JF1477: From Large Scale Flipping To Large Scale Multifamily with Andy Dane Carter

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Andy used to be in the house flipping business, (150-250 homes per year!) but changed course into buying and holding multifamily deals. Not only does he buy smaller multifamily properties, he’s also syndicates larger properties. Taking it even a step further, his company wholesales around 30-40 deals per year. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Andy Dane Carter Real Estate Background:

  • Real estate investor and entrepreneur
  • Has had over $500 million go through his company from real estate deals in a short period
  • Based in Long Beach, CA
  • Say hi to him at https://andydanecarter.com/
  • Best Ever Book: Healing Mushrooms

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

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

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


TRANSCRIPTION

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

Andy Dane Carter: I’m doing well, brother. How are you?

Joe Fairless: I’m doing well, and nice to have you on the show. A little bit about Andy – he is based in Long Beach, California, he is a real estate investor and entrepreneur, and has had over 500 million dollars go through his company from real estate deals, and we’re gonna talk about that.

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

Andy Dane Carter: Sure, yeah. My main focus is real estate and real estate investing. And exactly like you said, we’re gonna cut out all the fluff, and that’s basically exactly what we do. We’re like a one-stop shop. We do multifamily, we do syndications… We don’t flip as many houses as we were doing in ’09, ’10 and ’11. We were doing about 150-250 a year, which was a lot… So we moved those into more buy and hold positions, and we’ve been very successful in doing that and then repositioning them to new states, because I’m sure some of your listeners know that we have horrible cap rates here in Southern California right now – somewhere between 2.3% and 4.3%… So we’ve actually positioned ourselves in a few other states across the country which yield  much better returns and much better cashflow for us and our investors.

Joe Fairless: Multifamily… You were doing fix and flips, and now you’re more buying and holding those properties… What does the bulk of your transactions right now comprise of?

Andy Dane Carter: Those are multifamily keepers. We like to find stuff that’s either B- to D- neighborhoods, low rents, not really performing, long-time owners that are maybe just looking to kind of get out of their positions… We come in and we do what we do best, and we love to add value as quickly as possible. That’s the bulk of our stuff that we do on a monthly basis across the country.

Joe Fairless: Can you give us an example of a case study?

Andy Dane Carter: Sure. We actually have one going on right now in San Antonio. That one we purchased for 240k (a fourplex) and then we got the one that was right next door for another 180k. We’ve fully remodeled those, we relocated the bad tenants into a different property, and we’ve put in some really good tenants. It’s been completely remodeled, we just had the thing reappraised, and it’s right around 620k-640k… So within four months we were able to get the thing to really start performing, and we got all of our cash back for ourselves and for the two investors that we’ve actually partnered with. Now it’s just gonna go under the fold and everybody’s cash-on-cash return has been made whole, and off we go. We usually do that very similar model everywhere we go.

Joe Fairless: Congrats on that deal. The 240k purchase price – how much did you put into the remodel?

Andy Dane Carter: We did 42k-43k on one, and then we only did 20k on the other. So we were all-in just over 60k for both units. It’s actually two fourplexes that sit side by side and they actually share a driveway, so now it looks like one huge property.

Joe Fairless: Okay. And you’re holding on to that one?

Andy Dane Carter: Yes.

Joe Fairless: How did you find it?

Andy Dane Carter: I found it from Instagram. I have a pretty large social media presence, and I spend a lot of time on that. I get deals now sent to my DM in my Instagram daily. There’s people that either follow my podcast, or they follow me on Facebook or Instagram, and they know exactly what I do; I have a very clear message, and I buy stuff across the country… If they have a deal, they send it to me, I take a look at it, and if the deal makes sense, I usually fly to the location, I stand on the property, I look at it, and I meet them, and then we write it up and I fly home.

Joe Fairless: What was the story with these two deals that were next to each other, the two fourplexes?

Andy Dane Carter: They were in a trust, and the trust was getting ready to be liquidated, and a particular real estate agent had to find somebody that can close in three days. So it was just one of those deals where they happened to reach out, it was absolutely perfect timing. I was on an airplane, and then we wired the money and we closed, and away we go.

Joe Fairless: With the structure with those deals, in terms of you and your investors, how do you structure that?

Andy Dane Carter: It depends on how the property is actually acquired, but usually we’ll do like a 50/50 scenario where we split the capital going in, we split the capital for all of the rehab costs, and then we split the profits, and then we split the cashflow as well. So it’s super-simple for us, just for simple math, and we try to keep it really easy for ourselves and very easy for our investors… So it just makes it really clean. It’s usually 50/50 splits that we do. Sometimes we’ll do 70/30, but we usually like to share the risk.

Joe Fairless: So in that scenario, where you got the lead from Instagram and then you ended up closing on it, you did 50/50 where you put in half and you receive half of the profits?

Andy Dane Carter: Yes, exactly.

Joe Fairless: And I’m just curious, with you finding the deal, how do you think about that in terms of the value that you added to the transaction? Because you’re getting half, but you are putting in half, so on the surface it doesn’t look like you’re giving yourself credit for finding the transaction.

Andy Dane Carter: 100%, and that’s a complete separate part of our business. We do a lot of wholesaling, tons and tons. We do about 30-40 properties a month that we just actually wholesale. These deals that we do these splits with – these are long-time investor partners of us, of about nine to ten years… So it’s not for everybody. These are literally just investors that we’ve made millions with, so we just like to share the value with them, because we’ve actually built this slowly together with them.

So that’s not for the normal investor that finds me through my website. It takes years to even have those deals even be brought to you.

Joe Fairless: What’s a tip that you have for a real estate investor who’s looking to get traction on Instagram, so they can too receive deals on Instagram and be able to get some off-market leads?

Andy Dane Carter: It’s consistency with everything in business, it’s consistency and tons of discipline, and if you can sit there and DM 30-40 real estate investors like myself because you have some deals, it would behoove you to start those relationships. Especially when the market turns, you’re gonna wanna have as many cash investors as you can. So what my team does is they reach out to people like me the very same way that there are people that reach out to me as well through Instagram.

The beauty about that particular platform is you can follow hashtags. For example, you can type in “#realestateinvestor” and there’ll be two million posts that’ll come up, and you can go into those particular areas, those particular cities that you work in, and you can track down who the actual active investors are in that city. Because I’m sure you know this, but there’s a lot of people that call themselves investors and they’ve done three deals. So it’s very easy to get straight to the source when you use a direct message… And you can get people just like me, that you would have never been able to talk to me before; but now we have all these social media platforms.

Joe Fairless: And what is your team posting about?

Andy Dane Carter: It’s about me as a whole… So it’s not just about the commas and zeroes for me in the bank. That part is great, but I’m trying to build a huge legacy, and for me it’s really about how I show up for my family, how I show up for my kids every morning, how I show up for my wife… So for me, business is actually the last thing I think about. The first thing I think about as soon as my brain wakes up is I go into a 10-minute meditation, and then I sit in gratitude for five minutes. Then I work out, and then I eat something really healthy. Then my kids wake up, and that’s about 7 AM. Then the nanny shows up, and I start making breakfast for the whole family, and I get my family ready for the day, and then I’ll even go to the office. Then I’m home at 3 o’clock every day.

So I’m wildly scheduled from 9 AM until 3 PM, and then it’s family time. So for me, I’ve got two small kids, and I’m trying to show them that you don’t have to work from 7 to 7 every single day to create an empire.

Joe Fairless: So if we were to go to your Instagram profile, what are you posting?

Andy Dane Carter: I’m posting links to my website, videos of just kind of what I’m doing, and I’m giving talks, pictures of me and my children… I just kind of tell a story through my Instagram, and there’s about 15k-20k people that follow my Instagram stories; that’s more of like a daily vlog for me, so you can kind of see straight into my day through my Instagram stories. I do the same thing with Facebook. I also have a YouTube channel that was picked up by AppleTV and Amazon, and it’s  called Unlock Now, With Andy Dane Carter. It’s just kind of my life that’s been videoed. Some people like it and watch in, some people don’t.

Joe Fairless: What’s the latest deal that you’re working on, that perhaps you haven’t closed but you can talk about?

Andy Dane Carter: We have 60 units in Cleveland that we’re trying to close. We’re hitting a little bit of a roadblock with the city, just because there’s a lot of work that needs to be done before we can close, and we’re just having some problems with the seller… But it’s probably gonna close. We just have to figure out a way to get a $300,000 price reduction, or if we’re gonna have to do the work first – which I do not like to do, because it just causes all kinds of contracts and legal stuff that we have to get signed up before we can start, so we can make the buildings ready for the city to inspect, and then we can close.

It’s a really good deal and I don’t wanna lose it, but at the same time I don’t wanna make a bad move at the top of a 10-year cycle either.

Joe Fairless: What property in your portfolio is valued the lowest, and can you tell us a story of that deal?

Andy Dane Carter: Sure. I have a deal that I actually talk about a lot… It’s a fourplex, and the fourplex was owned by somebody who lived out of state, they wanted to sell it, I happened to know the property manager at the time, they reached out to me if I wanted to buy it, and I was able to buy it and I was able to use the commission that they insisted on paying me to just about cover the entire down payment for the property. So with the commission, because I’m a licensed agent, I was able to do the deal, I was able to take the commission from the deal and put it down, and I only had to come out of pocket 6k, and it was actually cash-flowing just a little bit when I bought it, and now it’s cash-flowing right about $3,000/month.

When I bought it, the property was worth about 400k and now it’s just over a million dollars, so that was a fun one.

Joe Fairless: Wow. So the cheapest property in your entire portfolio is worth one million dollars?

Andy Dane Carter: As of right now, in this state, yes. But I’ve got stuff that’s in Cleveland–

Joe Fairless: Yeah, just across your entire portfolio, what’s the cheapest property and how much is it worth and what’s the story about that?

Andy Dane Carter: Sure. I closed on six duplexes in Cleveland that we closed for 240k for all six, and that’s almost three years ago. Those have appreciated a little bit, but we picked those up for 40k and change a unit, so… There’s stuff that we have that was $40,000, and it’s worth probably 65k-70k for a duplex right now.

And there’s actually a tape of houses that we bought in Ohio as well, and we took those down for 38k a door… So there’s stuff that’s all over the place. It just kind of depends on what we’re looking for.

Joe Fairless: So we’ve got the six duplexes in Cleveland for 240k (worth more now), and then on the other end of the spectrum, what property is valued the highest at this point?

Andy Dane Carter: We have a 48-unit building that we finally got out the three JV partners last year, and that one is right around 14 million.

Joe Fairless: Awesome. And where is that one located?

Andy Dane Carter: That one is in Southern California, just outside of Los Angeles.

Joe Fairless: Will you elaborate on “you got the JV partners out”?

Andy Dane Carter: Yeah, so there was a five-year either refi, or a five-year buyout agreement, and we weren’t sure how fast the building was gonna actually take off and do its thing, but I’m sure as you guys know, this entire market has gone really hot the past five years… And we were able to take out all of the cash that they had originally put in, and then we were able to push the actual profits that we made straight back to those two partners and completely buy them out. So now it’s just owned by myself and one other business partner of mine that we do a lot of deals with.

So  there was four of us, now there’s only two of us, but our cash-on-cash investment is zero.

Joe Fairless: That’s beautiful.

Andy Dane Carter: It’s the best, and I’m gonna hold that thing until [unintelligible [00:17:11].02] ground.

Joe Fairless: [laughs] You’ll still be clutched onto it deep down in the ground, won’t you?

Andy Dane Carter: Absolutely.

Joe Fairless: Okay, so we’ve got the six duplexes in Cleveland, 240k purchase (worth more), a 14 million dollar 48-unit in Southern California… In terms of the amount of time, does the 48-unit take a disproportionately greater amount of time, since it’s worth more, than the six duplexes in Cleveland?

Andy Dane Carter: No, and it’s funny how that works, and it’s crazy how my eyes have really changed to that entire scenario the past 6-7 years. It’s usually more of a headache the fewer the doors per property than it is more of the doors. You can almost put one particular manager, and it’s exactly what we do in the 48-unit – they live there, and they’re on-site, and they take care of all the headaches, all the problems, all the phone calls, all the everything. And then once a month, they bring all the rents, and everything has been collected to the office, they sit down with our entire property management team, they go over the books, and that’s it. So it’s our biggest, most profitable, with the least amount of headaches.

Joe Fairless: On the 48-unit, when you did the cash-out, what was the profit that the two that exited received?

Andy Dane Carter: They made 480k and change each.

Joe Fairless: 480k… About what type of return is that? I’m sure it’s astronomical.

Andy Dane Carter: Yeah, they were at 39%, almost 41% return.

Joe Fairless: Annualized?

Andy Dane Carter: Yeah.

Joe Fairless: So that’s clearly a phenomenal return. Were they wanting to still stay in and not receive that, and did you have to say “Sorry, I wanna do this…”, or were they like “Yeah, sure. Buy me out. I know it’s in the contract. I’ll be happy to get this return”?

Andy Dane Carter: They were thrilled because we just took that money and they were able to buy two more deals, and they did nothing but wire some money in. We did all the work, we did all the heavy lifting, we found the deal… They were thrilled. And we have a lot of attorneys, so they’re very grateful that they get to still practice law at a very high level, and they can still do very well in the real estate market by using us as partners.

So they were thrilled, we found them each two new properties that are 100% managed by our company… So we did all the work, we made a lot of money – yes, that was great – we gave them all the value, because that’s what we like to do for all of our investors, and then we found them two more deals that’s gonna make them even more money.

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

Andy Dane Carter: Get your real estate license… Even if you only use it once. There’s so many opportunities to invest in real estate once you change your mindset. So many people think that you have to have a certain amount of money to be a real estate investor, and when I started, I didn’t have any money, but I was able to get deals. Where people get confused is they think they have to have money; you need to have deals. The money will find the deals. So the best advice is don’t focus so much on what you don’t have, and focus on your strengths.

If you don’t have any money, you have time, and that’s what is your leverage and that’s your value. So you find the deal, and then you go find the money.

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

Andy Dane Carter: I’m ready.

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

Break: [[00:20:51].28] to [[00:21:38].14]

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

Andy Dane Carter: It is actually a book about mushrooms, and —

Joe Fairless: That should be the title of it, by the way – The Book About Mushrooms. [laughs]

Andy Dane Carter: Yeah, so here’s a quick little thing, and this is a lightning round… We have 82% the same DNA as mushrooms. We are a closer relative to the mushroom than any other species on the planet as a human. I found that fascinating… So now I eat more mushrooms.

Joe Fairless: Do you remember the name of the book?

Andy Dane Carter: It’ called Healing Mushrooms.

Joe Fairless: Best ever deal you’ve done that we haven’t talked about?

Andy Dane Carter: Probably the house I live in with my family. We were sixth in line, all cash, and there was 12 offers in 24 hours. We were able to get the property because my wife was pregnant at the time, and the trust wanted a new family there, so they took $68,000 less to go with our offer.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Andy Dane Carter: Not knocking on the door when we bought a huge house, that was a legal single-family, that when we got there it was chopped up into ten units. That was not disclosed by the bank, and we were subject to $18,000 relocation times ten, in a rent-control nightmare.

Joe Fairless: If approached a similar situation, how would you approach it differently?

Andy Dane Carter: We would have the bank sign more disclosures, for sure.

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

Andy Dane Carter: I literally give out all my stuff for free. It’s free on YouTube, it’s free on everything that I do. I give you all the stuff that I’ve paid hundreds of thousands for in masterminds – I give it away for free because I really want people to know this is possible for anybody.

I was raised with nothing. I was raised poor, I was raised by a single mom. We literally had nothing, and if I can do it, anybody can.

Joe Fairless: Best ever mastermind group that you pay to be a part of right now?

Andy Dane Carter: Wake Up Warrior was a really good kickstart for me to really get my head around what’s really important, and it’s not just about business.

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

Andy Dane Carter: They can find me at (@) my name everywhere – @andydanecarter on Facebook, Instagram, Twitter, YouTube… And you can go and get my new book that’s called 100 Doors; it’s free on my website. My website is andydanecarter.com. The book is only 100 pages, and I literally give you the blueprint of how to do this with no money, or hundreds of millions.

Joe Fairless: Andy thank you so much for being on the show. I personally took a lot of lessons from our conversation; I’m really grateful for it. One of the things that solidified my thought process but I thought was really interesting is how you said “the fewer the doors, the more of a headache”, and we talked about the six duplexes that you’ve got, compared to the 14 million dollar property, the 48 units.

Also what was interesting for me is learning about your structure with those investors, the joint venture partners and how you had a refi or a buyout agreement, and you ended up buying them out. Then you and your business partner own that property now, and then the investors were able to then go invest in some other projects that you’re working on… Really interesting, as well as, obviously, the Instagram and the building the brand that we talked about.

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

Andy Dane Carter: Alright, Joe. Thanks again.

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