JF2751: Use THIS Creative Strategy to Win Direct-to-Seller Deals ft. Dedric Polite

Struggling to find off-market deals? Dedric Polite, co-host of A&E series 50/50 Flip, shares his strategy for finding direct-to-seller deals, and how his method helped him close on his latest mobile home park.

Dedric Polite | Real Estate Background

  • Chief Investment Officer of Be Polite Properties LLC, which owns and operates income producing single-family, multifamily, and commercial real estate.
  • Portfolio: GP of 42-unit mobile home park and 66 units.
  • He and his wife, Krystal Polite, host the A&E home series 50/50 Flip, a six-episode series following the Polites as they renovate and flip 10 single-family and multifamily homes, each one for under $50,000 and all in under 50 days.
  • Based in: Burlington, NC
  • Say hi to him at:
  • Best Ever Book: Never Split the Difference by Chris Voss

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TRANSCRIPT

Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed and I’m here with Dedric Polite. Dedric is joining us from Burlington, North Carolina. He’s the chief investment officer of Be Polite Properties. He is currently GP of 66 residential units and a 42-unit mobile home park. Dedric, can you start us off with a little more about your background and what you’re currently focused on?

Dedric Polite: Sure. Great to be on, Slocomb. Thanks for having me on the show. I’m a long-time listener of the Best Ever podcast. I remember listening to it eight years ago when I first got started. We are full-time real estate investors here in North Carolina. I got into real estate in 2017, started out with the goal to build a large portfolio of cash-flowing rental properties. We got into wholesaling first, because we didn’t have a lot of cash when we first started. We used wholesale checks in order to buy rental properties. Over time, we got into flipping houses; that’s actually how we landed on a TV show. We’re actually on the TV on A&E, we have a home renovation television show called 50/50 Flip, that I can talk a little bit more about… So I’m excited to be here.

Slocomb Reed: Awesome. You just started in real estate investing five years ago?

Dedric Polite: Yep.

Slocomb Reed: Gotcha. When did you buy your first commercial property?

Dedric Polite: Well, good question. So I started 2017, but I have to rewind a little bit. I actually bought my first investment property in 2007. Went to school, graduated college, did what your parents told you to do, “Go to school, get good grades, get a good job with benefits.” 2004, I graduated from Amherst College, got into pharmaceutical sales, was a pharma rep in the Boston area… I read Rich Dad Poor Dad a few years earlier, and I was like, “I’ve got to buy some real estate.” What I did was I do what people now call house-hacking. I bought a triplex in Boston, Massachusetts, I lived in the ground floor unit, I rented out the top two units, it paid my mortgage. I maybe spent 300 or 400 bucks out of pocket each month, and that was my first property.

Then I went back to just working my job. I had a good nine-to-five corporate job, so I didn’t really do too much. I continued to buy books and go to seminars here and there, but I was more of a watcherpreneur at that point. That was until I met my wife. My wife was a serial entrepreneur. Again, we were both working jobs. We got into franchises, so we bought a franchise in 2016. We ran that for a couple of years, and we sold that franchise.

Slocomb Reed: What franchise?

Dedric Polite: It was animal rides, animal scooters. If you’ve ever been to your local mall, you see these little furry scooters riding around with kids…

Slocomb Reed: Ah, okay, gotcha.

Dedric Polite: We brought that and we grew it, three locations in two different states, had like 13 employees. This is why we both were working jobs, we owned this business on the side. We sold that in 2017 and we dove into real estate at that point. It took about a year for us to fire my wife’s boss, and about two years to fire my boss to go full-time into real estate investing. But a mobile home park would be the first commercial property we bought. Again, we bought other multifamilies where they’ve been three-unit, four-unit properties.

Slocomb Reed: Gotcha. Dedric, I’m a house-hacker, too; my starter home was a four-family close to downtown Cincinnati. When my wife was pregnant and it was time for us to move out of downtown and get a larger place, I ended up talking her into a really nice three-family in a neighborhood here called Northside, so we’re on house hack number two.

Dedric Polite: Nice, nice.

Slocomb Reed: So your commercial property is this mobile home park, 42 units. Where is it?

Dedric Polite:  It’s in a town called Mebane, North Carolina. It’s about 30 minutes from Durham, North Carolina.

Slocomb Reed: Gotcha. What got you into mobile home parks?

Dedric Polite: That’s a good question. When I first heard about mobile home park investing, I was turned off, like most people might be. We’re like, “Trailer parks? You mean there’s really money in trailer parks?” As I did research, I learned that it has the highest cash on cash return of any commercial real estate, so that definitely piqued my interest. We’ve been looking to buy a mobile home park for quite some time; for some time, we started marketing directly to them. We were fortunate enough to find a seller that was in his 90s and he was looking to sell off his entire portfolio, which included several small multi families and a mobile home park. We actually were able to negotiate some pretty sweet seller financing terms to purchase a mobile home park.

Slocomb Reed: Tell us about those terms.

Dedric Polite: We bought the mobile home park for $800,000. The kicker was we negotiated seller-financed terms of a $10,000 down payment, the seller agreed to hold a note for $790,000, principal-only payments, no interest of $2,000 a month for 84 months. As is, this mobile home park – we just closed on it about a month ago – it’s worth a million as-is, we bought if for $800,000. After repair value, it’s probably closer to 1.5 million. But we’re not planning to sell it, we’re going to keep it long-term as a cash-flowing property. But you know, it was some pretty sweet terms on it.

Slocomb Reed: Is everything you’ve bought right there in North Carolina?

Dedric Polite: No, we own some property in Boston. I still own that one I bought in 2007. We started buying properties in Cleveland, Ohio before COVID; we had accumulated about 12 or 14 units there. Then COVID hit, so we had a hard time going back and forth and finding a contractor, so we sold everything we had in Cleveland. Right now, our focus is on North Carolina and in the Southeast.

Slocomb Reed: Gotcha. Nice. So do you guys self-manage them?

Dedric Polite: No. We started out self-managing, definitely been there, done that. But now, our properties are managed by a property manager. We also do short-term rentals, so we have quite a few Airbnb’s. So we have two property managers, because those are two different beasts; the long-term rentals have a property manager, and then our Airbnb’s have a separate property manager.

Slocomb Reed: Gotcha. Dedric, what is the biggest challenge you’ve had to overcome as you’ve gone full-time in real estate?

Dedric Polite: That’s a good question. The biggest challenge I think is always deal flow. I think if you find the deals, you can find the money. But that’s one of the things we specialize in, is marketing directly to sellers to find off-market deals for motivated sellers. So we’ve done a pretty good job of finding those off-market deals. Almost nothing that we buy is on market, it’s all direct-to-seller. But I think in today’s environment, with it being such a hot seller’s market, it’s gotten more and more difficult to find deals where the numbers make sense.

Slocomb Reed: Totally. I get that, Dedric. The only things I’ve ever bought on-market were for me and my wife to live in ourselves. Everything else, I’ve gotten off-market for a very similar reason. On-market deals just don’t have the same cash flow, and I have, especially now, the bandwidth for some serious off-market lead gen. Let me ask about that, Dedric. You’re going direct-to-seller – how is it that you’re getting in front of sellers right now?

Dedric Polite: Various ways. Cold calling works very well; text messaging, direct mail, a lot of referrals as well… People have gotten to know us in the market as serious cash buyers and people who deliver… So those are some of the ways we generate off-market deals.

Slocomb Reed: It sounds like you’ve got a lot going on. Did you say that you have people you’ve purchased from who are referring other owners to you?

Dedric Polite: Oh, yeah.

Slocomb Reed: Nice. Going direct to seller, Dedric, when you’re speaking with a property owner who has some genuine interest in selling their property, do you have an idea of how often those sellers are also engaged with other buyers and getting other offers, and how often you’re the only buyer at the table?

Dedric Polite: That’s a great question. Of course, you want that percentage where you’re the only one that they’re talking to be as high as possible. But we live in a real world here, so I would say, out of 10, probably 80% of the time there are other buyers in play, and 20% of the times there are not. We try to stack the odds in our favor where we’re the only or the first person that gets to them. We assess their needs and we can meet all their needs, so they don’t need to talk with anyone else. That’s really the goal where you can negotiate typically the best terms, where you’re not getting outbid by other cash buyers, people paying crazy prices and willing to accept minimal returns… Which is happening every day in this market.

Slocomb Reed: Yeah, totally. Even with going direct-to-seller, doing your cold calling, your text marketing, and direct mail, things like that, 80% of the time you’re still coming across sellers who are being approached by other people at the same time. The deals that you’re buying – how many of them are coming from the 80% where it’s competitive, and how many are coming from the 20% where you’re the only show in town?

Dedric Polite: That’s a good question. I’ve never really looked at those numbers. Just anecdotally, I would say probably 50/50. 50% come from that 20% where we’re the only game in town, and those are easy to pull the trigger to buy, because you’re usually getting it at a really good price if they’re truly motivated. The other 50% comes from where you’re competing against other offers and you have to get creative with how to win that deal.

Break: [00:12:16][00:14:12]

Slocomb Reed: Dedric, you talked about the mobile home park… Tell us about another time that you got creative to win a deal direct-to-seller in a competitive situation.

Dedric Polite: That’s a good one. One of them was a house in Charlotte. We came across this property in Charlotte half a mile from where the Carolina Panthers football team plays, walking distance there. We were the first ones to be on the scene, talking to the seller. We sent them a postcard, we found a driver for dollars, sent her postcards, she called us back, did the appointment, made an offer. A couple of days later when she was supposed to get back to us, she did say that there was someone else in play.

“Someone else contacted me, they want to buy it. You have competition.” What we did in that case was we offered other things, other than just a sale price. This was an older lady, she was in her 60s, she lived by herself, she had accumulated all this stuff over the years, so we offered her two things. We said, “First of all, we’ll help you move. When we buy the house, you don’t have to figure out how to move all this stuff; we’ll pay for your moving.” And, we offered to pay for a year of storage of her stuff, because she was downsizing from this four-bedroom house into a one-bedroom apartment. So by offering those two things, which most people wouldn’t think of, we were able to win that deal.

Slocomb Reed: Nice. I know some people would be chomping at the bit to hear more about the way that you negotiated the mobile home park deal. It sounds like part of the reason you were able to get it is that you were also interested in those three and four-family properties that the seller was looking to sell. What do you think are the factors that led the seller to a price of 800, which seems a little low, and to seller-finance 790 of that on principal-only payments? What are the factors that led to the seller being interested in and willing to take terms like that?

Dedric Polite: That’s a great question, Slocomb. I think it’s two things. One is we built a relationship with the seller, and two is we built trust with him. We met the seller in 2018. Again, we found one of his properties driving for dollars. We first got in touch with him, he’s like, “Yeah, I’ve got a four-unit I want to sell, as is.” We looked at it, it was completely trashed and we realized why he wanted to sell it. But when we looked this seller up, he owns 70 units. And oh, he was like 90. So we’re like, “Okay.” When I first met with him, I said, “With all due respect, sir, I would like to buy your whole portfolio.” He was like, “Well, slow down. You’re a [unintelligible [00:16:40].06]” He wasn’t ready to sell the whole thing, but he was like, “I’ll sell you this first one. Let’s see how you do.”

We bought the first one, it was a fourplex we bought for 55,000. That’s like some Cleveland, Ohio prices right there… But it needed everything. I mean, it needed everything, or a demo. So we were going to remodel it and rent it, do the BRRRR strategy, but this was early in our renovation experience career, so we were like, “Well, we got the renovation numbers.” We thought it was going to cost like 80 to 90 grand to fix it up. It turns out, it was going to cost like 150 to fix it up. So we’re like, “Um, I don’t think we want to take on this gut renovation of a four-unit where we’ve never done anything this big.” So we actually sold it; we put it on the MLS and sold it as-is. We bought it for 45 and we sold it for 55 as is on the MLS.

So we got out of that deal without losing money, but we performed. That led to the next deal; the next property he sold us was a single-family house he owned in Durham. Again, it was kind of a hairy situation; it had a failed septic tank and no one would touch this property, no one wanted it, because it was some type of special septic and needed to go through city approvals. We ended up buying that property when no one else could buy it from them, so we delivered on that. That’s when he started to be like, “Okay, I’m willing to accept some owner finance terms.” Because we’re like, “Hey, we want to buy two other four-units you have and a mobile home park.” After we’ve proven ourselves on a few deals and he saw that we were trustworthy, that’s what he’s like “Okay, I’d be willing to do seller financing.”

Slocomb Reed: You said you closed on that just recently, end of 2021?

Dedric Polite: Which one?

Slocomb Reed: The mobile home park.

Dedric Polite:  The mobile home park, we closed on that officially last month. We had it under contract for five months, but closed on it last month.

Slocomb Reed: So January of 2022, with a seller you originally connected with in 2018?

Dedric Polite: Absolutely.

Slocomb Reed: So it sounds like part of the secret here was your staying power and just follow up, and your willingness to perform on some of the smaller deals to gain trust, for sure. Yeah, get on base a couple of times and it lead to a home run. That’s awesome. Since you went full-time in real estate, Dedric, what would you say is the most important skill you’ve developed?

Dedric Polite: That’s a good question. I think the skill that’s paid off the most has been negotiating skills. Everything in life is a negotiation, but especially in real estate. Honing your negotiating skills is something; it can earn you an extra 20,000 per deal, it can earn you extra million on a deal if you know how to negotiate.

Slocomb Reed: For our Best Ever listeners, Dedric, do you have any recommendations on how they can develop their negotiating skills?

Dedric Polite: Yes. Again, people think you’ve got to be born a great negotiator. I wasn’t born a great negotiator, I had to learn it. One of the books I read was a book called Never Split the Difference by Chris Voss. Some of you have probably heard of that, Never Split the Difference. His background is he is a former FBI hostage negotiator. So we’re negotiating real estate deals, but you learn from someone who’s negotiating life and death situations. I read that book three or four years ago and I still read it once a year, because the tips you can pick up on negotiating from there made me millions of dollars.

Slocomb Reed: Nice. Dedric, are you ready for our Best Ever lightning round?

Dedric Polite: Yes.

Slocomb Reed: What is your Best Ever way to give back?

Dedric Polite: Best Ever way to give back… One of the things we do before we start a lot of our rehabs is we’ll go to a local homeless shelter and we’ll hire some of the guys from there who are skilled tradesmen. Like, you’ve got carpenters, plumbers, and people like that who just maybe are on hard times. We’ll hire them to do the demo and clean out on a lot of our properties. Some of them we’ll actually even give them full-time jobs. That’s one of the ways we like to give back.

Slocomb Reed: Wow. Let’s sit on this for a moment. You’re going to homeless shelters to find people to do the demo for your rehabs. How reliable have you found that workforce to be?

Dedric Polite: I would say fairly reliable. One of the things we have to do is — a lot of times they don’t have cars, so we have to send one of our guys to pick them up in the truck and bring them to and from; that kind of comes with the territory. But other than that, these are folks that, again, were productive members of society. They’ve just fallen on hard times for whatever reason, and I like to try to give them an opportunity to earn an honest day’s work.

Slocomb Reed: That’s awesome. Dedric, what’s the best book you’ve recently read?

Dedric Polite: I would say it’s that Never Split the Difference by Chris Voss. Anyone, especially anyone interested in real estate investing, I think it’s a must-read.

Slocomb Reed: What is the Best Ever lesson you’ve learned in a deal?

Dedric Polite: Best Ever lesson I’ve learned in a deal… that’s a good question. I would say do what you say you’re going to do. If you say you can do a deal, perform on that deal, because that speaks to your reputation. And again, with us being able to buy that mobile home park and buy pretty much this one seller’s whole portfolio, it was because we delivered and we were able to close on what we said we would.

Slocomb Reed: Awesome. What’s your Best Ever advice?

Dedric Polite: My Best Ever advice would be to just take action. Once you’ve done all the educating, you’ve read the books and taken the seminars, don’t be afraid to take action. You’ve got to make mistakes. I made mistakes, I still make mistakes every day. But you learn from those mistakes, you pick yourself back up, and you just fail your way forward.

Slocomb Reed: Where can our Best Ever listeners get in touch with you?

Dedric Polite: On all social media, Dedric Polite. You can also lookup Be Polite Properties, which is my company name. We’re on Instagram, Facebook, we have a YouTube channel under Be Polite Properties, Twitter, LinkedIn… All social media is just Dedric Polite or Be Polite Properties. In addition, we do have our television show 50/50 Flip, which airs on A&E every Saturday at 12 noon Eastern. They can check out the behind-the-scenes of how we renovate and flip houses and build wealth.

Slocomb Reed: Great. Well, Best Ever listeners, thanks for tuning in. If you’ve gotten value from this interview with Dedric Polite, please subscribe to our podcasts, leave us a five-star review. If you know someone else who would get value from listening to this episode, please share it with them. Thank you and have a Best Ever day.

Dedric Polite: Thanks, Slocomb.

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JF2735: 3 Ways to Systemize Your Investments for Maximum Growth ft. Chris Larsen

What if you could simplify the complex strategies of investing? Chris Larsen, Founder of Next-Level Income, shares how you can create a basic and repeatable method to streamline your business. He also discusses mindset hacks and how to form a clear vision for your future.

Chris Larsen | Real Estate Background 

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TRANSCRIPTION

Ash Patel: Hello Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Chris Larsen. Chris is joining us from Asheville, North Carolina. He was a previous guest on episode 2370. You can google Joe Fairless and Chris Larsen and these episodes will show up. Chris, we’re glad to have you back, thank you, and how are you?

Chris Larsen: I’m doing great, man. And Asheville – I think they half named it after you, right?

Ash Patel: You’re right. Awesome. Today is Sunday, so Best Ever listeners, we are doing a skill set Sunday episode, where we talk about a particular skill that our guest has. Chris is the founder of Next Level Income, which helps people plan for financial independence through education and investment opportunities. He is also a GP on 3,000 doors in an LP on 15 properties. Chris, before we get started into your particular skill set, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Chris Larsen: Yeah, I’d be happy to. I bought my first property at 21. We didn’t scale up to 3,000 overnight here, it’s been a couple of decades in the works. I raced bicycles for a lot of years, and I went to school for engineering. When I was in college, I was learning the engineering process, which has stuck with me through my real estate investing career. But what I realized during my engineering education was that I didn’t want to be sitting around behind a desk my entire life. My best friend passed away between my freshman and sophomore years, and it was really kind of a slap in the face to say how precious life was. During some reflection over the next couple of years, I realized that I needed to make the best out of every day, I need to make the most out of the life that I was given.

Let’s face it, in this world that we have, you have to have the financial independence to live your best life. That’s how, over two decades ago, my investing journey started. I started in single-family, ultimately moved into commercial properties, office, multifamily. Multifamily has been the bulk of what we’ve done for the past six years. Today, we focus on multifamily, self-storage, as well as mobile homes and a couple of other things. Personally, we have some short-term rentals here in Asheville, because it’s such a great place to come visit.

Ash Patel: Chris, the skill set that we’re going to dive into today is systematizing investments. Tell us more about that, please.

Chris Larsen: Yeah. Again, I talk about our process in my book. If you’re listening, you’re welcome to get a copy at nextlevelincome.com, just click on the Book link, input your info, and I’ll send it to you. But I’ve always been a systems guy. I raced bicycles in school, and I was never the smartest guy, I was never the fastest guy on the bike… I had to put everything together, and I want to limit variables. So I’d figure out how to do something, then I would move on to the next thing, and figured out how to do that. I would just try to make what I was doing repeatable and improve upon the process. In engineering, they call this iterating. So you iterate, you go through the process, you improve it, you iterate again, you improve, you improve, you improve. So we moved to Asheville, and a lot of people thought, “Oh, you guys just got lucky.” We were living in DC.

I just wrote a blog post here that’s up on our website… I took a snapshot of a spreadsheet I put together 20 years ago. What I did was stack-ranked cities across the country where we wanted to live. A lot of these studies were based on the quality-of-life metrics; the quality of life, places where growth was occurring, this was in the early 2000s… We determined the places where we wanted to live, and Asheville was number three on the list. Through a confluence of events, we ended up moving here. The reason I bring that up is that through these systems that I built, we use the same things today for multifamily investing. So whether you’re an operator and you’re going out and finding properties, or whether you’re an investor and you’re trying to figure out the next best place to live, you can take data, you can distill it down or work with somebody that does that, and you can really simplify the process of — what I like to say is predicting the future of where you can be successful.

Ash Patel: All those systems, how do they apply to investing?

Chris Larsen: Alright, two different things. We could talk about how to determine the areas of opportunity, and then we can talk about how to basically short circuit human nature and really help you achieve success in your investing. We’ll talk about that here in a minute. So the first thing is, if you’re trying to figure out the best areas for investing in the future, you need to figure out what are the big tides, what are the big shifts taking place, that are going to give you those tailwinds? I’m a demographics guy, and if you’ve been listening to this show, you know that the lifeblood of commercial real estate, specifically multifamily, is people. Are they moving to an area? You want population growth, you want job growth, you want income growth; all those things are going to help give tailwinds to the growth of a multifamily property.

One of the easy things to do is you can go on the United Van Lines annual moving survey and you can see where people are moving. This is going to give you some broad strokes; it confirms a lot of things that you probably already know if you’re listening, which is like people are moving to the southeast, Phoenix, Texas. What do they call Austin? The cheapest city in California? [laughs] But again, if you understand how to take some of these broad-stroke data pieces, and you can apply them, you can really simplify the decision-making process for where you want to invest next, and then ultimately also decide who you want to invest with in the future.

Ash Patel: And you mentioned short-circuiting human nature. What is that?

Chris Larsen: Look, I’m a person, I have genetic tendencies. About six years ago, I started seeing a new doctor, and they do genetic analysis, and I have my genes taken. I raced bicycles for a lot of years, I’m not like a big guy, I’m like a pretty skinny…

Ash Patel: You’re like a Lance Armstrong.

Chris Larsen: Lance is even more muscular than I am. I got to train with Lance before he won the tour, as a matter of fact. Thanks for giving me a chance to name-drop there… He’s way better than I am. But my doctor said, “Chris, you should be fat; you should be obese.” He goes, “But you somehow basically short-circuited your genetics.” Now, my wife jokes because she’s like, “Chris, you don’t have any self-control.” She’s like, “If I bring a pint of ice cream in the house, you’re going to eat it all.” I said, “But I have the self-control to tell you not to bring it in the house.” So that’s an example of me knowing my tendencies, as somebody that loves ice cream, to not put that in front of my face.

So if you’re an investor, and if you’ve chosen your strategy, if you say, “Hey, I’d like to invest in multifamily. I’d like to work with this specific operator, to invest in this specific region”, the question is, how do you put a system in place so you ultimately achieve success? If you want to achieve financial success, you have to say, how much do you have to invest on a regular basis to get to the point of achieving financial freedom? So then the question is, how do you replicate that?

In my book, I talk in chapter three about having an opportunity fund. So you have to be diligent about setting aside money. I call it a savings tax. So if you’re like, “Man, it seems like at the end of every month, I have no money left”, you need to turn it around. Most people hate budgets, no different than people don’t like diets. I don’t like to deprive myself of ice cream, but if it’s not in the house, I don’t feel deprived, because it’s not sitting there in front of me. So my first suggestion, if you’re starting out on your investing and your financial journey – tax yourself first, before the government does. Before you spend all your bills, take your savings out first, put that into an area that you can’t touch. I use cash value life insurance, you can use a money market fund, you can use a savings account in another bank that you’re not going to see; put that money aside first. Second, determine a timeline with which you are going to invest. My coaching clients that I work with – we have a quarterly investing plan.

Ash Patel: I love putting money in a bank that you can’t just get online and say, “Oh, I’ll just transfer X number of dollars from savings to my checking account.”

Chris Larsen: That’s a great point; you want it somewhere different. Before there was Apple Pay and everything on your phone, these financial gurus would say, “Hey, if you can’t stop spending money on your credit card, put it in a freezer, in a block of ice, so you have to thaw it out before you can use it. I’m like, “Who uses their actual credit card anymore?” You pay on your phone, you pay online… It’s so easy to spend money without a credit card, so you have to figure out new ways. Again, you set it up in a different bank, or a different account, so maybe you have to request the money or you have to access it differently. It’s not just sitting there every day in front of you to spend. Then develop an investment timeline. Let’s say you’re training for a marathon; you don’t get up one day and the next day run 26 miles. Some people that are crazy, like David Goggins – he does that. If you haven’t read about David Goggins, that guy’s crazy; but read his story. Maybe you run a mile, then you run two miles the next week, then three miles, 26 weeks later, you’re running 26 miles; you built up to it. But you have a program that goes back from your end goal. So if your goal is to invest $100,000 in a year, figure out how much you need to save, and then figure out when you’re going to make those investments; then you can figure out when and how you’re going to invest in those.

Ash Patel: Are your clients older or younger?

Chris Larsen: That’s a great question.

Ash Patel: I have coaching clients and investors that are in their mid-20s. Coaching clients [00:12:23].04] as old as my investors. I have investors that are well into their retirement years that do that.

Break: [00:12:28][00:14:24]

Ash Patel: I’m going to throw you a crazy phone call that I received yesterday. This guy texts me and makes it seem like I should know who he is. He calls me up, I take his call, he’s like, “Hey, here’s my story. I’ve got a W-2 job, I want to get into real estate, I’m 45 years old, and I have a goal of reaching $50,000 in passive income by the age of 50.” He calls it 50 by 50. I’m like, “Awesome. How are you going to do that? What’s the plan?” “Well, I don’t know.” Then he goes on to say, “But you know what? I think 50,000 a month is actually too small. I’m going to achieve 70,000 or 75,000.” I’m blown away; you have no plan… How do you coach somebody like that? First, I’m like, “How did you find me?” He’s like, “Oh, I saw a YouTube video where you’re analyzing a property. At the end of the video, you said feel free to hit me up, so I hit you up.” I’m like, “Do you know anything about me?” He’s like, “No.” He didn’t get on Facebook, LinkedIn, or google me, or anything. So I guess kudos for taking some initiative, but how do you coach somebody like that? They have no plan. My advice to him – get on Bigger Pockets, educate yourself, network, go to meetups, but immerse yourself into this world, if that’s what you want to do. But man, that was too big of a leap for me to try to give him real advice.

Chris Larsen: Yeah. And he said, 50,000 a month?

Ash Patel: Passive.

Chris Larsen: Passive, a month.

Ash Patel: A month.

Chris Larsen: In five years.

Ash Patel: Yeah.

Chris Larsen: Okay. Well, maybe he’s starting off with a nice stockpile.

Ash Patel: He’s not, I asked him.

Chris Larsen: I guess my first step would be to stop posting YouTube videos if I were you. I’m joking, I’m joking… But in my book, I talk about a three-step process: make more money, keep more money, and then grow your money. Again, you have to figure out how much you need to invest at a specific assumption. We actually have a dashboard we’re coming out with to help investors just plug those numbers in. If they say, “Hey, I want 100,000 in passive income in 10 years”, you can see how much you have to invest based upon what your options are for investments. So if you can get a 15% return, you can plug that in; 10%, 20%, whatever your investment returns are, you can plug it in. You have to know where you’re going. This guy, 50,000 a month – okay, let’s say that’s his goal and he wants to achieve $600,000 a year in passive income. The first thing I would do is say, “What are you going to invest in?” Talk him through that. He says, “Hey, I’ve got these investments that are producing 10% a year.” I’d say, “Well, how much do you need to be invested?” It’s what – $6 million, right? That’s where I would start. Now, is that a reasonable assumption for him? I don’t know, but it sounds like it’s not. But let’s say he wanted 60,000 a year, and he could invest $600,000 over the course of the next five years. For a lot of people that are high-income earners, if you’re listening, if you’re a physician… I was a sales rep for a lot of years; I was investing six figures a year for quite a while. It was very realistic. We talk back and make sure that my coaching clients or investors have realistic expectations, because the last thing I want to do is paint an unrealistic picture, and have bad assumptions, and have expectations that can’t be met with a plan. Because nothing squashes confidence than somebody that just isn’t making progress, right?

Ash Patel: Yeah. Chris, I love that approach. You break down and really paint the picture of what it takes to achieve what they want. In my mind, a lot of people just look at retirement as, “Alright, I just have to save a bunch of money.” How many people actually put down numbers, make a budget, and figure out what they need to start saving more of or investing more of?

Chris Larsen: This is what’s wild… My MBA is in portfolio management; I almost did a PhD in finance, so I took a ton of finance classes, I was really interested in becoming a financial advisor. I’m in a little bit of a different role now, but I had the same kind of motivating factors underneath. And if you compare the traditional financial world – financial advisors, let’s say they charge a 1% annual fee; a financial advisor actually earns their clients typically a multiple of that 1% fee. And the reason is, they develop a plan and they hold their clients accountable. So it’s no different than a coach. A coach is going to help you develop a plan, and hold you accountable, whether you’re training for that marathon, or if you’re trying to develop a specific passive investing plan. I think that’s the key. I work with clients that make hundreds of thousands of dollars a year, and very few come to me and say, “Hey, here’s my three-year vision, and here’s a plan.” No, they come to work with me because they say, “Hey, I don’t know where to start and do that.”

If you’re listening and you want to put something together yourself, here’s my advice… Paint a vivid three-year vision of what you want your life to look like; that can include your financial goals in there as well. Personally, I do health, wealth, my social relationships, and my personal, which would be personal enrichment. You could even include things like, maybe you want to buy a new car, or a boat, or something like that. Then you break it down and work backward to what your goals are, and determine based upon, again, the assumptions, based on your returns for a financial goal, what you have to do each step of the way. Again, if you don’t know how to do that, that’s why we’re developing these tools to do that. But then you have to figure out ways, like we were talking about, short-circuiting human nature, which is finding something that you can repeat on a regular basis. Because investing, especially in the things that we talked about, commercial real estate, it’s “get rich slow”, it’s not “get rich fast”. And it’s not really exciting; you make your first investment of $50,000, you get a few $100 a month coming in. You’re like, “Wow, honey, I can take you out for a nice dinner.” You need to do it over time to really grow that snowball of wealth.

Ash Patel: What’s the biggest reason people are non-conforming?

Chris Larsen: I think the first thing is that people don’t stop to visualize what they really want. I’ve found a very high correlation between success with people that paint a clear picture. Here’s what I want you to think about if you’re listening… You get in the car, you have a destination; you take out your phone, you pull up Google Maps, and you put the destination in. Now, if you go to the same place on a regular basis, you know sometimes Google Maps takes you on a different route. If you just started driving and there was a traffic jam, you took a turn and then you didn’t know where you were going, you probably would never end up at your destination. But Google tells you, “Hey, we’re going to take you on this route, because there’s traffic, there’s an accident, the road is closed, whatever it may be.” You must, must, must have a clear vision of what you want in your life to get there. That’s first and foremost, and I think that’s the big thing.

The second thing that’s very correlated with success, is do people show up to do the work? For my coaching clients, if they’re on the weekly calls, if they’re responding to the weekly emails, they’re more successful. Number one, a vision; number two, are they doing the hard work? When I say hard work, this isn’t onerous, but just are you doing the things every day, every week, every month, every quarter, every year, to get you where you want to be? That’s what’s really key to achieving success.

Ash Patel: How do you deal with non-compliant clients?

Chris Larsen: You fire them. First off, if somebody is going to pay me and not show up, I’m going to cash the check. So if anybody’s interested in working with me, you’re welcome. This would be no different than the US Treasury. If you send them a check, they will cash the check; they’ll put it in a treasury. So hey, news for anybody that thinks that you make too much money and you’re not paying enough tax – you can write a check to the Treasury and get that done. But again, I think sharing the success and the tips from people that are achieving success is important, and I think social motivation is good as well. We have group calls on a regular basis, so that way people can hear — because it’s really hard. Let’s say you’re investing and a deal doesn’t go well, or 2020 hits and your distribution checks stop coming in, because people aren’t paying rent and you can’t evict your tenants. It sure is helpful if you know other people in the same boat and then how people are getting through that. So you stick to your plan; no different, again, like I always mention, the financial advisor. The reason a lot of investors underperform the overall stock market is because when the market drops, they sell, and then they take a loss, and then they start all over again. But they have this loss, instead of sticking to their plan when times get tough. No different than when I eat that tub of ice cream that my wife brings in, I’ve just got to get up the next day and say, “Alright, back to the gym” and start all over and put that behind me.

Ash Patel: Chris, I’m going back to that bank example. I’ve got a couple, they’re really good friends of ours and they both just love to spend. I’m thinking, if they have a portion of their check put into a different bank, I’m pretty sure when you open that account, you can set something up where both people have to be present to withdraw money. Because I remember, when you sign that thing…

Chris Larsen: If they have a joint account, they could probably put a restriction on that.

Ash Patel: Yeah, I’m going to recommend that. What would you say to a couple, maybe mid-30s or even into their 40s, they just love to spend, don’t save anything, and don’t really give retirement much thought?

Chris Larsen: Again, this is where you have to flip things around. I’ve found that in life a lot of times when you invert what traditional wisdom would tell you, you get more success. So the first thing you need to do is say, “Okay, are you both in line with what you want out of life?” Then you say, “Alright, we’re not going to have a budget, you love to spend money. Let’s make it enjoyable to spend money.” Again, let’s say that couple brings in $10,000 a month after tax, and their goal is to save $2,000 a month. Well, if you give them $10,000 at the beginning of each month, and on the 30th of each month, say “Okay, where’s your $2,000?” There’s probably a fairly low probability with this couple that they’re going to have it left, because they love to spend money. You take the $2,000 out first and you save it first, you pay your bills second, and then guess what you say? Spend everything that’s left.

Now, what happens is you take people and you say, “Alright, if you make extra money, then you get to spend it on the back end.” You can take this a step further. If you’re like, “Well, I don’t have that problem. I love to save money. I have an investing problem.” Well, let’s say you make $200,000 a year. I would say a really good high bar to set – so this is the opposite end of the spectrum, somebody that’s mastered saving – set a goal of saving 50% of what you make. Because then, every year you work, you can take a year off essentially. But then you can do the same thing, if you save 50%, if you make 100%, more, you get to spend 100% more than you’re making. That was our rule. A lot of people would see, like, “Oh, you bought a new car, you did this, you did that… You’re spending a lot of money.” I was making a lot of money, but our mortgage was $1,300 a month; we’d save a lot of money, and then I would spend what was left. It’s enjoyable.

Part of the problem is once you master saving and investing, you’re ingrained into saving, investing, and a lot of people that are listening to the show, when you become successful as an investor, you then have a hard time learning how to spend money. So you have to learn how to enjoy the money that you’ve saved and enjoy life. What I’ve found is that the 50% rule allows you to achieve higher savings and you also get to learn how to spend some money and enjoy it on the backend as well. But you have to have a lot of discipline on the front end to achieve high savings levels like that.

Ash Patel: I love these mindset hacks. Chris, thank you so much for joining us today, sharing a lot of these tricks, a lot of these mindset changes, and sharing the story with your best friend passing away. It’s a tragedy, but I feel like it’s had a huge impact on how you’ve structured and led your life. We appreciate your time today.

Chris Larsen: Thank you for having me on. If you’re going through a tough time in your life, adversity strengthens you in the long run. It’s a blessing and a curse, but thank you for having me on, Ash, and sharing my story.

Ash Patel: Chris before you leave, how can the Best Ever listeners reach out to you?

Chris Larsen: Real easy, nextlevelincome.com. You can get a free copy of my book there, you can also find all my contact information. Check us out on social media, as well as our podcast.

Ash Patel: Thank you again. Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review and share this podcast with anyone you think can benefit from it. Please also follow, subscribe, and have a Best Ever day.

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JF2717: 4 Advantages to Self-Managing Your Rental Property ft. Jacob Garza

Jacob Garza believes that no one will manage your properties better than yourself. As GP of over 2,000 units, and also co-founder of a property management company, Jacob has been able to follow this advice and scale his portfolio over the last 10 years. In this episode, Jacob shares his strategies for self-managing his rental properties and how he was able to grow his businesses. 

Jacob Garza | Real Estate Background

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Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed. This is the world’s longest-running daily real estate investing podcast. Today, we have Jacob Garza with us. How are you doing, Jacob?

Jacob Garza: I’m fantastic, Slocomb. How are you?

Slocomb Reed: Doing great. I’m excited about this interview. Jacob is a co-founder of REEP, real estate equity partners, which focuses on acquiring underperforming income-producing multifamily investment properties in Texas. Current portfolio, they are the GPs of 2374 units worth over 274 million. REEP is currently celebrating its 10-year anniversary. Congratulations, Jacob.

Jacob Garza: Thank you on that one.

Slocomb Reed: They are based in San Antonio, Texas. Jacob, tell me how the last 10 years have gone with REEP.

Jacob Garza: Well, like a lot of things, they started out very slow, until we get our legs, and from that it’s taken off. We started with a 24-unit apartment complex. My wife and I were both co-founders of REEP Equity, and we’ve also self-managed. I’m kind of a different tool, if you would. When we bought our first property 10 years ago, we actually did all the maintenance on it and Arlene did the leasing on it. Prior to that, we had a very large exit with a software company so we were able to take our time, if you would. Fast-forward to today – yeah, we’ve just got about 2,500 units under management, we do our own management company, we’ll talk more about that later, we raised –I forget the number now– $100 million, we’ve done full-cycle on 13 properties, and those also include refinances, and we deployed about $100 million and CapEx. So like a lot of your listeners, that’s our story and that’s where we are today.

Slocomb Reed: That’s great. Starting slow for you means starting with a 24-unit?

Jacob Garza: Yes. It seemed like a big behemoth goal at that point; we bought one and we were so overwhelmed. But yeah, that was it.

Slocomb Reed: I’ve been there literally with a 24-unit. It wasn’t my first, it was fifth or sixth. And self-managing… Man, I’m even bad with a hammer and a paintbrush. So there are some things that I couldn’t do myself, which I’m fortunate to say, because it forced me to find good people for that. But I know how daunting a 24-unit can feel. [unintelliigible [00:06:13].22] the first commercial property. You said you guys self-managed back then and you own a management company now; so you guys are still fairly self-managed, even with 2500 doors?

Jacob Garza: Yeah, we’re totally self-managed. We have a president who runs REEP Residential; our building – we’re on the fourth floor and they’re on the second floor. It’s a traditional accounting and property management company; full accounting, HR, whatever else they do down there. But yeah, that’s what it is. For your listener’s knowledge, Arlene and I actually went third party, Slocomb, when we hit about 350 units. The story behind that is we weren’t large enough to hire anybody to run it, so we were running; and then we couldn’t buy anything, because we were literally running a management company. So we went third party for about two years.

Slocomb Reed: 350 doors, couldn’t manage it yourselves and grow… What year was this?

Jacob Garza: 2015.

Slocomb Reed: 2015. Okay, please continue.

Jacob Garza: Yes, thank you. We went third-party, and that was the best piece of advice, because it actually allowed us to focus more on raising money, buying, relationships with brokers… And we got about 1200 units, and then brought it back in-house in 2017. The rest is history, and it’s where we are today,

Slocomb Reed: How many doors did you have when you brought it back in-house in 17?

Jacob Garza: 1,200.

Slocomb Reed: 1,200. Gotcha. What made that the right time to bring management back in-house?

Jacob Garza: There is enough management fee income coming through the door; we can hire some good staff. So we opened up an office, we hired an accountant, we hired an HR person, an accounting clerk, and then someone to run it at a director level. Not like with the president we have today, but certainly not a regional either. Still, when that happens, the director was able to run the management company pretty much by themselves; a little guidance from me… I have experience with startup companies. But this made all the difference in the world, and allowed us to continue to raise capital, and have relationships with the brokers, and buy properties, so it worked out.

Slocomb Reed: I’m going to be selfish for a moment here and just hope that the Best Ever listeners get value out of me asking questions on my own behalf, Jacob… I self-manage, I’m at 65 doors, and I’m looking to double my portfolio this year. It’s January 2022 when we’re recording. I self-manage, it’s just me, no other partners that are active enough to be involved in property management or asset management. The only way that I can stay efficient with my time right now is by hiring virtual assistants. Even with only 65 doors, hiring a virtual assistant, depending on how you count, 20% to 40% of the cost of a local full-time employee with the same skills, that allows me even just at 65 doors to have one person full-time on the phones, handling all prospective tenant inquiries, tenant concerns, everything in the leasing process that doesn’t have to be done in person.

I do have one full-time maintenance technician on staff, I have some decent rehabbing subcontractors, and then I have another VA who’s helping me with back-end things, bookkeeping, tracking financials, things like that. What I’m asking for here is when I get to 350 doors, I expect that I will still want to self-manage. So why is it that you decided when you were that size, that it was time to let go? Do you think you should have done it sooner? And is there anything that you have learned since then that would have helped you remain self-managed, as opposed to needing a third party?

Jacob Garza: I think one of the first questions was, should we have done this sooner? And like a lot of things in life, the answer is yes. However, I can tell you, you can’t change history; it is what it is. We’ve learned so much in running the management company. Again, still, it would have been better earlier rather than later, but we learned so, so, so much. Even today, it just continues to pay really big dividends for us, because I do believe this is the decade of the management company. We can talk more about operational execution and how that juices the returns [unintelligible [00:10:40].21] your proforma. What was your other question? You had three really good ones.

Slocomb Reed: The other question here is, you say you should have given it up sooner. One of the issues that we face in Ohio, particularly in Cincinnati where I am, is that our market rents are so much lower than so much of the country that finding quality third-party property management that’s paid on a percentage of gross revenue… Our gross revenues are so much lower in so many places, including a lot of the places where you’re invested in, in Texas. It’s really hard to find quality third party property management for 10%, much less for less than that, of our market rents.

You just said this is the decade of the property manager, which makes me feel, Jacob, like I need to stay in control, even though it is very enticing to find a third-party manager… And hiring a third-party manager would help me free up my time to grow. Again, Best Ever listeners, I’m really asking on behalf of myself, but I really also hope that you’re getting value out of this, too. I feel like Jacob has an abundance of knowledge that he’s sharing with us right now.

The real question is, how can I stay in control? How can I continue to self-manage –because I know that self-management will mean that my portfolio performs better than if I hire someone else– and still be able to continue growing the portfolio?

Jacob Garza: In a perfect world, you definitely want to stay in control. Grow the company to where — you say you want to double in size this year, correct?

Slocomb Reed: Yes, it’s just 65 to 130.

Jacob Garza: No, that’s significant. Getting there’s probably burning the midnight oil and maybe hiring an extra VA, I don’t know… But at some point, bringing somebody on board that’s there, that’s tangible, that can help run these… Are these single families, duplexes, a couple of them?

Slocomb Reed: Predominantly C Class apartments, and predominantly one bedroom. Specific to one-bedroom C class apartments – the turnover rate is high. We’re good at being aggressive about leasing, but also that means that they’re very hands on.

Jacob Garza: So while you’re getting and doubling in size — it’s just all you; let’s just say it’s you for now, because you want to stay in control. I agree with that by the way, I think that’s the strategy to go with. You mentioned something about leasing online. So some of the efficiencies that we have done to help maximize the less time it takes is all of our lease applications, all of our forms, our TA lease, every one of those are online. As a matter of fact, you cannot sign anything; because that’s what’s happening with user software…

Slocomb Reed: 100%. between my virtual assistants and my software, my electronic signature software, my property management software, it’s all online. When someone tells me they need a paper application, we tell them it’s only online. Frankly, in a C class area, someone who can’t handle an online application – I look at them as less employable, and therefore less qualified an applicant. Because if there’s someone who can’t handle opening a link in an email, then that’s not somebody I must have in one of my apartments anyways.

Jacob Garza: I like that. That’s a nice nugget there. So the point in that is just try to automate as much as you can. Because when you do that, it’s less for you or your VA is to do, while you’re buying more and just making that transition into “Yes, now I’m going to bring somebody on part-time or full-time”, to help you. That’s going to be your game changer. If you could get there, then you’re focused fully on… I’m assuming you syndicate some of these, or all of them?

Slocomb Reed: Not yet, no. I do have partners on some of my deals, but they’re active partners.

Jacob Garza: Okay, the more you’ll be able to find other opportunities and work with your partners to close more deals. Then it just begins to scale; then you get to 300 and you’re a whole different shop at that point. You’ve got some lieutenants, I call them, that’s taking care of the day-to-day. The good news is you’ve been there and you know what it’s like. You can’t BS the BS-ers, as they say. I don’t know, I’d put money with you, because I know you’re going to take care of it. I wish you all the luck. I think you have a lot going for you and you’re right there.

Slocomb Reed: Jacob, thank you. I want to ask a little more specific question here, and then I want to move on to a comment you made previously. Outside of maintenance, the guy who turns the wrench or rolls the paint roller, I am the only person in-house locally. I totally feel the compulsion that you have that you’re giving me to hire someone part-time or full-time to be here locally. For my first local hire outside of maintenance and renovation, what responsibilities should I be looking at giving that person? What is it they’d be taking off of my plate, from your perspective?

Jacob Garza: Okay, if you could color code the work that you currently do, you’ve got what I consider gold time, which is like family time, time that you maybe spend with something you want to do, maybe you want to write a book or something that’s just really, really your time. Below that, you’ve got green time, and those are some of the things that you just have to get done. And then below that, you’ve got brown time, which is really wasting your time watching YouTube videos and spending hours on TikTok. So you want to try to give up as much of that green time as you possibly can; and I don’t know what that specifically is. I’m assuming you want to continue to buy more properties, spend more time cultivating your investors, and managing them. Showing an apartment, making a move in, doing a punch list on something – all those, in my opinion, you can teach somebody to do and manage it. Then you can, from that point, continue to grow your business.

Break: [00:16:29][00:18:38]

Slocomb Reed: Jacob, I want to go back to what you said about this being the decade of property management. Except for two years between 2015 and 2017 when operationally it made more sense to go third-party so that you could continue growing, you guys have kept property management in-house, you have it in-house now, and it sounds like you will, for the foreseeable future. The decade of property management – how is it that keeping that in-house has played to your advantage for the last few years? What is it that you’re projecting about self-management moving forward that is going to help your portfolio outperform other similar portfolios?

Jacob Garza: Sure. I think this is a fact – no one’s going to manage your properties better than you will.

Slocomb Reed: I feel that every day. Yes.

Jacob Garza: And if everyone could do it, they would. It’s a special breed; my wife wouldn’t do it. She likes buying and then she likes raising the capital, but there’s something inherent in both of us that we just like that. Today, that’s a huge advantage for us. That to me, the fact that we like to do it and we can do it, no one else is going to manage our properties better than we will. And you’re right, we have no intention of handing this off to anyone else.

For the foreseeable future, what makes us competitive is we have an opportunity, like you, to create your own culture, your own caring individuals that actually come to work every day. And hearing this from you, and me, they know why they’re there; there’s a real sense of purpose. You and I have a chance to treat these employees the way we want to be treated. Because the link is the property, us, and ownership. There’s that conduit that sits between and there’s a real energy, if you would, that goes through there, that – we’ve got some owners that really care, not only about the property, they care about us. When you start building that — and there are so many other intangibles that I could talk about with how this works. It has nothing to do with property management, nothing to do with treating people right, giving them guidance, and giving them a roadmap. They come to work with a purpose, they’re on a team, and they’re fulfilled.

I know all of this sounds, perhaps for some people, like whatever, but it’s really the absolute truth – so you have an opportunity to really build something pretty special, and with a purpose. And I’ve always said, any business I’ve ever operated and owned, if you take care of the ultimate end user, everything will take care of themselves. In this particular case, it’s the renter. If you take care of them, they’re going to pay the mortgage, they’re going to pay the landscape, they’re going to pay the water, and they’re going to pay us the money that’s left over to hit our proformas. That’s what we’ve been able to establish here at REEP, and it’s worked very well for us.

Slocomb Reed: Absolutely. You know, with all of the tumult of Coronavirus the last couple of years –again, this recording is January of 2022– I saw within my own sphere and within the off-market lead generation I’ve been doing for the last couple of years, that it is particularly the non-local real estate investors who went and hired a big property management company that they had never heard of before, that they didn’t do much vetting on; those are the people who had a hard, hard time with rent collections when COVID first hit and people were getting laid off. We got the feeling that a lot of C and D class renters especially, were using COVID as an excuse to not pay rent, whether they had the money or not. It was the people who didn’t have a local presence, who didn’t have the ability to adapt to the changes in the market, in the economy, in the world, whose portfolios suffered the most. Those are the people that I’ve been buying from, frankly, for the last couple of years.

Having that control, having the ability to adapt to the changes that come in a time like the last few years – very beneficial. Are you seeing anything coming in the next few years, Jacob? Any shifts in the housing market, in the economy, otherwise in the nation or in Texas, that you think are going to be challenges for property management to adapt to?

Jacob Garza: Yes. For us in Texas, it’s the growth. I grew up in Dallas and I moved to San Antonio in 2008, after I sold my third software company. Dallas has been growing ever since I was a kid; I’m kind of an old guy. Everybody thought in ’16 that Dallas was going to implode and Dallas is going to stop slowing down. But the challenge we have here is how do we keep up with the massive influx of corporations and people coming in. And I don’t see any slowdown, in general, we can include some of the other southern states with that, because people are leaving other states and they’re coming in. I’m going to speak for Texas because that’s where I am. It’s been a challenge, to some degree, for talents, not as hard for some other management companies. It’s been challenging to buy properties that are not a two cap, for example, because equity is finding its way to these particular states, Texas including. So for us, it’s about maintaining that constant focus on buying the principles right and not getting over our skis, if you would.

Slocomb Reed: Yeah. It’s acquisitions in markets with lots of growth. I think it’s clear to everyone that that’s difficult, unless you’re willing to buy a two cap in Waco, Texas. You’re going to have trouble with acquisitions in a place that’s growing. Outside of acquisitions, this sounds to me Jacob like you’re describing a dream scenario. Everyone is moving in, the employers are bringing jobs… Are there specific challenges that that presents in the management of your current portfolio? You did say it makes finding talent more difficult, I believe. Please continue.

Jacob Garza: Yes, that’s it. My pretty good educated guess is most people who work on site would much rather work for an owner-operator than a fee-base, for the reasons I was talking about earlier in the broadcast. For that particular reason, I don’t think we’ve had a more difficult time bringing in people; the days of $1,200 per unit payroll – that’s what it is in Texas – those are gone. You have to pay these people right, our investors know it, and they know; in reality, we’re not spending any extra money, we’re investing it. They stay on our properties and they take care of our properties. We just opened up a 401K this year too, so… We’re just trying to stay nimble, trying to listen to the marketplace that’s out there and treat our employees right. Because I go back to it – this is a decade of the management company, and we’re in a good spot, Slocomb, we really are.

Slocomb Reed: Yeah. Jacob, to your point, I was interviewing maintenance technicians — I made a great hire recently. I’ve gone through a couple of interview processes, a couple of hiring processes in the last six months. The majority of people who made it to the phone interview in my process told me that one of their biggest frustrations was when they came across a problem and they reported it to their supervisor, and their supervisor had to go get approval from one or two other people or companies before they could fund the repair, replace the vent hood, or the door, or whatever… Everyone I spoke with, you could hear their excitement when they heard me say, “You’re calling me when there’s an issue and I am making a decision with you over the phone as to what to do next, and then you get to go solve the problem right there.” So you’re right, not only because owner-operators care more than third-party managers, and I don’t want to over-generalize there, but also, we are nimbler, because it’s much easier for us to make quick decisions, and big, bold decisions when necessary. Jacob, we could go for another hour, but that is not the best real estate investing advice ever podcast is. Are you ready for a lightning round?

Jacob Garza: Yes. Thank you.

Slocomb Reed: Awesome. Jacob, what is your Best Ever way to give back?

Jacob Garza: It’s treating our employees right. We’re very charitable, my wife and I, and I’ll leave it at that.

Slocomb Reed: What is the Best Ever book you’ve recently read?

Jacob Garza: It’s not recent, but it’s Good to Great, by Jim Collins. That’s my go-to book, and I love that book.

Slocomb Reed: The last time I read it I didn’t have any employees. So I need to go back and reread it now that is more applicable. Jacob, what’s the most money you’ve lost on a deal?

Jacob Garza: Fortunately, none. We have not hit our proformas before; it was early on, and bought some properties we really shouldn’t have, or property we shouldn’t have. So we’ve been very fortunate in that sense.

Slocomb Reed: What’s the most money you’ve made on a deal?

Jacob Garza: 340% return.

Slocomb Reed: In how long of a timeframe?

Jacob Garza: Two years.

Slocomb Reed: Oh, wow.

Jacob Garza: But that was back in the day, Slocomb, when cap rates were falling. I could have gone to sleep for two years, woken up, and still would have made money.

Slocomb Reed: Yeah. Not a relatable circumstance in 2022, so we’ll move on. Jacob, what is your Best Ever advice?

Jacob Garza: For people that are out there that want to invest in real estate either passively, as a sponsor, or on your own, you just have to not skip any steps. You have to find someone who can help you, a mentor, or get educated. If you’re an LP, you just got to know your sponsor, get to know them, pick up the phone, call them and ask them questions. That’s the best advice I would give in real estate. If you don’t feel comfortable with them or in a hurry to get off the phone with you, then they’re not right for you.

Slocomb Reed: Great. Jacob, where can people get in touch with you?

Jacob Garza: My email address is the easiest, it’s jacob@jacobgarza.com. It’s just basically my name. Send me an email, I’d be happy to help out in any way I can for anyone out there.

Slocomb Reed: Great. Well, Jacob, I’m hoping we can have you back on the podcast or one of your partners so that we can continue this conversation. But for now, Best Ever listeners thank you for tuning in. If you’ve enjoyed this conversation with Jacob Garza and me, we ask that you follow and subscribe to the podcast, leave us a five-star review, and share this with someone who you think can benefit from what Jacob has shared with us about self-managing your portfolio as you grow. Thank you and have a Best Ever day.

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JF2715: Best Practices for Self-Storage Conversions ft. Erik Hemingway

Erik Hemingway traveled the world with his family for years. They’ve lived in Costa Rica, sailed through the Mediterranean, and sailed across the Atlantic Ocean. All of their travels were made possible because of Erik’s passive income from self-storage. In this episode, Erik shares his strategy for locating self-storage deals, assessing the market, and analyzing the risk on these deals.

Erik Hemingway | Real Estate Background

  • Founder of Nomad Capital which focuses on heavy value-add properties, bringing an in-house general contractor component to projects such as self-storage conversions, ground up development, boutique hospitality, and commercial retail asset classes.
  • Portfolio: $35M in CRE, primarily in self-storage properties.
  • Erik used passive investing to leave the ‘9-5’ life and take his family on adventures, including living in Costa Rica for 1.5 years and sailing through the Mediterranean and across the Atlantic Ocean.
  • Based in: Wilmington, NC
  • Say hi to him at: www.nomadcapital.us | erik@nomadcapital.us
  • Best Ever Book: Traction: Get a Grip on Your Business by Gino Wickman

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TRANSCRIPTION

Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed. This is the world’s longest-running daily real estate investing podcast. Today, we have Erik Hemingway with us. How are you doing Erik?

Erik Hemingway: Great. How are you doing, Slocomb?

Slocomb Reed: I’m doing fantastic, excited to be interviewing you. Erik is the founder of Nomad Capital, which focuses on heavy value-add properties, bringing in-house GC components to their projects, a self-storage conversion, ground-up development, boutique hospitality, and commercial retail asset classes. His current portfolio is 35 million in commercial real estate, primarily in self-storage. Erik used passive investing to leave the nine to five life, and take his family on adventures, including Costa Rica for a year and a half, sail through the Mediterranean and across the Atlantic Ocean. Now he’s more active though as a GP. He is based in Wilmington, North Carolina. Erik, preparing for this session, the thing that stuck out to me was that you focus on heavy value-add properties. What do you consider heavy value-add?

Erik Hemingway: So for us, a heavy value-add would be… We’ve got a couple of Kmart conversions to storage right now; we’ve done ground-up development… We really like to think out of the box and think creatively; I think that’s one of our biggest strengths. When I say “our”, my son and I are partners. We like to kind of look at stuff that everybody else has overlooked, and see what we can rethink how it’s being done, and maybe pivot into something else.

Slocomb Reed: How long have you been doing these kinds of projects?

Erik Hemingway: I’ve been in construction for over 25 years on my own, with my own license since 2001, so just past 20 years on that. And as you mentioned, we traveled abroad for a total of about five years. After coming back to the states in North Carolina, it was time to get back to work, so we started with rehabbing old houses. Wilmington has a huge historic area, so we were crawling under houses, reframing, all that. After a few years of that, I said, “Something’s got to change.” So we pivoted into commercial and kind of been focused on that since about 2016 or so.

Slocomb Reed: Nice. It’s great that you bring that construction component to your deals. It’s especially vital right now with how difficult it is to find good quality contractors and good quality labor. Now, with a Kmart conversion, turning an old big box store into self-storage, something like that – that would definitely be considered heavy value-add. In fact, you’re changing asset classes with a property like that; as opposed to a typical self-storage or a typical self-storage value-add, how do you calculate the difference in risk? When you’re taking something like a big box store and converting it into a completely different asset class, how do you assess the risk involved in that differently?

Erik Hemingway: Great question. We kind of broke it down into four buckets, if you will. The highest risk would be ground-up development. You’re going to buy land, hire an architect, get it designed, engineering, permitting, build the thing… If you’re not a general contractor, you’re hiring a general contractor, going through risks… Materials cost is through the roof, as we’ve seen. So that’s the highest risk.

The next one in our mind is a conversion, where a lot of the heavy lifting is already done. We’ve got the footprint, the building is there, it’s really repurposing it. You’re not designing parking, drainage, sewer, water connections, and all of that. The next step in my mind would be a mismanaged property that’s already storage, but just neglected, rents are way below market, there’s a lot of value still to add there… And then, of course, the least risky project would be to buy something –if we’re just talking about storage– at a cap rate, stabilized, maybe there are some little dials you can turn, you can lower expenses a little bit, raise rents, but basically all the juice is squeezed out of it. So for our appetite, we are doing a little bit of the first and second bucket, and just for the value we want to bring our investors, we don’t find a lot of projects that makes sense at the third and fourth bucket. It seems like all of the heavy lifting and the value-add has already been done. That’s why we like that, and that second bucket is kind of where we’re focusing right now, if that makes sense.

Slocomb Reed: How many of these Kmart conversion style deals have you done now?

Erik Hemingway: We converted a printing company in Wilmington in 2016. Not a huge project, it was about 30,000 gross square footage, and we have 24 to 25,000 net rentable. That was our first conversion. And then we’ve got two Kmart’s right now that we’re working on, one under construction and one under contract.

Slocomb Reed: Gotcha. Tell me about the one under construction. What did the big picture numbers look like?

Erik Hemingway: It was a 1.5 million purchase, it was 87,000 square feet, so – what is that? I should know it. $14 to $15 a foot, which is way below replacement costs. We’re going to have about $22 to $24 in converting it to storage, so we’re going to be all in for 35 range, 36, and we’re seeing storage trading at 70 to 100 and up. So we feel like that’s a great day, and that’s something we should be able to pass on to investors, and everybody has a great day at that. It’s going to cash-flow, stabilized fairly quickly, and that’s our target.

Slocomb Reed: Gotcha. How long is the hold period on a deal like that?

Erik Hemingway: We’re targeting five years. We’ve just closed on this first one on December 1, 2021. We’re in the demo mode and we hope to have units to rent in early summer. It’s not as daunting a task as a ground-up project… So yeah, we’re shooting for six to seven months build-out, and then our target is to hold it for five to seven years. Of course, as we approach that threshold, we’ll see what the markets… At four years, if it makes sense to get out early, we see the horizon, we see interest rates are going to spike up, and now’s the time to get out, or we decided to hold until the full seven, or kind of play it by ear at that point.

Slocomb Reed: You said six months to deliver. Are the entire 87 square feet rentable and available to the open market?

Erik Hemingway: Yeah. We debated doing it in phases, and just decided, for the ease of simplicity and mobilization, our crew is there, our guys are there, let’s just knock it out. So that’s kind of what we’re targeting for that. So we should be open, hopefully, July.

Slocomb Reed: That’s awesome. $34 million worth of renovation in six months seems exciting and fast. I know that if someone didn’t have your construction background, numbers like that sound like a pipe dream. But when you look at the experience and the value that you bring, that’s exciting, and it’s exciting that you’d be able to deliver on that quickly. I would be surprised if you didn’t find a really good opportunity to sell before that five-year mark.

Erik Hemingway: Could be.

Slocomb Reed: So you were mentioning to me before we started recording, Erik, that you and your son are partners in Nomad Capital, and that you’re syndicating deals like this, which means you’re bringing on limited partners. And you said just now that you’re underwriting to the five-year hold, which gives a great point of comparison for those light value-add or mismanaged asset deals when it comes to the kinds of returns that you can project and what it is that you’re offering to LPs. So when you were putting together your proposal for this one that you’ve just closed on in December, that you’re currently demoing, what is it that you are offering to investors, what kind of return?

Erik Hemingway: We’re targeting 18% to 21% IRR on the five-year. And then of course, as the scale slides, if you’re taking on less risky deals, then there’s less meat on the bone if you will, and I think that’s when you get into the 10%, 12%, 13% IRR, because there’s just not enough there. That’s kind of why we like those. It’s in our skill sets and our wheelhouse, we’re comfortable with it, so we can bring the GC side, we can bring the sponsor side, and we also do in-house property management as well, so we have that going for it. So this will be our fifth site, and then the sixth one is under contract.

Slocomb Reed: Nice. So you said an 18% IRR, and this is for one of those — not the highest tier of risk, that would be your ground-up construction deals. That makes sense across the board; an 18% IRR for these kinds of conversions of an existing structure into a new asset class to self-storage. Have you syndicated a ground-up construction deal yet?

Erik Hemingway: We have not. The ones we’ve got on the plate right now are conversions, and we do have one that’s under contract; it’s a CFO, we’re buying it as soon as it’s complete. And there is a fifth building that we’re going to add immediately on that. So that’s a small component of a ground-up, but… We do have a couple of ground up projects going, but we didn’t syndicate those; they’re just in-house.

Slocomb Reed: And all of these will be self-storage properties when you’re done with them?

Erik Hemingway: Yup.

Slocomb Reed: Gotcha. Erik, I’ve had the opportunity to speak with a few people in the self-storage area, which I’m not personally in myself. Driving to some of my properties, I see little mom-and-pop self-storage places and I see the phone number, and I keep thinking to myself, “Man, I need to call them.” But I haven’t yet I do need to call them.

Erik Hemingway: It’s worth a call.

Slocomb Reed: Of course. ANd I’m already in the car, driving by, and I already own assets in the area. These conversion deals – how is it that you analyze the demand for self-storage in a given market?

Erik Hemingway: Initially, when we find a property, we just do our own due diligence. Start basically with Google Maps, find out what other storages are nearby, the kind of population. We are on Costar, so we see some demographics, and then of course we order a feasibility study right away after the property is under contract. That really gives us a good gauge of how aggressive the market is and what the appetite is for more storage there. So we definitely check those boxes while we’re under contract, to make sure it’s the right move.

One of the reasons we started leaning towards the conversions was there’s a lot of storage hitting the market right now. A lot of longtime operators are getting out, because the time is right for them to get out and make a change. But the market is so hot for storage that I can’t remember the last time I saw an offer of a new property that came with a price. It’s just “Call for offers. Call for offers” So it’s like I just don’t want to get in that frenzy and up bid, this one won a million and five over ask… I just don’t want to play that game. We really liked the conversions, because it’s under the radar, it’s kind of stealthy, which we like. So there’s a building that’s ugly and we turn it into storage, painted it, dressed it up, signage, and all of a sudden – boom, there’s a storage, when everybody was fighting over this market, and here we come, half price or 40% under the market, and boom, there’s another competitor.

Slocomb Reed: Do you have any particular market research that you do, analytics or metrics that you track for the changes in demand for self-storage? I’m imagining as an outsider to the self-storage space who’s familiar with real estate investing that there’s got to be some sort of number – for every X households, you’re going to have a demand for Y self-storage units or Y square feet of self-storage in a given market, or within a given radius. Does something like that exist?

Erik Hemingway: Sure, square foot per capita is the number that a lot of storage guys have used historically.

Slocomb Reed: What numbers do you use?

Erik Hemingway: Historically, it’s been seven to nine square feet per person in a given market. You can kind of gauge what storage is there and what… Yardi Matrix has a lot of data on that, CoStar will have some data… But you can back out where it’s at. The interesting thing is that number has grown pretty significantly over the past three years or so, specifically since COVID, since everyone’s moving around, and with the national trend of affordable housing, of course, multifamily, as you well know, is just going up everywhere, and people are able to afford less square footage. So that’s pushing storage. Now the number is probably closer to 12 or 13, and a market is not considered saturated until it’s at 14, 15, 16, depending on the MSA. So that’s definitely changing, and storage as a general asset class has just been on fire the past couple of years. I think last year nationwide saw 20% to 22% increase in rental rates. That’s a lot in one year.

Break: [00:16:33][00:18:43]

Slocomb Reed: Erik, I know that everything that you do cannot be summarized quickly in 15 or 30 seconds. But what’s stirring in my head, based on what you’re saying, Erik, is that if I understand a market well enough, I can draw a circle around a fairly homogenous area within a market, and then I can figure out how many square feet of storage there are per person within that circle that I drew or that squiggle that I drew. A balanced market would be 12, saturated would be 14 to 16 square feet per person in that area. But if I found a space where there were only six to nine square feet of self-storage per person within that squiggle, it seems like that would be an exciting place to find a Kmart. Is that what you’re saying?

Erik Hemingway: Yeah, 100%. You’ll see it in broker listings and stuff that this property is for sale, there are only three or four square feet per capita in this market, and they’re saying this has the ability to expand. Of course, that’d be very attractive to us, because the market is already under-supplied, in our opinion. So yeah, of course, if you find something like that, that would definitely be worth exploring, I would think.

Slocomb Reed: What were you investing in before self-storage?

Erik Hemingway: My background is a builder, I did some light commercial… The first storage I built is in Arizona in 2006, and we still own it today and manage it. But before that, residential home builder, spec homes, custom homes, that kind of thing, pivoted into storage in 2006, and then went traveling as we talked about… And once we came back here and started renovating houses, I said “The only thing we’ve really done in the past 10 years or so that’s worked is storage. Maybe we should look at storage again.”

Slocomb Reed: Nice. How does the development and construction of single-family homes compare to these self-storage conversions? How many of the skills are translatable from residential development to self-storage conversion? Do you have a feeling that one of them is just easier than the other?

Erik Hemingway: Well, that’s a tricky one. The construction is a lot of work in general, especially now with prices and subcontractors and all the rest of it, so neither one of them are easy. The residential stuff – it’s just a lot of details, a lot of meeting subs, meeting customers, just going through the whole process. Then you sell the home if it’s a spec, then you go look for a lot, and you start all over again, and it’s just a treadmill. With the storage, what we liked about it, of course, is we’re building a cash flow base – yes, if you put it into work, and maybe a residential home takes five months and storage takes eight months or whatever… It’s more work obviously on the front end, but then it’s not sold and you got to do it again, and again, and again. Now it’s cash-flowing for the long term and that was like, “Okay, this makes way more sense.” So we kind of hung up the residential side of things, not looking to do… Possibly multifamily development down the road, maybe, but no more single-family site build kind of stuff for us.

Slocomb Reed: Yeah, totally. And there’s also a mindset shift there. Most developers are not thinking like investors and they’re not thinking about building a portfolio for residual income the way you do when you’re building a portfolio of cash-flowing self-storage. It’s definitely a mindset shift that’s going to lead to greater profitability over time and make your efforts and renovating more valuable over time as well. An 18% IRR is going to be enticing to a lot of people. There are a lot of moving parts in what you’re doing that increase the barrier to entry for a lot of investors and a lot of operators. That’s exciting. I come from the apartment space, and one of the reasons I think that you’re able to project the returns that you’re projecting is because there are so many fewer operators who are capable of doing the kinds of deals that you’re doing. When you are offering on these Kmart’s, I keep coming back to that example, but you have multiple Kmart’s now, right, Erik?

Erik Hemingway: Just two. [laughs]

Slocomb Reed: Just two. I would like to have two Kmart’s, too. Erik, when you’re offering on these deals, do you sense that there is a lot of competition?

Erik Hemingway: No, not at all. The one we closed in December, I think was for sale for two years and it had been vacant for five. So Kmart moved out five years ago, the seller wanted to get rid of it, and it’s just in a place where “Who’s going to buy an 87,000 square foot building?”

Slocomb Reed: That’s you.

Erik Hemingway: Right. Retail’s bleak for that kind of size. I don’t even know. There’s just not a lot of those tenants right now, so that was a great opportunity for us for sure. And that led to the next one; I talked to a broker who knew we did the one Kmart, and then he said, “I know some guys that are selling a Kmart in Virginia. Would you consider that?” We said, “Yeah, we’ll certainly look at it.” So there you go, the rest is history.

Slocomb Reed: I don’t know anyone who would have wanted to be known as the Kmart guy 10 years ago, but it’s probably lucrative now.

Erik Hemingway: Yeah. We think so. It looks like it’s going to work.

Slocomb Reed: Last question on these conversion deals. What kind of debt is available to you on these? What kind of financing are you getting?

Erik Hemingway: Good point. So we’re using a community bank local to North Carolina. We feel like we got a strong term on this one. A 25-year amortization, 3.75 APR, seven-year term, and 80% loan to cost.

Slocomb Reed: Loan to cost, got you. That’s 80% of your all-in, around 35, 36.

Erik Hemingway: Yeah. 3.5 is our all-in. I’m sorry, it’s close to… What did we say earlier? 3.5, 3.6 million.

Slocomb Reed: 3.5, 3.6. That’s my error; sorry about that, Erik. So you’re able to borrow even though more than half of your total cost is the construction component. You’re still getting 80% debt on loan to cost. That’s exciting.

Erik Hemingway: Yeah. It’s a relationship we’ve had, we’ve done other projects together, so that helps. But the appraisal came in at 5.1 when complete. As soon as we get everything built out, we’re off to the races, and stabilize goes up from there.

Slocomb Reed: Awesome. Are you ready for the Best Ever lightning round, Erik?

Erik Hemingway: Hit me. Hit me with it.

Slocomb Reed: Great. Erik, what is your Best Ever way to give back?

Erik Hemingway: My wife started a nonprofit theater group. We’ve got a lot of kids, we got six kids. A lot of my kids are into theater, great singers, and stuff so my wife started a theater group called Acting Up. It’s a community theater that teaches 50 kids twice a week, something I can’t even comprehend. So we work together on that.

Slocomb Reed: Nice. What is the Best Ever book you recently read?

Erik Hemingway: I’m almost done with Traction, Gino Wickman. We’re at the stage where we’re starting the syndication side and it’s time to build the structure of how to do this the right way. That book came from a lot of recommendations and I am making my way through it. It’s as good as advertised.

Slocomb Reed: I’m working on implementing Traction in my management company as well.

Erik Hemingway: Oh, good.

Slocomb Reed: What’s the most money you’ve ever lost on a deal, Erik?

Erik Hemingway: I was thinking about that, I saw the question… A recent one was we are dabbling in the hospitality space and we had a property under contract that we thought we had financing lined up for. They let $30,000 go hard and the lender changed the name of the tune on us after that, so we ended up walking away from that, so that was a little painful. We didn’t actually see a term sheet, but had a verbal “This looks good,” and that was a tough decision.

Slocomb Reed: With 30,000 going hard, how big was the deal? What’s the purchase price?

Erik Hemingway: Just around three million.

Slocomb Reed: Gotcha, so like 1%. What’s the most money you’ve made on a deal?

Erik Hemingway: We don’t sell a lot. We typically buy and hold, so we haven’t really exited out of stuff. We’ve done great on some spec houses.

Slocomb Reed: What’s the largest appreciation or forced appreciation you’ve seen on one of your holds?

Erik Hemingway: Well, we just finished another hospitality project at Kure Beach. We bought a boutique motel, nine rooms, and put in about a million, so we’re going to be able to do cost segregation and bonus depreciate that this year. That’ll be a big help.

Slocomb Reed: Nice. What is it worth now that you’re done?

Erik Hemingway: On a cap rate, it’s probably close to five million.

Slocomb Reed: Oh, wow.

Erik Hemingway: We’re all-in for just over two.

Slocomb Reed: Erik, what is your Best Ever advice?

Erik Hemingway: I was talking to somebody about this the other day… So I think for us, we make risky moves, or what seem like risky moves… People are like, “Well, that’s just way out of my scope.” In my logic and what my son and I talked about is risk is a muscle that needs to be used, and I think every step you take leads to the next thing. We would have never dreamed about doing the deals we’re doing now, even five years ago, forget 10 years ago when we were on a sailboat. But each little step kind of gets you ready for the next step, so we’re just super excited to see where this goes from here. We feel like there’s a lot of great opportunity left and we’re just enjoying the ride.

Slocomb Reed: Absolutely. Erik, where can people get in touch with you?

Erik Hemingway: The best way is through our website, nomadcapital.us, or they can reach out through email at erik@nomadcapital.us. My son and I are starting a podcast very soon called The Real Estate Nomads, so you can find us there. We want to try to help people achieve a nomadic lifestyle, whatever that means for them. Work how they want and where they want. We’re obviously big travelers, and real estate seems to be the best way to do it.

Slocomb Reed: Awesome. Well, Best Ever listeners, thank you for tuning in. If you enjoyed today’s episode, please do follow and subscribe to the show, leave us a five-star review, and share this with someone who could benefit from what Erik has shared with us about self-storage conversion deals. Thank you and have a Best Ever day.

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JF1834: From The Corporate World To Mobile Home Parks with Ryan Narus

Ryan had a job in the banking world, didn’t like it, looked for a way out, found his way out with real estate investing. We’ll hear how he was able to take the leap to being a full time investor, and how he closed his first deal. We’ll also hear how he has scaled his business to owning over 500 mobile home pads. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“We are obsessed with getting people on the phone” – Ryan Narus

 

Ryan Narus 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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Ryan Narus. How are you doing, Ryan?

Ryan Narus: Great, I’m honored to be here. Thanks for having me.

Joe Fairless: Well, I’m glad that you’re on the show, and looking forward to our conversation. A little bit about Ryan – he is a real estate investor and has been one for the past four years. He’s closed on 20 million dollars in mobile home parks. Currently owns eight parks and about 535 pads. Based in Charlotte, North Carolina. With that being said, Ryan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Ryan Narus: Absolutely. So I woke up one day with a corporate job, and realized I hated it, and realized I needed to find an escape because I was stuck. And I refused to take what the world gave me, so I picked up books, I read everything I could, I picked up the phone, I called anyone I could… I looked at about 100 or more different possible business to buy, because I realized I needed to be an owner. And it was Rich Dad, Poor Dad and 4-Hour Workweek…

Joe Fairless: What was your job?

Ryan Narus: I started off as a car salesman, because I graduated in ’09, which was the worst year ever to graduate, other than the great depression, for jobs. I was sold this idea of “Hey, go to college. You’ll get a good job, you work at a good company for a long, long time…” That might have been true for my parents, but that’s definitely not true for us millennials today… So I just refused to take what the world gave me, and I went out and I just for years met people, learned, tried to figure out who I was and what I wanted to be, and eventually I buddied up with a childhood friend,  Ian Tudor, and he turned me on to mobile home parks, and I said “Hey man, if it’s anything like the show Trailer Park Boys on Netflix, sign me up, because that show is hilarious.” And I found that it matched my skillset extraordinarily well.

Flash-forward – no money, no experience, no network, four years later I found my way into over eight deals, because we’ve sold out of a few… I hope that your listener base  hears my story and goes “You know what – why am I making excuses? If this guy can do it, I can do it.”

Joe Fairless: Well, let’s dig in there… So I had asked “What was your corporate job?” and you said you started out as a car salesman, but what was that last job that you were hating? That’s what I was wondering.

Ryan Narus: Banking.

Joe Fairless: Banking. So what were you doing exactly?

Ryan Narus: I was in THE leadership program… [laughs] Which turned out to just be a lot of hype and not a lot of substance, and it was probably everything that you would guess. “Hey, come on in. You’ve got an MBA… This is  a big bank. We want you to be a future leader”, and then you get there and you’re ignored, and you find you’re doing copying and pasting more than actually providing a ton of value; and then you go and you do something no one else has done, and provide a bunch of value, and you get a pat on the back and that’s it. And then it’s “What have you done for me lately?”

I’ll put it to you this way – a friend of mine, my best friend just started a business, and he was a former banker as well. We were having lunch the other day and I told him “At your bank, in the next five or ten years, were you in any danger of basically having your job removed and being  able to walk away with a couple million bucks?” Because that’s his exit. He wants to in 5-10 years sell his company for a couple million bucks and ride off into the sunset, maybe start another business, maybe do something else…

And we both were laughing because we were like, there’s literally no way that a bank would ever be like “Oh, you’ve done such a great job scaling this, that and the other thing. Here’s a couple million bucks. Go retire, go do something else that you wanna do.” The United States of America is about the ability to go and start your own business and chase wealth, and I’m just so glad I did that.

Joe Fairless: When you were in banking, noted on being in the leadership program, but that isn’t what it was cracked up to be, or at least positioned to you… But what were you doing? You weren’t a teller, it doesn’t sound like. What was your role within banking?

Ryan Narus: I was in operations. Anytime something like a credit default swap trades, I was the guy behind the scenes, making sure the trade is made properly.

Joe Fairless: Got it. Sounds riveting.

Ryan Narus: [laughs] That’s why I’m gently trying to steer the conversation away from —

Joe Fairless: No, I get it, I get it, but it’s important to know where you came from and what types of skillsets you were using then, and what you’re using now. Okay, so that was four years ago… So I’m decent at math, I can subtract; that was around 2015, correct?

Ryan Narus: Correct.

Joe Fairless: Okay, around 2015 you had your corporate job in THE leadership program for a bank, and you were in operations… Then what?

Ryan Narus: I’ll unwind this… [unintelligible [00:07:03].13] wanted to be a salesman. Went and sold cars for four years, loved it, until I didn’t anymore… Because I realized — I sprained my ankle once playing basketball, showed up the next day in crutches, trying to sell cars, because I realized I wasn’t getting paid sitting at home with ice on it.

Joe Fairless: That’s gotta help you sell cars, when you’re out there in crutches…

Ryan Narus: Believe it or not, it got a lot of attention.

Joe Fairless: Of course.

Ryan Narus: I can’t remember… It’d be funny if I sold a car that day, but I don’t think I did. I don’t remember… But I just remember that day; I don’t wanna get a promotion to the finance office, because that sounds miserable. And then the sales desk sounds miserable, and then 20 years goes by, I’m a general manager, and the best advice my general manager had for me was “Go start your own business. You know why?  Because I never see my kids!”

So then I went and got my MBA, because I figured “Alright, maybe my MBA will show me what business I wanna start, and give me that toolkit to go start a business”, and it did, because in 2015 I met back up with Ian Tudor during my internship between my first year and second year of MBA, and then my second half of my MBA I spent starting the mobile home park business, and then I was a year in banking, working on my mobile home park business while working full-time, and then I quit to go full-time in mobile home parks in June of 2017. So as of today, we’re almost two years into it full-time.

Joe Fairless: What was the first deal you did, mobile home park, and what was your role in that deal?

Ryan Narus: Our first deal was an 89-lot park, 1.525 mil acquisition. We wanted to use that as a training wheels deal. So we grabbed that deal and we went out to try to get debt financing, and we reached out to 40 banks, and I am proud, Joe, to tell you that I got 40 no’s. Every single bank rejected me. And here’s the sad part about it – that deal has been an absolute home run in terms of debt  coverage ratios and anything a bank would be looking at… And we still just got nothing but rejections, which… I think it’s important for folks listening in that have never started a business before – you can’t let no stop you. Because eventually what we did is we brought in some investors who were outstanding, and we decided we wanted to be a fly on the wall, and learn.

So our first deal was more about “Okay, how can we monetize this and how can we educate ourselves?” And our second deal was really our first deal, because that was our first deal without training wheels, if that makes sense.

Joe Fairless: You mentioned the person’s name… Who is “we”?

Ryan Narus: Ian Tudor is my business partner, and I have not asked my investors if I have permission to talk about them, so I’d prefer to leave them out.

Joe Fairless: Yeah, I would have never asked for your investors’ names, but your business partner is Ian Tudor – okay. How did you meet Ian?

Ryan Narus: Believe it or not, we grew up in the same neighborhood, and if you asked him, he would say he absolutely hated me growing up. [laughs] But we kept in touch, and we bumped up when I was doing my MBA internship in Miami, and he was in Orlando. We hung out a bunch of times, discovered we’d be great business partners, and four years later talking almost every single day. We’ve grown a business, and were able to quit corporate America, and have done pretty cool things that we probably had no business doing, just because we refused to stop when we were told no.

Joe Fairless: On that first deal, what did he bring to the deal in terms of value, and what did you bring to the deal in terms of value?

Ryan Narus: Sure. Ian is an underwriter, so that’s what his background is in. And he found a new up-and-comer broker, who was weak in underwriting. So what she was doing was funneling him off market deals, so he could help her underwrite, and also teach her. So he provided value to this broker, and she provided value to us. Because what ended up happening there was we got a look at a great deal before it ever went to market. So that’s where he brought the value to that first deal.

Where I brought value to the first deal was my networking, because eventually we ended up finding the right bank, and we ended up finding the right investors… But I don’t think it’s fair to necessarily put that in those buckets, because we were both wearing many hats during that process… But if I was to just say “Boom, this is what Ian did. Boom, this is what I did”, that’s probably — with a little blurry in the lines, that’s probably how I’d put it.

Joe Fairless: Of course. Even after many deals, the lines are still blurred on, and responsibilities.

Ryan Narus: Yes.

Joe Fairless: But that’s helpful to categorize them, at least for this conversation’s purpose. The up-and-coming broker that Ian met – how did he meet her?

Ryan Narus: Straight networking. Ian and I are obsessed with getting people on the phone. It doesn’t matter if you’ve never bought real estate before, or if you own billions of dollars of real estate – we wanna get you on the phone. I’ve gotta say, Joe, that most of the times when I reach out to someone, especially when I started, they were not interested in taking my call… So I’ve gotta say, of the 100 people that both of us reached out to, probably less than half actually took our call, and she was one of them. Probably because she too was just starting out.

Joe Fairless: And do you remember how Ian found her, to initially reach out?

Ryan Narus: Man, that was four years ago… That’s tough. But I will put it to you this way – we hit any avenue we can. We ask people “Hey, do you think there’s anyone that would be cool for you to introduce us to, and vice-versa?” We do LinkedIn, we do Facebook, we look people up online… There’s so many avenues. Any stone that we can unturn, we try to unturn. So that would be a great question for Ian, but those two just hit it off. They’re still buds to this day, really close friends. You’ve just gotta turn up the rocks and see what’s under them.

Joe Fairless: And was there a particular focus on mobile home parks at the time, so that’s the type of people you were connecting with? Or is it just more general?

Ryan Narus: Absolutely. The primary goal at that time – and really still – is anyone who has any interest in mobile home parks, I wanna talk to you. Whether you bought them or not, you own them or you don’t, I would love to get on the phone with you. That was our focus at the time, and we really decided mobile home parks fit our skillsets extraordinarily well; this was going to be it.

We’ve looked at marinas, we’ve looked at RV’s, but we keep coming back to our skillsets are set for mobile home parks, so it’s almost exclusively been mobile home parks.

Joe Fairless: Okay. And how do your skillsets fit mobile home parks?

Ryan Narus: Straight car dealership. When I graduated in 2009, undergrad with a degree in psychology and a big dream of being a salesperson, business-to-business, and no one was hiring… And I went “Alright, well I guess I’ve gotta settle with car sales”, it taught me everything I needed. It was probably the best job I could have ever not realized that I needed to have… Because it was rejection every day you show up.

So it’s learning how to get basically punched in the face, and then when that next customer walks through the door, if you’re not smiling, you may cost yourself a sale, so you have to learn how to pick up your own emotions rather quickly… Because that next person walking through the door – it’s not fair to them that your boss just yelled at you, or you just blew a sale because X, Y or Z, or someone was calling you a scummy car salesman, even though they’ve never met you before. That plus persuasion, overcoming objections, negotiating, organization, learning how to use business analytics, statistics – all of that was perfect for mobile home parks, because it is a lot of learning how to deal with confrontational situations, be it [unintelligible [00:14:44].09]  yourself and your business… Because people don’t just flock to you. You have to put yourself out there to get them to come to you, and have to have word of mouth.

So it’s a lot of sales, it’s a lot of marketing, it’s a lot of organization, it’s a lot of things you would not expect you need if you just listen to the hype stories about mobile home parks, which are “Wow, it’s a great investment. They’re ten-caps everywhere. Buy it from mom and pops, and you set it and forget it.” It’s quite the opposite. And mom and pops in and of itself are a sale; you have to convince them that you are not like everyone else who’s calling them… So I’ve gotta say selling cars was probably one of the best things for me in terms of enjoyment, yet it fits this industry like a glove.

Joe Fairless: How do you differentiate yourself when you’re having those conversations, to position yourself not like everybody else who’s calling them?

Ryan Narus: With the mom and pops? Well, one big thing is I speak Spanish, I’m on my properties, I do not have a fund, I do not have pressure to acquire. I go for the long game. I like to show up at folks’ houses – obviously, if I’m invited – and shake their hand.

Joe Fairless: I have a feeling you’d show up even if you weren’t invited.

Ryan Narus: True story, I have done that before. I showed up at a woman’s house and we ended up watching Wheel of Fortune, and we had such a great conversation. It pulled over into The Price is Right, so we ended up spending a couple hours. And I’ve got a baby boy on the way, and she texts me every now and then and asks me how my wife is doing with the pregnancy, so… Look, you have to be different, and the way that I want to be different and I have been successful being different is I’m doing things no one else wants to do.

Who wants to go and knock on someone’s front door? Who wants to pick up the phone every morning and get yelled at and hung up on? Who wants to do anything other than call someone and say “Will you sell me a property right now? No? Okay.” Hang up.

I constantly am looking to put myself in situations that differentiate myself, and one big thing I’m not afraid of is being embarrassed. If you ask my wife, she hates it. She’s like “You’ll literally walk the dog in dress shoes, dress socks, athletic shorts and a tank, because you just don’t care what people think about you, but I care what people think about you… And it’s weird, dude.”

Joe Fairless: You’re doing mobile homes… Why are you knocking on front doors?

Ryan Narus: No one else is doing it.

Joe Fairless: Whose front door are you knocking on?

Ryan Narus: Sellers. Potential sellers.

Joe Fairless: Sellers. So their residence, where they live, you’re knocking on their front door, or…? Help me understand the situation.

Ryan Narus: Absolutely. I’ll give you a good for-example. There was an elderly woman who we called a bunch of times, had wonderful conversations with, but every now and then she’d just disappear for 30 days… And one time she kind of casually was like “Oh yeah, sure, come on over.” And long story short, she set up a time for us to go over, and we went over and she was in the hospital. We met her whole family, and long story short, we ended up knocking on her door several weeks later when we figured that she was probably back… And yeah, literally we showed up at her residence.

Now, it wasn’t completely cold, out of the blue, “Who are you? Go away. This is trespassing.” This was more of a warm knock on her front door… But we have done that several times. I’ve also done the cold knock on the front door as well. I’ve showed up to mobile home parks and just walked into the office… But all of the above because what’s happening in our industry now is you have wholesalers coming in with Boiler Room types of telemarketers, just trying to find the low hanging fruit. You have tons of brokers and you have tons of folks sending mailers, and the competition has just exploded.

I do anything in my power to be different, because otherwise I’m no different than anybody else who’s calling and sending mailers, and doing all that stuff.

Joe Fairless: Has walking into the office cold resulted in a completed transaction for you?

Ryan Narus: It has not. We are getting very close with one, but I will say that one that we did close here in Gastonia, North Carolina, right outside of Charlotte – it wasn’t knocking on her front door; we showed up at the property with an LOI, and a contract, after months of talking with them. And the reason why we showed up is because the seller said “You know what – we like you guys, we wanna do business with you guys, it sounds like the price is right, but we just wanna wait until January 2019 for tax reasons.” I remember Ian did this, and I’ve gotta give him all the praise in the world for doing this, because he walked me through the objections that the seller threw out, and I said “Show up at the property when we know she’s there and we’re at least somewhat warmly invited.”

Joe Fairless: Yup.

Ryan Narus: So in other words, “Hey, Ms. or Mr. Owner, are you around then?” “Yeah, we’re in our home right now.” “Great, do you mind if I stop by?” “Yeah, sure.” So he shows up with the contract and the LOI, and I told Ian, “This is what we did in car sales, this is what you’re gonna do when you get there. You show up, you give them the pitch…” You say “Hey look, it takes 60-90 days to close, period.” Because it was August. “Why don’t we go ahead and sign this contract, just in case the economy takes a dip. We know the price, the economy takes a dip, this price is locked in; we will do literally everything we have to do with the bank, and the appraisals, and the surveys, and everything, so that way on January 1st, 2019, all you have to do is sign it and it’s done.” And then just sit there and don’t leave. [laughter]

It took over an hour… This is a hysterical story, because he showed up, he walked them through it, same objection, and then he said “Well, why don’t we go through the contract?” and she said “We’ll just leave it here.” He said “Okay.” And he left it there, and he just sat there. Created an awkward silence. Didn’t say anything, which was by design… And that awkward silence unearthed another objection, and then–

Joe Fairless: What was that?

Ryan Narus: It was just that “Well, I’ve gotta go through the  contract.”

Joe Fairless: Which is legit.

Ryan Narus: Legit, right. But it’s also a dodge, too. Because “Oh yeah, leave it here”, and then you leave, and then they got you out of there. So then it was “Great, I’ll wait right here while you go through it.” Well, I’ve gotta finish this sub-floor job.” “Okay, I will wait in my car then.” Then he went out and waited in his car.

Joe Fairless: I’m surprised he didn’t offer to help with the sub-floor job.

Ryan Narus: I hate to say it, but neither of us are very good handy folks, so…

Joe Fairless: Still… He could do something. Move some materials around, or play some Spotify, play their favorite playlist, at least from your phone, while they work…

Ryan Narus: That’s actually a great idea. I might try to offer that. Like “Hey, you’re doing some tiling work. You definitely need an extra hand here. Let me help out.” But here’s my favorite part of the story – he went out and he sat in his 2006 Honda CRV, with very limited, questionable air conditioning, in the hot North Carolina sun, in the middle of August… And waited for her to walk back out, which she did. And then he sat in his car, with the window rolled down, for what he described to be forever, and they went through every single line of that contract, and he left with a signed contract that day.

So when I say my skillset — and our skillset really, Ian’s too, because he doesn’t have sales experience, but he is a natural salesperson… It fits like a glove, and that’s just the only way you can compete when it is a hot market right now. Because it is a seller’s market right now.

Joe Fairless: Thinking about one other mobile home park that you’ve closed on, what’s one other way that you found the deal?

Ryan Narus: Networking has been phenomenal. I’ll give you a good for-example. If an outfit is selling their way up; in other words, they maybe built a giant portfolio on two and three-star, and now they’re selling while the market is good up to four-star properties, a lot of times you can snag something off market, because someone knows you can perform… Eight mobile home parks, 20 million dollars, plus you’ve heard of me, and we’ve talked several times, and maybe we’ve had a beer, maybe we’ve had a lunch, maybe we joke about the NBA together… I’ve had several looks at several properties, a lot of which I’ve passed on, but several which we’ve closed, from bigger name folks, who were like “Look, I don’t wanna put this to market, because I don’t wanna see a bunch of knuckleheads who’ve never bought stuff before. I’d rather just sell it at a fair price, get it off my books. This is less than 10% of my company’s overall revenue, it’s a liability to me at this stage. You guys are growing, you’re comfortable with two and three-star assets – here’s a fair price.” Boom. That’s one way to do it.

Then another off market way — obviously, networking is huge, and then also I know a ton of folks through my podcast who anytime I see a deal, I pitch it off to them, and I’m happy to do that, so… Literally not even an hour ago a broker brought me a deal off market, that I had already looked at, and I immediately connected her with someone else. So there’s plenty of folks within my network  who have reached out to me, who I am happy to pitch something off to you. So networking is huge.

If you’re listening in right now, reach out to me, reach out to folks like Joe, because you never know. If you’re like “Hey, I’m looking for something in Greensboro, North Carolina, about this many units”, if you’re in the back of our minds and we have good deal flow, we see a lot of deals, we’ll think of you. And if you’re like me and you like helping other people out, you get something off market from a broker; you make a cold call and the deal doesn’t make sense for you – we’ll call you. And that comes right back to me, I’ve done several deals just like that.

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

Ryan Narus: Bet big on yourself. I don’t know if you’ve ever watched the Austin Powers series – they’re totally silly movies, with Mike Myers in it, but there’s–

Joe Fairless: I’m not a fan, but I know it.

Ryan Narus: [laughs]

Joe Fairless: I hate those movies, but go ahead… [laughs]

Ryan Narus: I don’t blame you… There is one line which I was sitting down with a single-family home flipper, just as “Here, let me help you out, man” kind of thing, because I don’t do single-family home flips… But it was one of the best meetings I have ever had, with a newbie home flipper, not interested in mobile home parks, I’m not interested in his – we sat down and he hit me with a line from Austin Power, from the fat, bad guy who says “I’m unhappy because I eat, and I eat because I am unhappy.” And he hit me with the real estate equivalent of that line, which is “I can’t go full-time, because I don’t have deals, and I don’t have deals because I’m not full-time.”

And when I pressed him on that, I said “What’s stopping you from quitting your job, going and living in one of your flips to cut expenses…? What is the one thing holding you back right now from increasing your deal flow?” And he’s like “Man, if I could just go full-time…” and I was like “Can you get a job, in 12 months?” If you just said “In 12 months, if I can’t make my business happen by giving it full-time effort…” and he looked so uncomfortable, Joe; he was so uncomfortable, but he was like “You know what, you’re right.” And I’m proud to say that he’s not gonna just quit his job tomorrow; he’s gonna take the next 3-6 months to plan for it, but he is gonna do it. He’s gonna bet big on himself. Obviously, plan because he’s got kids etc, but it’s gonna take some prep, because it took me a lot of prep too, to go full-time; even without kids it took me a lot of time to prep.

So don’t just blindly jump into it. But here’s the thing – if the one thing stopping you is deal flow, and you are confident you can get that deal flow if you devoted your full-time to it, what are you gonna say when you’re 80 years old, looking back on this, when you’re in your early thirties or twenties, or even in your forties or fifties? What are you gonna say? Are you gonna say “Boy, I’m glad I stuck with the job that I hated?” or are you gonna say “When I was a young lad, I had the courage to bet big on myself. And if it fails, even though it failed, I learned so much and I’m glad I took a chance on myself.”

Because if that’s the worst you’re gonna say when you’re 80… The flip of that is “Boy, I quit corporate America, I literally work from my couch now, and I get to do what I want, when I want, and I live my career dream.” If that’s the upside there, why wouldn’t you bet big on yourself? So that’s probably bar none my best advice to anyone looking to break into the industry.

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

Ryan Narus: Let’s do it!

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

Break: [00:27:25].14] to [00:28:14].22]

Joe Fairless: Okay, real quick – best ever book you’ve recently read?

Ryan Narus: Oh man, that is just so tough, because there’s so many I wanna talk about… Probably Chris Voss, and I’m gonna forget the name of–

Joe Fairless: Never Split the Difference.

Ryan Narus: Never Split the Difference, bar none best negotiation book I’ve ever read.

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

Ryan Narus: Not checking the water bills.

Joe Fairless: Best ever deal you’ve done? Which one?

Ryan Narus: Probably a countryside mobile home park, because it was a huge win for the residents, huge win for us, huge win for the investors. Everybody won.

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

Ryan Narus: My time. Call me, email me. It doesn’t matter what type of real estate you’re getting in, I want to help you and I want to talk to you.

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

Ryan Narus: Ryan Narus, just literally google me, shoot me a line. All my contact information is there, my podcast is there, all  my YouTube videos are there. I have nothing to sell, I have everything to give, give, give.

Joe Fairless: Ryan, I enjoyed our conversation thoroughly. I love your never-quit, very resourceful, gonna-make-things-happen approach, a do-whatever-it-takes type of attitude, and I loved hearing the story about Ian and the sale that took place in August, when perhaps it for most people would have taken place in January or not at all taken place without that perseverance.

Thank you 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.

Ryan Narus: I loved it, Joe. Thank you so much for having me.

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JF1803: Selling $40 Million In Real Estate Before 25 Years Old with Chris Salerno

Chris got his real estate start as a real estate agent, he gained traction quickly and led his team to being the #1 team for residential sales in the Carolinas. Theo will ask about how he was able to do that, and then they’ll talk about his newest venture into multifamily real estate. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“For people trying to get into multifamily syndication, give people details on what you’re doing” – Chris Salerno

 

Chris Salerno Real Estate Background:

  • By 25 years he sold more than $40M in real estate volume and helped lead the #1 real estate team in the Carolinas
  • Named to Charlotte’s 30 under 30
  • Leads QC Capital as a well respected, high-return investment firm
  • Based in Charlotte, NC
  • Say hi to him at https://qccapitalgroup.com/
  • Best Ever Book: Best Ever Apartment Syndication Book

 


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TRANSCRIPTION

Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I am your host today, Theo Hicks, and today we are speaking with Chris Salerno. Chris, how are you doing today?

Chris Salerno: Hello! I am doing phenomenal. How are you, Theo?

Theo Hicks: I am doing fantastic, I’m looking forward to our conversation. I actually know Chris, so it’s our first time actually meeting virtually face-to-face. I’m looking forward to learning a little bit more about you and your business.

Chris’ background – by 25 years old he had sold more than 40 million dollars in real estate volume, and helped lead the #1 real estate team in the Carolinas. He was named to Charlotte’s 30 under 30. He leads QC Capital, which is a  well-respected, high-return investment firm. He’s based out of Charlotte, Carolina, and you can say hi to him at QCCapitalGroup.com.

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

Chris Salerno: Yeah, definitely. Thank you, Theo, for the introduction. Best Ever listeners, I’m excited to be on here… I started listening to the podcast about two years ago to gain my knowledge and education throughout the real estate industry.

I’ve been living in Charlotte, North Carolina for 13 years, and this is where my family is. Within those 13 years I focused heavily on real estate, and I got into the residential side of selling real estate here locally, and very quickly gained a success track record.

From that success track record in residential real estate I landed myself in the position of leading the number one team here in the Carolinas for residential real estate, and made  them 46% profitable in one year, compared to their three years of just being stagnant.

With the education of learning that, I just fell in love with multifamily, especially value-added, B and C class assets… Because I feel when acquiring those type of assets – they’re basically a failing business, or they’re not extremely profitable as they could be… So I find it very exciting to go in there and make them extremely profitable for our investors. So that’s how I got into the multifamily industry,  and I love it ever since.

Theo Hicks: That’s an interesting way to look at it, that you’re basically taking over failing businesses and turning them. [unintelligible [00:04:16].01] TV shows where they go into failing businesses and flipping them around. I can’t remember what it’s called, but I’ve got the picture of the guy’s face…

Chris Salerno: Yeah.

Theo Hicks: So before we dive into the multifamily, let’s talk about your time as an agent, leading a team. What were some challenges that you faced? Obviously, you were a young guy, you came into this industry… Obviously, you were very successful at it, but being a manager is tough.

Chris Salerno: Very much so.

Theo Hicks: Anyone who wants to grow a massive business at some point is gonna bring on team members. Maybe talk a little bit about some challenges, maybe talk a little bit about some tricks you learned, about hiring people, and anything surrounding being a manager and building a team.

Chris Salerno: Great question. My big thing was I enjoy studying businesses, and not just successful businesses, but failing businesses too, because you can learn a lot from studying a failing business.

Before I even got into that role, I just would study different types of businesses, like Sears for example. I studied Toys R Us. I just studied them and why they failed and why they didn’t succeed. So when I went into that role, I found a lot of holes… We call it the T-12, but I’m still used to calling it the P&L. I found a lot of holes in the P&L that needed to be filled to make sure we are tracking the leads better, to make sure that the money that is being spent on advertisement and marketing is being spent properly, and we’re not just dumping money anywhere.

So I really honed in on the P&L and the structure of that to get a good grasp of it, to make sure that we are cutting down our expenses and then making sure that the agents who are on the team, their sales role — every agent that joined the team I trained in selling; sell themselves, and how to sell a product.

So I’d made sure that they were selling themselves at a very high level, to make sure that the homes would sell. That was definitely a big difference, that I had a role into making sure each agent was trained properly and selling at a very high level, and then also overlooking to make sure expenses were lower.

Theo Hicks: When you did this deep-dive in the P&L, were you at this point already the manager, or is this something you did when you were just an agent, and then by doing this they’re were like “Geez, this guy is legit”, and then because of that you became a manager?

Chris Salerno: Yes, this was just me as an agent. I would go in there and all the other agents didn’t care about running a business or operating a business, but my long-term goal was owning a billion-dollar business and running it… So I would always walk into the boss’ office and ask him “Hey, can I see your P&L?” At first he was extremely hesitant, but then he just felt that I just wanted to gain the education that comes behind studying a P&L and understanding how money flows in a big business, that is an over 100 million dollar revenue business.

Theo Hicks: That’s what I thought. But that’s definitely a great way to get educated, but also to position yourself as a leader, and someone who’s serious about the business. A lot of people – your typical W-2 job; you kind of go in there, you do what you’re told, and that’s it… Whereas you went above and beyond, you looked at the business and you wanted to actually improve the overall business, for the business itself, but also for yourself, to learn and to grow as well. I think that’s awesome.

So because of that – you think that’s one of the reasons why you were eventually able to lead… Was it this same team, or was it a different team that you led?

Chris Salerno: No, that was the same team that I led. I was their top sales person leading that team and training each agent that joined the team. So that was the team that I led, and then going in, making that transition to multifamily – I then cut selling residential real estate off in full, so I do not sell residential real estate, and I’m full-time into multifamily syndication.

Theo Hicks: Was it your plan to start off by selling residential, and then transition into multifamily, the entire time?

Chris Salerno: It was my plan to make that slow transition, but a big thing that I preach to a lot is that when my back is against the wall, I end up doing things that I would normally not do, to gain business or to gain the knowledge. And I think that’s all of us as humans – when our back’s up against the wall, we would end up doing something that we’re normally not comfortable in doing. So when I figured that out, I spoke with my coach and I told my coach “Hey, in six months I’m done selling real estate.” Then I called him in a month and I said “I’m done selling real estate.”

I made that transition right away, and I took that risk. It is a big risk, jumping straight into it… But I will not fail, and that’s the only thing I have going – I will make sure I succeed in it.

Theo Hicks: What was — not necessarily the biggest challenge making that jump, but after you made that jump, what was the biggest challenge you faced to complete that first deal? What was the hardest part about completing that first deal?

Chris Salerno: Really gaining the knowledge. I think I’m always gaining knowledge, and I will always be gaining knowledge, and especially in this business. That’s one reason why I love it – it’s always different, it’s always transforming. It’s not the same thing over and over.

When I first made that transition into multifamily syndication, like I did when I first got into that company’s role by giving up my own time to gain the knowledge – I did that in the syndication world here; I met with Dan Hanford, who only lives an hour and a half away from me, and I told him “If you come to Charlotte, anything you do in Charlotte, let me know. I wanna shadow you, I wanna gain as much knowledge as possible.”

They acquired a property out in Greenville, South Carolina, and I drove out there 2-3 times a week when I first got into the multifamily syndication business – it’s about two hours from Charlotte, North Carolina – just to shadow Brandon Abbott, Danny Randazzo and Dan Hanford, to just soak up as much knowledge as possible to help myself close that first deal.

Theo Hicks: So that deal that Dan Hanford did – is that your first deal, or is this what you did before you did your first deal?

Chris Salerno: That’s what I did before I did my first deal. It actually closes tomorrow.

Theo Hicks: Oh, congratulations.

Chris Salerno: Thank you, I appreciate it.

Theo Hicks: You’re basically there. So how long were you doing this gaining knowledge period? How long were you shadowing other successful investors before you started the process of starting your own syndication business?

Chris Salerno: Great question. It was about two to two-and-a-half months. But I’ll never stop that. Any chance I get to just learn from someone where I want to be and where I want the company to be – I’ll always shadow them, I’ll always ask questions, just to gain the knowledge… Because to me, that better helps the investors that invest in our deals.

Theo Hicks: Let’s talk about this first deal… So you gained that knowledge from the other successful syndicators; what were the steps you took from “Okay, I’ve got the knowledge, I’m ready to go” to “Alright, I got this first deal under contract”? What is some of the upfront work that people who want to do what you are doing need to do before they actually sign on the dotted line and put their first deal under contract?

Chris Salerno: Great question. It’s very nerve-wracking, too. I started the same way Joe Fairless started; I actually started with no money down. I have a very strong client that I have with QC Capital, who trusts me very much, that actually lent me 220k to put down as hard money for this particular property.

So once I found that I had someone who trusted me and trusted my business and my real estate education here in the Charlotte area, once I had that, then I had that footstep to go ahead and put that down for a non-refundable deposit on this particular property.

Once I finished with the PSA and all the negotiations in regards to that – and I definitely feel from my residential background side it’s definitely helped me with the negotiation and understanding the contracts to a point here… That right there has definitely helped in making that transition to getting my first deal under contract.

Theo Hicks: Alright. How did you meet this person? Was it one of your clients you met through residential selling?

Chris Salerno: Great question. He’s one of my clients for residential selling. A very high net worth individual here in Charlotte, North Carolina, with a big public company, and it took me eight months — I was all about cold calling when I sold residential real estate, and scripting. I taught people around the United States and I coached people around the United States in selling real estate, so it took me eight months to get him on the phone. But I finally got him on the phone, and when I did get him on the phone, he bought four houses from me.

Then when I was making that transition into multifamily, he called me up and he said “Chris, I wanna buy some more single-family or condo rentals.” I said “Well, let’s sit down and talk a little bit.” He always does a business deal over brewery here in Charlotte, so we went to a brewery… And I spoke to him, I said “This is what I’m doing now in multifamily. Your returns are higher, you have higher tax benefits, and you don’t have to manage the property, you don’t have to worry about the tenants.”

Once I showed him the returns on some of these deals, he invested in myself, and I raised capital for another deal… Once he saw that, then he said “Okay, this is where I want to park my money, for the tax benefits and for the returns.” So that’s when he trusted me to move forward with this particular deal. It was a very risky point, but we are closing tomorrow, so everything turns out good for it.

Theo Hicks: Is he investing in the deal as a passive investor, too?

Chris Salerno: Yeah, so he’s investing as a passive investor as well, and he’s also investing in other deals throughout the Carolinas, passively-investing.

Theo Hicks: What about your other investors? You mentioned that when you were presenting this particular business to this client, you mentioned that “Here are the returns I’ve gotten on some of the other deals I raised capital for…” So obviously, you have experience raising capital. What are some tips you have on how you were able to raise all that money without having necessarily done a deal before?

Chris Salerno: Yeah, it’s very difficult. I think the biggest thing is really network. If you see me on social media – I’m very active on social media in all the real estate groups that are on social media that I’m in. I’m extremely active on social media, and I try to stay in front of everybody, especially my network that I have. I’m always reaching out to them.

And I think a big thing for people who are trying to get into the multifamily syndication is not necessarily sell yourself or sell the deal, just give them the education on what you’re doing. Once they figure that out… And because this was my first deal, some did not want to invest, and they just said “We wanna see how you do your first one”, which is totally understandable… And I’m still staying in contact with them and keeping them updated through this process, just like if they would passive invest, so they feel comfortable with me.

So I’d say the big thing is just making sure you’re staying in contact, staying in front of them, and just giving them the education of the returns on multifamily real estate, not necessarily selling them on a deal.

Theo Hicks: What percentage of the total capital you’ve raised so far has come from your residential real estate network?

Chris Salerno: The percentage of the total capital came from (I would say) right now around 15% to 20%, and it’s growing. I had a couple of phone calls yesterday with some high net worth individuals here in Charlotte who actually found me on social media and we’re having lunch next week, in regards to me just being out there in front of people. But from my network I’d say about 15%-20% for this particular deal.

Theo Hicks: And the rest – where is that coming from?

Chris Salerno: The rest is coming from me networking. And with my KP and my sponsors as well, who are on the deal. I feel that with your first syndication — or I would say all the syndications, it’s always good to have multiple people on the KP and on the sponsor, because you’re having multiple people see the issue. If an issue arises or if anything comes up, you have multiple people seeing it, so it’s very helpful to have multiple people in that position.

Theo Hicks: Alright, Chris, besides all of the fantastic advice you’ve provided thus far, what is your best real estate investing advice ever?

Chris Salerno: Best real estate investing advice ever… I would say find someone that is at your goal or where you want to be in the future, and find a way to get with them and just soak up as much knowledge as possible. I’m willing to fly on a plane to meet with my coach, and just sit in the same room with him and soak up as much knowledge as possible.

So I would say find someone who’s where you wanna be and has already hit your goal or has the same goals as you with business, and just soak up as much knowledge as possible.

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

Chris Salerno: I am.

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

Break: [00:16:47].01] to [00:17:27].27]

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

Chris Salerno: I would say Joe Fairless’ book. I’m actually currently reading that right now, and that is just phenomenal. I’m gaining the education from it.

Theo Hicks: That’s the Best Ever Apartment Syndication Book. You can find that on Amazon, or BestEverBook.com.

If your business collapsed today, what would you do next?

Chris Salerno: I’m a big believer in never giving up, and focusing on your one thing. I would rebuild the business. I would rebuild it.

Theo Hicks: Besides your first deal or your last deal – and this could be syndication-related, or any properties you sold through your residential selling career – what is the best ever deal you’ve done?

Chris Salerno: Best ever deal I’ve done was actually a single-family rental. I bought it off market for 55k; I found a tenant to pay $1,100. I had to put 20% down; I got a conventional loan, and in six months I refinanced that deal. I got my 20% back, plus an additional 5% back, and it’s still renting for $1,100 and it’s cash-flowing around $550.

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

Chris Salerno: Worst deal I’ve done – I would have to say going from a flip, dealing with contractors and finding good work, and trusting contractors to say they’re gonna get the job done. So I’ve learned not to trust contractors saying that they’re gonna get the job done, and oversee their work.

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

Chris Salerno: Best ever place to reach me is at QCCapitalGroup.com, or Christ@QCCapitalGroup.com.

Theo Hicks: Alright, Chris, I really appreciate you coming on the show today. It was nice finally officially meeting you virtually. Lots of solid advice. Just to quickly summarize some of the main takeaways – I really like your perspective about looking at these B, C multifamily assets as failing businesses, that you go ahead and essentially turn around and make profitable, or more profitable again. I really like that.

You also talked about your experience as a residential agent, and how you’d go in there, go to your boss  and say “Let me see the P&L and the T-12”, and you’d take a look at that and you’d essentially figure out ways to increase the bottom line. And because of this, you were the leader of that team.

We talked about your transition to multifamily and how this was kind of your plan all along. You started off as an agent and eventually transitioned into multifamily, and how your plan was to quit after six months and you were able to do that after one month, which is always great to hear… And you mentioned what you did is you essentially found the people who were doing what you wanted to do and just met with them and shadowed them. It wasn’t just a virtual meeting or a back-and-forth; you literally went out there to a specific deal they were doing, multiple times a week, multiple hours’ worth of driving, and just watched and observed and asked questions to the syndicator. You mentioned Dan Hanford, Danny Randazzo, Brandon Abbott… You did this for about two and two-and-a-half months. Obviously, you’re continuing to do this, but once you did that, you made the transition into your own deal, which you’re closing on tomorrow; once this goes live, you’ll be well into that business plan.

You mentioned that, like all new things, it’s pretty nerve-wracking, and you were actually able to start with no money out of your own pocket. We talked about the client you had met through your residential agent career, and how because of your credibility and trust with that person, they actually lent you the non-refundable down payment for that property, which I’m sure was very helpful in securing that deal.

Chris Salerno: Very much so.

Theo Hicks: And then we talked about raising capital for your first deal, and it basically comes down to networking. Sometimes I really liked that you said is you’re not selling yourself, you’re not selling the deal, you’re just educating them on what you’ve got going on.

Something else that I think — I’d never heard this before, because most of the time when people raise money for deals, they send the deal out to their main database, and then whoever says they wanna invest, they make a new email and they’re only giving those people updates… Whereas you will also include people who said “Well, we wanna invest, but we wanna see how you do on your first deal.” So keeping them updated on what’s going on that deal I’m sure probably elicits that fear of missing out response.

Chris Salerno: Yeah, that too. It does tap into that. So then once we close, they’re like “Oh, I wish I got into it.”

Theo Hicks: Exactly. And then your best ever advice, which obviously you live, is find someone who is either at your goal, or is doing what you wanna do, and then find a way to meet with them and soak up as much knowledge as possible, even if that involves getting on a plane and meeting them in person.

Again, Chris, I really appreciate it. Great advice. Thanks for joining us today. Best Ever listeners, thanks for listening. Have a best ever day, and we’ll talk to you soon.

Chris Salerno: Thank you.

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JF1693: Leverage Your Skills To Find Partners & Close More Deals with Jerome Myers

Jerome has worked on other peoples’ deals, as well as his own. He and Joe will talk specifics on a 23 unit heavy value add deal that Jerome is still working on. What problems has he ran into, how did he find the deal, and how does he plan on going from no tenants to fully leased? Listen in now to find out. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“I’ve watched people buy bad deals just because they wanted to get a deal” – Jerome Myers

 

Jerome Myers Real Estate Background:

  • Serves as an executive coach, real estate investor, and business strategy consultant at The Myers Development Group
  • Asset manager for over 75 units and 75,000 square feet of workforce housing across Virginia and North Carolina
  • Hosts the Dreamcatcher podcast
  • Based in Greensboro, NC
  • Say hi to him at http://d3v3loping.com/
  • Best Ever Book: Millionaire Success Habits

 


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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, Jerome Myers. How are you doing, Jerome?

Jerome Myers: Great, Joe. Thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Jerome – he serves as an executive coach, real estate investor and business strategy consultant at The Myers Development Group. He’s an asset manager for over 75 units and 75,000 square feet of workforce housing across Virginia and North Carolina, and he’s the host of a podcast; it’s called The Dreamcatcher Podcast. He’s based in Greensboro, North Carolina. My mom and stepdad used to live Wilkesboro, NC, so I’ve been to Greensboro many times. With that being said, Jerome, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jerome Myers: Sure. My formal training is in engineering; I’m a civil engineer, licensed in North Carolina, Virginia, New York and Texas. I got an MBA, and in my last corporate America job I built a 20-million-dollar division in a construction company.

Today we’re focused on small multifamilies, really buying things that are between 20 and 50, but looking to scale that up to 75 to 150 over the next couple of years. Our ambition is to hold 1,000 doors by 2028.

Joe Fairless: Great. You’re an asset manager currently for 75 units, correct?

Jerome Myers: Yes.

Joe Fairless: Okay. Is that your own company, or are you employed by another company?

Jerome Myers: No, that’s my company. We’ve partnered with some old friends.

Joe Fairless: So those are your deals?

Jerome Myers: Yes. We’ve been the lead on two of them, and then we’ve put together the strategy on another one, but it was another person’s contract.

Joe Fairless: Okay. So you’re the general partner on some, and then you’re brought in as an asset manager for others?

Jerome Myers: For one we were hired in/brought in as a partner. So we’re a partner in every deal, we buy in every deal. The first deal that we got in, we didn’t have multifamily experience, so we had to partner with others that did… So we came in as kind of a strategy partner, we also brought some cash to the deal, and then from there we were able to take that experience and roll it into our own deals. We’ve been really focusing on Greensboro, NC since that point.

Joe Fairless: Oh, great. Let’s talk about that first deal, and then we’ll go from there. Tell us about the first deal.

Jerome Myers: The first deal is a 23-unit building in Richmond, VA. It was a heavy value-add. We are spending — I don’t know if I can disclose it, but we’re spending a lot of money there. We’ve purchased that property for 1.3 million, and we’re looking to start leasing that one up this summer. So we’re about 60%-70% through renovations at this point.

Joe Fairless: And you mentioned you helped with the strategy and you brought cash… What’s been your more specific role with that deal?

Jerome Myers: We had to come up with an initial construction strategy; we also were instrumental in the business plan development. We helped create the PowerPoints and present those to the bank, and we also solicited a couple a couple of investors to help fund the down payment.

Joe Fairless: When you created the presentation and did it for the bank, what are some things that you learned through that process?

Jerome Myers: The numbers matter. For this property they didn’t want lipstick on the pig. They really wanted us to come in and improve the property. The previous owner had a ton of deferred maintenance, and the property was just falling into disrepair… So they were looking for somebody to come in and really upfit the units, make them look nice. The area that we bought in is pretty affluent. A lot of the homes are 300k plus, which may sound cheap for some of the markets, but for Richmond, that’s one of the more affluent areas, so we’re taking rents from $695 up over $1,100. We’re hoping for $1,195.

Joe Fairless: Wow. That’s a huge jump. Have you achieved those rent premiums?

Jerome Myers: We pre-leased two units. We ended up deviating from the initial business plan that we set out on. We were going to upgrade units as people’s leases expire, and we’ve cleared out the whole complex and we’re doing everything all at the same time. We’ve already leased up two, so yes, we are getting those rent premiums.

Joe Fairless: So you have no residents living at the property right now.

Jerome Myers: No. It’s a dead asset, which is one of my biggest fears. We haven’t done that on any project afterwards, but this one we’ve got some pretty strong financial partners in the deal, so we’re able to carry the note.

Joe Fairless: Is that the reason why you did it, is because you have the cash to float the property, versus leasing it up as leases expire?

Jerome Myers: We found out after we got into the deal that there were some big plumbing issues. The property wasn’t functioning well enough to keep people there, or trying to keep people there while we went through the construction, so we felt like it was just better to clear it out and be able to get in, hit it really hard with all the trades; it ends up being more efficient.

There’s really two schools of thought on that – some people wanna clear it out, bring everybody in, wham-bam-thank-you-ma’am, get back out. Then there are other people who prefer to turn units as the leases expire. I think I’m more of the school of thought of the latter, but on this project, with the amount of renovations that we’re doing, we’re gonna have basically a brand new property when we get done… So this approach is actually working pretty well for us. Except for the fact that we have to pay a mortgage every month.

Joe Fairless: Yeah, those are details… [laughter] How are you able to remove residents if their leases did not expire?

Jerome Myers: When we buy assets, we’re typically looking for ones where the majority of the residents are month-to-month. That happens a lot with the mom-and-pops that we’ve been running into. They aren’t renewing the leases and they don’t have terms in the leases where there’s a premium for being month-to-month… So we try to come in where either they’re month-to-month, or they expire in those first six months of ownership, so that we can get in and do our thing.

Joe Fairless: That’s the 23-unit… What was the next deal?

Jerome Myers: The next deal was two addresses, but the total deal was 28 units. It was 20 townhome units at one address, and then eight one-bedroom — two side-by-side quads, I guess that’s the best way to describe it, at another address.

Joe Fairless: Okay. Where is that located?

Jerome Myers: In Greensboro, NC.

Joe Fairless: That one’s in Greensboro… How did you come across the 23-unit, by the way?

Jerome Myers: It was on market. The funny story with that is I tried to buy the deal by myself in January, and then I got connected with another group of folks who were interested in the same deal, and eventually we closed it in November of that year. It’s funny how things come full circle.

Joe Fairless: And why didn’t you buy it on your own?

Jerome Myers: I didn’t have the multifamily experience. When I went to the bank, they said “Yeah, this is nice, but what loan have you signed?”

Joe Fairless: The 28 units, that portfolio – how did you find that portfolio?

Jerome Myers: Direct mail.

Joe Fairless: Can you elaborate on your process for direct mail?

Jerome Myers: Yes, we created a letter, sent it out to 50-60 owners, we pulled the list from the city’s GIS/county’s GIS; we got the addresses of the businesses or the owners of the properties, sent out letters to them with our phone number on them, and we got a pretty high response rate. We looked at probably three or four deals out of that mailing, and we were able to close one.

Joe Fairless: What did you write in the letter?

Jerome Myers: We told them that we’re looking to buy properties in their market, we told them what type and size of properties we’re looking to buy, and we told them that we know that it’s not being actively marketed, but there are many reasons why people might sell. In this instance, the owner was ready to retire, so he was willing to divest with the property without going through a broker and all the other rigmarole that a lot of people do when they’re trying to get top dollar for their property.

Joe Fairless: And what was the reason why he went with you all, versus going with a broker?

Jerome Myers: I think it was just ease of sale. He was very confident that we were gonna close from the beginning, and we built rapport; there was never a question in his mind on whether or not we were gonna close. I think he would have spent a whole lot more time marketing and maybe had to make some more investment if he wanted to take it to LoopNet, or CityFeet, CREXi or something like that, in order to get the dollars that he wanted out of the property, after paying the broker.

Joe Fairless: If you wouldn’t mind, please walk us through the interactions that you had with him. Will you tell  us a little bit about how that conversation went on the first time you talked to him, when he was calling you, after he received the direct mail piece?

Jerome Myers: I put my phone number on the  bottom of the letters and told him to call me if they’re interested… And he did. I answered the phone; he asked if it was me, I confirmed it was, and then he began to tell me a little bit about his property. I asked how soon I could tour it, and then I think it was that day or the next day he and I met on the property. We did a brief tour around the outside. He had a vacant unit, so we went in one of the vacants. Then we discussed what he was looking for out of the property.

I went back to my model, made sure that the numbers worked, and then I submitted an LOI. We negotiated some of the terms of the LOI and then went under contract. From there, we closed it in 75 days.

Joe Fairless: When you were having that initial meeting with him at the property, you said that you talked to him about what he was looking to get for the property… How much was he looking for during that conversation?

Jerome Myers: I think he asked for 860k.

Joe Fairless: He asked for 860k. That’s a very specific amount. And what did you say at that point in time, while you were on-site?

Jerome Myers: I just told him we’d have to look at it, I’d have to look at what he actually collected in rent, because it’s very different what people collect versus what they show on the spreadsheet. I needed to go through and actually do an inspection of each unit to make sure that I understood the condition of the entire property, so that I could make a reasonable offer. But in concept, I thought he was in the right ballpark, so I thought it was okay in concept; he felt good about that, and we kept moving through the process.

Joe Fairless: And just so I’m clear, you mentioned that you needed to see every unit before you could make a counter-offer to him? Did I hear you correctly?

Jerome Myers: That is not what I meant to communicate.

Joe Fairless: Okay, maybe I misheard.

Jerome Myers: I just told him that in concept I thought his price was close to where we could be, but before I got to a final number, whatever the closing number is might not be what that LOI number is… But I just wanted to be transparent with him that we were gonna go through every unit and make sure that the property was in good shape, because we weren’t going to pay for things that were wrong with the property going in. We would ask for some type of credit. I just wanted him to understand that, just because if we agreed on 860k, or 850k, or 840k, whatever we agreed on on that day, that a month later, two months later, when we got down to the wire, if we found out there were issues with the property, that we were gonna be looking for some help from him on those issues.

Joe Fairless: What was the final purchase price?

Jerome Myers: The final purchase price was 840k, and then there was another 10k-15k in closing concessions.

Joe Fairless: Okay. The LOI terms that you initially sent to him, what was the price that you initially proposed to him?

Jerome Myers: I think I sent him 840k.

Joe Fairless: 840k, okay.

Jerome Myers: I’m pretty sure I sent him 840k, yeah. In fact, he brought it up towards the end, when I started asking for closing concessions. He’s like “I asked for 860k, you came in at 840k. You should take that money and apply it to whatever closing concessions.” I was like, “No, we found out new information, so we need to make an adjustment on the deal because of that.”

Joe Fairless: What LOI terms were negotiated during the process?

Jerome Myers: Just the closing date. I think we put in we were gonna close July 31st or so, and he wanted to close at the end of June, so that it’d be a clean break, basically. He’d have the first half of year, I’d have the second half. We kept the 07.31. and said “We’ll close earlier if we can”, and that was gonna be a function of them providing all the documents that we request, the appraisal going as planned, and the bank being ready to fund. And in fact, we closed on July 5th, if I’m not mistaken.

Joe Fairless: And what are some things from an execution standpoint, now that you’ve closed, that you’ve come across from a challenge standpoint?

Jerome Myers: I was probably gonna save this for the end, but make sure when you’re doing your inspection that the utilities are on in every unit. A lot of times the landlords will cut off utilities if the units are vacant, especially in the summertime, because they don’t have the risk of pipes bursting… So one of the units had a broken pipe in it. When we turned the water on when we started renovating it, we found that out after closing. It wasn’t a huge amount of money to get it fixed, but it was something that I should’ve known about.

I think the other thing that’s a big deal is appliances and understanding what condition the appliances are in, because they’re one of the bigger ticket items in the rehab budget. In the past I hadn’t paid attention to it, but as we’ve turned 11 of the 20 units at this property, that thousand dollars for a refrigerator [unintelligible [00:15:57].12] just keeps popping up, and at times it gets frustrating, because I feel like if people were living there, then the appliances were functioning properly, and then all of a sudden, when we get in there and we’re making it ready for the next person, they’re not actually functioning the way that you would expect them to.

Joe Fairless: You had a 23-unit, then a 28-unit portfolio… What was the next one?

Jerome Myers: A 26-unit in Greensboro.

Joe Fairless: And was that direct mail?

Jerome Myers: That was back on LoopNet, believe it or not.

Joe Fairless: Wow. You’ve got a smorgasbord of ways you find deals. One is through a fully-marketed deal, another is through direct mail, and then the third is LoopNet.

Jerome Myers: Yup.

Joe Fairless: So you reached out to the owners directly via LoopNet, or were they represented by a broker?

Jerome Myers: They were represented by a broker, and by far this guy has been the best broker that I’ve worked with thus far in real estate. He’s responsive, he wants things to be done fairly, and he doesn’t mess around with a bunch of nonsense. He just wants to get the deal closed, and make sure that everybody is playing fair ball… So I really enjoyed working with him.

Joe Fairless: What was the purchase price for the 26-unit?

Jerome Myers: 1,375.

Joe Fairless: $1,375?

Jerome Myers: No…

Joe Fairless: [laughs]

Jerome Myers: $1,375,000. [laughter]

Joe Fairless: Ohh… I dared to dream. Okay… And what’s the business plan for this one?

Jerome Myers: This one is something different than what we’ve done. It’s near UNC Greensboro, and they were leasing this property as student housing, even though about 50% of the residents weren’t students. So they were charging basically $420/bedroom, and some of the units, at least 4 of the 26 units  only had one person in a bedroom… So you’re getting $420 for a unit that’s $820.

Our business plan is we’re converting from student housing to workforce housing. Also, in that shift, we’re gonna give the utilities back to the residents, and that should drop about $40,000 to $55,000 to the bottom line.

Joe Fairless: How active are you with the 26 units business plan?

Jerome Myers: I’m the asset manager, so I’m on point for everything. We’ve laid the plan out with the property manager. We’re gonna consolidate those four units into two, where only half the unit is leased. We’re gonna put those two units online, and then as leases expire, we’re gonna get folks to migrate to the new leasing program, but if they wanna transition, then that’s okay, too.

The thing that we’re concerned about, or our big risk point in this business plan is in July we have 18 of the 26 leases expiring, so we’ve gotta make sure that our cash coffers are ready to take on the mortgage for a month or two if we have to.

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

Jerome Myers: Trust your numbers. If you know how to model and you know what rents are, don’t chase a deal just because you’re close. I’ve watched people buy bad deals just because they wanted to say they had a deal, and then once you buy a deal and you’re too high in your cost basis, there’s no fixing that part of the deal… So make sure you trust your numbers when you’re going into a deal.

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

Jerome Myers: Yes. Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:19:42].05] to [00:20:41].29]

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

Jerome Myers: Millionaire Success Habits by Dean Graziosi.

Joe Fairless: Best ever deal you’ve done?

Jerome Myers: The 26-unit is the best deal we’ve done. We’ve purchased that for $1,375,000, the appraisal came back at $1,750,000.

Joe Fairless: That’s a nice appraisal. I did the 23 units, 28 units and 26 units – does that equal 75, or am I missing another deal?

Jerome Myers: I think it’s a little over 75. I just used round numbers.

Joe Fairless: Alright, cool. What’s a mistake you’ve made on a transaction?

Jerome Myers: I’ve talked about it a little bit before, but it’s not making sure that the utilities are on when you go into a unit. It came up in multiple places. I talked about the busted pipe, but at another property utilities weren’t on, and we weren’t able to check A/C units… So I found out the hard way that the A/C units weren’t working properly. In one instance we replaced two whole systems.

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

Jerome Myers: My family has a full scholarship in North Carolina Agricultural and Technical State University, for engineers. We wanna continue to grow that. And then the other way is through our podcast. I feel like we help a lot of people with that.

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

Jerome Myers: They could check out our website – it’s d3v3loping.com. They can reach out through the Contact Us form there.

Joe Fairless: Jerome, thank you for being on the show and talking to us about the deals that you’ve done. I love talking about deals and I love getting into the specifics, so thank you for getting into the specifics of the deals and the business plan, and how you found the deals, that’s really interesting. Best Ever listeners, if you wanna find a 28-unit portfolio, put together a direct mail campaign. You got, as you said, 3-4 responses by mailing out to 50-60 owners, and ended up closing on a transaction.

Thank you so much for being on the show, Jerome, talking us through what you’ve done so far. I hope you have a best ever day, and we’ll talk  to you soon.

Jerome Myers: You too. Thanks, Joe.

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Joe Fairless with Greg Rand Finding More Deals Than You Can Handle

JF1587: Finding More Deals Than You Can Handle & Scaling Your SFR Portfolio #SkillSetSunday with Greg Rand


Today we welcome back Greg Rand who has told us about investment markets before on the show (link to that episode is below). Now he is the CEO of a platform that has an abundance of deals for single family investors. At the time of recording, they had $200 million in assets for sale on their website. Hear how they find all these deals and take notes to use for you own deal searching, or buy something from their site. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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TRANSCRIPTION

 Joe Fairless:  Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. As you can hear, this is not Joe, this is Theo. Joe is taking a break, because he just had a baby, so congrats to him. Today I will be speaking with Greg Rand. Greg, how are you doing today?

Greg Rand:  I’m doing great, Theo. How are you?

 Joe Fairless:  I’m doing amazing, and thanks for joining us. Today is Sunday, which means it’s Skillset Sunday, so we’ll be discussing a specific skill with Greg, that you can apply to your real estate business. Before that, a little background on Greg. He is the CEO of OwnAmerica, which a single-family resident investment company with 21 billion (with a B) in total assets on the platform; they have 200 million dollars in assets for sale, as well as 490 million dollars in total assets sold. He is currently based in Charlotte, North Carolina, and you can say hi to him at ownamerica.com.

Greg is a repeat guest. He was actually one of the first 300 people to be interviewed on the podcast, so make sure you check out his first interview, which is episode 300, “Why every market you invest in is essentially the same.”

Before we dive into the very specific skill, Greg, do you mind giving us a little bit of an update on what you’ve been up to since we last had you on the show?

Greg Rand:  Sure. Thanks for having me on again. Yeah, so that was three years ago, the episode that I joined you on… A lot has changed. We recognized right around that time that there was a segment of the real estate economy in this country that was unrepresented, and that was the single-family home that was already occupied by a tenant. So the realtors of our country and their MLS and the Board of Realtors, all the way to Zillow and Trulia and Realtor.com presumed that a home is going to be vacant when it sells. So the whole super-structure that sells houses presumes that an owner-occupant is gonna be the buyer of the house, and so those houses are vacant, and you can test that theory by going to any real estate broker, agent or major portal and try to search for occupied rental properties. In other words, don’t buy a vacant home and rent it out, but actually buy a rental home that’s already being occupied and rented, and has a performance history, which has a lot of advantages.

We realized  that that product was kind of an orphan, so we’ve built OwnAmerica.com to represent buyers and sellers of rental properties that are already rental properties. We focused initially on the institutional and professional investor, because that was the world we were in, those were the people that we had the relationships with; Wall Street came in about 6-7 years ago, and came in very strong into the single-family space for the first time… So we had the opportunity to build the data sets and the analysis techniques and the systems to help those companies analyze the whole country, figure out what pockets they wanted to invest in, find assets in those pockets, analyze them, size them up, acquire them, renovate them if it’s necessary, rent them out and then manage them. Doing that at scale was unprecedented, so we had the opportunity of being part of that innovation bonanza that took place back in 2011-2014…

But then we realized that only 2% of all the single-family rentals that exist in the country are owned by institutions; the vast majority are owned by entrepreneurs, or just everyday people that see single-family home rentals as the ideal way to secure at least part of their financial future… And there was no marketplace to buy and sell these occupied properties. So we built version one in 2016; it’s been a success, and it’s largely a testament to the fact that if you’re gonna buy rental homes, buying houses that are already rental homes is a really good way to go, because you’re cash-flowing from day one, and you’ve already got a track record, so financing rental homes that are already rental homes is easier than financing vacant ones, where the income is not proven.

And of course, if you wanna sell a home that’s already a rental property, it’s a really good idea to sell that home as an occupied rental, if you can, because then you cash-flow all the way through the closing. So the seller wins, because they have no vacancy issues, they don’t have to spend any money fixing the place up in order to sell it; the buyer wins because they can buy a property and they’re starting to make a profit on day one, and the tenant of course wins, because they’re being kicked out of a house they like at the end of their lease just because the seller wants to liquidate. So it’s kind of a win/win/win situation; we saw that back then, built a platform for it, and people like it so far.

 Joe Fairless:  Yeah, I totally agree with those benefits of the buying the single-family home that’s already occupied. Before we went live we were talking about a new development that you’re working on, but before we get into that, since it’s Skillset Sunday, let’s talk a little bit about how you find these deals. Obviously, you’ve got a ton of assets for sale… What types of systems and automations do you have in place to make sure that you always have a consistent pipeline of these single-family deals?

Greg Rand:  That’s a great question, thanks for asking it. I mentioned a moment ago that we learned how to sort of get our arms around big-scale data on housing valuations, rental valuations, analytics on yields, analytics on forecasting and projection and price appreciation… We learned all that stuff with the big REITs, as they master this asset class on the Wall Street scale. So we spun that around and created something that takes all that institutional expertise and makes it available for free to anybody who wants to use it.

So the way that we tracked people, number one, is that we give a bunch of cool stuff away. It’s the age of Google, right? You wanna get people to use it, give it away, and figure out a way to monetize them later. So we had something we called The Portfolio Visualizer. If anybody who is listening wanted to go to OwnAmerica.com, you can look at the way we present portfolios for sale, and there’s a version of that Portfolio Visualizer that you can have for free for your own portfolio, or for a fantasy portfolio you’re thinking about building. You basically can put any address in in the country, or upload a spreadsheet of addresses of a portfolio and get charts and graphs and maths and photos and projections and interactive calculators and all this really cool stuff about the market fundamentals, like population growth, employment trends and long-term price appreciation trends.

You  get all of that for free, and you tend to appreciate us for giving you all that cool, free stuff… And then some of you, around 9%, will wind up saying “Hey, I think I do wanna sell.” And about 15% will say “Hey, I think I wanna buy.” So by virtue of giving away the portfolio visualizer in a free account, we’ve been able to build just a level of appreciation out of the gate, that somebody says “Hey, these guys cared enough to spend the money to build this technology, they’re giving it to me”, and that little level of appreciation has a chance to turn into loyalty over time, by virtue of the people then being able to use it over time, and then become sellers of buyers… And we began targeting them.

We offered this out through traditional marketing means, but because we have a good handle on the data, we know who owns what investment property in America, and we’ve been creating accounts for them by the thousands.

Let’s say you own 17 rental properties in Orlando. We know that, because it’s public record, and we’ll go out and get our hands on that public record data, create that online investment account around your 17-unit portfolio, and then try to track you down and tell you about it. So we’ll send you mail, we’ll telemarket to you, we’ll try to find you digitally via social platforms to say “Hey, you’ve got 17 units in Orlando. We think it’s worth about 2.45 million. Go to this URL to check it out”, and that’s worked. People are like, “How do they know all this about me?”

We haven’t gotten the reaction, Theo, that I thought we might, from some people, like “Big Brother is watching me… How do you know this? How do you know I own these properties?” I think most folks know that it’s public record. We just go through the trouble of creating the account for them, and then try to track them down to show it to them. They smile, and then if they wanna take any kind of action to buy or sell, now we’ve got the beginnings of a relationship.

 Joe Fairless:  So you actually create an account for them in this portfolio visualizer? Is that what you’re saying?

Greg Rand:  That’s right. We create the account for free, with their properties in it, and basically they can just look at it. We use automated valuations, automated rental analysis… So if we think the rental is is $1,125 and it’s actually $1,200, they can change it, to see a more accurate depiction of their yield… And they do. We kind of give them a starting point. We make it so that 80% of the way there, their portfolio is now loaded in.

It’s almost like — imagine you go to Schwab, or Fidelity, or some other site that sells investments, and if it knew what stocks you owned, and you went there and you opened up a free account and you saw your stock portfolio staring you in the face, and you could track the value of it… It’s kind of like that, but it’s with real estate instead.

 Joe Fairless:  Let’s say for example I want to find all of the single-family portfolio owners in Tampa, Florida, because that’s where I live… How exactly are you going about doing that?

Greg Rand:  How do we find the owners in Tampa?

 Joe Fairless:  Yeah, how do you find not only the owners, but know that they have this many properties? Are you doing a search on the auditor sites? Do you have access to some paid software? How are you going about building this database?

Greg Rand:  It’s paid data. The national housing database was digitized back in ’90s and 2000s. It was done mainly by title insurance companies. I was around back then; they were literally going by municipality and digitizing whether it was index cards, or microfiche, or some of them even had it in a database. So they created that public record database, and of course, whenever you buy a property, the deed gets recorded, and there’s an indication of whether it’s owner-occupied or non-owner-occupied. We’re able to track the non-owner-occupied properties, and then we focus on people that own at least five.

If you have an entity – either it’s your name, or it’s Theo LLC, and you own 16 properties under that LLC, our data sifting allows us to identify you, your entity, your address, the addresses that you own, and then we add to that what they’re probably worth, what they probably rent for, what they probably cost to operate, and the population and market trends and so forth.

So we pull data, starting with who you are and what you own, which is in the public tax records, and then we append it with all this other data, to create the Portfolio Visualizer for you.

 Joe Fairless:  That makes sense. Going back to your giving away a bunch of free stuff to generate leads – obviously, the majority of people listening to this won’t have a very technical portfolio visualizer to give away, which can be very impressive… What types of tips do you have to someone who’s maybe just starting out and wants to apply this concept of giving  before you receive? What advice would you have for that person?

Greg Rand:  I have to think about that… If you’re starting out in real estate investing, the first place to start is to try to figure out what market you wanna invest in, and what your long-term goals are. I’ve never been that obsessed with the idea of finding a deal, and that makes me kind of unusual in this space. I approach investing in real estate as – you’re buying the market, you’re buying Tampa, or you’re buying some subset market of Tampa. That’s why we call the company OwnAmerica. We have this philosophy that you’re literally accumulating an ownership stake in the country. The country is in demand, the population is growing, so if you hone in on a place like Tampa, which is in demand and growing, and you find neighborhoods and school districts within Tampa, you’re gonna win no matter which house you buy. In fact, usually the risk that people take when they buy the house that’s discounted — I’ve seen a lot of people focus on what they wanna buy before they worry about where they wanna buy it… So they buy a house they’re getting a great deal on, but they’re buying a junker, and they’re taking renovation risk, and they may not be capable of doing an efficient renovation. They may be new at this, so they’re going with the riskier approach to investing.

I’ve seen professional investors make the mistake of choosing what to buy based upon getting a deal on and finding out later they wish they hadn’t had bought that, because they bought something in the wrong place. So my advice would be not so much using our methodology of using public record data to attract leads to them for buying property, but use the data that us and other people are now willing to give you to identify the markets that you think have the best lift-off in the future, based upon your own intuition of the trends of people – where are people going, why are they going there, are they staying, are jobs going there, what are those macroeconomic trends that are gonna give an entire market lift in terms of property value and rental demand?

And then honestly, I don’t think I’ve ever gotten a great deal on a property in terms of the price. I get great deals on buying properties in places that I have intuition are gonna rise in value and be in more demand rent-wise, more than the other markets around them. I’ve got a sixth sense by having spent so much time looking at this data over time, that my approach has been proven at least to me and my clients to be spot on… And I’m not forecasting the future. I’m just watching what people are doing right now, and if businesses are moving in and people are moving in and they’re staying, and the data reflects that, and then the human intelligence on the ground, people that you actually talk to kind of validate and reinforce that, that’s what we call a winner. That’s a  buy. And then you can just go buy a nice house in a good school district in that area and you’re going to win because you picked a winning market and just got a standard property in that winning market.

 Joe Fairless:  Okay, so let’s talk about the market for a second then… And I guess this is multiple questions in one – let’s say you are going to enter a new market; I know you mentioned a ton of different metrics and factors that you look at, but what would you say would be the top three macro factors you would look at?

Then my secondary question is, do you look at these factors just for the MSA or the city level, or would you then after analyzing these three factors for the entire MSA or city hone in on a specific neighborhood and submarket, and do the same thing? Or do you analyze the MSAs and the neighborhoods differently?

Greg Rand:  We do it slightly differently. The data that we have — to your first question, the three things that we look at, in this order… Number one is the long-term price appreciation performance of the market; and there it’s helpful to go at the MSA level, or at least the county level. The reason is that when you get too close to the ground you could see some wild swings in median price growth, because if one really cheap house or one really expensive house sells you get this weird blip on the chart and you lose the trending on it.

We use 20-year price appreciation data. You can actually see a place like Tampa during the late ’90s, into the wild times of the early 2000’s where it went up like a rollercoaster on the way up, then it crested in 2005-2006, and then it came down… But what you can see is when it came down it kind of made its way back down to where it probably would have been had there never been a rollercoaster ride in the first place. That gives you a sense of equilibrium that the market is very healthy; it deviated from a trendline on the high side, it came back down to the trendline on the low side, and then made its way back to the gradual upward trajectory, which tells us “Okay, the market remedied itself”, and I can get a sense of how Tampa performed during a stress test.

When you have a heart murmur, they put you on the treadmill; they wanna see how your cardiovascular system handles the stress. Well, I can see over a 20-year period how a market handled the stress test of the last 20 years, and it tells me a story that if I compare Tampa to, say, Oklahoma City or Cincinnati, I can see and draw different conclusions based upon the way the peaks and the troughs actually play out. But it also then gives me a 20-year average. We focus on that average, and here’s why.

In most places in the country, if you combine the 20-year price appreciation average – for the country it’s 3.4%. Let’s say in Tampa you’re gonna get 4.6%. Okay, so now you’re beating the country; that’s a good thing. But when you add the price appreciation to the yield – and most of your listeners probably know that yield is what your cap rate is, what your percentage of profit in a given year is, compared to how much money you have sunk into the property. Most places around the country are ranging between on the low side a 4% yield, and on the high side an 8% yield. That’s all-in, every expense counted, even a maintenance reserve, a very conservative and responsible expense load will give you somewhere between 4% and 8%. When you add the yield on a property with the long-term price appreciation that market has performed at, you usually end up at about a 9%… Meaning Tampa is gonna be today a 5.75% yield and a 3.75% or 4% price appreciation average – it puts you in the 9% range. Between 8% and 10%.

You go to Charlotte, North Carolina, you’re gonna get a 5% and a 4%. Same thing with Dallas. You go to Raleigh or Austin, you’re gonna get a 4% and a 5%. 4% yield, prices have gone up kind of high, but at the same time the prices have gone up kind of high, so you get a higher appreciation rate.

Think of the United States single-family homes are around a 9% ROI, yield plus appreciation. So when you find a 10%, you found a winner. When you find an 11%, like Charleston, South Carolina – it’s north of 10%. The combination of yield and price appreciation puts you into the double digits even before you put any leverage on, you put a mortgage on, or anything like that.

So that’s what we do, we take a look at that combination of things – the cashflow yield, plus the appreciation, and try to find a place that is already performing, above a 9%, or even above a 10%, and then I wanna try to understand why, so I’m gonna look at the job growth. The job growth is a great harbinger of population growth. Companies come in, they plan on being there for 25 years or more. They don’t do that stuff frivolously; they’re gonna go in based upon cost of living, quality of live, advantageous tax situation, a pro-business environment… When they do that, people come for a lot of the same reasons, but with an additional reason they come for the jobs that are going there… And if you can get a feel for how the property and the market perform as a baseline right now and you get a 10%, and then you get a sense of “Are the reasons why the market has done so well likely to continue? Are they still in favor, are they gonna continue?” and you focus on population and job growth and all the things that go into that, that’s going to give you a really comfortable place for a 25-year hold, which is what we’re all focused on here. None of what we do is about flipping; it’s all about owning America, building your own little real estate empire, however big you want that to be – 3 properties, 300 properties, whatever.

Those are the techniques that we use with big Wall Street funds, and now we’re teaching it and providing the tools for everybody else to use it.

 Joe Fairless:  That’s great information. Last thing before we wrap up is something that — I guess me personally, and I’m sure others might have this same thought, but I accumulate a massive portfolio of single-family homes, and I own them for 25 years let’s say, and I get ready to sell… Will I be selling them one by one, or will I be able to sell them as an entire portfolio?

Greg Rand:  That’s a great question, because that has changed a lot since we spoke last. It used to be — and today, if you call up ten real estate companies in town and say “I have 25 houses I wanna sell”, after they get done celebrating, you tell them “Oh, by the way, they’re all occupied by tenants”, they’ll probably tell you, 9 out of 10, if not 10 out of 10, will tell you the way to sell those houses is to wait till the leases are up, boot the tenants and then fix them up and sell them on the MLS.

What’s changed about that is that we’ve been able to demonstrate – not just us, the industry has been able to demonstrate that occupied rental properties are a thing; there are 16 or 17 million – depending on whose data you look at – existing rental properties in America… Just to put some context around that, that’s 12% of the population. So there are more people living in single-family rental homes than drive SUVs. So it is a big market segment, much bigger than most people thought.

Now that Wall Street has gotten involved, there is a massive, decades-long consolidation underway, where right now only 2% of all the single-family rentals are owned by big Wall Street firms. But 55% of all the apartment buildings in America are owned by big Wall Street firms. It didn’t use to be that way in multifamily either. I know it’s hard with numbers sometimes over the podcast, but there’s around 3,5 trillion dollars worth of apartment buildings in this country. There’s around 3,1 trillion single-family rentals. So they’re both 3 trillion dollar asset classes. More than half of multifamily is institution-owned, only 2% of single-family. The reason for multifamily’s consolidation is there was a big commercial real estate distressed situation that went on back in the late ’80s into the early ’90s. That distressed real estate situation caused a lot of capital to come in, to buy up all this distressed real estate; Wall Street bought a lot of real estate, liked what it saw, continued to acquire… And then you blink your eyes, two decades go by, and now more than half of all the apartment buildings are owned by big pension funds, insurance companies and other institutional sources of capital.

We see all the indicators that the same kind of thing is happening now. The housing crisis was distressed real estate, Wall Street came in to buy up distressed property, liked what it found, learned how to operate it at a very, very high margin, and now all the major companies that owned thousands and thousands of single-family homes are freshly capitalized, but have billions (with a B) more capital into the space now. They’re all doubling and redoubling their holdings, and I don’t see it changing.

What that means is that if you have three properties and eventually you have 50, there’s going to be an exit for you when the time comes where you don’t have to disassemble and destabilize your 50-unit portfolio; you can actually package it up and then roll it up to a larger player intact.

 Joe Fairless:  That’s good to know. I was actually attempting to wholesale a single-family portfolio, and I wish I would have known what you’ve just explained now. Greg, I really appreciate you coming on for our Skillset Sunday. In fact, it was more of a skillsets Sunday, as you provided a lot of skills. You’ve talked about how you find deals, which one way is to give away things for free, in the hopes that they will appreciate that free giveaway and will use you to sell their property or allow you to buy their property.

You also talked about how you would use the digitalized public record information from the title companies and you would find non-owner-occupied properties that had the owners owning at least five properties, and then you would add other datasets to that, to reach out to those owners to buy their properties.

We also talked about the metrics that you use to analyze markets, you talked about the long-term appreciation trends for 20 years, and using that as a stretch test, as well as a comparison tool to other markets. You talked about the yield, and combining the yield and the appreciation together, to determine what’s a good market to invest in… And also you wanna look at the job growth, because it’s a great indicator of population growth, because massive companies aren’t gonna move to a bad market, because they plan on being there for a while. And you talked about how it’s important to understand why those trends are happening, and if they will continue. And then lastly, we talked about the new trend of the ability for these single-family portfolio owners to sell their portfolios to institutions, rather than having to sell them off one by one.

Lots of information. I could definitely keep talking to you, but you’ve gotta go. It was great having you on the show. Have a best ever day, and we’ll talk to you guys tomorrow.

Greg Rand:  Thanks very much.

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Matthew Pollard Best Ever Show Flyer Ways to Rapidly Grow Real Estate

JF1377: 3 Ways To Rapidly Grow Your Real Estate Business #SkillSetSunday with Matthew Pollard

Matthew has helped countless companies go from struggling to thriving. Today he tells us different methods and strategies for growing any business. Of course for our show, we’re focused on real estate investing businesses mostly. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Matthew Pollard Real Estate Background:

  • Founder and Executive Director of Small Business Festival, ranked the #3 business conference by Inc.
  • His methods have transformed more than 3500 struggling businesses into profitable successes
  • Author of The Introvert’s Edge
  • Known as “The Rapid Growth Guy,” dedicated to helping small business owners
  • Featured in Fortune, INC., Entrepreneur, and CEO Magazine, and is a regular TV, radio, and podcast guest
  • Based in Chapel Hill, North Carolina
  • Say hi to him at https://matthewpollard.com/

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TRANSCRIPTION

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

With us today, Matthew Pollard. How are you doing, Matthew?

Matthew Pollard: I’m doing great, mate. Thank you for having me on. The longest-running podcast, congratulations!

Joe Fairless: Yeah, I appreciate that. Over 1,300 episodes, every single day for the last 1,300+ days. A little bit about Matthew – he is known as someone who can create rapid growth for your business. He has done the same thing for his businesses. He’s responsible for five multi-million-dollar businesses. He’s also the author of The Introvert’s Edge, which can be found on Audible, as well as Amazon… And he’s gonna be talking to us about three ways to rapidly grow our businesses.

As real estate investors, we are certainly entrepreneurs who are looking to grow our businesses. And because we are having our conversation on a Sunday, this is a special segment of the show, Skillset Sunday. The skill that you’re gonna come away with from our conversation is how to rapidly grow our entrepreneurial businesses, which happen to be in real estate. Matthew, what’s the best approach for our conversation?

Matthew Pollard: Yeah, sure. In regards to starting this conversation, I think the best way to look at this is really two-fold. People that are in investment in real estate – there are two ways that we generally monetize that, right? If we’re just getting started, having our own business is the best way to create the revenue that we need or the capital that we need to create a real estate portfolio. Then we need to be able to market our real estate portfolio. So I think we can really take it in two different angles at the same time, which is regardless of which business we’re in, how do we rapidly grow our business? What I always look at is most business owners generally have really strong functional skills, but what they generally lack is having that strong differentiated message that separates them from everyone else, an understanding of who their niche is, who their ideal customer is – that guy/girl that’s going to rally to their cause, and then a sales system that actually works.

Joe Fairless: Yeah, it makes sense… So a unique value proposition, know who your customer is, and then have a sales system that works.

Matthew Pollard: Exactly right.

Joe Fairless: Okay, I like it. So before we dive into each of these three, tell us a little bit more about your track record and what you’ve done, just to set the stage for your accomplishments, so that we can then learn a little bit more about who is talking to us about how to grow our business.

Matthew Pollard: Yeah, sure. I think the best way to do that is not just to talk about what I’ve achieved, but really where I’ve come from. A lot of people that see me speak – I’m speaking at Microsoft Inspire in July, I’m a featured speaker, 18,000 people in the audience that will be seeing me speak from the stage and they’re gonna go “That guy is an extrovert. That guy has just got that natural gift of the gift of the gab” It’s actually not true.

When I was in late high school I had a reading speed of a sixth grader, I was horribly introverted, I had no idea what I wanted to do with my life, and I really took a job at a real estate agency to be in the back-office of that agency for about a year… So not to be the person out selling, but the guy in the back doing the data entry, trying to find myself for a year.

School – I got in the top 20% of my state, but it was really difficult. It took every bit of energy I had to succeed, and I just wanted that year off to really figure out what I was wanting to do. About three weeks into that job, my boss comes up to me and says “I’ve got some really bad news. Our company is being shut down and you’re out of a job.” This was three weeks that I’d been working there, and it was just before Christmas, and unlike the United States who go on Christmas, and they have Thanksgiving, and it’s winter time, it’s our Christmas and our summer break at the same time. People go on holidays from the 20th of December to the 15th or 20th of January.

So the only job I could really get at the time – because no one’s hiring at that time – was commission-only sales. I don’t care — my manager used to say “We throw mud off against the wall and we see what sticks.” That sounds great, until you realize you’re the mud, right?

Joe Fairless: Right.

Matthew Pollard: So my manager put me into training, and five days of product training I got, and not a single second of sales training, and I got thrown on this road which is really over 1,000 retail stores on both sides. I got told to go and sell.

I went to walk into the first door, and I had that realization that no one really taught me how to sell. So I took a deep breath, I walked in, and I was politely told to leave, and very shortly after that, I was less politely told to get a real job, and then I was sworn at.

93 doors of that it took me to get my first sale. I remember I was ecstatic, really. I made my first sale, I made about $70, and I was ecstatic for about 45 seconds really, until I had that realization “I’m gonna do this again tomorrow, the next day, and every day for the rest of the year.” That just really wasn’t okay. I needed to find another way, but I had a reading speed of a sixth grader, so I couldn’t exactly pick up a Brian Tracy or Zig Ziglar book.

So what I did gravitate to was — YouTube was just becoming popular at that time, and it might surprise people to know that there’s more there than just cat videos, right? So I learned the steps of the sale, I learned the system of the sale, and every day I went out and practiced that. And I went from 93 doors, to 72, to 48, to 12, to 3 within the space of about six weeks.

My manager called me in and he actually said “I’m actually blown away by this… I just got our monthly report and you’re the number one salesperson in the company”, which just happened to be the largest sales and marketing company in the Southern hemisphere; thousands of salespeople. It took about six weeks…

Fast-forward a few more years – I was promoted seven times, I went into business for myself about a year later. Three years later we were the number one brokership for business-to-business cell phones in the country. It turned over 4.2 million dollars in year three, and fast-forward a few more years, I’ve been responsible for five multi-million-dollar success stories before my 30th birthday.

Then I went to the United States, wrote the Introvert’s Edge, and I’ve been helping business owners ever since.

Joe Fairless: So the five multi-million-dollar businesses – are those five that you’ve founded, or are those five that you consulted on?

Matthew Pollard: Ones that I’ve founded. The first one was in telecommunications. Most people, I think, when they leave or go into business for themselves, they generally gravitate to the thing they’ve always known, and telecommunications was what I’ve always known, so that’s what I’ve gravitated to.

From there I moved into electricity, and then I actually moved into coaching, and then into education, and then my commercial real estate has always been one of the other ones that I’ve really been able to be involved with.

Joe Fairless: Got it. And each of those five had revenue of over a million dollars?

Matthew Pollard: Correct.

Joe Fairless: With each of those five, do you currently own each of them still?

Matthew Pollard: No. I predominantly only focus now on commercial real estate and also my education business.

Joe Fairless: Okay. With the telecommunication and the electricity businesses – what happened to those two?

Matthew Pollard: With the education business we were following a government funding trend, so when the funding ran out, we slowly wound that down. In telecommunications we did pretty much the same thing.

Joe Fairless: Got it. So you rode the wave until the wave was no more, and then you said “We’ll move on to something else.”

Matthew Pollard: One of the things I specialize in is finding great ways to monetize specific markets for the right period of time.

Joe Fairless: What are some things you look for in order to do that? I know this is a general question, so if you wanna use one of these examples, feel free to do so.

Matthew Pollard: One of the things that I look for is an unmet need, or a currently unserviced niche in the marketplace, in a highly established, almost saturated market. What I mean by that is that when you’re talking about a marketplace like telecommunications, one would assume that the market was pretty saturated; we were a market of 22 million people, and the marketplace was crazily saturated, except it was a whole market of small business owners where the market was just being moved off-shore for customer service, and these people were screaming out for additional support.

It’s great to save money on your telecommunications, but if something goes wrong on your phone and there’s no one there to support you, that’s horrific, right? You’re losing more money than you’ve saved. So what we did is we launched with an independent brokerage where you could really go with any company… But if you were focused on saving money but also wanted the service there, we would service you no matter which company you went with.

Education is another great example. When we were looking at the marketplace, there were really two marketplaces, right? There were groups of clients that were in the market to do post-graduate qualifications, that already had a degree, and those people were looking for more prestigious schools where they could leverage that qualification for a long period of time. Then you have the marketplace of people that were high school leavers, didn’t get the grades that they were looking for, and they needed to go and do a qualification somewhere else to get the grades that they needed to get into the schools that they really wanted to get into.

Both of those markets are highly competitive and really tough, but what we discovered was that there was this whole market of tradespeople, and tradespeople really had an interest in track record… So they left school generally at about the age of 16. Most people in real estate would know this, in commercial investing especially. These people generally leave school at the age of 16, they’re either highly entrepreneurial or they struggle with school, they go into an apprenticeship and they generally learn how to do what they do through sarcasm and aggression from their bosses, and then eventually they end up the best at what they can do.

They then look around and they’re like, “Well, everyone else here is making the same sort of money as I am. Why would I bother with this?” I may as well go into business for myself. So then they do, and they start to get some clients, then they hire staff, and the staff aren’t performing, and they’re not great at managing stuff because they learned through sarcasm and aggression, so they do the same thing for that group of people that they’ve hired. So now they’re not making money, their staff aren’t performing, their systems and processes are horrible, their customers are upset… They need help, but they couldn’t afford business coaching, which is the help they wanted… But they hated school. They have this view of “If you can’t do, you teach.”

So what they did is they were looking for an answer, and we launched business coaching at a price you can afford. What we did is we ran our classes like a mastermind. Business coaches ran the classes, and what we did find is at that time when we were researching the market, we were going through the global financial crisis and the government was incentivizing training. It wasn’t free training, but it was incentivized by the government, so what we did was we launched into that marketplace with business coaching at a price you can afford, and we targeted business owners that worked on a trade site – plumbers, electricians, tailors, that sort of thing. We took on 3,500 clients within the space of three years.

Joe Fairless: That’s a lot of people.

Matthew Pollard: It was a lot of people, it was  a very busy time.

Joe Fairless: And it WAS a very busy time – you’ve just said past tense; why isn’t it still a very busy time?

Matthew Pollard: Well, we focused on the trade demographic during that government funding burst.

Joe Fairless: Okay.

Matthew Pollard: One of the things that’s important with business is to always be looking at the marketplace and how it’s transforming, and as the market gets saturated, there are two ways to do it. One is you look for blue oceans in the current marketplace, with the current product and service you have, or you look for blue oceans in the marketplace for other products and services that are emerging. That’s always been what I do.

So for me it’s “How do I apply my sales and marketing skillset to different markets over time?” That is now one of the things that I specialize in. I consult and speak all over the world on how to create a unified message that resonates with your true why. Because one of the things that I’ve learned over time is I can create rapid growth out of anything, but there’s nothing worse than a rapid growth company with customers you can’t stand or a business you don’t like working within.

Joe Fairless: Right.

Matthew Pollard: What I now do is — in the past, I looked at marketing the way a lot of people look at marketing, and it’s finding a need in the marketplace, create a message for that market, then create the sales system… Bang! You’ve got a rapid growth business. The problem with that is then you may be in a niche market you don’t enjoy, so what I structure my branding around and what I do now is it’s really about discovering what you’re passionate about, what your purpose is, and then looking for the unmet need in the marketplace in the global economy, that way you can drive your ideal clients to you, and then you create a sales system around that.

What that means is that you end up owning a business that’s completely aligned with what you’re passionate about and what your purpose in life is, which means that’s the business you wanna be in forever. And as long as there’s unmet needs in the marketplace, which there always is, and this was one of the big shifts for me – in the past, I was an offline salesperson… Direct sales, telemarketing, that sort of thing. When I moved to the United States I went online and I had to become a student of it. I mean, I didn’t even know how to change the word “the” to the word “they” on a website.

Nine months later, I was an international award-winning blogger, and [unintelligible [00:14:06].16] was one of the most retweeted business coaches on Twitter. So I learned the potential of the online marketplace, and what I realized is that so many people in business trade in what they’re passionate about for what’s practical, or a marketplace, this shiny object that they can see. And that’s what I did for a lot of my life. I was always looking for that shiny object that I could make money out of for the short term, and what I realized is you can make a lot more money and be in love with what you do for the long-term if you focus on what you’re passionate about, get your branding right and look at the unmet needs in the global marketplace to monetize it that way.

Joe Fairless: Beautiful. I completely agree. There’s so much opportunity out there, and everyone’s world-class at something, whether they recognize that or not. The key is to identify where those skills can be applied, to then build the business and have long-term sustainable success, right?

Matthew Pollard: Well, this is what I’ve found. My first business – I’ve created that because I wanted to prove everyone else wrong. [unintelligible [00:15:05].04] a horrible acne, and all of a sudden I started to do good, and then I kept getting promoted, but because I was in sales, every time I got promoted I actually took a pay cut until I started to make money off all those people that were underneath me, and then they’d promote me again.

So I went to my manager and said, “Look, I used to make a ridiculous income just selling. Now I’ve got all these responsibilities, and I keep taking a pay cut for [unintelligible [00:15:26].13] You’re gonna have to give me a base.” My manager said “Matt, at your age this salary is huge. This is the best you’re ever going to do.” That upset me, and I went on the march to prove him wrong.

Three years later, the business turned over 4.2 million dollars, but I was miserable. I [unintelligible [00:15:47].08] and I was like “If this is as good as it gets, I don’t want this life”, so I looked for a different way to monetize, and I continued down that journey… And here was my realization – people inherit their goals from their mother, their father, their drunk roommate they had in college. They hear these guys and go “Yes, that’s what I wanna charge towards!” and they either struggle to master that energy to excel at that, or they get there and they’re like “Wow, this wasn’t as good as I thought it was”, and then become disengaged.

What I realized is that’s why people tend to jump from shiny object to shiny object, and I was exactly like that. Then what I realized is that if I can focus on what I’m passionate about, what my why’s were — and to be honest with you, I had to really think about that… Because for the longest time I did trade that in for practicality or the shiny object. And as soon as I realized what I was passionate about doing, which was looking at somebody’s business, coming back to looking at what they were passionate about, creating a message around that, discovering an unmet need in the marketplace where they could create exponential growth and then create the sales system, and then I made the decision to focus purely on that – well, since then, my business has just absolutely exploded. I now get to help everybody do what I absolutely love, where in the past I’d get to about 12 months in and I was bored, because my talents weren’t being utilized anymore.

Joe Fairless: So practically speaking now, kind of bringing this all full circle, the three ways to rapid growth – it sounds like there’s three, but then there’s an underlying foundation that needs to be established, and that’s identifying what you’re passionate about (the Why), and then its unique value prop, knowing the customer, and then the sales process. Is that accurate?

Matthew Pollard: Yeah, definitely. If you wanna frame this right – and I think we’ve got a few minutes left, so I can elucidate with an actual real case study, if that’s helpful for you.

Joe Fairless: Yeah.

Matthew Pollard: I had a client out in California – her name was Wendy, she was a language coach; she taught kids and adults Mandarin. She comes to me and she’s like “Matt, I’m really struggling. I used to make $50-$80/hour to teach Mandarin. Now there’s all these people moving into the city and they’re willing to charge $30-$40/hour to get their first client, doing exactly what I do.” Not only that, she had to deal with people advertising from China on Craigslist at $12/hour, and then she had to deal with – thanks to our friends in Silicon Valley – people saying “Oh, I’ll teach you Chinese, you teach me English” and there’s now platforms where they just exchange time.

So she was losing her current clients, she was struggling to get new clients, and she said “Matt, can you teach me how to sell better, to be able to get rapid growth?” I said, “Wendy, what I want you to do is I want you to avoid the battle altogether.”

What we did is we looked at all the clients she worked with, and there were two people specifically – these were executives being relocated across to China, and she helped them understand these three things. The first one was this concept called Galaxy; now, I know that to us it means out of space, but over there, it’s their version of rapport. If I was gonna sit down and try and sell you something, I would sit down and have one meeting with you in the Western world, maybe 30-45 minutes later if I was a bad salesperson I’d say “Do you wanna move forward?” and you would say “Yes”, “No” or everyone’s favorite, “Let me think about it.” If I called you back next week and you said “Yes, I totally wanna go forward”, great. If you still said you wanted to think about it, I know my chances of getting that sale are going down and down. Well, in China they’re gonna wanna meet with you five or six times, they’re probably gonna wanna see you drunk over karaoke once or twice. That’s just the kind of character they are, because they’re not talking transactional 12 or 24-month deals, they’re talking about 50-100 year contracts. It’s longer than a lot of people’s lifetimes, so as a result they wanna know the kind of person they’re getting into bed with.

The second thing she helped them understand is the difference between e-commerce in China and e-commerce in the Western world. And the third thing she helped them understand was the importance of respect. It’s like, when somebody hands you a business card here, we just grab it, throw it in our pocket and continue the conversation.

I just spoke at Electrolux – 150 vice-presidents, all commanding over 1,000-2,000 staff, and when they get my card, they hold it, they cherish it, they look at all the detail on the front, they look at all the detail on the back, pull out a card case, slot it in, then bow and continue the conversation. Anything less than that is considered disrespectful and you’re not going to be doing business with them.

I said, “Wendy, you’re doing so much more for these people than just private language tuition. What are you doing?” She’s like “I’m just trying to help”, and I said “Wendy, you’re stuck in your functional skill. Is it fair to assume as a result of this assistance these people are going to be more successful in China?” She’s like, “Yeah, that’s the point”, and I said “Great, so why don’t we call you The China Success Coach?” Instead of focusing on teaching Mandarin, because there’s a price tag battle to the bottom, why don’t we create The China Success Intensive, which became a five-week program that worked with the executive, the spouse, and any children to be relocated across to China.

She said, “Well, that sounds great, but who would I sell it to?” I said, “Well, who do you think your ideal customer would be?” She said, “Well, obviously, the executives.” I said, “Well, yeah, the executives are terrified.” I mean, I moved from Australia to America and I was terrified, and people here speak the same language… But no, not your ideal customer.

She said, “Well, then obviously the organization would pay.” I said, “Yeah, well they’ve got tens, hundreds, if not millions of dollars riding on the fact that these executives are successful, but still not your ideal customer.” She said, “Well, who then?” I said, “Your ideal client to me would be the immigration attorney.” Think about it – if anybody that needs to go to China needs a visa… These people that do these visas charge between 5k-7k, but after all the paperwork, all the bureaucracy, cost of acquisition, they’d be lucky to make about $3,000. So offer them $3,000 for any successful introduction.

She reached out to them and they were ecstatic with this. That was almost double their profit. They were like, “Well, what do I have to say?” She said “Simple. All you’ve gotta say is ‘Congratulations, you’ve now got your visa.’ Now, I just wanna double-check you’re as ready as possible to be relocated across to China.” And they’d say “We’ve got our visa organized, we’ve got our place sorted, we’ve learned the language, the kids are getting pretty good at it, too… I think we’re set”, and they’d just respond with “There’s a lot more to it than that. I think you need to speak to the China Success coach.”

Wendy would then get on the phone with this easy sale, because they were terrified, the company was financially motivated to make sure they were successful, and Wendy got to charge $30,000 for this private intensive program, instead of struggling every day to make $50-$80/hour. That’s the power of a rapid growth system.

See, if Wendy [unintelligible [00:22:03].07] she would have already lost, but looking at the skillset she had above and beyond her functional skill, these were the things that she was passionate about. By doing that and saying “Well, I hope [unintelligible [00:22:12].19] respect” and then asking themselves “What’s the high-level benefit of that?”, which was China success, that’s what created rapid growth.

For me, I’m a branding expert, I’m a social media strategist, I’m a sales systematization specialist, I’m a master in NLP, I’m a business coach — I’m too many things; nobody cares. But when I say “I’m the rapid growth guy. I help organizations large and small obtain rapid growth”, the simplicity of that message gets me heard in a crowded marketplace.

Joe Fairless: Great stuff, I love that example. It reminds me of the question “What business are you really in?” versus what you think you’re in. As that example illustrated, she was not in the business of teaching a language, but rather she was in the business of setting them up for success for their journey, and then the key there also was the immigration attorney, where you’ve got alignment of interests with the sales funnel, where you’ve got people sending you leads, who want to send you leads, and are a gatekeeper, or someone that has a high degree of influence on a lot of people who are in her target audience.

Matthew Pollard: You’re exactly right. What we’ve really looked at is “China Success” was the message, the niche was executives being relocated to China, and the sales system was using a joint venture with immigration attorneys. That’s what a lot of people don’t look at, and they always think “I’ve got this functional skill. Now I need to bend myself to the market.” Especially in service provider businesses, that makes you feel incongruent, inauthentic, and it’s why a lot of people suck at sales.

If you can tap into – and this is what I’ve learned – what you’re truly passionate about, you can have this avalanche of energy always, to share with your ideal clients, and that’s what gets you more market share than ever.

Just to track back to what you were talking about, about this one step that’s earlier than that… One of the things I did – and I did this at the National Freelance Conference recently – is I went through this five-step process to crafting a unified message and discovering your niche of willing-to-buy clients… And it really was — it’s a five-step process, and it’s not something that I sell, it’s something that I give away; people can get that at MatthewPollard.com/growth. For 45 minutes, we went through this worksheet, and at the end I said “Now, put your hands up if you now have a strong, unified message that separates you from everybody else, and you feel more comfortable sharing it with your client base, and a right understanding of who your ideal customer demographic is.” About 95% of the room put their hands up.

Now, what’s sad about this though is about 82%-83% of the room kept their hands up when I said “Now, keep your hands up if this is the most time you’ve ever spent on marketing”, which is terrible… I mean, that’s 45 minutes, right? Now, what I discovered though is the group of people that struggled with the people who couldn’t make the decision on step three – which specific demographic to choose – and what had happened is they’d been trading in what they were passionate about for what was practical so long they weren’t even connected to what they were passionate about anymore.

For the people that were in that part of the process, I’ve actually created a podcast called Better Business Coach Podcast, and one of the segments is — it’s episode 17, it’s called “Forget about goals. Why is the key to success.” It will help you reacquaint yourself with what your passion, what your why’s and what your drivers are. Then if you go to MatthewPollard.com/growth and do that worksheet, then you’ll be able to really congruently discover your niche of willing-to-buy clients and the message that’s going to resonate and excite them to wanna know more about you.

Joe Fairless: Matthew, thanks so much for being on the show. Thanks for talking about the three ways to rapid growth, the underlying foundations that’s required in order to be sustainable over a period of time, as well as case studied to go along with that example. I hope you have a best ever day, and we’ll talk to you soon.

Matthew Pollard: Cheers, mate.

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Michelle Ketchum on Best Show Ever flyer

JF1346: Mayonnaise Fights, Man Crushes, & Property Management with Michelle Ketchum

Michelle is the owner and broker of Acorn + Oak Property Management. Her and her team have over 1000 units under management, and still growing. They take a customer service approach to their company, and that really sets them apart from other companies. They even have tenants that wait for a unit to open up, just so they can rent from Acorn + Oak. Hear different tips and advice that you can use to set yourself apart from your competition. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Michelle Ketchum Real Estate Background:

  • Owner/Broker in Charge of Acorn + Oak Property Management and managing partner of Acorn + Oak Triad.
  • Have been an active property manager and Realtor since 2009
  • Active in property managements throughout North Carolina and is leading Broker in the area
  • Based in Durham, North Carolina
  • Say hi to her at www.acorn-oak.com
  • Best Ever Book: The Four Hour Work Week by Tim Ferriss

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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, Michelle Ketchum. How are you doing, Michelle?

Michelle Ketchum: Hey, Joe. Doing well. How are you?

Joe Fairless: Good! I’m glad you’re doing well; I’m doing well as well. A little bit about Michelle – she is the owner and broker in charge of Acorn + Oak Property Management, and she’s been a managing partner of Acorn + Oak Triad. She has been an active property manager and Realtor since 2009, and her company does property management throughout North Carolina, and is also a leading brokerage in the area. Based in Durham, North Carolina, and you can say hi to Michelle at her website, which is in the show notes link.

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

Michelle Ketchum: Absolutely. Michelle Ketchum, owner of Acorn + Oak Property Management, down here in Durham, North Carolina. We’ve been in business since 2013, so we just celebrated our five-year anniversary here in the triangle…

Joe Fairless: Congrats!

Michelle Ketchum: Thank you! Really amazing growth since the beginning. We’re currently managing just over 1,000 properties in the triangle area, and just having a really good time doing it. We focus on mid to high-end rental properties; that’s anything from a single-family home, to townhomes, to — our largest client owns about 90 units in Durham… So everything in between, as well.

Joe Fairless: 90 units – is that an apartment community, or does that person have 90 single-family homes spread out?

Michelle Ketchum: It’s some small multifamily complexes, with like 14 units here, 20 units there… They’re kind of all in the same neighborhood, but just split up a little bit.

Joe Fairless: Got it. So in the case of the 20-unit, that would be a 20-unit apartment building, or 20 single-family homes around each other?

Michelle Ketchum: Well, this particular client – that would be a 20-unit apartment building, but we do have some folks that own 20-30 single-family homes. There’s a pretty good market down in this area for student housing, so we work with a lot of those landlords too, that are renting out big homes to UNC Chapel Hill students, and some Duke students, and things like that.

Joe Fairless: Okay. I’d love to dig into some of the intricacies of managing 20 units, versus student housing, versus single-families… But first, before we started recording you said you were doing some research on the show and you took issue to my no-fluff approach… Can you elaborate on that?

Michelle Ketchum: I did… I’ve been listening to quite a  few of your podcasts and I know that it’s your signature line to say “no fluff”, and I’m a pretty fluffy person; I mean, I’m not girly, but I do bring a hands-on, heart-led approach to property management, which I think has really been the key to this company’s success – the fact that we are compassionate, we try to do the right thing, not only for our clients that own the property, but for the tenants that are in place. We really want it to be a win/win/win, the third win being for us, the property managers.

But anyways, so I was a little nervous about not being maybe as hardcore as what you’re used to… But fluff isn’t always bad.

Joe Fairless: Fair enough, I agree to that – fluff isn’t always bad. From a compassionate standpoint, how does that come to fruition as a manager, that would be different from perhaps another company that’s managing properties?

Michelle Ketchum: When I started Acorn + Oak, one of the very first things I did was just research on other property management companies in the area; that’s a good place to start when you’re starting a new business – what’s the competition doing? What are they lacking? And what I felt time and time again were complaints actually both from the clients as the property managers, but also a lot of tenant complaints just that they weren’t being treated very fair. They were going weeks on end without any communication for different maintenance requests, they ordained a lot from security deposits just because… And I really took that to heart, and I would say almost everyone out there has been a renter, and a lot of us still are, and I just really wanted to bring this philosophy that everybody matters to my business.

So some things that we do are — for instance, a lot of times property managers will charge a non-refundable pet fee, and… We’re all dog owners at Acorn + Oak, so it’s really important to me to just kind of not do that anymore. You can collect an extra deposit, which will basically do the same thing as a fee would do – rectify any damage if there is any damage done by the pet… But just things like that, where we’re not nickel and diming tenants just because we can, and really just giving them nice places to live, treating them fairly, and just really making it an experience about them as the customer, and really thinking about them as the customer, and then the property as the product, and the property manager and the client as kind of the business owner. You always wanna make sure your customers are happy.

We just really led with that approach, and it has absolutely helped and made us one of the best companies in the area to rent from. We have tenants that specific land on our website and have heard great things about us, and they’re like “We’re renting from you. It just depends on when the right house comes up, but we are renting from your company.”

Joe Fairless: Wow.

Michelle Ketchum: So it really does matter.

Joe Fairless: Oh yeah, creating a property management brand is not something a lot of property management companies do to the extent where people are requesting to live at their properties. That’s not very typical. What are some other tactical things…? Because I’m gonna admit that when I heard you say “compassionate”, my first thought was “So her company will let it slide if a resident is late on the rent, and then that’s gonna hurt my bottom line.” Selfishly, that’s just what I immediately thought.

So one, can you address that? And then two, just some other tactical things that you all do that other management companies might not do.

Michelle Ketchum: Sure. Specifically for late rents – it’s our policy that if somebody is late for the very first time, we’ll waive their fee and reduce it from whatever it was down to a dollar. So it’s still on our records that they paid late, but we reduce it and they get one freebie. And then it really just depends. There’s tenants of ours that have rented for years and years and years, and maybe they had a late payment their first year, and now it’s year four… So they’ve been great tenants, but guess what – they’re people, and life happens, and their car broke down, or the kid had to go to the hospital, and they’ve had some emergencies come up… So we don’t necessarily just automatically waive that fee, but we think about it, and we talk to our clients, and  of course if they’re troublemakers we’re not just gonna keep waiving fee after fee; we’re going to charge those fees, and potentially not renew if it becomes a real problem.

But for those people that have been great and they’ve just had a situation come up in life, we’re gonna be compassionate about those things.

But at the same time, we can play hardball when needed, for sure, and we’re not gonna let people just take advantage of us.

Joe Fairless: From a fair housing law standpoint, how do you walk that line of doing it on a case-by-case versus just uniform, regardless of what the situation is? Educate me on that part, will you?

Michelle Ketchum: Yeah, it’s really important, and that’s why we do allow it one time. We do make note of it. It’s not based on anything else except that’s just our policy, for the first time… And then after that, it gets into — again, we just have those conversations with the client; it’s not like we’re just making the decision for them on if we should waive it, but we’re giving them the option, and at the end of the day it’s their money, so they really have the ultimate say on if they want to waive it or not.

Joe Fairless: Some other tactical things… You mentioned instead of a non-refundable pet fee you have a refundable pet fee, correct? So what are some perhaps other tactical things that you all do?

Michelle Ketchum: Some other ways that we make it tenant-friendly – and still again, with any of these ideas, they always have the owner’s bottom line in mind.

Joe Fairless: Sure.

Michelle Ketchum: Going back to the pet fee vs. deposit – we still are protecting the owner’s investment, and usually what we do when we do the deposits is we’ll do something higher… You’ll see a lot of times where it said maybe a non-refundable $250 pet fee – what we’ll do is we’ll charge a $400-$500 refundable pet fee. So we’re charging more, but the tenant has the chance to get all of that back if their cat just lays around like a pillow and doesn’t do anything to mess up the house.

So again, we’re keeping the owner’s bottom line in mind, always… But another thing that we do too is we don’t make it easy for the tenant to break the lease, but we also don’t make it completely financially horrible for them to have to do so. We live in a really transitional area, where there’s a lot of professional people, they’re getting promoted, or sometimes they’re getting fired or being laid off, and we don’t want them to have to stay in a lease they can’t afford… Or again, if they got promoted, then they’ve got a great opportunity to move away. We don’t want to make them pay 2, 3, 4 months rent to break a lease, or a huge termination fee… What we do is we give them the option of advertising the property on their own, finding a tenant to take over their lease, and they have to pay rent, obviously, through that term, until the day before the new lease starts. They’re also required to have the property professionally cleaned… But that’s it. So they can get away with it for almost the cost of a house cleaning, and a little bit of their time.

For the busy professional we do offer a service where they can pay us and we’ll re-advertise for them, and really just do our best to find someone to take over that lease. And a lot of times, the owner of the property – they don’t skip a beat, right? They’ve got rent coming through, they have the tenant pay for the professional cleaning and anything that needed to be done during the turnover… The tenant wasn’t paying an arm and a leg to break their lease. It just makes it a little (I think) fair, and a little bit more flexible to rent with us.

We also really do a lot of nice things for our tenants throughout the lease. When they move in, they get this awesome welcome box that’s beautifully hand-crafted with a card from us; it’s got everything from [unintelligible [00:11:47].04] coupons to local business, a roll of toilet paper… Just a little welcome box saying “Hey, we’re happy to have you here. We’re gonna treat you well while you’re here. Welcome to your new house.”

We do monthly gift  card drawings every month for tenants that pay rent on time… So we just don’t always approach it as “Ding-ding-ding! We’re gonna ding you with a late fee, we’re gonna ding you with an early termination fee…” It’s like, “Let’s support you if you’re doing what you’re supposed to do.” So we do monthly drawings every month for tenants that pay rent on time, we do renewal gifts, and we actually have a tenant appreciation happy hour thing coming up next month where we’re having all these raffles, and just having them stop by our office for some ice cream and beer.

Joe Fairless: Yum! Sign me up.

Michelle Ketchum: If they’re of age.

Joe Fairless: Of course, obviously. With the monthly gift card drawings, how much is that gift card worth and how many gift cards are given out every month?

Michelle Ketchum: We do two right now, but as we continue to grow, we’re probably gonna need to up that… But we do two $20 gift cards to a local business. We don’t generally give out gift cards to chain restaurants or anything like that; we’re trying to support our local restaurants and shops and everything. They also get a really awesome Acorn + Oak T-shirt… So it’s about a $30 value.

Joe Fairless: Cool!

Michelle Ketchum: But hey, they’re paying their rent on time. For doing what they’re supposed to do, there’s a chance they can win something cool.

Joe Fairless: Absolutely. Have you noticed any benefit as a result of including local businesses in your marketing approach?

Michelle Ketchum: It’s probably just something I haven’t noticed, but this area is such an awesome place to have a small business and to have a local business… So it’s just being part of the community. That was another really important piece of starting a company – I want it to be an active, supportive part of this amazing community and culture that we have down here.

I think we kind of just rub each other’s backs. Some of our clients are business owners in the area. Some of our tenants are business owners in the area… So it’s just nice to keep it local when you can.

Joe Fairless: The renewal gifts – how do you determine how much that gift is and what do you give them?

Michelle Ketchum: It’s pretty standard. It’s another $20 gift card to a local ice-cream shop here in downtown Durham, and it just says, basically, “Thanks again for renewing. We’re so excited to have you! Enjoy an ice-cream out on us.” Usually, $20 should get you two fancy ice-creams, so… It should get you two ice-cream cones.

A lot of our renewals are happening in the summer, so again, it was just kind of a fun thing to do in the summer months.

Joe Fairless: And you have over 1,000 properties that you’re managing. If let’s say you get 75% of those residents renewing, then you’re investing $15,000 in that local ice-cream shop for these renewals… So do you have some sort of deal negotiated with them, where you save some money on these gift cards?

Michelle Ketchum: You know, I don’t… But I should.

Joe Fairless: That local ice-cream store owner is gonna hate me. [laughs]

Michelle Ketchum: [unintelligible [00:14:56].16] Yeah, exactly. Again, so this is five years old. When I started, it was me, working at my house, with nothing. No brand recognition, nothing. I literally started from the ground up with this thing… So the renewal gifts – those have kind of come along over time; that was actually something that we developed last year, so it wasn’t something we’ve always done. So it’s only a year old, but you’re right, I should be talking to this ice-cream shop about getting some sort of discount.

Joe Fairless: Don’t tell him/her that I mentioned this, because I don’t wanna be on their bad list.

Michelle Ketchum: I won’t…

Joe Fairless: Let’s talk about the differences in managing a 20-unit versus a single-family house… Because you started out doing single-family homes and you have a 20-unit in your portfolio that you manage. That’s accurate, yes?

Michelle Ketchum: Yes.

Joe Fairless: Okay. What is the difference between managing the single-family and the 20-unit, and how did you evolve your team and the process to be able to do that?

Michelle Ketchum: Obviously – or maybe not obviously – managing a 20-unit apartment complex is gonna be… It’s a small building, chances are the layouts and the floor plans are exactly the same, so there’s gonna be less work as far as producing marketing and remembering paint colors and all of that. It’s gonna be a little bit easier if it’s in bulk, and generally those clients pay a little bit less in management fees… But it’s really not that much different in anything else.

The way that we structure it – some of our agents work for maybe two or three clients; we’ve got a couple people at our company that really love multifamily. They’ve come from the apartment complex world, so they’re just bringing that expertise and they’re working with those kinds of clients.

Then we have other people that really love working with the investor that’s just getting started and they’re buying a single-family home this year, and a townhome next year, and all that. But the way that we approach it really is we try to do everything in batches. So even if it is 20 single-family homes versus one building with 20 units, we’re still really trying to do batches and kind of keeping them as a portfolio. If we’re doing inspections, we’re gonna inspect either that one building with the 20 units, and we’re going to inspect those 20 homes at the same time.

I don’t know if that really answers your question, but we try to kind of make the single-family homes into sort of like a multifamily, just with a little bit more drive time in between… But the way that our agents are set up too is – when you start as a property manager with Acorn + Oak you’re kind of given a territory, and usually that territory is pretty close to where you live. So the idea is that you’re not having to drive from Raleigh to Durham and to Chapel Hill; really, the idea would be let’s condense your territory into maybe a five to ten minute drive from your house, so that you can easily serve these tenants and these properties and these clients.

Joe Fairless: So for a Best Ever listener who’s got a 20-25 unit, maybe a 30-unit that they are looking to purchase, would you say it does not matter if the property management company currently does apartment buildings and they’re only doing single-family homes?

Michelle Ketchum: I think it can be done, but I think it helps to have a company like ours, that has the experience from both sides. So with the multifamily that we’re doing right now, we’re doing things differently, and there’s also a whole side for like cap ex, repairs, there’s a whole side for budgeting and specific reports, because it’s just a little bit different.

So I would say that it’s not necessarily a deal breaker; I would always hire a property manager based on their personality and how you all mesh together. That’s me personally. I would choose just getting along with them and having the same ideas and philosophies on how you wanna run that property; it’s gonna be more important than their experience, because I think the experience kind of goes both ways. If you did multifamily, you can learn how to do a single-family residential home, and vice-versa. But at Acorn + Oak you don’t have to choose, because you get both – you get the great personality and the great service, and all of the expertise… But maybe in other markets, I would say that I’d probably go for, again, just kind of “How do I feel about this person?” I’m kind of a gut person.

Joe Fairless: Yeah, it makes sense. In terms of the student housing, the last question I was kind of leading you – but I shouldn’t have, because then you said basically you didn’t do many different things for the single to 20… So I won’t have a leading question this time, I’ll just ask you – is it different with student housing, versus singles, versus apartments, and if it is, how so? And if not, then we’ll move on.

Michelle Ketchum: Student housing is definitely its own animal, and I think “animal” can sometimes be the right word. [laughter] You just have to have different expectations, and that’s really any kind of real estate investing. You just have to have really good expectations on what this is gonna look like.

For student housing, specifically for what we do over at UNC Chapel Hill [unintelligible [00:20:13].18] Some of these students are moving at August 1st. By September 24th – literally, less than two months into their lease – they have to tell us if they’re going to be staying for the next school year. So they’re making decisions about renewals really quickly. It’s important to start advertising those student rentals.

I’m giving an example – if someone wants to move in August 1st, 2018, so their lease runs through July 31st, 2019… So by September 24th, 2018 they’re telling us if they’re gonna be staying from August 2019 through July 2020.

Joe Fairless: Wow.

Michelle Ketchum: Yeah, they’re having to make those decisions. But that’s cool, chances are they know if they like the house, moving kind of sucks, so they usually tell us, and we start advertising October 1st for 2019-2020 leases… And it’s just crazy, it’s a frenzy, and all the students at UNC know that it’s the time to advertise, so the advertising is a little bit different, there’s obviously a lot more moving parts, because sometimes you’ve got four people living together, and they’ve all got a co-signer, and maybe four groups of four people with four co-signers, so that’s a lot of people…

So it’s different in that way, and then the expectations are they’re gonna leave couches at the curb, they’re going to leave trash in the house… The houses are definitely gonna need a deep clean when they move out… I’ve had great tenants, and I’ll say, I was like a pretty mature undergrad, so I’m not saying all undergrads are this way, but we’ve also had tenants that have had mayonnaise fights on their way out, and now there’s grease stains all over the walls… So you have to expect that a mayonnaise fight might happen, and just be prepared that we’re gonna have to [unintelligible [00:21:57].03] we have a nice deposit as well for these student rentals, so…

A lot of the times too you have to understand that – specifically in UNC Chapel Hill – you can live off-campus I believe as soon as you’re a freshman, so a lot of these people are going from living with their families to being out on their own, and they have no idea what an air filter is, or a water filter, or a [unintelligible [00:22:24].09] filter… And I was asking myself, I’m like “When did I learn about air filters?” I don’t know, but there was a time in my life when I learned about air filters.
So it’s really kind of like taking these kids under your wing too, and showing them how to live alone, in a house, without their parents. That’s why a good property manager takes that off your plate, so we can be the den mother.

Joe Fairless: Many unique challenges there, that’s for sure. When you were talking about the mayonnaise fights – I never had a mayonnaise fight, but in college we rented a house, and it was in Lubbock, Texas; it was like $200 each of us, and there were two of us, so like $400. We had a wrap around couch we found on the side of the road, and since it was a wrap around, it wrapped around in a corner, so in that corner there was a little open spot behind the couch, in between the couch and the wall, and we would just throw our empty beer cans in that corner, instead of taking them to the trash can.

Michelle Ketchum: And this is not unheard of, yeah.

Joe Fairless: Good, good, I appreciate you backing me up on that one.

Michelle Ketchum: And I hope that in my title on your podcast website it says something about mayonnaise fights, because we really want people to click and listen, like “What is she talking about…”

Joe Fairless: [laughs] That’s right, that’s right. “Student rentals and mayonnaise fights. Wanna learn more? Listen to this show.” Well, what is your best real estate investing advice ever?

Michelle Ketchum: My best advice would be to just do it. I think a lot of people are scared, and if you have the right property manager helping you along the way, it’s really not that bad. And a lot times too we’re getting clients — so we actually don’t do any general brokerage; we don’t help people buy or sell property, we only do property management. We wanna do one thing, and we wanna be the best at it that we can. But we get a lot of people that contact us first, they’re thinking about investing here and they wanna make sure that they’ve got a good property manager in place before they even start looking… Because again, the property management will make or break your deal.

So I would say don’t be scared, do it, educate yourself, get some advice… It’s not for everybody; more people could do it, but I think they’re a little nervous. So get educated, learn, and if you feel like it, start out with one, see how it goes, and then you’ll get the bug and you’ll be having 90 properties.

Joe Fairless: Between single-families, student rentals and small to medium size apartment buildings, what has the highest profit margin for you as a management company?

Michelle Ketchum: What do we make the most money on?

Joe Fairless: Yeah.

Michelle Ketchum: It’s probably just your middle of the road single-family home. Our student rentals rent for a lot of money. You said you were paying $200 in Lubbock, Texas. UNC Chapel Hill houses are going for $800/bedroom, and they’re not marble, quartz, gold-plated houses; they’re basic homes, but it’s all about location.

So the rents are high there, but a lot of times we end up discounting our management fee for those… So for us it’s probably just the people that own the single-family homes, taking them up one at a time.

Joe Fairless: And why do you discount your management fee? Because from what you describe, it sounds like they’re much more time-intensive, those student rentals.

Michelle Ketchum: Our management are an initial fee ($395), and then 10% of the rent… Which I don’t know that I’ve seen anyone charge more than 10% yet. And if people have more than one single student house, again, this can get kind of pricey. So a lot of times they’re kind of coming in knowing that they can get it for cheaper. We’re usually settling — we don’t stray too far from 10%, and some of our clients do pay 10%, but because we know that could be a pretty large management fee… I mean, it is a lot of work, but it’s just different work.

Joe Fairless: Yeah, it’s more entertaining work.

Michelle Ketchum: It’s definitely more of a surprise.

Joe Fairless: It sounds like it’s really more entertaining.

Michelle Ketchum: Yeah, exactly.

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

Michelle Ketchum: Yes!
Joe Fairless: Cool. First, a quick word from our Best Ever partners.

Break: [00:26:18].25] to [00:26:59].00]

Joe Fairless: Best Ever book you’ve read?

Michelle Ketchum: I love The 4-Hour Workweek by Tim Ferriss, and I think I’ve just been sort of in love with Tim Ferriss, but I also like Tools of Titans by him; I’m reading that right now.

Joe Fairless: Great book… Both of them. I completely agree. I have a quasi-man crush. I have a Tony Robbins full-fledged man crush, but Tim – quasi-man crush; I love most of the stuff Tim does and talks about. What’s the best ever business deal that you’ve done? Either a property, or a client transaction, or something else.

Michelle Ketchum: You know, I think when it really boils down to it, when I first started the company, again, I had very little. I had some experience working for another company, but Acorn + Oak was brand new, and I got my first client that had 30 properties, and he totally whittled me down… But that was such a monumental point for my business.

You always kind of wonder, like “Am I gonna make it? Am I gonna make it? How long is it gonna take?” and as soon as I got that client, I was like “I’m in. I’m all of a sudden legitimate”, and it really started to roll in after that. So he’s a current client, and we butt heads sometimes, but at the end of the day we actually have legit love for one another… So I always say that he’s been my best deal.

Joe Fairless: What’s a mistake you’ve made on a deal or a transaction, or in business?

Michelle Ketchum: I would say that there was a deal — and it wasn’t even that big of a deal, but it was a multi-unit building, and again, because I’m this fluffy person, we had a verbal contract… I felt like I did a lot of work, I did a lot of reports, I did a lot of inspections, and I thought everything was good to go. I’m used to people doing what they say they’re gonna do, and right before the deal closed, they said “We’re gonna go with another company, and I felt really used… But it was a great lesson in business – get your contract signed.

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

Michelle Ketchum: I really enjoy… Again, I haven’t been a business owner for super long, but I’ve had quite a bit of success – and success to me isn’t money, but I’ve had this rollercoaster ride, and so I’m now in this point in my career where people are actually wanting to sit down with me and hear my story and hear the do’s and don’ts, and I really love getting into this mentorship field… Especially, like I said, Durham, North Carolina is just a wonderful place to have a local business, and I’m always up for like supporting people that wanna venture out on their own. I love being in a position where people actually want my advice, and being a mentor.

Joe Fairless: And how can the Best Ever listeners get in touch with you and learn more about Acorn + Oak?

Michelle Ketchum: Our website is a great place. There’s actually a video on there as well. That’s acorn-oak.com. Or my e-mail, which is Michelle@Acorn-Oak.com.

Joe Fairless: Lots of lessons learned in our conversation. I’m so grateful that we were connected and that you’re on the show. One is the differences between managing single-families versus small to medium-sized apartment buildings, versus student housing… The unique challenges in particular with student housing — well, this is actually a pro, having a longer lead time to fill vacancies… But then some cons – having a lot of co-signers, having a lot of people within each of the properties, and it can get messy with mayonnaise fights… As well as some ways that you have positioned Acorn + Oak from the ground up, to be differentiated by taking that compassionate approach, hands-on, heart-led approach, as you say, and some specific things that you’re doing – the refundable pet fees, welcome box with a card, monthly gift card drawings for residents who pay on time, renewal gifts of $20, and then coming up, a tenant appreciation happy hour with ice cream and booze.

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

Michelle Ketchum: You too. Bye!

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real estate pro advice

JF865: Dead Body Disposal at a Property and Why You MUST Wait for EXECUTED Docs Before Making Plans #SituationSaturday

You read the title correctly, a dead body was disposed at a property that our guest had interest in. Everything that could go wrong did go wrong in this deal, and some pretty serious cycle paths were definitely against our guest… Hear the details!

Best Ever Tweet:

Ross Hamilton Real Estate Background:

– CEO of Connected Investors, http://www.cix.com which is an aggregator of crowdfunding portals
– Nominated by Entrepreneur Magazine as Emerging Entrepreneur of the Year in 2011
– Based in Wilimton, North Carolina
– Wrote the book “Real estate investing in your 20s
– Used to compete in BMX Freestyle
– Listen to his Best Ever Advice here:

https://joefairless.com/podcast/jf308-how-to-be-a-social-media-marketing-expert/

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever

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JF855: Beginner Wholesaler is CRUSHING It with 9 Properties!

Two properties under contract in her first 30 days! She is extremely positive and an action taker in the DFW market. This episode is for those who might lose hope starting their wholesale ventures, keep the faith and remember that it’s all about your attitude and network.

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Brandy Johnson Real Estate Background:

– Owner at Turner Investments, a multi-service company that has the ability to buy, sell and wholesale properties
– Began investing in August 2016, now has 3 available properties, within 30 days had 2 signed contracts
– Based in Thomasville, North Carolina
– Say hi to her at buynchousescheap.com
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever

https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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JF835: $10,000 in 2 Days, Using a VA, and How Even New Guys Can Make a KILLING!

He has been an active wholeseller for only four months but nets approximately $20,000 every month. Our guest jumped in 100% after limited experience in real estate. He managed a multi million dollar portfolio as a young man and scraped by when between checks. Now he is rocking his market, hear how he did it and what he’s doing now!

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Max Maxwell Real Estate Background:

– Full time wholesaler at Cash Homes Triad; A real estate solutions company
– Started in real estate in 2006, very successful for 2.5 years until the crash
– Mainly does flip, hold, and rent
– Served 4 years in US Air Force and is now a private pilot on the side
– Based in Winston Salem, North Carolina
– Say hi to him at http://www.cashhomestriad.com
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

Click here for a summary of Max’s Best Ever Advice: http://bit.ly/2gGiAJI

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever

https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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JF820: How to Own America, or at Least Portfolios of Properties that Render Big Returns Nationwide

Would you like to begin earning a massive yet passive income on large portfolios? Today’s guest sets up a somewhat turnkey operation that you are able to analyze and purchase all at once. His business model is fascinating with a ton of upside for the buyer, hear how you can buy your next portfolio.

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Adam Stern Real Estate Background:

– President at OwnAmerica; A National Real Estate Investment Brokerage
– OwnAmerica is the leading broker in the single family residential space
– Adam is currently the number 1 portfolio salesperson in the US
– 14 years in senior leadership positions within companies in the residential and investment real estate space
– Based in Charlotte, North Carolina
– Say hi to him at http://ownamerica.com
– Best Ever Book: Think Bigger by Mark Van Rijmenam

Sponsored by:

Door Devil – visit http://www.doordevil.com and enter “bestever” to get an exclusive 20% discount on your purchase. Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:

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JF811: How to Be Rich and Generous and B.R.A.G. About It

Would you like to give back? Our guest helps other people complete real estate transactions as a coach and allows others to give back to the community. He is the host of a radio show and has completed just about every type of deal in the residential real estate investment realm. Here why he believes there is no excuse to not buy real estate if you’re making offers and some interesting deal scenarios.

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Larry Goins Real Estate Background:

– Active real estate investor & Host of the BRAG Radio Show
– Founder of Real Estate Day Trading, the art of buying and selling homes from your home office
– Real estate for over 30 years
– Travels to speak and train audiences on his strategies for buying and selling houses
– Author of “HUD Homes Half Off!” and “How to Get Started in Real Estate Day Trading
– Based in Charlotte, North Carolina
– Say hi to him at http://www.larrygoins.com/besteverlisteners
– Best Ever Book: Lessons from the Richest Man Who Ever Lived by Steven Scott

Want an inbox full of online leads? Get a FREE strategy session with Dan Barrett who is the only certified Google partner that exclusively works with real estate investors like us.

Click here: http://www.adwordsnerds.com to schedule the appointment.

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no fluff real estate advice

JF688: How to AFFORDABLY Work With REALTORS Nationwide

Ever wanted to close deals in other states but don’t have the time? Today’s guest will shoot you an agent in any market to show and sell your properties very quickly and EXTREMELY affordable! Listen very closely.

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Tommy Sowers Real Estate Background:

– Founder and CEO of SoloPro
– Raised 1.6 Million in capital
– Based in Durham, North Carolina
– Say hi at solopro.com

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

Made Possible Because of Our Best Ever Sponsors:

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

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

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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Best Ever Show Real Estate Advice

JF648: How to Host a Rockstar MEETUP Where all Deals Find You

He and his partner host four meetings A week, no mistake, four meetings a week! It makes sense as the majority of all his deals came from these meetings of adding value to other investors and has been diligent in doing so. He has raised a following in Charlotte and is quickly establishing himself as an authority in his local market. Hear how he sets it all up and what success he has seen.

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Taylor Peugh Real Estate Background:

– Holds 4 meeting a week for real estate investing (over 15 hours)
– Acquired properties via meetings
– Based in Charlotte, North Carolina
– You can reach him at taylor.peugh@gmail.com

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

Made Possible Because of Our Best Ever Sponsors:

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

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

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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Best Ever Show Real Estate Advice

JF633: How She Sells the Majority of Her Inventory on FACEBOOK!

That’s right she uses Facebook to sell her listings. Today’s guest is a top-rated broker and agent with volumes of well over 7.5 million. Tune in to hear how she built a team and sells her inventory.

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Aimee Freeman Real Estate Background:

– Became the top 3% of all agents in Wilmington, North Carolina
– Owner and broker of Aimee and Co. (Keller Williams)
– Over $7.5MM in sales volume
– Certified negotiation expert
– Based in Wilmington, North Carolina

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

Made Possible Because of Our Best Ever Sponsors:

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

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

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

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