How to Scale Commercial Real Estate

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By interviewing the best minds in real estate we give you the tips, tools, and tricks to scale your investment portfolio.

Sam Wilson

    • Jun 30, 2022 LATEST EPISODE
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    Creating Systems in the Fragmented RV Park Industry

    Play Episode Listen Later Jun 30, 2022 21:03

    RV parks are booming, but there's still plenty of opportunity. Here to talk about how we can take advantage of the space before institutional investors come in is Jeremy Hans.   Jeremy is the co-founder of Climb Capital and has been an active multifamily real estate investor since 2010. He believes that RV parks are a great investment because of the high returns and low risk and discusses their opportunistic approach in finding deals. Jeremy is also passionate about what he does and shares inspiring insights of choosing a lifestyle he wants to live.     [00:01 - 03:29] Building a Lifestyle You Want From reservist to real estate investor How Jeremy is finding work-life balance   [03:30 - 19:38] Pivoting to RV Parks The opportunities in the RV parks industry What a deal looks like in the RV resort space The advantage of being the frontrunner in a lesser-explored asset class Investments that Jeremy and his team are staying away from The long-term potential in destination RV parks Adding amenities and testing the market Launching an RV park investment fund   [19:39 - 21:03] Closing Segment Reach out to Jeremy!  Links Below Final Words Tweetable Quotes   “You could give me multiple millions of dollars in my bank account tomorrow, I wouldn't change what I'm doing. I've chosen the lifestyle that I want to live.” - Jeremy Hans   “If I had better criteria, there'd probably be a lot of more people in this space because there'd be a lot more data, but right now there's not. So I'm making my own and we're making it work.” - Jeremy Hans -----------------------------------------------------------------------------   Connect with Jeremy at the Climb Capital website. Email him at and follow him on LinkedIn, Instagram, and TikTok!   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Jeremy Hans: I think it's more of an issue of where does it kind of fit in the local kind of economy in both size, location, and distance to things that people want to be at. So if you're an RV'er, if you ever RV'ed, you don't necessarily need to be right next to where you're trying to go, but you want to be close and close is relative. It might be an hour. It might be 30 minutes depending what you're looking at. And so, Hey, is there a draw? Is there a reason somebody want to be there? It's it near a major highway? Does it have a water feature and is it a place that I or my family would ever want to visit are kind of the basic criteria that we look at. And if I had better criteria, there'd probably be a lot of more people in this space because there'd be a lot more data, but right now there's not. So I'm making my own and we're making it work.  [00:00:46] Sam Wilson: Jeremy Hans is the former Navy helicopter pilot who began investing in multifamily and commercial real estate while on active duty. He skipped residential real estate almost entirely and recently he has pivoted from multifamily syndications to RV parks, amongst other things. Jeremy, welcome to the show. [00:01:03] Jeremy Hans: Sam. Thanks for having me glad to be here. [00:01:05] Sam Wilson: Hey man, pleasure's mine. Three questions I ask every guest who comes in the show: in 90 seconds or less, where did you start? Where are you now? And how did you get there?  [00:01:11] Jeremy Hans: Sure. So, Jeremy Hans started as a middle class, white kid from the suburbs of America, as white bread as they come, right? So, I did all the right things, went to school, and learn nothing, but, you know, just keep taking the next step to get a job, join the Navy ' cause I thought that was the next step in my life to get, get me started. That was great, had a great time, but realized pretty quick, the harder you work in the Navy, the more work you get, and you don't get paid a dollar more. [00:01:30] Jeremy Hans: So, started planning my exit pretty early on. First thing I ever bought was a fourplex in San Diego as a 22 year old kid. House hacked and BRRRR before those were words and then got moved, not by my own choice to Pensacola, Florida and realized I got to do something else, right? There's no fourplexes to buy here. [00:01:44] Jeremy Hans: And so jumped into commercial real estate on a small scale, met a partner, trying to buy the same mobile home park. And then together we kind of get, got a bunch of education, started just doing deals, started syndicating on a small scale, and slowly kind of grown that to Climb Capital. So today we're a team about 10, primarily focused on syndicating RV parks and then doing some private equity stuff on the side as we continue to sell and operate a few of our apartment and mobile home park deals still.  [00:02:07] Sam Wilson: Wow, man. That's a lot of moving pieces. Now you are, you're still active military? You're reservist? What's your status?  [00:02:14] Jeremy Hans: So I I'm a reservist, so I left active duty in 2017, did a couple more years on active orders as a reservist, but now I'm just a part-time 60 day a year flying helicopter pilot in the Navy reserves.  [00:02:26] Sam Wilson: Oh, man. That's, that's really cool. You, you have a lot of things in the air. What's something or a lot of moving pieces, like balls in the air was the phrase I was looking for, a lot of balls in the air, a lot of moving pieces. How do you organize all of it?  [00:02:38] Jeremy Hans: You know, I, I think the thing that I tell people all the time, right, I also got four kids, got an airplane, do a lot of stuff at church, right? I keep it busy, right? You could give me multiple millions of dollars in my bank account tomorrow. I wouldn't change what I'm doing, right? So I've chosen the lifestyle that I want to live. I want to run a company. I want to be able to do these things. I know that's going to mean a lot of work right now. I'm okay with that. I know that's going to be a lot of long days with little kids. I'm okay with that. And it's just putting kind of, you know, lifestyle priority in check. And maybe that means I don't hang out and watch as much Netflix as I'd like. But I go, I'm done. So, I think that's my answer. [00:03:05] Sam Wilson: Netflix isn't that much fun anyway. Let's, let's all be honest.  [00:03:09] Jeremy Hans: Listen, when you don't watch it for a month or two and you go back, like, there's nothing you want to watch. Like, it's amazing how, you know, it becomes an addiction that you don't even realize when you stop, you know, doing some of that stuff that... [00:03:19] Sam Wilson: Oh, for sure. For sure. and again, you're building a lifestyle that you want. And I think a lot of people at times people use Netflix as an excuse to get away from the lifestyle they built. So, that's, that's awesome, man. Good for you. Tell me, when did you guys switch from multifamily to now syndicating RV parks? [00:03:35] Jeremy Hans: So we made a pivot, really at the end of 2021. We bought our first RV park beginning of 2020, kind of, we're not really planning to do it, just kind of a deal fell on our lap. And then a second one, the same. And then we looked up in the middle of 2021 and we said, Hey, COVID eviction were terrible. [00:03:48] Jeremy Hans: These deals for class C multifamily are getting really thin. The people are not getting any better, locations aren't getting any better, but these RV parks. They're making a ton of money. The people are happy to be here. They're growing by leaps and bounds. There's no information. Let's jump and do something a little bit different. [00:04:01] Jeremy Hans: So, we kind of had a hard conversation, lot teeth sucking and said, okay, let's do it. So, we said, let's sell off everything else. And let's put our full focus on this kind of macro trend right now. And we'll ride this until the wave crashes, I guess.  [00:04:13] Sam Wilson: Well, hopefully the wave doesn't crash, but tell me, tell me what I guess what were the things that turned, you know, the deal fell in your lap, which I think is funny part of the story, like for most of us where all sudden it's like, oh yeah. And then there it was, and then I just did it, but it, there had to be enough compelling information that came your way as you guys dissected this first deal that said, man, this is where we need to go long.  [00:04:34] Jeremy Hans: Right. So, you know, we kind of stair stepped it. Our first deal was an RV park, in the RV park space, wasn't an RV park, but it really looked, operated more like a, a mobile home park. And so we had to learn some of the complexities of the RVs specifically, but the actual model was much more mobile home park esque was something we understood and done for years. And in that process, we brought on our own in house management from day one. [00:04:53] Jeremy Hans: And so we had a little bit more flexibility. So then when we bought our second RV park, that was actually a traditional kind of resort style, you know, destination RV park. We kind of already had built half of the team necessary to run that thing. And so what has been hard for a lot of other people to switch to, which is you can't just call up somebody off of the internet to go run your RV park. [00:05:10] Jeremy Hans: We had already built basically half the system to be able to do that. And so, that second RV park is when we really realized if we kind of dig into this a little bit deeper, there's a lot of opportunity. And so that's when we really started, hey, to expand, you know, basically provide the same CapEx kind of turnaround that we did into a classy multifamily. Similar idea, right, into a hospitality product and just kinda watch that continue to succeed. And then macro, I mean, people want to do, you know, live on the road, remote work, ubiquitous internet's everywhere so people feel like they can do it now. People want to take, you know, midlife retirements, traveling with their kids for a year. [00:05:39] Jeremy Hans: I mean, van life, you name it. There's people that want to be on the road. COVID has changed, I think, a lot of people's outlooks on what travel looks like and what they want to be doing. And so, I think we're really meeting a demand that right now has not really been kind of eaten up by the institutional investors yet. [00:05:52] Sam Wilson: Right. No it hasn't. Why do you think that is? [00:05:54] Jeremy Hans: It's hard, right? It's hard because nobody has the management system in place to be able, in a box to go buy an RV park tomorrow, right? They're all different. They're businesses that require a lot more work. Totally could be in time as that people kind of build out these systems a little bit better, but until your hotel type spaces moves into the RV park space, I think there's going to be a lot of opportunity to kind of play that delta cap rates, which you still buy RV parks a lot better than you can buy mobile home park and make a lot more money.  [00:06:20] Sam Wilson: Yeah, absolutely, absolutely. What's your long term plan with it? I mean, 'cause these are, these are known, like you said, for producing an excellent income stream. Is your idea to hold onto 'em in perpetuity? You going to package 'em all up and sell 'em once the institutions start coming in? What what's your long term play?  [00:06:37] Jeremy Hans: I see myself as a deal junkie, right? And so at the end of the day, when somebody wants to pay me, what I would assume is too much money for them in the future, we'll likely package them together and try to sell them off to institutional investors. [00:06:47] Jeremy Hans: But I think the only place you can, the only way you can get to that is when you have years of experience, really solid system and some really good product. And so our process right now is to continue over the next two to three years to really try to buy as much as we can, update, systemize, make sure things are running really at peak efficiency, continue to scale and then be at a position to kind of see, hey, we want to hold these long term and we want to be the guys or, hey, we want to sell these off and go find our next big adventure. But I'm an adventure guy, so I can't claim that in 10 years or 20 years I'll necessarily be the RV park guy I am today. [00:07:15] Sam Wilson: Right. Understood. Understood. What does a deal look like in the RV resort space right now for you? [00:07:23] Jeremy Hans: For us, it's trying to provide an opportunity for us to provide value, right? So we want to create value. Typically that looks like some kind of expansion, typically some kind of ability to raise rents to a more of a market standard. That market is really fungible. It's hard to kind of tell where it's at, but trying to, you know, understand where that is and can we push it, providing other ancillary services that we can also get paid for. And I think the big one for us is just marketing and, and putting together business systems and processes. We're buying RV parks from people that don't have online booking, right? We're buying RV parks from guys who, you know, they've got the same lady that's running it for 20 or 30 years and she's doing a great job for what she knows, but she doesn't know how to use online, digital marketing, right? And so they're just leaving money on the table, 'cause they're not running like a business. And so if I could run a business where somebody else has had a hobby, I typically can find a way to make some money on that.  [00:08:08] Sam Wilson: Yeah, absolutely, absolutely. Is there, you know, a geographic focus for you guys? Is there somewhere you say, hey, this is better than that? What is that?  [00:08:18] Jeremy Hans: Yeah, so I think that's a funny question. Our company's name is Climb Capital, right, which is supposed to be like climb out capital, the idea of like flying, taking off, right? Climb out also kind proceeds, maybe climbing out of like a ditch. And so we just went with climb. [00:08:29] Jeremy Hans: But the reason we, we named that, right, both military aviators, my partner and I that founded it. We wanted to create a business that built a lifestyle that we wanted to have. So one, right, we both liked to RV. I met my wife, actually, growing up with my parents, you know, RVing, going on camping trips, but we wanted be able to buy an airplane. [00:08:44] Jeremy Hans: So we bought an airplane and we want to be able to have a reason to fly it. So we want to buy stuff in the Southeast. We're based out of Pensacola, Florida. We want to buy stuff far enough away that it convinces our wives that we need to keep this airplane. So really anything from Texas to the Carolinas and any place where I can go get a reason to fly away, a place. I want to be myself, right? So, tired of dealing with class C places, class C people, class C problems. I want to go buy vacation properties and vacation areas with vacation people and enjoy my life while I make a little bit of money. [00:09:10] Sam Wilson: So that's an interesting point and maybe a differentiator that you put on there was vacation properties in vacation places that you want a vacation. Is there a difference between the RV resorts you were looking at versus maybe something in a fly overstate?  [00:09:24] Jeremy Hans: There's absolutely opportunities for destination RV parks in flyover states. You know, we're really heavy in places like Alabama. Some people don't think Alabama's like a place that you want to be, but we're doing great there. [00:09:35] Jeremy Hans: I think it's more of an issue of where does it kind of fit in the local kind of economy in both size location and distance to things that people want to be at. So if you're an RV'er or if you ever RV'd, you don't necessarily need to be right next to where you're trying to go, but you want to be close and close is relative. [00:09:49] Jeremy Hans: It might be an hour. It might be 30 minutes depending what you're looking. And so, hey, is there a draw? Is there a reason somebody want to be there? It's it near major highway? Does it have a water feature? And is it a place that I or my family would, would ever want to visit, are kind of the basic criteria that we look at. [00:10:02] Jeremy Hans: And if I had better criteria, there'd probably be a lot of more people in this space because there'd be a lot more data, but right now there's not. So I'm making my own and we're making it work.  [00:10:09] Sam Wilson: That's it? That's it. And I think that's where the opportunity lies and that's, that's something that you know, that a lot of people are, it's overlooked because there's just, there is no data. There's not data. There's not good management. There's not, it's a, it's a very fragmented, I think, industry, which, you know, for those who are willing to, you know, be the front runners into it and pioneer the professionalization, if that's even a word, kind of just made it up, of the space, you know, as you, as you bring more, more of a institutional approach to owning and operating. [00:10:39] Jeremy Hans: I mean, this is, yeah, this is to us this is not an unknown, right? This is the same thing that happened in apartments 10 or 15 years ago, right. Happened to mobile home park seven or eight years ago, happened to sell storage, happened to short term rentals, happened to residential real estate. We're just providing the same opportunity, right, with a new asset class. And knowing that we have really kind of a short time, we feel like, before it is going to be institutionalized and that advantage kind of goes away and we'll have to go find the next asset, and the next thing to go, kind of find our niche in the world.  [00:11:04] Sam Wilson: What is a, a deal that you would look at? And you'd say absolutely not. That is just a bad RV resort or park to buy.  [00:11:12] Jeremy Hans: So for us, I think the biggest one is size. We want to be able to have a full-time property manager on site, and we don't hire property managers. We hire people that want to run businesses and we, you know, teach them how to be a property manager and how to run it. [00:11:23] Jeremy Hans: And then we let them have a whole, much more control than anybody's ever given that person, or probably use most of their employees, right? We find a lot of opportunity by having that super high trust. And so if we can't have a, a site that will ever make enough money to support that person and then still have any kind of profit on top of it, it's probably just not going to be for us. [00:11:39] Jeremy Hans: And then the second one is if it's really hard to get to and there's no reason to be there. I don't care if a lot of people have been there in the past. There may not be that anybody in their future, 'cause there's no reason to be there. So, for us, a lot of times I'd be like, you know, man camps, places that are, you know, work, you know, way out in the west, Texas or up in North Dakota, not a bad place. [00:11:56] Jeremy Hans: People make a lot of money on it. That's just not our business model. And so we try to stay away from places we don't think is a long term kind of defensible vacation investment if that makes sense.  [00:12:03] Sam Wilson: Right. Right. Tell me about the long term component you said earlier that these functions to an, to a certain extent, sort of like a mobile home park. What did you mean by that?  [00:12:14] Jeremy Hans: Well, so the first one we bought was 36 space RV park, had two rows, one road down the middle of it, and functionally people live there like they were mobile homes. So, one of the things that we kind of recognize is that we're trying to buy destination RV parks, where people have short term stays and they're, they're paying a higher rate for that shorter term. [00:12:29] Jeremy Hans: But we also know that based on the lack of affordable housing in this country, that we always have the opportunity, if things would turn and people just decide to not vacation anymore, which by the way, hasn't ever been a thing. But if people stop vacationing, right, we can always take either a portion or the entirety of that park and really turn it back into more or less an RV park mobile home park, which would allow long term renters. [00:12:48] Jeremy Hans: We might turn down what we provide for amenities or other services. But there's always kind of a baseline. Like, if you have it, somebody will pull in. And so for our long term spots, more than a month at a time, we typically have 10 or 15 people on the wait list for each spot, because there's just not enough places to park these RVs as if they've been printing 'em so fast and there hasn't necessarily been the same building for the actual RV park spaces. [00:13:09] Sam Wilson: Right, right. Are there, are there code considerations or municipal restriction considerations around converting an RV park to a long term stay RV park?  [00:13:20] Jeremy Hans: I can't speak to everywhere. Generally, no, it typically depends on your zoning, but most of our zoning allows us to have longer term. We choose not to because we can get a higher, you know, return. [00:13:29] Jeremy Hans: And then generally as a business, we're choosing to not sign leases because just like a hotel, if you don't pay, you got to, we don't want to deal with the evictions. We don't want to deal with the government oversight and we don't want people to feel like that they're intruding on somebody's living space if they're coming to vacation. [00:13:43] Jeremy Hans: So if you want to pull out your your plants and you're starting to, you know, start guarding in front of your, your trailer, that's probably not going to be a place that somebody else is going to feel comfortable coming for a night or a weekend. And so we have to make that consideration too. And it takes, you know, I don't mind somebody that stays two or three or four months, even a year. [00:13:59] Jeremy Hans: Traveling nurses, traveling contractors, people that are on the road, working remote. Great. Just living there and just leaving all your trash out front, treating like mobile home park ain't going to work ours. So just kind of a business choice.  [00:14:09] Sam Wilson: Right. And again, this, this goes back to the vacation theme. Like it's, that's a really good point that you don't, you want other people to come in and be like, oh, Hey, I belong here, not, oh, I'm intruding on somebody else's, you know, backyard barbecue. Okay, cool. That is really cool. What about amenities and things like that ?I'm sure every park you look at has different amenities. Are there certain amenities you find that bring value? Certain ones you'd say, man, that's that's, you know, we're getting rid of that on every park we buy, what's that front look like for you?  [00:14:39] Jeremy Hans: I mean, it's really relative based on location and what the park is. For me personally, I, you know, I've got four kids. Like, if I'm going to an RV park, I want some water. Like, I need those kids to go burn some energy, get messy, you know, not sweat all over me all day. [00:14:51] Jeremy Hans: And so if there's not some kind of water feature, it's probably not a place for me, personally. And so that's probably not going to be a place for us, you know, professionally either. But besides that, there's nothing in the RV park space that I feel like I'm really strongly for or against. Generally if I can find a way to bring that in as part of the business and then not take away. [00:15:08] Jeremy Hans: You know, either from time or effort for my, my property manager, it's kind of an add on, then I'm always willing to try it. And then I'm always willing to throw it out. If it doesn't make sense, you know, we've tried to do like paddle boats and some, some rentals like that great idea. And then we found massive headaches of dealing with, you know, local municipalities on legalities and insurance. [00:15:24] Jeremy Hans: And so, Hey, okay, great. It's not going to work. We'll just take it away. It's not going to hurt my feelings. We're still there. But you know, it's just things like that. Just testing the market and being very willing to kind of continue to learn in a space where there's not a lot of information. And then we'll create that information over time and tell people in two or three years exactly how to do it. [00:15:40] Sam Wilson: Tell me about this classes of RV park, so there are similar classes like there is in multifamily or is, I mean, what's the...  [00:15:49] Jeremy Hans: Well, there's, definitely, yeah, there's definitely kind of the, the, the high highs and the lows lows, the middles, definitely a lot more squishy. I would describe it. When you start talking about high end kind of RV resorts, where, you know, the, the RVs for a lot of these owners of those resorts have to be within 10 years or newer. [00:16:04] Jeremy Hans: And if they're not, you have to get, you know, special permission, or whatever that's tippy top, right? You're talking people that are spending, sometimes even buying condos RV spots, whole different business model than what I'm looking for, right? So we're definitely kind of more that B class family style park. [00:16:18] Jeremy Hans: And then when you start thinking about RV parks that look more like rundown mobile home parks, that's also not what I'm looking for. And so I've not seen a classification system that I love. It's kind of like, you know, when you see it you'll know. This is a place. This is a place for me. This is not a place for me. [00:16:30] Jeremy Hans: And a lot of that comes down to just kind of personal feel like would my family be able to comfortable here? If not, it's probably not for us. And if so, then let's keep digging and see if this is the right deal.  [00:16:39] Sam Wilson: Right, right. No, that's I think that that's absolutely right. I mean, and again, the classification system probably largely doesn't exist because it is so fragmented. It is so mom and pop and it is so nuanced to, you know, to its exact location.  [00:16:53] Jeremy Hans: And some of it listen, like, I don't want to stay at some places that are perfectly fine to stay, but it just doesn't meet my design or style or whatever, right? And so, if it's a place that, you know, really, you know, caters to motorcyclists, that's great. [00:17:04] Jeremy Hans: I'm a motorcyclist. I love it. But I probably don't want to stay at a park where it's got you super loud bike going off all night, Right? So there's so many kind of variability kind of steps there that it's tough to, to note. And if you've ever been to RV parks, even KOA, right? The KOA is around the country, which is a franchise RV park and campgrounds. [00:17:19] Jeremy Hans: There's a lot of variability in kind of the classification of how nice they are too, right? So a lot of it comes down to just your local who's running day to day and making those decisions to spend the money.  [00:17:28] Sam Wilson: Love it. Tell me about your fund. You guys are launching an RV park investment fund. Tell us about that.  [00:17:35] Jeremy Hans: So, so the idea here is that a lot of our investors want to get in the RV parks. We want them in the RV parks with us. When you start making a bet on an asset class, right? And you start trying to do that on an individual property perspective, you need a lot of data. So it's really easy to make an investment in the apartment space on a deal by deals, because you can really understand that data's really, really well, really granular. [00:17:55] Jeremy Hans: What we decided was, Hey, we think it's probably better for us and for our investors if instead of investors buying into each individual deal and it ran a place in Alabama or South Georgia, that they, Hey, let's take a bigger swing of the bat here, have a, have a bigger swath, right. Kind of make a bigger bet on the asset class. [00:18:10] Jeremy Hans: So that's what we're doing, we're doing a 20 million RV park fund and allow us to move a little bit faster, buy some of these deals with cash right away, and then refinance out to be able to move even better for some of these mom and pop owners who sometimes have very weird requirements for purchase and be able to kind of start moving a little bit faster and a little bit faster spend, a little larger scale than we would've had to go deal to deal. [00:18:28] Jeremy Hans: And we think for our investor base that they're going to be really happy by being in the asset class and then have some opportunities to get some broader you know, not only depth, but also breadth of what they're investing in.  [00:18:39] Sam Wilson: Well, a 20 million fund, what would be the total assets under management that that fund could potentially absorb?  [00:18:45] Jeremy Hans: We're looking probably 60 to 70 million would kind of be our, our expectation. You know, naturally we have kind of delevered as we move into RV park space. There's not the institutional capital that there is in the mobile home park, in the apartment space. And so we've already kind of naturally delevered just because we can't go lever up to 80, 85% on these deals like we could in the past. [00:19:03] Jeremy Hans: And so we'll keep a little bit lower leverage, one, because there's some unknowns in the economy, but two, that's just kind the natural kind of place for the space. And we're still making really good returns without having to go kind of unnatural leverage to get there.  [00:19:14] Sam Wilson: Right. Man, and that's, that's absolutely, you know, as, as we've observed that space, that's one of the things we've found too. It's like, we don't, we don't have to go high LTV in order to juice returns. Like we can deleverage take some risk off the table and still hit exceptional returns. Like, that's a win-win.  [00:19:32] Jeremy Hans: Yeah. Let's not tell anybody. But if you're listening right now, just turn it off. We didn't talk about this. Yeah. [00:19:36] Sam Wilson: I have no idea. No idea. Jeremy, this has been a blast, man. Thanks taking the time to come on today and really talk about the opportunities you guys see in RV parks. It sound like you got a lot of a lot of passions and a lot of fun you know, that, that you incorporate into your life. And I love the way that you've built a life of style around the life that you want. And, you know, like you said, Hey, in two or three years, you may be outta the RV park industry as a whole and made your exit and moved on. But, but you are very opportunistic and I love, I love the enthusiasm and the just go for it mentality you bring to the table. So thanks for sharing with us today. [00:20:10] Jeremy Hans: Absolutely.  [00:20:10] Sam Wilson: Appreciate it. If our listeners want to get in touch with you and learn more about you and even maybe your fund, what is the best way to that?  [00:20:17] Jeremy Hans: Easiest place to find us, of course, would be the internet. So going to You can always email me directly And I could be found in many of the major social media platforms to include some TikToks. [00:20:29] Jeremy Hans: Nice. I'll have  [00:20:30] Sam Wilson: to look that up. TikTok, Jeremy Hans. There it is, folks. Jeremy, thanks for your time today. I do appreciate it.  [00:20:36] Jeremy Hans: Thanks guys. Thanks for having me. 

    Investing on Class B and C Assets

    Play Episode Listen Later Jun 29, 2022 18:51

      Colby fryer civil engineer that is now a multi-family investor, specializing in C and B minus class assets. And the Principal and Founder of Mountain Bridge Capital, a Multifamily Investment Company specializing in apartment real estate. With a goal  to maximize returns for their investors and provide a stable income source for them over time. Colby and his team are very passionate about providing clean, comfortable housing for people across the country in need of housing.   Highlights:   [00:00 - 06:04] Colby Fryer: Multi-Family Investor, Specializing in C and B Minus Class Assets He started investing in 2013, bought six houses and then decided to get a coach and mentor to help him transition into the multifamily market. Since then, he's invested in over 136 units of multifamily, which has been an exciting journey. One of the biggest challenges he faced was learning how to overcome uncertainties when investing in C and B minus class assets. He recommends reaching out to family and friends for help when starting out, networking with brokers, and doing your due diligence. [06:05 - 11:49] Colby's 4,000 Door Goal Colby's team is now focusing on turning the property around and getting it rented again. They are expecting to increase rents by 50%. He shares that they are looking to transition out of the real estate business within the next few years. [11:49 - 17:33] How to Succeed in the Real Estate Market in Today's Economy Colby discusses how he scaled into the multifamily space, from no deals to 136 units in a year and a half He recommends starting with lower returns, but going with something that is already done if possible Mentorship is key, selecting someone who is not a guru but will be a mentor [17:34 - 18:50] Closing Segment Reach out to Colby Links Below Final Words   Tweetable Quotes   “I think once you start doing it and you talk to a few people, it gets easier and easier. And, I think you just gotta own up to who you are and. What you're really doing and you have to come up with that new identity.”  - Colby Fryar ----------------------------------------------------------------------------- Connect with Colby on LinkedIn  or email him at:   Connect with me: Facebook LinkedIn Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in! Email me → Want to read the full show notes of the episode? Check it out below: [00:00:00] Colby Fryar: I think once you start doing it and you talk to a few people, it gets easier and easier. And, I think you just gotta own up to who you are and. What you're really doing and you have to come up with that new identity. [00:00:12] Colby Fryar: I'm a, apartment investor now I'm not civil engineer. I'm not whatever else you have to identify that with yourself and when you do that, That really changes the game for you and helps you to connect with people. And people want to help you if they trust you and they like what you're doing. [00:00:29] Sam Wilson: Colby fryer is a multi-family investor, specializing in C and B minus class assets. Anything over a hundred units, Colby. [00:00:49] Sam Wilson: Welcome to the show.  [00:00:49] Colby Fryar: Awesome. Thank you for having me, man. Appreciate  [00:00:52] Sam Wilson: the opportunity. The pleasure's mine. Three questions. I ask every guest who comes in the show in 90 seconds or last, can you tell me, where did you start? Where are you now? And how did you get.  [00:01:00] Colby Fryar: My background's in civil engineering doing a lot of construction project management. [00:01:05] Colby Fryar: So it really transitioned well into what I'm doing. In, multifamily. So we started investing in single family in 2013 bought six, six houses and then decided, well, that's not scaling as much as we like to be. So jumped in, got a coach and a mentor and over a year and a half ago. And. Right now we're sitting at over 136 doors of multifamily. [00:01:29] Colby Fryar: So it's been a journey, really exciting.  [00:01:31] Sam Wilson: I'm sure it has. I mean, going for C and B minus class assets and coming from the engineering perspective, everything I know about engineers tells me that you guys really like to know. Like to a very, very fine degree, what it is that's going on. You're getting into C and B minus or class assets and there's quite a bit of uncertainty, I would think sometimes when you're investing in those projects, how do you overcome that? [00:01:57] Sam Wilson: Yeah, so  [00:01:58] Colby Fryar: It was huge to have the guidance of a coach and a mentor through the process. Somebody that had been through that a little. But yeah, there was definitely some challenges to learn and having that engineering background, you like everything lined out and kind of organized in a package and this business is not that way. [00:02:18] Colby Fryar: You kind of put things together on the run and, it's crazy sometimes but well worth it just a lot of challenges to overcome  [00:02:25] Sam Wilson: for sure. Right. And having a mentor is one thing. What do you feel like some of the questions were that you had early on that were like, I guess, things that made you concerned about your next steps in this business. [00:02:38] Colby Fryar: some of the big things were how are we gonna get money? how are we gonna find the deals, all those things that you have to wrap your head around. And, you kind of have to do a little bit , of both. And so the big thing for us was to start reaching out to family and friends and just let 'em know what you're doing. [00:02:56] Colby Fryar: Tell everybody, and so you start to build those relationships, start to network with people. , and that was really big for our first capital race that we did. , but at the same time, you're, meeting with brokers and so I find that's important for an investor. You don't want to just be a one trick pony show. [00:03:13] Colby Fryar: Or have one, wear one hat per se. You want to be able to do multiple things when you're starting out. I think that drives a lot of value, brings a lot of value to a team in order to get involved in this business. How did you  [00:03:27] Sam Wilson: select your first market?  [00:03:30] Colby Fryar: So our market kind of came through my network and the mentorship group that I was in. [00:03:35] Colby Fryar: Also I'm from New Mexico. So I grew up there and knew Albuquerque well, which was our first multifamily asset that we purchased. And then Las Cruces. I went to college there. So a lot of background in the state and familiarity with the market. And so that, that really helped.  [00:03:55] Sam Wilson: Right, right. [00:03:56] Sam Wilson: absolutely does help. Tell me about this. I mean, know, you went from single family investor in 2013 and 2019, or I can't remember when you said it was, but you decided, Hey you're gonna go into multifamily. Was there ever consideration of any other commercial real estate asset classes? [00:04:09] Colby Fryar: not really. I. looked at mobile home parks. I had looked at a little bit of office space in terms of businesses and that sort of thing, really like the mobile home parks and not opposed to that may do that someday. Storage. I've seen that a little bit, but I think multifamily was really what we wanted to focus on. [00:04:29] Colby Fryar: I think you can get, if you start looking at too many things, you get that, shiny object syndrome. And then, and I think that takes away from your focus sometimes. And I think, especially to start with, you need to just focus on one. And that was why we went with multifamily. Just great asset, I think in terms of cash flow, stability through recessions just can't beat it. [00:04:52] Colby Fryar: Right. And  [00:04:53] Sam Wilson: that's why we chose it. Absolutely buying C or C and B minus assets, probably more in the C class assets. This question may be framed, but how did you know, I guess when you're looking at those assets, there, there can be in what we call a lot of hair on the. How did you know, you could turn 'em around. [00:05:09] Colby Fryar: Yeah. That that's a good point. And we always heard that you gotta be really careful when you go into those types of deals. especially on the C class, you gotta really do your due diligence, but, our main focus was just really trying to get a deal. And this seemed like a great opportunity. [00:05:27] Colby Fryar: And that's the thing with these C assets is even though there's a lot of hair out on 'em, there's a lot of opportunity there because you have the value add. And so if you can turn those assets around, you can typically get 'em at a pretty reasonable price and then drive that value, increase the value which can really help your investors. [00:05:45] Colby Fryar: Now. Other side of that, there is increased risk with those investments which we've learned a lot about.  [00:05:51] Sam Wilson: Tell us a little bit about that. I mean, is there anything you can, as you kind of review, the last year and a half, is there anything you feel like you could've done better or that you would do differently? [00:06:01] Sam Wilson: Yeah,  [00:06:01] Colby Fryar: I think during our due diligence, we could have done a lot better job. There was some things there we could have seen. And I'm talking about our bigger deal in New Mexico that we did. It was a syndication. This particular deal, like you said, had a lot of hair on it. and when we visited the properties and did our inspections, I think we missed out on, on seeing some of the issues there were, that were there with tenants. [00:06:24] Colby Fryar: We had some, some problem tenants that we had that we're having to deal with now. And, there was some signs we missed, like broken windows and other things that, that could have really helped us when we started.  [00:06:38] Sam Wilson: What would you do in that case? If you could go back and say, Hey, look, there's problems, tenant it's on this property, you see these broken windows. [00:06:45] Sam Wilson: How would that have changed the conversation either with the seller, with the broker or even amongst your team [00:06:50] Colby Fryar: Yeah. And we did have those conversations. Some of it was going on, but I think, I Really would've got some like a contractor or really know person that was knowledgeable in that space property manager to go visit the property with us and really give us an idea of, Hey what exactly are we gonna run into here? [00:07:08] Colby Fryar: And, that, that would've really helped. Of course you never know exactly. Sometimes you just have to go with your gut, but. But I think that's what we would've done differently, for  [00:07:17] Sam Wilson: sure. Right. And so let's say they came to you and said, all right, Colby, you got some problem tenants here. It looks like you're gonna have a really hard time collecting rent from them. [00:07:26] Sam Wilson: You may have a higher than normal vacancy. What would've been your next step as you look to the deal.  [00:07:30] Colby Fryar: we probably would absolutely have gone to the seller and, talked to him about how we could possibly resolve some of those issues. Maybe negotiate on the price. That sort of thing. Yeah. I think that would've been really good. [00:07:44] Sam Wilson: So I guess, what steps then let's ask this, what are you guys doing now? What's your active plan? Because these are things that people can learn from and say, oh man, they've got vacancy to property. You've got problem tenants New Mexico, as far as I know, isn't necessarily a landlord friendly state. [00:08:00] Sam Wilson: Maybe correct me if I'm wrong. I don't own anything in New Mexico. But, what's the plan going forward? How do you guys overcome those challenges now?  [00:08:06] Colby Fryar: Yeah it's sort of in between, it's not landlord friendly, but it's not tenant friendly, the most tenant friendly. Okay. But, yeah, so the steps that we're taking now is, we, our property managers done a great job of getting problem tenants out. [00:08:20] Colby Fryar: And so our effort now is just really focused on market. Advertising and filling up our units and turning the units, getting those ready to go. So we do have a little bit higher vacancy, but that's our main focus is turning that around as quickly as possible.  [00:08:37] Sam Wilson: Right. Right. And have you guys been able to achieve rent bumps with this property as you do renovations? [00:08:43] Sam Wilson: I mean, is that the  [00:08:44] Colby Fryar: value you add plan? Yeah, there's been for renters there, so that's been good. So our, we expected to increase our rent to six 50 for one bedrooms and seven 50 for two bedrooms at this property. And we've been able to do that very successfully. That's  [00:09:00] Sam Wilson: really cool. [00:09:02] Sam Wilson: That's really cool. Tell me about raising money. I know you said that you've gone out, you've talked to all your investors or family and friends. Was that a hard conversation initially? Especially without a track record in the space or what how did you work that out?  [00:09:15] Colby Fryar: Yeah it is it's, especially coming from an engineer, more of a introverted type person. [00:09:21] Colby Fryar: So it's, it's something that's a challenge for sure. And, but I think once you start doing it and you talk to a few people, it gets easier and easier. And, I think you just gotta own up to who you are and. What you're really doing and you have to come up with that new identity. [00:09:37] Colby Fryar: I'm a apartment investor. Now I'm not civil engineer. I'm not whatever else you have to identify that with yourself. And when you do That really changes the game for you and helps you to connect with people. And they, people want to help you if they trust you and they like what you're doing. [00:09:54] Sam Wilson: Yeah, absolutely. Yeah. Coming from the civil engineering background was what was the tipping point for you? And you could walk away from being a civil engineer and go directly in actually  [00:10:05] Colby Fryar: haven't walked away, still doing that, but, still working the W2. my plan is to transition out over the next couple of years. [00:10:11] Colby Fryar: but you know, that's kind of a tough thing too. Cuz when you're still working, people are gonna ask you. Oh, so what do you doing? I mean, you gotta tell 'em. But it's not the first thing I identify with. I always say I'm investing in multi-family properties. Right. And if they ask and I say, yeah, it still work, but I'm transitioning out over time. [00:10:30] Sam Wilson: Right, I think that's great. And that's a good point. what's the plan for that? Have you hit a certain say, Hey, when we hit a certain revenue number, when we hit a certain number of assets under management, I mean, is there, have you kind of built the plan for the exit or is it really when you want to. [00:10:44] Colby Fryar: Yeah it's a plan. My plan is 4,000 doors in like in five years, I would like to obviously do less, less years for that, but that's the goal and what I'm pushing towards. And I think that would be the number that would offset set of income. Really, what I define as a success in this business is replacing. [00:11:05] Colby Fryar: Income that I'm making now with the passive income from real estate. And at that it's not the number of doors. It's not the money. It's just really will I, can I support myself and my family off the real estate and not have the job anymore? That's it right there.  [00:11:21] Sam Wilson: Right. 4,000 doors in five years. [00:11:23] Sam Wilson: That is, an amazing goal. I love it. How did you guys select that number and what do you feel like you were going to do to achieve that goal?  [00:11:33] Colby Fryar: Yeah, so the thought was, based on that number of doors and the income off of that using the syndication model that would offset my current income that I'm making. [00:11:44] Colby Fryar: It's a lot of doors for sure, but yeah, to get there, the main focus is you gotta take the baby steps. Okay. I gotta do this many deals. This year, this mini deals the next year. And so you set those goals and your priorities, and then you break that down on a more frequent level. Okay. I'm gonna underwrite this mini deals a week. [00:12:02] Colby Fryar: Put in this many Lois and so you start to build out your steps towards that progression just to make sure it happens. We're  [00:12:09] Sam Wilson: seeing obviously an incredible amount of interest in really all real estate asset classes, but especially in multifamily seeing cap rates compressed, and we're also seeing rates go up, what are you guys doing in this environment to one, continue to find success. [00:12:25] Sam Wilson: And then how are you offsetting, those two kind of obstacles.  [00:12:29] Colby Fryar: Yeah, that's a very good point. And it is difficult in this environment. It seems like there's a huge disconnect in what sellers are asking and what we're able to offer. Now, I'm starting to see that more and more, although they are, the sellers and the brokers are becoming aware. [00:12:45] Colby Fryar: That there is a change. But so what we're doing is to really look at ways to, to evaluate more deals. How can we scale this and really underwrite more deals? Because I think that's what it's gonna take. You're gonna have to look at more to get the one that works. It's not gonna be as easy as it was before  [00:13:04] Sam Wilson: for sure. [00:13:05] Sam Wilson: Gotcha. So underwriting more deals is one of the plans. Is there, are you guys doing additional broker outreach? Are you doing yeah. Your own off market outreach? What, is there anything on that front?  [00:13:16] Colby Fryar: More just working with more brokers and trying to build those relationships, looking at more markets to get the deal flow. [00:13:23] Colby Fryar: We're looking in Houston and other areas of Texas. Of course, New Mexico. Tucson has been a big focus of ours. We're also interested in Phoenix. We'd love to get something here in Tucson.  [00:13:35] Sam Wilson: Gotcha. Gotcha. Very good. How have you guys defined, who does, what on your team? I think you said there's five of you, is that right? [00:13:42] Sam Wilson: Yeah. So,  [00:13:43] Colby Fryar: Our team is made up of my, my partner, Danny and I we kind of handled asset management, property management, overseeing the property manager. The bank accounts and the meetings. And then also Les he helps with a lot of that. And then we have a couple other partners that help us on the money raise side, but they're active in the meetings as well. [00:14:02] Colby Fryar: So everybody has to be active on the asset management side doing something, right. So we kind of split up our duties, who handles proper manager. Handles, social media, the website different items. So we're kind of spread that out, but we really focus on the, money race part of it too. [00:14:19] Colby Fryar: All of us.  [00:14:20] Sam Wilson: Yeah. Gotcha. That is really cool. If you were to say to someone else and they said, Hey, Colby, I wanna follow in your footsteps. And I like what you've done. You've gone from no deals to having 136 units. in a year and a half. What would be the first thing you'd tell 'em to do? [00:14:36] Colby Fryar: I would say, really, you just gotta, you gotta jump in. You're not gonna find the perfect deal I think, to start with. But, I think one thing that we did that really helped on our first deals, we found a deal that, Probably wasn't, the best revenue generating deal it, it didn't look that good on paper, but it, a lot of the work was done. [00:14:59] Colby Fryar: The CapEx was done on it. There wasn't a lot of hair on it. And so I would encourage people to possibly look into that. Maybe you get lower returns, but go with something that's already done. B class, if you can try C class, a nice C class that's fully occupied with stable tenants. I think that's really important on your first deal. [00:15:19] Colby Fryar: I don't think you want to get into something with a lot of vacancy. To start off with,  [00:15:23] Sam Wilson: right? No, I think that's great. That's great advice there that there is, there is no such thing as the as the perfect deal. And I think that's what a lot of people are hunting for right now in, in, and you do need to be selective. [00:15:33] Sam Wilson: No doubt. As you said, there's, things due diligent, and I think  [00:15:36] Colby Fryar: just if it cash flows, it, it it's reasonable. And you can make it work. I think go for it. It doesn't have to be perfect.  [00:15:44] Sam Wilson: Right, right. No, I think that's great. That's absolutely great advice. Yeah. Wonderful Colby. I love what you've done. [00:15:50] Sam Wilson: Here so far, you've gone from you still are a civil engineer and successfully found a way to scale into multi-family properties. You guys are looking, you've got a clear game plan. You've got your team lined. I know you said early on that it was mentorship really, that helped you in the beginning, have the confidence to take the next steps. [00:16:07] Sam Wilson: Talk to us about that here as just kind of a closing thoughts on mentorship. How did you select cuz listen, you and I both know that there's a million, one gurus out there. How did you select somebody that wasn't a guru, but that really would be a mentor for you in the space. Yeah.  [00:16:23] Colby Fryar: So my mentor Jens, he was, I heard him on a podcast and, I liked what I heard from him. [00:16:29] Colby Fryar: He was on rod Cleves podcast. and so we connected on bigger pockets. I had looked at a few mentors and I was actually thinking about going into Rod's program and the warrior group. I know that's a great group, but, I chose this group just because I knew it would be intimate and I'd get the one on one setting with my coach and mentor. [00:16:50] Colby Fryar: And I think that's important. I also think the network. Is important. So the size of the network and the people and the experience that they think that's a big thing to consider when you go into a program. But also the experience level really reach out to somebody that has experience and make sure that they're gonna be the one that's gonna be talking to you, working with you. [00:17:11] Colby Fryar: I think that's a, a huge part of it.  [00:17:13] Sam Wilson: Right? Right. Absolutely. Absolutely. I think that's those are awesome. Very, very valid points as. Review and people, a lot of people wanna know that. I mean, there's a lot of programs out there and not, no two programs are created the same and no, no two programs are for, for everybody or no one programs for everybody. [00:17:29] Sam Wilson: So I love absolutely love hearing how you made that selection. Is there any other closing thoughts that you'd like to share with our listeners or pieces of advice that you would give them?  [00:17:38] Colby Fryar: just be persistent and keep going. Don't give. I think there's deals out there. You just gotta be willing to meet with brokers. [00:17:45] Colby Fryar: I think the big thing with brokers is to get in front of 'em sit down with them, meet 'em for lunch. And I think that'll really help. They they'll know you're serious and wanting to. you're gonna be a player , in the game,  [00:17:58] Sam Wilson: right? I think that's great Colby. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that? [00:18:04] Sam Wilson: They  [00:18:04] Colby Fryar: could reach out to me at Colby @mountain bridge can email me. I'm also on LinkedIn, Facebook and my website's www dot mountain bridge, Do have an ebook in the works. So look that will be coming soon and look forward to getting that out there.  [00:18:21] Sam Wilson: Awesome Colby. Thank you for your time today. [00:18:23] Sam Wilson: I do appreciate  [00:18:24] Colby Fryar: it. Thank you.  

    Attracting and Engaging Potential Investors

    Play Episode Listen Later Jun 28, 2022 21:51

    Finding investors is easier than we think.   In this episode, Ace Karimi reveals the secrets to getting investors interested in your deals. He is the co-founder of Invest Capital, a real estate investment firm that is dedicated to buying A and B apartments to provide double-digit returns to its clients. Ace goes to the nitty-gritty of their unique syndication model,  how they are turning around projects with heavy deferred maintenance, and the importance of setting the right expectations with investors to increase the chances of success.     [00:01 - 06:47] Getting Out of the Hamster Wheel of Wholesaling and Flipping Making the leap from single-family to multifamily Ace breaks down their first deal Taking massive action and getting the word out Finding an asset that feels right Running the numbers   [06:48 - 20:26] Building a Unique Syndication Model Presenting the offers to investors The #1 thing investors are looking for: when will they get their money back? Ace on asset management fees Taking on heavy-lift assets Offsetting refi risks Looking out for the worst-case scenarios Helping everyone to be an investor   [20:27 - 21:50] Closing Segment Reach out to Ace!  Links Below Final Words Tweetable Quotes   “Just getting your name out every single place possible. That's the thing. It's like, you got to let everybody know you're buying unapologetically.” - Ace Karimi   “Investors are hungry for deals. There's so much hunger and desire for just an opportunity, right?” - Ace Karimi   “Money finds deals. Money's trying to find deals to go into and the only thing is you need is to have good enough deals that the money wants to be a part of.” - Ace Karimi   -----------------------------------------------------------------------------   Connect with Ace! Follow him on Facebook, Instagram, and LinkedIn and visit the Invest Capital website.   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Ace Karimi: The owners, they don't care. Like, they're not looking after the property. They're just, Hey, I'll just take a check and whatever happens, happens, and property management's usually not involved. And you know, that's just, what's going on. Nobody really cares. Like, we care about our properties, right? My team's involved every single week. [00:00:16] Ace Karimi: We're on Slack. Well, we have a communication channel, 24/7. We do weekly pulse checks. You know, we're looking after our asset for our investors, but also for ourselves. That's always how I am with any business I do. I'm keeping my eyes on the prize.  [00:00:41] Sam Wilson: Ace Karimi buys cash flowing apartment buildings through a unique indication model, and he teaches others how to do the same. In 2021, he bought 35 million in deals and they are growing. Ace, welcome to the show.  [00:00:53] Ace Karimi: You're welcome, Sam. Thank you for having me.  [00:00:55] Sam Wilson: Hey, man. Pleasure's mine. There's three questions I ask every guest who comes in the show in 90 seconds or less, can you tell me, where did you start? Where are you now? And how did you get there?  [00:01:04] Ace Karimi: Wow. I like it. Rapid fire. So we started, I think three years ago, we, we jumped in from single family. [00:01:10] Ace Karimi: We used to do a lot of wholesale and flipping, pretty sure you're familiar with that, doing the hamster wheel, always hunting the next deal, next deal, next deal. Like, looking for those single checks, I realized we wanted a better way. We wanted consistency. We wanted predictability. So, we made the jump. [00:01:25] Ace Karimi: We made the leap one day. It was actually. Right before COVID happened, believe it or not. But we went really, you know, full all hands on deck. Like, Hey, we're not turning around. This is it. And that was the year that we ended up buying 35 million in apartment buildings through our unique syndication model in which we're able to give the investors, their money back a lot sooner, 24 to 36 months usually give 'em an infinite return while still kill while still keeping most of the deal. [00:01:51] Sam Wilson: Now that is really cool. So you guys went, went long in multifamily at the beginning of the pandemic. How long did it take you to get your first deal?  [00:01:59] Ace Karimi: Let me think. So here, here, it's the funny thing is, you know, how you start doing it initially, you're kind of just looking at deals on a side here and there. [00:02:07] Ace Karimi: And if I look at it from that regards, probably like, I don't know, three four months, something like that. But when we really went like committed, Hey, this is it. We're going to find a way. It was like maybe 60 days.  [00:02:19] Sam Wilson: Okay. Okay. That's pretty fast for people, you know, out there listening. I mean a lot of people we talk to on the show, just say, Hey, look, you know, be patient when you get your first be patient, you know, as it cuz it takes time to get your first deal. [00:02:32] Sam Wilson: What do you feel like you did differently that allowed you to find your first deal? So fast?  [00:02:37] Ace Karimi: Massive action.  [00:02:39] Sam Wilson: What does that mean? Can you define that for us? [00:02:41] Ace Karimi: Dude, just, just getting your name out every single place possible. I mean, that, that's the thing. It's like, you got to let everybody know you're buying, you know, unapologetically. [00:02:48] Ace Karimi: I was letting it be known. Like, Hey, I'm going to buy apartment buildings. And everybody that I was talking to, I was flowing up with them consistently. And I'm like, Hey look, do you have something for me? Do you have something for me? I'm looking, I have capital sitting right here. Then I eventually found one. [00:03:01] Sam Wilson: Okay. Tell me about the first deal. What, how big was it? What, what were the parameters of it? And, how did you know that was the one for you?  [00:03:10] Ace Karimi: Oh man. So yeah. Great question. So, you know, your first deal, it, it means so much 'cause once you can really identify what a deal is, you know, it, it makes everything a lot easier for your second, third, fourth that, you know, the domino trickles down. [00:03:23] Ace Karimi: My first deal we got, we were at our first deal four different times. I had one down in Georgia. I had one down over in Maryland, like I'm in the east coast by the way. Right. I'm in DC. So I'm over here looking out of the area, which, you know, you're as an more of an inexperienced investor getting into multifamily, you're just looking anywhere and everywhere for a deal, which is a big mistake, right? And so, it was so many close times where the numbers looked good, everything looked good, but something just didn't line up. And we had to pass on it, which, you know, you have to have the discipline to do. And we ended up finding this deal that literally passed and checked every box that those other properties didn't right. [00:04:01] Ace Karimi: It was a 72 unit property, in my home state here in Virginia. So I'm right out of the DC Metro I'm in Northern Virginia. And great property. Beautiful, right? Still, it was like a seventies build, but it didn't look like it. Right. It just, you know, the owner had, was already starting to put a lot of CapEx into the property as we were looking to buy it, which was great. [00:04:22] Ace Karimi: Already started doing the windows, the roof and the plumbing work and a lot of the exterior stuff. So, you know, he was already getting that ball rolling for us. We, we came across the deal and it had a beautiful view of the mountains. Believe it or not, which was, you know, amazing. That's just one of the things that's like, it felt good. [00:04:39] Ace Karimi: I think that's one of the things that you just know of. It's the deal. Something feels good about it. It's in a great location. You're just like, dude, I would love to own this asset. Right. And then the numbers, like I, the numbers look kind of slim at first. Like, we bought it for 3.8 million. It was a 72 unit asset, right? Market rents were nuts. They were, they were at $600. And at the time, yeah, exactly. And at the time the, the rents in the market were like 900. So there was a $300 discrepancy. And now fast forward to now it, they went up to like 1100, by the way. So it we've got a big, big boost.  [00:05:16] Ace Karimi: We came across a deal, you know, we, we had a discussion and we went back and forth and then we ended up, putting it under contract at 3.8 million, put $600,000 into the property. We knew we could drastically increase the value. So, we underwrote the valuation around six and a half million, I believe, conservatively. So there was, you know, there was a couple million in equity at play and from our modeling, we realized that, Hey look, we don't necessarily need to give up most of the meat of this bone. [00:05:43] Ace Karimi: It's, it's a heavier value add property. We have a lot of work to do, really have to, you know, roll up our sleeves. And so we used our own syndication model in that regard and we gave up a higher preferred return and we actually kept most of the equity for ourselves because of the work that was involved. [00:06:01] Ace Karimi: And we promised an 18 to 24 month principal return, which we're actually on pace to do that even faster right now we've already initiated our refinance and essentially that's it. And they get to stay in the deal in, in perpetuity and they get a hundred percent of their capital back and a check and they get to keep the press, you know, and they get to stay in the deal. [00:06:22] Ace Karimi: And on top of that, they get a, they get a check at exit. So it's pretty awesome. And our valuation, by the way, for this deals coming between 9 and 10 million.  [00:06:30] Sam Wilson: I was going to say at a, 10 cap you're, based on the rent bumps, you know, I'm sitting here running your numbers behind and I'm like, okay, it's worth about nine and a half million bucks at a 10 cap. [00:06:39] Sam Wilson: Yep. I mean, so that's ridiculously, probably low, I would think, you know, actual valuation so that, that's really, really cool. Tell me, I want to hear more about the actual structure of how you brought investors in on this deal. 'Cause what I heard was that, did you identify and line out those terms, obviously on the front end? You said, okay, Hey, here's exactly how we're going to take this down because we just see huge runway here. And then I guess, break that down for me. Let's assume I'm, I'm an investor and I say, Hey Ace, I want to put a hundred grand in your deal. How does it work?  [00:07:15] Ace Karimi: Oh, great question. So essentially, yeah. So, Hey look, we, we, if it's this type of a deal, right, it has to be a specific type of deal, but you know, I'd go into the conversation and be like, Hey, look, I have a great opportunity. [00:07:26] Ace Karimi: There's a lot of upside, you know, several hundred dollars of upside. We have several comparables to prove that. It's not just one or two, this isn't speculation. Like, this property has not been bumped up in a, in a while. Owners kind of had some deferred maintenance to it. There's a lot of work involved to go in there and to raise these up to market level, turn all the tenant base and we're prepared to do that. [00:07:47] Ace Karimi: But in order to do that, and to, to make this property worthwhile for everybody, we ran a numbers, you know, we're buying it at an incredible price, far below market value. And so here here's where it's going to be valued. In 18 to 24 months, we're actually going to be able to give you your full principle payment back and we're giving you a higher preferred return. [00:08:06] Ace Karimi: Here's a structure. And then I show them, Hey, look, you're going to be able to make, I don't know, 30%, 20, 30, 40% in that short amount of time. And you get your a hundred percent of, of your principle back, 'cause at the end of the day, what they care about most number one thing. Isn't how much money they're going to make. [00:08:24] Ace Karimi: And you know, those too, Sam, they care. How long is it going to take to get their money back? If I can tell them, Hey, look, I'm, I'm telling you right now, from what I'm seeing here, 24 to 36 months, you get all your money back, you get an eight to 10% pref, virtually guarantee it. You can't ever guarantee anything, but it's like, dude, you're, you're getting the pref. [00:08:42] Ace Karimi: All the money's essentially going to them. I'm working for you essentially. I'm not getting paid. I'm getting paid, maybe some fees, but the, the alignment with that is, is because there's not really going to be any cash flows during the, during the period of time. Most indications don't really have cash flows anyway. [00:08:58] Ace Karimi: So it's like, why, why does it even matter? But it, you let them know, Hey, look, I only really get paid when I do the, what I'm telling you is possible. You don't have to believe me and, and see the numbers that it's going to hit this metric. But you are going to have the security to know that. Look, you're going to get your pref. [00:09:14] Ace Karimi: You're going to get your principal back one way or another. And the only way I'm really going to get paid is on the backside when I increase the valuation up. And you've already got your money back in your pocket safely.  [00:09:23] Sam Wilson: What is the investor split once you give them their money back? So you've done a cashout refi you've given 'em a 10, a 10 pref on the deal, cashout refi. I got my money back. What's your investor split going forward? [00:09:36] Ace Karimi: 30%.  [00:09:37] Sam Wilson: Okay. So it's still a 70, 30 split. [00:09:40] Ace Karimi: Yeah. And they get the stay a deal. Exactly.  [00:09:41] Sam Wilson: It's flip flopped in this case, most of the time, it is 70% to the investor. 30% to the sponsor. In this case, you're saying, look, if I can get your money back in 24 months, give you a 10 pref. [00:09:52] Sam Wilson: Of course the profit goes away once the capital is returned. At that point, you collect 30% of the upside on the cash flow and then upon disposition and you as the sponsor collect 70%. Do you guys, and again, I'm sorry, I'm getting in the weeds on this, but this, this is very different than what we see, you know, a pretty standard syndication model. [00:10:11] Sam Wilson: So this is why I kinda want to spend some time on this, just to hear that, give other, give listeners the idea that there's other options out there for how we structure these deals, you know? So, so you return the 30% to your investors, but do you guys take acquisition fees? Do you guys take other fees in the front end of these deals or do you wave all that just so you can say, Hey, you know what? We are truly getting paid only when we perform.  [00:10:33] Ace Karimi: No, I still take the fees because, you know what, the reality is, like the kind of deal that I'm talking by here, by the way, they're not something that you just find. Like, we have to hunt for these deals usually, right? So if I'm hunting for these deals and I'm spending time, resources, money, months to follow up, like, this is something that yes, we will still take a feet on upfront. [00:10:53] Ace Karimi: You know, and, and it's not like it's going to go straight into all my pockets. It's, it's just the reimburse really for our soft costs, right. That that's not even money that we're really grabbing. And then on a second hand, asset management fee is just there to just take care of, of the asset management team in the meantime. [00:11:09] Ace Karimi: But it's really pennies. Like, this isn't like you you're really, you're not really doing this on a large scale that that's, that's the differentiation I want to make here. You're not doing this on like, kind of 80 to a hundred million dollar property. I, I think you could, if you find it properly, but you know, these are, these are, this model is great for somebody who's just starting out, who sees an opportunity with an asset that's got heavy, deferred maintenance and needs a lot of work. And you're like, dude, I could come up there, scoop up a lot of the equity, do a lot of hard work once, twice, grab that equity, give my investors a return and then go put it into something better. Does that make sense?  [00:11:42] Sam Wilson: It does. So I guess that's the, that that's a follow on question to your investors. Heavy lift, heavy value, add, you know, maybe low occupancy, maybe there's crime, maybe there's a lot of those things that go along with, it feels like additional risk, you know, to a lot of investors. How do you frame that conversationto let them know, Hey, we can, we can make this work. And you know, the, it, it's not as risky as it may seem. [00:12:08] Ace Karimi: Oh, for sure, here's why our model still has certain metrics. It still has to be a B area, like C plus at the worst. I'm not going into the hood. Like, I'm just not, there's no way I'm going to go in there. You know, some people want do that. I'm not. Like, these properties still exist where they're in good areas. They are just mismanaged. They're just not they're, you know, they're not looked after properly and the right operator can go in there and turn things around. [00:12:34] Ace Karimi: And so at the end of the day, like if it's 40% occupied or something, I, I wouldn't really look at it too much. You know, like I'm not, I'm not taking on that much extra risk where I'm saying, Hey, look, I'm going to go into a D class area and take on a property that's low occupied. No, that, that that's just trouble. [00:12:52] Ace Karimi: We, we stay away from that completely. So there's complete no's that we do. Our, our properties, I did three of these in one year. They were all in over 90% occupied. Wow. And they were in good areas.  [00:13:01] Sam Wilson: 90% occupied.  [00:13:03] Ace Karimi: Yeah.  [00:13:03] Sam Wilson: Submarket rents because the place looked like garbage.  [00:13:07] Ace Karimi: Yeah, they just didn't treat it. Right, dude. And, and here's the thing it's like, and I, and I tell people this, and when they ask me, it's like the owners, they don't care. Like, they're not looking after the property. They're just, Hey, I'll just take a check and whatever happens, happens, and property management's usually not involved. And you know, that's just, what's going on. [00:13:24] Ace Karimi: Nobody really cares. Like, we care about our properties, right? My team's involved every single week. We're on Slack. Well, we have a communication channel, 24/7. We do weekly pulse checks. You know, we're looking after our asset for our investors, but also for ourselves. That's always how I am with any business I do. I'm keeping my eyes on the prize.  [00:13:43] Sam Wilson: Right. And, and we bought one like that last year is just like, I mean, absentee owner, running to the ground. They didn't care. Didn't care. So I get it, you know, then again, they were making their money along the way 'cause they bought it, you know, eight years ago for a, for a... [00:13:57] Ace Karimi: Exactly. Dude, they're happy either way.  [00:14:00] Sam Wilson: They're happy. They're clipping a coupon and the place looks terrible.  [00:14:04] Ace Karimi: To be honest, you want to be them? Like, that's the funny, that's what I tell people. I'm like, dude, it's not that fact that I'm winning. These guys already won. They're like 8 to 10X-ing their money doing absolutely nothing. [00:14:14] Sam Wilson: Well for sure. For sure. They're also slumlords and those are the people that we want to get out of the business. So it's like...  [00:14:19] Ace Karimi: That's true. That's true. [00:14:20] Sam Wilson: They're the ones that give us a bad name, so, and you're the one going in there and, and giving us a good name. [00:14:25] Sam Wilson: So you're doing, you're doing right. And I like that. Tell me about how do you offset refi risk, especially in today's rates environment. I mean, your business plan sounds incumbent upon being able to refi this property in two to three years.  [00:14:39] Ace Karimi: No, I could also just sell it, too. Like that, that's always something we, we let 'em know, like, Hey look, 'cause because if you sell it, they're, they're, you know, they actually get a higher than average returns metrics. [00:14:48] Ace Karimi: It's usually like 3X, two and a half, 3X or something. So if we sell it, they're even happier. They're like, wow, I'm making all my money. But to be honest, they want that capital to be used all the time. So we, we always run at both scenarios. We present both in front of 'em here. Here's our plan A, it's to go and refi. But if we can't do that, if we saw here's what it looks like. And on one of our deals, it was flip flopped. We're saying, Hey, look, we're looking to sell this deal, but if we can get an above average valuation above higher than our conservative number, then we're going to get a refi. So we always run both scenarios 'cause it's like, I don't ever like having one exit and be enforced into a position. Not, not a way you want to do that, especially with these big deals. Yeah. That's usually it.  [00:15:28] Sam Wilson: Right. Makes no, that makes sense. That makes sense. You could, you could always sell it. What is, I guess when you guys look at a cash out refi, are you maximizing the amount of capital you can pull out of the deal? Or is it, are you de-leveraging in some capacity or what's that. [00:15:43] Sam Wilson: How, how, how do you like to look at that? I'm sure it's on a deal by deal basis, but what's your general feeling around that?  [00:15:48] Ace Karimi: No, no. The funny thing is, so this first deal that we just refinance, right? Like, we're going to only going to pull out 70%. You don't need to pull all of it out. I don't, I, I think, you know, definitely keeps some in the deal for just cash flows to always pay things off, you know? [00:16:02] Ace Karimi: You always got to be looking out for the worst case scenarios, man. I'm just like thinking in the back of my mind. Sometimes I'm like, okay, some crazy thing happens. I don't know, like you've got to have months where you're able to have reserves, something drop, something crazy happens, you know, like, you got to make sure you can always break even. You have extra months to pay things off. You do all this work. Like, what's the point, you know, you pull out 80% and then your, your margins are thin as it is. And you always need to keep it 98 to 99% occupied. It's not smart.  [00:16:31] Sam Wilson: I hear you. I hear you, man. That, that makes a lot of sense. Ace, one of the things we talked about before actually hitting record on this was that you feel like finding investors is really easy to do. [00:16:44] Sam Wilson: That runs kind of counter to what a lot of people experience, especially getting started. Why do you say that?  [00:16:51] Ace Karimi: One, it's perspective, man. I, I really think it's like just a perspective. Like I've always had that belief even before I raised any money. You know, when I was wholesaling and flipping, I think that's one of the things that I saw. [00:17:01] Ace Karimi: It's it's investors are hungry for deals, man. There's so much, like, hunger and desire for just a, an opportunity, right? They will jump on it. I've seen when I used to wholesale houses, 'cause a lot of times we flipped, but sometimes when we wholesale, if I send it out in an email link, okay. And I had a property with some margin, with some meat on the bone and they can make, you know, 15, 20% dude, you should see how often it would blow up my. [00:17:27] Ace Karimi: Hey, what is it going to take to get in this deal? What's it going to take? You let me know, give me the number. Hey man, I don't want to be in a bidding war, blah, blah, blah. And I'm like, dude, here's my process. If you want to get the deal, I need you to come and highest and best and stop playing around, you know, because I have the opportunity. [00:17:42] Ace Karimi: I want to build a relationship with you, but you're not going to come and undercut me. So it's a respect thing, right? You have to come from a place of, of respect of holding yourself in a way where he's like, dude, like I got to, I got to understand that this guy has the value and I'm trying to build a relationship with him. [00:17:56] Ace Karimi: You know, I always look to the future. Sometimes I'll even take a little bit less, but I always go with the guy that I felt better about, that I knew had more principles instead of going for the extra five grand, six grand on, on somebody I did not like, I didn't like the way they were carrying themselves and they acted like they could run me just 'cause they had extra money. [00:18:13] Ace Karimi: I don't, I, you know, it's like, it's always about principles to me. So when I saw that in, in wholesaling that people wanted opportunity, you know, and, or everywhere. Hundreds and hundreds and, like, that, that I had just in my local market who just wanted single family houses, you know, but when I started talking to 'em, they were also just down for any opportunity. [00:18:33] Ace Karimi: That's the thing is if people, if you have an opportunity to make money, money finds deals, money's trying to find deals to go into. And the only thing is you need is to have good enough deals that the money wants to be a part of. That's how it works. So like, now that I did my apartment building, I probably raised, I don't know, five, 10 million by now in really over in about a year. The thing is it's like, as long as you structure it clearly, they see the upside, they understand, to me, everyone is an investor and everyone should be an investor, right? Like, I have my shirt here, right? Like, like part of our mission in our business is to help everyone become investors. I've, I've invested my own family's money and on, on my properties, I believe in it that much, right? [00:19:16] Ace Karimi: Savings accounts for years, I have friends of family that are investing with me. They're investors. Everyone's got money stacked, stacked away. They just want to be like, that guy's an expert. I trust him. He's an authority, knows what he's doing and I feel good. And you set the right expectations and you just lay back. [00:19:35] Ace Karimi: You should, you should see the responses. They, some of them, they just do it 'cause they trust you. And then throughout the actual stabilization period, dude, they're collecting monthly checks and they're happy. They're not getting that from stocks. Where else are they getting that? You know? So just from the monthly dripper loan on 6, 7, 8% pref, dude, they're happy. I promise you. And then, and they don't even realize that like when I return their money and then I'm going to give them an extra check and refi, dude, their mind's going to be blown, right? But just the pref alone, like that's powerful. It is.  [00:20:07] Sam Wilson: It really is. It really is. And that's, I got one of those texts from somebody the other day that just said, Hey, thank you. Thank you for giving me an opportunity to get outta the stock market. And get paid on a quarter. We, we, we do quarterly distributions, but get paid quarterly. This is awesome. Yeah, I really appreciate it. It's like, oh right. What you're, what you're doing is of value. Ace, thanks for the time to come on the show today and share with us what you've been doing, how you've done it so quickly, your perspective on , you know, finding investors is easy to do, how to take on a heavier lift project and yet still offset ,risk and, you know, really, your unique indication model. [00:20:42] Sam Wilson: I think that's really cool the way that you've kind of turned this on its head. And yet at the same time, are really attracting investors to your deals in a unique way. So, and congrats on that one deal that you've taken from basically four and a half million to a 10 million deal in a very short period of time. That is super cool. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?  [00:21:03] Ace Karimi: Social media is usually the best. Add me on Facebook, Ace Karimi, LinkedIn, Ace Karimi, and then on Instagram, @ace.Invest. That's it. I'm happy to provide the rest of the details to you. My email, if they have anything they want to talk about for sure.  [00:21:19] Sam Wilson: Certainly we'll put all that in the show notes. Ace, thanks for coming on the show today. Certainly appreciate it. [00:21:24] Ace Karimi: Sam. Thank you.

    Opportunities in Self Storage

    Play Episode Listen Later Jun 27, 2022 16:12

    For 12 years Andrew Leedom has been working successfully with his W2 job as a Structural Engineer, being a father, and finding he transitioned into commercial real estate specifically in self-storage.  Highlights: [00:00 - 04:19] Transitioning from a Structural Engineer to an Investor in Real Estate Andrew Leedom is a husband and father to four kids.  He transitioned from his structural engineering to investing in commercial real estate, focusing specifically on self-storage.   [04:19 - 08:33] Self Storage: A Hot Asset Class The self-storage market is hot and there are opportunities to invest in this sector. Self-storage is a good investment option because it is a hot asset class and the market is consolidating quickly. It is important to make deals that are profitable and have long-term potential.   [08:34 - 13:06] Trying to Focus on  Projects that are Already Available Conversion of a 60,000 square foot warehouse to indoor vehicle storage Looking at deals where the market isn't oversaturated and there's still some demand Underwriting for an indoor vehicle storage facility Andrew shares about doing a feasibility study specifically on boat and RV storage He expects  to start leasing within a month [13:06 - 16:11] Closing Segment Reach out to Andrew  Links Below Final Words Tweetable Quotes   “Going to the dealership Just making sure they know what we are doing and that we're here, that could assist them in selling the vehicles.  If their customers know they've got a place to put them”  - Andrew Leedom ----------------------------------------------------------------------------- Connect with Andrew Leedom on LinkedIn  or visit their website at: Self Storage Stewardship Connect with me:   Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Andrew Leedom: a lot of it will be word of mouth going to the dealerships and getting in touch with the folks that are selling the vehicles. Same thing with the RVs going to the RV dealers and just making sure they know that what we're doing and that we're here and, that could assist them in selling the vehicles. If their customers know they've got a place to put 'em.  [00:00:31 ] Sam Wilson: Andrew Leham is a husband and father to four kids. He transitioned from his structural engineering w two to invest in commercial real estate, focusing specifically on self-storage. Andrew, welcome to the show.  [00:00:41] Andrew Leedom: Thank you for having me, Sam. I'm glad to be here.  [00:00:45] Sam Wilson: Hey man, pleasure's mine. There's three questions.I ask every ghost. She comes in the show 90 seconds or less. Where did you start? Where are you now? How did you  [00:00:50] Andrew Leedom: get there? Well, where I started, I studied to be a structural engineer and did that for 12 years and transitioned to the commercial space about a year and a half ago. And currently investing in self storage and working with a. [00:01:05] Andrew Leedom: A group doing multi-family self storage, some hotel conversion stuff, but I'm focused on the self storage part of that.  [00:01:11] Sam Wilson: Interesting. So you were a structural engineer for 12 years? Yes. What were you doing as a structural  [00:01:18] Andrew Leedom: engineer? I got to see a little bit of everything. I did started my career off in the inspection world, doing some bridge inspections and transitioned to building design and then to waterfront design. [00:01:29] Andrew Leedom: So designing bridges, designing peers and waterfront structures doing some work for the shipyard port of Virginia doing some my, my latest job. I got to do some underwater inspecting, which was, A lot less glamorous than it sounds  [00:01:44] Sam Wilson: right. I mean, you're like decked out in scuba gear doing other water inspections. [00:01:48] Sam Wilson: Oh, my word. Yes. That's that's wild. When you look at the difficulties of the projects you were designing and building and inspecting, and then compare it to self storage. Do you feel like you, you now it's much easier or is it just different.  [00:02:05] Andrew Leedom: It's it's different, but you know, one thing that, that led me to pursue self storage when I was determining kind of between the various asset classes was the It's not an easy business, but it's a simple business. [00:02:19] Andrew Leedom: So the simplicity was very appealing. Both the structure as well as the business. I mean, the structure you're for drive up units, you've got a concrete slab and steel building. And not a lot of moving parts. So I appreciate that.  [00:02:34] Sam Wilson: I bet you do. Yeah, I would think from a construction perspective, you're like, okay, this is really easy compared to say a bridge over an enormous river. [00:02:46] Sam Wilson: Yeah. Yes. That That is really cool. So you made a point there where you said some of the effect of, when you were, assessing the various asset classes. Trying to figure out which one maybe you wanted to pursue. What was that process like  [00:02:58] Andrew Leedom: for you? I started off my investing career back in 2015 in the residential multifamily, a few duplexes Plex and through the years, saw that, real estate really is, there's nothing like it's it was doing. [00:03:12] Andrew Leedom: What I thought it would and growing but the time it was gonna take was gonna be a lot longer than I like. And so that was kind of what got me set on the commercial space. And I started just as a passive investor and some multi-family syndications and and then made the decision with my wife, that we were gonna make the commercial thing work. [00:03:31] Andrew Leedom: And so the start of that was just evaluating. Various various asset classes and really came down to three. It was multifamily mobile home parks and self storage. And so I just broke those down. I really like all three of those asset classes. I think they've all got a lot going for 'em recession resistant. [00:03:50] Andrew Leedom: Multifamily is the bread and butter it's, the everything's built on that. When I was looking at where I was with my W2 and just trying to figure out something that I could build and get my foot in while working a full-time job. I thought the multi-family space just with all the institutional money and the. [00:04:11] Andrew Leedom: How hot the space was gonna be a lot more difficult than the other ones and same thing with mobile home park, what led me, I, I really like that asset class. It really serves That affordable income and especially when you can own the ground and and lease the space. [00:04:29] Andrew Leedom: But really in that space, similarly, they're building and developing fewer and it's most municipalities aren't allowing 'em. And so. I just saw the competition growing and growing in that space as well. And so self storage was kind of where I landed, both what I mentioned earlier, just with the simplicity of the business model and the ability to really set up a business, to run remotely. [00:04:50] Andrew Leedom: So you're not as stuck in the location and with the self storage it's still several years behind multifamily in, in that the market is consolidating rather quickly. , it's definitely been the buzzword the past probably four to five years and is a hot market. [00:05:09] Andrew Leedom: But there's still a lot of potential right now, currently the market there, it's still over 50% mom and pop. And so there's that opportunity to have direct to owner contact conversations and really pick up opportunities direct from those mom and pop. Owners. And so that's where I felt like I could get my foot in the door and, focus more on the secondary tertiary markets and and get started. [00:05:34] Sam Wilson: Got it. That's that's really cool. Tell me at what point in time did you know you could transition from your W2 and what steps maybe would you recommend to somebody else thinking about that.  [00:05:44] Andrew Leedom: Yeah. I the the W2 transition was was actually a mix. I closed on my. My first two properties last year, and both of them were from, mom and pop operators and really kind of run into the ground. [00:05:57] Andrew Leedom: Very low occupancy needed a lot of capital improvements. So I knew purchasing those. It was gonna take a while before the cash flow caught up to where I would be able to step away from my W2 job. Right. And so the plan was just to, to run them until we hit. Hit that break even point and be able to step away and, try to scale. [00:06:18] Andrew Leedom: But fortunately com I mentioned earlier community investment group, who I had invested in as a passive investor and they're local to me. And I've really grown to be friends with a lot of the guys in that group. And they knew what I was doing and. Had kept them up to date. [00:06:34] Andrew Leedom: And and so once I got to that point they offered me a position with their team and just said, well, why don't you just come and join us and start our self storage division? So you don't have to wait until. Wait until your cash flow catches up to where you need it to be. So you can take the jump and start doing this stuff full time. [00:06:52] Sam Wilson: That's cool. So you went, you, I mean you, so you're still a w two or did you go in as a partner? How did you  [00:06:57] Andrew Leedom: arrange that? Yeah, it's right now I'm a 10 99, but also have some partnership on the deals. . Hi little girl. [00:07:05] Andrew Leedom: What are you talking about? I am talking about self storage. Can I come see you after I'm done? All right. Bye. Bye.  [00:07:11] Sam Wilson: You know, Andrew, I think we might leave that in. That's that one that's super cute. And two, the reality of, what it takes to business, right. I mean that's right. [00:07:23] Sam Wilson: A lot the stuff from home there's kids in the background, there is transition there's just everyday life. So that's really cool. I love that. Fantastic. That's right. So you went to work with them, 10 99 you said, Hey, , we're gonna start taking down properties. Talk to me like what opportunities are you seeing right now in the market? [00:07:43] Sam Wilson: Self storage, like you said, it's a hot asset class. How are you guys finding opportunity?  [00:07:47] Andrew Leedom: Yeah, really the market right now listed properties are just going for insane values and cap rates. [00:07:58] Andrew Leedom: And, , a few of the properties I've looked at recently are just these buildings, whether they're conversions or new development that go up and with where the market is, the developers are basically just listing these empty buildings and selling them for year three, year four performer numbers. [00:08:18] Andrew Leedom: Right. And so , when you're competing with that, it really takes making, creating deals. Either with trying to make those connections with owners directly we're still gearing up our acquisitions team and trying to accelerate. Build that out to focus just because we've been trying to focus on the projects we've already got in house. [00:08:39] Andrew Leedom: So, one of 'em that we're working on now is the conversion of about a 60,000 square foot warehouse to indoor vehicle storage and the back five acres doing a boat and RV enclosed covered, open storage trying to make that. Work with that. So, so yeah, as far as as far as the deals, we're, looking at some of those conversion type deals where you can get into markets where the market isn't oversaturated, there's still some some demand and trying to get in on that side where it's not, you're not purchasing an on market deal, but you're purchasing something where you can buy below replacement value do a conversion and and be up and running. [00:09:22] Sam Wilson: So how do you underwr. An indoor vehicle storage facility. I mean, it's not like you have all these, they're everywhere and you can go, oh, okay, cool. We'll just, we'll plug in the things that are normal. It's like, that's a pretty nuanced thing. How did you come up with idea and then how in the world do you underwrite that? [00:09:39] Andrew Leedom: Yeah it's been a process. Originally, being a self storage guy, the start was boat and RV and indoor climate control and maybe some indoor, just some indoor boat and RV storage. But the guys that I work with over at community investment group particularly the founder, Brad Newton, it's been a lifelong dream of his to have an indoor, like an exotic car. [00:10:02] Andrew Leedom: Storage, facility, club high end a place that has, like the executive lounge and just various amenities, detailing services attached to it. And so, it kind of morphed, I had, the underwriting started with, kind of splitting the space, but then we really came down to. [00:10:20] Andrew Leedom: We wanted the space to be dedicated to that and have the storage stuff in the back that we're developing, boat, RV some of the larger enclosed units. And so, we just did some research just throughout the country of other similar models and just looking at various various pricing models and and looking at the demand, we got a feasibility study done particularly more focused on the boat and RV side, but also just some of the other things in the area and knowing that, there really is nothing like it in our area and seeing seeing the success of other similar models in other areas. [00:10:57] Sam Wilson: Got it. So what's the timeline on that project? How what's the build out? What's the timeline? What's the cost? I mean, walk us through that side of the project. I'm really curious about this, cuz it's just not something we talk about a lot here on, on indoor vehicle storage, especially, exotic car storage going the higher end. [00:11:14] Sam Wilson: You're serving a very niche market, so yes. You hear kind of your thoughts around that and some of the parameters of the deal.  [00:11:20] Andrew Leedom: Yeah. So we're we're set to close in probably little over a month. We anticipate a. Three month window for the finalization of architect design drawings some of the the building permit side of things. [00:11:34] Andrew Leedom: The land is already approved as far as the zoning for what we're proposing And then we've got a nine month window for the construction and build out some aspects will be quicker than others. Some of the, once we can get the demo and the site work done, we'll be able to start on a lot of it. [00:11:51] Andrew Leedom: but you know, things like the enclosed units in the back and the canopies really that's. Primarily a lead time issue. , once the materials are delivered, those go up pretty quickly. Right. So we're anticipating, being able to start leasing, a lot of, especially the outdoor stuff. [00:12:11] Andrew Leedom: Sooner than later. And, , and even within the warehouse, being able to have some of the space, where it's not, , we've got it split into some nicer places where are more like a showroom type feel and then other spaces where it's more just , parking , glorified parking. [00:12:29] Andrew Leedom: And so once we open it up and clean it out, we'll be able to utilize some of that space. , and then same thing with the back, once we have the site cleared and graded, then we'll be able to start some of the open parking while we're developing the canopy and enclosed, and then start Leasing all that up and anticipate having a pretty aggressive marketing plan to try to get a lot of this preleased and, and going as we're doing the construction,  [00:12:55] I  [00:12:55] Sam Wilson: was gonna ask that, how will you market this property for, especially the higher end indoor vehicle storage, how do you reach out and find people that. [00:13:07] Sam Wilson: Those vehicles that want to be stored. I mean, again it's a nuance and niche market. So finding those clients, I would think would be a pretty specialized. Art.  [00:13:16] Andrew Leedom: Yes. Yeah. I'm not really in those circles, but we've got guys on the team that that run in those circles that have those cars. [00:13:23] Andrew Leedom: And so, I mean, a lot of it will be word of mouth going to the dealerships and getting in touch with the folks that are selling the vehicles. As well, same thing with the RVs going to the RV dealers and make, just making sure they know that what we're doing and that we're here and, that could assist them in selling the vehicles. [00:13:41] Andrew Leedom: If they. Their clients know that customers know they've got a place to put 'em. And so, so yeah, I mean, I think that's partnering with some of them doing some some online. Obviously, online marketing and Google ads, things like that where folks can find it. [00:13:58] Sam Wilson: Gotcha, man. That's great. I love that. If you were to rewind maybe five years and do one thing differently, what would it be? I [00:14:10] Andrew Leedom: would say Just to allow myself to dream bigger. It was one of those things. I mean, even just the idea of commercial real estate and multi-family syndications, self storage, all of these asset classes. For so long, It wasn't even in my realm of thinking, because that was just for those guys out there that are crushing it. [00:14:30] Andrew Leedom: And that's not something I could ever do. And so, I mean, it was the, that, Napoleon hill calls it the definitive purpose of really just making up your mind and making that decision to, we're gonna make it happen and whatever it takes, whatever training we need, you know, once my wife and I made that decision, Things just started falling into place. And I mean, you're still pushing through all those levels of fear and uncertainty and, I don't know what we're doing and trying to figure things out and just networking, meeting folks. [00:15:00] Andrew Leedom: But but I think just opening your mind to the possibility that if other people are doing it, then you can do it. Just as you take those steps and take action. The dominoes fall into place.  [00:15:11] Sam Wilson: Wonderful. Andrew, I've enjoyed it today. Thanks for coming on the show and sharing with us, your journey thus far, look forward to keeping track of you and seeing where where the next few years take you. [00:15:19] Sam Wilson: So this has been a blast. Thanks for sharing with us today. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that?  [00:15:26] Andrew Leedom: Yeah, they can find me on LinkedIn or go to our website. It's www dot self storage, And you can shoot me an email or reach out. [00:15:37] Andrew Leedom: I'd love to connect to your listeners.  [00:15:39] Sam Wilson: Wonderful. We'll make sure to put that information in the show notes as well. Andrew, thanks again for your time today. I do appreciate  [00:15:45] Andrew Leedom: it. Yeah. Thanks Sam.  

    Pitfalls and Opportunities in Self-Storage Investing

    Play Episode Listen Later Jun 26, 2022 22:24

    Learn about the good and the bad of the self-storage space with our guest, Mark McGuire!   Mark is a limited partner in 12 syndications ranging from multifamily to industrial hospitality and self-storage. He talks about how storage units are becoming an increasingly popular asset, why it's important to build relationships with brokers, and what bad investments to avoid in the market. Starting from the bottom of the ladder in his career, Mark also shares the lessons he learned as he worked his way up to success.     [00:01 - 03:08] Taking Action and Following Up How Mark climbed the ladder to success Investing time with people smarter than us   [03:09 - 21:03] What You Need to Know About Self-Storage Investing The self-storage industry is controlled by a select group of brokers This is the right way to approach and interact with them Comparing the first and the last self-storage deal he did Looking for locations The landscape then and now Mistakes multifamily investors make when transitioning to self-storage How Mark and his team position themselves and make moves in the current market The benefits of investing in self-storage What is a bad storage investment?   [21:04 - 22:24] Closing Segment Reach out to Mark!  Links Below Final Words Tweetable Quotes   “Find someone smarter than you, go ask them what you should do next, do that thing, And then once you're done, let them know that you did it and ask 'em now what the next step should be.” - Mark McGuire    “Self-storage is like the halfway house for recovering multifamily addicts.” - Mark McGuire    “The people who are willing to pay the most are young females and young females want properties that are well lit, and that are aesthetically pleasing, and have a lot of security cameras.” - Mark McGuire  -----------------------------------------------------------------------------   Connect with Mark at and follow him on Instagram, Facebook, and LinkedIn.   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Mark McGuire: We've been in an atypical market where we've been up to the right for the last four years. So, you know, despite how poorly you've operated a deal or priced a deal like you could sell it just in spite of your knowledge base, but there will come a day when you reach the high water mark and then pricing starts receding. And then at that point in time, brokers are going to be calling you asking, what do you think this is?  [00:00:33] Sam Wilson: Mark McGuire's biggest passion is wealth building and investing. He's a limited partner in 12 syndications ranging from multifamily to industrial hospitality and self-storage. He's invested in multiple private companies in the biotech, finance and AI spaces. Mark, welcome to the show.  [00:00:49] Mark McGuire: Thanks for having me, Sam. I'm pumped, man. Excited.  [00:00:52] Sam Wilson: Thanks for coming on today. Certainly appreciate it. Here's three questions I ask every guest who comes to the show in 90 seconds or less: can you tell me, where did you start? Where are you now? And how did you get there?  [00:01:00] Mark McGuire: Yeah. So started in, as the maintenance guy, the assistant to the maintenance guy. So I started, if there was a bottom rung on the ladder, I think I started in the ground and currently now functioning as the chief investment officer at Hearthfire Capital. And we focus in the syndication of the self-storage space and, you know, my journey getting there was from, you know, doing all of the work that nobody else wanted to do and kept finding people who were smarter than me and asking them for advice and then executing on the advice they gave me and going back to them and saying, Hey, I did that, now what? If I could give one piece of advice, find someone smarter than you go and ask them what you should do next, do that thing. And then once you're done, let them know that you did it and ask 'em now what the next step should be.  [00:01:48] Sam Wilson: And that is the follow-up that I think 90% of people miss is that, Hey, I did it. Lots of people are willing, lots of people are willing to say, Hey, you know, what do I do? And then they listen and it makes 'em feel good to hear what they should do. Then one, they don't do it. And then secondly, they don't follow up and go back and say, Hey, I did it, now what?  [00:02:06] Mark McGuire: I mean? Yeah. Some of the smartest people that I know, people that have mentored me, you know, I've asked them after the fact, like, why did you choose to invest time with me? Because, you know, time is a resource that people who, it doesn't matter how wealthy you are, you can't make more of it. [00:02:21] Mark McGuire: You can earn more money. You can earn more time. And the answer that I got from multiple people is you were a dealer. You went and you did what I told you to do. And then you followed up with action. So take action.  [00:02:34] Sam Wilson: Absolutely. That's an inspiring story. I think for all of us, I love starting, if there was a bottom rung of the ladder, I started in the ground. Did you, did you go to college? [00:02:43] Mark McGuire: I did three semesters, non consecutively, and never graduated.  [00:02:47] Sam Wilson: I love it. I love it. That's one I'm my, now it makes the story even better. Tell me what you guys are doing today.  [00:02:53] Mark McGuire: Yeah, so Hearthfire Capital, we currently own 12 facilities, about 420,000 net square feet buy, operate, manage, improve self-storage facilities. That's what we do.  [00:03:08] Sam Wilson: That space has seen, I mean, as all, I think real estate asset classes have, have just seen an incredible interest from the institutional side of things. How is that changing what you guys do, your strategy, your return profiles. I guess I asked that question and then like, we'll start there got too many questions for you, but we'll start with that one. [00:03:30] Mark McGuire: Hey, fire away. It's interesting. I was actually just on a call before I hopped on here today with a broker in the space. Just asking them what they're seeing. 'Cause we've been, self-storage has really been controlled heavily by a small group of brokers. So it's interesting in self-storage, that's different from other asset classes is that it's not, like there's a bunch of people, especially everyone comes from multifamily. Everyone knows multifamily. It's the easiest one to get into requires the least amount of capital. There's the most amount of possibility, but there's not a lot of like good trophy properties. And they're, the brokerage of those properties is A, a lot of them don't ever get on the market that they maybe get limited bid at best. [00:04:10] Mark McGuire: But two, there's a lot larger pool of brokers competing for the inventory versus in self-storage, it's controlled by like eight or nine groups that really do the vast majority of the industry across the country. So when you get in with a couple of them, you prove that you can perform, you sign deals up on the front end. [00:04:29] Mark McGuire: You don't retrade them. You take them down on the back end, obviously, assuming that, you know, you didn't get lied to or debt didn't go up 200 basis points over the time in which you had it in your contract. That's how you get in with these people and self-storage is really controlled by a select view group. [00:04:46] Sam Wilson: Got it. So how did you crack that egg? If you're coming in is the new guys on the, on the block, like what would you say to somebody if they wanted to get in front of these people and actually become a credible buyer?  [00:04:58] Mark McGuire: Yeah. So, you know what I would tell anybody who's looking to make that move, you know, reach out to them, sit down with them, tell 'em what you're looking for. And then when new offerings come in, that are what you're looking for, offer on them within like, you know, 24 to 48 hours. And, and if they don't work for you, tell them why that property wouldn't work and give them actual reasons, not just like, I don't feel like buying this today. [00:05:27] Sam Wilson: That is, and I hear that over and over and over. I think I've heard that 10 times in the last three weeks from guests on the show and it's something I just think that just needs to be reiterated again. I mean, I, I can't thank you enough for saying that, which is tell 'em, tell 'em why it doesn't work. [00:05:42] Sam Wilson: Communicate with your brokers. And I think that's, I need to go back and just kind of splice all these and put like a broker advice podcast together from about the last 30 guests and say, Hey, this is, this is how, you interact with brokers, 'cause it is, it is an interesting art and figuring out how to get in front of, and stay in front of them and what it means to be a valuable buyer to them. [00:06:01] Mark McGuire: And so many people misunderstand that they, they have the relationship with brokers confused. People think that brokers are supposed to bring them deals and, you know, brokers are out looking for deals, but the expectation of you telling somebody that you want something one time, A, is bad that, that's a horrible assumption that they're going to actually remember that they talk to you, let alone remember the specific criteria that you gave them. [00:06:28] Mark McGuire: And you want to find a way to bring value to them. 'cause sometimes brokers missed a mark on their pricing. And sometimes, you know, they look at it and we've been in an atypical market where we've been up to the right for the last four years. So, you know, despite how poorly you've operated a deal or priced a deal, like you could sell it just in spite of your, your knowledge base, but there will come a day when you reach the high water mark and then pricing starts receding. [00:06:51] Mark McGuire: And then at that point in time, brokers are going to be calling you asking, what do you think this is worth? And that's where the true relationship, it's a true two-way street at that point where they're coming to you asking, Hey, what would you pay for this and help me understand why because if they're not getting the pricing that they told a seller, they want to be able to go back to that seller and articulate why, what's changed in the market that's prohibiting them from executing on what they said. 'Cause it's an all about reputation and integrity and if you don't have those two things, you're out of the business.  [00:07:19] Sam Wilson: Exactly. And you know, to the point, yes, you are a buyer. Yes, you are a quote client of the broker, but like you said, it becomes a two-way, the symbiotic relationship in the sense that you need them, they need you, yes, they get paid, but you also get paid by buying deals as well. So it's and it becomes very valuable when that last step, I think, occurs. Like you said, where they suddenly go, oh, okay. Hey, you know, Mark, what do you think about this? [00:07:43] Sam Wilson: Tell me this is a project we're looking at. What's it worth? And, and they'll, they'll smell. They'll smell it. If you, if you're not telling, you know, giving 'em accurate feedback, low balling 'em with something that, that doesn't make market sense. That's a cool point you make there. Tell me about your first deal you did, and then compare it to the last deal you did. And tell me how things have changed and maybe what you guys are doing differently from the first to the 12th.  [00:08:07] Mark McGuire: So the first deal that we did with Hearthfire Capital or the first deal that I ever did relative to one that I just did with Hearthfire Capital? [00:08:12] Sam Wilson: Let's talk all self-storage. [00:08:14] Mark McGuire: Okay, cool. Very first self-storage deal we did, we purchased for, I think it was about 1.7 million. We're actually on market right now at 3.5 million to take that full cycle as we speak here. A lot smaller facility worth about a third of the value. And actually it's worth less than a third of the value. [00:08:37] Mark McGuire: It's just less, it's less decimal points. That's all it is at a certain point though, you know, if you're playing for big, for more decimal points, you got to really know your craft because when there's bigger decimal points, you can create more wealth. The process is the same, but the stakes are higher. [00:08:56] Mark McGuire: You want to kind of start a little smaller, so that way, if you do make a mistake, it, you don't get, I'm going to say totally crushed and knocked out of the game. Go a little smaller in the beginning and that one had no expansion. That one was just a pure revenue play, a pure, you know, optimization, doing some parking lot renovations and converting a particular area, the facility to climate control. [00:09:19] Mark McGuire: And the one that we just did, we bought a 31,000 square foot facility with a 34,000 square foot expansion that we'll be doing. So we're building 34,000 square, effectively taking this facility size to 65,000 square feet and upgrade in the class of that facility.  [00:09:34] Sam Wilson: What was the purchase price on the 12th one? [00:09:36] Mark McGuire: Man, now you're testing me. The equity, I think, the purchase price of the, the 12th one was like, you know, dirt and existing facility was like 4.7 million stabilized values going to be in the eight or 9 million range.  [00:09:55] Sam Wilson: Okay.  [00:09:55] Mark McGuire: And the first one was 1.7 million going to three, three, somewhere between three and three five. We'll see how it shakes out.  [00:10:02] Sam Wilson: Right, right. So, so yeah, I mean, obviously you're getting into bigger projects. It doesn't sound like you're playing for the 1.5 or 1.7 million dollar projects anymore. You guys are looking at bigger assets. Tell me on a square foot basis. Like I know 31,000 square feet, is that a small, I don't, I don't own, no, I don't own any, I have a passive investor in self-storage. I don't own any personally. So tell me you know, what's the size of a good facility for you guys? Like where do, where do the numbers make sense?  [00:10:28] Mark McGuire: Yeah. So from a sizing, it really kind of depends because, and, and, and I hate to say that, but it's the truth. If you're already established in a market and you can get economies to scale by pulling a property manager from a local facility nearby, and then getting cost shares on the operations side of things, you can go and take that facility and that facility makes sense. If you're going to go and penetrate a new market and stand, set up a flagship, buying a 20 or 30,000 square foot facility is, is going to be challenging unless there's a big, like we're doing here a big expansion on the backside to really get that economy to scale. So if we're, we call them bolt on sites. [00:11:06] Mark McGuire: So if we're going to look at a bolt on-site, we would do 20 to 30,000 square feet. If we're looking at a flagship, it's going to have to be 50 to 60,000 minimal.  [00:11:15] Sam Wilson: 50 to 60,000 square feet is a, okay, so that that's kind of the entry-level where you say, Hey, we're starting in a new market. It's gotta be at least 60,000 square feet. How have things changed on the buy side competitively? Like what, what's that landscape look like now for you?  [00:11:31] Mark McGuire: You know, it's funny you say that literally that was the call I had this morning with a couple of brokers. I've been reaching out to some brokers I have relationships with 'cause we've been swinging and missing on some deals. And we're just getting outbid and it's, and like, these are deals that when we hear what these things are selling for, I'm like the IRR at the investor level was like 11%. Nobody wants them, invest in a private equity deal with an expansion component for 11%. That assumes everything goes right. If anything goes remotely wrong, you're toast.  [00:11:59] Sam Wilson: Right. 11 became 4. Thanks at best.  [00:12:02] Mark McGuire: Maybe at best. Yeah. So, you know, we're, like you alluded to earlier, there's a lot of capital pouring into this space and there, and this is like, I always say self-storage is like the halfway house for recovering multifamily addicts. [00:12:16] Mark McGuire: And it's everyone who's sick of chasing diminishing returns and doing stupid stuff to try to acquire a facility that's way overpriced and overbid. And you know, there's not a lot of meat on that bone, it's been picked over. Now all those people are coming into self-storage and people are starting to put non-refundable deposits, which is stupid. [00:12:36] Mark McGuire: And they're starting to do, you know, waving due diligence. Stupid. I mean, it's just literally like, let me just increase the risk factor as much as I possibly can and be as ignorant as possible so I can absolutely make sure to get burned.  [00:12:52] Sam Wilson: Do you see, I guess that, and if, and if that's the way you, I guess that is the way you see it, is that eventually they will get burned Where do you want to be when that happens and how are you positioning yourself for that?  [00:13:04] Mark McGuire: Well, I don't want to be competing for their deal. I don't want to be competing for the deal the first time, I want to be competing at it after they've lost their shirt and the bank calls their note because they don't make their debt covenants. [00:13:13] Mark McGuire: That's where I want to be. But we're right now, like in order to acquire, I mean, it's an off-market game right now. I mean, and self-storage has for a long time, been controlled by brokers and a lot of the inventory was traded by brokers. And self-storage didn't have that popularity. And I mean, there were times, man, these things are trading for 10 to 12 caps. And that same property that traded for 10 to 12 cap five to six years ago is now trading for six. Like, it's nuts. [00:13:44] Sam Wilson: Right. Yeah. It's absolutely insane. What are the economic things or the environmental moves that maybe have to occur for you to think that it will return to a point where you can then pick up these properties at a discount when these people can't cover their note? [00:13:59] Mark McGuire: So self-storage, what no one talks about in the whole recession resilient thing about self-storage, during 2008, 2009 as a part of CMBS defaults, self-storage was at 0.03%. That is three-hundredths of a percent. Like that's a lot of decimal places in, in front of the decimal, smallest. The next closest, I forget whether, I think it was industrial, I think was the next closest. And it was like, not even close. So self-storage has traditionally been low leveraged. You're talking 65 to 70% loan to value. And you have people that, like, it's not a lot of money. I mean, you're talking like a hundred dollars a month for a unit and the alternative is put it in your house. [00:14:49] Mark McGuire: Well, if people don't have the space in their house, they don't have the money or the income to go buy a bigger house. Guess what? A hundred dollars a month is cheap alternative. So that all being said, I completely forgot the question.  [00:14:59] Sam Wilson: What has to happen economically for you? Because you had said, Hey, you see people taking a huge risk, people doing things, you go, gosh, that doesn't make sense. You guys are just, you're making this as risky as possible, paying the most you can. And when you get burnt, you can't cover the note. Then I want to be there to pick it up.  [00:15:15] Mark McGuire: So what has to happen is that people don't do their due diligence and a new facility gets built in the three or five-mile ring that totally crushes that other facility who had marginal returns to begin with. [00:15:28] Mark McGuire: And they, and, you know, either they don't meet their debt service or they just barely meet their debt service and, you know, make it out, you know, by the skin of their teeth. But the deal returns are you know, super compressed.  [00:15:40] Sam Wilson: Right. [00:15:40] Mark McGuire: So it, honestly, it just takes patience and time.  [00:15:44] Sam Wilson: Yeah, absolutely. Tell me about, you know, again, but you just kind of stay on the economic times conversation. You've invested as in, as a, maybe even an active investor in industrial and some other asset classes. How do you feel like you guys are going to weather any, any economic uncertainty and really, why have you favored this asset class over another?  [00:16:05] Mark McGuire: So self-storage just provides a really unique aspect to it where it kind of blends hospitality in terms of the dynamic pricing of the rates. [00:16:16] Mark McGuire: But it, it manages that and then has a better sticky factor that's more along the lines of multifamily. But it's got agility to it. So what I mean by that is people don't want to go and move their stuff. With self-storage, if you think about multifamily, right? And your rent is 2000 bucks a month, and someone says, Hey, I'm going to give you a 10% rent increase every six to eight months. [00:16:40] Mark McGuire: If you go from 2000 to 2200 to then, you know, 420 dollars within 12 months, you're going to be like, I'm out of this place. Forget it. Self-storage has 30-day leases. And, you know, if someone's unit rent is a hundred dollars a month and you raise it 10%, that's meaningful in terms of your revenue collected in your NOI. [00:17:02] Mark McGuire: It's not meaningful to the person who's renting the unit who has to then rent the U-Haul truck, pick up all their stuff and then go put it down somewhere else. At which point they may be able to find a place that's the same and probably not cheaper, probably more expensive. And then they got to take the time to move at all. Nobody wants to do that. For $10 a month, you're not moving that. You're not moving your stuff. [00:17:24] Sam Wilson: Right. Yeah. You're going to spend eight hours and 500 bucks moving all of it. And it's like, well, I'll just pay the 10 bucks a month to be done.  [00:17:31] Mark McGuire: So then if you go and get another 10% rent bump in eight months, people were like, eh, I don't really feel like moving it for another, you know, $11. That's what happens. And this is how it's just like, you're just tweaking the dial and turning the heat up. And that frog doesn't realize that that water's getting hot. But man, before you know it, it's boiling, that frog is cooked.  [00:17:50] Sam Wilson: Right. Right. Tell me about this. What are some storage units right now that you just look at and you go, man, I wouldn't buy that if it were free? What's some garbage out there on the market that makes a bad storage investment.  [00:18:03] Mark McGuire: Man, so, you know, what's interesting is aesthetics are such a, an important part about self-storage. Self-storage was used to be marketed to the cheap and three or four years ago, people realized they started doing more analytics, data. [00:18:19] Mark McGuire: I'm sure it was always being done, but it became more widely understood that the people who are willing to pay the most are young females and young females want properties that are well lit and that are aesthetically pleasing and that have a lot of, they have security cameras and solid gates and fencing. [00:18:40] Mark McGuire: They want to feel safe at the facility, 'cause if they feel safe while they're there, then their belongings are safe and therefore it's a good place to rent. And if they have to pay more for that. So be it. That's sanity that's well spent. So a couple of things I wouldn't buy. A, a facility I could buy, you could, you could build an A class facility in, in an oversaturated market that can't support the rent and I don't want that facility. So a facility that's located in an oversaturated market and how do you know if it's oversaturated? You know, there's base rules around square foot per capita, and it's historically been eight to 10 square feet. [00:19:15] Mark McGuire: I think that's totally busted. It really depends on the three and the five-mile rings. You gotta really understand your supply-demand analysis and how to execute that. Once you execute that, or you understand that, like the 8 to 10 square foot per capita is a great 1% rule of thumb, if you will, for storage, but it could be six square foot per capita, but there may not be enough population there to support the demand. Or you got stuff that's built to the wrong sizes. So if you go in and when you're doing your supply demand analysis, you're noticing that this facility is way under-rented, but it's all five by fives and five by tens. And the, the, the market wants ten by twenties. [00:19:54] Mark McGuire: That's a facility that I don't want, like, 'cause you could be 50% vacant. You're like, oh man, there's so much occupancy I could use here. But if it's not what the market commands, unless you can convert it, I don't want it. And then, I mean, ultimately it comes down to, I want a facility that looks, that looks nice, or I have the ability to make nice. And if I can't, the turd is a turd all the way through, and there's no amount of polish that's going to make it sparkle. I'm out.  [00:20:20] Sam Wilson: Right. That makes a lot of sense. No, that's really cool. I was just curious, you know, again, with the, with the buying frenzy, it seems like that we are in on so many fronts, you know, what it looks like or... [00:20:30] Mark McGuire: It's asset class agnostic, man, the buying frenzy doesn't care what asset class it is. There's just a ton of liquidity and there's sovereign money coming in now. Where these people, I mean, sovereign wealth funds where they're losing principle balance by not being spent. So these people were like, Hey, if I get 5% on my money, I don't really care.  [00:20:47] Sam Wilson: Right. Yeah. That's, that's really, really interesting, but still even in that, even in that buying frenzy market, I'm always curious what those, who are active buyers, aren't, aren't buying and why. And you did a great job of kind of explaining deals that just simply don't make sense even right now. So thanks for doing that. Mark, thanks for taking the time to come on the show today. It was great to have you on learn about your business, what you guys are seeing in the market, how you guys are interacting with brokers, what you guys are doing to get deals sent to you. Again, I love the, you know, just the, the, the information you gave us about how to interact with brokers, how to stay in front of 'em and then, of course, your info there on mentors and how to be of value to them and let them know that you are actually doing what they're saying, and then get them to continue to pour into you by, you know, giving them feedback and following exactly what it is they say to do. [00:21:31] Sam Wilson: So I think that was all awesome information. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?  [00:21:38] Mark McGuire: Yeah, best way is That'll put you right through our, our website and capture or contact form and or if you're in on socials Instagram slash investingwithmark. Facebook, same thing, LinkedIn, same thing. [00:21:51] Sam Wilson: Awesome. Yeah, we'll make sure we put those also in the show notes. Mark, thanks again for coming on today. I certainly appreciate it.  [00:21:57] Mark McGuire: Awesome. Thanks Sam.

    Building Lasting Wealth with Multifamily Real Estate

    Play Episode Listen Later Jun 25, 2022 22:28

    Ep. 573  Building Lasting Wealth with Multifamily Real Estate   Andrew Cushman is a former chemical engineer who found his entrepreneurial calling in real estate. He started out flipping single family properties in Southern California. In 2011 Andrew transitioned to multifamily acquisitions and has successfully syndicated and repositioned over 2,500 multifamily units.   Highlights:   [00:00 - 06:58] Find the deal, the money will come there is truth to that, but there's caveats Andrew Cushman,  decides to quit being a chemical engineer in 2007 and has since flipped houses full time in Southern California. Andrew and his wife decided to go into the apartment market and found the guy who had already done 18,800 units. They syndicated their first deal in 2011 and have since done around 26,700 units. One of the things they learned in their first process was that you need to have both capabilities - finding deals and raising money - simultaneously.   [06:58 - 13:55] How to Scale Your Business When the Deals Are Harder to Find Andrew notes that the current market is much more competitive than in the past, with prices for properties increasing significantly. It is now necessary to have a good relationship with a broker in order to find and buy properties. There are many things that can be done to make brokers think of you first when looking for a property, such as being reliable and truthful, being consistent and predictable, and having a clear understanding of what you are looking for.   [13:55 - 20:59] How to Put Yourself in a position where your broker thinks of you first Being top of mind. Not only because building an actual real relationship, but by knowing exactly what you want the brokers would exactly know what you want They think of you first when that thing shows up and that applies whether you're looking for any Real Estate Assets.  [21:00- 22:27] Closing Segment Reach out to Andrew  Links Below Final Words Tweetable Quotes   “It's about being top of mind. Not only because you've built an actual real relationship, but by knowing exactly what you want so that they know exactly what you want.” - Andrew Cushman ----------------------------------------------------------------------------- Connect with Andrew Cushman by visiting their website at: Connect with me:   Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below: [00:00:00] Andrew Cushman: Find the deal, the money will come there is truth to that, but there's caveats, right. The assumption there is that you've built an investor pool, or if you haven't. The assumption is, well, you're gonna take it to somebody who has, and now you're going to be giving away either control or equity or something like that. Andrew Kushman has syndicated over 2,600 value out apartment units in the last 10 years. Andrew, welcome to the show. Hi, good to be here, Sam. Hey, the pleasure's mine. Thanks for coming on today. There's three questions. I ask every guest who comes in the show in 90 seconds or less. Can you tell me, where did you start? [00:00:47] Sam Wilson: Where are you now? And how did you get there? Is that 90 seconds  [00:00:50] Andrew Cushman: for each or 90 seconds? Total, total. Ooh, geez. All right. well, I started back in 1977. My dad had a twinkle in his eye and, fast forward a little bit. I was a chemical engineer. Quit doing that in 2007 to flip houses, full time in Southern California. [00:01:05] Andrew Cushman: That was great, but it was the equivalent of another full-time job. Right. And so we want my wife and I, my wife's a business partner. We wanted to move into something that was more scalable and also provided more recurring income and had the higher probability of building lasting wealth. And so in 2010 we said, Hey, everyone just got foreclosed on. [00:01:26] Andrew Cushman: And they, so that means that no one can either can buy a house or wants to buy a house. Cuz they're all scared of it. We had a huge recession, which means we're going to be having probably a long expansion so that rentals should probably do well. So we went and found the guy who'd already done. [00:01:39] Andrew Cushman: 18, 800 units hired him as a mentor. Did our first syndication in 2011, it was 92 units on the other side of the country in Macon, Georgia. And. since then, I've been doing it full time and we're somewhere around 26, 2700 units. So  [00:01:53] Sam Wilson: that is that's really, really cool. I love just you found something you liked and you stuck with it. [00:01:58] Sam Wilson: Was there ever any temptation along the way to look at other asset classes?  [00:02:02] Andrew Cushman: No, not really. I'm a big believer and there's different theories on this when you're building businesses about having like, multiple businesses and diversification. And for us, we found the best thing is try to be really good at one thing. [00:02:15] Andrew Cushman: And that's what we're striving to do. I know guys that do multi-family and industrial and self storage and bunch of other things, and those are great investments and they've done really well. There's nothing wrong with 'em at all. Right. I. Feel like we know and understand multi-family and I feel like we're getting pretty good at it. [00:02:31] Andrew Cushman: And we wanna just get that much better. So stay focused,  [00:02:34] Sam Wilson: right? No, I think that's really great. I guess, uh, talk to us about this process. You said, Hey, we're gonna go buy our first 92 units in 2011 syndication. Really? We're probably wasn't even a buzz word like it is today. [00:02:48] Sam Wilson: How did you guys take those down?  [00:02:50] Andrew Cushman: That was a struggle. That first deal is a. Big part of why my hair is as gray as it is. and you're right. Syndication. Wasn't a buzzword. There was no one, Dave Al was like the one guy out there teaching people about apartments and that was it. [00:03:03] Andrew Cushman: There was no one else. There was no billboards in Dallas about how to become an apartment syndicator and So, we had, like, I, like I mentioned, we had started flipping houses in Southern California. And so we had some private investors that, if we bought a $400,000 condo I'd go to invest and be like, Hey, give us the money for this. [00:03:21] Andrew Cushman: We'll give you an interest rate and then we'd flip it and do all that. Right. And so we went into the, apart into the apartment world so that first one we bought 92 units for 1.2 million out in Macon, Georgia. And for anyone who's looked at a deal today, you're saying, well, wait, hold on, Andrew. No. You said something wrong. You said 1.2 million for 92 units. No, that was the price. [00:03:41] Andrew Cushman: I think as, again, works out to roughly 7,500 a unit that's. That's what the market was like in 2011, right? It's either really easy to get money and really hard to get deals, which is kind of today, or it's really easy to get deals and hard to get the funding. that's what it was in 2011, the market was at a bottom lots of distress and everyone was scared to death of real estate and no one wanted to touch it. [00:04:07] Andrew Cushman: And there was no liquidity and you couldn't get loans on a lot of this stuff. So the pricing reflected that so 1.2 million, and that included the rehab, the actual purchase price was 6 99. And the total that we needed is 1.2. And we had our mentor uh, we were a bit naive in terms of how easy it would be to raise $1.2 million. [00:04:25] Andrew Cushman: Back then it took us six months just, one investor at a time, 10,000 here, 50,000 there. And actually at the end part of how. Got there is we got the seller to carry a $200,000 note. So that we could at least get to closing and get it finished. And then we actually raised the last few pieces over the next few months after closing. [00:04:46] Andrew Cushman: So it was, a brutal process that first one. But wouldn't be here if we hadn't done it so glad we did. What  [00:04:52] Sam Wilson: were some things you feel like you learned in that first process that you could help other people either, emulate or avoid.  [00:05:00] Andrew Cushman: one of the big questions that you hear is, oh, well, do I get the deal first? [00:05:03] Andrew Cushman: Or do I get the money first? It's both work on your deal, finding capabilities and your money raising capabilities simultaneously. Don't wait until you have a deal. To then start talking to your investors, to potential investors. Then also don't go and get a big pool of investors, all excited about investing with you. [00:05:24] Andrew Cushman: If you don't have anything to ever show them. Right. So it's a simultaneous thing. And if you're like, well, but I haven't done a deal, so what do I talk to investors? Then? What you do is you look at deals, you analyze 'em, you put 'em together, you put together like a little package. [00:05:37] Andrew Cushman: And then when you're talking to people, say, yeah, these are the kind of deals I'm looking. Right. And you're not gonna, you're not gonna mislead people and say, oh, I'm buying this deal or anything like that. You're gonna say, you know what? I offered on this one. We didn't get it. But if we had, oh, it would've been a great deal. [00:05:52] Andrew Cushman: And I'm looking at lots more like it. Right. So be transparent and honest about it, but that's what you do while you're looking at deals. Then when you have one. Hey Sam, good news. Remember that deal that we looked at a month ago. I showed you that I didn't get, that was really good. [00:06:05] Andrew Cushman: I got another one just like it. And this time they accepted my offer. Right. So you build both at the same time. Right? Right.  [00:06:12] Sam Wilson: Yeah. I think that's that's really valuable cuz that is, I mean you hear the find the deal, the money will come, which is nonsense. But I also like the idea that you said that you have to build, you have to find the deals as well, because it is, I've been in that season before where you've got loads of investors lined up and you've got nothing to give 'em and it's like, oh, well, hold tight while we go find something else, it's gonna take, if it's 90 days before I bring a deal to you, a lot of those people have already moved. [00:06:36] Andrew Cushman: Yeah. And, what you mentioned a minute ago, you hear that a lot. Find the deal, the money will come there is truth to that, but there's caveats, right. The assumption there is that you've built an investor pool, or if you haven't. The assumption is, well, you're gonna take it to somebody who has, and now you're going to be giving away either control or equity or something like that. [00:06:58] Andrew Cushman: Right. So yeah, you're, right. It's not just to find the deal. It's not like, field of dreams, right. Where everyone just shows up and everything's happy and fun. There's costs and caveats to that. So, these days the deal is the tougher part of it but. You want to scale both at the same time, either on your own or by partnering with the right person. [00:07:15] Sam Wilson: Absolutely things have changed. You're no longer buying 90, what'd you say? 92 units or 96 units for 6,000 bucks a door  [00:07:24] Andrew Cushman: yeah. long gone. Well, we will not see that again.  [00:07:28] Sam Wilson: I don't think so. I don't think so. I think one we've rented too much money to see that. And I just think it's things are very different right now. [00:07:34] Sam Wilson: It's a very competitive market and you guys are paying a lot more, probably adding a zero plus to a lot of what you're buying. If not, gosh, the zero times one and a half, probably how are you guys finding deals in a competitive market? So  [00:07:46] Andrew Cushman: , it's kind of gotten a little better now, but for the last couple of years, we're averaging having to look at anywhere from one to 200 deals just to buy one And when I say, look at that means, at least put 'em through a screening process and, check things like median income and population growth and all of that. [00:08:02] Andrew Cushman: All of our deals, I don't, everything we've bought. And at least the last six years has been off market through a broker, meaning. It's a broker that we have a relationship with, and that knows what kind of markets and what kind of properties that we like to buy in. And that knows that if they connect us with the seller or owner, that they've built a relationship with that, we're not gonna make them look bad. [00:08:29] Andrew Cushman: But in reality, we're gonna have a high probability of being able to put a deal together. And then if we do actually get it closed. So it's just been nurturing those relationships, now over 11 years. But you know, candidly, we've done, we've bought three off market deals from one broker. [00:08:46] Andrew Cushman: In the last 12 months that I've just met for the first time, like 18 months ago. Right. So please, I just want, then the reason I say that is I don't want everyone to hear, oh my gosh, I gotta build relationships for 10 years before I get a deal. That's that's not true. It definitely, it benefits you over time as you persist with it. [00:09:02] Andrew Cushman: But we're finding. The best deals, cuz the broker , , I get direct calls all the time from people everyone's trying. Everyone tries to circumvent the brokers thinking they're gonna get a better deal. You might get one or two. But the brokers, they spend their lives. Like all they do is. [00:09:19] Andrew Cushman: Hunt down these owners and build relationships with them. And they, good, the good ones know every property. They know the state of every seller, what their intentions are. And the most effective way to to do a large number of deals is to leverage the relationships that they've built. [00:09:36] Andrew Cushman: Right. Right. One good broker knows every property in your city and can save you and them a whole lot of time. Now. That applies, I'd say, especially for 50 units on up when you start getting to smaller stuff I'd say between 10 and 50 units, that's where if you want to go direct to seller, it's a, I'd say it's a little bit more fragmented and a little bit more mom and pop, and there's probably some more opportunity for deals in that smaller space. [00:10:04] Andrew Cushman: But as you move up good brokers and good broker relationships really is the way to, to scale again, not saying you can't grab a great dealer to the other way, but for any kind of real volume you want those relationships.  [00:10:17] Sam Wilson: Yeah. And it's certainly, like you said they devote their lives to this. [00:10:21] Sam Wilson: And this is really, I mean, the brokers control the market especially when you get into the bigger assets. So that's, you might as well just go straight to the store, save yourself some time. I mean, it takes an incredible amount of time to build the database. For an entire city, let alone, all the outreach, the cold calling, the whatever your method is to get that far. [00:10:38] Sam Wilson: So you might as well just go straight to the source and go to the brokers on those deals and nurture those relationships. Are there things other than being known as someone that can get a deal done and get it closed that you guys do to make sure that brokers think of you first?  [00:10:52] Andrew Cushman: There's a couple things. One is, there's the I'm, I'm sure everyone's heard this before, but basically, you know how you do the little things is how you do everything, right? [00:11:02] Andrew Cushman: So be consistent and reliable and truthful in all of the little things. Right? So if you say, if you tell a broker they send you a property. and regardless of whether it's good or you like it or whatever, and you say, oh cool. they send you a property on Monday. You say, Hey, I'll get back to you on Wednesday. [00:11:20] Andrew Cushman: Get back to 'em on Wednesday. Right. And maybe, life happened and you haven't had a chance to look at the property on Wednesday, send him an email, say, oh, Hey, thanks for sending this. I really sorry. I wasn't able to get to it. Like I thought I would, I'm gonna look at it tonight. I'll be in touch tomorrow. [00:11:34] Andrew Cushman: Right. It's just feedback. another example is when you look at a property and this is me, most of them, and it doesn't work. Don't just delete it and leave the, leave. The guy hanging and I've heard I've had brokers tell us this over and over again. [00:11:46] Andrew Cushman: They appreciate being told. No, because their job is to find buyers. And if you have all these buyers that have just not answered. That means it's a task for them to follow up with you. And now you're becoming a pain in the butt. Whereas if you just reply, say, Hey, you know what, Sam, thanks for sending me this property. [00:12:03] Andrew Cushman: Looks like a good asset, but it does not quite a fit for us because it's a little too old or we don't like the submarket. But again, thanks for the chance to look at it and looking forward to the next one or something like that. Tell 'em no. So they can take you off the list and they're not looking for you to say yes to everything. [00:12:17] Andrew Cushman: They're just looking, are you interested or not? So they can do their service to the owner or the seller. So just little bits of follow up go a long way. And then the other, another thing. And that you can do again without having to have, huge track record or anything like that is in a sense. [00:12:35] Andrew Cushman: Train them to know exactly what you're looking for. Right. And the assumption there is that, you know exactly what you're looking for. Right. Right. So, for us, it's we want, ideally properties built between 1990 and 2010, that are 200 units in secondary and tertiary markets in the Southeast United States. [00:12:56] Andrew Cushman: And then we have, certain things about population growth and median income and crime and all that. Right. And so the more conversations that we have with brokers about, Hey, that's what we're looking for. And so someday when, topnotch broker, Sam Wilson is out there having lunch with the seller and the seller goes, you know what, actually, yeah, I think I'm considering actually selling this thing. [00:13:18] Andrew Cushman: Sam goes, oh, you know what. You need to talk to Andrew and his group and cuz they could be the perfect buyer for this. That's how that off market deal happens that no one gets to see. Right. And like literally we bought, we closed 200 units, 173 units in March. That's exactly what happened. The broker was having breakfast with somebody who said actually yeah, these guys made me an offer and I think I'm gonna take it. [00:13:43] Andrew Cushman: And he said no, hold on. Let me hit, let me call one guy he actually texted me an hour later. I was over there, met with that seller may have been offered the next morning and we B closed on that property in March. Right? Wow. So it's about being top of mind. Not only because you've built a, an actual, real relationship, but by knowing exactly what you want so that they know exactly what you want, so they can go, oh, so they think of you first when that thing shows up and that applies whether you're looking at industrial or self storage or multi-family, or even, Duplexes or, I mean, fourplexes, that principle applies across the board. [00:14:22] Sam Wilson: I love that, that is some very tangible steps and advice that you've given there on just managing broker relationships and telling us how really we should be interacting with the brokers Devo, put yourself in a position where they think of you first. Are there things that you guys are doing outside of competing on price? [00:14:43] Sam Wilson: That makes your offers get accepted over somebody else [00:14:45] Andrew Cushman: yeah, we've never won on price. If I do I get nervous or I would, if we did, I would get nervous. So, how we win without winning on price. Number one is kind of what we're just talking about is we. Just don't get into bidding situations where we're up against 20 other, people and all this kind of things. [00:15:03] Andrew Cushman: So, but whether you're doing it off market and that's, I should mention too, just cause it's off market doesn't mean there's zero competition. Right, There's other guys just like you who are doing the same thing. And so there may be two or three or four other offers, even though it's not listed or marketed. [00:15:16] Andrew Cushman: So other ways to stand out, number one, larger deposits. If most people are giving a $50,000 deposit, maybe you put a hundred or 75 the other, another thing you can do and getting kind of relating to the deposit is hard money, which basically means, once, once you make that deposit, it's not refundable. [00:15:36] Andrew Cushman: Like you have to be certain. That you're you wanna close on that property? Right? So you can't come back 30 days later and be like, ah, you know what? The roofs don't look that good. And ah, this don't, we don't wanna buy this well. Okay, great. But they're keeping your deposit, right? So that hard money gives the seller comfort that you really are gonna close in. [00:15:57] Andrew Cushman: You're committed to closing. Another thing we'll do is we provide just a really short, like three sentence. Bio at the bottom of our letter of intent, which is our offer that this kinda says who we are. And, we adjust that to the property that we're buying. So for example, if we're buying a property in the Florida panhandle, we might say, oh yeah, we've done 2,600 units, blah, blah, blah, including recently acquiring and you know, units in. [00:16:25] Andrew Cushman: Like, oh, these guys just bought units here. Oh, well, okay. Well they, they're in the market. They understand they close, they can perform et cetera. We'll also provide, references, meaning other brokers that we've closed deals with loan brokers that we've closed loans with. [00:16:39] Andrew Cushman: So that we can, say so seller can be like, oh, okay, well, these guys just closed the loan. Flow loan with this company, or, and actually, maybe for example, we just, so we just were in the process of selling two properties and the guy that we accepted his offer, he did that. And when I looked at his references, I personally knew the two brokers he put as references. [00:17:03] Andrew Cushman: I'm like, oh, alright. I can call these guys and talk to him. And if he's working with these two brokers, then I know he's a legitimate guy. Right. Because I know those brokers. Right, right. So, just that, that extra level of, did that one thing win him the deal? No, but it was an extra comfort point, like, oh, alright, well, he's working with these guys. [00:17:20] Andrew Cushman: I've worked with these guys. He's, clearly knows some people and has been doing things. So tho those are some of the ways that that you can do it also have your financing arranged in advance as much as possible.  [00:17:32] Sam Wilson: That is some excellent points. I appreciate that. That like you said, there are, larger deposits. [00:17:38] Sam Wilson: You can go hard on your money early on. You have a short bio and a letter of intent. You can have references to other deals you've done in other brokers, as well as, talking, even in that short bio talking about. Putting maybe the deals that you've closed nearby, the ones that you're looking at there. [00:17:52] Sam Wilson: I think those are those some excellent excellent things to really keep in mind as we put offers out there. Tell me about this. You are going on a pretty big adventure here. I think sometime this year. Tell us a little bit about what you're doing. It sounds a little bit risk. To uh, guys like me, but tell us about that, why you're doing it and then how you view that from a risk adjusted perspective and then how you relate that back to multifamily  [00:18:19] Andrew Cushman: Let's see. Well, yeah I love to go. I love to do back country skiing. Which means a couple, I've got a part, one particular friend. I do it with a lot, but I go, I never do it alone, but what that means is instead of going to a ski area and buying a Lyft ticket, we just drive around the Western us. [00:18:35] Andrew Cushman: And find really cool looking mountains and the Tetons or the seas or wherever and say, Hey, it'd be fun to ski that. So let's climb it. And then we'll ski down. And we've been doing that for 20 something years around the Western us. We've done it in Alaska. And we are, going to go do that in Antarctica. [00:18:53] Andrew Cushman: Yeah. I spend some time on the Antarctic peninsula climbing mountains and skiing. 'em down there. No, and we're not doing it alone. It's not just me and my buddy. Like, Hey, let's figure out how to get to Antarctica and, die in a CVOs or something. Right. We are going with people who actually know what they're doing but yeah, really looking forward to doing that. [00:19:08] Andrew Cushman: And, it is exciting and, stepping a little bit outside the comfort zone. I don't know how I'm gonna. Get across the Drake passage without throwing up. Cuz I get Sea Sick of not looking forward to that. but yeah, I guess relating back to multi-family one it can be pretty scary to make a jump from doing, fourplexes or 10 units to a hundred or 200. [00:19:27] Andrew Cushman: So it's a bit of a jump to go from climbing a mountain, two hours from my house to. Go into the literal ends of the earth to climb climb stuff that you're days away from any kind of assistance. And then actually now I think about it might be a business trip because the other people there might make for good investors. [00:19:45] Andrew Cushman: So  [00:19:45] Sam Wilson: that's absolutely awesome. What are some other than going along with people that know what they're doing? What are some other things you're doing on this trip to kind of mitigate risk?  [00:19:53] Andrew Cushman: Preparation. I mean, we, I try to be fairly physically fit as just in general, always have, but we're, making it in an extra effort to be in as. [00:20:04] Andrew Cushman: Fine tuned condition as possible before we go down there. So, being a healthy condition as possible also I'm having all my gear tuned up and going through it, making sure it's in, in good shape. So we don't have any gear failures out in the middle of nowhere. And also relating to business. [00:20:22] Andrew Cushman: I've been really fortunate. This is something I did too late, but three years ago I finally started building a bigger team around me in our business. And we've had, our success has multiplied because we've been fortunate. We've got some amazing people that have joined us. So this is also a good forcing factor for, making sure. [00:20:41] Andrew Cushman: If Andrew's off the grid for 10 days or whatever that everything runs smoothly without me. So this has been a good catalyst to, to push forward on that because one of my flaws is a lot of times it's just like, it's just quicker for me to just get something done, right. Instead of take the time to build the system. [00:20:59] Andrew Cushman: So somebody else can do it. And many times there's other people who would love to do it and want to do it right then mom's like, well, it's just faster. If I just handle this well, Maybe at the moment is faster, but not in the long term.  [00:21:09] Sam Wilson: That. Yeah. I heard building systems is never fun. Like, I think it's fun to get something checked off the list, but it's also not scalable so without building systems, there's no scale. [00:21:20] Sam Wilson: So that's that's absolutely awesome, Andrew, thanks for the time to come on the show today. Best of luck on your trip and Antarctica. I can't wait to follow along and see how that trip shakes out. That sounds absolutely amazing. You've given us some awesome things to think about in immediate ways that we can, [00:21:33] Sam Wilson: some of these very hands on approaches in our business. So appreciate taking the time to come on today. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that?  [00:21:42] Andrew Cushman: Yeah, just Google vantage point acquisitions. The website is VP [00:21:48] Andrew Cushman: There's a bunch of tabs on there for how to get connected with us. I mean, I'm on bigger pockets in LinkedIn and all that stuff, but just going to the website's probably the best way. Awesome.  [00:21:58] Sam Wilson: Andrew, thank you for your time today. Certainly  [00:22:00] Andrew Cushman: appreciate it. All right. Take care, Sam. Good to talk with you.   

    Raising Capital From Foreign Investors

    Play Episode Listen Later Jun 24, 2022 19:33

    Is it possible to invest overseas?   Bernard Pierson proves that you certainly can.   Bernard, Managing Partner at Equiti Partners has over 10 years of real estate experience. He has specialized in ground-up development and investing opportunities. Most recently, he led the development of over 100,000 square feet of single-family homes and condominiums, including land and infrastructure works. In this episode, he talks about his experience being a developer in Latin America and eventually focusing on multifamily and working with foreign clients.     [00:01 - 06:52] From Food Broker to Real Estate Investor Bernard explains his background in food brokering Developing in Latin America The political and economic risks they experienced Transitioning to active multifamily Investing Investing passively first and building relationships   [06:53 - 17:45] International Investing The advantage of knowing the native language and the culture Getting a CPA and attorney with expertise in international tax law How to start investing with Bernard and his team   [17:52 - 19:32] Closing Segment Reach out to Bernard!  Links Below Final Words Tweetable Quotes   “It's not going to be like your US or domestic investors where they can sign a PPM online and they can wire the money into the next day. It takes time and I encourage them to talk to a CPA.” - Bernard Pierson “If you're a syndicator or you're trying to raise money from, foreigners, it just makes your life a lot easier if they invest as a US person through a US entity.” - Bernard Pierson -----------------------------------------------------------------------------   Connect with Bernard at and follow him on LinkedIn and Facebook. Know more about the work they do at  Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below: [00:00:00] Bernard Pierson:  I mean, there's great benefits of investment with a huge operator, right? There's nothing wrong with that. There's plenty of good big shops that you can invest with and get good returns. But if you want to do this actively you're going to need relationships. This is a very relationship driven business and networking is, great. And one way that worked for me at least to network and build relationships was to invest passively with other operators first.  [00:00:33] Sam Wilson: Bernard Pierson has been in real estate for 10 years. He started off in development and has since transitioned to full-time multifamily investing and syndication. Bernard, welcome to the show.  [00:00:43] Bernard Pierson: Thanks, Sam. Happy to be here.  [00:00:44] Sam Wilson: Hey, the pleasure's mine. There's three questions I ask every guys who comes to the show: in 90 seconds or less, can you tell me, where did you start? Where are you now? And how did you get there?  [00:00:52] Bernard Pierson: I started in, I used to do food brokering. That was basically, I mean, I had a job out of college for, W2 for one year, but right into, you know, pretty soon I, I quit. I was an accounting job. I was bored out of my mind, so I quit. So I like to say I started off with food brokering, which is kind of like my entrepreneurial path that I took. We did pretty well. [00:01:11] Bernard Pierson: Very transactional. And I figured that out pretty quickly. And that's how I found real estate and ended up partnering with some guys that, great guys, great partners that had experience. And that's how I got into development. And we did some developments in Latin America specifically Nicaragua and Costa Rica. [00:01:29] Bernard Pierson: And I've then transitioned over the last five years or so, just a full-time multifamily investing in the US. Because I found out that there was a lot of risk and a lot of things that I was not thinking about before that Latin America exposed us to basically. So yeah. I think that was around 90 seconds. [00:01:48] Sam Wilson: No, I think that was perfect. Well done. Thank you. Yeah. Food brokering. Can you, that doesn't mean anything to me. I'm just really curious. Can you give me a ten second highlight? What does that mean?  [00:01:59] Bernard Pierson: Yeah. So we would source the suppliers and, find buyers for beef. We get coffee, we did sugar. I'm from, I'm a half in Nicaraguan, part Nicaraguan part American. And I, I grew up in Nicaragua a lot of my life. I lived there from like six years old to 18. So I, just know a lot of people, it's a small country. It's a very agricultural country and a lot of food production. So that's how I got into that.  [00:02:23] Sam Wilson: Got it very, very cool.  [00:02:25] Bernard Pierson: Very transactional though 'cause it was, it was based on finding the seller and the buyer. And as technology, you know, and globalization has grown, the value of being that intermediary is, is not as, as valuable, I guess, anymore. So we used to have a transaction here and there where, and we used to make a lot of money on the transaction or good money. But it was very transactional. We weren't really building a, a sustainable long term business that would work without us being there.  [00:02:49] Sam Wilson: Let's jump into the next section of your story there. Developing in Latin America, it sounded like there were some risks or some lessons you learned the hard way. [00:03:00] Bernard Pierson: Oh yeah. There's two reason. I ended up going back to Latin in America. So when I was 18, I came to the US. I lived here for a long time. But when I got back into real estate, there was two things I was looking for. One was partnering with someone who had experience. [00:03:12] Bernard Pierson: So development, in my case, checked that box. My partners or my potential partners at the time had experience developing for many years in, in Latin America. And the other thing was going, in my case, I was going back to Nicaragua, originally, at least at the beginning. And this was home, right? [00:03:29] Bernard Pierson: It was a place I knew a lot of people. I knew my, the area very well. So I checked those two boxes. I was local to Nicaragua and, and I had partners with experience. The part I missed was Latin America can bring money risks that we, we just aren't aware of here in the US and those are specifically going to be politically and, or just political risk. And just the economy in itself is not as robust as it is here. Investments are going to be a lot less liquid. There's just a lot more risk in general. And I did a lot of research into that at that time, right? And I really found out that risk adjusted return, at least for me, or from my point of view or the analysis I did was a lot better in the US than in Latin America. [00:04:15] Sam Wilson: Right. So if I'm hearing you, right, you're saying that there was, you were taking on a lot of additional risk without the additional return that would be involved in assuming that additional risk. Was this something, when you were doing these development projects, is that where you cut your teeth in raising capital and bringing in outside investors? [00:04:33] Bernard Pierson: Most of our developments, what we would do was the seller of the land would get some sort of, we, we would creatively finance the deals where the seller of the land would some, that's either equity or, or maybe. I don't know if we were building a condo building on the seller's land. [00:04:49] Bernard Pierson: Well, then they would've got a condo or two, depending on the value, right, of the land in payment for, for their land. So we didn't really work with investors much. It, they didn't require tons of capital. A lot of the capital we put up, which was just a at risk capital of the preconstruction phase, which is the designs, the architectural work and all that stuff. [00:05:07] Bernard Pierson: The seller of the land put up most of the equity. An d then the bank put up the rest, which was just a construction, right., Or the, the bank would basically finance our hard cost. We would finance the soft cost and the seller would just finance the equity or the land.  [00:05:23] Sam Wilson: Got it. Got it. So you did a few of these projects. You said, man, there's way too much risk in that I see g reener pastures in investing in the United States multifamily markets. What did you do to transition into that space?  [00:05:36] Bernard Pierson: Right, so, the reason I found out was while I was developing in Latin America, I was also investing passively in real estate. I was, I was an LP. And I was seeing, man, I'm getting great returns on these LP deals. And not putting much work into it, right, or if, if any, at all. No work into it, except the due diligence, right, at the beginning and signing the paperwork and all that stuff. [00:05:56] Bernard Pierson: I was traveling. When I was developing, I was still living in the US. I wasn't fully living in Nicaragua or Costa Rica. I would travel every week, Monday through Friday. It's a two hour flight from Miami, so I was based out of Miami and I would just travel every week. Sometimes I would say the week, and my wife would come over. [00:06:13] Bernard Pierson: And, but I was basically, we were half and half between the two countries, right? So as I was seeing my LP investments, maybe not out, outperforming, but at least matching, and in some cases outperforming my active work in development. So, so my LP, my passive stuff was doing better, you know, when I was doing nothing. I was like, no, did you know, this is something I have to transition to at the time also Nicaragua, back in 2018, we had a pretty bad social economic, political crisis that the economy came to a standstill. [00:06:41] Bernard Pierson: It still hasn't recovered. And it was just a perfect time to transition full time into active multifamily. Let's call it.  [00:06:51] Sam Wilson: Got it. How, how did you build your team members? What, what did that process look like to go, 'cause it's one thing to be a passive investor. And it's another thing altogether to say, all right, now I'm going to go actively start taking down deals. What are some steps you took that you feel like other people should take? [00:07:05] Bernard Pierson: If you have the opportunity to invest with another operator, someone, got to know an operator, invest with them. If you can invest with one, that's not a huge operator, I mean, there's great benefits of investment with a huge operator, right? [00:07:20] Bernard Pierson:  There's nothing wrong with that. There's plenty of good big shops that you can invest with and get good returns. But if you want to do this actively you're going to need relationships. This is a very relationship driven business and networking is, great. And one way that worked for me at least to network and build relationships was to invest passively with other operators first. [00:07:39] Bernard Pierson: And I got to meet them. And my first active investment was actually with one of the sponsors or operators I used to invest with passively so that my LP relationship with this operator ended up being a GP or co-GP relationship.  [00:07:53] Sam Wilson: That's cool. I love that. You already know the deal sponsor. When this goes live, it's not like you're going, oh, okay, well, let me get to know you and see if we can work together. I said, no, I already understand how you work. I've seen all your deals up front. I've participated with you. Now, is there a way to join the team and help take these down together? [00:08:10] Bernard Pierson: And the sponsor also wants to know you, too, if they're going to team up with you, right? And even if you're just going to be an investor, they'll want to get to know you because there can be some LP investors, which are not desirable to some sponsors for different reasons, you know, that I'm not going to get into right now. [00:08:26] Bernard Pierson: But a relationship forms. You know, if you've been investing with sponsor for 1, 2, 3 years, they'll get to know you you'll get to know them. And especially if you, not that you're going to call the sponsor every day, right, but maybe you speak once a quarter or just once every six months, whatever, you know, like these guys used to have quarterly call, you know, for the investors and I used to log into the calls and I would see them there. [00:08:45] Bernard Pierson: And. Yeah, I, I 've seen four or five deals before I went into an active deal with them. So yeah.  [00:08:51] Sam Wilson: Right. That's a great way, great way to get to know somebody up front. We talked about this off air and I, I want to make sure that we spend probably the rest of this show talking about what it's like raising capital from foreign investors, you know, 'cause you, you told me that the majority of your investors come from Latin America. [00:09:10] Sam Wilson: What has been the process for you? I mean, how, how does this work mechanics of it? What's the investor education like? Can you just tell us what, because that's a very unique, you know, the aspect of this business that, that you bring that many of our guests in the show just don't have any experience in that. So I'd love to hear how you do that. [00:09:29] Bernard Pierson: Right, yeah. So it's very different for several reasons. and one thing that's important is that an investor from the UK is not the same, or from Canada, or from Nicaragua, Venezuela, they're all different. They're all going to be different. Tax purposes, legal reasons, culturally, language they're, they're going to be completely different. [00:09:47] Bernard Pierson: I'll start off with how I met them and, and why they invested with me. For me, it's simply because I'm in Miami and there are other multifamily operators that speak Spanish and, and are from that in America. But not many, there's a lot less. [00:09:59] Bernard Pierson: And I'm one of the few that speaks the language. The multifamily language in Spanish if it even exists, right, 'cause just a concept of multifamily that doesn't even exist in Latin America. This rental, like, a rental building or a rental community, we don't really have that much. [00:10:14] Bernard Pierson: We may have a little bit of that in countries like Chile, maybe Mexico. Columbia is starting to see some of that, but it It's rare, right? You won't see it in Nicaragua or the rest of Latin America. And if you see it, there's very little of it. So first it's, that education part, right, and trying to educate someone in a language that's not their, their native language is not easy. So I have that advantage that I, can educate them in Spanish, or I can tell them about the industry in Spanish. And what I've done specifically to get to know these investors is I've been invited to speak to, to groups of investors and, and conferences or meetups, or gatherings where, and here in Miami, right, 'cause Miami is like we call it sometimes a capital of Latin America. It's the perfect place to be if you want to be exposed to Latin American investors, and I just got invited to these conferences, I speak in Spanish, talked about the industry, talked about what I think, talked about from the basics up to more advanced stuff, depending on who the audience is, right? But I do it in Spanish. And after every event, at least four or five, you know, individuals from the audience come up to me and the conversion rate of investment is 50 to 60% of the people that I, that come up to me after the, I don't even have to reach out to them. [00:11:25] Bernard Pierson: It's, it becomes a very, a very good connection. I, I guess. And so from there, the interesting part is that if most of the members of the audience at these events, or even if it's not an audience, even if they're just in Miami and they're interested for some reason or another, they're interested in investing in the US, they're usually here for a reason. And that reason is very similar to my reason, which is I found out that Latin America has a lot of risk. We have a lot of political issues. We have a lot of social unrest. There's unlimited number of things that can go, you know, I can go on all day here, so we identify very easily, right? I've been where they're at right now. And, and recently these are countries like Peru and, and Chile where they're having ,they got swings politically where they're nervous that they may, I'm not saying they will, they won't, but they're nervous that they may become like a Venezuela or something like that, right? So, so yeah, so they're nervous and we can help, right.? They're getting exposed to, to real estate in this country. I explained to them how I went through the same and how I measured, I have all these measurements I made and indices and all this research I did back in the day on, on why the risk adjusted return is better in the US, at least in real estate, specifically than it is in Latin America. [00:12:38] Bernard Pierson: And I show 'em all the data and explaining it to them. And I wrote a thesis on this, right. So I know my numbers pretty well. And which is another thing, right? When you speak to your investors, know your numbers, even if it's not the deal numbers, Just know your numbers of the demographics, the city, whatever you're trying to bet across.  [00:12:52] Sam Wilson: Are you bringing capital in from out of the country?  [00:12:56] Bernard Pierson: Yes, we are. If you're going to accept money from a foreign investor, there's a lot of things you have to consider. Most countries in Latin America do not have a tax treaty with the US. The only two that will have a tax treaty with the US are going to be Mexico and Venezuela. So Venezuela, you can't even do business with them for other reasons. So you can scratch that one off. So you're left with Mexico. I think there's, I don't know if it's Peru or there's another country that's negotiating a tax treaty, but not that I know of, at least there's no other country that has an active tax treaty other than Mexico. [00:13:30] Bernard Pierson: You would have to talk to your CPA about this, but usually if they don't have a tax treaty, you're going to have to withhold when you distribute back to them, right? So that withholding is, is just going to kill their returns or their cash flow. The only way, usually, again, that they'll get that money back, if they invest individually, is if they file a tax return in the US. [00:13:47] Bernard Pierson: And a lot of these investors don't want to just because they, they don't want to have to deal with, another tax return or there's different reasons why foreigners don't want file taxes in the US. And what we do is we have a team of, and this is what, if you're interested in working with foreign investors, find a CPA or an attorney or a tax attorney that knows this area very well, not necessarily real estate, but just taxes, just international tax law and has worked with foreign investors before. And they can help you and they can help the investors. And that's basically what we do. [00:14:21] Bernard Pierson: We refer our investors to a CPA. They sometimes have their own, but if not, we have the players that we can refer them to that can help them. And, and that's the only solution we can give them and it's going to take them time. So that's the other thing you have to know. [00:14:33] Bernard Pierson: It's going to take them time to structure themselves. It's not going to be like your US or like your domestic investors where they can sign a PPM online and they can wire the money into the next day. You know, not that it's all it happens most of the time. Right. But technically they can fund, you know, in a day or two. [00:14:49] Bernard Pierson: That's not going to be the case for Latin America. It's going to be a lot longer than that. They're going to have to get the appointment with the CPA, with the lawyers, talk with them. It takes time. It's going to take a couple weeks, two months, three months. So it's just going to take time and just encourage them to talk to that CPA. [00:15:04] Bernard Pierson: What we usually do is that we ask them to invest as a US person and they can do that if they either get an ITIN or some sort of us entity. Again, they have to talk with their CPA to do it right. And I'm not saying, just go get a n entity online or anything like that. It won't work if you do it, especially if you're a foreigner, 'cause there's a lot of different things that you have to do, right? But if you're a syndicator, or you're trying to raise money from, from, foreigners, it just makes your life a lot easier if they invest as a US person through a US entity.  [00:15:35] Sam Wilson: Right. Right. And just to reiterate your advice is to find a CPA and an attorney that really knows international tax law and is quite familiar with this process, it sounds like that's the way you've gone about, one, relieving yourself of any risk or giving bad advice, but also ways to streamline it and make it easy. Just say, Hey, go talk to person you know, X and Y,  [00:15:56] Bernard Pierson: Right and also talk to that CPA or that attorney before, so, you know, you start forming that relationship and they already know more or less what you do. So that'll save a lot of time that it's not going to be your investor, them coming to you. So, how does this work? What's the mechanics? How often are you going to distribute? When are you going to sell? When are you going to do that? Right? So it, there's a lot of specific things. Like there's certain tax laws that allow you to, if you dissolve an entity, then there's a lot of tax advantages to the foreign investor, for example, right? So they're going to start asking you, when are you going to dissolve it? And, and you might as well have answered that before if it's the CPA you referred them to.  [00:16:33] Sam Wilson: Right. Right. So is there a dollar amount, like when an investor comes to you? I mean, we see in most syndications, 50 to a hundred thousand is a minimum investment, you know, and obviously they go up much higher depending on, you know, what it is you're getting into, but is there a dollar amount for a foreign investor where this just doesn't make sense? I mean, is, is there a minimum? [00:16:52] Bernard Pierson: A hundred percent, yeah. So in our head, if, for Latin American investors, that amount is going to be about 250,000. If it's less than that, it'll probably be more expensive to structure everything than to invest. I've heard other operators say that they can do 50 or 100k and, and they they're fine with that. [00:17:10] Bernard Pierson: I don't know how they do it, right, but for us, that number is closer to 250. Tha t doesn't mean it has to be 250 on every deal. Once they have, they start building the structure, they can become more efficient and reuse their legal structure or, or whatever, right there, there's certain economies of scale that they can start and join. [00:17:26] Sam Wilson: Right. But out of the gate, in your opinion, if it's less than, than 250 grand. It just doesn't make any sense because of the administrative burden of getting everything set up you've, you've diluted your returns to the point where it's kind of like, okay, well this was an exercise.  [00:17:41] Bernard Pierson: A hundred percent. Yeah. Just the entities that they have to form the, you know, the, the legal costs you're going to have. On all levels, it's just going to probably be, it's not going to take any returns.  [00:17:49] Sam Wilson: Yeah. Right? Yep. Cost prohibitive. That's really, really awesome. Thank you, Bernard for taking the time to break down this, this process and how, how you've gone about bringing foreign investors into the US. I think that's really cool. And again, certainly it's something we haven't talked about a lot on this show. So I appreciate you kind of giving us the insight on how that works for you down to the dollar amount that maybe it makes sense for. And then you know, just the, kind of, some of the risks that you also see in investing in other countries. I mean, you have, you personally have experience in doing development in other countries. So I think that's, that's also something really cool that we've learned here from you today. So thanks for taking the time to share with us. I certainly appreciate it. If our listeners want to get in touch with you or learn more about you, what is the best way to do that? [00:18:30] Bernard Pierson: I'm on all those social media platforms, Facebook, Instagram, LinkedIn. Look me up, Bernard Pierson. Pierson is P I E R S O N. So just look me up, my company, and you can send me a message. I'm, I'm pretty responsive there. You can also email me, my email is bpierson, B P I E R S O N, And we spell equity with an I at the end for international, not a Y. So @ E Q U I T I  [00:18:59] Sam Wilson: Awesome. Bernard, thank you so much. I do appreciate it. We'll make sure we link all of that there in the show notes. Appreciate you coming on today. Have a great rest of your day.  [00:19:06] Bernard Pierson: Thanks a lot, Sam. Great being on here.

    Choosing the Right Real Estate Asset Class

    Play Episode Listen Later Jun 23, 2022 16:57

    Ep. 571  From Management Consulting to Commercial Real Estate Investing'   Matt Jones is a real estate investor based out of Minneapolis who specializes in investing in both small and large multifamily properties. He has a master of science in mental health counseling which comes in handy for building positive relationships in real estate. Let's hear him as he shares his thoughts about adding value to your clients and maintaining that relationship to achieve exponential growth.     Highlights:   [00:00 - 05:08] How to Add Value to Others and Get Ahead in Real Estate Matt Jones is the CEO of Hawkwing capital, which raises capital from passive investors to own large apartment buildings. He also wrote the book Book About Real Estate. In 2019, he learned about real estate syndication and decided to switch to this model to speed up his progress. He currently owns 244 beds of senior assisted living and is looking to raise capital for some other deals. Opportunity for him right now is through broker relationships.   [05:08 - 10:19] Real Estate Investor Shares Tips for Success Matt's shares his experience in real estate, including their time as a manager of group homes for adults with disabilities and their current focus on multifamily properties. Success for the author is defined as achieving goals that expand one's horizons and making progress towards those goals. Matt anticipates transitioning more from an active investor to a passive investor in the future.   [10:19 - 15:20] How to Raise Capital and Take Down Deals Matt suggests that you should raise capital from people who you trust and who understand the risks and rewards of the investment. When raising capital, you want to make sure that you're the people raising capital from and that they understand what they're getting into. Matt's approach is to first ask somebody if they would be interested in investing in a deal, and then to show them the investment and how it would benefit them. If someone says yes, Matt will ask them for their contact information so that he can contact them about the investment. Matt had success raising capital by being patient and being prepared with possible outcomes as seen today's market    [15:21-16:56] Closing Segment Reach out to Matt  Links Below Final Words Tweetable Quotes   “You want to add value to other people and it doesn't even necessarily have to be real estate related. Let's say you meet somebody who maybe they wanted to play the guitar and if you know how to play the guitar, you can offer them some free lessons right there. Then they're going to want to do business with you. Or you never know where things go with this, but by adding value to everybody around you at all times, good things are gonna come back your way ” - Matt Jones   ----------------------------------------------------------------------------- Connect with Matt Jones by visiting their website at:   Resources Mentioned:      Book About Real Estate     Connect with me:   Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below: [00:00:00] Matt Jones: You wanna add value to other people and it doesn't even necessarily have to be real estate related, yes, it's great. If you're able to raise money or you're able to find deals or, you know, some kind of real estate related value, but let's say you meet somebody who.Maybe they wanna play the guitar. And if you know how to play the guitar, you can offer them some free lessons right there in an instant value. And then they're gonna like you, and then they're gonna wanna do business with you. You never know where things go with this, but, by adding value to everybody around you at all times, good things are gonna come back your way.  [00:00:36] Sam Wilson: Matt Jones is the CEO of Hawking capital, which raises capital from passive investors to own large apartment buildings. And he also wrote the book about real estate. That literally is the name, the book about real estate and co-host of pillars of wealth creation podcast. He also owns 244 beds of senior assisted living. [00:00:56] Sam Wilson: Matt, welcome to the show.  [00:00:57] Matt Jones:Hey, good to be here.  [00:00:59] Sam Wilson:  Hey man. Thanks for coming on today. There's three questions. I ask every guest who comes in the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there? [00:01:05] Matt Jones: So in 2015, I bought my first Plex. I was living I house hacked it and I saved up money from my W2. It took me a few years before I was able to buy a second triplex and by a second Plex. And I was just so frustrated at how slow my progress was going. Like the idea was like eventually own like a large complex. And I was like, oh, this is gonna take me. Years before I can scale up at this pace.And then I learned about real estate syndication in 2019 and thought like, oh, this is bananas. Like, like it solves all my problems with now. I don't have to save up my own money. I can use other people's money and I don't have to wait to scale up to bigger properties. I can just jump in and start right now.And so then I found a mentor to help me out who actually I co-host the podcast with now. And Recently raised some capital with him for a 228 deal in Kentucky and then looking to raise capital for some other deals as  [00:01:58] Sam Wilson: well, man. That's that's really, really cool. I mean, 2019 till now that's pretty fast progress.I would say. , know you said , you had a mentor, but what are some other things you feel like you did right. That other people should emulate  [00:02:10] Matt Jones: I think, well, the biggest hurdle that I had to get over was my own mindset. So if you can, change your mind of thinking, like, how can I do this rather than like, oh, I, I couldn't buy a a hundred unit place. [00:02:20] Matt Jones: Like, whether you say you can, or you can't you're right. think it was Henry Ford that said that. And so, Getting into the mindset. Like I can do this. I just need to figure out how or better yet who I can work with to get me to that level.  [00:02:33] Sam Wilson: Right, right. That's that's really cool. Tell me what are you guys doing? I heard you say something about opportunity there in Louisville. What are you guys doing right now to find opportunity? You moved on from the Plex world, cuz you said that was two slow growth. You moved into mostly multifamily and I hear some also assisted living, but what does opportunity look like for you right now? [00:02:52] Matt Jones: It's primarily through broker relationships. So, built to connections with brokers. And so we're seeing a lot of on market deals, but I think some people prefer off market or on market, but with, on market it's you get all the numbers like it's presented in a way that's they're the seller is ready to sell.And you have the broker there to help make sure everything falls into place. So, plus through, on market deals, we get a lot of deal flow and right now you gotta look through a lot of stinkers before you find that one gem .  [00:03:19] Sam Wilson: Yeah, you do. How are you underwriting those to where it makes sense.That's what we're seeing a lot in across all asset classes is you're just. I don't even know how the current buyer is making this pencil. So what do you guys doing differently? Feel?  [00:03:31] Matt Jones: Well, we just go through the numbers. Yeah, the I'd say yeah, 99 out of a hundred deals, we just kind of shake our heads at like , I don't know how this is gonna work at that price point, but once in a while we find that one that actually does pencil in and then when we think oh what did we do wrong in the underwriting?But we're still underwriting conservatively. We're still, stress testing the numbers to make sure like, okay, if. If there's another recession and we get to like the record high, they can see raids or record high concessions and things like that. Is the property still gonna make money to ride through a potential recession?If yes, then that is a good deal. But a lot of these properties are like you say, they're going at these prices that if anything goes wrong for these operators they're gonna lose  [00:04:10] Sam Wilson: their pants. Talk to us about positioning, how are you positioning yourself in front of. The sellers. It's a, it's almost an art.I think of putting yourself in front of the sellers in a way that makes the seller wanna work with you, which is kind of a weird place to be in the cycle where it's like, Hey wait, like, why am I trying to court? You? Shouldn't you be courting me as the buyer, but it's not the way it's working. What are you guys doing on that front? [00:04:32] Matt Jones:Well, it comes down to relationships as well, relationships with our lenders, property management, the brokers, when you can build a reputation, or if you don't have one right now, partner with people who already have a good reputation. And so you can say like, my team, this is our experience and to show to the sellers that like, Yes, we can close we've closed on, X number of units and, taken so many units to, full cycle and such. And we already have the professional property management, that's local. That's gonna do a good job that already does a great job with these other properties. Just to show the seller like, yes, we can close. Yes, it's gonna go smoothly. And we can make it happen  [00:05:08] Sam Wilson: right now. I saw, we read that there in your in your bio there in the, in intro that you are also involved in assisted living. So, is that a core focus for you or is that just an opportunity that came your way and you participated in it? Walk us through. kind of being diversified across asset classes [00:05:23] Matt Jones:. Yeah. That was an opportunity that came up my way. And the numbers were really good. It had an IRR of 21 plus, so I couldn't say no to that.And I come from a background of managing like group homes for adults who have disabilities it's really, really similar the operation side, which I'm really well versed with. And so. And multifamily is where my focus is, but it's on a different cycle than senior assisted living. Like multifamily is high right now, senior assisted living.And a lot of times, and we focus on rural areas actually that's cheap so we can buy these mom and pop shops for a song from operators who didn't do well during the Covid but we're hitting the silver tsunami here with the baby boomers that are getting to that age where they need are starting to need more intensive care from senior assisted living.And so there's just a lot of opportunity right now. The, demand is gonna be much stronger than supply here shortly. [00:06:15] Sam Wilson: When you look at things like that, is that a a potential core focus for you when you see opportunity?  [00:06:23] Matt Jones:Yeah, I think it there's the potential thought we might shift focus to that being our primary. But multifamily is our bread and butter. We understand that we've done well with it and we know how it works.  [00:06:31] Sam Wilson: Got it. Got it. That's that, that is very, very interesting. Tell me what's a an excellent piece of advice that you were given. Say like in 2019, when you said, Hey, I wanna switch, I wanna go into something that can scale quickly. [00:06:44] Sam Wilson: What's something somebody told you, you feel like that, that everyone else should also hear.  [00:06:48] Matt Jones: you have to add value to other people without expecting value in return. And, if you try to just take and take from other people, take their knowledge, take their time, take their money without giving anything in return.You're gonna, it is really off putting like you you wanna add value to other people and it doesn't even necessarily have to be real estate related, yes, it's great. If you're able to raise money or you're able to find deals or, some kind of real estate related value, but let's say you meet somebody who.Maybe they wanna play the guitar. And if you know how to play the guitar, you can offer them some free lessons right there in an instant value. Like, and then they're gonna like you, and then they're gonna wanna do business with you. Or you never know where things go with this, but by adding value to everybody around you at all times, good things are gonna come back your way. [00:07:30] Sam Wilson:What are some surprises or potential pitfalls maybe that you learned or that you feel like other people should avoid?  [00:07:36] Matt Jones: I think my biggest mistake starting out was trying to do it all on my own. I consider myself a smart guy, very capable. And so I was trying to do everything on my own and I was just spinning my wheels for years before I realized I needed to take a nice big slice of humble pie.And, I, I'm very shy. And so I had to force myself to network with other people and just get out there and find people to partner with to make things. And once I did. My, my career propelled much faster than I, I could've on my own.  [00:08:06] Sam Wilson: When do a lot of education in this space.I think that's where your book about real estate really comes in. What are some of the common questions or common things that people come to you and you say, Hey, we're gonna start at square one. What's square one for you. And then how do you kind of work 'em through the process?  [00:08:21] Matt Jones: Square one is exploring the different types of asset classes and deciding which one two it the most, but preferably one that you wanna focus on right away. And because like there's a million different ways to. Make money in real estate. And if you try to do 'em all you're gonna do, 'em all poorly. So you're much more better being niche and focused. And like my book, it covers the whole spectrum of real estate investing. So to help people explore, like self storage units or mobile home parks or multifamily, or, all these different things.And then you choose like, okay, this one makes the most sense to me. This one, I think I can do, and then become specialized in that [00:08:57] Sam Wilson: Got it. Got it. So yeah, if I'm hearing you're right, you say, pick two at the most asset classes, and that goes back to the, and I'm even gonna contradict your statement there a little bit, but it said, he, he would chases two rabbits cases.He would chases two rabbits catches none. Right. If I could speak today. And I like that idea of that. You gotta really, that there's a lot of ways in this business that you can make a lot of money. Talk to us about success. If you were to define success for you, what is success and where do you look? What does success look like for you in the future. ,  [00:09:26] Matt Jones: you know, success is just, having goals that really expand you as a person and having a good plan to be able to achieve those. So whatever it may be, whether it's financial freedom, so you can hang out with your family more or being able to travel which I enjoy just, I guess living the kind of life that you want and taking the actions necessarily to make that happen. And as for the future I anticipate I'll transition more from an active investor, to a passive investor, so that I'll just have my various investments and enjoy the free money that shows up at my bank.  [00:09:58] Sam Wilson: I hear that, man, I'm a passive investor in a lot of deals and I can't wait till that is all I am. I love being an active investor, but there's something really special about that ACH in your account once a month. And you're like, oh, that was relatively easy. I could do more of that. So absolutely hear that. Raising capital, you went out and said, Hey, I've figured out that this industry, I don't have to have all the money myself. I can go out and pool other people's capital and take down deals. Talk to us about the capital. Raise side for you. Can you walk us through that journey? Getting your first deal done. Maybe some of the hiccups or the things that you would do differently on that front.  [00:10:32] Matt Jones: Yeah. Well, I guess just in general, when you're raising capital, you wanna make sure you're the people that you're raising capital from, understand what they're getting into. So, you don't wanna be like some scammer type of person. You I'm very upfront and honest, so. I make sure that I'm not taking, somebody's like last $50,000, for example, I don't want that. Like, if you need that money to live off of this is not the right kind of thing for you. So I, first make sure that they understand that like the risks and potential rewards and what'll happen with their money. And and then I, show them like what that, like, I'm myself. Investing my own money into the deals that I'm raising capital for. I just increase their confidence that okay. Like he's putting his money where his mouth is so that this must be a good deal. [00:11:11] Sam Wilson: Right, right. What were there strategies or I guess, methods you employed on your first capital raise.  [00:11:18] Matt Jones: Yeah, you start out with friends and family and like work acquaintances and, people like that. But I would say my approach is, I first ask somebody like, Hey, could I ask you a couple questions about your finances? And if they say they're, usually say yes, if they say no, that's fine. But once they say yes, then you say like, would you be open to a 10% return on your. Through an investment and which, is conservative very conservative for a real estate investment or the kinds that I'm looking at. Sure. And, they'll generally say yes because that's better often than the stock market will provide them and with their 401k such, but once they say yes, then I say, like, if I found an investment that could provide you with at least that much a return would that make sense for me to contact you about that? And just run it by you, and then they're gonna say, yeah, sure. Cuz that doesn't hurt for me to just like tell 'em about something. And then okay. If I found something like that, how much money would you have available to be able to invest in that kind of deal? And then they'll tell me like, whatever amount it is. And so now I've got, sort of a soft commitment and I can shut that down and like, get their contact information. What's the best way for me to contact you if I do find a deal like that, cuz I, I don't have anything right now, but you know, if I do. So then you can contact them. You've got their soft commitment already, and then you can show them like, Hey, there's a deal. That's gonna give you a 15% IRR or what have you then they're gonna be like, all right, here's that original money that I said. [00:12:34] Sam Wilson: Are these conversations you're having, like, under what? In what environment are you having these types of conversations? [00:12:43] Matt Jones: all environments. Because if you don't tell people about what you're doing, nobody's gonna know. So you really have to be, open and honest about yourself and authentic with that. And plus I think of it as all, there's all these people around me that are missing out on great opportunities if I don't tell them about it. If and so I'm doing them a disservice by not having this conversation with.  [00:13:05] Sam Wilson: Yeah. Yeah. And that's there you're absolutely right there. It's, I think it's uncomfortable. I'll be honest. You're you're I think the questions you asked there are excellent, but I was kind of envisioning myself asking those so directly and I'm like, oh man, that makes me uncomfortable a little bit, in, like you said, in all environments going. Hey, tell me about your finances. Like, well, maybe no, like okay. But it sounds like you've had great success with that.  [00:13:26] Matt Jones: Yeah. I would say the first time I did it, I certainly felt awkward, but it I got through it and I'm like, oh, that wasn't so bad. I can do that again. Do you ever get any,  [00:13:35] Sam Wilson: any any complete, just like, no. We're not talking about that responses. [00:13:38] Matt Jones: I haven't yet because it's not, like you say, like, hi, my name is Matt. Can I ask you a few questions about your finance? build a little rapport first, right?  [00:13:45] Sam Wilson: Right. I get it. Okay. No, that's cool. I like that. And I think that's an encouragement to our audience. And even to me to be more direct where it's just like, Hey look, we've got we do have excellent assets. We have excellent opportunities for investors. And, we're achieving amazing returns for 'em and it's kind of, it's bad on me if I don't actually just go out and tell people about it.   [00:14:07] Matt Jones:Yeah. You're keeping people from achieving their financial goals from achieving their dreams by not talking about it. [00:14:11] Sam Wilson: Right. Oh, for sure. For sure. Yeah. I had an investor call me she had received her first distribution in a passive deal and and maybe this is bad, it was extended family. So I, don't hang me for maybe not doing my My know, you're know you're customer as well as maybe I could have, but they're like, Hey on, wait. So I get this money. Like you get a distribution. And yet I still retain my equity in the deal. I'm like Uhhuh, like you still have your a hundred grand in the deal and you're gonna still get a quarterly payout. And they're like, wow, where's this been all my life. I'm like, , I'm on, I'm onto something here. So yeah, I wish they'd understood maybe the mechanics of the deal light slightly better, but that's okay. It all worked out. So that is fun. You're absolutely right. Not sharing that stuff with your investors is yeah, it's something we should all take certainly more seriously. What are you guys working on right now that you were excited about?  [00:15:01] Matt Jones: We're in between deals right now? My. Partner. He just did a his fire step five, six C offering, which I wasn't involved with. But before that did some that raising for that 228 unit deal. So looking for the next deal being really patient, being really cautious right now, cuz we're, potentially seeing some changes I guess in the market, but being prepared for that. [00:15:21] Sam Wilson: Right. Absolutely. Absolutely. Matt I've enjoyed our time today. Certainly appreciate you coming on, telling us how to get out of the triplex rat race, if you will, and how to scale and grow quickly, certainly look forward to sharing the links to your book, hear the book about real estate. Again, that is the title of the book about real estate that I don't know how you got that title, but that's awesome. It couldn't have been absolutely more clear. And then, just some of the values that you add the day, adding value to other people. Without expectation is one of the ways to certainly grow. You said, one of the mistakes you made early on was trying to do it all on your own and the bigger deals we go, certainly the more, this becomes a team sport and then also about sticking to your niche and not going too wide. [00:16:02] Sam Wilson: So I appreciate that. Thank you so much. Is there any last piece of advice that you would like to share with our  [00:16:07] Matt Jones: listen? It takes three things to get going in real estate, educate yourself, networking with other people. And most importantly, take action.  [00:16:15] Sam Wilson: Love it, Matt, for listeners. Wanna get in touch with you? What is the best way to do that? [00:16:17] Matt Jones: You can go to my website, and you can schedule a call with me through there, and you can also even download a free chapter for my book as well. [00:16:26] Sam Wilson: Awesome. Matt, thanks so much your time today. I do appreciate  [00:16:29] Matt Jones: it. Yep. You bet.  

    Building A Long Legacy

    Play Episode Listen Later Jun 22, 2022 19:33

    There's no quick way to success in real estate. It takes patience and consistency to create wealth and leave a lasting legacy.   In this episode, we share an inspiring conversation with Marcus Long as he talks about his journey to multifamily. Marcus is a husband, father of a seven and four-year-old, and an active duty Naval Officer with 21 years of service. As he transitions out of the military to focus on family, charity, and real estate full time, he is excited to serve others in new ways. He is passionate about positively impacting the communities he chose to invest in and finding financial freedom.     [00:01 - 05:51] There Is Value in Slow Growth Marcus talks about how he got into multifamily How he's able to do deals remotely while living in England Trusting the process and being patient   [05:52 - 11:24] Lessons Learned Going Into Multifamily Raising capital overseas and establishing trust with his investors Networking and letting people know what you're doing Don't take rejection personally A failure Marcus experienced and how he overcame it The importance of systems and processes   [11:25 - 16:10] Living Life in Your Own Terms Marcus' definition of success Being present in his family's life It's not just about the money, it's about giving back to the community Setting goals as a couple Encouraging conversations about real estate and investing opportunities   [16:11 - 19:32] Closing Segment The best piece of advice Marcus received Reach out to Marcus!  Links Below Final Words Tweetable Quotes   “People can't come to invest with you if they don't know what you're doing.” - Marcus Long   “Something's only a failure really if we label it as a failure.” - Marcus Long “Trust that process and be consistent with it. And the results will come.“ - Marcus Long -----------------------------------------------------------------------------   Connect with Marcus! Visit their website and find their socials here.   Resource mentioned The One Thing by Gary Keller and Jay Papasan Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Marcus Long: That's one of the first things I really did, was kind of turn around and like, make sure everyone knows what I'm doing, right? People can't come to invest with you if they don't know what you're doing. And so just kind of going back through, you know, social media, Facebook, LinkedIn, and everything else, just kind of reaching out to contacts and just letting people know like, Hey, this is the transition that I'm making in my business. There might be some opportunities available in the future if you're interested in, in having that conversation. [00:00:34] Sam Wilson: Marcus Long is a husband, father of a seven and four-year-old, and an active duty Naval officer with 21 years of service. As he transitions out of the military to focus on family charity and real estate full time, he is excited to serve others in new ways. Marcus, welcome to the show.  [00:00:49] Marcus Long: Thanks, Sam. Appreciate it.  [00:00:50] Sam Wilson: Hey man, pleasure's mine. There's three questions I ask every guest who comes to the show: in 90 seconds or less, can you tell me, where did you start? Where are you now? And how did you get there?  [00:00:59] Marcus Long: Yeah, so, you know, I grew up in rural Missouri. I enlisted in the Navy right out of high school. And a few years later I got selected for a commissioning program, was going to the University of Missouri when I bought my first real estate condo there. I did some house hacking, kept it as a rental when I left and I still own it today. [00:01:15] Marcus Long: And, after that I was doing a lot of deploying. And so I wasn't necessarily super intentional, but opportunistically, you know, picked up a dozen or so single-family multi-use buildings and stuff back in Missouri through my career. And about three or four years ago. You know, I went home from work early one day and my daughter was pretty young at the time, asked what I was doing home. [00:01:34] Marcus Long: Cause it was still light outside. So she was surprised to see me. And it was kind of a, a bit of a gut punch and, you know, kind of confirmed my desire to start my transition and off-ramp out of the military and preferably in a way to do so without having to have a W2. But, I realized the cash flow from the properties I had wasn't enough to do that. And so I kind of had to, to dig in, look at the numbers and figure out a path to do so. And that's kind of where I decided to start transitioning over to the, the multifamily side. And after investing in a few limited, as a limited partner, a few syndications, I transitioned to be a GP. [00:02:08] Marcus Long: And, by the time this airs will have, you know, Co-GP about 400 doors in the past 12 months. So that's where I am now.  [00:02:15] Sam Wilson: That is really cool. So I guess the, the long-term plan is to go long in multifamily. Do you think you'll stay as a Co-GP or do you see yourself going out and taking down deals on your own? [00:02:26] Marcus Long: Yeah, I think that's a combination there, you know, I've already kind of, you know, been analyzing deals and putting in some offers on my own. And just the way timings and stuff, some of my partners have ended up getting offers, accepted and stuff, and pulling me in on, on some of those deals with them. [00:02:41] Marcus Long: So certainly I'll, I'll do some on my own if those opportunities, present themselves. But, you know, I think, being a Co-GP and partnering has also been a big part of, you know, what has allowed me to scale at the pace that I have, you know, over the past year or.  [00:02:55] Sam Wilson: How did, I mean, you live, and we didn't talk about this yet here in the show, but we did off air. You live in England right now. You're stationed, I think, in England.  [00:03:02] Marcus Long: That's correct.  [00:03:03] Sam Wilson: How, how did you find partners? How have you vetted deals? I mean, there's a lot of these things that are kind of boots on the ground task. How did, how did you tackle that side of this business?  [00:03:12] Marcus Long: Yeah. So interestingly enough you know, some of my other partners are actually here in England and, and stuff as well. [00:03:17] Marcus Long: Although some of them are back in the states. And so, I think, you know, just between the, the group of us, like some of us have other connections, one of my partners has a mentor and a, a college roommate and a college classmate and stuff that was boots on the ground there. And so, really just by network And things and finding other partners that maybe already had some of those boots on the ground. [00:03:36] Marcus Long: You know, I have a couple of partners that are in, in Texas. A couple of our properties are in Texas and stuff as well. And so really a lot of that, you know, meeting people was really just getting networking a lot, whether, you know, that be meetups and other things and met some of them through partnerships and, and deals. [00:03:51] Marcus Long: And a lot of my initial partners were other military guys and girls, and that we, some of us were in similar masterminds together. So we spent a lot of time together in, you know, weekend calls or accountability groups and things like that. Really getting to know each other and then I've met other people through them. [00:04:05] Sam Wilson: What do you think someone should take time-wise from, you know, where you started? I mean, you kind had a, a base in real estate. But what, what would you say is an estimated time someone should budget in for all right, this is when I'm going to start digging in, doing what you did, joining masterminds, talking to people, figuring out what markets to be in, how to, how to grow and scale. How much time do you think that should take someone?  [00:04:29] Marcus Long: Yeah. You know, I think that's a difficult question because we're all in, in a different phase of life. Some of us still have a W2. Some don't have a W2, some have a family, some don't have a family. And so I think it's difficult to like compare to other people in, in their journey and we're all on our own journey to do that. [00:04:43] Marcus Long: But one thing I would say is, I think we, we do need to be patient with ourselves, you know, and stuff. I'm in some of these masterminds and, sometimes, you know, someone's just starting out and, you know, they start taking these actions and they don't have results in three, four, maybe even six months or something, right. And, and, you know, they, they want, we have that, want that instant gratification of something. And I think it's important for people to realize like, you know, once in a while, someone may get lucky or may have that, you know, deal come through early on, but you know, we have to be patient and trust the process and give it the time, you know, to, to take effect. [00:05:15] Marcus Long: 'Cause I mean, even if you have people that, you know, want to invest with you or brokers that want to work with you, you know, it doesn't happen based on one conversation, you know, it's a repeated follow up and stuff. And so, you know, I hate to put a time on it, but you know, I think a, you know, a good year, you know, for people to even really kind of expect results and stuff is probably. [00:05:34] Sam Wilson: Probably a fair number. [00:05:35] Marcus Long: Non-conservative approach, maybe.  [00:05:36] Sam Wilson: Yeah, no, I, I absolutely agree. Absolutely agree 'cause that's, I mean, that's what we see a lot of times is, you know, people are like, Hey, you know, they come out expecting two to three months. They're going to get through and that happens it. Sure, it could happen. [00:05:47] Sam Wilson: But it also, this is a, this is a slow growth, a slow growth game. Tell me, are you raising capital right now as well for your deals?  [00:05:54] Marcus Long: I am. Yes. So I've reached for every, every one of them.  [00:05:57] Sam Wilson: How do you do that living overseas? Are you raising capital in the states? Are you raising capital all for military members? How, how have you found your investor base?  [00:06:04] Sam Wilson: It has been significantly, in my first few deals, a lot of that has come from other military members or, you know, people that I was, it might be civilians or contractors or stuff that I was stationed or worked with at different locations over the course of my career. [00:06:15] Sam Wilson: And that's kinda where it started. And really, you know, I think it was useful that I had some single-family experience and stuff in the past, because as I transitioned into multifamily, many of them knew that I had been in real estate and stuff or had real estate properties throughout the years. [00:06:30] Sam Wilson: And so that already gives them a little bit of a, a level of trust or my familiarization with real estate there. And then of course, just working with them, you know, closely in the military environment and stuff. There's a level of trust there. So it wasn't, you know, a huge leap to maybe be ready to invest there. [00:06:46] Sam Wilson: Whereas if, you know, someone's just getting into real estate starting, or, you know, you've moved around or haven't had those connections and stuff that could be more challenging. So yeah, that was, you know, how did I get started there whenever I, you know, I first approached one of my partners basically said like, Hey, you know, how can I bring value to you? [00:07:00] Sam Wilson: You know, I'm a, I'm a finance major so I can help underwriting stuff. I've had this single-family experience, we've managed our, some of our own properties and, you know, the, the capital raising aspect as well. And so when he gave me some criteria. That's one of the first things I really did was kind of turn around and like, make sure everyone knows what I'm doing, right? People can't come to invest with you if they don't know what you're doing. And so just kind of go going back through, you know, social media, Facebook, LinkedIn, and everything else, just kind of reaching out to contacts and just letting people know like, Hey, this is the transition that I'm making in my business, there might be some opportunities available in the future if we're interested in, in having that conversation.  [00:07:33] Sam Wilson: That, that's awesome. I like that. And I think that's an important step that people I think are afraid to make early on is that, Hey, this is what I'm doing, even though you may, you may, like you said, you had some experience in single family, but you hadn't closed any multifamily deals yet. [00:07:48] Sam Wilson: I mean, you need a lead with that. It's just, it's hard. I think at times to go, oh, Hey, by the way, I've got no track record in this, but cool. This is where I'm going.  [00:07:54] Marcus Long: Yeah. So, and there are certainly, there are certainly some, you know, when I, I first raised that conversation. They said, Hey, you know, thanks. But not right now. And you know, now that there's two, three deals, they've been kind of watching, you know, as go along and, and now they're reaching out to me and, and they're ready and stuff, you know? So I think that's the other thing people have to think about too, is, you know, Hey, it's, it's not necessarily personal. [00:08:14] Marcus Long: You know, it's just their hard, earned, hard-earned money. The timing might not be right. Maybe they're investing other stuff. Maybe they have some goals where that money's not ready. Maybe they want to see you, you know, get a little bit of a track record and a few deals. And so just to, to keep that in mind, but be consistent because maybe later down the road, They'll be one of your investors. [00:08:29] Sam Wilson: Absolutely. Tell me about a time that you maybe, maybe you define something as a failure in your life and what you did to either write that or overcome it.  [00:08:38] Marcus Long: Yeah. You know, I think something's only a failure really if we label it as a failure. And so I try not to like label things as a, as a failure, from a mentality perspective and try more of a, you know, them being, lessons learned, you know, and, and proof from them, I guess, but to answer along with your question there, I think that we, you know, bought some single-family houses, you know, back in Missouri and stuff. And initially, a few that we had bought were kind of, you know, small rehab type things and, you know, a few thousand dollars and they were ready to go and, and we kind of jumped in and bought a few that needed significantly more rehab, you know, than we were prepared to, you know, whether we had the capital or didn't even have the contractors lined up to do them. [00:09:17] Marcus Long: And it was just a different, you know, kind of a shift of transition that we hadn't really properly, you know, prepared for and stuff. And so I think it was and we're still kind of, you know, on the tail end of fixing some of those steps that, that we took and stuff, but I think it was an opportunity for us to realize, you know, not to, just to, jump into something new or chase a tiny object or whatever. And we kind of needed to really understand the fundamentals of whatever the strategy was that we were doing. Unfortunately, there were, you know, rural Missouri, not significantly valued property, so it wasn't a hard hit to the wallet necessarily, but it was a good learning lesson, certainly. [00:09:50] Sam Wilson: Right, right. Were there, are there any things any lessons you learned in that, that kind of color the way you review and look at multifamily deals?  [00:09:59] Marcus Long: I think, I think one of the things was kind of just systems and processes and stuff, right? And like, even if, even if you're looking at like wholesaling and flipping and, and things like that, that I don't do as much those that are really good at it have systems and processes and know, you know, the timing and all that kind of stuff. [00:10:16] Marcus Long: And I think that that was one of the things I found during that I wasn't really flipping properties. And so it was a realization that I need to include, you know, these systems and processes and things. And so in, in multifamily, you know, things like, you know, we use like Asana, you know, to communicate with our property manager and things like that. [00:10:34] Marcus Long: And so we don't have to dig back through emails all the time to see where they said something or sent a picture. And, and so trying to use those tools to be more efficient and effective in things I think.  [00:10:44] Sam Wilson: Yeah, absolutely. Absolutely. Yeah. I've incorporated both Asana and Slack this year and it's a game-changer. [00:10:51] Sam Wilson: I mean, for, I, I posted this on social media here. I don't know, six to eight months ago, something like, what are people doing as an alternative to email? 'Cause I hate email. I mean, I hate it. It's like it's onboarded a new employee. Oh, maybe four months ago. And I'm like, look, we are not communicating via email. [00:11:08] Sam Wilson: We're just not like we are, we are going to use slack and we are going to set up channels and that's the way we talk. And our conversations are about each of those items. And I can always just go back and look back through. It's very easy to find like, oh, this is beautiful.  [00:11:20] Marcus Long: Yeah. It makes a lot more effective in my opinion. [00:11:23] Sam Wilson: Oh my gosh. Absolutely. Absolutely. Tell me a little bit about your definition of success and how that ties into your why.  [00:11:33] Marcus Long: Yeah. So I think, you know, for me, success is, is really like, you know, when I can spend my time where I want with who I want doing what I want and, you know, kind of create those options and freedom for my family. When I'm in a position to do that and we are living life on our own terms and not tied to, you know, W2 or, you know, there's not something holding us down, you know, I, I consider that to be successful. And so, you know, how does that tie into my why? You know, for me those things, I mean, there's a lot of things now I have a seven and four-year-old, as you mentioned. [00:12:04] Marcus Long: And so I want to be, have the freedom and the flexibility to be present with them, to be at their sporting events. I want to be able to take them on, you know, international vacations or on mission trips in Africa or whatever, right? Like I want them to have those experiences and I don't want to have to ask off work, you know, to, to be able to go do those. [00:12:22] Marcus Long: I want to choose when we get to go to do them. And, you know, I want us to, I want them to kind of see, you know, how we pour into the residents and the communities that we invest in, you know, we're actually trying to like make that a home for them. It's not just all about the money necessarily. You know, I want them to see about how we use our profits and stuff to, to give back to charities and, and things of that nature. [00:12:45] Marcus Long: So yeah, I think the, the definition of success there really just gives options for my family to live lives on our terms.  [00:12:52] Sam Wilson: Have you built a kind of a goal spreadsheet or, or set out some targets that say, Hey, when we hit X, then we are able to do Y?  [00:13:01] Marcus Long: Well, I don't know if I've set it out in quite such a pretty spreadsheet, you know, like, like you mentioned there, I think that my, my wife and I do sit down every year and kind of do couples, like, goal-setting retreat, if you will. [00:13:13] Marcus Long: And in some of those questions and stuff that we talk about, you know, I think that those are some of the things that we discussed, you know, kind of ranges through life stuff, like where, you know, monetary goals, like, new hobbies that we have or vacations that we want to take with the family, or, you know, what's a goal this year, as far as like our, our giving, whether that be time or money. We do talk through a lot of those things. I'm not sure if it's lined up in a spreadsheet format, but that's something that's certainly worth looking at.  [00:13:43] Sam Wilson: I think goal setting annually and reviewing that, it's a very good habit and practice to get into. Is there a guide you guys use or is this something you guys just kind of do on your own? [00:13:52] Marcus Long: We use the guide from The One Thing in there. I don't know if you've seen that. I think it's like, I don't remember, it's like the badass in couple's goal-setting retreat or something. And I think it's the name of it. We've used it for about two or three years and it's, it's pretty, pretty thorough. [00:14:07] Marcus Long: Like I said, it goes through quite a few different areas of your life. And we sat down, you know, as a couple and do it and kind of, we do it individually. You know, my spouse and I then like come together and talk, talk about those and then try to come back every, you know, quarter or so. And try to kind of follow up and look like, Hey, this is what we talked about at the beginning of the year. Kind of how are we doing on that? Are we on pace? You know, do we want to shift some things, but that's a, that's a pretty good guide if anyone wants to use it.  [00:14:33] Sam Wilson: Absolutely. No, we'll certainly note to that as a tool and a resource there in the show notes. What about as you guys set examples to, or as you and your wife set examples to other military members and people around you? [00:14:46] Sam Wilson: I mean, this is a demographic, I think, that probably doesn't have a lot of the, hey, we're going to go and be deployed a lot. And then also, by the way, we're going to be investing in multifamily and kind of building our own, you know, ticket out of here. Like, how do you guys interact with the people around you and engage with them on this front and really kind of build, I guess, a community around what you guys are doing. [00:15:07] Marcus Long: Yeah. So I think it's a big like education and awareness piece, you know, and that's true for everyone. I think, you know, there's a lot of people that love their W2 S or work really hard on their W2 S and don't have the time to, to look or be aware. Self-educate and stuff, or don't make the time to, to do that. [00:15:22] Marcus Long: And so the military is just like one sector, you know, like I said, there were, there were a few years there after I got out of college where I was deploying a lot and stuff, you know? And so it wasn't necessarily my focus at that time too. And so I think talking about it, sharing what we're doing and, and making people aware, and it kind of encourages conversations about it, right? [00:15:40] Marcus Long: Like, a lot of people just don't know that they have the opportunity to invest in a multifamily property, right? They think it's super wealthy people that are buying these, these complexes instead of you and I, you know, working together with partners to do that. And so I think, you know, by talking about it, sharing, you know, it encourages like, Hey, what are you doing? [00:15:57] Marcus Long: You know, can we have a conversation about that? And the more you have a conversation about that, and then they can make educated decisions and it's one more tool in their toolbox,  [00:16:07] Sam Wilson: Right. No, I think that's absolutely great. I love that. Marcus, tell me, you know, what is a best piece of advice, maybe a mentor or a peer in the industry has given you that you feel like other people should hear? [00:16:19] Marcus Long: Yeah, I think we kind of hit on this earlier, actually, when you kind of asked about like the timeline and stuff and, well, I didn't necessarily want to give like a hard number, but I think that was, you know, some of my mentors and coaches and whether it directly to me, or seeing them say it to other people and stuff, kind of remind us that, you know, it's a marathon, not a sprint type of thing, right? And so, you know, we hear that term all the time, but in these masterminds, like I said, people sometimes see this level of success, you know, and it could be on a podcast like this and they think it happened overnight or they, they just get the story of what happened in the last 12 months. [00:16:51] Marcus Long: And don't really realize the amount of work that went in before that, or even during that time. And so they want that same level of success in this, in, you know, in the time period that they saw the glimpse that they saw, and that might be, you know, three, six months, whatever it is. And so I think it's just important to remember that those people might have been working on stuff for years and years and years, or, you know, I'm over here in England. [00:17:16] Marcus Long: Like, if you look at my calendar, there's calls in the morning before I go to work. I go do my W2, there's calls at night, you know, late at night because it's six hours, 5, 6, 7 hours ahead of the states. And so it's, it's a pretty packed time sometimes. And so I think it's important for people to remember that and they just have to trust that process and be consistent with it. And the results will come.  [00:17:36] Sam Wilson: Yeah, no, that, that's absolutely true. I've got some meetings that we have on a fairly consistent basis after the kids go to bed. It's like, okay, guys, like everybody's got their kids to bed. Now let's all get together and put our heads together and see if we can actually get something done today. [00:17:49] Sam Wilson: So, I absolutely get it. Marcus, thank you for taking the time to come on the show today and share with us your journey thus far, I'd loved hearing about it, loved hearing about your why and what success means for you and how you know, really developing time options is one of your main goals there. And I love that. [00:18:06] Sam Wilson: I love how you and your wife plan, you know, for your year in advance. I think that's something that, if you learn anything from today, that's a, that's an excellent exercise to do especially if you're able to review it as the year goes on and revise your goals and look at, 'em go, okay, well, where are we, what do we adjust? What was a little ambitious? What was right? Love your way of thinking through that. And also that's really cool that you've built a multifamily syndication company, you know, living overseas. I mean, if you can do that, anybody can do it here stateside. So certainly appreciate that. Marcus, if our listeners want to get in touch with you or learn more about you, what is the best way to do that? [00:18:36] Marcus Long: Thanks Sam. I really appreciate that. The best way to, to get in touch with me, just go to And if you do /connect, it's kind of a one-stop-shop. You can send me an email there. You can set up a time to have a call. If you like to communicate through social media, our LinkedIn, Instagram, Facebook, all the links are on there. So  [00:18:55] Sam Wilson: And just to clarify, if you are listening, that is a long, A L O N G legacy or Marcus, thank you again, certainly appreciate it.  [00:19:05] Marcus Long: Thank you. 

    From Management Consulting to Commercial Real Estate Investing

    Play Episode Listen Later Jun 21, 2022 19:05

    Ernest has more than 12 years of experience as a management consultant providing technology and business consulting to Fortune 500 companies. His project/program management, business development executive background, an entrepreneurial mindset, provided him with opportunities to merge his enthusiasm to work in the technology sector and real estate as a broker and investor in residential and commercial RE since 2010. In this episode, Ernest Peralta discusses his journey from corporate consultant to successful real estate investor. He advises listeners to seek out mentors and learn as much as possible about the industry before jumping in, and to focus on specific asset classes during turbulent times.   Highlights:   [00:00 - 05:35] How to Scale Your Business in 6 Months or Less   Ernest Peralta started 12 years ago and has experience in management consulting and real estate. Took the route of consulting after he graduated with his undergraduate degree He networked with people in the industry and took courses to learn more about the business Right before the pandemic hits, Ernest educated himself about real estate and did some research. He considers Covid as a time of education and Post-Covid as implementation.   [05:35 - 10:50] How to Scale Your Business and Attract Investors with Strategy   Ernest uses programs such as Microsoft Office to create a project plan outlining steps to scale within six months to a year and where they could be to where they are today. He also recommends reaching out to potential investors through mailers, conference calls, and mastermind groups. Ernest shares that bad advice often includes telling people to find their passion.   [10:51 - 16:00] Follow Your Passion But Work on Your Daily Plan   One of the main things Ernest recommends is to not only follow your passion, but also to work on your daily plan and action plan. Ernest has found that the current market is challenging, but he is still optimistic about the future. One of the biggest challenges Ernest faces is finding investors who are willing to pay a high price for his properties." Tweetable Quotes “I would say it would be better advice to not only follow your passion, but work on your daily plan, work on those things that you don't want to do on a daily basis, because those are things that you actually need to do in order for you to accomplish your goals.” - Ernest Peralta   ----------------------------------------------------------------------------- Connect with Eric Peralta on LinkedIn or visit their website at You email him through Connect with me:   Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below: [00:00:00] Ernest Peralta: How can I scale within six months to a year? And where could I be to where I am today. So, you know, the first thing that I wanted to do was really understand the business. [00:00:08] Ernest Peralta: So I always go back to COVID because to me that was my learning year. And then the following year after that was my implementation year. So the first year was all educational for me, just really trying to understand, put together a plan of how can I learn as much as I can about the industry. [00:00:24] Ernest Peralta: But aside from learning, a lot of it is trying to, to implement can learn as much as you can, but if you don't implement, you're never really gonna pursue or grow.  [00:00:45] Sam Wilson:  [00:00:45] Sam Wilson: Ernest Peralta has combined his passion for multifamily investment management, consulting and personal development with his personal philosophy of goal setting, envisioning and manifesting success to help people who wanna live their best life. Ernest, welcome to the show.  [00:00:58] Ernest Peralta: Thanks a lot, Sam, thank you for having me. [00:01:00] Sam Wilson: Hey man. The pleasure's mine. There's three questions. I ask every guest who comes to the show. Can you tell us in 90 seconds or less, where did you start? Where are you now? And how did you get there? Yeah,  [00:01:08] Ernest Peralta: absolutely. So I started about 12 years ago. My background entails management consulting, but my family had a small portfolio of residential real estate. [00:01:18] Ernest Peralta: And so that's kind of how I got my start was kind of through my family. And over the years I basically had always had real estate in the back of my mind, but I took the route of consulting cause I had finished my undergraduate degree. My master's degree kind of did the whole educational thing worked in corporate arena for, several years long and long story short is that I ended up stumbling into commercial real estate right before COVID and tried to find out what asset classes or what areas could actually help me sustain if anything was to come again like this to impact me and my family in the future. [00:01:51] Ernest Peralta: And I came across commercial real estate. Man that's and that's  [00:01:54] Ernest Peralta: where I am today. Tell me real quick. I mean, the term corporate consultant for somebody that has no experience in the corporate world doesn't mean much to me.  [00:02:01] Sam Wilson: Can you break that down for us.  [00:02:02] Ernest Peralta: Absolutely. Yeah. It's always a confusing thing. [00:02:04] Ernest Peralta: When you say corporate consulting or management consulting, it's like, what is that? Right? So what it is basically is I provide advisory services, whether it's project program management for fortune 500 companies. So you name the big retailers I've consulted for, companies like, and I'll say this here, like Microsoft AT&T , Costco. [00:02:24] Ernest Peralta: Bill Melinda gates foundation, all of their companies, basically I come in and I provide strategic type of guidance, whether it is pushing an initiative, a business initiative that they have a new application or a software. Sometimes it could be data privacy or security type of issues. These are things that I help them. [00:02:40] Ernest Peralta: Either document work with a team. It's usually a global team that I work with and we have timelines and processes that I typically kind of project manage until delivery of, these products and service. Is  [00:02:51] Sam Wilson: that something you're still involved in today or have you switched completely to commercial real estate? [00:02:55] Ernest Peralta: I did. Yeah. I actually had switched over about a year now. Okay. And so I ended up making that switch over. I spent about a good 16 plus years in that arena and I decided like, I mentioned earlier before jumping on COVID actually had impacted me. So this is where that pivotal moment for me actually happened is when I decided to look back into commercial real estate since I had done, residential real estate many years ago. And so that was my pivotal moment. And this is where my focus is right now.  [00:03:26] Sam Wilson: What was your strategy? jumping into commercial real estate just before, COVID probably had to be a little bit unnerving, but what was your strategy? [00:03:34] Sam Wilson: Once you said, okay, I'm stepping out of corporate consulting role. what did you do to get involved in commercial real estate?  [00:03:40] Ernest Peralta: Absolutely. Yeah. Great question, Sam. I think for me, one of the, one of the things that I always like to do is I like to strategize like, okay, I don't know too much about commercial real estate. [00:03:50] Ernest Peralta: Where do I start? So the first thing I ended up doing was trying to find individuals out there that actually could help me as a mentor or maybe I could take courses. So I did a lot of, research online and I came across a couple of individuals, like the Michael Blank of the world, the Peter Harris' and Dylan Borland, those individuals were folks that I had actually looked at research prior to me jumping on board and, really dedicating myself into commercial real estate. So that was number one, was trying to find experts in the industry. Secondly, I networked with people at that time, a lot of zoom calls. [00:04:23] Ernest Peralta: So a lot of interactivity, in, in, in the social media realm, if you will. So I did a lot of. Connections through LinkedIn social media with individuals that already had experience in commercial real estate. Now at the time I was really trying to focus on, okay, what aspect of commercial real estate do I wanna focus in? [00:04:40] Ernest Peralta: Cuz there are various different asset classes I realized at the time that, multifamily mobile homes, as well as, different types of retail could potentially be lucrative. In times of turbulent recessions, if you will, that happen in our economy. So I ended up just focusing on multi-family for the fact that it was kind of a segue for my family and I, when we had owned a couple of duplexes in the past. [00:05:03] Ernest Peralta: So for me, that was kind of a no brainer to kind of step into that arena that had became my focus, going forward. So kind of to where we are today, I ended up just really networking very well with individuals that are in the industry, tried to learn what it was to be like as a limited partner. [00:05:20] Ernest Peralta: What is a cog, what is a GP? And also, how do you equity raise? All those things kind of came into play for me to really understand, okay, what aspect of this business do I want to focus in? And how do I get involved? So that was basically my start.  [00:05:36] Sam Wilson: I love it. I bet. From the corporate consulting side, you did a lot of strategy in planning. [00:05:42] Sam Wilson: So what did you do? Find the experts network on social media. Did you lay out like a 10 step plan and said, okay, I'm gonna do this first and I'm gonna do this. And here's how I'm gonna raise equity. What did that blueprint look like if you had one and I'm sure you probably did.  [00:05:56] Sam Wilson: I did. [00:05:56] Ernest Peralta: Yeah. I created an Excel file. Basically. I used a Microsoft Excel document or basically it was Microsoft. And I pulled up my document, created a project plan, if you will. Basically, it was my steps to, how can I scale within six months to a year? And where could I be to where I am today. So, you know, the first thing that I wanted to do was really understand the business. [00:06:17] Ernest Peralta: So I like to use, I always go back to COVID because to me that was my learning year. And then the following year after that was my implementation year. So the first year was all educational for me, just really trying to understand, put together a plan of how can I learn as much as I can about the industry. [00:06:35] Ernest Peralta: But aside from learning, a lot of it is trying to, to implement you can learn as much as you can, but if you don't implement, you're never really gonna pursue or grow. So, about four months into it, after I put my plan together, my whole intent was to have a 90 day plan. And so, that's kind of what I got. [00:06:52] Ernest Peralta: It was kind of the theme after, a networking with various folks that within 90 days, I should definitely try to, know, go out there and start making some deals. So that's what I ended up doing. So one of my plans of action was learn as much as I could. And then also start reaching out to potential investors, whether it was, through mailers just cold calling and really trying to get exposure in that sense. [00:07:12] Ernest Peralta: So that was basically my first 90 days to, I would say, four to five months of just doing that and then also trying to make offers. So I would get on these conference calls. Or mastermind group calls with my group and basically talk about these different scenarios and go through different ways of how we're approaching it. [00:07:32] Ernest Peralta: If we did get a deal, how would we evaluate and analyze it? So it, there was a lot of brainstorming and just working with individuals that  I team with to really understand the business, as much as I could. One thing that I'd like to say is that there is a really good underwriting course that, that I actually, well, it's more of a conference call, but it's a, an underwriting conference call that I attended on a weekly basis for almost a couple of months. [00:07:58] Ernest Peralta: And this gentleman, I can name him here in a little bit, but he is. Exceptional. And I would say that he was the foundation of me actually, really trying to understand the underwriting process and everything, for multifamily.  [00:08:12] Sam Wilson: That is really I love the multi step, approach. [00:08:15] Sam Wilson: Hey, we're gonna line this out and then we're gonna go do it, I guess. You've brought up a few questions I have along the way. I mean, you talked about mastermind group calls. I mean, that's something that a lot of people like the idea of, but even just selecting a mastermind can take an enormous amount of time and going, gosh, especially if you're new to the industry, it's like, there's How many, a thousand masterminds you could possibly pick from there is, a thousand ways you can reach out to investors, I guess. [00:08:37] Sam Wilson: How did, I mean, it sounds like you, you broke this down on a very granular level. Like how did you even go about selecting? Let's just start there with your mastermind.  [00:08:44] Ernest Peralta: Yeah. Well, a lot of it was. Mainly geographic. I looked at folks that were geographically located to where, or an area that I wanted to invest in. [00:08:53] Ernest Peralta: For me, one of the lucrative areas outside of the state of Washington is kind of the Southwest, if you will, and the Midwest. So I tried to find mastermind groups that kind of focused in those areas and, just through social interaction, just meaning them online. That's how I developed, a lot of the relationships. [00:09:08] Ernest Peralta: So a lot of it also was based on building relationships folks that I just connected with right away. I think that's very key. And just developing that trust factor, when you invest in real estate, you just wanna make sure that you align yourself with the right people. The people that probably have done at least a few deals under their belt. [00:09:24] Ernest Peralta: So they've got a track record that is good at the same time. You wanna be able to, be able to. Talk to these individuals and to just be open with them. So I think having that connection and that connectivity, as well as a history of success would be ideal. Right,  [00:09:38] Ernest Peralta: right. [00:09:38] Sam Wilson: No, that's really cool. Tell us the the conference call you were on for underwriting. I think that's a valuable tool and resource that our listeners may really appreciate it.  [00:09:45] Sam Wilson: Oh yeah. So, gentleman's name is Charles seamen and he is incredible. As of this call, I believe he's still doing it every Saturdays. [00:09:53] Sam Wilson: That's right. If that's something that, your audience members or folks that are listening here on the conference, call one. 10, I would say, reach out to Sam or myself, and be happy to connect you to him. Yeah. But I would say he is ideal and  [00:10:04] Sam Wilson: certainly Charles has come on the show. [00:10:05] Sam Wilson: Gosh, it's been maybe a year and a half ago. So you can go to our website at slash podcast and just type in Charles Seamen, S E A M E N yeah, look up Charles Seaman and you can find their information there right on our website. [00:10:18] Sam Wilson: And you can probably attend that, that conference call. So there's a great tool and resource. Thank you for sharing that earnest that actually absolutely forgotten that. Tell me, is there been any bad advice that you were given along the way that you either implemented or immediately knew it was bad? [00:10:33] Ernest Peralta: Bad advice. I would say, you hear this a lot. It's like, find your passion. And I believe that to some extent, passion, I think is something that is relatively gets you moving gets you motivated. But I think it's short term. to me, by following my passion, I've done many numerous things prior to getting into into commercial real estate. [00:10:51] Ernest Peralta: But I think one of the main things and things that I would say would be better advice is to not only, follow your passion, but work on your daily plan, work on those things that you don't want to do on a daily basis, because those are things that you actually need to do in order for you to accomplish your goals. [00:11:06] Ernest Peralta: I think, , that to me is an advice to where if I were to flip that, I would say work on things that you don't want to do that you need to accomplish, , what you want in life. If it's, commercial real estate, you have to put in the work, you have to put in the grind, making your daily calls, working your action plan. [00:11:23] Ernest Peralta: Passion comes out of doing that for a number of days until it becomes a habit, then it becomes a passion because you're gonna end up liking some of the things that you do, whether it's the grind or it's gonna be talking to people or putting a deal together. I think that to me is probably one of the most misconceptions that I hear. [00:11:41] Ernest Peralta: And I think that if you flip that around a little bit, I think it would , be better advice that's from my perspective, the least, no, I think  [00:11:47] Sam Wilson: that's great. I mean, there's the it's always, I think it's always a a blend there, right? There's like the, Hey, you gotta get your reps in. Right. Yeah. If you wanna stay fit you, it doesn't matter. [00:11:55] Sam Wilson: If like I read that in the, on the workout plan for yesterday, it was something like, Hey, you know what, maybe you don't love the day's workout, but it's just, it's a matter of showing up and doing the work and then you'll get the results you want. Yeah. Do you love it every day? Maybe. Maybe not. But I think there's a blend there of like finding what your skill set is and what really, you can bring value to the table. [00:12:13] Sam Wilson: How can you bring value to the table, but also going, Hey, what is it at times? Do you just have to say, I just gotta get through this. So. It's it's a nice, but I like the idea of, maybe not necessarily following your passion, but following your plan at first and then, your passion will certainly come out of that. [00:12:26] Sam Wilson: What does your portfolio look like today?  [00:12:29] Ernest Peralta: Yeah, so portfolio today, we own over 600 units. It spends across the Southwest. I'm basically an LP, a GP co GP and a capital razor for for these assets. They're mainly multi-family their class B and CS. We typically look at, little bit of capital improvement. [00:12:48] Ernest Peralta: We don't come in and do huge renovations, but something to where we can come in and do some potential upside, whether it's mainly raising rents or just, adding different things to the To the property itself. And for us, that's been our stronghold and kind of our focus for now. [00:13:02] Sam Wilson: Gotcha. That's really awesome. Tell me you mentioned this earlier in the show where you said that you were reaching out to investors before you'd ever had a deal. Like yeah. What did, how talk, walk us through that conversation? Because for me, I would think that would be a hard conversation of like, Hey, I'm planning on getting into this, but I don't have a track record. [00:13:19] Sam Wilson: How'd you overcome that?  [00:13:20] Ernest Peralta: Yeah, well, for me, I always try to reach out to folks that have the experience  whether you're a VP SVP or an investor, in any situation, I'll definitely go to you because you have the knowledge. So for an me going out to an investor, my whole plan of action, there was basically to reach out to them to say, Hey, I understand that you own a few properties. [00:13:42] Ernest Peralta: I'm kind of getting into the industry. Do you have any best practices or any, anything that you could provide me in terms of how did you get your education and how'd you get your start? That was basically my segue and most people are very cordial. Those that have as you probably know, Sam, those that have success or have tremendous success, they're willing to help for the most part, and provide you advice. [00:14:03] Ernest Peralta: So to me, that was my segue because. You never know what opportunities come out that way. And that was the way I started. Yeah.  [00:14:10] Sam Wilson: No, I think that's absolutely great Ernest, tell me, what's one of the biggest challenges, now that you've kind of gotten your, I'm gonna call it your feet wet. Obviously you're firmly in the business now you've kind of developed your plan. [00:14:20] Sam Wilson: You've implemented part of it. What are some challenges that you face scaling from this point going forward?  [00:14:26] Ernest Peralta: Yeah, that's a very good question. I think one of the challenges that we have right now is that it's definitely a seller's market for the most part. So I think there's a lot of individuals now I think over just even a couple of years now, there's a lot of individuals such as myself that have done. [00:14:42] Ernest Peralta: Corporate work and are now starting to look into investing. So I think there's an influx of this group, this kind of group. Now that's getting into the industry. So it's challenging. It's more challenging at the same time. You have a lot of savvy investors. Now, a lot of these individuals are smart. [00:14:57] Ernest Peralta: They know how to come in underwrite. And so they're making it fierce in that sense. , think in combination with, a lot of folks coming now into this arena, because they understand that it's a great niche to be in for longevity, but at the same time, I think the investors also have the certain mindset of what they think their price is for their, their assets. [00:15:18] Ernest Peralta: You know, they're thinking six months ago that the price is still, relevant today. So they're asking for, a pretty hefty price on, on, their assets. So it's a challenge there it's a double-edged sword. You wanna make it work, but at the same time you wanted to be able to. [00:15:32] Ernest Peralta: Get the property and also make it lucrative for your investors as well. So I think that's probably one of the biggest challenges that I  [00:15:39] Sam Wilson: see. Yeah. And it, and I think as we see, who knows where interest rates, for those of you who are listening to this this is being recorded on May 12th, 2022. [00:15:47] Sam Wilson: So, we don't know right now where interest rates are going, what effect that's gonna have on a, as a, on a cooling, are we gonna see a continued rise in especially in multifamily, in, rent, rent increases, things like that. And so when you say six months ago, I wonder, just because it is fierce and it is competitive though. [00:16:06] Sam Wilson: Are we seeing a tapering in the prices in multifamily or at least a leveling off, or is it that people are still looking, for that, kind of almost vertical trajectory in sales  [00:16:14] Ernest Peralta: price? Yeah. Well, one thing is that I notice is that. A lot of the investors are holding firm on, what they believe their property is worth at this point. [00:16:24] Ernest Peralta: . And so I think for right now, I know inflation kind of, I think it slowed down a little bit last month from what I read. But you know, it's very minimal. It's probably not too impactful at this point, but For the most part. I think a lot of investors are still holding on. They're still holding firm. [00:16:38] Ernest Peralta: I don't think they're gonna budge anytime soon, but at the same time, I think investors are willing to pay, what they're asking. Right. So I think you really have to underwrite, look at the market and when you're doing your deals, just really make sure that you're coming. [00:16:51] Ernest Peralta: You're coming to the table with something that's worthwhile and you're not just paying just to pay, and I think that's kind of the challenge right now for us. I think we're taking the standpoint of, we're gonna hold onto our portfolio for now, but we're definitely looking at properties on the daily basis, we're just underwriting and if there's a good deal, then we'll definitely pursue it. [00:17:09] Ernest Peralta: But for right now, I think a lot of it is just kind of looking at the way that things are going right now in the market. And just evaluating things as we move along. We'll see what happens here in the next six months though,  [00:17:20] Sam Wilson: right? Right. Like to say time will tell last question for you. Is this 10 year plan? [00:17:26] Sam Wilson: Where do you wanna be in 10  [00:17:27] Ernest Peralta: years? Well, yeah, in 10 years, we'd like to have at least close to 50 million in assets. If not more what we'd like to do eventually is look at other asset classes right now. As I mentioned, we're looking at, we have a multi-family portfolio, but it would be nice to diversify that. [00:17:43] Ernest Peralta: Potentially get into mobile home parks or maybe into storage facilities too as well. Those are other, asset classes that we want to get into, but I think over time, that will definitely happen. But for right now, our focus is on multifamily. It's a great area for us to focus our efforts in, but that's our tenure plan. [00:18:01] Sam Wilson: I love it. I love it, Ernest. Thanks for taking the time to come on the show today and really break down your business and tell us your awesome story. I love the the precision with which you have enacted your plan and even putting the plan together. So many bullet just lack that out of the gate. [00:18:14] Sam Wilson: So some great tips, some great tools. Appreciate it. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that?  [00:18:21] Ernest Peralta: Yeah, the best way is you can look me up on LinkedIn. You could also reach out to That's basically our private equity company. [00:18:30] Ernest Peralta: And yeah, you could just reach out to me also  [00:18:36] Sam Wilson: Awesome. Thank you for your time, Ernest.  [00:18:37] Ernest Peralta: Appreciate it. Thank you, Sam. Appreciate it. 

    Revolutionizing Real Estate with IoT Technology

    Play Episode Listen Later Jun 20, 2022 21:25

    If you're still not sold on the power of the Internet of Things (IoT), then listen to this episode!   There are endless applications of the technology in real estate, and our guest John Humphrey joins us to discuss how STR owners can mine crypto on their property using IoT and create passive income. He also talks about their company, LinxSTR, and the work they do to help people optimize their business operations and build wealth by leveraging the potential of IoT.   [00:01 - 06:20] Decentralizing the Internet John talks about his background Helium and creating the world's biggest IoT network   [06:21 - 20:15] Passively Earning Crypto Rewards Losing money in their short-term vacation rental properties during the pandemic Starting a technology arm of their business Building their own Helium hotspot box How STR owners can benefit through mining HNT What's LinxSTR's next play Smart solutions using IoT John breaks down the best way to set up the hotspots in properties   [20:16 - 21:24] Closing Segment Reach out to John!  Links Below  Final Words Tweetable Quotes   “Almost a hundred percent of our lives in three years right now is going to be all interconnected.” - John Humphrey “Me and you won't be talking over cellular towers anymore. Our phone, our actual communication is going to box to box, to box, to box, to box, to get anywhere it needs to get.” - John Humphrey -----------------------------------------------------------------------------   Connect with John for a strategy session! Book now at   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below: [00:00:00] John Humphrey: Right now in the next three years, 75 billion new devices are going to need a place to hook up to the internet. I mean, this is everything what's going to happen. Almost a hundred percent of our life in three years right now is going to be all interconnected. It's really crazy.  [00:00:28] Sam Wilson: John Humphrey's a seasoned entrepreneur author and is best known as The Revenue Generation Expert. He is an expert at implementing systems to generate ongoing income for not only his own companies, but also for his clients worldwide. John, welcome to the show.  [00:00:42] John Humphrey: Sam. Great to be here. Thanks for having me.  [00:00:44] Sam Wilson: Pleasure is mine. Three questions I ask every guest who comes on the show: in 90 seconds or less, can you tell me, where did you start? Where are you now? And how did you get there?  [00:00:51] John Humphrey: Okay. Started 20 years ago, originally from New York. I'm out here in California, 20 years, April, this past April is 20 years. My wife and I had been out here in California. Yes. We came out of California to create fame and fortune and become entrepreneurs. And that's where our kind of our journey started. Fast forward 20 years, you know, I've been in business with like one of my best friends that I met out here california when we first got out here, Jerry Conti and we've owned three or four different companies together on our latest company right now, LinxSTR, is revolutionizing the new IoT Helium platform that's being launched worldwide. And that's our latest play right now. And it's a, it's super exciting what we're into.  [00:01:35] Sam Wilson: Can you, can you break this down for us? You may have used a bunch of words that if entrepreneurs like me just said, what did he just say? Helium IoT LinxSTR and my eyes glaze over. Break it down for us.  [00:01:48] John Humphrey: I'm going to tell you all about it. It's actually, it's, it's a, it's a pretty cool concept. It's right around a little bit over two years ago, a cryptocurrency called Helium, the actual cryptocurrency said, okay, listen, we're going to create our own new cryptocurrency. [00:02:01] John Humphrey: You know, it's right now there's 8,000 cryptocurrencies in the world that most people will never hear, right? This one said, we're going to do something different. We are going to create the world's biggest IoT network and IoT stands for internet of things. Now, if you don't know what that is, I didn't know what the hell it was when we got this whole thing rolling. [00:02:20] John Humphrey: But basically it's a network that is an, basically an outdoor network of the internet. I'm just going to give you the plain, plain simple truth. So like I was sharing with you saying like inside our house, we have, you know, we have our wifi in the house, right? But we go outside, we're using cellular data, but there are billions of new devices that are being developed right now for everything from, from a motor scooters to the cameras that go around your property to temperature monitor, to, to leak detection, to all sorts of things that can happen with a property. These, all these little devices need to be hooked up into the internet, but typically they're not going to hook up into the wifi 'cause a lot of these devices are actually outside the property. So how did they hook up? Well, they're not going to hook up to cellular because it's too expensive and they're not going to the satellite cause that's even more expensive. So over the last number of years, there's been a, there's been a network called the IoT network. [00:03:18] John Humphrey: Now the IoT network has been around in major cities for a very, very long time. So if you ever gone to, you know, swipe your credit card and a parking meter downtown. Well, your information is getting beamed into this outdoor internet network called the IoT network. If you've ever gone to a, like the, like the line motor scooters that you know, the little electric scooters you see everywhere downtown, how does that all operate? [00:03:44] John Humphrey: That's an IoT device. So now what's happening is that not only are more and more IoT devices becoming made. Right now in the next three years, 75 billion new devices are going to need a place to hook up to the internet. I mean, this is everything what's going to happen. Almost a hundred percent of our life in three years right now, it's going to be all interconnected. [00:04:05] John Humphrey: It's really crazy. So what do they do? Well, they created this, so Helium said we're going to create the world's first 100% connected worldwide network and how they're going to do it is not by building it centrally. They're going to decentralize the internet. So now this isn't the size of an actual box, but it's about the size of what's called, what's called a Helium hotspot. [00:04:28] John Humphrey: Okay. So imagine having this in your house and all this little device does is it looks for other IoT devices and all it does is it beacons and witnesses, it just basically shares the network to create a network. So think of it this way. If Netflix got started today, they would send you a little device that you would plug into your router. [00:04:50] John Humphrey: This is what they would do. And they would say, great, we'll send you the device. And when your neighbor orders, a TV show or a movie, and the movie has to go through all these devices to get to your neighbor. And this little movie goes over your box to get to your neighbor's box. We're going to pay you every time that that happens. [00:05:09] John Humphrey: This is a peer to peer network that is being built. This is really what. You know, Web 3.0 really is, it's called decentralized the network, having the people own the network. So Helium is known as the people's network, and this is what's getting built right now. So super exciting. There's about, like I said, there was about 700,000 of those little devices worldwide in 5,800 cities and 200,000 of them are in the United States. [00:05:36] John Humphrey: So there are quite a number, but people are saying, well, you know, how many will it take? It'll take about 2 to 3 million devices to completely blanket the United States. So think about this in a few years, and this is, this is kind of crazy me and you won't be talking over cellular towers anymore. Our phone, our actual communication is going to be going box to box, to box, to box, to box, to get anywhere it needs to get. [00:06:02] John Humphrey: The entire world, this is where it's going to be happening. So Helium's going to be really the biggest data provider, you know, in, in the world in the next few years, this is what's happening.  [00:06:13] Sam Wilson: That that is really amazing. I mean, this is, this is obviously you're, you're at the front of this, I guess. Tell us, give us the backstory on how you saw the opportunity here. I mean, was this what your background was in and, you know, are you a big tech guy?  [00:06:28] John Humphrey: Nope, not a tech guy. I love tech, you know, I like to use tech, but I'm not in the weeds when it comes, I'm going electrical engineer or anything. I'm more of a user, right? So, so here's what happened. So my, my partner, Jerry, we've had a short-term vacation rental development company for many, many years. And we actually taught people how to convert large homes into luxury short-term rentals. And we did that in the arbitrage model where we're basically, we would go rent a giant house. I convert it. And then Castro, the property was amazing. I mean, one of my properties at Arizona, I was paying 10,500 a month rent, which was nuts. [00:07:05] John Humphrey: Right. But it was bringing in $35,000 a month and bookings. Super great business, but then 2020 happens and we all know what happened in March of 2020, we had the pandemic. And what people don't realize is in the month of April, Airbnb came out and said, listen, we know everybody's panicking with travel, so here's what we're going to do regardless of your cancellation policy with your host, if you want to go ahead and cancel, go ahead. And we'll give you 100% of your money back. Well, listen that was great for the traveler, but it sucked for us as the host. Jerry and I lost $600,000 in bookings in 30 days 'cause everybody was canceling and there was no recourse. And so that really scared us. And we said, whoa, listen, if we're really hooked into a big tech giant here, like Airbnb or BRBO and they do something like this, it could really kill your business. [00:07:58] John Humphrey: And so, Jerry decided, Hey, let's start a technology arm of our short-term vacation rental business, where people can create websites where they can book direct that we, we can, we can do pricing. We could do marketing, social media marketing, where people can go out and get their own bookings. So they can be empowered to have their own business, regardless of what happens if they got knocked off of Airbnb or knocked off of BRBO. [00:08:22] John Humphrey: And the same thing happens in marketing, right? People have a Facebook account and it gets shut down for some. All their marketing drives up. So we want it to do that for the STR world. So we're doing this for a little bit, and a friend, and we were looking for all tech to put into our homes and somebody said, Hey, you want to check this thing out? [00:08:40] John Humphrey: It's called Helium. We don't know what it was. And they said, well, listen, you can put a box, literally add this Helium hotspot to your short-term vacation rental properties. And you can earn crypto. You'll get rewarded in crypto currency. And we looked into, we said, wow, that's really amazing. We jumped on it. But then as soon as we jumped on it, we saw a whole bunch of pitfalls of why it wasn't going to work. [00:09:04] John Humphrey: And so one of the big reasons is, is that I show you this little box, right? This is the size of a Helium hotspot. You would get off the internet. It doesn't work and it reason it doesn't work is it's not powerful enough. So what we did was is we hired a guy from Motorola who took that thing apart. We deconstructed it and we built this kind of this, it looks like a utility box. [00:09:26] John Humphrey: I don't have one right here with me at the office, but it's a, it's a small utility box, probably the size of a toaster. And then we put an external antenna on the roof and we did this whole thing. So we basically souped up the Helium hotspot. We contracted with a manufacturer and we created our own customized box. [00:09:44] John Humphrey: And by doing that, we built a better mousetrap. And then all of a sudden this was doing even bigger than our short term vacation rental businesses as people kept calling us saying, I want one of your boxes. I have a property, I'm a property management company. I have a thousand properties. I want to make crypto, like I could add this on and just make residual money without doing anything I'm in. And that's kind of how LinkxSTR got started six months ago. [00:10:07] Sam Wilson: Six months ago. That's rapid growth. Tell me, tell me about the opportunity for commercial real estate investors.  [00:10:14] John Humphrey: Yeah, this, this is what's amazing. If you have a property, if you're, if you have like a commercial building, if you have real estate residential, doesn't make a difference what it is is what we have done is we have created a software where we can literally predict how much cryptocurrency your location could mine, meaning how much it would get rewarded. So what we do is we invite people, you know, to get on our calendar. We will literally get on a zoom call with them and say, Hey, let's go over your 5 to 10 property that you have, or maybe it's even more. We'll analyze them in real time. And then they'll make a decision on where they want to put hotspots because the one pitfall that we did see, Sam, was that in the beginning, people were just buying hotspots, plugging them in, and then all of a sudden I'm seeing all over social media. [00:10:59] John Humphrey: This is a bunch of BS. Like I'm not making any money. This is what they're still like, well, what is this? And it's because they were literally taken a little box like this, plugging it into their router box, stick it next to a window on the first floor of their apartment. And the signal was going nowhere, absolutely nowhere. [00:11:16] John Humphrey: And so that's what we found, so for real estate professionals, commercial real estate people at buildings, we can put an antenna on the roof and you could just be earning residual crypto rewards. I mean, to me, it's a no-brainer for people. It really is.  [00:11:31] Sam Wilson: I mean, what's, what's the break, even on that, I mean, is this something where, Hey, it's a thousand bucks for the box, you know, in three years you break even on it. [00:11:39] Sam Wilson: I mean, it's, it sounds like I'm just going to be in being forthright here. So don't, let me offend you. Obviously, you've got a, you guys are going somewhere with, and you've got traction with it, so. I'm just the naysayer, trying to clarify.  [00:11:50] John Humphrey: This is great. I'll tell you the costs right now or how it works. Real simple. So the box is $29.97. So if you bought a retail box about three grand, now people say, okay, now listen, you can, I will tell you I'll be the first one to tell you. You can go onto eBay right now and buy a box for $500. You can, but it's going to look like this, right? And it ain't going to work. [00:12:12] John Humphrey: I'm just telling you it's a $500 waste of money. So, what we did is we, we have a premier piece of tech that we put together for somebody. Now, here's the reason we did it. It's not for how much it costs, but how much it's going to make. So let's say for example, you put our box out there and it gives you five tokens a month, meaning five HNT. [00:12:32] John Humphrey: Yeah, it's rewarded for you basically do enough and the box is sitting here and it's just pinging in witnessing. So over the course of a year, that 60 tokens in five years, that'd be 300 tokens that you would have in your crypto wallet worth, whatever the value HNT is going to be. Now, I will tell you, in five years, HNT is supposed to be around $250 a token, and let's just make it a round number. [00:12:54] John Humphrey: Let's just say it's 300 a token. And you've got 300 tokens, you know, that's not bad. That is not a bad if you, you know, if you do, if you could do the math on that, that's pretty good money. That's 90 grand on a $3,000 one-time investment with no maintenance fee, no anything. It costs about $5 a year in electricity to run the box. [00:13:17] John Humphrey: So this is what people are looking at in terms of ROI is that I'm in it for more of the 10 year play. You know, Jerry and I want to mine a few million coins in a, in 10 years. Our goal is to put 20,000 hotspots out in the marketplace and that's a hundred million dollar business right there. I mean, it's going to be massive. [00:13:37] John Humphrey: So everybody that gets a Helium hotspot, you want to be thinking right now, just accumulating coins, because then when Helium goes to 500 or a thousand, maybe becomes a Bitcoin one day and goes to 10 or $20,000. You're going to be sitting on a fortune for a very, very minimal investment.  [00:13:56] Sam Wilson: Tell me about this. You know, we're long in the RV resorts space. So talk to me about that application.  [00:14:03] John Humphrey: Yeah. We're putting them everywhere. RV resorts are fantastic because there is an office there, right? That does have internet. And the reason I say internet is because the, the box needs to be powered by the ethernet right now, it's simply that it plugged into the ethernet port of your router box. [00:14:20] John Humphrey: It doesn't use data. It just uses the power. Now in the future, they're going to have other locations where it's going to be Siler and you don't have to plug it in, but RV resorts are great. And one of the reasons they're great is because you can put literally a 40 or 50 foot tower, like an antenna, like in the RV resort. And the higher, the intent is the more HNT, the more crypto rewards you're going to earn, because the more boxes it's going to reach. Everything is about height with us, everything. So the higher, you know, the higher, the relocation of your intended, the better. So RV resorts, we have put Helium hotspots and our RV resorts very good, because they can kind of make their own rules they don't have an HOA, they can just build some fricking tower there that we'll help install. And now they're just mining tons of crypto there.  [00:15:05] Sam Wilson: What is your guys's angle? You know, I know you guys want to mine your own Helium, but what, or HNT I guess as you call it, maybe that's the short, short three letters for it, but what's your guys' angle other than selling the boxes, which is a one-time sale. I mean, maybe you're making some money on your box, but there's gotta be more to the business than that.  [00:15:23] John Humphrey: Correct. So we're sharing. Every box that we put out there, we're sharing the HNT with that person. So we will get 50% of the HNT. They get 50% of the HNT, but we do everything. We do the shipping, we do installation. [00:15:37] John Humphrey: We do your hotspot maintenance, your crypto wallet. Everything is like, we do it all for you. And the reason we did that is we wanted to target real estate professionals that want to make the want to be in the money of just making money with their properties. And this is extra money for them, but let us handle the technology, the tech of this. We're not interested in people that want to tinker and you know, like that, isn't it. [00:16:02] John Humphrey: I come across those people saying, like they're going. I'm going to go build my own hotspot. I'm going to go do that. I said, listen, you go for it. You know, our goal is every box is out there. It's a long-term play for us that we want to earn HNT but then the second part of this play is, is that we're going to be creating a consulting division of LinxSTR that is going to be all about the devices. [00:16:23] John Humphrey: Cause this is the next phase of what's going to happen. There's going to be 75 billion new IoT devices that are going to be introduced into the world marketplace. So we're going to create a whole division. That's going to be creating devices, consulting with companies on how to get the data to their devices. All of those things is really the next play and that's going to be massive. That's gonna be massive. [00:16:46] Sam Wilson: The sales and the front end of these devices, that's really just the entry point for you guys into the market collecting HNT.  [00:16:51] John Humphrey: And there's tons of hard costs in a tech company. So we don't, we're not making a fortune off of devices. We're really not. I mean, the whole point of this is the HNT and the consulting and how to use the data when the data comes up. [00:17:05] John Humphrey: And we, we actually was interested. We actually, we spoke to an IoT device manufacturer the other day and they, and it was this, they have hundreds of devices and they're the funniest devices you'll ever see. There are little devices, right? One of the ones and they were all designed for real estate, they're all designed for how to maintain your property remotely, how to, how to do everything from like a leak happening on your property or fire damage or, you know, anything even critters. [00:17:34] John Humphrey: So the funniest thing I saw was an IoT mousetrap that they have. So imagine you mentioned putting mousetraps out in your property, you got critters. And instead of hoping and praying that you're catching something, the device is actually an IoT device. So when something happens with the device, it'll alert. So you can put it out into your yard and it's on the network. And as soon as something catches, you actually get notification on your phone.  [00:17:59] Sam Wilson: That's funny. Yeah. There's endless applications like, oh, your applications right now. You, if you're in Memphis, it would be rats, not mice. So yeah, I know, right? Everybody on the show just took their headphones out and went, oh, that's disgusting. Yeah. Well, welcome to the Delta. Yeah. So that's, it'd be funny. Yeah. He caught a rat, great. Okay. Tell me about saturation. Like how far apart do these have to be? Is there, you know, is it one per neighborhood? Is it one per house?  [00:18:26] John Humphrey: Great, great question. The hotspots, ideally to be a thousand feet. So, if you had a building, like you had an apartment complex or something, or a fourplex, you would only put one hotspot there. [00:18:37] John Humphrey: So that's it. Now this is the, also the issue that's been happening because when the whole network got started, it's completely unregulated at this point. So people were just buying things and what happened is there'll be too many hotspots in a concentrated location. So there's a network called the IoT Helium network. [00:18:56] John Humphrey: And it'll tell you the great thing about it is that every hotspot that is live on the network, you can see what that hotspot is doing in real time. So there's actually a worldwide map and the way that they break it down is if I was to take this hotspot and have it go live, it would show up in what's called a green hexagon. [00:19:16] John Humphrey: That's what it looks like on the map. It looks like there's a green hexagon that is over my house here, but the hexagon is literally two square miles. And this, this shows up as one hotspot within the green hexagon. Now the ideal thing, and the reason they do that is because ideally you do not want to have more than six Helium hotspots in one hexagon. [00:19:41] John Humphrey: You get past six, then it's kind of like a pizza eating itself. There's only so much that's going to be, it's like a pizza and more and more people coming in. If the pizza is the same size, now that's this type of hotspot. Right? The one that we have, which is built ours is going to go outside of our hexes. [00:19:58] John Humphrey: And they're going to go up to 200 miles away. They're going to network with other boxes. So it's going to go super far, the signal like you don't realize how far the signal can go. It goes really, really far. So that's why ours will outperform anything on the market.  [00:20:13] Sam Wilson: Wow, John, this is fascinating. Thanks for taking the time to break down this opportunity. We have here with our properties. That's, that is the either. There's always something new to learn in this. This is certainly something new to me. So I appreciate you taking the time to share it with us. If our listeners want to get in touch with you or learn more about you and what you guys are doing, how do they do that?  [00:20:31] John Humphrey: Simple. I just, if you have some properties, you want us to do an analysis of your property. You want to learn about a little bit more what we're doing. I'd say just book some time directly on my calendar. I always kind of do this. I leave this open ended with everybody it's simple. It's iotjohn, And then you can book some time to get into valuations done of your properties and see if you're sitting on a crypto gold mine somewhere.  [00:20:54] Sam Wilson: That's cool, John, thank you so much for your time today. I do appreciate it.  [00:20:57] John Humphrey: Thanks so much, Sam, be well.   

    Investment Opportunities: High Yield Cash Flowing Real Estate

    Play Episode Listen Later Jun 19, 2022 17:48

    Eric Neely is a truck driver and  Acquisition Manager & Customer Relations of Febros Captial, Eric who has been in the real estate industry for over 20 years. He started to learn more about investing and networking with other professionals in the finance world and created his own podcast, The Wealthy Trucker, in 2017. Recently, he partnered up with another real estate professional and invested in a smaller apartment complex.   Eric Neely handles broker relations and even speaks directly with asset sellers. He also maintains relations with bankers and our investors. As a highly educated and experienced entrepreneur, Eric brings specific skills to the table, and always asks the right questions when evaluating a possible asset.   Highlights:   [00:00 - 05:48] How to Succeed as an Investment Professional  Eric Neely is a real estate professional who focuses on developing private placements in apartment complexes. He is also the host of the Wealthy Trucker podcast and has invested in larger apartment complexes. He recommends networking to build trust before attempting any deals.   [05:48 - 11:39] Full-Time Truck Driver Becomes Property Manager. Eric shares his experience in scaling a real estate business, including their first deal and subsequent deals. He recommends avoiding relying on myths about real estate and instead of learning as much as possible from personal experience. he added the importance of regular communication with property management companies, as well as taking care of finances and distributions.   [11:40 - 17:45] Closing Segment For Eric it learning the importance of screening tenants and learning the importance of being personable and talking to people while taking care of them should be priority  as its not only making money for yourself but also impacting lives. Final words Reach out to Eric See links below  Tweetable Quotes   “Cause we don't allow, people to just come sit on the property, so we're impacting more than just the people who live there we're impacted the community. And then beyond that you're impacting people who are looking for passive investment opportunities.” - Eric  Neely   ----------------------------------------------------------------------------- Connect with Nick Neely visit their website at Or listen to his podcast: The Wealthy Trucker Podcast with Eric Neely   Connect with me:   Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:     [00:00:00] Eric Neely: the fact that we self manage that it really ironed into my head, how. , you may be creating an investment vehicle for somebody. You may be trying to make money yourself, but you're also impacting people's lives that live in your Eric Neely is a real estate professional focused on developing private placements in apartment complexes. So the everyday professional has an opportunity to invest in high yield cashflowing real estate. And he's also host of the wealthy trucker podcast. And if I'm not mistaken, Eric, you're calling me from the road today on interstate. [00:00:43] Sam Wilson: I think it's i70 there in Kansas. Welcome. Welcome to the.  [00:00:48] Eric Neely: Thank you, Sam. It's a pleasure to be here and yet that's correct. I'm sitting on the side of the highway right now in my office behind the windshield.  [00:00:56] Sam Wilson: Yeah, I have to say this. I give you props for having fairly good audio for a guy sitting in a semi-truck. [00:01:01] Sam Wilson: That's pretty good. I've had people sitting in their own home offices with poor audio, so that that sounds good. I appreciate it.  [00:01:08] Eric Neely: Nope, no problem. Well, I, I have a lot of experience of listening to podcasts. And also like you said, I run my own podcasts. So audio is something that I had a little bit of time to research because I knew it was pretty important. [00:01:21] Eric Neely: So the headset I bought was specifically so that I could do what we're doing right now. Oh man. That's  [00:01:26] Sam Wilson: fantastic. I love it. There's three questions. I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now? And how did you get.  [00:01:35] Eric Neely: Sure. Well, I started, honestly it probably, driving a truck, I've been a trucker for 20 years almost. [00:01:41] Eric Neely: And, really didn't take investing seriously at all. Honestly I had a 401k and I always put money. But I just ignored it pretended like it wasn't even there that way. It wouldn't never be tempted. So I didn't even know how well it performed. So that's where I was. And as I was driving trucks, I spending all this time out on the highway. [00:02:04] Eric Neely: I started, thinking about how am I going to get out of trucking. Eventually I can't do this forever. It's beaten up my body. And I don't know. What I need to do to prepare for retirement. So, ended up starting to educate myself through podcasts and ran across the infamous BiggerPockets podcast and thought, well, maybe I can start flipping houses, something like that. [00:02:27] Eric Neely: And just ultimately the more I learned about it, the more I realized, man, I'm already working 60, 70 hours a week out here on the road. There's no way I can flip houses and do it consistently. And I also have a close friend of mine who's in the finance world. So I started talking to him about this multi-family syndication thing that I'd heard about and said, what do you think about that? [00:02:49] Eric Neely: And he he said, man, I've got clients that, that I do their taxes, and this is exactly what, I already understand this. I'm like, well, what do you think about us? Getting into partnership and doing something like this. And he goes, let's do it. Let's make it happen. So. I said, well, I'm going to spend the next couple of years learning how to do it while I'm out here on the road. [00:03:05] Eric Neely: Use the highway education tool. So podcasts, audio books, and started networking. We created our own meetup a few years ago that I host in our local community in Wichita, Kansas. And and then I started the podcast the wealthy trucker and. The sky's the limit and wherever the Lord will take us is where we'll go. [00:03:27] Eric Neely: And so now, today I own my I joint ventured into a apartment complex a couple of years ago. I J I've invested passively into larger apartment complexes and we are in the process of closing a larger syndication. So. If you take the education you get and apply it, you can go anywhere. [00:03:51] Eric Neely: And I still worked full time driving a truck. So it's still sitting in a truck right now,  [00:03:55] Sam Wilson: man. That's a lot of moving pieces and you've done what I think a lot of people. Are unwilling to put themselves out there and do right. I mean, you started a podcast, you started a meetup. [00:04:06] Sam Wilson: You those are obviously thought leadership platforms but also just kind of built a brand and a following around what it is that you're doing. I think that's really cool because then that takes a little bit of courage. Did you do that at the same time that you already had deals going? [00:04:19] Sam Wilson: Or was that something you had first? What would you recommend to somebody in your shoes?  [00:04:23] Eric Neely: You've got us. You've got to tell people what you're doing and it's challenging to do it when you haven't done a deal yet. And that's where, I mean, I guess if I look back on what I did and how I could maybe do it different, the one thing I regret is not starting the podcast, as soon as I did. [00:04:39] Eric Neely: I mean, I get more reach with the podcasts. I talked to more people because of it. and again, Your name out there so that people know what you're doing. And that's ultimately what it boils down to. People have to know what you're doing. This is very much a people business. If people don't know what you're doing, they're not going to invest with youth. [00:04:54] Eric Neely: They don't know who you are. They don't know. They don't know. I can trust you. That's the common thing you hear. So they don't know, like, and trust you. Why would they invest with you? I don't know how many times I've heard people say, well, if you have a deal, the money will come. I think. Not really true, because if people don't know who you are, if they don't trust you, why would they invest with you? [00:05:13] Eric Neely: I don't care how good your deal is. So that's kind of how it is, but that's how my mindset works. Anyway, if I could do it different, I would have started the podcast sooner. We did do the meetup pretty early, but, and Wichita, Kansas. Anyway, it's a smaller community, don't know how many people we have there around less than a million. [00:05:32] Eric Neely: And so. the reach, there was not as great as it might be in a bigger metropolitan area. So my meetup ranges anywhere from 10 to 20 people on average per month, it's a small amount of people. It still gets me there, but The more people you can reach, the more people that you're talking to, the better off you're going to  [00:05:48] Sam Wilson: be. [00:05:48] Sam Wilson: Right. Tell me about your deals. You said, can you rewind that a little bit for me? I know you said what you guys have bought so far. Can you give us the S the summary on what you guys own currently?  [00:05:59] Eric Neely: Sure. We bought our first one, like I said, it was a JV deal. It was really between me and my business partner. [00:06:05] Eric Neely: I was telling you about that. Does the finance, and then one of them. Primary capital partner. He put more, most of the money into the deal between the three of us. We bought that we self-manage it. And really that's because that third partner that I'm talking about, he is retired and he wanted something to do. [00:06:25] Eric Neely: And he's been in business most of his life. So anyway, long story short, it's been, it was an amazing learning. Curve buying that property and self-managing it because you really learn what you're going to ultimately end up hiring a third party to do. Right. And that in itself was worth quite a bit. [00:06:45] Eric Neely: So, learning the importance of screening tenants and learning the importance of being personable and talking to people and taking care of them. I mean, the fact that we self manage that it really ironed into my head, how. , you may be creating an investment vehicle for somebody. You may be trying to make money yourself, but you're also impacting people's lives that live in your property. [00:07:10] Eric Neely: And if you don't think about that, I think you're not really seeing the full picture. And if you're just being ingredient and wanting to make money, then I mean, you can do it, but that's not what this is all about in my mind. So. Self-managing it really drove that home for me that, Hey, this is somebody's home. [00:07:27] Eric Neely: They're living in my property. I need to treat it like that and take care of them correctly. And so if I'm going to hire a third party, now I've got a whole new set of criteria and standards that I'm going to hold this third party, property management company to, and if they're not taking care of the people out the way I wanted to take care of the people, then that I have no business dealing with them any longer. [00:07:49] Eric Neely: So it's very valuable.  [00:07:51] Sam Wilson: Absolutely valuable. And that's a that's an education, I think like you said, that everybody probably needs even if you learn it on a smaller property, just to get your head wrapped around what you're going to expect from your property management company on a larger on a larger scale. [00:08:07] Sam Wilson: Tell me about the biggest deal you guys have done in the syndication space. And tell me the, kind of the things that you learned in raising capital for that and bringing investors on board, and I'm gonna keep throwing questions at you all at once. And then maybe tell me about the conversation you have with investors as it pertains. [00:08:24] Sam Wilson: I'm sure you get asked. Hey, wait, you're still a full-time truck driver. How are you going to take care of this asset?  [00:08:29] Eric Neely: Right. It's it was a 66 unit in our local market. Wichita. The reason I stuck to which doll was because I needed something in my backyard that I could still have eyes on regularly because I work full time. [00:08:42] Eric Neely: So that's been one of the discussions with people that, well, listen, I'm going to be there on a very regular basis. , My communication with my property management company is very regular, and ultimately they're the ones managing the asset anyway. So, and then when it comes down to doing distributions and taking care of the finances, well, my business partner has his own accounting company, so that all gets handled through there. [00:09:07] Eric Neely: So. Anyway, that's been some of the conversation on that as far as how I'm going to take care of it as a full-time driver. And then beyond that, like it was a 66 unit complex. It was about a $2 million raise and, I did the capital raising through. The platforms of talking to people on the wealthy jerker podcast or going on other people's podcasts. [00:09:30] Eric Neely: Once again, back to just talking about it all the time and then met quite a few people through the meetup that we do in town. I'd go talk at the other real estate meetup in town, even though it's mostly single family people there, there's still people looking for passive investment opportunities and they've got the mindset of investors. [00:09:47] Eric Neely: So, I'd go talk at their meet ups. And really just getting out and talking, talking, talking that's that's. That was the, that was the key element of raising capital. And then, oh, I don't know. I mean, there's a lot of different things. You do. I built a website, which I did myself. I sometimes I think I should have just hired somebody. [00:10:07] Eric Neely: It would have gone faster and looked better, but ultimately I did build it myself and in managing a CRM, That's something that I went through a few different iterations before accounting started figuring out, all right, this is the way I need to do it. And just trial by error.  [00:10:24] Sam Wilson: I like it though. I mean, that's what it takes. [00:10:26] Sam Wilson: I think that's what a lot of people, especially as they're coming in new to this space, they want to hit the home, run out of the gate. They want it to be, they want it to be fast. They want it to be now. And it's, and this is a slow. A slow growth process. And I think that oftentimes gets overlooked and underappreciated because, we're, we live in a society that once, once it done, we want it done. [00:10:47] Sam Wilson: Now we want it done. And this is a, this is not an overnight success business. So I think I think you've set the bar appropriately for what it takes. Building a meetup, building a podcast, building a website, talking about your deals to everybody, you know, it's a moving train, but once it gets started, it's hard to slow down. [00:11:04] Sam Wilson: Tell me, was there bad advice that you have received along the way in the scaling process where you're like, yeah, that was, that just didn't work out the way that I was told.  [00:11:13] Eric Neely: I think I kind of mentioned it earlier, but I think the idea that if you have a deal, the money will come. I think that's bad advice. I don't think people should lean on that. [00:11:23] Eric Neely: I just think that's going to inevitably happen. The reason that it kind of does happen is because if you're actively pursuing a deal and trying to make things happen, you should be out talking to people and networking and to make it happen. And the more you talk about it, the more that people will want to invest with you. [00:11:43] Eric Neely: And inevitably you'll start finding the money. but to say that it's just going to come almost as if you don't have to put any effort into it. That's bad advice.  [00:11:53] Sam Wilson: Was there good advice that someone gave you along the way that was a pivotal? Hey, this is something you should think about or was there a mentor that gave you something that said, Hey man, this is, here's a good piece of advice that comes to top of mine. [00:12:05] Eric Neely: It's all about your mindset. I mean, the knowledge required to run a syndication or buy a property is. It's not a heck of a lot more than what you need to just buy a single family house. I mean, there is more, I'm not going to lie, but it's not overly accessible that. Anybody couldn't just go out and get the education. [00:12:25] Eric Neely: Like I said, I got most of my education listening to podcasts and reading audio books. I didn't get it all there. We did end up hiring a mentor that helped us really refine the underwriting process, which is pretty important. If you're going to be able to give somebody a perspective on what kind of return you're going to give them. [00:12:42] Eric Neely: But that, that was really the only thing I paid for this as far as knowledge is concerned. So. Really? The best advice is, just, you got to get your mind in the right place. If you look at a hundred thousand dollar house and think, oh, I can easily afford that, but Julie get a million dollar apartment complex. [00:12:59] Eric Neely: It's like, there was no way I could do that. Well, honestly, man, it's only one more time. And there's no reason you can't do a $10 million property as your first one, as long as that, what you set your mind on and you're focused on it and you don't tell yourself you can't do it. So yeah, our first indication was a $2 million raise. [00:13:19] Sam Wilson: Yeah. That's a strong raise out of the gate. [00:13:22] Sam Wilson: Absolutely strong raise that's fantastic. Tell me if you were to fast forward five years from now, what do you want your business in life to look like?  [00:13:30] Eric Neely: I want to be able to hit the road when I want to, as opposed to when the company tells me I have to. So that would be an ideal situation. [00:13:38] Eric Neely: I love driving. I really do. I can see the mountains every other day, cause I'm on my way to Denver right now. And. It, I would like to be in a situation where I can go hop in a truck and do it just because I want to do it. I enjoy real estate. I really do. I love touring properties, figuring out the problems and how I can make them better. [00:13:59] Eric Neely: So I would imagine five years from now, I'll be doing a lot of that and just solving problems. I mean, the beyond that got five kids. So five years from now, I want to be spending as much time as I can with my kids, even though some of them are already be out of the house, that's fine. I can still spend a lot of time with them. [00:14:19] Eric Neely: and then just volunteering more at church really is one of my big goals of volunteering the high school ministry now. And I'd like to be able to do more there than what I'm able to do right now.  [00:14:30] Sam Wilson: Got it, man. That's great. I love that, future thinking and, , did not just thinking in terms of business, but also personally where you want to land with that. [00:14:39] Sam Wilson: And I guess this is maybe the last question here I'll have for you before we sign off. But when you think about the word impact, can you define that word for me? And then tell me what type of impact do you want to have on other people?  [00:14:51] Eric Neely: Oh impact. I mean, you're changing lives when you're impacting somebody. [00:14:56] Eric Neely: I think about that 24 unit property we bought, we impacted the lives of 24 people when we bought it, because it was a beat down, run down class C almost class D property. And now, even though it's still in a class C area, it's almost a B minus a at this point because of what we've done to turn it around and not just from an aesthetic standpoint, but we got rid of a lot of bad people and almost well, really everybody in there now is a great individual, even though they're lower income, they're a great individual. [00:15:35] Eric Neely: So the impact that we had, I mean, I don't personally see it in the entire community, but I'm sure I know it's happening. Cause, cause we don't allow, people to just come sit on the property, so we're impacting more than just the people who live there we're impacted the community. [00:15:53] Eric Neely: And then beyond that you're impacting people who are looking for passive investment opportunities. You're giving people the opportunity to finally start making mailbox money in an asset that is so proven that it's one of the safest investment vehicles in the world, real estate. so the impact is vast right in this business. [00:16:16] Eric Neely: I love it. I love it. It's what I enjoy.  [00:16:19] Sam Wilson: Yeah, we can clearly tell that Eric, I certainly appreciate you taking the time to break down today. What it takes to grow a syndication business, even when working full time. For those that say it can't be done, you can clearly prove that they're wrong. You've done it from the road. [00:16:32] Sam Wilson: Mostly you've done it fairly rapidly and with precision, I think I think that's it. And you're clearly what your definition of the word impact you're impacting the people. And lives around you, both on the investor side and on the tenant side. So kudos to you for making it happen and doing what it takes to get it done. [00:16:49] Sam Wilson: If our listeners want to get in touch with you and learn more about you, what is the best way to do that?  [00:16:53] Eric Neely: Well, you can schedule a call with me if you go to my website, it's And then also if you listen to podcasts or you're on YouTube, look up the wealthy trucker, and the ability to connect with people on there as well. [00:17:08] Eric Neely: And  [00:17:08] Sam Wilson: that's FEBROS capital spelled F E B R O S Capital We'll make sure we put that also in the show notes, Eric, thank you again for coming on the show. Certainly appreciate it,  [00:17:20] Eric Neely: Sam. It was fun. I appreciate it.  

    The Golden Rule in Real Estate

    Play Episode Listen Later Jun 18, 2022 24:32

    Is it worth it to invest in gold?   Bringing in years of experience working for the oldest continuously family-owned and operated precious metals dealer in the US, Robert Goodin answers why we should add gold, silver, and platinum to our portfolio. Robert also gives his perspective as a real estate investor and talks about networking with leaders in the business, finding value in the market, and helping others get the financing they need.   [00:01 - 04:12] Networking is Key Robert shares his background Selling precious metals and side hustling in real estate on the side Building relationships with successful people    [04:13 - 10:25] Investing in Precious Metals Comparing the US dollar to gold Why gold is similar to real estate The potential of silver and platinum   [10:26 - 22:16]  Starting Small in Real Estate and Scaling Up Scouring the market to find value Turning around raw, underappreciated land How marketing and subdividing are keys to profitability What Robert and his team do to help people who are struggling to finance a property Working with notes and the importance of pre-payment penalty Finding the right people Robert's thoughts on debt   [22:17 - 24:31] Closing Segment The best piece of advice Robert has received Reach out to Robert!  Links Below Final Words Tweetable Quotes   “Gold still makes sense. Countries buy gold. Central banks are buying gold.” - Robert Goodin “You've got to know your market to be able to identify value.” - Robert Goodin “It's about the right people. You can kind of tell when somebody has your interest in mind.” - Robert Goodin -----------------------------------------------------------------------------   Connect with Robert at or 8556385616! If you want to know more about the precious metals market, check out their show, the Golden Rule Radio on McAlvany Financial's Youtube channel. They post every Thursday!   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Robert Goodin: There's been times when it only takes 50 ounces of gold or a hundred ounces of gold to buy the median home price in the states. That's a good trade. So gold buy real estate. If it's too high, it's over 200 being, I think, above the average. Well, real estate, may be a little too high compared to something else like a commodity gold. [00:00:31] Sam Wilson: Robert Goodin, a good old boy from Tennessee who believes in the golden rule, like his YouTube report, Golden Rule Radio, Robert, welcome to the show. [00:00:39] Robert Goodin: Hey, thanks. So glad to be here.  [00:00:41] Sam Wilson: Pleasure is mine. Same three questions I ask every guest who comes on the show: in 90 seconds or less, can you tell me, where did you start? Where are you now? And how did you get there?  [00:00:50] Robert Goodin: Yep. So I grew up in Tennessee, rural Tennessee, outside of Chattanooga, had a family who had some businesses. They were in the boat dock business Center Hill Lake, Dale Hollow Lake, Fontana back in the 50's, 60's, 70's. So my mom grew up. Doing that running the businesses with my grandfather. And so I kind of always had an eye for trying to recognize opportunity. You know, what makes sense, what makes sense in a business sense and societal sense. [00:01:20] Robert Goodin: And then what doesn't make sense when, when to not say something does work went to college at Sewanee: The University Of The South, got exposed to some of the, you know, older money crap. And my grandfather had always said, you know, those, those types of people can employ you. They can give you opportunity. [00:01:37] Robert Goodin: And it was about the people, not the education that I was going to get there 'cause it was totally different than what I expected walking in there. And so I recognize that he was a smart dude and he always said go west there's opportunity out west. I ended up right out of college, worked for SunTrust bank, did some mortgages, stuff like that for a couple of years. [00:01:57] Robert Goodin: And then, through a family that I went to college with, they had an opportunity here in Durango, Colorado. I quit my job cold Turkey at the bank didn't know what I was going to do, but I packed up my car and left Tennessee, headed out west, ended up in Durango, Colorado, and started working for them, met some more of the right people. [00:02:15] Robert Goodin: And I've been doing precious metals for the last 15 years. I worked for the McAlvany family. They're the oldest continuously owned and operated precious metals dealer in the states. The founder helped get gold legalized in the seventies. So I worked for a neat family and my side hustle real estate. [00:02:37] Robert Goodin: So I was at the real estate conference there, The Best Ever Conference, met you a few years ago, Sam, and then saw you again, not too long ago. So been doing side hustle real estate deals, started small scaling up and, you know, I sell precious metals as a, as a career, but the real estate thing's worked out well, Colorado real estate's been good to me.  [00:03:00] Sam Wilson: That's awesome. I love your story there. There's so much to pull out of that. The one, the one thing that I like what you said, which if you're listening that don't know about Sewanee and it's pretty probably one of the prettiest campuses. I think that existshere in the States. That's a, that's a gorgeous campus there in east Tennessee, but you know, it is, it is about I think building your network. [00:03:22] Sam Wilson: And I think that's a, that's a repeating theme I hear on the show. It's not, you know, the, the, the kind of overused phrase is not what it's, who, you know, but. It is, and it's putting yourself in those situations. And I think that's a, that's something that you just do over and over, right? I mean, it didn't end when you went to Sewanee, you had to continuously, and you still do put yourself in the right environment in order to grow. [00:03:43] Robert Goodin: That's right. Yeah. I think it is about the people. It's kind of like the saying don't marry for money, but look for love among the wealthy. [00:03:56] Sam Wilson: I've not heard of that. That's pretty good.  [00:03:59] Robert Goodin: You know, so my, my grandfather encouraged me to get involved with people, you know, who had businesses and, and learn from.  [00:04:08] Sam Wilson: Yeah, no, that's, that's absolutely, absolutely true. Tell me, you know, a little bit about, let's talk about gold and precious metals for a minute. I don't want to stay here for too long, but certainly want to hear, you know, what it is that you do, what you're seeing in the market, why people are going to gold. Just, just give us your overall market sentiments, because this is not something that I know that much about, and certainly don't specialize in a day-to-day.  [00:04:34] Sam Wilson: Sure. I think the interplay between the dollar being what everybody considers as liquidity and capital and gold, I consider gold capital. I go between gold and real estate. [00:04:50] Robert Goodin: The US dollar index right now, hit the highest level a few days ago since 2003. And it sure doesn't feel like the dollar is strong. If you go to the store and buy something. But there's weakness in Europe specifically that has been driving the dollar index way up. And I think it's, it's a better form of measurement to measure the dollar price in some commodity like gold instead of looking at the dollar index because the dollar index is at a high that it hasn't been, there was a high in 2020, and during COVID because the dollar was liquidity, it was the safe haven currency. There was a high in 2017, but the dollar poke just above that. And it hadn't been that high since 2003 on the index, right? Well, obviously you don't feel that buying something and being a consumer here in the states, but the dollar index is at a high. And the last two times a dollar index was, is a high 2017, gold was around 1212 to 1300. Then again in 2020 at a high again around where it is right now. And gold was in the 1600, 1650. [00:06:01] Robert Goodin: Today, Gold's around 1900. So you've got gold, kind of stair-stepping higher. And I think that's a better barometer for how powerful the dollar actually is. So I see gold as a safe haven going forward especially. And it is, there's some overlap between the real estate market and gold and silver, because you can do precious metals in your self-directed IRA. [00:06:26] Robert Goodin: So it's one of the reasons we were at The Best Ever Conference. You know, the, that group already, you, a lot of them have self-directed IRAs that they're doing real estate deals, Well, you can do precious metals in there as well. So there's a lot of overlap there and it's a mindset of a tangible asset. [00:06:43] Robert Goodin: You know, gold is basically real estate that you can move hide and, and trade and liquidate. Liquidity, it is a big, big thing I think, in today's market.  [00:06:52] Sam Wilson: Yeah. And certainly, certainly, you know, traditionally gold has been held as an inflation, you know, as a, as a hedge against. So, you know, seeing, seeing that, and I love, I love the idea of not heard anybody talk about that yet about comparing gold to the dollar index, because you're absolutely right. [00:07:10] Sam Wilson: None of us are going to, the, none of us are going to the gas pump or the grocery store and paying five or six bucks a gallon for diesel or gas. And then, you know, you didn't pay in 25% and 30% more for the same product and going, yeah. My dollar is buying a lot more. Clearly our dollars not buying more. And so that's a, that's a really intriguing kind of interplay between. [00:07:30] Robert Goodin: Yeah. I think it's about what you measure it against, you know, measuring anything against anything. There's kind of a relationship between gold and the average price of a home in America where it takes average 200 ounces of gold to buy the average house. [00:07:45] Robert Goodin: So I'm not just measuring it in price of the home or price of the piece of property, if you look at certain times and periods over time, there's been times when it only takes 50 ounces of gold or a hundred ounces of gold to buy the median home price in the states. That's a good trade. So gold buy real estate. [00:08:04] Robert Goodin: If it's too high, it's over 200 being, I think about the average. Well, real estate may be a little too high compared to something else like a commodity gold. So it's a a way to measure something. We do that with golden silver. We look for which one is undervalued or overvalued at any time, and there's a relationship that they have, that there's a consistent range that you can actually trade. But anyway, let's jump to real estate. If you want to. I don't know where...  [00:08:29] Sam Wilson: I certainly do. I've got one last question for you in, in the precious metals markets. Where do you think, today, which we're recording this and obviously this can change even by the time this goes live, today is May 3rd, 2022. And we're recording this. What is the value play right now in precious metals, the gold, silver, palladium. What is it?  [00:08:49] Robert Goodin: Yep. I would say. It was silver and platinum. Silver is about half of its all time high. What other commodity is half of it's all time high? Most of the other commodities are at all time highs. [00:09:04] Robert Goodin: So silver has a range that it's previously traded, that it could double from here and just be pushing back to an all time high. I think it's ultimately going to a higher, all high time high. But silver's good value. Platinum is about half the price of gold. Platinum is 5 to 10 times rare than gold, about 12% of its supply comes from Russia, which could put some strain on the price of platinum. [00:09:29] Robert Goodin: And so platinum's usually about one-to-one or even higher than the price of gold. So selling it a 50% discount to gold, I think platinum will ultimately have the day in the sun being a number of thousands of dollars an ounce. And right now it's below a thousand. With that said, I also like gold as kind of the ballast of the ship, right? [00:09:49] Robert Goodin: Gold is less volatile than the other industrial metals, like silver and ,platinum have a lot of demand from the industrial side. So I I'd say that gold still makes sense. Countries buy gold. Central banks are buying gold. They turned to net buyers of gold. So I like to have a mix because at certain times one can fluctuate dramatically to the other one. [00:10:08] Robert Goodin: And I would maybe sell ounces of gold to buy silver or vice versa. But silver and platinum are definitely your, your underappreciated prized assets right now in the metals.  [00:10:18] Sam Wilson: Awesome. I love it. Thanks for taking the time to break down your industry expertise there in the precious metals markets. Appreciate that. Let's talk about real estate. What's a, what's a deal you're involved in right now? Kind of, kind of just give us a case study on one of those.  [00:10:33] Robert Goodin: Sure. I started small. And I was patient probably shouldn't have been, being in Colorado in 2007. You could have bought anything from between 2007 and 2020. [00:10:48] Robert Goodin: And it was a good value, but I, what I did is I, I got on, I got my buddy, who's a partner of mine to, to set me up with a list of all the properties that are coming to the market. As soon as they get posted, I get an email and I would just scour through those. Look for what's out there because you've got to know your market to be able to identify value. And so I waited years, but I was looking at every single thing coming on the market, not in just set the range tightly of what I could afford. I set the range pretty wide because certain properties may be way out of your reach in terms of being able to buy it, and make it work, and be profitable, and produce income. [00:11:32] Robert Goodin: But there may be something to that property that's out of your reach, where you do want to go use debt and actually make it work because you've got these added value things on there. So I, I was too patient at first in 2007 to about 2010, but I wanted to really look at what the, being able to identify value. [00:11:53] Robert Goodin: What is the value? So I scoured through all the properties coming on the market for awhile before I really selected something that made sense 'cause then I knew that I was buying value. I knew what else was out there.  [00:12:04] Sam Wilson: Right, right. What were you buying?  [00:12:07] Robert Goodin: Single-family home at first, but also before that, buying land. Raw land, kind of just underappreciated and land that, you know, I can buy it at a lower value than what I thought it was worth. And ultimately a lot of those pieces were not marketed well. It was kind of finding a crappy realtor who didn't know what they were doing, and buying land, and then turn it around, and selling it. [00:12:36] Robert Goodin: So I think my first deal was like, I paid like 16 grand cash for a deal. Six weeks later, I sold it for 64. So, you know, since then I've done similar things and it's worked out. I hadn't lost money with it. And you know, we just, we're about to cash out on one and we've been looking for opportunity again, the same way, looking across the board to find a piece that's valuable, you know, under, underappreciated, but valuable. [00:13:03] Robert Goodin: And there's just nothing there, Sam. I mean, we've looked at within three or four or five hours from where we are, and we're probably not going to 10 31 exchange because there's just nothing there yet.  [00:13:16] Sam Wilson: When you say there's nothing there to buy, you're saying that there's no...  [00:13:19] Robert Goodin: No good value. [00:13:21] Sam Wilson: And you're saying the land and the land market?  [00:13:24] Robert Goodin: Land. Specifically land.  [00:13:26] Sam Wilson: Were you guys taking that and subdividing that and selling them off as parcels? What was, what was your strategy?  [00:13:32] Robert Goodin: Some doing that as well as just flipping. And I know that kind of goes against a lot of maybe what some people are familiar with being able to flip land for a profit. Right. But yeah, subdividing was, was also key in the profitability.  [00:13:49] Sam Wilson: Yeah. I mean, what are you guys, and I went, I've had a couple, you know, intense land investors on the show and we've, we've bonded into depth. Certainly try to find them, put those episodes in. I don't, but you know, but, but put those episodes in the show notes, but what, what were you doing? 'Cause it does kind of go against the grain. If you came to me and said, Hey man, here's a piece of land that's put on the market for a year as not sold, but I want to buy it and sell it for a lot more. I'd be like, no, I'm not in. What you do differently? [00:14:17] Robert Goodin: It was poorly marketed. That was really it. Getting really good pictures, talking about elevation, but like specifics that added a little bit of value to somebody just walking across the board and seeing it. But mostly the splitting of land was, was the profitable one.  [00:14:33] Sam Wilson: Who was the end buyer?  [00:14:36] Robert Goodin: Ah, yeah. Good question. Because that is key. They were people who couldn't afford to get a standard bank loan. So a lot of it was, we bought it, split it, and owner financed. So we carry the note and that allowed somebody to get into some place that they could camper drop a mobile home and we'll look to doing some mobile home parks. [00:15:03] Robert Goodin: And a lot of them are just, we're just overpriced. But a small scale of that was allowing somebody to not have to put 25-35% down. We'd take 10-15% down and owner finance it. And then, you know, a year or two later, we'd sell the note, full face value note and move on. Also it helped them to get traditional financing. [00:15:26] Robert Goodin: So my parents did that a little bit in Tennessee with renters. They would help the renter, you know, improve their credit score and get to the point where they can actually buy. And so you're doing, you're adding value to somebody who can't get into a property because they just can't afford it.  [00:15:42] Sam Wilson: Right. Right. Or they just, are they just, for whatever reason don't have the skillset, the skillset or the, they're not lendable from a, from a bank standpoint.  [00:15:51] Robert Goodin: Correct.  [00:15:52] Sam Wilson: Right. And I think that's a great way. Certainly done plenty of that as well.  [00:15:55] Robert Goodin: And it, and it was about the people. I mean, we did look through who we were going to be lending to, instead of just taking whoever's out there, because good people just need a lift up a little bit.  [00:16:10] Sam Wilson: Oh yeah. Oh yeah. Done plenty of that. Where, where you have people that, you know, making six figures a year, but have made some mistakes a few years before and they're just, they just can't get bank financing. [00:16:20] Robert Goodin: That's right.  [00:16:21] Sam Wilson: Those have been excellent, excellent products where you're like, okay, put your money down. And they pay on time and it's great. Who did you end up? Who's an end buyer of notes on things like the on ?  [00:16:33] Robert Goodin: We knew a few people who were willing to buy it. And one thing I learned in that process is to always have a prepayment penalty because a buyer doesn't necessarily want to get into the due diligence of looking at buying the note, and then they buy the note. [00:16:51] Robert Goodin: And then they get bought off, you know, the, the borrower pays the thing off the next month. They didn't collect anything. They did a lot of due diligence. And so the prepayment penalty was key in actually finding a solid buyer. That was something we learned in the process.  [00:17:08] Sam Wilson: Yeah. Were there any other surprises along the way, maybe that you've learned in your real estate investing?  [00:17:15] Robert Goodin: It's about the right people. And I mean, that's one of the reasons that I think you and Ibecame friends, I'll call it. That is, you know, you, you can kind of tell when somebody has your interest involved or in mind. And, you know, we named our YouTube show Golden Rule Radio after treating somebody how you want to be treated. And it's about the people, whether it's somebody who is your client, whether it's some partner, whether it's, you know, the person who you're lending to, it had to be the right fit. [00:17:46] Sam Wilson: That's great. Yeah. Absolutely. Absolutely. But no, I think you're absolutely you're spot on. I mean, that's the thing we, we talk about all the time here is, is, is when you're a passive investor, especially it's gotta be the know, like, and trust factor. And if that's not there, then like, what are, what are we absolutely doing? [00:18:03] Sam Wilson: Tell me, give me your thoughts on using debt and leverage. I mean, you're a precious metals guy that typically puts you in a, in a less, in a more risk averse category, right? You kind of aren't you aren't running mainstream with everybody. So that would probably, in my opinion, lend itself to not being in love with debt, like the rest of us real estate sickos are. Is that a fair assumption or what are your thoughts that?  [00:18:30] Robert Goodin: One of the main reasons that I haven't been using debt is my partner doesn't like that. I'm okay with it if it makes sense. I like fixed rates rather than variable, especially with the interest rate environment. [00:18:39] Robert Goodin: I think we're going to see over the next five to 10 years, you know, fed chairman's talking very similarly about how Paul Volcker back in the early eighties raised interest rates to curb inflation. Well, he, the current president and the fed president, he, he knows who butters his bread and I think there's maybe not as much interest rate hikes coming as maybe they think, but that's a whole nother conversation. [00:19:06] Robert Goodin: I'm okay with debt fixed rate. I like it, but my partner doesn't want that.  [00:19:12] Sam Wilson: It doesn't want that. I mean, what, what are, what are some of his maybe, I mean, cause obviously you agree with him because you continue to invest with him. So what are some of the thinkings that you get that you, you're in alignment with? Why you say, Hey, you know what, I'm good not using well.  [00:19:25] Robert Goodin: Yeah. You know, with land deals, I think there's a lot more risk than something that's an income producing property with what you're doing, Sam. I really like what you're doing, you know, because you, you've got kind of an already formed a business model. [00:19:38] Robert Goodin: Right, right. You know, kind of what to expect, like where you can add value, where you can improve the bottom line, the land deal. Do you not going to produce income like you would with your, your deals. So there is a lot more risk there getting stuck with the property. We didn't want to be making payments on these land deals if we couldn't move it. So different category, I'd say in the real estate market that actually made us kind of be more of a cash buyer rather than borrow, borrowing on it. I have used debt. I bought a vacation rental 2020, right before COVID hit and there was a value-add type of property completely renovated it. [00:20:20] Robert Goodin: It's paying for itself. We're using it about half the year banded for itself and I've been offered double whatever it for. So I I liked that. I looked at borrowing on another unit this week and, you know, the, the terms on it were more, mainly almost 6%, just a, you know, a longer term rental. And so rates have definitely affected things and are going to continue. So it has to make sense. You've got to, you gotta be a numbers guy, like you are to make that doubt work for you and know what you can expect to be able to pay and have your margin.  [00:20:56] Sam Wilson: I was talking to an investor. Gosh, just before this call. And he called and he's like, Hey, you know, we're having a big cash out on the sale of one property, buying something else. [00:21:06] Sam Wilson: So I'm going to have cash from that. And he goes, but on the new acquisition, do I use cash to buy it? Do I put a HELOC on that property? It's the small farm homestead properties like, man, I could get, or do I get long-term fixed rate? You know, which way do I, when we, we kinda just went through the mechanics of all of it. [00:21:22] Sam Wilson: No. I'm not comfortable with the interest rate risk right now. You put a HELOC on a property and maybe it's a half a million or a million dollar property. And we hit 16, 18% interest like the early eighties. Whoa. That's a tough nut to cover every single year. And I doubt you're gonna be able to do that on a million dollar property. [00:21:40] Robert Goodin: That's right.  [00:21:41] Sam Wilson: Yeah. I mean, so that, like you said, you know, it cuts both ways. That's a, that's a beautiful thing when properly structured, but improperly structured and, and it. It can really, really, absolutely hurt you.  [00:21:52] Robert Goodin: I've used variable rate, you know, in a fluctuating rate that HELOC, I've got those set up to be able to use those for a short amount of time. [00:22:00] Robert Goodin: Like, I know when I'm going to be able to pay that back. Right. Very versus something that I'm going to buy and hold for a while. I'm good with the fixed rate and I'll pay a higher rate even on a fixed rate, something like that.  [00:22:13] Sam Wilson: Yep. No. Good. Couldn't agree more with you. One last question here, Robert, before we sign off, certainly appreciate you taking the time to break down the, the precious metals markets for us. [00:22:21] Sam Wilson: Tell us, you know, about your land investing, investing in short-term rentals, your thoughts there on debt. And you know what you know, I guess the other cool piece you brought to the table was that was the U S dollar index and how maybe that's a fault. Indicator of what the dollar is actually worth. [00:22:35] Sam Wilson: I hadn't heard that before. Certainly also really enjoyed that and just got love, love what you've done in real estate and the precious metals markets. If there were a piece of advice that you've received from a mentor over the years, you'd say, man, that's the best piece of advice I've received. Any idea what that piece of advice would be? [00:22:51] Robert Goodin: There's two types of people in the world. One pays interest, one earns interest. So, you know, you can relate that to debt or you can relate it to the deals you're doing, which you know what you're going to earn from it, you know, to, you know, you've got some variables, but you do have the numbers down. [00:23:10] Robert Goodin: I like what you've sent me in the past. You have the numbers down and that's what matters. So you're either going to be paying interest. And not earning or paying interest and having a margin. And that's what I think you're about. What's your deals. I like it.  [00:23:26] Sam Wilson: Awesome. That's cool, man. Robert, appreciate you coming on the show today. If our listeners want to learn more about you, what is the best way to do this?  [00:23:33] Robert Goodin: They could email me It's M C A L V A N Y. The YouTube show that I do that posts every Thursday is called Golden Rule Radio. It's on the McAlvany Financial channel on YouTube that comes out every Thursday. It's about 10 minutes, metals market specific, but email or call. My direct line is 8 5 5 6 3 8 5 6 1 6.  [00:24:02] Sam Wilson: Awesome. Robert, thank you for your time today. I do appreciate it.  [00:24:05] Robert Goodin: Thanks, Sam. My pleasure. 

    Three Secrets of the Wealthy

    Play Episode Listen Later Jun 17, 2022 16:15

    Often in the media, Rennie supports individuals and business owners to create work as a choice, instead of a requirement, just as he did for himself. Complete Financial Choice® As a highly rated instructor at the University of California in Los Angeles (UCLA), Rennie uses his award-winning, #1 best-selling book, Wealth on Any Income, to teach the effective money skills from both the emotional and psychological aspects, as well as the practical components. His book has been translated into eight languages. Stay tuned and listen to Rennie Gabriel and his knowledge of the secrets of being wealthy. [0:00 - 06:53] Opening Segment Rennie Gabriel is the author of the best-selling book Wealth on any Income. It's been translated into eight languages, just as a Fun Fact: He failed high school Math and was broke at age 50, and is now a multimillionaire He considers himself an execution master, and he works side by side with people he calls visionaries. Rennie realizes that most of his success happens when he does it with other people and failures come when does it alone.   [06:53 - 13:13] How to Handle Money Powerfully: The Foundations Doing an income and expense report:  How Rennie was taught to help other people by maintaining or enhancing their wealth, but not how to do the day-to-day items regarding money. He discovered this and shared it in his book,   He now has enough, Rennie says that if he can continue to donate to charity the happier he can become. Setting aside 10% of your income for Emergency.  This is his challenge to most people. [13:14 - 16:34] Closing Segment   Reach out to RennieSee links below  Final words Tweetable Quotes   “If I look back at my situation where at one point I had to actually, collect soda bottles and cans to get the refund money, to buy food for my family. When I look at the tens of thousands of dollars a month of income now, and I'm living on maybe 40, 50% of that, I've got enough. If I can continue to donate to charity. The thousands of dollars that we donate. I mean, granted, it could be more, but it's enough. “ - Rennie Gabriel   “The more money I can donate to charity. The happier I am”-  Rennie Gabriel   ----------------------------------------------------------------------------- Connect with Rennie Gabriel. Visit the following    Resources Mentioned:Wealth on any Income The Richest Man in Babylon  Connect with me:   Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below: [00:00:24] Sam Wilson: Rennie Gabriel is the author of the best-selling book wealth on any income. It's been translated into eight languages, just as a fun fact, he failed high school. Math was broke at age 50 and is a multimillionaire by the age of 58 Rennie. I am looking forward to jumping into today's episode and learning about you and your story.    [00:00:55] Sam Wilson: Welcome to the show.     [00:00:56] Rennie Gabriel: Thank you, Sam. My pleasure to     [00:00:58] Sam Wilson: be here. Pleasure's mine. Three questions. I ask every guest who comes to the show in 90 seconds or less. Where did you start? Where are you now? And how did you get there.     [00:01:06] Rennie Gabriel: Where I started, I've always been an entrepreneur. And I guess I could say in terms of real estate started pretty much at 50, after two divorces and the business failure, that's the reason I was broke.    [00:01:17] Rennie Gabriel: And where am I now? Don't have to work for a living because of the rental income from the properties we have.     [00:01:23] Sam Wilson: That is fascinating. I'm looking forward. Looking forward to this always been an entrepreneur. You said two divorces and a business failure. Can you tell us what were some lessons you learned in that business failure?    [00:01:38] Rennie Gabriel: Biggest lesson is that when I have partners, I have success. And when I do things on my own it's mediocre or a failure.     [00:01:47] Sam Wilson: Okay. Break that down for us. Cause one of the things even though we talked about here off air was that building wealth is a team sport. So can you talk to us about that?     [00:01:57] Rennie Gabriel: Absolutely. So I had a pension administration company in the 1980s.    [00:02:03] Rennie Gabriel: I had two partners. We sold it off to a public company. I had a lot of money at the time and that was the first time I could choose to work or choose not to work. Then I got divorced, so I kind of ate that up. I had an art gallery business that failed and I was the solo person involved in that art gallery business.    [00:02:24] Rennie Gabriel: In the real estate business. When I started at age 50, I had my wife as a partner and a realtor and the three of us, Worked together. And what I recognized, at age 50 and looking backwards, the successes who are when I had partners and didn't do it alone. And the failures were when I tried to do things by myself.    [00:02:46] Rennie Gabriel: And then I decided to be an angel investor and really saw the value of partnership from this standpoint. Oh, Sam, you know who Warren buffet is, right? I've heard the name. Yeah. And probably also know who Charlie Munger is. Do you I've heard the name. Okay. But most people, when I ask that question, they don't know who Charlie Munger is, but he's half of Berkshire Hathaway.    [00:03:11] Rennie Gabriel: Right. And you go Steve jobs and Steve Wosniak you go to Elon Musk, Elon admits he knows nothing about building cars or rocket ships. But he has execution masters. Elon is a visionary Warren buffett's a visionary. Steve jobs is a visionary and what they have in their business organizations are people who can execute on those visions.    [00:03:35] Rennie Gabriel: In the real estate business, we had a realtor who was a visionary. And I was the execution master. I had taken a class at UCLA on how to manage apartment buildings 14 years earlier. So I took care of the tenants. I, oh, I met the plumber at the job site, or I met the painter at the job site and he found the properties.    [00:03:56] Rennie Gabriel: We bought the properties by X, but I executed on keeping tenants, happy renting showing units.     [00:04:03] Sam Wilson: Now is that what you guys did? You went into the multifamily space and that was what really set you up to financial     [00:04:09] Rennie Gabriel: independence? Yes. As a matter of fact, when I met my wife she, and this realtor had three rental houses and I said, Well, I actually have a bias against rental houses.    [00:04:21] Rennie Gabriel: I think we should buy a multi-units and now again, I was broken 50, but what I did was I took a principal that's 5,000 years old and I paid myself first and I was making 5,000 a month. I set aside $500 a month. And in three years I saved up a whopping $18,000. Right. And that's what was used to be a partner in the first property we bought, which was a triplex.    [00:04:50] Sam Wilson: Got it. Oh, that's wow. That's a long, I mean, saving $500 a month for three years in order to accrue 18,000 in investible, capital is a, that's a lot of plans.     [00:05:02] Rennie Gabriel: Yeah. Yeah. Well, I was looking at the future from the standpoint of, oh my gosh, I'm flat broke. Like I said, two divorces in business failure at age 65, 15 years from then, am I going to be eating cat food or am I going to eating tuna?    [00:05:17] Rennie Gabriel: And it was out of that desperation I said. I've got to make this work. And this principle has worked for 5,000 years. It's going to work when you and I are dust. I got to get serious.     [00:05:29] Sam Wilson: Right. No, I liked that, that they do put tuna and cat foods. So you could have it both ways if you go to the shop or pet shop.    [00:05:39] Rennie Gabriel: Yeah But I don't know if it's the quality tuna.     [00:05:42] Sam Wilson: Just want to throw that out there that may, maybe that you might have a dietary meet in the middle, if you really wanted to that. That's really cool At what point in time did you really start to see success though? I mean, 18,000 bucks, three years in you get your first triplex    [00:05:56] Sam Wilson: when did you finally know man, we're on the pay dirt and I got the traction going that I've, I've been working so hard for,     [00:06:02] Rennie Gabriel: I'd say in another couple of years, what I could see as this property was increasing in value because we were able to remodel it. Now I put physical labor into it.    [00:06:11] Rennie Gabriel: We'd re rented it. We increased the rents and with multiunit properties. The value is a multiplier of the gross rents. Right. Really simple. And so I could see my gosh, this is working. I borrowed money to make down payments with my wife and the realtor. And we went from that first three in a purchase within five years, we added another 47 units.    [00:06:36] Sam Wilson: Right. Yeah. And that was enough to really set you up for success. Is that what your book is about wealth on any income? Can you kinda give us kind of the backstory on the book and the principles that we may learn in that?     [00:06:48] Rennie Gabriel: The backstory on the book has nothing to do with how I made all this money in real estate.    [00:06:53] Rennie Gabriel: It's the foundational concepts of handling money powerfully. The first third of the book deals with the emotional stuff. That's in the way of people actually taking action. And okay. Sam, let me ask you a question. Let me put you on the spot here     [00:07:08] Sam Wilson: Sure.    [00:07:09] Rennie Gabriel: Do you know anyone who is obese? Yup. Okay. Let me ask you, do you know what the two primary things are for someone to lose weight?    [00:07:18] Sam Wilson: Well,     [00:07:19] Sam Wilson: 80% of his diet, 20% of its     [00:07:20] Sam Wilson: exercise. Okay, fine. So if they move and they change their eating, they can lose weight for sure. Do you think there's an obese person who doesn't know that.     [00:07:31] Sam Wilson: Nope. I think people maybe don't I think it will get it. Flip-flop I think it's 80% exercise, 20% diet.    [00:07:36] Sam Wilson: But outside of that, no,     [00:07:38] Rennie Gabriel: okay so I    [00:07:39] Sam Wilson: know the two ingredients, they just mailed the mixtures wrong.     [00:07:42] Rennie Gabriel: Yeah. So they know the two ingredients and the knowledge is the booby prize. Right because there's emotional stuff. That's in the way of them taking any action, whether it's reducing what they eat or moving. Right.    [00:07:54] Rennie Gabriel: And so the first third of the book has to deal with getting that emotional stuff out of the way, dealing with the messages. Someone may have been taught as a child, determining what they want out of life and that they can have it. And then I can, the latter two thirds are the tips and techniques of handling money powerfully.    [00:08:11] Rennie Gabriel: we talked about my being broke. I was also certified as a financial planner. Okay, but did not know the basic foundations of handling money, how to do an income and expense report. What to look for in a balance sheet for personal wealth, I was taught how to help other people maintain or enhance their wealth.    [00:08:33] Rennie Gabriel: Right. But not how to create a personally, not how to do the day-to-day items regarding money. And that's what I discovered. And that's what I have in the book, because. You probably have people in your sphere that make a lot of money and burn right through it. Yep. And I was the same way. I thought if I just made more money, things would work out and up until 50, I would make more and more money and have nothing to show for.    [00:09:02] Rennie Gabriel: I lack the foundation. I mean, I literally went 6,500 a year as a school teacher to $102,000 in sales per year. And I went from a hundred dollars a month short as a school teacher to $2,000 a month, short earning over a hundred grand.     [00:09:23] Sam Wilson: Right. So you were, it doesn't matter how much money you make.    [00:09:26] Sam Wilson: You were still losing money on a month, over     [00:09:28] Sam Wilson: month basis.    [00:09:29] Rennie Gabriel: Exactly. And so I had to turn that around again, that's a part of the process at age 50, paying myself first, making sure that how much money came in, we were able to set aside reserves. I took care of the financials because I finally learned what to do.    [00:09:46] Rennie Gabriel: Right. And that's why. Eight years later, I could choose to work or choose not to work.     [00:09:51] Sam Wilson: I love that wealth on any income is the name of the book. If we want to get in touch with you or not get in touch with you, but if we want to actually find that book, where can we buy that?     [00:09:59] Rennie Gabriel: The best place is my website wealth on any, because that way I can donate a hundred percent of the price of the book to charity.    [00:10:10] Rennie Gabriel: If they get it from Amazon, I get like a buck big deal.     [00:10:13] Sam Wilson: Right, right. Yeah. And I think that's a cool point to make is that because you don't need the proceeds from these books, sales, you're able to donate a hundred percent of that profit to animal. And what'd you say animals and veterans     [00:10:24] Rennie Gabriel: veteran charities correctly now.    [00:10:26] Sam Wilson: That's really cool. That is really cool. What's a challenge, I guess, since you've, you've been able to achieve financial independence, but what's a challenge you find right now that you're trying to overcome.     [00:10:37] Rennie Gabriel: being able to let go, my kids are talking about, Hey dad, when you pass away, we don't want these properties.    [00:10:44] Rennie Gabriel: We're not going to take care of these properties. And you ought to have a management company in place because you're going to get old, you're going to die and what's going to happen. And so I started interviewing management companies and the difficulty is. I've run the properties I've met.    [00:11:00] Rennie Gabriel: It's a property that was taken care of the tenants through this entire pandemic. 100% of my tenants have paid 100% of their rent and only one of them needed assistance from the government program. Wow. I don't know of a management company. I don't know of another landlord that can talk about     [00:11:21] Rennie Gabriel: that     [00:11:22] Rennie Gabriel: And when I started interviewing management companies, my assistant said, you know, Rennie, I've been looking for an apartment and one of the companies you interviewed had eight properties I had applied for or gone to see, and they don't get back to.    [00:11:40] Rennie Gabriel: I mean, the person who showed me the property said, if I want to turn in an application, I got to call the management company. I call the management company it's two days later before they even get back to me. Jeez. So guess what? They're they, it all looked good when I interviewed them, but with the experience of my own assistant, I could see, they can't do the kind of job I can do.    [00:12:05] Rennie Gabriel: So what's going to happen is I'm going to tell the kids when I dropped dead, sell the properties, you've got to step up in basis. Have a good time,     [00:12:13] Sam Wilson: right? Yeah. Looks like you guys just to find a good realtor and call it a day. Yeah. Wow. That's it. And so I guess out in the spirit of that question, are you still acquiring assets or is what you have right now?    [00:12:25] Sam Wilson: The bread basket. He said, Hey, this is what I've got for the duration. And I'm done. Where are you in your inbox?     [00:12:30] Sam Wilson: I'm done. I've got enough. We've got more money coming in. Then we need to live on. We're able to set a lot of money aside anyway, so that, yeah, I've ha I have enough.    [00:12:42] Sam Wilson: I'm done.     [00:12:43] Sam Wilson: Talk to us about that. Cause for most people enough, there is never enough. How did you figure that out?     [00:12:50] Rennie Gabriel: Well, I talked about having been broke. If I look back at my situation where at one point I had to actually collect soda bottles and cans to get the refund money, to buy food for my family.    [00:13:02] Rennie Gabriel: When I look at the tens of thousands of dollars a month of income now, and I'm living on maybe 40, 50% of that, I've got enough. If I can continue to donate to charity. The thousands of dollars that we donate. I mean, granted, it could be more, but it's enough.     [00:13:21] Sam Wilson: That's awesome. So it sounds like you've achieved financial and time and independence.    [00:13:26] Sam Wilson: And your main motivation is that you want to devote or donate to charity and to put it where you want be.     [00:13:34] Rennie Gabriel: That's it. It's the more money I can donate to charity. The happier I am. You do     [00:13:38] Sam Wilson: talk to a lot of people, I'm sure, because of the book about finances, what are some of the, what are some of the repetitive conversations you feel like that you have that you just go, this is something I think everybody needs to hear.    [00:13:52] Sam Wilson: Maybe save you the time of having that conversation all over again     [00:13:55] Rennie Gabriel: it would be such a simple formula. if someone just lives on 80% of the money that's coming in, they set 10% aside for when things go wrong, the car breaks down, they need registration expenses back to school, clothing for the kids, whatever I've found for hundreds and hundreds of people.    [00:14:13] Rennie Gabriel: It's an average of 10%. Sometimes it's 15 and the 10% they keep for the rest of their life. It comes from the book, the richest man in Babylon from a hundred years ago. Right. That formula 80 10, 10 will help anyone handle money powerfully.     [00:14:31] Sam Wilson: yeah. liked that book. That's a good idea.    [00:14:34] Sam Wilson: Very wise and easy, certain read. Are there any other resources you would direct our listeners to? I mean, because this is a topic that people talk about a lot. They go, it's at the front of most people's minds. Are there other resources you direct people to, that you feel like would be a value.    [00:14:49] Sam Wilson:     [00:14:49] Sam Wilson: Yeah, actually they, I've got a nine step roadmap on my website and they can hear my Ted talk as well. and this nine step roadmap comes with 27 pages of explanation on how I went step-by-step from broke to philanthropic.     [00:15:07] Sam Wilson: That's cool. Awesome. And we can find that there on your website wealth on any,     [00:15:13] Sam Wilson: correct.    [00:15:13] Sam Wilson: And then just put forward slash TEDx. And they'll see the roadmap and can hear the Ted talk, man.     [00:15:19] Sam Wilson: That's fantastic. Rennie, are there any other closing thoughts you have here for our listeners today, as it pertains to how you've achieved financial independence investing in real estate, living on wealth on any income, anything else you'd like to share with the listeners before we close out?    [00:15:33] Rennie Gabriel: Just a reminder that wealth creation is a team sport, not a solo sport     [00:15:38] Sam Wilson: I love it. Rennie, thank you so much for your time today. Again, we can find you on wealth and Appreciate you coming on the show today and look we're connecting   [00:15:46] Rennie Gabriel: soon. Thank you, Sam. My pleasure. Thank you so much.  

    Keeping Your Fingers On The Industry Pulse

    Play Episode Listen Later Jun 16, 2022 19:49

    Real estate investing has long been one of the proven ways to become wealthy. But like any other business, it's not as easy as it sometimes appears. Wesley Yates is the Co-Founder of VFR Capital Investments, a real estate investment company focused on the acquisition, management, and disposition of opportunistic to core-plus multifamily assets that can be repositioned on behalf of and for its investors. With his years of experience in real estate space and management, he shares valuable lessons on how you could start investing in real estate with little capital, finding the best people for your team, and how to qualify deals.   In late 2018, he turned down an Operations Management opportunity with Amazon to begin actively networking within the real estate investing community. Quickly building relationships with other like-minded entrepreneurs, he has created an extensive network of accredited investors who believe in his vision for methodically acquiring commercial assets.    Wesley is an enthusiastic leader and brings with him skills crucial to building successful teams and driving performance.   [00:01 - 03:14] Walking Away From a Job Opportunity to Get Into Real Estate Get to know Wesley Yates How Wesley led his team in growing their portfolio from zero to 862 units in just a little over 15 months   [03:15 - 09:11] Learning from Failure Experiencing his first failed deal Putting up his own team together  Achieving self-confidence with his wife's support Being willing to admit defeat and reflect on what went wrong   [09:12 - 17:31] Tips on How to Stand Out and Succeed in Real Estate The bad advice he received while scaling When it is best to get greedy Learning to say No Take the time to build relationships with the gatekeepers How Wesley leaves a good first impression Know who you are working with   [17:32 - 19:49] Closing Segment The best piece of advice Wesley has ever received Reach out to Wesley!  Links Below Final Words   Tweetable Quotes   “It's not a matter of when you hit a problem. It's not a matter if you have a problem. It's a matter of when. So who you have with you fighting those is really going to determine on how successful you are.” - Wesley Yates “Sometimes you got to look yourself in the mirror and just really go, what do you want? What can you live with? At the end of the day, what can you live with? Can you live with saying, I failed to chase a dream? Or I was too scared to try?” - Wesley Yates “You can't make a bad deal good. But you can make a good deal better.”  - Wesley Yates -----------------------------------------------------------------------------   Connect with Wesley Yates for commercial real estate investment opportunities! Visit the VFR Capital Investments now and follow them on Facebook and LinkedIn. Email Wesley at  Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below: [00:00:00] Wesley Yates:  One thing I will say and whatever advice you're taking it from vet out who is giving it, right? So if someone's telling you it's okay to overpay, meaning you know what if it's a good deal and you believe in it, then it's okay to get more aggressive on your price.  [00:00:28] Sam Wilson:  Wesley co-founded VFR Capital Investments, a syndication company that is owned by a team of veterans and first responders. He served as the CEO and he's led his team and growing their portfolio from zero to 862 units in just a little over 15 months, estimated about $70 million in assets under management, Wesley, welcome to the show.    [00:00:47] Wesley Yates:  Thanks, Sam. I appreciate you having me on.   [00:00:49] Sam Wilson:  Hey, man pleasures mine three questions I ask every guest come to the show 90 seconds or less. Where did you start? Where are you now? How did you get there?   [00:00:56] Wesley Yates:  Where did I start? I started at the bottom. Where am I now? Closer to the top? How did I get there? A lot of hard work racking my brain and most importantly, having the right team by my side. Because it's not a matter of when you hit problem. It's not a matter if you have problem. It's a matter of when. So who you have with you fighting those is really going to determine on how successful you are.   [00:01:20] Sam Wilson:   Man, I love that. That's absolutely right. Tell me when did you decide to take the plunge from smaller deals into larger deals?   [00:01:29] Wesley Yates:  So yeah, like a lot of people I think, you know, they started with residential, really wholesale. And I was more like a plus one. My wife was the one that was really in real estate. I was on a contract to go to Amazon. So I'm like, Yeah, I'm just here, you know. So as I was networking, it was really that was the story. But I got a phone call on July 19 of 2019 said, Hey, do you want to do some syndication? I said, Do I need a license for that? They laughed. I was serious. But showed up the very next day and just started networking had about 250 cards in my pocket after the first event. First conversation went something like this, Hey, what do you guys do? They said, You know, we're investors, investors, investors, I'm LP and this many doors, all that what do you do? Oh, I'm gonna be raising capital for a group. That's, you know, syndicating multifamily. They asked me, you know, the typical questions, what's your cash on cash? What's your target IRR? What's your total returns holding times? I didn't know a single thing that they had said. So I reverted back to my old days of being a leader in the military. You never could say, I don't know, you could say I will get you the answers. So that's exactly what I said. You know, those are great questions, I'd really like to get you the right answers. So whenever we get closer to ironing out our numbers, I'd like to be able to get those to you. Do you have some way for I can reach out to you later on? Boom, boom, boom, five cards, went back to the group that invited me there. said, Yeah, I have no clue what cash on cash IRR. So back and forth, I went for a good hour and a half of that event. And still, by the end of it was having full-blown conversation. So cared more about the journey ahead and building momentum than how dumb I looked asking what people would call dumb questions. So that's where I started. And that was, you know, was that almost three years ago now? So   [00:03:15] Sam Wilson:  Oh, and so you started off raising capital for somebody else? Yes, sir. And is that what you do now?   [00:03:23] Wesley Yates:   No, I will like I am now in a more the CEO route, found out that I was better with my brain doing the operations overseeing the formulas, the processes, you know, I've got the whole six sigma training, the, you know, I was gonna go work at Amazon as one of their manufacturers was the operations managers. And so a lot of tracking performance, tracking efficiency, you know, driving that all forward. And so that's kind of what I did to our team and our processes is put a manufacturing engineer mindset to it. And we really started cranking out some deals. But it wasn't until I put, I guess, my own team together that I ever closed the deal our first year and a half of syndicating with other teams, I was not successful.   [00:04:11] Sam Wilson:  What do you mean by that? You were not successful? I mean, if you're putting deals together with other teams, did all the deals fall through today?   [00:04:18] Wesley Yates:  Just yeah. So in a nutshell, the, you know, as I was raising a capital A, you know, raising capital for that first role for that first team. You know, there were some things that I found out later on, once we really got into due diligence of our first deal, kind of notice that or some unethical things that have been done in the underwriting some unrealistic things that had been changed in the underwriting to just make numbers work. And, you know, I kind of rapidly dove into everything to where I could, you know, read the underwriting, or at least started catching on to those things. So yeah, I had to say, hey, look, I can't move forward with this deal in my better judgment, and told my investors in good faith I cannot advise you to invest in This deal, some of them kind of said, Okay, most of them respected that. And one of them is actually now one of my partners on my company today. So one of the co-founders of our company, Robert Newbern was actually originally going to be a passive investor. So, you know, less than I kind of learned a lot. I mean, still is, you know, you can have many different definitions to that. But did I close a deal? No, I did not close a deal, until I started my own team with the right people. So up to that point, it was more of an I was learning, and it was a trial, and fail and learn and move forward. So   [00:05:40] Sam Wilson:  what gave you the confidence to keep moving forward or being as the new guy to the space you're learning from some other people, then you get involved and you put time, effort and energy, you're going to conferences, you're shaking hands, you're talking about deals, you're, you know, have an investor conversation, then you get halfway through it, you're like, oh, wait, I don't like any of this. And I don't want to work with these guys anymore. I mean, that's, that's, that's a lot of setback for somebody new to the industry. What gave me the confidence to say, you know, that I'm on to something, I just haven't figured out the right way to do it yet.   [00:06:10] Wesley Yates:  Well, I don't know. To be honest, sometimes I made the joke that I was just too dumb to quit. I guess it's that inner marine and us we hate failure. I mean, you gotta practically kill us before we'll stop trying. Right. And I think that's what it was, is I still saw every step of the way, I did learn, I did grow. So I was scaling up. Even without, you know, closing something, I went from just investor relations to, you know, operations of a hospitality company, to a co-manager of $100 million fund. So I was still scaling up and building up experience and building up skill sets, learning more rapidly growing. So I still believed in myself at the end of the day, but I'll be honest, a lot of it has to do with my wife. My wife really supported me through all of that at the end of the day, she she kind of let me know, you know, you can do this. You've got what it takes. My family didn't feel the same sentiment of that, you know, a lot of my family flat out, tell me you're you're an idiot. What are you doing? You walked away from a guaranteed paycheck with Amazon and all the bells and whistles? To do this? What do you what do you do? So sometimes you have to look in the mirror and just really go what do you want? You know, can you can't What can you live with? At the end of the day? What can you live with? Can you live with saying I failed chasing a dream? Or I was too scared to try. You know, which regret Do you want to have? And I felt like I would rather chase this thing down to the bitter end until I could catch it, beat it and make it mine. Before I wanted to say nah, I gave up.   [00:07:48] Sam Wilson:   I think that's a valuable lesson. And I'm butchering this, this quote, but it's something like failure weighs ounces, regret weighs tons. Something to that idea,   [00:07:58] Wesley Yates:  one of the things that I think I've read, I've read, you know, the little motivational quotes that and it's funny because I hate rah, rah. But some of those quotes still get me okay, they still get me I think the one that really helped me when I needed it, it said, Winston Churchill says success is going into a new endeavor with the same enthusiasm. You started the last, huh? And I was like, well, there you go. So, you know, a lot of people say, as long as you learn, you didn't fail. And I think that's one thing that, you know, throughout my time in the military, throughout my time as an entrepreneur, I realized that if you don't look back and reflect on the lessons learned the Hey, what did I do wrong? What did I do right? Then? How are you going to grow? You have to be willing to admit defeat, you have to be willing to meet to address. Where did you mess up? versus what's that? And, you know, that's something that I've always been able to do is look back on whether it was a successful takeover, it was a complete fail. Where could I have made that process better? What can I have done? What could I have had differently in place to make overall something move better in the future?   [00:09:12] Sam Wilson:   That's a great stance, and one that is often sorely lacking in today's society is just that personal responsibility piece. What's what is though, perhaps, some bad advice that you received during the scaling process? Has there been anything that you dislike? And somebody told me this and that was completely bogus.   [00:09:31] Wesley Yates:  It's okay to overpay.   [00:09:35] Sam Wilson:   Elaborate, please.   [00:09:38] Wesley Yates:  One thing I will say and whatever advice you're taking it from, vet out who is giving it, right. So if someone's telling you it's okay to overpay meaning you know what if it's a good deal and you believe in it, then it's okay to get more aggressive on your price. Like okay, but then I stood back and I reflected on who was telling me that was the guy that required me to use his broker to buy his deal that gets paid on commission based on price. So of course, he's going to tell you it's okay to overpay. But yeah, I would say that right? There is probably one of them. That's still It's like no, you mean, in real estate. And really anything, you make your money on the bot, right? You make your money on the buy, because there is a ceiling to a market, there is a ceiling to, to an industry, and including into every asset. So you've got to know what that is, and believe in your numbers stick to a criteria. And don't fall for it. You know, was, since we're big on quotes right now was Abe Lincoln said, Whoa, it was like, find your stance and stand firm or something like that. Like I probably butchered that one worse than you did. But, you know, basically, you know, that's a lot of the advice that I look at from the, you know, true leaders and true successful people. You know, Warren Buffett is a good one. I think right now, in today's times, it's never, it's never been more true, then be cautious when others are greedy, and greedy when others are cautious, right. And as we are going through this syndication has never been more hot of a topic. And I was looking at some people that were studying justification, they say there's going to be a 60% increase of syndicators in the next two years. So it's like, wow. And everyone's just trying to, you know, get there do get a deal. Get a deal, right. So, you know, in some just being out flat, greedy, we've had the lowest interest rates, and you know, whatever, almost right. And now we're fixing to go from that switch to where, look, the feds have just announced they're gonna rise again, and be even more aggressive than the last race. So and they're not done. So now's the time to really be cautious, and let others be greedy. And then later when the shoes on the other foot and you know, maybe we could see, hey, it might be a buyers market here soon. That's when it's time to get greedy with the right plan.   [00:12:01] Sam Wilson:  Yeah, that's for sure. Give me that. In practical terms, though. I mean, you guys are still actively buying, you're still actively looking at deals? What are you guys doing differently now, maybe than what you weren't doing? Or what are you guys doing differently now that you weren't doing six months or a year ago?   [00:12:17] Wesley Yates:  saying no. What I mean by that to elaborate is, you're gonna have some opportunities that come your way. And you got to understand is it a valid opportunity? Or is it just a time suck? Is it a, you know, risk? How much risk is with saying, yes, how much risk comes with actually acquiring the assets? We've had a whole lot more deals that we had the opportunity to be a part of that we said no, than the few that we were, I will be under, you know, understanding, looking back to where I was looking for that first deal. And so hungry and so almost desperate for it, it's hard to say no, it's hard not to try to make something work. But one thing that I've realized very early on, and I've just instilled it into every one of my team members is, you can't make a bad deal good. But you can make a good deal better. And that's really what it is of that is we screened more finally, we stick to our criteria. And at the end of the day as a syndicator, you're not looking for deals for you. Whether you realize that or not, you're not looking for deals for you. You're looking for deals for your investors, right? So what are your investors ultimately looking for? Because if you don't have a seller, if you don't have an investor, you better have the money yourself. So, you know, that's a lot of what we had to get, you know, more fine-tuned of what we're looking at and branching out to say, you know, what, there are more markets than just my backyard.   [00:13:48] Sam Wilson:  What? Yeah, I like that. Maybe that's you maybe you're gonna answer this question already. But what are you guys doing to be competitive? Like when you do put in an offer on a property, especially in multifamily? It's unlikely you're the only offer? So what are you guys doing to be competitive?   [00:14:07] Wesley Yates:  So a lot of that goes back before you even make that offer. A lot of that goes back and when people realize that this is a game of relationships with other co sponsors, but more importantly, with the gatekeepers, that's what I call my brokers. Ultimately, the brokers are the gatekeepers to the good deals, if they don't have a good feeling about your you and your capabilities, and ultimately, obviously, it's not just me, but when I say you, I mean my team, your team, then they're never going to push your package forward in front of that seller. You know, example right now, I was a good 300 I think maybe 500,000 under some of the other offers going into best and final. But the broker liked our team to the point where he encouraged the seller to still take our offer even a lesser amount because of who we are and what we have done. So even if you are looking at your first deal, co sponsor with someone that has been there that has a sucessful track record, that's how you can still overcome that. But take the time to really build your relationship with your brokers. Because that'll go a long way when the time really counts and do more than just put in an offer. When I put in my offer, I have a nice brochure that says who is VFR Capital Investments? What do we stand for? Why us, the bios of every member, the team and our portfolio and a nice PDF brochure versus just a letter, just a, you know, a Word document bio, or even worse an email, Hey, this is who I am in the body of an email. So take the time you get one first impression to that seller. I've had sellers actually come to properties and come up and say, Hey, while we were doing our due diligence, and they recognize us from our from the logo on my shirt, it was like, Oh, you're the VFR Capital Investments team. Yes. Hey, you know what, guys, I really want to let you know, I really liked your story. And your brochure really impressed me I had higher offers. But because y'all look like y'all were more prestige and more sophisticated, I ended up going with y'all. I've been told that twice now on two different properties during the due diligence that the sellers had to come out just to meet us.   [00:16:23] Sam Wilson:  That's cool. And that's, that's a good gold nugget, you know, getting, you know, developing your relationships with as you call it, the gatekeepers and doing more than just putting in your offers and finding ways. And those are relatively almost cost-free ways. You know, to stand out, some people are taking much more aggressive stances, and putting down you know, hey, we're gonna throw in a half-million bucks of hard money, day one, whatever it is, you know, trying to stroke the bigger check, which is, you know, that may be necessary to that's another card in the, in the deck of cards you can play, but I like what you're talking about. They're just an easy way to stand out.   [00:17:05] Wesley Yates:  Yeah. And I didn't have the deep pocket to go. I mean, I started this, I was making $24,000 a year, I was broke. So you know, having the deep pockets to be like, You know what, I'll just do a little bit more. Let me slide this over there. So I worked what I had, and I had the ability to take the time to actually get to know who I was going to be working with. And that was to me, in some cases to others. More important than how much dollars were on an offer.   [00:17:32] Sam Wilson:  Yeah, absolutely. What's one great piece of advice, we asked this question earlier a bad piece of advice he received? What's probably the best piece of advice you feel you've been given?   [00:17:43] Wesley Yates:  Hmm, that's a good one. I think you would probably be you know that. It's okay to say no, I know, I kind of discussed that. That's really something that that I've struggled with, but it's okay to say no, it's not an admittance of failure if you're saying no to something that is ultimately a dead end. Right. And that's something that I know some people might not relate to, but, you know, everything that dangles in front of you is not, it's not something that you need to chase, they could just truly be a carrot on the stick.   [00:18:14] Sam Wilson:  Right? Right. You have the stick at the end of the carrot. You gotta watch out for that stick. Yeah, yeah. That's absolutely awesome. Wesley, thanks for taking the time to come on today, really break down your story, how you have found success, the things you're doing to remain competitive, protect your downside, giving us some kind of insight on what you do to establish relationships with brokers and really just kind of your investment thesis and mindset that you've taken and implemented to get you to where you are today. If our listeners want to get in touch with you or learn more about you, what is the best way to do that? Yeah,   [00:18:47] Wesley Yates:  So I've got my email, And you can look it up on Facebook or LinkedIn, we're there as well. And I'd be happy to connect and if there's anything I can do to help another co-sponsor, with their first deal or their hundreds of deals. We're always happy to sponsor beyond co-sponsor a deal and, and hopefully add value as well as hopefully maybe learn from another person's strategy. So that's, that's what we're about.   [00:19:19] Sam Wilson:  Awesome, Wesley, thank you so much. Appreciate it.   [00:19:22] Wesley Yates:  Thanks, Sam.

    Boring is Beautiful - Why Industrial and Self-Storage Will Remain Strong For The Next 5+ years!

    Play Episode Listen Later Jun 15, 2022 19:29

    Ep. 563 Why Industrial and Self-Storage Will Remain Strong For The Next 5+ years!Dan Kryzanowski is a serial revenue driver and active alternative asset investor. Prior to joining Rocket Dollar, Kryzanowski led new initiatives, partners, and teams across multiple startups and Fortune 50 companies, including General Electric and Merrill Lynch. He also serves as an advisor to entrepreneurs and executives across the FinTech worldand self-storage industry. In addition, Kryzanowski is a certified Project Management Professional, and a graduate of GE's exclusive Experienced Commercial Leadership Program. He also serves as the Corporate Board President of Hugh O'Brian Youth Texas Capital Area. Kryzanowski graduated from the Wharton School of the University of Pennsylvania and has an MBA from Thunderbird, graduating with distinction (top honors). He resides in Austin with his wife and son.   Stay tuned and listen to how Dan Kryzanowski shares his knowledge on Why Industrial and Self-Storage Will Remain Strong For The Next 5+ years!   [00:00 - 05:26] Sponsors Get 20% on Raise if You Use Your Retirement Dollars in My Next Deal using your retirement dollars in your next deal. This can help sponsors get about 10-20% of their raise. The solo 401k is a powerful tool for sponsors because it allows them to defer taxes and generate high yields. Sponsors should go talk to a lot of people before investing in a deal, as the market has changed and preferences have shifted. Investors still want some appreciation in their investments, even in an inflationary environment. Classing a class B can provide this   [05:26 - 10:54] Delaware Statutory Trusts Can Help You defer taxes The benefits of a Delaware statutory trust (DST), which is a type of trust that allows property owners to sell and take the appreciation without paying taxes on the gain. Many DSTs are portfolios that contain different properties, which can provide diversification and low-to-mid single-digit returns. As an LP, it's important to be aware of when a DST expires and to get moving on selling the property as soon as possible in order to avoid paying taxes.   [10:54 - 16:11] Storage Industry Continues to Grow The industrial fund closed on four properties in four Q last year, allowing the company to enter the California student housing market at a favorable cap rate Storage is now a natural extension of the housing experience, with demand for RV and boat storage increasing Specialized storage is becoming more popular, with high-end facilities catering to those with high incomes and multiple properties"   [16:12 - 19:34] Closing Segment   Reach out to DanSee links below  Final words Tweetable Quotes   "Once again, you on property, You own and operate today. So what's your options. You can keep on owning and operating or you can sell. Now, if you sell, you generally have two options.A of course you pay your taxes or you own and operate property. B pretty much the same. It's just a different property. Now in the middle. I like to say per se as well, I don't want to own an operate, but I want to maintain the tax benefits.  - Dan Kryzanowski  ----------------------------------------------------------------------------- Connect with Dan Kryzonowski on LinkedIn.   Connect with me:   Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Dan Kryzonowski: My suggestion I've seen this play out time and time again, is that in your communication to your investors, to your prospects, one sentence saying, did you know, you can use your retirement dollars in my next deal? That alone from my experience sponsors tend to get about 10 to 20% of their raise.   [00:00:17] Dan Kryzonowski: Whether it's through an STI rate with the legacy custodian or solo 401k. And of course that ties to rocket dollar very powerful, especially as more folks are moving self-employed for better or worse. The solo 401k is pretty exciting   [00:00:29]   [00:00:40] Sam Wilson: Dan Kryzanowski is a capital raiser equity owner and LP investor generating double digit yields and lower taxes, but via commercial real estate, he's currently bullish on Texas commercial real estate, industrial self storage, and 10 31 and Delaware statutory trust.   [00:00:56] Sam Wilson: Dan, you're a wicked smart dude. I'm lucky to have you on the show. Thanks for coming on.   [00:01:00] Dan Kryzonowski: Sam. It's great to be here. And if the calendar's right, I think I was originally a number 44. So thank you for bringing me back. And I think today may actually be my 44th birthday. So, Hey, how about that? Hopefully there's something.   [00:01:11] Dan Kryzonowski: Well, look   [00:01:11] Sam Wilson: at that number 44 on your 44th birthday. That's right. Yeah. You came on the show January 12th, 2021. So it's been, yeah, that was 500 and something episodes ago. Tell me, what's happened here in the last, almost year now.   [00:01:27] Dan Kryzonowski: Yeah. I think high-level, and I was at a CEO conference here in Austin and one of the gentlemen on stage so that, Hey, in 2021, people were buying and in 2022 people are shopping and this extends everything from going to the supermarket cause inflation to I think our world.   [00:01:44] Dan Kryzonowski: And I think it's, in some ways it's a great thing. In some ways it's a challenge. So for fellow sponsors and hybrids on this call, realize. You're not the only game in town and somebody, if they are interested, your buddy that you worked with for 20 years at corporate, he or she is now listening to multiple podcasts, going to a few shows, talking to multiple sponsors, doing the diligence.   [00:02:03] Dan Kryzonowski: So just throwing a deal out there and thinking, ah, if you build it, they will come. Not as much. So, I always think it's what education, what can you play into, are you, have you listened to your audience? Your investors in the past, year and a half. And then what are you bringing them down to fulfill their needs?   [00:02:18] Dan Kryzonowski: So I feel this in all walks of life, but especially here in our real estate of passive investing world,   [00:02:24] Sam Wilson: man, I'd say it's absolutely true. The number. I feel like the investor conversation has changed. For me, I don't know, I probably have 15 investor calls. And it's changing, the preferences are changing.   [00:02:36] Sam Wilson: You're right. I'm hearing that more and more. It's like, oh, Hey, I've talked to X, Y, Z. You're like, they're shopping, I'll hear, eight to 10, we're talking to eight to 10 sponsors figuring out what's out there as well. They should, as limited partner, I encourage that. Go talk to a whole bunch of people.   [00:02:47] Sam Wilson: You may find you hate what I do. And I don't want you in my deals. If you hate what I do, you may find that I have bringing something unique to the table that you really find valuable. So I want you to, I want this to be a win-win, but they are shocked. And the other thing I think I've seen here recently, maybe you can attest to this is people are shying away from the appreciation play and really hunting for just cashflow go in.   [00:03:08] Sam Wilson: And I hear that across the board. Have you seen that?   [00:03:10] Dan Kryzonowski: I have, and we in that spirit at the, we recognize that, especially with inflation, creeping up, A lot of folks said, Hey boy, I'd love to get, I love to know I'm going to get a win for a year and then let's see where the world plays out.   [00:03:23] Dan Kryzonowski: So, typically a development multi-family is three to five, three to seven years through this feedback we have DV said, Hey, how about we chop it up to a stage one and stage two. And as a thank you to our current investors, we paid upwards up to 20% on money for up to a year on the stage. The, once again, listening to your investors, this is what was valued.   [00:03:43] Dan Kryzonowski: Now that said that we feel a lot of them are going to roll the principal and interest into the second stage. But I giving folks, Hey guys, you want to hop off the train or you want to wait a year and come on the train. I think investors prefer the sort of optionality. And once again, if you have the scale and you do your diligence to legal, et cetera, it's something you can provide your initial.   [00:04:01] Sam Wilson: Now stage one versus stage two, or are you talking about on a development deal where there may be no potential cashflow early?   [00:04:10] Dan Kryzonowski: Yeah. So think of generically called stage one, the land, almost a land loan per se age, two's going to be your typical development. And this can be your, development multi-family or maybe it's lots.   [00:04:21] Dan Kryzonowski: And you're say you're putting the pipes underground and the people come and purchase a lot. Both of these we've seen pretty attractive at least here in time.   [00:04:29] Sam Wilson: Right. Yeah. That's really intriguing. Yeah, you're absolutely right. I think that's something that providing that options, providing those options for your investors.   [00:04:36] Sam Wilson: And we've seen that also just in class shares. That's become a big thing is to class a class B do you want to clip the coupon? Do you want to clip the coupon with upside, but take a smaller clip? What's that look like? Tell me, what are you guys investing in right now in BV cap?   [00:04:51] Sam Wilson: And then maybe if you can give me a, some color to that as to what you guys are doing to protect against inflation, but also just protecting us market risk.   [00:04:59] Dan Kryzonowski: Yeah. So one thing, kind of in the spirit of our parents stock bond portfolio, we at BV feel. There's still a similar want and need that folks want some appreciation.   [00:05:11] Dan Kryzonowski: And that at times folks want a portion of their portfolio. That's a little more predictable. So, for example, and frankly, we haven't even market this. We have a triple net industrial portfolio that pays a monthly distribution. I like to say it's wonderfully boring. Cause guess what? You write a check.   [00:05:26] Dan Kryzonowski: And every month the check comes in the mail and it's a great way to also mutually know. Right. To the point that we have up to, close more than a half dozen investment advisors have actually trusts us with their client money. If you've ever been through that route, it's a hell of a lot of due diligence and everything else, just even have that conversation.   [00:05:43] Dan Kryzonowski: So that was a pretty good proof point. Yeah. Separately. We've had some stuff with sizzle on the multifamily side that we feel is going to be a good historically has been a 20 plus IRR, whether it's in student housing, Of course housing. And what I think is unique is I call it the mid point between doing a 10 31 and just painful taxes today.   [00:06:03] Dan Kryzonowski: There's many folks. In all stages of life, that own a few properties, whether it's inherited, they've had it forever and they want to probably get rid of some of that. Why as well, they want to cash in, or they're just like, Hey, this is a 1940s build. It's just tired of operating it. There's turnover. Or my time tenant is moving out.   [00:06:23] Dan Kryzonowski: Now's a good time to break Frank's. I don't want to pay high taxes in a place like Texas. So, one thing I think that's unique that we're looking into is. DST. So a Delaware statutory trust and lay person's terms is think if you have a property called property a is probably at a gain, you can sell, take the appreciation, move it to property B.   [00:06:42] Dan Kryzonowski: Okay. It's kind of the same logic that you're owning enough. Or you can pay the taxes, pay a pretty heavy tax. Now in the middle, if your goal is to defer, you can do that. So there's a saying called swap tea drops. Some people they say, ah, they never going to pay and I'm going to take it to the grave.   [00:06:57] Dan Kryzonowski: And part of my legacy, part of my planning for the next generation, that's what a DST can provide. Now that said. What rubs me a little bit wrong as an LP is a lot of these DSTs are only four or 5%. This is all in, not just a prep and I'm like, something just doesn't smell, right. It seems like pretty high in fees and everything else.   [00:07:14] Dan Kryzonowski: Not saying this isn't good product. But , in good faith, I think an operator could pay double digit returns on a DST and still have a healthy return for them for the time and effort to go into it. So, summing up on that, and this is all feedback from our investor base is folks ahead, I'm selling something.   [00:07:30] Dan Kryzonowski: I don't still want to own it. I might take out a little, a few hundred thousand for myself, but the rest I want to defer, let me think about a bit more three to five years. I think at DST particularly a property with double digit returns is going to be a pretty solid niche for the second half of this year.   [00:07:44] Dan Kryzonowski: In the next few years.   [00:07:45] Sam Wilson: How does a DST differ from a 10 31?   [00:07:50] Dan Kryzonowski: And I'm not the all I'm at, I'm not the CPA, the lawyer expert, but the as explained to me is that once again, you on property, You own and operate today. So what's your options. You can keep on owning and operating or you can sell. Now, if you sell, you generally have two options.   [00:08:07] Dan Kryzonowski: One of course you pay your taxes or you own an operate property. B pretty much the same. It's just a different property. Now in the middle. I like to say per se as well, I don't want to own an operate, but I want to maintain the tax benefits. Right? You could go into a DST, many DSTs are a. Usually a portfolio and there's different reasons behind that that generally pay low single digits or mid single digits overall.   [00:08:35] Dan Kryzonowski: But once again, what they are selling is, Hey, here's a diversified portfolio and you're not paying taxes. So, folks that main goal is I want to defer taxes. That's the attraction of the DST now also. What I think is cool historic. They said it's been a portfolio. There's a lot of fees baked into it.   [00:08:51] Dan Kryzonowski: Like anything, the curtains getting pulled off the wizard of Oz per se. And I think it's becoming time like, Hey, here's a pretty slick property that frankly, if I just had cash on the side, I may even consider, it might be a mid-teens IRR for example. So anyways just cool little niches, I think are out there for as, going full circle as folks continue to shop per se.   [00:09:09] Dan Kryzonowski: This is something I think too, not just us, but you know, investment advisors folks that play that role for their families should become a little more aware of   [00:09:17] Sam Wilson: is the DST set up by your firm and then multiple people can in pin roll their properties into the single DST, or is it a DST, each individual sets up and they then roll into your   [00:09:32] Dan Kryzonowski: there's some paperwork and there's folks that are.   [00:09:34] Dan Kryzonowski: Experts that have been around the block a few times , for example, if we at BB go down this route, we're going to partner with there is some paperwork, probably for a different discussion of, for today's call. It has to be completed. But one thing I would be aware of there is a timeline, there is kind of these windows.   [00:09:49] Dan Kryzonowski: That it's much like a 10 31 where it can't be, Hey, we sold the property and X days ago, and there's three days to go before I have to pay taxes. You have to get moving a little bit sooner. So, as I just spitball this in conversation, folks are saying, well, yeah, I'd like to sell maybe may, maybe June.   [00:10:05] Dan Kryzonowski: These are conversations I had back in April and March, even. So people are, I think they're aware at least that if they want to defer taxes, you really have to start thinking a good few months ahead. So I compliment, you and our community for sharing this on the podcast. So this is now kind of something that people do in their mental checklist as they look at their.   [00:10:25] Sam Wilson: Right. No, I think that's great. That's absolutely great. Tell me, what are you guys? What are you guys investing in? I know you, you do industrial multifamily and you even mentioned student housing. What are you guys doing right now to find opportunity at BV?   [00:10:38] Dan Kryzonowski: Yeah. So, the benefit being boots on the ground in Texas for many years, particularly in the two largest cities Dallas, Houston is we tend to find some pretty good off market opportunities and I get it, it's a buy high, sell higher, but I think it would be shown over the decades is certainty of execution.   [00:10:54] Dan Kryzonowski: For example, our industrial fund we closed on four properties in four Q last year. So we also have that ability. Something a little unique I think we can all pick on our California friends here. They weren't as versed in student housing. Let's just say occupancy was comically low.   [00:11:10] Dan Kryzonowski: We have the ability to come in at a great, very favorable cap rate. Which in turn we share those benefits. So those are a few things, sorry. That was my I, they call it my birthday buzzer that went off, sorry to scare you there on the backend. Otherwise it's something you didn't mention, but you know, folks that know me I'm still extremely bullish on self storage and why is that?   [00:11:29] Dan Kryzonowski: I feel storage is now it's a natural extension of the housing experience. So when I say housing, living, living in the 21st century, a few things on that. So, historically we can joke storage was for stuff that we really didn't need or, kind of the crap as they would say, what it's changed into.   [00:11:49] Dan Kryzonowski: I think in COVID show this as folks know, like, Hey, if I can even find an extra bedroom, I'm paying at least a grand in rent or sitting in Austin, it could be in the hundreds of thousands of a house. So with that in case I don't want to feel like a truly hoarding, I want to use storage. And it's not just for the Christmas tree it's it could be for your kids.   [00:12:07] Dan Kryzonowski: Winter clothes can be for your tax documents, some pretty important stuff here. That's becoming whether it's literally at a storage facility or onsite, say I have an apartment complex or something that you consciously build that. In your garage, but most people aren't going to go through that effort.   [00:12:19] Dan Kryzonowski: They're going to defer cause it's still a pretty favorable cost. So with that, I still think there's a very healthy appetite for storage. There's also specialized storage for folks of higher income. Think of the Tesla crowd pick your zip code. With six figure income plus there's many of these.   [00:12:33] Dan Kryzonowski: So they call it a very exclusive man-cave. One of my buddies said he couldn't say that his lawyer said he couldn't say that, but, frankly, there's some of that out there. So there's a whole bunch of types of storage that go into it. And, I think it really comes down to, is folks want to declutter even today, some folks might say shit, I can't have.   [00:12:49] Dan Kryzonowski: A crib in the background. Cause my, my newborns and I was six years old, things like that. So it leads into storage. So I think it's kind of a natural extension of especially as cultures are emerging too, folks want to do this. Not just even climate controls, you're talking for boat are B, we talked about the Tesla, the fun storage, a lot of folks are refurbing.   [00:13:08] Dan Kryzonowski: Think of the Kmarts, the Woolworths of the world. They're being referred to the storage project being in the middle of the country. So, yeah, a lot of folks it's becoming a natural, I think, way of life in the 21st century. And I don't think people are already crazy stuff that some of the stories, as I said, it's just folks get used to it.   [00:13:23] Dan Kryzonowski: They get used to it at a price point. You check in every three to six months to move some inventory for your personal and you go from there.   [00:13:31] Sam Wilson: Yeah. And I think you bring up some really interesting nuances. I think the storage space that most people aren't considering, and you call it specialized storage.   [00:13:40] Sam Wilson: And certainly we're seeing that demand on the RV and boat storage side of things. It's. It's insane. Just from the delivery side alone, they had no place to put them, but I also think it's interesting how you clearly said look the days of just storing piles of useless clothes in general.   [00:13:57] Sam Wilson: I think those are not behind us. Cause everybody there's still going to be days of piles of useless junk, but it's also it's changing. It is becoming smaller homes. People move into the tight, tighter spaces. And like you said, if it's a few hundred grand for an extra bedroom that you're not going to use, why not just get a rough storage unit for a hundred bucks a month?   [00:14:15] Sam Wilson: Okay. We can put all our tax documents and our Christmas trees and all our other random stuff in there. One of the, one of the storage, specialized storage things that I've looked at and obviously not invested in, but I think it's really interesting. Have you seen those like high class, like you call a man-cave, but they also make them, they make them for boat and RV storage where they're actually selling the.   [00:14:35] Sam Wilson: So they, they build this super swanky facility, with wash bays and clean out this and detailed crews and everything else. And they sell you your man-cave. So they'll maybe build 200 units and sell them each off their, the parcel amount and make actually sell them by the unit, create an HOA, basically for the storage facility.   [00:14:51] Sam Wilson: That's specialized storage   [00:14:53] Dan Kryzonowski: is definitely specialized storage. Yeah. I know it's out there and it'll continue to be in, certain zip codes for sure. Yeah, for   [00:14:59] Sam Wilson: sure. And I think that's a really, just a a neat way to look at that know there's lots of runway there for a variety of reasons.   [00:15:06] Sam Wilson: I think that's the other thing that people have said in the storage market all along is that no matter what the economy, there's reasons that people want stories. So it's either up-sizing downsizing, changing life, changing careers, moving it's always in fashion. What are you guys doing right now to take advantage of the the kind of the market dynamics that surrounds.   [00:15:27] Sam Wilson: Yeah.   [00:15:27] Dan Kryzonowski: For me, like a lot of us on the call, I'm a hybrid. I have a, fortunately I've built up a pretty sizeable retirement accounts, self-directed accounts, solo, 401k, food storage. We've had some myself as an LPN investor and those that I've introduced over the years. So I've had some, I'd say pretty sizable and attractive exits and like anything, every few years I call it the next generation of storage, whether somebody is up and coming or they're coming from some recent exits in multi-family.   [00:15:53] Dan Kryzonowski: Folks that are long, maybe, call it two to six facilities, but their goal is to get to 20. So, so far, so good. I've probably invested with four, I'd say newer folks to the semen storage and whether it's development, we're on track for development, or if it's a value add, it's pane out as it's supposed to be at the moment.   [00:16:11] Dan Kryzonowski: So, I'm excited and it varies, some folks are doing strictly. Everything's automated from when you book there's no humans in any way, shape or form. Are there folks are a little more old school. And then as we talked about kind of the luxury storage, that's just kind of a really unique fund model that I still think has tremendous upside.   [00:16:29] Dan Kryzonowski: Yeah,   [00:16:30] Sam Wilson: absolutely. Now BB capital also invest in multifamily is that. Yeah. The backbone   [00:16:35] Dan Kryzonowski: of BV historically isn't multifamily is a bit more DFW total exits of over 250 million to date. So, and it's been a good mix of, as I alluded to before our student housing, workforce housing, some development, some value add I think the new thing once again, just Texas is still real boots on the ground state.   [00:16:54] Dan Kryzonowski: We do have a lot of folks with the BD logo. So we found. Even in this market, the needle in the haystack of a piece of land that's, I don't want to say pennies on the dollar, but less than a dollar, which is a minor miracle these days. Right. We can do stuff with it. We found a track over a hundred acres in Galveston there.   [00:17:11] Dan Kryzonowski: I think the only one out there, a lot of folks want a second house. I want a beach. So it's a little things like, Hey, as an investor, in addition to getting double digit returns, how about you on first look at buying one of these plots. That's very important to some folks. So, we've done some really strong surveys.   [00:17:25] Dan Kryzonowski: Obviously a lot of one-on-one some more exclusive events with 20 or so folks and. We're going to hop across the states of the large cities for that to really get feedback. And that's what we'll, that's, what's kind of led outside of the fund to our our single asset offerings over the past year.   [00:17:42] Sam Wilson: Got it, man. That's fantastic. Dan, we're almost out of time here, but I've got one last question for you for people that know you well, they know that you've got extensive background in the self-directed IRA space. What do you see as the number one opportunity for capital raisers in the self directed IRA?   [00:17:59] Dan Kryzonowski: My suggestion I've seen this play out time and time again, is that in your communication to your investors, to your prospects, one sentence saying, did you know, you can use your retirement dollars in my next deal? That alone from my experience sponsors tend to get about 10 to 20% of their raise.   [00:18:16] Dan Kryzonowski: Whether it's through an STI rate with the legacy custodian or solo 401k. And of course that ties to rocket dollar very powerful, especially as more folks are moving self-employed for better or worse. The solo 401k is pretty exciting. So yeah, I just think that, and also for folks that are thinking of JV and Koji pain with.   [00:18:34] Dan Kryzonowski: Your old corporate money. This is a great pocket of money that frankly you can't touch anyways without paying taxes for a while. So take advantage of it now. Anybody with any questions just ping me on LinkedIn. LinkedIn is great. Say you heard it here and we'll have a chat.   [00:18:50] Sam Wilson: Awesome, Dan, and that's my last question here for the show is if we do want to get in touch with you, what's the best way to do.   [00:18:55] Dan Kryzonowski: Yeah, LinkedIn is great. And then I joke, if you can spell it, you can get it. And we'll get you a few pennies off of your rocket dollar. And for fellow sponsors out there I'm happy to share my VIP code, so, please reach out one alone.   [00:19:06] Sam Wilson: Awesome, Dan, thanks again for your time today. It was great to have you back on the show.   [00:19:09] Dan Kryzonowski: great seeing you brother.   

    How to Gain a Competitive Edge in Real Estate

    Play Episode Listen Later Jun 14, 2022 23:57

    Real estate is not just about buying properties. It's about building a business.   Brian Alfaro and Cody Laughlin of Blue Oak Capital join us to discuss what it takes to be competitive in the real estate market. They talk about the different components of real estate as a business, how we can make an impact with marketing, and what we can do to get brokers on our side. For new investors, Brian and Cody also list the 6-step proven framework that helped them raise their first $1 million.   Blue Oak Capital is a Houston-based real estate investing firm that focuses on acquiring cash flow producing commercial real estate. They partner with busy professionals who are seeking to grow their investment portfolio by investing in real assets like real estate.     [00:01 - 08:34] Finding the Best Business Partners Why Brian and Cody decided to form a partnership Making the transition from single-family to multifamily Slow growth vs instant success Building relationships and the infrastructure for a sustainable business   [08:35 - 16:44] Strategies for Your First Capital Raise Brian and Cody break down the 6-step capital raising framework that worked for them  Why these steps should work simultaneously The importance of persistence and consistency in execution Focus on the marketing-side   [16:45 - 22:19]  Standing Out From the Competition Go bold and be willing to get uncomfortable Find a story behind the opportunities Nurture strong relationships with brokers Visibility is key Get your first transaction done Be the best buyer that you can be   [22:20 - 23:56] Closing Segment Reach out to Brian and Cody!  Links Below Final Words Tweetable Quotes   “You've got having a strong brand, having a website, using a CRM, sending out a newsletter, making sure you're on social media and then trying to become a thought leader in this space.” - Brian Alfaro   “Don't focus on taking people out to lunch. Go focus on getting deals done. And that's how you build relationships.” - Cody Laughlin -----------------------------------------------------------------------------   Connect with Brian and Cody! Head over to the Blue Oak Capital website and follow them on Facebook and LinkedIn. Email them at and    Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below: [00:00:00] Cody Laughlin: You know, when we talked about real estate investing, we talk about like buying the real estate, right? We talk about the apartment buildings or whatever, but what you really don't understand, especially in this multifamily space, you're operating a small business. And you know, when we talk about putting these pieces in place, what you're doing is you're building the infrastructure of a business. [00:00:17] Cody Laughlin: You know, you're wearing the marketing hat, you're wearing the, the revenue hat you're wearing the acquisitions hat. Like you're wearing all of these different variables that go into owning and operating a small business.  [00:00:39] Sam Wilson: Blue Oak Capital is a Houston-based private equity firm focused on the acquisition of cash flow producing multifamily real estate across the US, Brian and Cody. Welcome to the show.  [00:00:50] Cody Laughlin: Sam, pleasure to be here, man. I appreciate you having us for having us.  [00:00:52] Brian Alfaro: Thanks for having us, Sam. Yeah, we really appreciate it.  [00:00:54] Sam Wilson: Hey, man. Pleasure is mine. There's three questions I ask every guest who comes on the show and maybe one of you can take this and just answer this for the firm itself, but the three questions are, where did you guys start? Where are you now? And how did you get there? So I'll leave it to you guys to figure out which one of you wants to tackle that.  [00:01:09] Cody Laughlin: Well, kind of high level overview. We all our Houston-based. Brian and I are two of the three managing partners here at our company. We all collectively met through networking channels and, and whatnot, and then formulated our, our company early, late, like late 2019, early 2020. [00:01:27] Cody Laughlin: And you know, the biggest kind of glue that's kind of held us together are our value propositions that are complementary skillsets and really that how the team has meshed and that's been how we've been able to grow, right? And so, but since our inception in late 2019, you know, like you mentioned, we've, you know, acquired and partnered in 847 units as general partners and looking to do some, some really big acquisitions this year, a hundred million dollars plus in acquisitions this year, hopefully. [00:01:56] Cody Laughlin: And really, it just comes down to great partners, great relationships and just a great network of investors and partners around us. So what do you think, Brian?  [00:02:04] Brian Alfaro: I think, I think you hit the nail on the head.  [00:02:06] Sam Wilson: Yeah. What are some things when you guys, 'cause this is a common you know, I hear this, this discussion a lot on this show, but I want to hear your, your take on what it was like figuring out one that you were onto something and then finding the partners, even if it was within the same network, like there's, there's, there's a lot of back and forth and like, Hey, should we, could we maybe we'll build something. Maybe we won't. How, how did you guys navigate that? [00:02:29] Cody Laughlin: Go ahead, Brian, tell them your side and I'm going to add to that.  [00:02:32] Brian Alfaro: Yeah, I, I think I knew I was onto something when I saw a lot of people around me were having success in commercial real estate. So you talked about commercial real estate. Cody and I both come from the single-family residential investment space. We were both doing that, Cody for way longer than I was. I was doing it for about two years. [00:02:46] Brian Alfaro: And I was kind of looking around and watching guys build their portfolio and seeing people, just regular people that were just like you and me doing big things. So why not me? It was the question I really asked myself, why couldn't I do that as well, especially as it was transitioning and getting a little bit older. [00:03:02] Brian Alfaro: I'm 33 right now. So, you know, back in my early thirties as I'll call it, I guess I'm still there. But I was looking around and going just, just regular guys doing this, there's regular guys buying these massive $20, 30, 40 million properties. And I'm like, why not me? So, it all starts with education. So it became a lot about educating myself, joining a mentorship group. [00:03:18] Brian Alfaro: And that's when I also met Cody and John and that's when I knew we had something was because these are two great guys. It all starts with the foundation of good business ethics. Work with people that you want to go grab a beer, right? So I'm gonna grab a cup of coffee with people you want to hang out with on the weekend. [00:03:32] Brian Alfaro: If you don't like your business partners, you're probably not going to get very far. So that's when I knew personally that I found something good because I had two guys that I really enjoyed hanging out with really enjoyed spending time with. So the idea of being on calls at 9, 10, 11, 12, 1 o'clock in the morning, you know, going through underwriting, basically giving up your nights, giving up your weekends, kind of hustling to make it happen. [00:03:53] Brian Alfaro: These are two guys. I had no problem doing that with it. Wasn't an inconvenience, right? So once we got that to together and we started form our team, you really just start to see things flourish. It took a lot of time, a lot of slow growth, as we like to say, it took about year and a half to get that first deal done. But that for us that's that's for me, at least that's how I knew it was on to something.  [00:04:11] Cody Laughlin: Yeah. And I will go with Brian's sentiments that, you know, I was exposed to this idea of syndication back in 2011, through a local networking event here at Houston. And at the time I had no idea what I was being exposed to. All I knew it was just this investor on stage partnering, 17 people, everybody got passive income and everybody was happy and I'm like, oh, that sounds awesome. [00:04:32] Cody Laughlin: You know, a lot better than the wholesaling, single-family also like I was doing at the time and, you know, fast forward several years later, you know, after kind of having to go through some refocus and some re development of goals and things like that, you know, really was getting frustrated in the past that I were taking as far as trying to find a fit for me, what was ideal from my investing thesis, what was going to get me to my financial independence, you know, all the things that we've all hear about and are challenged with and, you know, making that transition to multifamily. [00:05:04] Cody Laughlin: You know, you could look back and you see, man, there was so much wealth generated and created over the past decade from multifamily investments. You know, I mean, there was just so much wealth that was being created and the fundamentals projected an even more positive forecast for years to come. And, you know, it was just really, that was kind of very eyeopening. [00:05:24] Cody Laughlin: And so, and then having gone through some hard expensive lessons along my journey to get to this point in multifamily. It was a kind of a no-brainer that once, you know, once I met John, once I met Brian and we saw the synergies and we saw the power that be, you know, with all of us working together, you know, we just put the blinders on, stayed discipline, stayed focus. [00:05:44] Cody Laughlin: And I think that was really where we knew like, Hey, the future has going to be very, very bright here. If we just do.  [00:05:49] Sam Wilson: That's something you mentioned there, Brian was that you said slow growth. You know, people want, I think the, they want the quick hit, you know, the, the instant success, which it doesn't sound like you guys had that. [00:06:00] Sam Wilson: I think you mentioned calls at 1:00 AM one and a half years. What's what were some challenges that you guys faced in getting your first deal done?  [00:06:09] Cody Laughlin: There's a lot, obviously. I mean, look, everybody has the same challenge when you first started, you have no credibility, you have no experience. And I would argue that most people probably don't have the network. [00:06:19] Cody Laughlin: They need to go out there and buy these multi-million dollar deals, right? So it's really, how do you put that first foot forward and how do you really build the infrastructure for a sustainable business? And I think it all starts with that. So brian can attest to this too, right? I mean, it all starts with number one is relationships who are the people that are doing the deals, who are the people that are really having success in the same strategies that we wanted to model. [00:06:44] Cody Laughlin: And then who are the people that are gonna help us get there, whether that be partners or investors, whatnot. We need to go meet the people first. 'Cause we all know, I mean, this idea of have a good deal and the money will come. That's such a false adage. That's out there, right? I mean, if you don't, you can have the best tool in the world, but if you don't have the money to back you to do it, you're a dead duck in the water. [00:07:03] Cody Laughlin: So I think it really started with building out relationships in that framework first, and then everything else kind of expanded off there. What do you think, Brian?  [00:07:10] Brian Alfaro: Yeah. I think when you're new, you don't know how to put the puzzle together is how I like to the analogy I like to use, right? Like buying these properties is just putting a puzzle together. [00:07:19] Brian Alfaro: And when you're new, you don't have all the pieces just like you were buying a puzzle the store and it's missing a bunch of pieces. You're like, oh, that's the bad puzzle. Well, it's not necessarily a bad puzzle. It's just that you don't have the pieces you need. Do you have the KP to go on signing the loan? If you need. [00:07:32] Brian Alfaro: Somebody who has experienced an asset management, especially if you're brand new, because if I'm an investor and you're telling me like, this is your first deal, and you've never done this before, that makes me a little nervous. So having somebody on your team that can give you that credibility, that can sort of be your safety net. [00:07:45] Brian Alfaro: You don't have that when you're first getting started, you don't have the relationships as Cody was saying. And then with the equity, that's super important too. Properties are expensive now. Starting five years ago, you could get a pretty deal. Pretty big deal close raising three, four, $5 million. Now that's like a 50 or 60 unit depending on what market you're in, right? So can you put, yeah, can't you put the team together to go and raise 5, 6, 7, 8, 9, 10 or more million dollar. Do you have the relationships with those co-sponsors or with those equity partners to get the deal done? There was just a lot of things. Cody is our head of acquisition. He knows how much legwork it takes. [00:08:20] Brian Alfaro: Not only for those things I mentioned, but insurance quotes, property managers, all the people that are involved in closing process, you just don't have the relationships yet and that's where that first 12 to 18 months of getting started is. It's really building those relationships and understanding, you know, what are you getting into. [00:08:34] Sam Wilson: Tell me real quick, just briefly cover this the six step framework for raising a million bucks. I mean, everybody struggles out of the gate, just like you said, like you said Cody was that, you know, find the deal. The, the money will come nonsense. I think that that myth has been debunked too many times. [00:08:52] Sam Wilson: What's your guys's six step framework if somebody wants to raise a million bucks as fast as they can? [00:08:57] Cody Laughlin: Yeah. It's probably the, one of the most important skillsets you obviously need to have in a business. Probably one of the most difficult too, right? How many stories have you heard of tablet raisers that, oh, I can go raise a million, $2 million and they fall flat on their face. [00:09:09] Cody Laughlin: I being one of those, you know, on your first capital raise, it's, it's very difficult. So, you know, Brian, you want to go ahead and kick it off here with a framework that worked for us?  [00:09:16] Brian Alfaro: Absolutely. So our framework, it's very simple. It sounds simple, but the hard part is, is the execution. And I think what makes it even harder is persistence and consistency over a long period of time, because you can build out this, you can follow these steps and write them down and check each box. [00:09:30] Brian Alfaro: But if you're not consistently managing them and moving them forward all at the same time, it's where you can eventually fall flat. So the first one is just having a really strong brand. Now that's something we're really important about, like when people see Blue Oak Capital, do they know, do they have some sort of relationship with it? [00:09:46] Brian Alfaro: Do they know Cody? Do they know Brian? Do they know our third partner, John? Do they know mix of us? What are their thoughts? What are their feelings? What are their emotions? When they think about Blue Oak Capital, do they have positive thoughts about Blue Oak Capital? You got to have that brand. So creating a brand, creating a logo. [00:10:01] Brian Alfaro: That's something that's really, really, really important a lot of people don't think of. Now you can go out there and you can raise capital without one. It is possible. But if you're talking about growth and scale, You definitely want to have a brand. And after that brand, you definitely want to have a website that's, it's 2022. We're recording this podcast. [00:10:17] Brian Alfaro: You got it. It's your business card, right? People are going to go Google it, or they're going to go look you up. They're going to see what you've done. And if you don't have a legit website where people can feel like you're a professional, you're, you know, you're somebody in the industry who's serious, then you can have, you're going to have problems too, because if you're telling me like, Hey, you want to take a hundred thousand dollars from me and you don't even have a website. [00:10:35] Brian Alfaro: You don't even have a logo unless you and I have been friends for 20 years. And I just trust you like that. It's not very likely that I'm going to go and, you know, just be comfortable, raising, you know, giving you money, right? Yeah. Once you have that brand, once you have that website, you want to start laying some infrastructure in your website. [00:10:50] Brian Alfaro: You know, we we're really big on having a CRM. So that's one of the steps and then leveraging that CRM to keep your investors updated, which is another step, which is sending out a newsletter. So once you have that brand, you have that website, you want to make sure things are starting to talk to each other. [00:11:04] Brian Alfaro: So we have a CRM system where we're constantly feeding people, you know, we have a funnel we're constantly feeding people into the CRM, whether it's through our podcasts, it's through our. Let's do our newsletter, which is one of the six steps we want to create that update for your investors that are in your database. [00:11:18] Brian Alfaro: You want to make sure you're building out that investor database of quality investors, people that are pre qualified. And if you're planning on doing five or six Bs, so people you've had a conversation with, if you're doing five or six C's, you obviously want to make sure they're accredited investors. [00:11:30] Brian Alfaro: So that's four of the steps. The last one, I think that's really well, not the last one, but the fifth one that I think is really important is social media. You know, we're really big on just being out there, making sure that people are aware of who you are and you're growing your brand presence. So, you know, we're big on leveraging platforms, Facebook, LinkedIn. [00:11:47] Brian Alfaro: You know, there's other platforms, Instagram, Twitter, TikTok is becoming really popular. We're not on there yet, but I think if you're getting started, we're talking about raising that first million dollars, you want to pick one or two and really stick with it because it can be a full-time job doing social media, whether it's yourself or somebody you're paying to manage all of these accounts. [00:12:05] Brian Alfaro: So, you know, when first got started, we really leaned in heavily on LinkedIn and Facebook. Those were our two preferred choices. And then as we've continued to grow, you know, we're starting to layer on things like Instagram. You know, we'll look at things like Twitter and took doc down the road, but you really want to start and lay a strong foundation on one of those social media platforms. [00:12:22] Brian Alfaro: And then the last one is just having that thought leadership platform. You know, we talk about blogs. I just mentioned that we talked about our podcasts. We talked about our meetup. So just to kind of reemphasize this, we've got having a strong brand, having a website, using a CRM. Sending out a newsletter, making sure you're on social media and then trying to become a thought leader in this space. [00:12:40] Brian Alfaro: You want to create content, whether it's a podcast that meetup blog, maybe you're creating short reels or clips on YouTube, those are the six steps that we really followed for that first opportunity where we were able to raise over a million dollars.  [00:12:53] Cody Laughlin: And Sam, look, I think it's, it's really important for people understand like all of these pieces don't work on their own in silos. They all have to work in conjunction with one another, right? If you think about a visualization of a funnel, right? You have the widest part of the funnel, the top of the funnel is the most critical piece because that's where you're getting the most engagement. [00:13:13] Cody Laughlin: That's where you're connecting with as many people as, as many touches. And then you go to the middle of the funnel, which is where you're nurturing those relationships. You're actually curating relationships to where you get to the bottom of the funnel, which is where the solidification of that relationship. [00:13:26] Cody Laughlin: And that trust is cemented to where ultimately they want to invest with you or partner with you and work with you in whatever fashion, but I think the key takeaway is those six steps of Brian highlighted, which you did a great job, as you know, they were all critical to our framework and helping us to get to that first million dollar raise, but they all have to work simultaneously together with one another. [00:13:47] Cody Laughlin: And so I think it's important for people to understand that it's in multiple, you know, layers within the funnel that have to work in conjunction together.  [00:13:54] Brian Alfaro: Yeah. Once you have those first few layers, the other ones are about nurturing, right? People are listening to your podcasts or reading your newsletter. [00:13:59] Brian Alfaro: They're looking at your blogs, they're going to your meetup and that's the nurturing process. So you can build relationships with people without calling them every week, so.  [00:14:07] Sam Wilson: Right. And I think, I think the one thing that you hit on there, Brian, and all of this is consistency of execution. That's the hardest part I think of it is that discipline side of it where it's like, okay, now you've got people coming in. Now you got your website built, you got your infrastructure, but then is your newsletter going out every week? I mean, it took me until I'm embarrassed to say it June of 2021. Here we go, you know, I'm sharing my weaknesses here to get a weekly newsletter out and I've done it every week since it's like, but it was like, I will get this done. [00:14:39] Sam Wilson: And once you do that, of course, you know, that's been instrumental in building, you know, relationships that I just had never nurtured before. And it's a weekly newsletter. It's a total pain. I get my newsletter out on Friday. I'm like crud, that's gotta get done. Like I gotta, I gotta write the text for that. [00:14:54] Sam Wilson: Of course I got help putting the rest of it together and get it sent out, from my marketing manager, but it's still, you know, I still have to put work into that every week.  [00:15:01] Cody Laughlin: Oh, sorry. So, you know, as I'll tell you, man, what, what you're discussing here and what we're talking about is, you know, when we talk about real estate investing, we talk about like buying the real estate, right? [00:15:09] Cody Laughlin: We talk about the apartment buildings, whatever, but what you really don't understand, especially in this multifamily space, you're operating a small business. And you know, when we talk about putting these pieces in place, what you're doing is you're building the infrastructure of a business. You know, you're wearing the marketing hat, you're wearing the revenue hat, you're wearing the acquisitions hat. Like you're wearing all of these different variables that go into owning and operating a small business. And so to your point, I think most people don't realize that when you get in, we always talk about real estate, but you're like, oh crap. Like, oh, I've got to go a bit up my marketing funnel. [00:15:41] Cody Laughlin: I've got to go bit up my brand. I've got to go do all these other things that, you know, you don't think about. So it's not suited for everybody. You know, I hate marketing. I mean, I'll be candid with you. I hate it. You don't want me picking logos and stuff like that 'cause I'm too simple-minded. Thank God that I got Brian and John and have a better eye for that than I do. [00:15:56] Cody Laughlin: But the point is, is, you know, it's a, it is a critical part of the business for sure.  [00:16:00] Sam Wilson: It is. Yeah. And I think, I think that's one of the, one of the mindset shifts I had to make you know, in the last two or three years was that I'm in, especially, I mean, there's two things we need in this business. I say this well, gosh, I feel like every show we need deals, we need money. [00:16:13] Sam Wilson: And if you don't have both of those things, then you don't have anything here in a real estate business. And so like 70% of what I feel like I do is marketing, like finding the deals is almost secondary to first building out the marketing side of it, which has kind of a twist, I think, from what most of us think early on like, oh, we're going to go buy real estate. [00:16:30] Sam Wilson: Well, you're not going to buy a $30 million property if you haven't done the marketing first because you don't even have investors to go buy it. So start there. I love that. So, Brian, thanks for taking the time to break that down. No, we're spend a little more time here on this and maybe what we planned on, but I think this is a valuable conversation. [00:16:44] Sam Wilson: I'd like to use this as a segue, though. What are you guys doing? I guess, on the finding deals, the acquiring deals side of this equation. What are you guys doing right now to be competitive?  [00:16:55] Cody Laughlin: Great question. And it's a problem that everybody's having, right? I mean, you know, everybody's trying to figure out how to list, stand out from another. [00:17:01] Cody Laughlin: Listen, I think those who are willing to be bold. And get uncomfortable and take a little bit more risk, especially upfront are the guys that are standing out, you know, and I think right now, especially at the time of this recording where we're, we're going into a very aggressive rate hike environment. [00:17:19] Cody Laughlin: Rising interest rate environment. We're already hearing rumblings of investors wanting to sit out or, oh, they're just going to take a pause and things like that. You know, I think the guys that like our school are still gonna remain active, still going to keep our finger on the pulse, still adjust to what the market is going to give us. [00:17:34] Cody Laughlin: And stay tuned. I think those are the guys that are going to succeed. And so what does it take to be competitive? Again, you gotta be willing to get uncomfortable. What does that mean? Well, you gotta find a way, you know, to come up with the price guidance that these brokers are giving you, you know, and now we're seeing a little bit more flexibility because rates and the capital markets, but, you know, you have to find a way to find the story behind these opportunities, right? You have to be willing to put up the risk capital upfront. I mean, right now let's be honest. The guys that are writing the bigger checks, those are the guys that went into deals. I mean, it's that simple. So, you know, guys that are putting up half a million dollars of non-refundable risk capital upfront to get these deals awarded. [00:18:14] Cody Laughlin: Those are how deals are trading right now. And if you're not comfortable with doing that, Hey, I get it. It's a hard pill to swallow, but that's the reality of the market, you know? So you have to find a way to go make that happen and be the ones to kind of play with the big boys, so to speak if you want to win opportunities. [00:18:31] Brian Alfaro: Yeah. And I think to add onto that, because I know Cody does our acquisitions, but I can tell you what I see from afar is one way to be competitive is to have really strong relationships with the brokers. You know, when, when you have a relationship that you've been nurturing for 12 months, 18 months, 24 months, however long it's been when you've closed deals, obviously that helps a lot when you've done business and you've helped them put food on the table. [00:18:52] Brian Alfaro: That definitely helps a lot. But we've learned that the, you know, the more deals you do, the more the brokers want to go fight for you. The lenders want to go fight with you. Everybody on your team starts to come around to see like, Hey, we're gonna, we're gonna do our best to help you, you know, get this deal awarded. [00:19:08] Brian Alfaro: And the relationship and the communication side with the brokers are super important because as Cody mentioned, you know, we'll go toward deal and they're like, oh, this deal is 25 million. And then having Cody's calling daily, constantly staying on top of the broker, like, Hey, what's going on? What's going on? What type of offers are you getting? You ended up finding out that all the offers are coming in at 23 million, right. Then you thought it was gonna be 25 million. But if Cody didn't have that great relationship and the brokers didn't have that trust and given him that type of Intel that can help him be competitive. That's something that a new person would have trouble doing, right? So I think that communication piece, relationship piece is a way to be competitive and not being transactional with the broker. [00:19:42] Cody Laughlin: Yeah. Thank you, Brian. And I want to expand on that, Sam, if we have a few minutes, because I think a lot of people, especially for any new first time investors, they're hearing this and they think that building relationships is taking brokers out to coffee or lunch. [00:19:53] Cody Laughlin: And I'm just going to tell you right now, that's a complete waste of time. And I'll tell you why, because you are one of a thousand people that are calling brokers every single day, sourcing the same opportunities. You taking them to lunch doesn't set you apart, okay? Yeah. So it was a little effort, but it really doesn't distinguish you. [00:20:10] Cody Laughlin: If you want to really build a relationship with the broker, your number one objective should be to get to that first deal. Well, how do you do that? You got to show up for every property tour. You have to analyze all of the, you know, the deals that you think that are true interest, but you have to give feedback as you know, that's so critical. People undervalue that the brokers appreciate feedback, even if you're, you know, 50% off of their price guidance, they still want the feedback, right. They still want, because that's how they're going to learn who you are and what your investing thesis is, what you're looking for. But it also helps them gauge the market too. You know, like Brian said, Hey, if I've got 10 offers and they're all coming 2 million under whisper, that's information they need to take back to their seller and say, Hey look, the market's not here. [00:20:53] Cody Laughlin: We need to, we need to adjust. So they want the feedback. So you gotta be visible. You gotta be in front of the brokers, you got to give feedback. That's absolutely critical. The next thing is you've got to get to that first transaction. And when you get to that first transaction, when you finally get that opportunity, You have to make it a point to be the absolute best buyer you can be, right? And so, listen, you're going to eat some crap for, you know, you're going to have to take a couple, you know, shots on the chin, but you have to be the absolute best buyer that you can be on that first transaction. Because as Brian said, when you do that, when you solidify that transaction and it goes smoothly, I'm not saying go in carelessly. [00:21:31] Cody Laughlin: I'm not saying go, not fight for something that you know is not right. But what I'm saying is, is, you know, don't go going to nickel and dime battle over 25k when you're buying a $15 million deal. Oh, you want to retrade for 25 grand? I mean, come on. That's a great way to lose credibility, you know? I mean, that's, that's pennies when you're talking about these big multimillion-dollar deals, right? But when you close the transaction and it goes smoothly and the brokers see that, Hey, you're very easy to work with. Guess what's going to happen on the next one? They're going to go to bat for you and, and, and the vendors that you've worked with, they're going to go to bat for you, and that's only going to make it easier. And that's a snowball that we talk about. So something that I just want to make sure to reemphasize, don't focus on taking people out to lunch, go focus on getting deals done. And that's how you build relationships.  [00:22:19] Sam Wilson: Man. I think that's great. That is absolutely perfect advice, you know, and, and it comes from experience. So I'll like that. Focus on getting the first transaction done because yeah, like you said, Brian, once you start becoming that person that puts food on their table, you could you become a much more important part of, of their life. So that's that's really, really cool. Gentlemen. I thank you for taking the time to come on the show today and share with us your experience, how you guys have grown your company so quickly in such a short period of time, the ways to effectively raise your first million bucks, how you guys are staying competitive and then really what it takes right now to thrive in today's marketplace. [00:22:55] Sam Wilson: So certainly appreciate you guys taking the time to break all of that down. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?  [00:23:02] Cody Laughlin: Yes. And thank you for having us on the show, man. It's been fun. Listen, we're not hard to find. You can find us on LinkedIn, Facebook, as Brian mentioned, if you want to check us out you can go to our website, [00:23:14] Cody Laughlin: You can check on all of our various resources and thought leadership platforms that we have available to you there. But if you really want to connect with us directly, you can reach out to us at Brian or Cody  [00:23:26] Sam Wilson: Cody and Brian. Thank you so much for taking the time to come on the show. I certainly appreciate it. [00:23:30] Brian Alfaro: Thank you, Sam. 

    The Future of Real Estate Syndication

    Play Episode Listen Later Jun 13, 2022 18:47

      From the Atlanta area, Jake Marmulstein is an entrepreneur and business executive with a variety of experience, including ERP to SaaS, digital marketing to education technology, and hospitality to real estate. He has advised executives of early-stage companies, lead operations and finance, product, sales, and customer success efforts.   In his current operating role, Jake is the Founder, President & CEO of the Real Estate Investment Tech SaaS company Groundbreaker Technologies. He made the initial angel investment, completed key hires, established selling, financial and operational systems, lead a Series Seed-round of financing, and continues to grow the company.   Jake received his bachelor's degree from Cornell University, where he emphasized hospitality and minored in real estate. He studied abroad in Rio de Janeiro and at Cornell was involved in grant writing for grassroots community service organizations while also forming a non-profit peer-to-peer mentorship organization. Jake has worked abroad in London, Madrid, Rio de Janeiro, and Puerto Rico and has a working proficiency with Spanish and Portuguese. Stay tuned and listen to how Jake Marmulstein shares his knowledge on the future of Real Estate Syndication through their Groundbreaker Technologies.   [00:00 - 04:29] Groundbreaker Technologies: How to Scale Your Real Estate Investment Business Jake started his CRE investment career in 2011 at Watermark Capital Partners, a hotel REIT in Chicago He co-founded Groundbreaker, a software platform for real estate syndication, and began to build it out The platform is now used by real estate operators to raise money and manage their deals Jake has experience in software development and engineering, which helped him build the platform   [04:30 - 12:19] Groundbreaker Partners with JV Equity Partners to Bring on Larger Deals Jake shares that they were able to get press coverage for their solution after building a basic version on the web. This helped them to attract interested prospects, which led to them being able to pay their office expenses with revenue from their solution. They are looking to build a comprehensive ecosystem of services that will help their customers grow and be successful.   [12:19 - 17:20] Groundbreaker Software Introduces Education Program to Help New Class of Real Estate Syndicators Succeed Knowing that operators don't do deals alone, Jake and his company study carefully what that experience has to be and build a feature that allows people to do deals with each other without the problem where they share the data from their own investor list with the other group. They Don't want to be a CRM system or an email marketing system, but instead an investor management software. Jake notes that they have overcome alignment within the organization, but it's really hard to be able to work with people who aren't yet successful at doing a deal.   [17:20 - 18:45] Closing Segment Jake Marmulstein, CEO of Roundbreaker, offers listeners a three-month free trial of their annual subscription if they type "Bricken" into their website's request form. Jake also recommends LinkedIn and Roundbreaker's website for contacting him.   Reach out to Jake See links below  Final words Tweetable Quotes   "At the end of the day, were we going to be a financing system, were we going to be software? We can be both and really fielding those all structuring my questions and doing customer discovery."  - Jake Marmulstein     “It's real estate syndication. There's some complexity in doing that. Even marketing yourself to investors and building your investor base requires you to have an investment thesis and understand who the investor is that you're going after.” - Jake Marmulstein   ----------------------------------------------------------------------------- Connect with Jake Marmulstein on LinkedIn. Visit their website   Connect with me: Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Jake Marmulstein: if you're an operator and you're looking at who can be the best partner for you. You want to surround yourself with companies that are gonna really care about where you are now and help you to scale as you continue growing to set objectives that are mutually beneficial for both of you so that they have a vested interest in your success.  [00:00:21] Sam Wilson: Jake began his CRE investment career in 2011 at watermark capital partners, a hotel REIT in Chicago, and after struggling to raise capital for his own deals, he found a groundbreaker a software platform for real estate syndication, Jake, welcome to the show. [00:00:47]Jake Marmulstein:  Hey man, pleasure's mine.  [00:00:49] Sam Wilson:  There's three questions. I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now? How did you get there?  [00:00:58] Jake Marmulstein: So when I studied at Cornell university an undergrad, I did a real estate minor. I graduated, worked in the city government of Rio de Janeiro doing foreign investment promotion. And that's where things all started for me. Now I'm in. Chicago, Illinois as a CEO and founder of groundbreaker technologies, a real estate investment management software company. And I got here by getting the experience, the basic experience that I needed. Throughout my early corporate career to identify there is a pain in the space for a lot of real estate operators experiencing it first myself, and then going to the market and looking at the way different firms were dealing with the problem. And I just, started with 10 grand in my bank account and the dream.  [00:01:48] Sam Wilson: That's awesome. I love that. Do you have a background in software development, engineering, anything on that front?  [00:01:56] Jake Marmulstein: I have friends.  [00:01:58] Sam Wilson: All right. I liked that. I liked that. So tell us, how did you from concept to getting the idea hatched and built? Give us that quick story, because I think this is compelling for a lot of people that are sitting on ideas and don't necessarily know where to start.  [00:02:12] Jake Marmulstein: So the, when, when groundbreaker was conceived as a idea, it was the first step frustration. And then there was changes in legislation, such as the jobs act, which pushed real estate platforms that were technology driven to do crowdfunding and market themselves pretty widely. So you think of like fundraise and Realty, mogul and Realty shares, and groundbreaker. Started basically as a result of some of that, we came into the market and said, well, there's a lot of people that are raising capital and underwriting deals, but the software in this technology to infrastructure is still needed.Is there going to be a world in which everybody has a technology and they're raising money from their own investors or crowdfunding, or, how's this all going to play? And we saw that the technology is needed in the space. And it's just a matter of time before all real estate operators will be tech enabled to have a system that they can use with their investors. So that raising money happens over in electronic means data and information is no longer stored in Excel. And that's the vision that I had when all of that was happening. it's a combination of laws that were changing and just the times, and, consumer behavior where people are moving towards using more digital solutions to interact with financial technology, looking at banking, brokerage, all of it is going towards having a login and a portal. So you can check your information from your phone. Why not real estate?  [00:03:52] Sam Wilson: Yeah. Yeah. That's a, that's, you're absolutely correct. So what were some of the first steps you guys took in building this out? Having friends, but then going all right now, we're gonna develop a software. Now we're going to bring on team members. Now we got people to pay salaries, payroll, like how did all that work? And then when did you say man, this thing's actually gonna make money.    [00:04:12] Jake Marmulstein: So that part was a little bit more nebulous when we began. We had a vision and that vision was strong enough to get people to come on board and spend their time working with us without having to necessarily take a salary. So we had equity in the early days, they were giving to the talent that came and built the product for us. And then we use that vision to convince. Reporters to talk about our solution. After we had a very basic version up on the web. And so we got press, which gave us free advertising, which brought in a lot of interested prospects to our website. And I would feel the calls and talk to them about their problems without actually knowing what the solution was going to be at the end of the day. Where we going to be a financing system where we're going to be a software where we can be both and really fielding those calls, structuring my questions and doing customer discovery. There's a course that Steve blank does called customer discovery. If you're ever going to start a company, you should absolutely take that course because the process to understand the customer segmentation and their pain points. Helps you to be able to chart the course on which problems you want to solve and which problems you don't want to solve and for whom. And so we identified that the problem was while people wanted access to capital, there was also a segment of the market that wanted better systems to be able to manage the capital that they did have. And so looking at the way that the market was moving. And the risks associated with being the capital provider and underwriting all those deals. We wanted to move in that direction of being a technology provider. And so we use that vision to sell those early prospects were really interested in what we're doing to pay us, $500 a month for the software and pay us an implementation fee to get it started. And so really we use that vision, that dream to sell people on the product before. We really had much of a product built by making them early customers and helping them build the product with us. And then it took me about Six months of not taking any salary and the business, really not making any money, just, paying its office expenses in order for us to crack through some revenue that resulted in a distribution to the partners. [00:06:34] Sam Wilson: I liked that. That's a lot of the way that people who are starting out in, especially building teams early on as the active. Sponsor or investor. A lot of us start out that way where it's like, Hey, we're all going to get together. And we're going to, we're going to put our heads together and work really hard. And then it might be six, nine months or a year before we crack the nut and actually begin started making the money. So I like, that's not an unfamiliar chart or an unfamiliar territory for many of us. Tell me, you said there that you guys were trying to decide early on whether or not you want to do. Finance company, or you want to be a technology, you guys went into technology, but yeah, one of the things you and I talked about off air was that you guys are looking to build a comprehensive what you call it, a comprehensive ecosystem of services. Can you break some of that down for us?  [00:07:17] Jake Marmulstein: Yes. So the real estate operator who uses groundbreaker and we focus on is a small to mid-size. Syndicator that may have a couple of deals that they've done using Excel. And they're mostly communicating with their investors through email. Maybe they use Dropbox or a CRM system, and they want to formalize their business and be more professional and more efficient by using a solution like groundbreaking  But also these folks don't have a well-established network or relationship with capital partners and services. So there's other solutions that we can provide as a business to be able to make that experience of going from. One to two deals to 10 deals or 20 deals or $2 million sized deals, $10 million sized deals, easier and more scalable for the company that's working with us. So when I say the services ecosystem, if you're an operator and you're looking at who can be the best partner for you. You want to surround yourself with companies that are gonna really care about where you are now and help you to scale as you continue growing to set objectives that are mutually beneficial for both of you so that they have a vested interest in your success. And groundbreakers is doing that for the sponsors that we're working with by having a long-term vision where we rolled out. Different services that are embedded into our core product and our system so that you can get everything you need from us, whether that comes from legal or underwriting or capital or insurance, or even help operationally on the deal. Because we are a technology company that's providing that infrastructure, that layer to organize your business. But once you're using us, you're also. We're also, in a way, partnering with you because the more that you grow and the more deals you do on groundbreaker, the more successful you are as a customer, the more we're we are successful, the more you're likely to bring on other deals or other customers to us. So we want all of our customers to grow up and supporting them through those services as a way of helping them. And it's also a way of us creating additional revenue opportunities for the business.  [00:09:40] Sam Wilson:What's  it been like, cause each of those sound like their own siloed kind of business, if you're bringing on, JV equity partners and getting to know those people out there that are looking to joint venture, but don't want to necessarily be the active sponsor. And now you're building out a technology platform and then you're connecting all of those. What's that actual process like and how do you silo those and perfect each of those without distracting from your corporate.    [00:10:04] Jake Marmulstein: That's a great question. And we've thought about that a lot as we worked on piloting some of those services and getting initial traction from them, our core business is to bring on. Early in up and coming real estate syndicators that want to build and scale their business. On top of groundbreaker looking at us as a partner, that's going to help them to grow and the way that we impact growth through the. Other services is mainly by partnering with best-in-class providers and allowing those partners to have access to customers so that they can render their services and the customer can get value when they need it. So an example of that would be. One of my clients is doing a $12 million deal. It's one of their first larger deals. Initially when they began with us, they were doing smaller deals, like $3 million, $4 million deals in C class with C class assets, C class locations. And they really proved themselves out over the last two years and build their business. And they were successful in turning a lot of those assets. But now they want to swing for larger size deals. And their investor base is also confident to be able to invest more capital in them at this point. But they're going to need some additional capital to be able to fund some of these larger acquisitions. And by having that relationship with groundbreaker, we're able to know where they are in their cycle, what they need. So we've told them about our programs. Okay. They're entering into those services by giving us the information on their deal, and then being able to have calls with our equity partners, to be able to source capital from them and see if there's a fit amongst the investors that we can bring to the table. [00:11:59] Sam Wilson: That's really a really unique. Are there any other elements of the kind of tech platform that you guys are thinking about or building out or see things coming down the pike that you say, Hey, this is this something we're considering? And here's ways that we plan on implementing it? [00:12:14] Jake Marmulstein: Well, we're doing a co-sponsorship is the really big one. We know that. Operators don't do deals alone. A lot of them work with others. So we're studying really carefully what that experience has to be and building a feature that. Allows people to do deals with each other without the the problem where they share the data from their own investor lists with the other group, because a lot of sponsors, care so much about that investor list that they've worked so hard to build. And even though you're partnering with someone and you trust them, you still want that data to belong to you and only yet. So that's one of the big ones. And then we don't want to be a CRM sister. We're an email marketing system. We're an investment management software and we're going to continue being best in class in that. Whereas the CRM is going to be integrated into groundbreaker so you can continue to use your active campaign or your HubSpot or whatever CRM use, but it'll sync the data with our system so that those triggers. Anything else that you're running in those campaigns can be run in tandem with what happens on groundbreaker    [00:13:30] Sam Wilson: right. that's really cool. And that's one of the things that. Finding those integrations, I'm going to use that word. I'm not a tech guy, so you'll have to forgive me is that I can barely send an email, but I know that the integrations, when they work smoothly makes life so much easier. And I think that's what we're seeing is across the web and everything else is just all these different programs that we have to use because each one specializes in its own thing. But if they don't integrate and talk, it's like. This is really frustrating. So that's really cool that you guys are solving that problem. What are some challenges that you guys are facing right now that are not maybe have you stumped, but certainly have you scratching your head? Go, gosh, how are we going to overcome this?   [00:14:10] Jake Marmulstein: No, that's a great question. Until recently it's been. Focus on focusing on the core customer segment that we're dealing with and understanding what you know, what to build in for whom. But we've really overcome that alignment lately within the organization. It's really hard to be able to work with people who aren't yet successful at doing that. And we want to be able to serve those operators and help them. But a lot of them just don't have there. There's just a lot more that they need to be able to be successful. And we can't address those needs in the market. So we want to be able to be a big and successful company that serves a lot of operators, but we just have to stay focused on the operators Actually can, can value our help and use it to be able to build and scale their business. So I think a lot of the people that may be listening to this call would be appropriate. But there's many people that are entering the space as beginners who, haven't done a deal yet. And that's a real challenge is figuring out a way it is, I would love to figure out a way to work with them, but unfortunately I don't think we can.    [00:15:25] Sam Wilson: Yeah. You can't be all things to all people. That's a, that's certainly true. And I think that's an interesting point you make.Cause you want to be able to find a way for people to adopt your software early on. You want to build to bring them on and say, Hey man, come in, come into the fold, get to know us as you grow. Won't this be great. But it also sounds like you also don't want to be the baby. Saying. Okay.] All right. Let me teach you all about what you're doing and how to raise capital and how to use this. And it just, it sounds like there needs to be some level of not just rudimentary, but some sophistication involved before somebody can really adopt what you guys do.    [00:16:00] Jake Marmulstein: Yeah. It's, real estate syndication. There's some complexity of doing that. Even marketing yourself to investors and building your investor base requires you to have an investment thesis and understand who the investor is that you're going after. And it's, it is a beautiful thing what's happening right now in the world. I think that the market that we're in right now is growing significant. More people who are working nine to five jobs in the corporate world, or working from home and exploring ways to invest in real estate. People who are commercial real estate brokers are figuring out, Hey, why don't I invest, and do my own deals. There's a lot of people that are entering the market and will be entering the market and in the future. And I think we're in a good position to be able to help all those people, but there needs to be a base level. Education program. And, we work with groups like Jake and Gino and Joe Fairless and other types that are helping to educate that a new class of real estate syndicators. So I'm hopeful that those guys will continue to be the babysitters for the market if you will.  [00:17:10] Sam Wilson: Yeah. That's absolutely right. I absolutely love it, Jake. Thanks for taking the time to really break down what groundbreaker does, the problems you can. Are seeing and solving in the marketplace. I think that's really cool. You're building something that I think even across is as can fairly familiar with, everybody has competitors and I'm fairly familiar with even some of your active competition. And I think you guys are doing some things very differently that are solving problems, maybe that other people aren't in the marketplace.So that's absolutely cool. I love it. Jake, , Hey, so one of the things that you offered to our listeners to this show certainly appreciate it. I found it here was that if you're listening to the show and you type in the word BRICKEN, when submitting a request or your website, you can get three free months of groundbreaker when you sign up for an annual subscription. So, Jake, thanks for offering that up to our listeners. Certainly appreciate that. And last question for you here. If our listeners want to get in touch with you and learn more about you, what is the best way to.  [00:18:02] Jake Marmulstein: Please add me on LinkedIn, Jake Marmulstein, and also go to our website And if you fill out a demo request form, then we'll be in touch with you and you can go over our software and learn about your business. [00:18:16] Sam Wilson: Awesome. Jake, thanks for your time today. I do  [00:18:18] Jake Marmulstein: appreciate it. Thanks Sam. I appreciate it as well. 

    Leveraging Historic Tax Credits to Rescue Historic Property

    Play Episode Listen Later Jun 12, 2022 23:49

    If you're interested in rehabilitating and repurposing historic properties, then this episode is for you.   Kyle Southard started his investing journey by buying a single-family home in Colorado Springs with zero down and no money out of pocket using VA loans. He also purchases and renovates historic buildings in downtown Shreveport, Louisiana and is utilizing historic tax credits. Tune in as Kyle dives deep into federal and state historic tax credits and how these tax incentives can make a difference in your deals.     [00:01 - 04:12] Military Homeownership and Real Estate Investing Becoming a real estate investor and developer How he was able to benefit from VA loans    [04:13 - 10:07] Bringing New Life to Communities Kyle breaks down their development project in downtown Shreveport The uptick of new residents moving into downtown Shreveport, especially millennials Revitalizing abandoned buildings and properties Finding a gap in the market for short-term rentals   [13:42 - 22:13] Understanding Historic Tax Credits Historic tax credits incentivize people developing a historic buildings You have to own the building for a period of five years in order to get the full benefit of historic tax credits Federal and state tax credits You don't get the incentives until the completion of work Kyle explains their deal structure with investors   [22:14 - 23:48] Closing Segment Reach out to Kyle!  Read his book: Military Homeownership and Real Estate Investing Links Below Final Words Tweetable Quotes   “It's incredibly risky, but we think with great risk comes great reward.” - Kyle Southard “There's a lot of wealth in the world and people want to utilize their wealth wisely, and we can help them do that.” - Kyle Southard -----------------------------------------------------------------------------   Connect with Kyle! Follow him on LinkedIn and contact him directly at 318-900-1070. Head over to the Barksdale Real Estate website as well. . Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → Want to read the full show notes of the episode? Check it out below:   [00:00:00] Kyle Southard: So a historic tax credit is basically a dollar-for-dollar trade-off to incentivize people to develop. And so the way this works is I acquired this building for $160,000, totally vacant. $160,000 acquisition. None of that acquisition cost goes towards historic tax credits at all. So if I pour $1.5 million into the building through construction costs and soft costs, hard costs, et cetera, to develop the building. Not all of that is going to go into the bucket of money that we can call historic tax credit eligible. And so that bucket of money is called a qualified rehabilitation expenditure.  [00:00:52] Sam Wilson: Kyle Southard is an investor. He's a developer as well as a real estate agent licensed in Louisiana. He left the military a year ago to pursue real estate full-time and hasn't looked back, Kyle, welcome to the show. [00:01:03] Kyle Southard: Thank you. It's good to be here, Sam.  [00:01:05] Sam Wilson: Hey, man. Pleasure is mine. Yhree questions. I ask everyone who comes into the show" in 90 seconds or less, where did you start? Where are you now? And how did you get there?  [00:01:13] Kyle Southard: All right, well, I started out as a military guy. I went to the air force academy four years, spent the following nine years on active duty I was in Turkey, Louisiana, Indiana, and Colorado, and somewhere around the Indiana Colorado range. I got interested in real estate, investing through a book called Rich Dad Poor Dad. And that changed my world paradigm. I realized that if I wanted to have a life of freedom, then I needed to get some passive income going. [00:01:38] Kyle Southard: And I thought real estate was the best way to do that. So I looked into how do I buy a house first and foremost? And I knew that I had a bit of a VA eligibility to tap into for VA loans. So I bought my first house in Colorado Springs, Colorado with zero money down. And I'm sure a lot of our viewers and listeners will know that Colorado Springs has become a really hot market. [00:02:00] Kyle Southard: So I was right place, right time refinanced my first ever single-family home that I bought I bought a second single-family home, lived in that for a year, sold that home a year and a half later for $130,000 profit. And then bought another bigger home in Colorado Springs and then some stuff here in Shreveport, Louisiana as well. [00:02:19] Kyle Southard: And because of that, I was able to get some passive income through Airbnb and long-term rentals as well. And it allowed me some financial freedom to take some risks in life. So I left the military. And started investing in real estate full-time and I'm developing as well. So I've got a development in downtown Shreveport right now that's using historic tax credits. [00:02:39] Kyle Southard: And that is a really exciting frontier that I'm learning a lot about every single day. And I'm just amazed at how wonderful real estate can be when I really let go. And let God take over for me and really help some of this stuff take shape.  [00:02:54] Sam Wilson: That's cool, man. I love that. Let's talk I guess, you know, on a VA loan side of things, what's the limit of VA loans you can have active at a time.  [00:03:04] Kyle Southard: That's a really good question. And it's going to depend from person to person. But what I have found for myself is that I was able to have one active VA loan in Colorado Springs. And because there was still some availability left in my VA loan limits, I was able to then finance a second property using a VA loan. [00:03:23] Kyle Southard: However, I couldn't just do another $0 down again, because for me, I only had about $120,000 to work with in terms of VA loan eligibility. And so I had to make up the difference and there's a ratio to make up there as well. So I bought a second home for $270,000 and it had to come out of pocket about $30,000, but it was still a really good rate and a really good situation because it's pretty close to 20% down anyway.  [00:03:49] Sam Wilson: Right, right. Yeah. Do you guys or do you still have your rental portfolio or have you sold that off?  [00:03:55] Kyle Southard: So we still have a rental portfolio in Colorado Springs. We sold one of those houses because the getting was just too good not to. But with the proceeds of that, we use this section 1031 exchange to trade up to a bigger property and that produces a little bit more cash flow per month. And we hope that this one should appreciate quickly as well.  [00:04:12] Sam Wilson: Right. That's cool. All right. Let's talk about the historic tax credits project you're doing right now. You said it's a development project. Is that a redevelopment? What is this project? Give us the skinny on the whole, the whole project and how you discovered historic tax credits and how you're using them. [00:04:30] Kyle Southard: All right. Well, downtown Shreveport is relatively vacant compared to your average mid-sized cities downtown. And what I mean by that is there are several buildings, probably more buildings are boarded up than are active in commerce. And so we were looking around, I was looking around with some friends of mine at some possible properties to acquire and rent. [00:04:52] Kyle Southard: And one property that came to mind was this shoe store on the bottom that had been vacant since 2002, but it used to be a shoe store. And then on the top, it used to be a hotel apparently, but it had not been used as a hotel since the 1930s. And so a lot of the original features are still on that hotel all the way down to the wainscoting pink color, et cetera. [00:05:13] Kyle Southard: And this particular building is called the Sanger Drug Building because it was built in 1900 by the Sanger brothers who went on to build Sanger Entertainment Industry who then sold out to Paramount for a good sum of money. So it's a good bit of history in this building and in researching what we could do with the building, I just learned about historic tax credits and I have a friend of mine, who was a gym partner, turned into a business partner and we researched together the benefits of historic tax credits and how we can get creative financing done and, and bring in investors in syndicated deal to everyone's benefit.  [00:05:49] Sam Wilson: Right. That is really interesting. Let's find out first. Why is half of Shreveport not, I mean, why are the buildings all boarded up?  [00:05:58] Kyle Southard: It's a great question. I mean, I know that, you know, Shreveport has had about a 1% per year decline in population over the past 10, 20 years. And that's just due to economic situations that have, you know, bigger picture macro take on, on the world than I could possibly imagine right now. [00:06:16] Kyle Southard: But as a result of that, you know, a lot of folks are moving to south Shreveport or moving across the river to Bossier City. Or they're just choosing not to live in downtown Shreveport anymore. And because of the lack of downtown residents, there's a lack of downtown commerce as well. But what we've noticed in the past five to eight years is that there is new influx of residents moving into downtown Shreveport. And because of that, there's a slight influx now of commerce going in there too. And so we've got the military installation across the river here called Barksdale Air Force Base. And I know when I first moved here to Barksdale Air Force Base, I was looking for a place to live in downtown Shreveport. [00:06:53] Kyle Southard: At that time, there weren't many places, but now you're seeing lots of mom and pop investors like myself and developers turning formerly abandoned buildings into something really cool and a place where people can live and thrive.  [00:07:05] Sam Wilson: And that was gonna be my next question is, is if you can define why half of the buildings are boarded up, what gives you the courage to move forward on this product and say,, Hey, this is, this is a viable asset?  [00:07:16] Kyle Southard: Great question. And I'm glad you asked it because I have to plug my community here. Shreveport, Louisiana has such a tight network of people, whether they're developers, artists, business people, investors who hang out together. And there's a recent development that was made here by guy named Jim Malsch. [00:07:34] Kyle Southard: And he converted an old parking garage into the Artist & Entrepreneur Center. And that's become kind of the hub of innovation. And there's been a big uptick in millennials moving to Shreveport and kind of centering around downtown Shreveport, just because it's a cool, funky place to hang out with a lot of history. [00:07:52] Kyle Southard: And so, because of that, I think we're all banding together at this point and kind of moving the needle slightly day by day together as a, as a community. And so I always joke, like if an investor wanted to come in and buy a downtown Shreveport, they could probably do it for, you know, 20 million bucks and get a vast majority of this, but that hasn't happened in Shreveport. [00:08:12] Kyle Southard: And I think it's a good thing. There's a lot of people taking stake in downtown Shreveport. And because of that, there's a lot of buy-in and momentum.  [00:08:19] Sam Wilson: Yeah. That's really cool. I love that. So what is the project going to become? You told us a little bit about what it was and the history of it. What are you turning it into?  [00:08:27] Kyle Southard: All right. It's a four-story building and I say four stories because there's a ground floor, a mezzanine level, and then two stories above that. So the ground floor and mezzanine level will be a blank canvas kind of build to suit commercial, lease space. We're advertising right now, looking for tenants to move in there, either as a restaurant bar or just anything that would work well for the community and work well for the investors and the tenants as well. [00:08:52] Kyle Southard: The top two floors will be short-term rentals. And so across what used to be 22 total hotel rooms, we will be making seven short-term rental units with kitchens, bathrooms, et cetera. There'll be a two bed, two bath, three one bed, one baths and then three studio apartments in there. And so the reason we chose to short-term rentals for this is that right now we've got a couple of hotels in downtown Shreveport. [00:09:18] Kyle Southard: Then we've got maybe one or two short-term rentals in downtown Shreveport. But other than that, it's all long-term. And we think that there could be a good gap in the market for short-term rentals.  [00:09:27] Sam Wilson: Yeah. No, that sounds awesome. How much of what your business plan is, was defined by the historic tax credit? [00:09:35] Kyle Southard: Hmm, that's a good question. So I think I would say this project would not be done without historic tax credits. I can say that's probably the case for a lot of my friends who are investing as well, the historic tax credits really incentivize people developing historic buildings. And so I don't think we would be brave enough to take this on without that. [00:09:55] Sam Wilson: Right, but I guess, I guess let's see if I can clarify the question. Does the historic tax credit, so, you know, you're doing, you know, the bottom two floors meds or the bottom two floors built to suit, and then you're turning the, the other remaining units into shorter remaining rooms into short term rentals. [00:10:11] Sam Wilson: Was any of the decision to what this ultimately becomes based upon, was it, was it any of it driven by the historic tax credits saying, Hey, if you're gonna do this, you're gonna get the tax credits. You're going to have to put an X, Y, and Z was any of that in.  [00:10:24] Kyle Southard: Yes. Yes, it was. So because the historic tax credits are meant to incentivize development that ultimately stayed in the federal government, one, they do have some stipulations on what you're allowed to do. And so we're not allowed to turn it into something with the sex industry or something like that, right? There are all kinds of stipulations on what you can and cannot do there. And I mean, ultimately what it comes down to as the developer and investors, that when you use historic tax credits, you have to own the building for a period of five years in order to get the full benefit. [00:10:57] Kyle Southard: And so we were apprehensive about doing something that was not going to work long-term. And so, because of that, we know, my business partner and I know residential, we know a little bit of commercial real estate, but that's about where our imagination ends right now. And so since we were going to be married to this project for five years, we figured we'd do something that we thought was A, going to work, but B, be something we understand and would enjoy. [00:11:23] Sam Wilson: Right, right. No, that's a, that is really cool. Yeah. I guess that, that, that's something I hadn't really thought about was up until this point. Everything you've done has been, has been in the residential side. This is your first foray into commercial real estate. And it kind of sounds, I mean, this is, it's a pretty it's a pretty, not audacious is the wrong word is courageous was probably the more word I'm looking for. [00:11:46] Sam Wilson: Okay, cool. We're going to take 122-year-old building and we're going to put it in short-term rentals and do a build to suit and like. There's a lot of moving parts and do hit the housing tax credits. I want to hear before, you know, one of the, I got some uh, one question on build a suit before we get to that. [00:12:00] Sam Wilson: Tell me, can you just break down the 62nd soundbite version of this is how a historic tax credit actually works.  [00:12:08] Kyle Southard: Yes. So a historic credit is basically a dollar-for-dollar trade-off to incentivize people to develop. And so the way this works is I acquired this building for $160,000. Totally vacant, $160,000 acquisition. [00:12:22] Kyle Southard: None of that acquisition costs goes towards historic tax credits at all. So if I pour $1.5 million into the building through construction costs and soft costs, hard costs, et cetera, to develop the building, not all of that is going to go into the bucket of money that we can call historic tax credit eligible. [00:12:45] Kyle Southard: And so that bucket of money is called a qualified rehabilitation expenditure. And so a qualified rehabilitation expenditure's for things like mechanical electrical, fire safety plumbing, major fixtures, but it does not include appliances cabinets, certain things that could be considered, you know, manipulative or, or subjective when it comes to cost. [00:13:07] Kyle Southard: And so, because of this, when we look at our numbers, we have a $160,000 acquisition costs, a $1.7 million renovation costs and of that $1.7 million, about $1.5 to $2 million are going to be qualified rehabilitation expenditures. What you do with that $1.5 million is you break it up into, 20% of that is eligible for state historic tax credits. And 20% of that amount is eligible for federal historic tax credits.  [00:13:41] Sam Wilson: Is my number right, that's roughly $300,000?  [00:13:45] Kyle Southard: That's right, exactly.  [00:13:46] Sam Wilson: On both sides?  [00:13:47] Kyle Southard: On both sides. And so the trick here is that, one, it's not automatic, but it's pretty close if you do your, do your steps right. And what I mean by that is you have to get this renovation plan approved by the state level and for Louisiana, it's the state historic preservation office down in Baton Rouge. [00:14:04] Kyle Southard: And then it has to get approved at the federal level, which is the National Park Services in DC. And that's about a two-month process at the state level and a two-month process at the federal level, they look at our plans. They make sure that we're not changing the building's historic integrity, things like that. [00:14:21] Kyle Southard: But once that gets approved, you're clear to start work. And when you start work, you basically have to finish it, right? And so what I mean by that is you don't get any of the tax credits until you've finished the work. But once you finish the work you get the state tax credits issued to you. And then the federal tax credits get issued at, let's see it's 20% per year for five years. [00:14:48] Kyle Southard: So if there's a hundred percent of your federal historic tax credits, which in this example would be $300,000. You're getting paid out one fifth of that every year for five years. And so that is essentially a tax liability offset. I personally do not have $60,000 worth of federal tax liability every year. [00:15:10] Kyle Southard: And so because of that, we have to bring in investor, an investor or multiple investors who do have that tax liability problem to solve. And so what we have done is we have syndicated the deal to where we bring in third party investor who has a tax problem to solve has too much federal tax liability, invest a certain amount of money with us, and we issue him or them the tax credits. [00:15:32] Kyle Southard: And so, that's a nice deal because our ask in our project is $300,000 capital contribution, give or take, I mean, there's room for negotiation always, but the nice thing is that that person is going to get paid out a lot of about the same amount of money in federal historic tax credits over five years. [00:15:48] Kyle Southard: So they almost can't lose. And so that's really nice. There's a lot of nuances to this too, but I hope that it's just like a broad stroke overview of historic tax credits.  [00:15:57] Sam Wilson: No, that's really good. That's actually super helpful. Does that $304,000? Yeah. Cause it goes, you get $304,000 on both sides of the, of the equation at the state level. Does that come in over five years as well?  [00:16:10] Kyle Southard: That is not over five years. You know, that's basically, once it gets issued, you can use that. And there's an, there's a rule where you can go back a year to offset some of last, the previous year's tax liability at the state level, you can use the current and I think you can carry it forward. [00:16:25] Kyle Southard: I would consult a lawyer cause that's what I have to do on all this, but what we have opted to do, I'm glad you asked that question. One cool thing about this is the state historic tax credits are transferrable. What I mean is you can sell these state historic tax credits to people who compete for them. [00:16:42] Kyle Southard: What we've found is there's a firm who we found a firm in new Orleans who wants to purchase our state historic tax credits, call it $300,000 for 87 cents on the dollar. So they're effectively saving 13% in their taxes for that.  [00:17:00] Sam Wilson: Right. Are they gonna, are they gonna, they're going to buy it from you 'cause it's a firm that's going to be the end user or are they going to turn around and then resell those to somebody else? So they just do an arbitrage on it.  [00:17:11] Kyle Southard: That's a question I have not asked. I think it could go either way. And with this particular firm, I, I'm not exactly sure. I just know they're going to pay us, you know, at loan closing, they're going to pay us the, the capital that's required to purchase the state historic tax credits from us. [00:17:26] Kyle Southard: And so again, we're getting deeper in the weeds. I want to point out we are going to be able to use some of this capital from the state historic tax credit investors. So to speak this from at, in new Orleans that I mentioned, we're going to be able to use like a quarter million dollars of that for our down payment on our construction loan, through a bridge loan. [00:17:44] Kyle Southard: So it's just wild, how good of a deal this can be if we have the right players. And of course you have to have a great lender, a great, flexibl