JF2300: Flipping To Multifamily With Terrance Doyle

Terrance is a full-time real estate investor who founded “The Value Add Real Estate Company” called VareCo. He started his real estate journey in 2008 with two teammates from college, and in 2014 he branched off and started his own company VareCo.

Terrance Doyle Real Estate Background:

  • Full-time real estate investor and founder of “The Value Add Real Estate Company” VareCo
  • Started investing in 2008 with two college friends
  • Portfolio consists of $60M in single-family and Multifamily under management, approx. 500 apartments, and flipped 600 single-family homes from 2008-2014
  • Based in Denver, CO
  • Say hi to him at: www.thevareco.com 
  • Best Ever Book: Best Ever Syndication Book

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Best Ever Tweet:

“With perseverance and discipline you can do anything” – Terrance Doyle


Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking with Terrance Doyle.

Terrance, how are you doing today?

Terrance Doyle: I’m doing super-well, Theo. I’m excited to be on. This is one of the podcasts I listen to on a regular basis, so I’m really excited to be here.

Theo Hicks: We appreciate you listening and thank you for joining us and looking forward to our conversation. We’ll talk about raising money as we were just talking about before we started the show. But before we get into that, let’s go over Terrance’s background—he is a full-time real estate investor and founder of “The Value Add Real Estate Company” aka VareCo. He started investing in 2008 with two college friends. He did 600 single-family flips from 2008 to 2014, and then transitioned into multifamily, where he now has approximately 500 apartment units. He is based in Denver, Colorado, and his website is www.thevareco.com.

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

Terrance Doyle: Absolutely. So I grew up in Des Moines, Lowa, so just really solid Midwest town, kind of good old America. My mom is an immigrant from Bogota, Colombia. She came to the United States as an exchange student. My dad was a hockey player from Canada, so I like to say they basically met in the middle of the continent from where they both were from. And my dad didn’t end up graduating college, and my mom, English was our second language; even though she did graduate, she was just a full-time mom.

So I just came from a really solid, where we were a middle-class family. But what I feel like I got from growing up was just really great core values of just work ethic, integrity, and just being really self-aware of what was going on around me, and just the amount of gratitude I had for having two really loving parents. I spent a lot of time growing up in Bogota, so I speak fluent Spanish, which has really helped me in real estate. I basically went to school half the year in Bogota from 1st Grade to 8th Grade. I had a really good childhood, was fortunate enough to play college basketball; I like to say that I got paid to sit on the bench and keep the team GPA up to par. So I played college basketball.

And then in college, I started my first company with a couple buddies. It was a franchise, we franchised it and we had some pretty good success. We grew pretty well in the first couple years, so I made a couple bucks. And then in 2008, during the Great Recession, basically, of our lifetime, we started buying foreclosures. I had another college teammate come to me – and this is just an early 2008 – and he was like, “Hey, there’s this opportunity to buy foreclosures.” At the time, I was renting with my two best friends and had no idea what a foreclosure was, I had no idea what real estate was. and I was basically their first investor. We bought a house for $60,000 that I invested, and we sold the house for $96,000, roughly 9 weeks later.

And we were making pretty good money at the time, but I was like, “Wow, that was amazing.” That was like my first taste of real estate. I couldn’t believe how quickly and pretty much easy it was to buy and sell a house and make $30,000+.

So from there, I helped to raise some money, but I was just a third partner. The two guys that brought me in were full-time, they were doing it inside and out, and knew everything. I just really understood the money, so I helped raise the money, helped connect some other operators.

I really had a passion for sports, so in 2009, I became an NBA sports agent and I ended up representing 5 or 6 guys in the NBA, and then 20 to 25 guys overseas, that played in Europe and Asia, and I did that till 2014. And basically, one of the stories I like to share is that my top client that played on several big championship teams and was a really good player, we had made a bunch of money together, and he had a rough season in 2013, and in the summer — I remember waking up in June of 2013 and he had sent me an email basically saying he was going a different direction with his representation, and it broke my heart. This is someone that I had spent so much time with, talked to every day for 5 or 6 years, traveled with… Just as close as you can be to someone.

So that was a really hard time for me, and it really opened my eyes. I was dating my now-wife, we were about to get engaged, and it just rocked my world. And I was basically committed to myself — I didn’t want my income to be dependent on any other person. And that was through a series of events, I ended up deciding to focus on real estate from there. So I branched off from my other two partners. And we had a really great relationship, we still do, but we just kind of wanted to do different things… And that’s kind of where my jump into multifamily started, and just started building it brick by brick.

Then I started investing in Des Moines with my brother and my dad in 2015, and that’s where we have our largest holdings. We have about 400 apartments in Des Moines that we just own ourselves, we don’t have any outside investors there. And then in Denver, we currently have about 200 apartments, and we have started to syndicate in Denver as of 2020. So up to 2020, before this year, I had just funded everything myself and with another partner kind of inside of our company. So we didn’t have LPs, we just had some lenders that lent us money, and a bank, and we funded all the equity. So that’s kind of been my story to real estate. It’s been, I think, the best decision I’ve ever made, and learned a bunch along the way.

Theo Hicks: Fascinating background, by the way. But before I ask you about what you’re doing now with the money-raising, I’m just curious – when you were doing that sports agent stuff, were you also still flipping homes at that time? Were you doing those two things at the same time? Or did you stop flipping and then go into being a sport agent?

Terrance Doyle: I helped to raise money for the flipping, and I was the third partner, I was the minority partner. That’s kind of what funded the sports agency. So anyone that understands sports knows it takes a lot of money to get started. We probably invested close to a million dollars over the course of 3-4 years, from having an office and recruiting… You just spent a lot of time traveling… Basically, recruiting is very similar to raising money, so I think that’s the skill that has kind of translated into what I do now, with meeting with potential investors… But just a lot of time and money on traveling, meeting with families, going to watch their college games, and all that.

So I was still flipping houses. We were doing about 100 a year, and that’s kind of what funded the sports agency. But I was just a minority partner and I didn’t understand it. I didn’t know how to comp a property. I didn’t know how to do construction. I understood basically zero. All I understood was that our returns were phenomenal and you can make a lot of money, but my passion was really in sports and that’s kind of what I focused on. So I spent very little time on the real estate side. But that is what basically made us the most money.

Theo Hicks: Got it. So once you stopped doing this sports agent and you got back into real estate, why did you pick multifamily instead of fix and flipping?

Terrance Doyle: So I did a couple flips on my own… I started from the ground zero, Theo. I even remember calling some of our hard money lenders that we had used during flips, and these are lenders that had lent to us on 300 or 400 properties in Denver, some close friends. I actually introduced them to my partners in 2010, maybe. So these are close friends, and we had done a bunch of deals… And I remember one of the most awkward phone calls was calling them and asking them what their criteria was to lend, and that I was going up on my own… I was basically asking them every entry-level question you can ask. And it was very humbling. And it was kind of ironic and awkward, all at the same time. So I started ground zero, I was meeting with brokers, I was meeting with wholesalers, I had some door knocking going on, and I did about eight to 10 flips on my own, kind of got my feet wet.

I started to learn construction and see that Spanish really helped me on the construction side, so I was able to assemble a team of Hispanic contractors to do the plumbing, the electrical, the framing, the drywall, countertops, the tile… Every single trade. And I was able to build a pretty good crew pretty quickly, and learn — just kind of built an assembly line of doing the same paint, same tile, same materials on every project.

Then it was a buddy of mine actually had a family that wanted to sell four duplexes and a fourplex, and I looked at it just as like 16 small little flips; I was doing 16 bathrooms, 16 kitchens. I was like, “Yeah, let’s do it.” And then I quickly learned that — when we bought it, I think the rents were $600, and when we re-leased it ourselves, we were getting $1,250. So I quickly learned the power of cash flow and the correlation between rents and cap rate, and basically had the equation that every $100 of raised rent in Denver equal $20,000 on the backend of value. So if I was able to raise rents $600, I actually increased the value of that one unit by $120,000. And if I was able to do that four times, I actually made $480,000. So really quickly, I just put it all together and was like, “Multifamily is the best place for me to spend my time and money.” So I still did a couple flips here and there, but by 2015 and 2016, my focus was virtually 100% on multifamily.

Theo Hicks: So you said you started from ground zero – what types of things did you do to kind of educate yourself on this process? You said you were using your own money to do these deals. I know a lot of things that we talked about on this show is brokers aren’t going to necessarily give someone deals unless they know they’re going to close. I know the first deal you got from a friend, but I’m just curious, what were you doing to educate yourself on the process, to kind of build that credibility in the eyes of these brokers and the lenders, and understanding the lending lingo, and things like that?

Terrance Doyle: It’s hard. It took a lot of time and patience. I think one of the things that helped is that I started getting very aggressive in multifamily in Des Moines, Iowa, in 2015. Once I stumbled upon multifamily in Denver, I bought those duplexes for an average of $250,000 and sold them for around $450,000 in the same year, and then we bought that fourplex for $400,000 and sold it for $800,000 eight months later. So I was like, “Man, that was amazing.” But it was kind of a fluke, because it was just a friend of a friend from church, and it was like a family trust estate, and they were selling, liquidating everything, and they just happened to trust us… So that was more of a fluke.

In Des Moines, I started building relationships with a couple of brokers that I knew, that I’d grown up with, and I just said, “Hey, send me every duplex and fourplex”, because that’s what I was used to. ”Send me every duplex and fourplex, I want to look at them.” And I bought my first fourplex in Des Moines for $40,000, and it was a complete dump. I think we had to hire a company that wore hazmat suits to demo it and clean out the sewer line. It was really, really bad. I actually just sold that deal for, I think, $300,000 this year. So we had stabilized it, collected cash flow, we had done the whole thing for 5 years.

So I just started out doing those smaller deals and just really trying to buy very distressed, very heavy value-add, just for the sake of very low risk. Just buying it, what the renovation cost was going to be, what the rents were going to look like…

So I started out like that, with just local real estate brokers just on the MLS. They were friends that knew I had the capital close on $40,000, $50,000 or $60,000 properties… And then actually, the first broker from CBRE that I spoke with was in 2016, and he saw me post a project I’d done on LinkedIn… And he was a new broker. I think at the time, he might have been 23 or 24. Now he’s one of the top guys in the Des Moines. And we just built a relationship from there, and he brought me my first 42-unit in Des Moines. We ended up buying that for $20,000 a door. It was pretty distressed, it was actually a hybrid. It was an extended stay, and it came with some vacant land and a restaurant… It kind of operated like an apartment, and they just paid weekly and bi-weekly, so I just knew that I could figure it out. And then from there, we worked on a couple other deals, we ended up closing a 50-unit a year later, because he saw me close on the 42 unit…

And then from a banking standpoint, what I’ve found is that local lenders are actually very willing to help educate you, and I think that’s one of the tips – if you’re ever in doubt, local lenders can really help you with underwriting, they can help you with connecting with other brokers… So I just basically found a couple of local banks in Des Moines and said, “Hey, this is what I’m trying to do. What would it look like? What kind of loan would you give me for this kind of property? How much cash would you need? What would you want to see?” And they were very helpful in educating me kind of along the way… And I just think it’s one of those things where you’re crawling, then you’re walking and stumbling, and then you’re stumbling less, and then you get to a nice little jog, and then you just run. You’re constantly growing and evolving.

Even now, when I’m speaking with agency lenders, I’m still learning; it’s just a different conversation, there’s different terms with non-recourse loans versus recourse when you’re dealing with local banks… And there’s constantly a learning process, but I think that local banks are really friendly. It’s just a very easy place, I think, to learn, is dealing with local banks. I found that to be a safe place, I guess, in the industry to get help and to learn and to really grow your acumen.

Theo Hicks:  So kind of transitioning into now… I think you said you met the CBRE broker in 2015,  you said?

Terrance Doyle: Yeah, 2015, he reached out to me. Yeah.

Theo Hicks:  Okay. So that’s when you started doing kind of your bigger deals for the past five years, that you were funding all of your own money. And then now you’re transitioning into raising money. So why did you make that decision, unless it was just to get more money? And then maybe walk us through how you’re raising money, where you’re finding people, what types of things you’re saying to them to get them to invest, maybe how much money you’ve raised so far, things like that.

Terrance Doyle: So one of the things I’ve learned this year, Theo, is that I think I was afraid to raise money on deals in the past, and on larger multifamily… Because I wasn’t really sure how it was going to turn out. I still thought things could go bad, and I don’t really want to lose anyone’s money. I’d rather risk my own. So from 2016, 2017, 2018 and 2019, I bought and sold hundreds of apartments in Denver and Des Moines just with my own capital and my partner, and we did well, and I think I got more confidence.

And then as I was posting, I’ve really enjoyed connecting with people on social media. I’ve been able to do some things with Bigger Pockets here in Denver, and I’ve been on numerous podcasts here locally in Denver. So I think just, you know, being able to post and to document the story and the process of, “Here’s what it looked like when I bought it, here’s what I put into it, here’s what the rents are…” I’m really passionate just about — coming from where I come from, with immigrants and a low-income family, and being been able to create really massive amounts of cash flow and equity and net worth, that I want to help other people do the same thing, because I think that’s one of the beautiful things about real estate, is that anybody can do it, if you have the amount of determination and discipline, anybody can do it. It’s one of the incredible things about our country and real estate in general, is that there’s unlimited opportunity for everybody. So I’m really passionate about that. So I’ve just been documenting basically my journey since 2016.

Throughout that journey, there’s a bunch of people that have contacted me and said, “Hey, if you ever have a deal, we’d love to invest.” I never had the structure, I never knew how to structure it, I didn’t have legal documents, I didn’t really want to deal with attorneys… And honestly, in my own world, I just was moving so fast. I didn’t really have the time to sit there and underwrite a deal as if I was having to sell it to other people, and bring on investors, and the subscription docs, and all the things that are needed when you’re going to do it the right way as a syndication.

So I had a mentor that saw me grow with doing these projects, and he had wanted to invest… I think the first time I met him was in 2017, he was an Ex-Morgan Stanley guy. And he, as a friend, just came alongside me and said, “If you ever want to grow and take this to the next level, outside of this mom-and-pop thing, and you want to build a real company that’s sustainable and that outlives you, and that has real income and you can hire a team, you’re going to want to be more of an asset manager, as opposed to just an operator.” And I didn’t really understand what that meant at the time, and slowly but surely over this past year my eyes have really been open to what that looks like as far as looking at myself as more as an asset manager now, as opposed to just purely a multifamily operator.

So he really helped me open my eyes to what that looks like…. And I would say that the first deal that I syndicated was an $845,000 deal in Denver. It was a six-unit. It was an off-market that ended up going to-market. We tied it up maybe like a week before it went to market. And it was $845,000, it had washers and dryers in the units… I had just sold a 22-unit down the street. I’d bought it for $2.4 million and sold it for $3.7 million within 16 months, with my own money.

So I knew the area, I knew the tenants and I knew what the rents were going to look like, I understood the construction of the building, it was the same builder, same kind of building, garden-style, two-level, brick… This one actually had larger units and had washers and dryers in the unit, so I even felt more confident about the rents. So we underwrote it really conservatively, basically the same rents as the building I had just sold, even though these were larger units and had washers and dryers… And we put together a deal memo, and I sent it out to about 20 people and didn’t get any responses. So I was like, “Whoa, what’s going on here? This is a killer deal.” So then I actually had to pick up the phone and I called six people and five out of those six invested.

So when I walked them through the deal, I told him what was going on… The average investment was $50,000, so I raised it and I invested as well. So I think the total raise was $250,000. And we’re actually under contract — so this will be the first indication I’ve purchased and sold… And I was just doing something that I knew I could sell quickly to get confidence of investors to perform, to get some audited financials out there that I could show… Because over the last 5 years, even though I have numbers of properties that I’ve purchased and sold, it hasn’t been audited. We haven’t had really strong bookkeeping, because it’s been our capital. So I wanted to have something I could perform in a short amount of time, get some financials that were verified, and to get confidence of people and to be able to document that process. So we’re under contract at 1.23, so it’ll be roughly a 35% IRR, and it’ll be a really good deal for people.

So that was the first deal that I did. And then since then, I’ve done a $10 million 95-unit in Denver, we’ve closed on a 25 unit, we are closing on a 17 unit, and then we’re working on a 400 unit deal right now that’ll be $25 million; that’ll be the largest raise.

So to date, we’ve raised roughly $12 million of LP capital and we’ll probably raise another 10 by the end of the year.

And it’s been hard. It’s not sexy. It’s very humbling. Actually, two or three weekends ago I had one of our largest investors call me and tell me he was going to pull out of a deal that we were set to close two weeks later, and he had committed $500,000. He called me and just basically said he was really nervous about the pandemic, he was unsure about the market moving forward… He really believed in me, and he’s invested several million dollars in other deals with me, so we have a really healthy relationship… But he basically just said, “Look, I’m really worried. At my age, I don’t want to take unnecessary risk. I don’t think this thing’s getting any better, and I’m going to pull out and I want to give you enough time to go and raise the money and fill my spot.”

So there’s been a lot of hard things that come up, especially during a pandemic, raising money when people feel like the world is crashing, and there’s all these negative headlines that only makes it even more difficult. But I think net-net, it’s been a great learning experience to really force me to sharpen my pencil, get better at underwriting, get better at managing people…

Now we have a staff, we have a full-time CFO, we have a full-time bookkeeper, I have a full-time project manager, construction manager that’s on-site all day, we have a girl that’s in the office every day, she’s kind of the office manager. And so it’s allowed me to hire quality A-players that are really talented and build a team so that we can execute better and do more deals.

I think it was a really great transition, but I don’t think I could’ve done it without the experience from the last 5 years of doing it with my own capital and having that confidence that I can get through virtually anything, with tenants or the city or seller. There’s just so many little wins along the way that give you that confidence to sit in front of someone and just say, “Hey, look, I can execute on this. You can trust me with your capital.”

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

Terrance Doyle: The best advice I think is perseverance. With perseverance and discipline, I think you can do anything. And that’s kind of have been my story.

Theo Hicks: Alrighty. Are you ready for the best ever lightning round?

Terrance Doyle: Let’s do it.

Theo Hicks: Alright.

Break:  [00:23:11] to [00:23:55]

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

Terrance Doyle: Disclaimer, you guys didn’t pay me to say this, but a year ago, I read The Best Ever Syndication Book, and I’ve probably given that to 6 or 7 people. And I think anyone that wants to get into multifamily, that’s the best syndication book out there. I think, from an entrepreneurial standpoint, my favorite book is Shoe Dog by Phil Knight. It’s his autobiography on Nike. So I’d say those are two of the books that have, in the last year or two, really made an impact on my life.

Theo Hicks: Well, we appreciate that, thank you very much. If your business were to collapse today, what would you do next?

Terrance Doyle: I think I would still do something in real estate, but I think parallel to real estate. I’m very passionate about education, and my brother and sister graduated college with six figures in debt and they’re still paying that off, and they actually work for me full-time now. So I’ve just seen the damage that having debt does to being able to have financial freedom and invest in real estate, so I’m really passionate about education. I think I would want to do or build some kind of trade school where we train people on real estate, or even plumbing, electrical, HVAC, and allow people to create a really strong income without having so much debt getting out of college.

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

Terrance Doyle: I don’t know best deal… I’ve done some really good deals. I think my favorite deal is one that I spent three years sourcing in Des Moines. It was in an area that I grew up in, pretty close to downtown. It was a 52 unit deal. I actually had it under contract in 2016, and then I just didn’t understand a deal that complex at that time, so I terminated it. And then afterwards, I was like, “Dang it, that was a killer deal.”

So we ended up purchasing it in 2018, and I basically bought it for $1,2 million. It just appraised for 2.6. I will be able to pull all the capital out; it net cashflows after debt and management, everything, about $12,000 a month. So not only was it a great financial deal, but it was also just a great story of perseverance and staying with the seller and really trying to convince them that we are the right buyer. And it’s an area that I really believe in, in Des Moines. So that’s a deal that sticks out.

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

Terrance Doyle: My wife and I are very involved in our local church. We’re really passionate about our faith and we specifically work with an organization called The Denver Dream Center. We try and help kids that are at risk or come from unhealthy homes, and those are things we’re really passionate about.

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

Terrance Doyle: I’m pretty active on social media, and I have a show on YouTube with Bigger Pockets that basically highlights a lot of our deals. So you can find me on YouTube, you can find me on LinkedIn or Instagram, and it’s just @TerrenceDoyle, my name.

Theo Hicks: Awesome. Terrance, thank you so much for joining us today and walking us through your journey. I think the biggest takeaway people are going to get – because you went into so much detail on how you started, how you got to where you are today – that is really just a grind.

You said your best advice was perseverance and discipline, and you can do anything. And you kind of showed us there really is no shortcut; you have to take it one step at a time, from doing deals with your own money yourself, to educating yourself, to eventually getting to the point where you’re confident enough to raise money from people.

More specifically, you talked about a great way to get education is from local lenders. You can ask them questions about what they’re able to do for you funding-wise, types of financing they have, what they need from you. You said the brokers are a good source for learning how to do things like underwriting, or ask them to send you every deal, so you can learn how to underwrite, and at the same time building that credibility with them.

You talked about the importance of a thought leadership platform, documenting and posting what you’re doing. You met the first broker contact that way, from a LinkedIn post that you did. And you talked about how you generated a lot of interest from investors from your YouTube documentation of your journey.

And then lastly, when you talked about how you were fearful of raising money at first, but doing deals yourself with your own money and doing deals successfully gave you a lot more confidence to be a lot more comfortable raising money from people and using their cash… In addition to the conversation you had with your mentor about if you really want to grow and get big, you have to focus less on being the operator and more of the asset manager and working on the business, instead of in the business.

So I really appreciate our conversation. Thanks for joining us, and Best Ever listeners, as always, thank you for listening, have a best ever day and we’ll talk to you tomorrow.

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JF2292: Denny’s To Real Estate Investor With Dwan Bent Twyford

Dwan started as a broke, single mom who had been fired from Denny’s. She now heads up “investors Edge University” –  A company that specializes in training new and seasoned investors in a wide range of real estate investing techniques through live workshops, weekly webinars, a member site, coaching, and seminars.

Dwan Bent-Twyford  Real Estate Background:

  • Full-time real estate investor who started out as a broke, single mom who had been fired from Denny’s
  • Manages “Investors Edge University”
  • Portfolio consists of over 2,000 flips
  • Based in Denver, CO
  • Say hi to her at: www.dwanderful.com 
  • Best Ever Book: Real estate podcasts


Click here for more info on groundbreaker.co

Best Ever Tweet:

“Stop over-preparing, and just go for it” – Dwan Bent Twyford


Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking with Dwan Bent Twyford.

Dwan, how are you doing today?

Dwan Bent Twyford: I’m doing so good. I’m excited to be here.

Theo Hicks: Well, we’re very excited to have you. Thanks for joining us. Looking forward to our conversation. A little bit about Dwan’s background—she’s a full-time real estate investor who started out as a broke single mom, who had been fired from Denny’s. She manages Investors Edge University and has done over 2,000 flips. Based in Denver, Colorado, and you can say hi to her at her website, dwanderful.com, which I had said before we began, amazing website title.

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

Dwan Bent Twyford: Well, I really started off really truly as a broke single mom. I got married, and when my daughter was only eight months old, just eight months old, her dad and I had an unexpected split, and I was sort of faced with that decision. “Do I go back to work? Do I try to do something for myself?” What was my thing that catapulted me. And I always tell people – because so many people that listen on your podcast, they’re looking for real estate investing. I was just specifically looking for any job I could do from home and raise my daughter. And as I went searching, real estate investing found me. And I rehabbed my first house. I used to move in, rehab them while I was living there, sell them, move, sell them, move, and that’s how I did it for years and years and years.
Then I started flipping houses, which completely changed my life. And then as things progressed, people started having me teach, and start doing workshops and seminars and writing books, and then here we are today, I’m still doing deals, and podcasting myself, and just trying to educate. My whole goal is teach, teach, teach, teach, teach. Because I tell everyone, “Listen, if a broke single mom like me with no education, no nothing, could literally have been fired from 15 jobs ahead of that, can become a millionaire real estate investor, everyone can do it.”

Theo Hicks: Absolutely. So I want ask a question about the live-in fix and flips. So would you buy them all cash, or would you do the owner-occupied type of loan?

Dwan Bent Twyford: Oh, Lord, let me tell you… [laughs] Now, you have to remember — I mean, you don’t know this. So when I first, first, first started, this was like 30 years ago. So back in those days, and I know people are going to be like, “What? She’s that old?” Any kind of job, any kind of anything, everything was in the classified section of the newspaper. So I was looking in the papers, and going to all these meetings and jobs, and a lot of it was multi-level marketing and things like that. So I happened to meet some people at one of these, and they were investors and they said, “Well, we fix up houses then resell them.” So in my naive mind, I thought, “Wow, I could decorate houses for a living. I love to decorate. This is going to be so easy.” So I had no technology. I would drive to the courthouse, I would handwrite all the foreclosures, use those big city map books, take my child and go door-knocking with a baby on my hip, looking for deals.

Once I found my first deal, I had no idea what to do. I had no experience, I had no real estate license… I literally made a deal with this woman – a deal on a handshake and a hug; that was kind of it – I would move in, because I couldn’t afford to live here and do this. I’ll rehab this house, and when it it’s all done, we split the profit on it. And I did it 100% using credit cards; I lived on full credit cards. I made $22,000 on my first deal, which at that time—$22,000 is a lot of money now, but 30 years ago, that was the largest amount of money I’d ever seen in my entire life.

So my first few deals – I would knock on doors, find the homeowners, and they would move out and I would move in and fix it… And we would just make deals. And I look back, I’m thinking, “Oh my god, what was I thinking?” I would never let one of my students do that now. So I didn’t even have my deals really papered up. It was really by the grace of God that they all worked out; nobody ever sued me, or tried to keep the house, or didn’t want to follow through on it.

So I then started wholesaling, because it was getting harder to find deals, and moving in and out… I was not exposed to hard money lenders yet. We still didn’t even have a RIA in South Florida, so I didn’t have any resources. So I discovered wholesaling, so I started finding and flipping them, finding them and flipping them. So my first few deals, I really worked the deal out with the homeowner, which I would totally not recommend any person doing it that way. If my students did a deal like that and didn’t pay for that thing with debt, I would murder them.

Theo Hicks: Yeah.

Dwan Bent Twyford: It is crazy how I started off.

Theo Hicks: So while you were fixing up the houses that you were living in, at the same time you were still door-knocking, finding more deals and then—

Dwan Bent Twyford: Finding the next one.

Theo Hicks: But the ones you couldn’t do, then you would wholesale those.

Dwan Bent Twyford: Yes. So the first three years, I strictly moved in, rehabbed myself, I fixed them up myself, sold it, moved to the next one. I did that until my daughter got into kindergarten, and I thought, “Okay, I can’t keep moving around now,” and then I actually discovered wholesaling, because a REIA group had started. I heard people talking about flipping houses and I thought, “Well, I do know how to find them. I know a lot of people now, so I’m just going to find them and flip them.” So at that point, I jumped into wholesaling.

And you know, my first year, Theo, I wholesaled 75 houses my first year, because I was a working machine. I was living in these houses, I’m working like day and night, day and night, trying to get them rehabbed. For about the first three years, I just moved and fixed , moved and fixed, and then started wholesaling like a crazy woman. And then, when I would rehab after that, I started using hard money lenders. So I would rehab one, flip a few, rehab one flip a few, and kind of did both simultaneously for even still today.

Theo Hicks: When you say flip a few, you mean wholesale, right? You’d flip the contract.

Dwan Bent Twyford: Wholesale. Yeah, I would wholesale.

Theo Hicks: That’s why I was confused for a second Okay, got it.

Dwan Bent Twyford: I like the word wholesale, too. By the way, all these TV shows have everybody talking about flipping. I feel like a lot of people don’t understand wholesaling anymore, but I still to this today – we rehab a few, and we flip as many as we can still today, because I love wholesaling.

Theo Hicks: So when you originally were looking for deals, you were doing door knocking. How are you finding deals now, and how are you obviously teaching clients how to find deals? What’s the best way right now in 2020 to find deals?

Dwan Bent Twyford: Right now this sounds like a super old-fashioned way, but I still to this day put out those bandit signs. So we find those “I buy houses cash” signs, I buy those, and what I started doing about five years ago is as I would be out sort of driving for dollars, I would see all these vacant properties. Because as you know, once the house is vacant and the bank takes it to foreclosure, that house sits vacant for about two years. And so I started putting my bandit signs in the yards of all these vacant houses. So it’s not on the street corner, it’s not on the telephone pole, it’s not littering and not trespassing; you just stick them in the yards of vacant houses. And then in any given neighborhood, you put a sign in every vacant house that there is, and everyone suddenly thinks you bought the entire neighborhood, and now you’re the go-to person. And people will call you and call you and call you and call you. So even though it’s 2020, I still like to go put signs in the yards of vacant houses. It’s quick, I can get 50 signs out in a couple of hours, and they’ll work for me for months.

Theo Hicks: What’s the message on the bandit signs?

Dwan Bent Twyford: I have a couple. One is obviously just “Cash for your house.” I have one also says “Facing Foreclosure? No equity? No problem”, because a lot of people don’t have equity and we like to take subject to’s. And then I also have some that say, “Owner Financing, No Money Down”, because a lot of the houses that I find, I have people deed their properties to me as a subject to, and then I owner finance them back out, [unintelligible [00:11:20].09] turning them into rentals. I have a lot of owner finance deals going on all the time.

Theo Hicks: I was talking to someone the other day that does the same thing, and that’s a super fascinating strategy.

Dwan Bent Twyford: So good. I tell you what, you can make so much money, so, so, so much money owner financing deals, and especially – -just any market, because there’s so many people that had a bad thing or had some bad credit or has something and the banks don’t want to lend them any money. But whatever that was, they’ve fixed it and resolved it and they’re working, and they really want to own a house again. So owner financing is one of our top ways that we make money.

Theo Hicks: So you buy the house and then sell owner financing, or you buy a house with seller financing and then seller-finance it to someone else?

Dwan Bent Twyford: Yeah, the homeowner deeds it to us, and then we have the deed, the power of attorney, we put it in a Land Trust, we do all those things like that, with the homeowner knowing that we’re going to do that; they sign [unintelligible [00:12:11].25] on that deal and then we let them know that in somewhere in the next 5-7 years, we will get that house refinanced. So their name comes off of it, so they’re free to buy something else later.

So I find a homeowner in distress, they deed the house to me, and then I find a person out there that wants to own a house and I owner-finance it to them. So I basically become the bank; they pay me, I pay the bank. And then we give them five or six or seven years to fix their credit or whatever they need to do, so that they can actually turn around. They don’t purchase at that point, they actually just do a simple refinance on it.

So I get it from the homeowner, I find a new homeowner, I finance it for them, and the homeowner, if they are on the mortgage, I have the deed, I have the ownership and I offer it back out over here as owner financing.

So this person over here has to come up with a down payment, [unintelligible [00:13:03].26] have a good credit, and as they’re making the payments on this owner financing, after a few years they’re able to actually just do a refi, which is easier to qualify for than a brand new purchase. So it creates a win-win for all three of us, because this homeowner that deeded the house to me, every month that goes by and the payment is being made, it’s helping reestablish their credit from all those late payments that they had. I’ve got this house and I’m in the middle, and I have the money, and it’s coming in, and I’m paying everything.. But this person over here is also reestablishing their credit, so they can refinance and own the home outright.

Theo Hicks: As I would imagine, it can be a really good strategy now with the COVID things going on for sure. Maybe you’re able to do even more.

Dwan Bent Twyford: People are literally like, “Here, take my deed, take my house. I’m moving back in with family.” I have people that are inundated with homeowners that are just giving them the houses and walking away.

Theo Hicks: I was talking to someone yesterday too, who does the exact same strategy with actual restaurants and stuff.

Dwan Bent Twyford: Yeah.

Theo Hicks: So it’s definitely a super fascinating strategy. Another question I have is obviously you teach people, and you have different mastermind groups and consulting. How are you doing this now that you can’t actually go and do it in person? Is it just all virtual and are you finding it’s more difficult to do the things over the internet than in person, or was it a pretty smooth transition?

Dwan Bent Twyford: So it hasn’t changed a lot for me, as we do a lot of live workshops for the REIA groups around the country. So obviously, there’s no workshops at all right now, because hotels aren’t letting anyone book the ballrooms and things, but our teaching and our strategies have always been online. But if you are one of my apprentice students, I would talk with you, work with you, with your paperwork, tell you all the things to find a deal. I would help you work with the homeowner, work with the bank on short sales, or whatever. So we partner with people, we split deals with them and such. So none of that has changed for us. We’ve been doing that for 10 years.

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

Dwan Bent Twyford: Honest to God, I know it’s going to sound really, really simple… I’ve been teaching workshops now for over 20 years. I find the biggest thing I find when I’m talking to people in the audience face to face is they say, “Well, I need to take one more real estate course. I need to learn this. I need to learn that,” and they keep using the excuse, “I need more education” before they’ll jump in and do their first deal. And I feel like people need to get past that fear and get past thinking that they might not know what to do, and they need to just jump in, and have someone like me that guides them along so they don’t make a bunch of dumb mistakes, and stop overpreparing. Because people get stuck in this, “I have to have an LLC, I have to have this. I have to have that. I have to have 10 more hours of training. I’m not ready. I’m not ready. I’m not ready.” So I think people need to “Stop.Doing.That,” and just go for it. I would knock on doors with a baby hanging on my hip, with no knowledge whatsoever, and I was able to make it. So if I can do it, they can certainly do it.

Theo Hicks: Alright, Dwan, are you ready for the best ever lightning round?

Dwan Bent Twyford: Oh, I am.

Theo Hicks: Okay.

Break: [00:16:07] to [00:16:49]

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

Dwan Bent Twyford: I have to be honest with you. Recently, I have not been reading books. I have become a podcast addict. So I listen to yours, I listen to many, many, many, many real estate podcasts all the time right now. So I’m trying to get in as many people’s ideas and just all the things, I’m just absorbing it like a giant sponge.

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

Dwan Bent Twyford: I don’t know. If my real estate business were to collapse as far as investing in things, I still would do something where I would help homeowners that are in distress… Because I was that broke single mom, I also lost the house in foreclosure, and I know how that process is so devastating. So I would still somehow work with people in trouble and still try to help them find their way back out.

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

Dwan Bent Twyford: Wow, I have so many 1,000s of deals. I have one deal specifically that I don’t know that it was financially the best deal, but it was one of those deals that was extremely rewarding. I had met a woman, at that time she was actually about my age. I thought she was you know, an older lady. [laughs] She was in her 60’s. But she had a house that was completely paid for, she was doing fine, she was retired, and unfortunately, her son became a crack addict, and talked her into refinancing her house. He was literally coming into her house and taking her TV and selling it, her furniture, and selling things. And by the time I met her, she had not eaten for three days. And her son just controlled her and manipulated her and had her living in her house with a chair and a bed. It was just a really tragic situation.

And I was like, “You know what, I’m gonna step in over and above. I’m going to help you and you’re going to get away from this son of yours.” And I took her, I found her family, I made arrangements for someone to help her and take her. I went and got her, I bought her house, I drove her to the closing. The money, I wired it to her sister, put her on a bus and sent her over to Tampa with her sister, and helped her escape this terrible trap she was in with her own son, and I had him arrested.

And at the end of the deal, her sister called me several times after thanking me that I had rescued her out of this really weird, dysfunctional relationship she was in. And that was one of the deals that stuck with me forever, because it’s so weird to go to someone’s house who has not a bite of food, there’s not even a cracker in the cabinet. And I was just so devastated about that. So that’s one of my favorite deals, because I don’t know, it just made such a super big impact on that woman’s life.

Theo Hicks: Yeah, that’s probably the best ever, best ever deal stories I’ve heard, so thank you for that.

Dwan Bent Twyford: Thank you.

Theo Hicks: I don’t want to ask the other question, which is what’s the worst deal, so I’ll go to the next question, which is what’s the best ever way you like to give back?

Dwan Bent Twyford: I am just a big volunteer on anything. I work at the church, I work with [unintelligible [00:19:45].22] I mentor these young girls. I go to the schools in my area, and I teach and talk on finances, and just to try to teach the kids. I say “Listen, you don’t have to grow up and get a job and get married and save a pile of money and buy a house. There’s way more exciting ways to buy houses.”

I really like working with the teenagers. Weirdly, I love teenagers, and I like working with them and showing them the options that are out there. I was raised in Ohio, so I was grew up with “Work in a factory, get married, have kids, and that’s what you’re going to do.” And after six weeks in a factory, I thought, “Lord have mercy. If this is my life, I can’t do this.”

So I like working with the young people and like, “Listen, forget this path. Let’s go over here and have way more fun in your life.”

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

Dwan Bent Twyford: Oh, so easy – dwanderful.com. So it’s obviously a play on my name Dwan, so dwnaderful is wonderful.

Theo Hicks: Perfect, Dwan. Thank you for joining us and providing us with your best ever advice and your starting point. So the biggest takeaways for me – I really like your unique marketing strategy where you make bandit signs, messages from “Cash for your house,” “Facing Foreclosure? No equity? No problem,” and then your “Owner Financing, No Money Down.” And then rather than just sticking them on random street corners or high traffic street corners, you’ll actually put them in the yards of vacant properties. So you’ll put your messages in the yard of every vacant property in one neighborhood, and everyone thinks that you own all these houses, and you  bought all these houses, and so you’re the go-to person, and so your phone blows up. And you do this once and then have calls for months.

You also talked about your double seller financing strategy, where you acquire a deal through seller financing and then you, in a sense, resell it or re-contract it back out, seller-financing to someone else. That’s been a very good strategy for you and your consulting clients, and now it’s probably going to be a very powerful strategy moving forward in the next few years.

And then lastly, your best ever advice, which was not using the excuse that you need more education, which is why I always like to focus on the first deal with people that I talk to every time, even though it’s more of a story, and not technically tactical advice. Whenever you hear someone’s first story, 99 times out of 100, the person just kind of figured it out, and they didn’t really know what they were doing and it worked out, or it didn’t work out, but they’re still investing today. So just hearing that and realizing that you don’t need to have encyclopedic knowledge on real estate to get started is always good, always inspiring.

So thank you, Dwan, again for joining us.

Dwan Bent Twyford: Thank you, guys.

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

Dwan Bent Twyford: God bless.

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JF2230: Recovering After A Tornado With Scott Lewis #SituationSaturday

Scott Lewis is the Co-Founder and CEO of Spartan Investment Group, LLC and has completed $100 million in assets under management and raised over $30 million in private equity. He is also a returning guest from episode JF1565 and today he will be sharing how he has handled a tornado event that damaged his mobile park property in west Texas. 

Scott Lewis Real Estate Background: 

  • Co-founder and Chief Executive Officer of Spartan Investment Group, LLC (SIG)
  • Previously on episode JF1565
  • SIG has completed $100M in assets under management and raised over $30M in private equity.
  • Based in Denver, CO
  • Say hi to him at https://spartan-investors.com/ 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Plans are useful in battle but also dispensable” – Scott Lewis


Theo Hicks: Hello, best ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, we’re talking with Scott Lewis.

Scott, how are you doing today?

Scott Lewis: I’m doing fantastic, Theo.

Theo Hicks: It’s good to hear. I’m looking forward to our conversation. Today is Saturday, which means it is Situation Saturdays; we talk about a sticky situation our guest has been in, what happened, how they got out of situation and lessons learned… Of course, with the purpose of helping you, the best ever listeners, avoid making the same mistakes, or if you happen to go face that situation, you have the tools to overcome it.

The situation we’re going to talk about today with Scott is Recovering After a Tornado has Hit your Property. But before we get into that, a little bit about Scott; he is the co-founder and CEO of Spartan Investment Group. Spartan has $100 million in assets under management and has raised over $30 million in private equity. He is based in Denver, Colorado and you can say hi to him at the website https://spartan-investors.com/.

Scott, before we get into that sticky situation, do you mind telling us a bit more about your background and what you’re focused on today?

Scott Lewis: Thanks, Theo. My background is in not only real estate, but I’m also an army guy. I have done some government service work and I started my career as a regional sales manager for a biotech firm. My past is kind of checkered with a little bit different experiences that I think when aggregated, maybe paved the way for some of the success that Spartan has had, just from the very experience in sales and then leading troops in combat and working for the federal government, which is very process-oriented. And then bringing all of those various skill sets, training and experience to Spartan Investment Group, that primarily focuses on self-storage. We’ll talk about an RV park today that was hit by the tornado, that we do own in the Permian Basin in West Texas. But that’s me in a nutshell.

Theo Hicks: Let’s get into the tornado. Maybe kind of walk us through what happened and then I’ll ask some follow-up questions.

Scott Lewis: It was actually this year, just a couple months ago. As I mentioned, that park is in the Permian Basin in West Texas. If you want to add some tornadoes, sprinkle on a little COVID-19 virus and then throw a dash of a massive oil route on top of it –  this made the last couple months at that RV park pretty fun. But what happened in regards to the tornado is that on March 13th, and I know that I have that date seared in my head, because it’s Friday the 13th… So for those of you that are superstitious, well, there you go. I got a text from a manager of an adjacent RV park actually, who was interviewing for the manager of our park role. She is actually the manager of our park. She’s like, “Hey, did you know that your RV park was just hit by a tornado?” And I was like, “Well, no. I appreciate you letting me know.”

So then we start calling our folks and yes, lo and behold, a tornado had come through and hit our RV park. Out there, there’s not a lot of infrastructure in an RV park. We have an office, we had some covers for the RVs out there, which are just metal legs with corrugated metal roofs, and then of course, the RVs. It was an F1 tornado, but it did a fair amount of damage. There were RVs flipped over and thrown, and I’ve got some pictures there that looks like a scene from The Walking Dead. But it did a fair amount of destruction. But 12 hours later, I was on the ground and starting the disaster recovery efforts out there.

Theo Hicks: I kind of want to look at this from a few different lenses. First, let’s talk about what you did between learning about what happened and then actually getting there. Maybe we can talk about what you did once you were there. And I also want to talk about how—I’m assuming this was something that you had raised capital for, so how you communicated that with your investors.

Let’s start with that first process. You learn about this, what are the first things you did once you finished reading that text, and after talking to everyone about what the issues were? And then go up to when you actually arrived in Texas.

Scott Lewis: So we’ll kind of talk with disaster recovery efforts and then communication efforts, although they were in parallel. At Spartan, we’ve got a pretty good team here and we have a pretty big team for what we’re doing. These efforts aren’t sequential; they were definitely in parallel.

The first thing that we did was try to get the best assessment we could from our team on the ground for life safety stuff. In any disaster recovery, the first thing that you need to do is focus on life safety. By life safety, it’s treating and triaging any major injuries. We were very lucky in that regard that we only had some minor scrapes and bumps, even though people were thrown in their RVs by the tornado. Luckily, nobody was killed out there. We were able to very quickly assess that there were no major life safety issues. We got the fire department out there to quickly disconnect the electrical, which is the other major life safety issue that you have in any disaster.

Once we verified no major injuries, and we secured the electrical systems out there such that there weren’t any additional life safety issues. Now, if you have a multifamily building or something like that, you could have some structural integrity issues or something along those lines that may present additional life safety issues. But for us in the RV park, really we just had the electrical. That was only the part that would pose future life safety issues.

Once we did that, then we circled the leadership team, both on the capital side of the house, to deal with our investors in regards to making sure that we communicated with them, and then also to deal with the property from the operations’ team side of the house.

Me, I had probably the most experience in disaster management, both from my government training and then also my army training. So I was on a plane the following morning at [6:00] AM to get boots on the ground there to start kind of running triage at the site. But in the meantime, the processes that were started were to start engaging our insurance company, engaging the on-site management to make sure that they had whatever initial resources that they needed, engaging all the local facilities and then immediately, right away, Ryan Gibson, our Chief Investment Officer, put out a message to our investors letting them know that, “Hey, this asset was hit by a tornado. However, here is our initial plan.” And that’s kind of how we started in the initial 12 hours, with me conducting movement down to the site, to then start orchestrating the initial phase of the disaster recovery on-site there with our management teams, and then all the local first-responders.

Theo Hicks: Once you got there, what did that process involve? Obviously, the life safety was already taken care of, the investors were notified. Were you manually, yourself, with first-responders moving debris, or were you kind of just like the person in charge of telling everyone what to do? What was that process like once you actually got there? What was going through your mind? What did you do?

Scott Lewis: I definitely wasn’t the guy moving anything, I was more of, I’ll call it, the commander, if you will, of the operation. I basically set up—in the military we call them TOC, a Tactical Operation Center, in our office down there at the facility, in which I coordinated both with our reach back team here in Denver to providing whatever assets and assistance they could from research or engaging various entities down there to support the initial recovery efforts. And then also on the ground, we were trying to help the folks out there who were in a bad way, because everybody down there is living in their RVs. This isn’t one of those RV parks where it’s a destination of RV park, all these guys are oil workers. A lot of them lost their homes that night, because that’s where they were living. So their belongings were scattered everywhere.

So one of the key things that I was coordinating down there was making sure that they had shelter and food. Through the managers on-site, and then through the various governmental organizations and non-governmental organizations like the Red Cross, trying to coordinate as much food and water to the site as we could, and then also coordinating with local hotel owners to try to provide our folks with some emergency housing. And I’ll say this, some of the hotel folks down there in Pecos, Texas were fantastic. They offered free rooms to our folks and then also discounted rooms for the long term.

That was my immediate 24-hour focus, was to make sure that our tenants down there that had lost everything had at least shelter, food and water for them and their families, while we could kind of sort through the mess.

Theo Hicks: How long were you there for, in Texas?

Scott Lewis: I was on site 96 hours, so four days I was on site.

Theo Hicks: Okay.

Scott Lewis: The recovery efforts – like I said, these folks were living out there, and some of the RVs weren’t damaged. It wasn’t total destruction out there. We got very lucky that at this particular park, there’s no water in this area, so we have set up what’s called a public water service. And there’s a 28,000-gallon water tank that’s out there that provides water to the park. The electrical infrastructure, we got really lucky – the tornado only hit one of our poles, but the main poles coming into the property were not damaged.

So within 24 hours, we were able to get probably about 30% to 40% of the RV park up and running to where there was power and water so that the folks that were living out there could move their undamaged RVs – because not everybody was damaged – they could move their undamaged RVs and hook up so that they had a place to live. That was my main focus, was trying to get power and water back onto as much of the park as I could to take care of the people that were living and working out there.

Theo Hicks: It sounds like 30% to 40% were able to, within 24 hours, get back to relative normalcy, and then other people had to go to the hotel. Is the park up and running 100% right now?

Scott Lewis: 100%.

Theo Hicks: How long did that take to do?

Scott Lewis: 30 days. For Spartan, we’re planners by nature, both myself with my military background, and then my co-founder Ryan is a commercial airline pilot. Both of us come from roles that if you don’t have a good solid plan when disaster hits, a bunch of people die.

For this one, one of my key roles – and I did it on the flight down there and then finished it up once I had more situational awareness on the ground – I wrote a disaster recovery plan based on some of the Spartan’s principles for disaster recovery. We have three phases that we really focus on. That’s the life safety phase, which is right up front, and that’s just making sure that we secure the site and that everybody’s safe. We have IOC, which is your initial operating capability for any of our sites. That’s getting basic amenities back online, like water, sewer, electric, whatever it is. And then we have FOC, Full Operating Capability. That’s our last phase. And that’s getting the amenities back online, like Internet, all the cleanup, all the debris removed and everything else like that.

So we were at IOC within 24 hours. We got electrical crews out there and emergency folks to come out and fix the electrical lines. We were able to internally fix most of our plumbing lines ourselves. We did have to get some plumbers out there to fix some damaged underwater lines. And then we were at FOC, Full Operating Capability within 30 days.

Theo Hicks: So FOC is full operating capabilities. What was IOC again?

Scott Lewis: Initial Operating Capability.

Theo Hicks: Initial operating capability, okay. Obviously, not everyone has someone with former military experience and a commercial airline pilot, as you said, in both of those roles. When disaster hits you realize that you don’t have a plan that’s life or death, so what would be your recommendation for the everyday investor, who probably will not be able to react the way that you were able to react so quickly, based off of your background? What would be your recommendation for things that they do now, so that if disaster were to strike, they are already prepared, at least more so than they would be if they didn’t do anything?

Scott Lewis: There’s two quotes here that I really love that I think tie into it, and one’s by Mike Tyson. And I actually said this on stage at Best Ever 1, that “Everybody’s got a plan until you get punched in the face.” But at the end of the day, that quote ties into one from Eisenhower, in which Eisenhower said, “In preparing for battle, I generally find that plans are useless, but planning is indispensable.”

Regardless of the plan that you have or the planning background, whenever you get on-site, when you have a disaster or any complex situation that’s going out there with variables that you can’t control, your plan’s never going to work. However, the actual thought process that goes into the plan at least prepares you to some level to deal with the uncertainty and complexity that a disaster situation will provide you.

Disaster management plans aren’t special to the military and they aren’t special to the airline industry. In fact, most governments have home disaster plans that you could go down and you could get. What you do in a home disaster plan isn’t that much different than what you do in a commercial asset plan. If you google disaster management plans, there’s a ton of stuff out there. It might not be perfect, and you might not be able to execute like Spartan does, but at least you have a plan and at least you’re prepped so that maybe you can do 20% to 30% of what we were able to do because of the training that we had.

Theo Hicks: Sure. From an investor standpoint, so after that initial email that was sent out within — you said within 24 hours that email sent out to investors?

Scott Lewis: Probably one hour.

Theo Hicks: One hour. Okay. What was the follow-up communication like? When did you follow up with them again? What did you say? And then obviously it ended after 30 days – I’m just curious to see, was it a daily update, a weekly update? Was that whenever you transition from IOC to FOC? Kind of walk us through that.

Scott Hicks: The answer to your question is yes. During the life safety, it was every single day. I would make a video while I was down there every day and walk our investors through what we were doing every single day. When we got to IOC, it was still every day. I did it probably every day for about a week.

When we moved from IOC into cleanup, which was just like getting debris out of there, we went to weekly. where I would make a video weekly. And that video also came with a written message to say, “Hey, here’s what we did in the last seven days. Here’s what we’re going to do in the next seven days.” I did that until we hit full operating capability. All told, I bet you I did, in the 30 days, between myself and Ryan, between written communication and videos, we probably did 12 communications inside of those 30 days, keeping our investors up to speed on what was going on. It’s funny, we got handwritten notes, we got emails, we got calls from all of our investors, saying it absolutely blew them away with the amount of communication that we were doing for them.

Theo Hicks: Is there anything else that you want to talk about as it relates to this particular situation, where disaster hits your property, or anything else that you want to mention about your company before we wrap up?

Scott Lewis: I think just for any sponsors out there that get their selves in a situation where you have an emergency situation on it – in the infantry, we have a saying, “Take a knee, face out and drink water.” That basically just says pause before you react. Don’t necessarily jump in and react, because the first report you get will always be wrong. Take a knee, take a breath, kind of think through what you want to do before you just start acting. Because if you don’t take that breath, and you don’t really think through, your initial actions most likely will be wrong.

Theo Hicks: Okay, Scott. I really appreciate you coming on and going into extreme detail on what you and your company did in order to quickly resolve the disaster of a tornado hitting your property. You went into a lot of detail, but you kind of broke it down into three main steps, which is that life safety phase, where you secure the site, so you got there really quickly, you make sure that everyone is safe, you assess any injuries, you makes sure that the fire department comes in to disconnect the electrical. This was a mobile home park, so you mentioned there wasn’t a lot of infrastructure, but if there is infrastructure like at a multifamily, then that might be something you need to address as well, like make sure the walls aren’t going to fall down on people’s homes.

Once you get past that phase, you move into the IOC phase, which is the initial operating capabilities. That’s focusing on getting the water, the sewer and the electric working again, right? Things that people need in order to actually to live there. For this particular situation, you said you were able to get through the IOC phase in 24 hours. And then once you get past the initial operating capabilities, you go into the next phase, which is the FOC phase, the full operating capabilities, and that is essentially getting everything back to 100% operations; so clearing debris, getting all the things that aren’t necessarily needed to live off of, although it’s pretty important. But you said the things like Internet’s in that you’re able to get back to FOC within 30 days.

We also talked about the investor communications. You mentioned that the first email went out within an hour of you being notified of the tornardo having hit. And then during your first week, you said you made a video every single day of you basically walking around the site, and giving investors updates on what you were doing. And then after that, during the cleanup phase, you went to weekly videos, where you said, “Here’s what we did the last seven days. And here’s what we’re doing in the next seven days.” You also did a written communication as well. During that 30 day period, you said you did about 12 communications between video and written communication. And you mentioned that investors were really happy about this.

And you gave us two quotes; “Everyone has a plan until they’re punched in the face,” and then “Plans are essentially useless in battle, but they’re also dispensable.” You’re never going to have the perfect plan for when a disaster hits, but the process of actually creating a plan will help you a little bit more than if you did absolutely nothing in life-threatening situations. That’s important. You also mentioned that you can find some home disaster plans by googling it, because the government makes a lot of those.

The last thing that you said was that you want to make sure that whenever disaster hits,—and really this could apply to a lot of different things as well, is to pause, to take a deep breath before you react, because the first reports that you’re getting are most likely always going to be wrong. So you need to make sure you think through what you’re going to do before you actually do anything, because if you are taking action on false information, then you’re probably just going to make the situation a lot worse.

That basically covers everything you went over. Again, you went into a lot more detail on certain aspects, so that kind of hits the main point. Again, Scott, I really appreciate you coming on the show.

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

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JF2222: Active Investor & Podcast Host Steven Pesavento

Steven Pesavento is the Host of “The Investor Mindset Podcast” and an active investor himself who has flipped over 200 homes within his first 3 years in business. Steven started out in AirBnB before focusing on flipping homes, house hacking, rentals, and now is working on his first commercial deal. 

Steven Pesavento  Real Estate Background:

  • Host of “The Investor Mindset Podcast” and active investor
  • Full-time real estate investor for 6 years, the first 2 focusing in on AirBnB
  • Has flipped over 200 homes within his first three years in business
  • Based in Denver, CO
  • Say hi to him at: www.theinvestormindset.com 
  • Best Ever Book: Never Split the Different


Best Ever Tweet:

“I look for a partner who is good at something that I am weak in” – Steven Pesavento


Theo Hicks: Hello, best ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks and today I’m speaking with Steven Pesavento. Steven, how are you doing today?

Steven Pesavento: Theo, I am doing phenomenal. How are you doing today, my friend?

Theo Hicks: I’m doing phenomenal as well. I like the energy, looking forward to our conversation. Before we dive into that though, let’s go over Steven’s background. He is the host of The Investor Mindset Podcast, as well as an active full-time real estate investor for six years, with the first two focusing on AirBnB, as well as flipping over 200 homes within his first three years in business. He is based in Denver, Colorado, and you can say hi to him at his website, which is https://theinvestormindset.com/.

Steven, do you mind telling us a little bit more about your background and what you’re focused on today?

Steven Pesavento: Absolutely. I got into real estate just like so many others, kind of fell in through Rich Dad Poor Dad, but it took me about 10 years before I finally got into my first deal. I read that book when I was 17. But I actually started in AirBnB land, and I had no idea at the time that I was investing until years after I was already doing it. But I was essentially renting out my personal home and two other homes that I had leased from another owner, and then I had furnished those, and I was renting them on Airbnb. I started making money that way.

When I finally got into real estate full-time, and I really actually saw myself as a real estate investor, I started flipping houses, and in those first three years I had flipped over 200 houses. A portion of those were wholesale deals, but over 50% were full-blown flips, or new construction projects or land development.

And then I kind of shifted gears and I’ve focused on multifamily. I’m working on a 220 unit apartment building right now in Columbus, Ohio, so I’m excited to get that closed and over the finish line. Real estate has just been an amazing vehicle to create wealth, but it’s also been an amazing community, because I’m a real big believer in personal development and mindset and growth. Being surrounded by so many people who really believe that it’s possible to live a life different than what the norm is and that we can go out and create what we want, it’s been amazing to be surrounded by those kind of folks in this community.

Theo Hicks: Awesome. Thanks for sharing that. I want to ask one quick follow up question on your AirBnB, kind of how you started. You mentioned that you went out and rented out someone else’s house, and then re-rented that out to other people. What made you get into that, and then why did you stop doing that?

Steven Pesavento: What I was doing essentially was doing a master lease. I had the right to sign a lease with the landlord and I had the right to re-lease it to somebody else. Why I started doing that was I actually was dating somebody who lived out of state, and I was traveling to go visit quite often. I had heard about this thing, AirBnB, and it was right when it was just beginning back in 2014/2015. I rented my house one weekend, and actually, I made money after travel costs, after everything by going out of town that weekend. It was this “A-ha!” moment of, “Wow, Holy smokes, I can make money doing this.” It ended up being a vehicle. I used the money I made from AirBnB to fund a startup with a few friends that had just graduated from Stanford, on this on-demand storage startup.

That ended up not working out, but the experience of being able to rent out my home and know that no matter what, I knew that it was possible for me to make a pretty big chunk of money… I was making seven times rent during the busy season, about an average of four times rent on average over the year.

But what shifted or what changed for me was that in the state of Colorado, and specifically in the city of Boulder, they changed the laws, and a lot of cities across the country have made sweeping legislation that stops people from doing AirBnB for this specific type of strategy that I was doing. I just didn’t want to really play in that gray area. After about a year after the regulations changed, and things were becoming more clear, I made the decision to shift gears.

Theo Hicks: Sure, perfect. Okay. So then for your first three years, you focused on flipping after doing the AirBnBs; you did 200 flips. When did you transition into multifamily? Is this 220-unit your first deal?

Steven Pesavento: The 220-unit that I’m working on right now is my first commercial deal. I’ve bought plenty of residential multifamilies over the years and raised tens and tens of millions of dollars for that business. But this is the first deal that I’m working on where I am a managing partner and raising capital. I’m working with some extremely experienced operational partners that have experienced 25,000 plus units of management, they typically own 3,000 units at any given time.

One of the things for me that was really important, and it was the same way that I got started in the single-family space, was going out and finding operational partners that had a track record existing.

My first partner in flipping, he had built hundreds of houses, he had flipped hundreds of houses, and he had lost tens of millions of dollars back in 2008. Having that kind of experience ends up allowing us to move much faster forward and skip a lot of the challenges along the way, which is why we were able to flip so many houses so early on in my career, was because I was able to bring skills that he didn’t have; how do you go find the deals? How do you go raise the capital? How do you go and build the structure to make that a machine? And he knew how to manage the operational side of the business. I’ve essentially done the same in multifamily; I’ve been working at becoming educated for about a year, and about six months ago I made the hard switch to really ramp down my single family business almost completely out of the single family business at this point, and focused 100% of my effort on the commercial side.

Theo Hicks: Before we talk about the 220 deal, I wanted to focus on what you mentioned about finding partners with experience. You’ve already mentioned one characteristic you want to find in an experienced [unintelligible [00:08:52].14] experience, and number two would be complementary skill sets. Is there anything else that people should be looking for when it comes to finding a partner? And then also, what did you do to actually find these people? And then, I guess maybe on that same track, how specifically do you go to Google and look up experienced partners? How do we literally find them? But also, how did you make yourself, or what about you, was attractive to these people?

Steven Pesavento: Love the question. This is phenomenal. I actually just answered a lot of this in Episode 129 on The Investor Mindset, so I highly encourage you guys, head over there, check it out. If you like what I’m talking about here, you’ll probably like that episode where we dive deeper. But essentially, what I was looking for in a partner was somebody who had the track record and was good at what I wasn’t good at, who their unique ability was not the same as mine.

Where I looked was I went to networking events. I went out into the community and I was coming from a place of giving value, of always offering something without asking for something in return. One of my first mentors – I ended up making a deal to create a $10,000 website to allow me to follow her around. It’s a very, very good value delivery ratio there.

The same thing was true here. I built this relationship with this partner at some local events, and I think what really did it for him was that I had the background experience on marketing, about how to communicate and handle sales directly with homeowners, with investors, with people on that front, as well as the hustle, wanting to go out and grind and put this together, and the energy to go and do it.

When you meet somebody, and you get that feeling that you know they’re going to be successful, it’s just a matter of time – it creates this kind of energy. I feel it whenever I go to events with big players there as well, that are on their way up, it’s that feeling of knowing that you can either work with them, or potentially they’re going to be a competitor. Or it’s that feeling of, “Okay, I see this person coming to this event, and they’re continuously growing, they’re making progress.”

When you can bring that kind of energy to a conversation, when you can bring that energy to a relationship, to a partnership, people are attracted to wanting to work with you. That’s what I did to find these partners. Over time, you build those relationships and you start to understand, who do you trust, who trusts you, who do you connect with? You want to find someone that has the same core values as you. I think all of these things are super critical when it comes to partnership.

Theo Hicks: Thank you for sharing that. Something else you mentioned as well was that you raised tens of millions of dollars for your flips. I’m assuming that you’re responsible, or at least partially responsible for raising money for this 220-unit deal. If that’s the case, I’m just curious, how did you find that transition with your investors? They were used to investing passively in fix and flips, which is obviously a different structure than investing in large apartment deals. Were they on board? Did you have to do some convincing? Maybe walk us through that process.

Steven Pesavento: You know, it’s such a good question. For anybody who’s listening who wants to connect, just reach out to me, happy to share any advice on this front or if you’re interested in passive investing, put the same thing out there, you can just find me, Steven Pesavento, on LinkedIn or anywhere else.

But what I did was, I really don’t believe in convincing, right? I really believe in educating. I’m a big believer that you put good information out, you put good vibes out into the world and the right people and the right things are going to come back to you; you kind of create this space for greatness to happen in the middle.

What I did was I was working with these folks, delivering for them over and over again. When you flip 200 houses, you’re going to have some that are losses. When you’re able to say to your investor, “Hey, we wrote a check for $70,000 to sell this house, which means we’ve lost that $70,000; there’s good lessons learned. But guess what, here’s a check for you for 30k or 15k, or 20k”, or whatever it might be, and they’re seeing themselves get paid, it builds a huge level of trust. Because when you take care of your investors, they really believe in what you’re doing.

What I really did was when I had this “A-ha!” moment about commercial when I realized how powerful it could be for building my business, as well as building other people’s financial freedom, that I had to share it with them. I started calling my investors, started letting them know, “Hey, we’re going to be going in this direction, it’s going to be a long-term transition, but once we’re focused there, that’s where the sole focus is going to be.” And because I spent a good solid year building relationships, becoming educated, and really laying the foundation, when I essentially brought up that “Hey, we’ve got this deal,” they already were primed, they already knew about what we were doing, we knew why it was valuable to move this direction. For many of them, they were ready to jump at the opportunity because the structure that we have offers them all of the benefits that they were getting on the note side, but with a lot of the equity benefits that come along when you’re investing in a syndication.

It was really just creating the space and educating folks so that they could then opt-in and say “Hey, yeah, I am interested in joining you on this next deal.”

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

Steven Pesavento: You know, Theo, as somebody that is a go-getter and go-giver, just going out there and trying to do as much as I possibly can, the best advice ever is to be patient, is to slow down and to realize that you can accomplish more than you think in five years and less than you think in one. Be willing to double down on the things that you know are important and stay focused, but to be patient that some of the best things take time, and it’s worth it to wait for them.

Theo Hicks: Are you ready for the best ever lightning round?

Steven Pesavento: I sure am.

Theo Hicks: Okay.

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

Theo Hicks: Alright, Steven, so I saw behind you had Go-giver books. Obviously, it’s probably one of your best ever books. Besides that, what is the best ever book you’ve recently read?

Steven Pesavento: One of the books that I constantly keep going back to—well, actually, there’s two books I keep going back to. It’s the book Never Split the Difference and  The ONE Thing, and I read The ONE Thing every single year because it’s a baseline for me to be reminded about the focus that’s necessary to succeed, and Never Split the Difference because it’s a way about communicating more effectively. And yes, it’s about negotiation, and it just happens to be that I’ve been fortunate enough to be able to interview both of those authors and The Go-Giver, author, Bob Burg on the podcast.

If you guys haven’t read those, I highly recommend them. They’re books that will change your life for sure.

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

Steven Pesavento: I would immediately take a deep breath. I would recognize that I have to accept what’s going on in my life right now, and that, “How are we going to move forward?” The way that I move forward is I would go and find a way to add the most amount of value in the quickest amount of time to somebody or an industry that can afford to pay a lot for it. Finding a way to add so much value that I could make a large windfall of return, and would be able to get right back up on my feet pretty quickly.

Theo Hicks: I guess this next question would probably apply to your fix and flips. But tell us about a time that you lost the most money on a deal. How much did you lose and what lesson did you learn?

Steven Pesavento: Well, there’s going to be some bumps and bruises along the way when you’re focused on appreciation in real estate, when you’re just focused on pushing that value of the price up, which is what you’re doing in flipping.

I bought this large house, it was outside of Raleigh, North Carolina in a town that should have been able to afford this price point; but it was a unique house, it was in a unique area and it required a very specific type of buyer. We bought it thinking we were going to make 100 to 150 grand on it, we thought it was a home run. It was just a list and we would end up rolling in the cash.

Well, after having it sit on the market for about a year, because of some failures in our own systems while doing that many deals at a time, when we actually sold that property, we wrote a check for about 70 grand. It was one of the best days, because there was a huge realization, not only in the power of having multiple streams of income and not just focusing on appreciation, focusing on cash flow and having a hybrid approach, but it was also that feeling of knowing that once you’re able to close something out, sign that away, I wrote that check and obviously that money was gone… But it was such a relief to know that that was off of our plate, and that we could move forward. That was definitely one of the big lessons learned.

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

Steven Pesavento: I love directly working with young people through Junior Achievement. I go into classrooms, teaching mindset and entrepreneurship in schools. I believe it’s a big thing, because I think the school system is broken in so many ways. For some folks, just having the opportunity to hear another way of living or to hear that somebody maybe wasn’t the best student or wasn’t always doing the right thing in my youth, but to be able to then take myself and put myself into a successful position, it creates a really cool level of inspiration for these young kids who maybe were thinking there’s no other option for them, but to take some crappy job… But to really be able to go and see, “Hey, it’s possible for me to maybe create my own thing, go find a mentor and go down that path.”

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

Steven Pesavento: You can definitely reach us on social media. You can find me Steven.Pesavento on all the platforms, but I really encourage you, if you found this conversation valuable, to definitely subscribe to the podcast, The Investor Mindset. But if you’re a passive investor and you’re looking for more resources, we’ve put together a phenomenal deep dive guide on passive investing, and you can find that at https://action.theinvestormindset.com/passive.

Theo Hicks: Okay, Steven, I really appreciate you coming on the show today and giving us your best ever advice. I guess the main takeaway that I got, and I’m sure our best ever listeners got, was your advice on partnering up with experienced people. You mentioned how you did that for your flipping business, and you’ve also done this for your commercial apartment business you’re beginning to launch.

And you said, obviously, the main benefit of that is being able to scale faster, as well as skip a lot of the mistakes you would make on your own. And then more specifically, you mentioned that you want to find someone who has a strong track record, and is good at what you aren’t good at, has different unique abilities. You mentioned that you were able to find these people at networking events, and that you were offering value to these experienced individuals without asking for anything in return. You gave the example of creating the $10,000 website in order to basically shadow someone. You mentioned that for your business partner for, I believe, of your multifamily business, they really liked that you had experience in marketing, handling the sales process, investors, as well as the hustle.

And then you talked about how best ever listeners can attract those types of experienced people. It has to do with energy and making sure that whenever you’re going to these events, you’re consistently improving. So each time to go there, you’ve done more than you did before, and that is able to attract people towards you.

And you also mentioned that you also want to find people who have the same core values as you. And you also mentioned some advice in transitioning investors from one asset class or one real estate niche to the other. In your case, it was investing in fix and flips to investing in apartments. And you said you don’t believe in convincing, you believe in education, so you focus on educating and making your investors aware of this transition, and how it will benefit them. And this transition for you was about a year, so by the time you actually had a deal, they were primed and ready to go. They knew that they were getting the same benefits and then some by investing in these apartments.

And then lastly, your best ever advice which is to be patient, to slow down, and then realize that you can accomplish more in five years and because more than you think you can in five years in 10 years, and you’ll probably accomplish less than you think you can in one year. So doubling down on what is important to you, but also realizing that the best things take time.

Again, really appreciate you coming on the show and sharing your advice. Best listeners, as always, thank you for listening, have a best ever day and we’ll talk to you tomorrow.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2173: Investing Long Distance With Mike Wilkinson

Mike is a full-time real estate agent and broker with 4 years of real estate investing experience. He currently owns 4 units in Cincinnati and 3 in Denver with a few flips under his belt. He shares why he started off by investing out of state and explains what factors he paid attention to before jumping to out of state investing and the steps he took to invest out of state comfortably. 

Mike Wilkinson Real Estate Background:

  • Full-time real estate agent and broker
  • 4 years of real estate investing experience
  • Portfolio consisting of 4 units in Cincinnati, 3 units in Denver, 3 flips
  • Based in Denver, CO
  • Say hi to him at: https://embarkdenver.com/ 
  • Best Ever Book: The Go Giver


Click here for more info on PropStream

Best Ever Tweet:

“A good property manager is a huge part of your team in making out of state investing relaxing” – Mike Wilkinson


Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, I’m speaking with Mike Wilkinson. Mike, how are you doing today?

Mike Wilkinson: Good. Yourself?

Theo Hicks: I’m doing good, thanks for asking and thanks for joining us. A little bit about Mike – he is a full-time real estate agent and broker, and also has four years of real estate investing experience; his portfolio consists of four units in Cincinnati, three units in Denver, and three flips. He is based in Denver, Colorado, and you can say hi to him at embarkdenver.com. So, Mike, can you tell us a little bit more about your background and what you’re focused on today?

Mike Wilkinson: Absolutely. So I think like many younger investors, I got going interested in personal development, financial independence, freeing myself from needing to always work a job and pay the bills and have some assets do that for me. So that all got started back in 2016, 2017, and I got my real estate license right out of college, I think the same way week that I had graduated, and jumped in and out of the industry for the first year or two there. I got started with the house hacking strategy as a first asset, and for the last couple of years here, I’ve been a full-time agent and focused mostly on the residential, single-family, small multifamily asset classes.

Theo Hicks: Perfect. So you have four units in Cincinnati and three in Denver. Did you do the ones in Denver first or the ones in Cincinnati first?

Mike Wilkinson: The house-hack in Denver came first, and then a couple of deals in Cincinnati, and then a few more deals here in Denver. So I hopped back and forth.

Theo Hicks: What made you do Cincinnati?

Mike Wilkinson: I actually had a roommate and very close friend of mine living with me in Denver at my house-hack there, and he had a girlfriend, now wife, who was living in Cincinnati, grew up there. She had just bought a house out there, and was charging her roommates very similar rents (over $600 a month) for living in her $100,000 house out there, nicely fixed up… And I was charging my roommates the same rent out here in a $380,000 house, and a light bulb went off in my head and I said, “Hey, man, it might make some sense to try and invest out of state,” especially when my then-roommate moved out there and I could go and fly and have a close connection and someone to enjoy some time with out there.

Theo Hicks: Those four units, are those four single-family homes, two duplexes, or what’s the breakdown for those Cincinnati properties?

Mike Wilkinson: It is one single-family home, which is the first place that I purchased, a straightforward 2% rule deal, a $50,000 house or $45,000 house with $1,000 rent, and then a triplex that actually has a commercial unit below that was being treated as a residential unit, and two apartments above; that was actually also purchased around that $50,000 mark. So a little different pricing out there than here in Denver.

Theo Hicks: Sure. So when you decided to start investing in Cincinnati, do you mind walking us through the different steps you took for anyone else who lives in a pretty expensive market and wants to venture out to a market where they can buy properties for significantly less? So setting up a team, finding the deals, managing the deals, just A to Z.

Mike Wilkinson: Absolutely. I think a common thread through a lot of my clients here who invest out of state is the property management aspect, and that being a huge determinant as to whether they are successful and enjoying out of state investing. I’ve experienced that myself recently, fired and hired a property manager and feeling a lot better about those investments now that I’m having a little bit more of a trusty relationship with the property manager. So that’s a huge aspect, and I’d say probably the most important aspect of your team out there.

Another huge aspect is just networking your butt off and actually going out there. I had the opportunity of having a friend out there who I could go and stay with and drive around with and use his truck and leverage some connections that way. So meeting up with other investors out there, and not just focusing on the real estate agents and the property managers and the lenders, but also networking with other investors out there who have years of experience investing in that market was a huge thing for me to bounce one investor’s idea off of another to get a clear picture of which parts of town, which neighborhoods I wanted to be in, what price ranges I wanted to be in there, and talking with people who have already decades of experience there, who aren’t looking to make money off of me, I think, is an important thing that not too many folks that I talked to out of state investing wise do. They seem to jump straight into talking to property managers and agents and the like.

Theo Hicks: Do you mind telling us why you had to fire that property management company and maybe walk us through the timeline? Because I know and I’ve talked about this on syndication school that I do in the past, that it’s typically a high timeframe in which you want to wait before firing just to make sure that they’re actually the reason why the property’s not doing very well… So I’m just curious what happened – was it an instantaneous firing thing? Was it three to six months of poor management until you made that decision? And then on top of that, what lessons did you learn that allowed you to not make the same mistake in hiring the next property management company?

Mike Wilkinson: So this particular property manager, so they had an in-house maintenance division, which can be a positive thing and can also be a negative thing. It’s a difference that you’ll see across a lot of property managers; depending on the area, maybe it’s a half and half. Some people do have that some people don’t. This property manager, when I originally started with her, had a separate maintenance team manager through the year or years that I’ve been with her, then her new husband had taken over the maintenance division there… And in checking in with my portal, all property– a lot of out of state property managers have some portal where you can see your expenses, and I do a fair amount of rehabs here in Denver and help clients manage rehabs, so I understand the costs quite well, and things started to not add up. I wasn’t getting the explanations when I was asking for them and therefore, I just quickly lost trust. It seemed all of a sudden that they were making their money in the maintenance division as opposed to helping me manage some profitable properties.

So that was the gist of it, and I think it’s an important question to ask a property manager right off the bat and ask if you have an option to go that route or not, and then making sure that you have some checks and balances there to make sure that those maintenance costs are competitive and appropriate, and that you’re not just being up charged and they’re making money off of you in that aspect.

Theo Hicks: An important question was to ask if you have to use their in-house maintenance?

Mike Wilkinson: Yeah. My new property manager out there, they do have an in house maintenance team. The real important question is, “What is your guys’s protocol? How do you do maintenance? Do you hire everything out to a third party?” A fair amount of property managers do do that and you ask, “What is the typical protocol here? Do you have one handyman that you always go to? Do you pay some people hourly? How does this work? Who owns it?” things like this to get an understanding of, “Okay, is this one of the most profitable parts of their company?” That’s not what you’d like to see, as opposed to this being just a necessary part of the job. And some people do run maintenance in house and therefore that’s helping save you money, especially when those are just simple jobs like changing locks or installing a new appliance or something like that… But it can also go the other way where you’d rather just pay a third-party $100 and they have the interest of keeping up their reputation and charging competitive rates and things like that. So I think the main question there is how do you run your maintenance division? Do you have one in house? Is this all third-party? And from there, asking the appropriate questions to see how things are handled.

Theo Hicks: You do own some properties in Denver and then in Cincinnati as well out of state, but which one do you like better? Do you like out of state investing or do you like in-state investing better?

Mike Wilkinson: More and more my perspective, especially leading up to my purchase around Christmas time this year, around New Year’s, that was a huge debate of mine going into that, the three or four months prior to that, and I had met with plenty of different investors chatting about it… And more and more, I have a leaned towards in-state investing. Here in Denver, I really believe in our market and have a lot of connections and efficiencies that I can utilize here. So being at a younger age, I’m not interested personally in using my cash flow right now, and getting a sprinter van and going across the country or anything like that. I see myself working, I enjoy my job a lot. I don’t need the income in the next, say, decade. So therefore, I think what needs to be considered is with the non-passiveness of real estate, we need to think about, if I have reason to believe these assets are going to appreciate. And here in Denver, I really do believe that they’re going to continue to appreciate, especially in these little pockets that I truly know, being a broker here.

So for those reasons and having connections here, having complete control, being able to go meet with a contractor face to face, line them out and then have the understanding of, “Oh, I’m going to make this right,” or, “I’m not going to see any more work from this person,” is huge.

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

Mike Wilkinson: So the best real estate advice ever – I would say that networking your butt off and providing value to your network without strings attached is a huge thing, and that is something that I leverage to stay top of mind in my database and network.

Theo Hicks: Perfect, and do you have any examples of ways that people can add value without any strings attached?

Mike Wilkinson: Yeah, asking the simple questions of “Who do I need to keep in mind to introduce you to, what are you looking for in your business, in your job, in your life?” For example, a couple of weeks ago, I found a colleague of mine a great job, and that goes a long way in a time like this, and is something that I’m not seeing anything out of, but I know we’ll go to pay dividends in the future, and I think that just providing value in ways that extend far beyond your interest in real estate is a huge thing to do.

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

Theo Hicks: Let’s go for it.

Break [00:15:09]:03] to [00:16:12]:05]

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

Mike Wilkinson: I would say along the lines with this providing value and my best ever advice, a book that I love is The Go-Giver, and I recently read the other edition of that it’s called Go-Givers Sell More. These are quick little books, but have a super meaningful message that is very simple and if you take that with you in your network and in your day-to-day, it’s a pretty foolproof way of having a big life.

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

Mike Wilkinson: Wow, if my business were to collapse today – well, I would go ahead and start a new one.

Theo Hicks: Besides your first deal and your last deal, what’s the best ever deal you’ve done?

Mike Wilkinson: I would say, best ever deal was a flip project which I was taking a client through, realized that the numbers were awfully good, and they didn’t want to act on it. I got their permission to act on it myself, and in a matter of five months acting as GC, we turned an 83 grand profit on it.

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

Mike Wilkinson: I’ve work as a volunteer with an organization called Families First, and do a weekly volunteering for them. They do a great job to help parents in need in ways of raising a family with the right support.

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

Mike Wilkinson: Sure, I would say by email is a great way. I’m always responding to email, and that is mike@embarkdenver.com.

Theo Hicks: Perfect, Michael. Thanks again for coming on the show and sharing your advice with us. Mostly, we focused on comparing in-state versus out of state investing, and why you prefer in-state investing. We talked about how you’re able to know the market a lot better, especially because your job is as a real estate agent and a broker. It allows you to have more control, you have more connections in your local area, it allows you to meet people face to face, and just overall, you like the in-state investing more than out of state investing, even though you do have some properties in Cincinnati.

We talked about some of the tips you do have for people who do decide to invest out of state and the two things you mentioned was one, that the property management company is the most important, and you told us how you had to recently fire a property management company because the maintenance costs didn’t seem to add up and you weren’t getting a good explanation as to why. So you said that an important thing to understand with a property management company is how maintenance is handled and what the typical protocol is, and making sure that there’s checks and balances so that the costs are competitive and appropriate. The second thing you mentioned about investing out of state was networking, but more specifically, making sure you’re actually going out to the market to meet with people and network with people face to face, and this includes property managers, brokers, lenders, but you also mentioned it’s important to meet with other investors too, people who aren’t there to make money off of you and are gonna have an objective opinion as well.

And then you also gave us your best ever advice, which is to network and provide value to the network with no strings attached, and you gave examples like introducing them to different contacts, maybe referring them to people, and then you gave a specific example of how you were able to help someone find a job. So just asking questions, probing questions to figure out if there’s any way you can help them in order to strengthen that relationship. So again, Mike, I really appreciate you coming on the show and giving your best ever advice. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you soon.

Mike Wilkinson: You too. Thanks, Theo.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

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JF2139: Lessons From Owning Dozens Of Companies With Bart Rupert

Bart has 14 years of real estate experience and currently runs a merger and acquisition firm called Stone Peak Alliance. Bart has founded and has been able to grow about 30 companies and he explains how it isn’t really that hard to do. Bart’s perspective will challenge how you are viewing your business.

Bart Rupert Real Estate Background:

    • He currently runs a merger and acquisition firm called Stone Peak Alliance 
    • 14 years of real estate experience
    • Portfolio consists of 7 rentals, 1 commercial, and has also flipped multiple properties
    • Based in Denver, CO
    • Say hi to him at: www.spartansalliance.com

Click here for more info on groundbreaker.co




Best Ever Tweet:

“The biggest lessons you will learn as an entrepreneur is failure” – Bart Rupert


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

Bart Rupert: Good, Joe. Glad to be here.

Joe Fairless: Well, I’m glad that you’re glad to be here, and I’m glad you’re doing well. A little bit about Bart – he currently runs a merger and acquisitions firm called Stone Peak Alliance, he’s got 14 years of real estate experience, his portfolio consists of seven rentals, one commercial property and has flipped multiple properties, he’s based in Denver, Colorado. With that being said, Bart, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Bart Rupert: Sure. I think that primarily what I’m doing today is mergers and acquisitions and helping other people learn how to buy and sell companies for a living. It turns out that 88% of all new wealth is created through the sale of a small business or through real estate, and within that focus, we often find that the real estate and the business transactions go together. So what I’m now working on having sold my own companies, grown several to very large successes, is working with individuals to be able to help them do the same thing through a defined set of processes and techniques to help demystify some of the acquisition process and the sale process just the same way we’ve done with real estate.

Joe Fairless: What companies did you sell?

Bart Rupert: There’s been quite a few across the portfolio, and a number that we’re still holding today, but primarily what I’ve done is groups within some degree of leveragability or flip. So you look at technology companies, you look at Software as a Service companies, things that we’ve done within different emerging industries like energy or renewables that have been able to explode pretty rapidly; those have been a lot of the sweet spot.

For my own companies, I’ve started a number of different technology companies, grown and sold those, and even involved a lot of different transactions for other people that have either sold to Fortune 500s or large groups on that front. So we grew a healthcare company from $8 million to $75 million upon the exit. We grew an organization from $22 million to over $115 million upon the exit. But primarily, what we do day in day out, is work with entrepreneurs that have a vision for their company or an exit strategy in mind, and utilize what we call the boost technique to get them the most value upon their exit.

Joe Fairless: Okay. Well, I would love to talk about the boost technique in a moment. Just so I’m clear on your companies that you sold, I’d love to learn more about that, and then we can talk about what you’re focused on now with how that’s evolved. You said you started a technology company?

Bart Rupert: Yeah, I’ve actually founded almost 30 companies.

Joe Fairless: Oh gosh, okay. Well, it’s a 30-minute interview, so we won’t have time to talk about all of them then. You founded 30 companies…

Bart Rupert: It’s actually not that hard once you get the system down, and particularly when you take on partners, what you find is that you want to be able to use different techniques that we really look at from an acceleration perspective, to either fail the companies really quickly or find out where their successes are and promote their successes. So the idea is that within a 60 to 90-day period, after really getting out there and trying some of the ideas and processes we’ve got deployed, you want to say that company’s not gonna work in the way that I had intended it so I need to pivot it or you need to find a way to say, “Look, it’s just not gonna work at all. The timing’s not right, the luck is bad; just fail and move on,” because you either want to get to the point where you fail a company or move it into a multimillion-dollar success on the path. The way I look at it now is to an exit, because the vast majority of–  the value as an entrepreneur that you can create isn’t from salaries and from running a company, it isn’t from stepping into the risk zone of 10% of all new companies that are created are successful. It’s getting to a point very quickly where you can see the success, recognize the success, and sell it to be able to recognize a multimillion-dollar exit.

Joe Fairless: Of the 30 or so companies that you founded, what’s been the most profitable for you?

Bart Rupert: It’s tough to say, because profitable I would now equate to the one resource you can’t ever get back, and that’s time.

Joe Fairless: Let’s talk about money though.

Bart Rupert: Looking at it from strictly a financial perspective, when we were able to grow the company from $8 million to $75 million and do the exit there, that was extremely profitable. So it took a good amount of time.

Joe Fairless: So it started at $8 million. So does that mean you bought it when it was at $8 million?

Bart Rupert: That’s correct, and it was a minority interest; it wasn’t majority on that.

Joe Fairless: Got it. That makes sense. So when you said you founded 30 or so companies, this founding also mean you bought a stake in a company?

Bart Rupert: So that number is much higher. The companies that I founded have not grown over $100 million dollars, but the companies that I have bought into or leveraged the purchase process to be able to go through and take a stake in, those were the ones that had the larger exit.

Joe Fairless: Okay. I mean, that makes sense.

Bart Rupert: So between the two, I’ve probably– if you look at founded plus bought into, it’s closer to 100 companies.

Joe Fairless: Wow. So of the 30 or so that you founded, what was the most profitable?

Bart Rupert: Let’s see. Well, there was a technology company that I started and I originally had some partners and then eventually bought them out, but I started that one many years ago, I’d say, almost 20 years ago. It was a technology company, and we did backups of files; this is back when you had dial-up and things like that. It was a pretty new concept, nobody knew how to do it. Everybody was dealing with tape libraries and such, and we actually moved that to what was before the cloud to the Internet, and started off with DSL and dial-up and things like that, eventually got it to the point where we had large customers on tier ones like Vanderbilt University, University of Colorado, brain imaging scans, we got HIPAA compliance, went International… So that was a good growth mechanism, and it allowed us to get a ton of money out of that organization.

Joe Fairless: Wow, what was the name of the company?

Bart Rupert: Circadian.

Joe Fairless: Circadian. And then on the opposite end of the spectrum, you were talking about, hey, fail within 60 to 90 days or prove the business model or pivot. What are a couple of failures that you’ve had, if any, of the companies you founded?

Bart Rupert: I think I’d start off by saying, if any entrepreneur tells you they haven’t failed, then they’re either lying to you or not really in the game. I think arguably, the biggest lessons that we’ll learn as entrepreneurs is failure, and there’s so many different gambits of what that looks like. I would say, primarily within failure, it’s focusing on too much of a micro-level, and not seeing the big picture. If you get too wrapped up in something like the operation of a company or the promotion of a certain brand or just the advertising and marketing, you’re not going to see the other elements of it. There’s an operational element, there’s a sales element, an advertising, all of that’s got to be looked at more holistically. So really, it’s where I started to see, instead of looking at operating the business day in day out, what I’d like to do is look at managing or orchestrating the operation of the business, to be able able to work with the individuals that have their own individual skill sets that they’re experts in, that they can turn around and tune-up in fine detail… But I’m looking at the big picture of where it’s going to go and strategically how to position it. Because when you get too laser-focused on a particular aspect of your business, you almost always miss other elements, and those other elements are what are going to allow you to expand it to double that growth next year, to increase the profitability, to get it to the next level, and you need to be able to do that as a business owner without emotional tie in one element of the business, without it becoming a favorite if you will. You’ve got many ways– just go out there and be very ruthless with how you assess your business and look at it. Its goal, its job is to produce profit for you, and you’ve got to know that profit is what pays your salary and everybody else’s and allows you to be successful, but what’s more than that is that’s going to be the main metric when you go to sell it later on.

Joe Fairless: Yeah, and I want to learn more about the boost approach that you mentioned, because I imagine that factors into what you just said. Just to close the loop on maybe a lesson learned on a company that you founded that didn’t go right, what specific example of a company you founded that lost money and it didn’t go according to plan?

Bart Rupert: That’s a great example. So we had an organization that did training services, and we had successfully sold an organization that did online training or CD-based training at the time – this is many years ago – and we’re looking at another organization that was doing online and promotion of that, and years prior too, we’ve had great success by creating the best product in the industry. So literally, everybody that went and checked out the product line saw that it was the very best, they bought the product, we made a ton of money and sold the organization.

Years later, we thought the same strategy would work. We didn’t adapt to the new market, we didn’t adapt to the changes. There had been online organizations that had come out offering training programs, things that you could do in your own home that were maybe not as good as what we created, but they were far more plentiful. So what we had done is replicated our success from before by looking at, okay, let’s just create the best quality product, the best quality training solution, and we didn’t pay attention to the fact that all of our competitors were really leapfrogging us in terms of the delivery of that solution, the affiliate marketing, the ability to get that in front of others and… Think of it like Udemy today – very cheap online training, very easily accessible, and we got crushed by that. We absolutely got crushed because, again, we were laser-focused on one thing, which is quality of the product.

If you’re listening to this, you’re thinking, “Well, is that bad to focus on the quality product?” No, you need to; that’s great, but you need to have somebody that owns that, so that you can look at the big picture and be like, “How are my sales doing? How’s the adoption doing? What’s the feedback I’m getting from the market?” and if it shows that I’m not growing as quickly as I should or I’m really not getting as much traction, or the people might love it, but nobody knows it exists, you’ve got a real problem.

So we got very, very laser-focused on that, and it ended up not working out, because the competition outpaced us. Think about the old Bill Gates and Steve Jobs conversation, to where, essentially, when Steve Jobs finally found out that Bill Gates had his own product, the Microsoft Windows operating system, and he’d already gotten around the IBM platform, they were at this debut where Bill Gates had shown the world this product called Windows on the IBM. And Steve Jobs was sitting there contemplating and he shook his head and he looked at him and he goes, “Well, you won’t win, because we’re better than you,” and Bill Gates looked at him and he goes, “You just don’t get it, do you, Steve?” and he pointed to the fact that it was on the IBM, and he goes, “That doesn’t matter.” So he could see that, like, “You might have a better product, but it’s completely irrelevant, because my product is on the most popular hardware on the globe.” And we’ve seen the result, and arguably Apple’s made a phenomenal comeback due to Jobs and Jobs had a big lesson learned, but I had to, unfortunately, experientially, learn that same lesson, is that you can get laser-focused on one thing like, “Hey, I’ve got the best product.” It’s irrelevant if it’s not out there in front of people.

Joe Fairless: Let’s talk about the approach that you all take to help an entrepreneur determine if they have a business that is going to continue to thrive or has potential to thrive or they need to pivot or they need to go back to the drawing board. What is that boost approach that you mentioned earlier?

Bart Rupert: Two different things here – one of which is around the success or failure of an organization as you’re growing it; the other is around the sale of an organization. So the boost technique is specific to how you sell a company. What I would say to anybody that’s out there, if you’ve got a business, if you’re looking to buy a business and flip it, whatever your status is in that whole ecosystem, eventually you’re going to want to sell your business if you own a business. If you don’t own a business, you could buy one, but if you’ve got one, as you go to sell it, arguably, we’d all want to make the most amount of money possible. So over 90% of the businesses that are out there for sale right now are what I would call listed in the wrong way. They’re being done in a way that will minimize their chance of success, and unfortunately, the brokers out there give this process a bad name, because they’re lazy, and I say that as one of them. I would say most of my peers out there are lazy, which is why we just mop the floor with them. When it comes down to — if you’re presenting a business and you’re only focused on things like fundamentals, you’re missing the big picture. You’re not telling the potential buyer what it is that they really need to hear to get emotionally invested in that business. It’s all about how you tell the story. When I say tell the story, I’m not saying make anything up or do anything that it’s not accurate or ethical. It just comes down to how you’re actually going to describe what the business does.

So for example, let’s take that online backup business I talked about – if I go out there and listed that business to say, “Well, this is an online backup company. It backs up files, it makes $3 million in profit per year and it’s got x number of customers.” Okay, well, that’s factual. Do people really care? Probably not. But if I go in and tell the story in a different way and say, “Hey, this is a business that has literally rescued Vanderbilt University from audits, from financial repercussions and from data loss within patient records. This is like an insurance policy. This thing is recurring revenue like an evergreen tree that’s out there in the forest. It’s never going to go away. People always need their data and we see ourselves essentially as perpetual insurance agents… And oh, by the way, here’s how much money we make doing that. Here’s how fast we can close a client. Here’s why our technology stack is so much more powerful.”

Joe Fairless: Sold…

Bart Rupert: You don’t talk about– people who have software companies, they talk about features. Don’t talk about features, guys. Whether you’re selling to a customer, whether you’re selling your company, that’s the last thing you want to do. Talk about benefits, talk about value, talk about it through the lens of something that has an emotional tie to it. And it’s the same thing with property. This isn’t the house that I’ve got for sale. This is a legacy for a number of families; for potentially famous families who have actually experienced x, y, z as part of their life journey here. It’s a far more engaging way to present it, and that is at the core of the boost technique, because we’re able to regularly get 20% to 40% more from a company than anyone else.

I’ll give you an example. There’s a very no-frills company we’re representing right now. It’s a construction company. They do HVAC, and arguably, that’s not very exciting. So there’s not a great tremendous story you can tell around that, but there’s always a story with every business that you can tap into. We’ve been able to leverage our boost technique to get what is a valued company that values right now on fundamentals that enter in $50,000 and we’ve got an NOI that we’ve got executed that we’re going to close in the next 90 days for a $2 million offer. So that’s well over 100% more value on that business, which exceeds the 20% to 40% standard. But if you do the technique, if you follow the process of what I’m describing, you can get at least 20% to 40% more value from a company.

A couple of other tidbits around how to do that – you don’t just represent it the way every other broker does in America. That’s how you get the success rate which Morgan Stanley publishes success rates, the IBBA does as well; it’s 8% to 12%. So Joe, if you think about that, 8% to 12% of businesses that actually want to sell their business that engage experts like Morgan Stanley actually succeed. That’s paltry, that is pathetic. If you think about it, what job could you ever do where if you’re successful 8% to 12% of the time, that’s a massive success. These companies run press releases when they get above 10% because they think they’re so fantastic. We regularly close 60% to 80% of the groups that we represent because we just do things differently. You don’t just take a bit of data on the company and the fundamentals and list it; nobody really cares. In fact, most buyers, they don’t really understand that unless they’re doing this every day. But if you can take a company and really broadcasts that story, do it in a way that’s very visual, very professional, has a lot of colors and interaction to it, and focuses on the things that a buyer would care about emotionally. Now you’re on the right track to be able to get at least 10% to 20% more value out of it, and then there’s other things that you can do that are more sophisticated or technical like tax advantages or structural benefits around how you set up your corporations that allow you to get far, far more out of it.

Joe Fairless: It’s interesting; what you’re talking about for positioning a company for sale is apples to apples comparison or apples to apples applicable to positioning a property for sale–

Bart Rupert: Exactly, right.

Joe Fairless: –because it’s one thing to talk about the features, it’s also a different thing to talk about the benefits, and especially applicable to single-family home for sale properties. I think that’s probably even more relevant than, say, a commercial property, but still, it could all be applied in focusing on the emotional benefits. Do you all do anything with companies from a structure standpoint, prior to sale, or from a process standpoint? So actually help them become more profitable or help them optimize something within the system?

Bart Rupert: Yes, we do, and we’re one of the few that focus on that because we believe it’s so material to the success of an organization. So for example, we’ve got something we offer called the instant savings program and we do this for the clients we take on where we’ll go through and find ways to renegotiate their existing contracts, because that’s part of what we do is what we call asymmetric negotiation, and we will get their contracts locked in at far lower costs. We can often save them 20% to 40% on their operational costs within 30 days just through some of the tactics and techniques and processes we’ve deployed for everybody else we work with; that can result in– it depends on the size of company, but in some cases, we’ve saved people 5% or more percent in profit in their organization. So if you think that most companies are sold on a profit multiplier, and then it’s just a negotiation around what that multiplier is, and then you think that we’d be able to come in and add, say, 5% or more percent to the profit margin… Think about a company that originally was looking at 10% margin, that’s what they’ve been operating on for years, if we can move them to 15% and the multipliers off the profit, we’ve literally increased the value of that company by 50%, and we’ve done that within 30 to 60 days.

So we view it as an absolute necessity to be able to go through it and do that structuring. Plus, that’s not even where you can get the most lift, and this all goes into the boost technique. You can get a lot of lift into the structural elements of how you set up corporations as well. So for example, you can set it up to where there is not just one entity that does everything from an LLC or an S-Corp or C-Corp perspective. You can have a scenario to where you’ve got an LLC that collects all the revenue, but doesn’t own the assets; an LLC that holds all the employees, but doesn’t collect any revenue other than leasing those employees back to the primary company that’s collecting the revenue; and you can have another company that holds all the assets. Not only does that structurally protect you from a corporate perspective, but there’s extreme tax advantages if you do it correctly that are all legal, that are out there. It’s just very, very few people are taking advantage of it. If you structure that before you actually get a letter of intent on the company, then you can boost the value of that whole thing, or at the very least, sell it for the same price and get the owner double-digit percentages more out of the business by saving them on tax liability. And further, if you take that to the next level, you can even get into more complicated processes that we look at.

Very, very few people in the United States have ever heard of what’s called a nested C-Corp, but there’s advantages to being able to say you’re going to own something, say, at an S-Corp level, but having an aspect of the business that produces revenue or profit embedded within that organization or fully owned subsidiary that’s actually a nested C-Corp. Now a C-Corp, if you turn around and sell that company, it faces double taxation, which is not good for the owner. But if you essentially have all the taxation done on the revenue that it generates at just the C-Corp level without the sale, you have a lot of tax advantages, particularly if you, as the owner, are in the upper tax brackets. So you save a lot of money while the company is generating money. You grow that for a couple of years if that’s your goal, and then when you turn around and flip it, there’s a specific technique you can do. It’s like a tax equity flip in a way, but there’s a certain thing you can do to be able to make sure the value of the business is not taxed twice, like it typically would at the C-Corp level, to get the best of both worlds.

Joe Fairless: Have you ever come across a potential new client of yours who has a business, it is not profitable, but they come to you and say, “Bart, I want out, I want to sell. My business has gotta be worth something”? If you have come across that scenario, how do you approach it?

Bart Rupert: There’s two ways we go about that. I would say for me, personally, I don’t deal with a lot of those anymore; I used to… Because I’m typically focused on much larger transactions these days. But I work with a lot of people, teaching them strategies to buy and sell companies on their own, and these are folks that I directly coach and mentor and I’ve got a program that does that. So those guys do those types of deals all day long, and they’re very successful at them, because a lot of them want to take that company that’s plateaued or distressed and grow it to be able to get a multi-million dollar exit, and it’s actually a very easy way to get into this business in a very low-risk way. I mean, you can do it without a lot of capital.

So the way we would typically do that is one of two ways. We’d either just go in and buy the business, because it’s not that much capital, it’s not hard to do. We’ve got access to financing here. Like right now, I need to place about $100 million dollars in different companies, so I’m looking for things to buy. So that’s not a big acquisition for us, we just pick it up, and then we add it to our portfolio, we’d work with the owner that would be within our team and grow that for a period of two to three years. We’d look to at least 10x the amount of value we get out of from what we paid, and then we’d flip it. And we’d have them use our techniques, we’d have them use our acceleration systems to be able to grow it very, very quickly, and learn all the lessons in a very short period of time that took me two decades to figure out through a lot of failure, so they don’t make the same mistakes.

The other way to do it is you can actually keep that business owner on as a partner. You could say, “Look, I’ll take on a certain percentage, maybe a minority percentage,” if we believe in that owner, “but you need some guidance, and so we’re going to rewrite your operating agreement where we’re going to come in as coaches and we’re going to have a vote, if not a majority vote on what it is you do and how you do it. We’re gonna bring in our systems and processes to help you get there,” and then everybody wins. It’s a great win-win scenario, because the existing owner gets far more out of it over time. They stay employed, they get to grow the company, they get new skill sets. The person or people coming in to help them, they’re able to be part of that journey as well in that venture, and everybody exits for a whole lot more money.

Joe Fairless: Anything that we haven’t talked about that you think we should as it relates to positioning a business for sale, and also any type of relevant information regarding that?

Bart Rupert: Yeah, I would say that buying businesses and selling them – because that’s what I do for a living – it’s very misunderstood. There’s a lot of people out there that feel it’s complicated, it’s difficult, and it is; there’s elements to it. But just like anything else, it’s a system, it’s a process. Everybody that’s listening to this is familiar with buying real estate and what real estate transactions look like, and we’ve all heard about flipping houses. I would say, just equate this to flipping houses, except it’s flipping businesses for a living. The difference is typically when you fix a house or flip a house, you’ve got to go in, buy it and then do maybe $30,000, $50,000, $100,000 worth of repairs, upgrades, renovations to be able to flip it. The great thing about businesses is that’s not always the case. We can flip businesses within 30 to 60 days. We can go in, take a business on, add 3% to 5% more profit to it, and turn around and flip it. So if that’s appealing to you, I would invite you to look into it. I’d invite you to reach out to us. We can give you some sample techniques on how to go about using that… Or see if you wanted to work with them on that type of stuff with us, because we’re looking for folks that are eager to work with as partners and take these opportunities on, because there’s literally more opportunities out there today than any one group can handle.

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

Bart Rupert: They can check out our program at www.spartansalliance.com. If you have questions, you want to know more about it, reach out directly. We’ve got somebody in our team by the name of Austin, and you can reach him at Austin@spartansalliance.com.

Joe Fairless: I had a lot of fun talking about this stuff, and I’m grateful that you were on the show. So Best Ever listeners, we’re making this Situation Saturday episode. So you’re listening to this on a Saturday. Well, if you listen to it on the day it comes out, you’re listening on a Saturday.

Bart, thank you for being on the show, thank you for talking about how to prepare our business in order for it to be sold, and then how to position it during the sales process. Ultimately, we are all entrepreneurs who are in real estate, so this is applicable to us whether or not we do sell a business, because certainly, we can apply your techniques to selling properties. Thanks for being on the show. Hope you have a best ever weekend. Talk to you again soon.

Bart Rupert: Yeah, thank you, Joe, and I just want to say, I really appreciate what you’re doing. I’ve been honored to be part of this and keep it up. I think there’s a lot of people out there they get tremendous value from your podcasts.

Joe Fairless: Thanks a lot. Appreciate it.

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JF2080: Medical Real Estate Investing With Colin Carr

Colin is the Founder and CEO of CARR, one of the nation’s leading providers of commercial real estate services. He has personally completed over 1,000 transactions and has been in real estate since 2000. Colin goes into medical real estate investing and what it looks like in his business. 


Colin Carr Real Estate Background:

  • Founder and CEO of CARR, one of the nation’s leading provider of commercial real estate services
  • Has been involved in commercial real estate since 2000 and has personally completed over 1,000 transactions.
  • Licensed real estate broker in ten states
  • Based in Denver, CO
  • Say hi to him at https://carr.us/

Click here for more info on groundbreaker.co


Best Ever Tweet:

“I like to help healthcare providers maximize their profitability through real estate.” – Colin Carr


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

Colin Carr: I’m doing great.

Joe Fairless: Well, I’m glad to hear that, and a little bit about Colin – he’s the founder and CEO of CARR, one of the nation’s leading providers of commercial real estate services. He’s been involved in commercial real estate since 2000, and has personally completed over 1000 transactions. He’s a licensed real estate broker in ten states, based in Denver, Colorado. So with that being said, Colin, you want to get the Best Ever listeners a little bit more about your background and your current focus?

Colin Carr: Yeah, absolutely. Well, first of all, thanks for having me on. Excited to be here. My background is exclusively real estate. I started managing apartment complexes when I was 19 – mid-rise, high-rise, rural; moved to Denver in my early 20s, kept managing apartments for a few years, got into brokerage, few years after that did Walmarts, Wendys, Blockbusters, a lot of national retailers, moved into other aspects of office, industrial, investment, healthcare, and then started a firm about 12 years ago, and we are now operating in about 40 states, and we touch a couple thousand transactions a year and have a pretty good pulse in the market.

Joe Fairless: What’s your personal area of focus right now?

Colin Carr: I’m the CEO of the company and I oversee over 100 agents. We have a healthcare division, we have a commercial division, an investment division and a senior housing division. So I oversee our agents’ best practices, and I do a lot on the investment and development side.

Joe Fairless: Alright, so I was typing as quick as I could… Healthcare, senior housing, and I know I missed a couple. What are some others?

Colin Carr: Yeah. Commercial, and then just an overall investment platform as well.

Joe Fairless: Okay. So when you say commercial, I think of senior housing facilities as commercial real estate. So what’s commercial? How is it defined here?

Colin Carr: So we would differentiate commercial being corporate uses, CPA’s attorneys, architects, oil and gas, financial services. So everything that we do is commercial real estate. We have a just traditional commercial division that also touches those focuses of commercial tenants and buyers, and then we actually have a senior housing division and then an investment division as well.

Joe Fairless: Okay, when I hear investment division, I think, ‘Well all of these are investments.” So how is the investment division different from senior housing investment or healthcare facility?

Colin Carr: Great question. Our investment division is going after investors that are looking for income-producing properties, and we’re helping them on the buy side, the sell side, the due diligence side. So our commercialization is corporations, helping them with their real estate. Our healthcare is helping healthcare providers with their real estate investments, income-producing properties with savvy investors looking to grow portfolios, acquire, dispose of, etc, and then same thing on the senior housing side – it’s investors, developers, operators. So a lot of these overlap though, there’s investment deals happening in all those sectors, and it’s a lot of overlap.

Joe Fairless: Which division is your least profitable?

Colin Carr: That’s a great question. All of our divisions are profitable, which is great. Senior housing is our newest one, so we’re touching a couple of dozen deals in that sector right now in a handful of states, but that’s our newest division that’s only a couple years old. So still got a great expertise there, but that’s one of our newer platforms.

Joe Fairless: What are some reasons why you created a new division for senior housing, and how do you hit the ground running in order to grow that quickly?

Colin Carr: So senior housing came to us because people knew how much healthcare work we do. We help a couple of thousand health care providers each year with their real estate. So we touch a lot of deals there, and so there’s a lot of investors and a lot of developers that are involved with medical office buildings, complexes, and they want to get into the senior housing game. So we get a lot of people that try to come to us for advice in that world, but that’s how senior housing came to be. It’s just very ancillary and complementary to our healthcare world.

Senior housing is an interesting niche because it’s not just the real estate component, it’s the operations, and really the operations drive the value, as you know. So that’s a world that just takes a little bit longer to get into. Whereas a lot of profitability, a lot of opportunities, the amount of product that’s needed in the senior housing market is one that literally cannot be met over the next 10, 15, 20 years. So there’s a huge opportunity there, but there’s more complexities too, with compliance and operations and licensing. So it’s a little bit different world.

Joe Fairless: From a broker standpoint, why is it harder to get into because of operations? This is my ignorance showing, but I wouldn’t think that you all would be involved in the operations part. So it’s like, alright, you’re selling a property, so why does it matter that the operations are really important with senior housing?

Colin Carr: That’s a great question. So to understand how to value a senior house facility, you’ve got to understand the operations, and you’ve got to actually get in there and get under the hood and figure out how the property is being run, because the operations are what drives the income. Whereas if you’re looking at an apartment complex or a multi-tone office building, you can look at a rent roll, and it’s pretty clear to figure out what’s happening. There’s so many different variations of senior housing facilities, and there’s a lot of concepts of, “Is it government subsidized?” There’s so many different facets of senior housing, and there’s different revenue streams in addition to just “What do they pay per month for that room? What are the other services that are provided?” So to understand or read a senior housing facility, you’ve got to understand how it’s operated.

Joe Fairless: And is that as simple as hiring one person or bringing on one person who knows the industry, and then he or she can train your team, and now you’re off and running, or is it more involved than that?

Colin Carr: It’s really more involved than that. It’s a skill set that takes, in my opinion, years to really understand and learn, and I’m not trying to make it larger than it is or more complex than it is, but there’s so many nuances. Is it independent living? Assisted living? Is it memory care? Is it a skilled nursing facility? Is it Medicaid? There’s so many aspects to that world. And then on top of that, from a buying and selling side, the facilities don’t get put onto a commercial MLS or listing service predominantly, unless it’s a really challenging property that is less than desirable.

Whoever controls the listings controls the opportunity. So it’s not one that you can get on to an online database and preview 15 facilities and see their income statements and rent rolls and balance sheets. You can’t do that. So you got to understand how to evaluate them, number one, and then you’ve got to figure out who controls the opportunity,  number two.

Joe Fairless: It makes a lot of sense how you got into it, given your connections with healthcare. So can you talk about your healthcare business or division and what’s a typical transaction look like?

Colin Carr: Absolutely. So our primary healthcare division represents healthcare providers. So dentists, physicians, veterinarians, and we help them with every aspect of their real estate interests. So finding land, developing properties, new locations, relocations, a lot of lease renewals… And in doing so, we work with a substantial number of landlords, large REITs, developers, and we work with a lot of owners trying to figure out how to make their properties more valuable, how to increase occupancy, etc.

Joe Fairless: What’s a recent transaction that comes to mind, or a recent deal, whether you’re finding the location or the actual property itself, or selling it? …just something that we can talk about.

Colin Carr: So an owner purchases a building, wants to attract healthcare uses, gets us involved in the process, figures out where’s the deal got to be priced at, what we have to do to make it attractive to healthcare providers, is it a viable healthcare option… And then if we can assist them in that process of bringing them numerous buyers, we can create a lot of opportunity out of changing a property from an office use to a medical use, etc.

Joe Fairless: What are some questions that you ask the owner during your due diligence process to determine if that office can be used for medical?

Colin Carr: Some of the initial stuff– we go through all the zoning, we go through those concepts, but really it’s does the owner have a desire to invest heavily in the process? Medical office is a very attractive asset class of property. Markets go up and down, the economy changes, it will correct; everyone knows that. So if you’re an owner, you’ve got to look at it and say, “Who do I want on my property?” You want a franchise that maybe has thin or no margins, and they’re just trying to buy a market share to see if they can later sell, and it’s not really a long term viable option.

Are you concerned if you have a retail center and you’ve got a bunch of apparel and soft goods, and you can pull up their income statements and realize these guys are losing money quarter after quarter, and what’s going to happen when you lose the 20,000 square-foot Forever 21 store that doesn’t renew and how do you backfill that with four or five other people and who’s going to backfill it? Or do you look at a medical opportunity and say, “You know what, even when the market goes down, that dentist is not going to decide to start a landscape business. Or the plastic surgeons, they might tighten the belt, they might trim some staff, they might work four days versus three days a week, but they’re probably not going anywhere, they’re probably not gonna change industry.”

So we do a lot of education with landlords on why it makes sense to invest more money into a healthcare deal. Why if you can lock down a ten-year deal, the tenants are gonna go in there and pump a couple hundred thousand dollars into the space; they’re more invested, they’ve got more skin in the game – why that makes sense to stretch further to make that deal, and why that deal, even though you might have to put a little bit more money into it or invest more, why that deal actually ends up being a safer investment for you.

You put more money in, so some people would say, “Well, no, that’s more risky,” but you’re securing a more valuable blue-chip tenant in a lot of scenarios. So we do a lot of education with landlords and developers on why they want these deals, and then you get the right tenant, they sign a ten-year lease, they’ll probably be there for 20, 30 years. So you can literally do a deal and not always – there’s definitely changes, – but a lot of times, you put that thing to sleep for a couple of decades.

Joe Fairless: You mentioned asking the owner, do they have a desire to invest money into it, but then you talked about how the tenant will put in a couple hundred thousand to get it to fit their exact needs… So what is the owner putting money into the property to do, versus a tenant?

Colin Carr: Good question. So the tenants put a lot of their own money into the spaces because landlords are typically not going to front the entire cost of the buildout or the finish. We do ask the landlords to contribute as well. We’re looking for both sides to be invested in it. So a traditional office deal or industrial deal or retail deal, the landlords are going to put money into the space to attract good tenants.

A lot of times on the healthcare deals, we ask them to put in a little bit more than they would for a traditional office use or retail use, but we, in turn, put in more money than the traditional user as well, and a lot of times we’re doing longer-term leases, and we’ve got a much lower default rate. Most of our healthcare uses have less than a 1% default rate, so it’s a more secure investment. So we ask the landlords to put more money in because our clients are putting more money in, and they’re willing to do longer-term leases, and they carry a higher success rate, lower default rate with them.

Joe Fairless: Is the landlord putting in money prior to getting a tenant?

Colin Carr: Typically, we tell them, “Don’t touch the space on a healthcare deal until the actual healthcare provider or tenant shows up”, because you think they want that type of lighting or ceiling or walls or bathroom, and then they want to change the location of the finishes… So we don’t like landlords to put money into spaces. A lot of times, landlords will try to put into a vanilla shell format or vanilla box, and we don’t want that, because they’re going to upgrade it almost every time. So that’s another way for landlords not to waste money on vacant spaces. Wait till the tenant shows up, don’t spend money in advance.

Joe Fairless: Is it usually 50-50 on improvements or what?

Colin Carr: No, it’s usually a per square foot basis that comes into line with the lease rates to where some landlords say, “Hey, I’m not going to put in more than one year of total rent into the deal” if it’s new construction and they’re financing the money, and they’re going to turn around and sell it in a couple of years. They might put in two, three, four years of rent into that initial space. So it depends. Is it first generation? Is it second generation? Are they a long term owner? Are they gonna try and sell it? Is it the cash they’re putting into it, or are they going to finance it? So it just depends on who the owner is and the structure, but typically, on most healthcare spaces, it’s between one to two and a half years of total rent usually gets put into the concession package of TI allowance, free rent, stuff like that.

Joe Fairless: So for someone listening to that, and if they’re thinking, okay, so, in a medical transaction, where you bring a health care provider, if I’m a landlord, I’m gonna have to put in, on average, one to two and a half years of total rent that I receive. So I’m not making any money for one to two and a half years. Why would I ever do that? You mentioned it already, long-term, but is there anything else that we should be thinking about where it’s like, “Oh man, the first two years are gone. I’m not making any money.”

Colin Carr: A lot of landlords are going to finance that tenant improvement allowance and a lot of lenders are going to be more prone to give money for that tenant improvement allowance, especially if it is a healthcare use and a long term lease. So there’s definitely owners that want to put cash in upfront and not go to the bank, but if you’ve got a loan on the property already, which most landlords do, most lenders are going to give money for that tenant improvement allowance to secure that tenant. So at that point, it’s [unintelligible [00:16:25].25] game.

The other thing that comes into play too is for the landlords that are willing to put money into the space, they’re going to typically capture a higher lease rate, which means the property is worth more. So whether you look at it as having a long-term owner, that’s fine, but most people are always looking at “What’s my exit strategy?” and so the higher the lease rate, the better the cap rate, the higher the property. A lot of landlords are looking at properties, “Hey, if I could buy this property, and let’s just say it’s getting $20 a square foot for rent, and if I were to put a little more money into it and get a healthcare use in there, I could maybe get $23 a square foot in rent. Well, $3 a square foot on a six cap or seven cap, all of a sudden my property’s worth 200 grand more, 800 grand more, whatever it is, depending on the size of the property.”

So it’s a numbers game of “Can I put more money into this space to attract better tenants, longer-term lease, and then a better cap rate, because it’s stronger credit tenant, lower default rate, and then can I raise the value of my property?” So that’s the game – if you’ve got a property and you’re normally getting local mom and pops retailers or short term office leases, and you can attract the long term healthcare use, you can raise the value of your property substantially by getting healthcare in there.

Joe Fairless: What’s been one of the more challenging transactions you’ve personally worked on?

Colin Carr: How many hours do we have for me to run through that list? Almost every commercial deal we do has some–

Joe Fairless: A specific one. I’m looking for a specific example that you can tell us a story about.

Colin Carr: Man, that’s a great question.

Joe Fairless: It could be a recent one. I’m just looking for a story from you about a transaction where there was a challenge, you overcame it, and here’s some things we can learn from it.

Colin Carr: I would say, a specific deal I’m thinking of right now is, you find a landlord – and this is a specific deal – they bought a building a number of years ago, the tenant had an above-market lease rate when it was purchased, annual increases push the lease rate up 3% every year, and then you come to the lease expiration date, and you get ready to do a lease renewal, and the landlord is 100% set on not reducing the lease rate because they don’t want to discount their cashflow and discount the value of the property… But the deal is way over market, the tenant’s not going to stay. So you end up in an arm wrestling match with the landlord, and they’re assuming that the tenant’s not going to move, but the tenant has to move, because they can’t pay that type of rent.

So the landlord has come to grips with the fact that they didn’t do good due diligence upfront and it was an above-market lease rate, and they can’t capture and maintain that rate moving forward. And once that lease is over and that tenant moves out, they’re going to have to come to market with the real deal for the next person. So that’s a traditional deal, that’s what I’m thinking of right now, is “Hey, you’re 20% above market. I know it looks good on paper, I know you bought it thinking it was a great cash flow, but it’s not real.”

So it’s kind of a pro tip – you’ve got to make sure that you’re not dealing with inflated rents that are not renewable in the future, and if you lose that tenant and you have to go to market, you’re gonna have to come up with a real deal.

Joe Fairless: What a great piece of advice mentioning that… Because if I go to look at deals, and I see an office building and the seller says, “Hey, the market is X amount of dollars, but I got you even better at Y.” I think, “Ah, that’s awesome. This is gonna be a better deal than I’ll get it anywhere else, because I’m getting better market rents,” but as you said, there’s some pitfalls to that when the lease expires.

So then what I would need to do in order to make sure that the deal still makes sense is determine what type of market demand there is for that type of tenant, and if there’s a whole lot of demand for that tenant, then — I guess, I still shouldn’t assume that I’ll be able to get above-market rents upon the lease renewing, but at least there’ll still be more tenants to fill in if this one leaves.

Colin Carr: Absolutely. You’ve got two sides of the coin. You got, “Why the lease rate’s below market?” and “Is that really the lease rate?” They say, “Well, this is a below-market lease and you’re gonna be able to bump it up on a renewal.” “Well, alright, show me that you’ve achieved that the last couple leases you’ve done and show me where the market’s at, so that I have the track record that you’ve been able to do that.”

The other side of the coin is, “Hey, look at these lease rates. They’re capturing premiums, and these are a lot higher than our competing properties in the market or other comps.” And the question is “Is that sustainable in the future? Do I need to discount that value and underwrite it differently?”

The same concept applies with – you get a property as a 100% leased, you’ve got to put a vacancy factor in there and assume that you’re gonna run a vacancy over time and on average. You’ve got to put a 5% or 10% vacancy factor in there. So yeah, there are definitely pro tips as far as if it’s below market – why? If it’s above market, why? I think really the question comes down to what’s sustainable, and that’s where you’ve got to tap market experts to give you that advice and just make sure that you’re doing your due diligence.

Joe Fairless: Based on your experience as a real estate professional, what is your best advice ever for real estate investors looking to purchase, or in the industry of buying healthcare, or having commercial properties that cater to healthcare professionals?

Colin Carr: My advice would be just find the people that are the most likely to bring you those tenants. So when you’re talking about buying a medical building, and you’re talking to the seller, look at what they’ve done as a track record, because that’s a great indication of hopefully what you’ll be able to accomplish as well, too… But it’s really easy just to talk to the selling party and let them give you all the information, all the play by play. But at the end the day, they’re not going to be the ones to try bringing you the new people for your space, or helping you to renew those people. So I would say, find an industry expert like a company that represents healthcare tents and buyers, and then ask them, “What would be your objections to bring in your clients to the center? What would we have to do to attract your clients for the property? Do you think the market can sustain these lease rates? What type of TI allowance do I need to do to put into these deals?”

Get a perspective from the other side of the table with someone who’s not involved in that transaction. Not the listing agent, not the seller, but talk to somebody who is viably going to bring you an option or bring you a tenant for the future and get their perspective on it, because it’s going to be very different than what the seller’s selling you, trying to sell you the property.

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

Colin Carr: I am.

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


Break: [00:22:55]:04] to [00:23:38]:03]


Joe Fairless: What’s a bad piece of advice that you’ve received over the years?

Colin Carr: Thinking the market’s not going to change. Thinking that, “Hey, we’ve got this the last five years, it’s gonna continue to be that way”, and just not realizing the market is gonna shift.

Joe Fairless: What’s a best ever resource that you use in your business that is really helpful for you, whether it’s an online resource, an app, some website, something like that?

Colin Carr: The same answers two times ago – talking to the market expert who’s not involved in the transaction to give you an independent third party perspective on how viable is this location, this space, this deal, this price, and how would you critique it for your clients if you bring us a tenant or buyer for this?

Joe Fairless: What’s been one of your favorite transactions that you’ve done?

Colin Carr: Favorite transactions… I would lump them together as beginning deals in the business, grinding out the dirtiest, lowest-priced, worst location industrial deals you can possibly imagine, and just learning how to put together a deal, learning how to treat people, learning how to figure out how to solve problems, and just thinking back to the worst property you’d ever want to go to, and then getting that deal done and making no money on it whatsoever, but realizing you found a way to make a win… And at the end the day, even though it was a down and dirty property, the tenant was happy to be there, and learning how to do deals.

Joe Fairless: How do you not make money when you transact a deal, even if it’s a bad deal and a bad area?

Colin Carr: As a broker, you’re paid usually upon– it could be a per-square-foot commission, but a lot of times it’s a percentage. So I’m thinking of the 1,100 square foot machine shop industrial deal with a $4 lease rate, where you spend months on a deal and you make a couple hundred bucks or something like that, where you look at your time and you’re like, “Wait a second, I think I ‘ve made $1.50 an hour on this deal.”

We’ve got monster success stories of making a ton of deals, and that’s great, but honestly, it’s the deals that you learn to cut your teeth on, and even the ones where maybe, you lost some money, but you learned a lot. Those are my favorite because that’s the foundation you build upon.

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

Colin Carr: I love sharing information and helping people take what I’ve learned, and then help them become more successful… Because that’s really what I’ve done over my career – I’ve had the benefit of picking people’s brains, asking the exact questions you’re asking now, getting their insight, and then taking a lesson that a guy took 20 years to learn, and then he shares it with me and saved me all the heartache and pain. So doing the same thing of taking my information, the skillset, the contacts, introducing people to those same people, those lessons, and then helping them to build upon the foundation that I’ve laid, which is really the foundation of hundreds of other people before me.

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

Colin Carr: Website is carr.us, and in the upper right hand corner, you can find an agent. So if you want to talk about the viability of a deal or get a perspective from us before you buy a property or invest in and pick someone’s brain, our team, our agents are happy to do that. We do it every day. They won’t charge you for it. They’ll just give you free advice and give you their thoughts, and you can get in touch with someone locally that could give you a lot of information that could help you to process.

Joe Fairless: You’re a wealth of knowledge. It’s so nice talking to people who are so knowledgeable about what they do, and it is very clear that you know your industries that you’re in, and it’s just fun. I love talking to people like you. So thank you for being on the show, talking to us about the four divisions of your company, talking about how you got into senior housing as a result of being in healthcare, and then going deep into healthcare in particular, from an investor standpoint, and what to look for. So thanks for being on the show, really enjoyed it. I hope you have a best ever day, and we’ll talk to you again soon.

Colin Carr: I appreciate that. Thanks so much.

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JF2064: A Passive Investors Perspective During The Coronavirus With Travis Watts

 Travis is a full-time investor and the director of Investor Relations at Ashcroft Capital. Travis has written some articles on our blog to help investors during the Coronavirus pandemic we are all going through today. As a full-time passive investor, Travis gives his perspective on what he is seeing in the current market and what he is keeping an eye out for. 

Inflation article


Travis Watts Real Estate Background:

  • Full-time passive investor
  • Director of Investor Relations at Ashcroft Capital
  • In 2009 he started investing in multi-family, single-family, and vacation rentals
  • Based in Denver, Colorado
  • Say hi to him and grab a free passive investor guide at Ashcroft Capital




Click here for more info on groundbreaker.co

Best Ever Tweet:

“There is always a silver lining, there will always be opportunities that pop up. Look at this as an opportunity to educate yourself” – Travis Watts


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

Travis Watts: Hey, Theo. I think I know you from somewhere, don’t I?

Theo Hicks: Yeah, I think I know from somewhere as well. If you guys don’t know, Travis is the director of investor relations at Ashcroft Capital. That’s how I know him. I met him at our first quarterly meeting. I’m looking forward to our conversation, because I haven’t been able to have a long conversation with him yet, so I’m looking forward to getting some advice… Just like you guys are looking forward to it as well.

A little bit more about Travis – he’s a full-time passive investor, as well as the director of investor relations at Ashcroft Capital. In 2009 he started investing in multifamily, single-family and vacation rentals. He’s based in Denver, Colorado, and you can say hi to him at AshcroftCapital.com. You guys should all be able to spell that by now.

Travis, before we begin, we’re gonna be talking about the Coronavirus today. Travis has some really good articles on our blog right now, so we’re gonna talk about one of those in particular, and maybe talk about the other one as well.

Before we get into that, Travis, do you mind telling us a little bit more about your background and what you’re focused on today?

Travis Watts: Sure, I appreciate that intro. So I got started in real estate, as probably a lot of people do, probably the majority of real estate investors – single-family. It kind of led to trying to scale that portfolio up… The problem that I had personally, which isn’t applicable to everyone, but I was working a full-time W-2 job, more importantly a 98-hour workweek job, where I was away from home, completely dedicated to that… And as I started trying to scale the single-family on the side, doing some flips and vacation rentals, things like that, it just got to be too hands-on for me, which — I had to go back to the drawing board, learn how to become a completely passive investor, what strategies and assets and things like that existed… And that’s where I ran into syndication investing in real estate.

I made a complete transition around 2015 through 2016, where I was selling all my single-family, I was going all-in into multifamily and syndications… So that’s brought us to the last 5-6 years. I came onboard with Ashcroft to just help spread education around passive investing and what benefits those can have for certain people’s lives.

Theo Hicks: Perfect. Thanks for sharing that. One article that I really liked was your article about inflation, and how people can benefit from the inflation from printing off two trillion dollars in cash… Do you wanna summarize that article? And then if there’s anything else you wanna talk about as it relates to inflation.

Travis Watts: Yeah, and again, I think that article is out there both on the Best Ever Community – I put it out there I think under my Bigger Pockets as well, things like that… So check it out. But the concept is pretty basic, really. This is a topic we could have talked about a year ago, two years ago, five years ago… And that’s just this idea that the Federal Reserve is printing money, every time we’re going into these crisis situations – 2008-2009, now this pandemic here being probably the worst in terms of what we’re gonna see in money printing… But that’s devaluing the purchasing power of the dollar.

There’s a lot of scary headlines out there that you read, about the mortgage crisis, and just what’s unfolding, and all this scary bad news, but here’s a way to look at it in the light of real estate, whether we’re talking single-family, multifamily, whatever. When you’re acquiring debt, so you’re going out to get a mortgage, you’re hopefully getting some long-term fixed-rate debt, depending on what you’re doing, meaning that you’re locking in a payment every month, that’s gonna be due. Let’s just call it $1,000/month for a owner-occupied home, that’s your mortgage payment. So that payment, on the debt side, is never gonna change for 15 years, 30 years, whatever kind of mortgage you get.

The idea is as we move forward and the Fed continues printing and printing, and the purchasing power of the dollar is going down and down and down, you’re basically using cheaper dollars to pay off that debt. So what is $1,000 in today’s money could be worth $200 down the road in the future. So it’s gonna make it much easier to pay off that debt long-term, and more specifically in terms of investment real estate, where tenants are paying that off anyhow. So that’s what the article is kind of about, from a high-level, for those that may not be tuned in. Yes, the Fed has already printed a couple trillion dollars, and that can quickly escalate to 4, 6, 10. I hear all kinds of numbers out there.

The scary thing to think about is — this is how inflation is created. Basically, inflation is the cost of goods going up year after year after year, so it takes more and more dollars to purchase the exact same thing, years down the road. So the crisis here, in my opinion, if you wanna look at the negative side of things, is we’ve got 2019, four trillion dollars in circulation. That’s like our money supply. So if the Fed’s gonna go and print four trillion dollars as an example, then theoretically we’re gonna have some massive inflation kicking in at some point, theoretically a doubling in price… Maybe not today or tomorrow or next year, but down the road.

So if anything, look at this in a positive light – we’ve got all-time low interest rates; it’s a great time to be refinancing projects, and potentially getting involved with real estate, if that’s something that you haven’t done yet or that you’re currently doing. So a little long-winded… There’s still hopefully some value in reading that article, but that’s the high level.

Theo Hicks: Obviously, it makes sense to get debt, but since I’ve got a $1,000 payment and I’ve got 100k (let’s say) sitting in my bank right now, and five years from now that 100k is gonna be worth 10k… Practically speaking, should I pay down my debt on my properties?

Travis Watts: Yeah, that’s a good question. The way I look at it is “What’s my alternative?” In general right now we have a lot of low interest rate debt for things like real estate, whereas a lot of folks might have at this time high interest rate debt. They might have personal loans from a bank, or credit card, or retail debt… Things they’re paying 10%, 15%, 20%, 25% annually on. That’s what I’d be focused on right now paying down.

And what I mean by alternatives – if you’ve got a 3,5% mortgage today, could that money be better utilized if you were to invest it in something that could produce a higher return? Like a 8%-10% annualized cashflow return. So I’m not giving any kind of financial advice to anybody, but it just depends on your situation, what kinds of debt you have, but certainly for the folks that are saying “I have $100,000 in the bank account. I’m just gonna let that sit and ride for the next 10-20 years as my little reserve account”, you’re most certainly gonna be losing a lot of that purchasing power over that time, so I’d be looking for ways — while safely and conservatively keeping your emergency fund in place, certain months of living expenses (3-6 months is what you commonly hear), I’d be looking at places to park that capital, things like real estate, that are kind of a hedge against inflation, somewhat.

Theo Hicks: Okay, thanks for sharing that. Changing gears a little bit – so you are a full-time passive investor… Most of the people I’ve talked to about the Coronavirus are actively investing, so we talked about rent collections, and making sure they can pay their mortgage payments, and asking how much cash reserves they have… But something that I’d be interested to ask you about as a full-time passive investor is are you still seeing opportunities to invest in right now, or has that slowed down? And if so, what’s your strategy over the next 6-12 months as a passive investor? Are you kind of in a holding pattern, are you still looking for deals? Things like that, if you could talk about that for a little bit.

Travis Watts: Yeah, absolutely. I guess the unique perspective or the benefit of not only being an investor with one group like Ashcroft, but being an investor with 14 different groups is I get invited to a lot of webinars, a lot of conference calls, I get a lot of email updates, I get a lot of “Here’s what we’re doing in terms of Covid” and all this kind of stuff… So I have a bit of a broad perspective on what a lot of folks are doing out there.

In general, this interview is taking place mid-April. This is our first real impacted month. This whole Corona thing got real serious towards the end of March, and then rent was due April 1st. So my opinion here is that a lot of people were already kind of set up and primed to pay their rent anyway. They already had it in the bank, or in their savings account… They were ready to go for April. I’m a little more concerned maybe with May and June, and however long we’re in this lockdown, and the economy is shut down, and things like that.

What I have seen more specifically, to answer your question, with these different syndication groups in general is a little bit of wait-and-see right now. It’s a little too early to start calling the shots, it’s a little too early to start saying “Oh, there’s all these new deals popping up, things like that.” It’s hard to look at a T12 statement and have that make a lot of sense, looking at 2019 numbers, when now we’re in this state where we don’t know what our collections are gonna end up being. So I’m a bit of the same mindset.

I did invest in some recent deal that have closed through the March timeframe, and I think one in April… But at this point I’m focused more on making sure I have adequate cash reserves personally on hand, in case things pop up; capital calls, whatever. Or best-case scenario, I just hoard a little bit of cash and then maybe by late summer there’s some deals popping up that make a lot of sense to get involved with, and we’ll have the cash to do it.

So that’s kind of where I sit. It’s a little bit of sit-and-wait probably through April and May, and hopefully we’ll know a whole lot more in June, and hopefully the numbers start making sense again, and the economy starts reopening. But we’ll see. Who knows.

Theo Hicks: Exactly. So definitely wait and see right now. So you mentioned that you’re getting a lot of communications from either deals you’re investing in with all types of sponsors… Do you mind walking us through, as a passive investor, what types of communication you’re getting from syndicators? More specifically, maybe tell us what a good communication looks like at a time like this, and maybe some things that you see and it’s kind of making you worry when you consider a bad communication.

Travis Watts: Something I’d talk about on the podcast is why I like syndicate groups that not only distribute monthly distributions, but hand-in-hand they report monthly. I think in a time like this it means a lot. No one wants to sit here 3-4 months to wait on an update to see how their property is doing.

Some groups to this point that are quarterly that I’ve invested with have literally sent out one communication since this whole thing started to unfold… And I don’t appreciate that. I’m all about transparency and proactiveness, communication… So what does that prompt investors to do? Call. Email. Just bug you to death. So why don’t you just get the information out?

What am I seeing is a lot to do with helping the tenants, helping educate how they can file for unemployment if they’ve lost their jobs, how they can maybe get on some kind of payment plan and maybe make a half payment on the first and a half payment on the 15th, resources for companies hiring in the local area… There’s obviously some businesses somewhat thriving right now. It’s kind of a weird word to use… Amazon’s hiring, grocery stores are hiring… There’s a lot of opportunities. I invest mostly in workforce housing, B and C class properties, so a lot of these folks are in an income range of 30k to maybe 60k/year household income… So a lot of opportunities are available for folks like that, depending on the area where your property is located.

So in general, that’s the communication I’ve been getting – let’s wait and see how collections pan out, and here’s where we are as of today, and how does that compare to the previous quarter. Look,  I don’t need a communication every day, because it doesn’t make a lot of sense, but I think at least a monthly communication is ideal. A lot of groups have been doing webinars, Q&A calls, things like that… And I think that goes a long way as well in a crisis situation like this.

Theo Hicks: Another article that you wrote on the website – and I’m sure it’s on LinkedIn and your Bigger Pockets profile as well – is about the mortgage crisis. Do you mind talking about that for a little bit?

Travis Watts: Sure. That one’s a little more technical. I think there’s a lot of key elements that are just probably better read through the article itself… But basically, what you’ve been hearing a lot in the headlines is things like this mortgage forbearance, or people aren’t paying their mortgages, they’re not paying the rent… Well, the thing is there’s a chain effect here. It starts with, let’s say, the homeowners saying “I’m not gonna make my mortgage payment”. But then what a lot of people don’t understand is that mortgages are often sold. And they’re sold, they’re wrapped up into collateralized mortgage obligations, investments basically that people can invest in, where you’re investing in different tranches, and things like that…

So you’ve got the bank or the lender, you’ve got the tenant, and then you’ve got the investment, then you’ve got the investors behind the scenes there… And it’s like “Who’s left holding the bag here?” That’s kind of what the crisis is – trying to figure out what kind of stimulus is coming for who exactly; it’s gonna start with probably the person that’s supposed to be paying their rent or their mortgage, and then it’s gonna go as a trickle-down effect. But it could completely implode parts of the lending industry… So it really is a crisis in a sense, but… Anyway, there’s much more detail that’s probably better found in the article… But yeah, that was another recent one that I’ve just put out.

Theo Hicks: You don’t have to answer this question if you don’t have to, because I’m putting you on the spot, but I did read recently that Chase changed their mortgage criteria… So they’re only lending to people that have a credit score of 700 or higher, and then 20% down payments… Which seems to be one of the first residential lending institutions to make changes such as that.

I guess my question would be “Do you think that that is gonna be an opening for other lending institutions to also change their lending criteria?” And if yes, what kind of effect do you think it’ll have on the overall real estate market?

Travis Watts: Yeah, I’m happy to give a high-level overview… And that’s kind of how that article ends, that I wrote – what are the practical takeaways here? Well, if you’re selling a home, it may be a little bit harder, for obvious reasons, to get a buyer, just because people aren’t getting out as much, or they  may not be in the investment market space as much right now… But more importantly, to your point, someone who’s qualified. So which lenders are still lending? And if they are, like you said, I think that banks are gonna be tightening up quite a bit right now… Obviously, to lower their risk. They don’t want any defaults, and there’s probably a lot of defaults coming their way.

In fact today – maybe yesterday – was the earnings report for a lot of banks, and they’re in a bad place right now. They see a bit of a grim immediate future here, at least talking through the next quarter. With all of this mortgage forbearance, and people not paying, and unemployment spiking… It’s a tough time to be a bank.

If you’re buying – to your point – you may have to have a little bit better credit, you may need to put a little bit  more down… If you’re selling, it’s a little harder to find a qualified buyer… Obviously, that’s gonna have an effect in the residential space, of course, 100%. But in no way, shape or form, in my opinion, are we talking about something similar to ’08, ’09 housing real estate crisis. That’s not exactly what’s happening this time.

Theo Hicks: Thanks for sharing that. Is there anything else you wanna mention as it relates to the Coronavirus and real estate that we haven’t talked about already before we hop into the lightning round?

Travis Watts: There’s always a silver lining to this stuff. Even ’08, ’09 — yes, it’s bad news, and there’s negativity everywhere, and nobody knows, and where is the bottom, but there’s always going to be opportunities that pop up… Not only in the syndication space, in the publicly-traded stuff… Look at this as an opportunity to 1) above all, educate yourself. This is a really great time to educate yourself. Figure out what your goals are… And it’s a great time to get started. As you alluded to in the beginning of this podcast, I got started in 2009. Well, that was not quite the absolute bottom of the market, but it was pretty near and close to it. And riding the way up over the next decade is helpful, for a lack of better words. It wasn’t the perfect time to get in, but it was a pretty decent time… So just hopefully you can keep your job, and your income, and your business running through this. Hopefully the stimulus money can help soften the blow on that front, and then wait and see what opportunities can come over the next 6-18 months or so.

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

Travis Watts: Let’s do it!

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

Break: [00:19:48].09] to [00:20:50].16]

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

Travis Watts: I think you just said the title of it – it’s the Best Ever Apartment Investing Book that you and Joe wrote. That’s actually a really great book that you guys wrote. I actually just bought that the other day and gave it to someone who was looking to be a GP themselves.

One that’s kind of a classic, that I’ve recently re-read is Awaken the Giant Within, a Tony Robbins book. I don’t even know when he wrote that. Probably in the ’80s. But man, is it just timeless; great insight and info for self development.

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

Travis Watts: What would I do next… I’m trying to make this as short as possible, but I’ve always been a huge advocate of the FIRE Movement (Financial Independence, Retire Early), which has a lot to do with reducing your expenses and overhead, making as much money as you can make, and investing that into things that produce passive income. I would stay on the passive income route, I would just look for an opportunity to make as much income as I could, and put my focus back there again.

Theo Hicks: Do you mind telling us about a deal that you’ve lost the most money on? How much you lost, and the lesson that you learned.

Travis Watts: Yeah, I invested in something I clearly didn’t know that much about. It was a distressed debt syndication fund. Sometimes I experiment outside of real estate; that was one of the first big experiments I did. I put maybe — I don’t even know; there were two funds, and I put maybe 175k in, and lost (to date) maybe 40%-50%. It could be a lot worse… It’s in a receivership now, so who knows what that will end up being… But it was a rough ride.

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

Travis Watts: The best ever deal was actually in the single-family space during — I think it was like 2014 to 2015. I bought a house from a bank, I paid 97k for it. I didn’t do anything to it. I just rented it out as is, and I sold it two years later for 215k.

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

Travis Watts: My time. Week to week I take calls with all types of people, not only investors, but people looking to house-hack, or do a fix and flip, or become a GP, sometimes an LP… I just love sharing experience, talking through things, handing off resources… I just mentioned the book you wrote with Joe – I gave that as a resource to someone just last week… So just sharing my time.

I just wish that there had been more people in my life when I got started, that I could have reached out to, to say that classic “Hey, let me pick your brain for 30 minutes.” I give people that opportunity.

Theo Hicks: Then lastly, what’s the best ever place to reach you?

Travis Watts: Probably email. Travis [at] ashcroftcapital.com. Or ashcroftcapital.com/passiveinvestor. I’ve got a free passive investing guide there and it connects you with me if you’d like to jump on a phone call as well.

Theo Hicks: Perfect. Best Ever listeners, make sure you take advantage of that, and make sure you check out the two articles that we talked about today. The first one is “How inflation can benefit you over the next decade”, and the second one is “The Mortgage Crisis: Will You Be Affected?” As Travis mentioned, the Mortgage Crisis one goes into more technical detail on that.

Besides those two articles, the one other main takeaway that I got was you talking about the types of communications you’ve been getting from different sponsors… You’ve got some people who haven’t reached out at all, some people that are reaching out a little bit too much. The sweet spot is monthly communication, letting you know what’s going on at the property and being transparent and honest.

I think that is it… Travis, it’s been nice talking to you. Best Ever listeners, as always, thanks for listening. Have a best ever day, and we will talk to you tomorrow.

Travis Watts: Thanks, Theo.


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JF1936: Lost After College, Entrepreneur Turns To Real Estate Investing with DJ Scruggs

Today we have the privilege of hearing about DJ’s real estate investing story. He had no clue what to do after graduating college, started and ran multiple businesses, before discovering his love of real estate. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“You don’t have to be a jerk, but you can always ask why” – DJ Scruggs


DJ Scruggs Real Estate Background:

  • Has owned and operated multiple businesses for over twenty years
  • CEO of Blue Spruce Holdings
  • He has filled many roles in business and as a real estate investor including raising capital, marketing, sales, and software development
  • Based in Denver, CO
  • Say hi to him at http://realbluespruce.com/
  • Best Ever Book: The Book of Why


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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

DJ Scruggs: I am great. How about you, Joe?

Joe Fairless: I am great as well, and looking forward to our conversation. DJ is the CEO of Blue Spruce Holdings. He’s owned and operated multiple businesses over 20 years, filled many roles as a real estate investor… That includes raising capital, marketing, sales and software development. Based in Denver, Colorado. With that being said, DJ, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

DJ Scruggs: Happy to. And thanks again, it’s an honor and a privilege to be on this show. My background was — if we wanna go all the way back to college, I was a classic literal arts major, I had no idea what I was doing when I got out. I was a music major. I realized by my senior year that that was not gonna be a good career for me, just because financially it’s not always the best, and the people who really are good at it – to them it’s like crack; they can’t not do it. And I wasn’t one of those people.

So I got out of college and really did not know the first thing about business. I’ll fast-forward to say I started reading a lot. I read The Wall Street Journal, Inc. Magazine, lots of books… This was in the early ’90s, before blogs and even websites really. And around ’95, I remember very specifically it was Thanksgiving of ’95, I got on the internet — I had been on the internet before, but it had been through America Online, and stuff like that, so it was a very degraded experience… But this was the first time I was on the internet, in the wild, and I thought “Oh my god, this is the biggest thing ever. This is gonna be enormous. I’ve just gotta figure out a way to start a business.” And I would say the takeaway from that — a lot of people say “Well, how do you start a business?” or “Am I smart enough to start a business?” It doesn’t matter. Just start.

What really motivated me is I read this — it was actually in Inc. Magazine, they did an article about the early beginnings of great companies. And back then, great companies meant Apple – it was still a great company – Hewlett Packard, Motorola, Microsoft… And almost to a T, every single one of them when they started it was just one or two people with an idea. They had no idea what they were gonna do, they had no idea they were gonna build billion-dollar companies, but they just sort of said “We’re gonna do something different.” And it hit me like  a ton of bricks – everything you see around you, literally everything, except maybe for hiking in the mountains, is because someone had an idea. Someone said “I’m gonna build a desk for you to sit at. I’m gonna design a computer that you’ll like to use. I’m gonna create software that allows people to do interviews over the internet.” It’s all about having an idea and then just getting started.

Joe Fairless: Yup.

DJ Scruggs: And that’s what I did.

Joe Fairless: So what was it?

DJ Scruggs: This was back when Java was a new thing. Java, the programming language. It was actually still in beta then. Java now is considered a dinosaur; it’s ancient. But the basic business plan was “Do something with Java.” That was enough to get me excited, pretty much. And what it turned into was to create customer service software for email.

I used to go pitch investors — this was in Chicago, and this is like ’96(ish). I would pitch investors, some of them very sophisticated, who just did not think email was gonna be that important. They thought it was just a toy, they all had AOL accounts and that was fine for them, they didn’t need anything more… So it took a lot of convincing to say “Online customer service is gonna be more important than call centers.” But that was the basic idea.

Joe Fairless: Okay. Congrats on that. Do you still have the business?

DJ Scruggs: No. I ended up selling it, and this was probably another lesson for people… It never hurts to ask. We were pretty hard-pressed for money, partly because we were in Chicago. Chicago is not a great — I don’t know about now; I think now it’s probably a lot different. But back then, starting a software company in Chicago was not optimal. Lots of consultants, because of the banking/financial sector, but starting just a pure-play software company – that was not very common, so it was hard to find talent, it was hard to get investors interested… But I’d gone out to Silicon Valley, and of course, they’re biased towards Silicon Valley, right? They want a company that’s within 20 minutes Sand Hill Road, where all the venture capital firms were.

So we were running out of money, and I was like “I’ve gotta find some money.” I ended up making a bunch of cold calls to venture capitalists, and the one who returned my calls, a guy named Brad Feld, who’s now considered one of the top 50 venture capitalists in the world – he’s based in Boulder, Colorado… And one thing led to another, and I ended up selling my company to a roll-up that Brad was running. This was closed in 1999.

Joe Fairless: Nice! What did you sell it for?

DJ Scruggs: Well, it was an all-stock deal, which – there was a hard lesson learned around that, too… But it ended up being about 20 million dollars. My investors did really well, they made about eight times their money in a year and a half.

Joe Fairless: That’s a good deal for them. [laughs]

DJ Scruggs: Oh yeah, it was great for them. For me, it ended up not being quite as exciting.

Joe Fairless: And why was it an all-stock deal? Can you elaborate?

DJ Scruggs: Yeah. Basically, I got shares instead of cash, and I didn’t get them all at once. I had to earn them out over a two-year period… And I couldn’t touch any of them for the first year. So during that first year, the stock price ran up really high, so I was loving life. In that second year, it went really low, so I wasn’t loving life… And they were dragging their heels about – I don’t think it was malice; I think it was just incompetence – actually getting the [unintelligible [00:06:49].23] They were locked up in some kind of escrow, or trust, or something I don’t quite understand… And it’s one of those things where I didn’t realize my own power.

At that point, I was the largest single shareholder who was an employee of the company. I should have just raised absolute hell, and I didn’t. I was a little too nice about it. But hard lesson learned.

Joe Fairless: Well, on the raising hell versus being too nice, have you come across that situation in real estate, where you’ve since raised hell because you’ve learned that hard lesson early on?

DJ Scruggs: Yeah, I would say so… It’s not so much raising hell, it’s just figuring out when someone’s bullshitting you. I don’t know if I’m allowed to say that on your show…

Joe Fairless: That’s fine, yeah.

DJ Scruggs: Because here’s the thing… So I sold the company — like I said, I was a music major. There weren’t blogs or anything to learn from. I’d read a few books and kind of knew a little bit about business, but not a lot. There weren’t online courses I could take, or mastermind groups I could join, or anything like that. So when I sold the company, I remember thinking “Thank goodness. Now the experts are gonna run things.” Because it was all — a senior vice-president with an MBA from Stanford and ten years running traditional tech companies, and stuff like that. So I deferred a lot to them.

But after a while I just started noticing… Like, I remember when he hired this one person – I don’t wanna name names; she was a good person, I like her, and she had a pretty senior role. Everyone liked her. But I noticed pretty quickly that her solution to everything was to throw money at it. And my company — we had raised a little bit of money; we raised about 1,5 million, but it was all in drips and drops. So it’s not like I ever had 1,5 million in the bank to start with. It was always just trying to make payroll… So I would always stay at the crappy airport hotel, I would rent the economy car, I would take the overnight flight to save money. So I get there and these guys have a lot more money; they’re not making money, but they’ve got a lot more money…

Joe Fairless: They have access to more money.

DJ Scruggs: They have a lot of capital, yeah. So suddenly, we’re staying at the nicer hotels, and we’re renting the nice cars, and I remember thinking “Well, I’m not sure that’s how I would do it, but maybe that’s the way you do it when you’re big.” And this woman I mentioned – everyone loved her, and I noticed that her problem was she threw money at everything. “Let’s hire more people, let’s buy more software, let’s buy more equipment…”, and I thought “Someday the money train is gonna stop, and what’s that gonna look like?”

Well, it was about a year later that the money train stopped, and what it looked like was she stopped returning people’s calls. She stopped coming to the office, because her go-to solution was no longer available. And it went from everyone loved her to everyone hated her.

To circle back to the question of when to raise hell – I just have a better sense of when someone really knows what they’re talking about, or if they’re just trying to snow me. I remember early on in this business we talked with a potential partner about working on a deal together, and the questions he was asking just from the very first phone call – I realized he didn’t know what he was talking about. He wanted to see our operating agreement. Like, that’s not material. You don’t need to see that. The deal was a separate entity.

And there was another guy who was supposed to be on the call who didn’t make it. He’d blown us off two times in a row. So Brad, our underwriter, asked “What do we do? Do we send the operating agreement?” I said “Absolutely not. This guy is trying to big-time us, show us how important he is, and he’s not.” Anyone who knows what they’re doing is not gonna ask stupid questions like that.

Joe Fairless: Yeah. And then if you don’t pick up on that, then you might get into a deal with that individual, and then you lose money.

DJ Scruggs: Yeah. It’s not fun to lose money, but also, if you don’t pick up on it, the temptation especially if you’re new to this is to defer to their judgment… And like I said, just because they have an MBA, or a track record with some other business, doesn’t mean they actually now what they’re doing. It just means they’re good at talking about knowing what they’re doing. You don’t have to be a jerk, but you can always ask why. “Why are we doing this? What’s the point of this? How are you making this decision?” And oftentimes they don’t really have a good answer. And if you do it in a non-threatening way, maybe you can reach a better solution.

Joe Fairless: I like that. You don’t have to be a jerk, but you can always ask why. I like that a lot. What’s your role as CEO of Blue Spruce Holdings?

DJ Scruggs: A few different ones. I would say what I spend most of my time on is raising capital. I talk with investors, and I do a lot of (I guess you could call it) content marketing, email, newsletters to keep people informed of the business, introduce the company… We’re relatively new to this; we’ve only been doing it a couple of years. And what I tell people is – in any business –  the best answer to the question why you should do business with us is “Well, I’ve been doing it for 20 years, and  we returned X% every year.” That’s the idea.

Joe Fairless: [unintelligible [00:11:32].04]

DJ Scruggs: Yeah. If you don’t have that, then you need to demonstrate competency some other way. So act professional, be respectful, and be respectable. Show up a lot. That was basically [unintelligible [00:11:46].21] strategy. He started doing meetups, and he was just everywhere; he was all over Facebook, he’s always at different events, and just by showing that he cared and that he was serious about this… And by the way, he’s a fun guy to hang out with, and get advice from. Those are the ways that you can demonstrate competence.

So a lot of what I do is around talking to investors, writing our newsletter, writing for the blog, and then just some technology support around the way we automate a lot of our systems. And then I guess the other thing is just more broadly — the best description I’ve heard of a CEO… I can’t remember who it was; this was probably 20 years ago [unintelligible [00:12:22].15] You’ve got three roles. One is to make sure that you have a viable strategy. The other is to make sure that you’re operating as efficiently as possible, and the third is to make sure you have the capital in place to manage your growth or any challenges you might have. I sort of dip and out of those roles pretty much on a weekly basis, in different ways.

Joe Fairless: You talked about tech support for automating the systems… Can you elaborate?

DJ Scruggs: Yeah. Ironically, that first company I mentioned — I didn’t write any code for that company. Well, I wrote a little bit, but it was for reporting, it wasn’t the core software. It wasn’t until later that I started writing software seriously, and then I wrote a lot of software over about 15 years.

So I got really good at that, but also, when I joined with Blue Spruce it was really tempting to get sucked into it, because it’s fun; it was like solving a puzzle, but it was not the best use of my time. So I look for tools that are more or less plug and play, if you have a little bit of tech  skills. Active Campaign we use for email system, I think it’s a great CRM; it’s got a great price/performance ratio. And if you know a little bit about integration, you know how APIs work, you can use it along with a product called Zapier, which allows you to connect different APIs together.

For example, we use Zoom, as you do, for our webinars, and when you register for a webinar on Zoom, that data gets pushed through Zapier into Active Campaign. That way we have you in our CRM, we don’t have to download from one system and upload into another. Once you really dive into Zapier, you realize “Man, there’s a lot of things you can do.”

One of the companies I used to be with – I was one of the early partners at a company called SurveyGizmo. As you can imagine, they did surveys; they were like a Survey Monkey, basically. They were a little geared toward more professional uses of surveys. So I got really good at using that software. We have a whole system of — when you first go to our website and sign up, you receive an email that says “Hey, thanks for signing up. We need to know more about you to be SEC-compliant, so please fill out this profile form.” And if you take that form, it looks kind of like the investor questionnaire section of a PPM. They ask you “Are you accredited or not?” And then we ask a few extra question. We ask them what their birthday is, so we can send people birthday cards…

Joe Fairless: What other questions do you ask besides birthday?

DJ Scruggs: We ask about their investing priorities. We have four options: safety of principal, total return, cashflow, or tax benefits, and then we ask you to rank those in order. We make sure to get their mailing address at that point, because — we haven’t really done much besides the birthdays, but we intend to do that… And we do an annual letter that we send out every December, so that gets mailed.

Joe Fairless: What do you have in the annual letter?

DJ Scruggs: Well, it was our first one. The first part was just saying “Here’s what this thing is you’re gonna be getting from me every year”, and I just kind of talk about some highs and lows of the business. The real model was Warren Buffett.

Joe Fairless: Right.

DJ Scruggs: So I say “Here’s what we were good at this year, here’s what we were not so good at, here’s something we tried that didn’t work, here’s something we tried that did work, and we’re gonna double down on…”

Joe Fairless: What was the thing you mentioned that you weren’t good at?

DJ Scruggs: I would say our acquisitions was really haphazard last year. They always say – and it’s true – pick a market and really get to know that market, and we were still just kind of trying to figure out what our business even was, in terms of who was gonna do what… So we were just very — we like to say “opportunistic”, but a better word is “scattered.” We would just look anywhere that it looked like a good deal.

So after that, at the end of last year we decided we were gonna focus this year on Oklahoma City. So that was  a good opportunity — we did a series of webinars in December… Some of them were just pure value-add, things you should know as an investor, and then there was one that was just about the different markets we looked at and why we like them, and in particular why we were focusing on Oklahoma City. We’re about to announce three more markets we’re focused on, but we’re not quite ready to do that.

Joe Fairless: What’s one thing that you all have done that didn’t work out, separate from not having a particular market to focus on? Just tactically speaking.

DJ Scruggs: Our very first deal was a very small deal, it was 16 doors, and we made the mistake of using the existing property manager…

Joe Fairless: Because they knew the property, right? [laughs]

DJ Scruggs: Right, exactly. And it turned out that person was fine at just sort of the basics of leasing and dealing with tenants, but was just awful at communications. Awful. I would literally ask 3-4 times for the same thing. It’s not like I was a jerk who would blow up her phone three times a day. First I would email, I’d wait a couple days, then I’d send another email saying “Hey, have you had a chance to look at this?” I’d wait a couple more days, then I would text… It was outrageous.

So I had no visibility into what was going on with the property, and it turned out that there were a lot of things not going well. So we had to replace that person at the end of last year. We have a new one, and it was a little bit of a tough cookie to swallow, because it was more expensive… But it’s night and day, the new firm. They do what they say they’re gonna do, when they’re gonna do it, they proactively communicate… We still do weekly phone calls, but it’s pretty much just sort of checking a few items that we talked about last week to see if they got done.

Joe Fairless: Based on your experience as an entrepreneur and real estate investor, what’s your best real estate investing advice ever?

DJ Scruggs: Get started. You’re never gonna know everything you need to know. I’ve been doing this for a while and I still don’t know 20% of what I wish I knew. But I remember hearing an interview – I think it was the Farrelly brothers, the guys who made Dumb and Dumber… And they were shopping that idea for a while. And they had one agent who wasn’t doing a very good job, so they met with another agent; they would go into meetings and say “We’re trying to make this movie”, and the agent said “Stop saying that. From now on you’re saying ‘We’re making this movie.’ Here’s the plan, here’s what we’re gonna do, and here’s the people involved.” And it just changed the perspective in the meeting. It wasn’t a couple of guys who maybe had a pretty good idea, but maybe not… It was a couple of guys who were gonna do something.

So I would say just however you can get started, if it means just going to a meetup and committing to going to that meetup every week or every month, or spending an hour every day listening to your show… Make it a habit of moving forward, as opposed to thinking about moving forward.

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

DJ Scruggs: Sure!

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

Break: [00:19:15].04] to [00:19:50].17]

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

DJ Scruggs: Right now I’m reading a book called “The Book of Why: The New Science of Cause and Effect.” It’s not about real estate at all, but it’s about how we think about — you know the saying “Correlation is not causation.” It’s sort of the history of that idea. Because for a long time, correlation was causation in the minds of — “If we sacrifice this virgin, the gods are gonna be nice to us, and bring rain.” That was what cause and effect used to be. So that’s one that I really like, that I’m reading right now.

Joe Fairless: How could you see that helping you as a real estate entrepreneur?

DJ Scruggs: Well, I guess I’ll bring up another book that I really like, that I’ve read recently, which is Ray Dalio’s Principles.

Joe Fairless: Well yeah, that’s an obvious one how that can help  you.

DJ Scruggs: Yeah…

Joe Fairless: But the other book though – because I see parallels; I’m just curious how you’re thinking about it.

DJ Scruggs: Well, one leads to the other, because his whole thing was he made a horrible call on national TV back in 1980 about the economy, and was really wrong, and lost millions of dollars. And it wouldn’t surprise me if he’s also read this book I’m reading, “The Book of Why.” Because his whole thing is instead of asking “How am I right?”, you ask “How am I wrong?” So you look for “Am I assuming causation with something that’s not really there? Is it just a correlation?” So that’s where I think that book helps.

For example, I think – I’m sure you know, everyone’s talking about a  recession may be coming, or maybe not… What I have noticed is a lot of people, especially if you go online to Bigger Pockets and stuff, people say “I’m wondering if I should wait till a recession to buy.” And I think in their mind a lot of them think recession is what happened in 2008. That was not a recession, that was a borderline major depression. We really dodged a bullet there, and still a lot of people got crushed. In places like Las Vegas they were losing 30%, 40% of home value there. And I think some people think it’s like that. “Oh, I’m just gonna wait till prices drop 30% or 40%, and then I’ll get in.” You’re probably gonna wait 70 or 80 years for that to happen.

Now, I could be wrong. Maybe we will have a big crash like that. It’s like with the military. Generals tend to fight the last war. I think a lot of new investors think “Well, the next recession is gonna be like the last recession”, and I just think that’s a spurious correlation there.

Joe Fairless: I hadn’t thought of it the way that you described, and 1) it’s refreshing, as a real estate investor and entrepreneur; it’s refreshing to think of it that way. And 2) it’s logical, as I’m considering what you’ve just said… Because I’ll put myself in that category of — when I think of a correction or a recession that we think about as real estate investors, or I think about, I think about 2008. [laughs] That’s the one I’m thinking about. I don’t think about a bump, I think about a crash.

DJ Scruggs: Right. Well, it could be a crash. The thing is, the nature of a crash — or let’s call it even something broader, an economic shock… The reason it’s a shock is because no one was expecting it. So the odds are if there’s a big economic shock, it’s not gonna be in something that everyone’s looking at and wondering if there’s gonna be a shock. It’s gonna be something totally unrelated, like a war in the Middle East that drives up oil prices, or a currency crisis in Asia. Something like that, that no one is thinking about. That’s what makes it a shock. If it’s something that everyone’s looking at, then there’s lots of hedging that goes on, banks are a lot more risk-averse than they were then, both in fact, and also they’re constrained by law. So it just seems less likely to me.

Joe Fairless: Best ever deal you’ve done?

DJ Scruggs: Buying my house in Boulder. [laughs]

Joe Fairless: What year was that?

DJ Scruggs: That was 2003. That’s an example of good market, but it’s also — at that time, Boulder [unintelligible [00:23:39].25] or sometimes the People’s Republic of Boulder. They limit growth there. They’ve been limiting growth there since the ’70s. So no matter when you are there, whether you bought in 1985 or you bought in 2005, you were like “Holy cow, this is expensive!” And that’s how I felt. I bought a townhouse for about 250k in 2003, and I remember thinking “This is crazy. Why am I spending so much money on a townhouse?” And this goes to the point of a good market.

During the financial crisis, Boulder did not crash. It went sideways for about three years… But prices held value, and then I sold it a few years later for about 500k. So I doubled my money. I did some modest upgrades to the place… You know, hardwood floors, and stuff.

But the best ever deal I’ve done as a professional investor is probably a flip I did here. When I first got into this, I started out with flipping, but I knew I wanted to get into multifamily. I just wanted to kind of get my hands dirty and learn about real estate… And it was my first full rehab project, and I made tons of mistakes, but I was in the right market, so I ended up making good money on it… And that sort of taught me the power of being in a  good market, but it also taught me — I don’t like building my business based on that. I’m a lot more conservative in underwriting now.

Joe Fairless: Real quick, what’s a tactical mistake you’ve made on a deal?

DJ Scruggs: Well, the one I mentioned, the 16 doors. We really botched the due diligence on that… Again, because we weren’t sure who was doing what. And it wasn’t until after the due diligence period was over that we got the insurance quote, and it ended up being way more than the T-12, because it turned out the seller was under-insured. And the insurance we had to get – it wasn’t an option because the lender was demanding it. So that cost us several thousand dollars a year.

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

DJ Scruggs: You know what I like to do? Honestly, I just like to help the homeless. I did this last Christmas, and I still do this, but in a different way. You can go to Walmart or Costco and buy these boxes of cashews; kind of like airline size, but bigger, full of cashews… And I just give them out to homeless people when I see them.

And what I did over the holidays is I stapled five-dollar bills to them and put little Christmas stickers on them. I used to be sort of against that, because the thinking is “Oh, well, they’re just gonna go out and do drugs, or buy alcohol.” I’m kind of like “So what?” They’re having a really hard time; the least I can do is help them out somehow.

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

DJ Scruggs: Probably the best place is just RealBlueSpruce.com. There you can see our portfolio, learn about how we invest, learn about me and the rest of the team.

Joe Fairless: Lots  of valuable lessons for entrepreneurs, real estate investors and apartment investors in particular. I’ve mentioned this already during our conversation, but I love the thought process of when something’s not jiving with you, then you don’t have to be a jerk about it, but you can always ask the question why. And then separately, when anyone is starting in a business, because they are starting out, they don’t have that long track record; so as you said, if you don’t have that, then you have to demonstrate competency in other ways… So be respectful and respectable, and demonstrate the competency in all the ways that you know how, other than having that track record. And everyone who ever starts something will come across that challenge. I think that’s a very valuable reminder. And then many other lessons along the way, too many to recap now.

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

DJ Scruggs: Thanks, Joe.


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JF1902: House Hack Your Way To Financial Independence #SkillSetSunday with Craig Curelop

Craig is coming back on the show to tell us more about house hacking, which he has done three times now. He’s been able to go from a negative net worth to financial independence through this powerful wealth building strategy. Craig puts things into perspective with actionable tips and strategies for anyone to use in their own lives. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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“Buy a single family house, live in one room and rent out the other rooms” – Craig Curelop


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

Craig Curelop: I’m doing awesome, man. Better now that I’m on your show.

Theo Hicks: Absolutely. We’re glad you’re here and we’re looking forward to speaking with you again. Best Ever listeners, Craig is a repeat guest. Make sure you check out his previous episode; it is 1260, and it’s entitled “Bigger Pockets analyst tells us his life-hacking story, with Craig Curelop.”

Since this is Sunday, we’re going to be doing a Skillset Sunday. Craig is a house-hacking expert, so we’re gonna talk about how you can house-hack your way to financial freedom/independence.

Before we begin, I wanted to quickly go over Craig’s background as a refresher. He is the author of the house-hacking strategy, as well as an aggressive pursuer of financial independence. From sleeping on his couch to renting out his car, Craig has been able to go from a negative $30,000 net worth to becoming financially independent in three years, all while paying off $85,000 in student loan debt.

He’s currently on his third house-hack. Based in Denver, Colorado. You can say hi to him on Instagram @thefiguy. Craig, before we get into the skill, do you mind telling us a little bit more about your background and what you’ve been up to since we last spoke?

Craig Curelop: Yeah, the last time we spoke I believe I was living in my first house-hack, which was that duplex where I was really hacking it, living behind the curtain, and all that… I won’t go into all the details here, you can go back and listen to the previous episode… But since then, I’ve purchased two more house-hacks. About six months after that last episode, I purchased my second one, or a year after I got my first one; that one was a five-bed/two-bath in Thornton, Colorado, which is just North of Denver.

Then I did a different strategy, where I rented by the room. So it was a five-bed/two-bath, I lived in one room, rented out the others. I had my own bedroom, I was living a semi-normal life at this point… And then I rented out the duplex full-time. So the duplex was making me some money, the single-family I was living in was making me some money, and I was living for free; that allowed me to then save up and purchase the third house-hack, which I’ve just closed on about a month and a half ago, and getting that sold as we speak.

Theo Hicks: Perfect. So you’ve got your book “The House Hacking Strategy”, you’ve done three house-hacks… So let’s just talk a general overview, for those who don’t know – which I’m sure everyone knows what house-hacking is, but just in case… Do you mind just describing what this strategy actually is?

Craig Curelop: Yeah, house-hacking – the whole idea is that you buy a one to four-unit property, with 3% to 5% down; because you’re getting that 3% to 5% down loan, you’re required to live there for one year. So while you’re living there, you rent out the other parts of the property, such that the rent from your tenants is fully covering your mortgage, so you’re allowed to live for free, or maybe even get paid to live, and you’re just able to save tons and tons of money and build lots and lots of wealth that way.

Theo Hicks: Okay, so I actually house-hacked my first property too, so I’m familiar with this strategy… The first question I have is how do you analyze the deals when you’re actually house-hacking them? Because most deals make sense when you house-hack them, just because of the very little down payment, and the fact that you’re really just trying to cover some or all of your living expenses… But then, as you mentioned, the plan is most likely to move out and rent it out full-time. So are you underwriting it based on that time, when you’re gonna move out, and making sure that it’s cash-flowing then, or are you underwriting it so that all of your expenses are covered, you’re making money, some of your expenses are covered… Walk us through the analysis of house-hacking and how it compares to just a regular rental.

Craig Curelop: Yeah, for sure. So when you’re house-hacking, you definitely have to take into account the rent savings… Though I always try to live for free, but that’s just how I am… And I don’t care all that much that I have a super-fancy place. I don’t care all that much that I have my own space. So I really love this buy a single-family home, because it’s definitely cheaper than the multifamilies… And live in one room and rent out the other rooms.

The numbers on that – basically, I know that a $350,000 to $400,000 property is gonna be about a $2,000 mortgage payment each month. So it’ll be a little higher, a little lower, but within $100, that’s kind of what it is.

So I can go into a property – and I’ve been doing this for long enough where I can go in and look at the rents that I could get for each room, and I just make sure that the rents are well in excess of that mortgage payment. I like to see something between $750 to $1,000 over the mortgage. That will give me plenty of buffer for all of those expenses that you hear about – cap ex, vacancy, all of that stuff.

So rather than trying to have a percentage for each one of those and have all these moving numbers and moving pieces to play with, I just try to keep it really simple, with “Hey, what’s the rent? What’s the mortgage payment? How much do you want for reserves?”, which includes all of those expenses… And I just try to make it work that way, and it’s been pretty successful so far.

Theo Hicks: So you’ve done the renting out one of the units and living in the other unit, and then you’ve done the renting out the rooms… On this third one, is it a duplex or is it a single-family home where you’re renting out rooms again?

Craig Curelop: It’s kind of a hybrid. Technically, it’s a single-family. I’ve purchased it as a single family. But it’s a six-bed/three-bath. The top level is three beds, two baths, and the bottom level is three-bed, one-bath, with its own kitchen, it’s own bathroom, its own laundry room etc. So it’s essentially two units. So what I did was I actually just walled off basically where the upstairs meets the top of the stairs to go downstairs, and made a separate entrance, so that they can walk in and go directly downstairs and have their entire unit. Right now I plan to airbnb that unit out fully, and I expect to make a little bit more than I would with a traditional rental.

Theo Hicks: So would you say that the better strategy is to do the by-room, as opposed to the per-unit?

Craig Curelop: It all depends on who it is. I would say it’s the more lucrative strategy, for sure… But if you don’t feel comfortable living with the people, then maybe you do the duplex or triplex, or you do the “luxurious house-hack”, where you live in the big house and you rent out maybe the mother-in-law suite, or the downstairs, or whatever it is.

Theo Hicks: I’d probably say the most common thing I see — not the most common, but something I see a lot when people are talking about house-hacking is the amount of time you need to live in the house. So is it definitely a year that you have to live there, and if you don’t then something bad happens? Or do you need to live there longer than a year? Does it depend on the type of loan that you get? If you wanna talk about that a little bit, what’s the requirements for doing the house-hack…

Craig Curelop: To get that low down payment, that 3% to 5%, which is what makes house-hacking so powerful, you do have to live there for one year. Now, I don’t think the banks are knocking on your door every month to make sure that you live there, but if you do get caught, it is considered mortgage fraud, which I believe is five years in jail… So probably not worth it. I know people that have taken the risk and they’re not in jail, but again, I would not recommend it.

There are ways you can get out of it… For example if your job moves away, or something happens in your family… They are semi-reasonable with life-changing instances, but that’s really the only way to get out of it.

Theo Hicks: What’s some other important information that we need to know about house-hacking?

Craig Curelop: I would just say it’s a really great way to get started in real estate investing, if not the best way… Because you have to live somewhere anyway, so you might as well live where you’re investing. That way you’re really in the weeds and you can manage the property because you’re always right there. Also, it’s just a tremendous way if you’re doing this to really build yourself a great financial position and hopefully obtain financial independence within the next few years. I’ve never found a more powerful way to do so, with as little risk as house-hacking is.

Now, I’m not saying house-hacking is not risky, but it’s a lot less risky than investing in Bitcoin, or some startup company, or penny stocks, or something like that.

Theo Hicks: How many more house-hacks do you plan on doing?

Craig Curelop: I don’t really know. I guess this aggressively maybe one more… But then I probably intend to take some time off and do my own thing for a little bit… But when I come back and settle down, I still may house-hack, but it’ll probably be a little bit more of a luxurious house-hack, where I just rent out the bottom or rent out an  additional [unintelligible [00:09:44].14] in the back, or something like that. But yeah, I don’t see why not do this for as long as I can.

Theo Hicks: Do you plan on doing other investing strategies as well with the house-hack, or will you just keep house-hacking because it’s been so successful?

Craig Curelop: Yeah, now that I’ve got some capital built up, I’m looking to do some more BRRRR type deals, or even just some more buy and holds in the Denver area here. Definitely looking into exploring different types of investing. It’s pretty addicting, it’s hard to just do only one a year.

Theo Hicks: Is there anything else that we haven’t talked about as it relates to house-hacking that you want to mention?

Craig Curelop: One thing I would just mention is that if you do decide to go down this route of house-hacking, is that you’ll always feel different. The first house-hack you will look like a poor man/woman, because if you do what I did, you’ll be living on a couch behind a curtain, or you’ll be sharing a house with 4-5 different people, and you’ll be unlike everyone else, because they’ll probably have their own place and whatnot. But then you’ll be saving and saving more and more money, and after year one  you’ll be able to buy a second property; then you become unrelatable, because now you’ve just bought two properties in basically less than two years…

So then you’re able to save more and more and more, and then by the time you get your third one, you now have tens of thousands or hundreds of thousands of dollars to either investing — you can start investing in larger properties, or you can start going out and doing your own thing, and before you know it you’ll be financially independent, which even if you’re in your 30’s and you’ve got 5 years, you’ll be 35 to 40 years old, and most people are not financially independent at 40 years old.

So you have to be used to kind of being a little bit different. At first it’s kind of not so good, and then in most of your life it’ll be very good, it’ll pay off for you.

Theo Hicks: When you’re actually looking for these deals, do you just look for them how you would look for any single-family home? Are you just finding these on the MLS, or are you finding these things off market?

Craig Curelop: I find them on the MLS, yeah. I guess the main reason why that is is because the house does need to be livable. A lot of the ones off market are kind of rundown and beat up… So in order to live there for a year, the bank needs to deem it as livable, and basically it needs to have running water and electricity, and four walls and a roof… So yeah, there has to be that… And then also I’m looking for one deal a year when you house-hack, and in my market there’s lots of house-hacking deals… So you just have to figure out how to make a mark.

Theo Hicks: Alright, Craig. Well, thanks for coming on the show and essentially giving us a breakdown of exactly how to house-hack. Just to quickly go over what we talked about – so you’ve done three house-hacks so far. The first one we’ve talked about on the first show; again, that’s 1260, if you wanna check that out. The second one was the five-bed/two-bed just North of Denver, where you decided to rent it out by the room, while renting out the previous one full-time. You mentioned that by the room is more lucrative than by the unit.

And then you just closed on your third one a month and a half ago. That’s a hybrid one, where technically it’s a single-family home, but you were able to wall it off and turn it into a hybrid duplex, and you actually plan on airbnb-ing one of those units for even more money.

We talked about how you actually analyze these deals, and it really depends on what your goals are, but for you it’s you wanna live for free. You don’t really care if it’s a really nice place, or if you’ve actually got a room; as you mentioned, you lived behind a curtain on a couch for a while… So to do so you wanna calculate what the mortgage payment is going to be. You can do that pretty quickly, [unintelligible [00:12:45].27] experience. And then take a look at the rents for each of the rooms or each of the units, how you plan on doing it, and you want the rents to be at least (in your area) $750 to $1,000 above the mortgage, so that you can cover all the ongoing expenses and live for free.

You also have to live there for a year. If you don’t, it’s considered mortgage fraud and you can go to jail. There are some exceptions, but… If you’re gonna house-hack, live there for a year.

A few other things we talked about – it’s a great way to get started in real estate investing, because you need a place to live anyways, and you might as well have that be your own investment property. The strategy is a low-risk strategy, compared to other investment strategies out there.

And then lastly, you mentioned that when you’re buying real estate in general, but especially if you’re doing the house-hack, you’re always gonna feel a little different compared to others around you who maybe have their own apartment/home, and you’re living, as you said, on a couch behind a curtain, but obviously the benefits long-term outweigh that, because in a few years you’ll have a bunch of money, multiple properties under your belt… And the more money you get, the more deals you can do,  and you can be financially independent by just following the strategy and buying one property per year.

And then lastly, you mentioned that you’re just finding these deals on the MLS, because they need to be livable in order to qualify for the loan. And you only do one deal a year, so you’re able to find that in your market, because there are a lot of single-family homes available.

For more about house-hacking, make sure you pick up Craig’s book, “The House Hacking Strategy.” There’ll be a link to that in the show notes. And again, check out his first episode, 1260, “Bigger Pockets analyst tells us his life-hacking story.” And say hi to him at @thefiguy on Instagram.

Craig, thanks again for joining us. Best Ever listeners, have a best ever day, and we’ll talk to you tomorrow.

Craig Curelop: Thanks for having me, man.

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JF1887: From 10 Single Family Homes To 1600+ Apartment Units with Anthony Chara

Anthony got his start like many real estate investors, by doing a few smaller deals first. Once he had a taste of investing in apartments, he never looked back. We’ll hear how he scaled his business and also hear some specifics on a couple of his deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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“The only time that you fail is when you just give up, don’t give up, keep moving forward” – Anthony Chara


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

Anthony Chara: I’m doing great, Joe. How are you?

Joe Fairless: I am doing well, and looking forward to our conversation. A little bit about Anthony – he started real estate investing in 2001, owns and/or has syndicated approximately 1,600 apartment units across the country. Based in Denver, Colorado. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Anthony Chara: Sure. I can certainly do that. Hello, everybody.  I actually started in creative investing back in ’93; I’ve been doing pretty much apartments almost full-time since about 2001-2002… But in ’93 my wife and I turned our first house into a rental and then moved into a larger, nicer house… And for ten years, that’s all we knew. Our world consisted of buy and hold, because we didn’t know you could do wholesaling, fixing and flipping apartments, short sales, or anything else. So we did that for about ten years; had nine or ten single-family homes and condos, and then met a gentleman named Robert Allen, which a lot of people know – he wrote  a book called “No Money Down” years and years ago, and started taking some classes from him and then realized that you could do wholesaling, fixing and flipping and other things, and I did a couple of those. One of the biggest things that I learned after I did learn something was to take it and put it into action.

So I did that, I did a couple wholesale deals, I did a couple fix and flips, and realized that “Wow, that was a lot of work, and some reward”, but once the deal was done, I had to go out and do it again. It was like getting a job, and the job was over, and now I had to go find another job. So I also learned how to do apartments, and in early 2003-2004 I did my first apartment deal. One of the things that I learned from that was that the money kept coming in, and they were a lot bigger checks than some of the single-family homes that I was doing… So I decided that I really liked that.

Our next deal was 98 units, then we went up to 120, and 140, and 150, and our largest deal so far to date was a 410-unit portfolio that we did in Indianapolis. As you mentioned earlier, right now I’ve either owned or syndicated a little over 1,600 units. I love doing apartments, so my main focus now is apartment investing, and I’ve got a lot of students around the country, because I do actually teach people how to get into this… And then just keep on buying more stuff. I love traveling around the country and doing the teaching, I love meeting up with my students and educating people on how to be successful with the different deals that they get into.

Joe Fairless: That 410-unit – is that the most recent purchase that you’ve been a general partner on?

Anthony Chara: No, that one was a few years ago. We actually sold that one back in — it was either 2015 or 2016… So the most recent one we just closed was a — wow, I’m trying to figure it out, because we’ve got a bunch of them that just closed within the last year.  About a year ago we did a 60-unit in Iowa, we did a 100-unit property in Macon, Georgia…

The most recent one was actually a 32-unit property that we closed — perfect timing, we closed in Panama City, Florida, and shortly after we bought it, the hurricane came through, and took the roof off of it… So that was kind of nice. But fortunately, we had the right insurance in place.

Joe Fairless: What is that process like, when a hurricane comes in — you’re in Colorado, the property is in Panama City, and you see your weather alerts, that there is some nasty weather coming to an area where your property is… What do you do to keep track of that, and then when you assess the damage, what’s the process?

Anthony Chara: Sure. Well, in that particular case the property was being run by one of my students, so he went down as quickly as he could after the hurricane came through. Of course, before then you absolutely wanna make sure you have the right coverage, which we did… So not only are we getting the property taken care of, but the insurance company is also paying us as if the property is still being rented, as if renters were still in it. That helps tremendously, especially when you have investors that need or  are expecting some type of cashflow.

But it’s definitely been a pain in the butt, it’s been trying. The student has been interfacing with the insurance company, and if you’ve ever worked with an insurance company, most of them try and take in as many premiums as they can and pay out the least amount possible… So we’ve also been working with a public adjustor, who’s gone out to the property, and is on our side, because they’re working with us to battle our insurance company… Because you can’t imagine that you’re actually on the same team when you actually have to put in a claim. It’s like a big battle to the finish, and whoever survives is the winner and the victor.

Joe Fairless: Which is very unfortunate, but it’s ridiculous that they take it that direction… But yeah, [unintelligible [00:06:00].15]

Anthony Chara: It is, yeah. Yeah, so the public adjustor is helping, because they’re coming out and showing other detailed information to the insurance company, that says “Your estimates are way undervalued, because we need to bring this property back up to the condition it was in before the hurricane came through.” We can show them pictures and videos of the interior of the property and how we want this property to be put back like it was before.

They generally like to push back, they think that we’re charging way too much or asking way too much, and we think that they’re paying too little. Eventually, we’ll come to an agreement and get everything done, and ultimately we are gonna win; we’re gonna be successful, but it’s a very long, painful process, because as I mentioned, insurance companies, even though they love to take your premiums, they don’t like to actually pay for those repairs.

Joe Fairless: So you have business interruption insurance; you are also insured for the property whenever something like this takes place… Let’s fast-forward 12 months from now. In your opinion, is the property better off having had this event take place, is it a neutral event, or is it a negative?

Anthony Chara: In this particular case it’s going to be a hugely positive event. It has already been a hugely positive event, simply because there’s been so many homes and housing that’s been wiped out in the Panhandle area there in Panama City. We’ve actually been taking our rent up, and I know that there are some people out there that would say “Oh, you’re taking advantage of people in the area.” It’s like, “No, we’re actually not.” Most of the people that were living in the property are actually working for insurance companies and contractors, and there’s no place for them to live, and we need to pay for our increased premiums and everything else that goes on… Because everything in that area has gone up.

Not only are we raising the rent, but the things that you would normally pay for, that might cost you X amount – well, it’s now X plus an extra 50%, because it’s harder for even things like lumber and drywall and roofing material to get into that area… And as soon as it gets in, it’s gone, because there’s just so much work that has to happen in those areas; the people that live there just to get food, and things like that. They’re still working on the power in that area, and making sure that the power is flowing the way it’s supposed to, they’re still clearing debris out of the area… And it’s a year later. As a matter of fact, I’m down in New Orleans right now, and it was 14-15 years ago when hurricane Katrina came through; last time I was here doing a presentation was on their 10-year anniversary and they were still recovering from the effects of Katrina.

So if you were like us, and you were in that area right as the situation happened, it is going to be a very positive event for us, because we are helping to continue to provide housing for people in that area. We are benefitting from it, because we can increase our rents, because there is a lack of housing… But we’re also providing a service that do need to be down in this area helping people recover by fixing up their units and getting back on track with their lives.

Joe Fairless: One challenge I came across with one of our deals that we owned in Houston – we’ve since sold it – when hurricane Harvey came, it did not directly hit our property, but what it did is it increased the cost of contract labor, because now all of a sudden what we had budgeted for contract labor dramatically increased, because they were more in demand, and there were other properties that were paying much more for their services, because they had to, in order to get their services. So then our budget had to increase. Have you come across that with your property?

Anthony Chara: Yeah, we certainly have, same exact situation… Because there’s only a certain number of people. There’s a lot of workers that were in that area that are now displaced. They moved to other areas of the country with family, or to find a job someplace else, because their home, their apartment might have been wiped out. So the people that are coming down, that are there, their cost of living and being there is higher… And we’ve also found out that insurance companies are paying these people more to entice them to come back to the market or into the market, so that they can actually do the work that needs to be done for the insurance company. So yes, all the costs have gone up because of the scarcity. The infrastructure is still suffering, so a lot of the stuff that we take for granted, like warehouses to store food, and building materials and things like that – they’re all gone; there’s no place to do it. So it’s a constant, endless truckload of things, and food, and parts, and pieces that need to come in, and all the people that need to take care of those things.

So yeah, expenses have gone up. Until you get to the point where it’s very easy to go down to the street corner and get a gallon of gasoline, things are gonna continue to be expensive until it normalizes… And if it’s anything like what New Orleans went through, it’s gonna be about ten years before Panama City comes back to fruition.

So it’s good for us, since we already have property there, and it’s gonna continue to stay strong for a while, but yeah, it’s also costing us more, as well.

Joe Fairless: The 60-unit in Iowa – switching gears a little bit – will you tell us about that?

Anthony Chara: Sure. That particular one is on the Eastern Coast, right on the Mississippi River, in a little town called Burlington. One of my students found that through a real estate connection that he had; he’s created relationships with brokers in that area. He likes buying in Iowa and Kansas and Nebraska… And the broker came to him. And the interesting part was we know that that same broker likes this type of property, so when he brought it to us, we said “Wait a second… Why aren’t  you buying it, if it’s such a great deal?” And he said because it was too far away from his target area. It was about a 2.5 hour drive from where he lives, and he only likes buying properties that are over 100 units, which we do, too… But in this particular case, that same student already owned about a 118 or 119 property about three miles away, so it was an easy transition.

So we went out, took a look at the property… It was actually a great little property. The owner of the property – about four years ago now the fire department came through, and why they didn’t do this years ago I have no idea, but the fire department came through for one of their typical inspections, and noticed that in all the second-floor units… These were townhouse-style, where you’ve got the living area on the lower end, and then you go up the stairs to the bedrooms in the upper area… All of the upper windows had the through-the-window air conditioning units, and the fire department finally figured out that “Oh, wait a second… You’re blocking an emergency egress.” So they made them take out all the upper air conditioning units. Well, if you’ve ever been in Kansas in July or August, it gets very hot and very humid, and people aren’t going to only stay down on the lower level with the air conditioning unit that is going through the wall on the lower level… So the owner made the decision when they pulled them all out to put in all brand new air conditioners and furnaces in all 60 units.

Joe Fairless: Nice.

Anthony Chara: At the same time, they redid all the roofs, they redid all the siding… So we ended up coming in and buying what should have been a C class property, that was probably more like a B-, just because it had all this new equipment in it… And we also inherited an 18-unit HAP (Housing Assistance) contract from HUD with that same property. So 18 of the units were paid for, whether they were occupied or not, and then the other 42 we take care of on the open market.

It’s been going pretty good for us. We’ve had a little over a year now, and we’re looking to refinance out of a short-term bridge loan that we got on that one in order to get into it.

Joe Fairless: What was the business plan for it?

Anthony Chara: Well, the business plan was because we knew that it was gonna be a good candidate for a HUD loan, was to buy it on a bridge loan, which we did; unfortunately, it’s taken us a little bit longer. We had some issues with HUD themselves, getting this particular property going. The original manager that was in the property for us ended up getting blacklisted by HUD because another property that they managed, that the owner was taking care of the maintenance. Well, HUD didn’t care that the owner was supposedly taking care of the maintenance, because this management company had their name on the property, and HUD was not happy with the repairs that they were doing… So HUD blacklisted them and made us get another manager. Well, that whole process set us back, because it took us about 3-5 months for three different parts of this.

Joe Fairless: Yeah…

Anthony Chara: The first part – we had to find a new manager that we liked. That took us about a month, a month and a half of interviewing quite a few managers in the area. Then once we liked them, then HUD had to interview them to confirm that they were okay with them, and then do a background check on them and look at some of their other properties to make sure they were maintaining them… And then the third part of it was because of this HAP contract, as soon as they blacklisted the first manager, they stopped paying us for the HAP contract. So it’s like “Well, wait a second… You’re the ones that blacklisted them, and now you won’t pay us.”

So once we finally got the new manager in place, the new management company then had to redo all the paperwork and submit all the paperwork for the 18 units, and that took another 2-3 months in order for us to get fully paid and up to date with all the paperwork. Well, at the same time, with the transition, the previous manager was short-timing it, so they weren’t really doing a very good job of putting new people in, plus they couldn’t talk to anybody that was on HAP, because they knew HAP wouldn’t pay them. So they could only talk to people who were coming in off the open market.

So anyway, we ended up getting a bridge loan, and the plan was to be out of that within a year, but then with this whole situation with HAP our vacancy started to creep up. We ended up at worst-case scenario; we ended up at 30% vacancy, 70% occupancy, going through this whole process… And now we’ve got it back on track. Over the last few months the manager has been putting in better quality people, and we’re back up around the 85% range, but we can’t actually do the HUD contract or the HUD loan until we’ve got 90% occupancy for at least 90 days. We’re still working on that.

So the plan – long answer to a short question – with the business plan was to have the short contract in order to buy the property with the bridge loan, take out financing within the first year, and now we’re just slightly over one year, so it’s probably gonna be about a year and a half, so we’re about six months behind on the plan.

Once we get that new loan in place, the interest rate is gonna drop drastically, the cashflow is gonna go up… The last thing that we need to do with the property – because there really wasn’t a whole lot, since the owner had been doing a good job of taking care of it – was replacing most of the windows. A lot of the windows were original from the early ’70s when the property was built. They still had some single panes, and some of the windows don’t open and close very well… So we’re gonna replace all of those, which is also gonna help with the energy efficiency of the property, and then we plan on selling it in five years, when the loan  balloons, to other investors. Of course, the goal is to at least double our money within that five-year period, if not better.

Joe Fairless: About how much does it cost to replace the windows in a 60-unit?

Anthony Chara: It depends on the quality. We’ve had quotes anywhere from some of the smaller windows for maybe $150 to $200 including labor, up to $350 to $400 for some of the larger windows… I think we budgeted about $120,000 to replace all the windows, including labor.

Joe Fairless: And how do you think of that in terms of ROI for the deal whenever you sell it in five years?

Anthony Chara: That’s a great question. We actually took that into consideration before we bought it, because that was part of our plan when we purchased it. We knew that these windows were a sore spot, not only with the residents, but with the energy efficiency of the property. Some of them don’t look very good, some of them that are the dual-pane also have the seals broken, so you can’t really seen through them… And they also are kind of an eyesore at this point, simply because if you look at some of the units that have been changed, they have the larger, thicker, white vinyl border, whereas some of the older ones are still the old aluminum windows… They look older, and they’re kind of an eyesore.

So we actually budgeted for that in our numbers, and that’s one of the reasons we were really excited about this property, just because even with the 120k or 160k total between the windows and some other things we wanted to do, our investors were still getting a cash-on-cash return around 10%, and then the total return we were projecting – I think the IRR is gonna be in there around the 18% range over a five-year period.

Joe Fairless: With the 18 units under the government assistance program, would you rather have just 18, or all 60, or zero? Which of those three options would you rather have?

Anthony Chara: You know, if you would ask me before we bought it, I might have —

Joe Fairless: Before they stopped paying you…

Anthony Chara: …before they stopped paying me, I might have been interested in the whole project being a Section 8, just because whether it’s occupied or not, they’re gonna pay the contract. The downside is after what happened here – and I’ve heard this from other owners as well – is that if HAP has an issue with something, whether it’s the condition of the property, how you’re taking care of it, they don’t like the manager, something goes on, they can literally cut off all of your payments. So I think I’m actually kind of happy the way it is now that we only have a part of the property, about 30% under the HAP contract… And we still are allowed to take HAP vouchers; we still have other people on the property that are on Section 8, but because they’re under a voucher program, as opposed to the HAP contract, they did not get cut off, those payments did not stop coming in.

So I kind of like the way it is now. We  have 18 of them where we have guaranteed rent, and then the other 42 are open market and Section 8 people… So we have a variety of people on the property.

Joe Fairless: Will you elaborate on the difference between a  voucher program versus a contract?

Anthony Chara: Sure. The contract is just like it sounds – you have  a contract with housing assistance that says “We want these 18 units. We’re gonna decide who’s gonna go in the units. We’re gonna pay for these units so that they’re available for us to utilize.” And they pay that–

Joe Fairless: So they screen the tenants and they put them in there, and all that process?

Anthony Chara: Well, they’re supposed to… We still have the ability to screen them, and if we don’t like the people that are coming – and we have the ability to go out and look at their work history and their eviction history, and things like that (even their criminal history) to see whether or not we wanna allow them into the property. But a lot of times because it’s under the HAP program they just say “Well, Mr. Jones is here, and we’d like Mr. Jones to move in.” With the HAP program, people just go wherever HAP says “We’ve got a contract. You can go here. Here’s the available unit. If you like it, let us know and we’ll put you in.”

With the voucher program, people can actually take the voucher. It’s what’s called “portable.” So they can move that voucher from one complex to another. They’re not limited on where HAP only has a contract. They can go to a house, for all that matter. They can go to a homeowner that is willing to accept a voucher, and they can walk in and say “I’ve got this voucher”, and based on how much money that person makes, then HAP has a metric, a formula that they put them through, that says based on how much money they make and what the average rent is in this certain area and how many people are in the house, whether it’s husband and wife, or girlfriend and girlfriend, or boyfriend and boyfriend, and whether or not they have any kids, the size of space that they need, the number of rooms, how much they qualified for what their share is going to be, if any… We’ve had some people that even on a voucher HAP has paid for their entire rental rate, and some they paid a minimum amount – $4, $9, $11/month…

So the big difference is with a contract it’s set. Most of the time you pretty much accept the people that come, but with the vouchers you can still screen them, they can take that voucher and they can use it on your property this year, and then next year if they decide to move out, they can take that voucher and their income and go someplace else to somebody else’s unit, where the HAP contract is set for — I think it’s a five-year contract that we have with them. I don’t remember off the top of my head, but I think it’s somewhere between a five and ten-year contract.

Joe Fairless: On a separate, but related note, regarding the property… You said you came in town and looked at the property. What are some things that you pay particular attention to? And we’ll be specific – let’s just talk about the 60-unit. When you came and looked at the 60-unit, what are some specific things that you read about the property, you saw the financials, so you had the paperwork, and you probably saw pictures, but now you’re actually there… What do you look at? What do you look for?

Anthony Chara: Well, the biggest things that I wanna look for are the major issues with the property that can cause you a lot of monetary loss if they’re not taken care of properly. Some of the biggest things I wanna look at when I come in are things like the roof, I wanna look at the parking lot, I wanna look at the drainage around the units… We’ve had issues where years ago we missed things, because — well, I shouldn’t  say we missed it; we just didn’t realize that it was an issue until we actually had an issue with it.

We had  one property where there was actually a creek flowing through the middle of the property. And we knew it was there, we did our best to check and make sure that it wasn’t gonna be a problem, we made sure that there was a drainage area underneath a little bridge on the property that we had to make sure was cleared out… And then lo and behold, we get a huge rainfall, and the creek was not the problem; the problem was the way the property was situated – it was up on a frontage road next to a freeway; there was so much rain coming off the frontage road down into the property where there was no creek, and no clear path for the water to drain, because it had never really rained that hard in the area to even cause an issue… It actually washed out the foundation underneath one of our buildings. So that was  a pain.

Now that we’ve learned that, we walk around the property, we look to see if there’s any (in essence) chokepoints like that… Because you do get a lot of rain in Eastern Kansas, especially since we are very close to the Mississippi River. We look at the elevation to see how close we are within the flood plain, because – I don’t know about you, but the Mississippi River and a few other rivers in Central America (as in Central United States of America) have been over-flowing and flooding… Roofs are always a very big ticket item. We look at the either boiler systems and/or chiller systems. In this case we have individual furnaces in all of the units. We knew those were only three years old, so we didn’t have an issue with any of those… But we wanna take a look at the big dollar ticket items.

We also wanna look and see if there’s any types of issues with mold, bugs, things like bed bugs, cockroaches, and see what we can do to mitigate some of those issues to the best of our ability… Because those things are what’s going to cost you in the long run. It’s going to be very expensive to do the roofs. Ours were only three years old, but even though they were three years old, we still got up on the roofs and checked them out, because occasionally you can have decking under the roofs that is weakened, and sometimes people don’t actually replace the decking when they put on new roofs; they just put new shingles over old shingles if they’re allowed to, based on code…

So we did our checking on that, and the roofs looked like they were in great shape. All the furnaces and air conditioners were all in great shape. The drainage issue… We had one little area where I let the team know and the managers know that they needed to keep a particular area, clear it out, because it seemed like a lot of stuff – whether it was people dumping trash, or the trash just blowing or draining down into that area as the rains came; that all needed to be cleared out… Plus, it didn’t look nice with some of the trash that was in the area. So those were some of the big things we look at.

Then, of course, the parking lot, whether it’s asphalt or concrete, what’s the condition, does the parking lot need to be sealed… A lot of people don’t realize that the asphalt parking lots need to be sealed on a regular basis and restriped, so that they don’t dry out… Because if they do dry out, they can literally turn to nothing but mush and gravel, and then it’s gonna be a much more expensive fix to clear all that out and then put down a new overlayment, instead of just taking care of it and doing preventative maintenance in the meantime.

Joe Fairless: Taking a giant step back, what’s  your best real estate investing advice ever?

Anthony Chara: My best real estate investing advice is 1) take action. Learn, and then take action. And then the other part of it I would tell people too is to not give up. There are going to be obstacles that you run into, and it’s all too often that in our society people just hit a roadblock and they quit. In my opinion, the only time that you fail in any type of investing or any type of endeavor is when you just give up. So don’t give up, keep moving forward. Even if you have setbacks, learn from the setbacks. Use that as a tool, so that you are a better investor the next time you go out and you do a deal. Don’t let setbacks hold you back. Keep moving forward, keep doing more and more deals, and you will be more and more successful.

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

Anthony Chara: Let me sit up straight here, and… Yup, I’m ready to go.

Joe Fairless: Alright, I know you’re ready… First, a quick word from our Best Ever partners.

Break: [00:27:06].02] to [00:27:44].27]

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

Anthony Chara: Cashflow Quadrant. I’ve just reread that a couple months ago.

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

Anthony Chara: I donate money and time to a bunch of worthy charities, I donate a lot of money to Habitat, since I’m in real estate… I donate a lot of money to Habitat for Humanity, American Red Cross, Wounded Warriors…

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

Anthony Chara: You can go to my website, SuccessClasses.com. I do classes all across the country, and we’d love to see you out there.

Joe Fairless: I know some people in Cincinnati who have taken your class and had really good things to say. Anthony, thank you for being on the show, talking about some specific deals – the 32-unit challenges, with that and Mother Nature; the 60-unit in Iowa, and just talking through some things in the business plan, and what you and your team is doing, and things to look at from a big picture, whenever you’re taking a look at a property on a walkthrough.

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

Anthony Chara: Thanks, Joe.


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JF1827: Is Your Short Term Rental Legal Or Illegal? With Erin Spradlin

Erin is here today to help us understand the different laws and restrictions that some areas are placing on STR’s. Along with her team, they help investors find, buy, and run legal short term rental properties. You may be surprised by how many different regulations and laws exist that investors may not know about until it is too late. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“If you want to be serious about this, don’t treat it as a hobby” – Erin Spradlin


Erin Spradlin Real Estate Background:

  • Co-owner and broker of James Carlson Real Estate
  • They focus on setting people up with legal Airbnbs to cover their mortgage or reduce it significantly
  • Erin also focuses on female investors, they’ve done a BiggerPockets video series, and she is a blogger for on BP
  • Based in Denver, CO
  • Say hi to her at https://www.jamescarlsonrealestate.com/
  • Best Ever Book: Long Distance Investing


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

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


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

Erin Spradlin: Good, how are you doing today?

Joe Fairless: I am doing well as well, and looking forward to our conversation. A little  bit about Erin – she is the co-owner and broker of James Carlson Real Estate, where they focus on setting people up with legal Airbnbs to cover their mortgage or reduce it significantly. Erin also has a focus on female investors, where she’s done a Bigger Pockets video series, and she’s also a blogger for Bigger Pockets. Based in Denver, Colorado.

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

Erin Spradlin: Sure. In the past I’ve had an 8-to-5 job, as I’m sure many real estate agents and investors did. Starting about 2014 my husband and I got into Airbnb here in Denver, and it just started to change our lives pretty rapidly, because there was a significant extra income. After that, we started to look at ways to acquire different properties in Denver. This was before Denver had established laws around Airbnb… So like a lot of other cities throughout the country, they had a law where it made it illegal, because it was under a 30-day rental, but the city wasn’t really following up with that, they didn’t really have the zest to look into that… So at that point we were looking at other rentals, and we started seeing other people that were doing that as well, so then we ended up getting our real estate license, dropping out of our 8-to-5 jobs and going into real estate and helping other people identify Airbnbs and properties that were good for that.

Then the laws changed, so now our focus really is getting people into legal Airbnbs, because as an ambassador you wanna know that what you’re doing is okay and it’s not gonna change significantly in the next few years, depending on what the city council decides.

Joe Fairless: Yes. And as a human being it’s good to do legal things…

Erin Spradlin: [laughs] That too, that too.

Joe Fairless: That’s normally good advice. [laughs]

Erin Spradlin: Laws exist for a reason…

Joe Fairless: Yes. What were you and your husband doing professionally, prior to getting your real estate license and going all-in with real estate?

Erin Spradlin: I was a digital marketing director and he worked for the State Supreme Court in communications. I actually think both of those past careers have been really beneficial for us… Because I think we came to real estate with a professional background, so we had an idea as far good communication, or what that looked like, and also being able to support or justify whatever recommendations you’re making to clients, and then also just understanding — I know we both felt like we didn’t understand really the value of a real estate agent before we got into it, so we felt like being professionals, we could kind of explain what our value-add was, and then also get back, have good communication, explain things in a way that we didn’t necessarily feel like we’d had that experience in the past when we’d worked with real estate agents.

Joe Fairless: Let’s talk about what you offer exactly. Who is your ideal client and what do you do for them?

Erin Spradlin: Our ideal client is usually a homebuyer, and a homebuyer that’s looking to knock down their mortgage, or cover their mortgage primarily with short-term rentals. The way we go about that is that we research the laws for whatever city they’re looking in; whether or not that city has passed the law, if they haven’t passed the law, what that law looks like, also the temperament of the city council, if the city council is discussing it and researching it and just hasn’t made a decision yet… And then installing them in some kind of property that works for them.

A lot of times what that looks like is a basement apartment. Sometimes that’s a full duplex, so it’ll be an up/down duplex, it’ll be zoned that way, and have a kitchen downstairs… And then sometimes it just looks like a basement with a back entrance, where you can really knock out the rest of the house, but then you’re not seeing the Airbnb guests all the time, it’s still legal… But that property might not have a kitchen and it might still be zoned for a single-family house, but it’s still good for an Airbnb, and legal.

So a lot of our clients that come in have that profile, like “Okay, I wanna do this, but I wanna do it legally and I don’t know how the property works for that.” I think our value-add is coming in and saying “Okay, this is the law for that city, and these are the kinds of properties that work for that.”

Joe Fairless: So how do you make money when you do that?

Erin Spradlin: From my end or from my client’s end?

Joe Fairless: Your end?

Erin Spradlin: From my end, I’m a real estate agent, so I make the commission off of that. And then we have ongoing relationships; [unintelligible [00:06:43].23] if people will come in, they’ll buy their primary, and they’ll end up using that money to cut down their mortgage, and then they’ll turn around and buy an investment property… Whether it makes sense to do it short-term, because some cities allow short-terms for investors, or if it just becomes a long-term investment. Usually we just have ongoing relationships with clients based off of that model. And then we do that model as well, on some of our own properties.

Joe Fairless: Okay. You’re in Denver, Colorado, so you’re able to make commissions on places outside of Colorado?

Erin Spradlin: No. We do it primarily for Denver and Colorado Springs. Denver has different laws than Colorado Springs. Colorado Springs is a total free-for-all; you can go own, buy anything. The city actually is positioned as far as they are fine with people coming in and doing short-term rentals, whereas Denver is not. Denver has a primarily residence-based law. So we do both, two different communities, based on what our clients are looking for.

Joe Fairless: Okay, that’s the part I was missing. When I asked how you make money on it, I was thinking you’re working with people in New Jersey, so I was wondering how–

Erin Spradlin: No.

Joe Fairless: Okay, alright. So you’re making commission as a real estate agent, for the properties that you find for them. Let’s talk a little bit more about that, and your business model. So you’re helping them find the property, and then do you consult with them after that, or do you not have that part of the business, and it’s just “Here’s a property. It’s gonna be good for Airbnb. Now go execute the business plan.”

Erin Spradlin: I think that’s a great question, because people definitely have that curiosity about us all the time. I will say upfront, we don’t do property management. I have a lot of respect for people that do do that, but that just seems like an awful — or a job that is very hard. How we set people up is we do the front-end as far as figuring out if the law makes sense, the property makes sense, and what they can expect to make money-wise. Then we help them as far as talking about how they wanna furnish it, getting checklists  in front of them, how they would wanna set up their Airbnb advertisement, and what that looks like. Some of the things that you wanna highlight, how you would be different… And then also introduce them to people. Obviously, we have relationships with property managers, general contractors, so we put [unintelligible [00:08:55].13] with them post-close, just to make sure that it’s going well.

It’s really important to us that our clients do well, because we care about them, but also as a business model it’s not good to have people where you set them free and they’re failing, or whatever… So we have a pretty intense check-in after the fact.

Joe Fairless: When you have intense check-in – will you elaborate on that?

Erin Spradlin: It just means we have that relationship with the property manager, so we’re always checking in with them to see what the numbers are, and then we’re checking with our clients every once, two months, in the beginning, not after that; maybe six months to a year after the first one or two months… To see how their setup has gone, if they’re having any issues, if there’s anything that we can help out with, and just to make sure too that the numbers are running, and that they are meeting the expectations of what we told them.

Joe Fairless: Okay, great. Is that all part of the initial commission that you receive, or do you have a consulting thing that covers how to furnish it, how to set it up, advertising, introducing them to the team members?

Erin Spradlin: Yeah, for our clients there’s no extra charge for that, so it would just be the straight commission. In Denver typically it’s 2.8%, and then in Colorado Springs it’s 3%. But from our clients, that’s all they pay. For people that aren’t our clients, we do charge an hourly consulting fee.

Joe Fairless: Let’s talk about your Airbnbs. What do you have?

Erin Spradlin: We had two in Denver that we’ve actually converted to medium-term rentals, because Denver’s laws changed, so we didn’t wanna be outside the law. We have converted them to furnished medium-term rentals, which means 30 days or more; but they’re still furnished. Typically, the types of people we’re going after are corporate professionals, traveling nurses, people that have gotten divorced and that are kind of figuring out their situation, or are in the middle of the divorce, people that have moved here… That’s what our situation looks like in Denver.

And in Colorado Springs we just have a straight duplex that is about a mile from downtown, and people do Airbnb there, because again, it’s legal in Colorado Springs, whereas here it’s not. So I say Airbnb broadly, but it’s actually all the short-term rental markets, whether that’s VRBO, or Booking.com, or HomeAway – that falls under that – [unintelligible [00:11:07].19] Colorado Springs, and then obviously in Denver the law is a little bit different.

Joe Fairless: Okay, so you don’t help clients get short-term rentals in Denver, you help them get medium-term rentals in Denver.

Erin Spradlin: Well, you can do short-term rentals, and we definitely do help people do short-term rentals in Denver, but they have to live in that house.

Joe Fairless: Oh, okay.

Erin Spradlin: So it can be a room in the house, it can be a basement in the house, it can be a mother in law suite. The rule here though is that it has to be where you take your mail. So we help people with that kind of configuration, and again, how to do it legally. I would say probably 50% of our investor clients in Denver do Airbnb, and they do it in the house where they take mail. Whereas Colorado Springs, which is also a big part of our investor pool, they don’t have to live there. It can just be a straight investment, and then you bring in a property manager obviously, because you can’t do short-term rentals very effectively long-distance, unless you have a property manager on it.

Joe Fairless: Let’s talk about the last deal in Denver that you found for a client. What’s the purchase price and what’s the income-producing potential for it?

Erin Spradlin: Sure. Right now we had someone buy a four-bedroom house in Arvada, Colorado. That’s a city outside of Denver. They are doing it in their basement. The purchase price of that house was 425k, and for their first month it paid $1,600. They are doing a bedroom downstairs; there’s another bedroom downstairs, but that bedroom they’re using as an office and a kitchen space, so… It’s not a true kitchen, but it has a microwave, a mini-fridge, whatnot. So they pulled in $1,600.

I don’t think that they were overly aggressive; I think they could make more, but they kept their prices lower because it was their first month, and then also because they were just kind of trying to figure out what they were doing.

Joe Fairless: Okay. $1,600 a month?

Erin Spradlin: Yup.

Joe Fairless: Okay. Which would probably not cover the mortgage, depending on how much they’d put down, I guess, but… It’d knock out a  chunk of it, right?

Erin Spradlin: Yes, definitely. And we try to be clear with people about that; depending on where you’re at, what you’re doing, sometimes it can cover the mortgage. A lot of times it won’t. But it will make the payment a lot more comfortable.

Joe Fairless: Oh yeah, absolutely. The background of people who do this, your recent clients, maybe your last three clients who have closed on a house… Obviously, without disclosing who they are, but just tell us a little bit more about their background, and their age, and maybe their life-stage, that sort of thing.

Erin Spradlin: That’s also a good question. I think in general they tend to be first-time homebuyers, or a little bit younger. By younger I mean like 45, or 40, or younger. But I think that is because – honestly, a lot of that profile is more interested in Airbnb, and has had more exposure to it. Sometimes with an older clientele it’s hard to get them to have buy-in on that, or they’re new to it… And it’s interesting, because I think that seniors actually are the fastest-growing demographic for Airbnb, but they tend to do a room in their house, or  a house that they already own. They’re not looking to purchase a house and do that.

So typically, our clients tend to be in big life stages – they’ve just gotten married, or they’re just having a baby, or they’re just purchasing that first house, and then they’re open to doing something to cut down their mortgage… And usually, they’ve heard of us, because they’ve done some research online, or they’re hearing about it through Bigger Pockets, and/or they’ve had that experience where they’ve gone and stayed at an Airbnb [unintelligible [00:14:33].11] and then thought to themselves, “Oh, maybe I should try and do this.”

Joe Fairless: What are some misconceptions your clients have when they initially start working with you and they’re asking questions about the process?

Erin Spradlin: Two things. I think the first – sometimes people think it’s easy money, or free money… And it’s like, it’s good money, but it’s neither easy, nor free.

Joe Fairless: [laughs]

Erin Spradlin: I think they should have that expectation. If you’re doing it in your house, you are going to be doing cleaning, sometimes you’re gonna be fighting with your spouse about the furnishing, and things like that… So I always try to knock that down immediately, like “Expect this to be sort of a second job, and also expect to think about it as a business.” If you really wanna [unintelligible [00:15:15].24] don’t think about it as a hobby… And honestly, that’s true for any second business, or a business that you own – not to think of it as a hobby, but to think of it seriously, and run your numbers, and have your sheets, and everything. That’s part of it.

And I would say the other thing is getting them over the hump of what you can make. Sometimes they’re locked in on the long-term rental numbers, and they have a hard time getting over “This is what you can do short-term” and “These are the nightly rates, and this is what’s happening in your neighborhood.” So I feel like there’s an education piece as far as getting that into their head that this is actually what the numbers are… Because they’re looking at long-term numbers, or likely, if they’ve decided to go into investing, they have a family member that did it before them, and that family member is saying “No, you don’t want a two-bedroom. I’m cash-flowing $100”, or whatever. So just getting them to come along on that.

Joe Fairless: Wouldn’t the short-term numbers nine times out of ten be more favorable than the long-term renter numbers?

Erin Spradlin: Yeah, 100%. Usually what we see is about 150% to 200%, if you’re doing it full-time. So definitely not that example that I told you about with the $1,600. If you’re a full-time investor, usually we say 1,5x to 2x. We try to back that up obviously with neighborhoods; unless you’ve made a pretty bad decision, usually I think the short-term rental numbers are better. But there are additional costs you have to take into account though. Now you’re paying the utilities, the [unintelligible [00:16:41].20] in the beginning to furnish the place… Usually, your insurance is at 1,5x higher, because even though Airbnb promises insurance, we usually like our clients to have an additional insurance product on it.

So there are other expenses, and I would say in the beginning that can be a little bit more expensive, but long-term your monthly should definitely be better.

Joe Fairless: When you do those follow-ups with your clients, what’s one thing that someone’s complained about, or they didn’t take into account initially as much as they should have?

Erin Spradlin: Setup, honestly. I think that’s always an issue. That’s where we ran into problems, and it’s definitely where we see clients run into problems. There’s just a lot of decisions that have to be made on the furnishing, and how long that takes. I think there’s different philosophies on that, as far as whether or not you wanna go through a Craigslist, or Facebook Market, to acquire cheaper furniture, versus just going to IKEA. I think you see people maybe stretch out a timeline longer than they should based off of that, or you see business partners and/or couples getting in fights over how they think they should do it.

I think that part of it, and I also think property management. Sometimes you have people that have different ideas as far as how much the property manager should be involved, how much they should be involved… Those are some of the sticking points that come up a lot.

Joe Fairless: What are the fees that are typical for a property management company, should they be involved to the greatest extent that they could be involved?

Erin Spradlin: Usually, we see 17% to 25%. I would say 20% seems to be the average where we’re at, though those people are pretty intense. For our properties, the property manager that we use charges 18%, and we are really no part of it. We’re pretty hands-off. They provide us with a monthly report, and that’s it.

Joe Fairless: And that’s of the collected income?

Erin Spradlin: Yup.

Joe Fairless: Okay. So what are the responsibilities that they undertake, in your example, where they collect 18%?

Erin Spradlin: They are handling all the communication, which I think the communication on a short-term rental is a lot more intense. People have a lot of questions…

Joe Fairless: Yeah…

Erin Spradlin: You’re saying “Yeah…”

Joe Fairless: Because I’ve rented from one – my wife and I have – and I know she asks a lot of questions, so… I wouldn’t wanna be on the receiving end.

Erin Spradlin: [laughs] Well, there’s this idea — I mean it’s good; it’s why people like it and why it got started, but they wanna know the coolest places to go in town, where do you like to go get your beers, or what’s something that’s off the beaten path, that’s not just a touristy thing to do. I think there’s ways to limit those questions by building out your Airbnb profile correctly, but I think there’s just a lot of communication that goes on… So I think your property managers really dealing with all of that – cleaning, obviously is a  huge issue… If you have a long-term rental, you’re not worried about these things. But if you have a short-term rental, you’re changing out and doing a clean every single time someone stays… It’s honestly  a huge complaint that we hear about from the guest side – people always want it to be really clean, and they don’t wanna see a rogue hair somewhere, something gross… So I think your property manager has to put in place a really good team, and make sure that that’s done.

Those seem to be the stressors, and then again, dealing with just any kind of issue that happens, that would happen with a long-term property as well – your short-term rental management has to take care of it… If there’s a flood, or a backed-up toilet, or whatever. They’re dealing with that piece, so the normal long-term rental piece, but then on top of it the communication and the cleaning.

Joe Fairless: And what do you do?

Erin Spradlin: What do you mean what do I do? [laughs] I sit back…

Joe Fairless: Right, yeah. I have three single-family homes, and I sit back, too. I just get a monthly report… Is that the extent of it for you, since you have a property management company doing all this?

Erin Spradlin: Yes, it is. And that’s how we want it. I really feel like a good property manager — I really don’t wanna hear from them that often; I wanna have a relationship where we trust each other, and if I let them make any decisions up to $500, I feel like “I trust you, that’s why I have that relationship, and I really want you to handle this.” And then if something bigger comes up, or we need to change something, or I see a drop in numbers, then maybe we’re talking. But in general, I don’t wanna be involved.

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

Erin Spradlin: Short-term rentals… [laughs] It’s definitely been our market, and I think going after cities — we’re pretty bullish on Colorado Springs, and I think the reason for that is that you see a lot of millennials come in. It’s a city that had pretty depressed housing costs, because people didn’t wanna be there. It’s sort of interesting; it was on the front range, but now it’s benefitting from the fact that Denver is so expensive, so people are flooding into that…

So I guess I would say look at cities that surround cities that are very popular, because it turns out that the cities are probably gonna get expensive, and you’re gonna benefit from that overflow. And again, if you can find a place that will allow for short-term rentals, that is sort of a destination, I think you’re gonna do pretty well that way.

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

Erin Spradlin: I am.

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

Break: [00:22:05].22] to [00:22:45].15]

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

Erin Spradlin: Long Distance Investing, by David Green.

Joe Fairless: If Airbnb and short-term rentals became illegal, they had the same policies in place in Colorado Springs as they do Denver, what would you do with your business?

Erin Spradlin: I would try to keep our business model similar, but I would tell people to move into medium-term rentals, like they’ve done in Denver. I think it’s been a really positive experience for us. As people tend to pay more, they’re really responsible, and a lot of times they convert into long-term renters anyways, because they get into this situation – they think they’re gonna be there for three months, and just because of life circumstances they end up being a 6-month or a year-long tenant, and it just ends up being a good relationship for everyone. And I honestly think you could just build a business model around those people, without the short or the long-term on it.

Joe Fairless: Best ever deal you’ve done?

Erin Spradlin: Definitely my place in Colorado Springs. The duplex that we have down there is cash-flowing quite well. It’s a duplex, and then again, I just think Colorado Springs is a hot place, where the prices are increasing, and they have a lot going on down there.

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

Erin Spradlin: Buying in an HOA. No doubt. I know since then I’ve read about people not buying in condos, and that stuff has been true for us. We had a really good investment that was cash-flowing quite well, and then we were gonna get hit with a huge special assessment, and the HOA was just causing a lot of issues… So I don’t think we would repeat that.

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

Erin Spradlin: We have something called [unintelligible [00:24:17].09] so every single commission we do, we give 2.8% back into a charity of our client’s choosing. That’s one way I think we like to keep it local… And then also we do a lot of free education, because like I said before, Airbnb really affected and changed our lives, let us quit our jobs, so it’s exciting to talk to other people and help other people get in that position as well.

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

Erin Spradlin: They can find us on jamescarlsonrealestate.com, that is our website. They can also find us on Bigger Pockets; I have a dedicated blog there, under Erin Spradlin, and then my husband (who is my business partner) also has a profile, and that’s James Carlson.

Joe Fairless: Erin, thank you for being on the show, talking about your approach to short and medium-term rentals, and talking about some misconceptions that are in place with people who are just getting started… And then also some challenges for furnishings, property management, and solutions to those challenges.

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

Erin Spradlin: Yeah, thank you so much. Have a great day.

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JF1735: Going From Active Investor To A More Passive, Triple Net Lease Strategy with Alan Fruitman

Alan helps his clients own properties and lease them as triple net leases to commercial tenants. His clients are able to purchase properties nationwide through Alan, which his team personally vets before bringing them to his clients. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“You might get a little higher cap rate because its a strong B tenant and not an A, but you made up for it with the security that the incredible location will bring to you” – Alan Fruitman


Alan Fruitman Real Estate Background:

  • Owner of 1031tax.com and author of “The NNN Triple Net Property Book”
  • Has helped investors purchase more than $1 Billion of single tenant, triple net leased investments
  • Based in Denver, CO
  • Say hi to him at https://1031tax.com
  • Best Ever Book: Two Page Marketing Plan


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

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


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

Alan Fruitman: Excellent, thank you. Nice to be with you this morning.

Joe Fairless: Yeah, nice to have you on the show. A little bit about Alan – he is the owner of 1031tax.com, and author of The Triple Net Property book. He’s helped investors purchase more than one billion dollars of single-tenant triple net lease investments. Headquartered in Denver, Colorado. With that being said, Alan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Alan Fruitman: Thank you. My focus is very small. I help a target audience of investors looking for passive income, and the type of properties we sell are single-tenant, triple net lease properties. These properties range from pharmacies, Walgreens or CVS, restaurants, McDonald’s, Taco Bell, Chipotle, dollar stores, auto parts… Lots of the same retailers you see when you drive down the street – those are the properties my clients purchase.

Joe Fairless: I mentioned in the first line of your bio that you’re the owner of 1031tax.com… I’m gonna guess – and then please elaborate more – that you work with a lot of investors who used to be active, made some money, looking to 1031 that money into something that is passive, and therefore you connect them with a triple net lease property. Is that basically the business model?

Alan Fruitman: That is the model. Many of my clients come out of apartment buildings or shopping centers, office buildings, even land… They do a 1031 exchange into something much easier to manage; long-term leases with no obligations for the landlord.

Joe Fairless: Do you ever work with any of your investors who say “Alan, I’ve got some money, I’m an active investor. I do want to be passive, but I’d like to still get some of the financial benefits of a value-add deal.” So is it possible to get the best of both worlds? A passive investment via a triple net, while also incorporating value-add?

Alan Fruitman: It’s not, no. The triple net properties – there’s really no value-add. It’s considered mailbox money. You buy the property, you have a long-term lease, long-term meaning 10-20 years on the primary term. The tenant will have multiple renewal options, going 20+ years for options of renewal. There’s really no value-add. The concept and the focus is passive. Value-add is a great component of real estate, it’s just different from what this type of property entails.

Joe Fairless: Are you a broker?

Alan Fruitman: I am  a broker, and my clients purchase these triple net properties nation-wide.

Joe Fairless: So how do you find the triple net lease properties to match up with your clients?

Alan Fruitman: One thing that’s unique about my model – and there’s really nobody in the country that does it the same way that I do… What’s unique is we only represent buyers on this national level, and the properties come to me from owners, developers and brokers all over the country. My team and I receive usually more than 200 properties every day, and we sift through these properties and pick out the best of the best of the best, and we send an e-mail to our investors of these properties every day; Monday through Friday, my clients receive an e-mail of new properties that come to market.

Joe Fairless: And the new properties that you share – are those the ones that have already been filtered out, or have those passed the filtration process? Or do you share all 200 that you receive every day.

Alan Fruitman: No, they are filtered of 1) location, 2) strength of tenants, and 3) length of lease. The properties start around a million dollars on the low side, and go much higher than there, but our sweet spot is the 1 to 10 million market points.

Joe Fairless: Okay. And what did you say – location, strength of tenants, and what was the third?

Alan Fruitman: Number three is length of lease.

Joe Fairless: Length of lease.

Alan Fruitman: We try to focus on longer-term lease properties. It’s a different marketplace for the shorter-term lease properties. When you want a passive investment, the longer horizon is usually more appealing to our clients.

Joe Fairless: Do you prioritize it in that order, 1-2-3?

Alan Fruitman: Yes. It all comes back to real estate fundamentals. Location is number one. We want a location where the current tenant will thrive, but we also want a marketplace where when the tenant eventually vacates, it’s highly likely and easily re-tenanted. And specifically, we look for retail corridors where the tenants and the property is surrounded by many other prominent retailers. We want that stretch where you’re surrounded by Walmart, and Kohl’s and Home Depot, and Lowe’s, and McDonalds, and Chase Bank, and all the other national retailers. That prominent corridor is what we look for.

Other attributes would be near university, a big hospital, a highway exit… Permanent fixtures that aren’t trendy, that will pass the test of time.

Joe Fairless: Okay. And then what about the second thing, strength of tenants? How do you qualify that?

Alan Fruitman: Well, after location, the second most important feature would be strength of tenant. If it’s a corporation, we wanna make sure it’s a strong, profitable type of company, and an industry that will function in the long-term.

If it’s an industry we think that the internet will replace, we don’t show those properties. If it’s a company we don’t like their standing, we don’t show those properties. If it’s a franchisee, we wanna make sure it’s a quality franchisee – many locations, and stable within their financials.

Joe Fairless: What are some ways you quantify that qualification process with strength of tenants?

Alan Fruitman: Many of the companies are publicly-traded, so we look at their earnings ratios, their stock performance, their 52-week trends. That’s number one. If it’s a franchise, over 26 years I’ve sold so many properties that I recognize the franchisees from other properties my clients have purchased. I stay in close contact with my clients through the years. If there’s a problem, they usually call me right away, so I know which tenants have had a track record of stability and which ones have not.

I’m not perfect, so when there’s a new tenant, there’s a learning curve that has to happen… But because I’ve sold so many properties over such a long duration of time, I can usually weed out the problem properties well in advance of my clients ever seeing them.

Joe Fairless: You said most are publicly traded companies… What are a couple examples — or maybe tell us a story of a deal that was not a publicly-traded company, but still passed your test.

Alan Fruitman: Many years ago I sold a Burger King in Ohio, and when the lease came due, the tenant did not renew… So my client called me and said “Alan, what do we do? Burger King is not renewing.” I connected the client with a leasing broker in the local market, and because the location was so strong, within less than one month we had a bidding war between Chipotle and Starbucks to take over that soon-to-be-vacant Burger King. And the end result was Starbucks winning the bidding war, and we went from a franchised Burger King to a corporate Starbucks, which has certainly a higher credit rating, and the rents went up significantly, too.

That’s why our first criteria is location. And if our current tenant were to vacate, we wanna make sure the future is greater than the present.

Joe Fairless: And then length of lease… Do you have any investors who say “Alan, I do want something that is passive, but I see this area is growing, and I think the shortest lease possible would be best, because then we can get them real good on the increase once the area comes to where I think it will be.”

Alan Fruitman: That’s a great question… There is a segment of the market, and a very valid and valuable segment of the market that looks for that type of investment. It’s outside of my scope. We focus on the longer-term lease properties, but that’s a great angle within the triple net property world that investors purchase. It’s just outside of my scope. I have a very tight vision for what I sell. There’s an incredible demand. There’s lots of opportunities for these long-term lease properties. This is typically what the buyers seek, which is why it’s my focus. But the angle you described is a great angle, and it’s just outside of the box of what I focus on.

To take that thought one step further, my clients sometimes call me when their lease becomes short, and they ask me what to do, and 19 times out of 20 I’ll tell them “Don’t sell. Because if you sell, somebody else will pick up on that opportunity, that great location, the long-term vision that you have, and they’ll take your upside.” So when the lease gets short, if the location is excellent, I advise my clients not to sell, and not give somebody else that opportunity that you just asked about.

Joe Fairless: How do you define a longer-term lease?

Alan Fruitman: In the triple net lease world, leases usually are between 10 and 25 years, and that’ll be the primary lease term before the option periods.

Joe Fairless: Tell us a story of a deal that was a triple net, but did not work out.

Alan Fruitman: There’s probably many. You probably don’t believe me when I tell you I don’t have an example of any of my clients that it happened to… I’ll tell you another story. The first property I ever sold was a Denny’s in Colorado. It was near the outlet stores of Interstate 70. Very prominent location, but I guess it didn’t work out. The tenant  was a small franchisee; there was a personal guarantee associated with the lease.

The tenant closed their shop, because the franchisee had (we’ll say) other problems, without getting into a long story. The personal guarantee held up. The client received all of their rent. The client worked a buyout with the tenant, and was given a significant amount of money as that lease ended… And the property is now turned into a Chipotle and a Which Wich sandwich shop. It’s probably tripled in value over this long duration of time.

I don’t have an example of difficult endings… One thing I would share is if you don’t have a great location, when your tenant vacates, that’s where you could get in trouble. If you know that McDonald’s, or Burger King, or Dollar General, or any tenant in a rural area, the current tenant might thrive because they might dominate a small market which fits their model, but that’s the current use. The problem arises when they vacate – what do you do with that vacant building in a very small marketplace? That’s where clients could get in trouble.

Joe Fairless: Based on your experience, what type of returns should an investor expect on a triple net?

Alan Fruitman: The conservative McDonald’s, Chick-fil-A type investment with a new 20-year triple net lease will be around a 4% cap. The franchise restaurants would be somewhere in the mid-fives, or approaching 6% cap rate, and everything in between. So 4% to 6% is the range for most newer, longer-leased, triple net properties.

Joe Fairless: Okay. And what’s an example of something that is outside of that 4% to 6% range?

Alan Fruitman: As the location gets more inferior — again, we have these three criteria… We have location, strength of tenant, length of lease. When one or some combination of those three are not optimal, the cap rate rises. When all three are optimal, the cap rate is low, and when there’s a fine balance between those three, you’re in the mid range.

If your location is not very strong, the cap rate rises. If it’s a weaker tenant, the cap rate rises. A shorter lease, the cap rate rises, too. So when you get all three of those criteria that are not optimal, that’s when you’d have the highest of cap rates.

Joe Fairless: What’s the highest cap rate you can think of on a deal you’ve done? Triple net deal.

Alan Fruitman: Again, I only focus on the quality properties, so not much higher than a 7% cap. Maybe an 8% cap, but that was a long time ago. As the market has gotten better and better each year, as we’ve gotten further away from the recessionary times of a decade ago, cap rates on everything, on all types of real estate were higher. But in this marketplace, not much more than  a 6% cap, in the last several years.

Joe Fairless: Okay, so over the last several years what was the property – can you just tell us the property that was the highest cap rate, and just describe it a little bit?

Alan Fruitman: Without researching, the first one that comes to mind was a Zaxby’s franchise guaranteed, kind of a B- location, and that was about a year ago. The cap rate was around 6.5%.

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

Alan Fruitman: My clients always ask me — on my e-mail list there’s around 200 properties, and my clients frequently say “Alan, what’s the best property on your list?” And my answer is always the same – it’s the one in the best location. I’d rather have a franchised Burger King in an excellent location than a corporate McDonald’s in an average location. So the answer to your question is the best property is the one in the best location.

Joe Fairless: And you mentioned earlier how you’re defining the best location – that it will thrive and be easily re-tenanted, and it’s in a retail corridor… What are some other quantifiable things we could look at to say “Yup, this property out of the other 199 is head and shoulders in the best location”?

Alan Fruitman: Well, other quantifiable measures would be traffic counts, demographic, population counts, income levels… Those are other quantifiable. You can also look at market cap rate for tenants. Many of these tenants — McDonald’s is a… I don’t know the number, but it’s a well over 50 billion dollar company. And Chase Bank… You can look at Standard & Poor’s credit ratings; that’s another quantifiable measurement of worthiness, credit-wise.

Joe Fairless: And when you take a look at the location from a  traffic count, retail corridor, population, income levels, market cap rate, how do you determine which of those are more important than others?

Alan Fruitman: That’s a great question. There’s not one way to answer your question. There’s many measurements. Let’s look at demographics. You can have several hundred thousand people on a five-mile radius, but if you’re half a block apart, it’s a completely different area. If you’re on the signalized traffic corner or if you’re on a side street a half block away, the value of the property might be one-tenth as valuable.

So there’s an exception to every rule, and you have to take location, demographics, retail corridors, strength of tenant – you take all these attributes and figure out what makes each property unique. And there’s no two equal properties. Sometimes you have to make value judgments of which criteria to make more valuable than the other. Do you look at being on the corner more important than being sandwiched between on an outparcel to a Home Depot or Safeway or Walmart anchored center?

There’s so many great choices. Sometimes you have to make a value judgment of which ones you think will be the greatest long-term. Sometimes you say “I’ll take a  good tenant, not a great tenant, but a home run A+ location.” That might be a value judgment. And maybe you get a little higher cap rate because it’s a strong B tenant, but not an A, but you made up for it with the security that incredible location will bring to you.

Joe Fairless: Very helpful, thank you for that additional perspective on how to determine how to think about assessing opportunities, and in particular locations. We’re gonna do a lightning round now. Are you ready for the best ever lightning round?

Alan Fruitman: I’m ready.

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

Break: [00:19:31].17] to [00:20:23].16]

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

Alan Fruitman: I’ve read a book — I think it was called The Two Page Marketing Plan. I read it over the holidays… And it really helped me dig into what I’m doing, how I’m doing and how I can improve it.

Joe Fairless: Best ever deal you’ve been a part of?

Alan Fruitman: I don’t know the answer to that question. I close 30-50 properties every year. The one that my client loved the most… I’m blessed with so many clients that buy so many great properties. When my client is thrilled at the end of the deal, that’s the best deal.

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

Alan Fruitman: Good question. I’m not sure off the top of my head the best answer to your question… I think if I had to make sure I do consistently one thing in every deal it’s ask questions and just let my clients talk, and answer their questions, and let them ramble and tell me what’s important to them, and just listen, listen, listen, before I advise.

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

Alan Fruitman: My mom has run a Thanksgiving charity project since I was probably 8 years old. I was born and raised in Florida, I live in Colorado now, and for 40+ years I’ve been blessed to be part of this Thanksgiving charity project that has zero financial overhead, and we’ve fed many thousands of families, and continue to do so.

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

Alan Fruitman: Two ways. Number one, my website, 1031tax.com. And on my website you can sign up for my property list. That’s only for investors, not for brokers. And number two, I wrote The Triple Net Property book, and if you’re an investor looking to buy triple net property, you can call me at 800-454-0015, or contact me through my website and I’ll mail you a hard copy of my book.

Joe Fairless: Alan, thank you so much for being on the show, talking about triple net, and the reason why you are laser-focused on helping your clients get triple net properties, and how to evaluate triple net properties, the type of returns to expect, 4%-6% generally, and in terms of how to assess the opportunity – 1) location, 2) strength of tenant, and 3) length of lease. Then you went into detail for how to think about each of those three categories, and in particular location.

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

Alan Fruitman: Thank you, Joe.

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JF1719: Working With Commercial Real Estate Cleaning Companies #SituationSaturday with Edgar Aguilar

Edgar took over a struggling janitorial company at the age of 23 in 2008. He took that struggling business and grew it into a successful commercial and construction cleaning company, helping investors clean up their properties after construction. It wasn’t always easy, Edgar worked two jobs for some time. He’s had success, but some of the business slowed for a while, Edgar did not given up, he’s working harder than ever to get his business to levels it has never reached. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“I didn’t know how I would pay the bills, but I knew that if I kept learning, and putting myself out there, I would make it” – Edgar Aguilar


Edgar Aguilar Real Estate Background:

  • Owner of Legacy Construction Cleaning
  • Has been working with investors and construction crews, cleaning facilities for over 20 years
  • Based in Denver, CO
  • Say hi to him at https://www.legacyconstructioncleaning.com/


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

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


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

First off, I hope you’re having a best ever weekend. Because today is Saturday, we’ve got a special segment for you called Situation Saturday. Here’s the situation – you want to learn about the different aspects of investing in real estate, and what are those aspects that you probably don’t know or probably haven’t studied a whole lot is the commercial cleaning aspect of the business. Working with companies that come in and actually do the cleaning.

We’re gonna be talking to a Best Ever guest who is the owner of Legacy Construction Cleaning, and has been working with investors and construction crews, cleaning facilities for over 20 years. First off, how are you doing, Edgar Aguilar?

Edgar Aguilar: I am great, Joe! Thank you for having me on.

Joe Fairless: Yeah, my pleasure. Looking forward to our conversation. I guess what would be helpful is if you wouldn’t mind just telling us a little bit more about your background and your company’s current focus.

Edgar Aguilar: Yeah, I would love to, Joe. Thank you. Well, initially we took over the company about ten years ago. In 2008, in the best market ever, we took over a struggling janitorial company. I say that lightly, because 2008 was crazy… Well, little did I know at that point that we were going through one of the hardest recessions ever.

Joe Fairless: Sure.

Edgar Aguilar: So here I am, 23 years old, and my [unintelligible [00:02:32].16] had just passed away from lung cancer; I had just graduated from business management school, with the passion of one day owning my own business of something. Well, after he passed away, nobody really wanted to take over the company… So I put my hand up and I said “I’ll take it over”, thinking that I knew everything about business because I had just graduated business school. Well, that’s a joke, because as we all know, that’s not the way it goes.

At that point I was also working for corporate America, and I was running the job part-time; I continued doing that for the next four years. Going to corporate America, having an 8-to-5 job, and then going to go clean afterwards (or before), and doing that year after year… Well, at 25 I made the most money I had ever made, doing both gigs… And at that point I thought I was on top of the world.

Joe Fairless: How much were you making?

Edgar Aguilar: I made six figures. Woo-hoo! With my corporate job and the business. And at 25 I believed that I was pretty unstoppable, making more money than I had ever made, more money than my parents had ever made.

Joe Fairless: That’s a ton of money for anyone, but a 25-year-old, six figures – yes, please.

Edgar Aguilar: [laughs] That’s the way I felt, and nobody could tell me anything. Well, we fast-forward three years; now I’m 28 and the income kind of dropped, and we’re not really gaining no momentum on the business, and corporate America was — it was a very stressful situation, just going in to a job that you don’t like, doing something that you don’t wanna do, just for a pay check week to week. And I’m sure a lot of listeners can relate to this, when you’re stuck at a job just for a pay check, and you’re not happy about what you’re doing.

Luckily for me, I happened to put “personal development” one day on YouTube, and a course of Napoleon Hill came up. He was talking about personal development, about your goals, about a mastermind group… And that completely revolutionized the way I started thinking from that point going forward. I was like, “Man, who is this guy?! What is this whole thing about personal development? The more you learn, the more you earn… What is this about personal development?” It really intrigued me, so I started taking notes. I filled up a whole notebook of what Napoleon Hill was talking about.

Then at 29 I said “This is it with corporate America. I can no longer do this.” Fast-forward to when I was 30, actually that same year at 30 I put in my [unintelligible [00:05:40].12] and I jumped full-time into business ownership. Scariest thing I’ve ever done. It was the scariest thing, and the happiest feeling I had ever felt.

At this point I have three kids, I don’t know how I’m gonna be paying for health insurance, I don’t know how I’m gonna be paying the bills, but I knew that if I kept learning and just putting myself out there, I would make it. Well, six months after I made that transition, I landed a huge janitorial account, where I was bringing in $2,500/month. At that point it was enough money to pay all my bills and to just continue with the business. I knew that was the guiding light, because at that point it was the same amount of income that my corporate job was paying.

So I just had to work my butt off every day, for the next few years. I worked, I cleaned… Our focus was construction cleaning, so we would go in the morning, clean a custom-built home, and then at night I would go do my janitorial gig. That happened now for the next two years. I did that every day, worked from 7 AM to midnight, go home sleep for a few hours, get up and do it again.

I started getting a little bit of momentum, so I got one employee, two employees, three employees, I started putting them in teams, putting them in different offices… Now we have a team of 12, we have 30 different office buildings that we clean, and we have about 20 different builders that we work with… Anywhere from custom-built homes, remodels, pop-ups, apartment buildings, restaurants… We’ve pretty much done every type of construction cleaning that you could imagine. But I really put a lot of the emphasis on my personal development, because those two years that I was out there cleaning from 7 AM to 12 midnight, I had audiobooks just playing. While I was cleaning toilets, I was learning. While I was sweeping and mopping and vacuuming, I was learning. I put over 50 different books, from John Maxwell, Darren Hardy, Napoleon Hill, into my inner circle. Once I started doing that, I really saw my income jump. In the last three years we have been able to double the business each year, year-over-year.

Joe Fairless: Wow. That’s impressive, especially that you took a company and have grown it to this extent, and have scaled it… And clearly, the focus on personal development is at the forefront and is the foundation of everything, plus you actually acting on the personal development tips that these individuals give you. You need to actually do things that people suggest you do (first is just listening to them) and you clearly have done them…

Let’s get into some details about the business, because the audience is real estate investors, and it’d be good to hear from the perspective of someone who we would hire, how you price your jobs, things to consider as a real estate investor, knowing what you know, when we’re hiring a company like yours… So what can you tell us about some of your business specifics?

Edgar Aguilar: Great question. Our pricing is normally on a per square basis, and I’m sure that a lot of real estate investors, flippers like to know solid prices on it; what will happen, in my experience, is when I go in to give a bid for a new builder, I am normally competing with the smaller mom and pop shops. That means if we do it right, there’s gonna be three separate bids, or four different bids from different companies.

Normally, you have your lowest two, and then your higher two. Normally, your lower two cleaning estimates are gonna come from people who not only own the business, but are actually gonna be on-site, cleaning the job site… Which is a double-edged sword. It’s good on one hand, because you’re gonna get the lowest price, but on the other hand, you have the actual owner in there cleaning, and they’re paying themselves a very minimal hourly fee. And that’s normally how you could get to the lower price.

Joe Fairless: Why is that a bad thing, if you hire someone who is the owner of the company and they’re paying  themselves a lower fee?

Edgar Aguilar: It’s bad because you will never see any growth with that company. It was like what I was doing five years ago, and I had a very small mindset.

Joe Fairless: I’m thinking about it from a real estate investor standpoint, not your perspective. So if I’m looking at bids and one of the lower bids is with a group where the owner is gonna be cleaning, I don’t care what they pay themselves, as long as I’m getting the lower bid and a good service.

Edgar Aguilar: Very good, and a lot of people like that. A lot of people like to see the owner actually out there cleaning. The only problem with that is how long can they do that for? If we’re looking at the long-term game and you’re doing multiple flips, they will be good for one season. But if you’re doing multiple projects throughout the years, they might not be able to sustain that type of job for a long period of growth.

Joe Fairless: Okay.

Edgar Aguilar: For example, for me – I have all employees, I’ve got them under insurance, workmen’s comp, paying my taxes… So we are a total legitimate company, and sometimes when we deal with the smaller companies, especially the owners and the lower estimates, they’re not insured, they’re not bonded, they don’t have workmen’s comp, they don’t have standards, and they don’t have any long-term growth. So if you are in the game long-term, it’s better to just hook up with a cleaning company that has been around for a while and that is doing everything right by the books. Unfortunately, you’re gonna pay a little bit more with that.

So it’s a double-edged sword. You could go on one side with that lower fee person; the owner is doing it… But how long can they sustain that? Let’s say you have three flips, or four flips, or multiple projects, or you have a 27-unit apartment building – they could only do so much. And if you have an apartment building, 27 units or 30 units, and then you have two other houses, and then you have a commercial space that all need to be cleaned within the same week, a one-man crew normally can’t handle something like that. You need to have multiple teams. Because of that, you pay a little bit of a premium price.

Joe Fairless: Okay, it makes sense.

Edgar Aguilar: Yeah. So that would be the biggest thing.

Joe Fairless: And you said you charge on a per square foot basis – is that typical for the industry?

Edgar Aguilar: Yes. Or some people do T&M.

Joe Fairless: T&M… What’s that?

Edgar Aguilar: Time and material.

Joe Fairless: Oh, got it. Okay. So per square foot basis – what’s the range that price will be from a per square foot basis?

Edgar Aguilar: Now, I am in the Denver market area, so that means that there’s a lot of construction going on around here. People are flocking into our state and into the Denver Metro Area, so the competition is pretty high. We are about 40 cents/square foot, up to 60 cents/square foot for residential. That’s kind of average. You can find that throughout our industry when it comes to construction cleaning.

Joe Fairless: Okay.

Edgar Aguilar: So if you’re gonna do a flip, 1,000 square feet, at 40 cents/square foot you’re looking at $400. Pretty typical.

Joe Fairless: Cool.

Edgar Aguilar: Now, if you’re building a restaurant, because it’s a lot more detailed work, they’re gonna be putting in a lot more elbow grease; they’re gonna have to clean the walls, the stainless steel – now our pricing changes closer to $1/square foot. If it’s a 5,000 square foot Chick-fil-A, or just any type of restaurant, it’s normally closer to $1/square foot. Now, that normally does also include all the window paints with that $1/square foot, and it also normally includes two cleanings. One, the pre-construction cleaning, just to kind of get it up to the CO standards, right before they have the health inspection, and then the final clean right before they open.

Joe Fairless: Got it. And the 40 to 60 cents/square foot for residential construction cleaning – you’re talking a fix and flip house, anyone who does ground-up development… Those are the two primary residential construction cleanings, right?

Edgar Aguilar: Right.

Joe Fairless: Okay. 40 to 60 cents. What would influence it being 40 cents, versus 60 cents?

Edgar Aguilar: Normally, anything over 5,000 square feet would be on the 60 cent mark, because you’re gonna be there a lot longer; there’s a lot more detail-oriented work, and it’s just a bigger space, more to cover. Normally, the bigger the project is (over 5,000 square feet) that’s when you’ll see a 50 or 60 cents charge for that project. It’s just a lot more detail work.

Joe Fairless: So I would think that the bigger the project, the cheaper it would be, because then you’re in one place longer, and you don’t have to travel from job to job, therefore there would be economies of scale. So if someone has mentioned that to you, what’s your response to that?

Edgar Aguilar: Because the bigger it is, the longer it’s gonna take, and we’re gonna have to do multiple trips. Normally, for something over 5,000 square feet I always like to tell our customers, our builders, our homeowners, our flippers – it’s gonna take 2-3 days to be on the safe side. On anything smaller than 5,000 square feet, if we take a big team, we are normally able to be in and out in a day. The problem with that is that no matter what we do, there’s always gonna be dust particles that are gonna settle on flat surfaces. So to cover yourself, especially on a 5k, 6k, 7k square feet project, you wanna be in there two days. You could probably do it in a day, but it’s gonna kill your people, so you wanna be there two to three days in order to cover all those flat surfaces… Because once you start dusting the walls and the ceilings and the ceiling fans, that dust doesn’t settle right away. It normally takes 24 hours for it to settle down.

Then one thing that I came across – sometimes homeowners, flippers, builders will go the next day and rub their hands on flat surfaces and dust will come up on their hands… And it’s not that it didn’t get cleaned, it’s just that those dust particles now are settling down, and it needs to be recleaned. So the bigger the project, the longer it’s gonna take us to clean it. And to keep it on the safe side, we wanna ensure our customer’s satisfaction, so we wanna say it’s gonna take 2-3 days, so that way we’re always coming back to clean those flat surfaces after the dust particles have settled down.

Joe Fairless: I didn’t realize it would be a 2-3 day job, so it makes more sense… Thanks for clarifying that. Put yourself in our shoes for a moment, if you would, please – a real estate investor who is considering different cleaning options, or just being educated on the cleaning process… What else should we know that we probably don’t know?

Edgar Aguilar: First you wanna meet with them. Normally, just meeting someone face-to-face will tell you a lot. As we all know, the first five seconds that you meet anybody, the first five seconds tell a lot; your first impression. If someone’s getting there and they have pads down to their needs, and they have a shirt that’s tore up, do you really want someone like that in your house or in your project, cleaning it? Even though they might be the cheapest and they are the owner of the company, do you really want that to represent your project? I would say no. You want somebody that is clean-cut, looking clean, just because that is a representation of who you’re hiring.

So I would say the first impression is meeting them. The second would be getting on their website and looking at their reviews. Google their website, Facebook, LinkedIn, just making sure that they have solid reviews on there. That’s one thing that we pride ourselves in a lot – just having great reviews. Customer service is  a must for us, but other companies don’t have that as their philosophy.

So I’d say meeting them and looking at their proposal, seeing how their proposal is structured… Is it just something on a Word document, that anybody could do? Or is it a really nice, professionally-done estimate that was done on a nice software, that they have to pay? Just because all those little things have a lot to do with the way you feel about somebody. Then at that point you can make an educated decision. They have great reviews, they have a great website, they have a great online presence. When I met them, they were clean-cut, they knew what they were talking about… I guess those few items would be able to tell you a lot from a person.

Joe Fairless: Sure. Yeah, it’s the little things that add up to a big thing, and it’s how they approach those items that is a likely indicator for how they’ll approach working with whenever you have selected them.

Edgar Aguilar: Exactly.

Joe Fairless: Edgar, thank you so much for being on the show. How can the Best Ever listeners learn more about your company?

Edgar Aguilar: Yeah, thank you. They could just go to our website, it’s legacyconstructioncleaning.com. Or I’m on LinkedIn under Edgar Aguilar, or we have a Facebook page, Legacy Construction Cleaning. Any of those ways.

Joe Fairless: Excellent. In this conversation I learned a lot of things. One is the two common ways to price out; one is on a per square foot basis, which is typical, or the other is time and material (T&M). Where you are, in Denver, 40 to 60 cents/square foot for a residential construction cleaning – that’s the fix and flippers and anyone doing ground-up development for residential – and then it increases for restaurants, because of the higher level of cleaning and more detailed level of cleaning.

Then also when we’re selecting a cleaning company, looking at online reviews, looking at the website, meeting them in person, and looking at the proposal, how it’s structured and how professional it is, because it’s likely an indicator of how professional they’ll be and how good of a quality of job they’ll do whenever you select them, or if you don’t select them.

Edgar, thanks for being on the show. I hope you have a Best Ever weekend, and we’ll talk to you again soon.

Edgar Aguilar: Likewise. Thank you so much for having me on. Have a great day.

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JF1680: Natural Entrepreneur Combines Corporate World & Love For Real Estate Investing with Dino Pierce

Dino was raised by entrepreneurs, but took a little different path at first, going to and graduating from college before entering the corporate world. Once he was there, he wanted more, and to scratch that entrepreneurial itch! He started a few small ventures, before falling in love with real estate, specifically multifamily syndications. Hear how he jumped into the multifamily syndication business, and is teaming with others to grow the business. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“You can bring a deal to a team that is already experienced, chances are they’ll do it and add you to the GP side of the deal” – Dino Pierce


Dino Pierce Real Estate Background:


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

Dino Pierce: I am doing good, thanks for having me. I’m excited, and I appreciate the opportunity.

Joe Fairless: Yeah, my pleasure, and looking forward to our conversation. A little bit about Dino – he is the CEO of Edified Equity and an active multifamily investor. In 2018 Edified Equity and partners syndicated four apartment communities consisting of 254 doors, across four markets, valued at 9.3 million dollars. Based in Denver, Colorado. With that being said, Dino, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dino Pierce: Yes, certainly. Thanks again so much. My background – I have a little bit of a different background than most people, because I was raised by entrepreneurs. So literally it wasn’t just my mom and my dad, it was their parents, it was their brothers and sister… I almost didn’t know anyone who woke up and went to work for a company; they all woke up and ran their own business, and managed their own employees… So I didn’t realize just being in that environment that it was something unique until I graduated college, or kind of got out in a  different environment, let’s put it that way.

So I always have had an entrepreneurial spirit, and it’s almost all that I’ve ever known, from day one… I took a little bit of a different path, where I did go to college. When I talk about entrepreneurs, I’m talking about people who didn’t even go to college. They were finishing high school and going right into business. I know that’s kind of catchy and trendy today, and you hear a lot of people saying “Why are you gonna go waste this time in college? Just start now. If you’re not gonna be a surgeon, you don’t need to go to school.” And I’m taking that to the extreme… But anyway, I did go to college, and got out into the corporate world, but there was that entrepreneurial spirit that couldn’t be crushed.

So about four-and-a-half years ago, just jumping forward to real estate, by-passing all the little landscaping businesses and things that I did entrepreneurial along my path, about four-and-a-half years ago I got involved in real estate investing, when I relocated to the Denver Metro Area.

I started off – typical path, I was going direct to seller with marketing, getting distressed properties under contract, and I was taking it to a residential redeveloper, and I was either wholesaling it for a very small, quick, but heavily taxed profit, or I was saying “I’m not gonna wholesale this to you. I have the goods right here, we’re gonna partner. You’re gonna do the work, because I don’t know how to do that, but I’m gonna lend you $20,000 to $25,000, no points – this isn’t hard money; just straight interest – and we’ll settle up everything on the back-end.”

I did that for a good two years. I had a friend – still is my friend – COO for an apartment acquisition company, and he kept telling me “First of all, you have to be getting killed with taxes”, which was true, and he said “Second of all, our market is so tight…” and this was like four years ago; it’s even crazier now. But he’s like “I know it’s hard to find deals. Once you guys do a flip, you have to find another one. That’s another job for you. You have the business mindset and the wherewithall; you should really learn how to syndicate apartment communities and be on the GP side.” And I tell people all the time – I don’t think it was one of those things where I woke up and I was having a really tough day, but it was just him constantly dripping on me for those two years – “You’re getting killed with taxes. You really should learn this business. Here’s why – cashflow, tax shelter, tax deferment, profit refinance, tax-free, then big profit on the back-end…”

So I woke up one day and I was like “I should learn how to syndicate apartments.” And that’s how I got to where I have been for the past two years, with working in the multifamily only. I don’t do anything single-family, I don’t lend my private money unless it’s in my own deals, and that’s kind of fast-forward to where we are today, where I’m focusing only on multifamily.

Joe Fairless: Well, I wanna spend the majority of our time talking about what you’re currently focused on, but I am curious about the other ventures you did prior to getting into real estate. You mentioned landscaping… What else did you partake in?

Dino Pierce: It was a landscaping business; a friend and I had a trailer, we had some lawn mowers, some wheat eaters, and we had some elbow grease… We would drive around – we had a routing – and we would cut yards; this is during the summertime. I’m originally from Louisiana; we’re doing this call right now — I’m in New Orleans, Louisiana. I was on a business trip and I’m about to visit with some family… So that was number one.

I also got into personal training, which was another entrepreneurial — but everything was time for money, time for money, time for money. Even with the flipping, time for money… And I realized, especially with personal training, “Wow, it’s only me. The only way to scale this is to get many other trainers and me be the architect of the business.” And then again, you’ve got that heavily taxes, because you’re running your own business, you have your own job – you’re not in the right tax bracket.

Let me think if there’s anything else I can think of… I had some experience in the family business, which helped me learn how to run businesses, but one of the things that–

Joe Fairless: What’s the family business?

Dino Pierce: My grandfather — I’ll be quick, but it’s a great story; again, I’m from Louisiana. My grandfather went to school, to kindergarten, not even speaking English; he only spoke Cajun French. That man – his name is Nolte – literally was forced to quit school in the fifth grade to help his father put food on the table. He went on to become a self-made millionaire.

Joe Fairless: Wow.

Dino Pierce: So the family business – he started a tugboat company, he developed self-storage from the ground-up, he had single family as well as some mobile homes… He had a small motel – I think it was about 20 rooms – he owned an icehouse, a marina, a Laundromat, storage for sports fishermen that would come from New Orleans, leave their boats on the Gulf Coast, because that’s where I’m from… He did a little bit of everything. But the best thing about working for Nolte as his grandson was that I got to work the hardest and the longest, and I got to get paid the least… Because that’s what he passed on. He passed on “Nobody gave me anything. I quit school in the fifth grade and found my way. If one can do it, so can another, and I’m not gonna treat you any differently. As a matter of fact, I’m gonna be harder on you.”

So that’s the family business. And also – I didn’t mention – they owned gas stations, and things like that as well, in South Louisiana.

Joe Fairless: So the main takeaway I got from the ventures that you did – well, there are two takeaways. One, your grandfather was one heck of a person; but then two, the time for money thing – trading time for money, time for money, time for money. Landscaping business, personal training. That makes a lot of sense now, as you’re focused on syndication apartments, and the different benefits there… So let’s talk about the deals that you did last year.

When I read your bio, it said you did four apartment communities consisting of 254 doors, across four markets. First question is how did you come across the opportunities in four different markets?

Dino Pierce: Okay, so 100% transparency, still to this day – I guess it still has to do with the business mindset – I operate  a medical device business in Colorado. I have three small kids – and congratulations; I understand you are a father now…

Joe Fairless: Yup, thank you.

Dino Pierce: Yes, you’re welcome. I have three small kids, so that’s a full-time job. My oldest is nine, my youngest is three, and in addition to that, I’m on a syndication team; the keyword I’m gonna use there is “team”. So I don’t do this alone. I actually have a partner who is really good at networking with brokers, getting off-market deal flow or word of mouth from property management companies. We might be looking at something that maybe zero eyeballs are on except us, or three to five groups, but it’s definitely not something that’s going out to an entire broker’s A-list, or LoopNet.

So the deals came – they were pocket listings or off-market, from relationships that my partner had. Of those four deals, I actually don’t take credit for identifying and finding them initially.

Joe Fairless: Okay. Who’s your partner?

Dino Pierce: Three of the deals have been with the same partner, his name is Kyle. He lives right outside of Houston. And then I have done one deal with Kevin Dowling, and Pili and Jason Yarusi.

Joe Fairless: Okay.

Dino Pierce: So other than that, the other three have been with Kyle.

Joe Fairless: Very cool. Okay. And your role in these syndications it sounds like is not on the front-end, find the opportunities. I’m guessing it’s gonna be bringing some equity to the deals and bringing value to the deal that way. Is that correct?

Dino Pierce: That is 100% correct. And there’s other roles too, where we’ll underwrite behind each other, market evaluation, market research, making sure that we can all together collectively find enough data to say that “This is an emerging market.” And it might not be national news, which is good, because we wanna be there so that — and again, we don’t underwrite any of the appreciation, or maybe like a 2%, just go with the market, [unintelligible [00:11:13].07] kind of thing… But we’re not banking on the poised boom, if you wanna put it that way. The deal works even if that doesn’t happen. But if we can identify an area and be there when it does, everybody’s gonna be really happy. Because if you like the returns that we’re showing you, you’re gonna love us if we’re able to cash in on some of that appreciation as well.

But you’re right, what I did — and I’ll be upfront with you, you motivated me. I read an article, and I’ve even posted that blog on Bigger Pockets, I reposted the link to that article… You have a good article out there, and I think you recently updated it, about thought leadership. That’s exactly how I started. Because when I got involved, I learned the business of syndication, how to underwrite deals, and network, and talk to investors… But when people ask me, they say “What’s the easiest way to get my foot in the door?”, you can do one of two things – you can bring a real deal to a team that’s already experienced, and add value to them that way. Chances are they’ll do it and they’ll write you in on the general partnership side, and you’ll get started there. Or you can bring your network’s money to the table and add value that way. I think those are two of the easiest and quickest ways to get started.

That thought leadership article that you write – I just jumped in… And I started blogging, I started podcasting, I started my own closed, purely educational Facebook group; I’m not pitching deals or anything there. Writing articles on LinkedIn, now I just got on Instagram, I also have a YouTube channel… Taking one piece of content and modifying it slightly to fit those – I don’t know, I’ve probably just named about five different channels. You motivated me to do that, and start to just position myself as a thought leader, and start drawing attention as a credible source in the industry… And even – rewind back to before I had even done my first deal, “How are you credible?” Well, I’m credible because I’m leveraging the experience of my partners. It’s just like if you and I did a deal together, you have 500 million in assets under management, and even if I’ve never done a deal, but I’m bringing $500,000 from my network to your deal, now I can automatically leverage you; so when they say “Well, how many deals have you done?” “Zero, but let me tell you about my partner here, Joe, and what he’s done.” And right there, it’s instant.

Joe Fairless: It completely makes sense, and that is the approach that I certainly recommend, and I’m glad you got a lot of value from that article. And when I say “the approach I recommend”, when you don’t have the qualifications or the experience, the best way to learn is by networking while you learn; that’s what you’re doing on Bigger Pockets and at the events.

So how did you structure the deals on the GP side?

Dino Pierce: The way we structured all except one was a straight split. Anywhere from 70/30 to 80/20 split… That meaning, Best Ever listeners, 70% to 80% of the cashflow, tax benefits, profits are going to the limited partners and the general partnership team for identifying, underwriting, qualifying for the loan – the whole nine yards; bringing all the other money to the table from the equity partners you didn’t have to meet and build trust with… There’s a lot involved, as you know.

Joe Fairless: Right.

Dino Pierce: We’re keeping 20% to 30%, and we do a straight split for everything – cashflow, equity across the board. That’s how they were structured. Is that what you were asking?

Joe Fairless: No, I was asking about the GP side. Okay, so you do 70/30 or 80/20 split – cool. But on the GP side, for you bringing what you brought – what did you get in compensation for that?

Dino Pierce: We have a certain percentage carved out for everyone’s role, and usually — of course, it’s more than equity, like we talked about before, but… We usually have roughly 20% to 30% of the GP. So if  you take a 70/30 or an 80/20, that 20 now become the GP’s 100%; we’ll take about 30% of that and carve it out for the capital raise or the investor relations team, however you wanna call it.

Joe Fairless: Cool. And how much equity did you bring in total, across those four deals?

Dino Pierce: I haven’t put the pencil to the tee, but north of a million, last year, collectively.

Joe Fairless: Cool, so around a million.

Dino Pierce: Yeah, a little over a million.

Joe Fairless: A little over a million dollars… And of that amount, which investor – I’m obviously not asking you to name names, but just thinking about that investor, how did you meet him/her? The investor who invested the most; I didn’t add the important part of the question – the investor who invested the most, how did you meet him/her?

Dino Pierce: Yeah, I’m so glad you said that, because I crunched the numbers, and I don’t have them memorized, but it was enough math for me to know just the direction you need to go in. So it was something like 65% of the people who invested with me I had met online, over the phone, that kind of thing. However, when I put the pencil to it, it was almost 90% or more of the people that actually invest money with me – even though we met that way, we ultimately met up one-one-one, face-to-face, at a coffee, a lunch, or at a meetup.

So the person I’m thinking of – we actually met at a meetup, that ended up about two weeks later to a coffee, and then to the investment… Because there’s the levels of trust that you have to climb; they have to like the asset class, then they have to have trust in the team, and then the team has to show them the right deal. But what I’m trying to say is, even though I have all these methods of thought leadership, the reason I created a meetup group this year – I failed to mention that when we talked about my avenues of thought leadership… But the reason I created a meetup group this year is, again, because when I put the pencil to it, the people who actually put money into the deal, over 90% had actually met me face to face later on.

Joe Fairless: What meetup did you meet this person at?

Dino Pierce: The first time I met this person it was at the Denver Apartment Network meetup group.

Joe Fairless: Okay. And then that person you met at a meetup, an apartment networking group – you met up with him a couple weeks later, had coffee, and then they ended up investing… Have they invested in multiple deals?

Dino Pierce: Not yet, but they invested a nice chunk in this one, and we are meeting — actually, we’re gonna have dinner before your Best Ever event coming up; and my partner is also attending, so we’re gonna go to kind of like a one-off one-on-one dinner and talk about future opportunities, because we have a few other deals in the pipeline… And we realized that there’s more money, and this person also has a network, and if we can bring him to the GP side, he would be willing to open that up as well.

I’m in for the long game, and I will go off of good quality volume, and I have no problem giving up a percentage so that we can get a good deal done and offer a great investment opportunity to more limited partners.

Joe Fairless: When you were bringing equity and other things – you have other responsibilities in those deals; one responsibility was to bring some equity… When you were bringing equity to those deals, what was something that was surprisingly challenging to you?

Dino Pierce: I think surprisingly challenging was – initially, when I started out and I was letting people know what I was doing, I had a sample deal package, it was upfront… This is not a real deal, but this is where I’m transitioning from single-family to multifamily; “When a real opportunity like this comes around, are you interested in it?”, it was almost overwhelmingly yes. But then when we had a real deal, it was very difficult to get people to wire money, subscribe into the deal. And the only thing that changed was that it was real now. And it was like “Oh, wait, I’m really gonna wire $50,000 or $100,000 into this opportunity…”

That was a little bit surprising, because initially I thought “Wow! I know it’s gonna be work, but this is very doable.” And then it turned into “No, you need to have some wherewithal, and you need to have a last man standing, long-game mindset”, because when the rubber meets the road… I’ve even had investors subscribe and not wire. They go dark after subscribing. And again, probably one of the trust levels hadn’t been met yet, and that’s fine. It might take me putting five, ten, fifteen deals in front of someone before they say yes.

So we don’t burn bridges or anything, but I think that was a little bit of a surprise, how difficult it actually was to get people to do what they said they were gonna do.

Joe Fairless: There’s a video and a  speech that Jim Rohn gives, and the name of it is “The sower and the seed.” He talks about how when you plan seeds, not all of them blossom, and sometimes the birds get some; that’s just what happens in life. There are certain things we can do to optimize the performance of the seeds that we sow, but ultimately they’re not all gonna blossom, so I get that… And it’s a really good speech too, for any Best Ever listener. Jim Rohn, “The sower and the seed.”

What is your best real estate investing advice ever?

Dino Pierce: Related to this business, my best real ever real estate advice would be to take action, and don’t get caught in analysis paralysis. Now, admittedly, I am the 1% who will tap into really good podcasts, and go to great events, go to meetups, and I’ll put the pieces of the puzzle together and run with it… To where there’s other people who need not one mentor, they have to have three different people hold their hands through the first deal; that’s fine too, if that’s what you need and that’s how you learn. But for me, I’m like “Fail forward.”

The only thing I wasn’t willing to fail forward with is someone’s investment… Because I am the type of person – if you and I invested into a deal, we both put $100,000, same deal, and it went south, and let’s say I was a GP and you were an LP, I’m the type of person who says “Tough lesson. I will make it back. There’s no use crying and dwelling over this. Let me take the lessons learned from it and don’t let that happen again, if at all possible.” But it would be your $100,000 that would literally create ulcers in my stomach and keep me up at night. So I wasn’t willing to let people invest into a deal I was involved with without having–

Joe Fairless: Would you pay it back?

Dino Pierce: Would I pay it back to you?

Joe Fairless: Yeah.

Dino Pierce: Yeah, by all means possible, because — that was a scary story, it almost happened; I owed someone $25,000, and that was what I was thinking, “Okay, how do I get him his $25,000 back?” Well, come to find out he never wired… Because we were like “We’re missing person X’s wire. We can’t find person X’s money.” We verified over the phone the routing number; he has a disclaimer in his e-mail saying “Never wire to a routing number that was sent via e-mail”, so I’m like “Oh my goodness, it’s this guy, and we can’t find his money.” So I’m like “Okay, I owe him $25,000.”

So the answer is yes. Now, if I’m not liquid, we would have to sit down and talk and work something out, but I would do my best to make things right.

That’s the only thing  I wasn’t willing to do. But you know what – if you’re a broker and I’m learning to speak the lingo, and I’ve been studying, and I know the terminology, yeah, I might have some nerves… But the phone’s not a cactus; I’ll pick it up and call you, introduce myself, tell you about my team, “Here’s what we’re looking for. I saw this deal on LoopNet. Do you have anything bigger?” And I will start meeting with investors too, because there’s gonna be a first time. You just have to do it, and get good at it… Because I actually learned more, because I went through a course to learn about syndication, but I learned more doing my deals —

Joe Fairless: Which course?

Dino Pierce: I learned — I don’t wanna say everything, but initially everything multifamily through Michael Blank.

Joe Fairless: Cool.

Dino Pierce: And from there, I learned more actually doing the deals, being active.

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

Dino Pierce: I’m ready.

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

Break: [00:23:22].24] to [00:24:44].13]

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

Dino Pierce: I know it’s kind of cliché, but it’s “How to win friends and influence people.” It’s a classic, and I reference it regularly.

Joe Fairless: Best ever deal you’ve done?

Dino Pierce: Best ever deal was actually not for tax reasons; this is back when we were doing the flipping. I actually found the lead, it was free, from Craigslist, for sale by owner; father passed, the daughter didn’t want anything to do with his investment portfolio. I made an offer, they said “No. We’d rather have an open house and take the highest bidder.” But me being me, I followed up after the open house; I just sent a text message and said “How did it go?” and she wrote back and she said “It sold.” I was like, “Okay, good for her.” Then about five seconds later she says “…to you.” I was like, “Okay… Now I see where we’re going here.”

Long story short, I was tied up, really busy at that time… She was happy with the purchase price, the residential redeveloper was happy with the purchase price, and me being in the middle experienced a $45,000 heavily-taxed profit from scouring  Craigslist for a deal.

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

Dino Pierce: Real quick, a mistake I made on a transaction… The only transactional mistake I made was not knowing what was gonna happen with the market, and I ended up paying two mortgages… Because I was transitioning state to state. And I paid two mortgages for a year. That was my personal worst transaction.

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

Dino Pierce: Give back – of course, through the thought leadership. I do complementary mentor calls with people who are just getting started; I don’t charge anything… Just giving them advice, letting them know they can do it. Constantly donating to good — Joe, my kids have more than they’ll ever need for toys. I told my son, I’m like “Do you want a birthday present? Then you have to take five toys, and you’re going with me to Goodwill and we are giving this.” So we donate to Goodwill, Salvation Army… That’s how I like to give back.

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

Dino Pierce: It’s easy to get a hold of me. I’m very active on social media, so you can look me up on Facebook, Dino Pierce. Go to EdifiedEquity.com and you can contact me there as well… But I’m easy to get a hold of.

Joe Fairless: Dino, thank you so much for being on the show, talking about your entrepreneurial family and background. The ventures that you started with – the landscaping business, personal training, and it was time for money, time for money; spend time, get money. But ultimately we run out of time, and we’ve gotta scale that. You went to real estate, doing wholesaling, heavily taxed profit; you then focused on apartment investing and syndication. You took a course, learned, and then started doing it. You are now in four deals, worth almost ten million dollars.

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

Dino Pierce: Yes, sir. Thanks for the opportunity. I really appreciate it.

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