JF1824: Doing 18 Deals In 18 Months with Dave Dubeau
Many new real estate investors, and even seasoned ones, would love to do 18 deals in 18 months. We’ll hear how Dave was able to do exactly that in this episode. We’ll also hear how Dave helps other investors raise capital. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Start with your sphere of influence” – Dave Dubeau
Dave Dubeau Real Estate Background:
- Real estate investor, best selling author and a trainer and consultant
- Began his real estate investing career in 2003 doing 18 deals in 18 months
- Has done rent-to-own deals and now invests in apartment buildings
- Helps real estate entrepreneurs grow their portfolios
- Based in British Columbia, Canada
- Say hi to him at https://davedubeau.com
- Best Ever Book: Dream 100 Book by Dana Derricks
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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, Dave Dubeau. How are you doing, Dave?
Dave Dubeau: I’m doing awesome, Joe. Thanks for having me on the podcast.
Joe Fairless: Yes, my pleasure, and looking forward to our conversation. A little bit about Dave – he’s a real estate investor, he’s an author, a trainer and consultant. He began his real estate career in 2003, doing 18 deals in 18 months. He has done rent-to-own deals, and now invests in apartment buildings. He is based in British Columbia, Canada.
With that being said, Dave, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Dave Dubeau: Yeah, so my background is I’ve been self-employed since early 20s. Marketing is my main interest, so I’m a marketer first and a real estate investor second. I got into real estate investing after living overseas for about 14 years. So I kind of started from scratch, and got into the creative, wonky, no-money/low-money down type deals. Those were those 18 deals in 18 months… Which might sound kind of impressive, but if I had understood the power of using other people’s money, I would have been a lot further ahead.
Fast-forward a few years, I got into rent-to-own kind of deals, focusing on what I call tenant-first properties. I had some pretty good success with that, until the market kind of turned around. Then most recently, starting about 2013, I started focusing more on multifamily properties.
My main thing, Joe, in addition to real estate investing, is helping mom and pop real estate investors attract money partners, attract investors, and raise capital. That’s really what it’s all about.
Joe Fairless: Okay. Let’s talk about 2013 and on. You said you’ve been focused on multifamily properties. What have you purchased?
Dave Dubeau: Well, right now the biggest deal is two buildings, actually, outside of Ottawa, Ontario, and I also have three sixplexes myself as well.
Joe Fairless: Okay. That 54-unit – are you the only partner on that deal?
Dave Dubeau: No, I’ve got joint venture partners on those deals. On all of the deals.
Joe Fairless: Okay, cool. Let’s talk about it. When did you buy the 54-unit?
Dave Dubeau: That was in 2013.
Joe Fairless: And what was the purchase price?
Dave Dubeau: The purchase price was 4.9 million.
Joe Fairless: Alright. And what’s the business plan, and can you talk to us a little bit about how much you are investing into that business plan, and how that’s gone?
Dave Dubeau: The investing plan is we’re actually looking at divesting ourselves of that property right now. The local market in that area has appreciated more than we thought it would, and it looks like it’s a pretty good time to divest… So we’re in the process of that.
We have a buyer on board that we’re just in the process of seeing if he can get qualified for financing for that property… So yeah, basically we’re looking at getting out of that one.
Joe Fairless: Okay. So what are you selling it for?
Dave Dubeau: I believe we’re gonna be selling that for 6.5 I believe is what we’re gonna be getting for that.
Joe Fairless: Okay, and then what was your role in this whole deal?
Dave Dubeau: What I do, Joe, is I partner up with people that are smarter than I am, and better at dealing with the tenants and the toilets, and all that kind of stuff. I take an equity position in the properties and I help raise capital to buy the deals.
Joe Fairless: Okay. How much equity was raised for this purchase?
Dave Dubeau: That was approximately $800,000.
Joe Fairless: And when you bring capital and partner up with people, what is the equity ownership that you typically receive for doing so?
Dave Dubeau: Well, it depends on the size of the deal. For that one it was 15%. For other deals – it really depends on the size and how many partners I bring on board.
Joe Fairless: And was the $800,000 all of the equity required to close the transaction?
Dave Dubeau: It was, yes.
Joe Fairless: Okay. And $800,000 divided by 4.9… That’s only 16% of the purchase price. That surprises me that it’s so low. Was it owner financing?
Dave Dubeau: It wasn’t, actually. It was just very good financing at the time. The active partner that I’m partnered up with in that deal has a pretty significant portfolio and a very good relationship with the lender that we used.
Joe Fairless: Okay, so it was a local lender… What was the business plan for that deal?
Dave Dubeau: The business plan was to hold on to it for five years and then refinance, and ideally pull out a good chunk of the investors’ initial investment, and then keep holding on to it. However, after reevaluating the property, it looks like it’s probably a better idea to divest, because the price is right, plus we’re looking at some probable capital improvements that have to happen over the next few years, so we’ve decided as a group we’d rather sell.
Joe Fairless: Sure, okay. Yeah, sell before you have to invest in those cap-ex projects.
Dave Dubeau: Yeah. We already had to replace an elevator, and that was pricey.
Joe Fairless: Okay… How much was that?
Dave Dubeau: I think that was $120,000.
Joe Fairless: $120,000 to replace an elevator.
Dave Dubeau: I believe so, yes.
Joe Fairless: Dang… Okay.
Dave Dubeau: Everything’s a little more expensive up here.
Joe Fairless: [laughs] Right. Well, in terms of the business plan, just so I’m understanding it, did you all do anything to the properties, to the units? Any renovations, any cap ex projects, starting out?
Dave Dubeau: Nothing big. These properties were in pretty good shape. They were more 55+ focused for the tenant profile, so… No, they were in good shape. We did have to replace one boiler, as well as the elevator, which we already knew about ahead of time, so that was already contemplated… Other than that it’s been just the normal stuff.
Joe Fairless: Okay, cool. And then you mentioned — did I hear you say three fourplexes?
Dave Dubeau: Sixplexes, yeah.
Joe Fairless: Three sixplexes.
Dave Dubeau: Yeah. These are interesting. These are in a different area of Canada, kind of a slightly different business model. These properties we’re focusing on furnished rentals. Short-term rentals – not Airbnb short-term rentals, but 3 to 6-month type situations. It’s almost like an aparthotel concept. In order to crank up the cashflow on these properties, we actually rent out the properties by the room.
Joe Fairless: Okay. And you say “we”, so you mentioned you have business partners on all your deals…
Dave Dubeau: I have. Again, the smarter guy that’s actually running the business – that’s my partner. He’s got a lot of experience with that, as well as a pretty significant portfolio focused almost exclusively on the whole medium term furnished rental.
Joe Fairless: Okay. And did you buy these three sixplexes all at once?
Dave Dubeau: No, one of these sixplexes I’ve had in my portfolio for quite some time. The other two – he actually got kind of a bulk deal direct with the seller; the seller had built these when times were good. Times went bad pretty quickly after he built them, so he’d been sitting on these properties, underperforming… So we were able to get in with owner-financing. Not complete owner-financing, but definitely some vendor take-back to make the deal work a lot better. No realtors involved, just drumming up business himself.
Joe Fairless: Sure. With the purchase of these three sixplexes, you have a business partner; is the equity to purchase the properties – I know you said some were owner financing, but was the equity required your money, or did you bring it from other partners?
Dave Dubeau: A bit of both. I had put some of my own money into one of these properties and brought on investor partners for the others.
Joe Fairless: And how do you structure that?
Dave Dubeau: Well, we structure this as a joint venture, and it depends on how much equity is brought in by the individual investor. I believe the minimum is a 10% equity stake in the property, and moving up from there depending on how much they put in.
Joe Fairless: So it sounds like one sixplex came first, and then you closed on these other transactions, correct?
Dave Dubeau: Actually, he got into both of these sixplexes with hard money lenders, and is now replacing those funds with investor partners.
Joe Fairless: Okay, but in terms of the sequence of when you purchased these properties, how did that flow?
Dave Dubeau: It flowed that it was — I believe he bought two of them at one time, and then within the next six months or so he bought the other two.
Joe Fairless: And where does the 54-unit fit on that timeline?
Dave Dubeau: It doesn’t. That’s a completely different deal, completely different partner.
Joe Fairless: Right, but I’m just talking about your portfolio; so when on your timeline of purchasing property was the 54-unit compared to these three sixplexes?
Dave Dubeau: This was a couple years prior.
Joe Fairless: Okay. So the 54-unit came first?
Dave Dubeau: That’s for sure, yes.
Joe Fairless: Oh, cool. Okay. So was that $800,000 the first time you’d raised capital for a deal?
Dave Dubeau: No, I was raising capital when I was doing rent-to-own deals, from 2010 to 2012 or so, and then transitioned into the multifamily property.
Joe Fairless: Cool. The $800,000, looking at the investors who invested in that property, how much did the investor who invested the most invest?
Dave Dubeau: I believe it was 350k or 400k.
Joe Fairless: And how did you come across meeting that particular investor? Obviously, I’m not looking for any names or anything, but just trying to learn how you met them.
Dave Dubeau: Yeah, well I’ve been in the marketing and in the education business for some time, so this particular investor – I’d known her for quite some time; she’d been following me… Kind of like what you do with your podcast, I had done different things with paid membership programs, different kinds of things like that. I do a pretty good job of staying in touch with people that are on my contact list… So over time she just was watching what I was doing, and when I made this opportunity available, she reached out and she was very interested.
Joe Fairless: Okay, so it was just through marketing efforts; you weren’t able to pinpoint exactly which one, but just the holistic approach of marketing, and she was on some list of yours that when you sent out this opportunity to the list, she replied.
Dave Dubeau: Yeah. And the way I do is I really wanna focus on people that I’ve got a pre-existing – either personal or business – relationship with. This person had already done business with me on something different.
Joe Fairless: Okay. So you’ve got the 54-unit, you’ve got the three sixplexes – what’s something that’s gone wrong?
Dave Dubeau: What’s something that’s gone wrong… One of these sixplexes is not part of that portfolio with that partner. So the one that’s gone wrong has been a property that was inherited – one sixplex that’s part of my portfolio – and just long-distance management hassles… Having the challenges of inheriting a property, and the emotional luggage that comes along with promises made on deathbeds to my father that left us the property. So dealing with my brother on this, dealing with my father’s dying wishes about the property… All this kind of stuff has made a pretty messy and not a great investment.
Joe Fairless: What advice would you give someone who comes across a similar scenario that you had?
Dave Dubeau: Like the inheritance type thing?
Joe Fairless: Yeah…
Dave Dubeau: I think you’ve gotta look at it more objectively and try and take the emotion out of it. Because again, that’s what’s really been the hang-up – trying to follow our father’s dying wishes. But basically – long story short – it’s driving the value of the property down and making it more difficult to sell once we do sell.
Bottom line, he made us promise to keep his buddy on board as the property manager until he wanted to move on or he kicked off. And we kind of thought that was gonna happen sooner rather than later [unintelligible [00:14:02].15] so he just keeps holding on and holding on… [laughter]
Joe Fairless: Oh, man… Yeah, that’s a tough one. What are you gonna do?
Dave Dubeau: We’re going to basically bribe him to move out and sell the property with owner financing. We’re gonna give him a free place to stay for a while, and then bribe him to move on.
Joe Fairless: That sounds like a very fair solution.
Dave Dubeau: Yeah. It’s only taken about nine years to… [laughter]
Joe Fairless: Oh, my…
Dave Dubeau: But it’s all good. It’s part of the learning process. But it gets back to not letting the emotions override logic, I guess would be the short way to put that.
Joe Fairless: What project are you most proud of?
Dave Dubeau: You know what – this 54-unit deal I’m pretty proud of, because our investors are super-happy; it’s been a completely handsfree investment for them. My partner on the deal is doing just an amazing job on it… And actually, it’s one of those situations where you’re very easily able to underpromise and overdeliver. We’ve blown the projections off the roof with what we were telling our investors they’d be getting. It looks like they’re gonna probably be getting at least (by the time the smoke clears) about 50% more than they expected.
Joe Fairless: You purchased that six years ago… How come you haven’t been purchasing more since then?
Dave Dubeau: Well, that’s a good question. My main focus has been more on the marketing side of things, and I’ve just really decided to kick things back into gear. The partner I was partnered with on that is getting to the age where he’s starting to divest and sell off, and to be perfectly frank, my whole goal, Joe, was to partner up with other people that are actively doing this, and not be the active partner myself. I’ve found one of my clients, one of my students who is very successful at what he’s doing, and just within the last year (actually within the last six months) I’ve partnered up with him. Since then, we’ve purchased these two sixplexes… So I’m kicking it back into gear right now.
Joe Fairless: And when you are structuring partnerships and when you’re bringing capital to transactions, what type of tips would you give someone who hasn’t done it already?
Dave Dubeau: As far as finding investors, or structuring the deal?
Joe Fairless: As far as finding investors.
Dave Dubeau: That’s a good question, Joe. My typical people that I’m helping are mom and pops that are just starting to look for investors, looking to work with other people’s money. They’ve hit the wall when it comes to their own cash or credit… And what I always suggest is start with your sphere of influence. Start with the people who you already have that pre-existing relationship with. They know you, they like you, they may or may not trust you with their money yet, but at least we’ve got our foot in the door. Does that make sense?
Joe Fairless: Yup.
Dave Dubeau: Especially up here in Canada, we’ve got these things called securities commissions – the trade commission down in the States – and you have to be very careful about who you’re raising capital from, especially if you’re doing smaller deals and you’re not jumping through all the regulatory hoops. Always start with the folks that you have a pre-existing relationship with.
And then what I do a little bit differently, Joe, is I encourage people to reach out to me instead of me chasing after them. In other words, I apply marketing to finding investors and raising capital, and I try to avoid at all costs the so-called “common sense” advice of dialing for dollars, or turning every conversation into a real estate conversation, or being just that person that’s always networking and schmoozing. What I’d rather do is create curiosity, get people to reach out to me, put up their hand and say “Hey, you know what – I’m interested. Tell me more about the deal”, and then that conversation just makes things so much simpler.
Joe Fairless: What are some tips to having investors who you’re looking to potentially partner up with reach out to you, versus you reach out to them?
Dave Dubeau: Well, the first tip is to avoid the biggest dumbass mistake I made when I first started this, which was just kind of blasting everybody cold with a version of “Hey, it’s Dave. I’ve got a great deal, are you interested?” That really didn’t go over well, and in 20/20 hindsight I see why it didn’t.
What I think you really need to do is you need to break the ice with people on a non-business topic first, and then start talking business after that. What I suggest, Joe, is people warm up their contacts; first of all, I highly recommend that you target in on a couple hundred people. Create a list of prospective investors, and then focus all of your attention on them. I always encourage people, let’s come up with a list of 100, 150, 200 people that you have a pre-existing relationship with, then start things off by having a warmup, or breaking the ice with them. There’s a couple different ways you can do that, Joe. One is we send out a quick little email which is kind of a catch-up email; saying something like “This is Dave. Chances are it’s been a while since we’ve been in touch. I thought I’d try something different and just reach out to you, let you know what I’ve been up to”, and then just do kind of a brief synopsis of what you and the family have been up to for the last 3-5 years. Then at the end of the email you say “Well, that’s what I’ve been doing… But how about you? Please hit Reply, let me know what you’re doing. I’d really love to hear back from you.”
You send that out, and then as soon as people start replying to you, make sure you have a little bit of back and forth with them. Three or four days after that, I highly recommend that people send out a second version of that, but this time a little video message… Just because video is so much more personal. So they click on the link, they watch your video, they see you, they hear you, they see your expression, and again, the call-to-action is for them to reply to the email and just catch up. And then you catch up with them.
Then the third message is what I call your transition message, which is now where you give them the heads up that you’re gonna start changing the conversation, talking a little bit more about what you’re up to with real estate, and then inviting them to reach out for more information if they’d like to find out more. Does that make sense?
Joe Fairless: It does make sense. With the initial email, has there ever been complaints about it being disingenuous, because they kind of see through that you’re randomly reaching out to them after 3-5 years, or you haven’t really sent an email like that ever before, and then they see that you have that transitioning message where you talk more about the real estate stuff?
Dave Dubeau: Not very much, and I haven’t figured out a better way to do it. I’ll give you an example of what the transition — because the transition message is really important. So I’d say something like “Hey, it’s David. It’s been really good reconnecting with you over the last week or so. Moving ahead, I wanna do a better job of staying in touch with you, and letting you know what I’m up to with real estate investing. It’s something that I’ve been doing really well with; I think it’s the best way for regular people like you and I to get a really good, solid return on our money, backed by a tangible asset that’s real property. And then who knows, maybe sometime in the future you might even wanna partner with me and share in the profits on a deal. But if you’re not interested in real estate, that’s okay too. You can always click on the Unsubscribe button at the bottom of any of my emails. You’ll be taken off my list immediately, no hard feelings. In the meantime, if you haven’t had a chance, please get back to me and I’d love to catch up.”
And then we send that out. So we do give them the heads up, and we let them know that we’re gonna be switching gears. A lot of people are freaked out that 80% of the folks who get the email are gonna opt out… And what we’ve found, Joe, is actually very few people opt out. Once in a while you might get somebody who’s a little bit snitty, but not very often. It is very rare.
Joe Fairless: Sure. What type of email service do you use to send these emails out?
Dave Dubeau: I recommend one called GetResponse. There’s lots of them out there; MailChimp, GetReponse, Constant Contact… These are all email autoresponder systems.
Joe Fairless: And why do you like GetResponse?
Dave Dubeau: I like GetResponse just because they’ve got good customer service. A lot of people like to go with the MailChimp, because it’s free, but you get what you pay for. GetResponse I’ve found works pretty well, and the deliverability is good, too.
Joe Fairless: Based on your experience as a real estate investor, what’s your best real estate investing advice ever?
Dave Dubeau: Focus is the best advice ever. Focus on exactly what kind of real estate investor you wanna do and where you wanna do it. Invest in training or coaching or mentoring to get the education; it’s either that, or work for somebody for free. Don’t try and figure this stuff out on your own. It’s such a waste of time. So get the education, get the training that you need, and then if you’re nervous about it, partner up with somebody who’s doing what you wanna do, and partner with them on a deal or two before you jump in with your own two feet.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Dave Dubeau: Let’s give it a shot!
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve recently read?
Dave Dubeau: The Dream 100 Book. Dana Derricks.
Joe Fairless: What’s the best ever deal you’ve done?
Dave Dubeau: I’d say probably that 54-unit apartment building.
Joe Fairless: What’s a mistake you’ve made on a transaction, that we haven’t talked about already?
Dave Dubeau: A mistake I’ve made on a transaction… That’d be kind of like the worst deal ever, because it probably goes hand in hand.
Joe Fairless: Sure.
Dave Dubeau: Yeah… Worst deal ever was a rent-to-own deal I did years ago, where the whole strategy was a big flawed. I was basically buying houses for people and then turning around and rent-to-owning it to them over the next 2-3 years. Well, I got the absolute worst tenant buyer into a house because I’d heard about some tricky strategy to help them get the money they needed for the deposit. So the worst mistake ever was not making sure that the person had skin in the game. It turned into a disaster. I had to evict them… $18,000 worth of damages done to the property… I sat on it for like six months before I could get it turned around. And then the market went down too, so I had to rent it out for another 5-6 years before I could actually sell it. So… That one sucked. [laughter]
Joe Fairless: What’s the best ever way you like to give back to the community?
Dave Dubeau: You know, I’ve done some stuff with local homeless folks, and I’ve done a lttle bit of work overseas with some organizations in Nicaragua… But that’s a good question, Joe, and a good kick in the butt that I need to do more.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?
Dave Dubeau: Well, if they’re interested in attracting investors and raising capital for their deals, InvestorAttractionBook.com. They can get a free eBook version of my Money Partner Formula book, which goes through the whole five-step process.
Joe Fairless: Dave, thank you so much for being on the show, talking about the 54-unit, how you got the equity for it, the business plan, the $120,000 elevator, and the sixplexes, as well as the joint venture structure that you used to purchase the sixplexes. I really enjoyed our conversation.
I hope you have a best ever day, and we’ll talk to you again soon.
Dave Dubeau: Thanks a lot, Joe. Likewise.