JF2453: Passing The Real Estate Mentorship Torch with Dan Tokayer
Dan started working in real estate right out of college. He put together the money he made doing odd jobs, invited two other investors, and purchased a property in Manhattan. He fixed the property, refinanced it, and made his money back within the next couple of years. Thanks to his networking skills, he learned a lot of insider information about refinancing and flipping, so he managed to make a hefty profit relatively quickly.
Twenty years later, Dan’s investments amount to $80 million, and he owns 850 units. He now mentors aspiring investors and helps them acquire wealth by investing wisely.
Dan Tokayer Real Estate Background:
- Founder of Simplicity Capital
- 21+ years of real estate experience
- Has acquired, operated, and invested in $80 million of commercial real estate across 850 units
- Based in New Jersey
- Say hi to him at: www.simplicitycap.com
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Best Ever Tweet:
“When the market is bad, that should be the best time to raise money because things are substantially cheaper” – Dan Tokayer.
Theo Hicks: Hello Best Ever listeners and welcome to the Best Real Estate Investing Advice Ever Show. I am Theo Hicks. Today we’ll be speaking with Dan Tokayer. Dan, how are you doing today?
Dan Tokayer: I’m doing great. Thank you so much for having me.
Theo Hicks: No, thank you so much for joining us. Looking forward to our conversation and learning a bit more about what you’re up to. Dan is the founder of Simplicity Capital and has over 21 years of real estate experience. He has acquired, operated, and invested in 80 million dollars’ worth of commercial real estate across 850 units. He is based in New Jersey and his website is simplicitycap.com. Dan, do you mind telling us some more about your background and then what you’re focused on today?
Dan Tokayer: Sure. I started in real estate right out of college. I graduated from Queens College in New York in 1999. I was about to say 2000, but I forgot there is numbers before 2000. I took the money I saved up throughout working odd jobs, put it together with one or two investments and I bought a property in Manhattan, back when Manhattan –in Harlem actually specifically– was a lot cheaper. I fixed that up, I got in buddy-buddy with different banks and different vice presidents of banks. They were able to teach me the system of how to refinance and how to do all that good jazz. I was able to pay out my investors after two years with a hefty profit and sort of go off on my own.
When I first started, I called up a friend of mine who is in my neighborhood, and I said, “Hey, can I spend six months with you and learn real estate?” And he said –actually, funny– “No, I don’t want you to waste your time. I want you to come to my office whenever you can. I’ll give you a five-minute synopsis of how to invest in real estate, and I need you to take it from there.” He told me recently that I was the only person who took his five or 10 minutes synopsis and took it as far as I did. Everyone else sort of needed him to hold his hand, and I just sort of ran with it, moved on, and I kept on buying. Buying and refinancing, selling and selling, and buying and selling, until I was able to get to where I am sort of today where I don’t have that many partners and have the lion’s share of most of my deals. It’s been 20 years now, 21 years.
Theo Hicks: Perfect. So you said that in your first deal, you had investors in your first deal?
Dan Tokayer: Yeah, I had two investors. The first deal wasn’t a lot of cash, it was about $80,000 to buy a building in Manhattan. I took 20,000 of my savings and I took I think 50 or 60,000 from two investors, and I bought the property. It was an eight-unit in Manhattan, in Harlem. I actually still own that property today. I use it as an ATM, so every couple of years I refinance, pull out money, and buy other property from it. But it’s a beautiful building. I refinanced after two years and I paid them off a hefty return, and they were very happy with it. I just took it over myself and sort of kept on going from there.
Theo Hicks: I’d like to dive a little bit more into that because you’re fresh out of college, your real estate experience is a five-minute synopsis from someone that you knew, and then you’re able to raise $60,000 from two people. Who were these people? Did you simply say, “Hey, can I have 60 grand?” They’re like “Oh, sure.” How did you get them to invest? How to get them to trust you?
Dan Tokayer: That’s a great question. They’re friends and family, one was family and one was a friend. I think they were more into the idea of they liked what I had to say, they liked my go-gettingness, and they liked the fact that I knew what to do with the project. They sort of knew me going growing up. Well, family members definitely knew me growing up, but the friend knew me and they knew my personality. It’s very hard to raise money when you’re at zero. The only successful way to raise money, I’ve found out, is just a track record. If you have a good track record, it doesn’t matter if you want to buy a bridge in Manhattan, as they say. If you have a good track record, people will go after you and people will throw your money. I will say it’s funny that when the market is bad, it’s the worst time to raise money. But when the market is good, it’s the best time. In general, when the market is bad, that should be the best time to raise money, because things are substantially cheaper.
Manhattan went down in value 20 to 30% now’s the best time to go in and buy if you’re a Manhattan buyer. Now when the market is bad, everybody holds tight to their money and you should say the opposite. You know the saying, when there’s blood on the streets, you want to be the first one with your checkbook to say let’s buy everything we can.
But back then the market was just turning. It started to turn in 97 and 98. The market was getting good although it had a long run of being negative in Manhattan. So I showed them the numbers, I said, “You can get eight, nine, 10% return on your cash and I’m going to fix it up. This is what I’m going to do, this is what I plan on doing with the money, this is where I plan on taking the rents, and this is the proof that I have the rents that are going to go this way.” For them, thankfully, 20 to $30,000 wasn’t a huge dent in their checkbook or their accounts, so they were able to do it. I just sort of took a chance, and they were there to hold my hand, to answer my questions, and to follow me to make sure I didn’t do anything wrong. But if I ever had a problem, I would call them up for advice. So they were with me, even though they wrote a check and they were a silent partner. So they saw me along the way and they were very happy. I learned a lot. I used them as much as they used me.
Theo Hicks: Fascinating. So that kind of brings me to my next question, which is about the mentorship. You kind of gave me two examples. On the one hand, you’ve got the friends and family who invested, they were there to help you answer the questions you had, and were kind of there along the way. Whereas on the other hand, the other person gave you five minutes of their time, which was something I’m sure was very helpful. So from your perspective, let’s say I’m where you were, where you had some money, really no experience… We talked about the money side, but from the mentorship side, what’s some advice you have for that person to get someone like you now, or that friend you had that gave you that 10 minute synopsis, or these people who have money who we’re willing to help you along the way. What’s your advice on that?
Dan Tokayer: It’s actually quite fun and it’s like you’re in my mind in a way. To thank that person who gave me five minutes. Anyone I speak to, or anyone who gets in contact with me, I tell them, “I will give them as much time as I can to help them mentor.” So I mentor now for free. I just got a teaching job at a university in Manhattan to teach real estate. All I want to do now is mentor, I love it. I love teaching people and more than anything, I love seeing people successful from the ideas that I learned along the way.
One of the questions that you said that you’re going to ask me in the interview later on is what are the biggest things I learned in real estate, and that is making mistakes. If you can save so much money, which is all the money that I lost, by learning from my mistakes, it’ll help you along the way so much.
A lot of the real estate that I learned was actually in hindsight. I know it sounds weird when you’re dealing with oodles of money and no investor would ever want to go into an investment with me to learn things in hindsight; I don’t want to be that guy. But I’ve never lost money in terms of like, “Oh, that was a mistake.” But I learned things that I never expected to happen through hindsight, saying “I never thought that a wind of that magnitude can withstand a certain window that they said wouldn’t fall down.” Just random stuff like that. It’s a horrible example, and I hope you can look past that really weird example. But mentorship is all I do, and that’s all I want to do. So anyone who contacts me through my website, assuming that I vet them and they’re somewhat normal, if they have any questions, I’ll be more than happy to answer. I’ll be more than happy to walk through the real estate troubles that they have and answer their questions, because I feel that it was that person’s five, 10, and 15 minutes in his office that he gave me that took me to where I am today. If you have the right skills and you ask the right questions, you can go farther than me.
Theo Hicks: I want to quickly follow up, because you said something that you’ll help anyone as long as they’re vetted and normal. What does that process look like? Because you already mentioned that with a five-minute synopsis person, you’re the only person actually kind of took action on that advice. So maybe you do offer this and not many people reach out. But as soon as that’s the case and a bunch of people are reaching out to you, you can’t really invest time with everyone. How do you figure out who it makes sense to…
Dan Tokayer: Well, it’s very simple. It’s by the questions that they ask. If you ask a smart question, you’ll get a smart answer. If you ask a question that “Hey, Danny, I’m having this trouble. I’m looking to buy this property. Can you give me any advice on how I should look at it different?” That’s a smart question. But if it ends up being a question that… I don’t want to say it’s not worth my time, because it’s demeaning. But if there’s a question that you see that there’s some value in giving that person the answer, I’ll be more than happy to. If it ends up being sort of a back and forth of I don’t know where you’re going with this, you’re missing the point, then that’s I guess my way of vetting.
I’m nervous because you have 16 million people who listen to your podcast. I’m nervous about getting 14.9 million emails on Thursday. But yeah, I would love to help as many people as I can. That’s what I want to do right now. I want to put as many people into the millionaires club as possible. Any advice I can give them and pay it forward, that’s the only pay I want. I want someone to just do it for someone else.
I read all these books about real estate and I read these books about other subjects. Everybody sort of has this one person who when they’re on the bridge and they’re about to jump, and that one person reaches out their hand and say, “No, I got you.” I love that feeling. I would love to be able to teach that one person who doesn’t have a person to speak to and say, “Hey, I can help you out with real estate. I can answer that question and help you out.” I don’t know why. My wife thinks I’m crazy, but I want to help people. If I can help you be successful, then great, then pay it forward. Do it to someone else.
Theo Hicks: The last question before we get into the money question. You mentioned that when you started off, you were raising capital from other people, and then now, correct me if I’m wrong, you said that is mostly you who is the funder of these deals. How do you know when’s the right time to transition and then why did you decide to do that? Why not just keep raising money for other people so you can buy more and more deals? What’s kind of the thought process there?
Dan Tokayer: So I don’t like some of the fund outline where there’s 1% acquisition fee, 1% asset management fee, 1%, this fee, half a percent to refinance, this fee, that fee… I feel it takes a lot of your money if I give this guy a million dollars. If I give them $100,000, $82,000 gets invested in the property and the rest just goes to him. If the property does well, I make a lot of money. If the property doesn’t do well, I make money. I don’t like that. I say to myself, “If I need to raise 10 million dollars, I need to raise 5 million dollars, I need to raise 3 million dollars”, by going up to a person and saying “This is my track record. I’ve averaged 24.4% IRR since I started on all my investors, after fees.” So we’ve done very well, we’re quiet, and we’re under the radar, which is the way I like it. If I say “Hey, I need to raise a million dollars. I’m coming in for 600,000, you come in for 400k.” It makes them a lot easier to write that check for 400, it makes them trust me more, and it makes for a partner that I can deal with. I don’t need to answer 300,000 questions about why you’re doing this and why you’re doing that. And I like that, because it gives me the autonomy to spend more time looking at deals, navigating the deal, and making it worth the most amount of money, as opposed to dealing with investor relations which would take up 90% of my time.
So I believe that diversification is not the best thing in the world. If you find a good deal… I don’t know the term and I’m losing it right now. But put your money where your mouth is and put as much money as you can into it. If I found a good deal and it cost me 5 million dollars cash, and I want to put 3 million into it, why would I put 300,000 and raise money just so I can make a percentage off of it? If I know I’m going to double my money, which I on average do in every two or three years since I started. I know I’m going to double my money in 36 months, why would I not want to put every dollar I have? So maybe I won’t put every dollar I have, and I’ll get a little bit difference from somebody else. But because I don’t charge fees, I don’t need to raise all that capital, I’d rather make all the money myself. My only fee is 25% off the back end of whatever profit you make. So it’s a very simple fee, it’s very mom and pop. When I raise money, I do it saying “Hey listen, I need to raise 2 million. I’m 60% of it. I’m 70% of it, I’m 50% of it, and I just need you to help me get to that dollar.”
The proverb I used to tell people is, “I have 80 cents, I need to get to $1. Do you want to come in for 20 cents?” They say, “Well, if you’re in for 80, then I’m comfortable giving you 20, because I know that you’re the lion’s share.” For that, I say, “I’m not making money off of your money in the beginning, so I don’t need to raise the most amount of dollars. I’m very comfortable with what I’m doing. I don’t buy a lot, I rarely buy, and I buy right. So I’d rather just put as much money as I can to make myself as much money. And if I make money, you make money. If I don’t make money, you don’t make money. That way, we are sort of equal partners.”
Theo Hicks: Thank you so much for sharing that. Okay, Dan, what is your best real estate investing advice ever?
Dan Tokayer: Make a lot of mistakes and learn from those mistakes. The mistakes that I made, when I lose a deal, when I get pushed out of a deal, when I get negotiated out of a deal, when I get a lawyer or an investor who cheats me on a deal, I literally soak up as much information as possible on that, and I make sure it never happens again. That is probably how I became the most successful I’ve ever been.
And read. I read a lot and I read a lot about real estate. Not so much in books anymore but I read on theories, on how people build their businesses. Like the Rockefellers and the Carnegie’s. Because I believe it’s the small decisions they made that propelled them. It’s not the big ones that you and I both think of, it’s the little things of “Do I double down here? Or do I hold my money?” Those decisions build your gut, and once your gut is full, and once your gut is satiated with all the information, you’re able to rely on and more on your decisions and you’re able to make sharper decisions left and right. So mistakes and reading I think are my two biggest strong points in real estate.
Theo Hicks: Okay, Dan, are you ready for the Best Ever lightning round?
Dan Tokayer: Sure.
Theo Hicks: Alright. First, a quick word from our sponsor.
Theo Hicks: Okay, on the same track as your Best Ever advice, what is the Best Ever book you’ve recently read?
Dan Tokayer: There are two books that I recently read which I think are the Best Ever books. The first book that I read which I think is fantastic is Grit by Angela Duckworth. The second book which I think is fantastic in real estate, is The Secret Life of Real Estate and Banking by Phil Anderson. That book summarizes everything that you need to know about real estate in terms of cycles, and where it’s gone wrong, how to invest in it, how to time it, and what are the catalysts that bring it down since 1800 are. He found a rhythm through another economist by the name of Fred Harrison. That rhythm is one of the rhythms that I’ve studied very well, and I’m in right now. I buy based on that rhythm, and I think it’s a fantastic book.
Theo Hicks: If your business were to collapse today, what would you do next?
Dan Tokayer: Real Estate. I would start from the beginning. I have a track record behind me, so if it collapsed today, I would just do the opposite of what I’m doing in terms of the lion’s share, and I would raise more equity, and I would put in less cash, and I would do it again.
Theo Hicks: What’s the best deal you’ve done?
Dan Tokayer: The best deal I’ve done… I bought a deal six years ago now. I bought a deal in Fort Lauderdale, where all the cap ex work was done. The guy put in brand new kitchens and bathrooms, marble kitchens, marble bathrooms, fixed every single aspect of the building. But because he owned it for 15 years and he knew all the tenants by name, he never raised the rents a penny. Essentially, when I went in there, I literally had to just drop the gavel and say “I’m raising you for all these adages, all these brand new kitchens and bathrooms. You are now paying market rent and I don’t have to put in cap ex.” It was literally free money. I overbid on the property buy 300,000 and even the bankers were like “You’re crazy.” I made millions off that property. I didn’t understand why no one bought it.
Theo Hicks: This is four years ago?
Dan Tokayer: No, this is 2014. So I guess six years ago. I sold it four years ago.
Theo Hicks: Okay. What’s the Best Ever way you like to give back? Which you’ve kind of talked about, but you get to answer it again anyways.
Dan Tokayer: Mentorship is my way of giving back. From a financial perspective, I like to support a lot of my community stuff. I like to give money back to the poor, I like to give toys to families that don’t have a lot to give to their kids, I like to give a lot of presents for the holidays. Mentorship is probably paying it forward, it’s my number one.
Theo Hicks: The last question is what’s the Best Ever place to reach you?
Dan Tokayer: My website has my email address, email@example.com. Please don’t harass me, but if you have any questions or if you would like to speak to me more, I would love to hear from you. I’m also a… Not that I raise a lot of money, but I’d like to find one or two partners that I like to raise money from. So I do it through my website as well. But my email address is the best.
Theo Hicks: Perfect Daniel. Thank you so much for joining us today and providing us with your Best Ever advice. Kind of going through your background in a lot of detail and explain to people some of the things that got you to where you are today, with one of those being your hustle, your knowledge, your track record, and then your mentors.
You talked about one of the big things you focus on now is, as you said, paying it forward and being mentors of people who are the Dan’s of today, how you were when you first started, people like you today. You kind of talked about, what I think helped people how to actually get a mentor, make sure you’re asking those smart questions. And then kind of what you did, making sure you’re actually doing something, not being the guy that talks to you once then you never hear from them again… Because you really never know where that relationship is going to go.
We also talked about your philosophy behind how you fund your deals. You gave us a lot of interesting things to think about when it comes to using other people’s money versus using your own capital. A lot of people talk about raising other people’s money. It’s great to hear the other side of it. It’s like, “Well, here’s why I don’t like raising money. Here’s why I’d like some of the benefits of using my own capital in these deals.”
And then your Best Ever advice was; number one, make a lot of mistakes because that’s where you learn; number two, reading. You gave us some good places to start when it comes to reading. Anything else you want to mention before we sign off?
Dan Tokayer: No, I think that’s it. I really appreciate the opportunity to speak and I want people to pay it forward as much as possible with helping other people and mentorship. That is probably the hardest part about getting into real estate, was just having someone to bump ideas off of. If I can do that for people, it’d be great. Or if you can do it for other people too, that would be great. Just pay it forward.
Theo Hicks: Great, Dan. Well, thank you again for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.
Dan Tokayer: Alright, great. Thank you.
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