JF1356: Being A Better Leader In Your Business #SkillSetSunday with Nathan Brooks

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Nathan is on track to more than double his business this year and can track that growth down to a couple of big things. The first being knowing where the problems are, and addressing them with his team. In order to do that, a lot of smaller steps are involved, including listening to your team. Hear more about what it takes to lead an efficient team everyday in this #SkillSetSunday episode! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Nathan Brooks Real Estate Background:

-Owner of Bridge Turn Key Investments

Flips about 150 properties a year, providing exceptionally high quality turn key properties

-Recently started their own retail real estate team

-Based in Kansas City, Kansas

-Say hi to him at https://www.bridgeturnkey.com/

-Listen to his Best Ever Advice here: https://joefairless.com/podcast/jf475-his-first-purchase-was-2-homes/ 


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TRANSCRIPTION

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

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment for you called Skillset Sunday. The skill we’re gonna be talking about today is how to be a better leader in your business. With us to talk about that – Nathan Brooks. How are you doing, Nathan?

Nathan Brooks: I’m great, Joe. How are you today?

Joe Fairless: I’m doing great, and nice to have you back on the show. Best Ever listeners, if you wanna hear Nathan’s best ever advice, check out episode #475. It’s been so long ago I had to double-check that… Almost like a thousand days ago. #475, titled “His first purchase was two homes.” Today we’re gonna focus more on how to be a leader.

A little bit about Nathan to refresh your memory, in case you can’t remember one thousand days ago – he is the owner of Bridge Turnkey Investments. Him and his team flip more than 150 properties a year. They are based in Kansas City, Kansas, and recently started their own retail real estate team.

With that being said, Nathan, do you wanna catch us up to speed with your business now and your leadership role within it? Then that will frame the conversation for what we’re gonna be talking about.

Nathan Brooks: Absolutely. Thank you again for having me; however many days you mentioned had too many zeroes, so we shouldn’t [unintelligible [00:02:33].09] I can’t count that high. So yeah, our team at Bridge Turnkey Investments – over the last couple of years basically we’ve doubled in size every year; I don’t remember the exact date of that show, but knowing that last year we had well under 100 and this year in the first quarter [unintelligible [00:02:50].11] nearly the number we did last year, which is pretty crazy…

So for me, it has been understanding where the problems lie within that business, whether it’s our business we do – mainly turnkey – but we also flip and put stuff on MLS as well… And it’s about understanding where the problems lie and having the willingness to listen to your team and people you put in place, but also then suss out the information, understand that problem, and tear it apart, look at it, suss it out, understand what the answers are, but then also put those pieces into a process, so that you don’t have to try to rethink, relearn, re-educate your team and yourself on those problems.

Joe Fairless: Okay, those are the components of it, it sounds like, what you’ve just laid out – understanding the problem, listening to the team, dissecting the information to determine what information is relevant, and then putting a solution in place, as well as a process, so you don’t have to come across this multiple times. Can you give a specific example just to color this in a little bit?

Nathan Brooks: I’d love to. So one of the challenges that we’ve had — one of the things we talk about in our business is having our projects on time, quality and budget… So hitting all three of those components, meaning we start and stop the project on time, and we have scope of work, and a budget, and we’re within acceptable parameters of that within, say, 90% of our expected cost of that project. And then the quality piece too, where visually it’s appealing, we’ve got the landscape right, we’ve got the exterior right, we’ve got the color selections right, and then inside the same kind of concept.

So we have dug in on a number of things. One was inspection reports – we started dissecting every single inspection report over, say, 2-4 months, and looking at things that were repeatedly missed, whether it was a downspout, or insulation in an attic, or something like that… And based around those items, we took that lesson and we started incorporating that into our actual scope document. So when we went through it, we said “Hey, let’s look at the attic. What does it need? Let’s look at all the downspouts. How many are there?” We get hit on this every single time – what is it, and let’s nail it on the front-end, so we’re not trying to chase it on the back-end.

Joe Fairless: That makes sense, and that can be something that anyone does who’s buying properties, not just someone who’s rehabbing property… I’m thinking about with my business, buying apartment communities – if we don’t do the proper due diligence on the way the seller is screening the residence, and then we buy a property and lo and behold there’s a bunch of criminals and some bad actors in there, then we write that down and then on the front-end for future stuff we put that into the due diligence; we basically make due diligence a living, breathing document.

Nathan Brooks: Yes, exactly. And the key piece of that, which you mentioned, not only applies to a single-family house or a small multi, or an apartment deal, or whatever, but whatever that lesson is, whatever that learning was, you actually learned a lesson, and you didn’t just have that moment that you were in that deal and maybe you missed something… Don’t keep missing it; take time to look at it and learn the lesson.

Joe Fairless: Yeah, that’s a struggle I have with Ashcroft – not my apartment business, but with my other business, like the podcast and the consulting stuff… Putting pieces in place so that there’s a process, so we don’t have to continually address the same stuff over and over again. What are some tips that you have for that aspect?

Nathan Brooks: This is a great question… Are you familiar with the book Traction by Gino Wickman?

Joe Fairless: Traction – I have heard of it, I have not read it.

Nathan Brooks: Okay – great book, well worth the read, and if I had to guess with just having that same struggle in that area… It’s something I struggle with too, and what I realized was I was trying to do stuff that a) I didn’t like, and b) I wasn’t very good at, and therefore it did get dropped a lot and those lessons weren’t getting put in their place, because I didn’t have a great system to deal with them… And then even more importantly, I hated doing it, so I was naturally picking those pieces up, putting them in the proper folder, giving them a title, blah-blah-blah.

My business partner and I read the book Traction, and they use language which we didn’t have yet, which was really helpful – they talked about an integrator and a visionary relationship… And I squarely sat in their little test in the visionary seat, and my business partner, although he has some visionary qualities, absolutely sat in that integrator seat. And all that to say, you have to have people on your team who can do that. Part of being in the CEO seat, the visionary seat, is being able to say “This is what we have, this is who we are, this is the type of product we wanna be”, and then you put yourself in the position — and it might be just you, right? So you need to find somebody to help you administratively or otherwise… But if you already have multiple people on your team – it might not be your business partner, it might be a key admin or someone like that, but you have to find the people who will help you do that, and hold you accountable personally, as well as the actual information accountable.

So once we started processing this — we do all of our stuff in Podio, so we would build these systems around, say, just the one thing… So for instance, we have selection sheets on the color tile, and the wall color and all that kind of stuff – we have it built out in Podio, and that links to every property that we flipped. So when you go back, although for me trying to remember any of that stuff is crazy, but I know that because we built a process to say “Hey, if we’re rehabbing a house, it’s gonna have all these selections built out, and someone on my team goes in and looks before we start that rehab, and says hey, Selection 123 Main Street is not filled out. What’s going on?” Boom, she pings our team and we check it.

Joe Fairless: When we started out our conversation we said we’d be talking about what it means to be a leader of a business and how to be a better leader, and you started out the conversation by talking about “You’ve gotta understand where the problems are, listen to the team, suss out what information is important, and then put the pieces in place and a process for not having that reoccur.” How come you started out talking about understanding problems, versus any other area that you could have addressed, as it relates to being a better leader?

Nathan Brooks: I think it all starts with the problems, and not even just problems, but the right problems. I think a lot of times people think of problems in the negative; I think of them in the positive. As a CEO of my business and as a visionary of my business, my responsibility is to see things that other people can’t see. It’s to be able to talk about, explain, suss out the things that people on my team – that’s their day-to-day operation of writing contracts, or running construction sites, or picking selections… So they have day-to-day minutiae that I don’t know, but I can ask great questions and understand where the roadblocks are… And one of the things that I discovered was the more I pulled out of that day-to-day minutiae and helped my team figure out, whether it was language in the way that they communicated to clients, or owners, or whatever that would be – that was a process problem, and that was a language problem, so we could help solve it.

So although I am not the one having that conversation, the problem was “What do I do when X happens?” So by taking that time upfront, we wrote it down, we talked about it, it’s now in my voice… Not that they don’t communicate in their own voices, because that’d be crazy to say that they don’t, but I got to have influence in the way that we approach, because as a business, Nathan Brooks, or as a business, Bridge Turnkey Investments, this is how we approach a client when this happens.

So by approaching it from the problem, we could say “Okay, cool. Well, when this happens, this is what we do.” And then, guess what? …because anything that you don’t know how to do is a disruptor to the negative in your business. So when you come to something like that and your people on your team don’t know how to do it, you didn’t prepare them. So that’s your problem, you need to address it, and then by you addressing it, putting it in play — and then, by the way, you have to practice it with your team and make sure they got it… And now you’ve set them up to do that; they’re doing it exactly the way you want it done, and they’re probably gonna do it better than what you could do anyway.

Joe Fairless: I love that. Anytime someone on your team doesn’t know how to do something, it’s your fault, and it’s a problem that you’ve gotta solve for.

Nathan Brooks: Absolutely, yeah. Then you took ownership on it, rather than saying “Gosh, my team doesn’t know how to do blah-blah-blah.” That’s crazy. It’s not their fault.

Joe Fairless: True. So true. That is a great distinction. I’m glad we continued down that path. Anything else as it relates to being a better leader for our business, that we haven’t talked about, that we should?

Nathan Brooks: You know, I think the other piece of it is a lot of times – and I have the distinction of having CEO behind my name, and I don’t remember who it was, but I remember distinctly hearing somebody that I looked up to talk about the fact that the letter behind your name don’t mean anything. It’s all the actions behind it, and it’s the way you operate, and there are plenty of people out there – and I’m sure people will connect to – that it says “Administrative assistant”, or “Assistant to blah-blah-blah”, and those people do a ton of work, and they keep all those little nuts and bolts together… And it’s so easy as a leader to stop listening, because we feel like we have some authority based on the title that we have or we gave ourselves… And I have found the more I stop talking and the better questions that I ask, and then I close my mouth and I listen, the better off my team does, and then the better off they are, because they have autonomy in their workplace, they have autonomy in their job, and they had influence in what they did.

When you think about that, what does that build? It’s building a culture within your organization that says “Hey, if somebody’s talking, I’m gonna listen”, and that goes from the top down. I don’t care if it’s the landscape cleanup guys, all the way up to my VP of construction on my team; it doesn’t matter. If you’ve got something to say, I wanna hear what it is, and I’m gonna sit there and listen, I’m gonna understand, even if — hey, I put this in play years ago; well, it might be wrong now. Let’s find out.

Joe Fairless: Any tips for listening well?

Nathan Brooks: Yeah, I think the concept of listening is to me characterized with — you and I, Joe, we’re having a conversation, and you’re listening to me, I’m listening to you, I’m understanding the kind of questions you’re asking, and we’re talking to each other… And in order to listen, that means you have to be actively engaged as to what that person is saying to you, and first, we’re not formulating a response, first we’re actually formulating the ability to rephrase the question back, so that we understand a) that we listen to them, that person that you’re talking with knows that you know what they asked, because you’re gonna rephrase it to him…

And it doesn’t have to be a whole long question; you could just say “Hey, let me make sure I understand what this is. You said blah-blah-blah-blah, and I just wanna make sure I got your question right.” Holy cow! I might say your name, “Joe, let me make sure I got your question right.” Because I’ve now said your name, you’ve heard me say it, I’ve now stated your question back to you, which means you understand that I heard it, or maybe I didn’t hear it correctly – now you can correct it… And then you, as the person who are asking the question, has that feeling of worth, that you were being engaged with and you’re being heard, which is huge just to start from that place.

Joe Fairless: I love this stuff, and I am appreciative of you sharing this with us, and I know a lot of the Best Ever listeners are as well. How can the Best Ever listeners get a hold of you?

Nathan Brooks: A couple places… My team, you can check us out on BridgeTurnkey.com. We also have the Facebook page, Bridge Turnkey. It’s at facebook.com/fixfliprentkc, so you can connect with us there as well.

Joe Fairless: Nathan, thank you for being on the show again and talking about the different characteristics of a leader, and helping to provide value to help others be better leaders, myself included. Some tactical things – well, from a high level it’s to listen to the team (that’s been a theme throughout) and to listen well, and put the pieces in place to have a process implemented, so that things don’t reoccur.

Also, if any team member does not know how to do something, that is not a team member’s fault, unless you’ve told them multiple times; that is not the team member’s fault, that is your fault, and there needs to be a way to address that. Also, taking a look at and evaluating past projects that we’ve been a part of – anyone can do this who’s listening… Just evaluate the past projects you’ve done/been a part of, and what issues showed up, and writing it down in a document of the issues, and then taking that and putting it into a due diligence document on the front-end for your next deal.

It’s a very simple process, and it’s a somewhat obvious thing to do, but I imagine 50% of the people haven’t actually written that into the due diligence process for their next deal. They probably know “Hey, I need to make sure I address this”, but actually do an assessment of it, and write it into the due diligence process.

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

Nathan Brooks: Thanks, Joe. You too.

JF1320: Purchasing a 41 House Portfolio #SituationSaturday with Andrew Syrios

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Andrew is a returning guest on the show and has a story to share that we can learn from. We’ll hear about his recent 41 house portfolio purchase, what he learned, and how we can apply those lessons to our businesses. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Andrew Syrios Previous Episode:

https://joefairless.com/podcast/jf571-did-he-pay-cash-or-terms-for-a-97-sfr-portfolio-situationsaturday/

 

Andrew Syrios Real Estate Background:

  • Real estate investor at Stewardship Properties
  • Company owns around 600 units in four states
  • Has three branches in four states (Oregon, Missouri, Kansas and Texas)
  • Oversees over 100 properties and 170 units in the Kansas City metro area
  • Based in Kansas City, Missouri
  • Say hi to him at http://stewardshipproperties.com/

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TRANSCRIPTION

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

First off, I hope you’re having a best ever weekend, and because today is Saturday, we’ve got a special segment called Situation Saturday, where a returning Best Ever guest talks about a challenging and/or interesting – ideally both – situation and how they overcame it. And it’s not just to hear a story, but it is to learn what we can learn from their experience and apply it towards our stuff that we’re doing as real estate investor and entrepreneurs.

With us today to talk about a portfolio of 41 houses he purchased about a year ago, and how that came about and what the heck is up with it right now, Andrew Syrios. How are you doing, Andrew?

Andrew Syrios: Good, how about yourself?

Joe Fairless: I am doing well, and nice to have you back on the show. If you want to hear Andrew’s best ever advice, then go to episode 571, titled “Did he pay cash or terms for a 97 SFR portfolio?”

A little bit about Andrew – he is a real estate investor (obviously) at Stewardship Properties. His companies owns around 600 units in four states, and oversees around 100 properties and 170 units in the Kansas City Metro Area. Based in Kansas City, Missouri. With that being said, Andrew, tell us about the 41-unit portfolio.

Andrew Syrios: Yeah, first of all, thank you for having me back on. This 41-unit portfolio was an interesting one. I guess the lesson is that sometimes the best deals are the ones you want the least. You always have to be willing to walk away, sort of thing; that’s probably the greatest leverage you can have in a negotiation.

With this particular deal, we got it sent to us from basically a contact of our, a friend of ours… He met a real estate agent who had this deal and sent it to us. It was one of those deals where there’s a handful of stuff that looked interesting, and then there’s some stuff that’s just a big, long sigh… A lot of properties are in rough areas, or areas that we have a few in, but we don’t really want to put much of a presence.

So the first thing I asked him was “Would you be willing to parse out this portfolio?” There were 18 that we liked, and there were 23 that we didn’t, and can we just make an offer on the 18? And they had no interest.

I think it was like a small hedge fund, or a small group of investors who had bought a bunch of foreclosure, or notes — I think they bought some notes and foreclosed on them and they had to just kind of hodgepodge a portfolio with a handful of good properties in decent areas. One of these houses — we call it the Kramer House, from the levels… Do you remember that episode? He was gonna make them at various levels; every room is on a different level. You walk up a step, then you walk down… So there’s goofy houses in there, and there’s also some great houses – beautiful, Victorian houses in one of the best areas of town, and then a bunch of these ranches in this kind of sketchy area called Ruskin that’s good for cashflow, but it’s also pretty tough, you’re gonna have some property management issues.

A lot of people lost their shirts there, a lot of out of staters. They looked okay, and they bought these properties for inflated values; that was happening a couple years ago. But they didn’t want anything to do with that. They were like “It needs to be purchased all or nothing.”

We kind of looked at a few of them… The portfolio was kind of semi-performing; it was like 80% occupied, but it had a lot of turnover, a lot of rehab when these tenants left. It was very under-rented, but at the same time we knew there was a lot of deferred maintenance that was gonna kind of add up.

But one of the things I think about the portfolio – it’s kind of one of those things where you can be right in the middle, right in the weird middle. It’s too big for a lot of smaller investors, but it’s also too small for a lot of the hedge funds, and it’s also in areas that they usually don’t buy in, so there’s not a lot of buyers for this type of deal.

It’s kind of helpful thinking in those terms – what kind of deals can we purchase that most people aren’t interested in? They’re either too big, too small, they have to close too quick, they need to much work… Whatever.

Maybe you’re really good at investing in a particular area that’s fairly rough; gotten in with Section 8, you know that kind of thing… So if you have that kind of advantage, it really works for you.

So finally I was just talking to my brother, who does our property management [unintelligible [00:06:47].05] “I don’t really want this.” So I said, “Let’s just make a low offer and see what they say.” So we made this offer that we thought was very low. I think it was on at 2 million, and we made an offer about 1.45, or something like that. They came back at like 1.5, so we were just about there. I was shocked they came down so much… Of course, we were like, “We’ll see if we can split the difference…” [laughs] and take a little bit more on it, but we talked to them again… And again, it’s always advantageous to talk to the seller, not just the agent; the seller, if you can.

We kind of skipped over the first part where we talked to the seller, just briefly getting some information about the property; we talked to him again in between then, and what [unintelligible [00:07:34].08] is one of the biggest problems with this – we didn’t do a syndication or a partnership or anything like that, because then we were having to split the equity two ways… And also, because it’s a long, drawn-out turnover rehab situation. It was kind of like “How much money do we have to sit in the escrow, just sitting there waiting for the rehabs, or are we just gonna have to have virtually no cashflow for that first year and a half, or whatever?”

So for those reasons, 1) the weird cashflow situation with a semi-performant group of properties that would need rehab as you went, and the fact that we just don’t want to split any equity… We didn’t wanna do that, but I guess to take a little bit of a step back to explain how we ended up financing this thing, which I think is a fairly creative method… Our normal strategy is the so-called BRRR strategy – Buy, Rehab, Rent, Refinance. So what we do is we buy properties, usually REOs or fixers or absentee owners, or whatever. We fix them up, we rent them out, and then we take a group of them, usually between five and ten, and we bring them to a bank and we refinance it. We get private loans on it upfront, 8% or 9% interest, and then we refinance those out and then we try to put those private lenders onto new properties. It’s just kind of like a wheel that spins around. We get the property with a private lender, rehab it, rent it, refinance it with a bank, put that private lender on a new property.

Well, this is a little bit lucky on our part, but we just happened to have a very large one of these going through… We had 25 properties being refinanced.

Joe Fairless: Okay.

Andrew Syrios: And these were a little bit more expensive too, so it was not quite the same price, but very close. We had a couple other private lenders that we thought we could reach out to. But the advantage here was we could set it where these properties would refinance just before these other properties were set to close, so we could just take these private lenders and move them over to these other properties. Now, one problem with that, since we didn’t wanna cross-collateralize and create this giant mess, nor would these private lenders wanna be cross-collateralized with a bunch of other people that some of them probably didn’t even know… So we wanted to take [unintelligible [00:09:37].11] and move them over to this house, which is an arduous process when you’re trying to put together — I don’t think we ended up financing everyone, but we had something like 30+ trust deeds on 30+ different properties. I think we left a couple free and clear.

So we asked the seller if we could set the closing in four stages; so we closed — there’s 41; 33 of them were in Missouri, and 8 were in Kansas (Kansas City, in both sides, right on the border). So we took that 8 in Kansas and made that one closing, and then the remaining 33 we split into three groups of 11, and we closed each one two weeks apart. We split it up so each portfolio was about the same value, same couple good houses, a couple that are not so good and whatnot… And they approved that.

This allowed us to not try to put together 30+ trust deeds on the same exact day, which would have been just a logistical and accounting — well [unintelligible [00:10:37].10]  which would have been just an incredible nightmare. So we were able to split this up over the course of a couple of weeks, and that way it wasn’t such a logistical nightmare and we were able to basically split this package of 41 into four separate, smaller closes.

That also — it wasn’t a big thing, but it gave us a little bit of time to parse out the turnovers and rehabs and the ones that we knew were just vacant and ready to go right away… So we kind of had a double advantage; it was particularly advantageous because we were able to use a form of financing that is predominantly used on just this one-off house, buying it with the trustee from a private lender and then going through the BRRR strategy.

We were able to do that because we had a large portfolio being refinanced, and then turned over into this large portfolio that we were purchasing. We were able to do it on a larger scale using what’s usually a smaller type of financing on them.

Joe Fairless: Who did you go to for that? Financing…

Andrew Syrios: A local bank that we have here that we’ve done a lot of work with, called Bank 21. If you’re in the Kansas City area, I highly recommend looking them up… But they’re unfortunately not a national branch.

Joe Fairless: And they did all four?

Andrew Syrios: No, they’ve refinanced a bunch of properties we already owned and we had been renting out. They refinanced that package of 25. Then we had a bunch of private lenders just sort of [unintelligible [00:12:02].07] that had been paid off from that refinance, and we put them onto the various houses within the package of 41. Does that make sense?

Joe Fairless: It does. From a seller standpoint, was there any downside for you structuring it this way?

Andrew Syrios: For them? I’d say the only downside for them – there’s two minor downsides. One – usually sellers prefer cash out versus financing, just because there’s a possibility with financing that the financing doesn’t come through, and they have to put the property back on the market.

The other downside is that because we’ve split it up into four groups, it took a  little bit longer for it to close in that respect, and they could have been caught — it’s presumable that we could have… Not presumable – it’s possible that we could have bought the first two and then not been able to close the last two. We were able to pretty much [unintelligible [00:12:50].18] any concerns they had. They were basically saying that none of our earnest money that we’ve put down upfront would go towards anything but the last closing… So they could have gone on where they closed the first two groups, and then if we backed out then, [unintelligible [00:13:04].22] all the earnest money, plus they had already sold half the package… And because we split it up and got their approval on what groups have closed first, they were basically each very similar groups of properties that closed each time.
So I think as far as closing groups like this, you could even do this if you’re on a smaller scale, with a couple of houses, assuming the seller is having some trouble selling the properties. That was our advantage here, is that this was a weird package of properties to sell. It’s too small for the institutions and too big for most investors, but certainly not all.

Joe Fairless: And that was a year and a half ago?

Andrew Syrios: Yeah, about a year and a half ago.

Joe Fairless: What’s the status of the portfolio now?

Andrew Syrios: Well, it took a while to get through them all, because some of the tenants that were there — I think there’s even a couple that are still there from the original… There’s still a few properties that need to be turned over. But we have turned them all over and rehabbed them all to our specifications and brought them up.

We debated for a while whether to sell the  properties that were in the rougher areas, because we actually made them two offers. One was on the stuff that we wanted, and the other was on everything; and the one on everything… We’re paying like $20,000/house for the ones we don’t want, or something like that… [laughs] Very little. And eventually, it’s like — we have properties in these areas, we know how to manage them; they’re good cashflow areas if you do it right. So we decided to keep them, and they’ve done well for us.

At this stage, the portfolio is basically humming along. It took a while to get there, it was definitely a project; if you talk about it in terms of apartments, it would certainly have been a repositioning… At least a minor repositioning. But we also were able to increase the rents substantially. I mean, they were renting houses for $700 that we’re renting for $1,000 or more now.

Joe Fairless: Now that you are a year and a half into it, are you glad that you bought the houses that you didn’t initially want?

Andrew Syrios: I would say absolutely at the prices that we offered for them. [laughs] I think it goes back to the point where — the very first point I was making. If you’re not needy for the deal — you don’t want to be a motivated buyer, even you’ve [unintelligible [00:15:11].21] You don’t wanna become a motivated buyer and be like “I’ve gotta close this thing.” If you keep your distance emotionally from this, like “Well, you know, I don’t even want it…” That was the way we approached it at the beginning; we didn’t really want it, and that made our offer extremely [unintelligible [00:15:27].20] in the eye of the beholder, but it was an offer that we were very happy for them to accept or come close to accepting.

So if you are willing to walk away, that makes a deal all the better if you make that offer. Now, you don’t wanna just say like — you wanna give them some sort of hint that this isn’t something that’s hugely interesting; you don’t wanna just throw out low balls left and right, unless you’re throwing them out to banks… But explain why your offer is going to be low; that makes it a lot easier for people to stomach it, and those who [unintelligible [00:15:54].08] You make a low offer, and then they’ll say no, and then two months later you’ll hear back from them and you’ll get the deal done.

But if you just come up [unintelligible [00:16:05].00] that might offend the person if you can justify the case. In our case, we took the ones we wanted, we made a more competitive offer on them. On the  ones we didn’t want, we said we’re not really willing to pay much for these, so we had a low number attached to them. We kind of explained our case to them, and they just wanted them all gone, so they were willing to come down to a number that made it — so it was a very good price for us, even on the properties that we didn’t want.

Joe Fairless: And you said never wanting to be a motivated buyer; from taking that standpoint, what about the thought in your head or in someone’s head of “Yeah, but if I don’t buy it, then I know they’ve got a whole lot of other people who will, so… I do wanna get this deal done.”

Andrew Syrios: I think the key is does the deal make sense on paper? If it’s a deal that works – yeah, go ahead and get it done. But there’s a tendency… It’s like being at the auction; you have your strike price, but once they start jabbering as fast as they normally jabber and whatnot, you kind of get in this sense where you want to “win”… And you don’t win by buying, you win by buying it right. So the key is to keep sort of an emotional distance, I would say, where it doesn’t matter whether — well, it does matter whether you get it, but it only matters whether you get it below your strike price.

If there’s other people willing to buy it above what makes sense for you, let them buy it. There’ll be another one. The key is to do it as dispassionately as possible, I guess.

Joe Fairless: If a Best Ever listener is listening to this, what would be the perfect scenario to implement this approach again? …with the creative financing, and all the stuff that you talked about.

Andrew Syrios: I’d say with regards to small portfolios – small portfolios are often tough… Institutions, the big banks, the big B2R [unintelligible [00:17:46].04] they have no interest in this kind of stuff. A lot of investors who are working around it don’t have really the ability to buy even four houses, five houses, six houses. Or sometimes a seller will be like “I’ll sell all of them, or I’ll sell them in pieces”, but they’d rather sell all of them. So if you can find situations like that, you have an advantage if you can find a way to purchase them all together.

Let’s say you start using the BRRR strategy, or you flip and you have some private lenders… We’ve seen a lot of portfolios, a lot of them are junk, but every once in a while there’s some good ones, and just being able to put together the financing for those gives you a distinct advantage, because often when somebody wants to sell a portfolio of houses, even if they’re willing to sell them in pieces, they’d much rather sell them together. They’re pretty much stating that by listing it as a portfolio.

So if you can find a way to finance them, that gives you a distinct advantage over a lot of investors who can’t. And also, if you can buy some of the junkier ones and justify a lower offer by saying you don’t really want these, that can be an advantage too, because every property has got a value, even if you just wanna sell it. So if you put a very low value on those junky properties and sell it for a little bit over that after you get it – great… Especially if you’re willing to buy bulk, in wholesale, and to sell retail, individually. There’s profit to be made there if you do it right.

This is a deal we’re working on right now, so it’s too early to give any specifics, because I don’t even know if we’re gonna get it done. It’s just an idea… These various situations where it’s an odd deal or it’s a portfolio, and if you do what most people aren’t interested in doing or can’t do, there’s an advantage. We’re looking at a group of condos right now. This guy–

Joe Fairless: And just to clarify… You did this deal a year and a half ago, but you just said that this is a deal that you are trying to get done, so were you referencing the story you are about to tell with the condos?

Andrew Syrios: Yes, the 41 is done.

Joe Fairless: Got it, just to clarify. Okay, cool.

Andrew Syrios: We’ve basically refinanced every house in that portfolio, or all but a couple of them, with banks.

Joe Fairless: Okay.

Andrew Syrios: So that’s done more or less, and it’s all performing. The condo deal is sort of similar. I don’t know if we’re gonna get it; we’re negotiating. But I can give the broad strokes on why it’s a deal that most aren’t interested in or can’t do, and thereby there’s an opportunity.

So it’s 17 condos in a condominium complex. That’s about twice that size. The guy turned an upscale apartment complex into a bunch of condos ten years ago. He sold off about half of them, and then stopped, and now he wants to move his money elsewhere, so he’s selling the rest of them. But the problem is for him if he sells them individually, it’ll take — you can’t put every condo on the market at the same time, otherwise [unintelligible [00:20:19].22] Then he has also rented them all, so he has all these lease in place that makes it tricky in that respect.

Apartment buyers and institutions and stuff like that – they’re not interested, because it’s not the entire apartment complex. They want an apartment complex, not half of one. We on the other hand mostly focus on single-family houses and small multis, and then we do buy larger multifamily properties…
I think actually our first podcast together we talked about the 32-unit apartment complex we did right, and the 29-unit apartment we did wrong… But normally, we’re buying houses. So we bought some condos too, and this kind of fits in like “Okay, we’re basically buying 17 houses or condos in this complex.” They first listed it at about what the average price would be for each of those condos on the market, based on the few comps that have sold recently in that area… But who’s gonna buy it? Institutions, apartment buyers – they’re not interested in that kind of stuff.

Joe Fairless: Yeah, it’s gotta be a local investor, like you.

Andrew Syrios: Yeah, and homeowners are not interested, and small investors – it’s probably too big for them.

Joe Fairless: Yup.

Andrew Syrios: So there’s not many people that wanna buy that, especially since there’s an HOA there, and HOAs – they make condos tough; they can eat away your cashflow and make it pretty tight. But we think we can actually pull a similar financing “trick” with this property as we did with the 41, moving into private lenders there. It won’t cash-flow great, but it’ll cash-flow [unintelligible [00:21:44].28] brought the price down quite a bit, to the point where we’ll have some built-in equity, assuming we’re willing to hold them… Or (which we might do) hold them slowly selling one at a time and getting cashflow, because we’d be getting a good, solid equity position upfront. But it’s one of those things where there’s definitely equity there at the price they wanna sell them, but you can’t extract it quickly… Because you can’t list them all at the same time, and if you’re gonna put them on the market at the same time, you’re gonna crash that market because there’s just too much inventory, right?

The way I put it – the whole is worth less than the sum of its parts… But there are deals like that in that mid-range; small portfolios of houses, portfolios of condos, things like that that the big players aren’t looking for, they’re not interested, and most normal investors just can’t put it together to finance it. So if you can find a way to do that, because there’s less competition, there’s often plays you can make to get pretty good equity margins right up front.

Joe Fairless: The key besides being savvy enough to identify this as an opportunity and then put the pieces in place – the key really is in the financing, because that’s the big hurdle that most people have who are small or medium… Because if you are typically buying one or two properties at a time, you’re gonna have a hard time getting financing for this Frankenstein project. But if you’re too large, then you wouldn’t want to touch this for scalability reasons, and it just seems messy. So the question – and then we’ll wrap up here – is how can someone who’s listening get their financing prepared, so that if they were to come across a portfolio of, say, 45 single-families scattered throughout, or a condo community offering up, say, 30% of the condos, they can strike and act on it?

Andrew Syrios: I’d say there’s a couple ways. The first one is you wanna constantly be building your financing network on both sides. We have it on two sides, basically – private lenders (or private investors, too; it could be equity, too) on the one side, and then your list of banks or other types of lending [unintelligible [00:23:46].09] that can refinance your property of long-term debt. So I’ll always be talking to banks, taking them out to lunch, figuring out what their criteria are, what they’re willing to offer, what kind of properties they’re interested in, and whether or not they have a seasoning requirement. A seasoning requirement is how long you have to own the property before they’re willing to refinance it at the appraised value, instead of just how much money you have into it, which is critical.

Often times these days banks are willing to do it as soon as you have the property rehabbed and rented, they’ll refinance at whatever it appraises at, and the amount of money you have into it doesn’t matter. But we’ve had banks that have been great lenders for us, and all of a sudden they just fall off and get really conservative, or we hit their lending limit and we can’t do anymore… So we have to constantly be finding new banks.

We also always constantly wanna be looking for potential private lenders or private equity investors. That way you’re just talking to people, networking, going to various events… Always be telling people what you do. One way that my dad recommended which I think is great is just sit down with a pen and pad and see “Can I put down ten names of people that might have money sitting in the CD that’s doing nothing, that’s making 0.1% of whatever?” If you put down ten names, see if you can put down 20, see if you can put down 30, and then start talking to these people.

Put together a perspective or a business plan, or if you have done some deals in the past, [unintelligible [00:25:01].24] Give your resume – both your resume in terms of your actual resume, but also your resume in terms of what you’ve done and your business plan, too. Take them out, mention it, see if they’re interested, take them out for lunch…

We’re just constantly trying to grow this list. Once you have a couple people – maybe you have a couple private lenders – you might be in a position for that. If you have four private lenders and you’re looking at a portfolio of five, then all of a sudden that might be something that you can transition over.

Or maybe you have a private lender who’s lent you 100k, but you know they have a million, and then they could lend on more… And also, I’m sure you’ve talked to some people about syndications or partnerships and things like that… If we didn’t have the private lenders to do that portfolio – or this upcoming one with the condos that, again, we might not get, but we’re trying to – you might be able to get a bank to loan 75%, get a partner to bring in either all or most of the down payment, and then you split the equity with them or maybe you give them a preferred return or an interest rate. So maybe you give like 4% interest plus half of the profits, or whatever; there’s a million different ways you can arrange it.

So the more contacts you have, the more people that would be interested in lending to you, the more people that have already lent to you, the more opportunities and possibilities you have to make a deal like this work. If you don’t have very many people that you built these networks with, that you built these relationships with, your options are fewer. And that’s fine, that’s how everybody starts. But as you work, you wanna build that up, and that presents more and more opportunities for these types of creative deals.

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

Andrew Syrios: The best way to get in touch with me is probably on my weekly column for Bigger Pockets. They can also go to my website, which is AndrewSyrios.com, which is pretty small right now; maybe someday I’ll do something more with it. And then again, I have  a column on Bigger Pockets.

Joe Fairless: Well, thank you for talking to us about the creative solution and the closing of the 41 single-family home portfolio, and some takeaways… One is if you don’t need to do the deal, then good things can happen from the deal, because you won’t be a motivated buyer. Two – this is I think more important than one, in my opinion – is that as we’re acquiring properties, we’ve got to think about the end at the beginning… Because then if we are doing a good job of buying some single-family homes and then we’re amassing a portfolio, and then “Oh, I need to liquidate!”, if we’re in that in-between stage, then it’s gonna be tough for us to get maximum value for our portfolio, because it’s gonna be a non-traditional buyer who is creative and who is savvy enough to put a deal like this together, like you… But also you and others like you, Andrew, aren’t gonna do it at a premium, because you’re providing a solution to a challenge that others have not been able to solve.

Andrew Syrios: If you’re selling, you don’t wanna be selling to a small market. If you’re selling in that in-between area, or a weird deal, or something like that, you are selling to a small market.

Joe Fairless: And then on the flipside, as active investors we should position ourselves to be able to capitalize on those types of opportunities, and how we do that is we need to 1) find those opportunities, but before that we should focus on the financing network, both debt and equity partners, and you walked through ways to do that… And in particular, I like some of those questions that you ask the banks, with seasoning requirements and if they can refinance at the appraised value, or what their limit is, things like that.

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

Andrew Syrios: Thank you.

Best Real Estate Investing Advice Ever Show Podcast

JF1075: How to Reach Financial Freedom in 7 Years with Austin Fruechting

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Like many other real estate investors, Austin was bit by the bug after reading Rich Dad Poor Dad. He got started and never looked back. Now Austin owns enough property to live off of the income the produce! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Austin Fruechting Real Estate Background:
-Full-time real estate investor First real estate investment was in 2010 (age 25) and is financially free at age 32
-Have everything from single family to two 12-unit buildings, 107 rental units across 49 properties
-Have some cash investors for bigger portfolios, my ownership equals 70 units 32 more units under contract right now
-Based in Kansas City, Missouri
-Say hi to him at www.goodlifeinten.com
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Austin Fruechting. How are you doing, Austin?

Austin Fruechting: I’m doing good, how are you doing, Joe?

Joe Fairless: I am doing well, and nice to have on the show. A little bit about Austin – he is a full-time real estate investor. He started in 2010 when he was 25 years old, and is now financially free, at 32 years old. He has a whole lot of stuff, here we go.

He’s had everything from single-family homes to two-units or to two 12-unit buildings; 107 rental units across 49 properties. He’s got some cash investors in his larger portfolios, and he has right now a 32-unit under contract. He’s based in Kansas City, Missouri. With that being said, Austin, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Austin Fruechting: Sure, absolutely. In early fall of 2009 I had a friend who told me “Hey, you really need to check out Rich Dad, Poor Dad by Robert Kiyosaki. I got into that, and as a lot of real estate investors, that was something that kind of changed my perspective on everything and kind of kicked everything off.

I ran a big spreadsheet to financial projections for different financial strategies, and real estate investing always came out the winner. After that I just purchased every book I could find and just spent the next many months just educating myself. Then I was able to close on my first property in June 2010.

Fast-forward, I would pick up some properties here and there; my favorite type of investment was purchasing something that was run down, fixing it up, getting it rented out at a much higher rental rate and then refinancing it so I could move on to the next one and keep doing stuff like that.

Over time, now I’m at 107 rental units across the 49 properties, as you said. In total, I only have $150,000 of my own personal cash left in any of these investments.

Joe Fairless: Wow. And what’s the portfolio worth?

Austin Fruechting: I would say the market-appraised value right now is approximately seven million.

Joe Fairless: Cool. Congratulations on that! How many of the 107 units do you have partners in?

Austin Fruechting: Most recently we picked up 80 rental units in the past little while, that I’ve brought in some larger cash investors in on. On one of them I put a lot of my own cash to get us to our goal of financial freedom, so I would have a larger ownership in that. In that one I have 70% on some of the others, and 50% when using all investor money.

Joe Fairless: When using all investor money, does that mean you didn’t have any of your own money in those deals?

Austin Fruechting: Correct. I will give them a 7% preferred return, and then on that particular portfolio 7% preferred return on their cash, and then everything above that, it’s 50/50.

Joe Fairless: How do you answer the question from an investor – and I know you got this question before, in that particular deal – “Well, you don’t have any of your money in the deal… If it’s not good enough for you, why is it good for me?”

Austin Fruechting: Well, actually I haven’t really had to answer that question, because I’ve been very selective on bringing investors along. I’ve had opportunities for investors over many years, but I would always just try to do it myself if I could. These were just large enough that I wasn’t able to do it myself, so I took it to them and some of the people that approached me over the time.

They were familiar enough with what I’ve done over the years that they didn’t have any question that if I was looking to do a deal that it was gonna be a solid deal.

Joe Fairless: If you hypothetically had been asked that question, how would you respond?

Austin Fruechting: I would say I’m still signing personal guarantees on all of these loans. With the bank that I’m working with, even though the loan’s on an LLC, I’m still signing personal guarantees on it, so that means I’m risking the entire rest of everything that I own and putting my name on it.

Joe Fairless: Plus the preferred return the investors get paid first, that’s be another good one. So you’re signing — are they recourse loans?

Austin Fruechting: Yes. I’ve been working with the same portfolio bank since the beginning, and they do some special things for me that are not standard and which allows me to bring less cash down; as part of their thing, they’re servicing all the investment loans in-house, so they still want the personal guarantees.

Joe Fairless: What bank are you using that’s local and what are some of the unique things that they’ve done to help you grow your portfolio?

Austin Fruechting: This is a bank in Leavenworth, Kansas, just a small community bank. They’ve been able to do a lot of packaging together on some properties that I was fixing up. I could get a certain percentage of the purchase, the fix-ups and the closing as long as their loan never exceeded 70% loan-to-value and as long as I was putting the minimum 10% down. So as opposed to having to put 20%-25% down, and then fix up in cash and then have a long seasoning period, we could roll it all into one thing, with as little as 10% down sometimes.

Joe Fairless: How did you come across them?

Austin Fruechting: That’s where I got started investing in rental property. I just started the connection with them; I knew them before I even bought my first one. When I went to buy my first one, they were one of the banks I talked to, and they’ve been great to work with, so I’ve just continued to grow with them.

Joe Fairless: You’ve got 32 units under contract right now… Can you tell us about that deal, the numbers and the projected returns, and if you have investors in it?

Austin Fruechting: This is another portfolio deal; it’s across eight properties. So there’s two duplexes, two 4-units, 12 town homes, and then one 8-unit building. We’re getting at just over a million dollars; currently, it’s pulling in $16,700 in rents, but it’s being rented under market. Within a short period of time, even without having to fix up much, we should be able to raise the rents to approximately 19k-20k, with very minimal upgrades.

If we do a higher level of finish on turning some of these units over, we can easily be looking at probably 22k/month in gross rents.

Joe Fairless: It’s interesting that you went straight to the upside potential that you’re realizing in this, and that goes back to what you said earlier about the types of properties that you like to buy – the run down ones; you fix them up, you rent out at a higher rate, then you refinance.

Is your plan to refinance after a certain period of time with this one, too?

Austin Fruechting: There’s a good chance we will, I’ll discuss that. I do have investors along with this, so I’ll discuss what they would prefer to do on that. This one is not as crucial to refinance, just because the cashflow is going to fund anything we need to do. If we go for the higher level finishes to capture that 22k in gross rents, as opposed to 19k-20k, then I think we would definitely look at refinancing in two or three years when that’s done, pulling all the cash, plus — I would say we’ll be able to pull out all our cash plus an extra 200k or so with the new value.

Joe Fairless: And how much (if any) of your own money in this one?

Austin Fruechting: This one will be another where I have not put in any of my own cash.

Joe Fairless: What type of structure do you have with investors?

Austin Fruechting: This one will probably be at a 50/50, and this one we will probably forego the preferred return, just because it’s gonna take a little more time on my part than just putting the deal together. It will take some more time on the back-end, as far as getting all the units turned over and helping manage that process.

Joe Fairless: What type of management do you have in place? Is it your own company?

Austin Fruechting: It’s actually a company that I started years ago. When I was first getting into real estate investing, I knew my goal was always to have a passive income, but I didn’t necessarily trust the property managers that were in the area at the time, so I decided to start my own company. Then I sold that back in 2013, and they’ve continued to manage my property since then.

Joe Fairless: You don’t have any ownership interest in it anymore?

Austin Fruechting: No, I just found people that I would trust with my properties and we worked out a good deal for both of us.

Joe Fairless: Okay, so you’ve had it for about three years, then you sold it.

Austin Fruechting: Yes.

Joe Fairless: Did you make money on it? What type of return did you get on that one?

Austin Fruechting: On that one I probably only broke even; I might have even lost a little bit of money, but I would have been close to a breakeven on everything it took to build that company, versus what I sold it on. But the more important thing is it was only three years; even if I lost a little bit of money on the property management company, I now have property managers I can trust going forward indefinitely.

Joe Fairless: With your project, the 32-unit, how long do you plan on having it and what are the overall project’s projected returns?

Austin Fruechting: Pretty much everything I do is a long-term buy and hold, like no real plans to sell. My investors always know [unintelligible [00:11:37].26] Again, I’ve been super selective on who I work with, and I’ve never actually even sought investors. They’ve come to me, and whenever I see that our interests do align, then we’ll talk more about moving forward.

I would say in two years the cashflow might support everything that needs to be done, so we might just take zero cashflow for the first two years, and then we’ll be at 22k in gross rents.

Joe Fairless: What happens if an investor wants out?

Austin Fruechting: We have a very solid LLC agreement that’s written up. I could buy them up, or one of my two investors or the other investor could buy them out. Or they could get a qualified offer for their share, and we would have [unintelligible [00:12:21].28] If they sell their share to another investor, the new investor doesn’t have any voting rights, because that’s not who we agreed to get into business with. So if they could sell it to somebody else that is okay with that, they’re allowed to do that.

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

Austin Fruechting: I would say my best advice ever is that quick is costly. Looking for the quick answer is how you end up with the wrong math, or even the completely wrong investment strategy for you. You should always let the numbers make the decision, but more importantly, know the Why behind everything you do, from the smallest scale of why you should use X instead of Y for each expense factor on a particular property, all the way to the biggest scale of knowing why one investment path is better for your personal goals than another path.

Joe Fairless: Using that example, why you should use X instead of Y on an investment property – maybe it’s an improvement or something that you’ve done, can you give us a specific example of something that you used and why you used it?

Austin Fruechting: Well, a lot of times I see people wanting to just say “What percent should I add in for capital expenditures on a long-term buy and hold?” and that just doesn’t work. You can’t just throw in a percent for it, because if you’re looking at a 4-unit that’s maybe in this area, with rents of $750/unit, your capital expenditures are going to be probably a lot higher percentage on that than they would be a 40-unit over here, where you’re getting $1,200/month per unit. So just knowing why you’re putting every number into your calculations and analysis is crucial, or knowing that the vacancy is this percentage in this type of property in the area, or this percentage at this type of property in an area that’s maybe an A area, versus the C area that’s just a couple miles away.

Joe Fairless: Going back in time to when you got started, how did you come up with the money to buy your first property?

Austin Fruechting: I’ve gotten creative from the beginning… I didn’t have much liquid at the time, and I had read through a lot of Kiyosaki’s books, so I had set up lines of credit before I ever needed them, and I used a lot of that for the purchasing and fix-ups, and I’ve continued to use a lot from lines of credit along the way to do the work, and then I would refinance and pull the equity back out.

Joe Fairless: Was that with your bank that you did the line of credit initially?

Austin Fruechting: I’ve had a couple other banking relationships, and actually one of my lines of credit was at another bank, or other times our cars were paid off, so we just got a personal line of credit against the cars, and some other personal assets and things like that as well.

Joe Fairless: Can you tell us on that first deal with the line of credit how much did you borrow, what was the interest rate and what were the acquisition costs, and just give us the numbers on that first one? As best as you can remember…

Austin Fruechting: I don’t have them top of mind, but I can give another example on a 6-unit building that I bought. This was probably one of the best deals that I’ve done… I was able to purchase it for less than 60k. Initially I was able to get a loan for 120k total, but the working purchase total came to about 180k, so I pulled 40k from a line of credit; that was at 5%, and I could pay interest only. Then I had a lot of material and stuff like that, probably another 15k that I just put on a credit card, and I was able to refinance it at 195k within about four months after we fixed it up and put some tenants in.

So the 195k covered the 60k purchase, the 120k renovation, and put an extra $15,000 in my pocket.

Joe Fairless: Are you doing the work yourself?

Austin Fruechting: I act more as a project manager. I’ve hired pretty much everything out, most of the time. At the very beginning I did a little bit of the work myself, because I did work construction during college. Since then I realized the size of the projects I was doing, it was very much worth it to pay somebody else. I could get in and do this $120,000 project and we were done in six weeks. It would have taken me years.

Joe Fairless: Wow, that’s unique that you are not getting in there and swinging the hammer. You did initially, but you learned quickly that you wanted to scale, and you’re not the one doing it.

Austin Fruechting: Time is money. Every day additional, if I’m trying to do the work, that’s extra utilities, taxes, insurance, interests, payments – everything accumulates over time. If there’s a significant time saving in paying somebody else, you’ve gotta weigh that against what your time is worth, and your daily or weekly carrying cost on a property. Often times you’ll find out that it’s worth paying somebody else that can get it done in a quarter of the time, and you’ll probably come close to a breakeven on your carrying costs versus what you had to pay them.

Joe Fairless: A Best Ever listener is listening to this and he/she wants to essentially replicate what you’ve done, because you’ve got a seven million dollar portfolio, you’ve got only – $150,000 is a lot of money, but when you look at the portfolio size, it’s not a lot of money relative to what you control/own. So what would be something that you think they might spend time doing, but would be a complete waste of time when trying to replicate what you’re doing?

Austin Fruechting: That’s a good question.

Joe Fairless: Do you know where I got that from?

Austin Fruechting: I do not.

Joe Fairless: Tools of Titans, Tim Ferriss. [laughs]

Austin Fruechting: I haven’t read a lot of that book…

Joe Fairless: I’m gonna start asking this question more.
Austin Fruechting: I have it on my desk, sitting over here. I’ve started digging into it a little bit, but…

Joe Fairless: Yeah, yeah. When he talks about how to get better at a sport, he lists a bunch of questions, and this is one of the questions; I figured I’d pop it up, and you’re actually the first person I’ve asked this question to… [laughs] Welcome!

Austin Fruechting: Yeah, [unintelligible [00:18:50].11] Boy, I would say spend your time truly knowing the numbers, and if you’re gonna try to spend your time learning how to redo electrical or redo the plumbing, or things like that, if you’re gonna scale, you have to be the big picture guy and you have to be able to manage the little stuff. But if you’re spending your time just doing the little stuff, you’re spending your time trying to save a few pennies, when there’s thousands to be made if you spend your time on the big picture.

Joe Fairless: You have taken your own advice, that’s for sure. Are you ready for the Best Ever Lightning Round?

Austin Fruechting: Sure, let’s do it.

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

Break: [[00:19:37].09] to [[00:20:37].18]

Joe Fairless: Best ever book you’ve read?

Austin Fruechting: I would say Thinking, Fast And Slow. It’s an excellent study into how the mind works and how decisions are made, and it can help you make much better decisions and also know where the other people are coming from in their decision-making, which is a big advantage in real estate.

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

Austin Fruechting: I’m loving this 32-unit deal I have under contract right here. We’re getting it in at about 1.6% monthly rents-to-purchase, but with minimal work we can be right at 2%. The returns on this are gonna be a killer.

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

Austin Fruechting: On a transaction I can’t really say that I’ve made a big mistake; I’m such a numbers nerd that I put them through the ringer, run the numbers every which way I can. But as far as biggest mistake in real estate that I’ve made – at the beginning I was introducing myself as the owner of the property, instead of the property manager. It’s so much easier to treat it as a business if the relationship is the tenant to property manager instead of the tenant to owner… Since they know like “Oh, you’re the owner, you have full decision-making ability to grant me leniency, or do every little repair that I ask for, or whatever.”
I wasn’t really treating that part of it as a business, so I learned that lesson really quickly.

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

Austin Fruechting: I started up a little blog, Good Life In Ten. It’s just sharing what I’ve learned over the years and trying to help other people get started and go down the same path that I did.

Joe Fairless: And that’s GoodLifeInTen.com?

Austin Fruechting: Yes.

Joe Fairless: Cool.

Austin Fruechting: I got to this point within seven years, so I think anybody can in ten.

Joe Fairless: Cool. I’ll have that in the show notes page. What’s the best ever way the listeners can get in touch with you?

Austin Fruechting: I would say through the blog. You can contact me via e-mail there, and that’s GoodLifeInTen@gmail.com, or just checking out the stuff at the blog.

Joe Fairless: Austin, thank you for being on this show, for talking through how you’ve gone so quickly in a relatively short amount of time. Your main business model is buying the rundown, or properties that need to be fixed up; then you fix them up, you rent them out at a higher rental rate, then you refinance it. Tried and true approach that many investor before you and many in the future will do and have a lot of success doing.

How you have a relationship with a portfolio lender – a local one – in Leavenworth, Kansas, and how you approach your deals, the “quick is costly” approach, and knowing why you’re doing something instead of just doing it. Then when someone wants to replicate what you’re doing, don’t spend time on the micro-level stuff that you can hire someone for, but rather make sure that you’re a big picture person. Know how to be competent in the areas – I think you would agree with that, but you don’t have to be a skilled expert in every single facet; you’ll go freaking crazy if you try to do that.

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

Austin Fruechting: Alright, sounds good. Thank you, Joe!

 

 

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real estate pro advice

JF877: He Started with LITTLE and Now Creates >12% CR MONEY MAKERS!

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He started in an office and then later began to buy properties! He looks for the C class value add edifices and does just that, adds value! Hear how he gets it done and what he’s up to now.

Best Ever Tweet:

Sean Tarpenning Real Estate Background:

– Owner at US Real Estate Equity Builder (USREEB), a turnkey company
– Owns over 125 single family and multifamily units
– In 2016, his company sold over 250 properties and went from $5M in sales in 2015 to $13M in 2016
– His company provides over 300 jobs to Kansas City between the office staff to the construction crew
– Based in Kansas City, Missouri
– Say hi to him at http://www.usreeb.com
– Best Ever Book: Real Estate Developers Handbook

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Best Ever Show Real Estate Advice from experts

JF756: Making QUICK Decisions, Prioritizing Activities, Company Building and Real Estate

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It’s hard to pick one thing that our guest is good at, but if you’re looking for someone who is dynamic, creative, and can build multiple brands and companies this is the show for you! Oh, by the way, he has also done real estate. This is an intriguing episode with insights as to how to prioritize time and make quick decisions. This is a must listen!

Best Ever Tweet:

Eddie Wilson Real Estate Background:

– President at Affinity Enterprise Group
– Pepsi was his client
– Based in Kansas City, Missouri
– Say hi at www.affinityenterprisegroup.com
– Best Ever Book: Outliers by Malcolm Gladwell

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Best Ever Show Real Estate Advice from experts

JF741: How He Decreased his Wholesale Risk and Increased His Income

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Today’s guest is newer to the Wholesale game but was a genius when he decided to split the marketing budget on a direct-mail campaign to lower his risk of loss. Hear how he found his partnerships and which homes he targets!

Best Ever Tweet:

Brooks Mosier Real Estate Background:

– Co owner of Kansas City Property Group; A turnkey real estate company
– $180,000 revenue in his first year of flipping
– Based in Kansas City, MO
– Say hi at kcpropertygroup.com
– Best Ever Book: Rich Dad Poor Dad by Robert Kiyosaki

Want an inbox full of online leads?

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Go to http://www.adwordsnerds.com strategy to schedule the appointment.

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Best Ever Show Real Estate Advice from experts

JF715: MYTHS of Portfolio Property Insurance

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You probably think you are covered if your tenant trips and falls, think again! You will need to check your insurance policy, but our guest is here to share that not all are created equal. He is a national speaker and consultant for insurance on portfolios and all property types. Be sure to reach out to him to get a free consultation!

Best Ever Tweet:

Shawn Woedl Real Estate Background:

–   Senior VP National Real Estate Insurance Group
–   Speaker and Consultant
–   Based in Kansas City, Missouri
–   Say hi at Shawn@reiguard.com or www.nreinsurance.com
–   Get a FREE insurance consultation
–   Best Ever Book How The Mighty Fall by Jim Collins

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You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

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JF571: Did He Pay Cash or Terms for a 97 SFR Portfolio? #situationsaturday

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He buys, flips, holds, and refinances SFR’s and has been doing so for over 10 years. He was caught off guard with an opportunity to buy a portfolio of 97 homes, which would have been a record. He approached the opportunity at many angles, so you’ll need to listen to know how he decided to acquire the investment!

Best Ever Tweet:

Andrew Syrios real estate background:

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Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

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JF543: What to Do When Your Property Management Company Underperforms #situationsaturday

What is your vacancy rate? What is your turnover? Do you know the answer to these questions? If you’re not sure, then your property management company may not be keeping track. Reports are necessary for added value and improvement, tune in to hear how our guest took care of a sticky situation with his property management company.

Best Ever Tweet:

Spencer Cullor real estate background:

  • Director of Commercial Acquisitions at Apartmentvestors
  • Say hi to him at apartmentvestors.com
  • Been involved in over $20,000,000 worth of deals including a multifamily and a retail center
  • Based in Kansas City, Kansas
  • Here’s a copy of Spencer’s letter that helped him find on his first two apartment communities:
  • His Best Ever book is: The One Thing by Gary Keller and Jay Papasan

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

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JF531: How His Experience in Spec Homes Lead Him to COMMERCIAL Deals

He didn’t start with office retail and apartment deals—he learned how to put these deals together stating with spec home building. His transactions evolved into bigger deals with mini mistakes made along the way that gave him the experience needed to master his niche. Hear how he made the transition!

Best Ever Tweet:

Spencer Cullor real estate background:

  • Director of Commercial Acquisitions at Apartmentvestors
  • Say hi to him at apartmentvestors.com
  • Been involved in over $20,000,000 worth of deals including a multifamily and a retail center
  • Based in Kansas City, Kansas
  • Doc that helped him profit over $2M: https://goo.gl/AwJGZk (mentioned during our interview)

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
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JF446: Conquer Your Cold Call Fear!

It’s frightening! You have a fresh list of delinquent tax properties and your cell…what do you say? Our Best Ever guest is walking us through the cold call and how to make a deal happen. He explains the importance of transparency and simply being “up front” and helpful. Improve your cold call game now!

Best Ever Tweet:

Adam Doran’s real estate background:

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Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

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Best Ever Show Real Estate Advice

JF228: Why You Shouldn’t Give Up After ONE Bad Investment

Are you overwhelmed by the amount of data and statistics you find while conducting your due diligence? If so, you better crank up your speakers because today’s Best Ever guest shares with us where to find everything you need to conduct your due diligence in ONE PLACE and why one bad investment DOESN’T make or break you.

Best Ever Tweet:

Shane Sauer’s real estate background:

–          Co-Founder and COO of RentFax based in Kansas City, Kansas

–          Over 15 years of experience in the real estate industry

–          Licensed civil engineer, general contractor and appraiser

–          Loves to travel and scuba dive in Bora Bora

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Patch of Land – Want to learn more about crowdfunding? Let the leading expert in the crowdfunding space, Patch of Land, give you all the info you need to get started. Grab your FREE copy of Top Ten Answers to the Top Ten Crowdfunding Questions athttp://www.PatchOfLand.com/bestever

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