JF2439_ Using Green Energy To Increase Cash Flow With Lucas Weismann

JF2439: Using Green Energy To Increase Cash Flow With Lucas Weismann

Lucas has been a real estate investor since January 2008. In 2017, he got into solar development.

Lucas got interested in green energy for several reasons. First, he uses it to increase the cash flow of the property. Being able to take advantage of the tax credit is also nice, and the accelerated depreciation plan is very beneficial as well. And while ROI varies depending on the area’s energy and labor costs, he believes that green energy can add value to the property and help real estate investors increase their cash flow.

Lucas Weismann  Real Estate Background: 

  • President of Blue Mustang Investments
  • 12 years of real estate investing experience
  • Portfolio consists of 4 single family rentals, & a 24-Unit Apartment 
  • Based in Denver, CO
  • Say hi to him at: www.w-consulting-group.com 
  • Best Ever Book: Miracle Morning

Click here to know more about our sponsors RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“Find a local mentor group” – Lucas Weismann.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2436: $15,000 a Month Passive Income with Rachel Richards

Rachel is a former financial advisor, and now a real estate investor with a portfolio of 40 doors. At 27 years of age. Rachel quit her job and retired with $15,000 a month in passive income. Rachel is also the author of two books, “money honey”, “passive income, aggressive retirement”. Rachel is passionate about helping young women, millennials, and Gen Z. She combined her sales skills with her passion for finance but then she realized that she wanted to invest in real estate to set a goal for early retirement. In today’s episode she will share with us her transition from being a financial advisor to her $15,000 a month in passive income investment, she will share with us the details on how she started her journey and her goals on the way.

Rachel Richards Real Estate Background:

 

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“Being good at something doesn’t mean that you enjoy something, and I did not enjoy sitting in an office cold calling people all day long..” – Rachel Richards

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2435: Banking on Yourself with Mark Willis

Mark is a certified financial planner with over 10 years of experience assessing commercial real estate investors. Mark also helps real estate investors become their own source of financing. Mark dug deep into some strategies to become not just debt-free but correspondingly found a solution to build wealth, to help clients invest in real estate. Mark aims to create a more secure financial life by creating contracts to determine outcomes.

Mark Willis Real Estate Background:

  • Certified Financial planner and Bank on yourself professional
  • Assessing CREI’s for 13+ years
  • Helps CREIs become their own source of financing
  • Based in Chicago, IL
  • Say hi to him at: www.nyafinancialpodast.com  

 

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“Know what you want your money doing for you, because if you don’t do that, you’ll end up chasing a lot of fancy, shiny objects. So ask yourself, sit down and make a little checklist..” – Mark Willis

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2434: Transform & Revolutionize into the Next Level with Kris Reid #SkillSetSunday

Kris is the Founder and CEO of ArdorSEO, an Award-Winning Digital Growth Agency that directs traffic to your website. Enamored by his ego with his early success in the tech industry, Kris got a wake-up call when the global financial crisis happened—he lost his job, went back to Australia, and assessed what else he wanted to do in his life. As a business expert and tech enthusiast, he had always been interested in the framework that builds the massive global network called the internet, and today, Kris breaks down the discovery he found on unlocking the secrets of website traffic—that changed his life forever.

Kris Reid Real Estate Background: 

  • Founder of Ardor SEO
  • Business Growth Expert
  • Developed a simple system to direct traffic to your website
  • Based in Brisbane, Australia
  • Summit coming soon: www.ardorseo.com/bestEver  
  • Say hi to him at: www.ardorseo.com  

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“Google looks at the whole internet as a big internal web; they can’t trust what you are saying at face value. They have to look at what everyone else is saying and how your content reflects that.” – Kris Reid

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2432: Learning The Secrets of the Rich With Chris Naugle

Growing up, Chris didn’t have much, but his mom taught him to dream big. With her help, he opened a skateboard and snowboard shop when he was just 16. After the dot-com bubble crash, he got a job at Wall Street and soon became a top financial advisor.

In 2006, Chris did his first flip and went on to do a few more deals until the Great Recession of 2008. At that moment, he had just purchased a dilapidated building and had his girlfriend move in with him. At the same time, he was just one mortgage payment away from bankruptcy. He experienced both wild successes and crashes throughout his career, and now he mentors others on wealth-building and the secrets of the rich.

Chris Naugle  Real Estate Background:

  • Co-founder and CEO of FlipOut Academy, The Money School, and Money Mentor
  • 16 years of real estate investing experience
  • Portfolio consists of 500+ real estate deals – flips, wholesales, rentals
  • Based in Buffalo, NY
  • Say hi to him at: www.chrisnaugle.com 
  • Best Ever Book: Profit First

 

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“Changing one thing, adding one step to your life changes everything” – Chris Naugle.


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 Chris Naugle. Chris, how are you doing today?

Chris Naugle: Doing great. Thanks for having me on.

Theo Hicks: No, thank you so much for joining us. I’m looking forward to our conversation. Chris is the co-founder and CEO of FlipOut Academy, The Money School, and Money Mentor, with over 16 years of real estate investing experience. He’s done over 500 deals across flips, wholesales, and rentals. He is based in Buffalo, New York, and his website is chrisnaugle.com. Chris, do you mind telling us some more about your background and what you’re focused on today?

Chris Naugle: Absolutely. The background starts just like many others. I grew up in a lower, lower middle-class family. My dad was an alcoholic, my mom was the one that raised me and kind of brought me up. We didn’t have much, but my mom always taught me to dream big, and that served me well. A lot of things I did when I was younger was to just dream. I dreamed of riding dirt bikes, I dreamed of being a professional snowboarder. By the time I got to a young man, I guess 16 or 17, I was dead-set on being a professional snowboarder. That’s the only thing I cared about.

When we got into the early 2000s, I’ve not only accomplished that goal which everybody told me I couldn’t do. Because Buffalo, New York, if you don’t know much about Buffalo, New York, that’s a good thing. There’s nothing really going on here. But we don’t have mountains; it’s not like Colorado or Utah. We have hills.

I remember in order to reach my goal, I had to do what everybody was unwilling to do. But I also had to fight off people telling me “You can’t do that, you’re going to have to move.” That’s what drove me. I remember the more people that said I couldn’t do it, the more I was like, “I’m going to do it.” And I did, I ended up becoming a pro snowboarder. I ended up opening a chain of skateboard andsnowboard shops. I started those out of my mom’s basement at the age of 16. By 17, the first store opened and that first store opened because my mom did a crazy thing. She’s really the one person that believed in me my whole life. But she put her house, the only thing she had in the world, on the line, so her punk 17-year-old could open this skateboard snowboard shop. It’s a pretty silly thing that she did, but that’s how I did it. Throughout the early 2000s, that’s what I did. I rose to be one of the top riders in the country. I had my skateboard snowboard shops… I was living the life. And then I was highly leveraged, and my fourth store — in the early 2000s, when the dot-com crash hit, that first recession, I remember when the planes hit the tower. I had never known what a recession was; I didn’t even really understand it. But what I understood is that my business took a massive hit and I had to go get a job. Now I was either going to deliver pizzas or I was going to get a real job… What ended up happening was I landed on Wall Street, of all the places; a punk snowboard kid landing in Wall Street. But I thought it was going to be a temporary thing and it ended up being something I loved.

Over those couple years, from the early 2000s up to 2008, I rose to be one of the top financial advisors at the firm I was at. I was making a lot of money. In 2006 I did my first flip. Just like many other people, if you have watched a TV show, you’re like, “Wow, I can flip the house in 23 minutes.” That was the first flip. It didn’t take 23 minutes, it actually took a year, and I only made 8000. But it gave me the hope that I could do this.

I did another one in 2007, and in 2008 I was doing really well. I bought a dilapidated building, a paint store, and I was going to convert it into a three-unit strip mall. I borrowed money from a hard money lender. I nicknamed him Knuckles; he wasn’t a nice guy… And you know what happened. Timing is everything in life, and that was when the great recession hit.

So the great recession hit me, and it hit me like a Mack truck, at full speed ahead. I’ll never forget that point. It was one of the most pivotal periods. I was literally one payment, one month away from being bankrupt. I had nothing left. I remember coming home to the girlfriend who had just moved into my house and I said to her, “Sweetie, I need your help. I need your help paying the mortgage. I need your help paying the utilities. By the way, my friend Pete’s going to move into that bedroom down the hall, and my friend Jessica is moving in the bedroom upstairs.” I was laying my cards on the table right there. A 50/50 shot. She could have just walked out the door and I never would have seen her again. I think she kind of liked me. We’re actually married now, so you get the gist of it. We’ve got our first daughter, she’s six months old. But that was then.

Then 2009 to 2014 was the next journey, and that was the real estate journey. See, I made a ton of mistakes, but I at least knew what Warren Buffett said about buying low and selling high. So what I did in ’09 is I started buying dilapidated apartment buildings. I’d just buy them and buy them, and I went completely broke doing this, because every penny I made went into these deals. I was financing them all with this local bank, in my personal name. There was so much I needed to learn…

By 2014 I brought my 37th deal to the bank. My 37th door, I should say; not deal, but my 37th door to the bank. The bank said “No, you don’t fit in our little square box, debt to income ratio. Oh, and by the way, Mr. Naugle, because you don’t fit in our little box, we’re going to freeze your line of credit.” Now, any real estate investor knows your line of credit, that money’s what’s used for renovating these units. I was dead in the water. But then they did the fatal blow and they hit me with, “We’re going to also call one of your mortgages.” Now, I wasn’t the best borrower at this point. I was late on a lot of payments, and I’d gotten into some trouble. So they called my mortgage, and I was done, I had to sell all 36 units. Me and my fiance… Lorissa was my fiance then. We had to sell our dream house.

So you can see this rollercoaster. I had a bunch of money, lost it all in ’08. I climbed my way back out by ’14, and here I was, one fatal thing and I lost it all again. That was that point in life where you really ask yourself, “What am I here for?” Well, me and Lorissa split. I went to Thailand for a month and I found my way. My way was – in an all kind of weird story when I tell this, but I came home and I got a postcard to go to a three-day seminar to learn how to flip houses. I know what you’re thinking, you’re thinking “What the heck, man? You already did this.” But I didn’t go because of the flipping houses, I want because they gave away a free iPod shuffle and I wanted it. So at that three-day event, I met two key people in my life. I met Greg and I met Mike. I remember listening to him as an advisor during those events, I’m like “Come on, when do I get this stupid iPod Shuffle?” I’m sitting there with my arms crossed, and I started hearing Mike talking about how he used money, and how he was using money in real estate. I remember thinking to myself, these guys are doing everything that I have been taught to do the complete opposite way that I’ve been taught to do it. I was an advisor, a high-level advisor, and these guys did everything different than what I was taught to do with money.

That was where I had my epiphany, my calling. That calling was I needed to dive in and figure out what do the wealthy do with money that I was never taught as an advisor? What is it that the average person is taught that the wealthy do differently, and how do I learn that? That’s what I did.

From 2014 right up through to today, I’ve been a student of some of the wealthiest people, billionaires, multibillionaires, and I’ve learned the secrets of what the wealthy do. In that journey, a lot of other things happened. We flipped 263 houses, we had a pilot show on HGTV called Risky Builders in 2018, that was an awesome experience… And today, now, because of what I’ve done, I started teaching people these secrets that I’ve learned. Literally, the secret is this – changing one thing, adding one step to your life changes everything. That’s what I teach today. I teach people the secrets of the wealthy and how people can take back control of their money and use that to literally change their entire financial futures.

Theo Hicks: Thank you so much for giving us a detailed background. Lots to unpack there, I’ll try to go as quickly as possible. But I want to circle back to something you said in the beginning and then kind of at the end there. Also, the third thing that’ll be about mentors. But first, you talked about how you started with snowboarding, that grew and then you started over with something else, that grew and that went down, and something else, that grew and went down. So just the hustle aspect – is that something that came naturally to you? Or even if it did, what advice would you have to someone who’s listening to this and saying, “I can’t imagine ever doing something like that. LHow did he do it not once, not twice, but three times?” What advice would you give to someone like that?

Chris Naugle: That’s an interesting one. I don’t think I’ve talked about this a lot in other podcasts. But remember, I grew up with very little. When I wanted something, I didn’t go to mom. My dad was kind of not in the picture. But I didn’t go to mom and say, “Mom, I want this new dirt bike. Can I have it?” I went to mom and I said “I really would love to have this dirt bike.” And she would say “Great. What do we have to do to make that happen? How many lawns do we have to mow for our neighbors? Do we have to shovel some driveways? Do you have to go work on a farm?” Which I did from 14 to 16. She taught me how to, I guess you would call it hustle, but back then it was just a means to get what I wanted. If I wanted the dirt bike, the BMX, the skateboard, the snowboard, I had to basically go out there and I had the hustle. That stuck with me my entire life.

The other thing too in those failing periods – it’s easy to say you hustle when things are good. Like, right now we’ve been in a period of really good times, but hard times await us. I learned more in the hard times, the failing times, 2008, the early 2000s, 2014s… Because during those times I had to really look at myself in the mirror and I had to say, “Am I going to quit?” Because you feel like quitting when you’re at the bottom. When you’re getting kicked and beat and just nothing’s going your way, you just want to throw the towel in. I remember one of my mentors –and this is where you get into mentors, his name is Greg Reed– he said the only way you can ever fail at anything in life is to quit. I just decided I was never ever going to quit.

Break: [00:10:12][00:12:13]

Theo Hicks: A lot of people that I talked to on the podcast or just in general, I go through their bio, they started in 2010, 2011, 2012, 2013 up until the present, and they haven’t experienced a recession yet. We’re recording this in December so technically, we’re in a recession right now. But what advice do you have for someone that has not experienced a recession yet? What types of things do they need to start doing in their business, but also maybe mentally to prepare for what’s eventually going to happen to their business?

Chris Naugle: Oh, my goodness. This could be a whole podcast, so I’m going to try to keep it simple. This is a very important question. I’m 43 and I have been through multiple recessions; not only as a real estate investor but also as a financial advisor. So I’ve seen a lot of the sides of this. The biggest thing I will tell everybody listening to this – we’re in 2020, one of the craziest years of my life… We are in a recession, but most people don’t realize it right now; they don’t even know what that is, because things are still pretty good. We’ve been in really good times for a long time, which makes people weak and it makes people put their guard down. The biggest advice I’d give to everybody is to understand this – 2021, no two ways about it; it’s going down, folks. The stock market has to crash. And it will. I can’t tell you when I can’t tell you how.

When the stock market crashes, we’re real estate investors – that doesn’t mean real estate crashes. But real estate is a lagging indicator, which means you’ve got three to six months from when the market takes its big plunge to basically make some corrections in what you’re doing. Now, I want to say, here are the things you need to do. You need to, number one, start really getting a plan of attack in place for your business.

Number one, what are your reserves looking like? Are you in control of your money or are you not in control of your money and everybody else is? In other words, are you using everybody else’s money to do what you’re doing? Are you giving away all of your money you make when you make it on fancy cars and all these things? At the end of the month, where is your money? Is it in your control, or did you give up control of 90% of every dollar you make, just like the average? Statistically, 90 cents of every dollar we make goes to somebody else. That’s got to change; you’ve got to change that one thing at that one step to get back control of your money.

Here’s the most important thing I also want to let you know. Sometimes in times like this, we have to realize that we have to give up a lot right now in order to get everything in the future. What I mean by that is what is about to happen — now, I’ve been through ’08, and I bet you, a lot of people of you understood what ’08 was, and ’09 and ’10…  If you had a DeLorean that took you back in time, you would be a billionaire today. If you just knew a couple of things then. Well here’s the good news – you’re going to get that opportunity. But most people will not be able to seize this opportunity, because they are not ready, because they didn’t think this was coming. They were blind, they bury their head in the sand in good times and they just pretend that this good time is never going to end. You talked about the people in 2009, ’10 – they’ve only been in good times, they don’t know what it’s like to have the bottom fall out.

The biggest opportunity of many of our lifetimes is about to be on us. Are you ready? When it happens, you got to really ask yourself this. You don’t know what it’s like to go through that. It’s just not fun; it’s going to be awful. It’s going to feel like everything around you is collapsing and falling apart. But you know what that feeling is? That is the feeling where you need to rise up, be the leader that you were meant to be, be the light in the darkness for all those that follow you. This is the time where all of you have the chance to literally be that light. If you are ready for it, if you’re up for that challenge… I know all of you say you are, and I’m laughing. You can’t see me if you’re just listening to this, but I’m laughing, because I know for a fact you think you’re ready. But are you really? Because it’s coming folks, and you got to prepare and get back control of your money right now.

Theo Hicks: Is the idea that once you get back control over money, the concept behind that is one, things start to collapse, then you’re able to buy — maintain what you’re currently doing, and then buy more and grow more? Is that the goal?

Chris Naugle: Correct. The person who’s going to win in any recessionary period is the person that has control of the money. A lot of people are like “Yeah, control of money. I don’t really have much money.” Great. Millennials, or people just coming out of college, they might not have a lot of money. That’s not all in what I mean. I mean, you have control of access to money. When I say access to money, if you think that means the bank, “Oh, I got a line of credit at the bank”, that will disappear, just like it did in 2009. The bank will freeze your lines of credit. “Oh, I can get a mortgage.” What if you couldn’t? Do you have relationships built with people?

I know we’re going to get to this later, but here’s the secret… If you want to be ready for this, what you need to be willing to do is to solve other people’s problems, not yours. Your problems are non-existent right now; you need to solve everybody else’s problems. For example, your neighbor. We’re in COVID and maybe your neighbor lost his job, maybe his wife lost her job and there are two cars parked in their driveway. Well, what if you could go to your neighbor, and you can save your neighbor, “I have something that I want to talk to you about. Can I have 15 minutes of your time to show you how your house can pay for those two cars?” Because you know your neighbor needs help. They won’t admit it, but the best way to get people to talk about what their problem is, is to talk about your own problems.

Talk about what’s going on in your life, talk about hard things that are happening, like fear of what’s coming. They will immediately relate and start talking about it. Once you identify their problem, solve it. You’re in real estate folks, all of you listening to this, I think you’re in real estate. You hold the greatest key to every problem everyone has. It all lies in real estate, the greatest investment on earth. But if you don’t understand how to solve their problems through what you do, then that’s where you start. At the end, I’ll give you something that will help you with that, but that’s really where it starts. I’m not really touching the surface on that one change that I’m talking about, but we’ll cover that. That’s something that the wealthy taught me and it’s the craziest most profound thing, but it is that simple.

Again, first, just remember that when this happens, what you need to do, that light in the darkness, it means you need to then go out there, and above everything else, solve other people’s problems; help other people get what they want. Because if you do that – Zig Ziglar said it, if you help enough people get what they want, you will get what you want.

Theo Hicks: Before we get to that one secret, which I’m assuming is going to be your Best Ever advice, there is one other thing I wanted to talk about. You mentioned in your background that your mom, in a sense, was a mentor, and then you met Greg and Mike at the workshop, they were mentors… I’m sure you get a lot of other mentors… And I also want to talk about why mentors are important, because you’ve already talked about that… But one thing that I come across a lot is people who are new and very zealous, want Chris Naugle to be their mentor or Joe Fairless to be their mentor. So if someone comes to you and says, “Hey Chris, I want you to be my mentor”, what things can someone like that do when they’re reaching out to you or before they reach out to you, so that you know that they’re not going to waste your time, so you know that they’re serious and it’s worthwhile to take them on?

Chris Naugle: I’m just going to give a real example. There’s this kid, his name’s Dimitri, a young guy. He came to one of the REIAs that I was speaking at and he sat right in the front row. I’ll never forget, I kept seeing him, just looking at him like, “Who is this kid? I have never seen him before.” I remember after I was done speaking and just about to get off the stage, he comes up to me and stands right in front of me. He says, “Are you hiring?” I didn’t know his name so I said, “What’s your name?” He said, “Dimitri.” I said, “Dimitri, I’m always hiring, except for I don’t pay.” He says, “What do you mean?” I said, “I mean I’m always looking for somebody to hire, except for I can’t pay you.” He says, “Okay, that’s fine. I want to learn from you.”

That’s the first thing I’m looking for. I’m looking for somebody that wants more than just the immediate gratification of a paycheck. When someone comes to me and they say, “Hey Chris, I want you to mentor me. I want to learn from you”, I hear this every single day, but you know what the biggest problem is? The second I tell them what that involves, they’re not interested. “Okay, well, great. You want me to mentor you? Here’s where it starts. You can come into MSTV, our community, and we have group coaching there that costs $19 a month or $190 a year.” “Oh, I don’t want to pay.” Great, eliminated.

The biggest thing I had to do in the hardest times of my life is I had to reach into my pocket, pull out whatever I had or that credit card that I didn’t have the money to pay for, and I had to pay these people. The Greg and the Mike, that was $27,000 to start working with them. Greg is now my business partner; Mike has lent me millions and millions of dollars.

That toll, just like when you drive down a road and there’s a toll booth, that’s the ticket. I don’t want to work with people that don’t want to invest in themselves. The number one thing people need to realize is to forget about me helping you, you all need to invest in yourself, and that comes at a price. One of two things are the price. Number one, your time, that’s the first thing. Number two, your money.

You see, successful people, all wealthy people I’ve ever met do two things very, very well. They invest their time and they invest their money. If somebody comes to me and says that, that’s what you have to be willing to do. Dimitri was willing to invest his time for free. Dimitri still works for me. We’ve done – I don’t know how many, wholesale deals. Never once have I paid him, and he still brings me coffee. Just yesterday he brought us coffee, for no reason. He just said, “I just thought you needed coffee.” That’s the difference.

Theo Hicks: I love it. Best Ever listeners, you know my story, too. That’s exactly how I started working for Joe. Alright, Chris, we’ve been foreshadowing it and building it up… What is your best real estate investing advice ever?

Chris Naugle: That changing one thing, that adding one step. Here’s what it is. The wealthiest people in the world don’t keep their money at banks. They changed one thing, they figured out where they should store their money. Do you know where it was? That change was change where your money goes first. They use giant mutually owned insurance companies; they do not use banks to store their capital. So why? Because banks take control away from you. Insurance companies – this is what the Rockefellers, the Rothschilds, the Ray Krocs, the Walt Disneys, all of them have used this. They learned that by putting money in these giant mutually owned insurance companies, they can tap into one of the greatest financial secrets in the world.

Albert Einstein called it the eighth wonder of the world. Those that understand it, earn it; those that don’t, pay it. Do you know what that is? Uninterrupted compound interest. When you put money in the bank, first off, you barely make anything. But when you take that money out of the bank, you stop the flow of interest; you stop your money working for you. When you put your money in this insurance company – and I’m not going to have time to get into all the details. My book and all my videos will teach you this. When you put your money in an insurance company, the insurance company allows you to take that money right back out immediately in the first 30 days or even sooner. You can put money in, take all or some of that money immediately back out. But here’s the thing, when you learn how to do this, the insurance company continues to pay you interest in dividends on that money for the rest of your life even though you have that money in your hands to go out there and buy the next real estate deal, do the next private loan, pay off your credit cards.

But then the most important thing that I learned, and this was the hardest thing for me to accept, is when I do make my little marching money’s work – because that’s all my money is; all they are is little marching men that I send to work every single day, because I want my money working harder for me than I have to work. When I send that money out there, I need to basically recapture, I need to treat that money the same as I would treat the banks. In other words, I take money from my account and I pay off my Visa. I was giving Visa $100 a month, and Visa was charged me 24.99%. A true story. When I paid Visa up, most people would be like, “Great, I don’t have Visa anymore.” What I do is I pay Visa off and I take that $100 a month I was giving Visa and I take that $100 and I put it back into my bank, at that mutually owned insurance company. What I just did by just changing that one thing, by taking back the money that I was giving to Visa, by being the bank, what I did is I just made 24% plus on my money. Because I was giving 24.99% to visa. If I just paid myself the same amount I was given Visa, I made 24.99%.

But you see, I make money twice. Remember, the money that I put in that mutually owned insurance company’s account, that money is earning interest. How much? 4% plus dividends. So right now it’s about 6% to keep the math simple. I’m making 6% on the money, even though I took it out to pay it to Visa. Then I took back the money I was giving Visa and now I’m making 24% on top of that. If that didn’t get you excited, well, then I should teach you how to get all the money back for every single car you will ever buy driving on by just changing that one thing.

Again, I’m not getting too deep into this, because I’m watching the clock and we’re going to run out… But I will tell you I have all the resources.

You mentioned mentors. One of my mentors, his name was Greg Reed, you can look him up. He’s the best-selling author, Napoleon Hill Foundation, he makes movies… I went to an event in 2015 at the lowest point in my life. I spent five grand to be at his house, around all the people that he surrounded himself with. And I asked him, I got one moment where I got him alone. I said, “Greg, you know my situation.” I said, “What is the best advice you can give me?” Do you know what he said to me? He said, “Alright, Chris”, he puts his hand on my shoulder and says, “I’m going to give you the best advice I can ever give you.” I’m like, “Yeah, give it to me. Give it to me Greg. Come on!” He says, “Give your best stuff away for free.”

I sat back and I’m like, “Dude, really? I just spent five grand that I don’t have to be here, and that’s the best freaking advice you got for me? Give my best stuff away for free?” He says, “You know what, Chris, you don’t understand it now, but it is.” He said, “If you do that, out of all the people you give this advice to, some of them will never need you again, because you’ll give them everything they need and they’ll respect you for that.” But he said “95% to 99% of those people will respect you so much for giving everything you have, your best stuff to them, and for helping them, that they will follow you forever. And they will become your best clients, you will make the most amount of money because of them… Because you gave your best stuff away for free.” That’s what I do today. Everything I do, I give my best stuff away for free.

Theo Hicks: It’s interesting, that last point you made about giving the best stuff away for free… Because a lot of times, you would think that when people come on the podcast, [unintelligible [00:26:02].26] why are they telling me all these things? Why do they give out all their secret sauce or their secret strategies? As you said, yeah, give it all away for free. I totally couldn’t agree more. Alright, Chris, are you ready for the Best Ever lightning round?

Chris Naugle: Let’s do it!

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

Break: [00:26:17][00:26:53]

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

Chris Naugle: Recently read. Profit First.

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

Chris Naugle: Start over tomorrow and do what I learned by failing.

Theo Hicks: Out of all the deals you’ve done so far, what’s one that you’ve lost the most money on? How much did you lose and what lessons did you learn?

Chris Naugle: 34 Woodley, we lost $62,000. I’ll never forget that, out of 263 properties. I know every property that I’ve lost money on, because those are the ones I learned from. What I learned is I took my eye off the prize and I got greedy. That is the biggest lesson I ever learned, was from that loss. But every loss I’ve learned from; every win, I don’t even remember half of them.

Theo Hicks: We’ve already kind of talked about this, but what is the Best Ever way you like to give back?

Chris Naugle: I like to solve people’s money problem, and that is how I do it. I teach people how to create a financial butterfly effect in their lives by changing just one thing.

Theo Hicks: And then last question. What is the Best Ever place to reach you? You can also talk about the giveaway that you have for us today.

Chris Naugle: Yeah. The best place to get me is my website, chrisnaugle.com, and you can just go there. Everything I have is there. But to get you to go there – this is all knowledge, it’s all great stuff. The person that ever said “knowledge is power” was full of crap. Because knowledge isn’t power; it’s the application of knowledge. Any of you that want to learn, that really want to take advantage of what I’m teaching and what I do, you have to take action. So how can I motivate you? Because remember that free iPod Shuffle that I got from going to that event? I want to give you something for free. I’ve got two books – The Private Money Guide, where all the money is for all the real estate deals you ever want. I’m going to give you this one too, Mapping Out the Millionaire Mystery, that one change, how to change that one thing. How about I give you both of these books for free? Go to my website, one click, one swipe, click on “free book” and you can have both of those. While you’re at it, watch some of my videos, because they will absolutely change your life.

Theo Hicks: Chris, thank you so much for joining us today. Definitely going to be worth re-listening to this, because we went over so much, and time just flew by. Some of the main categories of things we talked about – I’m not going to summarize too much, but we talked about cultivating hustle, how you’re able to accomplish that, things people can do to replicate that. We talked about the advice you’d have for people who have not gone through a recession yet, and that a big one is coming, and that you need to, number one, make sure you have control of your money, number two, make sure you’re prepared to solve other people’s problems. You gave us some examples of that.

Chris Naugle: Theo, can I finish with one very important thing?

Theo Hicks: Yeah, totally.

Chris Naugle: Let me finish with a quote that really is one of the most profound quotes. That quote is from Will Rogers. Will Rogers says “The biggest problem in America is not what people don’t know. The biggest problem in America is what people think they know, that just ain’t so.” Be very careful who you take advice from. Be very careful who you surround yourself with, because that circle, if they are not living the life you want to live, the perfect day you want to live, are you in the right company?

Also, as you mentioned, be careful of taking advice from people that haven’t failed.

Theo Hicks: That’s a really powerful one. I think I’m going to stop my summary there and let’s end with that, Chris. Thank you so much for joining us today. Best Ever listeners, make sure you take advantage of his free books – read them, learn from them. Chris is a very successful guy who works with successful people, so if you want to replicate that, you’ve got to learn from the best. Chris, thank you again for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
JF2429 Taking Opportunities to the Next Level with Ward Schraeder

JF2429: Taking Opportunities To Next Level with Ward Schraeder

Ward is a dedicated and exemplary property owner who takes opportunities to the next level. He spent nine years working as a salesperson selling chemicals when he decided to put fate into his hands by building a business by acquiring real estate in bankruptcy. Ward started to take off from there up to the point where his commercial real-estate products reached almost half a million square feet! Through his patience, wisdom, and placing importance in relationship building, Ward sheds light on how he best utilized these opportunities.

Ward Schraeder Real Estate Background:

  • Develops commercial properties; primarily medical facilities
  • 35 years of real estate experience 
  • Portfolio consists of 50,000 sq ft of medical office space, 50,000 sq ft of rental properties, 2,000 acres of land holdings, and flipped 18 commercial properties
  • Based in Kansas City, KS
  • Say hi to him at: www.wardschraeder.com
  • Best Ever Book: “The Millionaire Next Door” by Thomas J. Stanley

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“My life has been mostly taking advantage of opportunities.” –Ward Schraeder


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here today with our guest, Ward Schraeder. Ward is joining us from Kansas City, Kansas. He has a portfolio that consists of 50,000 square feet of medical office space, and then another 50,000 square feet of rental properties, and then 2000 acres of land. Ward has also flipped 18 commercial properties. Ward before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Ward Schraeder: Alright. My background was science in college, chemistry and physics was my degree, primarily chemistry. I spent about nine years working as a salesperson for Union Carbide, selling chemicals and whatever. I then decided I wanted to be in business for myself. I actually acquired real estate that was in bankruptcy, and some of them were operating businesses that I took over as well. I got into real estate with a group of physicians that were having a problem with a medical office building they owned. We became great friends, and from that, I have done quite a little bit more than you described. I’ve built seven specialty hospitals and acute care hospitals. So my commercial real estate products are probably closer to half a million square feet, that I still own and operate.

The land – that came from my family, I’m a fourth-generation owner. 600 acres of it came from my family; I’ve added on to that every chance I’ve gotten. I always joke I grew up in a place that was about 20 miles from any town in western Kansas, and I had to drive about 20 miles to have a date while I was growing up, because everybody within 10 miles of me was my cousin. So as my cousins have decided to sell their land, I’ve been buying it and adding to our holdings. It’s a real pleasure. My daughter Tamara, who’s on the HGTV show with me, Bargain Mansions, her and her family just got back from there. They spent a week out there just playing; we have a lot of toys and lakes, and the kids love it.

Ash Patel: There are so many different places that we can start. Let’s go back to the medical office space and how you got into that, and then how that evolved into the acute care facilities and hospitals. Can you take us through that journey?

Ward Schraeder: Well, I wish I could tell you that this was a really well planned out process. My life has been mostly taking advantage of opportunities. The opportunity on the real estate was with the medical office building with some physicians that owned it – they were moving into a hospital space that was more convenient for them, and they couldn’t find a buyer. Fortunately, growing up on a farm and ranch, I was very aware of structures. We built everything we’ve ever needed there. When I looked at the building, I realized that it was a bunch of small office spaces or examination rooms that weren’t very conducive to office spaces.

I was able to see that you could expand that concept and move it into bigger office spaces and turn it into commercial real estate… And I just took a chance. I think it’s the biggest thing I see with young people wanting to get into business for themselves, having more than enough talent to do so, that they won’t take a chance on themselves. I did that, and because it was so successful the docs and I became good friends… And absolutely over cocktails at the country club on a Friday night, one of the doctors said “We’d really love to build a surgery center of our own.” I am like, “Well, what’s a surgery center? That’s nothing I’ve heard of.” They told me and I said, “Well, I’ve tried everything else at that point. Why wouldn’t I try this? It sounds interesting.”

Within a couple of weeks, I’d found a consultant that had an understanding of the business, put together a meeting, got the docs to bring all their doctor buddies, and we had a meeting of about 35 surgeons. Most of them walked in saying “Well, we’re never going to do this, but we’re curious what you’re selling.” By the time they walked out they had all invested, and two weeks later we were starting on a surgical hospital. It’s still in existence in Salina, Kansas. We do about 10,000 procedures a year; full facility, but small, 20 beds. We don’t really treat sick people, we treat injured or elective kinds of surgeries.

So I did that, got familiar with the industry, expanded, and decided to continue doing that. Over the last 25 years, as I said… Actually, it’s nine hospitals now. We’ve got two that are just opening up currently; probably 20 to 25 ASCs or ambulatory surgery centers, at least a dozen imaging centers… Not that I own all this, but we’ve built easily a million square feet of office space for physicians. It was one opportunity that you built off of the last one, you saw that it worked, you made some friends, you made some relationships, you got some introductions, you asked for some introductions… So that’s it in a nutshell. It’s a much longer story over 25 years, but that’s kind of it.

Ash Patel: What does a deal look like on a surgery center? You’re familiar with apartment syndications, are there similarities between the two deal structures?

Ward Schraeder: Yes, there are similarities. The structure of the hospital is that we would never build one without knowing what our business was. We went to the physicians in the community first, found those physicians, found out what their caseload history was, what their background was. After you’ve done a few of these, it’s very much mathematical; just like a performance for buying a piece of real estate. Well, this was a very mathematical formula. If I knew how many hip replacements you were going to bring, how many knee skips, tonsillectomies, and all that, I can predict on average how long an operating room is going to take a turn for each of those. That’s kind of the engine of the machine.

When you know that and you know how much time, you also then know how much recovery and how much pre-op, so you back in to how big the facility needs to be based upon the number of surgeons. You always give yourself an out, in that you build it so that it can be expanded. All of them have been expanded from what they started out as. So again, I’m a very mathematical guy, very practical. When I look at buying a piece of real estate, it’s very easy for me to identify in my mind what the right price is. The same thing with the business, it’s very easy if I have a good idea of what the revenue is going to be and how to build it to make some money.

Break: [00:07:34][00:09:35]

Ash Patel: Ward, you have a captive audience with all these physicians. Are there other investments that you bring them into? Non-medical investments?

Ward Schraeder: Yes, it’s interesting that you bring that up. We have developed our own… I hesitate to call it this, but it’s a venture capital or private equity firm that we’ve created. We have almost 400 high net worth individuals that are in that. We are into a wide variety of things; we have printed paperback books, but we no longer do that. We were in food distribution, we are in assisted living, we have almost 200 beds of assisted living, three different facilities, and two memory care units. We’re also into… You probably aren’t familiar with Freddie’s fast-food franchise. It’s a hamburger organization out of Wichita, Kansas that has spread out over the last 10 years to have about 400 plus franchisees… Or franchises, I guess I should say, not franchisees. We’re the largest single franchisee of them. We have about 70 units across the United States, all the way from Georgia to Texas.

Ash Patel: Do you own the real estate that those sit on?

Ward Schraeder: Some. Yes. It just depends. Some places people want to sell the real estate, some people want to lease it, or some people want to build the building and everything for us. We have a good enough track record and we have a fair number of those. We actually like to build them, because after we get them up and cash flowing, there are REITs out there that will buy them from us. We actually make money by selling them, as well as running the restaurants. So that’s an interesting prospect.

We also have a business, it was called Rocket Crafters, but it’s now called Vaya Space. This is a pretty far stretch for a guy that’s been in real estate most of his life, but we’ll be launching rockets, the first payload on April 24th, out of White Sands Missile Range in New Mexico. So I’m on the board of that.

Ash Patel: That’s got to be a whole other podcast. Ward, you flipped 18 commercial properties. Did you flip those with the intention of flipping them, or did that just happen?

Ward Schraeder: Most people when they go into the business, they’re saying, “What’s your exit strategy?” My entrance strategy is probably more than my exit. If I achieve what I’ve set out to do, which is to make the kind of return I expect out at that business, I don’t care whether I sell it or not. I am perfectly happy to run it, operate it, and collect what I like to refer to as mailbox money. I don’t have to do too much after it’s up and stabilized.

For example, in one of our hospitals I end up probably being a 10% to 15% owner of the operating company, not just the real estate. But there are so many people in this world who know more about running a hospital than I do, that I’m the inappropriate one to try to be the general manager or the CEO. So we’ll hire professionals that have been educated in that business. I sit on the board, I go to the meetings, I do make capital decisions and cash flow decisions… But that’s what I mean by mailbox money – I don’t really have to go to work every day to perform a function.

Ash Patel: Ward, picture this scenario – if your business collapsed your net worth went to zero or negative. What would you do?

Ward Schraeder: Well, that’s interesting… I saw that question in one of your interviews I watched before the show. I think I’d start just like I did. I’d go back and find a small commercial real estate property… Even though I did a lot of real estate for myself, homes that I built, lived in, sold, and did it again and again, commercial is by far more attractive to me. Especially if you have a good enough property that it requires good tenants, you almost never have to worry about collecting your money; you don’t have to worry about them trashing your property, leaving in the middle of the night, or something onerous happening, like drugs or something like that going on in it. It’s much easier to build a performer where I can manage the cash flow, manage the maintenance, and manage the cleanliness of the property. So I’d go right back into doing real estate.

When I got ahead, just as I did, Tamara always jokes that my children were forced into labor when they were young. But when we were young, I didn’t have enough money to really do anything else. On weekends, when we had something that needed to be done that the children could do, they worked with me. Worked with me, not for me.

Ash Patel:  Yeah. Ward, you interact with a lot of doctors… My wife is a doctor as well. What unique traits do you use to communicate with them, and how are they different when you’re pitching the investments?

Ward Schraeder: Pitching is one subject that isn’t too difficult. We’ve had a really remarkable track record. It’s pretty easy to get their attention when I need assistance with an investment. Assistance meaning capital. Physicians all work a lot of hours in general, they don’t really have time to study the economics of very many projects, so they have to have a trusted investor for them. All of them have their 401s or their IRAs or whatever they do, but this is a whole different realm of diversity for them. So they can be in a rocket company, they can be in a food distribution company, they can be in a printing company, or another real estate, or they can even be in one of our other hospitals.

The hospitals over the years have gotten bigger and more expensive, so doctors that trail with us have come from their hospital where they were successful and helped invest to get the new one off the ground. So talking to them, that side of it is relatively easy. I’m sorry, I’ve forgotten the first part of your question.

Ash Patel: Let me rephrase it just a little bit… Somebody who is wanting to solicit doctors for investment capital, what advice would you give them?

Ward Schraeder: Number one, don’t waste their time. It won’t take very long to lose their attention span. Not that they don’t have a long enough attention span, but maybe not as long as it needs to be for starting a business. My relationships with them started with some very basic kind of businesses. Real estate – very easy to understand and very limited risk. I’ve always looked at real estate and said, “Maybe I’ll lose my downpayment. But will it take my whole company and business down?” No, I don’t believe so. Even in the worst economy, I think I’ll still get out of it, maybe with no cash, but at least I won’t have to sell 10 other properties to make it work. So start off with something quite basic. Prove yourself with something not outrageous or gigantic, maybe is a better word. Once you’ve done that, then you’ve got their ear. If you’re successful, doctors are like everybody else in the world, they like to talk; they like to tell their friends how they’ve been successful with this guy out of Kansas, and you ought to meet him. That’s what I would suggest.

Ash Patel: That’s great advice. So be respectful of their time, get to the point quickly, prove yourself, and hope for a lot of word of mouth on your successful deals that you do with them.

Ward Schraeder: What better way of promoting yourself than by word of mouth? We have very little advertising in our business. We probably employ, in all of our facilities, 5,000 to 6,000 people. In all of them that were participating in. I shouldn’t say that we own 100% of them. But you don’t get that by advertising, I don’t think. I think the best way anyway to get it is the way we did it. Maybe you’d call it organic growth.

Ash Patel: Ward, the question that we typically ask is what’s your Best Ever real estate investing advice. With you, I’m going to change it up. What is your Best Ever investing advice? It doesn’t have to be real estate. As a matter of fact, let’s do both. Let’s do your real estate advice and non-real estate investing advice.

Ward Schraeder: The real Estate advice is the same old one – location, location, location. My ranch is a terrible investment, because it’s in the middle of nowhere; there’s no opportunity for growth. It’s a huge county in Kansas that has 3,000 people. In Salina, Kansas where I built the first hospital and I lived at the time, I started buying land that was one mile outside of town, paved roads on both sides, and water on both sides. I held that land for 10 years and sold it for a very high multiple of what I paid for it. So it proves the equation of location, location, location. I actually think the best advice for buying real estate is buying something that you can see as an opportunity, but is maybe dilapidated or in a state of disrepair. Maybe a good example of that would be one of the businesses we assisted in starting was a bank in Salina. We did a scratch start of a small bank, 250 million in assets when we sold it.

A gentleman came in with, let me say 50 properties; I don’t remember the exact number, but it was close. He had lived off the deferred maintenance of those properties for quite some time, several years, until the point that he was having trouble renting them. He just came in one day and threw all the keys on the desks and said “I’m 65,” or whatever it was, “I’m retiring and I’m sick and I don’t want these anymore.” It took the bank about 18 months to recover those. They needed roofs, they needed kitchens, they needed paint, they needed floors cleaned, and carpets removed… You know the story.

I came in after the 18 months that the bank had owned them and we reinvested every penny we got out of them and we were actually cash flowing, but nobody wanted to buy them. They were at a discount of 25% to county appraisal. I want to buy these; that’s actually what I started to say, it was my initial conversation. We ended up getting the 10 or 15 investors, I don’t remember the exact number, that had invested in the bank and we all got together and bought them.

What a perfect opportunity. The places were actually cash flowing. Every penny we made for the next 5, 6, 7 years needed to be put back into it… But we did it, and now we have almost 60 units. We only bought 33 or 34 of them but we now have 60 units, we still own them, we’re almost debt-free, and they’re all in tip-top shape. But nobody wanted them, because they were so beat up. But you could see it was an opportunity.

Ash Patel: Ward, are you ready for the lightning round?

Ward Schraeder: Sure.

Ash Patel: First, a quick word from our partners.

Break: [00:20:07][00:20:43]

Ash Patel: Ward, what’s the Best Ever book you recently read?

Ward Schraeder: There was one I read that I actually paid my children to read. It was called The Millionaire Next Door.

That is a great book. Ward, what’s the Best Ever way you like to give back?

Ward Schraeder: I am acting as a mentor for several young people to learn how to be in business for themselves. I get nothing economic from it. It’s just a pleasure being around young people that are motivated that want to do something with their life. I love it. It gives me encouragement for our society.

Ash Patel: That is great. Ward, how can the Best Ever listeners reach out to you?

Ward Schraeder: They can reach me on Instagram at @WardSchraeder, or Facebook, the same thing, Ward Schraeder. Just send me a note. If it’s something that requires more than a public conversation, I’d be happy to engage in a private conversation.

Ash Patel: That’s fantastic, Ward. Thank you for being on the show today. You could have written a book with all your different experiences that you have. I think the big takeaway here is you just look for opportunities and then you execute flawlessly in getting those deals done. You’ve built a great business and a great network. Congratulations on all your success and have a Best Ever day.

Ward Schraeder: Well, thank you. Thank you for having me on your show. I love doing this. It’s fun to talk to people that have had different experiences. I didn’t get to ask you enough questions about your business, but maybe there’ll be another opportunity.

Ash Patel: Awesome, Ward, thank you again.

Ward Schraeder: Take care.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
JF2428 Mistakes Do Not Signify the End of Your Career-Defining Journey with Matthew Tortoriello

JF2428: Mistakes Do Not Signify the End of Your Career Defining Journey with Matthew Tortoriello

Matthew started his real estate journey at 16 when he purchased a two-family home with his grandmother’s money. Four years later, he bought another property that was a challenge to manage. That experience taught him a lot of lessons that he applied later in his career.

With two other partners, he acquired a two-family house that he managed and renovated. After buying several more units, getting a construction license, and founding a property management agency, they were still looking for new opportunities. That’s when Matthew met a new investor and future partner who helped them take the business to a new level.

 

Matthew Tortoriello Real Estate Background:

  • Full-time real estate investor and property manager
  • 25+ years of real estate experience
  • Portfolio consists of 250 units, flipped 100, & wholesaled over 200
  • Based in Springfield, Mass
  • Say hi to him at: www.yellowbrick.org 
  • Best Ever Book: Recession Proof RE Investing

 

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“Don’t focus on learning everything because you’ll never learn everything. You’ll learn a lot along the way” – Matthew Tortoriello.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
JF2427 Growing Trust to Build a Better Brand with Stace Caseria #SkillsetSunday

JF2427: Growing Trust to Build a Better Brand with Stace Caseria #SkillsetSunday

In this #SkillsetSunday episode, Stace Caseria talks about the importance of trust. You can increase the trustworthiness of your brand by understanding its 4 fundamental parts.

Stace describes how trust works for a real estate professional who’s looking to reach out to a new lead for the first time ever. He also talks about the ways to make a brand or a business sound authentic and how to market your services on a whole different level.

 

Stace Caseria Real Estate Background:

  • Owner of Trust Deep, a branding agency and Evergreen North Properties
  • 20 years of investing experience
  • Currently has 4 properties, a small apartment building, & a passive investor in a syndication
  • Based in Boston, MA
  • Say hi to him at: www.trustdeepagency.com 
  • Best Ever Book: The Speed of Trust 

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

You can’t build trust with smoke and mirrors because eventually you’ll get caught” – Stace Caseria


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. First off, I hope you’re having a Best Ever weekend. Because today is Sunday, we have a special segment for you called Skillset Sunday. Here’s the skill – this is for real estate entrepreneurs who have a company and real estate brand that you’re looking to portray the trustworthiness that you deserve as a brand. We actually have with us Stace Caseria. He is the owner of Trust Deep, which is a branding agency. He has also 20 years of investing experience. They help brands build trust through their branding with investors. So Stace, would you mind first giving the Best Ever listeners a little bit more about your background and what Trust Deep does, and then we can go from there?

Stace Caseria: Sure, absolutely. As you said, I’m a real estate investor. I’ve been investing in singles and duplexes for about 20 years. I also have a small apartment building here outside of Boston. I’m also looking to scale up and join some syndications as a passive investor, and eventually, someday, I’d like to lead a syndication. But in my day job, I own a branding agency.

We focus on helping brands, business leaders, entrepreneurs find how they can become more trustworthy. Trust is not something you can force, you can’t ask somebody to trust you. You could, but it doesn’t work, though. But there are factors that are within your control, and by understanding the four parts of trust, you can level up on the areas where you might be lacking. All of this is to help you become genuinely trustworthy. You can’t create trust with smoke and mirrors, because you’re going to get caught eventually. So what we do is help brands use different tactics to increase their credibility, their track record, empathy, and alignment of interests. Those are the four factors that go into this thing that we call the trust dynamic.

Joe Fairless: Let’s unpack that one by one. Can you walk us through each one of them?

Stace Caseria: Sure. The first one is credibility. When people talk about trust… First of all, people don’t like to talk about it, because it’s this weird thing. It’s mysterious, as though we don’t have control over it. But once you understand that it’s an emotion just like anything else, we can control it and we can put it in our favor.

So the first factor is called credibility, and credibility is nothing more than speaking or communicating with authority on a topic. Credibility can be created instantly, from the second somebody rolls into your website and they see that you know what you’re talking about. If you’re talking about commercial real estate – well, you’re going to have to understand the lingo, you’re going to have to understand the factors that go into a deal, you’re going to have to understand what’s going on in the marketplace at the moment.

Do you seem credible? Do you have knowledge on the topic? That works whether you’re talking to somebody face to face, or if somebody is looking at your website or your social media, or even if you have a mailing. Credibility comes across in many ways, and it’s something that you can create instantly with somebody, from the second you shake their hand at a real estate meetup and you start talking about a topic. If you can speak with authority on that topic, you have credibility.

Joe Fairless: Okay. Number two.

Stace Caseria: The second part is track record. A track record is the only factor that takes time to build. We tend to think of trust as needing a lot of time to be established, and there’s only one area of trust that actually takes time, and that’s a track record. So you think about, is there a high likelihood that I’m able to repeat the success I’ve had in the past? Can you trust that I’m going to take whatever I’ve learned, lessons in the past, and apply them here? Do I have a repeatable process? That goes into track record.

The track record is your reputation, and this is something that does take a while to establish. Talking with syndicators or investors who are new and they may say “I don’t have a track record in real estate”, but every adult has a track record, because you went to school, you have a job, you have friends; there are people in your life who can speak to your track record.

If you don’t have a track record in real estate, you can borrow elements from the other parts of your life. Also, we know you can borrow the track record of your network. Let’s say you’re raising capital for a deal, and this is your first time. Well, hopefully, you have somebody who’s more experienced on your team, who’s done this before, and so you get a little bit of their track record by partnering with them.

Break: [00:05:34][00:07:36]

Joe Fairless: Lots of different ways to partner, that is the beauty of, specifically, commercial real estate or real estate in general. You can partner up with people on one deal and you don’t necessarily have to be married to them through the course of your professional life. You can just do a couple of deals with them, if it doesn’t work out, you move on. Okay, number three.

Stace Caseria: The third one is empathy. Empathy we call the human factor. A lot of people in business will sometimes dismiss empathy as a soft skill, something that isn’t needed in the hard-nosed world of business, and I completely disagree. There is nothing that can build trust quicker than empathy. Empathy is our ability to listen to people, it’s our ability to relate to people, it’s our ability to see people as human and understand their needs, their condition, the space that they’re in. Showing empathy doesn’t necessarily mean you agree with somebody by listening to them, it just means that you understand where they’re coming from. Thinking about somebody who might be a wholesaler, house flipper, or something like that, and they’re talking to a homeowner, and the homeowner says, “I need X amount of money for this house.” The wholesaler is thinking “I can’t give you that much. But let me understand why you need that or why you think you need that, and let’s see if we can figure something out.”

Empathy is not giving in to people, it’s listening and understanding where somebody is coming from. You might find out that you don’t have the ability to make a deal, but at least you listen to that person, because you validated their concerns or their thoughts and you validate them as a person. It is incredibly powerful when we are able to give validation to other people. As humans, we all need that. We’re social creatures, we don’t live by ourselves, we have to interact with other people. Those who demonstrate stronger empathy have more success in business, and they’re able to have a tighter group of people around them who want to work with them and people who are committed to their success.

Joe Fairless: Okay. The fourth?

Stace Caseria: The fourth one is the alignment of interests. This is something I know you’ve talked about in your book, and this is sort of really well aligned with that… There’s a slight nuance to it, but this is the factor that you want the same outcome as somebody and you’re willing to do the same steps to get there. Out of a deal, you may say, “Hey, I want a 20% ROI.” I might say, “Yeah, I do too.” But the way we’re willing to get there might be different. That would mean we don’t have an alignment of interest. I might say, “There are lots of rules and regulations, and we don’t have to follow all of them.” You might say, “No, actually, I plan to follow all of them.” We both have the same outcome in mind, but we don’t have the same commitment to the ideals that will get us there. That’s an alignment of interests.

Alignment of interest is really interesting, for what it does in the scale of branding is that it helps you create deep meaning with people, beyond a product or service. So that’s ultimately what branding is – it’s this connection that we have with a product or service that goes beyond the product or service itself. That’s how we have deep loyalty with a company. It’s because we share meaning, we share a motivation or an intention; that’s at the root of alignment of interests. That is the factor that creates the deepest connection and the chance for you to have loyalty with a customer or an investor. Because ultimately, that’s the goal. It takes five to seven times more effort and money to get a new customer or investor, versus keeping an existing one. At the end of the day, we try to build trustworthiness with our clients to gain long-term loyalty with their customers.

Joe Fairless: I’m thinking about how to try and put all four of these things in an ad, just to help bring it to less philosophical and more tactical. So if I were to send out a postcard to my customer, and let’s say I want them to invest in a deal of mine… Then I’m going to give some examples and you tell me, “You are trying to do way too much in this one ad,” or you tell me “Yeah, that could work.” So if I want them to invest in a deal of mine, and the postcard –which they’ve never received a postcard from me before, we’ll say that– says “We have X amount of assets under management, and we’ve been doing business for X amount of time.” So there’s a track record. I would think track record and credibility are pretty close cousins, because of speaking about authority on a topic… Well, if you have a track record, you can –I would think– speak with authority on a topic. So I would think we’d check both of those boxes with that type of statement.

And then with empathy, something along the lines of identifying a problem that they might have and that I have come across before, and talking a little bit about that as it relates to the business that I’m in, and the call to action, the step I want them to take. So maybe it’s “Hey, I had a full-time job and I was looking for ways to make money, and have my money worked for me while getting tax benefits, etc.” Then alignment of interests mentioning “…and I invest alongside you and the rest of my investors for every deal.” What do you think of that?

Stace Caseria: It seems like you’ve done this before. It’s difficult to do copywriting on the spot, so I give you a lot of credit. That is, in a nutshell, how this formula works. The four factors overlap, and the way you speak and what you say can do double duty.

The first statement that you’re talking about, track record and credibility working together, is absolutely true. The track record is what you were talking about, and the credibility was how you were talking about it. Empathy is about the why – there’s the why in there, your purpose – and of course, the alignment of interest, that one is really easy for you to do the way you did it there. It’s so far from being philosophical; it’s so concrete. It’s like you and I are walking step by step, doing this together. If you lose money, I lose money, but we hope to both gain money together. That’s exactly how the alignment of interest works.

And the four factors don’t always have to be in the same proportions in any communication, depending on the size of the deal, who you’re talking to, who you are, the relationship that you have with people. There are things that you might leave out if that were a repeat customer; there are things that you might include if it was going to a list of people who were first-time investors, versus people who have invested not with you, but with other people multiple times, or the certain needs of that audience. So the four factors come in different levels depending, on a lot of the parameters of a situation or a deal.

Joe Fairless: Okay, that is very helpful. So we probably should have talked about this early on. I’d love to hear your thoughts on this… What makes you an expert on this and how did you come up with these four things that create trust?

Stace Caseria: So I’ve been working in advertising for about 22 years. Before that, I’ve always been interested in people. It seems strange to say, but my wife always thinks this is weird that I will make conversations with strangers, I’ll try to learn about people; I always want to understand where people are coming from. This has been an interest of mine my whole life. I look to see how people relate to each other, and it’s sort of dissecting situations when I’m with people. I take a scientific approach, although I’m not a doctor… But I look at how people relate to each other and I try to understand that.

Another factor is that I like to understand how people make decisions. In my two decades in advertising — we talk about a lot of things in advertising, we talk about engagement, we talk about awareness, we talk about trying to get in front of people… But there’s the thing that we were always missing that I felt — we talk about trust, but we don’t talk about how to build it and we didn’t break it down.

I went through the process of breaking it down, and thinking about situations, relationships I have with people, and say, “How does this relationship work? Why do I have trust in this person here? Why do I not have trust with that person there?” Sometimes you’re having a conversation with somebody and you’re like, “This guy doesn’t really care about what I have to say. He just wants me to hear what he has to say.” So from that, I’m like, “Okay, there’s this thing here where there’s got to be some reciprocity.” He has to care about me a little bit, and I have to care about him a little bit, or we’re not going to get to a point of trust. I’m like, “Okay, so that’s a line of interest merged with empathy”, so I started breaking these things out. I said, “You know what? I might have credibility and I can talk about a topic. But if I’ve never done it before – well, that’s a different thing. I don’t have 100% credibility.” I started breaking it down, like “Wait, credibility is different than track record. Track record is a little bit different.”

There are people who’ve done something over and over again, but they might not be able to communicate to me how they’ve done it or show proof of that. So they’ve got the track record, but they might not have credibility. And these are the four factors. There might be other things, but I’m trying to group these four things together, so that we can make a system to conquer one element of it at a time and build that genuine trustworthiness. There’s a whole conversation we could have about where decisions get made in our brains… Decisions are not made in the neocortex – that’s the new part of our brain, from an evolutionary standpoint.

Joe Fairless: The crocodile brain, right?

Stace Caseria: The limbic system. That’s where decisions get made. And decisions can’t be affected by language, because that part of our brain doesn’t understand anything but emotion. The limbic system controls our decisions and our emotions; it’s the emotional center of our brain. When we try to communicate to people with words – well, it has to first be translated into emotion in that person, and then it can start to register. But when we think about like, “Oh, I made a decision based on the logic of it.” No, that that doesn’t happen; it’s just not biologically possible. There has to be an emotion created before that part of your brain can react to it and make a decision, yes or no.

Joe Fairless: When you’ve spoken to someone over the history of you talking to people about this, and then they’ve taken it and run with it, what are some mistakes that you’ve seen people make trying to implement this?

Stace Caseria: With everything in life — and I was thinking about this before I came up. I was thinking about what we were going to talk about… You can’t force certain things; you cannot force credibility. If I don’t know enough on a topic, I might get partway through the process of a conversation… When people try to sound like they know more than they know, the person that you’re talking to – you run the risk of them actually having the answers and you looking like a fool… Rather than you saying, “I really don’t know all about this. I can find out and get back to you.” People will give you the benefit of the doubt. But if you speak with authority and try to be convincing on something and you’re clearly wrong, you will do more damage than good.

Fake empathy is another problem. We work with a lot of brands, some large brands. In the past, I’ve worked with big brands like Heineken, Delta Airlines, Bose, Panasonic, large companies. Sometimes large companies will have a really great intention to sound human, but they might play it off wrong, and it might come off as disingenuous or not their place in the world. I think as consumers, we’ve become a lot more accepting of brands feeling human, because we’re at a point where we’re much savvier to marketing. So brands have had to come around and say, “Okay, what’s another element that we could tap? Oh, let’s try to be human and understand what people need, rather than telling them what we have to sell.”

Joe Fairless: I love this conversation. This is going to be helpful for the Best Ever listeners who want to take their business to the next level, from a marketing standpoint, and generating leads. Do you have any books that you recommend from psychology or sociology that you’ve come across that you think would be helpful for the Best Ever listeners and myself?

Stace Caseria: I can think of two. The first one is called The Speed of Trust. It was written by Stephen Covey. I think his dad wrote… I think it was called the 10 Habits of Highly Successful People. But The Speed of Trust is fantastic. If this is a philosophical conversation we’re having here, if it sounds too philosophical to your listeners, read that book and you will see how trust turns into dollars and how it saves companies time. It is fascinating when you read that. Here’s a guy who runs a consulting company, and they consult with some of the largest companies in the world, and they see these massive improvements in efficiency. So The Speed of Trust – it’s like a literal title. It’s talking about speeding up decisions, speeding up our ability to work together, speeding up getting to a successful conclusion.

The other book is called Everybody Matters. The guy who wrote it, his name is Bob Chapman. He runs a global manufacturing company and he decided to start treating his employees like they were family members. He says “Everybody who works here is somebody’s precious child, and they’re entrusted to me for the eight hours a day that they’re here.” He’s seen massive growth and productivity improvements by treating people like their family. A fascinating book.

Joe Fairless: I’ll check that out. I’m more interested in the first one than the second one, but who cares about me right? I’m a focus group of one. But I just bought both of them right now — okay, I just bought them. I’ll check them both out. Thank you for those recommendations. How can the Best Ever listeners learn more about what you’re doing?

Stace Caseria: They can go to our website. Our agency is called Trust Deep. The URL is trustdeepagency.com.

Joe Fairless: Thanks for being on the show, talking to us and educating us on the four factors of trust. One is credibility, two is track record, three is empathy, four is alignment of interests… And giving specific examples of how to deliver on that. I hope you have a Best Ever weekend and talk to you again soon.

Stace Caseria: Take care, Joe.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
JF2426_ From Fix-and-Flip Family Business to Multifamily Unit Acquisition with Jonathan Barr

JF2426: From Fix-and-Flip Family Business to Multifamily Unit Acquisition with Jonathan Barr

Jonathan got his real estate start in a family fix-and-flip business. As he was growing up, family dinners resembled business meetings a lot. After the last recession, Jonathan decided to join it full-time since good jobs were hard to come by. Thanks to his deep involvement in the business, he had a chance to learn every facet of real estate.

After separating from the fix-and-flip business, Jonathan and his brother started a new company focusing on multifamily buildings. Last November, he bought his first large multifamily unit in Kansas City, and this year he closed the deal on a 72-door house in Oklahoma City. 

Jonathan Barr  Real Estate Background:

  • Full-time real estate investor
  • 11 years of real estate experience
  • Portfolio consists of 14 unit building, 72 unit building, a commercial property, and has been involved in 400+ flips
  • Based in Los Angeles, CA
  • Say hi to him at: www.JB2investments.com 
  • Best Ever Book: Psychology of money 

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“Start bigger sooner” – Jonathan Barr.


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 Jonathan Barr. Jonathan, how are you doing today?

Jonathan Barr: I’m doing great. How are you today?

Theo Hicks: I’m great as well, thanks for asking. Thanks for taking the time to speak with us today. A little bit about Jonathan. He’s a full-time real estate investor with 11 years of experience. His portfolio consists of a 14-unit, a 72-unit, a commercial property, and he’s also been involved in over 400 flips. He is based in Los Angeles, and his website is jb2investments.com. That link, as always, will be in the show notes. Jonathan, do you mind telling us some more about your background and what you’re focused on today?

Jonathan Barr: Sure. I got my start after the last recession. I started in a family flip business. My parents kind of lost everything after the last recession, so I came back after college to kind of help them rebuild. It was obviously a tough time to get a job during that time.

We first started going to the foreclosure auctions. We were bidding on properties — we were probably bidding on buying at one point 7-8 homes a month; it was pretty nuts. As you said, we did about 400 flips during that time period, made about $22 million in profits, and a 38% return average yearly on all our deals.

Last November, I bought my first larger multifamily, a 14-unit in Kansas City, and then two or three months ago I just closed on a 72-unit in Oklahoma City. The reason why we transitioned was in 2010 or 2011 I bought a few duplexes that I held long term for eight to ten years. They appreciated 400% during that time period, and I was like “I need to do more of this.” I sold those and 1031’ed into these deals. Today we’re looking for more 70-unit plus deals and we’re now syndicating mostly with friends and family right now, but we are opening it up to other people at this point.

Theo Hicks: Is the transition from the fix and flips to the large multifamily just something that you’re doing? Or is the total family business now transitioning?

Jonathan Barr: It’s something I’m doing and it’s what I’ve been wanting to do for a while. My brother is my partner, so him and I left that business to start this business separate from that business. So we’re not flipping at all anymore. Part of the deal of us leaving the business was that we wouldn’t flip in LA and did not compete with our family in that business. So we’ve completely separated.

Theo Hicks: That makes sense. What’s it like growing up in a household where everyone’s doing real estate all the time?

Jonathan Barr: Our dinners are basically business meetings that we talk about real estate. My daycare was my mom’s real estate office. I’ve been showing houses since I’ve been a kid, it’s in my blood, it’s ingrained, it’s our whole life. Thanksgiving is basically talking about deals. It’s fun.

Theo Hicks: So you went to school, you graduated, and then basically went straight into the family business for the past 11-ish years?

Jonathan Barr: Yeah. 11 years.

Break: [00:04:06][00:06:07]

Theo Hicks: I know a lot of people, when they start doing deals they have a background where they worked in real estate in some form or fashion, and then they start to do their own deals. Walk us through what do you think are some of the advantages of that, as opposed to just going from a W2 job that’s not related to real estate, and then jumping into investing?

Jonathan Barr: Yeah, that’s a good point. Because most of the people out there — I’d say it’s 50/50 of GPs that I meet are either coming from W2 or have some sort of real estate experience. I feel it’s very beneficial to have — even though it’s smaller deals, it’s very beneficial, because you experience all kinds of things, even on the smaller deals, that you could use in the future… Especially because most of the deals we’re doing were heavily dealing with construction, so I have a pretty good understanding of construction down to beams, plans, all kinds of things. I feel it’s helped me a lot in negotiations, I’ve negotiated 400 deals, I’ve experienced all different kinds of people, I’ve dealt with tenants, I’ve been in the trenches doing leasing and management… I’ve kind of done every facet of real estate in the last 10 to 11 years, and I’ve learned so much that is helping me leaps and bounds now.

Theo Hicks: Let’s talk about the transition. You’re doing mostly, or it seems like, all fix and flips, and then you eventually did your first 14-unit deal. What brought about that transition? Why don’t you just keep working in the family business? Things seem to be going pretty well. What made you decide to say, “I want to do my own thing. I want to transition into multifamily.”

Jonathan Barr: So the thing about flips is, especially in LA, you can make 100k a pop easily on a deal, and it’s great, but you make that one pop and then you’ve got to keep on finding the next deal. It’s pretty challenging, especially with inventory so constrained and so much competition in such a large market. I wanted to have a future where I could be the business and not have to kind of keep on going, and not be so involved in the day-to-day. So that was part of it.

A part of it is it can be challenging to work with family, and especially your mom, so there’s definitely those dynamics as well. Then just having the ability — because I definitely had a say in things, but having the full say and direction of how you want things to go is pretty powerful. You don’t realize that until you’re out of it. The transition was tough; I was making a salary there, and it was consistent. But I left with some investment property, so I had some kind of stable income.

My wife has a job and now we have benefits through it. I bought my house pretty cheap in LA, so low overhead… It’s been challenging, though. It’s kind of like you starting this new business and you kind of start from the beginning when you’re kind of on top of this other business. It’s definitely humbling; it kind of puts you learning new things, learning new markets, dealing with new people. It’s been challenging, but fruitful, and I enjoy it and I have a lot of passion for what I’m doing now. And I feel better, too.

Theo Hicks: There you go. Well, there is something else I wanted to ask you, too — because usually whenever I talk to people who are either doing real estate with family or a significant other… So for you, you said you’re doing it with your brother right now.

Jonathan Barr: Yup.

Theo Hicks: Would you recommend that if you’re going to get a partner, do it with someone that you don’t know or do it someone that you do already know and have some sort of relationship with? What are the advantages of what you’re doing? Are there any challenges you have to go through?

Jonathan Barr: I worked with my brother at the other business for about eight years, so I really knew how he worked already. I kind of knew what to expect, and I trust him with my life. That’s pretty important to have in a partner, that I could trust them fully, which I think is very important. I think that’s a huge plus about dealing with someone that you know and trust, because that’s very important in business.

The downsides, I would say, is maybe one person ends up doing a little bit more the work, because they know more, or they’re just a little bit more motivated for whatever reason, and you kind of let it slide because you know them and you let it happen. So I think the good part about if you found someone new that is doing what you’re doing is maybe there could be more of a motivation in a different way like that… But I think the trust thing kind of outweighs a lot of that.

Theo Hicks: You brought up a really good point about the balance of the time each partner is spending on the business. I imagine that’s even more so when you’re first starting off, because depending on what your roles are, if someone’s supposed to be finding the deals and another person’s supposed to be asset managing when there are no deals to asset manage, what is that person doing? Was that a challenge? Maybe also talk about how you guys decided to break up the various duties involved. Was it that you both were kind of doing the same things? Or did you immediately say, “Okay, brother, you focus on this, I’m going to focus on this”? How did you make that decision?

Jonathan Barr: Right now, we’re just kind of splitting everything 50/50; we’re sort of 50/50. We’re still kind of figuring that out. Now that we do have a couple of assets and there is some asset management — and I think we each have our own strengths, and I think we’re leaning towards certain directions. I think my brothers probably leaning more towards the acquisition side, and I’m leaning more towards the asset management, investor relations, that kind of stuff.

Theo Hicks: How much money have you raised so far?

Jonathan Barr: About half a million. But the good thing is we have properties in LA that we’ve been selling, so we’ve mostly self-funded right now.

Theo Hicks: Okay. Is the plan to continuously self-fund, or is the plan to eventually start focusing more on raising money?

Jonathan Barr: We’re focusing more on raising money now, by putting content and putting that all out there.

Theo Hicks: Perfect. So you’ve raised 500k so far. You’re in the beginning stages of raising capital. This is perfect, so let’s talk about that. Also, you’re the guy who’s doing it, so what’s your current thought process on raising capital? What type of things are you doing? You already mentioned content, so maybe you can dive into that. Anything else you’re doing to start to raise capital? In addition to that, you can either answer that separately or with this, but I also want to know – do you have like a certain amount of goal of money you want to have in verbal commitments? Or are you just kind of seeing how much you can get? The amount of money you can raise, does that determine what types of deals you’re looking at? Or are you still going to look at any deals?

Jonathan Barr: Yeah, right now we kind of have verbal commitments around the 2 million range. That’s kind of where we want to be for the next deal we want to do. But yeah, I would say my recommendation would be to start as soon as you can. Our mistake on the last deal is we thought just with our inner network we could raise what we needed to do the deal. We kind of came short, and we ended up funding most of the deal ourselves, which we didn’t want to do. So I’d say the sooner you start…

And a big thing to do is just ask the people in your inner network who they know that might be interested in something like this. I have an ebook on our website. If you go to jb2investments.com/lower, it’s a taxes kind of thing where I talk about 1031s, accelerated depreciation, and investing with retirement funds as well.

And then I have a blog, so I put out a blog once a week to people on our list. I’m very active on Twitter, where I have a couple of thousand followers. I just talk about what we’re doing in the business and what I’ve learned, and I get a lot of feedback that way and a lot of people coming through our funnel through that. I’ve also set up some automation with emails, and being on podcasts, and doing little events where we do a deep dive on the last deal we did. So just a bunch of content, a bunch of networking, a bunch of just putting things out there as well. I think with the experience that we have, it’s pretty powerful. Doing that many deals, making that amount of profits, good returns, and over a decade is pretty rare out there, for people starting in this at least.

Theo Hicks: Sure. I’d be interested to know more detail a little bit on the Twitter… This is something that we particularly focus on. What’s your strategy there? You have already mentioned what you’re posting, but how frequently are you doing this? Are you making sure that you’re on there at a certain time of the day? Or you’re always checking your notifications and replying to people’s messages? What’s your strategy on Twitter? Walk us through maybe like a week on Twitter and what you do.

Jonathan Barr: First I’ll start with the reason why I went on Twitter. Another syndicator I know in LA raised $20 million from one person he met on Twitter. I was like, “Okay, I’m going to be on Twitter.” My strategy is I post something every day, and it just has to do with interesting things that I’ve learned on the deals that we’re working on. I’ve also been on a weekly basis just posting a really cool flip deal we did in the past. I’ll post all the numbers, pictures, I’ll do a thread of a story of how the deal happened, and what was unique about it. So I do that once a week.

Then I also just interact with a lot of people on there. I try to spend 30 minutes a day commenting on different threads that I find interesting, or other active people on there. I’ve also networked with a bunch of people on Twitter and I also did a Zoom multifamily Twitter event where there were a lot of active people on Twitter that I got all in a group, and we all talked and connected and we’re all trying to help each other out now.

Theo Hicks: I hope we get to interview you again in like a year from now when you raise 40 million from one person on Twitter.

Jonathan Barr: That would be amazing.

Theo Hicks: Yeah. Alright, Jonathan, what is your best real estate investing advice ever?

Jonathan Barr: I would say just start bigger sooner, because it took me 10 years to get into larger multifamily and I could have probably done that five years ago. But I think at the time, you get comfortable doing what you’re doing or you’re just afraid… Just kind of taking the bull by the horns and doing it; it’ll work out.

Theo Hicks: Are you ready for the Best Ever lightning round?

Jonathan Barr: Let’s do it.

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

Break: [00:16:21][00:16:58]

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

Jonathan Barr: The Psychology of Money. I like that because it talks about compounding, how different people look at money… Kind of our investment thesis – they’ve really drilled down to it and it’s really readable. I actually listened to the audiobook, so it was great. Morgan Housel is the author.

Theo Hicks: I already asked this earlier, but is that one of your apartments behind you on the video?

Jonathan Barr: Yes. That’s the 72-unit, Norman Creek Apartments.

Theo Hicks: Okay. If you’re listening to this, you probably have no idea what I’m talking about. He has a green screen behind and behind him is his apartment. It’s not a green screen, he’s actually sitting in the parking lot right now of the apartment.

Jonathan Barr: Yeah. And that’s a rendering too, so that’s a new signage we just put up. We designed it ourselves and everything.

Theo Hicks: Yup. There you go. Okay, if your business were to collapse today, what would you do next?

Jonathan Barr: That’s a tough question. I would start some kind of business. I don’t really know, probably if my real estate business collapsed, it would have to be a different kind of business. I’ve always wanted to open a breakfast joint. I might do that.

Theo Hicks: I love breakfast and brunch places. If you do that, I’ll come. What’s the best deal you’ve done? This can be one of your apartment deals or one of the fix and flips deals.

Jonathan Barr: I think the duplex that I sold in LA… So I bought it at an auction. The company I was working for let me borrow 300k for a week. I put 90,000 into the deal, and then I had a private party lend me the money a week later. Then I leased the property out, held it for about eight years, sold it for a million thirty, and 1031’ed that into a 14-unit in Kansas City, a turnkey, and I went from making 1,200 a month to about 5,000 a month. So it was huge.

Theo Hicks: Yeah. What about on the flip side? What about a deal that you or the business you used to work in lost money on? How much was last and then what lessons were learned?

Jonathan Barr: Going to the auctions, you have to do your own title. And sometimes second loans go to auction. We were getting our information from the title company in the morning for the deal, and what ended up happening is they gave us wrong information and we ended up buying a second loan. I think we ended up losing 250 or 300,000 on that loan because we had to sell the property, pay off the first, and then make up the difference.

What I learned from that is just making sure to have a due diligence list for everything. Especially in the auction situation, you have to triple-check everything; not even double-check, but actually triple-check. We created a bunch of checklists and different ways to double and triple-check any information we get, so nothing like that ever happens again. But out of 400 deals, to lose money on one auction deal I guess is not terrible.

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

Jonathan Barr: Actually, I like talking to younger people that are in college, thinking about getting into real estate and talking about that, helping give them direction. That brings me back to Twitter, because a lot of young people reach out to me on Twitter. I have conversations with probably one college kid a week about real estate, and what interests them, and what path they want to take.

Theo Hicks: Awesome. Last question, what is the Best Ever place to reach you?

Jonathan Barr: The best place would be at Jb2Investments on Twitter, or also on my website, jb2investments.com. You could also join our tribe to get in front of our deals. It’s just jb2investments.com/join. That will also prompt you to set up a call with me and we could talk more and get to know each other.

Theo Hicks: What was the backslash for the ebook?

Jonathan Barr: The ebook was jb2investments.com/lower.

Theo Hicks: Got it. Jonathan, thank you for joining us today and providing us with your Best Ever advice. We went over a wide range of topics, but you talked about the thought process you had about behind the transition from working –in a sense, but not exactly– a W2-ish type job in real estate, to doing your own thing. The thought process behind that, why you did that, and how you had a foundation before you jumped into that.

We talked about some of the things you want to see in a business partner, like trust. It was really nice that you were able to see how he worked for eight years, so understanding how they work in business is also a huge plus. You talked about how you’re doing things 50/50 right now, and eventually, you’ll start to naturally slide into your areas of expertise.

Then you went into a lot of detail on the different things you’re doing to raise capital, to start to get more verbal commitments from people. Although right now most of the deals you’ve done had been with your own money, and you are going to transition other people’s money in the future. We’ve talked about focusing on your inner network, but also not completely relying on them and assuming that they’ll be able to bring all the capital for that deal. We talked about your ebook, blogging, Twitter, the different types of events that you do, and a lot more detail on Twitter, going on podcasts, things like that.

And then lastly, your Best Ever advice, was to start bigger, sooner, not getting super comfortable with where you’re at and being afraid to lose that, and not taking that risk. Just trying to do that sooner rather than later.

Jonathan Barr: Have the golden handcuffs, for sure.

Theo Hicks: The golden handcuffs, yeah. Thank you so much again for joining us. I really appreciate it. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and I’ll talk to you tomorrow.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2425: Attaining Your Passive Income Goal with John Soforic

John grew up in a blue-collar area just outside of Pittsburg; his family had coal miner and farmer roots. At the age of 24, John graduated college with $200k worth of student debt. By the age of 30, John had a wife and two kids to take care of, and the same student debt to pay off.

Real estate turned it all around for him. His goal was to attain $20k in passive income, and he pursued it one house after another while having a full-time job as a chiropractor. Later he wrote a book called “The Wealthy Gardner” where he talked about winning financially and taught others life lessons on prosperity.

John Soforic Real Estate Background:

  • Attained a net passive income of 20,000/month
  • Now a full-time property manager and author
  • 25 years of real estate experience
  • Portfolio consists of 110 doors freely owned (no loans), and has flipped 75 properties while working full-time
  • Based in Mount Pleasant, PA
  • Say hi to him at: www.wealthygardener.com 
  • Best Ever Book: The Checklist Manifesto

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“I stopped reading books that I liked. I stopped watching TV that I liked. You sacrifice.” – John Soforic.


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’re speaking with John Soforic.

John, how are you doing today?

John Soforic: I’m doing fine, Theo. Thank you.

Theo Hicks: Well, thank you so much for joining us today. Looking forward to our conversation. A little bit about John—he obtained a net passive income of $20,000 per month and is now a full-time property manager and author. He has 25 years of real estate experience and his portfolio consists of 110 doors freely owned, no loans. He’s also flipped 75 properties, all while working a full-time job. He is based in Mount Pleasant, Pennsylvania, and his website is https://wealthygardener.com/.

So John, do you mind telling us some more about your background and what you’re focused on today?

John Soforic: Sure. I thought it was also funny to hear it said, because when you say “property manager” – yeah, I’m a property manager of my own properties. I’ve managed my teams, I’ve managed my people… I don’t know what to call myself, though. I’m an owner? Yeah, but I manage my stuff. So yeah, that’s what I am.

Who am I? I grew up in a blue-collar area just outside of Pittsburgh. My grandfather was a coal miner. My other grandfather was a farmer. My parents, when they got together, they moved into half of a trailer, not a full trailer. So I’m the first person in my family to ever go to college. I graduated as a Chiropractor at the age of 24. What that meant, Theo, is I graduated with $200,000 worth of student debt. So from day one, I have no income and $200,000 for the student debts. Within a year, I’m married, within two years, after marriage, we have two kids, and you’re in it. My wife stayed home with the kids.

It took me till about 30 to realize that I’m not getting off this treadmill, because all of a sudden, I’m just paying for food, shelter and clothing and this big enormous student debt that nobody sees. So it was looking a little helpless at the age of 30 for me, and that’s where real estate started happening in my life. It became an avenue where I was able to get one house after the other; I just started slow.

I made a big goal. The big goal was that $20,000 net passive income. So I took that swing and I got busy. And because my mind was directed, my body followed that. By the age of 50, I was able to attain that goal. And at that point, I wrote the book, The Wealthy Gardener, because my son was coming out of college and he was going to face exactly what I had just faced. And this was going to be my book though, The Wealthy Gardener – it was just between he and I, about how to win financially in the real world. How to be a gardener, meaning a garden is a metaphor for your life, how to be a wealthy gardener. So it was just between he and I.

Long story short, when that was over, we published the book. The book took off and it was translated in six different languages. It was taken over by a publishing house in New York, they gave me a six-figure advance… It’s a big deal, and that’s why we’re here today.

Theo Hicks: Thank you for sharing that. So Wealthy Gardener is a book; you mentioned how you set that goal to attain $20,000 per month in passive income, and you did all this while working full-time. So right now, you’re full-time in real estate, but when did you leave your job as a chiropractor? Was that right away when you were 30, or did you wait until you achieved your goal first?

John Soforic: No, not at all, Theo. I needed the W-2 income. I see that you’ve talked about the BRRR technique with other guests on your show… Well, that was mine, right? So I would go in and I would buy a distressed property, and then I would fix it up and rent it and refinance it. And we were doing that repeatedly, over and over, until I ran out of money; then I started flipping and doing that. So that doesn’t happen unless you have a job, right? I’m the only job in the family, so I need a W-2, because I walk into a bank without a W-2, I’m not getting a loan. Nothing happens without that 40 hour work week for me. So when I say I retired, I retired at the age of 49 from chiropractic.

Theo Hicks: Got it.

John Soforic: When you say I’m full-time into real estate right now, it’s 10 hours a week. So that’s full-time. That’s my kind of full-time, right?

Theo Hicks: There we go.

Break: [04:37] to [06:38]

Theo Hicks: A big question that we get a lot is – I’m sure you get this a lot, too – is how do I get started? How can I use real estate to quit my full-time job? And what’s kind of assumed in that is that you have a full-time job, and so the real question is, “How do I do this while I’m working a full-time job? How do I invest in real estate? How do I quickly scale my business while I’m spending 40 plus hours a week doing something else completely?” So you mentioned that you’re doing BRRR and rehabs and fix and flips, all while working as a chiropractor… So what are some tips you have for people who are listening to this, who have a full-time job, want to get out of that full-time job through income through real estate? How can they accomplish that, practically? When did you work on your real estate business, and how are you able to do time management and make sure you’re spending enough time in there? And what happens if something happens while you’re working, things like that?

John Soforic:  Oh, no doubt about it. Let’s look at it though,  break down a week. Let’s really talk about turning off that TV. Let’s talk about all the frivolous things that we can do. I had to do that. I stopped reading books that I liked, magazines that I liked, I stopped watching TV that I liked… You sacrifice. There’s people out there that have two jobs; pretend you have two jobs. And you know what, live a lifestyle as if you lost one of your salaries in the house. I can tell you this – that’s exactly what I did. We saved 50% of my income. And then even though we had more and more and more — people say, how do you do it? Well, that’s how you do it. Without money, you don’t do anything. At least I can’t speak of it. Somebody might have a no-money-down technique out there. That’s not me. Mine was earning, and mine was saving, and I was buying used cars from other people when people bought new cars. And so it just works out gradually where you’ve got to get the money in the bank, and then once you can do that, you can buy a property, and that’s how it happens.

I was just talking to kid the other day, he said, “How did you get into real estate?” He knows I have a big business. I said, “Well, how much money you’ve got in the bank?” “Nothing.” “Well, you live with your parents. You’re making $70,000 a year. Save your damn money, and within one year now, you’ll be qualified to become an owner.” Now, who wants to hear that? Nobody. Sorry, that’s how it works in the real world. You have to earn it; it isn’t given to you. Now, I don’t know what else to tell people.

So I wrote a book for my son, I wanted to have him understand the hard truths. I want him to understand – yeah, you’ve got to put the money in the bank. It’s all about getting the money in the bank, not how much you earn. And that’s the problem. You’ve got to be frugal, you’ve got to have profitability in your house. And I’m saying this, I’m sure there’s people out there saying, “Well, I don’t have any money at the end of the month.” Well, change your expenses; there’s just no other way. Change your expenses, change your income. That’s the key to real estate investment, right there. You have to have money in the bank to be an owner of anything.

Theo Hicks: Yeah, it sounds like it’s more of a—obviously, practically changing your spending habits. But something else that you said in the beginning is how you had this moment when you were 30, and then you didn’t retire until you’re 49. So 19 years you spent patiently saving money, doing a deal, grinding, until you achieved your goal, right? 19 years. Someone hears that and says “I don’t want to wait 19 years.” So what’s your advice for someone who maybe has that instant gratification hump that they need to get over? Is it just hard truths, or is it something they can practically do to start to be more patient think longer term?

John Soforic:  I would say I’m okay with that, Theo. To be honest with you, I was too, you know. People with an ambition, they’ll feel that agitation, and that’s okay, no big deal. That’s called constructive discontentment. And I say use that, make that your friend. And yeah, you put a path there of 19 years. I get that. But I won’t tell you like I’m an ox in the middle of a field, grinding away with sweat rolling off my back, just being miserable for 19 years. I will tell you this, that there is joy in progress. And in my 20s, when I wasn’t having any progress, I was miserable. I wasn’t getting anywhere. But in the direction, when you have financial direction, there’s a joy in the days of that. Your ambition is being fed through your results, and there’s goodness there. It’s not as bad as you think. In fact, it’s good, it’s fun.

I look back at those times and I kind of miss them a little bit right now, when I’m on top of the world, and “Get out of my way, I’m ready to run through this wall, now!” And you’ll say, “Well, you didn’t have your goals then.” “Yeah, man, but I was powerful then.” And that was a good time. That’s what it feels like when you’re winning. So you just have to start winning; it’s fun to win. That’s all.

Theo Hicks: [unintelligible [00:10:55].18] you talk to a lot of people who are aspiring real estate investors; what would you say would be the one thing that you’ve seen hold people back the most from either getting started or once they’ve gotten started, continuing to scale and getting closer and closer to that goal?

John Soforic: One thing… I would say the one thing that prevents people from pulling the trigger and buying their first one, I would say they’re afraid. My first property, I can tell you that my hand shook, and it was a small property; my palms were sweating. I didn’t sleep that night. That’s how it starts. But you have to feel the fear and do it anyway. I would say that people aren’t really in touch with their worst financial fears, sometimes. What’s the worst thing that can happen in your life? Sometimes you’ve got to use your fear, sometimes you’ve got to use your dreams. What’s your why? What do you want for your life? I don’t know, man, it seems like that bounces off people’s heads and they don’t hear it, but that’s exactly what I did. I got in touch with what I wanted most and I’d trade a lot of things I want right now for what I want most. So no excuses. You either step up to the plate or you don’t get ahead. You can just be a procrastinator for life, and you normally will, because you’ll never say, “I’m never going to do this.” You say, “I’m going to do it someday.” And someday is where dreams die. So that’s what happens, it’s really dangerous thing to do.

As far as scaling up, I think they just get busy and they run out of money. Quite frankly, they stop earning. I get that, I ran out of money myself, and then I started transitioning, since I had nothing to do and to buy anymore, I transitioned into flipping, because I was using this BRRR strategy, so it seemed to be a natural approach for me.

And keep in mind, when I say I’m doing all this stuff, I have workers working for me; I am a full-time chiropractor, I have a family, we kept intact, I am still married… And there’s just a lot of that going on. And you can gain money through outside sources if you turn off the TV; it just gets back to that — I am a guy that believes in sacrifices, and I don’t tolerate excuses.

Theo Hicks: It’s kind of actually a good transition into what I want to ask you next… So this is going to be more for established investors, but maybe not… But you mentioned how a problem with scaling is running out of money. And you mentioned that earlier about with your book, and how I’m sure that’s been a pretty good source of income for you.

So what advice do you have for people who have a lot of expertise, a lot of knowledge on what they’re doing – what are some things that they can tactically do to create and replicate the success you’ve had with your book? So how to basically create a best-selling book. How do I know what to write about? Is there a certain tip you have on writing a best-selling book? And then once it’s done, any tips on marketing the book to make sure it gets a lot of exposure, and things like that?

John Soforic:  I would say write something that you care deeply about, that you won the game in. That gives me credibility to be able to write about money. And I’m sitting there thinking, before I wrote a book like, does the world need another book? I think about that… No, probably not. But what can I say?

Well, I can say this – I’ve learned a lot along this really tortured path. I’ve learned this, and there’s a lot of people with financial pain. So what’s the pain point that you can solve? And I would say that, if you’re looking to make money, I would not go the direction of books, that’s for sure. I did get rewarded with a $100,000 advance from a big company, all that kind of stuff, and the book is doing well and all that… But it’s really a small amount per book that an author really takes home as far as royalties.

I would say that what you could do maybe more profitably with your knowledge is can you make a course? Can you make a course that is remarkable to other people; like, not remarkable to you, but remarkable to others? And then you have something. Because courses – you have a 90% profit margin on that kind of stuff. Books – geez, man, you’re getting into the sea now. And anybody can write a book; you can self-publish anything. If you can put a sentence together, you could write a book and call yourself a published author. But I would say, Theo, that if you’re looking to make money, get out of the book business; real estate’s a great place to scale and just learn your way through it. You guys have an interesting platform right here, and I noticed your book has 91% five-star reviews. That’s impressive. So maybe they should look there as far as earning money; read your book, the book on syndication.

Theo Hicks: I always love it when people plug that syndication book. Alright, John, what is your best real estate investing advice ever?

John Soforic: My dad, he had just a couple duplexes, but he always just drummed in my head that it’s not about what you earn, it’s about what you keep, period. It’s about what you keep. That’s the best advice I have for me. That’s the best advice I have for others. And you’ve got to get your lifestyle in line to make that happen. It’s about what you keep. That’s the score.

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

John Soforic: Let’s go.

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

Break: [15:33] to [ [16:12]

Theo Hicks: Okay, John, what is the best ever book you’ve recently read?

John Soforic:  You know what, I think one of the more helpful books that I have read – and I read a lot, I read a couple of books a week – is a book called The Checklist Manifesto. And I promise you this, anybody that’s out there listening, right next to The Wealthy Gardener—let me plug my book—the Checklist Manifesto will speak to you, because it’ll get you in line for systems, man. And I’ll tell you what, you’ve got to get your systems together; a checklist, 1, 2, 3, 4, the bigger you get, the more complicated things get. It sounds like a small idea. I promise that book will revolutionize your thinking. It’s a good, good book.

Theo Hicks: Yeah, I love checklists. I always have my little checklist right next to me for things that I need to get done. And it feels good to cross it out, too. As you said earlier about — there’s joy in progress and results.

John Soforic: You’re one of those guys, Theo, that will get something done, and at the end of the night, you’re going to put it on your list just so you can cross it off, aren’t you?

Theo Hicks: Yeah, there you go. “Stand up from my chair, check!”

John Soforic: [laughs]

Theo Hicks: Okay, John, if your business would collapse today, what would you do next?

John Soforic:  I think that at this stage of my life, I would have to be a writer. And the reason I say that, Theo, is I am a big believer in finding those things that are [unintelligible [00:17:21].05] but you get feedback from the world and you get a positive feedback in. Keep in mind, I’m a self-published author; I’m nobody, and I wrote a book for my son, and it was rewarded pretty heavily by a New York publisher. These are the kind of dreams that full-time writers think about. And so that tells me that maybe there’s a knack there for me. So I would follow that and pursue that, and I kind of enjoy that. So I’d be a writer.

Theo Hicks: Tell us about the best ever deal you’ve done?

John Soforic:  Best ever deal. There was a group of seven duplexes in my town, and I did a BRRR on the whole damn block. I call it the block; one of the nicest blocks in my town. I offered them half price; the people were overseas, it was an estate sell. Half price, zero contingencies, I’m just going to take them no matter what, and they took it. Long story short, I went through a process of fixing those things up, and when it came time to refinance, what happened there was I refinanced all my costs into it and I took another 100,000 out of it.

Theo Hicks: Okay.

John Soforic: And when it was all said and done, that block, earned me $3,000 and still does every month of my life, even though I took $100,000 more than I put into it. And so that was probably the most astonishing deal for me. The people around the town looked at it and said, “Man, that folk must have some money,” and I think, “You guys don’t understand. They paid me to do this. This was better than free to me.” I got $100,000 back and $3,000 a month for life. So that was my best deal, no doubt about it.

Theo Hicks: On the flip side, have you ever lost money on a deal? How much did you lose and what lessons did you learn?

John Soforic: I am not a calamity guy. I always operate from the point of fear. So I don’t have that big calamity story that some people might. I had a bad stretch, I think, at one point in my career. I went through three flips in a row and at the end of those nine months I ended up netting nothing. My contractors, my painters, everybody – they made more money than me.

So what I was doing at that point was trying to keep a team intact. Sometimes what you’ll find is, when you get busy, if you don’t have a next project, then you don’t have work for your guys, they’ll splinter off and go into different directions. And then when you do get a project, they’re not back with you anymore. So I was always trying to keep properties one in front of the other, so I would have continual work for the people working for me. And sometimes I was buying marginal properties because the good ones weren’t around. So that was the mistake for me. I lost money on three in a row; that was a painful time. Because I would have been better off net cash inflow if I just sat around and watched TV. So that was it; don’t buy marginal properties. Even if you have to try to keep your team intact, you just can’t do it. Don’t break the rule of your criteria.

Theo Hicks: What is the best ever way you like to give back?

John Soforic: I believe in teaching people how to fish. So instead of giving them a fish, I like to teach them how to fish. My way to give back, Theo, is to write the book, The Wealthy Gardener, that was a lot of giving. That was three years, full-time. Sometimes people write in the margins of their life. This was 50 hours a week for three years, man; this was my sacred effort of my lifetime, and that was a serious giving back, first to my son; I couldn’t have done it without him. So he and I were sharing ideas back and forth; that was giving back to me. And whoever reads that book, they just live with me for 400 pages of that book. I can tell you that there’s a lot of people that cry when they read this book. So that was my giving back.

Now, the next one is called The Wealth Essentials, that’s my second book and my last book. So I give back through my time, energy, effort. I try to give my soul back. That’s what I do.

Theo Hicks: And then lastly, what is the best ever place to reach you?

John Soforic: Right now, it’s just https://wealthygardener.com/. That’s where I am, https://wealthygardener.com/.

Theo Hicks: Perfect, John. Well, thank you so much for joining us today and providing us with your best ever advice. Lots of practical advice given today, as well as mindset advice.

So we talked about some tips and tactics you have for attempting to, in a sense, achieve financial freedom while you’re working a full-time job. And I think if I could wrap it up in one word, it would just be sacrifice. We also talked briefly about writing a book, and that don’t necessarily do it if you’re trying to make money. If you do want to figure out how to leverage your knowledge for money, you can focus more on a course that will be remarkable to others. But if you do want to write a book, make sure if something [unintelligible [00:21:50].18] something that you’ve won the game in.

And then you also gave your best ever advice, which is very simple, but definitely powerful, which is it’s not about what you earn, it is about what you keep; again, playing into that theme of sacrificing.

So, John, thank you so much for joining us today, I really enjoyed our conversation. Best Ever listeners, as always, thank you for tuning in. Have a best ever day and we’ll talk to you tomorrow.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2422: Finding & Landing Real Estate Investors with Terry Painter

Terry is the author of the Wiley publication “The Encyclopedia of Commercial Real Estate Advice.” Since 1997, he has been the chairman of Apartment Loan Store and Business Loan Store, two mortgage banking companies specializing in commercial loans in all 50 states. He has worked as a top producer for Lasalle Bank and Lehman Brothers, and he is well-known for his excellent investment consultations and strategies. Terry has been speaking about commercial real estate investing and lending to commercial real estate investor groups and real estate experts worldwide for the past 18 years. In today’s episode, Terry will be going into details about the ways to find investors in real estate.

Terry Painter Real Estate Background:

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“Don’t talk about what-ifs. Talk about it from what you’ve either done in the past or what you plan to do.” – Terry Painter


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here today with our guest, Terry Painter. Terry is joining us from Portland, Oregon. He is the president and founder of Apartment and Business Loan Store. He’s owned real estate investments for over 40 years. His portfolio currently consists of two rentals and he is seeking multifamily properties. Before we get started, Terry can tell us a little bit more about your background and what you’re focused on now?

Terry Painter: Yes, thank you for having me, by the way. Just so you know, most of my background comes as a mortgage banker and a commercial mortgage broker. Over the past 24 years, I have financed hundreds of commercial real estate deals. I still, to this day, can’t wait to get to work. I’ve been doing it for 24 years, and I get to look at a lot of deals, and that’s fun for me.

Ash Patel: What are some of the challenges with what you do now?

Terry Painter: Well, there are always challenges. Basically, when you’re working with investors, they have already fallen in love with whatever they’re going to do, and they are behind it. So you don’t really want to be the bearer of bad news. What makes it difficult is — we’ve been around a long time, so we get a lot of inquiries; I have a staff that for the most part takes care of those, but I still work on the phones once in a while and I’ll tell you, it’s just that they’re so excited and you just don’t really want to put their fire out.

So I’m very busy, but I’ll tell you, if somebody has a dynamite property, something really good, I will drop everything and work on their deal, because that’s how we get deals done. But it is challenging, because some people have no money, they have no experience, their credit isn’t good, and so on. And yet, maybe they’ve found a great property. Well, if they have the property, it’s really the key here.

Ash Patel: So let’s dive into that. When you said commercial real estate, does that mean multi-family as well as non-residential commercial?

Terry Painter: Correct. I would define commercial real estate as any property that is occupied by a business or it’s five units or more if it has residents. So that’s commercial. And it’s also zoned commercial.

Ash Patel: Okay. Again, a retail shopping center – same thing, you’ll do those loans?

Terry Painter: Yes. It’s the same thing.

Ash Patel: Okay. So let’s dive into that. If I find a great property and I want a loan from you, how do I get my ducks in order?

Terry Painter: Okay, that’s a very good question; that’s really what it’s all about. I sell money for a living – how good is that? That’s pretty cool. But on the other hand, if you’re going to expect somebody to finance 75% or even more of your investment, you better have your ducks in order. What that means is you have to actually have the actual financials of the properties. A lot of people go for financing too early and they have not actually seen the actual rent roll, the actual P&L statements on the property, and they really don’t even know the physical condition of the property.

So if you really want to get your foot in the door, like I mentioned earlier, if you find a property that has cashflow today, it’s got a great upside, maybe the rents are under market, and you also have the financials for that property, that really will make a difference.

Also, you want to have your personal financial statement prepared. It’s really important that if you don’t have much money or experience, that you have somebody join with you; bring in a mentor, somebody that can actually fit in those shoes and help you look really good. Keep in mind, you’ve found that property, and that’s key. It’s going to be your deal because of that alone.

Ash Patel: I’ve got so many questions based on just what you’ve said. Okay, so I find this great property; do I call you right away and give you a heads up and say, “Hey, I’ve got this. I’m working on getting all my documents to you.” Do you want that heads up or do you just want the whole packet at once?

Terry Painter: Actually, I would prefer the heads up. I would really like to get into a dialogue with this person. This is not something I would recommend doing just to get rich. You’ve got to really love real estate. You’ve got to love putting deals together. You’ve got to love sometimes faking it until you make it.

So I’d rather get to know the person a bit. I’ll tell you, people get in the door with me sometimes because [unintelligible [00:04:54].15] My book has over 500 real estate terms in it and it’s amazing that if you just start talking some of the lingo, like throwing a cap rate, cash on cash return, and so on, you’ll get the attention of real estate professionals and lenders… But also be prepared — have some excitement behind your presentation and be prepared to tell the lender why this property is going to be successful.

Ash Patel: So pitch the whole narrative, not just your book of documents. You’ve got to sell the story of why you want to do this, and essentially sell yourself as well.

Terry Painter: Exactly. Because, let’s just say you’re even just applying for a loan at a bank. In your bank, you know some of the people there. Maybe you have a business; a lot of my clients who invest in commercial real estate already own a business. So you might know somebody. But what you want to do is go in and get them excited about your deal. Because bank employees are underpaid and overworked; they have more deals to look at, more heartburn than they care about. So if you bring in something and get them excited, they’re going to enjoy their job more, and you’re also going to be selling your deal at the same time. That’s a great recipe.

Ash Patel: That is an epiphany, because when most people think of bankers, they probably think of the blue suit that is just heads down looking at numbers, and I didn’t know that this narrative was that important… But it makes sense. It keeps you fresh in their mind. Maybe it builds some of the excitement in their mind in helping you get this deal done. What types of creative things have you done for somebody who may not qualify on their own, but the deal isn’t just right? How can a lender actually help them secure the deal?

Terry Painter: Well, I’m going to give you an example of my favorite one, actually. In 2004 – this is a while ago – I got this call from a lady named Kelly Fabras; she was an LAPD officer in Los Angeles. She told me she had found this great property called River Walk Apartments in Wichita, Kansas, and that she was going to buy it. I always have two qualifying questions. How much money do you have, and what’s your experience? Because usually if people don’t have the money, you’re just not going to take the time to work with them. I had already asked her what the price was, and the price was $6.8 million. She said that she had about $160,000 and she owns one rental property. I said “I’m really sorry. But this is not the property for you. What you should do is find a fourplex or something you can afford and you have the experience to operate.”

She would not have any of that. She said, “No, this is the property that’s right for me.” She actually had taken this course called Maui Millionaires – it’s still around – where they taught her how to raise investors, and if you find the right property, you could do that. Well, that was something that I had, at that time, not had much experience doing. But she had so much enthusiasm – that’s what I’m talking about – and she was so crystal clear. She knew the numbers on the property, which impressed me.

I told her, “Okay. Well, you’re going to have to bring in some more people.” She brought in a very high-powered executive from Intel, some other investors… And my gosh, she got the price lowered and that was her first syndicated deal. It was way sophisticated; something that a newbie could not really do. But I’m going to tell you her secret. She did not frigging know that she couldn’t do it. Most of us think about “Oh, no. I can’t do that. That’s beyond me.” But she didn’t know that, so that’s how she got it done.

Break: [00:08:15][00:10:16]

Ash Patel: That is a great story and a great example of how the narrative really helps in getting this loan secured. One of the things that I often tell people is to get with a lender before you start looking, and establish a relationship. Would you prefer that people come to you and say, “Hey, listen. This is what I’m looking for. Here’s my personal balance sheet, here’s my goals,” and establish that relationship, so that when they do find the deal, that part is already done.

Terry Painter: I actually really stressed that in my book. I think it’s really important, because so many new investors and commercial property, or for that matter, residential investment property, do it backwards. What they do is they try to put the deal together, they tie up the listing brokers’ time, maybe their brokers’ time, and time of investors without actually knowing that they have a loan. If you really think about it, the most important thing in this transaction is having the money to close the deal. So actually knowing what you qualify for and being able to fill in the holes where you don’t qualify is really essential. So you absolutely do that right out of the gate.

Ash Patel: Okay. And part of the underwriting process — so I’ve got my balance sheet, I get as many of the numbers as I can on the property… What if a lot of those numbers are hypothetical? What if there’s a fair amount of vacancy in, let’s say, a shopping center? How do I convince you that these are the right numbers?

Terry Painter: Okay. Well, here’s the thing – in the lending world we don’t deal at all with potential hypothetical numbers, proformas. A lot of real estate professionals, especially in this market — with the exception of retail, hotel, and hospitality properties, all other properties — there’s just such a low inventory, that realtors are really pushing a lot of properties based upon their pro forma, not based on actual. So you’re just going to be wasting the lender’s time and your investors’ time if you do not get the property financials together. You really need to convince the listing broker, even prior to signing the purchase contract, to give you some of the financials. A lot of times they won’t do that.

What you really want to do is deal with actual numbers, we need to know what those are. Okay next, go ahead and put a proforma together; absolutely enhance those numbers based upon fact. Show that market rents are higher; this property is $150 a month less than the market, that’s a multifamily. All you have to do is spend 4000 per unit and you could bring it up to the level of where these other apartment buildings are, renting at these higher rents. Show them what you’re planning to do. Don’t talk about what-ifs, talk about it from what you’ve either done in the past or what you plan to do.

Ash Patel: What if you’re a newer investor with limited capital, but you find a deal that’s just over your reach? What can you do to help them, or what would you recommend that investor do to get the deal done?

Terry Painter: Well, there’s a lot of people that fit that category. Once again, I’m going to go back to what we started this conversation out with – if you have a really dynamite property, in other words, what you want to know, and you’ve got to be able to prove it, based on financials – the cash on cash return, the internal rate of return, how much money you need to put into the property, and how much is that property going to sell for in five years if you’re going to fix and flip it down the road. What you want to do is money returns speaks to investors; you’d be surprised. Make a list of absolutely everybody you know, some of the people who you don’t think have much money, they’re just sitting on some money and they want to diversify, and they’d love to invest some money with you. The key is really having a really great property and knowing it, and then you can bring in an investor or two to fill in that gap.

Ash Patel: Terry, earlier, you mentioned variable down payments. What determines if I get to put 20% down, or if I have to put 30, or even more percent down?

Terry Painter: Well, we’re talking about commercial property. Commercial property is a cash flow-based system. We’re talking about net operating income, which most people probably know what that is. It’s just gross rental income less expenses. Okay, so we look at that number, and then we’ll take a look at two other items – you take a look at what’s the interest rate going to be on that program, and what’s the amortization. From that, we could compute the debt service coverage ratio.

Let’s just say for multifamily properties today, we’re looking for an extra 25 cents for every dollar of a loan payment you’re going to be making. That’s a 1.25 debt service coverage ratio. So cash flow really [unintelligible [00:14:49].28] so often today because it’s so competitive and properties are overpriced, commercial properties, especially multifamily. In the lending world, we look at some of these properties that just don’t cash flow the loan that they want. It’s just not going to happen, and you’ve got to put more money down. It’s so important when you talk to a lender to really know that ahead of time. Find out what a lender’s top numbers are, what can they lend. If they go up to 75%, then find out what their debt service coverage ratio is. Then take a look at actual financials and see if you could cash-flow that property out of the gate.

Ash Patel: So you’ve seen a lot of deals, and you’ve mentioned that multifamily is overpriced. What asset class do you think is the most attractive right now from a return standpoint?

Terry Painter: Well, here’s the thing… If you go after multifamily in any category — some of my best clients cannot find A or B properties and they’re looking at C properties right now that are over 40 years old. They’re in good shape, but they’re priced almost as high as a B property. So what you’re really going to be looking for I would say on this market right now is actually a repositioning opportunity; that would probably be the best. Or a repurposing property would be even better. But it’s really hard to find properties. Repositioning is basically doing value-adds, using your ingenuity and your intelligence to actually find the value that the seller hasn’t cared to implement. So finding properties with value-adds is really number one, and number two is actually repurposing.

An example of that – with so many hotel properties right now that are just tanking… Let’s just say you find one in a college town, and an opportunity could be to –we’ve done this many times– actually repurpose that. Change the purpose of a property to student housing. You could have a lot of single occupancy rental units, which a lot of college students are looking for.

Ash Patel: That would be a high-risk investment. What would the terms look like on a deal like that?  Taking a hotel — there’s going to be some period of vacancy while you’re doing renovations. To me, that’s a pretty high-risk deal. How would you fund that?

Terry Painter: That is so important that you brought that up… Because we’ve really got to take a look at risk here [unintelligible [00:16:57].25] for the opportunity. There’s a lot of hotels out there that could be repurposed into apartment buildings, or student housing, or something like that. In order for this formula to work, you do have to find the property at a really good price. You’ve almost got to steal the property, and that’s not easy to do. But just like any business, if it’s not earning income, what is it worth? Let’s say you wanted to buy a tire shop, and they just haven’t been running at a profit. Well, you’re not going to pay much for that business. You’re only going to pay the depreciated value of the real estate or something. So it’s really important to get it for a good price, and then to mitigate the risk, you’re going to have to really know what it’s going to cost to renovate that property, change the use, and so on. You’re gonna have to get an actual construction bid and you’re going to have to know how long it’s going to take. So it’s best to get a bridge loan for a property like that.

Ash Patel: What would the buyer have to put down on a deal like that?

Terry Painter: We do a lot of bridge lending or temporary loans. So just bridge a gap between what you want to do today on a property that’s not bringing in the income that it needs to cash flow to loan payments, to when the property’s doing great and fully occupied. Our best programs actually take a look at what the property is going to be worth once it’s stabilized; that means that it’s occupied at market occupancy. And that’s going to be about 75% loan to value, but we might be able to loan you up to, for a really great property in a good location, up to 85%. Because we’re in a recession right now, 80%, I would say, of the total cost of the project. We’re talking about the purchase price, the closing costs, the renovations, payment reserve perhaps will be likely in there. We would lend you up to 80% of that amount, but it will be constrained by 75% of what the appraised value is in today’s market.

Ash Patel: Okay, that helps a lot. So I have my balance sheet, I have my relationship with you, I have my great story on the property that I’m about to purchase… What else will help me in getting this deal done with you, or with any lender?

Terry Painter: Actually, if you’re kind of a newbie, just bringing in a partner that actually has the experience. If you don’t show enough net worth and liquidity, enough cash, you want that person you’re bringing in as a partner to represent that as well. You also want to bring in a dynamite team of professionals. We’re talking about a commercial real estate attorney, we’re talking about a really solid property management company… Because this is a business. The reason that businesses fail is not that they don’t necessarily have a great business going on, it’s because they probably aren’t managed well. That’s the same thing for commercial real estate. So if you could bring in a management company that fits those shoes, then it’s going to really help sell the deal to a lender.

Ash Patel: That’s really helpful. So I would imagine having the whole team, the property management company, the contractor, you’ll be able to put together a great narrative for the lender.

Terry Painter: [unintelligible [00:20:00].10] a great executive summary. It could be three pages, but not much longer than that. The lender wants to take a look at the deal and you want to get them excited about it. You could use the same executive summary to get investors excited. If you’re going to be doing a syndicated transaction, you’ll have a private placement memorandum that will cover that. You can show that to a lender, too. Then they really know you’ve got your stuff together if you have a PPM.

Ash Patel: That’s a good way to think about that… Pretend you’re pitching investors that are putting their own money in, versus a banker that’s just lending the bank’s money. You’d have to be more convincing, convincing somebody to put out money of their own. That’s a great way to look at that.

Terry Painter: I just remembered that excitement sells, and also great numbers sell, too.

Ash Patel: Yeah. And again, an epiphany, because we don’t think about bankers as exciting people.

Terry Painter: No. We don’t.

Ash Patel: Great epiphany. Give me an example of a deal, Terry, that didn’t go so well, and why. Maybe a loan that didn’t get funded.

Terry Painter: Do you want me to bring up one where…

Ash Patel: Let’s do both.

Terry Painter: Okay. There was the chiropractor that took a course from one of my colleagues, Peter Harris, who wrote the book Commercial Real Estate Investing For Dummies. He and his partner had a seminar circuit, and I would be part of that. I would mostly give my spiel on commercial lending. Anyway, this guy – he just studied, he just did everything right to find a property that needed to be rehabbed in Oklahoma.  What happened is I did this bridge financing for him, and then he was out of state, so he unfortunately did not manage the property well. Somebody drove by it and said there was like an old mattress in the driveway, and there were dead leaves in the swimming pool, and so on. So what happened is that I was also working on a perm loan at the same time for him. He did a lot of the renovations and spent this money with our bridge loan, but then the property went the wrong way. Why? Because the guy was out of state, he didn’t drive by the property, he didn’t see that mattress in the driveway, he didn’t see the leaves rotting in the swimming pool, and the bicycles on the patios that were rusting, and so on… And what happened is that he didn’t realize that his investment was going down the toilet. He was still doing his chiropractor business mostly.

So the truth of it is that if you’re going to be a deal sponsor, you’ve got to be hands-on. This is your baby; you’ve got to think about it; it’s taking care of your baby, and the buck stops with you. This guy did everything right, except for being out of state. So he lost the property is the end of the story.

Ash Patel: Was that because he wasn’t able to make the payments to the lender?

Terry Painter: Ultimately, yes. But what happened is actually his bridge loan matured and we no longer had a perm loan for him.

Ash Patel: So it’s not set in stone.

Terry Painter: An 18-month bridge loan, he had plenty of time — this property had very little occupancy and needed a rehab, but he had plenty of time to get it all done and occupied. But just once he got the rehab done, he had poor management… So you’ve got to really have all your ducks in a row to be successful on something like that. He was such a great guy, and he poured his heart and soul into it. So it broke my heart. It’s like it was my failure as well.

Ash Patel: Terry, a lot of our Best Ever listeners have transitioned into becoming full-time real estate investors. When they do that, they no longer have a W-2 income, they don’t have a job. I see a lot of these people on forums, and they’re saying how do I get a loan if I don’t have income and I don’t have a job? How do you address that?

Terry Painter: Well, fortunately, our firm – we represent Fannie Mae, Freddie Mac, CMBS; these are all securitized loan projects, HUD. We also have some private debt fund money. So income to a bank – that’s the most important thing. Bank examiners even, they want businesses and commercial properties to actually have two sources of income. Basically, what we would be doing is looking to get you a securitized loan. Those loans start at about a million dollars and go up from there. But that’s the key. Because we don’t look at personal income, we look at the income of the property and we look at your financial strength. There are plenty of loans out there that do not require tax returns, and for the most part, we have a lot of people in business who just don’t want to pay a lot of tax, so they don’t show much enough on tax returns to actually get a bank loan.

Ash Patel: Terry, if it’s a three, four, or $500,000 loan, what options does that individual have?

Terry Painter: In that case, their options are more limited. If it’s a loan of that size, what they are going to have to do is bring in a partner.

Ash Patel: That has an income.

Terry Painter: That has an income. Right.

Ash Patel: At what point does a high net worth or large balance sheet usurp the need for an income?

Terry Painter: Well, actually with a bank, it doesn’t. It’s quite shocking. We’re members of the Oregon Bankers Association and the Mortgage Bankers Association… And basically, it’s quite shocking, but we have clients that have actually tried to get a loan at a bank with millions of dollars in the bank. But their money was in the stock market, or let’s just say in treasury bonds, which don’t produce enough income. Two million dollars is not that much if you’re making less than 1%. So they can’t get a bank loan. So if the loan is only 300,000 or 400,000, they’re going to have to take out a private money loan. There’s soft or hard money these days, but it’s going to be probably at about 7% to 9%. So ouch; that’s what they’re going to qualify for.

Ash Patel: What’s the difference between soft money and hard money?

Terry Painter: In some ways they’re similar. Hard money really is, I would say, 10% and above. We’re talking about 10 to 12% on average, sometimes they go up to 14%. We’re not seeing such high rates with hard money lenders today, because there’s so much hard money out there. Soft money is actually, I would say, between 6% and 9.9%, somewhere in that range.

Ash Patel: So it’s just the rate.

Terry Painter: It’s really the rate, and also the points involved as well.

Ash Patel: So, Terry, you see these phenomenal deals every day for many, many years… Have you gotten the bug to go after some of these deals yourself?

Terry Painter: I do all the time. My passion is actually new construction. We’ve done many loans that have been 30 to 40 million dollars. We do a lot of the big stuff these days, although it didn’t start off that way. When I started out, if I got to 100,000, that was a big loan.

I love working with developers, and that’s where there’s a lot of opportunities there, but it’s a big learning curve. That’s where the opportunity is today, I would say especially in multifamily, where you can actually build a property for less than what you could buy it for. So when I see land, and so on — but the thing about it is that I’m an older guy. I don’t know if this is going to be on video or just on audio, but I’ve got to think about every moment in my life, and what I want to do with it. It’s really fun just to evaluate deals, but I do see deals all the time that I would love to participate in, and sometimes I do. Not if I’m making a loan out; then it’s a conflict of interest, so I cannot.

Ash Patel: Sure. I think what drives you is your passion for what you do. That gives you enough fulfillment on the real estate bug to satisfy that.

Terry Painter: Yeah, I love it. It hasn’t been easy. I’m on my third marriage, which I’m not proud of, and I finally learned to live a more balanced life that I used to. I’m the kind of person that couldn’t wait for the weekends to be over so I could go back to work. That’s not good when you have a family, you know…

Ash Patel: Terry, what’s your best investing advice ever? Whether it’s yourself or real estate this time.

Terry Painter: My very best advice is to really get to know the property and do not make a decision based upon having fallen head over heels for that property. You won’t believe how many times people do that. They go by looks; it’s like you’re dating, it’s the same thing. In my book, I give an analogy where one of my clients actually thought she was almost like online dating… It’s the same thing is looking at properties.

I’ve had clients that have overpaid for their properties. It’s not that they haven’t bought them in the right place and at the right time, but they just paid too much, and they have had to spend years to get the net operating income up to where it really made sense. The best action you could take is… Well, first of all, let me back up. Nobody buys a property to purposefully overpay for it. They only do it because they have an emotional attachment to that property. So you’re going to make some bad business decisions sometimes because of looks. So be careful.

Ash Patel: That is great advice. Terry, are you ready for the lightning round?

Terry Painter: Sure, go ahead. I’m not sure what it is, but…

Ash Patel: Let’s do it. First, a quick word from our partners.

Break: [00:28:10][00:28:47]

Ash Patel: Terry, what’s the best book you recently read?

Terry Painter: The best book is actually Passive Investing in Commercial Real Estate by James Kandasamy. What makes this book unusual is for those who want to invest in other people’s deals. Okay, well, what I love about this book, and I recommend it to some of my deal sponsors, is that you can reverse engineer it. It tells you exactly from an investor standpoint what are they looking for to protect themselves. This would be a great book for Joe Fairless to pitch to his clients, because if we reverse the advice in it, it tells you exactly what you need to accomplish and how you need to sell your deals to investors.

Ash Patel: Good to know. Terry, what’s the Best Ever way you like to give back?

Terry Painter: I’ll tell you what I love to do… And I don’t get too much opportunity, but I’ve done it a number of times, I’d like to do it more. I like to actually help new entrepreneurs in developing countries that have no opportunity. Currently, I have a home in the Dominican Republic, it’s my winter home. Somebody who’s working there, he’s Haitian. I said, “What’s your dream?” He said, “I would love to own my own store.” So my wife and I helped to invest in his store, and he’s now very successful today.

Ash Patel: That’s a great story.

Terry Painter: Now they have another store. So that’s what I’d love to do, is more of that. Help people actually get in business, that have dreams, in developing countries.

Ash Patel: Good for you. Terry, how can the Best Ever listeners reach out to you?

Terry Painter: Okay, well, if you want to learn just about everything on commercial real estate, I recently had a book published by Wiley. They published the dummies books called the Encyclopedia of Commercial Real Estate Advice. That book has all my web addresses, but you don’t have to buy the book. But otherwise, you could just google apartmentloanstore.com and you can reach me there. That’s my online business.

Ash Patel: Terry, thank you again for your time today. You’ve given us some great advice, sharing some of the inside tips on what lenders look for. I’ve certainly learned a lot and I had no idea that the narrative in having a team in place, but with the deal itself, was that important. Thank you for sharing all of your advice today and thank you for being on the show with our Best Ever listeners. Terry, have a great day.

Terry Painter: Thank you. It’s been fun.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
JF2421: Realtor Challenges & Business Growth with Jordan Nicholas Moorhead

JF2421: Realtor Challenges & Business Growth with Jordan Nicholas Moorhead

Jordan is a Real Estate Investor, Host of the Austin Real Estate Investing Podcast, and the owner of the Moorhead Team. He has been an entrepreneur since he was a kid and got into real estate investing before he got a realtor’s license. He focuses on growing his business, investing in real estate, and helping others get started in real estate. In total, Jordan and the Moorhead Team have acquired 29 units along with syndications. In today’s episode, Jordan will go into the details about single families, multi-families, turn-key, and his real estate background.

Jordan Nicholas Moorhead Real Estate Background:

  • Full-time realtor and investor
  • 5 years of real estate investing experience
  • Portfolio consist of 25 units and 3 syndications
  • Based in Austin, TX
  • Say hi to him at: www.themoorheadteam.kw.com 
  • Best Ever Book: The Lifestyle Investor

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“It’s very hard to find houses for people to buy. It’s very easy to find people who want to buy houses.” – Jordan Nicholas Moorhead


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here with today’s guest, Jordan Moorhead. Jordan is joining us from Austin, Texas. He’s a full-time realtor with five years of real estate investing experience. His portfolio consists of 25 units and three syndications. Jordan, how are you?

Jordan Moorhead: Doing great, Ash. How are you?

Ash Patel: Doing very well. Thank you. Before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Jordan Moorhead: My background – I got started in real estate investing actually before I got a realtor’s license. That’s part of the reason why I got a realtor’s license. I owned a fitness business that I started when I was 23; I had some trainers, and I had an admin working with me. We were really helping a lot of people; we had up to 62 clients at one point in time. And I just got bored doing that. Also at the same time, while I was doing that, I said I need to start house hacking. So I bought a duplex. And it just really started from there. I got my real estate license about a year and a half after the duplex. We’ve always just really been into real estate, and it took me until 2016 to get started.

Ash Patel: In Austin, Texas, you guys are absolutely on fire. What is it like being a realtor and an investor in Austin?

Jordan Moorhead: It’s hard for both, absolutely. Probably harder for the investment side. I still invest for cash flow, I’m not financially free yet. It’s very hard to find that in Austin. I’ve found it by taking on really big rehab jobs. The same thing with clients, I’ve found properties that work for the clients that I have, because I work with mostly investors or places that need some sort of rehab done to them. So there’s just not any sort of turnkey rental thing happening here at all.

Ash Patel: So 25 units – what does that consist of? How many single-families or multi-families?

Jordan Moorhead: It’s funny, I should have updated that before we started here. We’re actually up to 29 now.

Ash Patel: Congrats.

Jordan Moorhead: Thank you so much. I started with the duplex, bought a sixplex next, then bought another two sixplexes after that, sold that duplex, bought another two-unit here in Austin. My first single families were actually only about three months ago. So I had 20 units when I started buying single families with a partner in Louisville, Kentucky. Now we have nine single families in Louisville, and I have 20 units between Louisville and Austin.

Break: [00:03:24][00:05:25]

Ash Patel: Did you get your real estate license at the same time that you started house hacking? Or did one come before the other?

Jordan Moorhead: House hacking came first.

Ash Patel: Okay. So you had the real estate bug, and then decided to get your real estate license. What’s it like being a realtor in Austin? It’s probably like fishing in a stocked pond; throw your bait and catch a fish.

Jordan Moorhead: Catch a buyer. The hard part is finding the buyer a house to buy. Right now we have point four months of inventory, which means that everything sold at the current rate that it’s selling, everything would be gone in less than two weeks. The average days on market is 33 days, and that’s from listing to close. That means they’re only on the market for about three days. It’s very hard to find houses for people to buy. It’s very, very easy to find people who want to buy houses.

Ash Patel: And what are you doing to find people that want to list their property?

Jordan Moorhead: I’m calling people. I put aside time every day and just call people. Whether they’re rentals or properties that aren’t on the market at all. Maybe somebody doesn’t know they can sell. I just take the chance and call.

Ash Patel: What kind of investing are you looking for in Austin?

Jordan Moorhead: I’m not doing a ton of investing in Austin, because like I said, I’m investing for cash flow. I’m house hacking in Austin and I’m remodeling properties and taking that money and investing in Louisville where I’m from. I’m from Louisville, Kentucky.

Ash Patel: So give me an idea of what cap rates are for multifamily in probably the hottest market in the country.

Jordan Moorhead: They’re somewhere between three and five for all the different classes. So A, B, and C are just right stacked on top of each other.

Ash Patel: So buyers are buying for appreciation more than cash flow.

Jordan Moorhead: Absolutely. I know people who are syndicating apartment complexes here and they say “Hey, we just know it’s going to go up,” and I think they’re probably right.

Ash Patel: So what’s your rate of return? Zero, except for the IRR when you sell. What syndications have you done?

Jordan Moorhead: I’m actually, with you guys – I have one in Dallas, the Vista 121 property.

Ash Patel: Joe Fairless and Ashcroft.

Jordan Moorhead: Yup, with Joe Fairless. I’ve never organized one myself. I’ve invested in three. I’m in the Vista 121 property in Dallas. I’m in one in Tampa Bay, I think it’s Clearwater. And then I’m in one with Todd Dexheimer in Memphis, Tennessee.

Ash Patel: So somebody that does the house-hacking, you’re a realtor, you see deals all the time. What makes you want to invest passively?

Jordan Moorhead: It’s so easy. It’s just great. You get that check every month in the mail. You don’t have to deal with anything. The hardest thing right now too is finding a deal. My thought process is I don’t have to go out and find them, I just get the notifications from Ashcroft Capital that there’s a new deal coming up, and here’s all the information about it, and here are the expected returns. All you have to do is invest with us and you get the return. I know they pay out, because I’ve done them before. I started small, I started with the minimum investment with you guys, and just continued to invest after that because it’s so easy. There’s no headache.

Ash Patel: Yeah, it’s just that mailbox money. So Jordan, if somebody from out of state wants to invest in Austin, how do they find deals amongst the properties that are available? I know it’s hard to find deals. But what’s the best way to go about it? I’m an out-of-state investor wanting to pump money into this booming town.

Jordan Moorhead: I would say, and what I tell everybody, is look for the areas where it’s going to be growing in the next few years. Look outside of Austin. Where’s the path of progress? Absolutely don’t look in Austin. Don’t look at Round Rock, which is right north of Austin, and it’s been hot for a long time.

Ash Patel: Where is that path of progress?

Jordan Moorhead: Really, it’s almost a reverse C around Austin. You’re going South towards San Antonio. It’s growing like crazy. It’s absolutely growing North. And then on the East side, it’s growing like crazy. There’s nothing but land on the East side and they’re starting to develop it. So smaller towns like Manor and Elgin are really growing quickly.

Ash Patel: Would you look to invest in any of those yourself and do house hacks?

Jordan Moorhead: Yeah, we’re looking for one for my girlfriend right now. The house we’re in, it’s a duplex in East Austin. She wants to buy either a single-family or a duplex, and we’re looking in that reverse C around Austin. So Austin is kind of a rectangular-looking town if you look at the freeways. I always think reverse C around Austin. And that’s where the growth is.

Ash Patel: Got it. What are your challenges right now as being a realtor?

Jordan Moorhead: Finding properties for people to buy. If you’re going up against everybody else that’s putting a 50k to $100,000 over list and they’re waiving the appraisal – it’s hard to make that work for an investor where they’re buying based on numbers. They’re typically not going to throw, at least the people I work with aren’t going to put an extra $100,000 into a deal. It doesn’t end up working very well if you do that. So it’s a big challenge to find them. As I said, I’m steering people a little bit outside of Austin where you can still get some positive cash flow and you’ll absolutely get the appreciation, too.

Ash Patel: Jordan, what’s your Best Ever real estate investing advice?

Jordan Moorhead: Get started and buy for the long term. My best advice that I give to newer investors is to find something where you can add value. I don’t understand turnkey; I don’t see why you want to buy something you can’t fix it up at all, you can’t raise the rents at all. That doesn’t make any sense to me.

Ash Patel: I agree. Jordan, are you ready for the lightning round?

Jordan Moorhead: Absolutely. Let’s do it.

Ash Patel: Great. First, a quick word from our partners.

Break: [00:11:16][00:11:53]

Ash Patel: Jordan, what’s the Best Ever book you’ve recently read?

Jordan Moorhead: Lifestyle Investor. I’m actually almost done with it right now. I really like it.

Ash Patel: What did you get out of that book? What was your big takeaway?

Jordan Moorhead: Just to invest to make sure that you’re not working too much and you’re considering your lifestyle when you’re investing. So if you’re investing… Let’s take passive investing, for instance – I think that’s a great way to invest for your lifestyle. It provides you whatever lifestyle you want. You don’t have to sit around and manage your properties all day. So really thinking about the end goal when you’re investing; all passive income is not truly passive.

Ash Patel: Spoken like a true southerner from Austin. This stereotype fits. You’re right. So Jordan, what’s the Best Ever way you like to give back?

Jordan Moorhead: I like to give to charities. There’s a charity that I’ve been giving to, it’s called One Life Fully Lived. A guy named Tim Rhode put it together. It’s just helping people get out of the rut they’re in and develop a life that they can never dream of.

Ash Patel: Got it. Jordan, how can the Best Ever listeners reach out to you?

Jordan Moorhead: Find me on Facebook or BiggerPockets. Really any social media. It’s just Jordan Moorhead.

Ash Patel: Got it. Jordan, thank you for being on the show today. You live in what Elon Musk called the greatest boomtown of our generation. There should be a lot of excitement ahead of you. Thank you for sharing your story with us.

Jordan Moorhead: Absolutely. Thank you, and anybody that’s looking to get started, I think house hacking is the best way to go. But no matter what, find something you can add value to.

Ash Patel: Yeah. Jordan, have a Best Ever day.

Jordan Moorhead: Thanks, Ash.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
JF2420 - How to Be the Most Valuable to the Seller with Jason Palliser #SkillsetSunday

JF2420:How to Be the Most Valuable to the Seller with Jason Palliser #SkillsetSunday

In the course of his career, Jason has trained thousands of investors and 42 acquisition teams around the nation. His specialty is creating an off-market blueprint to grab motivated seller leads in 30+ ways as opposed to the typical 5 ways that everybody uses.

This mentality allows investors to be seen as a solution in the eyes of the seller, often resulting in cash transactions on the spot and a mutually beneficial business relationship.

Jason Palliser Real Estate Background: 

  • Full-time real estate investor & hedge fund acquisitions consultant
  • 25 years of real estate experience
  • Has personally closed over 3,000
  • Based in St. Pete, FL
  • Say hi to him at: www.2dayblueprint.com 
  • Previous guest on JF1749

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

 

Best Ever Tweet:

“If there’s a cause you need help with, we’re always happy to help.” – Jason Palliser.


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, Jason Palliser. How are you doing, Jason?

Jason Palliser: I’m doing well. How about yourself?

Joe Fairless: I’m doing well, and looking forward to our conversation. A little bit about Jason. He’s a full-time real estate investor and hedge fund acquisitions consultant. He’s got 25 years of real estate experience and personally closed on over 3000 transactions. Based in St. Pete, Florida. Today, Best Ever listeners, because it’s Sunday, we’re going to talk about a specific subject and a specific skill. We’re going to be doing Skillset Sunday and today we’re going to talk about Jason’s four-minute seller waltz he’s going to teach us. By the end of it, we will have honed our skill on how to acquire a property through this four-minute seller waltz from a potential seller. We’re talking residential here.

With that being said, Jason, first do you want to just give the Best Ever listeners a little bit more about your background? Because Jason was on episode 1749, so you can go listen to his Best Ever advice there… But just a refresher on your background, and then we’ll roll right into the four-minute seller waltz.

Jason Palliser: Yeah, okay. So I’ve been doing real estate for 25 years and trained thousands of investors around the nation. But specifically what people, individual investors, and hedge fund type players hire me for is how do we build an off-market blueprint to grab motivated seller leads 30 plus ways, instead of the same five ways that everybody does it. So I’ve been doing that speaking for 25 years, all the way down to techniques like how we do free direct mail and how we get on the first page of Google for “sell my house fast”. So basically, I got hired to suffocate cities from a lead generation standpoint. Then specifically here today, when we do a two-day blueprint, on day two we spent about two hours on acquisitions. So I’ve trained 42 acquisition teams around the nation, and besides lead generation process, my favorite thing on earth to do is find a way to connect with the seller, become a solution for them, and do it in such a manner that whether you buy the house or not, that you’re the most valuable to them. I’ve been doing that forever and I enjoy doing it for Kiyosaki, TV shows, you name it. As you said, I’m down here in St. Pete now, moved from St. Louis to St. Pete. Before we even started, you said “I’m jealous that you’re down there.” I absolutely love it down here.

Joe Fairless: It is a beautiful area, that is for sure. Let’s talk about the four-minute seller waltz. How did you come up with this?

Jason Palliser: Basically, it was born over an extended amount of time and it was also kind of spawned out of necessity. What happened was is when these larger companies started hiring me, the average 20, 30, 40, 50 homes a month in a market, because they have some big quotas to hit, they said, “Hey, we also need help training our team.” So if [unintelligible [00:03:41].27] maximize our value to a seller. So I started training their acquisitions teams and I’m in charge to get all the data and the feedback.

What I did was start testing out in multiple cities simultaneously with different teams, “Hey, let’s talk to a seller this way. Let’s present this opportunity to him to work with us. Let’s talk to him about this way that we can be a solution potentially for them.” Then I would have them do it in different orders in, different ways, and basically just filtered all that data back to me. I started to pay attention to what teams were closing more deals and striking deals to be a solution with sellers.

A couple of people on one of the teams was like — once we implemented it, they’re like, “Wow, we’ve increased our closing ratio by 27%. They’re like the seller waltz.” That’s kind of where it came from. They’re like “This seller waltz is insane.” That’s kind of where the seller waltz came from. It’s training the teams, presenting multiple solutions to sellers, seeing which ones resonate with them, which ones maybe didn’t resonate with them, then tweaking the order that we say the things in, and then – I’m a data guy, so just paying attention to the data. Now if you fast-forward nine or 10 years, 42 acquisitions teams trained… We kind of have our rhythm, shall we say? Or have it kind of down to a science on what do we do to connect with the seller on a level, show them multiple ways, and have them come to the best solution for them that works for both parties.

Break: [00:05:10][00:07:11]

Joe Fairless: Please start us off with how to have this conversation.

Jason Palliser: Okay. Before we go into the different techniques, what we always train the team to do – we set priorities, like what do we need to be on the appointment. We also lay the foundation before we go into the seller waltz. The first thing that we teach everyone, and for everybody that hears this, is that you have to be the most valuable to the seller. Most of the time, as I’m quite certain you know, all things remaining equal, most of the time, it truly honestly doesn’t come down to price. It comes down to are you the most valuable to them? So if everything remains equal and somebody is 1,000, or 2,000, or 3,000 off, the seller is going to work with the person they feel the most comfortable with. So what we always teach everybody, as the foundation for you getting really good at becoming a solution for homeowners and being a negotiations expert, is that you have to be the most valuable to them. That’s the foundation that we lay.

Then before we pull back the curtain on the waltz, then we say the second step is to make sure that you set the stage. You want to set the stage the right way, so that it flows effortlessly with the way that you engage that homeowner about becoming a solution for them… Meaning this – there are certain things that we put in place before we go into the waltz, which is we usually blame it on our boss or blame it on our partner. As an example, we would tell the homeowner, “Hey, look, I appreciate you having me here. We love the area, super-excited to see the house. I’m in charge of walking around, asking you a few questions and taking some pictures. I have one more appointment after this. I’ll be with my boss or my team lead in about 30 minutes, and we can hopefully find a way to become a solution for you.” One, I blamed it on my boss. So now in the appointment when I’m talking I can speak freely, and nothing really sticks to me, because I’m not the boss, essentially. Secondly, I also said, “We have one more appointment, give me about 30 minutes.” We always set the expectation of, “I’ll call you back XYZ, and then we do it ahead of time.” So if we say 30 minutes, we call back in 20. Because we want to plant inside that homeowner’s brain that we always do what we say we’re going to do, which subconsciously when you call them back on time, that’s what happens.

Now, I don’t want anybody to lose in translation. We close deals right on the spot. We say that we have one more appointment. But if everything sounds good, “You know what? I’m going to hit my boss up right now and see if we can just get this squared away right now and be a solution for you.” It’s just a technique just in case that you can’t come to terms, you’ve left an open loop to call them back. Lastly, before we go into a seller waltz and kind of [unintelligible [00:09:49].00] that open, we always put them at ease by saying “We don’t buy every house, but we try and help every homeowner that we talk to.” Meaning if we don’t come to terms, then we’re going to offer several ways to help you. Does that make sense, Joe?

Joe Fairless: I love it. Yup.

Jason Palliser: Before I go into the negotiation side, I’m going to give you some things about, “Hey, we don’t buy every house, but we try and help everyone that we talk to, so here are some things that we do to try and help them that separates ourselves from anyone else that they might speak to…”, because we don’t buy every house. That’s what we establish with them.

So we offer things like free appointments over the phone, “We’re in the area, and we saw the house needs a little bit of TLC. We don’t buy every house, we’re trying to help everyone we talk to, so if we set an appointment that works for you, whether we buy your house or not, we’d like to help you out. Well, if you’d like, we’ll go ahead and offer to cut your grass, so that you stop getting fines, judgments, liens, and violations.” It usually stops a homeowner in their tracks, they’re like “Seriously, you do that?” “Yeah, we love the area. We try and help. We certainly know that we don’t buy every house.” That’s one thing that we do.

Another thing that we do is beyond just saying “We’ll help you move”, which is what everybody does, we also establish with them, “If there’s anything that you can’t move or don’t want to move, we work with nonprofits and charities and people that are really in need… I just want you to make sure that we can help you with anything that is at your house that maybe you can’t move or don’t want to move and make sure that it goes to a good cause.” Those are just a few things… We’ve got like eight or nine things that we show them that we can do to be the most valuable.

Lastly, and then we can go into the seller waltz… The last thing that we do is always tell them, “We just appreciate the fact that you’re not using a realtor to save money. If we don’t come to an agreement, which I think we can, but if we don’t, if you’d like, I’ll help you market it for free, and help you put it on 20 or 30 different real estate websites. All I ask in return is if anybody ever needs help, that you think of our company first. If we help you find four or five people that may buy your property, you can only sell to one and we’d like to work with the other buyers.” It works like a charm with sellers, because then there’s no pressure to strike a deal, and are you going to lowball me, and all those other things that most of them think. So we put them at ease and offer things of value to them that, quite frankly, most people never even enter into the conversation.

Joe Fairless: I love that. Thanks for giving those examples.

Jason Palliser: So now having said that, on the negotiation side and the seller waltz, here’s what we do – we tell them after viewing the property, getting to know them, taking pictures, and as we’re going into the seller waltz, we always ask the question, “If we can become a solution, and if you don’t mind me asking, we deposit the money in your account, and you’re a happy seller, what are you going to do with the money?” We always try and ask them what they’re going to do with the money, because if we start to uncover the real motivation of what they need the money for, then we can craft our conversation in solution around making sure that we anchor in on just reminding them that we can’t wait to help them solve that.

Now, for those of you listening, a lot of times a homeowner will be like “Well, why would you want to know what I’m going to do with the money?” This is where some of the waltz stuff comes in. You just need to be prepared for that, because you’re trying to find out the real motivation, so that you can provide a real solution. If they say something like “Well, why would you need to know what I’m doing with the money?” “Because, look, we invest in real estate, but there are also things outside of real estate that we also invest in. So if you’re doing something with the money to make more money or whatever, I’m always all ears, because I may be open to doing that, too. I’m always looking to expand my horizons.” So it’s basically saying, “I’m not trying to pry. It’s just that we’re always looking for a way to create wealth and create security for our families, just like we’re trying to do for you. So just simply seeing what your motivation was so that if there’s a cause that we can help with, we’re more than happy to help. And if you have something that you’re going to do with it that’s going to produce more security and wealth for your family, we’re always all ears for that.” It’s just a polite way of just kind of digging a little deeper to find out what their motivation is.

Joe Fairless: Okay. It does.

Jason Palliser: Okay. So then when it comes down to the seller waltz, I’ll run through it, and then I’ll go back and dissect a few things for everybody listening… Because if you do it correctly, you can really drill down to how motivated the seller is or isn’t without them even knowing it’s happening. What we typically do is this, we say, “Thanks for your time. Let’s go ahead and talk a little bit about numbers to see if we can find a way to solve some problems for you and be a solution.” They say, “Okay.”

So what we do, the first thing we do is we always tell them, “Most of the time when we do a contract, we pay cash.” So I’ll start with, if we can come to an agreement, maybe what a cash offer would look like. “So having said that, Mr. Smith. if we can close on a date that works for you and I sit down with my boss, and my boss says, yeah, let’s go ahead and be a solution for Mr. Smith…” And for the sake of argument for everybody listening, let’s say the house needs a little bit of work and the seller was hoping to try and get 100k out of it. So they’d already mentioned that they want to try and get 100k… So we’ll say to them, “If we can close on whatever date you want, it’s cash so you don’t have to worry about loan approvals or anything. It’s just straightforward, closing day, and you’re done… How low could you go if it was cash? You don’t have to worry about moving a single item, fixing anything, taxes, or insurance anymore.” And then we zip or mouths and just see what they say. Sometimes they’re like, “Well, I really want 100k.” A lot of times we’ll say, if it’s cash, and I’ll just use the example of they say, “Okay, well, if it’s cash, maybe 95k.” We always follow that up with, “Okay, as I said, cash. When I sit down with my boss, is that as low as you can go? Because I’m just making sure that we can come to an agreement and that we’re good to go.” A lot of times, they’re like, “Well, if it’s cash…” and they’ll go down a thousand or two. Sometimes they hold strong, they’ll stay 95k, or 100k.

Let’s just say that they say, “I think 95k cash is the lowest as I can go.”  What we do is we go next into a part of the waltz where we just simply tell them, “Okay, just so that I’m on the same page with you. If I sit down with my boss in half an hour and he says let’s close on the date that Mr. Smith wants to, so whatever date you want, and he says 93,000. Are you saying that we can’t do business together?” Here’s why. A homeowner wants their house sold, but they don’t like the negotiations part, just as much as most people on the other side of this that are listening right now. It’s not their favorite thing on earth to do. I’m a little bit sick in that regard, because I like it… But having said that, they don’t like it on there. So it’s really hard for them, because now they have to talk with somebody else, they have to set a new time to meet with somebody. All those things run through their head, so they really don’t want to say “No, we can’t do business together.” So what most of them will say is, “I know I want it 95k.” “So if my boss says 93k, we can’t do business together?” Most of the time, the homeowner will say, “Well, I’m not saying that.” And we never let them finish their sentence. Because they’ll say, “Well, I’m not saying that… But I really need 95k.” So when they say “I’m not saying that,” we just say okay, “I was just making sure because I don’t want to waste your time.” We’re incrementally kind of working them down a little bit.

Once we’ve established that, I usually tell them – and what we teach is that, “Even if you do want the house at 95k, or you do want it at 93k” in our example, we always tell them that, “I think my boss might be lower, because we do a lot of these.” So we establish that, “I’m not saying that we are, because nothing sticks to me in the appointment, because I’ve got to talk to my boss.” So I we’ll say, “We do a lot of these. I think my boss might be closer to 80k. But I’m not sure. So I could be wrong. But having said that, Mr. Smith, there’s other ways we could work together.”

This is when we go into a few different techniques. We tell them, “If this works for you, great. If it doesn’t, no big deal. I’ll just tell my boss.” Because that’s what we established at the start the appointment. I’ll tell them, “I know that my boss may be willing to give you the 100k that you’re looking for if you’re willing to be the bank.” Meaning you guys owner finance the property to us, you get all your money over time, we just start making payments to you, and we’re responsible for taxes, insurance, and everything, all drawn up through the title company.” Some will say yes, some will say no.

Let’s just say they said that they are open to that. I’ll say, “Okay, well, I’ll talk to my boss and just let them know that you’re interested.” I don’t go down a rabbit hole with them unless they ask me more about it. But I just want to establish whether they’re interested or not, if that could be a solution.

The second thing that we do post cash offer is to tell them, “I don’t think I’d be here if you had the roughly 50 grand I think it might take to fix this house. So if you’re interested, my boss may partner with you. He may agree to give you the first 100,000, and then we’ll come in with the 50,000, and fix it and try and sell it for 200k, which will potentially net 50 grand. My boss may agree to give you 10 grand of the profit on the back end… Meaning you get the 100k that you were looking for if you’re open to potentially partnering on it, and you might end up with more than what you’re asking for, because we’ll give you a part of the profits on the back end.” The reason we do that is because now all of a sudden the seller’s like “Wow, I get more than what I was originally asking for.” It’s really hard for them to say no to that.

Joe Fairless: Right. Yeah, of course.

Jason Palliser: So let’s say they do; they say, “I’m interested.” Here’s why, everyone listening, you should at least offer it, because you can structure the deal, do the deal yourself. You can structure the deal and sell the terms of the deal to somebody else on a partnership deal. I always tell everybody, if you don’t have to buy it for 80k, 90k, 100k, and put 50k into it to make 50k (that’s a 30 something percent return), if you can put in 50k to end up making 40k, because you give them a little bit of the profitability, then that’s an 80% return on your money. Oh, and I didn’t have to buy it, so I’m already saving a few thousand in closing costs. So when we teach that, we also teach how to structure that deal, how to properly protect the investment, stuff like that. But I know we’re on a timeframe here.

Lastly, we tell them, “If you give us time to buy it, we’ll give you a down payment, start making monthly payments to you, which is just a lease option.” Now, having said that, for everyone listening, let me deconstruct it a little bit. One, anything that they say yes to, “I’d be open to a down payment and making some payments to me. I’d be open to partnering. I’d be open to maybe being the bank if you can tell me a little bit more bout that.” If they say yes to anything after the cash offer, then what they essentially just told you is that they don’t need to sell right now. They’re willing to go on a ride with you to get their money or get more money. So I always tell people, “Then why are you going to try and beat them up about the roof and the foundation like most investors do, to anchor in on your cash offer, when they just told you they don’t need to sell. It doesn’t make sense to do that.” What does make sense is to offer to market their home for free, cut their grass, help them move. If they’re in a bind financially, I’ll be like “Look, we’ve come to an agreement on the house. I just want to let you know that the day we close, expect an email from me because I’m going to go ahead and pay for your credit repair, because I want you to get back to where you want to be as fast as possible. We can buy any house; this isn’t about just buying a house, it’s about helping you.”

So when we teach the full seller waltz, those are some of the items that we go into. If they say no after your cash offer, no partnering, no owner financing, no giving you time to buy it, they’re essentially telling you “You know what? I am more motivated and I do want to sell now.” And that’s really where you just go back in and anchor in on trying to iron out a cash offer.

Joe Fairless: So if you had that cash offer initially stated, or when you state it, do you always do the other two options?

Jason Palliser: Yes. If the cash offer that you negotiate with them is something that you want, and you know you’re going to lock up the deal, you always pretend that your boss may be lower on price, so that you can go over the other options… Because you can start to see their real motivation.

We always go into the other options, because you can always go back and say, “My boss said let’s just make this clean and do the cash transaction,” because you’ve already negotiated that. But the reason you do that is this – every deal is different. If you find out that they’re willing to do any of those other options, well, that relieves you with coming up with a bunch of money upfront, which allows you to do more deals. Because you can always still execute on a lease option, you could execute two months from now instead of a normal 30-day contract, two months from now to buy, because you just bought yourself time to buy it.

Joe Fairless: Anything else, as we wrap up, that you think we should talk about as it relates to the seller waltz that we haven’t already?

Jason Palliser: Just that if you make sure that you center everything around, “We don’t buy every house, we try and help everyone that we talked to.” And you say, “I just appreciate the fact that you’re not using a realtor to save money. If I don’t come to terms with you, I’ll help you market it for free to try and help you” – that technique wins us a lot of deals. Here’s why. Here’s the last tip that expands on that. That’s what we do on day two of our blueprints after we set up all the lead generation… It’s that when we market it for free, all we do is market it for free for them. No realtor, we’re doing it for free. We didn’t ask for anything. But what we do is we set them for two weeks of follow-up. When nobody wants their property and they mentally know that it’s on 15 to 20 different real estate websites at the price that they want, what we do is we call back and say “I just want to let you know I’m going to refresh your ad. I’m still trying to help you. But I haven’t had anybody that’s hit me up with a phone call or email yet.” That’s very heavy on their end, and a lot of times they say “You know what? Let’s just sell it. What’s your cash offer again? Let’s just do it.”

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

Jason Palliser: All they have to do is go to 2dayblueprint.com and there’s information on there on what we do to help people take over their cities. Or you can simply email me, jason@goseejason.com. I would be happy to help you.

Joe Fairless: What a valuable conversation that we just had for the Best Ever listeners. Thank you for being on the show again. I hope you have the Best Ever day and we’ll talk to you again soon.

Jason Palliser: Okay, sounds good. See you guys.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
JF2419 - The Benefits of Looking for Opportunities Beyond Residential Real Estate with Dave Holman

JF2419: The Benefits Of Looking For Opportunities Beyond Residential Real Estate With Dave Holman

In college, Dave took a class on building an eco house. That’s when he fell in love with architecture, engineering, energy efficiency, and building in general.

Dave’s life took many unexpected turns. He spent several years in Bolivia learning the ins and outs of entrepreneurship. After that, he worked for a nonprofit organization that introduced him to fundraising. Over time, he partnered with his friends and family to start his real estate business. Now he’s a triple threat – a commercial broker, a syndicator, and an owner of a property management company.

Dave Holman  Real Estate Background:

  • Commercial broker, syndicator, and owner of a property management company
  • 9 years of real estate experience
  • Portfolio consists of 94 units across 14 buildings approximately valued at $11M
  • Based in Brunswick, ME
  • Say hi to him at: www.holmanhomes.com 
  • Best Ever Book: Investment Biker 

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“A commercial broker might misprice a residential property just like a residential broker might misprice a commercial property  ” – Dave Holman.


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, Dave Holman. How are you doing Dave?

Dave Holman: Doing great. Thanks for having me.

Joe Fairless: Well, I’m glad to hear that, and it’s my pleasure. A little bit about Dave, he’s a commercial real estate broker, he’s a syndicator, and owner of a property management company, triple threat. He’s got nine years of real estate experience. His portfolio consists of 94 units across 14 buildings, valued at approximately 11 million dollars. Based in Brunswick, Maine. 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 Holman: Sure. I used to describe what I do as a three-legged stool, but I like your term triple threat there. I’m going to take that and run with it.

Joe Fairless:  Yeah. Because three-legged stools tend to fall over.

Dave Holman: Yeah. That is not exciting. A stool is not going to move anything around for you, it’s just something your butt goes on. So I’m excited, because I have a better tagline; this has been very helpful. [laughter] So I grew up in Maine…

Joe Fairless: Should we stop the interview now?

Dave Holman: [laughs] …a state that I love. I just went to a public school, grew up kind of middle class, didn’t know anything about real estate. In college, I took a class called Building the Eco-House with an architect who was our director of facilities out in Minnesota at Carleton College. That really turned me on to the built world, architecture, engineering, energy efficiency, things like that. I got to do some hands-on work, TA’ed that class for the next two years, and thought about even becoming an architect. But life led me down to Bolivia, where I was studying, and I met my then-girlfriend, now wife, and we have two kids.

I spent four years down there, and I started a chain of retail stores selling camping gear, things like that. That kind of got my business and entrepreneurial juices flowing. I always thought, “Man, we’re renting and all these retail storefronts and it’s just like burning money up every month. I wish I owned them.” And then the monthly payment, half of that or two-thirds of that would really be pennies in the piggy bank savings. That got me thinking.

I came back to the US in ’09. I got my MBA and went to work in nonprofits related to helping poverty in Latin America. I worked for a nonprofit called Safe Passage, which helps kids in Guatemala to go to school. I was their Director of Marketing and Communications in English and Spanish for three and a half years. I got into fundraising in that job and that took me to Bowden College, where I spent five years in fundraising, learning to work with major donors, got to meet really cool people. It was a great experience. But I started real estate investing on the side, once our first daughter was coming along. I was like, “Nonprofit work is not profitable. It lets me pay the bills, but I need to up my game a little bit.” And having been a stock investor, I knew that wasn’t going to move the needle in a reliable way for me.

So I just dove into real estate, and I found your show pretty early on so I’ve been a longtime listener. Thank you for all the great free guidance and wisdom you’ve been sharing with people, and your guests as well. I did a lot of reading and podcasting and then just started out. I had no capital on my own, so I partnered with friends and family that did, and did all the work essentially to help them and me split a really good return.

I started with single families, then went into three-unit mixed-use, which kind of opened my eyes to commercial, and since then, I’ve been partnering with people to buy bigger and bigger properties, multifamily apartments, and now a lot more mixed-use commercial, restaurant, and retail. So the 94-unit is a little deceptive. Some of those units are like a 9000 square foot floor of a building that a law office rents for 12 grand a month, so it’s not all created equal. But it’s been really entertaining, and I love what I do.

Joe Fairless: A lot to unpack. You’re the first person I believe I’ve met who’s lived in Bolivia, in Maine, and Minnesota. What brought you to Minnesota for college if you’re from Maine?

Dave Holman: I was excited to get out of a small state and see the broad world. My parents encouraged me to spread my wings, and I was choosing between Carleton and Middlebury. I loved the people out in the Midwest, they were just very genuine and authentic; there was none of this elitism and preppiness that we on the East Coast are all too familiar with. I just fell in love with the people there, and ended up now partnering with my best friend from Carleton, who’s a syndicator in Minneapolis… We’re excited to do deals together. So it was a neat process to get out to a different part of the country, and I encourage everyone to travel a little bit if you haven’t been far away from your home state. It’s a very eye-opening experience.

Joe Fairless: Tell us how you transfer your skills and what transfers over from raising money for nonprofits to raising money to put deals together?

Dave Holman:  Yeah, it’s a great question. I joke with people that I’m in development, and I’m also in development. Because nonprofit development and fundraising – frankly Joe, it’s the exact same thing. It’s relationship building. Part of my job was being a relationship manager.

I got to escort Reed Hastings, the CEO of Netflix around his 35th reunion, and just really cool stuff like that that allows you to help people give back to causes they believe in and that are meaningful to them. Just like I’m now helping people invest for their future. And also to transform buildings and communities in a positive way.

It’s one thing if you just shotgun your money into the S&P 500; you’re not making the world a better place. Whereas when you invest in a deal that is a value-add and it’s going to make a building better for the tenants that live there, the neighborhood better, and it’s going to put their money to work, you’re earning a good return but also tangibly improving the world and that building. It’s awesome, and I like helping people. So you don’t want to think of fundraising for capital raising as asking people for money; you’re offering them an opportunity to invest in something that aligns with their values. It’s really very similar.

Joe Fairless:  So tapping into the deeper meanings behind the event of the money transacting.

Dave Holman: Yeah, you can get a good return anywhere. You can invest in Bitcoin, you can do all kinds of different things that are kind of morally agnostic, or they’re not cool and tangible. Whereas I think with real estate and with syndication, especially, you’re offering people to be an owner of something real. You get to show them through your investor updates, newsletters, what have you, what their money is helping build and achieve. I think that’s really special and it’s something that investors that I work with enjoy. They enjoy getting the updates and the little personal stories of the tenants, and that sort of thing.

 Break: [00:06:49][00:08:50]

Joe Fairless: I’m going to have a contrarian thought process just for the sake of our conversation. I think it will make our conversation even more interesting for the listeners. When you were talking about value-add investors, you make the building better when you add value, so as passive investors who are investing in private placements that buy value-add deals, you were saying that a warm and fuzzy feeling? You didn’t say that exactly, but that’s what I believe you were implying, where you’re actually doing good. You’re doing good stuff.

Dave Holman: I am. Not everyone is.

Joe Fairless: Right. Fair enough.

Dave Holman: [laughs] Because you can. You have that opportunity.

Joe Fairless:  Let’s talk about you then, so that way I won’t generalize it. With your deals — and again, I do the same business you do. I’m just thinking about it from a different perspective. Just for our conversation.

Dave Holman: Kick tenant’s out who have low rents.

Joe Fairless: Boom. How do you explain that? Yeah. How does increasing the value of the property which you need to increase the rent – how does that give the warm and fuzzies to a passive investor when they’re essentially displacing people who can’t afford to live at the place that you’re buying once you implement your business plan?

Dave Holman: That’s a great question. The basic answer is, I don’t displace everyone that can’t pay. With every building, there’s almost always someone that gets grandfathered in, where maybe we could earn a little more profit if we did bring them up to market and kick them out, but it’s just not something that’s going to let me sleep at night, and I think they’re often heartwarming stories for investors, that can actually generate goodwill, that may lead to more capital, more ability to do things, and you never know. So I don’t always want to transition people right to market right away.

For those that can pay, if you’re not a retiree on a fixed income, if you’re a couple both with incomes or those kinds of things, I like to explain it in very clear terms and make a plan that takes place either immediately or over the course of maybe even two years, that works for both sides. I might say “Your rent is 800. Now the market rate, if you look at Craigslist, and these comps, they are 1200. Could we get you up to 950 this year and then maybe 1125 next year?” Something like that, that’s a gradual step-up increase. It’s not, “Hey, you owe me $400 extra next month,” kind of thing. It often works for people. And then you avoid a transition. If they leave and stop paying, you’re losing 1200 a month time that it takes you to transition. Plus, you might have to put five or 10 grand into that unit to get it up to a better value.

So often, if you can keep a tenant and get them on a plan that gets them to bind to your 95% of the market, something where they’re not incentivized to move, but you can capture most of that value without really having to modify the unit, that can be a win-win.

Joe Fairless: Let’s switch gears a little bit and let’s talk about the different types of commercial real estate that you own. That certainly piqued my interest when you’re talking about you’ve got mixed-use restaurants and retail. Can you just high level what do you own right now?

Dave Holman: Sure. About two-thirds of my units are multifamily residential. We have two single-family houses, and that’s how I started. And then I have a lot of small office units, and some large offices. We have a sort of downtown main street building that has two restaurants and three retail stores in it. So a pretty wide range of different asset classes. I have basically everything except industrial. Not all of it was by design, especially in this climate. I wouldn’t buy restaurants; but the building, location, and all the other numbers were so compelling that it made sense. The restaurants were poised to survive COVID very well. They’re not asset classes in which I’m yet, I would say, even an expert in. It excites me to learn about them, and I had enough experience and track record to legitimately venture into new territory.

So they come with pros and cons. Multifamily is much easier, it’s more turnkey, it’s more obvious, but there’s a lot more competition for it. There are probably 10 times more people trying to buy multifamily than are trying to buy an office, for example. You can often get a better dollar rate per square foot in an office than you can in residential. So if you know what the market rents are, and how to make a building appealing, and how to manage it well, there’s a lot more upside managerially. Whereas in multifamily, it takes a pretty bad manager to get your rents to be half or 40% of the market. Whereas in office, that happens all the time. You often see office rents at 40% to 50% of the market and the owner has never studied or doesn’t care. They just “Yup, it’s 500 bucks or it’s 300 bucks for the small office.” They don’t really think about doing a lot of research and study into it, so there’s more ability to create value through just changing management, I think, in these other asset classes sometimes, than there is in multifamily.

Joe Fairless: That’s fascinating. I definitely see how that could be the case. I never thought about that, how in multifamily — you’ve got to be living in a cocoon if your rents are 50% of what they should be. But with office, you’ve just got one or two tenants, and someone just might not pay attention to those one or two units, and that provides some tremendous upside opportunity. Plus, there’s less competition going after that.

Dave Holman: Totally. We bought a mixed-use building… This was my first syndication, and it was only $820,000 at purchase. It just appraised for 1.2 million, and that was almost entirely because the seller who stayed on as a tenant didn’t want to pay market rent for his unit. It’s valued using the right numbers, because he wanted an artificially low thousand dollar rent for a beautiful office that would rent for 4000 in a market setting.

So things like that are very hard to find in residential, where there’s just much better market information out there and people study it more. So it has been intriguing to find value. I tell people, the way I find these buildings is often on the MLS. They languish there, because the numbers look awful. But when you go there, you dig into them, and if you know the market, you realize “Oh, the numbers are awful because they’re half of the market, and someone didn’t realize that.”

Joe Fairless: I have a good friend in Cincinnati, Ash Patel, and he buys office. He swears by buying small commercial properties, that’s his thing. And he does the same thing. He looks on the MLS and he finds properties where the numbers look horrible. Usually, what he told me, it’s because the property is listed by a residential real estate agent and not a commercial broker, because the residential real estate agent just happens to have a friendship with this person who owns one office building. So they just list it, but they don’t necessarily know the mechanics for how commercial real estate is valued and what it’s really worth it. Have you come across that?

Dave Holman: Every single office building I’ve bought has been with a residential broker, or directly from the owner in an off-market deal. But yeah, absolutely. Commercial brokers know what they’re doing in commercial, and if they try to sell a single-family home, they might misprice it, just like a residential broker might misprice a commercial property. But it’s much harder to really accurately value commercial, because you’re using the income model; comps really don’t apply. Not many residential brokers can use the income model to accurately price a building. They’ll kind of try to use comps and be like, “Oh, this building’s about 4000 square feet, so we’ll charge whatever the kind of going rate might be for that”, not realizing that that’s not how you value it. It’s actually worth 50% more than the price you put on it. So both sides can be very happy in all these transactions. I think both sides have felt like they got the price they wanted.

Joe Fairless: Well, that is a big step towards the overall buying a property; identifying the commercial real estate opportunity through this method is a big step in the success of the overall project. That’s what I was getting at. However, identifying the opportunity and then actually executing on it properly is a very important other step in terms of having the project be successful.

So once you identify that there’s a lot of value in this property, they don’t see that necessarily, or they’re choosing not to take advantage of it, and I’m going to maximize value by buying this property… But then you’ve got to find a tenant or multiple tenants to fill the building. So how do you go about finding those tenants?

Dave Holman: Yeah, that’s a great question. In several instances, a purchase that I’ve made has been dependent on me negotiating a lease with an anchor tenant. I write offers to basically market spaces during the contract period. Oftentimes, I’ll be able to lock in my profit and know that this will be a good investment before earnest money even goes hard, because I’ve talked with an anchor tenant and signed a new seven or 10-year lease with them, which will become valid on the day of closing.

That can be one way to mitigate your risk… And vice versa, if an anchor tenant says “No way, we’re [unintelligible [17:51] probably not to buy that building, because you’re buying an empty building that’s much harder to fill. Commercial vacancies can take six months to fill, whereas residential ones shouldn’t be more than six days or weeks at most.

The other ways to market are pretty similar to residential. It’s a little harder, because that many apartments.com kind of sites doesn’t really work for offices, nor does Facebook for that matter. So if Zuckerberg is listening, he should fix that. But Craigslist is still one of the best ways, or LoopNet, or other similar sites. We’ve got the New England property, Commercial Property Exchange is a good one for us in Maine… So different ways like that, and just networking. The bigger the space, the more it becomes about personal relationships. Who are the restauranteurs that we should contact to try to fill this restaurant vacancy, and that kind of thing.

Joe Fairless: Okay. You said it could take up to six months. Are you able to build that into your contract that I have the option to close on this property for up to six months? That seems like a tough sell.

Dave Holman: No, I have not tried to do that. I’ve been able to negotiate leases within about a month, because they’re with existing tenants. It’s not me putting it out on the market and trying to find someone new. It’s often these tenants that have been under market, negotiating a market lease so they can stay in their space. They’re often happy to have the security. Many times they’ve been month to month for years, and now they get a five-year or 10-year lease at a known price every year. That can be great for them. But it’s also great for me, because I’ve locked in many, many years of income. Whereas with residential, if you can keep a tenant for 18 months, you’re doing pretty well on average. So there’s less turnover in commercial, which is nice.

Joe Fairless: Have you purchased a building that has been vacant or at least had some vacancies and then had to fill them post-closing?

Dave Holman: Yes, this is a great story, and this is my best investment. I don’t want to steal from the lightning round here.

Joe Fairless: No, let’s talk about it. That way we have some time to hear the whole thing.

Dave Holman: Exactly. So this was a building that had been on the MLS for four years. It was a big class A office building, 18,000 square feet, that was occupied by a law firm. All the founding partners had retired, and they wanted to get out of being in the real estate business and sell. The current firm wanted to become a landlord, and they were only using the second floor, 46% of the space. I was brought in by the broker as a consultant, because she knew I did a lot of commercial, to get fresh eyes on it and help her market it. I came away after an hour thinking to myself, “I’ll buy this if the law firm was willing to stay and pay a market rent. I think it works just based on that.” And sure enough, I met with them, negotiated with them, and was able to have a long-term lease signed with them prior.

The closing was on March 3 of this year. COVID was just starting to become a real big problem. And I partnered with a broker to list the bottom floor, thinking it’d be great for a medical practice; it’s 9,000 square feet… And we just got crickets for months. No one’s renting big 9,000 square foot commercial spaces in April, March, or May of 2020.

So by the end of May, I was like, “You know, we’ve got much more familiarity with small office, and there are tons of private offices and this floor. I’m just going to take this listing back and just start putting these on Craigslist and seeing if I can rent them for 500 a pop. Because that would actually translate to about the same rent I would get from a whole floor triple net long-term tenant, and it would actually have a lot more diversity.” But I was pretty nervous, because we only had one tenant who was paying all of the mortgage and costs etc, luckily. But if they went bankrupt or something, you’d be in real trouble. So this is not a beginner-level investment necessarily. But very quickly…

Joe Fairless:  What’s the mortgage every month?

Dave Holman: We negotiated a year of interest only. So it’s been in the 2,000s every month. We’re earning 12,000. So it’s been a huge [unintelligible [21:39].

Joe Fairless: [laughs] Those numbers work…

Dave Holman:  It will soon go up to 5000 or so this coming March. But we’re still in a good position. We’re paying some significant taxes and utility bills as well. But we’ve been able to fill all but one of the offices downstairs, so we’re now actually building more in some of these open format, open workspaces that really just don’t really work for COVID, but that’s ending — the vaccine, I think, will bail us out within the next six to 12 months. But even so, private offices are just more valuable than open space.

I think it’s a good plan no matter what and they’re easier to rent out. So it’s now a multi-unit building, it’s got a lot more tenant diversity. The turnovers don’t hurt as much as when you’re 9000 square foot tenant turns over and you’re vacant for six months. Now it’s just filling office by office, room by room on most. Some of them have taken more than one office, but it’s been a great investment. We bought it for 1.1 million and we hope to refinance in the two and a half to three range next year.

Joe Fairless:  Wow, bravo on that. Just getting resourceful and making it happen. So the flip side to renting it piece by piece at the bottom is obviously management. You have more management and more leases to keep track of. Can you tell us about that process?

Dave Holman:  There’s a great video if you Google herding cats… That’s what management can be. But the nice thing is that commercial tenants, especially in a class A building like this, are not as high maintenance as a lot of residential tenants. They take pride in their places, they want them to look professional; they’re not going to be hanging the laundry out the window kind of stuff. So they’re a pleasure to work with, quite honestly. That’s kind of one of my rules of thumb, is I always want to rent to people that I enjoy interacting with if I possibly can, in a commercial space. Life’s too short to be dealing with unhappy people. So it’s a little more work. There’s certainly more management intensity when you have a lot of small tenants, versus one big tenant. But that was a risk I was happy to make, because I had investors on this ride that was not going well, for the first couple of months.

Joe Fairless: Right. Fair enough. It makes financial sense. So you make it happen on the administrative side in whatever way you need to make happen. You said you negotiated interest only for a year. Was that with the bank or is this some sort of seller financing deal?

Dave Holman:  That was with the bank, and I’ve learned, over time — I used to not really pay much attention to my financing. I always did it with the same local community bank. My most recent deal, a $3.3 million mixed-use building, I think we shopped at over 12 banks, and that was a huge learning process. That one we got two years of interest only. So those are things that can really goose your returns, that are not taught in the single-family, or possible in the single-family realm, that I kind of love about commercial, and larger multifamily applies here too. But you can negotiate these sorts of things.

The financing for this office building we did with a credit union. It might have been on your podcast, actually, but I heard an interview where someone mentioned that credit unions are not allowed to charge prepayment penalties. I had just been frustrated by some prepayment penalties, trying to refinance with another deal, so I was like, “Oh, that sounds good to me.” So we ended up getting a pretty good market interest rate and no prepayment penalties, because e knew the plan here was to refinance pretty early. That was going to provide the capital return to investors in the first year or two, was the hope.

Joe Fairless:  If you did hear that on my podcast, then I don’t remember it, but I’m glad that you heard it regardless, because that’s new information to me, too. Credit unions are not allowed to charge prepayment penalties. That’s interesting. I appreciate you educating me on that, or refreshing my memory on something I learned about maybe three or four years ago on a podcast in archives. I love talking about your deals, because I really enjoy learning about commercial real estate and the different nuances and some different asset classes that aren’t typical. That’s why I personally kind of steered our conversation towards the commercial real estate office and retail front. So thank you for humoring me, and I’m sure that a lot of Best Ever listeners got a lot of value from this too.

Before we wrap up, we got to do a lightning round and I obviously want to know what your Best Ever advice is. So based on your experience, taking a step back, what’s your best real estate investing advice ever?

Dave Holman:  Be true to yourself, follow your passion, and give it your best shot.

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

Dave Holman:  Let’s bring it on.

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

Break: [00:26:03][00:26:36]

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

Dave Holman: Investment Biker by Bill Rogers is a great combination of adventure where in the late ’80s he motorcycles with his girlfriend all across the world, through the Soviet Union, through Africa. But he was an investor and original partner of George Soros and Stanley Druckenmiller, and he was looking at each country with a kind of macroeconomic investing eye. I think a lot of it applies to real estate. A really fun read.

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

Dave Holman: I serve on two nonprofit boards right now, Healthy Homeworks and Passivhaus Maine. I’m giving my time back in that regard. I try to share what I know in podcasts; I encourage other people, and I always want to be giving with my time. And then I give money to different nonprofits I support as a recurring donor. So it’s just kind of set it and forget it, or a big lump sum, whatever it may be. Those are the three ways.

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

Dave Holman: They should give me a call on my personal cell phone at 207-517-5700, or they can hit up my website which is www.holmanhomes.com.

Joe Fairless:  Dave, thanks so much for being on the show talking about your experience in commercial real estate and getting into the details of some transactions. I enjoyed that and hope you have a Best Ever day. We’ll talk to you again soon.

Dave Holman: Thanks a lot, Joe. Have a great day.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
JF2418 - Using Diverse Background and Personal Superpowers

JF2418: Using Diverse Background And Personal Superpowers In Real Estate With Hemal Badiani

Hemal spent two decades traveling between three continents as he provided management consulting services to several fortune 100 companies. Several years ago he decided to hang up his traveling boots and join the financial world, which led him to real estate. He was both a passive and active investor, and now his portfolio consists of close to 600 apartments. His focus was multifamily syndication, and now he’s expanding to other classes as well. Thanks to his diverse background in business and management, Hemal was able to scale his company into a billion dollar business very quickly.

Hemal Badiani Real Estate Background:

  • Sr. Vice President in the Financial Space
  • 8 Years of real estate investing experience 
  • Portfolio consist of actively sponsoring or managing close to 600 apartments
  • Based in Charlotte, NC 
  • Say hi to him at: www.exponential-equity.com 
  • Best Ever Book: Indestructible 

 

Click here to know more about our sponsors

RealEstateAccounting.co

thinkmultifamily.com/coaching 

Best Ever Tweet:

“A vision for a million-dollar company is different from a vision for a billion-dollar company ” – Hemal Badiani.


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 Hemal Badiani. Hemal, how are you doing today?

Hemal Badiani: I’m doing phenomenal and I’m super excited to be here. Thank you, Theo, for hosting me.

Theo Hicks: No problem. Thank you for joining us. Let’s go over Hemal’s background. He is the senior vice president in the financial space and has eight years of real estate investing experience. His portfolio consists of close to 600 apartments that he is actively sponsoring or managing. He is based in Charlotte, North Carolina, and his website is exponential-equity.com. Hemal, do you mind telling us some more about your background and what you’re focused on today?

Hemal Badiani: Yeah, absolutely. I grew up back in India and came here to the United States to study a couple of decades back. That organically led me, after studies, to join a management consulting firm. For close to two decades, I was on the plane across three continents, helping a lot of CEOs build their firms, change direction, bring scale, bring efficiency, bring growth to Fortune 100 firms. Everybody that you could think of, from Disney theme parks to the Vatican, I worked with them.

So a lot of smart people, a lot of competencies and learning from that experience, I decided to hang up my traveling boots and join the financial world local to Charlotte. Charlotte is a great hub for the financial and banking industry. That led me to the real estate side of things, first passively for the first six years or so, and then actively, first in single-family, and  then in 2020 I went into the commercial space.

What I’m focused on now, since COVID started, is really building and scaling my business, bringing all those competencies and experiences from a wonderful set of leaders that I’ve learned, and to build my own billion-dollar business in the commercial real estate realm, starting with multifamily syndications – it’s what we focused on in 2020. Now we’ll be expanding into other asset classes, along with construction and property management on the horizon as well.

Theo Hicks: Thank you so much for sharing that. So lots of very interesting, diverse backgrounds, and lots to dive into there. Let’s first focus on – you mentioned that you were a passive investor for six years. What were you passively investing in?

Hemal Badiani: It was mainly my own portfolio of single-family townhomes, a bunch of land that I bought and hold… It was a classic busy professional scenario there. I was traveling every week and didn’t have anything to think about from an underwriting or active standpoint, so any new stuff, timing the right market cycle, and the right city in the Carolinas. So we just bought stuff as we stashed away cash and savings.

Theo Hicks: So you did that for six years before you transitioned into actively buying single-family homes. Why did you decide to transition to active? Why not just stay passive forever?

Hemal Badiani: Yeah, the whole transition from jumping on the plane and working 80 to 100 hour weeks to where I am with my job right now – it created a lot of space in terms of my week. That allowed me to introspect on what I want to be, how do I build my life, and my lifestyle on my terms. Real estate seemed like a natural choice.

As I was looking at local players in Charlotte and who to partner with and learn from, I found a lot of folks who were doing some creative flipping, creative financing, lending in the real estate single-family space. That’s how I got on that train. The amazing thing was, most of them are solo operators, but my competency and superpower being that I can scale businesses pretty quickly and help people scale businesses pretty quickly.

So in 2019 when I started my real estate single-family business, by the end of 2019 I had 10 employees, five in the United States and five in the Philippines, and we were doing a lot of high-volume transactional stuff, along with some buy and hold and creative finance stuff. That was a wonderful, wonderful confidence in the power of real estate.

Break: [00:05:14][00:07:16]

Theo Hicks: I want to go back to what you just mentioned about scaling, as you said that’s your superpower, but something else I thought of, too… You said you were working a lot of hours, then you transitioned into the job you’re doing now, so you had time to think about what you wanted to do and went into the single-family space… For people who are listening out there, do you recommend that people start by passively investing first? Or would you much rather, looking back in hindsight, wish you had gone straight to active investing? Like, is there any benefit to passive investing first, or is it something that you kind of just did because of the situation you were in?

Hemal Badiani: I would say do what makes you happy, and what your true calling is, and what you’re passionate about. It may not be real estate. For the season that I was in, with my kids very young, I was on a corporate ladder, institutionalized to be the next CEO – that was the vision I had. For that, nothing else mattered, except earning predictable returns that real estate provided. So the passive investments are my vehicle.

But when I wanted to change, and when I was in the next season of my life, where I really consciously thought off and got the time to think about what kind of life and lifestyle I want to live, real Estate became one of those things that just was my calling. I knew I could build a business around it, and I could scale, and bring my competency, culture, values, ethics to the table as I’m building this business. That’s why I went into the active space. It wasn’t that one earned more money than the other, or one had more work than the other. It was just where I was in my point of life, and that’s what determined where I wanted to be in terms of my investments.

Theo Hicks: Let’s move to 2019 now. You said that you started the active single family investing in 2019. It started off as just you, and then at the end of the year, you had 10 employees. So as you mentioned, your superpower is scaling, so I’ll kind of leave it up to you how you want to answer this question, but what are some of the top tips or top tactics or things that people need to think about when it comes to scaling their real estate business? Maybe you can answer this question from the perspective of someone who’s maybe just a one-man show right now, but they want to grow their business to a billion-dollar business. What are some tips you have for them?

Hemal Badiani: That’s a fantastic question. I can say these things, from my experience, I worked across the board, it doesn’t matter what business. In 2019 I had my single-family business, which I exited. In 2020 I built my commercial business and we have now five employees and partners, and we going to go to 10 or 12 this year. The same principles work, whatever business you’re in.

But the first thing I believe is to have a clarity of vision. What do you want to be? Most people, when they think about real estate, they think about financial freedom, two or three transactions, or a handful of transactions could get them there. And “Do you really want to build something as a business?” is a question you need to answer. What kind of business? How big? Because that would determine, not only where you make daily decisions, but people who aspire to join your team and join you because of that commitment to that vision, they understand and are aligned to what sort of culture and what sort of end goal you’re building towards… Because the vision for a million-dollar company is different from our vision for a billion-dollar company. The brand, the way you approach things systematically, the systems and processes you institute – all of that is different. So that’s one, and people need to aspire to that.

The second is you really have to carve out what things you do and know your strengths. Figure out how to build complementary competencies around you through the teams that you build, that allow you to focus on what you’re good at, and then start chipping away at what you’re not good at.

For me, I am good at building the business, being the brand, building forward-looking thinking; that allows me to continue to think about “Okay, what’s the next step? Do we need a marketing person? Do we need an accounting person? Do we need HR? Do we need payroll as we build teams? If we go into a new competency, how do we first partner up with someone, learn the ropes, and then go into it?” Those kinds of things – I wouldn’t be allowed to do that, or I wouldn’t have the bandwidth to do that if I’m in the day-to-day activities. I am also underwriting all the things, I’m also looking at lending quotes and all the nuances that go along to make any transaction in the real estate world happen, happen successfully, and execute on a business plan.

So slowly and slowly, as I looked at each role, I said, “Do I have an operational competency and partnership?” That came in first. And then we built an acquisitions team. Now we’re building an investor relations organization that allows us to speak with private equity. Then slowly we’ll go into the marketing etc. So knowing your strengths, really answering very honestly and authentically to yourself what you’re good at, and then complementing that with the right partners is the second piece.

The third piece is finding the people that have two elements. Everything else can be taught. Two elements, to me, are very important – ethics and drive. You cannot teach these. People who can make good tough decisions on behalf of the brand that you’re trying to create, that could sustain itself 20 years from now, 40 years from now, outlast you… And people who are driven; so you’re not just putting incentives and processes, but people who can work and go that extra mile, knowing that you’ve got their back, and then ultimately they’ve got the companies back. Those are things that come a little bit from experiences. Sometimes you can hire good companies that allow you to find employees or partners that allow you to do that… But those three things in my mind – having the right vision, knowing your strengths, complementing with team members, and then finding people who have ethics and drive, are super-important.

Theo Hicks: So right now you’re still working a full-time job in addition to your real estate investing?

Hemal Badiani: That is correct. I believe my first passive commercial investment was April of 2020, just when COVID hit. My intention, I think by the time this podcast will go live, my intention is to quit my job in exactly a year from there and go full time into commercial real estate investing. But for now, I’m a senior vice president for the bank.

Theo Hicks: So how are you able to work your full-time W2 job –or if it’s not a W2 job, just work a full-time job for someone else– while at the same time building up your own syndication business? To someone listening to this who has a full-time job and wants to get into syndication, maybe they’re saying “I need to quit my job today in order to focus on this full-time.” Well, you didn’t do that; you’re obviously doing it part-time or in your spare time, so what does that look like? What tips have you found that allowed you to be successful and build a portfolio of around 600 units while still working full time?

Hemal Badiani: It’s deep work and time management. Every Sunday evening, I sit down and plan two weeks out. Not just next day or next week. Every conversation with an investor that I have, it’s planned at least two weeks out. That’s how they get the calendar invites. I get a little bit of control of any fire drills from a job or business perspective that is going on during the week. Just time management hacks that over a period of time that I’ve been able to do, that allowed me to focus and compartmentalize job meetings versus business conversations that I might be having.

COVID has accelerated that, and I’m hoping everyone takes advantage of that, especially people who work from home. They have a lot of flexibility, they don’t have to travel anymore, most of the meetings are audio-only, some are zoom invites… But you can have certain conversations in the middle of the day while you’re eating your sandwich and can talk to investors. So you really have to work hard and plan for it.

The second thing was deep work. It’s easy to get distracted, overwhelmed with webinars, with conversations on the internet, phone, etc. For me, when I carve out my hour to do anything with regards to the business, the phone, all the channels, everything goes off. It’s one hour of solid productive work, and you’d be surprised if you do that for an hour straight, how many emails, how many responses, how much work you can actually achieve, which seems like a very short period of time, as opposed to doing multitasking… I find multitasking is just sub-optimal for your brain and the work that you’re trying to do.

Theo Hicks: All right, what is your best real estate investing advice ever?

Hemal Badiani: Have a bias for action. As I said, don’t get overwhelmed with a lot of webinars and information. There are 25 different ways of making money in the real estate space. There are different ways of building your business. You possess a different competency and you come from a different season of your life. You’ve got to just start where you are and not worry about all the information that’s going on. Find a good mentor or two, jump on it wherever it leads you. Once you get good at one thing, you can expand and that’s how you grow.

Theo Hicks: Expand that mentorship advice a little bit. You mentioned that when you first got started, you went out and wanted to find the people who are already doing it. What advice do you have? Any hacks you found at finding the right mentor?

Hemal Badiani: The hacks are two, again. Someone who has alignment with your vision and values. If you’re trying to build a billion-dollar business, finding a person who’s not doing that, at least halfway through there, is a no-go. You cannot take advice from someone who’s doing half a million-dollar business, because you’re not going to get as fast as where you want to be. The second thing is to find the doers. It’s hard to decipher, again, from webinars and calls, who is actually doing the work. So you have to dig deep, talk to people, referrals, etc. Understand who could be a good person, who’s actually getting that elbow grease, rolling up their sleeves and actually doing the work, or managing a team that does the work which you want to do. That’s how you really, really learn from them.

Then the third thing is beyond paid mentorship, etc. you’ve got to find that way of providing value to these mentors that is just priceless, that nobody else could provide. That way you forge a good relationship, where it’s not just transactional, and you’re learning from them, and you’re done.

Theo Hicks: Alright, Hemal, are you ready for the Best Ever lightning round?

Hemal Badiani: Let’s get to it.

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

Break: [00:18:07][00:18:43]

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

Hemal Badiani: This one is called Indistractable. Again, it focuses on that deep work and how do you not get distracted with all the social media and some of the things that are being manufactured to get that focus away from your work and into the social media realm.

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

Hemal Badiani: I would talk to people about mindset, all day long. When I was in a single-family, I didn’t have the mindset for commercial. I found a coach that helped me with that. I realized my true potential, thinking about building a billion-dollar business, and I think everyone has the potential to be their best in this form of life.

Theo Hicks: Tell us about a time that you lost money on a deal, how much you lost, and what lessons you learned?

Hemal Badiani: It was a direct to seller deal that we found through a lot of labor pain in a pretty hot market of Texas, a tier-one city of Texas. So we were excited, obviously, that none of the big players could have found it, and we found something.

We quickly got under contract, the earnest money deposit, we had to pay a fraction of that, the whole earnest money deposit upfront; it was non-refundable. We lost about $15,000, because we had to walk away from the property once we did our due diligence. That’s a lesson learned. Most sellers will hide away something or the other, and it’s your responsibility and a fiduciary responsibility to your investors to be very thorough in your due diligence process and be prepared to walk away, even if you lose money.

Theo Hicks: On the flip side, tell us about the Best Ever deal you’ve done.

Hemal Badiani: Oh man, we found this unicorn, the first ever deal… In the last 100 days, we’ve closed three acquisitions, which has been fantastic. The first one of them was a 208-unit in Tulsa, Oklahoma. That one was 60% occupied, again, direct to seller, it was just mismanaged, we had found it at a very steeply discounted price, got the owner to finance some of the note, and has outperformed way, way, way beyond our expectation, to the point where we’ll be able to cash all investors out in 18 months, which is just fantastic. Getting your money back plus 20 plus percent IRR in 18 months. We’re outperforming our projections.

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

Hemal Badiani: Through all things real estate. We are currently running a charity that allows distressed property owners who are tax delinquent or are facing foreclosures – we are helping them out in terms of saving their homes; and eventually, we would be buying — the vision is exponential equity. Our firm would be buying large tracts of land that allows us to plant trees and keep them from getting deforested, and just pay back to the environment and our children and grandchildren.

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

Hemal Badiani: I’m pretty active on Facebook and LinkedIn, Hamel Bardiani, and also exponential-equity.com. My email is hemal@exponential-equity.com. I’m pretty active there as well. I look forward to speaking and connecting with a lot of your listeners.

Theo Hicks: Alright, Hemal, thank you so much for joining us today and providing us with your Best Ever advice. I really appreciate the structure of your responses. I asked a question, and you are like “Oh, here are two things, or here are three things.” You got it in like that list form. It is going to make it very easy for people listening to comprehend and then hopefully take action on what you talked about.

We talked about your transition from passive to active, and I like what you said about it kind of comes down to what you’re happy with, what makes you happy, what you’re passionate about, and what chapter of your life you’re in. You said how you really wanted to become the next CEO, so passive investing made sense. Whereas when you wanted to change your lifestyle, then real estate itself became your calling, and you became an active investor.

You talked about the three tips for scaling, which was the vision, knowing what you’re good at, finding people to do what you’re not good at for you, and then making sure you’re finding people with the right ethics and drive, since those are not teachable. We talked about some of your time management and deep work tips for just really in general, but specifically around you having a full-time job while building your portfolio.

And then your best ever advice about taking action, where you’re at right now, and not getting overwhelmed with having to know every single little in and out of everything. Then about finding a good mentor, you gave three tips on that. Someone who would align with your vision, someone who is a doer, and then figuring out how to add value to that person. Thank you so much for joining us. 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.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
F2415: Good Partnerships & Dedication with Abiel Ballesteros

JF2415: Good Partnerships & Dedication with Abiel Ballesteros

Abiel is the Vice President and Founder of SAR Apartment Capital, a Miami-based real estate investment and asset management firm specializing in multifamily apartment syndication.   He is also the Principal Broker for United Dream Real Estate, a full-service real estate brokerage in Florida with over $150 million in sales. He focuses on sourcing, acquiring, and managing multi-family assets with low risk and high ROI potential for our investors. The key to his excellence is his competence and dedication in helping his investors gain financial freedom and build sustainable wealth. In this episode, Abiel takes us through the importance of strong relationships and partnerships and why it became the foundation of their success.

Abiel Ballesteros Real Estate Background:

  • Full-time real estate investor
  • 16 years of real estate investing experience
  • Portfolio consist of 845 units 
  • Based in Miami, FL
  • Say hi to him at: www.abielballesteros.com

Thanks to our sponsors

Best Ever Tweet:

“Having partnerships allows you to see the things that you don’t see.” – Abiel Ballesteros


TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here today with our guest, Abiel Ballesteros. Abiel is joining us from Miami, Florida. He’s a full-time real estate investor with 16 years of experience and his portfolio consists of 845 units. Before we get started, Abiel, can you tell us a little bit more about your background and what you’re focused on now?

Abiel Ballesteros: Thank you for having me on the show. I got into real estate in 2005. I was drawn to the business by that boom that was going on in real estate back in the day [unintelligible [00:01:26].28] doing residential appraisals sold me on it. As a young kid, my dad did a lot of rehabs, maintenance work, and things like that, so I was always around the construction business at a very early age… So it drew me to the business. I would have to say at that [unintelligible [01:45] about 25 years old, I was kind of lost in my life. I chose the path of workforce coming out of high school instead of going to college, and did a lot of numerous types of jobs. I think the only one that kept records of how many jobs I had was my mother.

I started the workforce very early. At the age of 16 I was already out there working. So school was not an option for me; not because I didn’t grow up in a family that had education, it’s just I didn’t connect well in school. I struggled in school with education, and the way the school was didn’t fit me at that stage in my life. I won’t preach that to my kid now, to my son now; I would love for him to go to school. But back then just working for me and making money was the option that I want it to go through.

Going through a lot of jobs, I fell into real estate and it just hit me, I just loved the industry immediately. But it evolved from different things; it evolved from a residential appraisal to start flipping properties with my father, with his background in construction. That led me to appraisails, to doing a lot of flips between 2005 and 2008. Then the crash hit, I was very fortunate that I had some strong and older mentors that were flagging me down, “Hey, you’ve got to slow down. Something’s going to happen. Something’s going to happen.” I was able to exit a lot of my flips in time in 2008, so I didn’t get to experience that hit that a lot of them took, but I did lose all my business, in the sense that I had no cash flow, nothing going on that had an income. The appraisals dropped, they changed the regulations, it was hard to do business.

Gradually I dwelled off into other businesses like restaurants and marketing. That led me back into going full-time into real estate and flipping houses, beacuse in 2010 the properties were just amazing and the prices were cheap. I saw the amount of all these hedge funds gobbling up properties in South Florida.

That’s how I lived from then on. Slowly I started watching how syndicators and multifamily guys were buying the properties. I got myself really educated through shows like this, through podcasts, through YouTube videos, trying to learn how do investors buy these big large apartments? It always intrigued me. Slowly but surely I got into duplexes and fourplexes; that was extremely hard to scale. I was living a life of a roller coaster, flipping houses. One day I was balling, the next day I was fully invested in four or five houses, and that was extremely stressful. That’s when I started saying I need to commit to a certain amount of cash flow to cove — I started first covering my expenses.

I think that a lot of multifamily investors go down that path. I just want to cover my expenses and do my thing on the side with real estate. Then I just got hooked with the multi-families, man. Now I am a full-time syndicator, buying large apartments, and actually not touching any single-family flips at the moment. Actually, I’m so focused that if you send me a house I wouldn’t even open the email, because I just don’t want to go down that rabbit hole right now. I just want to get big apartments.

Ash Patel: Tell me about your first syndication, please.

Abiel Ballesteros: My first syndication was in Cape Coral, Florida. It was a 16-unit syndication with a friend of mine, a partner, which actually we own a lot more units now. We bought that deal together; he put in the capital, I found the deal, I did the operational, I increased the rents, and once we stabilized it, we refinanced the property with Fannie Mae. We had the vision of a long-term hold and we got an offer. It was an off-market offer, it was a local broker that sent us an offer, and we were like, “How much are they going to give us for this?” We just couldn’t believe it. We told them, “Well, have a loan” and we explained to them the loan is assignable. What’s crazy was I wasn’t that educated. I knew I needed to get an assignable mortgage just in case, but I didn’t know how desirable that was. It was actually very desirable to this buyer that we already had the mortgage locked in.

We ended up exiting within four months after we got the mortgage. My mentality now is a little different. Now, I would probably not have accept that offer, because now we have a longer-term hold. But that was my first syndication multifamily deal, it was the 16-unit one.

Ash Patel: Did you have syndicators on that or just your one capital partner?

Abiel Ballesteros: It was two capital partners. So it was actually a joint venture.

Ash Patel: Okay. You found the deal, they fully funded the entire deal, rehab, everything?

Abiel Ballesteros: Correct. 100%.

Ash Patel: Abiel, do you remember the numbers on that property?

Abiel Ballesteros: They were townhouses. There were 16 townhouses; we bought them at $70,000 a door, we spent an average of between 10 to $12,000 a unit, I know that we hit a target rent of between $1,250 and $1,300 a unit, and we exited at $118,000 a unit. It was a nice little flip.

Ash Patel: How many years did you hold that?

Abiel Ballesteros: It wasn’t even a year.

Ash Patel: So now you’re riding this market wave up.

Abiel Ballesteros: I made more money on that small multifamily flip than I was making in residentials, because in residential we use sometimes bridge loans to buy these properties. There’s paying a mortgage out of my pocket to pay the bridge. This multifamily had income flowing in since day one, so it just offset that overhead of paying a bridge loan or private loan on a single-family. It just made so much sense, it was just like “Oh my god, this is sweet, man.”

Break: [00:06:51][00:07:57]

Ash Patel: Were you a 1/3 partner in this deal?

Abiel Ballesteros: That deal was a sweet deal. It’s hard to close those types of deals, so it was 50/50. It was a 50/50 and it’s hard to close 50/50s now. Now that you’re scaling it, it’s not like that anymore.

Ash Patel: What was your next deal?

Abiel Ballesteros: The next deal was another small apartment with 14 units in Fort Myers. That one was very similar, not with the same investor, but with a different investor. Very similar. That deal actually went a little longer; than one went almost two years. But same exact model, same structure. From that one, I jumped into a 32-unit in Crystal River, Florida. Then from there, I scaled it to 100 units in Miami, and now we are only looking at deals that are above 80 units. They just make more sense for our business model.

Ash Patel: Abiel, your first two capital partners hit a home run on the first deal. Why didn’t they invest with you on the second and subsequent deals?

Abiel Ballesteros: They did; the first one, he did the Cape Coral one, bought with me on the 100 units that we bought. The one that did the 14 units, to this day he’s still also my equity partner on deals.

Ash Patel: With cap rates compressing, what is your target cash on cash or IRR number that you want to hit on each of these properties?

Abiel Ballesteros: We need to be above 10% cash on cash. Our IRR has to be at least 18% and above. Traditionally, in most of the deals that we’re looking at, IRRs are above 20%. Realistic, conservative numbers; we want to be realistic. Our business model is distressed properties. We don’t buy stabilized products. Most of our deals have 20% to 30% vacancy, they’re just in poor shape. That’s our criteria. They usually come off-market. We buy properties that are completely empty, [unintelligible [00:09:37].23] deal not as completely empty. That’s what we like to get – we like to get into the heavy lifts.

Ash Patel: There’s your strong background work ethic wanting to take these distressed properties and completely turned them around. How do you find these deals?

Abiel Ballesteros: Strategically, what I did was, when I created — I always say “I”… When we created SAR Apartment Capital – I have my two partners, Rene Sanchez and Sam Jazayri… I saw that we shared the same values, principles, and love for distressed properties. What I mean is that I will show investors a vacant multifamily building and they will just get terrified. They’re like, “Oh, this is too risky.” I will show it to these two guys and they’ll get so excited. I’m like, “Yes, this is exciting. We’ve just got to get it at the right price.” They weren’t scared of the heavy lifting. In fact, they wanted those types of deals.

For them, it was actually less risky, because that’s the way I saw it. If we get it so cheap, it’s actually less risky, because we know what we’re walking into; we have a plain canvas to underwrite a deal. We’ve got access to all the units, we’re seeing the condition, and we know it’s going to cost this much… So for us, it was easier than looking at stabilized products where you have so many hidden things; properties are fully furnished, tenants are living in it, you don’t get to see too much of all the units, sometimes you don’t get access to all the units… So this is just, like I said, an open canvas just for you, to see everything that it has.

Ash Patel: So if you think back to when you were doing all of this yourself, and then you took on the initial partners, what advice would you give somebody that has always done their own deals and now they’re looking to take on capital partners or do a raise? What advice would you give them?

Abiel Ballesteros: Yeah, the best thing I ever did was joint ventures with my partners. It’s a dynamic that we needed. One of my partners, he’s been in the business for 40 years, very successful in real estate. Renee has also been in business for a very long time in multi-families. So I don’t have to make a decision on my own anymore. That stress of having partnerships allows you to see the things that you don’t see. Sometimes we’re so stuck in our vision, and we’re so gung-ho on what we want and what we want to see. Sometimes we’re blinded because we’re so eager to do a deal. Having other partners underwrite a deal with you, sit down with you, “Is this for us?”  When you start seeing how they see the deal and their concerns, you’re like “Whoa, whoa, I did not see that coming.” Especially when you have a partner with that much experience.

So that to me was the best decision I made. It’s like going back to a board meeting and bring to your board a deal that you feel confident about, and then they just start chopping it down. It’s a necessity. This is not a one-man game; you need a team around you, you need a strong support team. What we did also to bring in this team is that we join-ventured with [unintelligible [00:12:17].00] with a contractor that’s highly experienced. He comes in before we get out of our DD, our inspection period, he gives us his advice on what maybe we might be missing. That is just three great minds giving you advice on a deal. It just makes it so much better, man. And for the investors.

Ash Patel: That is great advice. Is your contractor a part of this deal as well?

Abiel Ballesteros: He does come in in some of the deals with us.

Ash Patel: What are the challenges with that?

Abiel Ballesteros: Well, it’s not really a challenge. We have contractors actually putting some capital up into the deal. We actually embrace that.

Ash Patel: Are there any conflicts of interest when that happens?

Abiel Ballesteros: That is always the concern, is a conflict of interest. The way we go around the conflict of interest is we have our underwriting, we’re very specific of what a cost to a knob installed in a unit is. We have our own construction detailed list of what each item should cost, and what each item should cost in labor and material. So we would walk and underwrite the units just like we underwrite an Excel sheet. We would do the same thing on a per unit basis. So we kind of have an exact specific cost of what we know the units are going to cost, and then we give it to them – “Can you do it for this amount?” Once we show them that amount, he says, “Yeah, we’re not seeing this, and that.” But we already know ourselves. We shouldn’t be too off on what we think it’s going to cost.

Ash Patel: Got it. So you’ve mentioned deals with joint venture partners. Do you also do deals with syndicators that are passive investors?

Abiel Ballesteros: That is correct. We just closed on a deal that we did with a group in Ohio.

Ash Patel: And how did you go about finding your investors in the passive deals?

Abiel Ballesteros: The passive deals were word of mouth, relationships, talking to a lot of people in my circle in Miami. Once you do a couple of deals in multifamily — sometimes you’ve just got to get in with the small deals first to get some experience under your belt. I definitely get that advice. Once you’re able to do a couple of small multi-families, some people are fortunate and they could just go into bigger deals. I started the small route;  I started with duplex, and triplex, fourplex, to the 16, to the 14. That’s the way I built my relationship and my experience.

Once you have a few of those you become more attractive to investors. There’s a lot of investors that are at the point of their lives that they’re educated in multifamily, they know the business world, they’ve had success in that business, but they don’t want to be the operator. They want to find a partnership with someone that is a strong operator, that is knowledgeable, and I found that niche. I saw that there are investors that know the business very well, probably better than I do, but they just don’t want to be the boots on the ground anymore. But they do want to invest with an operator that will.

Ash Patel: Do you also have novice investors that you have to educate on the passive side?

Abiel Ballesteros: I’ve had those. I do. There are friends and family that had nothing to do with real estate, that put in some capital in our deals. We do have those.

Ash Patel: What challenges are there with trying to educate those folks and get them to see the long-term picture of what you’re doing?

Abiel Ballesteros: I think it’s a personality thing. Some of them are very hands-on and want to know every time you send them a monthly report. Some of them are just okay with just hearing about the property. I know that some of them like to drive around the property, they like to see it, they like to walk it. Some of them don’t ever go to the property. It’s definitely a personality thing.

The only challenge that I find is not with them, it’s more of in-house, making sure that we provide our monthly reporting that it is as detailed as possible. If you do that, and you’re consistent with your monthly reporting to your investors, and you make sure it’s very detailed, there’s no reason for them to give you a call. Unless they have a concern about something that they saw in the report. But if you communicate well on a monthly basis with the investors on that monthly reporting, you should be fine.

Ash Patel: Good. What’s the biggest lesson you’ve learned in doing all of these deals? What’s the hardest lesson you’ve learned?

Abiel Ballesteros: There’s been so many…

Ash Patel: Give me a real tough one that hit you.

Abiel Ballesteros: Attention to detail. My two lessons are attention to detail on your craft. You can’t assume anything; do not assume the contracts that you’re signing are going to be okay, do not assume the agreements that you’re doing are going to be okay, do not assume that everyone is an expert in construction. Those are my experiences, my expensive lessons of life have been those – assuming that someone told me something, I saw their resume, I saw their background, that they knew what they were doing in construction.

Do not assume that someone read this agreement and said, “Oh, everything’s fine.” No. Give me bullet points. What are my warnings on his contract? What should I be aware of? That goes with attorneys, do not assume that your attorney — some attorneys just browse through it. They need to be very detailed in what they read in these contracts.

So the attention to detail is something that I work on every day in my life, especially when you’re trying to grow a business. I stopped assuming that everyone knew what they were doing.

Ash Patel: That’s great advice, and having your partners involved probably helps that attention to detail as well.

Abiel Ballesteros: Oh, yeah.

Ash Patel: Good. What’s your best real estate investing advice ever?

Abiel Ballesteros: Clarity. You need to have clarity of what you want, all the way down to the specific product you want to buy, to the specific city, suburbs, or neighborhood that you want to be in. You’ve got to have that clarity of what exactly you want. The day you discover that, it’s something that would take away so much stress from you. If you want to be the investor that’s doing it all, you’re not going to draw the big bucks. You need to become an expert at one thing, understand it, learn it, be obsessed with it. Understand that city, understand the submarkets, understand the rents in that city. If anyone says “I want to call Ash”, I know that Ash is going to tell me specifically the most confident market he’s in, because you have that clarity. That is the mistake that I see investors and friends of mines make all the time, and it’s a mistake I made for many years. Once you obsess about one thing, you become so good at it that when you talk to someone about it, they’re going to know you know your stuff.

Ash Patel: Are there markets that you focus on, in that if there’s a deal that comes up in a market you’re not familiar with —

Abiel Ballesteros: It happens all the time. It draws you in because you see the numbers are great, but then it goes — you’ve got to stay disciplined, “No, that’s not my sub-market. This is my sub-market. I’m sorry. The numbers look great, but you got to make sure you stick to the sub-market you’re an expert at.” As of right now, we are an expert in Atlanta, we’re an expert in Columbus, Ohio, we’re an expert in South Florida, we’re an expert in Jacksonville, and an expert in Orlando. Not an expert in North Carolina, Texas, all those hot markets; right now we’re not there yet. Right now, these are my markets where I’m confident.

Ash Patel: Let’s take Columbus, Ohio. What’s special about that? Why are you an expert and what makes it a good place to invest?

Abiel Ballesteros: We’ve done a lot of underwriting. We’ve purchased 194 units in Columbus, Ohio, the deal that was brought to our table. We wanted to be in Ohio, Cincinnati, and Columbus. We saw the job growth and an economy that was doing well, so we wanted to spread our investments and that was one of the ones that we identified. Then a deal fell in front of us that we had to buy. It ended up being a home run, and that deal actually was a syndication deal with other syndicators that we had great a relationship with.

Ash Patel: Explain that. You went in on a deal with other syndicators. Can you tell me more about that deal and how that worked?

Abiel Ballesteros: Yeah. We raised 50% with another group, a gentleman called [unintelligible [00:19:44].05] They raised money with a group of friends and family. They’ve done a few of these and they’re very educated in that business. My group, SAR Apartment Capital, came in with the other 50% of the equity. We bought it with a bridge loan. It was a very distressed asset; it had over about 25% to 30% vacancy, really low rents. We bought it at $41,000 a door, which ended up being a home run; average rents were between 800 to 900. It is a heavy lift; we’re actually still in the middle of the rehab.

Ash Patel: So the other syndicator found the deal.

Abiel Ballesteros: We found the deal.

Ash Patel: Oh, you found the deal. Why did you partner with the other syndicator?

Abiel Ballesteros: We had a mutual friend, David. David does all our financing on multi families, and David did a phone call with me and Gwaith on a Zoom call – this was like at the beginning of COVID – and we hit it off, Immediately. I liked what they were offering, their expertise, their knowledge, and the conversation just went well. Then we had a couple of other Zoom calls and we underwrote it a bunch of deals together. I saw the way they underwrite their deals and I just knew there were pros at what they did. Then this deal came up, I proposed the deal to them, they said “Yeah, let’s do it.” I went to my partners, “I want to do more business with this group. I think we could grow with them.” And it just led to that.

Ash Patel: And you guys are equal partners on the deal in terms of managing the asset?

Abiel Ballesteros: No, they handle the asset management side. I handle the construction side of the property. So we spread the responsibilities.

Ash Patel: Would you do another one of those?

Abiel Ballesteros: Yeah, 100%.

Ash Patel: Good. Abiel, are you ready for the lightning round?

Abiel Ballesteros: Let’s do it.

Ash Patel: Alright. First, a quick word from our sponsors.

Break: [00:21:28][00:22:05]

Ash Patel: Abiel, what’s the Best Ever book you’ve recently read?

Abiel Ballesteros: Oh, the 50 Cent book.

Ash Patel: What is that? Tell me more.

Abiel Ballesteros: Oh, man, the 50 Cent book just came out. I don’t know how to explain it, man. It was such a great read. He basically explains everything about how he did all his videos, coming from vitamin water all the way to the show with Power. He just gives a different perspective of what you assume. He’s just a rapper, he’s not a very successful businessman. That’s the last book I just read. It was great. I recommend it for anyone that’s interested in business but also into the hip-hop culture.

Ash Patel: Great advice. Abiel, what’s the Best Ever way you like to give back?

Abiel Ballesteros: I like to give back work. I like that we have, right now, 120 people throughout our projects. I like to see that we’re a growing company and we are giving out a lot of employment. We were employing a lot of people during COVID. That brings me a sense of pride that there’s a lot of people that are eating off this multifamily business. It’s not just me and my partners, but this employs a lot of people. These are large apartments; one apartment could bring a lot of money into an economy. So it’s a beautiful thing, man.

Ash Patel: That is a great accomplishment and a great responsibility as well. Abiel, how can the Best Ever listeners reach out to you?

Abiel Ballesteros: They can reach me at my email, abiel@abielballesteros.com, they can shoot me an email there. They can go to my website abielballesteros.com and hit me up if they have any questions or want to do a quick underwriting or anything like that. I’m always open to talk to someone about the business and any ideas that they have. I love this stuff, man.

Ash Patel: That’s great that you’re willing to help. Abiel, thank you again for all of your great advice today. You had an untraditional upbringing; you didn’t go the traditional college route. You had numerous jobs, found the real estate bug, and you had a great trajectory on the way up. The typical single-family, multifamily, graduated to syndications and partnerships… So, thank you again for sharing your story with the Best Ever listeners. I really enjoyed talking to you today. Thank you.

Abiel Ballesteros: Thank you, man. I appreciate the time.

Ash Patel: Have a Best Ever day.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
Facebooktwitterpinterestlinkedin