JF2001: Being Your Own Tenant in Commercial Real Estate with Ken Wimberly

Ken is a business owner who started out as a land broker and in 2008 he quickly learned how to adapt due to the economic downturn. Fast Forward to today and now he has developed a successful app called Legacy of Love, an app that helps connect kids with their parents. Ken also shares a story on how he went from purchasing a shopping center and searching for tenants to creating his own tenant. 

Ken Wimberly Real Estate Background:

  • Founder and visionary behind Legacy of Love, LLC.
  • Entrepreneur and real estate investor, and has 16 streams of passive income and 4 streams of active income
  • Based in Fort Worth, Texas 
  • Say hi to him at https://www.laundryluv.com/ 
  • Best Ever Book: The Obstacle is the Way 

Best Ever Tweet:

“Whether it’s a client, customers, tenants, your partners, your lenders, if we can figure out how to be a significant source of value to others life rewards us.” – Ken Wimberly

JF1981: Rebuilding your portfolio with new develoment with Russell Westcott

Out with the old, in with the new. Investor Russell Westcott is repositioning his portfolio by selling his older properties and replacing them with new construction rental homes. Having transacted over 100 properties over the past 20 years, Russell and his business partner decided they were done being eaten alive by deferred maintenance. He also discusses some of the lessons he’s learned by surviving a couple Canadian market downturns. 

Russell Westcott Real Estate Background:

  • Veteran and full time real estate investor 
  • Built his first million-dollar real estate portfolio within his first year of taking the leap into real estate investing
  • Based in Coquitlam, British Columbia, Canada
  • Say hi to him at https://russellwestcott.com/

 

Best Ever Tweet:

“You need to invest in yourself first. Even though you might not have the money and you might not be making money-investment into the deal, you need to invest into yourself. ” – Russell Westcott


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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. With us today, Russell Westcott. How are you doing, Russell?

Russell Westcott: Hey, Joe. How’s it going today, my friend?

Joe Fairless: It’s going well, and looking forward to our conversation. A little bit about Russell – he is a full-time Canadian based real estate investor. He’s built his first million-dollar real estate portfolio within the first year of taking the leap into real estate investing. So, built a million-dollar real estate portfolio within the first year, we will talk about that. He’s based in British Columbia, and his website, RussellWestcott.com, is where you can go and check him out; it’s russellwestcott.com. So with that being said, Russell, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Russell Westcott: Well, thank you, Joe. I’m honored to be on your podcast and share today. Before we get into it, I just want to acknowledge you. I want to acknowledge you with the service that you’re providing for real estate investors, and congratulations, the world’s longest-running daily real estate show. I understand your event that’s upcoming is getting pretty close to being sold out, so congratulations to you for providing an amazing service out there.

Joe Fairless: I appreciate it.

Russell Westcott: Well, it’s interesting… Maybe it’s just the Canadian in me deflecting and that– I’ve often found that’s the hardest question to answer, is “Talk about yourself for a little bit, Russell.” Well, my journey is maybe a little bit longer than most people’s; maybe because I’m just a slow learner, and I just take the long route a little bit, but I joke that my journey started around the turn of the century, right around the year 2000. At that time, I had a self-inflicted Peter Pan syndrome, where I was afraid to grow up. It was a milestone birthday that hit that year in 2000, I was turning 30, and I need to grow up, I need to take financial control of my future.

I was renting a basement suite and never bought a property before in my life, had no idea where I was going to go for advice or where to go to take my business and take things to the next level. And lo and behold, the answer to me came from watching Oprah. On Oprah, around that time, I saw Robert Kiyosaki when he talked about Rich Dad, Poor Dad. That little purple book changed the direction and changed the trajectory of my life. After reading Rich Dad, Poor Dad, it changed everything on a different path that I was going down. That’s almost coming on 20 years now.

Joe Fairless: Got it. So what is your current focus now?

Russell Westcott: My current focus right now is what I’ve been doing for 20 years. I’ve built a fairly sizable portfolio. I’ve transacted over 100 properties. I’m actually in the process right now with myself and my business partner – we’re building brand new construction rental properties. So I’ve had my lesson handed to me of buying old crappy– now don’t get me wrong, I’m not saying anybody who’s buying older, junkier, crappier properties is doing it wrong. Maybe my age and advanced years, what I’ve seen, I’ve had my lessons handed to me by buying old properties with deferred maintenance; you just get eaten alive.

When you buy a property, and you hold it for 15 to 20 plus years, it’s now another 20 years older, deferred maintenance starts catching up on you, and you just get your lunch handed to you with expenses and bills. I’m now getting into actually building rental properties, like building houses with suites, building houses and garage suites, building duplexes, fourplexes, all the way up to eightplexes, and that’s what I currently hold.

Joe Fairless: So let’s talk about that. But first, within your first year, building your million dollars real estate portfolio that’s in your bio, what does that consist of?

Russell Westcott: Well, it consists mostly of townhomes. You may call them a little bit different, you may call them semis; different people call them different names. Where I’m investing, they call them townhomes, apartment-style condos. Those are the typical ones. Condo fees just slowly started creeping up and just eating me alive. When I first got started, and I put it in my bio that I built a million-dollar portfolio in my first year, I add about a million dollars in properties every year. What I’ve done now is changed my focus a little bit. But there was a time when I first got started that I bought a property a month for five years, on average. But I say that to not impress people, I say that to impress upon people that that actually was a big mistake; that I added way too many properties too fast, didn’t have the infrastructure built, didn’t have maybe the business acumen, didn’t have the support structure to do that. When you build a portfolio of 60 properties in under five years, you better have some really good support systems and people and teams surrounding you to be able to handle that, because that’s very, very big business.

Joe Fairless: Okay, so 60 properties in five years. How many of those 60 properties do you still have?

Russell Westcott: Today, I have a right around 30. I added another six last year and I’ll probably add another six to ten this year.

Joe Fairless: What property have you made the most money on?

Russell Westcott: The most money would be — probably it’s still to be determined. The new construction properties that I’m buying–

Joe Fairless: To date. Whatever deal’s gone full cycle, what deal have you made the most money on?

Russell Westcott: Well, most of the properties that I have sold, actually, I didn’t make a lot of money on. Most of the properties that I did was because I called the herd; when something’s not right, get rid of it. So the properties that I do have are ones that are performing well now. But I’m actually repositioning, I’m calling the herd, getting rid of old properties, and building brand new construction to hold for the next 15 to 20 years. Eventually, I’m repositioning my entire portfolio.

So I’ve been doing it — not to say I’m starting over, but in essence, I’m almost starting over again with my portfolio, as I built an entire portfolio, but a few of them did not turn out well; it was in a market that had to downturns in 10 years. Some of the properties I bought 12 years ago are worth less than they were today than when I bought them. So I’m just repositioning a lot of my portfolio now and building it all again from scratch.

Joe Fairless: I get it. I want to talk about the two downturns in ten years and the causes of those based on your perspective, but just to complete the circle of the question, so you have sold about 30 properties. So of those 30, which one, if any, made you the most money?

Russell Westcott: Well, interesting to note – most of the properties that made me money, I had to reinvest that back into the properties that lost money. It’s funny, it was probably about five years ago I had to sit down and I had to have a really tough conversation and a real tough look in the mirror, and I put together the good, the bad and the ugly plan. What I had to do at that time is I had to sell some good properties to pay off the downright ugly ones. Some of the bad ones are starting to be flushed through now and I’m left with a few leftovers. I’m building more– I’m left, when I say a few, I’m left with 30 places.

Joe Fairless: Yeah, 30’s a lot.

Russell Westcott: Plus, still adding more to the portfolio.

Joe Fairless: So of the ones that made money, regardless of what you did with that money, I’m just wondering, of the 30, which one made you the most money and then we’ll talk about the flip side.

Russell Westcott: The mistake I made was, I probably should have exited when I needed to, at the peak of a mark. So I had properties that I bought that skyrocketed up in value and then dropped down significantly. But I had properties that have made hundreds of thousands of dollars. I don’t have the exact number. That’s actually a very good question. I probably should go back and [unintelligible 00:08:23.20]

Joe Fairless: About how much has the one that made you the most money, how much did that make you?

Russell Westcott: I would say probably about $130,000.

Joe Fairless: Okay, got it. So $130k on the upswing, and then some of them that you sold, as you said, you’re calling the portfolio… Which one did you lose the most amount of money on?

Russell Westcott: The one I lost the most amount of money on probably was on a flip that I had gotten, and had bought it, and  I’m just trying to get the exact number… It was probably the flip it was at about nine months and it lost about 60 grand.

Joe Fairless: Okay, that’s not that bad. If you were presented a similar opportunity now, and you had to buy the property, but you could change the terms or price (within reason), what would you do differently to help mitigate that loss from taking place?

Russell Westcott: The number one thing I would do is with the money partner I was working with, I would have clearly expressed to him that if this doesn’t make money by the time we turn around and sell, we are going to then turn around and rent it. We got in with the money partner together. We got in, and the total intention was to sell it at the nine-month mark. The nine-month mark came and there was a loss in there. I had to do what we agreed to, but I would have probably positioned it upfront that we have to be prepared to hold it for more years to come if it is at a loss position.

Joe Fairless: How many years was that ago?

Russell Westcott: That was fairly recent, actually; within the last two years.

Joe Fairless: Okay. Let’s assume that you had rented it out for the last two years. Where would you be at this point with it?

Russell Westcott: It’d be getting closer. That was actually in a suburb of Vancouver where I live, where we did that. We had a very severe downturn in the last probably 18 months, where the market just fell out, the bottom fell out.

Joe Fairless: Is that the market where you said it had two downturns in ten years?

Russell Westcott: That was the Alberta marketplace.

Joe Fairless: Another market? Geez, I’m staying away from where you invest in… [laughs] I’m just kidding.

Russell Westcott: I make a joke quite often, “Hey, I’ve invested in this marketplace. Everybody stop investing now; go somewhere else.” One of my early mentors on the ground told me that sometimes we’re put on this earth to be a warning to others.

Joe Fairless: [laughs] Well, I think that’s true for everyone. There are things we can learn from everyone, that’s for sure. With the markets, two downturns in ten years for the, you said, Alberta? Alberta market?

Russell Westcott: Yeah. It was an oil-based economy.

Joe Fairless: Oil-based. Okay. So primary economic drivers were oil, so oil went down, therefore the economy goes down.

Russell Westcott: Yeah. Well, it’s a little bit more involved than that, but that is the gist of it. The first downturn was the global economic crisis back in 2008. Then the next one  – there’s a lot of policy things that have happened. There’s been a lot of– not going to get political here, but there have been some governments that have not been favorable for the energy industry, things like that have just not been favorable to energy-based economies. But the good news now is the market has been down long enough that the green shoots are coming in and it’s actually a fantastic time to get back in and buy at a very aggressive rate.

Joe Fairless: Alright. So now let’s talk about what you’re currently doing. Thank you for sharing the lessons that you’ve learned from what you’ve acquired so far. So now, you said–

Russell Westcott: Success is actually a poor teacher. So we learn more from our failures than we do from success.

Joe Fairless: So now, clearly you’re a personal development student; you follow Tony Robbins and others. Yes?

Russell Westcott: Absolutely. I did it far more back in 1992.

Joe Fairless: When you mentioned the phrase, “Impress, and impress upon,” I was like, “Tony Robbins. There he is. I know that.” Alright. So you said, “Forget that other stuff. I’m doing new development. I’m going to be building my rental properties because the maintenance expenses over the next 15 years will be minimal. And I’m going to hold these puppies.” First off, is that an accurate assessment of where you’re at now?

Russell Westcott: Absolutely, yes.

Joe Fairless: Okay. So I’m going to play devil’s advocate and just mention – I want to hear your thoughts – that okay, new development, totally agree that maintenance is low, and you’ve got a brand new property, and it’s a shiny thing for residents to flock to. On the flip side, should a downturn happen – like what happened twice in Alberta, and like what happened in Vancouver that you mentioned – then having dirt that you’ve purchased that’s not generating income prior to stabilizing it puts you in a precarious position. So what are your thoughts on mitigating that risk?

Russell Westcott: So here’s how I mitigated that risk. I actually only buy the finished product. I do not own the dirt. I’m a business partner and I will go out, identify land positions, and then we have a group of builders that will actually go out and build it for us. We do not buy in spec, we actually only buy based upon properties that we have. When I close on it, there’s actually a host on it. When I own it, there’s actually a tenant in place on the property, fully done, purpose-built rental property.

Joe Fairless: Wow, okay. Just so I’m understanding it correctly, you identify the land positions, meaning you go and you say, “I’d like a house here, please.” Then you speak to your builder and he or she goes and builds it. They put up all of their own money, they put all their resources in it. You have no money, nothing tying you to purchasing that. Then once it’s built, then the builder comes to you and says, “Okay, you said you wanted that. So now you may buy it from me at x price,” and then you buy it.

Russell Westcott: That’s very close.

Joe Fairless: There has to be a catch. I knew there is a catch, because I knew it didn’t quite work that way. That’s why I wanted to summarize it.

Russell Westcott: Very close. So my business partner and I – he will go out, he lives in the area, I live in Vancouver. My job is to get on stages and talk and bring people and excite people and bring investors to the opportunity. I will go find an investor that might want to buy a property through me, or just go buy it on their own. Then my business partner goes out, finds a good subdivision, finds the right spot with good parking, everything; they have the right floor plan for tenants. Then the investor who’s buying it, whether it’s myself or the person that I bring to it, will write an offer. They’ll put down a deposit anywhere between 5% and 10% deposit. They’ll also qualify for a mortgage. Then when they have a purchase contract, the builder then has the confidence and they’ll go build the property then. Then the investor will then close on it, say, six to nine months later.

Joe Fairless: Got it. Okay, so the investor and builder are the ones who have the risk in that. The investor has 5% to 10% deposit and the builder has their time and perhaps supplies.

Russell Westcott: But with the investor, the risk is mitigated because the money sits in a realtors’ trust account. If the builder does not build it or does not fulfill upon it, the investor can get their money back because it’s sitting with a realtor. There are laws governing deposits sitting with realtors.

Joe Fairless: Cool. So assuming that there’s not a major market crash, then a lot of the risk is mitigated in that scenario.

Russell Westcott: Yep.

Joe Fairless: Okay.

Russell Westcott: The builders don’t want to bite off more than they can chew, too. Most of the builders are actually just using land positions they already have put deposits on.

Joe Fairless: Sure, right. Of course.

Russell Westcott: Right now, in the market I’m buying in, to buy a brand new construction property is not much more money than actually buying a house off the MLS. Usually, people say, “Well, with new properties, you’re paying a premium.” In the market I’m in, new construction properties cash-flow, and they’re not that much of a premium. That’s why I’m doing this.

Joe Fairless: What market are you in?

Russell Westcott: It’s in a northern city of Alberta.

Joe Fairless: Edmonton Oilers.

Russell Westcott: You betcha.

Joe Fairless: So you’ve been all over Canada. You’re all over… [laughs] It’s like, pick your Canadian reference point in this conversation. I gotta look at a map afterwards to see your travels of real estate ventures.

Russell Westcott: Well, I actually grew up in Saskatchewan, so…

Joe Fairless: Okay, there we go. I want you to mention as many Canadian places as possible during this 30-minute conversation.

Russell Westcott: Yes. And I may drop a couple A’s and I might apologize a couple times, too.  I should have my Tim Hortons’ coffee with me here, too.

Joe Fairless: [laughs] So Edmonton is where you’re buying. What’s the purchase price on average of new construction?

Russell Westcott: Well, depending on the model and finishing and stuff, anywhere between 400k to 525k for a suited house model, all the way up to, say, 1.6 million for an eightplex.

Joe Fairless: An eightplex, okay. For easy math, we’ll start with the $525,000 property. What’s that renting for?

Russell Westcott: Well, I’ll give you my last two suited houses I bought, where in essence there’s 920k, essentially for a fourplex. That’s rented for 75k grand a year.

Joe Fairless: Okay. $75,000 a year divided by 12 is $6,250. Then what did you say the purchase price was? 900k?

Russell Westcott: All-in, that includes all taxes, that includes all landscaping, that’s a completed turnkey  property.

Joe Fairless: Okay. So people talk about the 1% or 2% rule. This is 0.67 of a percent. But it’s a new construction. Have you heard of the 1% rule?

Russell Westcott: Yeah, absolutely.

Joe Fairless: Okay, cool. So it’s under, but your take on it, which is very logical, is that it’s new construction, so you have less maintenance headaches.

Russell Westcott: Well, let’s put it this way… I have not had a phone call for these properties yet. As a matter of fact, they’re under warranty for the next two, five, ten. There’s a warranty on it. The maintenance hassles are a lot less. The difference in tenant profile is completely different, too. Like, getting people that are making a $100,000/year incomes. One of the other units is — there’s a police officer, an [unintelligible 00:18:05.20] officer, and his family. It’s a completely different tenant profile that you’re getting. It removes a lot of the maintenance and a lot of the management hassles as well.

Joe Fairless: Then when you scale up in units for the eightplex, is that a similar ratio?

Russell Westcott: It’s a little bit better.

Joe Fairless: A little bit better. Okay, that makes sense.

Russell Westcott: Yeah. On an eightplex, I don’t have my numbers in front of me, but it’s significantly better on an eightplex where potentially you’re getting, depending on the mix, you’re getting $1,800 per unit on the up; you’re getting almost $12,500.

Joe Fairless: Okay. So you did the annual amount?

Russell Westcott: No, that’s for a month.

Joe Fairless: Twelve five, $1,250 a month, per unit?

Russell Westcott: No, a total, all eight, $12,500.

Joe Fairless: Okay, because it’s about $1,800 a unit?

Russell Westcott: They come in stacks; there’s an up and down. So it’s 16 up, 9 down.

Joe Fairless: Okay. So how much per unit, on average, rent per month for an eight-unit?

Russell Westcott: $2,500 per stack of four. $2,500 times four. Then there are utilities on top of that. So the way it’s built is essentially– it’s a stacked townhome and there’s four of them put together.

Joe Fairless: Okay. So there’s an eightplex, so there are eight different families. There could be eight different families living there. Is that accurate or not?

Russell Westcott: That’s correct. It could be 16 up, 9 down.

Joe Fairless: 16 up, 9 down for an eightplex?

Russell Westcott: No, there’s four. There’s a stack of four. So think four townhomes all stuck together.

Joe Fairless: Okay, got it. [inaudible at 00:19:41:05] Okay, so eight total dwellings if it’s an eightplex, right?

Russell Westcott: So I guess this would be the best way – four of them at $1,600 and four of them at $900.

Joe Fairless: Got it. Okay, so four are at $1,600 rent a month and then four of them at $900.

Russell Westcott: Correct. Then there are utilities, there’s parking there, there are things on top of that as well.

Joe Fairless: Fair enough. Okay, I understand. I apologize for being dense on that, but I understand now. So let’s just go with the best-case scenario. If it’s $1,600, and I’m paying about $200,000 for it, instead of 0.67%, it’s 0.8%.

Russell Westcott: Yep.

Joe Fairless: So it’s inching up closer to the 1% in the $1,600 case, and the other one would be obviously lower than that.

Russell Westcott: Then where we’re doing these and building these, that might be different across jurisdictions. But some of the investors that are getting in with residential financing on these, instead of going the commercial route, are able to get actually a residential mortgage with full discount CMA, those kinds of things as well, as opposed to the commercial route.

Joe Fairless: Okay. Yeah, I imagine it’s going to be a lower down payment and lower interest rate and longer amortization.

Russell Westcott: No fees as well.

Joe Fairless: Oh, beautiful. If they buy the whole eightplex, they can get that type of loan?

Russell Westcott: On one title. If you buy one title, you can get one mortgage.

Joe Fairless: Wonderful. For the whole eightplex?

Russell Westcott: Correct. And really cool exit strategies; you now have the ability to potentially subdivide it into four separate titles.

Joe Fairless: There you go. Then you can sell them off piece by piece.

Russell Westcott: Yes. Buy by the yard, sell by the foot.

Joe Fairless: Okay, that’s not the first time you said that. I’m kidding with you. Cool. Well, when you take a look at your experience as a real estate investor, what is your best real estate investing advice ever?

Russell Westcott: The best advice was someone who gave it to me very early, and the best advice was, “Money is required to buy real estate, but it doesn’t have to be your money.” That came to me very early and thank goodness it came to me very early, because I had no money to buy real estate. I had to learn the process of how to raise capital from other people in order to move forward and keep building this portfolio. So I built my entire portfolio raising capital from other people. I’ve written books on it, I’ve taught people, I’ve trained… I’ve done the majority of my real estate investing in other people’s capital and helping other people.

Joe Fairless: You’ve just come across a 20-year old, and she asks you how she can get started in real estate. In particular, she wants to learn how to partner up with people and use their money, not hers, because she doesn’t have money. What is your advice to her?

Russell Westcott: The best advice I would give her would be you need to invest in yourself first. Even though you might not have the money and you might not be making money investment into the deal, you need to invest into yourself. I was in the exact same boat and then I would just share my story; truly, when I got in, I had no money. I could qualify for a mortgage, but I had no down payment. So what I did was I got involved with a network.

I networked, I trained, I got a coach, I got mentored, and I kept sharing with everybody that I talked to what I was doing, and the action I was taking, and the properties I was dealing with, and things that I was learning. And all these people that had the capital saw that I was willing to invest in myself and that I was willing to do the work. Then eventually, I was getting my hands dirty, and eventually, they trusted me to do the work for them, and they were putting up their money into the deal after that.

Joe Fairless: What program did you go with to find a coach?

Russell Westcott: Through a company up in Canada called the Real Estate Investment Network. I actually ended up being their vice-president for the better part of 13 years as well.

Joe Fairless: So I was going to ask, would you recommend — but you’re a fan. So yes, you’d recommend it.

Russell Westcott: Yeah, 100%. But here’s the thing – things have changed so much, and you would know this too, Joe; things have changed so much. Meetups – there are so many amazing meetups in the real estate space. Every local community and market almost has something. The main thing I would just say is, just show up, get out there, start hanging out with those like-minded people, and you’ll be amazed at what can happen.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever lightning round?

Russell Westcott: You betcha, brother.

Joe Fairless: Alright. Let’s do it. First, a quick word from our Best Ever partners.

Break: [00:23:59:08] to [00:24:59:02]

Joe Fairless: Alright, what’s the best ever deal you’ve done?

Russell Westcott: Best ever deal– interestingly probably, it was my first one. I know sometimes people obviously say their first one, but the first one was the one that I got in the game. I will be honest, I did everything wrong, I made all the mistakes, I struggled along. Actually, the tenants in the basement suite passed away on the property and I sold it within probably a year of buying it. I did the entire cycle of buying and selling it within one year, and I lost money on it. I lost about 500 bucks. I sat there and I’d go, “You know what, if I just do one thing better the next time, I think I can make this work,” and I didn’t quit. That was the main thing, was it got me in the game. It started — even though I did a lot of things wrong, I didn’t quit, and that was probably the best deal I ever did.

Joe Fairless: What’s the best ever way you’d like to give back?

Russell Westcott: The best way I like to give back is actually just teaching and sharing and coaching and consulting. I jump on to podcasts all the time, I do Facebook live all the time. I host multiple Facebook groups. I write books, I teach, I share. I’m a firm believer in the quote by — and I’m probably gonna mess up the quote a little bit, but it’s a John F. Kennedy quote, “To whom much is given, much is expected.” And I’ve been so blessed over the years and in order to be a blessing to others, I need to share everything that I’ve learned. I’ve had so many amazing mentors in my life, and I’m actually in a point that I’m giving back to the real estate investor community of mistakes I’ve made.

Some people will not talk about their mistakes, that it’s only just unicorns and butterflies and sunshine and roses and everything’s wonderful. Not everybody will actually share the struggle and share the downturn and share the mistakes that you made. I actually celebrate them, and I actually am sharing all these lessons I’ve learned through almost 20 years. I share this with the real estate investing community, to encourage them and inspire them to keep moving forward.

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

Russell Westcott: My website is the hub of all things. That’s just russellwestcott.com.

Joe Fairless: How’d you come up with that website name?

Russell Westcott: I think my mom did. [laughter]

Joe Fairless: Russell, I really enjoyed our conversation. As you said, celebrating mistakes and talking about that, but then also talking about your success and your focus now, and why you’re focusing on it, with new development and the structure that you have with the individuals or the parties involved. I really enjoyed our conversation. I hope you have a best ever day and we’ll talk to you again soon.

Russell Westcott: Right on. Thanks, Joe.

JF1940: Investor Gets Into Real Estate On Accident, Scales To $750M AUM with Don Wenner

Don got his start in the industry by knocking doors to sell security. An investor told him to do that same thing with real estate. He took the advice and ran with it, knocking on doors to find properties to buy, eventually getting away from the door knocking and scaling a large real estate investing business. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

“When people lose money on an asset, usually it’s because they couldn’t execute internally and over extended themselves” – Don Wenner

Don Wenner Real Estate Background:

  • CEO of DLP Real Estate Capital, a family of real estate solution companies w/ 350 team members, 750MM in assets under management, and 100MM plus in annual revenue
  • 10k units owned, 12k homes and apartments acquired
  • Based in Allentown, PA & St. Augustine, FL
  • Say hi to him at https://dlprealestate.com/
  • Best Ever Book: Turning the Fly Wheel by Jim Collins

 


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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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, Don Wenner. How are you doing, Don?

Don Wenner: I’m doing great, Joe. How about yourself?

Joe Fairless: I’m doing great as well, and looking forward to our conversation. A little bit about Don – he’s the CEO of DLP Real Estate Capital, a family of real estate solution companies with 350 team members, 750 million in assets under management, and 100 million plus in annual revenue. They’ve got 10,000 unit owned, 12,000 homes and apartments acquired, and based in a couple places: Allentown, Pennsylvania, and Don, where are you located?

Don Wenner: St. Augustine, Florida. Just south of Jacksonville.

Joe Fairless: Just south of Jacksonville. First, Don, do you wanna give the Best Ever listeners a little bit more about your background and your current focus? And then we’ll go from there.

Don Wenner: Absolutely, so I’ll give the one minute or two version. I started in real estate probably like most people; I was a college student at Drexel University in Philadelphia, and I was actually spending my days knocking on doors… Literally, all day, knocking on doors while I was in college, for ADT Security. I became the number one sales rep in the country for ADT, and I was making 5k to 8k every two weeks; I thought I was on top of the world, I was 19-20 years old… And the guy who owned the company was in real estate. This was 2006. Everybody was in real estate in 2006… And he told me if I could sell alarm systems knocking on doors, I’d do great selling real estate.

So I got my real estate license, started selling real estate. That led to very quickly starting to flip real estate, which then at the bottom of the market led to building a real estate portfolio of single-family homes, scattered multifamily, all the commercial food groups… That led us to build a construction company to handle all the renovations, it led us to build property management to handle all the management, it led us to need to open private investment funds to bring in capital to fund all the growth… That led down a path of starting to lend capital to other investors and growing a large lending business, and then further writing equity and partnering with other operators.

To fast-forward all that now to today, we have a family of 350 team members across eight total companies, headquartered, as you said, in Pennsylvania, Florida, offices really throughout the East Coast… And having a lot of fun at it.

Joe Fairless: What do you miss about door knocking?

Don Wenner: [laughs] It was a lot of fun. The simplicity of the one appointment sale, the simplicity of you know on the door, you put your head down and shuffle and walk in that door, and you walk out with a signed contract and a commission check. The simplicity of that type of sale was pretty awesome. It was a great way to cut your teeth and learn the basics of sales… I’ve been having a lot more fun since then, but it was a great experience.

Joe Fairless: So how many units does your company own right now?

Don Wenner: We own somewhere between 10,000 and 11,000 right now.

Joe Fairless: And where are they located?

Don Wenner: We’re heavy in the South-East. We’re in a total of 15 states. We’re heavy from North Carolina down to Florida, we’re also heavy in Pennsylvania and New Jersey, because that’s where the company is headquartered, and we have a lot of relationships and assets… But we’re out as far West as Arizona, we’re as far North as South Bend, Indiana, but we’re in 15 total states and we own anywhere from 200 to 3,000 apartments and homes.

Joe Fairless: And how are you able to manage that process?

Don Wenner: Great question. It starts, of course, with great people. If you asked me where do I spend most of my time, the largest segment of my time is spent on hiring and developing leaders. We really build a culture of  — our mantra is “Leaders made here.” So we build great leaders throughout the individual businesses, empower them to grow and take ownership and lead, and that’s been really the key to our ability to scale, both geographically, and the new business lines, and sitting in different seats with any of these different business lines and transactions.

Joe Fairless: And I’d love to talk more about that, but first just so I’m wrapping my head around this correctly… You said you have 350 team members. How many of those are W-2 employees?

Don Wenner: 325.

Joe Fairless: So you have 325 W-2 employees across eight companies. What company of the eight has the most employees?

Don Wenner: Property management.

Joe Fairless: Yes, of course…

Don Wenner: We have about 150 in property management.

Joe Fairless: Okay. And why have your own property management? Because I’m sure you did some pros and cons of starting your own management company.

Don Wenner: Yeah. To be honest, in the beginning, the types of properties we were buying – it was hard to find good management. When you’re buying 20-unit, 40-unit, 60-unit type properties, there’s really not good professional management out there. Or at least not that we were able to find in the secondary and tertiary markets we were in. So in the beginning, there really wasn’t any other option. And then as we grew, we evaluated and we’ve used third-party management, and we have some of our portfolio today, about 2,000 of our apartments we do a third-party management. But we still provide the construction management and the asset management.

But really, at the end of the day, your job running a business is operations, and your ability to execute is the key in any business, and certainly managing real estate is no different. I believe that my interest, my alignment and then the interest in generating profits at the asset level is always gonna be much greater than the interest level in the management company whose goal is to drive his bottom line.

So the alignment of interests are in place when you own your own management company, and then we believe strongly that by executing what we call our elite execution system, which is how we run each of our businesses, and the disciplines of executing, of hiring, of laying out our strategy and business plans and then doing the things every day, building the right forms of communication, solving issues, managing your top priorities – the way we’ve built that throughout our organization allows us to get significantly better results than any other management company we’ve been able to come across.

Joe Fairless: And since that’s the case, why have 2,000 units be with third-party management?

Don Wenner: When we go into a new market – for example, we’ve gone into Arizona, and we didn’t own anything within six or seven hours of this new community we just bought in Arizona… So in that specific case we didn’t have any infrastructure in place yet, we didn’t have any relationships yet, we didn’t have any contractors yet… So it was in easier — in that case, actually, it was one of the rarest situations where we bought a property that already had pretty good management in place… So it was just a lot easier to keep that third-party manager in place initially. They already had the knowledge of the asset, the knowledge of the market, the knowledge of the people… Than to force change, and with all my senior leadership being remote – it made it a lot more challenging.

So generally we’ll bring in third-party if it’s a new market to us, we don’t have experience… And then if they do an incredible job, we’ll keep them. If they don’t, then we take over the management.

Joe Fairless: So let’s talk about the Phoenix portfolio or property. Can you tell us some details about it?

Don Wenner: This property is actually right outside of Tucson, and…

Joe Fairless: Oh, Tucson. Arizona — I made a poor assumption.

Don Wenner: [laughs] So this is a 196-unit built in 1997, class B community, in a class B+ neighborhood.

Joe Fairless: Okay. And how did you find the deal?

Don Wenner: I actually bought it through an auction platform. So we’ve actually done pretty well buying through auction platforms, because generally, especially this platform, you have to wire a 10% deposit, and it was a 14 million dollar deal… A 10% deposit within 24 hours of winning the auction, and you have to close in 21 days with no contingencies.

So generally, what we joke is smaller operators generally don’t have the ability or the confidence that they can pull the money together that quickly, and the big guy, the guy sitting in New York, generally the big Wall Street funds, they generally can’t get the contract signed in 21 days, let alone close on the asset. So we’ve generally done very well on those types of deals, with very short timetables and very hard terms.

Joe Fairless: That’s interesting. What platform is it?

Don Wenner: Real Insight Marketplace.

Joe Fairless: Okay. How many deals have you bought from Real Insight Marketplace?

Don Wenner: Five or six.

Joe Fairless: And the first one, how did you get comfortable with buying the first one off of an online auction? …I assume it’s an online auction platform.

Don Wenner: Correct. You have to be willing to invest and do your homework upfront. So you have to be willing to invest, and doing your due diligence, getting out to the asset, doing everything upfront when you know there’s a good probability that you’re not gonna win the auction. You have to make that investment to get to the point of 100% confidence before the time of submitting your offer, so that then you’re confident in the asset and in your underwriting, but also in your ability to close quickly, and understanding all the hair that could come up as you’re finalizing up your capital structure and getting the deal closed.

Joe Fairless: So what do you do, tactically speaking, to get 100% comfortable with purchasing a property where you’ll have 21 days to close with no contingencies?

Don Wenner: I’d say the first place for most people who start is you have to confident you have your capital in order. That’s the first thing that we focus on. Beyond that, it’s understanding the asset and the market at a high level. Generally, our due diligence process consists of a team going out to the asset, or an acquisition team, our construction management team, our asset management team… In this case, this property didn’t have a heavy redevelopment component, but when they do, generally bringing contractors, and often bringing — our third-party is bringing an engineer out right away, if there’s not already one. In this case there was. Getting the phase one done on the property before you even have it tied up…

But bringing a full team out there, spend a couple days, walk through every single unit, dive deep into the asset, do your full lease audit and evaluation of the financials upfront… And then getting out to the competition. That’s really a big part of it. Truly understanding the market… This was, again, our first deal in a new market, so getting to know the market, getting to know the competition, getting to understand the demand, getting to understand the larger employers in the market, understanding the demographics, understanding the tenant base, and getting comfortable that we’re gonna be able to continue to execute over the 5 or 7-year business plan that we’re laying out for that property.

Joe Fairless: Approximately how long does it take to complete this part of the process for you? I know on the ground you said a couple days, but I imagine the lease audits, and looking at the financials – that takes a little bit longer.

Don Wenner: Yeah, if we’re under a short timetable, like on a deal like this, we’re generally gonna complete the whole process, start to finish, in about seven days. Like most, we’d prefer to have a little more time, but when we’re operating under a short timetable, generally we’ll complete the majority of our due diligence in about a week.

Joe Fairless: And what part of what you’ve just said — are there still some lingering things that could bite you in the butt, just because you were having to compress your timeline to seven days?

Don Wenner: Yeah, it’s a great question. Like any deal, we look at it as — a deal or an asset can be a great asset at one price, and a terrible buy at another price… So one of the great parts of buying on auction platforms generally is you’re picking up assets at a lower basis, that gives you a little bit more room. So anything we’re not 100% confident we’ve nailed down, then we just assume the worst in our underwriting. We’ll assume the worst on what it’s gonna cost us, or if we’re not 100% confident with what rents we’re gonna be able to drive through an upgrade package, we’re gonna assume the most conservative side of our analysis, and max out our max bid based on a more conservative underwriting.

So generally, the more holes we have in our underwriting at the point of the auction, the lower our bid is gonna be, which can result in us getting a better buy, or of course, can result in us losing out, because we weren’t able to complete and check every box in our underwriting, so we came in more conservative.

Joe Fairless: I believe you said you’ve closed on six properties on that auction platform… Did I hear that right?

Don Wenner: On that specific auction platform, yeah. We bought many, many on multiple different auction platforms, but on that specific one – yeah.

Joe Fairless: Okay. On that platform, approximately how many bids have you put in to get those six closings?

Don Wenner: We’ve probably bid on 15 assets to win those 5 or 6.

Joe Fairless: Oh, so 15 which includes those six, or 15 that you didn’t get? Wow…

Don Wenner: Correct. So we have a 33% to 40% hit rate generally on auction deals that we decide to bid on. We feel we have a good chance at it, and we do all our homework upfront to determine what the whisper price is, what the reserve price is, really where is the thing gonna shake out, to know if it’s something we’re gonna put forth all that energy and effort around.

Joe Fairless: If you mobilize your crew to go do that 7-day exercise and go visit the property, and do the lease audits, do you generally then move forward with making an offer?

Don Wenner: Generally, yes. There’s certainly exceptions to the rule. You come up with something you just don’t wanna tackle or deal with. It’s usually less about the physical asset, and it turns out that an issue with the neighborhood that we don’t wanna tackle, whether that be crime, or drugs, or just we see negative trends in population growth, or socio-economic changes going on that we don’t feel confident in the basis, that we didn’t have the most accurate assumptions before we got out to the asset. That’s generally what happens. It’s less about the asset than the neighborhood.

Generally, we like to buy C+, B- assets, in B+ or better neighborhoods. So if it turns out to be a neighborhood that we don’t think we’re gonna be able to control or change, then that can be what turns us away from an asset.

Joe Fairless: What online platform have you bought the most properties on?

Don Wenner: In terms of multifamily communities, we’ve bought on many of them. But I’d say the one we’ve historically been the most active on has been 10X.

Joe Fairless: How many would you say you’ve closed on that?

Don Wenner: Maybe 15.

Joe Fairless: Any recent ones?

Don Wenner: I don’t think we’ve won any in 2019. In 2018 we definitely bought a number of assets. I know we’ve been the bridesmaid on a few this year, but I don’t think we’ve won any this year.

Joe Fairless: And any nuances that you’ve identified from one auction platform compared to another, that you think would be relevant to share?

Don Wenner: I’d say some of them have more flexible terms, but the more flexible the terms are, generally the higher the price is gonna go. For example, on 10X they’ve started providing debt options, or giving you time to place debt… Which, as an operator, of course, that’s a great thing. We actually, on the lending side of our business, have funded a ton of auction deals for other operators, because we’re one of the few lenders who will close loans in 20 days. So it’s actually been a huge source for us not only to buy deals, but actually to fund deals to other operators. And some of the auctions that we’ve lost out on, actually we’ve ended up funding the guy who won the auction. And because we already underwrote the property, we were comfortable with it and we could close in 21 days. That’s happened many times. More times that we funded other guys buying deals than we’ve bought them ourselves.

But when auction platforms start saying “Hey, we’ll give you a 30-day extension, we’ll give you 60-day terms to place financing”, or sometimes they’ll say “Hey, we’ll give you unlimited time, as long as you’re working with our lending partner” – that’s generally when everybody realizes “Hey, I can have a lot time. I have time to go place debt, I can go get financing.” Then that opens up the buyer pool times three, four, five or ten. If they had to close in 21 days, or even 30 days, they wouldn’t be bidding. When that happens, generally we’re not able to be the buyer, because people are gonna be willing to overpay, when they can go out there and place some CMBS debt, or something that operators will use to get interest-only 10-year paper, and they can justify paying prices that to us don’t make sense.

So we actually love [unintelligible 00:16:52.15] as an operator, and we love it as a provider of debt and equity. The other guys — when there isn’t time typically to place financing, that’s where we can excel and get the best deal and bring value.

Joe Fairless: And what makes you like a deal as a lender, but not like the deal as an operator?

Don Wenner: That’s a great question. I’d say if one of our partners or borrowers comes to us with a deal that they wanna fund, we don’t compete against them. A lot of times we do like the deal a lot as a lender, but in many cases we’ll go and provide equity to them as well. A big majority of deals where we provide debt to, we end up providing the majority of the equity as well. So a lot of times when deals do come to us for debt, we really do like them and we provide them with capital as well.

We just had a deal – it was an auction deal – this past week that we were bidding on, and then we found out one of our close partners that we do a lot of business with was bidding on the same deal. We didn’t bow out, but we strategized with them and we still put out an offer, but we purposely put out our offer to be inferior terms to the partner, to help his offer actually look better, and we actually helped him win the deal. Then we ended up coming in and we’re providing both the debt and we’re providing 90% of the equity on that deal, but we’re doing it with another operator; we’re allowing him to run and manage and execute on the property.

Another case is we’ve had situations where we’ve put offers in on a deal, we lost out, because somebody else was willing to pay a little more, and then we found out who the winner is and we come and offer them capital into the deal. We’ve operated that way as well many times.

Joe Fairless: Tell us about the deal that you’ve lost the most amount of money on.

Don Wenner: Yeah, good question. I can’t really say I had a deal that I’ve lost a lot of money on. We certainly had some single-family flips, we’ve done a couple thousand single-family flips… One that comes to mind – we’ve renovated a house, start to finish, beautiful house, sold it; it was like a 350k house. And a week before closing, a realtor or an inspector doing the inspection – we never identified who did it – turned off the emergency heat switch and shut off the heat, and the whole house froze. It was a long story, but the insurance company didn’t cover it… So we ended up having to re-renovate this entire house, to the tune of about 80k. So it turned it from a 40k profit to a 40k loss. That’s the biggest loss that I can think of on any property we’ve had.

We don’t have a lot of times we’ve lost money. When I think about bad deals, where my mind goes with deals gone bad is generally doing deals with people I don’t wanna be in business with, and I think that’s the mistake that people often make. A deal can go bad because you’re stuck with a partner who restricts and doesn’t provide the capital, or doesn’t agree with the business plan, or slows things down, or won’t make decisions, or whatever the case. Or just makes your life miserable.

In the early days, like a lot of people, when we first got going, we would partner with anybody who had capital… And we worked with some lousy partners in the beginning, that really made deals unenjoyable, and sucked some of the profits out, because we had to move so slow, answering questions, and getting their feedback, and getting their approval on decisions… It really slowed us down. So that’s been the bigger challenge in our early days, and why we really committed to raising our own private funds that we had complete discretion and control of, and then being able to go out there and offer capital to others with complete control. It’s been a huge reason why we have not dealt with those issues since our early days, and why we haven’t had issues of major losses on deals. It’s a big part of it, because we do business with people we wanna be in business with.

I think building relationships with people is a huge part of success, but the other point I wanna make is I think generally when guys lose money on a property, generally it’s not that the property was a bad piece of land, or a bad asset… Generally it’s not that they bought it at a bad price. Generally it’s not that they didn’t understand construction, or they didn’t understand property management. Generally it’s not that the market turned on them. Usually it’s that they couldn’t execute internally. They tried to take on too many projects at once, and they just couldn’t handle them. They over-extended themselves.

They didn’t have any structure in their organization to stay on top of the important things, and time started going by, and things didn’t get done, they forgot to pull their permits, and then they had to go backwards, they hired a new project leader and put them in charge of the project and he completely screwed up because they hired the wrong person; they didn’t really train them, they didn’t really manage them… They didn’t have a way to scale. And what I’ve seen is when guys go from being successful home flippers or whatever type of investor and wanna scale and grow a business, they tend to struggle not because they don’t understand real estate, but because they don’t know how to scale a business. They hire the wrong people, they don’t partner with the right people, they don’t build the internal processes to execute in their organization.

They don’t have a way to drive communication as their organization grows, they don’t have a way to set priorities, they don’t have a way to solve issues, they don’t have a way to keep out the noise and stay focused on what really matters, and they end up overextending themselves. And even though they may be doing a decent amount of business, they end up starting to have losses, they end up starting to be inefficient, they end up starting to take longer than it used to take them, and they start running a business that’s no longer profitable like it was in the beginning. That’s what we see more times than not, especially over the last number of years, where the market has been so great.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Don Wenner: My best real estate advice ever kind of ties to my last comment, and it’s two parts. Number one, be in business with people you like. The Chug Test I heard recently by Steve Sims, who wrote Bluefishing, the Chug Test – don’t hire anybody or do business with somebody you wouldn’t wanna go and grab a beer with. So be in business with the right people.

And focus on building the internal operations of your business, and it’ll take care of everything else if you focus on execution in your organization.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Don Wenner: I’m ready.

Joe Fairless: Alright, I know you are. First, let’s hear from our Best Ever partners.

Break: [00:22:24.03] to [00:23:00.12]

Joe Fairless: Okay, best ever book you’ve recently read?

Don Wenner: I read 3-4 books every week, but my best one I’ve read recently I’d say is Turning the Flywheel by Jim Collins.

Joe Fairless: And what have you implemented in your business from that book?

Don Wenner: Turning the Flywheel is a little monogram, as he calls it, an add-on to Good to Great, and I’m a huge Jim Collins fan. He doesn’t really teach anything new in this book, but what he does is he crystallizes a lot of his teachings – Good to Great, and Great by Choice, and How the Mighty Fall – and really lays it out in a really clear basis.

The biggest thing I’d say I implement is he [unintelligible 00:23:26.28] that you need your organization to be discipline-centered. He calls it disciplined thought, disciplined action, disciplined people. He just does an amazing job of crystallizing and explaining that, and then he breaks out all his different tools and things he teaches: the hedgehog principle, the flywheel etc. and breaks them out in a really organized fashion. It’s a tiny little book, it takes an hour and a half to listen to, but his strategy simplified in a little tiny book – it’s amazing.

Joe Fairless: Best ever deal you’ve done?

Don Wenner: The next one I’m gonna do.

Joe Fairless: What deal have you made the most money on, and how much did you make?

Don Wenner: I’d say a deal we’re actually selling in 3-4 days is gonna be the most profitable single deal. We bought a property for seven million dollars in Orlando, and we’ve put about a million dollars into it, so eight million total cost, we put two million equity and six million debt, and we’re selling it for 15 million. We’re gonna return an 8 million-dollar profit on a two million dollars investment in a little over two years.

Joe Fairless: A couple things that you did to increase the value that greatly are what?

Don Wenner: Management was the big play there. Really, really poor management, and a really, really poor tenant base. So we’ve spent a lot of energy and effort to turn over the tenant base, and put the right people in place there on our end, on the management side, and changed it from — when we bought the property, there were multiple shootings on the property the previous year, there were a lot of drug issues, there was unfortunately a rape on the property… And we really focused heavy on putting security in place, not allowing that type of behavior to continue, getting rid of all the troubled tenants. We turned it around over the first year and really drove up not only the occupancy and the quality of tenants, but the rents as well.

Joe Fairless: Best ever way you like to give back to the community?

Don Wenner: About two years ago I launched a foundation called DLP Positive Returns Foundation, and we focus on two epidemics that we believe to be epidemics in America. One is the affordable housing epidemic here in America, that’s frankly getting worse every day, and second is attacking the job epidemic; that we’re losing jobs to technology at  a rapid pace, and I believe the only way to solve for that is through entrepreneurship here in the States.

So we’re really focused on those two causes, supporting a lot of other great organizations, both in terms of monetary capital, but then also I teach our operating system, our elite execution system – which I’ve just finished our book called Building an Elite Organization – and I go and I teach that to social entrepreneurs and help them grow their causes. It’s been incredibly rewarding.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing and get your book, Building an Elite Organization?

Don Wenner: Email is the fastest way to contact me: don@dlpre.com. And of course, you can find us on all the social platforms and such as well. Our website is dlprealestate.com.

Joe Fairless: That’s how they also can get the book?

Don Wenner: Yeah, so you shoot me a quick note to my email address, and as soon as the book is going live, which is gonna be January 1st, you shoot me a note and we’ll send you out a copy of the book.

Joe Fairless: Awesome. Congratulations on the book, and also clearly congratulations on the real estate business. I really enjoyed learning about the approach you’ve taken to acquisitions on the online auction platforms, and what you do to mitigate risk as much as you can, what would be a reason why you would pull out – not necessarily about the property, but really about the market, because it’s very challenging to change that… And then the approach that you take from a mindset standpoint, and how you’re continuing to learn, you’re annihilating books on a weekly basis. Very impressive.

I really appreciate our conversation, I enjoyed it. I hope you have a best ever day, and we’ll talk to you again soon.

Don Wenner: Awesome. Thanks, Joe. I appreciate the opportunity.

 

 

JF1930: Building A Real Estate Investing Business & Apartment Syndication Breakdown with Mauricio Ramos

Mauricio has been building his real estate portfolio and is invested in passively in other deals. He currently owns 48 units, we’ll hear about his first 16 unit apartment syndication, and what he’s learned along the way. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Take action, don’t wait until you have learned everything on the subject” – Mauricio Ramos

 

Mauricio Ramos Real Estate Background:

  • Full time real estate investor and accredited investor
  • Founder & Managing Member of de Medici Group
  • Currently controls over $2M in multifamily assets
  • Based in San Antonio, TX
  • Say hi to him at https://www.demedicigroup.com/

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks, I’ll be your host today. Today we’ll be speaking with Mauricio Ramos. Mauricio, how are you doing today?

Mauricio Ramos: Hey, Theo. Doing great. Thanks for having me. It’s a pleasure.

Theo Hicks: Absolutely. We appreciate you coming on the show today to share your expertise. Before we get into the conversation, a little bit more about Mauricio’s background. He is a full-time real estate investor and accredited investor, founder and managing member of de Medici Group. Currently controls over two million dollars in multifamily assets. He’s based out of San Antonio, Texas, and you can say hi to him at demedicigroup.com.

Mauricio, do you mind telling us a little bit more about your background and what you’re focused on now?

Mauricio Ramos: For sure, and thanks for the space. My names is Mauricio Ramos, I’m from Merida Yucatan, Mexico. I grew up in Matamoros, Tamaulipas, which is also in Mexico. I went to school through high school all the way in Mexico, and I came to Texas for college, under a student visa, and obtained my civil engineering degree from Texas A&M University, and worked for ten years in the construction industry as a project manager, under different work visas.

Currently, I’m 34 years old, I live in San Antonio, like Theo mentioned, since 2014. I’m married to my wife, Dominga, since 2018. She’s a mariachi director here in San Antonio ISD. Currently, my wife and I own and manage de Medici Group, a multifamily real estate investing firm here in San Antonio.

We are currently invested in 234 units, and recently just got another 28-unit apartment complex under contract. A little bit of how I got started – I got introduced to real estate by one of my interns when I was in construction, and it  really caught my attention. I started educating myself and changing my mindset, like many people who read Rich Dad, Poor Dad and Cashflow Quadrant, and those kinds of books. So definitely  a lot of mindset changing for about a year; not really a lot of deals, but just mindset changing.

With the help of my first mentor I bought my first deal. It was  a mobile home. So I bought a mobile cash, fixed it up, and owner-financed it out in 2017. Right after that I did another mobile home, wholesaled a few single-family homes, and then this is when I came across multifamily, and I immediately fell in love with it. I started educating myself, reading books, listening to hundreds of hours of podcast, and going to seminars to start learning.

I decided to start doing my first direct mail campaign in September 2017, so by December 2017 I bought my first my first ten-unit apartment complex in Lexington, Texas, which is 34 minutes South of San Antonio. This was a seller finance deal, 0% interest, 7% down. It was a very good deal, and actually, this property — I just went full-cycle on this property 18 months later for a 159% return on investment.

Theo Hicks: Alright, thanks for sharing that story. Of the current 134 units, are those all properties that you own yourself, or is it a combination? Because I know that you said you’re an accredited investor as well. Is it a combination of deals that you own outright yourself, obviously with the loan, and deals that you are a passive investor in?

Mauricio Ramos: That’s correct. It’s 234, and it’s a combination of passive and syndicator, and that 10-unit was just me and my wife.

Theo Hicks: Of that, how many do you own yourself?

Mauricio Ramos: Currently, 48.

Theo Hicks: Okay. How many different buildings?

Mauricio Ramos: There’s a 16 and a 32-unit apartment complexes in McAllen, two separate properties that we’ve syndicated.

Theo Hicks: Okay, so you actually syndicated those deals. Do you wanna walk us through — which one was your first deal, 16 or 32?

Mauricio Ramos: The first syndication was the 16.

Theo Hicks: Alright, do you wanna walk us through that? Before you’d even found the deal, what types of things did you put in place? Did you have the capital first, did you have your team in place first, or did you find the deal and did that later? Walk us through the process of acquiring that deal.

Mauricio Ramos: For sure. At this point me and my business partner Adrien – we continued sending direct mail (postcards) to McAllen and different other cities which we were familiar with… And we found this 16-unit apartment complex. This is in a very good area in McAllen, Texas. We bought it for $570,000, and we brought four other investors, and Adrien and myself, and we just got a long-term loan on it. The plan is to hold it for 3-5 years.

Theo Hicks: How did you find those four investors?

Mauricio Ramos: People that I knew from when I was in corporate America, people  that knew that I was doing real estate and they saw how I was making progress, and having success. Then I quit my job last year, so during the last few months they said “Hey, the next one – I wanna jump in with you.”

Theo Hicks: Did those first four investors actually come to you, seeking out the opportunity, or did you bring the opportunity to them?

Mauricio Ramos: I brought the opportunity to them.

Theo Hicks: Can you walk us through how you presented that to your co-workers? Did you do it at work? Did you do it at a bar after work? I’m just curious… I know a lot of people that are listening probably have their W-2 jobs, have a lot of people who are the ideal passive investor, but might not necessarily know how to properly go about presenting deals, especially when they’re still working at  the company… So do you wanna walk us through that process?

Mauricio Ramos: For sure. I put a package together, my investor package, which is a ten-page deal where I explain all the ins and outs of the deal. I presented it to my investors, met for lunch with them and said “Hey, I have this opportunity. This is how much I’m looking for, this is the return on your money. If you’re interested, this is how it’s gonna look like”, and they decided to jump in. But it was definitely a combination of doing things while at work, then at lunch, and then definitely a lot of work after five, after my job.

Theo Hicks: Yeah, I figured. And what was your structure for those passive investors? What types of returns did you offer them?

Mauricio Ramos: This one is a 9% cash-on-cash average, and 96% ROI over the life of the project, for a 3-5 year hold. It’s a 70/30 split GP/LP.

Theo Hicks: So the GP gets 70%, or the LP gets 70%?

Mauricio Ramos: The LP gets 70%.

Theo Hicks: Okay, okay. Are those the actual numbers? Is 9% cash-on-cash, 96% ROI over the life of the project, or is that what your projections were, that you presented to them, and said “Hey, if you invest, here’s what our projections are.”

Mauricio Ramos: Those are the projections. We’re six months into the deal, so we’re still working through it.

Theo Hicks: You said 96% ROI?

Mauricio Ramos: Yes.

Theo Hicks: So essentially doubling your money, okay. What about the second deal? Do you wanna walk us through that one?

Mauricio Ramos: For sure. This 32-unit we found through cold-calling. We called the seller (he’s out of state). After probably two months of following up, we finally agreed on a number, got it under contract… And this one is a little over a million, so we were able to get agency debt on it. Similar situation, 70/30 split, brought seven investors, and then my business partner and I, to the deal.

This one is a little better, because since it’s an off-market deal, the price was pretty good compared to the area… So this is a 10% cash-on-cash average for 3-5 years the life of the project, and 100% return. We’re pretty confident that this one — we should be able to turn it around in two years max.

Theo Hicks: Why did you decide to transition from the direct mail to the cold calling?

Mauricio Ramos: We had both going on… We just had the resources to do some skip tracing and have some good properties to call. So we just had the resources to do it.

Theo Hicks: So you’ve done three deals so far: the 10-unit, the 6-unit, and the 32-unit that came from a combination of cold calling and direct mail. How many marketing contacts – combination of direct mail and cold calling – would you say you did in order to get those three closed deals?

Mauricio Ramos: I’m gonna back up real quick, and I’ll get to the question; it’s a great question. So after I did my 10-unit through direct mail, I found an 8-unit in Kingsville, Texas, and I wholesaled that for a five-figure fee. Then I found a 24-unit in downtown San Antonio, and with that one I did a six-figure fee, which was twice my annual W-2 income… So this is the one that really put me in a different position to be able to get into some mentorship programs, get into a couple of Airbnbs and get some additional cashflow. I also basically quit my job. At that point is when I decided to marry my wife, and quit my job and just went full-time into real estate.

So to answer your question, I’d say the response of the postcards is pretty good compared to what typically single-family people see. I’d say probably 5%-8% response. We have a good 150 to 200 leads that got offers in our system to get to those five deals or so.

Theo Hicks: Do you wanna walk us through that 24-unit that you got the six-figure fee on? Obviously, you mentioned that you got it through your direct mail… Why did you decide to wholesale it, as opposed to buy it yourself? And then how did you find the person who ended up buying that property from you?

Mauricio Ramos: For sure. And a little bit of that I have prepared to one of the questions further, but I’ll try to not spoil it…

Theo Hicks: It’s your best ever deal… You can go over it now, and I’ll ask a different question.

Mauricio Ramos: Okay, I’ll just go through it. We found it through a postcard, it was a mom and pop owner… They were just tired. My postcard was delivered just at the right time. It was actually the right color. My postcard is pink, and the owners of the property are gay, so for some reason they decided to call my postcard. So they called my postcard, we met, great people, they liked me, and we went under contract.

I wasn’t sure what I was gonna do with it. I was going to either wholesale it, or try to kind of syndicate it, bring some investors in and do it. It was a very old building; there’s two buildings, one of them built in 1896 and the other one in 1928… So there’s a lot of historic character in it.

I wasn’t prepared to syndicate it at the time; I didn’t have the resources to do it. So at the same time I attempted to wholesale it. I put a package together, put it on Facebook, and within 24 hours I had it under contract to sell.

Theo Hicks: That’s amazing. And then you said you got a six-figure fee. Was there negotiation back and forth, or did you just say “Hey, this is how much money I want for wholesaling this”?

Mauricio Ramos: I double-closed, so the buyer didn’t know how much I was making until the very end… But I double-closed, and actually there was my asking price, and the buyer really wanted it; it’s a buyer from California that has a strong presence in San Antonio. They really wanted it, so they were like “What do you need to put this under contract with us right now?” So I said “Alright, just throw in 50k and then I’ll do it”, and they did.

Theo Hicks: Perfect. Alright, so before I ask you the money question, I had asked you — for those who are listening, I’ll describe it, but those watching will understand… So Mauricio has a whiteboard behind him, with a bunch of different color codes on it. I can’t read it, but it’s got a statement at the top. Do you wanna walk us through what that is?

Mauricio Ramos: Yeah, the statement at the top says “Keep God first place.” I’m a Christian, and ever since I really started taking that to heart and really putting God first, my life really started making a transition and making a change for good.

Theo Hicks: But below that, are those like your goals, or is that strategies for your business? Is that like a goal board/vision board?

Mauricio Ramos: No, it’s really just everything that I have going on in my mind… Everything just floating in my head, I put it on the board, and that way I get everything every morning, and I just know where I’m at. Just different things that I have going on at the same time; so it’s not necessarily goals, but just ongoing deals.

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

Mauricio Ramos: Best advice for the Best Ever listeners is to take action. Don’t wait until you have learned everything, all the ins and outs on the subject. Just take action, jump, and build the parachute on your way down. Just do it. For example, you don’t have to wait to learn how to do a 1031 exchange if you haven’t even submitted an offer on a property.

Theo Hicks: Alright. Are you ready for the best ever lightning round?

Mauricio Ramos: Ready.

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

Break: [00:14:07.26] to [00:14:50.05]

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

Mauricio Ramos: It’s called “Am I being too subtle?” by Sam Zell.

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

Mauricio Ramos: I would go straight into  multifamily.

Theo Hicks: What deal have you done that you’ve lost money on?

Mauricio Ramos: I haven’t done a deal that I’ve lost money on, but maybe I can think of a few deals that I could have done it, I just wasn’t ready; I didn’t have the knowledge at the time to do them. So now that I know, it’s like “Oh, man, I could have done that”, I just didn’t know.

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

Mauricio Ramos: Anonymously. I believe in Matthew 6, so I give to my church and other charities, but I don’t announce it to social media.

Theo Hicks: I like that. What is the best ever place the Best Ever  listeners can reach you?

Mauricio Ramos: It’s on my Instagram. I’m at @maurms, and my webpage, demedicigroup.com, and mauricio@demedicigroup.com.

Theo Hicks: Mauricio, I really appreciate you coming on. A very inspiring conversation; you’ve come quite the journey. I’m sure things are just getting started for you. Just a summary of what we talked about – we went into how you got into real estate, and you were actually introduced to it by an intern at one of your companies. That’s a first I’ve ever heard that one. You mentioned how you started off with buying a mobile home, which you owner-financed out after you bought it, and then you wholesaled some single-family homes before you came across multifamily.

You started sending out your direct mailing campaigns, and your first deal was that 10-unit in Texas. Again, another seller finance deal, 7% down, sold it 18 months later for a very high return on investment.

We went through two of your syndication deals. One was that 16-unit, which was your first one; you got that through direct mail. Four investors, all co-workers, and you kind of walked us through how to present investment deals to people that you’re working with, while still at that company. You also gave us the returns on that one.

We talked about your second deal, which was that 32-unit that you got through cold-calling back and forth for two months and ended up putting it under contract. It was a better opportunity because it was off-market, and again, you walked us through the returns on those as well. You told us that you get about a 5% to 8% response rate on those direct mail that you sent out, and for those five or so deals that you either bought yourself or wholesaled, you said that you had to go through about 150 to 200 offers before you got those five.

Then we also talked about your best ever deal, which was that six-figure fee on the 24-unit. Mom and pop owner who you sent the pink letter to, so perfect letter, perfect timing… You didn’t really know whether you’d wholesale it or syndicate it. Older building, historical building. You decided to wholesale it. A company came to you once you posted on Facebook within 24 hours. You got to add a nice little $50,000 fee to that to close it quickly.

Then you talked about your whiteboard, which I like how you’re just kind of like journaling, but you see it; it’s much more present in your office. And then your best ever advice, which was to take action. I liked how you said “Don’t wait until you know everything. Just jump and then build your parachute on the way down.”

Mauricio, I appreciate you coming on the show. Great advice, again. Best Ever listeners, thanks for listening. Have a Best Ever day, and we will talk to you tomorrow.

Mauricio Ramos: Thanks, Theo. Thanks for having me. It’s such a pleasure.

JF1916: How This Investor Grew His Portfolio to over 125,000 Units with Jeff Klotz

Jeff is not only an investor, but also a broker who helps others grow their own portfolio. He struggled in the beginning to grow his business, so he focused on that until he was having some success. Now Jeff shares his knowledge with his clients and with us on today’s episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“If you buy right and you have the right business plan and business strategy, you should be able to survive another 2008 crisis” – Jeff Klotz”

 

Jeff Klotz Real Estate Background:

  • Serial entrepreneur, real estate investor and developer
  • Klotz’s investments have included 125,000 apartment units, 42 developments, and numerous other real estate projects
  • Founder of over 100 companies
  • Based in Jacksonville, FL
  • Say hi to him at http://theklotzcompanies.com/
  • Best Ever Book: 10X Rule

 


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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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, Jeff Klotz. How are you doing, Jeff?

Jeff Klotz: I’m doing great.

Joe Fairless: Well, I’m glad to hear that, and looking forward to our talk and our conversation. A little bit about Jeff – he’s a serial entrepreneur real estate investor and developer. Klotz investments have included 125,000 apartment units, 42 developments and a bunch of other real estate projects. He’s the founder of over 100 companies; based in Jacksonville, Florida. With that being said, Jeff, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jeff Klotz: Okay. Well, my background is interesting – I started out in real estate, literally straight out of high school. I actually bought my first investment property while still in high school. I fell in love with the multifamily business, and I guess the rest is history. For 24 years we’ve been intimately focused on the multifamily industry, and have built a platform called the Klotz Group, which is basically a group of wholly-owned subsidiaries that provide pretty much everything from concept through completion, along the way of both a multifamily value-add strategy, renovation, rehab, modernization, to a ground-up development strategy.

Like you said, that body of work over the last 24 years has been a little over 125,000 units of multifamily throughout the South-East, and just over 40 projects completely full-circle… And then of course the platform itself provides a whole series of services, including brokerage, property management, mortgage banking, construction, development, investment banking, and a handful of other (what we call) ancillary service providers that have probably racked up transaction volume into the billions.

So it’s been an interesting track record and an interesting 24-year stretch in the industry, and I still love it today as much as I loved it when I joined.

Joe Fairless: So you own companies like a mortgage brokerage within your portfolio? Did I hear that right?

Jeff Klotz: That is correct, yes. We are in the mortgage banking business, which is predominantly a commercial mortgage brokerage; I’d say 90% of that body of work is strictly multifamily.

Joe Fairless: So what made you want to be vertically integrated, versus just being focused on development?

Jeff Klotz: Well, for me, early stage I really struggled to grow. As a teenage entrepreneur, my challenge for business and business growth was probably the same as almost everyone else starting out – access to capital, capital constraints. I think experts will tell you the number one reason why most small businesses fail is a lack of capital… So I certainly battled that. As a kid, it’s hard to access capital. I didn’t grow up rich, I didn’t know any rich folks. I was kind of knocking on doors the hard way.

Early on, I really wanted to perfect my portfolio, and I needed to grow my business, and the best way to grow the business was to produce what I’ll call “ancillary revenue” from all these different services. But I started to become more successful, and then later on I began to really understand capital markets, and started to really solve my access to capital problems, it was almost the exact opposite.

We perfected the platform and really broadened the reach and the scope of all the different platform services to really serve our own needs, because that was the best way we found to control the results and to deliver superior results and returns by really controlling your own destiny. We learned along the way that it was next to impossible to rely on third-parties and get the same type of results if you were relying on yourself.

So long story short, I probably don’t desire to be in all these different businesses, but to some extent it’s a necessary evil.

Joe Fairless: Yeah, I get that. So how many companies do you actively oversee right now?

Jeff Klotz: The Klotz Group has as many as 12 subsidiaries that are in the real estate business. I’ve got some other investments, and we’ve got a family office that focuses on some philanthropic efforts and things like that, but probably for the focus of this call there’s 12 wholly-owned subsidiaries under the Klotz Group umbrella that provide all different types of services, pretty much a soup to nuts or an A-to-Z, or a concept through completion strategy in what we’ll call multifamily real estate investment.

Joe Fairless: And the purpose of those businesses is twofold, it sounds like. One is to help you and your team do your deals, but then also you might as well have other customers and clients outside of your company if you’re gonna have a business anyway. Is that the thought process?

Jeff Klotz: That’s exactly correct. The strategy is really a 50/50 strategy. I think that a healthy business is one where you’ve got diversification. About half of our business comes from what we call captive work, which is our own investments, and then the other half comes from the third-party marketplace. So that does a lot for both the industry and the organization. It allows us to have a lot of different touchpoints to the entire industry, and it really helps us grow the business. We meet a lot of really great people, and can help a lot of really great people…

You kind of hinged on the mortgage banking business – a lot of our clients come to us looking for debt, and for whatever reason they’re staking 75% leverage and we might only be able to get them 70%, because that’s what the deal qualifies for, so they might be 5% short on a deal, and we end up stepping in and becoming their partner, owning a piece of the deal and helping them get it across the finish line… And then of course, by that time they’ve figured out they can leverage a lot of our other services and really add value to the deal.

Joe Fairless: What’s the most and what’s the least profitable of those 12?

Jeff Klotz: Oh, boy… I’d say property management is probably the least profitable… And included in those 12 is the investment subsidiary, which is by far — the gain on sale, or the gain on real estate investments is by far the most profitable.

Joe Fairless: Okay.

Jeff Klotz: Many of those businesses are loss-leaders. They really contribute to the overall investment result. I might make X in the construction business, but I’m creating 10x at the property level because of my efforts on the construction side.

Joe Fairless: Yeah, it makes sense. And I imagine over the years you’ve created a business as a result of [unintelligible 00:07:15.09] loss-leader, but even — it wasn’t something that you wanted to be in the  business anymore. So you created one, then shut it down because you thought you needed it, or thought you wanted to be in it, but you didn’t… What’s an example of that? If there is an example of that.

Jeff Klotz: Okay. Well, there’s a couple of times… In 2001 we sold the construction business. We were able to stay out of that for a couple of years. In 2006, if you remember, the market was on fire. You couldn’t help but trip and fall and make money in the real estate business… So we thought we didn’t really need to be in the property management business, so I sold the property management company, only to really be forced back into the business a couple years later by my partners and investors, who said “Look, Jeff, this isn’t working. We’re not seeing the same results or returns from the properties and from the projects like we were when you were running it, so… Get back in the business”, basically. He who has to go makes the rules, right?

Joe Fairless: And with where you see your group of companies headed, do you see a new business coming up that you are gonna be creating, or maybe putting more emphasis in a current area that you have?

Jeff Klotz: Well, our business – we really hit a reset button back in 2015 after building a portfolio of (we’ll call it) C-class housing. We were one of the most active operators and groups focused on (what we’ll call) middle market C-class housing throughout the South-East. We’d built a portfolio close to 40,000 units, and that was the goal; so we accomplished our goal, but we really couldn’t celebrate the accomplishment because it was just a really tough struggle. That’s a tough business to scale, and it’s a really tough portfolio to operate… So we really kind of hit the reset button, spent the next couple years exiting that business, and really focused on a cleaner, more quality body of work. So for us it was testing and proving the concept in a much newer, higher-quality asset class [unintelligible 00:09:00.06] create the same type of results and returns.

Over the last couple of years we spent proving that concept out, so today the real focus is just growing that strategy. So we find ourselves doing a lot more luxury ground-up development today. It’s a different type of development than we’ve done previously. Previously we were just looking to get something built, and it was more workforce housing, and what have you. Today we’re able to develop some of what I’ll call best in class in several different markets.

The strategy today is not necessarily get into new business, but it’s just continue to grow the business both vertically and horizontally, so that we can once again — we were once upon a time the largest residential landlord in about 13-15 cities throughout the South-East, and that’s our goal, to do that again, just with a little different quality of assets.

Joe Fairless: And I’m sure you get this question a lot, but I’m gonna ask it anyway… When a correction takes place, what’s your thought about being in ground-up development luxury?

Jeff Klotz: Well, you’ve probably heard this, and I’m sure every one of your listeners have heard that – you make your money on the buy. That can mean a lot of different things, but it’s kind of an old cliché in real estate. It took me a long time to even really figure out what that meant… But being well-protected by your bases on the way in, so that you have what I’ll call “a lot of screw-up room” or a lot of mistake room, is really one of the founding principles that we operate by. So if you buy right and you have the right business plan and the right business strategy, you should be able to withstand another catastrophic event like in 2008.

Joe Fairless: What’s a quantifiable example of buying right? How do you stress-test that?

Jeff Klotz: Well, I think today this concept of value-add – that’s probably one of the bigger buzzwords in the multifamily industry, and a lot of times it’s a lot more complex than just buying a piece of real estate and raising rents. You’ve really gotta understand the asset, the asset class, the market… And I think you’ve gotta buy right. You’ve gotta buy at — I’ll still call it a discount. I’ll tell you what is not lining up through an internationally-marketed brokerage effort and participating in first, second, third round, best and final, and winning an option – the concept of who pays the most wins, I have always had a hard time understanding that. So almost all of the deals that we do are privately negotiated, they’re off-market, they’re situational acquisitions and they’ve got a good story.

Even in today’s very frothy real estate market, you look at the last 12 acquisitions that we’ve made  – they’ve all been what I consider below market value. I think there’s good deals out there, you’ve just gotta really know where to find them and where to look. Our platform, which has many touchpoints to the industry, helps to contribute to putting us at the right place, at the right time, and being able to have access to those deals that otherwise might not be available to us.

Joe Fairless: And just maybe one or two more follow-up questions on this, and then I’d love to learn more about the 40,000 units and the scaling challenges with the C-class housing. A lot of people will say when a correction takes place, class A is gonna get hit first, because they’re the ones who are gonna lose their jobs, so those residents are gonna then go down to class B… So you don’t wanna be in class A. And then the people will also say that ground-up development is riskier because there’s no income that’s being generated until you get out of the construction loan and you’re completely leased up in your long-term financing. What are your thoughts on those two points?

Jeff Klotz: Well, I agree with those two points, to some extent. In fact, that was the thesis of some of our early real estate funds, and that was the pitch. And again, we were focused on C-class… And I think, for the most part, that’s  a real concern, right? But we always like to shoot for a much shorter strategy. A long-term strategy – you have a greater chance of getting stuck holding the ball, or whenever the music stops, without a seat… So I think the merits of a project are strong. Again, if you buy or build the project plan with a lot of screw-up room, or mistake room, or whatever you wanna call it, it should pass the stress test for a softening in the market, or what have you.

The bottom line is people will always need a place to eat and sleep and call home… But there’s always gonna be a cyclical nature to our business and almost every other business, so I think you have to be afraid of that. You have to plan for that. When we underwrite a deal, when we go to acquire a deal, when we go to build a deal, there’s always a sense of urgency, and we always plan for the worst, but work for the best. So it’s always a concern of ours, which is one of the reasons why we have a short-term strategy.

We were a large multifamily owner going into 2008 in the recession/downturn/crash, and our strategy then was to really just protect the asset; if we were the best operator, with the best service and the best performance in the market, then we were well-protected… So we were fortunate enough to survive the downturn without losing any assets. In fact, we were quickly able to start a growth process.

I think it’s just a quality operator, with a quality project, in a quality location, with a quality credit risk. So the stronger your residents are, the more protected they are from a recession, and things like that. So I think there’s a whole series of merits that you really have to pay close attention to.

Joe Fairless: Let’s talk about the 40,000 units. What were some specific challenges that you had in scaling and executing on that level of collection of units, with that type of classification of property and resident base?

Jeff Klotz: Well, first of all it wasn’t so much the class of asset, but  it was. And what I mean by that is to succeed at C-class multifamily operations – it’s a lot more staff, or manpower, or people-intense. You’ve really gotta check the boxes and  dot the i’s and cross the t’s. You need a lot more people to succeed in that effort. We built a team of over 1,000 employees, and we went from 100 to over 1,000 really quick. So just that type of scale was really difficult. We were consistently chasing the growth.

And then to top it all off, the business strategy that we had – we were buying and selling quite quickly… For about five years in a row we were buying over 8,000 units/year on average. So to have that type of portfolio churn, you’re always moving. It’s hard to build a team, it’s hard to build consistency… And then of course, the assets themselves – yes, they’re challenging. They were in rougher neighborhoods… So it’s harder to find good people, it requires more training, it’s harder to find good residents, it requires a lot better screening and tenant evaluation or qualification. Even the municipalities started to neglect those types of neighborhoods, where there’s lower income. So it’s a tougher, longer, harder grind or battle or fight, and you almost had to fight for every bit of success, every good resident, and what have you. So all in all, the entire effort is more difficult.

On a personal level, I really underestimated or probably was naive in how difficult it really is to build and scale a business. I’ve found building a real estate portfolio easy. In fact, growing is easy. But actually building a business around all that growth, and building the right type of team, and the right types of policies and procedures and structure – that was probably the most challenging part of it all.

Joe Fairless: Thank you for that. I appreciate that insight. That’s very, very helpful. And one thing that I’d love to learn more about is if you were to have a 300-unit class C apartment building, in a class C area, and a 300-unit new development – picture whatever you’re building now, that 300 units – how many people would it take to staff each of those?

Jeff Klotz: There’s an old rule of thumb in the industry – 2 per 100. So in theory you’d need 6 people. Three in the office, and three in the field, on the maintenance team. I think that in a C-class operating property… Was the A-class a new build, new construction?

Joe Fairless: Yeah, it’s one you’ve just completed. We’ll just say one you just completed.

Jeff Klotz: I think on the property itself there’s probably only a slight difference in the amount of manpower needed. But we’ll call it the corporate oversight, or the regional/district oversight – you definitely need a whole heck of a lot more oversight on the C-class asset than you do the A-class asset.

Joe Fairless: Got it. Taking a giant step back, based on your experience in the industry – you’ve bought your first place while you were in high school; that is pretty close to a record, I think, from the 1,800 guests I’ve interviewed… What is your best real estate investing advice ever?

Jeff Klotz: Oh, boy… That’s a hard one. I think the real estate business is not a get-rich-quick plan/strategy. All these late-night advertisements for “You too can be rich like me” – it doesn’t work that way. I’ve been doing this for 24 years, and it took a long time to create success. It is a get-rich-slow business, by the way. It’s a lot of hard work, it’s a long late-night grind…It’s difficult, and it’s tough to think that yo can create success as a hobby or a part-time business. It’s a lot like the gym – there’s no shortcuts. Nothing takes the place of hard work and effort if you wanna get in shape. You can try all the latest, fad this or fad that, but you’ve gotta do the work.

I see way too many people enter this business thinking that they can do it part-time, or in-between a day job, or after a day job… And I think if you’re gonna be a passive investor – sure, that works. There’s a whole other topic of how do you make good passive investments; probably the least successful deals I’ve ever done were called passive investments… But  I think just preparing somebody for the time it takes to learn the business and what have you – it sounds pretty basic, but that’s where I see most people making a mistake; it’s the inability to really truly commit to the time, effort, energy and hard work it takes to be successful in this business.

Joe Fairless: And over the period of time that you’ve done it.

Jeff Klotz: Right.

Joe Fairless: Yeah, it’s a shiny object for some people, and then they find something else… Whereas put in decades – then you can see some results if you do things consistently that are the right thing, right?

Jeff Klotz: Right. And I think whether we’re talking real estate or we’re talking anything else in business, I think that part of our culture today is that of things happening quickly, and there’s almost a sense of lack of patience, and I can go on and on… But I just really think that you’ve gotta really be realistic with the goals, and the time it takes, and of course the effort it takes. There’s an old saying, “If it were easy, everybody would be doing it”, right?

Joe Fairless: Yup. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jeff Klotz: I’ll give it my best.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:19:15.10] to [00:20:13.09]

Joe Fairless: Okay, what’s the best ever book you’ve recently read?

Jeff Klotz: Oh, boy… I’m not a big book reader. There’s an interesting story behind it… But I’ve just recently read some of Grant Cardone’s stuff, and I was amazingly shocked with just how relatable it was, and just how great the content was. That was kind of an interesting experience for me.

Joe Fairless: What’s a deal you’ve lost the most money on?

Jeff Klotz: That would have been a passive investment. Once upon a time, prior to really committing to grow the entire platform vertically and horizontally, I thought I could leverage some other operators and other sponsors. I wasn’t in a good pick of a couple different guys. I had no control, and so therefore the outcomes weren’t that good.

Joe Fairless: And knowing what you know now, if you were to passively invest and you were to interview them again about the opportunity, what are some questions you would ask now that you didn’t ask before?

Jeff Klotz: Well, I’d really wanna understand the track record, their true experience in actually controlling outcomes… There’s a lot of sponsors out there that have worked for other folks, or have been alongside other sponsors, or have been on teams with sponsors, but I  really wanna see someone who has a solid track record of doing it themselves, signing on the debt, having real skin in the game, and really a solid commitment to the business.

I think nowadays there’s a lot of folks that think it looks a lot easier than it really is, so I think that might be the tone of what I’m saying here… I’d spent a lot more time getting to know the individual and the organization and understanding what their theories and philosophies and their ideas are for how they operate real estate.

Joe Fairless: What’s the best ever deal you’ve done?

Jeff Klotz: Well, the next deal, right? In this business you’re always as good as your last deal, so we continue to get better and better. I think that really my next deal will be the best deal I’ve ever done.

Joe Fairless: Best ever way you like to give back to the community.

Jeff Klotz: Years ago I’ve formed a family office called the Klotz Family Office. We have three main philanthropic efforts, including a faith-based not-for-profit named Save Your Communities, which is focused on creating and preserving, as well as providing sustainable [unintelligible 00:22:10.08] affordable multifamily housing. That’s a big part of our mission. I also have a Central-American-based foundation called [unintelligible 00:22:16.17] which basically serves the needs of those living in poverty, most likely as a result of natural disaster.

Then we have a third effort, which is basically an entrepreneurial scholarship. So once a year we pick a young individual who I think might possess some real serial entrepreneurial traits, and we try to partner with them and mentor with them, and help them get themselves in the door [unintelligible 00:22:35.20]

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

Jeff Klotz: Well, they can visit our website, TheKlotzCompanies.com. They can email me at jklotz@theklotzcompanies.com.

Joe Fairless: Cool. Well, Jeff, thank you so much for being on the show, talking about your experience, talking about your approach, what your focus is now, and the challenges that you came across on the passive investment, as well as when you achieved the goal of 40,000 units… Not really having time to celebrate, and then reconfiguring the structure of your focus. And what you’re doing now, building the luxury ground-up development.

Thanks for being on the show. I really enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you again soon.

Jeff Klotz: Thanks, Joe. I enjoyed it.

 

JF1901: From 0 to $1.5 Billion In Assets How To Hustle & Build From The Ground Up with Peter Rex

Peter is an entrepreneur that started a real estate investing company, which now maintains $1.5 Billion in assets. We’ll hear about his story and some tactical tips and strategies he has used throughout his career to scale to the level he’s at now. We’ll also hear about what he’s doing to improve the maintenance side of investing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“As I was running all this stuff, I realized how inefficient maintenance was” – Peter Rex

 

Peter Rex Real Estate Background:

  • An entrepreneur who hustled and bootstrapped a startup into a billion dollar real estate company
  • His real estate company has purchased 17,000 units and maintains $1.5B + in assets.
  • Based in Seattle, WA
  • Say hi to him at https://rhstrategic.com/
  • Best Ever Book: Julius Caesar

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


 

JF1893: Office & Retail Real Estate Investing 101 with Catherine Kuo

Catherine was learning the real estate investing world from a very young age. As she said, when most kids were having playdates, she was with her mom at work underwriting deals. She invests mostly in office and retail space now and that is where the conversation focuses today. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:
“Be persistent, try to get in front of the decision makers, build rapport and create a relationship” – Catherine Kuo

 

Catherine Kuo Real Estate Background:

  • Commercial real estate advisor, investor, and entrepreneur
  • Currently handles leasing for just under 100,000 SF of office and retail space in Las Vegas
  • Based in Las Vegas
  • Say hi to her at https://www.elitehomes.us/
  • Best Ever Book: The 5 Love Languages

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


 

JF1889: Investing In & Managing over $2 Billion In Real Estate with Alexander Radosevic

Alexander is joining us today to share his background, how he got into real estate investing and built a large company focused on investing and managing real estate. We’ll hear a couple of case studies from some of his deals, how he found them, financed them, and what he’s done with the deals since acquiring. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“There are so many career opportunities in real estate” – Alexander Radosevic

 

Alexander Radosevic Real Estate Background:

  • Launched his real estate company, Canon Business Properties, in 2001
  • His company now owns or manages over $2 Billion of retail, hotel, industrial, and residential properties
  • Based in Beverly Hills, CA
  • Say hi to him at https://www.canonproperties.com/
  • Best Ever Book: Great by Choice

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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, Alexander Radosevic. How are you doing, Alexander?

Alexander Radosevic: Doing great!

Joe Fairless: I’m glad to hear that, and looking forward to our conversation. A little bit about Alexander – he launched his real estate company Canon Business Properties in 2001. His company now owns or manages over two billion dollars of retail, hotel, industrial and residential properties. Based in Beverly Hills, California.

With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current business focus?

Alexander Radosevic: Sure. Initially, I was an investment banker with Lehman Brothers, from ’84 to ’87. That collapsed, and I got involved with real estate through a client, and have consistently stayed in that marketplace, from the acquisition side, into management and construction… And the focus of our company is in those areas today. We focus on retail investment, commercial/industrial investments, we also then take care of construction and construction management, and we’re also advisors in other genres for debt financing and things along that nature.

Joe Fairless: So when you were an investment banker and you transitioned into real estate full-time, what were a couple of your first projects that you worked on?

Alexander Radosevic: Interestingly enough, I was involved with debt financing first. Numbers is something that comes very good to me… So I analyzed a lot of properties first, before we started making acquisitions. So it gave me a lot of understanding really how properties operate. And I looked at industrial, office, retail – all different types of investments, from the analytics side, and see how profitable they were for our investment purposes. That was my first role in real estate.

Joe Fairless: So you were a W-2 employee, assessing opportunities that you all wanted to finance?

Alexander Radosevic: Yes.

Joe Fairless: Okay. And then how long did you have that role?

Alexander Radosevic: To give you an idea, after about two years of doing this, one of the brokers I did a transaction with – I asked “How did everything go? Were you happy with the funding?” [unintelligible 00:03:36.20] “What are you gonna do with your $10,000?” and I was like “Excuse me?” He said “Yeah, isn’t that what you made on this?” And I was thinking like “Wow, this is interesting. What did you get out of the deal?” and he said “Well, I made $50,000 out of it.” So I had immediately said selling is a much better opportunity from the side of the financing for me at that time, I thought, and I enjoyed getting out of the office and working on properties. So that sort of conversation got me to get out of an office, go entrepreneurial, and begin to search for investments on my own, and that’s how I started my company. I was driven by the commission dollars earned from the sale and acquisition side, other than the financing side.

Joe Fairless: So you had that background both from Lehman Brothers as an investment banker, and then also looking at debt financing… And what was the first couple projects as an entrepreneur?

Alexander Radosevic: Well, probably the one that I’d say to me was the best one for me long-term – in 1994 we had the L.A. riots here, and South Central L.A. was the area which was hurt the most. At that time I was looking at properties there and found an abandoned bakery, about a 40,000-foot single-tenant building. It had been burnt. I took a risk, which we all know risks can have great rewards… I acquired the property, I went in, I had some construction background already through my family, and my father was in the construction business… I went through, cleaned the property up, and converted it into a nine-unit multi-tenant manufacturing/warehousing building.

What that became was my first value-add project, really without even knowing it. And it sort of set a template for me going forward, and it’s something I still do today.

Joe Fairless: How did you get the funds to purchase that?

Alexander Radosevic: My very first real estate transaction of my life – I bought land at Laughlin before Laughlin was ever developed. I was reading something called The Penny Saver; it was a throw-away paper here in L.A. while I worked at Lehman Brothers…

Joe Fairless: Sure.

Alexander Radosevic: …in my twenties. I think I was 22 at the time when I bought it… And I bought 2,5 acres on the river, which as we know Laughlin, Nevada has now turned into quite a profitable sort of marketplace. There’s hotels, some 60,000 people there living, and so forth. So that was my first opportunity in real estate, and I used those funds from the monies I made there and continued to invest those monies when I sold out of that property and invested into other real estate opportunities.

Joe Fairless: And that abandoned bakery – did you get financing on it?

Alexander Radosevic: Yeah, we did. At the time it was tough to get…

Joe Fairless: I bet.

Alexander Radosevic: [unintelligible 00:06:25.04] you’re talking double-digit rates… But I think I probably leveraged somewhere around 40% debt. It was all I could get out of it… So I had to raise 60% capital. but once I got the capital, the profit — not even the profit, really. The building was bought at such a good price, obviously, like anything in that time. It was worth it. I took a little risk, and the rewards were there.

Joe Fairless: So it’s been a little while since that property that we’re referring to, and I respect your memory. I appreciate you going back in time with us on this… You’ve clearly grown your company to a great degree since then… So along the way, my assumption is that you’ve optimized certain things that you do now on deals, compared to when you were doing your first handful of deals as an entrepreneur. What are some things that you’ve now optimized, knowing what you know now?

Alexander Radosevic: Well, from a standpoint of acquisition, due diligence has become to me the key to all the opportunities I find for myself personally, and those that I represent on transactions. I’d say the ability to gather and review information today, in comparison to what I did 20 years ago, is really one of the key elements to what we do for not only myself, but for my clients. We’ve got a very vast portfolio of property. We look at tons of deals all the time, and our ability to thoroughly examine cashflow, marketplaces, management, financing, all within a concise period of time, so that we’re performing and not losing opportunities, like we had at times – I’d say that’s been probably the key growth for me personally, is to have the ability to analyze the information quickly, and that the information is accurate and thorough. It’s been a great change for us.

Joe Fairless: Would those be the four buckets that you do due diligence in? On a high-level… Cashflow, marketplaces, management and financing?

Alexander Radosevic: Well, those four are critical. Look, first of all, you have to know what you want to achieve. Are you looking value-add, are you long-term hold, are you short-term? Are you gonna tear down, develop? You have to know what you’re shooting for, but first and foremost, like they say, “location, location, location”, and then of course, pricing and financing, because you’ve got debt… And for me, since we have a lot of properties under management, we’re real strong on who will be the team that’s gonna be responsible for that asset as it’s being repositioned or acquired. So those are four strong buckets, but there are other criteria in which we may look at something for a specific client… Especially if we’re looking for trophy/legacy properties. There are other very serious factors to look at, and those become a little bit more detailed… Without getting into that; I’ll just leave it at that. But there’s other criteria for different acquisitions, but those would be the four primary.

Joe Fairless: Let’s go with any of them, whichever one you wanna go with. Cashflow… When you say marketplaces, just so I’m tracking what you’re talking about, what are you referring to?

Alexander Radosevic: Okay, so for us it was some corporate offices here in Beverly Hills. We consider L.A. our home base… Outside of Beverly Hills, a province within L.A, right? So we look at the marketplace here as a focus — if we’re looking at retail, we might be looking in Beverly Hills specifically; we might be looking at a trophy sort of property on Rodeo Drive. And then within that area it’s just gonna be a long-term hold  for the family, are we looking to perhaps take out a quality tenant, bring in a new tenant that the family has a relationship with? It’s that sort of criteria.

If we’re looking at industrial properties, which I’m a big fan of, to be honest with you, we’re looking for properties that are located near international airports in major cities like LAX, Denver, Cincinnati. We’re looking for major distribution centers, let’s say within a mile or two-mile radius, that we’re looking to acquire to develop… So that marketplace already has a built-in need, or a built-in opportunity, if you will. That’s the  criteria in which we’re investing for that particular purpose. And again, we’re in different areas, but let’s just hone in on the idea of industrial, for instance.

Joe Fairless: Sure.

Alexander Radosevic: We’ve looked at stuff in Houston, George Bush Airport, LAX airport… We wanna stay, as I said, within a mile to two-mile radius. We know that these are key opportunities for distribution, and distribution now is becoming quite a big topic with what Amazon has done recently to the marketplace. We’ve been probably doing that for almost 15 years consistently, and that actually has been one of the best returns we’ve seen; industrial real estate has become a very hot topic, whereas 15 years ago there were very few really dedicated to that market space.

So that’s what I’m referring to. If it’s in industrial, we’re very specific on the criteria we’re gonna acquire. We have a base of who we’re probably gonna be looking for for tenants. We’re doing build to suits, if you will, along the way… And that’s how we evaluate the real estate; if it’s gonna be an office building, again, whether it’s in South Beach Miami, in a marketplace right now where we’re looking at some opportunities, there has to be for us to evaluate an end game [unintelligible 00:12:08.19] for us in that marketplace. We’re not just going in blindly, and I think that’s where we really capitalize, again, on the information that we’re ascertaining on these deals. Because when you’re not in a city itself, you’ve gotta rely on foot soldiers’ information. So this is critical to us.

Joe Fairless: Let’s talk about a recent transaction… Just real quick, what’s a recent transaction, and then I’ve got a couple questions; I just wanna learn more about it.

Alexander Radosevic: Sure. Recently, we’re looking at – to be honest with you – land acquisition, that we’re gonna go into for the development of a boutique-style hotel. That’s hotness marketplace, as you know; I know you’ve had some of your speakers speak about this… The small boutique hotel is a very hot market. We’re looking now for something on the coast here in California. California has a lot of restrictions, [unintelligible 00:13:03.03] but we’ve found a land, we do have entitlements in place, and it was a process that was started by the previous owner some nine years ago…

Joe Fairless: Wow…

Alexander Radosevic: And it will take us about another four more years of entitlement work to get what we need out of it. To give you an idea, that’s a very, very marketplace-specific opportunity. And once it is entitled, of course, like anything else, it will give us  a tremendous amount of opportunity and profitability, that’s for sure.

Joe Fairless: I was gonna ask some questions, but you took it in a direction that’s much more interesting than what I was thinking, so let’s talk about it… Nine years that they started on it, and then four additional years; what is transpiring over the four years?

Alexander Radosevic: Sure. Coastline development, which is similar to (let’s say) inner-city development, if it’s got too many apartment buildings, there’s more restrictions placed on it. But coastline here in California in particular is difficult. So the nine-year process was converting what was originally a residential/commercial use into what will be a hotel use. So the zoning process itself, with the prior ownership, and the city, combined with the Coastal Commission, all have to come to an agreement on the conversion from its initial approved use into a hotel base use.

So you’ve got three different governmental agencies working at the same time, and not all of them want the same result. Then you have to have some legal power come in, you have to have some meetings with city officials… There’s just so many things that take place that many people give up.

Joe Fairless: Oh, yeah.

Alexander Radosevic: This family persevered, but they owned quite a bit of real estate, knew or were properly advised by  a third-party that said “This is gonna be your highest and best use”, but the issue was they couldn’t take it to the end because they lacked what the city really wanted, which was where we come in – hotel-experienced operator/developer that could show the finish line to them. And that’s where some people get stuck and repurposing a property. You have the great idea and you have the right intention, but you don’t have the expertise. Without the expertise sometimes you just have to sell it and allow someone else with more expertise to take over.

So we’re looking at that opportunity now, and we’re gonna get the feedback we believe that we should get, which is an approval. The issues now we’re battling with is how many keys are we gonna get out of the property. We would like to get 131 keys, but we may only get 101. Well, if you only get 101 keys versus 131, you’ve lost almost 25%, right? So now the dollars and cents become more critical. The construction costs may come down, but then your cashflow NOI on the back-end are also coming down. These are really critical issues when you’re developing any sort of project roundup that’s relying on cashflow, not the single-tenant use.

So this is part of what any development — this is gonna be the same with an industrial building. If you only get a 500,000-foot structure down to 300,000 feet, it’s the same sort of an issue. But in this particular matter we’re fighting to get as many keys as we can, obliging the city with communal parking for the [unintelligible 00:16:29.09] providing some retail opportunity,  a quality restaurant, and all those factors come into painting this beautiful picture, so that someone sitting behind an office the day that it goes to a Council meeting can now look at this visually and say “Okay, I get it. Let’s go with 131 rooms” or “Let’s split the difference at 117, but you’ve gotta give us an extra 100-car parking on the weekends for the beach, and we would like two restaurants instead of one”, and some other criteria. So it’s a give and take, and it’s a process, but it’s one that — in this particular case I can’t share with you the exact location, but it’s gonna be very well received and a very well-used hotel.

Joe Fairless: So you’re estimating four years from now that process will be completed…

Alexander Radosevic: Yeah, yeah.

Joe Fairless: What about the project makes it worth four years of your life to focus on?

Alexander Radosevic: In that particular market space it would be the only class A opportunity there. So number one, the destination is very well known, however there just has not been a new development there in over 20 years. To give you an idea – number one, we’ve capitalized on the most important part… Quality AA, plus location, the most newest development, highly-trafficked, perfect opportunity for us to capitalize on what will be a new destination. High dollar rent per door, and in a marketplace that, as I said, is very desirable. It’s a very well-known area. If I said it, you’d be like “Oh my god, I can’t believe this is gonna be the first one in 20 years”, but that’s the way it is; it’s been that way. So that’s the answer for that.

Now, why is it worth the four years? Well, the back-end value of it – it’s construction costs after we’re done and  into this project, and depending on what flag we decide to put there, it will be more than 4x return on your money after it’s all said and done. So you’re looking for that sort of opportunity. It doesn’t come that often, so  you have to be patient; it’s just part of real estate, you have to be patient at times… And this is one of those you’re gonna have to jump through not one hoop, not two hoops, but probably like 50 more hoops. It’s gonna be that sort of process.

Joe Fairless: If you were the original owner, so nine years ago you owned that land, and for whatever reason it also would have taken you 13 years from the start to finish to get it done, would you have chosen to do this, versus just — you said it was zoned for residential, so I assume you could do some sort of multifamily use there…?

Alexander Radosevic: Yes… No. Because multifamily — well, actually let’s take that back. The answer is I would have chosen it, knowing what I know now. But nine years ago you don’t know. So if you take a risk like when I bought that 1994 property – they took a  risk and carried that torch a long way, but only lacked one component: they don’t have the expertise in this marketplace to develop this property. They had to have a third-party come in or flip it. So had they had the experience, then they would have taken this all the way to the end and really benefitted. They took it as far as they could.

One lesson I learned from one of my original clients was I bought some land — I bought land a lot, and I had asked one of my clients to help me build it. He was a builder. He was actually an industrial real estate builder and a mentor of mine, and one of the guys I first started managing with. I bought some land down in San Diego, and I said “Look, I got this from a guy, he went belly up, out of New York, doing a subdivision funding up in San Diego. And it was about 32 acres. We can get 16 homes out of it. Each parcel had to be a minimum of two acres, and I was gonna put a park in the middle of it, and it would be a communal park for families.

Joe Fairless: It sounds like a nice place.

Alexander Radosevic: So I laid it all out and I called my client up and I said “Would you help me with this?” His answer was “Alex, you’re a great guy…” I was maybe 29 at the time. Not even 30 yet. And he says “…but here’s what I’m gonna tell you. If you can just get some utilities there and get some streets paved, let someone else carry that torch and build the houses. You did your part and make a profit.”

To give you an idea – I ended up buying all those pieces at about $70,000 for a two plus acre parcel was my total all-in cost in the end, and I sold them off for over $200,000 a piece without putting up a structure.

Joe Fairless: Beautiful.

Alexander Radosevic: Just assembling land and getting utilities, and basically doing a subdivision, getting things lined up and handing it to somebody else can also be a very profitable business in real estate. Real estate is great for that reason, because you can be a land guy, you can be a land parcel guy, you can be the guy who puts utilities in and flips it to the developer, you can be a finance guy… There’s so many [unintelligible 00:21:07.08] opportunities in real estate, and I’ve had the good fortune of touching a few, and really becoming an  expert in some others.

The land thing happened through a client who said “I won’t help you, but here’s what I would do if I were you, and this is how I got started.”

Joe Fairless: With this transaction, the one with the boutique hotel, did you just outright purchase that land from them? Or is there a joint venture?

Alexander Radosevic: We will do a joint venture…

Joe Fairless: Okay, cool.

Alexander Radosevic: …and they will participate, as some do, not on a 50/50 basis, but we’re giving a sort of back-end deal, and then at the time of the sale, if we decide to sell out, there will also be a piece for them on the back-end.

Joe Fairless: Cool. So their contribution was the land, plus getting it to wherever point they had gotten it, and then you’re taking it–

Alexander Radosevic: Correct.

Joe Fairless: Got it. Okay. And if they had sold it to you outright, I was gonna ask you why they didn’t just do a joint venture, but never mind. Okay.

Alexander Radosevic: [unintelligible 00:22:02.07] he would love that. Any guy like me would love to have been able to acquire it all out, but you know what –  they’re not fools either. They did have [unintelligible 00:22:09.18] They just didn’t have the expertise to take it to the next level… As I didn’t when I bought that land in San Diego. I knew the client, it was a client of mine. He says “Look, Alex, I don’t wanna build with you right now, my friend. I’m building other things. But here’s what I would do… Take it from there.” So they did what they could do, and I think they’re very happy. We came in strong, and — don’t get me wrong, this isn’t something that happens in a day. It took quite a bit of time to build a relationship. It’s not just coming in and knocking on someone’s door and saying “Hey, we’re the best deal in town.” It’s building a relationship with someone, the family, and creating some faith and trust, and having some sort of proven track record to do something.

Joe Fairless: Taking a giant step back, based on your experience, what’s your best real estate investing advice ever?

Alexander Radosevic: Best ever advice – if you can, try to hold the properties that you buy, allow them to appreciate, and leverage against them, as opposed to selling them and trying to trade up. We all need to sell and trade up to buy bigger and better things, but there comes a point in which if I just had held on a little bit longer to some investments, I could have easily leveraged out now two or threefold what I got out of it selling it. It’s just the way it is. And I have tried to buy in areas — because I understood how to underwrite property, so I’m always trying to buy in areas where I know that are strong, that are growing.

As a cheat sheet answer – and sorry to divert, but you’ll have the chance to do what you want with the information I’m providing – I would track the top five best places to live and work in in the United States when we’re looking and analyzing properties. So that’s one of the criteria I look for. I look at consensus information throughout the country, and tracking the top five places to live and work. What does that tell me right away? There’s expansion, there’s stability, there’s financing…

I’ve tried to invest that way not just in California, but throughout the United States, where I’d put my money and my clients’ money to work. In those marketplaces you know that push comes to shove, you can always get rid of a property. In all those marketplaces that we’ve held on to, refinancing out, cashing out, holding the asset is a better position to take.

Joe Fairless: What source do you use for best places to live and work? Or sources. Because there’s all sorts of stuff  [unintelligible 00:24:28.16]

Alexander Radosevic: Yeah, unfortunately that’s changed a lot, too. You bring up a great point without really saying it… There’s too much information available for a lot of us, and knowing when information has value is what you’re kind of alluding to; which one of this many sources is there.

So there are government consensus in every state, that I’m more a fan of than just a third-party periodical published by a company saying “These are the spaces.” So I’m looking at cities, I’m looking at their information provided, because theirs is the most accurate in terms of income, revenue, traffic, tax bills, all that information. Now, there are companies now that are coming out, and I’ve had a chance to speak on some panels that are out there, but I won’t say one is favored to the other. I would have to say if you go online and you’re looking for that specific information – growth, tax bill, tax benefits, utility bill opportunities…

You must understand, if you’re building an industrial building, I’d rather build it in an industrial marketplace right now that the city is giving tax benefits for the next ten years for developers coming in that are building in this marketplace, and I know that’s gonna be attractive for the buyer coming in, and the manufacturer coming in, because they’re also getting tax benefits. So if I’m looking at an industrial building, I’m looking for those specific  marketplaces, with those key information, if you understand what I’m saying.

So I’m picking the five best places to live and work, and then I’m saying “Okay, I wanna build an industrial park near an airport. Where am I getting the best tax benefits from?” That area is gonna be growing. This is gonna be a multi-tenant park, there’ll be a lot of small mom-and-pops wanting to develop in that area and service the community… So I’m looking at true city factual statistics; I’m not really going to third-party emailing sort of collaborated surveys done by third-parties. I’m actually going to those cities and getting as much information as I can from them directly.

Joe Fairless: And then your team has to aggregate that, and then make it apples to apples comparison, because I’m sure you’re getting it in all sorts of different formats from each of the different cities, right?

Alexander Radosevic: Right. And there are, as I said, without giving a lot of secrets out, there are ways to get that information a little bit easier… But you’re right. We will look at the information aggregated, and I’m looking for specific factors that are attractive to me in that marketplace. As  I said, housing, if you’re doing an apartment structure, how many have to be in a community that’s really thriving? How many of those have to be units that are dedicated to housing for X, Y and Z? Is it 10% of those properties? Is it gonna have to be subsidized housing? Is it 18% of that property that has to be subsidized housing? That element to me right away is important, because that’s gonna change my cashflow out of that property by x%. Is it worth it for us? So we’re looking at certain criteria within that marketplace specific to our needs.

Joe Fairless: It makes sense. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Alexander Radosevic: I hope so. Let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:27:39.25] to [00:28:18.18]

Joe Fairless: Best ever book you’ve recently read?

Alexander Radosevic: Wow… That’s a tough one. I’d have to say probably a book — Great by Choice, let’s go with that one. Jim Collins is a pretty well-respected author, and he’s got some good books out. I don’t know how many bestsellers — he’s got quite a few. The most recent one is why do some companies thrive, let’s say in uncertainty and in chaos, and others not? It’s a great read; it’s something that anybody in business can use.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about?

Alexander Radosevic: Wow. A mistake… You know what – as always, lack of due diligence.

Joe Fairless: What about a best ever deal you’ve done?

Alexander Radosevic: I alluded to the first one, the bakery, but probably the best I ever did was buying that land in Laughlin, Nevada. It was my first, and it had an amazing return.

Joe Fairless: What did you buy it and what did you sell it for?

Alexander Radosevic: I bought those parcels of land for $2,500, with $500 down. 2,5 acres on the Colorado River. I am embarrassed to say that we’re talking well over hundreds of percent return on my money.

Joe Fairless: [laughs] Embarrassed/you’d do it again.

Alexander Radosevic: Oh, my god… Let’s say 1,000% return on my money, right? Yes, of course. It’s just luck. Sometimes we need to be lucky in life, right? But I was reading a paper — and I’ll tell you why I read the paper; can I get a minute?

Joe Fairless: Yeah, of course.

Alexander Radosevic: I know it’s the lightning round, but I’ll just tell you – true story. At the time I was working at Lehman Brothers, and a couple guys had brand new Porsches. And I wanted a Porsche. I had heard a story that a woman sold her husband’s Porsche for $100, angry because she had cheated on him. And that’s why I started reading that Penny Saver. Because I really was — I was reading the Wall Street Journal, what you normally do as an investment banker; you’re in a different realm. But that story got me so convinced, so I started reading it all the time, and coincidentally I found this guy selling this land in the Penny Saver. I contacted him, and he goes “If you buy this, you’re gonna be rich, kid.” I was like 22 at the time, the guy was like 45 years old. He was an airline pilot, of all things, who was friends with the developer.

Joe Fairless: Oh, wow…

Alexander Radosevic: And he goes “Trust me, you’re gonna be lucky.”

Joe Fairless: [laughs]

Alexander Radosevic: So I bought as much as I could, with $500 each time, and that’s how it worked out.

Joe Fairless: Oh, good for you. Best ever way you like to give back to the community?

Alexander Radosevic: Okay, so I didn’t come from any family with money, to be honest with you. I alluded my dad was in construction… My mom and dad divorced when I was six months old, and my mom remarried a clothing guy; I worked after school every day as a kid, since I was eight years old, buttoning blouses, and sweeping the floor, and doing things like that with my stepdad. So I didn’t come from many money… And what I do or what I like to do is help young entrepreneurs that lack education or funding, if you will, that have the strive and desire to be successful – I like to help in that matter one-on-one, if I can. So I always focus on trying to help young people, or young men or women, whether they come to my office and they leave to go on to another career, or they come to my office and  start their own construction company… Whatever it is that I can do. But I like the idea of working with someone one-on-one and helping them grow.

Joe Fairless: How can the Best Ever listeners learn more about your company?

Alexander Radosevic: The company is Canon Properties. I’m at my office here. My website – you gave it – is canonproperties.com, and I’m happy to take any email. I try my best to respond, I’m at alex@canonproperties.com.

Joe Fairless: Alex, thank you so much for being on the show. I loved hearing about the boutique hotel land acquisition joint venture that you’re doing, and just talking us through the four-year process (knock on wood) that you’re about to undertake, you and your partners, as well as the previous nine years that your joint venture partner undertook with what they did.

Then also the deals that you did previously, and then talking a little industrial, too. We don’t talk enough about industrial on this show, so again, thank you so much for being on the show. I’m really grateful for our conversation. I hope you have a best ever day, and we’ll talk to you again soon.

Alexander Radosevic: Thank you so much for your time, and I really appreciate the opportunity to speak with you as well.

JF1875: Real Estate Titan Educates Us On Development Deals with Erez Cohen

Erez is on the show today to tell us his real estate investing story, which has included a few different roles and strategies. These days Erez focuses on development deals so we’ll take a dive into his role with those deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“If you want to start real estate investing, your work ethic matters more than your knowledge” – Erez Cohen

 

Erez Cohen Real Estate Background:

  • Real estate investor and author
  • Has taken part in over $3.5 Billion worth of real estate deals, author of the book Real Estate Titans
  • Based in Mexico City, Mexico
  • Say hi to him at https://www.linkedin.com/in/erezcohenh/
  • Best Ever Book: Principles

 


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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, Erez Cohen. How are you doing, Erez?

Erez Cohen: Doing well, Joe. How are you?

Joe Fairless: I am doing well, and looking forward to our conversation. A little bit about Erez – he is a real estate investor and author. He’s taken part in over 3.5 billion dollars (that’s with a B) worth of real estate deals. He’s the author of the book Real Estate Titans. Based in Mexico City, Mexico. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Erez Cohen: Yeah, Joe. Thanks. I’m very happy to be on your show, thanks for having me. It’s a pleasure to be talking to your audience. About 14-15 years ago I started working in real estate full-time. I’ve always been enamored with real estate since I was a young kid. I had two sisters who were architects, so I was always exposed to seeing the creation, and buildings, and homes, and neighborhoods, and cities. To me that was just always something really wonderful, and so I always wanted to be in real estate.

I started on the financial side, so on investing, and then more recently I’ve moved to the development side, and it’s a lot of fun. I love it.  It always keeps you busy, and it’s really a wonderful business.

Joe Fairless: Well, if you’ve moved to the development side, you’re certainly staying busy… So educate me on what you’re doing from a development standpoint, and we’ll go from there.

Erez Cohen: Sure. Like any other field in industry, you always try to look for a supply and demand imbalance. Currently in Mexico and Mexico City a very interesting segment to focus on is residential [unintelligible 00:03:05.05] Mexico City is truly a verticalized city, so we have to go up… And we’re currently focused on doing residential projects targeted for the middle sector in Mexico. GDP per capita here is about a fifth of what it is in the U.S, so very different price points… But building apartments for anywhere between $150,000 to $300,000. Usually, financing is readily available for buyers, and also for developers. So keeping busy on that side…

Also, looking at some mixed-use property. In today’s world it’s really a live-workplace leap; everything together, in the same place… So we’re trying to add some component, some retail, maybe a little bit of co-working office etc into these projects as well.

Joe Fairless: Let’s go back a little bit… What was your background before you got into real estate about 14 years ago?

Erez Cohen: I was never 100% sure which field within real estate I wanted to be in, so I focused on business administration and pre-law. I did some summer internships in law firms and investment banks. It was all really interesting, but I definitely decided that I did not wanna be a lawyer… So I did that, and then I started working full-time in an investment bank, in the real estate group. It was a really interesting challenge. For those people listening who work on Wall Street and investment banking – it’s a wonderful learning experience, it’s not such a great lifestyle. You’re working between 80 to 100 hours a week, but at the same time it’s a phenomenal learning. We can go into the discussion whether school and education really prepares you in today’s world for financial and professional success. My opinion is it does not. But when I was in investment banking, I felt it really taught me a lot of important skills that I needed.

I also believe that if you start your career off with something really challenging, I think that’s wonderful, because life unfortunately (or fortunately, whichever way you look at it) is really a big challenge. So the more arduous endeavors you go through at a younger age, I think the better that prepares you to deal with the inevitable challenges that will come up later.

So I did investment banking for a while, and then I was able to jump to the investing side. So I worked then for a large private equity fund, focused on real estate investing. And you’re kind of on the sell side in banking, and then you’re going to the buy side when you’re in a private equity, and it’s also really interesting – it also teaches you a lot of transferable skills… But I’ve been asked “If you could go back to school/university, what would you study?” Honestly, I think that there’s a lot of  different fields, and there’s so many different entry points in real estate, as you know, Joe, that I do think that there’s a lot of different things that one can find passion for, whether it’s economics, or pre-law, or architecture, or civil engineering. Whatever you decide to study and wherever you decide to go, I think that there’s always those leaps that are available. I don’t think that if you study civil engineering you can’t go work on Wall Street in a quantitative job.

Everything throughout my life, and I’m sure throughout your life and a lot of the people listening – we’re always told that “Hey, you know what – it’s too hard. You can’t do that leap. You can’t go that way, you can’t do this, you can’t do that…”, and it’s important to never listen to these limiting beliefs. We’re surrounded by people that have these limiting thoughts, that tell us what to do.

So I’d say that if you have some people that are looking to start maybe a career in real estate or to further their career in real estate – it doesn’t matter so much what you’ve studied, what matters is your will, your hunger, your values towards hard work etc. If you have those things, I think you’ll be able to do whatever it is you want.

Joe Fairless: 80 to 100 hours  a week working in investment banking you said was a phenomenal learning experience. What are some specific things that you learned?

Erez Cohen: First and foremost, you learn the value of hard work, and I think that’s really important in life. I would say that in general – and that’s in banking or in any other very tough job, with these types of long hours – most importantly what you learn is the qualitative things. It’s interacting with other humans, leadership, teamwork etc. It’s kind of like the softer things, because obviously, you’re gonna learn a lot of technical things… I would say that in order to succeed in life, the technical skills in my opinion are important, but they’re not that important.

So if I’d have to throw out a number, maybe 30% of the things that I learned were technical skills, financial modeling side, so you do a lot of Excel proformas… In real estate we have ARGUS, as many of your listeners probably know. You also do a lot of presentations, like pitch books, offering memorandums etc. Sometimes you do capital raising on the equity side, so maybe IPOs (initial public offerings), and then you might be on the debt side, helping your clients raise debt… All these things are great, and you’ll learn a lot about them, but you can also read a lot about them. But I’d say the better experience comes on the softer side of just you interacting with everybody else, and you learning leadership skills, teamwork skills. I think that those are super-important and I’d say that’s probably the biggest thing that I take away from that… Because it’s almost like being in the army. If you go through an IPO, like a year and a half’s work, for example, you’re traveling the world trying to raise money for your client, it’s almost like you went to war.

You and your colleagues were in the trenches, staying up till 5, 6 AM, having an hour’s sleep, going back to the hotel, showering and going back at it. All these things are just overall a really good experience, especially if you get them at a younger age.

Joe Fairless: What are some leadership fundamentals that you believe in order for someone to be a good leader?

Erez Cohen: That’s such a great question, and there’s so many wonderful people out there who do have probably much better responses than I do, but I’d say the first and foremost thing in my opinion is understanding very clearly what are your assets and what are your values, and if you live according to your values and you’re congruent. For example, you might yell at somebody for doing X, and then you do it yourself – I think that’s very incongruent, and in life and in any industry anywhere in the world you see this a lot.

I do believe that you have to have your values very clear. I think that both this simple, basic common sense to just treat everybody else as you’d like to be treated. On Wall Street I’ve seen from my career a lot of people that when they’re analysts, they’re starting out, they have a really tough time with their bosses, and their bosses’ bosses… They get treated very badly, so what they do is that eventually when they’re in more senior positions, they treat their analysts in a really bad way. And I think that’s just a really sad thing to see.

So for me, it’s always about treating your team very fair, very good, and taking care of business… I mentioned this in the book I wrote – I think that something wonderful… Anybody who can read Dale Carnegie’s “How to win friends and influence people” – he has so many really good points there, really valid points that I have seen throughout my life, that are really truthfully things that if you inculcate/integrate them into your life, you should be able to find a lot of success. It’s just about being a good person, being a nice person, and obviously, important skills that come with being a leader… But I’d say in general those are my main recommendations.

Joe Fairless: You mentioned that this career path helped condition you for the challenges that come up throughout life… What is a big challenge that has come up for you in your life?

Erez Cohen: Every human on Earth has challenges, and many times we think that our job – especially if we live in the Western world – and our professional life is the most important thing. We’re always focused on those challenges, and it’s not until you get something happen to you on the personal side, whether it’s (God forbid) a disease that you get, you or somebody close to you, or some other type of personal thing that might happen, some type of tragedy… So I think that that’s really when everything balances out.

So I’d say that I’ve had a lot of personal things come up to me, diseases with different people close to me and my family, and including some loves ones – that is always definitely a bigger challenge than anything professionally. And of course, like everybody else, we have a lot of professional challenges; depending on the economic environment, you always have things that you’d never think will come up, that will come up… And I’d like to also just put a parenthesis to this answer and say that this book that I wrote, called Real Estate Titans – what I did in this book is I went and I interviewed 11 real estate titans from around the world, people that are super-successful professionally, personally, and in so many other aspects, and I asked them this question, about their challenges… And it’s the craziest things that one can never imagine that will come up. It’s almost like Murphy’s Law – whatever can go wrong, will go wrong. These are the types of things that you have to be ready for.

So that’s why, in my opinion, and going back to what I said about challenges – you have to be mentally strong to get ready for any challenge that might come up… Because you never know what might come up. And I know, Joe, you probably lived through this many times in your life and you know this, but — we never know, so I feel like it’s super-important to be mentally strong and perseverant. And also, I’d say — sorry for the fluff here; it sounds corny, but it’s true… I’d say try to surround yourself with people that are just optimistic in general about life, because they keep you motivated, they keep you inspired… And if you yourself can do that every day, you have to work on it; you have to start your day off doing different things. But if you can be optimistic, I think in general it’s great, because you always need that in order to deal with those challenges that will inevitably come up.

Joe Fairless: So now let’s transition a little bit into the development projects that you’re working on. Are they all in Mexico City?

Erez Cohen: Yeah, most of them. There’s one deal that we’re looking at in South Florida, Miami, but yeah most of them are in Mexico City.

Joe Fairless: Okay.

Erez Cohen: As you guys know, real estate is a very, very local business. Building in Miami is very different than building in L.A, and very different than building in New York. You have different state laws, and tax issues… So in Mexico City I can tell you that probably more than in the U.S, and perhaps we can make this a more macro conversation – kind of like the developed world versus the emerging market world, Mexico obviously being in the emerging market world and the U.S. being the developed world… In an emerging market it’s much tougher to get permits and licenses, so it’s a much longer process. At the same time, the positive thing about that is that as you look at the ground-up development value chain, you’re dealing with the biggest risks upfront; you put less money, and I think that’s something better.

In this case, the biggest risk that you would have if you build any type of building, or shopping center, or whatever, anywhere in Mexico, it’s gonna be the permits and licensing. So if you can deal with that successfully and you can get all the dozens of different permits and [unintelligible 00:14:05.25] that you’ll need, then after that you’ll be in a much better position.

Another thing that we try to do is I asked a few years ago — I love learning from really successful people; one of Latin America’s probably most successful developers – I asked him throughout his career what was the most important thing that he’d learned from developing all these projects, and he said “Learning what it’s gonna cost me now.” Because Joe, I’ve been throughout my career maybe in  50 different projects, involved in them, and I could tell you that one of the main things when you’re doing ground-up development is getting the budget correct.

Joe Fairless: Yup.

Erez Cohen: There’s almost always – I’d say maybe 95% of the time – cost overruns. So because of that, one of the things that we’re trying to do is get the GMTs (guaranteed maximum prices) in place. There’s a lot of different construction contracts, and it’s totally important to learn them. You’ve gotta look at the open book, and you’ve got the lump sum contracts etc. (we’ll go into that), but what we’re trying to do is today, before we even build the building, know what it’s gonna cost us. So depending on your construction scheme, if you’re hiring a GC (general contractor), let’s say Beck [unintelligible 00:15:16.15] (there’s so many out there), but whoever you decide to hire, then you’ve just gotta make sure that they’re also taking the risk.

In any type of business – and in real estate it’s no different – you always try to have all parties do well. In this case, “Hey, you know what, GC? If you’re gonna come in with us, you’re gonna get all this potential upside… You’ve also gotta have potential downside. So you’re gonna tell me today what it’s gonna cost me.” Obviously, there’s more details to that; usually, there are different parts of the architecture scheme, but once you get to CDs (construction documents), if you can advance with those and maybe get to 60%-70% [unintelligible 00:15:50.19] construction documents, then probably it makes sense for a GC to give you a GMT. So they’re gonna tell you what it’s gonna cost you today. That’s something huge that I’ve seen in my career, that is super-important.

Joe Fairless: You mentioned in emerging markets it’s harder to get permits and licenses, but those risks are upfront, and it’s less money that  you have currently in the deal, so that’s a good thing… In developed markets where is the largest risk for doing a development there?

Erez Cohen: As we look at the supply and demand in emerging markets – let’s take for example Mexico, but you could do the same argument for Brazil or India or Russia or China – the population is much younger. So because of that, you’ve got much more millennials, you’ve got gen Z’s etc. who are purchasing whatever it is you are selling to them, whether it’s an experience in a shopping center, whether it’s staying in a hotel, whether it’s an apartment, or renting some co-working space at a WeWork, or whatever it is. So because of that, usually demand is larger, and usually your productions are a little more interesting

On the one hand, we discussed how you could mitigate some of the potential construction risks, but then on the leasing/sales risk, or market risk, or however you look at it, in emerging markets it’s usually a little more comfortable. The demand is usually there. You have an investment thesis based on smarts and logic.

If you look at the developed world, obviously demand is lower in general terms, because the population is not growing, the demographic is not as interesting, the economies are growing at a much slower pace… So because of that, usually the construction and market risk are bigger risks, I would say, from my experiences developing in emerging markets.

So in emerging markets it’s probably gonna be permits and licensing. It’s dealing with the fact that there is law, but forcible law is very tough, and because of that you’ve gotta deal with local municipalities, with governments, there’s a lot of corruption, unfortunately… So because of that, permits and licenses are an issue.

But as you move, for example, to the U.S, obviously there is always the human element, and there might be challenges, with some sorts of corruption or favoritism, but in general terms the U.S. is a developed economy, there’s a forcible law, the courts are open for anybody… It’s much easier, and so permits and licensing is a little easier, but a the same time you’ve gotta deal with the challenge of the market risks, as we discussed. So overall, that’s my perception.

Joe Fairless: Tell us about a project that has lost money, that you’ve worked on.

Erez Cohen: There was one project when I was in investment banking — and fortunately, I haven’t had too many of those yet… But they will always come. If you do enough deals, you’re always gonna get one or two or three or four bad deals. Hopefully, you don’t get too many… But when we were in investment banking – I wasn’t an investor on this deal, but basically it was this resort time in Mexico. It’s near Cabo, it’s called La Paz, for any of your listeners who have actually been there. It’s a really beautiful place. The investors – they made a bet on this town taking off.

So what I’ve learned is that when you’re developing anything in resort towns – let’s say for example Myrtle Beach; something that your audience can relate with… In Myrtle Beach clearly there’s more access to their town. In this specific case there weren’t direct flights. Today you go to Cancun or to Cabo and you’ve got direct flights from any major city in the U.S. This town did not. The investors went in saying “Okay, we’re gonna go talk to United, we’re gonna go talk to American Airlines, we’re gonna talk to these different airlines and get them to change some of their routes and get some direct flights in there.” Unfortunately, that never happened…

And you’ve also gotta have support locally from the municipality, from the state etc. Here in Mexico it’s very tough, as we’ve previously said, to interact with the local communities, or the local municipality government etc. to get them to support  you. They really expect almost 100% of the support from the developers. And just as a parenthesis, I was recently at the Urban Land Institute Spring Meeting in Nashville, Tennessee, and that’s an example of a city that’s had phenomenal, phenomenal help from the local government and the state. I was in Nashville, and it’s like “Wow, what’s happened here…” It was absolutely inspirational to see what’s going on down there. But unfortunately, in Mexico it’s not the case, so in this specific investment the investors did not do well.

Joe Fairless: If presented a similar opportunity in the future, what are some questions you would ask about it prior to undertaking the opportunity?

Erez Cohen: First and foremost I wouldn’t be that focused on having such a great location, maybe a beachfront with a marina, getting the permits and licenses etc. I would be really focused on “Hey, guys, how are we gonna make sure that the demand  comes?” Because it’s a speculative development. For anybody listening who hasn’t developed yet, it’s really important that anytime you’re analyzing any type of deal, you look at the demand and you realize “Is it speculative demand, that it’s not currently there, but you’re gonna have to fly it in? Are you gonna have to bring it from some other city, some other state, some other country?” Usually, I don’t like those types of deals, because obviously there is much more risk involved in them. In this case specifically I would be super-focused on “Hey, how are you gonna bring in airlift in here? Who is gonna come and buy these beautiful condos on the beach? Who is gonna come and stay at this beautiful, luxurious hotel? Who’s gonna come and park their yachts here, when you’re an hour away from Cabo San Lucas, which has a much bigger marina?” etc. So I’d be very, very focused on the demand.

Joe Fairless: Based on your experience as a real estate investor, what’s your best real estate investing advice ever?

Erez Cohen: Wow. That’s a really great question. I would say – this might sound like a cliché, but I would say that any decision that you make, that it’ll be focused on maintaining a really good reputation. So many times in my career I’ve seen really phenomenal investors, people that are truly [unintelligible 00:21:49.03] that really understand supply and demand – which that’s what it’s really all about in terms of your investment thesis – who have really great relationships with equity investors, and with different banks etc, just really great people on the investing side, but they’ve made some very poor decisions regarding ethical standards; they decided to do things that were unethical, and they got caught, so they had to pay the price, and that’s very unfortunate.

So I’d say your reputation is everything, so every decision that you make, be focused on long-term. Think that you’re gonna be — whatever your age is, if you’re 20, 30, 40, 50, you’re gonna be working hopefully till you’re 80-90; you’d gonna wanna stay busy. So always make a decision based on that.

Joe Fairless: We’re gonna do a lightning round. Are  you ready for the best ever lightning round?

Erez Cohen: Let’s do it, Joe.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:22:48.16] to [00:23:23.16]

Joe Fairless: Okay, what’s the best ever book you’ve recently read?

Erez Cohen: Principles, by Ray Dalio.

Joe Fairless: What’s the best ever deal you’ve done?

Erez Cohen: A vertical residential deal in Mexico City.

Joe Fairless: And why was that the best ever?

Erez Cohen: Because we were able to mitigate almost all the risks. We went in when there were already permits and licensing in place, and a really phenomenal construction company was doing the building. We were able to pre-sell many of the units, and returns were over 40% IRR.

Joe Fairless: Best ever way you like to give back to the community?

Erez Cohen: I believe that it’s kind of like what Bill Gates says – it’s your fault if you die poor, but it’s not your fault if you’re born poor. I believe very much in that. I believe that helping children for me is the most satisfying thing, whether it’s children with cancer, or HIV, or any children that are impoverished… I take part in different foundations, and that gives me tremendous fulfillment… And all around the world.

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

Erez Cohen: I’m happy to connect with your listeners on LinkedIn. They can go and find me there. And if they really wanna learn a little bit more about me and the journey that I went through the last two years, they can check out the book that I’ve recently launched. It’s called Real Estate Titans, and they can find that on Amazon. I went and I interviewed 11 of the most phenomenal real estate investors from around the world, that I know have invested billions, or tens or hundreds of billions of dollars… And I went and I asked them many of the questions that you’re asking me… And they’re really just phenomenal. I learned so much from them. So there’s a little bit of my story in there as well. If you want to check that out, I’m sure that it’ll be tremendous value to  your readers.

Joe Fairless: Absolutely. The Real Estate Titans: Seven Key Lessons From the World’s Top Real Estate Investors. That is on Amazon.

Thank you so much for being on the show. I really enjoyed learning about what you’re doing with the developments in Mexico City, learning about the differences between developing there versus the United States, and then some global mindset lessons that we’ve talked about. So thanks for being on the show; I hope you have a Best Ever day, and we’ll talk to you again soon.

Erez Cohen: Thank you. It was a pleasure, Joe. I appreciate it. Take care.

JF1840: Buy & Hold, Development, & How Meetups Help Your Business with Steve Arneson

Steve is on a mission to educate and inspire 1,000,000 people with his podcast, meetup, and his own real estate investing. With over 20 units, 4 development projects, 60-70 person real estate meetup, he is on his way to that goal. We’ll hear about how he grew his meetup, what that has done for his business, as well as hear about some of his real estate deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Keeping track of all the places you are looking at or have made offers on, and revisiting them after a month” – Steve Arneson

 

Steve Arneson Real Estate Background:

  • Real estate investor with 20+ doors
  • Has 4 development projects in the early stages, hosts a monthly meetup for the last 3 years, and is a co-producer of Victoria Real Estate Investment Expo
  • Based in BC, Canada
  • Say hi to him at https://thereinvestors.ca/
  • Best Ever Book: Traction

 


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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, Steve Arneson. How are you doing, Steve?

Steve Arneson: Joe, I’m having a best ever day.

Joe Fairless: Oh, well, that’s as good as you can get then, I guess… I’m looking forward to our conversation. Steve is an investor who has over 20 doors, he has four development projects in the early stages right now. He also hosts a monthly meetup – he’s been doing that for three years – and is the co-producer of Victoria Real Estate Investment Expo. Based in British Columbia, Canada, right?

Steve Arneson: You’ve got it. Hometown is Victoria, BC. I absolutely love it here. It’s best place ever to be, in my opinion.

Joe Fairless: Alright, well let’s learn more. Do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Steve Arneson: For sure. Background in real estate; I’ve been a full-time investor for about three years now. With my best friend and business partner, Randy Molland, I bought my first investment about six-and-a-half or seven years ago now. It was a live-in condo flip. All my family is involved in real estate on one  level or another. Like you said, we have a monthly meetup here in Victoria to help educate people on the benefits of real estate investing… And yeah, we are on a mission to inspire and educate a million people to live a more fulfilled life, and have the equity and the cashflow that can supplement that lifestyle through real estate.

Joe Fairless: Do you keep track of the million people that you inspire?

Steve Arneson: Mentally, I’ll say. We don’t have a formal tracker to it. I think our number is about 1,500 right now, so we’re steadily pacing.

Joe Fairless: Got it. You need a little thermometer on your wall, where you color it in all the way to a million. So you’ve been investing in real estate for six years, full-time for three years. Your first one was a live-in condo flip… Are all of your properties in Canada?

Steve Arneson: They are, yeah. West Coast.

Joe Fairless: Okay, let’s talk about your monthly meetup. You started it three years ago. That, by no coincidence, I imagine, is when you became a full-time real estate investor. Why did you start it and how do you structure the meetup?

Steve Arneson: We started it basically for our own accountability and to grow our network. It wasn’t until we started listening to podcasts where we found like, hey, meetups can be a really good source of building network, building content, educating people, and kind of building investors and other people into our funnel, as you say in marketing.

So we took it upon ourselves to become the face here in Victoria, because there wasn’t an educational meetup, so there was a huge demand for it. There were those typical meetups where it’s a sales pitch on like “Hey, join my new fund”, or whatever, and then the other side of it, where it’s the old white guy, sitting around and drinking their scotch, talking about their yachts. There was nothing in between where it was just educational-based.

We bring in professionals from all across Canada to come and speak and present with us, and the format is like a half hour of networking to start off, and then about an hour and a half, two hours of content, where we talk about any given topic, from simple things like market updates, to creative strategies, to financing. We bring in developers to talk about what they’re doing in the green space, and everything in between. It’s really the community that we wanted to build from day one, to help people come, feel safe asking those “stupid questions.” So it’s an environment and a community for all levels of investors, and it’s been a lot of fun.

We started off — our very first one  was 12 people in the back of a restaurant… And at the Real Estate Investment Expo we had 900 people come through the doors one year, and our meetup now is steadily at like 60-70 people every single month. It’s been so rewarding to watch people who have come a year or two ago and go through this massive shift between realizing they have equity in their home, for example, and then refinancing that and reinvesting that into growing their portfolio to produce more monthly income, or a nest egg for building a legacy for the rest of their family. It’s been really rewarding, and that’s really what drives us on a monthly basis to keep active and keep doing it ourselves, too.

Joe Fairless: Twelve people in the back of a restaurant, to now consistently 60-70 people… What are a couple tips that you’d give someone who has a meetup to help grow their meetup?

Steve Arneson: Great question, thank you for asking that. There’s a lot that we’ve learned over the last few years. Number one is as you start building it, don’t allow anybody in. We literally vetted every single person who wanted to come, and we denied some people because we saw that they were the more selfish type, of like “Hey, here’s my business card. Hey, here’s my business card. What can you do for me?” And the community we wanted to build was the exact opposite. It’s people that we want to have in that room, or people who want to go there and be able to support and give to others. So that’s kind of rule one.

Joe Fairless: Before you go to rule two, let me just make sure I understand it. You vet people to attend your meetup… So how do you vet someone? If there’s someone you don’t want in there, like you described, how do you vet them if you haven’t seen them at the meetup before?

Steve Arneson: We didn’t market the meetup the first 6-8 months. It was just word of mouth, and they had to go through a screen process. Joe, say you had a friend who wanted to come. You would introduce us and we would have a quick conversation about basic stuff like building a relationship, but also where are you at now and what do you want to accomplish from this. We don’t want it to be that type of community where it’s just a bunch of solicitors. We’ve seen that not work, and it doesn’t align with our mission.

So it was just a five-minute conversation. You can tell a lot from people’s demeanor, how they respond to questions… So that was how we executed on that.

Joe Fairless: Sure. But now do you still do that interview process?

Steve Arneson: We don’t now, and it’s really interesting, because I can pick out a couple different situations in my brain where somebody comes in — because we are marketing it actively now to grow it, and to get power/caliber speakers in, and impact more people here in Victoria… So when those people who are more on the selfish side and are just looking for business come in, they kind of stand out like a sore thumb… Or what’s the phrase where it’s like a thorn amongst roses kind of thing.

Joe Fairless: Yup.

Steve Arneson: And they don’t come back, because they don’t feel like they belong or fit into this community.

Joe Fairless: Okay, I get it. So  you’re intentional about who you brought in initially, and then as a result of being intentional about the initial people, it’s then built a foundation of the overall community vibe. Then people come in who don’t fit that vibe or the culture – they opt out of that.

Steve Arneson: Exactly.

Joe Fairless: Okay, cool. Thank you. Alright, that’s one.

Steve Arneson: That’s one. Rule number two is just provide as much value as humanly possible. We are very strict on our timing. Doors open at 6. At 6:30 we get kicked off with the presentations. Randy and I typically open up with a “Hey, how are you doing?” kind of thing, and it may be a quick overview of what you’ve missed over the last month. Then we jump into presentations until 8:15. That’s kind of like a hard close. We tell people that it’s gonna be ending at 8:15 sharp, and if you wanna leave – great, no hard feelings. If you wanna stick around and continue networking, awesome. Maybe it’ll be more Q&A. But it’s really jamming a lot of content, or at least education, into that hour and a half, so that people who come feel like they’ve taken something away that’s tangible, that they can implement into their business or into their life right away. That along with it being a little entertaining just keeps the energy high, just keeps people engaged, and keeps people coming back.

Joe Fairless: With the online presence that you have with this meetup, what do you do online to promote it?

Steve Arneson: We have some targeted Facebook ads, Instagram as well… We’re pretty decent for Google search. But we have a community on Facebook that we’re pretty active in. We invite everybody who’s in Victoria or who knows about us to join our Facebook group, and within that you get the exact same thing – you get lots of content, lots of education, lots of updates, and then also just notifications on who our next speaker is gonna be, the date, the time, some tidbits, a bunch of notes with the last meetup etc.

So we wanna communicate with people, we wanna engage people, we wanna help people, and it’s a great space for people to come and ask questions. It’s really cool to watch us not even have to interact with those people, because the other members of the community are stepping up and supporting new people with new questions.

Joe Fairless: You’re a co-producer of The Victoria Real Estate Investment Expo… What is it and how many years have you been doing it?

Steve Arneson: We did it for two years, 2017 and 2018. It’s a very large event; the largest that Victoria has ever seen in this space. It was a kind of dual purpose. We had about 30-40 exhibitors both years, so for people who wanted to connect with tradespeople, or funds, and then we had two different stages as well at the venue. We had people who were interested in doing workshops, where it’s more hands-on… For example budgeting. We had a budgeting workshop. And then we had the other stage, which was the main stage; we were having our keynote speakers there educate people on trends in the marketplace, or strategies etc.

Joe Fairless: How many people did you have in year one?

Steve Arneson: Year one we had 900. Year two we had 600 or 650.

Joe Fairless: Interesting. How come the decrease?

Steve Arneson: Yeah, unfortunately we booked our date a year in advance after the first one went so well, and over that year, leading up to year two, we had three other very large events booked for the exact same weekend. Victoria is not a big town; there’s only 350,000 people here. We’re close to Vancouver, which is a million and a half or so… But when you have 3-4 very large events in a small town like Victoria, it just gets a little diluted.

Joe Fairless: What were you competing against?

Steve Arneson: I think there was Comic Con, and there was a women’s conference, and I can’t remember what the third one was.

Joe Fairless: Okay. Are you doing it this year, 2019?

Steve Arneson: We’ve shifted our model, so we’re not doing the same type of event, but we are going to continue with the education stuff. We’ve built our network to a really great space; all those exhibitors that were there… We have special connections with each and every one of them. So if people are interested in meeting them – we can facilitate that introduction. Then we’re really focusing on just doing more hands-on workshop-type events and live events, where we bring in speakers and trainers to help facilitate and host with us, to just kind of move the needle a little bit further in people’s investing careers or lives.

Joe Fairless: Got it. So instead of one large event, you’re doing a bunch of smaller events.

Steve Arneson: Exactly. Our next one is actually coming up in — today’s the 9th, and the next one comes up in two weekends from now, 18th and 19th.

Joe Fairless: Okay. And for someone who has a grand vision of doing  a big event like you had put on for two years, what are some watch-outs that you would give them? …other than the date thing.

Steve Arneson: Oh, don’t do it…

Joe Fairless: I can tell, yeah. Because you would be doing it again if it made sense… So please, elaborate.

Steve Arneson: It was one of the most time-consuming and stressful efforts I’ve gone through my entire life. Full transparency, we had over $100,000 invested into this one event, and in Victoria specifically, more so than a lot of other markets, but in events as a whole, you sell like 50% or more of your tickets the last week. So leading up to that last week, we’re sitting there going “Come on, where’s all of our ticket sales?” and stressing, because we’ve got $100,000 on the line here… It was a little nerve-wracking.

So make sure you have a good date, plan it well in advance. For real estate, I would say late spring is really good. [unintelligible 00:13:37.23] earlier spring people aren’t quite in the rhythm yet. The real estate cycle kind of picks up and is more popular in the later spring, before people go on vacations and stuff through the summer… So that’s critical timing. If you’re not gonna do it in the spring, do it in the fall, late September, October. And then just have a really good marketing plan in place, and then just cross your fingers and pray that people will start buying your tickets early.

Joe Fairless: [laughs] How much money did you lose on the second, year two?

Steve Arneson: I think we broke even on it. It was tight. And in our minds, it was the best marketing expense ever.

Joe Fairless: Sure.

Steve Arneson: Because we were at the time a very new business, but we had professionals from all across Canada come, that we got to build really great relationships with, because they got to see the integrity we have, the work ethics, the characteristics of who we are as people… And we got really put on the map from those two events. So it was basically a breakeven event which just gave us infinite return afterwards.

Joe Fairless: So if it’s a breakeven event that gives you infinite returns, why not put someone in place to do that work, have a couple interns, and then continue to have infinite returns on an annual event?

Steve Arneson: That’s definitely something we’re gonna lead up into, but we wanna take it in a little bit smaller, bite-sized pieces, hence the smaller workshops. So instead of just putting all of our eggs in one basket for the year, what we’re doing is we’re basically diversifying our risk, and going from Victoria, to up island, and then on the mainland into different markets, to create new audiences and fresh content.

Joe Fairless: Oh, okay. Start more guerilla efforts leading up to it, and then when you have some massive amount of people that you know will be confirmed attendees, because you’ve got so much exposure through all those little areas, all the surrounding communities… Then you could build back up to the larger event with more certainty.

Steve Arneson: Exactly.

Joe Fairless: Okay. Cool. Switching gears – you’ve got four development projects in the early stages… What are they?

Steve Arneson: We’ve got one basically at lock-up right now, which means we’ve got windows and doors, and a roof… It looks really good. It’s a townhouse complex of six units. And we have the lot directly beside that, where we’re gonna basically take the exact same plans, but rotate it 180 degrees and build the exact same thing. Another lot is a question mark right now, but it’s in the core downtown, in a growing city, growing market, just North of Victoria… And then the last one is really exciting, where it’s currently got a house with a suite on it. With our investor we bought it cash, so the place is covering itself really well right now. It cashflows, obviously, because we own it outright… So the investor is getting a really good cash-on-cash return. And we bought it rezoned…

We have the ability to build up to five stories on it, and it’s two blocks away from the core of downtown. Growing neighborhood. It looks out onto kind of a big community garden type thing, and it has a lot of upside for us… So being in the development space has been a goal and a dream of mine for a long time. I didn’t know if it was gonna be possible or not, but I’m really excited to complete our first one with our developer, and move on to bigger pieces.

Joe Fairless: How do you structure that with the developer, in terms of just ownership of the deal?

Steve Arneson: Our very first one, because it was completely new to us, we didn’t want to take on that mass amount of risk… Because I think it’s like a 1.5-1.8 million dollar build, and walking into the developing space there’s a lot of unknowns. So basically how we structured it with our developer was we found and facilitated the deal, and then we basically wholesaled it to them, and then we got a rev share at the back. So if we do really well on the sales, then we get a chunk of that, and the developer has the majority of that.

Going forward, we’re being more and more involved in each deal, to create more income for us as our company.

Joe Fairless: Nice. And for someone starting out and who has a similar opportunity, and they don’t have the development experience but they’ve found a deal and they’ve found a good developer they know locally, what type of structure in terms of revenue share would you recommend that they try to negotiate?

Steve Arneson: If you did a lot of the front-end work, especially if you went through a rezoning process… Rezoning is really difficult.

Joe Fairless: Oh, yeah.

Steve Arneson: I’m sure you know, Joe. If you’re going through that process, you want at least 15%, in my mind.

Joe Fairless: 15%?

Steve Arneson: Yup. And then we can kind of negotiate here and there for different pieces. We have the bonus that my business partner, Randy — he’s a journeyman electrician, so he’s gonna be a little bit more hands-on through the whole process… So that’s really exciting. And then I’m the data geek; I’m the guy that’s gonna do all the number crunching, build spreadsheets etc. and make sure that the economic factor makes sense.

Joe Fairless: What’s a deal that hasn’t gone according to plan?

Steve Arneson: [laughs] Not according to plan… I’ll rewind to my very first purchase, which was that live-in flip.

Joe Fairless: Yeah… The condo?

Steve Arneson: The condo, yes. So I bought it at 24, and it was best part of town, bottom of our market, which was 2012 here… And I knew that it hadn’t been renovated since late ’70s. It was the dream for me – walking in there, putting in some elbow grease, and resell when I’m ready to move. So as this business builds, and my time — I got less and less available for doing renovations, I hired a contractor to do the renovations for me, as I wanted to flip and sell.

Joe Fairless: Oh, and here’s the challenge… Contractors…

Steve Arneson: Here comes the challenge. The part that went unexpected was the guy that I hired, who I thought was going to be doing all the work, then outsourced all of the work to someone who was not nearly as experienced. You could tell the craftsmanship from the original guy and the guy actually did the work was not the same. That was just disappointing for me. I probably lost out on 20k, but I probably saved 10k or 15k, so I maybe only lost 5k out of the process… But the process itself was a real pain, because I was communicating with one, some other guy was coming in, and the work just wasn’t what I was expecting.

Rewinding, I learned a lot through that process, and I’m much more diligent on the communication and the upfront expectations of people who are doing work in our properties.

Joe Fairless: You said you lost out on 20k but saved 15k… Will you elaborate on what you meant there?

Steve Arneson: I kind of leveraged the relationship with the contractor I hired, so he gave me a 20k discount or a 15k discount on the work that was going to be done in my condo. So he was gonna charge me 50k, let’s say, and if I went out to the market and brought in any other  contractor, that person would have charged me 65k. So I saved that 15k, but then because of the quality of the work that wasn’t quite met, I think I lost out on about 20k of what my sale price was.

Joe Fairless: So knowing what you know now, when you are presented a similar opportunity in the future, how do you approach it?

Steve Arneson: Now I have as much as I can in writing, and very articulate with what I expect in the design and the quality of work.

Joe Fairless: Got it. What’s your best real estate investing advice ever?

Steve Arneson: I’ve actually got three, if I may.

Joe Fairless: Sure.

Steve Arneson: Real quick… One is you have to get educated. Whether it’s in your marketplace or where you want to invest, as well as what your strategies are. Hire mentors, get connected with community groups like ours, that are helping people along the way, and reach out to people who have been there and done that.

And then in our market, in BC and a lot of the West Coast, and a lot of the markets through the continent – it’s a really hot market here, so you have to be able to act fast. So whether you’re working with joint venture partnerships, or you’re buying a place yourself, you need to have financing in place, you need to have the strategy ready to execute, have the timetable set, and all your team members on the same page, to be able to act as quickly as possible.

And then lastly, we have found some of our best deals – actually, absolutely our best deals – from following up with those listings three or six months later. So keeping track of all the places that you’re looking at and making offers on, and then every month go back to that list and check which ones have sold or haven’t sold, and then follow up with the places that have not sold, and revisit that as an opportunity has really been beneficial for us.

Joe Fairless: Oh, it’s huge. It’s a big deal to just consistently follow up and be methodical about it. There’s a lot of fly by night people who try to do it, it doesn’t work out, move on, find something else that’s shiny and then try and do that… But when you’re methodical about it, there’s a whole lot of money that can be made there.

Steve Arneson: Yeah, it’s a strategy that not many people take advantage of. So if you can get creative and if you can stand out, that’s gonna put you further down the line to meet your real estate goals.

Joe Fairless: And by creative and stand out, are you meaning following up, or do you have an additional approach for following up, that’s creative?

Steve Arneson: More so just the follow-up side of things. For us, we’re looking for distressed properties. So we’ll go to a distressed property, and say it’s worth a  million dollars, we will offer them 800k, let’s say, just for examples. And it doesn’t sell. Three months later we’ll go back to there, it’s still on the market for a million dollars, and we’ll say “Hey, what’s happened over the last couple months?” and they’ll kind of tell us a little bit of details, and we’ll say “Great. If your seller is ready, our offer stands.” And then if that doesn’t go anywhere, we follow up a month later, and if it’s still on the market, our offer is no longer 800k, our offer is probably a little bit lower than 800k, knowing that it’s been sitting on the market for a little while, and there’s something probably wrong with it that other people are seeing as well.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Steve Arneson: I’m so excited, Joe.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:23:06.09] to [00:23:48.18]

Joe Fairless: Alright, Steve, best ever book you’ve recently read?

Steve Arneson: One of my favorites that I’ve recently read is called Traction. It’s by Gino Wickman. It’s all about being a leader in your company, and understanding how to put the right butts in the right seats in terms of employees and growth and scalability for your business.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t discussed already?

Steve Arneson: Paying too much.

Joe Fairless: Will you give an example?

Steve Arneson: There was a property that we looked at… I think it was marketed at like 700k, or something, and we ended up over-paying for it because we knew it was an awesome opportunity and because we  were just eager to buy something. It was a bit of a draught. So we actually ended up getting traded with it towards the end of negotiations. We were at that point of “We’re overpaying for this, but we’ve already put a lot of stake into the game.” We got a little bit emotional with the deal.

Joe Fairless: How did it turn out?

Steve Arneson: It turned out to be a really good win, actually.

Joe Fairless: [laughs] Well, that’s–

Steve Arneson: At the time, as we went through it, we had to really think outside the box and bring in some mentors to help us.

Joe Fairless: So how did you turn it around so that you made it very profitable?

Steve Arneson: We ended up buying it cash instead of financed.

Joe Fairless: Okay, so the purchase price wasn’t as high as what you initially offered, because you offered cash?

Steve Arneson: We paid the same price, we just did it a little bit creatively in the sense that we bought it cash… So our investor had put up 770k, or something, and then we put in additional money into renovations, and then we went to the bank for financing, once we raised the value so much.

Joe Fairless: Oh, okay, then you got some cash out.

Steve Arneson: Exactly. We got 94% of our investors’ money back out, and the property cash-flows very well.

Joe Fairless: Best ever way you give back to the community?

Steve Arneson: We’re a for-purpose business, and our monthly meetups – we charge $5 for it, and 100% of that $5 ticket entry goes to an organization that’s called KidSport. They help families who can’t financially afford to put their kids through organized sports get involved with organized sports, because we believe in the team environment, and working for a common goal, and learning how to fail, and recovery from that failure. Not only this builds your talent as an athlete, but it also gives you a lot of learning life lessons that you can use for the rest of your life.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Steve Arneson: The best thing is to visit us on Facebook – The RE Investors.

Joe Fairless: Well, Steve, I enjoyed our conversation, learning about how over the last three years you’ve built a network, you have built an expo that had 900 people year one – holy cow, props to you on that. And then the lessons you learned from that, doing smaller groups in the surrounding areas and continuing to build that interest (more of a guerilla effect) and then eventually go back up to that larger expo, so that you have mitigated the risk of having six figures outlaid with the hope that more people will come to help you breakeven… But then also just the monthly meetup that you’re doing too, and how you’ve used that to get investors and continue to be a thought leader in your area.

Thanks for sharing the condo flip example, with the contractor hiring someone else out, and how you navigate that, and what you’d do in the future.

I really enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you again soon.

Steve Arneson: Thanks, Joe. Thank you so much.

JF1812: Starting An Investment Club, Renting RV’s & Building Indoor Sports Arenas with Ryan Enk

Ryan is here to share his story today, which will have a heavy focus on hard work and passive income. Ryan’s passion is helping other working class people earn passive income to better their own futures. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Some people have no money and no network, they can start with wholesaling” – Ryan Enk

 

Ryan Enk Real Estate Background:

  • Founder of Columbia Real Estate Investment Club, the author of Rolling Real Estate Formula and owner of an RV rental fleet
  • Has built 2 two million dollar indoor sports arenas
  • Based in Covington, LA
  • Say hi to him at www.cashflowdadlife.com
  • Best Ever Book: Rich Dad Poor Dad

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


TRANSCRIPTION

Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks and I will be the host today. Today I will be speaking with Ryan Enk. How are you doing today, Ryan?

Ryan Enk: Doing great. I’m glad to be on the show, Theo. Thank you.

Theo Hicks: Yeah, I’m glad to have you on. I’m looking forward to our conversation. A little bit about Ryan. He is the founder of Columbia Real Estate Investment Club, the author of Rolling Real Estate Investment Formula, and the owner of an RV rental fleet.

He has built a few in-door sports arenas – I’m looking forward to talking about that. He’s based in Covington, Louisiana, and you can say hi to him at cashflowdadlife.com. We’ll have that website in the show notes of this episode.

Before we get started, Ryan, do you mind telling us a little bit more about your background and what you’re focused on now?

Ryan Enk: Yeah. The main thing that I’m focused on right now is helping people achieve passive income, specifically through real estate investing… And enough passive income to replace their working income. The reason that I’ve got a heart for that is because I’ve got five kids, I’ve got five boys (I don’t know how to make girls, but I’m not a quitter, so we’ll see what happens there), and when I was going through corporate America, and had a corporate job selling copiers – I don’t know if you’ve ever seen that movie Office Space, where they take the copier to the backfield and beat it with a baseball bat… That was how people felt about me when I walked in the door unsolicited to sell them a copier.

I was really at this crossroads, because I was having all these kids, and I just got chewed out by this [unintelligible 00:03:57.11] who I sold a copier to, and I was like “Man, I’m in a really bad place right now…” And I asked myself a critical question that I think everybody should ask themselves, and that’s “What would you do if money didn’t matter?” Because if money didn’t matter, I would be more present for my wife and my family and my kids, I’d be able to serve my community better… And I just chased that rabbit all the way down the hole, and the vehicle I used to achieve that was real estate investing… So that’s what I help people now.

Theo Hicks: That’s such a great business model, and I’m sure people really appreciate you helping them out with that. So when you’re helping people achieve their passive income, is it more you’re helping them set up their own real estate business, or are they investing in some of the deals that you do, or is it a combination of those two things?

Ryan Enk: Yeah, it’s a combination of those two. A lot of real estate mentors sometimes pigeon-hole you into one strategy or another, and as you know, there’s tons of strategies out there…  So what we like to do is we like to reverse-engineer the situation, because some people might not have money, but they have a big network. Or they have a lot of money but they don’t really wanna spend a whole lot of time going out and finding deals… So we focus on creating single-family portfolios and multifamily portfolios as the main two strategies.

But that being said, some people have no money and no network, in which case sometimes we’ll say “Well, let’s get started with wholesaling.”

So we really kind of figure out where people are with their current capital situation, their current time constraints, their current network, and then we recommend a strategy and educate them from there.

Theo Hicks: Okay, that’s great. That’s how you’ve gotta do it; you don’t wanna just present one strategy and say “This is exactly how you have to do it”, because as you mentioned, it’s based on where they’re at right now, and everyone’s situation is different, so… That’s a great strategy.

As we said it in your background, you’ve built a few indoor sports arenas… I’ve personally never met anyone who’s done that before, so do you mind telling us a story about that? How you determined that that’s what you want to do, and then maybe kind of walk us through the numbers on one of those deals?

Ryan Enk: Yeah. So as part of the story I was giving you earlier, I asked myself what I would do if money didn’t matter… I was actually driving across the bridge from New Orleans – it’s the longest bridge in the world, across Lake Pontchartrain, and I just prayed for a little bit, I asked God to help me, because I was miserable; I was waking up every day with anxiety with what I had to do for work… So it popped in my head, “Well, what would I do if money didn’t matter?” I’ve always loved played soccer and football, and I was previously a teacher before Hurricane Katrina hit… This school I was at was six feet underwater.

So I was like “You know what, I’d like to do something where people are happy when I walk in the door, they want to know me… And something that people look forward to every week.” People look forward to their games every week, and it makes a positive impact on the community… And I also played guitar too, so I was like “There’s three things – I would either mentor people, help people, I’d open up an indoor sports arena where people can come and play sports, have birthday parties, whatever it is, or I would play music, if money didn’t matter.”

So I called my wife – and we had never had this discussion before – and I said “Obviously, you see me coming home unhappy and miserable, and not totally present to you and the kids… What could you see me doing if money didn’t matter?” She said “I don’t know, maybe opening up an indoor sports arena, playing music, or mentoring people.” So I was like “Alright, that’s my golden ticket to remind her that’s her idea, as I try to pursue this.” [laughs]

And at the time I didn’t have anything in my bank account really but overdraft fees. For anybody looking to get started, most people think that that’s a huge brick wall… But there’s a saying that I heard – I think it was Tony Robbins that said “Most people’s problem isn’t the lack of resources, it’s a lack of resourcefulness.” So I just decided whatever brick wall I was gonna come across, whatever I didn’t have, I would go look to find who had that.

So I began, I created a business plan, started looking for money, looking for capital, met with investors, met with banks, I got a consultant… One thing just led to another until we got our first deal. I think we built it for 1.7 million dollars. We structured like 11 investors in order to build that arena. So it was 1.7 million for the actual building, and then it was like another 380k just for the furniture, fixtures and equipment, the indoor turf and whatnot.

So that was just an experience, and all I brought to the table at that time was sweat equity. It turned out to be a pretty good deal. I don’t know if that answers your question, but if you’re looking at a little  bit about how that was structured, I basically got investors to help me build it.

Theo Hicks: And at this point had you done anything like that before?

Ryan Enk: No. [laughs] That was actually a huge problem, because when I first started, I was like “Alright, I know that I’ve gotta get a consultant”, and a lot of people when they first start something – and you can apply this to multifamily apartments, to anything that you’re starting for the first time – a lot of times the question that you’re gonna get is “Well, what’s your experience with this? Have you done this before?” And the biggest advice that you can give is it’s not like going to a job interview, where you have to present your own resume. I think too many people are trained in that mentality, like “This is just my job resume.”

When you’re pursuing something in investing, or a business, whether it’s an indoor sports arena or a multifamily apartment, you basically can give everybody else’s resume as part of the team. So you start creating a team around you, and that’s what I had to do – basically, look to leverage other people’s experience, other people’s money in order to prove myself to investors and to bankers.

Theo Hicks: And how did you find these team members? Because this is a very specific and unique niche, indoor sports arenas… Obviously, when you’re talking to investors for multifamily – it’s not easy, but it’s not super-difficult to find a multifamily consultant. How did you find  an indoor sports arena consultant? And the rest of your entire team.

Ryan Enk: The biggest thing I can say is I kept on saying if the door closed, I was like “Well, what’s another door?” With consultants, I just did a Google search; I found this one guy, called him, he wasn’t interested. Then I found this website, USindoor.com. They had a bunch of consultants listed. I called them all, interviewed them all… It was gonna cost $15,000 for the consultation. Obviously, I didn’t have that, so I took a second mortgage on my house in order to pay for some of it, and then I offered the guy equity in the arena if we were to get it off the ground. That way, I could say to the bankers and whatnot, not just “This is my consultant” but “This is my business partner.” That gave them more confidence in moving forward with it.

And then as far as finding the other partners, I went around and I had this airtight business plan that my consultant had drafted. It was this 40-page thing, it was very good… And I got so excited about meeting with investors once I had that business plan, because it really made me look like I knew what I was doing. But then everybody started telling me no. So I was like “I’ve gotta have some sort of experience here”, because everybody’s looking at me like “Well, you are a teacher and a copier salesman. I have no confidence that you know how to run an indoor sports arena.” And to be honest, I would probably say the same thing, too.

So I started a daytime business for the arena called SoccerTots. Basically, it’s this small franchise — I don’t think it’s around now; I’ve since sold it. But it’s this child’s sports development franchise. You can rent out a gym, like a basketball gym, a local recreation center, or even a church gym, and pay them a percentage of your revenue, and just basically train two-year-olds and four-year-olds how to play soccer.

So as soon as I had that, I was like “Alright, I now have the daytime business for an indoor sports arena.” That changed the conversation, and I ended up connecting with this one guy, connecting me to another guy, and they pooled together some investors; then this other guy knew another guy, and it just snowballed once I had a couple of those pieces in place.

Theo Hicks: That’s a great story. You explained how you went from not necessarily having any experience whatsoever, it was just kind of a dream of yours based off of that money question, “What would you do if money didn’t matter?”, and then you kind of just hustled your way to get it done. Every time, as you mentioned, you faced one of those brick walls, you just figured out a way to overcome that. That’s great advice.

As you mentioned, all these strategies we’re discussing can be applied to any strategy… And if I’m being honest, it’s probably gonna be easier if you’re doing this for multifamily, as opposed to doing it for a sports arena. That’s awesome.

Ryan Enk: Way easier.

Theo Hicks: Yeah, seriously. So what types of returns are you getting on that deal? You mentioned how much money you invested… What’s the return factor that you use, the cash-on-cash return, or whatever, and how are you making money on this sports arena?

Ryan Enk: Yeah, the sports arena is mostly the business, and actually at first we got investors in just the business, and not necessarily — the real estate investor was separate. Three years into it, we’re like “Wow, this is incredibly stupid. I wish we would have thought of this before, to actually own the real estate, instead of just the business…” Because we’ve got an exit strategy with the real estate. With the business, you either sell it, and what is the market for that…

So three years later we ended up negotiating with the landlord to “Please, help us out and sell us the building.” He sold us the building for two million dollars. So he built it for 1.7, and three years later – he basically make 100k a year – sold it for 2 million.

We didn’t make any returns the first three years. In fact, we lost money. As soon as we started owning it, we were looking at closer to 20%-30% returns.

Theo Hicks: So how did those conversations go with your investors when you didn’t make any money those first three years?

Ryan Enk: It wasn’t fun. But we did have business projections… When you’re starting a new business like that, not a whole lot of people make money their first three years in business. I think they say that your first 3-5 years you actually lose money. So we actually projected losing money in our business plan. That being said, presenting that business plan, a lot of investors are like “Yeah, I understand, you’re being conservative”, but then they kind of expect that you make money.

So the first year all the silent investors were silent. By the third year, all the silent investors were not silent anymore. They were constantly “What are we doing here on this management?” So that part was not fun. But as soon as we owned the real estate, it changed things around.

Theo Hicks: And then on that second deal, did you apply all those lessons and did you actually own the real estate from the get-go?

Ryan Enk: Well, the second deal was a little bit of a different situation, where we didn’t have to own the real estate. We kind of took over a foreclosed business on the other side of the lake. It was a foreclosed sports arena, because the guy – I think he was a doctor – who bought it didn’t manage it himself; the people he thought were gonna manage it kind of ran it into the ground.

So we ended up being able to get the actual business – you’re looking at 380k to 500k just to start the business for the assets. We got the assets for free, and we took over a lease that was half the cost of our lease on the [unintelligible 00:15:13.24] building. Ideally, we would have liked to own the property, but because the cost to lease it was so little and we could get the assets for free, it was a little different of a situation.

Theo Hicks: Okay. And transitioning to the other business model, which is the RV rental fleet – do you mind telling us a little bit about that business plan?

Ryan Enk: Sure. I call it rolling real estate. It’s basically Airbnb, but for RVs. Once I had done enough with real estate — and the indoor sports arena was more of a passion investment; it is an exciting story and I’ve put a lot into it, but I had most of my success developing single-family and multifamily portfolios in real estate. That really gave me the comfort and the passive income to do all these other things… So once I’d gotten to a certain point, I told my wife that I wanted to buy a boat, a little cabin cruiser or something… And she was like “No, I’ve always wanted to do an RV trip.” So from that standpoint obviously we had to get the RV, because “Happy wife, happy life”, right?

So I didn’t want to just have a liability. I wanted to see — kind of taking the page from Rich Dad, Poor Dad, instead of saying “I can’t afford it. How can I afford it?” I could afford it, but at the time I was like “How can I make this into an asset, something that cash-flows, instead of something that I’m just wasting $600/month on a payment?”

So I looked into it, and there’s a couple platforms out there – RVshare and Outdoorsy are two of them. Basically, like the Airbnb or the VRBO of the internet world. It looked like there was some demand for privately-owned RV rentals. So I went ahead and got a class A RV, traveled all over the country with my family for a couple weeks, and then listed it on these platforms just to see “Alright, let me see if I can get enough rental income to cushion my payments.”

Well, I ended up making $32,000 in profit in that first year, so that’s when I was like “Okay, this could be a really great business model.” Kind of  a real estate play, but it’s rolling real estate; the same thing as the house, but on wheels, and you can take advantage of the trends in the short-term rental industry.

So I ended up getting three others in the fleet, but using other people’s money and other people’s RVs instead of putting my own capital towards it. It ended up being a neat little business.

Theo Hicks: That’s interesting. So you bought your first RV, and then once you had the proof of concept and saw that you were able to generate profit, you would reach out to other people who already had their RVs, and then rent their RVs out too, and sharing the profits?

Ryan Enk: Yeah, I basically said “Hey look, this RV is doing nothing but costing you in storage fees your monthly rent. We’ve got an airtight operation.” We basically outsourced and created a small little management company that was part-time.. And we were like “We’ve got a pretty good operation, so if you want to share in this trend and some of the rental revenues, then why don’t you go ahead and put it in our fleet. We’ll cover you on the insurance, and you can make money on this instead of losing money on it when you’re not using it.”

Theo Hicks: Wow, very interesting. Alright, Ryan, what is your best real estate investing advice ever?

Ryan Enk: I would say if I had to go back in time and slap myself around, the first thing that I would tell myself is that there is a difference between speculating and investing. Speculating is kind of like your flipping houses type thing, where you’re going in and you think you might be able to get this, but you’re susceptible for market crashes; you don’t know if you can get a tenant in there. You might research the demand and see that there’s a demand for rentals in the area, but you’re not sure. You’re not sure if you can sell; you think based on days on market you can… So that’s speculative.

And there is a way to do it in a low-risk way, but at the same time there are better investments out there, such as apartments and multifamily, where you know without doing any value-add or any improvements on day one – you know what you’re gonna make when you go in there and rent something… Because you see the T-12, you see the P&L statement. So on day one you’re getting the money that the property has been able to generate for the past 20-30 years.

That is the biggest advice that I give people when they wanna first get started in investing. A lot of them come up with all these ideas. “Let’s see the foreclosure sale, let’s see this…” – look, all those can be fun and lucrative, but they are still speculative. The best thing you can do with your capital is to invest it and not use it for speculation.

Theo Hicks: That’s solid advice. Are  you ready for the Best Ever Lightning Round?

Ryan Enk: Yeah, let’s do it.

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

Break: [00:19:59.24] to [00:20:40.29]

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

Ryan Enk: Recently read…

Theo Hicks: It can be within the past few years. Recent subjective.

Ryan Enk: I’d say my best ever book – not recently read; read like 10-15 years ago was Rich Dad, Poor Dad, by Robert Kiyosaki.

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

Ryan Enk: I would syndicate multifamily apartments.

Theo Hicks: How would start over today if you had little or no capital?

Ryan Enk: Little or no capital… I always say the biggest domino is to find the deals. So if you can perfect that skill, finding deals, I would go find deals anywhere in real estate. Once you do that, with little or no capital, the money tends to follow. Now, there’s strategies to find the money, but I would focus on getting out there and finding any real estate deal and then getting started.

Theo Hicks: What is the worst deal that you’ve done?

Ryan Enk: I can tell you exactly what it is. I started playing around with different strategies, and I heard that coworking was an up-and-coming trend. Like WeWork, and whatnot. So I decided to buy this million-dollar building in the downtown area where I live, which is on a very nice street… And the downstairs wasn’t occupied. Totally speculative, again. I planned on getting the same kind of rents that you could get for a coworking facility. Well, it’s a little town with a big ego, and I had the big ego, and nobody else really understood the concept. It had a few people that understood it, but most people were interested in just regular office space. I ended up hemorrhaging about $3,000-$4,000 a month on just that one real estate deal. So that’s where the earlier advice comes in on – know the difference between investing and speculating.

Theo Hicks: And then lastly, what is the best ever place to reach you?

Ryan Enk: Best ever place to reach me… Probably on Facebook.

Theo Hicks: Well, Ryan, this has been a very fascinating conversation, a very interesting journey, and also very inspiring because of all the obstacles you overcame. Just to summarize what we talked about today – you talked about right now you’re focused on helping people achieve passive income in order to replace their full-time income, their full-time jobs. The way that you do that is you don’t just have a one-size-fits-all formula, you reverse-engineer a specific strategy based on this person’s specific current situation.

Then we dove deep into your indoor sports arena, and we discussed the most important question you asked yourself was “What would you do if money didn’t matter?” You decided on investing in this indoor sports arena. We talked about some of the numbers, and how much money you paid for the deal, and the investors… But more specifically, you talked about how you were able to complete the deal without having any experience in that indoor sports arena. This advice can apply to really any real estate or business niche in general, and that is to find someone who has done it before and leverage that person’s experience when you are going out to raise capital.

Specifically, you talked about how you found your consultant through a Google search, and just reached out to a bunch of people until someone was interested. And you actually had to take a second mortgage out on your house, as well as offer equity to the consultant in order to have them come on board.

Then you talked about once you had that business plan, you still weren’t able to get investors. They still wanted to see some sort of experience from you, so  you actually went and started a business just to gain that experience in order to raise that capital.

We also talked about how in business you expect to not necessarily make money those first few years, but for this sports arena, once you actually bought the building, you were able to achieve 20%-30% returns.

Then we also quickly talked about the story behind your RV rental fleet, and how you wanted to buy a boat, your wife wanted the RV, and you didn’t want a liability, so you decided to check out a way to make money off of that, and you ended up making about $32,000 a year  by renting out the RV to other people, in kind of like an Airbnb form, and ended up turning that into a business.

Then lastly, you provided your best ever advice, which is to know the difference between speculating and investing, and that it’s great to have all these ideas of what you can do with the property, and it’s fun, and it could work out, but at the end of the day, the best course of action is to invest in deals that you will know what you’re going to be making from day one.

Again, very fascinating conversation. I learned a ton. I appreciate you coming on the show and speaking with us today. Thank you to everyone who listened to the episode. Ryan, have a best ever day, and we will talk to you soon.

Ryan Enk: Thank you. And is it okay with you if I offer your audience my book?

Theo Hicks: Yeah, absolutely. You asked a question earlier about what would you do if you had to start from scratch – I actually wrote a book called The 7-day Real Estate Survival Blueprint: How to Create $10,000 Out of Nothing in Less Than a Month. It deals with wholesaling and sandwich lease options, and it’s basically an hour-by-hour, play-by-play of what I would do in seven days to make sure I had a check at the end of the month. So if your audience is interested in picking up that book, it’s got nothing but five-star ratings on Amazon. We’ve been selling these books like crazy. A lot of people are getting a ton of value out of them.

You can get it for free if you just cover the shipping charge at cashflowdadlife.com/7.

Theo Hicks: Alright, cashflowdadlife.com/7. We’ll make sure that the website will be in the show notes.

Ryan Enk: Perfect.

Theo Hicks: Alright, thanks for coming on, Ryan. We will talk to you soon.

Ryan Enk: Thank you.

JF1799: An Investing Niche You Haven’t Heard Of: Owning & Managing Farm Land with Brian Luftman

Brian and his company own and manage farm land, which they purchase along with investors. He will cover the main benefits of investing in farmland (cash flow and appreciation) as well as the secondary benefits. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Anything that you’re spending money on, if it’s quality, there’s going to be someone who wants to pay more for it down the road than you paid for it” – Brian Luftman

 

Brian Luftman Real Estate Background:

  • Founder and President of American Farm Investors
  • AFI now manages thousands of cropland acres as an investment for accredited investors from 25 different states in the U.S.
  • Based in Lexington, KY
  • Say hi to him at https://americanfarminvestors.com/
  • Best Ever Book: The Art Of Leadership

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


TRANSCRIPTION

Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today I will be speaking with Brian Luftman. Brian, how are you doing today?

Brian Luftman: I’m doing well. How are you, Theo?

Theo Hicks: I’m doing fantastic. Thanks for coming on the show, and I’m looking forward to our conversation and learning more about your real estate background.

Brian is the founder and president of American Farm Investors (AFI), which manages thousands of cropland acres as an investment for accredited investors from 25 different states in the U.S. He is based out of Lexington, Kentucky, and you can say hi to him at americanfarminvestors.com.

Before we begin, can you tell us a little bit more about your background and what you’re focused on now?

Brian Luftman: Sure. My background is almost exclusively financial. I always wanted to be a trader in Chicago, and that’s what I did right out of college. I was a derivatives trader on the Chicago Mercantile Exchange; I traded cattle options.

Then how it parlayed into the farmland company that I run – I was looking for a passive farmland investment while I was still in Chicago, because I wanted an inflation protection and a real asset, that would be able to provide cashflow, and I couldn’t find anyone to help me buy into a farm, or to be a  private equity consultant, so to speak…

So I kind of filed that in the back of my mind and knew that that’s what I wanted to do after trading, and thus American Farm Investors was born. I now manage a lot of farmland acres for a lot of investors throughout the country.

Theo Hicks: For those that don’t necessarily know what cropland is and how it generates money and what’s done on that land – like me – would you mind quickly giving a high-level overview of the business plan?

Brian Luftman: Certainly. I’ll go back to the beginning on why I was interested in it in the first place – because it was really an inflation play; I wanted to bet on commodities, and I figured why not own land that grows commodities? You can invest in farmland in many different ways; you can buy an almond farm in California, or in Orange Grove in Florida, but I wanted to buy grain-producing farmland in the Midwest, because it’s pretty affordable. We buy land for 5k, 6k, 7k/acre. We produce corn, wheat, soybeans, industrial hemp… And basically, as an investor, you have the benefit of owning the underlying land, of course, and that goes up in value anywhere from 5% to 7% annually; if you look back 100 years, that’s the average, 5%-7%. It comes in waves; when there’s big inflationary cycles it goes up in a hurry, and then years like the last 10 years we haven’t seen much appreciation in farmland. So it’s kind of been stagnant, at least over the past five years. Then the cashflow is a component as well.

The real reason you invest in farms is for the appreciation, but the cashflow is tied to inflation. We produce corn, wheat, soybeans, and those are commodity crops. My investors get anywhere from 3% to 5% cashflow a year. That’s kind of the investment thesis.

The real thesis is if you believe that inflation is going to occur – and I believe it’s gonna possibly occur in a big way – this is a great way to bet on that, and be hedged for inflation.

Theo Hicks: Okay. Essentially, the primary objective is that inflation, and then a secondary benefit would be that cashflow you provide. So is the goal to eventually sell that land and then distribute a lump sum profit to your investors?

Brian Luftman: Sure. More or less. But most of the investors have a pretty long-term outlook on this. And if indeed inflation does occur, and commodity prices go up, and these farms are generating 5%, 6%, 7% returns, maybe they’ll just wanna hold on to the asset as a cash-producing asset.

There’s definitely the option to sell the properties down the road, but I don’t know; a lot of my investors are pretty long-term with this.

Theo Hicks: Okay. How do you underwrite these deals?

Brian Luftman: It’s very simple – we’re looking for the very best dirt, and you do a whole lot of assessment on how productive a farm will be. There’s a lot of tools that we can use in the industry. We use farmers a lot in the region, because farmers in that region all know where the best farms are, how to assess the properties, what pitfalls could occur, what type of capital expenditures might be coming down the pipeline when you buy a property.

We have a team of people that help us in analyzing these farms, and we haven’t really found many surprises. You’re really just buying farmland dirt, more or less. Sometimes in buildings there’s drainage involved, or logistics, but essentially it’s pretty simple, and the underwriting is how productive we think the farm will be over the next ten years.

Now, obviously, I do wanna add in that the location is an important component as well, because we’ve seen higher and better uses for some of our farms. We may be farming them now, but we think they might be developed down in the future; if that comes into play, we’re willing to pay a premium for stuff that’s on a busy road, or nearby development, because we know that that will help boost the return someday for the investors as well.

Theo Hicks: That’s interesting. I didn’t think about that. So you’ve kind of got multiple plays going on at once.

Brian Luftman: Correct. In some cases. Now, sometimes we buy a farm in the middle of nowhere that’s got very good productivity and we’re happy with that, knowing it’s gonna be a farm forever.

Theo Hicks: How do you find these deals?

Brian Luftman: Just hustling. I mean, I shouldn’t say it that way, but it’s just constantly digging, it’s cold-calling, it’s going to the PVA office (property value administrator) and seeing who owns what, driving around, networking with the farmers in the region that we wanna acquire land… And the farmers help us a lot. Our best tenant farmers — we use a lot of the farmers that grow corn and wheat for the bourbon industry here in Kentucky. A lot of our properties grow for Maker’s Mark, Jim Beam, Buffalo Trace Distilleries. These are some of the biggest ones in the country, and we provide corn and wheat for those.

So our farmers are big-time, and they’ve got a big footprint, they farm multiple counties, and they know all the landowners. [unintelligible 00:08:06.20] when they wanna expand, they don’t really necessarily have the capital to buy more farmland, but they wanna farm more farmland; so they call me, they say “Brian, you buy it. We’ll farm it.” So it’s a good relationship we have with all those tenant farmers in the region.

Theo Hicks: Are you raising capital for these deals, or are you funding them yourself?

Brian Luftman: Mainly raising capital for them, but I invest personally in every deal that we have ever done, and I will continue to do that. I like to have skin in the game along with the investors, and I’m a partner in the deal like everyone else. And they’re on a deal-by-deal basis. So we don’t do a fund, we like doing each deal — whenever we find a  farm or multiple farms in a region, we’ll put a deal together around it. It will have one finite group of partners, and they all know who each other are. Not intimately, but they know their names and how to contact each other.

It’s just that really simple way to do business, and that way it’s a majority do if we ever need to make any decisions on the property, and it’s not necessarily that we control the deal outright as the manager. It allows it to be more like a partnership deal. But they all look to our firm for all the guidance on what to do and when to do it… But there are mechanisms in place where they could even remove us as the manager, even though we put the deal together,

Theo Hicks: Okay. So do you have the same investors who will invest in every deal, or are you kind of going out and finding new investors? Either way, whether the same ones or new ones, how are you finding these investors? Is there anything unique about presenting farm deals, as opposed to some other real estate investment that you’re raising capital for?

Brian Luftman: Sure. A lot of it is people doing their own Google searches and searching out “private equity farmland manager.” I don’t really have any competition in this space. There’s a few other firms that do this, but very few will do it for the lower minimums, like we do. For that matter, if someone’s looking for what we do, we’re kind of the answer. There’s not many other companies; if someone wanted to invest say 50k or 100k or 200k into a farmland deal, there’s very few options.

So with people searching it out themselves – which we love; those are the most loyal clients… They found us, we didn’t sell it to them; they wanted to put farmland in their portfolio, and they’d done the thinking and the work to understand why they wanted farmland, and they came to the same conclusion that I did – they wanted inflation protection, a real asset, they wanted a non-correlating asset; something that will do well when the economy is doing poorly.

So those are really loyal customers and clients, and they actually tell their friends. So it’s been a little bit of a network effect on how people — not a network effect, but just kind of a web that’s growing of the people that like to invest in these deals. Does that make sense?

Theo Hicks: Yeah, that makes sense. I know for Joe’s syndication business that’s his number one way of getting new investors – that referral network.

Brian Luftman: Right. Obviously, we do public relations a little bit; we had an article in U.S.A. Today, the money section, a couple years ago… That got some really good outreach and a lot of people learned about us through that. Then podcasts like this, so I appreciate you having me on. I think if it strikes a chord with one of your listeners, they can call and maybe they’ll become a loyal client if they like it. It’s not for everybody, farmland investing; it’s a low return.

People can get much better than the 3% cash return in the market, I’m sure. Many of the podcasts that I’ve listened to on Joe’s and your podcast have much higher returns that ours, but ours fits a niche, for a reason, and we have people looking for us, too.

Theo Hicks: Yeah, I actually have a neighbor who — I’m not necessarily sure what the company name is, but he works for a pretty big bank, and he works on their farm division… So he buys land down here in the Florida area, and in the Midwest, too. So now I’ve got more information and I can talk to him about that, because I know what I’m talking about now.

Brian Luftman: Absolutely. You can teach him some stuff.

Theo Hicks: There you go. So do you mind walking us through specifics – the acquisition costs, just any numbers surrounding a recent deal, your best deal, or your first deal, and kind of just walk us through some of the numbers.

Brian Luftman: Sure. It’s really simple. Basically, our first deal looked a whole lot like our recent deal, and I’m really proud of that. We structured this perfectly right out of the gate, and we’ve just kind of hit the Copy button [unintelligible 00:12:04.08] to do each one… Because it’s really simple – we buy a farm that we hope will cash-flow a gross return of somewhere between 4% and 5%. We used to do better than that when grain prices were higher, but they’re not right now. Coin and wheat and soybeans prices are very low, for multiple reasons. There just hasn’t been inflation, commodity prices are down in general. Oil – I mean, you’re paying below $3, below $2,50 in some cases at the pump right now, and that’s a deal. So our cashflow is not really great. But the 4% gross, and then basically our expenses out of that – we don’t even take 75 basis points as a manager fee… And then there’s other costs associated, and then that return ends up being about a 3%, if that makes sense. So it’s as simple as that. If we did a ten million dollar deal, we can lease those acres out to farmers to generate about $400,000 worth of income; all the fees, and costs, and legal, and everything else amounts about 100k, and then 300k is distributed to the investors. Does that make it as simple as possible for you?

Theo Hicks: Yeah, that is simple and straightforward.

Brian Luftman: Yeah. So if someone invests a half million dollars in that deal, they own 5% of it, they would get 5% of the 300k, and it all works out. And then they’d get 5% of the upside on the sale.

Theo Hicks: Are you buying this with all cash, or is there a bank involved?

Brian Luftman: Yes, all cash. We like it that way, it’s incredibly simple. There’s a little bit of a doomsday component when you invest in a farm. It takes a person that’s a little bit thinking on the doomsday component, like “Hey, if everything else fails, I’ve got a real asset.” Those type of folks – that’s not all of our clients, but they like to have an asset with no mortgage debt on it whatsoever, and own it outright.

Theo Hicks: You’ve gotta know your customer.

Brian Luftman: Exactly.

Theo Hicks: Alright Brian, what’s your best real estate investing advice ever?

Brian Luftman: It’s simple, I think it’s quality. That can boil down to the quality location, or quality building, or quality farmland. It doesn’t matter what you’re in. And that doesn’t even have to be for real estate; in anything that you’re spending money on, if you own something that is quality, there’s gonna be someone who wants to pay more for it down the road than you paid for it… And I’ve put such a premium on buying the very best of farmland, because I’ve seen it already. We’ll overpay for something because it’s in a phenomenal location, and the next thing you know, someone wants it more than I did.

Theo Hicks: Simple, but very powerful advice. Are you ready for the Best Ever Lightning Round?

Brian Luftman: Yeah, I am.

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

Break: [00:14:35.27] to [00:15:21.21]

Theo Hicks: Alright, what’s the best ever book you’ve recently read?

Brian Luftman: A friend told me to read Max De Pree’s The Art of Leadership, which is an old book… And I was sunk into it with one of the first lines, which said “The first responsibility of a leader is to define reality, and the last is to say thank you.” I loved it. I was like “That’s so elegant; really just boiling it down to defining reality is so important in life, and so few people have that art or that skill, so… I really like that book. It was powerful.

Theo Hicks: If your business collapsed today, what would you do next?

Brian Luftman: I’d start a new business. I’m so entrepreneurial… I just love starting businesses, and I would find whatever was next very quickly, because I love running my own business, and doing it my way, and trying to add value to other people as well.

Theo Hicks: If you were starting in farmland investing today and you had little or no capital, how would you grow that business?

Brian Luftman: I guess I’d do exactly what I did ten years ago, which is… I didn’t have much capital to do it, but you find a great property that you can put a deal around  – and I think this goes for anything in real estate… If someone wanted to get into commercial private equity purchasing to build a big commercial private equity fund, all you’ve gotta do is find the first really good deal, get excited about it, and then start selling it to people that have a little bit more money than you do, and the next thing you know, you’re up and running. That’s what I did with farms, and I think that’s a great recipe for success in real estate. I think it’s “Find a great deal, and then get people excited about it to invest with you.”

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

Brian Luftman: I guess the smaller deals… I get excited about finding value in something that’s small, and I’m excited about it because it’s a good value, but it ends up being more of a nuisance. I’ve bought a couple of smaller farms, and they’ve been good performers, but they’ve taken a lot more of my time than the bigger ones have, and financially speaking or time-wise it wasn’t necessarily worthwhile… So I’ve tried to stay a little bit bigger and tried to focus on spending time in the right way.

Theo Hicks: And lastly, what is the best ever place to reach you?

Brian Luftman: It’s gotta be my website, americanfarminvestors.com. My email is on there, and I welcome anyone. If you ever have a farmland question or wanna learn more about this, just shoot me an email and I will respond. That’s the best way to get me.

Theo Hicks: Alrighty, Brian. Thanks for coming on. This has been a very fascinating conversation, learning the ins and outs of investing in farmland… Just to kind of quickly summarize what we discussed – we talked about just the overall business plan of investing in farmland, which is it’s primarily an inflation play, where you’re investing in land that grows commodities, in your case farmland that’s producing grains. We talked about, on average, the value of the land has grown 5%-7% each year historically.

And then secondarily it’s the cashflow play, which is between 3% and 5% each year. We talked about how you underwrite the deals – essentially, you’re looking at how productive the dirt is gonna be over the next ten years, and you rely on farmers, because they’re the most knowledgeable of the business, so they help you with the analysis.

We’ve talked about how you find a deal, and you said it comes down to hustling – cold-calling, going to the PVA office, networking with farmers, and obviously having farmers who know you reach out and say “Hey, you buy this land and we’ll farm it.”

We talked about how you raise capital for farmland deals – you don’t do [unintelligible 00:18:39.04] it’s more of a deal-by-deal basis. The most loyal customers are the ones who are doing that Google search and are actually looking for those kind of investments. You don’t really have much competition in this space, so if they google search, then you’re the answer. You also find investors through those referrals, and then some PR – you had an article in U.S.A. Today, and you also go on podcasts.

Then we discussed your first deal, which as you said, is very similar to your most recent deal; it’s kind of a copy and paste strategy, where you buy farmland that will have a gross return of 4%-5% each year. You buy a ten million dollar property, you gross about 400k; after about 100k in expenses, you’re left with 300k in cashflow. And you do not do banks, you buy these properties all cash.

Then lastly, you gave your best ever advice for real estate investing – and just life in general – which is if you’re spending money on something, make sure it’s high quality, because someone’s gonna pay more for it down the road if it’s that high quality.

Again, Brian, thanks for coming on the show today, speaking with us about farmland investing. Thanks to everyone who listened. Have a best ever day, and we’ll talk to you soon.

Brian Luftman: Thanks, Theo.

JF1789: Ground Up Development, Asset Management, & Litigation Tips with Roni Elias

Roni always loved real estate, he worked in the industry for years before working in his current role. He helps manage a large portfolio for his company, as well as works on the funding side. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Someone has to be the good cop, someone has to be the bad cop” – Roni Elias

 

Roni Elias Real Estate Background:

 


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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, Roni Elias. How are you doing, Roni?

Roni Elias: Wonderful. Thank you so much for having me.

Joe Fairless: Well, I’m glad to hear that, and it is my pleasure. A little bit about Roni – he’s the lead asset manager for TownCenter Partners. He has worked in litigation cases reaching over 9.5 billion dollars, managed a portfolio of over 520 million in real estate assets at a previous firm. Based in McLean, Virginia. Did I pronounce that right?

Roni Elias: Yeah, McLean, Virginia.

Joe Fairless: McLean, Virginia. With that being said, Roni, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Roni Elias: Sure thing. Thanks for the introduction. Previously I was very heavily involved in real estate assets, and predominantly we were ground-up developers, going anywhere from purchasing hundreds to thousands of acres, and being the master developer, holding back sometimes portions for multifamily development or retail development, and selling off residential portions, outparcels and so forth.

We grew from a very modest firm. We were backed by very significant private individuals. We grew from probably a five-million-dollar firm, in excess of almost 600 million. As our ownership team started to get a little bit older, we started to liquidate some assets, so they could retire. I was then given the opportunity to do something a little bit outside of real estate when I came and joined TownCenter Partners, where we do probably something very unique – while everyone probably hates the word “lawsuits”, or being involved with a lawsuit, we look at a lawsuit as an asset. A lot of plaintiffs come to us – or plaintiff law firms – saying “Hey, I’ve got this great case. It’s against a Fortune 500, or this massive company. Lawsuits are very expensive, I need assistance.”

We step in, we fund that lawsuit or fund the company that has been essentially hurt by that lawsuit to keep it afloat, and then when they win their lawsuit, we’re repaid what we invested, plus a portion of the winnings. And if the case, for some reason, is not successful, no harm, no foul; we have taken that financial loss and the plaintiff can just go on from there. So we’re definitely assisting folks, and we started to do a dramatic amount of real estate litigations, and a lot of our clients now who have won their lawsuits – we’ve created kind of our asset advisory side, where we’re out there scouring for talented general partners, where we’re created our own fund for clients who have now successfully won their lawsuits and wanna put their financial earnings to work… And seeing who are talented GPs to partner up with. We will just be focusing on the multifamily sector. We think that that’s a great sector to be in, and it can create a great income stability for our clients. We’re just very excited for what the future holds for everyone right now.

Joe Fairless: Well, so many questions to ask… Let’s start with — when you were working with the ground-up development team and you were developing hundreds of thousands of acres, how did you get involved with that, and what was your role?

Roni Elias: I started off initially as an asset manager. We were a very small team, and our ownership group kind of wanted to be in control of the process, the planning, and kind of creating large-scale development projects. I always had a love for real estate; it was always  great that you could take a drawing, where sometimes there was just a big, square box, and just saying “Hey, this corner is going to be apartments. Along this major highway we wanna do a retail shopping center, grocery-anchored.” We really love that.

As we started to do it more and more, I’ll tell  you, it was a lot of probably brain cell damage. We predominantly were developing in Florida and New York…

Joe Fairless: Oh, wow…

Roni Elias: …and we got to see some extreme heights, where you could have bought a property for 2-3 million dollars, and the next day you were getting phone calls saying “Hey, I wanna buy this for 4-5 million dollars.” Appreciation was happening through the roof. And then during the downturn, where things were just so bad, we had some development projects where we had poured millions into it, and a new mayor was elected and there’s now a referendum on any large-scale developments. And now millions of dollars poured in for design plans, engineering, legal fees and all that, and now you’re kind of holding something that “has a diminished value” because the city wants to look at its new scale type of developments.

So it was very exciting, we got to experience some great highs, but we during the Great Recession even a firm of our size, we did have to give back the “keys” to some assets, because they just did not work… And we worked some things out with some banks. We had to restructure some deals with them; and some banks were great to work with, some not so great. Again, when we’re looking for GPs to partner up with our fund for our clients, we don’t look at it as really a  bad thing that folks went through a tough time, or some things happened to them. We’re doing our due diligence and seeing “Hey, did you at least live through a bad fight call, or how did you deal with the situation?” Because life is not perfect. Things happen, and how you react to it is the most important thing, and how you dealt with those situations.

Joe Fairless: When you’re in a tough spot and you’re working with a bank, or you’re attempting to work with a bank, what are some things a bank that isn’t as amenable to you working with them, what are some things that they’re saying to you, versus a bank that is willing to work with you more?

Roni Elias: I’ll give you at least a tactic that I think is the best way. I think there should be always a two-team approach, and the best way to attack it is someone’s got to be the good cop, someone has to be the bad cop. I predominantly took on the position as the bad cop, to kind of drill things down while either another team member of mine would be the good cop, or our legal counsel would try to be the good cop.

Our goal was to always save the assets. Sometimes banks are just very unrealistic. Back in the day when you’d just call them up for “Hey, I’d like to borrow 20 million”, their response was “Why don’t you borrow 30 million?” Now the phone call was “You owe me 25 million. I would like a check for 25 million tomorrow.” And my response would be “Well, let me go and look underneath my bed, and if I have 25 million dollars, it will be there tomorrow.”

I think as we’ve gotten older, especially now that we’ve been through that downturn, we try to always see where that person is coming from. Understanding people might be going through bad days, and if this person is maybe sometimes speaking that aggression out on you, it’s okay; I don’t try to take things personal, which in the back of my mind it was personal, because “Hey, you’re taking this asset that we added so much quality to and put so much money into…”, and things change; and it didn’t just change for us. This was kind of a halving across the board for everyone.

Joe Fairless: When you were being the bad cop, and say your counsel was being the good cop when you’re communicating with the lender, what were some things that you would say or talk about as the bad cop?

Roni Elias: As the bad cop, we’re gonna make this a very long, arduous journey. Today you’re getting some payments. We’re asking for extensions; we’re asking for maybe lowering the payment. If you aren’t happy with getting paid $100,000 a month, I wonder how it’s gonna feel when you’re getting paid zero a month, racking up hundreds of thousands of dollars in legal fees. We made a name for ourselves — I think one thing you have to also make sure is you don’t say something unless you’re actually gonna do it or back it up… Because the worst thing is to put deadlines or say stuff and you just would not follow through.

Our in-house and even our outside counsel understood when we would say something (or when I would say something), that they could pretty much take what I said as going to the bank. So if we were gonna fight this aggressively, or we were closing on this deal on XYZ date, it was going to happen. So I think them just making sure that what you say is actually gonna happen — and some folks might not know this out there. Once the loan goes into default, usually there is some person, a special asset person who’s usually a legal cousin Vinnie, who wants to kind of just scare you and intimidate you into all of these actions to take. “Hey, if you’re not going to get us our money, we’re gonna chase you till the end of time for this”, and all of these things, and kind of scare you.

Those folks – what maybe a lot of people don’t know about them is they have a financial incentive to squeeze as much blood out of you as possible, because they are going to earn either a bonus or some type of commission off of you by squeezing every little penny out of you. Again, nothing wrong with that; everyone has to make a living. But I think knowledge is power coming into discussions with them, and just saying “Hey listen…”, you lay it out there for them, you try to make them understand things…

And sometimes I would say they’ve got a little bit of a sick head; it takes a couple knocks to the skull for things to now start making sense, saying “Oh, jeez, these guys are kind of difficult”, and making them realize for every dollar we’re spending in legal fees, you’re probably spending 5 or 6 dollars. Is that a wise benefit of the bank’s time and money? …while “Hey, maybe we should give these guys some breathing room, so they can refinance, earn some money during this time period, and we all go our separate ways.” Because at that point it was “Okay, do you wanna take the property back? What are you gonna do with it? You’re a bank. You’re not in the business of developing. Or do you wanna start building apartment complexes and doing that? No.” So what were they gonna do? They were gonna take it back, have to fire-sale it… Okay, so we could have refinanced you out higher than that fire-sale, and all it was was time, and you’re still earning a monthly P&I payment.

So it took some convincing. Some did not wanna see it, so finally – “Okay, here’s the key”, and walked away, no recourse against that. And at the end of the day they did what we expected – they fire-sold it, and had to take a substantial loss than the offer we had given them. The market dictates what people are willing to offer, and then when things are in that distressed position, it causes different dynamics. Either has to come all-cash purchase, or there’s a lower LTV or LTC, so the pool of buyers becomes much more limited. Some banks recognize that, some did not.

I would say an unfortunate [unintelligible 00:15:38.11] good learning experience, because now definitely — at least myself and the team, we definitely look at things much more differently. Back then when things were just gung-ho and the phone was always ringing off the hook, “Hey, I wanna buy this asset, boom-boom-boom…” Looking back at it, I wish we said yes to a lot of those phone calls, instead of wanting to hold on… So that’s just given us kind of a much better outlook, especially now going forward, and being extremely good shepherds for our clients, who — we’ve seen them go through very difficult positions with their lawsuits, and now they came to us and said “Listen, I wanna do something that can help my family” or “I wanna have some type of income-generation going forward”, finding those quality general partners for them, so they can have a healthy cashflow and their initial investment is protected as much as possible going forward.

Joe Fairless: Let’s talk about some of the circumstances where there’s litigation and you all fund the company through that process, and then you share on the upside… What are some examples — and obviously, share whatever you can share, but I’m curious of some examples where there’s this level of litigation. What happens where there’s a multi-million – or in this case, when I introduced you and your bio, I mentioned that you’ve worked in litigation cases reaching over 9.5 billion… So what are some things that one company is doing to another that causes this high of dollar values?

Roni Elias: Let’s take an example, and – not to get a letter tomorrow from the Fortune 500 company saying “How dare you use our name?!” Let’s take an example, and let’s try to make it real estate-related… So let’s say the John Doe family in 1960 became joint venture partners with the Mouse company. At that point, the Mouse company was a very small company, and part of their joint venture agreement – that they would continuously grow together, and as new locations were built, they were 50/50 partners.

Let’s say in 2018 John Doe company has now 100 stores with the Mouse company. The Mouse company has now grown to be a publicly-traded Fortune 500 company worth billions of dollars. Someone inside of the Mouse company says “Man, these John Doe’s have really made a ton of money off our back. And you know what? Looking at this agreement, we think they actually are in default of their agreement. And if they’re in default of their agreement, do you know what we can do? We can take those 100 stores from them, liquidate them, give them 10 cents on the dollar, and we’ve now come into so much great cash and great equity. This is a home run for the Mouse company.”

[unintelligible 00:19:06.12] this is all highly unethical. You’re doing this to a partner that has been with you for 50+ years, and this was the deal. Just because the deal went great and you became a multi-billion-dollar company, and John Doe’s family has become wealthy off the deal, which one would say is a win/win situation for all”, someone in grand wisdom says “You know what, we can stick it to John Doe company and call them on a default.”

It’s a lovely Thursday, he’s out there drinking coffee with his family, and goes and checks his mail, and gets a letter from the Mouse company that says “Dear Mr. John Doe, we find you in default. We are hereby terminating our agreements. We are seizing the 100 stores. You will be receiving no more distributions, and we think after we do all the books more than likely these 100 stores have zero value, or you have to write us a check.”

Adding insult to injury, a Fortune 500 company wants to rob you blind and tell you at the end of the day “Hey, you might even owe us some money on top.” So John Doe quickly goes and speaks to their lawyer, has to file a lawsuit, and predominantly if you were to imagine yourself looking at the courtroom, it’s John Doe with his one-person attorney, and on the other side this Fortune 500 company who has five or six representatives there, and probably another five or six attorneys also, and spending thousands of dollars an hour saying how John Doe and his family are such bad people, and they were forced to call them in default, and so forth.

Joe Fairless: Got it.

Roni Elias: So John Doe comes to us and says “Hey listen, I’m up against the Mouse company. They are a multi-billion-dollar company. My attorney has told me it’s going to a million dollars to fund this lawsuit and go forward.”

We’ll review it, we’ll do our own underwriting, and give it a value internally. Then we’ll come up with, let’s say, “Okay, John Doe, we’re gonna fund your lawsuit for half a million or a million dollars.” Or if John Doe says “My attorney is working on a contingency fee. I need half a million or a million dollars to survive during the lawsuit”, we would do that also.

And then there would be a repayment structure where every six months the amount that has to be repaid is increasing… And as I tell everyone, it is increasing at a very high rate. But it’s not a loan, and so forth. It’s a non-recourse advance. Again, like I said, if the lawsuits flop, you never have to pay back that money. We take that loss.

So a year or a year and a half later the Mouse company says “How about we pay you 75 million dollars? We’ll take these 100 stores off your books, and we just separate and go away.” It is up to John Doe and his attorney to decide what’s fair; if the thinks 75 million is fair. He takes the 75 million, refers to our contract and sees what that million dollars has now grown to, pays us, and the rest goes to him, and everyone goes their separate way.

Had we not funded that million dollars, who knows what John Doe would have gotten, if anything. If you look at our tagline, that’s all that we’re doing – we’re here to help folks that are truly hurt, or trying to be taken advantage of by some larger player out there in the market, and just trying to tip the scale in favor of John Doe.

Joe Fairless: Got it. Thank you for that example, and thank goodness that you all are there for the companies that need help and can’t financially weather the storm during the litigation process.

Taking a giant step back, really quick, here’s a question I ask all the guests – what is your best real estate investing advice ever?

Roni Elias: The best real estate advice – listen to your gut and do your homework. If for whatever reason it doesn’t feel right, listen to it. There’s been multiple chances that “Man, I wish I did that deal.” I could have made so much money. And there’s been times where we were like “You know what, thank God we didn’t do it.” We would have been sitting here with a fat zero. So just listen to your gut and do your homework.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Roni Elias: Yes, sir!

Joe Fairless: Alright, let’s do it! First, a quick word from our Best Ever partners.

Break: [00:24:17.25] to [00:25:18.15]

Joe Fairless: Okay, best ever book you’ve recently read?

Roni Elias: The best ever book I’ve recently read… Believe or not, I’ve been reading the BRRRR book by Bigger Pockets. It kind of intrigued me a bit.

Joe Fairless: What is the best ever deal you’ve done? We’ve talked about some already… What’s the best ever?

Roni Elias: By best ever you mean largest profit ever made, or…?

Joe Fairless: However you define it.

Roni Elias: I’d say the best ever deal closed Friday, on a purchase for two million; on Monday we sold it for five.

Joe Fairless: Yes, please. Where was that located?

Roni Elias: This was located out in International Drive in Orlando, Florida. Heavy tour area, next to the Convention Center… A commercial piece of property where we had certain plans for it during the due diligence and closing of the property; a substantial tenant reached out to us, that wanted to purchase the property, and made us a deal that was too good to be true in such a short time period that we said we should be put in an insane asylum if we do not accept these people’s offer. We said “Let’s do it!” We were very hush about it. We did not even tell our lender about it.

They were very perplexed when we closed on Friday, and Saturday I was just saying “Can you just confirm what is the pay-off amount?” and the banker was like “Well, I can tell you what it is, but I’m kind of surprised why you’re asking about this.” I said, “Don’t worry about, we’ll talk on Monday.” On Monday our closing agent reached out to them and said “Hey, I wanna confirm the pay-off. Is it this?” They were like “Yes, it is. Thank you very much, we look forward to receiving the wire.”

That was probably one of our best deals ever.

Joe Fairless: We’ve talked about deals that didn’t go well, so I won’t ask about that again… What’s the best ever way you like to give back to the community?

Roni Elias: Right now at TownCenter — when we were created, 5% of our profits (not our investors’ or anyone else’s) we donate. We have two charities, Hands Along the Nile and Orphans Africa, and we also do a couple scholarship programs for young attorneys who are studying for the Bar. You reap what you sow, so we’re very big believers in that.

Joe Fairless: I completely agree. And how can the Best Ever listeners learn more about your company?

Roni Elias: I invite you to our website, which is yourtcp.com. I’m very accessible via email; if you ever wanna shoot me an email just to discuss whatever, roni@yourtcp.com. It would be a pleasure to help anyone out there that’s going through some type of difficulty, in a lawsuit where they’re the plaintiff. And I definitely wanna wish everyone an exciting 2019, and see how things go here for the rest of the year. It’s gonna be definitely some exciting time periods for everyone.

Joe Fairless: Well, Roni, thank you for being on the show, talking about the challenges that took place during the recession, and some insider knowledge on when you’re working with banks – how to approach it, the team members involved. I loved your “unofficial cousin Vinnie to scare you” analogy  (or reference, I should say), and how to have those conversations if we are in a situation like that… And then also, on the flip side, some deals that you’ve done that have received a tremendous amount of profit.

And then obviously, talking about what you’re focused on now, and representing those who need representation in order to receive the justice that needs to be received… So thanks for being on the show, Roni. I hope you have a best ever day, great catching up with you, and talk to you again soon.

Roni Elias: Thank you so much. Take care.

Best Real Estate Investing Advice Ever Show Podcast

JF1001: A Hidden Wealthy Niche that Involves a Fine Tuned Team

Condo conversions are tricky, and not for the novice investor. Our guest talks about his team including an architect, and Attorney, contractors, and other individuals that are needed to convert buildings into condominiums. This is a great show that has a purpose to give you a little insight into this hidden niche that has made many people wealthy. Tune in!

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Ricky Beliveau Real Estate Background:

– Owner of Volnay Capital
– Specializes in both buy and hold as well as condo conversions
– Currently have 6 condo conversions in different stages in/around Boston.
– Based in Boston, Massachusetts
– Say hi to him at http://www.VolnayCapital.com

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Best Ever Show on hidden wealth

 

Joe Fairless: Best Ever listeners, 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 podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Ricky Beliveau. How are you doing, Ricky?

Ricky Beliveau:  Joe, I’m doing well. How are you?

Joe Fairless: I am doing well, nice to have you on the show. A little bit about Ricky, he is the owner of Volnay Capital. He specializes in both buy and hold, as well as condo conversions. He currently has six condo conversions in different stages in and around Boston, and he is from and based in — well, I don’t know where you’re from, but you’re based in Boston, Massachusetts. With that being said, Ricky, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Ricky Beliveau:  Sure. As you said, I own Volnay Capital and we’re based out of Boston. I started out, I went to Northeastern University, and at Northeastern I actually stuck to a class called Real Estate Finance, and in that class we had to do a paper on some type of real estate investment, and the property that I chose was actually a multifamily building near the college. After graduation and looking through the figures and seeing the opportunity there, that’s what kind of jumped me into the real estate business by buying my first multifamily in 2010.

From that point forward, I’ve continued to acquire rental properties, and about three years ago I made the jump over to the condo conversion side, and doing condo conversions over the past three years, mostly centered in East Boston, which is an up and coming neighborhood, close by to the downtown area.

Joe Fairless: Condo conversions – what do we need to know about condo conversions?

Ricky Beliveau:  The condo conversions market – you’re able to create a large amount of value by taking a single property and splitting that into three individual units, and updating the deeds with the city, and then you’re able to sell those off to individual buyers. By doing that, on what would be a single project, you’re actually able to create three sales out of that one project.

Joe Fairless: From a fundamental standpoint, that sounds great – you buy one and you get three at the end of it. Tell us one deal that you’re working on, and the numbers on that deal.

Ricky Beliveau:  A deal that we just finished up – it’s actually one of the most successful deals that we’ve done to date… The acquisition price of the property was for 650k, and at the time that was about the going rate on the market; it wasn’t that I got a great price on it… It was a pretty good deal on the purchase. The renovation cost on that project was 575k, and the building was 4,300 square feet, so it’s a large property. That brings the total project cost on that into $1,225,000 all-in project cost. The sell out on that was 1.7, so it left a profit after fees of $447,000.

Joe Fairless: How long did that take?

Ricky Beliveau:  We tried to turn it around 10-12 months. That project actually spread over the year mark. We had some issues when we were trying to get started, so it kind of delayed the beginning of the project, but all in we were about 13-14 months on that project.

Joe Fairless: Okay, 14 months worth of work to make about $450,000.

Ricky Beliveau:  Correct. ROI on it was around 36,5%.

Joe Fairless: Okay. What are some challenges that came up in that one that made it take longer than what you projected?

Ricky Beliveau:  When we acquired the property, the property was tenanted, which when you’re getting in the business of doing condo conversions and there’s tenants in place without leases, you can kind of expect that there might be some issues getting the property, relocate those tenants, find them a new place to live and then be able to start the project. That’s what happened here – when we acquired the property, one unit was vacant and two units had tenants. We were able to relocate the top floor tenants into a new apartment, but the second-floor tenants, we were going back and forth for a few months regarding what their needs were. I was finally able to relocate them into one of my rental properties around the corner. Just that process delayed us about 3-4 months.

Joe Fairless: How were you able to eventually relocate them? What convinced them to do that?

Ricky Beliveau:  The property they were currently living in, which was the one we wanted to put under construction, their rent was currently $1,200/month. What we agreed upon to have them moved is I was able to lower their rent to $900/month. Then I also had my guys move them from that property to the other. So with a reduction of rent by $300, as well as me covering moving costs, we were able to finally come to an agreement to have them relocated.

Joe Fairless: What did you propose initially?

Ricky Beliveau:  The initial request was that they don’t have a lease in place and that they would relocate. In this market it’s tough, because as the rents are continuing to rise, a lot of these people are not able to afford in that neighborhood anymore, so it becomes tough for them. We try to really work with the tenants and find ways to find resolutions, instead of having to go to court.

In this case, once we started the negotiations, the first attempt was just to work with them as we had the other units, and find them a place to move and pay for the moving costs and pay for their first month’s rent. They weren’t open to that idea. They were really set in stone that they wanted to stay in that neighborhood in that area. As we went back and forth, an opportunity came up that I had just acquired another building that was a block away, and I was able to use that property as an offering and move them over into that building.

Joe Fairless: Did they ask to have some sort of agreement so the rent wouldn’t go from $900 to $1,900 after year one?

Ricky Beliveau:  We signed them up on a two-year lease, but actually backdated it with the date because of the four months that they had held up the start of construction, so it ended up being a little bit less. I think instead of a 24, about 20 months. So it was a 20 months lease at $900, and then after a year it went up to $990. So I was able to build in a 10% increase after year one.

Joe Fairless: After year one, okay. And if you didn’t have them relocating to that unit, how much would it rent for?

Ricky Beliveau:  That was a third floor, three-bed apartment; we probably would have gotten around 1,600-1,800. It definitely was a financial hit, but when you have approved plans and you’re able to start construction on a property that can create the returns that we just discussed, those are small potatoes in the long run.

Joe Fairless: Yes, a no-brainer. You said there was one vacant and two were leased; one was more challenging than the other, they left… Was that the primary reason why it was held up for 14 months?

Ricky Beliveau:  Yes. That cost us about four months before we could start the demo. So in the end, the project timeline was still around 10 months, but from demo to completion we lost four months in negotiations.

Joe Fairless: What do you have to do when you demo?

Ricky Beliveau:  When we started out three years ago, we would be more selective with our demo. We wouldn’t get into the property and take everything down to the studs. We realized that to create the quality product that we want to and build the reputation that we have, you really have to start from scratch. Demo days — it takes us about 2-3 weeks to demo a property. We’ll send in a team of guys and they will take it all the way down to the studs, remove everything and we’ll start from scratch.

Joe Fairless: So you’re basically building from the ground up, but you have the framework, or the studs there.

Ricky Beliveau:  Exactly, keeping the exterior skeleton of the property, and then rebuilding from there.

Joe Fairless: So you do the demolition, and then what part of the process tends to go, or is more likely to go over budget than others?

Ricky Beliveau:  At the beginning we were seeing more items going over budget than we are now. The recommendation I would make is to really know the numbers and negotiate the prices upfront. When you’re getting into one of these projects, we sub out everything; it’s all subbed out. We hire a GC firm to handle the project, and then the GC firm hires all the subs. So before a project even demos, we’ve already negotiated, and the majority of the expenses of the project are already locked in with those subs. The fact that we’ve done so many now and that we have these long-standing relationships, and that they know that it’s consistent work, we’re able to see those numbers come in much closer to budget than we did when we were first starting. I think having clear cut budgets upfront with these contractors and with the subs is very important.

Joe Fairless: And you talked through at the beginning of the high-level summary of doing condo conversions – creating a large amount of value by splitting them into (in your case) three units, from one to three, updating the deeds with the city, and then selling to individual buyers. Can you elaborate more on the splitting it into three individual units? Explain how the thought process works for someone like myself who hasn’t done this.

Ricky Beliveau:  The actual process of making the switch from a single property into three condos – it really would depend on your state and also on your city. Using Boston for an example, the process is we work directly with our attorney, as well as our architect. Those are the two parties that are really involved. From the architect standpoint, they need to redraw up the documents to submit to the city that will show now what the assessment should be for each unit. Now when the city looks at this property, they need to know what is the size and ownership of each unit. They require an architect to do that section of it, where then they stamp that and they submit that.

The second part is with the attorney. The attorney takes that information and they’re gonna compile that along with the condo documents. Those are guidelines that are set up on behalf of the association, showing the rules and regulations of the building you’re creating. That’s all put together and then submitted to the city. So it’s really a team effort. You need an attorney involved, and you’ll need an architect involved.

Joe Fairless: Where do you spend most of the time managing? Is it the demo, the architecture process or the attorney process?

Ricky Beliveau:  For our condo conversions, I think the most involvement I would have is with the architect. That’s just because we need to meet at the property, and he needs to take exact measurements of the whole space. So we would walk through the property and go through everything and make sure that we’re properly calculating the unit square footage, which is also very important to me on my sellout side – I wanna ensure that we’re properly calculating and that my buyers are getting the square footage that actually is there, and that they’re not paying for something that’s not correct. So I would say working with the architect on his end.

Joe Fairless: How much does that cost?

Ricky Beliveau:  On a project like that we build it into the original budget for the architect. The same architect who does our plans from start to finish, as well as code review and all that – he builds it into his budget. I think it’s around $2,500-$3,000 for his time that he spends on the condo document side.

Joe Fairless: Do you engage either one – the attorney or the architect – before having the property under contract, just to have an idea of what the business plan is and that it is something you can execute on?

Ricky Beliveau:  At this stage, now that I have more experience with these properties, I’m comfortable in making the decision without my architect involved. When I was first getting started I would try to have him come with me to a showing that I thought was a great opportunity, or if I saw a property and I wanted to get his opinion on it, I would try to have him meet me there, as well as my contractor. But now over the years that I’ve been doing this, I’m much more comfortable in making those decisions on my own. So now the process is once I get a building under agreement, I’ll then immediately schedule a time for both my GC and my architect to meet me at the property as soon as possible to start the process of getting the budget together from my GC, and then from my architect get the plan started for the project.

Joe Fairless: With the process of updating the deeds with the city, what type of challenges have you come across that probably are unique to Boston, but maybe some aspects of it can be applied towards other markets?

Ricky Beliveau:  Right. In the Boston market it’s actually pretty clear cut. There  are standard processes followed, and you’re able to do this conversion. I’d say that one thing that your listeners should definitely look into is if they’re going to get into one of these projects, speak to an attorney before you begin, or even before you acquire a property with the hopes of doing this kind of conversion; each market is different. I’ve talked to investors in other markets where the process is not as easy as it is in Boston. You wanna make sure to speak to an attorney and get that information up front, before you’re midway through a project and then you’re having an attorney tell you that that property is not condoable. I’d say do the legwork up front and have those conversations.

Joe Fairless: How do you find the right attorney and architect for this?

Ricky Beliveau:  It’s a great question. I preach to everyone I talk to that networking and relationships is what really makes this business. I try to spend as much time as I can every week meeting with people and networking. That’s the only way you can really know that someone is the right contact – if someone can vouch for them that you really trust. A mentor of mine introduced me to my attorney, my architect I played soccer with in college… Almost everyone in my business that I work with is connected to me in some way, closely in my network.

Joe Fairless: You didn’t do a Google search.

Ricky Beliveau:  No Google searches.

Joe Fairless: If someone doesn’t have those connections, do you have any suggestions? Maybe certain traits or qualifications that your team members have that you would look for if you had to start over in a different city?

Ricky Beliveau:  The first person that I would go to is a real estate agent. If you reach out to a real estate agent who has a large number of listings, or you can pull the data that they’ve been successful and they were one of the top agents in that market, you can then go to them, take them out to lunch and try to ask them to open up their network to you. What you’re offering to them is always a back and forth – you’re saying “Hi, I’m new to this market, I’m new to this business and I want you to be my agent. I’ve done my legwork, I’ve looked into you as an agent.”

If you commit to them that you’re going to bring them business, they’ll then open up the doors to other individuals who could help you out. Obviously, since it’s not a direct connection, you’re gonna wanna do some more legwork before hiring an architect or an attorney, but I think that if you can find someone and get references, and it’s someone who’s very successful in your area, you can’t beat that. That’s what would be my recommendation and that’s what I would do. If you [unintelligible 00:17:38.18] me into Cincinnati and I had to compete with you, I’d go out and find the top real estate agent on the block.

Joe Fairless: I would never compete with you in condo conversions. [laughs] I’d be like, “You win, you win! Mercy, mercy!” Ricky, what’s your best real estate investing advice ever?

Ricky Beliveau:  I would say know the numbers. I think that in real estate now it comes down to the Excel file. I look at the property and the first thing I do is I sit down at my computer and I run the numbers, whether that’s for a buy and hold or for a condo conversion. Before I’m even walking out my door, I have already decided if this is a good buy or not. Obviously, things can come up when you get into the property, but you can know by (I’d say) 95% if that’s going to be a purchase that you’re gonna make before you leave your computer.

Joe Fairless: What are the main inputs?

Ricky Beliveau:  From a condo conversion standpoint, I’m looking at the building square footage… The most important thing from my standpoint is I’m looking at my sellable square footage, so I know that I can sell those condos for a certain price per foot. When I look at a building, if the building is only 1,500 square feet, I know that when I make it into condos I’m gonna lose the common area. There’s gonna be a very small sell-out on that, because the units are very small.

So I’m gonna look at the property and I’m gonna say, “Alright, what’s the total building area?” Usually, you can say about 85% is what you’ll be able to sell, so usually about 15% is a good guessment of common area. So you do 85% of the total square footage – that will give you the sellable square footage. And then since I have a really good grasp of my market, which is also important – knowing where you’re going to invest, I can then take that square footage and I’ll know what it costs me to build with that square footage for my construction costs, I also know what I can sell it at with those numbers, so before I even go see this property, I have a spreadsheet that’s already built out with my profitability.

When I get to the property, there could be things that come up – foundation issues, things that could make me adjust my sheet, but those are all items I’m able to enter in before I even leave my computer.

Joe Fairless: What does it cost to build?

Ricky Beliveau:  Right now we’re running our numbers for [unintelligible 00:19:50.27] renovation at around $150/foot. It ranges. Sometimes we’re under that, sometimes it goes a little over that, but in Boston that’s the calculation we’re using to see if a project is feasible or not.

Joe Fairless: And what’s it selling for?

Ricky Beliveau:  Right now in East Boston the prices have really rose. Now we’re in the high fives, low sixes per foot.

Joe Fairless: High five-hundreds?

Ricky Beliveau:  Correct, yeah. For a property that’s closing 1st May, maybe the average sellout was 573/foot.

Joe Fairless: And then the only other factor is the cost of acquisition when you factor in the costs, right?

Ricky Beliveau:  Yeah, it’s acquisition, and then there’s the other soft costs – there’s the carrying on the interest, the insurance, attorney’s fees… So that $150 is just the cost that would actually go towards the construction of it. There’s still the other soft costs that would need to be added in.

Joe Fairless: Okay. Is there a rough percentage that you use for that?

Ricky Beliveau:  No, I build those out in my analysis. I look at the acquisition price, I know what rates I’m getting from my lender, so I’m able to build that out. I use a 12-month timeline to give myself a buffer, so that I know where my interest will be if it does take me 12 months. It’s always better to overestimate these numbers and then in the end come back extremely happy with your results, than underestimate and then end up losing money.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Ricky Beliveau:  Let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:21:22.24] to [00:22:17.18]

Joe Fairless: Ricky, what’s the best ever book you’ve read?

Ricky Beliveau:  I’m not a big book guy, but lately I’ve been really enjoying the How I Built This Podcast that came out – that’s been really enjoyable the past few months.

Joe Fairless: That’s a book, or a podcast?

Ricky Beliveau:  A podcast.

Joe Fairless: Okay, it’s a podcast on how he or she built the podcast…

Ricky Beliveau:  No, How I Built This is a podcast that interviews some industry leaders – Mark Cuban, the founders of Instagram, for example, about how they got started and how they built their business, and the complications that they had to get to where they are. It really relates to real estate. We’re all looking to build these businesses, build our real estate empires or companies, and listening to these really successful people tell their story – it really translates to the real estate business.

Joe Fairless: Best ever deal you’ve done?

Ricky Beliveau:  We already ran through my last condo conversion, but it’s actually the first building I ever purchased. I currently own it today – it’s my largest rental property. My purchase price was $930,00 and reappraised for 2,2 million.

Joe Fairless: That was your first purchase?

Ricky Beliveau:  Correct.

Joe Fairless: Wow, how did you get the funds for that on your first buy?

Ricky Beliveau:  I used FHA Owner Occupant, and in Massachusetts at the time the max one you could get was $816,000 for FHA, and then actually using the paper that I wrote I went to my mother, who had just inherited some money, and I asked her if she would invest in the property with me. So she gifted me $160,000 to get me started on that first property.

Joe Fairless: And that was a single-family home?

Ricky Beliveau:  No, it’s a three-family property. When I purchased it, it was a nine-bed, three-bath; I lived in one of the units and I got my hands dirty and renovated it and turned it into a 12-bed, six-bath.

Joe Fairless: [laughs] Of course you did.

Ricky Beliveau:  I was able to really drive up the rents and drive up the value. And also, I bought it at the perfect time. Boston in 2010 had really plateaued. From 2007 to 2010 it had almost been dead even, and then right in 2010 is when the market started to explode, and it hasn’t stopped since.

Joe Fairless: Best ever way you like to give back?

Ricky Beliveau:  Right now I’m a member of the Venture Mentoring Network at Northeastern. What that is is it’s startups and college students who have ideas and they’re trying to start their businesses. Right now I’m mentoring a bunch of college students, trying to help them get their businesses going.

Joe Fairless: What’s a mistake you’ve made on a deal?

Ricky Beliveau:  Thinking back, one mistake I made from the start was that I tried to self-manage my rental portfolio. I think that you can’t really deliver the high level of service that these tenants need when you’re doing it on your own, at least from my standpoint. I quickly realized that it was a mistake that I was trying to do that on my own, and I was able to correct that by hiring a management company to take over that for me.

Joe Fairless: And where can the Best Ever listeners get in touch with you?

Ricky Beliveau:  You can find me on Facebook, Instagram, Twitter, all at Volnay Capital. You can also find me on my website, volnaycapital.com.

Joe Fairless: And I recommend the Best Ever listeners to go check out Ricky’s website, volnaycapital.com. It’s got pictures of the condo conversions, it’s pretty cool.

I really enjoyed this conversation on condo conversions, and other deals, but really we focused on condo conversions – the challenges that we might come across. Definitely a red flag if tenants are there, there likely will be issues. It’s not a deal breaker, but just expect for there to be issues. And then knowing your numbers, talking through how you calculate the back of the napkin math, and then you have your financial model, so obviously going much more detailed. During our conversation you gave really good, high-level back of the napkin approach for how to evaluate deals. Thanks so much for being on the show, Ricky. I hope you have a best ever day, and we’ll talk to you soon.

Ricky Beliveau:  Joe, thanks a lot! This has been great.

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Best Ever Real Estate Show Banner

JF965: Why He SOLD All He Had, Went to War, then Returned to Develop Land and Syndicate BIG Deals

He found the best and highest use of real property, and brings it to life! This exciting episode showcases the complicated yet rewarding nature of syndicating and developing deals. Scott, our guest, literally sold all he had and went to war to be a soldier, he learned leadership and initiative, and came home to build an empire. This is a must listen!

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Scott Lewis Real Estate Background:

– Co-founder of Spartan Investment Group, LLC
– In 24 months, SIG has completed 4 projects totaling $2.5M with an average ROI of 36%
– Currently has three more projects underway, and raised over $3M in private equity
– Led several successful real estate developments ranging from single-family flips to raw land development
– Based in Denver, Colorado
– Say hi to him at http://www.spartan-investors.com
– Best Ever Book: It’s Your Ship by Michael A

 

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real estate deal syndication advice

 

Joe Fairless: Best Ever listeners, 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. We only talk about the best advice ever, we don’t get into any fluffy stuff.

With us today, Scott Lewis. How are you doing, Scott?

Scott Lewis: I’m doing great, Joe, and Best Ever listeners.

Joe Fairless: Well, nice to have you on the show and I’m glad you’re doing great. A little bit about Scott – he is the co-founder of Spartan Investment Group. In 24 months his company has completed four projects, totaling 2.5 million dollars, with an average ROI of 36%. Currently, he has three more projects under way, and has raised over three million dollars in private equity for those projects. He has lead several successful real estate developments, ranging from single-family flips to raw land development. Based in Denver, Colorado… With that being said, Scott, do you wanna give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Scott Lewis: Sure, thanks Joe. Best Ever listeners, my background really started Chemistry and Marketing major coming out of Michigan State University. I went into the corporate world for a little while, I had a regional sales job with a biotech firm, and kind of got sick of that, so I did the crazy thing and sold everything I owned and joined the army and went off to war, which actually was a really good experience. It got me some really good leadership training and what not, and when my active duty time ended I came out, I went into government service, which gave me some additional really solid training – less on leadership, but more on strategic planning, which I’ll talk about… Which ultimately lead me to build the strategy for my company. Currently – Spartan Investment Group. We’re real estate syndicators and developers. We go out, we find deals and then we put together the money for them. We also develop deals as well.

Joe Fairless: Real estate syndicator AND developers… When you say “develop”, are you talking about ground-up development?

Scott Lewis: Absolutely. We specialize in taking raw land and then developing it. As I’ll get into a little bit later, we look in two different areas. There are larger single-family developments with multiple units, or self-storage, but we like to focus on raw land.

Joe Fairless: Larger single-family development or self-storage… The four projects totaling 2.5 million that I mentioned earlier – what were they?

Scott Lewis: They were all single-family flips. We started, like a lot of folks do, in renovating single-family homes. I will say that I was a little bit non-traditional in that the smallest renovation budget we’ve ever worked with is $165,000 on an 850-square-foot house in Washington DC. One of the houses of those four projects was a raw land development, and that’s kind of what wet our appetite for that. This is a little bit more difficult, so there’s a little less competition in that asset class.

Joe Fairless: It is a little bit more difficult, that’s for sure, the raw land development. It’s interesting… We talked in Denver, and Scott was a speaker at the Best Ever conference, and I really enjoyed getting to know Scott, and I took a lot of notes whenever he was talking. We had some drinks afterwards, and one of the things that I’ve noticed with all of the interviews I’ve done is when I ask a developer “Okay, you’ve been developing for a certain amount of time – is it really worth the risk vs. reward?” and sometimes they’ll say “You know what? I just like doing it. I don’t know if it’s worth the risk versus reward, because there’s so many uncertainties and so many grey hairs that I got through the development process.” What are your thoughts on that?

Scott Lewis: Joe and Best Ever listeners, it’s definitely true. There’s a lot more risk in the development side of the house, but with risk comes reward… And maybe I’m just a glutton for punishment like some of the other developers, but I really enjoy doing it because that’s where the real money is made. Once somebody has figured out the best and highest use for a property, and then entitled it so that it’s ready for the construction phase, they can suck a lot of the juice out of the deal because they’ve done the real work, they’ve done the real risky work.

Being able to go in and do that work and then take it all the way through to fruition to whatever the project is, whether it’s a single-family home, ten townhouses, a four-phase condo development  – whatever it is, that’s where the real excitement is, and then also the real payoffs.

Joe Fairless: So let’s talk about a specific project, any one of those four that total 2.5 million on the four over the last 24 months. Can you give us some numbers and just tell us about the project?

Scott Lewis: One of them was the development deal, and it was not quite raw land… A hole had been dug in the ground, so not quite raw, but our contractor that we’ve partnered with over the last six years had a stuck project that he had kind of started and stopped, and we got in there and we helped him look through a [unintelligible 00:07:02.08] which anybody that got the fluorescent tag on their door once in a while knows that that’s a bad place to be.

So we helped him work through that, we did kind of a partner deal. He owned the land already, so he brought the land, we brought the money, split 40/60, 40% going to him 60% going to us. [unintelligible 00:07:21.19], I wanna say we were in at about $450,000 for development and construction and sales and everything, and the out was about $750,000. So we made about $300,000 with $450,000 in, and split – 40% going to the contractor because he did all the work at cost, and then 60% going to us for bringing all the money and helping him work through the city and the utilities and all of the other tangential things that go with development that aren’t there during construction.

Joe Fairless: What would be a couple things – knowing what you know now – if you were presented with those same scenarios on a future deal, that you would do differently?

Scott Lewis: Joe, that’s a great question, and Best Ever listeners… That scenario was presented to us in July of this year and then again in December. Joe, at the Best Ever conference I referenced a deal that I had two different raises on, at two different time points, and which we kind of combined them because we took two pieces of land that were just raw, and one had a house on it that we were going to demolish and get rid of. But the two pieces of land, independently, could get a total of seven townhomes, but combining them and leveraging a special zoning exemption where we were building, we were able to actually get 11 homes.

So one of the things that we’ve done right upfront is we’ve started engaging the utility companies, because that was one of the things that we waited on for our first development project, and it caused us a 60-day delay because those guys were just so backed up, and anyone that’s worked with utility companies in the past knows they are not the most motivated and efficient folks. They’re incredibly burdened, they’re under-staffed, coupled with just how it is out there, that can really stop a project. So in any of the development projects now, after we make sure we’re good with zoning and the tax guide and everybody else from the government, the next thing we do is get everything we need to do with the utility companies going right away, so that we can adhere to their traditional timelines and not be worried about delaying the project.

Joe Fairless: What type of timeframe do you have to allocate for the utility companies?

Scott Lewis: We just got a notice back from the gas company that their timeframe is 8-12 weeks. [laughter] So we’re doing another project that’s a condo conversion, and we’re basically taking a single-family home and we’ve dug out underneath the house and it’s a row home… So there’s a row of probably five or six homes; our property is the second in from the end, so we’re actually digging underneath the two other houses, on the walls and underpinning and going out the back, but we’ll also have to dig out the front a little bit to have an egress to the seller’s condo, and with that there’s a gas line there, so we have to do what’s called gas line abandonment.

The gas company has to come out and [unintelligible 00:10:17.29] and then take it out so that we can dig out, and that’s 8-12 weeks… Which is fine; this isn’t a surprise to us, we knew it was coming, so it’s built into our timeline.

Joe Fairless: How much does that cost?

Scott Lewis: The gas line – they just have to come and turn it off, and then our contractor does all the digging. So it’s just part of our construction cost, it’s not a ton to us. But sometimes the utilities can be upwards of $30,000 if you have to bring new service in… We don’t have the final bill yet, but we have to increase the size of the water line from the street because of the new sprinkler system requirements, and we don’t have the final cost there. We usually budget around $30,000-$35,000 for our projects per unit for utility cost, so it can be pretty significant.

Joe Fairless: Yes, they can be. Let’s talk about the three projects you have under way and have raised three million dollars in private equity for those projects. Have those projects closed as far as you’ve bought them, you’ve got the equity and now you’re implementing the business plan?

Scott Lewis: Yeah, so one of them is actually closed, constructed and sold. Last Friday we just closed on the property. That one went pretty well, it took a little bit longer; we missed our timeline by about two months, so we gave our investors a 2% equity bump just for us missing our timelines. So that one went pretty well other than the timeline. Our budget came in as we wanted it, so that was good.

Joe Fairless: What type of project was it?

Scott Lewis: That was a single-family flip. That one was actually a favor to our contractor. He owned the house since 2006 and he came to us and asked us to help him put it all together and get it ready, just because he didn’t want to. We put some of our money in it, we went to some of our really close investors, and just asked them if they wanted to be in it. Three of them jumped in. We raised $200,000, so not very much for that one, but it was projected to be a six-month timeline for a 10% return. We actually gave the investors 12% because of the eight months… So pretty close to a 24% annualized.

Joe Fairless: What was the all-in price, what was the exit price?

Scott Lewis: The all-in price was about $630,000, and the out price was $785,000. That normally doesn’t meet our 30% ROI criteria, but because of a favor to our contractor and the short timeline, we decided to do it.

Joe Fairless: Cool, $185,000 profit in eight months. Let’s talk about project number two.

Scott Lewis: Project number two was the condo conversion. We’ve been working on that — our plans went in in June 2016, and we actually split those plans into foundation plans and building plans, so that we could go ahead and get started with all the underpinning and foundation work that we needed to do, while the [unintelligible 00:13:04.00] was running its course through the normal application process.

That one is kind of our gold standard, we got a pretty sweet deal on that. We worked on it for about 18 months, trying to track down the owner, and just a random, fortuitous meeting at a corner bakery with an attorney to talk about another project, he referenced having a client with a property on L Street, and we immediately knew who it was. We had talked to the owner a couple of times and she had told us that she had an attorney and we didn’t think that it was even remotely possible, but it turned out it did. The financials are pretty good, we’re gonna be all-in at a million and out at 2.6 million.

Joe Fairless: Condo conversion – is it just one condo?

Scott Lewis: No, so we’re actually taking a single-family and we’re digging out underneath it and we’re adding a floor and a half, so when we’re done we’ll have four two-bedroom, two-bath condos. Three of them will be about 1,000 square feet, and the third one will be about 1,300 to 1,400 square feet.

Joe Fairless: Wow… Okay, I wanna make sure I understand that. You have a single-family house and you’re converting that into four condos?

Scott Lewis: Yes. The real sweet deal about that is we acquired the property as a single-family home, but because we’re converting it to condos, that allows the financials to change a little bit, and that’s where the deal is. It’s a big thing that’s going on in the district of Columbia right now – the condo conversions, because the housing is so limited… And DC – there’s a number of reasons the housing is limited in DC, but one of the things folks are doing is they’re row houses, so you can’t really go out to the sides, and you don’t really wanna go out to the back too much, because you kill the property, and sometimes the lots are really small, so the other way is to go up and down.

Some folks have taken it to an extreme – those are called pop-ups, and they look pretty bad. We probably could have gotten a six-condo out of it, but it would have looked really bad. We’ve actually made the top choice to go with what’s better for the neighborhood and just do the four condos. And even on the fourth condo, we’re only going half a floor, so that it still holds the charm from the street.

Joe Fairless: And you said your all-in price was a million – did I hear that correct?

Scott Lewis: Yeah, the all-in, after everything is done, is about 1.5 million, to include acquisition, construction…

Joe Fairless: And what are you projecting it will sell for once all four condos are sold?

Scott Lewis: Right around 2.6.

Joe Fairless: Nice! What do you do if anything while you’re building it to secure the condos’ sales?

Scott Lewis: That’s kind of a balancing act. As soon as we get the drywall up, we’ll go through and we’ll start soft-marketing them… But with condo conversions there’s a lot of documentation that needs to get approved before you can get your certificate of occupancy, so there’s only so much that you can do prior to the certificate of occupancy.

With this particular one, our agents work consistently in this particular area of Washington DC, so probably maybe 45 days out or so we’ll start letting them pocket-list it, and then once we get the certificate of occupancy then we’ll really go full bore, because we can’t close before that comes in anyways, so we don’t wanna market them too early.

Joe Fairless: You mentioned it was a fortuitous meeting, that you knew exactly who your attorney was talking about when he mentioned the other client… You said before that you had tried for 18 months to track down the owner – what were you doing and why didn’t it work?

Scott Lewis: We were just using the traditional methods that a lot of wholesalers and direct marketers use. We weren’t doing anything crazy. We do have an aggregation process that we use to bring a lot of different data sets together to identify sellers. Whenever we do direct marketing campaigns – which we’ve actually stopped doing – we only do maybe 50 letters at a time, but those 50 letters have been vetted through multiple levels within our organization, so it probably takes us as much time to hit 50 people as some of the wholesales could hit 2,000 people, because we take a very focused approach, versus a wide blast of mailers. Every one of our letters is personally written to the person that we’re trying to get at, and we’ve actually got really good response rates that way.

This one was no different. We got the person’s phone number, we actually talked with her and she confirmed who she was… We met her later because one of the things that we do for any of our sellers is we help them try to reduce any client’s fees/taxes; it doesn’t help us at all, because our contract price is our contract price, but the mission of Spartan Investment Group is to improves lives through real estate, and we’ve had some pretty good luck working with the District. We’ve saved one of our sellers $50,000 in bad taxes and fees; it didn’t go to us, it just gave her $50,000 more. She was a DC firefighter, so that really helped change her life.

This particular seller, she was in her late seventies, her husband had died quite a while ago, and it was probably pretty intimidating to have us call her on the phone. But once we actually got in contact with her lawyer and he vouched for us and verified who we were… I actually went over to her house a couple times and took her down to the District of Columbia, so she would be there in person, and we were able to save her about $10,000 in fees and fines. That was 10k that went right back into her pocket that she wouldn’t have gotten.

Joe Fairless: So your process which does work for other deals didn’t work initially when you were reaching out, because they might have been intimidated, or for whatever reason, but when you talked to her attorney, that proved to be the door that opened up and you were able to get the deal done. As a result of that, do you now make a more focused effort on speaking to attorneys about clients they have and just reverse-engineer that process?

Scott Lewis: We’ve actually moved away from going after the probate guys or the estate attorneys. We’ve got a couple attorneys that will occasionally pitch us deals, that we have relationships with, but we made a strategic pivot in October 2016 to kind of get out of the single-family and direct marketing. Just too much competition down there in that red ocean market, so we recently haven’t even been engaging.

We’ve got relationships with two attorneys that occasionally send us projects that they have as estate attorneys, but other than that we really haven’t even been engaging sellers.

Joe Fairless: So let’s talk about what you are doing and the shift that you’re making. What are you shifting towards? I would suspect it’s self-storage, right?

Scott Lewis: Yeah, Joe, that’s it. We’re 100% going after self-storage, and we are using some of the same methodologies. Lindsay, who is our director of business intelligence, comes from the Intelligence Community in DC, so she takes some of the methodologies that she used there to do the same thing for our business, to identify sellers and to identify pieces of property that we wanna go after.

We found that when we’re going after commercial deals, it’s not a big deal if we contact the sellers, because commercial deals are based on numbers, there’s no emotion involved. I mean, occasionally there is, but the vast majority is based on numbers, so that as long you present a reputable front from your company and that you are reputable yourself, we found that it’s much easier to deal with sellers for commercial deals.

Joe Fairless: Have you gotten a self-storage deal under contract?

Scott Lewis: Yes, using our research methodology we identified a piece of land in Washington state, went through the whole process and engaged — the seller was using a broker, so he pointed us to the broker; we engaged the broker, and now we’re under contract and we’re in the due diligence period now. It’s a piece of raw land, so it’ll be ground-up development.

Joe Fairless: How many storage units would be able to be built?

Scott Lewis: That’s a good question, Joe, and it’s one of the things that we’re trying to look at right now. There’s wetland on the property, so we had our biologist out there last week, and he is delineating the wetland on our survey, and then he’s also classifying them; there’s various classes of wetlands, and depending on the class, they can either be easily moved, or you have to go through board of zoning approvals to get an exemption to move them

Once we figure out what we can do with the wetlands, we can then go ahead and develop our site plan so that we know our unit mix and how many units we’re gonna put there.

What we did initially was we looked at if we couldn’t use any of the wetlands, and we could only use what turned out to be about 40% of the acreage that we’re buying, is this deal still feasible? Could we still pull this off? And the answer to that question was yes, which is why we wrote the contract, and the contract is contingent upon the biologist’s report on the wetlands.

Joe Fairless: Okay. When I was trying to interrupt you, you read my mind, so I’m glad I didn’t interrupt you… [laughs] That’s what I was gonna ask, how you identify what you make an offer if you don’t know how many units can be built? Let’s just say you cannot use any of the wetland area… Do you know how many units can be built just for that 40%?

Scott Lewis: We could do approximately 50,000 square feet of self-storage. Again, we haven’t done our unit mix yet, we’ve just used averages at this point, which a lot of folks might say we’re treading in dangerous waters, but we have the contract written as such that we can kill the contract if necessary if we can’t get what we need, so that’s why we’ve decided to go this route, versus having the complete feasibility studies, which usually include the unit mix, which we’ve done kind of in heuristics to see whether the numbers would work out… And there’s also some self-storage land acquisition heuristics that are out there that kind of point the needle at what your per-square-foot land cost needs to be based on your monthly cost for a 10-by-10 and a 10-by-15 unit.

We’ve done that projection, and if that’s correct, then there’s actually a lot of value in this land already, so we’re okay.

Joe Fairless: How much does it cost your company to qualify a deal like this before you can actually say yes or no definitively?

Scott Lewis: That’s a good question. We’ve done our internal feasibility studies. Lindsay, our director of business intelligence, does our internal feasibility studies, so currently it hasn’t cost us anything, other than her time. And feasibility studies cost anywhere from $3,000 for a desk audit where folks don’t actually travel to your site, up to $7,000-$8,000 if folks travel to your site to do the feasibility study.

Joe Fairless: Didn’t you say you had a biologist or someone going out to look? Aren’t they charging you something?

Scott Lewis: They are. We think we’re gonna put about $10,000 on the line before we actually know whether we can do this or not.

Joe Fairless: And the bulk of the $10,000 comes from where?

Scott Lewis: All of our money, we don’t use investor money.

Joe Fairless: No, I mean what are the expenses that make up the 10k?

Scott Lewis: There’s three major ones; four in this case, but normally it’s three. In this case we need a civil engineer to give us an initial site plan to take to the city. Then we need our biologist to go out there to delineate the wetlands and any protected or invasive species of plants or animals. We need a geotech report, so they can go out there and test the soil and tell us what type of soil it is, so that we can then have the civil engineers calculate the concrete mix, and for this particular area, we actually need a mine hazard report, because there’s some old mines that are there, so we have to make sure that there is no mines underneath. With all pooled, it’s probably gonna be about $25,000, but $10,000 of it is probably money that we’ll have to spend before we make a decision. The mine and the geotech we really don’t need to do before we make a decision, but the biologist and the civil engineer we do, to see what the site plan is, and then ultimately the unit mix. Then we can tighten up our proforma.

Joe Fairless: Based on your experience as a real estate investor, what is your best real estate investing advice ever?

Scott Lewis: Best Ever listeners, the best advice is broken down into two categories. One is just starting out, and if you’re just starting out, take some time to learn yourself before you start. There’s some personality assessments out there… DISC and Myers-Briggs are two that are out there. I really recommend you go out and you figure out what type of personality you are. Then once you figure out what type of personality, build your tribe around your weaknesses.

Myself, I’m a DISC D, that means I’m a driver – I just wanna get stuff done, I don’t really pay attention to details. So I went out and I found a partner who is very into details and he’s very detail-oriented. The two of us, plus a couple other members of our team kind of really round that out.
Once you figure out your team, then start with an education period. Just figure out what asset class you wanna focus on, and then go. For those of us that have been out there and have been in the trenches, constantly challenge your assumptions and operating models.

We recommend a devil’s advocate. The Israeli Mossad, which is their version of the CIA, they call that the 10th man. This person is just the person on the team that disagrees with everything that’s going on. What that does is it ensures that groupthink doesn’t cause you to make a bad decision.

Joe Fairless: Does that person rotate on the dissension, so that they don’t get punched in the face eventually?

Scott Lewis: Absolutely, Joe. So Best Ever listeners, there’s two key components actually. One is (absolutely, Joe) they have to rotate. Somebody else has to come in and be that person. And then second, there is no personal attacks on that person whatsoever.

Joe Fairless: Makes sense, yes. Alright, are you ready for the Best Ever Lightning Round?

Scott Lewis: I am.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:26:44.16] to [00:27:26.08]

Joe Fairless: Best ever book you’ve read?

Scott Lewis: “It’s Your Ship” by Michael Abrashoff.

Joe Fairless: Best ever deal you’ve done?

Scott Lewis: Our condo conversion in DC. There’s a million dollars of profit in that one.

Joe Fairless: Best ever way you like to give back?

Scott Lewis: Mentoring and education.

Joe Fairless: What’s the biggest mistake – or any mistake you can think of – you’ve made on a deal that? One that you haven’t mentioned earlier.

Scott Lewis: We had the opportunity to buy a church that was right behind where my partner and I lived when we were in DC, and at the time they needed two million bucks to make the deal work, and we were pretty novice and had no idea about raising money, and we’ve been able to raise two million dollars in like two hours over the last couple months… So that deal, the guy that bought it is building 36 units there that will probably have a sales price of probably 22 million dollars for that deal. We could have had it, but we didn’t know how to raise money.

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Scott Lewis: Best Ever listeners, if you have any questions about what I said, you can reach me at my e-mail address, which is Scott@spartan-investors.com, or our number is 202 827 5483.

Joe Fairless: I enjoyed our conversation in Denver, and I enjoyed this one just as much, because we’re talking just about you; it was less back and forth, and I was learning more about you and I really enjoyed that, and I know the Best Ever listeners got a lot out of it as well, specifically some of the takeaways…

Utility companies – they are slow; we’ve got to allocate in the timeline for the amount of time that they need (in your case 8-12 weeks). And condo conversion – holy cow! – 18 months to track down the owner, and eventually it ends with you getting in touch with their lawyer coincidentally, and then using that as a conduit into the deal that has over a million dollars in profit, that is yet to be realized but looks really good.

Then the self-storage evolution that you’ve taken in your company. As you said, the red ocean versus the blue ocean strategy – I think it’s a book, I’ve just heard a podcast on it – where there’s not a bloodbath and a feeding frenzy, and that is in self-storage and ground-up development. And the amount of money that you have on the line prior to making a go/no-go decision on that deal.

Thanks for being on the show, we learned a lot. I hope you have a best ever day, and we’ll talk to you soon!

Scott Lewis: Joe, Best Ever listeners, thank you very much!

 

 

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Best Ever Show Real Estate Advice from experts

JF814: How He Turned $10,000 into Over $10 MM in Real Estate Developments

Starting with $10,000 in his bank account our guest was able to surround himself by the right people and begin his fix and flip ventures. Developments, fix and flips, and other ventures have built his total net worth above $10 million. Also, find out how he is able to only do a project the year and make it out alive!

Best Ever Tweet:

[spp-tweet tweet=”I don’t want to be rich when I’m old, I want to be rich when I’m young, and real estate allows me to do so.”]

Slava Menn Real Estate Background:

– Principal at Labrador Real Estate & Contributing Writer at Inc. Magazine
– Guest lectures at his alma maters, BU & MIT, and writes for Inc Magazine
– Started with a $10K savings and has developed $10M worth of real estate
– Since 2013, Labrador Real Estate has developed over $6.5MM in real estate
– Based in Boston, Massachusetts
– Say hi to him at http://www.labradorre.com
– Best Ever Book: Unique Ability by Catherine Nomura

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Best Ever Show Real Estate Advice from experts

JF799: How to BOOST Your Profits Per Hour, Direct Mail, and High End Construction

So you’re deciding if you should wholesale or rehab your new found deal… Well have you asked yourself how much time and energy it takes to rehab? Today you are going to hear why some deals are better to simply wholesale while others make more sense to fix and flip. You will also hear about how our guest went from accounting to a direct mail business and why he loves high-end flips.

Best Ever Tweet:

[spp-tweet tweet=”Decide what you are worth on an hourly basis.”]

Justin Silverio Real Estate Background:

– Founder of Open Letter Marketing, a direct mail company for investors
– Managing Member at JS2 Homes LLC, his own investment company on rehabbing, redeveloping and wholesaling
– Prior to starting his company, Justin was an accountant in the private equity space
– Over 10 years experience in the investment industry
– Based in Boston, Massachusetts
– Say hi to him at http://www.thebostoninvestor.com
– Best Ever Book: Millionaire Real Estate Investor by Gary Keller

Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment. Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips: https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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Best Ever Show Real Estate Advice from experts

JF770: ATTENTION Expert Investors, It’s Time to DEVELOP!

You may hear that you shouldn’t choose the reward over risk in real estate, you are about to learn how to mitigate your risk even better. Our guest is a pro The product that allows you to understand your risk in developing and better negotiate the transaction and process with your partners. This is a must listen!

Best Ever Tweet:

[spp-tweet tweet=”Make your profit before you close.”]

Brian Barbuto Real Estate Background:

– CEO of Infobrij LLC, a private equity firm for commercial/residential real estate investors/sponsors
– He has 40 years in Real Estate Development
– Has has designed an innovative investment model that is poised to change the way real estate investing is done
– Completed over 1,000 residential units and worked through over $100M in real estate project funding
– Based in Orange County, California
– Say hi to him at www.infobrij.com

Want an inbox full of online leads?

Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

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https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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JF599: BIG Money Raised, Investor Partners Set, and on the Closing Day the Lender Says…#situationsaturday

Today’s guest has been here before. He shares a suspenseful yet agonizing account of funding a large medical building in Nebraska, well, almost funded. Hear how after all the due diligence, raising money, and cutting red tape the deal goes south.

Best Ever Tweet:

[spp-tweet tweet=”We value more consistency in our relationships.”]

Mark Mascia real estate background:

  • President and CEO of Mascia Development and has over 13 years of experience in real estate
  • Based in New York City, New York
  • Prior to forming Mascia Development, Mark was in charge of developing over 2,500 residential units and multiple retail and mixed use properties with a total portfolio of over $1.1B
  • Presently an adjunct professor at NYU teaching Real Estate Development Principles and Practices as well as Advanced Real Estate Financial Modeling
  • Say hi to him at https://invest.masciadev.com/properties/find/

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

I recommend talking to Lima One Capital. A Best Ever Guest told me about them after I asked how he financed 10 properties in one year. They are an asset-based lender with unique programs for long-term hold and fix and flippers.

Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF585: From $0.00 to $800.00 to Rich and How He Did It #situationsaturday

He lost it all after jumping into a business he knew nothing about. He decided to come back to his home…real estate. Joe specializes in lease options and creative finance structures today, he also runs a mentor program. He shares how important it is not to give up; his drive took him from broke to wealth. Here his Best Ever advice!

Best Ever Tweet:

[spp-tweet tweet=”Real estate always works…you will always need a place to live.”]

Joe Bodek real estate background:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

I recommend talking to Lima One Capital. A Best Ever Guest told me about them after I asked how he financed 10 properties in one year. They are an asset-based lender with unique programs for long-term hold and fix and flippers.

Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF568: Why He Finds the BUYER Before He Negotiates the Deal

Our guest is creative, and serious about all his exit strategies. He finds a buyer before he negotiates a deal which will ensure the sale. We also purchased a large commercial building and bought out the tenants to re-rent at higher rates to eventually create a better cash flow investment to resell later. You have to hear this man’s show!

Best Ever Tweet:

[spp-tweet “Negotiation is an artform.”]

Adam Cohen real estate background:

  • President of West One International
  • 23 years of experience as a real estate investor, hard money lender, developer and advisor
  • Based in Miami, Florida but works in the UK as well (as you’ll hear from his accent)
  • Say hi to him at Westoneinternational.com
  • His Best Ever book is The Magician by Raymond Feist

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF566: The Skinny on 1031 Exchanges and How You Can Win!

Want to defer your capital gains taxes when selling your home? You can! Today’s guest is a 1031 Tax Exchange genius! Hear how you can move money without the negative effects of Uncle Sam’s fees!

Best Ever Tweet:

[spp-tweet “Always anticipate the worst and plan for the best.”]

Dave Foster real estate background:

  • Specializes in multiple ways for each investor to create portfolio enhancing strategies using the power of the 1031 exchange
  • Regional development director at MSM and has over 20 years of experience in all phases of real estate investing from large scale institutional development and renovations to vacation rentals and everything in between
  • Say hi to him at erg1031.com and he is based in St. Petersburg, Florida
  • His Best Ever book: the bible

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF555: How This Investor/Biz Owner Retains and capitalizes on AMAZING Clients Through REALTORS

Today’s guest has a program all property management business owners needs, and it’s all about quality retention. He shares what he has learned over the years in regards to marketing and business development. He is not new, and has some advice for the small apartment owners to the heavy hitter community investors. Listen in!

Best Ever Tweet:

[spp-tweet “Don’t consider marketing and expense, consider it an investment.”]

Pete Neubig Real Estate Background:

  • Co-founder and CEO of Empire Industries and president for the National Association of Residential Property Managers (NARPM) Houston Chapter
  • Has grown Empire from 0 to 500 doors under management in three years and is based in Houston, Texas
  • Say hi to him at http://www.empireindustriesllc.com/
  • His Best Ever book: Think and Grow Rich by Napoleon Hill

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF550: Why You Shouldn’t Be Your Own Contractor #situationsaturday

How much does it cost to use a general contractor? Does it matter? Sure, but what you could have finished in two months took six. MONEY LOST! Be the investor that not only leverages the money well, but also the work! Hear it and take notes!

Best Ever Tweet:

[spp-tweet “Just because it’s cheap doesn’t mean it’s the best thing to do.”]

Jason Myles real estate background:

 

–          Been in the real estate industry for 15 years

–          Done hundreds of deals from single family, multifamily, new construction and raised almost $20,000,000 for his deals since 2008

–          He is based in Atlanta, Georgia

–          Author of The Home Finders Guide, First Edition

–          Say hi to him at: http://www.jasonomylesrenetwork.com

 

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips: https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF547: What this Music Artist Does Day to Day to Invest in Real Estate

Our guest loves to invest in real estate. He got in during the crash and purchased a cash flowing four-plex in which he was able to pull equity from to fund the acquisition and rehab of multiple dwellings. Hear how he handles his fixing flips and what he’s doing now!

Best Ever Tweet:

[spp-tweet “Be sure to pay contractors after the work is done.”]

Austin Schalhamer real estate background:

  • Active real estate investor who is currently doing nine flips, two developments and owns a couple rental properties
  • He’s involved in software development and is a serial entrepreneur
  • Based in Denver, Colorado
  • Say hi to him at corecrowdfunding.com
  • His Best Ever book is: Stop Acting Rich by Thomas Stanley

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF533: Why You Need to go ALL IN TODAY and What It Requires

He went shopping with Pat Hiban in the downslide. Our Best Ever guest owns a large Keller Williams, principal owner in the 20th largest real estate company in US with 2,100 agents responsible for over 19,000 transactions and $4.5 billion in sales. He is a big player in the real estate field and he shares how he took action and why you need to go ALL IN!

Best ever tweet:

[spp-tweet “It’s easier to go all in when you don’t have anything.”]

David Osborn real estate background:

  • Principal owner in the 20th largest real estate company in US with 2,100 agents are responsible for over 19,000 transactions and $4.5 billion in sales
  • Investor in 5 Keller Williams Regions and owns 20+ related ventures and is principle of a REI private equity group and the operator of 35 profitable
  • Based in Austin, Texas
  • Say hi to him at davidosborn.com

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF512: How She Moved from Medical Billing to Million Dollar Developments

She started out in medical billing, and knew there was something bigger out there—she fell in love with real estate. She works now with investors, general contractors, and planners to develop large multimillion developments. Hear how she did and her Best Ever advice!

Best Ever Tweet:

[spp-tweet “The reward outweighs the risk significantly.”]

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Michelle Wong’s real estate background:

  • Real estate sales agent and is based in NYC, NY
  • About $5M in total transactions over the last 12 months
  • CEO of The Wym Group which is focused on single family and commercial real estate
  • Focus on conversations and large renovations and development in markets across the US
  • Say hi to her at http://www.thewymgroup.com
  • Her Best Ever book is Think and Grow Rich by Napoleon Hill

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF503: He Thought BIG, From 8 Broken Houses to Multimillion Developments

At 25 years old, he purchased 8 “crack houses”, or shells rather, to jump into real estate, and specifically big deal developments. In Philadelphia, he had a vision to add value to residential communities, and he did so. He even renovated a portion of what was once one of the largest brew towns in the nation. You gotta hear his start and what he’s doing now!

Best Ever Tweet:

[spp-tweet “If you start small, you’re not going to lose your shirt.”]

Dave Waxman background:

  • Co-founder of MMP, a leading urban infill development company in Philadelphia, Pennsylvania
  • Has done over $50M of development and has over $75M in new developments in the pipeline
  • Say hi to him at mmpartnersllc.com
  • His Best Ever book: Titan: The Life of John D Rockefeller by Ron Chernow

Made Possible Because of Our Best Ever Sponsors:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

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JF476: For 5 Years He FAILED Until He…

Our Best Ever guest wasn’t able to cut it in the real estate investing game for five years…but he didn’t give up! He did what EVERY new investor should do—found a mentor! He began wholesaling but eventually found his niche in development and new construction. He feels that the saturation of real estate activity has raised prices and seller expectations. Hear his strategy and see if it’s for you!

Best Ever Tweet:

[spp-tweet “Start early, and fail, fail, fail, fail, and fail some more.”]

Abhi Golhar’s real estate background:

  • Managing Partner at Summit & Crowne Partners, an Atlanta-based real estate investment firm
  • Uses value-add approach to acquire, renovate, and(or) develop real estate
  • Host of #realestatedealtalk on YouTube
  • Currently he has 35 new construction deals in Atlanta and Charlotte and is expanding in other markets
  • Here’s a map he referenced in our conversation
  • Say hi to him at http://www.abhigolhar.com/
  • Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

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JF463: How to be Tax Time Smart with Rentals

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

It about time…the end of 2015 is here and all of your assets are ready to be accounted for. Our Best Ever guests know what you are able to write off and how to save paying EVERYTHING to the IRS. They share some simple yet paramount tips to that you need to be sure your CPA knows…tune in!

Best Ever Tweet:

[spp-tweet “Capture ALL of your deductions!”]

Amanda Han’s real estate background:

  • CPA and real estate investor based in Orange County, California
  • Director of Business Development at Keystone CPA
  • Real estate investor investing for 17 years
  • Investor in syndicated multifamily deals
  • Say hi at http://www.Keystonecpa.com

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

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JF460: How to be Effective at a Sales Event with a Booth #skillsetsunday

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Tradeshows and product presentations are great ways to sell your goods and services, but how do you do it effectively? The dynamics involved are important, and our Best Ever guest is walking us through the steps to sell your brand and eventually your products. Hear his unique way to make an impression at the show and reconnect with the customer for the sale later; you gotta take notes!

Best Ever Tweet:

[spp-tweet “Make a follow-up plan before you go to the show. “]

David Masover’s background:

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

 

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JF445: He Paid $60k and it Sells for $300k!!!

Our Best Ever guest wears many hats, rehabbing and property management are two of them. He has completed a full rehab on over 250 properties and counting! He instructs us not to “wing it” and have a plan. You HAVE to hear his 27% Cap Rate purchase that will leave you fired up to find a beast of a deal! Listen now!

Best Ever Tweet:

[spp-tweet “PLAN PLAN PLAN…do not “wing it”.”]

Mark Ainley’s Real Estate Background:

  • Founder of GC Realty and Development, LLC
  • Say hi to him at: gcrealtyinc.com
  • Active real estate investor since 2003 based in Bartlett, Illinois
  • Bought and rehabbed over 250 homes

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

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JF440: Live Your PASSION by Having the End in Mind with Kent Clothier

He decided to live near the beach in California because of his lifestyle he created. While being a world class wholesale genius, our Best Ever guest moved to California where he enjoys the fruits of his labor…while others labor. He is an advocate of framing your business around your passion, and to do that, you must have the “end in mind”. He shares the automation and systems that allows him that freedom. Keep an ear close to this episode!

Best Ever Tweets:

[spp-tweet “People love to find comfort in complexity.”]

[spp-tweet “Start with the end in mind.”]

Kent Clothier’s real estate background:

  • Within 18 months after starting in real estate full time he wholesaled 91 houses throughout South Florida
  • Founder and CEO of REI Marketing, a multi-faceted real estate education and marketing company based in Boca Raton, Florida
  • His team is responsible for the development of real estate tools such as 1-800-Sell-Now, Find Motivated Sellers Now and Find Private Money Now
  • Member of Memphis Invest

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

Best Ever Show Real Estate Advice

JF419: How to Start a New Company from Scratch

Our Best Ever guest is the author of Real Estate is a Team Sport The 9 Player You Need To Profit and has successfully closed deals in the U.S and Australia. He lends a hand to Australian investors that wish to invest in the U.S. He began with a small network and scaled it by helping others. He is passionate about helping anyone passionate to profit in the REI business…you may need to grab his book, tune in!

Best Ever Tweet:

[spp-tweet “Find people who are successfully doing what you want to be doing and ask for help.”]

John Carney’s real estate background:

  • Active real estate investor and developer in the United States and Australia
  • He moved to Melbourne, Australia in 2009 and founded America Property Source to enable Australians to invest in US real estate
  • In 2013 he developed properties in Geelong and the surrounding Surf Coast
  • Author of the book Real Estate is a Team Sport
  • Say hi to him at http://www.johncarneyonline.com 

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

Best Ever Show Real Estate Advice

JF384: Forced to LAY OFF His Team, but Now Developing 7 figure Profits

Forced to lay off his real estate team during rougher times, our Best Ever guest and young entrepreneur has seen darker days than most…but it didn’t last! As a young and ambitious business owner, he learned quickly how to rebuild from the ground up and execute most all real estate transaction types. Beginning in the mortgage processing world, experience and many deals have molded him into a now successful investor and host of The Real Dealz Podcast  

 

 

Best Ever Tweet: 

 

[spp-tweet “If you’re good with people and good at marketing, you’ll be good at this business.”]

 

 

Tucker Merrihew

 

  • Host of The Real Dealz Podcast

  • Owner of TTM Development Company which is focused on renovating older homes and building new homes throughout Portland, Oregon

  • Say hi to him at http://ttmdevelopmentcompany.com/

  • Based in Portland, Oregon

  • Began his career in the Real Estate business back in 2002 as a Top Producing Mortgage loan officer, and then by 2004 he built his own Mortgage Company TTM Finance, LLC & Davis Financial which is still in operation today

  • Play basketball three times a week and was a millimeter away from pursuing a professional career in snowboarding

 

 

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

 

Made Possible Because of Our Best Ever Sponsors:

 

Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

 

Best Ever Show Real Estate Advice

JF354: How Would YOU Invest $100,000? Find out the gameplan on #situation Saturday

Picture this…you’ve got $100,000 in the bank and don’t really know what to do with it. You want to make it work for you, but aren’t sure how. Here is your guide to using that money to benefit you.

Best Ever Tweet:

A good property manager is worth their weight in real estate.

Jason Hartman’s real estate background:

–          Involved in thousands of transactions

–          Owned income properties in 11 states

–          Host of The Creating Wealth Show

–          Say hi to him at http://www.jasonhartman.com/podcast

–          Started out as a broker

–          Recently became a real estate developer

–          Self-made multi-millionaire, entrepreneur, investor, lender and developer

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsor:

Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

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JF351: The Mortgage Switcheroo…How To Fund YOUR Flips

Today’s best ever guest shares with us exactly how he funds his flips using private money, and exactly what he does to insure his investors get in, get out and get rich!

Best Ever Tweet:

[spp-tweet “I want to make sure that we always have some kind of way out.”]

Joe Evangelisti’s real estate background:

–           Based in Haddonfield, New Jersey

–           Specializes in flips and new builds in South Jersey

–           He flips about 35 homes a year and has been doing it for about 8 years

–           Host of The Flip King Real Estate Radio Show

–           Decorated veteran who served in the Navy and holds Letters of Commendation from the US Navy and The White House, a Letter of Appreciation from President Clinton and numerous service metals from the US Navy and Secretary of Defense

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsor:

Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF303: How to Become a MASTER Marketer in Creative Real Estate Investing

Today, we have an incredible conversation about lease-options and ALL you need to know about them. Our Best Ever guest shares with us his motivation for going into lease-options, why they are beneficial and what he does to be a master of marketing.

Best Ever Tweet:

[spp-tweet “He who asks the most questions, always wins”].

Joe Bodek’s real estate background:

–          Third generation real estate entrepreneur who is born and raised in Philadelphia, PA

–          Has run 7 apartment communities (3,000) units, developed land and built single family houses

–          Guitar player and played with local groups

–          Lease options is what he specializes in now

–          Say hi to him at http://www.realestatementoringusa.com

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsor:

Patch of Land – Want to learn more about crowdfunding? Let the leading expert in the crowdfunding space, Patch of Land, give you all the info you need to get started. Grab your FREE copy of Top Ten Answers to the Top Ten Crowdfunding Questions athttp://www.PatchOfLand.com/bestever

Best Ever Show Real Estate Advice

JF230: How YOU Can be the Next Real Estate Rockstar

Punk rock and real estate can’t have anything in common, right? Think again, because today’s Best Ever guest learned how to translate her punk rock days into multi-million dollar real estate success. We discuss finding the next up and coming neighborhood in your market, why you shouldn’t judge an agent by their tattoos, and how to find YOUR real estate investing niche.

Best Ever Tweet:

[spp-tweet “I don’t think you can be successful at anything if your heart isn’t in it.”]

Jenelle Isaacson’s real estate background:

–          Owner of Living Room Realty based in Portland, Oregon

–          She is an experienced real estate agent, developer and investor

–          Living Room Realty closed on over $242M in sales in 2013

–          Jenelle has been named one of Portland’s 40 under 40 up and coming  business leaders by the Portland Business Journal

–          Expert on Portland’s local food scene

Check out Scaling Up – one of Jenelle’s keys to success

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Made Possible Because of Our Best Ever Sponsors:

Norada Real Estate Investments – Having a hard time finding great investment properties?  Unfortunately, the best deals are rarely found locally. Norada Real Estate’s simple proven system provides you with the best deals across the U.S. to create wealth and cash-flow.  Get your FREE copy of The Ultimate Guide to Out-of-State Real Estate Investing

Patch of Land – Want to learn more about crowdfunding? Let the leading expert in the crowdfunding space, Patch of Land, give you all the info you need to get started. Grab your FREE copy of Top Ten Answers to the Top Ten Crowdfunding Questions athttp://www.PatchOfLand.com/bestever

Best Ever Show Real Estate Advice

JF227: The COMPLETE Guide to Investing in Single-Family Properties

In an airport bookstore at a low point in her life, today’s Best Ever guest experienced a life changing moment. Learn what was so special about that ONE moment, how to determine the best market for your next deal, and why she conducted her first deal sitting on a box. Listen up, because she doesn’t only share incredible investing advice, she shares motivational life advice.

Best Ever Tweet:

[spp-tweet “Follow the strategies that make sense for that market.”]

Tamera Aragon’s real estate background:

–          Investing since 2003 and invested in hundreds of properties

–          She is based in Stockton, California

–          Done ground-up development, wholesale, fix and flip, buy and hold `

–          Founded her first multi-million dollar company when she was 20

–          Say hi to her at http://www.reiposse.com

–          Learn more about Locator Gold and Tamera’s Getaway Experience 

Tamera’s Best Ever websites for determining a good market:

–          Mortgage Rates

–          Unemployment Rates

–          Federal Housing Finance Agency House Price Index (HPI)

–          Foreclosure Trends

–          Real Estate Investing News

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Made Possible Because of Our Best Ever Sponsors:

Norada Real Estate Investments – Having a hard time finding great investment properties?  Unfortunately, the best deals are rarely found locally. Norada Real Estate’s simple proven system provides you with the best deals across the U.S. to create wealth and cash-flow.  Get your FREE copy of The Ultimate Guide to Out-of-State Real Estate Investing

Patch of Land – Want to learn more about crowdfunding? Let the leading expert in the crowdfunding space, Patch of Land, give you all the info you need to get started. Grab your FREE copy of Top Ten Answers to the Top Ten Crowdfunding Questions at http://www.PatchOfLand.com/bestever

Best Ever Show Real Estate Advice

JF205: Discover Canada’s New and Improved Version of the MLS

Finding listings on Canada’s current realator.ca is so yesterday. Today’s Best Ever guest shares with you his newest technology and why it’s needed for all the Canadian investors out there.

Best Ever Tweet:

[spp-tweet “If you’re popular with everyone you’re not doing the right thing.”]

Tarik Gidamy’s real estate background:

–        Co-Founder and Broker of real estate tech start-up, TheRedPin.com based in Toronto, Ontario

–        Over 16 years of experience and has facilitated and sold over 5,000 condos and homes

–        Built and developed some of North York’s finest high-end custom homes

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Sponsored by Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF195: How to Become a Billion Dollar Developer

Listen to today’s Best Ever Guest’s inspirational journey about how he started in the development business. And, the lessons he learned along the way that you can apply to your business as well.

Best Ever Tweet:

[spp-tweet “Invest for the long term.”]

Mark Mascia’s real estate background:

–        President and CEO of Mascia Development and has over 12 years of experience in real estate based in New York City, New York

–        Prior to forming Mascia Development, Mark was in charge of developing over 2,500 residential units and multiple retail and mixed use properties with a total portfolio of over $1.1B

–        Presently an adjunct professor at NYU teaching Real Estate Development Principles and Practices as well as Advanced Real Estate Financial Modeling

–        Say hi to him at http://masciadev.com/

Best Ever Show Real Estate Advice

JF192: The Art of Protecting the Downside in Real Estate Investing

From protecting the downside to buying an acre in the middle of Washington DC, today’s Best Ever guest shares with you his experience and how you can apply what he’s learned to your biz.

Best Ever Tweet:

[spp-tweet “Make sure the downside is protected and the upside will take care of itself.”]

Ben Miller’s real estate background:

–        Co-Founder of Fundrise which is a crowdfunding platform that has 40,000 investors funding deals and over 600 companies putting deals on the platform

–        15 years of experience in real estate and finance and has acquired, developed and financed more than $500 million of property

–        He is based in Washington D.C.

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

 

Sponsored by Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF175: The Next BIG THING in Real Estate Technology Is…

We’re speaking to one of the leading real estate entrepreneurs and technology innovators and he is going to share with you the NEXT BIG THING in real estate technology. Let’s go!

Best Ever Tweet:

[spp-tweet “It takes time for things to change.”]

Dave Eraker’s real estate background:

–        Serial entrepreneur with an interest and focus on the intersection of economics and applied technology

–        Co-founder at Surefield and is based in Seattle, Washington

o   Surefield is a full-service brokerage that has virtual tour technology that builds virtual models of homes allowing house hunters to navigate a property inside and out from their computers

–        As the founder and CEO of Redfin, he led the product development efforts for a new web-based form of map search and developed a salaried model for residential real estate agents

o   Company received the Innovator of the Year award by Inman News

Subscribe in  iTunes  and  Stitcher  so you don’t miss an episode!

Sponsored by Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF149: Bringing Popcorn to the Tax Assessor Office…and Other Proven Tips to Building Lasting Relationships

Friends, we do much more for our friends than we would acquaintances or business colleague (gross, what a stale term). The more friends we have the more support we have and the more successful we’ll be. Today’s Best Ever guest shares ways she builds lasting relationships PLUS she gives you some ridiculously good negotiation advice.

Best Ever Tweet:

We widely underestimate the power of the tiniest personal touch.

Terri Murphy’s real estate background:

–        Over 30 years in the real estate business

–        She’s the CIO at U.S. Learning, a company provides virtual training programming, and is based in Memphis, Tennessee

–        She specialized for several years in REO markets and has experience in commercial development management

–        Author of 5 books, including contributing author with Donald Trump, “The Best Real Estate Advice I Ever Received.”

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Sponsored by Cozy – Simple, free online rent payments, tenant screening and credit checks. Get Cozy for free at cozy.co

Best Ever Show Real Estate Advice

JF122: How to Start Slow and Steady Then Go Fast and Furiously

Today’s Best Ever guest shares how to get started in real estate and how you can too. Already started? That’s fine. He also shares how to go from a couple properties to a large portfolio.

Tweetable quote:

[spp-tweet “Cap rate should exceed interest rate on property.”]

David Campbell’s real estate background:

–        CEO of Hassle Free Cash Flow Investing based in Benicia, California (Benicia)

–        Say hi to him at http://www.Hasslefreecashflowinvesting.com 

–        David has been a principal or key advisor to over $800 million of real estate transactions including apartments, office, retail, hospitality, winery, condo-conversion and home building

–        As a real estate syndicator, he has raised and managed over $30 million of private equity invested in real estate developments

–        Author of an ebook called Hassle Free Cash Flow Investing

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Sponsored by Cozy – Simple, free online rent payments, tenant screening and credit checks. Get Cozy for free at cozy.co

Best Ever Show Real Estate Advice

JF119: The Anatomy of a $1,000,000 Flip

Today’s Best Ever guest flips homes that are over $1,000,000 and he talks about a case study and how he makes a living out of luxury flips. He has a fascinating career path from buying and holding to land development and now flipping multi-million dollar homes.

 Tweetable quote:

[spp-tweet “Focus on one thing and do it well.”]

Will Barnard’s real estate background:

–        Founder of Barnard Enterprises, Inc. based in Santa Clarita, CA

–        Full-time investor and developer focused on flipping luxury homes with values over 1MM

–        Does millions worth of real estate transactions every year

–        Say hi to him at http://www.barnardenterprises.com/

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Sponsored by: Twenty Four Sound – visit http://www.twentyfoursound.com and mention “bestever” for an exclusive 20% discount on your purchase.

Best Ever Show Real Estate Advice

JF80: Get Out When the Gettin is Good

Today’s Best Ever guest talks about the importance of gettin’ out when the gettin’ is good.

 Tweetable quote:

[spp-tweet “When you can take profit in #RealEstate – Do it.”]

 Jay Hinrichs’s background:

–        Bought a mansion from an NBA star on a short sale and made close to $2,000,000 on it

–        Has done more than 3,000 transactions

–        Formerly president of a mortgage company in Oakland, CA that pooled 35MM of assets across over  250 investors

–        Say hi to him via phone at 503.789.2451

 Subscribe in iTunes and Stitcher so you don’t miss an episode!

 Sponsored by: Twenty Four Sound – visit http://www.twentyfoursound.com and mention “bestever” for an exclusive 20% discount on your purchase.

Best Ever Show Real Estate Advice

JF70: Over 40 Years of Real Estate Investing Lessons in Under 30 Minutes

A life’s worth of lessons is jam-packed in today’s episode with our Best Ever guest. From crashing in burning to building a business back up again with only a couple thousand dollars. Deal syndication, overcoming paralyzing terror, flipping, urban rehab projects, deal structure with investors and so much more is discussed. Let’s go!

Tweetable quote:

[spp-tweet “Following your dreams without a viable Plan B is foolhardy.”]

 Phillip Elmes’s real estate background:

–        Founder of NDP (Neighborhood Development Partners)

o   Buying, improving and reselling homes in Chicago’s south side inner city neighborhoods

–        Licensed broker since 1973 – been in real estate over 40 years

–        Active in real estate since then as both a broker and developer of residential and commercial real estate

–        Say hi to him at http://urbanrehabber.com/

Subscribe in iTunes and Stitcher so you don’t miss an episode!

 

Sponsored by: Door Devil – visit  http://www.doordevil.com  and enter “bestever” to get an exclusive 20% discount on your purchase.

Best Ever Show Real Estate Advice

JF 68: Optimism is Great…Just Don’t Buy Based on It

My glass is always half full but today’s Best Ever guest cautions to not buy based off of optimism. Listen to what you should be buying off of…

Tweetable quote:

[spp-tweet “Luck is when opportunity meets preparation.”]

Theresa Bradley-Banta’s real estate background:

–        Founder and CEO of Theresa Bradley-Banta Real Estate Consultancy

–        Flipped properties from 50k to 2.5MM across the nation

–        Investor in a development deal in Mexico

–        Author of Invest in Apartment Buildings: Profit without the Pitfalls

–        2012 winner of the Stevie Award for Entrepreneur of the Year

–        Her company has won 11 American and International real estate awards

–        Visit her at http://theresabradleybanta.com/

Subscribe in iTunes and Stitcher so you don’t miss an episode!

Sponsored by: Door Devil – visit  http://www.doordevil.com  and enter “bestever” to get an exclusive 20% discount on your purchase.

Best Ever Show Real Estate Advice

JF 67: Talk to Strangers

Today’s  Best Ever guest talks about the importance of talking to strangers and why he has a remarkable goal of meeting 100 new people a day. Too fluffy for ya? Well he has a personal portfolio of over $20,000,000 and he talks about his tactic for building that too. Boom – psychology and strategy – get ready!

Tweetable quote:

[spp-tweet “My goal is to meet 100 people a day.”]

Aaron Woodman’s real estate background:

–        Sold over $200M in real estate

–        Had a property mgmt. company that oversw 1600 units

–        Personal portfolio of over $20MM in property

–        LA Operations Manager at The Boutique Real Estate Group located in Corona Del Mar, California

–        Got his license while in high school and was selling homes before graduating

–        Say hi to him at http://www.aaronwoodman.com

Subscribe in iTunes and Stitcher so you don’t miss an episode!

 

Sponsored by: Door Devil – visit  http://www.doordevil.com  and enter “bestever” to get an exclusive 20% discount on your purchase.

Best Ever Show Real Estate Advice

JF63: Revealing Five Profitable Exit Strategies for Note Buying  

Note buying. Buying notes. And more note buying…you want to hear from a note buying expert? Listen to today’s Best Ever guest as he shares how to do the due diligence on note buying and the reveals five exit strategies for note buying.

Tweetable quote:

 [spp-tweet “A discounted note today saves the bank money tomorrow.”]

Val Sotir’s real estate background:

–        Founder of Watermark Capital Partners (http://www.watermarkcapitalfund.com/)

–        In 2009 he was featured on the cover of Forbes magazine as one of the mortgage survivors on Wall Street

–        10 years of experience as a stock broker

Subscribe in iTunes and Stitcher so you don’t miss an episode!

 Sponsored by: Door Devil – visit  http://www.doordevil.com  and enter “bestever” to get an exclusive 20% discount on your purchase.

Best Ever Show Real Estate Advice

JF38: Don’t You Dare Lose Control

Mark Cuban says he isn’t a glass hall full or half empty guy. Instead, he wants to be the guy pouring the glass. Today’s Best Ever guest shares the same philosophy. Jason Hartman talks about the importance of maintaining control and when it makes sense to relinquish the control.

[spp-tweet “Concentration creates wealth and diversification perpetuates wealth.”]

Tune in to listen to his Best Real Estate Investing Advice Ever!

Jason Hartman’s real estate background:

–        Involved in thousands of real estate transactions

–        Owned income properties in 11 states and 17 cities

–        Host of the popular Creating Wealth Show

–        Developing 71 homes in Kansas City

–        Visit him at http://www.jasonhartman.com/podcast

Subscribe in iTunes and Stitcher so you don’t miss an episode!

 Sponsored by: Door Devil – visit http://www.doordevil.comand enter “bestever” to get an exclusive 20% discount on your purchase.

Joe Fairless Best Ever Real Estate Investing Advice banner

JF31: Scale the Top of the Real Estate Mountain by Learning This One Skill

What if, instead of specializing on a particular niche in real estate investing, you raised money for the deals and partnered with experienced real estate investors who actually manage and execute the deals?

Today’s Best Ever guest considers himself a money manager.  He believes raising and organizing money is the top of the real estate mountain and thinks other investors should learn the skillset. I agree.

Tune in to listen to his Best Real Estate Investing Advice Ever!

Bryan Hancock’s real estate background:

– Currently has over 40 development projects in Austin, Texas

– His funds have raised more than $13,000,000 for real estate development in Austin, Texas over last 2 years

– Plans to raise $25,000,000 in the next year

– Founder of Inner 10 Capital (http://www.inner10capital.com/)

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Sponsored by: Door Devil – visit www.doordevil.com and enter “bestever” to get an exclusive 20% discount on your purchase.

Joe Fairless Best Ever Real Estate Investing Advice banner

JF 12 : Continually Evolve Your Approach…or Become Extinct

Ankit Duggal has successfully invested and exited in over $50,000,000 worth of real estate assets since 2008. He focuses on multifamily deals and tax liens in the Northern New Jersey market and discusses with us the importance of maintaining your focus on what you know while evolving how you make the deals happen.

Ankit’s real estate background:

  • A wide variety of experiences from hard money lender to brokering deals to deal syndication
  • His company Real Estate Renaissance Group (www.rernj.com) has deployed over $90,000,000 into investments

Subscribe on iTunes so you don’t miss an episode.

Listen to the show to hear his Best Real Estate Investing Advice Ever!