JF2372: Generating Off-Market Deals Through Broker Relationships With Chad Sutton

Chad quit engineering because it pigeonholed him into a very narrow career path. Real estate, however, offered him plenty of opportunities without limits. His family had a real estate business, and he followed in their footsteps.

He started by acquiring a 35-unit multifamily property. It was an off-market opportunity, and the business took off from there. Since then, Chad has taught several classes on how to approach real estate brokers and leverage your perceptual position into getting off-market deals even if you’re a first-time investor.

Chad Sutton Real Estate Background:

  • Full-time real estate investor, formerly Aerospace/Mechanical Engineer
  • 2 years
  • Portfolio consists of 138 units, 5 properties
  • Based in Nashville, TN
  • Say hi to him at: www.thequattroway.com 
  • Best Ever Book: The Honey Bee

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Best Ever Tweet:

“What you really have to do is build that perceptual position” – Chad Sutton.

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JF2364: How To Go From A Commission Chaser To A Problem Solver With John Chin #SkillsetSunday

John cut his teeth as a traditional real estate broker. He escaped the “hamster wheel” of chasing sales thanks to a mentor who put him on the fast track to investing. That paradigm shift made him see licensed agents as problem-solvers for homeowners rather than just salespeople.

Now John teaches real estate agents how to leverage their license into creating 8-10 various income streams as opposed to relying on commission alone. In this episode, he talks about his lead intake process that helps licensees make the most out of their leads.

John Chin Real Estate Background: 

  • John and Ron are the founders of Investor Agent
  • Together they have done 2,800 rentals and flip properties (mostly short sales, foreclosures, and REOs)
  • Closed over $260 Million in residential investments
  • He currently manages over 470 cash flow rentals
  • Based in Orlando, FL
  • Say hi to him at www.investoragent.com 

Click here for more info on groundbreaker.co

 

 

Best Ever Tweet:

“You’ve got to look at your listing as just one tool in your tool chest. It’s not the main driver of your business ” – John Chin.


TRANSCRIPTION

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

John Chin: I’m doing awesome, man. Thanks for having me again.

Theo Hicks: Yeah, no problem. Thanks for taking the time to speak with us. And today being Sunday, we’re going to be doing a Skillset Sunday. We’ll talk about a specific skill set that can help you in your real estate business, and we’re going to talk about how you can go from being a real estate agent who chases commissions to being a real estate agent wolf. John’s going to explain what that means, where the word wolf comes from, because he told me a really funny story before we got on. I want him to tell again where it came from, to have this concept hit home for you. Before we get into that, a refresher on John’s background.

He is the founder of InvestorAgent, and InvestorAgent has done 2800 rentals and flips, mostly short sales, foreclosures, and REOs, closing over 260 million dollars in residential investments, and currently manages over 470 cashflow rentals. He’s based in Orlando, Florida, and the website is investoragent.com. So John, do you mind telling us a little bit more about your background and what you’re focused on today?

John Chin: Yes. I cut my teeth in traditional residential real estate brokerage. Then, like a lot of us who end up in the investment business, where we’re flipping houses, buying rental properties, building cash flow portfolios, and serving investors to do the same thing, there was a pivotal relationship in our past – we met somebody, and they kind of set us on a fast track of doing deals, and kind of got us off of that. We call it the sales hamster wheel, where you are in perpetuity unemployed and chasing the next closing or closings. So I was fortunate enough to have that kind of relationship, and pivot the trajectory of my real estate career to actually doing deals, and then using my license as a way or just a tool to solve problems for sellers. So it’s kind of a paradigm shift.

That whole wolf story came from Pulp Fiction, where we kind of liken ourselves to one of the characters in Pulp Fiction, Mr. Wolf. Anybody who’s listening who saw that movie, there was that accident in the back of the car, they ended up at Quentin Tarantino’s character’s house, and he was going through the roof, he was upset because he had a dead person in his garage… So the boss guy sent his problem solver to the house to fix that problem, and his name is Mr. Wolf. He shows up in the tuxedo at the front door, and he says, “Hi, I’m Mr. Wolf. I solve problems.” And he comes in and cleans up the whole situation. So that’s what we kind of do for sellers.

I think the biggest paradigm shift I had that helped me transform from being somebody who just tried to chase more closings and more listing and buying commissions, to somebody who was actually building wealth, was the paradigm shift from being a salesperson to being a true problem solver for homeowners or property owners. This means that you go from only being able to make money one or two different ways as a licensed salesperson, to actually being able to make money maybe eight to 10 different ways on a property, while solving problems for homeowners that are a little bit more flexible, that most licensed agents can’t do. So you end up making more money, you end up getting more deals for yourself, and you end up solving more problems for sellers.

Theo Hicks: Perfect. Then you were talking about in order to start this process of solving the homeowner’s problem is to properly doing the seller intake. You talked about a form that you have, that people use. Can you explain at what point of the process is this used? Is it when I find a lead? And then maybe tell us what people usually do if they’re not doing seller intake.

John Chin: If you get into the mind of a traditional licensed agent who’s working what we call the retail business,  that’s all they do exclusively – they work with buyers and they work with sellers. When you talk to a homeowner in that space, what you’re trying to do is turn that phone conversation into a listing presentation or an appointment at the seller’s house or at your office to list their property. And to do a CMA form a lot of times, you do your formal listing presentation… Basically, how I can help you sell your house as quickly as possible, for the highest net proceeds as possible, that’s kind of the goal.

Everybody heard the expression, if you’re a hammer, everything looks like a nail. Well, everybody looks like a nail to a licensed commission salesperson who’s just trying to do that all day. So we bring in this process like the number one thing that helps you shift from being a commission earner to being a problem solver dealmaker is when you do that initial intake call a little bit differently.

So if you just do this one thing really well, number one, you’re going to look a lot different to that seller… Because most people aren’t coming to them as an advisor/consultant capacity. What they’re really trying to understand from that seller, “Look, you’re at point A right now and you’re trying to get to point B in your life, and your house is a mechanism to help you get there.” That’s the difference, the way you’re looking at that situation with the seller, as opposed to somebody who says, “Okay, I know you’re just trying to sell your house as quick as possible, for as high proceeds as possible.” That conversation looks different than the former. So if you do a proper, what we call a lead intake consultation with the seller… And this is the template that we use. I’ll kind of walk through what we’re trying to accomplish in that template. But it’s just a different line of questioning.

If you follow that line of questioning in a specific chronology or a specific order, then number one, you’re going to sound like a consultant, a lot different than most agents, because you’re really trying to get deeper into the life situation of the seller. Then the house just becomes a tool or a mechanism to help them get from point A to point B.

Theo Hicks: That makes sense. Let’s talk about this lead intake consultation form. So just explain, if you’re on the phone with the seller, do just read straight through it? Or is there I guess a script that you do? Or is it like, if they say this, then you say this, like a logic tree type of deal? How does it tactically work?

John Chin: Okay, so it’s a worksheet. And I always have a paper copy printed up, and it’s a front and back worksheet. So I literally can just print one up and I can fill out the front and I can fill in the back. All of the students that we work with, our trainees and our licensed agents that we support, they literally fill this out, take a picture of it, the front and the back, and then they can send it off, and now we can huddle to figure out how to best solve a problem or turn that into a deal. Or maybe it’s a better short sale listing, or maybe it’s a better traditional listing… But the sheet helps you get there, to that if-then prognosis, if you will.

So to answer your question, you just start at the top of the sheet, you go down and you just fill in the blanks. Now, the blanks just prompt you of the type of information you want to ask. As you get skilled at using the sheet, the second and third-level type questions will follow the answers you get from just the blanks. In other words, the sheet serves as a wedge for you to get what we call first-level answers from these sellers.

For example, I could ask you, “Why are you selling the property?” and someone says “Well, because I just evicted the tenant. The place is kind of trashed, and I want to get rid of it now”, for example. Well, then I don’t just stop there, even though the sheet just prompts me to find out why they’re selling. What I want to do is then go second and third level, because that’s where the juice is, that’s where you get the real nuggets that are going to help you find out what the true problem is for that seller, and help you monetize that deal.

In that situation, it would prompt me then to not just leave it with that answer, but then for me to ask, “Well, tell me about that experience with your last tenant. What happened there? How’d you end up getting that as a property, as a rental?” So all kinds of solutions come out of the info you get when you go second and third level with the sellers.

It’s a huge paradigm shift, because most people want to just get facts. And a lot of investors too, they want to just get facts, because they want to get to understand is there equity in this house? Or is there no equity in this house? They just want to go for the jugular and they take five to 10 minutes, because they’re spending more time qualifying than they are actually trying to solve a problem for somebody.

So that’s the benefit of what we do as licensees are. We have so many tools in the tool chest; you’ve got to look at your listing as just one tool in the tool chest. It’s not the main driver of your business, for example. That’s the major shift from people who are on the hamster wheel to actually evolve into problem solvers and dealmakers. But you could almost look at this sheet as a marriage between what cash investors who are looking for motivated seller leads, what they do on the phone, combined with what your typical licensee does on the phone with the seller.

You combine the two because they both offer unique solutions that they both bring to the table. But even your cash investor who talks to motivated sellers – they’re a hammer too, because all they’re trying to do in most cases, they’re trying to find out how much equity you have, build rapport, and then make a lowball offer and throw a bunch of spaghetti against the wall with maybe 15 to 20 sellers to get the deal or the discount they want. Well, if you’re a licensee and you take a consultative of approach, you can monetize maybe three or four of those out of 15 or 20, as opposed to just one out of 15 or 20. That makes sense.

Theo Hicks: Yeah. So is that where the eight to 10 different ways of making money comes from? You’re going to have a higher success rate? Or are you saying that there are eight to 10 different ways to make money on a particular deal?

John Chin: Both. So the former is what we emphasize, because of the latter. In other words, because you’re able to solve a problem a few different ways with the seller, there could be two or three ways to make money with the seller. Now there’s only one ideal way that’s a happy marriage or medium between what they’re trying to accomplish in life and the profit motive you may have as a real estate professional. So you want to find that one highest and best answer, if you will. If you’re able to have multiple ways to do that and there’s a highest and best answer, then to the latter point there, you can take more leads and turn more leads into deals.

So if you’re concerned, like a lot of us are, about our lead generation spend… Because you know, depending on where you are on the spectrum – if you’re a cash buyer, you’re spending anywhere from low competitive market $50 to $100 per paid lead, up to $200 or $300 per paid lead. If you’re in the retail sales space, you’re spending anywhere from 20 bucks a lead, five bucks a lead, on up to $100 or $200 a lead, too. So if you’re in a business that you’re trying to scale, and you’re sensitive about your lead gen cost, then you want to take as many of those leads and monetize as many of those leads as possible. Well, if you’re a hammer and you only have that one solution, whether it’s on a cash buyer side or on the listing side, you can’t monetize many of those leads. So it’s both.

Theo Hicks: Got it. I wanted to circle back to that… But I first want to hit on what’s actually on the form. I don’t want you to walk us through every single question, but what are some of the ones that are pretty unique, that maybe people don’t typically think about asking?

John Chin: Okay, let me give you the overarching philosophy here. We call it the four Ps. When you’re using the form, what the form does in two pages with about 50 different questions, or lines of questions, or fields that you have to fill in – what that does is it actually just answers or addresses four Ps that we’re trying to uncover. The first two Ps – and I’ll break them down, because it’s an acronym for four different things that you’re trying to uncover. The first two Ps you get done in the first few minutes of the phone call, and that’s “Is it a property type that I can deal with?” In other words, if you don’t do vacant land, then you don’t have solutions for vacant land or commercial properties, then you want to qualify that right upfront. It’s kind of a knockout question.

Second thing is, “Are you talking to the person,” that’s the second P, “who has control of that property? Are they entitled to the property? Or are you talking to a friend of the owner?”, for example. So you have to not waste your time and obviously address those right up front. Those are the two easy ones.

The second two Ps are a little bit more in-depth. And the sheet – it does a couple of things. Number one, because of this line of questioning, it allows you to build rapport with somebody by virtue of your seeking to understand them with a line of questioning they’re not used to from commissioned salespeople. You build rapport with them and it helps you agitate some pain and urgency, because you have to break this inertia of them doing nothing with their property, to get them to act… And that involves people getting emotional, and getting into what we call that negative fantasy that keeps them up at night when they’re worried about what this property, if they don’t get rid of it, is going to do to them in life.

The second two Ps are pain and profit. That’s what really takes up the bulk of the sheet. The magic behind the methodology is the profit is self-evident, it’s obvious. If I want to find out what kind of profit potential I have on this as a dealmaker, then I’ve got to understand what the cashflow opportunity is, are they willing to leave the loan in place, for example, on a subject-to acquisition? Is there potential, because they don’t need to sell it right, now for us to lease option it? What would the spread be between what market rent is and my carry costs on the property if I was going to structure something like that for a cash flow deal, for example?

So the profit potential, that line of questioning gives you permission and helps you build rapport naturally, and gives you the actual facts that you need to determine if there’s profit potential from a cash flow perspective and/or equity position.

Then the other P is pain, or urgency. The questions are designed so that you want to agitate the pain to build the urgency to get them off the couch, for example, to actually take action, whether that’s getting the property listed or getting it under contract. You have to agitate that pain, because if you’re going to get a deal, people only leave equity or cash-flowing deals if they’re making an emotional decision, so you have to stir the emotion. And that’s where I think people fail the most.

Our typical lead intake is going to take anywhere from 30 to 45 minutes, assuming we know the first two Ps we have checkmarks with – they are in control of the property and it is the type of property that we want to deal with, that we can monetize. If we know those first two Ps, then the rest of the conversation should take about 30 to 45 minutes if you’re doing it correctly. I’ll tell you that when it relates to the pain portion of the questionnaire, the type of questions that elicit that pain and agitate the emotions to get them to take action – I’ve asked somebody what they want to get for their property on the front end of the phone call, and I’ve compared it to what I can get them to sell their property for at the end of the phone call. It’s like a 10 to $15,000 difference, just by virtue of making that pain front of mind for them.

I’ll give you an example, coming back to your initial question, what are some questions on here that maybe somebody doesn’t ask; or maybe they do ask, but they don’t take it third level. So for example, somebody says they just inherited the house. You’re going to see a lot of that; we have two million houses in the probate pipeline with the boomers dying off right now. There’s a lot of heirs or siblings that don’t want to contend with those properties. If you’re talking to somebody, for example, who just inherited a house, they’re in another state, and they’re trying to unwind the legacy of this property owner, their deceased family member, or parent… And they’re telling you that that is how they have the property. Then what I’m not going to do is just leave it there. I’m going to say, “Well, what happens if you can’t sell it? Who’s helping you with this probate case, or to help liquidate all these assets?” And then they’re going to tell me — I’m going to uncover more of their pain and more of their situation that is going to be more agitating to them. So it’s not even the questions on the sheet, it’s kind of the mindset you have. The sheet gives you permission to go second and third level to agitate pain, to get them to take action.

Theo Hicks: Very interesting. You mentioned that once this sheet is completed, then what are the next steps? It sounds like for you, you have people that use this and they can kind of come back to you and your program and talk through it. What about people who don’t have access to this? What should they do once they’ve finished out their intake?

John Chin: That’s a good question. So as you evolve as a licensed agent, [unintelligible [00:18:55].07] having somebody you can link into that can help you put all this information together into a practical solution. I’ve never had that question before, because the people that we work with, we work with on a consistent basis. They’re around the country; so I don’t want to get into a pitch here, but… If you don’t have somebody that can help you put those tools together, I guarantee you the way you find them is you can just do on Google and find people who are spending big money for leads like this, that have dealt with sellers in urgent situations. So if you’re a licensee and you want a quick low-hanging fruit way to find those people, you can go to your local REIA meetings and find somebody who helps people with different deals, that does coaching programs. They’d gladly get on the phone with you to help you unpack one of these after you finish it, so that you can get their feedback on how to do it. Because a lot of times, they’ll either provide the funding for it, or they want to JV with it, or there’s an incentive there to turn into a deal, and to take you by the hand and walk you through that process.

Another way to do it is to go on Google and just type in “sell my house cash,” and you’re going to see all the people who pay big money for Google AdWords to be found by sellers who you’ve already started working with. You can collaborate with that person, and they’d be happy to do it, because the incentives are there to partner with you on a deal. I’d say that those are the two easiest ways to do that.

You could also just look at the mail you get at your own house. A lot of people get direct mail from people who will pay cash for houses. Or just google cash for houses in your local area and you’ll find people who market in your geography that want leads like this, that will partner with you. So I would say lean on somebody like that.

If I was in that situation, and I had one of these done… By the way, I’ll walk through the structure of the type of information you’re getting without going into the exact questions… If I had that already done and I could take a picture of it, the front and back of that sheet, and send it off to that experienced cash investor or that deal maker, and then I jump on the phone with them, they have everything they need right there to unpack the deal. Because I’m actually collecting more information than chances are they’re even getting on their intake phone calls.

Theo Hicks: That makes sense. I’m glad we talked about this, because I think this clearly applies to real estate agents, but as you kind of mentioned a few times, it really applies to anyone who’s talking to owners and attempting to get them to sell their house. So that applies to anyone who’s generating off-market leads.

Some of the big takeaways that I got is – first of all, this is kind of obvious, but making sure that right off the bat on the phone call, you’re asking the questions that will automatically let you know if you’re talking to the right person and if this deal meets your criteria. That way, you’re not going to waste time in the meaty part of the conversation which is the profit potential, and then the pain and urgency.

It sounds like, in a sense, you’re trying to tap into what would make them motivated to sell the property, or why they’re motivated to sell the property. It’s most likely going to be some emotional reason, that’s going to be an emotional decision, which is what’s going to help you not only get leads, but get the best types of deals. And then overall kind of shifting your paradigm from just intaking a bunch of facts and then leaving it there, as opposed to approaching and saying, “Hey, you said you’re at point A and you want to get to point B. Let’s figure out how we can use your house to get to that point.” And then going through a solid seller intake form, but not just relying on those questions only, but using those questions to catapult into the second level and third level questions. You kind of gave us an example of that.

Then you talked about how can you create this form, and then once you have this form, how do you know what to do with it? Well, you really need to find someone who’s the expert. I like the advice you gave, you can just Google “sell my house cash,” and you’ll find all the companies that are trying to capture these leads, and you can work with them. So John, is there anything else want to mention before we sign off?

John Chin: Yeah, I’ll give you one last juicy tactical nugget. It’s the setup of that phone call. So literally, when you first talked to that seller on the phone, my question is have you ever worked with a licensed professional who takes more of an advisory approach to solving problems as opposed to only listing houses? Right off the bat, that sets a different tone with you. So they say, “Well, no, I haven’t.” Because they never have. “Well, let me tell you what I do. I solve problems for sellers, in various situations, various scenarios, in various life situations, whether it’s divorce, or they’re missing payments on their house, especially in today’s environment. Sometimes listing your house isn’t the best thing. My intent with this phone call is to get as many of these puzzle pieces on the table of information about your situation where you’re trying to go and what you’re trying to accomplish, so that we can together put our heads together and figure out how to put these pieces together to get you from point A to point B. So with your permission, I’d like to ask you some questions about your house and your situation, and then we’ll be able to solve this problem for you. Is that fair?” That’s the intent statement that we use to set up that actual phone call. Then you have permission to go into everything, because they know what you’re trying to accomplish now, and you clearly are different than your competition.

Theo Hicks: Yeah. Instead of just going straight into the questions. That totally makes sense; making sure you have that solid intro to set the foundation for the conversation. Thank you for sharing that, John. Well, alright Best Ever listeners, thank you for listening. You can learn more about john at investoragent.com. Thank you for tuning in. As always, John, thanks again for joining me today. I enjoyed our conversation. Have a Best Ever day and we’ll talk to you tomorrow.

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JF2348: A&E’s Flipping Boston With Dave Seymour

Dave Seymour was a firefighter for 16 years and is now a full-time real estate investor who also was on the A&E’s hit TV show “Flipping Boston”. Dave has done millions in real estate transactions and now manages a 100 million dollar fund investing in multi-family.

Dave Seymour Real Estate Background:

  • A  firefighter for 16 years and now is a full-time real estate investor
  • He was acclaimed as the star of A&E’s hit TV show “Flipping Boston” 
  • Has done millions in real estate transactions
  • Now manages a $100 million dollar fund investing in multi-family 
  • Based in Boston, MA
  • Say hi to him at: https://www.freedomventure.com/ 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Educate don’t speculate” – Dave Seymour


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 the fluffy stuff. With us today, Dave Seymour. How are you doing Dave?

Dave Seymour: I’m well, Joe. How are you, man?

Joe Fairless: Well, I’m glad to hear that. I am well also and looking forward to our conversation. A little bit about Dave. He’s been a firefighter for 16 years and is now a full-time real estate investor. He was on the A&E show Flipping Boston, he was the star of that show, and he’s done millions in real estate transactions. Now he manages $100 million fund investing in multi-family. And that’s what we’re going to spend a lot of our time focused on. Based in Boston, Massachusetts. So with that being said, Dave, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Dave Seymour: Yeah, absolutely. It’s kind of interesting when you hear somebody describe a 10+ year journey in two or three sentences right there… But I was a firefighter and a paramedic for many years here just North of Boston, a city called Lynn, Massachusetts. I found myself in some financially challenged positions, and transitioned into real estate. I had some construction experience, Joe. Firefighters tend to have that second and third job, and mine was in construction, and that was my first taste of investment. I got to see investors. Their clothes were cleaner, their cars were nicer, they smile more than I did while I was digging ditches. So I kind of thought to myself, what are they doing that I’m not? And I figured that out, and it was an education for me. It’s crazy, man. I attended one of those seminars that were traveling around the country back then, invested, and actually did what I was taught to do. And the results from that spoke for themselves. It got me out of some financial jackpots I was in, just through financial illiteracy.

Spending more money than you earn is probably not a great policy. But I learned through real estate what an appreciating and a depreciating asset was, and a lot of the single-family stuff that most people are familiar with – the eating popcorn on a Saturday morning, watching HGTV; it looks so easy, doesn’t it? But in the real world, real estate investing takes expertise. It takes practice. It takes some guts. But if educated, and then implemented what I learned – it took me on a pretty dramatic journey.

One day I’m sitting in a firehouse watching the show, and the next day I’m on TV creating a show. We did about five years of Flipping Boston, which was great. It was a lot of fun, it was also a lot of work; it wasn’t financially what most people think reality TV is.

Joe Fairless: What do you get paid for that?

Dave Seymour: Yeah, look at you asking me such a personal question… It’s fine. Here’s what I didn’t get paid. I didn’t get paid Kardashian money. You know, we started out at about $1,500 bucks an episode, myself and my partner. And at the height, it was probably around $30,000 an episode. But you’ve got to remember, we weren’t doing fluff and puff, we weren’t doing garbage flips. In New England where we are, our stock is pretty old. The majority of our properties that we buy, fix and flip, were turn of the century 1910, 1920, ’30, ’50, ’60s. So they had a lot of deferred maintenance. Plus you’re bringing all of that up to code. So it was a lot of work, but the national exposure was the real value in doing that TV show.

Joe Fairless: So many questions, and we’re going to focus a lot on your 100 million dollar fund, but just a little bit of context for your background. You said you were in some financially challenged positions. How bad, financially, did it get?

Dave Seymour: I was working 120 hours a week. So I would work full-time in the fire department, full-time construction on my days off, and then part-time nights and weekends. And I came from a very blue-collar background job. I was never taught what money really was, which was a tool. I was taught that saving was smart. I was taught to just trade time for money. And when you’re continually trying to keep up with the Joneses,  I crossed that threshold where I had about $60,000, $65,000 in unsecured debt, depreciating debt, cars, boats, leather coats…

Joe Fairless: Leather coats? You don’t seem like a leather coat kind of guy to me.

Dave Seymour: [laughter] You know, that’s just — I use that as a term.

Joe Fairless: So you didn’t buy any leather coats?

Dave Seymour: Well, I might have had one. I didn’t look that good in it, Joe. [laughs] But being a consumer rather than an investor. I think we trained that way, Joe. I think it’s how America is driven. And for me, I was 2006-2007, I’d refinanced my primary residence I think three times in 18 months, because they told me my house was a bank, and it was always going up in value. And then I found myself in late 2007 in a pre-foreclosure, potentially working on a short sale. That’s when I actually started in real estate. The first job I tried to do was save my own house. Very pleased to say I was able to do that.

So it was bad… It cost me a marriage, it cost me a relationship. When you’re working that much you can’t really show up and be present for the people that you love, because you know, I’m riddled with fear, doubt, and insecurity every day, like, “Oh my god, can I make ends meet?” So I never forgot that. And it’s kind of interesting, Joe, because I carry that sense, if you will, that feeling into everything that I do today in dealing with our investors. Because I know that they’re probably feeling a lot of the things that I felt, like what is five years, 10 years, 15, 20 years going to look like on their financial landscape? So I’m very cognizant of that. I think my own journey has been a huge benefit to me and to my investors, rather than a deficit, like “Oh my god, that guy nearly lost his house. Why would I invest with him?” That’s probably the best reason to invest with a guy like me, because I take every dollar seriously as if it was my own when it comes to investing.

Joe Fairless: How did you get on the show?

Dave Seymour: I was a seminar student. I was a product of a three-day class and then some mentorship. It was amazing…

Joe Fairless: Was that Rich Dad, Poor Dad, or what?

Dave Seymour: Well, it was a different company. It was actually the Russ Whitney group. And Rich Dad, Poor Dad actually bought them out. So it’s the same kind of organization. It’s crazy, man; that world is a different animal in and of itself, buy… It really is, Joe. And I got to be on the other side of that curtain because they asked me to start teaching because I was doing so well, and I’m like, “What, are you crazy? I’m just coming out of a pre-foreclosure scenario. Now I’m going to get on the stage and teach?” They said, “No, just share that it works. Don’t lie. Don’t say you’re a billionaire. Just tell the truth.” And I found that people resonated with that.

So because I was recognized as a teacher and a trainer, somebody in that world suggested that I put in an application for a TV show. It was a company out in New York, it was a vanilla application that you could download… And I just did it for [unintelligible [00:09:17].07] and giggles, Joe, to be very honest with you. I loaded the application with profanity, so that I knew somebody would at least pay attention to it… And yeah. They picked up the phone, they kind of laughed at me. They said, “You’re either a genius or you’re crazy putting all these incredibly unpleasant words in your application.” And I’m like, “Look, dude, they got you to get on the phone, didn’t it?” And I said, “Why don’t you come up to Boston? I’m a firefighter. We do this real estate stuff the same way I fight fires – when everybody else is running out, we go running in.” I said, “I’ve got a great crew, we can have some fun. And if we don’t, okay, I’m still going to do houses.” And it was like that posturing I think was important as well. They came out, shot a little sizzle reel (they call it), sent it to the guys at A&E. And it’s funny, the guys at A&E their comment was, “That big English guy looks like he could get pretty angry. We want to see more of that.” And that was it, man. That was it. So the game’s began.

Joe Fairless: Now let’s fast forward, let’s jump ahead to a hundred million dollar fund. Have you raised all the hundred million dollars?

Dave Seymour: Oh, I wish. No. I could spend 100 million tomorrow, if somebody wants to write us a check. We’re about 80% of where we want to be right now, but we are in acquisition mode.

Joe Fairless: 80% of where you want to be. So you’ve raised 80 million dollars?

Dave Seymour: We’re 80% of where we want to be. There is not 80 million in the bank either right now. A lot of the money — I’m not trying to avoid anything, Joe. But a lot of the…

Joe Fairless: No. Fair enough. Yeah.

Dave Seymour: …a lot of the capital is coming through what’s called qualified funds. So I could say 80 million, but because it’s qualified funds, I might only land 50 million of it. But we’re consistently in a capital raise mode, because of the amount of apartment complexes. They’ve gone through our underwriting funnel job. They’re primed and ready to go. But the reason we transitioned into this world from where I was, is because the landscape demanded it. COVID has created an unprecedented opportunity. And that word unprecedented is used pretty much in every conversation today. Unprecedented that our kids don’t go to school, unprecedented that the restaurants are shut down, unprecedented medical front; it applies everywhere. So if you’re doing the same thing now that you were doing late 2019, then you’re probably not doing the right thing.

And we looked at it and we said pre-foreclosures will hit, the forbearances will be lifted, and people will be hurt. Unemployment is still three and a half times what it was pre-COVID. The moratorium on tenancy is going to be lifted, people will be evicted and they will need to be reassigned to new housing. We need to be ready for that. And it’s a case of he or she who controls the capital in this chaos is going to win the race. And the amount of dry powder – and we refer to dry powder as the capital dollars on the sideline – has grown exponentially as I’m sure you’re aware. So we have a responsibility to be in that position to put that capital to work. Double-digit returns, which is what we target out.

Joe Fairless: And when you say qualified funds, are you talking about retirement accounts?

Dave Seymour: Yeah, correct. So that’s your self-directed IRAs, your solo 401K’s. That money funnel, if you will, has got a lot of checks and balances along the way. I work solely with one company, Horizon Trust, so I have a great line of communication, and our systems integrate, so we can take maybe a couple of weeks off of the general timeline that it takes to get that capital into the fund. Because as soon as it’s in the fund, my goal is to get it out the door and on the street into a property as soon as possible. So yeah, that’s what we mean by qualified funds.

Joe Fairless: Why is a lot of the money through qualified funds?

Dave Seymour: That’s a great question.

Joe Fairless: Firefighter connections is my guess.

Dave Seymour: Yeah, it’s partly that. It’s an interesting world. Fearless real estate is kind of like our topic here, but at the end of the day, I’m now in finance more than I am in real estate. So these kinds of funds, what’s called a regulation D 506(c) fund – because I’ve gone through the SEC compliance process, I’m allowed to market to the general public for my fund. Well, there are really two kinds of investors; there’s what we call the retail investor and the institutional investor. The institutional investor are the smaller hedge funds, pension plans, things of that nature. They are very comfortable with 10, 20, 30 million dollar commitments into a fund, but they shy away when it’s a new fund or a first fund.

So the qualified funds for us are coming through the retail investor pool. I’m 54 years old, so I have a lot of commonality, for want of a better term, with my investor pool… Because we’re in their late 40s or early 60s age group where we’re starting to think significantly about “Will the retirement capital honestly get to the finish line for us?” The number one fear is having the money die before you do. It’s interesting, medicine has extended our life and yet our financial fortitude doesn’t meet life expectancy anymore. People are still just plunking money into 401Ks, are not paying attention to their expense ratios inside of there, and they talk about compound returns, but they never refer to compounding costs.

So that’s why we attract that kind of capital, I think. We have various marketing funnels, Joe, that are out there. And it’s a wide net that we cast. But it’s the retail investor that puts their hand up, because I think they just identify with the message. If you’re sitting on three and a half million, four million dollars right now, is that really enough? And most economists say it’s not enough money to get there. So I’m not necessarily interacting every day with the pension funds and the smaller hedge funds, although I do have a lot of conversations with those guys.

You know, it’s funny, man – you get to a point where you show them your PPM, your private placement memorandum, which is a legal document that explains the business model for the fund. Why we invest, where we invest, what’s that criteria, returns, etc, etc. And these funds are looking at it and saying, “I love what you’re doing. It all makes sense. You know what though? You’re only 100 million, you’re way too small for us. Please call us when you’ve got fund two up and running, with half a billion, and then we can write you a check for 75, 80, 90 million dollars.” So the business model isn’t what’s being overly scrutinized, it’s actually the size of the fund, which is pretty interesting.

So that’s why I think it’s commonality, it’s people resonating with the message that we put out there as to why wouldn’t you let somebody else do all the work, Freedom Venture Investments, and you the investor participate passively in those double-digit returns that we target on the fund when we execute and bring the assets in? Does that make sense?

Joe Fairless: It does. You mentioned marketing tactics, you’ve got a bunch of them. What’s been the least successful and the most successful at bringing in the accredited investor?

Dave Seymour: Yeah – the least successful is thinking that just because you have the TV guy status, that people are going to write you a check. [laughs] I think that’s kind of interesting. We brought in Kevin Harrington to be head of business development for us. Kevin Harrington was one of the original sharks on Shark Tank. And Kevin is a fantastic asset to the company. But you look at it and you think, why is this so much work? And you can’t just have a fund and think the money is going to come. So what we did was we stepped back after a couple of weeks and said, “What more that we need to be doing?” And for us, the most successful funnel, if you will, that we have, is actually building out an online education piece that brings the investors awareness and competencies up the gradient enough so that when we have the offer in front of them, it makes a lot more sense to them. And we do that through various online social media type platforms, and things of that nature. That’s been the number one spot.

And then the second spot is where we’re at right now, which is actually doing in-person presentations for our accredited investors. We do one down in Tampa, which is where the majority of our assets are, in the Gulf Coast region in Florida. We just go to a really nice steakhouse, we do an hour and 20-minute presentation, gauge the interest in the audience, and then start to work with them and bring them up the gradient, so that they can feel comfortable about making an investment. I’ve always done well live and in person, Joe, and it’s so hard right now with COVID. The very best restaurants — Tampa is a little looser than we are up here in Massachusetts. Our offices in Tampa are firing on all cylinders. But up here in Mass, I think I’m down to about 18 to 24 butts in seats. But again, look, my minimum investment is $100,000. It’s two, three, four thousand dollars to put on a decent event, feed your potential clients, gauge their interest… This isn’t a hard sell.

Joe Fairless: How do you find them? Like the in-person one.

Dave Seymour: Yeah. Direct mail. We pull a list of accredited investors, we can go in and base somebody’s accreditation on earnings. It’s amazing how much information is out there when you know how to go find it.

Joe Fairless: Who do you use for direct mail?

Dave Seymour: My marketing team does it. Blockbuster, or Big Block, I think, is a postcard that we use. A little bit bigger. And again, that’s where we get a little pop for the TV thing, because you get to be able to use you know the face and the names, and people are like “Oh, that’s a little bit different.” It’s just separating yourself from the noise, Joe. If you can do that… Just like I did using profanity to get a TV show… I now use the TV show to separate myself from the other funds that are out there that are vying for this retail investor capital.

Joe Fairless: And I know this is more the marketing team, but if you do have knowledge of this, we’d love to learn about it. On the direct mail piece, do you have a frequency in what you send those direct mail pieces to the credit investors?

Dave Seymour: Yeah. Let’s say I pull a list of 1,000 accredited investors from direct mail marketing. It’s not like 1,000 pieces one time; you want to segment that out. So we’ll do either a three or five-touch campaign over, I think it’s a three to four-week period. I’m not exactly sure how often they send them out. But we commit to that. I’m not a great marketer, I know the basics. So with direct mail, my response rate for these kinds of events is probably around three and a half, 4%. We haven’t done too much split-testing with these pieces because we haven’t really needed to yet. But it’s trial and error. Marketing is all trial and error. It seems to be in such an intangible world sometimes for me; I’ve learned my lessons over the years with online marketing companies and stuff like that. I like tangibles. I want to see dollars out, customers in, cost of acquisition. Again, the marketing team does all of that. But it’s not just a “one list, one time, I hope it works.” Its three to five-touch campaign is what you generally need to get that kind of response rate.

Joe Fairless: And you said three to five touch campaign over roughly a three to four-week period. Just so I’m tracking right, does that mean about one per week?

Dave Seymour: Yeah. Approximately one a week. It’s the consistency that really gets it done.

Joe Fairless: Different postcards each week, or the same ones?

Dave Seymour: Well, we haven’t needed to split-test yet.

Joe Fairless: So the same one over and over?

Dave Seymour: Yes. So the same one. We back that up locally here in the Massachusetts market. I have a radio show that runs on Saturdays, like a talk show piece. It’s a one hour show called Real Estate Revealed. So I also use that as an education and a traffic-driving platform as well. I bring in Kevin Harrington and interview him, and I interview my custodian from Horizon Trust, and that kind of stuff. It’s all angles. It’s all angles.

Joe Fairless: It’s a fun conversation, I appreciate you sharing the inner workings of how you’ve put together the fund. Have you purchased any properties with the fund money yet?

Dave Seymour: Yeah. We’ve got a smaller asset class that’s just about to come into the fund. And there’s approximately, I would say, another 15 or 18 million that has been underwritten and has been walked, and is right on the cusp of coming into the fund. It’s interesting, because what we’re seeing now is practically zero outbound marketing for leads for properties. My partner Walter Novicki, he has over 25 years syndicating multi-family apartment complexes in the Gulf Coast region… So he’s known as the guy to call when the you know what hits the fan. And we’re actually getting pre-foreclosure leads now… Because we deal with a smaller asset class, Joe; I don’t like these 200, 250, 500-unit complexes. I’m going to let Wall Street and all the big boys fight over those. And then what we’ll do is we’ll pick up all the crumbs, because the verticals are exactly the same for us.

Joe Fairless: What size units are you targeting?

Dave Seymour: We target 40 to 150, we’re in that range.

Joe Fairless: Got it.

Dave Seymour: And again, because the verticals are there, property management, construction, those kinds of things for repositioning, we almost look at it as if it is (and it is) all one fund or one real estate strategy for each of these complexes inside the fund. It’s inbound calls.

I was talking to a fund manager the other day, and he deals with international pension funds for teachers. And he asked me bluntly, he said, “Your fund is 100 million.” He said, “If I write you a check for 100 million, how long can you put it to work?” That’s a hell of a question to have somebody ask you. And I quickly dialed in my CIO, Walter, and I said “If I give you 100 mil tomorrow, how long can you put it on the street?” He said, “I can buy 300 million of cash flow and assets within the next 30 to 45 days.” And that’s a pretty powerful statement to make. But again, it only comes through longevity and expertise in a market, being able to execute on that stuff. So that conversation is still going on. I wish I could tell you with all confidence that we pulled that one off, but it’s interesting the way that they’re looking at this stuff. They’re looking for a lot of distressed debt right now, and that’s probably part of the fund too for us, is bringing distressed debt into the fund and working some of those angles as well.

Joe Fairless: Just taking a step back, based on your experience in real estate investing. What’s your best real estate investing advice ever?

Dave Seymour: Educate, don’t speculate. Really, it’s that simple. There are so many investors out there who think they know what they’re doing. I’m watching a lot of speculative investments going out there right now. People got hurt in 2008, 2009, 2010 because they did the ostrich thing. You know what I mean, Joe? They put their head in the sand and said, “Nah, we’re going to be alright.” No, you’re not. You’ve got to pivot, educate. Do you know what’s going on in the marketplace? Do you know what the yield is on a T-Bond right now? Because that’s important. Do you know how many mortgages are in forbearance right now? That’s important. You know, all of the easy data that they throw out there needs to be analyzed with a professional mindset, and a lot of people just kind of wing it. And I’ve seen a lot of people get hurt. I’m very proud to say I have never ever in my career, missed one payment or lost $1 of investor capital ever, ever. I’ve always done that from an ultra-conservative standpoint. I don’t do skinny deals. I educate myself first before I execute. So yeah, sorry to get long-winded man, but it’s important. Educate, don’t speculate.

Joe Fairless: We’re going to do a lightning round. But first, are you ready for the lightning round?

Dave Seymour: Whatever you’ve got. Bring it on, Joe. I’m feeling strong. I’m on a roll.

Joe Fairless: I know you — you can handle anything. First though, a quick word from our Best Ever partners.

Break: [00:24:21][00:25:08]

Joe Fairless: Alright, let’s do a lightning round… Real quick, Best Ever way you like to give back to the community?

Dave Seymour: Tunnels for Towers. It’s a charity close to my heart that supports 9/11 victims, and veterans, and first-responders.

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

Dave Seymour: Freedomventure.com, look us up online. You can find out who we are, what we do, and how we can help you.

Joe Fairless: Dave, thanks for being on the show. Thanks for talking about your fund. Thanks for talking about a little behind the scenes action on the show Flipping Boston, and your personal story, along with ways that you’re currently attracting accredited investors to your fund, the focus of the fund being 40 to 150 units, and why that is the case. So I appreciate that. Hope you have a Best Ever day, and talk to you again soon.

Dave Seymour: Thanks, Joe.

Website disclaimer

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JF2345: Financing Commercial Real Estate With Anton Mattli

Peak Financing CEO, Anton Mattli, has decades of experience in commercial and investment banking, private equity, and commercial real estate. Throughout his career, he and his team have closed over 5 billion commercial transactions.

Anton Mattli  Real Estate Background: 

  • CEO of Peak Financing
  • He has 20 years of real estate experience 
  • Personal portfolio consists of 200+ units (not syndicated)
  • Based in Dallas, TX
  • Say hi to him at www.peakfinancing.com 
  • Best Ever Book: Tipping Point

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Focus on cash flow” – Anton Mattli


TRANSCRIPTION

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

Anton Mattli: Very good. Thanks, Theo, for having me.

Theo Hicks: And thank you for joining me as well. A little bit about Anton’s background. So he is the CEO of Peak Financing, and has 20 years of real estate experience, with a personal portfolio of over 200 units, not syndicated. He is based in Dallas, Texas and his website is peakfinancing.com. Today we’re going to talk about commercial real estate financing as it relates to the Coronavirus. Before we talk about that, Anton, do you mind telling us more about your background and what you’re focused on today?

Anton Mattli: Sure, happy to. As your listeners can hear, even though I’m based in Dallas, Texas, I’m not from Texas. I was born in Switzerland, and right after school, I studied finance, economics, I went into banking, worked for UBS in New York, then Tokyo, and Hong Kong, and then I left banking. So I have worked all around the world, always in real estate related activities and other financing activities. And after that, I started helping high net worth individuals and family offices with their direct investments. I have been involved in this now for roughly 20 years. And separately from that, we also have founded Peak Financing, which is a financing intermediary. Essentially, we are a commercial mortgage broker, and we find the best financing solutions for commercial real estate based on the asset, where it’s located, as well as the sponsors, and we make sure that there is a certainty to close, which is a crucial piece to the puzzle, as you know.

Theo Hicks: Before we go into the financing part, you said that you manage money for families and then high net worth individuals?

Anton Mattli: Yes. My focus on that is no longer as strong as it was in the past. My focus always was on direct investments, whether it was real estate or other types of alternative investments, as they’re also called. So the non-traded securities, obviously, real estate and commercial real estate always made up a big bulk of it. But some of the other investments were also industrial firms, as well as oil and gas, and similar types of investments.

Theo Hicks: Okay. Let’s talk about commercial real estate financing. I’m going to be selfish and focus on multi-family. So do you work with all types of apartment investors, or do you only do agency debt or only bridge debt? Is there a certain unit number you want to see, or a minimum loan amount that you want to see? I’m trying to get a picture of what types of loans you do.

Anton Mattli: Sure. Generally speaking, we prefer to be above the one million mark, ideally above the two million mark, but we have done a lot of deals with a property value of over a million and a half to two million, too. In that space, so only agency debt, whether it’s Freddie SPL, or Fannie, or [unintelligible [00:06:23].20] as long as the property is stabilized. If not, then it’s typically a bank loan. As a property gets larger, we have been doing also a lot of bridge loans. Over the last six months or so, since COVID-19 hit, not as many of those, because a lot of bridge lenders stopped lending. But still, for good sponsors, and good locations, good assets, with a true upside potential there are still bridge loans available. We are also doing CMBS loans, life insurance companies for lower leverage loans, mezzanine loans in certain situations, typically for larger deals, for more experienced sponsors… So we essentially find the right financing solution for a particular situation.

Theo Hicks: Okay. So you do it all then.

Anton Mattli: Yes.

Theo Hicks: Over a certain size.

Anton Mattli: That’s correct. Yes.

Theo Hicks: So let’s talk about the bridge loans first, because you mentioned that in the current environment… And I’ve heard this too, and many people listening, you’ve probably heard this as well, that bridge lenders – some of them have stopped entirely, other ones have slowed down. But you mentioned that there are still some available to good sponsors, good market, stabilized deals. So let’s talk about what you mean by a good sponsor. So if someone comes to you and they’ve looked at a deal that isn’t going to qualify for agency debt, or they want a bridge loan, maybe to cover renovation costs, what types of things are you checking off the list to make sure that, “Okay, this person is going to qualify for a bridge loan right now” or “Okay, I know this person is going to get rejected”?

Anton Mattli: So in the past, because there were so many players that came into the markets for bridge debt, it was very easy to get bridge debt virtually for anyone. As long as you had financial strength with a minimum net worth and liquidity, we were able to do it. And the reason for that really was that most bridge lenders that were out there, did it similar to CMBS loans. So they originated a loan and then they sold it into the CLO market, which is essentially collateralized loan obligation. So it was securitized today; it didn’t really stay on the book for more than maybe three to 12 months maximum. Because the CLO market really has collapsed since COVID-19, most players that are still active, that have a strong balance sheet, and they are willing to keep these bridge loans on the balance sheet if they are not able to securitize it. As a result, they want to focus on sponsors that have a true experience with these types of assets. So they’re really looking for someone who has already done it in the past, or partners up with someone who has already experience with true value-add properties, rather than someone who just feels, “Well, here. I want to have a value-add deal.” And as you know, particularly in the syndication space, everyone is looking for that. That’s not really for newcomers to the game. It’s very hard to get a decent bridge loan. But the benefit is, as you also know, and many of your listeners know, is you can partner up with someone who brings that experience to the table.

Theo Hicks: Is there a specific number of years, or number of units, number of deals? Or is it more on a case by case basis? Or is it just, “I’ve done one value add deal, so now I qualify for it”?

Anton Mattli: Yeah. Obviously, the more, the merrier, right? But at least one that went full circle; they want to see ideally in the same market where the new deal is being targeted, as well as the similar size.

Theo Hicks: Perfect. And then let’s talk about the agency debt now. I know one of the big changes is the upfront reserves that are required. So do you want to talk about that a little bit?

Anton Mattli: Obviously, that’s on everyone’s mind. And it makes it tough, particularly for syndicators; they need to achieve a certain cash on cash return in year one and year two, and they need to raise more equity. There is just no other way around it. Depending on the leverage, and again, for syndicators specifically, most long to go for maximum leverage, so the reality is, for most of these agency loans, it will be nine months to 12 months of principal and interest, and if it’s a smaller loan on the small balance Fannie side, then it’s still 18 months. At least on the Freddie SPL side, it’s 12 months. So that’s certainly a benefit to go with Freddie SBL. Frankly speaking, whenever it’s possible, in that sub $6 million mark and it fits into the Freddie SBL box, I would generally advise to go with Freddie SBL anyhow, compared to Fannie.

But coming back to these reserve requirements that need to go into escrow – it obviously is a hard pill to swallow. But frankly speaking, other than the fact that the lender controls these funds, rather than you as a borrower, you should really, in my opinion, raise those funds, regardless. Even if the lender didn’t require you to raise escrow –this 12-month or nine-month, or whatever it may be– of principal interest, it’s really advisable to have that raised anyhow. Because at this point, we still do not know how the situation will evolve after the election and into 2021. So if you have a new deal, it’s really worthwhile to have plenty of cash cushion.

Theo Hicks: Sure. So if the lender does require the reserves, and I raise 12 months principal and interest, what happens to that money? Do I have access to it after a year? Do I have access to it until the deal is sold? When do I have access to this capital?

Anton Mattli: Yeah. So generally, with Freddie, you can get it back a little bit later. The rule there is – it needs to be, essentially, for 90 days all the restrictions have to be lifted, and then you need to be sure that your property has been performing for two quarters. So I would say in the best-case scenario you may get that money out within six to nine months, but realistically speaking, it’s probably more than 12 months to a year and a half, unless you’re in a just perfect situation.

So I would anticipate if I raise money, that that money potentially sits with the lender for a year to a year and a half. Now, if you need that money for debt service, you actually can have access to it. It is really meant as a principal and interest reserve. So if for whatever reason, due to COVID-19 or other reasons – it’s very hard to tell, but whether it’s very specific to COVID-19 or not, but if you have collection issues, if you have occupancy issues and you, in turn, have cash flow issues, that makes it harder for you to service your debt… You can ask the lender to pull from these funds to service the debt, right? Obviously, you cannot just decide that on your own, but you can make that request.

Theo Hicks: That’s what I was going to ask you… So I’m assuming that they’re going to check to make sure you actually need it. This might not be something that changed during the current pandemic, but when it comes to these reserves, these upfront reserves are different than ongoing lender reserves or…?

Anton Mattli: That is correct. That’s completely separate. Yes, so that’s definitely completely separate; you still have the replacement reserves that you have to fund. If the lender also requires you, and that’s depending on the program and how the lender assesses the risk, you may also have to escrow insurance and/or taxes. Very often you don’t have to do that. But the replacement reserves definitely have always to be funded separately from that principal and interest.

Theo Hicks: And that is that then kind of held by the lender for the entire hold period, or…?

Anton Mattli: Well, it’s really meant for replacements, right? So as you do replacements, you can draw from these. So essentially, it’s money and money out, eventually. So as you spend more, you can request to get money back for proven replacements that you have done. And all the while, you continue to do your monthly debt service that also includes a certain amount for replacement reserves.

Theo Hicks: So besides the bridge loan and the agency loan, you mentioned a few of the other loan programs that you do. I imagine that bridge loans and agency debt are the most popular. So correct me if I’m wrong, but assuming they are, what’s the third most common loan program that you see apartment syndicators specifically will use for their deals?

Anton Mattli: Pre COVID-19, I would say in the non-recourse space, CMBS loans were really popular. Whenever they didn’t fit into the agency box, whether it was a sponsor that was too weak or the property was close to stabilize, but just did not meet agency standards in terms of location, or repairs, or condition of the property… With CMBS loans also having fallen off the cliff in March, they have come back a little bit, but it’s still a very tight market to actually put deals into it. It can be done, but it’s still not something that is nearly as readily available as before.

For syndicators, other than that, bank loans are still a valid option. Obviously, under the 1 million mark, most indicators actually go with bank loans, even though they are non-recourse. But we have also done bank loans above the million mark, for various reasons, even though there might be recourse. Some banks are doing non-recourse if the leverage is a little bit lower, but the majority is recourse. But some still prefer to go with a bank loan rather than a bridge, because you have much less restrictions compared to a bridge loan, you have much less upfront cost… And some also go with a bank loan, because they don’t want to get into the prepayment penalty issues that you have with agency loans, so they are happy to go with a five, or seven, sometimes 10-year bank loan, even though the amortization is typically 20, 25 years. But they can easily refinance later, or sell the property without any issue.

That typically only happens when a syndicator is strong enough to partner up, or do it by him or herself, or partner up with someone who is strong enough and who also feels comfortable to go with recourse. Most syndicators cannot do it, because they have to rely on other financial backers that insist on non-recourse loans. But there’s only a pocket of syndicators that are perfectly fine with that.

Theo Hicks: Okay, Anton, what is your best real estate investing advice ever? And I’m going to add context to that and say, apply it to apartment syndicators looking to do deals during COVID-19.

Anton Mattli: Sure, absolutely. I would say I have applied that rule since I started investing personally, and I see it over and over again with syndicators – it’s focus on cash flow. Do not focus on appreciation potential. If you get it, it’s a cherry on top, but you need to focus on the cash flow… The in-place cash flow, as well as the projected cash flow, and make sure that the projected cash flow is realistic, rather than just a number that you need to get to in order to entice investors to invest with you.

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

Anton Mattli: Sure.

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

Break: [00:18:45][00:19:35]

Theo Hicks: What is the Best Ever book you’ve recently read?

Anton Mattli: Well, there are a number of them. Once in a while, I read The Tipping Point by Malcolm Gladwell. And particularly now with COVID-19, I think it’s a perfect book to reread, with COVID-19 really creating that type of tipping point that no one anticipated. But certainly, I think it’s very worthwhile to mention, since it’s a syndicator show [unintelligible [00:20:02].12] it’s a Joe Fairless show, I have enjoyed the Best Ever Apartment Investor Syndication Book by Joe too, which I think is really worthwhile for any upcoming syndicator to read. But there are some others, like Frank Gallinelli has written a book about cash flow in real estate. He’s probably done that 20 years ago, but he has [unintelligible [00:20:26].05] on his book and that’s more technical, but it’s really also importantl and again, for cash flow, for me, it’s so crucial for syndicators. So that book by Frank Gallinelli is also worthwhile to read.

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

Anton Mattli: Pick up the pieces and restart. I have been an entrepreneur – or business owner, whatever you want to call it – for 20 years. I have my failures with ventures I attempted, and the only thing that you can do is pick up the pieces, and move on, and restart.

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

Anton Mattli: Because we have been involved in multi-family and particularly also in workforce housing, we obviously meet a lot of people that are in need, and a lot of them are in need not because of their own fault, but because of just bad luck… And we support a homeless shelter that is local to us, that has a very unique approach to them. It’s a Samaritan Inn in McKinney; that’s just North of Dallas. And it’s not the typical homeless center, but they are actually bringing in families and teach them to get back to independent living. So it’s not just, “Okay, here you have a roof over your head. Here you have food.” But rather, actively help them, everyone in the whole family, to get back out and live an independent life.

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

Anton Mattli: I would say the best is probably by email. My email is anton@peakfinancing.com. I’m also very active on Facebook, I’m on LinkedIn… So I’m really easy to reach.

Theo Hicks: Perfect, Anton. Well, thank you for joining me today and going into lots of details and updates on commercial real estate financing, specifically multi-family financing, due to the current virus… And we talked about the bridge loans, and kind of the reasons behind those that have slowed, down but how they still are available, but only available to sponsors that have true experience… Whether that be me, or you, or the individual themselves, or a business partner. And more specifically, what you mean by true experience would be doing at least one deal in the same market, similar size, same business plan, and have it gone full cycle. So not just buy, but manage, and then disposition on the backside.

We talked about agency debt and the upfront reserves, how those have gone up, and how that affects syndicators. But you recommend raising those funds regardless of whether they’re required or not. We’ve talked about the best-case scenario – you have access to those funds within six to nine months, whereas 12 to 18 months is more realistic. And then you’re still required to do the ongoing replacement reserves. So they’re separate from the upfront reserves. And that’s a pay-it-and-take-it type of account.

You also said that the CMBS loans were the next most popular before COVID-19, but obviously, that’s not the case anymore. And then you also talked about some of the pros of bank loans over the other programs, and when it might make sense to go for a bank loan over an agency loan or a bridge loan.

And then your Best Ever advice to syndicators during these times, and all times, is to focus on cash flow and not appreciation, which as you know from our book, is one of the three immutable laws – buy for cash flow, not for appreciation. Appreciation is the cherry on top, whereas the in-place cash flow and then a realistic projected future cash flow is the cake in that analogy.

So Anton, thanks again for joining me today and sharing your knowledge on financing. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Anton Mattli: It was a pleasure.

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JF2342: Military Couple Powers Through Real Estate With Lindsey Meringer & Amanda Schneider

Lindsey Meringer and Amanda Schneider are the power couple of the month with Lindsey being a green beret and an operator in the 10th special forces group, and Amanda was also in the military and later decided to become a full-time real estate agent. They began their journey into the world of real estate in 2016 and currently have a portfolio of 5 single-family rentals, a triplex, and working on growing their portfolio even more.

Lindsey Meringer & Amanda Schneider Real Estate Background:

  • Lindsey is an operator in the 10th Special Forces Group (Airborne), a green beret
  • Amanda is a full-time real estate agent
  • They started their real estate journey in 2016
  • Portfolio consists of 5 single-family rentals, a Triplex, and currently working on a duplex to turn into a 5 unit
  • They have added 11 doors in the past 12 months with 14 overall with the goal of reaching 20 by end of 2020
  • Based in Colorado Springs, CO
  • Say hi to them at: www.TheVeteranREaltor.com 
  • Best Ever Book: The One Thing

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Both mentorship and your community is important.” – Lindsey Meringer & Amanda Schneider


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking to two guests. We have Lindsey Meringer and Amanda Schneider. How are you two doing today?

Amanda Schneider: Great! Thanks.

Lindsey Meringer: Doing great. Yeah. How are you?

Theo Hicks: I’m doing well, thanks for asking and thanks for joining us today. A little bit about their background. So Lindsey is an operator in the 10th Special Forces Group (Airborne) and is a green beret, and Amanda is a full-time real estate agent. They started their real estate journey in 2016 and their portfolio consists of five single family rentals, a triplex, and they’re currently working on a duplex that they’re going to convert into a five unit. So they’ve added these 11 doors in the past 12 months, with 14 overall, and their goal is to reach 20 doors by the end of 2020. They’re based in Colorado Springs, Colorado, and their website is www.theveteranrealtor.com.

So starting with Lindsey, could you give us some more information about your background and what you’re focused on today?

Lindsey Meringer: Yes, so I grew up in a small farm town, and that kind of life has helped us a lot in where we are today, in that I have a very extensive construction background, from roof framing, I worked in a finished cabinetry shop, so pretty extensive in the construction world, and I’ve been able to leverage that into real estate; joined the military in 2010 and since then, Special Forces… I’ve truly been all over the world from Africa to the Middle East and Europe and just kind of living that life as we’ve been W-2 entrepreneurs, and just pushing forward.

Amanda Schneider: Yeah. I was also in the military, and then I came out to Colorado Springs to be a contractor for the military, and that’s when I met Lindsey. And I had read the book Rich Dad Poor Dad, which kind of made me realize how lucrative real estate could be as far as that passive income.

So when Lindsey and I started dating in 2015, we had taken a road trip and we called it our all-or-nothing road trip… That if this worked out well for us, we were probably going to get married and move on with our life. If not, we were going to break up. So during that road trip, we listened to a ton of real estate podcasts. I think we may have even listened to Rich Dad, Poor Dad on that one, too. So that kind of spawned our investing from there. We got married and the next day we went looking for our first house together.

Lindsey Meringer: Yeah.

Amanda Schneider: Yeah.

Theo Hicks: Perfect. So I kind of want to talk about this duplex deal. So you are currently working on a duplex, and then the plan is to convert it into a five-unit. So maybe walk us through from the conception of the deal to where you are standing as of today.

Lindsey Meringer: Yeah, I think part of the conception – it is important to start at the beginning, because one little piece of advice I’ll give is to please trust your wife. We had a search setup, we were looking for multifamilies, and we look at zoning applications that are single family, zoned R-4, looked for potential… And I had actually trashed this duplex on the search, because it was a really expensive duplex. She messaged me and said, “Hey, I found this great duplex,” and it was zoned R-5, and it was 3,300 square feet. And she actually got me to kind of look into it more and it ended up having a lot of potential as a project.

So we went and  looked at it, and saw a duplex split level, and they had actually at one point converted a porch, done trusses over it and enclosed it; it has like these couple of weird storage areas next to a two-car garage and then a detached one car. And that porch has an outdoor patio area. So when we walked into it, we’re like, “You know what, this would be a really great conversion to four smaller units. We can break off the back of the property and we’re going to end up with a two bed, two bath; a two bed, one bath; a one bed, one bath and two studios.”

Theo Hicks: So from a manager’s perspective, it sounds like Lindsey saw this deal and was like, “Ah, nah, I’m good.”

Lindsey Meringer: “Nope.”

Theo Hicks: And you saw it, and  I guess — you saw it separately and thought that it was good. So what was it about the deal that made you interested in it?

Amanda Schneider: Well, Colorado Springs is an exploding market and we have tons of investors here. So we have five single families, so we’re like, “Hey, we really want to break into the multifamily.” But it’s so tough here, because we have lots of cash investors that are just coming, they’re paying over market value… So we wanted to find a creative way that we could possibly make a multifamily out of either like a single-family or a duplex or something. So we had a specific search setup where I would go on MLS and specifically search for properties that were zoned for more than the actual doors that were on that property. So that’s really what appealed to me.

Yes, it was priced a little high as a duplex, we did negotiate a little bit, we got the price down a bit… But I just saw that we could turn this into five units, and I just thought about the potential. And it’s in a really up and coming area of Colorado Springs, so that was another huge draw for me.

Lindsey Meringer: Yeah.

Theo Hicks: Could you maybe walk us through how you financially analyze a deal like that? How do you know how much you can pay for a deal that you’re going to ultimately convert into something completely different?

Lindsey Meringer: We just analyze everything as an end state, and the numbers work or they don’t. We had two contractors walk it. So there is actually some hiccups with this that we can talk through… But as far as the base analyzing of it, we just looked at rehab costs and conversion costs, funding fees, lending fees and then what we could rent everything for on the backside, and if the numbers made sense, they made sense. So even though it was kind of a big project and thinking outside the box in the use of the property, the base analyzing of it was pretty straightforward.

Theo Hicks: Sure. So if you don’t mind, walk us through some of these hiccups that you just mentioned.

Lindsey Meringer: Well, I think one thing to highlight before the hiccup is kind of creative way we financed it. So as opposed to using hard money, I went around to a ton of local commercial banks and just talked to the head of lending and all of them and told them the way I wanted to go about this, the vision I had for the project. It was great, because I got that face to face time and that recognition. But then I found a great local bank that was willing to be super creative with lending. So what we actually ended up doing is doing a commercial loan on the front, kind of as a hard money lender at a one point and 7%, which anyone who’s used hard money knows that would be an incredible hard money rate. But the way the lending works on it is the same principle. It’s an interest-only loan on the front side, and then we have residential on the backside. We’re doing four units, we’ll cash out, refi, roll it into a residential, and then down the road, we’ll pay out of pocket and just convert the single-car into a fifth and make it a commercial property.

So it’s been kind of fun learning a lot with this in the funding application to it, and kind of the way the fiscal tie in. But then yeah, with hiccups. We had a contractor that we ended up going with – we get a call one day that he is backing out. Then the next day, the plumbers and electricians back out. So yeah, we’re a month in and I had done all the demo myself just to save some money, so we were back to ground zero.

I had a great commercial contractor come in, he’s become our contractor for all our properties now. But he was like, “Yeah, this $78,000 property, a rehab is more like 140k.” So that was kind of a little bit of a heartache. But we’ve managed to push through it and we’ve kind of brought that budget down a lot as we’ve worked through and gotten creative. And the numbers on the backside with the rental are still so great that even that heartache and that raising the cost of rehab – we’ve still managed to make it work as a pretty solid deal.

Amanda Schneider: Yeah, and one thing I wanted to add too is there were some other things that this original contractor — it was ultimately our fault, because he had never done such a big project for us. So we just had faith that he could. But he was not versed in what it takes to convert something into more than a duplex. And the city, even though the lender looks at four units and under as residential, the city does not; it looks at it as commercial. So it also took a couple weeks of Lindsey calling around to different departments within the city to make sure we could do what we wanted to do. Do we need a development plan? If we need a development plan, that was going to be 15k… There was so much more that we had no idea that we had to do in this conversion.

Lindsey Meringer: Yeah.

Theo Hicks: Just going back a little bit… We talked about your search on the MLS – you’re looking at things that are zoned above what they actually are.

Amanda Schneider: Yes.

Theo Hicks: Is that something that anyone can do, or is that something that you need to have access to the MLS? So you need to do it through an agent?

Amanda Schneider: To make it the easiest, access through the MLS is the easiest. You could find an address, you can look it up on the county assessor’s website and see what is zoned. So I guess theoretically, if you found something on Zillow and you were just curious, you can always find that on the county assessor, and I would assume every city makes that public knowledge.

Theo Hicks: Yeah.

Amanda Schneider: But obviously, using the MLS is much easier, because I can just set up a simple search.

Theo Hicks: Alright. Something else I wanted to talk about too is maybe some tips, some advice on people who want to get into real estate investing with the person that they are married to. What are some pros and cons of that?

Amanda Schneider: Yeah.

Theo Hicks: Well, we may be a bad example, because we truly see eye to eye on most things with real estate. I thing that’s the thing, is we truly share this passion as our way forward in life. Our whole life revolves around real estate; granted, I’m still in the military, but if I’m not actively at work or deployed or something, I’m working on a job site or analyzing future deals… So sharing that common bond is absolutely crucial. I think we’ve heard plenty of stories through podcasts where the husband wants to buy a house, an investment property, and the wife isn’t on board. And I think the biggest thing that happens there is that nothing happens. They never take that leap.

Amanda Schneider: I would say the one thing that maybe we butt heads about sometimes is the fact that Lindsey does have all of this background knowledge about construction, but I’m kind of a type-A personality, so I like to have control and I like to know a schedule and a timeline. So sometimes I get to the point where I’m questioning a little bit too much about the subs that he’s running.

So one thing that I would say for advice is to find your lane and then stick within that lane, even though it can be really hard. So I do a lot of the finding of the properties and the finance, figuring that out. And Lindsey runs the subs, meets with them. He does that part of it. And that has worked really well for us, is not trying to get in each other’s lane… Because Lindsey can also freak out about some of the financing, where I know our way forward and how we’re affording things… But when he goes and looks at our bank account or something, he’s like, “Oh my gosh.”

Lindsey Meringer: Yeah, because I see the day-to-day and I’m pretty sure we’re broke all the time.

Amanda Schneider: Yeah. So just kind of just defining your own lane and staying in it.

Theo Hicks: Sure. So once you have these lanes defined, does that mean that Lindsey has the final say on everything related to his lane, and then Amanda has the final say, or do you guys still come to these decisions together? Or are they completely separate?

Lindsey Meringer: Yes and no is the answer to that. I’ve learned she is a genius with finances. She’s so organized. So in things like that, I’ll voice my opinion if something sounds super strange. But for the most part, I just have complete faith in her. When it comes to stuff on the building and design side, then sometimes I’ll just make the command decision, but a lot of times it’s really us looking at things together and making that kind of functional decision. But I would say the only thing that is truly just mostly hands-off is the financial. I really just trust her.

Theo Hicks: So Lindsey, you mentioned that you’re still in the military. Are you still working a separate job full-time? You said you’re a contractor for the military. Are you still doing that? Are you a full-time agent, or are you full-time in the real estate business?

Amanda Schneider: No, I’m a full-time agent and then we property-manage all of our properties, so I kind of do a lot of that, too.

Lindsey Meringer: Yeah.

Theo Hicks: So what happens when Lindsey is deployed, who takes over his duties? How does that work?

Amanda Schneider: Well, it’s been okay so far, because we haven’t really purchased the property that would need a full rehab when he wasn’t here. And that’s really where I rely on him the most, I would say.

Lindsey Meringer: Yeah, I’m currently in the process of a medical board for medical retirement from injuries, so I’m non-deployable now. So we’ve been fortunate in that. And I think that’s why we started in 2016, but we’ve added 11 doors in the past year, is because I’ve been here, and we’ve been able to approach everything together.

The first couple of years—we’re pretty much experts in the VA loan at this point. We got four properties under the VA loan, or five, I guess, now. And we would do one and then when I’d redeploy, we’d do another one, and then I’d deploy and redeploy and do another one. So we just kind of spaced it around deployments. But now that I’m home, we’ve been able to accelerate.

Theo Hicks: Perfect. Okay, starting with Lindsey, what is your best real estate investing advice ever?

Lindsey Meringer: Definitely the people around you, both mentorship and community. And there’s that rule, the sum of five, I think it is. You had a gentleman on your podcast, Nick Giuliani; I talk to him every single day, just for motivation. He’s farther along than I am and kind of chasing them at this point, but we bounce stuff off each other. We’ve surrounded ourselves with like-minded investors; there’s a couple of buddies that I have in special forces that are investors, and we do meetups and everything. And we’re just so driven every day by their social media posts, their text messages, everything. If we got down on ourselves a little bit or a little frustrated, we just look at our community around us and are immediately reinvigorated to go.

Amanda Schneider: And then I would say, don’t be afraid of doing your first deal or doing additional deals, even if you don’t have money, because you can make it work. And that’s one thing that just this last year has taught us. We’ve found, other than what Lindsey said about approaching the commercial banker and being able to use some of the equity from our other houses, we’ve also been able to borrow some money from our IRA creatively, and we’ve just found ways to make it work. If you find a deal and it’s amazing, you’ll find a way to make it work.

Lindsey Meringer: Yep.

Theo Hicks: Perfect. Okay, are you both are ready for the best ever lightning round?

Lindsey Meringer: Let’s do it.

Amanda Schneider: Yep.

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

Break: [00:17:36] to [00:18:28]

Theo Hicks: Okay, so for each of these questions, we’ll start with Lindsey and then we’ll do Amanda. So what is the best ever books you’ve recently read?

Lindsey Meringer: So I’m a big podcaster. But if I went for books, The ONE Thing is my book.

Amanda Schneider: Yep. And mine is going to be Profit First. It’s not really a real estate book, but it’s just an entrepreneur business book overall that teaches you how to make sure you’re also getting a profit from your business from the beginning.

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

Lindsey Meringer: So that’s kind of easy for me, because I do for now do W-2 entrepreneurship. I’m in the military. And then as I Med board out, I’m transitioning into the space world here. So I will have a full-time career.

Amanda Schneider: Yeah. And I would say, I can’t imagine my business completely collapsing, but if the real estate market collapsed, I think I would just shift my focus towards working foreclosures, short sales, things like that. I would keep grinding, because I can’t imagine doing anything other than real estate.

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

Amanda: That would be a couple properties ago… Security, Colorado, 80911 – there’s a report recently it’s the number one appreciation real estate market in the country. And then we bought a house there; it was next door to another house that we actually lived at. I found the guy, he was out, moving stuff out of his house. I just approached him, asked him what was going on.

Long story short, we were able to work a deal where they could leave the house in the condition it was in. The yard was full of stuff, they just needed to get out and get [unintelligible [00:19:49].23] for some security reasons. And the return on that was in the 20% range, but we have turned $57,000 into that, into about $145,000 in equity in a one year period. So it’s been pretty incredible.

Amanda Schneider: Yeah. And the one thing I would just add to that deal is that we were also able to get the sellers to cut us checks at closing that equaled about $15,000 towards our contractors. That was just part of the deal, too, which was pretty sweet.

Lindsey Meringer: Yeah.

Theo Hicks: Nice. What about on the flip side? Have you guys lost money on any deals? If so, how much did you lose and what lessons did you learn?

Lindsey Meringer: So we have not. Fortunately, a bunch of our first deals were VA loans, which gives you a super low barrier to entry. And then the Crestone property, the duplex conversion, the rehab budget has close to doubled, but we will still not lose money on that property, the numbers are so good. So knock on — I don’t have any wood around me, but we’ve been pretty fortunate.

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

Lindsey Meringer: We started about six months ago doing host home providing for intellectually and developmentally disabled persons. And it’s been stressful at times, but extremely rewarding, and that is something that we love doing.

Amanda Schneider: And then I’m part of an organization called Angels of America’s Fallen. It supports children of any kind of first responders/military that have passed during their service. It provides them up, until the age of 18, with extracurricular activities, so we donate a lot of money to that every year, we participate in their yearly gala, including volunteering for that.

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

Lindsey Meringer: So I’m kind of a child at heart, so on Instagram, I’m Calvin J. Hobbs. You’ll see a picture of me, Amanda, and our dog. Then on Facebook, I’m just my name Lindsey Meringer.

Amanda Schneider: Yep. And you mentioned my website at the beginning… So the  https://www.theveteranrealtor.com/. You can message me there, but then I’m also on Instagram as @the_veteran_realtor.

Theo Hicks: Perfect. Lindsey and Amanda, thanks for joining us today and giving us your best ever advice. A few of my biggest takeaways – I like the idea of when you’re in a really competitive market and you want to get into multifamily, rather than buying a multifamily, trying to find something that you can convert into a multifamily or into a commercial property.

You mentioned how Amanda has access to the MLS, and you search that, looking for properties that are zoned something that is higher than what the property actually is. So something zoned R-5, that’s a duplex; R-4 that’s a duplex. So that’s the deal you guys are currently working on. And even though the renovation costs have increased because of this conversion, because of the strength of the market, you’re still be able to make money.

We talked about how you’re able to secure some pretty creative financing, and that was by simply going to local banks and talking to all the heads of lending about your vision for the project.

We talked about a few tips about starting a business, growing a business with your significant other, and making sure, as  you both share in the passion for real estate, realized that it is kind of your financial driver, in a sense. And then make sure that you’re defining what each of your roles are, and then whoever is the best at that thing is the person who’s the ultimate decider if you guys don’t agree… Or you can just follow Lindsey’s advice, which is that you always trust your wife, and let her do everything—no, I’m just kidding.

Lindsey Meringer: Hey, happy wife, happy life is a motto that I live by.

Theo Hicks: Exactly. And then lastly, your best ever advice – Lindsey’s was about mentorship and community, both in person and online for that motivation. And then Amanda’s was not being afraid to do a deal, do more deals without necessarily knowing exactly where the money will come from, because we’ve been able to make it work. If it’s a good deal, the money will follow. So thank you both for taking time out today to speak with us.

Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Lindsey Meringer: Thank you so much.

Amanda Schneider: Thanks.

Website disclaimer

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

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

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

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

Oral Disclaimer

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

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JF2338: Laid Off to 200 Single Family Homes With Sakar Kawle

Sakar is originally from India and immigrated here in 1997 to pursue MS in Clemson University. He is a full-time real estate investor who started back in 2000 after being laid off. He now has 20 years of experience and a portfolio of 200 single-family homes so some would say his “laid off” was a blessing. 

Sakar Kawle Real Estate Background:

  • Full-time real estate investor since 2001
  • 20 years of investing experience
  • Portfolio consists of 200 single-family rentals
  • Based in Ellicott City, MD
  • Say hi to him at www.premiumcashflow.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“You will find the scalability plays in the investors favor the more you study multifamily ” – Sakar Kawle


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever. We don’t get into any of that fluffy stuff. With us today, Sakar Kawle. How are you doing Sakar?

Sakar Kawle: I am good, Joe, thank you. I appreciate you inviting me on the show.

Joe Fairless: Well, of course. And I’m grateful that you’re on the show. A little bit about Sakar. He’s got 20 years of investing experience. Portfolio consists of 200 single-family rentals. That’s 200 single-family rentals. He’s based in… Oh man, I forgot the pronunciation. How do we pronounce this city in Maryland?

Sakar Kawle: Ellicott City, Columbia area.

Joe Fairless: Ellicott City, Columbia area. Thank you for that. Sakar gave me the pronunciation before. I even spelled it phonetically in my notes, but I butchered it either way. Ellicott City, Maryland. And with that being said, Sakar, do you want to give first the Best Ever listeners a little bit more about your background and your focus, and we’ll get into it a little bit?

Sakar Kawle: My story is a typical immigrant student who comes to US in 1997. I did my [unintelligible [00:03:55].20] in Clemson University, and after a brief working stint for a couple of years, I got laid off. I shifted my focus to cash flowing rentals, and basically, since I got my full-time job here in Maryland just outside the Baltimore area, I discovered that Baltimore was a cash-flowing state. Very good city to invest. So I pretty much started investing in Baltimore back in 2001 or so… And slowly but surely been accumulating houses – one, two, sometimes a lot more; in the post-2008, 2009 crash we were accumulating probably 12 to 14 houses a month at that time. So collectively, we are at about close to 200 houses and some midsize apartments and things like that as we stand right now. So that’s in short, you can say, my snapshot.

Joe Fairless: All in and around Baltimore?

Sakar Kawle: Correct. So it’s majorly concentrated in probably four or five zip codes here in Baltimore, which gives us a decent scale from a management perspective and things like that. So it just helps out in terms of lots of things, as you can imagine.

Joe Fairless: What’s the average house value worth?

Sakar Kawle: Sure. So average values worth here are depending on the area, Joe – anywhere between 160k to 225k, and things like that. So if you want me to clarify some acquisitions, and things like that…?

Joe Fairless: Sure. Please.

Sakar Kawle: So back then, you know, we bought houses anywhere between let’s say, 50,000, 55,000 to 70,000, 75,000. There were some houses I bought for close to 100,000 as well. But that’s just the acquisition. But then in every single house, we would spend anywhere between 20,000 to 30,000 just from a renovation standpoint. So we would have completely new kitchens, bathrooms, refinish basements, and things like that.

So that gives us a good position that you kind of harden all the surfaces and stuff. And once you do the house right, as you know, tenants stay longer, their satisfaction level is great, your maintenance also is much less. So that helps out in a lot of respects, basically.

Joe Fairless: Let’s talk about the model. What is your business model with the direction of the portfolio? Is it what you just described, where you’re buying at 55k to 75k,  you put in 25k or so and then you just hold on to it long term? Or is there something else that you’ve been doing?

Sakar Kawle: Sure. So typically, Joe, my mindset always had been buy and hold for the longest time. And then as I was collecting houses and the cash flow numbers were going up, there were many years I would see that I would have lots of cash in my bank. So back in 2018, we ended up purchasing about 15 units, two apartment buildings right next to each other, right at the heart, right next to the university, and things like that. Then again, turned around in three, four months, bought another 66-unit portfolio, all by myself. And during that time is when I saw that, yes, you can place a large amount of capital as well in multi-family buildings… As you can imagine, like someone who’s been sort of rehabbing and renting houses for a number of years.

But when I came to multi-family, you’re dealing with smaller units, of anywhere between 600 to 900 square feet and things like that, you’ve got one-level apartments. So here you’ve got a house guy who’s been doing renovations, and when you throw me into a small box of apartment, if I may call it, I got really excited. I said, “You know what? I mean, such a small place – we can turn it around.” And just the whole dynamic about commercial valuation versus house valuation comps, and things like that… That really resonated with me. And the more you study multi-family, you find, yes, the scalability, the management and things like that, the best days, as I said, the commercial cap rate evaluations and stuff like that – that really sort of plays into investors’ favor.

So as far as the direction of the portfolio goes, Joe, since I have held on to the houses for a much longer time, my LTV is quite less right now. So eventually, we might sell it and maybe completely transition into multifamily as well. But since I have such a larger portfolio, I recognize that it may not be as easy as boom, you shift gears and sell off two, three houses, or 10 houses, and off you go, in six months you will transition off completely. It may not be like that. There may be a transition of two, three years where we are slowly unloading and perhaps, you know, moving forward.

So that’s what I would say. But the nice thing also, Joe, is that we own and manage everything ourselves, right? So we can always say that, yes, there is a bit of overhead involved as well. But the cash flow, the type of renovations that we have done, and stuff like that – we have no qualms or misgivings about the portfolio that we currently have. It’s just that, yes, multi-family will probably give you more bang moving forward; that may be the direction. But again, as we know, we are in such a low cap rate environment. Even if let’s say the multi-family ramp up takes a little longer, I still have my good bit of all this portfolio by myself, that we can still bank upon and move forward. So those would be the general points, I would say, for all of this.

Joe Fairless: Boy, we have so much to talk about. I love this. Let’s first talk about the loans that you have on the single-family homes. Is it one, or do you have one per property? How do you structure it?

Sakar Kawle: Sure. That’s a good question. So, Joe, typically when folks are newbies, they wouldn’t recognize the power of your credit unions or nearby banks, and things like that. But the more you start in this business, you realize that you don’t have to go to your typical big banks, Bank of America and Wells Fargo, and things like that. In fact, it’s quite the opposite, that the bigger the banks you go, they do not know how to do the investment portfolio financing.

So coming back to the portfolio that I have, my loans are mostly commercial loans. They are probably portfolio loans, as you can call it. So they are pretty much held on by credit unions or smaller banks, and things like that. And they’re all mostly loans comprising of, let’s say, 10, houses, 12, houses, eight houses, things like that. So that’s how it is.

When I initially started, I did smaller loans, maybe three properties, one loan, four properties, one loan, and things like that. But as things started to ramp up, I would pretty much discover that I’ve got to scale big, and then I would present a much larger loan package. So for example, just to give you a brief snapshot, you would bundle let’s say, 12 houses for, let’s say 800k, 900k. And as you can tell, on a per-house basis, you’re mostly less than 100k of sorts. So from a cash flow perspective, even from a debt balance perspective as well, it’s very conservative. So it really is a win-win for everyone, honestly.

Joe Fairless: Let’s say you have a lender and they say, “Okay, Sakar, I’d like to lend to you. But we need at least 10 properties.” Well, you’re looking at property number one, and number two, but you don’t have properties three through 10. So in that case, are you just getting a one-off loan and then transitioning it into a portfolio loan later?

Sakar Kawle: Sure, that’s a good detail there. So what happens, typically, Joe, is that you would acquire them first. And you have to have the properties. There’s no such thing as you’re starting a loan package of 10 and you don’t even have the properties ready. So just to give you an idea how it played out on the street for us is that I would buy properties from my own cash, or perhaps through hard money loans, and things like that. And as we were renting them out, and things like that, we would go approach the bank, saying that we are looking at eight to 10 properties loan. And how that would play out is that typically, we play a lot into Section 8 and [unintelligible [00:12:18].06] base programs.

And the reason I bring that up is that the inspections and by the time you rent the house, typically you’re talking sometimes maybe two months by the time someone submits their paperwork, and you’re going through inspections, and you sign a lease. Typically, it can take one and a half to two months easily. And in that case, what would happen is that in that hypothetical example of 10 properties that we were discussing, you would have eight properties ready, but looking forward, you would submit the package to say that, “Yes, we have these other two properties that are coming on the books in the next 60 days or so.” And you would present that.

So the answer to your question is that you definitely need properties upfront. You cannot have a fictitious case where you are doing a 10 properties loan, but you don’t even have tangible assets to present or show to the bank, and things like that.

Joe Fairless: Cash flow. When listeners hear about 200 properties they’re thinking, “Wow, what does that bring in a month?” So what does 200 properties bring in a month in cash flow?

Sakar Kawle: It’s crazy, Joe. I honestly haven’t even counted, because one of the biggest things that I’ll tell you – maybe you can understand this in this manner… Just the property management alone, I probably make $15,000 to $17,000 just on the property management fees. I’m not even talking net cash flow or anything.

Joe Fairless: Those fees are coming from who?

Sakar Kawle: From our own portfolio. So we own and manage ours, right? But at the same time, I want to make sure that… Sometimes you know how numbers get all sort of commingled and you don’t realize what’s happening, and all of that… Although I have these eight to 10 entities between all this portfolio, right? So sometimes you don’t know how numbers are playing out. So it’s very important to sometimes just make sure that not only you’re doing it right, but at the same time from an accounting perspective, that management fees and some of the utilities and all of that that come with all of this, you’re accounting it correctly.

So maybe three, four years ago, I wasn’t doing this, thinking that, “Hey, this is my own portfolio. Why do I need to do it?” But then suddenly, you start to realize that when it comes to the time of taxes and things like that, you realize that, “Geez, there are all these details that are asked”, and you’ve got to account for them properly.

So I started to do all of that, and then suddenly I realized that hey, you know what – we were doing management the whole time ourselves, but we were not really paying ourselves, because we were constantly renovating and pulling the cash out and putting it back into businesses, and things like that, right? So we were not doing that. Bust to answer your question, just property management alone is upwards of 15k to 17k just on the fees itself.

Joe Fairless: That’s awesome.

Sakar Kawle: And then probably over well over 50k or so in pure cash flow, and stuff like that. And my story is a slightly different, Joe, wherein I am very debt-averse. So what I also do is just the power of compounding and writing the debt down really. On every single loan that I have, I typically pay a minimum of $1,000 every month extra principal. That’s just automatically that goes to the bank. And those are the things that I don’t even see. So sometimes I’m okay with not having that much cash flow. But to me, as we all know, that all the banks review their loans quarterly and on a semi-annual basis, and things like that… And once they see the performance of some of the investor portfolio – boy, really good things happen when they start to see that, hey, not only their portfolio is performing well, but look at the amount of writedown that they’re doing on their loans, and things like that.

So that puts you in a lot of good position in front of lenders, because all this game of cash flow, in general, all of this, it’s a kind of a close-knit entity where you’re not running too far from the known players. It slowly pretty much starts to become a close-knit circle where bankers, the VPs, and all these folks know each other, and they’re talking about, “Hey, I know this investor, he’s great” or “He’s not so great.” “I love him”, and things like that. And the more you mature, you start to realize that these are the aspects that you really have to look forward to, you know… You know, how you communicate, how you behave, how you’re servicing the loans, or communicating, even with the back office people at the bank, and things like that. And that goes a long way, and you suddenly start to open doors or get things done, which otherwise would be quite difficult.

Joe Fairless: Oh, absolutely. And thanks for going into those details. It’s good for the listeners and myself to just learn from someone who’s got this size of portfolio with single-family rentals. Let’s talk about – you and your team do your own management, so God bless you for that. Let’s talk about some bad deals. What deal have you lost the most amount of money on?

Sakar Kawle: Sure. So we have had tough times, many times. Typically, our pain has always been is that, gosh, it’s taking so much time to renovate. We would sit on renovations for like four months sometimes. And it sounds crazy, but the right thing that I have learned is that you’ve got to do the right thing in terms of renovations, and stuff like that. And in that aspect, Joe, as far as losing the money and stuff like that, I clearly remember there was one time where we were very close to getting the house done, and then we found out that the mechanical inspector had changed upon us. Some new inspector came along, and he had us change a lot of plumbing and HVAC as well. We ended up losing about almost 35,000, 40,000 on that deal because  we  were redoing all of that. And we were big enough at the time, meaning we had lots of things going on…

So in those cases, your run rate goes down; you don’t suddenly collapse to the ground. But it’s just a headache sometimes. And like you have people who’ve been doing the business for 30 to 40 years, who are doing the plumbing, HVAC, electric, and then as you know, a lot of municipalities, you’ll notice that all these young inspectors who show up with the rulebook, and they think they know better than the 30-year veterans who are doing the job. So it’s one of those classic cases that we had gotten into, and we were like, “Fine, let’s just do what is told, and let’s just move on.” So that ended up costing us a lot of cost overruns, and things like that. That’s kind of what you call the tip of the mountain, so to speak. That’s the most we have seen. But otherwise, as you can relate, in real estate, in renovations, and things like that, if your cost overruns are not happening – boy, you’re really doing something wrong… Because cost overruns are like always the everyday norm, you know…

Joe Fairless: Yup. And as far as management goes, did you always manage your own properties?

Sakar Kawle: For the large part. And when I say that Joe – I started full time doing this, I was doing pretty much double duty with my W2 almost until 2014 and 2015. That’s when I quit. But during the interim years, I think around 2009 or so, we took a brief detour where we hired a property management company for a year, a year and a half. But then we quickly realized that not that we were out of the woods at the time; we were still present. But since we were already doing the renovations and managing the tenants to some extent all the time, we discovered that whatever properties we have given to the property manager, we would do the management or even the maintenance and things like that much better. So we took that property management from the other company also in-house at that time.

So you can say that, yes, we’ve been managing mostly in-house. If you want to maybe say the staff, in general, we have about four maintenance people and about two back-office people right now. And that’s good enough. Not everybody’s so busy, because the properties are fixed up very well, so we don’t tend to always have folks running around and doing different things, and things like that. So it’s been a blessing for sure.

Joe Fairless: Let’s pretend you’re still buying single-family homes. When you first started buying them, to what you know now, if you were to go back and tell yourself, “Hey, keep in mind these things. Because I’ve learned these things over the last 20 years”, how would your buying criteria have evolved?

Sakar Kawle: Sure. So over time, what I have matured into, Joe, is that… And these were tough learnings, quite honestly. These were natural intuitions that I got, and I gravitated towards that… And now they have become my strong beliefs. And it goes by saying that anybody lives in a neighborhood first, and then a house.

For example, you can get a cheaper house in a not so great neighborhood – you wouldn’t be successful. So for someone listening or watching the show, I would say that, it’s always better to pay more to be in a good and better neighborhood, rather than just looking for a deal. That deal can sometimes really crash and burn you and you would probably lose your shirt, and things like that. So sometimes stability and having that occupancy sort of ride you out; that behooves you and works in your favor for the long term… Rather than just looking for the highest cash flow and ending up in a not so great of a neighborhood. That’s what I would say. And that’s what I kept on doing.

Initially, I was buying properties for 40,000, 50,000, then slowly, I discovered that I’m buying for 60k, 70k. And until the time I was actively buying the properties, those select properties, I still bought for about almost 90,000 a door, and things like that. And as long as the cash flow works conservatively, that’s the good matrix.

And then of course, in your career  sometimes you can say that “Hey, I’m looking for slightly greater cash flow”, so you’re buying not that great of a neighbor, but still safe neighborhood type of property. That also works. Where you don’t want to swing the pendulum is that it goes completely the other way and just buy really bad properties in really bad neighborhoods.

Joe Fairless: So if you have to choose between a better neighborhood with less cash flow, or a worse neighborhood with better cash flow, you’re going to go with a better neighborhood with a little worse cash flow?

Sakar Kawle: Sure. And close second also comes, Joe – real quick I’ll say also that you have to do the renovations correctly… Because maintenance, vacancies, turnovers, as everyone can relate – that kills this business. So once you acquire, if you can renovate it in a great shape, and keep that maintenance down, that itself is extremely powerful for you. Because the cost of not only the maintenance, but the opportunity cost of if you’re doing something X and then you have to move your maintenance folks to all over the place, that has a lot more premium as well; you don’t want to be running [unintelligible [00:23:18].01] fixing just maintenance problems. And that quite frankly becomes one of the bigger points why people don’t scale, or people hate single-family rentals as well… Because people would have done the business in the wrong way, and they would have probably done very sub-standard work, and things like that, to begin with.

Joe Fairless: Based on your experience. What is your best real estate investing advice ever?

Sakar Kawle: I like to always say, Joe, that it’s a people business. Keep on learning all the time, networking, and podcasts like this, or mentors, and things like that. Those are actually the pillars of your success. Sure, you have the real estate side of it, but the whole mindset about how you can improve yourself, have great people around you… Sometimes it’s not the resources, it’s really your resourcefulness to gain information or gain an edge into learning and things like that. So I always say that you have to keep learning different things and learn from the experiences of different people. That to me stands out the best and greatest above all.

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

Sakar Kawle: Sure.

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

Break: [00:24:33][00:25:22]

Joe Fairless: Okay, we talked about the deal you lost the most amount of money on. Now let’s talk about some fun stuff. What’s the Best Ever deal you’ve made the most money on?

Sakar Kawle: Back in the days I bought a single-family home, typical foreclosure and stuff like that, for around $62,000 that had been rented for a long time. And then I decided to sell it. And recently, I sold it for about $210,000. So I guess I made some money along the way. I had my own share of headaches as well, so… It goes. But that’s what I would say. And then recently, when I bought the portfolio of 66 houses, the average price on that was about 78k a door. And now when I’m selectively selling some of those houses, those are also I’m selling for around 200k a door. So it’s been great. I lucked out in some cases, for sure.

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

Sakar Kawle: I love to network and share advice. Here in Baltimore, where I’m based, I started our own community organization way back in 2008, and 2009. So we celebrate festivals, do all the giving back activities as well. So we do that. I donate a lot as well. So there are a lot of different ways how I give back to the community as well.

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

Sakar Kawle: My website is premiumcashflow.com. Folks can learn all the information there. I’m readily available on Facebook, LinkedIn, Instagram, and things like that. So if viewers want to reach me, drop me an email at info@premiumcashflow.com. There I host a podcast as well, focusing on commercial real estate, premiumcashflow.com. That’s where a lot of experts come on share their advice as well. So that would be another great place to learn some information as well.

Joe Fairless: Sakar, thank you for being on the show, talking about how you’ve built your portfolio, how you approach the cash flow, the debt, the business model for how you’ve evolved your approach to buying properties, put a premium on the better neighborhood over cash flow… Thanks for being on the show. I hope you have a Best Ever day and talk to you again soon.

Sakar Kawle: Great. Awesome. Thank you Joe. I appreciate it. Thanks a lot.

Website disclaimer

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

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

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

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

Oral Disclaimer

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

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


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JF2337: 4 Decades Of Real Estate Experience With Paul Montelongo

Paul is a full-time investor and entrepreneur with 40 years of real estate experience and a portfolio of 555 units. Paul started when he was 17 years old and through the course of his career he did the whole gambit; wholesale, single-family, fix and flip, etc… and now he focuses on multi-unit-properties.

Paul Montelongo  Real Estate Background:

  • Full-time Investor and entrepreneur 
  • 40 years of real estate experience
  • Portfolio consists of 555 Units
  • Based in San Antonio, TX
  • Say hi to him at www.PaulMontelongo.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Get a mentor, I’ve been fortunate to have 3 mentors in my career” – Paul Montelongo


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 is today, Paul Montelongo. How are you doing Paul?

Paul Montelongo: Really good, Joe. How about yourself?

Joe Fairless: Well, I’m glad to hear that, and the same. I appreciate you asking. A little bit about Paul. He’s a full-time real estate investor and entrepreneur. He’s got 40 years of real estate experience. 40 years, four decades worth of real estate experience. His portfolio consists of 555 units, and based in San Antonio, Texas. He’s got a website, paulmontelongo.com. With that being said, Paul, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Paul Montelongo: Sure. When you say 40 years experience, that makes me sound like an old guy, doesn’t it?

Joe Fairless: It’s impressive. That’s why I said it multiple times.

Paul Montelongo: Well, I did my first deal when I was 17 years old. My father said, “Buy real estate”, so I believed him and I did. But anyway, through the course of my career, you know, I’ve done all the single-family residence stuff, and flip, and wholesale and cash flow, that kind of thing. And then about seven, eight years ago, someone introduced me to multi-unit properties. And I thought “Now, that’s a cool idea.” So I just took the life experience that I had, the career experience that I had, contacts, network, etc. and just started acquiring multi-unit properties. And so that’s brought me to here, 2020. That’s what I do full time, just looking for multi-unit properties. And I still do single-family and I still do that arena, but my primary focus is the multi-unit property.

Joe Fairless: Okay, let’s go back in the time machine. Seven years ago, what were you doing from a real estate standpoint that was generating the most income, prior to buying multi-family?

Paul Montelongo: Single-family flips, and I was in various areas of the country. In late 2008, 2009, 2010, 2011 I did flips in California when the market was really calling for opportunities… So we did that. But when I got into multi-unit, I was doing single-family flips and wholesales. And I think a lot of people who listen to your program — we were in the single-family and you flip one, and then you go find another and you flip one, and you go find another. I mean, even if I were doing five or six or seven at a time, you’re still basically on a one-off situation. So when I was introduced to the multi-unit concept, I’m like, “Oh, that makes sense.” So one acquisition and multiple streams of revenue. I’d heard about it; obviously, being in the real estate business, I’d heard about it. But it seemed too big to me, it seemed too overwhelming to me. And what I’ve discovered is that a lot of people who come into this space, at one point they did seem to be like “How do I go raise millions of dollars? How do I manage hundreds of doors and the toilets that break with that?” You know, these paradigms, these preconceptions that you have because you don’t know any different. And then once you know different, or once you learn differently, well then – ah, the world opened up. The world becomes your apartment oyster.

Joe Fairless: Were you living in San Antonio seven years ago?

Paul Montelongo: No. I was actually living in Las Vegas, doing real estate in California and some in Las Vegas, but mostly in California. I’m originally from San Antonio, I’ve been born and raised here. And then in 2009, I moved to Las Vegas for a real estate opportunity. And I had some transitions in my life, so I moved to Las Vegas and I spent eight years out there. And then I acquired a property in North Carolina, and moved to North Carolina, and moved there for a couple of years. And then two years ago, I moved back to Texas. Came back to my roots in San Antonio, and my current deal is in San Antonio. So that’s kind of been my journey, my path there.

Joe Fairless: How were you doing a flip in California when you were living in Las Vegas?

Paul Montelongo: Partners, competent partners, confident contractors.

Joe Fairless: Yeah, how do you structure that?

Paul Montelongo: I was the money person. So the deal would be presented to me, I’d bet the deal, I would check out the numbers on the deal, and if the deal made sense to me then I would fund the deal. And then I would have a competent partner that would run the contracts and run the contractors. And I was involved along the whole process, but in terms of actual day to day or even week to week operations, it was the boots on the ground people. And then I would visit about once every 30 to 40 days, check on the projects.

That’s when I really understood the power of what’s going on with the internet. Doing your homework on the internet, sending job photos on the internet, paying all of your bills… Because everything is virtual, right? That really helped. And that’s when I really got an understanding of what the virtual world is about. So since then, I’ve been able to use the virtual world, obviously, like you and most people, to do this business.

Joe Fairless: And want to spend some time on the 555 unit portfolio… But just a follow-up question on that joint venture structure. What percent ownership do you get of that deal on a fix and flip? Or is it just debt structure?

Paul Montelongo: It would depend, but usually it would be a 50/50. So as the money partner, someone would bring the labor, and someone would bring the money. So as a money partner, that’d be a 50/50 joint venture partner. 50% of the profits. Sometimes I get a little interest on the money, but usually, if I brought the gap, and if I brought the rehab, then 50/50 partner on the profits.

Joe Fairless: How much were you putting into one deal?

Paul Montelongo: At the time, the values in California had really nosedived. So we could buy a deal for 200k, and then put 40k or 50k into it, and then it would sell for 350k. I’m using round numbers. But why that was so cool is that the Californians would see a house, and it would be for sale on the market after rehab for $350,000. But just 2, 3, 4 years earlier, that same house would have run 550k, 600k. So in my experience, Californians were like, “Oh, this is a good deal.” Even though it was by most terms around the country — it was a small house, it was 1,200 square feet, maybe 1,400 square feet, that sort of thing. But Californians would be “Oh, that’s a good deal.” So there was never a vacancy of buyers because of values.

And now, the values of those homes have met or exceeded the potential market value. We call this a hypermarket. In other words, all the elements were right for flips. There were low days on market, usually 30 or less, the banks were letting go of foreclosures, there was a pool of buyers, and it was hyper at that time.

Joe Fairless: It was good eating.

Paul Montelongo: Yeah, it was. If you had some sensibility and didn’t get greedy; at least that’s how I felt.

Joe Fairless: What area of California?

Paul Montelongo: Mostly in the Inland Empire. Orange County and the Inland Empire.

Joe Fairless: Now let’s talk about 555 units. What’s the largest deal?

Paul Montelongo: I am a passive investor of 192. So the other ones I have partnerships in four others, and they range from 80 units, 58 units, 120 units, that kind of thing.

Joe Fairless: Which one do you have the most active role in?

Paul Montelongo: One that I have the most active role in is — up until about a year or so ago, it was at a marina RV park out in North Carolina. I call it 158 units. And the way I reasoned on that was…

Joe Fairless: Is that the one you moved to North Carolina for?

Paul Montelongo: Yes, it is. So I moved over there to help stabilize it and to put in place on-site management. So I was there two years and then moved on, after became stabilized. But I always classified a boat slip in a marina as a unit, like an apartment door, and an RV space as a unit, like an apartment door. Now you receive your money a little bit differently, but to me they were still units. So I believe the total number of that one is 158.

Joe Fairless: You lived there for two years.

Paul Montelongo: I did. It was great, because it was on the lake, and I had an office that overlooked the lake, and every morning — this is a great period of my life, because most days when the weather was right, I’d go to work in shorts and flip flops and a company T-shirt, look over the lake, and do the business of the business, because that was acceptable attire. In fact, if you went in any other kind of outfit, you know, the locals would go, “What’s this guy up to?” So that was a cool experience.

Joe Fairless: On the general partnership side, how many people were on the general partnership? And can you, high level, describe what everyone’s role was?

Paul Montelongo: Are you talking about the marina, or are you talking about just in general my other ones?

Joe Fairless: Yeah. So I’m specifically talking about the marina.

Paul Montelongo: Four. Two had a minor role. One was a mortgage guy and knew everything there was to know about the mortgage, and helped us with a mortgage. And another one was someone that helped us raise money for it. And then another partner – her role was marketing, administrative, the paperwork involved in managing a business. And then my role was the actual building out the business model to get the place stabilized and up to speed.

Joe Fairless: Okay. Did all partners put in money?

Paul Montelongo: Yes.

Joe Fairless: Okay. How much money did you have in that deal?

Paul Montelongo: That one I had $55,000 in. And then since then, I have $75,000. I still have part of that $75,000, $76,000 actually, that is out to the property as a loan for cash.

Joe Fairless: So you all still have that one?

Paul Montelongo: Yeah.

Joe Fairless: I’ve never bought a marina… And this is an RV park and marina, is that correct?

Paul Montelongo: Here’s the cool thing. So originally, it was an RV park, right? It was  zoned for an RV park. So we had the concept of replacing the RVs with tiny homes, for nightly rentals. So what I discovered – and I didn’t know then, I now know – is that the RV park zoning designation is the same as a tiny home designation as long as that tiny home is 400 square feet or less, and as long as it sits on an axle, and it’s transportable. So when a tiny home sits on an axle, is transportable, 400 square feet or less, it is designated by the United States for Recreational Vehicle Association, it’s designated as a recreational vehicle, thus it can be placed in an RV park.

And they get more on a nightly basis through Airbnb, VRBO, TripAdvisor, any of those kinds of services, right? They get more per nightly rental than you would, say, to put an RV in there. For example, you put an RV on the pad and you might get $45, $55 a night; you put a tiny home on the pad, you could get $250 a night depending on its location and depending on the time of year. Now, you’re going to invest $55,000 or $65,000 for a tiny home. But the business model was, I believe, 65% of the year occupancy. So at 65% of the year occupancy — it could be somewhat seasonal. At 65% of the year is occupied, at say $200 a night, then you pay for the tiny home, its infrastructure, furnishings, and so forth, just shy of three years. I think it was two years, nine months, something like that. Then beyond that, then it’s just a cash-flowing asset.

Joe Fairless: Who came up with that idea? That’s next-level.

Paul Montelongo: It’s a group effort, okay? So what’s cool about this is we’ve looked at a lot of different models. Everything from keeping it an RV park to making it an airstream park, which is a thing, you may notice. It’s an airstream park…

Joe Fairless: I don’t know that. Aren’t airstreams RVs?

Paul Montelongo: They are. Classic air streams is a thing. So people will go stay at classic airstreams at an RV park just because of the… What’s the word I’m looking for? The ambiance. They’re vintage, usually. So we looked at that. We also looked at yurts, we also looked at tents, we also looked at little tiny cabins, and we finally settled on tiny homes.

Joe Fairless: Why not yurts?

Paul Montelongo: Maintenance. They get dirty, and the tent material, I discovered, needs to be replaced usually in a three to five-year period, depending on its usage. And you can’t put bathroom facilities into it. You have to walk down the hill to go to the community bathroom. So these tiny homes, they all have kitchens and bathroom facilities, air conditioners, mini-split units. Most of them have lofts. A number of them have balconies that overlook the lake. That’s a slick deal. Let me ask you this, Joe, how many lime green jeeps do you see on the road?

Joe Fairless: Lime green jeeps?

Paul Montelongo: Lime green jeeps.

Joe Fairless: Don’t remember the last lime green jeep I’ve seen on the road.

Paul Montelongo: Precisely. Now that I pointed it out to you, you’ll be looking for lime. You’ll see “Oh, there’s a lime green jeep. There’s a lime green jeep.” So…

Joe Fairless: Is that the reticular activating system?

Paul Montelongo: Yes, yes, yes, yes, yes. So now since I’ve discovered tiny homes, they’re everywhere. So tiny home parks and tiny homes, and so… The lime green jeep, right? And the reason I used lime green jeep is because my wife wants a jeep, and I keep telling her she needs to buy a lime green jeep. We’re having that conversation, and of course, everywhere we go, we see lime green jeeps. But yeah, you have an awareness.

It’s the same thing in multifamily. I’ll go back to my story – I didn’t have that awareness prior to seven or eight years ago. I mean, I had this cursory knowledge that was out there. I’d obviously lived in an apartment when I was younger. I had this knowing that it was out there. But once I stepped into it, now – guess what? You’re the same way, I’m certain. Everywhere you drive, everywhere you go, “Oh, there’s an apartment. It’d be cool to have that apartment. I wonder what that apartment costs. I wonder how much that is per door. I wonder what they had to do that one?” It’s the lime green jeep.

Joe Fairless: You initially put in 55k. You said now you’ve got 76k. That’s 21k as a loan. So what happened that was unexpected that you put in an extra $21,000?

Paul Montelongo: Let’s see. How can I say this…? We didn’t account for some of the overages in infrastructure. Some sewer and water services. More was required than I anticipated.

Joe Fairless: Was that tiny home-specific? …where if you didn’t use tiny homes, and if you did the yurts, then you wouldn’t have had that?

Paul Montelongo: That’s correct.

Joe Fairless: Okay. So what about the tiny homes–

Paul Montelongo: Because each of these tiny homes has a bathroom. So when you build out a community, let’s say of houses, you do a load test on what that community is going to require for sewer and water capacity. And we underestimated; that’s all there is to it.

Joe Fairless: How’s the project doing?

Paul Montelongo: Well, it’s doing well. So I haven’t been an integral part of it for a couple of years. I get an overview on it, and as I said, my money is still invested in it. And it’s doing well. Let me put it to you this way – it survived COVID. And kind of an odd, unexpected thing happened. Since people were on lockdown and in their houses, they looked for places to go that were “safe.” So an outdoor park, an outdoor nightly facility seemed to make sense to people. So it was able to be sustained through that time.

Joe Fairless: What type of loan do you have on it?

Paul Montelongo: Oh, you’re going to ask me the hard questions here. It’s a permanent, and I believe it’s a 10-year with a 25-year am. And it’s somewhere in the 6%.

Joe Fairless: So you’ve got some time to hold on to it. What’s your plan for an exit, if any plan of exit?

Paul Montelongo: The plan for that one is to build out some more amenities in it, and then refi, take some cash, and then either sell, or keep and cash out. So sometime in the next three to five years.

Joe Fairless: How many tiny homes have you built on that…

Paul Montelongo: 38.

Joe Fairless: 38 of them. Dang.

Paul Montelongo: Yeah. I like to talk about it, because it was a unique deal to me. Most of my life…

Joe Fairless: [unintelligible [00:18:51].06] deal to everyone who’s listening to this. Changing an RV park to a tiny home village…

Paul Montelongo: Yeah. Right now, currently, all over Central Texas, I’m in search for an RV park. Because I like–

Joe Fairless: To do the same thing?

Paul Montelongo: To do the same thing.

Joe Fairless: Good for you.

Paul Montelongo: So there’s a set of conditions that it has to be. It has to be zoning friendly, there has to be something major close to it that’s an attraction – a theme park, a lake, a river, some kind of entertainment that causes people to want to come into your area. In Charlotte, there was the lake, it’s a big NASCAR community, so there were always people coming in for NASCAR and they needed a place to stay. The city can hardly hold the crowds that come in on big weekends. So Charlotte’s a booming metropolis, right? So what I’m in search of now is, maybe not a major metropolis area like that but right on the outskirts of a San Antonio, of an Austin, of a Houston, somewhere in Central Texas. I like to be boots on the ground, right? So somewhere that I can find an RV park.

Here’s the thing, Joe, about an RV park. If it has RV pads, and it has trailers on it right now — and I say trailers, right? …it will begin to cash the day you close. Maybe just a little bit of marketing to get some people on those pads… While you convert it progressively to a tiny home park. So a tiny home – they’re manufactured, and from the time you ordered it, it takes a couple of months. But when they actually put them on the assembly line, it only takes three days to build the tiny home.

Joe Fairless: Who do you order from?

Paul Montelongo: There’s a company in Virginia, they’re called Pinnacle Park Homes. And they are a combination of Pinnacle Homes who built, if I remember correctly, mobile homes, and Cavco. Cavco built RV recreational vehicles. So they put their two heads together, they have an assembly line, they have a really cool warehouse, and they feed these down a railroad track, and they have little ants crawling all over them just building them, and they can pop them out in about three days. They deliver them with a big trailer, you level them up and skirt them, you connect all your infrastructure and furnish them…

So anyway, I learned a lot. And the key thing is though, you’ve got to have a zoning-friendly tract of land, so that RV could be converted to tiny home. Because like I said earlier, the zoning is the same… Or an agricultural piece of land that has little to no zoning or deed restrictions, so that you can immediately go in and start putting infrastructure in and pads in, and start filling it with tiny homes. And then, of course, you put some amenities around it. You put a pool, and you put a bathhouse, and a dog park, and those sorts of things. Google tiny home parks. They’re peppered all over the country.

Joe Fairless: I will. I’d like to know where the closest one is to where I live in Cincinnati.

Paul Montelongo: Where do you live? Cincinnati?

Joe Fairless: I live in Cincinnati, yeah. So I’ll do some research on that. I could go see a village.

Paul Montelongo: Yeah. That’s what they call them too, villages.

Joe Fairless: They should. That’s an appropriate term for a tiny home community.

Paul Montelongo: Yeah. It was a different type of project. It was more development than rehab. So a very cool project.

Joe Fairless: And that’s why I wanted to talk about it so much, and thank you for humoring me. And I’m sure it was very interesting for a lot of the audience as well.

Paul Montelongo: Yeah. The Discovery Channel, they came out and did two episodes out there on the property, because we had a resident that brought her own tiny home and placed it out there, that she had built. So they did a couple of episodes on the Discovery Channel. And we’ve actually had tiny homes come through the property and park for a couple of nights… And then they move on down the road. So like I said, it is a thing,

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

Paul Montelongo: Get a mentor. I’ve been fortunate to have three men that have mentored me. And not only have they mentored me in the technicalities of the business, but they’ve helped me go through the ebb and flow, and the ups and downs, the tides of the emotions that investors can get involved in.

And very early on my father was a mentor to me, as well. He was in the real estate and construction business, and he’s the one that originally told me to buy real estate. And he’s a businessman, so he also taught me how to operate a business, manage people, set a goal, stick to the goal, and keep a structure or an organization to your business. I’d say having a mentor is key. Sometimes that sounds cliche to have a mentor, but I just have found it so important.

Joe Fairless: Oh, there’s a lot of truisms that sound cliche, but they’re true. And you better do it, otherwise, it’s not going to work out. We’re going to do a lightning round. Are you ready for the Best Ever lightning round?

Paul Montelongo: Let’s do it.

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

Break: [00:23:57][00:24:47]

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

Paul Montelongo: Mentorship. I have a group of young to middle-aged men and a couple of women that I mentor. I’m just with them, and my deal with them is they have access to me at any time. And I handpicked these folks, and I don’t charge them. I just mentor them.

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

Paul Montelongo: Anything Paul Montelongo. Paulmontelongo.com, any social media outlet, @paulmontelongo – Facebook, Twitter, Linked In, Instagram.

Joe Fairless: Paul, I thoroughly enjoyed our conversation, and learning about joint venture structure on fix and flips. And clearly, the star of the show, the RV park marina, turned tiny home village, and the economics that drive that business decision. And it’s also a good competitive advantage that you’ve created by turning something into something else that most people wouldn’t do… Whereas if you’re a value-add apartment building investor – I won’t name any names – then that’s a model that a lot of people have, so you’re going to face similar competition… Whereas they talk about the blue ocean strategy – you go where there’s not a lot of blood in the water, and that’s what you’re doing. So thanks for being on the show talking about that. I hope you have the Best Ever day and talk to you again soon.

Paul Montelongo: Thank you, Joe. Best to you.

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JF2335: Focusing On BRRRR With Anam & Aamir Hashambhai

Anam and Aamir Hashambhai are a husband and wife team. Anam is a marketing director for a local luxury auto group while Aamir runs a family dry cleaning business with several locations. They have been focusing on the BRRRR strategy, completing 19 properties so far, and have a goal of continued growth. 

Anam & Aamir Hashambhai  Real Estate Background:

  • Anam marketing director for a local luxury automotive group
  • Aamir runs a family dry cleaning business operation with several locations
  • They have 3 years of investing experience
  • Their current experience is with purchasing 19 properties and have completed 15 BRRRR; currently have 4 going through BRRRR progress
  • Based in Dallas, TX
  • Say hi on Instagram @rehabrental 
  • Best Ever Book: girls stop apologizing

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Get started and focus on creating the best product for the best price ” – Anam & Aamir Hashambhai


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today I’ll be speaking with two guests. We’ve got Anam and Aamir Hashambhai. How are you guys doing today?

Aamir Hashambhai: Great. How’s it going?

Anam Hashambhai: Good.

Theo Hicks: I’m great. Thanks for asking, and thank you for joining us today. A little bit about their backgrounds – so Anam is a marketing director for a local luxury automotive group. And Aamir runs a family dry cleaning business operation with several locations. They have three years of investing experience in real estate. Their current experience is with purchasing 19 properties. And they also do BRRRRs. So they’ve completed 15 BRRRRs, and have four in progress. Based in Dallas, Texas. You can say hi to them on their Instagram page, which is @rehabrental. So starting with Anam, can you tell us some more about your background and then what you’re focused on today?

Anam Hashambhai: Yeah, absolutely. So after graduating high school, I went to SMU, which is a private university around the corner from where I grew up. I went there for business school. Graduated with a degree in marketing advertising, and went into the field of marketing and advertising, and I’m currently in that field.

When it comes to real estate, basically, we sat down three years ago, and we were like “What do we actually want to do for the rest of our lives?” And we both kind of have a passion — he loves numbers, and I love designing. So real estate was kind of the path that we wanted to go down. So that’s kind of what I do now. I do a lot of the leasing, the designing, helping with what the best layout is, and stuff like that…. And then he’ll go into detail what he does, but he does numbers, that I don’t like doing.

Aamir Hashambhai: The way I got started – while I was in high school I was always helping out with my family business, and actually, throughout middle school, high school, I was helping out with my family business. Went to community college for about a year or a year and a half or so; I didn’t finish up over there… I just completely took over with the family business and ran that, grew it as much as I possibly could. After that, we decided that we wanted to kind of do something for ourselves… Because we were dating for a while, and like, we started talking about stuff like that.

We stepped into real estate, and we fell in love with it from the beginning. It was tough in the beginning, because it was a good learning curve… We really liked that it was like our own, and we started on our own, without the help of anybody else…. And we just took off with that.

Currently with real estate, like she said, I’m running most of the numbers, out on the field as much as possible, managing our contractors, the maintenance calls, anything to do with getting guys to where they need to be, getting materials to where we need to get them to, stuff like that.

Theo Hicks: Perfect. So can you explain in a little bit more detail why you picked real estate? You guys mentioned that you wanted to figure out what you were going to do with the rest of your lives, and you guys knew what you were good at, but for example, why didn’t you go into an interior design business or something? Why specifically real estate? Maybe tell us how you became aware of it.

Anam Hashambhai: So both of us actually grew up in a family that had family-run businesses, as in various service-based businesses, which meant you were there from 7 am to 7 pm, doing things on the weekend. It was just a lot of labor-intensive — and service business, so now you had people you had to please. Over the years, it’s done very well for both families. We became jaded a little bit. What people learn is we like people, but we also like being by ourselves and doing things in the background. But what business can we do that still projects us, we still interact with people, but on our own terms, on our own time, from anywhere, essentially, which is one of the reasons we decided to go that route.

Theo Hicks: That’s interesting. Yeah.

Aamir Hashambhai: And after the initial rehab, and the whole processing of getting the money together, getting the project completed, getting the backend financing – after all the major work is done on each of these projects, it’s very hands-off. Because it’s a smooth process kind of after that. You’ve got a couple of maintenance calls here and there and there’s some paperwork to do on a monthly basis, but other than that, it’s a very hands-off business.

Theo Hicks: Perfect. So you guys landed on real estate… And obviously, there are probably literally a million different types of strategies. So it sounds like you guys do BRRRRs. So the 19 you two have, were those all BRRRRs? So you bought them, rehab them, refinanced, rented, and then repeated? Or did you buy some turnkey properties and then get into BRRRRs? Or have you always done BRRRRs?

Aamir Hashambhai: We have specifically [unintelligible [00:07:26].10] BRRRRs. It just makes sense to us because you’re going into a property where you’re going to add some value to the property. You’re buying it in a very distressed condition, that’s why you’re getting deep discounts. And then you’re going to go in and add value, whether you’re adding square footage, or whether you’re just renovating it cosmetically, or whatever it is. And then you’re going to pull your money, most, if not all; you’re going to pull most of it back out doing a refinance because of the added value.

Theo Hicks: So you picked a BRRRR because of the value-add and the ability to pull money back out?

Aamir Hashambhai: Correct.

Anam Hashambhai: Basically.

Theo Hicks: Okay. So you’ve got four BRRRRs going on right now. Have you always done multiple at a time? Or did you start off doing one?

Aamir Hashambhai: This year was kind of a weird year where the first half of the year we had no idea what was going on with the world. For the last two years, we’ve done probably five or six, on average. The first half of this year, we only did one, because after March or so everything basically shut down. Some of our refinances that were in progress completely got halted. So a lot of our money was actually stuck in some of the deals.

We also didn’t know what was going to happen, whether we were going to get our rents on time… And then we had a couple of projects that we had to hurry up and quickly get done, so that we can get somebody in there to start getting some revenue back in. After July or so, when we kind of felt like okay, because the rents are coming in on time, and the lending market kind of opened back up, we completely jumped on in and I think we picked up five or six.

Anam Hashambhai: Six. We picked up six in three months. Yeah.

Aamir Hashambhai: Yeah. We picked up six units in the last three months. So it’s been a busy second half so far.

Theo Hicks: Are these all single-family homes?

Anam Hashambhai: All of them but our most recent purchase. We actually just purchased a duplex. So everything but those two are single-family rentals.

Theo Hicks: Is the plan moving forward to continue to do duplexes now? Or it was just kind of like a unique situation?

Anam Hashambhai: That particular deal was a super unique situation. We do want to eventually get into multi-family. Whether that’s another duplex, triplex, or bigger, like a 40-unit. I think in the next year we most likely will probably jump into one of those — like, it’s not big, but small multi-family, like 20 units plus,

Theo Hicks: When you got started three years ago, how much money did you guys start off with? And then where’d it come from? Was it money you guys had saved up from your jobs?

Aamir Hashambhai: So we had very little of our own capital. We did have some savings off our personal, but we opened up a lot of different credit lines and stuff, to get money for the deals. So what we did was for the actual purchase of the units we opened up a business line of credit against our business, and then we opened up a home equity line of credit against our home, so that we can use that for the purchase money. We opened up a couple of different credit cards for the renovations, so we could purchase the materials on those, and then basically with the money that we had saved, we use that for our labor costs. So a little bit from everything.

Theo Hicks: Okay, perfect. Is that how you still fund the deals, is with those lines of credit? Or are you using the money that was made from those deals?

Aamir Hashambhai: We amplified it now a little bit… Because in the beginning, in a way, we were kind of risk-averse, because we weren’t going to have interest payments on our personal capital, and very little on the business lines of credit, because they were given to us at like 4% or 5%, very low interest rates. But now what we did was we amplified that. We still use the same cash, but we also couple that with some of our private lending or hard money lenders, so that we can do more deals at the same time.

Theo Hicks: How are you guys finding your deals?

Anam Hashambhai: We are probably on a hundred different list of wholesalers in the DFW market. We almost pretty religiously just purchase from wholesalers; we don’t try to do it ourselves. Someone else can do that for us. And I think we probably look at 10 to 15 deals a day. We probably offer multiple offers a week, and then usually something comes to light from there.

Theo Hicks: So basically, you’re on these lists, the emails come out, you look at every deal, and then you send the offers on ones that makes sense. And then you [unintelligible [00:11:10].00] the ones that you get awarded?

Anam Hashambhai: Yeah.

Aamir Hashambhai: We know the areas that we want to stay specifically into, and then the areas that we completely don’t want to buy in. So the first thing is just to judge it out by the areas. There’s a specific price point that we’d like to stay in, which is the sub 120k or so on the purchase price. So any deals above that, we don’t dabble into. There are a couple of other items that you look at also.

Anam Hashambhai: So we basically use an acronym called AREA. We’ll basically scan it very quickly when it comes in our emails, using that. So literally, the AREA is “Is there investor activity?” We look at is there a lot of retail near? Is or Walmart? Is there Starbucks? Is there Chick-fil-A? Because that warrants a lot of foot traffic, which means the property would be rented easily. We look at education in terms of how close the school is. We like buying in neighborhoods where one of the schools are at least walking distance or super close. And then it’s a formula. If we buy at a certain price, but the ARV is a certain price, we don’t really even consider it. We will never put ourselves in a position where we’re stretching. We always run our numbers at worst-case scenarios, just to protect ourselves.

So it’s fun analyzing a bajillion deals a day when you also have full-time jobs at the same time… But the cool part is we’ve gotten so good at it by practice that we almost never look at any of the homes we actually offer on, and the ones we even buy. There’s some of them we will never look at, as long as it fits our criteria and the numbers work for us.

Theo Hicks: What was the first A?

Anam Hashambhai: The first A is area. Actually the area, so we look at the area.

Theo Hicks: Oh.

Anam Hashambhai: I know it’s kind of confusing. The acronym is called AREA, but the first A is area also.

Theo Hicks: It’s perfect. So, area, retail, education, ARV?

Anam Hashambhai: Yes.

Theo Hicks: Perfect. So you did mention not wanting to look at a bazillion deals while working full-time jobs. I’ll ask that in a second, but one other question that I had is – so whenever you’re looking at a wholesale deal, and this is for the ARV in a sense, so how do you know how much money you’ll have to invest into the rehab costs without seeing the property?

Aamir Hashambhai: Most of our cosmetic rehabs over the years – it’s very, very cosmetic, and barely anything to do. We’re roughly coming in around 10 bucks a square foot. If it’s cosmetics plus maybe a component here or there, like an AC, or foundation, or roof, we’re probably in the $15 to $18 a square foot range. And then if it’s a very heavy rehab, where we’re doing A/C, roof, foundation, full cosmetics…

Anam Hashambhai: Down to the beams.

Aamir Hashambhai: Yeah. Then we’re talking about somewhere between the $20 to $25 a square foot. So when we look at pictures, we can kind of get a pretty good idea of which ballpark it’s going to be in, and then we’ll run our numbers based on that.

Theo Hicks: That’s very helpful. The last question before the Best Ever question… So maybe tell us for each of you how your weeks are structured? So when are you working at your full-time jobs, and then when are you doing real estate stuff?

Anam Hashambhai: So for me, I have a more corporate job, so it’s super structured in terms of timing. I go in, I’m at my day job from eight to probably [5:30], 6 o’clock. So real estate for me is very much nights and weekends. We start our weekends at 7 am, we work Saturday and Sundays, just because I like touching and feeling our properties and making sure everything passes my personal design inspection. [unintelligible [00:14:33].04]  I don’t think it would always be what I want it to be. There are times if something comes up in the middle of the day, I’m able to handle it. I have a very great job that allows me to be a little flexible, but most of [unintelligible [00:14:43].09]

Aamir Hashambhai: Yeah, I like to start my mornings early off at my family business, and then as we need to, I just make adjustments. So like whether it’s meeting contractors, or appraisers, or the city officials, or whatever it is, I’ll structure my day accordingly. But usually, my mornings start off right around six or seven at the family’s business, and then probably in the afternoon I’ll go back to the real estate side between 12 and 4, 12 and 5, I’ll focus on that, meeting guys on projects, or whatever it is. And then I’ll end my day back at the business.

Theo Hicks: Alrighty. Starting with Aamir, what is your best real estate investing advice ever?

Aamir Hashambhai: The best advice ever is to get started. There’s a lot of people who just focus on reading and learning as much as they can, but you’re not going to get the experience until you fully get going, until you jump in.

Theo Hicks: And then Anam?

Anam Hashambhai: You want to be the best product at the best price. You never want to be at the higher end and you never want to put too many high-end finishings if the area isn’t warranted. So mine is the best price for the best product, for the area.

Theo Hicks: Perfect. Are you ready for the Best Ever lightning round?

Anam Hashambhai: Yeah, we are.

Theo Hicks: Perfect. Alright. First a…

Anam Hashambhai: [unintelligible [00:15:52].07] lightning speed here.

Theo Hicks: I think I said the Best Ever lightning round, at lightning speed, so I guess you didn’t understand me. Alright. First, a quick word from our sponsor.

Break: [00:16:02][00:16:52]

Theo Hicks: Okay. So we’re going to do Anam and Aamir, for each of these in that order. So Best Ever book you’ve recently read?

Anam Hashambhai: Actually, I’m in the process of reading Girls Stop Apologizing book. It’s a self-help book.

Aamir Hashambhai: I don’t think I’ve ever read a full book. If I do read, I’m reading articles and just blog posts. and stuff like that. Just on items that I’m looking for.

Theo Hicks: What’s your go-to source of these articles and blogs?

Aamir Hashambhai: Bigger Pockets.

Theo Hicks: Bigger pockets? Okay. Let’s see. If your business were to collapse today, your real estate business, what would you do next?

Anam Hashambhai: Sleep on it. Think about it, and probably start back up the next day.

Aamir Hashambhai: Yeah. Alcohol, sleep and then get back started. You can’t lose your mind. So you figure out what you need to do. So if you’ve lost everything, you would just basically go, start day one, and get restarted. It’s not that big of a deal.

Theo Hicks: Exactly, yup. The concept of the first million is the hardest. And after that, you know how to get it. Okay, what is the best deal you guys have done so far?

Anam Hashambhai: That we’ve actually finished? Our best deal would be one of our Fort Worth deals.

Aamir Hashambhai: Yeah.

Anam Hashambhai: Yeah. I guess it’s a shared answer.

Aamir Hashambhai: Yeah. It was the Fort Worth deal. This was one that came out to us early in the morning and we were able to lock it up like five minutes after it came out. We purchased that one for 80,000. It took us about two weeks on the renovations. The renovations were super light; I think we came in at 12,000 on the renovation budget. So we were all in, with closing costs, renovation, everything, for about 95k. The appraisal came back at 160k, so we were able to pull out not only what we were in it for, but an extra 20 or 30,000 on top of that, and get it rented and still cash flow about 500 bucks.

Theo Hicks: Have you guys lost any money on any of your deals?

Aamir Hashambhai: Technically, we do a BRRRR strategy, so it would just be leaving more money into the deal. So technically, no. Our appraisals have never come in lower than what we were in it for it, if that’s what you’re asking.

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

Anam Hashambhai: I like to give back by being very active on our Instagram. I like giving advice to people. We occasionally do calls here and there just to get newbie investors started, because sometimes they just need that extra push to make it feel real. Real people that are similar to them in age are doing what they want to do.

Aamir Hashambhai: Yeah, she handles Instagram. But a lot of our callers will just call me or text me if they know me, and just be like “Hey, I got a quick question on this.” And then we’ll hop on a call or answer any questions in text or whatever.

Theo Hicks: Okay. And then lastly, what’s the Best Ever place to reach you? I think I know the answer to this, but go ahead.

Anam Hashambhai: You can reach out to us on our Instagram @rehabrental. We’re not very active anywhere else.

Aamir Hashambhai: Definitely, that’s probably the best place to reach us.

Theo Hicks: It’s like a solid Instagram handle. You think that’d be taken, but I guess it wasn’t.

Anam Hashambhai: Yes, I would have liked it to be @rentalrehab but that was taken.

Theo Hicks: That was taken? Okay.

Aamir Hashambhai: She also had DFW on there, which we dropped that, because it made no sense.

Theo Hicks: A good point. Alright Anan and Aamir, thank you for joining us and kind of going into a lot of detail on your strategy, as well as how you guys started. So we talked about why you guys chose real estate in the first place – kind of jaded from growing up in service businesses, and so you wanted to find something that was your own, but you can choose your hours and choose when you have to deal with people. And then it’s hands-off on the back end, once the actual deal is completed.

We talked about why you selected BARRRR — or BRRRR… And that’s because of — I’m not sure where the A would be, I think I’m getting ahead of myself with AREA. [laughter] The BRRRR strategy, because it’s the best value-add play, you’d pull all the money out, and rinse and repeat. We talked about how you’re funding the deals. Originally, you guys really just did lines of credit to do it. Now you guys have some private lending you use.

Deals are all through wholesalers. We talked about your AREA acronym for when you quickly analyze deals. So thank you for sharing that. Again that’s the area, so the geographic location, the market, you know your market very well, so you guys can do that pretty quickly… Retail, so what’s the retail situation nearby – Walmarts, Starbucks, and

Chick-fil-A’s. You said education, so schools within walking distance. And then the ARV.

I really liked how you broke down the rehab cost, so you said $1 per square foot for those three different categories, that’s very helpful. Because when you do look at the pictures,  you can kind of gauge and estimate what the rehab costs are going to be.

Then we talked about when you are actually able to work on real estate. And since you guys work a lot, so nights weekends for Anam, and then for Aamir – your job is a little more flexible… So you kind of have both situations going on. And then Best Ever advice – Amir was education is important, but you’re not going to make money by just reading books. And then Anam was “the best product for the best price”. Don’t have the best house in the block, don’t have the worst house on the block. Find that sweet spot. So thank you again both for joining us today. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Anam Hashambhai: Thank you.

Aamir Hashambhai: Thank you. See yah.

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JF2334: Talking With Full-Time Investor Melissa Johnson

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

Melissa Johnson  Real Estate Background: 

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

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Find a coach or a mentor” – Melissa Johnson


TRANSCRIPTION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Melissa Johnson: I am.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Melissa Johnson: Thank you.

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JF2323: A Little Push Into a New Journey With Ragan Mckinney

Ragan Mckinney started her own brokerage in 2019 and for the year was named The Southern Ohio Association of Realtors “Top Sales Team”. Along with being recognized for having the most sales as a team, Ragan McKinney Real Estate was also awarded the Platinum award for the fourth year in a row. In the past 5 years, Ragan has been involved in over 600 real estate transactions and is focused on growing her business and becoming the local one-stop spot to service anyone’s real estate needs. 

Ragan Mckinney Real Estate Background:

  • Full-time real estate investor and broker 
  • Has been investing for over 20 years
  • Portfolio consist of 19 rentals, 1 vacation rental, and has flipped 11 properties a year 
  • Based in Hamersville, OH
  • Say hi to her at www.raganmckinney.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Don’t fix them as if you’re going to live in them forever” – Ragan Mckinney


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Ragan McKinney. How are you doing, Ragan?

Ragan McKinney: I’m good. How are you?

Joe Fairless: Well, I’m doing well, and I’m glad to hear that you’re good. A little bit about Ragan. She’s a full-time real estate investor and broker. She’s been investing for over 20 years, has a portfolio of 19 rentals, one vacation rental, and has flipped 11 properties, based in Hamersville, Ohio. With that being said, Ragan, you want to give the Best Ever listeners a little bit more about your background and your current focus?

Ragan McKinney: Sure. So I basically started when I was 20. My grandparents, they flipped houses before it was popular on HGTV and everybody was doing it, so I picked up a knack for it from them. I’ve always been self-employed, I come from a self-employed family, so that was a source of my potential retirement… And I just grew to love it. So spending Friday nights at Lowe’s or Home Depot, picking out tile and things like that has turned into a full-time gig over the last 20 years. I flip about 11 a year, and I did many more than that over the last 20 years… But basically got started from  – my grandparents who taught me how to do it, and I’ve just grown it from there.

Joe Fairless: So you at first started doing what, and then how has your investing approach evolved since then?

Ragan McKinney: So when I was 20, getting ready to get married, I wanted to go buy the standard house in a subdivision, with the white picket fence, that’s already ready… My grandparents steered me into a different direction, pulled up into a property; it looks like it should be a haunted house. The grass was four feet tall. And basically, they persuaded me to buy that. So we did.

We did all the work ourselves on that one, and lived there two and a half years, and flipped it and made 42,000. Basically that’s where I got my taste, applied that 42,000 to my next property, and I’ve just continued to do that with the home I live in, all the way up through. We’ve lived in six different houses since, and then and then started adding additional properties, doing the same thing. That’s probably one of the better investments I made. It was a nice profit on the very first one to get my feet wet. They’re not all that lucrative, but I’ve done better and worse.

Joe Fairless: Wow. Yeah, right out of the gate. After two years, 42k. What did you learn from that first deal, from a renovations standpoint? …if you can recall; I know it’s been 20 years.

Ragan McKinney: I do remember. So it’s “Don’t fix them all as if you’re going to live in them forever.” I still struggle with that, trying to go in and pick things not the best/highest dollar, versus picking out what I like.

Joe Fairless: What are some specific examples of that? Just to bring it to light a little bit.

Ragan McKinney: Everything from flooring, to adding details. Right now the modern farmhouse is in, so I tend to steer towards shiplap. I like the nicer countertops when we get into courts and things like that, but we can go with a lower grade granite. In the market that I’m in, the buyers don’t necessarily care as much about what type of granite or, whether it’s quartz or solid surface; they just care that it’s new and that it’s not Formica. So for me, I go in and tend to have — my dad would have always said, “Champagne taste on a beer budget.” So I’ve always went in and tried to pick out the nicer things, and things that I think I would like, and that at the end of the day for the bottom dollar isn’t profitable.

Joe Fairless: What’s the next step up from Formica that you can get by with?

Ragan McKinney: Probably a Grade C granite.

Joe Fairless: Grade C granite. And about what’s the price difference?

Ragan McKinney: Now things are starting to change, because some of the Formica is fantastic. Probably a couple of thousand dollars to go from picking the Formica to the granite. Now, where I really see the difference is when I go into the showroom and I start picking out countertops, for example, I’m gravitating to what I like first, which typically tends to be a Grade A. Now you’re talking several thousand dollars difference. And there’s just not a big enough return in selecting the higher grade versus the lower grade. So it’s not necessarily just a difference in Formica to granite, but coming down to what the dollar amount is and knowing how much more return I can get on a specific property based off of the countertops.

Joe Fairless: So what grade do you go with?

Ragan McKinney: Typically it’s C.

Joe Fairless: And the price difference is – you said a couple of thousand?

Ragan McKinney: No, that would be from Formica to granite. From maybe C to A you’re talking anywhere from eight to 12,000, depending on how many feet you need.

Joe Fairless: Yeah, how much you’re buying. Got it. Significant difference.

Ragan McKinney: Yeah, it’s a big difference especially when it’s coming out of your net dollar.

Joe Fairless: Approximately how many deals does it take to really settle in on “Okay, this is what the market will bear. And that I shouldn’t go over; this is right at where I need to be. So I need to be at grade C granite, versus something nicer, or something worse.”

Ragan McKinney: So you’re asking how many deals you need to do to figure that out?

Joe Fairless: Yeah.

Ragan McKinney: An honest answer to that is I think there are lots of people out there that are willing to help and lend advice. So if you’re working with a realtor, take that advice. That would lower your number. I’m a slow learner when it comes to that, because it’s been my way, but I would say it took me four or five years to figure out, “Okay, I’m not going to live in this property. This is just as nice, and it’s going to put more money in my pocket at the end of the deal if I choose this.” So I don’t know that for me it’s the number of deals, but more surrounding yourself with good contractors and with a good GC, or general contractor that’s going to help guide you and kind of… I always say he checks me on, “Hey, Ragan, you don’t really need to do this.” Because we know when we buy a property and then we go in and walk through, we know what it’s going to take. And we do allow for some areas, and if you get into something unexpected, we kind of pad it for that. They always say I tend to spend my budget in the tile shop and on the flooring store. [laughter]

Joe Fairless: So the first deal you mentioned, you killed it. And then you said, “Oh, but some have been better and some of them worse.” So let’s talk about those extremes. Let’s talk about the deal that you’ve lost the most amount of money on; tell us about it.

Ragan McKinney: Buying sight unseen. I eat, sleep, and breathe real estate, so if I’m not selling it professionally, then I’m looking online for a deal or an auction, or I’m going to the Sheriff’s Sales. So the one that I would say I got burnt on or lesson learned would be one that I purchased unseen. The first time we walked through, it didn’t look terrible, but when we started pulling away the drywall, lots of molds and rotten [unintelligible [00:09:44].17] It was basically a rebuild and I joke that I paid the people to buy that house. So it was definitely a loss – probably $18,000 in the red, without having that file right in front of me.

Joe Fairless: You paid people to tear down…

Ragan McKinney: No, it was — basically, that was my loss.

Joe Fairless: Okay. $18,000, you said?

Ragan McKinney: Mm-hmm.

Joe Fairless: In the grand scheme of things, in two decades, an $18,000 loss… Bravo to you. That’s pretty good, right?

Ragan McKinney: I don’t know. Like I said, my grandparents and then even my parents — I just feel like I’ve been super fortunate in being guided in the right direction… Whether it’s been houses or it’s been cars, my dad owns a salvage yard… And this kind of goes back a little bit off of real estate, but it kind of will give you a background of the way I think – we don’t go buy brand new cars; we would buy them, he would fix them up. So I’ve never paid full price for anything. And I’ve always been able — even with a car, I’ve been able to drive it, and then still make money on it. So the same thing with my houses – it was a really hard pill to swallow to come in and say, not only are you going to not make money, you’re going to lose money. That’s a lot. It’s more of mental for me and a blow to my ego than the dollar amount.

Joe Fairless: Mm-hm. You bought it sight unseen. How many properties, if you know, have you purchased sight unseen before?

Ragan McKinney: More than I should admit. In the 20 years, probably eight to 10.

Joe Fairless: Eight to 10. And about what number was this, on the eight to 10 range?

Ragan McKinney: This would have been right out of the gate probably the second one.

Joe Fairless: Okay. What were the circumstances where you bought it sight unseen?

Ragan McKinney: It was an auction, and there was people bidding against me, and I was younger, and I thought, “Well, if all these other investors want it, it has to be a great property. Somebody has to know something.” It’s really important, probably the biggest lesson I’ve learned, is to do my own due diligence. Yes, I have a big support system that I can bounce things off of, but I know how to make a deal and how to set it up to where I look like a fantastic buyer. But there’s a lot of mistakes I’ve made that have cost me, and that would be A, sight unseen, B, waiving inspections, not using my due diligence, period, things like that.

Joe Fairless: But one out of eight to 10, your batting pretty good there.

Ragan McKinney: Don’t jinx me.

Joe Fairless: Right. [laughs] So the sight unseen actually has been successful for…

Ragan McKinney: It is, and I’m not scared of it.

Joe Fairless: How do you mitigate that risk?

Ragan McKinney: Well, I don’t believe — and I know this is cliché, but no risk, no reward. I actually have one under contract right now. I’m steering kind of away from the residential, single-family, and getting into multi-family, and also into the vacation rentals. I just bought my second vacation rental on Norris Lake Tennessee, sight unseen. How to mitigate that risk is my contract allowed the due diligence period. I am getting the inspections and following it through top to bottom, just so I know what I’m getting into… Because I tend to operate on a deal based off of the purchase price and knowing what I can do… But I always like to forget that middle part of what it cost to get it there. It’s not enough to scare me, but I am being smarter about how I get there.

Joe Fairless: I want to spend a little bit of time talking about where you’re headed and why that shift in your focus. But before we do, I mentioned earlier, let’s talk about the extremes. Most you’ve lost, 18k. What deal have you made the most money on?

Ragan McKinney: Well, the most money I’ve made is — I buy and sell real estate all the time, so I have bought them and I have other investors that I work with that decide that they want to go ahead and flip it. So instead of me taking the time, I have to weigh my options of “Can I fix this?” And I now pay contractors to do all the work, wherein the very beginning, I was doing a lot of the work myself with my family. So to offset the cost, the best deal – and I don’t just weigh the net dollar, it’s how much work was invested, as you know, being able to buy something and then turn around and flip and sell it… And that was for $52,000.

Joe Fairless: $52,000. So you found the deal, and then you sold it to a client of yours who fix and flipped it?

Ragan McKinney: Correct. I actually bought it, and I was going to flip it. So I–

Joe Fairless: You bought it.

Ragan McKinney: Yeah, I bought it. Super sweet deal. I had bought a lot of the material for it… And then how that worked is they came to me, they were looking for one… I don’t have the time, now that I am where I am in real estate, so basically, the market had shifted. It did sit for a period of time, and then I sold it to them.

Joe Fairless: Got it. Okay, that was a sweet deal.

Ragan McKinney: It was a sweet deal.

Joe Fairless: If you got a $52,000 profit before they even touched it, and then they fixed it up, flipped it, and then my assumption is they made money…

Ragan McKinney: Oh, yeah, they made money. And then I get to list it as well.

Joe Fairless: Oh, bravo!

Ragan McKinney: Mm-hm, yeah.

Joe Fairless: Wow.

Ragan McKinney: So… Keep your investors happy.

Joe Fairless: Yes, it reminds me of the lease with an option to purchase, where people make money in many ways with those types of deals – on the front end, on the back end, and during the middle. Alright, so let’s talk about your shift in focus. You said vacation rentals and multifamily. I believe I heard that correctly. Did I hear that right?

Ragan McKinney: That’s right.

Joe Fairless: Okay. Why? You’ve got a good thing going, with flipping about 11 properties a year. You’ve got some rentals. You’re a broker, you’ve just opened the brokerage about a year ago. Why are you shifting?

Ragan McKinney: I just think the market is changing, and also, it’s for my own personal… The flips – everybody’s getting into flipping. When you turn on HGTV or TLC and everybody has a home renovation show… So there’s a lot of people out there that are just getting their feet wet. So the competition to buy the property at a price that you can go in and do the work to make the profit worthwhile – that’s the first issue.

The second issue is I have to look at, “Okay, if I’m going to take a smaller profit on a flip, can I make more money doing something else?” And right now I can’t selling real estate, because the profit margin for the flips just aren’t what they used to be.

As far as going from residential single-family into multifamily and the vacation homes, as far as single-family goes, I’m just really struggling getting really good renters. I feel like the turnover is starting to be more than I would like, and I can get more of a return on a multi-family. And the vacation rentals so far have been fantastic. And I don’t know if it’s due to COVID; more people were camping… And like I said, both of them are on North Lake, booked completely out. And not just for the summer months. People are doing this at Thanksgiving, they’re going just for a weekend getaway, something different than maybe the Gatlinburg or the Pigeon Forge. And it’s somewhere you don’t have to fly, because a lot of people are from Norris, or are coming from the [unintelligible [00:16:25].02] area, so a lot of locals. And the profits have been way better than my single-family, with less headache.

Joe Fairless: Let’s talk about the profit. So what’s the last vacation rental that you purchased, or are about to purchase?

Ragan McKinney: So the first one I purchased was two years ago, with no intentions to rent. It was going to be just our place to get away. To kind of recap I went in, bought it through an estate, got a really good deal.

Joe Fairless: How’d you find it? MLS?

Ragan McKinney: No… It doesn’t matter where I’m at, I’m always shopping real estate. So we were on vacation at Norris… And I want to know what’s for sale, and I go and I talk to people, and ask, and I ended up meeting with a realtor. He said he had this come in, it wasn’t yet listed, it was an estate. There were four kids that were split four different ways, so it worked to my benefit.

It did need work, but we’ve put a year and a half worth of just our sweat equity into it, and we started running it this year. It was a pretty decent experience, with the exception of one… But as far as what the return is, we started in March and we ran it through Labor Day… And it was kind of a test run, because like I said, this was designed to be my family lake home, so something where we could go when we want… And I didn’t like that it cramped my schedule, but as far as money goes, it was about 28,000.

Joe Fairless: 28,000 that you got in for rental income?

Ragan McKinney: Mm-hmm.

Joe Fairless: And what did you buy it for?

Ragan McKinney: I bought the property for 430k.

Joe Fairless: 430,000? And about how much did you put into it, knowing that it was you doing the work… But what about supplies and stuff?

Ragan McKinney: I would say 50k.

Joe Fairless: 50k, got it. So if you had hired a contractor, what – double that? 100k?

Ragan McKinney: 100k, yeah.

Joe Fairless: Okay. Two follow-up questions. You said something like it worked out except for one. Was there something that didn’t…

Ragan McKinney: Well, rentals can go either way. People are on vacation with their families, and they can go in and treat it like their own, or they can go in there and it can be like a frat party. So that’s kind of what the last one was. Luckily, we did get deposits and things like that. But you have to think about your time to go in. And that income – we didn’t fully rent it, because I did leave it open for myself. The one I’m purchasing is going to be strictly a rental. And right now as it sets with the current owner, it’s $52,000. That’s what their gross rental income is.

Joe Fairless: Oh, really? Over the course of 12 months?

Ragan McKinney: She doesn’t rent in the winter, because they go down. So that was from February through October.

Joe Fairless: Dang. And how much are you buying that for?

Ragan McKinney: 285k.

Joe Fairless: Wow. Yeah, that’s a killer.

Ragan McKinney: I found that one on my morning run. Yeah. So…

Joe Fairless: Okay, that’s what I want to dig into. We’re going to come back to the morning run in a moment. On the first deal, you said when you go places, you want to know what’s for sale, so you talk to people… You met a realtor, and then the realtor told you that he had this off-market thing that was coming up. Who did you go to? When you say you talk to people, did you just randomly come across someone, or did you look at the brokerages, and you make it a point to call them? What did you do exactly?

Ragan McKinney: So exactly what happens is we were down there, the people that we were renting the property from… Like I said, I always am talking about real estate just by default… So let them know that I’m a realtor. We were looking to book another weekend; everything was completely full, so when the kids were out at the lake and we were just kind of chilling, I was on my phone and looking for rentals so we could come back in a few weeks… And everything was booked. I come across an email, reached out to the guy, and just said, “Hey, do you have anything?” And he said, “Everything’s completely booked. But I have one I’ll sell you.” And I thought, “Okay.”

So the next weekend, we drove down just to look at that property. That one wasn’t a fit for us. However, we drove four and a half hours to look at one property that I had intended to write a contract on and turn around and leave… So we ended up getting a hotel and reached out to a few agents. It was a Saturday, and they said, “We’re booked.” And finally, I just called agents until somebody that could meet me an hour. “Hey, we have X amount of dollars to spend, and we’re here to spend it this weekend. What do you have?” And he was fantastic, “I’ll meet you in an hour.” He showed us two properties.

Then after meeting with him, he said, “Well, I have this one, but it’s not active yet. But we might be able to get you in.” So he did, and I knew it was a perfect fit. Wrote a contract, and then just maintained that relationship.

The one I just bought, now that I’ve owned that property down there for two years – you start to meet people in the community and you start to look for life changes. Some people are finished down there, or some people have outgrown, or need to downsize… So I’m always looking for life changes, as I like to call them. And I go for a morning run every day, and happened to notice a house that was needing a little love, so we started looking on the county websites, and who owns it, and I send a letter, or I Facebook message, and reach out, “Have you thought about selling?” And eventually, you get a hit. And then you look at it.

This one I haven’t looked at. I’ve seen the outside, because I have ran by it several times… But we are under contract. I am during due diligence period, and we do have home inspections. So hopefully everything checks out. But what I have found is people that have bought the vacation rentals, most of them have owned them for several years, and a lot of them don’t understand what the market’s doing… Or they’re just done. They don’t want to rent anymore. They don’t want to deal with the headache of that. Or there’s some kind of life circumstances to where they just want to get out of it.

North Lake is a place that real estate is just booming. It’s booming everywhere, but people that bought lots for 30,000 ten years ago are selling them for 300 today. So like I said, I don’t know if it’s COVID, or if it’s just the market, a combination of everything, but there’s a lot of activity. And not just North Lake, any of the ones you can get lakefront homes on.

Joe Fairless: Did you send this person a Facebook message, or did you send them a note?

Ragan McKinney: Both. I sent a note and…

Joe Fairless: Which one did they respond to?

Ragan McKinney: Facebook.

Joe Fairless: They responded to the Facebook message. Got it. Thank you for those stories. That is beneficial for people looking for deals in hot markets. Taking a step back, what is your best real estate investing advice ever?

Ragan McKinney: Don’t ever be afraid to go after what you want, or to ask for something. The worst that anybody’s going to tell you is no, and I feel like the best deals have always come from the most unexpected situations. And if you’re looking to do it per a playbook or how you think it’s supposed to be – yes, realtors (because I’m a realtor) can get you fantastic deals. But most of them are going to come from homework or just paying attention to your surroundings. A lot of times the best deals are right in your own neighborhood, and that’s where I really like to focus… And like I said, the vacation house is two doors down from my other one. Most of my deals are right here in the middle of my hometown… Because you know people’s life changes, and it just presents an opportunity.

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

Ragan McKinney:  I’m ready.

Joe Fairless: Alright. First, a quick word from our best ever partners.

Break: [00:23:36][00:24:16]

Joe Fairless: What’s the Best Ever deal you’ve gotten in the most unexpected way?

Ragan McKinney: Best Ever deal in the most unexpected way? I would probably say the lake house. I went down there expecting to get something, I immediately felt disappointed, and ended up with something better.

Joe Fairless: What’s the Best Ever way you like to give back to the community?

Ragan McKinney: I’m big, big into my local community. Big, big advocate for giving to the people that take care of me. I like to turn back and give it back. So police, fire or paramedics. I’m big on that, and then all of our military.

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

Ragan McKinney: They can check me out on my website at raganmckinney.com, or they can go to any of my social media, Instagram or Facebook.

Joe Fairless: Ragan, thanks for being on the show. I enjoyed our conversation. Thank goodness for your grandparents, and that conversation they had with you 20 years ago, when you were going to buy that white picket fence house, and look at the path that they helped you get on, and then you’ve blazed the trail from there.

I love hearing about the resourcefulness and just the tenacity for how you’re uncovering deals, and that will be helpful for a lot of people. And also the shift in focus, and why you’re shifting with your focus. So thanks for being on the show. I hope you have a Best Ever day and talk to you again soon.

Ragan McKinney: Thanks so much for having me.

Website disclaimer

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

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JF2321: Altus Investment Group With Kevin Dugan

Kevin started his journey down the real estate road by reading “Rich Dad, Poor Dad”. He left his full-time W2 in tech sales in September 2019 and is now a full-time real estate investor with 7 years of investing experience. He now has a portfolio that consists of 25 rentals and is a general partner in a 208 unit deal. He is currently the managing partner of Altus Investment Group, a fast-growing private equity firm with 35AUM that specializes in acquiring,  repositioning, operating, and selling residential and commercial properties that are underperforming.

Kevin Dugan Real Estate Background:

  • Left his full-time W2 tech sales job in September 2019 and is now a full-time real estate investor
  • 7+ years of real estate investing experience
  • Portfolio consist of 25 single-family rentals, 208 unit General Partnership side, and Limited partnership
  • Based in Los Angeles, CA
  • Say hi to him at: www.altusig.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“People should buy based on how much cashflow a property will produce” – Kevin Dugan


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Kevin Dugan. How are you doing, Kevin?

Kevin Dugan: I’m doing great, man. It’s an absolute pleasure to be on here with you today.

Joe Fairless: Well, it’s a pleasure to be speaking with you too, and I appreciate that. A little bit about Kevin, he left his full-time W2 tech sales job in September of 2019, and now he’s doing real estate full-time. He’s got seven-plus years of experience in real estate. He’s got a personal portfolio of 25 single-family rentals, and he’s a general partner and a limited partner on a 208-unit. He’s based in Los Angeles. With that being said, Kevin, you want to get the Best Ever listeners a little bit more about your background and your current focus?

Kevin Dugan: So you kind of hit all those bullet points on the head. I’ve been in real estate for a little bit of time now. But the traditional story, read Rich Dad Poor Dad back in the day, got inspired to run a business. Real estate was kind of the foundation, and then I bootstrapped on weekends and nighttime while working that high paying tech sales job. And then now I run a vertically integrated real estate firm based out of Chicago, but 100% remote from Los Angeles. So we have property management, general construction, investments, and it’s all based on cash-flowing rental properties.

Joe Fairless: Please talk more about your vertically integrated company.

Kevin Dugan: Number one, it’s a lot of work to create something from scratch out of state. So for a lot of people out there, property management’s definitely a challenging aspect of the business, but essential. It doesn’t get as much notoriety as some of the other elements, like raising capital or finding the deal. But that’s a strong component of what we do. We self-manage all the properties, and the properties for our clients. Also to add additional value, the general contracting component is really critical because that’s how you buy a discount, and then rehab, and create value into the property. So that’s something that also is another component. And then the last is more the fun part of finding a deal, presenting to investors, and actually nurturing client relationships to help them meet their financial goals. So we have all those components in-house.

Joe Fairless: You live in Los Angeles, and the company is in Chicago, correct?

Kevin Dugan: Yeah, that’s correct.

Joe Fairless: And the company manages your own single-family rentals, plus I think I just heard you also manage your clients’ properties, correct?

Kevin Dugan: Yup. That’s correct.

Joe Fairless: And how many properties is your company managing?

Kevin Dugan: It’s about 50 right now.

Joe Fairless: All in Chicago?

Kevin Dugan: All in Chicago.

Joe Fairless: What’s your connection to Chicago?

Kevin Dugan: I don’t have a real connection initially… But my friend who started me in real estate eight years ago now, he was from Gary, Indiana. He approached me and asked me if I want to flip houses out there in Chicago. I said, “The numbers make sense. Let’s go for it.” So we started that in 2012. Did that for about two years; it’s very difficult to run a flipping business from across the country, right off the bat. In 2015 I switched to rental properties. So that’s kind of the shift towards what I’m doing now.

Joe Fairless: You said you were working weekends and nighttime while having a sales job. Sales hours, at least from my experience, tend to be all over the place, depending on when your clients are able to meet with you. Do you have a significant other?

Kevin Dugan: I do, I have a girlfriend.

Joe Fairless: Did you have a girlfriend at the time?

Kevin Dugan: I did. Balancing that can be challenging. [unintelligible [06:28] kind of wheel of life distribution.

Joe Fairless: It wasn’t quite round, was it?

Kevin Dugan: No, no. It was like you distribute more towards the work end. But I’d also seen a lot of lessons where by it’s not all about the work. The work will always be there, the money will come if you put in the effort and energy into the right space. Relationships are really important. So I was always cognizant of it, but maybe I couldn’t give it my full attention. So it’s a juggling act, for sure. Challenging.

Joe Fairless: Any tips for someone on a wheel that’s a little lopsided right now, for how to just get through that time knowing that eventually, that wheel will smooth out a little bit?

Kevin Dugan: Yeah, for sure. So one big thing in life, in general, is communication. So if you are able to communicate effectively your current state – and maybe this state is a temporary transition – to your significant other, your friends, your family, they’re understanding that everybody has different types of hustles that are going on. So communication is really big. But also just effective scheduling, trying to block out specific times where you can hammer out specific projects or jobs. And I still struggle with this right now. But having specific blocks where you can accomplish goals allows you to frame your 24 hours every day a little bit more structured.

Joe Fairless: Let’s talk about the deals. 25 single-family rentals over a period of six or so years?

Kevin Dugan: Yeah, so the rentals started in March 2013. So about five and a half years.

Joe Fairless: Five years. Okay.

Kevin Dugan: Yeah.

Joe Fairless: You have them in Chicago. Tell us about how you qualified Chicago. I heard how you got introduced to the Midwest, but how’d you qualify of Chicago? Why did you double, and triple, and quadruple down on the Chicago market?

Kevin Dugan: So Chicago is a massive metro. My general advice, generally speaking, is to follow the numbers and follow the people. And that’s a moving target right now, especially with everybody’s relationship to COVID, and the work at home relationships. So people should have more focus on demographics, like where’s the best population growth, job growth, where the wage is going up, where it’s going down, the traditional stuff. Chicago doesn’t necessarily fit that mold.

Joe Fairless: Yeah, I was going to ask you about that. People are leaving Chicago.

Kevin Dugan: They are, but I invest in the suburbs of Chicago. And I specifically invest in Section 8 housing. So it’s been one of those elements where Chicago is the third-largest metro in the US, there’s the massive railway that goes through a lot of Illinois, there’s a lot of major corporate headquarters there… So technically, yes, there’s an exodus, but it was slower; it may be increasing now. But a lot of what we do is kind of the outside of the traditional Chicago mentality; it’s like suburbs of Chicago.

We’ve found that we buy rental properties out there that cash flow very, very well and perform above the 1% rule and it’s just a really solid target market that we’re in, within the larger Metro of Chicago.

Joe Fairless: Let’s talk about the first deal, and then I want to ask you about the last deal that you’ve purchased, single-family home-wise. So the first deal, what were the numbers?

Kevin Dugan: So the first deal, way back in the day with my first business partner, we were buying at 50k, putting about 50k all-in, and selling at 170. So fix and flips.

Joe Fairless: Okay, so the 25 single-family rentals – that wasn’t your first hold, though. That was a flip, right?

Kevin Dugan: Yeah.

Joe Fairless: Sorry. I didn’t communicate correctly. Tell us about the first of the 25 that you currently have in your portfolio. That purchase.

Kevin Dugan: Got it. So I still have it today, it’s appreciating in value, it cash-flows really well, so I’m just holding on to it. That particular property purchased at $75,000, and it was a traditional loan. So I didn’t feel adventurous enough to start rehabs and go through the whole construction process again, because it is technical, and not being on-site requires a lot of trust. But that property I bought [unintelligible [00:10:25].05] turnkey, ended up being more of like lipstick on a pig type situation, and hence the motivation for bringing in my own construction crew. So $75,000, and it rented for $1,650 at that time.

Joe Fairless: That’s pretty good.

Kevin Dugan: That’s really good.

Joe Fairless: And that’s Section 8, you said?

Kevin Dugan: Section 8.

Joe Fairless: Okay, what are the challenges associated with Section 8, if any at all?

Kevin Dugan: It’s definitely a more technical manage, for sure. And the world is about people, everything in this world and life is about people. So you have to understand that there’s a gradient to everybody on that program; there are those who are taking advantage of it, which you want to avoid. There are those who are kind of stuck and lost, but there are a lot of people who need that program – seniors with disabilities, single-family mothers with some sort of illness, or many children. There’s a lot of reasons why people would need assistance from the government where you need that help to be able to get back on your feet, to gain more momentum, to live the life that you want to live. And so it’s very detailed in like really knowing who the person is, reading between the lines of what their credit shows, and determining whether they’re going to be a good household and family that will take care of the place for a long time.

Joe Fairless: When you say reading in between lines, that’s got to be an art plus a science. So take a page of Tony Robbins’ book, right? It’s got to be an art and science. So can you educate us on the art and science of that?

Kevin Dugan: So there are simple items such as presentation. How does the person carry themselves? When they drive up to the house, is their car in shambles? Are they looking like they’re in shambles? Are their kids wild? Or are they well put together, are they respectful? Do they seem like a person that would treat the home like a great place? And then, of course, you ask a lot of questions about their background and why they’re moving, you get referrals to confirm what’s going on. You want to make sure that their story fits, and then you want to make sure that any red flags are covered. So if there are any types of potential evictions – that’s a huge one; you don’t want to go through that process, especially in that non-friendly eviction state like Chicago. That’s a place — especially when you have the eviction moratoriums that’ll last six months or a year. So it’s really having a conversation with the individual and just seeing like, “Hey, what’s their circumstance? How eager are they to move? Why are they moving?” And then making sure that there aren’t any holes in their story.

Joe Fairless: You bought that in 2015? How many times have you turned it over for a new tenant?

Kevin Dugan: That particular property, I want to say we’ve turned it over either once or twice.

Joe Fairless: Once or twice, okay. So that’s great, I would think, because that’s got to be the main expense. And I did some quick math; the 1,650 divided by 75,000. That’s 2.2% on the cash flow rule. So you crushed it on that.

What, if any, the challenge has come up for this property in particular, since you’ve owned it the longest as a buy and hold?

Kevin Dugan: So as I’ve mentioned before, lipstick on a pig. That particular property on surface-level looks fantastic; new floors, newer cabinets, backsplash, painted rooms, semi dated bathroom, but fairly clean. But come to find out there are a lot of issues hiding behind the walls. So that particular property was built in ’56, and with a lot of older homes, people need to look out for galvanized pipes; those will probably break around the 50 to 60-year point. So you want to make sure you get all the galvanized out whenever you can. But this one had a bigger issue – the sewer line collapsed. So the water is backing up through the entire house, we had to like excavate, we had to tear up all the new tile in the kitchen. This is a couple of years into it… And basically, we replaced that mainline out to the street level. That was a big adventure, especially…

Joe Fairless: Especially what?

Kevin Dugan: During the wintertime.

Joe Fairless: Oh, man…

Kevin Dugan: Yup, yup, yup, yup, Chicago.

Joe Fairless: The Chicago winter.

Kevin Dugan: Chicago winter. So lesson learned… And then on top of it that house had termites. So we started seeing little holes up in the ceiling; come to find out there’s like a massive termite infection on that property. So that’s one of those places where definitely have a third-party inspector come in. I still remember when I bought the house, [unintelligible [00:14:41].03] the doors, the doors didn’t close. I’m very big picture at times, and those details missed me when I was looking through this “beautiful” house.

Joe Fairless: So you didn’t have a third party inspector?

Kevin Dugan: On that one? No.

Joe Fairless: No. Okay.

Kevin Dugan: That’s for anybody first buying stuff – definitely get it.

Joe Fairless: How much did the sewer line collapsing and resolving cost?

Kevin Dugan: Fortunately, at that time, we had an in-house crew, so it’s probably about 5,000. But it was more the massive headache of having a tenant in there; we had to get them into a hotel. It was like a three-day process. And that was just the changing out of the sewer line. That wasn’t the initial exploration of why is there mold constantly behind the sink, what’s going on behind the sink, and this other wall over here. So it took us some time to decipher what was going on there and actually find it.

Joe Fairless: Tell us about how you already had an in-house crew on your first deal. Now, I know that you did fix and flips, so that’s probably where it originated from. But will you just talk about that evolution?

Kevin Dugan: So let me kind of take a step back. The first two deals were purchased as turnkey. The third one I purchased, I’m like, “Okay, I prefer to start building equity into these deals if I buy them at a discounted price.” So we started sourcing out all kinds of different contractors. I’ve gone through probably at least 10 at this point. Don’t hire anybody from Home Depot — or not Home Depot, Craigslist; stay away from Craigslist… For the most part; I can’t say that completely, but Craigslist has been a bad experience.

So this crew that I was able to [unintelligible [16:06] they were actually inherited from a GC that was a referral to us. That GC ended up moving to Arizona, left his crews, and then I kind of inherited them. So I’ve been working with them ever since. So they were able to help us out on this one. But it’s a process. Definitely, if there’s any type of red flags with your contractor, give them one warning, never overpay them past the work that they’ve done, and make sure that you have that leverage of the money; it will keep them motivated.

Joe Fairless: What’s your worst Craigslist experience?

Kevin Dugan: There have been various; some were more to the quality work, and especially doing things [unintelligible [00:16:44].16] is pretty challenging. But we had one guy that he spoke a big game. And that’s one thing about Chicago, people talk fast, but maybe don’t perform the way that they say they can talk about. And a lot of people, like contractors in general, say that they can do everything. And that’s an initial red flag, like, “Okay, you can’t do everything.” That’s very difficult to do.

But we had one guy who basically was falsifying the work that he did, sending us bad pictures or pictures that made it look like he was doing it, but it wasn’t actually installed. He asked for prepayments beforehand… This was one of my business partners [unintelligible [00:17:15].21] and he ended up stealing like close to $5,000 in labor materials. So… Tough.

Joe Fairless: Let’s talk about the last single-family home that you purchased. What are the numbers on that?

Kevin Dugan: The one I just closed on is an interesting project. We have three we’re closing on right now, but it’s already 90% completed. It’s just the original owner didn’t finish the electrical decode. So we’re buying it at 150k or 165k. We’re planning to put about 50k into it and sell it 290k. So it should be a really quick turnaround, like literally, like three weeks in, out, listed back on the market. And so…

Joe Fairless: Okay, so that’s a flip.

Kevin Dugan: Yup. Oh, a rental property?

Joe Fairless: Yeah, a rental property.

Kevin Dugan: Got it. Got it. So on the rental, one that we have right now my client actually picked up an amazing deal. I was under contract for it at $72,000. It fell through because it was right at the beginning of COVID. Literally, all the banks froze up because they couldn’t trade the paper anymore. And because of that, another [unintelligible [00:18:19].08] to offer, that deal fell through. So my client came in, she offered $50,000 cash and bought it at $50,000. We put 40k into it, so all-in 100k, and we’re going to get about $1,950 in rent on that.

Joe Fairless: How about the last one that you bought? The 25th property in your portfolio.

Kevin Dugan: Let me think about that one.

Joe Fairless: You’ve got a lot of transactions. I get it.

Kevin Dugan: Yeah. I lose track of them at some point.

Joe Fairless: You’re a big-picture guy.

Kevin Dugan: I really am, yeah… Which is the difficult part of being a vertically integrated company across the country. So the last one we bought was just a small townhouse. It was like $52,000 on that, super-light rehab. We changed our investment philosophy; as opposed to doing deeper rehabs right now in the current state of the economy to just kind of like doing a two-tier, almost what you see in multi-family. So we bought it 52k. It’s currently rented at $1,466.

Joe Fairless: Okay. And what do you mean by two-tier?

Kevin Dugan: So you can go all out with the rehab… I really love to definitely solidify the infrastructure. So like all the electrical plumbing, I want to make sure that’s just done the first time; HVAC, roof, like all the major systems, you want to solidify that. But then there’s like how far you can go with the kitchens, how far you can go with the flooring… So as opposed to doing flooring throughout the entire place, we’re like okay, let’s just do flooring in the main areas, carpet in the bedrooms… Instead of doing like super-sick cabinets and backsplash in the kitchen, let’s hold off on that type of rehab for phase two on a five-year period if we want to sell it as a portfolio or something like that.

So we started with the sticky backsplash from Amazon, which gets the message across for the kitchens; kind of resurfacing kitchen cabinets… So just ways to cut costs where maybe it doesn’t add as much benefit. But we’ve already done the major rehab where the house is still above; it creates a good energy for the resident to want to live there for a long time.

Joe Fairless: Will you give some other specific examples of how you’re saving money on the rehabs, but still making them look good from an aesthetic standpoint?

Kevin Dugan: Yeah, for sure. Vinyl’s really big; I highly recommend it to anybody who has a rental. Vinyl nowadays is a slam dunk, it’s pretty much bulletproof. So you can go that route. Let’s see… Same thing – as you’re doing more and more rehabs, the easiest thing to do to save on time, which is equivalent to money, is to try and do repeated material costs; we paint every house the same color, floors are all the same, cabinets are all the same. So that just helps eliminate the decision-making process.

When it comes to vanities, you can actually pop off the top of the vanity if the actual structure is good. You can keep that. With mirrors, you can put trim around the mirrors, that we’re finding… So there’s a lot of ways you can kind of recycle the old infrastructure and allow for the house to have a nice resurfacing, but not spend brand new costs on it.

Joe Fairless: That’s really helpful. And looking at that deal compared to the first buy and hold… Let’s put aside the economy and a pandemic, just for a moment let’s put that aside. What, if anything, did you change in your process, from the very first buy and hold to the last buy and hold? I know one of the things is now you have a third-party inspector. But what else, if anything, has been changed?

Kevin Dugan: Just my level of education across the board has changed. So my understanding with general construction — like, I never wanted to be a general contractor, but I understand the fundamentals pretty well. YouTube is a fantastic resource. For anybody out there, you can pretty much find anything. But what’s changed is having people in place that can kind of take on those specific responsibilities, so that I can take a step back and try and work on more of the bigger picture stuff.

We’re still in a growing phase right now, but I definitely have key team members that I can rely on to help push projects forward and make sure that they’re getting done with the quality that we needed to get done.

Joe Fairless: Speaking of big picture, what’s next for you?

Kevin Dugan: Right now continuing to build out the residential turnkey business that we have; since the product is good, there’s a lot of demand for what we have. We have a firm belief that this product will perform well and be desirable through the current type of recession we’re in… But I’m also trying to think about where the world is changing long-term, especially as people’s relationships with real estate is changing drastically, office spaces are changing. Retail has been dying; it’s going to come for reform. Hotels are in a lot of distress. So there’s a lot of commercial asset classes that I’d like to diversify into. But I need to not get — excited is a bad word, but be cautiously optimistic knowing that the world constantly goes through change.

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

Kevin Dugan: I’m really big on cashflow. I truly believe that people should buy based on how much income that produces as the foundation. And you can make more money as a flip or development, but those really depend on market timing. You don’t want to miss timing, because you can lose your shirt, and more, if you missed out on a big asset class. But if you buy with cash flow in mind, you’ll be sitting pretty.

Joe Fairless: About how much cash flow does 25 properties earn on an annual basis? Buy and hold at this level?

Kevin Dugan: Net or gross?

Joe Fairless: Net.

Kevin Dugan: Net. There’s leverage on these, so it’s roughly in the $12,000 to $15,000 range. It’s complicated because I’ve been under multiple entities/structures… So I made things more complicated, like way too big picture. It should have been simple.

Joe Fairless: So about 12k a month or so?

Kevin Dugan: Yeah.

Joe Fairless: $180,000 a year is a great nest egg, that’s for sure. And some people might think well, “Okay, that’s great. But what’s your exit? Because are they appreciating? And if not, then do you just never plan to exit?” And clearly, 180k, then maybe there’s no reason to exit. But is there an exit plan?

Kevin Dugan: Yeah, there’s definitely an exit. The beauty about real estate — when you have enough cash and you free up your time, that’s where you get a lot of power. And I’ve gained my most momentum since doing real estate full-time. So that’s number one – free up your time, and you free up a lot. But yield is something that will continue to be searched for, especially in this unknown economic climate. So it’s very realistic to group a set of these together like a portfolio sale. I see a lot of it going on right now where people are just grouping together single-family homes. So I never plan to exit out of this cycle; this would be a great cycle to exit on. I like the cash flow for stability, but there are countries looking for high-interest rates, high-yielding, performing properties. They can also be resold to other people, and the tax benefits are also beneficial as well. So you get a lot of appreciation by just holding. And then there’s a lot of benefits to holding real estate [unintelligible [00:25:05].11] selling it immediately.

Joe Fairless: I love the tax benefits almost as much as I love dogs. It sounds like you’ve got a cute dog in your room too, so that’s… [laughs]

Kevin Dugan: She has a sensitive stomach, so I’m not sure what’s going on.

Joe Fairless: Oh, man… I raise you a sensitive stomach, and see you two sensitive stomachs; my dog just has a really sensitive stomach, so he’s got twice as sensitive as yours. I guarantee you. He’s on a hunger strike right now. It’s the only dog that I know of that does hunger strikes. We’re going to do a lightning round… Are you ready for the best ever lightning round?

Kevin Dugan: Yup.

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

Break: [00:25:40][00:26:20]

Joe Fairless: Alright, best ever deal you’ve done.

Kevin Dugan: A more recent one; pushed on it for a long, long time. I put it over the asking price. Basically fix and flip, offer 125k, put $100,000 into it, and got it under contract first day for 350k. So three and a half months, really solid product.

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

Kevin Dugan: Big on education. I really believe that it’s something that we all need and it’s something that I can actually contribute. And I like to help people just open their eyes to the power of real estate.

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

Kevin Dugan: I’m definitely more active on LinkedIn and Instagram. You can find me @KevinKDugan, or shoot me a text at 310-988-5081.

Joe Fairless: Kevin, thanks for being on the show, talking about how you’ve built your portfolio, getting into the specifics of your vertically integrated company, how that came about, the amount of money that is made on deals, and some lessons learned between the first buy and hold and the 25th buying hold. Appreciate you being on the show. I hope you have a Best Ever day, and talk to you again soon.

Kevin Dugan: Thanks a lot Joe. Have a good one.

Website disclaimer

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

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

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

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

Oral Disclaimer

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

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JF2317: InvestNext With Kevin Heras

Kevin is the co-founder at InvestNext, a software that modernizes the way real estate syndicators raise and manage capital. Prior to funding InvestNext, he was employee #2 at the college career network startup, Handshake, where he contributed to initial product development efforts. Handshake is currently valued at over $400 million and it is the leading college-to-career recruiting platform in the nation. Today, Kevin is honored to be part of the season team of software engineers and a real estate professor.

Kevin Heras Real Estate Background:

  • CEO & Co-founder of InvestNext, software that modernizes the way real estate syndicators raise & manage capital
  • 5 years of real estate experience
  • InvestNext platform has hosted 230+ syndications worth over $1 billion
  • Based in Detroit, MI
  • Say hi to him at www.investnext.com 
  • Best Ever Book: Crossing the Chasm

Click here for more info on groundbreaker.co

Best Ever Tweet:

“The benefit of InvestNext is being able to manage and raise your capital” – Kevin Heras


TRANSCRIPTION

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

Kevin Heras: Good, Theo. How are you doing?

Theo Hicks: I am well, thanks for asking and thanks for joining us. I’m really looking forward to this conversation. We’re gonna talk about Kevin’s InvestNext apartment syndication/real estate syndication software platform. So he’s the CEO and co-founder of InvestNext, a software that modernizes the way real estate syndicators raise money and manage capital. He has five years of real estate experience, and the platform has hosted over 230 syndications worth over a billion dollars. He is based in Detroit, Michigan, and you can say hi to him at InvestNext.com.

Before we get into what InvestNext is, do you mind telling us some more about your background and then what you’re focused on today?

Kevin Heras: Sure thing. To give context on InvestNext – as you mentioned, real estate investment platform geared towards your private network of investors, manager investors, on that platform. But ahead of InvestNext I was kind of going through the corporate track. I worked at a consulting firm and we implemented CRMs, ERPs, accounting systems and so forth… So I got exposed to a lot of different enterprise-level clients, as well as even real estate clients ahead of that… So that was kind of my systems background.

Ahead of that, really one of the most formative parts of my life was actually my time at Handshake. Handshake, for context, is basically what you might call the LinkedIn for college students. So it’s a career network. I was involved there when it was just a dorm room founded startup. Today they’re over a half billion dollar company. I was employee number two, working with the co-founders, building out the product, going to university career centers, getting shut down, going back, building more… The rest is history.

That being my third year of college was pretty formative in what I’m doing today, and I knew at that point that I really wanted to be involved in the tech space; I wanted to build something meaningful that solved a systemic problem.

Fast-forward to a few years back, when I met my co-founder, Michael Gisi; he was working on this interesting side-project, working for a real estate investment firm that was really just trying to streamline the way they interacted with their investors, they were they reported and communicated to them. It was a tool that was meant to be a one-off tool for that firm, but we got people knocking on the door, saying “Hey, would you mind deploying something like this for our group?” And we’d been talking about it for a while, and that was kind of the a-ha moment, and pretty much the founding moment of InvestNext. We realized at that point that there’s a massive gap in this space, how people go out and they syndicate and manage their capital partners and investors. From that point on, the rest is history.

Theo Hicks: Sure. And then InvestNext – was that five years ago when it started?

Kevin Heras: Yeah, proof of concept, product – that would be five years ago; we were really just getting into this space, exactly.

Theo Hicks: Okay. Are you a coder?

Kevin Heras: I’m on the product team. I stay away from the code. I did the design portion of it. I let Michael and his team work through that stuff, but I am heavily, heavily involved in the side of the workflows and the product.

Theo Hicks: So he was essentially working for an existing company, created something for them, and then other people were asking for the same things, so that’s where you identified the need.

Kevin Heras: Exactly. It was pretty serendipitous from that standpoint.

Theo Hicks: How did you meet the co-founder.

Kevin Heras: I think back to how this all came together, and really, at my last company where I worked at, it was an indirect connection. One of my customers said “Hey, my good friend’s working on a side project. Maybe you guys might be able to connect, or interact on this.” So there was really no presumption on what we’d be working together, or especially on what we’d be  building.

He just happened to know that I had experience with Handshake, I’d been in the startup world, and perhaps I could lend some advice. So an indirect connection, and then we really just hit it off from that point.

Theo Hicks: Nice. I always like hearing about how partners met each other, because it’s traditionally pretty random.

Kevin Heras: It really is… And again, something I always think back to is just the serendipity of it all. You really just never know the doors that you can keep open, and you never know who you meet… So absolutely.

Theo Hicks: Exactly. Perfect. So let’s talk a little bit about InvestNext now. I have experience with syndications, so in my mind, when it comes to investors, it’s really finding the investors, and then it’s getting the money from the investors, or raising money for a particular deal or for a fund, and then the investor relations part. Obviously, your business focuses – from what I’m understanding – on helping with the actual process of raising the money for a particular deal or  a particular fund. Then once that deal is closed on, helping with the investor relations portion.

Let’s start with the raising money part first, and then we’ll talk about the investor relations second. So how does InvestNext help the syndicator raise money? You do help them find more money, but help them manage that process.

Kevin Heras: Yeah, so the concept around this is that whether  you’re a first-time syndicator or you’ve already done this many times, our intent with the platform is you have a single workspace to manage the very beginning lifecycle of that syndication to start with. So that’s everything from you have a CRM, of course, to manage prospective investors, capital partners, just people that you are interacting with. That ties in directly into what we call an online deal room. So when you’re ready to go live with your offering or your deal, it’s really housing that digital tear sheet, that presentation. You can send it out to your groups, they can view that full offering, and then of course, commit online, run the entire transaction, subscription docs and everything through the actual deal room.

So that’s the big, major component to begin with, is just streamline that entire initial transaction with the investor, and of course, saving you time at the end of it all.

Theo Hicks: So it has a CRM that I have to track all my investors that I have. Would that also be like “Here’s ones that are potential, and here’s ones that have invested, here’s how much they’ve invested, and here’s the deals that they’re in”?

Kevin Heras: Exactly. It’s really being able to manage your entire pipeline of prospective capital. And again, it’s from the very onset; we work with groups that are doing their first deal, and they know that “Okay, perhaps we may not land on something for the next few months”, but at the very least they wanna start building up that pipeline, building those relationships. So they’re just tracking those relationships in the CRM, tracking their pipeline. And then of course, when the deal hits, they put together all their collateral, all their documents in the deal room, and of course, when they’re ready to actually present that, it’s as easy as sharing that.

Theo Hicks: So you said there’s an online deal room. So I have a  deal… A big thing is obviously keeping your investors up to date on where you’re at, when are funds due, when do you need to submit the documents, getting that information to them. So is there some sort of email service you’re connected to, that I can say “Okay, I want to send an email every week to remind them about funding. People who have funded will get one email, people who haven’t funded will get another email.” Is it capable of doing all that stuff, too?

Kevin Heras: That’s exactly it. So when you go live with the deal — first and foremost, what we wanna present to the investor is… Call it that kind of single source of truth. So they can go back to the deal room and say “Hey, what’s the status of anything that’s happening?” And within that deal room they can see all the updates of what’s been going on. So that’s kind of the inbound approach, so the investor knows — instead of digging through their email chain and looking for what was the last update, it’s all in one place.

The second part to that is yeah, there’s the intelligence built behind this, so that when the sponsor goes out, they market the deal, they have all their commitments in, they can transact the capital, transact the funds… And of course, who’s left in the previous sequence to that. So then from there, there’s intelligent reminders to follow up with those investors. That’s a very common scenario that we see, especially when you go on a capital  raise.

Theo Hicks: As an investor, how am I getting access to this?

Kevin Heras: Multiple ways. Different groups have different approaches to how they’re gonna interact with their investors. Some groups are very “by invitation only.” Of course, this can live behind a security layer that you can only be granted access to the deal room, and of course, once you’ve been verified, you can go in to view the deal. Other groups – call it maybe like a 506 open format fundraise; you can literally open it up to the internet as a whole. So varying groups do varying open access to the deal room.

Theo Hicks: So would I need to share a link with my investors, or would I input their email into InvestNext and then they’d get the “Here’s  how you set up your account” email from InvestNext?

Kevin Heras: Both ways. Basically, imagine if you’ve had a mass communication out  to a group of investors – you could actually grab that shareable link; you can say “Hey everyone, feel free to access the deal room right at this link.” And of course, when they jump in, they can view all the details there.

On the other side of that, whatever you wanna do with that – you can post it on your website, you can send it out… And of course, back to that “by invitation only”, you can select a certain group of investors and directly send them an invitation to that deal room.

Theo Hicks: Perfect. Okay, so I think we hit on that front part pretty well… So deal is closed, investors get the email that the deal is closed, and then now let’s talk about the investor relations aspect. So how does InvestNext help me manage my communication, and then getting the proper information to my investors about the deal?

Kevin Heras: That ties in directly into what we call the investment part of the product. First of all, that’s all connected. Once you’ve actually received those contributions, those investments, that’s now being tracked on the cap table. You can now set up your waterfall structure around this. So it’s a full drag-and-drop builder, exactly as you see it in your operating agreement; you model it right in the system, and then moving forward, when you’re running your distributions, whether that’s monthly/quarterly schedule, that’s being all run through the system. Investors are getting paid out.

On the flipside of that, on the investor relations side, of course investors gain access to their portal, they can view their full portfolio with you, distributions to date, return metrics etc. So that’s where we now carry into the investor relations part.

Theo Hicks: What about reporting? So do I upload my own reports? Am I inputting individual line items for data? How does that work?

Kevin Heras: One of two ways that can be done. Individual investor reporting… Since InvestNext houses the entire investor transaction data – so again,  contribution amounts, distributions – we are now the calculation engine for a lot of the investor performance metrics. So maybe you’re sending out a quarterly batch of statements out to your investors… You can generate those in the system; those can get placed outbound to the investors. Or the investors can log in at any point, as they would with their Charles Schwab account, they can view those in live… And then the other side of that is if you have any sort of property-level reporting or any sort of asset-level reporting, we’re working through integrations with systems.

So if you have an asset-level — we’ll call it your standard property management software, we can actually connect right into that and marry that data into your reporting. That’s especially useful for groups that, again, maybe at scale you’re working with multiple property managers, and each one of those may utilize a separate system. So what we need to be able to do is connect the data from each one of those systems and then aggregate those up both for internal reporting, as well as external reporting for investors.

Theo Hicks: So you’re saying that InvestNext can connect to ABC Property Management Company’s software, so that you’ll have instantaneous access to the reports for my property…? Like rent rolls, profit and loss statements, and things like that.

Kevin Heras: That’s exactly it. We’ve facilitated many of those integrations in the past, and that’s really the vision around all this stuff – again, we aggregate the very asset-level data, and not only for the sponsor, but for the investor, that’s now presenting an added layer of transparency, exactly.

Theo Hicks: And then the last question – so not sending distributions, not sending the reports, but sending monthly or quarterly update emails with specifics on current occupancy rates, and renovation updates, things like that… So would I need to do that somewhere else, and manually type in my explanations of what’s going on, or is there some sort of automation for that as well?

Kevin Heras: Yeah, so we have this — and maybe I’ll get a little into the nuts and bolts or techy about this, but we have this concept known as merch variables. The idea here is that when you’re drafting up a new communication, or even in our system, what we call a post, you can actually carry in as part of your natural language, as you’re typing out your summary or so forth, you can actually include metrics that you can embed into that paragraph line. So it could literally pull metrics in from the system that are already being automatically calculated. Of course, you can set that as your template moving forward when you’re doing your monthly or quarterly cadence reporting… And again, two different formats, as I just mentioned.

One way is I’m gonna send out a mass communication or mass email out to my industrial park investors. Of course, the system already knows who your industrial park investors are, it knows their actual reporting metrics… But then the other side of that is we have this concept of posts. When you do that, you basically can post an update to the investor portal; the investor logs in or they can receive that on their phone and they can view it in a rich-format text, as you would an online blog.

So it’s kind of the historical concept where maybe you sent out a mass email, you attached a PDF or an Excel, just kind of saying “Hey, this is what’s going on.” It’s a bit more of a richer format, where you can even embed YouTube videos or whatnot.

Theo Hicks: Like pictures, and stuff?

Kevin Heras: Yeah, exactly.

Theo Hicks: This is very neat. Alright, Kevin, what is your best real estate investing advice ever? Or your best advice ever for running a business?

Kevin Heras: I always say “Focus.” It seems pretty standard, but for me personally, focus has been an incredible paradigm to go after. Just understanding that when you’re building something, it’s really about becoming really good at what you do… And it’s, again, just staying focused on the core problem you’re trying to solve. And again, that’s from the paradigm of a problem-solving platform and a software. So focus is my big statement here.

Theo Hicks: Perfect. Alright, Kevin, are you ready for the Best Ever Lightning Round?

Kevin Heras: Sure thing.

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

Break: [00:17:26].14] to [00:18:17].21]

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

Kevin Heras: I’d say one I’ve revisited is “Crossing the chasm”. Again, primarily related to product building, product development, but I think it’s extremely applicable to any business. So it’s just about as you’re getting started, it’s being able to handle that initial growth, and at the same time it’s being able to keep yourself disciplined on what the problem is that you’re trying to solve. You’re not gonna build a business that solves everyone’s problems. They use the landing beach analogy; when you land on your beach, focus on that area, really own that area, and then of course, later on you can always expand your business. So… Crossing the chasm.

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

Kevin Heras: I would definitely have to ask myself what led to the point that the business collapsed. After that, it’d just be a matter of reflecting on what led to that moment, what inflexibility caused the business, unless some act of God… But if the business fell apart, I’d say I’d still be in real estate, I’d still be solving the problems in that space, because for us I think it is truly the final frontier for a lot of the stuff that’s happening in the world economy around real estate.

Theo Hicks: Besides this particular need of apartment syndicators needing technology for managing investors, what’s the other biggest pain point or biggest need that could be solved by tech that you see in real estate?

Kevin Heras: We really think that the entire transaction of real estate still  is yet to be disrupted, because just the process of acquiring real estate, all of the stakeholders involved, we have literally barely  scratched the surface on that side… And I think that’s very much so open for disruption. So the whole acquisition side is a very interesting problem to solve.

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

Kevin Heras: As you stated earlier, we’re a Detroit-based company, and we’ve made it our internal mission — Detroit is our home, and when people think about Detroit, you get this sense of “It’s seen better days/It’s grungy” and whatnot… And it really is, for us — I’m a transplant to this city, I’m not a Detroiter, but I’ve moved here five or so years ago and I’ve seen the place rebuild itself. A lot of big tech companies moving in; they’re seeing the opportunity. So our focus is hiring local talent, as well as just giving back to the local community here. So that’s kind of our mission locally.

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

Kevin Heras: Best ever place – you definitely can reach me directly at my email, at Kevin@investnext.com. Of course, you can hit me up on the website; there’s a little chat bubble and you’ll likely see my mugshot on there. Likely me or one of the people on our team that will get to you… But yeah, kevin@investnext.com is the perfect place.

Theo Hicks: Awesome, Kevin. Thanks for joining us today and walking us through the capabilities of the InvestNext platform. Very fascinating. We’ve talked about, first of all, how you met the co-founder of the business, and how it was kind of just random, and keeping in mind — this is pretty common, that I get people who have partners and just realizing that really any relationship that you have, or any action that you take could lead randomly down the line to a deal, to a partnership… You never really know. So keeping all of your doors open is always a smart play.

And we talked about the two main areas that are addressed by the InvestNext software – the raising money and the investor relations. And really, it covers everything that I can possibly think of, that is involved in the raising money part of it, from when you first touch someone who’s interested in investing, to the deal closing, and then from the investor relations standpoint, once a deal is closed, until the deal is sold. It’s seems as if it’s capable of covering all of that in one centralized location.

So anyone who’s interested in raising money, or has raised money, or is currently raising money, definitely check out this InvestNext.com. So definitely check that out. I’ll be checking it out as well after this interview.

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

Website disclaimer

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

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

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

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

Oral Disclaimer

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

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JF2316: Rentals & ATMs With Billy Keels

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

Billy Keels Real Estate Background:

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

Click here for more info on groundbreaker.co

Best Ever Tweet:

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


TRANSCRIPTION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Billy Keels: Absolutely correct.

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

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

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

Theo Hicks: Let’s talk about ATMs. How does investing in ATM work?

Billy Keels: This is one of the things that I’ve found out as a passive investor; I guess when you’re really busy and you’re in a multinational and you’re thinking to yourself “Well, you’ve gotta bet on the stock market, you’ve gotta do this, you’ve gotta do that”, and one day it looks like you’ve got a lot of money, because it’s on paper, and then three days later some things happen, or someone’s said something or done something and you’re in the hole again… So one of the things that attracted me to ATMs, or at least the ones that I’ve invested in passively, is it provided a very predictable stream of income. There was a portion of my portfolio that I needed to just provide very predictable streams of income.

So building our relationships, understanding, getting to know more about the person who is syndicating, as well as the team that was delivering their track record, how many successful ventures they’ve done – it  was something that made sense for me, because as I mentioned, I was looking for a portion of my portfolio to provide very predictable streams of income. ATMs are a real asset at the end of the day, it’s a  real asset play, and it’s something that everybody understands. You walk up to an ATM machine, you take money out, and when you take money out, you typically see at the bottom there’s a little transaction fee… So there is a portion of that transaction fee that goes to the person that owns the machine, there’s a portion that goes to the person that’s renting it in the space, the restaurant or whatever place you’re in… And then to the investor.

So it was something that really made sense, it was really simple, and it fit into what I wanted that part of my portfolio to do.

Theo Hicks: Can you maybe walk us through an example of one of your ATM investments? How you’ve found the actual team that owned the ATM, and then what the compensation to you looks like. You don’t have to get specific if you don’t want to, but just to understand how much money I can make investing in ATMs, and then how do I find these ATM deals.

Billy Keels: So just explaining how it works, the mechanics behind it? Is that right?

Theo Hicks: I’m more thinking how do I find these people, and then how much money will I make.

Billy Keels: Perfect, I love that. So it’s much like most things  – you have to be in the right place t the right time, and you need to be able to find the people. So you’re asking the right questions – I’m sure people will want to know how do you find out more about ATM machines; as I’ve mentioned, I’ve done this passively.

One of the things I think is really important, Theo, is to continuously go out and look to build relationships. I know it’s something that you believe a lot in as well. And I have done that not only living in Spain, but you meet a lot of people doing things remotely, on Zoom, or Skype, or Teams, or whatever the case may be… But I actually spend a lot of time where I invest my own capital to fly back to United States. So going to a number of events in the United States, I was able to meet people, and a lot of times, in a lot of these different events, there are people that have certain types of opportunities. It can be self-storage, it can be multifamily, it can be ATM. I didn’t know much about ATM, but it was something — just like you’re asking the question now, it’s like “Okay, let me find out a little bit more about this. I don’t have any idea about it.”

So through a number of different relationships and getting to meet people over the span of a year, I was able to find out specifically about the ATM opportunity. So having taken action, gone to the U.S, met someone at an event, when I was there at the event; we had a conversation then offline. I had a chance to meet them offline back in the United States, and then found out more about the specific ATM opportunity.

Basically, the way that the ATM works – and this is different for different people, but this specific ATM works… Is you put a certain amount of money – this is typically for accredited investors; I believe it’s accredited investors only, this particular one… But you place your capital; you have a seven-year lease on the ATMs. For the use of your capital during the seven-year period you get a predictable stream of income every single month. So every single month for the use of your capital, for a period of seven years, you get the exact same amount of capital, that you can see from now until seven years from now.

Going back, it’s really about being able to build relationships, meet people, ask the right questions, and find out about the opportunity; that was done offline.  We went online, and eventually offline, and it was something that made sense for me and that specific portion of capital in my portfolio. So hopefully, that is clear, how we built the relationship, and also the way that this particular ATM works.

Theo Hicks: Something else I wanna ask you, too – we talked about before you were in real estate you were doing the stock market, and how the values kind of fluctuate, you’re not really in control, and so you knew that you needed to transition into something else that gave  you more control… But it sounds like you’re kind of investing your own money  into your active business, you’re investing money passive into real estate, you’re investing money passively into ATMs… How do you decide what portion of your money goes into what? Or maybe a different way to look at it is  am I gonna invest in ATMs next, or am I gonna invest in my own deals next, am I gonna invest in this next? Or was it kind of just as opportunities come up? How do you know what to invest in and how do you know what portion of your capital should go into what?

Billy Keels: Okay, I love that question. And I guess this is maybe just giving you a little bit more about my background and how I grew up. I grew up in a family where we didn’t have lots of excess capital, so one of the things as I started to get to know myself  even more – I really fell in love with being able to see money in the bank, because that gave me a sense of security, and a sense of satisfaction.

Up until recently, I really was one of those people that believed “Just have more and more capital.” And as I’ve continued to get educated more and more, it’s about making sure that my capital is always working out. It’s always on the treadmill and moving. So at the same time, I wanna make sure that there is always a portion of my capital that is in the bank, so that I can sleep well at night no matter what.

And then from there, it’s going through a process of saying “There is a portion of my capital that I know that I want to be able to actively manage”, for a couple of reasons. Number one, because I want my business to continue to grow; so through that business and placing capital and building the relationships I’m able to make sure that that capital will also get the highest financial return, as well as educational return, I believe… And I have that portion of my portfolio that isn’t active.

And then there is a lesser portion of my portfolio that I know that I don’t want just sitting in the bank, Theo, because that’s something that I did for a really long time, and I realized that that wasn’t it. I’ve been in an area where I wanted to know more about multifamily investing, so I knew that I wanted to place capital in at least one or two other passive investments. So it was more about the quantity of investments in multifamily assets. I knew that I wanted to do something that was development, so I placed capital on development, and then there was just additional capital.

So the ATM play was really the wild card that went beyond the multifamily, and went beyond development. So it wasn’t any more sophisticated than that, but I knew more than anything that there was a portion of my capital that I just wanted to be in the bank, so that I can sleep well at night; the other portions of my capital were specifically there to be able to invest. A larger portion for direct investment, to build out my business, and then the others were to gain more experience and have that capital working.

Theo Hicks: And then really quickly – you don’t have to give me exact numbers, but if you had 100% of your money, what percent is that security blanket, what percent is being actively managed, what percent is being passive invested? If you had to give me ballpark percentages.

Billy Keels: For me it’s 15% that is just sitting there, that I know just needs to be there to help keep me fine in the evening. Then there’s gonna be about another 45%-50% that is actively for my business, and then another 35% that is moving or investing through and with other people.

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

Billy Keels: So one of the things I believe is that you need to surrounding yourself with the right  team of people that are where you want to be, so that they can always inspire you. And most importantly, you need to take action. And take action before you’re ready; don’t be like I was many years ago, and I’m still fighting through this as a recovering perfectionist. So don’t wait for things to be perfect before you get started, or you will lose so much time. And time is really what is the most important thing. So start before you’re ready I guess is probably the best thing.

Theo Hicks: Alright, Billy, are you ready for the Best Ever Lightning Round?

Billy Keels: I am. Let’s go!

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

Break: [00:17:21].05] to  [00:18:10].23]

Theo Hicks: Okay, Billy – if you guys are watching on YouTube, you’ll see the beautiful bookshelves behind him, so… What is the best ever book you’ve recently read?

Billy Keels: Wow, the best ever book I’ve recently read… It’s one that I talk about a lot. It’s called “The creature from Jekyll Island.” I say “recently read” because I’m rereading it again; it’s by G. Edward Griffin. It’s just amazing if you really wanna understand what is happening what is happening, how the money system works, debt… It’s “The creature from Jekyll Island.”

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

Billy Keels: The first thing that I would do is, number one, make sure that I have a clear plan, and reach out to my network.

Theo Hicks: If you’ve lost money on a deal before, how much money did you lose and what lesson did you learn?

Billy Keels: Wow. So I definitely lost money on a deal; the one that has been the most painful is I lost $25,000 because I did not take the time to read a home inspection. I got the home inspection done, but once I got the home inspection done, I didn’t read it and really understand it. I just felt good because I got  it, and it cost me $25,000 on some roof issues… So the lesson is if you’re gonna take the time to get the inspections, make sure that you or somebody on your team understands what the potential risks are. That cost me $25,000 about seven months into owning the property.

Theo Hicks: What about the best ever deal you’ve done?

Billy Keels: Without a doubt it’s — my company purchased a mobile home park in the Charlotte MSA. Without a doubt, it was the best opportunity, primarily because it was one where the owner – he was really skeptical of owner financing, and once he understood, because myself and the broker would really spend time helping him to understand the advantages for him from a taxation perspective, he got his accountant involved, and it was something that really worked out well for him, and it also worked out for my company as well. So that was without a doubt the best ever opportunity.

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

Billy Keels: Really two ways. Number one is there’s something that we do every year, where we actually donate capital to a local children’s school just outside of Barcelona. At the same time, I also love spending time helping people to understand, especially really busy six-figure salary employees to understand more about finances by playing Cashflow 101. It’s one of my favorite things to give back.

Theo Hicks: So we have a few more minutes, and there’s one thing I wanted to ask, and I wanted to make sure I have enough time… So you do work full-time as an application software sales executive, and then you’ve got half of your money in your active real estate business, buying mobile home parks, and rental properties… You’re passively investing… When are you doing the real estate aspect of your business? Do you have a job that allows you to do it during the day, or are you waking up really early, or doing it at night, or only at weekends? How does that work?

Billy Keels: Yeah, great question. One of the things that I’ve been very blessed with is that I sleep very little. So I love – and I like to share on different social media platforms as well – to wake up in the morning. I don’t have an alarm clock or anything like that, but I’m usually up somewhere between [4:30] and [5:30]. For where I live, that’s really early… So I go through meditation, reading in the morning, getting things done, and then I can focus on my business before my boys wake up and get ready for school.

So between about [4:35] until 8 o’clock I really have time to focus on myself, on getting my energy right, and also looking at the business. Then I’m working typically from about 9 until 6 or so, and then afterwards I like to spend some time with my boys. It doesn’t always happen every single time, but I do like to get some quality time with them, and then typically once I have dinner, I’m going back and I’m working on building relationships, I’m on the phone, or specifically looking at the properties, and then I’m in bed somewhere around [11:30], 12. [unintelligible [00:21:44].09] and I try to maximize every single minute that I can between family, my own business, and definitely with the company where I’m working, where I continue to overachieve, again, some of the objectives.

Theo Hicks: Thank you for breaking that down for us, I appreciate that. I’ve always wanted to try the getting up early, but I definitely cannot survive off of that little sleep… Maybe it’s something you just kind of get used to.

The last question is what’s the best ever place to reach you.

Billy Keels: The best ever place to reach me is basically on my website, which is BillyKeels.com, which you’ve talked about before. If anyone wants to learn more about long-distance investing and some of the things that you can avoid and a lot of the mistakes that I’ve made, you can also go to billykeels.com/seven-mistakes-to-avoid, and we’ll be in touch. I’ll get you a PDF so you can avoid the mistakes that I’ve made.

Theo Hicks: Perfect, Billy. Well, thank you for joining us. A lot of solid info, I think, in this interview. Really, we kind of focused a lot on two things. Number one is how do you do your full-time job and invest at the same time? For you, you don’t sleep a lot; for other people it’s obviously working in the morning, working at night, or working on weekends…

And then in the actual investment arena we’ve talked about diversification and the balance between the different types of ways you can invest… And then the benefits of each of those different types. So you’ve talked about you’ve got your money that kind of just sits there for security, and you’ve got the money that you actively manage for your financial reasons, but also for educational reasons; passive investing – same thing… It’s like, “Okay, I might be interested in doing this type of thing in the future”, so rather than just doing it for a year, you’re going to just passively invest in a deal and see what it’s like. I really appreciate you talking about that.

Then also you went into a lot of specifics on investing in ATMs, which I thought was very fascinating. Billy, thank you for joining us; I really appreciate it. Best Ever listeners, as always, thank you for listening. Have a best ever day, and we will talk to you tomorrow.

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JF2313: Tennis To Investor With Sunitha Rao

Sunitha works in corporate financial planning for a biopharmaceutical firm while investing on the side for the past 2 years and currently has a portfolio consisting of 6 properties with a total of 9 doors. She shares how she dropped out of school to pursue tennis and eventually realized tennis wasn’t for her so she pivoted and went back to school to get a degree and now she is working full-time and building her wealth on the side part-time. 

Sunitha Rao Real Estate Background:

  • Works in corporate financial planning for a biopharmaceutical firm while investing on the side
  • 2 years of real estate investing experience
  • Portfolio consists of 6 properties with 9 door rentals
  • Based in Indianapolis, IN
  • Say hi to her at www.Griffixpropertygroup.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“You have to add value in everything you do” – Sunitha Rao


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, Sunitha Rao. How are you doing, Sunitha?

Sunitha Rao: Doing well, thanks. And yourself?

Joe Fairless: I am doing well, and thanks for asking. A little bit about Sunitha – she works in corporate financial planning for a biopharmaceutical firm, while investing on the side; she’s got two years in real estate investing experience. Her portfolio consists of six properties with nine doors, and she’s based in Indianapolis, Indiana. With that being said, do you wanna give the best ever listeners a little bit more about your background and your current focus?

Sunitha Rao: Sure. My background is a little different from many people, especially those in the investing world. I spent actually the first ten years of my “professional life” as a professional tennis player.

Joe Fairless: Nice!

Sunitha Rao: I turned pro when I was 14, that’s why the air quotations are there. I retired at 23; no money, no education. I dropped out of school after sixth grade. I was basically a train wreck, right?

Joe Fairless: So don’t have my daughter do that then, huh?

Sunitha Rao: No. Don’t. Keep her in school. [laughs]

Joe Fairless: Okay.

Sunitha Rao: So at that point I was all about “Let’s get a good job, let’s make that stable income, let’s get going with life. There’s no reason to be poor and broke for the rest of my years.” So I went back to school, I got my bachelor’s, I got a job at a Fortune 500 company, in their management training program; it was a rotational program meant to breed leadership… And I thought life was great. But as time went on, I realize — and by “time” I mean like two whole years. It didn’t take me too long to figure out what was going on, I think. I was giving so much of my time to this company, and I just wasn’t seeing the same returns back for the time invested… And I started thinking “There’s got to be a better way to invest my time so that I can have more financial freedom, and maybe even earn back some of that time in the future.” And that was when I started looking into different areas of personal finance; I found actually Bigger Pockets and real estate investing, and just kind of dove in head first, studying basically any free moment that I had… Because I was also getting my MBA and working full-time at that time. I like to have a full plate.  [laughs]

Joe Fairless: Clearly.

Sunitha Rao: And then it took me about two years to save up a little bit of money, and then I started investing in Indianapolis, after I’d saved up that money and gotten a little bit of that knowledge base. However, at this time I was still based in Boston, still working that full-time job, still trying to make ends meet, figure things out on a single W-2 income salary. So that in itself was a really interesting process.

After that first investment, spring of 2018, a little over two years now, I’ve gotten up to nine doors using a variety of strategies, from BRRR, long-term buy and hold, I have an Airbnb, I’ve house-hacked, I’m still house-hacking, I’ve done seller financing, investor financing, you name it. I’ve had to use a whole variety of strategies in order to make the most of my W-2 income, so that I can grow this business as safely and as quickly as possible.

Joe Fairless: Wow, you have just been resourceful and made it happen. When you left the tennis world at age 23, I think I heard you — you said you went back to school. Now, I imagine you already had your high school degree, right?

Sunitha Rao: Uhm…

Joe Fairless: No?! Okay, tell us about that. So you’re 23 years old and — what do you mean when you said you went back to school?

Sunitha Rao: So what I had was a GED, which was an equivalency diploma.

Joe Fairless: Yeah, that checks the box, right?

Sunitha Rao: Yeah, but this test is so easy; I feel like if you’re even halfway literate… I dropped out of school after sixth grade; I didn’t know any high school math. I didn’t even finish middle-school math, yet I don’t know how I was able to get a high school equivalency diploma when I didn’t do anything after that, essentially… So yes, I did have a high school degree, but when I went back to school, I enrolled in local community college and I had to take 6-8 months of remedial English and math classes to get myself back up to a college level. Then I started from there.

Joe Fairless: Okay. And then you got your undergrad?

Sunitha Rao: Yes. I eventually got kind of an academic merits scholarship, which is hilarious…

Joe Fairless: Wow.

Sunitha Rao: …and so weird, at a private school up in Boston called Babson College.

Joe Fairless: Oh, yeah.

Sunitha Rao: They focus on business and entrepreneurship. So I was really lucky to have landed that spot, and ended up getting my undergrad from there.

Joe Fairless: And how were you paying for school?

Sunitha Rao: Through scholarships and merits, and I was also working all the time; I was teaching tennis on the side, I was bartending on the side, waiting tables… I dog-sat, I baby-sat… I didn’t like kids then. [laughs] I did basically anything I could to fund my existence during that time.

Joe Fairless: So then you saved up some money and you bought your first place… What did you buy and how much money did you save up to buy it?

Sunitha Rao: I think at the time I had about $60,000 saved up. I bought — there were two homes on the same parcel. They weren’t attached, it wasn’t a duplex. It was a single-family home with a dethatched carriage house, and it was in one of the more affluent counties in Indianapolis, while not being in the most affluent city. So I was getting a lot of the run-off with people who couldn’t afford to be in the best area, but still wanted their kids in the best school district, and they wanted to be in a low-crime neighborhood, and that sort of thing. So it was a really good situation to have found; I found this while I was still half a country away, essentially.

So the numbers – the purchase price was 95k. I spent about 11k in initial rehab, and got that rented. Since then, I have transformed this property; it’s much more profitable now. At that time I rented the main house for $800 and rented the carriage house for $500. So it was still about 1.3% price-to-rent ratio. But since then I’ve had to invest probably another 13k, but I turned the dethatched carriage home into an Airbnb. It’s this 400 sqft. level home that is just so awkward and weird… But it’s been great as an Airbnb. I’ve been doing it about a year. I’m grossing between $1,400 to $2,000 amount, so that’s netting at least 1k a month after all of the  holding expenses, and stuff.

Joe Fairless: Wow.

Sunitha Rao: So it’s a little over 2% in a very good area.

Joe Fairless: And it’s been over a year since you’ve been doing the Airbnb. How has the impact been over the last 3-4 months?

Sunitha Rao: It’s actually not been too terrible. When Covid initially hit and the travel started to die down, and the quarantines were in place, I actually shifted to a medium-term rental, so like one month here, another person who wanted two months… So I was really lucky to have found it; it’s not like I went out searching for it, they just reached out to me via VRBO or Airbnb, and we’re like “What can you do…?”

I definitely had a little bit of a hit in terms of profit, but it’s still way more profitable than a long-term rental, so I consider that a win.

Joe Fairless: You bought it for $95,000… What type of financing did you get?

Sunitha Rao: Conventional. That was my first deal. There’s no way I was going into it with cash; not that I had it, or any other options… So yeah, I did the conventional route. But it’s actually helped me out getting into it with a little  bit more equity, because about a year and change after I purchased the property I refinanced that and a couple others into a commercial mortgage… And that property actually ended up appraising for about 140k. So I already had 20% equity, it appraised for 140k, and I was able to get a line of credit as a second position, that I’ve since been using to fund other rehabs and other acquisitions. So I actually didn’t mind in the long run having a little more equity in that property.

Joe Fairless: I’d like to talk more about that in just a brief moment… But first, you were in Boston at the time, and this is in Indianapolis… Are you from Indianapolis?

Sunitha Rao: No, I have never been to Indianapolis before doing that deal… [laughs]

Joe Fairless: Really?

Sunitha Rao: Yeah…

Joe Fairless: How did you come across the deal?

Sunitha Rao: MLS.

Joe Fairless: MLS, but how do you know — were you looking at MLS’es in a bunch of cities, or what?

Sunitha Rao: No, I was focused on Indianapolis. I’m a visual person, and what I did was I built out this map of where the Trader Joe’s were in the city, where the good school districts were, where certain crimes were happening, so I  could get a visual depiction of exactly which neighborhoods I wanted to be in. Then when I looked at the MLS, I would look at it in the map view; and when something popped up in my price range in the right area, I could pull that trigger really quickly and know what I was looking at.

Joe Fairless: And how did you have access to the MLS?

Sunitha Rao: Through a broker.

Joe Fairless: Through a broker, okay. So you were working with a real estate agent… And did they give you access  to the MLS? Or were they looking–

Sunitha Rao: They would just send me the drip feeds whenever something came within my criteria, and that’s when I would use the map view.

Joe Fairless: Okay, cool. Well, I wanna talk about what you just mentioned… You refinanced that and a couple others into a commercial mortgage, and then you got money out… Plus, you got a line of credit.

Sunitha Rao: Yes.

Joe Fairless: Please elaborate on that. Next level.

Sunitha Rao: This is one of my favorite things.

Joe Fairless: Yeah, next level is what it is.

Sunitha Rao: Thank you. [laughs] So a lot of people talk about having “dead equity” in the smaller residential area, and I don’t think that’s 100% true because of what I’ve been able  to do. It also, I think, highlights the importance of not only buying for cashflow, but also buying with plenty of equity and for appreciation in good areas. I’m a firm believer in balancing the two, and that it’s possible.

So I found a lender; it was a local portfolio lender. This was one of the benefits in terms of moving to Indiana, because then I was able to network and build the relations I needed to meet these people. But I’ve found this lender who would take a minimum of five doors — it didn’t even have to be five properties, just five doors… And they would appraise it. They would have to have first-lien position. So they would have to have the primary loan under their name, but then for whatever equity was left over after whatever they loaned on, they would give a line of credit. It’s essentially like a HELOC, but it was under my LLC, so it was kind of like a business equity line of credit; I don’t know if that’s actually a name, if that’s the actual name for it…

So I went with them, I refied, and even though it was on a 20-year amortization schedule, they were able to offer a lower blended interest rate that actually brought my payments down. At this point I think it’s like $200/month lower, despite being on a shorter amortization schedule.

Then they did the appraisal. There were three properties, five doors, and they said “Okay, you have this much equity. We will lend–” I think it was 80%. I forgot if it was 75% or 80% of that, in this line of credit… Which you can basically use as a credit card. I don’t use it a lot of time, but when I need to have the cash for a BRRR, or now that I’m paying that off, if I want to acquire, I can just pull on that cash and be a cash buyer, which is so impactful, and also really helpful, because on my single W-2 income it’s not like I’m gonna have hoards of cash sitting around. I’m just trying to figure this out and basically get by and grow this as time goes on. So having just this little pile for an acquisition fund is so beneficial.

Joe Fairless:  Oh, it’s empowering, because you know you’ve got that in your toolkit, and should you choose to exercise it, then you have the ability to close on deals that you wouldn’t have… But just the confidence in knowing that you’ve got that in your backpocket, it’s gotta be awesome.

Sunitha Rao: If you told me two years ago that I would have X thousand dollars just sitting in cash, doing nothing, until I want to do something with it, I would have told you you were crazy. But there’s a  way to achieve things if you just keep plugging along.

Joe Fairless: So on that refinance where you put it all under a commercial mortgage with a portfolio lender that’s local to Indianapolis – just so I’m clear, you didn’t get any money out, just that money that you would have gotten out was a part of equity that you have a line of credit against up to 75% or 80%… Is that correct?

Sunitha Rao: That is correct. I didn’t look into options for cash-out refi, because I didn’t want one.

Joe Fairless: Why not?

Sunitha Rao: So let’s say I could cash-out refi for 200k – then I could pull that cash out and it would also be sitting there, but then regardless of whether I am using it to earn a return or not, I’m paying for that. I much preferred with where I am at this point in my investment journey  to not have to incur extra costs while I’m not using the money.

Joe Fairless: And what do you mean by you’re paying for that in extra costs?

Sunitha Rao: Because it’s essentially a loan, right? So if it’s a cash-out refi, you’re taking out that 200k, you’re taking the money from the bank and you are keeping it. And if you get to keep the money, they’re like “Sure, you can keep it, but you’re gonna be paying that in a larger loan value.” Now I only took out, let’s say, 150k, so I’m only paying for 150k until I wanna use that 50k. When I use that 50k and I can earn a return with it, then I’m like “Okay, I’ll pay the bank for it, because I’m making money off of it anyway.” But the rest of the time, I don’t have to.

Joe Fairless: Do you remember what the interest rate is?

Sunitha Rao: Yes. Initially, it was 5.5% for the primary, and I think the HELOC (or the BELOC) was 6%, but then when interest rates dropped this year, I went back to them and I brought them like a bunch of business, and we’d all become buddies, and I was like “Guys, help me out here.” They were like “Okay, let me talk to underwriting.” Because it was a portfolio lender, because they did everything in-house, a week later they came back and they were like “Okay, we’ll lower your rates.” And I didn’t have to pay a dime or do anything else.

So now I’m at 4.75% on the commercial/primary, and 4.75% on the business line of credit.

Joe Fairless: Good for you. Wow, they lowered both.

Sunitha Rao: Yeah.

Joe Fairless: I could see them lowering the line of credit rate, but you’ve got some power of persuasion to have them lower the other one… It wasn’t fixed, was it?

Sunitha Rao: Five-year balloon.

Joe Fairless: It was a five-year balloon… Fixed interest rate?

Sunitha Rao: Until the five years, and then we’ll see after that.

Joe Fairless: Yeah. So they lowered a fixed interest rate?

Sunitha Rao: Mm-hm…

Joe Fairless: Wow. [laughs]

Sunitha Rao: It pays to make [unintelligible [00:17:42].02]

Joe Fairless: That’s me clapping right here. That’s me clapping. Wow… Okay. So let’s talk about what you did right there with the lender who you had a fixed interest rate with, but yet you go to them and you somehow convince them to lower your fixed interest rate. I’m not sure the right question to ask, other than I’ll start with how did you convince them to do that?

Sunitha Rao: It’s everything else. You have to add value. If I hadn’t worked on building those relationships… I make it as easy as possible for them to work with me. They’re working with me because they make money off of me. And if they need information when they’re trying to get something to work, I am on it right away. I answer emails, I don’t make them wait, and then as time goes by, when I find people who I think will be a good fit, I’m always looking to connect people. And if I can find people who will be a good fit, then I connect them right away. Sometimes it works, sometimes it doesn’t, but I try to make sure that it will work before I meet with them, so that I don’t waste anybody’s time.

Joe Fairless: What are some examples of how you added value to them in the past, other than you business?

Sunitha Rao: I brought them other investors who were looking for similar products in the area, and who I thought would also be easy to work with and enjoyable for them to work with. It’s not enough that they just bring money if the guy’s a complete jerk. So I’m very careful with the people I connect. I like to make sure that they’ll be able to execute, and they’ll also just be generally good people.

Joe Fairless: And how many customers have you brought them?

Sunitha Rao: Quite a few. I don’t know the exact numbers, but these aren’t people who have one home or two homes. These are also portfolios of dozens of homes, or millions of dollars etc. So I bring them the gamut, and then I also work to help them on their residential space; there are other people I know who are trying to have HELOCs – I’ll connect them. So then I have an overall holistic, strong relationship with the bank.

So even if I’m like “Hey, I haven’t done anything for a minute for you, but I talked to the other lady on the residential side and I heard things are going well. She’s gotten a couple HELOCs” etc. So they want to keep working with me because I’m bringing value to them personally, but also to the bank.

Joe Fairless: It makes sense. So if you had to guess or estimate about  how many referrals you’ve sent their way… Give it your best shot, if you wouldn’t mind.

Sunitha Rao: Probably at least two dozen, at least.

Joe Fairless: And they’re highly qualified, based off of what you’re saying.

Sunitha Rao: Oh, yeah.

Joe Fairless: Say you’ve got a new referral today. Are you sending it to the same person you’ve been speaking to all along and have a relationship with, or are there a couple people that you make sure always copy it on the emails, and they see that you’re hooking them up.

Sunitha Rao: I try not to flood anyone’s inbox. So the people who will directly benefit are the ones who will have that connection.

Joe Fairless: Okay. So do you have one point of contact there?

Sunitha Rao: It depends on the need. Within that specific bank there are two points of contact, and I’ll loop in whoever is needed at that point.

Joe Fairless: Okay, so there’s two different people who you have a really strong relationship with.

Sunitha Rao: Yeah. And you also have to really know what they’re looking for and what they can offer. If someone comes to me with a cash-out refi, wanting a contact for a cash-out refi for X property, and I know someone at that bank – if one side of that bank is not gonna work, I won’t even go there, because that’s not gonna be in the investor’s best interest. It is  a warm lead for the bank, but the bank might not be able to execute on that, so why would I wanna waste their time?

So it’s about looking through and evaluating each individual with their unique needs, and figuring out how to help them, and that in turn somehow helps you… I don’t know. But it’s worked.

Joe Fairless: Oh, absolutely. I have a relationship with a local bank, and I have not once asked them  “What types of customers are you looking for, who maybe I can bring them to you?” I’ve never asked that. Never even thought to ask. And I pride myself on — I have a vision board, and on my vision board in the middle it says “The secret to living is giving.”

Sunitha Rao: I love that.

Joe Fairless: But I’ve never even thought of asking the questions that you were asking them, and then connecting those dots…

Sunitha Rao: It’s not just that either… So when I talk to the residential broker there, I’m like “Okay, so if I bring someone to you, what’s the most efficient way to get them through your process and to give you the information?” And she’ll be like “Okay, if this is the situation, just send me an email. If this is the situation, they can apply online. Here’s the link.” That also makes it more efficient for both the banker and the person trying to reach out for the loan product.

If they are larger investors, usually I connect them personally, so that both sides can build that relationship, because there’s more possibility for a long-term relationship in those situations.

Joe Fairless: Yeah, that is beautiful. That is absolutely beautiful. I will today email my point person at my local bank and ask her — in so many words; I’ll wordsmith it, but “Who can I introduce you to? What are you looking  for to help your business?” And then as a follow-up, what’s the best way to do that, so that I’m not (as  you were talking about) flooding someone’s inbox and not becoming a nuisance when I’m trying to help; I don’t want it to backfire on me.

Sunitha Rao: Exactly, exactly.

Joe Fairless: Well, taking a step back, what is your best real estate investing advice ever?

Sunitha Rao: It is to think outside the box. I’m paraphrasing a Steve Jobs quote that I saw somewhere, but it has to do with getting ahead. If you want to succeed or get ahead, look at what others are doing, but do it differently. And I think investing is no different. When we invest in real estate, it’s the same thing like buying a stock. You’re trying to identify a mispriced asset. And if you are looking at everything in the same way that everybody else is, if you’re looking in the same place that everybody else is, doing things the same way, you’re shooting yourself in the foot.

So that’s in terms of investing… But then also, looking at what others are doing who might have the same goal. My goal is financial independence, and I have a lot of friends in the FIRE arena; one of them was like “Yeah, you have to go to FinCon.” FinCon, for those who haven’t heard of it, the tagline is “Where money and media meet.” It’s the largest personal finance conference, geared towards those who put out financial content – financial advisors/websites etc. When he told me that, I was like “You’ve got to be out of your mind. I don’t have a website.” I didn’t have an Instagram at that point. I had three houses. I was like “What am I gonna do?” But I trusted that he knew what he was doing, because he was so much more successful. And I went, and it was one of the best decisions I could have made for my investing career. I met so many people, got so many ideas… It was amazing.

So don’t be afraid to do things differently than  maybe you initially saw yourself doing.

Joe Fairless: Story of your life, right? Tennis from 14 to 23, and then just making a very dramatic pivot at that point…

Sunitha Rao: Yeah, basically. Thanks for connecting those dots. I hadn’t seen that until this point.

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

Sunitha Rao: Yes, I am ready. Let’s do it.

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

Break: [00:24:46].11] to [00:25:27].00]

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

Sunitha Rao: I don’t think I’ve lost money on any deal just yet. However, I did just finish a BRRR. I literally refinanced three days ago, completed the refi… And that was not as successful as I had hoped, because — we all make rookie mistakes; I made rookie mistakes on this go around. I didn’t factor in holding costs, because it leased and rehabbed during the time of Covid, so we had trouble getting materials, it took longer… So I didn’t take that into account. I didn’t take in to account refinancing costs, etc. So I definitely ended up leaving more in the deal than I had wanted. I still would have done it, but that was a little bit sad for me.

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

Sunitha Rao: I am very passionate about social causes. At this point I’m a little bit formant in my activities, but in prior years I’ve been heavily involved in women’s causes, diversity and inclusion initiatives at my workplace, LGBTQ community stuff, presenting at workshops and just doing anything I can to help those who I think don’t have as strong a voice, or helping those who may not have allies. That’s really why also I’m in real estate… I really want to be involved in non-profit work as a long-term goal. I just can’t do that right now with my job in real estate.

Joe Fairless: Any non-profit in particular?

Sunitha Rao: Yes. One is the National Coalition of Domestic Violence Against Women. I am a survivor, so that is something that means very much to me. I’m also after my time in my LGBTQ [unintelligible [00:27:00].04] at my prior employer; I’m also really passionate about that. I have many friends who are in the LGBTQ community and have seen how they have suffered and been treated unfairly, and not been able to have the same experiences and opportunities as many of those who have the privilege of being straight, or in more of a majority position. So those are two areas I’m particularly passionate about.

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

Sunitha Rao: I have a website and I have an Instagram. Both go by the same moniker, GriffixPropertyGroup.com. And then my Instagram goes by that handle, @griffixpropertygroup.

Joe Fairless: Sunitha, it was a pleasure having a conversation with you and learning from you and your path, and your resourceful ways about getting deals done… Which we didn’t get into a whole lot, but I’m confident that we got into some stuff that was at least equally as valuable, which is adding value, and specific ways to add value to lenders, so that you can build that relationship and ultimately save money on what is likely your largest expense for the deal.

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

Sunitha Rao: Thanks for having me.

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JF2309: Beginning Their Investing Journey With Ambrose & Chidi Ozieh

Ambrose and Chidi Ozieh are both young real estate investors who have been investing for the past 6 years. Ambrose left her education job to focus on real estate investing and being an active agent. During these few years, they have acquired 5 rental properties and currently work together to continue to grow their portfolio.

Ambrose and Chidi Ozieh Real Estate Background:

  • Ambrose recently left her education job and is now focusing full-time on real estate as an active agent and investor
  • Chidi, her husband, is an artist and investor part-time
  • 6 years of real estate experience
  • Portfolio consists of 5 rental properties
  • Based in Brooklyn, NY
  • Say hi to them at amaproperties09@gmail.com 
  • Best Ever Book: Richest Man in Babylon

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Just get started” – Ambrose & Chidi Ozieh


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we have two guests – we have Ambrose and Chidi Ozieh. How are you both doing today?

Chidi Ozieh: We’re doing great. You know, we’re in Covid, but we’re good.

Ambrose Ozieh: Thank you for having us, Theo. We are doing well.

Theo Hicks: That’s good to hear, and thank you for joining me as well. A little bit about their background – Ambrose recently left her education job, and is now focusing full-time on real estate as an agent and as an investor. Chidi, her husband, is an artist and an investor part-time. They have six years of real estate experience with five rental properties. They are based in Brooklyn, New York, and their website is AMAprops.com.

Starting with Ambrose – do you mind telling us some more about your background and what you’re focused on today?

Ambrose Ozieh: Yes, so I was born in Ghana, but my family moved to the U.S. when I was very young, to Philadelphia, so that’s where I grew up. I followed the advice that most parents teach their children – go to school, get good grades, become an employee. So I went to Penn State, [unintelligible [00:04:20].26] and after that I worked in the non-profit world. Then I eventually moved to New York for me to go to grad school at NYU.

In Philly, that’s where I met Chidi, my husband, who had just recently moved to the U.S. from London. I always knew that I didn’t want to work 30 or 40 years forever as an employee, but really didn’t know what I wanted to get into until we decided we didn’t want to pay the high rents of New York anymore… So we started saving as much as we could to have a down payment to buy a house. But this was even before we learned what real estate investment was. We just wanted to buy a house to live in.

Chidi Ozieh: Yeah. And mine is a similar story, just in the opposite side of the pond, in England. I was born and raised in London, and I grew up with a similar thing – go to school, get good grades, get a 9-to-5 job, work, retire, and then die, that kind of a thing. But I saw my parents – they were entrepreneurs, they had their own business, so I always knew there was a difference between having a business and having a regular job.

Eventually, I knew I want to start a business, didn’t know what that was gonna be… So I got the opportunity to emigrate to the United States in 2008 during the height of the credit crunch and the recession – which is a great time to emigrate anyway – and I met Ambrose in Philadelphia the year after I emigrated. We decided to move to New York two years later, and we kind of fell into real estate accidentally, for the want of not wanting to pay high Brooklyn rents anymore. So that’s our background.

Theo Hicks: Perfect. So was the first piece of real estate you bought your personal house in New York?

Ambrose Ozieh: Yes. Our first property was also an investment.

Theo Hicks: Okay. Maybe walks us through that then.

Ambrose Ozieh: Yes. So around 2013 we decided that we had saved enough where we could buy a property, but we actually didn’t really know the different ways we could go about it… And again, this is New York, so the price point is quite high… So we talked to different mortgage brokers and we decided that we were gonna be able to buy a property with FHA. It took us about nine months from when we decided to actually go and find the first property.

We were coming from work every night, going to see properties, every weekend going to open houses.

Chidi Ozieh: Getting outbid a lot.

Ambrose Ozieh: Yeah. We were newbies, we didn’t even know how things worked. We would emotionally invest in a property, and then we would get outbid with a cash buyer. So it took us a while… But because it took us so long, we learned exactly what we needed to buy. Our main goal was to buy a property that had a lot of rooms and square-footage, because we knew we wanted to rent some of the units.

So once we found our first property, we knew that that was the property, because it was large, it was three floors, two units, and a lower-level floor. We found it off-market actually, through an agent that we had come to; he told us he was the wholesaler, but also an agent… So he told us he had just sold this property to a flipper; so if we wanted to meet the flipper before he fixed the house.

So he set up a time, we met in the office and we negotiated the price… So by the time we went into contract, to closing  it took about eight months, because that’s how long it took him to renovate the house. It was a large house.

So yeah, we learned from that, and because we knew the seller before he renovated, we had a lot of input in terms of what we wanted inside the unit. So we were able to pick our cabinets, our countertops, the type of floors we wanted…

Chidi Ozieh: And just to add to that – it’s a three-family house, and there’s two larger units and one smaller unit. We decided to live in the smaller unit, because Ambrose said “We’ve been saving since we met to purchase the property”, and that frugality carried us through to want to live in the smaller unit and rent the other two out.

And by doing that, we kind of fell into what’s called house-hacking, without knowing what it meant to be house-hacking… And getting our first two renters, we were like “Wow, this is like magic. You basically just sit and get rent checks.” [unintelligible [00:08:33].02] any maintenance. We didn’t have any roof leaks or any things for maintenance to get, so we were just getting rent checks and we were able to save our W-2 income, all of it, in the bank. That feeling of being able to save 100% of your money is an amazing feeling when you have a W-2 job.

That kind of changed the game for us, and that made us understand that real estate is something that we wanted to pursue full-on.

Theo Hicks: Sure. So you had this deal, the house-hack deal… What was your next deal?

Ambrose Ozieh: So our next deal, again, we were constantly saving… After we bought the first one, in about a year the house had appreciated enough where we could take out the equity. So again, we talked to a mortgage person who did the math and he told us how much we could pull out. It had appreciated about 30%-40%…

Chidi Ozieh: Actually, about 50% or 60%, because what happened was — again, Ambrose said we were looking for nine months… We actually got word that a certain part of Brooklyn was being rezoned, and it hadn’t been announced yet. So we bought in that area before the mayor rezoned the area for more development… So that made the prices of all the properties go up the year after we bought it a lot. So we were able to capitalize on that.

Theo Hicks: How did you come across this information?

Ambrose Ozieh: A lot of research, and just by talking to a lot of people. So going to the open houses, reading, constantly every morning reading the news about the real estate market and the different areas of Brooklyn… So we knew about the rezoning before — the seller didn’t know that it was going to be rezoned, and he found out after we were already in contract, and he tried to get out of the contract, but he couldn’t.

Chidi Ozieh: Yeah. And also, the area that we were in is an area called East New York, and it’s the last transit hub left in the city, where all the trains meet… So it was kind of inevitable that eventually it was gonna get rezoned for higher-scale development… Because in New York – I don’t think many people know, but it takes them two lifetimes to build a subway line here… So it’s very transit-rich. It’s like 20 minutes from LaGuardia and JFK. It was a no-brainer that it was gonna get rezoned eventually. It was an outlying area in New York City.

Theo Hicks: Sure. Do you mind telling me exactly how you found  this out? Did an article get released one morning and you’re like “Oh, this is amazing”? Or did someone talk about it at an open house? How did you come across the information specifically?

Ambrose Ozieh: So while we were looking, we were able to connect with our local council member. And we weren’t friends, but we became acquaintances with him. So he also told us that they were considering rezoning the area. So we got that info from him. But the local media – they were also covering it, but it was not like a sure thing, because the city still had to vote on it. So it was something that the city was considering. There was some media coverage, but it wasn’t as known until much later.

Chidi Ozieh: Like Ambrose said, having that information really made us look more aggressively at that area, and [unintelligible [00:11:33].10] that was undervalued in there… Because we kind of knew that within 12-18 months the appreciation would be enough that we could pull money out and purchase the next one. So that’s what we did.

Theo Hicks: Alright. So you pulled the money out of that property to buy your second deal. So what was your second deal? Same thing – how did you find it, what was the business plan, things like that.

Ambrose Ozieh: The second deal was listed on the MLS, so it was listed on all the different websites – Realtor, Zillow. So we found it, we contacted the agent, we went to see it… It was a two-family. There was one tenant, and they tried to sell it to us with a tenant, and we insisted no. We needed it vacant. So we were in contract about 3-4 months before the tenant moved out. Then after the tenant moved out, the contract price included the whole building being renovated. So we waited for the seller to renovate it, similar to what we did with our first house. So they renovated it, and we closed. When we closed, it was rent-ready. We were able to rent it right away.

What is great about that property is it was really — even more than the second one, the stepping stone, we got a tenant right away who paid two years upfront of a New York City rent. So we had a large sum right away to be able to invest again into another property. So that property really helped us to get to the next level.

Chidi Ozieh: Yeah, that property really helped us start off our investment fund that we now use to BRRR (buy, renovate, rinse, repeat). And as Ambrose said, that tenant paying all that rent upfront really galvanized that. Not only that, we were still riding the waves of the appreciation, so even that property has greatly appreciated… Because it’s actually bigger than our primary residence, so it’s really appreciated a lot even since we bought it, and everything else; so it’s really been a great deal that one.

Theo Hicks: How did the renovations being included in the contract – how did that work? I think I’ve heard of that before. That’s amazing, but let us know how that transpired.

Chidi Ozieh: What happened was the person that sold us the second property – he disclosed to us that he needed the money to buy a building. I think  he had a portfolio; he was selling off two or three other buildings, and he was stuck between a rock and a hard place because he had renovated the top unit [unintelligible [00:13:52].13] selling the building, and then the first floor tenant didn’t wanna move; so he then tried to sell it with her in it. So he was kind of stuck and needed to sell it. He [unintelligible [00:14:00].01] to us. I don’t know why he did that, but he did… And we used that as leverage, and said “Okay, we’ll meet you at your price, but you have to renovate that unit too, and get the tenant out within a certain timeframe.” So he did all that, and we kind of leveraged him to do what we wanted, which is very rare in New York.

Theo Hicks: So you kind of just said that “I want you to renovate the bottom unit the exact same as the top unit…” How did you come up with the purchase price then? Because obviously, since he’s investing more money into that unit. Was it just the original purchase price plus whatever he told you the costs were? Did you get receipts for this, or did you just kind of say “Hey, we’ll give you 10k extra”? How did that work when it came to the contract price?

Ambrose Ozieh: First we made the offer. It was lower than what he wanted. So we went back and forth between him and his agent, and we decided that “Okay, we can go up close to the number that  you want, but then it needs to be delivered vacant, and it needs to be renovated.” So he agreed to it, and we had a great lawyer and she put it in the contract – that it was gonna be delivered vacant, it was gonna be renovated to the standard of the top floor…

So we agreed to it that way… And to be honest, even with him, he tried to get out of it, too. It seemed there was some miscommunication between him and his attorney when he tried to get out of it and realized that he couldn’t. So it was all in the contract, he agreed to it… But like Chidi had stated, he also needed us to close as soon as possible, because he needed the money to buy a larger property.

And if you have someone who’s ready to go with 25% in New York City, and even if you’re good to get out of the contract, it may take you a few more month before you can sell it, to get maybe a few thousand dollars more. So for him – it was also worth it  for him to stay with us and close, so that he can move on to the bigger thing that he was looking to do.

Chidi Ozieh: And with that too, I believe also even at closing – because we had an inspection report a week before the closing… [unintelligible [00:16:07].28] we had a very good real estate attorney; she put in there “Subject to inspection a week before.” So we got all of our guys to come in there and inspect it, and then we found a hole in the roof, we found debris… So we got about 8k at closing off the contract price, which was great.

So it was a sweet deal, that one.

Theo Hicks: Yeah, those are two very interesting, unique deals, especially for your first two. Alright, starting with Ambrose again, what is your best real estate investing advice ever?

Ambrose Ozieh: I will say just get started… Because even with us, you can read all the books, listen to all the podcasts, go on YouTube… You can learn, you can study as much as you want, but it’s the first step. Just get started. Because once you start, that’s part of the education. You cannot know everything before you start. Starting is part of the education process.

Chidi Ozieh: Yeah, I would echo that, but I would also say actually have a date that you’re gonna start. Put things down on paper; don’t just say “I wanna  start, I wanna do it.” Actually have a date and set goals. And also, don’t get emotional when it comes to property. Our first house – we wanted new cabinets, we wanted granite this, we wanted this color, this kind of paint on the front of the house… If you’re gonna house-hack, it doesn’t really matter as long as on paper your tenant is paying your mortgage and  you make a little bit of money on top. It doesn’t matter if the house is bright green, and it has pink strips around it. It doesn’t really matter. All that matters is that the house is cash-flowing, and at the end of the month you walk away with some money in your pocket, and you haven’t got to pay your mortgage out of your own W-2 income. That’s all that matters.

Theo Hicks: Alright, are you both ready for the best ever lightning round

Chidi Ozieh: Yes!

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

Break: [00:17:53].21] to [00:18:33].29]

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

Ambrose Ozieh: I would say for me not recently, but I go back to it time to time, is the classic “Richest Man in Babylon.” I like that book because a lot of the lessons and principles are now in some of the books, even Rich Dad, Poor Dad. A lot of the lessons such as paying yourself first – those are all lessons that are in that book. So I love that book. You can read it in one sitting, and there are a lot of lessons, and even a five-year-old can read and understand it.

Chidi Ozieh: And I would say Think and Grow Rich. Think and Grow Rich, even though it was written in the 1900s, I think that the lesson sit teaches are ubiquitous among everything, in terms of business, and how to really be training your mind to approach business and finances in a different way.

There’s also in that book a lot about having a   mastermind team, and how the mastermind really is important. I think that having a mastermind is something that people try and do or think about, supposedly, but don’t actually implement in their actual daily or weekly lives.

I think Think and Grow Rich is a great book in terms of changing your perspective when it comes to money in general.

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

Ambrose Ozieh: So like you mentioned in the intro, I am now a licensed agent in New York. I work with mostly investors who are looking — because I always find great ways of making deals work. Other than our first property, the next four were all listed on the market. It depends on your negotiation skills and the price point that you buy it at. Because a lot of people think all great deals have to come off-market, but it’s not true. We’ve found all of our properties, which were great deals, all listed on the market… So it depends on how you negotiate and the price point that you buy.

I work with a lot of investors to help them find properties, and we’ve also started to teach and coach people who want to get into the real estate game, especially for New York, because there’s a lot that you need to learn… So we’ve been doing that.

In addition, like I said, I was born in Ghana, so there’s a school in a town called Kumasi where Chidi and I – we help support, especially when it comes to girls’ education. It’s something that’s been very fulfilling, being able to contribute to that part of the world, and especially when it comes to education and girls.

Chidi Ozieh: Exactly what she said. [laughs] That’s the way we give back. We have started coaching, and also we love to support back home.

Theo Hicks: Perfect. And then the last question is what is the best ever place to reach you?

Ambrose Ozieh: You can reach out to us at AMAprops.com. People can also reach out to me directly, 347-471-1804. I’m always ready to chat and help other people who are interested in real estate, especially for the New York market. If they have any questions, they can always reach out to me.

Chidi Ozieh: And if you wanna email us directly, you can go to info@amaprops.com. That’s our email address on our website there. Or fill out the Contact form on the website.

Theo Hicks: Well, thank you both for joining us today and walking us through your first two deals. Very unique. The takeaways that I got was your first was patience, because you waited a long time to make sure you found the right property… And you waited long enough, since you had the information and the education to know what the right property even was.

Another lesson – a great way to get started is house-hacking, and if you’re gonna house-hack, consider living in the unit that will generate the least amount of rent, so that you make the most money. And then also, that you’re able to buy this deal from a flipper before he actually did the flipping aspect of it, so you had a lot of input into the renovations.

And then your second deal was also very interesting, and it teaches us a lesson on constantly staying up to date on the market we’re investing in, consistently networking with the big players, the decision-makers in that market, because you might come across a piece of information that can help make a deal work, or a lot better. I guess that was technically the first deal, but you said also the second deal as well, about the rezoning… And then also, leveraging information that the seller gives you, if they are motivated to make the deal even better for you.

For this example, the owner needed to sell, and you used that as leverage to get the property not only vacant, but also completely renovated and vacant. You also added in a contingency that the contract was subject to an inspection a week before, which allowed you to [unintelligible [00:23:20].18] because you got that 8k credit at closing…

So again, two super-unique deals. I really appreciate you guys sharing that with me and the Best Ever listeners… So thank you both for joining us again. Best Ever listeners, as always, thank you for listening. Have a best ever day, and we’ll talk to you tomorrow.

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