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Continuing a conversation they started about a month ago, Joe and Theo are giving away more of their top tips for underwriting value-add apartment communities. We also have a new segment of the podcast announced towards the end of this episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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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. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
Today we’re doing Follow Along Friday. It’s part two of a two-part series on underwriting a value-add apartment community. Part one is episode… What episode is that, Theo?
Theo Hicks: 1445.
Joe Fairless: 1445 is part one. 1145… That’s a bunch of episodes. Part one was 1445, so you’ll probably wanna listen to that one if you haven’t yet. This will make a lot more sense, because this is part two of ten tips for underwriting a value-add apartment community.
Normally, we interview guests on this show, but Follow Along Friday – we break from that pattern and we talk about what we’ve got going on, and/or talk about some specific lessons that we think will be helpful for you in your real estate endeavors.
So where do we wanna pick up, my friend?
Theo Hicks: I just wanted to quickly mention the podcast episode, 1445; I wanted to quickly just mention what the first five tips were, and then if you wanna know the answer to these questions, go and listen to that episode, 1445.
The five tips that we went over were how to calculate an offer price, we talked about why you shouldn’t trust a broker’s offering memorandum, we talked about how to calculate the rental premiums for after you take over the property, we talked about what to watch out for when you’re performing a rental comp analysis, and we also talked about why it’s important to confirm your underwriting assumptions with your property management company.
So most of it had to do with how to calculate the rents after you take over the property, as well as your stabilized expense assumptions, and why must confirm it with your property management company. Those are the first five. These next five will also help you with your underwriting.
Before I go into it, I was going through Bigger Pockets, and trying to add value to people, and I could tell that there’s a lot of confusion on underwriting for larger apartment communities compared to the smaller properties, so I’m really glad that we’re doing this episode; that just confirms the need for this type of information out there.
Joe Fairless: What’s the most common thing that’s causing confusion?
Theo Hicks: Well, actually it’s the first one that I wanna go over…
Joe Fairless: Good segue. You smooth operator.
Theo Hicks: …which is technically number six, but it has to do with the actual rents. For example, when you’re doing a regular smaller deal, you typically look at what their actual rent is, and then you’ll do your rent comp analysis, or talk to the property management company and figure out what the rents could be after you take over… But for apartments it’s a little bit different, because if you’re at such a large scale, a 2% decrease in rents across one-units is gonna have a much larger impact on your revenue, because there’s 100 or 200 units. So when you’re underwriting a deal, you don’t wanna just input the actual rent that’s being collected, you wanna input the market rent.
I think a lot of trouble with this is distinguishing between the actual rents and the market rents. The actual rent is the rent that’s being collected on the actual lease. If someone’s on the lease for $600/month, that’s how much they’re paying. The market rent is how much the unit should be rented for if it was rented to market standards. Now, sometimes those might be the exact same, but if they’re not, the difference between those two is called loss to lease. I see a lot of people are confused by what this loss to lease means. The loss to lease is the amount of rent lost due to the actual rent being below the market rents.
The reason this is important, number one, is because if you rent out a unit to someone 12 months ago, at market rent, you’re not gonna be increasing the rent each month, so 12 months later, assuming the market went up, their unit is gonna be below market rent. That difference is called loss to lease; it’s money that you’re leaving on the table because that unit is not up to market rate.
Now, typically, a good percentage you wanna see is between 2% and 3%, because you are assuming that the rent is going to increase 2%-3%. For example, I was looking at an apartment deal yesterday where the loss to lease was $100… And if you just input the actual rents, then you won’t have an understanding of the historical loss to lease of that property, which is really important, because you wanna know what the loss to lease will be after you acquire the property, because you wanna know how much money you’re leaving on the table. So that’s one big thing – the difference between the market rents and the actual rents.
Something else you need to take into account is the vacancy, of course… But again, something else that’s different between how you typically underwrite a smaller deal and how you underwrite an apartment deal is you don’t wanna use the percent of vacant units; you wanna use the vacancies loss, so the rent that’s lost due to the vacant units.
For example, if you have ten vacant units and they’re all one-beds, the amount of money you’re losing is a lot different if they’re all two-bedroom units.
This comes down to the distinction between the economic and the physical occupancy rate, which we’ve talked about a lot on this podcast. The physical vacancy rate is not as important as the economic occupancy, because you wanna know how much money you’re actually collecting, and the physical occupancy does not take that into account. So you’re gonna have a 90% physical occupancy rate, but maybe 10% of those units aren’t paying the rent on time, or aren’t paying rent in general, or are paying only a portion of the rent. Your economic occupancy rate is gonna be 80%, and that’s actually what’s going to be used to calculate the calculate the cashflow, not the physical occupancy rate.
So a combination of all those things, which had to do with the actual revenue line items, knowing the difference between the actual rents and the market rents, and also the difference between the physical and the economic occupancy rate; I think understanding that will help you a lot when you’re underwriting this type of deals.
Joe Fairless: And this information is so valuable… I was not resourceful enough when I got started to find the source that educated me on this, and I’m so glad that we’re talking to the Best Ever listeners about this, because it’s necessary to know. If you’re wondering how to double-check economic versus physical occupancy, well you double-check that in three ways. One is the profit and loss statement that’s provided to you; they might fudge the numbers a little bit, or a lot. Two is the actual leases to verify that those leases add up to the rent that is allegedly being collected, and then three would be the bank statements – looking at the bank statements for that entity and determining how much income is coming in to the property.
A lot easier to do on larger deals than smaller deals, because it’s been my experience talking to people, because I haven’t bought a property — I went from single-family homes to 150+ units, so I haven’t done the middle range… But I’ve talked to people who have, and one common challenge that they come across checking the bank statements is the owner mixes the income with all their other income sources, so it’s really hard to parse that out.
A solution to that is hire a firm that will help you with that, assuming that you can get those bank statements from the owner.
Theo Hicks: Exactly. And something else I wanna focus on before going to the next step is — if you listened to the last episode, we talked all about how to calculate the rental premiums, and what to look for in the offering memorandum… When you’re looking at a deal, they’re most likely gonna tell you what the market rent is, but always make sure you’re double-checking that it’s accurate, and always make sure that they’re basing that off of rental comps that are similar.
I was just looking at a deal yesterday, where they told me the property had $100 loss to lease, the units as is were $100 under-rented, and here’s the comps to prove it… And then I looked up all the comps, and what they had that the property didn’t have were pools, fitness centers, clubhouses, ponds with fountains, much nicer interiors… And that’s not a rental comp. Those aren’t the same property, so how am I supposed to determine the market rent of my unit if I’m looking at properties that are not even close or the same as mine. So always keep that in mind, and make sure that you’re not just taking their market rent at face value. Make sure you do some investigation on your end first. As I said, that’s the big one that I’ve seen.
These other ones are also very important. Number one is taxes. When you are underwriting an apartment deal, it was likely purchased by someone a couple years ago, at a purchase price that’s much lower than what you’re gonna buy it at, and the taxes on their profit and loss statement are gonna be based off of essentially how much money they paid for the property.
So once you buy the property for them, at the new purchase price, the taxes are not gonna be the exact same; so you can’t assume that you’re gonna pay the exact same amount of taxes as they are. This is something else that you might find in an offering memorandum – their proforma will have the exact same taxes that the current owners have, but they mentioned how they’ve done all these improvements to the property, and you look it up on that auditor site and discover that they’re selling it for two million dollars more than what they bought it for. What you need to do is you need to base your stabilized tax assumption on the actual purchase price. So exactly what you do is you’ll wanna go to the local auditor or appraisal site and find out what their tax rate is; it’s gonna be some percentage – 2,35% or whatever. So you’re gonna go on their site and find the exact one for the city or the county that that property is located in, and then you’re going to take that, multiply it by 80% of the purchase price, which is what you usually do. In California I know it’s 100% of the purchase price, but wherever you find this tax rate, it should show you exactly how they calculate the tax rate. It’s gonna be 80% or 100% the purchase price, times the tax rate. And that’s gonna be the tax rate that you use.
The reason it’s important is because you’re gonna look at deals sometimes where the taxes – which is one of the largest expenses – is gonna double, and that’s gonna have a huge impact on the amount of returns you can make at a specific purchase price…. So make sure that you’re using the correct tax number when you’re calculating your purchase price.
Joe Fairless: And it’s common practice to protest the taxes and negotiate with the county, and I highly recommend that you have someone on your team to do that for your asset. One way you could attempt to not have taxes increase is by purchasing the entity instead of the property; that way it doesn’t show a sale on record… But it’s not bulletproof. The mortgage that you’re getting is gonna be recorded, and for Cincinnati in particular, they have lawyers on staff, full-time — the Cincinnati public schools have lawyers on staff full-time who are just looking for transactions to increase the taxes, because you know, the school needs their money.
There’s no bulletproof way of avoiding the increase in taxes, so I would just anticipate it happening… But there are ways that you can attempt to not have it happen, or not have it happen as much.
Theo Hicks: Exactly. Number two of part two is taxes – make sure that you use the correct tax rate and the correct tax expense for the base of the purchase price.
Joe Fairless: By the way, if you purchase the entity, buyer beware, because you’re also purchasing all the issues that they might have incurred as a result of their ownership. For example, if there might be liens on the entity, there might be someone who comes seven years later or however long later and says “Hey, this bill was due” and you have no clue what they’re talking about, because it was the previous owner… A good attorney could find out most of that stuff prior to you purchasing the entity, but there’s no guarantees that you’ll find everything.
Theo Hicks: Exactly. The third tip is gonna be about renovations. Now, I know we focused on this in the past, but I’m just gonna reiterate it again. For the interior renovations – this is talking about a value-add community, so you’re buying a property that the current owner has already started a value-add program, he just hasn’t finished it yet, or you’re going to do a value-add program to 100% of the units. So these are four questions you need to ask yourself, the broker, the owner, to help you determine what the interior renovation costs are gonna be.
Number one, you’ll wanna know how many units were actually renovated by the current owner. If you read through the offering memorandum or you ask the owner or you look at the rent roll, you should be able to determine how many units are renovated versus how many aren’t.
The next question you wanna ask, assuming that they’ve renovated units, is what were the actual unit upgrades, and once you know those, are you going to be replicating those, or are you going to be doing more than that, or less? You probably won’t be doing less, but are you gonna be doing the exact same, or are you gonna be doing more?
The third question you wanna ask is what period of time were those units renovated. If you remember back to two Follow Along Fridays ago, when we were talking about the underwriting part of the Best Ever apartment syndication book, we talked about what you need to look for when you’re looking at the rental comps on the offering memorandum, and you wanna know that if they’re being used as a comp, were those units renovated within a timeline that’s similar to how quickly you’re gonna be renovating the units.
The same thing here – you wanna know how long it took them to renovate those units, because the next question is gonna be what premium was achieved, and if they renovated over a long period of time, then that premium is not gonna be as accurate as if they renovated in the last couple of months.
The reason you wanna ask all these questions – you wanna know exactly how many units you’re gonna be renovating, and you wanna know to what level you’re gonna have to renovate those units. Say for example that the current owners have already renovated 50% of the units to, let’s just say, basic upgrades. Your goal is going to be to do premium upgrades, for all the units. You’re going to go in there and spend a certain amount of money for the original 50% that were already updated, but not as much as you would spend for the ones that had not been renovated at all… Whereas if you didn’t ask this question, you would assume that it’s gonna cost twice as much as it actually would.
Then you also need to know how much money you’re gonna make based off of those upgrades, determining if they make sense from a return standpoint. So those are the four questions you wanna ask in regards to specifically the interiors.
Next, of course, is the exterior upgrades, and really the only way you can figure this out is you or someone has to visit the property in person. If it is an on-market deal, they’re gonna have an offering memorandum that tells you that you need to replace the roofs, and the parking lot, and that’s it… But unless you actually go to the property and look at the roofs, look at the exteriors, look at the landscaping, there’s no other way to know exactly what you need to do, without, again, seeing it in person… Preferably with someone who has construction experience. If your business partner has construction experience, they should come with you, or if you have a contractor…
Of course, if you’re not in the market, you need to plan a trip, or if you have a trusted team member or a property management company, or a real estate broker that’s willing to go there and do it for you, take pictures, take notes – that could help, too. But in order to determine the exterior budget, you have to go visit the property in person.
And then lastly, once you determine exactly how much money it’s gonna cost for the interiors and exteriors, you always wanna have the contingency for the unexpected. Because again, you’re just looking at it with your eyes before you’re submitting an offer, so it’s gonna be an assumption how much it’s actually going to cost… So you always wanna add in a little extra, just in case you uncover some things during due diligence that you didn’t expect, or if you uncover things after you’re buying the property that you didn’t expect.
A good rule of thumb here is 10%-15% of the entire budget. You wanna take the interior cost, plus the exterior cost, and add an additional 10%-15%, and that’ll be your total renovation cap-ex budget. That’s number three.
Joe Fairless: Or… Eight.
Theo Hicks: Eight. Great. Number nine is actually one of the three immutable laws of real estate investing, and that is always have operating reserves when you’re buying a property. When you’re underwriting a value-add apartment deal, and you have an idea what the purchase price is going to be, you wanna add in an additional 1% to 5% of the purchase price as an operating account fund. Obviously, the higher range is if there’s a lot more deferred maintenance on the property, and the lower end of the range is when deferred maintenance was already addressed.
Now, this is to cover unexpected dips in occupancy, this is to cover unexpected cap-ex projects… Essentially, to cover things that you can’t pay for with the amount of revenue you’ve made so far within the first couple of years. Of course, you’re keeping an ongoing lender reserves and you’re gonna have cashflow coming in, but if something happens in the first couples of years and you haven’t created a fund for that yet, how are you gonna pay for it? You’re gonna have to do a capital call, pay for it out of pocket… I don’t know how you’re gonna do it, but you’re not gonna have to worry about it because you’re gonna have an operating account fund.
Now, a specific example of where this would have come in handy for me, if you’re a loyal Best Ever listener, when I talked about all the boiler issues I went through… If I would have had an operating account fund, I would have been able to — I guess I would have been technically out of pocket regardless, because it was my money either way… But I wouldn’t have been as surprised, and I would have just been able to take it out of a fund that I already have, as opposed to having it come out of my personal expenses.
Another example of when this would come into handy is let’s say you are underwriting a value-add deal, and it meets your return projections overall during the hold period, but let’s say year one, the cash-on-cash return is lower than the preferred return you’re offering to your investors. An operating account fund is a way that you can pay that difference upfront for the first year, and then of course, the cashflow from the property will cover the rest… Or you can just have that accumulate, but this is just another option for getting your investors their returns, starting from day one. That’s number nine.
And then lastly, number ten has to do with the sales disposition, or the sales assumptions. When you’re underwriting a value-add apartment deal — well, let’s just take a step back. Something else that I noticed is that when people are underwriting these smaller deals… And I mentioned this in part one – they just input one set of numbers, and then the returns based off of those numbers is kind of how they figure out, “Okay, if it’s 15% cash-on-cash returns I’ll buy it.” And of course, that’s not gonna be the case. You wanna have a proforma budget that is going to be a yearly breakdown for whatever you plan on holding the property.
The last step of that is to actually include the sales. Let’s say for example you plan on holding on to the property for five years; you’ll have your year one through five budget, and then the cashflow from that is gonna be taken into account for your cash-on-cash return. At the same time, if you’re gonna sell the property after five years, you’ll have to also include the profit from the sale in your returns… Whereas if you plan on holding on to the property forever and that’s how you’re underwriting the deal, you’re missing on maybe the largest profit that you’re going to make.
One thing that I wanted to talk about for disposition is how do you determine the cap rate at sale? So you need to know your NOI based off of your budget, and your rent increases, and the likes… But how do you figure out what the — the other part to the value is the cap rate. So what we do – and this is gonna be very conservative – is we actually assume the market is gonna be worse at sale than it was at purchase. How you do this is you set a cap rate that is 0,2% to 0,5% higher than the in-place cap rate. So you buy the property at your purchase price, and based off of the in-place NOI you get a cap rate – let’s say 6%, and if we’re gonna sell the property five years later, we’re gonna assume an exit cap rate of something between 6,2% an 6,5%. That’s what will be used to calculate the sales price… So we would take the exit NOI, this new cap rate to figure out what the sales price is, we’ll subtract out closing costs, broker’s fees, things like that, as well as the remaining debt that you owe on the loan, to calculate how much money you’re going to actually make at sale.
That’s really important, because if you’re making multiples of millions of dollars at sale and you have to take that into account when you do your returns, you’re leaving a lot of money on the table and you’re leaving a lot of return percentages off the table, that your investors aren’t going to see when they are initially looking at the deal.
Always make sure you’re including these sales profits in your return projections. What we actually do is we have two separate returns – we’ve got the cash-on-cash return from just the cashflow from the property, and then we have a cash-on-cash return that includes the proceeds from the sale.
Joe Fairless: And these ten tips – Theo went over five in a previous episode (episode 1445), and then six through ten, these are the tips for underwriting a value-add community.
The important thing to think about after you’ve applied these tips is that you’re likely going to have a management partner, and if they’re not aligned with you on how you’re underwriting, then you might as well just throw it out the window and then hand your wallet over and tell them to take it… Because if the executors are not aligned with what you’re projecting in your spreadsheet, then you’re gonna fail, or at a minimum there’s a higher likelihood of failure on the project. And I’m defining failure as not meeting whatever you have in your projections.
This is a common mistake, so please don’t do this… The common mistake is doing the underwriting, closing on the deal, handing the budget over to the property management company and saying “Let’s go, team!” Instead, you should be aligned with your property management company; what I mean specifically is give them your budget prior to you getting awarded the deal and solidifying the terms with the seller. Make sure that your property management company has signed off on it… Because so many times I talk to investors and they say they did not share the budget with the property management company, the team that’s actually executing on the deal, and things went haywire right out of the gate.
Or you shared it with them, and the management company comes back afterwards with a revised budget, and nothing gets solidified, and then investor thinks “Oh, we’ll make it work.” It’s possible you can make it work, maybe with another management company, depending on whatever variables they’re changing, but that’s something that we’ve got to always keep in mind, because the main way we can lose money on deals is lack of execution. If you’re buying a large apartment community, 150+ units, or even 50+ units – think about a 50-unit, you’re dealing with 50 families, and dealing with 50 individualized dwellings; they’re connected, but they’re individualized, and there’s a lot that can go wrong on the execution, so make sure that you talk to your management company and they sign off on the budget. And even better, you see a template of what the budget reporting will be from them prior to closing… Because there have been times where I’ve talked to investors that say “Joe, I sent it to them. They said yes, that’s good, but then two months into it I finally get the finances back from the management company and they’ve got this whacky budget; I don’t know where that came from! They said we’re on track with the budget, but it’s not the budget I had…”
So a way to decrease the chances of that happening is by receiving a report – the template – with your numbers plugged in, that just shows “This is the budget we’re gonna be going off of.”
Theo Hicks: Those are all great points. Just one thing to add to that – make sure that when you’re interviewing property management companies (taking it even further back), you ask them “Will you review my proforma? Will you review my budget before we’ll probably be under contract?” The answer you wanna hear is yes, that they will review it, and of course, in combination with them having experience repositioning properties, so that you can trust that they actually know what they’re talking about. Those two things combined when you’re interviewing property management companies are key, because when the time comes, if you ever ask them, you say “Hey, can you review this?” and they say no, what are you gonna do? You’re gonna have to start the search for a new property management company all over again.
Joe Fairless: Yeah, very true.
Theo Hicks: So those are the top ten tips for underwriting… And again, there’s a lot of difference between value-add apartment community underwriting and the smaller deals, so I think all of these tips are going to push you in the correct direction when you are starting to look at these larger types of deals.
Joe Fairless: Just to clarify – when you say there’s a lot of difference between value-add apartment communities and the smaller deals… Will you define those?
Theo Hicks: Yeah, sorry. I would define that as four units or less. Most people who underwrite four units or less as if it’s a single-family house, and they’ll use the percentages for expenses…
Joe Fairless: Right. But for a ten-unit value-add, this applies.
Theo Hicks: Yes.
Joe Fairless: Or a five-unit value-add, this applies.
Theo Hicks: Exactly.
Joe Fairless: Cool.
Theo Hicks: And heck, you could even apply this stuff to the smaller deals too, to have more accurate underwriting. I guess what I was saying is that there’s a lot of differences between what I see people actually do and what I used to do compared to what’s the correct way to have the best assumptions possible and account for as many things as possible.
Joe Fairless: Cool. It makes sense.
Theo Hicks: Alright, so let’s move on to updates and observations. Joe, do you wanna give us an update on that property you were looking at in Cincinnati?
Joe Fairless: Yeah, the six-unit, flood zone, flood insurance too high… Not buying it. So… There’s that. No diversification for me in smaller stuff, which is fine. And again, for anyone who didn’t hear the episode where we talked about it, I was not gonna be active on that; I was gonna be the money man, and we were gonna do 50% ownership on the deal. My friend/real estate investor locally was gonna do the management, and [unintelligible [00:29:32].15] about $30,000. So the first $30,000 out of the entity that owns the property would go to me, because that’d be repayment, and then everything after that would be split 50/50. But nonetheless, it didn’t work out. The flood insurance is too high in the flood zone. Some things are too good to be true. It was killing that 2% rule, too.
Theo Hicks: It was.
Joe Fairless: I was seeing hundred dollar bills in my dreams… [laughs] And the other update I have is Colleen (my wife) and I went to a Jordan Peterson conference – or seminar, I guess, is more accurate – two nights ago in Cincinnati; he’s doing a tour, and it’s something I recommend. He’s doing a tour all over the country. I sent it to my siblings who live in Dallas, Fort Worth, because he’s gonna be there October 11th.
If you’re not familiar with Jordan Peterson – he’s a psychologist; he used to be a Harvard professor. He just talks about different philosophies and how to live life… And one thing I wanted to mention that really resonated with me – I am going to write a blog post about all the lessons I learned from this seminar; I have already written down my notes in a Word document, so I’ve got the outline, and I just need to bring it to life… But one of them I wanted to mention now is something that really stuck with me; he said “Compare yourself to who you were yesterday, not to what someone else is today.” It’s really powerful, for me at least, because what that makes me focus on is incremental improvement on a daily basis, and that’s what he talks about. Am I better today than I was yesterday? Or, better yet, how can I be improved today, so that I’m better off today than I was yesterday, I’m a better version of myself today than I was yesterday?
He talks about the Matthew principle. Essentially, it states that with every success that we have, that increases the probability of a future success. And the inverse is true – with every failure that we have, that increases the probability of the next failure taking place. So what do we do with that information? Well, what I do with that information, and what he talks about, is if there’s something that we are working on and we want to make the large goal happen — or a small goal; let’s do a small goal. For me, it’s not eat as many sweets. So if I instead just have one less sweet, one less bite of ice cream a day, or — I don’t eat ice cream every day, by the way… [laughs] But if I do something one less time, and not totally remove it, then that’s incremental progress, and there’s compounding returns on that.
And same with the podcast. The podcast is a great example. We have a daily podcast; it’s been daily for the last 1,500 days; holy cow, there have been compound returns on this podcast. It’s made me a multi-millionaire, that’s for sure… In an indirect way it’s made me a multi-millionaire. So when we do daily things — and another example is Bigger Pockets. I champion the thought of going on Bigger Pockets and being incredibly active, but some people I talk to say “Oh, I just can’t make enough time to do it!” Well, then do one post a day. “Oh, I can’t do that.” Okay, do one post a week. “Oh, I don’t know about that…” Really? You can’t do one post a week? Do one post a week. “I don’t know…” Do one post every two weeks. “Fine, I’ll do that.” So when you do one post every two weeks, you feel some sense of accomplishment – that’s pretty weak, by the way, but you feel some sense of accomplishment to do one post every two weeks… And then you’ll get some momentum. That increases the probability of you having future success, and increasing the amount of posting that you do on Bigger Pockets, there will be a direct cause and effect for increased activity on Bigger Pockets – it generates an increase in success in your business, I’m pretty confident about that.
That’s one takeaway from the Jordan Peterson seminar. Check out his tour. If he’s coming to your city, it’s worth the investment. I don’t recommend getting VIP. I did get VIP with Colleen; all it is is a picture with him, which – cool. I don’t really care about that so much. So I wouldn’t recommend the VIP thing, but I recommend going to check out his seminar.
Theo Hicks: That Matthew principle, the concept of momentum in the positive direction and in the negative direction – it really applies to everything; it’s just a truism for everything. If you have a goal that’s not gonna happen tomorrow, it’s baby steps, and then nothing will happen for a long time, and then all of a sudden everything will start happening. Not all at once, but it will have that compounding effect, and it’s kind of the same thing in the negative direction too, but we’ll focus more on the positive direction for this episode.
I didn’t realize you were a Jordan Peterson fan. My friend Joey was actually there, too. I’m surprised you didn’t run into him.
Joe Fairless: Oh, cool. Cool. Well, I hadn’t read his book, and one of my good friends who I respect greatly, and who has a brilliant mind – someone I worked with in advertising, he’s a strategist; GCP, shout-out to you, buddy! – he told me about Jordan Peterson… So when he tells me about someone, I listen, and that’s why I went there.
Theo Hicks: I’m glad you went, and got a lot out of it. I’m looking forward to reading that blog post. Alrighty. Well, just to wrap up…
Joe Fairless: Oh, wait… We’ve got one more thing, something exciting – Syndication School. Sorry, I should have mentioned this. Syndication School, my friends, we’ve got that coming up… What is Syndication School? It is a series focused on teaching you an aspect of apartment syndication. Theo is gonna lead the charge on that. You are going to learn the how-to of apartment syndication; and it’s just gonna be on this podcast, so you’re not paying for it or anything… We’re just giving it to you, and it’s gonna be valuable.
The reason why we’re doing this is because we’ve gotten so much feedback on the Best Ever Apartment Syndication Book that we wrote, and the how-to nature of the book… Not just theory-based stuff, but exactly “Here’s how to do things”, getting into the details. So starting next month, in October, we’re going to have a weekly series on apartment syndication. It’s gonna be a two-part series, so two days out of the week will be Theo doing a lesson on some specific aspect of apartment syndication… So how to find off-market deals — and again, it’s not theory-based, it’s actual examples of how to do it, getting into the details. How to get capital on your first apartment syndication, how to get the experience, how to attract the right team members, but again, being very specific.
So it’s gonna be a two-part series, there are gonna be some corresponding documents that you’ll get on most of the episodes, so we’ll give you a link to get the free documents… All of it is free, and it’s gonna be a great way to add value to you if you are an apartment investor, or you’re someone who wants to bring more capital to your deals via partners – passive or active partners – or someone who’s looking to scale your business. If you’re in none of those categories, then just skip these two episodes whenever they come up each week, but if you are in either one of those three or all or some of those three categories, then this is going to be very valuable for you.
Theo Hicks: Yeah… And I would say listen to them anyways. I’ll listen to podcasts with a wholesaler, and he’ll say some success habit, or he’ll say something that has to do with his business that I’m like, “Oh, I didn’t even think about that. How can I apply that to my business?” So even if you’re a wholesaler or a fix and flipper, I think listening to the syndication school will still add value to your business, and maybe give you some future ideas of how to (as Joe mentioned) scale your business, as well. I’m excited for that.
And speaking of the book, make sure you guys pick up a copy on Amazon and leave a review…
Joe Fairless: Guys and girls, Theo…
Theo Hicks: Guys and girls, guys and girls… If you leave a review and take a screenshot and send it to us at info@JoeFairless.com, we will send you some free apartment syndication content. This week’s review is from John…
Joe Fairless: Who’s not my wife.
Theo Hicks: Yeah, who’s not Colleen… [laughs] John said “I received the book yesterday and plowed through it during a long flight and airport layover.” That’s impressive. “The book is crammed full of practical advice based on Joe’s experience actually building a large portfolio of apartment communities over the past five years. Notable aspects of the book are:
- a) it’s highly detailed and contains best practices to achieve success in critical areas, like finding deals, underwriting, raising debt and equity capital;
- b) a number of options are presented in the book, which leaves readers with choices of how to best apply methods to grow their apartment syndication business.”
Joe Fairless: Thank you so much for that comment, and taking the time out of your layover to write it, assuming that you wrote it during your layover… That is quite a long layover. I went through the book myself, right before we published it, just to do one final pass-through, and I read the whole thing and it took me approximately 24 hours, but I did sleep in between the two, and I wasn’t reading the whole time… So that’s very impressive, that you read 450 pages during a layover / I’m sorry that you had a layover that long… But nonetheless, thank you, John.
Again, if you leave a review on the book on Amazon and e-mail us a screenshot at info@JoeFairless.com, we’ll get you some good stuff that will help you on your apartment investing journey.
Thanks again for hanging out with us. I hope you have a best ever day, and we’ll talk to you tomorrow.