JF2363: Losing Credit Last Second With Gary Beasley #SituationSaturday

Gary Beasley is the Co-Founder and CEO of RoofStock, a real estate investment marketplace. He was a previous guest on episode JF1129 where he shared more of his journey and start into real estate but today he is going to share a sticky situation where he was in the middle of a deal and lost his funding while in the middle of it and only had one month left of cash. 

Gary Beasley Real Estate Background:

  • Co-Founder and CEO of RoofStock, a real estate investment marketplace
  • Gary was co-CEO of Starwood Waypoint Residential Trust – which owned and managed 15,000 single-family rentals
  • A previous guest on episode JF1129
  • Based in Oakland, CA
  • Say hi to him at www.roofstock.com 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“It’s amazing how resilient our industry is, especially after COVID19” – Gary Beasley


 

TRANSCRIPTION

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

Gary Beasley: I’m doing great Theo. How are you doing?

Theo Hicks: I am well. Thanks for asking and thanks for joining us again. Gary was previously interviewed in an episode aired three years ago. We’re going to catch up with what Gary has been up to, as well as talk about a sticky situation because today is Saturday, Situation Saturday. We’re going to talk about a sticky situation that Gary was in, how we got into it, how he got out, lessons learned, that you can apply those lessons to your business.

But before we get into that situation, a little bit about Gary. He’s the co-founder and CEO of Roofstock, a real estate investment marketplace. He was also the co-CEO of Starwood Waypoint Residential Trust, which owned and managed 15,000 single-family rentals. His previous episode is Episode #1129. Make sure you check that out. Based in Oakland, California. His website is roofstock.com. So Gary, before we get into that sticky situation, do you mind telling us a little bit about your background and then what you’ve been up to since we last had you on the show?

Gary Beasley: Sure. It seems like ages since I was last on this show three years ago, a lot has happened. So my background, I’ve been sort of at the intersection of real estate and technology for the majority of my career. I started off in a somewhat traditional real estate capacity, doing financial analysis prior to business school, got my MBA, did some work in the REIT industry for a while, and really caught the entrepreneurial bug at Stanford Business School. I knew that ultimately, I wanted to do something a little bit more entrepreneurial. So Roofstock is my third real estate startup. Broadly defined, those early days at ZipRealty, which was one of the first online residential brokerages, and we were fortunate enough to take that company public in 2004. I was the CFO of that business.

Then my second real estate startup was called Waypoint Homes. We built a platform in the single-family rental space during the big downturn ’07 to 2011, and built that into a company that we ultimately took public in partnership with Starwood Capital. That was called Starwood Waypoint Residential Trust, and that’s where we’ll talk about a sticky situation that we had when I was at Waypoint.

So we took that public, and I was the co-CEO of that business, as you mentioned. We took that public in 2014, and then I left in 2015 to start Roofstock, which is really a marketplace for single-family rental homes. So think about it a little bit like Amazon for houses. As a retail investor, you can buy or sell properties that already are tenanted, much more like a stock or a bond, through our platform. We do a lot of work to get the home certified and break down those geographic barriers so you can make it much more like a financial transaction.

When we last talked in 2017, we were still quite small. We’ve grown quite a bit since then; we crossed over, at the end of last year, a couple of billion dollars of transactions through our platform, and we’ve continued to grow. We’ve had some interesting experiences through COVID where the business really dropped off a cliff in March and April, and really started to come back in earnest over the summer. So we’re now sort of back ahead of levels we were at pre-COVID. So one of the things we could talk about is the resiliency of the sector we’re in. But anyway, that’s kind of what I’ve been up to. We’ve got about 150 people into offices, and we’re active in about 70 markets around the country with our marketplace today.

Theo Hicks: Thanks for sharing that. So as you mentioned, the sticky situation… I’ll let you explain it in more detail, just at a high level. Gary’s company, Starwood Waypoint Residential Trust, had a big line of credit negotiated with a bank, and then it seems like they backed out last second. You only had a certain number of months worth of funds left to use for your company, so you had to come up with a solution to that problem. Do you mind telling us more detail, kind of set the context for the situation, and why it was so sticky, as we say?

Gary Beasley: Just hearing about it is making my blood pressure go up, so this will be cathartic. I haven’t talked about this in a little while… But as an entrepreneur, oftentimes you do face these existential threats to your business. We were one of the first groups to raise significant equity capital to buy distressed homes back during the last housing crisis. We raised 200 million dollars of equity from a company called GI Partners; they were a very high-quality, private equity firm based in the Bay Area. And because it was a new asset class really, the single-family rental homes at scale, there was really — at that time in 2012, when we were doing this, there was no debt market. You could get individual mortgages on properties for perhaps 50% of the value, but that was not very efficient. We were buying thousands of houses and we needed a credit facility that was similar to what was done for multi-family or other sorts of commercial assets.

So what ended up happening was, we were working with a large bank, and we had fully negotiated the deal. This was roughly a 200 million dollar credit facility we were negotiating. So it was going to be the first of its kind in single-family rentals. The bank was super excited about it, we were super excited about it; we thought it was going to take three to four months to put it together. It ended up taking nine months. It was extraordinarily complex and it ended up going to the very top levels of the bank, because it was new.  And I think it was because people wanted to sort of take credit for what a cool and innovative structure it was, so they wanted to get it really noticed within this bank, even though at that level it really didn’t need to go up that high. So it was ostensibly approved until the very end.

I remember this was during the London Olympics, and one of the senior bank members was at the Olympics. The decision was made at the last minute, and really kind of right prior to funding, that the bank just couldn’t do it because of the headline risks of funding a company that was building a business off of foreclosed home assets. So even though this had been discussed at some length, and we could legitimately say we were part of the solution to the housing crisis, we were not the problem. What we were doing is buying homes that needed capital, renovating them, and renting them to families who were looking for affordable housing products.

But that left us in a real bind, because what we had been doing is we built this machine to keep growing and we had our full team going, we had acquisitions, renovation, and property management people all over the country in addition to our corporate staff… And we were investing, call it 30, 40, 50 million dollars a month of capital. And because we were counting on this debt to be in place, we were investing all of our equity. So we had an expectation there’d be another couple hundred million dollars of capital available to keep funding the business and keep buying. So we’re kind of accelerating toward this cliff. And then the rug got pulled out from under us, and they said, “Sorry, guys. We just can’t do it.”

So because it took so long to do, we knew that it would be impossible to put another facility in place anytime soon, and we had literally a month, perhaps two months of cash available. So we really thought we were done. We said “Okay. Now, what could we do? Can we just become a property management company? Should we sell the portfolio? What can we do?”

And it’s funny how life works… The next day after this happened, we had a meeting scheduled with another very large lender, Citibank, who came in. It was just a call, that they came in kind of a courtesy call, to kind of see how they could be helpful, blah, blah, blah. At that time, I said, “Well, I’ll tell you how you could be helpful. You could give us a 50 million dollar bridge loan in 10 days. Close that, and then do a 200 million dollar facility within 60 days. That’s how you could be helpful.” [laughs] And I was almost joking about the bridge loan, but I figured I had nothing to lose. They looked around the table and they had a lot of the senior people from the bank there, including the head of credit from the real estate side and some senior bankers… And they said, “I think we could do that.” And they did. So it was really extraordinary. In fact, I think they close that bridge loan inside of 10 days, it was probably more like seven days. Worked with us incredibly constructively.

We went from being on the brink of really having nowhere to run to then having this great relationship that we developed there. They ended up doing even a larger facility, it was a 250 million dollar facility; it was pretty innovative so they’re the first to do it. They viewed it as an opportunity to step in and help us out and in the process, put themselves in a leadership position in the sector to develop the first facility of its kind.

What an interesting learning experience there was it was beneficial to both parties. We felt like we didn’t have a lot of options, they did not take advantage of that situation. What they saw was that the situation that we were in created opportunity for them. So that was a good learning experience – when you have these crises, how can you find a group out there that might view that as an opportunity for themselves and not just an opportunity to crush you, but view that as an opportunity to be helpful and forge a long-lasting relationship, which I’ve had with those guys ever since, even through Roofstock. It was really good all around.

So definitely had to get creative there. Had we not had that meeting on the books with those guys, I would have been making a ton of phone calls and trying to set something up. But I think the reason that we were well served there is even though we didn’t need to have that meeting with Citi, because we already had another facility, we were moving forward with, the idea of constantly staying in touch with lots of people in the industry, because you never know how things can develop… An old CEO of mine had a very wise phrase that I think about quite a bit – Mike Shannon, who runs KSL Capital. or used to… He said, “A smart mouse has more than one hole to run to.” Especially when you’re running businesses that can be too reliant on any one single thing happening, having optionality is good.

So I think just being able to cultivate relationships that you never know when you’re going to need to turn that into an opportunity… I almost canceled that meeting when we were moving forward with our other facility, and like why do we need to meet with these guys? Something told me to keep it and I’m really glad that I did. It was awesome.

Theo Hicks: That’s very fascinating. So you kind of hinted at this, but was it literally the next day? This meeting.

Gary Beasley: It was literally the next day.

Theo Hicks: Okay. So you already hinted at this… So let’s say we go back in time, and you either canceled the meeting with Citigroup because you assume that this other deal is going to go through, or you ask Citigroup for the bridge loan for the facility and they either say no, or they say yes, and the same thing happens again. What would you have done in order to rectify this situation and gotten capital?

Gary Beasley: We had a couple of different options. One was to go back to our equity partner and get more equity and say, “Hey, guys. You’ve given us 250 million. Can you give us another 50 so we could continue to fund the operations? We’ll slow our buying…” And that was our best alternative, is to go back to them; they were very supportive. Not sure that they would have been able to do that, because that was the full allocation that they had approved for our investments, so I’m not sure that we could have actually gotten that done.

We could have then gone out to other pockets of equity. But the problem with that would have been just going to another equity partner, it would have been impossible to get through any sort of diligence process that quickly. So it was really going back to our equity sponsor; that would have been really our only option to continue that way.

The other option was to literally stop our buying operation. We would have had to have furloughed or let go the majority of the people in the field who are doing those activities, and sort of been like a turtle that then goes in its shell. And at that time, stop our buying, continue the property management operation, while we worked feverishly to try to raise more capital to grow the business. That would have been really difficult for us, because as you’re building these businesses, a big part of it is getting the right teams in place and the right processes. So it takes a while. We were firing on all cylinders, and if we then had to let everybody go, and then a few months later having to restart, we would have lost enormous momentum, enormous credibility. I’m not sure we ever would have gotten back to where we were.

So it could actually have just ended the growth of the company. We probably would have ended up just having that existing portfolio and managing it, and ultimately selling it, and going to do something else. It would have been arguably a good real estate trade for the equity investors, but what it turned out to be is both a good real estate trade, but also it allowed us to build real enterprise value in taking the company public. So it created a lot more value, a lot more jobs, it was just good all around. So I think we were fortunate.

But as I think back on it, a big part of my role at the time was to try to be that steady hand during that crisis. When I think back on it, it was really scary. But being terrified internally was very different than what I needed to project to the team. I didn’t know if we’re going to solve it, but I said “We’re going to solve this and we’re going to figure this out. If it’s not with Citi, we’re going to go back to GI. But we’re going to do this.” But it was very clear – when you’re in those kinds of situations, people are looking for leadership and looking for somebody who’s going to be a steady hand at that wheel. So it definitely was a good leadership lesson for me.

You don’t want to be disingenuous with people, you want to be honest but optimistic. Because I think the only way as entrepreneurs, typically, if you’re successful, is if you have to have real optimism, because there are all these hurdles that you need to overcome.

There is a good story that a good friend of mine, Aneel Bhusri, who runs Workday; he founded Workday with Dave Duffield. A very successful company. I was talking to Aneel and he said… It was very funny. I asked him, “How are you and Dave Duffield different?” He said, “Well, we are different.” He said, “If I look at a glass of water, I’ll say that’s half full. Dave will look at it and have a totally different view; he’ll look at that glass and say it’s entirely full, not half empty.” So its optimism oftentimes that drives success, I think, of entrepreneurs who can see past those what looked like impossible challenges.

Theo Hicks: That was actually my next and, I guess, final question, which was keeping your cool during this type of – you called it an existential threat to the business. So you mentioned the reasons why you needed to stay cool, but how did you actually, in practice, do this? Was it just natural? You just told yourself, “Alright, I’m going to be cool,” and it just happened? Did you have outside help? Did it take some time to get into this groove? Maybe kind of walk us through that really quickly.

Gary Beasley: It’s the first time I ever meditated. I was willing to try anything… And I still do that. I think I’ve always had, for whatever reason — when situations dictate and the pressure gets raised, it increases my focus. So I can’t say that I crave that all the time. But when it does happen, I find that things sort of slow down and I can think clearly, where I know some people get more paralyzed by it. For whatever reason, the opposite thing tends to happen to me. I don’t know why that is, but it’s been the case ever since I can remember.

I think that’s one of the reasons that I enjoy starting companies and I enjoy being an entrepreneur, because that uncertainty and those challenges, I find very rewarding. I like trying to sort those things out and I don’t mind the unpredictability of it. I think part of it is you have to be realistic with yourself, but optimistic, and just be comfortable with the downside, and do some scenario planning, and sort of say “Okay, worst case, this is what happens.” You have to kind of make sure you figure out and mitigate, to the extent you can, if you can’t solve things, “This is what I’m going to do. It’s not going to be the end of the world, we’re going to make the best of it.” So you have that plan, and then you work like hell to not have to do that. So I think you have to think through those downsides, understand the implications, and then do everything you can not to have to go there. But at least you know you have a plan.

Theo Hicks: All right, Gary. Is there anything else that you want to mention about this situation? Or where people can learn more about what you’re doing now at Roofstock before we sign off?

Gary Beasley: I guess I would just say, if people are interested in learning more about investing in real estate for their own account, check us out. You can go to our site roofstock.com. What we’ve tried to do is take a lot of the learnings that we as a collective founding group and management team had from our prior lives, working for larger organizations, and make those tools available to individual investors. So you don’t have to be a big institutional investor, you can be anyone and get access to a lot of the same data, same tools, same types of inventory, and then access to the services that you need to start investing.

So I would just suggest, as you’re looking at investment options in this environment, whether it’s through Roofstock or not, I think investing in housing – it’s a pretty interesting asset class. It performed quite well during COVID, and because of the lack of supply of housing, and I think, the increasing importance of shelter for people and housing, there’s going to be a lot of demand for single-family homes. So it’s, I think, something worth looking at as part of your investment portfolio.

Theo Hicks: Perfect, Gary. Well, I guess your catharsis is now officially over.

Gary Beasley: I feel much better.

Theo Hicks: Good. [laughter] Don’t think about it anymore. I really appreciate you going into a lot of detail on what happened, and then how you were able to get through the situation. Really, the main takeaways from this – number one thing to do, as you mentioned, is worst-case scenario planning. What you will do if the worst-case scenario happens, and then making sure you do everything you can to set yourself up so that that worst-case scenario never happened, but if it does, you’re ready. But the other one, which is obviously the bigger one, as you talked about making sure that you are constantly proactively networking with people that might not necessarily be based off of something that you immediately need right now. Don’t just network when you need something…

Gary Beasley: Yeah, pay it forward.

Theo Hicks: …because you don’t really know when you’re going to need anything.

Gary Beasley: And I would say the last thing is don’t be afraid to ask for exactly what you need.

Theo Hicks: Very good. That’s a good point. Don’t be afraid to ask for exactly what you need. Obviously, lots of other great lessons in there as well. So Gary, I really appreciate it. I really enjoyed this conversation, I learned a lot. Make sure you guys check them out, roofstock.com, and his other episode 1129. So Gary, thanks again for joining me today. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.

 

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin

JF2002: The Benefits of Having a 900 Mile Investment Property with Zach Evanish

Zach helps investors locate and identify properties that fit their goals; whether that is cash flow or long term appreciation. He explains how diversifying where your investment property is located can be beneficial. On average his clients have investment properties that are 900 miles from their residence. Zach also gives out some great lessons on what to pay attention to when buying properties. 

Zach Evanish Real Estate Background:

Best Ever Tweet:

“He said “No”. Go Buy a single-family home, start with that and then from there we can talk about duplexes and fourplexes. How do you think I got these 10-15,  50 unit apartment buildings? I started with a Single Family Home.” – Zach Evanish


TRANSCRIPTION

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

Zach Evanish: I’m good, Joe. How are you today?

Joe Fairless: I’m good as well and looking forward to this conversation. A little bit about Zach – he’s the Director of Retail at Roofstock; he’s been with Roofstock since the beginning and has worked in the real estate sector for most of his career. Based in Oakland, California. So with that being said, Zach, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Zach Evanish: Sure, yeah. Like you said, I’ve been in real estate for actually almost two decades now. I got my real estate license in my junior year in college, did my first deal in college, and since then, I’ve done everything from commercial appraisal to multifamily brokerage, to running acquisitions for a real estate fund. Now I’m the Director of Retail Sales at Roofstock, and my team and I are tasked with helping both buyers and sellers achieve their goals through our real estate marketplace.

Joe Fairless: From your previous experience, what experience has helped you best with what you’re doing now at Roofstock?

Zach Evanish: Probably my time running acquisitions for a fund. So this was in 2010, 2011. Just after the crisis, we were buying foreclosures, renovating them and renting them out. We were really the first group to raise private equity with the question of “Can you buy homes in bulk and renovate them at scale?” And then most importantly, can you manage them like a big apartment building?

So I learned a lot of lessons the hard way, but probably the best way just by boots on the ground and buying homes and making the mistakes of maybe buying in the wrong neighborhood or buying a home with small bedrooms and trying to rent it out like a full four-bedroom, two-bath home. So learned a lot of my lessons during that time when I was acquiring all the different foreclosures and short sales, renovating them and then renting them out.

Joe Fairless: Let’s talk about that. So a couple of things you mentioned, buying in the wrong neighborhood. Another is, I think you just said buying small bedrooms. Will you elaborate on that?

Zach Evanish: Yeah, I think sometimes you’ll see, say, a three-bedroom home, and it’s 900 sqft, and you say, “Wow, this looks like a good deal because it’s priced appropriately.” And then when you’re comping it out with the rents, you just need to make sure you’re comping it out with similarly small-sized three-bedroom homes. A bedroom is not necessarily just any room with a closet. A lot of these older 1950s, 1960s homes will have some really small rooms that are basically just big closets, and if your target renter is this family, maybe it’s okay, but tough to fit too many people into those small bedrooms. So just make sure you’re comping it appropriately.

Joe Fairless: Okay, what are some other mistakes or lessons that were learned throughout the process of running acquisitions for the fund?

Zach Evanish: Yeah, some other mistakes – buying near a large industrial facility or buying near railroad tracks or going to a neighborhood at 10:00 a.m. in the morning and thinking, “Wow, this is a great neighborhood. It’s quiet, it’s peaceful,” but without coming back on the weekend or at night to also see what that neighborhood is like. So making sure you’re really getting a full 365 view of a neighborhood you’re buying in. And if you are buying a home near an industrial facility or across the street from a gas station, again, just making sure you’re factoring that in and using other comparables that are in similar situations.

Joe Fairless: When you’re buying in bulk, as I imagine you were buying, what, thousands of homes in certain transactions…?

Zach Evanish: Yeah, I think we bought at least several hundred home tapes from the banks back in 2011, 2012.

Joe Fairless: Right. So when you mention the 10:00 a.m. tour of the neighborhood, I doubt you or team members– and maybe I’m wrong, but I doubt you all were going to tour each of the homes to make sure that the neighborhood was good. Is that accurate?

Zach Evanish: Yeah, it is accurate. We try to do our very best to understand what we were buying. But at that time, it was just difficult when you’re buying that many in scale.

Joe Fairless: So how do you mitigate as much risk as possible knowing that, since you’re buying in so much bulk, it’s just virtually impossible to go do individual tours of neighborhoods on the night and the weekends?

Zach Evanish: Yeah… At Roofstock, we have our data science team that is constantly pulling very granular neighborhood data. I think a lot of that wasn’t around even five or six years ago. So I think using a combination of data to look at school scores, crime ratings, that type of thing, but also having boots on the ground, whether it’s a local real estate agent, contractor, and then in the Roofstock case, most importantly, relying on third-party property managers who can really give you a feel for desirability of that property as a renter.

Joe Fairless: I know this is especially a challenge for investors who are out of state. My first investment properties– actually, every property I’ve purchased as a rental property has been in a city that I wasn’t living in at the time. So that’s even more important for remote investors. Are you seeing more investors buying rentals remotely versus when you first started with Roofstock?

Zach Evanish: At Roofstock, that’s been the theme all around. Really, our goal is to democratize real estate investing, and one of the things that were challenging when building this company is, it doesn’t necessarily make sense for people to only invest in their backyard. One, because if you live in San Francisco or L.A. or Seattle, you’re just not getting any return on your investment if you’re investing locally, but also you want some diversification. I live in San Francisco, but work in Oakland. So my primary residence, my job is all strongly correlated to tech, so it’s nice to invest in places like Cincinnati and Cleveland in Atlanta, which maybe aren’t as strongly correlated, so it’s a nice diversification. So I think throughout we’ve seen people buying homes — on average, I think it’s about 900 miles away from their primary residence.

Joe Fairless: On average?

Zach Evanish: Yes.

Joe Fairless: Okay, that’s interesting. What other trends are you seeing in the real estate market based on your team’s access to the amount of data and the analysis that you all do?

Zach Evanish: Yeah, I see a couple of trends. One, I see a flight to both tertiary markets… So the Austins, Nashvilles, Atlantas of the world, which have been some of the hottest markets over the last five or six years, price appreciation has outpaced rent growth. So you’re not able to get the same type of return cashflow-wise as you were five or six years ago. So there’s definitely a flight towards secondary, tertiary markets, like a Huntsville, Alabama or Augusta, Georgia, places like that.

And then secondly, this is correlated, is just people going more towards the $1,000 to $1,400 home rents, versus either the lower price rents. I think a lot of investors start with lower-priced properties, and then start to see some of the difficulties or management intensiveness of that type of property… Or they’re starting on the higher end properties, either as an accidental landlord or because that’s all they had access to in their higher-priced market. So we’re seeing a lot of people really focus onto those tertiary markets, but also middle of the road, $900 to $1,300 or $1,400 a month rent.

Joe Fairless: What are the pros and cons on each of those three levels that you described – below $1,000, $1,000 to $1,400, and $1,401 and above?

Zach Evanish: Yeah, really good question. So if we start with a lower-priced property, the benefits are the cashflow… You can buy a $60,000, $70,000 home in a Midwest market, say a Cleveland and Milwaukee, and it’s gonna rent for $900 or $1,000. So your cash flow is going to be strong. There’s  generally a high supply of tenants that can afford that type of home.

Some of the downsides are it’s a little tougher to raise rents, because the neighborhood you’re buying in has a higher percentage of renters. So if you want to raise rents, one, your tenant is pretty price-sensitive and maybe can’t afford higher rents, but also they’re going to look around that neighborhood and see seven other vacancies and go to one of those. It’s a little harder to raise rents.

In that mid-tier, say $1,000 to $1,400, these are kind of a total return property, while the prior one was a cash flow property. So total return – I think it’s great because you, again, have a pretty large tenant base. The properties are more in the $80,000 to $120,000, $140,000 range. Some of the downsides are – still a little bit older inventory and you’re probably not going to see a ton of appreciation; obviously, that varies by market.

And then the higher-end homes, when say, we get to $1,400 above– but really when you get to $1,800 or $2,000, there’s fewer renters, so a home can stay vacant a little bit longer. But generally, those tenants are a higher likelihood to go buy their primary residence. So that’s some negatives there, but some positives is you’re going to see generally higher appreciation because these are going to be in more owner-occupied neighborhoods, where you generally see strong school scores, really quality neighborhoods, quality amenities, and generally higher appreciation.

Joe Fairless: What if someone says, “I want cashflow with a good total return, plus I want a property that will appreciate over time”?

Zach Evanish: I want it all.

Joe Fairless:  I want it all, baby.

Zach Evanish: Yes, as we all do… Generally, what we ask is, “What is your primary objective and how long is your time horizon?” My parents have bought some properties through Roofstock using their retirement funds. So cashflow is a big objective for them. They’re looking to replace an income, so they’re focused more on the cash flow properties. Some of our younger investors, we have people who are 23, 24, who make great incomes in San Francisco, who are buying investment properties – they have a very long-term time horizon, so I think they can buy those lower cash flow, higher appreciation properties that generally are just going to barely break even with 20% or 25% down.

Joe Fairless: What’s been some challenges that you’ve had in your position at Roofstock in terms of just either the objectives that you’re looking to accomplish, you came across a couple of challenges. or maybe the type of deals that you all come across, maybe inventories lowered? What are a couple of challenges?

Zach Evanish: Yeah, I think similar to what a lot of investors are experiencing is just a supply-constrained real estate investor market right now. Part of that is just an uptick in owner-occupied market with interest rates being low. It’s just harder and harder to find quality cash-flowing inventory, which is again why we’re starting in to go to some of these secondary and tertiary Sharing markets. So I’d say our biggest pain point is just finding quality supply.

Generally, marketplaces are tough, because you’re always balancing supply and demand, and we want to make sure, as a curated marketplace, investors can buy with confidence, and a big part of that is making sure we have quality supply, that’s been rehabbed professionally, with tenants that have been underwritten correctly… Because again, these investors are buying generally sight unseen from thousands of miles away, and so we really want to make sure they’re buying a quality product.

Joe Fairless: When you’re talking about markets like Huntsville, Alabama, and Augusta, Georgia, what are the metrics that you all look at in order to qualify a market that puts it in that type of category versus a category like Austin, Texas or Nashville?

Zach Evanish: We really try to look at, as you had mentioned earlier, different investor types – someone who’s focused on cash flow, total return or an appreciation investor. We want investors — as soon as they register on our site, we ask them some questions, we hop on a call with them and really help them come up with their hypothesis based on their goals, their time horizon, and hopefully help them fall into one of those buckets. And then once they’ve picked out their strategy, then we can help them connect with a market.

Our data science team looks at things like net move-ins, job growth, overall market appreciation, rent growth, and then we look for pockets of neighborhoods where we say, “Hey, these still have solid crime scores and school scores, but also still offer quality cashflow.” We don’t want to help necessarily Californian investors buy overpriced properties in the Midwest. So we do a lot of diligence on the frontend to make sure people are buying quality properties, that are priced appropriately.

Joe Fairless: When you’re looking at crime and school scores, are they relative to that market or to the US?

Zach Evanish: We have a neighborhood rating, which is a proprietary system at Roofstock. Every property has a rating between one and five stars, and that has five different components, and we get down to the zip code plus two level. So that neighborhood rating will be for a subset of 500 homes. So we get pretty granular with that rating.

Joe Fairless: What do you mean zip code plus two?

Zach Evanish: So generally, a zip code has five digits. But if you get to a zip code plus two level, it’s just a way of looking at the city from a very granular level, and that’s generally every 500 homes will fall into that.

Joe Fairless: Oh, okay. Here’s a little factoid I didn’t know. I always wonder what those extra numbers were after my five number zip code.

Zach Evanish: I asked the same thing. My much smarter data science team was explaining it to the sales guy.

Joe Fairless: Did they roll their eyes?

Zach Evanish: Yes, they did.

Joe Fairless: Oh, damn that. They shouldn’t; that’s a legitimate question. Based on your experience, what’s your best real estate investing advice ever?

Zach Evanish: Wow, great question. The best advice ever – get started sooner. My real estate mentor was actually a client of mine when I was about 27, selling apartment buildings. I was actually selling one of his buildings and he said, “What are you going to do with this commission check?” And I was talking to him about cars and boats and ridiculous things, and he said, “No. Go buy a single-family home. Start with that, and then from there, we can talk about duplexes and fourplexes and– how do you think I got these 10 to 15 different 50-unit apartment buildings? I started with a single-family home.” So him giving me that look and kicking the butt of, “No, you’re not going to go buy those things. You’re going to go buy a single-family home and then we’re going to help you build your real estate portfolio.”

Joe Fairless: Did you?

Zach Evanish: I don’t think I did.

Joe Fairless: You didn’t…? [laughs]

Zach Evanish: No, I did probably—

Joe Fairless: Did you get a boat?

Zach Evanish: No. No boat, but I don’t think I listened to that advice. I think I probably went back to him six months later after more handholding from him and bought my first investment property. It takes me a couple of times hearing something before it sinks in, Joe.

Joe Fairless: Hey, when the student is ready, the teacher will appear.

Zach Evanish: Exactly, right.

Joe Fairless: What was that first property?

Zach Evanish: It was a single-family home in Northern California, in an area called Pittsburgh, just Contra Costa County of Northern California. I think I probably paid $130,000, $140,000. I think it rented for $1,000 or so.

Joe Fairless: Do you still own it?

Zach Evanish:  I do not. I’ve exchanged that one into a 4-plex that I now own in the Bay Area.

Joe Fairless: Nice. What did you sell that one for? Do you remember?

Zach Evanish: I don’t–

Joe Fairless: You don’t remember what you sold your first house for?

Zach Evanish: I don’t remember. I want to say it was $310,000, $350,000, something like that.

Joe Fairless: Okay. And then you exchanged that into a 4-plex?

Zach Evanish: Correct.

Joe Fairless: Cool. And you still own the 4-plex?

Zach Evanish: I do.

Joe Fairless: What are your plans for that?

Zach Evanish: It’s in a really good location in Oakland, so I plan on probably holding that for quite a while. Oakland’s one of those markets that’s just been on fire lately. Potentially even a condo conversion play, I might able to sell those units off individually. The location is just so prime that I feel like the longer I hold it, it’s just getting better and better.

Joe Fairless: You’re going to do a cash-out refi?

Zach Evanish: I don’t think so. I love paying down the mortgage and have very little debt on it right now. Most of my properties, I just continue to pay down.

Joe Fairless: So you touched on your philosophy there, but will you just elaborate a little bit more? I’d love to hear your thoughts, because there’s two schools of thoughts – you cash out, refinance, get the cashback, and then you got little or no money in the property, you don’t cash-flow nearly as much; it’s not as safe, it’s more aggressive, but you can then take that money and go buy more property… Versus your approach, which is opposite. Will you just elaborate more on why you do that?

Zach Evanish: Yeah. I have done the cashout refi, the BRRRR strategy on a couple of properties that I bought at a discount and bought them all cash, and was able to pull that cash out. So if it’s a property I buy with that strategy, I will do that. But what I don’t do is every five or ten years go to the piggy bank and refinance that property.

I do look at my strategy for that particular property and I have cashflow goals that I’m looking to achieve. When I’ve run the numbers for most of my properties, it’s just made more sense to hold on to them long-term.

So yeah, I guess that’s my strategy – if during acquisition I know this is a property that I’m buying at a discount, but in order to get that deal, I need to buy it cash or go hard money or partner with someone, then as part of that acquisition strategy I may do a refi after getting a tenant out or making repairs. But generally, my strategy is to hold on for the long term on the properties.

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

Zach Evanish: Yeah, let’s do it.

 

Break [00:18:48]:03] to [00:19:42]:07]

 

Joe Fairless: Best ever resource you go to to stay up to date with news about your industry or just to stay sharp professionally?

Zach Evanish: John Burns reports for single-family rentals.

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

Zach Evanish: Not getting a second opinion on a foundation issue.

Joe Fairless: Please elaborate.

Zach Evanish: So I bought a property which it looked like there were cracks, and I had two differing opinions. One inspector said, “No, it’s just settling, you’re fine.” Another one said, “I’m not sure. I think there could be a bigger issue here.” I was under a timeline, and it was an earlier purchase and got pressured to remove my contingency and move forward, and 30 to 60 days after owning the property I started to see some additional cracks and it turned out there was a pretty significant foundation issue that ended up costing me, I think, $15,000 or so.

Joe Fairless: Best ever deal you’ve done?

Zach Evanish: A deal I bought two years ago in Cleveland. I bought it directly from a property manager and they had a tenant who was on  Section 8, and very motivated seller because of this tenant who hadn’t paid rent. I was able to meet with the tenant, figure out a payment plan and then work with them, and also get that home rehabbed. I bought it for probably, 55% or so of market value.

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

Zach Evanish: A couple of ways – Habitat for Humanity and also First Tee. I’m a big golfer, so I’m a coach for The First Tee program.

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

Zach Evanish: They can email me directly, zach@roofstock.com. Before that, just go to Roofstock, it’s free to register. You’ll see all our different investment properties. We also have a product for accredited investors, new investors, we have a new real estate academy. So really, no matter where you’re at in the real estate journey, we have something for you.

Joe Fairless: Thanks so much for talking about some trends that you’re seeing, talking about the different types of objectives that investors have, and how you walk investors through the thought process for what makes the most sense based on those objectives and type of property. So thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Zach Evanish: Sounds good. Thanks a lot, Joe. I appreciate it.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
Best Real Estate Investing Advice Ever Show Podcast

JF1129: Buy Cash-Flowing Properties Online with Gary Beasley

Gary created Roofstock with intentions to attempt to democratize the real estate investing world. Not only does his company and the technology help him with his investing, but also helps anyone who would like to invest in single family homes anywhere in the country. They have already negotiated deals with property management companies, an important aspect when 90% of his investors are investing in markets they don’t live in. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Gary Beasley Background:
-CEO and co-founder, Roofstock, first online marketplace for investing in leased single-family rental homes -Provides research, analytics and insights to evaluate and purchase independently certified properties at set prices.
-Served as CEO of Joie de Vivre Hospitality, then the second largest boutique hotel management company
-Integrated more than $800 million of resort properties for KSL Resorts, and spent five years as CFO of online brokerage pioneer ZipRealty
-Based in Oakland, California
-Say hi to him at www.roofstock.com
-Best Ever Book: Guns, Germs and Steel


Made Possible Because of Our Best Ever Sponsors:

Fund That Flip provides short-term fix and flip loans to experienced investors. If you’re looking for a reliable funding partner, their online platform makes the entire process super easy, and they can get you funded in as few as 7 days.

They’ve also partnered with best-selling author, J Scott to provide Bestever listeners a free chapter from his new book on negotiating real estate. If you’d like to improve your bestever negotiating skills, visit http://www.fundthatflip.com/bestever to download your free negotiating guide today.


 

Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of fluff. We’ve spoken to Barbara Corcoran from Shark Tank, Robert Kiyosaki, the author of Rich Dad, Poor Dad, Tony Hawk – he is a successful entrepreneur, that’s for sure; Emmitt Smith – he develops real estate (if you didn’t know that, go listen to his episode), and a whole bunch of others.

With us today, Gary Beasley. How are you doing, my friend?

Gary Beasley: I’m doing great, Joe. How are you?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Gary – he is the CEO and co-founder of Roofstock, the first online marketplace for investing in leased single-family rental homes. Him and his company are based in Oakland, California. With that being said, Gary, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Gary Beasley: Sure, happy to. I’ve been at the intersection of real estate and technology for the majority of my career. I’ve spent some time in the resort and hotel business, I was CFO at one of the first online residential brokerages called ZipRealty; we took that public in ’04. Most recently, I got involved in the single-family rental business with some partner; we started buying homes during the downturn in 2009 and built a platform called Waypoint Homes, which we ultimately took public in 2014.

Currently, I’m running Roofstock, which I co-founded with Gregor Watson two years ago. As you mentioned, we’re the first marketplace that’s focused on selling homes that are investment homes, that have tenants in place. So you can buy them and have cashflow day one, and if you’re selling the homes, you don’t have to vacate them. So it’s very low cost, low friction, diligence is done upfront; you get to buy homes more like a book on Amazon. We’re really trying to increase liquidity and open up, democratize the investing market for real estate.

Joe Fairless: What’s the difference between Roofstock and Memphis Invest?

Gary Beasley: Memphis Invest, for those of you listeners who don’t know, is a turnkey company in Memphis. So with Memphis Invest you are buying homes that already have tenants in them. I think the difference would be when you come to Roofstock you could buy homes all over the country, and we have a little bit more variety of products, you can choose to use different property managers… I would say it’s similar in that you’re buying a cash-flowing product; it’s a much different UI in the ability to shop and buy properties, and you can buy them in many different markets around the country.

Joe Fairless: Okay. I’m really looking forward to diving in here, but I just wanted to comment that I hadn’t heard of Roofstock until — I think it was two days ago, and actually on my website I have a “Invest With Joe” form, and accredited investors who want to get to know me fill it out, and we can potentially partner on future stuff… And one of the gentlemen who reached out to me, he told me that he had invested with you all, and I hadn’t heard of it. He had a good experience, and I was like “Roofstock? I can’t believe I haven’t come across them before”, because I feel like I’ve interviewed everyone in this space.

It was cool, and it’s such a coincidence that two days ago I was doing some research on you all, and then I just happened to see on my calendar that I was talking to you today. So one, I just wanted to mention that as a point of social credibility for everyone listening, that I have spoken to someone who has invested with you all on a couple properties… So now a couple of follow-up questions on your business.

As an investor who is looking to purchase turnkey properties, it’s one thing to identify the opportunity, it’s another to successfully see it through from a management standpoint, so how do you all set up the investor for success on the latter part?

Gary Beasley: Great question, really important dealing with that last mile, which is the operations. At Roofstock, a part of our goal here is to really separate operations from investing, and we do that by certifying local property managers who pass through our screen, and we make sure that they’ve been around for a while, they have good accounting software, good customer service ratings etc., enough scale. So we certify them, and when you buy a home through our site, you can select which property manager you would like to use, and it gets transferred over pre-closing, so it’s seamless.

That’s a really important part of our business, plus we’ve built an app that allows us to suck in the data from all the property managers and monitor the performance on behalf of all the clients. So we can benchmark you and make sure that the property managers are doing a good job, make sure you’re not being overcharged for things and hold them accountable for service. We also have negotiated bulk pricing with all the property managers, so you can get pricing that’s similar to an institutional investor, even though you’re a mom-and-pop investor. They’ll handle all the leasing, repair and maintenance, collections, turns, all those types of things that need to be done in the market.

One of the things to keep in mind – over 90% of our investors through Roofstock are investing in markets where they do not live, so it’s really critical for us to have those in-market property management relationships that perform well.

Joe Fairless: Another point of emphasis if I were an investor looking to purchase a turnkey property would be the quality of renovation that the property just went through, so how do you qualify the quality of the renovation that likely just took place?

Gary Beasley: These homes are already occupied, so unlike some of the turnkey operations where they’re buying homes and they’re renovating them and just leasing them, our homes have already been renovated and leased, so they have sort of a cashflow history to them already. What we do is we have them inspected, and the inspection reports are all on our website, so you can review the inspection report; there is cost estimates of any repairs that would need to be made, either immediately or at the next occupancy.

We estimate the useful life of all the major systems and things like that, and that’s all built into the underwriting of the asset. So that’s how we do it – we have a whole series of inspectors we work with, and we use our app to [unintelligible [00:07:13].06] properties.

Joe Fairless: I’ve learned the difference of economic versus physical occupancy the hard way, where physical occupancy is the number of people living at a place; economic – the number of people paying to live at the place. So with the property, when you have a resident in it, what type of qualification process does that resident go through and what type of assurances – if any – does the purchaser have?

Gary Beasley: We started off by design getting our inventory from some of the largest institutional owners; several of them are public, some of the large private companies… They all have very similar screening processes – the tenants have been through background checks, they have at least three times income to rent ratio, no prior evictions etc. That’s part of our tenant certification. So for a home to show up on our site, not only does it have to pass our home certification, it has to pass our tenant certification, and also we have to have a certified property manager there. So all of those three legs of the stool need to be there, that’s really important.

As we continue to broaden our supply partners, we do put through each of these property managers who are managing the homes that are being sold, we evaluate the screen that the tenants have been through, and over time we’ll continue to expose more and more of that information to buyers, about payment history, the various screens that they’ve been through etc. That’s as we sort of broaden the number of sellers that we put through the platform. But to date, it’s been fairly uniform and really a very high standard of care that the leasing companies have used.

Joe Fairless: And what are the ways Roofstock makes money?

Gary Beasley: We make money principally by getting a fee from the sellers when the properties sell. We typically charge 2,5% your seller, so it’s obviously less than the traditional fee, and we have a 0,5% marketplace fee for buyers, which gets buyers access to our platform and all the diligence materials on our site, as well as all of our closing tools etc.

Joe Fairless: Got it. So per transaction, your company is making 3% on the total transaction amount. What type of challenges have you come across since you’ve launched, and what year did you launch?

Gary Beasley: We launched exactly two years ago. There were a couple big challenges we’ve faced and so far overcome. One was could we actually get people to buy $100,000+ items site unseen over the internet, in a marketplace environment? And the answer is yes, we’ve sold hundreds of homes this way.
Two is can we actually source proprietary supply from sellers, who would agree to sell them with tenants in place, through Roofstock, not through a traditional MLS environment, and really have enough supply to create a vibrant marketplace? And that has actually worked, too. So the buying chunky items site unseen and getting supply going were both big challenges we’ve overcome.

I’d say the biggest challenge any marketplace faces, like ours, is balancing supply and demand. When we first started off, we felt like we had plenty of supply, because we had a couple hundred homes from some big sellers. We sold through that inventory and now we have a lot of demand, looking for supplies for going back and now filling the supply bucket again. That’s one of the constant challenges with any marketplace – balancing those two elements. Depending on what week it is, I’m more worried about either supply or demand, which I guess it’s the sign of a healthy marketplace as it’s being built.

Joe Fairless: With the sellers, what is their motivation for selling with Roofstock versus a local broker?

Gary Beasley: Well, when I was selling homes running my last company, it was costing me 10%-12% all in, because there’s a 5% or 6% broker commission, plus I was losing on average about four months of income, because I’d have to vacate it to sell it on the MLS, and that’s 3 or 4 points. And then I was having to spiff the homes up to sell them to retail buyers… So it was 10-12 points, versus 2,5% through us. And half of that 10%-12% is your lost income and cap-ex to spiff it up to sell it on the MLS, the other half is the traditional commission… But we don’t have any of that. Our commission is half as much, plus there’s no lost income and no cap-ex to sell it.

So you could actually as a seller sell it for a little bit less and still net more, and it’s easier; you get your money faster because you don’t have to wait for the home to vacate. So it’s a really compelling value proposition for the sellers.
On the buy side it’s interesting and compelling too, because you don’t need a big team of people to go out and make a bunch of offers and renovate homes to get them cash-flowing; they’re already cash-flowing. So you could really be more of an investor, and it’s almost real estate as a service. You’re buying these cash-flowing homes across the country, in a diversified way, and relying on our software and business processes to enable that, and it’s a very low fee.

Joe Fairless: I guess in my mind I’m trying to do an apples to apples comparison, and in my mind it’s not apples to apples, so help me understand this a little bit… Because when you mentioned the 10%-12%, you said broker fees – got it, that makes sense; apples to apples in my mind. 5% or 6%, and total 3% to what you all do…

Gary Beasley: It’s 2,5% to the seller, because we get 0,5% from the buyer.

Joe Fairless: Oh, okay, got it. Fair enough. So 2,5%, thanks. But on the other side, four months of lost income, plus you have to fix it up… But if they’re fixing it up, don’t they have to fix it up to have a tenant in there already to bring it to Roofstock? Isn’t that the whole thing?

Gary Beasley: Yeah, to maximize the value on the MLS typically you wanna do maybe some paint and carpet and landscaping, things like that. We’re not talking about a major renovation, but it’s typically a few thousand dollars to present it and compare well with other homes that are being sold retail. But the bigger issue is you’ve got several months of vacant rent where there’s no income. So you’re carrying the home, you’re paying the mortgage, you’re paying taxes, and there’s no rent coming in.

The average gross yield on these homes is about 10%-12%.  A 12% gross yield home means you’re getting 1% of the value of the home every month, in rent. So if you lose four months of rent, that’s 4% of the value of your home of cash that you don’t have, that you otherwise would have. So that’s how you get to that [unintelligible [00:13:40].25]

Joe Fairless: I totally understand that. I totally get it. If you were to put it on the MLS and it takes four months to sell, four months of lost rent. Got it. But in order to sell on Roofstock, don’t they have to have a tenant in place?

Gary Beasley: The tenant is already in place, so they’re continuing to collect that rent as the owner, during the marketing process.

Joe Fairless: Got it. But what I was thinking is if I have a house, I’m fixing it up, and I’m deciding “Do I sell it with a broker, local, or do I sell it via Roofstock?” If I choose to sell it via Roofstock, then I have to get a tenant in place and I have to make sure it’s obviously move-in ready, because there has to be a tenant in there.

Gary Beasley: Exactly. We’re starting to work with a lot of traditional fix and flip partners who instead of fixing up homes, they’re buying and selling in retail, they’re starting to now put tenants in them and sell them through Roofstock, because they could get paid while they wait and sort of get a yield… But the typical sellers right now have homes that are already occupied, and they’re looking to sell them, and the choice is “Do I wait for the tenant to move out, or do I move it over and sell it through Roofstock?”

Joe Fairless: Oh, okay, I’m with you. Based on your experience – you’ve been in the real estate industry in some form or fashion (real estate and technology, for sure), what is your best advice ever for the best real estate listeners?

Gary Beasley: The best real estate advice – I would say for me it’s developing a thesis and then having enough conviction around it, even when people may not agree with you. I would say from my experience, for example when we first started buying the single-family rental homes, a lot of people thought we were crazy, and probably one of the biggest mistakes that I’ve made is not raising more money earlier to do it. My partners and I had conviction, but because so many people said “You’re crazy. You’re buying houses? The world’s ending.”

So my advice would be that – develop conviction around a thesis and then go for it, execute. Obviously, you have the right time horizon, and don’t over leverage yourself. Stick to your guns, and remember, real estate is cyclical. If you invest in the right points in the cycle, eventually you end up doing well.

Joe Fairless: I’m all about when we make mistakes we learn from them, so maybe they’re not a mistake; I get that mentality, but what are three mistakes that you’ve made that come to mind? And again, I understand if they turn into growth experiences etc., but what are three mistakes that you’ve made in this business that come to mind?

Gary Beasley: As I think back on it, not raising enough money early enough in one of my earlier ventures, worried about, say, [unintelligible [00:16:17].17] creating too much dilution by raising too much money at a lower valuation at an earlier company. We didn’t raise enough money, had to raise money again, and then had to raise it at a lower valuation, so it kind of got washed out a little bit. That’s something that I advise entrepreneurs – when the money is there, generally, raise more rather than less, and accept a little bit dilution.

I would say a mistake I made early in my life personally was I rented for a very long time while homes went up in value, and finally decided to buy, and ended up buying at the peak of the market, when I could have bought at a much better time.

Joe Fairless: What year did you buy?

Gary Beasley: 2005.

Joe Fairless: Oh, congratulations… In California?

Gary Beasley: Yeah, it was fantastic.

Joe Fairless: There you go. [laughs] Do you still have the place?

Gary Beasley: I do.

Joe Fairless: It doesn’t really matter, since you still have it, but is it worth more than 2005?

Gary Beasley: Yes, it’s definitely worth more than it was in 2005, but had I bought it in a different time in the cycle it would have been much better. Again, it comes down to timing with a lot of these things with real estate.

I would say another mistake that I’ve made – this is more related to building a company in the real estate space, or really in any space – is not acting quickly enough when you have a bad hire who you know is not gonna work out. I just think in general making a change when your gut tells you you need to do so, you sort of bite the bullet and do it, whether you’re building a company in real estate or anything else… That’s just a lesson that I learned over time – you have to sort of take the pain.

Joe Fairless: Absolutely. And usually, they are relieved when you fire them.

Gary Beasley: Correct.

Joe Fairless: Because it’s clear that it’s not working out. They feel it, they understand it, and they’re meant to do bigger and better things in some other area of their life.

Gary Beasley: Absolutely.

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

Gary Beasley: Sure!

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

Break: [00:18:18].17] to [00:19:20].28]

Joe Fairless: Okay, best ever book you’ve read?

Gary Beasley: Gosh, probably Guns, Germs and Steel by Jared Diamond.

Joe Fairless: What’s the best ever transaction you’ve done in business or real estate?

Gary Beasley: Probably when I was in the resort business we bought an iconic resort for about 50% of what the prior owner paid for it ten years prior. We bought it at a very good time in the cycle, and ended up selling it a few years later for about three times what we paid for it.

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

Gary Beasley: I like to give back to youth and kids. I’ve been involved in a non-profit called Build for a number of years. It teaches disadvantaged kids in high school about entrepreneurship and it helps them get into college and on to life success. I find that very rewarding.

Joe Fairless: And how can the Best Ever listeners get in touch with you or learn more about your company?

Gary Beasley: To learn more about Roofstock, they can go directly to our website, which is Roofstock.com. You can follow us on Twitter, @Roofstock, or me personally, @GaryBeas2013… That’s my Twitter handle.

Joe Fairless: I’m guessing I know what year you joined Twitter. [laughter] Gary, thank you for being on the show. Thanks for talking through the business model of Roofstock, the approach that you take as an entrepreneur, the lessons learned along the way that are applicable not only to real estate investing, but also to business building as a whole… The business model, as well as talking through the competitive advantage that you all have.

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

Gary Beasley: Thanks, Joe. I appreciate it.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
no fluff real estate advice

JF701: How to Buy a 4 Plex in CALI with LITTLE and NETWORK Your Way to Financial Freedom

Find it difficult to get your foot in the door? Today’s guest did all he could to squeeze himself into a four Plex FHA deal, and he did it! It wasn’t great at first, but he worked at it, and in the end he grew the largest real estate meet up in San Francisco! Hear how he networked his way to wealth!

Best Ever Tweet:

J.Martin Real Estate Background:

– Founder of the San Francisco Bay Real Estate Networking Summit
– $1,000,000+ in high cashflow real estate
– Based in Oakland, CA
– Say hi to him sfbaysummit.com
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

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

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
Best Ever Show Real Estate Advice

JF80: Get Out When the Gettin is Good

Today’s Best Ever guest talks about the importance of gettin’ out when the gettin’ is good.

 Tweetable quote:

 Jay Hinrichs’s background:

–        Bought a mansion from an NBA star on a short sale and made close to $2,000,000 on it

–        Has done more than 3,000 transactions

–        Formerly president of a mortgage company in Oakland, CA that pooled 35MM of assets across over  250 investors

–        Say hi to him via phone at 503.789.2451

 Subscribe in iTunes and Stitcher so you don’t miss an episode!

 Sponsored by: Twenty Four Sound – visit http://www.twentyfoursound.com and mention “bestever” for an exclusive 20% discount on your purchase.

Follow Me:  
FacebooktwitterlinkedinrssyoutubeinstagramFacebooktwitterlinkedinrssyoutubeinstagram


Share this:  
FacebooktwitterpinterestlinkedinFacebooktwitterpinterestlinkedin
Joe Fairless