JF2026 : Analyzing Storage Properties With John Manes

John is the CEO and Co-Owner of Pinnacle Storage Properties and Pinnacle Storage Managers. John gives an example of how he looks at a deal and determines if it’s worth his time and money. His goal is to buy a storage property that can run without the necessity of him being there. You will learn the formula John uses to evaluate each property he finds before making an offer. 

 

John Manes Real Estate Background:

  • CEO and co-owner of Pinnacle Storage Properties and Pinnacle Storage Managers
  • Has been involved in self-storage since 2005, has raised over $35 million in private equity to build a $100M+ portfolio
  • Based in Houston, TX
  • Say hi to him at Pinnaclestorageproperties.com 

 

Best Ever Tweet:

“Can you be successful? Yea, but you’ll trip over yourself doing it and your going to make mistakes that might be very costly” – John Manes


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, John Manes. How are you doing, John?

John Manes: Doing great, Joe. How have you been?

Joe Fairless: I’m doing well as well, and I’m glad to hear you’re doing great. A little bit about John – he’s the CEO and co-owner of Pinnacle Storage Properties and Pinnacle Storage Managers. He’s been involved in self-storage since 2005, has raised over 35 million in private equity to build a 100 million plus portfolio. Based in Houston, Texas. With that being said, John, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

John Manes: Sure. I started my career in retail, spent 17 years working for people like the Walmarts and Kmarts of the world. Got burned out on that, and applied to a job with self-storage as a district manager, with this little tiny storage company called Uncle Bob’s self-storage, the fourth largest self-storage company in the United States, and who are now Life Storage.

Ended up doing so well they promoted me to regional vice-president. I started with them in ’05, got promoted in ’08, and from there I went on to be the COO of a privately-held self-storage company here in Houston, that had 55 self-storage properties. I did that for about five years. Four years ago I went out on my own, create Pinnacle Storage Properties, and currently have 20 properties under ownership, two that we’re raising money on right now, and we’re getting ready to partner on eight others.

We have ground-up development on top of that around Texas, and a conversion deal in Temple, Texas. So by April we’ll be 32 properties.

Joe Fairless: Wow. The conversion deal – what are you doing with that?

John Manes: So we’re buying a 25,000 sqft. single-span building that used to be a youth sport building. We’re putting a mezzanine in it and an elevator for two stories, so it’ll be a 50,000 sqft. footprint right off the bat. It comes with four acres of land, it’s right on I-35 at the exit, in Temple, Texas, just north of Austin.

We were brought that deal off-market. It’s under contract – the building and the land – for $18/sqft. So we can’t build it for less than $35/sqft. It’s one of those ones that you find every now and again, and it was brought to us by another storage operator that was able to do the conversion, but not raise the equity or be able to sign on the debt, because it’s such a large project… So we partnered with him, and here we go. We’re already in the process of permitting and everything like that right now.

Joe Fairless: The youth sport building, from the ones I can think of, I wouldn’t think that a conversion would be too much to do, because a lot of times they’re just boxes with some dividers, and maybe some nets and stuff. Was it tough to do? I know the other operator was involved on that more so than you, but  do you know the details?

John Manes: So we haven’t started construction yet. We’ll probably start construction in the next 30 days… But to your point, it is a single-span building, which means there’s no pile-on posts in the middle. It’s just one big, huge, open room. The challenge to that is we’ve gotta put a second floor in the middle of it… So you will end up with those posts and everything on the first floor. But we’ve got some great construction people that we’ve dealt with for the last ten years, that have done all that kind of stuff. So from that standpoint, it’s a matter of getting the right engineer, the right architect, and then getting the right construction guys, put all them in place and let them do their magic. Rely on the people that know what the hell they’re doing, right?

Joe Fairless: Yup.

John Manes: So the painful part of that is going through rezoning and permitting and things like that, because you’ve gotta get it switched to be storage zoning versus an operating business like a sport athletic center would be.

Joe Fairless: In this case, when the operator came to you all and said “Hey, I have this opportunity. Here’s what I need”, what are the first five or so questions that you asked the operator, to just quickly assess if you should have more conversation about  it?

John Manes: That’s a great question, because we do some creative things on partnerships, and we get approached a lot on these types of projects… And mainly the reason people approach us is because they want somebody to help them raise equity. So to me, I always say “If you’re just looking for me to raise equity, I’m gonna raise  equity on my own deals.” So if you’re looking to operate it afterwards, or you’re looking to just put non-recourse debt on it with no risk on debt…

They always say there’s four components to a deal – you find the deal, you raise the equity on the deal, you sign on the debt, and then you operate the deal after it’s done. If you’re looking for me to just raise equity on the deal, it just doesn’t have much interest to me, because I can do that for my own deals, and I have 100% of the deal.

So the questions I ask, most importantly, is what are their needs? What are you looking for? What do you need help with? And I know you’ve been doing these for a long time, and you’ve probably had storage people on your podcast, but the reality is not everybody knows how to run and operate storage like they would in single-family or multifamily environments.

So they come to us for those needs. If I ask them the question of what they need and they need help operating it and they need help raising the money, then I perk up a little bit more. So I try to find out what their needs are. Because we’re a full-service shop, right? One of my business partners, Eric, handles all of our construction-related stuff, and he’s navigated the cities probably 15 times already… So he’s got those reps that have been painful to other people for the first go-around. He knows how to navigate those. So if they need help with construction, that gives us an idea. If they need help with raising money, that gives us an idea; or if they need help signing on debt, or if they need help managing it when it all said and done… Those kinds of things – that’s really when I perk up.

Joe Fairless: That’s helpful to know. So that’s from a partnership standpoint. What about from the deal standpoint? What are some main questions that you’ll initially ask or information you’ll initially ask just to get a sense of the opportunity, or if there is not an opportunity?

John Manes: I ask the basics – what do they have it under contract for, how many square feet is it… You asked earlier what is our specialty – our specialty is buying under-managed, under-enhanced, under-expanded self-storage property. So we buy the mom and pop. That’s what we’re known for. We’re not known for ground-up development, we’re not known for conversions, things like that. We’re known for fixing the mom and pop up, and running it better, and adding value that way.

So my questions generally revolve around “How many square feet is it? Is there room for expansion? What type of sales volume are they doing on a monthly basis? Why type of ancillary income do they do?” All the basics to see — because we’ve underwritten 350 self-storage properties in the last 14 months, so we can look at a deal and do the math in our head to find out whether that’s a good deal or not… So by asking those basic questions, we’re not class A cashflow buyers that have a self-storage property at the corner of I-10 and 45 in Houston. That’s not our bread and butter.

So when I ask the basic questions, “Where is it at? How big is it? What’s it doing per month? Is there room for expansion? Who owns it?”, those are all the basic questions that I ask right out of the box. On the conversion deal, I wanted to know how many square feet it is, how much land comes with it, what’s the potential for doing expansions; then if we do expansions, do we have to have detention, do we have to put a detention pond it, which eats up an acre, an acre and a half of your land…  All the things that allow you to know whether the purchase price equals the amount of revenue you can create.

Joe Fairless: Okay. For the detention pond, when would you not need one, versus need one? Generally.

John Manes: We focus on secondary, suburban, and some tertiary markets. So because of that — I live in Katy, Texas, which is a suburb of Houston. Almost everything around here is going to be required to have a detention pond to it, because of all the flooding from Hurricane Harvey, and things like that… So they want you to hold back as much water under your property as you can, for a temporary amount of time, so it doesn’t flood your neighbor’s property.

So when you’re dealing with suburban markets, chances are you’re gonna have to have some type of detention. When you get into the secondary markets, it becomes a little looser, and it’s not 100% of the time that you need detention… But in those areas, they might want you to have a fire hydrant on your property instead of detention. So if you have a fire, they can put it out, things like that. But then when you get into the tertiary type of markets, there’s so much–

Joe Fairless: Wild West?

John Manes: Yeah. There’s a lot less regulation. But everything’s relative. Inner city environments, urban core, you’re getting $1,50-$2 per square foot on rental rates, but you have a lot heavier cost in detention and things like that. Then when you get to suburban areas, you’re getting $1,10-$1,20 per square foot, and you’ve got a little bit less. You go to secondary markets, you’re getting a dollar, and you have less… And then you get out to tertiary markets – you’re getting $0.75, but it’s kind of a free for all. But to go build out there, it’s harder to make your numbers work, because you’ve still got the same building costs… So this is what you do downtown, urban market. Your buildings will cost you the same amount of money.

So it’s all relative to how you buy, how  you build, how you expand, but it all plays around what the zoning and the cities will allow you to do or not allow you to do.

Joe Fairless: When you’re initially qualifying a deal and you said you can do the math in your head, if  it’s a good deal or not and just run some rough numbers by asking those questions about what’s it under contract for, square footage, room for expansion, monthly sales volume, other income… Would you just run through an example? You can make it up, or a real one, and I would love to hear the thoughts that are going on when you’re thinking about “Hey, here are the numbers. It does work/doesn’t work based on this.”

John Manes: Okay, but I’m warning you, Joe, you’re getting inside of [unintelligible [00:12:31].23]

Joe Fairless: [laughs] Well, as long as we can exit out of it… We’ll exit out of it quickly thereafter.

John Manes: [laughs] So to me it’s pretty easy… In storage I’m gonna use $20,000/month, which is $240,000/year. But how I equate it in my head, pretty easy, and it’s not a perfect math, is if you’re doing $20,000/month, then you’re looking at a property that’s doing $20,000/month, you’re gonna pay around two million dollars for that property.

Joe Fairless: Why?

John Manes: I’ll just use basic math – you have 240k a year, your expense ratio on a small property like that is typically around 50%. 240k divided by two is 120k. If you divide that by a 6% cap, it’s two million dollars.

Joe Fairless: Okay.

John Manes: So basic math on a 20k a month – there’s not ten months in a year, so it doesn’t equate perfectly to two million dollars, but it does equate to a 6% cap. And then secondary, suburban type of markets, like a Katy, Texas, you’re sitting around a 6% cap. Now, if I’m looking at a tertiary market that has a population of 10k people, it might be a 1,8 million dollar buy on that 20k/month, because it’s a 7% cap. So what I do is I start with — if it’s doing 20k, the purchase price should be around two million. If it’s doing 10k, your purchase price should be around 750k. So when you go down in monthly sales volume or revenue, the smaller the number gets below 20k. Above 20k, when you get to 30k, your purchase price is gonna be about a 3.3 million dollar. And the reason is because your expense ratios in storage stay the same, whether you have 50k/month or whether you have 20k/month; they’re relatively the same.

We buy off a cashflow, so because of that, when you’re doing 30k/month it’s not a 50% expense ratio, it’s 42% expense ratio. So because of that, you’re paying more for the property because it has more cashflow that goes along with it, and you’re trying to stay about the same.

So if you come to me and you go “Hey, I’ve got this property, it’s in Tyler  TX” and I go “How big is it?”, you go “It’s 40k sqft.” I go “What are they doing?”, you go “They’re doing 33k/month”. I go “Okay. Ancillary income?” You go, “No, they’re not doing any ancillary income.” U-Haul? No. They don’t sell, boxes, insurance? Nope. I go “Alright, so let me guess… You have that property under contract for 3.5 million dollars?” and they go “No, I have it under contract for 4.2.” I go “Well, you’re paying too much.” Just like that.

Joe Fairless: Yup.

John Manes: So to me it’s an equal balance inside my head. You said you wanna get in my head.

Joe Fairless: Yeah. And I reserve the right to exit out whenever I want… [laughter] But did I heard you right, that the expense ratio in storage stays the same, regardless of how many units you have?

John Manes: That’s correct.

Joe Fairless: So if I buy a 100-unit versus a 1,500-unit, the expense ratio is gonna stay about the same?

John Manes: Yes and no. If you brought me a 100-unit property that did not have any land for expansion, that was doing $10,000/month, I would not buy that property. And the reason I would not buy that property is I do not wanna buy a job. So you can get an expense ratio in that property of 25% or 30%. You’re the one answering the phone, you’re the one meeting the customer out there, renting this space, and showing this space and so on, and you have no payroll. And then you have no website, you have no marketing… Right? So all of that expense ratio gets driven down.

But if I’m going to buy that 100-space property and it comes with 3 acres of land, and I can add another 40,000 sqft. to it, I’m going to spend 50k/year in payroll, whether it’s 400 spaces, or… I’ve got a property in Nacogdoches that’s 1,000 spaces, and we run that property with 2,5 people, versus 1,5 people. So we spend about 85k-90kin payroll in that store, versus a 400-space property that has 1,5 people to it and they have 50k work of payroll. So everything is relative, and there is a point that you have to add labor to it, or take away labor from it…

But if you’re looking at running and buying a self-storage property that is an investment asset, like most of your listeners are looking for, then the expense is relatively gonna be the same from a 250-space property all the way up to an 800-space property, which is the meat and potatoes of the self-storage industry.

Joe Fairless: Based on your experience in self-storage, for someone who is looking to get started in self-storage, what is your best advice ever for them?

John Manes: My best advice – and I give this all the time, because we get a lot of people that wanna get into the industry… My best advice to them is find somebody that already knows how to operate these things. I don’t think the operators of self-storage get enough credit against the value-add of these assets.

Let’s say that somebody in your audience that’s listening right now is a finance guy, or a broker that can find these things, or something. Go out and find somebody — when I meet people one-on-one, I say “It doesn’t have to be us, but go find somebody that knows how to operate these things…”, because that’ll make you more money, and it’ll make you more money faster. Can you be successful? Yeah. But you’ll trip over yourself doing it, and you’re gonna make some mistakes that might be pretty costly.

Joe Fairless: What are some common mistakes that someone with that lack of experience would make, that an experienced operator wouldn’t?

John Manes: Hiring the wrong website people. A lot of these guys wanna just go to GoDaddy, create their own website, it doesn’t interact with your software, there’s no prices online… Things like that. And Google doesn’t give you any credit for not having any content, or anything. Believe it or not, 80% of our customers touch us online some way, whether it’s they look at stuff on their phone, and then drive to our store, or they look at prices online on their PC or  on their telephone… They touch us somehow online. And a lot of them try to be cheap, because they’re doing 10k/month and they don’t wanna spend $300/month on having an effective website. But your effective website drives demand to your property. The more demand you have, the higher your prices can be, and eventually it pays for the $300.

Joe Fairless: What’s a URL to one of your websites?

John Manes: Mystorageplus.com.  It’s a many aggregator type of site that has [unintelligible [00:20:24].17]

Joe Fairless: Okay, cool. We’re gonna do a lightning round where I’m gonna ask you some quick-hitting questions. Are you ready for the Best Ever Lightning Round?

John Manes: Hit me!

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

Break: [00:20:40].03] to [00:21:30].27]

Joe Fairless: Alright, John, what deal have you lost the most amount of money on?

John Manes: The good news is I’ve not lost any money on any deal, so I can’t answer that. Have some of them gone sideways? Sure. But we’ve not lost money on it, and that’s the beauty of storage. It tends to be recession-resistant. We had a project that we bought 20,000 sqft, we expanded 63,000 sqft, and the construction company was eight months behind delivery on the product. So we were paying the mortgage rate months without having cashflow, we ended up in a lawsuit with them… That’s the bad news.

The good news is we were able to restructure that deal, get an extension of our interest-only payment on our loan, we borrowed an extra $150,000 from our investors in the form of a loan to be able to support the interest-only payment for an extended period of time, and now we’re back on track.

Time healed that wound, and so did increase in occupancy. We didn’t lose money on it, we just didn’t make as much money as we thought.

Joe Fairless: What was the result of the lawsuit?

John Manes: We settled.

Joe Fairless: And knowing what you know now about that experience, when presented a similar situation in the future, how would you approach it a little bit differently?

John Manes: Honestly, I don’t know that I would have approached it differently. I’ve been in a relationship with the contractor for eight years, so… The obstacle became that the construction company grew too fast and took on too many projects at one time, and ours was one of them. So I personally could have never predicted that, particularly knowing the individuals involved.

So doing it differently – I’d have to say pick a different contractor, but how do you know that, particularly when they’ve done a tremendous amount of work for you in the past, right?

Joe Fairless: Yeah, that’s a tough one to identify. Best ever way you like to give back to the community?

John Manes: I have a servant’s mentality. Right now I’m in the process of creating a mastermind group of professional athletes. The reason that we’re doing that is because like myself, most of these guys grew up poor, and all of a sudden they have money, and they just don’t know how to handle it or what to do with it. I like to educate people on how money works, from the simplest form of how to compound your money, to how to create a budget, and all those different things that people like Dave Ramsey teaches.

I love to give back in the way of the knowledge that people have given my and us as a company. We teach our store manager team how to go buy a self-storage property if they want to. So we try to take care of the people that take care of us, at the same time as the people that just don’t know. You hear a lot of people say “If I knew 20 years ago what I know now…” Okay, well, go teach somebody that.

Joe Fairless: Yup.

John Manes: That’s why I volunteer a lot for these podcasts. I have rooms full of people that I teach, not only storage, but basic financial principles around credit scores, and how credit works, and all that kind of stuff. I love giving back through teaching, and the knowledge that we’ve been blessed to be exposed to.

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

John Manes: They can call me – 210 818 1496. They can go to PinnacleStorageProperties.com, or they can email me at john [at] johnmanes.com. They can go to my YouTube channel and watch a bunch of my YouTube videos that talks about a lot of this stuff, why storage is a good investment, and all the stories about how me and my partners grew up with nothing, and have created something. All that is on YouTube.

Joe Fairless: Well, John, thank you for being on the show, talking about self-storage, and in particular talking about a deal that you’re working on, and also how you qualified that initially… And then taking a step back, how you qualify opportunities, and the questions that you ask. And then I’m officially jumping out of your head… [laughter] So you can be one with yourself, and I can go about my way, too. But I really did appreciate your conversation, and I’m grateful that we talked.

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

John Manes: Thanks, Joe. I appreciate it, buddy.

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JF2019: Building back your business with Land With Adam Southey

Adam Southey lost it all in the 2008 market crash and in this episode, he explains how he was able to come back strong from a big setback that took him from full-time investor to W2 employee back to full-time real estate investor all with a sole focus on his new niche, raw land.

Adam Southey Real Estate Background:

  • Raw land investor
  • Invests in raw land and consults with clients to help them do the same
  • Host of the podcast Casual Fridays REI
  • Based in Fort Worth, TX
  • Say hi to him at http://www.casualfridaysrei.com/

Best Ever Tweet:

“Trust but verify.” – Adam Southey


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. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Adam Southey. How are you doing, Adam?

Adam Southey: Hey! I’m doing so good, thank you so much for having me.

Joe Fairless: Well, I’m glad to hear it, and it’s my pleasure. A little bit more about Adam – he’s a raw land investor; he invests in raw land and consults with clients to help them do the same. Host of the podcast Casual Fridays REI. I love that podcast name; it just makes me want to enjoy myself and listen to the podcast, just really relaxing, versus something like Best Real Estate Investing Advice Ever… Right? Casual Fridays just welcomes me into it.

Adam Southey: Yeah…  You know, every day is a casual Friday when you’re an investor.

Joe Fairless: There you go… That’s true. Based in Fort Worth, Texas. With that being said, Adam, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Adam Southey: Yeah, no problem. I’ve been in real estate for probably 15 years now, and I’ve done just about everything. I got started as a new home builder, and became a realtor, and a wholesaler, a rehabber, a landlord, I’ve done mobile homes – you name it, I’ve done it. Then the market slowed down back in 2008-2009, and essentially because I was so leveraged, I went broke. Just like a lot of people, I ended up having to go get a job, and I ended up on the railroad, I was a conductor.

The whole time, all I was trying to do is rebuild everything I had and get back into real estate. I was listening to a podcast, the Side Hustle Podcast, and some guy was coming on, talking about buying and selling land, and how he was doing it for a couple hundred bucks an acre… And that hooked me, because that’s essentially all the money I had right then.

So I got involved, and my very first marketing blitz I bought three 2,5-acre parcels for $250/piece, and I sold them for $1,000/piece, and that was it. I was hooked. I went all-in at that point. That was 3,5 years ago, and we’ve scaled up the number of properties, the price range of properties, and like you said, we built a podcast where we just kind of talked about our journey as land investors… And through all that, other people reached out, and we started helping others. That’s where we’re at today.

I have a partner on the podcast, Justin Silvia. We have our land businesses, and we have the podcast, where we like to help others out.

Joe Fairless: Will you elaborate on how you went broke?

Adam Southey: Yeah… A bunch of bad decisions, really. I was  a realtor, a house flipper. As a realtor, basically I was living dollar-to-dollar. If I went out and made 10k, 15k, I spent it. And then I’ve had rehabbed properties that I had just over-leveraged, and couldn’t sell them for what I initially thought I could… So when it came time to sell, I didn’t make what I needed to, and that put me on the job as a railroader.

Joe Fairless: Okay… And why in the world would you wanna get back into real estate after al that?

Adam Southey: That is a good question… I don’t know, but I wanted to do real estate all through college. I think I came up and gone through college around that time when those HDTV shows became really popular and made it seem really cool… I thought “That could be me. I could be out there flipping houses…” So I gave it a shot, and it went well at first, until it didn’t… And then luckily, through it all, I found land, and it’s just been the best thing I’ve done since.

Joe Fairless: Okay. Well, let’s talk about land now… Prior to us recording this, I rarely talked to investors on this show about raw land, because there’s just not a whole lot of people out there – maybe there are, but my team hasn’t found them – who do raw land. YOu mentioned that  you saw I’ve interviewed a couple people and you said “There’s a similar approach to what we do, but we all do it in slightly different ways.” Can you first talk about your overall approach for how you buy it, and then mention your differentiators for how you’re unique?

Adam Southey: Yeah. So really at the core of what we’re looking for is more of an opportunity than per se some people wanna look just for back-tax properties, or they’ve got websites built where people come to them… What we do is focus on a county where there’s plenty of raw land, and then instead of just picking out certain people, we will send blind offers to everyone in the entire county who owns land. And it’s an actual offer, it tells them exactly how much money we’ll spend for it on their land, and they can sign it, mail it back, they can call us and talk to us about it… But regardless, that’s what we do.

So as we’ve done this over the years, the price range has also increased. Like I said earlier, my first properties were 2,5-acre parcels, for $250/acre. They were way out in the desert, I didn’t know why anyone would ever wanna buy them, but they were so cheap I bought them anyway, and just trusted the process. And as we’ve gone over the years, we’ve scaled up to what we now kind of refer to as a bass boat property, which is that price range that a bass boat or a Harley or something recreational would be. Our typical deal now would be somewhere in that 7k to 12k, and selling in the 25k to 35k range.

Joe Fairless: Okay. You  live in Fort Worth, Texas. I’m from Fort Worth, and I don’t remember a dessert being in Fort Worth… So where was the first raw land that you bought?

Adam Southey: Yeah, so that’s the great thing about this industry – you can do it anywhere;  you don’t have to buy near your home. I’m in Fort Worth, my first properties were in North-West Arizona. I currently own land in about seven different states, and never been to any of it, don’t plan on it.

Joe Fairless: You’d never bought land before… How did you end up looking at properties there?

Adam Southey: Everything’s online. Everything you need to buy land is online. You have to have a GIS mapping software, and those are readily available. You’ve got like ParcelFact, and MapQuest… You’ve got Google Earth, Google Maps, the counties sometimes have really good websites where you can get on their GIS, and do research on taxes, make sure everything’s current, make sure the right owners are there… You have everything you need to make your decisions based on that without physically going to see it.

Now, if we’re gonna spend a lot of money, 15k, 20k, 30k or above, we would send someone out there, but for the most part we’re not in that price range, so we just go with what we have.

Joe Fairless: Yeah, but Arizona – how did you pick Arizona as an area to take a look at?

Adam Southey: Yeah, that’s a good question. One of the things that I look for when I’m doing it is I just look for other investors. I knew there was activity going on in Arizona just from my research, and I just narrowed in on a property there. At the time, I didn’t really know what I was doing. I just saw other investors were in that North-West part of Arizona, so I figured if it’s working for them, maybe I should give it a try too, and that’s what I did. I ended up mailing out there.

Since then, I’ve put a little bit more thought into it, and we kind of know what we’re doing… But basically, every time I do a mailer now, for me personally, the first thing I always do is go “Man, where do I wanna own some land right now?” The last marketing I did was in Oregon. I just thought “Oregon is gonna be a cool spot to go.” So we get online, we go to Lands of America, or LandWatch.com…

Joe Fairless: That was the last one?

Adam Southey: Yeah, the last one was in Oregon.

Joe Fairless: I thought you said you’d put more thought into it. [laughs]

Adam Southey: Yeah, so it gets better.

Joe Fairless: Is the thought “Hey, where do I wanna own land?” [laughs]

Adam Southey: Yeah, so once we pick the state, then the thought comes in… We start looking for “Are there other investors there? Is it affordable?” So for me, I like to look for that market value of being right around $1,000. You can go on these land-specific websites like Lands of America and you can put Oregon in, as an example, and you can see everything that’s for sale in that state.

Then you start looking for the market value, where 20 acres is selling for $20,000. You’ll find certain counties where that happens, and then you’ll start doing a little bit more research. Are there other investors there? Is the pricing the same throughout the entire county? Because some of these counties will have big cities in it, so the price per acre will be one price in one part of the county, and cheaper in the other… And the way that we do it is we mail the whole county. So we wanna make sure the pricing is similar throughout.

And we wanna make sure there’s good attributes… Like, is it a good county? Are there mountains there? Are there lakes there? Is there hunting there? Are the things that would draw a buyer there? And you can really tell a lot of that from these land websites. That’s kind of where once we see all that stuff in one area, that’s where we’ll mail to.

Joe Fairless: Well, I’ve never done this, so I don’t claim to know much at all about buying raw land… One thing I’ve heard from conversations with other raw land investors is your best buyer is the neighbor of the property… Because they’ll want to buy the land right next to where they currently live. But when you said one of the first questions you ask is “Are other investors there?”, why is that relevant if other investors aren’t the number one buyer? …assuming that is a true statement.

Adam Southey: Yeah, for me it’s relevant that other investors are there, because you wanna know if the county works. Is there people actively buying and selling land there? What a new investor does is they get this idea into their head that they’re gonna go find the golden nugget. They’re gonna go to a county where no one’s working, and they’re gonna be the only investor there that makes all the money. Well, the problem with that is there’s a reason why it’s not working. And while you might find some good deals, you can go to counties where you know it’s being worked, and you can up your chances of success.

For example, Costilla County, Colorado is probably one of the most worked counties in America. It seems like every new investor goes to Costilla County, but they’re all buying land, and that’s because there’s so much of it. I’ve heard there’s 26,000 5-acre properties in Costilla County, Colorado. That’s more than enough to go around for anyone if they just put in the time to market out there.

Joe Fairless: Okay. What’s been an interesting deal that you can tell us a story about?

Adam Southey: Yeah, so I’ve got a good one and I’ve got a bad one I can touch on…

Joe Fairless: Let’s talk about the bad one first.

Adam Southey: Sure. I got this killer deal in South-East Oklahoma. It was 20 acres. It was a beautiful property. I got it under contract for $16,500, and it was gonna easily sell for 60k. I probably could have put it up on the market  for 100k and sat on it for 2-3 months and gotten it… But I was buying it from an only child, whose parents had passed away. She was an older lady, she had been paying the taxes for 10-15 years… Only child, but there was no will, so the property wasn’t in her name. She said if I could help her get it into her name, she’d sell it to me for what I offered her.

So we got through this whole process of getting a quiet title done, hiring attorneys, going in front of the judge… It takes about six months. She goes in front of the judge, says that she’s an only child, she does all this, and at the end of it the order goes through, it gets transferred in her name, she goes to the attorney’s office, I transfer the money, they close the deal, and two days later a guy walks into the attorney’s office and says “You sold my 20 acres to some guy, from my sister, who had no right to sell it.”

So the attorney initially calls me back, he’s freakin’ out, and I’m like “She swears she’s an only child.” So we call her, she takes a friend of hers to the attorney, the friend swears up and down she’s an only child, so we kind of think that this guy is just full of it, basically… But he [unintelligible [00:11:58].17]

Joe Fairless: [laughs]

Adam Southey: So not only was she not an only child, but there was 14 brothers and sisters.

Joe Fairless: [laughs] Oh, man…

Adam Southey: And because it was a quiet title action in Oklahoma, they had a certain timeframe that they could fight this, and just have it overturned. Obviously, she said (whether she did or not) she spent the money I gave her, so now I’m basically out of my money and out of a property… But luckily enough, the 14 brothers and sisters – they came back and… Let me go back real quick – one of the best things my attorney did when he heard this, when he found out there was more brothers and sisters, is he went to all of them and told the story and got them to deed over their ownership, their portion of it to me, so I became the controlling interest.

Joe Fairless: Why would they do that?

Adam Southey: Most of them lived out of state, they didn’t care for their sister, which I can’t really figure out why…

Joe Fairless: No kidding…

Adam Southey: And even though they didn’t really talk to her, they didn’t want her to get in trouble, because she had just committed fraud.

Joe Fairless: Wow… That’s the kicker.

Adam Southey: Yeah.

Joe Fairless: Okay…

Adam Southey: So they came back and they bought it back from me for 18k. So I bought it for 16,5k and got 18k out of it. Not what I would consider a great success. It was definitely a huge learning opportunity, but I definitely don’t want to do that again.

Joe Fairless: Well, besides not doing deals with that one woman, what are some lessons that you’ve taken from that and applied to your business?

Adam Southey: Trust by verify. The way that we knew that guy was true was that he — this is what I thought I had hired the attorney for, because I was brand new to this and I didn’t really know, but… We just started doing Google searches, and going deeper, and we found out that yeah, that was true; we found an obituary from way back, that told the whole story.

Also, instead of closing through the attorney, I would have gone through a title company, and gotten title insurance, but because I had hired the attorney to do the whole thing, I thought it was just above board; I thought it was legit… So now any property that we buy above a certain price range is always through title.

Joe Fairless: What’s that price range?

Adam Southey: 5k or higher.

Joe Fairless: Okay.

Adam Southey: That was a good one to learn from.

Joe Fairless: Yeah, it’s a fun one. What about the other one that you mentioned?

Adam Southey: That was a good one. That was in North-East Nevada… So like I said, we mail to an entire county when we do our mailing. I sent out a bunch of offers… I had previously had some people looking for land, around 80 acres in size, but didn’t have anything available… And I mailed to this entire county, and without knowing, two people both accepted my offer, and each person had a 40-acre and they were right next to each other.

Joe Fairless: Oh, my…

Adam Southey: So it was just pure luck that the two 40-acres right next to each other, with access, 100 feet off the highway… And now I’ve got an 80-acre where probably 45 acres or so is flat, and then the rest of it is just mountain. So the person that bought it, they can sit back on the side of this mountain and look into the flat part, or they can somehow hide in the flat part, or do whatever they need to do… But I bought each 40 for $4,500, and I turned around and sold it for 36k.

Joe Fairless: Alright, so you were in it for 9k plus costs, and sold it for 36k… Which – 80 acres for 36k… [laughs]

Adam Southey: That’s still a great deal, right?

Joe Fairless: I think it’s still a great deal, but I know that’s an ignorant statement, because it’s all based on location-location-location… But it’s still sticker shock to me, talking about these price points with this amount of acreage.

Adam Southey: I get it, too… Especially when you’re trying to see the lower-end range. We have people we work with that go buy land for $100 every day. We have one client who’s done 400 deals where he bought them for $100 and flipped them for $500.

Joe Fairless: Where’s the 80 acres, by the way?

Adam Southey: That was in North-East Nevada, Elko county.

Joe Fairless: Okay. And what would disqualify an area? So “Hey, I wanna buy in Oregon.” Okay… Now I look at the areas. What would disqualify them?

Adam Southey: Like I said, if there’s no activity going on, but also there’s nothing attractive there. A lot of the properties we look for have mountains, or they’re good hunting areas, or there’s lakes nearby… It’s affordable, people wanna get out there… Maybe there’s a tiny home community in the area, or it’s a place where people like to get outside and go hike…

There’s a big area in Colorado –  Alamosa, Costilla counties, where there’s big 14,000-foot mountains, where it’s real popular to get out and hike during the day, and then go back to your tiny home at night… So you can buy five-acre parcels for cheap and sell them for $5,000-$6,000, and you’ve got people lining up to buy them, because a) it’s super-affordable for them, but then they can live that kind of free lifestyle.

Joe Fairless: That’s interesting. I love talking about this stuff, because I’m learning a whole new world, and it’s fun to do… Based on your  experience as a real estate investor, what’s your best real estate investing advice ever?

Adam Southey: Don’t give up. Not just investing, but any industry can be difficult; times get tough, or it gets hard… And a  lot of people wanna make their first million dollars, or flip their big deal in the first 2-3 months, and when it doesn’t happen, they give up. But the dream is to be an investor where you’ve got cashflow, or you’re doing big properties. If it takes you a year or two years, who cares? As long as you get there and you keep working and be persistent; eventually, it will happen, as long as you don’t quit.

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

Adam Southey: Yeah, let’s do it.

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

Break: [00:17:22].24] to [00:18:10].11]

Joe Fairless: Best ever resource you use right now to do what you do?

Adam Southey: MapQuest. It’s an online GIS. You can go on and put in a property APN and the county, and you can see everything you need to see about the piece of land. It will draw a line around it, you can make maps to send out for marketing… It will essentially tell you anything you need to know.

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

Adam Southey: Hm… I think probably not fully checking everything. When you’re new, there’s so many due diligence points that you can forget. You may check ownership, but you’ll forget to check back-taxes. Or you’ll forget to send in a certain document when you register… That’s a pretty common one, because every state you just don’t need to send the deed in; some of them have excess paperwork, like an affidavit or property value or something. It’s easy to forget those as you learn and grow. Those aren’t huge deals; after you learn and grow, you’re good at them.

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

Adam Southey: I’m really involved with my CrossFit gym, and just like every crossfitter, we always think of a way to get together… So several times throughout the year we do big things for charity, like [unintelligible [00:19:02].02] We raise money for neverthirst. It’s a company where they go out and they build clean drinking water for people that don’t have it. Or we’ve done Barbells for Boobs – that supports breast cancer. Anything we can do to get together and help out.

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

Adam Southey: Casual Fridays REI is our podcast. Monday, Wednesday, Friday. Me and my partner, Justin Silvia, we talk about our journey, we talk about things that come up in our business, and try and help everyone out.

Joe Fairless: Adam, thanks so much for being on the show, talking about raw land, your approach to finding areas, your approach to buying, and then the two entertaining stories. Trust but verify, for sure, Google searches… But really, even with the Google search that’s a little flimsy still… But the title insurance – that’s where it’s pretty rock-solid.

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

Adam Southey: Alright, thanks so much.

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Brandon Silveira

JF1977: How to invest in farmland without huge amounts of capital with Brandon Silveira

Fourth-generation farmer, Brandon Silveira, could never see himself venturing too far off from his roots. He focuses on acquiring a variety of farmland, especially through his crowd-funding website, FarmFundr. Listen to this episode to hear Brandon explain everything you need to know about passively investing in farmland. 

Brandon Silveira Real Estate Background:

  • Fourth-generation farmer and real estate investor who has bought and sold millions in real estate
  • Currently manages over $100 million in assets
  • Specialty is in farm management, land acquisition and a variety of farm and land financing and strategies
  • His passion is to bridge the gap between the farmland and investors
  • Based in Fresno, CA
  • Say hi to him at https://www.farmfundr.com/ 

 

Best Ever Tweet:

“You expect a certain amount of return on your capital – say 15% – you may not hit that number, you may only do 2%, you may only do 3%, but if you’re doing your job right you should never lose money on that deal.” – Brandon Silveira


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. 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 fluffy stuff. With us today,  Brandon Silvera. How are you doing, Brandon?

Brandon Silvera: I’m doing good. How are you?

Joe Fairless: I’m doing well, and looking forward to our conversation. A little bit about Brandon – he’s a fourth-generation farmer and real estate investor who has bought and sold millions in real estate, currently manages over 100 million in assets. His specialty is in farm management, land acquisition, and a variety of farm and financing strategies. His passion is to bridge the gap between farmland and investors. Based in Fresno, California. So with that being said, Brandon, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Brandon Silvera: Sure. I was born and raised in farming. Just like any farm kid, I was out here on the ranch most of my life. I went and got an agricultural degree at Cal Poly, and came back and figured I’d better do what I like and know best. So I just kept farming.

Joe Fairless: Okay. So you’ve got 100 million in assets right now. What is that comprised of?

Brandon Silvera: Mostly agricultural property. So we farm almonds, walnuts, grapes, garlic, tomatoes, cotton, corn, wheat, oats. We’ve got a variety of permanent crops as well as real crops that we own and manage.

Joe Fairless: So you own the land, and the business, which is the product that you’re farming.

Brandon Silvera: Yeah. There’s the land that we own that we grow our crops on. Then we also manage some other property where we grow crops on other land for other owners; kind of a full service type situation. I’ve been doing that for quite a while. We put together some bigger investment deals. One thing that I saw was there was a need for lower capital entry for some investors. Some of the deals that were happening were, say a $5 million farm and it’s five guys putting in a million dollars apiece. Then there’s one guy who has $100,000 but couldn’t get in on the deal. I just saw a huge need for this lower entry level to buy smaller farms and for people to get in and invest in farmland without putting up huge amounts of capital.

Joe Fairless: Okay, and that is the company that you founded.

Brandon Silvera: Yeah. I founded FarmFundr, which is a crowdfunding website, where with as little as $10,000 you can invest in a property that we have on our site, and own the land. We also manage the farm instead of leasing it back. The way that works is, we either hire a separate farm manager, or if it’s in our geographical area, we’ll hire our company to manage the farm. That way the investor sees a larger return.

Joe Fairless: Got it. Okay. So as an investor, if someone were to invest, say, as you said, as little as $10,000… Let’s say they invest $10,000 in a deal, then they’re buying a portion of– what exactly are they buying?

Brandon Silvera: For example, we have an almond orchard up right now as an offering. We have a $900,000 capital raise. For as little as $30,000, in this particular investment, you buy a portion of that orchard. That orchard is put into an LLC, and you own a portion of that LLC, and the LLC owns the almond orchard outright. That way, you can see the appreciation of that farm, and when you harvest those almonds, that profit from that crop goes back to you.

Joe Fairless: I know next to nothing on different types of crops and what they yield. I imagine — well, I do know that certain things are seasonal. So what are some products that you would farm that are more seasonal, versus others that are always generating income?

Brandon Silvera: There’s not many monthly cash flow type of commodities out there that we’re growing. There’s some alfalfa, different things that you harvest every month, but those investments really aren’t great on the scale that we’re trying to do things. Almost everything is once a year, after you harvest the crops; after the crops are sold, the payments are distributed back. It’s pretty crazy compared to the commercial world or apartments or anything like that. The returns can be great, but you just aren’t going to see that 12 months of income in every 30 days.

Joe Fairless: With alfalfa, for example, you said it doesn’t really get you to the scale that you’d like to get. Why wouldn’t it be able to?

Brandon Silvera: Here in California, land prices are pretty high. So if you’re going to buy a piece of property with a high land value – and alfalfa is a water-intensive crop, and the water is pretty expensive here as well – to go out and buy this property, and the return you’re gonna get on your investment probably wouldn’t be something that would be interesting to an investor. Now there is a lot of that crop around, but most of these are older dairy farms and whatnot that farm those types of crops.

Joe Fairless: Okay. So what are the disadvantages of going to an area with much cheaper land? Is it that you just can’t command the same price that you get in California for the product once it’s ready?

Brandon Silvera: So the Midwest, for example, with $5,000 to $8,000 an acre, you can get some good ground out there. But you’re also limited to planting soybeans, corn, very few crops. Here in California, the range of crops that we could plant is astronomical. If you have class one really good soil, we can grow stone fruit, cherries, walnuts, you name it. There’s just so many different things that we can plant, which makes it very appealing to outside investors, because you have options. Unless you’re planning a permanent orchard or vineyard, if you’re in the row crop business, if you have one commodity that isn’t doing well that year, you can switch it out and plant something different. So it’s very appealing.

Joe Fairless: As a passive investor who’s looking at your opportunities, who has not invested in this type of asset class before, what are the questions they should ask themselves when looking at a specific opportunity to qualify if it is the right opportunity for them or not?

Brandon Silvera: If you’re going to invest in California, the number one thing you’re going to want to know is  does it have water? Does it have two sources of water? Most everything, especially here in the San Joaquin Valley where we’re at, you’re going to want a groundwater source and you’re going to want a surface water source. If you don’t have both of those, I wouldn’t buy it. That’s going to be the absolute number one.

Joe Fairless: What exactly is a surface water source?

Brandon Silvera: Surface water source – we have a pretty intricate system of canals and dams here in California where you own stock or the ditch water owns a stock that owns a percentage of the water that’s held in the dam, and you have a right to use that on your crops.

Joe Fairless: Okay. So number one, make sure it has at least two sources of water.

Brandon Silvera: Yep. Then number two, you’re gonna make sure it’s good soil. Soil is very important.

Joe Fairless: How can someone analyzing this via the internet know if it’s good soil or not?

Brandon Silvera: Well, first of all, you’re going to want to see the past yield report. So if you’re buying a new piece of property, or investing in something like what we’re doing, you’re going to want to make sure that it has a history of producing what it should produce to have a good return on your investment. You can dive into it a little deeper. The USDA has soil reports that classify everything between a class one, two, or three soil. So if it’s a class one soil and you can see it on this USDA report, you know it’s pretty good there.

Joe Fairless: Okay. Is class three a deal-breaker?

Brandon Silvera: No. It’s like, if you’re going to invest in an apartment complex in an A, B, or C location. C location isn’t a deal breaker if the price is right. It’s the same concept. If you’ve got some pretty cheap dirt, and you can put a crop on there that’s going to give you a good return on investment, it may be a good investment. But you also have to look at  what’s the lifespan of that crop, and am I going to have to take that crop out? How many years can I keep it in there? Then what am I going to put in there next? It’s class three bad soil, you’re very limited. So I definitely wouldn’t say it’s a deal breaker, but you’d want to be a lot more careful.

Joe Fairless: One, does it have two sources of water? Two, is it good soil? What else should we consider? And thank you for the analogy of ABC multifamily. That helped me personally, so I appreciate that.

Brandon Silvera: Yeah. You’re going to want to make sure that whoever’s managing it or whichever farm manager is going to farm that crop is familiar and knows what they’re doing. That’s something we take pride in here at FarmFundr, that if we’re not farming it ourselves, which we’re extremely familiar with these crops, we’re going to hire the best of the best.

Joe Fairless: When you’re initially looking at a new opportunity, I imagine you ask yourselves questions number one and two. Number three, you know that you have confidence in yourself. So that’s good. Number one and number two. What are some other questions that you ask yourself when assessing an opportunity to offer up to investors?

Brandon Silvera: Basically, what’s the upside? Can we add value? Is this commodity going to return a good yearly cash flow and is it going to appreciate? One thing here in California, we’re seeing a lot of consolidation as far as farms because of water districts and their location, and I look at what’s going to happen to this property in 7 years, 10 years, 20 years, and how long is the investor going to have to hold on? How long are we going to hold on to it, and what’s the upside gonna be? For example, in almonds – almonds have a lifespan of around 20 to 25 years, and there’s a lot of workers out there that are producing great right now that have high price tags on them, but they’re at 15, 18 years old. If you’re an investor and we invest in this particular orchard for, say, $30,000 an acre, in seven years we have to pull that orchard out. What’s that ground going to be worth? Is it going to be worth 20,000 acres? Do we have to replant? There’s so many different variables that we look at to make sure that–

Joe Fairless: How do you project that? How do you determine your assumptions there?

Brandon Silvera: Due diligence. I’m finding out the varieties, I’m finding out how old these trees are, or grapes or– what the price has been, what the demand is. There’s just probably 1,000 different things you’ve got to look at to make sure that you’re investing in the right piece of property. The hold period – seven years is a lot different than 12 years in this world.

Joe Fairless: Talking about some major successes and some not so much, let’s first talk about your most profitable venture. What’s the most profitable venture you’ve done?

Brandon Silvera: Single deal or in general?

Joe Fairless: Either one. Whatever you want to talk about.

Brandon Silvera: Almonds right now are very profitable. We like almonds; I think the demand is strong.

Joe Fairless: Don’t they take a bunch of water? Am I imagining that? I thought they did.

Brandon Silvera: Well, it all depends on how you look at it. They don’t take as much water as a lot of other crops. For example, walnuts take a little bit more water, alfalfa takes tons of water, corn takes more water than almonds. Almonds take a little bit more than you would put on, say, a tomato crop or some of these other row crops, a little more than you put on a vineyard… But they got some bad press because people said, “Oh, it takes a gallon of water per nut.” Well, it’s a terrible way of looking at things, because when you put water on these crops, they’re building an entire plant. They’re building the root system, and any excess water is going down, and is being pushed back down into the aquifer. So if you use a certain amount of water, there’s a good amount of water that’s going back into the soil and going back into the aquifer as well. It’s not really a good way of–

Joe Fairless: Interesting soundbite, but not completely painting the whole picture.

Brandon Silvera: Exactly.

Joe Fairless: Thank you for that, because the press got me on that one. So thank you.

Brandon Silvera: Yeah. There’s so many other good things that these orchards are doing. Almonds, depending on how they’re farmed, they call it a zero carbon crop, where they take as much out as it’s costing us to farm these crops. That’s a whole different story, but they’re a good investment.

Joe Fairless: Let’s talk about a individual investment that didn’t go well. Which one have you lost the most amount of money on?

Brandon Silvera: Me personally, the only thing I’ve ever really regretted was I bought a condo and it was a bad investment. It wasn’t farmland. I’ve done real well in the farmland in the past. Maybe that’s because I’m more familiar. But I bought a condo one time that we had an HOA that was pretty reasonable. I think it was 300 and some; and the HOA started going up and astronomically to where I thought, “Man, there’s something wrong here. I don’t understand.” It was in a high rise building. I had bought it for an investment. I kept saying, “Man, I think this guy is going to go bankrupt. There’s too many fees on this condo owners, because the units underneath aren’t doing very well.”

Joe Fairless: You’re probably right.

Brandon Silvera: The board of HOA’s are like, “No, you don’t know what you’re talking about.” I’m like, “Okay, okay.” Well, sure enough, 18 months later, the guy claimed bankruptcy. The whole building went bankrupt. I didn’t do too well on that particular investment, to say the least.

Joe Fairless: How much did you lose? Do you remember?

Brandon Silvera: Well, I ended up hanging on to the unit and renting it out until the building was actually sold. We kept our units and whatnot. The price rebounded back to about the same price. It was exactly the same price I bought it at. But considering interest and what I was losing money for the mortgage and rent…

Joe Fairless: Plus stress.

Brandon Silvera: Yeah, I don’t even want to do the math.

Joe Fairless: We won’t make it. That’s fine. That’s fine.

Brandon Silvera: Yeah, I’d probably be very sad about it.

Joe Fairless: This is a happy show. Well, based on your experience, what is your best real estate investing advice ever?

Brandon Silvera: Honestly, “Never lose money.” That’s it. If you expect a certain amount of return on your capital, say 15%, you may not hit that number. You may only do 2%, you may only do 3%, but if you’re doing your job right, you shouldn’t lose money on that deal.

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

Brandon Silvera: Sure.

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

Break: [00:15:29]:02] to [00:16:09]:08]

Joe Fairless: Alright, you said that, “Never lose money.” So I heard that. But earlier we talked about the cycle of what you do, and you said you get money basically once a year after harvesting. So one might hear, “Don’t lose money”, but then think “Well, shoot, you’re getting one pop and hopefully the market doesn’t change over 12 months. Hopefully, some wacky stuff environmentally doesn’t change…” So it seems like it’s a riskier investment, because you’re only getting paid after harvest and you’ve got to hold your breath and cross your fingers that hope everything works out over 12 months. What would you say to that thought process?

Brandon Silvera: I’d say that it is riskier, but you have to hedge your bet. We have crop insurance and we have different things that we can do. Also, you can’t gauge a long-term investment like farmland after 12 months. It really is a long-term investment. So you may lose money in a year, but if you lose money over the life of that particular investment, it was a bad investment from the start.

Joe Fairless: How many years should one expect to invest in farmland in order to give it a fair shake?

Brandon Silvera: I wouldn’t invest any less than seven years. I think appreciation and the commodity prices need a fairly good life cycle. Anything over 12 or longer is probably a great investment.

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

Brandon Silvera: We’ve held a couple of different events strictly for our local children’s hospital. It’s probably my sweet spot right there.

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

Brandon Silvera: Go to farmfundr.com. You can also reach me anytime on email, info@farmfundr.com. Check us out on Instagram, Facebook, Twitter, LinkedIn, google us, find us. We’re out there.

Joe Fairless: Brandon, thanks for being on the show talking to us about farmland, funding, your company and your venture. I enjoyed learning about this, because I did not know much, if anything, about it prior to our conversation. So I hope you have a best ever day and we’ll talk to you soon.

Brandon Silvera: Sounds good. Thank you.

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JF1925: Investing In Legally Compliant Cannabis & Hemp Properties with Dana Wallace

This is either a first or possibly the second time we’ve had an investor on to talk to us about real estate investing, in the legal cannabis space. Dana will walk us through how she finds and vets properties, and the obstacles she has to work around in this space. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“You may have a license that you can move to a different location” – Dana Wallace

 

Dana Wallace Real Estate Background:

  • Owner of 420Estates.net, a firm that specializes in legally compliant Cannabis properties
  • she has over sixteen years of experience in the typical aspects of investment real estate sales
  • Based in San Francisco, CA
  • Say hi to her at https://www.420estates.net/
  • Best Ever Book: Code Of The Extraordinary Mind

 


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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

Theo Hicks: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m your host today, Theo Hicks, and today we will be speaking with Dana Wallace. Dana, how are you doing today?

Dana Wallace: Great, how are you?

Theo Hicks: I’m doing fantastic, thanks for asking. I’m looking forward to our conversation. It’s gonna be a fun one, I can already tell. Before we get started though, a little bit about Dana. She is the owner of 420Estates.net, which is a firm that specializes in legally-compliant cannabis properties. She has over 16 years of experience in the typical aspects of investment real estate sales. Based in San Francisco. You can say hi to her to 420Estates.net.

Dana, before we get started, could you tell us a little bit more about your background and what you’re focused on now?

Dana Wallace: Absolutely, and thanks so much for letting me be a part of your podcast today. I really appreciate it. My company is just a boutique real estate company which basically specializes in legally-compliant cannabis and hemp properties. I am solely focused on the cannabis industry and hemp industry. We voted to bring recreational cannabis in in 2016, and I started my company in late 2015 when I saw that California was more than likely gonna vote this through… And it’s been a really interesting journey, anywhere from cultivation properties, to warehouse, industrial, commercial properties for distribution, extraction, which is considered manufacturing, dispensary, delivery… Lots of different things going on in the real estate portion of it. And I just have become very involved with a lot of the companies and small craft farmers that are working in the industry as well.

Theo Hicks: Okay, so I personally don’t know anything about these types of properties, so I’m gonna ask you just a bunch of questions, and if they seem like dumb questions, I apologize.

Dana Wallace: No, they’re never dumb. It’s a complex industry, and there’s a lot going on, and no municipality is the same, so… Yeah, fire away.

Theo Hicks: Okay. How many properties do you own? Either number, or just dollar amounts… What’s the volume we’re talking about here?

Dana Wallace: So I don’t specifically own any of the properties. What happens is an owner of the property will call me and they would like me to sell their property along with the business entity that obtained the cannabis licensing permits, or they have bought a property that they want to lease. And more than likely, that’s usually a warehouse; however, there are some landowners who are leasing to cultivators as well.

These owners have either gone through the process of becoming a permitted, licensed operation, or their actual property is zoned or approved to be able to operate a cannabis business, whether that’s cultivation, manufacturing, distribution… It just depends on what licensing they’ve gone through and what their property is approved or zoned for.

Theo Hicks: Okay, so you deal with owners of properties that are in the beginning  phases, all the way up to the shops that someone can go into and buy cannabis?

Dana Wallace: Yes. They can either be in the licensing process, they’ve already finished the licensing process, and so now they’re wanting to sell not only their real estate, but also the business entity that obtained the permits. That way, someone can come in and start operating and doing buildout, or they’ve got an already-established business and they’re looking to sell that as well, maybe for expansion, or they have obtained multiple permitting in multiple businesses.

Theo Hicks: Okay, so I’ve gone through the beginning phases, I’ve got my license and I want to buy a property, and I come to you. What would you say to me when I first sought you out?

Dana Wallace: In most cases you’re going to have a property, because in most municipalities you need to identify the location of where you’re gonna be operating your cannabis business. So they want you to have that property in place, whether you have purchased the real estate or you’re in a long-term lease on that real estate and the landlord has given full consent… Otherwise you would not have licensing in hand. Because with the lease, that landlord is going to have to be cannabis-friendly and have to submit an approval letter in order for you to be licensed. So you will have already identified a location.

Theo Hicks: Okay.

Dana Wallace: Sometimes different zoning has happened, especially for example in Los Angeles, and maybe you had a location and it’s no longer zoned correctly, so they’re allowing you to find a different location. In that circumstance you may have a license that you can move to a different location.

Theo Hicks: Is there a particular type of property I have to buy? Can I just buy a single family home in the middle of a neighborhood, or does it have to be in a specific location?

Dana Wallace: If you were going to grow out of your home, which some people choose to do, you’re gonna be allowed, in most cases, six plants per adult in the home. And again, the municipalities may vary, so your city or county may say “If you’re gonna grow six plants per adult, that’s fine, but you need to only grow in an enclosed space. Or you can only grow outdoor. And if you grow outdoor, then you need to put it in a small greenhouse.” And then they might have smell mitigation rules in place.

So most people that just wanna grow for personal use will not be utilizing me, because you can do that out of most homes. You just have to check your local ordinances. But if you’re coming to me because you want to grow commercially on a recreational level to sell to dispensaries, then you’re gonna be coming to me and saying “Okay, we have to find out what the proper zonage is in my particular area, whether they even allow it or not.” So there’s a bunch of research to be done, because each municipality does things differently.

Theo Hicks: I think you said this already, but do these people own a property that’s already zoned, or do you help them have their property rezoned to allow them to grow cannabis?

Dana Wallace: I have not gone through a rezoning process. I imagine that in most cases that would take quite a while. It’s just a matter of figuring out “Are you correctly zoned with your particular property?” And a lot of times they’ll have already gone to their planning department, spoke with their cannabis staffing, the building and planning permit department, and they’ll find out if they’re zoned. Like I said, each municipality is very different.

For example, in Oakland you’ve got a green zone. So you plug in your address and you look to see “Hey, does my industrial warehouse fall in the correct zone? And if it does, what am I allowed in my zone? Maybe I’m only allowed to do non-volatile manufacturing”, which is extracting cannabis plant oils. Or maybe I’m only allowed to do cultivation and distribution, moving my product out of this location. In that case, you look and see where you fall on their zoning map.

Other municipalities don’t have a zoning map, so you really need to go down to the municipality’s planning department, find out who to speak with, and find out where your property falls as far as zoning. If you’re looking at land, a lot of times if you’re zoned ag and you wanna do cultivation, that municipality is saying “If your property is zoned ag and you can meet these setbacks from your neighbors, and you’re not pulling from a creek or a natural water source, or basically harming the environment with what your plants are, with your cultivation business”, then yes, you can move forward and get your property permitted, because you’re zoned ag.

Theo Hicks: Okay. So you mentioned that someone would call you, and they either already have the business and they wanna sell it, or they want to lease it. The amount of money I can sell my property for, or the amount of money I can lease my property for – is it a lot higher than using it for just standard industrial use?

Dana Wallace: Yeah, there is more than likely always a cannabis premium on those properties. For example, if in your city a regular industrial warehouse is usually being leased for 75 cents to a dollar, to a dollar fifty a square foot, it can be as high as two to two fifty a square foot. So there’s definitely a cannabis premium. Same thing with selling… Because now you’ve added value to that property – and also leasing – because that property is actually permitted to conduct whatever cannabis business you’re looking to get into, which means you’re that much farther ahead of the game, so there’s more value in that property. You’re able to step into a business and purchase it, along with the real estate, whether you’re leasing and purchasing the real estate.

Theo Hicks: Do you know the types of returns these owners are getting once they actually start to operate their business? Let’s just use a landlord, for example; let’s say I’m a real estate investor, I’ve got one of these properties that’s leased and permitted to conduct a cannabis business… What types of cash-on-cash returns should I expect to see?

Dana Wallace: So you’re looking at 12% to 14% cap rate. A lot of investors have that business model in mind. I’m going to buy an industrial warehouse in the correct zone, get it permitted for cannabis business use, and then I’m gonna lease to cannabis tenants with that lease premium, for being able to operate a cannabis business.

So it can vary, again, from municipality to municipality. There are some small towns which are having economic hardships. Maybe they have a bunch of industrial properties that have been sitting abandoned, and they’re looking so forward to the tax revenue, and the jobs, and the things that it’s gonna bring to their communities, so they may have better lease pricing, or better purchase price points on their buildings. But in a lot of the bigger cities – yes, there’s a definite return margin. And it does vary, because a lot of the state permitting just became permanent at the beginning of this year, and there’s a lot of businesses still going through the process…

So it’ll remain to be seen where everything kind of settles and ways that we can mark in the fluctuations in the market. But we are starting to be able to point to different figures in the business and say “Okay, well this is kind of what this market is getting on returns and what they can commend. Okay, let’s go over here; this is kind of what we’re seeing in this particular municipality.” But it’s very new, so there’s not a lot of hardcore, solid points… But you’re definitely getting a premium on any purchase or lease figures that you do with cannabis clients or tenants; you’re definitely getting a higher return, because of the risk and the complications with this market right now.

Theo Hicks: That’s a perfect [unintelligible [00:12:52].20] my next question, which is besides the obvious regular risks associated with investing in real estate, what are some additional risks associated with this specific investment strategy?

Dana Wallace: The risks are that it is still federally illegal, although we are making huge progress. There’s bills in front of Congress now to push for federal legalization. One of our main hurdles in the cannabis industry is that the banks are federally regulated. Cannabis operators do not have a banking system that they can walk in and bank with, so it remains very much an all-cash business, which causes security problems for the operators. This is something that we’re in desperate need of – banking for our cannabis operators.

There are private groups that put together banking for Colorado, and that’s starting to happen here in California. You’re gonna have private groups that are able to put together banking, so that they can safely go in and bank. So instead of showing up to the state capital to pay your taxes with (unfortunately)  a briefcase or duffel bag with your tax payment in it, you’re actually gonna be able to safely bank. There’s also things that are set up – secure vaults; companies have started those as well, so that it is becoming more and more secure… But that’s one of the main hurdles – the banking for our cannabis operators.

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

Dana Wallace: My best real estate investing advice for people who would like to dip their toes into the cannabis industry is basically when you’re being presented with ideas or real estate that has a cannabis entity that’s going to be operating out of it, is basically really find out who your cannabis company or operator is. You should know the full story on them, the full background story; who are they, how long have they been in the industry? Is there a brand that they can point to? Is there products that they can point to that they have on the market? What is their business history?

I say this with also the point that because of the banking industry, everybody had to do business in cash before, so you’re not gonna be able to look at somebody and go “Where’s your tax records? Where’s your bank statements?” So it’s very important to sit down and find out who it is you’re dealing with, what their experience is in the industry, and do they have a team made up of people who are also savvy with just regular business and corporate structures?

The other thing is you’re gonna wanna look at their growth plan for their company, whether it’s expansion capital, whether it’s buildout capital now, the guy has received the licenses and he wants to build out… You’re gonna wanna look at “Okay, well how has he planned out his growth?” Because for some of these businesses it’s much better to see them going through phases of growth – “Here’s phase one, and we’re  gonna start seeing profit before we move on to phase two, and phase three…”

Or you can get some guys who come in and go “We’re doing it all. We’re buying millions of dollars’ worth of real estate, we’re buying millions of dollars’ worth of licensing, and we’re going so big because we wanna dominate the market.” That can be very dangerous, because you need to really take baby steps… Unless you are getting involved with an absolute huge company and they have a record of being able to sustain themselves in the business so far. Again, we’re still a very new industry. But it can be very lucrative, you just need to do your due diligence and basically do the research it takes regarding who it is and where you’re gonna be located.

Theo Hicks: Alrighty. Are you ready for the Best Ever Lightning Round?

Dana Wallace: Sure.

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

Break: [00:17:05].08] to [00:18:03].07]

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

Dana Wallace: Code of the Extraordinary Mind, by Vishen Lakhani. I may be pronouncing his last name wrong… But it’s basically — the whole book is premised on the way we grow, the values we are taught based on our culture, religion, or whatever it is, in our families, and maybe how our parents and grandparents grew up… And just taking a hard look at what do you wanna do, what are your passions, stepping outside of that box and following your own heart, instead of just the regular structures of maybe what you grew up with and the rules that you grew up with.

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

Dana Wallace: Being in real estate, I am very used to pivoting and making sure that I’m always keeping one step ahead of my thought process as far as being able to build a sustainable real estate business… And it’s all about following niches.

So if the cannabis business or industry were to fall apart, I would stay in the investment realm of real estate, but I would pivot over to the hemp and CBD market, which is less regulated, less taxed, and is also going to be a huge industry. So I’m kind of always on the lookout for “Okay, what are the offshoots of what I’m currently doing? Keep your eye on that and stay involved in that as well”, and definitely pursuing niche real estate, or niche businesses, because it really sets you apart from what everybody else is doing, and helps you kind of stay at the forefront of people’s minds.

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

Dana Wallace: The way that I like to give back is you can spend a lot of time having conversations with people that may not end up monetizing anything for you. But the fact that you can share your knowledge and maybe help them in some way that’s not related to at all is really valuable to me. I appreciated when I first got into this industry being able to just pick people’s brains, find out what they were doing; they invited me to their properties, they invited me to lunches and conversations so I could learn everything I could about the industry and soak it all up. So I try to be very mindful of sharing that knowledge.

A lot of people like to label themselves as consultants and charge fees, and in my mind if I’m sharing the knowledge of what I know, it will come back to me, because I’ll have given someone else an opportunity that maybe there’s an idea or a  thought process they hadn’t thought of before I shared what I knew about the industry with them… So I just remain very mindful of sharing my knowledge.

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

Dana Wallace: Well, you can reach me at my website, which is 420Estates.net. I’m also on Instagram, which is @420estates4you. I have a pretty good presence on LinkedIn as well, under Dana Wallace. You’ll see the 420Estates there also.

Theo Hicks: Alright, Dana, I really appreciate you coming on the show today and sharing your insight on the cannabis industry. Again, I didn’t know anything about this going in, so I really appreciate you giving us a rundown on the entire process. Just to summarize some of the key takeaways… So you mentioned that you need to buy a property in the right location, in the right zoning in order to operate a cannabis industry. If you’re a landlord or if you’re looking to sell that property, you need to keep that in mind.

We talked about the leasing and purchase prices of these types of properties, so there’s always gonna be what you call the cannabis premium. So if you’re looking at leasing your industrial warehouse, where you could get 75 cents to $1,50 for just regular use, the premium would be as high as $2 to $2,50 per square foot. And then similarly for selling that property – just like any other value-add strategy, if you’ve got the zoning and the permitting to allow you to conduct a cannabis business, you’re further ahead in the game and you can get a premium for that property. More specifically, you said that the returns are around 12% to 14% cap rate. Obviously, it’s new and there’s no hard data on this, and it could go up in the future.

You talked about the risks associated with this industry, and the fact that cannabis is still illegal federally. Because of that fact, the main hurdle is banking, so a lot of this investment strategy is all cash… But you mentioned that there’s some private groups out there that are starting to put together banking, and there’s some legislation that might pass that allows it to be legal federally, which would obviously change and reduce these risks.

And then lastly, you gave your best ever advice, which was to make sure you’re doing due diligence on any company who’s going to lease your industrial warehouse. You’re not gonna be able to find the typical tax records and bank statements like you would for a regular property, so instead you need to do due diligence on the companies, to get their background, how long they’ve been in this industry for, is there a brand or product that they can point to, what’s their business history, what does their team look like, are people on their team savvy businesspeople who have done businesses in the past?

And then lastly, look at their growth plan… And you mentioned that it’s better to see a growth plan that is in phases, as opposed to someone who is trying to just go all-in at once, unless of course it’s a well-established company who has a track record of being able to do that.

Again, I really appreciate it. Lots of great information. I know Best Ever listeners are gonna learn a lot from this episode and might have an idea for a new investment strategy if they are in one of these states where it is legal recreationally. I appreciate you stopping by, again. Best Ever listeners, thanks for listening. Have a best ever day, and we will talk to you tomorrow.

Dana Wallace: Thank you so much.

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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

 


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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.

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JF1809: Power Connections, Cannabis Properties, & Hiring VA’s #FollowAlongFriday with Joe and Theo

Theo did the podcast interviews again last week so we’re hearing the lessons that he learned from those interviews last week. The lessons that Theo will be discussing come from Alex Talcott, Brad Stevens, and Dana Wallace. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“The idea of the money raising tracker is to see how you are finding investors and know where to focus your time”

 

Free Document:

http://bit.ly/moneyraisingtracker

 


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.


 

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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.

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JF1468: How To Create Passive Income Through Raw Land Investing #SkillSetSunday with Mark Podolsky

Mark has been on the show before and he always delivers great value to his audience. Known as The Land Geek, he specializes in raw land investing. For this interview, Joe and Mark are focusing on uncovering how Mark uses raw land investing to not only buy land at a discount and sell for a profit, but also use raw land to create passive income. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help.

See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


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. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday, where — well, by the end of it, you will acquire or hone a particular skill, and the skill we’re gonna be talking about today is how to create passive income through raw land  investing. With us to talk about that, Mark Podolsky. How are you doing, Mark?

Mark Podolsky: Joe Fairless, always a pleasure to talk to you. I’m doing great, my pulse is normal, my respiration is fine… I’m just thrilled to be here. Thank you.

Joe Fairless: Well, I’m glad, because if it wasn’t normal and your respiration wasn’t fine, quite frankly I wouldn’t know what to do… [laughs] I would try and call someone in Phoenix, Arizona, or Scottsdale, where you’re at, and see if I can get you help that way. But you’re good, so we don’t have to worry about that.

A little bit about Mark – he is the owner of Frontier Properties, a land investing company, and he is the author of a new book that came out… You’ve gotta check it out, it’s called Dirt Rich, which discusses a step-by-step way for how he creates passive income in raw land investing, and how you can, too. He’s been buying and selling land full-time since 2001. His website is TheLandGeek.com, and he’s based in Scottsdale.

You recognize Mark’s name because you’re a loyal Best Ever listener; I have interviewed him multiple times, most recently in episode 915, “How to buy raw land at 20-30 cents on the dollar.” 915 – that was about 500 days ago or so, so it’s time we catch up again.

First, how about you tell the Best Ever listeners a little bit about your background, just as a refresher, and then we’ll get into your book?

Mark Podolsky: Sure, so I started as a very unhappy, miserable, overworked, overstressed, 45-minute commute to work and back, cubicle sitting in hell investment banker. I worked with private equity groups, doing mergers and acquisitions, and Joe, it got so bad for me that I wouldn’t get the Sunday blues, anticipating Monday coming around, I’d get the Friday blues, anticipating the weekend going by really fast and having to be back on Monday.

So my firm hires this guy, and he’s telling me that on the side he’s buying raw land, pennies on the dollar, at tax deed auctions, he’s marketing them online, and he’s making a 300% return on his investment. So I’m looking at companies all day long, and a great company has 15% [unintelligible [00:05:42].17] margins, or free cashflow, a great company. Your average company is at 10%, and I’m looking at companies all day long less than 10%, so of course, I don’t believe him.

I go to New Mexico with him, I’ve got $3,000 saved up for car repairs, I do exactly what he says to do, I buy 10 half-acre parcels, an average price of $300 each, I put them up online, and they all sell for an average price of over $1,200 each. 300%, it worked. So I took all that money and went to another tax deed auction where I live, in Arizona; again, it’s $2,000 [unintelligible [00:06:16].12] I’m buying up lots, I’m buying [unintelligible [00:06:19].08] and on that one auction I made over $92,000. So I said to my wife, I’m like “Honey, I’m gonna quit my job and I’m gonna be a full-time land investor.” She was pregnant at the time, and she said “Absolutely not.” So I said, “Okay, fine.”

I worked land investing as a side hustle for about 18 months, and it took that long for the land investing income to exceed the investment banking income, and then I quit, and I’ve been doing it full-time ever since.

Joe Fairless: When I think of raw land investing, I think of the type of activity that a wholesaler would have to do… That type of work where they’re constantly having to jump from one transaction to another; I don’t think of passive income. When I think of wholesaling, I don’t think of passive income, I think of active income. So help me understand… Your book is called Dirt Rich, and the value proposition is the step by step way for how you create passive income in raw land investing, so how does that take place?

Mark Podolsky: Joe, where do you live?

Joe Fairless: Cincinnati.

Mark Podolsky: You’re in Cincinnati, okay. So I go on the tax delinquent lists on this county in Texas, and I see “Oh, there’s Joe Fairless. He owes $200 in back taxes on his 10-acre parcel in Texas.” But you’re advertising two things to me; number one, you have no emotional attachment to that raw land. You live in Cincinnati, the property is in Texas. And number two, you’re distressed in some way, because when we don’t pay for something, we don’t value it. Maybe you’ve just lost your job, maybe you’re going through a divorce; maybe you inherited the property and you don’t know what to do with it. Maybe you just are sick of paying taxes, who knows… I don’t know. But essentially, you don’t value it.

So what I’m gonna do then is I’m gonna look at the comparable sales for the last 12-18 months on similar 10-acre parcels, I’m gonna take the lowest comps, and all I’m gonna do is divide by 4, and that’s gonna get me what Warren Buffet would call a 300% margin of safety. So in our example, let’s say that the comps are 10k; the most I’m gonna pay for your property, Joe, is $2,500. You get the offer and you accept it. Now, in reality, 3%-5% of people accept this “top dollar” offer.

So now I’m gonna go through due diligence, I’m gonna make sure you actually own the property, I’m gonna confirm that back taxes are only $200, I’m gonna make sure there’s ingress and egress, there’s legal access, I’m gonna get the GPS coordinates… I’m gonna go through this whole property checklist, and the way that we do it is all of this is automated with software. The offers are automated… Basically, the business is 90% automated with software. Our due diligence is outsourced to the Philippines, it costs us about $11 to do due diligence.

If it’s in a new area, we’ll crowdsource and have somebody actually physically go out with our property checklist, look at the property, take pictures, shoot video. So we physically don’t have to be there… But this is where the passive income piece of it comes – it’s a one-time sale, and then we get recurring income every single month, but we don’t have to deal, Joe, with any renters, rehabs, renovations or rodents.

Essentially, I buy that property from you for $2,500, and then I have a built-in best buyer to buy that property. Do you know who it is?

Joe Fairless: The neighbor.

Mark Podolsky: The neighbor.

Joe Fairless: I’ve talked to you before; I wouldn’t know that if I hadn’t interviewed you before though.

Mark Podolsky: Right, so I’m gonna send out neighbor letters and I’m gonna stoke a little fear, I’m gonna say “Hey look, before I go to the open market, here’s your opportunity. Protect your view, protect your privacy, expand your holdings.” And then the way I’ll sell it – and this is where the magic happens – is I’m gonna try to get my money out on the down payment. So I’m gonna ask for a $2,500 down payment; I might go six months out… And then, Joe, I’m just gonna make it a simple car payment. Let’s say $449/month, and 9% interest over the next eight years. So essentially, I’ve created a $449 passive income stream for the next eight years, without any of the traditional headaches of real estate, and I’ve got my capital out on the down payment.

My average return on investment on a seller-financed piece of property is 800% to 1,000%. So the game that we can play then is can we create enough of these land notes where our passive income exceeds our fixed expenses? …and then we’re working because we want to, and not because we have to.

And as far as passive income is concerned, I’ll make the argument nothing is passive. If you inherit a billion dollars tomorrow, you still have to actually expand some effort to efficiently invest that money to get a return on it. You just have to. So nothing is completely passive.

Joe Fairless: Yes, I agree. It would be irresponsible for someone to do nothing with the money, and not spend any time overseeing how it’s being invested, so I agree. There’s varying degrees of being passive.

So in the ideal scenario you go to the neighbor, they say “Yeah, I wanna buy it”, and your down payment equals what you paid for, and then the payments thereafter on a monthly basis is all cashflow and profit after that.

Mark Podolsky: And we automate that using a program called GeekPay.io. Essentially, that money flows out of their checking account every single month, and if the checking account bounces, then it’ll charge their credit card on file as a backup. And it automates the notifications, they can log in and they can see their current balance, and they can make a pre-payment anytime… So I don’t even have to spend any energy managing the note. That’s a one-time set it and forget it as well.

Joe Fairless: Yeah, that’s smart of you to build that out, and helpful for you, as well as the people who use that program. This approach – you’re having a conversation with a different neighbor, depending on where you’re buying it… So you’re talking to a whole lot of people for each deal, and I imagine there’s a decent amount of negotiating involved, and them validating that you actually are who you say you are, as well as you actually making sure that they can deliver on the payment… Is that also what’s done in the Philippines?

Mark Podolsky: We have an acquisition manager that handles that piece. We also have an intake manager that we automate using RingCentral for the buyers and sellers to qualify them. So we do have a process in place, so that I don’t have to personally handle that piece. But when you first start, there’s not a lot of negotiating that actually takes place. You’ll have to talk to your seller for about five minutes and explain to them your offer, and it’s a take it or leave it offer, because we don’t wanna be in the appraisal business. We don’t say “Hey, I’m interested in buying your land”, they’re like “Oh, I’m interested in selling my land”, and now we’re in a negotiation. We actually send them a real offer.

And then as far as the neighbors are concerned, they typically know they’re getting a great deal because of the pricing involved. So there’s not a lot of negotiation with that too; it’s more like “Hey, how do I get you the money?” So those are actually more anomaly type of events, or edge cases, where we actually have to do any type of real serious negotiating.

Joe Fairless: What percent of the transactions are purchased by a neighbor?

Mark Podolsky: I would say that at least 50% are neighbor transactions, and if the neighbor passes, then we’ll go to our buyers lists. These are people that have already indicated to us in some type of marketing format that they’re interested in buying raw land. If the buyers list passes, we’ll actually go to Craigslist, and we use software to automate our Craigslist postings. So I can put out like 100 ads by just pressing a button. That’s just PostingDomination.com/thelandgeek. It teaches people how to do that for themselves.

Then we also automate that as well to Facebook Buy/Sell groups. So Joe, in 30 days I’m gonna sell that property, one way or the other. Now, if it doesn’t sell in 30 days, then either I’m going to have to raise the price; maybe people think “Well, there’s something wrong with it if it’s too low”, or I might have to lower the down payment, I may have to extend some terms, lower the monthly payment, raise the monthly payment… I have to play with the pricing in some way, but essentially, we need to make it irresistible to the market.

Joe Fairless: Each of those three approaches – first is neighbors, second is buyers lists, third is Craigslist – are they equal in profit margin, or do they increase or decrease?

Mark Podolsky: The pricing stays the same. It’s equal.

Joe Fairless: Okay.

Mark Podolsky: Yeah.

Joe Fairless: I don’t know, I guess you could make an argument for each of the three that they would pay more or less for the land.

Mark Podolsky: Yeah, the reason we don’t play with the pricing to different platforms is simply because often times those people will be like “Hey, why is it more expensive here?” or “Why is it less expensive there?” and now we’re sort of losing credibility in the marketplace, with all the different pricing advertising. Because I could go to a site like Landmodo.com or LandsofAmerica.com, and probably get more on those platforms, but I don’t. What’s the old saying – pigs get fat, hogs get slaughtered… We just try to be piggish about it.

Joe Fairless: [laughs] Fair enough. First off, congrats on your book, Dirt Rich.

Mark Podolsky: Thank you.

Joe Fairless: It’s a step by step process for how to create passive income. Did you basically just walk us through that step by step process, and if not, then what additional stuff can you tell us about that?

Mark Podolsky: So the book gives you a lot more detail as to that step-by-step process. It also makes it come to life with stories. Then I also tell my own story about what happened to me through the real estate cycle, so that you don’t have to make the same mistakes I did, and live vicariously through me.

The people that have actually read the book and have reviewed it, they know land investing and they’re still getting value out of the book.

Joe Fairless: When you take a look at a deal that you thought was gonna be this passive deal, but became very active – can you tell us a story about one of those circumstances?

Mark Podolsky: Yeah, I did a deal in an area of Western Pennsylvania called Treasure Lake, and I fell in love with it. I flew out there – that was the first mistake, by the way. So I flew out there and I started negotiating with the Property Owners Association, and the county… The reason I fell in love with it is this gated community, and there’s two PGA-rated golf courses, there’s three lakes, there’s million dollar homes in there… But it was over-developed, so there’s like a thousand lots just sitting there, not earning the county any tax revenue, the Property Association is not getting revenue, so they can’t make any improvements to their own community…

So I said, “Look, fellas, you have dead money here. I could sell these lots for a dollar, and as long as someone pays their taxes this year and their POA fee, you’re going to be ahead of where you are now”, and that actually took years, Joe, of negotiating. I ended up buying up a thousand lots for nothing, but essentially, when I’ve factored in my time, I made only $100,000 on the deal, because the deal went south in 2008, and I bought it in 2007… But when I factored in my time, I actually broke even on that deal, going back and forth with negotiations… So today I won’t do any of that.

Joe Fairless: What’s the last deal you bought?

Mark Podolsky: The last raw land deal – I don’t even know, because just managing… Actually, tomorrow is my team meeting, when I would look at it. Do you have a second for me to open up my spreadsheet?

Joe Fairless: Yeah, sure.

Mark Podolsky: And I can tell you here… Let me just go into my software, and open it up… I should have known you were gonna ask me this. Okay, here we go. I see what we just bought – we just bought 1.76 acres in Arizona, 10 acres in Texas, 11 acres…

Joe Fairless: Where in Texas?

Mark Podolsky: In West Texas.

Joe Fairless: West Texas… What area?

Mark Podolsky: Culberson County. Do you know where that is?

Joe Fairless: I’ve heard of it, I don’t… I went to school in West Texas, in Lubbock, so I was wondering…

Mark Podolsky: Oh, okay. It’s a couple hours from Lubbock. It’s near where Jeff Bezos owns a bunch of property.

Joe Fairless: Huh, okay… I didn’t know he owned property there. Okay, got it. What were the terms on that land in Texas?

Mark Podolsky: On that deal, it looks like we paid $1,200. Let me look at the taxes… Oh wow, taxes were $175, and we sold that for $11,200. That was the last deal; that was one we just did.

Joe Fairless: That’s great.

Mark Podolsky: We’ve got a $150 monthly payment, we’ve got a note fee, we’ve got a late fee on there for $15, and we got a $300 down payment.

Joe Fairless: That’s cool. I’m glad that you gave us some examples. That brings it full circle. How can the Best Ever listeners get in touch with you and learn more about what you’ve got going on?

Mark Podolsky: I think the best place to go is TheLandGeek.com. If they go to TheLandGeek.com/DirtRich, they can actually get the book on Amazon, along with over $500 worth of bonuses. There’s a great blurb in the book, Joe.

Joe Fairless: I heard that you were bragging about that… I didn’t know [unintelligible [00:20:28].27] I’m grateful that you asked me to check it out and review it. I assume you’re talking about mine… Are you talking about mine?

Mark Podolsky: Only yours, of course…

Joe Fairless: [laughs]

Mark Podolsky: Of course.

Joe Fairless: Absolutely.

Mark Podolsky: This week, Joe, I’m actually sending out the paperback copies to the people that did review it, so be looking for yours as well.

Joe Fairless: Sweet. Yeah, digital gets me a little bit of a headache, so I’ll be glad to check out the paper one, as well. Mark, thanks for catching up with us again, talking about investing in raw land, talking about some case studies, how you do it, the approach that you take… And I agree there is no true passive income, but there are varying degrees of passive income, and it’s just irresponsible to completely just put money somewhere and then never look at it. I’ve gotta check up on it every now and then.

Thanks again for talking to us about your approach of what you do, and congrats on the new book. I hope you have a best ever weekend, and we’ll talk to you soon.

Mark Podolsky: Thanks, Joe. I really appreciate it.

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Best Real Estate Investing Advice Ever Show Podcast

JF1101: How Strategically Partnering can Land you More Deals – with Matt Martyn

From a film and digital company, to a property management company, Matt is cofounder in both. Definitely a strange combination of companie, but it works for him and his partners. They found a deal because of a partner’s aunt was a broker who heard of the deal from another broker, proof that sometimes your network is more important than anything else!

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Matt Martyn Background:
-Co-owner of Cobertyn, a real estate management company for commercial buildings, single-family units, and apartments buildings.
-Co-owner of Ahptic, a Film and Digital Company Worked with Oscar winner Carl Kress and celebrities including Nelly Furtado and Miley Cyrus
-Based in Lansing, Michigan
-Say hi to him at www.cobertyn.com/
-Best Ever Book: Crime & Punishment

Made Possible Because of Our Best Ever Sponsors:

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They’ve also partnered with best-selling author, J Scott to provide Bestever listeners a free chapter from his new book on negotiating real estate. If you’d like to improve your bestever negotiating skills, visit www.fundthatflip.com/bestever to download your free negotiating guide today.

 

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 of that fluff. We’ve spoken to Emmitt Smith (yes, he’s a real estate developer; go listen to that episode), Barbara Corcoran from Shark Tank, Robert Kiyosaki and a whole bunch of others.

With us today, Matt Martyn. How are you doing, Matt?

Matt Martyn: Good, how are you doing, Joe?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Matt – he is the co-owner of Cobertyn, which is a real estate management company for commercial buildings, single-family units and apartment buildings. He is also a co-owner of Ahptic, which is a Film and Digital Company. He has worked with celebrities in that regard, I imagine… With Nelly Furtado and Miley Cyrus. He’s based in Lansing, Michigan. Matt, with that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Matt Martyn: Sure thing. My business partners and I started our film and digital company, Ahptic, back in 1997. Being a startup, bricks and mortar, you need expensive equipment to film things on a high end… Really just step by step building our company and the equipment, the resources. As opposed to renting from others, we would start acquiring that so we could shoot it ourselves.

Along the way, our landlord – we were in a downtown space in Lansing Michigan – needed to convert that to apartments, and rather than finding another place to rent, we bought a building. We gutted it, renovated it, and it just really took on a life of its own, it was a great thing… Just an excellent experience. It took a long time, a lot of money to do it, but again, we thought in the long-run; we really saw the benefits of that.

A few years later, when the whole bottom dropped out of the Lansing real estate market, we found a duplex in a downtown location – just prime location – and we scooped it up for a steal. It was great in a lot of ways, but it really was not enough of a purchase to justify a shift in our focus and priorities. We were still building this film and digital business, and really the duplex was somewhat of a distraction. But of course, that appreciated, and with renovations to that it came to be a nice little property, and just by fall we acquired three small apartment buildings, and with that we founded Cobertyn Management Company, which has just been a game changer.

Joe Fairless: Yay, three of them – in one shot, or in a short period of time?

Matt Martyn: In one shot, yes.

Joe Fairless: Tell us about it.

Matt Martyn: Well, we’d been looking to really expand into real estate for quite some time, but the single-family or duplex units – buying ten more of those or twenty more of those sounded exhausting, frankly… So my business partner, Dom, had his finger on the pulse, and we discovered these three 8-unit apartment buildings that were off-market, and we made an offer and negotiated it, they kept them off market, and closed on them all at once. And they’re really the right size, goldilocks; they weren’t too big, they weren’t too small. It was not easy for us to lock down the financing – that was very time-consuming, that was more involved than what we had anticipated, but we were able to close on them, and it’s really been a great experience.

Joe Fairless: We’ll start high-level and then we’ll get into some specifics. High-level – how much did you acquire them for and what type of cashflow, or maybe even what’s the cap rate going in?

Matt Martyn: 600k. So far we haven’t aggressively increased the rents on the existing tenants, but as they move out, we’ve been able to increase them to the tune of 25%-30%-35% without any problem finding people to fill them.

Joe Fairless: On average, what’s the rent for a unit?

Matt Martyn: Some of the long-term tenants pay as little as $410, and the shorter term on the newer units would be $550-$570. Now, we are in the process of renovating two of the units that are on the lake, one of which has a lakefront view, that we plan to triple the rent.

Joe Fairless: Triple the rent?

Matt Martyn: Yeah, it’s a prime location.

Joe Fairless:  To $1,500?

Matt Martyn: It might be more like $1,500, but it’s right in that range. There’s reason to believe we can justify that. We’re going to see what the market determines, but it’s really exciting. It’s not just that it’s on our city’s potentially only recreational lake and it has a spectacular view of it, it’s butted up next to a park, and one block away from three of the hottest bars in town.

Joe Fairless: Oh, man… It’s the place to be.

Matt Martyn: It’s phenomenal.

Joe Fairless: How much would you need to put into the unit in order to justify or command the $1,500 (plus or minus) rent?

Matt Martyn: The dust has settled on that. My business partner John has been spearheading the renovations, so I don’t have the numbers in front of me, but it certainly makes sense for this in the long run. It’s really exciting.

Joe Fairless: Yeah, and that makes sense… You each have your responsibilities and what you’re focused on in the business, I get that. The reason why I was asking is because you acquired this property at $25,000/unit, and at $550 for a unit, that’s 2.2% of the acquisition of a unit… So $550 is 2% of $25,000, and I was wondering “Well, if they put in $10,000, that’s $35,000 all-in, and if they’re able to command $1,500 in rent”, that’s a — it’s stupid numbers is what it is… It’s 4.2%.

Matt Martyn: [laughs] I would love that. I can safely say that we have been in and are putting more than $10,000, especially into the one with the lake view, we are really going all out – everything, high-end across the board.

Joe Fairless: Right. And that would be one 8-unit that you’d go high end, or are there units within the 8-unit that you would go more high end?

Matt Martyn: Within the 8 units, 4 of them face the lake and 4 of them do not. The 4 that face the lake, we certainly are going all-out. The ones that don’t face the lake – they’re very nice… One of them we’re literally finishing in the next couple weeks, and we’ll see what the market commands for that. But I would say those are 8 or 9 out of 10, and the once facing the lake are 10 out of 10.

Joe Fairless: Okay. And the reason why I was asking about that is because if you were doing a couple apartments within a building at $1,500 but then you’re renting the others for $500, you’d get a different type of resident profile.

Matt Martyn: Oh, no, absolutely not… The ones that don’t face the lake, we were talking maybe $1,100, or something like that. But that would create this disparity. The hallways, everything is going to be high end to maintain [unintelligible [00:08:32].12]

Joe Fairless: So now let’s talk more micro-level on this deal. You said it was an off-market deal… How did you find it?

Matt Martyn: Through my partner’s aunt, who is a real estate broker, and was talking with another broker. He was aware of these properties, and we were able to keep it off market and close the deal.

Joe Fairless: What type of financing did you get on it? You said it was challenging – please elaborate.

Matt Martyn: Well, we know the commercial loans are more challenging than, for example, financing a home as a private loan. We have experience with commercial loans, and we know that there’s a certain degree of difficulty with that. We’ve dealt with loans less than 250k. Once we broke that threshold, we were seeing that the level of complexity and involvement of underwriters was much more involved, and the length of time in vetting was far beyond what we had experienced in the past… And with the length of time that goes by, then that inherently requires more information. For example financials, as a month or two goes by, then you need to provide financials for those months as they pass. I totally respect the entire process, because I would assume among other things, making sure that nobody’s playing a shell game with their money, like maxing out a credit card while they supposedly have the cash in their savings account, or whatever it might be…

Joe Fairless: Right.

Matt Martyn: The process was pretty slow, and in fact, one of the lenders — we’ve had great experiences with both of them in the past, and after all this time, one of the lending institutions was not able to get the information that they needed to from the underwriters… So they eliminated themselves from the process. Our broker was trying to make sure that everybody was keeping things moving as fast as they possibly could, and when it came down to it, they were not able to get the information processed in time, and thus kind of made the decision for us.

We were pleased with the interest rate that we got, and with the terms and everything else, but it was just a lengthy process.

Joe Fairless: Knowing what you know now, what would you do differently if presented the same deal, same exact circumstances from a financing standpoint?

Matt Martyn: Well, we were actively looking, but like so many things that happen in life, there’s the idea of looking, and the idea of “This is the deal we need to close now”, which changes everything completely. So had we [unintelligible [00:11:07].21] then we would have had things more locked and loaded from our end, in a more presentable way. We got things presentable very quickly, but we were not keeping our accounts flush with cash, as a bank would like to see. Things were not as liquid as they possibly could be. We [unintelligible [00:11:24].28] get there really quickly, along with other things, but of course, the endless personal financial statements and that which needed to be provided.

Joe Fairless: Matt, what is your best real estate investing advice ever?

Matt Martyn: If you see a deal, jump on it. I know you don’t wanna make impulsive decisions by any means, but if you know a market and you’re aware of a deal when you see it, there’s all the reason to act. And be ready as much as you can be.

Joe Fairless: You said these three 8-units are in Lansing, where you live – is that correct?

Matt Martyn: They’re in the Lansing area. They’re actually in the surrounding communities, which have great school systems [unintelligible [00:12:06].24] and Williamston, which both are nice little b&b communities.

Joe Fairless: What’s your role on the team? Just taking a step back…

Matt Martyn: By and large I’m involved with the finances, and big picture paperwork type stuff. We all wear different hats at different times. When we were closing on this, there were significant renovations that needed to be done, so I was spearheading some of the bigger projects… Not involving renovating the units as much, but replacing a roof, and decking; we had to tie in the city water in one of the units. So things like that, I spearheaded some specific construction projects.

Joe Fairless: What’s it like to oversee the process of tying into city water and why did you have to do that?

Matt Martyn: That is the lake view property that I mentioned; it was the only one that was not tied in… It was still on an old well. The wells require maintenance, and the cost in and of themselves – most none of the tenants like it, and that also stained the bathroom fixtures. That impeded any ability to renovate. It was a downside to any potential tenant. So that was just really a barrier that we saw to getting these units to where they needed to be. They would never be high-end if they were still tied into this well.

That was a process, like any municipal interaction, and the good news is that as we did that, we actually tied in in a way that will allow us to provide more water, so down the road, who knows, maybe we’ll do a demo and build more units in that spot, given the prime location of it. Should the opportunity ever arise, we are already set for growth.

Joe Fairless: And then what about the replacing the roof and decking – can you tell us about the process and anything that stands out to you?

Matt Martyn: Yeah, the roof had been patched in a few different places, and it’s one of those things where it’s kind of bleeding money slowly, and kind of opening the door to other potential problems, so it makes sense to just get in there, take care of it and call it good for a decade. The decking was — that was one where it didn’t take an engineer to tell us things needed to happen with that quickly… So that was addressed as quickly as possible.

On one of the units it’s an entry directly from outside, so the upper units have stairs on either side of the building and a wooden deck to enter. We saw that, again, as an opportunity to upgrade, so when we were replacing it, not only did we give it the proper support that it needed, but then also expanded it. Now both levels benefit, because the upper units have more room where they could put out lounge chairs or other things to relax up there, and the lower units are more protected from the elements – rain, snow, or whatever. It reaches out twice as far from their building as it did before.

Joe Fairless: Matt, are you ready for the Best Ever Lightning Round?

Matt Martyn: As ready as I’ll ever be.

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

Break: [00:15:23].18] to [00:16:21].20]

Joe Fairless: Best ever book you’ve read?

Matt Martyn: Crime and Punishment.

Joe Fairless: Crime and Punishment?

Matt Martyn: Yes, [unintelligible [00:16:28].24].

Joe Fairless: I should be familiar with that book, but I’m not, so I will check it out. What’s the best ever deal you’ve done?

Matt Martyn: My personal home. I paid $15,000 for a foreclosure, gutted it and didn’t put more than 30k into the renovations, and I wouldn’t change anything. I love it.

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

Matt Martyn: The duplex that we talked about – it was easy to be lacksidaisical about getting tenants in there. As I said, it was not the focus, it was not our core competency at the time, so we were not as quick as we could have been to get tenants in and out of there.

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

Matt Martyn: With our production company we’re able to send very powerful and compelling messages to issues that matter a lot to us in our community.

Joe Fairless: And how can the Best Ever listeners get in touch with you, Matt?

Matt Martyn: Cobertyn.com. We are actually already managing other apartment units. We talk about lightning speed – this is happening at an incredible space.

Joe Fairless: So you’re doing third-party management as well?

Matt Martyn: Yes, just in the last two months, and that’s already going well. We’re filling units at rent rates that you’d not think was possible.

Joe Fairless: Wow, congratulations. Where are you doing management? Is it just Lansing?

Matt Martyn: Yeah, that one is in Lansing proper, nearby downtown.

Joe Fairless: And how many units do you have under management.

Matt Martyn: Eight.

Joe Fairless: Eight. And why do third-party management? A lot of people steer away from that who are initially interested because of the low margins and a lot of the headaches. And I’m not saying there’s not money in it – I know there is – but it’s a tough business.

Matt Martyn: For us, I think it’s a little bit of a different animal because we have the infrastructure in place from our existing business. It makes sense for us to just grow from here. We hit that tipping point – the duplex did not justify it, but once we moved into having this many units and having people dedicated to maintaining and growing the business, it’s really just a matter of adding this to what we already have.

Joe Fairless: Matt, thanks for being on the show. Thanks for talking about the case study of the three apartment buildings that you acquired, $600,000. Three apartment buildings, 8 units each, so 24 units for $600,000, 25k/unit. You’re increasing rents, and in some cases looking to triple the rent, but also putting a large chunk of money into those units to do so, and looking at it from a long-term play standpoint. Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Matt Martyn: Thanks, Joe. I appreciate it.

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Best Real Estate Investing Advice Ever Show Podcast

JF989: How to Save Paradise and Put Up a Parking Lot…and Garages for BIG MONEY

Save paradise, put up a parking lot… and rake in the cash! That’s right, everything you want to know about investing in parking lots and garages are locked in this episode! Unconventional ways to invest? Absolutely! Take some notes!

Best Ever Tweet:

John Roy Real Estate Background:
– Founder of JNL Parking, a parking investments company
– Featured on CNBC as an expert in parking from his guide The Ultimate Parking Business Buyer’s Guide
– Serves on the Board of the National Parking Association and is a Certified Parking Professional
– One of the leading brokers in the Parking Industry
– Based in Fort Worth, Texas
– Say hi to him at www.jnlparking.com/
– Best Ever Book: The Fish that Swallowed the Whale

Made Possible Because of Our Best Ever Sponsors:

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 adwordsnerds.com/joe to schedule the appointment.

 

Investment advice from John Roy

 

 

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 fluff.

Today we’re gonna be talking about a topic we have never interviewed someone about before. As creepy as it sounds, I’ve actually dreamt about interviewing someone about this topic, because I hadn’t met anyone who invests in… Parking lots and parking garages! How are you doing, John Roy?

John Roy: Great, Joe. How are you doing?

Joe Fairless: I am doing well, and I’m pumped to talk about this stuff. I guarantee you no one’s ever been more excited to talk about parking lots and parking garages than I am right now, because again, I’ve interviewed close to 1,000 people and not one person has invested, or at least have talked about investing in parking lots and parking garages.

A little bit about John – he is the founder of GNL Parking, a parking investments company. He’s been featured on CNBC as an expert in parking, from his guide “The Ultimate Parking Business Buyer’s Guide.” He’s on the board of the National Parking Association and is a certified parking professional. He is based in Fort Worth, Texas, my hometown. With that being said, John, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

John Roy: Thank you, Joe. I don’t wanna put the listeners to sleep with all the accolades in parking. Sometimes it’s not a very exciting topic to talk about. People that know about the subject, once they start learning about it, they can’t stop talking about it. They always say “I’ve never really looked at it as an investment.” I know that I always have to pay, so it’s something that’s relatable to everybody, because we’ve all had to pay for this, but we never really think about it as an asset class.

Once people come around and learn about it, they’re usually very motivated to learn more about the investment and how they can get involved.

Joe Fairless: Well, let’s talk about how you make money with parking lots — well, first off let’s do this, before you answer that question. How about you tell us the business model behind parking lots and the business model behind parking garages? And if we can group them together in the same conversation or if we have to have two separate conversations.

John Roy: Great. Here’s the basic business – it’s the business of taking blacktop or pavement, an 18 by 10 section, and renting it over and over and over, with very little upkeep, no TI’s and very little headaches when you do it properly. That is the basic business model. Now, as with anything, it’s a lot more complicated, but what you really are looking for when you’re looking at parking investments is “What is my demand generator?” That is the number one thing that you always have to ask yourself.

We look for certain demand generators and certain demographics… We love universities, we love courthouses, we love hospitals and we love sporting events. We focus on those areas that have just proven time and time again to be great demand generators for people in need of parking.

Joe Fairless: Universities, courthouses, sporting events and what else? What was the fourth one?

John Roy: Hospitals.

Joe Fairless: Yes, I have driven to all four of those and parked somewhere. That makes sense. How do you run the numbers?

John Roy: It is calculated on a cap rate basis. A lot of times people get hung up in the price/space, what you’re paying. It’s similar to the hotel industry and a lot of other industries, where they’ll look at the price per key, but really in parking it comes down to your cap rate. You look at it and you analyze it just like any other business. You’ll take your revenue minus expenses, and you end up with your net operating income, and you look at it based on a cap rate.

Now, there’s opportunities within that, and you can’t always be scared of the cap rate because some of our best deals are purchased at low cap rates, so we immediately turn around, fix the operations and we can increase the cap rate sometimes by 300-400 basis points.

Joe Fairless: Will you give us an example?

John Roy: We were looking at a deal up in Milwaukee – it’s a great little parking market, not a lot of big institutional investors are really clamoring to look at some of these great Midwestern towns, but we found a listing where an owner was selling a Thai restaurant and a parking lot. A lot of people are gonna be chasing Thai restaurants in downtown Milwaukee. So we went up there, took a look at it, and we found a great opportunity with a surface lot. We didn’t really want the Thai restaurant, that’s not our forte, so we convinced the owner to keep the restaurant and we would purchase the parking lot for a million dollars.

Now, on the cap rate it was a 5% rate of return. It didn’t look great, but we saw opportunity, we saw the traditional signs that you look for, which is an attendant taking cash, not good signing, no automation… The operations were wrong. He was catering to monthly parkers, which in the parking industry you don’t typically want a lot of monthly parkers. You want daily, what we call “transient” parkers that are gonna turn the spaces over and over again.

So we purchased it on a 5% cap, then we turned around and signed a lease with Standard Parking, which is the largest parking operator in the country for $155,000/year. After our taxes, we were at an unlevered rate of return of 14%. We signed a ten-year lease, so we don’t even operate the lot; that’s not our model, we’re not operators. And we have a tenant in there that’s a publicly-traded company, and we have a great asset that we can probably turn around and make some good money off.

Joe Fairless: So you’re not operators, that’s what you’ve just said… Standard Parking – is that the name of the company? You usually just lease out your stuff to them?

John Roy: And there are hundreds, if not thousands of parking operators in the country. When somebody wants to get into parking, the easiest thing to do is to get into the operation side of it. Very few people have the capital, the wherewithal, the patience to actually invest into real estate, and that’s really what’s made us successful – we invest in the actual, physical real estate asset of parking, and then we turn around and lease it. It’s a cutthroat industry among operators. They operate on very low profit margins, so you’re actually able to get really good lease terms from parking operators throughout the country.

Joe Fairless: Okay, so you’re buying the actual real estate, the parking lot, but then you’re leasing it out so you don’t have to operate it, because as you said, it’s a cutthroat business and it’s tough to make some money on that unless you’re a well-funded, well-oiled machine…?

John Roy: I’m gonna jump to the end of your show here, where I’m gonna offer your listeners the best advice ever.

Joe Fairless: You’re killing my format! I’ve gotta ask you the question, we’ve got lead-up music and everything, so I’m gonna ask you the question and then we’re gonna keep our conversation going… What is your best real estate investing advice ever, since you forced my hand?

John Roy: Don’t get into operations. [laughter] If you’re going to get into parking, get into the physical real estate side of it. Don’t get into operations, it’s a nasty business. If you go into it, you’re gonna get killed. They’re very competitive. Focus on real estate. That’s really my talk here – we’re driven by real estate; there’s no money to be made in operations… Very little. Let’s look at the actual ownership of assets. However, we have a lot of experience in operations, because we’ve done that in the past, so we could literally walk into a parking lot or a parking garage and within the first five minutes be able to say, “Okay, this is how we’re going to improve this operation, this is how we’re gonna drive our return; here’s what they’re doing right, here’s what they’re doing wrong.” Once you know that, then you can drive the actual value.

For people who wanna get into this type of business, what I always tell them is if you find a great site, contact two or three operators, let them do the due diligence by having them give you offers to lease this parking space from you, and you’ll have three competitive bids and you’ll be able to know pretty quickly what the real value of that asset is, without getting in trouble.

Joe Fairless: Okay. Obviously, you need to have it under contract at that point, when you get the bids, right?

John Roy: Not necessarily, no. Because if it hasn’t been sold and you’re doing your due diligence work before, it doesn’t take the operator very long to give you an operating bid. It usually takes about a week to get a bid back, as long as it’s not a very complicated process.

Joe Fairless: But the concern would be that they’d buy it and take it out from under you.

John Roy: That’s correct, yes. If you’re in a marketplace that’s competitive, depending on the market, sometimes these assets are gone very quickly, so you do have to tie it up and then start your due diligence, and that’s usually the process that we follow.

Joe Fairless: You said you can walk into a parking garage and know pretty quickly what they’re doing right, what they’re doing wrong. You already mentioned two things that are wrong – an attendant taking cash and not good signage… What else is wrong that you’ve commonly seen?

John Roy: I’m gonna give you an example for a garage, and this is very common. We had an example of a garage in Baltimore where they couldn’t make money – they were operating in the negative. We walk in there, and there’s another garage just a few doors down that is just absolutely killing it. It doesn’t take very long for us to walk in there and say “It’s the lighting. You have a lot of female clients who will not park in a garage that’s not well lit, that [unintelligible [00:11:52].24] that’s dirty.” A lot of times you’ll neglect that demographic of your business, which is a huge mistake.

First thing we tell people is make the appearance presentable and welcoming, and don’t ignore that demographic of your clientele. They wanna be able to feel safe the whole time – safety is a huge issue in garages. So just simple things like fixing up the lighting, cleaning up the place, new paint will do wonders in turning around that garage.

Joe Fairless: And then things people do right with their garages – proper lighting, having it automated, good signage and clean with new paint?

John Roy: That’s correct. You want a garage that’s presentable, good lighting, you want the latest technology… You want to be able to have a garage where people can come in, pay and get out quickly. They don’t wanna wait in lines, they don’t wanna deal with cash, they don’t wanna deal with tellers a lot of the time. The business is moving away from the human factor into almost complete automation.

You really do find opportunities out there when you find what we call the dinosaurs – people still taking cash… Or some people will be familiar with the [unintelligible [00:13:02].24] boxes with a bunch of slots in them that you fold your dollar up sometimes to slip it in there… Whenever you see that, it’s a great opportunity. You know, on average, that according to studies through the National Parking Association, there’s about 30% theft rates whenever you’re dealing with cash.

Joe Fairless: You say “death rate”?

John Roy: No, theft.

Joe Fairless: Theft. [laughter]

John Roy: I guess it could — well, let’s not talk about that. Yeah, theft rate. People are stealing money, in other words. It’s a cash business, it’s been going on for years and it’s changing, but there still are some opportunities out there.

Joe Fairless: Okay, so if we find a parking garage or a parking lot that had any of the things you’ve just mentioned that are wrong, then it could be a tell-tale sign that we have a motivated seller, or someone who would be interested in selling. How do we get in touch with that person?

John Roy: You rarely see signs for parking lots and parking garages for sale. I don’t know if you’ve ever have seen one yourself, but it’s very, very rare.

Joe Fairless: No, I haven’t.

John Roy: That’s the thing. Most of the times they’re done quietly, that’s why we’re in such demand in the industry and that’s why we specialize in what we do, and it’s really relationship-driven and you have to do your work. We call it pounding the pavement – getting out there, going to cities… We focus on downtown areas. We’ll walk around and we’ll look for garages and lots that have some of the tell-tale signs that we’ve just discussed, and we’ll call the office back and we’ll do a title search, tech search, and then we just start dialing and trying to get a hold of people. Sometimes it takes years before they come around, but eventually we see that if they get the right price, they’ll be interested in selling.

Joe Fairless: What does that conversation sound like, when you reach out to them initially?

John Roy: “Never. I will never sell this asset. It generates great cash, I’m not in a hurry to sell.” That’s typically how the conversation starts. Over time you just kind of break them down, sometimes you’ll bring an offer and  you’ll pique their curiosity. A lot of the times sellers don’t have an idea that their asset could be worth as much, so once you present a number that they weren’t really thinking about, they tend to start opening up.

Sometimes there’s deaths in the families, they’re generational assets that are passed down, and the next generation doesn’t have any interest in operating the parking assets.

Joe Fairless: If we find a parking lot and we’re like “You know what? I might be able to get this person to sell me it”, who are the top three leasing companies I should reach out to?

John Roy: The biggest one is Standard Parking. They go by ticker symbol SP. They’re publicly traded, so you can actually invest in them. You have a lot of regional operators. If you’re on the East Coast, you have a company called [unintelligible [00:16:02].24] they’re a pretty big one. You have a Canadian company named Impark – it’s growing rapidly here in this country. Then I would say ABM is another one that’s a pretty big company in the Midwest… There’s no shortage of operators throughout the country.

Joe Fairless: What type of risk should we be aware of as someone who has real estate experience, but not this type of experience in this industry?

John Roy: This is why parking, in my opinion, is the greatest asset, because it’s really a hybrid of investment vehicles. You have basically a bond that pays you regular payments once you sign a lease with an operator, and it’s also a stock, because the land underneath it appreciates in value, and it’s always for future development – whether it’s a garage or a surface lot in a downtown. You have a stock, you have a bond,  it’s all backed by real estate, and you also have basically a tip that protects you against surges in inflation because you have annual CPI increases built into your lease.

A typical investment is you purchase a surface lot in a downtown, you sign a lease for $100,000/year, plus 2,5% annual CPI increases. You have this guaranteed income for the next ten years.

Here are the risks that you have if you don’t get a guaranteed lease from an operator – the biggest risk is the governments, through taxation. But I guess that’s an inherent risk throughout real estate. What some cities will do is that it’s really a tech parking in the form of the parking tax, because that’s usually the low-hanging fruit for cities. So they could implement overnight a 10% parking tax. Now, typically it’s a pass-through cost to the consumer, but that’s really the biggest risk that you have.

If you’ve done your due diligence properly and don’t have any environmental risk on the land below you, there’s really not a lot of risk because if the operator stops paying you, you just move on to the next operator.

Joe Fairless: You mentioned environmental risks… Who does the due diligence on this? What type of professionals do we need to hire in order to do all the due diligence that we possibly need to do on a parking lot?

John Roy: Number one – you start with an operator. Get them to give you a guaranteed lease – I can’t emphasize that enough. Number two – YOU are going to do the due diligence on the surface lot, and here’s how it’s gonna go. You’re gonna tie it up for 45 days, you’re gonna order a property condition report if it’s a garage. You want to know that the garage is structurally sound. Do not ever buy a parking garage without a property condition report, because there’s a lot of swindlers out there that will try to sell you a garage that’s falling apart or could be condemned, and those are usually huge expenses. So get a clean bill of health through a property condition report.

You’re also gonna get environmental reports, and this is more prevalent for surface lots than garages. You wanna make sure that the land that you’re purchasing has not been contaminated in the past, because you could potentially be liable, even if it’s before you purchased this asset. Once you get a clean phase one, as we call it, then you’re fine. If they come up with what’s called RECs (recognized environmental concerns), you need to order a phase two where they will actually drill into the surface and try to get samples of any contamination. If it comes back that there are contaminations, walk away. Don’t do anything but walk away. If you get a clean phase two, then you can proceed with the deal. It’s as simple as that.

You’re gonna get a survey, which is standard for most real estate, and you’re gonna get a clean title. As long as you get that done, then it’ll be a very good investment for you.

Joe Fairless: Anything else we haven’t talked about as it relates to investing in parking lots and parking garages that you wanna mention?

John Roy: It’s tough to do. It’s tough to find these assets, but if you do, most of the time you need debt, so you wanna leverage these assets. Typically, in today’s market you can actually get debt on these parking assets where in the past you really couldn’t… Especially surface lots, banks would look at them as land plays, and you know how difficult and expensive it is to get financing for raw land. But now, with about 35% down, you can actually buy these assets, as long as you prepare a good proforma showing the cashflows, and especially if you have a guaranteed lease from an operator, you can get financing pretty easily.

I would say people that wanna get into this realm – don’t get discouraged. It’s gonna take you some time, but if you ever do find a great asset, you [unintelligible [00:20:53].01] make it work, have a worst-case-scenario and you can pass it on to us and we’ll give you a referral fee. There’s opportunities to be had, you just have to be patient with it.

Joe Fairless: The chicken before the egg thing that I’m getting tripped up on is this guaranteed lease from the operator, but hen also getting financing… Because the bank’s gonna wanna make sure that you have the guaranteed lease, but you can’t get the guaranteed lease until you actually own it. So how does that work?

John Roy: That’s a great point, thank you for pointing that out. Sometimes you get so caught up in your industry, you do it so much that you think everybody understands it. A guaranteed lease is just as simple as getting a commitment letter from the operator. The commitment letter will specify all the details; you will actually work through a lease, and then the day that you close on the property, the lease will be in place. The contract is really contingent upon closing.

So you get the commitment letter from the operator, you will sign a lease and it will state that on this date, the lease commence is as long as the deal close.

Joe Fairless: It makes sense. Are you ready for the Best Ever Lightning Round?

John Roy: Let’s go.

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

Break: [00:22:11].07] to [00:22:52].25]

Joe Fairless: Best ever book you’ve read?

John Roy: The Fish That Swallowed The Whale. It deals with Sam Zemurray and the Banana King. If people have not read that, that would be the number one book that you need to read right now. Get it on our list, you won’t be able to put it down. Amazing book.

Joe Fairless: The Fish That Swallowed The Whale?

John Roy: About bananas. Who would have ever thought a book about bananas would be the best book that one could ever read?

Joe Fairless: Wait, I wanna make sure I got the title down right: The Fish That Swallowed The Whale And Bananas…? Is that the title?

John Roy: The Fish That Swallowed The Whale, that’s the title. And it deals with making of the Banana King.

Joe Fairless: Okay, got it. There’s a lot of nouns thrown into that title. Okay, cool. Best ever deal you’ve done?

John Roy: Downtown Cincinnati. We took an old mall, we converted into a parking garage. Purchased it for 14,5 approximately, and when I said “we purchased it”, we helped that real estate group buy it. Now potentially worth 25-28 million, two years later.

Joe Fairless: How much did you put in to make that conversion?

John Roy: It was already done. It was turnkey at 14,5.

Joe Fairless: Oh, wow. Best ever way you like to give back?

John Roy: I like to volunteer my expertise in parking. Like I said, it’s a difficult field to get into, but I will always take calls and give people advice. They’re free to call me on my cell phone and I’ll walk them through a process, I have no problem doing that.

Joe Fairless: Just on that best ever deal, you said it was a mall and now it’s a parking garage, right?

John Roy: Correct, it was a mall. It’s downtown on Ray’s Street and 3rd, if you know Cincinnati. It was repurposed into a parking garage, about 775 spaces, and it’s been an absolute home run.

Joe Fairless: It was repurposed after you purchased it or before?

John Roy: It was concurrent. We had a deal in place with the city and a contractor to buy in and have them convert it into a parking garage. It took about 8-12 months for completion, but once it was done, it opened and we almost filled that garage up within two months.

Joe Fairless: So you didn’t have to pay for the conversion?

John Roy: We did, yeah.

Joe Fairless: You did, okay.

John Roy: Basically the conversion, land, everything, all-in 14,5.

Joe Fairless: Okay, I’m with you now. Got it. What’s a mistake you’ve made on a deal, on a very tactical level?

John Roy: Partnering up with a developer where you contribute the land and they don’t contribute enough equity themselves. We will never do that again.

Joe Fairless: And where can the Best Ever listeners get in touch with you?

John Roy: Go on my website and you can find both me and my partner’s contact information. Feel free to give us a call if you’re ever in Dallas or Fort Worth. Look me up, I’d love to have a drink or dinner with you.

Joe Fairless: Well, the theme has been clear, that’s for sure, on parking, and that is if you get into parking and you get into operations, then you did not listen to this episode very closely, because John does not want you in parking operations. Instead, buying the parking lot or garages and then finding an operator that has the experience to then enter into a lease with them.

We talked about a bunch of stuff, from the due diligence that you need to do to how you make money, which is through that lease, which is something I didn’t know. Then also you said at the very beginning of our conversation how you don’t want monthly parkers, you prefer to have more transient parking, and you look for universities, courthouses, sporting events and hospitals.

Then also the ways to do a parking garage right and wrong, and when we look at the wrong areas, perhaps we find a motivated seller. Or in your case, you said not a lot of times are they motivated, so really just someone who should be selling and perhaps eventually will sell to you if you stay in their ear long enough. Thanks so much for being on the show, John. I hope you have a best ever day, and we’ll talk to you soon.

John Roy: Joe, my pleasure. Thank you!

 

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best ever real estate pro advice

JF942: Why You Should Buy Distressed THEME PARKS

Theme parks! Why aren’t you investing in this asset class? From water slides to roller coasters, our guest nets $10,000 a month leasing a theme part to a type of tenant you’d never begin to guess. TIME FOR BIG RETURNS.

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Bruce Dickenson Real Estate Background:

  • Buys distressed theme parks across the nation
  • Owner of over 20 theme parks from California to Mexico
  • Owns more than $15,000,000 in theme parks
  • Based in Tyler, Texas
  • Best ever book: The Bible

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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.
Today we’re gonna be talking to an investor who invests in an asset class that we haven’t come across before. How are you doing, Bruce Dickenson?

Bruce Dickenson: Hey, Joe. How’s it going? Glad to be on the podcast today.

Joe Fairless: Nice to have you on the show, and looking forward to digging in. A little bit about Bruce – he buys distressed theme parks across the nation. He is the owner of more than 15 million dollars worth of theme parks that are distressed, over 20 parks across the country — well, actually nationwide, from California to Mexico, based in Tyler, Texas. With that being said, Bruce, do you wanna give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Bruce Dickenson: Yeah, thanks Joe. That’s a great introduction. I’m based here in Tyler, Texas… I was pretty much born and raised my whole life here in Texas. I attended a Tyler high school here in Tyler, Texas, got lucky enough to get accepted into Texas A&M; I’m a proud Aggie.

I think my whole life I’ve kind of been a little bit of that entrepreneur, always trying to do my own thing. I never really was the 9-to-5 office guy, if you know what I’m saying. I always tried to find a little bit of a way to make money, and I kind of fell into the old theme park business, and it’s been doing pretty well.

Joe Fairless: Yes, that’s what I’m so curious about. You’ve piqued my curiosity with your background. Now, I wanna talk all about how you buy distressed theme parks, but how did you fall into the theme park business? How did you get into it in the first place?

Bruce Dickenson: It’s kind of a funny story. A lot of people know theme parks and water parks have been pretty much a family gathering place all around the United States; there are thousands and thousands of theme parks and water parks around the U.S. Unfortunately, not all of them are run with the best management. A lot of them are left to kind of rot away, a lot of the maintenance isn’t upkept, and unfortunately people get hurt, insurance ends up taking that business down.

There was a rundown water park by the name of WaterWorks; it was just a couple miles away from Tyler, Texas, and one day my brother and I hop the gates, and it was just running around that theme park, we were skateboarding up and down the water slides, drinking some beers in the drained pools, and everything… It was a pretty good time, and I think I fell in love it. And I figured, “Man, this would be great if I could own me a couple of these.” So I ended up buying that one shortly after college and started making a little revenue on it.

Joe Fairless: So you happened to be living next to the theme park, and it was abandoned. That’s funny, you were drinking beers and hanging out, trespassing on a theme park…

Bruce Dickenson: Well, Joe, there was nobody there to stop us. I wouldn’t say trespassing, as much as it was just a couple of kids having a good time.

Joe Fairless: [laughs] So you visited the theme park and then you said you bought it. Well, why did you buy it? There’s a lot of questions I have, but the first one would be why did you buy it?

Bruce Dickenson: That’s the easiest question of them all. Why did I buy it? Because I had so much fun there and I wanted to keep living the dream. Shortly after I bought it — here’s the thing… These types of water parks that are run down, they’re just sitting there. A lot of times the banks or the owners are just trying to get them off the books. So that’s where I come in – I buy them up pretty cheap, and little do you know, there’s still a lot of functioning equipment, and a functioning scrap metal, and other things you can do with the land. Not only the land, but everything else that comes along with buying something like that.

After buying it, I’ve shortly realized, “Man, I’ve gotta figure out how to start making some money off of this.” So what I first started doing was I just started charging people to come in and kind of do whatever they want there. So it was pretty cool, there was sort of like this natatorium in this particular water park – I started renting that thing out for like $10,000/month, no questions asked. I’m not quite sure what they do in there, but they’ve been pretty good tenants for about the last ten years.

Joe Fairless: Educate me… I should be able to google this, I know, but what is a natatorium? I’m not familiar with that. I should know, I’m sure.

Bruce Dickenson: It’s an indoor pool.

Joe Fairless: Oh, it’s an indoor pool, got it. So there’s an indoor pool that you rented out… For how much? $10,000/month?

Bruce Dickenson: Yes, sir. I was approached by other local entrepreneurs. They needed a place to run their business. They couldn’t quite give me some of the specifics… And heck, I didn’t really care about the specifics; I needed to make a little money. They said they offer $10,000/month, so I said “There you go, man. It’s all yours. I’ll leave you alone.”

Joe Fairless: And how long have they been renting that for 10k/month?

Bruce Dickenson: Roughly ten years.

Joe Fairless: And how much did you pay for the WaterWorks?

Bruce Dickenson: $65,000.

Joe Fairless: Holy cow! That’s a return right there.

Bruce Dickenson: Yup… That thing has paid for itself many times over. It’s great. A lot of times what I’ll do now is I’ll make rounds to the functioning theme parks and water parks… A lot of times these guys’ equipment breaks all the time. If I were you, don’t ever visit a theme park, don’t ever get on a rollercoaster; these things are some of the most unsafe things I’ve ever seen. I know from experience. I know probably because I’ve sold, you guys… They’re all second-hand safety straps, they’re all second-hand motors and engines on there. Heck, because I’ve pretty much sold all of that stuff to them.

Joe Fairless: Wow… So theme parks buy the equipment from you, and you’re getting the equipment from these rundown theme parks?

Bruce Dickenson: Yeah, you wouldn’t imagine to see how much of this stuff has just been left to sit there, and most of it is still working and functioning, it just needs a little bit of a power wash, a pressure wash, and it looks clean as new. Heck, I sell them sometimes almost looking brand new.

But yeah, like I said, these theme parks operate under very tight margins, so they’re not looking to go out there and buy a whole new rollercoaster if a break just suddenly stopped working. They’ll go out there and find any breaks — as long as it will get the thing to stop and people don’t die, heck, they’re still up and running.

Joe Fairless: Yeah, that will give me pause the next time I go to a theme park. You mentioned scrap metal… I know with apartments we talk about the number of doors or units that a community has; with mobile home parks it’s the number of lots, and I’ve heard that with theme parks it’s number of slides. It’s like, “Okay, I’m buying a theme park… We’ve got 57 slides.” That’s how you basically say how large a theme park is. Is that how you measure it as well?

Bruce Dickenson: When it comes to scrap metal, most of the water slides are made out of carbon fiber, so the scrap metal is gonna come from your rollercoasters, and also the support beams actually holding up your water slides.

The more intricate any sort of rollercoaster or waterslide is, the more scrap metal is gonna be in there, the more that thing is worth to me.

Joe Fairless: Okay. And how do you know which slides you should scrap, versus which slides you should keep for different tours and other things that you might use the property for?

Bruce Dickenson: For the most parts, the slides are fallen down. There’s probably ones that gotta go. If it’s holding up pretty good, I’ll leaving it there because we also rent it out to the local skateboarding community. The skateboarders love these rundown water parks, the slides… I don’t know how they do it, it’s pretty dangerous, if you ask me… But they take their skateboards right down the waterslide, and it’s pretty funny to watch. I went up there one day and watched them. One of the kids got banged up a little bit, but I think he was alright.

Joe Fairless: So far we’ve identified three revenue streams. One is selling scrap metal, two is renting the indoor pool, and three is renting it to a skateboard community. Do you have any other revenue streams for the theme park?

Bruce Dickenson: All kinds of party promoters coming through town… I don’t know if you’re familiar with a lot of the paloozas and those types of festivals. A lot of those paloozas and festivals, when they first started, they were looking for venues. Obviously, those are much more established types of festivals now, but there’s like the EDM festivals and all these other smaller, weird Goth festivals, and then festivals for people who just run around in their underpants and paint their bodies… I don’t know what they’re doing, but they need places to do their little festival man, so I’ll rent out the park to them and let them do it [unintelligible [00:10:14].01] The other day we had about 19,000 people over there.

Joe Fairless: Wow. Let’s talk about the other water parks or theme parks that you have, because you’ve mentioned four different revenue streams, which I didn’t think that you’d be able to be cash flow positive on, but you clearly are doing really well, especially with the one with the indoor pool, $10,000/month when you paid $60,000 to acquire it.

How do you identify if a theme park — because you’re in Tyler, Texas… I know you have property in Mexico and all across the country – how do you identify what revenue streams that particular theme park is going to generate? Because it sounds like it’s very local; it’s depended on the local economy.

Bruce Dickenson: That’s true, it depends on the local economy a little bit, but also, like I said, there are these traveling festivals – if you’re getting good with those guys, those guys know everybody in all these different local markets. So being able to find those different revenue streams with those guys – this is pretty easy.

One of the famous rundown theme parks – I don’t know if you’ve ever heard of the Six Flags AstroWorld, the one in Houston…?

Joe Fairless: Yeah.

Bruce Dickenson: That’s a big one! That one cost me about $350,000, but I’ve sold a lot of scrap metal from that thing. I just kept the — man, I’m blanking on one of the coasters over there… I think it was called the Viper. That thing is still operational. Sometimes I go there with my family and we just strap it up and keep going.

Joe Fairless: What type of liability insurance/waivers do you make sure that you have in place? If any…

Bruce Dickenson: Legally, you’re supposed to have a lot, but here’s the thing, man… You grease up the right politicians around here, throw a little bit of money their way, they’ll kind of turn a blind eye. I wouldn’t say I spend a whole lot on it, I’m saying that’s where people get caught up in the whole legality of it all. I’ve been operating just fine with very minimal insurance at this moment.

Joe Fairless: That sounds risky, and it just doesn’t sound right…

Bruce Dickenson: You know what’s not right, Joe? Paying insurance every single month, every single year for how many years in a row, have nothing happen, and then all of a sudden one time one thing happens, and all of a sudden your insurance premiums go through the roof… You’re telling me that’s right? That’s highway robbery, if you ask me.

Joe Fairless: One thing you might wanna look at… I’ve interviewed a guest who talks about how he creates his own insurance company, and you have a monthly payment but you pay it to yourself. Then, if there is an event that happens where you have to pay out, then you’re covered by another insurance company. Your insurance company si being insured by another company and all your payments go in there. But only a few are I think paying more than $350,000 in insurance on an annual basis.

Bruce Dickenson: Well, I’ll have to look into that. I don’t know, but that sounds like a lot of money. I’ve been operating pretty good just the way I have been. I’ll look into that, maybe off the air you can set me up with this gentleman.

Joe Fairless: So you’ve got over 20 theme parks, from Texas, California, Mexico… How do you manage them?

Bruce Dickenson: I get a couple local people to manage them. It’s really depending… There’s not a big demand for people wanting to work in these types of places, but heck, I sure do pay good, I’m pretty flexible, the hours are great… So I’ll kind of go in there and I’ll find some local teenagers that I can really trust, and just kind of hand them the keys and say, “Hey man, the more money you can make for me, the more money you make for yourself.”

And then I’m constantly on the road, swinging by, checking in… Sometimes I don’t even let them know, I’ll just come check in, see what they’ve got going on. They’ve been pretty good so far… I let them hire and fire their own employees… I like to delegate when it comes to my management skills.

Joe Fairless: What are some lessons learned along the way, as a distressed theme park owner?

Bruce Dickenson: One big lesson – if you don’t know how to skateboard, don’t try to skateboard down a waterslide, I’ll tell you that. [laughter] Oh my god, I’ve got so many splinters in my backside…

Other things – be careful of who you’re getting into business with, because sometimes people try to take you for the proverbial ride, if you know what I’m saying.

Just kind of make sure you go in there, do your due diligence of what has been there, because a lot of times these theme parks have been sitting there too long, people go in there and they do a lot of picking. They’ll get all the good stuff out of there; they’ll get all the motors and the engines and the box cars and everything like that… You wanna make sure that all the cables from the bungee cord swing and everything – you wanna make sure those are all there, because heck… If you get some bungee cord cables, you sell those to somebody else, maybe you get about $50,000 just for some good functioning bungee cords. Those are about 200 feet, some pretty good stuff. So you’ve gotta be careful, go in there and do your due diligence, make sure that all the stuff is there.

You wanna make sure you hire some people — you want somebody always there, patrolling the lot, making sure nobody’s there coming by, piquing into your stuff. It’s hard work, but somebody out there’s gotta be able to move this scrap metal.

There’s other functioning theme parks that need to barely make it by, you know what I mean? [laughs] Until they shut down, then I’ll buy it up.

Joe Fairless: Bruce, based on your experience as a distressed theme park investor, what is your best advice ever for real estate investors?

Bruce Dickenson: Don’t listen all too much advice… If you find something that you love, just go for it. It doesn’t matter if it’s gonna make a ton of money right away; you’ll eventually figure it out. That’s what I did. I eventually figured it out. I started small time, local, then started working my way up big time, and heck, maybe one day you can also own AstroWorld. Once I do my run there, I might put that up for sale.

I say just follow your gut, don’t listen to too many other people. A lot of times they’re gonna try to hold you back and try to get at what you’re getting at.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Bruce Dickenson: Let’s do it!

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

Break: [00:15:50].06] to [00:16:32].23]

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

Bruce Dickenson: The Bible.

Joe Fairless: Best ever personal growth experience, and what did you learn from it?

Bruce Dickenson: Best ever personal growth experience is if you’re gonna be breaking and entering into a place, make sure you can run faster than your friend, because they’re gonna catch one of you!

Joe Fairless: [laughs] I think for legal reasons I probably shouldn’t ask, that way it doesn’t incriminate you, right?

Bruce Dickenson: No, sir… I think the statute of limitation is long expired.

Joe Fairless: Alright, what happened?

Bruce Dickenson: Again, this was probably at the beginning of…

Joe Fairless: This was WaterWorks?

Bruce Dickenson: This was WaterWorks, man. We were breaking and entering, I was there with my little brother… And sure enough, we were riding bicycles around the bumper car area, and one of the security officers came balling up on us, and I made it out. I didn’t hear from my brother for about three days, but he eventually made it out.

Joe Fairless: I’m just curious… On that $10,000/month that you’re making for renting the indoor pool, what are your expenses? I’m just wondering what the cash flow is. What are your expenses on that $10,000.

Bruce Dickenson: To be honest, as long as the electricity works, that’s all they care about. I’m not allowed to go in there. To be honest, I wouldn’t wanna mess with those boys. They don’t seem like they’re really up to much good, but if they’re doing their thing… They’ve got the entrepreneurial spirit as well, so they’re doing their thing and I kind of stay out of it. I make sure the electricity is working.

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

Bruce Dickenson: I tell you what, Joe… I’m not really that much of a giver backer. I give back by getting people jobs and that’s pretty much it. I feel like I’m a pretty fair business owner. And I give back by maintaining these pretty much dumpy theme parks that they’ve got going on in their towns.

I’m not really much of that… I’ll go [unintelligible [00:18:07].18] I think that’s pretty good.

Joe Fairless: Thinking back on a deal that you’ve made with the theme parks, what’s a mistake along the way that you made that you wanna share?

Bruce Dickenson: I don’t know, there’s a lot of mistakes… I think a lot of times people wanna get you into some bad agreements, some bad negotiations. A lot of times they’ll not want you to take a tour of the park where you make that final agreement and final payment.

One time I trusted this guy a little too much, so I bought the water park. It ended up turning out there wasn’t much left for me when I got in there. I was able to turn that land over and kind of sell it for just a little bit more than I bought it for, so it ended up being okay.

Joe Fairless: And where can the Best Ever listeners get in touch with you?

Bruce Dickenson: If you wanna get in touch with me, I do a comedy show every Thursday night in New York City, at a bar in Hell’s Kitchen called The Gaf. You can find all that information at www.bombsheltercomedy.club. We’ve got the Bomb Shelter Comedy Festival coming up in 12-15th April. It’s gonna be a good time. We have some pretty big time comedians: Mark Normand, Anthony DeVito, Marina Franklin, Sean Lynch… These guys have all been on national TV…

Joe Fairless: Wait, I gotta stop… Best Ever listeners, April Fool’s, baby… This is not Bruce Dickenson, this is Matt Azark, and he is not a distressed theme park investor, nor is he an investor in real estate, but he is a stand-up comedian in New York City.

Bruce Dickenson: Yeah, man… I think your listeners probably are quick enough to catch on that everything that I was saying is pretty much just kind of pulling out of my butt, so… Yeah man, I’ve been doing stand-up comedy for a long time, so if you’re in New York City, come on out, man! We’re gonna make it happen. This Bomb Shelter Comedy Festival is gonna be great. You can check out all the details at bombsheltercomedy.club.

Joe Fairless: Awesome, and that will be in the show notes link – bombsheltercomedy.club. Matt, thanks for doing another April Fool’s Day episode. I think it was two years ago that you did an episode… You were Ted Winters, and…

Bruce Dickenson: Ted Winters, and we described a Ponzi scheme, I believe…

Joe Fairless: Yes, yes… And I got very angry messages from people on BiggerPockets, via e-mail, on Twitter… They were like, “He’s describing a Ponzi scheme. Why don’t you realize that?” I was like, “Listen to the whole episode, please.” and they’re like “Oh, my bad…” So if you want another good April Fool’s Day episode, just search “Ted Winters Joe Fairless” and you’ll be able to hear all about a Ponzi scheme.

Bruce Dickenson: Yeah, and I run a comedy podcast. It’s a weekly podcast called “Cart Talk with Matt & Chris”. It’s like golf cart, not car. I know that there’s a Car Talk… I didn’t know that when I created this podcast. Anyway, it’s “Cart Talk with Matt & Chris.” You can find that on iTunes, we’re on Soundcloud, Stitcher… Tune in. It’s a once-a-week episode, so check us out there as well.

Joe Fairless: Awesome. Matt/Bruce Dickenson… Matt Azark, glad you came on the show, and I hope you have a best ever day. You sound like you are a legitimate theme park investor. Maybe you’ve missed your calling.

Bruce Dickenson: I actually have broken into a couple rundown water parks and did some skateboarding, and actually did wipe out pretty hard. It’s pretty dangerous stuff. Don’t go playing around in a rundown theme park, because you will definitely get hurt.

Joe Fairless: And we’ll end it on that. Thanks a lot, Matt. Talk to you soon.

Bruce Dickenson: Yeah, thanks, Joe.

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JF922: How to Buy CHEAP Raw Land Part 2 #SkillsetSunday

We’re BACK! Raw land investing and insights part 2! Take notes and start shopping for your cheap parcels surrounding your area today!

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Mark Podolsky Real Estate Background:

– Owner of Lank Geek Enterprises
– Investing in raw land for over 14 years and completed over 5,000 transactions
– His company is Frontier Equity Properties (http://www.frontierpropertiesusa.com/welcome)
– Popular podcast called The Land Geek (http://www.thelandgeek.com/)
– Based in Scottsdale, Arizona
Listen to his Best Ever Advice Here
Listen to part one of this 2 part series here

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JF915: How to Buy Raw Land at $.20 to $.30 on the Dollar! #SkillsetSunday

Seems cheap, well it is! And buying raw land in the path of growth can be one of your greatest investments of all time! Hear how Mark the Land Geek ? does it and how you can apply the same principles to start your raw land investments.

Best Ever Tweet:

Mark Podolsky Real Estate Background:

– Owner of Lank Geek Enterprises
– Investing in raw land for over 14 years and completed over 5,000 transactions
– His company is Frontier Equity Properties (http://www.frontierpropertiesusa.com/welcome)
– Popular podcast called The Land Geek (http://www.thelandgeek.com/)
– Based in Scottsdale, Arizona
– Listen to his Best Ever Advice Here: https://joefairless.com/podcast/jf77-buying-raw-land-2-0/

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JF768: What You CAN and CAN’T Do with Self Directed IRA’s #skillsetSunday

You’ve wondered what you could and couldn’t do, now you will know! Cure all your doubts about this this peculiar little entity and hear why you should have one. You can’t miss this one!

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Kaaren Hall Real Estate Background:

– President, uDirect IRA Services, LLC
– Helped thousands of Americans invest their IRA into real estate, land, private notes & more
– Educating individual investors and professionals is the cornerstone of uDirect IRA
– Based in Orange County, California
– Say hi to her at www.udirectira.com

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JF739: An Upscale Land Development Deal Gone WRONG #situationsaturday

It didn’t go completely wrong, but you need to listen to this episode to find out what our guest’s first intentions were and how it ended up.

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Dan Breslin Real Estate Background:

– Host of REI Diamonds podcast (http://www.reidiamonds.com)
– Founder of Diamond Equity Investments, a fix and flip company operating in Philadelphia, Chicago, and Tampa Bay
– Since 2006 he had closed more than 300 deals except for one has been Off Market purchases
– Based in Chicago, Illinois
– Say hi to him at http://www.diamondequityinvestments.com/

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Go to http://www.adwordsnerds.com strategy to schedule the appointment.

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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!

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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

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JF554: How He Wholesales, Holds, and Raises Money!

Our Best Ever guest first bought a duplex as a buy and hold investment, and now wholesales value add deals. He has raised private capital and seeks to close even more deals this year. Hear what he believes is the best investing strategy!

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Tosin Oduwole real estate background:

  • Purchased 2 properties as buy and hold investments, done 5 wholesale deals and bought 1 plot of land for development
  • Based in New York City, New York but born and raised in Saint Louis, Missouri
  • Been a real estate investor since graduating high school after several unhappy stints at fast food restaurants
  • He also raises money forjmrepartners.com
  • His Best Ever book is: The 50th Law by Robert Greene

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

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JF481: 5 Ways to Maximize Your Success with a Real Estate Broker

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

Who’s got the deals? That’s right, the man in the office next-door… a real estate broker. You know pocket listings are out there somewhere, but brokers are willing to feed well seasoned investors multiple deals per year if they know they can execute. Be sure to tune in today to hear these five ways you can benefit from a broker!

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Eric Odom’s Real Estate Background:

  • Commercial real estate broker with decades of experience in real estate
  • First as a lender and currently as a broker
  • His focus is on office, retail and multifamily investments
  • Say hi to him at http://investfloridashow.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.

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JF466: Neighbors Misinform Your Potential Buyers and Drive Them Away #situationsaturday

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Land deals…too simple to mess up a sale. You got dirt, length, and width. But then before you sell, the neighbors have a word about the land that they share with the buyers during the due diligence. UGHH! Our Best Ever guest went through just that! Hear how he turns it around!

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Seth William’s Real Estate Background:

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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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JF464: How Property Tax Sales Can Land You $728 MILLION!

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. .

Who knew that a property tax sales niche could turn into a million dollar operation in a short amount of time? Of course, every municipality is different, but our Best Ever guest has streamlined an offering system in multiple markets solely on property tax sales. He is a genius at his craft and he is sharing some awesome advice!

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Richard White’s Real Estate Background:

– Say hi to him at http://www.sterlingamerica.com
– Founder of Sterling America
– Based out of Callaway, Maryland
– Started invsting in property tax sales and started his own property tax sale investment firm now worth over $728 million

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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JF448: How He Started with Nothing and Made 12 Million in Real Estate Part Time

He recently sold a property for six times the amount he bought it for! He’s says it wasn’t a difficult thing, just a series of wise decisions and being in the right place at the right time. Our Best Ever guest had a 90% LTV for property number one, and now pays cash years later. He looked into certain types of inspections that would give him an edge on negotiating a deal. Being savvy in the development space, he could purchase “unbuildable” lots and make them build-able. $12 million dollars later…he’s now looking to liquidate. You have to hear his 40 years of experience in this show!

Best Ever Tweet:

David Krulac’s Real Estate Background:

  • Bought and sold over 900 properties for his own personal inventory
  • Wrote a 342 page book titled, How I Started with Nothing and Made $12 Million in Real Estate
  • Say hi to him at 12milliondollarbook.com and http://www.centralpennlots.com
  • Based in Mechancicsburg, PA (outside of Harrisburg)

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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JF 421: How He Made TRIPLE the Income from One Piece of Land

The title doesn’t lie, our Best Ever guest purchased land and subdivided it three ways to maximize his profits. He is a Canadian investor that jumped into the game at the young age of 23. He is now 27 and still acquiring properties at a rapid pace along with his power team. Hear his story and take some notes!

Best Ever Tweet:

Guillaume Dufour’s real estate background:

  • 27 years old and based in Montreal, Canada
  • Bought his first income property at 23 years old and completed 1st flip at 24
  • Sold his most profitable deal that netted $110,000
  • Real estate earnings expected to be $200,000 in 2015
  • Say hi to him at http://www.youngrealestatemillionaire.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.

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JF 396: Nuclear Pharmacist Funded 2 Million in Real Estate

He’s a pharmacist…and invests in real estate, IT IS POSSIBLE! Our Best Ever guest is an advocate of sharing what he has learned about real estate through his experiences with the investor community. He shares a construction project, info about his portfolio, and beliefs on being a self-sustained millionaire. Hear how he also funds local projects using his own money earned from his investments.

 

 

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