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:

 

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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.

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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.

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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:


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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.

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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:


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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.

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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.

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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.

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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

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, 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.

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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

 


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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.

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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 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 Theo Hicks, and I’ll be the host for today’s episode. Today I will be speaking with Peter Kim. Peter, how are you doing today?

Peter Kim: I’m doing great, thanks for having me.

Theo Hicks: Thanks for coming on. I’m looking forward to our conversation today. A little bit about Peter – he is the owner of the website PassiveIncomeMD.com, where he shares his knowledge of passive real estate investing with doctors and other high-income professionals. His website and blog are viewed by over 50,000 people each month. He’s based out of Los Angeles, and you can say hi to him at PassiveIncomeMD.com.

Peter, before we begin, do you mind giving us a little bit more information about your background and what you’re focused on now?

Peter Kim: Sure, absolutely. I’m currently an anesthesiologist living in Los Angeles, California, with a wife and two children. I’m originally from the East Coast, but I ended up out here following my wife, to follow the California dream. I started as an anesthesiologist about nine or ten years ago; I was working, and that was my goal from the very beginning – get out, finish my training, work as a physician, help a lot of people, live a good life… But a few things happened at work – a few things politically, with some job uncertainty – and I got to the point where I realized I can’t rely on this completely, at least this income, to give me the life that I wanted, at least for myself and my family… So I started looking outside of medicine to figure out what else are people out there doing for income for this concept of financial freedom, and I landed on real estate.

I had some other physicians that I saw who were living the life that I wanted, and they were pretty much all doing real estate… So I started exploring that, I started learning so much about it, I started going online, listening to podcasts, reading blogs, and the next thing you know, I started doing a few deals, started picking up a few rental properties, I started investing in some syndications and crowdfunding. I was telling all my friends about it, and they wanted to know exactly how I was doing it. I guess I got tired of having the same conversation over and over again, and I started just to put it up on a blog. I started to write about it, share my experiences, talk about some of my mistakes, my failures, some of the good stuff that was happening, and the next thing you know, organically people started to come [unintelligible [00:04:49].26]

Theo Hicks: I’m sure working as a doctor you work a lot of hours… So for other people who are also working a lot of hours, what advice do you give them to get started in this real estate investing endeavor?

Peter Kim: Yeah, my life as a physician is pretty busy, and for anybody who has a job, anybody who has a family, anybody who has hobbies or passions, you’re gonna be busy. So it’s not really a matter of finding time, it’s a matter of figuring out what your priority is. So what I would do is I would work a long day, I’ll come back home, I’d see the kids, try to spend my time with them, spend my time with them and my wife, put them to bed, and then at that point is when I would get working; and I would work from 8 PM to maybe midnight, work really hard, maybe sleep for five hours, wake up, and I’d even start working at it again.

So I would find the time just to do these things, and unfortunately some things I had to give up. I don’t watch TV as much as I used to before. Some of my favorite shows are just sitting there, waiting for me… But you just have to make the time and just take the action, and really figure out what’s important to you and what your goals are in life.

Theo Hicks: And are you strictly doing passive investing, or are you an active investor as well?

Peter Kim: I do both. I like the idea of diversifying. I started by investing in crowdfunding, I started investing in syndications first, because my lack of experience — I didn’t know how to start; I didn’t know whether I could take on a rental property on my own. But once I kind of dipped my feet in using those things, I started feeling more comfortable, got a little more confident. Then I started buying my own rental properties. I bought a single-family home. Then I bought a single-family home out of state. Then I picked up a few multifamilies. But then all along the way I’ve still continued to invest passively as well.

Theo Hicks: Okay, so you started off passively and then transitioned into actively, while continuing to passive invest… What skills, knowledge, anything that you’ve learned from passive investing helped you transition into active investing? Or did you have to learn active investing completely separately from your passive investing?

Peter Kim: That’s a good question. I think a lot of it just had to do with confidence for me. It’s just putting your money somewhere else to work. I was so used to working as a physician, doing the active income thing where you put in your time and you make money… The whole concept of investing, putting your money elsewhere, letting things happen, setting a system and letting things happen in place was totally foreign to me… So I kind of just had to get over that, and that’s what really passive investing helped me to do.

The funny thing is once you start passive investing, start investing in those syndications, in some of those crowdfunding debt deals and some of those equity deals – you know, I started actually looking to the numbers, I started learning. It wasn’t a whole lot of money when I first started, but just having a little bit at stake really forced me to get in there and learn. So I started learning about “Yeah, what is rental income? How do you increase these types of things? What’s cap rates? Net operating income”, I started learning about some of those numbers, and then – again, it gave me the confidence to go out and purchase my own properties. So there was definitely a hurdle that I needed to get over initially, and really passive investing helped me get there.

Theo Hicks: Yeah, I think that’s really important that you said that. I think one of the biggest characteristics that differentiates someone who doesn’t and does invest is that confidence. You learn everything, but do you have the confidence to actually take action and actually do it?

Peter Kim: Right. The thing is you have to be okay with failing. I think what I’ve learned is that you can sit there and read all you want, you can sit there and learn, but it’s like a totally different ballgame once you get in there… And you learn so much more by just getting your hands dirty. And I think I got to the point where I realized, “Look, I’ve gotta take chances here and I’ve gotta move forward.” I was just sitting there reading and learning and I wasn’t doing anything, so unfortunately I wasn’t growing as well… So  a part of it was that “Look, I’m gonna make some mistakes, but I’m gonna learn a ton in the process”, and that’s actually what ended up happening.

Theo Hicks: Exactly. So when you’re talking to doctors and other high-income professionals about getting started in passive investing, what advice do you give them? Or let’s say if they wanna invest in a multifamily property with a syndicator – what advice do you give them for finding, evaluating and screening different general partners, different syndicators?

Peter Kim: Well, that’s the number one question I get  through my blog… And I also have a community of about 7,000 physicians in a Facebook group that I work with and I moderate and I talk to, almost on a daily basis. We talk about different syndications, different opportunities, ways to make passive income… But again, the number one question I get is “How do you choose which syndicator or operator to trust? How do you know a deal is good? How do you verify what’s on paper?” So we spend a lot of time, and unfortunately that’s not an easy question; I think that’s a thing that even professional syndicators – that’s something that they’re continually refining and learning.

So I do spend some time on the blog, writing post, by post, by post, and we spend some time actually going through even some case studies in the Facebook group… But one thing that I’ve actually done recently to really help people in this manner is I’ve actually built a course. Again, so many people were asking me “What are some of the best resources out there for people?”, so I decided to really package that and put that into a course that hopefully condenses all those months and years that I spent trying to learn about this stuff, really only into a couple hours, for the busy physician.

Theo Hicks: Here’s a more specific question – what would you say would be the top characteristics of a syndicator that you can trust? What are 2, 3, 5, whatever things that a syndicator must do in order to gain that trust from a passive investor?

Peter Kim: I tell people the number one thing to look for is track record. I want someone who’s already established and has experience doing this thing. Ideally, this is somebody who’s seen some of the ups and downs of the markets and that has been able to navigate that. Obviously, there’s so many good deals out there and there’s so many bad deals, but what will make or break a deal is the way the sponsor can really operate and execute their business plan… So I go back to their history to look and see what they’ve done in the past. Again, it doesn’t have to be a spotless record, because obviously, what happened in 2007 and 2008 – there were some ups and some downs. Ultimately, how did they navigate through that thing?

So number one is track record. Number two – I feel more comfortable if somebody else that I know has invested with them, or somebody that I trust has invested with them… So that’s what I look for. I look for other people who have already invested with them, have a personal relationship with those people and can kind of tout, or vet, or attest to how good they are in terms of communication, how they’re executing their business plan, how they’ve been in terms of professionalism, that sort of thing. So that’s what I look for next.

Then after that, I need to have a personal conversation with them, and I recommend every single person does that. What we’re gonna do with this course, and what we’re gonna do even on the website, is I wanna give them the top ten questions they need to ask sponsors… And they should be doing these things themselves. I know on a lot of these crowdfunding platforms they kind of put the track record, and these kinds of things, of all the sponsors, and they’ve done the vetting… But I think it’s really important for doctors – or any busy professional – since they’re putting  a good amount of their income to use, is to actually personally vet them themselves.

Theo Hicks: Alright, let’s change gears a little bit and talk about your blog. So you’ve got 50,000 people a month reading your blog… Before we talk about how you did that, do you mind telling us a little bit about the positive benefits that has had on your business, your life in general?

Peter Kim: Sure. When I started this thing I didn’t even know who would read this thing; I actually really created it just for a few of my friends to read, so again, I wouldn’t have to answer the same questions over and over again… But it kind of blew up on me, and that’s something that kind of took me by surprise. I’d be lying if I said I expected to build a readership like this… But it’s been amazing.

Obviously, I’m still learning, and I try to tell people on the site, I am not the one who knows every single thing about this whole subject, but it’s something that maybe I’m a few steps ahead of people… And this is what I’m learning, and this is what I’m doing, and this is the mistakes I’m making along the way… And the cool thing is it’s put me in the center of this community, and I’ve met so many great — not just physicians, but even professionals in the business that are doing some amazing things, and it’s really inspired me to get better at this. So I love just being able to be in the middle, to connect with so many people, and I feel like it’s opened up my whole world to a lot of different things that different people are doing. And again, every day I get inspired by somebody else, so that’s what’s been amazing.

The other thing is it’s really allowed me to connect to a lot of physicians who are in the same position really that I was, where they felt kind of stuck in their position; they’re making good incomes, but they don’t really have that time freedom, that financial freedom, and they didn’t really know what to do to get to the next step. So I’ve connected with a lot of physicians like that, and it feels great to have something to offer them, and just really connect with those people. That’s been an amazing experience for me.

Theo Hicks: Okay, and now the last question before we get to the money question – how were you able to get to the point where you had 50,000 blog views per month?

Peter Kim: I wish there was a magic formula to that, but again, I think a lot of it has to do with consistency. You guys do that same thing with the podcast – you guys are doing it every single day, and people know that they can rely on you to provide information every single day. So on my blog what I started doing was just putting out consistent content, and I try to put obviously good quality content every single time, something that was of value to people… And I actually put out something about three times a week; that’s been really busy, sometimes a little bit of a struggle for me to do that, but I think that consistency is what’s really helped grow the readership.

What I also do is spend a lot of time engaging with people, both on the blog, on the Facebook group, and I make sure that everyone feels that they’re able to get value out of this. Honestly, it’s been a slow growth; nothing special, but over time it’s just continually started to grow. There’s no magic formula to it.

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

Peter Kim: The best advice that I would give is just get started. I’m sure other people have given that advice as well… But so many physicians – especially physicians – wanna make sure that they have all the information before they decide to take action. I think that’s what we do with our patients – we take all the greatest information out there before we make a course of action and make a plan for people… The problem is in this world you’ve gotta take action sometimes to learn, and to get better, and to grow. So that’s my advice.

Theo Hicks: Alrighty. Are you ready for the Best Ever Lightning Round?

Peter Kim: Sure, let’s do it.

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

Break: [00:15:12].28] to [00:15:54].22]

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

Peter Kim: The best book that I’ve recently read is called Never Split the Difference. It’s a book on negotiation by a former FBI lead hostage negotiator, and it’s just really taught me a lot about how to ultimately get what you want in a negotiation, and at the same  time help the other person get what they want as well.

Theo Hicks: What’s the author’s name?

Peter Kim: The author’s name is Chris Voss.

Theo Hicks: If you guys listen to episode 1244, it has the interview with Chris Voss. That was back in January of last year. If your business collapsed today, what would you do next?

Peter Kim: I would just start over again. I would just build it a little bit, by a little bit, by a little bit, but hopefully that won’t happen.

Theo Hicks: And how would you start over if you had little or no capital?

Peter Kim: Again, luckily, this thing doesn’t take a lot of capital. It’s a lot of time, energy and effort, and that I have a ton of… So I would definitely just continue to do this.

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

Peter Kim: I would say the worst deal that I’ve done is the one that I ended up backing out of. I had an opportunity where I was in escrow for a flip, kind of in the lower Beverly Hills area here, and myself and my partners – we ended up kind of freaking out and we actually backed out of the deal. That was about 3-4 years ago. Unfortunately, I looked, and if we had sat there and done nothing with it, we would have made an amazing return and we would have killed it.

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

Peter Kim: The best ever place to reach me is directly on my website, PassiveIncomeMD.com. I’d love to talk to you.

Theo Hicks: Great. And again, that will be in the show notes of this episode for those listening. Alright, Peter, I appreciate you coming on. Great information. Just a summary of what we talked about – we started by talking about how can people get started in real estate investing when they’re really busy, which is basically everyone… And for your advice and for what you did it was all about prioritizing your time, so just kind of finding the time to get to work, and giving up some of the things you used to do for fun. You said that you’d go to work and then you’d come home, spend time with the family, and then once everyone was to bed, you’d work until about midnight, get some sleep and then wake up and start working all over again, just to kind of get things up and running.

We talked about how you were able to transition from being a passive investor to becoming an active investor, and it was all about having the confidence to take action, as well as being okay with failing. Realizing that you’re gonna learn a lot more by taking action that you would by reading, but of course, with reading you’re not necessarily going to fail, so you kind of have to be okay with that, understand that’s part of the process.

We talked about the three things to look for when you’re looking for a syndicator. One is their track record and history, number two is references, someone that you trust having invested with them before… And three, making sure that you always have a one-on-one personal conversation with the lead sponsor.

We also talked about how you were able to grow your blog traffic to 50,000 users per month. Like most things in life, there is no magic formula. For this it was all about consistently posting high-quality content; for you that was about three times a week… And then as well as engaging with people on your blog, as well as in the Facebook group that you created.

We talked about some of the benefits of that blog, putting you in the center of a community, which allows you to meet physicians and other professionals, which was giving you inspiration and you also felt good to help out people and connect with people that are currently in the situation that you were in the past. Then your best ever advice was simple, but also powerful, which is just get started, and take action.

Again, Peter, I really appreciate you coming on the show today and offering your advice. Thank you to everyone who listened. Have a best ever day, and we’ll talk to you soon.

 

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JF1784: Doing First Multifamily Syndication Only Eight Months In with Kyle Mitchell

Kyle left his full time job just eight months ago (as of this recording) and already closed on his first multifamily syndication. He started out in real estate like many of us, working full time and buying single family homes. Hear how and why he was confident in leaving his job, and what it took to close on his first syndication. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Real estate is a team sport” – Kyle Mitchell

 

Kyle Mitchell Real Estate Background:

 


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TRANSCRIPTION

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

Kyle Mitchell: I’m doing well, thanks for having me on, Joe.

Joe Fairless: Well, I’m glad to hear it, and it’s my pleasure. A little bit about Kyle – he’s the managing partner and co-founder of Limitless Estates. Recently he closed on his first multifamily syndication, in May 2019. Based in Los Angeles, California. With that being said, Kyle, do  you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Kyle Mitchell: Yeah, absolutely. Thanks for having me on. What we focused on is value-add multifamily out in the Arizona market. In fact, about 18 months is when we first found multifamily and got started educating ourselves; I left my full-time job about 8 months ago to pursue this full-time. As you mentioned, we’ve just closed on our first project, a 42-unit property out in Tucson, Arizona a couple months ago.

Joe Fairless: Well, you’ve got a lot of exciting things going on. Congratulations on the closing. So you said  you focused on multifamily 18 months ago… What were you doing at the time as a profession?

Kyle Mitchell: I was a regional manager for a golf management company. I oversaw about 20 million dollars in revenue, and had about 250 employees. You can think about our company kind of like  a third-party property management company; municipalities would hire golf management companies to come into their properties and manage their facilities for them.

Joe Fairless: Okay, got it. And your role specifically within that was what?

Kyle Mitchell: I was a regional manager [unintelligible [00:03:37].12] general manager. So I oversaw the operations of the golf courses, and the day-to-day business.

Joe Fairless: Okay. So let’s talk about you leaving your job eight months ago to focus on, I imagine, this, full-time… Correct?

Kyle Mitchell: Yes, correct. I’ve always been an entrepreneur at heart and I’ve always wanted to leave my full-time job, and I’ve just been waiting for the right time to do it, and find the right vehicle. And about six years ago I got started investing in single-family homes, and much like many people, I learned I can’t scale as quickly as I wanted to… And that’s when I started looking into multifamily.

Once I found multifamily, I fell in love with it, I fell in love with the business model, and as soon as we felt like we had enough of an investor base, enough knowledge and a big enough network, I decided to leave and pursue this full-time.

Joe Fairless: Oh, okay. Let’s talk about the single-family stuff, so we get a full picture of your real estate background. What single-family properties have you purchased?

Kyle Mitchell: I have nine single-families; they’re all out of state. Some in Arkansas, Chicago and Ohio area. I bought them all turnkey about 4-5 years ago. At that point, I was just trying to get some passive income while I had my full-time job. Then, as I mentioned, I quickly realized it’s tough to scale, especially with turnkey, so I decided to become more active in the multifamily syndication space.

Joe Fairless: Okay. Do you still have those nine single-families?

Kyle Mitchell: I do, although I am trying to dispose of those. They do cashflow, but right now I wanna put that capital to work in multifamily.

Joe Fairless: Okay. So are you trying to sell them as a portfolio, or just one-off transactions?

Kyle Mitchell: [unintelligible [00:05:13].14] them in three different markets, so basically I have two in Arkansas, and I’m trying to sell those as two; three in Ohio, trying to sell those together, and then the four in Chicago. So three different portfolios. But if I get an offer, one-off and I’ll take those as well. Unfortunately, those have been kind of my worst deal. I bought them turnkey, and at the time I thought they appraised; they did appraise, but it’s looking that they’re worth less than what I purchased them for… So I’m having a little bit of trouble selling them, so I might have to take a loss on them.

Joe Fairless: Okay. Let’s talk about the 42-unit. When you said that “We got focused on it 18 months ago”, or introduced to it – who’s “we”?

Kyle Mitchell: We is my fiancée, who’s my business partner. She still has a full-time job, but she helps with raising capital.

Joe Fairless: Okay. The 42-unit that you two purchased – were you two the only general partners in the deal?

Kyle Mitchell: When we started out, yes. We tried to do it on our own. We had a little bit of trouble raising capital, and a little bit of trouble actually with the lender, so we had to switch lenders last-minute and go with a Fannie Mae loan… So we had to bring on two other partners to help sign on the loan and raise a little bit of capital on the side.

Joe Fairless: Okay. Let’s get into the specifics of the 42-unit. How did you find it?

Kyle Mitchell: Well, by driving the market. We look in the Arizona markets. We live in Southern California, so what we would do is every other week we would drive down to Tucson – it takes about seven hours, so we leave at [2:30] in the morning, get in around 9 or 10, and on the way we would call brokers and tell them we’re gonna be in town and asking if they had anything available.

It so happened that one of the brokers just got the listing that morning, hadn’t toured the property really themselves, and asked if we wanted to tour it… So we were the first ones to take a look at it, and as soon as it went to market, we had basically already put our offer in. So we had about a three-week headstart, and about a week later we got it under contract.

Joe Fairless: How many times did you do that seven-hour drive prior to purchasing the 42-unit?

Kyle Mitchell: I would say at least ten, and we still continue to do it. Sometimes we fly out of here now, but we were out in the market every other week.

Joe Fairless: Okay. And what are you doing in the market every other week, now that you have a property?

Kyle Mitchell: We’re just meeting with brokers, telling them about that property; we’re also meeting with potential investors, local people, and just trying to get to know the area a little bit better. When you’re dealing with out of state, you don’t know all the areas of the market unless you’re driving it and spending some time in it… So we like to do that, and then we’re buying brokers lunches, coffees, whatever we can do to build better relationships.

Joe Fairless: So you got it through a broker… What was the purchase price?

Kyle Mitchell: 1.65 million.

Joe Fairless: Okay. And total equity you raised  was how much?

Kyle Mitchell: A million.

Joe Fairless: And I imagine, since it was an agency loan, you raised the cap-ex budget from the equity from the investors, right?

Kyle Mitchell: Correct. Closing costs, around 600k, and then we raised another 350k or so for the renovations.

Joe Fairless: And what are you doing, renovation-wise?

Kyle Mitchell: Full paint job, changing out the doors… This property specifically has sliding glass doors, believe it or not, so number one, it’s a safety issue, and number two, the doors just don’t work very well, so there’s a lot of maintenance that has to be done on them. So we’re  replacing them with full wood doors on there, changing out the railings, and rebranding and re-signage. We’ll add a small little dog park and a barbecue area.

Joe Fairless: And you bought that in May, so… Very recent. What have you learned so far, after about a month or so on the property?

Kyle Mitchell: That the residents just have not had communication with the previous property management, so we’re bringing someone in there and spending time on the property, and they’re really loving the feedback that they’re getting from the property management, someone on site.

We’ve also learned that we’re able to get the market rents that we were hoping for after renovations, prior to renovations. That’s good news.

Joe Fairless: Excellent. Yeah, that’s great news. Congratulations on that. What is the rent bump that you’re looking for, or you have been achieving?

Kyle Mitchell: About $125, plus an additional $35 for RUBS.

Joe Fairless: Yeah, good for you. How long is the loan? When does it mature?

Kyle Mitchell: We’ve got a 12-year Fannie Mae loan, three years interest-only, fully assumable, at 4.2% interest rate.

Joe Fairless: And when do you plan on exiting out of it?

Kyle Mitchell: It’s a six-year exit plan, but obviously, if we’re able to exit out of it a little bit sooner, depending on the rents that we’re gonna get after renovations, it’d be great to exit out of it in about year two, or do a refinance.

Joe Fairless: In terms of the equity raise, what about it was surprising when you were initially doing it, and then you needed to bring on another partner to complete it?

Kyle Mitchell: Yeah, so the first time raising capital, you really get a peek behind the curtains of people’s lives. We anticipated that we’d be able to raise a million dollars, and we ended up raising 900k of that, but things happen in people’s lives, and it’s a whole timing issue. So whether someone’s having a baby, or someone’s out of the country for a month, or someone’s closing on another property so they need to show liquidity to the bank…

All these things come up where life just happens, and really when you’re raising capital I would say you wanna anticipate at least two times the amount that you wanna raise. If you wanna raise a million dollars, you wanna know that you have two million banked on.

Joe Fairless: What are the terms that you have with this deal, in terms of GP, LP, pref, all that.

Kyle Mitchell: We’ve got a 6% pref, 80/20 split, six-year hold, [unintelligible [00:10:43].29] 14% IRR.

Joe Fairless: Cool. What was your acquisition fee?

Kyle Mitchell: Acquisition fee was 1%.

Joe Fairless: Okay. So the acquisition fee isn’t something that you’re able to retire off of, clearly, but it certainly helps… But you left your job eight months ago, so how did you decide “Okay, I need to leave my job (or I want to leave my job, however it transpired) and I’m gonna make it on my own with this real estate investment career”?

Kyle Mitchell: Well, first, I have an amazing fiancée who is supporting me through this and said “Let’s do it”, and number two, I just feel like if you’re gonna go all-in and be one of the top players in the game, you’ve gotta go full out. That’s just something that I decided to do. Back when I  still had my job, we were still coming out to the market and we were still competing, but I just don’t think that we were competing to the level that we needed to. We weren’t building the relationships we needed to, we weren’t networking as much as we needed to, we weren’t building our investor base as much as we needed to, and the only way to do that was to be full-time and to go full-out with it… So we just decided to take a leap of faith and go after it hard.

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

Kyle Mitchell: Get out of your comfort zone. If you’re not pushing yourself to places you’ve never been, you’re gonna be stuck in the same spot forever.

Joe Fairless: Well, you certainly did that, and also I’m sure you’re very thankful for your fiancée and her full-time job during this interim period.

You’ve got a 42-unit, and you have a couple partners… How did you find the partner who ended up bringing the balance sheet for the loan?

Kyle Mitchell: Through networking. We have a meetup group that we’ve had for about 14 months now, and I’ve met him through that group; we started talking, and ten months later he approached me and said that he’d be interested in possibly partnering on a certain deal. He had the balance sheet and the experience, so I called him up and asked him.

Joe Fairless: And how do you structure that with someone who brings that to the deal?

Kyle Mitchell: I think it depends on the deal and the person, but basically we gave him a certain percentage for signing on the loan for us. Real estate is a team sport, as they say, so there are several pieces of the pie and you’ve just gotta figure out what pieces you can add to it and where other people can add to that pie.

Joe Fairless: And what’s the range of equity that that person would get on a deal?

Kyle Mitchell: I’d say anywhere between 5% and 15%.

Joe Fairless: Knowing what you know now, now that you’ve  completed your 42-unit purchase, if you were presented the same exact deal this week, I’m sure there’s something you would do a little bit differently than you did going into the 42-unit transaction… So what’s something you’d do a little bit differently, if presented the same opportunity this week?

Kyle Mitchell: I would have set up the team in advance, and not try to do everything myself. And then secondly, I would have probably better communicated with the lender what my plan was on the property, and the GP structure.

Joe Fairless: Will you elaborate on that? I should have asked some follow-up questions about the lender and the loan, what transpired with that…

Kyle Mitchell: Originally we were gonna go with a Freddie small balance loan, and we were gonna try and do the full raise by ourselves. We had an extension built in just in case we weren’t able to, but at that time I failed to communicate to the lender that we’d be adding GPs later in the game, so… Basically, with Freddie, they applied for the loan prior to that; they got to the point where it was too late to add on a GP, so we actually had to move lender and go with a Fannie Mae loan, and switch lenders completely.

Obviously, with 30 days left it was a scramble at the end, but we were able to get it closed… And it worked out in the end. We ended up getting a 80 basis point discount on the interest rate, because the interest rates had lowered so drastically.

Joe Fairless: Oh… [laughs] That’s good.

Kyle Mitchell: It ended up working out, yeah.

Joe Fairless: Yeah, I’m glad to hear that. Who did you have as your point person throughout that process? Did you have a mortgage broker?

Kyle Mitchell: It was a mortgage broker, correct.

Joe Fairless: And how did you get to know the mortgage broker?

Kyle Mitchell: Through a podcast, and networking, and going to certain events… And we had built a relationship with that person over the last 5-6 months. I feel bad that we had to bail on that deal, because we had built up that relationship, but unfortunately, based on the situation, they were unable to help me… And by switching over with someone who the other GP had a good relationship with, we were able to get it closed.

Joe Fairless: Did you say you run a meetup group, and have been for about 14 months?

Kyle Mitchell: Right, we joined in on another meetup group; we were the second chapter to join, and we’re now eight chapters, and we’re about to go nationwide towards the end of the year… But we’ve been doing that for about 14 months; we have about 1,400 members in our group, and I also have a second one that I started earlier this year that’s more of a smaller roundtable for multifamily.

Joe Fairless: Oh, cool. How do you structure the second one?

Kyle Mitchell: It’s a roundtable, there’s only about ten people that come, and everyone gets to go around the table and talk. They’ll talk about their goals, what they’re doing in the next 30 days to accomplish their goals, what have they achieved over the last seven days, if they have any needs or wants, and any opportunities.

I like it because everyone in that group gets to speak, whereas at our other events, which are great as well, they’re more education-based. So it’s networking, but not every person gets to speak their mind and share what they’re going through.

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

Kyle Mitchell: Let’s do it.

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

Break: [00:16:05].20] to [00:16:54].12]

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

Kyle Mitchell: The Best Ever Apartment Syndication Book. I model my business after that book, and it’s working great so far.

Joe Fairless: Oh, I’m glad to hear that. What’s the best ever deal that you’ve done so far? Let’s remove the 42-unit — because that was  your answer, right? Clearly, the 42-unit…?

Kyle Mitchell: Yes, it is. But it’s the only multifamily property that we’ve done, so other than that I don’t really have one.

Joe Fairless: Okay. Well, what’s your best ever single-family home purchase?

Kyle Mitchell: The best ever single-family home purchase is the ones in Arkansas. I like Arkansas because it’s such a landlord-friendly state. If you are late on rent, even one day, you can evict them… So – knock on wood, I’ve never had a late payment on rent in Arkansas.

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

Kyle Mitchell: A mistake was buying turnkey rentals out of state, site-unseen, especially the ones in Chicago. I’m still dealing with those problems right now.

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

Kyle Mitchell: Through our two monthly meetups, and then we also have a podcast, and we also host free webinars to help educate others in the space.

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

Kyle Mitchell: You can either give me a call at 562-833-5010, email me at kmitchell@limitless-estates.com, or check out our podcast, passive income through multifamily real estate.

Joe Fairless: Kyle, thank you for being on the show. Congratulations on the 42-unit. Thanks for sharing the lessons learned from the capital raise, as well as getting the right team members in place, how you and your fiancée have positioned your company to be at this stage, the seven-hour drives you two were taking, at least ten times, in order to get the transaction… And everything that you’ve got done to get to this point.

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

Kyle Mitchell: Thanks, Joe. I appreciate it.

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JF1720: Building A High Volume House Flipping And Turnkey Rental Company with Antoine Martel

Antoine has been investing in real estate for four years now, and he’s only 23. Turnkey was not always the business plan, but that is what the company has grown to. Just two years ago, they did 10 houses, last year they did 60, this year they’re on track to complete 100 deals. Learn what he does to grow his business to 100 deals per year in four years. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“From the networking, I had a pool of people that were interested in turnkey rentals” – Antoine Martel

 

Antoine Martel Real Estate Background:

  • 23 year old real estate investor
  • Does 100 flips per year (turnkey rentals), owns a 20 unit apartment building
  • Based in LA, CA
  • Say hi to him at https://martelturnkey.com/
  • Best Ever Book: The 10X Rule

 


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

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


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, Antoine Martel. How are you doing, Antoine?

Antoine Martel: Very good, how are you? Thanks for having me.

Joe Fairless: Yeah, my pleasure. I’m doing well, and looking forward to this. Antoine is a 23-year-old real estate investor who owns a 20-unit building and does 100 flips per year that are turnkey rentals. Based in Los Angeles, California. With that being said, Antoine, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Antoine Martel: Sure. This all started four years ago when I was 19 years old. I was in university, I went to Loyola Marymount University down here in Los Angeles. I didn’t wanna get a job after graduating, I wanted to go and do my own thing. I was studying entrepreneurship at LMU, and I wanted to really start my own company out of college.

While I was at university I went to a real estate investing seminar. They were talking about flipping houses, and wholesaling, and all the different ways that you can invest in real estate, and flipping houses was the most interesting to me… So I started to make all these offers in Los Angeles, but I didn’t have much money in the bank account; I was just a college kid, and my parents didn’t wanna fund a full rehab project for a million bucks here in Los Angeles, so after placing 20 offers a month for a number of months and never got anything under contract,  I realized I needed to change my strategy. That’s when I heard about rental properties out of state, and I thought that would be the perfect fit for my parents.

My dad owns his own company, my mom had her own company, so no retirement account, no 401K, but my parents had some money saved up, and I thought that it would be a great way for them to have a plan to retire at least, without having a 401K… So I started researching all these different markets out of state, and found a couple of good ones – Memphis, Cleveland, Birmingham, St. Louis. I went to Memphis, TN, bought a single-family home, renovated it, rented it out, and then did a cash-out refinance (the BRRRR strategy). My dad funded that first deal. We bought that first house in my last semester at university. Then I graduated in May and told them, “Hey, I can keep buying these properties out of state and keep growing the family portfolio”, so that’s what I did.

My dad paid for my living expenses for a couple of months so that I can grow the family portfolio, and by the end of that year we had ten single-family homes in Memphis. Then after that friends and family started reaching out to us to invest out of state as well, because they had never heard of people buying properties halfway across the country.

We started selling properties out of our portfolio to our friends and family, which led us to the company we have today, which is a turnkey company. So that’s what started it. We were like, “Oh, okay, we don’t’ have to refinance every single property. We can also sell it and make a profit, and then use that cash to keep growing the family portfolio.” Now we’ve built that company up the last couple of years to where we are today, and in 2019 we’ll do over 100 single-families and duplexes.

Joe Fairless: How many did you do last year?

Antoine Martel: Last year we did 60, and the year before that we did those 10.

Joe Fairless: Wow. Okay – 10, 60, 100. How did you go from 10 to 60?

Antoine Martel: Great question. I raised a lot of money here in L.A. So I was not only working on building teams on the ground in all these different markets, and researching markets, and finding the right projects, but then also we had run out of money, so we kind of started this whole thing with just $50,000. That first house – we bought it with $40,000, renovated for 10k, then did a refinance, and then my dad had all this money back because of the refinance and the way that we financed it. So we were able to pull all our money out and that’s how we grew our portfolio to ten properties.

Then after that I kind of built all these different case studies based on those ten projects, to show people that I knew what I was doing, and that I had rapport, and that I’ve done similar projects and similar project types in those neighborhoods… And then I would just network all day, every day, on Bigger Pockets, and go take people to coffee, or lunch, or dinner, and just share with people what I was doing. That in turn helped me grow my list, and grow my network from zero to 100 people, and those people started funding our deals then. They were equity investors on the turnkey flips.

We would buy a property, renovate it, rent it out and then resell it on our website, and people would fund those projects, they would fund 80%-90% of the project and then get a percentage of the profits. That allowed me to scale; with my $50,000, now I can just put $5,000 or $10,000 into each project, so it allowed me to go from one deal to ten deals really fast.

Joe Fairless: How much did you raise to the best of your recollection that year, from investors?

Antoine Martel: That year… So 60 projects, times $50,000 each, would be around how much I raised.

Joe Fairless: I will do that. Three million. Yup. You raised three million dollars. Approximately how many investors did that comprise of?

Antoine Martel: And again, people repeated their money, because these projects are very quick; they’re two or three-month projects in and out, renovations and reselling… Because we don’t have to list them on the market. So I had the investors — again, from that networking I also built a pool of people who wanted to buy turnkey rentals, so it was great. No matter what, I would walk into those networking meetings, or the coffee, or whatever it was, and I would get something out of it – either an investor, or somebody who wanted to invest in turnkey rentals. So it was perfect for me, because I got both ends of the spectrum.

The amount of investors – it was probably close to 50 investors, but the investors would keep reinvesting their cash over and over, because they would invest 50k, then they would get their money back plus the profit in 2-3 months, and then they were like “Oh wow, this is actually working” and then they would invest 150k. So it helped scale up very quickly the dollar amount that I was able to raise.

Joe Fairless: What were the terms?

Antoine Martel: It was a joint venture. Our LLC would buy the property, they would invest in that project and partner with us on that project, with our LLC, they would fund 80%-90% of the total cost, which is purchase price plus the rehab, and they would get close to 50% of the profits, sometimes a little bit less. So the annualized returns were incredible, because they were making a 10% return, but they were making it in 2-3 months.

I think it was worth giving that return at the very beginning, because then people kept doubling down their money and it helped me really scale the whole company.

Joe Fairless: And that’s why I said “were” those terms… What are the terms now?

Antoine Martel: [laughs] Yes, that’s something, too. We looked at those 60 projects at the end of the year and we were like “Here’s our profit, and here’s the payout to investors”, and it was literally like 50% of the payout. And then we had a little bit of overhead for other things that we don’t really put on a per-project basis.

We changed our model now… We still do joint ventures here and there to those people who are kind of grandfathered in and still have money with us, but we’ve kind of converted everybody to just being private money lenders, where people just lend money and they make 1% a month for a six-month project or less… So 12% annualized return is what we pay out to the investors, and first lien position, and all that kind of stuff.

Joe Fairless: Any points at closing?

Antoine Martel: No points at closing.

Joe Fairless: Okay, so just nice and clean, make 1% a month.

Antoine Martel: Easy. Right to their bank account, too. We just get their ACH, and then every single month they’re paid out. At the end of the project they get their principle back, hopefully they don’t want it back, and they just keep it with us and we keep growing their money.

Joe Fairless: What’s a deal that went backwards/sideways, just terrible on you?

Antoine Martel: I’m lucky enough to not have had a terrible deal yet. We’ve had some deals that have been pretty close to breaking even. We were lucky that we didn’t have any investors in those deals. That’s something else, too – we started doing more and more deals with our own cash, which helps expedite our growth of our own money as well. Raising private money, paying them 1% a month, but then also using our cash more and more to fund these transactions.

A deal that did go south – there’s a couple on the top of my head. One of them was stuff being stolen. We bought a house, and the day we closed, the furnace and all the ductwork was stolen out of the basement of this property in Cleveland. So I went and filed an insurance claim etc. They denied it. Then I replaced the furnace, I paid for it… The renovation was completed, and we were listing it on the market for rent, so whoever was watching the house knew it was vacant, because the contractors had left. Somebody goes back to the house and steals the brand new furnace again.

Joe Fairless: Ooh…

Antoine Martel: [laughs] So they must have been watching this thing, because… I don’t know. They timed it so perfectly. That eats your profits… A couple thousand bucks we had to pay out, times two, and our projects are pretty slim on the profit… There’s a big margin, but the profit dollar-wise is pretty small… So yeah, two furnaces and all the ductwork being stolen out can take a heavy hit on your profit… But we were able to probably break even on that deal still, even though we got all that stuff stolen from us.

Joe Fairless: Did you put another furnace in it?

Antoine Martel: Yeah, we had to, because there was tenants moving in.

Joe Fairless: Do you do anything to try and protect it?

Antoine Martel: We can do that with HVAC units. We can put cages around them etc. What we actually ended up doing was we waited for a tenant to set a move-in date, and then 24 hours before the move-in date we went and installed the furnace. These people who do this, who are stealing it, could be contractors, or contractors’ friends, or somebody who has a lockbox code… But they really watch the property and they check to see if the properties are vacant. They don’t wanna do it when somebody’s living there. Most of the time that doesn’t happen, so… We decided to just install the unit as soon as the tenant moved in.

Joe Fairless: How were they getting in?

Antoine Martel: There was a basement, and then from the backyard there was kind of a  barn door that would open with a left wing and a right wing, and they went and just popped off that lock every single time, because it was a piece of crap. So they just kept popping it off and breaking in through that little door in the back.

Joe Fairless: Isn’t there some video or security system, like maybe Simply for something like that, that you could install relatively inexpensively?

Antoine Martel: Yeah, we’ve never thought of that, because this doesn’t happen very often. We’ve done probably close to 100 projects now over the last couple of years and it’s happened twice where stuff has been stolen and restolen. Most of the times the insurance company will cover it, up to like a $10,000 a personal property… It just so happened that this time the insurance didn’t wanna cover it. Normally, we’re protected with that insurance company, just this time, for whatever reason –  it was the timing, or something – they didn’t wanna cover it.

Joe Fairless: Alright, we’ll move on. Contractors – I’m sure contractors are challenging. Do  you live in Los Angeles?

Antoine Martel: Yeah, I live in Los Angeles.

Joe Fairless: Alright, you live in Los Angeles. Your projects are not in Los Angeles. How do you navigate contractors, what are some tips you have?

Antoine Martel: Great question. I get this question all the time too, from people who are looking to invest out of state. One thing that I do where I haven’t had too much of an issue with contractors – I had only started having issues with contractors when I got into multifamilies. Again, I bought a 20-unit building back in December, a couple months ago, and we’ve only had troubles with contractors who are doing special things – HVAC, or electrical, or plumbing; just those contractors, the special contractors have been hard for us to find and navigate.

The general contractors have generally been – knock on wood – pretty good to us thus far. I think the reason why is just the method that I have used to find and vet those contractors. What I mean by that is I never picked up the phone and called a bunch of contractors and vetted them over the phone. I never went and visited, or shook hands with contractors, or personally chose a contractor for my project. The reason why is I’ve set up my teams on the ground to have a project manager (you can call it) for every single market, and those project managers have been people who have been doing real estate and renovation projects for many years in these markets, so they already have the contractors that they really love and like on speed dial.

I have been hiring these people to manage those projects, manage the contractors, and choose the contractors for me. I think that by doing that I haven’t had too many issues with general contractors, because I have that person who already has those pre-existing relationships with contractors on the ground actually manage the team. Some of these people – they go for beers after work, and they’re friends, and they hang out, and their families know each other… So if I just come in, the guy from California, and meet that guy from an ad, or calling him off of HomeAdvisor.com, or something like that, he may not trust me as much; but I think that putting that buffer in place – now it’s John’s project, and they’re friends with each other, but it’s unrelated to me, and they already have that pre-existing relationship.

Joe Fairless: How do you find the project managers?

Antoine Martel: There’s a couple of ways. Most of my project managers are either realtors, or they work in some fashion with the property management company. The most important thing for me, having a turnkey company and having rentals out of state, is the property management company. They play an integral part in the renovations, in taking the photos, in getting the properties rented… So a lot of these property management companies will have people already; a lot of them are required to have agents on board on their staff and on their team, in order to sign the lease agreements and all that kind of stuff. Many of those people also buy and sell real estate on the side…

So when I first go into a market, I try to find the best property management company that I can find; I don’t need it to be a huge property management company, with 3,000 doors. I’m fine if they have 300-500 doors or less; 200 doors is fine with me as well, as long as they can have somebody on staff who can help me grow my business, which therefore will help them grow their business. So if I can pay somebody off the property management staff, or just an outside realtor to manage my project, and then once that renovation is done, they help me take the photos, and then the property management company comes in and they’ll rent that property out… And they’ll be able to grow their property management business all because they helped me get the project from point A, which was unrenovated and not tenantable, to rented out. Now the property management company gets to grow their business by helping me take the project from unrenovated to renovated and rented out.

Joe Fairless: What fees do the property management charge you?

Antoine Martel: All of my property management companies charge first month’s rent as a lease-up fee, and then they charge 10% of collected rents on an ongoing basis.

Joe Fairless: Let’s talk about that 20-unit apartment building… When did you buy it, what are the numbers, where is it?

Antoine Martel: Sure. The apartment building is in Memphis, Tennessee. 20 units. We bought it in December of 2018. We bought it for a million dollars, so $50,000 per unit. The renovations entailed of full exterior renovations – painting, removing the bars off the windows, renovating the courtyard, installing all new doors, all new lighting, all that kind of stuff, and then also renovating the interior.

The rents when we bought the property were $550/unit. This is a B class, B- neighborhood. It’s in between a hospital district and a bunch of hipster upcoming hot spots. There’s a lot of young millennials, young professionals moving into the neighborhood.

Joe Fairless: What area of Memphis is it, for anyone familiar with it?

Antoine Martel: It’s in Midtown Memphis. The rents were $550/unit when we bought it. Our initial underwriting was we can renovate the units, renovate the exterior and increase the rents to $725. It turns out that we  were actually able to raise the rents — we spent a couple thousand dollars more per unit to get stainless steel, and granite countertops, and all this kind of stuff, and we were able to get the rents from $550 all the way up to $850, and we’re about halfway done with all of the units now, and just slowly as tenants leave we’re renovating the units and re-leasing them up for a much higher rent than we thought.

Joe Fairless: How much are you investing per unit?

Antoine Martel: Per unit it’s gonna be around $7,500.

Joe Fairless: That’s a 48% return. That’s pretty good.

Antoine Martel: Yup. [laughter] Yeah, it’s very good. And then the goal is to do a cash-out refinance with Freddie Mac at the end of the year, and just like we started with the single-family homes, do the same thing for the apartment building. We’re expecting to be able to pull out all our money at the end of the year, when we get long-term Freddie Mac financing.

Joe Fairless: A 20-unit last December, that is  a value-add deal… How did you find it?

Antoine Martel: Great question. For about nine months last year I built a list of brokers on LoopNet, and others methods, just collecting as many brokers in the multifamily space as I could, who are doing apartment buildings or multifamily in Memphis, Cleveland, Birmingham, all of my markets. And I collected this list of brokers and called them first, and told them who I was, what I was trying to do, what I was looking for, my criteria, and then every two weeks I set it up on just a calendar thing – every two weeks I would either call or e-mail these people, reach back out to them, ask them if they have any deals available, if they have anything that fits my criteria.

So every two weeks for about nine months I did that, and then it just so happened I emailed one of those brokers on a Thursday night, and he said “Oh yeah, I just got a deal that fits these criteria perfectly. I’ll send it to you in the morning.” Friday morning he sends me a little  jenky email with a couple of sentences and he says “Hey, you’ve gotta make an offer before we send you the financials.” I was like, “Okay, well, my offer is a million bucks then. There’s nothing else I can do.” The numbers worked at a million bucks based on the tiny information that I was given.

Joe Fairless: What info did they give you?

Antoine Martel: He told me 20 units, one-bedroom/one-bath units. He told me what the average rents were; he just wrote “Average rent – $550.” And then he told me the operating expenses, whatever the dollar amount was, and then like a taxes dollar amount, insurance dollar amount. And the last sentence – “You need to submit an LOI before we give you any other information.” I was like, “Okay…” He left me between a rock and a hard place.

So I just did a super-simple back-of-the-napkin thing, and the price per unit made sense, the rents definitely needed to be increased, so based on that we just submitted the LOI. And I wrote in the LOI that due diligence doesn’t begin until I get all the financials. I wanted to make sure that they actually had some financials, because trust me, there’s some landlords who just don’t even keep records, and they just keep it on a napkin as well.

Joe Fairless: Let’s go back in time – we don’t have to go back too far, because it was fairly recent, but… You said you did that for nine months. You made a list first, and then you called or e-mailed brokers from your list, every two weeks, and you followed up with them. Let’s travel back in time to month eight. So you still haven’t got a deal, but you’ve been doing this for eight months. What internal thoughts do you have at that point in time?

Antoine Martel: That’s hard… You just have to keep going, and I just kept listening to podcasts like this; people just kept saying “Yeah, just keep following up with the brokers, keep following up with the brokers.” So what I would do is I would just kind of keep changing my e-mail, and… I analyzed a lot of deals in those nine months, so I knew that it was working. It wasn’t like I wasn’t getting any replies, or I wasn’t getting any deals. Every time I would email, I would get a deal; maybe something on the market, or whatever… But sometimes I would get these off-market deals, I would run the numbers and go back to the broker and tell them “Hey, this deal is just way too overpriced. I can’t make this make sense at this price, but keep sending me stuff that you have.”

So there was this relationship that I was building, because I was replying to these people’s e-mails, giving them feedback on their listing from an investor’s perspective… So throughout those eight months – yeah, it was hard to keep going and to keep analyzing deal after deal after deal after deal, but I just knew that the break had to come eventually, and there had to be some landlord or some owner who was distressed, and it just so happened to be one month later, after those eight months of e-mailing and underwriting probably a hundred deals, that I was able to find the deal that made sense.

Joe Fairless: How many brokers were on the list?

Antoine Martel: I think 20, in a bunch of different markets, too.

Joe Fairless: How long does that take you to go through and follow up with 20 brokers?

Antoine Martel: Probably 30 minutes.

Joe Fairless: That’s it?

Antoine Martel: Yeah, because I had a template email just in my notes…

Joe Fairless: What did it say?

Antoine Martel: It was “Hey, my name is Antoine Martel. I’m a real estate investor, I own a turnkey company called Martel Turnkey. We buy, rehab and resell 100 homes a year.” And then I would say “Hey, I’m looking for apartment buildings in (whatever the market is) Memphis, Cleveland etc. I’m looking for 20 units or greater, less than 3 million dollars, cap rate between 7% and 8%, and I’m looking for 90%  occupancy or higher.” That’s kind of what the template said.

The last couple of sentences would be — I would change it up every single time. I would say something like “I just did a huge cash-out refinance…” I had a four-unit building last year that I bought as well, so I had done a cash-out refinance, so I would just include that little two-cent change in there as well. So I would say “Hey, I just did a cash-out refinance, and was able to pull out $250,000, and I’m ready to go. I just got the check from the bank.”

Every time that I would email, or every month I would kind of change up that last final sentence, to kind of tell them why I had cash and why I would be able to close, and that I just sold something, or I just refinanced something and got the money to be able to close.

Joe Fairless: And that’s the first email, because you’re not gonna introduce yourself to the same broker every two weeks, or else you’re gonna get in the spam folder, in his or her e-mail… So what were the follow-up e-mails?

Antoine Martel: The follow-up e-mails were very similar. Instead of introducing myself, I would just say “Hey, by the way, I’m still looking for apartment buildings. Here’s my criteria”, and then “By the way, I just did a cash-out refinance and I have funds available, ready to close.”

Joe Fairless: Every couple of weeks you’d just mix up the talking point. Sometimes you requalify yourself with “I just got a refinance”, sometimes it’s just other things about your criteria, or whatever else… Okay.

Antoine Martel: Yeah. And then let’s say I had a ton of cash in the bank one month, or one day – I would just take a screenshot of it and I would include that in the e-mail, too. Because I think a lot of these brokers get e-mails from California people all the time, and then they don’t really know that the people have actual money and they’re actually looking to close… So I think that showing them the bank account and showing them the number that I had… I kind of made it urgent, like “Hey, I need to get rid of this money. You’d better sell me something.”

Joe Fairless: [laughs] Oh, I love it. And how much was enough? How much would you be like “Okay, now I think I should send this” versus “Oh, they might laugh at me. I don’t know if this is enough.”

Antoine Martel: Since I was looking for 20 units, anything over 500k-600k I would just take a screenshot of it and send it. I think the first time I did it there was a million dollars in an account, and I just took a screenshot and I was like “I’m gonna use this for months.” [laughs]

Joe Fairless: Yeah, forever… [laughs]

Antoine Martel: So I took a screenshot of that, and then for a couple of weeks I would e-mail that and be like “This is urgent. I need to buy something. I need to get rid of this money.” So… yeah.

Joe Fairless: Wow. So smart. Thank you for sharing all of your stuff. I’ll summarize some lessons learned in just a moment, but first, what’s your best real estate investing advice ever?

Antoine Martel: Best real estate investing advice ever is to match your resources to the best strategy that makes sense for your resources. What I mean with that is a lot of people will do all this homework, and study all these different ways to invest in real estate, and buying 20 million dollar apartment buildings may be the most sexy or most attractive to you, but then look at your resources – how much time do you have? How much money do you have? What’s your experience level? Match those three things with the best strategy that makes sense today, that you can get started today… Because trust me, if you have $10,000 in the bank account and your end goal is to buy 100 million dollar or 20 million dollar apartment buildings, you’re gonna have to take a lot of steps to get there. Start with step one. That may not be even related to apartment buildings. It may be single-family, it may be Airbnb etc. But at least get your foot in the door and match the strategy today that makes the most sense for your resources that you have today.

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

Antoine Martel: Let’s do it!

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

Break: [00:25:36].08] to [00:26:38].20]

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

Antoine Martel: Best ever book I’ve recently read was The 10x Rule by Grant Cardone.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about?

Antoine Martel: In Cleveland we have this thing called “Point of sale inspections”. When you buy a property, you have to put pretty much a hold, which the escrow company holds until the renovations are completed, and I just realized yesterday that I sold two properties a couple of months ago and didn’t ask for the POS hold money back.

Joe Fairless: Best ever deal you’ve done?

Antoine Martel: The 20-unit apartment building.

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

Antoine Martel: I sometimes go to the Los Angeles National Forest and we plant trees and clean up the shrubs, and brush and replant new trees, and also clean up the existing trees in the forest.

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

Antoine Martel: I post a lot on Instagram. My Instagram handle is @martelantoine. If anybody wants to reach out to me, all my contact info is on my website, MartelTurnkey.com.

Joe Fairless: I thoroughly enjoyed our conversation. I learned a lot. You’re very wise, and have some great perspective and resourcefulness. Just making a list of brokers from LoopNet, calling them every two weeks, or e-mail them, and doing it for nine months, and giving them feedback along the way when they do send you deals, and then ultimately sending deals and switching up the follow-up process. That’s just great.

And then I loved the “Match your resources to the best strategy to utilize those resources.” I might have butchered that a little bit, but…

Antoine Martel: No, that’s good.

Joe Fairless: That’s the paraphrased version. And also just how you got out of the gate, senior in college, and started the company with your family, and then have grown it from there… So thanks for being on the show; I enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you again soon.

Antoine Martel: Absolutely. Thanks so much for having me.

 

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JF1678: How To Eliminate Time Toxins From Your Life #SkillSetSunday with Steven Griffith

Steven has written a book and been helping others optimize time for the last five years. He says time is our most valuable resource (we agree) and is here today to tell us how we can make the most of our time by performing at the highest levels with our time. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Time comes from you and you control it” – Steven Griffith

 

Steven Griffith Real Estate Background:

  • Nationally recognized author, speaker, researcher, and performance expert
  • Author of the book- The Time Cleanse and considered one of the leading authorities on the connection between time, productivity, and performance
  • Based in LA, CA
  • Say hi to him at https://www.stevengriffith.com/bestever/
  • “Get Steven’s Master Class on Time Free When You Order The Time Cleanse!”www.stevengriffith.com/master-class

 


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TRANSCRIPTION

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

Steven Griffith: I’m doing great, man. I’m glad to be here.

Joe Fairless: Yeah, I’m looking forward to our conversation. By the way, Best Ever listeners, since today is Sunday, we’ve got a special segment – Skillset Sunday – where you’re gonna learn a specific skill. That skill will be very evident after go through Steven’s bio. Steven’s a nationally-recognized author, speaker, researcher and performance expert. He’s the author of the book titled “The Time Cleanse”, and considered one of the leading authorities on the connection between time, productivity and performance. Based in Los Angeles.

We’re gonna talk about how to eliminate time toxins from your life. With that being said, Steven, before we get into the specifics of that, will you give the Best Ever listeners a little bit more about your background and your current focus?

Steven Griffith: Sure. I’ve been a performance coach for people’s personal business performance for over 20 years now, and my focus is working with entrepreneurs, executives, teams, to increase their performance. My focus now – it has been for the last five years – is dealing with and addressing the biggest issue people have today, not having enough time.

What I’ve done over the last five years, which is the focus of the new book, The Time Cleanse, is research the best methodologies and performance tools in how to start performing with your time, and how to take your life to that next level, and ultimately, Joe, to have time for what matters most.

Joe Fairless: Yes, please. I think 99% of the listeners are nodding their head, “Yeah, we’d love to have a way to optimize my time and be a higher performer during the time that I spend on certain activities…” So how should we think about this?

Steven Griffith: Well, the first thing is we’ve gotta start thinking about time as our most valuable and precious resource, and we also need to have the mindset of protecting it and maximizing its use. That starts with looking at it from a new perspective. You’ll see all types of books and theories on time management; that’s the buzzword. My book, my process has nothing to do with managing time. You can’t manage time. And time management – that mindset was designed when our phones were connected to the wall by a cord. And since we’re now mobile offices, we’re interacting with technology in such a different way, we’ve gotta shift our mindset to performing with it.

The old time management theories were you had a fixed hour, time was scarce, and you had the most done in it. What happens there, Joe, is that it provides time pressure, and it has nothing to do with the relationship. So when we shift to performing with time, we realize that time comes from us, and it’s actually expandable when you know how to use it the right way, and it’s abundant. That’s the philosophy we start with, is that times comes from you and you are in charge of it.

Joe Fairless: Hm, that’s powerful. So thinking about it in the way that time will exist as long as we’re alive, so let’s perform with time… Initially, when I initially said it’s powerful, my gut reaction was “That’s powerful.” But then, as I just started describing it, I’m thinking “Well, wait a second… What is the difference between managing–” Well, I guess I understand the difference between managing time, but I could see how performing with time could be just as stressful for someone, because if  they’re performing during the time, then hey, they’ve always gotta bring their A-game to everything they do.

Steven Griffith: Well, that’s a perspective, but the perspective that I work from is this – when you’re performing with time, you’re in the flow with time, and it’s a valued asset and resource to help you get what you want. The old philosophy is you’re working against time. So you can control time. What I stress is a concept called timefulness. Timefulness is being present in the moment, and really addressing the quality, experience and performance with your time where you’re always in control of it.

When you start realizing that you’re in the flow with time, it’s no longer stressful, because you’re controlling it. You’re not having something act on you.

Joe Fairless: I understand that conceptually. How can we take that concept and bring it to life on a practical level?

Steven Griffith: Absolutely. The first thing in the time cleanse is addressing what you really want your time for. You’ve gotta commit to what you want. And I know how committed you are in the work that you do on this podcast, and you’re coaching in the world is getting people to have time to spend however they want; that’s the same philosophy I have. So it’s first committing to what you want. You can’t have everything, but you can have what matters most.

So first in the cleanse process you need to decide what you want. If it’s a fitness desire, if it’s a financial desire, if it’s more time with your family… So you commit to it, and then in the time cleanse process the first thing that we do is we look at everywhere you’re spending time – with your technology, the people, the activities – and we list it all out. Then we ask the magical time cleanse question, “Is this contributing or contaminating to my happiness and success?” But first you have to identify “What are the contaminants?”

What’s happening today, Joe, is we have so many distractions; people are chasing so many things at once, and that’s one of the reasons why they don’t feel like they have enough time. They’re under a tremendous amount of pressure, and they’re not getting forward in their life. So once we identify what the contaminants are, then you have a choice of what to do with it. You can accept that as a contaminant, don’t change it, or you can reject it, and the rejection process is you may change the time of day you do something, how much time you’re doing it, and then lastly, the third choice is you remove it.

In that process, you reclaim time. The average person gets 10 hours, most people get up to 20 hours or more… And then here’s the most important point – it’s right in line with what you coach and what you speak about – it’s then investing it in what I call “high ROT (return on time) activities.” You’re investing that time, between your business or personal, where you get the greatest reward.

Joe Fairless: It makes sense. So 1) know what you want your time for, 2) look at everywhere where you’re spending your time, do an assessment of that more or less, or remove it, and then 3) be focused on investing your time in return of time activities.

One thing that comes to mind when looking at this process is that time management came into play, I imagine — who the heck knows historically where it came into play, and you have more background than me on that (because I don’t have any background, and I’m sure you have a whole lot), but now when people say “time management”, the reason why in my opinion people say “time management” is because we’re inundated with a whole bunch of stuff. We have more things coming at us at once, versus in the past. And that’s largely due to what you mentioned, the device that we keep tethered to us 24/7.

Well, in your approach, you mention “Know what you want your time for, and commit to what you want to do”, and you said for example a fitness desire or a financial desire. So you’re really putting a laser focus on one thing, versus trying to do a bunch of things simultaneously… And I’m all about the power of focus. I think in my opinion the only thing I’d like to learn from you about as it relates to this question is — the reality is we’re inundated with a lot of stuff, regardless of how we focus our time… So how do you navigate living in the world that we live in and being inundated with stuff, whilst still adhering to this philosophy where you have one focus and you’re committing your time towards that one focus?

Steven Griffith: That’s a great question. One of the things that I take readers through in the book is identifying your top five values. As I said earlier, you can’t have it all. If you are trying to have it all, you won’t have any at the level that you want it. So your point is well taken, is that we need to focus on what are the top things in our life that we wanna put our time, energy and focus on? I do what I call a top five values alignment.

For example, it might be health, business, family, relationships, travel. Those might be someone’s top five values. And within that, and depending on what quarter, what month, what year, you may have a very laser focus. So it’s not like you’re not gonna put time in any of those other areas, but when we’re going through the cleanse, we pick what we really wanna accelerate, what we wanna get our full potential activated in, and that’s what we use it for… But we’re absolutely addressing the other values in our life.

Joe Fairless: Okay, it totally makes sense. What are some challenges you’ve seen people have when implementing this process?

Steven Griffith: The biggest challenge is what I call the philosophy “I’ve always done it this way.” We’re not doing the same things we did when we were 18 years old, graduated from high school. We evolve. And so what people get stuck on is they’re stuck  in their old patterns. One of the things that I really promote in this process is [unintelligible [00:11:00].00] new activity, starting with things that you can implement quickly, but making a commitment to make progress. Not that you’re gonna change your entire life in one shot – it’s very difficult to do that – but pick areas where you can get traction… But really the key is making a commitment and picking things that I call are non-negotiable. One or two things that you’re absolutely committed to, no matter what.

As we start developing habit patterns, they become basically a ritual in our lives… But it’s like anything when we change something – we get stuck in our own process over time, and it’s making a decision to do something different… But ultimately, getting connected to the why we’re doing it; why we’re spending time in an area. When people wanna increase their business and gain more income, more freedom, what is it for? Understanding what that why is. It may be for freedom, like I’ve just said; it may be to have more energy and vitality, if they wanna lose weight. It’s not just about looking good, it’s the deeper value underneath it. So when we get connected to the why, then we’re more motivated to invest our time in the right ways.

Joe Fairless: You mentioned earlier the third part of the time cleanse is to really focus on return on time activities… How do we think about measuring return on time, and what’s some successful benchmarks for that metric?

Steven Griffith: When we look at return on time, there’s two things. One is what I believe is very clear and easy – I do X activity, and I get this financial gain. It’s very clear. I work with a lot of real estate professionals in the retail market; I tell one story in the book about my client Charles, who compressed a year’s worth of sales into one quarter. We did that by first looking at what his toxins were, and then identifying what his high ROT activities were.

His high ROT activities were really simple. He told me this from the very beginning, “ten by ten.” Ten contacts by ten AM. Then we expanded that. So that was his highest return on time; when he reached out to potential customers and past customers that were looking to buy or sell their home, his time investment went to the next level, and so did his performance.

The second ROT for him was looking for pocket listings that weren’t on the market, where he had qualified buyers. He wasn’t spending that time doing that. So those were two areas for him that once we got rid of the contamination that was taking the rest of his time away from him, he was absolutely able to focus, and he just crushed that quarter. So we need to look at investment of time/financial return.

Secondly, the other part is our felt sense of connection and purpose. What are the things that we’re doing in our life that makes us feel that we’re connecting to our talents and our gifts, and we’re making connection? Those are two areas to look at when we look at high ROT activities.

I just recently did a TV interview (yesterday, actually) and part of this was looking at, well, what are we using time for? And I said in the interview that time ultimately is for one thing, and that’s to create memories that matter, that become our legacy. So these are a couple metrics on how we determine what are those high ROT activities.

Joe Fairless: Yeah, I love your quote. Did you come up with it on the spot during the interview?

Steven Griffith: No, that’s something that has been in my mission from the very beginning on this.

Joe Fairless: Yeah, it’s powerful. I volunteer with hospice, and when I work with patients there it’s all about the memories; they’ve got a couple weeks, or a month or so to live, and it’s all about the memories that they have, the positive experiences; those are what they talk about during their last weeks and months. It’s not about the other things, whatever else there is in life; it’s all about those meaningful memories.

Anything else that we haven’t discussed as it relates to your book, The Time Cleanse, that you think it would be beneficial to discuss during our conversation?

Steven Griffith: Well, I think one of the things that we really wanna be clear on is when we’re looking at ROT, things that are compounding our time. So there’s two things when we look at our time, what I call “time hangover activities.” Being around people or activities that create a hangover. This is a big thing, Joe, when we look at how we’re using our time.

If you’re around somebody that’s negative, or you’re doing activities that are really not high-return on your time, there’s an emotional cost to that, and that becomes a hangover. The same thing when you go out and someone’s drinking – they have a great time, and then they pay the price the next day and the next couple days. It’s the same thing with what I call a time hangover – when you’re using that time ineffectively, or investing it in the wrong way, with a poor return. It carries over for many hours after that initial time.

The flipside is the compounding effect; it’s like compounding interest. We use the fitness as an example – when we’re investing the right time at the gym, we’re getting in shape, we get more energy, and now we’ve got more energy and vitality for our kids and our family and our business. So we wanna really look at using our time in a way that compounds it, and that we’re not letting these toxic things that I’m talking about get in the way.

Joe Fairless: Any suggestions for how to do that?

Steven Griffith: When you say “how”, how exactly are you asking?

Joe Fairless: Well, like to make sure that those time hangover activities – we’re going about it the right way; a practical next step…

Steven Griffith: Yeah, it goes back to really looking at the activities and saying “Is this contributing or contaminating?” I have an assistant that does a lot of my errands. If I’m caught doing errands (dry cleaning, follow-up on certain tasks in the office), I don’t like doing that. I get agitated. So now I’m gonna go speak or work with a client – there’s a hangover there.

Joe Fairless: Okay. That makes sense, thank you.

Steven Griffith: And the other one major thing that I’d love to share here with you and your listeners is this – taking control of your phone. This is a piece of advice that will get back hundreds of hours…

Joe Fairless: Please help me with this personally. I need help. I’m on the couch right now with you, so please help me.

Steven Griffith: Alright, so here it is… We’re gonna go through a time cleanse of your phone, alright? So the phone — there was a piece  of research that I put in the book that they monitor people for one week, to see how much interaction they had with the phone. The average person touched/clicked/swiped/looked/felt the phone 2,600 a day.

Joe Fairless: Wow.

Steven Griffith: 2,600 times. That’s about four hours of interaction with the phone. So here’s the deal… You heard me use the word “timefulness” previously, and it’s really about mindfulness; mindfulness is a bit part of this system – that really means being present in the moment. Present in the moment, right now.

So when we go to our phone, we wanna be in charge of the phone. Our phones right now are designed to take our thoughts and actions over. They have neuroscientists working on this around the clock to get us connected to the phone longer. So here’s a couple hacks, my time cleanse of the phone…

The first thing you do is you grayscale your phone. There’s a feature on your phone where you turn your phone from color to black and white. Why do we do that? It makes the phone less charming. It’s like Disneyland, that phone; when you turn it on and those colors come on, it’s Disneyland. “What ride am I gonna get on”, right? So we first grayscale it.

Number two, we remove all apps to the second screen. When you turn the phone on or you look at your phone, there’s nothing in front of you, except whatever picture you have there, screen saver…

And then the third thing is we turn all notifications off. All your dings, clings, flashes, notifications of text and e-mail. And here’s why we do that – it’s training your brain not to be present, and it’s distracting you. So when you go to your phone, now you’re in charge of what you wanna do with your phone; not having your phone in charge of what it’s gonna do with you.

Joe Fairless: Love it. Thank you for that. I’m personally telling you thank you… And I know that will be beneficial for other Best Ever listeners. I will be doing every one of those three things. Notifications will be tough, because I play chess with friends, against my wife, and we always go back and forth during the day… But I will do that for seven days. All three things for seven days, and then I will decide which ones I wanna continue to adopt… But thank you for that.

Steven Griffith: Great, great.

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

Steven Griffith: Well, a couple things. I’ve got a couple special things for your listeners. It’s StevenGriffith.com/bestever – there’s a free download there with ten tools and tactics, my best tips to get back your time and perform with it. Then for your listeners that order the book, the same URL, they’ll get a free masterclass; eight videos, I take them step by step through the whole time cleanse process to get back their time, and then show them how to actually perform at a higher level with it… So those are two giveaways for  you guys.

Joe Fairless: Outstanding. I just clicked it, and I am signing into Amazon to purchase the book right now. Checking out, placed order, done. I just bought it.

Hey, I really enjoyed our conversation, and some very practical pieces of advice… I already mentioned my affinity towards your three time cleanse tips for the phone, as well as just the overall approach for being focused on certain activities that you are intentionally focused on, versus trying to accomplish a whole bunch of stuff where most of that bunch of stuff isn’t necessarily moving you  towards fulfillment and your bottom line, because you’re not being intentional about the process.

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

Steven Griffith: Thank you, Joe.

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Joe Fairless & Igor Kajpust on Best Ever Show flyer

JF1644: How This 22 Year Old Profited $1.5M Last Year Flipping Houses with Igor Kajpust

At a very young age Igor has figured out how to build a consistent and profitable house flipping business. Not only has he been exceptional at networking and establishing advantageous business relationships, his business is structured smartly and his team is performing very well. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Igor Mike Kajpust Real Estate Background:

  • 22 year old full time investor specializing in SFR
  • Purchased $8.5M of flips in 2018 across 35 flip deals, sold 20 of them in 2018 for $1.15m profit and have $1.25m in equity in the remaining 15
  • Goal is to do 500 sfr deals in 2019
  • Based in LA, CA
  • Say hi to him at http://amoove.com/
  • Best Ever Book: Principles

 


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TRANSCRIPTION

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

With us today, Igor Kajpust. How are you doing, Igor?

Igor Kajpust: Good, good, Joe. Glad to be on here with you.

Joe Fairless: Yeah, nice to have you on the show. Igor is a 22-year-old full-time investor specializing in flips. He purchased 8.5 million dollars of flips in 2018. That was 35 deals. He sold 20 of them last year for 1.15 million dollar profit, and has 1.25 million in equity in the remaining 15 of them. His goal is to do 500 in 2019. Based in Los Angeles, he invests in other markets – we’re gonna talk all about it. Igor, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Igor Kajpust: Yeah, totally, Joe. I’m predominantly a fix and flipper. The majority of our business is in Orlando, Florida and Denver, Colorado, both markets that I’m pretty familiar with. I spent about three years in Denver before moving out here to L.A, and built up the business there. My partner is based in Orlando. We’ve got a little bit of a team in both of those markets, so we really just focus on acquiring and flipping as many of those single-families as we can in those two markets, kind of with a systemized approach.

A little bit of background – I’ve been really interested in real estate ever since I can remember, and I was always trying to make money, and buy and sell stuff here and there… I ended up buying my first piece of property when I was 17, when I was in high school; it was a $750 vacant lot somewhere, that I still have… And since then, I’ve been really interested in real estate, and have been learning and learning as much as I can along the way.

I went full-time when I was 19, doing wholesaling at the time and really sharpening my skills on the off-market acquisition side of things during the last couple of years. More recently, all of last year I decided to actually close on and flip most of our deals, rather than wholesaling them. That’s the approach we’re taking on going forward, and just raising more funds and closing on everything that we can and capitalizing on all those opportunities.

Joe Fairless: Where did you get the money to purchase 8.5 million of flips?

Igor Kajpust: So 8.5 million is the retail value. It was about 5-6 million dollars of equity. That was all just private money, essentially, at hard money terms, through networking, introductions from different people to their lenders, and just being able to show my track record of wholesale deals that I’ve done the previous couple of years. They were like, “This guy knows how to find a good deal, we’ll give him a shot”, and it’s really grown. Those are five, six different lenders that I use, that basically supply us with all that capital.

Joe Fairless: Okay, so they’re not private individuals — or if they are private individuals, they do this for a  living, they lend hard money out for a living?

Igor Kajpust: Yeah, the majority of them. Two or three of them are basically full-time either retired real estate investors that just lend now, or they have a little hard money side to their business… But I would definitely consider them more as private individuals lending at hard money terms, rather than hard money companies.

Joe Fairless: Okay.

Igor Kajpust: So some of them have a full-time job or a business, and they’re just lending to me on the side.

Joe Fairless: What are the typical terms?

Igor Kajpust: It’s pretty much two points and 12% across the board that I pay, and then they get their first position lien.

Joe Fairless: Okay. And something  you said is they look at your track record for when you were wholesaling, and you were able to find a good deal – how do you find good deals?

Igor Kajpust: It changed over the years, but really the strategy that’s worked best for us and that we’ve doubled down on over the last year and a half has been cold calling, and more specifically cold calling on a targeted list… Cold-calling pre-foreclosures, tax defaults, probates, those more targeted lists, as well as — we also have a blanket approach too when we run out of those lists, but the strategy we’ve really seen the most success with has been cold calling. We’ve done some PPC and online stuff in the past, but cold calling has been what’s really been best for us.

Joe Fairless: And where do you get your lists?

Igor Kajpust: The majority of this stuff comes directly from the county. In all of our Colorado stuff it’s really easy; the deed of trust states — so we reach out to the public trustee, or access their portal online, and they’ve got all that information beautifully organized, with how much the people owe, how long they’ve been in default, name, address… Everything you really need, it’s just neatly organized for you online. So a lot of that information – there are different departments for it in different cities and counties, but a lot of it is available just through the local governments.

Joe Fairless: Same with Orlando?

Igor Kajpust: Yeah. Orlando, actually we used to scrape it manually off of there. It’s the same way, but Orlando is judicial — not to get into too complicated kind of stuff, but it’s a judicial foreclosure process, so you’re kind of scraping through court cases, and stuff, and it’s a lot harder to see the information. We use different list providers in Orland that kind of put all that information together, and then we just pay them for that service.

Joe Fairless: And how much do you spend annually on the cold calling tactic? …which includes the team, the list and all that.

Igor Kajpust: Essentially, how we structure it is we basically pay our guys commission-only. It comes out to $3,000 upfront for each deal that they get, and that’s distributed amongst maybe a caller, or someone that went on the appointment; they might each get $1,500 or whatever the case is, and then they get a bonus on the back-end, depending on what our net profit is on the deal; they get a 5% to 10% bonus of the net on that deal. I’ve got 19-year-old guys in the office that got a $15,000 check as their bonus off of that net.

Joe Fairless: That would buy a whole lot of $750 vacant lots.

Igor Kajpust: [laughs] It sure would, but they like to spend it on freakin’ Gucci shoes.

Joe Fairless: Oh, no…! You’ve gotta have a word with them.

Igor Kajpust: [laughs] Oh, they’re learning, slowly but surely.

Joe Fairless: That $750 vacant lot that you bought when you were 17 years old – what is it worth now, if anything?

Igor Kajpust: It’d probably be tough to find a buyer for it. It’s maybe a grand or two. It’s out in the desert in Colorado somewhere, with no roads or anything.

Joe Fairless: How did you come across it if you weren’t living next to it?

Igor Kajpust: It was actually a website I found on my crazy googling and researching I was doing when I was just super-obsessed with the idea of investing in real estate, and I found that website, which I don’t know that I’d recommend using, but it’s called bid4assets.com. Have you ever heard of it?

Joe Fairless: Bid4assets.com?

Igor Kajpust: Yeah.

Joe Fairless: No, I have not heard of it.

Igor Kajpust: I stumbled upon that and I just saw “One dollar, no reserve, vacant land”, and I was like “Oh, wow… Is that like $100? Awesome!” and I ended up winning the bid. I was hanging out with my friends in my room, senior year of high school, and I’m like “Dude, you guys, I’m gonna totally buy this land!” [laughs] That was the first one, and I ended up buying another property off bid4assets.com, which was my second deal a couple months later, with a friend. We threw in a couple thousand bucks each and bought a property in Indianapolis from a bank, for $7,500, through the website.

At the time I didn’t know what a quitclaim deed was, so we ended up buying this property, and we go to sell it and find out there’s $14,000 of liens on the thing. [laughs]

Joe Fairless: Aww….!

Igor Kajpust: Yes. So needless to say, we learned a lot with that experience, and I haven’t been back on bid4assets.com since then.

Joe Fairless: What happened?

Igor Kajpust: We put it back on the market, because we thought we were gonna fix it up. We were like, “Oh, it’s just gonna need some cabinets and some paint”, just based on the pictures; we never looked at it, or anything. And then I ended up taking a drive out there and it needed a lot more than some paint and some cabinets… [laughs] So we put that on Craigslist; it took months, we weren’t getting any action. We listed it with an agent, he got a buyer for $12,900 or something. We were super-excited. We got the settlement statement, and it was like “You guys need to bring 3k to the table”, or something. I was like, “What…!?” [laughs] But then we ended up finding some investor that was willing to take it subject to the liens for $8,000 and we basically got out of it, by the skin of our teeth.

Looking back now, I would have probably been able to — the municipal liens on there, we could have negotiated those liens, [unintelligible [00:10:23].06] and probably done a little better, but you kind of learn as you go.

Joe Fairless: Yes, you do. Thank you for telling that story. So your profit that I read in your bio was 1.15 million – does that factor in the commissions that you’re paying out to your people and whatever expenses you have, overhead for your company?

Igor Kajpust: No, that’s just the gross profit that’s basically what we got back from all the closings, after having paid for whatever expenses we incurred…

Joe Fairless: Sure.

Igor Kajpust: …dialers, or any expenses. So essentially that’s just the gross. The net is a couple hundred thousand dollars less, and then we’ve got that remaining 1.25 million that’s just properties that are getting wrapped up now, or on the market now, or under contract… I actually just had a closing today, so we’re selling off the rest of that stuff. It’s scheduled to close the next month or two here.

Joe Fairless: That’s great. So who’s leading the charge here? Is it you and a business partner? It sounds like you have a business partner.

Igor Kajpust: Yes. Me and my business partner are both 22 years old, and we met at Sean Terry’s Flip2Freedom conference a couple years back, and just started working together at that point. Now he runs pretty much the majority of the day-to-day out of Florida. Now that I moved to L.A, Denver reports to Florida, and he kind of oversees the majority of the day-to-day, and I help with business development strategy and raising money for all of our deals.

Joe Fairless: And you mentioned the net profit was a couple hundred thousand dollars less than the 1.15, which is still relatively speaking a whole lot of money… So what is that – like 850k, 900k. Is that just money that you and your business partner split 50/50 and you go buy some Gucci shoes, or what do you do with that 900k?

Igor Kajpust: [laughs] No, we’re reinvesting the majority of all that into the business. We basically had it structured in a way while I was running the Denver office and he was running the Orlando office, where we were getting a larger or smaller share of the profits based on our office’s performance. So it wasn’t an exact 50/50 split.

But we’re basically reinvesting the majority of that money. We’re looking to do some rental portfolios right now, and just testing some strategies, keep buying deals and keep growing the business. So no more Gucci shoes for me.

Joe Fairless: And the 1.25 million in equity that you have remaining in the 15 homes – those are homes that you’re selling, you just have that spread based on what you put into it and what it’s valued at currently… Is that correct?

Igor Kajpust: Exactly. That will come out to another 800k-900k in net profit after commissions and expenses once all that stuff is sold.

Joe Fairless: And with your fix and flip business – why did you choose to go from wholesaling to fix and flips?

Igor Kajpust: We just really wanted to get more into the ownership side of the business, not just assigning the paper and getting a small fee, basically. My long-term goal is turning hundreds (if not thousands) of single-family homes, large portfolios, and wheeling and dealing with the hedge funds, and that’s kind of just what I’m working towards. I feel like that was a step in that direction, and being able to secure our own financing, get the deals funded, close on them… We have to improve the properties… So we see them as just getting us ready for the next steps that we wanna take, and teaching us the necessary skills to get there.

Joe Fairless: And what’s the long-term vision with the hedge funds and the portfolios of single-family homes?

Igor Kajpust: We just wanna keep growing our acquisition systems and growing the business to be able to acquire hundreds and hundreds and thousands of single-family homes, creating rental portofolios, doing huge volumes of fix and flips, and just dealing in much larger volume with single-families.

Joe Fairless: So in that example, let’s say you came across a 500 single-family home portfolio, and they are distressed properties; your vision is to be able to buy those 500 single-family homes, fix them all up, and then sell them to someone, or a group…?

Igor Kajpust: Yeah, or acquiring 30-40 a month for a year, just through our call center, putting tenants in place, and then selling that portfolio to a fund for 25 million, or whatever the case may be, as like a performing package.

Joe Fairless: Okay. And with your deals that you sold last year – you sold 20 of them – I’ve heard some fix and flippers say that their approach is for every 2-3 homes that they sell, they keep one in their portfolio… That way, they’re not just constantly having to churn our deal after deal; they’re actually making some residual income, so they’re not chasing the next deal. What’s your thought process on that?

Igor Kajpust: I think that that’s a great approach. Personally, the market has just been too tempting to sell the last few months, the last year or two… I mean, when you’re getting 15 offers over the weekend and they’re all 20k-30k over ask, it’s hard to keep them. So my strategy is the next downward cycle that we have, as the market is slowing down here, and we expect the market to cool down – it’s already cooling down in certain areas, but it’s expected to cool down more over the next couple years… At that point, I wanna just raise a bunch of money and create rental portfolios then, rather than buying all this stuff at the top of the market. Just buying a couple for my personal portfolio and keeping them.

I’m still a young guy, so I’m kind of out there, willing to take the risk and go bigger, rather than thinking in the long-term… Although I know it’s beneficial to think in the long-term, but I’m a little more hungry for risk right now.

Joe Fairless: Yeah, the market has been very favorable to what you’re doing, but people have lost money even during favorable times, and you have made money… Certainly, the market helps, but you have to have a system in order to actually make money, otherwise you could lose money in a good market. You mentioned that getting 15 offers over asking during the weekend – how can you really turn that down, and I totally get that… So my question is “What is your approach when you’re fixing up a property? Actually, I’ll be more specific. When you’re pricing a property, prior to listing it, what is your approach to get the maximum price?

Igor Kajpust: Honestly, we didn’t even have too much of an approach, especially in Denver, which has just been an insane market. We hardly staged any of the properties. It would literally be like asking our agent what they think we should list it for, do a little bit of our own research, looking at comps on the MLS, put it within 5k-10k or the same of what other stuff is selling for in the area. Then we’d put it on the market, and then we’d end up still selling it for 20k more than we listed it for.

Denver over the summer was like a month’s supply of single-family, the price range that we were in, so everything would sell so quickly. It was crazy.

So basically we’d just look at the comparables, talk with our agents and see what they think, and just go with that.

Joe Fairless: And how do you determine what type of renovations you do at a property?

Igor Kajpust: Again, looking at the comparables. In some of the properties on the lower end we would be putting just cheap Home Depot countertops, cabinets, not even granite, and stuff would sell really well. On the slightly more expensive ones, if everything else in the neighborhood is at 350k and it’s demanding granite countertops and [unintelligible [00:17:46].23] shower, then we would put that, what it was selling for in the area.

Joe Fairless: How do you determine what your comparables are?

Igor Kajpust: Just the basic rundown of comparable single-family homes, looking at whether it’s the same style of home, if it’s a ranch home, split-level, bedroom/bathroom count, square footage, look at the street view, or look at the street in real life to make sure that it’s a similar neighborhood, similar vibe. Then the finishes – like I said, if the kitchen’s got granite, if it’s got hardwood floors, if it’s got [unintelligible [00:18:16].02] we would just try to mimic the other stuff in the neighborhood that it’s comparable to, so it’d look similar.

Joe Fairless: You did 35 flip deals last year… Which one made you the least money or lost you money?

Igor Kajpust: Okay, good question. There’s actually one that lost me about $10,000, on which my lender made like $25,000… [laughter] Basically, just the quick story of the deal – we ended up buying it, it was already a little bit slim; we bought it at probably 80%, expecting it to be a quick flip. The guy ended up not moving out. We didn’t do a holdback, so he stayed for an extra three months; we had to pay him an extra $2,5000 to get him out. My interest payment on that — it was a 275k purchase, so it was a $2,700 interest payment, and I had to pay that for 3-4 months.

We ended up doing a six-month hold all-in, costing us a bunch of holding costs, some fix-up, and then we sold it for 340k and lost 10k.

Joe Fairless: Having the circumstances presented to  you in a similar deal in the future, what would you do differently to mitigate that risk?

Igor Kajpust: Oh man, the holdback. The biggest thing is if there’s a tenant or a homeowner that’s living in the house and they wanna stay after closing, that’s fine, but hold back some of their money. So if they’re getting 30k in proceeds or 50k in proceeds, holding back 5k or 10k of that for when they move out, so you ensure that they move out. It goes off without a hitch, and then you just pay them that 5k or 10k. It’s held in escrow by the title company, so as soon as they move out, they can get that money. That would have saved us on that deal and we would have ended up making some money, rather than losing a little bit.

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

Igor Kajpust: Staying consistent, especially for a lot of the newer people out there. I didn’t get my first deal for 6-7 months. I know a lot of people that are now successful in the business that didn’t get their first deal, they didn’t get any traction for a long time, and it could be very discouraging to keep running into a wall, and not being able to find a solution… But if you stick with it, put in the work, 9 times out of 10 you’ll be able to punch through and succeed.

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

Igor Kajpust: I’m ready.

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

Break: [00:20:40].11] to [00:21:38].24]

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

Igor Kajpust: Best ever book I’ve recently read… Ray Dalio, Principles is a great book. It’s really long, but it’s awesome.

Joe Fairless: Best ever deal you did last year?

Igor Kajpust: I made $140,000 profit in about four months, on a single-family flip.

Joe Fairless: Was that flip through the calling?

Igor Kajpust: Yeah, that was a pre-foreclosure lead. We got it for 160k-165k, put a little bit of money into it and sold it for 355k. And I actually had no money — I’ve had probably like 5k into that deal. Because it was so cheap, my lender lent 100% of the money that we needed.

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

Igor Kajpust: Honestly, I like giving back to homeless people. Whenever I’m driving by, and they’ve got their sign out, and I give them $50, and $20, and they get so happy that it actually makes me feel good inside, and I give them a hug… I like to do that.

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

Igor Kajpust: Just follow me on Instagram, @whoiskaj, and check out my website, evolvepj.com, or amoove.com.

Joe Fairless: And we have that in the show notes. Igor, thank you so much for being on the show, talking about how your business does deals across a couple markets that you don’t live in, so how you structure that with your business partner, how you get the deals, and that was the challenge, I imagine, last year – finding the deals; because once you found the deal, you have the operations in place, but then you’ve also got a pretty friendly market, too… So it’s really just about finding the deals. And how you do that? Cold calling a targeted list of pre-foreclosures and tax probates… And deals that didn’t work out, as well as deals that did work out.

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

Igor Kajpust: Awesome. Thanks, Joe!

 

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JF1624: From Homeless To Creating A Fund For The Masses To Benefit From Real Estate Investing with Pete Asmus

Growing up, Pete watched his Grandma own a lot of real estate and seemingly do whatever she wanted to do. He set goals to be the same way when he grew up. As life so often does, Pete was thrown some curveballs. He found himself homeless, joined the Navy, and then started working on a fund and platform that allowed anyone to invest in real estate and reap the benefits. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Pete Asmus Real Estate Background:

  • High performance real estate investor with a passion for creating smart investment opportunities for anyone, no matter their financial status.
  • Raised over $10 Million last year for high end flips and small business start ups
  • Based in Los Angeles, CA
  • Say hi to him at pete@peteasmus.com
  • Best Ever Book: The One Thing

 


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TRANSCRIPTION

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

Pete Asmus: Man, I am doing so good. How are you doing, Joe?

Joe Fairless: I’m doing very well, too. Nice to have you on the show, looking forward to it. A little bit about Pete – he is a high-performance real estate investor with a passion for creating smart investment opportunities for anyone, no matter their financial status. He raised over ten million dollars last year for high-end flips and small business startups. Based in L.A. With that being  said, Pete, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Pete Asmus: Yeah. You know, when it gets into real estate – I’ve loved it for years. My grandma, when I go back to when I was a kid, looking at everybody growing up, I always wanted to be like my grandma. She owned every house around her, she owned commercial real estate… It just seemed like she could do whatever she wanted, and I remembered always wanting to have that goal, of reaching that level. Then I had bad things happen, I ended up being homeless, and as I came out of that, I joined the Navy, and through all of it I realized that I had to count on me, focus on what I could do. And I remembered my grandma, and I remember thinking I wanted to create eventually a platform that anyone could invest in, even that 18-year-old kid that didn’t know what he was doing. That’s really what we’ve created with Alchemy Kings. It’s a regulation A+ fund, and it’s focused on the best and most lucrative aspect of commercial real estate right now.

Joe Fairless: What is a regulation A+ fund exactly?

Pete Asmus: What that means is that we can go and — it’s for non-accredited investors. There’s a difference — back in the 1930’s when the stock market crashed, the government wanted to step in and start dictating “Well, this person can invest and do what they want, but this person we’re gonna watch out for.” And what we created was a platform that all of those people could invest in.

Joe Fairless: So it’s a public platform that anyone — and I’m about to put words in your mouth, so please correct me, what part I’m right and wrong…

Pete Asmus: Okay.

Joe Fairless: So it’s a public platform where anyone can go to your website and then invest via their computer, remotely, and into projects that you’re participating in – is that accurate?

Pete Asmus: Yeah. Think of a pre-IPO. That’s really what we’ve created. So you’re buying shares within the company, and as the company performs well, then you’re gonna get dividends, and our whole goal is to go public… But the bigger picture for me — not only is it a platform that anybody can invest in, but really how we shifted our focus. We own the largest real estate groups on LinkedIn. We have over 1.1 million members on there. So when it goes to looking at strategies that are out there, we wanted to find the best strategy possible, and we found the strategy of our lifetime, period. There’s nothing that can touch this. The only thing that comes close to the returns that we’re looking at in this industry is gambling, because when you look at what cannabis is starting to do across the united states, it really is like a green rush, California being the fifth largest economy in the world, legalized it a year ago, and it’s looking at — I don’t know if all the numbers are in, but it’ll be in the billions.

Overall, nationwide, we’re looking at about a six billion dollar industry, that’s legal; we’re looking at a 40 to 100 million dollar industry that is still illegal. As the federal government goes on, you’re looking at almost an 85% to 90% growth rate that’s gonna happen within the next five years.

Joe Fairless: Just to clarify – when someone invests in Alchemy Kings, they’re buying shares in your company, and then your company invests into other ventures, businesses, real estate or whatever. Then as those profits from those investments go, so do the shares of whatever the company is worth. Is that how the business works?

Pete Asmus: Yes, exactly.

Joe Fairless: Got it. So the types of businesses that you invest in – clearly, one is cannabis, because you’ve just mentioned that…

Pete Asmus: Well, it’s not cannabis. See, that’s the beauty of it.

Joe Fairless: Oh, okay. Alright, so what are you all investing in?

Pete Asmus: We looked at what were the golden shovels of the cannabis industry. Because when you look at prohibition — this is a product that was outlawed for over 80 years, and has grown exponentially. You’ve got over 250% usage has increased in 65 and over. You’ve got senior citizens that are turning 55, 10,000 of them a day, and that’s a quote that I know just from assisted living facilities, but the reality is all of those people also are taking a lot of medications, and now they’re starting to shift from wanting to take pills and things that are very addictive, to things that are more holistic, if you will. So your usage is up by 250%.

They did a study on some seniors, and 95% of them saw a 50% reduction in pain. The reason I’m sharing this is because it’s these personal stories that really starts to open up the conversation and start to make people realize that 1) cannabis is coming, and there’s really no stopping it. It’s on its way. So we look at it like the gold rush. And in the gold rush, the people that were making all the money weren’t the people looking for the gold. They were the people selling the shovels. So for us, it was “What are the golden shovels of this industry?” And there were two.

One, in order to get a license, you must have real estate. You have to. It’s the cornerstone of that industry. Because you can’t just grow this in your car or somewhere random. They wanna be able to come in and verify that everything is going according to plan, that you’re paying your taxes, that the permits are right… So it has to be associated with a piece of real estate, and it has to have a CUP (conditional use permit) allowed for that, on that specific land. In California, only 18% of the municipalities allow that, and you’ve got 57% of the raw land sold for cannabis was in Coachella Valley, which is basically Palm Springs to Indio.

So you have this little, tiny section of California that is really gonna become the heartbeat of California. Does that make sense?

Joe Fairless: Yeah, it does.

Pete Asmus: So we looked at it from that standpoint, and we were like, “Okay, so we’re gonna take on real estate.” It’s a way for us to get into the boom without getting into the business. We don’t wanna touch the plant, we wanna be able to talk to Wall-Street, we wanna be able to do other things, and we have a regulation deed that we did that with – purchase the land, we have 8,5 acres, and we’re building out 162,000 square feet. We literally just talked to the city and they wanted us to add a few more spaces, and what they said we could do is lift the other four buildings up and park under one of them, so we’re looking at that option, and that could add another 50,000 square feet to this development.

Joe Fairless: What are you developing?

Pete Asmus: We’re developing — basically, what they are is industrial condos. If you think of a condominium complex, we’re doing the same thing but we’re making them industrial condos. So they’ll be in 3,000 square foot increments, you’ve got a few buildings (like I said) that are two-story, but the key to the 3,000 square foot increment is this – in order to get a license for growing in California… You have three licenses – you have a 5,000, a 10,000 and a 20,000 square foot license. They all need at least 10%-20% of overage for office space. So the reason we sold 3,000 square foot increments is because that gives them that 20% overage; all they do is they buy two if they want five, they buy four if they want ten, and so on. It allows them the flexibility to grow over time as well, and it gives more people the opportunity to get involved.

When you look at the statistics, 55% of cultivators are actually mom and pop organizations earning less than $500,000/year, so they can’t afford a ten million dollar development to create a space for them to be able to grow in. Does that make sense?

Joe Fairless: Yup.

Pete Asmus: Alright. So we’ve talked a little bit about the first shovel, which is real estate, because it’s something that is required by law, period. You have to have it. The second requirement is testing labs. We’re focused on building out testing labs and becoming the largest testing lab for cannabis in America, and here’s why – there is a huge vacuum. Until 2018, California didn’t have anybody testing cannabis. You can’t test cannabis and anything else. So you’re left in this real juxtaposition, because not only can you not test anything else, you can’t do anything else in the cannabis industry. So if you’re a testing lab, you cannot grow, you can’t manufacture, you can’t create inedible, you can’t test water, unless you bought double the machinery. So what it does is some people have converted to cannabis because there’s a higher profit margin in it and they’re believing in it.

Obviously, if you were to become a testing lab back in January, it would have been a lot (if you will) sketchier than it is now. There weren’t any banks back then that were allowing the use of a cannabis fund, so you had people walking literally hundreds of thousands of dollars into a bank, and they permeated of cannabis. That money smells like weed for weeks. It’s insane, and I’m not even kidding. I took my camera bag into a grow one time, and when I got out it took me about a week and a half to get the smell. Everytime I opened up the camera bag, it smelled like I was growing weed in my camera bag. It was the craziest thing.

But when you looked at the testing labs, we realized — we had been talking to a few different people, and our goal was we were gonna do everything. We were gonna grow, we were gonna manufacture, we wanted the brands, we wanted that part of it. And when we talked to the third dispensary that had to throw product away in June, we realized that the biggest hole was in testing labs, and that it was the least risk out of all of them, too. We wanted to be very risk-averse. So when we look at the testing lab park, anybody that converted from normal testing to cannabis, left a hole in normal testing. Anybody that was coming on to test cannabis was brand new, and there weren’t very many at all.

So by us coming into this space, we had, if you will, a plan B. If cannabis were to go sideways, we still could test water, we could test other plants, we could test agriculture… If cannabis goes sideways, we could still own the real estate, we could convert it into different types of commercial real estate; it’s still industrial condominiums… So there’s a lot of different things that could happen, it wouldn’t just be done, like if you were having a commercial kitchen, or if you had a commercial grow operation, or manufacture, where there’s nothing else you can really do with the product once it’s been contaminated, if you will, with cannabis. Does that make sense?

Joe Fairless: Multiple exit strategies.

Pete Asmus: Yeah, exactly. Exactly.

Joe Fairless: With the testing labs you said your goal is to become the largest testing labs for cannabis in America. How many testing labs do you have as of today?

Pete Asmus: SEC just approved our fund, so we’re in the very first round, which will be starting on January 20th; we’ll start the first round of funding. So we don’t have any testing labs yet. What we’ve done is — I think we have three different testing labs that we have talked to and are working with on working on a deal to basically build out a franchise. My partner and I aren’t chemists (we understand that part of it), but we’re very good team makers. So for us it’s just about managing the team, making sure that the right people are in the right position. Me being in the top position of a laboratory is not the right position for me, because that’s not what I do. But hiring, or becoming a franchisee and having somebody else hire again the right person for the job, then that puts us in the right position. We can still run the company, we can still make sure that everything’s happening according to plan, but when it comes to the whole organization of it, we wanna make sure that we’ve got a solid system that’s already proven.

Joe Fairless: For Alchemy Kings – are these two ventures within the cannabis industry the only way that you all are planning on making money? Because you mentioned you own the largest real estate group on LinkedIn, 1.1 million members. When I introduced you during this interview, in your bio it says you raised 10 million last year for high-end flips and business startups, so I’m wondering is this going to be a combination of all that, or is this just laser-focused on these two things?

Pete Asmus: Yeah, we have shifted all of our focus. We basically stopped doing everything on businesses. The businesses shifted to cannabis, so that’s what we’re focused on – laboratories. That’s what we wanna invest in – companies that are thriving, that need capital for growth, and that wanna open up a second location that we can work out a good arrangement with.

The second part of that is when you talk about the LinkedIn group and all the members, there’s various things that we can do with that, but when it comes down to flipping high-end homes, we don’t wanna get caught in any of the downtrend that could happen come the next few years, when we know for a fact that cannabis will be on the rise for the next 5 to 8. So we just shifted everything into what we saw… Now, you could say that it’s a bubble; eventually, it’s going to hit fruition and it’s going to start coming back down. But right now, when we know exactly what’s going to happen — we know that the government is talking about legalizing it, we know that Trump is looking at putting that on his agenda, and I’m assuming it’s going to be one of the key running marks of the presidency. However, you’ve got Democrats right now that just took over that wanna try and federally legalize it prior to that, so it doesn’t become part of that, because I think Trump is gonna wanna make that part of his legacy… Because cannabis by 2028 will be the largest single contributor to our economy, period. Hands down. Here’s why.

When you look at Desert Hot Springs right now, 800 acres out there is being developed. Now, that sounds like a lot, but it’s only 4% of what’s needed for California’s raw land being converted. It’s only 4%. So it’s a drop in the bucket to what we need currently, and that’s not including — as we start to take over the black market, that number is gonna go up. So when you look at that, and now you’ve gotta talk about “Alright, great, you’re developing 800 acres. Well, what does that really mean?” What that really means is there’s zero infrastructure out there right now. There aren’t nice houses that people making over $100,000 are gonna want to live in, and you’ve gotta look at who’s going to be moving in.

You’re not gonna be having a lot of middle-aged people taking on this category; you’re gonna have a lot of younger people that have gone to college now, so you’re talking millennials. Millennials like different things when it comes to housing. So an apartment building or a condo building would be very good out there. You’re looking at a lot of infrastructure that needs to be built out in Desert Hot Springs, not just cannabis-related, but all related to the cannabis industry. Does that make sense?

Joe Fairless: With the eight acres that you mentioned earlier that you’ve got, how did you acquire that if the SEC just approved the fund?

Pete Asmus: That was acquired with our Regulation D fund.

Joe Fairless: Okay, got it. So how does that work? Does Regulation D lead into A? Will you just educate us on that one?

Pete Asmus: Yes, one of the things that I wanted to do with the A was I wanted to allow it to basically come in at the last minute and do the funding of the regulation D’s construction budget. So knowing that we’ve already got people that wanna buy the properties and we’re in a really good position, that ends up getting a really good return for that regulation A right off the bat, getting into a great deal at the last minute. So one of the things that I wanted to do with that was be able to lend.

The other aspect of it is keeping them completely separate, the regulation A can still go out and we can buy pieces of land and basically duplicate the same process that the regulation D is doing. So the whole point of the D is to give an example of what the results could be. On that fund alone, when we’re talking about the 8,5 acres, we’re building out ten buildings. Eight of them are gonna be sold, two of them we’re gonna be holding. We do have three companies that wanna buy the entire development, and if that happens, then obviously we won’t be holding anything. But just based on us holding two of them, we’ve got a great ROI already intact.

So you’ve got condos that are happening, you’ve got multiple exit strategies, and you’ve got an industry right now that is basically begging for property. The whole reason we found this property, which is really what I wanted to share with you, because I thought that’s where you were going, was we were about to buy two buildings in property directly South of it. When we put the money together to buy those buildings, basically they ended up selling them before we could do it, and it was within 3-4 weeks. And I was like “Wait a second, man… You guys have raw land, right?” “Yup, raw land.” And I’m like, “You just pre-sold your entire development?” “Yup, pre-sold our entire development.” “So you don’t have anything left.” “Nope.” I’m like, “This is crazy.” So I go “Okay, well then this is what we need to get into”, because if they’re able to pre-sell an entire development, you mitigate so much risk, and you’re getting 25% down.

When we started doing all the numbers, we’re basically at a 30% build rate to a 25% deposit rate, so we’re only really being exposed about 5%, which isn’t bad at all. Not including the fact that we’ve got about 30 people that already wanna lease the properties and we now have an investor that is coming in that wants to change it up slightly and wants us to hold it; because if we hold it for the next 2-3 years, it becomes federally legal. Now, once it’s federally legal, we can sell these at a better cap rate. And if we’re only at an 8 or a 10 cap rate, we’re looking at a 40 to 50 million dollar sale price. So it just makes sense, and it’s (again) the best opportunity that we’ll ever have in our life. Never again will they schedule one drug becoming off of that — nobody’s ever gonna say that any of those other drugs are good for you. Cocaine – no, it’s just not gonna happen. So we’ve got this small opportunity, because once it becomes federally legal, then private investors lose out, because now as a developer I can go get a traditional loan, I don’t have to go to private investors to raise money.

Joe Fairless: Taking a giant step back, based on your experience as an entrepreneur and real estate investor, what is your best advice ever for real estate investors?

Pete Asmus: Coaches and mentors. Gene Guarino is probably one of the greatest mentors I’ve ever had. I literally try to copy everything that he does, because he’s just a brilliant guy, and if you’ve ever heard him talk, he sounds just like a Bible school teacher. It’s just — man, the way he talks, and… I love that guy. And he’s always got great advice. Whenever I’m stuck, whenever I’m feeling like “Oh, what should I do…?”, he’s always a text away… And I think that having great mentors, having great coaches, and really having people that you can rely on is a big part of your success overall.

Joe Fairless: Coincidentally, Gene is going to be speaking at my conference in Denver, on the 22nd-23rd of February. So you can go to besteverconference.com and get your ticket and listen to the talk.

Pete Asmus: Man, do that. Go get that, because I promise you, when you hear him talk, it will be well worth your time. He is an amazing speaker. And again, he’s just an amazing guy, so just go hang out with him. We went to his RAL Nat Con and we met the most interesting men in the world, and it was so neat; I was on the outside, I was like “I don’t really need this picture”, and he was like, “No, come on, Pete! Get over here and sit down.” And again, he’s just such a great guy… So yeah, if you guys have the opportunity, make sure you go out and check out Gene at that event. And I think he even usually does an extra day or something, doesn’t he?

Joe Fairless: Yeah, he’s doing something else too, later in the week. That’s on the website too, besteverconference.com. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Pete Asmus: I’m loving it.

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

Break: [00:21:59].20] to [00:22:56].24]

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

Pete Asmus: The one thing.

Joe Fairless: Best ever deal you’ve done that we have not talked about already on this show?

Pete Asmus: A mobile home deal.

Joe Fairless: Why was that the best ever?

Pete Asmus: Because it was super-quick, it was really fast. I went to one mobile home park, and the guy wanted to sell it, but he wanted a smaller mobile home, and I had just been at a different park that had a smaller mobile home. I ran back to the one park, basically secured it, bought it for a grand, and then ended up trading it to him for $10,000 value, and paying another five grand for his, and ended up getting like a $20,000 mobile home for about $6,000. Then I sold that in about two weeks.

It was just such a cool experience, and I was teaching people at the time, so I had a group of students with me and they all got to see it happen. It was just a really neat experience.

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

Pete Asmus: Trusting too much, and not speaking up when I should have.

Joe Fairless: Will you elaborate?

Pete Asmus: Yeah, I got into a deal where it was somebody I’d known for a long time, and I thought “Well, I’ve known him for a long time, so it must be real”, and it was really just a pipe dream that he had. All the numbers ended up not coming back, so I had to walk away from about 25k, and it was irritating, but it was a lesson learned – no matter how great of a friend they are, I need to make sure that I have the right people inspect the property and make sure that the numbers are what they are prior to getting involved.

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

Pete Asmus: My daughter has alopecia, so she’s lost all her hair for about four years; it grew back, then it started to fall out again… We’ve become CAP (Children’s Alopecia Project) mentors for Southern California. We go to camps every year, and once a quarter we put on different events at bowling alleys and things to bring the kids together. We wrote a book called Queen Alopecia you can check out at QueenAlopecia.com for free. Just read the story, it’s all about how a monkey loses her hair to find out that it’s what mother nature chooses as her placing stone. It was something that people couldn’t fake, and that’s why Mother Nature made them lose their hair, so that people could see who should lead them. It was just a way to show how differences can make you great.

Joe Fairless: What’s the best way the Best Ever listeners can get in touch with you and learn more about what you’re doing?

Pete Asmus: They can google my name, Pete Asmus. They can also go to PeteAsmus.com, or they can go to greenzone360.com. I’m on Facebook, I’m on YouTube, I’m on everything. Just google my name, and you’ll definitely find me without a problem.

Joe Fairless: You are passionate about what you do, and it shows. I haven’t talked to someone who is doing exactly what you’re doing right now; it’s interesting to learn…

Pete Asmus: Thank you.

Joe Fairless: You’ve certainly had to evolve, or chose to evolve from what you were doing, from high-end flips to this, and certainly some parallels and some commonalities among high-end flips and also other real estate transactions, but it is a new industry… And it’s interesting to hear the different ways you’re looking to mitigate the risk from the investment. That’s what I found most interesting, the different types of exit scenarios and ways you could pivot should the winds shift directions.

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

Pete Asmus: You’ve been awesome, thank you so much.

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Best Ever Show episode 1601 flyer

JF1601: How To Identify The Next Hot Neighborhood #SkillSetSunday with Jerry Chu

One way to make money in this business is by identifying an emerging market and get in early before everyone else. But how can we find those emerging markets before everyone else? Well Jerry has some ideas and tips for how anyone can do just that. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Jerry Chu Real Estate Background:

  • Developed multiple trading platforms
  • Founder and creator of Lofty, which uses artificial intelligence to identify neighborhood growth
  • Based in LA, CA
  • Say hi to him at www.lofty.ai

 


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


TRANSCRIPTION

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

Jerry Chu: I’m good, Joe. How are you doing?

Joe Fairless: I’m doing well, and nice to have you on the show. Best Ever listeners, because today is Sunday we’ve got a special segment for you called Skillset Sunday, where you will learn a new skill, or perhaps hone an existing skill, and… Well, today we’re gonna be talking about how to identify the next hot neighborhood.

Jerry, our guest today, has developed multiple trading platforms and he’s actually the founder and creator of Lofty, which uses artificial intelligence to identify neighborhood growth. He’s based in Los Angeles, California.

Before we get into the value proposition of Lofty, Jerry, would you mind telling us a little bit more about yourself, just so we get to know you a little bit better?

Jerry Chu: Sure. I’m originally from Vancouver, Canada. I moved down to Los Angeles to attend USC for my undergrad in mathematics and economics. After I graduated, I did my masters in financial engineering at Claremont. Then I worked on Wall Street for a couple months in financial risk management, and I just kind of didn’t really like the big corporate world; I felt like it wasn’t really for me. My interest was always in technology, so I kind of did a hard pivot, taught myself how to code, and took an internship here in Los Angeles at a tech firm, and then that’s where I met my current co-founder, and we talked about this idea, and everything’s history since then.

Joe Fairless: Alright, so you’re a smart cookie.

Jerry Chu: I hope so.

Joe Fairless: [laughs] That’s my unintelligent way of summarizing your background. So you co-founded Lofty… I’m on your website; you’ve got Request Demo and that’s about it, so I’m guessing that you all just started, but when I read what is on your website, which is about two sentences, it says “Trend spotting for real estate investors. Lofty AI is a real estate investment technology using artificial intelligence to identify neighborhood growth.” So as listeners on this show, what can you tell us that will help us after this conversation go identify where the next hot spot will be in our area?

Jerry Chu: Okay, so that’s a very interesting aspect, in that the reason we use artificial intelligence isn’t because that’s kind of the hot buzz word and the hot technology today, but really because the type of data that we’re pulling is really difficult for the human brain to actually understand. For example, it’s interesting – our technology applies to real estate with surprising accuracy, but we don’t use any real estate data. All the data that we’re pulling are free, public data on the internet, and they come from social media sources, forums… Essentially, what we do is we analyze what people are talking about, specifically millennials, kind of like the hipsters, and we find out what they like, what they like to eat, where they like to go… Basically, what trends they’re following. And based on those trends, we can actually find geotag information; then when you overlay that information on a map and filter by an AI, you get surprising accuracy on where the hot growth is occuring… So kind of like predicting Brooklyn in New York before everyone knows about Brooklyn. Predicting Silver Lake before the area got hot, Arts District before it became popular.

That’s really what our technology does, and the reason why it’s so difficult for a human brain to understand that type of data is because for example if we showed you there was a tweet about someone loving five-dollar cappuccinos in the area, and an Instagram post with a social media influencer taking a photo outside an art mural, and a variety of other of these weird data sources, you wouldn’t be able to compare and contrast between the different ones and weigh certain ones more heavily than the other ones. You could try, but most likely you wouldn’t end up with the correct answer. So that’s why it’s difficult for a person to directly find these trends, but it’s easy for an AI to do it.

Joe Fairless: How do you determine what weight to give one person’s voice over another’s, and ten people talking about it who don’t have as high of a degree of weight, versus two people who have a higher degree? How do you come up with that?

Jerry Chu: We look at everything on the social media posts. For example, an Instagram post – people buy fake followers and fake likes, so we don’t look at those. But what we do look at is how many comments you get, and within those comments, who the users are, how many followers they have, how often do they post, and how many people or their friend group they’re tagging in those posts. Because the more people that are tagged — essentially, if someone posts about this cool new brunch place and there’s thousands of comments, and most of those comments are real people, not bots, tagging their friends and saying “Let’s go there”, things like that – we analyze the context of what the comments actually are, we analyze the emojis to figure out the sentiment; are people responding positively to this post or this type of trend?

Based on all of that information, the AI assigns a weight to that specific data point, and that’s how it does it for thousands and thousands of data points across our platform.

Joe Fairless: You mentioned social media forums… Which social media forums or platforms do you scrape this data from?

Jerry Chu: Well, the main ones we’re looking at right now is Reddit. A lot of trends emerge there before it hits the mainstream, but we’re constantly looking for new sources. We’re looking to integrate Medium articles, we’re looking to integrate distinct generic news sources to see if anything is going on, local news sources, and things like that.

Joe Fairless: I didn’t hear Facebook. Is that because you’re not able to?

Jerry Chu: Yeah, we always respect the user agreements for the data vendors that we’re taking data from, and Facebook after the whole Cambridge Analytica situation has made it more difficult… And to be honest, we’re tracking millennial trends, and studies have shown that most millennials aren’t really on Facebook anymore. In fact, I think as recent as last month there was a statistic that came out – within 2018, about 20% of millennials have deleted their Facebook app on their phone. They haven’t deactivated their accounts, but they took the app off their phone, so they’re not really using it actively anymore.

Our whole idea is to find real-time data, as opposed to lagging quarterly reports that the industry always looks at, and we just feel like if people aren’t actively using Facebook anymore, that might not be the best source.

Joe Fairless: Is Reddit gaining membership or gaining traction? What’s the status of Reddit?

Jerry Chu: Reddit is very popular with the millennial age group, and attracts a variety of different people from different professions. There’s subreddits, subthreads on real estate, on real estate investment, on random trends like “What are you guys doing for fun?”, and things like that. So yeah, their user base is in fact growing.

Joe Fairless: And I imagine Reddit is one of the good platforms, or one of the ones that you use, because it’s actually accessible to scrape that data, whereas LinkedIn, Instagram – that’s more challenging or not allowed. Is that correct?

Jerry Chu: Yeah, that’s correct.

Joe Fairless: Got it. So taking a giant step back, basically you’re analyzing conversations, and then seeing what people are saying, what they’re talking about, and then as you said, you’re looking at the geotag information, or you’re overlaying that with geotag, so where they’re talking about it, and then you can see based on who’s talking about certain things, where they’re talking about it, or what they’re talking about, you can see where the conversation is… So it’s really a map of where the conversation is focused on in your area, and then your thought is based on conversation being focused in that area by these types of influencer people, then it’s likely that’s where the next area of growth is. Is that accurate?

Jerry Chu: Exactly. So if an area previously didn’t have a lot of these conversations, like people talking about how much they love $12 cappuccinos, or bone broth, or things like that, and all of  a sudden over the course of a few months in a previous under-developed region that no one really thought about investing in before a lot of these activities starts happening, what it shows is that in real time there’s a lot of the demographic that essentially tends to revitalize certain areas… So young college grads that don’t have enough money to live in city centers or areas that are already nice, so they’ve been priced out, so they’re looking for cheaper areas, and as they expand out, they build newer communities, and those areas tend to start growing very rapidly. That’s what we’re tracking.

Joe Fairless: How much of a surprise is it when you look at the data, when you reveal these areas of growth? And I ask that because it seems like… If I’m gonna be talking about a new restaurant in an area — and I’m probably not one of the influencers, so maybe I wouldn’t be the best person… But if someone who is much more influential in the community than me were talking about a new restaurant – well, that restaurant already exists; so if that restaurant already exists, then that leads me to believe that there’s already a lot of attention to that area.

Jerry Chu: Right. So what we’re trying to get people into is right before the big hockey-stick growth curve. You won’t be the first one into an area, and that’s actually beneficial for you, because it kind of de-risks your situation. You’ll never be the first developer in that neighborhood. But what ends up happening is just because there’s one good restaurant in an area that didn’t have any before doesn’t mean instantly the prices for properties and rents and everything just immediately [unintelligible [00:11:30].11] There needs to be what we call sort of a critical mass of amenities and infrastructure in place, and we track areas that have started to approach that critical mass but haven’t quite reached it yet.

Joe Fairless: Got it. What are some areas that you’ve seen that would fall into that category?

Jerry Chu: A couple ones that are pretty interesting — actually, we’ve noticed interesting activity in Paramount; that’s to the East of Compton. That’s pretty surprising. If  you look at the listings there for condos and single-family homes, you’ll notice a big contrast. There are homes being listed for over a million dollars, but a few blocks away there are still homes being listed for less than $200,000. So that’s a really good sign. It means that area is going through a rapid development because of that big pricing contrast.

We’ve also noticed places that people kind of have been talking about, like Hawthorne, Torrance, and places like that.

Joe Fairless: When you co-founded this company you had a business model, so this is the value proposition we’ve been talking about. Now, what’s your business model for it?

Jerry Chu: Right now we’re a SaaS-based platform, meaning that if you like what we have to offer and the intelligence we provide you, then you can subscribe for a monthly fee, and you can cancel it at any time; or you can pay upfront a yearly fee, that would essentially be the monthly fees added together, but with a 10%-20% discount. Those are the two payment options right now.

Joe Fairless: Okay. And who’s your ideal audience?

Jerry Chu: Our ideal audience is really real estate investors, people that have kind of done this process before, but in a very manual, intensive way. We’ve talked to hundreds of real estate investors since we started the company, and a lot of these people we thought we would have to explain to them “Oh, you should follow the artists or the hipsters in these new areas, and then prices are really gonna explode”, and it turns out they already know that, because they’ve done it over the past consistently, and have had very good returns. But their problem has been a lot of times it’s very difficult to find these areas consistently. They’re finding it through word of mouth… Some of them are ridiculously driving day-to-day through L.A. traffic, just looking for these areas manually. And what we provide is the same analytics, but not just for L.A. We have data for the entire United States, and even for some other parts for different countries… And you can have these analytics at your fingertip at home, or in the comfort of your office, and you don’t have to do all this manual, intensive labor to find these new areas anymore.

Joe Fairless: And what’s the subscription cost?

Jerry Chu: Right now we price it differently if it’s an enterprise model or if you’re an individual investor. Right now the individual investment is about $500/month, but if you’re a large firm, which a lot of our trial users and existing customers are, we make a custom pricing based on how many users they want and what additional features they might want.

Joe Fairless: Anything else that we haven’t talked about, that you think we should talk about as it relates to your company?

Jerry Chu: No, not specifically. I would just say the general trend is that a lot of real estate investors, in our opinion, are too focused on the macro market. They’ll hear statistics like “Oh, because interest rates are going up…” or “The whole of L.A. isn’t doing so well” or “The market is starting to tank in a city…”, but a city is a pretty large area, and often within the cities themselves there are micro-neighborhoods that are completely contrary to the overall trend. So as perhaps the whole of L.A. is declining, certain areas within it are growing very rapidly.

For a savvy investor, we think it’s a smart thing for them to look at these micro-neighborhoods, as opposed to just the macro city alone.

Joe Fairless: If I subscribe and I am looking for, say, Dallas-Fort Worth, and I have a property that I’m considering in Dallas-Fort Worth, in a certain sub-market, will I be able to see where that sub-market ranks relative to other sub-markets, or is it categorized a different way?

Jerry Chu: Yes, you absolutely will. We have two ways of categorizing it. There’s a ranking based within the city. In your case, Dallas-Fort Worth, it would be, let’s say, the top ten ranked micro-neighborhoods in that city. But then we also have another category that’s a national-based ranking, so the top zip codes within the entire country. So depending on what you’re looking for, you can subscribe to one or the other.

Joe Fairless: And what if the area is not in the top ten micro-neighborhoods? Are the remaining seven thousand ranked?

Jerry Chu: Yeah, they’re ranked, but at the moment we’re not displaying them, purely because based on demand, people have always told us they just wanna see the top ten, or the top 25. But as people put out requests and say “Actually, we’d like to see the entire ranking, or the top 50”, or whatever the range may be, we’ll obviously adjust it for our customers.

Joe Fairless: Okay, so if you have a subject property that you’re considering, and you subscribe, as of this moment you’re not able to see where it ranks if it’s not in the top 10?

Jerry Chu: Correct.

Joe Fairless: Got it. Alright, good stuff. How can the Best Ever listeners get in touch with you and learn more about your company?

Jerry Chu: Well, number one, they can go to our website, which is lofty.ai, or they can reach out to me personally on LinkedIn, as well as my partner. My name is Jerry Chu, and his name is Max Ball. We’re very active on those platforms, so just send us a request with a message in it and we’ll get back to you.

Joe Fairless: Well, thanks for being on the show, talking about this exciting startup that you two have, the implications and the value proposition that the company has, and the business model, too. I really appreciate it. I hope you have a best ever weekend, and we’ll talk to you soon.

Jerry Chu: Thank you so much, Joe, and thank you for having me here.

 

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Guest Peter Lorimer on Best Ever Show episode 1583 flyer

JF1583: From Successful Producer To Successful Real Estate Investor & Agent with Peter Lorimer

Peter got into the real estate industry around 2005 and hasn’t looked back. He has a way of finding the hot spots and upcoming hot-spots in neighborhoods and capitalizing, as well as helping his clients capitalize on the upswing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Peter Lorimer Real Estate Background:

  • Real estate agent for 13+ years
  • Started his career as Rookie Agent Of The Year with Keller Williams
  • In 2009, was the #1 Keller Williams agent in the entire LA region
  • Based in LA
  • Say hi to him at https://www.plgestates.com/
  • Best Ever Book: The Virgin Way

 


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


TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m your host today, Theo Hicks, and today I am speaking with Peter Lorimer. How are you doing today?

Peter Lorimer: Greetings! I am doing very well, Theo. Never better, in fact.

Theo Hicks: That’s great to hear, and we appreciate you joining us on the show today. I’m looking forward to our conversation. A little bit about Peter before we get started – he has been a real estate agent for over 13 years. He started off his career as the Rookie Agent of the Year with Keller Williams, and he was also named the number one Keller Williams agent in the entire Los Angeles region in 2009. He  is currently based out of L.A. and you can say hi to him at PeterLorimer.com.

Peter, before we dive into the conversation, can you tell us a little bit more about your background and what you’re focused on now?

Peter Lorimer: Sure. This is always an interesting question. My background was not real estate at all. You can probably hear by my very strong British accent that I was brought over to the United States in about 1993. I was in fact a record producer, doing all of the EDM, house music, ooch-ooch-ooch stuff… And I had no intentions of getting into real estate at all. My background – I became a record producer at 16 years old, and for the first 15-16 years of my life I was a creative.

Then I’ve always been a very techy guy and I’ve always followed trends. The music that I did was computer-based, so I’ve always had a very pointed ability to be able to understand technology, and I really have the dance music industry to thank for trend-spotting, because — I don’t wanna go too down in the weeds with this, but when you are a DJ, which I was, DJs have to know what’s gonna move the floor. Also, if you’re an electronic music producer, you need to know what’s gonna move the floor a year from now.

Those muscles, which I thought would never help me in real estate, turned out to be the best asset I could have ever hoped for. When I joined the industry – I think it was around 2005 – I was expecting to find other people that were obsessed with technology like me, and I didn’t find them. So my background in real estate has been very trend-driven, very social media-driven from its very inception; very kind of putting all my eggs in one basket as far as I’m an absolute believer in all things digital, and an absolute non-believer in all things paper, which 13,5 years ago made me seem like I was a mad man from the Moon… But now it seems that the industry is pivoting much more towards my ethos of how to attract business.

Theo Hicks: So how did you get into real estate as an agent then?

Peter Lorimer: Again, being British, I was living in Los Angeles, and my mother used to live in England; I’d lived in London for 8 years of my life. I’m not from London, I’m from a town called Leeds, but I lived in London for about 8 years and I was looking into buying property there. My brother lives in Sydney, Australia, and I remember him buying property, and I almost bought a place in New York. So I remember looking at the world stage of property and thinking that Los Angeles was terribly undervalued.

I remember thinking — at one point it was approximately half what it was in New York. I was obsessed with the birth of the internet; I figured that businesses and people would move to California, as the ability to run a business developed into essentially your laptop or your cell phone… So I bet on that thesis and I started buying property in the Los Angeles area, in areas that I believed were a really good buy… That weren’t necessarily the most popular areas.

There was an area that I first bought in called North Hollywood, which was a pretty rundown area in 2000, which is when I bought my first place there, approximately… And I bought it because it was 11 minutes with no traffic from Sunset Strip. Everybody told me I was mad, and I was bonkers… And I did very well on that property.

Then a very interesting thing happened – I was very active in the creative community of Los Angeles, from being in the music business for so long. My music business pals started saying “Hey, Pete, you kind of flip homes. You seem to be doing well. Can we get in on the action? Can you maybe represent us?” And I left the music industry –  this was pre-Napster; I think it was pre-Napster – because I saw that it was about to go through this absolute decimation through pirating… And I left the music business with over 30 number ones in the Billboard club charts under my belt. I’d had several massive records that year; I had a record on a label called [unintelligible [00:07:16].14] that I believe was number one in 12 countries… And I retired.

All my pals were saying, “What are you doing?” I took my winnings from the music industry and I started plowing that into property. Then I began to attract my tribe.

I had people approaching me saying “Hey, you seem to know about property. You know what you’re doing. Can you help us?” I didn’t have a license, so then I got my license, and I then managed to garner this enormous music business based primarily on clientele in Los Angeles. The rest is kind of history.

Theo Hicks: So your first year you were the Rookie of the Year… Obviously, there are thousands of people who become real estate agents of the year. What would you say separated you from all of the other new agents who did not win Rookie of the Year?

Peter Lorimer: Good question. Again, I owe a lot to my former career. In the music business, I was a songwriter that was signed to EMI Publishing… And in the music business the work ethic is so unbelievably grinding; you can work on a project for six months, you can put your heart and soul and every living breath you have into it, and it can sometimes never see the light of day. Having that work ethic of knowing that you have to work triple, double, quadruple as hard as everyone else in the music business to make a dent, I traversed that ethos into my real estate career… And the truth of the matter is I think I out-worked everyone.

The cornerstone of why I believe we were successful was due to the fact that I like to take risks with social media, I liked to not do the normal kind of generic nametag wearing vanilla imagery of real estate. I absolutely made myself the brand, and I kind of had this very rock and roll flavor about me. My lovely wife soon joined me thereafter; we’ve kind of been essentially a power couple ever since… But we most certainly have always danced to the beat of our own drum.

We look for the white space, we look for opportunity where not many people are… Because it’s an incredibly saturated market. So if I’m going up against thousands and thousands of other agents, how do I make myself look different? …and that’s what we set out to do, and I believe — the phrase I like to use is this, “If you don’t blend in, you stand out”, and I made a point of making us stand out.

Theo Hicks: Let’s talk about social media strategy. I can see in the background of your video that you’ve got a digital strategies billboard behind you… What types of social media strategies do you implement?

Peter Lorimer: It evolves, it changes. It changes pretty much like the dance floors used to change every six months; social media changes every six months… So I make a point of looking at trends. I don’t copy or follow trends, but I’m inspired. I see what other people are doing who I admire, and I go “Okay, it’s changing here, it’s changing there”, but I think one of the most important decisions I made was to do social media — I’m gonna give you an example, if you will permit me.

Again, referring back to the music business, I was at a point in my music career where I’d been in it a long time; I was kind of looking to get out, and I’d been kind of beaten up with a few projects that I’d written and nothing happened… And I found myself at times writing songs or producing records for the record company, as opposed to for myself. I thought, “Well, if I do it in this certain style, the record label are gonna like it, and I’ll probably get hired”, and blah-blah-blah… So I reached a crossroads where I said to myself, “Okay, the next project I’m gonna do, I’m gonna do it for me, and I really don’t give a toss if nobody likes it but me. I’m making it only for me. If it sells, great; if it doesn’t sell, I don’t care.” Ironically, that turned out to be one of the biggest hits that I ever had… So when I joined the real estate industry, I made a point of when doing social media I never pandered to anyone; I never put out what I thought they might want to see. Maybe I did — obviously, it’s experimentation; some of it was successful, some of it failed… But the stuff that really resonated with me was truly organic and authentic and real, and exactly the same as the Peter that you would meet in the street.

I’m not slamming agents here, but all too often I see agents playing it really safe, and not wanting to upset the apple cart… And I feel that that is really signing your own death warrant, because the real estate world has absolutely reset. We are watching the end of an era and the birth of a new one. It’s been a slow transition over the past few years. I spoke at a conference in Detroit last week, and that’s a real good kind of benchmark; it’s a litmus test for where the industry is, because it’s in the middle of the country, it’s good, hardworking agents who aren’t necessarily in New York, or L.A. or Miami, and even the senior agents, the younger agents, everybody in the room now when I was talking about social media and Instagram and the power and the reach of this phenomenon – every head was nodding… And I believe – and I’ll go on record and say this – if you are not crafting your own digital identity, you’re dead. If you’re leaving it up to your company to craft your digital identity, you’re dead. If you are having someone in the office do all your social media, you’re dead. It’s a question of time, and I think your business will contract severely within the next 1-3 years.

Theo Hicks: Have you worked with investors at all as an agent?

Peter Lorimer: Developers? Yeah.

Theo Hicks: Okay. Because a common theme amongst investors is trying to look for that investor-friendly agent, and of course in this industry there’s a back-and-forth, so the agent gives you something, but you also have to give them something in returns, so… I’m asking the money question now, which is what’s your best real estate investing advice ever, but I want you to provide that advice to that person who’s looking for an investor-friendly agent, and what they should do to position themselves to actually win that agent’s business?

Peter Lorimer: That’s a great question. I’m gonna answer it, obviously, as an agent; how should an agent try and win investor business? This is a very, very murky, dark, complex question, because unfortunately the nature of the beast with developers is they tend to bounce around with multiple agents. So if you want to work with developers, because if you work with a developer, very often if you find them the deal, you get to list it on the back-end, which is great. But. Be aware that exclusivity when working with developers is a rarity. It’s not impossible, but it’s a rarity. When it comes to development in Los Angeles, it’s high stakes, big commissions, but also intense competition.

I was one of the lucky few that managed to work with a lot of developers – a few developers – who I really liked, and I had their loyalty, and I still have the loyalty of some of them today. I have made the decision as an agent to not work with every developer that comes along, because I really value my time; and I get that a developer doesn’t want to just be exclusive… However, if you can provide value to a developer – if you have an investor that’s looking for multifamilies, and you can consistently provide them with great properties that they can buy, I always say this – nobody is gonna give you loyalty right off the bat; if you’re an agent that’s looking to get loyalty from this sector of real estate, you’ve got to deliver probably one, two, maybe even three deals. But on the third deal, or on the second deal – or even on the first deal – I would then say to that investor, “Hey, I think I’ve proved myself. I’d really like to get some exclusivity from you, if that’s possible.” And it’s all about the value-add.

There’s a phrase that I use, which is this – a lot of our industry are MLS jockeys, right? They’re not particularly proactive; the listings come in, they kind of forward them on, but a lot of the time that’s where it begins and ends. When an agent becomes really successful with developers is when they’re going the extra mile. They’re using websites such as PropertyRadar. PropertyRadar is unbelievably brilliant if you are looking to find off-market deals. It’s worth the investment, I think it’s like $60/month, but you get to categorize zip codes by how much people owe on their homes, how much equity they have, when they last refi-ed, when they last bought, and it allows you to really then zone in on properties that are not on the market, that are most likely to sell, and to a developer, that is gold.

Theo Hicks: That’s really, really good advice. Peter, are you ready for the Best Ever Lightning Round?

Peter Lorimer: Yes, and you want quick answers on this, right?

Theo Hicks: Yeah, lightning quick answers.

Peter Lorimer: [laughs] Not my normal  [unintelligible [00:16:37].22] on and on and on…

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

Break: [00:16:45].15] to [00:18:00].28]

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

Peter Lorimer: Richard Branson’s autobiography, The Virgin Way.

Theo Hicks: This one’s specific to you – best ever EDM artist that’s not Peter Lorimer?

Peter Lorimer: [laughs] I love that question! Well, it has to be a personal friend of mine… His name is Sasha. I think he’s a god.

Theo Hicks: I’ll have to check him out. Best ever deal that wasn’t your first deal or your last deal?

Peter Lorimer: That’s a great question! Best ever deal that wasn’t my first or my last deal… I guess, on a selfish note, it would be doing the deal that the Calvin Klein house was built on; I was part of that developer deal, which was really freakin’ awesome.

And then the other one would be when I had a buyer walk into their first house twice. They’d worked with me and bought two houses, and they bought the first one they saw twice.

Theo Hicks: Nice. What is the biggest mistake you’ve made so far in your real estate career?

Peter Lorimer: Not listening to my inner voice. I’ll be brief, because I know it’s lightning – when I was at Keller Williams, which was great, I shunned out my own thoughts and my own identity to try and adapt. That was the biggest mistake I ever made. Follow your gut, follow your intuition.

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

Peter Lorimer: Again, that’s a big question… The best way I like to give – I like to give everything away. I believe that knowledge is borrowed, and never owned, which is why I like to jump in front of the camera and give it all away. The best way for me to give back is to be generous in all my affairs. Not just with real estate, but when I’m standing in line at the supermarket, when I’m in traffic and somebody wants to cut in. This is gonna sound schmaltzy, but I believe this – every single day I don’t look at what I can extract, I look at what I can put in, and then the rest is up to Mother Universe.

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

Peter Lorimer: The best place to reach me I would say would be probably through my Instagram, and on my cell phone, and I’ll give my cell phone – it’s 310 666 PETE. That’s my real number.

Theo Hicks: Well, Peter, I really appreciate the conversation today and learning about your journey from an EDM record producer to a real estate agent extraordinaire. Just to quickly summarize what you’ve talked about – you attribute your ability to become the Rookie of the Year to your former career as a music producer, and the strong work ethic that you obtained from that. You applied that to real estate, and essentially you just out-worked everyone else… As well as your ability to take lots of risks with your social media strategy. More specifically for your social media strategy, you mentioned how it evolves every six months or so, so make sure you’re staying on top on the newest trends.

You said that you will always look at what people are doing for inspiration, but not to copy them exactly… And you said that the most important thing about your social media strategy is being yourself, being authentic, organic and real, as opposed to pandering or doing what you think other people want. You also said that it is very, very important for you to craft your digital identity yourself and not have someone else do it for you.

Then you gave your best ever advice for real estate agents who want to work with investors, and you said that — this is kind of specific to L.A, but I’m sure it applies everywhere… That investors are not going to be exclusive with you until you’ve proven your ability to add value. So bring them deals and don’t expect or even ask for exclusivity until you’ve done at least one deal, but most likely two or three deals… And you’ve provided a great resource that they could use to find deals , which is that PropertyRadar website.

Peter, I really appreciate it, again. Have a best ever day, and we’ll talk to you soon.

Peter Lorimer: My pleasure, thank you so much for having me.

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Best Ever Show flyer with Tyrone Jackson

JF1580: Learning To Diversify Our Investing Portfolios With The Stock Market with Tyrone Jackson

As real estate investors, we love real estate! Tyrone had a different experience with real estate investing, not a good one. He fell in love with the stock market after that and never looked back. Now Tyrone not only helps his own portfolio and wallet, he helps others learn how to invest in the stock market, with a lot of real estate investor clients that just want to diversify. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Tyrone Jackson Background:

  • Known as The Wealthy Investor, Tyrone is a stock market trader and best selling Amazon.com author, You Should be Rich by Now
  • He has a unique ability to simplify stock trading and investing
  • Has been trading and investing for 20 years and teaching others for 10 years
  • Based in Los Angeles, CA
  • Say hi to him at https://thewealthyinvestor.net/

 


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


TRANSCRIPTION

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

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday. Here’s a little wrinkle for you – we’re all real estate investors or aspiring real estate investors, depending on where you’re at, but what if you wanna diversify into the stock market? Well, we’re gonna be speaking today to an author about stock investing, as well as someone who’s known as The Wealthy Investor, who is a stock market trader… Who I’m talking about is Tyrone Jackson. How are you doing, Tyrone?

Tyrone Jackson: I’m thrilled to be here, thanks for having me.

Joe Fairless: My pleasure, and nice to have you on the show. A little bit about Tyrone – as I mentioned, he is a stock market trader, as well as an author of the book “You should be rich by now.” He has the ability to simplify stock trading and investing, and thank goodness for that, because that is not my area of expertise. He’s been trading and investing for 20 years, and teaching others for 10 years. Based in L.A.

With that being said, Tyrone, do you wanna give the Best Ever listeners a little bit of your background and what you’re focused on?

Tyrone Jackson: Sure. I love when you read my bio, it makes me sound really important… So thank you for that. My ego thanks you for that.

I started out making a living in radio and TV commercials about 30 years ago, and people used to say things to me like “Hey, you should invest that money that you’re making”, and I had no idea what that meant. Like a lot of people, I thought “Real estate – people need a place to live”, so I wound up buying my first piece of real estate. The only problem is I’m not really good at repairing things, like roofs, and piping, and electrical, and all of that. And it’s not that I hated real estate, it just wasn’t my thing.

My father, who’s no longer with us, said “Hey, you should really learn how to trade and invest in the stock market. If you’re gonna hold the real estate, you should probably know something about the stock market.” I was like, “Okay…”

He was living in senior citizen housing at the time, and he says “Next time you come and see me, I’m gonna have some books and tapes and I want you to learn how to invest in the stock market.” It changed my whole world, because I realized to be rich, particularly in the stock market, all you had to do was have the ability to count from one to ten. So I would say to people, “If you went to the fourth grade, you could be rich… Because your goal is to buy a stock that simply rises, and then you can sell that stock for  a profit, instead of having to worry about tenants, credit reports, piping and roofs”, and I simply fell in love with the market.

Joe Fairless: So for someone who does not have experience investing in the stock market, what are some practical things, or what are some tips for getting started in investing? Because we hear about diversification, and we need to do diversification, and whether that is or isn’t good advice could be up for debate… But let’s assume we think that is good advice and we are currently all-in on real estate – what are some practical things we can do to get started in stock market investing?

Tyrone Jackson: Okay. First of all, the thing that you want to understand is stocks are assets, just like houses, just like hotels… But they’re assets that increase in value based on the company’s performance. When I started looking at patterns, I wanted to understand “How can I add stocks to my real estate portfolio?” and one of the things I realized – pattern number one – all of today’s billionaires were billionaires created from stocks, not from real estate. There are some billionaires created from real estate, but the barrier to entry in the stock market is much lower.

So if I wanted to start investing in the stock market, but yet I knew very little, here’s a tip – you wanna start investing small amounts of money, like $500-$600, in stocks that are members of something called the Dow Jones Industrial Average. Now, what that is – the Dow is an index of the top 30 stocks in the U.S. stock market; companies like VISA, Home Depot, or the Walt Disney company. So even if you know very little about the stock market, here’s what’s exciting – those stocks that are in the Dow have the greatest probability of going higher, and have gone higher over time, because Disney, VISA and Home Depot keep earning more, which we call top line revenue. If you just understand that little bit, you see how you could have bought VISA shares for $37 five years ago, and today they’re $149.

Joe Fairless: When we take a look at the method in which we do invest, where we go — okay, I’m with you on investing in the Dow Jones, but then who do I give my money to in order to do that? What’s some advice you have there?

Tyrone Jackson: Well, here’s the beauty of it – you don’t have to give your money to anyone. You can simply open an account at a place like TD Ameritrade, E Trade, Charles Schwab, Fidelity, and you can buy more of these shares in these Dow 30 companies as they’re rising. And if you do that, buy shares as they’re rising, you’d be known as an investor. However, if you want to trade stocks, like making money in real estate, you would become a covered call writer. Now, when you’re writing covered calls, you’re selling rights to other people to buy your shares away from you, and you get paid for that.

One of my students described writing covered calls in the stock market – it’s kind of like rental stock. The stock is the real estate, and you’re just willing to rent it to somebody else at a higher price, and you can gain income for that.

Most real estate investors want a return on the money they’ve put up in the real estate; it’s the same exact thing in the stock market. You want a return on the money that you’ve put in the stock, the only thing is you can trade and buy stocks all over the world; you’re not tied to one geographic location.

Joe Fairless: Switching gears a little bit – you’ve got the book called “You should be rich by now.” Why should we be rich by now?

Tyrone Jackson: Because we’re in a fantastic era where we all have the opportunity to participate in the companies that are having the largest growth on the planet. Companies like Amazon.com five years ago was trading at $200. At the time of this recording it’s just under $2,000. Imagine if you just owned ten shares of Amazon.com.

Facebook, when it went live as a publicly-traded company, $50/share. It’s been as high as $195/share. All this technology that is changing the world, when you’re a shareholder in these major companies – Google is another wonderful example – you have the ability to rise along as an investor, as these companies are innovating and changing the way that we live our lives, and that’s exciting.

Joe Fairless: How much should we bounce around and try to find the right companies, versus investing in the Dow Jones and just riding that out?

Tyrone Jackson: Well, that’s a great question. The next thing is if this sounds like something that could be good to you, like earning another form of passive income trading stocks in addition to real estate, then you wanna go about the business of getting a financial education. You wanna learn how the market works, you wanna learn what stories you are most attracted to… For example, many of my students really like Google, so they wanna own Google shares. Or they love Netflix, because everybody has Netflix, so they wanna own shares in Netflix. So above and beyond the Dow, you wanna invest in the companies whose stories you like. I have a saying, “You never buy the stock if you don’t understand the story.”

I’ve built my reputation keeping the idea of trading and investing extremely simple, so that you can be successful at it. Outside of the Dow, you wanna find the stories of the companies that you like, and just buy shares; when those shares start to rise, you’ll be amazed at how much you can learn about the company through press releases online etc. For most people, in addition to real estate, the stock market is just this whole other world that draws most investors into it, and you begin to gain that education further and further and further. So the whole idea in “You should be rich by now” is if you really knew how to buy shares in the up-and-coming companies, the value of those shares are exponentially rising and you’d be riding along.

Joe Fairless: What are some of the traits that up-and-coming companies have?

Tyrone Jackson: Okay, so initially, in the Wealthy Investor Program, I have a saying – we don’t marry stocks, we only date them. We never fall in love, we don’t put all of our money in one… We date a stock; we let the stock rise, we buy more shares.

Companies that are up-and-coming, these days, they’re usually doing something with technology, like for example PayPal. Now, we’re all using credit cards in the real world, but PayPal focuses on transactions that are worldwide, online, in the digital environment. For example, if you ever wanna buy something online, you know there’s no slot to put a $50 bill into your computer. You’re either gonna use PayPal, VISA, MasterCard, maybe American Express. Each one of those companies allows you to own shares in those companies. So if you like that story, it simply makes sense to own those stocks. I like stocks of up-and-coming technologies because you can watch their earnings – how much the companies are actually earning on a quarterly basis… And if you’ve ever been on a date with someone and they keep getting job promotions and you’re attracted to them, you’re probably gonna wind up in a relationship with them, right? Because their financial life is going well. It’s the same thing in the stock market – when a company’s financial life is going well, the shares tend to follow, and that gives you more wealth as a shareholder.

Joe Fairless: What’s a mistake of someone who is venturing into investing in stocks that you see?

Tyrone Jackson: I see this all the time – a lot of people think they’re gonna make money in something called penny stocks… Stocks that are $2, $3, $4, $5. They think they’re suddenly going to $500. Now, let me just help you out – that rarely happens. So if I’m on a date with a stock, and I wanna be owning shares of the company that the entire Wall Street community likes – and those, again, are companies that have established revenues, not some small company that’s in someone’s garage, and they’ve discovered the greatest thing and they’re looking for another round of financing… That’s called gambling.

When you’re investing or holding shares in companies that billion-dollar institutions are buying shares in, those stocks have the greatest, highest probability of going higher, not penny stocks that are $2 or $3.

Joe Fairless: But they’re so enticing…

Tyrone Jackson: They are. We call them those sexy stocks, and as you know, sexy isn’t always good.

Joe Fairless: That’s true, that’s true. Well, how can the Best Ever listeners learn more about what you’ve got going on?

Tyrone Jackson: The easiest thing — again, we talk about this notion of getting a financial education, right? So if you go to thewealthyinvestor.net, you can download my totally free eBook called Trading Stocks for Wealth. In that free eBook is where I begin to educate you about the market, how it consistently makes millionaires, and going on good dates with Dow stocks. That’s a great free way just to dip your toe in the water, if you will, with the Wealthy Investor approach.

Joe Fairless: Some practical tips for how to get started, and who doesn’t like a free eBook to educate them on a topic that they wanna go further into, so go check that out if this is something that you’re looking to do, Best Ever listeners.

Tyrone, thanks so much for being on the show. By the way, Best Ever listeners, this is the second time we’ve recorded the interview. The first time I totally messed up with some recording issue, and Tyrone was nice enough to hang out with us one more time… Tyrone, thanks for that, and your patience, as well as hanging out with us. Looking forward to staying in touch.

I hope you have a best ever weekend, and we’ll talk to you soon.

Tyrone Jackson: Thanks, my friend. My pleasure.

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Flyer for Best Ever Show episode 1545

JF1545: 7 Due Diligence Items For Passive Investors & Passive Investing Opportunities #SkillSetSunday with Hunter Thompson

Hunter is back on the show today to share a valuable skill set for almost everyone listening. If you’re a passive investor, you can use this information to vet all the deals that come your way. For active investors, putting together deals and looking for money from investors, you can use this information to bring the best package to your investors possible. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Hunter Thompson Real Estate Background:


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Best Ever Listeners:

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

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

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


TRANSCRIPTION

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

Because today is Skillset Sunday, we’ve got a special skillset for you, and we’re talking to you, passive investors – investors who want to passively invest in deals… And you know what, we’re also talking to deal sponsors (general partners), and I’ll tell you how we’re talking to both of you… For passive investors, guess what – we have a skill for you… And when I say “we”, I mean Hunter Thompson, our guest; I don’t have the skill that he’s gonna talk about in the degree that he’s discussing it, because he’s the one who has seven parts of due diligence that he recommends passive investors go through when they’re assessing an opportunity… And active investors – deal sponsors – listen up, my friends, because these are things that you should think about when you’re putting together deals and prior to offering the deals to your investors, because things will be evaluated… So how are you doing, Hunter Thompson? Nice to have you back on the show.

Hunter Thompson: Hey, thanks again, Joe. I really appreciate you having me on.

Joe Fairless: A little bit about Hunter – you probably recognize his name, and that’s because you’re a loyal Best Ever listener; episode 1220 he was on the show and he gave his Best Ever advice, so you can listen to that episode. He’s the founder of Cashflow Connections, which is a real estate syndication company. He has helped investors allocate capital to over 100 properties, with a combined asset value of 350 million buckaroos. He’s the host of Cashflow Connections podcast, and he’s based in L.A., California. With that being said, Hunter, do you wanna give a quick refresher about your background, and then we’ll dive right into the seven parts of due diligence?

Hunter Thompson: Sure. I think a lot of people listening to this really had an interesting moment when 2008 happened. I think that we saw the opportunity that was going to be there for people that didn’t lose their shirts, at least; that was definitely a light bulb turning on moment. That’s kind of how it was for me. Generally speaking, I like to be counter-cyclical, so when everyone’s really concerned about real estate, I jump in… And I’ve been really fortunate in the timing of the market, obviously, but also in the people that I’ve met. I built relationships with some of those people in the heart of the real estate collapse; it ended up being that a lot of them ended up being some of the most influential people in the real estate sector, particularly in the state of California, so I’ve been able to develop a network and develop a company ever since starting out as kind of a small family office, going from friends and family, to now we have about 250 investors, and spread across many properties, like you mentioned, so… Happy to talk about this today.

I think the timing of this conversation is really important. You mentioned the sponsors listening up, as well; I think in the conversation there may be some sponsors that start to cringe when we talk about some of the details of passive investment due diligence, but there’s been such a significant paradigm shift that’s taking place in the real estate investment sector. So many people have access to deals, and the amazing run-up we’ve had in the last ten years, people have been able to invest passively in real estate, particularly since the Jobs Act – they’ve been able to receive incredible results, generally speaking, because of how favorable the market has been. So I think it’s really important right now for passive investors to take an honest look in the mirror, look at their processes, how they’re making decisions on these investments, so that they can yield similar returns over the next ten years.

Joe Fairless: Seven parts of due diligence process – what’s number one?

Hunter Thompson: The first one – and really the entire thing is all really about this, which is the sponsor. If you’re investing in a passive deal and you’re depending on someone else’s expertise, the entire due diligence process is really focused on them. So when we talk about sponsor due diligence, some of the things that I look for – obviously, you wanna look at the track record, you wanna look at references etc, but in terms of actually validating some of the claims they’re making, some of the things I like to do is call their third-party service providers and verify that things match up with them.

I like to talk to the lenders, their CPAs, their attorneys… Not only their investors. Some of those are obviously gonna be biased, because they are the ones that send you those references… Anyway, but let’s say if they say that they have a contractor that’s completed 100 million dollars of assets with them, we can call that contractor and just verify that that claim actually matches up. And if you’re going through and verifying different things, you’re gonna have some yellow flags that pop up if they’re making things up and if they’re not being honest. So that’s really one of the things that I think is a really good idea – just contact the lenders, the loan companies in particular.

Something else you could do is you can pull title on properties that they claim to own… Because anyone can just point to a property and say “Oh, we own that massive office center over there.” Well, if you can actually pull the title, you can follow the entity trail, so that you can actually understand if that entity is the entity you expected it to be, if the property is in good standing, if there’s a lien against the property etc. I think those two steps right there are gonna really help you start to validate some of the claims they’re making… But at the end of the day, again, it’s a gut check. When I’m looking at a sponsor, especially up front prior to me funding, I wanna talk about how frequently are they responding to e-mails, and how frequently are they answering their phone etc, because if they’re not doing a 10 out of 10 job now, they’re surely not going to do it later once you have funded.

Now, keep in mind, most real estate investments are long-term, 7 to 10 year holds, so the real question is do you wanna deal with this person for the next 7 to 10 years? I think those steps right there – that’s a good starting process, for sure.

Joe Fairless: How does the investor pull the title on a property?

Hunter Thompson: Good question. There’s a couple of service providers that can provide this. Soldifi.com, Chicago Title Company and the RealQuest. Those will all be able to do that; it’s just a matter of who you like more, the prices that you’re trying to accomplish etc.