JF2406 Learning To Listen To Your Intuition With AdaPia d’Errico #SkillsetSund

JF2406: Learning To Listen To Your Intuition With AdaPia d’Errico #SkillsetSunday

AdaPia has been a guest of the show twice before, in 2014 and 2017. This time she’s here to talk about her book, Productive Intuition. She started writing it back in 2018, and the Covid lockdown gave her a push to finish the book.

In the past, she’d feel that the deal would be off, yet she’d still go through with it since there was no rational reason behind the feeling. Now she’s learned how to listen to her gut, and she shows others that they can teach themselves to do it as well.

 

AdaPia d’Errico  Real Estate Background: 

  • Principal and VP of Strategy for Alpha Investing, a private real estate equity firm
  • Alpha Investing invests in multifamily, senior housing, and affordable housing nationwide 
  • 20 years of real estate experience 
  • Author of Productive Intuition – connecting to the subtle
  • Guest on episode JF1187
  • Based in Los Angeles, CA
  • Say hi to her at: www.productiveintuition.com  

Thanks to our sponsors

Best Ever Tweet:

“In real estate, we use our gut all the time” – AdaPia d’Errico.


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to The Best Real Estate Investing Advice Ever Show. I am Theo Hicks, and today we’re speaking with AdaPia d’Errico. AdaPia, how are you doing today?

AdaPia d’Errico: I’m doing really great. Thanks so much for having me.

Theo Hicks: No, thank you for joining us again. AdaPia was on the episode all the way back in 2017. It went live almost exactly three years ago, in December 2017. A lot has happened since then. We’ll talk about that just a little bit in the beginning, but the main focus of the day is going to be on AdaPia’s book, which was launched in October, correct?

AdaPia d’Errico: That’s right.

Theo Hicks: Perfect. It’s called Productive Intuition: Connecting To The Subtle. So this is Sunday, and that’s going to be the skill set for today. Before we get into that, a reminder – AdaPia is the principal and VP of strategy for Alpha Investing, a private real estate equity firm. Alpha Investing invests in multifamily, senior housing, and affordable housing nationwide. She has 20 years of real estate experience. As I mentioned, the author of the book we’re going to discuss today, Productive Intuition. If you want to check out her original episode, it’s Episode 1187. She is based in Los Angeles, California, and you can get her book at productiveintuition.com. So AdaPia, before we get into the book, can you tell us a little more about your background, and then what you’ve been up to since you were last on the show about three years ago?

AdaPia d’Errico: Sure. It seems like I have three-year stints, because the first time I was on the show was in 2014 when, we did a whole series on real estate crowdfunding. That’s how I met Joe and The Best Ever Show. So it looks like we have these three years stints.

For the past few years, I have been over at Alpha Investing on the equity side. Previous to that I was doing a lot more of the hard money debt side, and now I’m over here on the equity side. We have a private capital network, we syndicate these projects, we do the underwriting, what you would expect from syndication; we just really, really focused on these three asset classes, on the needs-based asset classes. Everybody needs a place to live, and we put a huge emphasis on the sponsors and the sponsor’s background. In addition to Alpha – I’m over there as VP of strategy, really building the investor-base, PR, and communications – clearly, like I’ve had some free time to write this book, I was actually able to finish it in COVID. I started writing this book in 2018, and if anybody’s ever tried to write a book, you might not finish and then there’s just this moment when it just feels right and it flows. COVID actually gave me that moment, because I was like, man, I need to stop doom scrolling and do something more productive.

Theo Hicks: Doom scrolling. I haven’t heard that before. I like that.

AdaPia d’Errico: So it’s been a real adventure. I self-published and it’s been really, really well received. It’s really aimed at more of a business audience. It’s really aimed at people that  — everyone is trying to bio-hack, optimize, or try to make their lives better, make their businesses better, and I feel it’s really important to touch on the subject of intuition for that because, as you know too, in real estate we use our gut all the time. Whether we know it or not, we are actually using our intuition a lot to understand partners, syndicators, or even deals… And you actually make better decisions when you’re tuned into your intuition; you make faster decisions, you can get into a flow state, you can be more creative. This book really kind of came about from my experiences, and especially my experiences of realizing that so many times when things went wrong. And Theo, I don’t know if this ever happened to you, but something went wrong and you’re like “I knew it. I knew I shouldn’t have done that. I shouldn’t have said that. I shouldn’t have whatever” because there was a part of you that had warned you and you just brushed it aside. “No, I’m not going to listen to that, I’m not going to pay attention.”

I kind of reached that point where after one particularly really big career crash for me that led to a whole need for me to re-evaluate my life, what am I doing, and what are my values, why am I not listening – I kind of landed on this place of “I really need to listen to my intuition.” So I just did all this research on what makes us intuitive, how it works, and how to use it.

Theo Hicks: Thanks for sharing that background. I’m sure we could go on the tactical side of a book, how do you actually write a book. I totally understand exactly what you’re talking about when it comes to writing books. I think a good place to maybe start is if someone’s listening to this, and maybe they don’t necessarily know what you mean by intuition… Like, they say, “Oh, I’m really angry and emotional. I should listen to that”, so what do you mean by intuition?

AdaPia d’Errico: Yeah, actually, that’s a really good point. When I’m angry and emotional, is that my intuition? Definitely not. So there’s a lot of discernment. That’s why the subtitle of the book is Connecting to the Subtle, because it’s a really subtle sensation.

Intuition is the full “You know something, but you don’t know why you know it, but you just know it.” Intuition will also feel very different than an emotion, especially an emotion like anger is really just a signal. Anger is signaling to you, it’s saying, “This is not okay for me, something to pay attention to.” And of course, we have to do our work with our anger and all that kind of stuff. I have anger issues of my own so I totally get that. But intuition is more like a hint or a subtle signal. Often we feel it in the gut. Some people feel it in different ways. It can be a fully formed thought, it can be that idea in the shower, it can be so many things. But most of the time, I think the best way to describe intuition is a knowing that goes far beyond the rational mind. It’s really just something that you know, and it’s unshakable. That’s your intuition.

Theo Hicks: Yeah, I think that’s how I would describe it as well. Now that we know what it is, you’ve kind of already hinted at this with the discernment and the Connecting to the Subtle, but very practically, I’ve got a decision to make on whether to buy this deal or not. What exactly does it look like when I’m tapping into my intuition? Do I sit there and just say, “Alright, what does my intuition say?” and then the first thought that pops into my mind is my intuition. What does it actually look like?

AdaPia d’Errico: It’s different for a lot of people. One of the best ways to work with your intuition is to journal. Actually ask yourself questions and just journal it out. For some people, meditation is also a really great thing, because what you’re trying to do is get beyond the chatterbox of the mind. We’re trying to get to the self, and the space, and the knower that goes behind that mind. So journaling is a really great way to do that. Meditation is a really great way to do that.

When it comes to a deal, intuition works in a couple of different ways. One of the big things that I always want to talk about is intuition isn’t this magic thing that’s like for psychics. There are definitely people who are super tuned in to their intuition, and they seem really magical… But a lot of times intuition is also a function of deep experience. Like, if you have a lot of experience, let’s say in real estate, and let’s say you’re walking a building, you’re going to walk around, and you’re going to know things about it that have a lot to do with your previous experience. You’re going to notice things, you’re going to see things, you’re going to get a sense of something, and that’s because you have this lifetime of experience stored in your brain and stored in your body that you’re drawing upon, because we function to create patterns.

There’s also an element there with your intuition, like you were saying with a deal, is something might hit you and you’re like, “Something doesn’t feel right about this.” So you should go explore that. “Something doesn’t feel quite right about this.” It doesn’t mean that you make a decision just based on that, it means that it’s an invitation to go check on that. Another really good place that your intuition is going to speak really loudly are your partners. The people that you’re going to be doing business with and how they interact with you. It’s like the non-obvious ways. You’re going to get a sense of, “Do I trust them? Do we have alignment?” All of this is operating in your body and it’s giving you these signals. So I would always say, if you have a sense of “Something’s not quite right about this, it’s not sitting right with me,” then go explore what that could be. Don’t just let that sit there niggle at you. It could be nothing, but at least you go and explore it and figure it out.

Theo Hicks: That exploration process – that would be the journaling and them kind of sitting there thinking about it?

AdaPia d’Errico: And actually exploration. If you have a bad feeling about somebody, I would just go do full background checks. It’s actually really practical, too. To me, intuition is extremely practical. It’s like “Okay, I need to go do some fact-checking, because I got kind of a bad feeling about this over here.”

So the important thing is not to ignore that little feeling that comes up; that might be a warning. Also in a positive way if it might be like, you just get the sense of like, “I’m going to go this way today.” You just get these little inspirations; you’re like, “I’m just going to do this today. I’m going to do this differently.” Sometimes it’s fun to just see where that takes you.

Break: [00:10:04][00:11:10]

Theo Hicks: What are some common traps that people might fall into when they first start doing this? Maybe they’re someone who’s always been very rational that every single decision needs to be based off of an Excel calculator template. It needs to be an exact threshold or whatever, and they’re like, “Okay, I’m going to start going on my intuition a bit more.” What are some common traps that people find and how can we avoid those?

AdaPia d’Errico: That’s a really good question. A lot of those traps actually are in the emotion, in the emotion and the ego. This happens to me a lot, especially when I’ve had a situation where I lost a lot of money to fraud. I knew it, and I just didn’t want to believe it. The whole time, I was paying more attention to what my ego wants. I really wanted this deal to work, I didn’t want to believe that this could happen to me, I was smarter than this. Whatever the narrative is in our head, we really have to watch what is going on that’s causing us to dismiss it. There are usually these ulterior motives. For me, it was pride, it was not wanting to ask for help…

So these are the things that trip us up a lot and they’ll start to trip us up when we start to question it or talk ourselves out of it. You’ll notice that, you’ll notice you’re talking yourself out of it, like “Oh, no, that could never happen to me. Oh no, I’m not going to do that. I’m not going to bother this person. It’s like the wrong thing to do.” But yet the whole time, like maybe you have this feeling in your stomach. For me, with this person that I lost all this money, I just would always get this really tight feeling in my head, and I just never felt good. But I just was so stubborn. I did end up down to the wire and I ended up getting defrauded for a lot of money.

Theo Hicks: On the flip side – because that’s an example of not listening to your intuition… So maybe give some examples of when you have listened to your intuition. I’m sure there are examples in the book. In addition to the example that you found about someone who listened to their intuition and either avoided a complete disaster, or you avoided a complete disaster, or it ended up being a really good decision, that allowed you to make money or to find the right partner or whatever.

AdaPia d’Errico: For sure. Yeah, absolutely. There are so many. We were saying this before we started recording, I helped launch real estate crowdfunding as an industry. That was my intuition that led me into that space. Even though it seemed totally bananas at the time, I joined one of the earliest firms. There were three people and I became employee number one, and it was wild, it was crazy, and it shouldn’t have worked. But it did. That was my intuition saying “There’s something here; there’s something about this real estate, and there’s something about crowdfunding. I don’t know what it is, but I know it’s going to be big.” So I’ve always had this ability to also understand the key trends. That’s your intuition kind of at work.

Another thing is actually this year, we moved to the mountains from the city of LA. We both had the same moment of this intuition. It came totally out of blue. We were not going to sell our house this year; it was not even on our radar. We both went for this hike, we both kind of came back from that hike and we’re like, “Huh, let’s look for some land. I feel like we should look for some land.” And then we ended up selling our house and buying this one.

That doesn’t mean that intuition makes it a smooth ride. It still took six months, it was still all the crazy housing market. But that’s an example of following my intuition, because otherwise, my rational brain “Well, that’s not on your plan for 2020.” But it just felt right. The more we did it, even though we encountered challenges, it just still felt like the right thing to do. So that would be like a really positive example.

Theo Hicks: You kind of already touched on this, but I’ll ask it again and see if you answer a little bit differently. You mentioned something about how it works, and that it’s going to be based off of your experience, too. So someone who’s never done a deal before, who has never flipped the house before, or done any sort of renovations to the house before is not going to walk into a house and then be able to listen to their intuition about what renovations need to be done. That’s just kind of an example. But what are some resources, what type of content, what sort of routines do we need to do to make sure that we’re continuously feeding whatever it is that allows us to have correct intuition?

AdaPia d’Errico: It’s a constant and daily self-awareness practice. It’s like a mindfulness practice. Anybody who has a mindfulness practice already — you’re already living life, let’s say, just noticing yourself. So you start to be able to notice when you’re having nasty thoughts; you’re going to notice when you have an emotional reaction, you’re going to notice when you’re triggered, you’re going to notice when something feels good. This is how you work with your intuition, because it’s really like a muscle. It’s like a super skill that we all have; every single person has it, and it must be worked. You do that, like with anything – with practice, and consistency.

It’s a constant daily awareness of yourself. What happens is you start to notice and you start to discern different aspects of you; you start to feel like you see yourself from the witness perspective for those who do meditation, and you start to be able to notice the ego part of you or the pride part of you, and then you’ll just also notice other parts of you. So it’s a self-awareness practice.

So if you go about your day, just like also noticing and taking the time, and remembering –because this is the hardest thing with all of this kind of work mindfulness– is to remember to do it. Let’s say you walk into a room, and just like you ask yourself, “What do I notice?” Just start with that and see. Now, you might not feel anything, nothing. Zero might come up. But over time, it’ll start to be there, because you’re starting to put attention on that part of you that’s always there, you’ve just haven’t given it space or time or any attention before.

Theo Hicks: Yeah, I think that’s the biggest thing. It’s not like these reactions we have are something that is completely brand new; you’ve been doing it forever, but you just don’t realize it. These are just patterns, for sure, so I totally agree with that.

Alright, the last question… Throughout your process for doing research for this book, I’m sure you’ve learned a lot of stuff. What was the most interesting thing you learned? Or maybe the one thing that maybe had you believe in one thing and then you did your research and like, “Oh, wow. I was completely wrong about that. THIS is actually true.” Or is there something that stands out from your research that you think could be valuable to listeners?

AdaPia d’Errico: I think one of the most shocking things that I’ve realized in my research is how powerful the heart is. It’s actually a thousand times more powerful than the brain. It sends more information to the brain than vice versa. The electromagnetic frequency of the heart is just so powerful… And it’s measurable now. They’ve done studies when large global events that happen, that just like the overall frequency of the earth will change. The reason that that is so amazing to me is that we’ve put such an emphasis on the brain in culture for hundreds of years, like the brain, the brain, the brain, the brain, and the heart is just a blood pump. But actually, the heart is so much more than a blood pump. It is actually what is controlling everything. There are really interesting studies that I had –I talk about it in the book too– that will put the heart as the main organ of intuition, and that it can future-see things. This is your heart.

So I just found that all of the research about the heart was so fascinating, and also timely. It’s time that we lead with the heart. We’re more human; we don’t want this top-down, aggressive, too cold, too rationally centered way. So many people that know, like you and Joe, for such a long time – you lead from your heart and you connect with people from your heart. The research around that will just blow you away. I know it did me.

Theo Hicks: Do you have that in the book?

AdaPia d’Errico: I do.

Theo Hicks: Perfect. That’d be fascinating to look into. Thank you for sharing that. I’m glad I asked that question.

AdaPia d’Errico: Yeah, me too.

Theo Hicks: Is there anything else that you want to mention, whether it be something we didn’t talk about before we sign off? And then obviously, where people can find your book.

AdaPia d’Errico:  This has been really great. I really, really appreciate coming on the show and being able to talk about the book. I really hope that people will be inspired to read it and start to work on their intuition and to listen to it more. Because intuition is productive, it’s faster decision-making, and it creates better outcomes.

So the reason I wrote the book too was I put so much science in there because I’m very left-brained. I’m like “No, I don’t want to just believe something. I want to know how it works.” So that’s what’s in the book, too. So I think it’s also very appreciated by a lot of people who — as you said, you’re like, “Okay, tell me something that’s scientific-based or that’s more rational.” It’s really important, because we need a rational side of us to participate in life, too. We’re not trying to throw it out the window. We’re just trying to say, “Hey, there’s another part of us that wants to work with us.” So I appreciate being able to come on the show and talk about the book, because it’s been a lifelong dream to write it.

Theo Hicks: This is a really fun conversation. It’s a lot different than what I usually do. I really enjoyed this. So thanks for coming on and talking about your book. Again, it’s called Productive Intuition: Connecting To The Subtle. You can buy it at productiveintuition.com. So again, thank you so much for coming on. Best Ever 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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2327: Turnkey Rentals With Eric Martel

Eric purchased his first apartment building at just 18 years of age while still at university. After graduation, in his position as an actuary, he was dismayed to see hundreds of company pension plans being rolled over into 401(k)s shifting the retirement risk to employees. This made him reconsider traditional beliefs about retirement saving. It also made him question his role as an actuary so he joined the lucrative technology industry. A few years later he lost a fortune during the Dot com crash of 2001 and he started looking for ways to earn passive income and stop trading time for money. He started various businesses, including a gourmet sauce company, but eventually came back to his first love of real estate investing and formed MartelTurnkey with his sons. After just four years of rapid success, he was able to retire from his day job. Now he wants to share what he’s learned so you don’t make the same mistakes he did.

Eric Martel Real Estate Background:

  • Full-time real estate investor for over 4 years
  • Owns a turnkey rental provider; selling 10 properties a month
  • Portfolio consist of 100 units in midtown Memphis
  • Based in Los Angeles, CA
  • Say hi to him at https://martelturnkey.com/

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Just take action, I think people are waiting and hoping for the greatest deal ever.” – Eric Martel


TRANSCRIPTION

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, Eric Martel. How are you doing, Eric?

Eric Martel: Very good. How are you?

Joe Fairless: Well, I’m glad to hear that, and I’m doing well. A little bit about Eric – he’s a full-time real estate investor, has been for four years. He owns a turnkey rental provider; they sell 10 properties a month. His portfolio consists of 100 units in Midtown Memphis, and he’s currently based in Los Angeles, California. He’s got a book coming out called Stop Trading Your Time For Money. And you can be notified about when that book launches and go check it out at marteleric.com/book. So with that being said, Eric, doyou want to give the Best Ever listeners a little bit more about your background and your current focus?

Eric Martel: My background, I was just a regular upbringing as a child, in a not poor family, but lower middle class, I would say. I purchased my first apartment building when I was 18 years old, while I was still at university. And then after graduating, I was an actuary, and I was dismayed to see so many corporate pension plans basically being converted into 401Ks. And that was really shifting a lot of the risk of retirement to the employees. So that made me reconsider the traditional belief about retirement planning and retirement saving.

Two years later after the .com crash in 2001, so I lost a lot of money, and that was my turning point where I said “Okay, well I have to do something where I am in control of my investment, and start working on passive income.” I did a whole bunch of different businesses to get there. I was trying to get into real estate at the time, but I was in San Francisco and we did the numbers and it didn’t make a lot of sense; the returns were very low. And if you wanted it to cash flow, you had to put a lot of money. So I did other things I did a gourmet sauce company, we did a low-carb grocery store, all kinds of crazy things. And then really four or five years ago we decided to get going on real estate with my two sons, and things are going very well. And now we’re helping other people also build a portfolio of passive income so that they can retire early, achieve financial freedom, and leave a legacy for future generations.

Joe Fairless: You’ve done a decent amount of varying things. A grocery store? You owned a grocery store?

Eric Martel: Yeah, low-carb. You remember Atkins? We did like a low-carb…

Joe Fairless: I do.

Eric Martel: Yeah. A low-carb grocery store. And then Atkins died, out of all things… So it was interesting. So yeah, when Atkins passed away, then the low-carb kind of disappeared, or really was not as prominent. So we moved on, then we did a gourmet sauce company. We worked at it for about five years. That was going very well, we were in Whole Foods across the country, we were in a bunch of other stores as well… And there was no traction; five years of hard work, and it didn’t sell itself. The only time it would sell is if we were there in the stores, doing in-store demos and all of that. So, yeah.

Joe Fairless: And then I heard earlier, which is most relevant to this conversation – 18 years old, you bought your first apartment building?

Eric Martel: Yeah, that’s right. At 18 I bought an apartment building. And thing is that when I bought this building, I didn’t have any grand plans of achieving financial freedom. I was 18 years old, I had my whole life in front of me. But I had met through a friend of mine, a mentor, a real estate investor, he was a community college teacher, he was with a modest salary, and he managed to build a 36-unit apartment building 45 minutes outside of Montreal. And then I was really intrigued by that. He agreed to mentor me in, to learn about real estate investment. So that’s what I did. I kind of jumped at the opportunity, and he basically mentored me throughout this whole process. So basically, I kind of bought this building to prove that it can be done. I had no money down. I think I had $150 in the bank, and I had to write a check for the mortgage application; it was like $75, and that really made a dent in my budget. [laughter] You have to give half your money away to the bank for an application. It was crazy.

Joe Fairless: If only they knew…

Eric Martel: Yeah, exactly, right?

Joe Fairless: Which they should have known…

Eric Martel: Yeah.

Joe Fairless: Shame on them.

Eric Martel: We were there in front of the public notary, signing the documents and all of that… And then it  was kind of like “Okay, well does Eric have the money–” because I had to put like 20% down, and then he said, “Well, does Eric have the money down?” And stuff like that. And then the notary, and the realtor, and the seller were looking at each other and they said, “Oh, yeah. He has that. No problem. Moving on…” So the bank was satisfied that everybody was nodding that I had the money, and of course, I didn’t have the money. So that could have gone very badly. The rest of the money came from the seller, so I had like sellers financing for the 25% that was left. And that’s how I was able to buy it without any money down.

Joe Fairless: Oh, so the 20% down that the bank was asking about – that came from the seller?

Eric Martel: The seller. Yeah.

Joe Fairless: Okay, because you got a second loan, like a second mortgage on it?

Eric Martel: Got a second mortgage on the property. But in the order — when you’re signing the document, the first thing that you sign is you sign the sale agreement, then you sign the first mortgage on the first lien on the property. But at that point, the bank is asking, “Oh, yeah, do you have a 20% or 25% down payment?” That’s why everybody’s looking, “Oh, yeah. He has it, yeah.”

Joe Fairless: How many units?

Eric Martel: That was eight units.

Joe Fairless: Eight units. How much was the purchase price?

Eric Martel: It was not in a good part of town, I must say. So I think the purchase price at that time was $80,000. Something like that.

Joe Fairless: And where was it?

Eric Martel: This was in the Trois-Rivières. Three Rivers. About 45 minutes outside of Montreal.

Joe Fairless: Okay. Three Rivers. What did do you do with it?

Eric Martel: Eventually, I sold it… Because after that, when I became an actuary, I found a job in Toronto, which was six hours away from my investment. So I thought “Okay, well I better get rid of it.” So I sold it and made a little bit of profit. I think I made a 15k profit when I sold it.

Joe Fairless: What was it like managing an eight-unit as an 18-year-old?

Eric Martel: That what the problem, this is where I made a mistake… Because I should have had a property management company to handle all of that. It was an exciting project and all of that, I was very happy with it, but yeah, that really left a bitter taste in my mouth, that I had to go there and fix things, and fix the window, I remember, and then do some plumbing. And I hate doing plumbing. There was a leak in a wall or something like that, and I had to fix it. I don’t know what I’m doing. That’s the one thing where I made a mistake there.

Joe Fairless: And now let’s fast-forward to today. You have a portfolio of 100 units in Midtown Memphis.

Eric Martel: Yeah. We started doing single-family. A few years back we just did single-family, we just bid — I don’t know if you’re familiar with the BRRRR…

Joe Fairless: I am, but would you mind just quickly saying what it is?

Eric Martel: Yeah. So the BRRRR is basically you’re buying a distressed property, so this is the B, buy the distressed property. Then you renovate it, then you rent it out, and then you refinance, and then you repeat. So that’s how we got started – we bought our first single-family rental in Memphis. We renovated it, rented it out, and then we refinanced it, then we did it again. We did two more, and then we did three more, and that’s how we got started.

And we’ve done a lot of interesting things that you pointed out before with the low-carb grocery store and the gourmet sauce company, and a couple of other businesses that we did. So our friends started asking questions, “What are the Martels doing?” [laughter] So they started asking questions about that as well. And then Memphis, like “Why Memphis?” And, “What are you guys doing?” So then they wanted to invest with us, so we started to do joint ventures and all that.

And then we went to Cleveland, we opened that market as well in Cleveland. And at that point, we said about, “We should really do a turnkey rental business. We have so many people that are interested. Let’s do that.” And that’s when basically Martel turnkey was founded. Because we had these friends and close people that we knew in our network that were interested in building the passive income the same way we started.

And then from that, we invested in apartment buildings. We did such a great job in Memphis with their renovations that people noticed it. And then a realtor contacted us and said “Hey, are you interested in buying an apartment building?” And so yeah, so we jumped at the opportunity, and we bought our… That one was a 20-unit apartment building; we renovated it, and when we did that project — it was it was in Midtown, Memphis in a pretty visible area. So they noticed that “Oh yeah, they did a good job.” And actually, the seller of that apartment building kept getting compliments about, “Oh, you did a great job renovating your apartment building,” and stuff like that. So he says “Oh, well actually I sold it.” So, that seller, he had a whole portfolio of apartment buildings, so he contacted us to say, “Well, you did such a great job with that one. Are you interested in…” He showed us a whole portfolio. And he was kind of divesting from that and moving into a different type of investment. So we got our pick of other apartment buildings from that, and then we had more opportunities come our way.

Joe Fairless: So what did you buy from him after that?

Eric Martel: So after that, we bought another apartment building, also in Midtown Memphis as well, in what’s called Overton Square. That’s a very nice area; they have live outdoor concerts, lots of bars and restaurants. So that’s a very dynamic area. And we’re literally half a block away from that location, and that’s booming. Memphis is really booming. In that same area, they’re building a new hotel called The Memphian.

Joe Fairless: How many units was that other one?

Eric Martel: The first one was 20 units, this one is 24 units.

Joe Fairless: And then you’ve got…

Eric Martel: And we bought a bunch of other ones after that too.

Joe Fairless: Anything larger than 24 units?

Eric Martel: No. These are pretty much that size; we have 16 to 24 units. Yeah.

Joe Fairless: Percentage of real estate investors who are focused on multi-family would stay away from 16 units, 20 units, 24 units, especially if they weren’t local, because of the property not being able to pay for staff to oversee it. How do you get around that?

Eric Martel: Well, for us, we have a property management company. It’s actually the same property management company that is managing our single-family rentals, and these apartment buildings. So it is the same professional property management company, they have all the processes.

Joe Fairless: Third-party or you own them?

Eric Martel: It’s a third party.

Joe Fairless: Third-party. Okay.

Eric Martel: So they’re doing a great job, they’re professional, they know what needs to be done. And it’s really the same thing. There’s no difference for us whether it’s a single-family or multi-family. We don’t have anybody on location either, like a superintendent, or — we don’t have an office on site. So it’s just a property management company that handles all of that.

Joe Fairless: What type of learning curve was there for the property management company to manage a 24-unit property, if they weren’t already doing that for other landlords?

Eric Martel: Yeah, they were already doing that for other landlords. But that’s a good point. If you’re dealing with a property management company right now that only handles single-family rentals and now you want to get into the multi-family, you may have to find a different property management company to handle that. It is slightly different in how it is handled.

Joe Fairless: In what ways is it slightly different?

Eric Martel: Well, there’s a lot more traveling around in the single-family rental. If you want to go and visit your 16 tenants and 16 different houses, then your property management company has to travel a little bit more to get things done. You have 16 roofs that you have to deal with, you have 16 times four exterior walls that you have to deal with. So for the property management company it’s different from that perspective, and a different market. If they’re dealing with one apartment building in terms of maintenance and all, that’s a little bit easier, I would say. But they’re also dealing with other problems, because typically it’s in other areas, in other residential areas. For us, we’re in Midtown, so if you’re in Midtown Memphis, there’s a little bit more… It’s not a serious crime, but you have more serious problems, people, vagrants that are walking around, and you have to be careful about that. Also because you have all these people in the apartment building, then there are more potential conflicts, I would say, between tenants. The music is too loud and blah blah blah, and these kinds of things. In single-family rentals you don’t have to deal with that, or the barbecues, or… Especially in Memphis, you do a lot of barbecues.

Joe Fairless: They’ve got good barbecue there. Of course…

Eric Martel: They do, they do.

Joe Fairless: They should be doing barbecues. What deal have you lost the most amount of money on?

Eric Martel: I think it was really a single-family rental. We haven’t lost really that much money. Out of 200 or more properties that we did, we probably lost money on, I would say maybe, five properties.

Joe Fairless: Which one did you lose the most on?

Eric Martel: Less than 10.  And I think the one we lost the most on, going from memory, I think it was $9,000; that’s how much we lost.

Joe Fairless: That’s nothing compared to the good stuff. Do you remember what happened on that deal?

Eric Martel: There was a couple of things. There was a plumbing issue in the wall, and we didn’t know about it, because we didn’t open any of the walls; we just did our thing, and then the main stack had an issue with it, and we needed to fix that. And the one that happened last month was — there was a lot of rain in Cleveland, and then we had seepage in the basement of one of the units. And we had done some seal from the inside and everything seemed fine, but then there was like torrential rain, and now the water started seeping in. So we had to go and spend $6,000 that we were not planning to spend on that renovation. So, yeah, these kinds of things. So this one we didn’t lose money, but every once in a while you do get surprises like that where you actually have to plan for that.

Joe Fairless: On the flip side, what deal have you made the most money on?

Eric Martel: Sorry, there are so many… [laughter] I have to order them. One of them we literally bought a building at a very low price, way below market, and all we had to do was paint the inside, just clean it up, and then we sold it, and we made 30% profit on that property.

Joe Fairless: Wow. What did you buy it for?

Eric Martel: I think we bought it for 60 or something like that. And then we sold it for 90k.

Joe Fairless: And all you did was paint it?

Eric Martel: All we did was paint it.

Joe Fairless: Huh. How can I find one of those?

Eric Martel: Well, we’re still looking… We call those the unicorns. So out of the 200 or more properties that we did, I think we had two or three of these unicorns, where we just didn’t have so much work…

Joe Fairless: Was there any common denominator for how you found those unicorns, compared to other properties that you found?

Eric Martel: No. It’s just to cast a wide net, and then every once in a while you’re going to get something good. It’s really about the numbers, how many properties you need to do, and then that’s when you’re going to find these things. That’s why one of the advice that I give to investors that are getting started too, is that they keep looking for that great deal; they say, “Oh, yeah. This is good, this is a good deal, but I think I can find a better deal.” A good deal is a good deal. Just get it and then move on, and then do another couple of good deals, and eventually, you’re going to find a great deal. But taking action is very important, starting to invest is very important. It’s more important than finding the unicorn and finding these amazing deals. A good deal is a good deal; just take action, invest, and then eventually, you’ll get a great deal.

Joe Fairless:  I’m going to ask you to dig deep, and in addition to that advice, I’m going to ask you for additional advice.. Because of the format of the show, I have to ask the question, because we got some music that leads up to it and everything… So be on your toes, and here we go – what is your best real estate investing advice ever outside, of what you just mentioned?

Eric Martel: I think take action. I think this is critical. I think people are just on the sideline, either waiting for the great deal ever or something like that, or they keep moving around. I think it’s important for people to take action and invest in something. There’s a lot of talk, not a lot of action.

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

Eric Martel: Okay, I’ll do my best. I’m not very good at that.

Joe Fairless: Well, just a couple of questions. First though, a quick word from Best Ever partners.

Break: [00:20:13][00:20:53]

Joe Fairless: Alright, best ever way you like to give back to the community?

Eric Martel: I like the food donation thing; I forget what the organization is. But yeah, I like that. I’ve done a few of those and I really like that.

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

Eric Martel: They can go on marteleric.com, that’s my website, and then you can connect with everything else I do. My book, my podcast, everything.

Joe Fairless: Thank you so much for being on the show, Eric, and talking about your portfolio, accumulation and your focus now with the turnkey company. Congrats on the book that’s coming out, Stop Trading Your Time For Money. I enjoyed hearing about some of the lessons learned, as well as the good stuff too. So, I appreciate it. Hope you have a Best Ever day and talk to you again soon.

Eric Martel: Great. Thank you very much.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2321: Altus Investment Group With Kevin Dugan

Kevin started his journey down the real estate road by reading “Rich Dad, Poor Dad”. He left his full-time W2 in tech sales in September 2019 and is now a full-time real estate investor with 7 years of investing experience. He now has a portfolio that consists of 25 rentals and is a general partner in a 208 unit deal. He is currently the managing partner of Altus Investment Group, a fast-growing private equity firm with 35AUM that specializes in acquiring,  repositioning, operating, and selling residential and commercial properties that are underperforming.

Kevin Dugan Real Estate Background:

  • Left his full-time W2 tech sales job in September 2019 and is now a full-time real estate investor
  • 7+ years of real estate investing experience
  • Portfolio consist of 25 single-family rentals, 208 unit General Partnership side, and Limited partnership
  • Based in Los Angeles, CA
  • Say hi to him at: www.altusig.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“People should buy based on how much cashflow a property will produce” – Kevin Dugan


TRANSCRIPTION

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, Kevin Dugan. How are you doing, Kevin?

Kevin Dugan: I’m doing great, man. It’s an absolute pleasure to be on here with you today.

Joe Fairless: Well, it’s a pleasure to be speaking with you too, and I appreciate that. A little bit about Kevin, he left his full-time W2 tech sales job in September of 2019, and now he’s doing real estate full-time. He’s got seven-plus years of experience in real estate. He’s got a personal portfolio of 25 single-family rentals, and he’s a general partner and a limited partner on a 208-unit. He’s based in Los Angeles. With that being said, Kevin, you want to get the Best Ever listeners a little bit more about your background and your current focus?

Kevin Dugan: So you kind of hit all those bullet points on the head. I’ve been in real estate for a little bit of time now. But the traditional story, read Rich Dad Poor Dad back in the day, got inspired to run a business. Real estate was kind of the foundation, and then I bootstrapped on weekends and nighttime while working that high paying tech sales job. And then now I run a vertically integrated real estate firm based out of Chicago, but 100% remote from Los Angeles. So we have property management, general construction, investments, and it’s all based on cash-flowing rental properties.

Joe Fairless: Please talk more about your vertically integrated company.

Kevin Dugan: Number one, it’s a lot of work to create something from scratch out of state. So for a lot of people out there, property management’s definitely a challenging aspect of the business, but essential. It doesn’t get as much notoriety as some of the other elements, like raising capital or finding the deal. But that’s a strong component of what we do. We self-manage all the properties, and the properties for our clients. Also to add additional value, the general contracting component is really critical because that’s how you buy a discount, and then rehab, and create value into the property. So that’s something that also is another component. And then the last is more the fun part of finding a deal, presenting to investors, and actually nurturing client relationships to help them meet their financial goals. So we have all those components in-house.

Joe Fairless: You live in Los Angeles, and the company is in Chicago, correct?

Kevin Dugan: Yeah, that’s correct.

Joe Fairless: And the company manages your own single-family rentals, plus I think I just heard you also manage your clients’ properties, correct?

Kevin Dugan: Yup. That’s correct.

Joe Fairless: And how many properties is your company managing?

Kevin Dugan: It’s about 50 right now.

Joe Fairless: All in Chicago?

Kevin Dugan: All in Chicago.

Joe Fairless: What’s your connection to Chicago?

Kevin Dugan: I don’t have a real connection initially… But my friend who started me in real estate eight years ago now, he was from Gary, Indiana. He approached me and asked me if I want to flip houses out there in Chicago. I said, “The numbers make sense. Let’s go for it.” So we started that in 2012. Did that for about two years; it’s very difficult to run a flipping business from across the country, right off the bat. In 2015 I switched to rental properties. So that’s kind of the shift towards what I’m doing now.

Joe Fairless: You said you were working weekends and nighttime while having a sales job. Sales hours, at least from my experience, tend to be all over the place, depending on when your clients are able to meet with you. Do you have a significant other?

Kevin Dugan: I do, I have a girlfriend.

Joe Fairless: Did you have a girlfriend at the time?

Kevin Dugan: I did. Balancing that can be challenging. [unintelligible [06:28] kind of wheel of life distribution.

Joe Fairless: It wasn’t quite round, was it?

Kevin Dugan: No, no. It was like you distribute more towards the work end. But I’d also seen a lot of lessons where by it’s not all about the work. The work will always be there, the money will come if you put in the effort and energy into the right space. Relationships are really important. So I was always cognizant of it, but maybe I couldn’t give it my full attention. So it’s a juggling act, for sure. Challenging.

Joe Fairless: Any tips for someone on a wheel that’s a little lopsided right now, for how to just get through that time knowing that eventually, that wheel will smooth out a little bit?

Kevin Dugan: Yeah, for sure. So one big thing in life, in general, is communication. So if you are able to communicate effectively your current state – and maybe this state is a temporary transition – to your significant other, your friends, your family, they’re understanding that everybody has different types of hustles that are going on. So communication is really big. But also just effective scheduling, trying to block out specific times where you can hammer out specific projects or jobs. And I still struggle with this right now. But having specific blocks where you can accomplish goals allows you to frame your 24 hours every day a little bit more structured.

Joe Fairless: Let’s talk about the deals. 25 single-family rentals over a period of six or so years?

Kevin Dugan: Yeah, so the rentals started in March 2013. So about five and a half years.

Joe Fairless: Five years. Okay.

Kevin Dugan: Yeah.

Joe Fairless: You have them in Chicago. Tell us about how you qualified Chicago. I heard how you got introduced to the Midwest, but how’d you qualify of Chicago? Why did you double, and triple, and quadruple down on the Chicago market?

Kevin Dugan: So Chicago is a massive metro. My general advice, generally speaking, is to follow the numbers and follow the people. And that’s a moving target right now, especially with everybody’s relationship to COVID, and the work at home relationships. So people should have more focus on demographics, like where’s the best population growth, job growth, where the wage is going up, where it’s going down, the traditional stuff. Chicago doesn’t necessarily fit that mold.

Joe Fairless: Yeah, I was going to ask you about that. People are leaving Chicago.

Kevin Dugan: They are, but I invest in the suburbs of Chicago. And I specifically invest in Section 8 housing. So it’s been one of those elements where Chicago is the third-largest metro in the US, there’s the massive railway that goes through a lot of Illinois, there’s a lot of major corporate headquarters there… So technically, yes, there’s an exodus, but it was slower; it may be increasing now. But a lot of what we do is kind of the outside of the traditional Chicago mentality; it’s like suburbs of Chicago.

We’ve found that we buy rental properties out there that cash flow very, very well and perform above the 1% rule and it’s just a really solid target market that we’re in, within the larger Metro of Chicago.

Joe Fairless: Let’s talk about the first deal, and then I want to ask you about the last deal that you’ve purchased, single-family home-wise. So the first deal, what were the numbers?

Kevin Dugan: So the first deal, way back in the day with my first business partner, we were buying at 50k, putting about 50k all-in, and selling at 170. So fix and flips.

Joe Fairless: Okay, so the 25 single-family rentals – that wasn’t your first hold, though. That was a flip, right?

Kevin Dugan: Yeah.

Joe Fairless: Sorry. I didn’t communicate correctly. Tell us about the first of the 25 that you currently have in your portfolio. That purchase.

Kevin Dugan: Got it. So I still have it today, it’s appreciating in value, it cash-flows really well, so I’m just holding on to it. That particular property purchased at $75,000, and it was a traditional loan. So I didn’t feel adventurous enough to start rehabs and go through the whole construction process again, because it is technical, and not being on-site requires a lot of trust. But that property I bought [unintelligible [00:10:25].05] turnkey, ended up being more of like lipstick on a pig type situation, and hence the motivation for bringing in my own construction crew. So $75,000, and it rented for $1,650 at that time.

Joe Fairless: That’s pretty good.

Kevin Dugan: That’s really good.

Joe Fairless: And that’s Section 8, you said?

Kevin Dugan: Section 8.

Joe Fairless: Okay, what are the challenges associated with Section 8, if any at all?

Kevin Dugan: It’s definitely a more technical manage, for sure. And the world is about people, everything in this world and life is about people. So you have to understand that there’s a gradient to everybody on that program; there are those who are taking advantage of it, which you want to avoid. There are those who are kind of stuck and lost, but there are a lot of people who need that program – seniors with disabilities, single-family mothers with some sort of illness, or many children. There’s a lot of reasons why people would need assistance from the government where you need that help to be able to get back on your feet, to gain more momentum, to live the life that you want to live. And so it’s very detailed in like really knowing who the person is, reading between the lines of what their credit shows, and determining whether they’re going to be a good household and family that will take care of the place for a long time.

Joe Fairless: When you say reading in between lines, that’s got to be an art plus a science. So take a page of Tony Robbins’ book, right? It’s got to be an art and science. So can you educate us on the art and science of that?

Kevin Dugan: So there are simple items such as presentation. How does the person carry themselves? When they drive up to the house, is their car in shambles? Are they looking like they’re in shambles? Are their kids wild? Or are they well put together, are they respectful? Do they seem like a person that would treat the home like a great place? And then, of course, you ask a lot of questions about their background and why they’re moving, you get referrals to confirm what’s going on. You want to make sure that their story fits, and then you want to make sure that any red flags are covered. So if there are any types of potential evictions – that’s a huge one; you don’t want to go through that process, especially in that non-friendly eviction state like Chicago. That’s a place — especially when you have the eviction moratoriums that’ll last six months or a year. So it’s really having a conversation with the individual and just seeing like, “Hey, what’s their circumstance? How eager are they to move? Why are they moving?” And then making sure that there aren’t any holes in their story.

Joe Fairless: You bought that in 2015? How many times have you turned it over for a new tenant?

Kevin Dugan: That particular property, I want to say we’ve turned it over either once or twice.

Joe Fairless: Once or twice, okay. So that’s great, I would think, because that’s got to be the main expense. And I did some quick math; the 1,650 divided by 75,000. That’s 2.2% on the cash flow rule. So you crushed it on that.

What, if any, the challenge has come up for this property in particular, since you’ve owned it the longest as a buy and hold?

Kevin Dugan: So as I’ve mentioned before, lipstick on a pig. That particular property on surface-level looks fantastic; new floors, newer cabinets, backsplash, painted rooms, semi dated bathroom, but fairly clean. But come to find out there are a lot of issues hiding behind the walls. So that particular property was built in ’56, and with a lot of older homes, people need to look out for galvanized pipes; those will probably break around the 50 to 60-year point. So you want to make sure you get all the galvanized out whenever you can. But this one had a bigger issue – the sewer line collapsed. So the water is backing up through the entire house, we had to like excavate, we had to tear up all the new tile in the kitchen. This is a couple of years into it… And basically, we replaced that mainline out to the street level. That was a big adventure, especially…

Joe Fairless: Especially what?

Kevin Dugan: During the wintertime.

Joe Fairless: Oh, man…

Kevin Dugan: Yup, yup, yup, yup, Chicago.

Joe Fairless: The Chicago winter.

Kevin Dugan: Chicago winter. So lesson learned… And then on top of it that house had termites. So we started seeing little holes up in the ceiling; come to find out there’s like a massive termite infection on that property. So that’s one of those places where definitely have a third-party inspector come in. I still remember when I bought the house, [unintelligible [00:14:41].03] the doors, the doors didn’t close. I’m very big picture at times, and those details missed me when I was looking through this “beautiful” house.

Joe Fairless: So you didn’t have a third party inspector?

Kevin Dugan: On that one? No.

Joe Fairless: No. Okay.

Kevin Dugan: That’s for anybody first buying stuff – definitely get it.

Joe Fairless: How much did the sewer line collapsing and resolving cost?

Kevin Dugan: Fortunately, at that time, we had an in-house crew, so it’s probably about 5,000. But it was more the massive headache of having a tenant in there; we had to get them into a hotel. It was like a three-day process. And that was just the changing out of the sewer line. That wasn’t the initial exploration of why is there mold constantly behind the sink, what’s going on behind the sink, and this other wall over here. So it took us some time to decipher what was going on there and actually find it.

Joe Fairless: Tell us about how you already had an in-house crew on your first deal. Now, I know that you did fix and flips, so that’s probably where it originated from. But will you just talk about that evolution?

Kevin Dugan: So let me kind of take a step back. The first two deals were purchased as turnkey. The third one I purchased, I’m like, “Okay, I prefer to start building equity into these deals if I buy them at a discounted price.” So we started sourcing out all kinds of different contractors. I’ve gone through probably at least 10 at this point. Don’t hire anybody from Home Depot — or not Home Depot, Craigslist; stay away from Craigslist… For the most part; I can’t say that completely, but Craigslist has been a bad experience.

So this crew that I was able to [unintelligible [16:06] they were actually inherited from a GC that was a referral to us. That GC ended up moving to Arizona, left his crews, and then I kind of inherited them. So I’ve been working with them ever since. So they were able to help us out on this one. But it’s a process. Definitely, if there’s any type of red flags with your contractor, give them one warning, never overpay them past the work that they’ve done, and make sure that you have that leverage of the money; it will keep them motivated.

Joe Fairless: What’s your worst Craigslist experience?

Kevin Dugan: There have been various; some were more to the quality work, and especially doing things [unintelligible [00:16:44].16] is pretty challenging. But we had one guy that he spoke a big game. And that’s one thing about Chicago, people talk fast, but maybe don’t perform the way that they say they can talk about. And a lot of people, like contractors in general, say that they can do everything. And that’s an initial red flag, like, “Okay, you can’t do everything.” That’s very difficult to do.

But we had one guy who basically was falsifying the work that he did, sending us bad pictures or pictures that made it look like he was doing it, but it wasn’t actually installed. He asked for prepayments beforehand… This was one of my business partners [unintelligible [00:17:15].21] and he ended up stealing like close to $5,000 in labor materials. So… Tough.

Joe Fairless: Let’s talk about the last single-family home that you purchased. What are the numbers on that?

Kevin Dugan: The one I just closed on is an interesting project. We have three we’re closing on right now, but it’s already 90% completed. It’s just the original owner didn’t finish the electrical decode. So we’re buying it at 150k or 165k. We’re planning to put about 50k into it and sell it 290k. So it should be a really quick turnaround, like literally, like three weeks in, out, listed back on the market. And so…

Joe Fairless: Okay, so that’s a flip.

Kevin Dugan: Yup. Oh, a rental property?

Joe Fairless: Yeah, a rental property.

Kevin Dugan: Got it. Got it. So on the rental, one that we have right now my client actually picked up an amazing deal. I was under contract for it at $72,000. It fell through because it was right at the beginning of COVID. Literally, all the banks froze up because they couldn’t trade the paper anymore. And because of that, another [unintelligible [00:18:19].08] to offer, that deal fell through. So my client came in, she offered $50,000 cash and bought it at $50,000. We put 40k into it, so all-in 100k, and we’re going to get about $1,950 in rent on that.

Joe Fairless: How about the last one that you bought? The 25th property in your portfolio.

Kevin Dugan: Let me think about that one.

Joe Fairless: You’ve got a lot of transactions. I get it.

Kevin Dugan: Yeah. I lose track of them at some point.

Joe Fairless: You’re a big-picture guy.

Kevin Dugan: I really am, yeah… Which is the difficult part of being a vertically integrated company across the country. So the last one we bought was just a small townhouse. It was like $52,000 on that, super-light rehab. We changed our investment philosophy; as opposed to doing deeper rehabs right now in the current state of the economy to just kind of like doing a two-tier, almost what you see in multi-family. So we bought it 52k. It’s currently rented at $1,466.

Joe Fairless: Okay. And what do you mean by two-tier?

Kevin Dugan: So you can go all out with the rehab… I really love to definitely solidify the infrastructure. So like all the electrical plumbing, I want to make sure that’s just done the first time; HVAC, roof, like all the major systems, you want to solidify that. But then there’s like how far you can go with the kitchens, how far you can go with the flooring… So as opposed to doing flooring throughout the entire place, we’re like okay, let’s just do flooring in the main areas, carpet in the bedrooms… Instead of doing like super-sick cabinets and backsplash in the kitchen, let’s hold off on that type of rehab for phase two on a five-year period if we want to sell it as a portfolio or something like that.

So we started with the sticky backsplash from Amazon, which gets the message across for the kitchens; kind of resurfacing kitchen cabinets… So just ways to cut costs where maybe it doesn’t add as much benefit. But we’ve already done the major rehab where the house is still above; it creates a good energy for the resident to want to live there for a long time.

Joe Fairless: Will you give some other specific examples of how you’re saving money on the rehabs, but still making them look good from an aesthetic standpoint?

Kevin Dugan: Yeah, for sure. Vinyl’s really big; I highly recommend it to anybody who has a rental. Vinyl nowadays is a slam dunk, it’s pretty much bulletproof. So you can go that route. Let’s see… Same thing – as you’re doing more and more rehabs, the easiest thing to do to save on time, which is equivalent to money, is to try and do repeated material costs; we paint every house the same color, floors are all the same, cabinets are all the same. So that just helps eliminate the decision-making process.

When it comes to vanities, you can actually pop off the top of the vanity if the actual structure is good. You can keep that. With mirrors, you can put trim around the mirrors, that we’re finding… So there’s a lot of ways you can kind of recycle the old infrastructure and allow for the house to have a nice resurfacing, but not spend brand new costs on it.

Joe Fairless: That’s really helpful. And looking at that deal compared to the first buy and hold… Let’s put aside the economy and a pandemic, just for a moment let’s put that aside. What, if anything, did you change in your process, from the very first buy and hold to the last buy and hold? I know one of the things is now you have a third-party inspector. But what else, if anything, has been changed?

Kevin Dugan: Just my level of education across the board has changed. So my understanding with general construction — like, I never wanted to be a general contractor, but I understand the fundamentals pretty well. YouTube is a fantastic resource. For anybody out there, you can pretty much find anything. But what’s changed is having people in place that can kind of take on those specific responsibilities, so that I can take a step back and try and work on more of the bigger picture stuff.

We’re still in a growing phase right now, but I definitely have key team members that I can rely on to help push projects forward and make sure that they’re getting done with the quality that we needed to get done.

Joe Fairless: Speaking of big picture, what’s next for you?

Kevin Dugan: Right now continuing to build out the residential turnkey business that we have; since the product is good, there’s a lot of demand for what we have. We have a firm belief that this product will perform well and be desirable through the current type of recession we’re in… But I’m also trying to think about where the world is changing long-term, especially as people’s relationships with real estate is changing drastically, office spaces are changing. Retail has been dying; it’s going to come for reform. Hotels are in a lot of distress. So there’s a lot of commercial asset classes that I’d like to diversify into. But I need to not get — excited is a bad word, but be cautiously optimistic knowing that the world constantly goes through change.

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

Kevin Dugan: I’m really big on cashflow. I truly believe that people should buy based on how much income that produces as the foundation. And you can make more money as a flip or development, but those really depend on market timing. You don’t want to miss timing, because you can lose your shirt, and more, if you missed out on a big asset class. But if you buy with cash flow in mind, you’ll be sitting pretty.

Joe Fairless: About how much cash flow does 25 properties earn on an annual basis? Buy and hold at this level?

Kevin Dugan: Net or gross?

Joe Fairless: Net.

Kevin Dugan: Net. There’s leverage on these, so it’s roughly in the $12,000 to $15,000 range. It’s complicated because I’ve been under multiple entities/structures… So I made things more complicated, like way too big picture. It should have been simple.

Joe Fairless: So about 12k a month or so?

Kevin Dugan: Yeah.

Joe Fairless: $180,000 a year is a great nest egg, that’s for sure. And some people might think well, “Okay, that’s great. But what’s your exit? Because are they appreciating? And if not, then do you just never plan to exit?” And clearly, 180k, then maybe there’s no reason to exit. But is there an exit plan?

Kevin Dugan: Yeah, there’s definitely an exit. The beauty about real estate — when you have enough cash and you free up your time, that’s where you get a lot of power. And I’ve gained my most momentum since doing real estate full-time. So that’s number one – free up your time, and you free up a lot. But yield is something that will continue to be searched for, especially in this unknown economic climate. So it’s very realistic to group a set of these together like a portfolio sale. I see a lot of it going on right now where people are just grouping together single-family homes. So I never plan to exit out of this cycle; this would be a great cycle to exit on. I like the cash flow for stability, but there are countries looking for high-interest rates, high-yielding, performing properties. They can also be resold to other people, and the tax benefits are also beneficial as well. So you get a lot of appreciation by just holding. And then there’s a lot of benefits to holding real estate [unintelligible [00:25:05].11] selling it immediately.

Joe Fairless: I love the tax benefits almost as much as I love dogs. It sounds like you’ve got a cute dog in your room too, so that’s… [laughs]

Kevin Dugan: She has a sensitive stomach, so I’m not sure what’s going on.

Joe Fairless: Oh, man… I raise you a sensitive stomach, and see you two sensitive stomachs; my dog just has a really sensitive stomach, so he’s got twice as sensitive as yours. I guarantee you. He’s on a hunger strike right now. It’s the only dog that I know of that does hunger strikes. We’re going to do a lightning round… Are you ready for the best ever lightning round?

Kevin Dugan: Yup.

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

Break: [00:25:40][00:26:20]

Joe Fairless: Alright, best ever deal you’ve done.

Kevin Dugan: A more recent one; pushed on it for a long, long time. I put it over the asking price. Basically fix and flip, offer 125k, put $100,000 into it, and got it under contract first day for 350k. So three and a half months, really solid product.

Joe Fairless: Best Ever way you like to give back to the community.

Kevin Dugan: Big on education. I really believe that it’s something that we all need and it’s something that I can actually contribute. And I like to help people just open their eyes to the power of real estate.

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

Kevin Dugan: I’m definitely more active on LinkedIn and Instagram. You can find me @KevinKDugan, or shoot me a text at 310-988-5081.

Joe Fairless: Kevin, thanks for being on the show, talking about how you’ve built your portfolio, getting into the specifics of your vertically integrated company, how that came about, the amount of money that is made on deals, and some lessons learned between the first buy and hold and the 25th buying hold. Appreciate you being on the show. I hope you have a Best Ever day, and talk to you again soon.

Kevin Dugan: Thanks a lot Joe. Have a good one.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2280: Raising Capital Fast in an Efficient and Scalable Way with Hunter Thompson #SkillsetSunday

Hunter was fortunate to start his career in the wake of the Great Recession. At that time, he surrounded himself with great partners and educators. As a result, Hunter built his first company around his personal investment strategy. He was a sole investor at first; now he has hundreds of investors.

Hunter shares his experience in raising capital quickly and efficiently. Time is often the most important determining factor to close the deal. Listen to this podcast episode to learn how he closes deals within 30 days, having a line of prospective investors ready to wire the money in.

Hunter Thompson  Real Estate Background:

  • Founder of Asym (A-Sim) Capital, a private equity firm
  • He has raised more than $30 million in private capital
  • 10 years of real estate experience
  • Current assets under management of $100MM CRE
  • Previous guest on episode JF2028
  • Based in Los Angeles, CA
  • Say hi to him at: www.5millionin30days.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Attract, educate, nurture, and close” – Hunter Thompson.


TRANSCRIPTION

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 have a repeat guest Hunter Thompson.

Hunter, how are you doing today?

Hunter Thompson: Hey, thanks again for the opportunity. Much appreciated.

Theo Hicks: No problem. Thanks for joining us again and looking forward to our conversation. Today is Sunday, so this will be a Skillset Sunday episode, where we talk about a particular skill set that our guest has. And today it’s going to be about raising money, more specifically how Hunter was able to raise $5 million in 30 days, in one month.

So before we hop into that skillset, a little bit about Hunter’s background— he’s the founder of Asym Capital, a private equity firm, and has raised more than $30 million in private capital. He has 10 years of real estate experience and the current assets under management for his company is $100 million. Check out his previous episode, which is Episode 2028. He’s based in Los Angeles, California, and the website that he’s giving out today is 5millionin30days.com.

So, Hunter, before we jump into the skillset for today, can you just give us a quick reminder on your background and what you’re focused on?

Hunter Thompson: Yeah, so my background is really as a passive investor. I was very fortunate to start my career in the wake of the Great Recession, and I think a lot of people looking at the graph right now and go, “Oh my goodness, how great would it be to be able to buy in 2009 or 2010!” I can tell you, it was not as great as the chart looks because when you can’t see the rest of the chart, it looks like a terrible spiral death circle of foreclosures and your whole family is telling you that you’re insane.

However, the reason I say I was fortunate is that the market acted as a really massive filter for bad ideas when it comes to investing. So starting my career at that time, I was very fortunate to surround myself with some very sophisticated investors, operating partners, institutional actors that guided me towards the world of syndications and kind of allowed me to leapfrog some of the more beginner strategies that are employed frequently here. So I built a company around my personal investing strategy and went from one investor, me, to five, to 100, 200, and like you said, raised about $30 million. Actually, the number is now $35 million because of what we’re going to talk about today, but that’s a little bit about my background.

Theo Hicks: Thanks for sharing that. So yeah, let’s jump into this skill set. So you raised $5 million in 30 days. I guess my first question is, was this something that was kind of like something bad happened that you needed to quickly raise capital or did the deals need to close in 30 days and you needed to raise capital that fast?

Hunter Thompson: It’s actually a good question, because I didn’t really think about it until after the fact. We actually had plenty of room in the offering; it was an open fund that was not an evergreen fund, it was open on a rolling basis. And it wasn’t our most successful raise; we raised $5 million in 72 hours once. But the thing about 30 days stuck with me because of the fact that most deals that are not an open fund, for example, are extremely time-bound. And I feel like the time component is something that doesn’t get talked about enough. I wrote a book about raising capital, Raising Capital for Real Estate, by the way, and I put everything I know into that book. But I didn’t really focus on the time.

And the reason I say this is that the time can be the most important determining factor in whether or not you actually close the deal. And there are so many people out there that “could raise money”, but their real concern is being able to raise it in a 30 day period; most escrows – let’s say 90-120 days. You need that money to hit the bank account in day 30, day 45 and you need to be confident you’re able to do that or you will burn some relationships, or be too scared to go under contract.

So the way that we raised this money, and I’ll talk about all the strategies and tactics that we implement to do this, but the only way that I see that you can actually effectively confidently know that you’re going to be able to raise money is to do the opposite of what most people think about when they think about raising capital, which is chasing people around, trying to convince them to invest with you. I tried to do that, if you anything about my background, you know, I failed miserably on my first capital raise and just basically got laughed out of a room; I had to text my wife after the fact. And my current wife and the woman at the time who was just a friend of mine, quote, aka I was chasing her around for years on end, I had to text her and say, “Look, I was supposed to raise a $500,000 or $1 million and ended up with the total [unintelligible [00:07:47].27].” It’s one of the most embarrassing moments in my career.

But what’s happened between that time and now is that I built a fairly significant infrastructure to attract leads, nurture them through educational content, really create an educational platform so that thousands and thousands of investors are attracted to our firm. And then once you send that email out and that great deal is finally available, boom, the wires start coming in very, very quickly. So that kind of inspired me to create the summit, which is the 5 Million in 30 Days Summit and we’re going to have a bunch of speakers talk about different strategies, but that’s kind of the background.

Theo Hicks: Perfect. So the idea behind this is that once you put a deal under contract, that 30 days is from contract to when you need to have all the funds wired into your account for closing the deal. Correct?

Hunter Thompson: Exactly. And there’s so many people that are stuck—well, first of all, 5 million is consequential, right? Because if you have $5 million and you leverage it two to one, let’s say you can buy a $15 million piece of property. In most markets that’s 150 units, 200 units or more. So from my perspective, outside of the institutional space, that is where the elite players in this space play.

So a lot of people are asking, you know, “How can I get to the next level?” They may have had success raising from their friends and family to the tune of $500,000, and that’s a really confusing way to have success because it gives you a green light in a direction that’s a dead end. Because there’s a big difference between half a million and five million. And the difference is if you know some wealthy individuals, you can raise $250,000 or $500,000. But in six months, when you want to do a bigger deal, you go back to those same people, most of them aren’t ready to transition their whole portfolio into real estate.

If you go back to your uncle, for example, that’s made one real estate investment with you and you go, “Hey, I need another 50 grand,” they’re going to think you lost the first 50 grand. So it’s really a big hurdle, because I want people to be able to get to that elite level so we can help get money out of the stock market and invest in these deals we love so much.

Theo Hicks: Perfect. I like that you said that big difference between raising $500,000 and $5 million. What are some tactics that you’ve found to help people get to that elite level, to go from the family and friends who might invest in one deal every couple of years to being able to do multiple deals in a year and do these bigger money raises?

Hunter Thompson: I think, first of all the mindset shift from going out to try to get someone to invest with you – it cannot be overstated. The shift is from thinking of yourself in the middle of the circle and running around trying to find some rich uncle you haven’t talked to him 10 years, and convert him into becoming a real estate investor. You can do it. The problem is, it’s not replicatable. It’s not scalable. It’s not something that’s going to actually help you achieve your goals, which is creating multi-generational wealth through real estate.

So the framework, if you get nothing else from this short interview, the framework itself is a big shift. And I talk in my book about the stages are attract, educate, nurture and close. And I’ll kind of give some details into each of those. So attract – I think that a lot of people underestimate the value of building their email list and how powerful that email list is. We focus on podcaster — I’m a podcaster, as well, and I’m sure a lot of listeners are as well, which by the way you should be and if you haven’t yet, make the $30 investment in a microphone and start doing it, start putting out content. Trust me, the risk-return ratio on that $30 investment is very asymmetric.

But once you have people listening to your podcast or looking at articles on your website, or just engaging with you on LinkedIn, it’s so critical that you take them away from those platforms and get their email address. That’s the beginning of your real company.

So if you’re listening to this and you have 100 people on your email address, the goal should be to get to 1000. If you have 1000, you should be able to get to 10,000. And we’ll talk about why in a second. There are some confusions as far as how to do this. If I go to someone’s website and I see a call to action, which is for a phone call, let’s say, that is such a massive, massive undertaking, and it takes so much credibility for someone to take 30 minutes out of your day to call you. And also it shows that you have the 30 minutes, which is kind of a low credibility kind of thing to do.

So what I would suggest, definitely take the time to write your 5000 or 10,000-word ebook on one particular topic, hopefully that’s evergreen, and exchange that email address for that content.

Something else I would say recently, I have the tendency to try to give all the tactics away as possible. And that’s perfectly reasonable after you get the email address and after you kind of nurture the relationship a little bit. But something that I’ve had much more success with is actually tapping into the reality that when people give you their email address, the first thing they want to know is, is this person credible and how quickly can I establish that credibility? So rather than requiring them to read 5000 words, I have had much more success with things like due diligence checklists or 100 questions you need to ask about real estate investing, or anything like that where they can download it, instantly get that value, instantly understand credibility and go boom, “I’m going to be opening this guy’s emails for the next hundred years.” And the third email can be that 5000-word ebook. So those are just a couple of ideas. I’d say that the lead capture mechanism is critical. Just viewing your list as the way to scale your portfolio is important itself.

And we kind of transition into the educate stage. So you’ve got the email address. Now it’s time to provide some kind of potential for interaction on a daily, weekly, monthly, quarterly, annual basis. So where that is, is taking long-form conversations, chopping them up, putting in an Instagram post on the daily basis, let’s say a weekly newsletter, and the potential to opt in to a weekly newsletter, and quarterly updates for things like their investments, of course, but also changes to the market, potentially other podcasts that you’ve been on… And then as an annual update, we do an annual conference. And I know that Best Ever does as well. It’s an excellent way, because actually, once you’re doing this, it’s not only the time – the cadence of the time is important – but also the senses. So some people like to learn auditorily, some people like to read, some people will never read, will only listen to 100 audiobooks at 3X speed, and then some people want to go in person and go to a conference, can’t do that in 2020. But you’re giving the potential for all those senses to be touched.

Okay, I’m halfway through so I just want to take a second before we move on to the next ones but the first stage is attract and then convert to email is just so critical, and then it’s just about nurturing those emails.

Theo Hicks: I love it. Keep going with the last two, nurture and close.

Hunter Thompson: So nurture is something that it also can be done in a way that’s coinciding with educate. But I really want to just smash the credibility pedal all the way to the floor. So in the summit that we’re talking about, we’re going to have people come and talk about public speaking, strategies for how to deliver and communicate really complicated matters in an effective way, that when you look at the median of people can understand, but also feel like you’re intelligent. That’s a very challenging skill.

Neal Bawa who I’m sure has been on the show before, one of the best public speakers I’ve ever heard. I’ve never heard him speak about public speaking though, so he’s going to be talking about that. But appearing on other podcasts, how do you do that?

One example that talk about in my book is just creating a Google Form, inputting the top 200 Real Estate podcasts in that Google Form through a VA, sorting by number of reviews, starting at the bottom, meaning the lowest number of reviews and sending out emails to them, because they’re more likely to have you on your program and then working your way up. This is just a way to be seen in a way that’s going to nurture your leads. So we’re all working towards this close stage and we’re going to talk about in a second… But all of this work allows you that when you do finally put a deal out, it becomes oversubscribed really, really quickly. So there’s just so many things about this. But people are hesitant to do a lot of these things because they don’t see the dollars being printed.

But the truth is, I don’t spend my time trying to convince anyone to invest with me. I want to focus on smashing the credibility all the way up, so that I never have to do that. And it may sound like an infomercial if you’re still working towards that, but I can tell you, that is the case. I never tried to be a pushy salesman. It doesn’t work. It’s not scalable, it’s not replicated, it’s not going to help you. So there you go.

Theo Hicks: So for the nurture part, for the credibility, you said that going on other people’s podcasts is what increases the credibility of you.

Hunter Thompson: Yeah, and I’ll give you another tip on this kind of stage, because I think it’s really important. So networking events. And I know, again, during COVID there hasn’t been these, but this historically has been extremely powerful for those who focus on it. If you are going to an event, you need to remember that you’re in a sector which has the potential to be very lucrative. Warren Buffett, Carl Icahn, all these people have a lot of capital in real estate for a reason.

So seeing a $25 ticket price for a networking event can have the effect of people going, “Wow, I only need to get $20 worth of value, and I’m great.” But if you’re taking four hours of your time, you need to get thousands of dollars of value. Because this is a game where we’re standing to making thousands 10s of thousands, millions or 10s of millions of dollars. So you don’t want to substitute your four hours for $25. So when you go in with that mindset thinking, what ideas can I get that are going to give me thousands of dollars of value? What contacts can I get that are going to give me thousands of dollars of value?

And most importantly, when I’m talking to someone, I want to listen for the concepts, ideas, books, resources and other people that I can connect them with, to give them thousands of dollars of value. Because if you’re able to do that, the next time you come to that same networking event, that person is going to want to reciprocate. And then all of a sudden you walk into a room and everyone’s trying to give you the value and give you the context and now, that nurture mechanism is just going on itself like a snowball and it’s very, very powerful.

Theo Hicks: I love that second one about giving thousands of dollars of time. And we’ve talked about this on Syndication School a lot, about always trying to find ways to add value to other people. We’ve got a blog post about how to approach conferences, and how to make one good relationship every day and then follow up with that person based off of the conversation and add value to their business. So I could not agree more with that last one, because as you mentioned, it’s like a reciprocal positive feedback loop type of thing.

Hunter Thompson: 100%. And I’ll actually give a shout-out to Ben who helps produce Best Ever and I didn’t even realize this until you said it. But Ben is actually coming to the summit to speak about creating conferences as a way to nurture your clients. So I say we get the Best Ever speakers, literally the best ever in copyright manner. Ben is actually speaking on that topic. So I’m really looking forward to it.

Theo Hicks: Awesome. Alright, so step four, is to close.

Hunter Thompson: That’s right. This is what most people focus on when they’re starting the business. They start at the end and they don’t succeed because they’re starting at the end of the process. And by the way, when I say “they”, I mean me, right? Because I mentioned I got in a room of $30 million in net worth, gave a presentation that I would be happy to give today and got a total goose egg, right? So I’m guilty of this too, but it should only happen once.

So here’s why. If you’re in a room of 10 people and you are reasonable close and salesman, you can probably close 10% of that room. So if it’s 10 people, it’s one person. Now, what a lot of people do is they make the mistake of spending all of their energy, focusing on getting from a 10% closing ratio to a 20% close ratio, which by the way, would be insane and incredible, 100% increase, basically. But the issue there is that, that’s going from one investor to two if you’re in that room and that’s not consequential. I’m sorry, no disrespect to myself 10 years ago, but that’s not going to help you. The totality of your energy should be focused on getting out of that room and getting into a room of 10,000 people in it or an email list with 10,000 people. And if you already have an email list with 10,000 people, it should be, what’s the goal to get to 100,000?

And here’s why. Even if your close ratio goes from 10% with 10 people to 1% at 10,000, you’re still talking about 100 investors, let’s say with a $50,000 minimum aka $5 million in 30 days, that’s how you do it. That’s how this is done, not with different objection handling type of stuff, those that can help. That’s not the way the business becomes scalable. So I do have a keynote at the summit called Closing Strategies for High Net Worth Clients. And there’s one tip in there that we increase our average investment size by 33% by just one simple phrase. I can’t give it away now, you’ve got to go to the free summit to hear it. But I’ll give you a chip that is actionable immediately, which is time framing that Oren Klaff talks about.

During the close, especially the first call that you get on with the investors, once it’s established that yes, you are the person that they anticipated calling and such, I would just confirm that the call is scheduled from 2:30 pm to 3:00 pm. And that you have another call that’s right after that, that’s going to start at [3:00], so that you have to go. And this just makes everything after that, even if you blow it after that, it’s going to put you in such a better position because they know you’re not going to drone on and on and on. And perhaps more importantly, the credibility is much higher, because it shows that there’s a high demand for your time.

So I go into a lot of details in terms of that keynote, but really is just about outlining the process, ensuring that you’re communicating effectively and then any resources that you mentioned—oh, I recently had a question about interest rates and housing prices. I’ll send you an article that I wrote about that topic, smashing the credibility forward again. I’ll email them right after the call.

So those are just a couple of tips. Oh, wait, one more tip. And I know I’m giving away some tactics right now. But this is such a strong tip that I almost didn’t put it in my book, because it’s so powerful and 100% true. Giving a $30 to $50 gift to your high net worth investors on an annual basis is likely the best bang for your buck in the whole industry. You could certainly have an investor reinvest with you, solely because of a wireless charger that you sent them with your brand on it. So spend 35 bucks or 50 bucks after the close and you’ll see why we don’t have to do a lot of convincing for our investor base. So hopefully that helps.

Theo Hicks: Yeah, Hunter. I really appreciate you coming on here and giving us kind of the overall picture but also very specific actionable tactics for each of these steps in the process. And I also like when you said that I’ve got this one thing that increased our close rate or money raised, but you’ve got to come to our conference. I’m sure that’s another tactic I’ve heard from, I think, it might have been The Best Ever Conference actually.

And you kind of talked about today, not giving every single thing away, but giving a little bit away and then if you want the full picture, if you want the last answer to that question, the last piece of the puzzle, then you need to take this action. So I guess to wrap things up, what is that action? How can we sign up for this conference?

Hunter Thompson: Well, here’s the big upsell. So it’s a free summit and you can get a ticket for free at 5millionin30days.com. And it is some of the G.O.A.Ts, like I said, Ben’s going to be speaking, Bridger Pennington is going to be speaking, Jake and Gino is going to be speaking, Neil Bawa, Kathy Fettke, all these legends are going to be there but specifically to talk about raising capital, which means it’s very curated if you’re interested in the topic. They’re all going to be talking about one particular strategy so not; what’s your background? Why do you like real estate? But one thing; give me every detail. Okay, 30 minute interview, boom. So check it out at 5millionin30days.com.

Theo Hicks: Perfect. Everyone listening, that will be in the show notes, so you can just click on that link and go straight there. So, Hunter, again, I really appreciate it, how you talked about the basically four-step process for raising money. And the last step being the close which is what a lot of people focus on at the start and skip the other three steps which is not going to lead to success because you said that the goal here is to not increase your closing rate, but increase the number of people who are being presented your deals. That’s how you get the $5 million in 30 days, that’s the secret sauce.

And then you said that you need to increase that exposure, you need to focus on the first three steps, which is to attract people, which starts with creating an email list and making sure you have a nice carrot to get people to sign up, but not too big of a carrot and so we kind of work your way to the bigger part. So start with maybe a quick checklist to get their email address and eventually down the road, give them that big free ebook. And then from there, it’s education. So figuring out ways on a daily, weekly, monthly and annual basis to make contact and interact with your audience through various educational resources and you gave examples of that. Nurturing focuses on credibility and so getting other people’s podcasts and networking events as examples.

And then lastly, you said you can work on the close and at that point, we get some other tips as well about sending them resources if they have a question about something and say, “Hey, I’ve got this article about 1031 exchange that I wrote to learn more about this,” and then sending that gift so that the closing process is that much easier, that much smoother.

So, Hunter, again, really appreciate it. I can definitely tell you a podcast because you’re really good at speaking and presenting these ideas. So make sure you check out his podcast as well. What’s your podcast called?

Hunter Thompson: It’s Cash Flow Connections Real Estate Podcast and cash flow is two words.

Theo Hicks: Perfect. So check that out as well. As always, thank you for listening, Best Ever listeners, 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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2258: Your First Deal Is The Hardest To Find With Antoine Martel

Antoine is a repeat guest who appeared on episode JF1720. Previously, he talked about how it took him 9 months to find his first apartment building and today he shares how different it has been in finding new deals because his door has been flooded with multiple deals because people started to see he was serious and would get the job done. 

Antoine Martel  Real Estate Background:

  • 25-year-old real estate investor
  • Does 120 flips per year (turnkey rentals), owns about 100 units
  • Based in LA, CA
  • Say hi to him at https://martelturnkey.com/

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Controlling your growth is important, you can move very quickly but sometimes it’s important to slow down a little bit to see how things go” – Antoine Martel


TRANSCRIPTION

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 Antoine Martel.

Antoine, how are you doing today?

Antoine Martel: Very well. How are you?

Theo Hicks: I’m doing great. And thanks for joining us again. So Antoine is a repeat guest. He was on here about a year and a half ago. So as a reminder, he’s 25 years old now, real estate investor and he does 120 flips per year. He also owns 100 multifamily units. This is up from 20 units last time we spoke, so he’s gotten 80 more units since then. He’s based in Los Angeles, and his website is https://martelturnkey.com.

So Martel, do you mind telling us a little bit about your background and then what you’ve been up to over the past year and a half?

Antoine Martel: Yeah, sure. So thanks again for having me on the show again. It’s great to be back, and a lot has changed, a year and a half later… We’re doing around the same amount of flips per year or turnkey rentals per year through Martel Turnkey, but especially last year, I was focusing a lot on the multifamily acquisitions. As you can tell, to buy 80 units in one year was a lot for us, because it was multiple different properties. So I think when I first came on the show, I’d actually bought my first apartment building, and that was a 20 unit building. And I think I was talking to Joe about how it took me nine months of reaching out to agents, non-stop for nine months, every other week, contacting these agents to find that first building.

And then after the first building, it was like the deals were coming to me left and right. My email was blown up with deals next door to the building I had just bought. The word had got out that some rich guy in California was buying stuff in Memphis, and all these brokers started reaching out to me. And I’m by no means rich, it was just they saw that all the renovations being done on the property and they thought, “Oh, wow, maybe that guy can pay top dollar for my property,” and little did they know that they were selling it way under market value and that’s how we were able to buy so many so quickly. So that’s how we were able to buy 80 units last year. So that’s kind of what I’ve been focusing on in 2019.

And then 2020, we’ve kind of slowed down the apartment building side, and I’ve been again focusing back on the turnkey side. So trying to get us from 10 houses a month to where we are right now to 20 houses a month, by opening up a new market.

Theo Hicks: Wow. So you bought the 20 unit property, and then all the 80 units came from brokers just reaching out to you?

Antoine Martel: Yep. I didn’t have to go look for one deal after that. It was crazy. They say the first deal’s the hardest and that was very true in this case. I looked super-hard for that 20 unit. As soon as people saw that I performed and the kind of renovations I was doing, the deals were coming to me. And also, I had rapport with brokers now, where before I was cold calling these brokers, “Hey, my name is Antoine. I’m a real estate investor in California.” They get that phone call all day. But now I can say, “Hey, I own 123 Monroe Street in Memphis, it’s a 20 unit building. Do you know it?” “Oh, that’s you, huh? Yeah, I saw it. I drove by it,” because it’s a small part of town. So there’s very few brokers, but you have to get in with something. And that was my foot in the door then with all these other brokers, because they saw that I was legit. I had bought something and they saw the renovations that were happening, so they were kind of excited to send me other deals, because there’s a lot of dilapidated stuff that just hasn’t been touched since 1960, and I was coming in and giving it a 2020 refreshed look, and the brokers were excited to be a part of that.

Theo Hicks: So these brokers that are reaching out, had you talked to them previously and said, “Hey, I’m Antoine, I’m looking to buy deals” and they’re like “You know, maybe… I don’t know…”, or were they these brand new brokers that essentially were cold calling you now. Had you already talked to them before?

Antoine Martel: Both. So a lot of the brokers I’d spoken to in the past, just because I was literally cold calling everybody for those nine months when I was looking for that first building… I mean, I was on LoopNet. Anybody who had a LoopNet account in Memphis, I was calling them. So most of them I had spoken to in the past or sent an email, but most of them didn’t pick up the phone or didn’t reply to the email. Now, as soon as I bought that property, they saw it closed in the MLS, and it was made public that that building had sold, and they saw the renovations happening, then people started doing their digging and started replying and calling me like, “Hey, I saw you bought this. I have this off-market opportunity” etc.

So it was a little bit of both. Many of them had spoken to me in the past, and then the conversation had kind of changed a little bit because they were like, “Yeah, okay, now that I know you’re legit, I’m going to go start talking to some sellers that I know, because I think you’re going to close and you’re going to do what you said you’re going to do.”

Theo Hicks: And then in this part of town, you said, there’s a lot of dilapidated 1960s houses. Was this house that you bought, this 20 unit, one of the first homes in that area to be rehabbed, or had there already been rehabs occurring in that area?

Antoine Martel: This is Midtown Memphis, so a lot of the single-family homes have been renovated and updated and they’re selling for $200,000 or $300,000, which is pretty high end for Memphis, Tennessee. So that’s the single-family inventory. The multifamily inventory on the other hand, there was a bunch of new developments, like new construction projects, old parking lots just being leveled and being turned into dirt and then an apartment building going up… So that’s kind of what was happening, but nobody was going to these old 1960s/1970s apartment buildings by a Mom-and-Pop landlord and renovating those, and making those look nice, with tile flooring and stainless steel appliances and granite countertop, right? So that’s kind of what my niche was, because nobody was really touching that. Somebody was either flipping the homes and selling them for 200 or 300 grand. I wasn’t really interested in that. And then somebody was doing new developments. I didn’t have the cash or the people to be able to do that. So I was kind of right in the middle, which was doing the value-add small apartment buildings.

Theo Hicks: And then these more recent deals that you’re doing, are you just doing the exact same business plan, doing the same renovations to them, still have the same market rents, same level of renovations, things like that?

Antoine Martel: 100%. Exactly the same time. We’ve bought five buildings so far and all five of them have been exactly the same gameplan. Normally, we buy them, the rents are 400 to 500 bucks a month for a one-bedroom apartment. We’ll go buy those properties. Tenants, most of the time, just leave on their own accord after we start doing some exterior renovations. Then with the vacant units, we start renovating those, spend 10,000 to 20,000 bucks a unit, and then relist them for rent for $800 to $900 a month, so pretty much doubling the rents. And there’s a clientele out there that’s willing to pay for that, whether it’s college kids at the University of Memphis, or young working professionals that work downtown or in the Medical District.

Theo Hicks:  That’s something else interesting you said there. So you’re not having to forcefully remove people, you’re not having to wait until a lease expires. They’re just leaving on their own accord?

Antoine Martel: Yeah, because most of these mom and pop landlords just have — it’s crazy… 70% of the leases are just month to month anyways. And many of these people, once they start seeing the renovations on the exterior like paint the property, we’ll repave the parking lot, we’ll build a fence around the property, they’re like, “Oh-oh, my time is ticking. There’s no way that I’m going to be able to keep this rent up. I’m just going to start looking for a place to move.”

So they’ll kind of do it on their own. I’ve never had to go and forcefully evict a bunch of people in an apartment building. I don’t like to clear a house, especially if it’s a 20 unit building and I have three or four units vacant. Okay, I’ll work on those units for a month… Because the renovations for these units take a couple of weeks. It’s not some quick paint job. It takes a couple of weeks, because – new flooring, new kitchen, new bathroom, everything’s been touched in the apartment. So it takes some time to get it done. I don’t want to have an empty apartment building, I’d rather be making 400 bucks from somebody than just having a unit sitting vacant.

Theo Hicks: And then do you know going into a property that the leases are month to month, and that’s one of the things that you are actually looking for in a property, or does that not matter as much?

Antoine Martel: It doesn’t matter all that much. We’ve just been kind of lucky with all the deals we’ve bought, that the majority of them are month to month tenants. If a property that I was buying and the numbers still work, but they were on leases, I think I could still make the deal work. it wasn’t really a big factor for me. It was just something about these mom and pop landlords that own these properties. They just didn’t really care about leases and didn’t renew them, and many of these people were month to month and they lived there for many, many years.

So I don’t think it would be a deal-breaker for me if they were on leases, unless they were on something crazy like everybody was on a two year lease and I couldn’t do anything for two years, then okay, that might be an issue… Because most of my projects for the multifamily and my goal is to make them just two years long, where I could buy them, renovate them the first year, increase the rents, and then year two stabilize it and do a cash-out refinance. That’s kind of what the goal is. So, it hasn’t been an issue thus far and I don’t think it would be an issue again, unless there’s some crazy lease in place.

Theo Hicks: So you’re doing the cash-out refi to get your own money back or do you have investors investing in these deals?

Antoine Martel: Good question. So the first two deals we bought were our own capital; no investors. I wanted to test it out, wanted to make sure I knew what the hell I was doing before I started raising money from other people. Then the three deals after that, they came to me and I didn’t really have enough capital to take them down myself, and I was like, “Okay, maybe I’ll start bringing in some people into these deals, and not do a syndication, but more do joint ventures with people,” because I’ve been investing in real estate for five years now, so people along the way have been reaching out to me to invest, and they have large sums of money, and [unintelligible [00:12:15].08] No, I want to do something bigger. So those people I reached out to, and “Hey, I have this apartment building, do you want to partner up with me on it?” And that’s how I was able to buy the last three buildings. So that’s what I’ve been doing with the last three buildings, is just raising money, joint venture just with people I’ve met and networked with along the way.

Theo Hicks: And then what does that JV look like? What’s the breakdown of the compensation?

Antoine Martel: So most of them — of course, it’s different for every deal, but let’s say for building the cash required is half a million dollars. So most of the time, we’ll come up with 50% of the funds, the investor will come up with 50% of the funds, and then we’ll sign on the loan, they don’t need to sign on the loan, and we’ll get 60% ownership and they’ll get 40% ownership. That 10% additional fee for us or kickback to us or equity for us is just for finding the deal, managing the deal and signing on the loan.

So that’s kind of how we’ve been doing it. Some variation of that, of course, every deal is a little bit different. But that’s kind of how we’ve been doing and working out these deals.

Theo Hicks: Perfect. And then when you say you’re managing it, so do you have your own management company or do you have a third party?

Antoine Martel: I’ve just been managing the construction process using our contractors, etc, etc. Property management companies, all third party. We’ve been using third party property management for the last five years and it’s amazing. I don’t really want to handle the property management side, so we just have these companies we’ve been working with for a while that managed our single-family homes, they manage our turnkey rental property clients, and they also manage the apartment buildings as well for us.

Theo Hicks: And then for the JV, these investors, are they just bringing the money or do they have other roles in the deal as well?

Antoine Martel: Well, it depends on how active or passive they want to be, because we have a system and process in place already. Many of them are going to be passive and still be in the decision-making process. And about like, “Hey, should we go high end?” Again, most of our units, we do them exactly the same, and same renovation. So they’re part of the decision-making process and they’re involved in the process, but many of them kind of just let us take the reins and they’re kind of just standing beside us along the ride.

Theo Hicks: Perfect. So since this is your second episode and you gave us your best ever advice last time, let’s do it a little differently this time and we’ll say, what is your best ever advice or the best thing that you’ve learned or the piece of advice that helped you scale from 20 units to 100 units, since we last spoke?

Antoine Martel: Great question. And I would say controlling your growth. I’m a young guy too, and right out of college, I bought my first house, my last semester at university, and now I’m doing 120 homes a year, 10 houses a month just a couple years later. And a lot of people would say that’s super fast, but to me when you’re in the weeds every single day, it doesn’t seem all that fast, because every day you’re pushing to the next level and doing stuff to get to the next level to do another house, another house, another house.

And I would say that you can move very quickly and you can blow up your business and buy a ton of apartment buildings, but sometimes you need to take your foot off the gas pedal, and you need to kind of slow down a little bit, see how things fall through or see how things go. And I think that with the whole COVID Coronavirus thing as well, it’s had a lot of people take their foot off the gas a tiny bit, just to see how things shake out. Because with the turnkey rentals too, we were nervous about people backing out of deals, we were nervous about our contractors not being allowed to go to the job site, even with the apartment buildings [unintelligible [00:15:29].13] be able to go to the job site.

So controlling your growth and don’t grow faster than what’s possible, because I think that’s what breaks a lot of people. So just controlling your growth and making sure that you’re growing at a steady rate.

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

Antoine Martel: Yep.

Theo Hicks: Okay.

Break: [00:15:46] to [00:16:29].

Theo Hicks: What is the best ever book you’ve recently read?

Antoine Martel: The best ever book, Sell It Like Serhant by Ryan Serhant.

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

Antoine Martel: Man, I’d probably do it all over again. Let’s say I had zero dollars, I would probably use the people that I know with the money that they have, and I would probably go and do some BRRR projects with residential one to four units, buy them with their money, renovate them, refinance them, pay those people out and then just keep doing that until I had enough money coming in.

Theo Hicks: What are the four deals you’ve done since we last spoke? Which has been the best deal?

Antoine Martel: There was an apartment building in Midtown Memphis right next to Cooper young, literally a football field away; you can see Overton Square, and you can literally see the square from the apartment building. That’s the best deal I’ve ever done. That’s a lifetime legacy asset. It’s, in my opinion, the best location in Memphis, Tennessee ever. So that’s pretty exciting, and we’ve paid a pretty penny for it, but I think it’ll be worth a lot in terms of appreciation which is hard to get in a place like Memphis.

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

Antoine Martel: Giving back, I was on a mentorship call for somebody’s mentorship program last night… And I think that that’s a way that I like giving back and I wrote a book and I give it away for free. I go and try to educate and help people get started as much as I possibly can. I go on live streams on my Instagram all the time and post content every single day.

So that’s how I’d like to give back and just help, you know, help somebody who was like me sitting in a college dorm room trying to invest in real estate and trying to change their life and the family’s path and trajectory. So helping people get started.

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

Antoine Martel: Best ever place to reach me would be my Instagram. You can go shoot me a DM, follow me. All my contact information is there. My handle is @MartellAntoine.

Theo Hicks: Awesome, Antoine. Well, thanks again for joining us and catching us up on what you’ve been up to over the past year and a half. So again, you’ve gone from that 20 units, done four more deals and now at 100 units. And you mentioned that all of your deals have essentially come from these brokers that you had either spoken to in the past or had reached out to and been ignored. But once you had done your deal, you now had that rapport, as opposed of calling brokers, talking to brokers and saying, “Hey, I want to do a deal.” Now, you say, “Hey, I’m Antoine. I just bought that 20 building down the street or at this address.”

Antoine Martel: Yeah.

Theo Hicks: And because you had reached out to them in the past, you said you cold called every single person you possibly could or emailed them, you were able to get all your deals from the broker relationships.

Antoine Martel: Yeah.

Theo Hicks: So I think that’s something that would be very helpful for our listeners to know that… You spent all this time getting that one deal… So you could say, well, you spent nine months doing that one deal, but in reality, you spent that nine months getting all these deals.

Antoine Martel: Yeah, 100%.

Theo Hicks: If you hadn’t put that work in, you wouldn’t have gotten the four deals, which seem like they came pretty easy, but they actually didn’t. It took a lot of upfront work to do.

And then you mentioned that you do have your cookie-cutter system where you buy the property, you start rehabbing the exteriors, residents get the clue that things are changing and they start looking elsewhere, so you don’t even have to worry about evicting people or having those difficult conversations. You work on the vacant units first, you spend about 10 to 20 grand per unit, and then you will get everything renovated year one, stabilized by year two, and then do that cash out refi.

You mentioned your first two deals, you used your own money to prove the business plan and then after that, you expanded to using other people’s money through JVs, and you just reached out to people that you had met before who had reached out about doing deals and you didn’t really have something that met their criteria. Now, you did.

You gave an example, you said that you’ll put up half the money, they’ll put up half the money, you’ll sign the loan and then it’s like a 60/40 split. And then your best ever advice was to control your growth; not necessarily go at a slow pace, but go at a steady, manageable, sustainable pace and don’t feel like you have to go psycho and buy all the properties year one.

So, Antoine, it was great catching up. Best Ever 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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2254: Serial Entrepreneur Advice From Vahan Yepremyan

Vahan Yepremyan is a business attorney, speaker, author, serial entrepreneur, and children’s rights activist. Vahan has spoken around the world on topics like achieving entrepreneurial success by removing the beliefs that block us, business fundamentals, and other entrepreneur topics. He was the winner of the Business Freedom Speaking Academy Idol held in Calgary, Canada, where he competed with speakers from around the world.

Vahan Yepremyan Real Estate Background:

  • Vahan is a serial entrepreneur with businesses in law firms, film production, distribution company, & real estate investments
  • Has been a entrepreneur for over 22 years
  • His real estate developing company focuses on buy/hold, flipping, and hard money loans
  • Based in Los Angeles, CA
  • Say hi to him at: www.vylawfirm.com 

 

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“Getting rid of beliefs will not ensure that you will be a successful investor, what it does is it gives you the freedom to choose” – Vahan Yepremyan


TRANSCRIPTION

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 Vahan Yepremyan.

Vahan, how are you doing today?

Vahan Yepremyan: Good morning, Theo, I am great. How are you doing?

Theo Hicks: I’m doing great. Thanks for asking and thank you for joining us today. So before we start, a little bit about Vahan. So he is a serial entrepreneur with businesses in law firms, film production, distribution company and real estate investments. He has been an entrepreneur for over 22 years, and his real estate development company focuses on buy and hold, flipping, and hard money loans. He is based in Los Angeles and his website is https://www.vylawfirm.com/.

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

Vahan Yepremyan: Of course. I don’t know how far you want me to go back, but I was born and I grew up in the former Soviet Union, in a place where entrepreneurship was illegal. So when I moved to the US, I was 17 years old. That was one of my fascinations with this beautiful country – entrepreneurship, the ability to set up and build your own enterprise, your own company. Where I grew up, everything was government-owned, everyone worked for the government, everyone got paid from the government, and everything entrepreneurial, was discouraged; thinking outside the box, questioning authority… Because of that, the whole system collapsed. There was no innovation, there is no competition, there is no incentive.  So coming here and seeing how not only is it free, and it’s also encouraged to do.

I started studying it and ended up finding my way into law. And I had a little bit of time in politics, which was another fascinating thing for me; the whole concept of democracy. And I clicked for a White House think tank doing the US-Russia trade relations, since I spoke Russian as well. And then ended up in Los Angeles where I set up my law firm about 23 years ago, focusing on representing entrepreneurs and startups from pre-launch to pre-IPO, pretty much kind of taking care of setting up companies’ contracts, negotiating deals and helping them scale.

I went back to business school. Initially, I did a program at Harvard Business School and then I got my postgraduate on entrepreneurship in Cambridge out of the UK Business School. So not only do I represent entrepreneurs and have probably represented over 3000 entrepreneurs over the years and ventures, I myself am an entrepreneur. I speak the language, know the struggle and I know the journey of it. I’ve, over the years, had more than dozen ventures; some of them failed, some of them did okay and some of them are doing well.

As you mentioned, I have a law firm. That’s one of my main focuses. I also have a film production distribution company. We’re likely to win an Emmy and an Oscar nomination. And one of the other ones that I have with three other partners is a real estate investment and development company, for the last about 12 years or 13 years. I’m focusing on that and on the law firm. I speak a lot and teach at different universities and conferences. I have a book coming out about entrepreneurship and mindset.

Through this journey, I’ve learned the way I thought and my mindset and my beliefs affected my businesses and my entrepreneurship ventures. I was pre-programmed based on where I grew up on what does money or success or an entrepreneurship mean, and I had to reprogram myself. And as I did that, I noticed the difference in my businesses, and I continue to work through some of the stuff. I see a stark contrast in my businesses. I believe that your business is a reflection of you, who you are, what you believe, your story, your thoughts, your mindset. And as you grow, your businesses grow.

Interesting enough, as I really dove into this several years ago, while nothing else changed in my business except just me and my mindset, I saw my business really take off. In the last three years, we’ve made it into and we’re named Inc magazine’s fastest-growing companies in America, for three years in a row. It’s a big deal. And then for a company that’s 20 years old is as well named on the list of the Greatest Entrepreneurs of the Year for the three years. The Entrepreneur Magazine put us in as top 100, and first company in America last year.

Anyway, all this stuff that started happening without really much change in the business, rather than changing me, that started reflecting in my business. I speak a lot on that in the book that’s coming out. It is about kind of bringing that personal awareness, personal growth, mindset beliefs, into the world of entrepreneurship.

Theo Hicks: Let’s focus on that then, because as you mentioned, you grew up in the Soviet Union, and you kind of mentioned how the approach to money and entrepreneurship is essentially the opposite of here. So most people, when they talk about mindset blocks and having limiting beliefs about money, that’s one thing, whereas yours is an extreme version of that, because most people that are saying that they had limiting beliefs about money, at least grew up here. So it’s [unintelligible [00:08:04].07] whereas for you, it’s just everywhere.

Vahan Yepremyan: Yes.

Theo Hicks: So you probably have a good insight into how to focus on, like you said, reprogramming your mind, getting rid of those beliefs and kind of reorienting yourself and creating an entrepreneur mindset, and you wrote a book on it. So walk us through top two or three things people can start doing right now to adjust their mindset, whether they’re just starting off, or as you mentioned already have an established business and want to take it to the next level.

Vahan Yepremyan: Sure. And I want to also just give credit to my co-author. I’m co-authoring this book with Shelly Lefkoe of Lefkoe Institute. And her and her late husband have been studying these limiting beliefs and patterns and how to get rid of them for the last 30 years. So she did part of the book bringing in her background and experience in this.

You’re absolutely right, the place I grew up, and we form a lot of our beliefs in childhood. And spending 17 years of my life growing up and forming these beliefs in a place where not only is it part of school curriculum, it’s part of the media. Everything was censored and everything was filtered to teach you the socialist or communist mentality. And coming out here and realizing that those were not true.

When you have a belief, you believe that whatever that believe you hold, you believe that’s the truth. And as you come out and you see an alternative version of interpretation of things, you start questioning them. And then all of a sudden, that reality starts crumbling. You will notice if someone has certain beliefs that’s holding them back — and beliefs are not good or bad. It’s just they’re either limiting and holding you back or they’re empowering you. So one belief could hold me back and not hold you back. This is a very personal journey where you have to really become self-aware and pay attention to patterns that are happening in your life; are they things that keep happening and then you look at, what do I have to believe for me to experience these things and look at it this way?

And as you look at it and identify that belief, you look at alternative explanations. It’s amazing how a belief not only influences the way you think, but it also influences the way you act and the way you filter the world. They’re kind of like glasses through which you see the world. So whatever color those glasses are, that’s the world you see. And if those glasses are not clean and they have these limiting beliefs, that’s how you’re going to see the world. So essentially, getting rid of limiting beliefs is kind of like cleaning that filter.

I’ll give you an example – you and I walk into a room where there is a big dog. And I grew up with a belief that dogs are dangerous because I saw some dogs attack someone or I was attacked by a dog. And I’ve been told to stay away, don’t play with the dogs, that they can bite you and they’re dangerous. You grew up with a bunch of dogs in your household and had an amazing relationship and friendship with dogs. And two of us walk into the same room, see the same dog; because of our beliefs, we’re going to have a completely different experience in that room.

I’m going to tense up, I’m going to become anxious, I’m going to stay away from the dog and probably if I can, I’m going to turn around and leave the room. You on the other hand are going to get excited, walk over to the dog and you’re going to start petting him or playing with him, and have a completely different experience.

And the external is exactly the same, but our behavior, our emotion in every case is influenced by what beliefs we have inside. And I see this in clients. I see this as clients come in and they have certain beliefs. For example, you mentioned money. So I had a client who had this amazing intellectual property that she developed in her business over about 15 years… And was running a successful business, but had an identity of, “I’m a sole business owner, one location,” and she had a bunch of celebrity clientele and was making a good living.

But she also had a belief that money doesn’t grow on trees, you have to sacrifice and struggle in order to earn money. And she was certainly creating that struggle and sacrifice in order to get the money, because that was the belief. If you believe that’s the only way to do it, you’ll find how to sacrifice so that you can get that money.

An opportunity came to her where someone wanted to license her IP and take it to overseas, and open up a bunch of businesses similar to hers; over there where she had no intention of doing business. And her natural reaction was, “What do you mean, they’re just going to give me money for doing nothing?” And I said, “No, you’ve been doing this for 15 years. You’ve developed your sweat and tears and everything’s gone into this business. And now, they’re the ones who are getting something for very little effort. They’re just giving you money. You’ve given your 15 years of your life into this.” She goes, “Yeah, but people don’t just give your money, money doesn’t just appear.”

And she fought me on this for two weeks, as these investors were trying—eventually they were wanting to leave, and I did due diligence and they were serious. They had done this before they had the funds. They did a really great licensing deal for her, where she was secure in. They were not even licensing her brand, because she was concerned “Oh, they’re going to take the brand”, but it was just the IP.

And eventually, as they were ready to walk away, I asked them to give her a check and promised not to cash it; in fact, I had to sign something, taking personal responsibility for it. So I called her in and I gave her the check. It was on Friday. And I said, “Hold on to this check.” This was the initial licensing fee, which is a big chunk of money. I said, “Hold on to this for the weekend and then come in on Monday either to sign the contract and go straight to the bank and deposit the check, or just come in on Monday and bring the check back and we’ll void it and give it back to them.” And she’s like, “Just keep it and I’ll think about and I’ll let you know.” I said, “No, I want the check with you. I don’t want it in the office. I don’t want it with me. Just come get it.” I wanted her to have physical check and just start kind of thinking that she can have this and it’s in her hands, all she has to do is just sign and go to the bank.

Long story short, something shifted over the weekend and she called me Sunday and she said, “Okay, I’m going to do this.” And she came in and she signed, and about three years now has passed. She’s in about four or five countries, she’s got over a dozen licensed locations, she’s making more money from that than her own business. In fact, she’s thinking about selling her business and just kind of focusing on her health, which is not so great because of all the sacrifice and everything else, and just continuing to license. And all really happened there is because she had these offers before I got involved with her and stuff, and people wanted to open locations and joint-venture with her and do all kinds of stuff – her belief stopped her each time. And in this case, just shifting one belief, that money has to come with certain conditions and certain things have to happen and it doesn’t come in easy, it has to be really hard – her whole life changed, her whole business changed.

I see this in so many of my clients and so many people that I interact with. It’s amazing. So looking at your beliefs and your patterns and sometimes things happen that has nothing to do with your belief. That’s fine. But things sometimes happen because you have certain beliefs and you look at things a certain way, or interpreting things. So a self-awareness of this is a big thing.

As a CEO of your company or an entrepreneur who runs your company, you have to be really aware of what’s the culture you’re creating in your business and in your company. And what’s the emotional intelligence that you bringing in. You come in and you’re the Chief Emotional Officer, not only the Chief Executive Officer. And a lot of times your enterprise reflects you and your emotional intelligence, how you deal with challenges, how do you take responsibility,  do you blame others, do you take responsibility? So all this stuff, a lot of it is formed in our childhood and in other experiences.

As entrepreneurs and in real estate as well, it’s not just about your next investment, it’s not about next house or next apartment building… This is a journey. The market goes up and down, you go with it up and down, your cash flow goes up and down. So you have to look at it as more of a journey and a long term thing. Especially in real estate, one of the things you must have is patience. And going in, you have to analyze things, just like you would do due diligence on the property. What are the comps? What’s the neighborhood? Where’s the market going?

I invite your listeners to do the same due diligence on themselves, because some of their decisions have nothing to do with the market, have nothing to do with the prices and opportunities. It’s more of, “Is there anything that’s holding me back from being the best version of myself?” And again, just to clarify, get rid of beliefs that will not ensure that you’re a successful investor or real estate developer. What it does is gives you freedom to choose, that you’re not stuck in a certain way just because that’s your belief, but now you have an opportunity of, “Hey–” You know, just like in that room, I said we walked into the room – if I didn’t have that belief, I could still turn around and walk out the room, or I could stay and pet the dog, or I could stay and not pet the dog. So I have options at that point. And then I could make that business decision based on the due diligence, for example, on the property that I’m looking at, without having my personal issues come into that.

So looking at yourself and looking at what triggers you, and how do you look at the fear of failure in real estate or in entrepreneurship – people can experience failure, whether it’s on a smaller scale or a bigger scale. Looking at why are you doing this and what is your driving force and what are the things that are holding you back will really empower you and open up a whole world of choices to you.

Theo Hicks: So one of my follow-up questions – I get all this, 100%, and you gave your example of the woman who had that limiting belief about money. But in that example, she had you, she had a Vahan to help her. You gave her that check and that’s what helped her kind of reprogram herself. So for people out there who don’t have a Vahan, who don’t necessarily have a mentor, maybe tell us tactically speaking, specifically, what am I doing in order to accomplish this goal? Am I writing it down? Am I meditating? Am I talking to myself in the mirror? What’s the actual tactic that I need to do in order to act on the advice you just gave?

Vahan Yepremyan: Sure. Having somebody help you through it is always a great idea. And sometimes some of the insights I’ve gotten from my close friends who I invite and I’m open to constructive criticism, they’ll come in and say, “I have noticed you say this thing or you behave certain way”, just look at it. And you kind of sit with it and say, “Ah, I do do this. And I have done this over the years. And why do I do this? And what do I believe that makes me act a certain way?” And sometimes that perspective helps. Having somebody who’s professionally done it, like Shelly Lefkoe, obviously, helps a lot.

But what I would say is one, just being aware that what you believe and that your thoughts really influence how you act in your decisions is already a big step. Because then you’re now aware of this thing that’s going on in your head, that a lot of us if we’re not paying attention, it just happens automatically. You just see the world and you assume that’s the belief you hold. So first thing is just become aware of this.

The second thing is look at patterns. What happens? I had a client who refused to work—he had a really bad experience with a partner who was a relative of his, and he came to me… And he was afraid of conflict. He had a belief that confrontation or conflict are really bad. He grew up in a household where his parents constantly fought and it just created a whole dynamic for him.

So in this scenario, his partner was stealing from him, and he would not confront him. And I offered me getting involved and bringing this up. And he’s like, “No, no, no, no,” you know. And so what he did after spending, I think, three or four years building this company with a partner, he just gave all his shares away and he walked away, just because he thought confrontation was bad. And later on, he would set up another business with him. Something happens with his employees, and again, he doesn’t know what to do with it and he doesn’t know how to fire them and he’s like, you know, “Should I be—,” and there’s a pattern here of being afraid to speak up or bring up things that are on your mind or confront someone. And it doesn’t have to be in a negative way, it just there has to be a conversation. If you have a partner, you have an employee, you owe it to them, this conversation, because maybe that employee wasn’t doing anything wrong. Maybe it was in his head. And by giving a chance for them to explain themselves, why they did this, why they acted this way, could change the whole thing. So there is a pattern.

So if you pay attention “Why do people always take advantage of me?” how are you showing up? And why are you giving them that room? Or there’s this thing where people get to a certain level and then that’s it, because they think that they don’t deserve more, or imposter syndrome, where they’re going to be found out because they don’t deserve all the praise or they don’t deserve the accomplishment they have, or the trust that their clients put in them, so they start playing small. So look at are you playing small? Can you step up? And what’s holding you back from playing small?  Is it your self image?

It’s one thing if you don’t have the skill set and knowledge and ability, that’s fine. And if you still have the desire, then you go acquire those skills and get educated and get a mentor or somebody else to help you with that. That’s one thing. But if you do have the skill set, but you hold yourself back… And I’ve had this when I first started my law firm, a very sizable startup that was very prominent in the media news approached me. One of my employees, who was working with me, got hired away to work with them. And then as they were looking for legal representation, he said, “Look, you guys have got to go with this guy. I’ve worked with him. I know how he does, what he does, and how he handles his clients.”

So they approached me and said, “Usually we deal with bigger firms. And this is the representation we have”, and they handled some big, big names. “But because of your employee, and what he’s described how you work, we’d like to consider you.” And the first thing that went through my mind is, “I don’t line up with those firms.  I’m going to be found out if they hire me and then I fail.” All these things come up. So paying attention to—it’s one thing if I don’t have the skill set to help them. That’s a good reason for me to say, “Hey, I’d love to help you. But no.” But if it’s me, if it’s me stopping me, that’s a whole different thing.

So what I would do, the first thing is just pay attention and be aware and then look for a pattern. And then as you determine a pattern, see if there’s an alternative explanation to this. If you can explain the same thing different ways, there’s a second version to this explanation, then maybe your belief is not the truth. It’s just one version. Somebody says, “Hey, I’ll call you tomorrow,” and then they don’t call you. Now you form a belief that they didn’t like me, because I’m not tall enough, I’m not whatever enough, I’m not handsome enough, or whatever; they don’t call you. And that becomes your truth. “Hey, she said, she’s going to call and she didn’t call.”

Now, if you sit there and say, could there be any other explanation? She got busy, she lost my number, there were complications, something happened to her, whatever. All of a sudden, that one explanation that you’re focusing on that’s making you feel terrible is not the truth. It could be, but it’s not. So why focus on something that makes you feel bad and disempowers you, rather than focus on “Hey, maybe she’ll call. Maybe she got busy,” or whatever. And then just leave it like that, rather than kind of projecting it back to yourself and making yourself feel bad.

So look at an alternative explanation of an event, because events by themselves don’t have any meaning. Things just happen. Just because you’re venture fell doesn’t mean you’re a terrible person, terrible entrepreneur. Maybe you make some bad decisions or maybe you didn’t. What do you take out of that that’s going to empower you for the next, “Hey, I’ve learned this from this.” And you know, you take the lessons, but you have to be careful what meaning you give to things. Because as soon as you attach a meaning to an event that happened, that meaning will make you react to it and you’ll have an emotional reaction to it.

Some time ago—I don’t know how we’re doing at time, but some time ago—

Theo Hicks: We actually have to wrap up here.

Vahan Yepremyan: Okay. That’s fine.

Theo Hicks: I can definitely talk to you for a long time. You gave a lot of powerful advice in this episode. I wish we did had more time.

So Best Ever listeners, make sure you listen to this again, because he gave a lot of practical advice, as well as specific examples of how this has helped people, including himself, scale and grow to the next level. And I liked what you said that you’re the CEO, you’re the Chief Executive Officer of your business, but you’re also the Chief Emotional Officer of your business, both for yourself and for your employees.

Vahan, I really appreciate it.

Vahan Yepremyan: Thank you. Thanks for having me.

Theo Hicks: Absolutely. His website is https://www.vylawfirm.com/. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Vahan Yepremyan: 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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2217: Setting Up Your Taxes Like The Elites With Khurram Chohan #SkillsetSunday

Khurram is the founder of TogetherCFO and an expert in high net worth tax structures. KC helps the elites set up their taxes and in this episode, he will be helping you understand how they pay fewer taxes than the majority of the public and how you can do the same.

Khurram Chohan Real Estate Background: 

  • Founder of TogetherCFO
  • Writer for Forbes Magazine
  • Expertise in high net worth tax structures 
  • Based in Los Angeles, CA
  • Say hi to him at: www.togethercfo.com 

 

Best Ever Tweet:

“We use the law in a way to optimize the taxes” – Khurram Chohan


TRANSCRIPTION

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, KC Chohan. How are you doing, KC?

KC Chohan: I’m good. Thank you so much for having me on, Joe.

Joe Fairless: Well, it’s my pleasure. And a little bit about KC; he’s the founder of TogetherCFO, his focus is on high net worth tax structures, based in Los Angeles. Best Ever listeners, today, is a special segment called Skill Set Sunday, where we talk about a specific skill, and here’s a specific skill that you’re going to learn by the conclusion of our conversation today. It is know-how that that the wealthy are able to pay a lot less in taxes and how you can set that system up for yourself. With that being said, KC, first, do you want to get the Best Ever listeners just a brief background on yourself?  And then let’s go right into the tax structure.

KC Chohan: Yeah, I’m KC, born and raised in England, and moved out to America with a big Fortune 500 company. I was working there for over eight years. I worked my way up through the ranks. I was always curious and wanted to understand taxation, accounting, and business. It got to a point where I was pretty fed up with corporate America and then started my own company, TogetherCFO.

I watched this clip once and it really sparked my imagination. Warren Buffett was on, I think it was NBC News, and he was sat right next to his secretary, and he was talking about how he pays a 17% tax rate, which is half of what his secretary pays, and she’s the epitome of kind of the average American. She’s paying over 35% in taxes, and he’s calling for this new tax law to go into effect, which obviously didn’t go into effect. But the takeaway from that was, how is he openly sat on national television, talking about paying such a low tax rate, and he’s not the only one, and nothing’s really been done about it?

That really sparked something inside me to help my clients and myself figure out exactly what he was doing… Because it’s fully legal. He wouldn’t be on national television, CEO of Berkshire Hathaway, one of the richest men in the world, talking about how the system allows that to happen. And then when you look at other big companies like Amazon, and Microsoft, and Google, all these companies have paid very little, if anything, in federal taxes, all fully legally.

What my firm now specializes in is helping the regular average American, the slightly higher net worth middle-income American to be able to do that same thing that Warren Buffett’s doing, legally.

Joe Fairless: I’d love to learn about the process of doing so. Can you walk us through the process?

KC Chohan: Absolutely. There’s different types of taxation in America, right? Every single state has its own set of rules, its own set of guidelines that they follow. Then on top of all 50 of those states with their own legal entities and rules, there are federal rules as well. There are two real taxation systems, if we look at a high level; it’s the 1040 system, which 99% of people use, and then there’s the 1041 system, which the top 1% use.

The difference in the 1040 system is its state and trust structures. And even within that system, there’s nine subsets that all have different rules as well. You’ll hear me talk a lot about different rules and regulations, and it’s all hidden in the tax code, which is over 22,000 pages long. It’s like reading Shakespeare, it doesn’t really make very much sense unless you know how to read it properly.

Hidden within those 22,000 pages is one specific subset in the 1041 system, and it’s called the complex trust system.

The rules within the complex trust are a very different set of rules that apply to any other system out there, and that’s what the top 1% and the top elite people use to legally pay very low taxes. Even Mitt Romney, when he did declare his tax returns a while back, it was 13%. Prior to that, he’d been alleged to not pay any taxes, the same as President Trump. He’s never going to release any of those returns, because he just hasn’t paid any taxes; and the system that they all use is this 1041 complex trust system.

Joe Fairless: You said there’s two will taxation systems 1040 and 1041. Will you educate me? What do you mean by there’s two systems, 1040 and 1041?

KC Chocan: The 1040 and 1041 are just two forms that you’d file with the IRS. The 1040, you [Inaudible [00:08:45]. We’re talking about business owners here, primarily. This system doesn’t apply to people who earn the majority of their income via W-2. So just to put that requisite in there.

Joe Fairless: Good distinction.

KC Chocan: Yeah, so we’re very clear that this is people that own businesses primarily.

Joe Fairless: Why do you say primarily, and not only—does this sometimes apply to W-2?

KC Chocan: Sorry. Let me rephrase that. Because yes, if you are that top few percent that make millions on W-2 income, this could also apply to you, but the likelihood is that’s just a totally inefficient way of doing things. I would not recommend that. But it would also apply as well.  Very rare, but yeah, technically, yes, you’re right.

Generally speaking, the vast majority of people will be business owners, they will be paying their taxes through a K-1, and that care one goes through the 1040 system. When you file your taxes with the government, the form you fill out is actually called the 1040, for the vast majority of people. The smarter people, they’ll research what they can use in the 1041 world, which is just another different form, which is the next form that the IRS provides. And then at the top of that form, there’s a section that’s split into nine different checkboxes, and those nine different checkboxes are the different subtypes of the 1041 system. And they all have their own different rules and legalities within them. The one that we use specifically and exclusively is the complex trust system.

Joe Fairless: Got it. So there’s 1040 and 1041. Is there 1042, 1043, 1044, etc?

KC Chocan: There’s multiple forms, but they’re the only two that you really need to worry about.

Joe Fairless: Okay. With the nine subtypes of the 1041, if you couldn’t do the complex trust system, which we will talk about a lot during this conversation, but if you couldn’t do the complex trust system, what’s the next one you would look at?

KC Chohan: I wouldn’t look at any of the others. But the types of systems that we were talking about, if you don’t qualify to set up a 1041 complex trust system, then I would look at other types of policies and procedures that you could do in the 1040 world… Because part of getting into the 1041 world, there is a lot of setup costs, a lot of legal fees, because we’re dealing with a lot more complex vehicles, and that isn’t always cheap.

Joe Fairless: Okay. Well, let’s talk about the complex trust system. What is it?

KC Chohan: The complex trust, like I said, it’s one of nine types of system that you can use in the 1041. The way we build our trusts, it’s a three-tier system. There’s a reason for that, in terms of you want to segregate out business expenses with family expenses, and then charitable foundations as well. It’s a three-tier system that allows you to fully optimize your taxes.

Joe Fairless: Okay. How does it do that?

KC Chohan: Well, the proof is in the pudding, as we say in England. I don’t know if you use the phrase over here. But generally speaking, it’s down to the laws that apply in that system, and the verbiage and the way that the trusts are written. There’s a certain wording and phrasing in the trusts that we write in with our legal teams that allow us to use the law in the way to optimize the taxes.

Joe Fairless: What’s an example?

KC Chohan: An example would be—let me just run through the way we kind of set someone up and maybe this will answer that for you. Let’s just say a regular person comes into the system, that paid $200,000 plus in taxes using the 1040 system. Generally speaking, the first thing we do is we do a side by side analysis, saying, “Hey, regularly you pay 200k in taxes, this is how you do it. These are the general write-offs that you have, all the loopholes that are current at that given time, and that’s your end taxable liability.”

We do the same thing through our system. We go through, “Hey, this is how we would run it through our system of trusts and foundations, and this would then be your taxable liability.” Generally speaking—we don’t guarantee anything, but generally speaking, we can save people a considerable amount of money, 60 plus percent.

Joe Fairless: Okay, so noted on the generalization for what you could save potentially, but we’d love to get into more of the nuances of it, either how that’s possible or just some details that you can provide?

KC Chohan: Well, the details are the tax code itself. So if anyone wanted to comb through that information, it’s all public knowledge. You could go on the IRS website and see that, and it’s all really spelled out there. If you type in 1041 complex trust, and you can see the way that the laws are written — and there’s not just one law, there are multiple laws here that allow you to allocate funds differently in the 1041 complex trust system than you would in any other system that I know of.

Through that allocation, and the way you can dictate how the revenue or the income is classified, and what the governing body of the instruments actually says, and the way it says it… And a lot of it is semantics, and it’s very much in the literature, and the secret sauce of kind of what we do is it’s the way that the trust documents are actually written. It’s several different types of law. We’ve got taxation law, we’ve got business law, and it’s all based around common law.

Our legal team has spent a lot of time tweaking, testing, perfecting the verbiage of the trust documents to get them to a point at which we can then lean on the law the same way Warren Buffett does, Bill Gates, Jeff Bezos, all these guys, the Rockefellers, all these elite people and their teams, and do exactly the same thing so that you get to a point where you can openly say on national television that you pay 17% tax, and that’s perfectly fine.

Joe Fairless: When you’re speaking with a new potential client, what are some common questions that he or she has?

KC Chohan: How is this possible? Because a lot of people just don’t know… And it boils down to — this is not really information that’s supposed to be out there. This is written by the powerful and for the elite, for themselves. They haven’t written this, for everyone to use this, because then taxation would take a big hit.

The whole reason why it’s hidden in the tax code is just for them to use it for themselves, and not have to play by anyone else’s rules. A lot of the time people don’t believe that it’s true, which is why we have legal counsel, opinion letters and external firms that consult with our clients to ensure that, “Hey, this is exactly what we say it is,” just because it’s such a new idea, and not many people know about this, and that’s by design.

And then also from a professional standpoint, when you speak with lawyers and accountants, they don’t know about this either, because they’re all trained at a state level. So they all do state bar or state CPA, and they’re very good at knowing what’s going on in their own state. But this structure is at the federal level, and even within that federal level, it’s a subset of nine different types of federal law. So to find experts that know this system inside out is very difficult.

Joe Fairless: What’s the average investment or cost to implement this system?

KC Chohan: It depends who you do it with. So you could go to BNY Mellon bank in New York, for example. You’d have to have liquid assets, I think they’re asking for at least 10 million in liquid investable assets before they would even have a conversation with you. Their set of fees was 700,000 plus, the last time I checked, on top of their annual fees. That’s quite expensive; or you could find a more boutique firm like ourselves, but we do it for a lot less than that.

Joe Fairless: Approximately how much on average?

KC Chohan: Around $150,000 in setup fees, and then we have a yearly percentage on what we save; so the way we prices on value, and the value is a percentage of whatever we would save you compared to the way you were previously doing it.

Joe Fairless: To do that analysis, to determine if it makes sense or not, how does that process work? Is there a cost to it? Do you reach out on your website? What’s that like?

KC Chohan: No, there’s no cost to it. We do that completely upfront. We want to build long term relationships and we do that for free, eat all of that cost in time. Normally, it takes around a week for us to run those numbers and get it back to people. But that’s the way we let people look inside our house and see, “Hey, this is what we do, and this is how we do it, and this is how it would work for you before you even make any decision.” We want people to be fully informed before they make a decision to move forward with us, and that’s why we do that side by side up front for free.

Joe Fairless: What information do you need from that prospective new client in order to run your analysis?

KC Chohan: Just their personal and their business tax returns.

Joe Fairless: That’s it?

KC Chohan: That’s it.

Joe Fairless: For the last year, or last two years?

KC Chohan: Last year. As long as we’ve got at least one year, but last five years is probably the best. And then we can literally go down that and say, “Hey, you paid X amount doing this. If we run it through our system, this is how much you would pay.”

Joe Fairless: Our audience are real estate professionals and investors – what if the real estate investor is already getting significant depreciation losses passed through and is paying basically nothing? Let’s say they’re paying a little bit in taxes. Is your system still able to help that individual, since they’re already paying a low or no amount in taxes, to begin with?

KC Chohan: Yeah, specifically for kind of your audience in the real estate world, the advantages of our system is paying no capital gains tax. When you come to sell a property or if you’re looking to do a 1031 exchange and upgrade, if you did it through our system, there’d be no capital gains involved at all.

Another thing is inheritance, the probate, all of passing on wealth to future generations – none of that is taxed either, because it’s all the way we write it in the body of the trusts, so there’s no taxation there. And then more importantly, the real estate professionals are the ones that we’ve worked with a lot here in LA. A lot of them are buying properties because they do need to get that tax write off. They do need to depreciate down, or they’re doing conservation appeasements… There’s a lot of different things that people do to write down the taxes. You wouldn’t have to do any of that anymore. So you wouldn’t feel the rush of, “I have to close on this property by the end of the year or a property by the end of the year so I can depreciate it, get my tax write off.” You’re not forced into being in that game, unless you really want to close on a deal, because the way we write our trust system allows you to optimize the taxes without having to use depreciation as a vehicle.

Joe Fairless: And since it is called a complex trust system, my assumption is that you would be creating a trust for them to run things through. First off, is that an accurate assumption?

KC Chohan: Yes, two trusts and one foundation is the way our structure works.

Joe Fairless: Okay, which aligns with business expenses, family expenses, and charitable donations.

KC Chohan: Yeah, that’s right. Yes, so there’s three new entities that are created.

Joe Fairless: Okay. Now, one perceived disadvantage of a trust, or in this case two trusts, would be your loss of control over the assets if they’re put in a trust. What are your thoughts on that?

KC Chohan: It depends on the way you write the trust service. Over 85 different types of trusts, and yet a lot of them, you have that disadvantage, but not in the way that we write ours. Ownership stays with the trust, but you have complete control at all times. That’s not an issue. That’s the way we do it.

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

KC Chohan: They can reach out to me at https://togethercfo.com/ or they can email me directly at kc@togethercfo.com.

Joe Fairless: KC, thanks for being on the show, talking about this system and the 1041 taxation code for complex trust systems and talking to us about some details around it, why you champion it, and some potential advantages for doing so. So thanks for being on the show. I hope you have a best ever weekend. Talk to you again soon.

KC Chohan: Thank you so much.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2128: Investing As A Insurance Agent With Stacee Evans

Stacee is an insurance agent who bought her first rental in 1996 and slowly started to buy rentals and sell them. She has bought and sold 10 rentals and currently has 3 active properties that she rents out and 1 AirBnB. While living in California, she bought a house sight unseen in Houston, Texas, and shared the specifics of how she found it, the mistakes, and lessons she learned. 

Stacee Evans Real Estate Background:

 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“The reason I want to learn more is because of all of the mistakes I have made” – Stacee Evans


TRANSCRIPTION

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, Stacee Evans. How are you doing, Stacee?

Stacee Evans: I’m doing great. How you doing today?

Joe Fairless: Well, I’m glad to hear it. I’m doing great as well. A little bit about Stacey – she works as an insurance agent, she invested in her first property in 1996, she’s bought and sold about 10 or so properties since then, and she currently has three rental properties and one Airbnb. She’s based in Los Angeles, California. So with that being said, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Stacee Evans: Sure. So I started accidentally like quite a few people. Bought my first house to live in at ’94, a couple of things about the house I didn’t like, I didn’t want to raise a family there. So I just ended up saving money so I could do the down payment on my next one, turned my first one into a rental, the market went up, took out a home equity line of credit, bought another one, and then another one. Somebody called me and said, “Hey, I’ve got a friend that wants to move to Vegas. I don’t even live there. You want to buy a house and rent it out?” Did that, went up… Just got lucky on all the timing, didn’t know what I was doing, didn’t really know anything about tenant screening. I learned the hard way, made a lot of those mistakes, and then in the last few years, I learned how to learn, I would say. So I did a lot of research, listened to a lot of podcasts, read a lot of books, I started taking it a little more seriously. It’s not my main job, but it’s been a nice side job, especially lately; a nice way to make a lot of money. It’s nice to have a cushion, and I really enjoy it. So far, it’s been great, and I’m now at the point where I’m helping other people. People see my success and I love helping out and giving back that way as well.

Joe Fairless: I’m glad that you do, and I’m glad that we’re having this conversation. It sounds like there’s some lessons that can be shared that you’ve learned. It sounded like you took a more concerted effort fairly recently towards educating and doubling down on focusing on this. If that is correct assumption or if I interpreted it correctly based on what you said, what took place that made you want to take it to another level?

Stacee Evans: Well, for one thing, I really enjoy it. I do like my job, it’s a day job. I’m 40 hours a week, just the normal, and I’ve been there for many years. So I’m getting to the point where it’d be nice to have the option to retire and to be able to live off my real estate. So I might get to that point and keep working, but I’d like to have that and have the freedom and then have more money to do things that I’m more passionate about and just give back and help other people.

Another reason that made me want to learn a little bit more is because of all the mistakes that I’ve made. So it’s given me the courage and the knowledge to have a little bit of information. I live in California; last year, I did a major flip in Texas. It was a house that was almost burnt down, and I did it from living in California. I had actually bought the house sight unseen because I missed out on so many, and I learned how to do that through books and podcasts and forums… Basically, when you’re out of state, it’s all about building your team, and with a lot of hiccups, it worked out great. So it was nice to have that under my belt, and moving on to more things, which is just great for me.

Joe Fairless: Well, let’s talk about that deal in particular. I would love to learn more about the details of it. Can you tell us how you found it, what did you buy it for, what did you have to do, hiccups that you came across, all that good stuff?

Stacee Evans: Sure. So I bought it from a wholesaler. These numbers are [unintelligible [00:06:25].00] they’re going to be within a couple thousand. I bought it for $67,000.

Joe Fairless: Where in Texas?

Stacee Evans: It was in Houston.

Joe Fairless: Okay.

Stacee Evans: Beautiful neighborhood. Of course, I drove by. Like I said, I found it through a wholesaler, but this was probably maybe a total of 30 people. So I was referred to someone, used them, referred to someone else, referred to someone else. I had a lender; this was actually brought to me by a contractor that was looking at other ones who hooked me up with the wholesaler. He told me the ARV, the after repair value would be about $210,000. The contractor said he could do it for $95,0000. It ended up where the contractor took longer. It did come in, as he said, with the $95,000. A little bit of the work wasn’t great at the end, but I ended up selling it as soon as I went to go put it on the market; I thought it was going to be $210,000. My real estate agent said, “Let’s start it at $229,000 because the market’s pretty hot,” and I trusted her. I had three full-price offers within a few days; I couldn’t believe it. I did have to take a little bit of money off at the end. I expected the financing to be the hardest part, and because of good credit and access, the money was simple to get. At the last minute I ended up not using hard money lending, ended up paying cash for everything by using some money that I saved and getting extremely low-interest rate loans. I did part of it on credit cards; it was 0% loans for 18 months with a 3% fee, and then once it was–

Joe Fairless: How’d you come across that credit card?

Stacee Evans: I had the credit cards. I do a lot of credit card churning where you buy stuff on credit cards, everything and then you pay it off at the end of the month and you get all the benefits. I called one credit card company and I said, “Can you increase my limit?” and it was $12,000. They’re like, “Yeah, we’ll give you $60,000.” Are you kidding me? So it was just all kinds of things like that. At the very end, as I was finishing up, there were so many issues with the house. There was a little bit of bumps in the road with the contractor; it took a longer time. He did finish it, it looked great, but there was just a few things that weren’t great, and the buyer was going to back out.

Part of the money that I got was a friend of mine who’s a mortgage broker, and I called him and I said, “Can you do a HELOC for me?” He goes, “Yeah, just sign this piece of paper.” It was a low-interest loan; wasn’t even official, just sign up for the house. So I wanted to pay him back, and then I took out another low-interest credit card loan. So by the time I was about to close, I’d had everything paid off. So I had no more loans, because I was going to turn it into a rental… And then I called my realtor and I said, “Where’s the cancellation?” and she goes, “You’re not going to believe it; the buyers are buying it.” So it ended up going through. I had all this money and now I’m doing more deals.

I bought a house last month [unintelligible [00:08:59].21] Kansas City. I have an amazing team there. I’ve got a local bank there, a lender; it’s all about the team. I’ve got a rehab company, I have property management, I got a real estate agent. I’ve never used property management before. I’ve always managed everything, but these are a little low rent houses, so it’s nice to branch out and do something different, and then to rely more on other people so that I can scale up, which is my next plan.

Joe Fairless: On what you said regarding the churning credit cards and getting the benefits paying them off at the end of the month – when you got your approved credit limit from $12,000 or $16,000, whatever the number you said, to $60,000, how do you access that money to then buy real estate?

Stacee Evans: I just called a couple of my credit cards. I have a lot of credit cards that have zero balance because I don’t really use them. I only use whatever is going to give me–

Joe Fairless: I know, but–

Stacee Evans: So I called the credit card; they send me offers all the time. “We’ll give you a 0% cash [unintelligible [00:09:56].02]

Joe Fairless: Sorry, I’m not asking the question correctly. I understand getting the credit increased. I’m wondering about how do you actually get those dollars and buy real estate? Is that a check that you receive? Because you can’t swipe the card to buy a property.

Stacee Evans: Right. So I call them on the phone and then within two days, they just transfered it into my bank account.

Joe Fairless: Okay, so it’s a cash advance.

Stacee Evans: Correct, with 0% interest.

Joe Fairless: With 0% interest. Okay, got it. So I want to make sure I’m wrapping up the $67,000 house before we move on. So you bought it for $67,000. How much in total did you put into it?

Stacee Evans: The rehab was $95,000. I don’t have the spreadsheet in front of me with the exact expenses, but I had insurance, I had utilities, I flew back and forth a few times… So I counted all of that in, obviously on my taxes when I looked at my profit. Off the top of my head, I want to say it was roughly another $20,000 with everything, which included going back and forth. And then after I sold it, there was, of course, realtor fees and all of the closing cost fees.

Joe Fairless: What did you sell it for?

Stacee Evans: It sold for $229,000, but we did have to take $8,000 off, because there was a couple of items that weren’t done properly. So I did that as a credit for the buyer.

Joe Fairless: Okay, so $229,000 minus $8000, minus $20,000, minus $95,000, minus $67,000, not including any of those other miscellaneous things, that’s around $39,000 profit. Does that sound about right?

Stacee Evans: I subtracted all of the interest from my loans, because I did take a couple of low-interest loans. The credit cards had a 3% fee, so I subtracted that. So it was probably about another $10,000 off of that. It ended up being pretty nice at the end of the day.

Joe Fairless: You live in Los Angeles?

Stacee Evans: Correct.

Joe Fairless: This property’s in Houston. It’s almost a six-figure rehab. How did you manage the process and what would you do differently, if anything, if you were to do this type of deal again?

Stacee Evans: I managed it by relying on the people that I had there. It ended up that the wholesaler who sold me the house was absolutely amazing. I was having some issues with the rehab, and when he sold me the house, he goes, “I’ll do whatever you need during the rehab,” and when he said that, he performed just incredibly. He would go to the house, send me videos. So he was almost–

Joe Fairless: What’s his name?

Stacee Evans: His name is Colby, Colby Samson.

Joe Fairless: Colby Samson. Props to you, Colby Samson.

Stacee Evans: Oh, amazing. And he would check on me every week or two. I told him– I said, “I’m new.” I want to say that I did jumped in — even though I had spent a lot of time studying and learning and realizing how to do this, it was scary, and I don’t know that I would say I 100% knew what I did, but the first thing that I would do is – I wrote the one check to the contractor for the initial $30,000, and in my mind, I kept doing worst-case scenario. Okay, if he runs off with the money, I’m down $30,000; I can get through it; here’s how. I never really believed that it was going to work until the very end, and my goal was to come out even. I go, “I just want to come out even; I want to do my first flip,” and when I profited so much, I was over the moon, because it was something completely different from what I’ve ever done.

Joe Fairless: Good for you. There’s a lot of resourcefulness and educated risk-taking involved here and also some leaps of faith.

Stacee Evans: Oh, big time leap of faith. Yes, I did have the money and the access to it that if it went south because I kept doing worst-case scenario, I’d be okay, I wasn’t going to lose everything. But it was scary.

Joe Fairless: When did you complete that flip? How long ago?

Stacee Evans: It was last August of 2019.

Joe Fairless: Okay, and you just completed that less than a year ago, you found an outstanding wholesaler, you found a good contractor, it sounds like, correct?

Stacee Evans: I’m not going to say that, because his communication’s–

Joe Fairless: Okay, average? Below average?

Stacee Evans: He got it done; his communication ended up not being that good, he kept dragging it out, he was running out of money, he wanted me to pay him before it was done…

Joe Fairless: Oh, man. Okay, alright, alright. Well, you found a contractor that you wouldn’t use again, but eventually got you to the finish line.

Stacee Evans: But the house did look beautiful when it was done.

Joe Fairless: Okay. But you have some team members that were discovered that hey, they’re really reliable.

Stacee Evans: Absolutely.

Joe Fairless: What made you leave that area, since you’ve already established some connections that were really helpful, and then go to a completely different state in Kansas City?

Stacee Evans: So my experience is rentals. I’ve had a lot of rentals and I have some right now, and it was pretty much just looking for an area that has a good price to rent ratio. I was a little nervous about just Houston, because it does flood, the insurance is very high, the taxes are very high. So it’s not as good of a return on investment. So I was looking at other areas for that. I’m looking a little more in the long term. I’ve been doing this for so long. I’m looking at the end game, so if I can get some rentals, have a little bit of steady income, pass them on to my kids… So Texas was just a little bit too scary for me for rentals, personally. So I just wanted to find an area that’s going to give me a nice bit of return.

Joe Fairless: How did you become introduced to Kansas City?

Stacee Evans: I actually did a lot of research. I had a mentor that I paid that just gave me a few one on one sessions over the Internet, that taught me how to analyze different areas, how to look at the employment, if the population is going up or down… You want to make sure that when you are looking at a certain area, that the companies that are in the area are diverse, so you don’t have a situation like Detroit had where one company goes out of business and then everything collapses, and you want to look at the income of the people, that their rough estimate is three times their income from the rent, and then just the price to rent ratio where the price of the house is not going to be so high compared to the rent that you won’t make a profit. Where I live in California, the price of the houses are so high that you’re just buying it for appreciation here, but not really for income.

So an easy way to do it is if any of your listeners are trying to figure out how to find an area, you can literally just google ’10 best cities to invest in for rental houses’, and then you just analyze data. There’s a lot of public websites to analyze the data, and look at their average income. I like the area because the schools were decent. So a lot of the areas that I looked in other cities, all the schools were bad, and you want people that have families. So, so far, so good. I’m dealing with a very small local bank there and they just give you the money for the house and the rehab, and then they start out with just interest only for six months, and then instead of having to roll it out or refinancing it, they’ll go principal and interest, and the prices are so low that I’m just putting the 20% down. I’d rather do that than try to do 100% financing. I’m a little more comfortable having more equity.

I know there’s a lot of schools of thought where you buy it and you rehab it and refinance it, you get all your money out and go to the next one, but because of my last deal, I have so much cash that  I’m able to do that and just keep a little money in each deal.

Joe Fairless: Now, earlier, you said that you’ve learned some hard lessons. What’s the story of a hard lesson that you’ve learned?

Stacee Evans: My hardest lessons were all about tenant screening. I had one story where I had a house in Vegas, and they weren’t able to pay the rent, and I got an extremely long, detailed email about how the girl couldn’t pay the rent. She put on her application; she was a dancer. So I’m thinking my little kid has dance teachers. Apparently, she worked at a brothel, she was getting diseases, she lived in a house with her ex-boyfriend and her husband and they were out of work and they were fighting, and I got a whole detailed thing; she couldn’t pay her rent. Actually, that ended up being okay, because I served her the notice to evict her. She called me; she goes, “We just can’t afford it,” and she moved out, and she left it a little messy, but it wasn’t too bad. The worst story is, on another tenant screening, I was in a situation where I wanted to rent my house out and I didn’t know what costs–

Joe Fairless: The first one?

Stacee Evans: This is another story. So I probably should have with this one. I’ll condense it, but I had somebody that wanted to run it; everything didn’t check out completely, I didn’t have criteria for running out for my effective tenants like I do now. I rented it to her and all she did was complain about everything and get the city to come out for one item after another. And after she moved out, she sued me and it was a year and a half lawsuit. She didn’t get anything out of it because my documentation was so good, but it was very stressful. So the biggest lesson that I learned is tenant screening.

Joe Fairless: Well, thank you for mentioning that, because let’s talk about your comment about your documentation was so good, because that will certainly be helpful for pretty much every Best Ever listener to learn what about your documentation helped you successfully defend yourself in that lawsuit.

Stacee Evans: So for every issue that she had, she would send me an email, I would reply to her email and I would tell her how I’m resolving it, and then she ended up trying to get a few people to testify for her in court, and she would go to the city Inspector and I would contact the city Inspector, and the inspector would say, “Oh no, we know she’s just trying to get money out of you.” She had about four, five people she was trying to get on her side, and they all came to my side. So she was saying that I wasn’t taking care of the air conditioning and I was sending the technician out over and over, and he said, “Well, her dog is so big and she won’t clean the filter, so he’s blocking it.” So it was pretty much just item after item; then and she said that her kid was getting sick from mold, and I had a doctor that has a mold company and I sent her his credentials. I said, “I’m gonna have him come out there. He can test for mold, he can look at your kid,” because she went and got her own mold testing company, and when I went on Yelp, this company had all bad reviews and they weren’t certified. So I said, “I’m going to send this guy out. He’s legit and he’ll even look your child,” and she goes, “I don’t want anyone that you refer,” and it was just documentation after documentation, and we ended up going to court. We didn’t have to, but by the time we were going to bring everything in, I presented documentation for everything she complained about, had my cell phone text messages, and I had all my emails. So the biggest expense of that was the attorney fees, and insurance covered a lot of that.

Joe Fairless: How much were the attorney fees?

Stacee Evans: I actually don’t know what they ended up being because the insurance covered that. I had to pay about $8,000 of it for an attorney to get my insurance company to cover it because my company didn’t want to cover it; my insurance company. I would guess over $100,000, because it was a year and a half of a lot of work.

Joe Fairless: Wow, and stress on your part; unnecessary stress, right?

Stacee Evans: Extreme stress. Oh, yeah. This is one thing that I learned in life is when something like that happens, [unintelligible [00:21:01].14] happen to you, you get it. So I take 100% responsibility for it. I didn’t know about tenant screening, or kind of did, but I didn’t have strict criteria; you either fit it or you don’t; if you fit it, then everything checks out, you get it; if you don’t fit it, I’m not taking a lot of excuses. I didn’t check out her employment, and I didn’t check everything out the way I was supposed to. So I look at that now that I’m not stressed out about it is a lesson learned.

Joe Fairless: The documentation, fortunately, that you had that back and forth documented, with not only just it documented, but also it sounds like you were providing solutions to her issues during the time, and it’s one thing to document stuff, but it’s another if you’re documenting it and that documentation shows that you’re looking to resolve the issues.

Stacee Evans: Yeah. Well, I mean, I knew that she was trying something. I didn’t know I was gonna get sued but I–

Joe Fairless: How much was she initially suing you for?

Stacee Evans: I don’t even remember the amount. I want to say $300,000 or something, and it was for just emotional distress. It wasn’t even for anything specific.

Joe Fairless: Gosh. Well, I’m glad you shared that story, because we’ve talked about the lessons already, and it’s a risk that we take as landlords, even if we’re not self-managing because in your case, you were self-managing. There’s always some way that something like that could– eventually, some resident could eventually sue a landlord, whether it’s self-managed or through a third party. Yeah, there’s certainly a high degree of confidence that that would get dismissed if it’s especially a third party that you have managing the property, but nonetheless, I imagine it was jarring when you first heard about that.

Stacee Evans: Oh, yeah. For sure.

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

Stacee Evans: Well, that’s a good question. I would say, at this point, and I should have been doing this all along, is to consistently learn, read books, talk to other people that are doing what you want to do, listen to podcasts, and do every single thing that you do with 100% integrity. It’s not a win-lose situation, ever. You always want to help everybody out, and just be nice to the people around you, and if you can add value and help them, you don’t even need to get something in return for it. It makes you feel better and it’s just a better way to do business.

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

Stacee Evans: I’m ready.

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

Break [00:23:31]:07] to [00:24:24]:03]

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

Stacee Evans: I am going to say that best recently was The Book on Tax Strategies; I believe that’s what it’s called. It’s by Amanda Han and Matthew MacFarland. I read that book; the main thing I got out of it was you can’t have your accountant just find all your deductions; you have to take responsibility for yourself and saving lot of money on taxes.

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

Stacee Evans: I work with a couple of groups that help feed the homeless, and I’ve been out there with them and I see it firsthand, and I also help out a lot of young people and some older people with financial advice in real estate, but I’m always happy to share any knowledge that I have.

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

Stacee Evans: I don’t have a website or anything, but I am on BiggerPockets, so you can find me there. That’s probably the best way I would  respond to messages, and I love to talk to people, keep learning from them and have them learn from me.

Joe Fairless: Stacee, thank you for being on the show. Thanks for talking about some lessons learned from tenant screening, as well as when you get sued what you better have ready to go in order to defend yourself, and that’s documentation that shows that you were attempting to resolve each of the issues. So it’s not a he-said-she-said thing. So thanks for being on the show. I hope you have a best ever day and talk to you again soon.

Stacee Evans: Thank you for having me.

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.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2028 : How To Attract Investors, Establish Credibility, and Fund Deals With Hunter Thompson #SkillsetSunday

Hunter Thompson is a return two time guest from episode JF1545, and JF1220. In this episode, you will learn a ton from Hunter on attracting the right investors, how to establish credibility and fund your future deals. This exact same information has helped him raise more than 30Mil in private capital. He has a book called “Raising Capital for Real Estate” so be sure to check his book out to ensure you can get more info on this topic. 

Hunter Thompson Real Estate Background:

 

Best Ever Tweet:

“Content creation is one of the most efficient ways to build your brand but also raise capital.” – Hunter Thompson


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m your host today, Theo Hicks, and today we’ve got a two-time repeat guest, back for a third time, Hunter Thompson. Hunter, how are you doing today?

Hunter Thompson: Hey, Theo. Thanks again for having me on.

Theo Hicks: Absolutely. I’m looking forward to our conversation. Today is Sunday, which means it’s Skillset Sunday, where we go over a specific skill that our guest has. Today we’re gonna be talking about how to attract investors, establish credibility, and fund deals.

A little bit about Hunter before we begin – he’s the founder of Asym Capital, which is a private equity firm. He has raised more than 30 million dollars in private capital. As I mentioned in the intro, he’s been on the show two times before; listen to his episode 1545, “Seven due diligence items for passive investors and passive investing opportunities”, as well as 1220, “He took his money out of the stock market to syndicate self-storage and mobile  parks.” Both of those links will be in the show notes as well.

He just had a book come out. We’re recording this in the past, but when this episode airs, the book will be live. That book is “Raising Capital for Real Estate: How to Attract Investors, Establish Credibility and Fund Deals”. You can buy that book by click on the link in the show notes.

He is based out of L.A, and you can say hi to him at asymcapital.com. Hunter, before we get into the main skill of today, do you mind giving us a little bit more about your background and what have you been focused on since the last time we spoke?

Hunter Thompson: Yeah. So it’s interesting, there’s so many ways to make money in real estate. I mentioned earlier about conducting due diligence, which is obviously critical; if your deals don’t perform, no one’s gonna get paid… We talked about mobile home park businesses, self storage business… But in my opinion, this element of real estate is the most important, sought after and lucrative part of the entire business. I was at a conference recently where someone said “Is the money in the deal, or is the money in the money?”, and man – the money is really in the money.

Now, that could be the case that not everyone agrees with that and not everyone wants it to be that way, but it certainly is, at least for right now. In those earlier interviews I had been focusing on very much of the same; we have been focusing on the recession-resistant real estate asset classes, most notably mobile home parks, self-storage, and workforce housing, or C and B class apartments. I’m really comfortable with those, from my perspective. I know that a lot of people are more and more interested now  in the “recession-resistant” real estate asset classes.

From my perspective, it’s always a good time to invest in recession-resistant real estate, not just late in the cycle. Because when the economy is booming and the capital markets are loose, you’re going to get the advantages there. But when the economy is correcting or there’s a recession, you still get the advantages of the stable demand for that product. So more of the same – I experienced a lot of success and a lot of growth and a lot of scalability, and that’s what we’re really gonna talk about today.

Theo Hicks: And you wrote a book, which is a great accomplishment. I’ve written three, working on the fourth right now, so I totally understand the work and effort that gets put into that, so… It’s always great to talk to the fellow authors who’ve gone through that experience.

Hunter Thompson: I appreciate that. I’m going through the experience that most people go through when they write a book, which is — you know, I have waited a long time to build up the knowledge to feel comfortable sharing with people, because I want to make sure that I was bringing a lot of value to the table. So I wrote the 60,000 words in about 60 days… And I was like “Wow. When is the next one gonna be?” And then I started the editing process and realized “I’m never gonna write another book in my entire life.” That’s where I’m at right now.

But no, I’m really proud of it, and also I have been really fortunate in the sense that I’ve been able to give back to the community… But I’m really happy and looking forward to the response to this, because there’s so many key takeaways. I’ve spent $100,000 on legal fees in 2018. A lot of what I’ve learned in pursuit of that is in the book, and of course, the strategies and systems that I’ve outlined are what has enabled us to get to where we are today… So I’m really happy to hear both of those responses.

Theo Hicks: So the title of the book is, again, “Raising Capital for Real Estate: How to Attract Investors, Establish Credibility and Fund Deals”. You did kind of drop a bomb that you paid 100k in legal fees and you learned some lessons, so do you wanna walk us through what happened, and the lessons that you learned?

Hunter Thompson: Oh, jeez. If you wanna start with the securities law stuff, that’s gonna probably bore your listeners to death. It’s one of those things where — when you’re dealing in the world of securities, you’re entering a new dynamic, where not only pooling investors together has significant legal implications. You have to stay within the SEC’s guidelines. But as an investor, it’s very favorable, because not only do you get the economies of scale going along with pooling investors together… In the sense of if you lose $25,000 in a syndication, it’s very hard to pursue someone and spend less than $25,000 on legal fees. But if you cumulatively invest in a syndication, there’s much more ability to pursue someone if they act in bad faith… Because cumulatively, each person may invest $25,000 and you may cumulatively be able to come up with a quarter million dollars, which is gonna actually do it.

But from a big-picture perspective, I’ll give away something that took me a lot of money to realize – and maybe not everyone listening to this agrees with this, but I’m a huge proponent of the 506(c) offerings. Those are the offerings which allow you to publicly solicit. It doesn’t necessarily mean that you “don’t wanna know your investors” or that you’re actually interested in publicly soliciting investors… But the solicitation or the 506(c) offering requires that you have a third-party verification of your investor status as an accredited investor. I think that level of scrutiny really adds to the protection of the [unintelligible [00:06:48].05] the person who’s actually creating the deal.

I don’t have to worry about going on  a podcast or going on a webinar and conducting an in-person dinner – all of which I talk about in the book – I don’t have to worry about saying the wrong thing at those events, which can cost me later down the road. If you’re using 506(b) – and please don’t take this wrong, this is just my perspective – there’s so much grey area surrounding it that I just don’t feel comfortable with it. Once you do create your 506(c), I think you’ll never create another 506(b). Just my opinion, of course.

Theo Hicks: I actually just did an interview earlier today – I’m not sure if it will air before or after those one – with Ryan Gibson; he does 506(b), and he basically mentioned the exact same thing. He has a really good process for making sure that he is going by the book. So make sure that if you are doing 506(b) you check out that episode and learn his process for making sure that he has that pre-existing relationship with them. Alright, thanks for sharing that.

Let’s go into the book… Attract Investors, Establish Credibility and Fund Deals. In the context of — let’s say I have not done a syndication deal before, but I do have previous real estate experience. So I’m not a complete newbie; maybe I’ve done — let’s just use me as an example – I’ve done 15 units worth of multifamily before, and I want to scale up and raise capital for a 50-unit building, and I want to attract investors. What should  I do?

Hunter Thompson: I’ll tell you what I did, and you can use it as a playbook of what not to do, when I started thinking about scalability. Back in 2011 I saw a great opportunity in the mobile home park business. I spent about two years learning every single thing I could as an investor, flying around the country, doing due diligence, taking it very seriously, as a full-time job. By 2013 I figured I had established a track record, I had created some amazing relationships with some high-caliber operating partners, and wanted to create my first fund.

Basically, what I did is I had an investor luncheon where I invited extended friends and family and their plus-ones or plus-two’s (they had to be accredited investors), I went through a 30-minute presentation, and at the end of the presentation I handed out a piece of paper so that people could write how much money they are interested in investing. I agreed with my partner that we’d at least raise half a million dollars; I thought I could raise up to a million dollars. There was 30 million dollars of net worth in this room.

I went through the presentation, I was very comfortable speaking in front of people, I answered some questions, and resulted in me raising a total of zero dollars. This was heartbreaking. And really what the book is about is realizing what I did so wrong, and then creating the infrastructure to do the opposite of that.

What I did wrong was that I envisioned myself going out and finding investors, converting them to investors in real estate – which is basically like a pseudo-religious experience, to say “Okay, I’ve invested my whole life in the stock market…” Now in this 30-minute luncheon this person is gonna start investing in not only just real estate, but the mobile home park business.

So I’m thinking about it in the wrong way. I needed to create an infrastructure that attracted the right people, that were already interested, converted them through education and indoctrination to a certain extent, and then close them through this sales process. So there has never been a more favorable time to create that infrastructure now. So if you haven’t really started doing this content creation — it is so asymmetric; it’s one of the most efficient ways to build your brand, but also raise capital… Because if you go through the process of writing ten articles, which we can talk about in a second how to do that, just writing the articles alone will help you communicate more effectively to future investors, so much so that it’ll pay for your time. That’s if no one even ever reads the article. So the book is really about how to create that infrastructure and then funnel people through the sales closing process.

Theo Hicks: Alright, so let’s talk about the infrastructure for a second. Content creation – basically, what you’re saying is that  you want to have some sort of thought leadership platform where you pump out content, and then use that to educate people and attract people who are already interested in investing. Then once you have those people who are already interested, that’s when you close them.

Hunter Thompson: Exactly. And that’s how you create a system that’s actually scalable. Because a lot of these sales strategies may take you from closing 40% of your investors to 60%. That’ll be a remarkable increase. But if you only have ten people in the room, that’s going from four people to six people. I don’t wanna go from four to six. I wanna go from 4 to 4,000, and the only way to do that is to attract the right people.

One of the things I talk about in the book which is a reoccurring theme is time batching. I’m hyper-obsessed with productivity, so I like to do things only in increments of 60 minutes to 180 minutes. And I don’t like to shift gears cognitively when I do these tasks. So what I’ll do is I’ll block out the 60 to 180 minutes, and all I will write is up to 100 topic article titles. These are things like “Five reasons to invest in self-storage; is the mobile home park business actually recession-resistant; what does low interest rates mean for housing?” Those are three, so if  you wanna use those three, go ahead; you’re only gonna have to come up with 97 more.

And then I go and sort those articles up, put them in Excel, put them in numeric value in terms of how quality I think they are and how aligned with my business they are, sort in terms of numeric value and then write an article about the first ten. And that is the beginning of your lead nurture process. I’m telling you, just going through that process alone is gonna help you. And then if you still have some below that ten that are still compelling, I would write outgoing emails – these are probably 300 to 500 words – I would write those emails about those remaining topics. And you’ll probably work your way down to where it doesn’t make sense to write about topics about things that are low on the numeric value. Stop that, put those emails in an outbound drip campaign so that your new investors receive one every single week, and that’ll give you time to focus on other areas of your business.

Three months later you come back, you’ve gotten a lot more knowledge, you’ve got a lot more topic ideas… Do the same thing again and constantly push those emails that aren’t as aligned with your business out months and months and months, and eventually you’ll have an entire year of outgoing email campaigns, so that you can spend your year focusing on operating the actual real estate or other things regarding content creation.

Theo Hicks: That’s a fantastic strategy, very specific. I really like that. But that’s kind of step two, but first I need to have my list of these investors. So you said that what you did wrong was you were trying to find people who weren’t interested in real estate and converted them to real estate. Instead, you wanna find people who are already interested in real estate, educate them on the deals that you do… But it seems like that’s what the article part is. But how do I actually find these people and get them on my list in the first place?

Hunter Thompson: Yeah, so the way that I’ve been able to do this is in effort towards those content creation strategies. So we did  not do paid marketing. I used to go to 3-5 networking events every single week; that’s fine, but it didn’t really help the scalability. So from my perspective, the pursuit of actually creating that content will attract thousands of people.

Now, of course, the content has to be quality, but write the content with that in mind. The goal should be to write something that your friends and family, and also the people that are interested in investing are interested not only in reading, but sharing with your friends. This is how you get things to become viral.

Now, if you wanna supplement that with paid marketing, that’s totally reasonable. I know a lot of people that have done that and have had success, but that just hasn’t been the route that we’ve used. So from my perspective, really the creation of the content will attract the right people.

Theo Hicks: Perfect. So you create the content, you’ve got the emails going out, you’ve got the blogs going out, people are reading these… How are  you converting them into investors?

Hunter Thompson: You kind of work your way up in terms of sophistication. I’m a huge proponent of writing a really quality eBook. This is something that’s probably 10,000 words. If you  have a topic that you think is really compelling that’s kind of evergreen — like “Stock market versus real estate” I think is the name of Michael Blank’s book. It’s a great example. That’s always going to be something that he can use.

In an eBook I like to use more things like detail, data, graphs, back up the claims that you’ve made in some of the articles that you’ve mentioned, and be very aware of who your readership  is going to consist of. I don’t think it’s wise to hyper-niche yourself into “Single moms with dogs” type of stuff, but you definitely wanna have an idea of who your ideal investor and who  your ideal reader is.

Now, if you don’t really like writing, for example, you can outsource this. One of the things that we’ve done – and I know that you guys have done as well – is have a friend interview you on a topic that’s very specific, do a one-hour interview, then convert that interview into a transcripted eBook. Just go to Rev.com, it’s about a dollar per minute of audio. If you wanna email me at info@asymcapital.com, I’ll shoot you an email of one of our transcripted podcast interviews we’ve done… It’s the easiest way to do that.

By the time that someone goes through reading an eBook that you’ve written that’s in that 10,000-word range (about 45 minutes to read), they’re going to be very interested in moving forward with you. Then you can move forward with the actual sales process, and looking at the particulars of the deal… But from my perspective, having a combination of articles, maybe some interviews that  you’ve done on podcasts and this eBook will get you so far along the lines that by the time you get on a phone call with someone, if that’s required, you’re going to be basically answering questions that they have, as opposed to trying to hard-close them, which is not scalable and not a good idea in the real estate sector.

Theo Hicks: Do you wanna walk us through what a typical conversation would be like for someone’s who’s read your eBook, or read some of your blogs, and then you schedule a call with them and you’re kind of having a conversation with them to get them to invest? How would that conversation go?

Hunter Thompson: Yeah, certainly. I’ll start by saying this – not only is it good for credibility, it’s actually good for you and your time as well to make everything as systematized as possible. So if you’re gonna be doing anything, whether it be having a phone call, writing an eBook, writing some articles, ask yourself “Why am I doing this? How can I make this systematized?” So for calls, I like to say there’s only two reasons to jump on a call with an investor. It’s either to have an introductory call, which is usually 30 minutes, or a due diligence call, which is usually 30-60 minutes, depending on the types of questions that they’re asking.

So when I jump on that first introductory call, my goal is to listen to their story, establish if they’re accredited, I want to learn about their experience investing… And here’s the really important part – I wanna hear their motivations for investing. Now, if you do 100 of these calls, you’re gonna hear the same things over and over again, so don’t block out the actual answers that they say. Listen to the nuances, because the nuances are gonna come up voluntarily.

You may hear things like “I really like the cashflow, because I wanna pay off my expenses in order for me to retire.” Or “I wanna invest in deals that have predictable outcomes, as opposed to the stock market, which I don’t really trust.” Then the conversation will transition over to me, and I’ll talk about two really important things here – my last straw moment, whether it be in the stock market or when I realized that my other career wasn’t going to get me the financial freedom that I was looking for, why did I transition out of a typical lifestyle into the world of real estate.

The reason this is important is that we didn’t learn about alternative investments in high school and college. Everyone that’s having this conversation with you – they have that moment when they realize “This typical way of thinking about money  is not going to get me anywhere.” So I transition from the last straw moment to my key motivating factor, and really address what motivates me to help people invest like this.

Then I directly address their reasons to invest, whether it be the cashflow, the lack of predictability of the outcome, or the fact that they think the stock market is too high, and say “That is absolutely correct.” I affirm that those fears are genuine, but there’s another way… And that’s when I outline our general investment thesis, answer any questions that they have, and make sure to stick to the time commitment, which is that 30 minutes.

The introductory call – half of it is about creating that credibility, and the way to create credibility is ensuring that they know that your time is limited, as well as the investment availability. So that’s kind of a brief introduction to introductory calls.

Theo Hicks: Perfect. Is there anything else as it relates to how to attract investors, establish credibility and fund deals that you wanna talk about before we close out the call?

Hunter Thompson: Yes, I’ll say this – your willpower is limited. There’s been many scientific studies about this – people have limited willpower throughout the day, but also over the long-term as well. The reason I say this is that it’s absolutely critical to find a mentor that you can inspire them to share their playbook with you… Because that’s gonna help you get over those humps when you run out of that free will. You’re gonna feel exhausted. But if you have someone that you know has succeeded and they’re depending on you to succeed, it’s absolutely helpful to have them push you along. The number one way to inspire this is just to have a real significant sense of urgency about accomplishing your goals.

Mentors are so drawn to momentum… So if you can show that mentor you attract the right people… And that’s someone that not only has helped me in my career, but I’ve also helped other people, when I’ve seen their momentum and wanna help them along.

Theo Hicks: Well, Hunter, very powerful content. A lot of these things I hadn’t heard of before, I hadn’t thought of in this way, so it’s been a very good interview for me as well. I’m actually looking forward to taking a look at your book as well. Again, that is “Raising capital for real estate: How to attract investors, establish credibility and fund deals.” A link to that will be in the show notes.

Thanks again for coming on. Just to summarize — I can’t summarize everything, but some of the big takeaways that I had… I really liked your time batching concept. How you implement that is you will do things in increments of 60 to 180 minutes. The specific example you gave was you will write down 100 topics for articles in that timeframe, and then you’ll put them in Excel, and then assign  them a numeric value based on how powerful you think the article will be. Then you will write an article about the top 10 articles, and then you will write smaller, shorter emails about the remaining topics. You repeat this process every three months, with the goal of having a year’s worth of content, so you can focus on other aspects of your business.

Something else I really liked on the content creation was the eBook idea. If you don’t like to write, a perfect way to overcome that is to have a friend interview you on a topic that you want to write about, that you’re very knowledgeable about, have it transcribed and turn that into an eBook.

Then lastly, we talked about when you’re actually talking to an investor on the phone, and the only two times that you believe you should talk to an investor on the phone is [unintelligible [00:21:43].10] or a due diligence call, and you walked us through exactly what you will do during that due diligence call. Basically, the outcome is to figure out what their motivation for investing is, making sure you’re listening to those nuances, and figure out what they’re (in a sense) fearful of; then affirm that those fears are genuine, that there is another way, and that’s when you present your option to them, and always making sure that you stick to the time commitment.

So again, Hunter, really enjoyable conversation. Looking forward to checking out that book. Best Ever listeners, thank you for tuning in. Have a best ever day, and we will talk to you tomorrow.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF1972: The BRRRR and Turnkey Combo Approach with Ali Boone #SkillsetSunday

Ali Boone is the founder of Hipster Investments, which focuses on connecting investors to hands-off turnkey investing opportunities. In this episode, Ali talks about the advantages of working with a turkey marketing company who vets out turnkey providers to find the best, non-biased option for you. She also explains how to combine the BRRRR model with a turnkey property so that you are able to keep any forced appreciation.  

Best Ever Tweet:

“If you have the risk tolerance and you really know who you’re working with, [the BRRRR and Turnkey combo approach] can be a fantastic option for the people who want to take advantage of the BRRRR advantages but don’t have the time, energy, or interest in doing the work themselves.” – Ali Boone, Hipster Investing

Ali Boone Real Estate Background:


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.


TRANSCRIPTION

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. First off, I hope you’re having the best ever weekend. Because today’s Sunday, we’ve got a special segment called Skillset Sunday. The purpose of today’s episode is to introduce you to a new concept called– well, it’s a BRRRR model plus a turnkey approach. With us today to talk about that is Ali Boone. How are you doing, Ali?

Ali Boone: I’m good. How are you? I was waiting to see what word you came up with for this model. [laughs]

Joe Fairless: A little bit of context, Best Ever listeners, it’s the BRRRR model and turnkey. So Ali said maybe it’s the BRRRR-key model… So we didn’t know exactly what to call it. She’ll describe it in a moment. First, just a refresher about Ali. She’s the founder and owner of Hipster Investments. She’s facilitated over $18 million in real estate investing sales in the first five years of business, author of over 170 articles on BiggerPockets… And not one, not two, not three, not four, not well, five years ago, so five years ago she was on the show, Episode 40, four zero, and it’s called “Love is in the Air”. Wow, that’s a funky title to the episode.

Ali Boone: My suspicions are sky high right now. I’m like, “What did we talk about?”

Joe Fairless: I’m interested in what we were talking about, too.

Ali Boone: Someone go listen to it and report back.

Joe Fairless: Right. I, for some reason, titled it “Love is in the Air”. You can go listen to it. We’re gonna be talking about the turnkey and BRRRR method combo approach. First, Ali, if you can just catch us up to speed, what you’ve been up to, and then let’s roll right into this combo approach.

Ali Boone: Cool. Man, I’m like, “What’s happened in the last five years since we talked?” I’m still wondering what “Love in the air” is. So I started Hipster Investments, I think we’ve just hit our 7th anniversary. For anyone not familiar with the company, we’re basically a matchmaker service, we focused on turnkeys up until now. Over the years, probably even since we last talked, I realized that we actually serve a second role, which is emotional support dog.

So over the years, we’ve probably worked with hundreds of turnkey buyers at this point, and turnkey, they’re a great thing for new investors. But new investors are often a little more scared, fearful of not understanding what the process is going to be… So there’s questions, and if a challenge comes up, we really step in and help support them.

I think my favorite thing about the company and just over the now seven years that we’ve been doing this is, I’ve really tried to make it a point to just seem different, in an otherwise stuffy, intimidating industry sometimes. You’re never going to catch me dressed up or in a suit, I’m probably gonna be the first person to tell you not to buy a turnkey. I just really wanted to keep it real and really build relationships. We’ve totally done that over the last few years and I’m so proud of our team and the company. It’s just it’s been a really cool place. As everybody knows, we’re now 2019 and it’s a very different dynamic real estate-wise than it was five years ago when we talked, and seven years ago when I started the company, as far as where the prices are, where the returns are. So we’ve had to do some innovation, because the turnkeys are typically sold at market value anyways, and market value right now is on the higher end. So everybody has an interest in this BRRRR model, and now we work with this opportunity to combine the two. So it’s been a really cool thing and I’m super stoked to talk about it.

Joe Fairless: Well, before we get into it, just to crystallize in listeners minds’ exactly what you’re company does know, are you a turnkey provider? If not, how do you work with turnkey providers?

Ali Boone: Great question. I’m glad you asked that. We are not a direct turnkey provider. So in the turnkey equation, you have the turnkey investors, obviously. Then you have the turnkey providers, who are the ones that physically produce the property. They’re the ones rehabbing it, they put tenants, you buy the property from them.

My company and myself are essentially a middleman. So some people call it turnkey promoters, turnkey marketers, and typically any company in this category probably works with several different turnkey providers. The advantage to that – and obviously, I’m a little biased because I am one of these companies, but I think there’s a huge advantage to working with a company like ours, because, first of all, we don’t charge you anything to do it. But if you go direct to a turnkey provider, there’s a lot that you may not know. First of all, how do you know they’re a legit turnkey provider? Then second, if you’re looking at your overall portfolio, how do you know where to buy or what to buy. If you’re trying to do some portfolio strategizing, the turnkey providers, if you say, “Hey, where’s the best place that I should buy?” They’re like, “Well, obviously, the city that I sell in.” All of us are holding a little bias in the equation, but they’re holding an extreme amount because they only sell properties in one market. If you say, “Hey, are you a legit turnkey provider?” They’re going to say, “Well, obviously.”

There’s just a lot of unknowns in the equation. So where the middleman comes in, is we are less biased, because we have access to turnkey providers in several markets. We have the experience with turnkeys that we’ve vetted these companies. We know the signs to look for, we’ve seen everything. So we really put a lot of time and effort into a) researching the markets and b) researching the turnkey providers. We can offer that list of people to you, the investor.

Then of course, turnkey providers have never been known for their customer service skills, with a couple of exceptions. For the most part, you’re not getting your hand held by these guys. They are very good at what they do, which is the technical side of finding the properties, rehabbing it. They’re moving fast and they don’t have time to hold your hand, and we do. So we really serve as that customer service buffer. I always joke about– it’s a very common thing that at some point, every turnkey provider goes through a stage of psychosis. So if that happens or any dynamics change, we’re on your side. You’re really coming in as a part of a bigger team versus just going at this alone. So that’s why, again, obviously, I’m biased because I am one of these companies, and it’d be great if you work with me, but you get all this for free from most of the turnkey marketing companies, whether it’s mine or anybody. So that’s where all the players fit into this equation.

Joe Fairless: And how are you compensated in that role?

Ali Boone: We all make money on the seller side in the terms of a referral fee. So if I send you to one of these properties, the seller pays me the referral fee. So that’s why the buyers don’t have to pay anything. I like to be really clear about that, is there’s always thought, “Oh, well, you’re only sending me to this property, because you’re going to make a referral fee on it.” I can’t speak for all the turnkey marketers, but for me, one of the most them important things that I’ve always been huge on is, I’m not going to send you to a company that either I haven’t bought through myself or I’m not somehow so closely tied to that I would send my mother there.

Over the years, especially as my name has gotten bigger in the turnkeys, I’ve had every turnkey provider under the sun offer me referral fees. In most cases, they’ve offered me higher than what I actually make, and I’ve turned them down, because either I don’t trust their company or I don’t know their company, or for whatever reason. So just a little disclaimer on the referral fee side. But yeah, it works out great, because it leaves the investors free to shop around and figure out what they’re doing without having to make a monetary investment into it.

Joe Fairless: I solved the riddle for why I titled the last episode what I did. Should I say it now, or should everyone get to go listen to episode number 40? Your choice.

Ali Boone: Man, that is a toss-up, because I want to go listen to the episode, but I want to know the answer.

Joe Fairless: I described you as “Meet the real estate matchmaker.” So it’s love in the air.

Ali Boone: Oh, fun. I like that.

Joe Fairless: There’s the connection. Once you mentioned your mom, I remember you talked about your mom on that episode, too. You said you wouldn’t send someone to a property or company that you wouldn’t send your mom. Then I asked you, “Well, do you have a good relationship with your mom?”

Ali Boone: Yeah, I remember that actually. [laughs] And you were like, “Wait, let’s clarify. Do you like your mom?”

Joe Fairless: Alright. Let’s talk about the BRRRR turnkey model combo Frankenstein thing. What is that?

Ali Boone: I love that. If anyone listening can ever replace the BRRRR acronym, I don’t care if it’s related to turnkeys… Please, I hate that acronym. It’s so many R’s. As if that wasn’t already bad enough, now we’re adding that to turnkeys, because that’s not super-obnoxious. Okay, so here’s how this works. The regular turnkey model is this – the turnkey provider, they have access to a whole bunch of distressed inventory. They go out, they buy the properties themselves, they fund the rehabs, they complete the rehabs, they put tenants in and they have property managers on standby to manage the property once you’ve bought it. So you as the buyer, you don’t have to put a dime into this investment until closing, which means you have the opportunity to verify that everything has been done correctly, that the property is as it was advertised. It’s a really cool system, aside from your hands off anyways, but you get the chance to verify everything before you put a dime into it.

Essentially, in that equation the turnkey provider is the one holding the risk during that whole time because it’s their money in the pot. So the downside of a standard turnkey model is that you’re going to be paying somewhere around market value for this property, and there’s really not an option to force appreciation. Number one, you’ve already paid market for it anyways, and number two, the property’s already completely improved. So you can’t do that. The only way really at that point is if the market itself improves, but where we are today that that’s not a huge thing.

So the upside is you get to verify everything, you get a fully completed product, your money is not at risk until you verified everything, but the downside is you’re paying market value and you can’t force appreciation. Well as most people in real estate know, one of the greatest tools or vehicles for financial wealth is that ability to force appreciation. So the BRRRR model by itself is you go find a distressed property, you buy it, you rehab it, and suddenly the value of that property is worth more than what you put into it.

So combining those models, where the shift from the BRRRRkey is, is the turnkey provider is still involved and all the same processes are still happening as far as getting the distressed property, rehabbing it, putting tenants and yadda-yadda-yadda. Except this time, you’re the one funding it. So they’ll help you select the property, you buy the distressed property yourself, you close on the property, and then you fund the rehab. It usually happens in phases. You’re not just slapping all your money down right off, but you’re giving them the money to do the rehab. So this is where it combines the BRRRR model and the turnkey. The turnkey side of this is that you’re still mostly hands-off, other than basic due diligence and all that stuff. But now because you’re the one funding it, you’re the one who gets to keep the forced appreciation on the other end.

So let’s say you buy the distressed property for $60,000, and the rehab cost $40,000. So you’re a $100,000 in, and now it’s worth $130,000. Well, that’s your equity. So at the six-month mark, you can do a cash out refi on the $130,000, and you’re actually able to pull out more money than you would have… Oh, I jumped ahead and I’m gonna confuse it… But you’re gonna get more of your money back in your pocket. I mean, I jumped, but on the standard turnkey model, if you put 20% down on the property, which is what’s going to be required for financing, let’s say you want ten turnkey properties; well, you’re going to have to have ten sets of 20% down, because you can’t force anything, or appreciation, and all that stuff. So with this, if now the value is $130,000, but you’re only $100,000 in, you actually get to pull more money out, so you’re not out the entire flat 20%, if that makes any sense. Or if it doesn’t, somebody email me. I’ll clarify.

But the moral of the story is you now get that forced appreciation that you would have, had you done all the BRRRR model yourself, but the turnkey providers were doing that. So that’s the super, major, huge upside.

The downside is now it’s your money at risk, and that’s huge. So the key with all of this is, you have got to know the turnkey provider you’re working with. A lot of them who will offer it, because if you say, “Hey, can I fund this and you guys do the work?” They’re gonna be like, “Yeah, obviously.” But if for some reason something goes wrong, you own that property, and it’s your money in the pot, so there’s a lot at risk. I don’t necessarily recommend this model for brand new investors or people who are just going to get their feet wet because of this. But if you have the risk tolerance for it, and you really know who you’re working with, and I mean really know, it can be a fantastic option for the people who want to take advantage of the BRRRR advantages, but they don’t have time, energy or effort or interest in doing all the work in themselves. So that’s the BRRRR-key model.

Joe Fairless: With the turnkey companies, I thought they made a lot of their upside on how much they originally buy it for, and how much they sell it to investors for, because it’s close to retail. So if an investor goes to them and says, “Can I fund this and you guys/girls do the work” why would they say yes? Because I thought that’s where they’re getting most of their profits.

Ali Boone: Well, it’s situational. A lot of the turnkey providers actually don’t make as high of margins as people think they do on essentially the flip, if you want to call it that. In this model, in particular, they’ve built their profits into the rehab costs and just the general work costs and all that stuff. Because the major advantage to them– while they may not make as much per property, it’s a huge thing to be able to use other people’s money. Because that’s where a lot of turnkey companies really get limited, is they only have their own money to do this, so they can only do so many at a time. So now that they’re working with other people’s money, and they’re not having to pull from their own pot, they can actually crank out a lot more of them, and still come out on the other end with their profits [unintelligible [00:15:22].24] while serving more investors at the same time.

Joe Fairless: Okay. You mentioned, “You must really know the operator.” What are some ways to qualify the operator?

Ali Boone: First, I would absolutely hands down look for people who have already been through with them and had a good experience. We started working with a provider on this model a few years ago, actually, and we had worked with this provider prior to that for years on the standard turnkeys. We probably had more people buying from him than any provider that we work with. Everything had gone really well and he had started getting more into this model, so we watched him do it for a couple of years to really make sure that this was happening as it should. He did really well with it and everything was going great, so we suddenly started advertising these.

Then it didn’t go great. People were cautioned ahead of time that, at the end of the day, we can all vouch for it, we can all say we believe this can be good, but this is your money at risk. So you’ve got to go into it with your own due diligence, with your own confirmation. If you want to go visit the provider, boots on the ground – yes, go do that. But I would say more than anything, look for people who have already done it with them successfully and had a good experience.

I would say, one of the key things I look for– and this is even outside of BRRRR-key or turnkeys, or whatever… Whether it’s property managers, whoever. For me, one of the biggest signs is communication. I can see a huge correlation with the people who have not performed well and their communication levels. I’ve rarely seen it where someone communicates everything really, really well and doesn’t also perform. So that’s a very vague measurement, and not one you can go off by itself, but that’s something, that’s part of what I look for. But really, look for those success stories and look for people saying that this is legit.

Joe Fairless: It was working with that one individual until it wasn’t. Do you know what changed?

Ali Boone: We are all actually still trying to figure that out. [laughs] I mentioned earlier, half joking around, but I’m kind of dead serious, too – this isn’t just turnkey providers. I’ve seen it with property managers, different companies, there’s just a cycle sometimes. This could actually go into your considerations for who to [unintelligible [00:17:35].09]for. The cycle that I’ve seen with property managers, turnkey providers, everybody, is somebody in the beginning is really, really good at what they’re doing. So people start buying into them, like, “Man, this is fantastic.” So they tell everybody they know, and suddenly everyone’s buying through these guys. For the most part, these roles, like I said, they’re really good at what they do, but they’re not necessarily good at business skills or whatever it is. So quite often I’ve seen it where when the company grows too fast, they don’t manage that well. So when they get overwhelmed, they almost start getting into this desperation type of thing and they just start making poor decisions. That’s when the cycle starts. That’s when I say they flip into psychosis at that point. All of these things are very fluid.

So one thing about the BRRRR-key provider we’re working with now, he’s at the beginning stages. He’s been doing it long enough to know what he’s doing and to be very well versed in what’s actually happening, but he hasn’t grown so much that he’s teetering this outgrowth, if you want to call it, outgrowing the capabilities of the company. The guy that we worked with before, he was on the other end of the cycle. In hindsight, really looking back at this, he was past capacity, for sure. So I don’t know what in that mix exactly was the thinking of things, but his communication had really fallen off, and he’s still married… Like, what happened to this guy? [laughs] Sometimes things just kind of happen.

I know this is a sidebar, but there was a Chicago turnkey provider that we worked with – this was years ago – and it was like overnight things stopped performing, and we’re like, “What in the world is happening?” Unfortunately, in his case, he had a brain tumor. It came out of nowhere, it became a thing and he has actually since passed away. But people need to remember that everyone’s a human in this equation. And humans, unfortunately, are not perfect or consistently reliable all the time. With that said, that’s why I encourage people, really don’t go at this by yourself. Because when you have a team of people, it brings on a bigger force to really support you and your investment.

Joe Fairless: Anything else as it relates to this combo approach that we haven’t talked about that you think we should?

Ali Boone: Not that I can think of. Just on the logistics side, like I said, normally you buy the distressed property, you fund the rehab in phases. Once you verify and some percentage is complete, you put more down. Then what they’re gonna do after that – I don’t think I really got into the side – is that once the property is rehabbed, they place tenants, just like a regular turnkey situation. So then you’re actually making the cash flow also. Around the six-month mark is when you have that cash out refi ability. So your money is gonna be in the pot for about six months doing this. But then at that six-month mark, that’s when you can go ahead and start to pull that out.

Of course, I’d say that’s your strategy, make sure ahead of time that you have reason to believe you’re gonna be qualified for a loan… And worst-case, if you don’t pull that money back out, you still own the property, have the equity and have the cash flow coming in, but you don’t get that money back out. So just some random considerations. If anyone has any questions, because it’s a condensed discussion, then they can always reach out for sure.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing and then reach out to you?

Ali Boone: I actually set up a link specifically for your listeners. I did not have this five years ago. I wonder what my website looked like five years ago. So I set up a link, it’s hipsterinvestments.com/bestever. On that page that it takes you to– so a few years ago, I wrote a turnkeys eBook that we still sell. On this page, it’s going to offer you guys this eBook for free. So you can type in your email address, get the eBook for free, whereas everyone else is paying for it. Also on my page, there’s all sorts of links to connect with me and you can reach out anytime.

Joe Fairless: Oh, well, thank you for that. I will make sure that we get that in the show notes. So Best Ever listeners, you can just click the link that’s in the show notes and it will take you directly to the page. Ali, I enjoyed our conversation, as always. We will talk again in five years, of course.

Ali Boone: Hopefully sooner this time. We’ve gotta ramp it up a little more.

Joe Fairless: Yeah, we’ll ramp it up a little bit more. Thanks for talking about this approach – two methods that have proven to be effective for real estate investors in certain situations – turnkey as well as the BRRRR method, and doing the best of both worlds. I love that you looked at it in a very objective standpoint and you talked about commercial downsides and how to mitigate that as much as possible.

There’s risk in investing, there’s risk investing in turnkeys, there’s risk investing in our deals, there’s risk in any type of deal. So there’s always going to be some potential downside, so how do you mitigate that as much as possible. Thanks for being on the show. I hope you have a best ever weekend, and we’ll talk to you again soon.

Ali Boone: Sounds great. Well, thanks for having me. I’ll talk to you soon.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF1965: The Six P’s of Raising Capital Like a Pro with Reed Goossens #skillsetsunday

Reed Goossens has returned to the show with his Best Ever advice for raising capital. Reed is a real estate entrepreneur and Managing Partner of Wildhorn Capital. As a native Australian, Reed moved to the U.S. to pursue his investing career in early 2012. Reed is a qualified chartered structural engineer and project manager. Since 2007, Reed has been involved with large scale commercial construction and real estate development projects, with a combined worth over $500 million; in Australia, the United Kingdom, and the U.S.—highlighted by his work in London in anticipation of the 2012 Olympic Games.

Best Ever Tweet:
“People don’t remember a great pitch, they remember a great conversation” – Reed Goossens

Reed Goossens Real Estate Background:


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.



TRANSCRIPTION

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 that fluffy stuff.

First off, I hope you’re having a best ever weekend. Because today is Sunday I’ve got a special segment for you called Skillset Sunday. And here is the skill – a lot of you are going to like this – it’s the six P’s of raising capital like a pro. With us today to talk through that, Reed Goossens. How are you doing, Reed?

Reed Goossens:  Good day, mate. Thanks for having me back.

Joe Fairless: Yeah, nice to have you back. And as I swig water, because I was choking on a bean that I was eating earlier, I am looking forward to our conversation. And you said, “Nice to have me back” and that is because you loyal Best Ever listeners know this – Reed was a guest on this show twice, actually. One, episode 102 titled “YOUR Blueprint for Getting Started in Real Estate.” And that was a long time ago. [laughter] And then, let’s see. Well, the date — okay, I’m looking at it… It aired December 13th, 2014.

Reed Goossens:  Wow…

Joe Fairless: We’ve known each other for a while… And then the next episode, Episode 593. It’s titled “Feeling Re-entitled? GOOD, Because Here is Why it Means Big Business!” and it’s a Skillset Sunday episode.

So today we’re going to be focusing on the six P’s of raising capital like a pro. Reed’s in the middle of his book tour. Reed’s also the founder of Wildhorn Capital, a large multifamily investing firm, host of the podcast Investing in the US, and author of two books. So first, Reed, how about just give us a refresher on your background and your current focus, and then let’s dive right into the six P’s of raising capital.

Reed Goossens:  Sure. So for everyone who didn’t listen to those many years ago, I’m originally from Australia, I moved out here in 2012. I just quit my job in Aussie and just wanted to follow a dream; I moved to New York City, I fell in love with an American girl, I fell in love with New York City. I came here, didn’t have a job, didn’t go to school [unintelligible [00:03:22].05] I found a job pretty quickly, and I think within six months of moving to United States, I had purchased my first triplex for 30,000 bucks. The barriers to entry are completely different in Australia than they are here in the US.

My background’s in structural engineering, and since 2012 I now control with my business partner Andrew at Wildhorn a $150 million worth of multifamily real estate, and I’ve been really enjoying the journey. I’ve obviously got my podcast as well and a couple of books out.

So that’s really the focus in the last seven years. And my whole mission and little motto is, “If I can move 10,000 miles across the globe and achieve financial freedom through US real estate, then so can the average Americans. Just gotta get off the fence.” So that’s a bit of the elevator snapshot, pitch, or whatever else you would call that.

Joe Fairless: What’s your latest book about?

Reed Goossens:  My latest book is called 10,000 Miles to the American Dream. About three and a half years ago I brought together a group of seven other Aussies – all Aussie blokes – who had made a pilgrimage to come across the Pacific and make a go over here in the United States. And I started a mastermind. Through that mastermind we just did a monthly call at the beginning, we met up a few times, and then we said, “Hey guys, we need to write a book, share our story with the world.” And each one of us wrote a chapter, and that book has just been launched on July 4th, 2019. We just started the book tour in Asheville, and it’s going really, really well. It’s called 10,000 Miles to the American Dream, our story of financial freedom, and again, there’s a lot of Aussie-isms in there. And if Aussie blokes can move halfway across the world and achieve financial freedom, then so can the average American.

Joe Fairless: Are there only eight chapters?

Reed Goossens:  There’s only eight chapters, but it’s quite dense.

Joe Fairless: Those are big, big chapters?

Reed Goossens:  They’re dense chapters.

Joe Fairless: How did you all divide and conquer? Are they chapters that stand alone or is there a flow to it?

Reed Goossens: Good question. Surprisingly, we all had our different niches in real estate. So one of the guys is into real estate technology. He came out here and started a real estate technology firm in Silicon Valley. Another guy is into mobile home park investing, another gentleman has started a complete fix and flip business in Texas, I’m also involved in multifamily and a bit about branding and raising capital… There’s a few other people who know about the philosophy of growing wealth and how to grow wealth… So really just different aspects. There’s a hotel investing chapter in there as well, because one of the gentlemen is in hotels in San Francisco… So a really wide range of stuff, but in and around my story of how I brought everyone together and really was just like, “Okay, let’s have a beer”. Being an entrepreneur’s kind of lonely, so I want to surround myself with other Aussies who are doing the same thing, so that’s what we did.

Joe Fairless: You are on your book tour now, you have a presentation, and that is the six P’s of raising capital like a pro.

Reed Goossens:  Yep.

Joe Fairless: I would love to learn that.

Reed Goossens:  Sure. So through just observation, when I first moved to United States, I saw all these people, including yourself, Joe, just emulating these six P’s. And I sort of sat down and wrote an eBook, and I actually started with four P’s, and then I added two more to them. So without further adieu, let’s just dive into it.

The six P’s are as follows – it’s Professionalism, Pitch, Practice, Profile, Platform and Patience. And I’ll go through them one by one. The professionalism part, the first P, is really about being professional. A lot of people are concerned and have these mindset barriers that “I can’t get involved in real estate because I don’t have all these years of experience.” Well, I mean to tell you that no one is born with 10 years or 15 years’ worth of real estate investing experience. We all have a story, we all have a journey… And that is where you have to lean on past careers or past journeys to bring a professionalism to the table that people are gonna wanna invest in. And that really starts by just rocking up, being punctual, dressing correctly, being on time, making sure you’re articulate in trying to get across a message. [unintelligible [00:06:40].13] people, one that some people tend to overlook, and it’s in and around mindset. The second P–

Joe Fairless: Well, a question on the professional part and dressing appropriately. So should everyone wear suits and ties, or really fancy dresses? …I don’t know, what women wear to make them look professional, but business pants or whatever?

Reed Goossens:  No. It’s uniquely you. This whole six P’s is about unearthing what is you, and really looking deep into yourself, and looking deep into what your brand is going to be, to then emulate it to the world. You obviously don’t look like a slob, but look at the Mark Zuckerbergs of the world. They coined the fashion of just wearing a hoodie and jeans on stage. So definitely, we live in a world where professionalism means a different bunch of things, and looking one way is just one part of being professional. Obviously, the way in which you host, your presence, being communicative with your audience, with your investors, and really laying the foundation to be a thought leader in your sphere.

Now, you don’t have to go out and be the next Tony Robbins or the next Joe Fairless, but you can be a key person of influence within your sphere, and that’s what you have to realize – that we’re all standing on a mountain of value, and that value needs to be shared with your sphere, and people will come to you as being the real estate expert, and that’s really the whole purpose of the first P.

Joe Fairless: Okay. Pitch.

Reed Goossens: Pitch. Awesome. So pitch is – I love this – pitching effectively is really quite hard, and in the chapter that I wrote, it’s all about pitching effectively. I’ve coined this little phrase – Pitching, there’s three levels of pitching… There’s social pitch, there’s a scheduled pitch, and then there’s a sales pitch. A social pitch is where you deliver that in a social setting. People never think when they leave a networking event or anything like that, that “Oh, geez! That was a really good pitch!” A really good pitch is really a good start to a conversation.

So the way in which I’ve formed the pitching formula is really quite simple. When you’re in a social setting, you want to have your social pitch ready, and we’ll talk about that in 30 seconds… But then, from a social pitch you want to get out your phones, and you want to get on a scheduled pitch, which is maybe a coffee or a beer, or get on the phone together… And that will be at some later point in time. And in that intermediary time, you’ve got to send them the pitch deck, a little bit of data about yourself, maybe direct them to your website…

And then the final pitch is the sales pitch, where you have a live deal and you’re answering investor questions and objections or whatever that might be. So pitching effectively and the whole ecosystem of pitching is really going from social pitch to scheduled pitch to sales pitch. And when we’re in a social setting, the whole Martin Luther King pitch, the “I have a dream”, you’re not going to change someone’s mind with one pitch, and your pitch will need to be practiced thousands and thousands of times. And like with Martin Luther King, he practiced it many, many times across the South before it became on the Washington Monument. And that’s the way we all have to pitch as well.

So I’ve come up with this little way of–  it’s a little form. It’s called Name, Same, Claim to fame, Goal of the Game. And I’ll repeat that, again, its Name, Same – so I’m Reed Goossens, I’m a real estate investor. My claim to fame originally when I first moved to United States was that I moved across the world, quit my job in Australia, and I moved to the United States to follow a dream. My goal is that I want to help 10,000 International folks realize the benefits of investing here in the United States in order to become financially free. So there is an effective pitch. It’s less than 30 seconds, it engages someone in a way that they wanna have a follow up conversation.

You never want to be pitching in a way where in Australia (or the British way) they pat you on the shoulders,  and go “Well done. Good luck.” You want to evoke emotion. So when you’re pitching at someone, people like to hear something big and bold. Like the Martin Luther King “I Have a Dream” speech. It was emotive, it got people — it stirred emotions within someone. And you can have obviously positive and negative emotions, but you want to be able to become emotive, so people are engaged in what you’re trying to do in order to get to a scheduled pitch, to then get to a sales pitch.

Joe Fairless: I love the fame part, because it really makes us think about what makes us interesting to other people. And if we’re interesting to other people, then people will tend to gravitate to us. Quite frankly, we’ll just be in a more enjoyable conversation, because your journey is interesting – I’m sure you enjoy talking about your journey – and other people will find interesting as well. What’s something that people mess up on within the pitch category?

Reed Goossens: So over the weekend, I just did a whole-day seminar on it, and people waffle. And the whole idea of name, same, claim to fame, goal of the game – it’s about getting that waffling to a very concise 30-second opener. Essentially, you’re trying to open a conversation to lead into “Oh, so you moved halfway across the world? What’s that all about? Why?” People don’t remember a great pitch, they remember a great conversation, and that’s really what you want to have. A lot of people waffle on for too long and people are standing there who are receiving a pitch, scratching their head like, “What are you? Are you an investor?” You never want to be pitching someone and they’re scratching their head going, “I don’t know what you do or what you are.” So the name, same, claim to fame, goal of the game is a concise way of getting to the point really quickly.

Joe Fairless: Cool. Practice? Is that next?

Reed Goossens: Sorry. Professionalism, pitch, profile… Would you want to talk a little bit about– it’s 2019. You’re going to be on Google. People are going to Google you. So that is where people are going to have to say, “Okay, well, I’m going to invest with this person”, so I’m gonna have to have a website. I’m gonna have to professional images taken of myself – headshots, logos. All that stuff contributes to bringing that professionalism across to the table.

It’s not a really massive P, but it’s a P that is sometimes overlooked, and making sure that your profile is coherent across all different social medias – LinkedIn, Facebook, Instagram – that your message is the same is really important… And making sure you have something to say on your website, so when people come and want to find a little bit more about you, they know where to go. And for whatever reason, people like to see things written down.

We live in a day and age where a website is essentially the new business plan. So people want to go to your website, they wanna find out who you are, they want to read a little bit more about you, they want to read some blogs that you might have done, your thoughts on x topic. So it’s really important to have a coherent profile, and that starts with headshots, logos, websites and stuff like that.

Joe Fairless: Okay, it makes sense.

Reed Goossens: Next one is the platform… The platform being about how you’re going to get your message out to people. Right now we’re talking on a podcast, and I know Joe you taught me in back in the day that you can leverage certain mediums like YouTube or iTunes. or you can leverage writing articles. Whatever you do, you have to be consistent and you’ve got to choose a platform in which you’re good at.

For me, I didn’t particularly like writing, so when I started my podcast – audio always came really quite naturally to me. I tried videos, videos were okay… But whatever platform you do choose to communicate with your investors with, you have to be consistent. So whether you choose just to do a simple monthly newsletter, with a couple of blogs that you’ve written – fantastic. But you have to be consistent with it. I think the biggest thing people fail is they start something like a podcast or a blog, and they just give up after six months. And Joe, you know this, after doing 700-800 episodes, how important consistency is, and choosing that right platform and medium to get across your message to your audience. So that’s the platform P.

Joe Fairless: Have you started anything from a platform standpoint that fizzled out and you took a different direction?

Reed Goossens: Yeah, videos. I had a YouTube channel, it’s not very popular… But I tried to go once a week on the top of Culver City Hill and try to set up a camera and try to not have bags under my eyes… It was a lot.

Joe Fairless: [laughs]

Reed Goossens: It was just like, “Oh, this is such a pain… And then I’ve gotta edit the bloody thing…” It was just too much, so I now just record some video with my podcast, and I just drop the podcast… But it just didn’t work out as successfully as I thought it would. It just takes a lot more effort with the video space, so I niched into being more in the audio space.

Joe Fairless: Okay.

Reed Goossens: So we’ve got professionalism, pitch, profile, platform… Practice. So the practice is about going out and doing that scheduled pitch with your investors, in a circle of people who know you best, so your friends and your family. It’s sitting down for coffee and presenting them a pitch book or a pitch deck. Essentially, it’s a business overview of what you’re trying to achieve. In real estate we are trying to invest in whatever the specific asset class that you’re in, so it might be multifamily, it might be mobile home parks… Whatever that is, there’s something that if you hand a pamphlet or a brochure to an investor over coffee, it makes it real for them. And it really is taking that website that you’ve already created and putting it into a pitch deck, and outlining you core values, your mission statements, what you’re trying to do in terms of your investment strategies, how the investment’s gonna work out for the investor, and maybe some structuring questions, maybe a hypothetical or an actual case study if you’ve been involved in any deals… And that is where you sit down and you practice with it. And you practice, practice, practice, practice.

And I remember when I raised my first bit of money with you, Joe, I thought to myself, “Geez, I’m gonna raise half a million bucks” or whatever it was, and I went out and approached 50 people, and only three people invested. And it showed how much I need to double down on getting to grow my audience. But it was a real cold shower in terms of that practice part of it. You have to be consistent with it. If you think “I’m going to approach 20 people and I’m going to get all 20 people to invest”, well, you’re wrong. It’s gonna take a couple hundred of people for maybe three or five percent of those people to actually invest in your deal. So having that mindset going on the front end… And that’s the practice part of it.

Joe Fairless: And lastly?

Reed Goossens: Patience, my friend.

Joe Fairless: But we want it now! We want it yesterday!

Reed Goossens: Of course, right? We always want it yesterday. But like anything… Tony Robbins famously says, “You overestimate what you can achieve in a year, but you underestimate what you can achieve in a decade.” And ten years ago, I picked up the book Rich Dad, Poor Dad. Now I’m living halfway across the world and I control $150 million worth of real estate. I don’t say it to boast, I say it because it’s wow. I pinch myself every day. I work for myself. I’m like, “Holy crap. This is incredible.”

So patience is a virtue, and it takes time and it’s a snowball effect, and combining with the five other P’s, it will take time and it will slowly build. You’ll feel like you’re pushing a boulder up a hill, but you will get to the top. Then once you get to the top, it will just cascade down the other side.

Joe Fairless: On the patience front, how do you know if you should exercise the patience or you really are being a lot slower than where you should be?

Reed Goossens: Yeah, it’s good question. We’re all trying to run our own race. With the social media age, we’re looking at other people and going, “Oh, I wish I was doing that. I wish I was doing this.” It is about running your own race, it is about looking at your own situation and understanding “Okay, well, I’ve got a full time job. I’ve got a family to take care of. I can squeeze in a little bit of real estate investing or building my brand, say ten hours a week.” Whatever that is, you have to be consistent with it.

So that’s the patience part of it, the patience side of it, because life happens. You’ve gotta keep food on the table, you’ve gotta keep a roof over your head. For many years I had a W-2 job plus trying to do deals on the side, plus trying to find investors… At one stage, I thought, “Jesus, it’s never going to happen”, but I had to have that mindset that it will take time. And anything worth building will take time. So that’s really the patience part of it.

Joe Fairless: Thank you so much, Reed, for sharing the six P’s of raising capital, and best of luck on your book tour. I have really enjoyed our friendship and looking forward to continuing to– I’ll interview you in five more years. That way, we’ll have our ten year anniversary of when your first interview aired.

And really, truly, thank you for being on the show. I hope you have a best ever weekend. How can the Best Ever listeners learn more about what you’ve got going on?

Reed Goossens: Easy. Jump over to reedgoossens.com. And Joe, thank you so much for allowing me to come back on the show.

Joe Fairless: Have a great weekend, and we’ll talk to you again soon.

Reed Goossens: Bye.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF1945: Doing 16,000 Transactions, Acquiring $0 In Debt with Jack Butala and Jill DeWit

Our two guests today have been building a real estate investing business as partners for around 10 years. We’ll hear how they have divided up their roles and get any tips they have for forming a successful partnership. They will also tell us about some of their typical deals, and Joe will dig in to bring us some of the specifics. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“You got to get a feel for what kind of property sells more there” – Steven Jack Butala

 

Steven Jack Butala and Jill DeWit Real Estate Backgrounds:

  • They have been investing in real estate since 1999
  • Built a $24 million land resale empire, completing close to 16,000 transactions without incurring any debt or leverage
  • Based in LA, CA
  • Say hi to them at https://landacademy.com/ or www.buwit.com
  • Best Ever Book: Showing Up for Life

 


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.


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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today – Steven Jack Butala and Jill DeWit. How are you two doing?

Jack Butala: Excellent, Joe.

Jill DeWit: Great!

Joe Fairless: Good, I’m glad to hear that, and looking forward to our conversation. A little bit about their company – they’ve been investing in real estate since 1999, built a 24-million dollar land resale empire, completing close to 16,000 transactions without incurring any debt or leverage. Based in Los Angeles, California. With that being said, do you two wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jack Butala: Yeah, Joe, it’d be great. I cut my teeth probably 25-30 years ago as a commercial real estate broker, and quickly learned that I couldn’t stand to cold-call. So I devised this system to collect data for commercial real estate property owners, and back then – this is before the internet – I put together a system where I would fax them overnight blind offers for their property, with a pretty substantial degree of immediate success.

Fast-forward now to 2019, I got sick of doing those complicated transactions back then, and decided that buying land, and specifically unwanted land, for much lower than I could resell it for on the internet was the way to go… And here we are.

Joe Fairless: Got it, okay. And what were you doing when you started to collect data on property owners and fax them blind offers? How were you getting that information?

Jack Butala: It’s a great question. I’ve learned of my own interests – and I guess I would say now obsession – with data… And back then, the highest quality data that you could find (again, before the internet) was about healthcare-related office complexes, and nursing homes, and assisted living type facilities. For whatever reason, there was a tremendous amount of data collected on that, and with associated fax numbers.

So I literally took a phonebook-size book and input it in Excel and through some programming – I call it a form fax, but it’s really like a mail merge fax situation… So right around 2003 I learned about RealQuest Pro, which was back then the first American Title’s data arm. Since then, we’ve become license providers of that and several other data sources… But for us, it’s all about manipulating sending offers to owners, and getting the responses, and having all that traffic come back to you, and deciding what properties you wanna buy.

Joe Fairless: So how do you two divvy up responsibilities?

Jill DeWit: Good questions. I always say it’s “Make my phone ring”, whether it’s on the buy side or the sell side. When I came into this I had a very heavy sales background, and I am not afraid to pick up the phone, answer the phone, talk to people… Jack and his data – he’s not really into talking on the phone; he’s more about just getting it going, getting a response. So that’s what he does – he gets the offers out, he prices them, he makes sure it’s perfect, and then my team and I come in on the buy side, carry them all the way to completion, and then same thing on the sell side. That’s what my forte is.

Joe Fairless: Got it, okay. How long have you two been partnered up?

Jill DeWit: Gosh, going on — it’s a little over ten years now.

Joe Fairless: Tell us about a typical transaction.

Jack Butala: By the way, we buy land, we buy houses, small apartment buildings… So it’s not just limited to land any longer. But a typical land transaction for us – I have the spreadsheet  now of what we have on the table… I’ll send out (I don’t know) 10,000 offers ballpark… We own a company called Offers to Owners, which is a bulk mail printing company, and we obviously provide a huge discount to ourselves, and to our Land Academy and House Academy members.

So I’ll send out 10,000 offers, it costs probably $3,000 to $5,000. For every 300-400 mailers we send out, we end up buying a property. So a typical deal for us would be — I’ve just reviewed one right before this call… It was a 40-acre property in South-Eastern New Mexico, just on the outskirts of town, surrounded by structures and stuff like that, for about 4k-5k. In that particular case we’ll resell the property through the MLS, probably, for about 20k, maybe 22k.

Joe Fairless: 22 an acre?

Jack Butala: No, it’s 40 acres, we’re buying it for about $5,000…

Joe Fairless: Total.

Jack Butala: …and we wholesale it for about $22,000.

Joe Fairless: Got it. I need to shift my gear into New Mexico prices. [laughter] You two are in L.A. so I’m sure you had to do the same thing.

Jill DeWit: Exactly.

Joe Fairless: Alright, $22,000 for 40 acres. So how are you finding these leads? What’s that process?

Jack Butala: I very simply take the entire universe of properties in a given county… If you can imagine, there’s houses, land, all kinds of stuff that you can dream up in there, and I scrub out everything that I’m not interested in for that particular mailer. In this case it would be houses, strip malls, any commercial property, any property owned by a municipality, cemeteries, hospitals, on and on and on. There’s a massive list. We actually have built algorithms to do this for us.

So what I end up with is a good, clean scrub of property that are owned by individuals, or let’s say LLCs, and they get an offer from us. It’s kind of more art than science at  a point, where you have to price that. Our whole goal is to get them to sign the offer and send it back, or to call back and say “$5,000 doesn’t work, but $6,000 might work.” And then we go from there.

Joe Fairless: What are you scrubbing for exactly, in order to get from the initial list to the scrubbed down list?

Jack Butala: Likely sellers.

Joe Fairless: Okay.

Jack Butala: John and Sally Smith are very likely sellers. If they have a 40-acre property or a 20-acre property in the county that I’ve chosen, they are a very likely seller.

Joe Fairless: Why?

Jill DeWit: [unintelligible [00:06:56].17] We’re not trying to seek out any particular thing, it’s just that they’ve owned it… We don’t even look for how long they’ve owned it. And the whole goal here – the best part of my job is that people are calling back because our offer is in their ballpark. He takes all the work out of it. I’m not sitting here going down and cold-calling everyone in a county, saying “Do you wanna sell? Do you wanna sell? Do you wanna sell?”, or do I send out a generic offer that says “If you wanna sell, call me”, because then again, everybody will call back and they’ll all want top dollar. That’s not what we do.

We send out real strategic, professional, respectable offers to these sellers. They get them, and they open them, and they read them, and they say “You know what, Sally, I even forgot we owned this. Aren’t we still paying the taxes on it? We’re not gonna retire there. The kids don’t want it. I’m calling.” And then I get nothing but quality people. Again, he liked my price, it’s in their range, and we’re just gonna buy it and solve a problem for them, usually.

Joe Fairless: And what makes them likely sellers?

Jill DeWit: Usually because it’s paid for. That’s really what we look for. And most of the thing is rural, vacant land. It’s very hard to get a mortgage on. Most of it is paid for.

Joe Fairless: But you said that you don’t look to see how long they’ve owned it, so you don’t necessarily know if it’s paid for or not, right?

Jack Butala: What makes them a likely seller is this… Imagine this – if every single person who owns a piece of rural, vacant land that’s not developed, in a given county, with the exception of government entities, and any individuals and LLCs, let’s say, everybody gets an offer from us; every single person. And the likely sellers choose themselves. So we just blanket the whole thing with an actual offer.

So instead of us waking up in the morning to go find all these likely sellers, they find us. Jill wakes up, sits down at her desk, and there’s many envelopes literally to open that have signed offers in them, or her mailbox is full [unintelligible [00:08:51].20] to return the calls. So they find us. I blanket it.

Joe Fairless: And how do you determine how much to offer to make that a fair offer, as Jill mentioned?

Jack Butala: That’s an excellent question. It’s very different for specific product types. Three major product types that we deal in now are rural vacant land, infill lots, which are properties in an urban setting, and then houses. We buy tons of all  three.

Rural, vacant land is a little bit more tricky to price, because you have to do a lot of research about what’s on the MLS, what’s on LandAndFarm.com, what’s on LandWatch.com… We own a site called LandPin.com… You’ve gotta get a feel for what properties sell for there. We try to come in at 20% or 30% of the actual retail price, and sell it for maybe 50% of its worth.

Joe Fairless: Okay. So that is with rural and vacant land. What about infill lots and [unintelligible [00:09:42].29]

Jack Butala: Infill lots is a function of what house values are in the very immediate area. Infill lots and houses are really exciting from a data perspective, because there’s so much data available in this internet age we’re in. So if a house sells for $200,000, if you asked any homebuilder, they’ll tell you they’re very will to pay 20% to 25% for the land on a house that they build. So if it’s $200,000, 20% of that is about 40k. I try to get in at 10k or 15k and mark it up about 10k and really quickly sell it to a homebuilder.

Joe Fairless: Okay.

Jack Butala: For houses it’s even easier.

Joe Fairless: So 20% to 25% of the value of homes equals the land value, as a rule of thumb.

Jack Butala: That’s right.

Joe Fairless: Oh, interesting. Okay. How does that fluctuate, if at all, from where you live to where it sounds like Jill is originally from?

Jack Butala: Ha-ha! Well, Jill and I started the company in Arizona, and we lived in a house that was about —  I don’t know, we don’t live in very logical areas to do this in. [laughter] We live right on the Pacific Ocean, and I’m not sure that this whole model would work there. [laughter]

Joe Fairless: Right, right. But as far as that percentage though, just to estimate, would you say L.A. is still within 20% to 25% of home prices (the land equals) compared to Des Moines, Iowa, or something like that?

Jack Butala: I don’t wanna complicate this for your listeners, but…

Joe Fairless: Please, try. That’s fine.

Jack Butala: Okay. [laughter] There’s a construction cost component. In my mind, the rock bottom new construction cost is gonna be about $100/foot. If you’re really pulling out the stops, it goes to maybe $250, even $300/foot. So if you take our neighborhood, rural, vacant land goes for about 4 million bucks a lot. And when you pull out the stops and build a 3,000 sqft. house for $300/foot, that’s a million bucks. So now you’re sitting at a theoretical completed asset at 5 million dollars, that’s probably worth 7.

So you have to go in — there’s a lot of analysis upfront that I do when transactions happen in different markets. But I’ll tell you, we do really well in Phoenix, Las Vegas, Tampa… Those are the markets that are really high growth, in-bound population increase  environments, and the real estate component of cost of living is very low.

Joe Fairless: What are some markets that you have been in, but you’re not longer in?

Jack Butala: I’m from Michigan. In all of Michigan I can’t get to work with any [unintelligible [00:12:21].14] and it baffles me. I’m not sure why.

Joe Fairless: Well, I was gonna ask you that, but you don’t have any answer to it [laughter] Okay…

Jack Butala: I’m not alone. I’ve really tried to figure this out.

Joe Fairless: Yeah… Because you find some land, and then you just can’t find the buyer, or you can’t find the land, or what?

Jack Butala: The yield – I micro-manage our mailer yield, and for whatever reason our yield is just atrocious in Michigan. I can send out thousands of letters and just not really get any real responses.

Joe Fairless: Even Grand Rapids area?

Jack Butala: Yeah. Seth Williams is in our space. I don’t know if you’ve interviewed him or know him…

Joe Fairless: Yeah, of course.

Jack Butala: Seth is really a hands-on — he’s got a 616 area code phone number, and he does okay there… But we do more of a shotgun approach to all of this than a rifle approach.

Joe Fairless: Got it. And what’s a market that you weren’t in, but you have now had a lot of success in? …if there is one.

Jack Butala: Northern and Central California are on fire for us.

Jill DeWit: Yeah.

Joe Fairless: Okay. And so what’s a typical deal there look like? Or maybe a specific example would be even better…

Jack Butala: I can give you a couple of examples. We’re doing several transactions in Lassen County right now. There seems to be a lot of subdivided 20-acre properties there. We buy them for 2k-4k each, and wholesale them for 10k-12k, maybe 15k, that week.

Jill DeWit: Easy and fast. They love them. Modoc is good… And we have some other great areas up there.

Jack Butala: Yeah.

Jill DeWit: It’s [unintelligible [00:13:44].08] and it’s pretty, and people love it.

Joe Fairless: And Jill, switching gears a little bit to your area of focus – what are some typical objections that a seller has, and how do you resolve them?

Jill DeWit: Usually, it just comes down to the situation… Like, the kids will find it, and our only issues are sometimes undoing trust issues, and just kind of finding people sometimes. And then we can undo that. I have access to everything, and a lot of our deals [unintelligible [00:14:15].03] two titles, so they take care of them right there. But even before I get a two-title, I wanna make sure everybody’s alive and able to sign…

Jack Butala: There’s a huge misconception out there, Joe, about willing property to your heirs. If I own a piece of property and I pass away, and I have a will that says “I’m gonna give all my stuff to my kids” and the property remains in my name, and I pass away and the kids say “Great, I own the property”, they actually don’t. Depending on the state, there’s a huge legal component to this.

The kids learn this eventually, because maybe a potential buyer before us gets in there and they say “You know what – there’s nothing we can do on this without legal action.” So we get a lot of calls like that… And we can undo and solve a lot of those problems. Over the years we’ve become experts at that.

Joe Fairless: And how do you solve that?

Jack Butala: It’s very, very, very geographically specific. In California it tends to be a lot easier than certain states. You need a death certificate and an affidavit and you can go through it. And most title agents can do it – or will do it – for you.

In Arizona it takes a probate action. It’s almost prohibitive. You have to almost do a quiet title action to undo it. So consequently, if you go to Arizona, there’s a lot of back-tax property there, which is a whole different animal, because people just aren’t willing to go spend 2k-3k to get an asset that’s worth 2k-3k in their name. So it’s really geographically specific.

Joe Fairless: Got it. Taking a step back, based on y’all’s experience, what is your best real estate investing advice ever for investors?

Jack Butala: Go ahead, Jill.

Jill DeWit: I have to think about it… My best real estate investing advice? Learn how to use data to do the heavy-lifting, which is everything that Steven has taught me… And then everything works out. We joke about “Money solves all problems.” Man, when you buy an asset, use data, so you don’t have to do a lot of work. Smoke out the great deals, buy something really cheap. You can market it all wrong, and do very well.

Jack Butala: We just did a podcast with this title, and I answered this exact question… I like to say it like this – good acquisitions solve all problems.

Jill DeWit: Yup.

Joe Fairless: Right. It makes sense.

Jill DeWit: [unintelligible [00:16:15].29] Even though I’m the sales part of the team and I really love being in charge of all that, I get excited on the buy side. And now one of the roles that I’ve taken on is we do deal-funding for our Land Academy and House Academy members, and it kind of rolls through me… And I approve the transactions and fund the deals. And I just get excited on the buy side, because we know how it’s gonna go; you know when you bought it, “Wow, this is  a home run. Quickly, let’s close this deal. We’ve gotta own this” kind of thing, and it’s the greatest.

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

Jill DeWit: Yes!

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

Break: [00:17:02].26] to [00:17:37].14]

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

Jack Butala: The best book I’ve ever read is not a real estate book at all, it’s called Showing Up For Life. It was written by Bill Gates Sr. The Bill Gates that we know – his father.

Joe Fairless: Got it.

Jill DeWit: Wayne Dyer.

Joe Fairless: Oh, yes.

Jill DeWit: Everything Wayne Dyer. I have him around the house all the time.

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

Jack Butala: The biggest mistake I’ve made – and this isn’t transaction-specific – is not believing in marketing, specifically internet marketing, and I got my butt handed to me around 2009 because of that. It had almost sunk the ship, but luckily we cured our ways.

Joe Fairless: And will you elaborate a little bit more on that?

Jack Butala: I had a single marketing channel. We were selling a tremendous amount of property on eBay. We were doing about 30 transactions a day on eBay, and the bottom fell out of that market and it was a classic example of a single point of failure/all your eggs in one basket… And all we had to do was just plan for a downturn and have a bunch of — now we probably have 20-30 channels of marketing through social media, on our websites, and a network of buyers, and a massive email list, and all of that.

My advice to somebody who’s brand new is to really develop those networks and start now.

Joe Fairless: What’s the best ever deal you’ve done?

Jack Butala: The best deal I ever did was a deal early on where I purchased a ton of property right at the Grand Canyon, for a very small amount of money, and resold it about six months later, and we netted over – this was really early in my career – almost $900,000.

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

Jill DeWit: Land Academy.

Jack Butala: Yeah, we started a whole company… Jill, go ahead.

Jill DeWit: We’ve spent the last couple of years really growing, and even put our own acquisitions and things on hold a bit, to really give back and help the planet. We have hundreds of members now, several that we know, that are making more money than us every month, and that’s the greatest feeling ever. We have taught them everything that we do, and they are killing it.

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

Jill DeWit: Buwit.com shows all of our companies – Land Academy, House Academy, the direct mail company, how to get data, our online communities… Tons of free stuff. Or just go to LandAcademy or HouseAcademy, our podcast, and videos on YouTube, and all kinds of good stuff.

Joe Fairless: Awesome. Well, you two, thank you so much for being on the show, talking about your business model, what works, what doesn’t work, what you have in place now to make sure you’re set up, so that if one marketing channel does not go according to plan, then you’ve got many others that can pick up the slack… And also, just the overall approach for how you’re finding sellers and how you think about making offers and the type of offers that you make.

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

Jack Butala: Thanks, Joe. A pleasure.

Jill DeWit: Thanks.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF1880: Lifetime Entrepreneur & Real Estate Investor Syndicates Apartments Full Time with Gary Lipsky

Gary had multiple businesses before getting into real estate investing. Once he started with real estate investing he knew that he wanted to syndicate apartment communities and found a way to start doing that. Now, 1500 units later he’s on the show to tell us how he’s scaled to the level that he has. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“We had closed two deals with that broker before, so that helped” – Gary Lipsky

 

Gary Lipsky Real Estate Background:

  • Founder/President of Break of Day Capital
  • Syndicates B & C Class value add apartment opportunities in high growth population areas
  • Owns over 1500 units both passively and actively
  • Based in LA, CA
  • Say hi to him at https://qccapitalgroup.com/
  • Best Ever Book: Millionaire Fastlane

 


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.


TRANSCRIPTION

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

Gary Lipsky: Very good, thanks for having me.

Theo Hicks: Thanks for joining us. I’m looking for the conversation and talking about what you’ve got going on in your real estate business. A little bit about Gary’s background – he is the founder and president of Break of Day Capital, syndicates B and C class value-add apartment opportunities in high population growth areas. I’m looking forward to learning more about that investment strategy.

He is both a passive and active investor, owning over 1,500 units. Based out of Los Angeles, and you can say hi to him at BreakOfDayCapital.com. Gary, before we dive into the meat of the conversation, can you tell us a little bit more about your background and what you’re focused on now?

Gary Lipsky: Yeah, I’ve always been an entrepreneur my whole life. I was shoveling driveways, and [unintelligible [00:02:19].20] growing up in New Jersey. I owned a restaurant delivery service in college, and co-produced three independent films in my twenties. I started an after-school business in Los Angeles and we served over 9,000 students daily… But I always knew real estate was going to get me to where I wanted to be. When I looked around, the wealthy people either had their own businesses, or owned real estate, and usually both.

So when I even bought my first residence, I always was looking for value-add opportunities, and I kept finding houses that I can add value to, and upgrading and moving into a nicer community for my kids. And I took advantage of the tax benefits, and then was able to leverage that and turn it into some single-family rentals, and passively investing into real estate. Now, like you said, I own over 1,500 units, and now I’ve gotten into real estate full-time a little over 2,5 years ago.

Theo Hicks: Of those over 1,500 units, what percentage are you a passive investor and what percentage have you syndicated yourself?

Gary Lipsky: Passively I would say about 90%. I have a 76-unit deal that I was a key principal on in Crowley, Texas, and a 42-unit in Tucson, and I most recently signed an LOI for a 128-unit in Phoenix that I’m working on.

Theo Hicks: So the 76, 42 and 128 – those are your active deals.

Gary Lipsky: Yeah.

Theo Hicks: Okay. Let’s now talk about passive investing first, and then we can dive into the active investing. A pretty common question that I see a lot is how do you — not find a syndicator, because it’s pretty easy to find a syndicator to invest with these days, but what’s your process for vetting a syndicator? What would your advice be to someone who is doing their first deal? There’s hundreds and hundreds of syndicators out there these days, so what are some things they should be looking at?

Gary Lipsky: It does get overwhelming in the beginning, because you just don’t know what to look for. I would look at a lot of deals, and learn from the different perspectives to see how are people underwriting, get to know the sponsor… I have some friends that even go out – they’ve driven across country to meet with all the different sponsors to vet them before investing… Which I love. I did not do that, but that’s one strategy.

So once you start looking at a few different properties in the same area, you can start seeing the differences, and seeing what reversion cap rate they’re using, how they’re doing the value-add, does it make sense, do the comps support it…? So you start getting a feel; the more deals you see, the better acclimated you get.

Theo Hicks: So those are some things to actually look for that they’re doing, in order to pick them; so make sure they’re doing things properly. Are there any red flags you can think of, where if you’re talking to a syndicator and they say something, or you see something, and you’re automatically like “Whoa, whoa, whoa… Something is amiss here. I’m definitely not investing with this person.”

Gary Lipsky: Yeah, it’s surprising how many sponsors are wary of answering questions, or don’t answer it in a way that — it’s okay if you don’t know the answer; just get back to me and give me the right response… Versus just saying something where you don’t know the right answer, or if they start backing away from the question… When you converse with a sponsor, you start getting a feel “Do I trust them or not?” That could be a red flag, if you don’t feel like they’re being completely honest.

Theo Hicks: Yeah, I actually talked to a passive investor, and he would purposefully ask questions that he knew the answers to, but he just wanted to see how they would reply to it, just to see if they would say “Hey, I don’t know the answer to this, but I’ll get back to you”, or they’ll start BS-ing a response… So that’s definitely a red flag.

And again, I’m not sure if you’ve ever invested with someone where it’s their first deal, but I guess the question is would you ever invest with someone who has not raised capital before, or would you only invest with someone who’s done 10, 20 syndicated deals already? So I guess the question is if I’m a syndicator, I’ve maybe done a few multifamily deals on my own, what would be something I would have to do in order to have you invest in my first syndication deal? Or is there nothing I could do?

Gary Lipsky: Well, that’s the exact experience that I had to go through as a first-time syndicator. So what I’m looking for with a syndicator who might not have done any deals before is had they run businesses before? Because if they have, then they can use that experience to translate into real estate, particularly multifamily. The way you’re running a business, you’re building teams, how you communicate with people, how you follow up and hold people accountable – those are all experiences that you can take from previous businesses, and that’s what I used when I started out.

Theo Hicks: Okay, let’s transition into talking about your first syndication deal – a 76-unit, a 42-unit… Do you wanna tell us a little bit about some of the steps you had to take before you started finding those deals? Any team members you had to find? Did you find the capital first, verbal commitment-wise? Did you have financing lined up from a bank? What are some of the things you did before you actually went out and found your first deal? Or did you just find your first deal and then figure all that stuff out later?

Gary Lipsky: I was looking at smaller deals in the beginning, and realized I needed to go bigger, and with a team. So the 76-unit I was a key principal on… So I signed on the loan, I invested some money, and I was able to learn from sponsors. They kind of walked me through everything, and be a part of the process. So that was a really good education for me.

Then on the 42-unit – that’s when I’m raising money, my business partner found the deal, we constantly underwrote it, checked the comps, kept evaluating it, and felt strongly enough by having had that other person to bounce back the ideas… It was really important to have that level of confidence. Doing it on your own, particularly in the beginning – you think it’s a good deal, but being able to run it by someone and going through the process really helps have that confidence level up, and… Hey, you’re not crazy, you’re not doing anything foolish.

Theo Hicks: Yeah, exactly. So with that 76-unit you were on the GP because you were the loan guarantor, you invested some capital, and I’m sure you learned a ton from that process.

Gary Lipsky: Yeah.

Theo Hicks: A lot of people might not have the net worth liquidity in order to do that… But on the second deal you were able to raise capital. You mentioned you had a business partner, so I’ll ask you about that in a second, but how much money did you have to raise for that deal, and how did you raise that capital? Who was it from, how did you position the deal to them, it being your first time raising capital?

Gary Lipsky: Yeah, we raised just over a million dollars, and it was friends and family, people that I had done business with previously and trusted me, knowing that I had been successful before… but yeah, it’s not an easy process your first time. But what you’re doing is sharing an opportunity and something that you really believe in, and people buy into that opportunity. When they look at other places where they’re gonna put their money and they see that this is a great opportunity, with amazing tax benefits, they were excited to be a part of it.

Theo Hicks: And you mentioned the benefit of a partner… Obviously, it is possible to do a syndication deal by yourself, but you need to make sure you know how to do everything, and most people don’t know how to do everything… From what I’ve seen, you’ve got kind of like the numbers guy, and then the networking guy. So someone focused on the relationships, raising capital, and the other person is at their computer, crunching numbers and underwriting the deals, and maybe asset-managing it… What advice do you have a) on finding a partner, and b) on vetting that partner?

Gary Lipsky: It’s spending time with them and seeing if they have the same values as you. Do you trust them, how they look at deals? It’s a process that you build over time. The guy I’m partnering with – we kept running into each other at meetups, so… Developing a rapport over time, and we were both interested in a property together, so we went out there together and looked at it… And over time, it was clicking.

I appreciated how hard he worked, and I can rely on him, and that was really important to me… And obviously, he felt the same way about me.

Theo Hicks: How did you find the 42-unit deal and how did you find the deal you’re currently working on, that 128-unit deal?

Gary Lipsky: The 42-unit deal – my business partner was already out there in Tucson, and — it hadn’t even come on the market yet. He was the first one to see it, so that’s how we actually got it. It’s certainly not the sexiest-looking building, but tremendous value-add opportunity… And it’s in that 42 range, which is maybe a little bit bigger than some of the small players, and smaller than some of the bigger players. So it’s that middle ground, which was nice.

But the 128-unit… One of the guys that came in on our 42-unit deal  – he works full-time, but he got this deal because he had done business with the broker previously. He sent it to my business partner, and I got a text at like [12:30] in the day, he’s like “We’re going to Phoenix tomorrow, 3 AM. I’ll talk to you later.”

So this deal was going to market, and we wanted to be the first ones to see this. So we drove out from L.A, 3 AM, and checked out the comps, walked every inch of this property… I was underwriting the deal on the computer the whole way back, and five hours back to L.A, and just going through every single scenario. We thought this was a great opportunity, so… We got it by outhustling others, and being one of the first to see it. We didn’t get into a bidding war. We aggressively went after this property, trying to avoid best and final… Because I’ve been in best and final a number of times and have lost, and I thought this was a really good opportunity, and if we could take it down right from the beginning, then let’s try to do that.

Theo Hicks: So both those deals were off market. The second, that 128-unit, was — you said it was someone who invested in the first deal knew the broker, and then sent you that opportunity, and then you were able to get it before it went to market, right?

Gary Lipsky: Yeah, he had actually closed two deals with that broker before, so he had a relationship with him. That’s important. Even after doing one deal, we’re just getting a lot more attention from brokers… So that’s how — it starts snowballing really fast, so it’s been really nice.

Theo Hicks: Yeah. And that 42-unit – that was off market through your business partner; was that also through a broker relationship?

Gary Lipsky: No. Certainly, he’s looked at properties with the broker before, but he really didn’t have that strong of a relationship. It was right time, right place, so we were able to grab it.

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

Gary Lipsky: I would say outhustle and be creative on solutions. It’s worked for me in all of my businesses in the past, and it’s worked in real estate as well.

Theo Hicks: Do you wanna give us an example of a creative solution? Maybe not real estate-related, but on one of your businesses? If you can think of anything — you said you made some films; that’s pretty interesting… What are some creative solutions you had for that? I’m sure that was–

Gary Lipsky: Sorry, for what?

Theo Hicks: You said you created films when you were in college, is that right?

Gary Lipsky: Oh yeah, in my twenties. Well, the company that was handling one of my foreign distribution sales – they were going under. We had a deal with Germany for 50k for the rights for the film, and I said “Give me the number of the person and I’ll get the money myself.” And I would wake up, 4 AM, and just call every single morning for like two months, and I got fully paid. And most people were like “Germany never pays, or they give you a discount…”, and I got the full amount after two months, just calling myself.

Theo Hicks: Yeah, that’s definitely hustling right there.

Gary Lipsky: Yeah.

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

Gary Lipsky: Yeah, let’s do it.

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

Break: [00:13:31].16] to [00:14:09].24]

Theo Hicks: Alright, what’s the best ever book you’ve recently read?

Gary Lipsky: Millionaire Fastlane, by M. J. DeMarco.

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

Gary Lipsky: Well, I would reflect and learn from what went wrong, and get back right at it again.

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

Gary Lipsky: I’d have to say my personal residence right now. I bought it, and I knew it was a great value-add opportunity, and fixed it up, and within a couple of months the value went up a quarter million dollars.

Theo Hicks: What about your worst deal?

Gary Lipsky: It had to be a student housing. We bought this as a passive investor, and they just built up too much student housing in that area, so now we’re struggling over there.

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

Gary Lipsky: I’ve founded CORE Educational Services. It was in 2006… So we service under-served youth in L.A. We’ve had a tremendous impact over the last 13+ years.

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

Gary Lipsky: You can reach me at Gary@breakofdaycapital.com, or visit my website as well.

Theo Hicks: Alright, Gary. I really appreciate it. Very insightful conversation we had today. Just to summarize what we talked about so far – we talked about first your passive investing, and we discussed some of the things to look for when you’re vetting a syndicator, or just how to become a passive investor in general. You talked about how you just looked at a ton of deals, underwrote them, just to see the different ways different sponsors underwrite deals, look at deals, revenue cap rates, how they’re adding value, how they’re finding their comps, if their comps make sense… You mentioned that you had a buddy who literally drove across the country to meet all these people, so that’s definitely one strategy that will definitely work.

Then some of the red flags – we talked about [unintelligible [00:15:55].05] So if you ask them a question and they either refuse to answer it, or they do answer it and you can obviously tell they’re making up an answer on the fly, what you wanna see is obviously that they’re knowing the answer, but if they don’t, at least saying “You know what, I’m not sure about the answer to that question, but I’m gonna go look it up and I’ll get back to you within a few hours”, or something like that… And just kind of trust your gut. And if you feel like someone is not trustworthy, that’s definitely a red flag.

Then we transitioned into talking about active investing, and you provided some solid advice about how someone who has never syndicated a deal before can attract  capital from friends and family… And you mentioned you need to focus on what you have done in the past. So if you’ve done real estate deals, focus on that. If you’ve started businesses before, focus on that, and in particular focus on the skills that you’ve learned from those experiences and how that will help you conserve and obviously make them money.

We also talked about how you’ve found your business partner, and some tips on forming syndication partnerships on the GP side, so finding a GP to work with. It really comes down to spending time with them, [unintelligible [00:16:56].24] and making sure that your values and your core missions are aligned, and again, going back to that trust factor.

Then you mentioned that you actually met your business partner at a meetup group, which is pretty cool. Then you mentioned, lastly, about finding deals. Your first 42-unit was kind of a right time/right place deal, but you talked about on the 128-unit how you’ve found it through hustling. So your business partner said “Hey, we’re going here tomorrow. I’ll see you at 3 AM”, you drove there at 3 AM, you visited the comps, you drove the property, and on the way back, that five-hour drive, you underwrote the entire time, and you were able to get your offer in before you had to go to that best and final seller round.

And something else interesting that you mentioned was most people want to find those off-market deals from brokers, and most brokers are gonna wanna see some sort of track record… And it seems, at least for you, one deal was enough to start getting a lot more attention from brokers, and seeing more off market deals. I’m sure a lot of people who are listening – that’s something they’d like to hear; just do one deal, and then you can have the chance of getting those off-market opportunities.

Then lastly, your best ever advice, which kind of summarizes everything you’ve talked about, which is hustle and be creative about your solutions, and there were plenty of examples of that throughout the conversation.

I appreciate it, Gary. Again, you guys can say hi to him at BreakOfDayCapital.com, and he also provided his email address. Thanks for joining us today. Have a best ever day, and we’ll talk to you soon.

Gary Lipsky: Thanks, Theo.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF1862: Deal Specifics On A 172 Unit Multifamily, & Scaling Your Business with Yusef Alexander

Joe and Yusef will dive into a recent 172 unit deal that Yusef closed on and is adding value to. We’ll hear the numbers as well as Yusef’s partnership structure and how he’s scaled from single family homes to buying apartment communities. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“If you stay disciplined in your fundamentals, that usually creates longevity for the experienced investor” – Yusef Alexander

 

Yusef Alexander Real Estate Background:

  • Co-founder, VP, and Business Development Officer at Real Estate Asset Partners (REAP)
  • He has over 20 years of experience, repositioning commercial and residential properties
  • Based in Los Angeles, California
  • Say hi to him at https://reap.capital/
  • Best Ever Book: Daily Stoic

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

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.


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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Yusef Alexander. How are you doing, Yusef?

Yusef Alexander: Hey, Joe. I’m doing great!

Joe Fairless: Well, I’m glad to hear that, and looking forward to our conversation. A little bit about Yusef – he’s the co-founder, vice-president and business development officer at Real Estate Asset Partners. He has over 20 years experience repositioning commercial and residential properties. Based in Los Angeles, California. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Yusef Alexander: Background – I’m an old guy, I started in the mid to late ’90s, buying and selling homes in the blighted areas of Los Angeles. I went through both economic swings in the mid-90’s and 2000’s. I bought and sold high-end and small, distressed properties from Bel Air to Compton, and everywhere in between. So what I did was I created a resource of investors. From that activity I moved to multifamily, and now my focus is multifamily assets in South-East, North Carolina and mainly Georgia.

Joe Fairless: Okay, got it. So you are buying apartment communities in the South-East.

Yusef Alexander: Yes.

Joe Fairless: What have you bought recently?

Yusef Alexander: A 172-unit building in North-West Atlanta. It’s just an emerging area — well, it’s not emerging anymore, it’s just an established area… And in a — not a renaissance, but the working class population there has now become the upper-middle class.

Joe Fairless: Okay. How long ago did you close on it?

Yusef Alexander: Probably 7-8 months now.

Joe Fairless: Okay. Belated congratulations on the close… Let’s talk about some specifics of the deal. What was the purchase price?

Yusef Alexander: I put two million down, purchased it for eight million.

Joe Fairless: Okay, and what’s the business plan?

Yusef Alexander: The business plan is to — actually, a tiered approach. I wanna keep some of the population in the surrounding areas there, so I’m gonna do a tiered approach by having a light rehab, and then I’m gonna have a very high-end rehab. So I’m gonna offer apartment homes, pretty much, luxury apartment homes, and I’m gonna reposition it for low twenties as far as the price; twenty million or so. I’ll refinance it, and get on to the next project.

Joe Fairless: Okay, so you’re doing a light rehab, and then you’re also doing a high-end rehab. What percent of the 172 units are light rehab?

Yusef Alexander: Light rehab probably 5% to 10%.

Joe Fairless: Okay. And then the high-end rehab the rest?

Yusef Alexander: Yes.

Joe Fairless: Okay. And how do you determine that percent breakdown?

Yusef Alexander: Well, the building was owned with a previous partnership, so I have a lot of historical experience with that area and with the occupants. So studying the activity and know what the population is, and how the pulse of the market as far as the population in the area is, I’ve determined that I wanna keep some of the — I don’t wanna say lower-end… I just wanna keep some of the lower price points available for some of my occupants.

Joe Fairless: And will you repeat the partnership thing, so I’m understanding it correctly?

Yusef Alexander: I was a smaller partnership, meaning a 12% partnership, and now I’m a 100% owner with my new partner; we’re 50/50 partners.

Joe Fairless: Okay, so you had 12% ownership of the property, and then you and another partner bought out all those other partners?

Yusef Alexander: Yes, on a purchase.

Joe Fairless: Okay, on a purchase. So now you and the other partner are the ones that own this building together. Is that 50/50, or another breakdown?

Yusef Alexander: Yes.

Joe Fairless: In that structure, who brings what to the transaction?

Yusef Alexander: Well, we bring 50% of the equity, we bring 50% of the partnership, and we split it down the middle.

Joe Fairless: So you both tackle things together and it’s all 50% of the money, 50% of asset management… It’s all split down the middle.

Yusef Alexander: Yes. You know, with an asset there’s asset management, there’s leasing, there’s construction, there’s design, there’s a lot of activity and expertise that needs to happen, and however you align it – if you third-party it or if you do it in-house – then there’s fees and partnerships that can be split… Sponsorships, general partnerships that can be split. We can get into that, but it just depends on how you guys take it down, how the group takes it down.

Joe Fairless: Yeah, let’s get into it a little bit, just in terms of what you’re focused on for the property, and then what your partner is focused on to oversee the project.

Yusef Alexander: My focus is going to be stabilization. There’s a de-leasing situation that happens, because some of the units – or most of the units – are not gonna be occupied while the renovations are happening… So you de-lease it and you have to monitor the de-leasing as that happens, which I’m gonna be in charge of, and then once the rehab happens or the business plan is executed, then we’re gonna make sure we optimize the occupants and the leasing to that new product that’s being offered. It’s pretty hands-on, it’s pretty important; you’ve gotta be on top of everything.

And then there’s the construction management. The construction management has to do with the design, the execution of… Let’s see – we’re doing 3 million dollars of rehab, a certain amount a door, and that has a whole process to it as well.

Joe Fairless: With being on top of everything, what are some specific examples that if a Best Ever listener is undertaking a project like this and they hear that they’ve gotta be on top of everything, what are some things that you’d want to tell them “Hey, you’ve really gotta pay attention to this stuff.”

Yusef Alexander: Well, if I just talk specifically about leasing – you wanna be very granular about what the market commands, the amount. So if your project is — let’s just use $1,000 as a round number. So your stable project is gonna offer a $1,000 rent for two bedrooms, and the next door they’re offering some of the same amenities or more and their price is higher or lower – you need to put an application in next door, you need to drive comparable rents, you need to walk comparable properties and figure out the rental experience of that product that is competitive to yours, because you’re putting all of your focus and all of your resources into delivering a product at a certain price point, and that price point has to prove out over 200 units.

Once that price proves out over 200 units financially, and then your lending, and your investors, and things like that – all it takes into account. So if I’m talking to someone and saying “Be on top of everything”, be on top of the rental rates, the product, the comparables in your area.

Joe Fairless: And then on the construction management side, when you say “design”, are you working with a design firm, or what are you referring to with that?

Yusef Alexander: As far as the construction side – again, there are some very specific areas that need to happen on that side, but yes, you need an architect, you need a design. This is only dictated by the level of construction that you are undertaking. If you’re making a new leasing center, that might not be that much design-heavy. But if you’re doing a pool, and a bungalow, and a landscaped DG area for pets and families, you’ve gotta get in there and make sure it’s done right.

Joe Fairless: DG?

Yusef Alexander: DG is the dirt or the landscape kind of pathways that are in a lot of hardscapes now. I just use it because we use it so much… I think the name of it is disintegrated earth, or something like that. It’s just pretty dirt. You’ll see it.

Joe Fairless: I like that, “pretty dirt.” [laughs]

Yusef Alexander: When you go outside and you see those landscape [unintelligible [00:09:42].26] you see dogs and people walking on them, you’re gonna be like “Oh yeah, Yusef was talking about that.”

Joe Fairless: [laughs] So with this project you have one business partner. Was the other business partner in the deal before this as well?

Yusef Alexander: They were in the asset, and then the other business partner wanted to move in a different direction with their portfolio.

Joe Fairless: Okay, so there were only three people previously, and now there are two.

Yusef Alexander: Yes.

Joe Fairless: Cool. How does that work, when you’re three owners in a deal, and one wants out, two wanna stay in… What do you do?

Yusef Alexander: Well, if you are in a situation where the business owners are all kind of in the industry or in the same ilk of how they conduct business in this space, specifically multifamily, then usually it’s just a price; you come up with a price and you pay out an owner.

Now, I don’t know how many partnerships you’ve been in, Joe, but people are people. Sometimes there’s different seasons of life, there’s different issues… Who knows how a partnership would move into an equitable space if someone wanted to move out. There’s an infinite number of examples to that effect happening.

Joe Fairless: In your case it just had a price… So how did you value the price of their ownership?

Yusef Alexander: The price of their ownership comes from the price of the asset. The price of the asset is determined by the agreeable third party, and then that is split from the percentage of the partnership.

Joe Fairless: And then what type of third-party do you hire to do that valuation?

Yusef Alexander: You can do a broker’s opinion of value, you can do an appraisal, you can do kind of a desktop appraisal from a lender… There’s a number of ways you can get a third-party valuation for an asset.

Joe Fairless: Which one did you do?

Yusef Alexander: Broker’s opinion of value and a desktop appraisal.

Joe Fairless: And will you define a desktop appraisal again?

Yusef Alexander: A desktop appraisal for me is some type of financial group that loans money and they underwrite deals to make sure they position correctly in the money that they lend. So they do appraisals and valuations – that’s kind of what they do.

Joe Fairless: And did you all agree prior to getting the broker’s opinion of value and the desktop appraisal on who would be doing those?

Yusef Alexander: Yeah. Again, if I’m buying units in Georgia, I don’t want a broker’s opinion of value from a group in Hawaii.

Joe Fairless: Right. So you all identified “Here’s a broker we’re gonna get an opinion of value from. Here’s the lender that we’re gonna get a desktop appraisal from, and then we’re going to average those two and then come up with a valuation”?

Yusef Alexander: No, that’s a pragmatic way of doing it… It depends. If the numbers are the same or agreeable, then we just kind of use that metric – averaging them out, or using the one that’s most trusted… Or maybe even using the higher one, if you wanna get this done, and whatever is agreed upon  in the partnership.

Joe Fairless: And what did you all do?

Yusef Alexander: We did the higher one.

Joe Fairless: You did the higher one, okay. And I imagine the higher one was the broker’s opinion of value, yes?

Yusef Alexander: Yes.

Joe Fairless: [laughs]

Yusef Alexander: Their motivation is what it is.

Joe Fairless: Right, right. That’s interesting. So that was your most recent purchase… And is that the largest property you have in your portfolio currently?

Yusef Alexander: No.

Joe Fairless: What is the largest one?

Yusef Alexander: The largest one is a 355-unit in Georgia.

Joe Fairless: In Georgia… Staying in  Georgia.

Yusef Alexander: Yeah, there’s some opportunities here… But there’s opportunities in other markets as well; it’s just that one came up.

Joe Fairless: When did you buy the 355-unit?

Yusef Alexander: This one was purchased maybe five years ago. I’m a minority partner in that.

Joe Fairless: Okay. So you’re a passive investor in that one?

Yusef Alexander: Yes.

Joe Fairless: Okay, cool. It’d be interesting to touch on briefly then… So you’re an LP in that one… How many deals are you an LP in, approximately?

Yusef Alexander: Let’s say five.

Joe Fairless: Okay. And then how many are you a GP in?

Yusef Alexander: Two.

Joe Fairless: Two. So with the 172-unit you’re clearly a general partner; with the 355-unit you’re an LP… What things – if any – did you learn from being an LP in the 355-unit, that you apply to the 172-unit.

Yusef Alexander: Well, again, I’m a deal junkie, and I like to get deals done, and sometimes the way to insert myself in a deal to leverage my capital, or to leverage my knowledge – my participation is determined by that. So the LP deals – I could have been a general partner, but the sponsorship was already established: who’s gonna reposition the asset, what the business plan is gonna be, and the management of the asset. That was already established. The limited partner was available; they were raising  – I forget; maybe 3-4 million dollars – and I was able to insert myself and leverage the capital.

So I’m always learning in deals. I’m a deal junkie… Not a deal junkie — I like to look at deals, but I also like to participate in deals that are in alignment with my business goals and my experience and my career.

Joe Fairless: Okay. So what did you learn from being an LP in that deal, if anything, that you apply to actively managing the 172-unit?

Yusef Alexander: It’s not really a cross-over. I’m trying to put both hats on. If I didn’t know about the risk factors are the experience and the duration of taking an asset from acquisition to disposition – if I didn’t know that as a general partner, would I have invested in that as an LP? No, I probably wouldn’t. So by being a general partner, it allows me to have comfort in being a limited partner.

Joe Fairless: But weren’t you a limited partner before general partner, right? Or am I missing something…?

Yusef Alexander: No, I bought assets as a general partner throughout my career.

Joe Fairless: Oh, got it.

Yusef Alexander: This is the current activity now…

Joe Fairless: The current portfolio. I’m with you. Yeah, alright.

Yusef Alexander: We can go back and talk about deals…

Joe Fairless: Yeah, okay. Got it. Fair enough. With the other property that you’re currently a GP on, which one is that?

Yusef Alexander: The 172 units.

Joe Fairless: Right, one is  a 172-unit, but I thought you mentioned you’re a general partner on two deals.

Yusef Alexander: Oh, yeah. That deal – it’s actually closing right now.

Joe Fairless: Oh, okay.

Yusef Alexander: It’s being sold, and the deal is done well; investors – cross my fingers – will be happy with the returns, and we’ll do some other deals together, but that one’s being sold.

Joe Fairless: Nice. Well, congratulations on that. [unintelligible [00:16:15].13] Yeah, deal. How many units is that one?

Yusef Alexander: That one is 190 units. 193… I think we captured a couple of the units… 193, let me just say that.

Joe Fairless: Got it. And where is that?

Yusef Alexander: It’s in Georgia as well.

Joe Fairless: In Georgia. I’m noticing a trend. And what was the business plan and how long did you own it?

Yusef Alexander: The business plan was to buy it, do a value-add on it, take the asset, and actually change the class of the asset. The asset was probably a C asset in a B area. So it was an average asset in a very nice area, or nicer area… And then to change the class with the accommodating amenities to a nicer area, what the area would want.

Joe Fairless: Got it. Taking a step back, based on your experience, what’s your best real estate investing advice ever?

Yusef Alexander: The best real estate advice ever is — would it be to a beginning investor, or…?

Joe Fairless: Sure.

Yusef Alexander: Well, what I would tell a beginning investor is surround yourself with the right people, and experience. Get out there and have some real estate experience. I could drill into those if you like…

Joe Fairless: What about a more experienced investor? What’s something you would tell them?

Yusef Alexander: Be disciplined, stay disciplined. Because what happens with the experienced investors, which I’ve known and I’ve made this mistake as well – the market is very influential. There’s a lot of things happening in the market with interest rates. There’s a lot of things happening in the market with the movement of activity to different areas. This is a hot area, this is an emerging area. But if you stay disciplined in your fundamentals of why you buy property, what you’re looking for when you buy that property, and also what your plan is for exit – having multiple exits versus one or two exits – staying disciplined in that usually creates longevity for an experienced investor.

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

Yusef Alexander: We’ll see. Let’s do it!

Joe Fairless: I think you’re ready. First though, a quick word from our Best Ever partners.

Break: [00:18:22].23] to [00:19:07].14]

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

Yusef Alexander: I like The Daily Stoic, Ryan Holiday.

Joe Fairless: Okay. Tim Ferriss talks about that a lot.

Yusef Alexander: Yeah. Pretty cool.

Joe Fairless: Best ever deal you’ve done?

Yusef Alexander: I was the second investor on a condo conversion. It pretty much quadrupled the returns. I bought in it for a million, sold it for over four million.

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

Yusef Alexander: Early in my career, 20-something years ago, I bought a home next to a gas station. [laughs] That was a mistake.

Joe Fairless: And that’s because of the loitering, or the environmental issues?

Yusef Alexander: You could stack 20 different reasons why. Looking back, with 20 years of experience – I never should have bought that. But anyway. I learned a lot.

Joe Fairless: Did I get the two big ones, loitering and environmental issues? Or is there something else?

Yusef Alexander: Yes – loitering, environmental issues, smell, noise… Usually the lighting on a commercial gas station has these lights that are like baseball stadium lights. So no matter what time at night it is, you have these — anyway, it was a mistake.

Joe Fairless: Note to self, never buy a property to live in next to a gas station, too.

Yusef Alexander: [laughs]

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

Yusef Alexander: I’m a literacy advocate, so I like to give back through championing literacy projects, childhood literacy, emotional literacy and financial literacy.

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

Yusef Alexander: LiteracyUp.com is a website that we launched to help close the world gap with childhood literacy. My company’s site, Real Estate Asset Partners, or www.reap.capital, and I’m online, you can easily find me.

Joe Fairless: Okay, and we will include that in the show notes. Yusef, thank you for being on the show, talking about the 172-unit you’ve got in North-West Atlanta, the areas of focus, and how you structured that… And then with that transaction, how you structured the exiting of one partner, more so so that as Best Ever listeners we can know what to do if we are in a partnership and things need to go a different direction, how to do it fairly so that everyone is more or less happy with the outcome, as well as talking about different lessons you’ve learned from the other projects you’ve worked on.

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

Yusef Alexander: Thanks, Joe.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF1859: Getting Free, Easy Access To Real Estate Industry Professionals & How To Generate Leads with Ben Bacal

Ben sold over $2 Billion in real estate in his first year. We’ll hear some of his best ways he generates leads for high end homes, as well as hear about his app Rila and how that is helping people with their properties. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Save your cash” – Ben Bacal

 

Ben Bacal Real Estate Background:

  • Real estate agent and co-founder of Rila, a mobile app designed to provide the community with free, unencumbered access to real estate and industry professionals
  • Has sold more than $2 billion in real estate
  • One of his most notable transactions includes 1181 Hillcrest—the largest sale ever recorded in Beverly Hills at $70,000,000
  • Based in LA, CA
  • Say hi to him at Rila in the app store or @benbacalestates on instagram

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

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.


TRANSCRIPTION

Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m your host today, Theo Hicks, and today we’re gonna be speaking to Ben Bacal. Ben, how are you doing today?

Ben Bacal: Good. Thank you so much for having me.

Theo Hicks: Absolutely, and I appreciate you taking the time to speak with us today and provide us with your real estate advice. A little bit about Ben – he is a real estate agent and co-founder of Rila, which is a mobile app designed to provide the community with free, unencumbered access to real estate industry professionals.

He has sold more than two billion (with a b) in real estate. One of his most notable transactions includes 1181 Hillcrest, which is the largest sale ever recorded in Beverly Hills’ history, at 70 million dollars. He’s based out of Los Angeles, California, and you can say hi to him by downloading his app, Rila, in the app store.

Ben, before we dive into the meat of the conversation, can you tell us a little bit more about your background and what you’re focused on now?

Ben Bacal: Sure. My focus is twofold. I am a luxury agent, and I cater to those buyers that really don’t need these expensive homes, but they just wanna keep on stepping it up… So I’m doing a deal right now on the beach for 26 million dollars; it’s a beautiful beach house. I have a house in the Hollywood Hills for 30 million; the designer did all the James Perse stores across America. I’m working on another property in the Hollywood Hills for 40 million, by a designer SAOTA Design Group. He’s an architect out of South Africa… And hopefully, I’m about to work on some really big deal for 100 million. But my bread and butter every day is deals between half a million up to five million, and I do about 7-8 million dollars a month in those transactions.

My focus these days is helping my teammates learn the ropes and get out there and get leads. That’s my focus, to help them get leads.

Theo Hicks: Alright, so for those of us that aren’t too familiar with these size deals – I’m assuming we’re talking about residential here – let’s start high-level. How are you generating these leads? For example, your 26 million dollar beach deal, these deals in the Hollywood Hills – how are these sellers finding you?

Ben Bacal: Well, it’s been a long process, but I guess I can dial it back from day one. When I first sold my first luxury home for 3 million dollars, I let everybody know up and down that street that I accomplished that sale. I let them know door-knocking, telling them face-to-face, I let them know with a postcard, I cold-called, I sent out a video on YouTube, I did an e-blast letting them know… Essentially, that’s what I did with all my sales. I leveraged the fact that I closed X, Y and Z for so-and-so money, and that enabled me to get another opportunity to list someone else’s house. That’s really the name of the game. I leveraged all the past sales that I did, and people were like “Wow, okay. I’m gonna give this guy a shot.” That’s how I got my foot in the door to get the listings.

Often the sellers say “Okay, maybe I’ll sell”, and then you have to prove to them that you’re not just all talk. So I would get a potential listing, they’d say “Yeah, I wanna sell. Bring me some buyers.” I would then go into my office at my real estate company and announced “Hey guys, I’ve got this style home, in this location. Who’s got a buyer?” And out of all the couple dozen realtors in my office, one person or two people would say “Yeah, I do.” I’d schedule a meeting and show that buyer, and that would be another meeting with that potential seller; he’d see me again, we’d build rapport with each other… And eventually, I’d say to him “Look, what if I was able to take some really cool photos with my professional camera or with my phone, and  I can reach a really broader audience, and instead of just bringing one or two people, I’ll bring 10-20 people.” Because that’s what it’s gonna take. And I rinse and repeat, and lo and behold, I end up selling over two billion.

My first year of real estate I made $394,000 in commissions by using that tactic of hitting the pavement, door-knocking, meeting as many people as I can, and convincing them with a smile on my face, and ease of comfort, by just realizing that I’m not this pushy salesman, that I genuinely believe that their house is terrific, and I can connect them to a potential buyer that could pay their price.

I developed those relationships with those people, because this is all about a relationship game. If people like you, they wanna work with you, and if you can further provide a track record of success, then you’re on your way to making millions of dollars.

Theo Hicks: Yeah, thanks for walking us through that entire process, from your first deal and your thought process for how to 1) find leads, find deals that actually sell, and 2) find those buyers. On the first hand, find those leads – you mentioned some of the things that you did after you sold your first home, and one of those was a video… That’s my first time hearing about that; it’s a very interesting, unique strategy. Do you mind telling us what was all included in that first video?

Ben Bacal: Well, it was actually a WhatsApp video. I shot my camera, and then I used WhatsApp to send the video. I basically chose a dozen of my  contacts – actually, a few dozen – and I essentially handpicked them, thinking that they would like this pocket listing that I’ve found, this off market deal, this property you couldn’t find anywhere else… And I sent out that video.

But I mainly did it with photos, because right now the MLS and homes.com and Zillow and Trulia – they’re all the same photos. So by just sitting at the MLS and sending content to these prospective clients of mine, I’m not providing any value. They can go on the internet and search for that. So what I did is I literally went to these properties myself and I shot a bunch of photos that they could see on the web, and I shared them on my phone. I texted them or I emailed them to everybody. Then it’s like “Oh, wow, what is this property?”

Some of the properties were actually on the MLS, but they just looked different, because they never saw the fact that it had an ocean view, or that it was beside a Freeway, or it had power lines [unintelligible [00:09:12].06] or that the backyard was actually bigger than what the photos were on the MLS. That really differentiated me, because I was providing value that no agent could find in your house, and I was getting comments on the text that say “This house is awesome, but it’s got this problem”, or “This is a deficiency”, or “This is why it’s terrific.”

That’s what I did, and it got me a lot of reactions, it got me a lot of potential clients, and people were kind of tuning in to me. But it only worked as fast as I could take photos and videos and send to people, unfortunately… But that’s why I’ve built Rila.

Theo Hicks: So you’re taking these photos and these pictures, and you’re sharing them on WhatsApp?

Ben Bacal: Or text message, or email.

Theo Hicks: Okay, so you have a  list of these potential buyers. How did you create that list?

Ben Bacal: Just by meeting people. Whenever I’m out and about, whether it’s at a hotel, or if it’s waiting in line at the grocery store, or I’m about to have dinner, if I feel that there’s a potential buyer near me, I’m gonna start conversations with them. Everyone likes to talk about real estate… And I drive that conversation towards “Are you ever thinking of buying or selling a property?” and they become a potential buyer.

I also hold open houses, of course, and I get a lot of leads that way. And of course, these days I’m putting photos of properties that I visit (open houses) on my Facebook, on my Instagram, and most importantly, on Rila, so I can actually get the lead, because my phone number actually shows up that way.

Theo Hicks: Okay, so let’s dive into Rila. It’s  a mobile app… Do you mind walking us through exactly what the app is, and maybe you can talk a little bit about the process of creating it, why you created it, any challenges you had creating it, things like that.

Ben Bacal: Exactly. First of all, it can be found on the App Store. It’s on iOS only. Like I said, the way I was successful as an agent when I started is I would literally go door-to-door and find these properties that weren’t for sale. And then I know where to distribute that content, tell people about it. So I’d take photos on my old Nokia phone, and eventually my older iPhone and even Blackberry – I’d take these photos and I’d start sharing them with my network. I’d be like “Look at this house I’ve found on 1221 [unintelligible [00:11:35].08] Street” and I’d share it.

Then I’d get maybe one or two texts back from the 30 texts that I sent out with that photo, with like “Oh, where is that?” But I’d send that also to realtors as well, not only to my own buyers. And then from that photo I would get a potential lead through another agent and their buyer. I’d then show up to that property, show that client the house; maybe it worked out and I got it sold, I went in escrow. Chances are it didn’t, but it got me through the door, and it showed the seller that I really [unintelligible [00:12:04].03] and I’ve got buyers.

So what Rila is is a place where you can essentially go out to any open house or any off market property and you can post that photo into an area, and buyers, if they see that photo, and that photo takes them to the listing – because it will take them to the listing – I get the lead. So literally, instead of paying for leads through Zillow, Trulia, Homes.com, all you need to do is go out to open houses, take photos, and if  a buyer sees your photo and they click on it, you get the lead. It’s that easy.

So this whole project Rila is to empower agents, and go out and earn as much business as they desire. All they’ve gotta do is go out there, like I did, and shoot content, and create listings. And the more photos that they put up, the more leads they’re gonna get, and it’s all free. The idea for consumers is that, like I said before, you’re providing value, because you’re showing them photos that they can’t see anywhere else. That’s the magic, and that’s why I was so successful.

It was in Forbes a couple days ago, and the Real Deal talked about it and had an article about, saying it’s the Instagram of real estate, except the difference is instead of following people, you’re following places. Buyers are following areas of interest that they like – Connecticut, Beverly Hills, Cincinnati, Chicago, Florida, Miami Beach – and your photos that you take out there, as you’re posting them, they’re dropping in the feed, and you’re dropping like breadcrumbs of potential leads.

When I’ve got open houses now in L.A. – they’re on Tuesdays and Sundays – instead of leaving empty-handed, I’m literally going to these open houses and I’m creating listings, I’m creating all these photos you can’t find anywhere else. The idea here is to empower all the agents.

I went out there, we were literally just sitting at our desk, forwarding existing content that’s on the MLS. Bring value to all these customers out there by showing them what these properties actually look like, and your contact number is gonna be right there.

So for me, when I go get a pocket listing – how are you gonna tell people about it? You can take a couple pictures and put it in an email and blast it – sure, that could be useful… But here, you can take ten pictures, you can actually create a listing in under a minute – it literally takes like 30 seconds to create a listing – and then you always have it in your profile section; there’s a share button right on that listing, so you can share it with the world, on Facebook and Instagram and Twitter and so forth.

Theo Hicks: Is this strictly in L.A, or if I’m an agent in Cincinnati — is there a Rila in Cincinnati as well?

Ben Bacal: Yeah, when you log into the app it says you can follow three different neighborhoods – Beverly Hills, Los Angeles and West Hollywood – but you can go into your profile section and you can follow any city. We have actually thousands of users using it all over the country, and you can get to thousands of more buyers and sellers by simply creating a listing and then pressing the Share button. There’s a little arrow… And that shares directly to Facebook, and Twitter, and your email, your text…

The idea is that it’s all crowdsourced, so it’s never been done before… Where you go take a dozen pictures, and then other people will be in that open house and they’ll take photos, and it’s all gonna contribute to one listing. Then that makes your job easier. So only your name is gonna show up next to that photo to get the lead, if that makes sense.

Theo Hicks: Is this something that from a business perspective you’re trying to get a lot of potential buyers to use the app, or is your goal to focus on getting a bunch of realtors to use the app? Or both.

Ben Bacal: No, it’s both. It’s very much a  consumer app, but it’s all about free leads. The whole idea here is all these MLSes and Zillows – it’s so expensive. These fees are exorbitant. Collectively, it’s costing agents millions of dollars. But why? I mean, they’re cheating.

Theo Hicks: Yeah, it’s like — you can advertise on there, and be the top of the list, things like that…

Ben Bacal: Oh, it’s so expensive. Beverly Hills is like $10,000, and the cheapest area of Los Angeles – $1,500 every month. They lock you into a six-month contract, you get maybe one good lead a month, but the rest are just spam and [unintelligible [00:16:17].11] And what’s worse is we’re uploading our content to the MLS, and they’re selling it to Zillow, they’re selling it back to us, and now they’re just trying to cut us out of the business entirely.

Theo Hicks: Yeah, exactly.

Ben Bacal: So what Rila is trying to do is put the power back into the agent’s hands, so it will never go to Zillow and Realtor.com. It’s literally going from the agent directly to the consumer, and then the consumer directly back to the agent. So we’re cutting out the MLS and the Zillows that are trying to kill our livelihood, and we’re empowering the agent to get out there and make as much money as they can just by taking photos and sharing them with their database via Rila. That’s free. All free.

I created this for myself, because I have a couple hundred listings on there, and I’m able to go into my profile and share those all day long. So instead of going home and playing Fortnite or watching my favorite TV show, I’ll go home and I’ll spend that two hours – or even an hour – and I’ll just add content to different listings that I saw, and I’ll share that.

For new agents getting in the business it’s almost impossible. I’ll tell you why… Because the top agents in all these brokerages are favorite, and they’re given the best splits, they’re given the resources to succeed. They can leverage the fact that they did all their sales, which is what I do, yes… But for a new agent, how do you get in the business? You’ve gotta spend money on Zillow, thousands of dollars… We can’t afford that; we’re just trying to get our feet wet, right? So this is what I did to start – I went out there and I hustled and I door-knocked and I cold-called, and I did the hard work, I put myself at risk and I made myself feel really uncomfortable. When you feel uncomfortable by saying [unintelligible [00:18:03].04] things happen in life; you start meeting people and connecting.

Now, if you’re not that type of person and you don’t wanna do that, and you’re going to open houses, don’t leave empty-handed. Create listings from those open houses. Literally, create a listing. You can’t do that on Instagram, it doesn’t create a listing; it doesn’t have your contact number, it doesn’t have a description, it doesn’t have a map associated to it, it doesn’t have any real estate… It’s all dogs, cats, girlfriends, girls in bikinis, guys in their underwear. It’s too everywhere. This is an app built by a realtor, for a realtor, so you can literally get out there and promote yourself via sharing content, sharing photos of homes you see. So agents are essentially helping other listing agents broadcast their listing, if that makes sense.

Theo Hicks: Yeah, 100%. Once I’m done with the interviews today I’m gonna look up in Tampa and see what properties are on there. Alright, Ben, what is your best real estate investing advice ever?

Ben Bacal: My best real estate investing advice ever is to save your cash. I think there’s great FHA loans now. You can probably get a loan and put down 10% or even 5%… So since you save up some money, go to those opportunity zones, those areas that are a little seethy, because the world’s only getting bigger… So go buy any property you can and rent that property, and you’ll see a couple years later it’s gonna go up in value, and then you’re gonna refinance that, cash out, and you’ll maybe save a little bit more cash from another sales transaction you did, and you’re gonna go buy another one. And you’re just gonna keep on doing that until you’re 60 years old, 80 years old, and you’ve got 200 of those that are just cash-flowing… It’s called champagne money.

Theo Hicks: There we go, the champagne advice. Alright, Ben, are you ready for the best ever lightning round?

Ben Bacal: Yes, lightning round. Let’s do it!

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

Break: [00:20:01].26] to [00:20:46].28]

Theo Hicks: Alright, Ben, best ever book you’ve recently read?

Ben Bacal: The PayPal Wars.

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

Ben Bacal: I would sell shoes on the internet. Collectible shoes. I’d buy them on eBay, sell them somewhere else.

Theo Hicks: I actually used to do that in college, with Nikes.

Ben Bacal: Oh, you did? There you go… I’d sell something.

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

Ben Bacal: It would be — god, they’re like, every other deal. Just kidding. [laughter] The worst deal I’ve ever done… I’ve just had a bad deal two days ago. There was a homeless man sleeping in the house and I couldn’t get him out of the 50 million dollar home. He kept on messing up the deal, because was always showing up every Sunday.

Theo Hicks: That’s a unique one. And then lastly, what’s the best ever place for the Best Ever listeners to reach you?

Ben Bacal: Instagram, @benbacalestates. That works. I answer to everybody, so I’m really good at that. If anyone wants to reach out to me, it’s @benbacalestates. Check me out there. You can also see the article on Forbes about Rila, too. It really explains what we’re trying to do.Theo Hicks: Fantastic. Alright, Ben, I really appreciate the conversation with you today. Lots of solid information. Just because you’ve been selling multi-million-dollar homes doesn’t mean that you can’t apply some of these lessons to your business. Something that stood out to me that I think everyone can apply is the way you were generating leads.

You do a deal, and then you essentially let everyone know that you did that deal… And you’d use that by doing door-knocking, doing face-to-face, doing postcards, cold-calling, you make videos, you e-blast… But then the biggest thing you focused on was taking those photos that people couldn’t find on the MLS, Trulia, Homes.com, places like that, and showing those with your potential buyers or potential sellers, and that kind of helped you evolve into starting Rila, which is available on the iOS store. I’m definitely gonna check that out after this call. Essentially, agents can post pictures, and the pictures turn into listings. So it’s the Instagram of real estate, as Forbes called it, but instead of following people you are following areas.

And of course, your best ever advice, the champagne advice, which is to buy property, if you can leverage the FHA (low down payment), rent the property out, refinance, pull that cash out and do it again until you’re 60-70 years old, to have 200 properties that are cash-flowing, and making that champagne money.

Again, Ben, I really appreciate it. Best Ever listeners, thanks for tuning in, and we will talk to you soon.

Ben Bacal: Thank you so much. Terrific! Bye for now.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF1806: Passive Income MD: Full Time Doctor, Family Man, Real Estate Investor & Blogger with Peter Kim

Peter runs his own blog which is very popular for people who are in a similar situation to him. He shares his knowledge of putting his money to work through real estate investing, while working a ton of hours as a doctor. This episode has tons of value for other high income earners, as well as anyone who could use help with prioritizing their time between family, work, and real estate investing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“I look for other people who have invested with them” – Peter Kim

 

Peter Kim Real Estate Background:

  • Owner of the website https://passiveincomemd.com/ where he shares his knowledge of passive real estate investing with doctors and other high income professionals
  • His site and blog are viewed 50k people each month
  • Based in Los Angeles, CA
  • Say hi to him at https://passiveincomemd.com/

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

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 scre