JF2342: Military Couple Powers Through Real Estate With Lindsey Meringer & Amanda Schneider

Lindsey Meringer and Amanda Schneider are the power couple of the month with Lindsey being a green beret and an operator in the 10th special forces group, and Amanda was also in the military and later decided to become a full-time real estate agent. They began their journey into the world of real estate in 2016 and currently have a portfolio of 5 single-family rentals, a triplex, and working on growing their portfolio even more.

Lindsey Meringer & Amanda Schneider Real Estate Background:

  • Lindsey is an operator in the 10th Special Forces Group (Airborne), a green beret
  • Amanda is a full-time real estate agent
  • They started their real estate journey in 2016
  • Portfolio consists of 5 single-family rentals, a Triplex, and currently working on a duplex to turn into a 5 unit
  • They have added 11 doors in the past 12 months with 14 overall with the goal of reaching 20 by end of 2020
  • Based in Colorado Springs, CO
  • Say hi to them at: www.TheVeteranREaltor.com 
  • Best Ever Book: The One Thing


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Best Ever Tweet:

“Both mentorship and your community is important.” – Lindsey Meringer & Amanda Schneider


Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking to two guests. We have Lindsey Meringer and Amanda Schneider. How are you two doing today?

Amanda Schneider: Great! Thanks.

Lindsey Meringer: Doing great. Yeah. How are you?

Theo Hicks: I’m doing well, thanks for asking and thanks for joining us today. A little bit about their background. So Lindsey is an operator in the 10th Special Forces Group (Airborne) and is a green beret, and Amanda is a full-time real estate agent. They started their real estate journey in 2016 and their portfolio consists of five single family rentals, a triplex, and they’re currently working on a duplex that they’re going to convert into a five unit. So they’ve added these 11 doors in the past 12 months, with 14 overall, and their goal is to reach 20 doors by the end of 2020. They’re based in Colorado Springs, Colorado, and their website is www.theveteranrealtor.com.

So starting with Lindsey, could you give us some more information about your background and what you’re focused on today?

Lindsey Meringer: Yes, so I grew up in a small farm town, and that kind of life has helped us a lot in where we are today, in that I have a very extensive construction background, from roof framing, I worked in a finished cabinetry shop, so pretty extensive in the construction world, and I’ve been able to leverage that into real estate; joined the military in 2010 and since then, Special Forces… I’ve truly been all over the world from Africa to the Middle East and Europe and just kind of living that life as we’ve been W-2 entrepreneurs, and just pushing forward.

Amanda Schneider: Yeah. I was also in the military, and then I came out to Colorado Springs to be a contractor for the military, and that’s when I met Lindsey. And I had read the book Rich Dad Poor Dad, which kind of made me realize how lucrative real estate could be as far as that passive income.

So when Lindsey and I started dating in 2015, we had taken a road trip and we called it our all-or-nothing road trip… That if this worked out well for us, we were probably going to get married and move on with our life. If not, we were going to break up. So during that road trip, we listened to a ton of real estate podcasts. I think we may have even listened to Rich Dad, Poor Dad on that one, too. So that kind of spawned our investing from there. We got married and the next day we went looking for our first house together.

Lindsey Meringer: Yeah.

Amanda Schneider: Yeah.

Theo Hicks: Perfect. So I kind of want to talk about this duplex deal. So you are currently working on a duplex, and then the plan is to convert it into a five-unit. So maybe walk us through from the conception of the deal to where you are standing as of today.

Lindsey Meringer: Yeah, I think part of the conception – it is important to start at the beginning, because one little piece of advice I’ll give is to please trust your wife. We had a search setup, we were looking for multifamilies, and we look at zoning applications that are single family, zoned R-4, looked for potential… And I had actually trashed this duplex on the search, because it was a really expensive duplex. She messaged me and said, “Hey, I found this great duplex,” and it was zoned R-5, and it was 3,300 square feet. And she actually got me to kind of look into it more and it ended up having a lot of potential as a project.

So we went and  looked at it, and saw a duplex split level, and they had actually at one point converted a porch, done trusses over it and enclosed it; it has like these couple of weird storage areas next to a two-car garage and then a detached one car. And that porch has an outdoor patio area. So when we walked into it, we’re like, “You know what, this would be a really great conversion to four smaller units. We can break off the back of the property and we’re going to end up with a two bed, two bath; a two bed, one bath; a one bed, one bath and two studios.”

Theo Hicks: So from a manager’s perspective, it sounds like Lindsey saw this deal and was like, “Ah, nah, I’m good.”

Lindsey Meringer: “Nope.”

Theo Hicks: And you saw it, and  I guess — you saw it separately and thought that it was good. So what was it about the deal that made you interested in it?

Amanda Schneider: Well, Colorado Springs is an exploding market and we have tons of investors here. So we have five single families, so we’re like, “Hey, we really want to break into the multifamily.” But it’s so tough here, because we have lots of cash investors that are just coming, they’re paying over market value… So we wanted to find a creative way that we could possibly make a multifamily out of either like a single-family or a duplex or something. So we had a specific search setup where I would go on MLS and specifically search for properties that were zoned for more than the actual doors that were on that property. So that’s really what appealed to me.

Yes, it was priced a little high as a duplex, we did negotiate a little bit, we got the price down a bit… But I just saw that we could turn this into five units, and I just thought about the potential. And it’s in a really up and coming area of Colorado Springs, so that was another huge draw for me.

Lindsey Meringer: Yeah.

Theo Hicks: Could you maybe walk us through how you financially analyze a deal like that? How do you know how much you can pay for a deal that you’re going to ultimately convert into something completely different?

Lindsey Meringer: We just analyze everything as an end state, and the numbers work or they don’t. We had two contractors walk it. So there is actually some hiccups with this that we can talk through… But as far as the base analyzing of it, we just looked at rehab costs and conversion costs, funding fees, lending fees and then what we could rent everything for on the backside, and if the numbers made sense, they made sense. So even though it was kind of a big project and thinking outside the box in the use of the property, the base analyzing of it was pretty straightforward.

Theo Hicks: Sure. So if you don’t mind, walk us through some of these hiccups that you just mentioned.

Lindsey Meringer: Well, I think one thing to highlight before the hiccup is kind of creative way we financed it. So as opposed to using hard money, I went around to a ton of local commercial banks and just talked to the head of lending and all of them and told them the way I wanted to go about this, the vision I had for the project. It was great, because I got that face to face time and that recognition. But then I found a great local bank that was willing to be super creative with lending. So what we actually ended up doing is doing a commercial loan on the front, kind of as a hard money lender at a one point and 7%, which anyone who’s used hard money knows that would be an incredible hard money rate. But the way the lending works on it is the same principle. It’s an interest-only loan on the front side, and then we have residential on the backside. We’re doing four units, we’ll cash out, refi, roll it into a residential, and then down the road, we’ll pay out of pocket and just convert the single-car into a fifth and make it a commercial property.

So it’s been kind of fun learning a lot with this in the funding application to it, and kind of the way the fiscal tie in. But then yeah, with hiccups. We had a contractor that we ended up going with – we get a call one day that he is backing out. Then the next day, the plumbers and electricians back out. So yeah, we’re a month in and I had done all the demo myself just to save some money, so we were back to ground zero.

I had a great commercial contractor come in, he’s become our contractor for all our properties now. But he was like, “Yeah, this $78,000 property, a rehab is more like 140k.” So that was kind of a little bit of a heartache. But we’ve managed to push through it and we’ve kind of brought that budget down a lot as we’ve worked through and gotten creative. And the numbers on the backside with the rental are still so great that even that heartache and that raising the cost of rehab – we’ve still managed to make it work as a pretty solid deal.

Amanda Schneider: Yeah, and one thing I wanted to add too is there were some other things that this original contractor — it was ultimately our fault, because he had never done such a big project for us. So we just had faith that he could. But he was not versed in what it takes to convert something into more than a duplex. And the city, even though the lender looks at four units and under as residential, the city does not; it looks at it as commercial. So it also took a couple weeks of Lindsey calling around to different departments within the city to make sure we could do what we wanted to do. Do we need a development plan? If we need a development plan, that was going to be 15k… There was so much more that we had no idea that we had to do in this conversion.

Lindsey Meringer: Yeah.

Theo Hicks: Just going back a little bit… We talked about your search on the MLS – you’re looking at things that are zoned above what they actually are.

Amanda Schneider: Yes.

Theo Hicks: Is that something that anyone can do, or is that something that you need to have access to the MLS? So you need to do it through an agent?

Amanda Schneider: To make it the easiest, access through the MLS is the easiest. You could find an address, you can look it up on the county assessor’s website and see what is zoned. So I guess theoretically, if you found something on Zillow and you were just curious, you can always find that on the county assessor, and I would assume every city makes that public knowledge.

Theo Hicks: Yeah.

Amanda Schneider: But obviously, using the MLS is much easier, because I can just set up a simple search.

Theo Hicks: Alright. Something else I wanted to talk about too is maybe some tips, some advice on people who want to get into real estate investing with the person that they are married to. What are some pros and cons of that?

Amanda Schneider: Yeah.

Theo Hicks: Well, we may be a bad example, because we truly see eye to eye on most things with real estate. I thing that’s the thing, is we truly share this passion as our way forward in life. Our whole life revolves around real estate; granted, I’m still in the military, but if I’m not actively at work or deployed or something, I’m working on a job site or analyzing future deals… So sharing that common bond is absolutely crucial. I think we’ve heard plenty of stories through podcasts where the husband wants to buy a house, an investment property, and the wife isn’t on board. And I think the biggest thing that happens there is that nothing happens. They never take that leap.

Amanda Schneider: I would say the one thing that maybe we butt heads about sometimes is the fact that Lindsey does have all of this background knowledge about construction, but I’m kind of a type-A personality, so I like to have control and I like to know a schedule and a timeline. So sometimes I get to the point where I’m questioning a little bit too much about the subs that he’s running.

So one thing that I would say for advice is to find your lane and then stick within that lane, even though it can be really hard. So I do a lot of the finding of the properties and the finance, figuring that out. And Lindsey runs the subs, meets with them. He does that part of it. And that has worked really well for us, is not trying to get in each other’s lane… Because Lindsey can also freak out about some of the financing, where I know our way forward and how we’re affording things… But when he goes and looks at our bank account or something, he’s like, “Oh my gosh.”

Lindsey Meringer: Yeah, because I see the day-to-day and I’m pretty sure we’re broke all the time.

Amanda Schneider: Yeah. So just kind of just defining your own lane and staying in it.

Theo Hicks: Sure. So once you have these lanes defined, does that mean that Lindsey has the final say on everything related to his lane, and then Amanda has the final say, or do you guys still come to these decisions together? Or are they completely separate?

Lindsey Meringer: Yes and no is the answer to that. I’ve learned she is a genius with finances. She’s so organized. So in things like that, I’ll voice my opinion if something sounds super strange. But for the most part, I just have complete faith in her. When it comes to stuff on the building and design side, then sometimes I’ll just make the command decision, but a lot of times it’s really us looking at things together and making that kind of functional decision. But I would say the only thing that is truly just mostly hands-off is the financial. I really just trust her.

Theo Hicks: So Lindsey, you mentioned that you’re still in the military. Are you still working a separate job full-time? You said you’re a contractor for the military. Are you still doing that? Are you a full-time agent, or are you full-time in the real estate business?

Amanda Schneider: No, I’m a full-time agent and then we property-manage all of our properties, so I kind of do a lot of that, too.

Lindsey Meringer: Yeah.

Theo Hicks: So what happens when Lindsey is deployed, who takes over his duties? How does that work?

Amanda Schneider: Well, it’s been okay so far, because we haven’t really purchased the property that would need a full rehab when he wasn’t here. And that’s really where I rely on him the most, I would say.

Lindsey Meringer: Yeah, I’m currently in the process of a medical board for medical retirement from injuries, so I’m non-deployable now. So we’ve been fortunate in that. And I think that’s why we started in 2016, but we’ve added 11 doors in the past year, is because I’ve been here, and we’ve been able to approach everything together.

The first couple of years—we’re pretty much experts in the VA loan at this point. We got four properties under the VA loan, or five, I guess, now. And we would do one and then when I’d redeploy, we’d do another one, and then I’d deploy and redeploy and do another one. So we just kind of spaced it around deployments. But now that I’m home, we’ve been able to accelerate.

Theo Hicks: Perfect. Okay, starting with Lindsey, what is your best real estate investing advice ever?

Lindsey Meringer: Definitely the people around you, both mentorship and community. And there’s that rule, the sum of five, I think it is. You had a gentleman on your podcast, Nick Giuliani; I talk to him every single day, just for motivation. He’s farther along than I am and kind of chasing them at this point, but we bounce stuff off each other. We’ve surrounded ourselves with like-minded investors; there’s a couple of buddies that I have in special forces that are investors, and we do meetups and everything. And we’re just so driven every day by their social media posts, their text messages, everything. If we got down on ourselves a little bit or a little frustrated, we just look at our community around us and are immediately reinvigorated to go.

Amanda Schneider: And then I would say, don’t be afraid of doing your first deal or doing additional deals, even if you don’t have money, because you can make it work. And that’s one thing that just this last year has taught us. We’ve found, other than what Lindsey said about approaching the commercial banker and being able to use some of the equity from our other houses, we’ve also been able to borrow some money from our IRA creatively, and we’ve just found ways to make it work. If you find a deal and it’s amazing, you’ll find a way to make it work.

Lindsey Meringer: Yep.

Theo Hicks: Perfect. Okay, are you both are ready for the best ever lightning round?

Lindsey Meringer: Let’s do it.

Amanda Schneider: Yep.

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

Break: [00:17:36] to [00:18:28]

Theo Hicks: Okay, so for each of these questions, we’ll start with Lindsey and then we’ll do Amanda. So what is the best ever books you’ve recently read?

Lindsey Meringer: So I’m a big podcaster. But if I went for books, The ONE Thing is my book.

Amanda Schneider: Yep. And mine is going to be Profit First. It’s not really a real estate book, but it’s just an entrepreneur business book overall that teaches you how to make sure you’re also getting a profit from your business from the beginning.

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

Lindsey Meringer: So that’s kind of easy for me, because I do for now do W-2 entrepreneurship. I’m in the military. And then as I Med board out, I’m transitioning into the space world here. So I will have a full-time career.

Amanda Schneider: Yeah. And I would say, I can’t imagine my business completely collapsing, but if the real estate market collapsed, I think I would just shift my focus towards working foreclosures, short sales, things like that. I would keep grinding, because I can’t imagine doing anything other than real estate.

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

Amanda: That would be a couple properties ago… Security, Colorado, 80911 – there’s a report recently it’s the number one appreciation real estate market in the country. And then we bought a house there; it was next door to another house that we actually lived at. I found the guy, he was out, moving stuff out of his house. I just approached him, asked him what was going on.

Long story short, we were able to work a deal where they could leave the house in the condition it was in. The yard was full of stuff, they just needed to get out and get [unintelligible [00:19:49].23] for some security reasons. And the return on that was in the 20% range, but we have turned $57,000 into that, into about $145,000 in equity in a one year period. So it’s been pretty incredible.

Amanda Schneider: Yeah. And the one thing I would just add to that deal is that we were also able to get the sellers to cut us checks at closing that equaled about $15,000 towards our contractors. That was just part of the deal, too, which was pretty sweet.

Lindsey Meringer: Yeah.

Theo Hicks: Nice. What about on the flip side? Have you guys lost money on any deals? If so, how much did you lose and what lessons did you learn?

Lindsey Meringer: So we have not. Fortunately, a bunch of our first deals were VA loans, which gives you a super low barrier to entry. And then the Crestone property, the duplex conversion, the rehab budget has close to doubled, but we will still not lose money on that property, the numbers are so good. So knock on — I don’t have any wood around me, but we’ve been pretty fortunate.

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

Lindsey Meringer: We started about six months ago doing host home providing for intellectually and developmentally disabled persons. And it’s been stressful at times, but extremely rewarding, and that is something that we love doing.

Amanda Schneider: And then I’m part of an organization called Angels of America’s Fallen. It supports children of any kind of first responders/military that have passed during their service. It provides them up, until the age of 18, with extracurricular activities, so we donate a lot of money to that every year, we participate in their yearly gala, including volunteering for that.

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

Lindsey Meringer: So I’m kind of a child at heart, so on Instagram, I’m Calvin J. Hobbs. You’ll see a picture of me, Amanda, and our dog. Then on Facebook, I’m just my name Lindsey Meringer.

Amanda Schneider: Yep. And you mentioned my website at the beginning… So the  https://www.theveteranrealtor.com/. You can message me there, but then I’m also on Instagram as @the_veteran_realtor.

Theo Hicks: Perfect. Lindsey and Amanda, thanks for joining us today and giving us your best ever advice. A few of my biggest takeaways – I like the idea of when you’re in a really competitive market and you want to get into multifamily, rather than buying a multifamily, trying to find something that you can convert into a multifamily or into a commercial property.

You mentioned how Amanda has access to the MLS, and you search that, looking for properties that are zoned something that is higher than what the property actually is. So something zoned R-5, that’s a duplex; R-4 that’s a duplex. So that’s the deal you guys are currently working on. And even though the renovation costs have increased because of this conversion, because of the strength of the market, you’re still be able to make money.

We talked about how you’re able to secure some pretty creative financing, and that was by simply going to local banks and talking to all the heads of lending about your vision for the project.

We talked about a few tips about starting a business, growing a business with your significant other, and making sure, as  you both share in the passion for real estate, realized that it is kind of your financial driver, in a sense. And then make sure that you’re defining what each of your roles are, and then whoever is the best at that thing is the person who’s the ultimate decider if you guys don’t agree… Or you can just follow Lindsey’s advice, which is that you always trust your wife, and let her do everything—no, I’m just kidding.

Lindsey Meringer: Hey, happy wife, happy life is a motto that I live by.

Theo Hicks: Exactly. And then lastly, your best ever advice – Lindsey’s was about mentorship and community, both in person and online for that motivation. And then Amanda’s was not being afraid to do a deal, do more deals without necessarily knowing exactly where the money will come from, because we’ve been able to make it work. If it’s a good deal, the money will follow. So thank you both for taking time out today to speak with us.

Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Lindsey Meringer: Thank you so much.

Amanda Schneider: Thanks.

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JF1560: County Engineer Matches Year Salary In 6 Months Of Real Estate & Quits Job with Colin Smith

As a full time engineer for the county, Colin had a decent income, but did not enjoy his job. He enjoyed real estate and got his real estate license, after two years of being an agent, Colin was making as much as his engineer salary in just six months. Hear how he was able to have such success while also working full time, and eventually quit his engineer job. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Colin Smith Real Estate Background:

  • 28 year old engineer who fell in love with real estate
  • Owns a boutique brokerage consisting of 2 full time employees and 6 agents
  • He has syndicated flips, a small apartment complex, and owns a small portfolio himself
  • Based in Colorado Springs, CO
  • Say hi to him at http://www.solidrockre.com/
  • Best Ever Book: The One Thing

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


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, Colin Smith. How are you doing, Colin?

Colin Smith: I’m doing pretty well, Joe. How about yourself?

Joe Fairless: I’m doing pretty well as well, and looking forward to our conversation. A little bit about Colin – he is a 28-year-old engineer who fell in love with real estate. He owns a boutique brokerage called Solid Rock Realty. It consists of two full-time employees and six agents. He has syndicated flips, a small apartment community, and owns a portfolio himself. Based in Colorado Springs, Colorado. With that being said, Colin, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Colin Smith: Sure, absolutely. I originally got a degree in engineering. I was an engineer for the county for about four years, but really didn’t love it very much. During that time I bought a four-bedroom house and rented out the other three bedrooms. One of the guys who came and lived with me was just starting to flip houses and got his real estate license, so I really learned a lot from him on how the whole game is played, but I really didn’t have the capital to flip properties myself, so I thought “Well, there’s really only ever a few people involved in the flip, so why don’t I become the real estate agent to help find deals for other investors, so I could build that capital?” And that’s exactly what I did – I went and got a real estate license, and through the whole process actually kind of fell in love with the whole real estate game. I’m no longer an engineer actually. I’m currently just doing real estate full-time as an agent, I have a small company, and really my niche is working with investors, and I really enjoy what I’m doing now.

Joe Fairless: I don’t remember coming across someone who used to be an engineer and now is a full-time real estate agent… There’s no question there, that’s just a comment.

Colin Smith: You know what, I got a lot of weird looks when I was still going through that transition. They said “What do you do?” I said, “Well, I’m an engineer for the county, but I’m also a realtor and trying to make that a full-time gig.” A lot of people thought, “Huh… Well, that’s different.” [laughter]

Joe Fairless: Yeah. Well, it’s cool. It’s fun to hear your story. It is different. When you were an engineer for the county, what kind of engineer were you?

Colin Smith: I was actually a traffic engineer. It wasn’t really my favorite job. My job was really road signs and road markings, and we’d joke around with some engineers saying “Oh yeah, you make sidewalks.” That was pretty true… It was pretty boring.

Joe Fairless: [laughs] What was your major?

Colin Smith: Civil engineering.

Joe Fairless: Civil engineering. Got it.

Colin Smith: It was civil engineering with a specialty in traffic.

Joe Fairless: Okay. Well, you made the bed you slept in then, if you put a specialty in traffic.

Colin Smith: Yeah, kind of.

Joe Fairless: Okay, so you were an engineer, and you started house-hacking, had a four-bedroom, one of the people who were renting a bedroom from you was a fix and flipper, and then you didn’t have the money to do fix and flips, so you thought you’d be a real estate agent, and that would help you make some money in order to do those fix and flips, so you became a full-time agent. Was there overlap with you as a traffic engineer and as a real estate agent?

Colin Smith: Yeah, I would say it was probably a solid two years I was kind of almost working full-time for both. It was that 4/10 schedule for the county, so I’d get up early, get over there, I’d use all of my breaks for making phone calls, returning phone calls, or shooting over and doing showings if it was nearby, and then usually doing showings in the evenings, and then weekends and days off, I was doing showings or closings or inspections, or something of that nature. It was kind of a grueling two years of trying to make that transition.

Joe Fairless: And what was the milestone that you decided that you had reached it, so you were no longer going to be a traffic engineer, and you were gonna be full-time as an agent?

Colin Smith: I realized I had made as much money as a real estate agent in about six months for what I was gonna make for the entire year at the county. I kind of realized the numbers are looking a whole lot better in one direction.

Joe Fairless: That was a two-year process, from when you got your license to when you had that six-month mark of income?

Colin Smith: Yes, that’s right. About two years.

Joe Fairless: Okay. And when you had your full-time job and you had your job as a real estate agent, during those two years as a real estate agent, what were you doing that eventually set you up so that you were making more – or as much – in six months as an agent than you were as a traffic engineer in 12?

Colin Smith: Very good question. What I kind of set myself up was — I was constantly networking with other investors, other realtors, other wholesalers, and always seeing how I can provide value. So part of what I did is I sort of built my own small cash buyers list, I would scour the MLS on a daily basis, I would look for decent deals, and then if I found what I thought was a decent deal, I would go ahead and run a comparable market analysis on what I think it would probably be selling for as the after repair value, and send that out to the investors, with both the listing and the [unintelligible [00:07:25].25] It was a great way for the investors just to immediately have all the information right in front of them; they can make offers quickly… So I’d help them both buy the property and then sell it.

Then with wholesalers, a lot of times what I was doing is — they’re talking to a lot of sellers who don’t wanna sell nickels on the dollar; they’re looking to sell for top dollar. So we’d come to an agreement to work together where I’d work a lot of their seller leads, or help them find leads as well, if a seller is looking for a quick close. So I really just did a lot of networking, provided a lot of value to other people, and kind of got my name out there that way.

Joe Fairless: What’s the compensation on that – we’ll go with the wholesaler one – for them, if you find someone who wants to sell quickly?

Colin Smith: Usually it wasn’t actually charging anything. It was more often I was getting more leads from them than I was giving to the wholesaler, so I kind of just did it pro bono; it wasn’t a very often situation. Vice-versa, what I was doing – and I’d go through a lot of attorney paperwork to make this happen… But in Colorado, I cannot pay an unlicensed individual referrals. So instead, I’m hiring some of these wholesalers as part-time assistants and paying the commissions on leads that they brought to me.

Joe Fairless: I’m sure you met a lot of wholesalers, and more than who you actually sent leads to… So the ones you chose to send leads to vs. the ones you did not choose to send leads to – assuming that’s a correct assumption – what differentiated the two groups?

Colin Smith: Well, I’ve probably met with — and something else that I’ve been doing with both wholesalers, and people who wanted to do fix and flips, is I would spend an hour or two with them to kind of teach them ways in which they could get started… Even though I wasn’t personally doing what they were doing, I knew enough to be dangerous to teach them what to do. That was another way to find new clients, is that they were brand new, but they had the resources or the time to go out and do these things.

With that being said, a very small percent of population they actually met with took what I said and ran with it. Most of them would give up or fail, or just never really get started; sort of an analysis paralysis.

So if I were to send a lead to one of the other wholesalers, it was usually to the ones who were doing the most deals, and the ones who were also giving me leads, as well.

Joe Fairless: Alright, let’s transition into your small apartment complex… How big is the small apartment complex?

Colin Smith: That is a 19-unit, and what made that really interesting – it’s 19 units, but it’s split up as two fourplexes, one triplex, and an 8-unit, and it also has a vacant piece of land we can build another eight units on. And what’s also great about it is that each building is on its own lot and parcel number, so we’ll build some off individually to FHA and VA buyers.

Joe Fairless: You said “we” – who’s “we”?

Colin Smith: A small group of six guys that we use to syndicate that deal together [unintelligible [00:10:24].07] just finding enough cash to both purchase it, but also — the renovation cost was almost as expensive as buying the complex itself.

Joe Fairless: What were the numbers for the purchase and the renovations?

Colin Smith: The purchase price was 785k, and renovations about 650k.

Joe Fairless: And did you get financing for either one?

Colin Smith: Yes. We are using a hard money lender to both purchase and for renovations; we’ve done about half of the renovations. And we’ll refi into a longer-term commercial loan here in the next — well, I’d say most of the renovations are done in the next 8-9 months.

Joe Fairless: How long ago did you purchase this?

Colin Smith: About two months ago. [unintelligible [00:11:04].25] I’ve done about eight evictions in the last two months for this property. The previous owner was trying to manage this 19-unit from Tennessee, and if anyone sent him a  check, he’d send them a key in the mail. So it’s really been turning around a lot of that tenant quality, as well.

Joe Fairless: What are the six partners? Is it you plus six, or are you included in the six?

Colin Smith: I’m included in the six. I have one other co-management member, and then the other four are more passive investor members.

Joe Fairless: Okay. And what’s the structure that you have with them, that you’re using?

Colin Smith: In this particular case we did a little bit untraditional, and just did an equity split. The co-manager and I will get a percentage for managing the project, and then the rest of it will be an equity split based on capital contributions to the investment. And then as this property turns around and we start cash-flowing, we’ll also do quarterly splits based off those same numbers.

Joe Fairless: Got it. And do you have an ownership percentage in it?

Colin Smith: Yes. In fact, I hold the largest percentage. I did bring capital to the deal as well, but then with the managing aspect as well, that helped bump my percentage up.

Joe Fairless: Oh, cool. Well, congrats on that. So you’ve got a group of six; basically you’ve got limited partners – your four investors who are more passive – and general partners, right?

Colin Smith: Correct.

Joe Fairless: Okay. So for the general partnership, what’s the general partnership ownership?

Colin Smith: 90%. 10% to the managing members.

Joe Fairless: Okay, so 10% to you and your co-manager.

Colin Smith: Correct.

Joe Fairless: Got it. So 90% to limited partners, 10% to general partners, plus you’ve got money in the deal, so your ownership is great than whatever you split between your partner… Is it probably 50/50?

Colin Smith: For that section, yes, it is 50/50.

Joe Fairless: Got it. Cool. And how did you come up with that structure?

Colin Smith: A lot of the other guys I know personally, so it was just a way to, I guess, do this deal with friends and make it a fun way of structuring it, so that everybody wins and does fairly well on it… And assuming all the numbers come out right, then everybody should win together. If it doesn’t, then I guess we’ll all lose together at the same time. [unintelligible [00:13:20].14] That’s right, that’s right. I don’t suspect that will be the case, because we bought it at such a low price that it’s too good of a deal to pass on.

And some of it also – I’ve had to try and raise this capital pretty quickly, because my original goal was to actually take this on myself. But as I got into it more, I realized I was gonna either be over-leveraged, or was gonna get denied by some of the bigger banks with the lower financing rates.

Joe Fairless: What does the hard money lender charge? I’m just curious…

Colin Smith: We are doing two points and 8% interest, with interest-only loans.

Joe Fairless: Got it. You said interest-only loans?

Colin Smith: Yeah. Interest-only payments.

Joe Fairless: Right, yeah. Cool. And that is — I know you’re gonna be getting out of it, is the plan, in about 9 months, so around 12 months total… But how long is that loan in case something bad happens and you have to have it longer?

Colin Smith: 12 months with permission to do a 12-month extension.

Joe Fairless: Got it, okay. Cool. And what have been some of the lessons you’ve learned so far — or maybe not lessons you learned so far, but just things you’ve experienced besides the evictions that you think we should talk about?

Colin Smith: You know, honestly, this one has been pretty straightforward. I’ve done some flips in the past, so using some of the same contractors; we got a lot of quotes, we had quite a bit of time to do due diligence on it… So by the time we were getting to closing, it was just a matter of starting to pull triggers on things, the first step being getting some of the worst of the worst tenants out [unintelligible [00:14:54].02] was having a weekly drive-by, shooting at it, from one unit in particular… So really, it’s just been trying to clean everything up and getting everything going. I haven’t had any too major headaches or hiccups yet.

Joe Fairless: Sounds like a tough area.

Colin Smith: You wouldn’t think. I was surprised myself, because Colorado Springs is one of those cities that you go [unintelligible [00:15:16].21] it’s a great neighborhood. Then you go back down to our street and kind of wonder what the heck happened. But hopefully, as we clean things up, I think the whole neighborhood will keep turning around, because it’s not too far away from downtown, which always helps.

Joe Fairless: Oh, yeah. You said the plan is to exit out, refinance out of this hard money loan in 12 months total time, and put on a longer-term loan?

Colin Smith: Yes. And at that point in time if any partners wanna get out, we’ll do a buyout based on new appraised value, or hold it for the long-term. There’s a little bit of discussion. Some people wanna hold it, some people wanna sell it, so we might just structure buyouts for those who wanna sell it.

Joe Fairless: And on the sell, regardless of sell or hold on to it, do you all have voting provisions, so that everyone has an equal say, or is it structured in some other way?

Colin Smith: We do. For the most part, we’ll do voting just based on  a strict number count, but if we had  to, we could do votes. And I guess per the operating agreement, technically votes is based on their ownership interest in the total investment.

Joe Fairless: Got it. So it’d have to hit a certain threshold, like 70% of ownership interest wants to sell or wants to hold on to it.

Colin Smith: That’s right. I think it’s a 51% voting.

Joe Fairless: Okay, got it. Is this the largest collection of properties you’ve purchased at one time?

Colin Smith: Yes.

Joe Fairless: And how did you come across this deal?

Colin Smith: Actually, a wholesaler brought it to me originally. In this particular case, because it was such a large deal and a commercial deal, they said “Hey, we’ve got this property, but we don’t wanna use our standard wholesaling contract.” They asked me if they could just pay me a small fee to take it over. So I put all the paperwork together, and was gonna start helping them to get it sold… And I started looking a little closer at the numbers and thought “Hey, this looks like a great deal. I think I might be interested.”

So they kind of gave me the first crack at it, I didn’t really have to compete for it, thankfully, and actually at the end of the day we brought the wholesaler in as one of the members of the investment. So his wholesaling fee is a part of his capital contributions.

Joe Fairless: Oh, that’s great. That works out for everyone.

Colin Smith: Yeah, it worked out really well.

Joe Fairless: What’s a wholesaling fee for wholesaling a deal like that to you?

Colin Smith: His fee was 25k. Originally, it was gonna be 20k, and after doing some further inspections, I realized it was gonna be a lot more work than we originally anticipated, and I told him “Hey, if you can go back to the seller and get a price reduction, I’ll give you an additional 10% of whatever that is in the wholesaling fee.” He negotiated the property $50,000 back down, so it went from 20k up to 25k for him.

Joe Fairless: That’s amazing. You should keep that offer. Every time you negotiate it down I’ll give you 5k more; let’s keep this rolling.

Colin Smith: [laughs] That’s right, I was more than happy to pay him that much.

Joe Fairless: That’s great. Your other properties – what else have you got?

Colin Smith: My primary home – we’re sort of doing the fix and flip model, where we’re gonna be holding it for a couple of years and sell it, move into another property that needs renovations. We’re working on finishing up a lot of those renovations at this point in time. The trick there will be getting my wife to want to sell this one, so we’ll see if that happens.

Joe Fairless: How many times have you done that with her?

Colin Smith: This will be our second one… But she fell in love with the home on this one, so we’ll see. We have another single-family home we’ve had for a few years, and then I also just purchased another fourplex; that will be another total gut job that we’ll work on putting all back together when it’s gutted. I’m still working on getting two tenants… One particular guy is a disbarred attorney [unintelligible [00:18:54].25] so he was an interesting guy that I’m still working on trying to get out of there.

Joe Fairless: [laughs] That would be the worst. It’s not only an attorney, but it’s a disbarred attorney, so there are no rules there, but they do know what the rules are and how to skirt them.

Colin Smith: Yes… And thankfully – I was just in Court for this one on Tuesday, and I actually botched the paperwork, but the judge said “We should really just get this settled, because I don’t wanna see you guys again.” And long story short, he kept on trying to over-talk and tell the judge she was wrong, and that upset her, so actually the whole situation went in my favor… So he’s got 30 days to get out, and if he doesn’t, then we’ll complete the eviction and get the sheriff out there shortly thereafter. So I got lucky on that one.

Joe Fairless: Well, I actually hope he doesn’t go out and the sheriff actually has to throw him out…

Colin Smith: Oh, don’t tell me about it… I wanna get started with the renovations. [laughter]

Joe Fairless: Alright, fine, fine, fine…

Colin Smith: I guess the judge told me the same thing though.

Joe Fairless: Right, yeah… [laughs] With the fourplex that needs the gut renovation, how did you find it?

Colin Smith: We do property management as well, so I usually tell people I kind of do all things residential in real estate, so we’ll do both property management and sales; in this particular case, we sent out some postcards for growing our property management side of the business. The seller came to me and said “Hey, I really wanna just get this thing under management. I’m sick of it. Here’s the situation…” So I said, “Great, let’s go and get that started”, and then right after we signed the contract, she said “Well, I’m also interested in selling it. Do you think that’d be something you can help me with?” I said, “Yeah, of course, absolutely. That’s really more of what I do than on the property management side”, because I have an assistant who really takes care of more of the boots on the ground for property management. So I asked “How much do you wanna sell it for?” and she gave me a number, and I said “I think we can make that happen.”

From there, I said “Well, I think I’ll be your buyer. I’d be more than happy to make that price happen.” It ended up being a very good deal. She was actually also a real estate agent, so she kind of knew the value of the property and knew that she was giving it to me at a pretty good price.

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

Colin Smith: I would say — a lot of people ask me how to find a mentor, and a lot of people say “Hey, can you be my mentor?” In my opinion, if you’re asking the question “Can you be my mentor?”, you’re probably always gonna get the no answer. The better way to approach this is always find something of value to give; either bring them a deal, or be willing to just sit around and help out whenever you can, or [unintelligible [00:21:29].01] or maybe you go push a broom, clean up, work with the contractors, go swing a hammer… You can really learn a lot that way. It’s kind of how I learned a lot – by doing the work and finding deals for people and not expecting getting paid. We’ll do CMA’s for people for free all day long, and that really brings a lot of value to them and brings them back working with us.

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

Colin Smith: Okay, let’s do it.

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

Break: [00:22:01].11] to [00:22:59].10]

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

Colin Smith: Best ever book… I’ll probably say The One Thing, by Gary Keller. It’s a pretty good book.

Joe Fairless: Best ever deal you’ve done?

Colin Smith: This fourplex I was just telling you about. I think it’ll probably be the best ever deal when it’s all finished up. I bought it for about 175k all in, about another 75k for renovations, and it should get an appraised value of about 400k.

Joe Fairless: Doggies… Wow! There you go. You read my mind, I was about to ask you the numbers, so I appreciate that. What’s a mistake you’ve made on a transaction?

Colin Smith: I did syndicate a small flip on a manufactured house, and I did not know that to get lending on that house we would have to make sure that the home was never moved and it’s always [unintelligible [00:23:37].22] original location… And it was built in 1978, and they had moved in 1979 to the location I bought it from, and I had no idea. So rather than continuing on with the renovations, we decided to go ahead and just bite the bullet, sell it as is… Even though it was a syndicated flip, I covered 100% of that loss, which ended up being about $17,000.

Joe Fairless: So if it’s a manufactured home, in order to get financing it has to have always been at that location?

Colin Smith: Correct. And there should be a sticker, if not two stickers on the property – one on the outside, and one typically is put underneath the sink… And when they move the manufactured homes and mobile homes, they’ll usually take that sticker off.

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

Colin Smith: Usually we’ll give to churches and different church organizations, and then a partner and I [unintelligible [00:24:30].13] he’s the wholesaler that I do business with. He was on episode (I think) 1490 of yours; we run a REIA twice a month, the first and third Tuesday of the month, and we sort of give back… It’s a free REIA that we just like to provide knowledge to new investors and help them get started.

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

Colin Smith: The best place to find me is just on our website, www.solidrockre.com.

Joe Fairless: From how you got started, working the hours that you were working, the four days, ten hours – I believe that’s what you meant by “four by ten”, right?

Colin Smith: Yeah.

Joe Fairless: Okay… Four days, ten hours, plus being a real estate agent on the side and/or in the evenings and on the weekends, to transitioning from that job to a full-time real estate agent who’s not got a brokerage, and putting together deals – a 19-unit deal, I love that we got into the specifics of the deal structure, the business model, the debt that you have on the property and some challenges that you’ve come across and how you’re working through those challenges, as well as the fourplex, too… Congrats on all you’ve done so far, and I’m really grateful you were on the show.

Thanks again for being on the show, and we’ll talk to you soon.

Colin Smith: Awesome. Thank you, Joe. It was good chatting with you.

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JF1490: Build A Successful Lawn Company & Start From Scratch With Real Estate? With Brent Bowers

Brent had a successful lawn care business in high school while he was working on getting his real estate license. He left the business to do real estate full time at a very difficult time, in 2008. Eventually, he left real estate behind to join the military. After the military, he got back into real estate and started doing well with wholesaling. We’ll hear today how he approaches wholesaling and what he does to succeed. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


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, Brent Bowers. How are you doing, Brent?

Brent Bowers: I’m great, Joe. How are you doing today?

Joe Fairless: I’m doing great as well. Nice to have you on the show. A little bit about Brent – he’s got ten years of real estate investing experience. He has pretty much automated his wholesaling business. He also does some flips… He bought his first house in April of 2007, and since then has helped a whole bunch of homeowners get out of troublesome situations by buying their properties. He’s based in Colorado Springs, Colorado, and his website is in the show notes page. With that being said, Brent, will you give the Best Ever listeners a little bit more about your background and your current focus?

Brent Bowers: Yeah. I had a super-strong lawn landscape company when I was in my senior year of high school, and my father came out and kind of joined me in the business. I was working on getting my real estate license in about 2004-2005, and the hurricanes came through Florida, it kind of derailed me for another year or so… And then it seemed like I got my license right at about mid-2008, and then I went into it in about 2009, left the company I had built, and moved to West Palm Beach, Florida and started trying to do some real estate right at the fall of the market.

Things were quite rough, so I was like, “Well, I’m gonna go back to school. How do I do it?”, so I joined the military and didn’t really look back for several years. The military sent me to school, paid for a bachelors degree; they pretty much paid for all that, and [unintelligible [00:04:35].07] officer, and then I started dabbling in some real estate some more, and it just seemed like we just started buying rentals everywhere we were going. We were just buying all these rentals, and raking up all this debt, and then slowly paying down. I just knew there was a better way to pay down that debt, so we started wholesaling houses kind of haphazardly.

We were searching on Bigger Pockets one day, which is an extremely cool website (and I’m glad it came about), and I ran into a guy named Tom Krol, and took his course on wholesaling. He pretty much gave me the Ray Kroc version system of wholesaling. Here we are, a couple years later; we’ve done probably 80-something transactions in the last 24 months. We’re flipping now, we’re renovating houses, and the wholesaling is pretty much automated, but we like to do a couple flips a month. I prefer to stick with one only, but it seems like the deals come and we just keep doing them.

Now we’re taking the profits and purchasing raw lands, and seller-financing it at affordable rates to people that wanna own land. That’s kind of our business in a nutshell. I’m really building the raw land side now. That’s what I’ve been focusing on in the last couples months, and… Here we are.

Joe Fairless: Well, I’m looking forward to talking to you about the raw land stuff, because that’s something that I find really interesting, because I don’t do it, and I’m sure there’s a lot of listeners who’d find that really interesting.

Before we dig into the raw land stuff, you said 80+ transactions in 12 months – that’s gotta keep your team busy, and you mentioned… 24 months, sorry; I love misquoting people, to make things interesting… Okay, 24 months. 80 transactions in 24 months. Either way, that’s gotta keep your team busy… So what are some things that you have put in place in order to establish this system that you have with your wholesaling business?

Brent Bowers: Well, it was almost forced plays. I had to build a team, because as an army officer, which I’m completely out of the army now… I got out May 7th, with an honorable discharge, I did all my separations, left on great terms… But let me tell you – it’s a lot less stress in the real estate business, and a little bit more profitable. My last day was May 7th, 2018, so we’ve been doing this full-time about three months now, and things are rolling… But I was forced to put systems in place because I was constantly out there in Virginia, Kentucky… I didn’t actually deploy in the last couple years to any combat zones, but we were doing a lot of field time prepping to deploy.

So after leaving the field, I was in Kentucky, Virginia and I had to hire a lead manager. I was getting all these calls from my direct mail and my marketing that we were doing, and I was just trying to do all this closing over the phone, almost virtual wholesaling, which — it was working, by using 123notary, and an attorney, and title companies… But I just needed somebody that could do pretty much belly to belly sales. That’s when I found this wonderful person named Jen. She actually lives right down the road from me. I found her on the NextDoor app; I pretty much put an ad out for her: “We’re  a small real estate company, looking to hire. I need a lead manager.”

I called her a lead manager basically because I needed her to be an acquisitions manager, a disposition manager, and also hold the buyers and sellers’ hands from beginning to end – almost be a transaction coordinator as well. So that was pretty much my first hire, and I was so blessed to have found her. She has really helped me build the business… But it’s just forced systems. We had a system, and just hiring people and finding people to help  – a good realtor, a good attorney, a good title company… I hope I answered your question… In a super-long way.

Joe Fairless: You did, you definitely did. One thing that surprised me is I think I heard you say that you put an ad for this position on the NextDoor app. I didn’t know you could do that.

Brent Bowers: Yup. It’s like a little classify — you can do classified ads on there. It’s really the only time I’ve actually ever used it, except for one other time when I found a missing dog in my neighborhood. We put him on there, and that’s how we found the owner. But yeah, she answered the ads, super-professional, I liked talking to her on the phone, and I just knew it was gonna be a good fit. I invited her to my house, I let her meet my family.. And like “Look, we’re doing a couple transactions a month, we make this on average; would you like to join the team?” That was almost two years ago now.

Joe Fairless: Wow. How much do you make on average per transaction?

Brent Bowers: On average – our average assignment fee is somewhere around $15,000 to $20,000.

Joe Fairless: And then how much of that is profit, would you say, after all of your overhead?

Brent Bowers: After overhead – it takes us about probably $3,000 to acquire a property, and what I mean by that is it costs us about $3,000 as far as overhead and marketing for each transaction. So we spend about $3,000/transaction, so if we make $13,000, it’s $10,000 profitable, and then I pay my team out, and all that… But somewhere around $10,000 is what we net per transaction. That’s our typical assignment when we get a property under contract, and then we sell it to one of our cash buyers.

We have quite a robust cash buyers list, and it took me a couple years of working my butt off to get those cash buyers, but that’s how we get a higher assignment fee.

Joe Fairless: Your team is doing wholesale deals, but then you also have some fix and flip deals that you’re working on… When do you determine that it’s a fix and flip instead of a wholesale deal? Or rather how do you determine that?

Brent Bowers: It’s a great question. We try and do – like I said – at least one a month, but when we have an extreme amount of meat on the bone… Like, if I know we can make at least $35,000 to $45,000,  I don’t feel good on my heart when I see a cash buyer pay an assignment fee of 45k-50k. However, I don’t feel bad if I take the property down myself, renovate it, list it with my realtor, stage it and all that.

Generally, we try and make somewhere around 35k-45k for our flips. We average somewhere around $50,000 a flip; that’s been our last four anyways… But that’s about the number.

If I know it’s gonna be  a 10k, 15k, 25k assignment, that’s no problem whatsoever, but if it’s more than that, we generally will buy it and renovate it.

Joe Fairless: And why make the business decision to focus now on raw land and seller finance that raw land, versus continuing to scale your wholesale and fix and flip business?

Brent Bowers: Well, that’s a great question, and I almost feel like “Okay, am I spreading myself too thin with the wholesaling and the flipping and the land?” I always had a passion for land, I really like land, and Mark Podolsky says that there’s no three R’s: you don’t have the rats, the rodents or the renters. Not that I’m calling — I mean, I kind of am [unintelligible [00:11:42].10] renters in the same category, but we’ve had rentals for years and we’re actually… One of our four flips right now – I shouldn’t say the four, it’s one of the flips – we’re actually renovating a 19-unit apartment complex that we are gonna hold… So we do a little rentals too, but I like the land because it’s a lot less stress; it’s really cool, it’s unique… It’s dirt, no one can steal it. I really don’t have to hold insurance on it, because nothing’s gonna burn down… Other than liability insurance.

No one can steal anything, the contractors aren’t stealing materials, and it’s just — when someone comes in and we do the seller financing, we carry the note for them. They can come in with a small down payment, generally hopefully the down payment covers a little bit of our purchase price… But there’s really no maintenance. I don’t get calls from tenants, I don’t get calls from the city, I don’t get calls from the people downstairs because the people upstairs are stomping too loud… It’s just so low maintenance.

We’ve got several notes coming in from our land, and I don’t really have to manage it other than my assistant picking up the checks from the mail, and then inputting them into our note-tracking software. So it’s simple, and it’s cash-flowing.

Joe Fairless: Since it’s seller financing, you do get some of that cashflow on a monthly basis, so it’s starting to work for you; after you shift your focus away from that, you still have some money coming in. Was that another factor?

Brent Bowers: Yeah, for five years pretty much. We generally run it out for about 60 months, holding the financing… So I know that when my assistant does the paperwork and we do a land contract, I know for five years we’re gonna get paid on this property. I just pray they don’t default… Some people like when they default; I personally don’t. We’ve had that experience before, where we resell the property again… Yeah, it really helps the bottom line, and our ROI just goes through the roof; however, it’s just a sucky feeling whenever you know that someone’s going through hard times and they can’t pay for their land anymore… But yeah, I generally know that for five years these payments are gonna come in, so we can just continue doing these every single day or every single week, and just build such a portfolio that each one works for five years. It’s just amazing.

Joe Fairless: Will you tell us about the last deal that you did?

Brent Bowers: The last land deal that I did – this one’s kind of a funny one; it’s actually the one that I’ve had to take the property back. We bought this little piece of land, non-buildable, for $225. It was only 4,900 square feet. It was actually in my old neighborhood in Colorado, and I went and paid the taxes on this thing — and I didn’t even have to do it, because I had probably another two years left to do it… But the guy just wanted to get rid of it. He wasn’t doing anything with it, so I was like $225 – I gave it to him, paid him, and then I went and caught with taxes up. The taxes were like $700, so more than what I paid for the land… So I had maybe $1,000 into this property.

I put an ad on Craigslist, seller financed lot, this neighborhood, non-buildable. I had multiple calls on it, and I was just shocked, because this is non-buildable land. What did these people wanna do with it?

One guy wanted a garden, one guy wanted to park vehicles on it… So I ended up meeting the guy that wanted to park vehicles on it. I told him, I was like, “Dude, you’ve gotta check with the city. I don’t think they’ll allow that.” He gave me $1,500 cash on the spot. He was like “I don’t care, I want it.” So I was like “Well, I’ve gotta give you some type of receipt”, so I wrote him up a receipt and then he had said “Basically, I wanna pay this thing off in a couple months.” I was like, “Okay, perfect.” No interest, total price is $5,000. That was the last time I ever saw the guy. He didn’t take my phone calls anymore, didn’t answer e-mails, didn’t answer text, and I called his wife’s phone… He disappeared for six months.

I told my lead manager, I was like “Listen, if we don’t hear from him by December 25th, we’re going to sell this property again.” We already had another buyer lined up, they had called us on it and they were willing to pay $5,000 cash right away. It was a neighbor. They wanted to put a shed on the property.

So here comes December 25th, and we hadn’t heard from the guy. I waited till January 2nd, they gave us a $5,000 cashier’s check, and we literally made somewhere around like a 2,100% return on investment.

Joe Fairless: Hm… Still never heard from him?

Brent Bowers: Yes, I unfortunately did. About January 26th the guy’s uncle called me.

Joe Fairless: He passed away.

Brent Bowers: No, thank God he didn’t die, but… “My nephew has been in jail. He wants to know how he can keep making payments on his property” and I said “It’s no longer his property. We sold it about 20 days ago. I’ve been trying to get a hold of him. I’ve mailed him, I’ve e-mailed him, I’ve texted him… Nothing. The guy disappeared for like seven months, so unfortunately it’s no longer his property.”

The uncle said “Okay, no problem”, and hung up. But it made me feel bad, it really did. It’s like, “Man, this guy just spent $1,500 and went to jail.”

Joe Fairless: The wholesaling business compared to buying raw land and doing seller-financing – which one’s easier to find deals?

Brent Bowers: Oh man, I think they’re both easy to find deals if you create the systems. When you’re going after property that people aren’t paying taxes on, or it’s just rundown (the wholesaling), it’s almost like they’re two different beasts, but the deals come on both of them if you create the systems and have the coaches to teach you how to do it. I’d say volume – we could probably get more raw land; however, the wholesaling may not be as much volume. We could probably get ten pieces of raw land and maybe seven or eight wholesale. However, the wholesales are much bigger money, wholesaling houses.

But you also are competing with a bunch of other real estate investors that want the houses. The cool thing about land is not a lot of people do it because it’s not huge chunks of money; you’re not pulling $94,000 profits. When you pull a $94,000 profit on your flip, the land is not that big of a profit and it takes longer, if that makes sense. So maybe the land is not as sexy.

Joe Fairless: When you’ve gotten into these new business models – wholesaling, raw land – I’ve noticed that you mentioned someone you learned from. In wholesaling it was Tom Krol I’ve interviewed him on the podcast I think a couple times, and it raw land it was… Who did you mention?

Brent Bowers: Mark Podolsky.

Joe Fairless: Mark Podolsky, that’s right. Yeah, sorry, my brain froze up. I’ve interviewed him like three or four times on this podcast. How do you think about investing in your education? …because I doubt they trained you for free, but correct me if I’m wrong… And if I am correct, then you paid for education – how did you think about it?

Brent Bowers: I love it. You know what? I went to so many of these real estate seminars, dropping 5k here, 5k there, but I think it was a little bit different when you have more along the lines of a coach, that’s a little bit spaced out. Tom sets his up perfectly. He spaces it out to like eight weeks, and kind of the same thing with Mark Podolsky. They space them out, and I feel like that was part of what really made me successful, and also the student was ready, finally – I was finally ready to commit and do the freakin’ hard work that it takes to do this. It’s all simple, but it’s not easy. It’s hard work.

I get up at 4 AM every single morning, and I’m still usually working at 6 or 7 at night. I take some time to put the kids down to bed, eat dinner with my wife, but it’s a grind. But I would pay for the education over again, I would pay double for it knowing what I know now, because you’re gonna pay one way or another. You’ve paid through just the pure grind of it, making mistakes and costing yourself money, or working for free to learn from another flipper, for people that don’t have money…

I know flippers out there that have ten crews. I wish I would have known these guys when I was 18-19 years old; I would have pushed the broom for them and power wash their houses and painted it for them for free if they would have just taught me some of this… But I didn’t think to do that. I kind of took the easy route, I paid a coach to teach me. And I didn’t just have the cash lying around… It was stressful. I maxed out credit cards, and negotiated, and made payments, and didn’t have money to mail after that…

I remember Tom Krol telling me “Don’t join my program, because you don’t have the money to market.” I still did it, I still joined, but it took door knocking, things like that. So absolutely, none of this was free, and I am so glad I paid for the education, because I think it accelerated and it gave me an opportunity to get out of the military and stop being away from home so much… And it’s quite lucrative. It’s very hard work though, and the people I see that don’t make it are not willing to do the hard work and work smart.

Joe Fairless: I’ll make sure I send this interview to both Tom and Mark, since you said you would like to pay double, so maybe they can get a check from you for the difference there…

Brent Bowers: [laughs] Don’t tell Mark that; I’m still paying [unintelligible [00:21:19].10] to Mark. But Tom Krol is paid off, you can tell him anything you want. [laughter]

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

Brent Bowers: Oh, man… Educated yourself, be coachable, and get up early. I read The Miracle Morning – I can’t remember the dude’s name that wrote it, but I’ve read The Miracle Morning about three years ago, and that really just resonated. For about three years now I’ve been getting up at 4 AM, and from 4 to 7, before my children wake up, and my wife, I wake up, I make coffee, I already have it ready to go, just press the button.

Then I read the Bible, my quiet time for like 30 minutes, and then from pretty much [4:30] to 7 – that’s the power hour. That’s buildings systems, and improving systems, and doing the couple tasks I wanted to complete right off the bat… Kind of like eating the frog first, the hardest thing, because the e-mails are not coming in, and the phone is not ringing… Sometimes it does ring a little bit before seven, but it’s on Do Not Disturb, so I really keep focus. No one’s taking my attention away from the task I’m trying to complete… So I’d say that’s my best advice – get up early; these billionaires, they get up at 5 o’clock in the morning, so that’s why I get up at four, because I figure I wanna get a jump on them, too.

Joe Fairless: I love that mentality. That’s great stuff, I’ve never heard it put that way. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Brent Bowers: Sounds good.

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

Break: [00:22:55].15] to [00:23:35].13]

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

Brent Bowers: I’ve recently read The Greatest Salesman In The World. That book really just touched my heart when I read it.

Joe Fairless: I at one point had all of those rules memorized, and I recorded it on an app, and I would just play it over and over while I was running. That’s an amazing book.

Brent Bowers: Yeah, I wanna get the hard copy; I actually listened to it on Audible. It was just such a great story, too. Short little read, but yeah, I’d like to get it on hard copy. I feel like I get more when I read things, rather than listen to it on Audible.

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

Brent Bowers: December, I’m sitting in my garage, making some cold calls, because I had to get away from the kids, and I cold-called this property, the guy yells at me, he’s like “What are you doing calling me?” I just kept my composure, and it turns out he was an old retired Air Force guy. We got to talking about the military, and I just kept working out, just taking his beating, and I was just being very respectful. Not timid, but respectful… And he just thought I was a scam. So the guy hung up on me, and I called him back… We kept building relationship.

I had an offer for his house at 135k, he said “No, I’ll take 124k”, and I said “Really?” I was just so shocked. Then I had to follow up with him for another couple months. I literally just would show up to this guy’s property, because he was driving from South Dakota to Colorado Springs, so I was trying to catch him there, and I kept missing him…

And one day he called me back and said “Let’s do the deal.” So I signed the deal for 124k, bought the house… We put about 25k into it, so we had roughly 150k-155k, and then we sold the thing for like 265k about a month later. So after all expenses, utilities, insurance, closing costs, realtor fees, staging fees, all that, we made a $94,000 profit after everybody was paid. That was one of my best deals. I’ve got some others, but that was a good one… And it was pretty cool, because this guy – I checked up with him while we were doing the renovation – he had some important-looking documents in the mailbox that I thought he’d be interested in… So I got his forwarding address from him and he just appreciated that so much.

He told me he was actually going to preach at this church the next day, and he asked if he could share what we had done for him, and bought his house… And he was just praying that we’d make a profit… And I’m telling you what – his prayers were answered, because we darn sure did. That was actually just this July. That was probably the most recent one.

Joe Fairless: Oh, that’s cool. It’s a good story for everyone, for multiple reasons. What’s a mistake you’ve made on a transaction?

Brent Bowers: I don’t make mistakes.

Joe Fairless: Of course not. Perfect!

Brent Bowers: I’m kidding. Oh, man… Not following my instincts. I don’t get too cautious on most properties, but when I don’t trust my gut, I always sorely pay for it. And I’d like to say another one, too – when someone tells you they have a brand new roof on a 4,500 square foot house, and you’re in Florida and lead manager doesn’t get on it, or your realtor doesn’t jump on it just to check – bad mistake. It was a brand new roof, but it was a fly by night company that did it, and it was about a $9,000 mistake. Luckily, it still was a profitable deal, but it sucked to make the mistake.

Joe Fairless: I was gonna say, that sounds like a very specific example, like it might have happened very specifically to someone we know.

Brent Bowers: Yeah. [laughs]

Joe Fairless: What’s the best ever way you like to give back?

Brent Bowers: We give to our church. We have a REIA that we do on the first and third Tuesday at Third Space Coffee on North Academy in Colorado Springs. We have a bunch of new investors, old investors… I feel like we give a lot of value, me and Colin Smith with Solid Rock Realty; he’s my partner with our REIA… So we are constantly helping new guys get started. That’s all free.

We bring in CPAs, we bring in attorneys, we bring in flippers, we bring in hard money lenders, we bring in private money lenders… And then just giving [unintelligible [00:27:47].19] It says we have to in the Bible, and I think that helps us a lot. We’re partnered with the Lord, and that’s how we give back.

Joe Fairless: Best way the best ever listeners can learn more about what you’ve got going on and get in touch with you?

Brent Bowers: Yeah, my company is called Zech Buys Houses LLC. You can google that. We’ve got a bunch of parcels of land, we’re seller financing… If someone wants to go to vacantlandofthefree.com and mention this podcast, we’ll give you 15% off of your down payment and your monthly payment. I’m ready to sell some land.

Joe Fairless: That’s awesome! Well, I might be buying… [laughs] If I can find a way to cashflow it, I might be buying… Or maybe I just want a place to put a shed up somewhere.

Brent,  I really appreciate you spending time with us and sharing the different business models that you’re in. Thank you for what you did for our country, to keep us all safe, and your role in that, first off and foremost… And then from a real estate standpoint, really interesting to hear how you’ve gone from wholesaling, building that model, and now focusing on buying raw land, doing seller financing, and how you’re getting deals and how you approach learning about each of those businesses.

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

Brent Bowers: Thanks, Joe.

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The Best Show Ever flyer for how to do over $15M in wholesale

JF1485: How To Do Over $15 Million In Wholesales In Just One Year with Steven Libman & Adam Rae

Steven and Adam teamed together to build a huge wholesaling business. They also transitioned over to commercial real estate to secure some passive income. If you want to know how to wholesale A LOT of deals and/or want to know more about commercial real estate investing, listen to what they have to say in this episode! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:


Steven Libman & Adam Rae Real Estate Backgrounds:

  • Two of Three of the Managing Partners of Integrity Capital Group
  • Steven Libman Real Estate Background:
  • Has spent over 10 years in real estate as a broker at first, then an investor
  • Managing Partner at one of the largest private investment companies in NJ, doing over $50M in transactions, and over 150 deals a year.
  • Based in NYC, NY
  • Say hi to him at https://www.integritycapitalgroup.com/
  • Best Ever Book: Never Split the Difference
  • Adam Rae Real Estate Background:
  • Has spent most of his career in real estate
  • In 2017 his company, Integrity Invest LLC had grown to be the largest Wholesale Acquisitions Real Estate Investment Firm in Southern Colorado, coordinating the sourcing and deployment of over $9,000,000 into the market over 12 months
  • Based in Colorado Springs, CO
  • Say hi to him at http://www.integrityhg.com/

Get more real estate investing tips every week by subscribing for our newsletter at BestEverNewsLetter.com

Best Ever Listeners:

Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


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, Steven Libman and Adam Rae. How are you two doing?

Steven Libman: Doing well.

Adam Rae: Thank you so much for having us.

Joe Fairless: Yeah, my pleasure. A little bit about these two – they are two of the three managing partners of Integrity Capital Group. Steven spent over 10 years in real estate as a broker at first, then an investor, and he’s been a managing partner at one of the largest private investment companies in New Jersey, doing over 50 million in transactions and over 150 deals a year. Based in New York City.

Adam has spent most of his career in real estate. In 2017 his company, Integrity Invest LLC, had grown to be the largest wholesale acquisitions real estate investment firm in Southern Colorado. He is based in Colorado Springs, Colorado.

We’re gonna be primarily talking to Steven, but you’ll hear Adam as well, because I know it’s tough to follow voices with three people on a podcast… With that being said, Steven, do you wanna tell us more about your company’s background and focus?

Steven Libman: Sure. Integrity Capital  Group was established just this year, actually, because we both (Adam and I) run very similar business. We have a wholesale/fix and flip business in New Jersey, and he does the same thing in Colorado. We actually met through a mastermind, and we’re both on track to do probably 15-20 million dollars in each state.

The name of our company is Integrity Holdings Group, the name of his is Integrity Invest, and the goal has always been to get from wholesaling into commercial real estate and multifamily. Just through meeting over the last year, and being of like mind – he is cut from the same cloth – we decided “Hey, why don’t we attack this together?” and in a very short order of time we’ve gotten thrust into a couple of pretty large multi-million-dollar commercial deals, and we just kind of hit the ground running.

So here we are, and our business model is to raise capital from private investors and deploy that into safe, securitized, and providing higher than expected returns on commercial real estate deals.

Joe Fairless: The primary reason why you two partnered up is so that you could go into commercial deals?

Steven Libman: Correct. Our businesses still operate kind of on their own now, and are — Integrity Capital Group was established specifically for commercial.

Joe Fairless: You both have, it sounds like, flourishing wholesale companies, 15-20 million in each state, if I heard you correctly… Why did you choose to partner with an individual who has similar experience, versus choosing to partner with someone who has commercial experience, since you wanted to get into commercial deals?

Steven Libman: Great question. That’s kind of one of the things that has always driven us, is to find like-minded people and find people of different skillsets. The experience level in commercial was both where we wanted to go, but it was more important to find people that were kind of similarly minded when it came to values and relationship, and where our family goals were, and things like that. So that was the most important piece of the puzzle for us when creating a team, and we all have different skillsets… So Adam’s genius zone is different than mine and different than mine, and different from Travis’, who’s not on the call today… But the three of us meshed really well, and that’s why we started the company. But to your point, the deals that we are involved in are co-sponsoring with guys that have a ton of experience. Collectively, they own about 2,000 units, and we’re building a self-storage facility down in Orlando with one of them, and acquiring 152 units in Arizona for another one… So we certainly get the value of partnering with people with that experience. For our core group and what our company was gonna be doing, we just decided that the three of us would make the best fit.

Joe Fairless: 15 million dollars on track this year – that’s great for anyone who’s listening, but especially it’s inspiring for people in that particular area. How much money do you make when you do 15 million dollars in wholesaling?

Steven Libman: So that’s just total transactional volume, and you skew statistics to make them sound really good, and that’s that one. But to put it in perspective, in 2016 we did 16 deals for $240,000 in revenue. This year we’ll do about 180 for 2,4 million dollars in revenue. So it’s been an extremely quick growth curve for us.

Adam, I forget what your numbers look like from two years ago till now…?

Adam Rae: Two years ago we did 21 deals for about $400,000 in revenue (just under, 380k). And this year we’re on track to do 88 deals with like 1.4-1.8, somewhere in there.

Joe Fairless: And just so I’m clear, revenue is the total amount of income, not necessarily the profit, correct?

Steven Libman: Correct. About a 35% profit margin.

Joe Fairless: Okay, so like for the 1.4 now we do 35% of that, and that’s about where you’re netting out from a profit standpoint.

Adam Rae: Yeah. My profit margin is about 33.76%, roughly…

Joe Fairless: About…? [laughter]

Adam Rae: Yeah, I’m a numbers guy.

Steven Libman: It depends if you’re in growth mode, too. So when we were doing extreme growth mode, that might have dipped down to 20%-25%, because we were pumping money into new markets, and new marketing channels, and things like that. So it fluctuates, but that’s the goal.

Joe Fairless: Interesting. I never heard that type of percentage expressed as a profit just for wholesalers; that’s great to know. When there’s a certain amount of revenue, then approximately — well, I don’t remember the percent that you gave, Adam, but approximately 35% of that is profit. That’s pretty cool.

Why go into commercial? Why not just continue to scale from 15 to 20 million to 100 million in wholesale?

Steven Libman: I think we’ll both have the same answer for this, and we’ve discussed it a lot, obviously, before we went into commercial. It’s because of passive income. Cashflow ebbs and flows significantly in a fix and flip business and in a wholesale business. And at the beginning of every month you hit the reset button… So you’re sending marketing pieces out, you’re spending more money on pay-per-click, you’re sending your acquisition people out on new appointments, and it’s just a heavy-lift at the beginning of every single month.

As entrepreneurs, I think we always wanted something that would create some passivity in our lives, and commercial offers that. We’re watching other guys that are building their businesses, and now that we have a business that’s kind of printing some cash that we can turn into passive income, that was always the goal for us.

Adam Rae: And then the second thing is Steven and I were headed down the path of partnering to build a monster single-family portfolio in different regional locations we were scouting, different cities around the country, trying to look at local partners, and I’ve got a small 23 rental portfolio in Colorado, so I have some experience with our passive income and growing that one house at the time, and we just looked at the amount of energy that it takes to source, find, fix and then deploying that capital, even in a small amount, into a  single-family house across the country… And then also looking at analyzing the numbers of a large, large commercial project.

To be honest, we’ve both done a lot of residential deals and we looked at our time commitments and said “My goodness, I can add three zeroes to this deal and it’s about the same amount of work as flipping three houses and buying two rentals”, but the payoff on the back-end has a couple extra zeroes on it, and then we can actually scale if we combine both of our ability to build businesses together. And we are talking every day anyway, so…

Joe Fairless: It sounds like two things. One is the endless heavy-lifting cycle that is wholesaling, because you’re constantly ramping up the machine, and then the time commitment in terms of opportunity cost too, and being able to scale.

When you two made that decision to go into commercial, what were some of your first steps?

Steven Libman: I would love to say that it was methodical, and I would love that we sat and wrote our plans of what we were going to do, but the truth of the matter is that we were at a mastermind together in Baltimore not more than 60 days ago, and a sponsor that I had been communicating with reached out and said “Hey, if you guys wanna get involved in this deal and you can raise six million bucks, then let’s talk about that.”

I went, I found Adam, I said “What do you think? Do you think we should paint ourselves in a corner and commit to doing this?”, and…

Adam Rae: Yes.

Steven Libman: He said “Yeah, I think we should.” [laughter] So we did, and just last week we closed on 14 acres of land with 1,193 approved self-storage units on it, just outside of Orlando.

Joe Fairless: Wow.

Steven Libman: And we just closed on the two million dollars of the land last week, and we’re in the process of closing out the second round for the 12 million dollars worth of construction cost for that. How did we get started? It was a violent shove into it, and our eternal need to say yes to things kind of got us in there, and then that just really opened the door for us to go side by side with a sponsor who has a lot of experience with 100 million dollars of assets under management, and to just learn and watch and figure it out… We’ve been raising money for a long time with our single-family fix and flip business, so we thought it was achievable, and it was, and now we get to take the ride.

Joe Fairless: What was something that surprised you as you got started having those conversations with investors?

Steven Libman: I think first it’s how many people are really interested in creating some passive income for themselves. When you’re paying double market returns to your investors, they get excited about that. So I would say that it was not easier than we thought, but initially the conversations were a little bit different, where “Hey, we’re gonna deploy your capital now for 3-5 years, versus 3-6 months” and people were excited about that. So the people that we’ve already had relationships with were saying “Yeah, that’s kind of what I was hoping you guys would do.” So it turns out it was the right move.

Joe Fairless: New development… I heard that right, correct?

Adam Rae: Correct. Ground-up.

Joe Fairless: Ground-up development. You definitely got into this with a violent shove, as you described, Steven. Did  you get any pushback on ground-up development?

Steven Libman: No. We actually have some experience in that. Travis, our third partner, is from the underground utility and site development world, so he has a lot of that background, so we’re confident that we can oversee that project with a solid fiduciary responsibility to our investors. Then also in New Jersey in 2018 we’ve taken down some, divided and either improved or approved over 100 lots for single-family development, so… It’s not that different, except storage doesn’t have any kitchens and baths. Well, maybe one or two baths, but it’s a little bit different of a process, so it goes much quicker than that larger single-family development stuff.

Joe Fairless: You’re working on another project, too. I think you said you’ve got that and something else, right?

Steven Libman: Yeah, so in just about 30 days we’re getting ready to close on 152 units in Yuma, Arizona. That’s a little bit different. It’s a cash-flowing asset already. We’ll make some changes to it cosmetically and operationally that will create some value… But yeah, we’re still in the middle of raising the final round for that as well. That’s a really exciting project as well.

Joe Fairless: And how much are you bringing into that deal?

Steven Libman: 2.6.

Joe Fairless: How long does it take you to raise 2.6 million?

Steven Libman: Hopefully less than 30 days.

Joe Fairless: It’s in process, it sounds like.

Steven Libman: Yeah, exactly. It’s in process, doing two projects side by side, with different risk tolerances. Ground-up means a different risk tolerance than the stabilized asset, so… Different investors, lots of conversations, but we’ll see. I wish we had a better dataset for that.

The goal moving forward is to continually meet with investors that like what our portfolio is turning out to be, and then as those deals pop up, we don’t have to play behind the 8-ball, because right now a little bit we are.

Joe Fairless: What have you noticed you’ve had to give more attention to as it relates to your wholesale business that you thought was on auto-pilot, but then not so much?

Steven Libman: For us, and I think for Adam too in the next couple of months, the goal is — for us, we’ve already identified and are starting the onboarding process for a COO, so that they can take the operations day-to-day off of our hands. But as much as we like to say everything’s on autopilot, you don’t need a COO if it’s on autopilot. Nothing’s really ever on autopilot. Marketing changes, your response rates change, your appointment quality changes, acquisitions people sometimes get sick or go on vacation so you’ve gotta step in and the business still has to run… But I think we’ve done a really good job, and I know that Adam has too in his wholesale business created a really good culture of accountability and team play where everybody knows that they are part of the [unintelligible [00:16:42].09] where we all hold each other up. If you have that type of accountability to everybody on the team, then everybody works really hard and that’s the culture that we’ve created, and that has been the biggest win for us in terms of making sure that things continue to run… Because if they don’t wanna run it for themselves, they wanna run it for their teammates, and nobody’s ever wanted to run it just for us; that’s been really helpful.

Adam Rae: One of the big surprising things on my end has been as I’ve started to shift my focus, I’ve realized I’m less important to my business than I actually thought.

Joe Fairless: That’s good.

Adam Rae: Not in the sense that I haven’t given a lot to it and made a lot of things work, but at the end of the day if I take an extra 24-48 hours to get back on a problem, by the time I get back to if I’ve noticed over the last couple of months somebody on my team has taken that opportunity to step up, usually, and has solved that problem prior to me being able to get to it. Actually, that’s been the most surprising thing, and exciting to see some of those team members step up into situations that you didn’t know that they could handle… But now my attention being pulled in another direction has given me the opportunity to see them do that, and my trust in that is growing, for sure.

Joe Fairless: What’s the short to medium-term vision in terms of asset class? Because you’ve got a couple different asset classes in commercial right now.

Steven Libman: We like multifamily and we like self-storage… The reason being is that during the last great recession, storage was the only asset class to continually gain throughout the recession, and multifamily because we like to have impact on people’s places that they live. People always need a place to live, and if we can impact that in a positive way, I would say that it’s arguably one of the other stable asset classes. If you buy those things right, and you manage them properly, then you can do a really good job and win. Not that we know how to run a self-storage facility, but CubeSmart is gonna sign on, and they are the ones that are gonna be running that facility for us. Then we have great asset managers and property managers to help us run those other multifamily assets.

Joe Fairless: What’s been a surprising challenge as it relates to getting into commercial and having those investor conversations that you didn’t think you’d come across, or maybe questions that they asked that you didn’t think you’d come across?

Steven Libman: First, I think it’s a slower process. I think that what makes the two deals that we’re in right now significantly more challenging is timeframes. People need time to discuss a property with you, they need to figure out where their investment moneys are coming from. If they’re rolling it over from a 401K or an IRA, that’s not a one-week process.

We have self-directed IRA companies that work with us often and they can do it in between two and three weeks, which is really fast… But I’d say that that’s been in my mind the biggest challenge – just making sure that you’re consistently having these conversations, because if it’s not this deal for an investor, it will be the next one… And making sure that you’re continually keeping them involved and updating them with where we’re at with the current project, and when they get excited for that, to make sure that they’re ready for the next one.

Joe Fairless: How do you grow your list of investors?

Steven Libman: I’m sure you can answer that better than we can at this point… [laughs]

Joe Fairless: Well, I’m not being interviewed though… [laughter]

Steven Libman: That’s been a strategy point for us over the last couple of weeks, figuring out exactly how to build those relationships… But I think like anything else in your business that you find has been really successful, it’s based on relationship, and making sure that you’re out there meeting people, getting connected, and just letting people know what you’re doing.

There’s a book called Getting the Money, and she talks about how she’s not Wonderwoman, but her and Wonderwoman have never been seen in the same room together,  and her point was don’t forget to tell people who you are and what you do… And I find that most of our investors work with us more for who we are than what we do. It’s great that we can provide good returns to them, and certainly, it’s better than what they have seen in the past… But it’s mostly about who we are and why we do what we do.

I think as you continue to build that base of good investors, they have friends, they have family, they have other people that they want to introduce you to, because you’ve done a good job for them, and they trust you, and you just continue to build that relationship.

Joe Fairless: And the self-storage investment near Orlando – if you can think about the one investor who invested the most amount, how did you meet him or her?

Steven Libman: By asking the question of the people that we know “Who else should we know that you think should be in this deal?”

Joe Fairless: Wow. And they introduced you to this person who wrote the biggest check.

Steven Libman: Yeah. It was one point of separation, and we said “Hey, this is what we’re doing.” They were involved in the deal themselves on a lighter scale, and we said “Who else do you know that we should be talking to?” and about an hour later we had the largest commitment that we had. So it’s our warm network.

Joe Fairless: Wow, that’s incredible.

Steven Libman: That’s the key – making sure that people know what you’re doing, and then asking those questions, “Who else should we be talking to about this?”

Adam Rae: But it’s also positioning yourself. We’ve done due diligence on this, we have a partner who his job is to blow up deals for us… Because we’ll get excited about something and we’ll send it across Travis’ desk, and he spends 36 hours in the numbers and says “Hey guys, here’s three yellow flags. We need to resolve these before we go any further.”

When we’re having conversations with people, we’ve found something that is intriguing, enticing and exciting, and we’re not even gonna take it out to somebody unless we feel like this is something we’re gonna put our own money into, that we’re excited about, and that truly has a great opportunity… So positioning ourselves as the prize, and just asking for who else possibly would be interested in something like this, and people are excited to share it.

So just capitalizing on that relationship and warm network, because you have built the trust and you have that relationship with someone and they’re excited to bring somebody else in that they know, because they trust you.

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

Steven Libman: For me it’s build the team. We started our business in 2011, the wholesaling side, and for five years I built a great job… But you heard the numbers – in 2016 they weren’t great, and now they are. The fear that I had and that was holding me back was I didn’t wanna be responsible for other people’s income. When mentors of mine told me that the value of our business is going to be predicated upon the talent of the people we bring in, it really changed my mindset to say “Wow, if I build a really good team, then I don’t really have anything to worry about.” That changed everything for us.

We started hiring people, and not all of them have worked out, but being able to confidently go in and say that building a rockstar team is gonna build a great company – that’s been the best advice I’ve gotten.

Joe Fairless: Adam, do you have any thoughts?

Adam Rae: Yeah, I would say for me it’s check your ego at the door, and just try and find somebody who’s doing what it is that you wanna do, and model. Just don’t try and recreate the wheel; it’s not complicated, but it’s not easy. So just keep your head down and try what someone else is doing, and stay long enough to really figure it out, and that takes checking your ego.

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

Steven Libman: Let’s do it.

Adam Rae: Let’s do it.

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

Break: [00:24:54].17] to [00:25:41].19]

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

Steven Libman: Never Split the Difference.

Joe Fairless: Best ever deal you’ve done?

Steven Libman: It’s gotta be so far this over a thousand-unit self-storage development deal.

Joe Fairless: What about a deal that has gone full cycle, best ever deal you’ve done?

Steven Libman: Probably the 24-lot subdivision, from entitlement to completion.

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

Steven Libman: So many. Probably making sure that we haven’t touched and felt every piece of it… That’s more in the single-family world, where we had less of a stringent timeframe with the due diligence, and we’ve uncovered some stuff in the deal that we should have known before the deal… Luckily, we still made money on it, but that’s a learning curve for sure.

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

Steven Libman: We work with Samaritan’s Purse, and we donate a portion of the proceeds from every property that we’re involved in to their Clean Water project, digging wells in third-world countries.

Joe Fairless: Best way the Best Ever listeners can get in touch with you two and learn more about what you’ve got going on?

Steven Libman: IntegrityCapitalGroup.com. My name is Steven, that’s Adam, and our e-mail addresses are just our first name, @IntegrityCapitalGroup.com.

Joe Fairless: Thank you so much for being on the show, talking about how you two have built  wholesaling businesses that are thriving, and now going into commercial deals – two primary reasons why… One is the heavy-lift at the beginning of every month; basically, just ramping up every month, because you’re starting fresh, and two is the opportunity cost, and I believe as Adam said, you could spend the same amount of time, but then you add three zeroes to the deal and it’s a significantly bigger payday for your time…

And the projects that you two talked about, and holy cow, that question that secured the largest investor in your recent deal… That question is “Who else should we know who should be in this deal?” and you’re asking that to a current investor. Now, you already have that rapport build up, and Adam, as you said, it’s not a magical question; when you ask that, people get into a trance and then say “Talk to my uncle Billy. He is a billionaire. He’ll give you money.” [laughter]

Adam Rae: Sometimes… [laughs]

Joe Fairless: Maybe, sometimes… I haven’t met uncle Billy yet, that is a  billionaire, but I’m sure he’s out there… But it is a question that once you have positioned yourself properly, then that question can help you get to another level. Thanks so much for being on the show. I hope you two have a best ever day, and we’ll talk to you soon.

Adam Rae: Thanks, Joe. You too.

Steven Libman: Thank you.

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JF1482: How To Quickly & Effectively Solve Various Problems That Arise In Your Biz #SkillSetSunday with David Begin

As investors and entrepreneurs, we must be able to adapt and overcome various situations that come up. Being comfortable with being uncomfortable is kind of a necessity. Today, David has some tips and strategies to overcome problems, regardless of the business and reasons. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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David Begin Real Estate Background:

  • David is the Managing Partner of Wild Blue Car Wash
  • has 3 exterior express car washes in Colorado
  • has also applied his extensive sales and marketing experience to deliver sales training throughout the world
  • Say hi to him at wildbluecarwash.com  (www.thehowofcarwashing.com)
  • Based in Colorado Springs, CO

Get more real estate investing tips every week by subscribing for our newsletter at BestEverNewsLetter.com

Best Ever Listeners:

Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


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.

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday. The purpose of this episode is to help you hone in or acquire a skill that you will need in order to be a successful real estate investor/entrepreneur. We’re gonna be talking today about as our business grows, what are some challenges that we’ll come across, and how have others effectively solved those challenges.

We’re gonna be talking to a real estate investor, but then also someone who has not only commercial property, but someone who operates those properties, as well as actually car washes. So there’s gonna be a slightly different slant to this, but the interview guest who is on the show now – he is also a commercial real estate investor… How are you doing, David Begin?

David Begin: Good, Joe. How are you doing? Thanks for having to be on, I’m excited to be on.

Joe Fairless: Yeah, nice to have you on the show, and I’m glad you’re excited. A little bit more about David – he is the managing partner of Wild Blue Car Wash. He has three exterior express car washes in Colorado, and he owns the property for each of those three. He’s in Colorado Springs, Colorado. With that being said, David, will you give the Best Ever listeners a little bit of background on how you got to this point and what you’re focused on now? Then we’ll talk about the evolution and challenges of your business.

David Begin: Yeah, that’d be great. I started off in the corporate world; I got a degree in Public Administration, thinking I wanna work for the government. I did that for two or three years and decided I didn’t like that very much… But I did get interested in technology, and was application to join an application software company back in the late 1980’s, and worked in the software industry probably for 10-15 years.

Then I transitioned to sales training, so I was able to get involved in sales training and teach people sales skills at the enterprise software level, which is a much more complicated type of sale that you would get into. It’s a group of people selling to a group of people, so there’s a lot of political dynamics that go into play. So I got involved in that and I really enjoyed it, and as I was kind of getting a little older, my kids were getting a little older, I wanted to kind of own a small business, so I was making the transition from the corporate world to being a small business owner, and for some reason I fell into car washing, and about 15 years ago started looking at the process, and it really took us about three years to find a site… So I certainly appreciate the real estate aspect of it, but it took us a long time to find a good site, and then we were able to come up on two of them pretty quickly.

We opened two car washes, ran them for about ten years, and then recently just opened up my third car wash… So I’ve been in that process, I’ve been involved in it; I’ve had to go from a corporate world to being a small business owner, to being an entrepreneur and learning all the challenges and excitement that goes along with it.

Joe Fairless: And I’m sure everything has been absolutely perfect, with no issues whatsoever since you’ve purchased these properties, as well as the businesses and ran them… Is that correct?

David Begin: Absolutely, yeah. It’s been a dream come true, it’s been heaven on earth. [laughter] The people that do entrepreneurism does it, the people who really like it, love it. And although there’s a lot of issues that go along with it, most people who are their own boss, and entrepreneurs, and small business owners, they wouldn’t trade it for anything, and I think I’m in that position.

I always tell my friends, if I had to go back to the corporate world, I would, but I would do everything I could possibly not to do that.

Joe Fairless: So let’s understand where we’re at with your business, and then we’ll talk about the challenges that you’ve come across as you’ve grown it… Because you own the properties where these car washes are at, and you mentioned it took you three years to find the site for a car wash… What were you looking for?

David Begin: You know, car washing has kind of changed in the last 15-20 years. A lot of car washes early on were what I call self-served car washes; that particular model is where you drive into a bay, and it used to be a coin-operated process. It still is in some cases, but now it’s kind of credit card… But you kind of wash the car yourself. So you might have a brush, a high-Fpressure hose, you’re provided with soaps and waxes and different things that you can do that.

Those investments that those people made – a lot of times they had a piece of land; it didn’t have to be an A property, it could have been a B or C property, but they put a car wash on it because they were gonna hold it and it was more of a real estate play for those people. “I’m gonna hang on to this for 3-5 years, or 10 years, and I’m gonna flip it and make money as the property appreciates, as maybe things build around it.”

That’s changed quite a bit now. The car washes nowadays that are popping up — the market is exploding in terms of car washes. We’re seeing more and more car washes being built now than ever before.

Joe Fairless: Really?

David Begin: Yeah, very much so. A lot of money is coming into the market, a lot of people realizing it’s a good business to get in if you’ve got the right location… And location, obviously, as it is in many cases for retail, is very important. If you pick a bad location, it’s hard to recover from that location… So nowadays the real estate component is just part of it; so you’re not making money necessarily on the real estate investment, you’re making money on the car wash operational investment.

So you’re competing with everybody else that’s looking for those corner sites – you’re competing with the banks, you’re competing with 7-Elevens, with the other convenience store chains that are out there, to try to find something that’s got great visibility, it’s good egress/ingress, the traffic count is relatively high, the traffic speeds are not too fast… So you’re looking for those things like a retail investor would be looking at; you’re looking at the same things, but… Unfortunately, you’re competing with them, so you’re paying a pretty good premium for real estate if it’s a good site.

Joe Fairless: The traffic count and traffic speed – what is an ideal count and what is an ideal speed?

David Begin: Anything about 25,000 cars per day, you typically can make the numbers work if you’re looking at an exterior express type car wash… And speeds, you wanna be close to an intersection as you can, depending on where you are. Here in Colorado Springs we’ve got long stretches of roads where there’s no access, so they expect you to access the sites from going to an intersection and going to the next street over and the driving up… So if you’re in Texas, for example, it’s amazing how the roads in Texas – you’ve got your turn lanes anywhere you wanna put them, so it’s very easy to get in and out of those types of sites, so you’re not gonna be in a situation… If you put them in the middle of one of those long stretches, it’s very difficult for people to get access to it, and they drive by it and they say “Oh, I’ve gotta go there one of these days and get my car washed”, but it never really happens because it’s not a convenient in or out.

So like anything else, you wanna be close to an intersection, and if you’re close to an intersection, you have Stop signs, you’ve got stop lights, which slows down the traffic, which then people can look at… Car washing is very much an impulse purchase. It took me a long time to believe that, but it is very much an impulse purchase, so you wanna make it easy for your customer to see it and then drive in and come wash their car.

Joe Fairless: Is there an ideal speed that the road is at? I mean, I guess 5 miles an hour would be the ideal speed, right? But realistically speaking, what is too fast? (I’ll ask it that way)

David Begin: You know, if it’s above 30 miles an hour, then people are more concentrating on driving than they are looking around. But if it’s slower than 30 miles an hour, then people have a chance to kind of look around and see what’s around them.

Joe Fairless: Okay, got it. So it took you three years to find your first site, and you’ve just described exactly what you’re looking for. Did you get all those things?

David Begin: We did. We lucked out. We actually thought the site we were purchasing was more of a B property, but it actually turned out to be an A property, and then the other site we bought was an A property and turned out to be an A property… So we were very fortunate in the sites that we purchased upfront. We sort of knew what we were doing, but we didn’t really know what we were doing, so we felt fortunate and lucky that the two sites that we picked here in Colorado Springs were great sites.

Joe Fairless: And you mentioned you have three sites. You have two in Colorado Springs; is the other one somewhere else?

David Begin: Yeah, it is. It’s in the East side of Denver; it’s close to the city of Aurora. It’s an unincorporated Arapahoe County, which is close to Aurora, so it’s on the East side of town. There was an opportunity up there, so we took that opportunity.

Joe Fairless: When you purchased all three of them, are you buying the actual land and a car wash, or are you just buying the land and then you have to build the car wash?

David Begin: For us, they were a ground-up project; we bought the land, and then we had to develop the car wash. We built a building, and then we bought th equipment to put in there, so it was a big overall large project, large package. There are some people that lease land, and there’s disadvantages sometimes with leasing land; some banks are kind nervous about leasing land for car washes, because a car wash is considered by a bank to be a single use entity, so when they make that investment in that project, you can’t turn that into something else.

If you buy an office building, for example, and for whatever reason it doesn’t work out, the bank can take over the office complex and then probably sell it to someone else and still get their money. They’ll eventually get to the point where the last guy who gets in it for 30 to 50 cents on the dollar will be able to make money at it. Car washing is a lot different, because it’s a single use entity, and once you make that commitment of building the building and putting in the equipment, if it doesn’t work you might be able to sell it to someone else, but it’s never gonna be anything else unless you scrape the project; you can re-use the land for something else, but… It’s considered a single use, so it’s a little bit more of a risk, and when you’re in a lease situation, you’re fighting with that lease holder who’s gonna take over the project if that particular owner goes under.

Joe Fairless: You described earlier in terms of the location you’re looking for, corner side, good ingress/egress, nice traffic count of 25k cars a day or more, traffic speeds lower than 30 miles an hour… You’ve got a really good location, and my skeptical brain is asking “Is a car wash truly the highest and best use for that corner lot?” What are your thoughts?

David Begin: Well, from an income perspective if it’s a good site and a good car wash, the answer is yes, because car washing, if it’s done correctly, can be extremely profitable; so it could be the best use. You’re competing with banks or competing with convenience stores, you’re competing with the Walgreens that are out there, but yeah, if you’ve got a great site and you’ve got a good project in place, and you’ve got good operations and you know how to operate these things, it could be the best and highest use for that particular piece of property.

Joe Fairless: How do you do it correctly?

David Begin: These are operationally intensive business. The problem with people that wanna get in the car wash business is it looks easy, so they just their car through and think “Oh, I’ve gotta get me one of these car washes”, and they don’t realize there’s a lot behind the scenes to make it work, and they’re operationally-intensive, because there’s so much equipment that you’re dealing with, and then you’re dealing with the customers, and you’re dealing with the customer’s asset, which is their car, and the customer is involved in the process, which they actually stay in their car and go through the tunnel… So there’s lots of things that have to take place, but I’ve been to a lot of car washes in the last ten years and you can tell the ones that are run well and the ones that are not by really focusing on making sure you’ve got operational processes in place, that you’re running them well and you’re taking care of your equipment, you’re taking care of the location, that it looks good…

People wanna come to a clean place to wash their car, and if you let it go for six hours, it’s not a clean place anymore… So making sure you keep those standards high, making sure it has that retail look to it. That’s another thing we’ve seen in the last 5-10 years’ transition in the car wash industry –  it’s kind of gone from an industrial look to more of a retail look, and you’re seeing properties that are being built, and you’re seeing buildings that are being built that are inviting, attractive, very well-lighted, different colors in the tunnel… It’s becoming more of a retail experience for people.

So if you’re doing those things right, then yes, you can do well at it.

Joe Fairless: What are some other nuances that would make it retail look versus industrial?

David Begin: Well, the building is a big one, so you’re seeing a big shift in the way people are building car washes. Ours are ten years old, so we still have kind of the old cinder block look to our building. We have windows to kind of let light in, but we’re still kind of cinder block. Nowadays a lot of people are building car washes that have a lot of glass in it, a lot of steel, so you’re seeing steel structure with glass involved; it’s really an inviting-looking building. There’s three or four good car wash building providers out there that do a good job of designing it, so it looks inviting, it looks interesting.

The way the equipment lays out, so what’s the experience that the customer goes through when they go through the car wash… The old days’ car washes was a pretty violent process. You got on this conveyor, and then the cloth came at you from all different directions, and back in the ’80s it wasn’t cloth, it was brushes… Guys liked it, but women didn’t like it, because it wasn’t a friendly experience.

Nowadays you’re seeing the retail experience, which is now appealing to everybody, and I think it’s making a big difference. People are washing their car more often, it’s becoming more convenient to wash our car. The exterior express model, for example, which I consider more of a fast, casual model to car washing… So you stay in your car, and then if you wanna vacuum your car yourself, you can do so, or you can just drive off. But you’re talking about waiting five or ten minutes, instead of in the old days – they’re still full-service car washes, but the prevailing model 10 or 15 years ago was full-service car washes, and it took you 30-45 minutes to wash your car, and people just don’t have that time anymore to wait.

So you’re able to get in quickly, get out quickly, you get a really good quality car wash, you get it for a good price point… So all those factors come into play, for people now are washing their cars much more frequently than they ever have before.

Joe Fairless: When you look at a potential new site, and the ground-up development that’s required, and the business that you’ll implement, what type of returns do you look for?

David Begin: You’re looking for returns on your investment — you can get your return back I think in probably a minimum of three years. It could be quicker, depending on the site and the investment… But 3-5 years is a pretty good window to look at your cash-on-cash return on that. Then from there the car wash does very well.

It’s like any other business. There’s a sub-section of owners that do very well, a sub-section of owners that do pretty well, and then a sub-section of owners that struggle through that. But there’s a lot of private equity money right now coming into play, because they’re seeing the opportunity in car washing. It’s still very much a fragmented industry, so it’s very much a mom-and-pop industry; probably 3%-5% of the car washes are owned by what I would call “corporate entities”, and you’re starting to see chains roll up car washes, but it’s still a very small percentage of the business.

But private equity sees the opportunity here. In the last three years we’ve seen a tremendous influx of money coming into the industry, and a tremendous influx of building car washes.

Joe Fairless: Does the 3-5 year get your money back return factor in the cost of the land, as well?

David Begin: Yeah, because you’re rolling all that up into a basic loan. Again, it’s land that’s working for you, so it’s part of the investment, just like the building would be, just like the equipment would be… So all that gets rolled in from that standpoint. It’s a working piece of land, it’s not necessarily the real estate as more of an investment anymore. It works for you, and you’re making money off the land as a result of the business you’re putting on it.

Joe Fairless: Oh, that’s great. And were you able to achieve that in any of your three deals?

David Begin: Yeah, our new car wash has only been open 4-5 months, so we’re still getting that thing up and running, and we’re getting close to a breakeven point where we’re able to pay our expenses at that point, so we were able to kind of jump on that pretty quick… But our first two car washes – yes, we were able to accomplish that and even probably more.

Joe Fairless: Any environmental issues that you have to be aware of with a car wash?

David Begin: No, professional car washing is extremely environmentally-friendly, when you think about what we do versus the old days where you washed your car in the driveway. Most people don’t do this, but if you just turned on the hose and let it run, you’re burning 200-300 gallons of water at that point. That water goes across the car, so you’re rinsing the car, all the garbage on the car, and then it ends up in the wastewater system and the storm sewers. It doesn’t go to water treatment, it goes to storm sewers, and then it ends up in the rivers and streams. So from an environmental standpoint, a  professional car wash captures all that dirty water.

Most of us have equipment to clean up that water and reuse that water, so probably 80%-90% of the water we use in washing a car is recycled, reclaimed water that we store on site, and then we add maybe 10% of fresh water. That typically gets put in when you’re creating foam and soap and you’re rinsing a car. Then any water we don’t use gets sent back to the wastewater treatment system. They clean it up, and then they either send it back to the streams or rivers, or it gets used as non-potable water. In some cases, large commercial office buildings might have non-potable sprinkler systems, for example, and they’ll use the water.

So it’s a very efficient process, it’s extremely environmentally-friendly. Cities like that, so if you partner with your utility company or your city and explain to them the environmental aspects of professional car washing, it really communicates that.

From a real estate standpoint, you just have to make sure that the environment that you’re buying, the real estate you’re buying – either do a phase 2 study or a phase 1 study as far as “Was there anything on that site that could have caused problems?” But environmentally, car washing [unintelligible [00:21:02].18]

Joe Fairless: What about insurance you have to carry in order to protect yourself from somebody’s Lamborghini getting smashed up or scraped?

David Begin: Yeah, insurance is always an issue. It’s a very specialized market when it comes to insurance, so we’re always shopping… And a lot of players get into the market and get out of the market, so we’ve gotta have an insurance agent that really understands car washing. There’s a lot of car wash associations, whether they’re regional associations or national associations, that have insurance agents they work with to help you find a good insurance policy. But yeah, if you’re a full-service car wash, you’re gonna have to have what’s called Garagekeepers insurance. If your employees are getting into the car and driving the car, that’s a very different insurance policy than if the customer maintains control of their vehicle.

In the exterior express model which we have, the customer maintains control of their vehicle, which helps us quite a bit. But yeah, you do have to have insurance when it comes to those types of issues, and insurance in general is becoming more expensive.

Joe Fairless: It’s been really interesting. I know our conversation went a direction that I didn’t set it up for it to go; we were gonna talk about challenges and stuff you’ve come across, but it was really interesting, because it’s a real estate opportunity that I didn’t ever pay attention to, nor did I think about, even if I got my car washed… I never thought, “Oh, it’d be interesting to buy some land and start a car wash.” I’m not, because I’m focused on other stuff, but it could be an opportunity for others… So you’ve opened up, I imagine, some minds on this show.

How can the Best Ever listeners learn more about what you’ve got going on and perhaps get in touch with you?

David Begin: We actually have a podcast as well, Joe. I’ve got a podcast that I do called TheHowOfCarWashing.com. We’ve got about 55 episodes online that people can listen to if they wanna learn more about the car washing industry. That’s done through a business I call Levante Business Group… So if you go out to TheHowOfCarWashing.com, you can find us out there. If you’d like, listen to some of our podcasts, and then you can contact us directly through that website if you’re interested in learning more, or if you’ve got any questions that we can answer, we’d be happy to help you.

Joe Fairless: I’m just curious, what’s your business model for having the podcast? Do you franchise your thing, or do you consult? What’s the reason why?

David Begin: We’re setting up as a platform to communicate, but my ultimate goal – and this kind of goes back to my sales training days – is I’d like to create some online coaching and training for car wash operators, because as we were gonna talk about, a lot of the challenges you run into when running a small business, you’re not prepared for those challenges, and you’re not prepared to run a car wash. Most of us didn’t have car wash experience before we got into the car wash business, obviously… But I wanted to kind of set up a place where people can go to send their employees to get some training in the car wash, how to run a car wash, how to manage people; I wanted to set up some training for owners for what they need to think about and how they need to set up their businesses.

It’s a platform right now that we’re creating that we’re gonna move in the future to more online coaching and training.

Joe Fairless: It makes sense. Well, thank you so much for being on the show. I really love learning about new commercial real estate opportunities; even it’s not something I’m gonna personally pursue, just learning the different types of ways that we can make money in this business, and you got very specific about what you look for in a good location for a car wash, the type of returns you can make… It is not only  a real estate investment, but we are operating a business. I think of it as senior living, where you buy the land, but you also develop and then you’re operating a very active business.

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

David Begin: Thanks so much, Joe, for having me.

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Joe Fairless and Jeremy Porto podcast episode JF1470

JF1470: Tears His Achilles, Starts Flipping Meth & Chinese Drywall Homes with Jeremy Porto

Jeremy was serving in the Air Force when he tore his Achilles in pilot training. He was laid up, reading real estate investing books. When he was able, he took action and started flipping homes with unique problems. Now he also owns 40 units. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Jeremy Porto Real Estate Background:

  • Became interested in real estate while recovering from injury in USAF pilot training
  • Flipped 15 properties in 3 different markets including meth and Chinese drywall homes
  • Owns 40 doors in 3 states including recent 13-unit apt acquisition, transitioning into larger apartment syndications
  • Based in Colorado Springs, CO
  • Say hi to him at www.facebook.com/jeremyportorealestate
  • Best Ever Book: Emerging Real Estate Markets by Dave Lindahl

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Best Ever Listeners:

Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


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, Jeremy Porto. How are you doing, Jeremy?

Jeremy Porto: I’m good, Joe. How are you doing?

Joe Fairless: I’m doing good, nice to have you on the show. A little bit about Jeremy – he became interested in real estate while recovering from injury in the United States Air Force pilot training. He has flipped 15 properties in three different markets, including some challenging properties, meth homes, and as you put — Chinese drywall homes; he’ll give us some stories about that, I’m sure.

He owns now 40 doors in three states, including a recent 13-unit apartment acquisition (congrats on that) and he’s transitioning into larger apartment syndications. Based in Colorado Springs, Colorado. With that being said, Jeremy, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jeremy Porto: Sure. Like you said, I got really interested in 2008 when I tore my Achilles’ in pilot training; I had a long time to lay on my back and just read a bunch of books, and probably unlike a lot of people, I was more interested in real estate stuff because I thought it was cool, it was interesting.

Even now you see on TV all the flip shows, and that was going on back then as wel… So I learned a bunch, and I started out pretty slow. I bought a couple rentals, I got a fourplex relatively early on, I started doing some flipping, like you said meth house, Chinese drywall was kind of some of the more interesting ones that I did; also just some cosmetic stuff… I did all that —

Joe Fairless: What is Chinese drywall?

Jeremy Porto: Back in the early 2000’s there were several hurricanes that hit the South-East, and when they were rebuilding everything, there was a shortage of drywall, so they started importing a lot of it from China… And I don’t know if it was a manufacturing defect or what, but when they installed it, it was leeching like a sulfurous compound and making people sick, and the only remedy there was just to kind of rip it all out.

I think it’s kind of passed now, I don’t think there’s really too much issue with it now, because it’s kind of all been figured out and taken care of, but back then it was a real issue, especially in the South-East.

Joe Fairless: And what about the meth house? Were there multiple meth homes?

Jeremy Porto: Yeah, there were, in El Paso County… Don’t quote me on this, but I think El Paso County is the number one or the number two county in the United States for number of meth-affected properties.

Joe Fairless: Is El Paso County in Colorado?

Jeremy Porto: Yeah. It’s Colorado Springs, basically… Just South of Denver. But yeah, I did two of those… I kind of fell into it —  so my wife is still active duty, and we bounced around a lot, but I was having a hard time kind of getting into new markets all the time, and I had to relearn stuff… And I found this meth house that was on an online auction, and hey man, I figured nobody else was gonna go for it, so I just learned everything I could in like a couple of days before the auction was gonna start.

I talk to all the remediator guys, I talked to the department that handles the remediation and made sure I was legal in what I was doing… I’m licensed in Colorado for real estate, so I had to make sure I was following all the license law for disclosures, and stuff like that. Those were some pretty interesting properties.

Joe Fairless: What do you have to do to remediate that?

Jeremy Porto: I guess there’s two main steps; one is remediation of the methamphetamine itself, so that comes in two parts as well… There’s removal of anything that’s porous; not that I’d wanna keep it, but things like the carpets – it’s gotta go, because it’s just gonna absorb it. The other big one is popcorn ceilings; they’ll typically absorb the meth, so that’s gotta get all scraped.

After that, the second part of the meth remediation is to clean it. They’ll use industrial chemicals, and HEPA filter vacuums, and they just elbow grease and they scrub it to death… And then you have a third-party tester coming in to make sure that it’s all clean and below the state limits. That’s the remediation side of things. Then it becomes a normal flip like anything else – you put it back together, so whatever you’re left with, which often times isn’t a whole lot, [unintelligible [00:06:32].07].

Joe Fairless: Do you get charged based on per square foot of remediation?

Jeremy Porto: That’s a good question. I’ve worked with a couple different companies, and pretty much they wanna see the initial report that shows you how much meth is in a home. It could be lightly affected if they only smoked it a few times in the house, or light manufacture – then there might not be as many micrograms of meth on the walls and in floors and ceilings… And also just the size of what they have to clean. So when they kind of  look at those two things combined, and what do they have to tear out, what do they have to clean, they kind of put a bid together. So really, there’s not a real science to that, I would say; it’s mostly an art.

Joe Fairless: Alright. So I’ve checked the box on the drug topic. I always like to bring it up in every episode, I always like to talk drugs… So now that we’ve gotten that out of the way, 40 doors in three states, including a recent 13-unit apartment acquisition… Over what period of time did you acquire those 40 doors in three states?

Jeremy Porto: I bought the first one in 2008 – that was just a small townhome – with my mom, actually. We were just getting into it, didn’t know anything… Several years later I bought the next one in 2012, on my own, a single-family, and then I just started a kind of exponential increase. I was buying fourplexes, so adding them a little bit faster, and buying two or three properties a year; so that 40 doors is up until now… So in the last ten years I’d say I probably bought two thirds of them, or maybe half of them I’d say in the last 3-4 years or so.

Joe Fairless: Where are you getting the equity for the purchases of the ones that you’ve purchased in the last three or so years?

Jeremy Porto: I’ve been a benefactor of the market, for sure. The ones that I bought early on, obviously — I did some renovations to the rentals, but just the market appreciation was phenomenal… Using 1031’s to kind of save on taxes, finding deals that were below market in the first place… It was one of the first couple of fourplexes I bought – I was in the middle of renovating it, and a guy from across the street said “Hey, do you wanna buy two more?” and I’m like “Well, sure.” They were off market, obviously, so I bought those well below market… So instant equity in that sense. And then just the market has continued to appreciate, and then just using the tax strategies has been really helpful, too.

Joe Fairless: Well, let’s follow the process then… I’d love to hear each of the deals and how you got to today… Because the first one, in 2008, you started with one townhome, and then you waited four years, you got a single-family in 2012… I know it’s gonna be a little challenging just to think of the numbers off the top of your head, but maybe you have them memorized… But can you just go through each of the deals that gets us from 2008 to today, and just when you bought it, and purchase price? Then we’ll go from there.

Jeremy Porto: I could probably think of like a representative property for like a time period, if you will…

Joe Fairless: Sure.

Jeremy Porto: That very first one, the townhome in 2008 – we bought it at 115k, somewhere in that ballpark. That was right at the end (or the beginning), with the crash, so there was — oh my god, there was like five or six bank-owned properties on that street… So it was a smokin’ deal; I didn’t quite realize that then.

Then ironically, we’re selling it tomorrow, we close tomorrow, my mom and I, to sell that,  and that is at about two and a half times the price, roughly… And the renovations that we did upfront were fairly basic. Mostly cosmetic – paint, carpet… I think we actually put in new countertops, stuff like that… But pretty basic stuff, and then rented it for the last ten years. So really phenomenal gains there, and leveraging a residential 30-year am loan was great, as well. We were cash-flowing roughly $500 before maintenance/month.

Joe Fairless: So you’re selling it for about 287k?

Jeremy Porto: Yeah. Man, that’s pretty spot on. [laughs]

Joe Fairless: Well, all I did was the math, when you said 2,5 times.

Jeremy Porto: I didn’t actually do the math, so… If that’s exactly 2,5, then that’s pretty cool.

Joe Fairless: Yeah, good job; nice work to you then. I’ll turn the table and compliment you. Okay, so you haven’t tapped into that equity yet from that deal, so that’s even more interesting to me… Unless you did  a refinance, or something…

Jeremy Porto: Well, very early on we did.

Joe Fairless: Okay. Did you use some of that money to then buy your 2012 single-family house?

Jeremy Porto: That one was a little complicated, because it was with my mom. I don’t recommend investing alongside people that you’re very close to and you’re very different from. We actually didn’t do that. That refinance was more — we dumped the money back into the renovations, because she’d actually pulled a home equity line of credit out on her own home to fund the renovations and the down payment. I’m not sure now how we did that [unintelligible [00:10:56].05] I don’t know.

Joe Fairless: You bought it for 115k… How much did you all put into it?

Jeremy Porto: About 20% down, and then upfront about 20k or so.

Joe Fairless: Okay, got it. So it wasn’t a huge amount. Okay, so that’s an isolated property. 2012 rolls around, you got a single-family… Was that money that you just saved up?

Jeremy Porto: Yeah, I’m a huge saver, plus being in the Air Force and deploying, you don’t get much time to spend your money… So that’s just money from the Air Force, I saved it all. And because of the timing of that one as well, it was still kind of in the lower part of the market; I was able to snag that for a pretty good deal. That was 92k or so for the purchase price. I put maybe a couple thousand into it, for like paint and just some touch-up stuff, and then started renting that for $500-$600/month.

I’ve just sold that one a couple of months ago for over 200k… So I doubled that one again. Not much of it was renovation; much of it was forced appreciation, it was mostly the market. I did take that one and 1031-ed it. I’ll be honest, I did a couple 1031’s in a row, so I’m not exactly sure where that went… That one went into the 13-unit.

Joe Fairless: Okay, that one went into the 13-unit; we’ll get to that. This is why I wanted to go through it in a linear way, because I wanted to learn how you grew from one townhome with your mom, in 2008, to today, where you’ve got 40 doors in three states, and a 13-unit. Okay, so you saved up money, you bought a single-family house… We’ll still stick to the 2012 timeframe. You then bought some fourplexes, you said?

Jeremy Porto: Right. And let me actually just throw in a comment here, Joe. This is all kind of in the beginning of my real estate career, and I knew a little bit, but I didn’t know a ton… And I always had an exit strategy in mind, but I think the biggest part of this learning process has been flexibility. I may have intended to hold the property for X number of years or whatever, and do something with it, but as the market grew and changed, I just found better ways to implement that money and use it… So I don’t mean it was on the fly in the sense of “I didn’t have a plan, I just did whatever, whenever”, but it was on the fly in the sense that I had a plan, and then things changed and it made better sense to do something else with it.

Joe Fairless: For example…?

Jeremy Porto: That second property in 2012, with my kind of naive mindset, I was like “Oh, I’ll just keep this forever; [unintelligible [00:13:12].08] 30 years and then I’ll have the property paid off.” And as I learned that hey man, if I can leverage the money better, I can do more with it, and the market is going up along with me… Then it made sense to sell that property and get into the 13-unit, because my mindset to get to multifamily – oh man, it was slow and painful. I’m not tooting my own horn — actually, kind of the opposite. I did it on my own, I came to that realization without really talking to people… So if anything, it proves it in my mind that multifamily is great. But it was painful, because first I’m flipping, then I’m doing single-family rentals, then I’m like “Huh, maybe fourplex rentals. That’s the way to go.” So that will tie back into your actual question… And then from there, I’m taking them into something bigger…

I bought the fourplex about a year later, maybe a little less. It was on the MLS, the guy kind of ran it pretty terribly, and in my mind it cash-flowed great… But nobody was buying fourplexes at that time, or nobody was buying a whole lot at that time. I think it was still early 2013 or so… And that has turned out to be a phenomenal deal. That’s also appreciated, and that’s where I’m kind of like “Alright, do I start selling my fourplexes now? Because I really like them, they’re great cash-flowing properties.” On each of them I would say I’m in the ballpark of about $1,000/month cashflow, so I’m like, well, do I take that and roll that into bigger multifamily? If I can find something, I think I will, but right now I’m really liking where those are at.

Joe Fairless: How many did you buy in 2013?

Jeremy Porto: One fourplex, one duplex, and a single-family that I actually kind of sort of house-hacked – I moved in, did some renovations while my wife and I were living there.

Joe Fairless: All of this from saving your pennies from your job and your wife saving her pennies from her job?

Jeremy Porto: Yeah, exactly.

Joe Fairless: Okay. Because so far, following the timeline, you haven’t done a refinance or exited out of anything, so so far at this point you’re just acquiring them, in the timeline… Okay, after you did the fourplex, the duplex and the single-family, what did you do?

Jeremy Porto: Let’s see, that was 2013… So in 2014 I started doing the flipping for the first time; that was the Chinese drywall, that was a duplex. That’s maybe not the biggest mistake I made, but a mistake that I look back and say “Hey, that was a great duplex; I renovated it completely, it was gorgeous, it was renting for way more than I anticipated when I started the project…” I wound up selling that – I think I made 50k or 60k on that one, and that’s kind of the time where I started deploying real heavy with the Air Force, so it was kind of up and down as far as what I was doing at the time.

So I got 50k back in my pocket from a flip, I’d also been collecting cashflow this whole time, and putting away my Air Force savings, so I’m still pretty cash-heavy at this point. 2015 rolls around, and that’s where I kind of ramp up the flipping a little bit. I think I did four that year, in 2015. All single-families. Those were kind of smaller deals, probably about 25k-30k for the profit.

Joe Fairless: How many did you do that year, roughly?

Jeremy Porto: I think it was four that year.

Joe Fairless: Okay.

Jeremy Porto: [unintelligible [00:16:03].16] the cash back into my pocket. Then we start getting into kind of the moving around part of — like I said, my wife’s active duty, and we constantly bounce around at different places… So I wasn’t buying a whole lot of rentals right then, and then it just kind of exploded I would say probably ’16 into ’17 – that’s kind of really when I started buy-buy-buying. Like I said, I bought that other fourplex, where that guy came up to me and said “Hey, do you wanna buy these two?” So that was three fourplexes in the span of four months maybe.

Joe Fairless: And you got that with equity from the flips that you had earned, and the other methods’ income… Okay.

Jeremy Porto: And that does remind me – in there I sold that duplex from 2013, 1031-ed from the one duplex into the two new fourplexes that the guy was selling. That was the moment when I kind of realized, “Hey, it’s not necessarily the best thing to hold onto these forever.” That’s when I started becoming flexible.

I had planned to hold that duplex for a while, but when I saw this opportunity for two fourplexes, and I didn’t have enough money to do the whole thing – at that point I was thinking “How can I do this?”, trying to get creative, and realized “Hey, sell the duplex, take that money – that will cover everything for both fourplexes.” So kind of the appreciation in the down payment that I put into those… And that was when I started including sales in there to then start 1031-ing; that was actually the very first one I did.

Joe Fairless: And when you got the two fourplexes, now you’ve got a portfolio – does that lead us to basically today, where you’ve got the 40 units, where you’ve acquired those units plus the 13-unit?

Jeremy Porto: Yeah, I came to Colorado, started buying some fourplexes here; I do own two or three… I just sold one today, so I’ve lost track of where I’m actually at as of today… But I own at least two here in the Springs now, fourplex-wise. And I’ll be very honest, when I moved here – this goes back to the flexibility – my intent was buy-buy-buy fourplexes. Well, I kind of see that the numbers here work, but they’re not phenomenal, and can I make my money work harder elsewhere? The answer is yes. So I just sold a fourplex today, I just closed on it this morning. I’ve got another one that I’m probably going to list in the next week or so to get rid of, take that money elsewhere… So yeah, I think that kind of brings us to today.

There’s a few more flips, as well… I did a couple of flips here in the Springs… But yeah, it’s a flurry, it feels like, of buy and sell and just reposition to make the money work even harder. There’s a lot of transaction costs, which I don’t like, and that’s part of the reason I got my license, was to kind of help with that… So not only am I making a little money on the buy side with my license, I’m saving a little money on the sell side with my license as well.

Then that led into unintentionally brokering for a lot of people, which I’ve since decided to kind of set aside, because I just think it’s not the best use of my time right now. I need to focus on one thing here… So yeah, flurry is probably the way I would describe the last few years.

Joe Fairless: Yeah, it sounds like it’s really interesting how you’ve maximized the equity that you have, and then rolling into something else. With your 13-unit now, were you able to only use the 1031 from your 2012 purchase to purchase it, or did you have to do some other stuff to acquire it?

Jeremy Porto: Yeah, I had to bring a little bit of extra money, not a ton. That’s a story in itself. I made a little bit of a mistake there with the lending side of things. I was not as aware as I should have been. You know, when you’re under a million dollar loan price, the banks don’t give you the best terms, so I actually had a private lender lined up for that deal. It was gonna be a 90% loan-to-value, a pretty good interest rate – 5,5%, maybe 5,75% – and it was gonna be amortized over 30 years, and I think it was two points… Which, at the time, I was balking at a little bit… But as I realize now, I’ll pay probably close to two points anyways when it’s all said and done.

That fell through at the last minute. I got it under contract, I was ready to move forward… He had actually done a deal for my buddy, very similar. It was 10 units in Panama City; I was near Pensacola with these 13 units, so it’s not like this was something I had made up and was just trying to believe something that wasn’t true; my buddy had done this. It fell through at the last minute, so then I was scrambling that week to find financing to get the deal done, because the property itself and the price itself I thought was phenomenal.

I wound up going through a local bank, and I wound up with a 15-year am, 5,75% interest rate, and I think it balloons at year five… And it just didn’t turn out to be very favorable, really. It was a 70% loan-to-value, so that’s where I wound up bringing the extra money, which you asked me where that came from – I don’t really know right now.

Joe Fairless: [laughs] Yeah, a whole hodgepodge of things… So what was the purchase price of the 13-unit?

Jeremy Porto: 615k. The owners were a kind of mom and pop group of guys that wanted to get into multifamily, so they had mediocre records; that was also a challenge, to kind of pick through that… I think the reason they decided to lend to me — because I had actually gone through (I think it was) four other local banks that said no, and they were saying no only because the records were not up to par.

The reason this lender went with me – I think because the deal itself was pretty good; it was cash-flowing nicely. The expenses were relatively low, I think; there wasn’t a whole lot there… And I think they also just liked it was pretty local to them. I guess they’re more of a regional bank, Centennial.

So put all that together and I had a great property with kind of terrible financing, so I think overall the deal kind of works out to be mediocre. I’m still happy I did it, because I’m in multifamily now; I own a 13-unit apartment complex, and that’s just the stepping stone to get even bigger.

Joe Fairless: How did you find it?

Jeremy Porto: That buddy that I told you about that did 10 units – he found it… On LoopNet, of all places. And he showed it to me, he was like “What do you think? I wanna do it…” and we talked about it for a while… I was all trying to help him get it, and then he on his own came to the realization that he just didn’t have the money for it. He wanted to keep some big cash reserves, and this would pretty much deplete him… So I said “Hey man, look, I’m not trying to steal your deal, but if you think that you’re not gonna do this, let me know, and maybe I’ll try to get in on it.” So that’s how that happened.

I wound up calling the seller, and made the connection, and then it was pretty quick after that.

Joe Fairless: What did they have it listed for?

Jeremy Porto: 650k.

Joe Fairless: 650k, and you got it for 615k… Why do you think it was on LoopNet? Because the perception is that if something is on LoopNet, then it’s not a good deal, or something’s off about it.

Jeremy Porto: So as I said, these guys were your sort of mom-and-pop(ish) type owners… I just don’t think they were super-versed in how to dispose of a property in the best way possible… So they were thinking “Hey, we’ll save a buck by not dealing with a broker. We’ll just put it on LoopNet”, which they don’t realize — it has a perception that it does… So that’s how they wound up there.

Now, I don’t know this for a fact, but he was telling me several other guys called him, and that could have just been him drumming up the interest, but… My thought is when I see the expenses, when I see the income, when I see the upside – because that was the other piece that was pretty big for me… I’ve got probably about $100 to $125 of upside in rent increases, and that’s without really doing anything. These units aren’t in phenomenal condition, but they’re good enough right now; they’re average, I would say.

Here was the other lucky part – it was right in the market that I had spent about 8 or 9 years in for the Air Force, so I personally knew that area very well, knew exactly what it was… So when I say there’s $100-$125, that’s from personal experience and knowledge, and having fourplexes there and rentals there already, and knowing that market. So that was the other piece of it, that I really knew the upside.

Joe Fairless: $125 without really doing anything is pretty darn incredible. Sign me up for that too, that’s for sure. Usually we have to put in like $5,000 into the unit in order to do that. Based on your experience, what’s your best real estate investing advice ever?

Jeremy Porto: I was saying this too, and I hear it a lot, that there’s no deals out there… I think my best advice to the Best Ever listeners is don’t be afraid to do the deals that no one else wants. When I moved in Colorado Springs and couldn’t find deals, that’s how I got into the meth house flipping. If you learn that niche well – or any niche; it could be marijuana grow houses, it could be the Chinese drywall, it could be foundation issues… If you learn that and become the expert, people are going to bring those deals to you.

When I was doing the latest meth house, I got on a local news station, they did a piece on me, and from that I got a lot of calls, and people saying “Hey, I’ve got this house, it’s meth-affected”, so I got to be known somewhat – some will use the term “expert” – in the meth house area, so people come to me for that.

The spreads are gonna be bigger, because people don’t understand the property, they’re gonna discount it more than they really should be, because it’s unknown and scary… So I can bid realistically on these places without lowballing fear, and then I get the deal; that’s the ultimate thing, to get the deal, because everybody’s complaining there are no deals.

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

Jeremy Porto: Sure thing.

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

Break:  [00:24:44].09] to [00:25:20].13]

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

Jeremy Porto: You threw me off on that one… [laughter] So let’s go with Emerging Real Estate Markets, David Lindahl. I’ve read a ton about how to buy real estate and all that stuff, but the market itself and knowing about the market I think is really pivotal, so I’ll go with that.

Joe Fairless: Best ever deal you’ve done?

Jeremy Porto: I bought a fourplex here in the Springs, I did a little arbitrage action… I bought it from a Springs seller, sold it to a Denver buyer about an hour away, right off of I-25, the North-South highway that runs between us, and netted 80k without doing anything to the property.

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

Jeremy Porto: Probably what I mentioned before — well, it was not quite on a transaction, but… Having my license and using it to broker deals – if I wanted to be a broker, that’s great… But that was not the best use of my time. I can do things that are value-add in a better way.

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

Jeremy Porto: Definitely sharing my knowledge. There was a guy that joined my squadron after I left, so I never met him… He reached out to me through a buddy, told him all I knew and everything, and that guy today owns like 20 or 30 doors; I’ve partnered with him several times… It’s just awesome to see. The fact that I was willing to share my time with him, and where he’s at now, it was pretty awesome to see.

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

Jeremy Porto: The Facebook page – I put a lot of my real estate activities on there. Facebook.com/jeremyportorealestate. Or they can e-mail me, jeremy.porto@gmail.com. If you’re thinking about getting into real estate, or you just wanna talk about the stuff that I talked about today, reach out to me; I’d love to talk to you.

Joe Fairless: I loved to hear how you went from 2008, buying a townhome with your mom, to today, 40 units, three states; you’ve just bought that 13-unit, you found the 13-unit on LoopNet, and how you got into that from a financing standpoint… And as you said, it’s been a flurry of transactions. You’ve constantly been assessing the equity that you have in deals, and then seeing how you can leverage up into those deals.

I was on a call with a potential investor — I get potential investors e-mailing me, and then I follow up when and we have a phone call before they invest anything, so we can know each other… And he said he was following the Dave Ramsey advice for two decades – or however long; I don’t know how long he was following it, but he’s been investing in real estate for three decades… So he was paying off his homes and things, and he had followed it up until (I think he said) 2012. Then he realized that he wasn’t on the right side of the tax code after that, and he wasn’t leveraging up. He was talking about it more from a tax liability standpoint, that’s why he was looking to invest in apartment syndications… But it’s also what we didn’t talk about in that conversation – he and I didn’t talk about – leveraging up and using debt as your friend, and to continue to optimize your portfolio along the way, versus just paying things down, and that’s exactly what you’re doing.

I really enjoyed hearing your approach, and how you got to where you’re at, and the period of time in which you’ve done it. Thank you, by the way, for everything that you were doing for our country, and your wife is doing for our country; I really appreciate it. I hope you have a best ever day, and we’ll talk to you soon.

Jeremy Porto: Definitely, Joe. Thank you. Have a good one.


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Best Real Estate Investing Advice Ever Show Podcast

JF1005: Why He Prefers to Buy Shopping Centers Now with Danny Newberry

He’s not interested in residential, and believes that the evolution of an investor starts with a single family house and turns into commercial shopping centers. He also turned a shopping center around in as little as eight months, that’s fast! Hear how he did it!

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Danny Newberry Real Estate Background:

– Founder and president of Value Investment Group, a commercial real estate investment firm
– His firm has acquired more than 20 properties since its inception in 2008 acquiring assets in 7 states
– Owns over 250 rental units and now invest in high end commercial deals and retail shopping centers
– Based in Colorado Springs, Colorado
– Say hi to him at http://valueinvestmentgroup.com/

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buying shopping centers

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 investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff.

With us today, Danny Newberry. How are you doing, Danny?

Danny Newberry: Good, how are you doing, Joe?

Joe Fairless: I’m doing well, and nice to have you on the show. A little bit about Danny – he is the founder and president of Value Investment Group, which is a commercial real estate investment firm. His firm has acquired more than 20 properties since its inception in 2008, and that’s across seven states. He owns over 250 rental units and now invests in high end commercial deals and retail shopping centers. Based in Cedar City, Utah – with that being said, Danny, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Danny Newberry: Yeah, thank you, Joe. Just to clarify and give everybody enough data, I have officially moved to the beautiful state of Colorado. I am officially a Colorado Springs resident, and originally from Southern California. I was born in Mexico, my mom is Columbian, my dad is American, and I couldn’t tell you how I ended up being born in Mexico… But I’m here now.

I’ve definitely had the privilege of investing as a young guy. I’m 28 years old now, and I’ve been able to accomplish some pretty good things based on the mentorship that I’ve had and the people that I’ve had in my life to help me and propel me down my path. It’s been a lot of fun, I’ve been enjoying the ride, I’ve been having a good time, and again, thanks for having me on.

Joe Fairless: What are you buying now?

Danny Newberry: I’d say my core focus is shopping centers. I’m looking across the spectrum of [unintelligible [00:03:48].07] commercial, so retail shopping centers, medical office buildings and industrial complexes… I’ve got a mix of all three right now. I’m really not buying any more apartments right now; I’m a little bit burnt out. They are a little bit more management intensive, but I heard this the other day and it kind of made sense to me – someone told me it’s the evolution of a real estate investor, going from residential to apartments and then ultimately into commercial, and I wanted to wrap my head around the different sectors and learn them, so that way I could identify opportunities in different marketplaces across different asset classes, so that’s what we’ve been doing for the past couple years. I’d say over the past 24 months I’ve really focused on the commercial side.

Joe Fairless: Tell us about a shopping center you’ve bought.

Danny Newberry: I actually just bought one last week here in Colorado Springs, a little over 20…

Joe Fairless: Congrats!

Danny Newberry: Thank you… Yeah, I’m very excited about it. It was a small shopping center in a neighborhood with an outparcel. It’s a little over 20,000 square feet. One of the names [unintelligible [00:04:48].14] other than that we have some mom and pops in there. Just signed a lease with a cryotherapy group, and we’re also working on a distillery right now, so that would be a pretty interesting tenant to get in the shopping center if we ultimately commence with them.

We bought that for about 700k, so it was only $30/foot when neighborhood shopping centers are going for about $125-$150/square foot. Our goal on this deal is a flip, it’s not one that we are necessarily interested in holding in our portfolio long-term. Our goal is to get in there — we’re gonna put a new roof, a new parking lot, a new facade, new signage and stabilize the rent roll, and then put it back on the market probably… I’m hoping to get it back on before the end of the year, we’ll see.

Joe Fairless: Wow, what a quick turnaround… That’s less than 12 months. That’s an eight-month turnaround.

Danny Newberry: Yeah, we identified this opportunity and we already had a team in place in Colorado; I bought a medical building about a year-and-a-half ago out there, so we already had boots on the ground, had a good team, a good leasing agent, my construction guy is ready to go… So this one – we looked at it, we looked at the numbers… Rents were below market, everyone was either on month-to-month or very short-term leases. We were able to renegotiate a few of those already, and we’re bringing them up to market.

The previous owner – I hope he’s not listening, but he did a terrible job of managing this place and left so much meat on the bone, and that’s what we focus on… It’s a value-add opportunity, so our goal is to have it on the market for about three and a quarter at the end of the day.

I’ve got a bet with one of my friends that we have to buy it, fill it up, stabilize and flip it this year, and sell it for at least 2,5 million. If we can do that, then I get a free ski trip to any ski resort in Colorado, so I’ve gotta make it happen now.

Joe Fairless: [laughs] You said you’ll probably put it on the market for 3,25 million, right? But you wanna sell it for 2,5. Okay. And you bought it for 700k. How much will you put into it?

Danny Newberry: I’m looking to put about a quarter million into it. My roof’s about under a hundred, parking lots about 55k, monument sign is about 30k and the facade is gonna be about 50k.

Joe Fairless: Will you say those again but slower? Because I’m taking notes, I wanna write that down.

Danny Newberry: So we’re under a hundred on the roof – it actually came out to 88k (I’ll give you specific numbers), brand new roof. Then we’re going to do the parking lot, which is 52k. We’re gonna do a new monument sign, it’s gonna be about 30k, and then the facade work is 44k.

Joe Fairless: So all in about 250k, as you mentioned.

Danny Newberry: [unintelligible [00:07:32].07] tenant improvement… Like I said, I just signed a cryotherapy groups – they freeze your body below the head, for inflammation. We’re doing about 26k in tenant improvement for them, and they’re signing a ten-year lease. A quarter million is our capex, and then we’ll be anywhere from another hundred to up to 200k in tenant improvement, to basically stabilize the center.

Joe Fairless: How many spots do you have to get filled between now and when you put it on the market?

Danny Newberry: We had two tenants before we closed the shopping center, and as soon as we closed, we signed a barber for about 1,000 square feet at $12 triple-net; that means the tenant pays for the taxes, insurance, and common area maintenance, and that’s another reason I really loved commercial property, our triple-net.

Anyways, we signed them, and then we ended up signing, like I said, the cryo-group at about $13 triple-net. We’ve only got one space available now that’s about 4,000 square feet, and that is the one that we’re talking to a distillery about.

Joe Fairless: I’ve interviewed successful investors who focused on shopping centers, and they say it’s desirable to have destination tenants, so companies that you actually have to drive to, versus you could buy online. Clothing store – not a destination tenant; you can buy on Amazon or Macys.com or whatever, whereas a barber shop would be a destination tenant, so would be the cryotherapy, because you actually have to go there to get your whole body frozen, and other things. Do you take that into consideration when you’re flipping a product?

Danny Newberry: Absolutely. It’s all about having a good tenant mix, and that’s what we look at. We look at what are the demographics to this area, what’s missing, who needs to be there, who’s gonna do well? So when we look at the tenants, especially when we buy and we have an area that we know that’s really strong, that there’s good demand, good absorption for space, we can pick and choose the tenants that we want in our center, so we absolutely look at that. We’ll look at their financials, we’ll look at their previous history, current locations, and then we look at the business and look at everybody else’s in our center and say, “Hey, is this a good fit for who’s in there now?”

Joe Fairless: After eight months, let’s say things — congratulations, everything has gone perfectly according to plan; you’re on track to getting your ski trip. Why wouldn’t you do a cash-out refinance on this, instead of selling it?

Danny Newberry: That’s a great question, and the biggest reason is we do have properties that we hold on long-term. I’ve got three shopping centers that [unintelligible [00:10:20].00] This is the reason I’m holding the other shopping centers versus this one – I’ve got three shopping centers that are extremely well located. One is a Walmart [unintelligible [00:10:29].11] shopping center, all national tenants in there, and then I’ve got another [unintelligible [00:10:34].27] to a Home Depot and a WinCo Foods and Pepco, and then all the tenants around that are all national. My neighbor to the right of me is Carl’s Jr., to the left of me is [unintelligible [00:10:43].24] behind me is Big O Tires… These are locations that I don’t think that there’s gonna be much, if any, high vacancy, or an area where let’s say the demographics are trending downwards. Those are areas where the demographics are trending upwards, the population is growing, the income is growing for the residents in the area…

But on this center, this is more off the main road. Academy Boulevard, the one we’re talking about now – it doesn’t have the traffic counts that I would necessarily like to hold on to a property long-term. It’s under 15,000 traffic count, but it’s definitely a destination neighborhood shopping center.

If you live in the area, you know about it, but it’s not necessarily like you’re picking up traffic from people going from one end of the town to the other. In the long-term view this property is older, this property is off the beaten path, and it doesn’t necessarily fit with our business model of the type of tenants that we want in there. We’re not gonna have Verizon and Subway; some of the other ones could be Einstein Bagles and those type of tenants that are a little bit more high-quality.

Joe Fairless: That makes sense, location and age… But in that order, it sounds like location first and foremost, and then age – it doesn’t quite fit your long-term hold. You’ve done one of these turnarounds before, obviously… What do you know is going to come up as you start doing the roof and the parking lot, the monument sign, that you’re gonna have to address? You just know, you’re expecting this issue to come up, based on your experience?

Danny Newberry: Well, first of all, tenants. No one’s happy if they have to have all their customers park out on the streets or on the other half of the parking lot and have to go around, and a lot of times you’re gonna have a lot of noise when you’re doing the parking lot or doing the roofs or doing the facade, and those types of things. So it’s going to be an interruption to our tenants, and we always wanna make it as painless as possible, so we always shoot to do a lot of these things, if we can, on slower days. If Sunday is a slow day and most of the tenants are not open for business, that’s a great day to do it. Otherwise, Mondays, Tuesdays and Wednesdays seem to be a little bit slower, especially at this shopping center, so we would try and get everything done for the big stuff or the loud stuff, or where we need to actually cone up certain areas where they can’t go into – we’ll do it on those slower days.

Joe Fairless: That brings up a good point – is there some sort of clause that they have, or have you heard of any tenant going after a landlord for lowering their sales because of ongoing improvements that hurt them and maybe didn’t allow them to pay rent, or something like that?

Danny Newberry: You know, I haven’t… I’ll tell you what I have done though in the past – when we know we’re doing something like this and it is disrupting their business, we want to create a really good atmosphere with our tenants and we wanna make sure they’re taken care of and they don’t feel like we’re not addressing their needs. So a lot of times we’ll talk to them, we’ll figure out “Hey, what day works best?”, we’ll have our contractor involved in this conversation, and a lot of times at that point everyone’s happy.

If they’re not, what we’ve done in the past is maybe we’ve done like “We’ll give you a couple days free off your rent. We’ll give you a pro rata for five days off if we’re really having to cut your customers in half of those five days.” A lot of times they’re gonna be like, “Oh, that’s great. That’s fantastic.” I’ve really only had to do that once, but you can stop that by just getting everybody involved and letting everyone voice their concerns, and then addressing those issues.

Joe Fairless: When you’re evaluating a shopping center and you talk through the rent per square foot and what you buy per square foot – I’d love for you to just recap how do you evaluate if you are going to purchase a shopping center or not?

Danny Newberry: We look at it from three different views. One is who are the tenants, what do their leases look like, how long are they going out, what kind of strength do they have, how long have they been in business? We look at it from that standpoint.

Then we look at it from the cost approach – if I had to build this brand new, what’s it gonna cost? I’ve gotta buy the dirt, I’ve gotta build it, I’ve gotta fill it up. Then the other thing is looking at it from a cap rate and price per square foot comparable. On the comparables you look at what are prices going for shopping centers that are similar to this property in this area, and then also what are the cap rates that people are paying in this area for this type of product. So we’ll look at it from all those different aspects, and then we can say “Okay, this is about a 7-8 cap marketplace (I’m just giving you an example of this shopping center)”, and the shopping centers, depending on your tenants, will adjust that cap rate.

Then looking at the price per square foot, everything that’s selling in the immediate areas, between 125-150 is the most average price per square foot that things are selling for, and then looking at it from the standpoint of who your tenants are… We’re gonna have more mom and pop type tenants. We do [unintelligible [00:15:50].06] and then we’re got a children’s feeder where parents bring their kids and drop them off and they are doing dance and theater stuff and all that. Then we’ve got the barber, we’ve got the cryo, we’re looking at doing some other tenants over there that would make sense…

At the end of the day, these are mostly gonna be your mom and pop tenants, so when we look at it from a disposition standpoint, we’re gonna be on the higher end cap rate, so we’re shooting at an 8 cap, and we’re probably gonna be between 2,5-3 million on a disposition when we look at what the price per square foot is and what the cap rate is gonna be. So looking at it at the low end on a price per square foot of $125/foot on a sales price is 2.6 million. Looking at it at $150, you’re above 3 million. So it all just comes down to who we end up lending, what those leases look like, and obviously, what we do to the center, as well: doing the new roof, the parking lot, the facade and signage… That increases the value for the tenants, but also for buyers.

Joe Fairless: What type of financing do you get on these properties? On this one in particular – we’ll keep staying specific with this deal.

Danny Newberry: This one we just bought cash because it was an easy takedown, 700k; it really didn’t make sense to get financing when we knew we were going to flip it in a year. And even if we had to hold it, that’s fine, it’s gonna cash-flow like crazy, but at the end of the day we do a little bit of both. I’ve got partners that like to go into long-term deals for the cashflow and the depreciation, and on the other side I’ve got deals where it’s like “Hey, this is a perfect one for us to pick up, fix it up, stabilize it and turn it around and make a nice profit.”

Joe Fairless: The 700k – is that investor cash, or just you and your company’s cash?

Danny Newberry: On that one I’ve got two partners. What we did is we basically split it up to where we were able to take down the 700k, and then we had another couple hundred thousand that we needed for our tenant improvement dollars and our capital improvement budget.

Joe Fairless: And how did you structure that with the two partners?

Danny Newberry: I used syndications, and just like you, Joe, I started out in this business and really I had to build up an investor pool. I started off with friends and family, and then that started to morph into more relationships as we grew, and right now I’ve got about two dozen investors that I work with that come into our deals. Usually, it’s our a little bit bigger capital raise deals that I’ll have several partners on, but on this one specifically it was just the three of us total. We did a [unintelligible [00:18:27].06] we just did the operating agreement, subscription agreement, questionnaire, and ended up opening up a banking account in the name of the LLC that we purchased it in, which was a brand new entity formed in Colorado, and everyone comes in with their own entity; it’s for the equity and their ownership.

Joe Fairless: Okay. And do you do a proffered return, or what is your investor partner structure?

Danny Newberry: No, we don’t really do preferred returns. What we do is we just do “Hey, look, here’s the deal, X amount. We’ll get you X amount of ownership in it.” Most of our deals we’ll do [unintelligible [00:18:59].23] and a lot of people like that bonus depreciation or that depreciation that you can give out to people that are either considered full-time real estate investors or can use it in other faculties of their W2’s. A lot of times when we set these up, each deal can be a little bit different, but for the most part they’re pretty cut and dry at the same time.

Joe Fairless: Based on your experience, for a Best Ever listener who’s interested in shopping centers in particular, what is your best real estate investing advice ever for them?

Danny Newberry: I think the best advice for the Best Ever listeners would be make sure that you have really good mentors in place. I feel like I wouldn’t have been able to do all these different asset classes, from residential, multifamily, retail, office, medical, industrial – all these asset classes, without having professionals and people there that can help me on my deal when I’m going through it, and being able to ask the right questions, and being able to have people when things come up and you’re not sure exactly what the next move is.

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

Danny Newberry: Yeah.

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

Break: [00:20:14].00] to [00:21:07].29]

Joe Fairless: Best ever book you’ve read, Danny?

Danny Newberry: Best ever book I’ve read – I’d have to say Think And Grow Rich. I know that’s not very original, but when I think about it… I read it every year, that’s how good it is. And I can’t say that about a lot of books, that I read that often.

Joe Fairless: Best ever deal you’ve done?

Danny Newberry: We’ve bought a medical office building and we were able to turn it and stabilize it in under a year, and then we sold it on month 13th and profited over a million bucks on it.

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

Danny Newberry: Right now I donate to three charities. I really enjoy giving back, but one thing I’d like to do more of is mentoring, and giving people skills that I’ve learned over the past few years.

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

Danny Newberry: A mistake that I’ve made on a deal… Trying to be my own attorney. Don’t ever try and be your own attorney, always hire professionals. Always make sure that you have qualified people on your team to review all your documentation and to help you from A to Z on any of your deals.

Joe Fairless: What’s the best way the Best Ever listeners can get in touch with you?

Danny Newberry: They can go to my website, which is www.valueinvestmentgroup.com, or they can reach out by phone at 435-590-9095.

Joe Fairless: Shopping centers – that’s the focus of our conversation, and you walked us through a case study for the shopping center that you’re doing, as well as some previous examples of deals that you’ve done, what you’re expecting to work through, like any time there’s interruptions with capital improvements on the exterior – there’s gonna be some interruptions with tenants, so doing it on slower days, as well as just walking through how you run the numbers and the things you look for on evaluating the shopping center, the tenants, the cost approach if you were to build brand new again (or rather the replacement) and the cap rate and price per square foot comps. Talking through the type of tenants that you’d like to have in there, and the strategy that you use, why do a refinance versus a long-term hold, and in this instance on the deal we talked about it had to do with the location first and foremost, then also the age – that’s why you’re looking for an exit versus a long-term hold.

Thanks so much for being on the show, lots of great information. I have you have a best ever day, and we’ll talk to you soon.

Danny Newberry: Thank you, Joe. I appreciate it.


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