JF1840: Buy & Hold, Development, & How Meetups Help Your Business with Steve Arneson
Steve is on a mission to educate and inspire 1,000,000 people with his podcast, meetup, and his own real estate investing. With over 20 units, 4 development projects, 60-70 person real estate meetup, he is on his way to that goal. We’ll hear about how he grew his meetup, what that has done for his business, as well as hear about some of his real estate deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Keeping track of all the places you are looking at or have made offers on, and revisiting them after a month” – Steve Arneson
Steve Arneson Real Estate Background:
- Real estate investor with 20+ doors
- Has 4 development projects in the early stages, hosts a monthly meetup for the last 3 years, and is a co-producer of Victoria Real Estate Investment Expo
- Based in BC, Canada
- Say hi to him at https://thereinvestors.ca/
- Best Ever Book: Traction
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Steve Arneson. How are you doing, Steve?
Steve Arneson: Joe, I’m having a best ever day.
Joe Fairless: Oh, well, that’s as good as you can get then, I guess… I’m looking forward to our conversation. Steve is an investor who has over 20 doors, he has four development projects in the early stages right now. He also hosts a monthly meetup – he’s been doing that for three years – and is the co-producer of Victoria Real Estate Investment Expo. Based in British Columbia, Canada, right?
Steve Arneson: You’ve got it. Hometown is Victoria, BC. I absolutely love it here. It’s best place ever to be, in my opinion.
Joe Fairless: Alright, well let’s learn more. Do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Steve Arneson: For sure. Background in real estate; I’ve been a full-time investor for about three years now. With my best friend and business partner, Randy Molland, I bought my first investment about six-and-a-half or seven years ago now. It was a live-in condo flip. All my family is involved in real estate on one level or another. Like you said, we have a monthly meetup here in Victoria to help educate people on the benefits of real estate investing… And yeah, we are on a mission to inspire and educate a million people to live a more fulfilled life, and have the equity and the cashflow that can supplement that lifestyle through real estate.
Joe Fairless: Do you keep track of the million people that you inspire?
Steve Arneson: Mentally, I’ll say. We don’t have a formal tracker to it. I think our number is about 1,500 right now, so we’re steadily pacing.
Joe Fairless: Got it. You need a little thermometer on your wall, where you color it in all the way to a million. So you’ve been investing in real estate for six years, full-time for three years. Your first one was a live-in condo flip… Are all of your properties in Canada?
Steve Arneson: They are, yeah. West Coast.
Joe Fairless: Okay, let’s talk about your monthly meetup. You started it three years ago. That, by no coincidence, I imagine, is when you became a full-time real estate investor. Why did you start it and how do you structure the meetup?
Steve Arneson: We started it basically for our own accountability and to grow our network. It wasn’t until we started listening to podcasts where we found like, hey, meetups can be a really good source of building network, building content, educating people, and kind of building investors and other people into our funnel, as you say in marketing.
So we took it upon ourselves to become the face here in Victoria, because there wasn’t an educational meetup, so there was a huge demand for it. There were those typical meetups where it’s a sales pitch on like “Hey, join my new fund”, or whatever, and then the other side of it, where it’s the old white guy, sitting around and drinking their scotch, talking about their yachts. There was nothing in between where it was just educational-based.
We bring in professionals from all across Canada to come and speak and present with us, and the format is like a half hour of networking to start off, and then about an hour and a half, two hours of content, where we talk about any given topic, from simple things like market updates, to creative strategies, to financing. We bring in developers to talk about what they’re doing in the green space, and everything in between. It’s really the community that we wanted to build from day one, to help people come, feel safe asking those “stupid questions.” So it’s an environment and a community for all levels of investors, and it’s been a lot of fun.
We started off — our very first one was 12 people in the back of a restaurant… And at the Real Estate Investment Expo we had 900 people come through the doors one year, and our meetup now is steadily at like 60-70 people every single month. It’s been so rewarding to watch people who have come a year or two ago and go through this massive shift between realizing they have equity in their home, for example, and then refinancing that and reinvesting that into growing their portfolio to produce more monthly income, or a nest egg for building a legacy for the rest of their family. It’s been really rewarding, and that’s really what drives us on a monthly basis to keep active and keep doing it ourselves, too.
Joe Fairless: Twelve people in the back of a restaurant, to now consistently 60-70 people… What are a couple tips that you’d give someone who has a meetup to help grow their meetup?
Steve Arneson: Great question, thank you for asking that. There’s a lot that we’ve learned over the last few years. Number one is as you start building it, don’t allow anybody in. We literally vetted every single person who wanted to come, and we denied some people because we saw that they were the more selfish type, of like “Hey, here’s my business card. Hey, here’s my business card. What can you do for me?” And the community we wanted to build was the exact opposite. It’s people that we want to have in that room, or people who want to go there and be able to support and give to others. So that’s kind of rule one.
Joe Fairless: Before you go to rule two, let me just make sure I understand it. You vet people to attend your meetup… So how do you vet someone? If there’s someone you don’t want in there, like you described, how do you vet them if you haven’t seen them at the meetup before?
Steve Arneson: We didn’t market the meetup the first 6-8 months. It was just word of mouth, and they had to go through a screen process. Joe, say you had a friend who wanted to come. You would introduce us and we would have a quick conversation about basic stuff like building a relationship, but also where are you at now and what do you want to accomplish from this. We don’t want it to be that type of community where it’s just a bunch of solicitors. We’ve seen that not work, and it doesn’t align with our mission.
So it was just a five-minute conversation. You can tell a lot from people’s demeanor, how they respond to questions… So that was how we executed on that.
Joe Fairless: Sure. But now do you still do that interview process?
Steve Arneson: We don’t now, and it’s really interesting, because I can pick out a couple different situations in my brain where somebody comes in — because we are marketing it actively now to grow it, and to get power/caliber speakers in, and impact more people here in Victoria… So when those people who are more on the selfish side and are just looking for business come in, they kind of stand out like a sore thumb… Or what’s the phrase where it’s like a thorn amongst roses kind of thing.
Joe Fairless: Yup.
Steve Arneson: And they don’t come back, because they don’t feel like they belong or fit into this community.
Joe Fairless: Okay, I get it. So you’re intentional about who you brought in initially, and then as a result of being intentional about the initial people, it’s then built a foundation of the overall community vibe. Then people come in who don’t fit that vibe or the culture – they opt out of that.
Steve Arneson: Exactly.
Joe Fairless: Okay, cool. Thank you. Alright, that’s one.
Steve Arneson: That’s one. Rule number two is just provide as much value as humanly possible. We are very strict on our timing. Doors open at 6. At [6:30] we get kicked off with the presentations. Randy and I typically open up with a “Hey, how are you doing?” kind of thing, and it may be a quick overview of what you’ve missed over the last month. Then we jump into presentations until [8:15]. That’s kind of like a hard close. We tell people that it’s gonna be ending at [8:15] sharp, and if you wanna leave – great, no hard feelings. If you wanna stick around and continue networking, awesome. Maybe it’ll be more Q&A. But it’s really jamming a lot of content, or at least education, into that hour and a half, so that people who come feel like they’ve taken something away that’s tangible, that they can implement into their business or into their life right away. That along with it being a little entertaining just keeps the energy high, just keeps people engaged, and keeps people coming back.
Joe Fairless: With the online presence that you have with this meetup, what do you do online to promote it?
Steve Arneson: We have some targeted Facebook ads, Instagram as well… We’re pretty decent for Google search. But we have a community on Facebook that we’re pretty active in. We invite everybody who’s in Victoria or who knows about us to join our Facebook group, and within that you get the exact same thing – you get lots of content, lots of education, lots of updates, and then also just notifications on who our next speaker is gonna be, the date, the time, some tidbits, a bunch of notes with the last meetup etc.
So we wanna communicate with people, we wanna engage people, we wanna help people, and it’s a great space for people to come and ask questions. It’s really cool to watch us not even have to interact with those people, because the other members of the community are stepping up and supporting new people with new questions.
Joe Fairless: You’re a co-producer of The Victoria Real Estate Investment Expo… What is it and how many years have you been doing it?
Steve Arneson: We did it for two years, 2017 and 2018. It’s a very large event; the largest that Victoria has ever seen in this space. It was a kind of dual purpose. We had about 30-40 exhibitors both years, so for people who wanted to connect with tradespeople, or funds, and then we had two different stages as well at the venue. We had people who were interested in doing workshops, where it’s more hands-on… For example budgeting. We had a budgeting workshop. And then we had the other stage, which was the main stage; we were having our keynote speakers there educate people on trends in the marketplace, or strategies etc.
Joe Fairless: How many people did you have in year one?
Steve Arneson: Year one we had 900. Year two we had 600 or 650.
Joe Fairless: Interesting. How come the decrease?
Steve Arneson: Yeah, unfortunately we booked our date a year in advance after the first one went so well, and over that year, leading up to year two, we had three other very large events booked for the exact same weekend. Victoria is not a big town; there’s only 350,000 people here. We’re close to Vancouver, which is a million and a half or so… But when you have 3-4 very large events in a small town like Victoria, it just gets a little diluted.
Joe Fairless: What were you competing against?
Steve Arneson: I think there was Comic Con, and there was a women’s conference, and I can’t remember what the third one was.
Joe Fairless: Okay. Are you doing it this year, 2019?
Steve Arneson: We’ve shifted our model, so we’re not doing the same type of event, but we are going to continue with the education stuff. We’ve built our network to a really great space; all those exhibitors that were there… We have special connections with each and every one of them. So if people are interested in meeting them – we can facilitate that introduction. Then we’re really focusing on just doing more hands-on workshop-type events and live events, where we bring in speakers and trainers to help facilitate and host with us, to just kind of move the needle a little bit further in people’s investing careers or lives.
Joe Fairless: Got it. So instead of one large event, you’re doing a bunch of smaller events.
Steve Arneson: Exactly. Our next one is actually coming up in — today’s the 9th, and the next one comes up in two weekends from now, 18th and 19th.
Joe Fairless: Okay. And for someone who has a grand vision of doing a big event like you had put on for two years, what are some watch-outs that you would give them? …other than the date thing.
Steve Arneson: Oh, don’t do it…
Joe Fairless: I can tell, yeah. Because you would be doing it again if it made sense… So please, elaborate.
Steve Arneson: It was one of the most time-consuming and stressful efforts I’ve gone through my entire life. Full transparency, we had over $100,000 invested into this one event, and in Victoria specifically, more so than a lot of other markets, but in events as a whole, you sell like 50% or more of your tickets the last week. So leading up to that last week, we’re sitting there going “Come on, where’s all of our ticket sales?” and stressing, because we’ve got $100,000 on the line here… It was a little nerve-wracking.
So make sure you have a good date, plan it well in advance. For real estate, I would say late spring is really good. [unintelligible [00:13:37].23] earlier spring people aren’t quite in the rhythm yet. The real estate cycle kind of picks up and is more popular in the later spring, before people go on vacations and stuff through the summer… So that’s critical timing. If you’re not gonna do it in the spring, do it in the fall, late September, October. And then just have a really good marketing plan in place, and then just cross your fingers and pray that people will start buying your tickets early.
Joe Fairless: [laughs] How much money did you lose on the second, year two?
Steve Arneson: I think we broke even on it. It was tight. And in our minds, it was the best marketing expense ever.
Joe Fairless: Sure.
Steve Arneson: Because we were at the time a very new business, but we had professionals from all across Canada come, that we got to build really great relationships with, because they got to see the integrity we have, the work ethics, the characteristics of who we are as people… And we got really put on the map from those two events. So it was basically a breakeven event which just gave us infinite return afterwards.
Joe Fairless: So if it’s a breakeven event that gives you infinite returns, why not put someone in place to do that work, have a couple interns, and then continue to have infinite returns on an annual event?
Steve Arneson: That’s definitely something we’re gonna lead up into, but we wanna take it in a little bit smaller, bite-sized pieces, hence the smaller workshops. So instead of just putting all of our eggs in one basket for the year, what we’re doing is we’re basically diversifying our risk, and going from Victoria, to up island, and then on the mainland into different markets, to create new audiences and fresh content.
Joe Fairless: Oh, okay. Start more guerilla efforts leading up to it, and then when you have some massive amount of people that you know will be confirmed attendees, because you’ve got so much exposure through all those little areas, all the surrounding communities… Then you could build back up to the larger event with more certainty.
Steve Arneson: Exactly.
Joe Fairless: Okay. Cool. Switching gears – you’ve got four development projects in the early stages… What are they?
Steve Arneson: We’ve got one basically at lock-up right now, which means we’ve got windows and doors, and a roof… It looks really good. It’s a townhouse complex of six units. And we have the lot directly beside that, where we’re gonna basically take the exact same plans, but rotate it 180 degrees and build the exact same thing. Another lot is a question mark right now, but it’s in the core downtown, in a growing city, growing market, just North of Victoria… And then the last one is really exciting, where it’s currently got a house with a suite on it. With our investor we bought it cash, so the place is covering itself really well right now. It cashflows, obviously, because we own it outright… So the investor is getting a really good cash-on-cash return. And we bought it rezoned…
We have the ability to build up to five stories on it, and it’s two blocks away from the core of downtown. Growing neighborhood. It looks out onto kind of a big community garden type thing, and it has a lot of upside for us… So being in the development space has been a goal and a dream of mine for a long time. I didn’t know if it was gonna be possible or not, but I’m really excited to complete our first one with our developer, and move on to bigger pieces.
Joe Fairless: How do you structure that with the developer, in terms of just ownership of the deal?
Steve Arneson: Our very first one, because it was completely new to us, we didn’t want to take on that mass amount of risk… Because I think it’s like a 1.5-1.8 million dollar build, and walking into the developing space there’s a lot of unknowns. So basically how we structured it with our developer was we found and facilitated the deal, and then we basically wholesaled it to them, and then we got a rev share at the back. So if we do really well on the sales, then we get a chunk of that, and the developer has the majority of that.
Going forward, we’re being more and more involved in each deal, to create more income for us as our company.
Joe Fairless: Nice. And for someone starting out and who has a similar opportunity, and they don’t have the development experience but they’ve found a deal and they’ve found a good developer they know locally, what type of structure in terms of revenue share would you recommend that they try to negotiate?
Steve Arneson: If you did a lot of the front-end work, especially if you went through a rezoning process… Rezoning is really difficult.
Joe Fairless: Oh, yeah.
Steve Arneson: I’m sure you know, Joe. If you’re going through that process, you want at least 15%, in my mind.
Joe Fairless: 15%?
Steve Arneson: Yup. And then we can kind of negotiate here and there for different pieces. We have the bonus that my business partner, Randy — he’s a journeyman electrician, so he’s gonna be a little bit more hands-on through the whole process… So that’s really exciting. And then I’m the data geek; I’m the guy that’s gonna do all the number crunching, build spreadsheets etc. and make sure that the economic factor makes sense.
Joe Fairless: What’s a deal that hasn’t gone according to plan?
Steve Arneson: [laughs] Not according to plan… I’ll rewind to my very first purchase, which was that live-in flip.
Joe Fairless: Yeah… The condo?
Steve Arneson: The condo, yes. So I bought it at 24, and it was best part of town, bottom of our market, which was 2012 here… And I knew that it hadn’t been renovated since late ’70s. It was the dream for me – walking in there, putting in some elbow grease, and resell when I’m ready to move. So as this business builds, and my time — I got less and less available for doing renovations, I hired a contractor to do the renovations for me, as I wanted to flip and sell.
Joe Fairless: Oh, and here’s the challenge… Contractors…
Steve Arneson: Here comes the challenge. The part that went unexpected was the guy that I hired, who I thought was going to be doing all the work, then outsourced all of the work to someone who was not nearly as experienced. You could tell the craftsmanship from the original guy and the guy actually did the work was not the same. That was just disappointing for me. I probably lost out on 20k, but I probably saved 10k or 15k, so I maybe only lost 5k out of the process… But the process itself was a real pain, because I was communicating with one, some other guy was coming in, and the work just wasn’t what I was expecting.
Rewinding, I learned a lot through that process, and I’m much more diligent on the communication and the upfront expectations of people who are doing work in our properties.
Joe Fairless: You said you lost out on 20k but saved 15k… Will you elaborate on what you meant there?
Steve Arneson: I kind of leveraged the relationship with the contractor I hired, so he gave me a 20k discount or a 15k discount on the work that was going to be done in my condo. So he was gonna charge me 50k, let’s say, and if I went out to the market and brought in any other contractor, that person would have charged me 65k. So I saved that 15k, but then because of the quality of the work that wasn’t quite met, I think I lost out on about 20k of what my sale price was.
Joe Fairless: So knowing what you know now, when you are presented a similar opportunity in the future, how do you approach it?
Steve Arneson: Now I have as much as I can in writing, and very articulate with what I expect in the design and the quality of work.
Joe Fairless: Got it. What’s your best real estate investing advice ever?
Steve Arneson: I’ve actually got three, if I may.
Joe Fairless: Sure.
Steve Arneson: Real quick… One is you have to get educated. Whether it’s in your marketplace or where you want to invest, as well as what your strategies are. Hire mentors, get connected with community groups like ours, that are helping people along the way, and reach out to people who have been there and done that.
And then in our market, in BC and a lot of the West Coast, and a lot of the markets through the continent – it’s a really hot market here, so you have to be able to act fast. So whether you’re working with joint venture partnerships, or you’re buying a place yourself, you need to have financing in place, you need to have the strategy ready to execute, have the timetable set, and all your team members on the same page, to be able to act as quickly as possible.
And then lastly, we have found some of our best deals – actually, absolutely our best deals – from following up with those listings three or six months later. So keeping track of all the places that you’re looking at and making offers on, and then every month go back to that list and check which ones have sold or haven’t sold, and then follow up with the places that have not sold, and revisit that as an opportunity has really been beneficial for us.
Joe Fairless: Oh, it’s huge. It’s a big deal to just consistently follow up and be methodical about it. There’s a lot of fly by night people who try to do it, it doesn’t work out, move on, find something else that’s shiny and then try and do that… But when you’re methodical about it, there’s a whole lot of money that can be made there.
Steve Arneson: Yeah, it’s a strategy that not many people take advantage of. So if you can get creative and if you can stand out, that’s gonna put you further down the line to meet your real estate goals.
Joe Fairless: And by creative and stand out, are you meaning following up, or do you have an additional approach for following up, that’s creative?
Steve Arneson: More so just the follow-up side of things. For us, we’re looking for distressed properties. So we’ll go to a distressed property, and say it’s worth a million dollars, we will offer them 800k, let’s say, just for examples. And it doesn’t sell. Three months later we’ll go back to there, it’s still on the market for a million dollars, and we’ll say “Hey, what’s happened over the last couple months?” and they’ll kind of tell us a little bit of details, and we’ll say “Great. If your seller is ready, our offer stands.” And then if that doesn’t go anywhere, we follow up a month later, and if it’s still on the market, our offer is no longer 800k, our offer is probably a little bit lower than 800k, knowing that it’s been sitting on the market for a little while, and there’s something probably wrong with it that other people are seeing as well.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Steve Arneson: I’m so excited, Joe.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Alright, Steve, best ever book you’ve recently read?
Steve Arneson: One of my favorites that I’ve recently read is called Traction. It’s by Gino Wickman. It’s all about being a leader in your company, and understanding how to put the right butts in the right seats in terms of employees and growth and scalability for your business.
Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t discussed already?
Steve Arneson: Paying too much.
Joe Fairless: Will you give an example?
Steve Arneson: There was a property that we looked at… I think it was marketed at like 700k, or something, and we ended up over-paying for it because we knew it was an awesome opportunity and because we were just eager to buy something. It was a bit of a draught. So we actually ended up getting traded with it towards the end of negotiations. We were at that point of “We’re overpaying for this, but we’ve already put a lot of stake into the game.” We got a little bit emotional with the deal.
Joe Fairless: How did it turn out?
Steve Arneson: It turned out to be a really good win, actually.
Joe Fairless: [laughs] Well, that’s–
Steve Arneson: At the time, as we went through it, we had to really think outside the box and bring in some mentors to help us.
Joe Fairless: So how did you turn it around so that you made it very profitable?
Steve Arneson: We ended up buying it cash instead of financed.
Joe Fairless: Okay, so the purchase price wasn’t as high as what you initially offered, because you offered cash?
Steve Arneson: We paid the same price, we just did it a little bit creatively in the sense that we bought it cash… So our investor had put up 770k, or something, and then we put in additional money into renovations, and then we went to the bank for financing, once we raised the value so much.
Joe Fairless: Oh, okay, then you got some cash out.
Steve Arneson: Exactly. We got 94% of our investors’ money back out, and the property cash-flows very well.
Joe Fairless: Best ever way you give back to the community?
Steve Arneson: We’re a for-purpose business, and our monthly meetups – we charge $5 for it, and 100% of that $5 ticket entry goes to an organization that’s called KidSport. They help families who can’t financially afford to put their kids through organized sports get involved with organized sports, because we believe in the team environment, and working for a common goal, and learning how to fail, and recovery from that failure. Not only this builds your talent as an athlete, but it also gives you a lot of learning life lessons that you can use for the rest of your life.
Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?
Steve Arneson: The best thing is to visit us on Facebook – The RE Investors.
Joe Fairless: Well, Steve, I enjoyed our conversation, learning about how over the last three years you’ve built a network, you have built an expo that had 900 people year one – holy cow, props to you on that. And then the lessons you learned from that, doing smaller groups in the surrounding areas and continuing to build that interest (more of a guerilla effect) and then eventually go back up to that larger expo, so that you have mitigated the risk of having six figures outlaid with the hope that more people will come to help you breakeven… But then also just the monthly meetup that you’re doing too, and how you’ve used that to get investors and continue to be a thought leader in your area.
Thanks for sharing the condo flip example, with the contractor hiring someone else out, and how you navigate that, and what you’d do in the future.
I really enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you again soon.
Steve Arneson: Thanks, Joe. Thank you so much.Follow Me: