Best Real Estate Investing Advice Ever Show Podcast

JF1015: How He Bought Over 100 Units in Nine Months with Todd Dexheimer

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He was even a schoolteacher at one point. Our guest is limitless and decided that he wanted to jump into real estate all of a sudden. He then thought apartment complexes would be a good idea, hear how he purchased over 100 units in the last nine months!

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Todd Dexheimer Real Estate Background:

– Owner at Sterling Acquisitions
– Began investing 2008, bought 1st rental, flip and own house to live in a flip within a few weeks of each other
– Proceeded to complete over 100 rehab/sell flips and 80 units of SF’s – 4 units and a 15 unit
– Bought a ski resort and now buying apartments out of state – has bought 76 units since July 2016
– Formerly was a high school teacher from 2005-2010
– Based in Twin Cities, Minnesota
– Say hi to him at toddATsterlinggroupmn.com
– Best Ever Book: Emerging Real Estate Markets

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Todd Dexheimer

 

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 fluff.

With us today, Todd Dexheimer. How are you doing, Todd?

Todd Dexheimer: Good, Joe. I appreciate you having me on.

Joe Fairless: We’re glad to have you on the show. A little bit about Todd – he is the owner at Sterling Acquisitions. When he began investing in 2008, he bought three different properties; I’ll let him explain what he did with those three properties, but right out of the gate he bought three different properties. He proceeded to complete over 100 rehab and sell flips and 80 units of single-families, and he has bought a ski resort and he is now buying apartments out of state. He’s bought 76 units since about this time last year. He’s formally a high school teacher and he is in Twin Cities, Minnesota. With that being said, Todd, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Todd Dexheimer: Yeah, absolutely. Like you said, I used to be a high school shop teacher; I did that for about five years, and my wife took a job in Saint Paul, which is where we live right now, so I had nothing to do but read, because right when she got married, she took a long-distance job, we were living apart, so I read and I got really interesting in investing, and in real estate investing in particular. I really like the apartment stuff, and I thought “This is what I wanna do.”

Timing worked out really well, obviously. I started in 2008, right when the market crashed, and like you said, I bought three properties. I bought them all within a couple weeks of each other. I bought my first rental house, which I actually still own today, I bought a house to live in and fix up and flip, a foreclosure that my wife and I lived in; that was a treat. Then I also bought with a partner my first actual flip that I didn’t live in, and it all went really well, I kind of wanted to keep on going.

In 2008, early 2009 I bought three more rental homes and a duplex, and just kept on going. In 2009 I formed a partnership with a business partner that we went out and flipped houses, and then we also bought rentals with some of that income… But between 2009-2015 I flipped over a hundred properties, I kept a bunch of them, 50-60 properties. There’s a few more in that, I guess, but right now I still have about 50 of them. Mostly single-families, up to four-unit buildings.

You mentioned I bought a ski resort… During that time I also bought one 15-unit apartment deal which was a flip, and just some other random stuff.

Where I’m at right now – in 2015, my business partner and I split; we each had differences in our vision, and I decided “You know what? I always wanted to go and buy apartment buildings, and that’s what I’m gonna do.” So I started researching more on apartments, on the markets, and I was looking for kind of emerging real estate markets. In the Twin Cities it’s really expensive here to buy, not a ton of good deals, so I knew that I needed to go somewhere else to achieve my goals.

I took over a year of research and finally I jumped on a plane and went to several markets that I thought had good opportunities to buy, and within nine months–

Joe Fairless: Which ones?

Todd Dexheimer: I went into Memphis, Tennessee…. That was scary, if you’ve ever been there…

Joe Fairless: There’s some good pockets and some bad pockets, but some really, really bad pockets.

Todd Dexheimer: Yeah, definitely. I got chased down there, I thought I was gonna get killed. I went into Florida, Jacksonville, and then I went to Cincinnati. Cincinnati is where I ended up buying most of my deals; I’ve also bought some stuff in Milwaukee, Wisconsin as well.

In the last nine months I’ve now purchased about 100 units, all out of state, all between 11 and 22 units, and now I’m looking for that next step up to try to get into the 50+ units. My main focus is on just trying to find those emerging markets, finding apartments and private investors to invest in them.

Joe Fairless: What type of structure do you have with private investors on a deal?

Todd Dexheimer: I’m pretty flexible, but what I try to do on my properties is a partnership split, and it really depends on the deal, but let’s just say — my main focus is on trying to find value-add. If it’s a value-add with a lot of work and a lot of potential, it’s gonna be closer to like a 50/50 type split. They put in most or all the funds, depending on the deal, of course, and they get a preferred return (7%) and then we split 50/50. That’s the equity, that’s the cashflow, that’s the profit when we sell. It’s kind of a 5-7 year plan on the deal. But again, it depends on the deal.

It’s all about making the investors money, right? You’ve gotta make them happy, you’ve gotta make them money, and they’re not gonna wanna do business with you if you can’t do that.

A lot of the deals I put money into — like I said, I do value-adds, and I do a lot of construction value-adds, so we have to put some funds in right upfront.

Joe Fairless: What do you mean construction? New build, or just major renovation?

Todd Dexheimer: No, renovation. For instance, I just bought a 20-unit and I’ll put in about $180,000 into it.

Joe Fairless: How much did you buy it for?

Todd Dexheimer: 185k.

Joe Fairless: You bought it for 185k and you are putting in about 180k?

Todd Dexheimer: Yeah. 20 units, 2-bedroom, one-bath…

Joe Fairless: And it will be worth…?

Todd Dexheimer: Probably in the sixes when we’re all done.

Joe Fairless: Got it. Where is that one?

Todd Dexheimer: It’s in Cincinnati?

Joe Fairless: Okay. What area in Cincinnati?

Todd Dexheimer: Westwood.

Joe Fairless: Okay, cool.

Todd Dexheimer: It’s a C area, it’s definitely gonna require a lot of work just because of the area it’s in and because of the work that needs to be done, but it’ll be a good property once it’s done, and we might sell that one a little quicker than five years.

So some of those deals like that I might put a decent amount of the rehab portion in, and then when we finance it finally, then typically I get my money back, the investor gets a lot of their money back, if not all, as well.

Joe Fairless: And do they maintain original ownership, or do you cash them out?

Todd Dexheimer: I don’t cash them out, I keep them in the deal.

Joe Fairless: Cool. You’re in Twin Cities; Cincinnati is not a couple hour’s drive from where you are, therefore I suspect that you have a team in place doing these renovations. This is a major construction or renovation project, it sounds like. How did you find your on-the-ground partner?

Todd Dexheimer: It’s all about referrals. Basically, when I started there, it’s finding the agents that are doing deals, and then getting referrals from them on who are the managers in town that can do this type of thing, who are the contractors in town. Then once you find some managers, who are the contractors in town.
With my background, I’ve done a lot of construction, so I know what I’m looking for, too. That’s really helped in finding contractors. I’ve actually found a lot of the contractors that I work with just through Craigslist, through word of mouth. My top contractor right now is a guy that I found, and he’s just doing awesome. He’s getting these projects done fast and he’s doing them right, and he’s [unintelligible [00:09:44].05]

Like you said, you have to find the right people, that’s extremely important. Your manager and your contractor – those people are gonna make or break the deal.

Joe Fairless: One unique thing that I love about what you’ve done – and it shouldn’t be unique, but unfortunately it is for fix and flippers… That is you have kept a lot of the homes that you’ve renovated in your personal portfolio; you said you have about 60 of them that you’ve kept. Most fix and flippers, they flip and then they just keep on turning that money. My advice, based on the interviews I’ve done, is to do what you’ve done – to keep some of them in your portfolio. Clearly, you can’t do a one-to-one ratio, otherwise you won’t have money to fund the next flip, but at least keep some.

How do you manage the 60 properties that you have in your portfolio?

Todd Dexheimer: Those ones I self-manage now.

Joe Fairless: Wow…!

Todd Dexheimer: I’ve got a team… It sounds daunting, but it’s really not. I’ve got a team of maintenance, people that can handle that kind of stuff. I’ve got a bookkeeper assistant that does a lot of the day-to-day, so I don’t really spend that much time. I’ve got people that help me with showings…

Joe Fairless: How many hours a week?

Todd Dexheimer: I don’t know, maybe 2-3 hours.

Joe Fairless: 2-3 hours, that’s it? So you have your own property management company.

Todd Dexheimer: Essentially, yeah. It’s all about delegating. If you can delegate and get the right systems in place… Definitely, there’s some weeks, Joe, where I’m tearing my hair out [unintelligible [00:11:17].02] I spent 20 hours that week. But there’s other weeks I don’t even think about them.

Joe Fairless: The weeks that you’re starting to yank on your hair and you spend 20 hours a week, what’s happening? What’s a specific example?

Todd Dexheimer: I’ve had it where a tenant would call into the city because something happened. The tenant doesn’t contact me, they just contact the city first… Some repair, or something like that. So then the city gets on me, then they do their inspections and they might find five other things that they want me to fix, and it’s just dealing with the city, dealing with the tenant, dealing with all that kind of stuff…

It was really bad when I was doing most of the maintenance myself. I pretty much missed my wife’s birthday one year because of that, so…

Joe Fairless: She appreciated that… [laughter] You were on call, you were fixing someone’s maintenance issue?

Todd Dexheimer: Yeah, I started a [unintelligible [00:12:07].12] and I get a phone call from a tenant. It was a Friday night, and I get a phone call from a tenant that they’re plumbing had burst, and this wasn’t as simple as “Go shut your water off.” This was a small apartment building, so I called a bunch of plumbers, I called my plumber – everybody’s out of town, everybody’s gone. So I was like, “Sorry, honey, I [unintelligible [00:12:28].00]” [laughter] I’m back and forth to Home Depot, getting parts and I finally fixed it, and I get home at 10 o’clock at night…

Joe Fairless: Smelling great, I’m sure… [laughter]

Todd Dexheimer: So as I said, it was time to delegate some of that stuff.

Joe Fairless: Did you decide that, or did she decide that for you?

Todd Dexheimer: She decided, yeah. “It’s either me or your apartments.” She’s [unintelligible [00:12:57].17]

Joe Fairless: What type of software program do you use?

Todd Dexheimer: QuickBooks is all that I’ve used. I don’t do any of that stuff. When I was doing it myself I was using Excel, but now my assistant takes care of all the books, everything right now. I’ve been looking at a new program called AppFolio that I might try out, but we’ll see.

Joe Fairless: Alright, I’ve gotta ask about the ski resort… Is that making you money?

Todd Dexheimer: I sold it.

Joe Fairless: You sold it. Did it make you money?

Todd Dexheimer: A lot, yeah.

Joe Fairless: Tell us about it.

Todd Dexheimer: So actually I’ve got give credit to my old business partner, he found it. He’s a big deer hunter. He ended up stumbling across this property, talked to the guy that owned it… It was just perfect timing. He wanted to sell it, so we bought it for $450,000 or something, right around there. We kind of wanted to do something with it, but it just wasn’t gonna work. He wanted to do [unintelligible [00:13:50].18] he was gonna run everything… And it wasn’t working; he wasn’t doing anything, and I didn’t want any part of running it. So we ended up putting it on the market and selling it and making a pretty good chunk of money on the sale.

Joe Fairless: What did you sell it for?

Todd Dexheimer: 900k.

Joe Fairless: Okay. In what period of time?

Todd Dexheimer: This was just over a year.

Joe Fairless: About a year…

Todd Dexheimer: Yeah, so we were gonna run events and weddings and stuff like that out of it, and it probably would have made good money, but it just would have been a lot of management and a lot of time and effort on something — I just didn’t wanna focus on it. Actually, a young guy bought it and he’s running weddings and events, and he runs one of those [unintelligible [00:14:32].07] events out of it, and he’s doing pretty good. I talked to him not too long ago and he’s doing pretty good with it. We sold it to the right person, I think.

Joe Fairless: Yeah, win/win all around. What city is that in?

Todd Dexheimer: That’s in Rochester, Minnesota. It’s an hour South of the Twin Cities. Beautiful area, 172 acres… A beautiful piece of property. 8,000 square foot lodge…

Joe Fairless: How did you originally finance that?

Todd Dexheimer: The bank gave us 100% financing on it.

Joe Fairless: Wow… What year was this?

Todd Dexheimer: This was in 2012-ish…

Joe Fairless: Huh!

Todd Dexheimer: Based on the appraisal value, they gave us 100% loan on it, because it appraised at like $950,000.

Joe Fairless: Wow… Did the seller review the appraisal before closing?

Todd Dexheimer: I’m not sure. I’m sure if he did, he went “Oh my gosh, what am I doing?” [laughter]

Joe Fairless: Wow.

Todd Dexheimer: But you know, it kind of worked out for everyone. Yeah, he probably could have sold it for a little bit more, but they needed to get out of it, and they needed to get out of it desperately, and they wanted somebody that was gonna do something with it; that was the intention, and it just ended up not working. But again, now the right person has it and he’s doing really good with it.

Joe Fairless: How did you get the funds for the original purchases? Was it through your high school teaching, or was it some other way?

Todd Dexheimer: When I first started, my wife and I basically took all of our money and we bought our first — or I guess it was our second house, but our first house in the Twin Cities in the foreclosure and that rental property, and that was all of our money. I don’t know why she let me do it, but she did.

That rental, after I fixed it — both of them were foreclosures… The single-family that we bought didn’t require a ton of money because we did a 203K loan on it, I think it was called…

Joe Fairless: Yeah…

Todd Dexheimer: An FHA loan. But the rental – we had to put 20% down and then I put my own cash into it to fix it up… Then we ended up refinancing it and we pulled all of our money out of it, plus we got paid, and we still retained about a $350/month cashflow. With that money then we went and did the same thing quite a few times. At that time you could do it. I don’t think you can do that really anymore, refinance that quickly. But at that time you could refinance right away. So that’s what we did – we bought five properties like that, I think, and then I started finding investors to help fund flips, and find banks.

In 2009 and 2010 I probably called about 300 local banks to get financing on flips, and I found a handful of them that said yes.

Joe Fairless: That’s a lot of banks.

Todd Dexheimer: You wouldn’t believe how many of them called me stupid. “You’re crazy to be investing in real estate. In 2009…?” [laughs] The sky had fallen. So many of them just felt sorry for me that I was investing in real estate… [laughter]

Joe Fairless: In hindsight, 2009-2010 ended up being a phenomenal time to be investing in real estate.

Todd Dexheimer: Yeah, absolutely.

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

Todd Dexheimer: I guess I’ll come up with two things. I would say focus on your actual goals and be patient. Especially in this market, to be patient is really important. It’s just so easy to get distracted. There are so many gurus out there teaching all kinds of stuff on how to get rich; a lot of it works, but you’ve gotta figure out what’s for you and then kind of stick with it, and try not to [unintelligible [00:18:09].24] everywhere.

What I’m focusing on right now is apartments and building that business, but in the past I was doing flipping and I was doing contracting, I was doing the rentals, I was doing really anything… Anything that I could get my hands on, I was doing. I was selling real estate… I joined an MLM selling vacation packages… I just wanted to do anything to try to make money, and it just distracts you.

Just focus on what you wanna do and really be patient with it and understand that it takes a while and it’s not just an overnight business. I’m piggybacking on what I just said – this is a business, and I think too many people take this as… They think they’re a real estate investor; you’re not a real estate investor, you’re a business owner, and you’ve gotta run it as a business and not as a hobby, especially if you wanna buy apartment buildings and you wanna use private money. You can’t just go and use other people’s money and run it as a hobby. It’s a business, and you know that… You’ve got a good portfolio, you run it as a business.

Joe Fairless: You do. You mentioned “Focus on your goals and be patient.” Now, I wanna call you out a little bit and I wanna hear what your response is, because you bought three properties right out of the gate, and I have yet to meet someone who on their first purchase three deals, but yet your advice is “Be patient.” What do you say about that?

Todd Dexheimer: [laughs] I guess you did call me out. I would say it was a different market then. And before I bought that rental, before I bought that flip and the house that I ended up living in, I looked at probably 200 houses and I didn’t buy any of them until I found the ones that worked, and worked well.

I bought a lot at one time, but I looked at a couple hundred of them and it was over several months before I bought. And like I said, that time was different; there were deals everywhere. Now there’s still deals, but you have to make sure you’re not overpaying for a deal.

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

Todd Dexheimer: Yeah, let’s do it.

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

Break: [[00:20:18].10] to [[00:21:20].24]

Joe Fairless: Best ever book you’ve read?

Todd Dexheimer: David Lindahl, Emerging Real Estate Markets. I’ve also got this cool new book sitting on my desk that I just dug into, and it’s written by this guy Joe Fairless.

Joe Fairless: I knew this was coming…

Todd Dexheimer: Best Real Estate Investing Advice Ever, Vol. 2. [laughter] I love it though, Joe. I met you in Cincinnati not too long ago, and you talked about the Junior Achievement… I thought that was cool, so I had to go and buy the book right away… If nothing else, just to support that Junior Achievement. I didn’t know if your book was gonna be good or not, but that’s what I wanted to buy it for.

So far the book is pretty good. I haven’t gotten too far into it, but so far it’s pretty good.

Joe Fairless: Best ever deal you’ve done?

Todd Dexheimer: Oh, boy… It’s hard to say. I bought a fourplex for 98k; it was listed for 210k. That was pretty fun. One of my favorite ones – I bought a triplex pretty much by accident. It came on the market for about 80k. I think I put my bid in for about $80,000 and I get an e-mail from the agent, he says “Hey, your offer for $86,000 is the best, and if you come up to $88,000, you’ve got it, and we won’t call for [unintelligible [00:22:25].13]” That wasn’t my offer, but I’m like “Okay…” [laughter]

I run over to the property, I take a look… I walked there as quick as I could, because I had to make a decision. I’m like, “This is a slam dunk.” So I said “Yeah, I could do this deal.” During my inspection, I’m walking this building and I find out that there’s an extra area to this house that’s completely [unintelligible [00:22:50].07] You can’t figure it out from the outside and you can’t figure it out from the inside, but I can see where there was a door that was patched in from the inside – and I shouldn’t say this out loud, because I probably shouldn’t have done it, but I broke a hole in the drywall… This was a foreclosure, condemned building. I broke a hole in the drywall and it’s a whole other unit, an illegal unit that somebody had put in. There was an extra bedroom, bathroom and it allowed me to expand the kitchen. I don’t think anybody would have known about it until after they bought the house and they’re going “What the heck is going on with this building?” So it ended up giving me an extra bedroom.

That’s not even the best part. This deal was close to a couple of our private colleges, but I didn’t know how close, if it was gonna draw college students or not, so before I even closed on this building I threw ads on Craigslist, and I’m showing this building… Before I closed on the house I’m going into the building and showing college students, and I ended up getting three leases signed on the triplex before I closed on the deal. I closed on it, and there was $100,000 of renovations I had to do in two months. I had so many people on that property…

We did the renovations, we got it done exactly when we needed to get it done. The city inspector walked through, gave me the certificate of occupancy and literally within an hour three of my units moved and I collected $3,700 of income right then.

Joe Fairless: Wow.

Todd Dexheimer: It was so cool. [laughter] I still have that thing, and it’s a cashflow machine… All by accident. I was just putting offers in and being diligent about making sure you’re on top of it and not letting opportunities pass you by.

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

Todd Dexheimer: I don’t think I’ve ever made a mistake.

Joe Fairless: Seriously? [laughter]

Todd Dexheimer: No, I lost 100k because of lack of contracts and lack of just really paying attention. What happened was I flipped a house but I didn’t actually do the rehab on it. I just flipped it to this unassuming couple, [unintelligible [00:25:00].21] they seemed good, and I [unintelligible [00:25:03].02] to do the repairs; so I was gonna make money on the flip and gonna make money on the contract, but everything was loose. I had poor contracts, change orders were done through text messages and e-mails, all that kind of stuff.

A day or two before the house was done, I met with these people and gave them the final bill with all the changes and all that kind of stuff. They didn’t like the bill, so I said “Well, let’s talk about it.” They said “We’ll go home and we’ll talk.”

The next day my contractor shows up and the locks are changed, and I get a call from an attorney saying they’re suing me. So legal fees and a long time later I end up losing about 100k. The only good thing is I’d made money on the flip, so I really only lost in the end about 50k, but still, it’s a lot of money. It’s just all because of not being diligent.

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

Todd Dexheimer: Right now most of my giving is through my church. I love volunteering. I’ve got two kids, so I love volunteering with them, bringing them to events… I really just wanna focus on doing that more. And like I said before, I love giving to this Junior Achievement – that’s kind of one of my goals. As I invest in apartments, my commitment is to give a minimum of 5% of the income to local charities that that property is in, with the main focus being education for underserved, low-income youth and young adults.

Joe Fairless: Well, that is Junior Achievement right there.

Todd Dexheimer: Yeah, absolutely.

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

Todd Dexheimer: They could e-mail me. My e-mail is Todd@SterlingGroupMN.com.

Joe Fairless: Well, Todd, thanks for being on the show and talking through how you got started with the three different properties, how you and your partner bought a ski resort and made a good chunk of cash on that, how you have kept a percentage of your fix and flips in your portfolio, so you get that income coming in… Your self-management, how you do partner splits where they put most or all of the money in, 7% preferred return, 50/50 split thereafter. And again, every deal is unique, but generally that’s how you approach it. Then the extra unit that wasn’t your offer that you rented out before you bought the property, which I’m not sure if that is recommended, but either way – what a story! Thanks for sharing that, as well as everything else that you shared.

This has been an educational interview and an interview that is inspirational. I hope you have a best ever day, my friend, and we’ll talk to you soon.

Todd Dexheimer: I appreciate it. Thanks, Joe!

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JF953: How this Foreigner Made ZERO Excuses and Transformed His Life Through Real Estate

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He has done just about everything in residential real estate, and he did it as a foreigner. Hear how he thinks anybody can jump in the real estate game regardless of their background.

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Andrey Sokurec Real Estate Background:

– Founder of Midwest Real Estate Investment Association, as host of the TV Show “The Real Deal in Real Estate
– Co-founded Homestead Road to integrate the process of buying homes and “homesteading” families
– Purchased first investment property in 2005 and has completed over $40 million in real estate transactions since
– Native of Belarus, after coming to America worked as a manual laborer, and by night he read books on business success – Based in Minneapolis, Minnesota
– Say hi to him at www.homesteadroad.com
– Best Ever Book: Shoe Dog by Phil Knight

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Joe Fairless: Best Ever listeners, 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. We only talk about the best advice ever, we don’t get into any fluffy stuff.

With us today, Andrey Sokurec. How are you doing, Andrey?

Andrey Sokurec: Joe, I’m doing fantastic. How are you?

Joe Fairless: I am doing fantastic, nice to have you on the show. A little bit about Andrey – he is the founder of Midwest Real Estate Investment Association, and is the host of the TV show The Real Deal  in real estate. He co-founded the Homestead Road to integrate the process of buying homes and homesteading families.

He purchased his first investment property in 2005 and has completed over 40 million dollars in real estate transactions since. Native of Belarus. After coming to America, worked as a manual laborer and by night read books on business success; based in Minneapolis, Minnesota. With that being said, Andrey, do you wanna give the Best Ever listeners a little bit more about your background and what you’re focused on?

Andrey Sokurec: First of all, thank you so much, Joe, for having me on the show. Everything that you said is true. My main business is Homestead Road, and we are dedicated to serve people better than anyone else. When people have a house to sell as is, I have a team of about 18 people who work for me.

I have rental properties, and my biggest belief is that anyone – it doesn’t matter how old you are, where you came from, whether you came from Africa, Russia, Australia, or you’re being born and raised in America, anybody can become financially successful through real estate investing. This is the easiest way to go, and you don’t need to spend hundreds of thousands of dollars of college education; you can start with wholesale, and build your rental portfolio and be happy and wealthy.’

Joe Fairless: I love talking to people who came from another country and have done incredibly well in the United States, because so often we get fixated on what we don’t have… And holy cow, people who aren’t even from this country and come and are able to be successful – they likely don’t have the same resources that the people who were born here have, but hearing someone who is successful without those resources, it’s an inspiration, and I’d love to learn a little bit more about your story.

I mentioned (because it’s in your bio) that you have a TV show. Is that on TV, or is that just an online show?

Andrey Sokurec: It’s actually on a local cable channel. I go to the studio and we record an actual TV show in the studio. It’s a little bit time-consuming, but I love doing that, because first of all I have access to a lot of high-profile people, and when I do a TV show I learn personally a lot from them.

Joe Fairless: Okay, that’s interesting. How long have you been doing the TV show?

Andrey Sokurec: Three years.

Joe Fairless: Three years… And how much do you pay for the news station to have the show?

Andrey Sokurec: I have a producer, so it costs about $500 to produce each show, and just the engineer and the producer to follow up with the guests. It’s a little bit expensive, so now I’m thinking to switch to have more guests and go to YouTube, because it’s cheaper and faster. Because if I wanna talk with someone, I can just reach out to them, my assistant can talk to them and I don’t need to go to the actual studio where you have to do make-up, and people get embarrassed when they see a lot of cameras…

Joe Fairless: What business results have you seen from doing the TV show for three years on your local cable channel?

Andrey Sokurec: Well, a lot of people who are successful at what they learn, they either have a radio show or a podcast or a TV show. With this TV show I build relationships with a lot of people… Harry McKay became my personal mentor; I had the chance to interview Michael Gerber, Kevin Harrington from shark tank, and a lot of local high-profile people who do business. That’s the way to actually get access to them, because you don’t see them often in the street, walking around and giving you their personal cell phone number.

You can get access to those people when you have a TV show or a radio show or a podcast. When you tell them “Hey, I have a TV show on a local channel. Would you be interested in my TV show?” and a lot of people are actually excited to be on the show, because they have never been on a TV show before.

Joe Fairless: This is beautiful, thank you for sharing that. You’ve been doing it for three years… Your business is Homestead Road, and it integrates the process of buying homes in “homesteading” families. Excuse my ignorance – what are homesteading families?

Andrey Sokurec: It’s a good question. We’re changing the market scene  a little bit, but when we started originally, we were thinking to buy houses and sell out of houses on the contract [unintelligible [00:07:25].13] and help people to become homeowners, so we sold quite a few homes on a contract [unintelligible [00:07:31].19]. Then with the new regulations (Dodd-Frank act) we stopped doing that, because now you cannot have balloon payments, and it’s become complicated.

So what we do is we build our own niche, we market to people who wanna have easy, stress-free sale; our average customer is 45+ years, who wanna sell their parents house and they don’t want realtors; they also want to have easy, stress-free out, they don’t wanna have strangers in the house. We built a really nice process to serve them better than anybody else.

I don’t believe that anyone in the country has the same process that we have and what we do for customers.

Joe Fairless: I’d love to learn more, because on the surface what you described, in my opinion, is you’re wholesaling the house, where the owner wants a stress-free sale, no realtors, not a lot of people coming. That sounds like it would be a wholesaler who is just tying it up and then finding a buyer with cash. Are you doing something different than that?

Andrey Sokurec: Yes, first of all we don’t do wholesale. What we do is we buy every house, and probably 70% of the homes we renovate ourselves, and 30% we sell to smaller investors. We decided to change the whole marketing message; we don’t use any “cash” words in our marketing, and we’ve built quite a unique process. For example, when somebody sells a house to us, after it’s done – and a lot of people have emotional connections – we do a final “say goodbye” tour, where they might tell the relatives and [unintelligible [00:09:21].26] actually painting the house, and we collect the best memories from the family and put it right below the painting.

It’s interesting, but let me pull out my Facebook page – when we give the plaque with the painting of the house people are actually crying, because it’s so emotional. Let me just recap  some memories that people put. This is the best memory – a house on 10325 Clinton Avenue; the basement door became the measurement board for the height and growth records of children, grandchildren and great-grandchildren. The second-best memory, Christmas Eve with children [unintelligible [00:10:10].03] pajamas for the long night of opening presents and songs around the piano.

So what my point is — because everybody can offer a better competitive price, and we offer a competitive price because we are efficient, but not a lot of people actually strive to serve people better than anybody else. When I got into this business, I saw a lot of ads like “We buy houses cash” and it sounded like a used car salesperson, and there is a negative connotation about what exactly it means; it’s like, “Hey, you flip houses?” and a lot of people are skeptical and then go negative.
We decided to change it to build a really nice process with people. I actually brought my entire team to a company called Zappos. Amazon bought them for 820 million dollars, but they have an office in Vegas, and they have a really nice course – it’s called Zappos Inside. It’s a three-day training, and they let any person come in and spend three days to learn how they hire people, how they fire people, to listen to their customer service… This company is considered one of the top 5 companies to work for.

So I brought my entire team there so they could learn and see what’s possible and why a lot of people become loyal to that brand. For example, let me ask you this – do you use Amazon?

Joe Fairless: I do.

Andrey Sokurec: Why do you use it?

Joe Fairless: Because it’s so easy to buy books.

Andrey Sokurec: Yeah, would you recommend Amazon to anyone?

Joe Fairless: Sure, absolutely.

Andrey Sokurec: So that’s what I wanted to change – we wanna provide so much value, so people can start recommending our company to someone else, because selling a house… It’s lots of life experience for people [unintelligible [00:12:11].15] but a lot of people didn’t pay attention to the fact that those people have the same friends, the same people who have the same income level, and they also wanna get out stress-free from their situation.

Joe Fairless: Thank you for sharing that. I want to make sure I’m understanding… I get the plaque that an artist paints that illustrates a story about the house, and you provide that to the seller, but just so I am understanding your business model real quick – you said you buy all the houses, and 70% you what, and 30% you what? I wanna make sure I have that in my notes.

Andrey Sokurec: You cannot do a lot of wholesale because the Department of Commerce actually regulates you and they want every purchaser actually to close on the house. So we close on every house; we use our own money, and we work with private money and bank money. 70% of the homes we renovate ourselves, and 30% we sell; we just clean them for rehab and sell to contractors, to smaller investors who have more time and lower overhead to fix them up.

Joe Fairless: Okay. And 70% that you renovate and keep – do you keep them long-term?

Andrey Sokurec: Most of them we sell, and for rental properties we have a completely different model. We’re buying lower-income homes, like section 8 type of homes who [unintelligible [00:13:44].11] back in 2008, and by now they increased in price by two-and-a-half times. So we have a different formula for how we calculate the offers for rentals. So rentals is a separate business from flipping houses.

Joe Fairless: Okay, got it. So you have a flipping business, and you have a buy and hold business. And now just coming full circle – when you say “homesteading families”, what does that term refer to?

Andrey Sokurec: We wanted to sell houses with [unintelligible [00:14:15].12] but basically the meaning of that term is when we buy a house, we fix it up and we provide the house for a new family — because a lot of people when they spend their entire life in a house (30-40 years) they really don’t want their house to be turned into a rental property. They want someone else, a nice family to occupy their house. So that’s the meaning for homesteading.

Joe Fairless: Okay. Now I’d love to talk a little bit about the plaque and the artist thing, because that’s unique and I’ve never come across that before. Have you taken a look at how many referrals you’ve gotten as a result of this tactic? I know I’m saying it in a very cold-blooded manner; I know it’s not necessarily about how much business you get from it, it’s about adding value, putting smiles on faces, putting good karma out in the world, but also I’m curious from a business standpoint (cause/effect) have you taken a look at that?

Andrey Sokurec: Yeah, absolutely. I don’t know exactly how many referrals we got from the plaque, but I know exactly how many referrals we get every week, because my [unintelligible [00:15:38].07] compiles the reports weekly. On a weekly basis we have about two or three referrals from people. That’s a really high number, because average lead costs us about from 100-300 bucks, and we can get two leads a week for free from people. Those people who have worked with us in the past who got recommended by their friends, most likely they’re going to do business with us.

So I tell people, when somebody calls in our office, you have to provide value for the people first, and then money will follow. That’s what I see a lot of new people struggle with – they hear about real estate investing, and they don’t do any marketing whatsoever; they try to make every person who calls them for advice, they try to convert them in a motivated seller and make them a cash offer. What I tell my people is “Give the best advice and see how you can serve the customer ever.”

If it’s an outright [unintelligible [00:16:48].18] let’s say for example somebody has a nice house, completely sellable, I tell people “Hey, just save your time and give your best advice.” “If I were you, Mr. Seller, I probably would hire a realtor and sell it on the open market.” Then if the person says “Yes, that’s what I’m going to do”, that’s great, but they will probably recommend you someone from their friends who is in a different position, and in this case you save your time, you save those people’s time. A lot of sellers just tell you, “Hey, I don’t wanna sell a house with a realtor; I don’t wanna have a lot of strangers in my house. I actually wanna have an easy, stress-free situation. I like your price point and I’m okay to take a little bit lower price for the convenience of having my own time for closing, and do it easy and stress-free.”

Joe Fairless: How much does it cost to commission the artist to do that painting?

Andrey Sokurec: I think we pay him like $60 for painting, and the frame costs maybe $60. So it’s about $100/piece.

Joe Fairless: I know I’m being very cold-blooded about this, but I’m just trying to get the numbers – so basically the cost of the painting all-in is a $120 bucks and your average lead costs between $100 and $300; so if you get one lead as a result of giving them that painting, then it’s paid for itself.

Andrey Sokurec: Yes, but Joe, it’s not about the plaque itself, it’s about the process. For example, my lead manager, I tell her “Hey, when you answer the phone calls” – we have a lot of people who call and they’re going through a tough situation in their life; their parents died, or they’re going to die… So I say “Hey, feel free to spend the money – it’s your decision – even if we don’t buy a house, just to do something special for those people.”

So from the time people call my office… People who are listening, just feel free to give a call to Homestead Road (you can Google the phone number) talk to my lead manager and see what kind of experience you’re going to have talking to her.

The seller talks to the lead manager, sales manager; we have nice closing, after closing… It’s an entire process. I cannot say that only that plaque contributes to referrals, but the entire process is what’s important.

Joe Fairless: Yeah, it’s a microcosm of your larger operation.

Andrey Sokurec: Yeah, exactly.

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

Andrey Sokurec: Take action. A lot of people want to be real estate investors. They think “Someday I’m going to be financially independent. Someday I’m going to buy my first house. Someday…” but I tell you what, there’s never a good time. Because it’s never a good time to have a kid, invest in your business, go to get education… But the best time is right now.

If you’re hearing this show and you’re brand new and you wanna change your life, right now is the best time.

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

Andrey Sokurec: Sure, yeah.

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

Break: [[00:20:26].25] to [[00:21:08].22]

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

Andrey Sokurec: It’s hard to say, because I’m addicted to reading different books. I consume them, like, probably a book/week. The most recent book that I read is by the founder of CEO of Nike – Phil Knight. I got really inspired by this book. He’s still around; I actually didn’t know the story of the company. He built this company from ground zero – didn’t have the money, he’s a self-made billionaire, and it was really impressive to read the book. Now I started buying Nike again.

Joe Fairless: [laughs] And that book is called Shoe Dog, by Phil Knight. What is the best ever deal you’ve done?

Andrey Sokurec: The best ever deal that I’ve done is one I’ve never actually done; I walked away from the deal. Because a lot of times, especially now, you have so many opportunities, and sometimes if you think that it smells bad, like you don’t have a good internal feeling, you probably should walk away from the deal.

A couple years ago we started buying so many houses… So we became lazy and we actually stopped inspecting the properties, and we’ve done a couple of deals where we did not inspect the property and we ended up losing money.

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

Andrey Sokurec: That’s a good question. We have a company and we do something every quarter; we’re building houses for Habitat For Humanity; this summer I took my daughter and we partnered up with other investors and raised money for the kids in Jamaica and went there to assemble the wheelchairs. That was a really eye-opening experience. But we do as a company something good every month [unintelligible [00:23:05].15] who actually started our own foundation, Homestead Growth Foundation, where we donate the money for the technical college, where kids can get scholarships.

Joe Fairless: And what would you say is the biggest mistake you’ve made on a deal?

Andrey Sokurec: There are so many mistakes that I’ve made… Biggest mistake would be probably not inspecting the property, that was the biggest mistake. Because I became over-confident, I would say, and I was thinking “Now I know everything.”

There was a small mistake that we just recently made – we bought a property, and it’s not in Minneapolis, it’s like 50-80 miles from Minneapolis; this property is a single-family home, but it’s zoned commercial. We didn’t even know about it, we didn’t do our due diligence and now we cannot sell the house because nobody can get financing for the house. It’s a normal, single-family home and it’s impossible to rezone it. It’s kind of seasoned on the books… So again, do your due diligence; don’t be overconfident, inspect every house. That’s my learning lesson.

Joe Fairless: With that particular deal… Usually that’s a good thing where you have a single-family house and it’s zoned commercial, because then you can get it rented for a higher premium than the single-family tenant would pay. Did you find that’s the case?

Andrey Sokurec: Yeah, that’s what I was thinking. Unfortunately, the town where the house is is too small; there’s maybe a couple thousand people living there, so there is enough commercial space. We had a buyer who wanted to get a Fannie Mae loan, and it fell through because it’s zoned commercial, and nobody wants it, basically. But I’m glad that it’s a cheap house, it’s like $50,000.

Joe Fairless: Where is the best place the Best Ever listeners can reach you?

Andrey Sokurec: If you’re listening to this show, you can connect with me by going on YouTube and type “The Real Deal real estate” and watch a couple shows and post your comments. That’s the way I communicate with the people, through YouTube. If you’re here in the Midwest area, we do monthly meetings at [unintelligible [00:25:34].23] and I do a couple events a year where we do three days training, where we take people on a bus tour, show them properties… It’s exciting how many younger people become real estate investors and start making money right out of college, and they become captains of their lives through real estate.

Joe Fairless: Well, I’m on your YouTube channel now. You’ve got a couple interviews that I personally am looking forward to watching and listening to. One of them is “How to succeed in real estate” with the original shark on Shark Tank (the Kevin Harrington interview). I’m gonna listen to that one and watch it.

Lots of great stuff, from having a local cable channel where you’re able to build relationships with high profile people and get in touch with them, increase your sphere of influence, to the giveback mentality first, add value first… You’ve got the unique idea with the painting that you give the sellers when they sell their home – just a phenomenal idea. I mentioned that it was worth from a dollars and cents standpoint, since your cost per lead is 100-300, that it’s basically paying for itself because it costs $120, but that’s not really an accurate statement, because I’m sure your lifetime value of a customer is much more than $120-$300; I’m sure you’re making much more than that.

What I should have said is that your $120 painting is about the same as the low end of a lead, and it continues to pay and pay and pay, because they’re gonna continue to tell that story. What a phenomenal tactic. I know I got caught up on that one tactic, but it’s illustrative of what you’re doing as an overall business plan.

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

Andrey Sokurec: Joe, thank you very much. I enjoyed being on the show. Thanks!

 

 

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JF926: Don’t Listen to Dave Ramsey and BUY 10 Duplexes in 10 Years!

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Dave Ramsey is not about debt, but our guest is! He made a goal to purchase 10 duplexes in 10 years, and did it in eight! This was a goal he said after being sick and tired of the rat race, hear about his purchases, management, and where he’s going!

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Cory Binsfield Real Estate Background:

– Financial Advisor at Structured Wealth Advisors, and full time investor
– In 1998, set a goal to purchase 10 duplexes (20 units) in 10 years, reached that goal in 8 years
– That accomplishment lead him to create http://www.ten2million.com
– Owns over 97 units from duplexes to apartment buildings, and brings in more than $1 million in annual revenue
– Based in Duluth, Minnesota
– Say hi to him at http://www.ten2million.com
 Best Ever Book: Building Wealth One House at a Time

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