's amazing that you started in  2016 when you first got back into the real estate investing. Kind of gave it a second chance if I'm getting it right. So now we're in the summer of 2019, and you're already in control of how many units?  Well I mean I'm on the general partnership side of, I don't even know. I would have to do the math honestly. Let's see, give us a ballpark. Six hundred and twenty-six units. We got one deal that set to close the next couple of weeks. We're supposed to close last week, but the seller had some issues with their current loan that they had in place or whatever, that we've got to get taken care of. So, after that closes, we'll be at six hundred and twenty-six units.  Okay, so when you say when you're saying we'll be. Who exactly are you talking about? I believe it's a different partnership. I don't I'm involved in four different deals. So full and all four of those deals have various partners, different partnership arrangements. So it's different on every project. The first project I got in it was it's myself and one other guy, that was a thirty-six unit. That's kind of where I got started and then from there as you go to more significant projects, you'd have more people get involved.  So when you got into your first deal of the thirty-six units, obviously you're not bringing any experience, just the desire, and motivation. So how did you how were you able to get on the GP side of that acquisition?  That particular one I'm trying to think back here. I had been to a couple of conferences and boot camps throughout 2017. In early 2018, I bought, probably three different tools to help kind of analyze the deal. Help with run all your numbers and things, you just shot, pretty much spent 2017 educating myself, through online courses boot camps things of that nature, reading books, obviously listening to podcasts. So coming out of a boot camp the first part of January last year, I decided that I needed to find a mentor or somebody that was actively pursuing deals and doing deals that I could learn from.  So that's what I did. I spent probably next month and a half looking and deciding whom I wanted that to be. So I found a guy that I liked what we're doing here. We had a Zoom call set up once every two weeks. It consisted of him, myself, two others, and we were just all learning the business. I mean how to analyze a deal how to know how to build relationships with brokers how to determine what markets you're looking at I mean everything that you have to do in this business. One of the students when I got involved though, already had a deal under contract and just 36 units out in Greensboro North Carolina. I got involved in that at the end of February and so fast forward to the first part of April, he got on the call that day and he and some friends or family or whatever that last-minute maybe decided to back out or not invest. So he said he was going to be a couple hundred thousand dollars short. I liked the Greensboro area already I mean that was one of the markets I was interested in. I asked if you would send the information to me about the deal and ask him if I want to pursue it if he'd be willing to partner on it. So we spent the next week or two going through that deal and looking at everything suddenly jump on board with him. So that's how the first deal with the 36 unit came about. It was the partner I mean that's I guess, that's the name of my story is, partnering. You don't have to do everything so  A to Z. I think if you find, for me anyway, you find good partners and learn from them as you go. I mean it just everybody wins right? So team together everybody.  So let me see if I'm getting this right. This guy that you were partnering up with, they got the deal, they did the underwriting. They found it through a broker relationship or whatever it is that they did over there in Greensboro, and then you partnered up by bringing the money on that specific first deal right?  Well, not all of the money. I mean he had already raised a good bit of the million together. We had raised, I mean what he thought was going to be a couple of thousand dollars short, he ended up being 400,000 dollars short altogether in that first deal he and I together raised right at eight hundred thousand.  Okay, so you helped him with raising the 400,000. He was short. So how did you go about that? Where did you have the connections?  Well, I had already I mean 26 years in the insurance business through the years. Number one I had lots of clients that were already quote-unquote real estate investors or landlords or whatever you want to call them. Then number two I had a lot of other clients, note high net worth and top income-producing clients, a lotta professional whether they be engineers, physicians, things of that nature; very interesting system in 26 years, you have lots of conversations and friendships. So yes, I knew that I had many people that were very interested in investing in real estate quote-unquote, but with no desire to be a landlord. So I knew that I could call you and talk and have conversations with them about, ‘hey guys I found a way that you could invest passively in real estate without having to deal with tenants and being a landlord’.  Yeah, also pretty safe. I would say it's safe to invest in apartments when you're on the LP side because you're getting a preferred return and that's going to come out anyway. So I mean you could always lose the money, whatever investment it is you're making but I would say that if I had like five-six million dollars that I was looking to invest. I think I would put everything on real estate syndication or had the majority of it on real estate syndication. So I could see the benefit for a passive investor. So I think it's beautiful that you seized the opportunity of everything you've gained so far in your life even though you were not in the real estate business, but you have realized that investors and people that have money and people that are interested in investing, so I love it. You seized the opportunity once again to an estate end, and you knew how you could use your experience and your skillset and tools to get what you want. Now you're in a better place, and I think I truly find that amazing. That's a beautiful story, so tell us more about that 36 unit, give us the details of that deal. So what was the value adds and what was the common?  This one is kind of you to know; it's that story that I guess we all kind of look for that says, it's an old tired property in a great area. It was in an area of Greensboro that you see as it sits next to a huge bank, it sits next to an assisted living facility. So then right down the road like maybe an eighth of a mile in, a Starbucks, a Chick-Fil-A, a Panera Bread, Harris Teeter grocery store, kind of a shopping center. It was a 1970 construction, so it was old in the interiors. Now next year the property looks great. I mean the owner that we bought from, I mean he'd redone all of the asphalt outside on the parking in the exteriors, it had two euro roofs, the exterior does look great. It's the interiors that were just the 1970 construction. So there they're compartmentalized apartments, real small, choppy kind of dark dingy and they just really haven't been putting money into the interior renovations. Yeah. We analyzed the market as far as our competitors in that area, and the market rents even though we were smaller. I don't know, a quarter of a mile down the road the other direction is an over 200 unit apartment complex. So we don’t have the same amenities as them. However, you get real comfortable as to what the market is, and what kind of rent they're getting, and ripper square foot and all those sorts of things. Then see how far under market this property was. That was the plan, to go in there and spend money on interior renovations and increased rent.  What's the premium you've got on the rent? Well, it's turned out to be a good chunk better than what we thought when we underwrote it. For instance, when we underwrote it, it consisted of twenty-four two bedrooms and twelve one-bedrooms. So at the time that we underwrote the property, we were planning on crossing the six hundred dollars a month for the one-bedrooms and seven hundred dollars a month for the two bedrooms in year three. It was kind of two bedrooms. Were they’re two-one or two-two? No, they're all two-one and one-one. Yep. That being said, let's say we closed at the end of June last year and started our renovations and leasing up the renovated units, and I mean we're already, even the ones that we're not renovating, like full-blown renovation, just going in there and freshening up we're achieving seven-twenty-five on the two-bedroom, and six-twenty-five one-bedrooms. Wow. So yeah we're already leasing up to above year three numbers on that. It is just a matter of our most significant learning curve is on a thirty-six-unit; you run into issues with property management. That's big, with it being at home, we don't live there, so you're relying on third-party management and finding the right property manager to manage that. So yeah.  So let's get back to the rent before we move on to the property management. I want to clarify the right. So you brought it to seven-twenty-five and six-twenty-five even though you forecast at six hundred and seven hundred, and that was after the renovations of a few units, or just the way it was? Yeah, I think today we've rented renovated so far probably six-seven units something like the players' thing.  You're saying okay that the owner and I hear about that a lot, the owner of the property did not raise the rents because they just didn't.  So sometimes they just don't know that they could right? Or they get in touch and get close with the tenants, so they complain honestly about this particular deal; what the issue was I'm going to say the owner so much as it was the property manager that he had, he just didn't believe that he could push the rents.  They were good at what I would say bringing a D class property up to a C class, but they were only used to dealing with C to C, C minus tenants if that makes sense. We planned to push it to with the location that it was in, we thought that we could renovate, at least some B tenants in there. Do it that way but so we had a difference of opinion on our demographic, our avatar if you will for our tenant.   So what was the rent when you guys got into the deal?  I mean we had, some of the one-bedrooms were renting for as little as four-fifty-five. Wow... And the two-bedroom, we had some two bedrooms that were five-twenty-five, five-fifty. The average rent across the thirty-six units we bought it about five-sixty. We've pushed the rents now. What we did was we know neither one of us having experience with Fannie or Freddie, which means we had no experience with a property manager. Then Fannie wanted to see that the property manager that was already in place, stay in place even though we had a difference of opinion on the business plan. So that was the big issue. We closed the end of June just call July 1, June 29th is what it was. So we finally got it, proof from Fannie to let them go, let the property manager go. And we changed property management firms in November. So from November to June of this year, we were with our second property management firm and there again to a small property management firm. It just, everything's bottlenecked in there. Sort of like every decision had to go through one person and nobody was given, so if they're out of the office or whatever nothing happens. So it just a lot of issues with, project management, issues on timing, budget, issues on the renovation. Just all sorts of issues with them. So long story short we changed to our third property manager June of this year and we just decided to bite the bullet with a larger firm, that I mean they manage over ten thousand units. Yeah obviously we're paying more for them, but we know what we're getting. This was the firm that we used during the due diligence as well it's just that we're probably the smallest apartment complex they manage. Yeah. So we're actively trying to find other deals there in Greensboro to add units to scale.  Yeah. So what is the average of the rents right now? You said it was five-sixty, so what do you think about the average right now? I'd have to pull that information and look.  I mean we're probably the six-fifty range, six-seventy range, and the cap rate that you bought it for was when you bought it for what the corporate calculation based on it was like, six-point six caps, six-point six. So essentially, let's say you sell it on or refinance that property on the same cap rate. I just want our audience to understand the value add and the amount of money that you guys added to the property's value. So you think it's safe to say that you've got ninety-nine dollars for each unit in value-add? Right. And that's thirty-six units? Right.  The way that we've got cash out if you want to go through the math, but I mean the way that we are projecting it is for the number one, they didn't have the prior management everybody was on a month to month. So there were no long term leases in place. So yeah that's what the new firm is not only out there leasing up and getting twelve-month leases in place but getting rents, getting the rents up to the market to where they're supposed to be. So, yeah I mean with all the value add and everything I mean we ran it probably a month or so ago and looked at it. We're hoping we'll get everything in place in another twelve months to eighteen months from now. We've got it projected that it should be worth two points three, so that would be about six hundred thousand dollar value.  Yeah. So from my calculation, I just got at five hundred and eighty-nine thousand and that's before you even reduce the expenses which I'm sure you could. And what's funny is that you're saying all the things that are really like, the jams that you're looking for when you're after properties between the 10 units and 50 units. Which is, by the way, it's what I'm after at the moment. What you're saying is that all the tenants they had a month to month leases. And that's already a flag that as an investor, somebody is trying to buy multi-families, and that if all the tenants are on a month to month basis then that property is not being managed correctly. So there's always a value-add and that's the key. That's why you're looking for and I think that is why I'm going over with you the deal and the numbers, because I know that when you're first starting to look into multi-families and especially if you're doing a transition from resident to residential real estate than it's very difficult to comprehend what it is that you're looking for. Right? Because when you're looking for, if you're looking for a property single family that you're trying to renovate or flip, or fix then you're looking for a distressed home, and then you just try to get a discount. When you're looking for an apartment building than what you're looking for is something that's not managed correctly, and that is exactly what you're talking about. I love that, we can see it as we break down the deal. I'm sure our audience would appreciate it, and that is why I'm doing this and you probably learned so much in your first deal right? Yeah. And then actually, I mean to that point is what you're looking for. I mean that's the big thing right? I mean being where you can communicate with a broker exactly what you're looking for, in the exact location, the size, the vintage, the unit mix the whole deal you want. You want to know what you're looking for.  And to that point is, I think today you hear, you just talk to some different people, and you hear I'm staying away from the larger properties, the three to five hundred units. Because of your competition with institutional investors and things of that nature, conventional money and yeah everybody. Well, I'm going to focus between one hundred and a hundred fifty units or whatever, but then you got tons of people like us running around in that space, and there's so much competition especially when you look at markets like Atlanta and Dallas. So it's coming, what you just said I mean, so we've kind of changed our thought process with that, and hey, we've got thirty-six units there in Greensboro. So, instead of looking for that hundred and fifty to two hundred units, why don't we find four more thirty-six units. Yeah. There's a lot less competition for thirty-six units; it makes sense obviously because all these property management headaches you have at that level. But if you put four of those types of properties together, now you're closer to one hundred and fifty of their units, and a lot more manageable. You get good property management and all that.  Definitely. And what else I think everybody is talking about in the podcast and on the shows. They're talking about how they've done the big deals, the ones over a hundred, and how it's the best thing to do. But sometimes you hear it like an episode on somebody's podcast and that episode is from two years ago or one year ago and the money's already changed. Now it's more difficult to find these things. So right. Yeah. So right now when, as investors when we look at the market we can never see what it's doing right now. We can only look back and see what it did, but we never know what it's doing. So that is my perspective too. I share this perspective. I'm looking for, I know you, we've already discussed in yours, you said that you're going after this. You have a deal that's about to close, it's more than a hundred units and I think that is great. But I'm very, I feel very confident about what you said before about finding properties that are in the range of the thirty units, forty units right now because there's less competition. You could find things directly from the owner and not necessarily through a broker, which is what I'm going after and that's my strategy for dealing with the situation. That there's so much competition for multifamily right now.  Right. Yeah I mean I believe that there is no right or wrong way necessarily to do it and there are so many different tools. I mean we're talking about syndication whatever but, I mean obviously, if somebody has them. Wherewith all or if you're able to work out a deal with an owner where he'll finance it for free. You mean there's many different to rules? It doesn't all have to be pigeonholed into this perfect hundred and twenty unit value, it adds to class C property and Class B area and we're going to syndicate it.  Yeah, it was simple.  Yeah, that's right. That's right. So and that's one of the things that I love about this business is as you expand and grow and partner in different deals, you get to meet people from all over the country and learn about different markets. You can even do some joint ventures rather than syndication. I mean obviously, syndication is expensive, you got all the attorney's fees and all those extra reporting to investors and all these types of headaches and stuff that you don't have to deal with. Yeah. If you have three or four guys that can take down forty units.  Yeah. But there's more reward obviously when we talk about a hundred units.  Sure, but there again, that's what I'm saying. I mean I just don't think there's a right or wrong, it's just what is your strategy right now. It's like you said we can always look back, and obviously, there's been lots of people that the syndication strategy has done very well of less than five to eight years.  Yeah, I think you just need to focus on your strategy and just stick to it. You need to come up with your idea and the way that you see things and just to continue doing it until you find something. If it's too hard or you find out that it's not something you can do, then yeah maybe it's a good idea to change the strategy but not to quit. Right. Right. But I do agree that you've got to have your way and do things the way that you see them. I'm not saying that it's impossible to find a deal of a hundred units or more, I'm just saying that that's not a strategy that I chose. I'm aware that there are deals out there that you could find, even two hundred units. I've heard about a person that bought two hundred units from a mom and pop. Believe it or not. You see it's not even a sophisticated seller. So how did he do that? It's a low chance but it happened. That's what I like about real estate everything is possible. Everybody has their way, and I think your way is remarkable because you were looking for the knowledge and you just did actions and you took stuff into your own hands. You went there. You went to a coach and you partnered up with people and you involved your connections, and so you made it happen. I think that's beautiful really. Well, thank you. Yeah. So what are the best ways to connect with you if anybody's trying to partner up or do things or even learn something?  Well, my web site is back nine investors spelled out, so backnineinvestors.com. You can reach me there. Email address is Andi@backnineinvestors.com. I'm giving up my phone number I don't care, my phone number 318- 614-0681. I’m on LinkedIn, Instagram and Facebook and all. I like that you give out your phone number so people talk to you because this is a business of people and networking. So if anybody listens to that and you guys want to connect with Andy it's a great opportunity to talk to an investor that's experienced and knows what they're doing. Yes, that's one of my favorite parts honestly. I was at a conference a couple of weeks ago in Dallas and we went out to dinner they were looking around the table, there was a guy from Oklahoma City, Columbus Ohio, Rochester New York, Boston and myself from west Louisiana. So now you get to meet all kinds of different neat people who build relationships and who knows, I mean help out in the very least, maybe partnering on some deals together with him, so yeah.  And sometimes your phone rings and you don't know. But that bet could be one hundred thousand ringings right there and I missed it. It happens in real estate though. So yes Andy thank you very much for participating in the show. I want to wish you the best of luck in your future ventures, and thank you. That was an amazing insight.  Thanks for listening to the real estate investing podcast with Don and Eden, stay tuned for more episodes. Till next time. 

After a strong career as a civil engineer, Hawaiian native, Lane Kawaoka, decided to kiss corporate America goodbye and turn towards a stronger long term wealth plan - investing in single and multifamily units. After purchasing his first property in Seattle, Lane quickly realized what he needed to do to bring better cash flow to his strategy and invested in eleven different single-family units is not as large cities, such as Birmingham, Alabama, and Indianapolis, Indiana. Lane has a different business model where he focuses primarily on getting the money for the deal, and this way he joins on the GP side of the syndication.  In this episode of Multifamily Real Estate Investments with Don and Eden, Lane dives into how he conducts business all over the country - investing in multifamily units in different regions of the United States and more specifically how he anticipates what the markets are like so he can find a good deal. From there he will detail his unique business model of finding deals that no one else is really putting into practice and why it generates such great success for him and his partners. Lane also talks about why he thinks self-storage units and mobile home parks are a great start to investing in real estate and why he is focused on that for his investment future. At the end of this episode, Don also records an outro that explains how the entire syndication process works.   Highlights:  Lane’s Beginnings In Real Estate  His Unusual Business Model  How He Analyzes Markets Throughout Us Why He Believes Mobile Home Parks Are A Great Investment   Current Projects And Future Outlook   How to Connect with Lane   SimplePassiveCashFlow.com Simple Passive Cashflow Podcast with Lane Kawaoka    ----------------------------------------------------------- TRANSCRIPTION   Hey guys, today I'm going to interview Lane Kawaoka - a real estate investor from Hawaii and he is also syndicating deals. What I like about him is that he's going to educate us on a different way of making passive income from multi-family and other real estate's syndications without ever finding the deal, but only finding the money. Now I realize not all of my listeners are really educated as far as the syndication process and how it works. So I decided to add a small part at the end of the interview, at the end of this episode really, to kind of educate you guys about the process so that you would know exactly what we're talking about because these are some critical advice that he gives and I really want everybody to understand. So I hope you guys are excited and stay tuned.  Welcome to the real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.  Hey, Lane Welcome to the show. Thanks for having me, Don. Yeah. So how's the weather in Hawaii?  Perfect as normal little hot, but not complaining.  So I live in Florida and that's where I want to live. But right now as it's the summer here it’s not that pleasant, there's a lot of rain, hurricanes, the Internet is bad. I'm pretty sure you're having a better time than I am the other day or just in the office all day long looking at deals.  You're so right about that. So how about you tell us a little bit about yourself. For our audience to be able to get to know you a little bit.  Yes. I used to be an engineer, graduated from college in 2007, but none of my family was in real estate. They thought that the tenants would just rip the house. So I kind of grew up on this linear path that goes to school, study hard, get a good job, yeah engineer of all things and work for 40-50 years and maybe retire, but that kind of changed for me when I started to work as a construction supervisor and my first job out of college. The job kind of sucked. I didn't like it at all. I was traveling all the time, but I got paid a pretty good salary   80-90 grand a year wasn't bad. And I was able to buy a primary residence up in Seattle which I'm sure you guys talk a lot about that. That's not exactly where you want to invest for cash flow, but I didn't know any better start to rent it out and for a young 20 something-year-old kid. It was a lot of beer money when the monthly rents were twenty-two hundred a month. And the key idea the mortgage payments were sixteen hundred dollars a month. Then at that point, I realized like shoot I gotta keep doing this over and over again and that's my way out of this crappy job and to get financial freedom.  So, you bought some more single-family units afterward right? Yes, I bought another one in Seattle, but at that time I was in a bunch of podcasts and kind of learning this concept of yeah you don't want to buy A class rental. You want to buy more B or C class. And so I bought a nice class rental was a duplex, but at that time it was   2011, 2012 the prices were starting to come out and I was realizing that wasn't cash-flowing. That's where I learned the concept of you don't buy properties and probably markets like Seattle, San Francisco, Los Angeles, New York, Boston you look for more of these secondary markets like Kansas City, Memphis, Indianapolis, Little Rock, Jacksonville, Birmingham kind of those places are. Today tertiary markets so that you can buy more for cash flow as opposed to appreciation which is sort of gambling and a little dangerous in my opinion especially when it looks like we're sort of getting to the top of the market.  Yes, I agree. So, what was the stage where you decided to move from single families to commercial real estate especially multifamily?  Yeah so after those two rentals - all I bought the other one of these turnkey rentals in Birmingham. So, I think the purchase price is like 80 grand. And the rents were like eight hundred or so. Right at that 1 percent rent to value ratio and I had some pretty good luck with it. So, I sold those two Seattle properties and did a 1031 exchange for nine out-of-state properties and then they picked up another property in Pennsylvania. So in 2015, I found myself having 11 rental properties and at that point, I was operating off of this mindset of hey I'm just going to buy a whole bunch of these single-family homes just get another 20 I'll be financially free right. Thirty properties cash flying at 300k dollars a piece that's about 9-10 grand passive. But then I realized with those 10 rentals I was getting an eviction or two every year. So that's when I kind of walked down this path this logical path of becoming a multi-family investor.  That's cool. So, I know you have a different business model when it comes to multifamily apartment especially when it comes to syndication. So tell us a little bit about that business model. What's so special about it and how do you go about it. How do you do it?  Yeah. So, I mean, I started to do this podcast and if at first, it wasn't very popular. Like most podcasts die. But I kept doing it because my motivation was that in the first like the podcast was about, hey educate people buying a single-family home, turnkey rentals, or buy properties remotely. Just because a lot of my friends were asking me this and I was just so tired of saying the thing over and over again to people and nobody does anything. But throughout that process people kind of got to know me and they realized like alright this is cool and nice you're going into these multifamilies, these syndications and private equity deals. Can we just copy what you do? So that's what I do today and every deal I go into I typically bring in about 50 or 60 investors or three million dollars follows along with me.  That's very cool. So you're focusing on raising the funds rather than finding the deal or you're doing both? So if you've kind of back up to 2016 I joined an apartment investing group and you spend like 30 grand to get in and get the training. But I went in this because I wanted to be the operator I want to be the guy who is running this 200-300 unit apartment complex.  So I went and got the training for it. I got the coach and learned how to underwrite deals and for about 18 months I must have analyzed a couple of hundred properties and I realized that absolutely none of them made sense. Most of the garbage is out there especially through brokers and Don you kind of mentioned that most of you guys are looking for properties, not from a broker which I think is a good idea because even me and my partner we had like 30 or 40 units in their name, but nobody cared. If you have a bunch of single-family homes they only want to know if you close big deals. So I wasn't getting anywhere in terms of traction if there was one saving grace being able to underwrite deals pull the panels or rent rolls do my analysis. It prevented me from buying a lot of deals in that from 2016-2017. And at that point me and my partner were like ‘hey we're not getting anywhere with these brokers’ which I'm sure a lot of you guys can sympathize with. And because it is super hard and so we're like well let's just go as a passive investor into some deals and build our track record and make us look cool on our resumé.  So we went through a few deals and then we had 300 units to our name, but then I realized like ‘hey this is pretty easy just being a limited partner, making 10 to 15 percent on my money and then not doing a thing like this’ is pretty good and my net worth at the time I was getting to a point where hey if I die if I just invest my money at 10 or 15 percent I'll be financially free in the very near future. Definitely, well before my 40s. So why would I want to take on all this risk putting down all this hard money on these bigger deals and I'm going down that route.  So it's always the question we always want to do the bigger things. Even though we could make good money by just investing our money inside other people's deals but we want to be the people that actually operate the deal.   That's the thing right. I mean but ego aside. Right.  Everybody wants to do big things or whatever, but it comes down to your net worth. Like if you're under half a million dollars net worth you're broke. I mean you got to be the guy operating there. You can't be a passive investor. You got you gotta have money to invest as a passive investor. So it's just more of a math equation kind of moving past that critical mass point or I could be a passive investor and just sort of these single-family homes and those rentals got me up to that point so I could switch that just instead of talking with brokers and finding my deals. I started to go out and network with other operators and to go in as a big name partner on these deals and just got really good at underwriting those deals because I did it as a sort of pseudo operator for a while.  I could look through all the garbage and all these pitch deck deals because I've been in Dallas trying to invest my own money and so it all kind of came together where my investor list wanted to know what I was investing in and I was kind of looking for deals for myself.  So far we've closed on about two hundred sixty million dollars worth of properties and 26 units or twenty-eight hundred units I think I don't really count anymore.  Who counts. Yeah. Yeah, I got six hundred after a thousand, that just sounds a bit ridiculous. I just sound like a jackass.  So you were just getting into these deals that other syndicators had and you were just investing as a passive investor and then you decide that you have the connections with other investors that are looking to invest. So you could get on the GP side of the deal by just being the person who brings the money in the right. Am I getting you?  Right. I mean I'm very valuable when I come into a deal. I bring in three million dollars of investors with my great relationships. It’s a big problem especially being in some deals that don't go as well.  Investors start to get very whiny and they start to ask a lot of questions and some of them may even sue you. So those relationships are key and I think a lot of newer investors lead investors don't realize this. So having relationships with all your investors is very important and not to mention that that's the S.E.C. protocol you need to have your pre-existing relationship with all your investors and you need to know every single one of their financial pictures intimately.  So now I go in as sort of a sub syndication and bring in my investors and my investors want to know that they have somebody on the inside somebody who is pulling the strings on the management team and a lot of times I've been in more deals than the operators at this point, almost like 20 something deals. So I bring in my insights I bring in my contacts best practices from other deals. But at the end of the day I don't I'm not I don't want to be that person managing the manager on a week to week basis know in my opinion that's trading time for dollars. That's not the highest best use for my time.  Ok, so you're giving some critical advice here which I love. So the first thing that you're saying is that you're getting in all the deals that your investors are getting into. So they know that Lane here, that we trust Lane, and he's got experience and he was involved in 20 deals or so and he's investing his own money. So we know that we could invest together with him because we've made money with him and we have a great rapport with him and we trust him. So that's the first thing that you do but the other thing you do is you've got to screen out all these deals coming from syndicators must have heard about you and your connections because a lot of people are stuck because they don't have money right? So then you have to screen out the deals between all the syndicators and you've got to pick the right one for your investors and yourself. So how do you do that?  Well it's a simple process of I mean it's just no different than getting deals from brokers or figuring out deals from wholesalers are good. At the end of the day you grab the pen, you get the rent roll and you put it into the analyzer and you analyze the paper yourself. That's half of that right. The other half is building up a network of other past the best serves so that the operators because I don't go into a deal unless I know I have a strong relationship with somebody who has been in their previous deal to bet that expense.  Yeah. So how often do you see syndicators that are involved in bad deals? Ones that don't have any chance of delivering what they're promising to their investors.  Well, I mean quite often. I mean it's kind of like syndication. They're kind of like airplanes right. When they take off everybody's all happy, but nobody knows if it's taking off with a quarter tank of gas. When I go into a deal I want to at least know we have enough fuel to get there.  Yeah, I see so that's your criteria. Your check to see that the plane is not going to crash.  Well, I don't know. I don't know if it's going to crash or not. Nobody knows, but I want to make sure it has enough gasoline to get there and metaphorically what I'm talking about is it underwritten the right way or are they using these loony projections on rent increases per year, the reversion cap rates are too low, or if the rent increases just too aggressive? Okay, but let me try to understand something. So when you're underwriting a deal you also have to get to know the market. So if you're working with syndicators from all over the United States sometimes they would show you deals from markets that you don't know you're not familiar with. So how do you go about getting to know the market so that you could understand that their underwriting is done correctly?  Well, every day where the rubber meets the road is on a few cells on a spreadsheet. Different locations are underwritten a little bit differently. For example, Dallas is a very hot market these days you might underwrite it for more than 90-92 percent occupancy whereas Oklahoma City is not the case and you might underwrite it for a maximum of 88 percent occupancy. Now, of course, there are a lot of other boxes on the spreadsheets that I might play around with based on the market, but those are some of the levers that you pull. And where do I get some of those numbers from? Well I just call up some of my buddies who are in those markets and I ask them what they're using at the time and they level and normalize based on what other people are using.   So it's all about networking, you don't know anything about every market that the people in every market so that you could ask them?  Right. Right. But it's the same it's no different than like me asking you well hey what's the temperature in Florida like I don't have a clue what the temperature in Florida is, but I know what it is relative right to Hawaii or California. Same thing.   Yeah. That's a very smart perspective. I like it a lot so I know you've been looking at other asset classes recently especially self-storage sites and mobile home parks which I've been hearing a lot of people talk about recently. So could you tell us a little bit more about that? What exactly are you looking at and what are some of the opportunities that you see over there.  Yeah. So I mean multifamily don't get around as a great asset class right. The population is increasing and the whole workforce housing story. And then a lot of people like to get into multi-family because of great financing options. In theory, you could just get a good property manager and they just run the show for you. But those are the exact reasons why you shouldn't do it because everybody and their mother is syndicating multifamily deals these days and very few people are into the mobile home park space. So from one perspective, you're kind of looking for an investment that is a good investment. Which mobile home parks and what they found they are but from another viewpoint. You're looking for which one has less competition and this is where mobile home parks vastly overpower what they found the apartments. If I were a new operator today I would do a mobile home park investing just because there is a lot less competition out there for it. Part of the reason why it's kind of a dirty asset. Most people have a knee jerk reaction to it like they're like I don't want to own a mobile home park, a trailer park trash type of environment and everybody who's own single-family homes gets the renter mindset of a renter in that environment and they're like all of this. It's a logical progression to go to multifamily but not a lot of people have lived in a mobile home park. So again it's a lack of competition.  So, what are the opportunities or more correctly the value add opportunities that you see in a mobile home park?  Yeah, I mean it's no different than apartments or says family homes. It's a little bit nice lipstick on a pig but a lot of it more like management plays. There's a big increase in the amount of community and that's where the property manager comes in with the leasing getting more systems in place improving the community because the nice thing about these mobile home parks is yeah you can have one business model where you rehab the existing units but you're trying to get to a point where the tenants on their own houses. Right. So if a tenant screws up property just like how they screw up a single-family home or they screw up an apartment complex in a mobile home park when it's their property, well, that's their problem as a mobile home park owner you want to get to a point where you just on the concrete slabs and people pay you the rent for that lot. It's really hard to screw up a concrete slab.   Yeah, that makes a lot of sense. So where do you see yourself in the next 10 years as far as real estate investing, what are your goals and dreams for the future? You are still in your 20’s right? No, I look 20 but I'm a lot older it's the Asian thing or something.  Thirty-three. Oh, you must be using some good anti-aging then yeah.  Well, it kind of sucks when you're in corporate America right. Because you look like a little kid. One of the reasons why I quit my job five months ago.  Well, I thought to do somebody that they look younger is always a compliment.  Yeah. I mean, I kind of realized that like five years into my career - probably like seven years into my career and at that time I had like five or eight rental properties and like somebody told me at work to go grab these boxes with the interns. And I was like Man I've been here for like five-seven years don't tell me to go grab some boxes so then I realized at that point this is how companies are it's how much white hair you have. It's funny. Yeah. But yeah. So to answer your question, yeah and let's get back to that.  What's going to happen in 10 years think in the next I think in the next couple of years.   I'm going to write out this mobile home park because I feel like it's a little bit better cash flow than apartments. It's not as great appreciation play. But quite frankly I'm not looking for appreciation. I'm looking more for cash flow these days.  I stay away from the development deals and I think I'm going to be doing this mobile home park for the next couple of years of course still like cherry-picking the mobile home parks or the multi-family apartments because there are still big deals out there you just need to know how to analyze them and figure out the good ones from the bad ones. But two years and beyond. I think I might phase-out of real estate and maybe go to something more recession-proof or not correlated asset to the economy such as life settlements or something like that when you buy policies the people who are going to die. I mean there's nothing more guaranteed than death and taxes right. Yeah definitely. Ok so now I want to get back to the mobile home parks again just one last question. So when you look at a mobile home park what are you looking for? What are you looking at? How do you have a deal? Yeah, I mean, I don't know yet too much. I mean I'm still learning the asset class. That's why I'm going to go into parks that are already stabilized so eighty-five to ninety-five percent occupied. I'm just going to buy existing lemonade stands that are cash flowing? I learned it from that. I mean that's it but it's no different than an apartment. Really. It's just I think the key difference is property management. They are a lot stronger. The key employee part of this business.  I had a guest maybe like five or six episodes before and he said something about adding a value add to a mobile home park by just cutting some weeds out and just clearing some more space so that you could lease more units or you could do small storage for people to put some stuff they have like boats or cars or stuff like that, so that's how you could get some more value-add and you could increase your rent.  Then we went over the numbers together and I think it was Paul Moore one of my guests here and we went over the numbers together and I was shocked by how easy it is to increase the value of that park and I was actually starting to look at them myself and asking people what they know about them. So I was looking up I use Reonomy if about it but I use it it's very the interface is very nice and I started looking up the mobile home parks here in South Florida which I'm not really sure I want to invest in them yet because of the hurricanes and everything you're people they want to have.   That's exactly why do you want to own them because that 10 if you if you get to the point where the tenant owns the homes I don't care if the tornado or hurricane takes the target but you would think but you would think that maybe now when there is a big hurricane make almost every year that people would just maybe prefer not to move their homes here so maybe that the demand is decreasing.  I don't know. See I don't know as much as I know about real estate. There are so many things said I don't know. And so I want to do some more research before and try to understand exactly what's going on because people are talking about mobile home parks right now and I have to say it is interesting and you're talking about it and then people say it's like the next big thing right and apartments are already overheated but they're still buying apartments and you rarely hear about anybody that's buying mobile home parks. So it's kind of confusing. Everybody's saying different things. Right?  Right. I think I will talk about a lot like psyche. He has a saying there's two there are three sides to a coin. There are people who are on heads or tails right. What people normally think that you should buy multifamily you shouldn't buy multi-family, you should buy a mobile home park, you shouldn't. But there are investors out there that have a spreadsheet and they can put the numbers into the spreadsheet and those are the guys who live on the edge of the coin. Good or bad market. They know what the deals are. And I think that's the key is figuring out being able to analyze the properties and that's going to require you to go find a mentor to teach you that too and then go doing that for yourself. Because numbers don't lie. People do.  I could agree. Numbers don't lie. People do. So maybe I'm going to make that the headline of this episode. Who knows? So Lane, really it was a pleasure talking to you to do it today you're so smart and you have such beautiful insights. What are the best ways to connect with you for other people that are listening to that show?  Yeah. My podcast is Simple Passive Cashflow mostly for passive investors, first money podcast about single-family home, turnkeys. But then that's when the story starts changing to these private equities and we talk about all kinds of stuff like internet banking and that kind of stuff and have a whole bunch of articles on my website simplepassivecash.com. Wonderful. Ok so thank you very much for coming to the show and I hope you're going to enjoy the beautiful weather in Hawaii and stay in touch, I'm sure we have a lot more to talk about.  Yeah yeah. Thanks for having me.  You have a great day. ------------------------------------------- Syndication Process by Don  So a real estate syndication is essentially the operator of a deal. That's a person that's trying to facilitate a deal in real estate typically commercial real estate. It's usually the bigger deals but it could be any type of deal it could be one million, it could be 10 million, it could be one hundred million. So the syndicator what they're trying to do is they're trying to raise the down payment to the purchase of that property. So let's say that we are buying a property for one million, let's say this is the purchase price. So the syndicator is going to need at least two hundred thousand to get a loan so that they're going to get 80 percent of the purchase price from the bank. They still need a down payment so that the 20 percent and that they raise from investors.    Now, what's in it for the investors? The investors are making a preferred return which is a return that they're going to make anyway using a PPM, also known as a private placement memorandum. And then they're going to make that preferred return anyway every year. So if they invested a hundred thousand they're going to make eight thousand every year. And they're also the partners of the entire LLC that is purchasing the property and they are known as limited partners which means they're not taking any decisions of operating the transaction doing the value add plans and all of the above. But they're just making the money. So they're just passive investors making the 70 percent, of course, based on the amount of money that they had contributed. But they're going to make that limited partnership return and also the preferred return that they're going to make every year.    So the syndicator is going to make 30 percent of the entire LLC but he's going to be a general partner. So he's making decisions, he's implementing the value plans and he's doing all the work of assembling the deal. And that is what he's making. So a lot of syndicators they would also make acquisition fees so once the deal is completed then they're going to take between two to five percent of the entire purchase price of the property and they're going to take that in a check from the money of the investor. So the money of the down payment which is why you have to raise a little bit more than 20 percent also for a cap-ex and other things but that's pretty much how it works. Of course, you have to remember that sometimes the numbers change. I've seen general partners that are 30 percent and the limited partners would be 70 percent obviously but then I've seen general partners that are 25 percent /75 percent limited partners and so it changes. I've seen acquisitions fees for one percent and I've seen some 4 5 percent. So the numbers are negotiable. Every syndicator has its secret sauce. So what I would say is average is 30 percent, General Partners 70 percent, Limited Partners and a preferred return of 8 percent and then an acquisition fee of 2 percent is what I think is the average. So I hope you guys enjoyed the episode and remember two episodes are coming every week so stay tuned.    Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time. 

Danny Randazzo is a man of many trades. With over half a decade of financial consulting experience advising multi-billion-dollar companies, Danny and his wife, Caitlyn, also a highly successful entrepreneur, sought out a future where they didn’t need to trade time for money anymore. Thus they invested everything they had and bought a commercial building and continued to grow their real estate portfolio eventually partnering with two other business professionals to form the company they now operate today which currently holds a $146 million portfolio value.     On this episode of Multifamily Real Estate Investments with Don and Eden, Danny and Don discuss the importance of a partnership both in personal life and business. Danny will also talk about raising money, finding good deals in today's market and some off-market strategies.    Highlights:  Danny’s Beginnings in Real Estate  His Partnership with Caitlyn How His Business Partnership Was Formed How They Find Deals Why They Use Brokers To Typically Find Their Deals   Current Projects and Monetary Goals   How to Connect with Danny DannyRandazzo.com PassiveInvesting.com    --------------------------------------------------- TRANSCRIPTION   Hey, guys welcome to the show. Today I am going to interview real estate syndicator and entrepreneur, Danny Randazzo. Danny and I will discuss the importance of a partnership both in personal life and business. We will also talk about raising money, finding good deals in today's market and some off-market strategies. Stay tuned because this one is very powerful.    Welcome to the real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.    Hey Danny, welcome to the show. Don, thank you so much for having me on, I appreciate being here with your followers, the audience and just participating with what you and Eden have going on-I’m happy to be apart of it, thank you again.       Of course. So tell us a little bit about your day. What did you do today? What does your day look like?   The first thing I do in the morning is I go for a walk with my dog George. Today we had a little bit later of a start I had a very busy weekend and I was catching up on sleep. Usually, I'm out of the house by about six o'clock in the morning and we're out walking. Today we got started at about 7:30 am. So a little bit behind schedule, but we got our walk and my wife Caitlin joined us on our walk. I use that time to mentally prepare for the day and figure out the major activities that I need to get done for the morning ahead. I try to plan my schedule where eight o'clock until noon. I do the things that I need to get done and then I use the time from 1 to 5 o'clock in the afternoon to follow up with people or reach out and make phone calls and things like that. And so that's been a good thing for me to be productive. And it allows me to focus on cleaning out my emails following up on any sort of deal information or underwriting and things like that as a priority when I'm at my absolute best which is in the morning. I learned an interesting tidbit the other day that the male setup is to have the peak performance, usually, we're peaking in the morning from 6:00 a.m. until noon and so I've kind of taken that to heart and really built my schedule around when my physiology and also body feels the best.    That's a great idea. Actually, my partner even says the same and he's really a morning person and I'm not really a morning person, but I'm trying to become a morning person because recently I started to go to sleep much earlier and then I figured out that I'm so much more productive in the morning. So I know you guys are living in South Carolina?    Correct. Yep.    My wife and I live in Charleston, South Carolina and that is where you primarily invest in real estate or you're investing all over the United States.    We invest primarily all over the Southeast US. So we have multi-family properties from Texas to Florida up to North Carolina. And we definitely invest in South Carolina as well.    I see. So tell us a little bit about how you first started doing real estate and the process that you went through to get to the point where you are right now?   The first time that we started doing real estate and when I use we I'm talking about my wife and I, at the time several years ago she is my girlfriend and we were sitting down having serious life conversations about what we want to do in life and how we want to live. We were just evaluating our situation. I was working as a corporate consultant helping multi-billion dollar companies improve their financial performance which that job took me all over the world and all over the country. I traveled most days out of the week- Monday to Thursday, Monday to Wednesday whatever this schedule demanded of me. I didn't really have control of my time. And Caitlin was an entrepreneur, she had her own wellness and yoga business where she would work with corporate clients in the Bay Area like Nike or Uber or LinkedIn and private wellness and yoga classes, as well as she, would work with private clients or even teach public classes in the Bay Area. And so our life at the time was this constant demand away from home working really hard and trading our time for money. And so we had a serious conversation about it and just said this lifestyle is not sustainable and it's not what we want long term. I could hit the fast forward button and see 20 years into our future of how much time we would spend exchange or a paycheck. And so I had kind of brought up the idea I said, I know some things about real estate I owned my own house and house hack and got started that way. And we decided to up and sell everything California. We moved across the country to Charleston, South Carolina and started to build a real estate portfolio that generated monthly cash flow to replace our previous income.    I was still working as a traveling consultant at the time, but building a portfolio that generated income to replace that W-2 salary and so we alternately wanted to achieve financial freedom where our investments generate enough money for us to live on. And then how do we continue to grow that. And so for us, we are very highly motivated individuals and people and as we evolve we change our income number and we continually strive to grow that number. And so that's really how we got started. It was out of a not want, but an absolute need to change our environment, where we live, who we surround ourselves with and that took us across the country to Charleston where we started building a portfolio and we worked very hard. I would work 8-10 hours a day as a consultant. And then in the evening evaluate real estate deals, call property managers, called brokers, build relationships, talk to investors and really grind very hard to get to where we're at today where we now have over one hundred and fifty million dollars worth of real estate under management.    That is amazing. And what I find even more amazing is that you had your life partner your wife with you through the journey and you guys were on the same page and that is rare and it shows me, I had this debate with my friends- how you should pick your wife and it shows me that the way that I saw things was right because you got to pick the person that's going to be your partner for life you're going to pick the person that has the same mindset and share the same goals. And I bet you feel this way right? I mean you are very grateful for the opportunities that you guys have together.    Oh absolutely. I mean that personal decision has turned into the absolute best decision I've made not only from a personal perspective but from a business perspective to have your partner in your corner supporting you above all else is the most important thing to be successful and stay on track. And so I think finding the right person is imperative to your success. You can certainly do it alone it's just a little bit harder because you don't have someone there to pick you up on a daily basis. If your down, or struggling or may not know the next move they can be there to support you and that's just great for every day that I have Caitlyn there in my corner doing that and keeping me going and seeing things that I don't see because again there's strength in numbers. When you are just one individual person, I am still Danny Randazzo and kind of see things and believe things the way that my mind and life experience has shaped me. But I've got an equally beneficial and powerful individual that's on my team who has a different way of seeing things or a different way of thinking about things. And it just makes for that extra level of opportunity or success or just the ability to perform having two people instead of one.    So from one personal partnership, I want to move to a more of a business partnership because I know that you are in a partnership and you have two partners. And I'm also in a partnership which is why I'm asking you this question. So tell us a little bit about your partnership. How was it formed and what is the role of each person in the partnership and do you guys share an office and do you have employees together?    Well, the most important thing to finding the right partner I get this question a lot is you as an individual doing the right things to meet enough people to find the right opportunity. I don't think you can go even if you went to a networking event with 100 people and you had this you had to pick one person to be a partner with. I just don't think it's reasonable to do it in a forced situation. And so the way that I met my partners was just a natural evolution. The three of us as individuals.    We're building our individual experience our individual real estate resume. And my one partner Dan and I; we connected through a mutual friend. We stayed in touch for a little over a year of just what he was working on what I was working on and then the stars kind of aligned and it made a lot of sense. We were going to look at a deal in Charleston a multi-family property about two hundred units. And so our third partner Brandon actually came down and Caitlin and I went and toured the property with Brandon and we were just talking about this one specific deal and if we may be one the team up on it and we actually ended up passing on doing that deal. But at that time it was the perfect timing for us as three individuals. Dan, Brandon and myself to come together and say ‘hey look if we want to take this multifamily syndication business seriously we have so much more power working together with the three of us than we do as individuals.’ We're going to get way more deals done. We're going to be way more successful. And the reason for that is the different areas that we cover within the business. And so again the most important thing about meeting the right partner is just being open to different opportunities. Networking with a lot of different people to figure out who may be the right fit. So within our business once that kind of timing worked out naturally. We didn't say hey we need to start doing multi-family right now. It was just a natural evolution. The three individuals coming together, we really broke out our company into three distinct areas that each of us are very skilled and very passionate about. So for example, Brandon is our renovation material and due diligence expert he has ten years of custom home building and another 10 years of insurance adjusting experience. He knows every single construction material type their useful life and a great idea on pricing. And so he oversees all of our kind of property tours he'll work with the brokers to talk about what types of value add opportunities there may or may not be at certain properties. He comes up with renovation budgets and oversees the renovation implementation, once we close on a deal and have that value add strategy he loves it and he's very good at it. Dan and I lack the ability and probably lack the desire to learn about construction materials and deal with contractors, but Brandon lives for it and we love him for it.    Yeah. So the minute you guys get a deal. So you guys do the underwriting? You guys go over the deal and you actually work to get the deal in the first place and then you just give it out to Brandon and you don't need to worry about it anymore and you can go ahead and find the next deal. And that is how you guys grow and that is the synergy that you guys develop between the three of you. Am I right?    Yeah. All three of us are involved along the way. But the way that we think about it the renovation scope is Brandon's ownership. He's the final decision maker in that capacity. But when it comes to the dollars and the cost of it that's my lane from a finance perspective. So I oversee all the underwriting and so that's where Brandon and I work together and it's great to have those different responsibilities because if he says ‘hey we need this material for our value add renovation’ I say ‘if it's in the budget.’ And if it's not in the budget -  Brandon I have conversations about what can we adjust to make sure that it's in the budget. But ultimately having a distinct decision-maker for each major process is a great way that we've been able to keep the partnership moving and make decisions as we go. So there's no lack of decision making because one person is the final decision maker in each category but we're able to bring in two other opinions to help finalize that decision. Yes.    So, Dan, you can be more sure of yourself and the decisions that you're making because you have two other partners that are telling you that you're doing it right and they think that it's going to work and it's going to play well. So yeah I like that I know exactly how that feels because like I said I'm in a partnership. And so I know exactly how a partnership works and what are the benefits and the advantages there are also disadvantages, but I think that they are not, I mean I think the advantages are just way bigger. So you guys are still focused on multi-family nowadays when the market is a little bit more difficult than what you used to be?    Yeah, I think difficult is a relative term because at the end of the day there are deals in every market and deals at any time. It's about timing and luck plays a part in it but I always believe that if you're doing the right things. If you're having calls with brokers or property managers or attorneys or appraisers that there's always going to be an opportunity that comes up that makes a good deal. And so sometimes you have to work a little bit harder. Like you said today's market is probably a little bit more competitive in the multi-family space but we're still finding deals out there and we're doing all of these things to make sure that we have the ability to have a first look at a property or that we stay very competitive in the offer process by having good referrals from sellers or brokers that say ‘hey this group passive investing dot.com made up of Brandon, Dan and Danny are the best buyers for your asset and so trust them to get to know them and let's work together to sell them our asset and sell’ - that's what we continue to do. It is a little bit harder but like I said there are opportunities in every market at every time. You just have to work.    I see. How do you guys go about finding deals so what is your secret sauce or strategy?    Well for the multifamily space there is a smaller community I would say of brokers and sellers and so the best way to find deals within the multifamily space is building a good relationship with an active broker who sells or brings a lot of multi-family deals to market.    And so we focus a lot of attention on building those relationships. Again we're not in it to buy one deal this year. We want to buy over a billion and probably a few billion in assets over the next 10-20 years. So we're in this business for the long haul and we want to invest in those relationships and continue to use those relationships as we grow and as we age throughout this process and so we focus a lot on the relationship aspect of the business. And then whenever we're talking to people whether it's an investor who maybe a friend of theirs is invested in an apartment community that someone else is looking to sell it's just about having those candid conversations with people about things that matter.    Personally, I'm not one to sit down and have a very basic conversation with a person about the weather outside. I would rather talk about real estate, money, mindset, multifamily. Those are things that are important. Those are real-life critical items and it makes for a much better conversation, at least in my opinion. And so whenever I'm surrounded by people again those things naturally come up and it's always someone knows someone who is involved in real estate or involved in multifamily or invested and so you just meet more people and have more opportunities come your way as a result of just having fun interactions with people.    Yeah, that's great. So have you ever considered contacting the sellers directly instead of going through the broker? Because I know a lot of multifamily investors are doing that right now. They're just skipping the broker so they could find a better deal and so have you ever considered doing that maybe sending letters or called calling sellers directly?    Yes, I have and for the criteria of property that we target we look for a hundred and fifty units plus community. For those sized assets, the seller is definitely a sophisticated buyer. They didn't happen to just stumble into buying one hundred and fifty units. And so the seller in most cases 99 percent of those sales they're going to want to take it to market or. They're going to use their broker who they always use who sold the last 20 properties for them. I just believe that those size assets the best way to get those deals is through the broker because guess what? The broker knows the seller way better than you do. And so if I can meet the broker, have a good relationship with them that the broker is going to introduce me to 10 more sellers as opposed to just one. So if you're looking for smaller multi-family deals I would say less than 50 units, you may want to go directly to the sellers because they may be first-time multifamily owners or maybe a little bit smaller time where they're willing to come in a wheel and deal with you without a broker being involved. But for us our business at PassiveInvesting.com where we look at properties one hundred and fifty units plus in size built between 1985 and 2010 that have a value add opportunity.   We're working with brokers I see and that only makes sense because I noticed that when I targeted a few sellers that had multiple families that were less than 50 units then I found people that actually inherited these properties and that's something that you would not find with somebody that has one hundred and fifty units because you typically don't inherit that.    So I could totally understand what you're talking about. And I also notice that it's more efficient on the smaller scale. But when you're going to look for the hundred units 150 units then I notice that it's just easier to create the relationship. So tell us a little bit about the first time that you had to raise money to buy one of these deals since they're gigantic and what was the raise and how did you go about it?   Yeah. Throughout my real estate resumé   I started very similarly to a little bit different, but on a smaller scale like the rest of the folks start out.    And so the first asset that Caitlin and I bought we invested in 100 percent on our own to prove the concept that we are real estate investors and we're in it for the long haul.    We started by buying one million dollar office building because we work backward from the outcome that we want to find the solution that we need. And so we were targeting a specific cash flow number per month. At the time we wanted to buy an asset that generated five thousand dollars a month. And so we looked at if we had to do that we would need to buy like 10 single-family rentals in the area. And that just didn't make a lot of sense to me or we could buy one million dollars commercial asset and that generated five thousand dollars in cash flow each month for us. And so we bought that property and shortly after that we bought another office building and I had two investors that invested with me. And it took a lot of work to get those first investors onboard and the raise was only one hundred thousand dollars but when you're starting out raising money is very difficult because people want to know that you have experience and that you've done it before. So you need to either have real estate experience or another type of experience that leads to your ability to own and manage real estate assets. So fast-forwarding to today work closing on a property and a couple of weeks. It's a 17 and a half plus million dollar asset. We're raising eight point five million dollars for it and again we have evolved to this level you don't probably start out buying your first property and trying to raise eight-plus million dollars for it. But as you grow and as you kind of build that track record, that following, that investor based naturally more people become attracted to you and want to know what you're doing and how you're doing it and how they could be involved in it. And so if that answers the question, otherwise I'm happy to expand on it.    No that definitely answers the question.    So what are your plans right now and what are your plans for the future as far as your business - where are you planning to be in the next 10 years?   So our plan for the future, this year we're going to close on our goal of one hundred million in assets acquired in 2019 we're a little over halfway there. We're past the 50 million marks and sell for us. We're going to be buying two to three more assets this year. Our goal next year will likely be about three hundred million and we're going to stay focused and on track to get to over a billion in assets in the next few years.    Wow. So yeah I was just saying that's amazing that you guys got to the place where you're doing so well and you're making such progress from starting with just buying one office building with your wife to a point where you're thinking about buying properties in the millions and get to the billions one day. So that's amazing. What is one of the best ways to connect with you for our audience if anybody wants to get in touch?    The best way for people to connect if you're interested in investing with us in multi-family value add opportunities. Go to PassiveInvesting.com and you can get everything you need to know there. If you want to learn more about me personally just go to DannyRandazzo.com and you can get everything that you need to know about me there.    Wonderful. So thank you very much for being on the show today. We really appreciate it. I hope you're going to have a great rest of your day and I hope to hear from you in the future. So good luck in whatever it is that you guys are going to do.    Don thank you so much for having me on. As always have yourself your team or even the listeners go ahead and reach out to me if there's anything I can do to help them.  Thank you very much, Danny, you have a great day. Thank you.    Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.   

As an immigrant from Denmark 23 years ago, Jens had no prior real estate investing knowledge. Yet, in only four years he has managed to acquire 82 units and has been growing his business ever since. Having lived all over the United States, Jens held many successful corporate positions yet, when the Dot.Com bubble burst in 2008, he knew he had to do a little rethinking of what he envisioned for his long term wealth. That vision included investing in multifamily real estate. Eager to learn more, Jens started educating himself on any type of book, podcast, or article he could find to learn more about the craft of investing in real estate. Once he began putting this knowledge into action, he found to have great success and is looking forward to his future continuing to invest in multifamily units.    In this episode of Multifamily Real Estate Investments with Don and Eden, Jens details his start into real estate, his marketing methods for finding deals, and his advice for how to jump into the commercial real estate world. More specifically, he also shares the types of units he buys and what types of deals he looks for.    Highlights:  Jens’ Beginnings in Real Estate  Marketing Strategy for Finding Sellers Why Jens choose to invest in Multifamily units   Current Projects   How to Connect with Jens OpenDoorsCapital.com Schedule a Call with Jens ------------------------------------------------------------- TRANSCRIPTION   Hey guys. My guest today is Jens Nielsen and he's a real estate investor who came to this country from Denmark 23 years ago without any knowledge or any experience. Now he's in control of 82 units and all that happened in the past four years. So, let's hear more about it.    Welcome to the Real Estate Investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.    Hello! How are you doing today? I'm doing great. Don, how are you? I'm doing just fine. I'm glad to have you on the show today. Tell us a little bit about your day. What do you typically do?   How does your routine look? Well, I get up early in the morning like 5:00 and spend some time setting the tone for the day. Do a little bit of yoga and meditation, some readings, some journaling just kind of a miracle warning start, set the tone for the day and make sure I know what my goals are and make sure I start with purpose not just roll out of bed and run to run out of the door. So that's kind of how I start every day.    Yeah, I talk to a lot of people and then I notice a lot of growth and investors they do that- they wake up early in the morning even though we don't have to do that. But we do it. So a lot of people start their day with reading and personally I always say it on the show- I like doing a lot of reading. So what are you reading typically when you wake up in the morning? Something either a business book or something inspirational.    I'm reading a book it's older but it's ‘How to Network with the Wealthy’ something I can’t remember the exact title but just how do you provide value to investors or partners and so forth. So that's interesting. It’s an interesting concept, adding value to the people you're connected versus taking from them.    Ok. So first of all, that's a very interesting book and you can be sure that after the show I'm going to ask for that headline and we're going to add that to the podcast. We're always trying to give people recommendations. And so there's that and also kind of for our audience. Could you tell us a little bit about your real estate career? How did you get started and what are you currently working on?    Yeah. And maybe it's a step back and man just like you I have a little bit of an accent maybe mine is slightly less pronounced because I've been in the US for Twenty three years now. I was born and raised in Denmark and at a young age moved to London, England in my early 20s and then on to the United States in 1996. So it's a couple of days ago.    I worked in the I.T. telecommunications field and you may find it interesting, I started out working for the subsidiary an Israeli company back in the days back in Maryland. So I was kind of thing and then move west first to New Mexico and now to the Southwest to Colorado. I’ve always been kind of an employee, working for somebody else, getting a good education, saving for your 401K and hopefully retire one day. And I realized I'm just going in circles, I'm pushing this rock up the hill and every time that stock market turns it rolls back down runs me over to 2,000 when the dot.com bubble burst in 2008. These swings it's like I got to find a different way to secure my future. So that was kind of the impetus to rethink what I was doing. So three or four years to go outside of the real estate is kind of the path I want to take and started connecting with people I knew in and around here that was doing that and started just asking lots of questions reading books listening to podcasts and everything kind of how I got started.    Ok, so how old were you when you started four years ago. I was in my early 40s.    So later I wanted to but as Jack Canfield says ‘it's never too late to start right now.’ I guess I had quite the right mindset until a few years ago when I started thinking about being my success was based on what I could do as an entrepreneur versus relying on an employee to keep a job.    Yeah. So sometimes in a show, we have people here that are in their 30s, 20s even and you talk to people that are in their 50s and 60s and that's the beauty of this business is that it doesn't matter how old you are. Right. But it's just about the mindset sometimes you get that mindset when you're 40 years old and sometimes you get that mindset when you're 20. But at the end of the day, you need to have that mindset if you want to be successful as a real estate investor. So tell me how many units do you own or in control right now at the moment?   So we have eighty-two units that we're in direct control of, some of them we own just right. Me and my wife and some of them we have a few partners on and it goes it's all multifamily very quickly decided that multifamily was the path I wanted to take a couple of reasons first of all where I live. It's super expensive to buy any. Buying a house and try to rent that out the numbers would not make sense. And so I had to go out of state, decided to move out of state. I needed to look at multifamily just so I have a scale to start. So sometimes a couple of small quadplexes in Albuquerque, New Mexico is the place I started because that's the closest bigger city to where I'm at. I am in Colorado. Denver is like seven hours away, so I'll pass that distance, so I used to live there so I knew it. So I started burying a searched for some for places and 11 units and then I scaled up and bought a 38. But it was a little bit beyond my means so I partnered with that property man on that deal plus a couple of friends to do a joint venture. So that was getting close a year and a half since you bought that one so that was kind of a bigger one. That started then it went to some other one and we have a small home part and 16 units. That kind of rounds out our personal portfolio.    Ok so let me see if I get this right? You started by buying two fourplexes so two quads and these are classified as residential. Theoretically, one to four is residential than for four and above is considered commercial and then let me try to think about it this way. So you bought that kind of real estate and then you had that desire and hunger for owning or being in control of more units which is what made you go after the bigger apartment buildings. Am I right?    Yes, correct. Yeah. So yeah there's two first where they were residential so I got you to know 30 years fixed loans and so that was it was quite nice. And then yeah I decided to go better because at the same time as I was investing with my taxable funds if you will. I also started putting money into syndication through my self directed IRA. I set up a self-directed IRA a rolled over some money from another IRA I had and bought into various syndications and funds and stuff because I wanted to go. I realized the value of the real estate doesn't grow quickly but you can go wealthy all the time. So yes I really lost trust in the structure of the stock market, to be honest. I know you can make a lot of money and have no control over the next downturn. So that was why I felt like no status it's a more stable asset especially multi-family.    Yeah definitely understandable. So you bought eleven units and then you bought 16 units. Now tell us a little bit about how you got in touch with that broker or the people that sold you these units so how did you even learn about them?    Yes, so the eleven, the quads...the 11 units and 38 they were all broker listed properties. And I've been working with one specific broker in Albuquerque because he's actually also my partner. He knows the market is very real strict and he owns a lot of investment real estate as well. So he's been kind of my mentor through this process that's been quite useful and I still feel like he's been treating me well, so I'm going to continue to work through him. I can but I was about a 16 unit yes close and that may this I actually found through direct mail and I think that's something you probably have an interest to him and definitely the wholesaling and so forth. So, that was in the single-family it's a lot about volume and no letters and different strategies that I haven't really done.    So me and my wife kind of did a little bit of it when you're the more hands-on approach. We just started like finding apartment units, size, and area that you're interested in. Something that we felt we could take down by ourselves and we send out letters: Dear John, we saw the apartment building that wanted you to remain if you're looking to sell let us know with high handwriting and below. And so we looked somewhat personalized sent out several hundred letters and one-day last fall I got a call from this gentleman who said ‘hey it's had a letter for a while I wasn't ready to sell and I'm ready to sell.’ So okay cool. And then went through a long process of negotiating and I learned a lot around that people get very emotional around selling stuff so you spend some time going back and forth with them. No, I wanted to sell the terms and the price and everything else and all those interesting processes for sure.    Yeah. So I want to ask you a few questions about doing direct mail. So when you do that. First of all, what are some tips you can give for somebody that's trying to get a hold on properties using direct mail so you're essentially cutting the broker? So you become the broker. You're doing your own marketing and you're getting to sellers and you're talking to sellers yourself and then these sellers they don't have to pay any commissions to the broker. So it's a win-win for them and their broker is not collecting the highest and best offer for their property rights. So how big of a deal like how great of a deal could you get if you're doing the marketing yourself. What is the advantage actually? Is there a big advantage you could actually find better deals if you do it yourself?   Yeah, I think you can definitely find better deals, that was my experience. You can get out there and get people that are motivated but not motivated enough to go through the whole process and a lot of them don't want to contact a broker and take those pictures and everything listed and go through that whole process. So if you catch people when they are motivated definitely it's a good strategy. I think it has to be kind of mom and pop owned property. You can't get the 200 unit apartment building despite the kind of big heart direct mail to but  20, 30, 40 doors as you can. You can have some success there. Know I think you have to be you have to make your mail kind of personal. So it's not just a random postcard that says ‘Sell me your apartment building.’ Be specific. Figure it out and if you can get information about how long they own the property and other things. So I have known him for a while meaning they have some equity and it tends to tap into that.    Ok. So let's talk about that. So how did you make the list of, you said you sent letters to 100 owners? Right. So how did you make the list and how did you figure out whether they have equity and how long they've owned it?    So New Mexico is a non-disclosure state and it's a little bit hard to find all the information. So what we did, we actually went on like apartments.com and said ‘ok what are two different apartment complexes here that had units for rent? Start writing them down such as address would have 20 units and we'll figure out who what the average small is and then go back to the assessor's office look up the owner. So we were like we definitely did send letters to people that just bought the properties that we were interested in selling. We also found sued lock just people at and some 10, 20, 30 years. Right. So that was the process this is an interesting process. I don't know about it you have done something similar but it kind of works for us.    Yeah, I've done similar things. So how many batches have you sent? If you just sent one batch?    So we got into a process of we would send like 50 letters at a time and say retarget let's say 16 to twenty-five units we'll send that one next month. Twenty-five or 50 and so forth. They would roll back as to be done maybe two or three months later we can go back and do it again. So just to get out there and to get out in front of them because I think distance does and statistics around they may not react until the first letter or something. So you have to be consistent. It's time-consuming and I must say we've actually just because of all the other things that are going on we stopped doing it again because we've kind of this change of strategy a little bit of what we used to buy and how we want to partner with people. So it was something that really happened a lot last year not so much this year anymore.    Ok, so the last question about that subject. When you actually got in touch with the seller and you got a deal. What were the details of that deal? Was it actually better than what a broker could give you?    Yeah. So it was a 16 unit building in Albuquerque's 61 bedrooms and kind of a nicer area around the university. So I think it's attractive to students and millennials and so forth and we end up paying seven hundred and forty thousand dollars. I believe that's actually his numbers, there's probably like around eight or nine caps and something even that management there so there are some expenses I have to add to it. But his rents were also 50 to 75 dollars below market. So there's the upside right there. Yeah. And initially, he had gotten like a broker opinion on it, I think the broker was over 800. So that's why we were able to I save six percent we are able to negotiate a price that was significantly lower than what he listed with a broker.    Ok. And what did you do with that property? Well, what kind of value adds to put on it? Yes.    So we just closed it in May. And I had underwritten it for like six hundred dollars per door, that was where I thought the market could do. And we've gotten two units that mean slow because they don't have too many vacancies. We have two units of your renovated and rents out at six or nine so we're exceeding very quickly too, so who may even be too low. Jut put a new roof because it's flat roofs in that part of the country, so make sure there aren't any problems there. You put your Final Four planking in some kind of gray walls. Fixing up not like light value-added interior kitchens with six of the bathrooms. So looks nice but not like brand new. Yeah. And then we got to repaint the exterior because it's a little bit tired. That's the next project. So yeah it's going really well. It's encouraging to see we’re able to rent out the latest units in like three days to my property.    Yeah. So I know you bought your first three deals these two quads and then the other building they live in units. I know you bought them in C-class areas and then you moved on to buy a few other properties in a B class area. So I want to ask you about buying properties in C class where you're dealing with bad tenants or was it actually good?    I learned some because I was before I really started getting trained and educated and a lot of it I learned I learned a lot around what area to buy and what not to buy-in. And while the numbers may look really good on paper in reality if you have a lot of turnovers internally it's the most expensive thing or delinquents. Yeah, and there is some I may start off maybe exiting somebody's property because their property increased in value and they're not I don't. In retrospect, I wouldn't have bought them again just because they're not an area that's really what I'm interested in anymore.  That's a learning experience and it hasn't been bad. And it also hasn't quite been what I expected. So I'm definitely moving up to a better property and better areas because that's more expensive but in the long run.    So another thing that I wanted to talk to you about was the fact that you and I are both immigrants and I'm sure everybody that's hearing this with our is very noticeable accents. So I want to ask you, I was just on this show and I was asked about the immigrant mindset and what is it about us that makes us different? So I want to return the favor and I want to ask an immigrant on my show. What is the difference? What do you think makes us different is our mindset?    Yeah I think we came to a country, where there is a new language is a new culture and we pretty much have to figure out how to survive and how to thrive, how to be successful. I took the employee route for a long time. And I had some really good jobs and make good money that way but I always like I'm not tied to a specific area I can always move around. I know that I can land at my feet. Just that idea of moving many thousand miles away from home. That's scary, right? You just kind of adapt to it. I'm sure you get the same type of experience right.    Yeah. For me what my answer was that I did not have any distractions when I came here. So I have no friends & no family. So I was focusing entirely on work. So that was one major thing. Then the other thing was that as an immigrant, you move from your homeland to a different country and you're making a big sacrifice. All these people that you know and care about -you want to know that if you sacrifice this much then you want to be successful. Right. So I guess that's what I had my experience and the things that I went through. So why would you say you're your best advice for other investors whether new or veteran?    Oh yeah just get a couple of things and get educated right. Make sure you understand what you're getting yourself into that could be through reading and listening to podcasts becoming part of the mentorship, coaching or something like that. I mean there are all kinds of resources out there. Definitely, also network like there's no tomorrow or do a lot of reaching out. I think that's a better word it just connects with people in your community go to meetups and everything else because that's really it is a relationship-based business. We can't do it in isolation and that's been my major thing. I've gone to conferences. I've just been out there and connecting with a bunch of people. That's really part of my continuous success. The more people, the more chances you have- them helping you, you help them or some sort of business arrangement.    Yes, definitely that's great advice. So what would you say are your plans for the future?    So I must admit I still have a full-time job. So my goal is to exit that. I'm really moving into work on some occasions working with the sponsors that buy larger apartment complexes throughout the country. Through my network, I help raise money on those deals, done two deals this year and I'm working on the third one right now. I think by the year another one so I'll be on with a thousand units. Eight hundred to thousand units that I've helped raise money on, that's something I really enjoy. And I think it suits me well with my current network that I feel so. And then probably start syndicating my own deals on so I can exit my nine site job.    If you can raise money then you can definitely syndicate your own deals. Yeah, that's right. Yeah. Ok. So what are the best ways to connect with you? Oh yeah.    So my website is opendoorscapital.com and one of the things I like to give back and the way I do that is by offering free 20 minute calls to anyone that’s interested. Schedule a call to just chat about real estate or anything else, I’m into the outdoors, cycling, skiing and all that. So sometimes we talk about that.    Wonderful. Ok. So yes I want to thank you for coming to the show today. We really appreciate it. And I hope you're gonna be as successful as you are right now and even a lot more. And thank you. Thank you for being here. I appreciate it. Thanks, Don. I appreciate the time. OK. So you have a great rest of your day. You too. Bye-bye.    So first of all as promised the name of the book we discussed at the beginning is ‘Networking with the Affluent’ by Thomas Stanley. I personally haven't read that book but I'm going to order it right now and actually give it a try. And the other thing I want to talk about is notice how every guest in the show always says that it's so important to educate yourself and keep educating yourself in real estate. If it's reading books or if it's listening to podcasts or anything of that nature because that's really the way to succeed in this business is to acquire knowledge. And if you're not doing that then you're probably going to stay behind. And if you are doing this then you're probably going to get ahead and that is what I recommend for everybody that's going to be my first advice to if somebody asked me what is my best advice. I would say the same thing I would say just get knowledge. It's free. It's out there. It's some of it it's free some of it is cheap like ordering books. You can do a book every week. If you go on audible and you just buy a book for 10 bucks and you get a lifetime study of a very smart person for just ten dollars. So I think it's worth it. And you keep doing that and I hope you guys enjoyed the episode and have a great rest of your day.    Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.   

It’s no secret that Tim Bratz is a real estate workhorse. Starting out as a commercial real estate broker in NYC, Tim first immersed himself in the business, quickly learning the ins and outs of real estate. Over the past decade, he went from flipping homes and wholesaling to transitioning his business primarily into the multi-family realm and has never looked back. Managing a team that has over 2,500 units currently under control, Tim has managed to, in a short period of time master multi-family commercial real estate investing. As a mentor and active investor, Tim’s “Keep it Simple” approach is one that he puts into play with his very own business transactions every time proving that his methodologies work.    On this episode of Multifamily Real Estate Investments with Don and Eden, Tim dives into his unique approach to investing and the lessons he learned along the way perfecting his business strategies. He also discusses what his typical deal size is, how he finds motivated sellers, and what his number one strategy is for conducting business in commercial real estate is, “Keep It Simple.”  Highlights:  Tim’s Beginnings in Real Estate  Average Deal Size for Tim  Why he Choose to Move into Commercial Real Estate  How Tim Finds Motivated Sellers  Current Projects How to Connect with Tim LegacyWealthShow.com LegacyWealthShow Podcast CommercialEmpire.com - For Training ------------------------------------------------------ TRANSCRIPTION   Hey guys. This is your host Eden today. Me and Don are going to interview one of the biggest investors on the show to date. Tim Bratz team has over twenty-five hundred units under control and he's about to purchase four other projects in the next month.    Welcome to the real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.    Hey Tim, welcome to the show. Don and Eden excited to be here. Thanks for having me guys. Thank you. Thank you. Tell us a little about your day. How's it going so far.    It's going, man. Been in meetings all morning working on opening up an investment fund and launching that in the next 30 days here so we're really really excited. And I got a bunch of deals closing next week actually 648 units amongst four different properties. So we're pretty busy.    Yeah I know you're a busy man and I'm so happy and grateful that you actually got on the show on a Monday morning.    Yeah I know typically because Mondays are always so crazy in the office we all have that. I actually do my team meetings on Tuesdays now just to give everybody a day to catch up over the weekend get updates on all the projects all the properties and that way they can come prepared on Tuesday morning.    So Mondays worked for me bud. Yes, that's great. So Tim for our audience tell us just a little bit about your real estate background how you got into real estate and what are you currently doing. Yeah yeah sure.    So I mean high level I started paying attention to real estate when the market was going gangbusters last time remember 03 to 07. If you had a pulse you could make money in real estate and I was going through college then and realized I wanted to be involved in real estate so I was money motivated guy back then and had like a painting company in the summer where I employed a bunch of my buddies, we'd go around paint houses and then I worked for- interned for one of the largest homebuilders in the entire country. And my brother was living in New York City at the time. I'm from Cleveland Ohio.    And my brother said Hey come on out live with me and get a job out here in New York after you graduate. So moved to New York City became a commercial real estate agent and I brokered a deal that was 400 square feet in Greenwich Village of Manhattan and I signed a lease with a tenant for the landlord front for square feet was ten thousand dollars per month on a 12-year lease term with 4 percent annual escalations. I realized quickly after doing the math that this landlord was going to make almost two million dollars off of doing something at one point in time over the next 12 years. I quickly learned about residual income right passive income and the opportunity and lifestyle that can create. And so I ended up moving down to Charleston South Carolina. Just wanted some better lifestyle whether that kind of thing this is 08-09 now when the market crashed and I'm a punk Twenty-three-year-old kid at the time with no money. The worst real estate market history and deciding that I want to go and start a real estate investment company. And so nobody would lend me money. I remember going to a seminar and somebody is like oh yeah you could just call up your credit card company they'll increase your limit. So that's what I did,    I got my limit increased. I bought a dumpy little duplex in the hood for about fourteen thousand dollars put another five grand into it and then I just went and knocked on doors and pass out flyers held an open house I sold it to one of the neighbors who is going to run it as a rental property for thirty-three thousand dollars so after closing costs made about 13 grand on that deal. And it was like seventy-five total days and I was like oh my goodness I don't even know what I'm doing I'm making money on this. So let me go do it again.    I think we got this natural progression as investors and we get into wholesaling we any money or at least I didn't at the time low risk. You don't need any credit you don't need money so I got heavy into wholesaling single-family, got into flipping houses. People came to me and said 'Hey listen man and you obviously know what a deal looks like. But I have money but I don't have the time I don't have the bandwidth or the knowledge or the expertise. Why don't we split deals?' And so I end up partnering with people that way. And then nice in partnering with people on buying some and holding some single-family rentals and then got into some bigger stuff retail flips and buying some small multi-family and then eventually got into apartments and I remember just kind of reflecting a few years back and looking at where was I spending my time where was I getting the highest return of my on my time highest return on my investment and what met my long term goals the best and I realized that apartments checked every single one of those boxes. And so I decided to double down on apartments I'd burn the ships on everything we had going on and residential we saw all the deals we had in the pipeline- we saw those to the finish line at that time we were flipping probably 80 to 100 houses a year and I'm back in Cleveland at that time right.    I got married to a girl from Cleveland so I moved back to Cleveland about six years ago and I've just been looking at all that stuff. We've got some big management company and just realize we need to dedicate all of our resources to buying apartment buildings. So had a few hundred units a couple of years ago and over the past, about thirty-six little over thirty-six months almost 48 months just been doubling down on apartment buildings. And I'm currently at a little over twenty-five hundred units with that package of well not a package but four other closings this month put me a little over thirty-two hundred units in my current portfolio. Ninety-five percent of that is apartment buildings. The other 5 percent is some vacation rentals and some office buildings. So that's what we're at now. So I just dedicate all my time to apartment buildings. That's our niche. That's what we're really really good at. That's what we know inside and out. My team's comfortable with it. Every time I go outside that box. I get kicked in the crotch either from a financial perspective or wasting of time perspective. And so now we just focus on apartment buildings what we know is what we're good at and it's what's making us a lot of money right now. So everything's going great.    Yeah. So first off that's amazing that you're doing so many deals and you're so active and you've grown so much and I know you’ve only just turned 34 right? That's it last week. Thank you. Well so happy birthday.    So yeah we have been in that position to where we were making a lot of money in residential real estate whether wholesale or flipping homes and I gotta tell you making the move to commercial real estate was difficult because it requires to put the focus there and you have so much going on in residential. And so I want to ask you about making that move. When was that point that you decided to do it and how did you take the risk of shifting your entire business which was successful at the time, especially when you're still young and have your whole life ahead of you?   Yes, so that's a really really good question right. It's one that I actually get quite often for people who are scaling into apartments. I think again all of us go through this natural progression of wholesaling, flipping and we get out of flipping as fast as we get into it because we're like there's no money in that. Right? Then we get into like some turnkey type stuff or buying and holding some single-family rentals and small mall ties and then bigger apartments and commercial real estate. And it's a natural progression that a lot of investors go through. And how do you make it happen sooner than later? So to answer that, I got to tell you- for me, when we were flipping houses there were five of us. So it was me, a CEO, kind of a visionary, going out raising money; that's what I spent my time on. I had a COO, Chief Operating Officer that ran the day to day operations and just met with the team and making sure that all the daily minutia stuff is taken care of, fires are put out,  all those kinds of things. And there were three other guys on my team. One was an Acquisitions Director, two a Project Manager and three was a Dispositions Manager.    So from a tactical standpoint, it was very easy to pivot everybody on my team and move from single-family into apartments. So I took my acquisitions guy and I said ‘Hey man, you're not looking at single-family houses anymore you're only looking at apartment buildings;’ ‘Hey project managers that are renovating houses you're going to renovate apartments;’ ‘Hey, dispositions guy sort of selling houses you're going to manage the management company and you could be an asset manager.’ And so is this very small pivot from a functional operational standpoint it was a very big mindset shift right. You've got several deals a month five six eight deals a month closing and now you're like, ‘What do I do with my overhead right?’ I have all these expenses I have all this payroll I have all these other things that have to pay for. How do I do that? So we didn't just like take deals that were in the pipeline and throw those away we still saw all those through. So we still had a pipeline of another three-four months worth of deals. Right. So at the time that we pivoted, we knew that we could still cover our overhead for the next three or four months. And it's amazing when you make three-four a declaration to the universe how the universe responds. I'll give you an example when I was wholesaling houses I was a total prostitute I would take any kind of deal any kind of wholesale commission that came across my desk if it was five hundred bucks I remember doing one for two hundred dollars and I was like it was such I'm banging my head against a wall and like what the hell am I doing for two hundred dollars. But it didn't matter I would just do that. So it got to a point where I told my team feels like we're not doing any wholesale deals that we can't make a minimum five grand happened. We didn't see any deals that were less than five grand anymore we only saw deals that were eighty-five hundred and eleven thousand dollar wholesale and a fifteen thousand dollar wholesale on a seventy-five hundred wholesale. And those are the kinds of deals when you focus on those opportunities they expand. And the same thing happened when I got into apartments when I said to burn the ships. We're not doing any more single-family. We'll see these ones through that are already in our pipeline and we're only working on apartment buildings moving forward.    Do you know the next deal that came across our plate was? An 11 unit apartment building that had a big renovation that we didn't want to spend the next 12 months renovating this thing with four or five hundred thousand dollar renovation on only eleven units. That's a massive rehab but we said Hey I bet we can wholesale this thing pick up the phone I call up six or seven people. One of them says yeah dude I'll take that. We made a wholesale fee of ninety-five thousand dollars had a double close on it pay some fees. We walked away with eighty-seven thousand dollars wholesale fee from our next deal that came across our desk. So the universe whatever you want to call it responded to us making that decision and it gave us then enough overhead enough cash to cover our overhead for another three months. Right. So it got us to the point where now I got six months in reserves. I'm good to go. And now we start buying apartment buildings renovating apartment buildings have the cash flow coming in and have these things performing and that's what we end up doing.    We flipped a couple of apartment buildings made some big chunks that way. So it's an 18 unit couple months later made about one hundred twenty-five thousand dollars on that. And then we were sort of buying and holding a 74 unit portfolio a 48 unit building a 20 unit building and some of them were stabilized some of were not stabilized and you just kind of you kind of roll with it man when you solve problem by problem. And you understand what the long term vision is and then as long as you can get past each issue that presents itself on a daily basis and move the needle forward. That's just kind of what we did. We know what our long term goal was. We know what our long term benefits of reaching that goal would be. And we just we didn't let the daily issues get in our way. We knew that there would be hurdles we'd let the hurdles keep on coming and we just kept on rocking and rolling. We roll with the punches knowing that eventually one day it would be OK. Right. Eventually one day we'd get to where we want to be.  Yeah.  So if I'm getting you're right you're recommending to the residential real estate investor to if they want to make the move to commercial real estate that they're just better off stopping all the transactions or just finish everything they have in the pipeline? But not taking any new acquisitions in residential if they ever want to make the move because I'm in the same position where I used to be in the same position where me and my partner Eden- where we would buy properties and we would have more deals coming on daily or weekly and then we would get so busy with the deals that we wouldn't really be able to make that move because there's no time with real estate wholesale or flipping homes. It takes it's a full-time job. So if I'm taking your advice and you're saying stop doing this and just start focusing on whatever it is that you want to do?    Here's the thing that I know what I'm capable of right. Like if there's somebody listening to this I don't know what their capabilities are and what their background is like I'm a workhorse like I'm willing to get my hands dirty, I'm not too good to do any any role of responsibility, I'll pick up the phone and do acquisitions, I'll go and meet the contractors and kick the table, I'll go and pick up the phone and try to sell the property or meet with a broker in order refinance or whatever that looks like. And so I can speak from my own experience that that's what worked for me was always easy. Absolutely not. There was a lot of very skinny days a lot more money going out that's come in over the past several years because I don't make an acquisition fee. I don't take an asset management fee. I don't take a fund management fee. I only get paid when my investors get their principal returned. So we buy value add properties apartment buildings that are distressed in some capacity. We go in we fix them all up. We renovate them. We rent them all out. We put better management in place and then we refinance in 12 to 18 months and then we're able to cash out our investors. They get all their money back and then we have all these refinance proceeds and then cash flow in perpetuity from then on and then we help hold onto the asset long term. So that's my business model it's the Byrd method for apartment buildings. I buy an apartment building I'm all into it for 65 percent of the after repair value and then I go and refinance it at a 70 or 75 percent LTV loan.    So if I'm all in for six and a half million bucks and the banks willing to give me a 75 percent loan and on a 10 million dollar valuation I'm able to then put a seven and a half million dollar loan on the property pay off the six and a half million dollars to investors in the acquisition loan and then I have a million dollars a refile proceeds that then I carve up amongst me my partners and the equity investors. So that's my entire business model and it was very difficult early on because I didn't take acquisition fees. I had those again a lot more money going out than money coming in. So what I do it exactly the same way. I don't know probably because it got me to where I am so I can't I don't have any regrets in that regard. But what I've taken an acquisition fee or maybe wholesale a few more properties or flipped a few more apartment buildings maybe just to help soften a little bit of the financial stress and cash flow management of it. But at the same time on our model's awesome our investors love our model our partners love our model and it is it's worth really really well for us. So for somebody else to come in and say ‘hey Tim should I burn the ships? Dude. I don't know what your work ethic is right? I don't know what your unique ability is. I don't know what your team's capabilities are. I was able to go and just focus on raising more money and finding more deals and doing a bunch of marketing stuff because I knew that my day to day operations was handled by my business partner my COO and my team. So it depends on what your resources are. But if you are resourceful enough you will be able to make this work and you can make the transition no problem. I will tell you this, I wish I would have made the transition weight way sooner than I did as far ahead as I am. Can you imagine buying apartment buildings I could buy in for 50 cents on the dollar if I would've gotten involved this heavily a year or two in advance- 50 percent of what they're going for today? So there's no better time to get rolling and then to do it right now today is the best day kind of a thing. Don't put off what your long term goals are. Whatever you're doing does not meet your long term goals. Burn the ships.    I actually think that it motivates you more when you do burn the ships to go out and get your head out of your ass kind of thing and figure this stuff out because now it's a little bit of a wakeup call knowing that if you either have to succeed or you've to die - that's the way the whole ships comes from.    Yes, I see what you're saying and I couldn't agree more. So tell us, Tim, what other types of sellers do you usually buy from and how many units you like to work with?    Yes, so I'd say now my average deal size is around 100 to 150 units per building of the four properties and closing on next week. Have a 40 unit which is right next to some bigger buildings that I have I have 116 units. I have a two hundred fifty two-unit and a two hundred forty unit. I'm buying all those buildings next week. So it ranges and depends on I'll buy stuff under one hundred units. If if there's paired up with one of my buddies usually 100 units are bigger. The reason for that is you can provide on-site property management and onsite meet its personnel it can withstand having that payroll there you'd see a lot of people getting into like 30 unit, 40 unit, 50 unit buildings. That's it's almost like it's a hell zone. It's a goldilocks zone in a bad way because you don't have the scalability of having on-site property managers or personnel or anything like that. At the same time, you don't have the scale of property management companies willing to give you a big discount or know it's just there's a lot of stuff going on in that realm once a little bit tougher.    So we try to say it usually over 80 units is the minimum that we'll go to and hope in four hundred two hundred units. I like two hundred units and bigger is my ideal clientele. But then you get the hedge funds and stuff that come in there and they're buying up everything that stabilizes. So my niche is really the value add stuff. It's stuff that's physically distressed or managerial or distressed and that comes from one of two sellers typically. One is mom and pops own the building great grandpa bought the building a while back or a couple bought the building 20 30 years ago and they've lived off of the cash flow for the past 20 years and so they've sucked every drip every drop of cash flow out of the property and never reinvested anything into it. And when you do that for 20 years guess what happens. Eventually, the roof goes. Eventually, the parking lot goes eventually the windows go. Eventually, the mechanicals goes and they don't have any money set aside in reserves and then reinvest it into the building. So now they're in a tight spot. They're not financeable, they don't have any cash. Their only option is to sell the property. So Mom and Pop owners who have owned the property for 10, 15, 20 years or longer -typically that's one of the people I buying from. And then the other people I buy from are smart wealthy entrepreneurs who are not full-time real estate investors are not full-time apartment investors. How is that possible? Because they make money in their traditional business and they need to park it somewhere and they think real estate is a safe investment. And it is if what you're doing right? So they go and they park it into real estate into an apartment building and then they don't have a joint venture partner. They don't have any equitable partner, boots on the ground who gets paid based on the performance of the property. They don't know how to manage a management company. They don't want to review the profit loss. They don't know what the expectations are and what happens is the management company ends up ripping them off. They don't hire the right management company or they hire one that just rips them off.    Eventually what happens is they're bleeding so much money on this property that they take their eye off the ball and the primary business is still going through the learning curve on the apartment building side and they end up losing one or both of their businesses because of it. I just bought seven-hundred units last year from a couple of stockbrokers out in New York. These guys make millions. Each of them makes millions of dollars every year. Brokerage stocks on Wall Street to buy a few hundred units down at Georgia. They think they're all set. They don't have a partner down there that interview the management company that knows what with the right questions are to ask. And because of that, the management company rip them off they're bleeding all sorts of cash flow from these properties because they're bleeding cash. They don't want to reinvest anything else into these properties because they're not sure if they're getting ripped off or not. So now they don't have enough cash flow to reinvest into the property to turn units. And then it's just a downward spiral that happens from there.    So we come in and we bought 700 units for 10 million bucks. That's fifteen thousand dollars per unit at a peak of a market right in the middle of the summer of 2018. How is that possible. Because we found motivated sellers. Now we had to put a bunch of money in I put another 15 almost 20 grand into every single unit. But now I'm all in for thirty-five thousand a unit. One of the buildings just appraised for sixty-eight thousand dollars per year. Wow. So I'm all in for almost 50 cents. Just over 50 cents on the dollar in that portfolio and it's going to be I'm all in for 25 million bucks let's say it'll appraise for just shy of 50 million dollars. So there are deals out there. I don't sixty-eight care who you are. Whether you think you can or you think you can't you're right.   I know that deal finding is a mindset. And I know that there's a motivated seller in every single market in the United States right now. I just need to find it there aren’t before a broker finds them. And so I try to find direct to seller off-market relationships the same way that you do in wholesaling. And I've just taken a lot of the same strategies and wholesaling residential real estate and I've moved that into acquiring apartment buildings so directly. Oh great. You can. You can do direct mail for apartment buildings to driving for dollars. Great. There are houses with tall grass and boarded up windows. Guess what. There's an apartment building with tall grass and boarded up windows. Dialing for dollars instead of calling for sale by owner residential. I call for rent by owner apartment buildings. So we say hey I'm not interested in renting your place I'm interested in buying the whole thing. Do you have any interest in selling? Just get the conversations out there. Start planting the seeds and eventually they will sprout. I don't know if it's going to be 60 days later, six months later, six years later but eventually, the seeds will sprout. You've got to keep on planting seeds. It's a much longer-term mindset than wholesaling real estate. This is for long term wealth. This is not a get rich quick. So you've got to have a long term vision and a long term mentality and realize you're building wealth for generations to come. Don't expect that you're going to get all these apartment buildings in the first two weeks.    Yes, I totally agree with you. Because you can make good money or even great money in residential. But I guess it's safe to say you truly start to get wealthy when you think bigger and understand that it's a longer play.    So tell us a little bit about your underwriting. A lot of people look at they got these fancy calculators. They're paying hundreds of dollars for it. See if Facebook ads for it. I think it's all B.S. I don't use any fancy calculators. What I do is I do some back of the napkin math on what the stabilized rents can be. So I don't care if it rents for five hundred bucks a month right now. I go and look up what market-rate rent is for a two-bedroom unit and if it's 750 a month then I'm going to take one hundred units or however many units are at the complex times 750 gives me seventy-five thousand dollars a month in gross potential rental income. I know what my expense ratios are. Most of my buildings are 40 to 45 percent expense ratio, so I can five thousand a month. That's nine hundred grand a year. And then multiply it by let's say point six because of a 40 percent expense ratio. And that gives me was five hundred forty thousand dollars of net income of NOI. If I want to buy it a 10 percent cap rate that means the most I've got to be all into that thing four is five point four million dollars. Then I back out my construction budget. It's gonna cost on average ten thousand dollars in unit times one hundred units that's a million bucks so my maximum allowable offer on that is four-point four million bucks. We'll go in somewhere around four million dollars and hopefully close the deal somewhere between four and four-point four million. And then from there, I get all the due diligence from a seller. Rent rolls, Profit Loss Statements, trailing twelves, tax returns, and Utility bills. All that stuff I handed over my commercial mortgage broker who then packages it all up and pulls all the data from co-star and all the different commercial data aggregators and puts together his entire package that the banks are going to underwrite as well. It's not like he's making up any numbers these are actual numbers. They've all come from somewhere. The real financials I let him underwrite the deal. If a bank's going to underwrite it and put up the first mortgage of 80 percent of the purchase price and cost of this thing guess what you do they're gonna do their due diligence. Absolutely. So I let them do their due diligence. Why do I need to go through all the brain damage in under in order to underwrite this thing? I just do back the napkin type math. Make sure it works submit the letter of intent and then I hand everything over to my commercial mortgage broker. He underwrites everything then tells me that it makes a lot of sense to go ahead and do it. And usually, my math is much less than what we can actually pay for it. When he does his math he might say hey we can actually pay five million bucks for this thing is that a four-point four million. And guess what. That's just extra juice and a squeeze for us because we went in the right number. So that's it then that's all I do.    So you think what makes you such a good investor is the fact that first of all, you came from residential and you had some residential techniques as far as I'm doing direct mail and marketing to get to the sellers? And so the other thing that I want to ask you about that is also I mean how do you get to these people? Like what else do you do besides just sending them letters and getting in touch with these millionaires that have a lot of money that they're looking to park somewhere because it's not really easy to get to these people. They're rich people they're busy.    So how do you get in touch with them for private money? I know I'm talking about when you're finding motivated sellers for properties from the properties that you were talking about.    Motivated sellers everywhere. What are the 4Ds? Death, Disease, Divorce, Disaster. Right? You go to Pensacola and like Panama City, Florida and that hurricane that went through last fall decimated Panama City. Guess what? That's a disaster. There's a lot of people motivated sellers in that area going take their insurance proceeds and let the property go. There are some deals there. So that's disaster death. I just bought four hundred units earlier this year and in Georgia from a guy who inherited 400 units from his parents who passed away a few years ago he's been living off the cash flow. He lives in a little bungalow on the beach on the Gulf Coast of Florida. And he just doesn't care. And so does he want to do the work in order to try to get 16 million out of this apartment building or is he willing just like let it goes and for 13 million dollars and he let it go for 13 million dollars and we came in bought it and got a good deal on it and stabilized it and now it's worth north of 25 - 30 million dollars.    So like there are deals out there death disease divorce disaster in every market going. You can do probate leads and apartment buildings the same way you do probate leads in. It's just reaching out to these people just because like I'm a millionaire. Right? So I get mail the same way that everybody else gets mail. I have a cell phone that rings the same way that everybody else's cell phone rings. So if you can get a hold of me, I am selling properties I am buying properties and I'm a passive investor in different properties as well. So if you build any one of those funnels you're building all three of those funnels because in commercial real estate a buyer is a seller is a private money lender. It just depends on timing. I'm right now a net buyer, I'm buying more than I'm selling but I am selling some of my smaller buildings right now. So if you if I'm on your list and you see me that buying properties you can wholesale property to me you can buy a property from me, you can joint venture on a deal with me because I'll passively invest in other people's deals and bring the equity I'll maybe sometimes even co-sign on the loan sponsor their loan and get involved in different capacities that way.    So if you feel any one of those funnels you're looking for private money or you're looking for buyers of multifamily real estate or you'll more sellers of multifamily real estate find a marketing funnel that works for each one of those. And by building one of those funnels it builds all three of those funnels and then you can drip the same marketing content. I had everybody into a simple email drip campaign and I sent him an email once a week said hey I'm looking to buy properties. You got anything you're looking to sell? And I let people send me deals and ninety-nine percent of them are crap but there's a needle in the haystack. Every once in ninety-nine while the other thing that I do is I give content they look at I'm joint venturing with this person and here's how I under underwrote the deal and here's how I structured the deal. They have 30 percent equity but there's in the project. I have a percentage of equity, our investors have a percentage of equity and guess what everybody gets paid. This guy couldn't get involved in this apartment building deal unless I came in and partnered up with him. Now he's able to start building generational legacy wealth for his family. How does that sound? Great. If you want to bring me deals bring it to me. I'll fund your deals. So now I have people who want to partner with me on projects I people want to wholesale deals and the people who want it so I'm just I'm telling people all the time on social media through my email campaigns of what I'm doing of how I'm doing it and I'm not the biggest investor in the country but I'm one of the best known because I'm just consistent with my marketing across the board.    I see well these are amazing techniques and I really think you're doing things differently from all the guest we had on the show. Nobody is doing things the way you're doing.    One of the things I do is I just keep it simple. I think commercial real estate is such an antiquated, old school method, methodology and how everybody does it they all do broker relationships. You don't have a broker relationship and how are you gonna get a deal. And so you've got to be willing to do just kind of off the cuff different kinds of things that other people aren't willing to do. You'll find deals that other people can't find. So one of the things that I do is again all these different strategies on the residential side that I implemented and I do the same thing on commercial real estate. And none of the other old school investors in town are doing that. They're not doing direct mail they're not doing it like that. The only people I'm competing with on direct mail is brokers. Do you think somebody calls back a broker or a callback actual buyer rather callback a buyer?  Of course, so and then I develop relationships with residential wholesalers, residential investors and I let everybody know that I buy apartment buildings so they come across apartment buildings too? They just don't know how to underwrite them or don't know what to do with them can't raise the money. And so then they sent him to me because I'm top of mind all the time and we get a lot of deals that way. But during my deals actually, come from that. I don't spend much money on advertising.    Yeah. So once you purchase the property what kind of value strategies do you usually apply?   Yeah. So a good question. Apartment buildings are 100 percent based on the income approach. That's how they're valued that they're valued based on how much income does this property achieve right? On an annualized basis they don't care what the building on the down the street sold on a per-unit basis because that size could be different. It could be tenant-paid utilities versus landlord paid utilities it's a lot of differences and variations. It will depend on a building down the street is the cap rate that it's sold at. That's the only thing that's based on a comparable per-unit is the cap rates in the area. So if you can increase the income or the net income of your apartment building then you can increase the value and it's very predictable how you can do that how you increase the net operating income you could do two things. One is you can increase the gross income but you can also to decrease the expenses of the property. So we do both of those so we increase the rents. How do you increase the rents? It's by renovating units know by attracting better tenants who are willing to pay more by having nicer cleaner safer more functional more aesthetically pleasing type units. You do that. You could also add amenities dog parks, workout rooms, pools, clubhouses, laundry, covered parking, storage like there are a thousand different things you could do to increase the income and add additional revenue streams to the property. Like when I was in New York everybody to have cell phone towers on top of the buildings they got rent from that- there'd be billboards on the side of buildings they make rent from that. There's a lot of different avenues to generate income on these things. So once you generate all the income that you possibly can. Now you're looking at how do I decrease all the expenses. So you could do all the energy-efficient, plumbing fixtures, light fixtures all that stuff's going to reduce your utility bills. We harden our units and what I mean by that is we don't put carpet in because carpet wears off replaced every few years holds bugs and holds dirt. It's hard to turn when a tenant moves out. You gotta wash it and then not walk on it for a day. Time is there. So what we do is we do luxury vinyl tile in every single one of my units and you can sweep it in mop it and be done with it in 30 minutes. It doesn't wear the same way. Carpet does it doesn't hold bugs, it doesn't hold dirt, people can't put their cigarettes that burn cigarette marks out on it and it just looks nicer it attracts better tenants. So we do things like that to harden the property and minimize ongoing maintenance as well. The reason we do larger apartment buildings is that the whole management thing. So now I can have onsite property managers and onsite maintenance staff to reduce my ongoing maintenance, to reduce my ongoing management, attracting better tenants and more qualified tenants. Screening them better and having nicer units than down the street and still just charging market-rate rent. Not trying to get a premium out of it. We're able to attract the best tenants and they stay longer. Your biggest expense and only rental property are going to be turnover. So if you can minimize your turnover you're going to be able to increase your income increases your returns pretty significantly long term on that apartment building. So you do all those different kinds of things. You increase the income, you decrease the expenses, and the end of the day your NOI is much greater and then the cap rate that it appraises at is a multiple of that and now you're able now you're in the ballgame. It's very predictable what the stabilized value is going to be on our properties. I know what I know it's going to praise for before I ever even buy it. So we know what numbers we just back into the numbers that way.    Yeah. So it sounds like here you're doing things differently. Also in and renovating the property so I'm curious to know about how you raised money because I bet you have some secrets over there as well.    Yeah, that's one of my unique abilities I'd say I'm pretty decent because I've done everything else so it's easy for me to talk from an operational basis, from an investment basis to my investors. And like on these deals that are closing next week we just raise six point eight million dollars over the course the past probably three weeks. It took us to raise almost seven million bucks and it was not as I wouldn't say it wasn't difficult but it wasn't as hard and it wasn't as much work as I thought it would be it was actually a lot simpler and smoother of a process than I thought. It's the most I've ever had a raise in a single deal before I've ever raised 3-4 million bucks in a single deal before but this is the most I had to raise. I've not got a single deal but in closings, all occurring in one day know how it lined up but all four of these properties are all closed on the same day. So how do you raise money? You tell people what you got man, you gotta tell everybody what you do and how you do it. And I think you need to have an offer that cannot be beaten. That's just it's so good that everybody has to listen or at least entertain the idea of investing with you and so what we do is we pay a 10 percent preferred rate of return regardless of the property's performance we're paying a 10 percent fixed pref. So you invest a hundred thousand dollars with us you're making ten thousand dollars a year regardless of the property's performance. And then when we refinance it's a pretty quick turnaround usually 12 to 18 months. Our investors get all their money back and then they keep equity in perpetuity so they get a little bit of equity in the deal forever. So they get a percentage of those refinanced proceeds that come off the table. They get a percentage of the cash flow they get a percentage of the depreciation and they get a percentage of any future sales proceeds. So now it's an infinite return because they made a solid return double-digit return respectable return on their money while it was in play. They get all their money back and now they have an infinite return on their investment because they have five proceeds. Cash flow forever and equity in the deal and they don't have anything invested anymore. And the next question is ‘hey Tim let's go do another deal. Do you have anything else? I don't want my money back. Let's roll it and do another deal.’    Then I roll it into another one and another one and another one in ten years down the road. I'm in seven or eight different deals that I'm partnered up with this person and they have these little almost annuities right here in their bank account on a monthly basis of the cash flow from all seven or eight different properties. They made a phenomenal return while their money was in play. They have all their money back and they have equity in seven or eight different deals that will pay off these big pops of re proceeds and sales proceeds whenever the property sells. And then every month their equity increases that we pay down the mortgage balance on these properties and every year that we bump rents and the property appreciates their equity increases over time. And now they're building real wealth. Right. So not only that making a good return on their investment but they're actually building wealth for them and their families. And it's a win-win all around. Now I don't have to work as hard because they want to do more deals. It breeds a lot of loyalty with my investors and it just makes sense that way. But I tell everybody that I invest in real estate. I tell them how I structure deals you cannot pitch people. There are S.E.C. violations to pitching people that you don't know or posting something on social media like I don't do anything like that. I post about deals that I have going on and post about case studies that I did and from that people inquire and they say ‘Hey man I'm sitting on some coin. Do you have anything that I can roll into?’ Well, let's develop a relationship first. Tell me a little bit more about your background. Tell me a little bit more about what you have going on right now. It's about a little bit about your experience in real estate investing. Tell me what your long term and short term goals are. Once I develop the relationship then I can tell them, oh this deal just came up. It fits and meets your needs. You're a good match for this. You're accredited. You're not accredited. Whatever that looks like. And then you can move to the right project.    That's amazing so yeah you're the first person that ever told me that they're paying 10 percent to prefer return but somehow it makes so much sense to me, to be honest. I mean that's amazing that you do things so differently than anybody else.    And it's a dude. It all boils down to finding good deals one and being an awesome Operator. You gotta be able to oversee the value add project management you've got to be able to oversee. I mean on that 700 unit deal I bought last summer we put 10 million dollars of renovations into this thing. So you think about that in a year and three months. We invested 10 million dollars. What is that  That's six and a half or six under fifty thousand dollars a month. We're doing renovations it takes a hell of an operator to be able to do that right. So what's not all of our deals. Some of them are less but I mean on on our projects they're gonna be able to find really good deals and or do really good project management in order to force the appreciation by putting in that sweat equity and that's why we can pay the returns that we pay because we take on a lot of that responsibility on our side as the operators. Yeah but again I told you at the beginning man I'm cool with it. We're cool getting our hands dirty work, we're cool with doing the work that nobody else is willing to do because then we get the deals that nobody else is willing to- they can find and or they're willing to work on.    Yeah and I bet there are bigger rewards for these kinds of deals.    Massive. I mean I'd rather buy a building that's worth 10 million. Like the hedge funds go in and buy 10 million dollar building for 10 million dollars and hope that it appreciates by 3 percent every year for the next 10 years. I don't come from that world. I'm an investor. I gotta find a wholesale deal right. So I'd rather buy and renovate something that I could be all into for six and a half million dollars. That then it for 10 million and still and still appreciates by 3 percent every single year. So that's more, my business model. And by doing it that way I'm also very safe for any market corrections or any anything that happens in the marketplace. I'm at a low enough basis in my properties. If and when shit hits the fan I have options right. I could sell. I can refinance. I can hold. I can do whatever the heck I want because I bought at a low enough cost basis and I've created appreciation versus speculating for appreciation.    Yeah and that's amazing. I think if I if I'd be investing in multifamily apartments as a passive investor I'd definitely be interested in talking to you. So what are the best ways to connect with you?    I'm active on social media Facebook. I'm really active. I have a podcast my own called LegacyWealthShow.com - I got a lot of free content there and I do a little bit of mentoring not a lot. I'm not a guru. I was approached by some guys who have an education business and they said ‘hey man you keep on doing what you're doing as an active Operator we'll do the education side’ but it's a good way that I'm able to train people on how to go out and find apartment buildings and be great operators and at the same time sometimes they have needs that they can't fill and I can invest in their projects. I can raise money I can sponsor loans for them. They can be boots on the ground they can find the deals do the project management and I can fill any voids that they might have. And there are other people who can come out to my events and I came out of it sitting on money I want to get involved in commercial real estate. I don't have the time or the bandwidth to do it myself but can I marry up with a great operator? There's a lot of passive investors that come out to my events that then we pair up with awesome operators or they invest in one of my projects or whatever and we're able to do deals together. So it's one of those things where one plus one equals three and a rising tide floats all boats. I give all the content that you could ever want to go out do deal on your own and if you want me involved and want to partner up some way knowing that you have somebody with my expertise my experience my team's experience in your corner is a big deal for a lot of my students. So I throw events three-four times a year as well and that's pretty cool it's kind of a way that I can kind of give back and help people build some of that wealth for the family too. So that's called Commercial Empire and if anybody wants information on that they go to commercialempire.com. That's more formal training.    Ok, wonderful. So Tim thank you very much for coming to our show today and I really hope we are going to have a beautiful rest of your day.    I appreciate you guys. Thank you for all the value that you guys give and all that you're doing for the real estate community and obviously if there's anything I can do to help you guys out as you guys transition into commercial real estate let me know.    I'm here for you. All right thank you very much.    Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.   

  Bryan Chavis, the bestselling author of “Buy It. Rent It. Profit” is highly regarded as one of the leading experts in the multifamily field having spent the last two decades learning from the ground up what it takes to invest in multifamily units. Being in property management himself, and working in all areas of multifamily, his unique perspective has allowed him to find great success in real estate - and lending valuable insight to his peers as a professional speaker, author, and business coach. Being able to see the business from a different perspective than most investors today in the field, Bryan’s refreshing take and step by step methodologies truly show how to build long-term wealth.    On this episode of Multifamily Real Estate Investments with Don and Eden, Bryan discusses his start in the real estate industry and how technology has made a vast difference. He also will explain the five phases of stabilizing a property and the details for scoping out the right property. His steps for how to create wealth as a syndicator are revolutionary and powerful for anyone looking to conduct business in real estate. If you are an entrepreneur seeking insight that is sure to bring results then this is the podcast episode for you.    Highlights:  Bryan’s Beginnings in Real Estate  Five Phases of Stabilizing a Property What to look for in a Potential Property Manager  Why Multifamily Units are Personal to Invest In  Current Projects   How to Connect with Bryan: BryanChavis.com  BryanChavis.com/youtube ChavisCapitalRE.com AllisonsAlligator.com - Nathan (Bryan’s Day One) --------------------------------------------- Transcription Hey, guys today I'm interviewing Brian Chavis, the author of the book Buy it. Rent it. Profit! Brian is a very successful multifamily real estate investor and syndicator. He's also considered to be a leader when it comes to multifamily investing. What I think is so special about him is that he started his career as a property manager and that's why his insights are always on point since he had seen this business through its core. So let's get started.    Welcome to the Real Estate Investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.    Hey Brian, welcome to the show. Thanks for having me. Good to be here.    So I've been wanting to have you on the show ever since I was listening to you in a different podcast. And I got to say that you're one of the experts that I've ever listened to when it comes to multifamily management and you're a very renowned speaker. The first thing I want us to do is, tell us a little bit about yourself and what you've been doing in the past year and what you're doing right now.    Oh, awesome. I'll be glad to. My background as is the multifamily industry I got started in this industry well over a decade ago - probably push closer to two decades now but first got into this industry just leasing. I started leasing apartments worked my way up from leasing into management to acquisition specialist. So really I've been around the multi-family industry from day one. I think when you were saying and I greatly appreciate the feedback that you heard me on other podcasts and gravitated toward my style or my brand I think that comes from really just living this and doing this for so long.  there's a lot of syndicators and there's a lot of outstanding guys out there getting involved with my multifamily. A lot of experts now offering classes in educational content which is awesome. I love it. We welcome it and I admire all those guys but very few have started like I have, which was almost 20 years ago leasing, management and working their way up through the multi-family industry a lot of them got in as syndicators and been blessed to have the opportunities to be able to raise money coming from other positions or jobs and creating these real estate investment firms where they're now acquiring multi-family but  there's very few of us who've actually lived and breathed and worked and got a W-9 from this industry so I feel like that is kind of what sets me apart is that as a practitioner this is what I do this is who I am. So it allows me to be able to really give great content great feedback what I feel is which makes the podcast so interesting is because I'm usually not regurgitating something I've heard I'm usually telling you something I know, so at the end of the day I think that why the viewers and individuals resonate with what I say on the podcast or in my lecture.    Yeah definitely. So when I was 18 I told my father I wanted to open a bar. And so my father told me ‘that if you want to open a bar -first you got to be a bartender. And I could totally relate. When I think about your story that you became a syndicator- right? you're syndicating deals right now. Yes. So you became a syndicator but you started from the bar. If we use that analogy and so I think that's terrific because you get the insights from firsthand. You really know what's going on the inside. And so I want to ask you how did that make you a better syndicator?    Really its fundamentals… experience. The one thing that no one can buy you can't acquire in books. You can't go to a four or five-day boot camp can't attend a mastermind and obtain experience. And I'll go a step further. Not only experience- but tested & evaluated experience. There's a ton of people out there who've gone through life or gone through some sort of experience but haven't really learned from it.  they've haven't mastered it. So for the experience of being in the industry and the multi-family industry allowed me to not only become trained and educated through the National Apartment Association and taking my certifications and then going on to teaching a lot of the courses through the camp certification but it allowed me to experience managing and operating thousands of units. And at the end of the day, that's the key. That's the great divider separator you want to just make sure that you're syndicator that you're dealing with has some sort of experience.   I know a lot of people say experience syndicating and that's good. I also like experience and that you have experience as a syndicator but you also have a hands-on experience at operating these properties because experience at the end of the day if all hell breaks loose- there's countless YouTube videos with me stepping foot on the property and releasing everybody on site going to work for a private equity firm and having to fire the staff at one hundred thirty three-unit apartment building and actually run in it for a week or so by myself with just me and my personal assistant until she was able to staff it and help me staff it. We’d close it down for lunch and did the interviews and then I spent two days training the new staff and then staffing the place so that at the end of the day to me if you're raising money and you're a syndicator you want to stay on top of your game you want to always continuously be educated and have as much experience hands-on operating experience as possible.  I think at the end of the day I think that's always for me is always a key fundamental or a key trait.    Yeah. I mean I think if you were raising money for me and I know that you were also a property manager and that's how you started and so it would have been a strong card so it would have been I would definitely consider. So thinking about giving you my money to work with because I know how to handle it. And so I'm pretty sure that helped you a lot. And I also know you wrote two books on multi families right? Property Management. So tell us a little bit about these books.    Yeah. Well, those books for there were social media before brands were created in and thought leaders were instantly created like a microwave label product.    There was me 15 years ago  and I had a book a manual I wrote out of the back of my car I was working in the multifamily industry at the time managing thousands of units and I decided I wanted to become ago and a real estate entrepreneur and I didn't have two nickels to rub together hand. So I decided that what I could do is write about the procedures manual and Operations Manual. And so I wrote this manual and selling it out of the trunk of my car and I was visiting various different real estate associations and I had no experience speaking. I actually sucked at it. I mean I had several people would put on the comment forms that I looked like a deer in the headlights. But I kept grinding and I kept going at it I kept doing it and eventually,  people would start to come in wanting to meet with me outside of these real groups. And so then I started to hold these little meetups before meetups were popular I started holding them at a Kinko's off of Dale Mayberry in South Tampa and they allowed me to use the broom closet. So I cleaned up the broom closet because the manager actually was a part of one of the groups, they let me come in. I cleaned up the broom closet, cleaned the boxes out and I put a table in there and started holding meetings and teaching individuals how to manage their properties properly. And then I would try to sell my two hundred dollar Procedures Manual that ran their entire business for them, give them all the forms everything they needed the procedures, how to do it, how to interact with prospect tenants, how to deal with them, how to move them in, how to move them out, how to evict them if they ever had to do an eviction. So the procedures manuals were the same manuals I was using pretty much operate thousands of rental units so it was kind of second nature to me.    Then,  that eventually became the distant relative to the books that are out there on the shelves now and I think one other thing that makes me unique is that these books are published and both are best sellers. One is, ‘Buy It, Rent It, Profit!’- the original is in the US Library of Congress. So it's not only a best seller and published by Simon Schuster but it's in the US Library of Congress so  I'm extremely proud of that but I'm probably more so proud of the humble beginnings. I wasn't born up social media age of being able to grab attention by doing YouTube videos I mean the content delivery I was doing was organic- I was living it day to day and now it's just sharing my knowledge with individuals and my experiences with individuals. I think again that falls back to where you ask me what makes me different. I think the big difference is just experience... tested & evaluated the experience  and so at the end of the day I think that experience came through to the training materials comes through to the books comes through my coaching programs and I believe that's really what gives not only myself but others the opportunity to succeed in this industry is being able to piggyback off of someone else's experience. That to me is is key because I've piggybacked off of my predecessors and most supervisors in the months our family industry who taught me getting and tons of others that I've worked for in the apartment industry I've learned from these individuals so it's  it's really passing it on and then passing it on through curriculum and design and training coaching programs. So I'm just really doing what I've naturally done from the very beginning.   Yeah, that's truly inspiring. And I want to talk about your book ‘Buy It. Rent It. Profit!’ So actually I read your book.  It was a long time ago as I think I was a year ago. I read a lot. I do a lot of reading and that's I think that's truly essential in today's world. I always talk about it here in the podcast. You're saying stuff about social media and the world the way it used to be. I think the world is very different right now and I think that there is access to so much information. So what is essentially what is a book? A book is the life study of a very smart man. Think about it. I mean isn't that what it is. I just said it on, I was hosted by this youtube channel and I just said it over there. It's called ‘One Rental At A Time’. If you guys want to see me over there. So yeah they asked me about books and reading and I said I read a lot. And the reason why I think it's so important to read is because, think about it, if you're not reading your competition is always reading and they are acquiring the life studies of very smart people. Right. What is it what does it cost? Ten dollars? I mean it's so cheap to get that critical knowledge for whatever it is you want to do so I have read your book and I want to talk about that book. I want to talk specifically about the ‘Five Phases of Stabilizing a Property’ because I think this is really getting down to the details without crunching too many numbers. But I think it's really what the audience needs to know. So I know the five phases are Acquisition and then Implementation, Stabilization, Growth, and Exit Strategy right. Exactly.    So I want us to talk on and dedicate the rest of this interview or the majority of this interview for these five phases. So could you please tell us shortly about each one of the steps and what are the most important things to look after or look for in these steps when you're buying and trying to stabilize a multifamily property.    Yeah. Acquisition. The number one phase of the five phases is understanding how to acquire a property from an income approach. And I think at the end of the day there are always challenges when you have an investment firm and your firm is thriving or you're syndication thrives for putting deals together. The idea is where do you find deals? I'm fortunate enough to live in Tampa, Florida area where there are deals for me and a great market is in my own backyard. However, the ability to find and evaluate these great markets are to use another process called the ‘SEOTA process’ if you read the book ‘Strategic Evaluation of Our Target Area’ and they wanted to identify your area through building permit activity demographics and graphs of your prospect tenant knowing really more about your prospect tenant than they know about themselves. Then you start looking for deals and then you back deals into that particular understanding that prospect tenants demographic- that's going to reveal the type of projects or deals that you can really go after like what type or class and asset classes you're going to kind of target.  Whether it be A or B or C asset classes and then obviously the price points you want to pay for those because those premiums there are premiums on A, B and C properties. A and B properties are obviously more and you can't build a Class B property out of the ground because of the cost of construction so knowing and identifying your assets once you've done that, then you will acquire it from an income approach and then understanding what does that income look like in the future not what you're acquiring and far the entry cap will put the exit cap may look like there's always a balancing act. For me, it's really understanding who that prospect tenant is.    I'm not gambling on the property itself.  I'm more so gambling on the prospect tenant at the end of the day, so I'm really the gamble is really not appropriate and that's something that should be stressed. It's on the market essentially. Well, it's on, that not only on the market but what makes up the market so you gotta keep drilling down. That's where again where you see a lot of the Internet gurus  they'll say ‘oh you focus on the property.’ Everybody is talking about underwriting properties and real estate is not about the property. Multi-family, in my opinion, is not so much about the property as much it is about the prospect tenant the demographic. I always say real estate is about people right.    Buildings don't pay rent. People pay rent. So at the end of the day if what's going to increase value over time you're increasing value by a periodic increase of rent and a periodic pay down the debt and that's how you create value. And at the end of the day this whole game that we're playing is predicated upon the prospect tenant and how they react and how do you react to market conditions. So you have to kind of forecast market conditions and then you have to kind of forecast how that's going to be how your prospect tenants going to react to those market conditions, therefore, i.e. no impact the value of your asset moving forward. So a lot more to it than just go into a five-day boot camp and thinking you're going to learn everything you need to learn about this industry by understanding how to underwrite property numbers can tell you a lot. One of my good friends the boxer, Winky Wright. Winky said ‘everybody looks good on paper. Everybody's a competitor on paper until you get in the ring and get hit in the mouth’ - everybody looks good and until you actually get hit. So at the end of the day, X's and O's and strategies and numbers, they can help predict. They can help evaluate but they don't run the property at the end of the day.  Someone's got to get in there from the operational level and know how to run this thing on Monday through Friday or Monday through Sunday. So that's extremely important for individuals to understand. I think that's where a lot of this is lost. This is really understanding how to evaluate investment properties from the acquisition level by really understanding who your prospective is and really identifying that demographic and forecasting them.  Then you move into the Implementation phase where most lose on the implementation phase because they don't know how to implement the right types of systems -there are two types of core systems hard systems and soft systems. The hard systems are your procedures & manuals. The manuals should identify the work that needs to be done Monday through Sunday. Then tell the user how to go about performing that work in a consistent manner like a franchise. So, if you have a franchise - your multifamily apartment building you're not running it like a franchise which means I could take it and put it in any kind of city or any state or anywhere in the country and it runs the exact same way, then you really don't have a business model. So, first of all, you have to implement the type of systems that will allow you to kind of franchise the way you're doing business which really means offer consistency because when you can offer consistency then you create profitability. So then you have the second system which is the soft systems which are your property management software. You have Appfolio, then newcomers that are disrupting like Uptop which is a free property management application. So if you're a real estate broker or agent you're trying to strike into the property management you probably want to look at those free platforms.    So, you systemize the apartment building and then you're in the implementation phase which brings you into Stabilization and then now you're focusing on stabilizing the property which is maximizing income and minimizing expenses. So you're maximizing income and you're minimizing expenses and that's the name of the game because typically you're buying a value add project. If you're syndicator like I am looking at the deals and you're looking to be able to add value and create value over a period of time and exit at a higher value. So that is done through stabilization and then of course then you're focusing on Growth.    From Growth, it's the Exit strategy and typically the exit strategy is to refi. And obviously, if what you're doing as an operator the ability to refi is all about having management in place, good numbers, good T-12’s is basically your accounting, your profit and loss statements for the past year just making sure you're on top of your game as an operator. So make sure that you're on top of your game as an operator allows you to refine that you can refine pay off your investors reposition and then you just keep them you keep the ball rolling. Really that's how you create wealth as a syndicator  because you're taking a percentage of each of these deals and obviously if you look at your IRR if you're only putting maybe zero to 5 percent into these deals and you're reaching your press and you're reaching your goals and structure I mean you're making 100 X obviously if you're putting zero when your ability to be able to create seven or eight-figure incomes for yourself based on your approach to this business is really obtainable.    I mean if I could do it. I mean to be told that anyone could do it.    Yes, I mean I think you could do it you're a very smart man.    But I really feel like the reason why I excel is like you I read and then go back to that reading and a lot of people, I think I've been criticized before - well someone said I know because I've mentioned to them that I didn't read a lot of books. However, they didn’t let me finish. I don't read a ton of books. What I do is I find four or five and I master them and I won't move to another book. It's like I master the three or four that I've read. And so I'm not big on consuming a ton of information or a ton of books as much as I am about consuming one book and mastering that book and implementing into my lifestyle. And for me, I can't speak on anyone else but for me, that takes time because I'm a bit of a knucklehead so to read a book like ‘The Book of Five Rings’ and to master that and implement it or read a book like ‘The Richest Man in Babylon’ take me a while to implement it and make it a day today. So for me, I'm not necessarily the smartest person I'm definitely not the smartest person on my team. But at the end of the day, I just think that while others are playing checkers I'm playing chess and not necessarily smarts but I think it’s strategy and that I leave it at that.    Yeah. Which for me, that's what I mean when I say smart. I also never went to college and I and I have a high school diploma and that's it. And I don't think I need more than that because I think being smart and successful is measured by society by being a good student which doesn't necessarily make you a successful man. Because I wasn't the best student in my class but I'm pretty sure I am one of the most successful ones.  if you look at my class I grew up in Israel and I know the situation of the people there. It's like they're doing okay. They're not bad. But I know they're not doing well right. I mean some students in my class they were so smart and they would get like A's on every test and I wasn't like that because I don't think that the things they teach you in schools are necessarily the things you need to be successful in today's society. I think it's a little bit outdated but that's a subject for that we could talk about for hours.    Absolutely. And it's funny because I have three coaching clients that are Israeli and they’re three of my favorite guys so I definitely understand that  I understand the school system, I understand the struggle because I'm helping them syndicate and a lot of it is what it is- the school system is a factory. You gotta get them in, you got to get them out and move them on- you get caught up in that because everyone learns differently. So, I think that's why again people resonate to my coaching programs and they resonate to my lectures, and podcast because I think I deliver it the way that obviously people had time in school.  it should be delivered but we have such imagination. So we feel like if they're not successful in the school that they can't. I mean look you can go to YouTube to you to see so many different places where you can grab education.     I knew nothing about private equity firms.  I just went on online research took a few classes online classes on private equity firms and start them and I didn't know much about the finance world took a few classes on finance so I'm always learning I'm always evolving. So at the end of the day if you're the same person you were even a week ago something's wrong you should always be constantly looking to evolve and push forward. So  I'll say no more than that.    Definitely. So I want to ask you as a property manager or somebody that started this as a property manager what would be the things you think are the most important things to look for when you hire one for your property that you're trying to stabilize?   That's a good question. Very good question as to what to look for property managers. Mostly as syndicators, you should be an asset manager. Every syndicator, every investor should start trying to start an asset management business and grow from there. And so as an asset manager, a syndicator you're really looking when you hire a property manager- you want a property manager to really understand how to navigate those five phases and you really want them to be able to sit at the table with you and look at your project and offer you a management plan. I mean how many property managers have you ever sat with? And I encourage anyone to think about this who or maybe bring it on property management or even interviewing property managers ask or find out how many have ever sat down and brought you a release a framework of a management plan for your project. So if there's a project and I'm bringing a 150 unit project to a property manager I'd want them to at least develop some sort of framework.    Well on that particular property do some research and bring me up to the beginnings of a framework of a management plan on their strategy for this particular property identifying the prospect and its demographic. What are we going to do to increase rents? I mean is that going to consist of changing units that can mean you can watch all my videos you can see what I've done at Park Plaza you can see where I know it's about changing fixtures and vanities and the type of ceiling fans you're putting in all that to attract a certain demographic. And then there's a price associated with that what does that cost? What is the recapture rate on that i.e. payback period on that? I’d like the property manager to be able to identify not just say ‘OK I just handle your headache for you, I'll handle the tenants I'll handle it.’ There's a strategy, people really think a property manager's job is just to kind of just manage it & keep an eye on the farm make sure the wolves stay away from the stable. But that's not property management that's stewardship. If you're a good property manager you're developing management plans. You have a plan on executing the prospect tenant, how to tap into that demographic, how to increase rents over a period of time, how to forecast market conditions by our competitors in the area. So you're sitting down to the table and you're articulating that to me, whether I already know it or not, it helps me, by knowing that my property managers can articulate that. So that's one of the first things that I'm doing when I'm looking in evaluating property managers.    So let me see if I got this right? You want to see that they've done their homework when they come to speak to you and that they're just trying to sell you themselves. Right? Right.    Yeah I mean I'm not interested, I'm looking here at a fancy brochure on my desk. I mean this is Nathan Johnson he’s the guy that handles all the marketing and branding. I mean you've got a nice fancy brochure, but a brochure won’t manage my property.  I mean, it’s great a brochure- it might open the door for you, might get you a sit, an interview or some sort of meeting for a cup of coffee. But at the end of the day, if I meet with you and we're talking about my property, I want you to come to the table, not with fancy brochures, or a business card I want you to come to tell me what the plan is for my particular property. I mean I'm already going to have one as a syndicator but I want to know that you've taken the time to come and let me know that you've done your homework as well.    Definitely. So I want to thank you for coming to the show today and dedicating your time. I know you're a very busy man and so let me ask you what are the best ways to connect with your audience. If anybody wants to reach out to you?   Cool. Great. Yeah.  we just launched our new BryanChavis.com - There you'll be able to find me. We're launching our new coaching programs I actually have a ‘Buy It. Rent It. Profit’ masterclass coming out. That's gonna be awesome. We have our designations, our certified real estate investment specialists and then we have our certified apartment syndicator which is a class designation so we have those two designations that are coming out within the next couple of months. I encourage everyone to go online definitely start with that master class to buy a property if you love the book. You going to love the course the ‘Buy It. Rent It. Profit.’ class should be ready in a couple of weeks and then the designations will follow in a few months. And if you're interested in coaching  I'm always here if you're a housing authority you're a private equity firm. If you're a wholesaler and you're looking to get into commercial, the coaching and consulting that I offer I highly recommend that and then the ability to also we offer templates and white labeling and licensing. So if you're a startup company you're looking for instant credibility you can license my brand and we can help you with your direct mail pieces in your sites and stuff like that so there's a ton of information if you're interested in actually investing please visit ChavisCapitalRE.com. My YouTube page is BrianChavis.com/YouTube and make sure you can always find me on Facebook and in our multi-family meetups, we do those. We'll be doing them twice a month. We got a next one I believe coming up soon it'll be announced on our Web site and come out to the multi-family meetups- meet other accredited investors and get to know your local investors and your influencers in your market.    Yeah, that's perfect. I got to start looking at your website right now. BrianChavis.com. And it's a beautiful website. It's designed meticulously.    I give credit to Nathan Johnson. He owns a company called Allison’s Alligator- he’s been with me since day one. Well, a really long time and he puts together an impeccable brand and we work together to help syndicators and wholesalers and individuals such as yourself develop their brands. And the idea is to be able to piggyback off- you're never going to be able to get 15 years of experience like I've got. So why not just piggyback off of my experience. Learn from standing on the shoulders of giants. So we definitely offer that to everyone so there is there's really no excuses at the end of the day.    Wonderful Bryan. Thank you for a great interview. And I hope you're going to have a beautiful rest of your day.    Well, thank you for having me. I greatly appreciate you. Continued blessings. Of course- Thank you. You too.    Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.   

Back in 2006, Aaron was a pharmacist who decided to dive into the real estate market and start investing. He bought a townhouse at the top of the market and realized that he could make more of a profit renting then just solely owning it. Once 2009 rolled around, he knew there were major opportunities to be had and started investing in real estate all over the country. As an “accidental investor”, Aaron now holds his real estate license and is more excited than ever to continue doing business in real estate while also maintaining his pharmacy career.   On this episode of Multifamily Real Estate Investments with Don and Eden, Aaron shares how he stumbled upon real estate in 2006, now thirteen years later concluded his first real estate syndication and is in control of 29 units. He also will dive a little deeper into how he just completed a six-unit syndication deal in Pittsburgh, Pennsylvania and how exactly he found the property and raised the funds to invest. These step by step examples are sure to impress and enlighten you on how to get started in the real estate business.      Highlights:  Aaron’s Beginnings in Real Estate  What he looks for in a solid deal  Key Lessons Learned  Why he is a Pharmacist and Real Estate Investor Current Projects   How to Connect with Aaron Email: ahowell7@hotmail.com  Bigger Pockets- Aaron Howell   Blacklickcapital.com  ------------------------------- TRANSCRIPTION   Hello everyone, my guest today is Aaron Howell who stumbled upon real estate accidentally back in 2006. Now 13 years later he concluded his first real estate syndication deal and is currently in control of 29 units. Let's hear more about how all this happened.    Welcome to the Real Estate Investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.    Hey, Aaron welcome to the show. How are you doing today? Great. How are you?   I'm doing just fine. I'm doing just fine. So tell us a little bit about your day. How does it look like?    Well, I get up early. I take the car in for service. That was done in about an hour and 15 minutes. I stopped by fellow investors business for a few minutes to chitchat. I'm home for the rest of the day and I don't have any plans. Might take the dog for a walk later and maybe take a nap.    So it sounds like you're semi-retired.    I am a part-time pharmacist these days. I just got my real estate license so I have access to the MLS now. And you know I'm a part-time investor so I've got a lot of stuff going on but nothing overwhelming at this point.    Yeah. So I already know a lot about you. And so that's why I want to ask you about your real estate career for our audience so they would know as much as I know about you. So how about you tell us a little more about that.    Sure sure. Well, I got started sort of as an accidental investor. I had bought a townhouse in 2006, kind of at the top of the market.    I think there was one neighbor who paid maybe even more for their townhouse than I paid for mine. By 2009 the market had tanked. I had kind of outgrown the property so I knew I needed to move into a larger property and I kind of moved outside of the city. I thought ‘oh you know I'll sell my townhouse yet should be no problem.’ You know ended up leaving it for about a year. The prices kept dropping off and dropping my realtor at the time said hey you know you ever thought about renting it.    So yeah at this point I probably need to you know a month or two later we had a tenant move in and I think that's kind of within the light bulb initially clicked. You know the tenant paying the mortgage was way better than me paying it. And then a year or two later I made a trip to California and Nevada to do some mountain climbing. And my mom mentioned you know get some real estate information while you're out there. Newspapers and flyers and stuff that you can get it like gas stations and restaurants and stuff. And then a month later so she was like hey we need to go to Las Vegas and take a look at some of the properties. You know I don't know where she got this idea. She's not really an adventurous person but we did go to Las Vegas and put it in all four on a pretty single-family residence at the time the market out there was really hurting. I went back about six months later and bought another property another single-family residence and you know at that point I was like ok do this four or five times I can have an extra thousand dollars a month. A couple of years later I'm going to school as a pharmacist. I graduated from pharmacy school in 2000. So this is like 10 years into the job, 11 years, you know the light bulb starts to click a little bit more and more and more 2013 I meet my wife. She didn’t become my wife until 2015. So you know you're thinking about things 2014 got a duplex here locally and you've got a really good buy on it, 2015 I got a single-family residence and actually two single-family residences 16 got a duplex. At work, a lot of the culture started to change. You know I could just tell you know the workplace is changing for the pharmacists that the company I work for you could tell a change in tone of voice on a conference call us and things like that. In 2017 I purchased three duplexes and a quad, that year my mom and I sold the one property in Vegas to be home together. Then I sold the second property that I owned individually. Those I did 1031 exchange with my property and use it to help close on those side duplex, then, in 2018 formed a partnership with some friends. And we purchased a six-unit building in Pittsburgh and then in late 2018 early 2019 completed my first syndication on another six-unit building.    But for the six utilities that are outside of Pittsburgh and most recently I moved from a primary residence into another primary residence and we have got that property rented now some up to twenty-nine units at this point and part-time and pharmacy that lets me take a nap in the middle of the afternoon.    Ok. So the first question I have is why are you still doing your job as a pharmacist when you are in control of 29 units?    To be honest with you, I enjoy the job still. I enjoy helping people. I enjoy the process of a pharmacy. I'm kind of strange, I like mowing the grass, I like shoveling snow, I like painting. For some reason but I think because you can look back at the end of the day and say oh you know that the job is done. You can see the work you did. Pharmacy kind of does that same way know at the end of the day you know you can look back and say you know I help these people today. So I still enjoy it. You know it's a steady income I go in three days a week clock in and do my job. You know. Go home. I'm not in charge of anything like I was at the previous job. So a lot of the headache and stress that I had to deal with it's gone. I have one key on my key ring. Now at this point, I used to have five or six keys. I had a door key safety register key after I left a full-time job at the previous company. Yeah, just a lot of stuff. The first month or so I kind of went through withdrawal. You know I was used to doing all kinds of odds and ends and having to think about things and worry about where my next employee where I was going to recruit them from. So I don't have to worry about that anymore which is great.    Yeah. So it looks like you're doing it the right way. Like you keep yourself together you're not changing with the success. And that's great because success has a lot of benefits but it has a downside as well. And I know what you're talking about. I know how it feels when you become successful then everything changes so fast and sometimes it's very overwhelming.     Yeah, the market's doing really well. You know if the market is downturned, I don't know whether I did a good job purchasing these properties or not. I mean I could have been completely out of percent wrong. I think I'm doing well with cash flow but you know until the market kind of turns in the wrong direction we won't know for sure. But I feel like I've done well with the purchasing.    Yeah I don't think you're doing anything wrong because you're focusing on the small properties you're not going on the 50 to 100 unit kind of apartment buildings that are overheated and people are paying for them.    I think if you're doing your research well enough you're pretty safe. And especially if your properties are cash flowing because whatever it is you could weather any storm. If your cash flow is positive right. Right yeah. That's very cool. So let me ask you this. Are you going to keep your job forever now that you're I could say financially free or close to being financially free?    You know I don't know for sure. I see myself wanting to go to work less and less.    You know I still enjoy it but I find myself at work you know the kind of wishing my eight-hour shift was a five-hour shift or my eight-hour shift was a four-hour shift. And I recently got my real estate license. I have a bunch of investor friends you're like oh ok you know hey you can give me info on this and that or I have some friends that are like Hey could you help me find my next house so we'll see where that goes. But at this point you know I see myself being a pharmacist for a while especially if I can go in and kind of you know part-time like I'm doing now like last week I worked an extra day next week I don't work any kind of put on my schedule I'm not available so it's pretty flexible.    Ok. So I want to ask you more about that six-unit syndication deal we just did in Pittsburgh. So tell me more about this deal. How did you find the property and how did you raise the funds?   Well, the first property we bought in 2018, the broker I stayed in touch with him. I told him I had left my job. I was looking for some other properties to add to the portfolio. So he had been in touch and the property we found where he found for us we end up closing on I think maybe in August or so. He had you know given me the information. And at first, I know the properties are kind of like an ugly duckling you know the cash flow is good things going really well but it's not the prettiest building. Yeah at first I was kind of like you know we'll see and then over time, the price dropped and the price dropped in the price dropped.    So we got it for about fifty thousand dollars less than it initially was listed for. But basically just kind of keeping in touch with that broker. You know after we closed that first deal I think they realized you kind of you can close another deal or you have the potential to close. You know what you're doing. So I just stayed in touch with him. He's emailed me a couple of other deals since we closed in January on the syndication but haven't really found anything I liked yet more than my job. So what is it that you like when you're looking at a deal? You know obviously cash flow. I'm also looking at the surrounding areas. You know I invested in 2015 through 2017 pretty heavily in Cleveland. You know there's certain neighborhoods there are zip codes that I like better than others. Same thing with us investing in Pittsburgh I was kind of looking at the areas you know the suburbs where we're dealing with. That's important. You know you want your tenants to feel safe. You want your tenants to want to live in your property. You want it to be close to certain amenities. Good school zones things like that but it predominately cash flow. You know that's going get you through the tough times if things go wrong and the property manager to you know a lot of people on you know where I'm investing it that far the property manager will make or break the deal for you lots of times and the property manager we use there in Pittsburgh is very aggressive. They're good at putting tenants in place when there's a vacancy.    Yeah, it's always important to have a good team member on your side especially a property manager when you're dealing with multi-family. So tell me more about the cash flow when you're saying it was cash flow. What were the numbers? So what is the percentage that you'd be interested in purchasing?    What was it we're looking in the grand scheme of things about a thousand dollars a month? You know the eight hundred and a thousand dollars a month which is about 8 to 10 percent you know that the first six months on a new property lots of times pretty rocky.    And after things settle you know we're kind of looking for that 8 to 10 percent return. You know the first couple months we've taken into account we've got reserves set up. You know the lender knows a lot of times that people are borrowing that want 6 months of reserves because they know just like you know I've learned over time that things don't always go as planned for that for six months to a year.    Yeah. So tell us more about the units. So what is the composition of the units?    There's a couple of ones but most everything there is the one I think got the top unit or the best unit was a three-one. But you know it's in a good school district also. Literally, the dividing line for the school district is in the middle of the street. So the other side of the street has that you know a different school district different taxation because Pittsburgh basically taxes on the school district. You get a tax bill from the school district itself. Yeah. So the 3/ 1 you know it was in probably the best shape it was tons of space. So we walked in there and I was like wow this is really nice. And the guy was only charging like six hundred dollars for the unit. So you know right after closing it went vacant and I think we raised the rent to around 750 or so which is more kind of what's normal for the market there. Yeah.     And so the other units the 2/1’s and the 1/1 they were in bad shape?   No. The previous owner was a handyman. That was his profession. So pretty much everything was in really good shape. I mean like I said the building looked ugly from the outside but once you got inside the units were in pretty good shape. I mean we've replaced a little bit of carpet. Some of the paint schemes were a little bizarre you know like the kind of like lime green and things like that we were you know when we renovate the units to neutralize that and just kind of make it more tenant-friendly. But yeah most everything was in pretty good shape. The owner's unit probably was the one that was in the worst shape and I had the weirdest paint colors but when he leaves he's actually still paying us to rent at this point and he's actually fixing stuff for the property manager as part of like part of his rent.    So tell me in that case, your value add was just increasing the rents and a little bit of touch-ups but just increased the rents right?    So he did not know the previous owner did not know what his property was worth or how much he could be renting for? Correct me if I'm wrong.    No, I think you're exactly right. You know I think maybe him living there and dealing with the tenants on a day to day basis he became very friendly with them and you know when it came time to raise the rents he was probably less likely to do so because they were friends and a neighbor. Yeah. So you know now that we have a property manager and they're you know they're obviously getting paid a percentage of what rents they bring in you know they're getting more. Aligned with the market.    Yeah. So let's break it down you stumbled upon this property that you know is doing all right but could do better because the rents are just for a little bit lower than the market rents. Right. Then you just raise the funds through syndication for a six-unit which is not I believe it was the total purchase price? It was three hundred thousand. So it's not that expensive of a property so the raise is not that difficult did you finance it? We did yes.    Twenty-one years and five-point two five percent and I raised about one hundred and five thousand dollars.    I'd open the accounts at the bank we use doesn't have a huge debt they don't have a really good app yet their like a smaller local bank. They don't have a great website literally as we were you know we were raising money a couple of days. I was literally calling in on their phone number and checking the balance throughout the day making sure all the money was yet again never done that my entire life. But I kind of did a happy dance around lunchtime when I heard that you had all the money was deposited and we were ready to go for closing nights.    So tell us a little bit about the people that you raised funds with. Do you know them because I bet it's not a lot of people since we're talking about 300 thousand pounds deal right?   You're correct. Yes. So for them you know I was the fifth investor the originator of the syndication. I got a small percentage but then I invested my son myself. One of the investors I've been friends with for a couple of years. I met him through Bigger Pockets. We've been catching up for coffee and another investor was the previous investor on the other partnership. He invested with us again another investor was a friend of a friend - father-in-law of our friend. I had asked if he was interested in investing and he said no but my father in law maybe. And then the fourth investor was that person who had reached out to me after a previous podcast and we've talked on the phone we've met in person. So we've become friends over the time period. So yeah kind of just a random collection of people when investors you know.    Yeah. So it is to my understanding you never had a real estate license before you just did it. So how did you even know about this deal? How did you even start? You must have gone through getting to know Zillow and Redfin and all these other websites that you could learn a little bit about the market but they're not super accurate. So you had to have some guts.    Yeah.    Are you talking about the Pittsburgh market or just in general? In general, like you never had a real estate license. So how did you get into the MLS and look for properties, to begin with? So let's say that there is somebody - in a position where they don't have a real estate license and they don't have money but they want to do what you're doing. So how would you recommend for them to start when they don't have all that information. So for me for instance I have a real estate license and I'm very experienced in real estate and if I want to look on a deal then it's very easy for me to understand analyze it because I've been doing this for a few years and because I have a license and access and all of the software and programs and MLS and name it I mean I have access to it so I can analyze anything but you did not have that access. So how did you analyze deals? How did you even understand the values?    Well you know initially I just kind of look at on Zillow or Redfin or realtor dot com you know and I would familiarize myself with the market you know initially in Vegas we were looking there wasn't a lot of time that stuff would hit the market and we'd be under contract in that day. So we had become friends with the realtor there. Now as I kind of progressed to moving it's in the best sense closer to home. My realtor here would lookout for things for me. You know I'm looking all the time myself. So I became familiar there with properties. And as far as Cleveland goes I would just scour the MLS on a daily basis. I think becoming familiar with the market you're looking and like a certain zip code. I think that makes a huge difference. If you're looking every day you'll know what's a deal and what's not a deal. You just develop this sixth sense that you could just pick it up when you see it right. Essentially yeah. You know as you look at more and more stuff you'll just know ok that's an owner trying to hit a homerun there or you know that's a value there property wise but you just you know you learn over time just looking at things over here but you must have got knowledge from books and podcasts and stuff and that if you're the type of person I think you are that you look like the type of person that educate yourself when you want to learn something.    I don't even know how I found Bigger Pockets initially. I think that's my first podcast. I started listening to. And you know from there I branched out. And know as far as you know educating myself podcast wise I was driving 35 minutes to work every day, 35 minutes home, so that gives a lot of time to listen to a podcast.    As far as reading goes I've always been a good reader. I think after graduating pharmacy school I probably swore that I would never read a book again. But you know at some point along the way I did start reading and you know that's really helped as far as education-wise and there's only so much reading. You do have to take action. You know you have to put that knowledge into play at some point.    Yeah definitely. If you're reading and you're not taking action then you never have any chance of executing what you've studied. Exactly.    Yes. So what are your goals for the future? It looks like you're doing well and you're getting to know the real estate world. What do you aspire to be in a few years?    You know I. I see myself still being a pharmacist may be the even less part-time than I am now. I'm anxious to see what this real estate license takes me. You know I think I could be a value add to investors here locally. You know they were looking for properties. I think you could probably help them out as far as knowing what's good property and what's going to be good for them. So we'll see. And then you know just maybe just enjoying the properties and currently, maybe you know maybe adding a deal or two a year. You know. I don't have a specific job or goal that I'm working toward. But you know a few more here and there that are good properties and cash flow definitely won't hurt anything. Yeah.    So what would be the best advice you'd give the beginner real estate investor? I would say educate yourself with you know with a little bit of action moving forward you know to join your local RIA meet people. Maybe even get your real estate license. You know I could see myself down the road as I've added you know realtor friends or clients or that may be having more partners potential partners I should say for a deal that I might find you know I think I'm on Bigger Pockets of meet local reach and stuff like that. There's only so people in those meetings but I think I just expanded my network will help out. And I think you know somebody who is getting started?    So what are the best ways to connect with you? Probably my email. You know I would email someone back if they e-mail me I'm a. Which is ahowell7@hotmail.com - I'm on Bigger Pockets, I'm on Linkedin I have a website - blacklickcapital.com. Those are the best ways. You know like I said out you know I've been on a couple of podcasts previously and I emailed everyone back who e-mails me which is always kind of funny hearing where people are from that they heard the podcast. I actually had one or two people here in Charlottesville, Virginia reach out to me say ‘Hey I heard you on the podcast I live in Charlottesville too’ which is kind of strange that many people listen to the same podcasts that you're listening to.    Oh yeah definitely. And then people from your city. That's a great opportunity to increase your network. Exactly. Yeah. That's great.    So I really want to thank you for being on the show Aaron, you gave us some beautiful insights so I really appreciate it. And I'm sure our audience would appreciate that as well. So thank you very much. And I wish you all the best and keep exploring the real estate world. It's amazing there are so many things that we don't know yet and we are just longing to see where it's going to take us.    Right. That's right. Well, thank you for having me today. All right, Aaron, you're welcome. Thank you for coming. I appreciate it. You have a nice day. All right thank you.    Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.   

Episode 10: Have you ever thought about truly achieving the financial independence you’ve always wanted in order to provide a better future for yourself and your family? Are you seeking a strategy that is effective when buying and holding real estate? Then today’s episode will provide great insight for you.  After a hefty career in sales, Michael Zuber decided he needed to find a better alternative than the intense grind of a sales career and focus on building his future. One that allowed for a better work-life balance and less anxiety. This led him to start investing in rental properties and outsourcing property management so he could generate an income on the side while also keeping his traditional career. His ‘going against the grain’ methodologies have proven very successful for his real estate investments and today he is excited to share with you exactly why.  On this episode of Multifamily Real Estate Investments with Don and Eden, Michael, the author of One Rental At A Time, shares his in-depth strategy and plans that he implemented for buying and holding real estate in order to generate enough income for him to live a much better-balanced life. Michael shares his take on the current real estate market, his advice for investing in the right deal at the right time, and his business model he applies to invest in the smaller 15-20 units.    Highlights:  Michael’s Beginnings in Real Estate  Why he typically invests in the smaller 5-20 units How he views the current real estate market Current Projects   How to Connect with Michael One Rental At a Time- YouTube Channel Michael Zuber  One Rental At a Time Book Available on Amazon ------------------------------------------------------------- TRANSCRIPTION   Hey guys, today I’m hosting Michael Zuber - as you know every investor likes to do things a little different. So Michael is investing in multi-family apartments but he's after the smaller ones typically between five and 20 units.  Today I want to realize why and more importantly how.  Welcome to the real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.   Hey Michael, welcome to our show.   Hey hey, thank you for having me. This is going to be a lot of fun.  I hope you guys are excited because today we have a very special guest. So, Michael, you've been specializing at 5 to 20 multifamily units and you've been doing that for 15 years. Am I correct?  Yes. I was a busy technology worker worked in sales and realized that it is a very hard career to do for a long time. So I worked very hard during the day saved my money and bought multi-family properties which ultimately allowed me to leave the rat race and quit my job at a relatively young age and left at forty-five. So it is absolutely possible to leave your job because of buy and hold rental properties.  That's great. So you've been going against the advice of all the gurus which is to quit your job and your W-2 so that you can focus primarily on real estate investing. So I mean a lot of people say that you've got to quit your job if you want to do it because otherwise, it's really hard to focus on two things simultaneously. So, for me I mean I'm hearing it's either you really loved your job right or you are very good at doing things simultaneously.  Well, I think it's actually probably a third option if we're honest with ourselves right. I think that Guru message that hustle and grind that message is really tailored to I'll just call it the people younger than me right. So I'm in my 40s just for comparison sake. That's a message that college students folks right out of college or high school students love to hear right. So I think when gurus are pushing that message they're saying something frankly because they want to get a little bit of your money for some course or video or something. Yeah. You know my point of reference was I was a 30-year-old man. I had a family I had already “been successful” at least by my parents' definition which meant I went to high school when I graduated high school went to college, got an MBA and was making six figures. But what I quickly realized is not only was I making six figures I was spending six figures. So I had nothing to show for my success. And I knew I was in a chosen career that I just couldn't do for a long time because it was so stressful these 90 day cycles really beat you up and you know I needed a way out and I wasn't going to be a professional athlete or a songwriter wasn't going to you know to create something from scratch. So I had to jump in and buy and hold rental properties or real estate is how much you know lots of people get rich. And I just started buying one at a time. And I truly believe that the right answer for most people is to bust your butt during the day. So earn as much money as you can at your job or jobs because there was a time where I had two jobs and then invest in real estate on the side. I believe buy and hold rental properties when you do it correctly. You outsource property management and the rest takes maybe four hours a week when you're in your build phase because all you have to do is learn your market and track down that one deal and you know you're doing one deal maybe every six months. So it's really not a full-time job right. If you're wholesaling or flipping or you're building chunk money that's a job right. You've got to choose. But if you're doing buy and hold rental properties where your volume is two a year that's not a full-time job. So my job was to earn as much as I could, save which are not a lot of people talk about right, you need to reduce your expenses and then invest. So that's what we did we did for 15 years replaced to six-figure incomes. And now you know time is what we make of it. And it's a pretty good life.  Yeah, it sounds like you guys are having fun. So now I know you're forty-five and you're retired from your regular daytime job. So what I was curious about is that. Tell us a little bit about your day. So when you wake up in the morning, what do you do right now? Do you have an office still or do you work from home? Do you have people that work for you? So how does your day look like? How many units do you have under control right now?  Yeah. So we have just under two hundred units. I think it's one ninety-five or one ninety-six it really depends because we're buying every month and I have a couple in escrow right now. So that's why I think we are today somewhere around there plus or minus one or two as far as my day. I am a morning person. There are not many days that you will catch me functional after 10 p.m. That said I'm up at 6 a.m. without an alarm clock. Six out of seven days a week no problem. So I'm definitely a morning person. So what I do now, when I get up in the morning is we have a dog so I take care you know what dogs need to take care of in the morning. I love some coffee and the first thing I will do is I will do some content from my YouTube channel. I like to do that in the morning. The house is quiet. My wife's asleep so I can record my daily content which I try to put out again every day. You know I've been doing it for six months now and will continue to do that. I then look at real estate. I've looked at real estate every day for the better part of 10 to 12 years so I still look and buy look I mean look in the MLS. I return voicemails from agents or wholesalers or bird dogs that may have left me a voicemail because lots of them are evening folks. And you know that's my morning right. So I'm doing something on my YouTube channel or something for my real estate portfolio. Probably till nine-thirty maybe ten o'clock each day and then that's it. The rest of the day is what we want. We typically go to the gym. After that we come home, shower, we go to lunch every day somewhere different. We come back in the afternoon we're returning phone calls on eviction or some kind of one of our rental portfolios. And then in the evening, it's probably going out to dinner. We probably go out five days a week and you know we just enjoy spending time together so that's the average day something for my followers something for my buy hold portfolio something for my rentals the gym. I do read a bunch you know during basketball season I will watch the Warriors games when they're on. So you know it's not a very stressful life.  I don't have any employees. I do most of my work from my home office. Interestingly enough, I am just now buying an office building in Fresno because I think I can help more people. But again I'm not going to have employees, everybody there will be their own business and we'll work something out, but it will be my office it will be where I brand “One Rental at a Time” because that's my experience in Fresno. So again I'm lucky enough that I don't have any great desires for fancy things. I can live very modestly and my bills are covered. So I spend a lot of time thinking about how to give back and creating a physical place called “One Rental at a Time” is it's something I'm doing now and going to open it up August 1st. So a lot of fun.  Ok. I'm excited for you as well. So you're doing one rental out on time and not quitting your job and I also know that you are focusing on five to 20 multifamily units instead of buying the 52 up to 100 hundred apartment complexes that everybody is always telling us to buy. Yeah. So the first question I have when we're digging deep into your business model is why do you choose to buy the five to 20 units instead of the bigger ones?  Well, there's a couple of reasons. The first and foremost was I never had any desire to complicate my life and I believe going outside and doing something called syndication or things of that nature would add complication.  So everything that we buy is in our name are LLC as are our entities right. I have no partners when we talk about roughly two hundred doors under ownership it is ours and by ours I mean my wife and me.  Right. So I don't get great energy by saying oh I have two thousand units well. Oh, by the way, I own 10 percent of it. That's not my thing. It's not that I don't like you know the huge building. It's frankly I've never had the capital to go buy one. And the other thing is you rightly said at least in the last 18 months because I've been doing this for 15 years the last 18 months to 24 months. Everybody's talking bigger is better. Everything is priced for perfection. And fortunately, I think a lot of people are gonna get hurt. I think there's just not very many solid 50 units in above. And if everybody is following Grant Cardone and like syndicators, I think there's going be a ton of living in partnerships that either take a haircut or they have to hold for 10 extra years because the math does that when things get priced crazy it's going to end badly. So I won't touch things that are overpriced and you know back in 2008 that was a single-family home. Today it's a 50 unit apartment building and I don't mind telling people that I think today they're overpriced and I think they're grossly overpriced especially when people are buying C class properties and lying to themselves about oh we're going to upgrade it and when recession comes. I'm going to get more occupancy. Yeah you're going to get more occupancy but you're going to lose 30 percent of your tenants and your tenant turnovers are gonna kill your cash flow and you know you're going to lose a ton of money. I'm not trying to sell anybody anything I'm not trying to raise any money so I can just be honest and tell you what I think and I think 50 units and above today is we're talking in the summer of 2019 they are grossly overpriced and I believe there's going to be a lot of limited partners that have to take haircuts or lock up their money for five to 10 years longer. So that's what I think is happening.  Yeah. Well, we are all about saying the truth here in the podcast. So you're definitely not the first person to say that. And so that is why I'm curious about your model because you are focusing on the fact that it's funny. So you think they're not overpriced and you think they're there is not as much competition. What is it that's so special about them.  Well, let's be clear. I think there's a ton of competition there as well. You know I've actually sold two of my 18 unit buildings here in the last six months because I knew what they were worth to me. Let's just reuse round numbers say a million dollars and what I did is I called up a couple of agents and I actually listed three of my buildings for 30 percent more than I thought they were worth. So in this example of a million dollars, I listed them for one point three and two of the three sold. So if you want to give me an artificial gain of 25 or 30 percent. Great. The third one didn't sell so great. I kept it right my LTV on that is like 30 percent. So cash flow is great. That said I'm still looking to buy. I just did a 15 unit deal about four months ago but I found that by going direct to sellers a lot like wholesalers do and I offered up seller financing and all of those things. So I still think there are lots of opportunities out there, but one of the things you learn about me just like in 2008 when stuff gets priced insanely. I'm not opposed to selling or more to the fact exchanging the 10 31 exchange is there for a reason. It allows you to shield year 1 taxes and push the basis onto something else. So the 1031 exchange that has been a great vehicle for us to maintain our wealth and also to take artificial value when something is overpriced.  Yeah, that's great. So what are you looking to buy right now?  Well, I only buy things that make financial sense. One of the things that I talk about a lot to my students is I have this yield calculation and I will buy whatever produces the highest yield not what takes the most cash not what's the prettiest, what's the highest yield? Sometimes that's a house sometimes that's a 20 unit apartment building. I can tell you for the last six months houses are a better investment than multifamily which is crazy the last 15 years of my career 5 to 20 unit buildings have been outstandingly priced and without question the better investment. Unfortunately, when the herd starts chasing multifamily the herd can push prices up. And unfortunately, there's not a lot of supply right? They're not building a lot of 5 to 20 units. If there are building stuff it's a big class a one hundred, two hundred, three hundred units. So the fact is the supply is dwindling. And when the herd follows Grant Cardone or like syndicators prices go up for the first time in 15 years it shocks me to say this but a single-family home produces a better return in most markets than a 20 unit apartment building. And that's crazy. But I think it's true today.  That is crazy. OK. So, Michael tell me a little bit about how you find these 5 to 20 unit buildings because I know a lot of people are talking to brokers and to try to get deals from brokers. So are you doing the same thing? Are you talking to brokers to find these kinds of deals or you're doing the marketing yourself?  Yeah. So you know one of the keys to this business as you know is you can't just have one strategy to find opportunities. So you know the short answer is I do lots of things. But let's kind of walk through each of them. First, off most of the five to 20 unit buildings I have found to date have been out of the local multiple listing service not looping it right loop net is kind of a graveyard for listings and they're all overpriced and things of that nature. So I do mean like your local multiple listing service in the beauty about that is what I'm seeking or searching for when I look there is marketed or mislisted properties because one of the things you learn in this business over time is most people do residential meaning single-family homes. But you know over the course of a year or maybe two years residential agents I have a friend or contact or some acquaintance go ‘hey can you list my building as well?’ And when they do that they make lots of rookie mistakes like one of the buildings I bought I still remember today was listed as a single-family home and I found it because it was listed oddly. Right.  The square footage was over eleven thousand square feet. It had twenty-four bedrooms and 12 bathrooms right. So for me, I'm like ‘Okay that's probably a 12 unit building and they're probably averaging 950 square feet.’ Most people would miss that because it wasn't allocated as multifamily it wouldn't show up in their automatic searches. So I peruse the multiple listing service every day I've been doing it for well over 12 years now.  I still get probably three deals a year just out of mismarketed or miss-listed multi-family properties. The other thing I do is obviously in this business it's a people business you have to market yourself you have to talk to people you have to network. One of the goals I had, while I was working a full-time job, was I wanted to meet two new people a week every week. So, you do that for a year that's over a hundred people you do that for five to 10 years that's five to a thousand people and you become known and you tell them what you're looking for and you follow up and you send them emails and you just build your Rolodex and you become a trusted known buyer. So you know probably 30 percent of my deals come from off-market listings where I get a phone call before anybody else sees it. So when somebody is trying to sell something and it's underpriced or it's in the condition or area town I like there's a pretty good chance I'm going to get a shot at it before it gets mass-marketed. Which is a great place to be. The other thing I do is, I do talk to people.  I remember a building I just closed this year 15 units and that came from having a conversation with the seller on a six-unit building I bought last year. Last year the seller via wholesaler sold me his building right. The wholesaler made like 30 grand. So they were really happy. And you know I had a building that I wanted to keep but I let the seller know when I shook his hand and I took the keys that hey you know if you have another building which you said he did if you're ever looking at selling it we should look to do owner financing because I could save you a lot of money on taxes keep giving you in income but also remove the headaches and you know I didn't think he listened to me because he kind of shook his head and you know this or that. He called me up a year later almost to the day and said ‘Hey do you remember me I'm like yeah you sold me that building on Main Street’ whatever it was. And he goes well, you know you told me about that seller financing and I thought it was a scam and I didn't really understand what would happen to my taxes because I depreciated that six-unit building to zero. Tell me more about that because I don't want to pay 50 percent hit. You know this next tax year which he had to pay roughly because he had zero cost bases and a six-unit building so you know he had to pay a fair amount of taxes. So we ended up working it out and the long story short is he sold me one point three million dollar asset for nine hundred grand. He kept roughly a five thousand dollar payment for the next 20 years which is what he thought his life expect to see would be his year when taxes were significantly reduced because I only gave him 50k down, I got a reduced down payment, I got a reduced interest rate and I got a whole bunch of equity. He got a prepayment penalty of five years because he didn't want me to sell it at least cheaply within the first five years. So you know by talking to sellers you can't create win-win but to be clear I don't do mass mailings. I work with wholesalers that do I don't have any direct employees as I shared earlier. So you know I 'm probably not as active as I should be but I think I'm doing ok.  I think you're doing ok too. No doubt about that. So yeah first of all these are very accurate strategies and some of them at least I could see that you're doing something that everybody's doing like the first thing and that is to put your name out there and that is probably the most important thing. I always say on the show whenever you do real estate let everybody know that is what you're doing because you would never know where it's coming from either from your friends from people that talked about you and said that you're doing stuff. And so all of a sudden you get a phone call and that phone call is worth a hundred or two hundred thousand you know down the road. So I could totally agree. And so I want to ask you about specifically about these five to 20 units because not every day I have somebody who's focusing on them. So I want to ask you about the potential value adds all of these units, I know they're different and I know the value rates are different so you can do the same things you would do in a bigger apartment building and also I want to focus on the management. Yeah. So these two questions are really important for our audience. So I know a lot of people say that you want to buy the bigger units or the bigger apartments sorry so that you can put on-site management and that way you are not required to do anything. So how do you combat that struggle of managing your units yourself or putting somebody to do it where they're not that big?  Well first off I think anybody who believes that if you just put an on-site manager suddenly the world is better is either new or lying to themselves. Because I have a couple of buildings in the state of California. Anything over 16 units you have an on-site manager. So I have several buildings where I have to pay to have a manager free rent. All of those things. And it's still management intensive. Right because they are essential to be eyes on the ground but they're you know most of them aren't going to be you know maybe they can do light bulb changes and you know to call out repairman it's tough but they're not going to be your general contractors you're not going to want to mess with electricity or plumbing or anything of that nature. Yeah. Okay. So you have a hundred unit building you have to onsite managers but if you think that's gone you're not going to have any other management headaches. You're kidding yourself. The other thing is I've invested in a market my entire life that's two and a half hours away from me. So I've had property management since day one. So in a building where I have onsite, I obviously pay a slightly reduced rate because I'm also paying for the onsite. But I've been paying property manager since day one since I had only a single house. So I don't do self-management. I don't believe in self-management. We've already talked about the fact that I had a busy day job. I was paid relatively well so I was going to exchange my very well self-management-paying job for a ten dollar an hour job. So I've had property management since day one. And then as far as a value add. The thing about 5 to 20 unit buildings is they're building them b they're never gonna be Class A. But you can take these 60 and 70 unit buildings that do have some kind of functional layouts just different right the kitchens are smaller. You know they had it was more boxy. Back in the 70s so with very little investments you can make a choice do you just want to go in and change the flooring and paint and put in new appliances or do you want to update a little bit take out that fake wall that's just there to box it in the kitchen put in the open feeling create an island or a bar stool kind of layout and there are things that you could take a C class building to assume the area that you're in supports it and really dress it up for not very much more money. Right. I can dress up you know a 750 square foot two bedroom one bath for sixty-five to seven grand and I could take the rents up two hundred and fifty dollars and they're going to stay there because what people need to realize is most renters are living paycheck to paycheck. So if you can make this place the nicest rental they have ever lived in. The chances of them leave leaving are slim. And more importantly, they're going to if you have a good tenant and they're paying rent they're going to bring their friends and they're gonna see hey you're at your unit has a barstools seating by the kitchen. Oh my God I've never seen that right so there's just little things that you can do to make your you know 20 unit building that was built 50 or 60 years ago stand out and you know I don't mind that because you know full occupancy and a 20 unit building as it is a good thing and then let's turnover is even a better thing.  Yeah, that sounds great actually. I mean I can understand why you're doing it this way. It sounds brilliant, to be honest.  Thank you. Yeah. It worked. You're welcome. So let me ask you how can other people connect with you.  Well, the best thing to do would be to subscribe to my YouTube channel it's called One Rental at A Time. I do put out daily content anywhere from successful interviews to real talk to walk through. I put it all out there I need to do something during the day. So that's what I do and I do that in the morning. If you really want to learn about our story one of the first things I did after leaving the workforce is I wrote a book. It's called One Rental At A Time itself published on Amazon. I'm proud to say that there are sixty-five five star reviews now which means a lot to me. So people are liking it and it's not really selling anything it's just here's our 15-year journey. This is what we did. This is what worked what didn't work and what's interesting about the 15-year journey is it. We rode the wave up, we rode the wave down, and then we rode the return. So you get a full cycle and a half and you know people are enjoying it. So that's probably the best way YouTube for daily contact and if you really want to get our story go by the book on Amazon called ‘One Rental at a Time.’  Well, Michael, I could talk to you all day because I see your story is so interesting. But yes definitely I mean I'm sure there are many things that we didn't talk about just as you know you can only talk to all and talk about so many things like you know how you dealt with the crisis back in 08 we did not cover that so I'm sure that's going to be on your book and anybody that wants to know more buy it and that's about it. Yes, Michael. So thank you very much for being on the show. I'm excited to be on your show. I can't wait. Yeah. I would also have a lot to talk about I'm sure. And thank you and continue with your amazing day as a retired man. Thank you very much. All right. Michael always a pleasure. Thank you.  Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.   

Episode 9: Discussing Current Strategies for Investing in Commercial Real Estate with Paul Moore After graduating with an engineering degree and then an MBA Paul Moore decided to enter the business world working at Ford Motor Company. After a few years, he departed to start working with a partner who was interested in real estate investing just as he himself was. Three successful developments, including assisting with the development of a Hyatt hotel and a very successful multifamily project, led him into the commercial multifamily arena.  On this episode of Multifamily Real Estate Investments with Don and Eden, Paul shares his strategies behind the steps he took to develop and successfully execute his real estate projects, and his reasoning for what lead him to move into the self-storage development area after being in multi-family units.  Highlights:  Paul’s Beginnings in Real Estate  Past Deals with Multi-Family and Commercial Real Estate  Why Paul invests in Self-Storage and Mobile Home Parks  Benefits of Self-Storage and Mobile Home Park Investing  Current Projects Connect with Paul https://www.wellingscapital.com Bigger Pockets- Paul Moore --------------------------------------------------------------------------- TRANSCRIPTION:    Hey, guys, this is Don your host and today my guest is Paul Moore. Paul is one of the people that influenced me the most as I heard him talk over a different podcast a few years back and that was when I decided to actually make the move from residential investing to commercial real estate and what I like about Paul is that it feels like he's always one step ahead of everybody else. And after finishing the interview with him I decided to record this intro a little differently because I was really blown away from the more practical things we've talked about towards the last third of this episode. So I don't want anybody to miss out on that. We're going to talk about amazing value eight strategies in different asset classes so stay tuned and I hope you guys are excited. Let's get started.  Welcome to the real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.  Hey Paul, welcome to the show. Hey, it's great to be here. Thanks, Don.  Ok, so I got to say personally that you're one of the guests that I am excited to have the most on my show. And that's because listening to you on a podcast I can't remember which one exactly because it was a long time ago was what actually made me decide to do the transition from residential real estate to commercial real estate. And the reason for that is because I heard you talk about commercial real estate and you were so passionate about it. Well yeah. You were so excited about it that I was like wow well this man talks about this as if this is the best thing ever so I got to check it out. And so I hope you know this makes you feel good that you have an impact on people.  Absolutely I am really honored to hear you say that Don. Thank you so much.  Of course, of course, well you deserve any kind word. And what I'm so excited about is that really when I heard you talk then I could hear that you're an expert. You're really somebody that knows what you're talking about. So how about you tell our audience a little bit about who you are, what you do and what's your what is your main focus right now.  Okay great. Well I got an engineering degree which was a big mistake because I didn't know who I was, what I wanted to do and I went out and got an MBA back in the mid 80s and went to Ford Motor Company for five years and then I just really loved Ford- still do, but just had an entrepreneurial bug and so I quit Ford, my buddy, and I started our own company and we just hit the timing just perfect. You know Bill Gates said, “the problem with early success is it makes people feel like that they're smarter than they are.” And I think that's kind of what happened because we sold that company for several million dollars and I went out and started investing. And you know what? I wasn't really investing at all. I was speculating and calling it investing you know investing is when your principle is generally safe and you've got a chance to make a return. And speculating is when your principal is not at all safe and you've got a chance to make a return. And so I didn't know the difference. And so I actually had all kinds of issues and problems along the way I lost a lot of money along the way and eventually got involved in real estate. And when I did I was able to see over time what the difference between speculating and investing is. And at this point, I'm really excited to be doing what we're doing in commercial real estate.  Wow, that's an amazing story and I'm going to tell you why I can totally relate to that. I recently read an amazing book by Napoleon Hill which I think is an outstanding book and it's called “Outwitting the Devil” and what he says in that book - you gotta check it out it's amazing so it kind of works on your mind it kind of changes your mind and the way you think mentally it makes you a more positive person whereas which kind of gives you the fundamentals for success. I got like a manuscript for success. This book is kind of different and so one of the things he says in the book that I could totally relate to is that there is no such thing as failure only temporary defeat. And for every failure or for every temporary defeat you have the same equivalent seed of success. And so when I hear you talk about how you were speculating and how you were actually kind of investing money in the chance of making a return that kind of makes me feel like you even if you've done mistakes you've learned from the mistakes am I right about that.   Yeah absolutely and that's one of the reasons we have a podcast called “How to lose money.” You don't really want to teach people to lose money but we want to teach people what not to do because I think it's a lot easier sometimes to avoid other people's mistakes than it is to copy their successes. And if we can learn what to avoid what not to do which all of our guests on almost 200 episodes now have told us what they did wrong then you can be better positioned to be sure you're doing what's right. And so I've got to tell you I never heard of that book and I just looked it up. It kind of looks like it's a newer book. I wonder if it's just never been published before.  Yes, so I'm happy to talk about this book because it is truly a life-changer in this podcast. I know it's about real estate but you know if you want to be good in real estate your competition is constantly acquiring knowledge. So you've got to acquire knowledge right. It was actually written in 1936. Right. I don't know maybe 1938 one of them got it was. Published in 1980. And so yes it was. It was hidden for 50 years. And the reason it was hidden is it was because of Napoleon's Hill's family, they were afraid. They were afraid of publishing this book because of the things that they talk about over there are just life-changing. And back in the day if you had published things like that to talk about you know our culture, schools, churches and the things they put into your mind when you were young then they were afraid that they would be there would be frowned upon. So that's why it wasn't published. And now a lot of people know about it. And but that's an amazing book. Yeah. I want to hear about your first successful deal. Tell me how you found it. What were the struggles in that specific deal? How did you come up with the money? I know you had money. So tell me a little bit about that.  So the first successful deal in multi-family was actually something I would never do again. It just happened that the timing was right. And again going back to Bill Gates it made us think we were probably smarter than we were. What happened is in the year two thousand eight we had this little economic crisis in the US I'm sure nobody remembers it but I took some time off of real estate to learn to do marketing copyright and actually trained under some of the great copywriters in the US a couple of them and I really enjoyed that. But somehow in that process I stumbled into oil and gas investing, now I had a Petroleum Engineering Degree and like I said I never used it but I thought hey I can maybe put this to work and so I actually stumbled into this North Dakota oil and gas project and without explaining all the details I'll tell you that I convinced about six or seven friends to invest in this with me. One of those friends has a jet and he actually is a very successful entrepreneur. He's the guy who I started the company with when we both left Ford and we flew together to North Dakota once and he flew a couple of other times to talk to this oil and gas guy and we could never find a place to stay.  Now we were both involved in real estate and had some commercial real estate background and well you know we looked at all these pickup trucks and cars and larger trucks you know parked along in the Wal-Mart parking lots alongside of the road because there wasn't enough housing and we said why don't we quickly build a multi-family facility to house these oil workers in this huge oil boom. There are 18000 job openings. So we built these little 300 square foot really nice cabins 300 square foot units. They were usually in two or four units per building. And we know that the average rent for an apartment around the US is more or less a dollar per square foot per month. So an eight hundred square foot apartment might rent for about eight hundred dollars in the heartland of America, not in places like Miami. But we were getting 13 times that average. We were actually getting almost 4000 dollars a month for this 300 square foot little unit. So I think it was thirteen dollars per square foot per month and they were staying full because the oil companies were I mean their choices were maybe if they could even find a motel room. Spending three or four hundred dollars a night and this was one hundred twenty-nine dollars a night. And so we did really well with that and sold it when oil prices were about one hundred dollars a barrel and we were really happy and we moved on to build a Hyatt Hotel which my business partner did almost all of but I supported him in that effort.  Wonderful. Great. So you were actually you were lucky with that deal?  We were because you know six months later oil was down to thirty dollars a barrel and the people who had man camps, apartments, hotels that had built they had built quickly all over the region of Williston and Watford City, North Dakota were going bankrupt left and right because they didn't have you know they didn't have enough oil workers to join them. And I tell you it what's crazy is we decided when we build ours to be the nicest one in town and ours generally did fine and is still doing fine even though like I said we sold it a long time ago back in 2013. It's still doing fine. And it makes me very happy that it is.  Yeah definitely. So you know I kind of heard that you're moving from multi-family into self-storage facilities and I want to ask you why? What is it that you see? Because it looks like you have the Midas touch. To be honest, looks like you know what you're doing and you got some luck on your side. So why is it you decided to make that move? Well you know I if I had to invest a million dollars right now and I couldn't touch it for 100 years in one asset class I would invest in multifamily. I really believe that the multifamily that's existing now and that's being built now will still be housing people as apartments. A hundred years from now I don't know if that's true for self-storage and mobile home parks. But I'll tell you this, right now there are opportunities in self-storage and mobile home parks that I can't find in multifamily. Let me first quickly review a couple of the reasons Multifamily is overheated. First of all, it's just very popular. It's very much “the thing” and people love the idea of making value, adding upgrades, adding countertops, paint, and colors and it's similar to what they see on HGTV and they think well you know this is something I can do. Well you know honestly it's often something that that can be done. I agree but ninety-three percent of the multifamily over 50 units are owned by professional corporations and they've already done most of those things. So it's hard to find a really good deal. There's international money, there's 10-31 exchange money, there's institutional money, there's dumb money all chasing multi-family right now. There are also new rules which are people you know it's fine if you weren't investing in multifamily and you know the 12 years ago before the recession. That's fine. But it's another thing to be called a guru calling yourself a guru just because you had a few successes along the way now and some of these gurus I call them “newrus” are actually telling people it's OK to overpay.  Well, that's not real smart and people like Warren Buffett and Howard Marx and Charlie Munger and Ray Dalio they would tell you it's really really not smart to overpay for an asset just because it's popular. In fact, that's the time to sell. So multi-family is largely overheated. What I love about self-storage or mobile home parks is that they're largely fragmented in their ownership which means that the owners of these asset classes are often mom and pops perhaps 50 percent or more of the owners of self-storage are mom and pop operators, which means they don't know how or don't care or don't need to maximize income and raise the value.  And they're so mean sorry for cutting you, it also means it's easier to get a good deal.  It's much easier to get a good deal on what you can do is say you can pay them top dollar for what it is but there is still meat on the bone. There are still opportunities to do upgrades and that's the beauty of self-storage and mobile home parks in the path of growth because they have a lot of upsides but you can still pay a very fair price, in fact, one of the operators that we just invested with last week they're sellers know that they're selling below market yet they like this buyer, this operator so much that they're actually willing to turn around take the cash and often invest back with him. That's how much they like him even though they know he's going to take the value of that facility and perhaps double it.  Ok. I want to give you know a small opinion of what you're saying as far as multifamily goes. Just like a small story that I had with clients, I was trying to move these two people into an apartment here in Pembroke Pines and then they went to see that apartment complex. The price was fourteen hundred bucks for a two/two which was good because that's what they were looking for. Then when they got over there the parking fee was one hundred and fifty dollars a month. Now you're thinking, you know as an investor I know exactly how it got inflated that that much. It's just you know they're trying to add value, trying to force appreciation again and again and again. But isn't there going be a time where that the tenants of the apartment buildings are going to understand that they are being forced appreciated? It's just going to happen.  Yes, I think that's absolutely true. Now at the same time, they may not have a choice. I mean they like places like Miami. My friend lives in Miami, he spent months and months just looking for a room for like seven hundred bucks a month. And you know it's just a room in somebody's house. And so my understanding is that if you know if somebody needs to live there they're going to have to just accept that until they don't have to anymore in the time of a downturn.  So that's what's going to happen in time a downturn. All this forced depreciation is just what's going to happen with it? So the complexes are going to offer a two/two unit where you don't have to pay parking. That's going to be that's got to be what's going to attract more clients their way.  Yeah I mean it's very possible. I mean it's hard to tell. But you know Florida specifically has a history of pretty high swings between the up and down and so does California, Nevada, and Arizona.  Ok, so let's talk about the opportunities you mentioned. There's a lot of opportunities in self-storage and mobile parks. Self-storage you mentioned that it's easier to get a good deal because you're dealing with 50 percent of your owners are mom and pop. And you also mentioned that there's a lot of meat on the bone. So there's a lot of value add. So what I want to ask you is first of all what is the value add-in in a self-storage facility. What are the main things that you're going to implement if you were to acquire one? And what are the opportunities in mobile parks?  Yeah absolutely. So when I started thinking and hearing about these asset classes a couple of years ago I kind of chuckled when I thought about value ads for self-storage I could just picture the self-storage unit that I had in the past you know that I had rented. So it was four pieces of sheet metal a bunch of rivets a concrete floor and a roll-up door. That kind of rhymed and you know I just thought, “Where are you going to add value.” You can't paint it you can't upgrade. You can't stage it. What can you do? Well, there's a ton of value to be added in self-storage. And if you like I can run through a few examples and then I can actually give out some math if you'd like to try. Yeah. If you'd like me to try it on the fly at least so self-storage. There is a mom and pop typically doesn't have a web site and do a lot of marketing. Therefore their rates are often below the average rates of the other competitors in the area.  So that's one thing, you can improve marketing that's not exactly a value add. That's just better operations but a real value add is U-Haul adding Hertz or Penske or U-Haul trucks by adding those you can add two to four thousand. I even saw a place in Florida that was getting 5000 a month and commission from their U-Haul rentals. Now let's do the math on just that one. Let's say it's five thousand dollars a month. That's sixty thousand dollars a year added to the bottom line with no cap-ex, it's just a change in policy and procedure. Now in residential real estate where you have been done in the past, you know that the value of any real estate is based on the comps you can improve a house to no end. And like you can add a million dollars in value to the house but you probably won't get that out of it if the neighborhood doesn't support it.  Yeah, but in commercial real estate, the value is based on a formula. And if you're going to write anything down folks this is the value formula for commercial real estate is the income divided by the rate of return. In other words, the value is the net operating income not including debt service divided by the cap rate or the expected rate of return for that type of asset at that time in that condition in that geography. OK. So take five thousand dollars a month let's not take five thousand a month. Let's take four thousand dollars a month which is more realistic for adding you all and multiply it by twelve months. That's forty-eight thousand dollars. Now that's the income added and there's no cost to this. This is just the net added to the bottom line. Now divide that by the cap rate. Now cap rates used to run about 8 to 10 percent. Now they're typically running four to seven percent four percent in areas like California, Boston, New York or self-storage. Yeah, self-storage is unfortunately almost as bad as multifamily. No, not quite. But let's just apply a 6 percent cap rate so you take the forty-eight thousand a year divide by point zero six. Eight hundred thousand dollars to the value of your facility.  Now, let's say you paid three million dollars for that facility and let's say you financed two- thirds of that. So that's two million in debt one million in equity. We just added from just adding U-Haul we added eight hundred thousand to our million in equity. Now it's worth one point eight million at least on paper and it should be in reality as well by the way. And you appreciated your equity by 80 percent increase. And that's before a lot of the other value adds like adding a showroom with locks, boxes, tape, scissors, adding late fees, adding admin fees, selling insurance, raising rates to market level and half a dozen to a dozen other things service lots of things that can be done and the value equation is really really powerful the most powerful that you can usually do by the way is convert some of those weeds out front or that perhaps RV parking area to an additional climate-controlled facility. You got the land paid for you've already got the marketing done. You've got the office done. Now you can add additional units at a lower cost and it's a very very powerful way to improve income and value. So that's an example if you like I can quickly do some mobile home park examples.  Mobile home parks are the only asset class that has a shrinking supply and increasing demand with the affordable housing crisis. And we won't get into all the whys for that but it's very very hard for a tenant to leave. I mean tenants you know even if let's say the tenant has a dispute with the management they just don't like being there anymore. Are they really going to spend five thousand dollars or even ten thousand for a double-wide to move their unit down the street? Probably not and they usually abandon them before they would actually spend the money and have the risk of moving an older unit. So these tenants are really really sticky. One quick value add that I like and this is just an example that applies kind of broadly to all commercial real estate. If you have commercial real estate you have an asset that you can actually compound your returns from and without going into more detail on that I'll tell you about one we recently invested and now these numbers are rounded. They're not exact. And I'm just using this as easy math example. So let's say, this cost to this mobile home park was five million dollars, 60 percent debt and that would be 3 million and 40 percent equity and that would be of course 2 million in equity. Now, the owner of this mobile home park got in there and he said: “Man this place is a mess.” There's are RVs and there are boats and there are broken down cars.  Some of these mobile homes have three, four, five and six cars parked out front. And we want to clean this place up and so we can raise rents and have a nicer place for everybody to live. And so what they did is they paved over an acre of weeds with a fence. They added a fence. They added a gate and they park our RVs and boats and extra cars and work trailers there now and they're even going out the community and having people bring their boats and RVs and they're charging them for this. Now when this is fully leased up this one acre will house ten thousand dollars worth of vehicles. Now ten thousand dollars a month in rent is a hundred twenty thousand dollars a year. They only paid one hundred thousand dollars to build this facility and they're getting one hundred twenty thousand dollars in total rent. That's 120 percent annual return. And so the value of that cash flow is great. But it's much better than that when you look at the value. But let's use a 6 percent cap rate again.  So I'm not going to make it One hundred and twenty thousand. Yep. Let's ignore that the expense one hundred thousand for a minute. We can ignore that.  That's right. Because that's just a capital expense.  So two million more initiating. That's a hundred percent return on your equity.  You got it. That's I mean you nailed it. So you just grew the equity by double. And that's only one change of dozens or let's say at least a dozen changes this upgrade will make it this park to increase rent and increase income.  Ok, so the last question I have on that subject is if the opportunities are so unique and easy why isn't everybody going in that direction.  You know Warren Buffett was asked that same question. They said you know if you've got such a great system why doesn't everybody just copy you exactly. And he said you know people don't like to get rich slowly. I think the parallel there is people don't want to take the time and take the effort and set up a marketing program to reach out to these owners. I only know one guy who's done it really really well. He's got a team. This is somebody we invested with just last week. He's got a team of four or five full-time employees who do nothing but call these self-storage and mobile home park mom and pop owners on their cell phones when possible and try to see if they are interested in selling. And that's what he's doing. It's a lot of work. It's hard. It's expensive but the rewards are incredible.  Wow. Interesting. Very interesting. Honestly, I'm you know as a wholesaler in residential real estate. It is for me it's music to my ears because all I've been doing is doing marketing and getting to two sellers.  So you know like the deal I told you about, that land we bought is from marketing that we do. So you know I think the way we market is we don't necessarily work with brokers as much as we do marketing to talk directly to sellers. So that is music to my ears and I want to thank you for that advice I'm definitely going to check that route.  And yes I mean these are some amazing insights that you're giving us here.  And so I want to thank you for participating, for dedicating your time to be on my show. It's just I'm truly grateful for that. And so what are the best ways to communicate with you?  Yeah. You can find us. You can find me on bigger pockets. Again my name's Paul Moore My company is Wellingscapital.com - We'd love to hear from your listeners there.  Of course, Paul so thank you very much for being on the show today and I really hope you’re going to have an amazing rest of your day.  All right. Thank you. It's been an honor to be here. Thanks so much.  All right. You have a great day. Bye-bye.  Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.   

Fresh out of business college and a yearning desire to be an entrepreneur, Joseph Reyes sought a life of more than being confined to a 9-5 corporate position. He knew from his drive and high ambitions that he wanted to start involving himself in real estate - he just needed to start on the path to get there. From working in the restaurant business and as an Uber driver, Joseph temporarily took unconventional jobs that he knew would work around his schedule to spend his spare time on educating himself in the real estate wholesale business and looking for his first deal. Ultimately, through cold calling, driving for dollars and perseverance, Joseph came across his first deal and with the assistance of Don, was able to drastically change his life. Today, Joseph is one of Don’s most successful students and they have managed to generate over 90k worth of assignments in the past three months together. On this episode of Multifamily Real Estate Investments with Don and Eden, Joseph shares his ability to generate solid leads through driving for dollars, cold calling, Don’s ability to guide him through the steps and use his connections to find cash buyers for his deals. Joseph also discusses with Don, the importance of having a mentor and why you should partner up with local established players when you are at the beginning of anything you're going to do in real estate if it's wholesale or if it's real estate syndication and multi-family. Highlights:  Joseph’s Beginnings in Real Estate Wholesale  How Joseph and Don Crossed Paths Why You Need A Mentor  How to Pick the Right Mentor  Current Projects- 5 Year Outlook    Connect with Joseph #: 954-940-2366 jhreyes1@gmail.com    ---------------------------------------------------------- TRANSCRIPTION: Hello everybody. Welcome to the show. Today's episode is going to be a little bit different. I have Joseph Reyes here with me. Joseph is one of my students in my local market here in South Florida. And I've been teaching him the secrets of real estate wholesale which I'm still very much active in today despite being involved in commercial real estate and syndications. Joseph is one of my most successful students and we have managed to generate over ninety thousand worth of assignments in the past three months together. And the reason we've been successful is Joseph's ability to generate solid leads through driving for dollars and cold calling and our ability to guide him through the steps and use our connections to find cash buyers for his deals. So it's critical to be able to partner up with local established players when you are at the beginning of anything you're going to do in real estate if it's risky at wholesale or if it's real estate syndication and multi-family. So let's welcome Joseph to the show. Welcome to the Real Estate Investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies. Hello, Joseph, I'm so happy to have you here. Welcome to the show. I appreciate you having me on. Thank you. Of course of course. Well, you deserve it. If there's anyone that deserves it, it's probably you. So tell us a little bit about your day and what you've been doing today? Today I have been cold calling driving for dollar leads and doing follow-ups, always grinding - so let me ask you this. We have obviously had a relationship and we know each other very well for our audience. Tell us a little bit about your background and when did you decide to get into real estate. So I was a finance major at the University of Florida. I was doing really well. I had my dreams of working in hedge funds and corporate America and just financial services. And after I graduated I was looking for that nice corporate gig. Kind of gets my foot in the door. Finally got a corporate gig and I was getting paid pretty well for about two years. It was really cool living, but I wasn't satisfied because I was locked into a kind of a 9 am to 7 pm role. And it was just daunting and I had to be somewhere from 9 to 7 Monday to Friday. It really annoyed me. Ultimately that company kind of tanked and I got laid off. So I was in a position where I was thinking of my next step in life and I was kind of assessing where I want to go. And I know I wanted to make a lot of money in my lifetime and I wanted to be an entrepreneur and I didn't really want to work for someone. So with that mindset, I always had in the back of my mind passive income and the concept of passive income really intrigued me and I took out a couple of real estate books to kind of educate myself on what real estate is and the whole business. And it ultimately led me to a different seminars and trainings which taught me the concept of wholesaling and wholesaling really allowed me to kind of say hey I can make money in real estate without utilizing a lot of capital because my previous knowledge which was just ignorance lack of knowledge was only thought you could fix and flip or buy and hold. I don't know about this concept so then I started kind of going on Bigger Pocket forums and doing a lot of researching to understand this process. A lot of YouTube education and then I ultimately got my first deal and then that kind of just enlightened me and opened my eyes to OK this is a thing and then I just did more research on it. And that's pretty much all it is. Ok, so we're going to talk about that first deal soon enough. But first I want to talk about a few things you mentioned. So you had a job in a corporate office and I know you and I know how talented and how motivated you are. And so that is something that I want to talk about with our audience because a lot of people don't understand that you could be the strongest smartest person ever right, but then you could get laid off for whatever reason you know your boss and you don’t get along and you know nobody had faith in you or you maybe you were not doing your job right because you were not satisfied with your position that the amount of money you were making. And so that's exactly the disadvantage of doing the corporate gig which you know is sort of the American dream like you know to go to study, go to college, have a degree, you know to apply for a job, get a job to have a career and so on. But what happens if you get laid off all of a sudden and you have a mortgage and kids and family and people that you've got to support then what happens? And so that is something that you discussed and it's so nice yet sad to hear you know that from somebody like you that I know who you are and the things you know how to do. On one hand, it's amazing to hear that you've got out of it and that now you're doing so well in real estate as a real estate investor. But on the other hand, it's kind of saddens me to know that there are so many people in that position that feel miserable and unhappy about their life and they're not changing it. So I want to ask about that. When was the moment that you decided that you're no longer going to try to get back into the corporate gig and that you know you're going to get into real estate? Tell me more about that moment specifically. I mean so in the back of my mind I just always had the thought process of passive income the ability to sleep at night and still make money always resonated with me and I know I couldn't do that with a corporate job. So I was exploring the financial markets I was exploring real estate different concepts that I can utilize without having so much capital. I explored business ownership, but I had no business ideas and I thought about the unconventional lifestyles like entertainment there's a lot of people that make money on Instagram and on platforms like Snapchat or Vine and stuff like that just unconventional professions in the world. But ultimately when I went to a training seminar like a workshop I would say that introduced the concept of wholesaling no money down, no credit, being able to assign contracts and double close on contracts that really piqued my interest. And the overall concept of it allowed me to say hey let me do a couple of these deals and kind of go into a position where I build capital and I can establish some type of like a rental for. Ok. So you’ve learned that at a seminar. People talked about risk and also that's the first time we heard about this. First time I heard about wholesaling at a seminar I never knew there was okay. And then when you heard about it what was the amount of money you thought an assignment would be? I would say like to build between 3000, 10000 or 15000 if you go to probably on a contract that's typically what the assignment fee is. And that's what was being kind of explained to individuals and that's what they always say see. And so I want to talk about this so I thought when I got into real estate I thought that an assignment fee is 5000 -10000. But we all know that we know better than that right now. I mean I do 5000 and 10000 assignments. And after what you've seen and the deals that we've done together I guess you would also get used to something else. So for me just you know a typical assignment for me is 40,000-50,000 that's what I'm trying to make in a wholesale deal. And it is possible if you do it in the right market and you have the right system and the right technique. So the first thing that I want to ask you about your first deal. Tell us a little bit about how much money you made? How did you find it and what was the assignment over there? So that particular deal was an interesting one. I was driving in the City of Lauderhill and I came across a 15 unit boarded up an abandoned apartment building. I looked up who the owner was on the tax records and the property appraiser and I saw that the owner was a church. So then I looked up the church to see who kind of oversaw like properties that this church owned because they owned several. When I looked them up through the tax records. So I finally got a hold of calling numerous numbers got a hold of somebody that said hey this is the gentleman you speak to about our properties spoke to him and he was like hey we don't want to sell that apartment. We have plans to do something with it but we do want to sell this three unit triplex down the street and then I ultimately got into a conversation with him on what the price he wants, over rental details, what was taken for rent, who pays for what from tenant and landlord. So I got this information now and this is when I'm just really learning the game and I'm googling like a lot of terms that he was utilizing so ultimately I got that property locked up and I found a buyer. I had cold-called landlords to see if they wanted any deals and got the permanent contract for two o’ nine sold it to him twenty-nine and he gave me twenty thousand maybe ninety thousand - wow I could make more than five thousand I got about twenty thousand and one deal and that was their first deal and that's exactly what happened to me in my first deal when I had my first day it was about forty-five thousand and I was shocked. I was like wow that's a life changer. And I bet twenty thousand.  How much time did it take to do that deal specifically? From the time the first contact to closing, I would say 60 days like the first time I saw a gentleman when we closed about 60 so some people don't make twenty thousand in a year. And then you may twenty thousand which just pure profit and sixty days. Yeah, most of the time was because of there's a lot of levels to a church-owned property that I had to find out through a title company. Multiple people needed to sign multiple documents and that was really the main holdup. But getting the prior getting the property and a contract signed by the church and then signing it took like 20 days. It was a process of getting all documents needed to close on it from everybody involved in the church. That's the most time. Ok. So let's talk about that moment. You drove by that 15 unit you said right. Was a 15 Unit and so you say that 15 unit -  what caught your eye? What was the moment you said ‘This is interesting I want to figure that out.’ So it was 3 p.m. It was an empty parking lot the grass was high every single window was boarded up. There were signs of light just wear and tear on their apartment building buildings as I hope this is interesting. So I just took down the address and then as I finished my day just went home and looked up or kind of put everything on an Excel spreadsheet of all the properties I found. And this was the unique one because of its situation and I know properties that had so many units can be such huge deals. And it was owned by a church. So that really sparked my interest I merely used a search engine looked up how can I get in touch with the people that own this and I mean that was a whole mindset. Yeah well, that's amazing because that's really you know thinking outside the box. I mean I have never done a deal like that and I've been doing a lot of deals you know and I've been doing that for a long time but I've never done a deal like that something that's owned by a church. You know I've got to the church and then spoke with the people in charge and then got a different deal from that from the church. That's ridiculous. But it's amazing. So right after that deal, you made 20000 now. When was the time that you decided that you know you want to focus on that only on that? And you know what was the next step for you. So it's crazy I got laid off from my job I was like “Man I hate working for people I don’t want another 9-5.” Even though I was sending in a lot of applications I had work experience and educational background. So I was doing Uber and Lyft for a long time I had to kind of be disciplined and set a schedule. I got kind of annoyed and I did have a restaurant background so the restaurant gave me the flexibility to work there to pay my current expenses. And at the same time allow me to do things like the drive for dollars or find for sale by owner or just learn the business as a whole and really needed to free up my time and if a 9-5 allowed me to do that because at a 9 to 7 I had to do someone else's work. And so once I got to 20000 it was kind of paying off a lot of the loan debt that I had incurred but then I used some of the money to reinvest in the business which to me was cold calling I send a few postcards out but I wasn't really following up doing that. And the postcards like 38 cents a postcard. So I was like let me just cold call people and knock on doors. I did a lot of door knocking in 2018. Got a lot of rejection a lot of the ‘get off my yard get out’ and ‘get off my property’. Yeah - I learned a lot from that. So through the combination of door knocking through a combination of cold calling people sending out a few postcards here and there I was able to do some more deals free up my time and just learn the business overall and kind of put like systems in place to further scale. Ok so then was that the part where you met me. Yeah. And we started doing business together. So I can't remember exactly what happened there but I remember that I was at the gym. I was working out. So you call me when I was at the gym and you talked to me about this deal that you had in Pompano Beach which is an area that I really like. I've done a lot of deals over there and I know this area very well. So you were talking to me about this deal and then what was the case you had it under contract or didn't you. I didn't have it so I felt this seller was an interesting guy. Yeah. So it was interesting I lead, this particular lead had an auction date. So I was like man she must be really motivated. So the house is a vacant property. Then I had to look up I didn't get a hold of this person. So the property address and mailing address were the same on the tax records. So I had no idea how to find her. Got a number of the property owner and she was like literally be at my house in two hours. She spoke a little bit about the situation and got into the condition of the property. Ultimately, we were having issues with price and that was pretty much like a stop right there. So a couple of days I followed up with her against the notion of timeline with an auction date and when did I get into the picture. So I'm thinking this lady is so motivated to sell I eventually got her to a price that was 51 cents on the dollar which I thought was a good deal. I gave her at the time I had a two-page contract that I utilized. She reviewed and she said ok. Give me the weekend to think about it and just follow up with me on Monday because we had a conversation on Saturday when I had finally met up with her at the property. So I gave her a call on Monday. This is all speculation. So through the speculation period, I was looking for a cash buyer. Thinking like Hey she's going to sign in on Monday I'm going to get a contract. I hadn't signed on the cash buyer and I gave him a call. I was like Hey I'm going to sell a property in Pompano Beach. OK, that's all I want to say something about that. So that's why it's always important to tell people that you're doing real estate always on my end. Right. I was always giving out my business card to everybody and I would always say hey I'm a cash buyer. I buy houses. And then one of my business cards. I never remembered even meeting Joseph and one of my business cards got to him. And then he had my number. And then he gave me a call when he had a deal on Pompano Beach and I remember that deal. It did not have it on the contract but I remember that it was interesting to me because it was for the right price. I don't like as a wholesaler. I don't like doing deals that are small. I think it's too much work. I think it's a lot of work to make five thousand dollars. You know I'm not. I'm in the business of making 5000 but I would prefer to make forty thousand on a deal. And I know yeah, of course, I wouldn't. Who wouldn't? But when I looked at a deal and or somebody shows me a deal and it's 60 cents on the dollar then I'm very interested and so I remember with Joseph calling me and I was interested because the deal was it was right at the numbers. They looked right. So I told him I don't know if you have it under contract or not, but let's just meet. So we met what the day after or two days after it was a little both. So we met and then I remember that I've seen this guy that is very motivated and a very young man. How old are you, Joseph? I'm 29. So very young and very motivated and wants to succeed. And you know he's already talking to sellers but he's not really super educated about the business itself. But I did see the potential so we started working together and we started that you know teaching each other thing right of course. I was doing real estate for about five years at the time. And so I had a lot more knowledge but I was learning stuff from Joseph too. He had his own ways of getting leads and doing marketing. And he was driving for dollars which I always appreciate people that drive for dollars because that's not easy but it's very very profitable if you get a good lead because it's going to be a solid lead if you get it. If you're going to drive with that lead then that's to be your lead you're going to have not a whole lot of competition. So the price doesn't go up. And so that's the potential that I saw in the relationship with Joseph. And so we started working out these leads together and so he would drive for dollars and whenever he would need something or you know wanted to figure out how to do comps and this one property what it's worth how to talk to the seller how to work the lead how to follow up and stuff like that the fundamentals of the business. I remember the first thing I told you is that you're very smart you're very motivated, but you're missing the fundamentals of wholesale and lack understanding how to do a contract. And so I think it was about two weeks after that he came over with a contract in his hand and that contract was very interesting it was like a two-page document. Yeah, a two-page document from Google. Completely not an enforceable contract. So if the seller will decide it back out when the deal would be lost. And so the deal is good. What was the number there? It was eighty-eight thousand sixty thousand. Yeah. It was sixty thousand the property was worth we sold it for I think, thirty-five thousand more. So we sold it. The profit there was thirty-seven thousand five hundred. So that was our first deal together. So the deal was good, but the contract wasn't it. So we decided to start working together and teaching Joseph the fundamentals because it was a win-win situation and typically I charge for mentorship, but in this case I realized that the potential was so good and he had a deal in his hand that I decided not to charge him and to just walk on a partnership basis. And this is how I'm going to make money on that relationship which is going to be beneficial for both of us. So now that we've been doing some business in the past few months we've been doing a lot of business together. What would you say that you learned from our relationship? How did our relationship benefit? I mean honestly the structure of the business systems of the business understanding I guess terms of the business, having the opportunity to talk to Sellers and being instructed on what to say to sellers. But overall just what was previously discussed which are like the fundamentals, the techniques, the technical aspect knowing like hey this contract is unenforceable. Hey, this is what you need to do. Hey, this is how you do this. This how you do this is just further increase my knowledge in the overall business. So kind of having somebody to hold your hand to like hey this how you do this is how you do that has been like the most beneficial aspect of the relationship. So what would you suggest for somebody that's trying to get into real estate or real estate wholesale? What would you suggest about a mentor that they should they be looking for?  Definitely. A mentor that's proactive like active in the business versus a mentor that is not doing deals at all. So that they in the business can tell you like a wide range of things and they have the experience to say hey this is going to be an issue or there's going to be a problem or this is going to decide you should work on this particular thing. So the mentor is proactive in the business. That's I guess the most positive benefit from the relationship and just also somebody that can just guide you through various processes because you want to be alone because I mean this is action taking the business. So we are there taking action you are feeling or you're making mistakes and you kind of need to mitigate those mistakes by having somebody say ‘Hey man I've done all these deals I've done all these transactions this is how you should do this to avoid making further mistakes down the road.’ Exactly. I didn't take a mentor when I started and it took me about a year to make my first deal and everything I learned on my own and it was difficult. It wasn't easy and I think looking backward if I took a mentor then I would learn the things that that I've learned so much faster and at this point right now where I am. I would have more money. It's as simple as that. And so I think yeah you're right about finding a mentor that is proactive because a lot of people are trying to mentor other students and they have the knowledge but they're not doing it. And when they're not doing it then even if they have the knowledge of how to do with say wholesale or how to do us and investing then there is still you know at the past because they used to do it but they're not doing it anymore so they don't know about all the things that are new. They don't know about the improvements, the new services, the new ways of marketing, you know, the new regulations everything. They just don't know it. And when you're active then the benefits you get from a mentor is that you could do business together. So, for instance, Joseph's brother he found a dealer in Orlando right. And we are based in South Florida. So Fort Lauderdale - Miami area and so he found a dealer in Orlando and we got a deal because of our connections in Florida. We were able to close on a deal and sell it for 40000 more. That's the benefits of working with somebody who is active because I know investors in different areas of the state because I'm still investing and so any other mentor that you choose to guide you in the process of real estate make sure they're doing business because if they're not doing business and they're just not in the game and I'm making it and they can't overcome struggles when they need to be creative because finding a buyer and a market that's not our market. It's not easy. You know you've got to look carefully you've got to talk to people you know you've got to use your connections to be able to do that. And so we were able to do that because we're so active and that's a great point. I like it a lot. And so what's your plans for the future as far as real estate? Where do you want to be in five years? In five years is just a really build a tremendous rental portfolio. So that's in the residential side of the commercial. That'll be fantastic. Land development is something of curiosity to me as well wholesaling I think a wholesaling business just a fantastic amazing business model to make the amount of money you can make without having so much risk involved and how fast you can do things as compared to a fixed and flip who needs to kind of get a property and then it's a project and timeline involved versus a wholesale so you get a permanent contract today and sell in 10 business days. So I'm just increasing capital to get a rental portfolio and then just retiring. Yeah. You make money out of thin air. You see so in real estate wholesale you make money out of thin air whereas in a flip you have to invest money you have to put money down. You have to buy a house or take a hard money loan. And that is basically assuming the risk and it takes a lot more time. So yeah you can flip a house and you're going to be making a little bit more than what you would if you wholesale the property but you'd be investing more time and your time is so valuable. There’s an old saying “A fast nickel beats a slow dime.” In wholesale, you make fast nickels, but you make a lot of them. You’re not taking a risk. You’re not really putting your money down, you’re only putting a deposit.  If you're doing things right. You have 15 days to go to retrieve if you cannot find a buyer. Right. So, of course, you've got to be able to be on top of things. You can't lose track of your contracts and whatever you've got that's open. But if you do things right you can make money out of thin air. You can make money from nothing from not investing in properties not from putting money down which is terrific. And also the other advantage I was just talking to you about this before when we were at coffee right before this interview. The other advantage of wholesale is that you see Joseph here is of course still at the beginning of his real estate career. You've been doing this for one year? Yeah. So in the first year, you're going through so much adversity and you're just it's like it's you against the whole world. Right. I didn't make any money my first year. So the goal. Ultimately, is what you said to hold a lot of properties. That's the goal you want to make the passive income you want to make money without working so that your time is free and you can be with your family or kids or whatever it is you want to do with your time. So the thing is that when you are in real estate wholesale in residential and in commercial you're getting access to deals all the time. So the deal comes to you. And then if you've made one hundred thousand in real estate wholesale and now you want to buy a house so you could hold it then your hundred thousand that you made in real estate wholesale would buy you much more than somebody that made one hundred thousand in retail. So like if they're let's say somebody is working in the retail industry or somebody is working at something else and or in restaurants and they made one hundred thousand and I made one hundred thousand since I have access to deals that are coming my way at 50, 60, 70 cents on the dollar then my hundred thousand is able to buy two properties that are worth a hundred thousand. So essentially my money buys me more. So I'm getting rich on paper and that's what's so amazing about wholesale the fact that deals are coming your way. You decide what you want to do with them. If you want to hold them then you could. You'd be buying a property that's worth two hundred thousand for one hundred thousand and you'd be fixing it for twenty thousand more. And now you have eighty thousand in equity. Right. So you're 120 in and you own property for two hundred thousand. That's great. That's amazing and it's not even taxable. You don't even have to pay taxes for that money because there was no taxable event until you sell it. Right. And even when you sell it then you've got a lot of depreciation during the year. If you have it for a few years right. So if you want to hold properties you want to. You want to have a portfolio. Best way to start is boosted wholesale because you're gonna have access to all the deals if you want to flip properties you actually want to start as a home seller because you get access to properties at a discounted rate the best rate. Right. Because we wholesalers we get it cheaper than anybody else. We get it cheaper than the flipper we get it cheaper than anybody else essentially. So If you want to flip properties you want to be a wholesaler get properties under contract and then you decide what you want to do with them. Do you want to wholesale them? Do you want to flip them? You could do that. Do you want to hold them? That's great that's terrific. You can do whatever you want. And that is how I have managed to hold properties so I hold out I have a nice portfolio here in South Florida and that is how I did that. I have never bought a deal from somebody else. All the deals that I have bought all the houses that I own are my houses that I got through my deals through my marketing and that's what I teach you right. That's where you're gonna be in the next two-three years and I'm super excited for you. And I'm very happy to see you grow. And hopefully, you know we're going to grow together in the future a lot more. So thank you for coming to the show. Joseph, I really appreciate it. Thank you for having me. Yeah. Do you have anything else you want to add? I would say if you get in the wholesaling business just really take action man like there's a lot of fear involved a lot of like preconceived notions like ‘oh man how does this work?’ I'm not going to make money. The opportunities there are you just have to take action and figure out your niche and how are you going to get a deal on a contract. I mean just get on your neighborhood you can find a rundown property and just knock on some doors look up some phone numbers you get a hold of the property owner and just like that in 30 days or 45 days- you can make 10, 20, 30 thousand dollars. Take a mentor is also a big thing as well because they can just guide you through the process. A mentor is a big asset. You have someone to lean on, someone to give you direction. All right Joseph thank you for coming. Really appreciate it. And you guys have a great day. Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Til' next time.  

In true American Dream fashion, Michael Beeman’s story exemplifies just that. Motivated with needing to provide for his family of seven children on just a corporate salary of $60k, he wanted to do more than just make ends meet. Michael started cutting firewood to generate an additional income stream and while doing so immersed himself in listening to countless multifamily podcasts and real estate audiobooks. While his splitting firewood business brought in an additional $15k a year, Michael decided he was ready to make the leap into real estate investing.  With $12k to his name to invest, he turned to his mother and best friend to see if they were interested in working with him to start looking for his first deal. His mother and best friend contributed $20k. Then Michael was able to invest in his first deal and he has been acquiring multifamily units ever since with a current portfolio of 136 units.  On this episode of Multifamily Real Estate Investments with Don and Eden, Michael shares the details of his current projects, how to find the right deal at the right time, and discussing the importance of networking to develop key relationships for future business partnerships. Michael describes how his passion for real estate investing paired with his resourcefulness helped him find his first breakthrough deal and overcoming the challenges he faced along the way. Listen in for a remarkable story of Michael starting a side-hustle of splitting firewood into real estate investing with a portfolio worth seven-figures in less than two years! Highlights:  Michael’s beginnings in Real Estate Investing Key Tips for Acquiring Multi-Family Units How to Find the Right Deal  How to Stay Open-Minded when forming Partnerships  Ways to Analyze the Current Market and Anticipate  The Importance of Networking and Building Relationships   Connect with Michael Michaelbeeman@beemanandsons.com #: 217-508-8185   ----------------------------------------------------------Transcription   Hey, guys welcome to the show. Today we're going to host Mr. Michael Beeman. I'm very excited to have him here because his story is truly exceptional. Michael was able to educate himself in real estate through podcasts and books. And two years later his portfolio is worth a little bit over three million dollars which is phenomenal. So without further ado let's welcome Michael to the show.  Welcome to the real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to multi-family apartment buildings and off-market strategies.  Hey, Michael welcome to the show. How's everything today. Oh, everything is going well. How are you? I'm good, I'm good. I can't complain. How is your day so far?  It's going good. You know talking to some business partners talking to some possible investors looking at deals; always grinding. That's the key to success though. Honestly, I'm very excited to have you here today on our show because your story is a story that a lot of people could relate to as you know you started with a big family and you were splitting wood the last time I checked I kind of listened to your story in a different podcast. This story was so special that I wanted to have you on my show as well and see how you could change your whole life from one direction to the other with real estate. So, first of all, how about you tell us a little bit about yourself so my audience here would know this story as much as I do.  Well back in early 2016, I was going through bankruptcy from a previous marriage where I had agreed to take on more debt than I actually could handle, but    I also got custody of my kids We met and we had three kids each and we have a very large family. And I was making 60 grand a year and she had to stay home with the kids because we had very young ones. Obviously, a newborn plus you know seven children altogether between doctor's visits and everything else it made working for her almost impossible with the cost of daycare and stuff. So I decided to start a side hustle splitting and selling firewood because I knew that that would help us to make ends meet a little better, but then I was doing that for about a year and a half or about a year into it I started listening to real estate investing podcasts. And one of my dreams, you know at the time I had been renting, was to own rental properties because I'd always felt like landlords were making pretty good money, of course, that was the naive mindset of a renter at the time, but I was willing to learn and grow. And so I had saved up about twelve thousand dollars and I went to my brother and my mom with this plan of what I was gonna do.  And I was asking them to all pitch in - and let me guess they were not really up for it. No, they were not up for it at all. So then my best friend he had said I'll pitch in twenty thousand dollars because I just inherited 80. What would you give me for that? I said I will give you one-quarter of the business. And then my mom heard about that and she had actually wanted to go along with me before, but she did not want to upset my brother. So it felt like the easiest route was to just be quiet. So she went ahead and said No if he's going then can I have one quarter for 25 percent so then I had all of a sudden fifty-two thousand dollar pool of money to expand wisely to start investing. So shortly after that one of my buddies was over and we were having a drink that evening and I was telling him about you know because I always talk about this you've got to be super excited and you've got to be really excited and you've got to really want to go for it. And so I was telling him about my dreams and what I was planning on doing. And he said, Well I don't know if you're interested, but my girlfriend's mom used to manage this 66 unit building for the guy and then he got tired of dealing with it. Now it's sitting vacant -it needs some work, but you can get it at a steal of a deal.  So you know you basically heard about a motivated seller of a six-unit.  Yep. So I bought the thing and I had to go through and rehab every unit, but I got 100 percent financing down. I spent a little bit of the fifty thousand rehabbing every unit. We did a lot of work ourselves, my wife and I and then we had some help from an outside contractor so what was the total amount of the purchase price. What was at this point I was sixty thousand, but it appraised even vacant right then for ninety thousand. It's amazing.  Yeah I mean you're in the Midwest so you can buy six units for sixty thousand in the Midwest.  Well, that's uncommon. I wish I could find another six units for sixty thousand. I'll tell you that you're usually looking at 30 to 40 thousand units around here, but yes. So it was a steal of a deal and I ended up putting about thirty thousand units and we ended up about two years later we sold it and made a significant profit on it.  That was your first deal in real estate, wasn’t it? Yes. And that was basically for you. I remember my first deal it was a flip I flipped the house and it was just a residential deal. And I remember I made good money, but you know your first deal is as if it's there to teach you what's going on. And just the rules, but it's not there for you to be able to make a lot of money. Everybody feels this way about their first deal, but you managed to somehow jump from 16 a deal as your first deal to what was 61 62 units.  Yes. For the next year, I was looking at triplexes - I found a 10 unit that was mostly vacant about six of the units were vacant and needed rehab. We got a really good deal on it and then I found a five unit that was vacant. So I was finding these landlords that were just exhausted that's all.  Ok so let's focus on that. Let's focus on the people that are just trying to get into real estate we all know it's about finding the deal. That's how you make money. So what would you give as advice to two young investors that are trying to find deals? When you say I found these deals how did you do that.  Well in my case I had a local broker that knew what I was doing because she had done a little bit of it years before, but never had done it in multi-family she would just buy single-family houses and she had been a landlord and decided she didn't want to be a landlord sold all of her portfolios and bought a hotel. She basically knew that there were still deals out there and she knew that there was finally a buyer around that would do it. You know that was gonna buy these and was gonna fix them up and actually do something with them. So she was bringing me a deal or two. And then when the landlords locally within 30 miles of me started hearing this the ones that were exhausted may occasionally talk to each other their friends they have their own community because these are generally 60 to 80-year-old men and they have their own community. And so as you know these might these portions of their portfolio that they don't want to deal with that you don't want to go through the hassle of a whole rehab. They don't want to deal with contractors and they're just kind of like the look I'll take a loss on this. And so that's how I built my portfolio over the course of a year. And then I got a deal from also an exhausted landlord that was a really good deal and I knew I was pretty well out of money getting close to being out of my own money to be able to just continue to buy up these deals because I refinanced out of as many deals as I could, but the bank was getting a little bit tight on being able to refinance. They wanted you to hold it for two years. And I'm not the type of guy that wants to hold onto something for two years to wait to do something else. I'm the type of guy that wants to go slow down. So high time right. Right. So I had a guy that reached out to me is a software engineer. Name is Rohit Jenga and he reached out to me he asked me cause he was really interested in real estate investing and he had a little bit of money saved and he was interested in partnering with me because he'd heard me on another podcast and I had said no at first that I didn't need any more partners. And then after I ran into a wall I was like you know what open your mindset Michael and look think that you do have something to bring to the table even though you can't bring money and maybe he can bring a little money and you guys can do a deal together. So we did and it gave him something like fourteen point nine percent returns and he was excited. Obviously, everybody be excited about that. So he was really excited. He got really good returns. And now all of a sudden I had an investor that was actually asking me if I had more deals.  So he was investing the entire amount or the entire downpayment.  He invested about 60 or 70 percent of the down payment. I had two other small investors that invested 10 percent down each and then I invested 10 percent. Now, what was that? What was the size of that deal? That was an eight unit deal. It was only about I found it half of an exhaustive landlord off the market so it was I think I only gave like twenty-five grand a door for it and now it's raised at like thirty-four. So anyway and we're actually in the process of trying to refinance cash out the investors, but they still get to hold onto their portion of the investment. Right after that so now I'm sitting around after this deal and I'm sitting on about 50 to 60 units at the time period and I start looking around and I'm like because he had mentioned bring in more money my mother because she was getting really good returns and she had a decent amount more money from her savings. My dad passed away in 2015. His family owns and runs this family business and so she had said well I could maybe bring some more money well. I talked her into bringing twice as much money as what she originally wanted to bring and Rohit brought a huge chunk of money so they basically both brought two hundred thousand dollars each because we were buying a sixty-two unit and we raised another one hundred thousand dollars from investors and we bought this 62 unit that we're always going to raise with half a million. That raised was half a million. So we did a syndication on that 8 percent preferred return and we had a huge value add in there which was there were thirty-nine thousand dollars thirty-nine or forty-two thousand dollars in water bills that we could get the tenants to pay because it was common locally to have tenants pay their own water bill, but we could do nothing expensive significant. Yeah exactly. So we could decrease the expenses significantly plus the units per unit rent was about fifty to seventy-five dollars below market so we could increase the value significantly. So we're in the process of doing that. And then we basically add about seven hundred fifty thousand dollars in total value to the property and then our plan is to have a two-year exit strategy to either ten thirty-one exchange out of that or try to refinance out of it. And so that's what put more permanent Fannie Mae debt on it. That's right.  So I want to ask you a few questions about that one deal specifically because I know as I talked to you before and we discussed the fact that you started from. So I want to talk about that for a minute. Here's the question that I have. As far as how you got the deals so correct me if I'm wrong, but it sounds like the place that you're living is that is that a small town or a small community.  The place that I'm living is a small community it's about halfway between St. Louis and Indianapolis right on the interstate that runs between I 70. So it's a small community with actually a Good job market in the area. There's a decent amount of jobs because there's a pretty thriving oil industry locally. Yeah and so then there are jobs for that. There's a local company that does about three different states around here and they do right away clearing for the pipelines so there's a lot of good jobs for young men that just start them out paying you to know 14 to 20 dollars an hour.  That's so important what you're saying right now. Why everybody keeps saying to first work your market. Doesn't matter where you are because you know your market better than anybody else. Exactly. And you know so from what it sounds it looks like you knew the people and that is how you got in touch with the brokers and that is how people got the word for what you're doing. And then they contacted you and you kept getting more and more deals because of the small community and now you're a player and people hear about you and they know about you. So they start picking up the phone and call you and wanting to invest with you wanting to sell you deals right.  That's the game. Yeah exactly. And so then we're basically doing that and then I'm on a few podcasts here and there because my story is quite interesting. That's not very common that you go from the guy that was renting his house for four years ago having a side hustle that was splitting firewood and you know exhausting work to have a portfolio that's worth over three million dollars. So that's not a common thing. So then I'm in the middle of this sixty-two deal the financing falls through.  And it was the loan it fell through on the day of closing. Oh actually I just had an interview with Joe Fearless on this and I think that comes out soon, but this whole financing topic because it was such a struggle to put the whole entire. And you can hear that story because it's a twenty-five-minute interview by itself, you can hear that story on Joe fearless. So that fell through and I struggled and I pieced all of it back together and still got it closed with a different lender.  And so you got to extend it closing. And yeah I had to get an extension on the closing date. I did do all of the things that you have to do when you're just trying to salvage something and we're talking on your first indication - Yep on my very first syndication Well my first syndication. My other one was a partnership.  You have to go through all this adversity and you manage to pull through and you manage to make it happen. That's amazing. Yep yep.  So now we're in the process of doing those value ads and then you know I started to give out my phone number on podcasts and I started talking to people just a lot more regularly just because it's so interesting. Like we were talking before this about your market because down in your market you have a portfolio that is basically about the same size as mine in gross gross revenue, but your money as opposed to residential or residential housing. And how do you know in your market you know you try to find cash flow, but you have to also assume appreciation and different things.  It's kind of different because you can make the same money people make in the Midwest from buildings from you know from single-family homes.  Yes. Yeah exactly.  And like you say the sellers are not as sophisticated you know when you talk to a single family owner they're not sophisticated you can get a bargain and it's yes it's quite easy. Where we talked to a multifamily investor then they're obviously not living in the property and know what they're doing.  Yeah, you're basically looking for in my market a lot of times you're looking for Mom and Pop owners. I have one of the good friends that are. A married couple that basically we partnered up. They brought the investment dollars we partnered up on a 12 unit that I found off-market in Terre Haute, Indiana which is right near me in a really nice location. And we founded off of a mom and pop owner and he had kept hold of it for about eight or nine years, but with his disability had come through from the military and he was already you know obviously he had all the back pain and shoulder pain. But anyways he's ready to sell and he got one of my letters from one of my mailing campaigns and he sent me a text message what I thought was kind of odd just getting a text message Yes I do want to sell and I'm like I don't think he realized because we did take time to make sure that the mailing looked like it was individualized, but I don't think he realized that I sent out like four hundred of them. And so it's like I'm sorry I'm confused too is this for me. You thought he was the one who got the letter. I developed a relationship with him and only that eight-unit building that I was talking about that I'd also bought. So this was a twelve unit building. This was a twelve unit building that he had bought back then and he wanted only twenty-five grand a unit for it as well. I already knew from my experience buying that eight-unit building and for twenty five grand a unit that we were gonna get some good returns if I could figure out how to come up with the sixty seventy thousand dollars I needed to get the deal done and sixty or seventy thousand I could probably go to the bank this point and get a lean on one of my businesses, but I'm really not trying to just leverage myself to death. I'd rather bring somebody else and opportunity partner with them on the deal. We have a property management company in place that can take over property management at a very reasonable like 8 percent on those units or 7 percent on those small families and still get great returns. I still wanted the deal. I just knew no matter what I didn't want to let that kind of deal go away. And so I built a relationship with him and then partnered with Roman and Amy and they brought the money to the deal. I bought the deal and we had good proper management and so we just closed on that last week so that brought us last month and that brought us a hundred thirty-six units. That's great.  So yes that's the portfolio right now one hundred thirty-six.   Yep, yep that's right now. And so right now I'm working on I'm going to tomorrow to look at a twenty-three unit building that is two thirds vacant exhausted landlord and it might be a steal of a deal as well. He's talking and numbers that are sound and really good at his per unit price. Actually, it's ironic.  I lived in the building when I was in college. Yeah. So 12 years ago I rented that building so I thought that was funny.  So I want to ask you another question regarding the first deal the sixty-two units. So yes a lot of young investors and syndicators they're worried about the value. So you know they worried about getting into the building and doing the renovations and picking up what needs to be done. And so you've noticed that there are a lot of expenses that you could reduce and that was your value plan. And so what I want to ask you is as a beginner so you could say somebody who had never done a big deal like that before is a beginner. So as a beginner How did you have the confidence of trusting your value and then knowing that this is what needs to be done in the property and that this would bring you to the place that you want to be? Maybe I'm overconfident I don't know. I think you know my degree is in business and I've read basically every book I could get my hands on real estate investing I've listened to thousands of hours of podcasts when I get into something I really get into it and I really study it. And so I knew you know I knew that if the same thing that I was doing was working on an 8 unit building there was absolutely no reason it wouldn't work for who underwrote the deal.  Did you do the underwriting?  Yes. Myself and my mother. Oh and that's special. Yep. Myself and my mother and so we underwrote the deal together. And then I kind of I've managed it because she's actually she enjoys your area. She gets down to Miami for about two or three months in the wintertime and we were closing and it was early spring late winter and she's in Miami. It's the closing day. It's the last day of all the extension that I got. And we're trying to do a for a close from down there. It was just a whole heck of a fun mess because we finally close the deal from Miami.  I mean I always whenever I close the deal you know I do that from Miami.  So I guess, you know she has a bank account with Regent Bank and I thought you know she has 50. She has 50 thousand sitting in that bank account just because it was one of her expense accounts or whatever. And I thought oh you know what. You have to fax and do a whole bunch of things just walk into a local Regence bank account. Tell me your account number. Tell him you need a little bit of assistance to just get this done. The guy behind the counter called his manager and the manager came out and said Well I don't care. We're not doing it we're not helping you. And so that's not our policy. We don't do that. She's like I'll pay you a dollar a page I know it's like one hundred some pages. I'll pay for you. I don't care. I don't want it. She's Ubering all over town trying to get something that will fax and do this other stuff because the hotel she was at was more not less of a hotel and more of the Air B and B for a month. So she didn't have access to anything. She didn't have access to any of those items that she would need to fax or email or any of this stuff. And so finally she gets the job done in the end and gets the paperwork signed and overnighted. And we finally get the deal closed, but that was just one of them. Yeah that was just one of the fun things at the end of the confidence issue I think that I run into that a lot of people call me and I try to mentor everyone. Everyone that asks or try to help people out all the time try and share my time. It actually just comes around to you too because when you do that you talk to these people you work together on stuff you know deals are coming your way. They'll have deals that they can't take down, but they know about and sometimes they'll have investors that are looking for a good deal and you'll have a good deal and you'll find an investor that helps you out there's more things to it than that because sometimes you'll get nothing more than just satisfaction and that'll be that's just it.  I mean you know why you're always going to get burned out because I have the same example this guy who's trying to get into real estate who's calling you about this deal and I could see that he was trying to wholesale deals and you know as I came in if you're already wholesaling it then you might as well just do a different thing. And so he was I guess listen I'm new and you know I don't know things right. So it's like hey come on up to my office and sit and let's talk about things and let me teach you a few things and then you know this guy he's one of my students now. So we've been doing I think we've done three deals together in the past two months. Completely changed his whole life. Also changed my income, of course, I made good money from that. So my desire to help him and teach him ended up creating some nice income for me you know from deals yes. Exactly. I would never find. And so helping others as always. You know you give what you get back. That's it. That's a law that any investor I think is already aware of that. Any serious investor is already aware of that right now because you know it's just the way things are. It's like karma is the way the world is working.  No, I totally understand that. You know it's just that's the way the world works. I think if you give it you can't you know you'll get the satisfaction you'll get deals you'll get it if you give your time and effort and you know because at this point it's very possible for me to just step away and say you know I have enough money to pay my bills. Well, I can kind of live this you know semi-retired life come in and check on the people at the property management company that they're actually filling units and doing their job, but I don't really have to because they do a great job at that. You know and I could be like which I do you know I do quite a bit of vacationing. I probably go on three or four of them this year, but which you know one-week vacations  It's a privilege that you deserve to get and also I just took a vacation in L.A. and I went there for three weeks. You know I just felt a little bit overwhelmed and when I got back I was so clear. You know and I was so motivated to do things you know things that I could not complete before all of a sudden it’s a piece of cake.  Yeah. Because you're basically your distressing from everything and stepping away, but I enjoy the grind. I keep coming into my office every single morning. I've got a list and right now I'm working with a life coach on organizing my life a little bit more, my time and trying to pack in what I'm doing. I'm curious about that.  So what exactly do you mean organizing your time a little more so? Right now I feel like there are times where I could pack everything I get done and 10 hours into five or six hours I feel like if I utilize my time better in certain areas and if I just went for only my high-performance hours and tried to organize so right now I'm working with her and she is she started out as a health coach and she started that business and she did really well with it and then she moved on to doing a little bit of life coaching because she's a high performer as well and she only wants to really work with high performers and she's kinda getting tired of being the health coach because sometimes you're not working with high performers.  And so she was offered her services after I pay for the health coaching stuff and started working on that she offered the life coaching for free because she'd been studying that for quite a while and so she wanted to see if she could take me on and help me out. So right now we're working on a schedule so I can see if I can't pack 10 hours of work into six hours of really effective high-end time and then be able to spend a little bit more time with my family.  Yeah obviously. So as you're saying it's always important to get better and work on self-improvement and I'm going to ask a question since you said you mentioned the fact that you're reading a lot and you're listening to a lot of podcasts so I bet you can give us a recommendation for the book that everybody listening to this show must read. So what's the book that you recommend the most to our listeners?  So if you're a very beginner and you need the confidence to step out into know everything about everything from the small stuff into you know basic mid-sized stuff because generally if you're a beginner you're not going to step in and buy a 60 unit even if you have the money you're going to be too scared or you're gonna make a mistake.  Brandon Turner did a wonderful job - His earlier book called The Complete Guide to Real Estate Investing. And I really enjoy that book because he explains his roles in single-family houses and multifamily. He explains a whole list and how to do it. Who to go to for financing. How to do the burn method which is by rehabbing refinance and get your money out. So he does a great job on that book and then he also does a follow-up book which is basically the complete guide to like I think property management or something like that. Managing your real estate in a real estate investment manager which my knowledge from just that book made me feel like a real king because Rich Dad Poor Dad does a great job with your mindset and Richest Man in Babylon really does a good job with your mindset.    I highly recommend both of those yes Rich Dad Poor Dad is the first business book that I've read. I think I read it when I was 15 or 16 and dad died. It was a book that changed my life forever. It means that I still do everything that I am you know right now is because of that book.  So I think reading books is so important and it's something that I've had to constantly improve because everybody around you is a possible partner, but you need to know what they know you need to be able to be on top of everything going on. I love that Marcus Miller lets out a bunch of good information on their website about markets that you can go to. What are things selling for? Watching the trends. And then I also spend quite a bit of time listening to podcasts that talk a lot about economics. I spend a lot of time which isn't even in the real estate deal I spend a lot of time listening to podcasts on economics trying to understand and see if I can somewhat predict that case.  So that's how he is today. Exactly. No yes, the fiat money. Basically, you're telling me it's probably going to be talking about the fiat money system monetary system. Yeah, I would love to read that thank you for the book recommendation of course. Michael, I just wanted to ask you a couple of questions because I love talking to people about their markets as well. You said you were down in south Florida. That's right. How did you get started?  So I got started I was actually in the retail business and I managed to save money together with my brother who's also my business partner and we always had a dream of becoming real estate investors and so we figured you know we were doing good money in retail, but we lived in Minnesota. So the cold wasn't for us I mean I love Minnesota.  It was like we said OK that's it we're Israeli. So I mean the cold wasn't for us. It's just you know not good for our blood I guess you know growing up in Israel you were so used to the heat. So we moved to Miami. Also, this is a big community of Israel people here and Jewish people and so we figured you know it's where we want to live. And we didn't think back then, Miami was the right market for us as far as mystical, but we said we're not going to compromise about you know our lifestyle because what's the point. What's the point of making a lot of money if you're not enjoying your life. So exactly yeah. So we moved here to Miami and then we were looking for. We were looking for a residential deal we were looking for a house to flip because we had enough money to buy in cash. So we went for this one property and then we found it and we flipped it and it took us about I would say six months to complete the renovations and sell the property and we made a decent profit I say I think it was sixty-three thousand and so we made a decent profit, but then during that process we were exposed to real estate wholesale and we figured that Miami and the entire region of South Florida was at its peak when we were there. So we came right on time and so properties were still appreciating a great deal. And so we managed to two also properties and you know us in our minds that we thought that when you host a property that you're going to take a fee of five or ten thousand, but literally we know that you could make fifty thousand sixty thousand if you're into it. Absolutely. Yeah. We stumbled upon this one particular deal that we got under contract for I think it was 80000. We had it under contract for eighty thousand and we were able to sell it for one hundred and twenty-five thousand and that's in two weeks time. So we made forty five thousand in two weeks and then we started comparing you know that with the flip that we made a little bit more, but it took six months and we had to put all the money down and so we were thinking  - Well wait let's change the direction here let's change our plans. Yeah. And so and so we changed our direction from doing flips into risk at wholesale and then things happened really fast. It's just it all exploded one day. So you know I remember this particular day that I was realizing that I was making good money you know really good money for the first time in my life. I was pretty young when that happened. So I couldn't you know really cope with it because mentally when you make a lot of money and you're very young family then something happens to your mental state your psyche, yeah you change. And so then you got to rebuild yourself and that's the position that I was at the time. And so from that point on we decided that we want to grow and we want to do things are a little bit bigger. And I remember that one time that I drove on the highway on I 95 and I've seen people doing you know renovating buildings you know left and right. I was like Well you're good enough you're able to do that. And so that's how I got into commercial real estate. And right now we are actually closing on a deal in Hollywood, Florida. It's on land and we bought it for $275,000. Yes. That particular deal is you could develop it, it's zoned for multifamily and the owner didn't care. He just sold it to us for a little bit under retail. It's like 320 and so we bought it for two seventy-five and we already have offers for like 550. It's like two. That's awesome. Yeah. So we're thinking about developing it and doing it ourselves or you know wholesaling it because we're just thinking about maybe wholesaling commercial properties or developing and getting into you know syndicate a few deals so that's the way to do it.  Where did that confidence come from for you to step into that from just you know all selling residential to step into because that's a big jump? That's a big jump stepping from the small individual house to wholesaling you know a large commercial space.  Well, that's a great question. First of all, you know I'm in a position where I hold many properties so I have passive income that comes in my way every month. So I'm not afraid because even if I'm going to make a mistake and that's what people don't understand when you're into real estate at the beginning it's so difficult, but when you’re already making good money. There is a confidence boost because you feel like you're invincible because you're making money passively every month. Your whole selling properties. Also every month you have acquisition managers people that that take care of your leads and go to go to your meetings so your time is a little bit more free. And then you have contractors working on your flips. So you're gonna be making good money one way or another. Right. You asked me about confidence. There is a boost in confidence because of right. OK, I'm going to buy that deal for $275,000. If I'm going to make it then and I could develop it and sell it for four million or I could assign it for four hundreds of thousands more then I would definitely learn something and I'll definitely get into a different arena.  Right. And so I guess that you could do knowing that it's okay that even if you can't make it and even if you lose that money anyway. I mean what a losing time my money when I buy a prize you can't lose product losing time.  Yeah, but even if it's just kind of that attitude that grabs you and it's the same thing for me it's that attitude that grabs you and says look even when I just started my attitude was OK I already have this side hustle and already have my job so I'm making seventy-five grand a year. I can make all I can pay all my bills even if I flop on this real estate thing which I didn't think that I would. I still felt like I know the property I know the property's worth more than what I'm buying it for. So it's really hard to lose on a hard asset. It's not like throwing your money into Google and then all of a sudden their ad revenue drops and you have no control over anything the ad revenue drops or something like that and you suddenly lose 20 percent of the value of your money. It's not very rarely anything like that happened because you have the knowledge your and control the asset.  All of that of course and I'm going to finish our amazing interview which is really one of my favorites so far by saying that you can't really lose because even if you lose money is the way that I see it right now as a successful investor is fake. But knowledge is not fake. And even if you're going to lose money then that is your tuition.  You learn something and when you learn something that is going to be there forever until your last breath you're going to remember and know and have possessed that knowledge which could be utilized into the next deal. So I don't think you could ever lose money or you could ever lose you could lose money, but you could never lose when you're getting into real estate. I don't think that's exactly what it has been wonderful talking to you Michael really I had a great time and I'm sure we're going to be in touch you know and talk about other things in the future. Absolutely. Thank you for coming into the show and I really appreciate it because it's something that you know I'm grateful to be able to talk to people and hear their stories. I know you know we're investors and our time is very valuable. I want to thank you for dedicating the time to talk to us today. Really.  Absolutely. Thank you very much.  All right Michael. So you have a great day.  Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time.     

Today’s guest is a professor, author, active investor & developer, Richard Peiser. He’s a Michael D. Spear Professor of Real Estate Development at Harvard University, founded the Advanced Management Development Program and the university-wide Real Estate Academic Initiative. He has written a best selling book, Professional Real Estate Development: The ULI Guide to the Business. Richard will give us some insight on his beginning stages in real estate, his biggest project thus far, and current projects in the works. He also discusses developing new towns and the executive program at Harvard for real estate professionals.   Highlights:   *Richards’s start in the Real Estate World   *Current projects   *Reducing crime through Real Estate Development   *Insights on New Towns   *Harvard’s Executive Program   Contact Richard: rpeiser@gsd.harvard.edu

  Our guest today will feature the author of ‘MY LIFE & 1,000 HOUSES: Failing Forward to Financial Freedom’ - Mitch Stephen. He’s a self-taught real estate entrepreneur, author and has bought many properties throughout the years with different strategies. Mitch writes about his life story where he describes everything from his childhood, his success and failures, his trials in tribulations in the real estate world and his personal life, and how he ultimately persevered to attain a level of success that he hadn't envisioned. In today’s episode, he’ll discuss his “forever money” play, how to learn to make the right deal for you, the importance of finding where You fit in and why finding a mentor will save you tons of time and money. He learned the importance of asking for what you want and how starting with a few things will get the ball rolling. Most of all, he is an example of how to follow your heart, your dreams and to never give up on yourself.   Highlights:   *Mitch’s turning point during business school.   *Explains the art of Owner Financing.   *Importance of working with a business coach/ mentor.   *Mitch touches upon his successes, his failures, everything in between and he has worked through it all to end up where he is now.   *Mitch discusses his books and how he wrote it from the heart.   Resources: www.1000houses.com

Today’s episode will feature one of the most knowledgeable commercial real estate brokers and dear friend of ours, Todd Cohen. We will discuss the importance of building a relationship between the investor and the real estate broker, opportunity zones and some other interesting things about real estate.   Brokers play an important role in commercial real estate because they are constantly talking to sellers which can lead them to provide insight on deals that are on and off the market. As an investor, you want to look at as many deals as possible in order to find the golden deal that is right for you. This is important because you want to keep your deal flow alive and brokers are able to provide you with deals to look at constantly.   Todd has been in the real estate industry for the past 25 years and for the past 10 years has taken part in the advisory role and owns his own brokerage firm, TCC Advisors, LLC. He has vast knowledge on the market all over the state of Florida and Nationwide.   Highlights:   *Todd’s background and how he started in the wonderful world of real estate.   *The importance of building meaningful and lasting relationships between investor and broker.   *What’s an opportunity zone and why it’s a good thing in today’s market?   *Do’s and Dont’s when dealing with a broker.   *Todd’s move to South Florida and finding his place in the corporate world.   *The beginnings of an Entrepreneur and building his brokerage firm.   Connect with Todd: Todd@tccadvisors.com 786-385-9478   Resources: http://tccadvisors.com/

Garrett Sutton   Today’s guest is a corporate attorney, asset protection expert and best selling author based in Reno, Nevada, Mr. Garrett Sutton. He has assisted entrepreneurs and real estate investors in protecting their assets and maximizing their financial goals for more than 30 years.  He’s a Rich Dad Poor Dad advisor and has written several books for the series among them, Start Your Own Corporation and Loopholes of Real Estate.   One of the most important players on your team should be a strong real estate attorney and I cannot think of a better candidate than somebody who worked closely with Robert Kiyosaki somebody I admire personally.   Highlights:   *Insurance Loopholes on an LLC.   *Local vs Not Local Attorney on your team.   *What is Asset Protection?   *Garrett’s background to writing his books.   *Traveling around the world with Robert Kiyosaki sharing their knowledge. Contact Garrett: 800-600-1760   Resources: www.corporatedirect.com

The importance of conducting your due diligence before jumping into a deal can save you a lot of heartache and money. It’s important to take all necessary steps to ensure you have reviewed, verified and then double checked all your necessary details to ensure everything is in order.   In life, you live & you learn and that’s what Brian Hennessey did with motivation and persistence. He is the author of the “The Due Diligence Handbook for Commercial Real Estate", which is the number one bestseller for commercial real estate on Amazon. Brian wrote the manual for himself and never even thought of selling one copy. Brian has been investing in commercial real estate for the past 30 years and he's one of the most experienced syndicators and investors out there.   Highlights:   *Brian’s real estate beginnings & his first deal.   *Important items to look out for during the due diligence period.   *Brian’s thoughts on outsourcing initial underwriting.   *Advice for Multifamily Investors.   *His thoughts on the current Apartment Building Real Estate Market.   *Brian’s book- an investor’s manual to keep handy and refer to when entering a new deal to make sure nothing falls through the cracks. Cross all your T’s and Dot all your I’s.   Connect with Brian: Brian@impactcoachingsystems.com (818) 371-0311   Resources: www.impactcoachingsystems.com   www.impactcoachingsystems.com/courses

Kevin Tacher. Learn about the most critical of all team members - The Title Company - with Kevin Tacher. Working with a title company that has the same mindset of investors is crucial for the success of your business. But how do you find the right title company to work with? Kevin Tacher is the owner of Independence Title also known as The Title King of South Florida. Tacher started his career with no money or knowledge but sheer determination, motivation, and desire to succeed. At one point he was in $750,000 in debt and managed to turn this around and create a mega title company that is known for its investor-friendly traits. Kevin teaches young investors about the major role of the title company in their real estate investment business. Today Kevin will join us and tell us about his 20-year career in real estate title, and we will also talk about his most recent book “Rescue your Business” that debuted the beginning of the year.    Highlights:   * Kevin’s transition from a firefighter to a full-time real estate title company owner.   * Advice for young investors who are trying full-time to get into the real estate business.   * How important mindset is in the process of becoming a real estate investor.   * The state of the residential market in the beginning of 2019.   * Kevin’s new book - which talks about the plan and strategies you need to take when starting your own business.   *Do’s and don’t in real estate.   Connect with Kevin: Kevin@TitleRate.com Resources: https://titlerate.com/home