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

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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!

 

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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/


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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

Listen to the Episode Below (21:16)
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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

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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

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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

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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!

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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

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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!

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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

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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

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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!

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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

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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

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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.

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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

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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

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JF513: How YOU Can Buy Apartments NOW

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.

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