JF2366: Using Old-Fashioned Tactics to Find Buyers and Sellers with Frank Iglesias

From the music industry to IT, and then to real estate, Frank has always been fond of receiving education and learning something new. While working in IT, he picked up a few properties on the side. In 2011, he walked away from the corporate world and became a full-time investor.

Back then, he started by utilizing the power of tried and true methods of reaching people such as direct mail and networking. In 2020, people are still happy to share what they do in a casual conversation and get on the phone to discuss a deal, so old tricks do work when used properly. 

Frank Iglesias  Real Estate Background:

  • Full-time investor 
  • 11 years of investing experience
  • Portfolio consist of several rentals, construction projects, has completed 100s of deals as a wholesaler & flipper 
  • Based in Atlanta, GA
  • Say hi to him at: www.buyinvestmentassets.com 
  • Best Ever Book: Think and Grow Rich

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Surround yourself with the best people you can afford” – Frank Iglesias.

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JF2365: Embracing Mechanical Repairs with Mike Bonadies

Like many other real estate investors, Mike started his journey at a corporate 9 to 5 job. His buddy suggested branching out and becoming a landlord. Since then, has Mike grown his portfolio and has now become a property manager. Most of his properties were built before the 1940s, and few construction companies in the area could handle that kind of work. That’s why he opened his own construction company. He now has a nice cash flow coming from these adjacent fields, and his companies are working in synchrony with each other.

Mike Bonadies  Real Estate Background:

  • Full-time landlord and owner of Side By Side MRO, a construction company that specializes in pre-1940 construction & property preservation
  • Co-owns TerraVestra Property Management
  • 5 years of construction experience 
  • His personal portfolio consists of 25 units 
  • TerraVestra manages 250 doors, and his construction company works with 600 rental units
  • Based in Sewell, NJ
  • Say hi to him at www.sidebysidemro.com 

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“The system includes more problem-solving in pre-1940s construction.” – Mike Bonadies.

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JF2364: How To Go From A Commission Chaser To A Problem Solver With John Chin #SkillsetSunday

John cut his teeth as a traditional real estate broker. He escaped the “hamster wheel” of chasing sales thanks to a mentor who put him on the fast track to investing. That paradigm shift made him see licensed agents as problem-solvers for homeowners rather than just salespeople.

Now John teaches real estate agents how to leverage their license into creating 8-10 various income streams as opposed to relying on commission alone. In this episode, he talks about his lead intake process that helps licensees make the most out of their leads.

John Chin Real Estate Background: 

  • John and Ron are the founders of Investor Agent
  • Together they have done 2,800 rentals and flip properties (mostly short sales, foreclosures, and REOs)
  • Closed over $260 Million in residential investments
  • He currently manages over 470 cash flow rentals
  • Based in Orlando, FL
  • Say hi to him at www.investoragent.com 

Click here for more info on groundbreaker.co

 

 

Best Ever Tweet:

“You’ve got to look at your listing as just one tool in your tool chest. It’s not the main driver of your business ” – John Chin.

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JF2363: Losing Credit Last Second With Gary Beasley #SituationSaturday

Gary Beasley is the Co-Founder and CEO of RoofStock, a real estate investment marketplace. He was a previous guest on episode JF1129 where he shared more of his journey and start into real estate but today he is going to share a sticky situation where he was in the middle of a deal and lost his funding while in the middle of it and only had one month left of cash. 

Gary Beasley Real Estate Background:

  • Co-Founder and CEO of RoofStock, a real estate investment marketplace
  • Gary was co-CEO of Starwood Waypoint Residential Trust – which owned and managed 15,000 single-family rentals
  • A previous guest on episode JF1129
  • Based in Oakland, CA
  • Say hi to him at www.roofstock.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“It’s amazing how resilient our industry is, especially after COVID19” – Gary Beasley


 

TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Gary Beasley. Gary, how are you doing today?

Gary Beasley: I’m doing great Theo. How are you doing?

Theo Hicks: I am well. Thanks for asking and thanks for joining us again. Gary was previously interviewed in an episode aired three years ago. We’re going to catch up with what Gary has been up to, as well as talk about a sticky situation because today is Saturday, Situation Saturday. We’re going to talk about a sticky situation that Gary was in, how we got into it, how he got out, lessons learned, that you can apply those lessons to your business.

But before we get into that situation, a little bit about Gary. He’s the co-founder and CEO of Roofstock, a real estate investment marketplace. He was also the co-CEO of Starwood Waypoint Residential Trust, which owned and managed 15,000 single-family rentals. His previous episode is Episode #1129. Make sure you check that out. Based in Oakland, California. His website is roofstock.com. So Gary, before we get into that sticky situation, do you mind telling us a little bit about your background and then what you’ve been up to since we last had you on the show?

Gary Beasley: Sure. It seems like ages since I was last on this show three years ago, a lot has happened. So my background, I’ve been sort of at the intersection of real estate and technology for the majority of my career. I started off in a somewhat traditional real estate capacity, doing financial analysis prior to business school, got my MBA, did some work in the REIT industry for a while, and really caught the entrepreneurial bug at Stanford Business School. I knew that ultimately, I wanted to do something a little bit more entrepreneurial. So Roofstock is my third real estate startup. Broadly defined, those early days at ZipRealty, which was one of the first online residential brokerages, and we were fortunate enough to take that company public in 2004. I was the CFO of that business.

Then my second real estate startup was called Waypoint Homes. We built a platform in the single-family rental space during the big downturn ’07 to 2011, and built that into a company that we ultimately took public in partnership with Starwood Capital. That was called Starwood Waypoint Residential Trust, and that’s where we’ll talk about a sticky situation that we had when I was at Waypoint.

So we took that public, and I was the co-CEO of that business, as you mentioned. We took that public in 2014, and then I left in 2015 to start Roofstock, which is really a marketplace for single-family rental homes. So think about it a little bit like Amazon for houses. As a retail investor, you can buy or sell properties that already are tenanted, much more like a stock or a bond, through our platform. We do a lot of work to get the home certified and break down those geographic barriers so you can make it much more like a financial transaction.

When we last talked in 2017, we were still quite small. We’ve grown quite a bit since then; we crossed over, at the end of last year, a couple of billion dollars of transactions through our platform, and we’ve continued to grow. We’ve had some interesting experiences through COVID where the business really dropped off a cliff in March and April, and really started to come back in earnest over the summer. So we’re now sort of back ahead of levels we were at pre-COVID. So one of the things we could talk about is the resiliency of the sector we’re in. But anyway, that’s kind of what I’ve been up to. We’ve got about 150 people into offices, and we’re active in about 70 markets around the country with our marketplace today.

Theo Hicks: Thanks for sharing that. So as you mentioned, the sticky situation… I’ll let you explain it in more detail, just at a high level. Gary’s company, Starwood Waypoint Residential Trust, had a big line of credit negotiated with a bank, and then it seems like they backed out last second. You only had a certain number of months worth of funds left to use for your company, so you had to come up with a solution to that problem. Do you mind telling us more detail, kind of set the context for the situation, and why it was so sticky, as we say?

Gary Beasley: Just hearing about it is making my blood pressure go up, so this will be cathartic. I haven’t talked about this in a little while… But as an entrepreneur, oftentimes you do face these existential threats to your business. We were one of the first groups to raise significant equity capital to buy distressed homes back during the last housing crisis. We raised 200 million dollars of equity from a company called GI Partners; they were a very high-quality, private equity firm based in the Bay Area. And because it was a new asset class really, the single-family rental homes at scale, there was really — at that time in 2012, when we were doing this, there was no debt market. You could get individual mortgages on properties for perhaps 50% of the value, but that was not very efficient. We were buying thousands of houses and we needed a credit facility that was similar to what was done for multi-family or other sorts of commercial assets.

So what ended up happening was, we were working with a large bank, and we had fully negotiated the deal. This was roughly a 200 million dollar credit facility we were negotiating. So it was going to be the first of its kind in single-family rentals. The bank was super excited about it, we were super excited about it; we thought it was going to take three to four months to put it together. It ended up taking nine months. It was extraordinarily complex and it ended up going to the very top levels of the bank, because it was new.  And I think it was because people wanted to sort of take credit for what a cool and innovative structure it was, so they wanted to get it really noticed within this bank, even though at that level it really didn’t need to go up that high. So it was ostensibly approved until the very end.

I remember this was during the London Olympics, and one of the senior bank members was at the Olympics. The decision was made at the last minute, and really kind of right prior to funding, that the bank just couldn’t do it because of the headline risks of funding a company that was building a business off of foreclosed home assets. So even though this had been discussed at some length, and we could legitimately say we were part of the solution to the housing crisis, we were not the problem. What we were doing is buying homes that needed capital, renovating them, and renting them to families who were looking for affordable housing products.

But that left us in a real bind, because what we had been doing is we built this machine to keep growing and we had our full team going, we had acquisitions, renovation, and property management people all over the country in addition to our corporate staff… And we were investing, call it 30, 40, 50 million dollars a month of capital. And because we were counting on this debt to be in place, we were investing all of our equity. So we had an expectation there’d be another couple hundred million dollars of capital available to keep funding the business and keep buying. So we’re kind of accelerating toward this cliff. And then the rug got pulled out from under us, and they said, “Sorry, guys. We just can’t do it.”

So because it took so long to do, we knew that it would be impossible to put another facility in place anytime soon, and we had literally a month, perhaps two months of cash available. So we really thought we were done. We said “Okay. Now, what could we do? Can we just become a property management company? Should we sell the portfolio? What can we do?”

And it’s funny how life works… The next day after this happened, we had a meeting scheduled with another very large lender, Citibank, who came in. It was just a call, that they came in kind of a courtesy call, to kind of see how they could be helpful, blah, blah, blah. At that time, I said, “Well, I’ll tell you how you could be helpful. You could give us a 50 million dollar bridge loan in 10 days. Close that, and then do a 200 million dollar facility within 60 days. That’s how you could be helpful.” [laughs] And I was almost joking about the bridge loan, but I figured I had nothing to lose. They looked around the table and they had a lot of the senior people from the bank there, including the head of credit from the real estate side and some senior bankers… And they said, “I think we could do that.” And they did. So it was really extraordinary. In fact, I think they close that bridge loan inside of 10 days, it was probably more like seven days. Worked with us incredibly constructively.

We went from being on the brink of really having nowhere to run to then having this great relationship that we developed there. They ended up doing even a larger facility, it was a 250 million dollar facility; it was pretty innovative so they’re the first to do it. They viewed it as an opportunity to step in and help us out and in the process, put themselves in a leadership position in the sector to develop the first facility of its kind.

What an interesting learning experience there was it was beneficial to both parties. We felt like we didn’t have a lot of options, they did not take advantage of that situation. What they saw was that the situation that we were in created opportunity for them. So that was a good learning experience – when you have these crises, how can you find a group out there that might view that as an opportunity for themselves and not just an opportunity to crush you, but view that as an opportunity to be helpful and forge a long-lasting relationship, which I’ve had with those guys ever since, even through Roofstock. It was really good all around.

So definitely had to get creative there. Had we not had that meeting on the books with those guys, I would have been making a ton of phone calls and trying to set something up. But I think the reason that we were well served there is even though we didn’t need to have that meeting with Citi, because we already had another facility, we were moving forward with, the idea of constantly staying in touch with lots of people in the industry, because you never know how things can develop… An old CEO of mine had a very wise phrase that I think about quite a bit – Mike Shannon, who runs KSL Capital. or used to… He said, “A smart mouse has more than one hole to run to.” Especially when you’re running businesses that can be too reliant on any one single thing happening, having optionality is good.

So I think just being able to cultivate relationships that you never know when you’re going to need to turn that into an opportunity… I almost canceled that meeting when we were moving forward with our other facility, and like why do we need to meet with these guys? Something told me to keep it and I’m really glad that I did. It was awesome.

Theo Hicks: That’s very fascinating. So you kind of hinted at this, but was it literally the next day? This meeting.

Gary Beasley: It was literally the next day.

Theo Hicks: Okay. So you already hinted at this… So let’s say we go back in time, and you either canceled the meeting with Citigroup because you assume that this other deal is going to go through, or you ask Citigroup for the bridge loan for the facility and they either say no, or they say yes, and the same thing happens again. What would you have done in order to rectify this situation and gotten capital?

Gary Beasley: We had a couple of different options. One was to go back to our equity partner and get more equity and say, “Hey, guys. You’ve given us 250 million. Can you give us another 50 so we could continue to fund the operations? We’ll slow our buying…” And that was our best alternative, is to go back to them; they were very supportive. Not sure that they would have been able to do that, because that was the full allocation that they had approved for our investments, so I’m not sure that we could have actually gotten that done.

We could have then gone out to other pockets of equity. But the problem with that would have been just going to another equity partner, it would have been impossible to get through any sort of diligence process that quickly. So it was really going back to our equity sponsor; that would have been really our only option to continue that way.

The other option was to literally stop our buying operation. We would have had to have furloughed or let go the majority of the people in the field who are doing those activities, and sort of been like a turtle that then goes in its shell. And at that time, stop our buying, continue the property management operation, while we worked feverishly to try to raise more capital to grow the business. That would have been really difficult for us, because as you’re building these businesses, a big part of it is getting the right teams in place and the right processes. So it takes a while. We were firing on all cylinders, and if we then had to let everybody go, and then a few months later having to restart, we would have lost enormous momentum, enormous credibility. I’m not sure we ever would have gotten back to where we were.

So it could actually have just ended the growth of the company. We probably would have ended up just having that existing portfolio and managing it, and ultimately selling it, and going to do something else. It would have been arguably a good real estate trade for the equity investors, but what it turned out to be is both a good real estate trade, but also it allowed us to build real enterprise value in taking the company public. So it created a lot more value, a lot more jobs, it was just good all around. So I think we were fortunate.

But as I think back on it, a big part of my role at the time was to try to be that steady hand during that crisis. When I think back on it, it was really scary. But being terrified internally was very different than what I needed to project to the team. I didn’t know if we’re going to solve it, but I said “We’re going to solve this and we’re going to figure this out. If it’s not with Citi, we’re going to go back to GI. But we’re going to do this.” But it was very clear – when you’re in those kinds of situations, people are looking for leadership and looking for somebody who’s going to be a steady hand at that wheel. So it definitely was a good leadership lesson for me.

You don’t want to be disingenuous with people, you want to be honest but optimistic. Because I think the only way as entrepreneurs, typically, if you’re successful, is if you have to have real optimism, because there are all these hurdles that you need to overcome.

There is a good story that a good friend of mine, Aneel Bhusri, who runs Workday; he founded Workday with Dave Duffield. A very successful company. I was talking to Aneel and he said… It was very funny. I asked him, “How are you and Dave Duffield different?” He said, “Well, we are different.” He said, “If I look at a glass of water, I’ll say that’s half full. Dave will look at it and have a totally different view; he’ll look at that glass and say it’s entirely full, not half empty.” So its optimism oftentimes that drives success, I think, of entrepreneurs who can see past those what looked like impossible challenges.

Theo Hicks: That was actually my next and, I guess, final question, which was keeping your cool during this type of – you called it an existential threat to the business. So you mentioned the reasons why you needed to stay cool, but how did you actually, in practice, do this? Was it just natural? You just told yourself, “Alright, I’m going to be cool,” and it just happened? Did you have outside help? Did it take some time to get into this groove? Maybe kind of walk us through that really quickly.

Gary Beasley: It’s the first time I ever meditated. I was willing to try anything… And I still do that. I think I’ve always had, for whatever reason — when situations dictate and the pressure gets raised, it increases my focus. So I can’t say that I crave that all the time. But when it does happen, I find that things sort of slow down and I can think clearly, where I know some people get more paralyzed by it. For whatever reason, the opposite thing tends to happen to me. I don’t know why that is, but it’s been the case ever since I can remember.

I think that’s one of the reasons that I enjoy starting companies and I enjoy being an entrepreneur, because that uncertainty and those challenges, I find very rewarding. I like trying to sort those things out and I don’t mind the unpredictability of it. I think part of it is you have to be realistic with yourself, but optimistic, and just be comfortable with the downside, and do some scenario planning, and sort of say “Okay, worst case, this is what happens.” You have to kind of make sure you figure out and mitigate, to the extent you can, if you can’t solve things, “This is what I’m going to do. It’s not going to be the end of the world, we’re going to make the best of it.” So you have that plan, and then you work like hell to not have to do that. So I think you have to think through those downsides, understand the implications, and then do everything you can not to have to go there. But at least you know you have a plan.

Theo Hicks: All right, Gary. Is there anything else that you want to mention about this situation? Or where people can learn more about what you’re doing now at Roofstock before we sign off?

Gary Beasley: I guess I would just say, if people are interested in learning more about investing in real estate for their own account, check us out. You can go to our site roofstock.com. What we’ve tried to do is take a lot of the learnings that we as a collective founding group and management team had from our prior lives, working for larger organizations, and make those tools available to individual investors. So you don’t have to be a big institutional investor, you can be anyone and get access to a lot of the same data, same tools, same types of inventory, and then access to the services that you need to start investing.

So I would just suggest, as you’re looking at investment options in this environment, whether it’s through Roofstock or not, I think investing in housing – it’s a pretty interesting asset class. It performed quite well during COVID, and because of the lack of supply of housing, and I think, the increasing importance of shelter for people and housing, there’s going to be a lot of demand for single-family homes. So it’s, I think, something worth looking at as part of your investment portfolio.

Theo Hicks: Perfect, Gary. Well, I guess your catharsis is now officially over.

Gary Beasley: I feel much better.

Theo Hicks: Good. [laughter] Don’t think about it anymore. I really appreciate you going into a lot of detail on what happened, and then how you were able to get through the situation. Really, the main takeaways from this – number one thing to do, as you mentioned, is worst-case scenario planning. What you will do if the worst-case scenario happens, and then making sure you do everything you can to set yourself up so that that worst-case scenario never happened, but if it does, you’re ready. But the other one, which is obviously the bigger one, as you talked about making sure that you are constantly proactively networking with people that might not necessarily be based off of something that you immediately need right now. Don’t just network when you need something…

Gary Beasley: Yeah, pay it forward.

Theo Hicks: …because you don’t really know when you’re going to need anything.

Gary Beasley: And I would say the last thing is don’t be afraid to ask for exactly what you need.

Theo Hicks: Very good. That’s a good point. Don’t be afraid to ask for exactly what you need. Obviously, lots of other great lessons in there as well. So Gary, I really appreciate it. I really enjoyed this conversation, I learned a lot. Make sure you guys check them out, roofstock.com, and his other episode 1129. So Gary, thanks again for joining me today. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

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JF2362: Cherry-Picking the Deals with Gary Spencer-Smith

Gary’s father’s death pushed him into the real estate investment path. In 2007, he emigrated to Canada from the UK, and that’s when he got serious about doing real estate full-time.

Utilizing his electrical engineering background, Gary became an owner and a contractor of several single-family properties. Through joint venturing, he managed to create a portfolio, eventually refinancing and moving on to a different phase of his life.

Gary Spencer-Smith  Real Estate Background:

  • A full-time investor for the past 8 years
  • 20 years of investing experience
  • The portfolio consists of 24 single-family homes, 5 cabin holiday resort, 110 person restaurant, houseboat, and converted a 24,000 sqft dealership into offices, storefronts, storages, and a warehouse,
  • Based in British Columbia, Canada
  • Say hi to him at: www.revnyou.com 
  • Best Ever Book: Sapiens

Click here for more info on groundbreaker.co

Best Ever Tweet:

“I looked at what real estate could do for my life, and that was like a switch.” – Gary Spencer Smith.


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Gary Spencer Smith. Gary, how are you doing today?

Gary Spencer Smith: I’m doing fantastic. Thank you very much for having me on. I appreciate your time and effort to put this together for everybody.

Theo Hicks: Thank you so much. I appreciate you taking the time to speak with me today. I’m looking forward to our conversation. Before we get to that conversation though, a little bit about Gary… He is a full-time real estate investor for the past eight years and has 20 years of investing experience in total. His portfolio consists of 24 single-family homes, a five-cabin holiday resort, a 110-person restaurant, a houseboat, and a converted 24,000 square foot dealership, converting that into offices, storefronts, storage, and a warehouse. He is based in British Columbia, Canada. You can say hi to him at his website, which is revnyou.com. So Gary, do you mind telling us some more about your background and what you’re focused on today?

Gary Spencer Smith: Sure. I guess people will hear the accent and think that doesn’t sound Canadian… So I was born in the UK. I grew up normal. I say normal upbringing – normal in these days, with divorced parents; single mom… Didn’t have that silver spoon start that a lot of people have. I got to 18, thought I don’t know what I want to do. Ended up going into the military, served 11 years in the Royal Navy, served in the Afghanistan conflict, Iraq conflict, Bosnia… I got to go to over 100 countries in the world. That gave me a real perspective on, I guess, life in general.

My father passed away when I was 21, which enabled me, but it kind of started me on the real estate path ahead of the curve then. I managed to purchase a house. I did 11 years in the Navy, got injured while I was in service, and in 2005 I was pensioned out of the military. In 2007, I immigrated over to Canada. A couple of years after that was when I really started investing seriously, following a plan, and had a goal in mind when I was doing it. So that’s kind of my life in a nutshell.

Fast-forward to now, I’m a full-time investor, and I guess all my income is generated around my real estate businesses. I kind of get to live the life that I planned when I was 16 years old. So I’m pretty lucky and grateful for where I’ve got to, and the challenges I’ve had along the way, and the lessons they’ve taught me.

Theo Hicks: So when you first started to invest – you kind of went over your portfolio – what was your original focus?

Gary Spencer Smith: I’ll take a quick jump back. My first investing [unintelligible [00:05:52].13] impressionable age, maybe I was 18 or 19. He said, “Oh, such and such has rentals, and he gets X amount of dollars per month.” And something just triggered in my head.

When I had my house, the first house I purchased after my father passed away, and my wife at the time, I was like, “Let’s just rent this out when we move” and she said “I don’t want to deal with rentals. Rentals are a headache. You’ve got to deal with tenants,” that story that people say. I listened to it and I didn’t do that.

Then when I left the military, I had a house down the South Coast of England, and I’m like, “You know what? I’m keeping this and I’m renting it out.” It was purely a mathematical choice. It was just, I figured out where I’m moving to and renting, and what I would get for rent there, and I was like 200 bucks a month better off. There was no plan around it. Subconsciously, I wanted to have about three houses over my working career. Retire at 60, I would have my military pension and three houses. That was kind of my goal. I don’t know where that came from or how that was planted in me.

Then I emigrated to Canada. I bought a single-family townhome, and that was for my kid’s college. That was the idea behind it. My kids end up not going to college, and we can get into that a bit deeper if we want. But I guess I was looking for a way to create income within houses. I didn’t want to do the job I was doing when I emigrated. I just used that to get to Canada, which was a life goal. Then I’m like, “I don’t want to do this till I’m 60.” So I kind of looked at real estate investing and how I could generate revenue.

We started doing single-family homes and from those single-family homes, we would actually go in, act as the general contractor… Now, a little caveat to that, I do have some skills. I’m a qualified electrical engineer, so I have an ability (I’m a certified electrician) that I brought to the table, so I utilized those. I didn’t have money so I started joint venturing really early on. Through joint venturing, that’s where I managed to create a portfolio. We were doing like two to three single-family homes, buying them, [unintelligible [00:07:50].11] in them, and then refinancing and moving on to the next. The BRRRR type strategy; it wasn’t exactly that, but it was a variation of that.  That’s what got me to a point where I’m like, “Okay, I guess I’m full-time at this.”

Then in the last few years, again, you look at life, you get to each stage, and you get to each goal that you achieve. I was kind of like, rather than going out and looking for real estate, I looked at what I want real estate to do for my life. That was like a switch, and that’s how we ended up buying the resort that’s on the lake. Even though it’s a business, it was a real estate purchase, because the assets themselves, the land assets, the property assets are worth the same price as the business we were buying, effectively.

Now my focus looking forward is just to keep growing properties. But I have a different strategy. I’m not involved in the day-to-day real estate as much as just looking at the bigger picture stuff, and I guess cherry-picking the deals.

Theo Hicks: Thank you for sharing that. So after the single-family homes, the next non-single family home purchase was the holiday resort?

Gary Spencer Smith: No, it would have been the dealership. It was an old Ford dealership from the 50’s, so it had the car mechanic shop, the body shop, the paint shop, the warehouse, the showroom. The lady who owned that building… I was actually at a funeral and we’re sitting at the table, and I’m from a smallish town, people know everyone in it, 25,000 people in the town… And she said, “Oh, would you look at my property? I’ve been trying to sell it.” I was like, “Sure I’ll look at it.” Honestly, I was being polite. I was going to look at it, but I had no intention of buying it. I’m walking through the property and I’m just looking at the space going, “Well, this is a space that would rent individually. This is a space that would rent individually. I could put a mini storage here, here, and here.” So I’m just doing the math in my head is a walk around… And then we walked into this huge warehouse, like 3,000 square foot, 35-foot ceilings, and I was just like, “Wow.” I was blown away.

This building was made from all first-growth fir wood, so even if you knocked the building down, you could probably sell the wood and get back the money that we were paying for the building. And I was like, “Well, this makes sense.” So then I made a few phone calls to some investor friends I have, we each put in $100,000 and bought it for 500,000. So that was the next one after single-family homes.

Actually, when you deal with single-family homes, there’s a certain lifestyle that comes around that. Especially if you’re managing it, which we weren’t. We had a property management company, which looked after that, plus another 50 doors. The commercial real estate was just so much better. It seemed to be for me, for what I wanted to do for it to get some time back. The tenants are great, they’re all professional people in all the different spaces. We’ve got plumbers, electricians, roofers, they’ll rent different spaces within the building…

And the holiday resort, that came about a year after purchasing the commercial space. It was actually the local pub and restaurant on the lake where I was living anyway. It’s a houseboat marina, there are 12 houseboats that go out, there’s a marina… We knew the owner, we knew he wanted out, so we had a conversation, we looked at the books, and it made sense. It was like a switch, it’s like, “Okay.” Because we lived on the lake, but I didn’t enjoy the lake, because I was always doing something else, albeit real estate related… And I love what I do, by the way, don’t get me wrong. I’m not complaining about anything I’ve done. But this gives me the chance to actually live and work in the location that I want to spend my life.

I was like, “Wow, this is just a slam dunk. So why would we not do this?” So we got creative, we raised some capital privately, we had some joint venture partners, we got a vendor takeback on the mortgage, you name it, the strategies were involved in the purchase of that property. So it wasn’t very straightforward, but it was everything I’d learned from the single-family homes, that skillset that I could transfer to enable us to buy that business.

Theo Hicks: Going back to the old Ford dealership… It sounds like a lot of work. How did you know that “Oh, this would be good for stores. Oh, I could put offices here. Oh, storefronts. Oh, the wood.” You saw the wood. How did you know all that?

Gary Spencer Smith: I seen her outside, she was having a smoke outside and I was driving past, and I remember thinking in my head, “Oh, I said I will go look. So I should.” Because that’s what I said I do. So I just did a U-turn and went back, and it looks like three little single-story storefronts from the road that you drive past every day. So I thought it [unintelligible [00:11:52].14] in a strip mall, it looked like that.

Then I go inside and I’m looking, and they’re each individually located. So where the garage used to be where they’d repair the cars, that had its own unit; it had three big garages, its own office, its own washroom. Then the showroom had its own office, its own area… Then there was a middle room that I guess would have been management, like the middle building, and the same thing, had its own office, all broken down already. Then she showed me the outside space; it was under the deck that was the body shop, and I’m like, “Wow, this could fit six vehicles in here, at least. Or someone could use this space.” It’s actually a fabric company that’s in there now. But it’s a good usable space, and had its own office. So everything was already compartmentalized.

But what she’d been doing was using the main showroom for herself, just for her little sewing business, and then she’d been renting the warehouse out to fisheries. That’s all she has done with the building. Everything else, she was like “Oh, I’ve got some stuff in there. I’ve got a friend that’s got some stuff.” Then she showed me the middle floor of this building [unintelligible [00:12:55].04] side on side, butted up against each other. I know it’s fair, you can tell, and the time it was built… ANd I was just looking at it going “You could park a tank on this roof.”

So then we got the drawings to the building and I’m like, “Wow, the amount of material that is in this to create the strength, what they used at the time – there is huge value in that.” So I was, “Well, it makes sense.” I did the math and the building itself [unintelligible [00:13:16].25] six and a half, but I think you’d be running between 10 and $12,000 based on market rents. For $500,000, that 1% rule, it absolutely crushes that. So I was like, “Well, why would we not do this?” So we moved our personal offices into this and we set up our studio for doing our YouTube channel stuff, and then we rented the rest of the space out in the building to cover costs and make a profit. I wish I could say it was an open space and I designed the idea, but it was already set up.

Theo Hicks: Okay. So you bought it for 500k… How much did you put into it to get it ready to go?

Gary Spencer Smith: $200,000.

Theo Hicks: 200K. Okay. Who did the work? Was it just your contractors you had met through the single-family business, or did you need to find someone new? How did you find the people that did that work?

Gary Spencer Smith: I’ve got a pretty good team from doing the single-family homes. We got to where we were doing three or four properties a year, plus all the odd jobs that come with managing 50 to 60 units. So I’ve got my backup plumber, electrician, backup electrician, framer, drywall – all those people were in place. We did do some of it ourselves, Chris and my business partner, when it came to our office space. And when we were looking through the building, the old big glass sliding doors that they would have had on the showroom, they were actually downstairs in the storage. So we just framed up a two by six wall and put the big glass sliding doors in, and that’s our office. It’s through all these big sliding doors at the back of the showroom, so we have our own sectioned-off space. That’s the only thing we did ourselves, was set that up. But for the most part, it was pretty much set up ready to go. A couple of partition walls, and an upgrade on the hydro, and some new lights and escape lights for the separate spaces. That was it. It doesn’t sound like a lot, but that 200l – $70,000 of that was a new roof. It’s a huge space, and we did this silicone roof on it. It’s got a 50-year warranty. So that was a huge chunk of the money was that. And then hydro was probably about $30,000. So 100k just on those two things, and the rest $100,000 was pretty quick, once you do in flooring, and trim, and a little bit of work.

Theo Hicks: Got it. Very fascinating stuff. Alright, Gary, what is your best real estate investing advice ever?

Gary Spencer Smith: Actually, take steps and do it. Don’t sit and wait. Get some knowledge, which is free. You’ve got awesome podcasts like this that you can listen to. You don’t have to pay tens of thousands of dollars for the knowledge. Get the knowledge that you can for free, pay a little bit of money to get some more refined knowledge, and then go take action. That’s it. Action will teach you more than any mentor or coach.

The second tip would be to find a good mentor. You don’t have to pay for that. That would be someone that’s done it, successful, who is willing to let you take them for dinner, take them for a coffee, bounce some ideas. If you can get a good mentor, you’re going to jump leaps and bounds ahead of everything else, and listen to what they say.

Theo Hicks: Alright, Gary. Are you ready for the Best Ever lightning round?

Gary Spencer Smith: Okay, let’s go.

Theo Hicks: Alrighty. First, a quick word from our sponsor.

Break: [00:16:04][00:16:44]

Theo Hicks: Okay, Gary, what is the Best Ever book you’ve recently read?

Gary Spencer Smith: I so wanted to plug my own book right there, [unintelligible [00:16:51].05] which is about human evolution. I actually use that when I’m discussing with my JV partners, just about how we think; it’s a mindset. Because real estate managing, buying, it’s all about the mindset. I’ve actually used part of that book where he talked about human evolution to help people understand about where we’ve got to and why we do the things we do. People are like “Wow, that’s so good.” We didn’t even talk about real estate, but they became a joint venture partner through discussing that book Sapiens.

So it’s crazy – not a real estate book, but I think one of the best books is written by Julie Broad, called More Than Cash Flow. That book is fantastic. Because I think anybody who goes on their real estate journey, that is pretty much the journey that most people will go through. You read the books, you sign up for the courses, you pay some money, you make some mistakes, you keep going, you achieve success.

Theo Hicks: And that first book you said, I think I might have missed that. What was the first book?

Gary Spencer Smith: Sapiens.

Theo Hicks: Okay, Sapiens.

Gary Spencer Smith: By Harari. It’s actually about humanity and the evolution of us as a species. But I actually used parts of that book when I was discussing mindset with people who were looking to be joint venture partners. That conversation they even said to me, was a turning point for them, understanding their own belief systems.

Theo Hicks: Nice. If your business were to collapse today, what would you do next?

Gary Spencer Smith: You know what? To start with, I’d go get a job at McDonald’s, so I’ve got some money, and I can have a roof over my head and have some food. Somebody said to me once, if you lost everything, what would you do? Not that there’s anything wrong with working in McDonald’s, but I’m willing to go do anything to put a roof over my head and put food in my mouth, and for my family. So if I’m willing to do that, why would you not take the risks to go try something better, and even big? So I would go get a job first, then I would start looking for new joint venture partners, and I would move the business on and start again; you just keep going. If it fails, you start again and keep going. It’s like picking yourself up from walking, right? Like what would you do if you fell over? You pick up and you keep going.

Theo Hicks: What is the Best Ever deal you’ve done?

Gary Spencer Smith: It was probably my first joint venture. That was the house I bought when I came to Canada. I bought it individually. I put $6,000 down, then joint-ventured with my cousin a year later; he gave me $20,000. There’s a whole story behind this, but he gave me $20,000. He didn’t have to qualify, I managed the property. But I use that money to take my family for a trip back to the UK and have three and a half weeks over Christmas. And that one transaction made me look and go “Wow, I put $6,000 in, I got $20,000 back a year later, and I still own half the property. That’s a 333% ROI.” I didn’t really understand ROI, but this opened my eyes to the real percentages you can make using real estate, using joint ventures, and that was it.

I just said myself “How do I do that more?” And that was that one there, my first property in Canada, because that opened my eyes to ROI and huge returns, and it ignited the fire.

Theo Hicks: What is the Best Ever way you like to give back?

Gary Spencer Smith: I had a leadership company — well, I still have a leadership company that we do from time to time, and I work with a lot of youth at risk. So I help the youth at risk develop their leadership skills, just so they can do simple things like go get a job, go find a place to rent. A lot of them I’ll talk about getting their first place to rent, and how they should show up, and how they should answer people, communicate with people, shake their hands.

So I like working with the youth at risk, those 15 to 19-year-olds that are on the verge of going one way or the other. Hopefully, if you can give a tiny bit of guidance to even one person like that, you have no idea how far that ripple can go, where it can change someone’s life. I know that was done to me at an early age, and that’s why I like doing it.

Theo Hicks: And then lastly, what is the Best Ever place to reach you?

Gary Spencer Smith: I think if people email us at info@revnyou.com, or connect with us on Facebook, it’d probably be best.

Theo Hicks: You said you have a YouTube channel, right?

Gary Spencer Smith: We do, yes. Same as well – Revnyou With Real Estate. I think we’re about 7,700 subscribers right now.

Theo Hicks: Nice, good stuff. Well, thanks, Gary, for joining me today and going over your background and your journey to how you got to where you are today from in the UK, in the military, to moving to Canada and becoming a full-time real estate investor.

We talked about how you got started in single-family homes through JVs, as well as doing some of the rehabs yourself as a GC, as well as eventually the management company, which made you realize that commercial real estate was a better play for you. So you did the old Ford dealership, which you found at a funeral, of all places. And you talked about how much it cost, how you analyzed the deal when you’re walking through it.

And then after that was the holiday resort, which again, you walked us through how you got that deal as well, and how that made you start to think about how to use real estate to get what you want out of life. I thought that that was solid advice.

And then your Best Ever advice was to really just take action. Don’t sit and wait. Get some knowledge that you can now get for free pretty easily online. The different websites, and YouTube channels, and blog posts, and podcasts. If you need to, maybe pay a little bit of money to get some more refined knowledge, and then start taking action… Because that action will teach you more than any mentor or coach will teach you. But you still also said that it makes sense to get a mentor, but you don’t necessarily have to pay a lot of money. Just find someone who’s done what you are trying to do, and then the goal would be to take them out for dinner or coffee to pick their brain and get some advice on how to end up where they’re at.

So thanks again, Gary, for taking the time out of your day to speak with us today. Best Ever listeners, as always, thank you for listening. Have a Best Ever day, and we’ll talk to you tomorrow.

Gary Spencer Smith: Thank you very much, Theo. Have a great day, and it’s been a pleasure. Thank you very much.

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JF2359: Capturing Hot Leads on Facebook with Gustavo Munoz Castro

In 2008, Gustavo’s wife got her real estate license. Seeing how well she was doing, Gustavo followed her in 2010. He was doing the real estate hustle part-time as he was still working as a Microsoft Senior Engineer. 

In 2013, he went full time, and in 2015 he transitioned into inside sales. Now his agents utilize Facebook to get motivated leads, making over 50k outbound calls every day.

Gustavo Munoz Castro  Real Estate Background:

  • Former Microsoft Senior Engineer turned Real Estate agent turned inside sales guru
  • Runs one of the largest inside sales teams for real estate in North America, 65 agents making 50k outbound dials a day
  • His Agent set 100 appointments with buyers and sellers every day, mostly from Facebook leads
  • 10 years of real estate experience
  • Based in Mexico and working in the US and Canada
  • Say hi to him at: www.powerisa.com 
  • Best Ever Book: High Output Management 

 

Click here for more info on groundbreaker.co

 

Best Ever Tweet:

“The magic of Facebook is that it can be used for both scenarios, the motivated buyer and the motivated seller.” – Gustavo Munoz Castro


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Gustavo Munoz Castro. Gustavo, how are you doing today?

Gustavo Munoz Castro: Hey. Doing great, Theo. Nice to be here.

Theo Hicks: Well, thank you for joining me, looking forward to our conversation. A little bit about Gustavo. He is a former Microsoft senior engineer turned real estate agent, turned inside sales guru. And he runs one of the largest inside sales teams for real estate in North America, with 65 agents making 50,000 outbound dials every day. His agents set 100 appointments with buyers and sellers every day, mostly from Facebook leads. He has 10 years of real estate experience, and the company is based in Mexico. Gustavo works in the US and Canada as well. The website is powerisa.com. So Gustavo, do you mind telling us some more about your background and what you’re focused on today?

Gustavo Munoz Castro: Yeah, definitely. Thanks for that, Theo. I’m originally from Mexico. I came to the US in 2004, full-time to live. I got recruited out of Mexico by Microsoft. So I was an engineer, I graduated, Microsoft came… And I grew up on the border with the US, so I’ve always been exposed to US culture. My whole family is from that area, Southern California, and Northern Baja. And all my cousins would always make fun of anyone that spoke English with an accent, so I quickly kind of picked up that Southern California English accent. So that’s kind of where I’m from.

Then I moved up to Seattle for work, and my wife went with me shortly thereafter. And she’s actually the one that kind of got bit by the bug for real estate. She got licensed in 2008 as the whole world was ending, and I got licensed in 2010 because she was just killing it on her own. I helped her out… And I would help her nights and weekends. And then in 2013, I went full-time in real estate. I said, “Hey, you know what? High tech software can kind of wait. I’m interested to see what I can do here.” The market was really picking up in that area back then. It was a big, big, big upswing, and it’s still going on right now, to be honest with you, in every sense of the word. And I transitioned to an inside sales company.

We started with a real estate team, did great there. I transitioned to real estate inside sales in 2015. I started this company, Power ISA, and it’s been a lot of fun. Right now we have a pretty large team. Actually, today we have 77 ISAs in our team, servicing hundreds of clients in the US and Canada. And our focus has really really shifted the last couple of years more and more towards Facebook. Facebook has become a huge opportunity for real estate investors, real estate agents, loan officers, anyone looking to get folks’ attention, get motivated buyers, motivated sellers. And that’s been a big, big part of what we do nowadays. So that’s my biggest focus right now – understanding Facebook. Facebook is a beast. So a lot of stuff from big, big systems, big platforms. Understanding what it’s for, how to get the most out of it, and help our clients be successful with it.

Theo Hicks: Awesome. Well, let’s pick up right there then. Let’s talk about using Facebook to get leads. And I guess my first question would be, before we dive into details – is it a one size fits all strategy? Like, everyone can just use the same process or template? …whether as you mentioned their an agent, or an investor, or a mortgage broker? Or is it something that’s more specific to each of the different kinds of real estate niches?

Gustavo Munoz Castro: That’s a really good question. I’d say it depends on what you’re looking for. If you’re looking for a motivated buyer, whether you’re a mortgage broker, or a real estate agent, folks that are looking for buyers, they do use — I don’t want to say it’s a template, but they use the same approach. They want to show people properties, they want to show people a list of homes.

Buyers want homes. And especially in markets with really tight inventory, if you can demonstrate to the consumer you have access to properties, they’re going to call you. Like, “Hey, man. Give me the goods. What do you got? What do you know that I don’t know?” That kind of thing.

When you’re talking about investors, it’s a very unique and totally different approach. Because you’re not looking for the buyers, you’re not advertising properties. You’re looking for a seller, and you’re looking for a really specific kind of seller – the motivated seller, someone that might be interested, ready to go and make a deal, because they need money fast. They have a high motivation, they need to relocate, they’re going through some kind of life event, where cash now matters more than putting a bunch of money into fixing up a property and getting the highest and best offer for it. So you’re looking for a really, really specific client. But the magic of Facebook is that it can be useful for both scenarios, the motivated buyer and the moment.

Theo Hicks: So let’s dive into details on both of those. So let’s start with motivated buyers, because that sounds, like you said, it’s more of a template, in a sense. So you said that the goal is to demonstrate that you have access to properties. So how exactly am I doing this?

Gustavo Munoz Castro: To put people in the context of Facebook — everybody uses Facebook, I just want to put you in that mindset. You’re on Facebook, you’re browsing that newsfeed, you’re scrolling down probably on your phone, and you’re looking at pictures of your family members, your friends, some kind of event, the news, all these things. And you’ve got a couple of seconds to get people’s attention as they scroll.

So the number one thing is images. It’s a very visual platform. That will get someone to stop, give you a few seconds of attention, and they might read your headline. So the number one thing you want to do if you’re trying to advertise access to properties is to show people great pictures of homes. A lot of realtors use single property listings, like a great look in front of a home. Everyone else uses some kind of grid to show multiple pictures of homes. The inside of a home the outside of the home, something that looks beautiful, looks attractive, and something that they want. And in that title, again, you’ve got only a couple of seconds to get people’s attention. You want to have a really, really obvious call to action. “Hey, South End homeowners, access to a property list of 200,000 and below. Right here. Click For more information.” Something like that.

If you’re looking for a retail buyer, you’ve got to tell them, “Hey, I’ve got the best and most awesome home, at the best price. Check out this information.” It’s really similar even if it’s a single property ad, where like “Hey, this is a beautiful property. Just went on the market. Call us for a showing immediately.” Because a lot of these markets have super low inventory, so “Hey, immediate showing.” Boom. Show that. So you’re trying to get their attention with a very attractive photograph and just some simple copy that says,  “Hey, homebuyers in this area, I’ve got a great property for you to jump on.” Or “I have a list of properties for you to jump on.” If you don’t have any specific property, that’s fine. Get a list of properties that you can offer to them with whatever characteristic is awesome.

What works really, really well in a lot of these markets is offering a list of homes under the median home price. And sometimes it works a little bit under, a little bit more, a little bit above… Again, something you’ve got to test out in every market, but it’s kind of the formula people use to get people’s attention on the buyer side.

Theo Hicks: And then, I know there’s different types of ads on Facebook… What’s the type of ad? Pay per click, and a couple of other ones. What’s the type of ad, filters, which filter should I use…? Things like that.

Gustavo Munoz Castro: Yeah. Really good question. And this is getting us into the next level of detail, for sure. Especially when you’re starting out, you want to get a campaign that’s optimized for lead conversions. Because you want leads. That’s essentially what you want. There are other campaigns you can use, but to keep it simple, this is what the majority even of the professional marketers use. They’re optimizing for conversions. And within that ad, you want someone to fill out their information, or at least Facebook grabs their information immediately, and you want to generate a lead [unintelligible [00:10:31].17]. And I would keep it very simple. I would do a single image ad, just a single image. You don’t have to do a carousel, you don’t have to do dynamic ads; there are so many things that Facebook allows you to do. But the funny thing is the people that have the most success, actually, focus more on the pictures and the copy than the actual technology behind the ad. They keep it very simple; great looking property, sexy offer, clickable headline, really interesting reasons for people to click, and you’re going to generate those clicks.

Theo Hicks: So a lead form ad… So are you able to capture their info once they click on it? Or are they typing in their information once they click that link?

Gustavo Munoz Castro: So Facebook, now, when you click on an ad, you don’t have to fill out the information anymore. Facebook will automatically send it to you. Unless you put additional questions in there, like a questionnaire… You can add custom questions in these lead form ads. You can do it, but at its most basic level, they click on More Information and their information on that gets sent. They just have to acknowledge, “Okay, send it to this advertiser.” And we’re done.

You could put a message on there, “Hey, thanks for sending us the information”, so on and so forth, but at its most basic level, it’s very, very simple. You can make it very easy for a lead to just immediately send you their information, with the expectation that the lead has, that you’re going to give them what they want as well in the backend.

Theo Hicks: Got it. And then when it comes to the filters targeting people, how do I know who to target?

Gustavo Munoz Castro: Great question. So for real estate within Facebook [unintelligible [00:11:55].19] 18 months ago, in the US, this changed. You used to be able to do a lot of targeting. You could do targeting down to the zip code, down to the neighborhood, you could target demographics, all kinds of stuff. The downside of that was that according to the US government, you could actually do stuff, maybe unwittingly, that is illegal. You can actually exclude certain people that it’s illegal to exclude for housing. So the government came down on Facebook. Facebook changed its policy and took away a lot of the demographic, a lot of the income targeting, a lot of the geographic targeting. Now every single Facebook ad goes under something called a special ads category, so you have to kind of be compliant with that. And it takes away a lot of that detailed targeting.

However, people predicted this is going to be the end of real estate on Facebook. It’s gotten bigger after this measure came down, because one of the things it does well is… Remember that ad title I told you about? You have to have an ad title that’s clickable, that’s awesome. Below the ad title, you can put a bunch of text. And it doesn’t really matter whether the person interested reads the text or not, the algorithm reads the text. So in that ad copy, you want to be as clear and as concise as possible with what you’re advertising. You’ve got access to this property in this neighborhood, you’ve got lists of homes in this specific part of town… So that you give the algorithm as many hints as possible as to how to serve that ad.

And last but not least, and this is a really big nugget for folks that are interested in this… If you set up something called Facebook pixel, if you set that up, you can actually help Facebook understand who is the best lead you want. Whether it’s at the thank you page, or some kind of place you want to send people to, that tells Facebook, “Hey, if someone made it all the way here…” It’s a piece of code you put on a website. “If someone made it to that piece of code, then that’s the people I really want, Facebook. This is the people I’m most interested in.” And you’re teaching the algorithm, “Oh, I see. You want soccer moms that make 100 grand.” Again, you’re not explicitly saying that. You’re saying, “Hey, send me people that actually are interested in clicking on these ads.” And Facebook is really, really good at adapting to people that click on the ad. It will show it to more of them. And that is compliant. If you’re not explicitly excluding everyone, then you’re okay.

Theo Hicks: Okay, interesting. I’ve heard of that Facebook pixel concept before, so thanks for sharing that. So let’s move on to the motivated seller. So what are some of the differences between using Facebook to attract buyers and using Facebook to find sellers?

Gustavo Munoz Castro: It’s a different approach, because the easiest kind of lead to generate on Facebook, and actually online, are buyer leads. It’s the easiest, the lowest cost, the fastest. If I turn an ad on for a buyer lead ad, I can get leads in a couple of hours. Boom. I’ll have a lead pop in. It’s very simple.

The seller ads are more challenging. Sellers in general are a little bit harder, because you have to offer them something of value and it’s not as immediate as, “Hey, click on this link to find homes.” It’s like, “Hey, here’s something I think you need. Get it from me.” And if it’s a retail seller, it can be like a free home valuation, it can be a guide on selling your home… But again, those aren’t super burning needs, if you know what I mean. It’s not like an immediate “Oh, I want that, give me the goods.” Well, not necessarily. Those leads tend to be less motivated, they’re harder to convert, and just a little bit more of a difficult lead to generate.

The motivated seller lead, as opposed to the retail seller lead, they can have a burning need. It’s a little different. They can actually have a personal situation, relocation, job loss, all these things happening, and you want your ad to speak to that. You want your ad to say, “Hey, if you’re going under a difficult circumstance, we have options for you. We can help you; if you need cash fast, we can help you move that property if you have any property you want to sell. We can get you cash within seven days, etc.” And the picture you want to put on an ad like that is not of a beautiful home. This is totally the opposite of. You’re telling, “Hey, we buy properties as-is. No questions asked. Boom, whatever that is.” The tricky part, particularly with the motivated seller ads, is compliance. It’s the hardest. Well, I’d say that one, or maybe the lender ads, are the hardest to get past compliance, because you have to provide a delicate balance. You have to tell people that you’re there to help them in case they’re going through any one of these situations, without wording it in a way that tells the consumer that you know that they’re going through that situation.

For example, you can’t say “I know you’re going through a divorce. So here is a way you can sell your property so you can get out from under that woman. That is too direct. Facebook will not allow that. You cannot freak people out, saying “How do you know I’m getting divorced? Holy cow.” Facebook knows this, by the way; they have really good information on what we do, our activities. But it will not let you use it that way. So you have to word it carefully. It’s possible to get these ads through compliance. It’s always hardest the first time. You give it a few tries, you take their feedback, and you make the changes, and you can get it through. But the crux of it is, you want to give people a solution to any one of these really, really serious life events they could be going through. And it might be a positive one like a job relocation.

Right now – we’re recording this at the end of 2020 – people will relocate for a job. There’s a lot of unemployment, people are definitely moving around, there’s a lot of people that are in need, a lot of things going on at this moment. So yes, there’s definitely some interest there, and you’re going to get some clicks on that. But it has to be worded carefully, it has to be worded correctly… And talk about the options. Don’t focus too much on what that person is going through. Try and call out the different situations, and say, “Hey, I’m here to help. I can help folks in these situations. I can help them by giving them these options.”

Theo Hicks: Give an example of what would be compliant.

Gustavo Munoz Castro: Facebook compliance is a finicky thing. I’ve seen this work — and unfortunately, I can’t guarantee it’s going to work in every single instance, but one thing I’ve seen work is the “We buy ugly houses” kind of theme. You can’t use that because that’s trademarked, but “We buy homes in as-is condition. If you need to sell a home fast, give us a call and we can help out.” And that one kind of avoids a lot of the “Hey, I know you’re going to this and you’re going to that.”

Another one that I’ve seen work well is “We help folks that are going through different kinds of situations and different life events. For example…”, and like a bulleted list of the different situations. Again, you’re not being very direct. It’s happening to them. You’re not talking to them. You’re not speaking to them. If the ad speaks too directly to the consumer, they’re going to flag it. And it doesn’t matter if it’s financial stuff, or distress, or even medical advertising, e-commerce. If you’re being too weird with the targeting, they will not allow that ad.

So they want to keep it as general as possible to not freak people out, which I think is a really positive thing, honestly. Because we all know how powerful the targeting is on Facebook, but we don’t want it to get too strange. But I would go with those kinds of ads. Go with a generic offer. And if that’s not getting the results you want, try bulleted lists where you try to not identify the one situation in particular.

Theo Hicks: Are you this? Are you this? Are you this? And they click on one, whoever you want to target. That’s like the pixel. But anyways, super-fascinating. So based off of your experience with Facebook and advertising, finding buyers, finding sellers, what is your best real estate investing advice ever?

Gustavo Munoz Castro: Well, I’m an investor myself, so I kind of see this in a couple of different ways. As an investor, the best advice I’ve ever gotten from other investors is to be patient. The worst enemy when you’re looking for deals, when you’re negotiating, when you’re making an offer, when you’re remodeling and flipping, is to lose patience. And sometimes you just have to calm down, don’t get overeager. The money’s burning a hole in my pocket. That’s usually when you make bad decisions.

The same thing with Facebook advertising – do not expect this to work within the same day. You’ve got to test it out, you’ve got to find the right copy that works, you’ve got to find the right area that responds the best to your ads… So patience, patience, patience, because the best methods and the best results usually come from a little bit of work. It’s not like a slam dunk right away. It takes a little bit of work, it takes a little bit of tweaking. I’m not talking about months and months of work. I’m just saying have a little bit of patience, give a little bit of time, and it’s usually worth the effort.

Theo Hicks: Okay, Gustavo, are you ready for the Best Ever lightning round?

Gustavo Munoz Castro: Go for it.

Theo Hicks: Perfect. But first, a quick word from our sponsor.

Break: [00:20:03][00:20:51]

Theo Hicks: Okay, Gustavo. What is the Best Ever book you’ve recently read?

Gustavo Munoz Castro: I’m actually reading a book with my team right now. It’s called High Output Management. And it’s blown me away. It’s not necessarily an investing book or a real estate book. It’s just a general team building and management book. It’s really famous in Silicon Valley, in those circles. We got it as a team, read it as a team. Absolutely loved it. Very easy to understand. It really simplifies a lot of the management jargon and systems, and I really appreciated it. That’s a great book for teams.

Theo Hicks: If your business were to collapse today, what would you do next?

Gustavo Munoz Castro: So no doubt on this one, I would become a teacher. Because that’s the part of my job that I enjoy the most, the teaching aspect of it. And even talking to folks like yourself, being on a podcast, I love talking about the stuff that I’ve learned. I love transmitting knowledge, teaching other folks. So if I would no longer [unintelligible [00:21:42].23] tomorrow, boom, everything went away, I’d go and become a teacher.

Theo Hicks: What is the Best Ever deal you’ve done?

Gustavo Munoz Castro: My Best Ever deal I’ve done is actually a property in South Seattle. This is back in 2010. It was a mess of a property. They couldn’t get it sold, the short sale fell through multiple times, and it just fell in my lap. And I again, nobody wanted it, and I’m like, “I think I see potential in this thing.” It was my first investment property. I think I see some potential to make this happen. And like, “No, that’s the worst thing ever. What are you going to do? That’ll never work.” And it’s become the highest cash-flowing rental. I’ve doubled up on the equity on it since 2010. Obviously, it’s been a great run. So the best, best, best deal I ever got was just something that just literally fell into my lap because another investor passed on it.

Theo Hicks: What is the Best Ever way you like to give back?

Gustavo Munoz Castro: Teaching. I always come from contribution.  I think that’s the best way to go about things. I believe in karma. So going out there, sharing knowledge, trying to make people better, helping them out, I think is the best way to grow a business, to just be fulfilled. So that’s a big, big piece of what I do.

Theo Hicks: And then lastly, what is the Best Ever place to reach you?

Gustavo Munoz Castro:  That would be my website, powerisa.com. And a close second would be just Facebook. Actually, if you search for my company Power ISA, I’ll pop up on Facebook. I have a free Facebook group you can join. There’s a lot of ways to kind of reach me on Facebook, and I’d love to continue the conversation if folks have any questions.

Theo Hicks: Perfect, Gustavo. Thanks for joining us today and giving us some of your inside tips on how to use Facebook to generate either buyers and/or seller leads. We went to a lot of detail about each, and for motivated buyers it’s a little bit easier, cheaper, faster, and that the focus here is having a really nice one picture, because you want to gain their attention pretty quickly while they’re scrolling through. And then making the call to action and the title very obvious. You gave us some examples of that, and how to, again, use the lead form ad and a single image to optimize conversions.

Then you mentioned the change in targeting. They took away a lot of the hyper-targeting abilities, but you can kind of get around that by the text that you use, being very specific and clear about the opportunity and the text, like whatever the part of the town it’s in. And then you can also use the Facebook pixel to say that once people have gotten to this point, I want more of these people.

And then the other one would be the sellers, which is a little bit more difficult. You need to offer something of value. It’s even more difficult for retail, whereas for motivated sellers, they already have a burning need, so the ad needs to speak to that need, but it can’t be direct. You have us lots of examples of how to again create an ad that is compliant in order to get those leads and get past Facebook compliance.

And then lastly, your Best Ever advice, which is about patience. Now the worst enemy is going to be when you are impatient, when you’re eager, and that’s when you start making bad decisions. So similarly, when you’re approaching advertising on Facebook, be patient. It’s not going to work in an hour. It’s going to take some testing, some tweaking to find out what works best. So be patient and the results will come. It’s going to take some effort. It’s not just going to be, push a few buttons and you’re good to go.

So again, thank you so much for sharing your insights. I really appreciate it. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

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JF2358: Reaching a Passive Income Goal With Brian Briscoe

Brian’s first experience with real estate started when he purchased his first house after reading Kiyosaki’s “Rich Dad, Poor Dad”. As an active duty Marine, Brian was relocated every couple of years. Every time he moved, he added a new single-family home to his portfolio. 

In 2016, he did the math and found out that he was nowhere close to his passive income goal. Looking for ways to scale, he jumped into multifamily units and formed a real estate investment firm with three partners. With his latest acquisition being a 167-unit property, he’s finally approaching his income goal and getting ready to retire from the Marine Corps.

Brian Briscoe Real Estate Background:

  • Active duty US Marine assigned to the Pentagon and co-founder of Four Oaks Capital, a multifamily investing firm
  • Host of a new podcast called “Diary of an Apartment Investor”
  • In 2007 he started in real estate with a single-family home, & in 2018 he jumped into multifamily 
  • His current portfolio consists of 5 apartment complexes; 250 units
  • Based in DC
  • Say hi to him at: www.fouroakscapital.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Wherever you’re at, just start small. ” – Brian Briscoe


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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 fluffy stuff. With us today, Brian Briscoe. How are you doing, Brian?

Brian Briscoe: Doing well. Thanks a lot, Joe.

Joe Fairless: I’m glad to hear that. And a little bit about Brian. He is an active duty US Marine. I appreciate everything you and your colleagues do for us, keeping us safe and protecting our freedom, first and foremost. Brian was assigned to the Pentagon and is the co-founder of Four Oaks Capital, which is a multi-family investing firm. He’s a host of a new podcast called The Diary of an Apartment Investor. In 2007 he started real estate with a single-family house, and in 2018 he jumped right into multi-family. Right now he’s got five apartment communities, and the total amount of units among those five is 250. Based in DC. With that being said, Brian, you want to give the Best Ever listeners a little bit more about your background and your current focus?

Brian Briscoe: Sure, absolutely. Thanks a lot. So first of all, to back up, I’ll start with when I was in college. I was going to college to be a professor. I was always really good at math, and I enjoyed teaching, and when you put those two together, I think the natural path for me was to be a college professor in mathematics. I’ve got a bachelor’s degree, a master’s degree and I applied to a PhD program. Following the “Get good grades, get a degree, get a good job” pathway. I applied to a bunch of the top 10 schools and I got into a couple of them.

So I started a PhD program at the University of Minnesota in August of 2001. And that’s significant, because it was just right before September 11. So like most people, I watched three airplanes fly into the World Trade Center and the Pentagon, and that event changed my trajectory significantly. I decided to put my studies on hold, and basically went down to a marine recruiter and said, “I want in.” And I’ve been on active duty ever since. It wasn’t the plan to stay active duty. The plan was actually to do a three to four-year tour, do my part, and go back to school. But I ended up liking it, I guess, a little too much. I’ve been on active duty ever since.

And along the way, roughly 2005 timeframe, like a lot of people – I’m very cliché – I read Rich Dad, Poor Dad. And that got me thinking on, “Okay, I need to start minding my own business. I need to start investing into income-producing assets.” And I realized as long as I was in the Marine Corps, I’d be moving every two to three years. So I did what I thought I could do, and that was, every time I moved, I would buy a house.  So 2007 was the first house that we bought. And we bought another one in 2008. And every two to three years afterwards, pick up and move again and try to rinse and repeat the process.

Several years later, I think this would have been late 2016, I realized that the light at the end of the tunnel of the Marine Corps career started growing bigger. I started looking at my portfolio, and I was not making a ton of money off the single-family properties that I had. I had a lot of trapped equity, but I wasn’t cash flowing like I thought I would be by that time. So I pulled out my handy spreadsheet… Once again, math background, pretty good at spreadsheets, and just crunched some numbers. I realized that needs 60 or so single-families to hit my goals. So I started looking for ways to scale.

Right around that time, I picked up a Bigger Pockets book on buying a 24-unit apartment building with little or no money down. and that really kind of lit the fire. Shortly after I found this podcast and a couple of others, and I just started consuming everything I could about multi-family. I was listening to the Best Ever daily podcast on real estate on a daily basis, I was listening to several others, I was reading everything else, and I decided that multi-family would be the way that I would basically start to create wealth and cash flow.

I started touring properties and realized that I needed more help than just what the podcasts were giving me. I think podcasts give you a lot of motivation, talk a lot about stories. But there’s a lot of skills that are not quite covered in them. So I bought an analysis tool, I started going to events, getting around people who were doing the same thing. Eventually, we got our first property under contract. I found a couple of partners on the way, formed the company Four Oaks Capital. I’ll let you dive in on any area you want later, but that’s just the broad brushstrokes. But got the first property under contract in South Carolina, we were able to close on that one, and this point right now we’re sitting with 250 units under our belt, and with another 167 apartment community under contract.

Joe Fairless: Well, congratulations on the 167. That is quite a jump from the 250 total units that you’ve gotten. We’ll talk about that. Let’s rewind a little bit, just to get a little bit more context. Every time you moved… Once you had the idea of “Hey, I want to do this”, and then every time you moved, you bought a house – how many homes did you end up with?

Brian Briscoe: We ended up with three. One point where lenders looked at my income to debt ratio, and they said “Single income… You don’t have enough income to buy another house, so we ended up with three, actually. And like I said, the cash flow coming off of those wasn’t great cash flow.

Joe Fairless: What was the cash flow?

Brian Briscoe: One of them was kicking out a couple hundred dollars a month. And one of them was actually sucking up about $500 to $600 a month. And the other one was breaking even. So if you look overall, for the first part of it, we were negative cashflowing. Towards the end, with the three properties together, we were breaking even.

Joe Fairless: Okay, help me with that — oh, towards the end. So initially, you were making 200, and one losing 500 to 600 on the other, and the third one you were breaking even. But over time, you eventually were about breaking even. You said you did an analysis, and you needed 60 single-families to hit your goal. What was your goal?

Brian Briscoe: My goal was to basically match my current income. So I figured that we were living a pretty good life right now, we had everything that we needed, and if my passive income could match my current income, we’d be set. And I was also calculating in that I will retire in about a year from the Marine Corps and I’ll get a retirement pension. So I think that number was about 120k to 150k per year, based on certain parameters.

Joe Fairless: So if it’s 150k, then it’s $2,500 a property a year. So that’s $208 a month that each property would bring in. Does that sound about right?

Brian Briscoe: That sounds about right. And the only thing I didn’t mention is I was also planning on putting 20% down, and everything else, and it was… Anyway, it ended up being a pretty daunting task once I sat down and looked at it. I’m like, “Yeah, that’s not going to happen in a long, long time.”

Joe Fairless: You went through the same exercise I went through. I had three single-family homes. Oh, four. I ended up with four. But I don’t know, at three or number four I realized, “Wait a second. How am I going to get the down payment for each of these to get the cash flow goal?” I think I was wanting $10,000 a month. So around where you were wanting…

Brian Briscoe: Right about the same.

Joe Fairless: Yeah, and I was like, “That’s going to take a long time and a lot of money, unless I do creative financing. And how am I going to do that? And, man, it’s going to be a lot of paperwork.”

Brian Briscoe: Yeah. I wasn’t creative at the time; I didn’t think I’d be able to use other people’s money effectively. And I figured, “Hey, if I scrimp and save and do everything I can, I can probably manage to do two per year.” And I thought, “Oh my gosh, I’m 40. That’s going to take me until I’m 70 years old to get this financial freedom thing.” I’m like, “That’s too long.” Maybe if I started when I was 20… But anyway, that’s…

Joe Fairless: Which doesn’t factor in the value-add plays, and then you do a refinance, and get money out, and then you put that into deals… So there are some things that, to be contrarian to our thought process, someone who is doing that, they might say, “Well, you’re not factoring in the value-add play and refinancing and rinsing and repeating.” Yeah. Fair enough.

Brian Briscoe: Yeah. That was before I heard about the whole BRRRR method. So it was a straight out one loan. And at the time, we had refinanced all of our houses several times, and our loan balance kept on creeping up. So that model, honestly – you’re right, it didn’t have all the factors in there, all the money-making things in there; it was just “Get a 30-year loan and start paying it down.” And that was the model that I built. But like I said, it was right when I was struggling with that philosophy that I ran into Brandon Turner’s book. I’m like, “Wow, if I can buy 24 at once, I can take this 30-year plan and turn it into maybe a 10-year plan.” So that really kind of opened up a lot of doors for me, just that one little paradigm shift of apartment buildings or something that’s accessible. I think prior to that my own limiting beliefs told me that apartments weren’t even accessible to me.

Joe Fairless: So let’s talk about the first apartment building. Well, before we do that, why was the second house losing $600 initially? What happened?

Brian Briscoe: We were living in San Diego, and when we moved to San Diego, fortunately, we didn’t buy when we did. Because we moved there in 2006. And I couldn’t imagine putting two kids into what we could afford in San Diego, which was about 800 square feet. So we started renting. And then the market crashed, and I thought “Oh great, real estate’s on sale.” And we were patient, we were looking around in our neighborhood where we wanted to live and we found a place. And the numbers on this one, at the time, made perfect sense. It was like, “Okay, this property was bought two years prior, at 450. And we can get it for 300,000.” So I was looking at the difference between the peak and where we were at the time, thinking “This is a great deal.”

And we bought the house, we moved into the house. And honestly, I was expecting on living there for three to four years at the time. And I ended up getting orders across the country, so we lived there for one year. So the bottom line is I didn’t really do my homework on what I would be making month to month after we moved out. I just wanted to jump in as quick as I could, and say, “Hey, real estate’s on sale. We qualify for a loan, we can get a house. This is building our portfolio.”

When we ended up moving out our mortgage at the time was 2400 bucks a month. And we rented it out at 1850 with a property manager. So we were out of pocket about six 650 for the first year. And then, like I said, we refinanced. The interest rate we had on it was 5.5%. We refinanced it twice. And when we sold it, we were coming out of pocket about $300 a month on that property. But when we sold it, we walked away with $150,000 in our back pocket. So it all worked out in the end, just – I think that house prevented us from purchasing more at the time.

Joe Fairless: The first apartment community was in South Carolina. How many units?

Brian Briscoe: 55.

Joe Fairless: 55 units. So you went from three single-family homes to 55 units. You were in Washington DC at the time, is that correct?

Brian Briscoe: Yep. I was in Washington DC.

Joe Fairless: Okay. You said “we” when you talk about buying it. Who’s “we”?

Brian Briscoe: My partners at Four Oaks Capital. So there are four of us total. And at the time, we weren’t Four Oaks. I was involved in a mentoring program. I met one of my partners through the mentoring program.

Joe Fairless: Which one?

Brian Briscoe: Michael Blank’s. Anyway, just being around other people with similar ideas, I think was really the key point to any mentorship program. But I met Eric, one of my partners, through the Michael Blank network, and he introduced me to the other two. But when we got that property under contract, it was me, Eric, and Brian Mallin that were going to run the show.

We sat down, we looked at the purchase price, we looked at what we needed, and we said “We need one more person to help us raise money on this” and Eric says, “I know a guy.” Eric introduced us to Todd Butler. And we decided that we would collaborate and go in on this one deal. And three or four months later, after working with each other, getting to know each other, we had a couple of times where we’ve all met together, we decided to form a company Four Oaks. So that’s how we all met, that’s how we got together, and every deal since has been the four of us collaborating, and so far, so good.

Joe Fairless: What went wrong on 55 units?

Brian Briscoe: The biggest thing that went wrong is we got pinched on our interest rate. Going in, our debt service ratio was tight as far as getting the proceeds that we wanted. But we closed just over a year ago… And if you remember what was going on, Fannie and Freddie were coming up towards their mandated caps. So they artificially increased interest rates to be able to slow down their lending. I still remember getting the call from my broker, saying, “Hey, I know we’ve been telling you to expect three point something interest rate… But rates went up, and we’re at a 5.2% right now.” So that was the biggest thing that went wrong, was we expect to get 3.0, 3.3, $3.4 million in proceeds at about a 75% LTV, and at the end of the day we got mid-60s on our LTV, because of the interest rate hike.

We ended up scrambling to close that. We dug into our back pockets and basically put a bunch of our own money in there to bridge the gap. But that was the biggest thing that we had to deal with through the whole thing. But we ended up bringing in one other partner, who brought in some money as well. And we ended up getting across the finish line, and it’s a performing asset now.

Joe Fairless: That one is in South Carolina. Where are the other four?

Brian Briscoe: The other four are actually all in South Carolina. The one we have in our contract is Augusta, Georgia. In general, we’re looking in the Carolinas and Georgia for our new deals.

Joe Fairless: Okay. What’s the size of the other four that you currently own?

Brian Briscoe: We’ve got a 33 in Columbia, we’ve gotten 80 just outside of Greenville, and an 82 right next to Clemson University.

Joe Fairless: Okay. Is it focused on student housing, I imagine?

Brian Briscoe:  It’s actually not, it’s about three miles away from the university, and the average person who’s living there is an employee of the university, not a student. So it’s not getting the same rents that the student housing would get. The rent points are a little lower than the ones that are focused on student housing, and by the bed. But mostly two bedrooms, one bathroom… But still a good little property.

Joe Fairless: Which one has performed the best?

Brian Briscoe: The one that is performing the best so far is one called Windwood. And that’s the one next to Greenville, 80 units. When we bought it, 72 of the 80 were rentable. And we’ve been able to push rents even through COVID on our renewals. We’ve been able to, on the renewals, transfer the centralized water billing to the tenants, and we’ve been able to bring, as of right now, three of the eight down units [unintelligible [00:18:08].19] and they’re occupied. So we’ve maintained a fairly high occupancy rate even through COVID, and we’ve been able to push the numbers up.

Joe Fairless: How’d you find these deals?

Brian Briscoe: These were all through brokers. Three of them were through one brokerage, and that’s Fireman Capital. One of them was a Marcus & Millichap broker that brought it to us, and the other was a broker with Aligned Capital. So all of them through brokers. And Eric, one of my partners is the acquisitions guy, and he’s the magic behind it. He’s the one that’s dealing with the brokers, calling the brokers every day and doing all the analysis and making the offers.

Joe Fairless: What’s your primary role?

Brian Briscoe: My primary role right now is outreach. I’m kind of the wide end of the funnel. We do the podcast, and like I’m doing right now, I go on other podcasts as well. But in general, content plus marketing.

Joe Fairless: You have four partners. I imagine that roles responsibilities need to be defined clearly, so that there are not people stepping on each other’s toes. If that is the case, how do you categorize the roles for individuals?

Brian Briscoe: So Eric’s our Director of Acquisitions, Todd Butler does the majority of the asset management, Brian Mallin is handling the finance end, the bank accounts, the portals, the website, everything else. And the three of them right now are actually working full-time. And because I’m still about eight months away from retiring from the Marine Corps and still have a full-time job, my role is a little smaller for the time being. So like I said, podcast and outreach. I do a lot of the social media postings, and basically trying to bring new investors into the fold.

Joe Fairless: What’s been the biggest challenge that you all come across, practically speaking, on a property?

Brian Briscoe: The biggest challenge right now is none of us have a finance background. So we’ve struggled a little bit with that. We’ve hired a bookkeeper, we’re talking about bringing in a controller to be able to do our finances… But it was just one gap that we had. And we didn’t realize that it would be what it is, but right now, that’s our biggest challenge is trying to figure out… We know how much money we have in the bank. We know everything else. How much can we give as distributions and everything else. So we’re working with a couple of people, we’re interviewing a couple of people right now to come in and to be a part-time controller for us and help us with that piece.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Brian Briscoe: I would say take action. I firmly believe that there is a virtuous cycle that can occur if you believe and you take action, and just keep on rinsing and repeating. You end up getting a little more confidence. And every time you take action, you’re stretching your own boundaries. So your belief gets a little bit bigger, I guess, and then you’re able to do more. So I would say wherever you’re at, just start small. Take action and keep on pushing the ball forward.

Joe Fairless: Do you still have those three homes?

Brian Briscoe: I’ve sold two of them.

Joe Fairless: Which one did you keep?

Brian Briscoe: I have one in DC.

Joe Fairless: Okay, is that the breaking even one?

Brian Briscoe: That’s the breaking even one.

Joe Fairless: We’re going to do a lightning round. Are you ready for the Best Ever lightning round?

Brian Briscoe:  Ready.

Joe Fairless: Alright, let’s do it. First, a quick work my Best Ever partners.

Break: [00:21:23][00:22:11]

Joe Fairless: Alright, best Ever resource that you use to do your job as it relates to a real estate investor.

Brian Briscoe: Best Ever resource – right now, I would say partly my podcast, because I’m able to talk to so many different people with so many different experiences. And a lot of times I’m able to contact these guys who are light years ahead of me and ask them questions.

Joe Fairless: Best Ever book you’ve recently read.

Brian Briscoe: You know, I’ve read or listened to hundreds. I think the one I keep on coming back to and the one that I read daily is the Book of Mormon; it provides clarity and focus for me. As far as business books, I would have to say Seven Habits of Highly Effective People by Stephen Covey.

Joe Fairless: Best Ever way you like to give back to the community.

Brian Briscoe: Well, I give 10% of all my income to charity… And like I said earlier in the program, I do like to teach. So I do spend probably several hours a week talking with aspiring apartment investors who want to learn more about the business, and I feel like that’s a good way to give back to people who are trying to do what I’m doing as well.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Brian Briscoe: The best places are our website fouroakscapital.com, or once again, through the podcast, Diary of an Apartment Investor, which is available on all major podcast apps.

Joe Fairless: Brian, thanks for being on the show. Thanks for talking about how you got started and the reasons why you transitioned, as well as how you got up and running, going from single-family homes to apartments. You’ve got an analysis tool, you went to events, and you found partners through those events and mentoring groups. So thanks for being on the show. I hope you have a Best Ever day, and talk to you again soon.

Brian Briscoe: Thank you so much. I appreciate you and your time today.

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JF2357: Attacking Old Goals With New Methods With Matthew Faircloth #SkillsetSunday

Matthew is a returning guest from episode JF1432 and today he talks about figuring out new ways to accomplish old goals. Matt has been a full-time investor for 15 years and in that time has successfully completed projects involving dozens of fix and flips, office buildings, single-family homes, and apartment buildings.

Matt Faircloth  Real Estate Background:  

  • A full-time investor for 15 years 
  • Completed dozens of flips, office building, single-family, and apartment deals
  • He started with a 30,000 private loan and has completed over $40 million in transactions
  • A previous guest on JF1432
  • Based in Trenton, NJ
  • Say hi to him at www.DeRosaGroup.com

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Move forward with faith and take action” – Matt Faircloth


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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, Matt Faircloth. How are you doing Matt?

Matt Faircloth: I’m awesome, Joe. So great to be with you today.

Joe Fairless: Well, I’m glad to hear that, and I’m looking forward to our conversation. Best Ever listeners, because today is Sunday, we’ve got a special segment for you called Skillset Sunday. And first off, a little refresher about Matt, and then that will help tee this up. So Matt’s a full-time real estate investor. He’s completed dozens of flips, but also now focuses on office buildings, commercial real estate, apartment deals. He just had a rather large closing that he and his team done. Yeah, woohoo, nice work on that! And that actually leads into our conversation.

The conversation and the outcome of this conversation for you Best Ever listeners is to learn about some ways to have some stretch goals and to try new methods to reach old goals. So maybe you’ve been trying to reach certain goals, you have not achieved them – well, we’re going to talk about the thought process to take to try new methods to reach those same goals that you’ve been trying to achieve. So with that being said, Matt, what’s the best way to start out this conversation?

Matt Faircloth: Well, I’ll tell a little bit of the backstory to lead us up to the point where I hit that pivot where I said “Okay, I can stretch myself, or I can keep doing what I’ve been doing.” So let me give you a one-minute background story. So my company, as your business is too, we are regionally focused on specific territories. We are not a company that will buy anywhere in the continental United States. That’s not what we do. We are focused on North Carolina and Kentucky. That’s it. So a deal came up in a market we had been shopping in North Carolina, in Winston-Salem, and it came across our plate… And we have been a company that’s been able to put together say, I don’t know, maybe $5 million to $8 million transactions. In the apartment building world, that requires an equity raise of somewhere in the two to three million dollar range. We’ve gotten pretty good at that. So I’ve got a really good mechanism down for raising two to three million dollars for a real estate transaction, to the point where I can repeat it over and over again, as often as I need to, for deals. And we had built a pretty good wheelhouse of doing it.

So this deal in Winston-Salem comes up and the numbers work, everything checks the boxes, the location is phenomenal, everything’s awesome about it… And it’s an $18.5 million purchase, which is more than double anything else we’d ever put together before. 336 units, so more unit count than we’ve done, more equity we need than we’ve ever done, more loan amount than we’ve ever done, more everything.

Joe Fairless: What was the highest amount of equity you’d raised up until that point? On one deal.

Matt Faircloth: Just over three. Like three and a half.

Joe Fairless: Three. Okay. And how much was this one requiring?

Matt Faircloth: We’re doing this a little differently… This one is a total of $12 million in equity, but because the bridge debt world has changed and it’s very hard to get construction dollars from banks, what we’re doing is we’re going in with the Freddie floater product, which is a floating rate mortgage, lower loan to value, and we’re going to raise construction dollars as we need them during the process. So we don’t have all the money we need at closing, we’re going to get it as we go, which is an interesting process as well.

Joe Fairless: So in total 12… But how much to close it out?

Matt Faircloth: To close the deal. Eight.

Joe Fairless: Eight? Okay.

Matt Faircloth: To close the deal. Yes.

Joe Fairless: Got it. So a significant jump from three to eight, and ultimately 12. Okay.

Matt Faircloth: Right. There was some faith in there, and just crossing my fingers and knowing, “Okay, listen. I’ll just get in and do it.” That was the crossroads that I was at, Joe. It was the fork in the road to say, “Okay, do I tell my team that worked very hard to find this deal, do I say, “You know what, guys? A little too big, we probably should refer it to a larger outfit that can take down something like this, that has a long track record on taking down something like this.” And that conversation did come up. Are we okay? Do we want a stretch like this? And we decided to take it on and to go for it and we’ll figure it out. And that’s really what you and I were talking offline about, it’s about the growth that happens when you get into something where you’re not exactly 100% sure how you’re going to make it happen. But you got to move forward in faith that it’s going to work out. You’ve got to take action, too. But I decided to go for it and just had the confidence that me and my team would figure it out. I was just crossing my fingers.

And what’s interesting, Joe, is what happened was we put it under contract, and we tried the method, amd we went, “Okay, let’s go raise money.” Well, I used my method that I know to raise two to three million dollars. I did that, and guess what? We raised two to three million dollars.

Joe Fairless: What are the things that you do to raise two to three million like clock–

Matt Faircloth: There is a number of emails you need to send out to enroll people in your webinar. What we’ve been able to do is develop a pretty good magnet of people that reach out to us, that say “Hey, I want to invest in real estate with you.” So you call the last couple months worth of folks that called in… So the hot leads, if you will – we phone call those folks. We came in and we sent out two announcements to a webinar, and saying “Okay, we’re having a webinar.” We had 300 people show up on the webinar. Not show up, they registered. Because you know how these things go, right?

Joe Fairless: Yup.

Matt Faircloth: So they registered for the webinar. They watched the recording, and everything like that. Just webinar, and then present the whole deal, and then send out the recording, and that with some phone call follow-ups, in our world has been what we needed to do to raise two to three million dollars.

Joe Fairless: How many days in advance do you give them notice that there will be a webinar?

Matt Faircloth: We give them a week’s notice. About a week, a week and a half. And we just did a general presentation on the deal. “Hey, guys. This is what we’re going to talk about. Here’s the deal, here’s this, here’s that, here’s the opportunity, and everything like that. It was just here “Here’s everything.”

Joe Fairless: And you said phone calls, too. So you called the hot leads, but do you only call them? Or do you call everyone in your database? How do you approach that?

Matt Faircloth: We don’t call everyone in our database. That’s the two to three million dollar method, Joe. We didn’t call everybody in our database. We’ll talk about them…

Joe Fairless: Okay. Alright, alright. Cart before the horse. Okay.

Matt Faircloth: It’s okay. I love it. We can talk about the newly-discovered and soon to be patented $8 million methods that I had to come up with. [laughter] But the two to three million dollar method is you call your hot leads. Because I’ve had people that called me up that they were hot, and I didn’t have a deal.

This is a true story. I’ve never told you this story, but it’s a true story. A guy called me in August, and he was like, “Okay, I want a deal. Ready to go.” This isn’t this August. This was August a couple of years ago. And he said “I want to invest with you. Find me an opportunity.” That’s great. “Okay, listen. Hang out. I’m going to go find you an opportunity, my friend.” So October comes around. And not just for this person, but we put a deal under contract and I did my hot lead method and called back through my hot leads that had called the last couple of months… I had called this person up that called in August, and you know what he said?

Joe Fairless: “It took too long.”

Matt Faircloth: No, “I gave that money to Joe Fairless.”

Joe Fairless: Oooh… [laughter]

Matt Faircloth: I swear to God, it’s what…

Joe Fairless: So you did take too long.

Matt Faircloth: I said, “Well, it’s in good hands.” That’s what the point of that story is – that when people call, they’re not just shopping. Sometimes they’ll tell you this, “Well, I want to invest in a year or two.” But a lot of times when people call, they’re looking to place capital now. And if you don’t have something that’s available now… And it’s okay that you don’t. But if you don’t have something available now, they’re likely going to go — below Matt Faircloth’s name on the list is somebody else. And so if I don’t have anything at that time, they’re likely going to keep going. And that’s what he did. And God bless, he had money he had to put to work. And he did, and he put it to work. It’s in good hands, and all that. So I was happy for him. I said “Great. Joe’s a friend. That’s great.” But it’s that call the hot lead method that these folks hopefully have not gone somewhere else by the time you’d launched that webinars, so you let them know about it ahead of time; that was my two to three million dollar method. Then you do the webinar. Then you email everyone the recording to the webinar, and then you do a follow-up phone call to folks that were on the webinar.

Joe Fairless: So only those that were on the webinar that you were doing follow-up phone calls, for the first method.

Matt Faircloth: Yes.

Joe Fairless: Okay. Got it.

Matt Faircloth: Then you also had some sort of means for them to do a soft commit on a webinar. For us, back then, it was a Google doc saying like, “Hey, this is my name. This is if I’m accredited or not. And this is how much money we want to put in [unintelligible [00:11:02].00] list, whatever.” And that Google Form was the soft commit that they did. And that right there, given the database that we have, will get you two to three million bucks, and we had gotten pretty good at that. And also, the presentation on the webinar was solid enough that we could produce that. So we did that for this deal, and then we got two to three million dollars. And I said, “Oh, okay. We’re a quarter of the way there. That’s great. So now what?”

And we called that database again, and called the folks that are on the webinar again, and had another webinar, the same webinar, we just did the same show again. We had 50 people sign up this time instead of 300, because a lot of our database had already seen the first one, so why would they want to go to the second one? So we got it up a little bit. And my team and I, we had to drop back and punt and have a huddle up. We’ve got to try something different. So again, we’re in the middle of Corona, crazy, COVID, potential recession, all this other kind of stuff right now… So what we realized is some investors are looking for something that’s a bit of a hedge, or want to know a little more detail about the deal that has to do with how the deal is recession-proof, or how it’s COVID-resistant, and everything like that. So we said “You know what we’re going to do? We’re going to do a webinar that’s just on that – how is this deal COVID resistant and recession-proof” That’s an interesting conversation. So we came up with those bullets, and we came up with a way tighter webinar. The first webinar, the one with the 300 people, went two hours. That’s another mistake. That’s too long a webinar. With the presentation, with Q&A, it went two hours.

Joe Fairless: What’s the right amount of time?

Matt Faircloth: I think that you should be presenting the opportunity in 30 minutes or less. And then another 30 minutes for Q&A, and then wrap it up.

Joe Fairless: Got it.

Matt Faircloth: People are busy, man. Get to the point, don’t spend too much time on the fluff or on spending 10 minutes introducing your team and everything like that. Just get going, because people are busy, and you want to respect that. So we tightened it way up and did a 30-minute thing on COVID and the recession. Now, we had a way bigger turnout for that one, because people were curious about that.

Joe Fairless: So this is a third webinar?

Matt Faircloth: Yes.

Joe Fairless: This is the third webinar about the same deal. Okay.

Matt Faircloth: About the same deal, but we did two things. We cranked up our email activity. I went to my assistant and I was like, “I want you to do an email every other day. Just stay on people’s radar.” Because again, maybe we needed to just kind of — given everything going on… And maybe just to raise a lot more money, you’ve got to kind of scream and yell a little bit louder.

Joe Fairless: Were you concerned about people unsubscribing from your list as a result of that?

Matt Faircloth: Sure. And I’m sure they did, and that’s okay, because if they really are not that concerned — if they really don’t want to hear that much from Matt, then that’s okay, they unsubscribed. And I think it’s a risk you have to run if you’re going to wave your hand in the air. I think list attrition is something that happens all the time, if you use your list; not that you have to email every day, but if you email every couple of days or once a week or whatever, you’re going to have attrition. Because people just might not want to hear what you have to say. And you can’t make that a reason why you don’t send emails, I don’t think.

Joe Fairless: And how long did you email every other day?

Matt Faircloth: We did that toward the last 30 to 45 days of the deal. We were every other day emailing. And what we did – we took snippets of the COVID webinar… And I’m jumping around a little bit. We did a COVID webinar, and we did a tax savings webinar, because we’re doing a cost segregation study. We’re hiring Yonah Weiss, if you know him… We’re hiring Yonah to do the cost seg.

So we realized that some investors know what cost seg is, and some investors know how it helps, other investors don’t. So I interviewed my CPA and took some video clips from him, took video clips from an interview I did with Yonah, and I took those two video clips and assembled them into a dozen emails that we sent out on a drip campaign about what is depreciation and why is it important. We had one couple invest in this deal, they came in later, after we started this cost seg conversation… They had sold a business and the wife was filing taxes as a real estate professional. And we saved them $200,000, because they put a significant amount of money into the deal; they were able to pretty much save every nickel that they were supposed to pay in income tax; it got deferred through cost seg and through the negative K1. Incredible. What a difference we get to make in this business. So I touted that in the email, obviously…

Joe Fairless: I remember reading it.

Matt Faircloth: Yeah. Leaving the personal information out. Think about the tagline on that one. We got a big open rate on that email, because it’s interesting, “Wow, $200,000. That’s crazy.” Now, it takes a specific investor under specific circumstances to get those savings, but it’s still at least a good conversation.

So we started thinking outside the box on ways to get people’s attention. And I think that lesson learned, a few lessons I got out of this whole thing, was to raise a lot of money you’ve got to get a lot of attention. And people care about different things. So some people cared about the hedge, about like, okay, recession and COVID-proof. That webinar got over 100 registrants.

Joe Fairless: And it was the third one.

Matt Faircloth: Yeah. So my registrations went up…

Joe Fairless: Right. From the second one.

Matt Faircloth: …because we had this conversation. Yeah. And Joe, we had people that had gotten in after the first webinar. They increased their investments after that one, because [unintelligible [00:16:06].09] “I like what you guys are doing.” “I see what you guys are doing.” We had one guy go from 100k to 200k because they saw that we had really thought this thing out. And we had a lot of new investors come in.

But the biggest thing was being willing to have conversations with people in a manner that they cared about. “Yeah, I care about taxes; that’s my main thing.” And realizing that people that invest in real estate, they may want all the different things that real estate offers, but likely they want one thing or two things, and the other stuff is all just gravy. So we got connected to what people really want out of what syndicators can offer, so we pumped out emails that spoke to those specific conversations.

We also got a lot more personal. I got each of my team members to record a three-minute video and talk about what you love about this deal. And I got one of our investors, who is one of our larger investors, to record a three-minute video on what he loves about this deal. A lot of our investors are doctors, so he was in his scrubs, the mask, and everything, talking about what he loves about DeRosa Capital 11. So through all those efforts, we were able to clear a benchmark.

Joe Fairless: What are the categories of things that people care about? You mentioned you pivoted with the COVID-resistant, and recession-proof, and tax savings… What are they?

Matt Faircloth: Well, let’s go COVID-resistance beyond what that really is… Because people say, “I want something that’s recession-proof, or whatever.” What do you really want? You really want security. So I think that we as syndicators – and this is to your audience – if they’re able to address the security question on “Is my money safe?”, that’s really what they want to know. So if you can explain to them in their language how their money is safe – and in today’s world, that means are you recession-proof? Are you COVID-resistant? People ask the same security question. Maybe they’re asking in a different language, where they’ll say, “What kind of collateral do I have?” These are folks that have done a lot of private loans, but have never invested in equity, so they want to know, what kind of security do I have in your deal? What kind of collateral do I have? I don’t have a mortgage on the property; what do I have? So you explain what equity and ownership in an LLC gives you. So that was one conversation. Security.

And then the other thing is general taxes. Folks that earn a lot get it that it’s not about how much you make, it’s about how much you get to keep. So that tax level conversation is something that some investors don’t care about. Interestingly enough, anyone with an IRA was like, “Next, let’s talk about security. I don’t want to talk about taxes.” Because they know that the IRA does kind of defends them against that already. You have to watch who you’re talking to. If they have an IRA, don’t even bring up the tax savings, because they really can’t take advantage of it. So we went there; we tried some of the things ongoing to our personal story. Other people care about the market, because like, “Tell me why Winston-Salem, North Carolina is a great place to invest.” There were some folks that cared about that, too, so we did some e-blasts on why the markets amazing. So to answer your question, Joe, people also want to know why should they invest with you, the syndicator, and why should they invest in that market, and then why should they invest in that particular deal. And typically, it’s in that order that they want to know it. You can answer those questions in that order, and then there’s the security and the tax questions that come on top of it, too.

Joe Fairless: So I’m on your list, and I got 15 emails in the month of September. So it looks like you were doing it…

Matt Faircloth: We were busy.

Joe Fairless: ..,every other day. Yeah, you were busy. Every other day in the month of September, basically. Did you take a look at what your subscriber list was before and then what it was after, and just see what type of unsubscribe rate you got from that?

Matt Faircloth: What attrition we had. It’s good to know. I wish I could tell you that.

Joe Fairless: So it wasn’t a red flag with your team, like, “Hey, Matt… We can send out another email, but you realize we’re going to lose 20% of our database? Because yesterday we just lost 20%.” It wasn’t anything like that?

Matt Faircloth: No, I don’t think so. I don’t believe it was, and I don’t think that we lost anywhere near what folks would suspect that you would. Because at end of the day, people just auto-delete, skim through it, and everything like that. They tend to just look past emails, sometimes they go through the effort of unsubscribing, but at the end of the day, it does take a little bit to unsubscribe from something, versus just taking the time to delete. It’s not a big deal, you can just delete the email.

Joe Fairless: I ask that because I think some people would be concerned about the investors that we brought on to the list – it’s so precious, because we’ve worked so hard to get them, and then I don’t want to send them all these emails. But in your case, it worked. And that’s a surprising lesson that I learned from this conversation, in addition to other lessons, too.

Matt Faircloth: I have an admin that was sending out those emails, and I know she would have flagged it. And I’d be willing to bet that it was very low on attrition. If you give me one second, I’ll give you the number on what it was, because I’m able to log in here while we’re looking. You know what it is, Joe – I hope I can use this word when you show… People worry too much about pissing people off, and everything like that. And I think obviously, once folks are investors, you really don’t want to do that, but I’m thinking if people worry about from a marketing perspective about shouting too loud or anything like that… We obviously don’t want to be bold or audacious or too over the top on things, but at the end of the day, I think that we’re also looking to get noticed. And when you get noticed, it’s okay that some people are like, “I don’t want to pay attention to that guy.” So we lost about 4%.

Joe Fairless: That’s nothing.

Matt Faircloth: Yeah. Regular attrition is less than that. Maybe 1% or 2%. But we lost four during the lifecycle of that campaign. It’s okay, people are going to do that. Sorry, if I went there, but I think that people worry too much about ticking off people on your list. Because at the end of the day, if they’re just on your list out of general curiosities, they’re likely not going to do much with you if you email them a lot. If you email them a lot, they’re either going to get interested or they’re not. If they’re not interested, but they want to see what else Matt has to offer in the future, they’ll probably just delete the email and wait till the next one comes around.

I’ll tell you one thing – it did confuse some people that were already in the deal. “Hey, why are you still emailing me? I’m already in this opportunity.” So you can’t just do a general shotgun email everybody. You’ve got to watch to see who’s on your email list. Take the folks that have already…

Joe Fairless: Segment it.

Matt Faircloth: Yeah, we learned that one. People were getting confused. “I’m in, man. You already have my [unintelligible [00:22:28].02] thing. Why are you still emailing me?” We had to watch who we’d already emailed. We also took out people that had roundly said they weren’t interested, just out of respect. So we’ve learned that you’ve got to segment, you can’t just literally blast everybody.

Joe Fairless: This has been a productive and such an educational conversation because of you and what you’ve shared with us. Thank you so much for that, Matt. Before we wrap up anything that we haven’t talked about, that you think we should, as it relates to this topic?

Matt Faircloth: I think that you and I got into the nuts and bolts and all that, which is awesome, because I think your investors are going to get lots of great nuggets. I think the big thing for them to take home, in general, is that if you don’t stretch yourself, you’re not going to grow. There’s a book called The Way of the Superior Man; it’s good for everybody. But The Way of the Superior Man – there is a chapter in that book that talks about being okay with a little bit of fear. And people sometimes won’t engage in change or won’t engage in growth because it makes them a little bit afraid.

What I’ve learned through reading that book, and just by living my life – that if I’m not a little bit afraid, a little bit scared about where I’m stepping, that I’m not stretching myself enough. Because fear is the indicator that I’m beyond my comfort zone. And I was a little afraid of this deal, of being able to take it down, and what happens if I don’t… But because I move forward anyway, I was able to bring things to the next level in my company, and I think that a lot of people don’t realize that the only way you’re going to grow, is by feeling the fear and acting anyway. Getting into it and jumping in and figuring things out. And hopefully these nuggets here on how to raise your equity game, too. Yeah, I agree, this has been an awesome interview.

Joe Fairless: Yeah. And regarding the faith and being comfortable with fear, I’m coming at it from a logical perspective too, or standpoint, because you had a lot of pieces in place that gave you the confidence to be comfortable taking a couple of steps, really, that are beyond where you had been. Whereas if someone’s starting out, then they’re looking at a $9 million equity raise, then that fear is very healthy, because they don’t have those pieces in place that you had already had.

Matt Faircloth: You would say reasonable steps.

Joe Fairless: Reasonable steps. Right.

Matt Faircloth: But you’ve got to know that the possibilities are there somehow. So I’m not saying “never invest in real estate before you go take down a $9 million equity raise and figure it out.” Again, don’t hear what Joe and I are saying the wrong way here, audience. I think you understand you’ve got to take reasonable steps forward into growing your business, and that a little bit of fear is good. A lot of fear is probably a sign that you probably shouldn’t be stretching that far. So you’ve got to find that even marriage where it’s outside your comfort zone and it’s a little bit of uncertainty; that’s healthy. But too much of it is probably a sign you’re not ready. You’ve got to know the difference.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Matt Faircloth: They can get a hold of us at our website, which is derosagroup.com. Everything’s out there – copies of my book can be purchased, you can connect with us, you can learn from us, you can invest with us. Everything’s out there.

Joe Fairless: Matt, a pleasure, as always talking to you, and learning about what you’ve learned… I can be educated too, I love learning this stuff, so thank you for sharing that. I hope you have a Best Ever weekend and talk to you again soon.

Matt Faircloth: Thanks Joe, for having me.

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JF2356: Educating Students To Flip Homes With Paul Tompkins

Paul has 7 years of real estate investing experience and currently completes 30-50 fix and flips per year. He also teaches students how to fix and flip and how they can create wealth with rentals to change their life.

Paul Tompkins  Real Estate Background:

  • Full-time real estate investor with his wife Kelsey
  • 7 years of real estate investing experience
  • Portfolio consist of 30-50 flips per year and holds 5 rentals per year
  • Teaches students how to flip homes and create wealth with rentals
  • Based in Tallahassee, FL
  • Say hi to him at: www.flippinexperts.com 
  • Best Ever Book: Capital Gains

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Take a step. Focus on taking one step at a time. Take a step.” – Paul Tompkins


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today I’ll be speaking with Paul Tompkins. Paul, how are you doing today?

Paul Tompkins: I’m awesome, Theo. Thank you so much for having me on the show. I love you guys and I appreciate it.

Theo Hicks: Oh, well, that’s good to hear, and thank you for joining me today. A little bit about Paul. He’s a full-time real estate investor with his wife, Kelsey, with seven years of real estate investing experience. They do 30 to 50 flips each year and then hold five rentals each year as well. And Paul teaches students how to flip homes and create wealth with rentals. He is based in Tallahassee, Florida, and his website is flippinexperts.com. So Paul, do you mind telling us some more about your background and then what you’re focused on today?

Paul Tompkins: Sure, Theo. Again, I appreciate it. Thank you for having me. My story is like a little bit of a crazy one, because I bounced all over the place. I didn’t mean to, it’s just kind of the way I was raised and what was in my heart. But I actually started out 18 years old, since I was an adult, and I always wanted to serve people, I always wanted to give back to the community. I didn’t know what it was, but in my heart, I always wanted to be a police officer. I saw cops and robbers, and I saw cowboys and Indians when I was young, and it was big — that’s what you watch when you’re a kid; and that kind of ages me, but whatever. That’s okay, Theo. I had always wanted to be the good guy, riding in to save people, riding in to help people when they were in need… And that just transitioned into what I wanted to do, was be a police officer. But I couldn’t do that till I was 21 years old, so I was like, “Hey, what can I do to still make an impact in the world?” And it was to serve my country. So I became a United States Marine, and I did that for four years and loved it. I was overseas three years out of the four, but it was time to go be a police officer. So at the age of 22, I started doing that, and started getting into what does it take to be in law enforcement, applying, and all that. Then I became a Florida State trooper, and did that for about nine years.

And about six or seven years in, Theo, that entrepreneur bug kicked in again. It was awesome chasing people; they gave me a gun, a super-fast car, and they’re like, “Go catch bad guys, and we’re going to pay you.” And I was like, “I’m in.” But after six years, I’m like, “I’m working this really bad part of town, and I’m always into something, literally.” My sergeant kept saying, “You keep looking for the boogeyman, one day he’s going to find you.” And that kind of always stuck with me. And I said, “You know what? He’s right.” And I’m putting a lot at risk. I’m doing shift work, which means 28 days I’m on a day shift, 28 days I’m on a night shift, the next 28 days I’m on  a midnight shift. So family time – you can forget about it. Not seeing my spouse, missing son’s football games… And all this for $36,600. I was like, “There’s got to be something better.” And then my entrepreneurship started kicking back in and I’m like, “Okay, let me see what’s out there.” And I started looking at real estate, because everybody that I saw that had millions or billions of dollars had some connection to real estate. And I’m like, “Okay, that’s a clue.” And that’s all I needed.

And I started diving into real estate. And back then there weren’t online courses, and YouTube, and all these things where you can just learn from, and sit here and have a conversation like we’re having. I just had to do it grassroots way. I tried to meet with a local guy in town, and I’m like, “Hey, show me some, and you show me some.” And I’m putting it together, I’m making mistakes, but I’m still making money. And the first two years I did it, I was still a trooper full-time, 40 hours a week, still being a trooper, and on the part-time side of it, I’m making $300,000 a year in real estate. And I’m like, “Okay, after my second year,” I said, “it’s time to leave being a trooper. I got my feet wet enough, let’s do this.” And my coach at that time, the guy who was kind of showing me a little bit, he’s like, “Hey, man. Just get a little bit more training, get a little bit more flips, and get a couple of rentals, figure it out more”, and then boom, ’08 hit, and the floor came out on everybody.

Tt that time, I had never been through something like that. I didn’t know how to protect myself against something like that. I literally had 12 to 15 deals going on at a time, and they all had mortgages of about $900 on, because they were lines of credits. So I’m talking 12 to 15 grand due a month, and the floor falls out. And let’s just say I learned a lot of valuable lessons with that.

I went through that, and I got rid of those properties, and I took a break for a while… I ended up going to Afghanistan for a little bit as a police contractor and helping overseas over there for a while… And then when I came back, I was like, “Hey, what am I going to do? What do I really want to dive into?” And I had met my beautiful new wife at church, and me and her hit it off. We always had a heart for giving back to people, especially the kids. We both were very much into just serving kids.

We teamed up with a local church, we helped them buy this $7 million property, and we were going to run it as a youth center for the churches in the area. We did that for a year, and then one day the church said, “Hey, we’re going to go a different direction with this business, because it’s so expensive. It’s a lot of money. It’s not just a couple hundred thousand. You’re talking seven million or eight million dollars.” And they decided to go in a new direction in a single day. Literally, the CEO drove up… Because we had moved out of town to help start this. We had moved out of town, sold our house, everything… The CEO shows up one day out of nowhere, he says “Hey, I’m coming up tomorrow. I want to meet with you guys at nine o’clock.” And I’m like, “Okay, that’s weird, because you hardly ever come up.” And we knew there might be some shifting, but they’d always guaranteed us a job, employment, we knew them… And they say “Hey, we’re done. We’re shifting, we’re moving it. We don’t need your employment anymore. Please have all your stuff off the property by five o’clock. And we need your keys.” And Theo’s, my wife just started crying. I actually can’t believe how well I held it together, but I’m talking to the CEO, and he’s asking me questions, and I’m actually helping them, which I’m under no obligation to… And my wife’s crying… I think it was probably a relief in my heart like, “Hey, this wasn’t where I was supposed to be probably anyway…” But both of us lost our jobs. 100 grand plus gone in an instant.

We think about COVID, and we think about stock market crashes and all that, and people losing jobs… We were there. And it wasn’t just my paycheck or just my wife’s paycheck. All of our money ceased in a matter of a day. I think we had 13 days left on our insurance. We couldn’t move back home. We didn’t have proof of income to go buy another house. So we were literally stuck. And I just remember saying okay, “We’re going to sit here for 30 days and we’re going to really figure this, out because we’re never going to ever, ever, ever let somebody control our destiny again.” No boss, no company. I want to control my own destiny. And during that 30 days, real estate just kept coming to mind. Real estate, real estate, real estate. I had fun doing it. My wife was in design, she understood staging, and all these different things which I wasn’t that good at. I’m a dude, so I just go in and do paint stuff, and I thought it was good. So she brought that huge aspect. And then we said, “Hey, let’s do this.” And within two weeks, we had two deals under contract, and we were already flipping again. So kind of a crazy story…

Theo Hicks: It is very crazy.

Paul Tompkins: … but it all came back to real estate. And real estate has always proven to me, and to, obviously all these millionaires and billionaires that have their money tied up in it… It’s a long term thing. It’s an asset. It’s something you can touch, you can feel. Somebody can’t take it away from you overnight. You own it, it’s yours… So that’s kind of my story in a nutshell.

Theo Hicks: When you and your wife both lost your jobs and were taking that 30-day pause to figure out what you’re going to do and then decided to do real estate, did you have funds saved up at that point? Did you have a savings accounts? Where did you start when you started this now business of the flips and rentals?

Paul Tompkins: Yeah, I think we probably had 15 or 20 grand in the bank. Nothing major. Mortgages are $1500, car payments, all that. So I knew I had a little bit in the bank… But I knew from doing it previously, when I was a trooper, that I could borrow hard money, that I could have a partnership with someone where they would fund it, and I would do the renovation, because I’ve done so many of them. I had a track history of just doing an excellent job. And every house I was doing, I was making $40,000 to $60,000 profit. So it helped me a little bit.

Theo Hicks: So you’ve got 15k to 20k in the bank, 30 days, we’re going to do fix and flips… I think you said you quickly got two deals. Tell us about that. So tell us how did you find these deals, how did you fund these deals, what was the business plan, and how much money you made?

Paul Tompkins: I don’t know if there was even time, Theo, to create a business plan; because once we said let’s go… The great thing is I had already done it before. My wife hadn’t, she had no idea. She didn’t know the first thing about real estate. She didn’t know how to flip anything. She didn’t know what a flip was. So kind of getting her up and going… She picked it up very fast. I guess you would say she’s kind of like my first student. There wasn’t really a business plan, but I knew in the past, I had borrowed hard money. So I already knew how to do that. I knew the connection that I had a couple of hours away, and money’s money. So I was able to contact my hard money lender again and say, “Hey, here’s where I’m at. Here’s what I’m doing. What do you want to do?” “Yep, I’m still lending money, Paul. You’ve already done 40 houses with me. I’m good to go, just send me the paperwork.”

So literally, getting financing started that quickly. I know normal money lenders now, you’re talking seven to 10 days, so it’s still not a very long process… But I had already had a relationship. I also reached back out to a gentleman I was doing deals with already in the Jacksonville area in Florida and said, “Are you interested in partnering up on some deals?” And he’s like, “Actually, I’m exiting with the guy I’m with right now. He wants to branch out on his own. And I have a couple million dollars. I’d love to partner up with you.” To be honest with you, it just kind of fell on our lap. We were proactive, we made the phone call… And we still do deals together today. Two hours ago we just put an offer in on a $444,000 house together. So those kinds of connections, I always keep them; they’re very valuable to me. I treat them with respect, and they always end and start.

Theo Hicks: So the hard money person, the person you reached out to, who just happened to be exiting a partnership – is he who brought the deals in, or how did you find the deals?

Paul Tompkins: No, I actually found all the deals. Some of them were auctions, some of them were on websites or county options. We had cash, so with him having a couple million dollars cash, we’re able to do certain auctions that other people can’t do. Like county foreclosures, short sales… I also immediately reached out to wholesalers in my area, and immediately went to meetups. And here in Tallahassee, Florida they have meetups all over the place and real estate investors networks, and I just immediately walked in the door and started making contact with wholesalers. Wholesalers do amazing things for us… And it was pretty easy to get those first two deals. I found one and then a wholesaler brought me one.

Theo Hicks: Okay, what year was this?

Paul Tompkins: Yeah, that’s a great question. I’d probably say three or four years ago.

Theo Hicks: Okay, so three or four years ago. Okay.

Paul Tompkins: Yeah, ’16 maybe.

Theo Hicks: So how many deals — again ballpark here. You said you’re doing 30 to 50 a year now. But the first year, the second year, the third year, and the fourth year, what was the fix and lips?

Paul Tompkins: When I was part-time, I was probably doing 15 a year, consistently. 12 to 15 first year, second year. And then when I went full-time, I would say I was probably 15 my first year, the second year’s probably 25, the third year’s probably 40, and then the fourth year full-time is probably 40 to 50.

Theo Hicks: Okay. When did you start doing the rentals?

Paul Tompkins: Probably my third full year. And I didn’t jump into it. I encourage people not to just jump into rentals, because you’re tying money up, and your return is not as big. So the way I see it, Theo, is my business model is I flip, flip, flip, flip to get those big returns. Those 40k, 60k, 70k, 80k checks, and I fund my rentals through them. So I’ll flip, flip, flip, flip, have enough money saved up to go buy a rental with cash. So that’s kind of my business model. I probably buy one out of every seven or eight, I keep as a rental, and I get to cherry-pick them. And that’s what I like. Because all of them are coming in as fix and flip deals, so I’m buying them at 60 cents on the dollar. I get to do the renovation myself, so I know there’s a new roof, I know the A/C is good and warrantied, I know the flooring is a luxury vinyl plank, or tile, or whatever it may be. So when I turn it into a rental, it’s turnkey. I’m not going to have to touch this thing for a long time, unless it’s just simple cosmetics or something like that. So it allows me to cherry-pick and go after them, versus somebody saying, “Hey, there’s not a lot of equity in this, but it’s great as a rental because it’s making $300 a month.” That doesn’t do anything for me, I won’t buy it. I need a lot of equity in it, as well as a great rental per month.

Theo Hicks: Okay Do you buy them all cash and then you pull the cash out? Or does that cash stay in there?

Paul Tompkins: About half and half. I’m getting to where I’m leaving it all in there now. It’s just that the further along I get, I’m able to do that, and I don’t need as much cash. If I can leave it in there, I do. I can always pull a line of credit against it. And everybody thought I was crazy. Like two years ago, I went to this big conference out west, and there were all these mega flippers in there, and we went around the room, and they’re like talking about it, and everybody’s paying cash and pulling it right back out, or they’re doing money loans, or they’re doing this… And for me and my wife, our company, I’d rather feel like I’m broke right now while I’m young, and leave money in because then I get that whole rent check. If it’s a $1500 rent, I’m getting that whole rent check. It’s not, “Oh, I’m paying a $1200 mortgage, I’m getting $300, and then after taxes and insurance, I’m getting 100 bucks.” That’s just not worth it to me.

So when COVID hit, that’s where everybody understood where I was coming from. And they’re like, “Now we see.” Because I didn’t have a bank come to me and say, “Hey, we’ve got to do this,” or “Hey, this line of credit is going away,” or somebody can come and take my house. I never want it to where… Like 2008, when that happened, the bank was in control of my life. They said, “I want my $900 per mortgage, or we’re taking the house back.” When I leave my cash in it, no one can do that to me. So it’s just where I’m at in life. Other people, they’re just getting started, they’re, “Hey, I just want to pull that cash out, go do another one…” I have enough cash to where I’m doing enough flips right now, that I don’t need to do more flips. Or I really don’t even desire to hit 100 or 200, because that’s a lot more stress. I’d rather find bigger spreads. I’d rather find better deals than more deals.

Theo Hicks: How do you know how much money to take out for yourself to live off of? Is it just the rental income? Is it a portion of the flip profits? Do you live off the profit of a flip per year? How do you approach that?

Paul Tompkins: That is an awesome question. I’ve never had anybody asked me that man, that’s great. The funny thing is, when we first started, we said, “Hey, we know we can live off this dollar amount. So for the first so many years, we’re not going to increase our salary.” So if I know I can live off $80,000, me and my wife, why would I live off like I’m making $4 million? So what we did is we actually hired a payroll company that writes us a check, takes all our taxes out, like I’m a regular employee for my own company. And she gets a check, and I get a check, twice a month. So there is no, “Hey, I just made 80 grand on this house. It’s my cash, it’s my money.” No, that’s already reinvested. Because when I sell that house – let’s say I make $80,000 – I already have a percentage set aside that goes towards my next fix and flips. And I have another percentage set aside for my rentals. And as I get older, my rental side is going higher than my fix and flip. Because my fix and flip, I always have that money; so I’m doing more rentals, to where I have more mailbox money coming in. I consider it like retirement money.

Theo Hicks: That’s fantastic. Is it pretty easy to set that up with the payroll company? You can reach out and…

Paul Tompkins: It took me 30 minutes. It’s a payroll company here in Tallahassee. They say “How much do you want to pay yourself?” I think I started at $2,500 a month, and then my wife was getting $1,500 a month. So we were making four grand, we were around the $50,000 mark, and I think we’ve only increased it once.

For us, we’re okay living like that. Now I do write a lot of my travel, and expenses, and stuff off through my business, because it’s obviously real estate related. But as far as personally, you never keep that money; that money, that profit, when it goes on the HUD, it says my company name and this amount of money – everybody sees that, the IRS sees that, and that that just goes right back into my company. So it never comes out into Paul’s pocket. It’s reinvested.

Theo Hicks: Really quickly, before the money question; I always ask people this question when they are in business with their significant other… What are some of the pros and the cons of working with your wife?

Paul Tompkins: Is she going to listen to this?

Theo Hicks: Yeah, act like she’s not going to hear any of this.

Paul Tompkins: Okay.

Theo Hicks: Just me and you.

Paul Tompkins: Actually, I get a lot of people ask me that stuff, and I didn’t realize how many people are married in real estate. I think it’s so cool. So pros… She does things I don’t want to do. And I don’t mean that in a bad way. She loves design, I don’t. She’s on Pinterest, she’s on design sites. She’s drawing out kitchens and knocking walls down, and showing me “Hey, Paul. This is what I want it to look like.” And then I’m kind of executing on that. Whereas I’m a guy… And I see a lot of our students do that. If it’s just a single guy in the business, they do it like a guy. They’re not going to knock the wall down, they’re not caring if the kitchen is beautiful and gorgeous. And just by changing knobs and hinges, how much it can change certain rooms, and stuff like that. I don’t think about putting all the doorknobs in the same color as the hinges, the same color as the doorstop. We’re guys, we’re like, “I don’t know, go to Ace Hardware and buy some doorstops. I don’t care what color they are.”

So she brings that excellence, I think, to our brand, into who we are. And she’s good at things that I’m not good at. And then I handle a lot of things that she doesn’t want to touch. She doesn’t care how the wall comes down. She doesn’t care about the engineer coming out. She doesn’t care about this, this and this, or the finance side of it. I’m doing budgets, I’m doing rehabs, I’m going in houses before we buy them and inspecting them. She doesn’t want to do that. She doesn’t feel safe sometimes doing it by herself.

So we just really complement each other, and the ball just kind of goes back and forth. I think one of the hard parts about it is you live with them, you work with them, you go on vacation with them… So it’s a balance you have to set up from the beginning, and saying, “Listen, I’m going fishing with the guys once a month. I’m going camping, I’m going this. When I’m doing that, you go do your thing. You go to the spa, you go hang out with your family, you could take a girl’s trip to the Bahamas.” And having that time… Her family lives two or three hours away, so she could go there on the weekends. I’m still here, I’m out hunting, doing my thing, she’s there with her family, she’s getting refreshed, I’m getting refreshed, doing what I like… And it’s just balance.

Theo Hicks: Okay, Paul, what is your best real estate investing advice ever?

Paul Tompkins: Take a step. And it sounds so simple… My students, I’m just like, “Take a step, take a step, take a step.” Whether it’s the very first one, or it’s like “How do I go from 10 houses at a time to 20?” Take that initial step. And I know it sounds simple, but it’s the same as going to the gym. Like “Well, I need to go to the gym.” Take a step, go get a membership. Take a step, fill up your car with gas so you can make it to the gym. Take a step, eat a protein shake. So for us, it’s take a step, no matter what it is. If it’s in your first rental, “Well, I don’t know how to do it.” “Take a step, go buy an online course. Go listen to a podcast. Do something that gets you closer to your dream.” And for us, if we just take a step every day, that’s 365 steps a year. That’s a lot of steps towards your goals.

Theo Hicks: Yeah, that’s solid advice. Alright, Paul. Are you ready for the Best Ever lightning round?

Paul Tompkins: Let’s do it. I didn’t even know there was a lightning round. Yeah, I did [unintelligible [00:22:47].16] [laughs]

Theo Hicks: Okay. First, a quick word from our sponsor.

Break: [00:22:52][00:23:39]

Theo Hicks: Okay, Paul. What is the Best Ever book you’ve recently read?

Paul Tompkins: Oh, Capital Gaines by Chip Gaines.

Theo Hicks: The guy in HGTV?

Paul Tompkins: Yeah. You can see where he came from, what he’s still going through, but he also has a lot of vision for the future. And I like that. A simple read kind of guy, but it’s packed full.

Theo Hicks: If your business were to collapse today, what would you do next?

Paul Tompkins: Start it up again.

Theo Hicks: What’s the deal you’ve lost money on? How much did you lose and what lessons did you learn?

Paul Tompkins: Yes. I only lost money on one deal. I had just got done the renovation and listed it, and a week later a hurricane hit and flooded the house four feet. So I had to do the renovation twice. And I only lost $8,000.

The lesson I learned, which I don’t even know if I learned it, because you can’t buy hurricane insurance in every single house, especially when they’re not near the water… So I don’t know if I would still put insurance on the property, and I still don’t… I still carry insurance on all my properties though. If you’re near water, get hurricane insurance, I guess.

Theo Hicks: On the flip side, what’s the best deal you’ve done?

Paul Tompkins: For me, it’s more about my students. What’s the best deals they’ve done. I just had a student make $98,000 two weeks ago on a deal. For me, I do deals where I make $100,000 or $200,000 twice or three times a year. When you do that many deals… But for my students, I love it when they crush it. I have a student getting ready next week to make about $130,000 on a spread. And this is pure profit. So for me, it’s when my students win, I win. Because I know I’m teaching them right, I know they’re getting value out of what I’m teaching, and there are relationships there… So, them winning is huge.

Theo Hicks: What’s the Best Ever way you like to give back?

Paul Tompkins: Oh, good one. We have an outreach that we do, it’s called Flipping to Impact; it kind of matches our name. And we’ve always done it. It’s something that’s been in our DNA. And it doesn’t matter what somebody needs, we’re there for them, especially in our own community, where when COVID hit and schools shut down, there were kids that couldn’t get meals. And we went up to a local restaurant that was struggling… I live in a small town outside Tallahassee, so there are not that many restaurants; I think three. And one of them was struggling real bad, and I’ve made a partnership where I said, “Hey, you make all the meals and you feed all these kids that don’t have any food, and we’re going to fund it and pay for everything.” So things like that.

We build wheelchair ramps in our community for elderly people, and stairs, and fix some houses. So we’re constantly giving back, and I think that’s where we get our blessings from. I know somebody is looking down on us saying, “Hey, if they’re just going to keep giving and giving, I’m going to keep blessing them.” And I don’t do it because of that. I feel like that’s just who we are as people.

Theo Hicks: And then lastly, what’s the Best Ever placed to reach you?

Paul Tompkins: Oh… Social media is the easiest. Flippin Experts – go on Facebook, YouTube, Instagram. Our website, if you’re interested in anything real estate that we just talked about, they can go on our website at flippinexperts.com; there’s no g, pretty simple, flippinexperts.com. Check out what we have. If we can help them, we will. Happy to give them a discount on your behalf of 10%. So I’ll send you that information, and you can put that in your show notes and all that. But any way we can bless them; we have a lot of free training, we have other training that they can pay for at a monthly subscription that’s very cheap… So it’s just any way we can help them, we’re all about it.

Theo Hicks: Perfect, Paul. Well, thanks for joining me and telling us about your interesting, unique journey to where you are today. I always love hearing the origin story. We also talked about a lot of practical things as well. We talked about the power of connections and how once you’re ready to get back in the game, it was almost like a flip of the switch because of all the connections you had, with hard money and previous wholesalers. You also talked about how you find your deals, auctions because of your ability to buy all cash; wholesalers, meetup groups…

And then you talked about your business plan is basically cherry-picking the best fix and flips to keep as rentals, buying them all cash so that you get that big rental check… But also going back to the lesson you learn from ’08, from your previous business being closed down, is to not be controlled by somebody else. That’s why you buy properties all cash, and it paid off during COVID, that’s for sure.

And we talked about how you pay yourself, with the payroll company. And then you gave us some advice on how to work with a significant other, which I think that advice can apply to just relationships in general, about setting expectations.

And then lastly, your best advice was to take one step every single day, whether you’re starting out, or a step to scale your business. So Paul, thanks again for joining us, I enjoyed our conversation. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Paul Tompkins: Thanks, Theo.

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JF2355: The Benefits Of Hosting Real Estate Meetups With Megan Greathouse

After leaving the Marine Corps, Megan used the GI Bill to finance her MBA. With her savings, she and her husband invested in their first house. When they moved into their second home, they rented it out and then sold it. They acquired and flipped several types of properties since then.

A career in real estate gave Megan the flexibility she needed to spend more time with her family. Just a few years into this business, she now has an impressive portfolio. Megan also hosts a local real estate meetup that has awarded her new professional relationships and opportunities.

Megan Greathouse Real Estate Background:

  • Real estate investor and mom
  • In 2019 she left her W2 to focus on family and building her real estate portfolio
  • She started by turning her first home into a rental in 2015 & buying her first outright rental in 2017
  • Portfolio consist of 10 rental units, farmland, 2 flips, & 1 wholesale
  • Based in St. Louis, MO
  • Say hi to her at: www.linkedin.com/in/mkgreathouse/

Click here for more info on groundbreaker.co

Best Ever Tweet:

“There’s a lot of power in having a very strong network” – Megan Greathouse.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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, Megan Greathouse. How are you doing Megan?

Megan Greathouse: I’m doing awesome, Joe. It is so exciting to be here. Thank you.

Joe Fairless: Well, I’m glad to hear that, and looking forward to our conversation. A little bit about Megan. She’s a real estate investor and mom. In 2019, she left her W2 to focus on family and building her real estate portfolio. She started by turning her first home into a rental in 2015, and then buying her first rental outright in 2017. Now she’s got 10 rental units, she’s got some farmland, she’s done two flips, and one wholesale deal. Based in St. Louis, Missouri. With that being said, Megan, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Megan Greathouse: Sure. To go way back, I grew up as a military kid, and then after college, ended up joining as an officer in the Marine Corps myself. So I did four years of active duty. And while I was there, I was reading a lot of books about personal finance. I was very interested in what do I want to do after the Marine Corps and what do I want to do long term for myself and my future family, and real estate kept coming up. So after leaving the Marine Corps, I actually used my GI bill to get an MBA, and after saving a lot in the Marine Corps, especially during a deployment, and then saving a lot from my nicely paid post MBA job, we felt like we were in a good position, my husband and I, to buy some real estate. I really was interested in educating myself, so I took the lead on that.

We tested the waters, like you said, by turning our first home into a rental for a couple of years when we moved to our second home, and then ultimately sold that because it didn’t cash-flow as well as we’d like. But it was the learning opportunity we needed to move on.

And then after that, I just started buying small multi-families. And the big catalyst for me to actually get started was having our first kid back in 2016. That was what, despite liking my job, liking my career, liking the people I worked with, really motivated me to find a way to create wealth and a career for myself that was completely flexible and on my own terms. Because I wanted more time with these kids.

Joe Fairless: Okay. And first off, thank you for those four years that you spent in the Marine Corps and going overseas to help keep us all safe. I just spoke to an active duty marine gentleman right before you. So I don’t know what the theme is… I’m glad to be talking to you, and I was glad to be talking to him. So let’s talk about something that stood out to me when I introduced you, because it’s in your bio… And we’ll backtrack too, but I just want to ask about this right now. I said 10 rental units, two flips, one wholesale deal. And then what else did I say?

Megan Greathouse: Farmland.

Joe Fairless: Farmland, what is going on with farmland? So tell us about this farmland investment.

Megan Greathouse: This one was a little more of an experiment for us, I guess. We’ve always liked the idea of having some lands that we could use for our family eventually. And my husband likes hunting. So we decided, especially during COVID, when things were kind of shut down, and just working differently, that we were going to look into some of it. And we said, “You know what? We could go in and we could look for some land to flip. We could look for some land where the income from the farming kind of helps out…” Generally, what we’ve seen in our area is that it doesn’t cover everything, but obviously, the farming rent helps. And potentially, we could even find something where we go and spend time with our kids on weekends and such. And what we ended up finding was more of a short to mid-term property, 60 acres, about an hour and a half from St. Louis. And we thought eventually, we could potentially build something here. It’s kind of vacant farmland, so it doesn’t have a house on it for weekends with family or anything. And that would be a way to flip it. Or we happened to meet a great broker who really knew the values and was able to bring us something under market value. So we said, “Or we can test this out and kind of flip it more short term.”

So right now, we’re deciding what we do with that going forward, but that one is a lot more of an experiment and it’s a lifestyle thing, and it’s one of those cool things where you get yourself into real estate, you start to understand how it all works, and you get to try new and interesting things, and you get to do things that also have a lifestyle benefit because you understand the power of the options created by real estate. So that’s what we’re doing with that one right now.

Joe Fairless: So you own it and you’re in the process of trying to flip it?

Megan Greathouse: Yeah. So we’re going back and forth between, do we build on it, and then flip it when we’ve put some more money into it and created more of a getaway kind of place? Or do we go ahead and just flip it pretty much as it is. We did some basic cleanup of the land, because the people who owned it previously had not paid much attention to it recently. So we might end up going with the shorter term option right now, just because we’ve got some other opportunities on the horizon, that using that money more quickly would help with.

Joe Fairless: Got it. Alright. So numbers on that are what?

Megan Greathouse: We bought that in just a handful of months ago, at 240. And it’s one of those things where we could turn around and sell it for probably 270 or 280 if we wanted to, in fairly short order, and it wouldn’t be some huge amount that we’d make back on it after commissions… But we’d get a chunk of money back that we could use for other things. And now we’ve got our foot in the door with understanding buying and selling land.

Joe Fairless: What would you do differently knowing what you know now when you purchase the next farmland?

Megan Greathouse: We really do like the idea of holding farmland a little bit longer term and having some personal use component to it. We bought this one thinking, “Sure we could try building something on it.” And then with how far out it is, we realized that’s a pretty big task with everything else we have going on. So I think a future purchase, we would definitely look for something that already has a property on it. If anything, we’re just improving the existing home, because then there’s a lot more personal utility that we can enjoy while we hold the property in the future.

Joe Fairless: Let’s talk about the two flips that you’ve done. Have you exited both of those?

Megan Greathouse: Yeah, those were somewhat earlier on. I definitely prefer buy and hold over flips. But they were kind of those things where as you learn, you try different things and you take advantage of opportunities when they come.

Joe Fairless: And in order to buy and hold, you need money coming in, obviously, as we all know… So if you’re not flipping and wholesaling actively, where’s the money coming from, since you left your W2 job to continue to build on that 10 unit portfolio?

Megan Greathouse: Right now, fortunately, we’ve been able to renovate properties that we bought for long-term buy and hold, and increase rents. So I’m actually in the process right now of refinancing pretty much everything, because we’ll be able to get cash out of those and have lower monthly payments, thanks to these insanely low-interest rates right now. So it’s a pretty sweet deal there. But yes, I did do a couple of flips, because to your point, if you want to keep building capital for more buy and holds, that’s one way to do it. And you already know real estate, and it can be a fun process, so why not?

Joe Fairless: With the new loans that you’re putting on your 10 rental units, is that a portfolio loan? Or are you getting individual loans? What type of service are you working with?

Megan Greathouse: We’re just working with the same lender that we’ve used since the beginning for the one to four-family space. So everything we have is in that space. And these conventional loans, obviously, have some of the best terms out there. So we’re working with the same people we’ve worked with in the past, we have a great relationship. By the time we’re done with these refinances, we’ll have done probably a dozen loans with them, of different types. So yeah, no portfolio loan. We looked at a line of credit, but with the rates as low as they are right now for conventional loans, and the fact that we were a point and a half higher on our current rates, it made sense to do the full-on refinance.

Joe Fairless: Is that a local lender?

Megan Greathouse: It is, yes.

Joe Fairless: Okay. So it was like a credit union or community bank.

Megan Greathouse: It’s a local mortgage lender, and they actually, on top of having just worked with us for three or four years now, the loan officer that I work with is actually one of the sponsors of my local St. Louis real estate meetup, as well. So we have a relationship that works for both of us in many ways.

Joe Fairless: Why do you host a St. Louis meetup?

Megan Greathouse: I think there’s a lot of power in having a very strong network, and I think that in real estate you really have to create that for yourself. When you’re working a W2 job or you work in an office, it’s around you; people are around you, colleagues around you all the time. That’s not the case with real estate investing most of the time. And I am a very outgoing and relationship-driven person, so pretty quickly – I think it was right after I bought my first four-family, I started posting things on the BiggerPockets forum, I got enough people interested in chatting that I said, “Let’s all get together as a group for a beer and talk.” And it naturally evolved over time. And on top of giving me a great resource of people to work with, it’s offered opportunities for me to help others. I’m just a handful of years into this, and it’s really easy for me to talk to some of the newbies at this point and share what I’ve learned just in the few years and be relatable to them right now. And then it’s also created a bit of, I guess, a reputation for me in the area too, because I’m someone who hosts a fairly well-attended meetup at this point and a fairly well-known meetup. And I think it helps me, and it helps me help others and a lot of different ways.

Joe Fairless: Just to learn a little bit more, for someone who’s thinking about starting a meetup. And during the pandemic, obviously, we’re just going to put an asterisk on this conversation, because we’re not having an in-person meetup; I don’t imagine that you’re having in-person meetups.

Megan Greathouse: No, not right now.

Joe Fairless: But just during a time when there’s no pandemic, what specific cause and effect business benefits that you’ve seen as a result of hosting the meetup?

Megan Greathouse: I’ve had a lot of folks come to me with different deals that they’ve found that they think might fit what I’m looking for. I’ve been able to strengthen relationships with some of the folks that I work with for real estate. So my lender, my contractor, my insurance company, my title company – they’re all sponsors, and I think that keeps me kind of top of mind for them in some ways, and allows me to give back to them in ways that keep our relationship really strong, and that makes things easier on me when I work through my real estate deals. And then I’ve met people who will be potential future partners as well. So it’s done a lot. I could probably name three or four other things too.

Joe Fairless: On the fix and flips, going back to those… Did you make money on both of them?

Megan Greathouse: Yes. One of them I made a whole lot less than I anticipated, and I would say that was my true fix and flip. Like I said, I’m a buy and hold investor. So both of these, they started as rentals that I kind of quickly decided I wasn’t going to keep them long term. They were single-families, and I liked the small multi-family space better. But they had multiple exit options when I got into them, so then I went the fix and flip route pretty quickly after buying them and holding them for a short term as a rental.

Joe Fairless: Can you talk about the one that you made a whole lot less on than you thought?

Megan Greathouse: Oh, yes. I actually love this property and this story. And no regrets, because I learned so much… But it was a two and a half story, 1910 build, in an amazing neighborhood in St. Louis City. Walking distance to one of our major universities, Washington University in St. Louis. And I found it actually on BiggerPockets forums. So it was an off-market deal. Another investor was looking to offload it because he was getting ready to invest in another market. And I reached out to him out of curiosity — even though I kind of prefer duplexes and four-families — because his rent was so high. He mentioned is his rent was so high, and we started talking, and it was because he was renting to students and he had kind of a unique model.

So I knew going into it that I probably didn’t want to do the student rentals, but I figured I’ll buy it, I’ll let these students finish their time in the home, and then I’ll renovate it, because there are so many beautiful homes surrounding it that have been updated and maintained and they’re historic. And I was expecting to make about 40,000 at the end of the day. And by the time we finally sold it, after many many delays, I think I eked out 10,000. And that was with my contractor accepting some of their mistakes and taking a hit on their side.

Joe Fairless: Knowing what you know now, what would you do differently, if you were presented a similar opportunity and you decide to buy it?

Megan Greathouse: Knowing what I know now, I think I would be much, much tighter on my timelines and the way that I set those up. And then much tougher on the management of the contractor as well. And I potentially would have switched contractors halfway through if I needed to. Because the vast majority of what came up was major delays that cost money, and holding costs, and everything. And that’s what really ate into my profit at the end of the day.

Joe Fairless: What are some specific things with the contractor in this case that took place?

Megan Greathouse: The contractor actually went through three different project managers during the time of my project. And every single time we switched over, it was just more delays, and more learning curves, and changing of how things were happening.

They also were not on top of their subcontractors. So there are multiple times when I reached out to them and said, “Hey, where are we? Are we done with XYZ?” And they said, “Well, no, because we’re still waiting on the plumber.” Or, “We’re still waiting on this guy or that guy to come in.” And I’d asked them about that. And it’d take two or three weeks before that person who was supposed to come in a couple of days was finally there and getting done what they needed to do. So it just continued to drag out. And I tried to stay on top of my contractor, but I couldn’t seem to make them stay on top of their subcontractors. So that was something I needed to improve. I need to be better at finding contractors who are more on top of it, and/or being willing to fire and hire someone new when those things come up.

Joe Fairless: 10 rental units. On average, what does a rental unit generate in profit each month?

Megan Greathouse: Each of my units net cash-flows after everything about $300 per month is probably where we’re averaging out at this point.

Joe Fairless: And what’s the average price point for what you purchase, each unit?

Megan Greathouse: Yeah. In St. Louis – it can certainly range by neighborhood, of course – anywhere from 50 to 80,000 per unit at purchase. And it definitely varies by neighborhood.

Joe Fairless: Yeah, I get. Let’s talk specifics. Let’s talk about the very last deal that you bought. How much was it?

Megan Greathouse: This one I bought for $132,500, and it’s a duplex in a really awesome and popular neighborhood of St. Louis called Dogtown.

Joe Fairless: Dogtown. Alright. Is that an artists and hippie area?

Megan Greathouse: It’s actually more of like old Irish pubs and walking distance to Forest Park and all its attractions.

Joe Fairless: Okay. $132,000 for a duplex. And what’s the rent for each of the units?

Megan Greathouse: So one side, the previous owner had done some basic cosmetic updates… And these are one bed one baths, by the way.

Joe Fairless: Okay, thanks.

Megan Greathouse: They did some basic cosmetic updates, it was nothing too special. But we currently have 700 in rent per month on that one. On the other side, I put about 20 to 25 to really open it up and create a bigger kitchen, and a better flow, and nice cosmetic updates… And that one is currently renting for $900 per month, which I think we were filling that one during COVID. I think we could easily get $1,000 for that one next time around.

Joe Fairless: How do you look at ROI when you’re looking at doing a $25,000 renovation? What must you have from a return standpoint, if any, to justify those cap-ex dollars?

Megan Greathouse: For this one, I knew I was going to do it, because while the one side had been kind of updated, the other side was in really rough shape. So for that one, the side that I updated previously had been renting for I right around $500, maybe 550. And I knew I could get 900 maybe more if I updated it. So that monthly is $300 or $350 per month, maybe more, that I would get on top of if I just rented it as it was. So annually, that’s like $4,200. So if I put in $25,000 to get an extra $4,200 per year, that’s like a 16% or 17% return. So my cash on cash return, I like off the bat when I’m buying something to have greater than 10% cash on cash return. And then when I’m putting work in, I hope I’m getting into the mid-teens on cash on cash return, and then eventually able to refinance out a lot of my money and push that return rate even higher on the cash that I have left in, if any.

Joe Fairless: Do you self manage?

Megan Greathouse: I do.

Joe Fairless: Well, you’ve got some interesting stories for us then, from that…

Megan Greathouse: Indeed. [laughter]

Joe Fairless: What’s something that comes to mind?

Megan Greathouse: So I actually just had my first issue with bedbugs recently. That has never happened to me before and it was a little frightening, honestly. Especially because I had just been in the unit not that long ago. I actually do my best to not go to my units personally as much as I can. I have a really great handyman, a great contractor, a great leasing agent, so I outsource the things that require a lot of run around and time physically at units. And they are excellent about reporting back to me on what’s going on. But I just so happened to have been at this unit previously. So of course, I had, first of all, just the heebie-jeebies for about 48 hours after I found out… And then it’s not cheap.

Joe Fairless: You were in the Marine Corps, right?

Megan Greathouse: I was. I was. But I didn’t ever get bedbugs in the room. [laughter]

Joe Fairless: I know a Marine’s kryptonite now. Thank you.

Megan Greathouse: [laughs] Yeah, I’ve got two young kids. And I just was having these horrible images of dealing with bedbugs in my own home, with a four-year-old and a one-year-old… So I think that’s probably been the worst of it honestly… When you’re dealing with things like that, it’s expensive. It’s one of those things that in a single-family, I think it would 100% make sense to bill it back to a tenant. In a four-family, it’s a little harder, because you just don’t quite know for sure how these things could have spread… So we did our best to maintain boundaries with the tenant and make sure they kind of had some responsibility, but that we also took responsibility, and cleared it up before it became a problem for the whole building. And it was cleared up pretty quickly, and we haven’t had any issues since, but that was probably one of the biggest pit in your stomach feeling when you get the call from someone saying, “I’m going crazy. I’m all itchy and I think I have bedbugs.”

Joe Fairless: Yeah, well. Was it [unintelligible [00:21:35].18] treatments? Is that what they did?

Megan Greathouse: They actually did a heat treatment on it.

Joe Fairless: Heat treatment. Okay.

Megan Greathouse: So there are two units top and bottom on the left, two units top and bottom on the right. They inspected the right and saw no issues. On the left side of the building, they did do chemical treatment in the upstairs unit. In the bottom unit they did the full-on heat treatment, and then they went back for two checks after that.

Joe Fairless: How much did it cost?

Megan Greathouse: I think we were at $1,500 for that.

Joe Fairless: For all of it?

Megan Greathouse: Yeah, for all of it. Well, this is in one of the areas where rents are a little bit lower. And even though these are slightly bigger units, that particular tenant only pays $525 per month. So when you look at the amount going into that unit just in one month from bed bugs that, frankly, they probably brought into the unit, it kind of stinks. But you’ve got to do what you got to do. I’m not going to be a slumlord.

Joe Fairless: There’s a pro tip that I came across, and I learned the hard way with bedbugs… If you’re looking at a property, and the owner has a spray bottle, and it kind of smells like rubbing alcohol, and they spray themselves before and after they go into the unit, then there’s probably a bedbug issue. I didn’t pick up on that until later. Fortunately, I didn’t ever get them, but it was missed in an inspection early, early on in my real estate days… And that spray bottle, I was like, “Wait a second.” And I did a Google search. “Yeah, rubbing alcohol, doesn’t take out an infestation, but it kills them.” That’s why he was spraying his legs before and after.

Megan Greathouse: Oh my gosh, wow. Yeah, there’s your sign now, I guess.

Joe Fairless: There’s your sign. Yep. spray bottles. So what’s your approach when you have a unit that is vacant? Do you have any leasing tips that you’ve come across that have been really helpful for you to fill your units quickly?

Megan Greathouse: Yeah, we actually have a pretty solid process with my leasing agent. And this was one of the issues that I had with property management companies. I’ve worked with a few before I took over and self-managed. And none of them were bad, but I always felt like I had vacancies for a little too long. So I found a really awesome leasing agent who’s just kind of a hustler, and he’s willing to do things my way, and not just stick to something that he’s been taught elsewhere.

So I have written into my lease that we’re allowed to enter the unit to do showings within 30 days of a tenant leaving. And generally, this is happening when it’s a solid tenant, and they’re moving on just because they are moving in with a roommate, or moving for work or something. If it’s been a hairy situation with a tenant, you might not want to actually show while they’re still there. But so far we’ve been able to.

So I have files with pictures and descriptions of all my units, and if I haven’t done any major changes to the units, I’ll just use those existing pictures for the leasing agent to get his advertising out there. And he’ll list the unit three to four weeks before my current tenant leaves, and then about two weeks before the current tenant leaves he will usually ask for an hour or two on a Sunday to do a few showings. Usually, he’s done decent enough phone screenings that by the time he’s done with those showings, he is sending me one or two applicants. I will run them through my own application process. It’s all online. It’s very easy. I do it through [unintelligible [00:24:48].24] so they fill everything out online. We do the background and credit checks all online. And oftentimes, I have a new tenant who has been approved, has sent me their security deposit, and is ready to move in within a few days of the old tenant moving out. So they’re usually lined up and ready for it before my old tenant moves out. And then I get my occupancy inspection done and the cleaning done the day after my old tenant moves out. And a day or two later, the new tenant comes in. So my vacancy is a few days.

Joe Fairless: I’m glad I asked you that question. Thank you for sharing that.

Megan Greathouse: Yeah, sure thing.

Joe Fairless: Taking a step back, what’s your best real estate investing advice ever?

Megan Greathouse: I think use time to your advantage. And with that one, I actually mean, not moving super fast, but the amount of time that you have to build with real estate is always helpful. So for instance, a property that I bought four years ago, just by naturally taking care of it and increasing rents as tenants turned over is now worth almost 50% more than it was when I bought it, thanks to buying in kind of an up and coming area, taking care of it, and increasing rents. So all of a sudden, even though cash flows were maybe early on $100 per door per month, and then $200 and then $300 – the cash flow has grown, but my value has also grown and I’m able to refinance and take cash back out and put that into other rentals. And it’s just amazing, the snowball effect that you have over time with real estate. It’s not “get rich quick,” but it’s quicker than just throwing money in a savings account forever. And there’s a lot of power behind it. You make money in a lot of different ways. So time is actually very helpful in real estate.

Joe Fairless: We’re going to do a lightning round. Are you ready for the Best Ever lightning round?

Megan Greathouse: Very ready.

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

Break: [00:26:37][00:27:24]

Joe Fairless: Best Ever book you’ve recently read.

Megan Greathouse: I feel like every other book I read, I’m like, “That’s my favorite book ever.” But I just read Twelve Pillars by Jim Rohn. It was something someone gave to me years ago and I put it on the bookshelf and just recently found it. And it was really great; just mindset and mentality for a successful well-lived life.

Joe Fairless: Best Ever way you like to give back to the community.

Megan Greathouse: I really like to be a networker. Someone who can connect people, someone who can also teach and help others… So I run my real estate meetup, I try to answer all the questions that I get from people who are starting out in this game, or who are pivoting in some way in the field… And then I also co-host a podcast with Josiah Smelser called Multi-family Mavericks. As we’re both looking to scale into larger multi-family, we are taking others who are in the same place along with us and interviewing a bunch of multi-family investors to give everyone a leg up.

Joe Fairless: What’s a bad piece of advice you’ve gotten or heard?

Megan Greathouse: I think anybody who tries to tell you there’s one way to do something is giving you bad advice. Generally speaking, there are many ways to do almost everything in real estate. There are very few black and whites in real estate. And if someone who’s talking to you isn’t giving you the perception that this is what works for them and here’s why, they’re just telling you this is right and that’s wrong, it’s probably bad advice.

Joe Fairless:  I love that. So, so true. Not just real estate, right?

Megan Greathouse: True.

Joe Fairless: Just life in general.

Megan Greathouse: Everything.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Megan Greathouse: I am kind of all over the place, but I have an Instagram called @parttimeempire where I really chronicle what I’m doing with real estate. My goal here is not to scale the biggest, fastest. I do want to scale and grow big, but it’s about the lifestyle for me. So @parttimeempire is where you can see how I balance being a mother, being an entrepreneur, being a real estate investor, and having fun along the way.

Joe Fairless: Well, thank you for being on the show. We talked a little bit about farmland, which I was really curious about, so thanks for talking about that. Will you be writing about the exit of that whenever it happens? In Instagram or wherever else?

Megan Greathouse: Yeah, I’ll need to share it. Like I said, we’re still getting the details nailed down, but I’ll have to share it for sure.

Joe Fairless: And then the flips as well as the reasons why you do a meetup, the benefits, some specifics on the duplex that you’ve recently purchased, and why one of the flips didn’t make as much as you wanted because of some management optimization that has since taken place for future deals… So thanks for being on the show. I hope you have a Best Ever day. Talk to you again soon.

Megan Greathouse: Thanks, Joe. You too.

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JF2352: Playing A Real Estate Version Of Moneyball With Kevin Clayson

A divorce moved Kevin to change his career path. After working in retail, he decided to try himself in the financial sector working with mortgages. In 2007, he started a Done For You Real Estate company together with his three friends. They make investing in real estate easy by educating their clients about the market and guiding them through the closing process. Their mission is to help people replace their income and secure their future by making a conservative investment that will hold no matter what the economy’s like.

Kevin Clayson  Real Estate Background:

  • Owner of Done For You Real Estate a multi-million dollar real estate investment company
  • 15 years of real estate investing experience
  • His company has transacted around 4,000 single-family homes
  • Based in Utah
  • Say hi to him at www.dfy-realestate.com 
  • Best Ever Book: Go-Giver

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Leave people better off” – Kevin Clayson.


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Kevin Clayson. Kevin, how are you doing today?

Kevin Clayson: Good, Theo. Thanks for having me, man. How are you?

Theo Hicks: I’m doing well, and thank you for joining us. I’m looking forward to diving into what you do. So Kevin is the owner of a Done For You Real Estate, a multi-million dollar real estate investment company. He has 15 years of experience and his company has transacted around 4,000 single-family homes. He’s based out of Utah, and the website is dfy-realestate.com. So Kevin, do you mind telling us some more about your background and what you’re focused on today?

Kevin Clayson: Yeah, sure man. I’ll be honest, I never thought I’d be here. I was not one of those kids growing up that was repackaging pixie stick powder and selling it to my friends at school, right? Like I was not entrepreneurial at all. I grew up in California, just right outside of Oakland, and I just grew up like a normal kid. My dad, he was always working sales jobs. I just thought, “No, I’m going to go to school. I don’t know what I’m going to do. I’m going to go get a good job somewhere”, right?

Well, I ended up graduating high school, went and lived overseas for a couple of years, came home, got married shortly after I came home. I was in my early 20s. And dude, three and a half years after getting married, I find out my wife is leaving me. It totally rocked my world… So I had this crazy thought. The thought was, “Oh my goodness. Maybe if I stop working retail and I go get a real job with my real college degree, maybe she’ll come back to me.” It didn’t work out, which was a good thing. But what I ended up doing is I ended up getting a job with Wells Fargo, doing mortgages, unsecured lines of credit, and doing auto loans. And the reason why that was such a crazy piece of the story is I had never even thought about setting foot in the financial realm whatsoever… And I found myself kind of liking the mortgage product. I’m like, “This is kind of cool.” I was kind of digging this idea of these amortization schedules, which I had never heard of before. And I was living in Utah at the time, I came back here to Utah to go to school, and here I am starting to do loans.

And so one day, I was prospecting. And I called up a buddy of mine who I knew was doing a bunch of real estate investing, and I’m like, “Hey, who does your mortgages?” And he’s like, “Well, I kind of have somebody… But dude, it’s been a long time. We should go to dinner.” Well, we go to dinner, and there were about four of us that decided to start a company to help people invest in real estate. So at the time – this was like 2007 or so when we started the company – the whole idea was we wanted to help people transact real estate instead of just pay for education. Because there’s awesome education out there, there’s awesome mentorship and programs. But we saw so many people that would spend tens of thousands of dollars to learn how to do real estate, but then would never go transact real estate. So we’re like, “Well, let’s fix that.” So we just started to help people do real estate. One of us would put a plan together, I’d do the mortgage, one of us would find the home, and then the other would help the person rent it out. And frankly, that’s what we’ve now been doing for 13 years. Now we’ve got clients from all over the country and we’ve done, as you mentioned, a good number of properties. So now, that’s what we focus on, helping hardworking Americans stay focused on what they’re best at, and then we help them by investing in simple and conservative single-family, residential real estate in some of the best markets in the country by doing all the work for them, so they can gain all the benefits from real estate without having to be an expert in without having to do all the work themselves.

Theo Hicks: Wow. It’s always interesting when I hear people’s conception stories starting business, and it always just seems to be, “Oh, I just met some dude I hadn’t talked to in years, and then we started a company together.”

Kevin Clayson: That’s the power of networking. Right?

Theo Hicks: Exactly. Yeah. I can’t tell you how many times I hear that… So it definitely reaffirmed the power of networking. Okay, we’ve got the four people, we’ve got the planner, the mortgage person, the home finder, and the person who rents it out. So Done For You Real Estate, obviously by the title, is a turnkey company.

Kevin Clayson: Yes, it is. It’s turnkey, but with a kind of like a little bit of a difference, right? So a lot of turnkey companies, if you go to the website, it’s “Hey, here’s properties, and it’s ready for you. Buy it.” That is not what we do. Everything we do is purely custom. We always specialize in a certain type of real estate, right? It’s got to check the boxes.

We have teams on the ground in multiple markets throughout the country. We get clients that come to us from all over the country that just wants to buy real estate. So we can help people buy real estate in states they don’t live in, assuming that the real estate is a good fit for them. So we take our clients to different states, into different teams, and look at different price points of properties, at different cash flow targets, based on what they’re trying to accomplish. Because for us, we try to help our clients replace their income, one property at a time.

So it’s very much like they’ve got money in a 401k or an IRA, or maybe they’ve got home equity, and they’re looking at it and they’re going “Oh my gosh, the math isn’t going to add up.” So then based on wherever they are and whatever assets they have available, we can create a custom income replacement plan, and then begin to transact real estate with them in an order that gets them to total income replacement, hopefully within the next 10 to 15 years. So it’s simply conservative long term real estate, but there’s a plan to it, so that you will organically grow the portfolio over time.

Theo Hicks: So when you say there’s a difference between what you guys do and what the traditional turnkey company does, it’s that you kind of enter into the process a step earlier, and rather than just presenting a bunch of properties, you start at what’s a good fit for them based on what they’re trying to accomplish and what they are capable of. So from my perspective, if I want to do this, how does that work? Am I paying you money to do the plan? Or is that something that kind of comes with assuming I’m going to buy a property? How do you know who to do this plan for? Is it anyone who comes to you, or do you need to see something first?

Kevin Clayson: No, what we do is we always do kind of an introductory call. So we’ll just talk to people and we’ll make sure that they’ve got assets and ability. And if they have assets and ability, and they think that they want to move forward with our company — we actually own a mortgage brokerage. We’ll do a full pre-approval in-house. We effectively underwrite the file in-house before we ever shop a lender, so we know how many pieces of real estate they can buy, which markets we ought to target for them, and what their cash flow projections, what they need to look like. Then we assign them an individual to work with them and introduce them to our teams in the market, help them evaluate properties, they get properties under contract, we go through and do the loan for them… And then where we make money is we charge a flat, per-property fee. It’s a separate buyer-paid commission, only charged at closing, of $4,995, on the closing documents. And we include that in all the calculations; we’re trying to determine whether or not ROIs are going to fit. We’re saying what’s our total out of pocket expenses, we’re going to take everything into consideration from the downpayment to what our fee is, to potential rehab expenses, and then we’re going to look at projected rents on the property, and projected appreciation, and then we’re going to just do the calculation and say, “Does this give us the kind of projected rate of returns that our clients are looking for?” Once we know that that’s the case and they put the property under contract, go through that process, we get them closed… We also own a little insurance company, so a lot of times we can do the policy for them. Then we’ve got our property managers that work with our teams in the market, that then find the tenants and rent them out.

Now, the other place where we differ, it’s not only the customization on the front end of putting a plan together, we don’t charge anything until someone closes on a home with us. We’re $0 until you close on the home; that means we’ve got to perform. And that, I think, is why our clients come back again, and again, and again. Because they’re not paying us an upfront fee. We just go to work and do the work.

So that kind of customization of showing them properties that are custom fit for what they’re trying to accomplish, that’s one aspect that’s unique. Another, the fact that they can work with our teams in multiple markets simultaneously, as opposed to just look at a list of homes and kind of pick the one they want best, combine that with the hand-holding we do throughout… And then where we really are quite different is most turnkey companies, once you close on the deal, it’s kind of like “Cool, good luck. I hope it rents well.” We continue to work with our clients, year after year. In fact, annually, we put together annual property and market reviews on their property. We pull the numbers, we see how it’s performing, we see what the market is looking like, so that they know when it’s time to refi, when it’s time to sell, when it’s time to just kind of hang back and hold tight.

So we continue to work with our clients year after year, because the way we’re successful as a company is when our clients do multiple transactions over a number of years. When they sell one, and 1031 exchange it into a couple more.  So that’s kind of the way that we approach it.

Theo Hicks: So it sounds like it’s pretty customizable, and I’m sure the answer is it depends, but what type of single-family homes are you targeting? Are they already fixed up and turnkey? Or are you finding distressed properties and then fixing them up? Or is it a combination of both?

Kevin Clayson: Good question. It does depend by market. The acquisition strategy depends on the market. But generally speaking, we’ve got some new construction products that we do in Orlando, because we work with builders out there. Indianapolis is another one of our markets. We’re largely looking at recently published MLS deals. Sometimes in Memphis – we do a lot there – we can get pre-MLS deals because we have a reputation and people kind of know. And then we’ve got a couple of other markets we’re opening later this year. So it totally does depend, but they’re always in the same box. Here’s the box – three or four-bed, two-bath, middle-class type neighborhoods, two-car garages, ranging in purchase price from $160,000 to $230,000. They’re going to cash flow anywhere from $300 to $600 net cash flow a month after you pay everything out. So it’s kind of like blue-chip real estate. Slightly higher quality. We’re not doing really low-end stuff, we’re not doing really high-end stuff. We’re frankly doing the kind of single-family residential real estate that is in the highest demand across the board.

And the reason that we do slightly nicer properties and slightly nicer neighborhoods – and these are neighborhoods that are primarily owner-occupied, neighborhoods with a handful of rentals, the reason that we do that is usually the tenants, they’re in a position where maybe after they rent from you for a few years, they may be the ones that buy your property; now you have a chance to sell that property, do the 1031 exchange to potentially grow your portfolio. So the quality of tenant that we attract by targeting these types of homes in these neighborhoods is a higher quality tenant, which means your rent is far more dependable, and usually, your properties are taken care of much better. So usually any of these properties across the board – we don’t do massively distressed properties. We’re not doing stuff where we got to go and throw 100 grand or 50 grand at it. It’s like a few thousand dollars, lipstick and paint, get it ready. Because usually by going and finding deals with our teams on the MLS – and our key is we just we are super zoned in on our neighborhoods in our zip codes and our criteria, so we can take action on deals quicker than a lot of people can, just because we have the buyer pre-approved ready to go. So we know we have everything in front of us to be able to go.

But what’s cool about that is if we get homes off the MLS, which we do a lot of the times, those are homes that were listed by a primary residential owner, so they usually try to get it pretty nice. They try to get it looking good. So that means we can go in and just do the most essential critical things that mean it’s going to rent as quickly as possible, for as much as possible.

Theo Hicks: And again, I know it depends, but what’s the range of rents on these types of homes? Just to make sure I’m understanding…

Kevin Clayson: So you’re probably between a thousand and 1,500.

Theo Hicks: Okay.

Kevin Clayson: That’s probably the range for the vast majority of them.

Theo Hicks: And then you mentioned the MLS and then developers. What else are you doing to find deals? Is it just MLS and developers, or are you doing other things as well?

Kevin Clayson: We used to do a ton of auctions, but auctions just aren’t quite what they were during the great recession. There’s a lot of institutional capital, it’s really hard to kind of compete at the auctions… And to get the stuff that we want to get, it’s just not always as available at the auction like it used to be. So it’s primarily MLS, new construction, and sometimes pre-MLS stuff. But we don’t do foreclosures, we don’t really do short sales or anything like that. It’s really just super-boring, straightforward real estate, that works, and works, and works.

Theo Hicks: Do you ever have an issue with the deal flow? Are you able to keep up with the demand of your clients pretty well just through those?

Kevin Clayson: Yeah, it’s awesome. We’re totally able to keep up. And the main reason is because we just have awesome teams. And we’ve got multiple people in our teams, on the ground, in those markets. So having developers and stuff that you can work with from a new construction standpoint – that can ease some of that. Because look, nobody else is looking at those deals, right? Those are things that we’re able to do because there’s effectively a portion of that subdivision earmarked for Done For You Real Estate clients, because we want it to be primarily owner-occupied in that neighborhood. But that gives us a little bit more flexibility, so we don’t necessarily have that supply problem, even if demand is high. And that’s been really awesome, for our clients, especially.

Theo Hicks: How many deals do you guys do on average per year?

Kevin Clayson: We’re not a huge company. We probably do between three and 500 deals a year. And those are purchase transactions. We’ll probably help our clients sell another 200 or so deals a year. It fluctuates, but that’s pretty common. And in fact, one kind of cool thing that we do is on our website – you can go to dfy-realestate.com – there’s a tab that says see the results. I don’t know anybody else that does this… We post our annual transaction reports. So you’ll be able to see every transaction we did. So we give these partial addresses; it’s not full addresses, but you can see what the purchase price was, how long it took to get the property rented out, what the cash flow was on the property… When our clients are listing and selling the property you can see how much equity they were able to capture when they sold the property. We put it out there by market, so that that way, we could just be super upfront and honest and stand on our track record and say, “Look, this is who we are, this is what we do.” And we like that, because we don’t know a lot of other people that do that. But we’re happy to, because we keep track of that anyway, so we might as well share it with the world.

Theo Hicks: Alright, Kevin, what is your best real estate investing advice ever?

Kevin Clayson: Oh, dude, that’s one of my favorite questions. Okay… Do you remember the movie called Moneyball? With Brad Pitt and Jonah Hill.

Theo Hicks: Yup.

Kevin Clayson: Okay, so I grew up just outside of Oakland. So I grew up an Oakland Athletics fan. And I didn’t know Moneyball was going on until the movie came out. And if you haven’t read the book, you should do that as well. But if you remember, what happened was the Oakland Athletics were trying to compete with the New York Yankees. The New York Yankees had like one of the largest payrolls in all of Major League. The book and movie specifically chronicle the 2001 season. And the A’s didn’t have that much money, but they had to compete with the big boys. So what they did is, instead of spending a ton of money on flashy, expensive players that maybe would fizzle out, maybe they go and get you a whole bunch of home runs, there’s a little bit of a gamble, a little bit of a risk, what they did is they bought dudes that could get on base; good at taking walks, good at bunting, good at hitting singles. And they called it Moneyball. It was the idea that they were paying for on-base percentage more than they were flashy, big-name players. The best advice I can give anybody when it comes to real estate, especially when you’re starting out, is don’t go try to hit home runs. Go play real-life Moneyball with real simple real estate. Hit real estate singles.

So so many of us want the big deal, right? We want to get up there, we’ve heard about how much money you can make in real estate, and we just get up there, we swing for the fence. And then you’ve got gurus out there that’ll say “Oh, whatever — you miss 100% of the shots you don’t take.” Or “Babe Ruth, he struck out more than anybody. But he had more home runs than anybody.” And we use this thing that we kind of use as psychology to make somebody feel guilty if they don’t swing for the fences. But here’s the difference between you and me, maybe, and I don’t know about you, Theo, but me and Babe Ruth… The difference is this is – when Babe Ruth got up and he swung for the fence every time, if he struck out, he had another at-bat coming in an inning or two later.

For most folks that have worked really hard to get money saved up for their future, if they get to the plate and they swing and miss, they may not get another at-bat. So what we say is just go hit real estate singles. And that’s that simple and conservative real estate, right? Maybe you’re getting a 30-year fixed loan; you’re going to own it for three, or four, or five years before you sell it. It’s not going to be a traditional BRRRR property where you’re going to try to turn it over really quickly. You’re not going to try to target massive cap rates and massive cash flow. You’re not going to try to go and do a massive rehab. It’s like simple and conservative, super-boring, predictable, but it works. You hit enough singles with enough velocity over enough of a period of time, you win every single game you play. And that’s the way we approach real estate, and it’s what served us well, so that no matter what the world is doing and no matter how many financial crises we have to go through, our clients succeed, the company succeeds and we change people’s lives one property at a time.

Theo Hicks: That’s solid, solid advice. Alright, Kevin, are you ready for the Best Ever lightning round?

Kevin Clayson: Let’s go!

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:20:24][00:21:12]

Theo Hicks: Okay, Kevin, what is the Best Ever book you’ve recently read? Besides Moneyball.

Kevin Clayson: I’ve got to give you two. One is the Go Giver by Bob Burgh and John David Mann. It’s a little business parable that’s game-changing. The other is a little bit more kind of a business book. It’s called Give and Take, by Adam Grant. Those books changed my perspective on everything.

Theo Hicks: If your business were to collapse today, what would you do next?

Kevin Clayson: It’s funny, I’m actually an author, and I do motivational speaking, and I go and I speak at middle schools and high schools and help kids know how to be happy in the middle of really tough circumstances… And I’ve got a book that’s sold in 26 countries throughout the world… So I would just double down and write more books and go speak at more schools and go try to serve more people that way if I wasn’t doing real estate,

Theo Hicks: What’s the book called?

Kevin Clayson: The books called Flip The Gratitude Switch.

Theo Hicks: Congrats on that success.

Kevin Clayson: Thanks.

Theo Hicks: Let’s see… What’s the best deal you’ve done with a client?

Kevin Clayson: It’s hard to say that there’s a single best deal that we’ve done with the client, because they all kill it. But here’s what I’ll tell you. I look at a deal that we did with a kid who had saved up money to get one little investment property before he went and served a church mission. This was back in 2009. The dude put 25 grand down, which was a 20% down payment on a property in Phoenix. He went and served God for two years, he came back he built 60 or $70,000 of equity, was able to refinance it out and go get a second property.

Then he was able to use the equity from those properties, and go buy another property or two, which funded his law school education at Harvard… And now he’s graduated from Harvard, and he’s got this real estate portfolio that could pay off all his student loans if he wanted to, but he just wants it to keep growing. So one simple deal with 20 grand down 10 years ago has transformed this kid’s life. That one I think about it a lot.

Theo Hicks: That’s a good Best Ever deal. What’s the Best Ever way you like to give back?

Kevin Clayson: It’s kind of a philosophy that I try to live by, and it’s not some sort of grand gesture, it’s this – it’s only four words long, it’s “Leave people better off.” And all I mean by that is you think of what this world would look like if every one of us walked into it every single day realizing that all we got to do is leave people better off than we find them. How much better would our marriages be? What would it be like in our relationships with our kids if inside of every small, tiny interaction, we tried to leave them better off? And then what about our clients? And what about the stranger that we meet at the store? What would this world look like if we didn’t try to compete and shout louder than one another, but we just had to leave people better off? So my little contribution is every day, in every way I possibly can, inside of every single interaction I have, I try to leave people better off than I found them.

Theo Hicks: And then lastly, what is the Best Ever place to reach you, and anything else you want to mention before we wrap up?

Kevin Clayson: I want to mention that you’re awesome. Thank you for having me on the show. The show was awesome. If you’re listening, you’re awesome. And the best place to find us is dfy-realestate.com. And also – listen, if you’re listening to this and you’re a podcast fan, we actually have a podcast called Replace Your Income, where we go through our strategy, and go through deals, and talk about what we do with our clients. It’s not nearly as good as this show, but if you’ve got extra time on your run or walking your dog and you don’t have anything better to listen to, give Replace Your Income and listen. And otherwise, social media is always a good place to find us, too. Done For You Real Estate USA.

Theo Hicks: Perfect, Kevin. Well, thank you for joining us today. I can definitely tell you do those kinds of talks, you’re a very good speaker and very animated.

Kevin Clayson: My hands, man. I know we’re like on a zoom call and you’re probably getting motion sick. My wife always makes fun of me. She’s like, “What would you do if you had to keep your hands in your pocket?” I’m like, “I don’t think I can speak if I can’t move my hands. I don’t think it’s possible.”

Theo Hicks: But I can see the passion for sure.

Kevin Clayson: Thanks, man.

Theo Hicks: Thanks for joining us today. I enjoyed this conversation a lot. And really what it kind of comes down to, your Best Ever advice really summarizes everything we talked about, which is you don’t need to hit the grand slam, do the crazy deal that makes you a million dollars or $100,000. It’s just consistent, simple deals over a long period of time. As you mentioned, you work with people to reach your financial goals in 10 to 15 years, not in a week, or a year, or two years even. So in order to do this, you talked about doing the single-family rentals, you were very specific on the type of property that you target…

We talked about how your company is unique, in that it essentially starts earlier on in the process, and doesn’t just give them a menu of roles to choose from and then say “Alright, good luck.” You work with them from the beginning to figure out what their goals are, and then you will match the correct property type and market for their goals. And then you’ll help them through the entire transaction process. And on the back end, you have the property management in place, you do the annual market property reports to help them sell it as well… So it truly is a full service done for you real estate business.

Something else interesting you said that I liked was you focus on following the simplicity, focus on the MLS, as well as new builds. And you focus on new builds because you want to focus on the owner-occupied areas. Because you’ll be able to not only get renters faster, but you might also have the possibility of selling it to that renter on the back end, since most people own the homes that live there. So it kind of increases the chances of you selling the property, or at the very least increase the chance of you selling it faster, once you decide to go time. Plus, you don’t won’t worry about getting the tenant out of there and all that other stuff that delays the sales process.

Kevin Clayson: It makes real estate more liquid when you do that, at the end of the day.

Theo Hicks: Exactly. And then I loved all of your lightning round responses as well. So Kevin, thanks again so much for joining us today. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Kevin Clayson: See you, guys.

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JF2351: CPA Guiding Entrepreneurs To Wealth With Noah Rosenfarb

Noah Rosenfarb is a full-time investor who counsels entrepreneurs that are looking for ways to enhance their wealth while working less, living more, and enjoying abundance. He has 20 years of real estate investment experience and believes that owning fractional pieces in large assets is an excellent tool to create multiple passive income streams.

Noah Rosenfarb  Real Estate Background:

  • Full-time investor
  • 20 years of real estate experience 
  • Portfolio consist of 3,500+ doors plus 500,000+ feet retail office space
  • Based in Parkland, FL
  • Say hi to him at: www.linkedin.com/in/noahrosenfarb 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“The key is having a map so you will know where you are, where you wanna be, and how you’re going to get there. ” – Noah Rosenfarb


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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, Noah Rosenfarb. How are you doing Noah?

Noah Rosenfarb: Awesome. Glad to be here.

Joe Fairless: Well, I’m glad to hear that, and glad that you’re here. A little bit about Noah. He’s a full-time real estate investor. He has 20 years of real estate experience. His portfolio consists of 3,500+ doors, plus half a million square feet of retail and office. Based in Parkland, Florida. So with that being said, Noah, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Noah Rosenfarb: Sure. So I’m a third-generation CPA, and I started my career in accounting, much like my father and grandfather… But I broke away and decided to start a family office. And that family office business has evolved over time where we serve really successful entrepreneurs in everything that they need to have it all in their lives. So we focus on their financial success, of course, but also on their personal success and making sure they’re living the life that they want. And a large part of that is creating predictable income. So we started investing with our clients in multi-family assets and other asset classes over 20 years ago, and it’s just been a great run, and it’s a lot of fun. The real estate portion of my business is a substantial part of our business portfolio, and expecting it to continue to grow.

Joe Fairless: To start a family office, do you have to have money?

Noah Rosenfarb: The way I started was I was really a wealth advisor, and kind of transitioned to a family office for affluent divorced women. That was the niche that I had. So I was neither divorced, nor a woman, but I built that family office. I sold it in 2014 to another registered investment advisory firm, and then I focused on creating a family office for successful entrepreneurs because they were more like me. So I’m an entrepreneur, I own other business interests, I have a large real estate portfolio, and I was really looking for what I needed for my family. I wanted somebody to help me with creating passive income and managing all my finances, but also making sure that I’m training my kids –who are now 13 and 10– about money, and our family business, and what’s important. And then in philanthropy, we have a lot of activities that my wife and I do both with time and money, and orchestrating that… So I wanted to build the team around me. And then it just made sense when friends were coming to me that I had a place to bring them as well. Now we’ve got about 50 families of entrepreneurs that we’re serving, and we invest together in real estate, we invest together in private debt, we invest together in royalties, and of course, in stocks and bonds as well.

Joe Fairless: So many interesting ways to take this conversation… And I hope we can get to a lot of them. First off, affluent divorced women, that was your focus. Why was that your focus?

Noah Rosenfarb: So prior to that, when I was a practicing accountant, one of my areas of expertise was testifying in divorce court about how much money people made, and how much their businesses were worth. And what I noticed was oftentimes, in New York, in New Jersey –which was where our practice was based– we had about 200 million a year worth of assets that were changing hands between the control of one spouse to the control of the other spouse. And the clients that I was working with that were predominantly homemakers, whose husbands were hedge fund managers and entrepreneurs in Manhattan, they really didn’t know what they were supposed to do with this newfound responsibility of managing their assets. And because I had all of the expertise and experience to help them through their divorce litigation, I recognized that there was really an opportunity post-divorce to start managing all the financial aspects of their life that they used to rely on their husband for – taxes, and bill payments, and estate planning, and insurance, and investments. And so I saw that opportunity and I left the accounting firm to build a family office geared towards affluent divorced women.

Joe Fairless: And what are some core things that you were teaching a new client right out of the gate, that perhaps they weren’t aware of? You mentioned something just now, but if you can elaborate on that, I’d love to learn more.

Noah Rosenfarb: Yeah, I think the hardest transition and the reason that we tie my experience from working with these affluent divorced women to my core focus in entrepreneurial families –especially around the time when they sell their companies– is that transition is very similar. You go from having a network of people, and a whole system in place where things are very reliable; your income seems reliable, because it’s coming from your company or it’s coming from your spouse. Your network of friends and family is pretty solid, because it’s either based around your business, or it’s based around the relationship that you have with the core family that you built. And then once that fractures, whether it’s because you’ve sold your business or because you’ve gotten divorced, you need to recreate that predictable income stream, and that’s really scary.

People like to think that when you sell a business and 25 million hits your bank account, that you go out and celebrate that night. Most people can’t sleep that night. And it’s not because they’re excited, it’s because they’re terrified. They don’t know what to do. And so we’ve developed that expertise of helping coach people, and train them, and educate them about what they could do with cash, and how to redeploy it to create predictable income, so that they can focus their attention on the other areas of life that are often more important to them… Whether it’s supporting noble causes, or creating family bonds that are unbreakable… Whatever it is that becomes important to that entrepreneurial family or that homemaker. Whatever it is, we want them to focus on what’s most important to them, and usually, it’s not figuring out how to create predictable passive income.

Joe Fairless: Going along the lines of the personal success aspect of things that you currently help your clients with, the successful entrepreneurs – you’ve just mentioned creating family bonds that are unbreakable. What is your advice for affluent parents? You’re a parent, you’ve got a couple of kids, you said… So what’s your advice to your clients when they ask you”Okay, Noah, I want to give my kids more than what I had growing up, but I don’t want to spoil them. How should I approach this? What are the best practices based off of what you’ve seen other clients do?” What is your answer to that?

Noah Rosenfarb: Yeah, it all becomes partly age-appropriate, partly culturally appropriate, and partially where you are environmentally. So families that live in affluent neighborhoods and send their kids to private schools, where other children have vacation homes and spend summers in Europe, and travel in private jets – what’s expected or reasonable in that environment is totally different than entrepreneurs that live in rural or suburban areas that aren’t affluent. And they’re driving their pickup truck, and nobody knows they have 20 million bucks. So we have to kind of match the environment with the expectations of how to educate children. Then we also have to look at a family’s core values, and understanding what’s important to that family. Why is it that they want to create wealth? Why is it that they’re driven to go out and create more, to buy more, to do more, to succeed more? And usually, what we find out when you start having those conversations is that there’s often part of someone’s childhood that’s driving them to behave in a way that wants them to accumulate wealth; that’s often kind of the fear-based that some people grew up with, which is kind of my situation… I grew up with a single mom that struggled to put food on the table and never really had enough money for us to do the fun things in life…

And on the contrary, my father who was a practicing accountant. When we’d go spend a weekend with him, if it was a rainy day, we’d go bowling in the morning, and go to the movies at night, and go out to dinner… And all of a sudden, just as a nine-year-old kid, I started to realize that having money meant having choices, and that I wanted to have those choices in my life. So that drove me in a certain direction.

For other families, it’s really their own sense of higher purpose and the noble causes that they want to support, and they want to give back to a certain area or a certain community, and that’s what’s driving them. So it’s understanding what’s motivating the family. What’s the story behind it? How do we share those stories? How do we share those values? And then what are the systems and processes we put in place to make sure that the family can act accordingly?

What I like to say is that when families make gifts to their children, they want to be able to do it with an open heart, and also with the expectation that their child is going to make them proud with how they use that gift. And unfortunately, for a lot of affluent families, they start transitioning wealth to their children because their accountants and lawyers tell them it’s efficient, and they can escape taxation, and unfortunately, that’s really a terrible motivator that creates really poor outcomes.

Joe Fairless: It makes sense. I just personally love the approach that you took. You didn’t have a direct answer, because it’s specific to the family and their situation based off of, as you said, age, culture, where you are environmentally… What do you mean by that, where you are environmentally, by the way?

Noah Rosenfarb: Like I said, if your kids are going to a private school and their friends fly in their own plane… Like, I’m hearing in South Florida there are a handful of private schools here where it’s not uncommon for parents to own a private island in the Bahamas, or to have a 100-foot yacht, or to fly on their own private planes. So if your children are in that environment, what’s expected of them and what’s expected of the parents is very different than when your kids are in a public school environment with kids of all socio-economic backgrounds, and maybe even getting an iPhone in fourth grade might be seen as somewhat flaunting your wealth.

Joe Fairless: I get it. Okay. I was taking environmentally literally, which I shouldn’t have. Alright. So I would love to learn just a couple of tactical things that you’ve seen, that have been helpful with raising kids and gifting them money or not gifting them money. So if you can just pick a family, a situation — obviously, we’re not looking for names… But just a couple of tactical things that families that you’ve worked with have done that have worked for them. It might not work for everyone listening who has kids and are affluent, but just a couple of tactics.

Noah Rosenfarb: I’d say one thing that I’ve done with my children based on the education and training that I’ve had, is I’d leave them responsible for as many expenses as I feel confident that they can make comfortably. So for example, when my son has to buy sneakers, we pay $60 and he pays whatever over that he wants. And that just makes him decide if he wants to spend $150 on sneakers, then $90 has to come out of his savings. If he wants to get sneakers for 60 bucks, it doesn’t cost him a thing. That’s a pretty simple way to help children start developing money habits where they have to value $1.

Another example might be talking with your children specifically about your family, and your family dynamics, and your family goals.  So my family does a retreat every year with a professional facilitator that comes in and helps us identify what are the strengths and weaknesses in our family, what are the opportunities and threats, how do we collaborate together to improve our family dynamics and make sure that we’re growing together as a family instead of growing apart? I encourage that for most families as well, especially — when the wealth is obvious, then there becomes a different set of expectations than when the wealth is hidden. And I think when wealth is hidden, it often also leads to unintended outcomes, because mom and dad hold on to their wealth well into their 80s or 90s and until they die, and then a pile of money gets left behind for their kids without ever having the responsibility, without ever having any insights from mom and dad as to what they wanted to do with it. And that’s what’s led to this description of shirtsleeves to shirtsleeves in three generations. That proverb exists in China, they call it rice paddy to rice paddy. In Holland they call it clogs to clogs. So this is a unique feature of humans, is that without the training and education of what it took to create the wealth, it’s going to disappear.

Joe Fairless: And just for anyone who wasn’t following along, it’s the first generation makes it, second grows it, third loses it. Is that basically it?

Noah Rosenfarb: The second kind of spends it, and by the time it gets to the third, it’s gone.

Joe Fairless: Oh, I was giving the second generation too much credit.

Noah Rosenfarb: Yeah. And unfortunately, the statistics are that 70% of people that inherit money, spend it all. And that happens for the second generation. So if you’re lucky enough to be in the 30% that transfers wealth to the next generation, to that third generation, 70% of them lose it as well. So you only have about 9% of families that are able to transfer wealth beyond their grandkids.

Joe Fairless: Family retreat – talking about a family dynamic and having a facilitator. What would you say? Less than one-tenth of a percent of Americans do that? I’ve never heard of that before.

Noah Rosenfarb: It’s very rare. But in my business, we use the entrepreneurial operating system, which is written about in a book called Traction, invented by Gino Wickman. Some people use other similar systems like Rockefeller habits, which was created by Verne Harnish… But all of these systems for business process and business process improvement are all designed around having a plan, having a strategic plan.

Early in my career, I started actually in my college fraternity by developing a strategic plan for our fraternity when I was our fraternity president. And that led to us having the largest house on campus, and we implemented the plan that we created. And when I graduated and got into the working world, I started helping small businesses create and implement their own strategic plans. I was the professional outside facilitator. And I helped these companies scale and go from 10 million to however many million, and have big exits. I did it in our accounting firm, I helped my dad grow his firm from two and a half million to 15 million before he sold it…  And the key to that process was having this map of knowing where you are now, and where you want to be, and how you’re going to get there. Oftentimes, families fail to operate on that same type of professional level.

For the families that we counsel, their family business of just running their family money – that’s a bigger business than 96% of the companies in America. Because only 4% of businesses in America ever get over a million in revenue. And when you think about these affluent families that we deal with, they all have a million dollars of revenue coming into their family. So that family business happens to be quite significant. And they need a plan for what are they going to do with that, how are they going to grow it, and a lot of that is designed around the family dynamics… Because if mom and dad aren’t really clear about how they want their wealth to impact their lifestyle and to impact the legacy they’re creating, the default setting is not a good one.

Joe Fairless: I love this conversation. I could talk to you about this a whole lot, but I know some listeners are also interested in your over 3500 unit portfolio of multi-family, so let’s talk about that. I’m on your LinkedIn profile. I see it says “We bought our first two-family home in 2000 and have slowly built our portfolio to over 3,500 units.” Okay, wow. First off, props to you for that. Those 3,500 units that we’re referring to, is that you’re the only general partner on those? Or a general partner on all of them? Or you also considering limited partner roles in that 3,500 units?

Noah Rosenfarb: Yeah. I’m going to give you two answers to that question. One’s an interesting answer. The non-interesting answer is I’m engaged in the operations and management of those 3,500 units, but we have LP investors in all those deals. This year, we’ll add 1,100 doors. I control all the equity. I have an operating partner that runs the day to day operations. But from a structure standpoint, what’s somewhat unique is we’re never the GP. Our operating partners are the GP, and then our operating partners pay a business that I own in Puerto Rico a consulting fee for helping to put the deal together. And because I’m a sophisticated tax planner, that Puerto Rico company has a 4% percent corporate tax rate, and the Puerto Rico company is owned by my Roth 401k plan. So all of my promotes and all my sponsor fees, they all get taxed at 4% and go into my Roth 401k plan, never to be taxed again. So then when I take that money in my 401k plan and I go and invest it in private debt, or other private real estate, I never pay tax on my profits, and I’ll take all that money out tax-free in my retirement as well.

Joe Fairless: That is interesting. And you are right, there’s a short and a longer version. That’s pretty cool. I won’t try to delve into that tax structure, because I’d be out of my league, and you already summarized it… But I am interested in the general partner role a little bit. So you said you are not the general partner, you have operating partners? Did I hear that right?

Noah Rosenfarb: Correct. So our platform is called Invest With Our Family, and what we do through our family office and through my individual relationships, is we gather capital that we’re going to bring to an operating partner who’s identified an asset, diligenced asset, lined up the financing, has the improvement plan, has already decided that they want to make an acquisition… And whether they’re going to come up with five or 10% of the equity, we’re going to bring the other 90 or 95% as a single check.

We make the process simpler for that general partner, because they only have to deal with us as sophisticated investors, being one point of contact. And then we do all the investor relations. We work with our investor base, we send them our quarterly updates, we send them the distributions, our operating partner just gives us one wire, and then we distribute it out, we deal with all the K1’s to our individual investors, we deal with all the questions they have that come up over time, and we leave our operating partner to focus on what they do best, which is sourcing, diligence-ing, acquiring, and managing properties.

Obviously, what happens from an economic standpoint is that in most of our deals, we’re doing heavy value-add in growth markets, and what we’re looking for are opportunities to create infinite returns where our operating partner is able to attract high loan-to-cost bridge financing at reasonable rates. We go in with the equity, they make their improvements. Hopefully, within a year to two years, we’re able to do a cash-out refinancing and return most of the principal to us as investors, and then when we get into the promote, we’re going to share that promote together. They’re going to receive 100%, they’re going to pay our Puerto Rican business half of that for the work that we’ve done to bring the capital and manage the investor base.

Joe Fairless: Got it. Getting high loan-to-cost bridge loans, and trying to get a cash-out of all your equity within a year or two is challenging, I imagine. What have been the results of the last couple of deals that have gone full cycle? Which it doesn’t sound like you take deals full-cycle, does it? Because you want the infinite returns, right?

Noah Rosenfarb: Correct. We just refinanced an asset that we acquired in Dallas, a 600 unit multifamily complex. We bought it with a large defeasance, so we took over the existing loan. It was about a seven and a half million dollar penalty if we refinance. So we got a nice discount when we acquired it. I think we paid 53 million, and the building was worth, call it 61 or 62, at the time. But we just basically got the discount for the defeasance fee… And we operated that asset for, I think it was about four years. We generated, let’s just say, about a 30% return on our invested capital through dividend distributions of cash flow. And then this year we were thinking about selling it, with COVID. We decided to do a recap. So we recapped it. We got back 170% of our initial investment. So now we’ve basically doubled our money in five years. We still own the asset; we’re going to be able to generate about a 10% return on initial invested capital each year while we continue to own it… And if we were to sell it today, we’d get another, let’s say 150% of our investment.

Joe Fairless: That’s a winner.

Noah Rosenfarb: So it’s a great investment. Yeah. That 200% return, none of that was taxable. The 10% yield that we’ll get should be tax-protected. So there’s really not a huge advantage to go and try and get that other 150% and then incur the cap gains tax. We might as well just keep owning it.

Joe Fairless: How many deals are you currently a part of? You and your group.

Noah Rosenfarb: We’ve done a total of 35 transactions. I think we’ve exited maybe nine or 10 of them. So we had an exit in Arkansas, we had a portfolio that we bought early in the cycle. It was a pretty new, class A, 300-and-something-unit building… And we generated a nice 13% or 14% IRR on that hold. It was a low-risk asset when we bought it. At the front of the cycle, we were buying more A properties, and then as we got later in the cycle we’ve done more value-add. We had an interesting value-add in Decatur, where we actually own about 1000 doors in Decatur, Georgia, right outside Atlanta. We were early there; I would say in 2015 we bought a property for $35,000 a door. We put in another 10k or 12k in the renovation, and then we recapped it, we got out all of our money plus a little bit more. We owned it another three or so years and then we sold it and made 4X our money over the hold.

Joe Fairless: What deals lost the most amount of money, if any?

Noah Rosenfarb: So we haven’t had a realized loss yet. We have two shopping centers in our portfolio, both of which are grocery-anchored. So the grocery tenants are doing fine, but the other tenants in the complexes are not doing well. One is in Texas, one’s in New York, I think. So we’re just kind of waiting to see what’s going to happen.

We also bought an asset in Chicago in 2014. We had a single tenant. So we were able to buy that building from the bank for a particular reason at the bank’s note. We got a good deal on the acquisition price. From a cash flow standpoint, we were going to be able to get back about 60% of our capital before the single-tenant would have to renew their lease. So the strategy was, if this is a massive failure, we’ll get back 60% of our money over six years, and we’ll lose whatever equity we put up. Or if the tenant renews, it’s going to be a home run and we’ll 3X to 5X our money. And if the tenant does something in between, we’ll kind of see how it shakes out. It ends up that tenant renewed two of the three floors. We have a $4 million reserve for tenant improvements and fit-out… And it remains to be seen; what’s going to happen with that asset? I don’t know. We got 60% of our money back already. It’s still a good asset in a good neighborhood. It’s a suburban office, Oak Brook, Illinois; it’s a nice, affluent suburb, right around the corner from a high-end Mall. Are we going to rent that floor out? My guess is yeah. At what price? Who knows. Are we going to have to renegotiate with the bank? We’ll see.

So I think the beauty to me of real estate is that your loss is always limited to your equity. But it’s not going to be 100% of that equity if you’re getting distributions from existing tenants and existing cash flow. So you’re always every year that you kind of survive, you’re reducing your equity exposure and your potential risk of loss. But your upside, in some ways, is infinite. So I like the risk-reward profile of these assets. As the cycles moved, we’ve transitioned where we’re focused. For the last three or four years we haven’t bought anything other than value-add workforce housing, and I don’t see that changing while interest rates are low.

Joe Fairless:  We’re going to do a lightning round, but first I’ve got to ask you the money question, and then real quick, if you can answer that… And then let’s go into lightning round. Based off of your experience, what’s your best real estate investing advice ever?

Noah Rosenfarb: Figure out what you’re good at. So I started buying these two-family houses, and I was not a good landlord, but I’m a really great aggregator of capital and great investor relations professional. So I’ve found my sweet spot, and that enabled me to scale quickly.

Joe Fairless: We’re going to do a lightning round. Are you ready for the Best Ever lightning round?

Noah Rosenfarb: Of course.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:28:18][00:29:06]

Joe Fairless: Noah, what’s the best ever way you like to give back to the community?

Noah Rosenfarb: My wife and I like to focus on three causes. It’s Jewish causes, we’re a Jewish family, and there’s this old saying, if Jews don’t support Jews, who will? We support education and food security. The most fun experience we had – my son, for his Bar Mitzvah, instead of having one of those lavish parties, he decided to pack 18,000 meals for our local food pantry.

Joe Fairless: Wow. What is the Best Ever tool that you use in your business? It could be software. You mentioned the book Traction, so we’ll remove that from the set… But what’s a tool that you use?

Noah Rosenfarb: My phone never leaves my side. It’s a blessing and a curse. But having the ability to access information and communicate with people on a real-time basis can’t be beat.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Noah Rosenfarb: Probably the best is to connect with me on LinkedIn or Facebook, or visit my website freedomfamilyoffice.com or investwithourfamily.com.

Joe Fairless: Noah, I enjoyed our conversation. Thanks for being on the show talking about the family office business that you are in, how you partner with operators, the structure, and then the type of deals that you’re focused on. Appreciate you being on the show. I hope you have a Best Ever day. Talk to you again soon.

Noah Rosenfarb: Thanks so much.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2350: The Art Of The Follow-up With Sterling White #SkillsetSunday

Sterling is a multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just over a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Today, Sterling will be going into details about one of his most powerful sales tool, the follow-up.

Sterling White  Real Estate Background:  

  • Full-time real estate investor and author of “From Zero to 400 Units”
  • Over a decade of experience
  • Previous episode – JF1236
  • Portfolio consists of 400 Units
  • Based in Indianapolis, IN
  • Say hi to him at: https://www.sonderinvestmentgroup.com/ 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“The art of the followup separates the newbies from the pros” – Sterling White


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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. And – well, it’s Sunday. Because it’s Sunday, we’ve got a special segment for you called Skillset Sunday. And here’s the skill that you might not have, or if you have, then props to you, but I bet we can hone this skill. And this skill is the art of the follow-up. And who’s going to teach us his way of the art of the follow up, which has been successful for him and others he’s spoken to about it? Mr. Sterling White. Sterling, how are you doing my friend?

Sterling White: Alright. Welcome, everyone. Strap in your seat belts, bring your bags with you, because we’re going to be dropping tons of golden nuggets and bombs. So I definitely appreciate being on here again, Joe. It’s always great catching up with you.

Joe Fairless: And a little bit about Sterling, just as a refresher – he was on episode 1236, titled What To Do When A Deal Falls Through, Situation Saturday. You can go listen to that, episode 1236. Just a refresher real quick. He’s a full-time real estate investor and author of From Zero to 400 Units. He’s got over a decade worth of experience. His portfolio consists of –imagine this– 400 units. He’s based in Indianapolis, Indiana. So with that being said, we’re talking about the art of the follow-up. How should we begin the conversation to frame it the correct way?

Sterling White: Yeah. One thing I love – we’re in essence triple S, because it’s Skillset Sunday with Sterling. So I love trple S’es. [laughter] And I would say is this was by far the absolute game-changer for me with the follow-up, and for individuals to know that this is really what separates the newbies from the novice, the novice from the amateurs, amateurs from the pros, and absolute mastery is just this one segment in itself.

Joe Fairless: Well, I’m in. And before we started recording this, we were talking about a couple of different angles to take with this conversation… And you mentioned the art of the follow-up, and you mentioned that it’s a mindset approach, first and foremost, and then you get into the tactics. And I loved that. So can you talk about just how we should think about following up with people?

Sterling White: Yeah, I would say is… How I’ve shifted it — and this is more so on the acquisitions, or you can say in general we’re relating to acquisitions… It’s that even when you’re buying, you’re still selling. So it’s a sales process. And many of the times, let’s say you’re taking the direct to owner approach, or you’re touching base with a broker. Let’s say we’re taking the direct to owner approach, because that’s the path that I go. 95% to 99.9% of the time that owner is not interested when I first reach out. So first, it takes six to eight attempts just to get in contact with them, they’re not interested, and now it takes additional follow-ups to now catch them at the right timing… Because I really want to touch and follow-up, because I spoke with someone the other day, and they said, “I’m doing direct mail, it’s not working.” And I asked them, “How many times did you do it?” They said “Once, Joe.” One time.

Joe Fairless: And that’s not going to cut it when you’re introducing yourself to someone for the first time, right? You’ve got to have multiple ways of having them get to know you, and you get to know them.

Sterling White: Exactly. And also, on top of that, is I like to call it the value-based follow-up. So now I’m going to get into some tactics. So you can keep following up with an owner with the same approach, saying now you’re interested in selling, now you’re interested in selling your property. Or you can go the extra mile and – this is one I’ll use, I’ll send out random birthday cards. And on the birthday card, it says, “I may have caught you a little bit sooner, a little bit later, but just want to ensure I got you.” So there’s that.

And then also, I’ll reach out to them and say, “Hey, we’ve got local meetups here that are in Indianapolis and thought you would be a great speaker to share your story, considering you’ve had success in the industry.” So all these different ways – and this is one quote I like to use, it’s “Creativity follows commitment.” If you’re committed enough, you’ll be creative as a way to stay top of mind. Because if not, you follow with the same message, and they’ll say just put me on the Do Not Call List.

Joe Fairless: We might bounce a little back and forth on getting into the weeds and then talking more high-level, but I want to ask about one of the things you just mentioned… When you say to an owner, “Hey, I want to profile you. I want you to share your story at a meetup that I host”, how many owners have taken you up on that?

Sterling White: Zero. At this point in time, it’s been zero. And of course, I started implementing this right as COVID happened, so that also affected things… But why this comes into consideration? I’ve at least gotten some engagement from them. That’s the main thing. Of course, if they say “Yes, I’d be interested”, then I would set it up. But it’s more of those things that’s just to open up the relationship again. Because many times these individuals just go ghost, and I don’t hear from them again. And then that’s when I start to get creative as a way just to touch them. And then from there, they say, “Yeah, I’d be open to it.”

One of the owners I got in touch with, he said, “Well, I’m a little bit nervous, but I enjoy doing things that are out of my comfort zone.” And then we started a conversation from there. So it’s just really just staying top of mind. So one, building the relationship, and then also, it’s timing. This was one individual, it’s going on for about two and a half or three years now, of which I’ve been following up with that individual… And it’s just about timing; they’re still not ready to sell. And at that right moment in time when I follow-up – there we go. I’m the one that first comes to mind.

Joe Fairless: How many have you got engagement from with the random birthday cards?

Sterling White: It is very low. I would say the percentage in terms of sending out, I would say…

Joe Fairless: Just the total number of people, would you say.

Sterling White: Four to five.

Joe Fairless: Four to five?

Sterling White: Correct.

Joe Fairless: And these are multifamily owners?

Sterling White: Yeah, these are multifamily property owners. And I’ll send these out after I’ve had some conversation with them. It’s just not one of those just direct mail campaigns where they are not familiar with me at all.

Joe Fairless: Okay. I thought you were about to say “I’ll send them out these random birthday cards after I’ve had some drinks” or something like that. I was like “That makes sense. If you’re sending random ones, you might as well make a party of it as you write these out.” [laughter] The four to five that you’ve had an engagement with, what did they say?

Sterling White: It’s just more of “Hey, you got me a little bit too soon, but I do appreciate the card.”

Joe Fairless: [laughter] And what’s your follow up there?

Sterling White: The follow-up is, “I just want to ensure I got you covered, and yeah, anyway I could be of value to you…” So I’m re-engaging the conversation. And it’s also a pattern interrupt, too. You get a random birthday card, they’re like “What is this?!” And I know one guy that actually sends — and yes, this is going to be hilarious. He sends potatoes. Yes, potatoes. And he had one of his clients reach back out to him and said, “Did you send me a potato?” He’s like “Yeah, I sent you a potato. But now that I’ve got you on the phone now…”

Joe Fairless: Oh, gosh… Oh, man. Huh… When you get these leads, what system are you using to track the leads? And this person responded to the birthday card, this one responded to the share your story meetup…

Sterling White: So I have a CRM that I use. And for everyone who’s on here, ECRM is different. There are tons that are out there. I do a lot of outbound communication, so there’s one that’s Mojo Dialer that some people use. I use close.com, which is very simple for me to use because I like things to be super simple. And it’s more for individuals that are doing quite a bit of volume in terms of calls. So that’s what I use in terms of a CRM, and I keep everything tracked in there.

Joe Fairless: Got it. close.com, “Turn more leads into revenue.” I’m on their website. I haven’t heard of close.com. So close.com – is that your main CRM? You send out emails through that, you track your leads, you track engagement… Like a Salesforce type thing?

Sterling White: Yeah, it’s the same exact thing. I’m unsure if Salesforce you can actually make outbound calls. And one thing I’ve heard about Salesforce is it can get very clunky and very convoluted. So that’s why I ended up going with this. And yeah, you can track everything. I can have the KPI, so I can understand if we make this amount of calls, this is where the conversion rate to appointments is. And then we can reverse-engineer from that and say, “This is how many LOIs that we can get from this amount of appointments”. And then from those LOIs, this is the amount that converts to an actual contract.

Joe Fairless: But a lot of the stuff we’re talking about, or you’ve been talking about, aren’t phone calls, they’re mailing stuff out. So are you also doing cold calls?

Sterling White: Yeah, cold calls are my primary channel. The direct mail and those that I was mentioned to you are more of just a way to follow up.

Joe Fairless: Ah, yes.

Sterling White: And the thing with my list is — so I target apartments 75 to 200 units. So I’m in Indianapolis and other Midwestern markets, so it’s very niche. So a primary touchpoint is calls. And then also we even get creative on top of that, but in essence, we just use direct mails as a way just to keep following up, versus just using a text message, or a call, or an email.

Joe Fairless: Okay. So you use direct mail to keep following up. You said earlier that 99% of the time you call the owner the first time, they’re not interested. So it takes six to eight attempts to follow up with them.

Sterling White: Six to eight attempts just to get in contact with them.

Joe Fairless: To get in contact with them. For them to say “Hi, Sterling.” Or “Leave me alone, Sterling.” Or “I’m interested.”

Sterling White: “I’m not interested to sell my property.” Or “I would sell it for above market, or top dollar, or the right price”.

Joe Fairless: Right. Okay. Let’s talk about the other ways then you’re following up. One’s a random birthday card. Another is to share your story. You said it takes six to eight times. So what are the other things you’re doing?

Sterling White: Personal visit, by far my favorite one. It definitely takes some, for lack of a better word, big cojones when it comes to this, just dropping in on the owner completely cold. But if you’re committed enough, you’ll figure out a way, and this comes down to your why. I have big why’s and I’m willing to do things like that. So that’s one.

And then also, there’s another channel if I’ve had difficulties getting in touch with someone – one way I’ve done, this was 120 units here in Indianapolis, in which I had not very much success in terms of getting in touch with the owner… So what I did was I use a database such as beenverified.com. I’m not affiliated with them, I just use them. So I typed the owner’s first and last name in there, and then I ended up getting a relative, which was the daughter. So I reached out to the daughter on Facebook, strictly business, everyone that’s on here, and just asked “Hey, looking to get in touch with your father relating to this property”, and was able to get their number directly.

Joe Fairless: Wow. Did she asked how you got my info?

Sterling White: Sometimes you’ll get that, but not from that. She probably just saw I was very handsome and said [unintelligible [00:14:20].25]

Joe Fairless: Oh, man. [laughter] That’s an interesting approach because it connects you with the owner through a loved one. What a warm referral that is. The loved one might be saying, “This creepy guy randomly reached out to me, dad. I’m going to give you his info, but then you call the cops right after.” But either way, she’s still talking to her father about you. And assuming that he loves his daughter, there’s some to be said about that.

Sterling White: Yeah, and it’s all just… Gosh, where was I going to go with that? It’s just really the habit of going the extra mile –which is a principle from Napoleon Hill– is I feel in those cases such as this example, people hit these specific barriers when they’re looking to get in touch with an owner… Whether they’ve made these multiple follow-up attempts, they’re not properly getting through, they’re getting in touch with a gatekeeper, can’t get through to the gatekeeper to the direct decision-maker… By going the extra mile, I feel — because people stop at that, and then when you go above and beyond, that’s what really separates you from those. Because I closed on a deal where I’ve actually sent it over to the brokers and said, “Hey, could you help me out with this lead? Because I haven’t had much success?” And then many of them just said, “No, we haven’t had any contact with them.” I went the extra mile to do some more skip tracing, ended up finding one of the operators having a unique last name. They were in Florida, I said, “Well, let me just give this person a call. They’re in real estate.” It turns out they were one of the people who actually put the syndication together close to two decades ago, and then started the conversation. Fast-forward, we closed on it. The brokers reached out to me and said “How the heck? I had so much difficulty getting in touch with that person.”

Joe Fairless: That was 120 units?

Sterling White: That was 156 units.

Joe Fairless: That was 156.

Sterling White: That was another property.

Joe Fairless: The 120 units you got through the beenverified daughter and dad connection?

Sterling White: Yes, correct. I didn’t close on that. That was just one that ended up going the extra mile was  a way to being creative as a way to get in touch with the decision-maker. Because many people just say, “Ah, this property is not going to work. It’s too difficult. Let me move on to another one.”

Joe Fairless: Why didn’t that one work?

Sterling White: Their price. And I’ve shifted away from those. It’s built in the early 1970s, C-class property. It needs quite a bit of work. And I’ve shifted my model more towards 1980 to 2000 construction, with less deferred maintenance.

Joe Fairless: So the random birthday cards, meetups to share your story, personal visits…

Sterling White: Rubik’s cube, many people know me for this. This is by far one of my favorite ones outside of the personal visit, is a Rubik’s cube. I’ll send it to them, direct mail, with a small note that says “Hey, let’s figure this out.”

Joe Fairless: How many conversations has that resulted in?

Sterling White: I would say more so about 15 to 20. And there was one –because I follow up right after I send the Rubik’s cube– is the owner, I had him on the phone, and he said “My wife cannot figure out this damn Rubik’s cube. So she’s in the back, working on the Rubik’s cube, and he’s speaking to the guy who sent it to him. So all these different channels are just a way to just keep pinging the person to stay top of mind. So once they do the transition from not interested to being interested, you’re the one that comes top of mind.

Joe Fairless: And you’re able to track that in close.com, like, “Okay, sent them this Rubik’s Cube, I did a personal visit.” Do you track all that stuff? Or just the phone call results?

Sterling White: I track more so the phone call results. I do include in the notes the various touchpoints. But in terms of tracking, “Hey, this converted to this,” that is something to actually implement. But right now it’s more so just the calls.

Joe Fairless: Do you have a process that you follow, where you do it in a certain order, these things?

Sterling White: In terms of a certain order, is if I send a letter of intent out to someone before the actual contract and I don’t hear from them, that’s when I will send the Rubik’s cube. And then if I have gotten in touch with…

Joe Fairless: Oh, real quick. A letter of intent… I assume that means that you’ve got financials from them, or are you just writing it up based off of what you believe to be the financials?

Sterling White: I have gotten financials — that does vary. I have actually recently sent an LOI to an owner. What I did was I just normalized; so they were able to provide me the rent roll, I normalized the expenses, and then I submitted an LOI just as a way to follow up.

Joe Fairless: But at that point, if they’ve sent you the rent roll, you’ve already engaged them.

Sterling White: Yes, correct. This isn’t a blind Rubik’s cube. Is that what you’re–

Joe Fairless: Yeah. Okay. Noted. So the Rubik’s cube is in place after you’ve had some sort of engagement with them. But the other things, like skip tracing an owner – you clearly haven’t talked to them because you have to skip trace them. Beenverified, same thing. Personal visit, I imagine, that’s in the same category. Meetup, share your story, same thing. So with those in particular, do you have a certain order in which you follow up?

Sterling White: Yeah, the first channel will be the birthday card. That’s one. So the birthday card is the go-to in terms of the subset, but also in terms of like a process. Because some owners are at different stages. So we have this owner, I know that they’re in Indianapolis, I’ll do a personal visit. And then I’ll follow up with a personal handwritten letter from myself as a way, “Hey, it was good to meet you.” So in terms of like an actual process of the direct mail, primarily is the happy birthday card. But outside of that is — it’s not “Okay, we’re going to do this campaign, we’re going to do this campaign, and this campaign.” We do have occasions that we do a campaign on the go to all of the owners that have expressed interest, but in terms of a process.

Joe Fairless: What would that be? All the owners who have expressed interest,  what does that campaign look like?

Sterling White: The campaign will be something along the lines of a handwritten letter. So that’s one. And then also there’ll be – myself will send an email out to them that says, “Hey, going to be out in the neighborhood, would love to put my hand in your hand.” So that’s what we’ll do if after a month we haven’t had an engagement with a specific set of owners. We’ll say, “Hey, this is a campaign that we’re going to use on all 25 or 30 of these individuals.”

Joe Fairless: I love hearing about this. Anything that we haven’t talked about, that you think we should, as relates to the art of the follow-up?

Sterling White: I would just say for everyone, this is one thing I learned… Love him or hate him, hose of you are on here –  Grant Cardone… So I’ve gotten so much valuable information in terms of just the sales in itself… Because I’m a believer that sales is everything, and not just in business, but even in life. But through this, the follow-up is some people just don’t have realistic expectations. The majority of the time, people don’t even make the attempt, whether that’s direct mail, or cold call, or whatever channel they’re using. And then they quit after the second, third, or fourth time, not knowing that on average it takes between six to eight attempts just to get in contact with the person. That’s just the get in contact, give them your pitch, and them many a time they’re not even interested. And now it’s, even more, follow ups after that.

Joe Fairless: What are your thoughts about someone who sends the same (let’s just call it) postcard or brochure to that contact six to eight times? Good or bad?

Sterling White: You’ve got to be creative, because they are getting tons of other direct mail. So by someone doing that, it’s better than nothing. And the good thing is that they’re consistent. But if they’re able to switch it up of some sort… Because that yellow letter that they have that was handwritten that they’ve sent maybe two to three times, if they send a red one in a red envelope, that could be the one that hits and triggers that person, “Oh, I’m actually going to pick this one up and actually take a look and call this individual.”

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Sterling White: You can visit me on Instagram, @sterlingwhiteofficial, and also visit sonderinvestmentgroup.com. [unintelligible [00:22:33].11] here to be a value to everyone who’s on here. Just remember, keep being awesome.

Joe Fairless: I loved our conversation as always. I love the creativity that’s put into action. A lot of people have… No, I wouldn’t say a lot of people have a lot of creative ideas to move the business forward, because that’s a unique skill set, I believe… But not only do you have creative ideas to move the business forward, but you also execute on them and follow through [unintelligible [00:23:03].12] the follow-up, like we talked about. Breaking through the clutter and then executing on that on a consistent basis.

And also, as you said a couple of times, setting expectations with yourself and with your team, that it is going to take six to eight times just to get in contact with them. And we’re talking about owners in this circumstance, but I imagine that’s applied to others as well. Thanks for being on the show, Sterling, I enjoyed it. I hope you have a Best Ever weekend and talk to you again soon.

Sterling White: Oh, yeah. Have a great one, everyone.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2349: Single Family Or Multifamily With Lee Kiser #SituationSaturday

Lee Kiser was on a previous episode JF1694 so make sure to go listen to get his best ever advice on that episode. A little bit about Lee, he is a principal and managing broker of Kiser Group, and today he will be sharing with you which option you should focus on, single vs multifamily investing. 

Lee Kiser Real Estate Background:

  • Principle and Managing Broker of Kiser Group
  • Before starting Kiser Group, Lee was the top producing apartment broker in Chicago at his brokerage
  • Previous guest on JF1694
  • Based in Chicago, IL
  • Say hi to him at: www.kisergroup.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Going for single-family or multifamily will depend on your goals & what you are trying to accomplish” – Lee Kiser


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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. And well first off, I hope you’re having a Best Ever weekend. Because today is Saturday, we’ve got a special segment, Situation Saturday. And here is the situation. You’re trying to decide between single-family or multifamily. What are you going to do? How do you decide if you’re going to start or continue with single-family or do multi-family? And with us today to talk us through a thought process for how to decide between the two, Lee Kiser. How are you doing Lee?

Lee Kiser: I’m doing well. How are you, Joe?

Joe Fairless: I’m glad to hear that, and I’m doing well as well. A little refresher about Lee. He’s been on the show, Episode 1694. You can go listen to his Best Ever advice on that episode. So we’re going to stay focused on the topic at hand today. A little bit about Lee. He’s a principal and managing broker of the Kiser Group. Before starting Kiser Group he was a top producing apartment broker in Chicago at his brokerage. He’s still based in Chicago. So let’s talk about it… Single-family versus multi-family. What are your thoughts?

Lee Kiser: Well, my thoughts are it really depends on what your goals are with investing and how much you want this to be sideline versus primary business. And pros and cons… Pretty much, the pros for doing single-family are the cons for doing multi-family, and vice versa, in my opinion.

Joe Fairless: Like what? What would be some pros for single-family?

Lee Kiser: Well, how much cash do you need to make an investment in a rental property? And not always, but most typically, single-family homes are less expensive and usually have higher leverage available, meaning you get a higher loan relative to your acquisition price than our apartment buildings in the same area markets. And I’m not talking about a two flat versus a single-family, I’m talking about a multi-unit, a six flat or larger versus a single-family home. And if you’re buying it for investment reasons and renting it out, a single-family home, you can most likely get 80% leverage on that from a lender. Depending on the local rules with lenders, you may be able to leverage it higher than that… Which means, if you can get that loan for it, then how much cash do you need? How much equity do you need to use to buy it?

Versus an apartment building – right now, typically, the highest you can get is 80% leverage. Right now with COVID and recent changes, it’s really 75%. And if you’re a newer investor, you’re probably going to suffer on your loan-to-value there some more. So you probably look at 70% loan-to-value, which means you’ll need 30% of your acquisition price for the cash to buy the deal. And typically, that’s just simply a lot more cash when you look at the price of the building, and then the leverage available. A lot more cash that you would need to buy an apartment building. So a pro in my mind for single-family is the con for multifamily, is how much cash you need to buy an investment property.

Joe Fairless: Okay. And I don’t think it’s any secret that you and I are both focused on commercial real estate. So we do have a dog in the fight. And it is tough to be unbiased… But I’m going to do my best to be unbiased, because I have invested in single-family homes, and I assume you have as well. So let’s just keep on the pros section of single-family homes. You mentioned less cash. You mentioned higher leverage. What about better discounts? Because you’ve got less sophistication from the seller standpoint, than larger properties.

Lee Kiser: Yeah. To me Joe, the discounts all have to do with supply and demand. And for the last decade, multi-family has been in pretty high investor demand; there’s more demand than supply. The big econ 101, duh… That means it’s going to be a higher price, and therefore a lower return. So I would say relative to the single-family market, yeah, that’s another pro for investing in single-family homes, is that there’s more of an equilibrium between supply and demand, which helps keep valuations more in check, theoretically, meaning you could get a better return sometimes from a single-family home investment. But I think that’s isolating that particular issue in a vacuum… Because I think when you look at some of the pros of multifamily, which we haven’t gotten to yet, then it begins to mitigate that return as a potential pro for single-family… But the pro for single-family is – yeah, there’s generally not as much demand for it as multi-family. So relative to valuation, it’s probably cheaper.

Joe Fairless: What about liquidity? I no longer own single-family homes, besides for personal reasons; but as from an investment property standpoint, I don’t own any single-family home investment properties. I sold them all in October 2019. And when I decided to sell them, they were sold in about three months. There was only three of them, but it was quick, it was easy. I worked with a real estate agent who happened to be my sister, and sold them; liquid, nice, done, moving on. Apartment buildings, if I want to quickly sell three apartment buildings I’m a general partner on, it’s more complicated. So what about liquidity? Would that be a pro on single-family homes?

Lee Kiser: I think liquidity, if you’re looking at a single asset, I would agree. Or if you have a portfolio of assets, but you’re marketing them individually when you’re exiting, then yeah. I think – back to that old supply and demand topic we just talked about previously, you’ll be competing with a lot of other single-family homes on the market, but there’s also a large demand. And it’s simply making the right matches. I think if you own a large enough portfolio of single-family homes, and you’re only interested in exiting as a portfolio, I think you’ll find it may be more difficult than exiting an apartment building.

Joe Fairless: That makes a lot of sense. What would you say that number is, of homes in a portfolio where then it’s like you’re starting to actually to be harder to sell than an apartment building because of all these homes that you’ve got?

Lee Kiser: Sounds like you’re asking me what a con is Joe, and I just want to make sure I’m following the lead, correct?

Joe Fairless: Oh, fair enough. You got me.

Lee Kiser: So I wish it were that easy to say, “Okay, here’s the threshold. And if you have more than five, it’s going to be more difficult.” Now, one of the con is management. And to understand the con, you have to look at the pro. So in multi-family, you have several units under one roof, it’s all one location, and you have multiple tenants. And that is what is attractive to an investor, and that’s also what makes that property easier to manage. You have one mechanical system, you have one person who’s going to do your maintenance and repair, one location to send them. It’s simply a more efficient management. Contrary, if you look at a portfolio of single-family homes, then the geographic concentration of those would be very important if they were a grouping, and you’re looking at a portfolio and an investor to take out everything.

When it’s scattered-site, meaning over a large geographic distribution, then I think it is a different equation. If you had five single-family homes you’re trying to sell and they’re in the same county, but they’re in five different towns or five different areas, it’s a very different equation than if you had 10 single-family homes in a three-block radius. And I think that’s more important with your question. So it’s not really a number, but there are other factors involved.

Joe Fairless: That is such a good point. I hadn’t thought of it in the way that you described, because basically what we’re saying –or what you’re saying, and I completely agree– is if you do single-family homes, here are some benefits for doing so, but don’t have too much success if you want to exit out of this portfolio in a way that attracts a lot of buyers… Unless you want to sell them individually off. Or unless you’re concentrating in a specific area. It’s almost like you can acquire and do well, but don’t do too well unless you follow this specific model of buying.

Lee Kiser:  Yeah, and management. That’s something touched on briefly here. In some ways, the management of single-family is easier. So I guess we’ll consider that part a pro… Which is usually you can structure leases that the majority of the upkeep can be put on the tenant. So mowing yards, making minor repairs around the house. So in some ways that management can be shifted to the tenant. But in many ways, it cannot be. Major systems — a gas forced air furnace, or a boiler if it’s an older home, that’s not something that the tenant is going to accept responsibility for, because it’s a capital expenditure that’s going to be a landlord’s expense. And when you think about it, you have one heating plant for a 30 unit building, for 30 houses you have 30 heating plants. And usually, it’s not a system replacement. Usually, it’s a repair item, but that’s still beyond the scope of the tenant or the responsibility of the tenant, so you’re having to send someone in. And it’s simply probabilities. What is the probability that you’re going to have an issue with a heating plant during the winter? What is it? A 10% probability? So you’ll have a 10% probability that your boiler at your apartment building is going to have an issue. But if you have 30 houses, it’s statistically proven, “Okay, you’re gonna have three houses that have a problem.” So it’s budgeting for that and then it’s managing how that gets repaired, who is set. So again, those are things to consider,

Joe Fairless: Before we move into the pro category for apartments, any other pros that you can think of as it relates to homes?

Lee Kiser: No, and I guess that’s why I do what I do for a living.

Joe Fairless: [laughter] Well, you started off the conversation by saying, “Do you want this to be a sideline thing or a primary business?” Which goes to or alludes to the point of a pro for homes is that it can easily be a sideline thing.

Lee Kiser: Yes. So that is a pro. It’s much easier to do on the side, and for some of the reasons we mentioned – some of the management can be transferred, some of the responsibilities can be transferred to the tenant, it’s cheaper usually to get into… So yes, it’s much more of a side business, and I guess that is indeed a pro.

I think another pro may be typically people who are able to buy an investment property kind of already established themselves to some degree, and statistically, higher probability that they actually live in a home. themselves. So I think perhaps it is an understanding of the tenants’ experience and how to run that home or market it, lease it, run the management because you’re more familiar with what that occupant might actually need, because you personally identify. So I guess maybe you call that [unintelligible [00:15:19].12] I guess that’s a pro as well,

Joe Fairless: I like that. You’re better set up for success because you’ve got first-hand experience, or you know others who have it. But most likely, you’ve got first-hand experience if you have lived in a home. Let’s talk about the pros for apartments, because – could you use that same logic to apply for apartment buildings if you have lived in apartments? Or does that not translate?

Lee Kiser: It doesn’t translate as well, because there’s so much going into renting an apartment building, that as a tenant, you’re never aware.

Joe Fairless: True that.

Lee Kiser: Yeah, apartment management can be very complex. And it really is a big thing. That sounds like a con. It’s not to me, because every market we participate in has an industry of third-party management companies for apartment buildings, and some very reputable companies, and if you can hire that service, where you’re probably not going to be able to hire it for a single-family home. So I would say that if that’s the question you’re asking versus me just going off on the pros that I have…

Joe Fairless: Yeah. That makes sense. What are some other pros?

Lee Kiser: We talked about cash needs… But the interesting thing – yes, you’ll need more cash to buy an apartment building. But it’s a whole lot easier to raise that capital from fellow investors for an apartment acquisition than it is for a single-family home. So going out and syndicating or raising that capital, if you have the right plan for the building is typically fairly easy, because there are a whole lot of people who don’t have the option of buying a building themselves, but they have enough cash that they want to invest in something, and their options are going to be very similar to yours – “I’m going to go buy an investment house, or I want to buy a building. If I can’t buy a building, who do I know who is?” It’s in my opinion a lot easier to raise that cash for multifamily acquisition.

Another thing that is really important is occupancy. And let’s flip the coin around and instead call it vacancy. So you own a single-family home and you rent it at a level that you know covers all of your expenses, and for one reason or another you lose your tenant. What is your vacancy rate? It’s 100% vacant. And until you can find a replacement tenant, as the investor, you shoulder the cost of the entire operation.

In a multi-unit building, certainly, occupancy is always a critical component of how you run the building and manage it. But when you inevitably have vacancies, it’s typically much easier to handle, because the costs are spread over multiple units versus just one. And you can actually have a percentage vacancy, and make your decisions on where rents need to be, and how you need to lower them, or how aggressive you can be based on how close to your income need your current revenue is. If you’re 10% vacant, but yet still completely covering all of your expenses, you may want to be aggressive on the rents on those vacant units when you’re marketing them to see where the market is and what the tolerance is for rent for that unit type.

Conversely, if you’re 10% vacant and you know that your second installment tax bill is coming up, you don’t have the right cash in the account right now, whatever, you may also decide, “Let me be less aggressive on those rents, let me lower them, let me get that filled.” But you’ve got that flexibility and it’s spread across a number of units. My main point is that losing a tenant does not affect you nearly the same way in a multi-unit building as it does in a single-family home.

Joe Fairless: And then I would also say a pro would be you make more money on apartment buildings relative to the amount of time that you put in, compared to being focused on single-family. So if I’m focused on single-family for five years, and I’m focused on multifamily for five years, I would be confident in saying that it is highly likely –assuming that both focuses are conservative and a value-add approach– that the multi-family investor is going to make a disproportionately greater amount of money than single-family home investors, because you’re dealing with higher dollar amounts, and cap rates, and being able to increase value through forced appreciation… Versus just some single-family approaches that some of you can add value through force appreciation, but you can’t do it at scale.

Lee Kiser: I think scale is the keyword, I was going to say. It’s an economy of scale question. And multifamily provides an immediate economy of scale. That’s the entire concept. Back to the boiler – am I going to heat one unit with this boiler? One home? Or am I going to heat 30? It’s almost the same size system. So there’s an automatic economy of scale. But you made an interesting comment, Joe, and that was that multi-family makes more money. And I think that’s a question of how you measure that. And by the way, I agree with you. Multi-family makes more money. It’s harder to get into for some of the reasons that we’ve described. But the reason people do it is because it’s more lucrative. But it also depends on how you measure that. And my favorite measure is cash on cash.

So yeah, people will talk about cap rates and they’ll talk about all kinds of ways to measure it. For me, it’s how much cash am I going to put into this investment, be it a home, or an apartment building, or a senior housing center? Any investment. How much cash am I going to have to tie up in this? And at the end of the day, after I’ve paid all of my expenses, and my mortgage, how much cash am I going to have left as profit? And what is the percentage of that cash against what I actually tied up to buy it? And I think when you run that analysis that you will see significantly higher cash on cash returns in multifamily than you do in single-family investments.

Joe Fairless: Anything else that we should talk about as it relates to pros for single-family homes or pros for apartments that we haven’t talked about before we wrap up?

Lee Kiser: Well, I guess this is a pro for single-family and it’s a warning for multifamily investing. The way you determine whether or not something is a good location. So a pro for single-family is you probably know the neighborhood, you probably know the schools, because you probably have some degree of experience with this yourself. And your criteria for deciding whether or not a house is a good investment, you probably have more intuitive knowledge about it. I think that’s a pro.

The con is you may not have that specific knowledge about a multi-family investment from a location standpoint, but you can’t approach it the same way. You need to learn how to determine whether a location is good for multi-family. And the criteria is not whether or not you would live there personally. It’s not an emotional thing. It’s access to public transportation, it’s access to employment, it’s the amenities that the building has relative to its price points, and it’s understanding the demographic of the location and the needs of apartment renters to determine whether or not that’s a good location. So I’d say it’s a con most people don’t start with that knowledge and they only see the investment through the lenses of whether or not they would personally live there, and the pro for single-family is, yeah, you probably have something in your experience silo that gives you an intuition about that location. That’s the only other thing that just came to mind.

Joe Fairless: This was a great conversation. It was great hearing your thoughts. How can the Best Ever listeners learn more about what you’re doing and how to get in touch with you and your company?

Lee Kiser:  Go to our website; everything that you would need to know is there and it’s easy to contact us through it. The name of the company is also my last name. People commonly misspell it. So it’s Kiser, not Kaiser, and the URL is kisergroup.com.

Joe Fairless: Lee, thanks for being on the show, talking to us about the pros of single-family home investing and the pros of apartment investing. I think we did a good job of being as objective as we could be… So I’m patting myself on the back and I’m giving you a virtual high five, because for two apartment investing people I think we did a good job of laying out the case for single-family homes too. I hope you have a Best Ever weekend and talk to you again soon.

Lee Kiser: Thanks for having me on again Joe.

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JF2348: A&E’s Flipping Boston With Dave Seymour

Dave Seymour was a firefighter for 16 years and is now a full-time real estate investor who also was on the A&E’s hit TV show “Flipping Boston”. Dave has done millions in real estate transactions and now manages a 100 million dollar fund investing in multi-family.

Dave Seymour Real Estate Background:

  • A  firefighter for 16 years and now is a full-time real estate investor
  • He was acclaimed as the star of A&E’s hit TV show “Flipping Boston” 
  • Has done millions in real estate transactions
  • Now manages a $100 million dollar fund investing in multi-family 
  • Based in Boston, MA
  • Say hi to him at: https://www.freedomventure.com/ 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Educate don’t speculate” – Dave Seymour


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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 the fluffy stuff. With us today, Dave Seymour. How are you doing Dave?

Dave Seymour: I’m well, Joe. How are you, man?

Joe Fairless: Well, I’m glad to hear that. I am well also and looking forward to our conversation. A little bit about Dave. He’s been a firefighter for 16 years and is now a full-time real estate investor. He was on the A&E show Flipping Boston, he was the star of that show, and he’s done millions in real estate transactions. Now he manages $100 million fund investing in multi-family. And that’s what we’re going to spend a lot of our time focused on. Based in Boston, Massachusetts. So with that being said, Dave, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Dave Seymour: Yeah, absolutely. It’s kind of interesting when you hear somebody describe a 10+ year journey in two or three sentences right there… But I was a firefighter and a paramedic for many years here just North of Boston, a city called Lynn, Massachusetts. I found myself in some financially challenged positions, and transitioned into real estate. I had some construction experience, Joe. Firefighters tend to have that second and third job, and mine was in construction, and that was my first taste of investment. I got to see investors. Their clothes were cleaner, their cars were nicer, they smile more than I did while I was digging ditches. So I kind of thought to myself, what are they doing that I’m not? And I figured that out, and it was an education for me. It’s crazy, man. I attended one of those seminars that were traveling around the country back then, invested, and actually did what I was taught to do. And the results from that spoke for themselves. It got me out of some financial jackpots I was in, just through financial illiteracy.

Spending more money than you earn is probably not a great policy. But I learned through real estate what an appreciating and a depreciating asset was, and a lot of the single-family stuff that most people are familiar with – the eating popcorn on a Saturday morning, watching HGTV; it looks so easy, doesn’t it? But in the real world, real estate investing takes expertise. It takes practice. It takes some guts. But if educated, and then implemented what I learned – it took me on a pretty dramatic journey.

One day I’m sitting in a firehouse watching the show, and the next day I’m on TV creating a show. We did about five years of Flipping Boston, which was great. It was a lot of fun, it was also a lot of work; it wasn’t financially what most people think reality TV is.

Joe Fairless: What do you get paid for that?

Dave Seymour: Yeah, look at you asking me such a personal question… It’s fine. Here’s what I didn’t get paid. I didn’t get paid Kardashian money. You know, we started out at about $1,500 bucks an episode, myself and my partner. And at the height, it was probably around $30,000 an episode. But you’ve got to remember, we weren’t doing fluff and puff, we weren’t doing garbage flips. In New England where we are, our stock is pretty old. The majority of our properties that we buy, fix and flip, were turn of the century 1910, 1920, ’30, ’50, ’60s. So they had a lot of deferred maintenance. Plus you’re bringing all of that up to code. So it was a lot of work, but the national exposure was the real value in doing that TV show.

Joe Fairless: So many questions, and we’re going to focus a lot on your 100 million dollar fund, but just a little bit of context for your background. You said you were in some financially challenged positions. How bad, financially, did it get?

Dave Seymour: I was working 120 hours a week. So I would work full-time in the fire department, full-time construction on my days off, and then part-time nights and weekends. And I came from a very blue-collar background job. I was never taught what money really was, which was a tool. I was taught that saving was smart. I was taught to just trade time for money. And when you’re continually trying to keep up with the Joneses,  I crossed that threshold where I had about $60,000, $65,000 in unsecured debt, depreciating debt, cars, boats, leather coats…

Joe Fairless: Leather coats? You don’t seem like a leather coat kind of guy to me.

Dave Seymour: [laughter] You know, that’s just — I use that as a term.

Joe Fairless: So you didn’t buy any leather coats?

Dave Seymour: Well, I might have had one. I didn’t look that good in it, Joe. [laughs] But being a consumer rather than an investor. I think we trained that way, Joe. I think it’s how America is driven. And for me, I was 2006-2007, I’d refinanced my primary residence I think three times in 18 months, because they told me my house was a bank, and it was always going up in value. And then I found myself in late 2007 in a pre-foreclosure, potentially working on a short sale. That’s when I actually started in real estate. The first job I tried to do was save my own house. Very pleased to say I was able to do that.

So it was bad… It cost me a marriage, it cost me a relationship. When you’re working that much you can’t really show up and be present for the people that you love, because you know, I’m riddled with fear, doubt, and insecurity every day, like, “Oh my god, can I make ends meet?” So I never forgot that. And it’s kind of interesting, Joe, because I carry that sense, if you will, that feeling into everything that I do today in dealing with our investors. Because I know that they’re probably feeling a lot of the things that I felt, like what is five years, 10 years, 15, 20 years going to look like on their financial landscape? So I’m very cognizant of that. I think my own journey has been a huge benefit to me and to my investors, rather than a deficit, like “Oh my god, that guy nearly lost his house. Why would I invest with him?” That’s probably the best reason to invest with a guy like me, because I take every dollar seriously as if it was my own when it comes to investing.

Joe Fairless: How did you get on the show?

Dave Seymour: I was a seminar student. I was a product of a three-day class and then some mentorship. It was amazing…

Joe Fairless: Was that Rich Dad, Poor Dad, or what?

Dave Seymour: Well, it was a different company. It was actually the Russ Whitney group. And Rich Dad, Poor Dad actually bought them out. So it’s the same kind of organization. It’s crazy, man; that world is a different animal in and of itself, buy… It really is, Joe. And I got to be on the other side of that curtain because they asked me to start teaching because I was doing so well, and I’m like, “What, are you crazy? I’m just coming out of a pre-foreclosure scenario. Now I’m going to get on the stage and teach?” They said, “No, just share that it works. Don’t lie. Don’t say you’re a billionaire. Just tell the truth.” And I found that people resonated with that.

So because I was recognized as a teacher and a trainer, somebody in that world suggested that I put in an application for a TV show. It was a company out in New York, it was a vanilla application that you could download… And I just did it for [unintelligible [00:09:17].07] and giggles, Joe, to be very honest with you. I loaded the application with profanity, so that I knew somebody would at least pay attention to it… And yeah. They picked up the phone, they kind of laughed at me. They said, “You’re either a genius or you’re crazy putting all these incredibly unpleasant words in your application.” And I’m like, “Look, dude, they got you to get on the phone, didn’t it?” And I said, “Why don’t you come up to Boston? I’m a firefighter. We do this real estate stuff the same way I fight fires – when everybody else is running out, we go running in.” I said, “I’ve got a great crew, we can have some fun. And if we don’t, okay, I’m still going to do houses.” And it was like that posturing I think was important as well. They came out, shot a little sizzle reel (they call it), sent it to the guys at A&E. And it’s funny, the guys at A&E their comment was, “That big English guy looks like he could get pretty angry. We want to see more of that.” And that was it, man. That was it. So the game’s began.

Joe Fairless: Now let’s fast forward, let’s jump ahead to a hundred million dollar fund. Have you raised all the hundred million dollars?

Dave Seymour: Oh, I wish. No. I could spend 100 million tomorrow, if somebody wants to write us a check. We’re about 80% of where we want to be right now, but we are in acquisition mode.

Joe Fairless: 80% of where you want to be. So you’ve raised 80 million dollars?

Dave Seymour: We’re 80% of where we want to be. There is not 80 million in the bank either right now. A lot of the money — I’m not trying to avoid anything, Joe. But a lot of the…

Joe Fairless: No. Fair enough. Yeah.

Dave Seymour: …a lot of the capital is coming through what’s called qualified funds. So I could say 80 million, but because it’s qualified funds, I might only land 50 million of it. But we’re consistently in a capital raise mode, because of the amount of apartment complexes. They’ve gone through our underwriting funnel job. They’re primed and ready to go. But the reason we transitioned into this world from where I was, is because the landscape demanded it. COVID has created an unprecedented opportunity. And that word unprecedented is used pretty much in every conversation today. Unprecedented that our kids don’t go to school, unprecedented that the restaurants are shut down, unprecedented medical front; it applies everywhere. So if you’re doing the same thing now that you were doing late 2019, then you’re probably not doing the right thing.

And we looked at it and we said pre-foreclosures will hit, the forbearances will be lifted, and people will be hurt. Unemployment is still three and a half times what it was pre-COVID. The moratorium on tenancy is going to be lifted, people will be evicted and they will need to be reassigned to new housing. We need to be ready for that. And it’s a case of he or she who controls the capital in this chaos is going to win the race. And the amount of dry powder – and we refer to dry powder as the capital dollars on the sideline – has grown exponentially as I’m sure you’re aware. So we have a responsibility to be in that position to put that capital to work. Double-digit returns, which is what we target out.

Joe Fairless: And when you say qualified funds, are you talking about retirement accounts?

Dave Seymour: Yeah, correct. So that’s your self-directed IRAs, your solo 401K’s. That money funnel, if you will, has got a lot of checks and balances along the way. I work solely with one company, Horizon Trust, so I have a great line of communication, and our systems integrate, so we can take maybe a couple of weeks off of the general timeline that it takes to get that capital into the fund. Because as soon as it’s in the fund, my goal is to get it out the door and on the street into a property as soon as possible. So yeah, that’s what we mean by qualified funds.

Joe Fairless: Why is a lot of the money through qualified funds?

Dave Seymour: That’s a great question.

Joe Fairless: Firefighter connections is my guess.

Dave Seymour: Yeah, it’s partly that. It’s an interesting world. Fearless real estate is kind of like our topic here, but at the end of the day, I’m now in finance more than I am in real estate. So these kinds of funds, what’s called a regulation D 506(c) fund – because I’ve gone through the SEC compliance process, I’m allowed to market to the general public for my fund. Well, there are really two kinds of investors; there’s what we call the retail investor and the institutional investor. The institutional investor are the smaller hedge funds, pension plans, things of that nature. They are very comfortable with 10, 20, 30 million dollar commitments into a fund, but they shy away when it’s a new fund or a first fund.

So the qualified funds for us are coming through the retail investor pool. I’m 54 years old, so I have a lot of commonality, for want of a better term, with my investor pool… Because we’re in their late 40s or early 60s age group where we’re starting to think significantly about “Will the retirement capital honestly get to the finish line for us?” The number one fear is having the money die before you do. It’s interesting, medicine has extended our life and yet our financial fortitude doesn’t meet life expectancy anymore. People are still just plunking money into 401Ks, are not paying attention to their expense ratios inside of there, and they talk about compound returns, but they never refer to compounding costs.

So that’s why we attract that kind of capital, I think. We have various marketing funnels, Joe, that are out there. And it’s a wide net that we cast. But it’s the retail investor that puts their hand up, because I think they just identify with the message. If you’re sitting on three and a half million, four million dollars right now, is that really enough? And most economists say it’s not enough money to get there. So I’m not necessarily interacting every day with the pension funds and the smaller hedge funds, although I do have a lot of conversations with those guys.

You know, it’s funny, man – you get to a point where you show them your PPM, your private placement memorandum, which is a legal document that explains the business model for the fund. Why we invest, where we invest, what’s that criteria, returns, etc, etc. And these funds are looking at it and saying, “I love what you’re doing. It all makes sense. You know what though? You’re only 100 million, you’re way too small for us. Please call us when you’ve got fund two up and running, with half a billion, and then we can write you a check for 75, 80, 90 million dollars.” So the business model isn’t what’s being overly scrutinized, it’s actually the size of the fund, which is pretty interesting.

So that’s why I think it’s commonality, it’s people resonating with the message that we put out there as to why wouldn’t you let somebody else do all the work, Freedom Venture Investments, and you the investor participate passively in those double-digit returns that we target on the fund when we execute and bring the assets in? Does that make sense?

Joe Fairless: It does. You mentioned marketing tactics, you’ve got a bunch of them. What’s been the least successful and the most successful at bringing in the accredited investor?

Dave Seymour: Yeah – the least successful is thinking that just because you have the TV guy status, that people are going to write you a check. [laughs] I think that’s kind of interesting. We brought in Kevin Harrington to be head of business development for us. Kevin Harrington was one of the original sharks on Shark Tank. And Kevin is a fantastic asset to the company. But you look at it and you think, why is this so much work? And you can’t just have a fund and think the money is going to come. So what we did was we stepped back after a couple of weeks and said, “What more that we need to be doing?” And for us, the most successful funnel, if you will, that we have, is actually building out an online education piece that brings the investors awareness and competencies up the gradient enough so that when we have the offer in front of them, it makes a lot more sense to them. And we do that through various online social media type platforms, and things of that nature. That’s been the number one spot.

And then the second spot is where we’re at right now, which is actually doing in-person presentations for our accredited investors. We do one down in Tampa, which is where the majority of our assets are, in the Gulf Coast region in Florida. We just go to a really nice steakhouse, we do an hour and 20-minute presentation, gauge the interest in the audience, and then start to work with them and bring them up the gradient, so that they can feel comfortable about making an investment. I’ve always done well live and in person, Joe, and it’s so hard right now with COVID. The very best restaurants — Tampa is a little looser than we are up here in Massachusetts. Our offices in Tampa are firing on all cylinders. But up here in Mass, I think I’m down to about 18 to 24 butts in seats. But again, look, my minimum investment is $100,000. It’s two, three, four thousand dollars to put on a decent event, feed your potential clients, gauge their interest… This isn’t a hard sell.

Joe Fairless: How do you find them? Like the in-person one.

Dave Seymour: Yeah. Direct mail. We pull a list of accredited investors, we can go in and base somebody’s accreditation on earnings. It’s amazing how much information is out there when you know how to go find it.

Joe Fairless: Who do you use for direct mail?

Dave Seymour: My marketing team does it. Blockbuster, or Big Block, I think, is a postcard that we use. A little bit bigger. And again, that’s where we get a little pop for the TV thing, because you get to be able to use you know the face and the names, and people are like “Oh, that’s a little bit different.” It’s just separating yourself from the noise, Joe. If you can do that… Just like I did using profanity to get a TV show… I now use the TV show to separate myself from the other funds that are out there that are vying for this retail investor capital.

Joe Fairless: And I know this is more the marketing team, but if you do have knowledge of this, we’d love to learn about it. On the direct mail piece, do you have a frequency in what you send those direct mail pieces to the credit investors?

Dave Seymour: Yeah. Let’s say I pull a list of 1,000 accredited investors from direct mail marketing. It’s not like 1,000 pieces one time; you want to segment that out. So we’ll do either a three or five-touch campaign over, I think it’s a three to four-week period. I’m not exactly sure how often they send them out. But we commit to that. I’m not a great marketer, I know the basics. So with direct mail, my response rate for these kinds of events is probably around three and a half, 4%. We haven’t done too much split-testing with these pieces because we haven’t really needed to yet. But it’s trial and error. Marketing is all trial and error. It seems to be in such an intangible world sometimes for me; I’ve learned my lessons over the years with online marketing companies and stuff like that. I like tangibles. I want to see dollars out, customers in, cost of acquisition. Again, the marketing team does all of that. But it’s not just a “one list, one time, I hope it works.” Its three to five-touch campaign is what you generally need to get that kind of response rate.

Joe Fairless: And you said three to five touch campaign over roughly a three to four-week period. Just so I’m tracking right, does that mean about one per week?

Dave Seymour: Yeah. Approximately one a week. It’s the consistency that really gets it done.

Joe Fairless: Different postcards each week, or the same ones?

Dave Seymour: Well, we haven’t needed to split-test yet.

Joe Fairless: So the same one over and over?

Dave Seymour: Yes. So the same one. We back that up locally here in the Massachusetts market. I have a radio show that runs on Saturdays, like a talk show piece. It’s a one hour show called Real Estate Revealed. So I also use that as an education and a traffic-driving platform as well. I bring in Kevin Harrington and interview him, and I interview my custodian from Horizon Trust, and that kind of stuff. It’s all angles. It’s all angles.

Joe Fairless: It’s a fun conversation, I appreciate you sharing the inner workings of how you’ve put together the fund. Have you purchased any properties with the fund money yet?

Dave Seymour: Yeah. We’ve got a smaller asset class that’s just about to come into the fund. And there’s approximately, I would say, another 15 or 18 million that has been underwritten and has been walked, and is right on the cusp of coming into the fund. It’s interesting, because what we’re seeing now is practically zero outbound marketing for leads for properties. My partner Walter Novicki, he has over 25 years syndicating multi-family apartment complexes in the Gulf Coast region… So he’s known as the guy to call when the you know what hits the fan. And we’re actually getting pre-foreclosure leads now… Because we deal with a smaller asset class, Joe; I don’t like these 200, 250, 500-unit complexes. I’m going to let Wall Street and all the big boys fight over those. And then what we’ll do is we’ll pick up all the crumbs, because the verticals are exactly the same for us.

Joe Fairless: What size units are you targeting?

Dave Seymour: We target 40 to 150, we’re in that range.

Joe Fairless: Got it.

Dave Seymour: And again, because the verticals are there, property management, construction, those kinds of things for repositioning, we almost look at it as if it is (and it is) all one fund or one real estate strategy for each of these complexes inside the fund. It’s inbound calls.

I was talking to a fund manager the other day, and he deals with international pension funds for teachers. And he asked me bluntly, he said, “Your fund is 100 million.” He said, “If I write you a check for 100 million, how long can you put it to work?” That’s a hell of a question to have somebody ask you. And I quickly dialed in my CIO, Walter, and I said “If I give you 100 mil tomorrow, how long can you put it on the street?” He said, “I can buy 300 million of cash flow and assets within the next 30 to 45 days.” And that’s a pretty powerful statement to make. But again, it only comes through longevity and expertise in a market, being able to execute on that stuff. So that conversation is still going on. I wish I could tell you with all confidence that we pulled that one off, but it’s interesting the way that they’re looking at this stuff. They’re looking for a lot of distressed debt right now, and that’s probably part of the fund too for us, is bringing distressed debt into the fund and working some of those angles as well.

Joe Fairless: Just taking a step back, based on your experience in real estate investing. What’s your best real estate investing advice ever?

Dave Seymour: Educate, don’t speculate. Really, it’s that simple. There are so many investors out there who think they know what they’re doing. I’m watching a lot of speculative investments going out there right now. People got hurt in 2008, 2009, 2010 because they did the ostrich thing. You know what I mean, Joe? They put their head in the sand and said, “Nah, we’re going to be alright.” No, you’re not. You’ve got to pivot, educate. Do you know what’s going on in the marketplace? Do you know what the yield is on a T-Bond right now? Because that’s important. Do you know how many mortgages are in forbearance right now? That’s important. You know, all of the easy data that they throw out there needs to be analyzed with a professional mindset, and a lot of people just kind of wing it. And I’ve seen a lot of people get hurt. I’m very proud to say I have never ever in my career, missed one payment or lost $1 of investor capital ever, ever. I’ve always done that from an ultra-conservative standpoint. I don’t do skinny deals. I educate myself first before I execute. So yeah, sorry to get long-winded man, but it’s important. Educate, don’t speculate.

Joe Fairless: We’re going to do a lightning round. But first, are you ready for the lightning round?

Dave Seymour: Whatever you’ve got. Bring it on, Joe. I’m feeling strong. I’m on a roll.

Joe Fairless: I know you — you can handle anything. First though, a quick word from our Best Ever partners.

Break: [00:24:21][00:25:08]

Joe Fairless: Alright, let’s do a lightning round… Real quick, Best Ever way you like to give back to the community?

Dave Seymour: Tunnels for Towers. It’s a charity close to my heart that supports 9/11 victims, and veterans, and first-responders.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Dave Seymour: Freedomventure.com, look us up online. You can find out who we are, what we do, and how we can help you.

Joe Fairless: Dave, thanks for being on the show. Thanks for talking about your fund. Thanks for talking about a little behind the scenes action on the show Flipping Boston, and your personal story, along with ways that you’re currently attracting accredited investors to your fund, the focus of the fund being 40 to 150 units, and why that is the case. So I appreciate that. Hope you have a Best Ever day, and talk to you again soon.

Dave Seymour: Thanks, Joe.

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JF2345: Financing Commercial Real Estate With Anton Mattli

Peak Financing CEO, Anton Mattli, has decades of experience in commercial and investment banking, private equity, and commercial real estate. Throughout his career, he and his team have closed over 5 billion commercial transactions.

Anton Mattli  Real Estate Background: 

  • CEO of Peak Financing
  • He has 20 years of real estate experience 
  • Personal portfolio consists of 200+ units (not syndicated)
  • Based in Dallas, TX
  • Say hi to him at www.peakfinancing.com 
  • Best Ever Book: Tipping Point

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Focus on cash flow” – Anton Mattli


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today I’ll be speaking with Anton Mattli. Anton, how are you today?

Anton Mattli: Very good. Thanks, Theo, for having me.

Theo Hicks: And thank you for joining me as well. A little bit about Anton’s background. So he is the CEO of Peak Financing, and has 20 years of real estate experience, with a personal portfolio of over 200 units, not syndicated. He is based in Dallas, Texas and his website is peakfinancing.com. Today we’re going to talk about commercial real estate financing as it relates to the Coronavirus. Before we talk about that, Anton, do you mind telling us more about your background and what you’re focused on today?

Anton Mattli: Sure, happy to. As your listeners can hear, even though I’m based in Dallas, Texas, I’m not from Texas. I was born in Switzerland, and right after school, I studied finance, economics, I went into banking, worked for UBS in New York, then Tokyo, and Hong Kong, and then I left banking. So I have worked all around the world, always in real estate related activities and other financing activities. And after that, I started helping high net worth individuals and family offices with their direct investments. I have been involved in this now for roughly 20 years. And separately from that, we also have founded Peak Financing, which is a financing intermediary. Essentially, we are a commercial mortgage broker, and we find the best financing solutions for commercial real estate based on the asset, where it’s located, as well as the sponsors, and we make sure that there is a certainty to close, which is a crucial piece to the puzzle, as you know.

Theo Hicks: Before we go into the financing part, you said that you manage money for families and then high net worth individuals?

Anton Mattli: Yes. My focus on that is no longer as strong as it was in the past. My focus always was on direct investments, whether it was real estate or other types of alternative investments, as they’re also called. So the non-traded securities, obviously, real estate and commercial real estate always made up a big bulk of it. But some of the other investments were also industrial firms, as well as oil and gas, and similar types of investments.

Theo Hicks: Okay. Let’s talk about commercial real estate financing. I’m going to be selfish and focus on multi-family. So do you work with all types of apartment investors, or do you only do agency debt or only bridge debt? Is there a certain unit number you want to see, or a minimum loan amount that you want to see? I’m trying to get a picture of what types of loans you do.

Anton Mattli: Sure. Generally speaking, we prefer to be above the one million mark, ideally above the two million mark, but we have done a lot of deals with a property value of over a million and a half to two million, too. In that space, so only agency debt, whether it’s Freddie SPL, or Fannie, or [unintelligible [00:06:23].20] as long as the property is stabilized. If not, then it’s typically a bank loan. As a property gets larger, we have been doing also a lot of bridge loans. Over the last six months or so, since COVID-19 hit, not as many of those, because a lot of bridge lenders stopped lending. But still, for good sponsors, and good locations, good assets, with a true upside potential there are still bridge loans available. We are also doing CMBS loans, life insurance companies for lower leverage loans, mezzanine loans in certain situations, typically for larger deals, for more experienced sponsors… So we essentially find the right financing solution for a particular situation.

Theo Hicks: Okay. So you do it all then.

Anton Mattli: Yes.

Theo