JF2204: Investing While Overseas With Vincent Gethings
Vincent is the co-founder and COO of Tri-City Equity Group and is an active duty Air Force. Vincent shares the steps he took to begin his investing journey while still being active duty in the Air Force and not seeing the properties. He explains how he built a team through social media and through this team he has been able to grow his business to now a portfolio of 120 units.
Vincent A Gethings Real Estate Background:
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“Set goals based off your potential and not your abilities” – Vincent Gethings
Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, I’m speaking with Vincent Gethings. Vincent, how are you doing today?
Vincent Gethings: Good. Thanks for having me on, Theo.
Theo Hicks: Oh, yeah. Thanks for joining us. Looking forward to our conversation. Before we dive into that, a little bit about Vincent’s background. He’s the co-founder and COO of Tri-City Equity Group as well as active duty in the Air Force. He has six years of real estate experience and his portfolio consists of 120 units, broken down between 20 units owned, 52 from partnerships, and 48 from syndications. He is based in Honolulu, Hawaii, and you can say hi to him at his website, tricityequity.com. So Vincent, do you mind telling us a little bit more about your background and what you’re focused on today?
Vincent Gethings: Absolutely. So like you said, I’m active duty Air Force; I’ve been in about 14 years. So I do a lot of project management. I’ve done resource management before, so handling funds for big duty projects. Started getting into real estate investing, quickly wanted to scale up to multifamily. It didn’t take too long, about two years, to realize that small single-family, sub four-unit properties just were very hard to scale, especially because my entire strategy is out of state; being in the military, I’m always going to be out of state, essentially, from my market. So I wanted to scale up so I can afford the better systems, better quality project managers, property management systems… So I scaled up to multifamily. Now we’re looking at 50 to 100 unit property, B, C class. So we’re targeting El Paso right now. It’s our main market. We’re looking to take on a secondary market here, this Q3, Q4 this year.
Theo Hicks: Nice. So that will essentially double your units, right?
Vincent Gethings: Yes. So we’re eyeing up a couple properties right now. Nothing under the contract. We’re in June 2020, so market’s still uncertain. So we’re eyeing properties, but we haven’t pulled the trigger on anything yet. We’re still waiting to see if we can get some clarity on what the next year or two years is going to look like.
Theo Hicks: Perfect. So you’ve got 120 units. How many actual properties is that?
Vincent Gethings: Great question. So that’s seven properties.
Theo Hicks: And what’s the breakdown? So how many of those do you own? How many partnerships and how many are syndications?
Vincent Gethings: Well, I have 20 under my personal ownership. That was where I started, was I started with the zero down, VA house hack; that was my start. I made a bunch of capital off that. I was in Bay Area, California while it was crazy appreciating; took that capital, invested that. At the time, all I knew was small multifamily duplexes and fourplexes. So I went on a tear and bought six small multifamilies, had 20 units in about 18 months, and then that’s when I realized that I needed the partner to scale, and the next unit we closed was a 52 unit with a JV in Michigan. And then from there, we did our first syndication, which was actually closed two months ago in April now, during the height of Coronavirus. It was also our first syndication was that last 48 units.
Theo Hicks: Perfect. I want to walk through each of those. Let’s focus on the 20 units first. So six properties, all bought out of state. Obviously, the first one that you bought, you lived in it. So do you mind giving us some pointers, some tactics, some tips on how you were able to buy those properties, and then how you were able to manage those properties without being there in person?
Vincent Gethings: Absolutely. So the first properties I bought, I took that seed money from that live-in, VA, house hack, whatever the term we want to use. Took that seed money– it was about 150 grand I made off that first property from that VA loan, and then I started buying the out of state. So when I went into this, I went in with the mindset that I’m never going to work on these. I didn’t want to buy the properties down the street, become a landlord, and also the handyman and everything like that, because I know with being active duty military, I’m going to leave in three years, and I’m never going to come back to, say, Bay Area, California. So I didn’t want to have these properties sprinkled throughout the country at each base that I’ve lived in. I know that’s a very popular strategy for people in the military, and it works for them. That just wasn’t for me. So I picked the one location, said I’m going to build my team there, and I’m going to put my roots down there and scale up from that.
The way I did it is, I started with property management first, started building my out of state team, so property management first. Then I got a colleague. For this instance, I used BiggerPockets. Did their search feature of finding very active people in that market, set up some phone calls with them and developed a relationship, and said, “Hey, can you be my boots on the ground? If I have a property that I’m interested in, would you drive by it, maybe go do the– meet my agent out there, do the walkthroughs?” They were happy to do it, both for their personal experience, and then I would throw some money their way for their time, much appreciated. And then I had my agent.
So the way I pictured this in my head was a Venn diagram;my initial team was a Venn diagram. So one circle is my property manager, one circle was my agent, and one circle was my colleague, and they all overlap a little bit, and then that center in the middle was the synergy. So having all three of these people on my team, knowing my criteria of what I’m looking for, visiting said property – it’s the four-unit that we own – and reporting back to me their different perspectives on that deal… For the property manager, he would say, “Hey, these are the issues. We’re going to see a property manager. Here’s the upside I see.” That colleague might say he’s looking at that property from an investor [perspective]. He’s like, “This is what I see, value-add” or things that you might want to look at as an investor, maybe some cap ex item. And the agent, they’re going to report back and she’s going to tell me what she thinks about the price compared to the market and the neighborhood and everything like that. And then I can not be there at all. I can be 3,000 miles away, all three of these people report back to me. In my head, I’m putting together this picture of all of their stories and perspectives overlapping. And then when I’m done, I have this full thesis of this property and I have a very clear picture and understanding of the condition the property, how it’s going to perform, so I can do my due diligence and pull the trigger on that property without ever being there. So the first five properties I bought, all the duplexes and fourplexes, I don’t think I’ve seen any of them before I actually bought them. So I was 100% out of state.
Theo Hicks: So I think the property management company and the real estate agent, obviously they get paid after you buy a property, and I’m sure you did your due diligence on them to make sure they were experienced, but I’m curious about that boots on the ground person. So what types of qualification did you want out of that individual? Because obviously, you can’t just have a complete novice do it. Maybe you did; I don’t know. But I’m just curious to see what you did to screen that person initially.
Vincent Gethings: The first level of screening was at the time, I knew BiggerPockets, I read Brandon Turner’s books. So that was my base of my education at the time. That’s why I was investing in small multifamily. So I went to BiggerPockets, searched the zip code, and then I just filtered by pro members. So at the time, I was like, “Well, if they’re a pro member, they’re obviously invested enough into this industry to purchase the premium subscription at BiggerPockets.” So that was my first level. And then I looked at how active are they. Are they posting? What kind of portfolio do they have? And then I filtered it down more. And then I called a couple people, and I was like, “Okay, I need somebody that understands multifamily.” So I wasn’t going to send a wholesaler to go inspect a four-unit property. They might be pretty good at coming up with a valuation, but they’re probably not gonna be very good at understanding the value adds or the systems that need to be in place to run this property long-term as a landlord or an asset manager. So I looked for somebody that was actively investing in multifamily, and that’s where I found my good friend now, Manny, in Michigan, who’s just been a huge asset to my team.
Theo Hicks: Alright, perfect. Let’s transition to the JV deal. So do you wanna walk us through that? So you’ve got your six multifamily deal. Well, I guess, five, including the house hack, and then you decide to move up to this 52-unit deal. So do you wanna walk us through after you made the decision, what do you do, why did you decide to JV as opposed to doing it yourself, how’d you find the deal, what was your responsibilities, what was their responsibilities, things like that?
Vincent Gethings: Absolutely. So this was fall 2018, I hit the ceiling, so to speak, this plateau in my growth; in the current systems I had set up, we were seeing cracks in the systems and being able to grow further. So I knew that there was something wrong, but I wasn’t smart enough to know what I didn’t know. So I went out and I sought mentorship, did one of those paid mentorship programs. After vetting quite a few of them, it was an absolute godsend to me, and my team. I quickly found what I was doing wrong or how I could grow, and that was fall of 2018. By January or February 2019 I was in contract on the 52-unit. So that’s how fast I was able to figure out what I was missing in my education and my knowledge, break through that barrier and scale up.
I found this 52-unit through broker relationships that I was developing. Got them online, got the LOI, and then through meetups is how I found my partner. So I went to meetups, started talking about people that were interested in investing out of state. I’m in a capital market in Honolulu, Hawaii. There’s a lot of equity here, but the cap rates and the barrier to entry here is just outrageous. So there’s a lot of people that are like, “Look, I have a lot of equity, say, in my house, and I want to do a HELOC, or I have a lot of money in my IRA that I want to do self-directed, but there’s nothing around to buy. We’re looking at $200,000 a unit here.” So they’re looking for somebody to do out of state, but they just didn’t have that connection in the lower 48 to go and start that process.
The niche for me here was go to meetups and start finding people that are interested in multifamily, interested in out of state, in mainland. They just need the person to make that connection, that bridge. I found three investors very quickly that were able to come up with 25% of the deal. So it was very easy. Everybody just 25%, about $98,000 each is what we had to come up with, closed that 52-unit. We closed it, and I actually did a very creative strategy, because at this time — and as you know, brokers are very skittish on your credibility and your ability to close. And at this time, I thought I had 20 units, I thought I had some credibility. That was not the case at all, because the 20 units are all residential-sized property. So I had to prove myself.
The way we did it was the 52-units is more of a portfolio. It was an 8-unit, a 12-unit, a 32-unit, all in the same town. I said, “Look, we can buy the 8-unit cash. We had enough money right then to buy the 8-unit cash, and that’ll show you brokers and sellers that we are serious. I’m serious about scaling my company and I have what it takes to close this deal.” So I bought the 8-unit cash, and that gave me the time to put together the loan with the bank because also had the credibility issue with the bank of, “Okay, we see you can do small units, but what makes you think you can do a 52-unit reposition?” So I had to court them also, and they took longer for them to underwrite.
So I bought the 8-unit cash to show them I was serious. That gave time for the bank to underwrite the entire portfolio. And then what we did when the bank gave us that commitment, I ended up using the 8-unit as the downpayment. So I crossed collateralized the 8-unit as the down payment for the rest of the property, and then wrapped all 52 units back together into one loan.
So that’s how we were able to creatively close that with not really having the credibility on the team, because two of them aren’t real estate agents, the other team member’s a military member like myself. So we lack the credibility on our team and that’s how I solved that problem in being able to close that for both the brokers, the seller, and the lender, was that creative structure.
Theo Hicks: Nice. So after that, you moved down to the syndication. So I guess my question on that is, why didn’t you do the same thing as the JV? You had three investors come in including yourself… What made you decide to do syndication instead?
Vincent Gethings: One, we wanted to scale our company up further in syndication. Some ways, it’s a progression. Other ways, to me, I think it’s just another tool in your tool belt, that you should, as an investor, you should be aware of and experienced in. So some deals, you might be able to do JV. Some deals you might be able to do syndications. So whatever that right for that job to take down that asset, and one, for personally, I just wanted experience in syndication.
Another side of it is, we wouldn’t have had the equity upfront as easily as we did the first one. So a lot of our capital was deployed in that first 52-unit, and we’ve only owned it for a year. So we haven’t refinanced yet, we haven’t sold it yet, so a lot of our equity’s still tied up in that one. So that was obviously, the biggest factor of going to syndication. The other side of it is the desire to scale the company even further and get that experience. And the second syndication was a 48-unit, so it wasn’t like we went from 52-unit to 150, 200-unit deal.
Theo Hicks: Who were the investors? How’d you meet those people?
Vincent Gethings: We did the common thing of getting an Excel sheet and picking our power base and write down all of our family, our friends, our uncles, our aunts, our co-workers, our acquaintances that we know that all had expressed interest in investing in real estate, or maybe that we’re partners with on smaller deals, and we wrote it all down and we started courting these relationships even further. So obviously with the SEC law, you had to have that pre-existing relationship, so we didn’t go out and meetups or shouting from the rooftops, “Hey, we got a deal. We’re syndicating.” We stuck to that power base or that circle of influence of people that we already had pre-existing relationships with. And we only had to pull on 10 or 13 investors on this one. So very small; $50,000 was the average investment.
Theo Hicks: Okay, Vincent, what is your best real estate investing advice ever?
Vincent Gethings: Best real estate investing ever is set goals based off of your potential and not your abilities.
Theo Hicks: Do you want to elaborate on that a little bit?
Vincent Gethings: Absolutely. So a lot of people have these limiting beliefs, and what I see a lot of people, they set goals of what they think they can accomplish right now based off of their current experience, their current education levels, their current partnerships or whatever they have. So they set their goals extremely low. They use that SMART acronym, which I absolutely hate, because the R in smart is realistic. I absolutely hate that, because you sell yourself so short.
Giving you an example… My original goal, when I did this, I thought I was like, “I’m gonna do a SMART goal, because that’s what we’re supposed to do.” It was 20 units in 10 years. So two units a year was my cash flow goal. I did 20 units in 18 months once I actually started opening my mind up and growing myself, actively trying to grow my experience, my team members. And then now, my team is at 120 units, and I’ve only been doing this for five, six years. I think that the sky’s the limit, now that our eyes are getting more open, we’re adding more tools to our tool belt.
So I think the biggest thing is people sell themselves short because they want to set realistic goals for themselves. They do it based off of their ability and not their potential. So a big example of that is the 10X rule. I read that and I was like, “Well, 20. Well, scratch that off and write 200,” and that’s what was my goal, and I quickly went from 0 to 120 in a very short amount of time once I did that. So absolutely set big, hairy, audacious goals, and then take massive action toward them. Don’t be realistic, because it doesn’t give you any room to grow.
Theo Hicks: Alright. Are you ready for the Best Ever lightning round?
Vincent Gethings: Let’s do it.
Theo Hicks: Alright, Vincent, what is the best ever book you’ve recently read?
Vincent Gethings: Best ever book I recently read is Traction.
Theo Hicks: If your business were to collapse today, what would you do next?
Vincent Gethings: Be a commercial pilot.
Theo Hicks: Nice. Is that what you do in the Air Force right now, piloting?
Vincent Gethings: No, I wish. No, I wish. I am not a pilot. I’m not Air Force pilot, but I do have my pilot’s license, and I have a small plane out here in Hawaii that I use for island hopping. So If everything went to hell, I would go finish my commercial rating and go be a commercial pilot.
Theo Hicks: Have you lost any money on your deals yet? If so, how much did you lose and what did you learn?
Vincent Gethings: Not actualized losses yet. So back to my original four-unit – I bought a four-unit for $170,000, put about $50,000 into it for renovations, making it really nice, best place on the block. So I thought you were supposed to do that to get the rent premium. Went and got it appraised, and it was worth $170,000, and I was like, “I don’t understand why.” And the appraiser said, “Well, it’s a residential property. I don’t care how much you raise rents. We go off comp value, and you have the only four-unit in this neighborhood. So it’s worth $170,000 because we don’t have anything to go off of as far as what it’s actually worth.” So on paper, I lost, say, anywhere from 30 to 50 grand on paper. But I haven’t sold the place yet, so it’s not actualized. But that was a huge lesson and that was the last straw for me of like, “Okay, I’m done with residential. I’m scaling. I’m going to partner up, and I’m going to scale and do commercial where the valuations make sense.”
Theo Hicks: What is the best ever way you like to give back?
Vincent Gethings: Mentoring people, especially in the military. Financial education, financial literacy is huge for me. I see a lot of people that just come from home with a good financial intelligence, and they just make very poor decisions very early on in their careers. So I spend a lot of time giving them a lot of books, Rich Dad, Poor Dad or Dave Ramsey’s Total Money Makeover. So stuff like that and just coaching them how to make budgets, how to think about investing, the different shades of money, so to speak… How currency works is very big for me.
Theo Hicks: And then lastly, what is the best ever place to reach you?
Vincent Gethings: I’m on LinkedIn. So Vince Gethings on LinkedIn, and then firstname.lastname@example.org.
Theo Hicks: Alright, Vincent, thanks for joining us today and very systematically — I can tell you’re a project manager, the way that you just knocked through everything, boom, boom, boom, step by step process for how you grew from your first zero percent down VA house hack to owning and controlling 120 units now, and hopefully, in the next few months, doubling that with your next syndication deal.
I think some of the biggest takeaways was I liked how you were able to find your boots on the ground in a state that you didn’t live in. So you mentioned how you went on BiggerPockets and you filtered by the pro member, and then you looked at those pro members to see how active they were, what portfolio they had, and then you spoke on the phone to make sure that they were actively investing and actually understood multifamily.
You also mentioned how you were able to do your 52-unit deal and build that credibility with the broker and the lender by instead of trying to buy all 52 units with 25% down or 20% down, you went in there and said, “Okay, I’ll buy this 8-unit all cash,” to show that you’re serious, and then you were able to actually not put any money in the deal and just use the 8-unit as a down payment and refinanced everything and cross-collateralized it into one loan.
And then you talked about how you were able to raise money for your first deal, which was that Excel spreadsheet exercise, which, Best Ever listeners, we talked about something similar on the show before, where you write down every single person that you know. Then you took it a step further and let everyone you know that you’d already talk to about investing in deals, and you were able to pull together 10 to 13 investors with an average of $50,000 each. And then lastly, your best ever advice which is instead of setting SMART goals, you set the SMAT goals. Or I guess, try to figure out SMAUT, so unrealistic goals.
Vincent Gethings: The Boston version, the SMAT goals.
Theo Hicks: The SMAT goals, yeah. So set goals based on your potential, not based off of what you can currently do, your current abilities or what you can currently do. So Vincent, really appreciate you coming on the show. Best Ever listeners, as always, thank you for listening. Have a best ever day, and we’ll talk to you tomorrow.
Vincent Gethings: Thanks, Theo, for having me on.
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