JF1825: Building A Short Term Rental Business With Other People’s Properties #SkilSetSunday with Michael Sjogren

Michael is here today to tell us more about short term rentals. We’ll hear three different ways to make money from short term rentals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Here is how I will mitigate all these risks” – Michael Sjogren

 

Michael Sjogren Real Estate Background:

  • Michael and his wife Krysten are the founders of Occupied, LLC, a short-term rental investment and management company
  • They have a portfolio of six properties across three markets and are actively expanding across the northeast
  • Recently launched an education platform called Short Term Rental Secrets to help real estate investors launch their own STR business
  • Based in Boston, MA
  • Say hi to him at https://www.occupiednow.com/

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. First off, I hope  you’re having a best ever weekend. Because today is Sunday, I’ve got a special segment for you called Skillset Sunday. The purpose of this conversation is to help you acquire or hone a skill in real estate investing.

The skill we’re gonna be talking about today – and I suggest, if you’ve got some rentals, this is a skill that you at least become aware of, and then you can choose what to do with it – is the skill of making money on short-term rentals. Our guest today has been on the show before; he is an expert at short-term rentals, and he’s gonna talk about three ways to make money on short-term rentals. One of them is gonna be fairly obvious – you have a property and you make that a short-term rental, but we’ve got two other ways that are gonna be interesting, and we’re gonna dive deep into.

First off, how are you doing, Michael Sjogren?

Michael Sjogren: Hey, Joe. Thanks for having me back.

Joe Fairless: Yeah, my pleasure, and looking forward to our conversation. Best Ever listeners, you can just search Michael’s name and my name, and you can listen to his previous episode that he was on. We’re gonna dive right into short-term rentals. First, let me introduce you, Michael, just to refresh memories. Michael and his wife, Christen, are founders of Occupied LLC, which is a short-term rental investment and management company. They have a portfolio of seven properties across three markets, and are actively expanding across the North-East. They recently launched an education platform called Short-term Rental Secrets, to help real estate investors launch their short-term rental business. Based in Boston, Massachusetts.

Here’s what we’re gonna talk about – three ways to make money on short-term rentals. What are those three ways? And then we’ll get into the details of those three ways.

Michael Sjogren: Sure. The first is to purchase a property. The second is to lease a property from a landlord, you furnish it and then you put it on Airbnb, or HomeAway, or Rent It Out, however you want, and you make the difference between what your rent payment is to the landlord and how much revenue you can generate on a nightly basis. And then the third is to partner with a landlord, or landlords to partner with somebody that knows how to run a short-term rental business, and you set up a management fee, a percentage of the revenue collected. What I find is typically the landlord makes more with this model, obviously, than if you’re just gonna rent it out on 12-month leases to somebody.

Joe Fairless: Alright, let’s talk about number two and number three, because the first one is the “Buy  a property, make it short-term.” If you are interested in that, Best Ever listeners, then go listen to the first conversation I had with Michael, where he talks in detail about how to do that. You have a webinar for that… What’s the webinar?

Michael Sjogren: It’s STRSecrets.com.

Joe Fairless: Okay, STRSecrets.com. If you wanna do that, then go to STRSecrets.com, and/or listen to the interview. So let’s talk about number two and a number three – lease a property from a landlord. How do you approach a landlord and convince him/her that this is a good idea.

Michael Sjogren: I think the first thing to think about before you approach someone is what problem are you trying to solve for them? If you’re approaching a landlord that has a vacancy at their property, what is their biggest problem? Their biggest problem is vacancy. Every month that that property sits vacant, they’re not making money but they still have to pay their mortgage, and their expenses, and everything else. So the problem that you are solving is that you’re going to fill their vacancy, and that you’re going to take better care of their property than anybody else, and not be a pain in the butt and calling them every time a toilet gets clogged. Those are the three problems that you’re solving.

I know a lot of folks think “Oh, short-term rentals – that sounds like there’s more wear and tear on the property. How can that possibly be better for the property?” If you think of it, the last time you stayed at a hotel, or an Airbnb, or wherever you traveled to, how much time did you actually spend in the property? Probably from 8-9 o’clock at night until about 9-10 o’clock in the morning, and the majority of that time you’re sleeping. How many of you actually use the stove, or the dishwasher, or the washer and dryer, or any of the major appliances in there? You probably didn’t. And for those of us that are landlords, ask yourself this question – when was the last time one of your tenants hired a professional cleaning company to come in and sanitize and deep-clean that entire property? Probably never.

So with this model, the property stays in pristine condition, because it has to. It gets professionally deep-cleaned multiple times a week, and it has to look pristine every single day, otherwise we don’t make money. It has to look great every single day. So those are the problems that you’re solving. If you’re gonna sign a lease with a landlord, or if you’re approaching a landlord and saying “Listen, I’m happy to sign a 12, 18, 24-month lease and take care of your vacancy problem. And by the way, here’s why I’m going to take way better care of your property than anybody else… Oh, and by the way (and this is totally up to the listeners if you wanna go this route), I’ll actually take care of any maintenance requests that are $250 or less. I’m not even gonna call you, I’ll just handle it. If anything major happens, I’ll let you know, but otherwise I’ll take care of it myself. And if you ever wanna go inspect the property, just give me a heads up; I’ll make sure nobody’s in there, and you can go in there any time you want.”

Joe Fairless: That sounds like a very compelling case. [laughs]

Michael Sjogren: Right? So many folks get scared, like “Why would somebody rent me their property?” Well, what problem are you solving for them?

Joe Fairless: Yeah. So I’m gonna flip the script on this… If the listeners are listening and they’re like “Well, sold”, how does a listener or real estate investor find people who want to do this at their property?

Michael Sjogren: Email me. I’ve got a whole database of students that follow my exact system. Or just go on some of the platforms. Go on Bigger Pockets, go on the different groups, and find out who’s active in the space. Then it’s just like “Okay, well, show me your numbers. Show me your data.” If they don’t’ have experience, “Okay, well who are you learning from? Who are your mentors? What has been their success, and how involved are they gonna be?” So if you’re on the other side, like some of my students – they’re just getting started – they get so nervous, like “Yeah, but I don’t have a track record.” That’s fine, leverage my track record; say I’ll analyze the deals. You’re following a proven system from somebody who’s been in the business for two years and has trained a bunch of students doing this, and walk them through. Figure out what their fears are, and then walk them through how you’re gonna address those fears.

Joe Fairless: And one last follow-up question on that line of thinking… If a Best Ever listener has property, and they’re thinking “Well, I’d like this, too. I’d like my property in better condition than full-time residents, and I’d like to make more money than I could, and I’d like somebody to handle $250 or less in expenses, because then I would make more money (whether or not they offer that is another story).” How can a landlord quickly determine, “Hey, does my property qualify to be a short-term rental or not?”

Michael Sjogren: You can go back and listen to the interview that Joe and I did a little while ago, where I broke down the nine different traveler profiles. I’ll recap them real quick, and we’re not gonna go into detail. If you’re anywhere near a vacation town, that’s great. If you’re anywhere near an employment base… It doesn’t have to be huge; but are there decent-sized offices anywhere near you for corporate travelers that are coming in? Are you near any medical offices or specialty treatment centers, or major hospitals? Are you anywhere near a university, or a cosmetology school, or any type of trade school? Are you anywhere near an entertainment area, like a music hall or a convention center, or a professional sports stadium? Are you near a military base? There’s a few other ones, but those are applicable in any market; emergency situations, life events like birthdays, Christmas, wakes, funerals, all that stuff. And then relocation. People are always relocating, people are always moving. So if you’re anywhere near those… Basically, if you live anywhere near other people, it probably will work in your market.

Joe Fairless: Now let’s talk about someone who is facilitating this, so you in this case, or someone who’s in the industry… How much can you actually make on the spread when you are renting from a landlording and covering all this stuff, and then you’re getting short-term people coming in?

Michael Sjogren: As one example – we’ll take one property that I have, it’s a 2-bed 1-bath, about 40 minutes outside of Boston. It’s in a small city. That property previously was renting for $2,000/month. Now, during slow season in March, that property generated $4,400 in revenue. In July it’s gonna bring in close to $8,000 in revenue. In October probably closer to $9,000. So for somebody to go in and pay you $2,000 in rent, they’d be happy to do that.

Or on the flipside, like I did with this landlord, I said “I’ll give you the 2k, but quite frankly, you’re way better off staying in the deal. I’ll build it out, you invest the $10,000 to furnish it, but you’re gonna make way more money if I just manage it for you for 25% of the revenue. You’re still gonna make way more money than if I just rented it from you long-term.”

Joe Fairless: What did they decide?

Michael Sjogren: They decided to partner with me. This person’s been clearing at least 25% more than they would have made as a long-term rental.

Joe Fairless: Let’s talk about the third option. So there’s three ways to make money on short-term rentals. One, you buy the property and you do it yourself. Two, you lease the property from a landlord and you make the spread on what you lease it, and all the expenses, and what you actually rent it for. Three is you partner with a landlord and you get a management fee. Will you describe that model in detail?

Michael Sjogren: Sure. Real quick though, just to recap, when you look at the three different models, it kind of goes from based on how much capital you have. If you have capital to purchase property, great. Do the first model. If you’re got a little bit of capital, say 15k-20k – okay, great, you can do the leasing model. But if you have no capital and you’re just getting started, the co-hosting or the management model is the way to go. I’m not blowing smoke, you’re literally doing this with none of your own money. This is how I built my portfolio; other than the property I own, I have no money in these other deals.

Joe Fairless: Thank you for putting that in context.

Michael Sjogren: No problem. So the third model is similar to a property management company for a long-term rental, except now you’re doing it on a nightly basis. You’re basically running a distributed hotel. In this instance, in that example, he was getting $2,000/month for this two-bedroom property, unfurnished, as is. So I said “Okay, if you invest 10k, I’ll have my wife design it, because I don’t have an eye for that; she’s an interior designer, so she’ll design it. I’ll build it out, and then I will run the operations for you and take 25% of the revenue after cleanings.” Because I didn’t feel it was right to take my cut on top of the cleanings; that just didn’t feel right to me. So if this property brought in 4k/month in revenue, and say the cleanings were $500 for the month, then I’d take 25% of $3,500, and then he’ll clear the rest of it.

Joe Fairless: Okay.

Michael Sjogren: So for him, if he can get anywhere from $2,4000 and up per month, he’ll get his initial investment back within 15-18 months, and then he’s just increased his profitability by 25% forever.

Joe Fairless: When you’re starting out and you propose that fee structure, is there any negotiation that takes place with the landlord?

Michael Sjogren: I’ve had some landlords push back and say “I don’t know…”, and I said “Okay, fine. Here’s the deal. I have one landlord that actually will do the cleanings. He’s a retired gentleman, great guy. And I tell him he’s nuts to do this, but… He’ll actually do the cleanings, just to make an extra $70 or whatever it is per clean… And he’ll manage the supplies. So I don’t have to deal with coordinating supplies, he takes care of all that, so I charge him 15%.”

I’ve got another gentleman who handles a similar amount of the work, and I’ll do 15%. But if I’m doing everything, soup to nuts, I’m charging 25%. And quite frankly, I show them the numbers – and I’ll give the listeners another nugget, to give them some ammunition… You can go to a site called AirDNA.co, and that is a site that pulls all the data behind Airbnb and HomeAway, and you can plug in any address and it’ll spit out 5-10 comparable properties and what they did for revenue and occupancy last year, and what the site thinks this property will do for occupancy and revenue.

So I would just print that piece of paper out and I’d go to the landlord and say “Listen, you’re bringing in $2,000/month right now. This thing is telling me that you should bring in like $50,000/year as a short-term rental. I’ll manage it for you. What do you think?” And then obviously, we go through and talk about all the other controls that I have in place, around security, and locks, and all that fun stuff that we talked about on the last interview.”

Joe Fairless: That’s great. Anything else as it relates to these three ways to make money on short-term rentals that we haven’t talked about, that you think we should in this conversation?

Michael Sjogren: Now, I’ll just reiterate – just put yourself in their shoes. If they’ve never considered this, what are their biggest fears? Typically, it’s that their place is gonna get trashed, so how are you gonna mitigate that risk and how are you gonna explain that to them? Because it almost sounds too good to be true. At the beginning you’re like “Wow, okay…” But if you can explain it and just show them… I have all these credibility packs that I bring to these meetings, and I just show them “Okay, here’s what this property could do, here’s how I’m gonna mitigate all these risks”, step by step, with screenshots, and past experience, and reviews, and everything else… And I just show them. If you’re interested in this, great; if you’re not, that’s totally fine, too. Never get attached to it or try to force somebody into a deal that they don’t wanna do. There’s plenty of fish out there, and I see so many people get caught up “Oh, I talked to ten people last week…” Okay, go talk to ten more. It’s a numbers game. Keep going, man… You’re not done yet.

Joe Fairless: Yeah.

Michael Sjogren: Go back and listen to Joe’s podcast; how many guests have you had on that — I was listening to one the other day that you had… He emailed brokers for like nine months, every two weeks… I’m like, “Yes! Grind, man. Go make it happen.” It will happen.

Joe Fairless: Yup. And on the ninth month he got his largest deal he’s ever done, and then he’s continued to scale from there, to like a 50 or 60-unit property.

Michael Sjogren: Another piece of advice that you gave me a long time ago, that I took and it worked, for this model, was “How can I become an authority figure?” I started a local meetup called “Airbnb Mastery.” Every month I was getting people in a room, educating them about this, and I got three leads just from hosting that meetup. And it didn’t happen right away. That happened like five months in. And I had two months where not a single person showed up. And I said “Okay, fine. I’m gonna do it again next month, and again, and again.” So start a meetup, start putting content on social media, start becoming an authority figure in the space, and showing people “Hey, when I think of Airbnb, I think of so-and-so.” I changed my name in Instagram and Facebook to “The Airbnb Guy.” So anytime somebody thinks of Airbnb, I want them to think of The Airbnb Guy. How can you position yourself as an expert in your field?

Joe Fairless: And the last question real quick – this might be a larger question, but it can be a quicker answer… How can we determine if our property is in an area where the city or the township or whatever regulatory body there is, it is okay for us to do short-term rentals? Because I know New York City – not so much.

Michael Sjogren: Yeah, absolutely. Great question. For me, I always like to go to the source; so what I would do is I would google these exact words “short-term rental ordinance”, and then insert your city name. Try and go directly to their website. You can do a general search and just type in “Short term rental laws” and see what articles come up, but I always try and go to the source.

The reason that I am not in Boston, or in San Francisco, or New York City, or any of these major markets, is because these markets have a lack of “housing” or affordable housing. Lobbyists and everything else are going to say “Hey, you should put restrictions on short-term rentals, because they’re taking our inventory off the street.” So I would look for markets where they’re not seeing that message. And if you are, then just go 30 minutes outside of the city. If you’re in Manhattan – okay, go 30 minutes North, or go 30 minutes South, somewhere in New Jersey.

I told you, my property is three hours away in New Hampshire, and I manage that no problem. The last one we picked up was in Florida, and I can manage that remotely. So don’t be afraid to go a little bit outside your comfort zone.

Joe Fairless: Thanks for being on the show, talking about three ways to make money on short-term rentals. One, you buy the property, two, you lease the property, three, you partner with the landlord. And those are tiers based on how much cash you have access to. The value proposition to owners, landlords, of first identifying what problem we’re trying to solve for them, and then we are filling a vacancy, taking better care of the property, and we’ll be a painless person to work with, and actually might make their life even easier and even more profitable on the expense side if we’re handling things up to $250.

Thanks for being on the show. How can the Best Ever listeners learn more about what you’re doing?

Michael Sjogren: They can follow me on the social platforms @TheAirbnbGuy. You can send me a note at info@occupiednow.com, and for the free training that Joe and I were talking about, it’s a 60-minute class that I break down my entire business model, and help you kick off your own business within 6 weeks. Go to STRSecrets.com.

Joe Fairless: Thanks a lot for being on the show. I hope you have a best ever weekend, and we’ll talk to you again soon.

Michael Sjogren: Thanks, Joe.

JF1810: How Can You Build A Short Term Rental Business With Other People’s Properties? With Michael Sjogren

Michael has been building his company for the past few years and has seen success in a niche that almost anyone can do. He prefers doing short term rentals, and he doesn’t even own the properties (usually). Hear how he builds his business with property owner partners. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“You can do it yourself, but what is your time worth?” – Michael Sjogren

 

Michael Sjogren Real Estate Background:

  • Michael and his wife Krysten are the founders of Occupied, LLC, a short-term rental investment and management company
  • They have a portfolio of six properties across three markets and are actively expanding across the northeast
  • Recently launched an education platform called Short Term Rental Secrets to help real estate investors launch their own STR business
  • Based in Boston, MA
  • Say hi to him at  https://www.occupiednow.com/
  • Best Ever Book: The Millionaire Fastlane

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


 

JF1776: The Entrepreneurial Mindset #SkillSetSunday with Prady Tewarie

Prady is back on the show today to help us with some entrepreneurial tips. His advice today is focused all around the mindset that is important for any entrepreneur to have in order to succeed as entrepreneurs, which of course includes real estate investors. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Must approach things in a non confrontational way” – Prady Tewarie

 

Prady Tewarie Real Estate Background:

  • Started as a buy and hold investor in college and became a real estate developer focusing on condo conversions
  • Has over $100M in real estate assets
  • Based in Boston, MA
  • Say hi to him at www.thetewariegroup.com
  • Best Ever Book: Built To Sell

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we will be talking with Prady Tewarie. Prady, first of all, how are you doing today?

Prady Tewarie: Hey man, I’m doing fantastic. Thanks for having me on the show again. I had a lot of fun last time. I hope I was able to provide a lot of value, and so glad to be able to do it again.

Theo Hicks: Absolutely. So if you haven’t done so already, make sure you listen to Prady’s first episode. Search “Joe Fairless Prady Tewarie” and you will find that interview.

I actually was the one that interviewed Prady, and we’ve had a great conversation about his real estate investing. But today, since it is Skillset Sunday, so we’re going to talk about a specific skill that us as real estate investors can use to improve and expand our business… And the skillset that we’re going to talk about today is going to be around mindset. So the topic is going to be the ideal mindset that you’re going to need to have in order to thrive as an entrepreneur in general in today’s competitive market.

Before we get started, a little bit about Prady – he started as a buy-and-hold investor in college, and eventually transitioned into becoming a  real estate developer who focuses on condo conversions. He has over 100 million dollars in real estate assets currently, and is based in Boston, Massachusetts. You can say hi to him at thetewariegroup.com, and that link will be in the show notes of this episode.

Tewarie, before we dive into the topic of today, can you give us a little more about your background and what you’re focused on now?

Prady Tewarie: Absolutely. I think you did a fantastic job with the bio. My interest — and when people ask me “Prady, what do you do?” I do something things. I’ve owned an investment group where I invested in startups, I have a real estate development firm… What I do, in one sentence – I find under-appreciating assets and I turn them into appreciating assets, whether it’s real estate, condo conversions, or scaling a small business. The last time we talked a little bit – [unintelligible [00:04:19].03] or has potential, but hasn’t really found their momentum, and I like to go in there and see “Hey, what can we do to make this profitable?” And that’s my biggest passion and what I love to do. I feel that when I do that, it just makes it come alive, and I really enjoy that, so… Turning under-appreciating assets into performing assets is what I’d say in one sentence.

Theo Hicks: Alright, thanks for sharing that background. As I mentioned, we’re gonna talk about mindset today, and I think a good place to start — because I remember during our first conversation, when I asked you how you find your deals, you actually mentioned that you do door-knocking… And I know – at least for me personally, and maybe other people share this as well, but I think a lot of people (myself included) may be a little fearful of doing that. And obviously, since you do do that, that’s kind of proof of your powerful mindset… So maybe we can begin by — kind of walk us through what allows you to have that very outgoing personality, that’s willing to go out there and actually knock on people’s doors, and face all that rejection… And more specifically, what advice would you give to someone who (maybe like me) is completely turned off by the idea and doesn’t wanna do it, for those anxiety and fear reasons?

Prady Tewarie: Yeah, 100%. It’s a fantastic question, so thanks for asking that. I think the biggest thing about in-person communication or door-knocking, and the mindset that I always go into it – it’s not confrontational. I think if we frame it “Hey, I’m on one side. I’m the businessperson trying to buy a house, and the other person is on the other side”, we’re working against each other, and I think that mindset causes anxiety, because you think it’s confrontational. I’ve experienced that, too. You live in a place and someone’s trying to buy something from you, and I feel like I’m trying to sell it for a price that I want, and they want another price, and we’re going back and forth in just this negotiation and this power thing… And I can see for some people that has merit, but I never approach it that way.

For me it’s “Hey, we’re on the same team”, and I think that approach has allowed me to feel less anxious about approaching people for deals, because I go in there and it’s like “Hey, I wanted to see if you know anyone in the area, or if you’d be interested in selling, I’d be more than happy to help you out with that process.”

The way I approach it is they have a problem that I can solve. So I’m not selling them anything. I think a lot of salespeople – they’re generally a little bit anxious because they’re like “Man, I’m trying to sell something, and because I’m selling something, we’re on the opposite side. They need to buy what I have, and I need to trick them into buying it.” But if you don’t go in that mindset, if I’m like “Man, I can genuinely help you. You have something, and I can help you in that process, so we’re on the same team.” I’ve always approached it like that, even when I’m buying other companies, small business; I’ll go in and say “Hey, what are your bottom line problems? Okay, I can help you with those things.”

In real estate it’s actually very common – when you talk to a lot of owners who are not listing their property on the MLS, some people are hoarders (that’s very common) so they need someone to help them out… A lot of them don’t wanna go through the whole legal due diligence process, so what I do is I help them find  a lawyer, or I’ll take over all the legal fees. They don’t like working with brokers, so I’ll play for all the broker fees. Stuff like that.

When you put it that way, it’s like “Hey man, I’m here to help you.” That way, I don’t feel any anxiety, because it’s not like I want something from them that’s actually gonna hurt them. It’s none of this Wolf of Wall Street mentality, “Hey, I’m trying to get someone to buy shares that are useless, and then I win.” When you do that – for me, I’ll feel a little anxious, knocking on someone’s door, trying to get them to give me a product or sell them  a product where I know I’m getting a windfall and they’re not.

So I always approach owners in a way where I know they’re gonna benefit tremendously from this, and I’m also gonna benefit, so since we’re on an even playing field and we’re on the same team – that’s my number one thing I always tell about any type of relationship, I’m like “We’re on the same team.” That way I take the anxiety out tremendously, and I think that mindset alone is really powerful.

Theo Hicks: Thank you for sharing that. I haven’t heard it from that particular perspective. Most of the time people say “You’ve gotta just expose yourself to it, and eventually you’ll get over it.” But I like your advice there. Essentially, keep the same mindset and just expose yourself to it until you get over it, but think about the actual situation differently. As you said, it’s not a battle, it’s not a competition; you’re actually trying to help them. I appreciate you sharing that.

Prady Tewarie: Yeah, that’s huge. If you think about it from an analogy standpoint, if I approach you on the street like “Hey man, I want five bucks. I want it right now”, and then I try to swindle you… It’s a competitive approach. If you’re trying to sell cars, or something, it’s very combative. I was always very big on negotiation strategy, and I think a lot of the negotiation strategy we have, especially in the U.S, from the ’80s and ’90s, is very combative. We have tricks and things you should say, and themes… And maybe they’ve worked, and I’m sure they have, because there might be some anecdotal evidence for it, but I was like “What if you don’t do that?” What if I approach you and I’m like “What do you need help with?” You’re looking for some kind of help, and then I help you. Then you’re like “Oh yeah, here you go, man. Here’s something in return.” That way I’m not asking for a favor, I’m not tricking you, I’m not misleading you, and I don’t feel awkward asking you to give me something in return, because it’s just there.

So I think approaching it from kind of like friends, but really deep down knowing that — I do condo conversion development now in East Boston, what I talked about last time, and it’s kind of a hot topic, and a lot of developers are not able to fix your permits; my team is able to do that fairly well, fairly easy, fairly quickly, just because the people there like me… And the reason they like me – I don’t have any tactics or skills; it’s because I’m invested in their future. So I will make sure that they have a  place to go, they’re happy, their family is there, it’s secure… I make sure that the P&S is as long as they need in order to get to a new home, and sometimes they’re like “Hey, I’ve been able to secure a mortgage for my new home. Can I use some of the P&S money to put that forward?” I was like “Yeah, why not. We can figure something out so it’s beneficial”, and then of course the neighborhood isn’t gonna look at me from a poor standpoint, because I’m on their team. I’m helping them with what they need, and they help me back.

So I don’t really feel anxious at all anymore because I approach it from that standpoint. It’s not because I’m an ultra-confident guy, and all that stuff. I mean, of course, that’s part of it, but that’s not the advice I would give. I would say change your mindset around it, and think that you’re helping someone when you’re doing sales. When I sell a product from a supplement company, it’s because I believe it; I know that I’m gonna help someone with the product I’m gonna give, so it’s easier for me to get them to buy the product, because I think I’m helping them, and I know I’m helping them… As opposed to “Hey, buy my product. Here’s a flash sale. Here’s this, here’s that”, just to convince them to buy.

That creates word of mouth and a buzz for you as well, especially in real estate, where the market is fairly small, and people kind of know you in the neighborhood, and there’s lawyers and attorneys who will know you, and all that stuff. It doesn’t take long for that to really catch up.

Theo Hicks: Okay, so we talked about one particular mindset, just based on a personal question of mine, but I’m sure other people relate to that as well… Essentially, that was “It’s not confrontational, it’s you helping other people”, and that’s the mindset you need to approach when you’re going into negotiations or when you’re looking for deals.

What’s another top mindset/trait/characteristic that we need in today’s market to be successful?

Prady Tewarie: I think a lot of it — and this was really down to real estate… You’re gonna have to knock a lot of doors, and you’re gonna have to sometimes face rejection. This kind of goes back to the first thing I said, but it’s okay sometimes to be a little bit outcome-independent. We don’t have to tie ourselves — if something doesn’t happen, I know in the back of my mind that I’m gonna be okay. If the deal doesn’t happen, or if the negotiation falls through, I’m gonna be okay and I’m gonna find something else that’s gonna be equally good, or better. Down the line, I will.

I think that mindset changes the way I approach negotiations, because if the deal is not good, I’m okay to walk away from it. I’ve seen a lot of younger developers [unintelligible [00:11:47].02] and they get very tied to the project… And it’s hard not to. Here for instance you go through the permit process, that takes a year, you’ve gotta get this permit, and that permit, you’ve gotta talk to this politician… It’s a very long process, so it’s very easy to get married to it; I don’t blame anyone for it. But sometimes the deal isn’t good, and it’s okay to walk from it. And the reason why we’re afraid to walk from it is because we think “Hey, a door has closed. And because a door has closed, I’m not gonna be able to open any doors anywhere. I’m stuck in this hallway. All these doors are closed, I won’t find anything again anymore”, and that makes people really desperate and needy, and desperation and need is probably the worst emotion you can have in your life, because that makes you take incorrect decisions.

I think being outcome-independent is another thing… And that’s gonna help with the first question you asked, too; I don’t mind knocking on doors and sometimes people saying no, because it’s okay. At some level it’s a numbers game, and I know I’m gonna be fine whatever happens; even if I heard a no, what I am right now hasn’t changed, because I didn’t have property before, I didn’t have the deal before, and if they say no, I still don’t have the deal. So I’m actually never worse off.

If I was worse off after hearing no, then I’d be like “Okay, that’s risky.” But it’s not risky at all, because I’m not losing anything. So asking and going for things in life — most of the time, asking a question like “Hey, would you sell your house?” is a zero risk, and almost all reward type of play, so I really commend people to do that. By being outcome-independent, you can really foster that growth, and you can really believe and you know that it’s gonna be okay and you don’t have to be tied to a deal.

We hear this a lot, especially a lot of flipper — and I say young developers because they kind of get lured, and they see all the money that a lot of developers are making, and they get very tied in the project, and they forget that sometimes it’s not a good deal anymore, so it’s okay to walk… And that’s another mindset process that comes from being outcome-independent.

Theo Hicks: Yeah, that term “outcome-independent” reminds me of a concept that me and Joe have talked about a lot on the podcast, which is 50/50 goals. Essentially – because I know Best Ever listeners have heard it before – you set a goal, and 50% of the success is based on “Did you achieve that specific goal you set out to do?” and then 50% is based on “Did you identify some lesson by going through that process that you’ll be able to use to better yourself in the future?”

Similar to what you are saying, when you’re going into a negotiation, obviously you want them to say yes, but if they say no, one thing you mentioned is it’s really low-risk and very high-reward. But also, if they say no, you can go back like “Alright, is there something I could have done differently to make them say yes?” If the answer is no, then it is what it is. If the answer is yes, then you identify what that reason is and move forward and get that next deal, so in a sense, that no was actually successful, because it helps you get that next deal.

Prady Tewarie: A hundred percent, man. That’s math. When it comes to time as well – I think we all have a finite amount of time, and I think failing is good; we’ve heard that a lot, “It’s good to fail, you learn from it.” But failing is good as long as you learn from it, and I always say “If you’re gonna fail, try to fail as quickly as you can.” A lot of times in our life we know that something is not gonna be good for us, but we try to extend it. What I would always do is do everything possible right in the beginning to actually force failure, to see if I fail… Because that way I get it out of my way and I can learn quickly.

So that’s another thing about learning from failure – if it took you a year to learn from a mistake, if you could have learned that in one month, then that’s wrong; you should have learned it in one month. I’ll give a quick story on that point – a lot of times for instance I’m running a company, and we start selling products, and one of the biggest things that can happen when you sell a product is that your suppliers cannot handle the demand. People know this, and this happens a lot on Kickstarter; people start a Kickstarter project, they raise a lot of money all of a sudden, and then they can’t meet demand and the whole thing  collapses. So if you know that going in, what do I do? The first thing I do is when I make my first order, I go to my supplier and I say “Hey, instead of doing 100 of these units, give me 20,000. How quickly can you do it?” And I say that’s what I want, although I’m not gonna pay for all that, because I wanna see their reaction. And a lot of times the supplier is gonna say “Well, we can’t do that. We don’t have the capacity.”

So I could have just known that by talking and asking them right from the bat, than waiting for seven months by the time we have to make a 20k unit order, and then we ask the supplier and they’re like “Sorry, we can’t do it.” I could have known that before. This goes with real estate, working with the right contractors… A lot of times we’ll ask them about their schedule and I’ll say “Hey, I have a property. Can you do this right now?” I create situations that will actually most likely be the ones where you can fail. Instead of waiting… “Well, this can go wrong if we scale. That can go wrong…” – well, do it now. You can just simulate the situation and force failure and get the answers as soon as possible. That’s one big thing that I do all the time if I know that there’s room where things can go wrong, which there always are. I try to simulate that situation and I try to see how the people or the things which could lead to failure – how they react right now, instead of waiting for 6, 7 months when the stakes are really high.

Theo Hicks: I appreciate you sharing that example. That was gonna be my next question. So you gave two examples – one was the supplier situation, where right now you need 500 orders to get started, but your projections are saying you’ll need 20,000 in the future; then you’re gonna go upfront and ask for those 20,000 and see how they handle it.

You also gave the example of the contractor, and let’s say right now you need a project done in a month, but down the line at some point something might go wrong, or you might have a project that needs to move quicker, and so you ask them “Hey, I need a project done in a week”, or whatever. When you actually do fail in either one of those situations – or a different example – what’s the next step? Do you just go to another supplier/contractor and ask them the same thing, until someone says yes? What if no one can actually fulfill that? What’s the approach from there?

Prady Tewarie: The first thing is I find someone that can fulfill it. And if no one can fulfill it, then I have a big problem. That means that the company can never succeed. If there’s no one in the world or in a market that I could ask that could ever fulfill it, that means that I just don’t do it. Especially in real estate, a lot of deals sound really good on paper… But they’re only good if you can get certain points or interest rates with the bank; but then you ask all the banks and no one can give you that interest rate, and then it’s not profitable anymore. So you just don’t do the deal.

I think that’s the big thing. All the issues that you will face – and we can all list them out, because if you listen to your podcast, for instance, there are so many examples of things that have gone wrong, that people actually tell you. So you don’t need to be very experienced to know all the things that can go wrong. You can listen to your podcast, and there’s so many examples that people have provided… Real-life examples, like me giving this example. So you can test it out.

I gave the example of a contractor – huge issue. A lot of contractors are not responsive. They don’t show up at the project site. Well, you don’t have to wait until you start a project, when you’re securing your project, and then all of  a sudden you’re taking bank financing where you have to pay every month and the contractor doesn’t show up… Then you’re kind of screwed.

So the best way to do it is  — it’s very easy to check someone’s availability; you just call the contractor every day, have them do different tasks, have them do different things, tell them to go to different sites, tell them to help you out with inspections before you close, and then you can see how responsive he/she is. And of course, that’s not always gonna be a fool-proof method, but more likely than not — I think most of the failures that I had in the beginning, one thing that I did wrong was I waited a long time until I failed, and it was usually in the middle or right when the project was supposed to really start off and really go into higher gear; it’s that shift that you make from being good to great, where most people fail. And that’s because of this – they didn’t vet properly. Proper vetting is very important.

Now the change that happened is I still fail a lot, and people are like “Prady, you didn’t do this project, you didn’t project; you said you were gonna do this”, because all my failures are at the beginning. They’re not in the middle anymore. That allows me to have a huge portfolio right now, that I’m able to speak to you on this podcast. If this kept happening with all my failures, like most people, in that little growth phase, right from good to great – then they can’t handle it. But for me, I don’t even start, and when I start, it’s definitely gonna be great, because I’ve already crossed most of the hurdles that are gonna stop me from going from good to great, if that makes sense.

Theo Hicks: That totally makes sense, and I really like that – the interest rate anecdote that you gave. If you’re looking for  a deal and you need  a certain interest rate, and you’re not gonna get it, then you just don’t do that particular deal, or you need to figure out another way to do that particular deal. That really resonated with me.

As it relates to the mindset that we need in order to thrive as a real estate investor, as a general entrepreneur in today’s competitive and fast-evolving market, that we haven’t talked about already?

Prady Tewarie: Yeah, one thing that’s huge that I’ve implemented in my life – and I’ve seen some other CEOs talk about it – very valuable, is that you don’t have to be fantastic at everything. We talked about this a little bit the last time. I actually have come up with a rule, which is the 75% or 70% rule, which basically means if someone can do a task that I’m doing in my day-to-day 65%, 70%, it’s okay, I’ll outsource it. You as a CEO or as a developer, you wanna be able to free up your time to do big-level strategy things.

We think “Oh, I need to do all the small things, all the time.” You’re so deep working in your business, when you should work on your business. And that’s a  big mistake I see a lot of people make, especially developers. They kind of stay in the same game. They do their buy and holds, they do a fix and fix and flip, and they stay in fix and flips all their life… Which is fantastic, it’s awesome, if you can build a career. But I know a big question a lot of people have is “Man, how can I scale? How can I get to the next level?” When I was younger, I was doing really small rentals, really cheap and cost-efficient. Now I’m doing real estate development in Boston, and it’s because I recognized that I had to free my time at every point. Everything that I can outsource right now, I do. And there’s really cost-effective ways to really do that; through virtual systems…  There are so many ways to do that, you just have to be open to that.

Also, if you’re not good at something, it’s not the end of the world. That’s really where you should leverage other people. People say “Who should I hire?”, and usually people hire people just like them, because they like those people, because they’re the same. But then you guys are both doing the same thing.

If for instance you know that you’d get more leads by knocking on more doors, and you’re super uncomfortable with it, like it’s not your thing – that’s not the end of the world. You can train a team, find a group of guys, find a group of college students or someone that’s excited that wants to maybe learn from you, because you have all this wealth of knowledge… I do this right now, because I can’t knock on so many doors anymore, so I built a list from the tertiary that I wanna target, and I have a couple of guys that come to me, they found me on some website, and I’m mentoring  them. One of the things they do is they knock on doors, because I can’t knock on 500 doors every week, so they do it for me.

So it’s okay to not know everything. Don’t let it stop you. If you’re the CEO and an entrepreneur, always work on your business, not in your business… Because that is the number one way you’re never gonna be able to really scale, if you’re doing the minute things. You should always be doing the bigger things.

My concept is if I’m not good at something, I fire myself all the time. A lot of CEOs fire their employees, they fire everyone, but they don’t fire themselves. So I always fire myself; I’m like “Hey, I’m not so good at this”, I fire myself, and I free up my time to do other things.

Theo Hicks: Just to add to that – and you kind of already hit on it – obviously, if you aren’t good at something, then outsource it… But then you also mentioned, if you don’t like to do something, you could probably also outsource that too, instead of just not doing it at all.

Prady Tewarie: Right, 100%. Yeah. You asked earlier about the global economy of the internet, and I think we should take advantage of that. Back in the day it was maybe harder to find people [unintelligible [00:22:35].11] but nowadays even for my real estate — we think real estate is a more analog business, so we can’t use people online, or freelancers, or virtual assistants… You can definitely use them. Use the global economy, use the internet to help you scale, and use the internet to help you do things that you’re not good at.

Especially now, I’ve built a whole team that is just being outsourced, where they qualify leads, and they’re all based overseas; virtual assistants that help me vet deals and go through more… Because I realized my deal flow was too big for me to look at every single thing, so I had other people look at them, and it’s very cost-effective… And they’re happy, because they’re getting a job; and you’re happy, because — are they as good at managing and looking at deals as I am? No, but I can train them.

I think it goes back to your earlier question, where it’s like — use the digital economy to your advantage when you’re trying to do this. It’s relatively inexpensive, and it will actually make you more money down the line. The people who think “Hey, I wanna reduce costs” – you’re actually increasing costs by hiring yourself, because you’re not the cheapest source of labor.

Theo Hicks: Well, Prady, I’m really glad that I got to speak with you again. Again, powerful advice, specifically to the mindset that we need to have as investors to thrive in today’s global, digitalized economy. I just wanted to quickly go over the four mindset factors that we discussed.

First as it relates to essentially getting over that fear of rejection and anxiety, whether it’s negotiating or door knocking or whatever… And the mindset shift is to not think of it as a confrontation or a battle or a  confrontation where one person wins and one person loses, and instead go in with the mindset of genuinely wanting to help people, and thinking that you’re both from the same team, and trying to add as much value to each other as possible. That was number one.

Number two – if something bad happens, which is obviously eventually gonna happen to everyone, the mindset is to not just sulk and give up, but to realize that you’re gonna be okay, and you are going to eventually find something else, as well as you’re going to learn from whatever that bad thing that happened… And the term that you used was “being outcome-independent.” I also mentioned the 50/50 goals as well.

Something that I really like too when it comes to the example of door knocking and searching for deals – you’re really not putting anything at risk. If someone says no, you’re not really losing anything, whereas on the other hand there’s really nothing but upside and reward. So that’s number two.

Number three, which is probably my favorite one, which is not only learn from your failures, but try to fail as quickly as possible. You gave a few examples on that, as well as your philosophy behind that, which is essentially if you are going to fail at something and it takes you a year to do it, that’s a waste of time and a waste of money, whereas if you could have failed at that within a week or a month, then technically you can try 12 extra things before a year ends, as opposed to just trying that one thing and failing and having to start over again. So that was number three.

Number four was that you don’t need to be fantastic at everything, and you don’t have to like everything in your business. And you talked about your 70% rule, which is if someone can do a task 70% as well as you, then you’re gonna go ahead and outsource that task.

You also mentioned the reason why you’re outsourcing that task is so that you can focus on the big-level strategy. You are the CEO, so you’re gonna be working on your business, instead of in your business. That’s really the only way to expand and scale.

Then I’ve really liked what you said, that people get fired from their jobs all the time, or they are firing people from their jobs, but people never really fire themselves. Obviously, I’m not saying fire yourself from the entire business, but fire yourself from one particular role within that business, and bring on someone else to do that for you.

Again, Prady, I really appreciate you coming on today, great advice. Thank you to everyone who listened. Have a best ever day, and I will talk to you soon.

Prady Tewarie: Thank you so much, man. It was a pleasure.

JF1754: Getting Started In College, Building A Great Team, Running A Successful REI Company with Prady Tewarie

Theo is interviewing Prady today on his real estate investing experience. Prady has a little bit of a unique story in that he got his start in college and began his real estate investing journey in a time where a lot of people are strictly focused on getting through school. Now he has a thriving condo development business in the Boston area. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“I don’t even do calls, I just knock on doors” – Prady Tewarie

 

Prady Tewarie Real Estate Background:

  • Started as a buy and hold investor in college and became a real estate developer focusing on condo conversions
  • Has over $100M in real estate assets
  • Based in Boston, MA
  • Say hi to him at www.thetewariegroup.com or Instagram @iampradyuman
  • Best Ever Book: Built To Sell

 


If you’re a passive investor wanting to learn more about questions to ask sponsors in order to qualify the opportunities, sponsors, and the markets opportunities are in, visit BestEverPassiveInvestor.com.

We created this site just for passive investors to have a free resource providing the questions to ask and things to think through. BestEverPassiveInvestor.com


TRANSCRIPTION

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

Prady Tewarie: Hey man, I’m doing fantastic. Thanks for having me on.

Theo Hicks: Absolutely, thanks for coming on. I’m looking forward to our conversation and learning more about your real estate business. A little bit about Prady – he started as a buy and hold investor in college, and then transitioned into becoming a real estate developer, focusing on condo conversions. Currently, he has over 100 million dollars in real estate assets. He is based out of Boston, Massachusetts, and you can say hi to him at www.thetewariegroup.com. We’ll have that link in the show notes.

Prady, before we get started, can you tell us a  little bit more about your background and what you’re focused on now?

Prady Tewarie: Absolutely, man. I think you did a  good job with the intro. My background actually started in entrepreneurship, mostly focused on acquiring and selling under-performing small businesses, so basically anything from barber shops, to small restaurants, to cafes. I got into that while I was in college, helping out old friends of mine; I just kind of got sucked into that. From that, I started getting into real estate and buy and holds, and mostly focusing on multifamily properties around the Boston area. As many people know, it’s a huge college town, so focusing quite a bit on the college areas, multifamily properties… And I kind of phased from that into becoming a real estate developer, developing apartment buildings right now. So it’s kind of this up and down trajectory and scale that I’ve definitely seen, but I’m gonna talk about this a little bit today… But they’re all pretty much inter-connected, and using pretty much not real formal education in the space, or a lot of experience in figuring ways how to leverage my background in small business into this space.

Theo Hicks: Great. I’m looking forward to diving into that. But before we get into that, a lot of people when they first hear about real estate, they wanna jump right in, right away; and for some of them – they’re in college, and I’ sure a lot of people listening, at least me in particular, when I was in college, I had no right investing in real estate based off of how I was in college. I’m just curious, how were you able to balance going to school full-time, and you mentioned it sounds like you were also doing some other investing businesses… How were you able to balance all that while you were in school?

Prady Tewarie: Yeah, that’s a fantastic question. I think the hardest part with the balance was I didn’t know where I’m gonna find capital to do all this stuff, but also the time to manage all this. I went to college, I went to law school, and I was building all this stuff in real estate, and the biggest thing for me was to build a killer team that I could rely on. I think that if you have a killer team that you can rely on, that can propel you to do things that you can’t do by yourself.

I was at a point where I was like a workhorse. I’m gonna put hundreds of hours a week, and I’m gonna go all-in… And I recognized that at the end of the day there’s only one of me, and there’s only 24 hours. I can’t stretch out the day more. So at that point I changed my mindset a little bit and I started leveraging other people that really knew what they were doing, and really working together with them and creating an incentive structure (which I’ll get to in a bit). That was a big game-changer for me, that allowed me to go to school, keep my academics going, but also really focus a lot on real estate, where I was like “Look, these are my skillsets, this is what I have, but I also don’t know everything.”

I think the hard part for a lot of young people – they’re like “Man, I feel super-underskilled, I feel like I’m kind of an outsider, I feel like I don’t know what I’m doing”, but I think where they go wrong is they let that consume them. I think if you take another approach, which is “You know what, I’m gonna own up to it. I don’t know everything, and that’s fine”, instead of waiting until you get all the experience. Like any college student, I was a little impatient, so I had this philosophy, I was like “Look, there’s not enough time for me to get all the experience. It will take me forever.” So I was able to tap into a network of people – whether it’s brokers, whether it’s contractors, whether it’s architects now – that were just able to help me out. That alone propelled me to grow at a really rapid level. But you have to be humble about it and you have to admit you won’t know everything, and that’s okay, and then you have to be okay with asking for  help. I think many of us are sometimes super-hesitant to do that, for a variety of reasons.

That – just asking people for help, and building a team around me and what I wanted to do, that alone was a big game-changer. That allowed me to really go from just managing one income-producing property that was taking all my time, to really scaling it, because I recognized that I needed the help.

Theo Hicks: Did you face any challenges when you were reaching out to these people that you wanted to bring on your team, since you were a young guy, still in college, didn’t really have much experience? And if so, how did you overcome that challenge?

Prady Tewarie: Yeah, it’s super-difficult, but it’s also not super-difficult. Here’s the thing about networking… I recognized early on a lot of people don’t even try. We think things are super-difficult; why is that broker gonna respond, why is that contractor gonna respond? And the truth is they might not. But you should still try. I noticed if I was sending out messages or DMs or e-mails to people, a lot of them would actually respond. As crazy as it may sound, a lot of them would give me time in their day to actually meet with them and to speak with them. And the biggest thing that you have to do is you have to convey interest in your passion, but you also need to make sure that there’s an incentive structure tied for them in the process.

This is another thing I see quite a bit now – people think of networking like “I need something. Let me network right now.” But networking is a process, it’s an ongoing thing. It will rarely work “I need A, so I’m gonna look for people who have A and they’ll give it to me right away.” It’s like “I don’t need anything. I’m gonna network with people, and when I need it, maybe in 2, 3, 4 years from now, I can call to them because we have built that relationship.”

One of the things that I was doing when I was an entrepreneur in college – I built relationships with a couple of brokers, with people in the area that were in real estate, so when I started getting into that space, it was a little bit easier because I’d built those connections. But yes, it was difficult to get a foot in the door… But the biggest thing was just trying and going for it, and understanding “Look, if they don’t respond, it’s not the end of the world.” But you have to try. Most people don’t.

Theo Hicks: Tell us a little bit about this incentive structure. You’ve mentioned it a few times… What is this incentive structure that you offered to these team members?

Prady Tewarie: There’s a couple of ways, and I’ll take it right now, like what I do even now, in development. I was in the buy and hold; a lot of people are doing it using the cash-out refi strategy, and I really wanted to scale. At one time, my broker was like “Prady, you should start developing stuff.” And I was like, “Man, I don’t know what that is.” He was like “Don’t worry about it, you’ll figure it out.” And I knew going in that I didn’t know — it’s a whole different ball game. You’re not managing people, like day-to-day calls about “Plumbing isn’t working.” Real estate development means a plot of land, you go for permitting… It’s this whole process.

So what I did  was that I always asked for referrals from people that I know from each other. So I never bring anyone from my own team. What that basically means is my broker said “Okay, I think you can do real estate development.” I was like “Alright.” I had a couple architects that I knew, but I didn’t go to them. I went to my broker and I was like “Okay, do you know an architect that can help me?” He was like, “Yes, I do.” So he connected me to the architect, and I asked the architect, “Do you have a GC who can help me?” He connected me to the GC.

So what I’m doing is I set up a whole system that everyone’s tied to each other. So if my GC – which happens all the time in real estate development – they don’t show up, or they don’t do a good job, or if he runs away, well guess who’s gonna feel the heat? It’s my architect. And if my architect isn’t responding, guess who’s gonna feel the heat? It’s the broker. So because everyone’s tied to each other, the progress that I’m making on my projects – everyone else is winning along the way.

What I never do is I’ll never be like “I’m gonna bring my architect. I’m gonna bring my GC”, and they’re not tied to each other. Because in real estate you’re dealing with subs. Everyone’s subbed out. But all the subs are related or tied to each other in one or the other ways, where their jobs and their job security is tied to doing a good job. And I look at it from a futuristic standpoint, where it’s like “If this job doesn’t go well, there’s gonna be no more other jobs coming.” My broker knows that “Hey, if we don’t do a good job and we don’t make money in this project, Prady is not gonna work with me”, so he wants the architect to do well, and the architect wants the GC to do well. So setting up this incentive structure helped me tremendously, because that was the first thing I heard so many people speak about “Hey, I’m doing a fix and flip, I’m doing a development, and my property manager kind of screwed me over, my GC screwed me over”, and I wanted to avoid that all.

I’ve always built my businesses around “What can go wrong?”, and having plan B’s around it all the time. I knew that this could go wrong, so the way I set it up is “I don’t know much about this stuff, but other people do. But if they go, I’m screwed”, because there’s asymmetry; they have all the information I don’t. So I need to make sure they’re tied to the long-term plan for the project and for my long-term success. I did that by tying everyone together, and that’s always been my strategy. I’ve always used the same guys and I’ve always used the same brokers, so it’s been many deals now. That’s worked wonderfully for me.

Theo Hicks: That’s a very interesting and powerful strategy, that I’m definitely gonna take advantage of in my business. It’s a good idea. Transitioning a little bit, you said you started off real estate-wise doing the buy and holds, and then you transitioned into the developing, specifically condo conversions… Why did you decide to make that transition?

Prady Tewarie: Honestly, it was a new challenge. I came into this space knowing the buy and holds; I was an outsider in this space. This goes back to, again, a lot of people say “Well, I’m an outsider, I don’t know anything”, but I think being an outsider you have an advantage. You can see things other people don’t. I came in this space and a lot of people were like “How can we increase rents?” They would fix up the kitchens, they would fix up the floors… But I realized that my customer – they were college students; and the college students that I was talking to didn’t really care about which countertops they were using, or how everything was looking… And I was like “You know what they care about? They care about technology.” So I bought iPads, and I bought a lot of automation equipment. It wasn’t very expensive, and I put it in all the homes. I didn’t fix anything in the home, and the rents went up, because that’s what my customer cared about.

So building your product for what your customer wants and what you think the market thinks is important, is vitally important. So I did that, and it was a super-success. All the projects that I had around college campuses – the only thing I ever did was install technology, and the rents went up.

So I did that for a bit, and after that I was like “I need the next challenge”, because everything was automated and systemized, and that’s when my broker was like “Prady, I think we’re ready for the next challenge. Let’s start developing stuff.” It’s a whole different strategy, it’s super hands-on, it’s definitely not passive – you have to be at your project site pretty much all the time – but it was really for a different  challenge, because business is, I believe, about setting up systems and being able to automate a lot of things, and I felt that I was able to accomplish that to a large degree in my area where I wanted to be.

Then this whole condo conversion developing was a whole new challenge that I wanted to take on. It’s very different. There’s no cashflow; you make everything at the end, so you will go long periods of time where there’s just cash outflows. You have to be very good with numbers, very organized. I’m very glad though I didn’t do it right off the bat. I did buy and holds and I grew slowly with that, because it’s laid the foundations for me to do other bigger projects, which I’m doing right now, but… It’s all purely for the challenge.

Theo Hicks: Nice. How are you finding your condo conversion deals?

Prady Tewarie: Most of the time right now the way I find it – there’s a couple of neighborhoods here in Boston that are really up and coming, and most of the time where I go is I do the things that most people don’t  wanna do, which is I knock on people’s doors and I talk to the owners, and I just have a conversation and I let them know “Hey, I’d be interested in buying your property down the line. If you’d ever be interested, let me know.” I do that, and my team does that all the time, so it’s more than just finding stuff on the MLS, or sending out fliers, because they get so many. It’s all the human interaction, the human touch.

I don’t even do calls, I’ll just knock on the doors, and do that on several hundreds of doors. Now and then, every few months, once a  year, people wanna sell their properties. That’s always been  a winning strategy. But also looking at the properties from the inside for a condo conversion, which is turning a multifamily into a condominium – it needs to have certain characteristics for it to be able to be a condo conversion.

What I always do if there is an open house, or if I can inspect the property – I never go there by myself, because for me it’s pointless. I’m a developer, I know some stuff, but I always go there with my entire crew. When I used to go to open houses in the beginning I’d have my architect, my engineer, my GC, my broker and me. It was a five-person crew that would go in there to all the open houses. That way it was very efficient.

A lot of times you look at properties — for rentals it’s totally different, because you can kind of make out what you can get for rents. But for condo conversion  I need to know, if we tear down X amount of walls, what is it gonna cost? Is there enough space here? Is the ceiling height gonna be big enough? I can’t see all of that, and it goes back to what I was saying earlier – going in there with a team, that’s a much better approach.

I’ve seen this quite a few times, especially in Boston, because the market is super-hot… You go to an open house and you have 2-3 days to make a decision, or it’s gone. I see a lot of developers, a lot of guys, young people that are trying to get in there go there by themselves, and then they have to call their broker, or they have to call someone else and do all the due diligence. I don’t wanna waste time, so I go with a full crew every time that I see it. I never go there by myself, because I don’t know all the technical details.

All of it right now is knocking on doors, building personal relationships in the area, and then also making sure that my entire team vets it before I even go into any depth about financing, or anything like that.

Theo Hicks: You said that the condo conversion projects typically need to be multifamily properties. So are you knocking on the doors at the actual multifamily properties, or are you finding the owner and then going to their house and talking to them?

Prady Tewarie: Yeah, it’s a mix of both. A lot of times we have here in Boston — it’s an older town, so a lot of families that lived there for generations, so usually what you have is the whole family will live in each unit for a multifamily property. That’s very common here. But often times I reach out to the owner and I’m like “Hey, I was just passing across here… I just wanna have a conversation.” But especially for a lot of the areas that are gentrifying, I think where people go wrong is because they approach it super-aggressively. If you go there super-aggressively, people don’t like that. They feel like you’re kind of screwing them over, and then you get all the bad images.

For me, I’m just a young dude, I’m kind of laid back, and I just have a conversation with them. I’m not there to screw them over, kick them out, or any of this crazy stuff. I come from a big family, I totally understand the value of living in a place and growing up in that; I totally understand that, and it’s just a conversation, if they’re interested… And also making sure that I can help them. A lot of them maybe need help with a bunch of random stuff in their place that they need to get cleaned out; maybe they need legal help. A lot of them don’t wanna pay commission to their broker, so I’ll pay for it.

Being creative with it will go a very long way, because at the end of the day in business we can have all the numbers, but you’re dealing with people… So people have to like you. I think a lot of times that gets lost when we’re so numbers-driven. At the end of the day, it’s just another person that you’re talking to. That’s someone’s uncle, father, sister, brother, mother… It’s just another person, so if you’re willing to understand their problems and their situation, if you’re willing to generally help them out with it, I think it’s always a good thing to do. I’ve always found that to be very successful.

Theo Hicks: Do you mind walking us through a deal that you’ve recently completed? How you found it, what the business plan was, and then maybe some of the numbers.

Prady Tewarie: Yeah, I’ll give you a pretty straightforward one. This was a smaller deal that we recently did. This was a deal in East Boston. East Boston is an area right around the airport, that is just kind of abandoned. This whole town was part of the Boston zip code, Boston’s real estate market; East Boston was this immigrant neighborhood that people really weren’t focusing attention on. This past year is it really started to grow… And basically I had a broker who’s a buddy of mine, he said “Hey man, we should probably look at East Boston.” There was a developer who was developing one big building, had two sides; he was trying to sell me one side, completely finished, but we weren’t able to agree on a price, so I kind of let that deal go… And then one of the guys that owned the building right next to it – the family had owned it since early 1900’s.

It’s a fairly decently-sized building. I think it’s about 6,000 square feet. It was about 2-3 units only there, so it’s fairly big, and a small amount of units… And he was just walking outside and we were just having a conversation. He told me about the neighborhood, what’s all going on, and I was like “Hey man, if you’re ever thinking about moving, I’d love to talk to you.” Same thing like I just mentioned. He was like “Yeah, I’ll definitely keep you in mind.” Long story short, two weeks later he ended up calling me. His mom also lived there, and he said “She’s getting really sick, and we’re thinking about leaving.” So me and him started talking and chatting… And I know I went in there with my crew, and I saw an opportunity.

Basically, there were two units in there. I believed because of the size and the space that we could turn that into four. It’s a process in Boston where you have to ask for variants, and work with permitting. Long story short, we were able to close on that property in about a month or two. He needed help with moving his stuff, he needed extra time and buffer. He needed some cash to buy one property… His other property that he was buying in the middle – he needed some buffer, so I helped him with that.

It was basically trying to solve all his problems that he had, from moving, to timing, totally working with him through the whole process, building a relationship in the beginning. Once he moved away, immediately we were able to successfully get a permit to build four units in there. Basically, we got two units for free. We didn’t pay for those two units, so we got two units for free, which ends up being a big windfall for us. But I knew that we could do that because I had my attorney pull some permits, think about it, look at it before we even closed. So by the time he and I met for the first time, I had my team do a lot of due diligence.

Right now we are still developing that property. It should be done end of July, early August, and there’s gonna be four luxury condos. What we’re doing – something different again, because that’s been my signature –  we don’t have parking in the spot, so a lot of people don’t always like that, but what we did is we partnered up with Uber and Lyft, and anyone who lives in our condos gets to use Uber or Lyft for free, as long as they live there, when they leave from the condo… So they don’t need that parking, which is included in the condo fee. So that’s the process that’s been there, but it’s really about building that relationship, which was huge.

Theo Hicks: Thanks for sharing the story, it was very interesting. How much did you buy that for, and how much did you put into it, and how much do you expect to make on that property?

Prady Tewarie: We paid $970,000 for it. It was listed at over a million, but basically even before they put it on the market, I was the first person who called; he said he was thinking about selling it for about 1.1, 1.2. We went back and forth and he agreed on the 970k. We did finance that completely cash, and then I think the total of the construction right now [unintelligible [00:19:17].02] shy of 900k we put in the construction. Then the sell-out, because it’s four units – they’re gonna be luxury units, so anywhere from 800k to 900k each. We’re trying to be shy of 3.4 to 3.5. So the total net on these is anywhere from 1.5 to maybe shy of 2 million dollars. This is, of course, the Boston market, which tends to be pretty lucrative at this time.

Theo Hicks: Yeah, that’s impressive. So almost doubling your money.

Prady Tewarie: Yeah. It comes mostly because you buy a two-family and you make a four, so you get two condos for free. And if you do live in Boston, and you got a condo for free — right now we’re paying about $200-$250/sq.ft. to build. You only have your construction costs, but you’re getting a full two condos for free. I always recommend people when you’re doing condo conversion, seeing if you can get a variance for it to increase the number of units in the building, because that’s gonna be your buffer.

You can make  money if it’s three units, but it’s gonna be very tight sometimes, so if you get another condo in there that you didn’t pay for, that’s gonna be your massive buffer. And it works out for everyone. He bought that like a 100+ years ago, it was like 40k or 50k or something. Everyone wins in this project. It’s building that relationship, but also knowing what you’re gonna get into. At the end of the day, it’s a numbers game. And yes, it’s a fantastic deal, but it’s also the market, and it’s also making sure that you can go for a variance, and a lot of people don’t wanna do that because they’re afraid of dealing with the city, and the town hall, and the neighbors’ meetings… But I really enjoy that, because I like talking to people, I like to understand “Hey man, were there issues?” So I was not afraid to talk to the town about getting an extra two units, and it ended up being super-successful as far as we got the permit fairly easily. A lot of people are scared of doing that, but I welcome the challenge.

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

Prady Tewarie: The best real estate investing advice ever is that it’s okay to not know everything. You don’t have to know every single thing about real estate. I meet quite a few young people that constantly ask me about which books to read, which resources to go to, which courses to take in college… I love all those resources, I love all the podcasts, I love all that, but at the end of the day the people that win in life are the people who take action. All the talent, all the skill – it will always pale in comparison to action. So if you don’t know everything, that’s totally fine, because there’s plenty of people out there in the world that do know the things that you don’t, and your goal is to find  a way that they can help you. That should be your obsession, as opposed to trying to learn everything all the time… Because what that’s going to do is that’s going to lead to procrastination.

I’m here on this podcast today, and able to build real estate and financial freedom just because I went for it. I don’t think I have any special gifts, or talents, or business acumen at all. I just took the challenge, like “Yeah, I’ll do it.” And if I don’t think I can do it, I’ll find other people that can help me get there.

Theo Hicks: Prady, are you ready for the Best Ever Lightning Round?

Prady Tewarie: Sure, man.

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

Break: [00:22:13].09] to [00:22:57].15]

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

Prady Tewarie: The best ever book that I’ve recently read is Built to Sell. It’s a book that talks specifically about how to systemize businesses. And I’ll mention another book that [unintelligible [00:23:07].29] which is a very famous book, “Principles”, by Ray Dalio. It talks about systemizing and finding principles in everyday occurrences.

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

Prady Tewarie: Start another one.

Theo Hicks: How would you start over today if you had little or no capital?

Prady Tewarie: Build better relationships.

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

Prady Tewarie: The worst deal that I have done is where I didn’t do my homework on the tenants. That was a big mistake. I didn’t know the product. It was in a college area, which down the line ended up being profitable; in the beginning it was a nightmare. I remember I had the tenants in there, and it ended up being Section 8 tenants… And while it was great, but it was a huge nightmare. A lot of legal battles. I just didn’t know the product that I was getting into, nor did I understand the tenant pool, so… Big mistake of mine.

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

Prady Tewarie: The best place to reach me is actually through Instagram. If you’re looking up Prady Tewarie, you can usually reach me through DM. That’s probably the best way to reach me.

Theo Hicks: Alright, Prady, I really appreciate you coming on the show today and speaking with us about your real estate journey.  Some very powerful information… Just to summarize what we discussed – we talked about how you were able to start your investment journey while you were in college, and not really knowing how you’d pay for these deals and how you had the time to actually complete these deals, and your solution was to build a great team to rely on.

You talked a lot about your strategy behind building a team. First and foremost, you’re gonna be under-skilled when you’re starting out, but don’t let that be the reason why you don’t do anything. Instead, own that and then focus on how to solve that problem, which is, again, to create this team.

One specific strategy that you talked about is your networking strategy. When you’re ready to, for example, transition into condo conversion, you didn’t go out and try to find individual team members that had no relation to one another. You started off with the broker, and then from then you asked them for a referral, and then from that referral, the architect, you asked a referral from them… That way, everyone is connected, there’s that alignment of interest, and everyone is gonna win along the way and everyone’s in it for the long-term because of that incentive structure and because everyone is connected.

We talked about why you decided to go from the rentals to the condo conversions, and essentially it was just because it was kind of the next challenge for you, and you wanted to try your hand at something else, essentially completely different than the rentals.

You did provide a really strong piece of advice about your rental property strategy when you were doing it, which was focusing on [unintelligible [00:25:43].07] using that to your advantage, and realizing that you had a different point of view, and while everyone was figuring out what types of kitchens, and what types of flooring to put in these homes for college students, you instead knew that college students actually cared about technology, not how nice their kitchen was… So rather than just fixing things, you just bought iPads and some automation. The other example was the Uber and Lyft example.

You talked about how you found your condo conversions, and you are doing that through knocking on doors and actually talking to the owners in person. Sometimes it’s a quick deal, like the example you gave when the [unintelligible [00:26:14].03] was two weeks; other times it might not be for months or for years.

Then you went through a specific example of a deal that you’re currently working on. That was the one that was actually two units, and you were able to convert it into four condos, so you got those two condos for free, and because of that, you’re gonna hopefully net around 1.5 to 2 million dollars on that deal.

One of your value-adds for that deal was figuring out how to solve the problem for the owner. You helped them move their stuff out, then they needed help with cash to buy another property, they needed some flexibility with the closing date.

Then lastly you provided your best ever advice, which was something you live by – you don’t need to know everything to get started. It’s more important to take action. As you said, the people that win in life are the people that take action.

Prady, I really appreciate you coming on the show today and talking with all of us and providing your best ever advice. Thank you to everyone who listened. Have a best ever day, and we’ll talk to you soon.

Prady Tewarie: Hey man, thank you so much. It was a pleasure.

JF1673: IT Guy Realizes Retirement Looks Bleak – Turns To Real Estate Investing For Help with John Fortes

At some point, most of us start thinking about retirement. John was ahead of the curve for most people and at a younger age started projecting out his income and savings. He realized retirement was not looking great, tried to figure out the stock market, then fell in love with real estate investing. Now he’s got a large portfolio and currently working on a 41 unit deal. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“It’s all about partnerships” – John Fortes on his real estate investing success

 

John Fortes Real Estate Background:

  • One of the founding partners of Community First Investment Group
  • has 62 units under management and is currently syndicating another 41 units
  • Based in Boston, MA
  • Say hi to him at https://www.cfigwealth.com/
  • Best Ever Book: The Third Door

 


Sponsored by Stessa – Maximize tax deductions on your rental properties. Get your free tax guide from Stessa, the essential tool for rental property owners.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, John Fortes. How are you doing, John?

John Fortes: Hey, Joe. How are you doing? I’m doing good. Thank you for having me.

Joe Fairless: Well, I’m doing well, and I’m glad to hear that also. Well, looking forward to this conversation. A little bit about John – he is one of the founding partners of Community First Investment Group. He’s got over 63 units under management, and is currently syndicating another 41 units. He’s based near Boston, Massachusetts. With that being said, John, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

John Fortes: Yes. I have a background in IT, but back in the day I noticed that the 401K situation wasn’t gonna help me retire. I presented this to my wife, and I stumbled upon multiple other things. I went through five years of just researching, and I finally decided to do it.

I valued real estate over stocks, so that’s how I got here, and it led me to form the company, Community First, with my two other partners, and… Now I’m here on your show.

Joe Fairless: So you were looking at your retirement plan, and what indicated that “Hey, this isn’t gonna work out. I need to do something else”?

John Fortes: Great question. Projecting it out. I started working, and then nine years later I’m projecting it out to see in another nine years what it would look like, and I said, “Hm, this is very shaky to me.” It’s not much to live off of, so I said,  “I’ve gotta figure out something else.” I literally turned to stocks, I tried to figure that out, I could not make sense of it. Real estate really was understanding… And I could completely understand real estate because I went through the process of buying a house and seeing how equity worked.

Joe Fairless: So how long ago was this?

John Fortes: Five years ago, in 2013. Six now, yeah.

Joe Fairless: Okay, five to six years ago. And what did you do immediately after, to prepare you, to where you are today?

John Fortes: I presented it to my wife, and I went through a huge growth process from 2014, 2015 and 2016, and in 2017 I finally joined Bigger Pockets. From there I did a bunch of research, and just kind of networked with a few people and just poked holes in a few arguments that I had, but nothing really fell through the concrete, so I was like “Okay, it’s got some legs.”

Then I started looking at my own home in value, and how it’s appreciating, and how basically if you buy right, you can really enjoy the benefits of the appreciation… But when I go back and look at it if I have a tenant doing everything that I’m doing in my own home, I saw crazy value in that.

Then when I purchased my first single-family – kind of like you; you have a few single-families…

Joe Fairless: Yup, I do.

John Fortes: I’m always kind of surprised that you still have them, but you said they cash-flow well…

Joe Fairless: You want them?

John Fortes: [laughs]

Joe Fairless: 175k per single-family. I’ll give them to you; we’ll do the contract right after we get done with this conversation.

John Fortes: I’ve shifted my focus since then… [laughs]

Joe Fairless: Oh, darn it! Okay…

John Fortes: [laughs] I purchased mine and then I saw the value of multifamily, because I wanted to scale… So that’s when I reached out to my first partner, who’s my tax accountant. He runs my analysis for me, and he’s great with numbers; I don’t wanna do anything with numbers. Now I wanna focus on investor relations, raising money, raising capital, broker relations, looking for the opportunities and presenting it to my partner… Because he doesn’t wanna be the face of anything, meaning he doesn’t wanna speak to people really…

Joe Fairless: [laughs] I know the type, yeah.

John Fortes: Yeah. He’s awesome when you get him to talk, but he just doesn’t wanna go ahead and look for it.

Joe Fairless: Yup.

John Fortes: But with that said, my other partner’s the same way, but he has a focus in inspection companies. He has an inspection company on the residential side, and then he has a multifamily inspection company as well, so… He helps us with boots on the ground and what we’re looking for when we’re looking through the property, when we’re walking through the property; he knows exactly what to look for. So we really, really help each other. We form a nice little team.

Joe Fairless: Oh, absolutely. Yeah, so you’ve got someone who is good at the underwriting, you’ve got someone who’s good on due diligence, and you’ve got someone who’s good at bringing in the capital… What about asset management? Is that the inspection person who focuses on asset management, or the accountant?

John Fortes: Well, it’s the inspection person who focuses on the asset managing, making sure everything’s going according to plan, and then we’ll all get on a call with the PM if we have to, and just say “Hey, why is this happening, why is that happening? Can you explain  this to us? We expected this…”, or something like that.

Not that any call has gone bad or anything, but we just have a good sense of what we’re looking at when we’re dealing with certain things, when we have to reach out to the PM.

Joe Fairless: Got it. So let’s talk about this – is it 63 units that you have under management?

John Fortes: It’s a 62-unit, yeah. A 62-unit in Johnson City, Tennessee.

Joe Fairless: Alright, 62 units in [00:07:24].20] You are near Boston, Massachusetts, which is not close to [00:07:30].04] I imagine. I know where Tennessee is, I don’t know where Johnson City, Tennessee is. How did you find the property in Johnson City, Tennessee?

John Fortes: One of our partners in the community that we’re part of–

Joe Fairless: Which one?

John Fortes: [unintelligible [00:07:41].25]

Joe Fairless: Okay. Yup.

John Fortes: They’ve been good to us. And everybody in the community has been kind of really formed like a brotherhood/sisterhood, and it’s tightly knit with anybody that’s actively in the communities… So they found an opportunity and they had someone drop out, and my team was literally looking; it was a JV opportunity, and after we did our due diligence and looked at everything, and we knew we had another member as boots on the ground in the area, it made sense to do it. We would have been crazy if we didn’t do it. Everyone in that JV opportunity has been wonderful to work with. Had we not been part of the community, we probably wouldn’t do the deal because we wouldn’t know them like we did. So that was important.

Joe Fairless: What did you all bring that was missing from the partnership?

John Fortes: We brought capital, but also we brought another level of looking over the analysis of the work, and then another level of being able to walk the property, and with my partner Matt give a great detail of what the scope of the work that needs to be done there in the inspection period.

Joe Fairless: Okay. And how many other partners do you have besides your team of three?

John Fortes: There’s seven of us total in that deal.

Joe Fairless: Wow. So seven total people, or you three plus —

John Fortes: Yes. I’m counting us as an entity, yes.

Joe Fairless: Okay, so you three is one, and then you’ve got six other people who are in the deal?

John Fortes: Yes.

Joe Fairless: And are they six other entities, or are there literally six other people?

John Fortes: I believe some came in as entities and some came in as just an individual.

Joe Fairless: Okay, so there’s probably more than six–

John Fortes: Oh, no, no, we know everybody that’s part of the deal, but some people wanted to come–

Joe Fairless: Oh, right, right, right. So it’s six people behind the entity, or six people, plus you three. So there’s nine of you on the general partnership side, correct?

John Fortes: Yes.

Joe Fairless: How did you structure the general partnership?

John Fortes: We came in with a per capita amount, and that’s kind of how we came through with it. The person that found the deal got a little bit bigger piece of the equity as well.

Joe Fairless: Okay, so someone who found the deal got a piece of equity, plus it was split up among you all based on the capital that you brought to the deal.

John Fortes: Yeah. And then another partner – I wanted to mention this because he’s been very important. One of our partners, Darren – he has been boots on the ground, because most of us are all out of state. So he got another additional piece of the equity as well as part of the structure, for his hard work in that. That’s very important, because he deserves it.

Joe Fairless: Yeah, that’s very valuable. So you’ve got someone who found the deal, they get equity; someone boots on the ground, they get equity, and then those two people may or may not have raised money, but everyone gets equity based on how much equity they brought to the deal.

John Fortes: Yes.

Joe Fairless: How do you make decisions on which direction to take the property, on which direction to take the property?

John Fortes: This is the fun part – we all get on a call and we discuss the two different options that we need to decide on, and we all make the decision on the call. So that’s really, really been a great experience, because in the other syndication the pool is smaller, and now we have a better understanding of how to tackle certain things because of this project, the 62. So we do make a decision by getting on a call, presenting the details first and then presenting the options.

Joe Fairless: What were you making the decision on on the last call you did with everyone?

John Fortes: The last call we had to make the decision because when we hired a contractor for a particular piece of the project, when he presented us a bill, his bill was a little bit higher than what he already negotiated on…

Joe Fairless: Imagine that…

John Fortes: [laughs] Oh man, you’ve gone through that too? [laughter] So with that said, we had to decide on how could we pivot for this, and good thing we work with a great PM that could outsource different project to different people to bring at different phases of the project… And it’s a very, very highly intense project. We have one building down, but two of them still with some vacancies in it… But we are still cash-flowing about $3,000/month. So that’s a testament to the underwriting that was done on this project.

Joe Fairless: How much higher was the bill than what they quoted?

John Fortes: I believe it was like — it had to be over 50k, because we weren’t comfortable…

Joe Fairless: Dang…

John Fortes: I can’t remember the exact number, but it was like “Are you kidding me?” And we were looking at the itemized — it appeared he was charging an hourly rate for just like a light fixture, or something like that…

Joe Fairless: Oh, wow…

John Fortes: Something insane. And when we went through and itemized it, because we’re questioning everything on that, and it was ridiculous from what he already told us… And it was certain things like that lightwork that could have just been done by a handyman, and8 he just really, really overcharged us on those things.

Joe Fairless: So when you have those calls, how do you structure the conversation with — I’m sure not all nine of you are on every call, but I’m sure there’s more than three or four of you on every call… So how do you structure a conversation with that many people?

John Fortes: Well, it’s all about communication. If we know certain people are not gonna be on the call, we try to present what is actually happening and what will be discussed and what needs a decision on, and we try to give everyone an opportunity to have a voice. That’s very important. And that’s been very, very awesome with this group, because we all have the same end goal, we all have the potential of this property, and we all know exactly what we need to do.

We also present options, the worst-case scenario and the best-case scenario during those calls, and we make sure that whoever can’t make it knows exactly everything that we are going to discuss, and we try to get something beforehand, for their not being able to make the meeting.

Joe Fairless: Yup. It sounds like you get along really well with the other partners, and you have a lot of respect for them. You can tell just by hearing how you talk about them.

John Fortes: Oh, they’ve been great. It’s been an awesome partnership, and I know there’s a bunch of us in it, but it was everybody that wants to learn, everybody that wanted to do this, and anybody that just had the desire, the passion to just be able to go ahead and let’s make this happen.

Joe Fairless: How much equity did you bring to the deal?

John Fortes: As my group, we brought in 81k of the raise.

Joe Fairless: What was the total raise?

John Fortes: It was 550k, I believe.

Joe Fairless: Okay. And what structure do you have with investors?

John Fortes: Everybody that’s in it — we don’t have any passive investors in this deal.

Joe Fairless: Okay.

John Fortes: So that’s why on this one, the 41, we are syndicating.

Joe Fairless: Okay. Of the nine people that you have on the GP side, is that everyone in the deal? The equity actually came from all nine of you?

John Fortes: Yes. Everyone has equity in the deal.

Joe Fairless: Okay, got it. Did you personally invest in this one?

John Fortes: Yes, we all did. My whole Community First did, we invested in this deal, and everybody else that is part of the GP contributed to the deal.

Joe Fairless: Is the plan to renovate it, reposition and refinance out, or what’s the exit strategy, if there is one?

John Fortes: The exit is pretty unique. We have a worst-case and a best-case. The worst-case is we stay in the bridge loan, and we have options to be able to go out. The best-case is to refi after repositioning, and… As a matter of fact, the last conversation we had, the property is going to be one of the best in the area, so we will be able to [unintelligible [00:15:42].01]. We can command – or whatever we wanna try to do – market rate, and maybe even a slight bump, but I’m not even entertaining that; market rate would be great.

Joe Fairless: This 41-unit that you’re syndicating – where is that located?

John Fortes: In Chattanooga. It’s quite a way.

Joe Fairless: In Tennessee…

John Fortes: Yes.

Joe Fairless: And how many partners do you have on that one?

John Fortes: There’s five of us on the GP side, I believe.

Joe Fairless: Oh, that’s nothing.

John Fortes: [laughs] That’s nothing anymore, right?

Joe Fairless: Yeah. You make a decision in the blink of an eye.

John Fortes: Yeah. It’s basically a lot of people from the first deal, that came on this deal… So it’s great. It’s a great opportunity again, and the raise was, I believe, 600k, and it was recommended by us to syndicate this one. We kind of fell into syndication, and it was funny, because we had  the money raised to complete the deal before we even kicked off the meeting with the syndication attorney. It was just that quick for us to raise.

Joe Fairless: And what’s the business plan with this deal?

John Fortes: It’s gonna cash-flow from day one. It is under-rented by $75 to $125 in certain units, and it’s a light value-add play where we can turnover units as people’s leases come up, if they don’t choose to stay… And we can kind of be able to position a unit for them to get the bump increase, and just really, really light value-added, and complete that for a five-year hold on that one.

Joe Fairless: And when you take a look at this deal, compared to the other deal — I know you said the other deal you came across through the group that you’re in… How did you come across this deal?

John Fortes: The same person that found the other deal was like “Gosh, are you guys ready to rock ‘n roll again?” We said, “Absolutely!” We work well together, it’s a great opportunity, and it’s all about partnerships… Because sometimes it might take you two years to find your own deal, and if you wanna hold on to whatever you have for two years, or you wanna rock ‘n roll with someone else – you’re still doing what you want to do, it’s just someone else found an opportunity. It doesn’t matter at the end of the day. You’re all doing it and you’re all going to benefit from it at the end of the day as well… So partnerships are important, and I preach it heavily everywhere; I don’t know if you’ve seen me screaming from the hills… I really believe in it, because there’s a lot of people in the industry, and it’s built off partnerships. I can’t probably name one person that’s doing it alone.

Joe Fairless: Yup. Well, when you look at the two deals and you think about the lessons you’ve learned so far, what’s something that hasn’t gone according to plan? …other than that contractor, which clearly that’s an issue, but you resolved that… What’s something else that hasn’t gone according to plan? Probably the 62-unit, since the 41-unit is still in motion.

John Fortes: Yeah, funny you ask… It’s been the 41-unit. The reason why is we’ve pivoted lenders twice. Was it twice…? Once, once. The other time was a back-up, just in case we needed to… So we were going to with agency debt, and they didn’t approve of our seasoning from the 62-unit because of how fast we went under contract with this one; we were supposed to close in December 21st, or something like that… And we’ve extended twice since we actually — we’re supposed to close tomorrow, but we’re extending out to the 8th, and it’s only because we had just received approval from the lender, we shifted to a community bank, and… If all went according to plan, we would have had this thing closed already; it’s just we had to move from the agency debt to community bank debt. We got the approval… And I think that was all in part to maybe the government shutdown, because it slowed a lot of things down; we don’t know, I can’t pin that down for sure. But yeah, that’s the only thing.

Joe Fairless: Are you signing on these loans?

John Fortes: Yes.

Joe Fairless: And are they recourse?

John Fortes: Yes, they are recourse.

Joe Fairless: How do you think about that in terms of your personal financial stability?

John Fortes: Well, it doesn’t bother me, because of the fact that the business plan — I’m confident in our underwriting, I’m confident in our business plan, I’m confident in our strategy, so it doesn’t bother me as much as it would for maybe someone else… But I do see the power of non-recourse, and I completely get it, but when you’re trying to make things happen in the beginning, why not…? I mean, come on…

Joe Fairless: [laughs] Yeah, I get that. Based on your experience, what is your best real estate investing advice ever?

John Fortes: Partner up. Find partners that complement you, and just go for it.

Joe Fairless: And clearly, you’re living and breathing that advice. I don’t think I need to ask you to elaborate, because we’ve already talked about the power of partnerships with what you’re doing.

Alright, we’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

John Fortes: Let’s do it.

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

Break: [00:20:57].05] to [00:22:14].19]

Joe Fairless: Best ever book you’ve recently read?

John Fortes: Best ever book… The Third Door, by Alex Banayan I love it.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about already?

John Fortes: When I bought my single-family home, I wanted to do the BRRRR strategy, but when you buy turnkey, you can’t do the BRRRR strategy… [laughs] So that was my mistake, but it’s still cash-flowing well, it’s doing good, and… I just can’t refi out of it, so hence why partnerships is important when I kind of ventured out.

Joe Fairless: I would think in Boston it would have appreciated just because the market went up enough, even if it was turnkey… Not the case?

John Fortes: I failed to mention that, but my first investment was in Florida. [laughs]

Joe Fairless: Oh, okay… What part?

John Fortes: Cocoa. right next to my sister-in-law, because my wife’s parents have a home in Cocoa Beach, and their daughter lives in Cocoa, and I was like “Hey, I’m just gonna look in the area.”

Joe Fairless: Well, I’ve never been to that area of Florida, but I don’t feel sorry for you, because you mentioned that it’s Cocoa Beach, so…

John Fortes: [laughs]

Joe Fairless: …it sounds like you’re still enjoying yourself, and you got some life experiences from the transaction.

John Fortes: Yes, yes.

Joe Fairless: What’s the best ever deal you’ve done?

John Fortes: My own personal home. The reason why is when I was going through those periods of 2014 through ’16, I saw the value of how appreciation worked with every paydown when I paid my own mortgage… So when I incorporated that and made sense of it, saying “Hey, what if I had someone else do this for me?”, I saw that basically an investment home could be a big piggy bank for you.

Joe Fairless: Best ever way you like to give back?

John Fortes: I love [unintelligible [00:23:53].19] my church and helping my friends and family with realizing the power of real estate. Like I said, you don’t need me to say it again, but I’m gonna say it again – I scream it from the hills, and I blast it and I try to promote it as much as possible, because I think it’s important. Because where I grew up, no one was telling us this stuff; schools ain’t, we don’t have a lot of people around us that tell us these things, and we don’t grow up around certain people that kind of know better, so… When I took my education in finance and it kind of shifted into this, then I scream it from the hills.

Joe Fairless: What was the point in time during your path where you had to put the chips on the table, and you were financially really strapped, at what point in time — if any; perhaps I shouldn’t imply that there was, but usually in any entrepreneur’s journey there’s a point in time where it’s like “Okay, I really stretched, but I believe in this.” Is there a part that you can think of?

John Fortes: Man, this hits home, because right now, the reason why I say that is had I not put all of this in motion — and this is the first time I’m gonna speak on it publicly, and I thank you for the platform, but I think it’s important… I was laid off in November. So right now, right now is the time.

Joe Fairless: You’re all in.

John Fortes: Going through it, yes. I am living it.

Joe Fairless: Well, it’s impressive what you’ve done, and the partnerships that you’ve created as a result of the value that you’ve added to all the people, and the communities that you’re actively participating in. Before we started recording, you and I hadn’t had a conversation before, but I’d seen you on my Facebook community, BestEverCommunity.com, and other places, and I told you (I think I said) “I feel like I know you already because of how active and how involved you are”, and also in the Bigger Pockets community… You’re always encouraging others. That type of stuff – well, “Service to many leads to greatness.” You’re an example of that.

John Fortes: I appreciate that, thank you. I believe firmly in the giver’s gain. I don’t do it for that reason, but it’s something of a mantra that me and a fellow person recite back; one of my brothers in this community – we say it back and forth to each other, and it really resonated between us because it helps us in certain situations, so I appreciate you saying that. Thank you.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

John Fortes: I’m all over social media, John Fortes. I kind of use Instagram every now and then, but www.cfigwealth.com.

Joe Fairless: John, I’m grateful that you were on the show, thank you so much for joining us. Thanks for talking about the power of partnerships. That’s one components of this, it’s a main component, but I think the primary component is you being resourceful and putting yourself out there and adding value and wanting to help and contribute, and as a result, you find yourself in situations where you’re attracting others who want to be around you, and then you’re adding value, and then you all go together, and you’re just scratching the surface right now.

I’m excited to interview you at this stage in the game, and then I’m excited to bring you back in a couple of years once you continue to do what you’re doing now, for even an extended period of time.

Thanks again for being on the show, John. I hope you have a best ever day, and we’ll talk to you soon.

John Fortes: I appreciate you. Thank you, and God bless.

JF1574: From Real Estate Being A JOB To Being A Passive Investor with Steeve Breton

Steeve was like a lot of real estate investors, started buying properties to hold and was self managing. He grew tired of all the work he was having to do, a full time job almost. He started passively investing in apartment syndications and never looked back, even performing his own syndication deals now. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Steeve Breton Real Estate Background:

  • Founder of Velocity Capital, focus on large multifamily syndications
  • Partner in over 14 apartment syndications totaling over 1,700 units – 1,100 as LP, 608 as GP
  • Based in Boston, MA
  • Say hi to him at https://velocitycap.com/
  • Best Ever Book: The One Thing by Gary Keller

 


Sponsored by Stessa – The simple way to track rental property performance. Get dashboard reporting, smarter income and expense tracking and tax-ready financials. Get your free account at stessa.com/bestever


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Steeve Breton. How are you doing, Steeve?

Steeve Breton: I’m doing great, thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Steeve – he is the founder of Velocity Capital (velocitycap.com), which focuses on large multifamily syndications. He’s a partner in 14 apartment syndications totaling 1,700 units, and we’ll break that down for you from an LP/GP side – 1,100 as a limited partner, and 608 as a general partner. Based in Boston, Massachusetts. With that being said, Steeve, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Steeve Breton: Sure. I started in 2012 in real estate investing, after watching my portfolio go down with the financial crisis of 2008… I saw it coming back slowly, but it just wasn’t coming back as quickly as I’d like, and I had always done the “Hold on to your portfolio, it’s all gonna come back. You have to listen to everyone’s financial advice there.” Then I finally got tired of it after reading Rich Dad, Poor Dad; that was a  good clue as to what other people are doing.

I went out and bought a triplex, and then a duplex, and then another triplex, and I just kept going. Then I slowly was realizing that this is like having another job, because I was self-managing, and that’s when I got into the passive investment space, buying into projects or apartment buildings that were sponsored by other folks. They were doing all of the heavy lifting, and I was just simply a limited partner, making a great return.

Joe Fairless: Before we get into the second half of the story, I imagine, which is you on the GP side, pros and cons of investing in a triplex, versus a passive investor in a syndication?

Steeve Breton: I’ll go with the pros – I think in the end if you’re self-managing, you can probably make a bit better of a return, because you are gonna get all the tax benefits, the mortgage paydown, the appreciation etc. plus your cashflow. So all in all it’s probably a little bit better, depending on your market, but it also comes with a lot of headaches. It’s a fair amount of work.

I still do own some of those apartments. I just sold off some just to make it a bit more manageable for me. So that’s the pros of ownership.

On the syndication side, or being a passive investor, I literally do the analysis upfront, so I do have to vet the project sponsor and the project itself, the apartment complex. Once I have written that check and I’ve decided to invest, I’m pretty much hands-off for 3, 4, 5 years or whatever it is, and the mailbox money just comes in.

Joe Fairless: And you mentioned perhaps better returns on the triplex… I was just looking at my single-family home portfolio – I have three single-family homes; I’ve had them since 7-9 years… And this year, year-to-date, I’ve made $951 in total across all three of them, because when someone moves out there’s an expense, and mortgage, and property management etc. So from a better returns standpoint, are your deals value-add deals, or what allows your triplexes to get slightly better returns?

Steeve Breton: I also have a single-family, but on most of these I did buy them where there was at least a little distress. One of them in particular I did a gut rehab on a triplex… So there was a lot of construction management upfront, and now they’re cash-flowing about 10%-12% for each of them. It’s in the Boston area, so all-in we were in at 300k-400k.

Joe Fairless: So you invested in 1,100 units as a limited partner… Is that still your focus, or since you are in 608 as a GP, now you’re focused on the GP side?

Steeve Breton: I’m still doing a bit of both, actually. I literally just signed up as a passive investor again, limited partner, in a syndication out of Texas. It’s a great operator there. We’re between buying and selling a house, so we’ve got a bit of money to invest on the sale of our old house… So I jumped on that one as a passive investor, because I wanna put my money to work.

I also invest, I would say, as a limited partner in my own syndicated deals, because I wanna have skin in the game as well… So I’m very much still active in the passive side of it, but then what happened was after investing in a dozen of these things over the course of 5-6 years, I got to know some of the syndicator pretty well, I got a bit under the covers… One of them is here in Boston, so we’re very friendly; and I started realizing how much there is to gain as the syndicator.

I also had a lot of friends and family who wanted to be involved, and I was steering them toward these other passive deals that I was getting into, but in the end they wanted to invest with me on my properties, which was a bit of the nudge that I needed to start looking at what other possibilities there were where I could be the lead, I can get the greater returns and I could also help friends and family.

Joe Fairless: You’ve got 608 as a general partner… How many apartment communities is that?

Steeve Breton: The 608 is three communities. My first deal was 130 units in Texas. Then we did another 90 units, and then 388.

Joe Fairless: Where in Texas is the 130?

Steeve Breton: The 130 is in San Antonio.

Joe Fairless: Okay, and then the 90?

Steeve Breton: Tyler, Texas, and then back in San Antonio again.

Joe Fairless: Got it, alright.

Steeve Breton: I’m under contract at the moment for 152 units down in Georgia.

Joe Fairless: Okay. You said 152?

Steeve Breton: 152.

Joe Fairless: Okay. Where in Georgia?

Steeve Breton: That’s Thomasville. It’s down in the South-West corner, by Tallahassee.

Joe Fairless: Okay. So you live in Boston, Massachusetts, your first GP deal was in San Antonio, and then you go way out in East Texas in Tyler, Texas (San Antonio is not East Texas), and then you go back to San Antonio and now you’re in Georgia. The main question is how are you finding these deals all over the U.S. so we’ll go with that.

Steeve Breton: Okay. Primarily, when investing in these investments, for me as a passive investor I’ve always considered the general partner first – who is the operator? Who am I putting my trust in to ensure that the deal is gonna go well, ensure that they’ve picked a good market etc.? There’s so much that goes into that. So now that I’ve become more active – I went and got a ton of training, worked my tail off trying to understand this business, I realized it’s going to be difficult to operate these from Boston. So I reached out to a lot of operators, people that I’ve invested with in the past, as well as others that I’ve met through a couple of different masterminds that I’m in, and what I’m looking for there are operators with high integrity, a long track record of success, folks that I know are gonna do what they set out to do. With that trust, I’m able to then partner with them, and what I have here in Boston is the ability to raise capital. That’s what I’m bringing to that partnership.

Joe Fairless: Got it, okay. So you found the operators through relationships, and they find the deals, and then your primary role in the partnership is to bring money to the transaction, so that they can close on the deals and they can operate it successfully.

Steeve Breton: Correct, yeah. And over time that has also evolved a bit, so I’m getting more involved in the underwriting of the deal, to right upfront looking at the numbers, helping with assumptions, talking to property management companies that are in the market, also getting involved in the actual due diligence, physical on-site due diligence, and signing on the loans to be a co-sponsor as well… So it does continue to evolve, and eventually I would like to be the sponsor myself at some point… But all of this that I’m telling you is all being done as I’m still working a full-time job.

Joe Fairless: Hah! I didn’t know that… What’s your full-time job, what industry?

Steeve Breton: I am in a biotech company, and I manage the IT systems for the commercial aspects of the business.

Joe Fairless: How much have you invested in your training? …for multifamily, not IT stuff.

Steeve Breton: I’ve gone to several weekend courses. Those were not a lot of money, but you’re gone for the weekend, you’ve gotta pay for your travel, and all that. That seems to be the first step most people take, these weekend bootcamps, and there’s a lot of value there initially.

Then I got into coaching, so I signed up as a coaching student. A lot of folks know where I’m doing that, so I don’t wanna throw numbers out there… But let’s say coaching in general, across the bunch that I’ve looked at, can range from 5k to 15k.

Then I’ve also jumped into a couple of masterminds, and again, those can be anywhere from 10k-20k. I think there’s probably some that are far higher than that.

Joe Fairless: And you’re in multiple masterminds where you’ve invested at minimum 10k to be in?

Steeve Breton: Correct.

Joe Fairless: And you said you’re a coaching student – who are you a coaching student of?

Steeve Breton: I signed up with Rod Khleif.

Joe Fairless: Got it. Cool. And when you take a look at the investment that you’ve made for all the training – for the weekend bootcamps, the one-on-one stuff, the masterminds – approximately how much have you invested in total?

Steeve Breton: That’s funny, I should have calculated this well in advance of this interview, but I would say 25k is the minimum. It’s probably closer to 35k-40k.

Joe Fairless: Okay. So let’s go on the high end, let’s just say 40k. You’ve invested 40k… With just the GP side of things, approximately how much money have you made as a result of being a GP, to date, on 608 units?

Steeve Breton: I would say about 125k — I’m sorry, it will be 125k when I close this new property here in December.

Joe Fairless: And that’s over what period of time since you’ve started the training?

Steeve Breton: That is almost a year to date, since I started coaching. The training – probably another six months prior to that.

Joe Fairless: Got it. The reason why I ask – and I believe we’ve just met on this call, right? Okay, yeah — I meet a lot of people… So the reason why I ask is I didn’t know where the conversation was going, and it’s just interesting to hear the thought process of people who choose to do training, and go into weekend bootcamps, and travel all over, and how they think about the investment of their dollars into that, versus people who think “Oh, this is too expensive. I’m not gonna do it.” Ultimately, that’s why I was asking about the return on your investment for this, and it’s three times.

Steeve Breton: Yeah. Let me also clarify a couple points there… So that’s the money that I made just this year. Going into the deal, you get various parts of that general partnership. One of the things that I’m also gaining there is equity in the deal, and all of these deals are heavy value-add, so in the end we’re making a lot of money on the back-end. If the project goes well, the sponsors are then going to be compensated for bringing together a complex project at the end of that project when it sells; so I’m probably sitting on half a million dollars in equity that, again, if all goes well, and we have every intention of meeting our goals, I’ll have that payout in five years from now.

Joe Fairless: The 130 units in San Antonio, the first one that you were on the GP side, how was that structured on the GP side where you brought the equity?

Steeve Breton: So in that case, generally on these deals the equity or bringing in the money to get the deal closed is about 30% of the general partnership. So if the deal requires two million dollars in capital raise for your down payment, because the bank loan’s gonna finance 80% or 75%, and it’s also the capital – we try to raise the money for the cap ex upfront, so we’re never strained for capital… So when we bring in that money – say it’s a  two million dollar raise and I do half of that, I bring in a million, then I would get 15% of the general partnership just for the capital raise piece. And of course, again, you can earn additional general partnership by being involved in the due diligence, the underwriting, and some of the other aspects.

Joe Fairless: The 152 units – this will be the fourth deal that you’re GP on… Has that structure evolved, and if so, how? …from the first one.

Steeve Breton: It’s only evolved in that I am trying to get more and more involved from the beginning, so when they’re first looking at the property and they think they have a winner, “Let’s talk about that underwriting and how might we make it a better return for investors” or “How may we de-risk it with (perhaps) the way that we’re going to finance the property?”, and many of the assumptions that we can make around raising rents etc, so that in the end we end up under-promising and over-delivering.

Joe Fairless: You’re in 1,700 units as an LP and a GP… What’s something that’s gone wrong?

Steeve Breton: A couple of those deals I jumped in probably a little too quickly… Mostly on the development side, and we all know it’s a bit more–

Joe Fairless: Oh, development…

Steeve Breton: Right… Some of those were amazing, so I made 30%, 35% in a couple of those deals. The one that went a bit sideways, it took a lot longer than we expected, there was an insurance claim… I won’t get into too many details there, but in the end we got all of our money back; I think I got maybe a 5% return over 18 months… So I didn’t lose any money, I certainly didn’t gain, but it did teach me a bit of a lesson. That’s one of the ones that I got in early on.

Another lesson was my very first commercial multifamily. It was a six-unit property, and I went into that one knowing it was in a bit of a rough neighborhood… And I thought “I’m gonna be able to help people by providing a nicer place to live, and I’ll clean up the neighborhood a bit by starting with my properties.” It was basically three duplexes all on one larger lot… And I did achieve those things – they did have a much better place to live, I’m providing this wonderful service for the people that live there, but in the end I think about that and I say “Well, at what cost? What could I be doing instead of all the hassles and the annoyance and the work that I had to do in that place, and continue to do?” I think I now have a really good property manager there, who’s now kind of running the show, so I’m a bit more hands-off… But I like to give back, and do other things, and I think my energy is much better served or spent there.

Joe Fairless: Yeah, opportunity cost, that’s for sure. I’ve been there as well. In terms of the 5% return over 18 months, what’s something that the general partner could have done differently, in your opinion, to have a better outcome with the deal?

Steeve Breton: In that case it was mainly — there was an insurance policy that wasn’t fully vetted; it didn’t quite cover what they thought it covered, and there’s a debate whether it was the agent or the insurance broker or whatever… But in the end, we could have gotten better insurance, we could have been certain that they were getting enough insurance, and then I think more importantly is when the deal started to go sideways, the partner went a little silent on us. It took a little bit of prodding, and then there was more communication, but at that time when it was no communication, everyone was thinking the worst. In the end, it wasn’t the worst. It’s not horrible to only make 5% on your money; I can live with that. But it’s not communicating enough, or often enough, and with enough detail.

Again, out of all these things you take from the various partners that you work with, or the many partnerships that you join – you understand what it is that you wanna do or not wanna do when it’s your turn to have that risk come to fruition, which, again, we all try to mitigate, but eventually something happens… So what are you gonna do about it? How are you going to communicate?

Also, even in your due diligence, in your underwriting upfront, how are you going to ensure that you avoid these things?

Joe Fairless: Very helpful, both of those points. From an insurance policy standpoint, what’s something that  you do with your deals now to mitigate that risk from happening on your deals?

Steeve Breton: To me – I wanna actually read the insurance policy, and just make sure that it’s in line with the area. If we’re in a high flood area, or hail area, you wanna make sure they’ve got proper coverage for roofs; flood area – what sort of flooding are we covered for and not covered for? There’s a lot of nuances there. Not that I’m an expert by any means, but I’ll just read it and then ask questions.

Joe Fairless: Based on your experience as a real estate investor, both on the LP and GP side, what’s your best real estate investing advice ever?

Steeve Breton: I would go with checking your mindset. There’s a story that I have in particular where I went and defined my goals – I’m gonna own X number of units, and I’m gonna be able to retire early, and all these things that I had thought of… And I spoke about those with my family; I have three boys – one of them is now in college. The oldest son kept asking me “When are you gonna go big?” This was when I had those 16 units still; I had sold one at the time, but I hadn’t really bought anything large yet. And he kept asking and I kept putting him off; “I have a responsibility, I have a family to feed” etc, all those stories I told myself.

Then one day at dinner time he just says “When are you gonna stop being such a…” — and I’ll say wimp, but that’s not the word he used.

Joe Fairless: [laughs] God…

Steeve Breton: This is when he was a senior in high school.

Joe Fairless: [laughs] Oh, man…

Steeve Breton: So I had to take a good, hard look at myself in that moment, and he was 100% right. I had already researched, I had done training, I knew everything about this business — not everything, but everything I needed to know in order to go and succeed at it. What I didn’t have is the right mindset. I didn’t realize the things that were holding me back.

Sure enough, I went ahead and signed up with Rod Khleif at the moment; I had looked at a bunch of coaching, and what I really liked about Rod or the Lifetime CashFlow coaching is he has a lot of mindset built into there. It also reminded me of — I think Tim Ferriss had something called “Fear setting.”

Joe Fairless: Yeah, that’s Tim.

Steeve Breton: Goal setting is super important, but at the same time you need to understand what are your fears. On the goal side, if you have absolute certainty that you can’t fail, what is it that you’re going to do? What would you wanna accomplish? And then you have to look at the opposite side of that, which is “What are the things that you’re afraid of? What are your fears that might prevent you from going and doing that thing, and actually accomplishing it?” That’s super-important.

Of course, once you list it out, then you can start looking at ways to prevent it or to fix whatever it is that might go wrong; it brings things to a better light.

All that said, I would say that I was on the precipice, I was almost ready, which is why I think he said that to me, so that when I did sign up for coaching, it was just like putting gasoline on the fire.

Joe Fairless: Yup.

Steeve Breton: I know a lot of people sign up for coaching and maybe they don’t have their head on straight yet or they’re not ready yet, and they may not do well, but trust me, it’s not the coaching. That’s more about your mindset.

Joe Fairless: And Tim Ferriss has a TED talk on that. Everyone listening, if you wanna watch that or listen to it, just google “tim ferriss ted talk.” There might have been two by now, but you’ll figure it out, one of those two talks about fear-setting.

Steeve Breton: Yeah, TED talks in general… I did a stint a couple years back where I just listened to a ton of those; I’m sure Tim was in there, but… There’s a lot of really good ones on mindset.

Joe Fairless: Oh, absolutely. Tony Robbins’ TED talk is another really good one. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Steeve Breton: Sure.

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

Break: [00:21:44].08] to [00:23:00].25]

Joe Fairless: What’s the best ever book you’ve recently read?

Steeve Breton: I’ve just recently re-read The One Thing by Gary Keller.

Joe Fairless: Best ever deal you’ve done that we haven’t talked about in detail yet?

Steeve Breton: Other than the three-family that I gut-renovated (but that’s not as interesting), the first deal in San Antonio – we added value to the point that when we sell this property, it’ll be about a two million dollar profit. Our plan on that was to do it within about 24 months of renovations, and it’s looking like about a year. That goes back to partnerships – the partner I have there is outstanding. He’s on point on every point, and really driving that project… And again, to be able to over-deliver in such a short period of time for us – it’s like a home run.

Joe Fairless: Best ever way you like to give back?

Steeve Breton: I used to coach — I have three boys, so coaching their soccer teams, hockey teams as they were growing up; now they’re in high school and college, and it’s like “Well, what do I do now?” I got involved in a local service organization, helping there… I also am thinking “How can I be a force multiplier?”, so it’s not just my activity that helps people of the world, but what I wanna do is help people by mentoring them.

I have a lot of friends in this business that I’ve met over the past year and  a half or so, and I’m always open for a phone call, always wanted to mentor and help people along in this business, because I think at some point they’ll be just like me; I sit here and think at some point I’m gonna cash in on some of these deals and I’ll have half a million dollars in my pocket. How much of that is enough? How much do I need, and at what point am I able to, let’s just say, I can write a check and fix a lot of other people’s problems? If I can do that, I hope the people that I surround myself with and that I mentor will also have that same mindset and do the same thing.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Steeve Breton: On the passive side it was that deal that I didn’t fully vet on, on a development deal.

Joe Fairless: That’s the 5% return over 18 months?

Steeve Breton: Yes.

Joe Fairless: What could you have done there on the passive side? Because it sounds like it was an insurance policy… Or was it something else?

Steeve Breton: It was a policy, but also the sponsor wasn’t really that experience as far as his own ability to manage these things. He had some experience, and I took a chance; I knew it going in. But then on my own side, as far as having my own property that I worked on and made a mistake – again, I go back to the headache of that sixplex I bought, and just not thinking that you can just change the world. If it’s in a bad neighborhood, it’s probably gonna stay that way… Or even if it’s up-and-coming, it could be years, and you have to live with the potential brain damage that comes with that.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Steeve Breton: Through my website. My company name is Velocity Capital, but the website is velocitycap.com.

Joe Fairless: Steeve, thank you so much for being on the show, talking about how you’re on the GP side and still have a  full-time job. You started out buying the duplexes and triplexes, and then went to the LP side, and then went to the GP side on deals… How it’s structured from a compensation standpoint, and then the importance of mindset. If everyone doesn’t have an 18-year-old full of testosterone calling him out at the dinner table, then at least we can go watch Tim Ferriss and learn about fear-setting, and go about it consciously, so that we do continually evolve our mindset. You mentioned TED talks is something you watched a lot; I did, too, when I was starting out, and that’s another great resource.

Congrats on what you’ve been doing, thanks for being on the show; I hope you have a best ever day, and we’ll talk to you soon.

Steeve Breton: Thank you. Take care.

#BestEverShow banner with Ricky Beliveau

JF1349: Using Social Media To Build Your Real Estate Brand #SkillSetSunday with Ricky Beliveau

Ricky has been a guest before and shared his Best Ever real estate advice and told us about his real estate business. Today Ricky is back to tell us about his social media division of his company. From tactical strategies to overall benefits of using social media, hear how a bigger presence on social media can help your real estate business. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Ricky Beliveau Real Estate Background:

-Owner of Volnay Capital

-Social media division Volnay Social Media has over 500,000 Instagram followers on 3 accounts

-Specializes in both buy and hold as well as condo conversions

-Currently have 8 development development projects in different stages in/around Boston

-Based in Boston, Massachusetts

-Say hi to him at www.VolnayCapital.com  

-Listen to his Best Ever Advice here: https://joefairless.com/podcast/jf1001-a-hidden-wealthy-niche-that-involves-a-fine-tuned-team/


Join us and our online investor community: BestEverCommunity.com


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Ricky Beliveau. How are you doing, Ricky?

Ricky Beliveau: Hey, Joe. How’s it going, man?

Joe Fairless: It’s going well, and nice to have you back on the show. Best Ever listeners, you might recognize Ricky’s first and last name; that’s because either you’re a buddy of his, or you heard his podcast. It was episode 1001, titled “A Hidden, Wealthy Niche That Involves a Fine-tuned Team.” If you want to learn more about that, as well as his best ever advice, then feel free to check that episode out – episode 1001.
Today we’re going to talk about the importance of social media in your business, Ricky, and how Best Ever listeners can implement a social media approach in theirs and help drive business results.

A little bit more about Ricky – he is the owner of Volnay Capital. He’s also got a social media division – Volnay Social Media – that has over $500,000 Instagram followers across three accounts. Based in Boston, Massachusetts. He currently has eight development deal projects in different stages in and around Boston. I personally know one person who has invested with Ricky and has many good things to say about that experience.

With that being said, Ricky, do you wanna give the Best Ever listeners a little bit more context around the importance of social media in your business and how you got started out with it?

Ricky Beliveau: Sure. I made my first Volnay Capital social media account on Instagram back a few years ago. The idea behind it was to showcase my work and to start building a brand. I didn’t really understand back then the importance of it or what it would grow into or what it would become today; at that time I really just wanted to be able to post pictures of my work and have people be able to see it.

Over the time, as that account grew and people started to follow it, it kind of picked up a lot of traction and started building recognition in the city of Boston as a company that people need to know about. I started being recognized, if you were able to understand what our brand was about and the quality of our work.

As that account was being built, I realized that I kind of shifted away from what I really wanted to be doing on that account, and I think that’s one thing that’s really important for the listeners to understand – when you’re creating a social media following, you wanna make sure you understand the direction you wanna take it.

What I’m kind of saying now is that I started showcasing other people’s work and stuff that wasn’t my own; stuff that I liked, and that I thought people would like to see, but wasn’t my own work… And I realized that that wasn’t Volnay Capital. So at that point is when I started our social media division, which was built around featuring other people’s work, and let Volnay Capital stand on its own as just showcasing artwork.

Joe Fairless: That makes sense. I apologize, because I should have asked this question at the beginning… What business results have you generated as a result of having a social media presence that you can tie a direct cause and effect to? And then once we establish the benefit for it, then I’ll follow up with some how-to questions.

Ricky Beliveau: Sure. So the first thing would be for selling real estate, as well as renting real estate. We used our Volnay Capital Facebook page, as well as our Instagram account, to market our condos that we do in Boston, as well as our rentals that we have both in Boston and in Providence.

So we were able to sell those directly to buyers, without having agents who would need to list those properties. We do put them out on the MLS and other ways to show them, but social media has been a huge asset to sell our properties.

One thing that’s different – and I love this about social media – is you can reach buyers who had no idea that they wanted to buy or rent in that location. When a buyer is thinking about where they wanna buy or where they wanna live, they might have a specific area that they’re thinking of, and then they’re close-minded to that area.

When you’re using social media you’re able to reach someone who might not know they wanna live in the neighborhood that you’re doing a project in… And when they see the quality of your work, and they see everything, it can trigger them to say “Hey, maybe I do wanna look in that neighborhood.” We’ve had many buyers buy from us who originally would never have considered the neighborhoods where our projects are, and the next thing you know they’re putting an offer in.

Also, we buy properties through social media, so we’ll have homeowners reach out to us, wholesalers will reach out to us, agents who come across opportunities, they’ve been following us and they say “Oh, I see they’re doing projects just like this [unintelligible [00:05:39].20]” from contractors. We use social media to vet a lot of our contractors, as well as find contractors.

I love a contractor who’s proud of his work; I love a contractor who wants to show it off on social media. If I can see a contractor is putting his tile work, his woodwork, the stuff that he’s doing, the project, and he’s proud of it, that just gives me a reassurance that he’s not hiding things; he wants to be out there, he wants to be seen.

So we use social media to find new subcontractors all the time, and we’re contacted all the time by subcontractors who wanna be featured on our accounts and they wanna be part of what we’re doing, and they understand the value in that… It’s been a great asset to our business.

Joe Fairless: One cautionary note, and it’s just because I’ve come across this recently with a contractor – not personally, but just through a meetup (one of the members of a meetup)… They worked with a contractor, he was terrible, took all their money, ran away, and then started a new Facebook page with a brand new company and now he’s trying to, I suspect, do the same thing again, because he’s done it to multiple people.

So the cautionary note here is if they do have a social media profile and they are promoting stuff, check out how long they’ve had that company and do some due diligence if they’ve had previous companies under different names… Because it’s free to create a Facebook page.

Ricky Beliveau: For sure. Instagram is great for that, you can see how long they’ve been on there, you can see their work, you can see if it’s something that was just created, if they have the past 2-3 years of work they’re providing. That’s just one small step in selecting a subcontractor, but it is a nice addition to the meetings and talking to other developers they’ve worked with.

Joe Fairless: So you have benefitted, from a business standpoint, in the ways you described, which are 1) selling real estate, as well as renting real estate, so finding buyers and finding renters. You have found buyers who wouldn’t necessarily looked at that neighborhood, because of the way social media is structured, and you find and do a component of the vetting process for vendors and other people who you work with… Are those the three primary business reasons why you’re focused on social media?

Ricky Beliveau: Yeah, and I guess another smaller one is, from an investor standpoint, I think just as I would look at a contractor and see his work, I think from investors, they like to see your track record and also what you’ve been up to or what you are working on. So if you’re someone who is doing house flipping or development projects and you are looking to raise capital, if someone’s able to look back and see your work and follow along with what you’re doing, there’s an additional level of comfort that that creates for an investor, and it gives your business more legitimacy.

The final one is really brand building and networking. You’ll meet like-minded people through social media, you follow each other’s accounts, you get ideas, as well as you’ll be able to build your brand so that when the time comes, you start to become recognized for your work.

Joe Fairless: Got it, okay. So that helps us set the foundation for our conversation, and Best Ever listeners, if you don’t have a social media presence and you are full-time in real estate investing – I mean, come on, really? So these are business reasons why, but I’m sure that most listeners, if they’re full-time real estate investors, have some sort of social media presence… But we went over that just to make sure we caught everyone’s attention in case they didn’t have it.

So now that you and I know that most people have some sort of presence, now it’s how do we get to the level that you’re at? …500,000 Instagram followers, from where we’re at – or hell, where I’m at. I’m not on Instagram; I personally don’t enjoy social media, which is something else we should talk about… But with Facebook, I think my Facebook page, the Joe Fairless page on Facebook – it’s got maybe like 2,500 or so likes… So how do I get to the level where you’re at?

Ricky Beliveau: From a Facebook perspective, Facebook is much more of an organic growth, and it’s been around for a lot longer, and they have a lot of algorithms in place. We look at Facebook more for when we want to run ads and use their ad platform. Our most growth on Facebook is when we’re looking to market a property to sell or to rent, because then we’ll run specific ads to target individuals who we feel would be interested in that unit. And then by doing that, we’re using keywords that we feel would hit people who are interested in what we do.

So one thing that’s different for our brand is how we allow the buyers to customize their units, kind of like the show Fixer Upper. So when we’re looking to target our condos, we’re looking for using the hashtag #fixerupper, #HDTV, #DIY… People who are interested in that space, because we feel that they’d be more likely to be interested in our units.

Joe Fairless: Interesting.

Ricky Beliveau: From an Instagram perspective, which is obviously our specialty, which is obviously a newer and still evolving platform – they’re continuously changing their algorithm, which makes it more complicated to continue to grow… But I think — kind of running through what you guys need to concentrate on… Number one is really figure out the direction of your page. When you’re building a social media presence, people wanna know what they’re following, and the posts that are gonna be posted there should follow that direction. So if it’s gonna be business-related for a house you’re renovating, it should be showing pictures of the house you’re renovating; it shouldn’t show your dog in the park. Because for the person who’s following that, they don’t wanna see your dog in the park; they’re interested in you from a real estate development perspective.

There’s a lot of accounts out there that are extremely successful with being both personal and business, and that’s fine; if you wanna show off yourself personally, with your work, as well as your family, and your dog, and your restaurants, that page can work as well. But you wanna select what direction you wanna go, and grow in that direction.

Also, another thing is you’re gonna feature only your work, or you’re gonna feature your work and other people’s work. You’ll see a lot of successful accounts that only show off their own work, because that’s what they want people to know. If you see a post on our page, it’s our work.

Then once you’ve decided that, it really comes down to content, and I preach this to all the people that I meet, regarding advice on social media – if people don’t like what you’re posting on your pages, they are not going to follow your account. That comes back to the quality of the images, quality of what you’re putting into the body of the post, the information you’re providing.

So is the content you’re providing both on Instagram with the images, or the post that you’re putting on your Facebook page, whether it’s linked information to websites or data about your area that you’re in regarding real estate  – is it something that people want to see on their page? And if it is, that’s the first step in getting them to follow you.

Joe Fairless: The quality of image and quality of the content in the post… Quality can be subjective based on who’s doing the quality assurance, so for you, what does a quality image mean and what does a quality content or copy of a post mean?

Ricky Beliveau: If you’re looking at my Volnay Capital page – that page, we’re doing a lot more photos taken with a phone, because it’s being taken on the job site of active work. So on that perspective, my content level (what is acceptable) is lower, because that’s much more active job site videos and active photos from job sites.

So I would say you just wanna make sure that if you’re doing a video, it’s using a steady hand, it’s not all over the place, and that you’re also describing what’s happening in the video well in the body of the post.

If you wanna go to the next level, there’s stuff out there that can hold your phone, like self-levelizers. We use those to post videos where you can put your phone right into the leveling device, so that when you do the video your phone will be completely still. That’s something that you’re starting to see more and more people do; they cost around $300 and it definitely takes your content to another level.

Another thing you can do to improve your videos is you can actually buy additional lenses to add to your camera on your phone. You go on Amazon, you can look up “additional lenses”; you can do a wide lens, you can do a more detailed lens… So it actually slides right onto the front of your iPhone or your other device, and then that will allow you to do wide-angle pictures or wide-angle videos right on your own phone. So these are all ways you can improve your content from just a standard video.

On our social media platform pages, the Kitchens of Instagram, Bathrooms of Instagram – those large accounts – we’re looking for professional-level photos, and we get hundreds of messages a day from people wanting us to showcase their work, and what we write back is we say [unintelligible [00:14:20].00] professional photographer, with a professional camera. That’s the level of picture that we expect, and that’s what our followers expect. So if we put a picture up that’s not at that level, we see that we don’t get the number of impressions, and we actually see that it can actually hurt our growth for that week.

Joe Fairless: And what page is that, compared to the other page?

Ricky Beliveau: So our main business page is Volnay Capital, and the kitchens_of_insta is our largest account; that’s the one with 186,000 followers. That showcases other people’s kitchens, and the designs of others; people are sending us their work, and we’re putting it on that account.

Joe Fairless: Very cool. So that’s how many followers?

Ricky Beliveau: Kitchens_of_insta has 186,000, and then our next account is bathrooms_of_insta; that’s 118,000. That features bathrooms that we’ve renovated and completed, as well as people all over the world send us their bathrooms to be featured on there.

Then bedrooms_of_insta – 84,000; exteriors_of_insta – 46,000, and then designers_of_insta – 50,000. So in total we just went over the 500,000 mark this Saturday.

Joe Fairless: Congrats on that. Interiors is how many thousands about?

Ricky Beliveau: Exteriors is 46,000, and then designers_of_insta is 50,000.

Joe Fairless: 46,000, and designers… What’s on designers?

Ricky Beliveau: That’s featuring the whole house, so it’s living rooms, laundry rooms… It can include kitchens, it can include patios… Really any type of design, as well as more actual design items, so the way a living room or a bedroom has furniture places in it, and all that. More than just the actual buildout.

Joe Fairless: Do you have a Volnay Capital account as well?

Ricky Beliveau: Yeah, that was the original account; that’s Volnay Capital, and that’s where we now feature solely our own project and our own work.

Joe Fairless: And how many does that have?

Ricky Beliveau: That has 16,000.

Joe Fairless: Got it. So here’s what I notice  – your largest one is People’s Kitchen, and that makes sense, along with the bathrooms and the bedrooms, because that captures a wide audience. That captures not just investors, not just people who care about or don’t care about real estate investing, it’s just people wanna check out kitchens… And same with bathrooms etc. So when you have this account that is showcasing kitchens, how does that help your business?

Ricky Beliveau: When you look at our business as in Volnay Capital, this is a whole division of our business. We’re using those large accounts not only to feature our own work and build our brand, we also use those to leverage for marketing opportunities. The way that works is we actually sell ads, as well as negotiate terms with our suppliers based on our social reach.

So do to the fact that we have a reach of almost 400,000 individual people per week, we’re able to use that when we leverage our purchasing with suppliers. When I purchase an order with a tile distributor who is looking to push a product, I can then show them that reach and say “We’d like a preferred price, we’d like this at cost, and then we’ll help promote your tile.” That goes for appliances, that goes for — across the board we’re able to leverage that reach.

Joe Fairless: It’s fascinating. I love that, because it’s connecting a larger audience, and then you’re repurposing it for some business reasons. As far as if someone is listening to this and wants to take a similar approach – it sounds like if they’re an apartment investor, then maybe they create an Instagram account about the beautiful apartment designs, or architecture or something, and then they do that, they build a following, and then they can help decide how they wanna monetize that or leverage that.

Ricky Beliveau: Exactly, and I think one key part about it is it needs to be something that they’re passionate about. A lot of work and a lot of time goes into this, it’s not something that just happens overnight, so it needs to be something that the person is passionate about and that they’re willing to put that time in.

So if it is something that they’re interested in with architecture, or building design, or apartment layouts even, if it’s something that they really like to look at and they’re interested in, that’d be something great to start an account about.

Joe Fairless: Got it. That’s interesting stuff. I’m glad you went through each of those… One is an Instagram account, a Facebook page, a twitter handle… What’s the Instagram thing? Instagram account?

Ricky Beliveau: Yeah, Instagram page, or Instagram account.

Joe Fairless: Alright, got it. I’m glad you went through each of those. Clearly, I’m not an Instagram guy. [laughs] I’m glad you went through each of those Instagram accounts and said the followers, because that helps us understand how you’re getting the traction… I can see my wife, Colleen, being interested in your Instagram page on kitchens and bathrooms and bedrooms and exteriors and designers… That’s interesting stuff, so it casts a wide net.

Would you suggest doing that? Because this is the approach you took, you evolved into… You’ve got things that are interesting to a large audience, but still relevant to your company, and you’re using that to build your own company’s profile. Is that the approach that you’d recommend?

Ricky Beliveau: I would say the first step would be concentrate on your own business and your own brand, and then through doing that, being active on social media, I think you’ll start to see pictures that you like, the stuff that you’re seeing that you feel that other people would like, and then from that you would then grow it into an additional account and go from there. You’re gonna do one at a time, it’s probably gonna be a slow growth, but I think that would be the first step.

So kind of like we did – start with your brand, start with your account, and then see the direction that social media is taking you.

Joe Fairless: It makes sense. As far as — let’s take your showcasing kitchens (the 186,000 followers), how long have you had that account open?

Ricky Beliveau: That accounts started in November of 2016.

Joe Fairless: November 2016, got it. So what is that, like a year and a half or so…? How much if any have you paid in advertising dollars or some other way to get followers?

Ricky Beliveau: Zero.

Joe Fairless: So it’s all organic followers, based on content.

Ricky Beliveau: All organic, yeah. That’s one thing that people always ask me. “I have an account, Ricky. I’m posting on it. Why am I not growing?” That’s the number one question I get. They’ve gotta understand the way Instagram works; yeah, content is important, but when you post onto your account, Instagram is really a closed circle. Yeah, there’s hashtags, but if you were to post with no hashtags, that post will be seen by about 10% of your followers. That’s the new algorithm, that’s the way Instagram works. So if you have 100 followers, you do a post, only 10 of them are gonna see it.

Then to decide if more people are gonna see that post is based on interactions with the post, so that’s likes and comments. If your post isn’t being liked or commented on, Instagram is not gonna show it to anybody else; they’re not gonna show it to your other 90, they’re not gonna show it to the rest of the people on Instagram.

So it’s key to ensure that the content is good, but then also that when you’re posting, you are having your post interacted with. And the way to do that is that you need to be active yourself. When I say being active on social media, that means that you’re commenting on other people’s posts, you’re responding to comments on your own posts, you’re liking other people’s posts, and that you’re interacting with other people’s posts… So you’re continuing that interaction.

What that does is that shows Instagram that you’re not a bot, and that you are an active participant in their platform, and all that plays into the algorithm that they use to show your post to the world.

So when you just post and you just go away from the day, unless it’s something that your first ten people like and that starts going, if you’re not doing these other things, you’re gonna see no growth. So I think that’s where the time comes in, that you have to really be committed to not just posting, but being an active member of the Instagram community.

Joe Fairless: You can’t just post and forget; you’ve gotta post and then get in there and really engage with others, and then they’ll engage with you.

Ricky Beliveau: Exactly.

Joe Fairless: Excellent. Well, anything else that we haven’t talked about that we need to talk about as it relates to this before we wrap up?

Ricky Beliveau: No, I think we’ve covered pretty much everything.

Joe Fairless: How can the Best Ever listeners get in touch with you?

Ricky Beliveau: You can find me at VolnayCapital.com, and you can e-mail me there. And obviously, on all these Instagram accounts…

Joe Fairless: [laughs] I was waiting for it… I was like, “Wait… And Instagram!”, right? [laughter] Sweet! Well, Ricky, thank you for being on the show again and sharing with us how you have grown your social media presence in these different channels, on Instagram primarily, and the way that you did it.

Your recommendation is to start with your own page, and then see where social media takes you and what you want to be focused on… But then the macro-level approach that you now have is  casting a wide net with different topics or areas of focus that are appealing to a whole lot of people, and then using those channels or those pages to then drive business to your company, and save money on projects through in-kind exchanges of exposure with discount on supplies.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Ricky Beliveau: Great, thanks for having me.

JF1306: He’s Got Capital For Your Deals with Dan Palmier

Dan and his company UC Funds provide funds for larger deals for investors. If you’re a syndicator, you can go to him for 100% of the financing, rather than tracking down the funds on your own. At the same time, wealthy individuals will invest their money with him and his company so they can get great returns on their money. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Dan Palmier Real Estate Background:

  • Founder, President and CEO of UC Funds – a vertically integrated private commercial real estate firm
  • Been in the real estate business for over 25 years, as investment manager, owner, developer, and financier
  • UC Funds originates, structures, underwrites, and manages commercial real estate investments
  • Based in Boston, Massachusetts
  • Say hi to him at http://ucfunds.com/
  • Best Ever Book: Purpose Driven Life by Rick Warren

Join us and our online investor community: BestEverCommunity.com


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate invsting podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Dan Palmier. How are you doing, Dan?

Dan Palmier: Very good, Joe. How are you doing?

Joe Fairless: I’m doing well, nice to have you on the show, my friend. A little bit about Dan – he is the founder and president of UC Funds, a vertically-integrated private commercial real estate firm. He has been in the real estate business for over 25 years as an investment manager, an owner, a developer and a financier. UC Funds organizes, structures, underwrites and manages commercial real estate investments. Based in Boston, Massachusetts. With that being said, Dan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dan Palmier: Absolutely. We are a firm that focuses on capital solutions and providing financing to entrepreneurs nationally. We have a growing investor base, we’ve done about two billion over the last four years. We’re transforming, we’ve got some really good new investors and joint ventures with some of the biggest banks in the world, and we’re very eager to grow our platform and provide capital solutions.

Most of what we do is debt mortgages, first mortgages, mezzanine capital, equity, preferred equity, and all asset groups.

Joe Fairless: Who is your ideal client?

Dan Palmier: We have a lot of repeat business, so I think the smarter the client is, the more entrepreneurial, the quicker they need things is the best client for us, so that they understand the difference between our capital solution and something more commoditized that our competitors or another bank will do. We’re very creative, so entrepreneurs that are very skilled and experienced are really our best customers.

Joe Fairless: Will you elaborate or perhaps give an example or two on having a creative solution versus what a traditional bank would do?

Dan Palmier: Sure. So one of our groups centralized here in Boston is called our screening group. Borrowers will come to us, brokers will come to us and they’ll ask for a first-mortgage loan to buy something, or they’ll come to us and say “We need some mezzanine capital” or “We need a little equity…” So we encourage them to give us all the information on the deal, and we’ll go back to them and say “We could do it this way, we could do it A, B, C, D.”

Joe Fairless: What would be examples of A, B, C, D?

Dan Palmier: If an entrepreneur or borrower comes to us and says they have a first-mortgage bridge loan, or first-mortgage loan to acquire or construct a property from the bank down the street, and that looks like 65% leverage and they’re looking for the remainder of the cap stack, so the next 35%, and they’ll say “Well, we have the equity, we only need 10% mezzanine loan.” So we’ll say “Great, here’s what that would look like. Your request was a mezzanine loan, 10% of the subordinate capital stack, but we can also do a 90% first-mortgage loan versus the 65%, and we can also do the equity piece, and your blended cost of capital would be less than doing it the way you’re doing it”, which is three phone calls, three meetings – one to the bank, one to the mezzanine lender, and then syndicating, which is basically cobbling together equity or going down the street to a big institution to give you that equity piece.

The syndicator would go to the country club and raise that equity, and all that is time, energy, and most of these guys lose the deal. So as a one-stop shop for commercial real estate capital solutions they could call us, and right here under one roof I can provide them 100% of the capital. That gives us a lot of flexibility on providing that A, B, C, D options. We could do the first, we could the first and the mez, we could do first, mez, preferred equity, or first, mez, preferred equity and the equity.

Joe Fairless: So there’s one of two thoughts going on right now. One thought is a Best Ever listener who is thinking “100% financed… Something’s not right here.” And the other thought that is going on could be “I want in on that. I want 100% financed deal.” Help me understand a little bit more about that, and kind of talk us through a little bit more, please.

Dan Palmier: Okay, so a traditional capital stack for a real estate owner to buy something, if they’re financing it – they can do this all-equity, but that doesn’t make much sense in our arena… So there’s the traditional debt piece, which if you go to a bank today, depending on what it is that you’re gonna do, between construction and something that is fairly stabilized, that may look like — let’s just call it 65% of the capital needed to buy or construct.

The 35% to get to 100% – that’s where some creativity comes in. Some of our borrowers will come to us for the next (let’s call it a) tranche or segment of the capital stack, and we’ll call that a mezzanine tranche. We’ll call that another 15%-25%. Let’s call it 15%, so now we’re up to 80%. The next 20% is typically equity, so what the entrepreneur or the buyer is bringing to the table; it may be his cash, or a combination of his cash and others. That’s kind of a traditional — 80% of the buyers buy like that.

What we can do, and do do here at UC Funds, we can do that 65%  piece, we can do that 15% mezzanine piece, and we can do the equity piece. Now, the cost of those tranches are different, but because our investor base is diverse, we have investors that wanna be in the first piece, they wanna be in the mezzanine piece, another would wanna be in the preferred equity and the equity. But it’s one phone call and we can do 100% of that cap stack.

Joe Fairless: With the actual investor who comes to you, if your group is doing all the financing, then how do you have alignment of interest with that individual so that you know they have some skin in the game?

Dan Palmier: Are you talking about the borrower?

Joe Fairless: Yeah, the borrower. Let’s just use me for an example. I’ve just found an apartment building, it’s (let’s say) 500 units, we’re talking right now, and I’m like “Yeah, I’ll roll with you, Dan. You fund everything. Here’s my deal, and I’ll take some ownership, and great. I hope it works out.” How does this work exactly?

Dan Palmier: Right, so every deal is unique. We wanna make sure that our investors that are providing the capital are safe, so we would like you to have skin in the game, we’d like you to have cash in the deal, but if you, like some of our other investors, just know how to buy right more so than others, and you’re buying something that’s worth 20 million for 15 million, being an entrepreneurial provider of capital, I’m gonna give you credit for that 5 million.

So I’m gonna say, “Joe, nobody does this except you. You’ve got something for 20 and you paid 15, so I’m gonna give you implied skin in the game an equity value of that 5 million bucks.”  So I feel good that if I’m financing 90% of your acquisition, you still have more equity in the deal. So it’s a case-by-case basis, but we look at the deal and we figure out “How are our interest aligned? How do we get paid back?” I wanna make sure we always get paid back with the appropriate yield on our investment.

So there’s some implied equity, there’s cash equity that we like… If they wanna give us a personal guarantee versus putting cash in, we’ll take a look at that, also being entrepreneurial on our side. You may say “I don’t have that much equity. Can I pledge another asset?” That’s another way of skinning the cat, and as a private institution I can do it, while others are not allowed, or don’t want to or don’t understand how to do it.

Joe Fairless: Yeah, that is incredibly nimble, that’s for sure… With the implied equity – let’s just go with that example that you used… We’re buying a 20 million dollar property for 15 million, so that’s at a 25% discount, so the implied equity – would you give me credit for all 25% of that, or just a percent of that 25%?

Dan Palmier: Again, it depends on the deal. As a real estate professional, you understand that every deal is unique. We try to do as much of the 25% as possible.

Joe Fairless: Wow. And what do you read from a interest aligned standpoint? You’ve mentioned implied equity, cash equity, personal guarantee, pledge another asset… What is the total amount, percentage-wise? …and I know every deal is different, but generally, what percent of skin in the game do you look for, regardless of how you get it, from any of those sources?

Dan Palmier: I would say that here we’d like to have about 25%. We can mix and match what the different enhancements are, but we like to have about 25%, whether it’s cash equity, or implied, or a pledge of another asset and a personal guarantee.

Joe Fairless: Got it. Very interesting.

Dan Palmier: Yeah, a very unique way of looking at things. And we too commoditize stuff also, but I think the audience probably wants to know something more entrepreneurial, and we do a lot of this stuff.

Joe Fairless: Two billion dollars in the last four years? Help me understand how that’s derived? Just break that down for me, will you?

Dan Palmier: I’d say we’re probably up to almost 150 separate transactions, in 26 states throughout the country; a lot of downtowns throughout the country, where we’re actually breathing life into obsolete buildings in urban areas, so that millennials can go down there and live, work, and play, we do that. A lot of multifamily… I’d say 75% of the 2 billion is in the multifamily sector, and then everything else of the 2 billion – most of it is debt, 75% of it is first mortgages, and mezzanine, and equity, and we do some ground-up construction, and we bought some assets, too. We bought two hotels and a nice multifamily in downtown Stanford, Connecticut a year and a half ago; we bought a hotel in Pittsburgh and we bought a broken condominium in Gulf Shores Alabama. So we do a little bit of everything throughout the country.

Joe Fairless: What is your best real estate investing advice ever?

Dan Palmier: I’d say get to know your customer, your borrower. It’s never really a good time to lend to somebody that’s not credit-worthy, and it’s never a bad time to lend to somebody that’s very credit-worthy. So know your customer.

Joe Fairless: In addition to 25% equity in the deal – there are many ways to get that we’ve talked about – what are the other things that you look for in the borrower, other than credit-worthiness, and will you define credit-worthiness a little bit more?

Dan Palmier: Well, we do a background check, we look at their history in the real estate field, we kind of rate their experience level, their credit score and all that traditional stuff. We really get to know the people we do business with, and not everyone has not had a problem. Obviously, we came from a very bad time back in ’07, ’08, ’09, so most borrowers have some kind of workout history, so we just evaluate what they’ve done, how they’ve done it, whether they’ve been honorable with their creditors and others. It’s very important to us.

Joe Fairless: I’ll give you a scenario, and based on the information I give you, I’d love to hear your thoughts, and then we’ll go from there. So let’s say I just quit my W-2 job, so no W-2 income. I’ve found an apartment deal; it’s the largest I’ve ever bought, any transaction. It’s about 100 units. The closest to that I’ve done is a single-family house, and I only have one… But the deal is a really good deal, and I have a good third-party property management company who I’ve lined up to manage it.

The deal appraises for 20 million, but I have it under contract for 15. I have good credit. If I come to you, are we doing the deal?

Dan Palmier: Absolutely. If the market is okay… You see, we look at the deal like a pyramid – we’ve got the borrower on one point, we’ve got the market, and we’ve got the property. For us, not all three things have to be stellar, but if it’s a good property, you’re buying it right and you’ve got a good property manager, we’re doing the deal.

Joe Fairless: And I have no money to put into it, but I can use that implied equity for it?

Dan Palmier: I’d like you to put something in.

Joe Fairless: [laughs] But I don’t have any money. I just left my job, but I have that one house… So let’s pretend maybe I have $15,000 in equity there; can I just say “Hey, here’s the house if things go wrong?”

Dan Palmier: We can do it that way… One of my mantras is we’re not going to lend a dollar unless we’re ready to own and operate the underlying real estate. So if that 5 million dollars is real, because it’s gonna be better luck next time – although we’re certainly not predatorial, we’re relationship lenders, we have no problem in taking the asset. And then it depends on the state. Some states are easier to take assets than others.

But I would do that deal for you, if that’s you, and I’m seeing you’ve got promise, and I like the story, and I think you have a lot of skill and future potential – I would help you. I would grow you and I would expect in return “The UC Funds guys, they helped me. They helped me actualize the American dream, they’re my guys. I’m going back to them over and over again”, and then you’ll say nice things about us.

Our referral network is very important to us. A new borrower that comes to us that may not know us, we give them 5-10 names and we just say “Just call them.” We don’t tell them to say nice things about us, but that’s what we work for. Reputation is very important.

Joe Fairless: I have a feeling you’re gonna get a lot of calls after this interview airs.

Dan Palmier: Joe, we do things others can’t or don’t wanna do. I’ve done a million, two million dollar working capital facilities for people that were referred, they needed some help making payroll, what have you, and I’ve done it off an e-mail. And subsequently, I’ve done hundreds of millions of dollars with the same people, because they remember that you did something that others can’t do or won’t do.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Dan Palmier: Yeah, let’s do it.

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

Break: [00:17:45].08] to [00:18:20].10]

Joe Fairless: Alright, best ever book you’ve read?

Dan Palmier: The Purpose-driven Life, by Rick Warren.

Joe Fairless: What’s a best ever deal you’ve done?

Dan Palmier: I haven’t done it yet, but starting UC Funds is a deal to me, and that’s awesome. This new product called UC Go – it’s a joint venture with Barclays Bank, and we’ll do a billion a year, 85% loan-to-value, and transitional [unintelligible [00:18:41].16] resonating throughout the country.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Dan Palmier: Lending to the wrong person.

Joe Fairless: I would think that would come up frequently with the 100% finance stuff.

Dan Palmier: In reality, have I lost a dollar in this business? I’m asking myself…

Joe Fairless: Yeah.

Dan Palmier: I lost on one transaction out of — I’ve done a thousand. It was a guy that we didn’t do a good job underwriting.

Joe Fairless: If presented a different person, but the same exact scenario, what question would you ask or what data point would you research to then mitigate that risk?

Dan Palmier: [unintelligible [00:19:17].17] just make mistakes. We would have done more due diligence. It was my mistake.

Joe Fairless: On what particular thing?

Dan Palmier: Really evaluated the history that he had with investors and other bankers. We overrode the [unintelligible [00:19:31].10] because we looked at the real estate and we fell in love with the real estate, and we can do some hard money asset-based lending, and we got wrapped up with somebody that really didn’t wanna pay us back, and couldn’t and then then Great Recession hit, and we just didn’t have enough capital to wait it out… But phenomenal real estate, phenomenal real estate. So it was definitely a timing thing, and we made it through the Great Recession at all odds, but there was definitely some bruises and some scar tissue.

Joe Fairless: Best ever way you like to give back?

Dan Palmier: Palmier Foundation. I woke up probably six years ago, seven years ago and was a little sluggish getting out of bed, and it occurred to me that God made me to create, so… I like to give back, throughout the world, for different causes.

Joe Fairless: And how can the Best Ever listeners get in touch with you?

Dan Palmier: I’m on LinkedIn, and also my website, UCFunds.com, and my initials, dp@UCFunds.com.

Joe Fairless: I thoroughly enjoyed this conversation and really enjoyed learning about your business, how you structure deals, we got into the specifics of it, and how you approach transactions in a creative way… So thanks so much for being on the show, Dan. I hope you have a best ever day, and we’ll talk to you soon.

Dan Palmier: Thanks, Joe. Take care.

Tom Cafarella and Joe Fairless

JF1233: Fired Accountant Builds 150 Agent Brokerage with Tom Cafarella

Tom was fired from his accounting job because he was spending too much time researching real estate investing online. Now he his a full time investor and broker. He flips over 100 properties a year and buys all kinds of properties from single families up to 10 unit properties. Listen in to hear how Tom built his real estate business up from nothing, and how he’ll continue to grow. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

 

Tom Cafarella Real Estate Background:

– Owner/broker of Cameron Real Estate Group, Founder of Ocean City Development, a residential real estate investing company

– Host of the Real Estate Mogul Podcast

His company buys everything from single families up to 10 unit properties

– Quit his full-time job as a CPA in 2008 so he could flip full-time with two partners

– Based in Boston, Massachusetts

– Say hi to him at: http://www.tomcafarella.com/

– Best Ever Book: Rich Dad, Poor Dad

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff.

With us today, Tom Cafarella. How are you doing, Tom?

Tom Cafarella: I’m doing awesome, thank you for having me on.

Joe Fairless: My pleasure, nice to have you on the show. Tom is based in Boston, Massachusetts. He’s the owner-broker of Cameron Real Estate Group. He’s the founder of Ocean City Development, which is a residential real estate investing company. His company buys everything, from single-family houses to up to 10-unit properties. He quit his full-time job as a CPA in 2008, so he could flip full-time with three partners. You can say hi to him at his website, TomCafarella.com. He’s also the host of Real Estate Mogul Podcast.

With that being said, Tom, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Tom Cafarella: Yeah, my background – like you mentioned, I was an accountant out of school; I hated it, I hated getting to work every single day, and I ended up getting fired because I was spending so much time reading online about real estate investing. Luckily for me, I was pretty young; this was ten years ago, I was 25 at the time… I did need to make a lot of money, and I knew at that point I needed to make a decision; I needed to go one way or the other – either I was gonna stay in corporate America, or I was gonna figure out how to be an entrepreneur, how to be a real estate investor… So I just started failing on my own, just trying every single thing, and finally figured it out.

Today we’re doing over 100 fix and flips a year. Like you mentioned, I’ve got a real estate brokerage of over 150 members, and just basically right now as of October 2017 trying to make as much money as I can while we’re in a market that allows us to make a lot of money.

Joe Fairless: Are you holding on to any of these properties?

Tom Cafarella: I am, but I’ve actually sold off some of my rental portfolio, and I don’t know, Joe, what market are you in?

Joe Fairless: I invest in primarily Dallas-Fort Worth right now.

Tom Cafarella: Okay, so Dallas has gone through a lot of appreciation, but some of my rentals in the past three years have doubled in price, so it’s really difficult for me to consciously hold on to some of them knowing that it’s gonna take so much longer for the prices to get up to that price point… So we’ve sold off some of our rental property portfolio, done some 1031s into other markets. I do hold on to some, but I make most of my income as of today fixing and flipping.

Joe Fairless: Okay, you already answered the question that I was gonna ask, but I’d like for you elaborate if you wouldn’t mind on the 1031, because I get it – if you see the property is double than what you paid, you sell, then you said you’re 1031-ing… Approximately what percentage of deals that you have sold have you 1031-ed, versus just taking the cash and putting it in the bank and using it somewhere else?

Tom Cafarella: We just started 1031-ing because we just kind of got fed up with paying the taxes. We just started doing that, and now we’re gonna try to 1031 everything going forward that we sell.

Joe Fairless: Alright, so the percentage isn’t as important as really your philosophy now. So you’re now doing the 1031. From an investor’s standpoint, when does and doesn’t it make sense for you?

Tom Cafarella: I think it makes sense if you can get into a market that is more flat, that hasn’t had as much appreciation and where you can get a lot of cashflow. I think it doesn’t make sense — what I see a lot of times in my market is people will 1031 over one inflated property, and then 1031 into another inflated property. To me, that doesn’t really solve the underlying problem. If you’re cashing out to make a lot of money and then you’re only 1031-ing to save on the taxes but you’re going right into the same market, to me that doesn’t make any sense.

Joe Fairless: Good point, really good point. The hundred fix and flips that you’re doing – that’s a lot of deals… I assume most deals you’re making money, so what are you doing with that money if you’re not actively acquiring new deals in your market?

Tom Cafarella: We’re always actively acquiring new deals.

Joe Fairless: For buy and hold I mean.

Tom Cafarella: So you’re talking about I sell a fix and flip, what am I doing with that money?

Joe Fairless: Yeah.

Tom Cafarella: I’m mainly rolling that into more fix and flips. So if we lose money on some of the deals here and there… You know, we might lose money on three deals out of 100, but it’s pretty few and far between.

Joe Fairless: So you’re creating a larger and larger bankroll for your fix and flip business. And then are you investing in other markets for buy and hold with some of that, or are you just putting most of it into the bankroll to do more and more fix and flips?

Tom Cafarella: Both.

Joe Fairless: We’ve started to invest in Jacksonville, Florida because it’s a market that we like a lot, so we’re pushing a lot of money there as of today. Then we also invest back into the brokerage as well, because we see that as kind of a play for us when the economy does start to go down a little bit and dip and we’re not making as much on the fix and flips. So really the best way to say what I’m doing with the money now is I’m trying to figure out how to keep making a lot of money when the market changes, and we’re anticipating that happening pretty soon. So my income might go down, but I don’t want it to go to zero, and that’s one of the things that we’re putting a lot of emphasis on as of today.

Joe Fairless: And you said one of the ways is to invest back into the brokerage…

Tom Cafarella: Yeah.

Joe Fairless: Another would be — is that the investing strategy in Jacksonville?

Tom Cafarella: The investing strategy in Jacksonville is to buy cashflow properties. In Jacksonville you can buy single-families that still cash-flow right now, and I like that model a lot. I like to look at “What’s gonna happen when the fix and flip income goes to zero? How much am I gonna make?” So right now we’re putting a lot of emphasis in building my brokerage, buying cashflow properties in other markets… We’ve got cashflow properties in the current market, and I also have a partnership program where I partner with people out of state and help them fix and flip properties, and I make money on that, too.

So those are kind of my other revenue pillars to make sure that, again, when the market does change, I’m still making good money.

Joe Fairless: As far as the brokerage goes, when you invest money back into the brokerage, what are you investing in specifically, and how do you track that that has an ROI?

Tom Cafarella: For example, we just did an $80,000 buildout of our office. So what ends up happening is you put the 80k into it, and how do we track the ROI? We’re looking at year-over-year what we’re doing for sales volume and number of agents. For example, two years ago I only had five agents in my brokerage, and I didn’t need to do an $80,000 buildout. But now that I’m up to 150 agents, I need to do the buildout to attract more. Eventually, I wanna have somewhere between 500 and 1,000 agents in the greater Boston area, so we need to build ahead of that space.

Other things in terms of reinvesting back into the brokerage to get that to grow would be hiring specific staff. For example, I’ve just recently hired a sales manager who is responsible for helping the agents get from point A to point B. She’ll work with them directly and coach them in order to get their sales up. So investing in capital expenditures and in labor as well.

Joe Fairless: What’s the lifetime value of a new agent that joins your brokerage to you?

Tom Cafarella: To me minimum probably $30,000 to $40,000.

Joe Fairless: That’s incredible.

Tom Cafarella: Again, it’s about who you’re bringing on, how you can help them and how long they stick around. If you get somebody good, they’re willing to work hard and you can train them, it’s very profitable. But of course, the thing that is a little bit difficult on the brokerage side is people could come and go as they please, and they’re always getting recruited by other top brokerages, so if you don’t do a really good job of helping them, then you’re gonna lose them.

Joe Fairless: At 150 brokers, $30,000 lifetime value, that’s 4.5 million dollars. That’s great. I’m glad that you talked to us about that; that’s helpful for anyone who has a brokerage, just how to think about it… Or anyone who’s joining a brokerage, their value to their team.

Tom Cafarella: The reason besides having the multiple revenue pillars to get us through the storm when the market changes – we needed people to take our leads. So as a real estate investor who fixes and flips over 100 houses a year in a very competitive market, we have to get the sellers before their property goes live on the MLS. So we have a huge marketing budget to get face-to-face with these sellers, and we needed agents in order to take these leads, in order to take these face-to-face appointments. So our brokerage has kind of grown on the back of those leads, and then obviously when we go to fix and flip a property, we can put a sign in the ground, we can promote the properties that we’re gonna be selling, so we generate a ton of buyer leads. It really works hand-in-hand, so if you’re a real estate investor, you have such an easy platform to become a big real estate brokerage.

Joe Fairless: That’s a great point, and something that could be another revenue stream, so thanks for mentioning that. You started out – I believe, because I’m reading this in your bio – with three partners. Is that correct?

Tom Cafarella: I’ve got two partners. I started out with two partners.

Joe Fairless: You started out with two, okay. You have two partners, so you’re the third, and you still have those two other partners.

Tom Cafarella: Yeah. At the end of the day, it’s segregation of duties. So in the investment side of the business, I’m the person who is responsible for generating leads and getting properties under contract at a really good price, so that we can make money. I also run the real estate brokerage. My two partners manage the construction and the accounting and legal side of the fixing and flipping business, so that we all have separate duties, we all have separate roles and we all work really hard and don’t get in each other’s way for the most part.

Joe Fairless: The construction, accounting and legal – does one person handle the construction, and the other two, accounting and legal?

Tom Cafarella: Exactly. Essentially, I’m typically in the office, managing the salespeople who are out making my offers for fix and flips and listing properties. My second partner is out in the field, managing the contractors. My third partner is in the office, making sure that we’re lining up financing, making sure that we’re getting the deals closed, making sure that any legal work, architectural work that needs to get done, permitting – basically, all of the administrative work behind the business itself is getting done.

Joe Fairless: That leads me to believe that you’re the one who’s really charged with the growth of the company.

Tom Cafarella: Oh, yeah. Basically, they say to me I create the masses… [laughter] But it’s my job to create the masses. So if it wasn’t for me, there would be no business to be had, but if it wasn’t for them, there would be a lot of business, but it wouldn’t be getting serviced. So it’s great that you can get a good deal under contract, but if you can’t actually renovate the property, then there’s nothing that can be done there.

Joe Fairless: Understood. Tell us the story of a deal that you’ve done recently, just to give us an idea of what type of projects you’re working on.

Tom Cafarella: They’re all kind of the same. They’re all cookie-cutter typical single-families. In my market, we might buy something for $300,000, put $50,000 or $60,000 into it, and then sell it somewhere in the high fours, low fives, in that range. We do so many, and it’s basically like just a factory, that for the most part for me not many of them stand out anymore. The ones which stand out are the ones that we did in the early days where I was really actively involved negotiating with the sellers, getting face to face, sweating out every deal… But now it’s kind of like, they come and they go, and I don’t think too much about them anymore.

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

Tom Cafarella: My best advice is you have got to learn the sales and marketing aspect of it. I see way too many people, especially today, trying to get deals on the MLS, trying to buy properties of HUD, trying to do things really the easy way, and they can never get a good deal. If you can control the sales and marketing funnel, so if you can market to get face-to-face with sellers and then do the sales part to get the great deals, you can make a ton of money. But if you try to shortcut that and not create the sales and marketing funnel, you’ll never make a lot of money in this business and you’ll always struggle to get a good deal, and you’ll start buying deals that don’t make sense, because you need to do your next deal… So that would be my advice – learn the marketing and sales side before you learn anything else.

Joe Fairless: What are some tips that you have on the marketing and sales side?

Tom Cafarella: There’s only three things that work when you talk about trying to generate leads for sellers in today’s market. There’s cold calling, which you can do for free; there’s online marketing, Google AdWords, Facebook Ads, which you can pay for, and there’s mailing. Those are the three things that work really well; they all have a different cost, they all have a different type of lead that will come through… So my advice would be to put together a budget if you can, and put it into one of those three mechanisms. If you don’t have a budget to me, then you have to cold-call… Which is fine, you can definitely generate a lot of face-to-face appointments that way, but that’s your only option if you don’t have any money.

Joe Fairless: Which of those three has been the best ROI for your company?

Tom Cafarella: That changes. So we’re having this conversation in October 2017; October 2017 Facebook Ads for me are the biggest bang for your buck. It changes though, because the market becomes crowded. Three or four years ago I would have told you mailers, but as of October 2017 everybody’s mailing. So when we go on a mailer lead, typically we’ll go on that appointment, and stacked on that person’s dining room table will be ten other letters. Obviously, the point of marketing in general is to eliminate your competition, to not have a bunch of bidding on a property, so you wanna go where other people aren’t going.

Number one for me right now would be Facebook, number two would be cold-calling – and we pay people to cold-call for us.

Joe Fairless: One thing that’s not in one, two or three is word of mouth referrals and intentionally having a system to generate word of mouth. Do you have anything for that?

Tom Cafarella: I’ve never seen anybody effectively do that, and I’ll tell you why I don’t think that that works… Because the majority of sellers period don’t sell to investors; maybe 5% of the overall population sells to an investor, so you only know so many people in your sphere of influence… And I know this from my real estate brokers that work for me. From your sphere of influence, you might only sell ten properties a year; the good agents, maybe they sell 20. So if a good agent is always prospecting to their sphere of influence and they’re selling 20 houses a year and only 5% of typical sellers sell to an investor, that’s only one investment deal a year. So to me, the problem with the sphere of influence is that you’re not in control of your business.

If you really wanna have a pipeline of doing a ton of deals, I don’t think that sphere of influence stuff will work. Maybe you get lucky and you do one a year, two a year, but I don’t think that you can really create a huge company off of sphere of influence when it comes to that. You don’t get many referrals when you buy properties at a discount, it’s just not typically a referral-based business.

Joe Fairless: Got it. As far as Facebook goes – you said that’s number one – what are you doing there?

Tom Cafarella: We’re just writing ads to people… We’re putting ads in front of them – “Sell your house fast for cash. Click here to get your offer today!” They’re clicking on it, that goes into my CRM, my inside sales agent is making that call to book one of our agents to go to a face-to-face appointment. So we’re not doing anything magical on Facebook other than we are running the right images, the right copy, we are putting it in front of the right people. So when you are talking about Facebook, those are the things that matter.

People, when they’re on Facebook, they’re not looking to sell their property fast. You don’t log into Facebook saying, “I wanna meet with an investor this weekend.” But if you put that ad in front of the right people… And it’s crazy what Facebook knows about you today; Facebook knows how old you are, Facebook knows where you work, Facebook even knows if you’re likely thinking about selling your property.

Joe Fairless: How is that possible?

Tom Cafarella: Based on what people’s interest are. For example, one of the things that you can look for is somebody looking for loans. Somebody that’s looking for loans is looking to buy, but it’s also possible that they’re looking to sell, so Facebook does know if you own property, because what Facebook does is they will actually take the data that they have and they’ll run it against other data. So Facebook automatically knows their age, because this is required in Facebook; they know your age, they know your name, they know the city that you live in, and then they’ll run that data against public records to see if you’re a homeowner. So Facebook knows if you’re a homeowner or not, and if you’re a homeowner that’s looking at mortgage rates or something like that, you’re possibly thinking about selling. So that’s just one example of someone that is possibly thinking about one indicator that will lead them to believe that you’re possibly thinking about selling… And it’s not 100% accurate, but when you run the algorithm the right way, you get your cost per lead down a lot.

I used to pay on Facebook somewhere between $200 and $300/lead, but now that I’ve got my filters down correctly, I’m at about $100/lead, which is very low for a motivated seller lead.

Joe Fairless: Did you learn that yourself, or do you have a team?

Tom Cafarella: I have a team. I have somebody that just runs these ads for me, and I actually started now running ads for other investors in other parts of the country too, because they were experiencing that the cost per lead was really high, so we ended up just offering that as a service. But the reality is that on Facebook you just have to keep trying and testing, so the person who runs them for me will split-test all day long. They’ll say, “What is the cost per lead if I run this image? Okay, great. How does that compare to the second image? Okay, I’m running the ad in front of this city. Okay, how does it compare to this other city?”, and they just keep working and split-testing to get the cost-per-lead down as low as possible.

Joe Fairless: With cold calling and mailing, any top of mind tip for either of those?

Tom Cafarella: Well, they’re different. When it comes to cold calling, you need to get good data, so you need to make sure that you’re getting cell phone records. The biggest mistake that people make is that they’ll get home phone numbers and have a lot of difficulty… And you need to loan them into a three-line dialer, so that you’re calling anywhere between 500 and 600 people a day. That would be my tip on the cold calling.

On the mailing, there’s a couple tips. The first is that you wanna make sure that you’re mailing the right people. A mistake that I see some people make is they’ll mail people from a list; maybe it’s a notice of default list, somebody’s behind on their mortgage… So when you’re mailing, you don’t wanna mail for somebody who bought that house two years ago, because it’s unlikely that they’re even gonna be selling, period.
You also don’t wanna mail to people who are in a younger demographic. I’m a 35-year-old guy – 35-year-old guys don’t tend to sell to investors. So you just wanna make sure if you’re mailing that you’re mailing to the right type of person and the right type of property.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Tom Cafarella: Yes.

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

Break: [00:22:47].10] to [00:23:36].00]

Joe Fairless: Best ever book you’ve read?

Tom Cafarella: Robert Kiyosaki, Rich Dad, Poor Dad.

Joe Fairless: Best ever deal you’ve done that you haven’t talked about?

Tom Cafarella: Man, that’s a tough– [laughs] That I haven’t talked about? I don’t know…

Joe Fairless: Well, that you haven’t talked about with us.

Tom Cafarella: Oh, sorry. Yeah, that would be my first deal – I wholesales something and I made $115,000… A two-family in Summerville, Massachusetts.

Joe Fairless: Your first deal?

Tom Cafarella: My first deal, yes.

Joe Fairless: You made how much?

Tom Cafarella: 115k on a wholesale. And I’ve made more on deals, but that was the luckiest deal based on the skill that I had and what I was doing at that time.

Joe Fairless: Why didn’t you just retire? [laughter]

Tom Cafarella: You know what, that deal actually hurt me though, because I made so much that I started doing the wrong things, because I didn’t have the skills necessary to really ramp up the business… So I got lucky, and then what I ended up doing unfortunately was I spent a lot of that money on marketing, and I went a long time before doing my second deal.

Joe Fairless: I’m glad we got the rest of the story, as Paul Harvey would say, on that. That’s good. What’s a mistake you’ve made on a deal?

Tom Cafarella: A mistake I’ve made on a deal – I’ve made this mistake multiple times… I bought a deal that on paper looks good, and the numbers work on paper, and then not thinking “Is somebody gonna want to live in this house?” And it probably sounds really stupid, but if you run comps in an area and your ARV is a certain number and your formula tells you you can pay 150k, that doesn’t always necessarily mean you should pay 150k… If nobody’s gonna want to live in that house at the end of the day, I wouldn’t buy it. And just simple things, like it has super low ceilings, or a terrible layout, and I would just think twice about buying that property.

Joe Fairless: Best ever way you like to give back?

Tom Cafarella: Best ever way I like to give back is raising up people in my brokerage… So helping people that work for me make a lot of money.

Joe Fairless: And how can the Best Ever listeners get in touch with you?

Tom Cafarella: The best way to get in touch with me would be to go to my URL, www.realestateinvestingiseasy.com. If they go in there and they put in their e-mail, they’ll get onto my newsletter. I hold trainings every single day for people who want to get into real estate, and it’s totally free. So if you’re putting your e-mail at www.realestateinvestingiseasy.com, you’ll get the links with all of that information and how you can get on that free training each and every week.

Joe Fairless: You’ve got a machine, and I appreciate you showing us the inner workings of it. Thank you for being on the show, talking about how you’re doing 100 deals (fix and flips) a year, what you all are doing, and that is you’re preparing for when the market changes, having revenue streams… Three ways you’re doing that – one is your brokerage, where on average it’s $30,000 to $40,000 lifetime’s value of a new broker who joins. Two is to buy cashflow properties, and you’re looking and actively involved in Jacksonville, Florida, even though you’re in Boston, Massachusetts. And three is a partner program where you help people do fix and flips and you get a cut of the action.
Thanks for being on the show, plus talking about the marketing tips, the three ways to get sales and leads… I really appreciate you spending time with us. I hope you have a best ever day, and we’ll talk to you soon.

Tom Cafarella: Thank you, Joe.

Best Real Estate Investing Advice Ever Show Podcast

JF1098: Break Into Investing by House Hacking Your First Investment with Ben Staples

Ben wanted to get into real estate investing, and decided that house hacking a three family. He bought it off the MLS, and wrote a letter to the seller in an attempt to persuade them to choose his offer. Well it worked and now he is successfully house hacking and looking to do more investing in the future. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Ben Staples Real Estate Background:
-Real Estate Investor 26 years old and bought my first property when I was 25
-Used owner-occupied financing through state program to purchase first 3-plex for $480,000
-Have had countless learnings ever since purchasing his first 3-plex
-Based in Boston, Massachusetts
-Best Ever Book: Rich Dad Poor Dad

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Joe Fairless: Best ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast… And guess what? We only get into the best advice ever, we don’t get into that fluffy stuff. With us today, Ben Staples. How are you doing, Ben?

Ben Staples: Great, Joe. Thanks for having me.

Joe Fairless: Nice to have you on the show, my friend. A little bit about Ben – he has recently acquired a three-unit property for $480,000. It’s an owner-occupied financing program through the state that he got. We’re gonna talk to him about it, because it’s nice to talk to Best Ever guests who are just getting started and have started off successfully, and hear their perspective. I know there are some Best Ever listeners who either haven’t got started or are in a similar situation. Based in Boston, Massachusetts… With that being said, Ben, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Ben Staples: Definitely. I’m originally from Philadelphia, I moved up here in the Boston area for school. I graduated and joined an e-commerce company where I’ve been for almost four years now. I absolutely love it, but as things calm down with the job, I started googling around and checking out real estate, doing my research, going to as many meetups as I could, reading as many books as I could, and decided I wanted to house hack, so I started looking at the Greater Boston area. It’s a crazy market, just like many places in the U.S. right now.

I was looking to pivot outside of the Boston market, trying to find less expensive opportunities, but decided in the end that the best thing for me would be to pursue a low down payment option and really try and house-hack close to where I work… So that’s what I ended up doing – I bought a property in June of last year (I can’t believe it’s already been a year), a three-family property. It has two two-bedroom units, and a one-bedroom unit. I’m living in the third unit, and it’s been a big, big learning experience and a ton of fun.

Joe Fairless: Two two-bedroom units and one one-bedroom unit, right?

Ben Staples: That’s correct.

Joe Fairless: Okay. And are you single?

Ben Staples: Yes. I have a girlfriend, but I am not married.

Joe Fairless: Got it. So there were no negotiations with your significant other about moving in with some strangers.

Ben Staples: That’s correct. I did, of course, wanna have her on my team, and she definitely did support me throughout the process, but I was on my own there.

Joe Fairless: $480,000 purchase price… How did you find the property?

Ben Staples: Originally, when I pivoted back to looking for an owner-occupied place, I was doing everything I could… I was cold-calling Craigslist listings, for people renting their apartments, trying to figure out if they wanted to sell, I was calling property managers… I got to probably page 110 on Yelp, just calling every single property manager.

Joe Fairless: Page 110 on Yelp? How many are on a page?

Ben Staples: I think it’s something like 10 to a page…

Joe Fairless: And you called all those people?

Ben Staples: I did, yeah. I’d work normal hours, get home, eat dinner and then start calling. Not everyone answered, and some people were pretty angry to talk to me for the cold call, that kind of thing… But some people really appreciated it. It’s sort of good to hear that there’s a lot of support out there in the property management community, and there are some good property managers out there.

Then eventually, I was getting through — I didn’t even realize that Yelp went up to page 110…

Joe Fairless: I didn’t either…

Ben Staples: But eventually this three-family popped up on the MLS – I was working with an agent, and we just went out to see it. It seemed to make sense. There was a good bit of work that was required on the property, but I put in an offer above asking… It turned out there were somewhere between 14-17 other offers that day, and I tried to really craft a nice offer letter. I positioned this as sort of my first step in the investing world, trying to set out on the right foot, and it was accepted.

Joe Fairless: Why did you write a letter?

Ben Staples: I’d been doing some reading, and it seemed to humanize the aspect of offer writing. It just seemed like right thing to do to really try and build the additional rapport with the seller. I asked my agent for sort of a template or rough ideas of what she had seen that had worked in the past, and then sort of built off of that.

Joe Fairless: What were the components of the template?

Ben Staples: Mostly it’s just sort of talking about your background… In her case, her recommendation was, since this was my first property, make sure that I sounded like an individual, like I was trying to start out, not like a big corporation or some heavy-handed investor, that kind of thing… Really trying to play into the human element there. But most of it was around really focusing on building rapport, showing who I was as an individual, and how really I was so excited to purchase their property.

Joe Fairless: Did you mention anything else that comes to mind? I don’t have anything in mind, by the way, I’m just wondering if there’s anything else relevant that you mentioned to them in that letter.

Ben Staples: I could post the letter in the show notes, if that would work… I don’t have it in front of me.

Joe Fairless: Don’t cause me more work for this certain podcast… Now we have to do it, dammit. [laughter]

Ben Staples: I’m sorry about that.

Joe Fairless: Okay, send it to me and I’ll have one of my team members make sure we put a link to it, so people can check it out. But no more doing that, please. [laughs] Alright, so you did a letter, and you had 14-17 offers that were on the property, and you got it… Did you have to revise your offer? Was there another round for offers?

Ben Staples: There wasn’t another round for offers, which I was pretty surprised by. I came in a little bit high, and then actually after my inspection, once my offer was accepted, I was able to get a $7,000 closing cost credit for the condition of the roof. That was one thing where the listing was written saying that the roof condition was five years old, and it turned out half the roof was five years old, which I was pretty surprised that they had redone just one side of the roof… That was really the only back and forth on the offer side of things there.

Joe Fairless: Okay. And once you identified, “Okay, I just got awarded the opportunity”, what about financing? Did you have it lined up prior?

Ben Staples: I had a pre-approval for a few different financing options. In the state of Massachusetts there’s the mass housing program, which allows you to put 5% and avoid PMI. And then of course there’s the FHA kind of financing with 3,5% down, but you have PMI… I wanted to try to avoid PMI, and went with the 5% down option, because it seemed like the best sort of option for me at the time… But I made sure to have my pre-approval lined up, and made sure to let my mortgage broker who I was using at the time that I was going out and aggressively looking at property.

Joe Fairless: Tell us about the process of getting financing.

Ben Staples: I would say it was pretty painless for me. I’ve heard some horror stories… One of the benefits of the work that I had put in before, of going to different real estate meetups, is that I was able to find a really great group in the Boston area called Boston Wealth Builders that really made it easy; they connected me with this lender that has worked with a ton of investors, and specifically works a lot with first-time home buyers to walk them through the process. He was really patient and answering all the right questions, and that kind of thing.

He was pretty willing to explain what he was going through as far as the pre-approval process, setting my expectations on max purchase price and things like that, and then making sure to really push things through once I actually submitted my offer, and it got accepted.

Joe Fairless: The Boston Wealth Builders – you said that’s a local group?

Ben Staples: That’s correct.

Joe Fairless: Do you pay to attend the meetup? Is it free?

Ben Staples: It’s totally free. It’s an incredible opportunity. Most of their meetups really focus on the flipping side of things. They have a lot of really great walkthroughs of properties that are currently being gutted or rehabbed, and will talk to a lot of really active local investors that are doing great things in the area.

Joe Fairless: So you found a lender through that group, and that lender worked with other investors, therefore they knew exactly how to approach your situation, and it was a smooth process.

Ben Staples: That’s correct. I actually ended up being out of the country on a family vacation during the closing, and was able to still have the confidence to move forward with this lender, and he kept me up to date the entire time.

Joe Fairless: Wow, your first closing… Half a million dollars, and you’re traveling the world, you’re globetrotting.

Ben Staples: Yeah…

Joe Fairless: And you’re okay with that… [laughs] Good for you.

Ben Staples: Well, of course I would have preferred to be in the country and I was incredibly nervous, but it’s just how timing worked out.

Joe Fairless: It makes sense. My first four homes — well, my only four homes that I ever bought, I was not present for any of those closings; it was all done remote, and I’d actually never visited any of the homes before I bought them, so I appreciate your approach, actually. What are the rents for the two two-bedroom units?

Ben Staples: When I got into the property they were pretty far below market. The first two-bedroom was renting at $1,000/month, and comparable rental units in the area could rent as high as $1,700-$1,800/month… And it was a very similar story for the second two-bedroom apartment, which was unit three. That’s the one I decided to move into, because it needed the most work.

That was a pretty interesting one, where I negotiated to serve a 30-day notice to quit to the unit three tenants the day before I closed with the seller. They were willing to let me do that just to speed up the process for me, get me a month ahead of my schedule and make sure that I had the time to move into the property in accordance with my mortgage, because Mass Housing does require you to live in the property.

Joe Fairless: That’s right, yeah… If you had residents in each of the units and you have to live in it, that’s an issue, right?

Ben Staples: That’s correct.

Joe Fairless: What is the rule there? How quickly do you have to be moved in?

Ben Staples: It’s 60 days after the close, and there’s two different types of Mass Housing programs, and of course, I recommend everyone to speak to a licensed broker… But from I understand, there’s two different types – one that is a Fannie Mae product that you have to live in the property for one year, and then there is a second program which I did not do, which is more on the affordable housing side of things, that requires you to live in the property for the life of the loan.

Joe Fairless: Your rents – one of them was $1,000, and it could go up to $1,800… I don’t think I heard what you brought it up to, if you did bring it up.

Ben Staples: Right now I’m definitely on the slow side for bringing up the rents… For the third unit I am currently marketing it to rent at $1,750, and it looks like I’ll be able to rent it there as I move out. The second unit, I increased the rents to $1,200. My hope is that after I finish the rehab and stabilizing the third unit, that I would then get into the second unit, rehab that and raise those rents… But I don’t feel comfortable raising the rents until I rehab the unit.

The first unit, which is the one-bedroom, I came into it at $800, and I’ve just raised it to $850, where fair market could be anywhere from about $1,200-$1,400, depending…

Joe Fairless: $1,750, $1,200 and $850, right?

Ben Staples: That’s correct.

Joe Fairless: Okay, and which one do you live in?

Ben Staples: I live in the third unit right now, but I’m currently moving out.

Joe Fairless: How much money have you put into it, if any?

Ben Staples: I have put a good bit; I had to redo a deck, redo a kitchen, got a bathroom, that kind of thing. I probably put roughly 30k into it.

Joe Fairless: So you’re at around less than 1%… It’s 0.7%, so you’re under the 1% rule. Are you cash-flowing?

Ben Staples: With me living there it’s definitely reducing my living expenses. When I move out, I will be cash-flowing.

Joe Fairless: How much?

Ben Staples: According to my numbers, it will be around $700-$800 mark.

Joe Fairless: Okay, $700-$800. And that includes you managing the property.

Ben Staples: That’s correct. I originally did run the numbers including a management fee, but until I get everything stabilized and fully rehabbed it looks like I’m going to be managing it. That’s sort of how I would like things, in the sense of learning about the property, and really trying to understand the process of management before I outsource it.

Joe Fairless: What do you do for your full-time job?

Ben Staples: I work in the e-commerce space as a product marketer.

Joe Fairless: Any skills that you have as your full-time job that have been applied towards this investment?

Ben Staples: I have had a lot of fun with the project management side of things; I do a lot of that at work. Then right now I’m really trying to get into the marketing side. Of course, marketing my unit has been a lot of fun, but that’s very small scale. What I’m starting to do is leverage my marketing skills for contractors that are looking to build their websites, and at the same time as helping their businesses out, I’m also hopefully making contacts around the business.

Joe Fairless: If you would, please put yourself in your shoes prior to closing on this deal… What is your best real estate investing advice ever to yourself?

Ben Staples: I would say two things… One would be to really understand the rents that you’re gonna be getting. I was a little on the over-estimation side, and from what I’ve seen, the best way to estimate them right now is of course to talk to local people on the market, but also to look at resources like Craigslist and see what people are listing individual units for that are pretty comparable in condition to your unit.

The other one I’d say is that as you’re preparing for the walkthrough, if you don’t have any experience with rehabs and understanding rehab costs, to be willing to pay someone to come along with you, whether it’s a contractor, another developer, anything like that… I think that that would have been one of the best things that I could have done to see some things that I hadn’t seen during my initial walkthroughs.

Joe Fairless: I didn’t do any of the walkthroughs on my four homes, because I was in New York City, the homes were in Texas, but when I got the inspection report, I immediately sent it to my dad and my brother-in-law, and I asked them “What does this all mean? What should I be worried about based on this inspection report?” So you’ve gotta have people, as you said… Either be willing to pay someone to come along with you, or have someone who knows what they’re doing on the rehab front to interpret the results.

Ben Staples: And the other thing I’d just add there is the more you can do to build up your local network and try and develop as many mentors as you can in your local market, the more beneficial it’ll be. I was lucky to have two guys – Ray and Dan from HRV Homes – that are developers, condo converters in the Boston market… They really know end-to-end the entire process, know costs off the top of their head and was able to, similar to what you were saying, run these different inspection findings by them and see really how realistic is this, that or the other thing.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Ben Staples: Yes.

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

Break: [00:17:30].08] to [00:18:29].03]

Joe Fairless: Best ever book you’ve read?

Ben Staples: I would say Rich Dad, Poor Dad for the biggest mindset shift in my life. And for those guys that wanna know a little bit more about the numbers and how they work, “What every real estate investor needs to know about cashflow and 36 other key financial measures” by Frank Gallinelli.

Joe Fairless: What’s another mistake that you made on this transaction that knowing what you know now you would have done differently?

Ben Staples: I would have been more rigid with finding the best possible contractor. I was in a little bit of a rush because I needed to move in and I wanted to work with someone quickly, and I saw a couple of red flags that I should have kept moving on. In the end it worked out okay, but to me it’s important to look up your references, make sure that they have great reviews, everything like that.

Joe Fairless: What were the red flags?

Ben Staples: He had a pretty big unwillingness to make some small changes to the contract. Another one was he was unwilling to provide references and basically just sent me to online review sites to really vouch for those, when I feel like my experience working with this particular contractor would have been saved by understanding how he works with other people. It seems pretty consistent.

Joe Fairless: Best ever way you like to give back?

Ben Staples: I know I only have a little bit of experience, but I’ve really enjoyed the opportunity to talk to other new and aspiring investors, and learn about their challenges and try and give my advice from my experiences. I’ve already had the chance to have an impact on a few people that are in my local network that were thinking about buying houses and now have bought houses. It’s a really great feeling to know that I’ve impacted them, hopefully for the better, and got them to take action.

Joe Fairless: How can the Best Ever listeners get in touch with you, Ben?

Ben Staples: They can reach me by e-mail at Ben@bds-marketing.com/

Joe Fairless: Ben, thank you for being on the show. Please e-mail me afterwards (or my assistant) the letter, and then we’ll get it posted up on the show notes. That letter is kind of a cool thing, because it will show what successfully allowed you to get the deal over 14-17 other offers that I’m gonna assume were similar or very similar to yours. That’s one takeaway.

Another takeaway I have is you being involved locally with a real estate investing meetup, and finding a mortgage lender who was familiar with how to approach this loans and it was a seamless process for you on your first deal, that’s another thing – surrounding yourself with the right people.

Thanks so much for being on the show, and also thanks for talking through some of the lessons learned that you had on this deal. I hope you have a best ever day, Ben, and we’ll talk to you soon.

Ben Staples: Thanks, Joe.

 

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Best Real Estate Investing Advice Ever Show Podcast

JF1001: A Hidden Wealthy Niche that Involves a Fine Tuned Team

Condo conversions are tricky, and not for the novice investor. Our guest talks about his team including an architect, and Attorney, contractors, and other individuals that are needed to convert buildings into condominiums. This is a great show that has a purpose to give you a little insight into this hidden niche that has made many people wealthy. Tune in!

Best Ever Tweet:

Ricky Beliveau Real Estate Background:

– Owner of Volnay Capital
– Specializes in both buy and hold as well as condo conversions
– Currently have 6 condo conversions in different stages in/around Boston.
– Based in Boston, Massachusetts
– Say hi to him at http://www.VolnayCapital.com

Made Possible Because of Our Best Ever Sponsors:

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Best Ever Show on hidden wealth

 

Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Ricky Beliveau. How are you doing, Ricky?

Ricky Beliveau:  Joe, I’m doing well. How are you?

Joe Fairless: I am doing well, nice to have you on the show. A little bit about Ricky, he is the owner of Volnay Capital. He specializes in both buy and hold, as well as condo conversions. He currently has six condo conversions in different stages in and around Boston, and he is from and based in — well, I don’t know where you’re from, but you’re based in Boston, Massachusetts. With that being said, Ricky, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Ricky Beliveau:  Sure. As you said, I own Volnay Capital and we’re based out of Boston. I started out, I went to Northeastern University, and at Northeastern I actually stuck to a class called Real Estate Finance, and in that class we had to do a paper on some type of real estate investment, and the property that I chose was actually a multifamily building near the college. After graduation and looking through the figures and seeing the opportunity there, that’s what kind of jumped me into the real estate business by buying my first multifamily in 2010.

From that point forward, I’ve continued to acquire rental properties, and about three years ago I made the jump over to the condo conversion side, and doing condo conversions over the past three years, mostly centered in East Boston, which is an up and coming neighborhood, close by to the downtown area.

Joe Fairless: Condo conversions – what do we need to know about condo conversions?

Ricky Beliveau:  The condo conversions market – you’re able to create a large amount of value by taking a single property and splitting that into three individual units, and updating the deeds with the city, and then you’re able to sell those off to individual buyers. By doing that, on what would be a single project, you’re actually able to create three sales out of that one project.

Joe Fairless: From a fundamental standpoint, that sounds great – you buy one and you get three at the end of it. Tell us one deal that you’re working on, and the numbers on that deal.

Ricky Beliveau:  A deal that we just finished up – it’s actually one of the most successful deals that we’ve done to date… The acquisition price of the property was for 650k, and at the time that was about the going rate on the market; it wasn’t that I got a great price on it… It was a pretty good deal on the purchase. The renovation cost on that project was 575k, and the building was 4,300 square feet, so it’s a large property. That brings the total project cost on that into $1,225,000 all-in project cost. The sell out on that was 1.7, so it left a profit after fees of $447,000.

Joe Fairless: How long did that take?

Ricky Beliveau:  We tried to turn it around 10-12 months. That project actually spread over the year mark. We had some issues when we were trying to get started, so it kind of delayed the beginning of the project, but all in we were about 13-14 months on that project.

Joe Fairless: Okay, 14 months worth of work to make about $450,000.

Ricky Beliveau:  Correct. ROI on it was around 36,5%.

Joe Fairless: Okay. What are some challenges that came up in that one that made it take longer than what you projected?

Ricky Beliveau:  When we acquired the property, the property was tenanted, which when you’re getting in the business of doing condo conversions and there’s tenants in place without leases, you can kind of expect that there might be some issues getting the property, relocate those tenants, find them a new place to live and then be able to start the project. That’s what happened here – when we acquired the property, one unit was vacant and two units had tenants. We were able to relocate the top floor tenants into a new apartment, but the second-floor tenants, we were going back and forth for a few months regarding what their needs were. I was finally able to relocate them into one of my rental properties around the corner. Just that process delayed us about 3-4 months.

Joe Fairless: How were you able to eventually relocate them? What convinced them to do that?

Ricky Beliveau:  The property they were currently living in, which was the one we wanted to put under construction, their rent was currently $1,200/month. What we agreed upon to have them moved is I was able to lower their rent to $900/month. Then I also had my guys move them from that property to the other. So with a reduction of rent by $300, as well as me covering moving costs, we were able to finally come to an agreement to have them relocated.

Joe Fairless: What did you propose initially?

Ricky Beliveau:  The initial request was that they don’t have a lease in place and that they would relocate. In this market it’s tough, because as the rents are continuing to rise, a lot of these people are not able to afford in that neighborhood anymore, so it becomes tough for them. We try to really work with the tenants and find ways to find resolutions, instead of having to go to court.

In this case, once we started the negotiations, the first attempt was just to work with them as we had the other units, and find them a place to move and pay for the moving costs and pay for their first month’s rent. They weren’t open to that idea. They were really set in stone that they wanted to stay in that neighborhood in that area. As we went back and forth, an opportunity came up that I had just acquired another building that was a block away, and I was able to use that property as an offering and move them over into that building.

Joe Fairless: Did they ask to have some sort of agreement so the rent wouldn’t go from $900 to $1,900 after year one?

Ricky Beliveau:  We signed them up on a two-year lease, but actually backdated it with the date because of the four months that they had held up the start of construction, so it ended up being a little bit less. I think instead of a 24, about 20 months. So it was a 20 months lease at $900, and then after a year it went up to $990. So I was able to build in a 10% increase after year one.

Joe Fairless: After year one, okay. And if you didn’t have them relocating to that unit, how much would it rent for?

Ricky Beliveau:  That was a third floor, three-bed apartment; we probably would have gotten around 1,600-1,800. It definitely was a financial hit, but when you have approved plans and you’re able to start construction on a property that can create the returns that we just discussed, those are small potatoes in the long run.

Joe Fairless: Yes, a no-brainer. You said there was one vacant and two were leased; one was more challenging than the other, they left… Was that the primary reason why it was held up for 14 months?

Ricky Beliveau:  Yes. That cost us about four months before we could start the demo. So in the end, the project timeline was still around 10 months, but from demo to completion we lost four months in negotiations.

Joe Fairless: What do you have to do when you demo?

Ricky Beliveau:  When we started out three years ago, we would be more selective with our demo. We wouldn’t get into the property and take everything down to the studs. We realized that to create the quality product that we want to and build the reputation that we have, you really have to start from scratch. Demo days — it takes us about 2-3 weeks to demo a property. We’ll send in a team of guys and they will take it all the way down to the studs, remove everything and we’ll start from scratch.

Joe Fairless: So you’re basically building from the ground up, but you have the framework, or the studs there.

Ricky Beliveau:  Exactly, keeping the exterior skeleton of the property, and then rebuilding from there.

Joe Fairless: So you do the demolition, and then what part of the process tends to go, or is more likely to go over budget than others?

Ricky Beliveau:  At the beginning we were seeing more items going over budget than we are now. The recommendation I would make is to really know the numbers and negotiate the prices upfront. When you’re getting into one of these projects, we sub out everything; it’s all subbed out. We hire a GC firm to handle the project, and then the GC firm hires all the subs. So before a project even demos, we’ve already negotiated, and the majority of the expenses of the project are already locked in with those subs. The fact that we’ve done so many now and that we have these long-standing relationships, and that they know that it’s consistent work, we’re able to see those numbers come in much closer to budget than we did when we were first starting. I think having clear cut budgets upfront with these contractors and with the subs is very important.

Joe Fairless: And you talked through at the beginning of the high-level summary of doing condo conversions – creating a large amount of value by splitting them into (in your case) three units, from one to three, updating the deeds with the city, and then selling to individual buyers. Can you elaborate more on the splitting it into three individual units? Explain how the thought process works for someone like myself who hasn’t done this.

Ricky Beliveau:  The actual process of making the switch from a single property into three condos – it really would depend on your state and also on your city. Using Boston for an example, the process is we work directly with our attorney, as well as our architect. Those are the two parties that are really involved. From the architect standpoint, they need to redraw up the documents to submit to the city that will show now what the assessment should be for each unit. Now when the city looks at this property, they need to know what is the size and ownership of each unit. They require an architect to do that section of it, where then they stamp that and they submit that.

The second part is with the attorney. The attorney takes that information and they’re gonna compile that along with the condo documents. Those are guidelines that are set up on behalf of the association, showing the rules and regulations of the building you’re creating. That’s all put together and then submitted to the city. So it’s really a team effort. You need an attorney involved, and you’ll need an architect involved.

Joe Fairless: Where do you spend most of the time managing? Is it the demo, the architecture process or the attorney process?

Ricky Beliveau:  For our condo conversions, I think the most involvement I would have is with the architect. That’s just because we need to meet at the property, and he needs to take exact measurements of the whole space. So we would walk through the property and go through everything and make sure that we’re properly calculating the unit square footage, which is also very important to me on my sellout side – I wanna ensure that we’re properly calculating and that my buyers are getting the square footage that actually is there, and that they’re not paying for something that’s not correct. So I would say working with the architect on his end.

Joe Fairless: How much does that cost?

Ricky Beliveau:  On a project like that we build it into the original budget for the architect. The same architect who does our plans from start to finish, as well as code review and all that – he builds it into his budget. I think it’s around $2,500-$3,000 for his time that he spends on the condo document side.

Joe Fairless: Do you engage either one – the attorney or the architect – before having the property under contract, just to have an idea of what the business plan is and that it is something you can execute on?

Ricky Beliveau:  At this stage, now that I have more experience with these properties, I’m comfortable in making the decision without my architect involved. When I was first getting started I would try to have him come with me to a showing that I thought was a great opportunity, or if I saw a property and I wanted to get his opinion on it, I would try to have him meet me there, as well as my contractor. But now over the years that I’ve been doing this, I’m much more comfortable in making those decisions on my own. So now the process is once I get a building under agreement, I’ll then immediately schedule a time for both my GC and my architect to meet me at the property as soon as possible to start the process of getting the budget together from my GC, and then from my architect get the plan started for the project.

Joe Fairless: With the process of updating the deeds with the city, what type of challenges have you come across that probably are unique to Boston, but maybe some aspects of it can be applied towards other markets?

Ricky Beliveau:  Right. In the Boston market it’s actually pretty clear cut. There  are standard processes followed, and you’re able to do this conversion. I’d say that one thing that your listeners should definitely look into is if they’re going to get into one of these projects, speak to an attorney before you begin, or even before you acquire a property with the hopes of doing this kind of conversion; each market is different. I’ve talked to investors in other markets where the process is not as easy as it is in Boston. You wanna make sure to speak to an attorney and get that information up front, before you’re midway through a project and then you’re having an attorney tell you that that property is not condoable. I’d say do the legwork up front and have those conversations.

Joe Fairless: How do you find the right attorney and architect for this?

Ricky Beliveau:  It’s a great question. I preach to everyone I talk to that networking and relationships is what really makes this business. I try to spend as much time as I can every week meeting with people and networking. That’s the only way you can really know that someone is the right contact – if someone can vouch for them that you really trust. A mentor of mine introduced me to my attorney, my architect I played soccer with in college… Almost everyone in my business that I work with is connected to me in some way, closely in my network.

Joe Fairless: You didn’t do a Google search.

Ricky Beliveau:  No Google searches.

Joe Fairless: If someone doesn’t have those connections, do you have any suggestions? Maybe certain traits or qualifications that your team members have that you would look for if you had to start over in a different city?

Ricky Beliveau:  The first person that I would go to is a real estate agent. If you reach out to a real estate agent who has a large number of listings, or you can pull the data that they’ve been successful and they were one of the top agents in that market, you can then go to them, take them out to lunch and try to ask them to open up their network to you. What you’re offering to them is always a back and forth – you’re saying “Hi, I’m new to this market, I’m new to this business and I want you to be my agent. I’ve done my legwork, I’ve looked into you as an agent.”

If you commit to them that you’re going to bring them business, they’ll then open up the doors to other individuals who could help you out. Obviously, since it’s not a direct connection, you’re gonna wanna do some more legwork before hiring an architect or an attorney, but I think that if you can find someone and get references, and it’s someone who’s very successful in your area, you can’t beat that. That’s what would be my recommendation and that’s what I would do. If you [unintelligible [00:17:38].18] me into Cincinnati and I had to compete with you, I’d go out and find the top real estate agent on the block.

Joe Fairless: I would never compete with you in condo conversions. [laughs] I’d be like, “You win, you win! Mercy, mercy!” Ricky, what’s your best real estate investing advice ever?

Ricky Beliveau:  I would say know the numbers. I think that in real estate now it comes down to the Excel file. I look at the property and the first thing I do is I sit down at my computer and I run the numbers, whether that’s for a buy and hold or for a condo conversion. Before I’m even walking out my door, I have already decided if this is a good buy or not. Obviously, things can come up when you get into the property, but you can know by (I’d say) 95% if that’s going to be a purchase that you’re gonna make before you leave your computer.

Joe Fairless: What are the main inputs?

Ricky Beliveau:  From a condo conversion standpoint, I’m looking at the building square footage… The most important thing from my standpoint is I’m looking at my sellable square footage, so I know that I can sell those condos for a certain price per foot. When I look at a building, if the building is only 1,500 square feet, I know that when I make it into condos I’m gonna lose the common area. There’s gonna be a very small sell-out on that, because the units are very small.

So I’m gonna look at the property and I’m gonna say, “Alright, what’s the total building area?” Usually, you can say about 85% is what you’ll be able to sell, so usually about 15% is a good guessment of common area. So you do 85% of the total square footage – that will give you the sellable square footage. And then since I have a really good grasp of my market, which is also important – knowing where you’re going to invest, I can then take that square footage and I’ll know what it costs me to build with that square footage for my construction costs, I also know what I can sell it at with those numbers, so before I even go see this property, I have a spreadsheet that’s already built out with my profitability.

When I get to the property, there could be things that come up – foundation issues, things that could make me adjust my sheet, but those are all items I’m able to enter in before I even leave my computer.

Joe Fairless: What does it cost to build?

Ricky Beliveau:  Right now we’re running our numbers for [unintelligible [00:19:50].27] renovation at around $150/foot. It ranges. Sometimes we’re under that, sometimes it goes a little over that, but in Boston that’s the calculation we’re using to see if a project is feasible or not.

Joe Fairless: And what’s it selling for?

Ricky Beliveau:  Right now in East Boston the prices have really rose. Now we’re in the high fives, low sixes per foot.

Joe Fairless: High five-hundreds?

Ricky Beliveau:  Correct, yeah. For a property that’s closing 1st May, maybe the average sellout was 573/foot.

Joe Fairless: And then the only other factor is the cost of acquisition when you factor in the costs, right?

Ricky Beliveau:  Yeah, it’s acquisition, and then there’s the other soft costs – there’s the carrying on the interest, the insurance, attorney’s fees… So that $150 is just the cost that would actually go towards the construction of it. There’s still the other soft costs that would need to be added in.

Joe Fairless: Okay. Is there a rough percentage that you use for that?

Ricky Beliveau:  No, I build those out in my analysis. I look at the acquisition price, I know what rates I’m getting from my lender, so I’m able to build that out. I use a 12-month timeline to give myself a buffer, so that I know where my interest will be if it does take me 12 months. It’s always better to overestimate these numbers and then in the end come back extremely happy with your results, than underestimate and then end up losing money.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Ricky Beliveau:  Let’s do it.

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

Break: [00:21:22].24] to [00:22:17].18]

Joe Fairless: Ricky, what’s the best ever book you’ve read?

Ricky Beliveau:  I’m not a big book guy, but lately I’ve been really enjoying the How I Built This Podcast that came out – that’s been really enjoyable the past few months.

Joe Fairless: That’s a book, or a podcast?

Ricky Beliveau:  A podcast.

Joe Fairless: Okay, it’s a podcast on how he or she built the podcast…

Ricky Beliveau:  No, How I Built This is a podcast that interviews some industry leaders – Mark Cuban, the founders of Instagram, for example, about how they got started and how they built their business, and the complications that they had to get to where they are. It really relates to real estate. We’re all looking to build these businesses, build our real estate empires or companies, and listening to these really successful people tell their story – it really translates to the real estate business.

Joe Fairless: Best ever deal you’ve done?

Ricky Beliveau:  We already ran through my last condo conversion, but it’s actually the first building I ever purchased. I currently own it today – it’s my largest rental property. My purchase price was $930,00 and reappraised for 2,2 million.

Joe Fairless: That was your first purchase?

Ricky Beliveau:  Correct.

Joe Fairless: Wow, how did you get the funds for that on your first buy?

Ricky Beliveau:  I used FHA Owner Occupant, and in Massachusetts at the time the max one you could get was $816,000 for FHA, and then actually using the paper that I wrote I went to my mother, who had just inherited some money, and I asked her if she would invest in the property with me. So she gifted me $160,000 to get me started on that first property.

Joe Fairless: And that was a single-family home?

Ricky Beliveau:  No, it’s a three-family property. When I purchased it, it was a nine-bed, three-bath; I lived in one of the units and I got my hands dirty and renovated it and turned it into a 12-bed, six-bath.

Joe Fairless: [laughs] Of course you did.

Ricky Beliveau:  I was able to really drive up the rents and drive up the value. And also, I bought it at the perfect time. Boston in 2010 had really plateaued. From 2007 to 2010 it had almost been dead even, and then right in 2010 is when the market started to explode, and it hasn’t stopped since.

Joe Fairless: Best ever way you like to give back?

Ricky Beliveau:  Right now I’m a member of the Venture Mentoring Network at Northeastern. What that is is it’s startups and college students who have ideas and they’re trying to start their businesses. Right now I’m mentoring a bunch of college students, trying to help them get their businesses going.

Joe Fairless: What’s a mistake you’ve made on a deal?

Ricky Beliveau:  Thinking back, one mistake I made from the start was that I tried to self-manage my rental portfolio. I think that you can’t really deliver the high level of service that these tenants need when you’re doing it on your own, at least from my standpoint. I quickly realized that it was a mistake that I was trying to do that on my own, and I was able to correct that by hiring a management company to take over that for me.

Joe Fairless: And where can the Best Ever listeners get in touch with you?

Ricky Beliveau:  You can find me on Facebook, Instagram, Twitter, all at Volnay Capital. You can also find me on my website, volnaycapital.com.

Joe Fairless: And I recommend the Best Ever listeners to go check out Ricky’s website, volnaycapital.com. It’s got pictures of the condo conversions, it’s pretty cool.

I really enjoyed this conversation on condo conversions, and other deals, but really we focused on condo conversions – the challenges that we might come across. Definitely a red flag if tenants are there, there likely will be issues. It’s not a deal breaker, but just expect for there to be issues. And then knowing your numbers, talking through how you calculate the back of the napkin math, and then you have your financial model, so obviously going much more detailed. During our conversation you gave really good, high-level back of the napkin approach for how to evaluate deals. Thanks so much for being on the show, Ricky. I hope you have a best ever day, and we’ll talk to you soon.

Ricky Beliveau:  Joe, thanks a lot! This has been great.

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Best Ever Show Real Estate Advice from experts

JF814: How He Turned $10,000 into Over $10 MM in Real Estate Developments

Starting with $10,000 in his bank account our guest was able to surround himself by the right people and begin his fix and flip ventures. Developments, fix and flips, and other ventures have built his total net worth above $10 million. Also, find out how he is able to only do a project the year and make it out alive!

Best Ever Tweet:

Slava Menn Real Estate Background:

– Principal at Labrador Real Estate & Contributing Writer at Inc. Magazine
– Guest lectures at his alma maters, BU & MIT, and writes for Inc Magazine
– Started with a $10K savings and has developed $10M worth of real estate
– Since 2013, Labrador Real Estate has developed over $6.5MM in real estate
– Based in Boston, Massachusetts
– Say hi to him at http://www.labradorre.com
– Best Ever Book: Unique Ability by Catherine Nomura

Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Click here: http://www.adwordsnerds.com to schedule the appointment.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips: https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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Best Ever Show Real Estate Advice from experts

JF799: How to BOOST Your Profits Per Hour, Direct Mail, and High End Construction

So you’re deciding if you should wholesale or rehab your new found deal… Well have you asked yourself how much time and energy it takes to rehab? Today you are going to hear why some deals are better to simply wholesale while others make more sense to fix and flip. You will also hear about how our guest went from accounting to a direct mail business and why he loves high-end flips.

Best Ever Tweet:

Justin Silverio Real Estate Background:

– Founder of Open Letter Marketing, a direct mail company for investors
– Managing Member at JS2 Homes LLC, his own investment company on rehabbing, redeveloping and wholesaling
– Prior to starting his company, Justin was an accountant in the private equity space
– Over 10 years experience in the investment industry
– Based in Boston, Massachusetts
– Say hi to him at http://www.thebostoninvestor.com
– Best Ever Book: Millionaire Real Estate Investor by Gary Keller

Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment. Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips: https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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Best Ever Show Real Estate Advice from experts

JF740: This Trick Makes You MILLIONS in phone Leads and the Conversion Code #SkillSetSunday

Today’s guest is an expert in turning leads into paying customers. He cofounded the company that will change the way you generate leads and capture them. He wrote a book that can hope you crack the conversion code. Tune in if you want to sell more and make more for your company.

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Chris Smith Real Estate Background:

– Co-Founder of Curator; A social media, digital marketing and sales coaching company
– Key note speaker and master lead generator
– In less than three years, Curaytor has grown to over $5 million in annual, recurring revenue
– Author of The Conversion Code
– Based In Boston, MA
– Say hi at curaytor.com

Want an inbox full of online leads?

Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Go to http://www.adwordsnerds.com strategy to schedule the appointment.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Joe Fairless Best Ever Real Estate Investing Advice banner

JF513: How YOU Can Buy Apartments NOW

Listen to the Episode Below (35:50)
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Best Real Estate Investing Crash Course Ever!

Our Best Ever guest has assisted many investors in the purchase of apartment complexes, in fact he is an attorney that knows the paperwork. He purchases investments for himself and eventually created his own in-house property management company. You must hear his story and advice to get started on your next syndication!

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Charles Dobens real estate background:

  • Say hi to him at multifamilyinvestingacademy.com
  • Attorney who specializes in working with multifamily investors
  • Owned over 800 units himself and been involved in close to 1B of transactions for investors
  • Owner, operator, syndicator and owned his property mgmt. company
  • Based in Boston, Mass
  • His Best Ever book: E-Myth Revisited by Michael Gerber

 

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Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

 

 

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