JF2412: Surviving the Recession with Stacy Bahrenfuss

JF2412 : Surviving The Recession With Stacy Bahrenfuss

Stacy started her real estate quest by applying for a job at a local real estate company when she was in high school. What started as a bet ended up becoming her profession. At 19, Stacy got her real estate license and started working hard at filling the gap the local market had at the time.

Stacy started her career in 2006, just a couple of years before the housing market crash. In 2020, her experience surviving the recession is as relevant as ever.

Stacy Bahrenfuss Real Estate Background:

  • Founder & CEO of Catalyst Group
  • Started her real estate company at 19, surviving the housing crisis of 2007-2010
  • She built her real estate company into a 7-figure operation
  • Based in Eagle, ID
  • Say hi to her at: https://www.catalystidaho.com/ 
  • Best Ever Book: The 5am Club

Thanks to our sponsors

Best Ever Tweet:

“What you do in a bad market is what protects you in the good market” – Stacy Bahrenfuss.


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to The Best Real Estate Investing Advice Ever Show. I’m Theo Hicks, and today we’ll be speaking with Stacy Bahrenfuss. Stacy, how are you doing today?

Stacy Bahrenfuss: Good, Theo. How are you today?

Theo Hicks: I am well. Thanks for asking and thanks for joining us today. Looking forward to our conversation. A little bit about Stacy. She is the founder and CEO of Catalyst Group. She started a real estate company at 19, and survived the 2007 to 2010 housing crisis. Since then, she has built her real estate company into a seven-figure operation. She is based in Eagle, Idaho, and her website is catalystidaho.com. So Stacy, do you mind telling us some more about your background and then what you’re focused on today?

Stacy Bahrenfuss: Absolutely. I was a senior in high school actually, and joking around with some friends, and they challenged me to apply at a local resort real estate office as a salesperson. Obviously, at that time, I was focused on high school and not able to go full-time into that field. But the resort real estate office ended up hiring me as an admin assistant to one of their coordinators, and that was the start of the real estate quest, as I say.

I worked there for a short period of time and quickly saw that there was a gap in the industry that I could fill, which is related to how I was seeing customer service being handled, and just the gap overall in the client experience. So I proceeded with getting my license at 19. I just really wanted to make a difference in the industry with how people experience the process, really inspiring them to see that whatever their goals are, they can be achieved, versus a real estate agent sort of being like a burden a lot of times more often than not, unfortunately, instead of a help.

So I started that then when I was 19 and built my business as a single agent, and then started building the team. Currently, that’s where I’m at today. I’ve done some development on my own, and built some properties, but the focus is existing residential and new construction today, with my real estate team.

Theo Hicks: Perfect. So when you were 19, was that before or after  — had you started your business already on your own and then the crisis happened? Or you started during the housing crisis?

Stacy Bahrenfuss: It was 2006 that I got licensed. It was essentially right as it was happening. Yeah. So that’s when I started.

Theo Hicks: What a perfect timing.

Stacy Bahrenfuss: I timed that one right.

Theo Hicks: Well, it’s it seems like it worked out. Let’s talk about that a little bit, about what’s it like… Because as we’re recording this in December, and technically, according to the Fed, a recession started back in February… So what advice would you have for an agent who’s maybe got their license within the past six months to a year, and they see that there’s a lot of stuff going on with real estate in the current recession? What advice would you have for someone like that?

Stacy Bahrenfuss: I would definitely advise what I always say, is the recession is my favorite time in the market, because the strong survive, and all the market share that was taken from people getting into real estate because it was really good, or easy, as they say – you get that market share back. So all the random aunts and uncles of the people that were your clients before, they typically go and get another job, because they weren’t trying to make it into their career.

As far as the recession and what you can do to recession-proof your business – just be aware that if you work your business like a business and commit to the numbers and metrics of keeping in contact with your people, and religiously doing that day in and day out, you will truly survive any storm. That’s what I did then, and that’s what we do now. What you do in a bad market is really what protects you in a good market, because it’s easy to do a lot of business in a good market. But when you’re operating from that same blueprint, you exponentially grow your business in a good market, because you’re operating from that recession plan, if you will.

Theo Hicks: Can you go to a lot more detail about what you mean by religiously and constantly staying in contact with people? Who are these people and then what’s your strategy for staying in contact? What do you do and then how do you make sure you’re continuously doing that?

Stacy Bahrenfuss: Yeah. What I encourage realtors to do is to focus on an area of business that you want to pursue that you enjoy. If you don’t like cold calling, don’t do cold calling; do open houses and networking, if you like that in-person experience. The more that you can cater to your strengths, the more sustainable that your plan is going to be. So do that.

What I mean by reaching out to these people is – let’s say you really enjoy open houses. Then make sure that three weekends out of a month, you have an open house going, since you’re probably not doing that during the week. You have an open house going three weekends out of four, and that is your lead generation, the metrics that you need to be working on. So you would need to make sure that, as an example, 10 people come through your open house; if they don’t, you need to have a strategy of what else you’re going to do. So that could look like door knocking to the neighborhood while you’re at the house, or before or after the open house, introducing yourself, asking who they know that needs to buy or sell real estate, and connecting with those people and making those contacts, and then putting those contacts into your database, and creating a nurture campaign so that you can stay in touch with them, and create them into clients ultimately.

Break: [00:06:19][00:07:25]

Theo Hicks: What’s the nurture campaign? Is that capturing their information, making a list, and sending content to that list? Is that what that means?

Stacy Bahrenfuss: Yeah, and more so just looking at it like how can you provide value; updating them each quarter on what the value of their home is, as an example, and keeping them up to date each month on the market. I always like to provide an educational and inspirational piece to whatever contact I’m making. So making sure that you’re not only calling them to say “Are you ready yet?”, but you’re also calling to educate them on something, like interest rates. Maybe you know that they were also considering refinancing. If you always go to that “I’ll provide and you decide” kind of mentality, that’s what we say on our team, the more impact that you can make and the bigger your business will get, because you’re worried about the impact versus the transaction.

Theo Hicks: Let’s zoom out a little bit and try to talk about something that applies to anyone who’s in real estate, or I guess in business in general… And that’s scaling. You said you started off doing this by yourself, then you eventually brought on team members, and now you’ve got your seven-figure operation. Walk us through, to start, how that initial scaling works. So I’m an investor, I’m working on everything by myself, I have no one working under me, I’ve got no employees in my business – how do I know when it’s time to hire employees? How do I know who to even hire first?

Stacy Bahrenfuss: I definitely think that sitting down and making a plan of what is that ultimate vision for your investing company. What does that look like and how big do you want it to be? Do you want to mess with employees and a team? Really be honest with yourself, because some people don’t want to mess with it and that’s fine. But in the case where you know you’re really looking to scale, is you can succeed and do things at a completely different level through people, and cover a lot more ground.

So looking at the first question, when is the right time to hire or scale? For me — it’s funny, my husband is very logical and more of that engineer kind of mind, and I’m visionary. So for me, I actually started sooner than I think you should. My thought process was, if I can get someone to do these postcards and these mailers that is taking time and it’s super annoying to me, frankly, then I could go out and deal with more people. So I took that leap really in the first year, because there’s that element of “Do I have a year’s worth of savings on covering expenses and everything like that?” That all is, of course, runway, and that runway is so important. But also trusting in your vision that you create upfront and what you’re trying to do – that is equally as important. Because you could wait, and wait, and wait, and really miss your opportunity to scale.

I definitely think looking at the tasks that you’re doing that are less than $250 an hour – if there are a lot of those, it’s time to hire and bring those people in. There are ways that you can make your team a part of the profit-producing activities, so everyone has skin in the game, so that it’s not an employee that’s just an expense, but they’re all in on the vision too. I think that that’s the first thing. Then looking at the vision and what tasks only you can do, and trying to delegate and outsource everything else makes it so that the business grows exponentially.

Theo Hicks: What’s the hardest step in the scaling process? Is it going from you to one other person? Or is it a little farther down the line where it gets a little bit harder? Is that the easy part? Like “Oh, I got my first hire. This is super easy” and all of a sudden you’ve got five employees and you’re like, “Oh, this is the hard part.” What’s the most challenging part that you’ve come across in scaling your business?

Stacy Bahrenfuss: The most challenging part is setting the expectations piece and clearly writing out the job description and the metrics, and all of that. Because I didn’t do that upfront. I hired first and I expected them to read my mind, and I was surprised when they didn’t. So really diving into those expectations, I think, is there whether you have one person or 10. That, for me, has been the recurring theme as I’ve grown, because I didn’t take that time. As soon as I did, it just made a world of difference, obviously.

I think that really looking at those job descriptions and expectations, and having someone you could bounce them off of, that has maybe a different personality type or perspective than you see the world, is super helpful… Because there are a lot of holes that maybe you don’t fill, that an employee or someone else would need answered.

Theo Hicks: So upfront, when you’re hiring people, it’s making sure you’ve got the expectations set, you are writing the right job descriptions so you’re attracting the right people… So is that kind of how you screen people, just based off of the job description, or there’s something else you do when you screen them?

And then a second part of the question – you can either answer together or separately, but… Once you’ve hired someone, what does that look like? Because you mentioned that you want to tie them to a profit-producing activity so that they have skin in the game. So is it they bring in a certain sales number, or is it, as you mentioned earlier, a certain amount of people need to come to the open houses? How are you actually measuring their success once they’re hired? And then how often are you looking at this? Are you doing quarterly reviews, yearly reviews, things like that? Lots of questions.

Stacy Bahrenfuss: I love it. I so appreciate it, because this is an area that I’ve just been so heavily focused on this year, so it’s all fresh, these answers. So it’s good timing. The first thing that I actually changed at the beginning of this year that has been so powerful in the hiring process is when I post the job description, I also require that they send a video with the resume. Just as an example, I was hiring for my executive assistant and I had 84 applicants. Out of the 84, only four read the directions and provided the video. It was just awesome [unintelligible [00:13:27].07] people are a lot more upfront, and then also get a feel for the person, so I don’t have to reach out and do that first interview and all of that.

The second thing just with that hiring piece is really checking references, and checking five references and asking those references for more references when you call. That just gives another level of perspective to the person. So that’s the other thing.

Also taking time to court this person in a sense, even going out to getting dinner or drinks, or something like that; so you can lead the dynamic in that way too, is looking at it more of like when you would start dating someone, what are those things that you would look at; we don’t take that fully over to hiring. We more have this annoying task we no longer want to do, and it’s super urgent, and we get the wrong person in. That whole “hire slow, fire fast.” So just take the time upfront to go through who they are as a person.

The piece that has been really exciting with regards to everyone contributing to the bottom line and production is incorporating that into each role. What that looks like for an admin staff is we have created focus points within the real estate business that they’re assigned to. For example, one of our admin, we have created a silo, if you will, that she is in charge of our out-of-state agent referrals. So she lead generates — she reaches out to them to create that relationship so that when they’re referring the clients here, we can be their point of contact, and vice versa. But that is her only focus. So when those clients get referred to our team, that [unintelligible [00:15:17].10] 25% referral. She gets 10% of that 25% that comes in. So she’s focused on that. Another admin is focused on her sphere of influence, because she’s lived here a really long time. So we’ve assigned these roles and then they build that into their daily schedule for at least an hour that they are doing outreach, making calls, and all of that. I feel like there was one more question than those questions…

Theo Hicks: Yeah, the last part was the ongoing reviews. So how often are you doing that and what does that look like?

Stacy Bahrenfuss: Yes. Doing weekly reviews with each person and going through metrics, but also tying it more to the silos, those assignments that they’re in charge of, from a higher level “How can we move this project forward?” versus being about what they’re doing day in and day out.

So yeah, as far as that’s concerned, I found it’s made such a difference keeping in contact and in touch with the employee in a structured way, versus you could go months and months and not really check in, and then they leave and you wonder why. So it’s really helpful to run that way.

Theo Hicks: Are you a believer more in the way of doing these meetings audio, or you do videos, too?

Stacy Bahrenfuss: We have an office, but we do video. It would be on Zoom, or in-person at the office.

Theo Hicks: Okay. Nice. One thing I wanted to ask you about that I didn’t get to, so I’ll incorporate this into the Best Ever advice… This could be your best advice that you have, as I was going through some of your social media, and you have a pretty big presence on there; you’re constantly doing stuff on social media. So what’s your Best Ever advice? This could be specific to real estate investing in general, or a real estate agent who’s trying to grow their brand. So what’s your Best Ever branding advice?

Stacy Bahrenfuss: It seems so simple, but to realize that every single thing you do affects your brand. It either takes away from it or contributes to it. The way you leave the house, the way you speak, what you say, the words that you used, how you show up in every way. And as far as the investment side of things go, you can’t know your numbers enough. I look at multifamily and apartment complexes and all of that, and it’s just crazy how many people have the proformas to get that higher asking price, and if someone is going to ask you have to do the work to get the rents up, they should compensate by lowering that total price.

So just really the advice is to really dig into all the expenses on investments and always shoot high. If you’re building, shoot for longer. It’s going to take longer, and they’re not going to sell right away.

Theo Hicks: Alright, Stacy, are you ready for the Best Ever lightning round?

Stacy Bahrenfuss: Yes.

Theo Hicks: Okay. First, a quick word from our sponsor.

Break: [00:18:09][00:18:44]

Theo Hicks: Okay, Stacy, what is the Best Ever book you’ve recently read?

Stacy Bahrenfuss: The 5AM Club.

Theo Hicks: The 5 AM Club. So you get up at 5 am?

Stacy Bahrenfuss: I don’t. It was four this morning, but it’s not a regular…

Theo Hicks: Okay. Is that what the book is about? Getting up earlier?

Stacy Bahrenfuss: It’s about that, but it’s about so much more. It’s just about it is 5 AM and there are all these studies about working out and learning your daily routine. But the way that it’s written is so helpful for every area of life.

Theo Hicks: Okay, cool. I want to check that out, because I need to start waking up earlier. If your business were to collapse today, what would you do next?

Stacy Bahrenfuss: I would continue forward with consulting and helping people with everything that I’ve learned over the past 15 years.

Theo Hicks: You do invest, so this could be either from one of your investments or a deal you’ve done with a client… But what is the best transaction or best deal you’ve done?

Stacy Bahrenfuss: I look at the best deal from a client’s perspective of the money that they’ve made from the investment and other factors that were important to them… But I think the best deal is a client that had purchased a house — it was 2011. We purchased it for $78 a square foot and today it’s almost $300 per square foot. So I love that kind of stuff, just being — you know, succeeding in that way.

Theo Hicks: Sure. On the flip side – and again, this could be an investment, it could be something that’s not even related to money, like a major problem that happened on a deal you did… But what’s the worst deal that you’ve done and what lessons were learned from that deal?

Stacy Bahrenfuss: I recently developed and built 11 custom luxury homes. It took way longer than was expected for everything. There was a portion of financing that I had used that was higher interest, and I will never do that again, because it goes way faster and eats up all of the profit. It’s obvious, but just when you’re in it, you’re putting the deal together and there’s aspects that it makes sense to do that, but if it goes too long, which is what happened to me, it eats all the profit and it’s not worth it. So just being really mindful of that.

Theo Hicks: What is the Best Ever way you like to give back?

Stacy Bahrenfuss: Teaching young people all of the things that I wish I would have learned starting the company when I did. I was just failing forward, so I actually am in the process of starting the BIM Foundation, which is the Believe In Me Foundation. It helps young entrepreneurs with business acumen, and goal setting, and just really designing their life, because that made all the difference for me.

Theo Hicks: Awesome. Then the last question, what is the Best Ever place to reach you?

Stacy Bahrenfuss: That would be on my website. Because my last name is super long, I’ve made it simple, which is limitlesswithstacyb.com. That has all of my contact information and things like that.

Theo Hicks: Perfect, Stacy. Thank you so much for joining us today and giving us your Best Ever advice. Some of the top things we talked about was advice you have for agents, or really anyone who’s getting started during a recession, or is going through a recession. You have a very positive attitude about it and you’re actually excited that there’s a recession, because that’s business that you can get from people who might not necessarily be cut out for this, or maybe got into it and just rode the previous economic expansion and didn’t have the proper business plan in place to thrive or maintain during a recession.

We talked about other customer service things you do with clients, like your nurture campaign that you send out. We talked about scaling, the beginning phases of scaling, hiring your first team member and how to know when to do that. The most challenging part of scaling would be setting expectations, and not just hiring people and expecting them to read your mind (wouldn’t it be great?) We went into more specifics on working with employees. You said that was a big focus of yours this past year. We went into a lot of detail on things you’ve done during the hiring process, as well as once you’re actually hired, making sure you’re tying what they do to profit-producing things. You talked about the focus points that each team member is assigned to, how their compensation is based off of that, and then the weekly reviews that you do.

Lastly, the Best Ever advice was for number one, the brand. Realize that everything you do either adds or takes away from your credibility and your brand, so keep that in mind. And then for investing, making sure you dig into the numbers, making sure you’re doing your underwriting and due diligence properly and to a high standard.

So Stacy, thank you so much again for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

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JF2399: Using Kindness And Discipline To Manage Life And Business With Cornelius Camp #SkillsetSunday

JF2399: Using Kindness And Discipline To Manage Life And Business With Cornelius Camp #SkillsetSunday

Cornelius was a podcast guest five years ago when he just started his journey as a realtor. Since then, he has worked with several brokerages. He also works as a school counselor full-time. Over the years, Cornelius has gained plenty of experience in time management and customer service. In this episode of #SkillsetSunday, he’ll be sharing his knowledge as well as some tips to manage a busy life efficiently.  

Cornelius Camp Real Estate Background: 

  • School counselor for Chicago Public Schools and a real estate agent
  • 5 years of real estate experience
  • Previous guest: JF220
  • Based in Chicago, IL
  • Say hi to him at: www.CluelessRealtor.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Kindness always wins no matter in business or in personal life” – Cornelius Camp.


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today, we’ll be speaking with Cornelius Camp. Cornelius, how are you doing today?

Cornelius Camp: I’m doing well, Theo. How are you doing?

Theo Hicks: I’m doing well as well. Thanks for asking and thank you for joining us again. So Cornelius was back on the podcast way, way back in the day, episode 220, all the way back in 2015.

Cornelius Camp: Correct. Yeah.

Theo Hicks: So he’s been up to a lot since then, so I look forward to catching up and also focusing on the skill for today, because today is Skill Set Sunday, so we’ll focus on a specific skill that Cornelius has that you can apply to your business. And the goal is to talk about actually two skills – customer service and time management. Before we get into that, a little bit about Cornelius. He is a school counselor for Chicago Public Schools and a real estate agent, hence, time management as a skill.

Cornelius Camp: Yeah.

Theo Hicks: He has 5 years of experience. As I mentioned, previous guest on Episode 220. He is based in Chicago and his website is http://cluelessrealtor.com/.

So Cornelius, before we jump into those two skills, do you mind catching us up on what you’ve been up to since you and Joe spoke about 5 years ago?

Cornelius Camp: Sure. So like you mentioned, that was 5 years ago and I was actually just getting started into real estate when I got an email from Joe and decided to be on his podcast, where he invited me to be on his podcast. So I’ve been practicing real estate along with being a school counselor for Chicago Public Schools. In real estate, I probably have been in three brokerages since then. I’m really happy with the brokerage that I’m at right now, Fulton Grace. I’ve partnered with the Louis Real Estate Group, one of the top producing groups here in the city of Chicago. So I’ve learned a lot. It’s been good. I’ve learned a lot.

Theo Hicks: Good. So the two skills that I mentioned we wanted to talk about is customer service and time management. And I’m just going to change it up on you, I’m going to do time management first. So you are a school counselor, which is a full-time job. I have an aunt who’s a school counselor… So you have a full-time job, but then you’re also a real estate agent on the side. Obviously, that’s going to take a lot of time management skills. I think you also mentioned that you said to us you’re married, you have a child, I’m sure there’s other things you enjoy to do as well… So time management is super important to make sure that you’re able to invest enough time in each of the different areas.

But first, before you go into your tactics for doing that, maybe just quickly explain how much time you’re spending in each of these; maybe give us like a typical school year week, Monday through Sunday, how much time is spent as a school counselor, and how much time is spent as an agent? And then when are you doing these things?

Cornelius Camp: Okay, so during the weekday, Monday through Friday, my school counseling hours, I usually arrive at school by around [7:45], or in this case, I log on at about [7:45], because we’re doing remote learning now. And usually the school day ends at about three.

I get a 45-minute lunch. So during that time, I’m usually eating at my desk, so that I can eat and also check emails, check post notifications on Facebook, Instagram, and just respond to the audience or just respond to any clients that I might have.

Once three o’clock ends, I usually will give myself about an hour and a half, maybe two hours… And that’s because depending on where the actual showing is – I usually have showings, I should have said that earlier; I usually will have showings with my clients. And depending on where the showing is, I’ll give myself about an hour and a half to get there. So I usually would do about 2-3 showings per night, and if I start at [4:35], that runs me till about [6:30] or [7:00], 2 or 3 showings. And then I can get back home, spend a little bit of time with my son, we have a family dinner, and then it’s time for him to go to bed.And then after that, once he’s in the bed, I’m usually up checking emails, responding to emails, trying to be creative with content and post content, and schedule out content. And then also trying to set up other showings for different clients.

Theo Hicks: What time are you usually in bed by?

Cornelius Camp: Usually about [10:30], because I usually have to wake up at about [4:30]. I’ve got to get prepared, because he doesn’t have an alarm clock; he wakes up some days at [6:00] o’clock, and some days he’ll wake up at [6:45], so it’s an adventure… And we have our little dog, so I have to go and walk her out as well. So I’ll take her outside and then I just stay up. That’s how I start my day; I have a little meditation period, a little time to read, a little time to focus, pray a little bit, and then I get ready for of him basically, yeah.

Theo Hicks: You’re kind of working all day from [4:30] until [10:30]. Besides the [unintelligible [00:08:00].01] that, how do you have the energy to do all of this?

Cornelius Camp: Well, I used to be a personal trainer, so I have knowledge as far as what type of foods you need to intake and what’s going to make you sluggish, and what might keep you up and peppy, I guess, so to speak. So I have quite a few sandwiches, protein bars here and there, I may have a shake in the morning. I’ll try not to have a very, very heavy lunch, nd then I just try to do things as far as what will keep me awake. I don’t really do much caffeine, but I do the decaffeinated green tea. So that keeps me going throughout the day. And water.

Theo Hicks: Let’s talk about the diet, because that’s actually really important, and we don’t talk about that a lot on here. As you mentioned, you’re a personal trainer, and the types of foods you eat, when you eat, how much you eat will determine the level of energy you have. And obviously, you have a lot of energy and you can get up at [4:30] in the morning and work until [10:30] at night, and more or less be on your game the whole time… So you kind of went over what you eat, but maybe be more specific. So you wake up at [4:30] AM, and you go to bed at [10:30]. What’s your diet look like in between there?

Cornelius Camp: I guess maybe around six o’clock is when I have breakfast. But that’s usually something kind of light, like maybe a cereal bar or—the past month or so, I’ve kind of gotten into a cup of green tea and toast with almond butter. So that’s usually how I kind of start the morning. It is real simple, it’s good, it’s healthy for you and I don’t have to put too much thought in it.

And I try to eat every 2-3 hours. So after that, I might have a bowl of oatmeal, after that maybe some yogurt and then usually it’s around lunchtime, so that includes maybe a sandwich or some type of chicken breast, or some type of carb or vegetable. I struggle with the vegetable part because I’ve never liked vegetables… So that’s where the ninja comes in. So the ninja comes in later on in the day.

And then usually I try to get something in, no matter what it is. Maybe a protein bar of some sort, once I get out of school and then going into the transition part of showing with my clients, because that’s when I really start lagging; it starts catching up to me around that time. So I may grab another cup of tea, a protein bar to give me a little boost of energy. Like I said, hopefully I can get home by [6:30] and [7:00]. My wife does usually cook a good meal for us, and I try not to eat past that time.

Every now and then I might get a little hungry so I may have some type of fruit, or like I mentioned earlier, the ninja part… I may get a cup of green smoothie or strawberries, bananas and mango. I usually like that combination. Get a little honey in it. Yeah, basically, everyday, at least Monday through Friday.

Theo Hicks: Is there any other tactics that you have besides the diet? And I guess all we’re talking about is a diet and your schedule, so maybe walk us through any other advice you have for people who are trying to balance a full-time job and working in real estate.

Cornelius Camp: Right now, because we’re working from home, my son’s daycare is very close to our house, so I drop him off at daycare. And then I actually have a little bit of time before I have to clock in at school to get a workout on. I’m kind of staying away from the whole gym area, because I have an underlying medical condition or compromised immune system. So I basically just run. I have a running background, I ran track in college, one state and the 100-meter dash in Georgia… So I have a running background, my dad runs marathons, I do half marathons. My goal is to do a marathon, but I haven’t gotten there yet. So yeah, I usually get a workout in between [7:00] and [7:45]. And then that gives me enough time to get home, get situated, don’t look so flustered, because I’m sweating and everything when I log on with the kids and in their classroom and stuff.

But any advice though – at least try to take 30 minutes. 30 minutes a day, even if you go for a walk, get some fresh air and get out of the house, get out of the office, just take 30 minutes, do some type of exercise. And if you can’t get outside, then I recommend doing sit-ups, push-ups and squats, and you can use your body weight and you can still get a good workout in.

Theo Hicks: Okay, let’s transition into the other skill, which would be customer service. So I will give you the floor. I know in your email you sent us that customer service is key to any business. So then walk us through why customer service is important and then maybe some of the things that you do to set yourself apart when it comes to customer service, compared to other agency or work with or seen out there.

Cornelius Camp: So I’ve been in the service industry ever since I’ve been working, since 15 years old. And that is a passion of mine. I like helping people, I like seeing people achieve their dreams, I like seeing people succeed. So that’s always been a passion of mine, is to help and serve.

But I got the whole excellent customer service, actually from my wife. She used to work at Verizon, and Verizon is the epitome of customer service. Any problem that they encounter, they’re always taught to keep a positive attitude. They’re always taught to not get frustrated, always taught to display empathy and so forth. So I kind of had a good sense of customer service. But when I met her and then she started working with Verizon, I started learning some tactics from her—not tactics necessarily, but just how to write emails, how to speak with people over the phone, how to speak with people one on one; that helps me out with when I have listing presentation, and so forth.

So that’s basically where it comes from. And then I am constantly now, because my wife introduced me to Gary Vee, I’m constantly watching him and listening to him and seeing his posts, and he’s always talking about kindness. And one thing that I often think about that he said was that “kindness always wins, no matter in business or in personal life. It always wins.” And in my part, as far as real estate is concerned, I’ve found that kindness wins, because it’s good that my clients might get frustrated at the whole buying process or the listing process, so kindness can kind of calm the situation down.

As far as working with other agents, I’ve known a couple of agents that will say to me, like, “Man, so glad that you put in an offer. I really didn’t want to work with this other agent,” or something like that. And then also when you go to refer your clients to a contract or to an inspector or to a lawyer or a lender, having those relationships can take you a long way and it can make you look a lot more professional, because you can say in your listing presentation, “Hey, I have a team. When you decide to place an offer or you decide to list your house, I have this lawyer,  I have this lender, I have this contractor if you need anything fixed on a house,” or whatever, and they’re very well recommended. And the customer service comes from people wanting to work with you, because they know you’re a good guy and they don’t mind referring you to another person as well.

Theo Hicks: I love the advice, especially the part on the kindness. Can you elaborate a little bit more on some of the other tactics that you learned from your wife, more specifically, those communication skills? So you said, how to write emails, how to speak with people over the phone, how to speak with people one on one in person; maybe for each of those quickly walk through how our customer service can shine through in those moments.

Cornelius Camp: So I guess when it comes to writing emails, when I first started working for CPS, that’s when I really had to do way more emails than I’ve ever had to do before in my life. Even though I was the kind person when you talked to me one on one, individual, when it came to emails, I was just blunt and straight to the point. It was just one or two sentences, three sentences or something like that. And talking with her and speaking with her, I’ve noticed that in my emails, when I either email my principal or I email students, I try to start off, “Hey, how are you doing? I’m doing well, I hope that everything is going good.” And then whatever it is, I’m emailing you about, “Stay safe, be safe.” And I try to break it down, instead of having them try to figure it out, I guess, lack of better term dummy-it down… So it can be made as easy as possible for them, whoever it is that I’m writing to.

For instance, just a few minutes ago, I was emailing one of the students about a particular assignment that they needed to do, and I was like, “Okay, you have not done this; this is where you need to go,” gave them the website. “This is what you need to do.” I had a screenshot of where they need to go on the screen, “…and here is the information that you need”, and I had the information laid out. So it was basically, you just need to look at the email and then you figure out the problem. That’s what the whole email thing came into place.

As far as talking one on one with people, she taught me how to be empathetic. And that really helps, because the way that you start off a conversation is to be empathetic. And then that helps build the rapport that you need, whether you’re dealing with a client or you’re dealing with a professional service person, a contractor, a lender or a lawyer, anything like that.

So if you set that ground that you have empathy for them and you know exactly what they’re going through, it kind of eases the tension maybe, that might be in the conversation. And then also, it allows you to build that rapport. And whenever in life that you’re dealing with someone, especially in business is concerned, you really have to have a rapport, and I think a rapport is so critical.

Theo Hicks: What does that empathy look like? Maybe give us an example.

Cornelius Camp: Okay, so here’s the example that my wife gave me, and she often uses this. When she was working at Verizon, we were dating, but we were not married. And she will get a phone call from someone and it will be kind of irate and saying that, “Oh, my husband is doing this, and I’m getting a divorce, and all this other stuff. And I’ve got these four kids and they’re driving me up the wall and everything.” Back then, again, we weren’t married, my wife didn’t have any kids, but she would empathize with the person. “Oh, my God, I tell you, I’m going through a divorce right now. It can be so hard, but you’ll get through it.” As far as the kids is concerned, again, she had no kids, but “I totally understand you. Kids, they drive me crazy. They’re pulling me from each and every angle. And I have to do this, and I’ve got to tuck this one into bed. And I’ve got to go over the homework lesson with this one.” Just being able to empathize with that person, and even though it was a made-up situation, she genuinely built a rapport and understood and made the customer on the other end – they’re able now to walk their way through whatever problem they were having.

Theo Hicks: I love that example. Thank you for sharing that. So Cornelius, is there anything else that you want to mention about either customer service, time management, before we sign off? And also where we learn more about what you’ve got going on and anything else you’re working on.

Cornelius Camp: So I wanted to mention about the time management piece, and I think one of the things that’s really critical, no matter what business that you’re in, especially in real estate, is set a schedule. A lot of people will ask me, “How do you work full-time and then also have a thriving real estate business?”

Really, it’s all about setting a schedule. If you set a schedule and you say that, “Between one and two, that I have lunch, I’m going to eat my lunch at my desk. And then I’m going to respond to emails,” well, then do it between that time period.

The same as if I’m not going to respond to emails or be on social media after [7:00] to [8:30] so I can spend time with my son or spend time with my family, set that specific time and then at seven o’clock, shut the social media down, shut the phones down. Don’t check emails, don’t be trying to spend time with your son or whatever and your family time and then you’re constantly checking emails. Set that timeframe and stick with it. The same with working out. 30 minutes, 12 to [12:30]. If it is nice outside, go for a walk during your lunch period. So that’s what I wanted, to express a little bit more about the time management. I think having a schedule, especially if you’re really, really busy, I think that’s critical to keep your sanity.

Theo Hicks: And then your phone, you’ve got an alert set up, or is it just written down, or it’s just in your mind?

Cornelius Camp: I have a couple of alerts on my phone, but my wife created a daily checklist, so it always has Monday through Sunday, and you can write on there and it has these little goals or whatever that you’d have to get done. Some of them are daily, and then some of them you can do every other day, or some of them might be weekly. And then whatever day it is, if you’ve completed that task, you check it off. You may have meetings, or if you have showings, you can put those as notifications in your phone. And then also, I recommend that you get a calendar, write it out.

As a counselor, I have to have a calendar. Because if I see Jonathan on Monday, I’m probably not going to see Jonathan on Tuesday. So I need to know who am I going to see on Tuesday and who am I going to see on Wednesday, so that way everybody can get the amount of appropriate services that they need.

Theo Hicks:  Sure. Thanks for sharing that final point, and thanks for sharing all the points. So Cornelius, thanks for joining us. Again, the focus today was on time management. So you went into a very detailed breakdown of how you spend your day, and then also what you eat, which again, may not seem super relevant, but again, you’re a personal trainer. I think most people understand that the types of foods that you ingest, the amounts, the timing is pretty important and has a pretty big impact on how you feel. That’s pretty big if you’re trying to balance all these different things and maximize your time, doing the details on that.

And then you talked about the importance of working out as well. And then overall, just having a schedule. We talked about customer service and how it is a passion of yours. So I guess I’m not saying it’s easy, but it’s easier, since you’re already passionate about it and don’t need to work on caring for other people; you’ve already got that going for you.

You mentioned some tactics for communicating, and then you also talked about kindness and how that can calm situations when you’re speaking with clients.

And another thing you talked about was for specifically as an agent, when you’re working with clients, providing a good customer service would be providing them with all different contexts they would need – so a lawyer, a lender or contractor. Providing them with a full service, so that not only is it more helpful to them personally, but then the clients and then the contractors or lawyers and lenders are more likely to refer you to more business. So that’s specific to being a real estate agent, but you can think of that in whatever you’re doing, whether you’re an active investor, or some other role or professional. The same concept applies when it comes to customer service. And then maybe call up Verizon and see how they handle you and get some tips from them.

Cornelius Camp: Right.

Theo Hicks:  So Cornelius, thank you so much again for joining us. Again, his website is http://cluelessrealtor.com/. Best Ever listeners, as always, thank you for listening, have a best ever day and we’ll talk to you tomorrow.

Cornelius Camp: Thanks so much.

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JF2378: Not Letting your Business Run your Life with Darrah Brustein #SkillsetSunday

Darrah used to be an entrepreneur who built businesses thinking that bigger was better and more was the way to go. Over time, the four companies she has built took over her life, and Darrah hit the burnout phase.

She restructured her businesses and her life in order to spend more time traveling and learning. That’s how she got into mentorship and coaching, helping other entrepreneurs and investors who are at a burnout point find their passion again.

Darrah Brustein Real Estate Background:  

  • Founder of four businesses; Equitable Payments, Network Under 40, Network Over 40, & Mind Your Business Accelerator
  • Author of “Finance Whiz Kids”
  • Prolific writer & interviewer for Forbes & other outlets working with Shaq, Seth Godin, Bobbie Brown & many more
  • Her mission is to connect people to the resources they need to elevate what they do.
  • Based in Atlanta, GA 
  • Say hi to her at: www.darrah.co 
  • Previous guest on JF151

Click here for more info on groundbreaker.co

Best Ever Tweet:

“We don’t know when it’s enough and why we’re building it in the first place.” – Darrah Brustein.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the Best Real Estate Investing Advice Ever Show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any other fluffy stuff.

And today – well, it is the weekend and I hope your having the best ever weekend. Because it is the weekend, we got a special segment called Skillset Sunday. And the outcome of today’s conversation is to make sure that we are setting up our businesses to do more of what we really want to do, and not just setting up a business to create a business.

With us today is Darrah Brustein. How are you doing, Darrah?

Darrah Brustein: I’m great, Joe. It’s really good to be here with you again.

Joe Fairless: Yeah. And you said again, and we were looking at this before we started recording – Episode 151, aired on January 31, 2015; more than five years ago, and wow, a lot has changed since then, especially for this show. And I’m looking forward to learning more about what has changed, or really just what’s the latest with you.

So I think it’s important that we first give a refresher on where you’re at. I have a couple of things that I’ll mention and then I would love to learn more from you. So Darrah is the founder of four businesses – Businesses Equitable Payments, Network under 40, Network Over 40 and Mind Your Business Accelerator. She’s the author of Finance Whiz Kids, and she’s based in Atlanta, Georgia.

But would you mind, Darrah, given us just a refresher on your background and your focus now? And then we’ll dive right into the outcome of our conversation.

Darrah Brustein: Great, sounds good. After spending a decade plus building most of those businesses that you just rattled off so eloquently, I hit a point where I realized, much like you teed up at the top of the show, that I have been building these businesses, thinking just bigger is better and more is always more, and I’m hitting all these metrics that other people are celebrating and glorifying… But when I looked around, I thought the life I’m living is not at all commingling with the things that I say I value, like growth and learning, connection, things of that nature. And I have really [unintelligible [00:05:08].12] those in favor of growing this business for the sake of that alone. And I was burnt out and sort of miserable, and I thought, “Well, what’s the point of doing this if this is the outcome?” And I sat back for quite some time, and it just sort of occurred to me that the thing people were asking most of me about three years ago now was, “How do you live the life that you do?” Because when I started to make that realization, I decided that I would shift all of my businesses to a place that would actually support the life that I wanted, which was about 50% travel, which allowed me to be at the milestones of people I cared about, it allowed me to constantly be learning and growing and collaborating with people whom I admired and respected intellectually, and all these other things. So I began to shift my career at that point to one of coaching and consulting entrepreneurs who were burnt out and felt like their business was running them.

Joe Fairless: So 50% travel and the other 50% was what – coaching the entrepreneurs?

Darrah Brustein: Well, interestingly, as I would travel, I would work. I just made sure all of my businesses were structured such that I could do them from wherever. And like I was implying, I’ve really sort of crafted this formula for myself of first design your life, identify what it is you want, identify what your core values are, and what your North Stars are, and then identify what does that life actually cost me so I can reverse-engineer my business or businesses to make that possible, rather than consume and de-escalate the things that I say that I want, but I’m not actually carving out time or priority for. And then lastly, it’s build the network that opens the doors to the success you’re seeking on your terms. And that’s how I started to prioritize everything.

Joe Fairless: Well, you went through that just now high-level… Can we unpack it a little bit, one by one? So is the first one, design your life, or is that the ultimate outcome and then the first one’s North Stars?

Darrah Brustein: Nope, you are totally right. It’s design your life first. And for some people, I think that’s really complicated, because the older we get, the further and further we get away from dreaming and envisioning what we actually want. And oftentimes we get bombarded by what other people expect of us or from us, or the things that our culture, society, parents, company, employees, fill in the blank, tell us that we should have, whether that’s directly or indirectly.

So it really is about pausing for long enough to tap into ourselves and suss out what is truly what I want, versus what other people have given to me. And that sounds quite simple, but actually is often a really big sticking point for people. So there are a ton of exercises that I do with my clients, or tons of freebies on my website if anyone wants to dive into them… It will really help you analyze what those things are, so that those North Stars are the goals.

I really encourage people to identify, what are your top three values? Because when you know those, it really makes decision making and road mapping for yourself, both short and long term, so much simpler. Because when you say — like, I mentioned two of my top three, when I was speaking earlier, about growth and learning and connection… So when I look at those things and I say, “Well, does this move me in that direction, or does it move me away from that?” And if it’s going to move me away, is it just temporary? Is it just a season? Or is it going to long-term do that? And if the answer is no, and then no, again, it’s definitely a no for me; but it helps me to really put it through the funnel of my own needs and value set, rather than just looking around and think what other people seem to value. Often that’s a subliminal process. But that, I think, is always the most important starting point.

Joe Fairless: What is an exercise that you do with your clients?

Darrah Brustein: Oh, there’s so many…

Joe Fairless: Yeah, I know, so that’s why I said just one of them.

Darrah Brustein: From the values-based perspective, I give them a list of 300 different values and have them chop it and chop it and chop it until they get down to the three… Because there’s this recognition, just like with everything in life, that just because it’s not your top priority doesn’t mean it’s not a priority for you or you don’t value it.

So for example, so many people would say, well, kindness isn’t on there, family isn’t on there, fill in the blank; it doesn’t mean I don’t value those things. They’re just not in my tops. And that’s okay. When we start to do that prioritization, it makes our yes-es a lot clearer and our no’s a lot clearer as well, which really trickles down into boundaries. It’s very simple these days to just say yes to everything, or have the FOMO of, “Well, I’m going to miss that opportunity if I don’t say yes to that.” But if we pause for long enough and either put it through that sieve of our own intuition or put it through the sieve of the values, we would have a lot more clarity.

You asked for one, but I’m going to give you one other. There’s also, on my website, a free guided visualization that I find very helpful for people who are saying, “I’m stuck, or I’m in analysis paralysis mode, or I just have so many ideas in my head, or I can’t even begin to figure this out.” It will take you through a 15 minute guided visualization to help you unearth and tap into some of the subconscious stuff that’s there, so you’re not judging and being critical of it.

Joe Fairless: Mm-hmm. Yeah, I see that, I’m on your site right now.

Darrah Brustein: You’re like, “Signing up right now…:

Joe Fairless: Yeah, I actually will be signing up right now, so I’m keeping the placeholder for after our conversation.

Darrah Brustein: Nice.

Joe Fairless: Alright, so design your life. First, we’ve got to know what we value and how we prioritize those values… Then what?

Darrah Brustein: Then is where the business comes in. So depending on where people are in their real estate journey, and the people I work with, myself included, do sometimes real estate – I do it as part of my portfolio – but oftentimes, they have other types of businesses, either as well or alternatively. And it’s really about either making sure that the business that you are going to start and grow aligns and elevates what that is, and doing some profit planning and projection based on “If I’m going to do this product or the service or invest in these cash-generating cash flow real estate opportunities, is it going to get me there? And how much of that do I need to do? And how does that either elevate or diminish the goals that I have set for myself? Because now I know what that life looks like, and a longer-term scale, typically a five to 10-year roadmap, and I know what it’s going to cost.” And what is the real roadmap to get this business to shoot off that type of cash to me and not just obviously revenue from the business, because obviously, you have to take out expenses and taxes and whatever else, to get you to that number.

And that’s when we know, “Is this business going to really do that for me, both from a time perspective and a financial perspective?” And if you already have the business to look at — this is exactly what I did with my earlier businesses, and I said, “How do I get these to be the types of businesses that allow me to be on the road and traveling, that allow me to make the same impact, create the same amount of revenue or greater based on what the goals were at the time, and do that so that it all aligns?” But oftentimes, we see the opposite, that people just go out and say, “I’m going to start a business, I have this idea, I’m going to build my real estate portfolio” and we don’t know when is enough or we don’t know why we’re building in the first place. And oftentimes that becomes quite taxing or fruitless, because we get these moments that should feel so fulfilling, but then suddenly, what was once the ceiling is now the floor as far as our stretch goals were concerned, and then we just say, “Well, I guess I got to get to the next thing and the next thing.” And it becomes this real fallacy of “when” – “When I get x, then I will feel _______.” And so many of us have experienced that in so many parts of our lives and businesses and know that that’s not true.

But when you say, “”Okay, the freedom for me is at this number, because I know that because of the life I planned and designed, and when I calculated its total, then when this business hits that, then I have hit my goals, and I can choose to either feel satiated, or I can redesign”, and that’s up to you.

Joe Fairless: What’s a tactical thing that’s completed? You said profit planning in this stage, you said taking a look to see if it elevates or diminishes what I ultimately want my North Star… What’s the deliverable from this that you do?

Darrah Brustein: It depends on the client and where they are. The profit planning – we use a spreadsheet that literally goes through, “These are the services or the products that I have, this is what I sell them for, this is how many of those I am either currently or plan to sell them at, these are my tax lines, these are my expenditures”, and then they have to move those around, because let’s say that number is 200,000 a year in income, not just revenue – then they’re going to have to move those around and say, “Oh, well, I need to flip this many more houses to get to that number”, and then look at that and say, “Well, is that realistic or does that mean I need to move into a different echelon of homes at different price points? And is that a risk that I’m willing to take?” And it allows them to go through some of that mental, both calculation and mental gymnastics to play out and envision the scenario, as well as look at how the numbers might get them there.

Or they might say, like I do, my real estate portfolio is just passive, and I use it as straight up investment, but it’s not my full-time; that’s not where I get my cash flow from. They might say, “I want to build something else on the side.” Otherwise, we’re often just looking at, what’s actually essential in your business? What’s actually making the money? What’s actually the path of least resistance, and where do you have the most impact for the least amount of effort? And how do we dial that up? Versus having scattered impact or scattered energies across the board.

Joe Fairless: That makes a lot of sense. I can tell you firsthand when I focus on my strengths and I’m not focused on a bunch of different stuff, then the overall business benefits, versus if I’m scattered across the board.

Darrah Brustein: Well, I think that comes down to a mindset thing. And I do this all the time too, where we think if we’re busy – and oftentimes it’s artificially busy – or we’re feeling productive, because we’re checking things off, that it makes us feel good. It makes us feel like we’re moving things forward… When really, if we really look at the impact of the things that we’re putting our energies into, oftentimes we can narrow it down to a much smaller list and delegate out other things, or get rid of them altogether. And then oftentimes, it opens us up to some of those mindset concerns… Because this is always where my clients get into the mindset hurdles, that no matter how much you think you have your stuff together, we all have mindset narratives that are holding us back; it’s the doubt, it’s the fear, it’s the ‘what are people going to think’, the ‘what if I fail’, it’s that ‘am I good enough’, the ‘they’re already doing it’, the ‘you fill in the blank’.

But when we hit that point, we have to recognize when you clear the slate a little and you create the spaciousness in your mind, that dust is [unintelligible [00:15:03].20] And that’s actually a healthy and a good thing, because it creates a spaciousness for you to be more creative, to get better ideas in your business and to come back more strongly.

Joe Fairless: What’s the next step? Is it the reengineering—oh, no, I guess it’d be building the network to accomplish this?

Darrah Brustein: Yes, I’m a big believer in once you know where you’re going, that it’s a lot easier to bring people along with you. And it’s just in my natural proclivity to be a connector and a collector of people and to help connect the dots for others… So I’ve always been a big believer in no matter how many technological tools we have at our disposal, nothing will be as powerful as human connection, whether that’s virtual or in-person, depending on when someone is listening to this.

And that being said, when we know where we’re going and we can enroll people in that mission and we can galvanize people [unintelligible [00:15:52].25] people who are helping us with our reno, or it’s having the people who are helping bird-dog for you and find the opportunities or whatever it is – your network are the people who hold the keys to the success that you’re seeking. And that is obviously by your definition, as we’ve talked about.

But it’s a little bit fruitless to just be garnering and gathering a whole slew of people into your network, when there are studies—there’s a woman named Robin Dunbar who talks about this, that we have about an average of 200 or so people with whom we can actually have contact. In three concentric circles, she displays this as five is our inner circle, 50 is the middle circle and about 150 give or take is in the external circle. And that each of those represents the amount of closeness and amount of actual contact and engagement we have with people. And everyone else is basically just a social media contact or in your CRM, Rolodex, whatever that is for you.

I think that’s a really important visual because it reminds us that there are seasons to life, there are stages of life and there are stages in our business. So when you’re in a growth stage, you might need more people who are helping sort opportunities or helping as mentorship, and that might be where you are investing some of your energy in those 200 people.  And you might have to recalibrate and do some housekeeping and say, “Well, these are the people that I was spending the most time with and I was investing my energy into and nurturing and maintaining my relationships.” But really now this other segment of people are those. And it’s hard to know who are the right people to do that.

This is a tricky combination here because I’m a believer that the networks are really just a fancy word for relationships, and relationships need to be you giving, you nurturing, you taking the lead…

Joe Fairless: Right.

Darrah Brustein: …you not making someone feel like it’s a transaction, because it’s not… And you’re not keeping tabs and certainly not doing something waiting for someone to do something in return for you. But you’re really investing because you believe in it. I personally call it this karmic retribution of giving in relationships where — it’s very a la Adam Grant studies, that when you give, it ultimately comes back to you. And in his studies givers win in the world, over matchers, who are the people that are sort of the ‘I scratch your back, you scratch mine,’ who are the takers, which are understandably, the people who feel like it’s all about them and them as number one. And that’s really counterculture to what we’ve been taught; we’ve often been taught, reciprocity is essential. But ultimately, I am such a believer, both anecdotally and through the studies from people like Adam Grant, that when you are a generous person, that it does come back to you and that it might be me giving to you and you giving to Alex and Alex giving to someone and that person ultimately comes back to me someway somehow, because that’s just how it works.

But you still need to consider about who those people are and being strategic about how you stay in touch; setting up systems in your calendar, in your CRM system, or baking into parts of your day that you text three people or while you’re making your coffee, you make a quick phone call or send a voice text or you DM some people that you’re following, just to let them know that you’re there and you care and you’re being considerate of the relationship… Because those little things to keep you top of mind and them for you, are really what makes the difference between a relationship going dormant and an opportunity being available to you when the time is right.

Joe Fairless: How do you balance over-communicating with people who you’ve recently found that, “Hey, I should bring them back into my network, I haven’t been as intentional about it”?

Darrah Brustein: I love this question, because I see people do it poorly all the time, where they’ll reach out and just immediately say, “Hey, I saw this thing you did,” or “I’ve been following you, help me.” And it immediately goes to the ask, or the brain pick… Or if you look at it from a bank account perspective, of “Let me take a deposit or let me take a withdrawal from this bank account that I have put no deposits into in the last decade.”

I’m just a big believer in defusing the situation and calling it out and taking the onus on yourself. So you and I haven’t spoken, like we’ve talked about, in over five years. And if I had reached out directly and just said, “Hey, Joe, I realize it’s been over five years and that’s on me and I am so sorry, but I’ve been following your career and tremendously admire it,” meaning that as a sincere and true compliment… And then say, “Here’s why I’m showing up in your inbox today”, or in whatever format I’m showing up… And if you’re going to be asking something of that person or you want to get them to be interested,  you have to make it something that’s both quick and palatable for them and isn’t something you can just find on one of your podcasts or on their website or on some other place that they put information out there, and make it something that’s going to make them want to help you, and it doesn’t ask for too much of them.

But ultimately, I think when you just call it out, that goes such a long way to demonstrate that you realize you kind of fumbled or that life just got in the way, and that you’re sorry that you haven’t been there throughout this, and that you don’t want it to just be this one-sided relationship. But that I have seen time and again, really helps the situation.

Joe Fairless: I’m glad that you elaborated on that. As it relates to this thought process of designing our life so that we’re spending the time doing what we truly want to do, versus just mindlessly doing things because that’s what we wanted before, or because maybe someone else wanted it, or whatever the reason… Is there anything that we haven’t talked about, before we wrap up that you think we should?

Darrah Brustein: Another tough one. Sometimes I just let my intuition kick in and tell me who is going to need what message today… I think a lot of that really does come back to the mindset piece. I’m really glad that there’s a lot of well-reputed entrepreneurs like Sara Blakely, and other people who are these billionaires in the world, who are talking openly about this idea, that success is not something that we can have if we don’t first tackle the mindset stuff, and we don’t continue to tackle it.

And no matter who we are, no matter where we are in the span of our business, by just the fact of us being entrepreneurs, we are growth-oriented and we are pushing ourselves into terrain we’ve never been in before, which means naturally at some point, you’re going to be uneasy and uncomfortable.

So getting more comfortable with that discomfort and with uncertainty, and saying, “What’s coming up for me? Why is it feeling this way? Is this narrative mine? Do I want this? Does it serve me?”, like you were hearkening to before… “Was this something that did serve me, whether it’s like an actual thing or a mindset or a thought, or not?” Because sometimes that can be the key differentiator to unlock an entirely new portal for us.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Darrah Brustein: You can head to my website and grab some of those freebies if you’d like. It’s just https://darrah.co/.

Joe Fairless: It’s such an important topic that if it gets brushed over now, we’ll likely regret it decades down the road when too much time has passed and we wouldn’t have time to do something about it at that point. And it’s tough to really capture, because people, myself included, tend to be so focused on business results and growing. Until some life event or someone like you come on and enter into our world, it’s tough to really break that cycle, and it’s important to have that jarring event to really understand, “Hey, let’s ask ourselves some tough questions that ultimately will be beneficial to ourselves now and in the future from a fulfillment standpoint.”

So I greatly appreciate you sharing your insight with us. I greatly appreciate you being on the show again, and looking forward to continuing to learn from you. I hope you have a best ever weekend and we’ll talk to you again, hopefully, before six years from now; we’ll try to make that conversation more frequent.

Darrah Brustein: Likewise. Thank you, Joe.

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JF2371: How to Scale a Business to 7 Figures in 3 Steps with Ravi Abuvala #SkillsetSunday

Ravi’s business started with a Google search “How to make money online.” After investing in a course, he started running ads for other people. That’s how he started an advertising agency and massively scaled it.

Ravi believes that the foundations of advertising hold true no matter what business you’re in. Once you write sales letters that convert, that skill can be applied to any industry. 

Ravi Abuvala Real Estate Background: #SkillsetSunday

  • Law school dropout and founder of Scaling With Systems
  • Scaling With Systems is an accelerator that works to bootstrap and scale businesses
  • In the past 14 months, he has scaled two 7-figure businesses with less than $1,000 of his own capital & 4 commission-based employees.
  • Based in Miami, FL
  • Say hi to him at: www.scalingwithsystems.com

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Everyone offers leads; no one offers closings” – Ravi Abuvala. 


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Ravi Abuvala. Ravi, how are you doing today?

Ravi Abuvala: I am doing excellent, you nailed my name perfectly Theo, better than some of my closest friends. Congratulations on that. Thank you so much for having me on here. I am super stoked to be on here; I’m hopefully going to give some value to the listeners today.

Theo Hicks: Yes, I’m very looking forward to this conversation as well. Today is Sunday, so Best Ever listeners, we’ll be doing a skill set Sunday where we talk about a specific skill set that our guest has. Ravi is an expert at scaling businesses. So that is going to be the conversation today, how to scale your business to a massive scale, and we’re going to go over some specific examples, business he scaled over the past 14 or so months.

Before we get into that, let’s go over his background. So he’s a law school dropout, and the founder of Scaling With Systems, which is an accelerator that works to bootstrap and scale businesses. As I mentioned, in the past 14 months, he has scaled two seven-figure businesses with less than $1,000 of his own capital, and four commission-based employees.

He is based in Miami, Florida, and his website is scalingwithsystems.com. Ravi, before we get into that skillset, do you mind telling us some more about your background and what you’re focused on today?

Ravi Abuvala: Yeah, sure. So I’ll keep it pretty tight for all the listeners out there, but just in case you have somebody in here that’s just new to the business, or thinking of being in business, or what have you – I have pretty much zero background in business whatsoever. No background in sales, no background in marketing. I was actually going to law school about two and a half years ago, and then I inadvertently dropped out; I decided it wasn’t for me. It’s a long story, with my dad’s cancer, and I pretty much had to take care of him. It kind of let me know how fragile life was. I won’t go too deep into that now.

I then got a job at an Italian restaurant around the corner from where I was living, making about $2,000 a month. I pretty much Googled – I’m not joking, for everyone that’s listening to this – “how to make money online”. I was retargeted by some ads, clicked on it, bought in, invested about $1,000 in my first course, and it pretty much was teaching me how to run ads online for other people.

My girlfriend at the time, her dad ran a plastic surgery clinic, and he comes up to me – well, he really came up to her, and he said, “Hey, do you know anyone that can run ads online? I need somebody to help me with my social media.” She’s like, “No, I don’t know”, because no one knew what I was doing at the time. I was so afraid to tell anybody I was running a business, because I had just left law school. So I said “I can,” and I remember he goes, “Oh, you can?” Then my girlfriend at the time goes, “Oh, you can?” I essentially signed him as my first client. I was pretty much addicted from then on.

We went and took that advertising agency from that first client at about $2,000 a month to, now we’re consistently doing a few hundred thousand dollars a month, spread across all around the world. Clients that range from personal injury, real estate, higher ticket clients that do e-commerce, consulting, coaching, services, businesses. Then in kind of that whole little realm of me doing, that I started helping other people to follow my journey and my path, which was pretty much leveraging paid traffic, sales funnels, product-market fits in order to scale really, really quickly. So through that, essentially, business accelerator, I started Scaling With Systems. We’ve helped grow over 800 different firms around the world, a dozen or so in the seven-figure range, and multiple dozens in the multi-six-figure range. That’s essentially what I’m working on right now. That’s pretty much my full-time job, if you want to call it, although it’s more of a passion for me now.

Theo Hicks: Perfect. Thank you for sharing that. As I mentioned in the beginning, and as you mentioned multiple times in your background, we’re going to talk about how to massively scale your business. You mentioned some of the clients that you have, some of the industries that you’re in… Before we get into specifics, just kind of generally, would you say that the tactics are going to be the same in all industries? Or do you need to know specifically what industry they’re in, whether it’s real estate or something else, to determine exactly what they should be doing to scale their business?

Ravi Abuvala: Yeah, that’s an awesome question, Theo. Originally, when I first started working on this, it was pretty industry-specific… Because I don’t want to say that I was just doing like tricks and hacks, but it was something similar to that. But then as we kind of started growing, I started investing more time really studying the foundations of copywriting, Dan Kennedy, The Ultimate Sales Letter, and really understanding the foundations of advertising, some of the largest SaaS companies built today, and  I actually started understanding what product-market fit was, I started understanding how to be profitable from day one, I started understanding how to write sales letters that convert, how to run advertising on a seven-figure per month basis.

So to answer your question, specifically this is going to be for service-based businesses. I’ll be honest with you, when it comes to products, it’s not something that I kind of specialize in. I’m sure you can take some of the advice here if you have some kind of e-commerce or product-based business, but specifically, the stuff that we’re talking about today, at least in my experience, will be helping service-based businesses, whether you’re brick and mortar or you’re online.

Theo Hicks: Perfect. Let’s dive into some of the tips. So if someone came up to you and you had 10 minutes to talk to them, and they asked you for the best tips that they could implement right now, what would you tell them? …for starting their business, obviously.

Ravi Abuvala: Great question. So I’m going to go ahead and really quickly just assume that they might be thinking of starting a business or they might barely have a business; most people play around at a 15% range when it comes to traffic for their business. That’s like the warm range – so your friends or family, your referrals… And you can grow a relatively successful business that way, but realistically, it’s tapping into that 85%, which is what I help my clients do, that you can actually start to really see leaps and bounds, double-digit, month over month growth. That’s going into people that don’t know the difference between you and a hole in the wall. And really, the only way that you can do that is by following a few simple steps.

Number one, you have to have just a massive product-market fit. You have to make sure that whatever you’re offering is a need in your marketplace, not just something that’s nice to have, but is an absolute need. We call it the whisper test inside of my company. You should be able to wake your prospect up in the middle of the night and whisper in their ear what you’re promising to do for them, and they should perk up, grab their wallet off of the counter and pay you immediately, because it’s that big of a pain point. And I’m not even being dramatic when I say that.

So the first thing is to make sure you have that product-market resonance. The easiest way that we’ve been able to find that is to pretty much bring your product or your service to total strangers and try to sell it to them. It seems simple, but most people are relying on inbound traffic. People that are on their Facebook, people that are on their Instagram, people that come to their website… Instead of actually going out and trying to attract traffic, whether it’s outbound messages, cold calls, going to fairs, or even running paid traffic. Because the cold market doesn’t really care how nice you are, what you look like, what you sound like, as long as you can deliver for them.

So the first thing you have to nail down is that product-market fit, and making sure that your messaging resonates with your market. There’s a really, really great book called The Ultimate Sales Letter by Dan Kennedy. I’d recommend it to people; if you’re interested in more of this stuff, look that up. He tells you how to craft that messaging and how to resonate with your marketplace.

The second step, once you have proven product-market fit and you know that people are interested in what you’re doing, is to collect some kind of case study or testimonial that shows some incredible results that you can make a claim about. So for us, we help services-based businesses scale to multi seven figures in under 12 months. Now, the reason I’m able to say that is because I’ve done it for myself, and I’ve done it for other clients as well. So that’s our massive claim that I’m able to say on podcasts, I’m able to say on ads, I’m able to say on my organic stuff, because we’ve done it.

So you need to go out there and find one of the best case studies that you have… Like, I can help people make more money, and then obviously, that’s always the best way to do it. If let’s say you’re in weight loss, or you’re in real estate, or whatever else it is – we call it trading apples for apples. I usually recommend having some kind of transformation that does involve money, because you’re not going to ask them to pay you in weight loss, so you should be able to exchange back to the money. You kind of should be able to tie, “Hey, because you lost 15 more pounds, you’re able to stand up longer, you’re able to work longer without less energy, an average of two more hours a day. Your ad time is worth about $200 an hour, so we essentially made you an additional $400 a day by losing those 10 pounds.” Something along those lines, so that you’re able to take that case study and then go to that cold market place and say, “Hey, somebody just like you, that’s in the exact situation that you were in, I worked with, and I took them to that exact stage that they want to be in”, which I know because I did my research beforehand, I know the product-market fit. “So they’re in this end state that you want to be in. Would you be interested in learning a little bit more about how we can maybe do this for you?”

And that’s obviously a really dumbed-down version of it, but that’s what you do when you start sending LinkedIn messages, you start sending cold emails, you start running Facebook ads, you start doing Facebook messages, Instagram messages. People that that’s going to resonate with are going to respond back, your calendar starts filling up, and then you pretty much start scaling from there.

Then the final thing I recommend is – for our clients, I have a training center in the Philippines, so we’ve interviewed and placed over 1,000 virtual assistants for our clients (that’s some of our secret sauce) and we train them for our clients. So once you have that product-market fit and once you have that case study, and you have some resonance, then what we’ll do is we’ll pretty much just pour gasoline on the fire. They will take this messaging we’ve built together and they’ll just start sending that out to everybody.

So there’s one thing you’re taking on in that last stage there – you shouldn’t be doing that kind of lead generation if you’re the business owner, because you’re going to get tired of it, it’s going to get annoying, it’s going to get repetitive, and it’s going to get mundane. So you should essentially as quickly as possible delegate that out to somebody else. We like virtual assistants because it’s pretty mundane, and virtual assistants are great employees, in my opinion. They’re going to be able to keep your calendar packed and full, and you can grow easily a seven-figure business just by doing that, without even touching the paid ad side.

Theo Hicks: Thank you so much for breaking that down into those quick three, easy steps. First, I was just going to follow up on each of those steps, but as I said in the intro, you’ve got two examples… So do you mind taking one of the examples of these businesses you’ve scaled to seven figures, and then kind of walking us through it from the perspective of these three steps?

Ravi Abuvala: Yeah, I think that’s an awesome question. I’d love to do it. My first ever company, that advertising agency, the first eight months of business, we did about $6,000 total. $5,550. So it wasn’t a great start for us, to be honest with you. But the reason was, was because I didn’t have a product-market fit, I wasn’t listening to my marketplace, and I was just reaching out to total, cold strangers and saying, “Hey, I can get this for you. I can run ads for you. I can run ads for you. I can run ads for you.” What I didn’t realize was that no one really gives a “you know what” about running ads. What you have to be looking to promise is that transformation, not “I can run ads for you.” But for me, specifically, I was in the real estate industry, and I was saying “I can get you two to three more closings a month guaranteed, without you ever having to call another cold lead again.” That was what my messaging shifted to once I started listening to my marketplace and I started saying “Why are you not renewing with me? Why are you not responding back to me?”

I started actually reaching out to them, and I started learning that everyone offers leads, no one offers closings, everyone offers leads, no one offers booked appointments, and no one offers to actually prequalify these leads for our clients. So long before some of these large companies out there like Zillow and Redfin are doing these qualification centers, I was one of the first advertising agencies for real estate to do it. I actually got on Fox News for it. We essentially took the system and then we started selling that to real estate agents.

My first real estate agent was a lady out of Santa Rosa Beach, Florida, where I’m originally from, and we just knocked out of the park for her. I took that case study and then I went out and we immediately started blasting it out to every single real estate agent that was pre-qualified in the United States. I’m saying “Hey, not only am I going to take cold leads for you and generate them for you, but I’m going to take them all the way through the qualification stage and figure out if they a buyer or a seller, are they pre-approved, what’s their timeframe? And then only once they match your qualification statuses am I going to pass them over to you as a booked appointment. I know you think that sounds too good to be true, so here’s a case study of one of my clients named Judy, who we knocked this out of the park for.”

I went from making, like I said, less than $1,000 a month, to the next month we did about $10,000, a month after that we did about $30,000, and within 90 days from the $30,000 month, we had our first $100,000 month. It was just because — it was like a sink or swim; I had to figure out what was actually a need in the marketplace and what was the real transformation that they wanted. As soon as I nailed that down, it was pretty much hammering messaging on that every single day until our calendars were full.

Theo Hicks: Something that you said in the beginning that was interesting… So you talked about the product-market fit. You said that for the agent, rather than saying, “Hey, I can do advertising for you” you said specifically what you would do for them to transform their business, and you’ve mentioned how you’ve found that need was based off of having conversations with different agents. Could you maybe go into a little bit more specifics? Were you just reaching out to just every single agent you could find and ask them what they wanted? I am still trying to figure out exactly what you did to find out exactly why your messaging wasn’t resonating with them.

Ravi Abuvala: Yeah, that’s an incredible question. We actually call it The Research Method inside Scaling With Systems, because we’re helping people do this themselves… But essentially something really similar to that. I actually just edited the document today… But pretty much what you’re doing is you’re reaching out to people in the industry that you want to be in and you want to work in and you say “Hey, look. I’m putting together a report on the top industry experts inside real estate. Your name came up when I was talking with some other people. I’d love to interview you and talk to you a little bit about what makes you tick, why are you so successful, that kind of stuff.” And I’ll tell you what Theo, everybody loves to be interviewed; everybody loves to give their opinion. Look at just the world we live in today. Everybody loves to give their two cents. So you say, “Look, I guarantee you, I’m not going to pitch you anything on this call. I just want to learn a little bit more about you.” And let’s just say six times out of 10, conservatively, they say yes.

When you conduct 10 to 20 of those interviews, what you’re going to notice is a lot of these questions that you’re asking, like, “Hey, what are your top three daily frustrations? What is a service that you paid for in the past 12 months that didn’t work out and why did it not work out? What’s a service you’ve paid for in the past 12 months that worked out and why was that working? What made you happy about it? What keeps you up at night? What do you secretly desire most in this world?” You get these answers and you’re thinking, “Oh, all these people are going to have these drastically different answers.” You put it on this chart and you start seeing they may be worded slightly different, but they’re all virtually saying really similar things. Then you can start taking and plugging those little points that they set in into some kind of messaging template to understand, “Hey, I help real estate agents get ___whatever they said in this bucket that they wanted___”, and then we’ll see what the kind of resonance on that message is. And they get that without whatever they said is the thing that they hate, or that one company that failed them, what was the reason why they failed them.

So it’s almost like a scientific experiment. But yeah, you’re literally going out and reaching out. And then the coolest part about it, if you’re thinking of doing this, is that after you’ve collected that report, which is essentially a Google Sheet, then you reach back out to all those people that you’d originally spoken to, even the people that turned you down, and said, “Hey, it’s been a week, it’s been two weeks. I’ve actually conducted this report, I got some really interesting findings. I’d love to hop on the phone with you and walk you through what I’ve found.” And I’ll tell you what – a lot of times, that’s where our clients close their first deals, is hopping on that call, explaining to them what I’ve found, and then saying, “I have the solution if you’re willing to give me a shot.” They’ll get their first clients just from that.

Theo Hicks: Well, I love it. Where did you get all these ideas from? Did you just come up with these yourself? Or is this all in that book you’re talking about?

Ravi Abuvala: Oh, no, no. It’s not all in the book. It’s probably the combination of 50 different books I’ve read, from a bunch of different coaching programs I’ve been a part of it, from my own insights, and from my own experiences of, like you had said, trial and error. Definitely, that part right there that I just told you was just from my own experience from trial and error.

There is a gentleman, Ryan Levesque — I forget the name, but he did come up with something called The Ask Method, which you guys can Google; it is something really similar to that. It doesn’t go in-depth and talk about selling them after you’ve done it, but it’s something really similar to that, asking people that question. And his is more B2C instead of B2B. But yeah, it’s essentially from me, from learning from other people, and then just my own experiences or learning from other people and then applying it, and then re-teaching it through my own lens or my own perspective.

Theo Hicks: Got it. So using that research method you were talking about, once you conduct these interviews, and then you have that chart you said, to kind of figure out what it is they’re wanting, and then you’ve got your messaging template – so the purpose is actually to take what they say they need and then do that. That’s going to be your business.

Ravi Abuvala: Yeah, it’s really funny, right? I work a lot in the SaaS world as well, software as a service, and you see some of these people, absolute genius. They’re engineers from some of the top schools in the nation, and they spend six months, eight months, a year, tens of thousands of dollars building this product, and they think it’s perfect, their friends, their colleagues, or mom, they all say “You’re doing a great job.” Then, like I said, they go out to the cold, cruel, unforgiving marketplace, and the marketplace says “I don’t really need this. They’re kind of solving not a really big problem of mine.” So they don’t really see crazy growth.

Instead, what we do is something I call just “sell before you create”, which is pretty much what that method was. It is, “Hey, go out there, figure out what their biggest pain points are by just simply asking them”  and then you’re going to see that kind of pattern. And “Okay, they don’t just need leads, they need close deals.” Then you’re going to come back to them, and you’re going to say, “Hey, if I could get you closed deals, would you pay me $1,000, $2,000…”, whatever the price point could be relative to the ROI. That makes it pretty much a no-brainer, because they’re taking a risk on you, you’re taking a risk on them. So “Hey, would you pay me $1,000 if I was able to make you an extra $10,000 a month?” They go, “Yeah, probably, if you can show me you can do it.” And then I go, “Okay, great.”

So then I come back and then now I’m starting to say, “Okay, this is something that the marketplace actually wants. Can I prove that I can do it?” So then I’m doing a little bit of research on my own. You can go online, there are websites like SimilarWeb, you can look at Facebook Ads library, and you can just see what your competitor’s websites are doing, and just figure out what’s working in the marketplace right now, and then you just make yours better, faster, and cheaper.

Once again, we’re still not building out this entire system yet. We’re just getting the ideas of how does this work. Then we’ll compile that together in some kind of pitch deck or presentation; it does not have to take too long. My original pitch deck was five screenshots; it was not pretty at all, I promise you. Then you go back to the person say, “Hey, I found out how to do it. It’s going to involve this, this, this, and this. If you did all this separately without me, it would cost you about $15,000 a month. I’m going to do it now, because you are my first client, for $1,000. If it doesn’t work out, I’ll give you all of your money back.” At that point, they’re like, “Okay, well, sure.” You probably can afford to give that money back, because you’re not really building anything at this point. You’re being profitable from day one by taking that money and then trying to solve it.

That’s when you kind of figure out what the mechanism is, which is, “What is the thing that’s going to give them that promise that I made them?” Then you give it to them. Does it work? Yes or No? No. Okay, that doesn’t mean his need doesn’t exist in the marketplace, it means this his mechanism is wrong. So now you need to go back to the drawing board and try a new mechanism. You pretty much just try mechanisms until one of them hits. Then there you go, you have a need in the marketplace, you have a messaging that captures their attention and slices the noise, and then you have a mechanism that actually delivers what you promise. And now you’re almost cheating. Now it’s too easy to scale.

Theo Hicks: Wow, I love it. Ravi, is there anything else you want to mention before we end the interview? Where people can learn more about you and the other call to action you have?

Ravi Abuvala: No, I really seriously appreciate you having me on here. I think that’s probably the fastest I’ve ever gone through that entire agency process. So I was like, trying to keep it under 30 minutes… So hopefully that was helpful for everyone on here, Theo. Thank you so much for having me on.

If you guys do want to learn a little bit more about Scaling With Systems, some of the stuff I talked about, because obviously, this was like the tip of the iceberg and I couldn’t cover everything, I do have a totally free course. It’s a few hours of content where I go a lot more in-depth; I have product-market fit, and a lot more in-depth on what your messaging should look like, etc. I actually made a landing page for this podcast, so if you just go to scalingwithsystems.com/best, then you’ll be redirected to the free course. You just give us your email, and you can get access to a few hours of the content there. Or you can feel free to find me on Facebook, Instagram, LinkedIn, YouTube, just type in my first and last name Ravi Abuvala. Thank you, Theo.

Theo Hicks: No, thank you so much for that landing page, and also thank you so much for sharing all the knowledge you shared with us today. I think this is probably the most unique information that I’ve gotten from just these quick 30 minutes. I really appreciate that.

Ravi Abuvala: I appreciate that. Theo.

Theo Hicks: Yeah. Best Ever Listeners, make sure you listen to this again. He went over his three-step process, starting with making sure you’ve got the right product-market fit, and then doing that case study, and then the virtual assistants… He also went into specifics on that first step, which was the research method to figure out what the right product is.

Then you walked us through an actual case study of yours and how you presented that case study. You also talked about how you actually create that service on the back end, and then a lot of other things, too. Again, super informational show. I really appreciate that, Ravi. Thank you for joining us. Best Ever listeners, make sure you take advantage of that free course; that was scalingwithsystems.com/best. We’ll have that in the show notes. Thank you for listening. As always, Best Ever listeners, have a best ever day and we’ll talk to you tomorrow.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2369: Secret to Success is a Superstar Team With Sharad Mehta

In 2010, Sharad started looking for a source of passive income. That’s how he bought his first investment property. A couple of years later, he built a real estate portfolio that allowed him to quit his job as an accountant and become a full-time investor.

His business is now 60% wholesale and 40% retail deals. Now that his business is scaled and streamlined, he started looking for new venues. His company, REsimpli, was built to manage various parts of his business. Now creating a one-stop business solution is his main focus. Having a superstar team allows him to run three successful businesses at the same time.

Sharad Mehta Real Estate Background:

  • Founder and CEO of REsimpli.com, a business in a box for real estate investors
  • 10 years of investing experience
  • Portfolio consists of 75 units 90% free & clear and completed 600 deals in the last 10 years
  • Based in Toronto, CA
  • Say hi to him at: www.resimpli.com 
  • Best Ever Book: Book of Joy

Click here for more info on groundbreaker.co

 

Best Ever Tweet:

“The goal is always to keep scaling” – Sharad Mehta.


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Sharad Mehta. Sharad, how are you doing today?

Sharad Mehta: I’m doing good, Theo. How are you doing?

Theo Hicks: I am doing great, thanks for asking and thank you for joining me today. A little bit about Sharad’s background – he is the founder and CEO of REsimpli.com, a business in a box for real estate investors. He has ten years of investing experience, and his portfolio consists of 75 units owned 90% free and clear, and he has completed 600 deals in the last ten years. Based in Toronto, Canada. You can say hi to him at REsimpli.com.

Do you mind telling us a little bit more about your background and what you’re focused on today?

Sharad Mehta: Absolutely, man. I started out investing in 2010. That’s when I bought my first property. I used to be an accountant before that. So I was a full-time accountant, and I used to live in Chicago. I started looking at what I wanted to do to generate some passive income, so at that point I started investing in Indiana, which is right outside of Chicago, North-West Indiana… And I started out buying a two-unit property, and then I started getting some decent cashflow, I’m like “Hey, this is great!”, then I bought another three-unit property, and then I left my job to do real estate investing full-time. Then I started buying a bunch of rental properties, and then after that I started doing some wholesaling, fix and flips…

Now we do a lot of fix and flip turnkey properties for out-of-state investors. I would say some properties we have flipped, 60% is turnkey to other investors, and another 40% would be retail flips.

Then I also founded the company Simpli just to manage the different pieces of the business, and then that’s kind of where the software company started, and that’s what my primary focus is right now.

Theo Hicks: Perfect. I’d like to talk a little bit about REsimpli, but – going back to the beginning, you said that you were a full-time accountant, and then you started investing in Indiana, and you had bought a two-unit property and then you bought a three-unit property. You said that after that is when you left your job, after the five units?

Sharad Mehta: Correct.

Theo Hicks: Perfect.

Sharad Mehta: So my wife and I – we’ve always lived on [unintelligible [00:05:31].23] income, so by me giving my job, it wasn’t gonna affect our lifestyle. So by 2010-2011 the market was really low, so I figured the downside wasn’t that bad, but if things worked out, the upside would be amazing. And things kind of worked out.

Theo Hicks: Sure. So you said that when you left your job you were still able to live off of your wife’s income, you said?

Sharad Mehta: Correct.

Theo Hicks: So you have five units, you’ve left your job… What was your main focus at that point? And then how did you fund that main focus?

Sharad Mehta: So my main focus was rental properties, and then I had some money saved up… So again, the area that I invested in at that point – the prices were really low. [unintelligible [00:06:17].11] The two-unit that I bought – it was listed for 65k, and I made an offer for 20k, and I think I bought it for 25k. I put about 10k into, and it was rented for $1,300.

The second property I bought, the three-unit, was 44k. So prices were pretty low, and I had money saved up, so I was buying these cash. And then once I ran out of my cash, I borrowed money from a private lender. With the private lender I had a very aggressive loan, because I wanted to make sure I was putting that pressure on myself to pay them off… So it was a seven-year amortization with a two-year balloon. So all the money that I was making from my rental income, I just basically kept repaying those loans… And I wanted to have a free and clear portfolio, for the most part.

Again, I think what happened in 2007-2009 had a big influence in how I wanted to invest. I didn’t wanna leverage too much. I wanted to make sure I had stable income coming in, that was free and clear. So that’s how I started investing.

Theo Hicks: And then how long did you use this private lender for? Or do you still use that person today to buy your deals?

Sharad Mehta: I don’t use that person now, but I used that person for about 2-3 years, until I got to the point where I had decent rental income coming in, and then at that point I started doing some other things in real estate, like fix and flip, wholesaling, so I had other revenues within real estate.

I borrowed money from that person to fund some flips that we were doing, but not for rental properties. Rental properties now that I buy for myself, I buy them free and clear, without any loans on them.

Theo Hicks: So when did you start the REsimpli business? Maybe walk us through what it is.

Sharad Mehta: So I moved from Chicago to San Diego in 2015, because my wife found a job in San Diego, so I moved to San Diego… And I still had a very active business in Indiana. Once I started looking at all the different software I would need to run my business, and that’s when I decided I would just  build something on our own, where if nothing else, we will get the value out of it.

The motivation behind that was we wanted everybody on our team to be on one software, from my acquisition person to my lead manager, to project manager, my bookkeeper… So that’s where the motivation started, and it’s turned into what it is now. Essentially, the goal, the vision with this is to be a one-stop-shop for real estate investors, everything from managing your leads to even doing your accounting, bookkeeping, and everything in between.

Theo Hicks: Is this something that just you and your company are using right now, or have you already started the process of having other investors on the platform? If so, how many people are using the platform right now?

Sharad Mehta: We have opened it up to other investors some time last year, so we have about 400 companies that are using it right now.

Theo Hicks: Nice. Do you wanna walk us through — when you first opened it up to investors, what did you do to find people? Or did you open it up because you already had interest from people that you knew?

Sharad Mehta: I tested in my business for about a year, a year and a half before I started considering letting other people use it. And then how we grew was I’m part of a few different masterminds. Essentially, we’d talk about what I’m doing in my business, and our software is focused very heavily on the KPI parts of it, tracking your data… So as I  would share the data, it would pique interest from other people, and at that point we started opening it.

We slowly started developing relationships with other affiliates that are helping us. They see the value in what we’re doing, so the big real estate investors – they’re using it in their business… And then they’re running a coaching program and they’re having their students use that also. So that’s kind of how we’re growing right now.

Theo Hicks: How do you balance your time between running this REsimpli business, while also managing – and I’m assuming continuing to grow – an active portfolio of properties?

Sharad Mehta: Yeah, absolutely. So I also own a property management business. So I own three businesses – my fix and flip business, property management, and REsimpli. Most of my time is spent on the software business. But as far as my fix and flip business, as I’ve said, it’s very hands-off, more or less. I would say I spend about an hour a day at most in the fix and flip business, maybe even less. And the only person that’s local in the area is my acquisition person. We have nine flips going on right now, and my project manager is based in California, managing everything from California, for projects in Indiana.

Everybody is very clear on what their roles and responsibilities are, and we do a daily call at the end of the day just to make sure how everything is going… And I’m in the process of hiring a fractional operating manager for my fix and flip business. As we’re looking to scale that, we wanna put a little bit more processes and systems in place, so I’m in the process of hiring somebody for a few hours a week just to oversee the growth.

And then on the property management side of it, I literally just have one call once a week for half hour, just to go over how everything is going. So that’s the extent of my involvement in that business.

Again, people that are working in these businesses – they’re the ones who are superstars, managing everything and very independent, making sure everything is very clear in their roles and responsibilities. And then I spend most of my time on the software side, because there’s a lot of moving pieces.

We’re working with a large development team, and then we’re partnering up with a large company. Actually, today we’re going live with our partnership, so we’re hopefully looking to scale with that partnership. That’s where most of my time is being spent.

Theo Hicks: Congratulations on that partnership. One of the things you mentioned was — I’m getting the idea that you have a really solid team, that allows you to be so hands-off on both the fix and flip and the property management business… So my question to you is “What did you do when you hired these people to ensure that they were superstars?” And then on a similar note, are these people who have been working for you the entire time, or did it take some trial and error to find the right team?

Sharad Mehta: It’s been a little bit of both. We started the property management about two years ago, so I’ve had the same two main people work for me. We’ve had other part-time people just kind of come and leave, but the main people have been there since the beginning.

And then on my fix and flip business, my project manager has been with me since — when I moved to California is when I hired her, when I was living in California. So she’s been with me for five years. My acquisition manager has been with me for two years, and then we have a virtual team that’s been with us for about six months.

So definitely, having a team that you can stay with for a long time – I could not be this hands-off if people were leaving every six months, for example… Because just the training and onboarding would take up a lot of time. So finding the right people, investing in them in the beginning, and then trusting them with the business, making sure that they can run the business.

At this point, my project manager has full access to my banking, for example. Not even making the payments anymore; she has access to the payments, so I trust her to the point where she’s making all the payments to the contractor. The only involvement that I have on that side is [unintelligible [00:13:25].19] when we buy a property, make sure before we buy it what the rehab budget is going to be. And then after that, we kind of know “This is our estimated profit at the end of the day.” And then she has full authority to hire whoever she wants, and then make the payments. With her I do a weekly call, just to go over the project, to see where we stand with budget [unintelligible [00:13:43].09] and then just tweak anything if we need to.

Theo Hicks: When you hired this person, how did you find them and what was your screening process? For them in particular, because it sounds like they’ve been with you the longest, and they’re the one that you trust the most.

Sharad Mehta: Right. The project manager I actually found on Craigslist. I interviewed a couple of different people. For me, the most important thing is finding somebody that I can trust, because I don’t wanna find somebody that I’m not able to trust them 100% with my business. Because the goal is to keep scaling, and then to keep making them in charge of a bigger piece of the business. But it doesn’t start with day one, it starts with “Okay, let’s just give them one piece of the puzzle and see how they handle that. If they feel comfortable and they’re able to manage it, then start delegating more of that, start trusting them with more.” So they have to win the trust.

I’ve had other people that are trusted in my business, and things didn’t go well. But that’s the nature of the business. But I have found my project manager through Craigslist, and then mostly everybody else has been through referrals.

Theo Hicks: Thank you so much for sharing that. Okay, what is your best real estate investing advice ever?

Sharad Mehta: I would say best real estate investing advice would be focus on one thing and be better at it than anybody else. I think in this day and age with social media we look at other people, they might be crushing it in wholesaling, or fix and flip, and then if our focus is real estate rental properties, then we might look at somebody else and go “Oh my God, look at them. They’re doing so awesome, and it’s taking me forever to build my portfolio.” So I would say just focus on one thing, be clear on it, and then stick with it, and be better at it than anybody else.

Theo Hicks: Solid advice. Definitely do your best to avoid the shiny object syndrome, especially when you’re first starting out. Everything looks great, and you wanna do everything, and then you end up doing nothing… Solid advice. Okay, are you ready for the Best Ever lightning round?

Sharad Mehta: Yes, sir.

Theo Hicks: Okay. First, a quick word from our sponsor.

Break: [00:15:41].13] to [00:16:22].05]

Theo Hicks: First question, what is the best ever book you’ve recently read?

Sharad Mehta: I have two books. On my personal side I would say The Book of Joy, by Dalai Lama. It’s an amazing, amazing book. And then on the business side, it’s The ONE Thing, by Gary Keller. It’s the best book. I’m actually reading with my software company, reading it as a team. So I’d say The ONE Thing for business.

Theo Hicks: That book definitely aligns with your best ever advice, too.

Sharad Mehta: Yeah.

Theo Hicks: Okay. If your business were to collapse today, what would you do next?

Sharad Mehta: Man, I absolutely love real estate investing. I thought about it. I love real estate investing… I would figure out what went wrong, learn from my mistakes, and then just think of a better real estate investment. I wouldn’t wanna do anything else.

Theo Hicks: If there’s a time that you lost money on a deal, how much did you lose and what lessons did you learn?

Sharad Mehta: I’ve recently lost $30,000 on a loan that I gave on a property to someone… And then another $15,000 on a flip that I did, that we were trying to do in Chicago. So again, the lessons that I learned from the loan was this was a loan that I gave to a friend; I still did my due diligence, so the lesson was make sure you always do your due diligence, even if you are giving money to somebody that you’ve known for a long time. So that was one thing.

And then the flip in Chicago was we kind of went outside of our own thing, we kind of went outside of the area that we know… So got a little bit greedy with this different market, and things didn’t work out so well, so we lost $15,000 on that.

Theo Hicks: On the positive side, let’s talk about the best deal you’ve done.

Sharad Mehta: A recent one we did this year – we bought a property for $5,000, put about 15k into it, and sold it for 100k.

Theo Hicks: What is the best ever way you like to give back?

Sharad Mehta: What I do is for every property that we sell, we pay for a kid’s education in India. So the best gift I ever got in my entire life was [unintelligible [00:18:09].20] They put me in a position where I was able to go get education, so that’s kind of my way of paying back – every property we sell, we pay for a kid’s education in India.

Theo Hicks: That’s awesome. Last question, “What is the best ever place to reach you?”

Sharad Mehta: The best ever place to reach me is through REsimpli.com. We’re very active,  and anybody can reach us, and we’ll get back right away.

Theo Hicks: Well, thank you so much for joining us today and giving us your best ever advice. Some of the things that we talked about was how you were able to leave your full-time job and start in real estate full-time, and how you initially scaled through money you had saved up, as well as through a very aggressive private lender, because of your focus on owning properties free and clear.

We also talked a little bit about your software company, REsimpli, and then we focused on how you’re able to manage your time between the other businesses, which really was all about  having a superstar team to be focused on what are some of the things you need to do in order to find those team members, and the process of slowly building up trust by giving them one piece of the puzzle, seeing how they handle it, as opposed to just giving them access  to everything from day one, because that’s gonna lead to trouble… And then your best ever advice, which is to focus on one thing, and then be better at it than anyone else, and avoid that shiny object syndrome.

Thank you again so much for joining us today. Best Ever listeners, as always, thank you for listening. Have a best ever day, and we’ll talk to you tomorrow.

Sharad Mehta: Thank you.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2359: Capturing Hot Leads on Facebook with Gustavo Munoz Castro

In 2008, Gustavo’s wife got her real estate license. Seeing how well she was doing, Gustavo followed her in 2010. He was doing the real estate hustle part-time as he was still working as a Microsoft Senior Engineer. 

In 2013, he went full time, and in 2015 he transitioned into inside sales. Now his agents utilize Facebook to get motivated leads, making over 50k outbound calls every day.

Gustavo Munoz Castro  Real Estate Background:

  • Former Microsoft Senior Engineer turned Real Estate agent turned inside sales guru
  • Runs one of the largest inside sales teams for real estate in North America, 65 agents making 50k outbound dials a day
  • His Agent set 100 appointments with buyers and sellers every day, mostly from Facebook leads
  • 10 years of real estate experience
  • Based in Mexico and working in the US and Canada
  • Say hi to him at: www.powerisa.com 
  • Best Ever Book: High Output Management 

 

Click here for more info on groundbreaker.co

 

Best Ever Tweet:

“The magic of Facebook is that it can be used for both scenarios, the motivated buyer and the motivated seller.” – Gustavo Munoz Castro


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Gustavo Munoz Castro. Gustavo, how are you doing today?

Gustavo Munoz Castro: Hey. Doing great, Theo. Nice to be here.

Theo Hicks: Well, thank you for joining me, looking forward to our conversation. A little bit about Gustavo. He is a former Microsoft senior engineer turned real estate agent, turned inside sales guru. And he runs one of the largest inside sales teams for real estate in North America, with 65 agents making 50,000 outbound dials every day. His agents set 100 appointments with buyers and sellers every day, mostly from Facebook leads. He has 10 years of real estate experience, and the company is based in Mexico. Gustavo works in the US and Canada as well. The website is powerisa.com. So Gustavo, do you mind telling us some more about your background and what you’re focused on today?

Gustavo Munoz Castro: Yeah, definitely. Thanks for that, Theo. I’m originally from Mexico. I came to the US in 2004, full-time to live. I got recruited out of Mexico by Microsoft. So I was an engineer, I graduated, Microsoft came… And I grew up on the border with the US, so I’ve always been exposed to US culture. My whole family is from that area, Southern California, and Northern Baja. And all my cousins would always make fun of anyone that spoke English with an accent, so I quickly kind of picked up that Southern California English accent. So that’s kind of where I’m from.

Then I moved up to Seattle for work, and my wife went with me shortly thereafter. And she’s actually the one that kind of got bit by the bug for real estate. She got licensed in 2008 as the whole world was ending, and I got licensed in 2010 because she was just killing it on her own. I helped her out… And I would help her nights and weekends. And then in 2013, I went full-time in real estate. I said, “Hey, you know what? High tech software can kind of wait. I’m interested to see what I can do here.” The market was really picking up in that area back then. It was a big, big, big upswing, and it’s still going on right now, to be honest with you, in every sense of the word. And I transitioned to an inside sales company.

We started with a real estate team, did great there. I transitioned to real estate inside sales in 2015. I started this company, Power ISA, and it’s been a lot of fun. Right now we have a pretty large team. Actually, today we have 77 ISAs in our team, servicing hundreds of clients in the US and Canada. And our focus has really really shifted the last couple of years more and more towards Facebook. Facebook has become a huge opportunity for real estate investors, real estate agents, loan officers, anyone looking to get folks’ attention, get motivated buyers, motivated sellers. And that’s been a big, big part of what we do nowadays. So that’s my biggest focus right now – understanding Facebook. Facebook is a beast. So a lot of stuff from big, big systems, big platforms. Understanding what it’s for, how to get the most out of it, and help our clients be successful with it.

Theo Hicks: Awesome. Well, let’s pick up right there then. Let’s talk about using Facebook to get leads. And I guess my first question would be, before we dive into details – is it a one size fits all strategy? Like, everyone can just use the same process or template? …whether as you mentioned their an agent, or an investor, or a mortgage broker? Or is it something that’s more specific to each of the different kinds of real estate niches?

Gustavo Munoz Castro: That’s a really good question. I’d say it depends on what you’re looking for. If you’re looking for a motivated buyer, whether you’re a mortgage broker, or a real estate agent, folks that are looking for buyers, they do use — I don’t want to say it’s a template, but they use the same approach. They want to show people properties, they want to show people a list of homes.

Buyers want homes. And especially in markets with really tight inventory, if you can demonstrate to the consumer you have access to properties, they’re going to call you. Like, “Hey, man. Give me the goods. What do you got? What do you know that I don’t know?” That kind of thing.

When you’re talking about investors, it’s a very unique and totally different approach. Because you’re not looking for the buyers, you’re not advertising properties. You’re looking for a seller, and you’re looking for a really specific kind of seller – the motivated seller, someone that might be interested, ready to go and make a deal, because they need money fast. They have a high motivation, they need to relocate, they’re going through some kind of life event, where cash now matters more than putting a bunch of money into fixing up a property and getting the highest and best offer for it. So you’re looking for a really, really specific client. But the magic of Facebook is that it can be useful for both scenarios, the motivated buyer and the moment.

Theo Hicks: So let’s dive into details on both of those. So let’s start with motivated buyers, because that sounds, like you said, it’s more of a template, in a sense. So you said that the goal is to demonstrate that you have access to properties. So how exactly am I doing this?

Gustavo Munoz Castro: To put people in the context of Facebook — everybody uses Facebook, I just want to put you in that mindset. You’re on Facebook, you’re browsing that newsfeed, you’re scrolling down probably on your phone, and you’re looking at pictures of your family members, your friends, some kind of event, the news, all these things. And you’ve got a couple of seconds to get people’s attention as they scroll.

So the number one thing is images. It’s a very visual platform. That will get someone to stop, give you a few seconds of attention, and they might read your headline. So the number one thing you want to do if you’re trying to advertise access to properties is to show people great pictures of homes. A lot of realtors use single property listings, like a great look in front of a home. Everyone else uses some kind of grid to show multiple pictures of homes. The inside of a home the outside of the home, something that looks beautiful, looks attractive, and something that they want. And in that title, again, you’ve got only a couple of seconds to get people’s attention. You want to have a really, really obvious call to action. “Hey, South End homeowners, access to a property list of 200,000 and below. Right here. Click For more information.” Something like that.

If you’re looking for a retail buyer, you’ve got to tell them, “Hey, I’ve got the best and most awesome home, at the best price. Check out this information.” It’s really similar even if it’s a single property ad, where like “Hey, this is a beautiful property. Just went on the market. Call us for a showing immediately.” Because a lot of these markets have super low inventory, so “Hey, immediate showing.” Boom. Show that. So you’re trying to get their attention with a very attractive photograph and just some simple copy that says,  “Hey, homebuyers in this area, I’ve got a great property for you to jump on.” Or “I have a list of properties for you to jump on.” If you don’t have any specific property, that’s fine. Get a list of properties that you can offer to them with whatever characteristic is awesome.

What works really, really well in a lot of these markets is offering a list of homes under the median home price. And sometimes it works a little bit under, a little bit more, a little bit above… Again, something you’ve got to test out in every market, but it’s kind of the formula people use to get people’s attention on the buyer side.

Theo Hicks: And then, I know there’s different types of ads on Facebook… What’s the type of ad? Pay per click, and a couple of other ones. What’s the type of ad, filters, which filter should I use…? Things like that.

Gustavo Munoz Castro: Yeah. Really good question. And this is getting us into the next level of detail, for sure. Especially when you’re starting out, you want to get a campaign that’s optimized for lead conversions. Because you want leads. That’s essentially what you want. There are other campaigns you can use, but to keep it simple, this is what the majority even of the professional marketers use. They’re optimizing for conversions. And within that ad, you want someone to fill out their information, or at least Facebook grabs their information immediately, and you want to generate a lead [unintelligible [00:10:31].17]. And I would keep it very simple. I would do a single image ad, just a single image. You don’t have to do a carousel, you don’t have to do dynamic ads; there are so many things that Facebook allows you to do. But the funny thing is the people that have the most success, actually, focus more on the pictures and the copy than the actual technology behind the ad. They keep it very simple; great looking property, sexy offer, clickable headline, really interesting reasons for people to click, and you’re going to generate those clicks.

Theo Hicks: So a lead form ad… So are you able to capture their info once they click on it? Or are they typing in their information once they click that link?

Gustavo Munoz Castro: So Facebook, now, when you click on an ad, you don’t have to fill out the information anymore. Facebook will automatically send it to you. Unless you put additional questions in there, like a questionnaire… You can add custom questions in these lead form ads. You can do it, but at its most basic level, they click on More Information and their information on that gets sent. They just have to acknowledge, “Okay, send it to this advertiser.” And we’re done.

You could put a message on there, “Hey, thanks for sending us the information”, so on and so forth, but at its most basic level, it’s very, very simple. You can make it very easy for a lead to just immediately send you their information, with the expectation that the lead has, that you’re going to give them what they want as well in the backend.

Theo Hicks: Got it. And then when it comes to the filters targeting people, how do I know who to target?

Gustavo Munoz Castro: Great question. So for real estate within Facebook [unintelligible [00:11:55].19] 18 months ago, in the US, this changed. You used to be able to do a lot of targeting. You could do targeting down to the zip code, down to the neighborhood, you could target demographics, all kinds of stuff. The downside of that was that according to the US government, you could actually do stuff, maybe unwittingly, that is illegal. You can actually exclude certain people that it’s illegal to exclude for housing. So the government came down on Facebook. Facebook changed its policy and took away a lot of the demographic, a lot of the income targeting, a lot of the geographic targeting. Now every single Facebook ad goes under something called a special ads category, so you have to kind of be compliant with that. And it takes away a lot of that detailed targeting.

However, people predicted this is going to be the end of real estate on Facebook. It’s gotten bigger after this measure came down, because one of the things it does well is… Remember that ad title I told you about? You have to have an ad title that’s clickable, that’s awesome. Below the ad title, you can put a bunch of text. And it doesn’t really matter whether the person interested reads the text or not, the algorithm reads the text. So in that ad copy, you want to be as clear and as concise as possible with what you’re advertising. You’ve got access to this property in this neighborhood, you’ve got lists of homes in this specific part of town… So that you give the algorithm as many hints as possible as to how to serve that ad.

And last but not least, and this is a really big nugget for folks that are interested in this… If you set up something called Facebook pixel, if you set that up, you can actually help Facebook understand who is the best lead you want. Whether it’s at the thank you page, or some kind of place you want to send people to, that tells Facebook, “Hey, if someone made it all the way here…” It’s a piece of code you put on a website. “If someone made it to that piece of code, then that’s the people I really want, Facebook. This is the people I’m most interested in.” And you’re teaching the algorithm, “Oh, I see. You want soccer moms that make 100 grand.” Again, you’re not explicitly saying that. You’re saying, “Hey, send me people that actually are interested in clicking on these ads.” And Facebook is really, really good at adapting to people that click on the ad. It will show it to more of them. And that is compliant. If you’re not explicitly excluding everyone, then you’re okay.

Theo Hicks: Okay, interesting. I’ve heard of that Facebook pixel concept before, so thanks for sharing that. So let’s move on to the motivated seller. So what are some of the differences between using Facebook to attract buyers and using Facebook to find sellers?

Gustavo Munoz Castro: It’s a different approach, because the easiest kind of lead to generate on Facebook, and actually online, are buyer leads. It’s the easiest, the lowest cost, the fastest. If I turn an ad on for a buyer lead ad, I can get leads in a couple of hours. Boom. I’ll have a lead pop in. It’s very simple.

The seller ads are more challenging. Sellers in general are a little bit harder, because you have to offer them something of value and it’s not as immediate as, “Hey, click on this link to find homes.” It’s like, “Hey, here’s something I think you need. Get it from me.” And if it’s a retail seller, it can be like a free home valuation, it can be a guide on selling your home… But again, those aren’t super burning needs, if you know what I mean. It’s not like an immediate “Oh, I want that, give me the goods.” Well, not necessarily. Those leads tend to be less motivated, they’re harder to convert, and just a little bit more of a difficult lead to generate.

The motivated seller lead, as opposed to the retail seller lead, they can have a burning need. It’s a little different. They can actually have a personal situation, relocation, job loss, all these things happening, and you want your ad to speak to that. You want your ad to say, “Hey, if you’re going under a difficult circumstance, we have options for you. We can help you; if you need cash fast, we can help you move that property if you have any property you want to sell. We can get you cash within seven days, etc.” And the picture you want to put on an ad like that is not of a beautiful home. This is totally the opposite of. You’re telling, “Hey, we buy properties as-is. No questions asked. Boom, whatever that is.” The tricky part, particularly with the motivated seller ads, is compliance. It’s the hardest. Well, I’d say that one, or maybe the lender ads, are the hardest to get past compliance, because you have to provide a delicate balance. You have to tell people that you’re there to help them in case they’re going through any one of these situations, without wording it in a way that tells the consumer that you know that they’re going through that situation.

For example, you can’t say “I know you’re going through a divorce. So here is a way you can sell your property so you can get out from under that woman. That is too direct. Facebook will not allow that. You cannot freak people out, saying “How do you know I’m getting divorced? Holy cow.” Facebook knows this, by the way; they have really good information on what we do, our activities. But it will not let you use it that way. So you have to word it carefully. It’s possible to get these ads through compliance. It’s always hardest the first time. You give it a few tries, you take their feedback, and you make the changes, and you can get it through. But the crux of it is, you want to give people a solution to any one of these really, really serious life events they could be going through. And it might be a positive one like a job relocation.

Right now – we’re recording this at the end of 2020 – people will relocate for a job. There’s a lot of unemployment, people are definitely moving around, there’s a lot of people that are in need, a lot of things going on at this moment. So yes, there’s definitely some interest there, and you’re going to get some clicks on that. But it has to be worded carefully, it has to be worded correctly… And talk about the options. Don’t focus too much on what that person is going through. Try and call out the different situations, and say, “Hey, I’m here to help. I can help folks in these situations. I can help them by giving them these options.”

Theo Hicks: Give an example of what would be compliant.

Gustavo Munoz Castro: Facebook compliance is a finicky thing. I’ve seen this work — and unfortunately, I can’t guarantee it’s going to work in every single instance, but one thing I’ve seen work is the “We buy ugly houses” kind of theme. You can’t use that because that’s trademarked, but “We buy homes in as-is condition. If you need to sell a home fast, give us a call and we can help out.” And that one kind of avoids a lot of the “Hey, I know you’re going to this and you’re going to that.”

Another one that I’ve seen work well is “We help folks that are going through different kinds of situations and different life events. For example…”, and like a bulleted list of the different situations. Again, you’re not being very direct. It’s happening to them. You’re not talking to them. You’re not speaking to them. If the ad speaks too directly to the consumer, they’re going to flag it. And it doesn’t matter if it’s financial stuff, or distress, or even medical advertising, e-commerce. If you’re being too weird with the targeting, they will not allow that ad.

So they want to keep it as general as possible to not freak people out, which I think is a really positive thing, honestly. Because we all know how powerful the targeting is on Facebook, but we don’t want it to get too strange. But I would go with those kinds of ads. Go with a generic offer. And if that’s not getting the results you want, try bulleted lists where you try to not identify the one situation in particular.

Theo Hicks: Are you this? Are you this? Are you this? And they click on one, whoever you want to target. That’s like the pixel. But anyways, super-fascinating. So based off of your experience with Facebook and advertising, finding buyers, finding sellers, what is your best real estate investing advice ever?

Gustavo Munoz Castro: Well, I’m an investor myself, so I kind of see this in a couple of different ways. As an investor, the best advice I’ve ever gotten from other investors is to be patient. The worst enemy when you’re looking for deals, when you’re negotiating, when you’re making an offer, when you’re remodeling and flipping, is to lose patience. And sometimes you just have to calm down, don’t get overeager. The money’s burning a hole in my pocket. That’s usually when you make bad decisions.

The same thing with Facebook advertising – do not expect this to work within the same day. You’ve got to test it out, you’ve got to find the right copy that works, you’ve got to find the right area that responds the best to your ads… So patience, patience, patience, because the best methods and the best results usually come from a little bit of work. It’s not like a slam dunk right away. It takes a little bit of work, it takes a little bit of tweaking. I’m not talking about months and months of work. I’m just saying have a little bit of patience, give a little bit of time, and it’s usually worth the effort.

Theo Hicks: Okay, Gustavo, are you ready for the Best Ever lightning round?

Gustavo Munoz Castro: Go for it.

Theo Hicks: Perfect. But first, a quick word from our sponsor.

Break: [00:20:03][00:20:51]

Theo Hicks: Okay, Gustavo. What is the Best Ever book you’ve recently read?

Gustavo Munoz Castro: I’m actually reading a book with my team right now. It’s called High Output Management. And it’s blown me away. It’s not necessarily an investing book or a real estate book. It’s just a general team building and management book. It’s really famous in Silicon Valley, in those circles. We got it as a team, read it as a team. Absolutely loved it. Very easy to understand. It really simplifies a lot of the management jargon and systems, and I really appreciated it. That’s a great book for teams.

Theo Hicks: If your business were to collapse today, what would you do next?

Gustavo Munoz Castro: So no doubt on this one, I would become a teacher. Because that’s the part of my job that I enjoy the most, the teaching aspect of it. And even talking to folks like yourself, being on a podcast, I love talking about the stuff that I’ve learned. I love transmitting knowledge, teaching other folks. So if I would no longer [unintelligible [00:21:42].23] tomorrow, boom, everything went away, I’d go and become a teacher.

Theo Hicks: What is the Best Ever deal you’ve done?

Gustavo Munoz Castro: My Best Ever deal I’ve done is actually a property in South Seattle. This is back in 2010. It was a mess of a property. They couldn’t get it sold, the short sale fell through multiple times, and it just fell in my lap. And I again, nobody wanted it, and I’m like, “I think I see potential in this thing.” It was my first investment property. I think I see some potential to make this happen. And like, “No, that’s the worst thing ever. What are you going to do? That’ll never work.” And it’s become the highest cash-flowing rental. I’ve doubled up on the equity on it since 2010. Obviously, it’s been a great run. So the best, best, best deal I ever got was just something that just literally fell into my lap because another investor passed on it.

Theo Hicks: What is the Best Ever way you like to give back?

Gustavo Munoz Castro: Teaching. I always come from contribution.  I think that’s the best way to go about things. I believe in karma. So going out there, sharing knowledge, trying to make people better, helping them out, I think is the best way to grow a business, to just be fulfilled. So that’s a big, big piece of what I do.

Theo Hicks: And then lastly, what is the Best Ever place to reach you?

Gustavo Munoz Castro:  That would be my website, powerisa.com. And a close second would be just Facebook. Actually, if you search for my company Power ISA, I’ll pop up on Facebook. I have a free Facebook group you can join. There’s a lot of ways to kind of reach me on Facebook, and I’d love to continue the conversation if folks have any questions.

Theo Hicks: Perfect, Gustavo. Thanks for joining us today and giving us some of your inside tips on how to use Facebook to generate either buyers and/or seller leads. We went to a lot of detail about each, and for motivated buyers it’s a little bit easier, cheaper, faster, and that the focus here is having a really nice one picture, because you want to gain their attention pretty quickly while they’re scrolling through. And then making the call to action and the title very obvious. You gave us some examples of that, and how to, again, use the lead form ad and a single image to optimize conversions.

Then you mentioned the change in targeting. They took away a lot of the hyper-targeting abilities, but you can kind of get around that by the text that you use, being very specific and clear about the opportunity and the text, like whatever the part of the town it’s in. And then you can also use the Facebook pixel to say that once people have gotten to this point, I want more of these people.

And then the other one would be the sellers, which is a little bit more difficult. You need to offer something of value. It’s even more difficult for retail, whereas for motivated sellers, they already have a burning need, so the ad needs to speak to that need, but it can’t be direct. You have us lots of examples of how to again create an ad that is compliant in order to get those leads and get past Facebook compliance.

And then lastly, your Best Ever advice, which is about patience. Now the worst enemy is going to be when you are impatient, when you’re eager, and that’s when you start making bad decisions. So similarly, when you’re approaching advertising on Facebook, be patient. It’s not going to work in an hour. It’s going to take some testing, some tweaking to find out what works best. So be patient and the results will come. It’s going to take some effort. It’s not just going to be, push a few buttons and you’re good to go.

So again, thank you so much for sharing your insights. I really appreciate it. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

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JF2336: Understanding The Numbers With Sylvia Inks #SkillsetSunday

Sylvia Inks is a business coach, finance expert, and speaker who teaches small business owners how to make sense of their numbers so they know what to do differently and build multiple profitable income streams.

Sylvia Inks Real Estate Background: 

  • Business coach, finance expert, and speaker 
  • Focuses on teaching small business owners how to build multiple income streams
  • Author of a #1 Amazon best-selling book, “Small Business Finance for the Busy Entrepreneur – Blueprint for building a solid, profitable business”
  • Based in Raleigh, NC
  • Say hi to her at www.smifinancialcoaching.com/bestevershow 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“I constantly see small business owners make the same 5 expensive mistakes” – Sylvia Inks


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. Here’s an interesting conversation for you. We’re going to be talking about the five expensive mistakes that small business owners make that negatively impact their personal finances. And with us today to talk about that, Sylvia Inks. How are you doing Sylvia?

Sylvia Inks: I’m doing great, Joe.Thank you.

Joe Fairless: I’m glad to hear that. And a little bit about Sylvia. She’s a business coach, finance expert, and speaker. She focuses on teaching small business owners – and by the way, we are all small business owners as real estate entrepreneurs – how to build multiple streams of income. She’s the author of Small Business Finance for the Busy Entrepreneur: Blueprint for Building a Solid, Profitable Business. Based in Raleigh, North Carolina. So first off, Sylvia, do you want to give the Best Ever listeners just a brief background of yourself? And then let’s get right into the five expensive mistakes you see people make.

Sylvia Inks: Sure. So I have been working as a financial coach for small business owners for a little over six years now, and what I’ve found was that so many small business owners, they’re so great at either their product or the service that they offer, but they’re financially overwhelmed. Their finances are either disorganized or they don’t know how to make sense of their numbers… And I started seeing just really, really smart business owners either go out of business or stressed, or they have marital stresses because they’re not able to bring a consistent paycheck from their small business to their personal household income… So what we’ve been focused on in the last few years, is really helping small business owners get profitable, figure out a way to save time, and make more money so that they can do more of what they love.

Joe Fairless: Well, we all want to get more profitable, and do more of what we love, and save time… So hook, line, sinker – let’s do it. What’s number one? What mistakes do you see people make?

Sylvia Inks: Biggest mistake, I see people co-mingling their personal and business money. I see it happen all the time. I actually had a real estate agent once who told me that every December, she called it “the week of hell”, her husband would give her literally the credit card statement from January through December of that year and gave her a highlighter and said, “Go highlight all your business items so I can put it on our tax return.”

Joe Fairless: I’m hyperventilating.

Sylvia Inks: Are you cringing?

Joe Fairless: No, I’m about to have a stroke as a result of just thinking about that.

Sylvia Inks: Yes. So they co-mingled everything. They just had only one credit card that was paying for their personal finances, as well as her real estate business, and it was just a mess. So the biggest thing everybody absolutely–

Joe Fairless: And they did that multiple years?

Sylvia Inks: Multiple years. Yes, every year. Every December, she got a printout, multiple pages of credit card statements, and a highlighter, and the husband said, “Here you need to go highlight and tell me which ones of these are business expenses.”

Joe Fairless: Just get a bookkeeper, right? That’s the solution here?

Sylvia Inks: No, actually, the solution is to make sure you set up three business bank accounts. So completely separate from your personal life.

Joe Fairless: Three?

Sylvia Inks: Yes.

Joe Fairless: Please. Elaborate.

Sylvia Inks: Okay, so the first one is your operating expenses, right? That’s whatever it needs to keep the lights on in your business. So everything that, no matter what, you have to pay the bills. So you’ve got a website, you’ve got phones, you’ve got whatever things that have to be paid, dues and subscriptions, those are in your operating expense account.

The second account is for taxes. I see so many business owners accidentally spend their tax money, because a lot of times you’re either paying monthly taxes or quarterly taxes. So if you’re co-mingling that and that’s all sitting in your operating expenses, there’s a good chance that you are accidentally spending that tax money. So a good business opportunity comes up and you’re like, “Oh, yeah.” I see a lot of business owners just log into their checking account and see that they’ve got a pot of money, so they’re like, “Oh, yeah. I could take advantage of that. Let me go purchase this, or let me go invest in this.” And then forget that that was their tax money. So separate tax account. And then the third business bank account is actually for your emergency fund. So having a separate emergency fund just for your business.

Joe Fairless: Okay, I hear you. But this isn’t for everyone though, right? Because if you’re disciplined enough to allocate an emergency fund within one bank account, and taxes, and expenses – you don’t need three. So this is for people who have a hard time doing that already… Is that correct? Or what is your thought process?

Sylvia Inks: Great question. So I actually did have a client of mine who said the same thing. She started working with me and she said, “Sylvia, I am really disciplined. I just know that a certain portion of my money is always dedicated to an emergency fund.” And she struggled with it and she fought me a little bit, but eventually, she did do it. She said, “Okay, I’m going to have to take this leap of faith.” It doesn’t cost you anything, you just open up a checking account or savings account, if you will, and put your emergency fund there.

She emailed me less than a week later and said it completely freed up her mental space by having a separate account for her emergency funds. That way, she knew that her operating expenses, she knew that what was going out for paying bills, versus if she saw more money in her checking account, that that was extra money that she could use to invest in a business opportunity that came up, right?

Joe Fairless: Okay.

Sylvia Inks: So it’s more peace of mind, and just freeing that mental bandwidth. You don’t want to have to constantly go, “Okay, well, there’s 50k in my checking account. Well, how much of it’s supposed to be for emergencies? And do I really have this money to invest in XYZ course, or this book, or whatever?” It just frees up that mental bandwidth.

Joe Fairless: Okay. And then as far as the checking accounts, are they three checking accounts? Just I’m getting into the weeds a little bit, I know.

Sylvia Inks: Yeah, of course. I would recommend if it’s your emergency fund, try to do a savings account, so you can get at least get a better interest off of that. But these days, I think all the interest rates are pretty minimal, but any little bit helps.

Joe Fairless: Yup. Okay, got it. And you’ll just also want to make sure that the accounts don’t have dormant fees, because if it’s just sitting there idle, and it is a checking account, that you have some sort of automatic transfer, that transfers $1 into that account, so you’re not getting charged fees, so it’s not actually costing you money.

Sylvia Inks: Absolutely a great point. And again, definitely make sure if you’re using this for your business, please make sure that it’s a business checking or savings account. I actually had a participant at one of the workshops that I gave, and they were running their business out of a personal checking account at a credit union, and the credit union found out and ended up closing down their accounts, because you can’t use personal accounts to run your business.

Joe Fairless: Okay, number two.

Sylvia Inks: So number two actually was making sure that you have an emergency fund. So again, I see a lot of small business owners think, “Oh, well…” Maybe their business is a hobby or a side business. So they feel like, “Okay, well, I don’t need to have a separate business emergency fund. I’ll just tap into my personal emergency fund if I really need to.” So I really highly encourage people to make sure that they separate that out and make sure you’ve got one just for your business. Because you don’t want to get into tapping into personal funds or anything that’s meant for your personal life, whether it’s…

Joe Fairless: Specifically how much?

Sylvia Inks: So I’ve always said three to six months. And that’s really depending on the type of business owner you are, especially if you’re paying for a leased space or rental, making sure that that may be more closer to like six months. But with COVID, probably more is probably a little bit safer these days.

Joe Fairless: Three to six months of what?

Sylvia Inks: Of your operating expenses. That way, you can make sure that you can cover expenses if anything happens. So a great example 0 I had a client of mine, she had a death in the family. And she felt like, “Okay, I can’t really work on my business.” She just took two months off of her business, but there are still bills that have to be paid. So she didn’t account for that, and she ended up going into debt, because she forgot to account for, “Hey, there’s things that even if I want to work, I may end up having to take time off because of personal emergency reasons.”

Joe Fairless: Number three.

Sylvia Inks: Number three – so not having your tax money taken out. So if you’re a W2 employee, your tax money’s already automatically taken out, that way you’re not accidentally spending it. So again, that’s why we want to talk about the three bank accounts. So making sure that you just account for that anytime that you are getting sales, working with your CPA to figure out what’s your tax amount, and just go ahead and put an automated process to take that tax money out. You can do it weekly or monthly, but just making sure that it’s not all sitting in your one operating checking account, so that you’re not accidentally spending it.

Joe Fairless: Okay. And number four?

Sylvia Inks: Number four, this is my favorite one.  A mistake that I see with small business owners is that they are willing to work for free. So basically kind of like a no paycheck. So they’ll work for months without paying themselves consistently, because they feel like “Okay, well, I don’t know when my next sale is coming in. So I’m just going to wait, and wait, and wait.” So I have business owners who have been in business for eight-plus years who don’t consistently pay themselves a paycheck, because they don’t put themselves as a line item, as essentially treating themselves as an operating expense. So figuring out how much they want to make sure that the business is paying them, so they can bring that into their personal household, family, etc.

Joe Fairless: And number five.

Sylvia Inks: Number five. One thing that I see a lot of small business owners make the mistake of is they lower their prices. So basically, they give discounts on the fly. So they feel like “Okay, well, if I don’t ask for too much, then I’ll be able to make the sale.” But a lot of times they don’t think about all the costs that go into keeping the lights on in their business. So when they’re having these sales conversation, or they’re getting nervous that maybe somebody’s not going to close on the sale, I’ve seen business owners just lower their prices or give a major discount to attract customers.

I had one instance where I had a business owner, when we’ve calculated everything that she did, she actually ended up giving her product away for free. When we factored in all her cost of goods sold, her discounts, her taxes, etc. She actually basically gave the customer money to walk away with a product.

Joe Fairless: It reminds me of the Office episodes where Michael Scott creates the Michael Scott paper company and they’re meeting with their number cruncher, and the big guy says, “Well, actually, as you grow, you’re going to lose more money and actually be out of business.” Because they’re doing a fixed cost model versus a variable cost model, as they’re just assuming the costs will stay the same as they grow, but they’re actually losing money.

And two things come to mind, besides the Office episode. One is that being aware of all the costs that are taking place in order to operate a business, it’s not something that a lot of entrepreneurs are aware of, in my experience. And the second is when you do lower your costs to attract a certain clientele, you’re actually getting hit twice. One is you have a lower profit margin, if any profit at all. And number two, you’re attracting not the type of client that you really want to attract. You want to attract clients and customers based off of the value that you bring, not a price point. So on the first part though, I’d love for you to talk a little bit about how do we become more aware and cognizant of the expenses that are going on in order to make our business run? Are there certain reminders or techniques or softwares that we should always keep in mind?

Sylvia Inks: Yes. This is actually one of my favorite topics. I’m glad that we’re talking about this. So in terms of expenses, keep it pretty simple. You can put it in Excel. But really, I stress to my clients to make sure that you list every single thing that you’re paying on a monthly basis or even a yearly basis. So everything that you’ve signed up for – subscriptions, all those monthly bills, yearly bills, or insurance. And then I also recommend just putting a line item for why you signed up for that service or that tool. Because when you start off, your reasons for signing up for something may be one thing, but five years into your business, that reason might change. And maybe you don’t need that product or that subscription anymore.

I actually had one real estate client that I was working with, we were looking at all their bills, and I looked at their phone bill, and I was like, “Why is it several hundreds of dollars? You have a pretty small team right now.” And then they started realizing that they were paying for seven or eight cellphone bills and realized that they no longer had those agents. So they were paid, right? And this was years; like, they’d been doing this for three-plus years, and they’re like, “Oh, my gosh, we had these people on our payroll, and we were paying their cell phone bills, but we don’t have those people on our team anymore.” So really, it was just there was no oversight for that.

And then it was a husband and wife team, and we were looking through and I was like, “Okay, well tell me what the subscription is for?” And they couldn’t remember. It was like, “Okay, well, let me figure out why did I sign up for this.” So really just giving yourself notes for why you signed up for something… As well as, if their yearly bills that are coming up, I would just say put it in your calendar, a couple of weeks, two weeks, maybe even a month out, and just remind yourself and say, “Hey, this bill is about to be due.” Especially if you’re paying a yearly premium for it. And say, “Make sure that you’re still using this tool. If not, let’s cancel it.”

Joe Fairless: What a great exercise to look at; first, in order to analyze the data, you need to have the data organized in the right way. I mentioned on number one, have a bookkeeper. And you said, “No, no, no, no, have three bank accounts.” I’m going to mention it again for this one. Because you haven’t mentioned “get a bookkeeper.” How come? Because I have a bookkeeper and it’s amazing. And that bookkeeper just provides the monthly finances, he’s with the CPA firm that I work with… But I haven’t sat down and done it methodically, I should say, “What is this one service and do I still want it?” Would you recommend having a bookkeeper and then taking this approach?

Sylvia Inks: I do recommend everybody have a CPA, for sure. So you definitely need somebody who is trained to do your taxes. So I don’t have a bookkeeper. I do have a CPA, but I use an invoicing and accounting tool called FreshBooks. So that provides…

Joe Fairless: FreshBooks?

Sylvia Inks: FreshBooks. Yup. I can give you a link as well. So it will take all my expenses – so I just sync up any of my credit cards or my debit cards, bank account information… So it will basically do an inventory of all my expenses and categorize them for me. So it will say “Oh, I see that you had gone to Starbucks five times this month.” And it’ll flag it as a meals and entertainment expense. Maybe I was meeting with a colleague or a prospect. Or “Oh, I see that you’re paying Microsoft for a subscription every month.” So it will start flagging those for you and categorize it for you. So basically, it’s an automated process where I don’t have to pay a bookkeeper for that, because the system will do it for me.

Joe Fairless: Initially, though… Because I used to have something like that… You have to categorize something so that the machine can start learning, “Okay, that’s for XYZ”, right?

Sylvia Inks: Correct. Correct.

Joe Fairless: I got it. So it takes some initial work on the front end. But then once you start having reoccurring purchases, then it puts them in those categories that you associate it with?

Sylvia Inks: Yes, that’s correct.

Joe Fairless: Awesome. Anything that we haven’t talked about before we wrap up that you think we should as it relates to expensive mistakes all entrepreneurs make?

Sylvia Inks: Yes. So we talked about expenses. The number one tool that I’d say every small business owner absolutely needs to budget for is a scheduling tool. I’ve seen people lose business deals because it takes three to four, or five emails back and forth trying to find a date and time to work.

Joe Fairless: Oh yeah.

Sylvia Inks: And lots of people are scheduling meetings after hours. So if you’re not accessible, or if it takes a phone call or it takes trading multiple emails to get on your calendar, you might lose the sale. So definitely having a scheduling tool is a must-have as a small business owner.

Joe Fairless: What’s your favorite one?

Sylvia Inks: Book Like A Boss is my favorite one.

Joe Fairless: Book Like A Boss. I haven’t heard of that one.

Sylvia Inks: I used to use Calendly, which I know a lot of people have heard of Calendly. But Book Like A Boss, it looks like a micro-website. So aesthetically, it looks prettier. And again, you can set up different types of appointments. So I have a different link for prospects versus clients, versus colleagues who want to connect with me. So I just give them a different link and they can get onto my calendar and it sends automated reminders. It’s fantastic.

Joe Fairless: Alright, thank you for that. I’ll check it out, Book Like A Boss. Well, five expensive mistakes that small business owners, entrepreneurs, real estate investors make that negatively impact their personal finances – co-mingling personal and business money. So get those three bank accounts set up. Emergency Fund, three to six months of operating expenses. Not having tax money taken out, number three. Four, working for free. You don’t want to work for free. Number five, lowering prices, giving discounts on the fly. And we talked about that, and the exercise that I’m personally in love with, which is taking a look at the expenses that you have on an ongoing basis and then asking yourself “Why did I initially sign up for this and is it still useful?” How can the Best Ever listeners learn more about what you’re doing?

Sylvia Inks: Sure, they can go to my website, smifinancialcoaching.com/bestevershow, so it’s just for your listeners. And they can get access to a free mini-course on the top five tools to help you save time and money starting today.

Joe Fairless: Well, wonderful. I will include that in the show notes as well. Thanks for being on the show. I enjoyed it, grateful, and hope you have a Best Ever weekend and talk to you again soon.

Sylvia Inks: Thank you, Joe.

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JF2334: Talking With Full-Time Investor Melissa Johnson

Melissa Johnson has been flipping houses in San Antonio, TX since 2003, growing and expanding the business into a thriving real estate investment operation. With over 1000 houses flipped, she has also built a portfolio of rental properties and real estate notes while raising five children. She provides coaching, support, and education for other high-level real estate investors nationwide. As co-founder of the San Antonio InvestHer meets up group and an active member of the Forbes Council on Real Estate, and the National Association of Women Business Owners, she is dedicated to the success and empowerment of women in business. 

Melissa Johnson  Real Estate Background: 

  • Full-time real estate investor, and the Co-Founder of San Antonio InvestHer meetup group
  • 17 years of real estate experience
  • She has completed over 1000 flips and has a portfolio of rental properties and notes
  • Based in San Antonio, TX
  • Say hi to her at www.themelissajohnson.com  
  • Best Ever Book: Everything is Figureoutable 

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Best Ever Tweet:

“Find a coach or a mentor” – Melissa Johnson


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today we’ll be speaking with Melissa Johnson. Melissa, how are you doing today?

Melissa Johnson: I’m good. How are you?

Theo Hicks: I’m doing well. Thank you for joining us today. A little bit about Melissa. She’s a full-time real estate investor and the co-founder of the San Antonio InvestHer Meetup group. She has 17 years of real estate experience and has completed over 1,000 flips, as well as has a portfolio of rental properties and notes. She is based in San Antonio, Texas, and her website is themelissajohnson.com. So Melissa, do you mind telling us some more about your background and what you’re focused on today?

Melissa Johnson: Sure. So like you said, I got started 17 long years ago; a lot’s changed since then. Came from a sort of a corporate background, working for a defense contractor, and started flipping part-time while I was still working for that company. And gradually, I transitioned into doing real estate full-time, which has been awesome, because I have five kids, and I love the lifestyle and the flexibility that real estate has provided for me especially as a mom, it’s been a really big blessing. I do mostly a lot of rehabbing. Over the last few years though we’ve transitioned more into wholesaling. I still do rehab, but I cherry-pick those, and I’m still working toward building up my portfolio. I really like creating notes. I’ve got a few rental properties; really, it’s not my favorite place to be, but I know it’s important to have a diverse portfolio, so I’m still working on those.

Lately, I’ve been kind of moving into the coaching space, just because I’m really seeing a need for that, especially for women right now. There’s a lot of women that want to get started, but they don’t know where to start, they don’t know what to do, they don’t have a plan… So I was finding myself doing that anyway, just randomly here and there, talking to people… I do a lot of networking, been part of masterminds, and things like that. So I was really starting to see that coming around as a thing. So I’m still doing the real estate thing, but I’m also trying to help and coach women in the business too, right now.

Theo Hicks: Thank you for sharing that. So a big thing that people like to focus on, or I guess a goal a lot of people have is they’re working a corporate job, and real estate is their way to get out of the corporate job. And so you mentioned that you started in the corporate world, started flipping part-time, ultimately transitioned into full time. And I’m assuming you left that job. So can you maybe walk us through how that process worked for you? How did you know that it was time to leave your job? Was it based off of some dollar amount? Was it a feeling that you had? Were you just “enough is enough”? How did that work?

Melissa Johnson: It was more the “enough is enough”. I’d reached a place where I knew that there wasn’t anywhere else to go in that company… And it was a great time, and I loved the people and everything there, but I knew that there was a glass ceiling there for me. And the big thing was – I’ll never forget, when we did our first or second deal, maybe. And we got this check, and I looked at the check and — I looked at my paycheck, and I said, “Oh my God, that’s what I take home in a year, from one deal.” And it didn’t take much longer after that, maybe like a month or two, and I just said, “I can’t go to this place anymore and be miserable. I really just want to focus on real estate at this time. Because I’d be crazy not to.”

Theo Hicks: So it was pretty quick after your first or second deal when you left?

Melissa Johnson: Well, not necessarily. It started that way, but there was buffer time. But I knew that I needed to have that escape plan. But that’s when I knew that I couldn’t stay there anymore. So I think it was maybe six months after that, something like that, that I knew I wanted to do it full-time.

Theo Hicks: Sure. Did you make enough money on that deal to cover living expenses for a certain amount of time? How’d you pay for living expenses once you had to left the job?

Melissa Johnson: By doing more deals. It’s like, when you get pushed out there, you’ve got to do what you got to do, right? So I had the security blanket of the job for a long time, but then when that was done, every bit of energy, focus, money, went back into the company to grow that and to do more deals. But not to do so many deals to where I was overwhelmed. It was more of a building the business around our life.

Theo Hicks: Okay. And then how were you funding the deals in the beginning, so right away? Was this your own personal money, were you doing lines of credit, credit cards? How were you finding the deals in the beginning?

Melissa Johnson: So all of my deals, even to this day, are all funded with private money. I’m a big fan of private money, and I like to encourage people to go out there and find and raise private money and build those relationships. I think that’s been a really big key to our success, is being able to leverage private money.

Theo Hicks: So let’s talk about the journey, really, to private money. So let’s talk about your first deal. Who were your investors on your first deal?

Melissa Johnson: It was actually a really cool thing when I look back at it now. There was a mentor, and the mentor was actually our private money lender. So it worked out beautifully, because we were able to work with him as far as being mentored by him. We did a lot of the self-education stuff on our own, but he was there when stuff would come up; we would say, “Well, this is happening. How should I handle this?” So that was a big plus. But then it was great too, because he had the funds available… So I’d be able to send him all the info on the deal, he’d say, “Yeah, that sounds good.” And he would fund it, he would take 50% of the profits, which sounds awful… But we would subtract from that all of our marketing costs. So that helped.

And then we went on like that for, I don’t know, maybe two years tops, something like that. And eventually broke that relationship off and turned that into just a strictly private money lending relationship instead of a mentorship. But it was a good way to get your feet wet and to have the benefit of somebody’s experience that’s been doing it for a really long time, and then to have those funds available, too. It was just a great overall strategy for us in the beginning.

Theo Hicks: How did you meet this person? And then not having done deals before, how did you get them to trust you and give you their money to invest?

Melissa Johnson: That’s a good question. I don’t think anyone’s ever asked me that before. It was really great, because it was actually somebody that we knew. So that’s something that I encourage people when they are looking for private money, is to reach out to people that you know. So it just happened that we actually knew this person already. He had done some deals with my father-in-law at the time, and he had been working with him for a while, so we had a lot of credibility already going into it, which I think helped out a lot.

Theo Hicks: So you said after two years he was no longer your mentor, just a private money lender. So is he, to this day, the only person to invest, or did you eventually grow to a kind of a larger pool of investors? I’m assuming you did. And so what are some of your tips for after you’ve established yourself with people that you know? ..friends and family, because usually that how people start. How do you then expand out to others?

Melissa Johnson: One of the things is just going to where the money is. If you’ve worked on your network, it’s just talking about what you do all the time, I guess, is really the big key. It’s really about networking, it’s connecting with people… So say you’ve done a couple of deals… Like, we did a lot of deals with that private money lender. Well, then we put this whole — it was awful at the time… Like a cheesy presentation kind of thing. But it worked, because then we were able to say, “Okay, these are deals that we’ve done, here are the numbers, here’s the holding time, here’s how much money was made on the deal, here’s how much interest that we paid out…”

So once you have a proof of concept there that you can take that to other people, and as you’re talking and you’re networking with all these other people, you have actual things to show them, like “Here is a sample of our deals that we’ve done.” It’s proof. So that gives you credibility, and then being able to just build those relationships from there.

So we did a lot of outreach kind of things just to network and, “Okay. Well, if you can’t lend, do you know somebody that might?” and then reaching out to those people. Finding business owners that had money, finding people that have lines of credit, people that have IRAs that are looking to invest money out of those accounts, are all good places. And then even doing searches on MLS and looking for cash solds, and going back in the research and finding out who funded those deals, and reaching out to them and pitching them on lending.

Theo Hicks: So what does that reaching out process look like? Are you just sending them your presentation? Or is it more just talking about what you do and then see if they’re interested? Is it a proactive, hard attack? Or is it more like a soft, “Hey, I’m doing this,” and then they’re like, “Oh, that sounds great. I’m going to do that, too.”

Melissa Johnson: It’s a conversation. It’s just, “Hey, we’re doing this stuff. I know, you might have some money lying around. If you’re interested…” And once you can show people what their money can do for them, it’s a huge game-changer. If you can say, “Hey, I’m willing to pay you 8%, 10%, 12% interest. You’re not going to make that at a bank. Let me show you how to do this.”

And the great thing about this too is you’ve got real estate, so you’ve got property actually attached to this. So it makes it a lot more desirable for them, I guess, knowing that there’s real property attached to all these deals, instead of just, “We’re going to loan you $100,000 to spend on whatever. Marketing, overhead, blah, blah, blah.” Hopefully, you get that money back, but you might not. But when it’s backed by real estate, at least there’s some security there for them, too. So as personable as you can be, as much information as you can give, I think those are the most important things. Just really connecting with people and really showing them what you can do for them.

Theo Hicks: If I invest with you, am I investing in a particular deal? And then what does that structure look like? So how long is the loan? And what are the terms of the loan?

Melissa Johnson: So what I do – I typically borrow, purchase plus rehab, because I’m getting private funds for rehabs. So when we do wholesales, we’re just assigning contracts; we’re not double closing those anymore. So I don’t count those. But for rehabs, it’s purchase and rehab costs. It used to be 12% interest, but over the years – and this is another thing, with just proof of concept and time, and building the relationship – I’m down to 8% with my private money lenders. And then one of them charges a point, and then another one, they just charge a straight loan origination fee. I have a couple of lenders that just do that. So it’s like a $200 origination fee that gets paid on the back end. I do no payments, so when we close the property on the sale, they get all the money back then plus the interest. And those are the main points. And we do a term for one year also, because I don’t want to hold anything longer than that. If we need to extend it, we do have a clause in there that allows us to extend, if the lender agrees to it.

Theo Hicks: Okay. So up to one year. So whenever the deal is sold is when — okay.

Melissa Johnson: Right. Right. And I don’t think I’ve ever had to use that extension clause because we move everything within that time period.

Theo Hicks: Okay, and then the last question before the money question. What is the number one source for your deals? And let’s say, since you now aren’t doing strictly fix and flips, and you’re cherry-picking those… The actual fix and flips, not the wholesale – what’s the number one source for the deals that you get in and you actually take to fix and flip?

Melissa Johnson: I know at one time it was primarily through organic traffic, just because I’ve had a website before most people had a website. So I got that going in my favor. So a lot of them come in organically through the website. And then recently just started direct mail again, which I had quit doing for several years, because the online was doing so well. So most of the deals that we’re getting now are from direct mail.

Theo Hicks: Okay, Melissa, what is your best real estate investing advice ever?

Melissa Johnson: Best advice ever is to find a coach or a mentor. I cannot stress enough how important it is to have somebody to guide you and to show you the benefit of their experience. And to have that good relationship with somebody that can really help you along the way.

Theo Hicks: Okay, are ready for the Best Ever lightning round?

Melissa Johnson: I am.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:15:56][00:16:41]

Theo Hicks: Okay, Melissa. What is the Best Ever book you’ve recently read?

Melissa Johnson: Best Ever book I’ve recently read hands down is Everything Is Figureoutable by Marie Forleo.

Theo Hicks: If your business were to collapse today, what would you do next?

Melissa Johnson: I would do one of two things – evaluate and execute, or plan and pivot. So by evaluating and executing, just looking at the situation – was there anything I could have done differently? Was there something out of my control? Can I change this? Can I fix this? If I can, what are the things to do? And then execute on that. If it doesn’t fit in any of that, then plan and pivot. What am I going to do now? Am I going to do something different? And then figuring that out and then doing that.

Theo Hicks: What is your Best Ever deal? That’s going to be in terms of dollar amount, or some other definition of best.

Melissa Johnson: Best Ever deal to date was in 2017. It was a flip; it came in from our organic lead from the website. And it was a perfect example of how important it is to buy right. So we bought the property for 130,000, and we rehabbed it, spent 44,000 on the rehab, spent about another 23,000 getting it closed, all the realtor fees, cost all that. And sold it for 292,900, and made $95,395.01.

Theo Hicks: And then what about on the flip side, a deal that you’ve lost money on – how much money you lost, and then the lessons that you learned?

Melissa Johnson: I try not to lose any money… And I’ve only lost money on a handful. But I did look back and the worst deal ever, I lost $18,754 on. And that was last year, actually. So it just goes to show you, no matter how much experience you have, you can still have those problems.

That one was an unknown equity lead that came in… And I learned a lot from that one. It was learning mostly about myself. I got busy, I got complacent, I let things go on for too long, and I had a multitude of issues. I had contractor issues, I had the house broken into multiple times, things stolen, things damaged, destroyed… Everything I feel that could go wrong, did, on that property. But it made me realize that no matter how long I’ve been doing this, I still need to keep my finger on the pulse of what’s happening, and it made me look at what I was doing and make some changes too with the business.

Theo Hicks: What is the Best Ever way you like to give back?

Melissa Johnson: I love helping other people. I love coaching people, I love mentoring people, I love talking to people about what they’re going through. I run a free real estate group for women in San Antonio, women investors. I do volunteer also with high school students that are looking to get into business, through the NAWBO, National Association of Women Business Owners. They do a mentorship program, so I’m a part of that… That’s how I like to give back.

Theo Hicks: And then lastly, what is the Best Ever place to reach you?

Melissa Johnson: Best Ever place to reach me would be on my website. That’s themelissajohnson.com. And I’ve got a lot of things happening over there. Also, I’m on Instagram, I have a lot of content there, and Facebook and LinkedIn also.

Theo Hicks: Perfect, Melissa. Well, thank you for joining us today and providing us with your Best Ever advice. Some of my biggest takeaways was talking about transitioning out of the full-time job into full-time real estate… And it was mostly just “enough was enough”. You talked about how you saw one of your first checks and realized that it was essentially the exact same as how much made at your job. So eventually, after a few months, you decided to leave. And then as you no longer had that security blanket, you invested all of your time into your real estate business, because you had to make money to live off of.

We talked a lot about private money, your journey from starting off with private money from a mentor who you had a previous relationship with, and he was your investor. And eventually, you transitioned and scaled to other people, and you kind of gave us a lot of ways that you are able to raise money. The main way was getting out there and talking to everybody you know about what you do, and just having a conversation with them, providing educational content on how it works, how they can make money from investing in real estate as a passive investor.

You talked about how you had a cheesy presentation that you’d give to people at first; everyone knows about those. I like this – so you find people, and even if they said that they weren’t interested, or that they couldn’t do it, you wouldn’t just say, “Okay, let me know if you change your mind.” You’d also say, “But do you know anyone else?” And so using anyone you talk to to be a potential source, either themselves or someone that they know.

You talked about specifically targeting business owners, people with lines of credit, IRAs, looking at people who had bought real estate all-cash, be it looking it up on the MLS… You talked about the structure, and you talked about your deals are coming through organic traffic from your website, and then also from your restarting direct mail, which you had stopped for a while.

And your Best Ever advice was to find a mentor or a coach, which we kind of talked about – a great source for education as well as a great source for contacts, as well as money. So Melissa, thanks again for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Melissa Johnson: Thank you.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2332: Balancing W2 Work and Real Estate Investing with Kevin Galang and Adam Ulery

While working full-time, Kevin Galang and Adam Ulery are active real estate investors. Adam prefers to build his portfolio by being a syndicate partner, while Kevin primarily focuses on notes.

Prioritizing and finding a balance is the key when pursuing multiple directions. Kevin works from home, and Adam has a lot of flexibility as a consultant. They both utilize their free time to tackle and execute their real estate objectives and share their knowledge on a podcast show of their own.

Kevin Galang and Adam Ulery  Real Estate Background:

  • Kevin is a full-time software sales engineer and Adam is a business agility coach
  • 6 years of combined experience in real estate
  • Kevin’s portfolio consists of 4 performing notes and 1 nonperforming note
  • Adam’s portfolio consists of 308 doors across 6 properties
  • Based in Tampa Bay, FL
  • Say hi to them at: www.dreamstoneinvest.com and www.notenuggets.com 
  • Best Ever Book: Can’t Hurt Me

Click here for more info on groundbreaker.co

Best Ever Tweet:

“You need to understand how you want the system to run. A system isn’t just magically going to make your life better.” – Kevin Galang.


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today I’ll be speaking with two guests. We have Kevin Galang and Adam Ulrey. Adam and Kevin, how are you both doing today?

Kevin Galang: Doing fantastic.

Adam Ulrey: Awesome. Thanks so much for having us on the show, Theo.

Theo Hicks: No problem. Thank you for joining us today. So a little bit about Kevin and Adam’s background. Kevin is a full-time software sales engineer. And Adam is a business agility coach. They have six years of combined experience in real estate. Kevin’s portfolio consists of four performing notes and one non-performing note. And Adam’s portfolio consists of 308 doors across six properties. They’re both in Tampa Bay, Florida, and the websites are dreamstoneinvest.com and notenuggets.com. So starting with Kevin, and then going to Adam, do you mind telling us some more about your background and what you’re focused on today?

Kevin Galang: Yeah, so as you mentioned earlier, I have a full-time job. I’m sure many of your listeners do. And outside of that, I focus primarily on mortgage notes. I like note investing for a number of reasons. I like the protection aspect. What I mean by that – if the borrower ever defaults, you could take back the property, you’re protected by that asset. From the non-performing note perspective, I love the ability to help solve a problem. Let’s face it, Theo, you know that the average American is kind of one crisis away, as COVID is showing us, from not being able to afford their mortgage. But that doesn’t mean they’re bad borrowers. So I want to be able to come in there, solve the problem, and make a difference in somebody’s life, but at that same time, you’re able to make a return.

Adam Ulrey: Yeah, that’s great. And my background is I work in primarily the software space in the tech industry as an enterprise business agility coach. I help transform businesses. What I invest in real estate wise is multi-family, focusing on large multi-family. I’m a syndicator, and we focus primarily on value-add apartments in the Southeast. I really like that asset class and that focus, because it’s in my opinion the best way to grow your wealth very rapidly. That’s the primary reason why I kind of focus in that area.

Theo Hicks:  So Adam, you’re an active investor? You’re actively on the GP as a syndicator?

Adam Ulrey: That is correct. Yes. My team is Dreamstone Invest, and I’m a partner with those guys.

Theo Hicks: Perfect. So you guys both mentioned that you work full-time jobs. Kevin, would you consider notes passive? Or do you still consider that active investing?

Kevin Galang: I personally am the active investor. So I’m the one finding notes, talking to my borrowers, talking to sellers… But it can be a passive investment. One way that people do it is through partnerships, where I’m be the active person, where I find the note, work with somebody to work with the borrower, and the financial friend is more passive, for lack of a better way of putting it. But there are other passive options, like investing in funds out there that are with notes, and things of that nature.

Theo Hicks: Perfect. Okay, so you both have full-time jobs, and you’re both active investors… So my question for both of you is, how much time are you spending on your real estate business? When are you doing this? What happens if you need to do something and you’re at work? How do you decide what’s given a priority? And anything else you can think of that is a challenge working full-time, as well as being an active investor?

Kevin Galang: Well, sleep is a friend that I’m not familiar with anymore. Just kidding. I really focus on prioritizing. So the nine-to-five during the daytime takes precedence because I have that obligation to the company that I’m working with, to maintain my value as an employee. And I take lunch — for example, I’ll schedule calls to take lunch calls. I work from home, so it’s a bit easier… And then I try to schedule things in the morning. So before eight o’clock, I’m working on stuff, reading about the mortgage industry, writing and creating podcast episodes. And then at night, same thing, I go back to analyzing notes, and Adam and I will record podcast episodes on the weekends… So it’s really a finding that balance; you just kind of make the time for it and figure out what is the most important thing that you need to tackle, and just execute.

Adam Ulrey: Yeah, that’s exactly what I do. You just hustle and make it happen. As a consultant, I’ve got quite a bit of flexibility in my schedule, so I let Kevin put the client’s priorities first, and then I just kind of work around that and fill in. So if I’ve got little pockets of time where I can do something, take a call, or perform an activity, I’ll do that, and then just make up for it later in some way. Fortunately, my work schedule doesn’t need to be like that traditional nine to five. I can work a little earlier or work a little later, or kind of fit work in where I need to, as long as I’m not in front of a client. And when I am, of course, I’m dedicated to that.

Also, systems are a big help. You’ll see social media posts coming out for me at different times during the day – I systematized that; it’s automated. So it’s not always me scheduling the post. A team is a huge piece of how I’m able to achieve that. So I’m partnered with other people at Dreamstone Investments, and they’re working on things during the day while I’m at work, and then I can work on things at night when I’m not working.

Theo Hicks: It sounds like you guys are just working all the time. So on the–

Adam Ulrey: That wouldn’t be wrong… [laughter]

Theo Hicks: I just want to say, what time in the morning are you guys getting up, and then what time are you guys done working at the end of the day?

Kevin Galang: I wake up at around five or 6am, and that’s part of the routine. I’ll meditate, do some journaling, get some workout in, and that for me helps set the momentum, to allow me to figure out, “Alright–” Part of my journal, I kind of future-set, saying “This is what I will accomplish that day.” Then I execute according to that. But I also have the vision of how it connects to everything else. And as far as when I stop working, my girlfriend and I love to watch Jeopardy and compete with each other, so at [7:30] – I’m done by them.

Adam Ulrey: Nice. I also get up early, usually, sometime between six and [6:30] on most mornings. I have a morning routine as well. I use that SAVERS routine that Hal Elrod created in Miracle Morning; that really helps me stay focused during the day. And weekends, I work quite a bit, actually quite a lot.

In the evenings, it just kind of depends. I’m usually trying to wind down sometime around nine to 10 on most evenings. It just kind of depends on what’s going on. And Theo, I’ll say, I just consider this paying my dues. I didn’t learn about real estate investing until later in life. And I’m just trying to make up for lost time and get something going. I do not intend to go like this forever. But I just have to pay my dues right now. And then once things start to level out, I won’t be working like this.

Theo Hicks: I’ll just say really quickly, Kevin, I know someone – I think she won either two times or three times on Jeopardy.

Kevin Galang: Oh, you know her personally? That’s awesome. That’s so cool.

Adam Ulrey: That’s one way to create wealth.

Kevin Galang: Yeah. Exactly.

Adam Ulrey: Did she get some real estate with that earnings?

Theo Hicks: I don’t think so. I think she said that she won 60k, something like that. So anyway, so both of you have mentioned, and if you’re watching on YouTube, you can see the little emblem they have next to their heads – Tech Guys Who Invest, which is the podcast. So not only are you working full-time jobs and actively investing, but you’re also, as Adam kind of mentioned, doing other types of thought leadership things, maybe social media or podcasts. Maybe walk us through what all you’re doing in that realm for thought leadership, why you selected those, and then what benefits it’s having to your businesses.

Kevin Galang: So Tech Guys Who Invest was founded because Adam and I connected in a mastermind group and we realized we had great chemistry. We also realized that we both love educating people, and the Tech Guys Who Invest was just a natural title that we came up with, like, “Hey, you’re investing, you work in tech. We’re the tech guys who invest.” And it’s our way of really giving back and sharing information about how to take control of your financial journey, how to invest wisely and safely from the experienced advice of guests we bring on, the mistakes that we’re making, the wins that we have – we share all of that. We try to be as transparent as possible because if we can do it, we firmly believe that other people can as well.

Adam Ulrey: And we have found we just love this so much more than we thought. Part of the reason we did it is to not only educate people and give back in that way, but to attract people to us. They could be people that we would potentially invest with, or partner with in some way, or add value to. So we just wanted to do it for that reason. But it’s ended up becoming more than that. We actually just really love doing it now. We’re learning a ton, we’re having fun, it is attracting people to us, and it’s definitely paying back.

Theo Hicks: Do you guys do all of the bookings, the editing, the posting, the writing of the descriptions yourselves? Or is that outsourced to someone else?

Kevin Galang: So we’ve recently just started outsourcing the podcast editing and posting the show notes. And to Adams point, talking about systems, eventually we would love to graduate, to be “Alright, we recorded it; push it out to the team”, and that’s it. Because we love the podcast recording aspect, and the editing just kind of comes with it and it’s paying our dues.

And another point about systems is you need to understand how you want the system to run. A system isn’t just going to magically make your life better. You can get a system without figuring out how you want the system to operate and just end up with a really big problem. So now that we have the comfortability of almost two years of it, we can say, “Hey, this is how we want it to sound, please do X, Y, and Z,” to our editor.

Adam Ulrey: Yeah, we’ve got our processes down now. We understand them well enough to be able to standardize them and then outsource it at some point.

Theo Hicks: Are all the episodes with a guest, or sometimes just you two?

Kevin Galang: It’s a combination of both. We try to keep a cadence of an episode with a guest, an episode of us, and maybe two of us in a row, or two guests in a row. But we like to mix it up.

Theo Hicks: How do you find the guests?

Adam Ulrey: We like to find guests that mostly focus on real estate, but occasionally put in someone who’s just interesting or does something that not a lot of people know about. So an example is the guy we had on who invests in ETFs. He had started a gold fund in his past, and it was just super interesting. So every now and then we’ll throw someone like that in there, just to kind of share with people there are different things to think about when it comes to investing. And to answer your question about how do we find them – a lot of it is networking and just discovery, and then we’ll just reach out to them. We’ll just take action and invite them on.

Theo Hicks: Is it like an email, I’m assuming?

Kevin Galang: Exactly, yeah. Send an email, send them a Calendly link, that way we don’t have to go back and forth with “Oh, we’re free at this time. Are you free at this time?” “This is our updated calendar. If this works with your schedule, pick any time there.”

Theo Hicks: What’s the conversion rate you guys have? Is it most people say yes or most people say no? I’m just curious.

Kevin Galang: I would say most people do say yes. And I think that’s a cool thing about having a podcast, I think it’s a low barrier to entry. And selfishly, you can use it to learn from experts that are out there. So if anybody’s kind of on the fence of whether or not they should start a podcast, I would highly recommend it.

Adam Ulrey: Yeah, it’s been very rewarding. And we’ve had some people we reached out to you who are really popular, and we were not sure if they’d even respond to us, and they came on the show.

Kevin Galang: Yeah, the worst somebody says is no.

Theo Hicks: What was your best episode so far? In number of views.

Kevin Galang: For a while, the one with Gino Barbaro was one of our highest-performing ones. I have to double-check which else is out there. But that was a big one.

Adam Ulrey: Dave Van Horns was big too. His was…

Kevin Galang: Oh, yeah. Dave Van Horns was a high performing one as well.

Theo Hicks: I recognize both of those names, so good for you guys. Alright, starting with Kevin, and then going to Adam – what is your best real estate investing advice ever?

Kevin Galang: I would say you need to get focused. So figuring out your investor identity early is huge, because there’s a book out there, there’s an expert out there, there’s a podcast out there for every niche in real estate. And every niche in real estate can make money. But there’s a component I feel not a lot of people talk about, where you have to enjoy it. If you don’t enjoy investing in real estate, you might as well just continue to work your job because you’re going to burn yourself out so much faster by trying to grind everything out in an asset class you’re just absolutely miserable with. So get focused and figure out what you really want to do with your time and how you want to invest in real estate.

Adam Ulrey: Yeah, I love that, Kevin. And clarifying your goals is really important. So you focus on what is the right thing for you. That’s really important. Be honest with yourself about what those look like, so that what you’re working on is in alignment with what you really want to achieve deep down inside. But I think at the end of the day, taking action is super important. It’s one of the things that we see a lot of people just stall out on; they let themselves be held back by self-limiting beliefs or fears, and they get stuck in different modes like education forever, analysis paralysis… And at the end of the day, at some point, you have to take action.

Theo Hicks: Perfect. Okay, are you guys ready for the Best Ever lightning round?

Adam Ulrey: Oh, yeah.

Kevin Galang: Yes, sir.

Theo Hicks: Alrighty. Well, first, a quick word from our sponsor.

Break: [00:16:48][00:17:33]

Theo Hicks: Okay, so starting with Kevin and then Adam – what is the Best Ever book you recently read?

Kevin Galang: Best Ever book I’ve recently read… I would say, Can’t Break Me by David Goggins. I know it’s not real estate related, but it is one of those things that it shows you how capable you are as a person, and that mental shift that you need to make to continue to work even though you’re tired, it’s been a long day from your nine to five, but you know you have podcasts or record or something like that… That helps you really dig deep. So it’s not real estate related, but I really like that book.

Adam Ulrey: Also not real estate related, but I think it can be applied… Late Bloomers by Rich Karlgaard. Fantastic book, especially for people who are a little bit older, or think they’re too old to start this thing – read that book, it’s amazing. It explains that you’re not too old, no matter how old you are.

Theo Hicks: In Late Bloomers, I know one of the big examples people use of that would be the KFC guy. Do they talk about him in that book?

Kevin Galang: Right, Colonel Sanders.

Adam Ulrey: Yeah, he even talked about it in the book.

Theo Hicks: Yeah. I figured. Nice. If your business were to collapse today, what would you do next?

Kevin Galang: Podcasts all day. And that’s what I would turn into, I guess, a business. But the idea of being able to just connect with people in different areas of life, doing different things, being able to converse and share that story with the hopes of inspiring somebody else to take action and achieve their dreams – that to me is what would be really cool to do.

Adam Ulrey: That’s awesome.  I’m with you, podcasts all day. That would be great. Definitely learn from the experience. I’m a big inspect and adapt guy, continuously improve, I love to take feedback and learn from that. So I would learn from why did I fail, and take that, roll those lessons into my next venture. And I think it’s important to never give up. That’s super-important to be successful. It’s just don’t stop. So I wouldn’t stop.

Theo Hicks: Yeah, you guys both have the voice and a cadence for podcasting, so that could work.

Adam Ulrey: Appreciate that. Thank you.

Theo Hicks: Okay, what is the Best Ever deal you have done?

Kevin Galang: So one of the performing notes that I recently did, I was super happy about it because I had zero money in; almost negotiated an equity deal. And as a performing note goes, you wouldn’t write home about the amount of money you get, $50 a month from it… But the fact that I had no money in, and it was the first one that I did, I was really excited to do it. Because for me, the first one was the hardest one. Once you get over that hump, you’re like “Okay, proof of concept. I can do this. Let’s just keep taking swings of that bat and see where it goes.”

Adam Ulrey: Yeah, I feel like the mastermind class I invested in might be the answer, because I wouldn’t have met Kevin, I wouldn’t have the Tech Guys Who Invest podcast if I didn’t. And a lot of people don’t think about an investment in yourself is an investment, but I really think it is.

Real estate-wise, we bought a 56-unit Class B here in the Tampa Bay area. It was our second deal as Dreamstone Investment as it’s known today… And it’s a great one, because the class B properties have low delinquency. It’s really weathered this COVID storm very well, and the numbers are strong. It’s been low hassle due to the higher class of residents we have in there, so that’s been a fantastic deal.

Theo Hicks: What is the Best Ever way like to get back?

Kevin Galang: I would have to say the podcast, a great way to get back that I personally love and I’m passionate about it. But I’m always available if somebody wants to reach me and has a question. I won’t turn anybody down if you want to book a time on my calendar. So many people have done that for me, and I want to kind of pay forward in that regard. So being out there as a resource I think is one way that I give back.

Adam Ulrey: Tech Guys Who Invest podcasts for sure is one of my favorites. Sharing lessons learned with others, so they can grow and learn from my experiences. That’s awesome. And as kind of a follow-up, I volunteer with my daughters at Metropolitan Ministries, which is kind of like a homeless mission in the Tampa Bay area. It’s just really great to pass that along to them as something they’ll carry for the rest of their lives.

Kevin Galang: We also host a meetup – that was pre-COVID – where we would use the cash flow game to kind of educate people… And the look on people’s faces when they realize that “Wait, you can do that in real life?” Or “There’s no way people are doing what the game is teaching you in real life”, and having that look on their face of realization is so fulfilling.

Theo Hicks: And then lastly, what is the Best Ever place to reach you?

Kevin Galang: Come take a listen to Tech Guys Who Invest podcast. We share our experiences, wins losses, you get awesome guests on that show… And we have an investor identity canvas that we have created. And it came about because I jumped from various different asset classes – Airbnbs, mobile home parks, multi-family, house-hacking… I looked into all of those things for a few months at a time, but never really got focused. And I wish I had something like the canvas we created to help me narrow down that list. If you want to check that out, it’s canvas.tgwipodcast.com.

Adam Ulrey: Awesome. So dreamstoneinvest.com. You can email me, adam@dreamstoneinvest.com. Find me on LinkedIn, Adam Ulrey. As Kevin mentioned, tgwipodcast.com. You can email either one of us at techguyswhoinvest@gmail.com. And the canvas he mentioned, once again, it’s canvas.tgwipodcast.com.

Theo Hicks: Well, thank you so much for taking the time out of your busy, full-time, all-day-working schedules to talk to me for half an hour today. I really appreciate it. Just to kind of summarize some of what we talked about – we talked about how you guys are able to balance the full-time job and active investing… And it’s just a grind, and as you said, hustling, and automating, and prioritizing things.

You also both briefly went over what you guys do with each morning to prepare for your day. Specifically, Kevin said he’ll set a goal each day, and then everything he does kind of based off of that, and then Adam talked about the Sabres routine. You both talked about your thought leadership with the podcast, why you do it, how it’s benefited you, and then more tactics on how it’s done. And then the Best Ever advice from Kevin – I really liked when you talked about how in reality you can make money and be successful in really any niche. So just find out which one you like, because if you don’t like it, then just keep working, because you’re going to burn yourself out, as you said. And then Adam said kind of similar to the same thing, focus on what’s right for you,  be honest on what you’re good at, what you like as well. Then also you added taking action is also very important. And I couldn’t agree more.

So thank you both for joining me again today. Appreciate it. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Adam Ulrey: Thanks, Theo.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

Follow Me:  
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JF2330: Using Closet Space to Increase Net Operating Income With Jim Monk

Jim Monk is the founder of Clozzits which he started up after reviewing needs in the multi-family industry for optimized closet space. His goal is to differentiate beyond the normal amenities and tap into a new area of construction development, renovations, and property management. Jim has 2 years of experience in multifamily ownership with 623 units himself but his primary focus has been bringing superior closets to billion-dollar multifamily companies

Jim Monk Real Estate Background: 

  • Founder of Clozzits, Clozzits is dedicated to increasing NOI & overall asset value resulting in immediate rent increase at an average of 2-5% 
  • 2 years experience in multifamily ownership with 623 units 
  • His current focus is optimizing closet space for multifamily companies
  • Based in Dallas, TX
  • Say hi to him at: www.clozzits.com 
  • Best Ever Book: Blitz Scaling

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Trust your team” – Jim Monk


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks, and today I’ll be speaking with Jim Monk. Jim, how are you doing today?

Jim Monk: I’m doing great. How about yourself, Theo?

Theo Hicks: I am doing well, thanks for asking, and thank you for joining me. So a little bit about Jim — He’s the founder of CLOZZITS. And if you’re watching this on YouTube, you’ll see that he is in a closet right now. CLOZZITS is dedicated to increasing NOI and overall asset value, resulting in immediate rent increase of an average of 2-5%. He has two years of experience in multifamily, and he’s passively investing in 623-units. His current focus is on optimizing closet space for multifamily companies. He is based in Dallas, Texas, and his website is https://clozzits.com/.

So Jim, do you mind telling us more about your background and then what you’re focused on today?

Jim Monk: Absolutely. So first thing, I hope you and your family are all doing well, friends are all doing well with everything going on, coming from big D to you, as well as longtime listener, first-time caller. I love what you guys are doing.

Theo Hicks: Thank you.

Jim Monk: So a little background on myself and what we’re doing today – we are in the closet space. It’s not an area that a lot of individuals think about, especially multifamily owners think about, as a way to increase their revenue. But there are a lot of differences that are occurring, a lot of changes that are occurring in today’s marketplace, and I’m excited to share that with you guys a little further. So as you said, you want a little bit more about my background, is that right, Theo?

Theo Hicks: Yeah. And so when did you start CLOZZITS?

Jim Monk: So myself and a partner started CLOZZITS roughly about two years ago. The way we got started was, I was just exiting out of a company where I had turned that company around; the company had been around for 40 years, it was on a negative decline, and I was able to get [unintelligible [00:05:04].06] company, we grew very rapidly. So I’m all about hyper-growth, and that’s been my background.

So a little bit about my background, before we get a little more into where CLOZZITS is today. I came out of the financial services space, I’m what they would call a serial entrepreneur. So I, out of college, went to work for one of the largest insurance companies in the country, Farmers Insurance, rose through the ranks there. After about 7-8 years, I started getting the bug to start my own company, I exited and then [unintelligible [00:05:33].24] from my house to the time of the sale of the company that I had created [unintelligible [00:05:38].08]  we got to about 8000 employees, so about 300 million in revenue, and sold three months before the fall of Lehman Brothers in 2008. So I really dodged a bullet there.

Theo Hicks: Yeah.

Jim Monk: Really dodged a bullet. So I sold there and then went into a technology play, scaled that up, and again, sold to a Canadian-based company, and then moved into manufacturing. It was a calling from a small client of my previous company who said, “Hey, we’ve seen what you’ve done with your companies,. Can you come in and do something to ours?” I felt the challenge to go in there and take this family-owned business and turn it around. And as I exited that one, I was sitting down with a friend of mine, Steven Bolos, who if most of you are not familiar with, started a company called United renovations, which became KATERRA. It was acquired by KATERRA, which is a $5 billion company in the construction-renovation space. Steven has a massive background in the multifamily renovation business, doing tens of thousands of renovations. And as we were sitting there drinking coffee together and talking – and this happened about two and a half years ago, Theo – he had said, “You really need to figure out what your next play is going to be.” And I was looking at real estate as a passive investor, like you talked about, and I said, let me ask you a question, “What has not changed in the apartment space as it relates to renovations?” And he sat down and he thought about it long and hard, and he said, “Well, the problem you have today, that most REITs and others are having is, a lot of these properties if they’re not relatively new, they’ve been through 2-3 iterations of renovations. They’ve had the hard surfaces upgraded, they’ve had the appliances upgraded, the stainless steel, the floor has been upgraded, we’ve put paint on this… So we’re at a level right now where there’s not a lot that can be done.”

So I thought about it, and my question that I rephrased was, “What hasn’t changed in the apartment at all then?” And he said, “Well, the closet.” So we started researching that process of looking at the closet and said, “Okay, is there a way for this to make business sense to the ownership?” And that business sense needs to be how can I improve my NOI, and how can I increase my asset value in a way that makes business sense, one plus one equals two.

So as I told the story, we got into the manufacturing side. So CLOZZITS today is a manufacturer, an advanced closet system, that we can either sell direct to the multifamily industry, which we do, we can sell through contractors, which we do, or we’ll do a full turnkey solution to the company. And ultimately, what we’re doing is we’re going in and we’re doing these either make-readies or renovation turns, or [unintelligible [00:08:22].02] new construction, and we’re showing a immediate impact to the NOI with what we consider – which is right behind me – a furniture grade quality product that is reasonably priced to make business sense. So as you mentioned, we’re seeing a 2-5% rent increase, we’re seeing our average customer today, after COVID here, post-COVID, at a 37% ROI, and usually they’re breaking even after a 3rd or 4th year of the product being installed.

Theo Hicks: You said 37% ROI is typically what it is?

Jim Monk: That is correct.

Theo Hicks: Okay. So are you typically installing these closets into — would it be existing homes, or is it mostly you’re getting in on the front end with a developer, and then having them planned into the development, or both?

Jim Monk: Great question. It’s both. We didn’t approach the developer space first, because really, that’s only about 5-8% of the marketplace with new developments. What we were looking at was the existing 90-95% of the market space and saying, “How can we go on there and do this in a way where you can do it on the make-readies as says residents are leaving? Or how can you as an owner do this as an ability to do a lease-up?” So we talked to companies like UDR, Alliance Residential, the Harbor Group… Big companies. Pinnacle, on the management company side, with their executive team, and we said, “We’re going to beta test this out. And so what do you need to see?” And for them, it was all about the economics of it, and they wanted to look at it both from how do we do this to our existing, and how do we do it in the new development side of things?

So their original focus was on existing, and how to kind of rip out, tear out very quickly, and so within a three hour period, you go from a wire rack or MDF to what you see behind me today, which is a high-quality product that allows that ownership of that property to now have something unique and something that people are willing to pay for. That’s the thing that we keep talking about, is that the numbers are there, we have multiple case studies that talk about this, that today’s residents want resort amenities, they’re willing to pay for those resort amenities, and they’re looking for ways to have additional space options. Because let’s be truthful on this, we all want to accumulate. Unfortunately, we all wanna accumulate, and especially after COVID here, a lot of people are staying in place, they’re working from home now and they’re really focusing on what can I do in the square footage that I live in to be more of a home?

Theo Hicks: Yeah, exactly. So if I have an existing property, how do I know if my existing closet is big enough? Or when I go into closets, there’s an array, and I say “My closet is this big.” But if my closet is really, really tiny, do you have options for super-tiny closets, or does it need to be a certain size already?

Jim Monk: Again, good question. So typically, what we’ll do is, being a guy that is focused on the numbers myself, I always ask the client or that prospective property owner, “What are you trying to achieve here?” And a lot of times, we’re trying to guide them to say, “I’m trying to get a rent increase first off,” and our very first question is, “Can you get to a minimum of a $20 to $25 rent increase on a monthly basis?” And the reason being is, we’ve found that that break-even based on our installation cost and overall cost of putting the product in is about $20 a month. So anything above and beyond that is where our clients benefit immediately, they’re cashflowing immediately off of our installation.

So what we’ll do is we’ll say, “send us your designs, as far as your layouts or floor plans, we will for free do the design and layout of it and show you what the cost is going to be for each of those designs.” And then the question we do—we have a whole calculator that we built out, which goes into here’s what the investment is, from the investment of the closet system here’s your cap rate on the property, here is what a rent increase would look like at $20, $21, $22 and so on… And what we’re calculating out is, here’s what the ROI would be and really what the asset value is going to be if there’s an exit. Because at least our experience has been that you have two different types of ownership; you have the ones that are really wanting to hold for the long term, and those who are wanting to keep for the short term. And depending on that approach and strategy, they’re really looking at the numbers a little differently. So if you’re looking for the more immediate, for that NOI, to see the rent increase, then here’s what that means to you from an ROI perspective. And oh, by the way, if you’re looking at the asset value as an exit, later down the road, then here’s what that means to you if you’re able to support those numbers.

Theo Hicks: Perfect. So I send you my closet size, and then you’ll send back a report with some designs and then a rundown of the costs and the ROI, and then the potential exit value based off of whatever the cap rate is?

Jim Monk: Correct. And we’re just using real numbers here; we just say, “Look, this has got to make business sense to you guys.” So what we will then do is say — we can do one or two things, and a lot of our clients started out with a beta test. So they’ll beta test it and take 20-units or 30-units and they’ll say, “Let’s see if we can get supported rents on that.” And then what’s the amazing part about this, Theo, that I really like to see, is when the client calls us back and says “Hey, not only is it working, but oh, by the way, I’m here ready to purchase more properties,” or “I need to put this in my existing other portfolio of properties.” And they’re either working with asset management, or working with operations… And then again, we sit down and say, “How do you want us to support you? Do you want us to support you by installing and doing full turnkey with you? Do you want us to teach your staff, your maintenance team on how to install this directly?” We have both English and Spanish instructions and videos so that we can teach the maintenance teams. And if not that, we can work with your GC directly; we can work with whoever your GC is, and we’ll do the designs, we’ll ship them the product and they can do the installation, during a renovation or a new build.

Theo Hicks: So you mentioned that I would need to see an increase of about $20 to $25 per month, so that’s to cover the cost, right? And anything above that would be a return?

Jim Monk: That’s correct. So some of the things that we’ve done that’s very unique in the industry as a whole, especially after post-COVID, what we recognized, Theo, was – obviously, everyone’s being impacted right now. So what we came out and looked at was twofold. If they’re a large enough company – and right now, all of our clients, and one of the reasons why we’re doing podcasts like this, is to talk to those groups that are not in the current client base. Our current client base, most of them have portfolios over $4 billion, so they’re really large; 50,000 or 100,000 units. A bunch of [00:14:57].22] people that have 500, 1000, 3000 or 4000 units that this applies to. And the nice part is that we say, “Look, you can turn to a number of companies and we can show you those companies and what they’re doing.” They’ve crunched the numbers down to a point that it makes sense.

But one of the things that we launched was a beta test that we’re working through right now, which is where we will finance the deals personally. As a company, we will finance the deals for 4 years. Now, why would we do that? You have those portfolio of companies that say, “Look, I don’t have the budget for this. I love the idea and I want to do it. But I don’t want to wait for a cap-ex. So what do I do?” So what we said was, let’s try to start working with partners and working step in step with them to finance them. We’re now beta testing with some very large companies out there, but we’re open to conversations with others as well, if it makes sense; it has to make sense.

But then on the other side of that, we can sell them just the raw materials. And so if we just sold the raw materials, that $20 break right there – that’s for us a full turnkey. If we’re talking just the raw materials, at about $16 a month in rent increase, they’re at a break-even stance, if they’re using their own labor, so we’ve seen.

Theo Hicks: Okay. So do you guys do the rent comp analysis? In your report, will you say that “Here’s how we know how much you’ll get in rent increase”? Or is that something that me, the operator, will have to do on my end? The reason I’m asking this is because I want to know if this type of closet is in demand nationwide, across all asset classes for multifamily, or is it specific to class-A in big Metro markets? Where are your clients located? Can you do this everywhere, or do I need to be in a certain spot?

Jim Monk: So pre-COVID – and I’ll talk about the post-COVID  here for a minute… You know, it has been a big impact on, again, our business, and everyone else’s too. Pre-COVID, what we found is – and we still find this to be the case – it’s almost a no-brainer at the A-class. At the A-class, they’re able to get the rent increases. At the B, it really depends on the B-class and what they’re trying to do, or where they want to spend their dollars, again, on the renovation. But we have, I would say — if I had to look at it, A’s, we are probably very dominant in. B’s are secondary. But we have been able to get the numbers to make sense in the B-class. And really the B-class is where we started, because if we can make it work in the B, we can definitely make it work in the A. So those are the two classes that I would say it definitely makes sense to have a conversation on.

What I would tell you is pre-COVID, we were doing a tremendous amount of business on the east-west coast, through major metros, down to what I consider your secondary markets, like Saint Paul, Minnesota, we’ve done work in Seattle, New York, New Jersey, Florida… Some of these markets, post-COVID now, have definitely slowed down or have been in lockdown. So one of the things I would say is – and I think your audience would agree – that you don’t want necessarily contractors coming in and potentially impacting their residents or exposing their residents to things.

So some of these markets where it’s been on heavy lockdown, it’s slowed down, but we fully expect you to open back up. And yes, the major metros are where we see the most demand, because there’s so much more competition. And one of the things that we try to teach and educate on is that instead of giving up concessions — like here in Dallas, it’s very competitive here. And so a lot of the ownership – they are giving major concessions, in my opinion; instead of giving them concessions that are going to burn off, why not look at something that’s going to increase the asset value, stay there and be there permanently on the property?

So one of the things that our clients have done is that, we’ll upgrade your closet at no cost to you or at a nominal cost to you, or they’ll do it on the lease-up. So that’s a strategy that they’re taking in these competitive marketplaces, to not only differentiate, but retain the client base.

Theo Hicks: And then last question before the money question. I think you mentioned this already. You said, this takes 3 hours to install?

Jim Monk: Correct. It’s a no cut product. So literally, we could go sell this product right now in the retail space. And we’ve had a couple major retailers approach us on it. That’s not what we designed this for. This product was originally designed from the ground floor up as being a multifamily – that includes senior living, student housing, even large REITs that have single-family homes, groups like Tricon and so forth, are coming out to us, because they own a number of doors… So it’s a product that can be installed. If [unintelligible [00:19:21].06] they’re installing about 20-units a day a team of two; it’s amazing. You know, but they do this day in and day out. So we’d always say about 3 hours is what the average would take for someone that’s a novice at it.

Theo Hicks: Alright, Jim, what is your best real estate investing advice ever?

Jim Monk: Well, as a passive investor, it’s not rocket science… I’m not in the business on a daily basis, so what I tend to do is lean on those who are experts… So leaning on business partners that are in real estate business, that have what I call a track record that I can vet out. Working with my legal team, my accounting team – it is really critical, especially if you’re a passive investor that’s not in the day to day as to what’s going on in the market today, is that I lean on my team, and making sure that they’re vetted out and that I can trust them. That trust is majorly important to me. And being able to depend on them to give me sound wisdom and guidance, so that I can make decisions and place my money where it needs to be.

So the best advice that I can give, especially if you’re a passive investor and not in it on a daily basis, is trust your team, but make sure you vet them out, make sure that you’re sitting there and talking to them… If they give you references, call the references. At the end of the day, I feel that I’m a protector of my money, and so whoever I’m going to trust to put my money to work for me, they need to be vetted, they need to be trusted, especially in today’s marketplace.

Theo Hicks: 100%. Alright, Jim, are you ready for the best ever lightning round?

Jim Monk: Absolutely. Throw it at me.

Theo Hicks: Alright.

Break: [00:20:47] to [00:21:33]

Theo Hicks: Okay, Jim, what is the best ever book you’ve recently read?

Jim Monk: Blitzscaling by Reid Hoffman; he’s the co-founder of LinkedIn, if you’ve never heard of him. He’s also one of the original founding executives for PayPal. He’s in Silicon Valley, amazing guy. But Blitzscaling is all about taking and doing beta testing, test, test test, and then scaling it up as quickly as you can in a very informed way, but making sure that you’re doing it with numbers versus just pure emotion.

A lot of times we go off emotion, especially as an entrepreneur like myself; it’s all about doing it in a formula, in a way that allows you to scale quickly. As I told you before, CLOZZITS is two years in the business and we’re already nationwide, so we’re moving fast, and I have to say Blitzscaling is one of those books that have helped entrepreneurs out a lot.

Theo Hicks: If your business were to collapse today, no one wanted closets anymore for some reason, what would you do next?

Jim Monk: Well, first off, it’s not going to, I’m confident of that… But if it were to, for myself, there’s two things that I’m pulled into. One is I love companies that are growing, that have a growth strategy. So you would find me in executive operations for another company that is looking to try to grow and scale in a very unique way; as I like to call it, disruptor. That’s why I look at CLOZZITS as we’re a disruptor. We’re really in the business of getting ownership to make more money. But I would be working there, and I’d also be working with startup founders. There’s a lot of millennials out there, Theo, that do not have necessarily the guidance or the tools; I’d love to help out and that’s one of the things I’m working on, is helping them out and seeing how they can grow their vision and their ideas.

Theo Hicks: What is the best ever way you like to give back?

Jim Monk: So there are three charities that we’re heavily involved in, not only in CLOZZITS, but also with myself personally. Actually, in our offices here, there’s two of them, literally in our offices here. That’s how committed we are. One of them’s called Living for Zachary. And Living for Zachary is a local – it’s now a national – group out of Dallas, Texas, and it’s focused on defibrillators for at-risk kids who do not know they’re at risk, for athletes and so forth. There’s a lot of sudden cardiac arrest that occurs on the field or when they’re practicing, and this is a way to give free defibrillators to schools in case a certain cardiac event happens.

The other one is called Ring of Hope; it’s an at-risk boxing ring. We have three of them here in the Dallas area, we’re getting ready [unintelligible [00:23:58].00] to Detroit and a couple of other areas, and it’s to bring inner-city kids in to teach them the gospel, but also to teach them how to really focus on education. I’m first-generation, Theo, a high school graduate, college graduate, and I’m a major proponent of education… So getting these kids into school and out of the inner city or areas where they’re at risk to get into drugs or violence is critically important. So Ring of Hope is the other one.

And then the last one is Catholic Charities, but that’s tied to my faith and focusing on Catholic Charities.

Theo Hicks: One last question. So are you actually in a closet right now or is that just–

Jim Monk: No.

Theo Hicks: — a back wall.

Jim Monk: Aactually, if I go over right now, I can literally touch this product right now. This is a closet system. These are the shoes, but I can tell you, Theo, this one’s actually about 12 foot long. It’s a long one here. Our product is a three quarter inch plywood. Our product is not particle wood, it’s not a cheap product. It’s a melamine-based product. We’ve got three plans [unintelligible [00:24:57].00] so we’re very proud to show it off. So we actually have clients that come in all the time. This is not my office, this is our conference room,–

Theo Hicks: It’s a conference room. Okay.

Jim Monk: –but when they come in, they go, “Wow, that’s really amazing,” and they can see and touch it and go, “Yeah, people would pay for this.” So people ask us all the time on calls, “Is that real?”

Theo Hicks: Well, I was asking if you [unintelligible [00:25:18].18] because there’s one other person I’ve interviewed before who was actually in their closet, and so I was like, “Oh, he’s in his closet. That’s interesting.” But I now it makes a lot more sense.

Jim Monk: I will turn it so you get to see the whole thing.

Theo Hicks: There you go.

Jim Monk: It goes all the way down. I’m very proud of this; it’s a floating system, so it floats. I actually have drawers in it, so it becomes a furniture, great product. So for a lot of those A-class properties, they want something like this because a lot of them don’t have space for the furniture. You see the top right there… So it actually becomes a lot more shelving. So it’s something that I love, and I think a lot of our folks are. You know, I always tell people, and I’ll show them real quick. When you got wire racking here, or this, I can tell you right now, that’s going to get a rent increase over this; and this is what we see most often [unintelligible [00:26:03].21]

Theo Hicks: Alright, Jim. Well, thanks for joining me; it’s been very fascinating. I’ll definitely look into it some more. Make sure you check out his website, https://clozzits.com. It talks about really the benefits and advantages of focusing on the closet space at your existing properties in order to get a rent increase, which will ultimately result in a higher ROI and a higher property value.

And then something else you also mentioned that was interesting was if you’re in a really competitive market, rather than offering some sort of rent concession, like you’ll have a reduced monthly rent, or something that you mentioned that burns off over time, you can give them a free closet that obviously they will get it for free, but then the next person moves in, and you’ll be able to realize that gain, plus you’ll be able to get someone in there, reduce your vacancy, reduce your loss to lease, everything like that.

So again, Jim, I really appreciate it. Thank you for joining us. Best Ever listeners, as always, thank you for listening, have a best ever day and we’ll talk to you tomorrow.

Jim Monk: Thanks, Theo. Have a great one. Stay healthy.

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JF2329: Money Saving Lessons With Jack Miller #SkillsetSunday

Jack is the president and founder of Gelt Financial Corporation and has experience in buying and financing over 10,000 properties and today he wants to share with you all the lessons you must learn to save yourself money in buying or selling properties. Jack was a previous guest on episode JF1675 so be sure to go check his previous episode out when you have time.

Jack Miller Real Estate Background:

  • President and Founder of Gelt Financial Corporation
  • Since founding Gelt, has made over 10,000 loans in excess of $1 billion
  • A previous guest on episode JF1675
  • Based in Boca Raton, FL
  • Say hi to him at www.geltfinancial.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“You don’t have to do that many good deals to make a fantastic living, so focus on the best deals” – Jack Miller


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. And first off, hope we’re having a Best Ever weekend. It is Sunday, and because it’s Sunday, we’ve got a special segment for you called Skillset Sunday. You knew that was coming, right? Because you’re a loyal listener, and that’s what we do on most Sundays.

With us today, we’ve got a guest who has made over 10,000 loans in excess of a billion dollars, and has also purchased a lot of properties. He’s the president and founder of Gelt Financial Corporation, and he’s going to talk about some lessons he’s learned along the way that will help you build your real estate portfolio the right way. With us today, Jack Miller. How are you doing, Jack?

Jack Miller: Excellent, Joe. How are you?

Joe Fairless: I’m doing excellent as well, thanks for asking. So, let’s get right into it. What’s the first lesson we should talk about that you’ve learned based off of your experience, that you see real estate investors do, or shouldn’t do, or should do more of?

Jack Miller: So the first lesson is you don’t have to do that many good deals to make a fantastic living, and to really become wealthy. But a lot of people want to do all the deals. So we see a lot of both as lenders and as buyers, you really need to be selective with the deals. So my first lesson is, don’t do a lot of deals, but focus on good deals.

Joe Fairless: That can ring true with some people who have fear of missing out. Because I’ve heard similar advice, but the exact opposite, where it’s don’t wait for the perfect deal, just get in there and do a deal, take action. What would you say to that?

Jack Miller: I would say whoever gives that advice isn’t there when things fall apart. The reality is there are a lot of people talking about how much money they make in real estate when things go good. But there’s a lot of deals that don’t go good and they end in total disaster. It’s sort of like people walking out of the casino, you always hear about the winners, but you don’t hear about the losers. So my biggest advice to people would be, learn to say no. Say no more often than you say yes. I would say approach this with precision, and absolutely don’t do deals that you don’t think are perfectly aligned. Because if it goes bad, you can do eight or nine good deals, and if you have one deal that goes bad, that can tank you and leave unbelievable damage to you, your credit, and your future ability to transact.

Joe Fairless: What’s the next lesson?

Jack Miller: I would say don’t fall in love with the deal. A lot of people fall in love with the deal, they fall in love with doing deals, and they put good logic to the side. You need to approach it from a business point of view. The deal is not going to love you, so don’t love the deal. So approach it very analytical, with your comparables be conservative… You see people and they’re too optimistic with their estimate on repairs, or too optimistic on their hold time, or too optimistic on what they’re going to sell it for… I would say, approach it from a pessimistic point of view, and if it works as a pessimistic point of view, the deal will surely work. Again, I don’t want you to think I’m a pessimist. I’m the ultimate optimist. But if everything works and you’re conservative, it’ll surely work when you’re optimistic.

Joe Fairless: Don’t love the deal, because the deal won’t love you. I love that.

Jack Miller: There’s no love back.

Joe Fairless: There’s no love back. No reciprocity at all.

Jack Miller: No reciprocity. The deal will suck up your money, and destroy you, and cause you sleepless nights like you wouldn’t believe.

Joe Fairless: What’s the next lesson?

Jack Miller: More people and companies die from indigestion than starvation. So what we see a lot is somebody will do one or two or three deals, they’ll make a good amount of money, and then instead of doing one or two or three at a time, all of a sudden they’re doing five deals at once. And that’s the wrong approach; I would say take it slow, do one deal, get it done, do another… Again, more people and more companies die of indigestion by growing too fast, than of starvation.

Joe Fairless: So, I imagine you see that a lot from the lending standpoint?

Jack Miller: Yes.

Joe Fairless: So tell us an example or two with as specific as you can get or remember about that.

Jack Miller: Over the past 30 years I’ve really had the privilege to work with some much more talented people than me. And I’ve seen time and time again, we have tremendous talent, tremendous well intent, and tremendous knowledge, and they over-expand. They’ll do one deal, they’ll do two deals, and they think they’re the best thing since sliced bread.

And all of a sudden they have four properties under agreement of sale. And inevitably, something happens that will tank them. It could be something like the coronavirus, it could be an economic meltdown, or it could be just the deals. You can’t do too many things at once. It’s just hard. It takes time to build up that infrastructure.

Joe Fairless: What’s the next lesson?

Jack Miller: A deal of a lifetime comes about every day. I hear all the time, “Oh, this is the best deal in the world. This is the deal of the lifetime.” I literally hear that just about every day from somebody. The reality is if you’re in there, you’re going to always find a good deal. And they’re all sort of interrelated, because people think “Oh, this is such a great deal. I can’t say no.” They fall in love with the idea of it. So with that comes the same thing as people are over-expanding. In order to do a deal, the deal has to be perfect, but your timing has to be perfect, too. You have to have the mental focus to be able to do the deal, the financial wherewithal to be able to do the deal, if something goes wrong. So again, don’t fall into that “This is a deal of a lifetime.” Because if you’re out there looking, they will come all the time. If you’re at home, sitting on your sofa playing video games, they’re not going to come all the time. But if you’re out there in the mix, they’ll be in there with you.

Joe Fairless: The first four lessons all relate to slowing down, be conservative about how you’re running the numbers, and make sure that you are not growing too fast. This seems like a consistent theme.

Jack Miller: Yes, it is, because that’s how I see people blow up. They want to do so much, because it’s so exciting and so energetic, it’s like a drug. But I see the need to slow down, they need to be more conservative. And those are really the same philosophies, by the way, that if you would read a book about Warren Buffett, or listen to him, he basically says the same thing. He says learn to say no. If you say no more, you’ll be better off. Because I’ve seen, and I see all the time, we have tremendously talented people who will explode and implode because they’re doing too much, or they’ve made the wrong decision.

Joe Fairless: What’s the next lesson?

Jack Miller: The devil’s in the details. We see all the time where people — especially now with the internet where you can be in one part of the country and see a property virtually in another part of the country. You could be in Texas and buy something in Des Moines, Iowa. And if you depend on other people to do the due diligence, usually something goes wrong. So my next one is, the devil is in the details. You need to understand the deal from every aspect. If the property needs work, how much work does it need? Don’t just take the realtor’s word that “Oh, he got you a contract.” Or how did you hear? He says ‘”Oh, the realtor got me a contract [unintelligible [00:10:33].26]” Or check-in with the township to make sure that you don’t need permits, or you do need permits. Factor it in.

A common mistake is when people buy properties, in some cities the real estate taxes are reassessed based on a sale. So a sale triggers it. So I see all the time the taxes are based on, let’s say $100,000 value, and someone’s buying something for 300,000, but they’re underwriting the deals based on the $100,000 taxes. They don’t realize that as soon as that deed’s recorded, the city’s going to triple the taxes. So it comes down to do your due diligence, know every aspect of the deal, again, from the buy, from the due diligence, from the contracting, from a zoning perspective, from a potential tenant perspective, read all the ordinances, read the leases…

I see it all the time where in a lease, a lot of times in commercial property, a prospective borrower, all they’ll read is the dollar amount the tenant’s paying and the lease term, but they don’t realize there’s co-tenancy clauses in there or other clauses that the tenant can leave for different reasons. So again, it comes to the devil is always in the details. That’s critical. You have to know these deals inside out and don’t depend on somebody else. It’s very easy to depend on someone else to do the due diligence; but you can almost bet that whoever you’re depending on is going to be long gone when the poopoo hits the fan.

Joe Fairless: Co-tenancy clause, for anyone who’s not familiar with it – will you elaborate on why that could be an issue?

Jack Miller: So co-tenancy is common in commercial real estate, it’s very common in retail. So what a co-tenancy means is, let’s say you have a shopping center, and you have a major supermarket in there, and you have five or six other little stores who are anchors. Those stores may come in and say “Hey, we’ll be a tenant as long as that supermarket’s there. But if that supermarket leaves, we could leave, too.” So a co-tenancy clause has to do with the tenancy of somebody else’s. And you see that a lot, especially now with Corona, with big stores going out of business. You have not only the big stores go out of business; if you have a co-tenancy in your lease, you could see the smaller stores leave or pay reduced rents. So you need to understand co-tenancy, and you need to understand if it’s in your leases.

Joe Fairless: Oh, absolutely. That could torpedo a deal quickly, and that could also bring in novice investors to buy a property who they think they’re getting a good discount, but in reality, they’re not getting a discount at all, because there’s no income that’s going to be happening in about three months after they buy it, because all the tenants are going to leave.

Jack Miller: People think I’m crazy, but I actually love reading leases; and they’re boring as could be, but you know what? I find it fascinating, and I tell buyers that you need to understand every clause in the lease… Because there’s a lot of times good clauses too, that you don’t understand. And it’s that way with every part of the deal – you have to really understand the deal. And again, don’t depend on somebody else to have your best interests at heart, because usually they don’t; they have their best interests at heart.

Joe Fairless: Lesson number six.

Jack Miller: Lesson number six really comes down to — I call it the three main parts of the deal. You think about every deal, I divided it into three parts. It’s the purchase, and maybe the fix-up if it’s a fix-up, it’s the management, and it’s the sale of it. And you have to really be an expert at all three parts. Again, if it’s not a fix up, it’s the purchase, and the leasing, and the management, and the sale. But we’ve seen so many people over the years who are really experts at one or two, but they’re not good at the third one, and the whole thing blows apart. Years ago – and I’m going back 20 years – there was one of the best buyers I’ve ever seen in the real estate business in Philadelphia. I’m going to call him Joe; that’s not his name.

Joe Fairless: Hey.

Jack Miller: He must have owned 100 or 200 properties, all in a prime section, and he bought them all for 30, 40 cents on the dollar. He was literally one of the best negotiators, and this guy could sniff out deals. Unbelievable. We have provided him financing, because every deal he bought was really a great deal. What I quickly learned was that this guy was a lousy manager. He couldn’t manage the property. He couldn’t deal with the tenants in the repairs. And he unfortunately had, I’m guessing 150, 200, properties, maybe 100 properties, all beautiful properties; he ultimately lost them all, and gone out of the business because he wasn’t good at the middle part, the managing and dealing with the tenants part. And he wasn’t good at selling them, because he could never sell them, because he always thought it was worth five times what the market would bring.

So he was one of the most masterful buyers of properties I ever saw, but he really wasn’t good at the other two things, and ultimately that was his downfall. So what I call the three main parts of the deal – we all can’t be good at different things, I’m lousy at a lot of things, but you have to know what you’re good and what you’re lousy at, or not as good, and outsource that, find a good property manager, find a partner who’s great at the things you’re bad at.

Joe Fairless: We’ve got time for one more. What’s one more lesson that you’ve learned?

Jack Miller: Think long term. What encompasses that is the power of compounding. When we do a deal, we think on a 10, or 15, or 20, or 30-year horizon. A lot of people are thinking six months and a year. And I think that’s the wrong approach. I think people who want to get rich quick, they tend to implode pretty quick. I have a sign on my door, it says “Get rich slow.”

Joe Fairless: What about the business models where it’s a value-add deal and you’re looking to exit out after five years?

Jack Miller: Nothing wrong with that. We’re in the middle of doing a deal now. As a buyer, we think we’re going to exit out within six to nine months. But sometimes you can’t. And you have to be prepared for the long haul. Corona is a perfect example of it, nobody could have predicted it before it happened.

Joe Fairless: On that six to nine-month projected exit, what specifically do you do or how do you approach, thinking long term, since you’re projecting that short of an exit?

Jack Miller: A few things. One, we stress test it instead of selling it. If we rent it out, how’s that going to look? And can we rent it out? Is our financing or our capital stack prepared for a long term hold, as opposed to a short term hold? Do we have the cash to be able to hold it if it doesn’t sell right away?

So I think it’s just looking at the deal from a 360 degree and saying “Okay, if I can’t sell it for what I want to sell it or what I need to sell it at, am I okay holding?”

Joe Fairless: Very, very helpful. How can the Best Ever listeners learn more about what you and your team are doing, Jack?

Jack Miller: You can go to geltfinancial.com. That’s the easiest way. We have a YouTube channel, it’s Gelt Financial. And just check us out on social media.

Joe Fairless: We ended up with seven lessons that you’ve learned from your experience, and I’m grateful that you shared them. Certainly, be conservative, continue to be methodical about the acquisition process, and make sure that you have experts on your team to address each of the areas of the deal throughout its lifecycle. The acquisition, the management, the sale process of it… And to stress test deals to make sure that even if you are projecting, in your case, a six to nine-month exit, or a five-year exit, or some other exit, it doesn’t matter, look at the scenarios where if that doesn’t take place, what will you do? And do you have enough money to withstand that? And is there financing in place that will allow that? If not, what would be your plan for acquiring that during the ownership periods?

So thanks for being on the show, Jack. I really appreciate it. Hope you have a Best Ever weekend and talk to you soon.

Jack Miller: My pleasure. Have a great day.

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JF2322: Social Entrepreneur With Matthew Ryan #SkillsetSunday

Matthew Ryan is a social entrepreneur, founder of Re-viv, which addresses the market inefficiencies in community revitalization efforts. Matthew was on the show before on episode JF1593 so be sure to go and check it out to learn more about his background. Today Matthew will be diving into “the what, why, and how of co-living”.

Matthew Ryan  Real Estate Background: 

  • A social entrepreneur, founder of Re-viv, which addresses the market inefficiencies in community revitalization efforts
  • Primarily focuses on the multifamily value-add and development space in distressed areas
  • A previous guest on episode JF1593
  • Based in San Francisco, CA
  • Say hi to him at www.re-viv.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“The best way to think about co-living is monetizing an existing market” – Matthew Ryan


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today we’ll be speaking with Matthew Ryan. Matthew, how are you doing today?

Matthew Ryan: Doing great. How about you, Theo?

Theo Hicks: I am well, thanks for asking, and thanks for joining us again. So Matthew was previously interviewed by Joe on episode 1593, so make sure you check that out to learn more about his background. Today is Sunday, so it’s skillset Sunday. We’re going to talk about a specific skill that Matthew is focusing on and how you can apply that to your business… And that is going to be co-living.

Before that a little bit about Matthew. He is a social entrepreneur, founder of Re-viv which addresses the market inefficiencies in community revitalization efforts. His focus is on multifamily value-add, multifamily co-living now, as well as the development space in distressed areas. As I mentioned, the previous episode is Episode 1593. He is based in San Francisco and the website is Re-viv.com.

So Matthew, before we get into talking about co-living, could you tell us just a little bit more about your background and then what you’ve been up to since we last had you on the show?

Matthew Ryan: Yeah. So my background was in the energy efficiency in green building space, specifically focusing on how we can make residential and commercial buildings more efficient. Back when I started the business in 2010, this was a blossoming industry. I ended up taking that skillset that I learned, the kind of comprehensive knowledge of building science and how we can build more efficient and advanced structures and dovetailed that into community revitalization and essentially value-add investing and development.

Theo Hicks: And then now you’re doing the co-living, right? That’s your focus now.

Matthew Ryan: Yeah. Yeah. [unintelligible [00:05:01].09] did the last episode, just to let the listeners know. So we were talking about opportunity zones back then, and that was actually around that time that we’ve launched our opportunity zone fund. And the primary focus was co-living, was to kind of overlay this blossoming industry with this now extremely advantageous tax deferral strategy with opp zones. So we launched our fund, we raised about a million and two million in capital in the early part of 2019. I spent the rest of the half of the year trying to place that capital, and got a little tripped up; we had a lot of difficulties. As everyone knows, we were very much at the top of the cycle, but here we are, back at it again.

Theo Hicks: So I’d never heard of co-living applied to real estate before. This will be very new to me, which is going to be good. I can ask you questions as a complete noob. So you said that the strategy is the using of opportunity zone funds, and then the properties that are developed, those will be co-living spaces, or are these two separate things?

Matthew Ryan: Yes, you hit the nail on the head. And then the as you know, with opportunity zones, the majority of opportunity zone investments are developments. We started in the value-add space, so we’ve kind of created a hybrid, looking at adaptive reuse, converting empty warehouses and districts in Oakland and Berkeley that can be converted into co-working, as well as co-living. And then also taking a single-family home in an empty duplex, triplex, quadplex, and utilizing the existing zoning. We’re looking at lot sizes that are much larger, where there’s available footprint and expansion. And in the early part of 2019, there was also an advancement in California law that allowed us to add up to two ADUs.

Theo Hicks: What’s ADU?

Matthew Ryan: An ADU is an accessory dwelling unit. So it’s a granny flat. So what it’s allowed us to do is basically take, say, a traditional 2000 square foot home that they had three to four bedrooms, right? And expand the footprint of that building up to 4000 square feet, and getting it up to 12 bedrooms. So we’re actually increasing the density between 200% to 300%. And in the context of what co-living is, and I know you want to touch on that, think of it as college-educated 22 to 35-year-olds who are struggling to find an affordable place to live, but they want to live close to a major metro where the high-paying jobs are. Sounds familiar? I’m sure some of us have experienced it or we’ve had friends who have experienced it.

And you know, what’s traditionally happened is those roommates had been bunking up in three and five-bedroom homes, splitting the rent… But then you’ve gotta figure out how you’re going to furnish it, how you’re going to split the utility bills, who’s going to clean the toilets, who’s responsible for the dirty dishes… So the best way to think about co-living is it’s monetizing an already existing marketplace. We call it the Craigslist marketplace, right? Apartments.com and so on and so forth. And it’s really just kind of capitalizing on this roommate situation, but adding degrees of efficiency.

So someone wants to rent a room, they don’t have to worry about getting a bunch of roommates together, putting a big deposit down, and taking that risk. They can simply hop on their smartphone, go to some of these co-living platforms, and look and see what inventory they have available, schedule a viewing, go and meet the roommates, and plug right in.

So it’s a turnkey strategy for people who are new to a city, again, looking for an affordable place to live. They want to be in these desirable areas, but they’re really struggling to find a place. And that’s the simplest way to break it down. There are all different shapes and sizes of co-living developments now. Developers are now integrating them into their mid-rise to high-rise developments. But that’s really the best way I can describe it. And then, of course, you’re sharing furnished areas and common spaces. So it’s not like a true apartment. But it’s really for those people who want an affordable place to live. The typical rents in a co-living are anywhere between 15% to 25% below the market rate and rent of a studio.

Theo Hicks: Okay, so let’s start from the beginning. So if I’m a developer, and I want to develop a multi-family building, with co-living… So do I need to develop a different unit for co-living? Or is it the same unit as before?

Matthew Ryan: Typically, you’re going to see a higher bedroom count. So the traditional multi-family developer, he’d have a one to three-bedroom unit. And if they’re set up in the development space, they’re set up as pods, right? So anywhere between four to six bedrooms, sharing a large common space. So you’re seeing a little bit bigger footprint, which you traditionally didn’t see, and a little bit more sharing of common space in lieu of that, where sometimes you’re using an old Victorian or an old house that had crammed up common spaces. These guys are actually expanding common spaces, expanding now offices post-COVID, where people can have a place to work from home. And they’re even integrating into their bedrooms as well. So does that answer your question?

Theo Hicks: Yeah, it did. So these are the development strategies, but also… I lived in a house in college that had 13 bedrooms in it, I think. So it can be the brand new development or you can be taking an existing, as you said, Victorian type home that has a ton of bedrooms and then turning it into co-living. So that all makes sense.

So if I’m developing an apartment, is it something where it’s I’m developing one? Or would it be like a 100-unit apartment that has a percentage that is co-living and a percentage that is regular? Or would it be all 100 units co-living?

Matthew Ryan: Both, is the short answer. People are also taking apartment complexes that have larger living spaces, common areas, maybe they’ve got a formal dining as well as a kitchen, and converting those extra spare rooms into bedrooms now. So you had a two one with an extra-large space, you can get an extra bedroom in there. That’s one way of working at it, but you’ve got to be careful; you don’t want to create a cramped space. Ground-up developers, yeah, they’re basically doing a four to six-bedroom, sharing a common space… They can start from scratch. Our strategy is typically taking these larger historical homes that have a lot of common space. Again, formal dining rooms, maybe two living rooms, finding ways to convert them, but then also expanding the footprint of the building. Sometimes they have an illegalized basement, so we’ll put a new foundation underneath it, expand the basement. The ADU law allows us to add up to 1,500 square feet additional.

So we’re kind of doing a value-add strategy, plus adding development, adding square footage, which again allows us to increase our bedroom count, squeeze the cash on cash return out of an otherwise not-cash-flowing assets… And again, provide a much superior product to those guys and gals out there just trying to rent on Craigslist and do the buddy-up system.

Theo Hicks: When you’re expanding, is it expanding horizontally? Or do you expand vertically, too?

Matthew Ryan: Wherever the lot will allow us and we can get that back. The nice thing about at the ADU law is typically residential zoning [unintelligible [00:11:48].14] 10 to 15-foot setback. Well, with ADU law you can do it right on the backlot line. So you don’t have to have to work about those setback rules, which is really, really nice, because a lot of these Victorians are built on these very fixed, large, five, six, 7,000 square foot lots, that are practically unutilized. You can fit almost another house there if you wanted to, if the current planning and zoning would allow you to. And that’s where the ADU laws come in and help us kind of expand that footprint.

Theo Hicks: Perfect. So my next question is going to be about where these types of properties are in demand. So can I do this anywhere? You kind of got it a little bit, but I guess be more specific, what are the characteristics of the ideal market for co-living?

Matthew Ryan: It’s funny, because I thought that definition was very defined to what we’re doing, which is extremely supply-constrained markets, with very high barrier to entry, high rent on a one-bedroom; San Francisco, now Oakland, which I think is now the fourth or fifth most expensive metro in the US… The New Yorks, the Bostons, the LAs… But just the other day I met a co-living operator who’s now taking a four or five-bedroom house in the suburbs in Charlotte and converting that into co-living. He’s seeing very strong demand, getting great cash on cash returns, and doing a fantastic job building a portfolio.

So I think, again, it’s from a product and a geographic area, I’m seeing that definition continue to expand. Most of what we think of in co-living is high density, urban areas, expensive markets. But again, we’re seeing success with other operators who are moving into the suburban market in an already somewhat affordable market like Charlotte, out in the suburbs. And he’s obviously seeing demand for his product.

So there is no right answer to that question, to be honest, because again, we’re constantly seeing this idea of co-living evolve, and people, again, just monetizing on that existing model of alleviating those pain points. Because normally, if you’re going to rent a house, and then get a bunch of roommates, you’re going to become the master tenant. It puts a lot of burden on someone who doesn’t traditionally have property management experience. I remember from our conversations, you’ve been through the hell of property management, right? So it’s not an easy game, and it creates a lot of tension. So I think what a lot of these operators are doing a very good job is not only are they taking that burden away from someone, but they’re also adding in community events. They’re also adding in value to those individual tenants. And I think that’s really interesting.

Theo Hicks: Okay, perfect. If I own one of these, how do the leases work on this? Is it an individual lease per room, and I’m charging per room? Or I think you mentioned it’s not going to be one lease one person, and the tenant collects rent from everyone else. How does that work?

Matthew Ryan: Yeah, it typically is a master lease, and then you’re subleasing individual rooms. As far as the larger developers, you’re traditionally going to have probably a professional management company in place. And again, they’re assigning individual leases for the rooms.

Theo Hicks: So the person who owns it – is he the master lease person? Or is one of the tenants the master lease?

Matthew Ryan: Well, typically the property manager — excuse me; let me back up. So you know in the smaller developments we’re instituting professional property management, which is technically the master tenant.

Theo Hicks: Okay, got it. And then you mentioned before about co-living platforms. So you said it’s capitalizing on the Craigslist market, right? That’s kind of what I thought about. And I know Joe – he lived in New York, and that’s how he found a roommate, was on Craigslist. So I know people are doing this already on Craigslist, but are there specific platforms for co-living?

Matthew Ryan: Yeah. And when I say a platform, fancy word for a co-living operator, a property manager, right? But when I’m talking about platforms, they’re instituting these technology platforms where someone’s now just going to their website, here’s the contact number, call me and I’ll set up an apartment viewing. These guys are going so far as they’re creating 3D models with the internals of the building, especially since COVID, especially the ones that are VC backed. They’ve got mobile apps where people can go on there and check inventory, they can scroll pictures of the rooms, they can set up leasing on their phone. So they’re really just taking this a step further and literally building a platform for people to be able to communicate with them, very much like the high-end multi-family leasing companies do. So the level of sophistication that they’ve instituted is what I mean when they talk about a specific platform.

Theo Hicks: I see what you’re saying. So it’s not like a Craigslist for co-living, you’re talking about this specific — like your company would have these technologies that the renters can use to have an understanding of what’s available… Just like if you go to a professional property management company site, and it says, “Here are all the available units we have for rent.” You have that, but then it’s a lot more; it’s as much detail with the models as those. Is that what you’re saying?

Matthew Ryan: Correct. We want to distinguish that there are developers who are vertically integrated in providing the property management in-house. There is few that I know of who are doing that on developing co-living assets as well as managing, but it’s typically the property manager who’s offering those platforms and services for the tenants to be able to go there and check that out. As a developer, we’re not; we’re just simply developing the assets and doing like every developer does, turning it over to a property manager who specializes in co-living, and then there have their degrees of setting up their own platforms for tenants to be able to view and check out the apartments, and lease, and all that fun stuff.

Theo Hicks: So after you develop, are you selling them? Or are the management companies managing them, and you’re still getting the income from that?

Matthew Ryan: Yeah, our strategy is and probably will be to hold over the long term. The reason behind that right now is there isn’t a lot of comps for co-living. The debt market is starting to approach co-living differently since COVID. So I really don’t think it’s advantageous for anyone to be trying to develop a co-living asset and then turn around and sell it, I think you’re actually going to lose a little bit of value in the marketplace until we start to see this make its way up through the chasm, through the adoption cycle, and it becomes more familiar, it becomes more of a regular part of multi-family, which every industry expert has agreed it will be; like, this is a permanent segment. But there’s still some trepidatiousness, and there’s still a lot of unknown in this marketplace.

So that’s not only our motive; we’re traditionally a long term buy and hold value-add investor. But that has also solidified our desire to not only develop assets, but to hold on for the long term, because quite frankly, we think over time people are going to see this 15% to 25% net operating premium that we’re getting on a co-living development versus traditional multi-family, and we think that those assets are going to essentially be worth more. So right now you’re not really getting that value; that level of value is not really being appreciated in the marketplace.

Theo Hicks: That totally makes sense. And so again, on the front end, how is the underwriting process? Not the due diligence, but like before you’re submitting an offer on these properties, how are you high level coming up with the purchase price? So basically, how do you know what rents you’re going to be able to get, and then how do you know the cost of the rehabs?

Matthew Ryan: So we’ve integrated with a very strong [00:18:46].13] and general contracting… Fancy term. A design-build company, general contractor. So they can really help us navigate the nuance, the development, the entitlement phase, which is very short, as well as the construction. So that makes it really easy from an underwriting perspective for us to be in constant communication with them when we get a property, that are generally all the same, but again, they all have little nuances. So that’s been a key portion of our underwriting.

The second piece is it’s extensive. So we’re looking at a couple of different things. There’s now enough inventory that we can go out to other co-living operators who have assets on the ground and see what they’re charging; it’s very traditional for multi-family. The flip side of that is we’re literally going to the Craigslist roommates section, and as well as Craigslist listings for two, three, four or five-bedrooms, and saying “Okay, if we were to split this amongst all roommates, what would be the price per head? What’s the average rent for a roommate?”

We just did this for a property that we’re under contract on right now, where you literally have three levels of consideration. And just like in the multifamily space, now you have to look and see “Okay, my roommates [unintelligible [00:19:53].06] say 1,500 a bedroom. If some were to split a three-bedroom that comes out to around 1,550. But my co-living operators were fully furnished, very high-end products, very well developed.. They’re more 1,700 to 1,750. So where do I land in all this, right? You have to make that determination based on the product that you have available to you, what finishes you’re going to institute… And also trying to keep up with how much supply is out there in that marketplace.

So when it comes to underwriting, those are two key components, just like any value-add investor, right? Your construction costs and your rentals. We will typically on an in-the-door basis, we’ll look at a company like Rentometer, who’s aggregating listings, and we’ll just say, “Hey, the studio rent is 2,000 bucks.” We know we’re going to have to be between 15% to 25% below that; let’s benchmark it at 20% in underwriting.” And that’s how we’ll evaluate the deal as it comes in the door.

The process I just described is obviously once we’re getting a property that we’ve submitted an LOI, or we submitted a purchase sale agreement, we’re starting to get the feeling that the deal is going to maybe go under contract, and then we’ll start doing that extra leg of due diligence. And that’s the extensiveness of our underwriting process. It sounds very simple, but of course, it’s fairly complex. And of course, we spend a lot of time building our performance up to where we can with our own in-house metrics be able to quickly analyze these deals. We’ve gotten to the point now where the smaller co-living deals we can underwrite in 45 minutes.

Theo Hicks: Something I think about – you might have mentioned it before, but it’s just clicking now… So when you say furnish, you just mean the common areas need to be furnished, right?

Matthew Ryan: Correct.

Theo Hicks: Again, this is kind of super-detailed, but are you putting in silverware? Who buys the silverware? Who buys the towels?

Matthew Ryan: Oh, I think that’s a great question. Towels, I’m not sure of. I think that’s what you’ve got to bring your own, especially in the days of COVID. But yes, traditionally, all the furnishings, all the kitchenware, all that stuff is there. Again, they try to make it as turnkey as possible. And there are also operators who are going out there and furnishing their apartments. Some people have differing opinions from a liability perspective, from a tenant preference… But the majority of the operators that I know – very high-end finishes; some are even instituting interior designers to come in here and make these spaces much nicer than the places you and I probably lived in coming at college.

Theo Hicks: Seriously.

Matthew Ryan: Yeah, yeah. So the level of detail there is great. And yeah, most of that stuff is just well finished. And everything’s pretty much supplied, and stocked, and ready. All the way down to the toilet paper and those types of things. All of them have their own cleaning plan. They all have their own cleaners coming in cleaning the place regularly.

Theo Hicks: I can definitely see that there’s going to be a lot of demand for this in the future, for sure. A hundred percent. Alright, Matthew, is there anything else that you want to mention about this strategy, about where people can learn more about you and your company before we sign off?

Matthew Ryan: Yeah, I would just like to say that there is still a lot of degree of doubt in the co-living space, especially with COVID. And we’ve seen this just in the last two months. And I would just like to remind your users – just let’s rewind, let’s go back to say March, or even further, let’s go February, January, December of ’19, and think about the world that we lived in prior to COVID… Because we’re also seeing this – everyone’s moving out of the urban core, everyone’s flying to the suburbs… And there’s a lot of doubt being sown in the co-living space. And for me, it’s very simple – just go back to the world that we were in before, where 72% of all the jobs created out of the last recession were in metros with over a million people. There was a reason why people are flocking to these [unintelligible [00:23:26].17] and there’s a reason why people are going to be flocking to them the future. And once we have a vaccine developed, and we’ve moved past this, I think a lot of the concerns – that are founded, but they’re a little unfounded, they’re a little irrational, about the co-living space… I challenge people just to think about that. The pandemic is a temporary situation, and co-living is very much, in my perspective, a long-term trend.

Theo Hicks: Perfect, Matthew. It was great catching up, and thanks for going in a lot of detail on this co-living strategy. We talked about some of the advantages from both the operator developers’ perspective, as well as from the renters’ perspective. We talked about the strategy… You could develop a new property and turn that into co-living, you can find one of these big — as you mentioned, what your company specializes in are these big single-family Victorian homes, lots of rooms and common areas… You can buy something and expand upon it horizontally or vertically. There’s really a lot of different options you have for the type of property you can buy or create to do this.

You also talked about the market and how you thought that it initially would be the high-density urban areas with really high one-bedroom rents, with very low supply, but then you heard of someone who’s doing it out in a suburban area… So there’s really no specific definition for the market, it can really work anywhere. Maybe a good thing to do would be just go on Craigslist and see how many people are looking for roommates.

We also talked about the underwriting process, and the way you’re approaching the construction cost is partnering with a company that specializes in design and building. And then for the rents, depending on where you’re at – if you’re in one of these high-density urban areas, it might be that inventory to do the traditional rent comps. If you’re not, then you can go on to the Roommates section on Craigslist and calculate comps that way; put a Rentometer, take a look at the studio costs and then reduce that by 15 to 20%, and do it that way.

You said a lot more, but that’s just all I got in my notes… So it’s definitely worth a relisten. At the end, you mentioned how there are doubts around co-living, but if go back to this time last year, I’m sure everyone thought this was the best idea ever. So this situation we’re going through now is temporary.

I can totally see this being a huge thing in five to 10 years, especially with people coming out of school and you’re moving someplace you don’t know anyone. If I move somewhere and I didn’t know someone that lived there that I could live with, I would go on Craigslist, [unintelligible [00:25:51].08]something like this. Matthew, again, appreciate you joining us again today. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Matthew Ryan: Thank you, Theo. I appreciate it.

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JF2320: Adapting Your Real Estate Business With Bruce Wuollet

Bruce is the founder, and owner of Bakerson, a multifamily syndication business. Growing up in the bakery business in the Twin Cities of Minnesota, Bruce wanted to pay homage to his now late father, hence the name “Bakerson”. He has a proven track record of success throughout Bakerson’s nearly 18 years in business with thousands of individual units bought, repositioned, and sold. His personal portfolio consists of 250 units and he focuses on finding good deals while his passion is serving the residents by providing them with one of their basic human needs – shelter.

Bruce Wuollet Real Estate Background:

  • Owner of Bakerson, full-time multifamily syndicator
  • Over 18 years of real estate investing experience
  • Bakerson has bought thousands of individual units, repositioned them, and sold
  • Personal portfolio consists of 250 units
  • Track record of 16 multifamily – 850 units and transacted over 2000 single-family homes
  • Based in Phoenix, AZ
  • Say hi to him at www.bakerson.com 
  • Best Ever Book: Relentless

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Always adapt” – Bruce Wuollet


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Bruce Wuollet. Bruce, how are you doing today?

Bruce Wuollet: I’m doing fantastic. Thanks for having me on.

Theo Hicks: Absolutely. Thank you for joining us. A little bit about Bruce. He’s the owner of Bakerson, which is a full-time multifamily syndication company. He has over 18 years of real estate investing experience. Bakerson has bought thousands of individual units, repositioned them, and sold them. He has a personal portfolio of 250 units, and then his track record is 16 multi-family deals that are 850 units. And he has also transacted over 2,000 single-family homes. He is based in Phoenix, Arizona and his website is bakerson.com. So Bruce, do you mind telling us some more about your background and what you’re focused on today?

Bruce Wuollet: That’d be great. So, the first thing is the name Bakerson, I called it Mr. Bakerson, and people say where does that name come from? So I’d like to share that. I tell everybody that I’m an S-O-B, I’m a son of a baker. I grew up in the bakery business in Minneapolis; my grandfather started the Wuollet bakeries. I worked there as a kid, and it’s to pay homage to my father. He was alive when I named the company and he really, at that time was suffering from cancer. He loved the name, “That’s just awesome, Boo.” That’s what he called me. So it’s pretty fun to keep and have that name in his memory. So that’s where it came from.

And I got started in real estate, in tax lien foreclosures. And in the tax lien foreclosure world, it’s a long and arduous process, so we found ways that we could get into the transactions in a shorter period. I worked with a guy named Gary who has now passed away; he was my mentor. And one of the things is he left money on the table when we were negotiating with these people to buy their homes, and I said “Gary, you could spend 15, 20 grand for this house and turn it around and make money on it.” And he said “No, that just not my model. I buy the tax lien and if they redeem the taxes, that’s it. If they don’t, then I get the house.” So I said, “Well, what if I buy them?” He said, “Go ahead.” So I started buying houses that way, from basically the Kiyosaki mindset of other people’s money. I picked up a triplex, duplex, and three houses.

But then in 2002 I met Jack Martin, and he and I wanted to go full-time in real estate, and we started finding houses, and I could find more houses than we could possibly fix and sell or keep… So I was introduced to wholesaling. And that’s where I’ve done over 2000 transactions in the single-family world. We were one of the top wholesalers volume-wise in Phoenix. And when the market shifted in 2006 and 2007, we got into land. Then the market came back after it crashed, I got back into houses at the auction and what have you…

But the transition to multi-family was the one that was almost accidental, because we got squeezed out of the wholesaling world and we didn’t adapt to technology like other people have. So to always adapt is something that’s very important to us now is you need to pivot and turn as the market shifts. Because everybody is shifting to technology, and we’re still doing the driving the neighborhoods, and the little yellow notes and everything done through the courthouse. But people were buying online, bidding online, getting loans online, title insurance, the whole bit for $1,200 somebody would flip a property to them. And I thought, “Man, I can’t compete with that.” We were averaging aroun$5,800 a flip. So we ended up switching to multi-family. And we did a couple of dozen of those 20, 25 multi-family flips, and we said, “Hey, we can buy, fix and sell those.” So we ended up doing our first apartment deal in Phoenix, a 64-unit with another group, and bought a 120-unit, and after that, we ended up buying six properties in Phoenix.

Then when we thought the market peaked, we said “Hey, we’re going to look at Tucson, it’s a little softer market, a little better margins. Let’s go down there.” And the values in Phoenix have almost doubled since we thought it peaked six years ago, five years ago. So in Tucson we’ve done 11 projects. So it’s actually 17 multifamily projects, the smallest being six units, the largest 120. Our sweet spot seems to be the 60 to 100 unit, which is where we’re able to carve out our sweet spot.

So that brings us to where we are today in the buy, fix, and sell. However, we’re now in another transition where I want to buy and never sell. I do not enjoy the sale process, and I absolutely love the buy and stabilization process. I love the impact we have on the residents and the community, so that’s really where we’re going in the future, is to buy and cashflow.

Theo Hicks: That’s interesting. So I don’t think I’ve interviewed someone who flips apartments. So I know that you want to transition into the buy and hold strategy, but what would you say is the biggest difference on your end between fix and flipping just single-family homes, as opposed to fix and flipping the 60 to 100 unit apartment buildings? Is it the same thing, just the property is different or is there something different?

Bruce Wuollet: Well, on the first flips we did in the apartment, we didn’t fix and flip, we just flipped the contract. So that’s where he flipped the apartments, that’s what I was talking about there. But on the buy, fix, and sell, as a standard syndication you buy it and within 24 to 36 months, you reposition the undervalued asset and sell it. So that’s pretty typical in the market. So those are, I guess, not really flips, I probably use the wrong term there, but the buy, fix, and sell, the 17 projects we’ve done in Phoenix and Tucson in Arizona.

So the difference between when we did the houses, even the ones that weren’t retail, of over the 2000 houses we did, only 12 were full retail products; everything else was buying them, cleaning them up, make it city of Phoenix primarily (or city of Glendale) compliant, and then selling to an investor. We do the trash out, get rid of the graffiti, and all that. The difference between that and what we’re doing in apartments is when you’re selling a house, it’s a commodity. When we do apartments, we’re selling a business, because we’re putting residents in there, we’re selling them as occupied units. So it’s your traditional buy, fix, and sell apartment turn, that is pretty popular right now.

Theo Hicks: So you said 24 to 36 months from buy to sell, right?

Bruce Wuollet: Yes, that’s historically what we’ve done.

Theo Hicks: Sure. So is a portion of that the fixing up, and then you stabilize, and then you sell, correct?

Bruce Wuollet: Yes.

Theo Hicks: So of the 24 to 36 months, what’s the breakdown? How long does it usually take to fix them up? And then how long does it take to stabilize them?

Bruce Wuollet: Okay, on the larger project like the 74-unit in Tucson took us three years. We bought it with 35 units occupied, so a 50% vacancy, or 55% vacancy. We ran it down to 17 occupied units. So basically there was a valley of death there, where we had a huge debt coverage to cover with no income. So that was part of that process. That takes about eight to 12 months to get through that. That whole cycle of getting in and repositioning those and putting in new residents.

And then the next year was where we did the additional value-add where we updated some of the units that were already occupied, and pushed the rents up to market. And then the last year is just getting from the 70% stabilized to 90%. Because when you go all the way down to vacant back up, it takes a good 12 to 18 months to create a really stable balance sheet. People say, “Oh, you can do it in six to nine months.” You can get there in six to nine months, but to keep it stable — when you ramp up that fast, you get a lot of residents you wish you wouldn’t have signed up for, because you get anything you can to get in the door.

So that is the reality that we have seen, at least in our experience. I’m not saying that’s everybody’s experience, but that’s been our experience… It really takes 18 months to get from when you’re filling the units until it’s completely stabilized.

Theo Hicks: Sure. So just to kind of dive into that a little bit and make sure I’m understanding correctly… So you bought it at 55% vacancy for that deal. And you said it went down to 17 units occupied. Is that because you evicted people, so it had low-quality residents? Or, I guess I don’t understand, because you said after eight to 12 months it was occupied, and then you did the value -add. So are you turning over the units first and then once you’ve got them occupied then you do the renovations? Or do you do the renovations right away?

Bruce Wuollet: Okay, this particular one was a slumlord that owned the property, so it was in a really, really rough shape. So there were some units that just needed paint and carpet. So we just did paint and carpet and we were moving people in. But then after those turned, we would update the cabinets, we’d update the countertops, update the flooring on some of those.

So it was almost like a two-phase value-add. First was to get rid of all the problematic tenants. And yes, that’s when we went down to 17. It was like a drive-through pharmacy; it was high, high crime. And we had to get rid of the bad residents and get a stable resident base in there. And that took a wave of people to get through there, because we ended up getting some bad people in initially, and we had to do a second wave of moving those people out. And then when we moved those out, then we did some updates to some of the units to show that, “Hey, if you update these units to this level you can push the rents to market.” And that’s the value add, the meat we left on the bone for the new buyer, that they can finish that, and push through the rest of the units.

Theo Hicks: So is that a typical deal where it’s not stabilized when you buy it? Like it’s got high vacancy? Or are you buying a mixed bag of deals? Do you target these types of deals that are really distressed? Or is your net a little bit wider?

Bruce Wuollet: Well, the net is wider now, but initially, yeah, that’s what we targeted. We would look for the roughest property in a somewhat stable neighborhood, and really zero in on that through our own efforts and the broker efforts to buy that property. There was a 32-unit in Tucson that we brought down to four occupied units. There was a 75-unit that was about 75%, 80% occupied, and when we bought it, we brought it to under 50%. 52-unit, brought to under 50%, because they were really, really rough properties. And they may have been a good quality product as far as the asset goes, but that resident base was really, really rough, where the property managers lost control. So we’ve targeted those. However, it’s been more and more difficult to find those types of properties in our current market cycle.

So we have broadened the net now… Our last purchase was a 90-unit in Tucson, and it’s a stabilized asset. It was over 90% occupied with a lot of economic vacancy. We’ve fixed the economic vacancy, we were at 80% occupied, now we’re back up to over 90%.

Theo Hicks: Is there a value-add/renovation play in that deal? Or is this still just a resident quality issue?

Bruce Wuollet: No, there will be a play on that as well for updating the units. It’s an older building that does need some effort. It’s not bad, but we can certainly upgrade the units. The beauty behind this one is the units’ average square feet is thousands, so they’re quite large. So we have an opportunity to bring in a more stable family resident base than the more transient single.

Theo Hicks: And then you’re raising money for these deals… Are you syndicating them with limited partners?

Bruce Wuollet: Yes.

Theo Hicks: What type of compensation structure is offered? Do you do a preferred return? Is it a profit split? Do I start getting a preferred return right away, or is it delayed until sale? How does that work for the people who are investing in your deals?

Bruce Wuollet: To date, there have been two times where there’s money exchanged. Once when they invest the money, and the second one when they get it back. And in between, there is no distribution, just because the assets have been negative cash flow. So that’s how it’s been, historically; there’s a pref or a split. So because there’s a heavy value add, there’s a little more favor to the sponsor for the return than some of the other syndications that you see. So the investors still get a mid-teens return, but it comes in a lump sum, it’s not distributed quarterly or monthly. However, the asset we’re looking at right now to buy would have immediate, probably second quarter, there would be a distribution. So we are moving more towards a stabilized asset where we can come into the market and finish the value-add that somebody else has started; kind of how we sold properties previously. But we’re looking at 150 to 200 units for the stabilized assets, under a hundred units for the heavy, heavy value-add.

Theo Hicks: Whenever you’re initially underwriting a deal, so not during the due diligence when you’ve got to go into more detail on the property… You mentioned that, for example, on these deals where you buy them and they were really distressed, maybe the property was fine, but it was more of a resident issue. So you know you’re going to go in there and reduce the vacancy to some unknown level, and then obviously, during that time, you’re going to have to cover that debt service, cover your expenses. So how are you calculating what that number is? So how do you know how much extra money you need to raise to cover the holding costs during that first phase of the value-add project?

Bruce Wuollet: We project pretty accurately how we’re going to vacate the units based on what we see when we do our inspection. You get a pretty good feel for “Okay, what number of residents are going to have to be let go?” And then you also look at their historicals… Now, when the resident base is not stable, you would see what their delinquency rates are, and you just have a feeling, “Okay, there’s going to be this many.” And it’s from experience, knowing that we’re going to vacate this many units. So with that plus the reserves that we save, there’s always been enough to cover the negative cash flow during that part of the renovation or the value-add.

So it’s put on a spreadsheet and we just build like a Gantt chart of when things are going to start, when they’re going to end, what is that… What we call the valley of death. What is our valley of death? Okay, it’s nine months. Okay, so we need to plan for more than nine months, because it may take longer, or we may have to plan for more vacant units, maybe a deeper valley than what we’ve projected. So we do the stress test, worst-case scenarios, and what does that timeline look like, and then we put that into reserves.

Theo Hicks: Do you know the death valley before the deal is under contract, or is it not until after you’ve done all these inspections that you know?

Bruce Wuollet: No, it’s during the due diligence that that is discovered.

Theo Hicks: So how do you come up with the initial offer price?

Bruce Wuollet: The initial offer price is based on four things: price per square foot, price per unit, and then based on the rent they’re getting per square foot and rent per unit. So if they’re not a performing asset, you can’t buy it on a cap rate. Right? So you say “Okay, I know that once this is stabilized, this property could be worth let’s say, 6 million.” So you’ll be able to back out the numbers. What is the estimated cost for renovations? Well, we have an estimate of the valley of death, but it won’t be finalized until we get through the underwriting after the inspection. But we usually have a pretty good idea of what the assets would trade for in that market, and then plug those numbers into the spreadsheet.

Theo Hicks: Alright, what is your best real estate investing advice ever?

Bruce Wuollet: I’d like to go with opinions, because advice comes with so much responsibility, right? Just looking at the words. But for me it’s two parts – it’s focusing on the resident, and then also when you’re doing the inspection, to really dive deep into the plumbing and HVAC. That’s the area where it seems to be the most hidden costs in our projects, has been plumbing and HVAC. So the inspection of the property is to hire contractors who are specialists in plumbing and HVAC for us to make sure that anything hidden can be estimated.

Theo Hicks: I wish I would have had this interview three years ago when I bought all these fourplexes and the plumbing amd the HVAC were absolute disasters. And the inspector had missed that. Alright, Bruce are you ready for the Best Ever lightning round?

Bruce Wuollet: Yes sir.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:18:05][00:18:55]

Theo Hicks: Okay, what is the Best Ever book you’ve recently read?

Bruce Wuollet: That would be Relentless by Tim S. Grover.

Theo Hicks: If your business were to collapse today, what would you do next?

Bruce Wuollet: I would do podcasts with you.

Theo Hicks: Every day. [laughs] What is the Best Ever deal you’ve done?

Bruce Wuollet: The Best Ever deal is my favorite one, it’s a 22-unit in Glendale that was in bankruptcy, foreclosure, a lawsuit, and the owner was arrested for drugs and prostitution, and it was vacant, boarded, distressed, and it was scheduled for demolition. And we were able to save the property, turn it around and sell it as a fully occupied asset. That is our favorite deal.

Theo Hicks: What about a deal that you’ve lost money on? How much did you lose and what lesson did you learn?

Bruce Wuollet: Well, the only deal that I lost money on is one that we didn’t buy. We had to walk away from the earnest money because we were uncertain of the market, so we ended up losing some earnest money. But as far as the projects go, they’ve been been profitable.

Theo Hicks: What is the Best Ever way you like to give back?

Bruce Wuollet: I like to give back by sharing anything that people ask me; that there is no secrets and I’d rather people would learn from people like me and you in the industry, and not from what they find on Google.

Theo Hicks: And then lastly, what’s the Best Ever place to reach you?

Bruce Wuollet: You can call or text me at 520-808-9111. That is my cell. And I invite people to reach out. Or bruce@bakerson.com.

Theo Hicks: Alright, Bruce. Well, thank you for joining us today and walking us through your multi-family strategy. So it’s kind of changing a little bit now, but what you were doing was focusing on very specific 60 to 100 units. These are properties that were very distressed, and it didn’t necessarily need to be the actual property was distressed. So it’s kind of like  property or operationally distressed.

As you mentioned, your best deal was the property and operations were a mess. But it could also be something where the asset is in good condition, but the resident base needs to be turned over. And so you’ll acquire the properties, and then during that valley of death, I think is what you called it, you’ll drop the vacancy so that you get all of the low-quality tenants out, you get better quality tenants in.

Once that phase is done, the second phase would be to upgrade the units and to kind of implement the value-add strategy. And then you will sell those properties as a business, right? Because the property is stabilized. And you’ll sell that as a business to someone else. You said that now because of the fact that those deals are kind of hard to find, you’re transitioning into properties that are going to be more of a buy, fix, and hold strategy.

We talked about the limited partner structure, so they invest and they get a lump sum on the back end whether it’s a preferred return or profit split. We talked about how you determine the upfront reserves, how to cover these holding costs during the death valley… And it’s basically you’ve got a spreadsheet where you’ll go in there during the inspection, looking at delinquency rates to be able to plug the numbers into your spreadsheet to determine exactly how long it will take to stabilize the property based off of the current occupancy, and then the number of people that you’re going to have to remove and then bring back in, how long that takes.

We also talked about how you come up with your offer price; so there’s a price per square foot, price per unit, rent per unit, rent per square foot, estimated cost renovations, estimated death valley time, and the after renovation value, to calculate the offer price.

In the beginning, you actually talked about a piece of advice about making sure you’re always at pivoting when the market shifts. You gave the example of wholesaling and how you didn’t transition into tech, which is why you accidentally got into multi-family.

And then your Best Ever advice, or as you said, your Best Ever opinion, was to number one focus on the resident, and number two, and I can concur with this wholeheartedly, is during the inspection make sure you take a deep dive into the plumbing and the HVAC, because those are where the most expensive hidden issues are. So thanks again, Bruce, for joining us today. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2316: Rentals & ATMs With Billy Keels

Billy has been working as a sales executive for a market-leading application software company and is a real estate entrepreneur, long-distance investing expert coach, and mentor. He currently has 361 doors as well as ATM machines. 

Billy Keels Real Estate Background:

  • Full-time Application Software Sales Executive
  • Bought his first rental in June 2013
  • Portfolio consists of 361 doors as well as ATM machines
  • Based in Barcelona, Spain
  • Say hi to him at: www.billykeels.com 
  • Best Ever Book: The Creature From Jekyll Island

Click here for more info on groundbreaker.co

Best Ever Tweet:

“It’s about always making sure that your capital is always working out.” – Billy Keels


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Billy Keels. Billy, how are you doing today?

Billy Keels: Theo, I’m doing fantastic, and really looking forward to today’s conversation.

Theo Hicks: Yes, me too, and thank you for joining us today. A little bit about Billy – he is a full-time application software sales executive. He bought his first rental in June of 2013, and his portfolio now consists of 361 doors, as well as ATM machines. He is based in Barcelona, Spain, and his website is BillyKeels.com.

Billy, do you mind telling us some more about your background and what you’re focused on today?

Billy Keels: Sure, Theo. You highlighted a couple things there, and I guess a very typical software sales executive, I’ve done leadership as well in the software sales arena… And I’ve been living in Europe for the last 19 years, actually. I didn’t even plan on doing that… And when I was here, I was fortunate enough to enjoy three different countries; I lived in France, I lived in Italy, and most recently in Spain… And I guess one of the reasons, aside from working in large multinational enterprise leading software type of companies, I had some experiences that were not so nice in the stock market crash in 2000… And then the same thing happened in 2008. So one of the things my parents always told me – if something happens once, it’s shame on them; if it happens twice, shame on you. So it was at that point, 2008, that I started really looking for some new alternatives… And that’s when a couple years later I actually found real  estate.

I was one of those people who just very much wanted to continue to climb the corporate ladder. I was doing everything to get the next raise, to get the next promotion… And as I went through that, I started realizing that I was going around and around and around in circles. And I remember one morning in October that my older son was turning 3, and I remember getting on a plane that morning – I was supposed to go to Germany, and when I flew to Germany, I thought “Well, something’s not right. I’ve been doing all this work”, I wanted to do all these things so that I could spend more time with my family, and I was flying away on my son’s third birthday.

So that’s when I really started focusing on how I could take more control of my financial life; that’s what I was thinking about then, and that’s how I started getting into real estate. I thought that I was gonna buy real estate here in Spain, because I read this little purple book, Rich Dad, Poor Dad, that kind of changed my life… And one thing led to the next, and as a US citizen who was living abroad, someone said to me one day “Well, why don’t you buy a property back in the United States?” and I thought that was the craziest thing I’d ever heard… But after listening to a couple people and doing my own research, that’s exactly what I decided to do.

So that’s how I got into real estate, that is what I’m enjoying, and now really having real estate as a vehicle that can help myself, and now even other investors that are alongside me get closer to our goals and our dreams, so we can really live the life that we want to.

Theo Hicks: Thank you for sharing that. So those 361 doors – are those all in the U.S.?

Billy Keels: 100% in the United States. They are, Theo.

Theo Hicks: Okay. And then can you maybe give us a breakdown of what those doors are? Are those single-family houses that you bought by yourself? Are you raising money for larger apartment deals? What’s that portfolio and what’s your main focus now?

Billy Keels: Yeah, I love that question. So what I have today is a mixture. So there are properties that actually 100% my company owns… And then I also found out – because I didn’t really know – that you could invest with and through other people’s syndications. So I’ve done a mixture of the two of those to get to the 361 doors, as well as the ATM.  So I’ve actually done active, as well as passive investing…

And as it relates to where I’m going now, even though I’m working in a very large multinational, my focus is really on building out the syndication part of the business, to be able to do that and do that in a way that is done full-time… Because one of the things that I really love, Theo, that I’ve found, is that I can use a lot of the same skillset that I’ve been building in the multinational, and I can do that to actually bring value to people that I know, and that know, like and trust me… And that is something that’s given me a lot of emotional satisfaction and fulfillment, and that is definitely where my heart and my mind is moving me, is to add more value in that way, as someone who is able to syndicate different types of opportunity.

Theo Hicks: So just to confirm – your company owns a portion of those, and then another portion of those are you passively invested into other deals… And then moving forward, you wanna start transitioning into raising money from other people for your own deals.

Billy Keels: Absolutely correct.

Theo Hicks: So what would you say is the number one thing you’ve learned, or the number one piece of advice you would give to someone who wants to invest while  not living in that country?

Billy Keels: This is one of the things I really like to focus on a  lot, and have been focusing on a lot lately, and speaking to people, and doing a lot of that even on my podcast… But this really is about helping people to understand that whether you’re tens of thousands of kilometers away or you are 30 kilometers/miles away from a property and it’s not in your backyard, at the end of the day, when you want to be able to scale and sleep well at night, it comes down to making sure that you understand why you want to invest in something, whatever that something is… And then when you’re doing it, if you wanna scale, it’s make sure that you’re in the location that’s going to provide you what it is that you’re looking for. That could be cashflow, that could be appreciation, that could be privacy; it depends on what the person’s looking for. And then the most important element is, without a doubt, in my experience, the team.

Make sure that you understand the team, make sure that you understand the track record of the team, understand what they’re very good at, understand where maybe they need to rely on others to complement what they’re doing… But I would say without a doubt, especially if you’re looking to place capital, or even if it’s your own team, it’s to make sure that you have a very strong team.

Theo Hicks: Let’s talk about ATMs. How does investing in ATM work?

Billy Keels: This is one of the things that I’ve found out as a passive investor; I guess when you’re really busy and you’re in a multinational and you’re thinking to yourself “Well, you’ve gotta bet on the stock market, you’ve gotta do this, you’ve gotta do that”, and one day it looks like you’ve got a lot of money, because it’s on paper, and then three days later some things happen, or someone’s said something or done something and you’re in the hole again… So one of the things that attracted me to ATMs, or at least the ones that I’ve invested in passively, is it provided a very predictable stream of income. There was a portion of my portfolio that I needed to just provide very predictable streams of income.

So building our relationships, understanding, getting to know more about the person who is syndicating, as well as the team that was delivering their track record, how many successful ventures they’ve done – it  was something that made sense for me, because as I mentioned, I was looking for a portion of my portfolio to provide very predictable streams of income. ATMs are a real asset at the end of the day, it’s a  real asset play, and it’s something that everybody understands. You walk up to an ATM machine, you take money out, and when you take money out, you typically see at the bottom there’s a little transaction fee… So there is a portion of that transaction fee that goes to the person that owns the machine, there’s a portion that goes to the person that’s renting it in the space, the restaurant or whatever place you’re in… And then to the investor.

So it was something that really made sense, it was really simple, and it fit into what I wanted that part of my portfolio to do.

Theo Hicks: Can you maybe walk us through an example of one of your ATM investments? How you’ve found the actual team that owned the ATM, and then what the compensation to you looks like. You don’t have to get specific if you don’t want to, but just to understand how much money I can make investing in ATMs, and then how do I find these ATM deals.

Billy Keels: So just explaining how it works, the mechanics behind it? Is that right?

Theo Hicks: I’m more thinking how do I find these people, and then how much money will I make.

Billy Keels: Perfect, I love that. So it’s much like most things  – you have to be in the right place t the right time, and you need to be able to find the people. So you’re asking the right questions – I’m sure people will want to know how do you find out more about ATM machines; as I’ve mentioned, I’ve done this passively.

One of the things I think is really important, Theo, is to continuously go out and look to build relationships. I know it’s something that you believe a lot in as well. And I have done that not only living in Spain, but you meet a lot of people doing things remotely, on Zoom, or Skype, or Teams, or whatever the case may be… But I actually spend a lot of time where I invest my own capital to fly back to United States. So going to a number of events in the United States, I was able to meet people, and a lot of times, in a lot of these different events, there are people that have certain types of opportunities. It can be self-storage, it can be multifamily, it can be ATM. I didn’t know much about ATM, but it was something — just like you’re asking the question now, it’s like “Okay, let me find out a little bit more about this. I don’t have any idea about it.”

So through a number of different relationships and getting to meet people over the span of a year, I was able to find out specifically about the ATM opportunity. So having taken action, gone to the U.S, met someone at an event, when I was there at the event; we had a conversation then offline. I had a chance to meet them offline back in the United States, and then found out more about the specific ATM opportunity.

Basically, the way that the ATM works – and this is different for different people, but this specific ATM works… Is you put a certain amount of money – this is typically for accredited investors; I believe it’s accredited investors only, this particular one… But you place your capital; you have a seven-year lease on the ATMs. For the use of your capital during the seven-year period you get a predictable stream of income every single month. So every single month for the use of your capital, for a period of seven years, you get the exact same amount of capital, that you can see from now until seven years from now.

Going back, it’s really about being able to build relationships, meet people, ask the right questions, and find out about the opportunity; that was done offline.  We went online, and eventually offline, and it was something that made sense for me and that specific portion of capital in my portfolio. So hopefully, that is clear, how we built the relationship, and also the way that this particular ATM works.

Theo Hicks: Something else I wanna ask you, too – we talked about before you were in real estate you were doing the stock market, and how the values kind of fluctuate, you’re not really in control, and so you knew that you needed to transition into something else that gave  you more control… But it sounds like you’re kind of investing your own money  into your active business, you’re investing money passive into real estate, you’re investing money passively into ATMs… How do you decide what portion of your money goes into what? Or maybe a different way to look at it is  am I gonna invest in ATMs next, or am I gonna invest in my own deals next, am I gonna invest in this next? Or was it kind of just as opportunities come up? How do you know what to invest in and how do you know what portion of your capital should go into what?

Billy Keels: Okay, I love that question. And I guess this is maybe just giving you a little bit more about my background and how I grew up. I grew up in a family where we didn’t have lots of excess capital, so one of the things as I started to get to know myself  even more – I really fell in love with being able to see money in the bank, because that gave me a sense of security, and a sense of satisfaction.

Up until recently, I really was one of those people that believed “Just have more and more capital.” And as I’ve continued to get educated more and more, it’s about making sure that my capital is always working out. It’s always on the treadmill and moving. So at the same time, I wanna make sure that there is always a portion of my capital that is in the bank, so that I can sleep well at night no matter what.

And then from there, it’s going through a process of saying “There is a portion of my capital that I know that I want to be able to actively manage”, for a couple of reasons. Number one, because I want my business to continue to grow; so through that business and placing capital and building the relationships I’m able to make sure that that capital will also get the highest financial return, as well as educational return, I believe… And I have that portion of my portfolio that isn’t active.

And then there is a lesser portion of my portfolio that I know that I don’t want just sitting in the bank, Theo, because that’s something that I did for a really long time, and I realized that that wasn’t it. I’ve been in an area where I wanted to know more about multifamily investing, so I knew that I wanted to place capital in at least one or two other passive investments. So it was more about the quantity of investments in multifamily assets. I knew that I wanted to do something that was development, so I placed capital on development, and then there was just additional capital.

So the ATM play was really the wild card that went beyond the multifamily, and went beyond development. So it wasn’t any more sophisticated than that, but I knew more than anything that there was a portion of my capital that I just wanted to be in the bank, so that I can sleep well at night; the other portions of my capital were specifically there to be able to invest. A larger portion for direct investment, to build out my business, and then the others were to gain more experience and have that capital working.

Theo Hicks: And then really quickly – you don’t have to give me exact numbers, but if you had 100% of your money, what percent is that security blanket, what percent is being actively managed, what percent is being passive invested? If you had to give me ballpark percentages.

Billy Keels: For me it’s 15% that is just sitting there, that I know just needs to be there to help keep me fine in the evening. Then there’s gonna be about another 45%-50% that is actively for my business, and then another 35% that is moving or investing through and with other people.

Theo Hicks: Alright, Billy, what is your best real estate investing advice ever?

Billy Keels: So one of the things I believe is that you need to surrounding yourself with the right  team of people that are where you want to be, so that they can always inspire you. And most importantly, you need to take action. And take action before you’re ready; don’t be like I was many years ago, and I’m still fighting through this as a recovering perfectionist. So don’t wait for things to be perfect before you get started, or you will lose so much time. And time is really what is the most important thing. So start before you’re ready I guess is probably the best thing.

Theo Hicks: Alright, Billy, are you ready for the Best Ever Lightning Round?

Billy Keels: I am. Let’s go!

Theo Hicks: Perfect. First, a quick word from our sponsor.

Break: [00:17:21].05] to  [00:18:10].23]

Theo Hicks: Okay, Billy – if you guys are watching on YouTube, you’ll see the beautiful bookshelves behind him, so… What is the best ever book you’ve recently read?

Billy Keels: Wow, the best ever book I’ve recently read… It’s one that I talk about a lot. It’s called “The creature from Jekyll Island.” I say “recently read” because I’m rereading it again; it’s by G. Edward Griffin. It’s just amazing if you really wanna understand what is happening what is happening, how the money system works, debt… It’s “The creature from Jekyll Island.”

Theo Hicks: If your business were to collapse today, what would you do next?

Billy Keels: The first thing that I would do is, number one, make sure that I have a clear plan, and reach out to my network.

Theo Hicks: If you’ve lost money on a deal before, how much money did you lose and what lesson did you learn?

Billy Keels: Wow. So I definitely lost money on a deal; the one that has been the most painful is I lost $25,000 because I did not take the time to read a home inspection. I got the home inspection done, but once I got the home inspection done, I didn’t read it and really understand it. I just felt good because I got  it, and it cost me $25,000 on some roof issues… So the lesson is if you’re gonna take the time to get the inspections, make sure that you or somebody on your team understands what the potential risks are. That cost me $25,000 about seven months into owning the property.

Theo Hicks: What about the best ever deal you’ve done?

Billy Keels: Without a doubt it’s — my company purchased a mobile home park in the Charlotte MSA. Without a doubt, it was the best opportunity, primarily because it was one where the owner – he was really skeptical of owner financing, and once he understood, because myself and the broker would really spend time helping him to understand the advantages for him from a taxation perspective, he got his accountant involved, and it was something that really worked out well for him, and it also worked out for my company as well. So that was without a doubt the best ever opportunity.

Theo Hicks: What is the best ever way you like to give back?

Billy Keels: Really two ways. Number one is there’s something that we do every year, where we actually donate capital to a local children’s school just outside of Barcelona. At the same time, I also love spending time helping people to understand, especially really busy six-figure salary employees to understand more about finances by playing Cashflow 101. It’s one of my favorite things to give back.

Theo Hicks: So we have a few more minutes, and there’s one thing I wanted to ask, and I wanted to make sure I have enough time… So you do work full-time as an application software sales executive, and then you’ve got half of your money in your active real estate business, buying mobile home parks, and rental properties… You’re passively investing… When are you doing the real estate aspect of your business? Do you have a job that allows you to do it during the day, or are you waking up really early, or doing it at night, or only at weekends? How does that work?

Billy Keels: Yeah, great question. One of the things that I’ve been very blessed with is that I sleep very little. So I love – and I like to share on different social media platforms as well – to wake up in the morning. I don’t have an alarm clock or anything like that, but I’m usually up somewhere between [4:30] and [5:30]. For where I live, that’s really early… So I go through meditation, reading in the morning, getting things done, and then I can focus on my business before my boys wake up and get ready for school.

So between about [4:35] until 8 o’clock I really have time to focus on myself, on getting my energy right, and also looking at the business. Then I’m working typically from about 9 until 6 or so, and then afterwards I like to spend some time with my boys. It doesn’t always happen every single time, but I do like to get some quality time with them, and then typically once I have dinner, I’m going back and I’m working on building relationships, I’m on the phone, or specifically looking at the properties, and then I’m in bed somewhere around [11:30], 12. [unintelligible [00:21:44].09] and I try to maximize every single minute that I can between family, my own business, and definitely with the company where I’m working, where I continue to overachieve, again, some of the objectives.

Theo Hicks: Thank you for breaking that down for us, I appreciate that. I’ve always wanted to try the getting up early, but I definitely cannot survive off of that little sleep… Maybe it’s something you just kind of get used to.

The last question is what’s the best ever place to reach you.

Billy Keels: The best ever place to reach me is basically on my website, which is BillyKeels.com, which you’ve talked about before. If anyone wants to learn more about long-distance investing and some of the things that you can avoid and a lot of the mistakes that I’ve made, you can also go to billykeels.com/seven-mistakes-to-avoid, and we’ll be in touch. I’ll get you a PDF so you can avoid the mistakes that I’ve made.

Theo Hicks: Perfect, Billy. Well, thank you for joining us. A lot of solid info, I think, in this interview. Really, we kind of focused a lot on two things. Number one is how do you do your full-time job and invest at the same time? For you, you don’t sleep a lot; for other people it’s obviously working in the morning, working at night, or working on weekends…

And then in the actual investment arena we’ve talked about diversification and the balance between the different types of ways you can invest… And then the benefits of each of those different types. So you’ve talked about you’ve got your money that kind of just sits there for security, and you’ve got the money that you actively manage for your financial reasons, but also for educational reasons; passive investing – same thing… It’s like, “Okay, I might be interested in doing this type of thing in the future”, so rather than just doing it for a year, you’re going to just passively invest in a deal and see what it’s like. I really appreciate you talking about that.

Then also you went into a lot of specifics on investing in ATMs, which I thought was very fascinating. Billy, thank you for joining us; I really appreciate it. Best Ever listeners, as always, thank you for listening. Have a best ever day, and we will talk to you tomorrow.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2315: High Density Parking With Matthew Wiatrek & Ben Trantham #SkillsetSunday

Ben is the President & Matthew is the Vice President of Trident Structures, and their focus is high-density parking that helps improve investor’s ROI. This is an episode that Joe Fairless really enjoyed because he loves talking about topics he does not have any knowledge in and especially one that can help improve your returns in your business.

Matthew Wiatrek & Ben Trantham Real Estate Background:

  • Ben is the President & Matthew is the Vice president of Trident Structures 
  • Matthew has participated in 5 multi-family deals
  • Trident Structures focus on high-density parking that improves investors ROI
  • Based in Fort Worth, TX
  • Say hi to them at www.trident-structures.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“By using a mobile app you now can request your car from our parking garage” – Trident Structures


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Matthew Wiatrek and Ben Trantham. How are you doing, Ben and Matthew?

Matthew Wiatrek: Doing well!

Ben Trantham: Doing well, thanks for having us, Joe.

Joe Fairless: I’m glad to hear that. So we’re gonna be talking about high-density parkings; we’re gonna be talking about parking lots today. It is an asset class that doesn’t get talked about a lot, at least in my circle, and I always find it interesting to talk about stuff that I don’t know a whole lot about… And that is certainly parking lots.

Ben is president, Matt is vice-president of Trident Structures, and they focus on parking lots. They’ve got a website, Trident-Structures.com. There’s also a link in the show notes. They’re based in Cowtown, Texas. Who knows what Cowtown is, and where Cowtown is? Yes, it’s Fort Worth; good guess if you’ve guessed it. That’s where I’m from, too.

So let’s talk about your backgrounds in parking lots first… Where should we start with that?

Ben Trantham: Hey, Joe. This has been really about eight years ago, we realized one of our only [unintelligible [00:04:07].22] customers – again, coming from our design/build industrial construction background – they had a project up in Calgary that needed to expand. As a mid-rise development, they were gonna be forced to pay for some parking in a municipal facility in [unintelligible [00:04:22].08] dig deeper, whatever the options may have been, those weren’t on the table. So we came in with some high-density mechanical parking and said “Listen, this is what we do, automated storage and retrieval for a variety of commodities”, and that was the start.

So they were gonna be able to provide their own parking right on-site, invest in their own property, with space they already had. So since then, we’ve worked in a variety of locations around the U.S. We’ve traveled to ten different countries, learning what’s out there, what’s been working for 40 years, qualifying some of the OEMs, figuring out how we can put our special sauce on it, and really understanding how to bring value to folks like your audience.

So we’ve worked on a variety of the Carvana facilities around the country, everything from fabricating the structures, to installing the systems, and providing some maintenance/support to those facilities. Most recently, we actually have a high-density, fully-automated parking project here in Fort Worth, on a piece of property overlooking the botanical gardens in this region… A piece of property that the market said was undevelopable and was priced as such.

Long story short, with respect to parking, it’s a  class A office space, it is dedicated to that, but we’re gonna be putting 72 parking spaces on the footprint of eight, right outside the front door.

Joe Fairless: Wow… 72 parking spaces on the footprint of 8. So just to catch up to Best Ever listeners, because I might have teed it up in a misleading way… Trident Structures – you all have a company that creates these structures on a parking lot, that you can stack cars on top of, so that you can park more cars in less space, right?

Ben Trantham: Essentially, yes.

Joe Fairless: Okay. So the eight spaces — did I hear you right, 72 cars in 8 spaces?

Ben Trantham: You heard it right.

Joe Fairless: Alright. How do you do that? You go really high, clearly…

Ben Trantham: We go really high… So we have a couple of options on this site, and that’s part of what makes us unique in the marketplace… We’re able to evaluate with experience a variety of different system types… Because again, for many decades, in other parts of the world and in the U.S, especially over the last decade, a lot of mechanical systems have been employed, and there’s actually quite a few out there that most people don’t realize. But in this case, we landed on a final solution of a couple of towers; it’s an open-air garage, and it has an elevator in the center of it. Vehicles pull onto a steel pallet, we lift it up, and it slides left or right into a storage spot for the vehicle.

In this case, we’ll actually be deploying a first of its kind with this system a mobile app that also — in this case, again, the land use is office… These folks will be able to retrieve their vehicle from their desk. They’ll see the queue on-demand, wherever they’re at, on their smart device. They’ll come down, right outside the front door, and pick up their vehicle.

As you mentioned, it’s a structural tower, open-air… We’ll see how the developer ultimately wants to dress it up and make it look good, but in this case, it’s interstate frontage, a piece of forgotten property, and it’s a pretty exciting project, that is on the cusp of getting bought, much less pre-leased, before we even finish 100% construction [unintelligible [00:07:38].23]

Joe Fairless: That’s fascinating, how you were able to do that… Because it just opens up so many other possibilities with buying real estate. And I think that’s a really interesting angle, because if an investor, as we all are who are listening to this show, as a real estate investor who looks at a piece of property, especially — let’s talk commercial real estate, because it’s easier to think about in this context… If three’s a piece of real estate that doesn’t have a lot of parking, but is in a good location that you like, and the structure is pretty good too, then this is the solution for it. You just stack them. You just go straight up.

Matthew Wiatrek: Yeah. Joe, I think it’s not limited just to commercial. Even on the multifamily…

Joe Fairless: Well, that’s what I meant, multifamily, too.

Matthew Wiatrek: Yeah, on the multifamily side… If you’re a value-add investor, like the majority of your audience is, or if you’re on the development side… So if you’re developing an apartment community in Downtown Dallas, or you’re in one of the tertiary markets, the key here is the high density system – we’re talking about the parking component of it, but the system itself, the beauty of it is it’s for the creative investor, the creative developer. They’re getting land use back. So what else can we do with that? What are the kind of amenities that we can bring to attract and retain tenants? What other cash-generating opportunities? We can talk a little bit about those (self-storage, and whatnot), to help drive rents or just improve cashflows on the property.

So it’s really a tool. We talk about the parking component, but there’s so much more to just the high-density parking systems, that for the creative investor/developer it really opens up, and I think gives you a competitive advantage, when  you’re out in this market especially.

Joe Fairless: If you have an apartment community, how does installing this structure make you more money?

Ben Trantham: That’s a good question. There’s several scenarios we’re talking through with several interested parties right now that says “Hey, there’s a lot of things in the current market that got accelerated due to Covid.” Everything related to e-commerce, final mile logistics, the increase of fleets as it relates to the future electrification of the automobile industry. In Dallas there’s a startup company that’s competing with Uber and Lyfts, and it may be more sustainable simply because of how they classify their employees… But the interesting thing is they will actually own their fleets and vehicles, and they’ll eventually be electric.

So when you take a look at what we’re building here in Fort Worth at the project called the Triune Center, it’s essentially an automated storage and retrieval vault. So when  you think about the fact that we can store and retrieve something that’s at least 2-3 tonnes, and can fit in that virtual box of the space claim of the vehicle, what else can you put in that space in addition to a vehicle? Several things, and we can talk about those in a moment. Just to plant a seed, one of them with respect to the multifamily market – self-storage.

Joe Fairless: Storage, right.

Ben Trantham: You can put a storage box on these systems. But you can create secure space, easily accessed digitally, if you have some of these systems on your property. So is that high-end vehicle storage? Is that fleet storage? You name it. Electric vehicle charging…

Matthew Wiatrek: Amazon distribution…

Ben Trantham: There’s so many conversations we’re a part of right now, where people are expanding their mind on how to actually make the parking facility portion of the project revenue generating… Because in this day and age, with the technology, we can control access, we can automate communication, revenue generation… We’re really just selling space. But at the end of the day, it can be automated or it can be non-automated. We also don’t wanna paint the picture for the audience that just because you’re on the edge of the city, more of a garden style development or whatever – there are different price points within the family of solutions here, and it could create some interesting opportunities for whatever your property or your local market is hungry for.

Joe Fairless: If I want five parking spaces full of these systems that stack five cars tall, how much will that cost me?

Ben Trantham: Let me answer that by giving a little structure around what’s out there. There’s everything from manual systems that simply lift up one level, or even up to four levels; sometimes it’s a valet operation, sometimes it’s a dedicated operation where you will operate the system yourself with an RFID card, or a manual control that only you have access to… There’s semi-automated systems that are next up in price point, but give you the ability to only get the vehicle you need out of the storage area. And then there’s the fully-automated.

So it could be as low as, installed, anywhere from 5k to 10k a space, which is going to be equivalent to, if not less, in some cases, in your surface lot construction. If you’re a value-add group, you may already have the sufficient concrete to employ some of the simpler systems out there to get density, or add some flexibility of use; again, self-storage, or whatever it may be.

If you wanna go sophisticated – in Fort Worth, the project we’ve mentioned, we’re in the mid-twenties on the parking system for a space. So again, that was made possible from a proforma standpoint because the land – we were able to activate unutilized land, because the market saw it at a lower value. We’re putting 30,000 sqft. of class A office space, again–

Joe Fairless: Yeah, I get that. I’m thinking more for everyone who’s listening – most people aren’t developing that type of land. A lot of people do have value-add apartment buildings, so… That’s helpful.

So the 5k to 10k a space – let’s just say people are parking their cars there. I’m a resident, I live in a  unit, and – holy cow, there’s my car… But oh, wait. I parked it, and it’s on top of three other cars. How do I get it down?

Ben Trantham: So there’s a couple of ways to do it. If it’s manual, that’s what we call a dependent system, where you have to have access to the vehicle below to retrieve it.

Joe Fairless: That’s a problem.

Ben Trantham: If it’s your vehicle – no problem, you have the keys. If you’re the owner/investor/developer, then you may have reason to want to limit that cap ex, so you employ a system where they’ve got control over whatever they’ve put in that space, whether it’s their motorcycle, their other car, or their self-storage box, so that they can manage that themselves.

A semi-automated is a great way to go, because one of the system types out there that’s very common is – if you can image a Hollywood squares type, where a cars shift left, they shift up and down… But in those systems, they’re independent. You only need to have access to the car you want. So it’s semi-automated in the sense that it knows how to make the machinery movements to present the vehicle you want, but you don’t have to literally have the keys to any other vehicle to get yours. That’s actually very easy. In the multifamily space in the U.S, what we call a lift-and-slide, semi-automatic system is actually becoming quite popular.

Joe Fairless: Okay. And that’s somewhere in between the 10k and 25k range?

Ben Trantham: Yeah, so that one’s gonna be probably more on the 10k to 18k range. You’re going to be towards the top end of that if you’re only putting 20 spaces in. But when you start to put in 100+ or more… And I’m not saying 100 is the breaking point, but as with anything, the more you do, the lower the cost per space.

Joe Fairless: Of course.

Ben Trantham: What we’re seeing in the U.S, most of the space is being built with semi-automated, with probably between 75 to maybe 200 in count.

Joe Fairless: What type of permit, if any, is required for this type of usage?

Ben Trantham: I can’t imagine a vast amount of your audience perhaps is — correct me if I’m wrong, but in places like L.A. County…

Joe Fairless: We’ve got a lot of California listeners.

Ben Trantham: There you go. So in L.A. though, they’ve actually done  a fantastic job developing a review process, where prequalified equipment needs to be selected. There’s been certain safety constraints verified… They’ve actually developed their own structural testing procedure, as I understand it.

So there there’s a well-primed mechanism to get these things approved and implemented. Although it’s an interesting use case, Carvana, the e-commerce car sales company – they’re putting up these automated towers all around the country. We’ve worked on at least 13 of them, in a variety of ways… But they also have paved the way, through a variety of  municipalities, getting these things approved.

So some cities, like L.A, there’s a rigorous process, but it’s a proven and fleshed-out process. Then in some cities, quite honestly like Fort Worth, so far we’ve been very upfront; strategically, they worked with us to — we’ve learned some things over the years about what is gonna make these systems most attractive from a regulatory standpoint… So an open-air garage that is breathable, you can limit the cap ex, and we don’t have to sprinkler so far in this location… So at the end of the day, you’re always up to the review of the local officials, but at the end of the day, it’s equipment. And there’s even some tax advantages associated with that as well.

We’ve commissioned some tax studies… Depending on how you implement the primary structure, even with the equipment in and of itself, a vast amount, if not the entirety of your high-density mechanical parking project could be depreciable year one 100% through bonus depreciation in the current tax law.

If you dispose of that property or resell that, the new owner – at least through 2022 – will get the same benefit. [unintelligible [00:17:39].08] if you don’t wanna do it all year one, but depending on what your portfolio looks like and whatnot, that could be attractive to some folks. It is expected that that tax benefit will be renewed, with some of the tax professionals we’ve talked to… But really, it depends on where you’re at.

The thing I wanna really impress upon you, Joe, and your audience – this isn’t brand new technology. This stuff is, one, proven, but more importantly, in getting things done, L.A. is a great case in the fact that these things have been around long enough they’ve developed a way in more involved locations to handle it.

NFPA (National Fire Protection) codes addressed specifically mechanical parking a few years ago. Most municipalities, if they’re going to take a position enough to make it difficult or easy on implementing this stuff, they’ve got great precedent if they haven’t already figured it out. Things like national codes, building codes, fire codes are responding in a way that we don’t’ have to overbuild these systems like maybe a decade we had to, because people were concerned about a variety of elements of safety.

So there’s a lot of things I mentioned to answer your question. I hope I answered it. If not, let me know.

Joe Fairless: Yeah, you did. Thank you. I appreciate that. I think it’s really interesting from a multifamily owner standpoint… And if you have an infill location and you don’t have much green space – maybe you’ve got all one-bedrooms, or your space is limited; you could do self-storage through some setup like this. As you said, you’re selling secure space. That’s what’s interesting. It’s like “What business are you in? No, no, no, what business are you REALLY in?” It’s like, okay, you answered the “What business are you really in” part, which is selling secure space. Thank you for that.

Anything that you wanna mention as it relates to this before we wrap up? I wanna make sure we’ve talked about anything that you think would be relevant before we wrap this up.

Ben Trantham: What I would do, Joe, is pull on the string you’ve just mentioned just a little bit further. We get into these conversations with some folks, and we’ve been conversing with municipalities, universities, individual developers, all across the gamut of folks that could potentially be interested in these types of systems… And there’s no problem ever in getting people excited. When the rubber meets the road, one of the things we’re learning is, really again, what you’ve just said – yes, we’re selling secure space, but these things are better than a Swiss Army knife, in the sense that directly, they can reveal some incredible new opportunities of how you leverage or utilize the space opportunities you can have by employing one of these systems. Add that dog park, or increase that open space, make up for the space that you need to give back to the onslaught of delivery van spaces we may need to provide now, and food delivery, and you name it.

But indirectly, we really wanna leave with folks the thought that the potential is really at your limit of creativity. So what else could you do with the space that could be revealed? Do you have such an amount of surface lot – if you’re a value-add and you come onto a property that others developed, is there an amount of space that could be reclaimed, that a vast amount of value can be revealed through an amount of space that could add units, that could reveal property that could go to a new land use, or whatever it may be…

We were in meeting about a year ago with a development group that said “Man, the thing that annoys me the most with some of my properties is having to deal with the trash dumpsters. Could I automate the material handling of where those dumpsters are, bring it more in close proximity to where people wanna use it, but then automatically kick it out at the right time to the best place for where the trash track could get to it?” Well, the answer was absolutely yes, because again, we’re already handling big and bulky with the vehicles… But some of the off the wall potential that could be is just stuff that we’ve never considered before.

So you’re right… To pull on that string – yes, we’re space-savers, we’re selling secure space, but the real return that can be realized is not what you can do from even solving a parking problem, but just what incredible opportunities could be revealed because now you can go after a piece of property that previously wasn’t available to your development footprint. Or what else, if you’re looking at a property, is going on around it in the gig economy or in adjacent development… All of a sudden, you get a tool here that – again, because it’s giving space, but because it’s secure and controlled, there’s just so many things that you could do. Matt, you’ve been in this space a little bit more, but that’s really the seed, I think, most important to leave with folks.

Joe Fairless: It makes sense. The challenge though, just from a practical standpoint, that I would have as an apartment owner – I have ideas for it, but I would be concerned about the permitting and approval process to actually execute those ideas, and how could you possibly get the approval of everyone who needs to approve it prior to closing on, or at least getting under contract, that deal. Do you have a solution for that?

Matthew Wiatrek: Well, I think you look at our background, Joe – we’re not an OEM. We’re design/build contractors. That’s our history. So navigating those waters from conceptual stages of a construction project, through the commissioning process – that’s what we do, and that’s what we’re experts at.

Joe Fairless: You could customize it based off of what’s needed by the permitting process.

Matthew Wiatrek: Right. Our value is to say “Look, here’s all the options, and then to help you as the end user or potential client navigate those waters, and to walk you through to [unintelligible [00:23:19].09] from a concept to a reality. That’s the role we play.

Joe Fairless: So it’s not a “round peg, square hole.” You can actually shave it down to whatever you need to, or customize or update it based off of what they’re saying. That makes sense.

Ben Trantham: That’s right. Real quick, Joe, to go back to the project here in Fort Worth  – we knew on the frontend this was the first of its kind for the city. We had actually already primed the city as far as five years ago that “Hey, we’re in town. We’re looking to do this stuff”, and we had support from day one. But we knew there would be certain challenges from a fire standpoint, from a design standpoint, from a potential developer tenant standpoint… There were certain things we did, like make it a standalone facility, open-air, various things like that that made it less of a target for any type of barrier to getting this thing approved. So some of them were site-specific, some of them were in the design… And just like Matt said, that’s what we do.

Another important thing to consider – it’s equipment, right? One of the things we do in our company is we maintain facilities that are 24/7. Again, our background came from industrial space, so we spent a lot of time traveling around the world in the last eight years. Good design, and then after, construction support is essential. So it’s one of the things we do, and it’s how we’re trying to position ourselves as a differentiator. But no matter what you do, folks, if you consider the use of these tools, you’ve gotta make sure you’ve got the backend squared away. Just like you take care of your HVAC systems, the elevators, whatever you may have. And that’s what we do for a living as well, is take care of these systems from a remote standpoint, and from an outside standpoint, mechanically.

Joe Fairless: How can the Best Ever listeners learn more about Trident Structures?

Matthew Wiatrek: You can visit our website, Trident-Structures.com. We’re also on all the major social media platforms. LinkedIn and Instagram I would say are our most active. You could obviously email Ben or I directly.

Joe Fairless: What’s your emails?

Matthew Wiatrek: mwiatrek@trident-structures.com.

Ben Trantham: And then ben@trident-structures.com.

Joe Fairless: Ben, Matthew, thank you so much for being on the show, talking to us about your business and how it could help us make more money on our current properties, or uncover opportunities that others are passing by because they know about this.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Matthew Wiatrek: Thanks, Joe.

Ben Trantham: Thanks, Joe.

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