JF2344: W2 To Syndicator With Elisa Zhang

Elisa Zhang is the owner/principal of 1000+ unit apartment buildings via 1031 exchange and syndication. After quitting her day job to invest in real estate full-time, she is passionate about teaching others to do the same. She now focuses her time and expertise on helping typical nine-to-fivers to quit their job in 10 years or less.

Elisa Zhang Real Estate Background:

  • Quit her W2 in November 2019 to go full-time into syndication and education
  • 11 years of real estate experience
  • Portfolio consists of 8 properties as a general partner and over 1,000 units in Phoenix & Dallas.
  • Also passively invest in an additional 1,000 units
  • Based in Seattle, WA
  • Say hi to her at www.ezfiuniversity.com 

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Best Ever Tweet:

“Get out there and do it” – Elisa Zhang


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

Elisa Zhang: Doing good. Thank you so much, Joe, for having me on here. Big fan of the show.

Joe Fairless: Well, I’m glad to hear that, and I’m grateful that you’re on the show. Elisa quit her W2 in November 2019 to go full time in syndication and education. She’s got 11 years of experience in real estate. Her portfolio consists of eight properties as a general partner, that’s over 1,000 units in Phoenix and Dallas. She also passively invests in an additional thousand units, and she is based in Seattle, Washington. With that being said, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Elisa Zhang: Sure. So I grew up in China actually, and then moved to Canada, and then moved to Seattle, and landed a tech job, as a lot of our Seattlites are. And from there, we invested using our savings into single-family to start with. We very quickly figured out that we should be doing a cash flow game instead, and moved into multifamily space, self-managed, fourplexes, etc. to start with, and then moved into larger multi-family from there. So that’s kind of a little background on me.

Joe Fairless: Okay. What was your last W2 position?

Elisa Zhang: My last W2 position, it’s the same as it has always been for 13 years. It’s a product manager position or program manager position in a high-tech company.

Joe Fairless: And what were you doing exactly?

Elisa Zhang: Oh, so I was responsible for strategic thinking about where the product should be going after. But it’s also a technical background, so I have a computer engineering background, and I basically [unintelligible [00:04:46].09]  work basically, making sure that my vision is realized on a much smaller scale. And that was a little bit painful, because as you kind of move up more to a senior position in a large corporation, politics kind of get in the way. So 80% of my time, I feel like it’s not serving the customer in the best interest. Also you’re just kind of working in the corporation world… Which is why I kind of started doing real estate, doing a side business… Because what you create when you’re becoming your own boss, you see that direct impact. So that is super-exciting for me, versus kind of grinding in a nine to five.

Joe Fairless: The skills that you used in your W2, what skills have you found that you’ve used the most in what you’re doing now?

Elisa Zhang: I think it actually transitions very well, and I was just about to write an article about that… The project management skill actually translates fantastically into real estate. Because we also know – and Joe, I’m sure you know, when you have constructions, when you have lease-up, all these steps that you’re doing, there’s a lot of follow-ups. There’s a lot of driving everybody to make sure everybody’s on the same page, not rolling all over the places. So I think that skill is very helpful in terms of asset management, as well as raising money. Because when you’re raising money, you’re coordinating with hundreds of people, like you’re doing. That requires a lot of herding cats per se. So that skill set, it was really helpful.

Also, the strategic thinking part was really helpful, in terms of just being the boss of your own company; then you kind of have that vision of where you want to go. So all in all, I was kind of surprised when I transitioned kind of over. I was like, “Wow, my W2 job kind of paved the way to what I do now, even though it’s a completely different career path.”

Joe Fairless: And it’s one thing to understand, “Yes, my skill set translates from W2 to entrepreneurial syndication, real estate investing.” It’s another to tactically see, “Here are some things that I’m doing, that others aren’t doing, because I have the skill set.” So what are some examples of some tactical things that you do that perhaps others don’t do (but they probably should) because they don’t have your skillset?

Elisa Zhang: Using technology, I would say… Because in a high tech software company, there is — I’m not sure if our listeners are familiar with this; it’s a method called Agile methodology, which is you’re basically dividing up developments into small, short cycles. Some are one week, some are two weeks. The idea is that you’re scoping the work so that it can get done within that week, and then making progress moving forward.

That skill set was really helpful in terms of applying the Agile methodology in project management, in constructions, in self-management. And actually, I’m glad you asked this, Joe… Recently, we’ve been using some of the software programs I have been using when I was working in high-tech. Asana is a project management tool, and we’ve been using it. And Slack, in terms of communication with team members, and also just kind of evaluating softwares to make the running of the project a lot smoother.

There’s another program that we usually now use, it’s called Knock CRM. I actually learned about that when one of my coworkers was interviewed for the software. Then I dipped into it a little bit more, and all our property is using Knock CRM right now to efficientize the communications between tenants and the staff, all that stuff, and the cutting down of time spent on that. And also increasing lease conversions, because techs are very high in conversion in terms of sales. So all these are slowly coming back in my life.

Joe Fairless: As far as Agile methodology, I’ve got it pulled up on Google… Is there a book that you’d recommend on that? If not, that’s fine. We can just do Google searches.

Elisa Zhang: I do not, because it’s just work.

Joe Fairless: Okay. You just do it. Yeah. It’s like you were trained on that a while ago. And then Knock CRM is just knockcrm.com.

Elisa Zhang: Yes, that’s correct. Yeah.

Joe Fairless: Okay. So let’s talk about your journey now, a little bit, now that we talked about some tactics that could be helpful for the listeners. So your portfolio – eight properties as a general partner, and then you’ve got passive investments and a thousand units as a limited partner. What came first? I imagine the limited partner stuff, but please educate us.

Elisa Zhang: Yeah, you’re right. It’s definitely the limited partner stuff. But before that, we were managing our own small multi-family. So that kind of has paved a little bit of background.

Joe Fairless: What unit size?

Elisa Zhang: So we started with fourplexes. We bought a couple and then I got bored. So I was like, “Hey, we’ve got to go a little bit bigger.” So we bought 12 units, 10 units… Small multi-family. They’re actually very, very [unintelligible [00:09:53].29]. I’m sure you can attest to it. Smaller properties usually require more hands-on from an asset manager, because the teams are not as professional. And then from there, we learned about investing into larger multi-family. And the decision came in because I lived in Washington, and our property was local before. In 2017 we noticed that we can no longer buy local properties, even small apartment buildings. So I spent a whole year going to three meetups a week, trying to look for a deal. But what I found was knowledge. And then from there, I felt comfortable enough, made enough networking with enough professionals, and felt comfortable enough to kind of move out of state in investing. And then I just started going out of state. I need to go a little larger in order to be able to be scalable. So hence the decision of getting into the larger multi-family. And then from there, we passively invested a few deals, get to know people, and got invited into one deal as a general partner.

Joe Fairless: You went from four units to 12 units, to a 10-unit… What are some challenges that you didn’t think you’d come across on those 12 and 10 units that you did come across?

Elisa Zhang: I did a lot of education before then, too – just kind of listened to podcasts, your show, BiggerPockets, and all that stuff. So I would say the biggest hurdle was financial, which is lending. Because from a four-unit to a bigger than four-unit, you’re crossing the boundary of residential lending to commercial lending. So that first loan, you’re like the bass trout nobody wants. It’s very difficult to beg anyone to get you onto the first loan.

Back then I didn’t really understand the partnering up concept. Nobody ever told me. So you’re just hitting your head on the brick over here over it, over and over again, until someone tells you “Yeah, we can take you.” Which is a local credit union. So we did get financed down on that property in particular, with a commercial loan. But that is after the first credit union got it all the way through and fell through on the 11th hour. And then that person introduced us to another credit union locally and got it done. So it was definitely a very interesting journey. That was very difficult.

The other part of it is I took on one partner. That was intentional. We had enough capital. But we know that after this property if we want to grow more, we’ll probably need to take on a couple more partners. So we were putting a majority of the money, and that was perceived as a lower risk for our investors. So we just kind of went ahead and took on one partner who was my colleague at that time, and then kind of went there. And he’s still my investor to this day, one of my best investors.

Joe Fairless: You said “We took on one partner.” Who’s we?

Elisa Zhang: Oh. I always say we, because it’s me and my husband. But really, I’ve been embarking on the thing by myself once it  was past the fourplex. Because he was basically doing the BRRRR strategy on our fourplex. So he was renovating and I was managing. But once we go beyond the fourplex and also went a little bit further away, he’s just kind of stepping back from that role, because he can’t be renovating them anymore.

Joe Fairless: Does he have a W2 job?

Elisa Zhang: He does not. So I am a single income — our household has always been a single income household. I get paid pretty well with my high tech job, so he didn’t really have a full-time job. So that was his job, which was working for us. Now his job is full time watching out for our kids.

Joe Fairless: There we go. Which is a full-time job.

Elisa Zhang: Absolutely.

Joe Fairless: That’s for sure. So 12 units, 10 units – did you exit out of those?

Elisa Zhang: Yeah. The first one we bought, the 12-unit, we sold it in a year and a half, and basically brought a hundred percent profit for our investor and ourselves. And then 1031-ed into what we call a tenant in common deal. Partner was two other people in Phoenix, into a 36-unit in Phoenix. And we’re actually selling (a year and a half later) out of that thing, and making about 80% profit as well.

Joe Fairless: Nice. That sounds outstanding. So that was your first foray into anything larger than 12 units, that 32-unit. From a limited partner standpoint, how many deals did you invest in on the LP side before you were on the GP side?

Elisa Zhang: I have to kind of think about it. I think maybe three to four or so. It really kind of happened really rapidly, because I had a solo 401k account. At the time I also left my job. I was going through a job transition three years ago, and I was able to use that money and moved into a solo 401k account… And then that’s the money that I can’t really touch and it’s not really doing too much, so I used that to passively invest in a deal and that freed up my cash to do the offers as active partners.

Joe Fairless: Got it. Okay. Let’s talk about the LP investments first, then we’ll talk about the GP stuff. From an LP side, what questions did you ask the general partner? Or what research did you do prior to investing with them?

Elisa Zhang: I really went by a person approach. Every single investment I made, I knew the person individually. And also, I looked at their past track record, I think that was really important. I’m more of a people person. So that was kind of important for me. And other things I looked at is I also took some education with CCIM courses, so I understood how IRRs and all the other calculation happens… So when I look at the underwriting, I would say maybe I’m a little more sophisticated than average LPs. And I look at rental income growth, and I look at reversion caps, and I also look at how feasible the business plan really is. And it looked like a property that has a lot of cash flow and had a pretty good cushion, in terms of how much they’re raising, in terms of reserves compared to their projects. So at that point, it just kind of clicked. Especially, also I had a small apartment experience, so I knew some of the business plans, what that looks like. They weren’t crazy in terms of rent increases, etc. Even if it is, then there’s a very slow step up. That is what I’m kind of looking at.

Joe Fairless: Yeah. And will you elaborate on the rental growth a little bit more? On what would be a red flag? Maybe we’ll approach it that way.

Elisa Zhang: So over the years, I’ve become more experienced with that. So on my first deal when I evaluated it, I was just simply looking at the market rent growth and wanted to make sure that matches with what the migration pattern looks like. For example, Texas back then, and Dallas, you can probably underwrite at 3% rent growth, because that matches with the report. But later on, the market has matured a little bit, so that rent growth has slowed down a little bit. So that’s the stuff that I’m kind of looking at, and also other incomes etc.

Now recently, by doing deals myself, I came to this conclusion. Also, recently the market has changed. It’s not as peachy looking. So when I’m kind of looking at — basically, total income is what I look at now. Because at the end of the day it’s how much you are increasing in total in terms of income, and then what your tenant can kind of weather. It doesn’t matter if it’s other income that increases, or it’s the rent income that increases; there are ways that you can structure it, obviously, that I would encourage people to do, but at the end of the day, they’re going to see what is the bottom line when they pay the rent. So that total income now has just become my metrics on what’s the increase over there.

I think with the recent market, we should probably be conservatively looking at them. In the first year, I don’t want to see anything over 2% on the total income increase… Which is super conservative, because when you’re considering a lot of value add projects, there’s intrinsically maybe 10 or 20% rent growth there just by implementing the market, even with a discount. In the second year, I’m looking at less than maybe 3% increase. And then the third year and fourth year, I have a pretty optimistic view on that, because I think inflation is going to pick up. So over then I’m okay to look at up to a 10% increase. That’s kind of the projects I’m looking at currently, using the current market.

Joe Fairless: It’s interesting that you’re talking about that now that you’ve been on the GP side. You’ve seen some other ways to increase income to help influence that. What are some things that you’re seeing now?

Elisa Zhang: Well, now increase is really difficult, because we’re in the middle of a pandemic. And I think by the time this episode aired, we’ll probably still be in it. So it’s about the preservation of the income. But what we noticed is even on the property that we were doing is, previously we had a plan on doing upgrades, and we were hitting them before the Corona time. And then as soon as that pandemic happened, we noticed the demand for updated units was a lot less. People are rather looking for amenities such as a washer and dryer in a unit. That’s a huge one, especially in the Phoenix market. You almost command a $60 to $100 increase; it depends on where you live. And then it’s a lot cheaper actually to put that in compared to doing the full upgrade in the Phoenix market, because the labor is pretty expensive over there. You can probably get away with $4,000;  that’s if you have to dig a hole in your wall and actually adding the connection itself. So the ROI is actually a lot higher right now, because people don’t want to go to public places to do laundry, and this and that.

Also, the Amazon lockbox in like a slightly better class property… Because again, the convenience is very big. So more amenities now, that’s a way to kind of increase the income, versus just a traditional upgrade. That’s kind of what we noticed in this particular market. Previously, obviously, by just updating the units, I think oftentimes we can hit the market rents that we wanted.

Joe Fairless: What deals lost the most amount of money?

Elisa Zhang: Well, there’s one deal that we are closing. On the 23rd hour it fell apart and we lost $30,000 in that. And that’s all our own money. So that was the first syndication attempt that we put together. So I had a partner in Mississippi and we found this tertiary market. Hindsight is probably a good thing that we didn’t go forward. Everything has lined up. We found the investors, because that was our first deal ever, we found the experienced GP to sign up with us, all that sort of stuff. It was very challenging. Every single step of the way was very difficult, because we tried to do it ourselves, with no mentors. But we got it done, crossed the line. On the 23rd hour, our lawyer — and Mississippi is an escrow state, which means your lawyer does all your closing. And our lawyer is not as experienced as she led us to believe so. She took extra time, because I’m in the Washington States and etc. So doing all these background checks, so she took one extra day.

And then we went back to the seller – and this is direct to seller deal – and negotiated with him and said, “Hey, we just need one more day extension to get the [unintelligible [00:21:24].21] done and we’re good.” And the seller turns around and said, “No, I want to hike up 10% on the purchase price.” I’m like “What? Who does that?” We can’t do that, because we had investor money in there. So we had to say no. And then we tried to save the deal last minute, negotiate with him, but the seller was just not cooperating. So as such, we had to walk away from the deal. And we didn’t have a lot of hard earnest money in, which is good, but we lost to all the expenses that were associated with it. It’s about $30,000 that we lost over there.

Joe Fairless: How many units was it?

Elisa Zhang: It was only 50 units. In hindsight is probably good we didn’t get into it because it was literally in a tertiary, if not like a [unintelligible [00:22:06].12] market.

Joe Fairless: Okay. Do you know what happened to that property?

Elisa Zhang: He still owns it.

Joe Fairless: Really?

Elisa Zhang: Yes. Yup. [laughs]

Joe Fairless: What deal has made you personally the most money to date?

Elisa Zhang: That’s a good question, because I have to kind of go through in my head… It’s a toss-up between actually the fourplex and my small apartment buildings… Which is kind of funny, because some of the deals that we’re still in the cycle for, for the larger apartment, which is why it’s not really comparable… But hey, I would say in four years, we have through a 1031, that 12-unit, quadrupled our equity gain over there, and then we’re doing yet another 1031. So we transferred a 300k to $1.2 million in three years. That’s a pretty good gain, I think. Other ones – I would say the fourplexes that we did multiple BRRRRs on them. So we pulled all our original capital out of it three times, and it’s still cashflowing a thousand dollars per complex…

Joe Fairless: Wow.

Elisa Zhang: …which is pretty good. Yeah,

Joe Fairless: Let’s take a step back… What is your best real estate investing advice ever?

Elisa Zhang: I would say get out and do it, and also get a mentor. We kind of struggled, as I shared that story about that Vicksburg deal. At the time if I had a coach or someone mentoring me on this, then we could have probably more creative maneuvers over there. Or better negotiation tactics, right? Or getting access to better networks, and this and that. So I think that is something I would advise my 10-year ago self, to get in quicker. So that kind of increases your trajectory a lot more and shortens the time that you have to suffer through trial and error.

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

Elisa Zhang: Yes.

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

Break: [23:56][24:45]

Joe Fairless: What’s the Best Ever way you like to give back to the community?

Elisa Zhang: I have started a university called EZ FI University. I like to kind of teach other people what I do and show them there are multiple different ways to reach their financial freedom. So this is one way that I’m giving back right now. And I’m actually also working on my charity strategies to figure out causes that are really passionate to me to give back to the community by donating.

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

Elisa Zhang: They can go to www.ezfiuniversity.com to check us out.

Joe Fairless: Thank you so much for being on the show, talking about your background, your journey, and how you have gone from the fourplex to now general partner on eight deals, and the lessons learned on the 12-unit and the 10-unit in terms of lending and bringing on a partner, even though you really didn’t need one, but you saw that it would be beneficial for you to have one in the future that you have a proven track record with. And I think that’s a very valuable insight, especially for those who are starting out. Thanks for being on the show. I hope you have a Best Ever day, and talk to you again soon.

Elisa Zhang: Thank you so much, Joe.

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JF2259: Translate Classroom Courses to Online With Carla Cross #Skillset Sunday

Carla Cross is a long-time licensed real estate professional. She and her husband started investing in single-family homes in the late ’70s. As the author of 7 books for real estate professionals, Carla is a known authority on productivity and profits. She is a recipient of the National Association of Realtors Educator of the Year Award. With her background in sales, management, and training, Carla is helping her audiences ‘translate’ their classroom courses to effective online formats.

Carla Cross  Real Estate Background:

  • Licensed real estate professional, and author of 7 books for real estate professionals
  • She started investing in single-family homes with her husband in the late ‘70s
  • She is also the recipient of the National Association of Realtors Educator of the Year Award
  • Based in Seattle, WA
  • Say hi to her at: https://carla-cross.com/



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Best Ever Tweet:

“What’s challenging is when your teaching someone to do something you must be sure your teaching them in the right order” – Carla Cross


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

Carla Cross: I’m doing great, thank you. It’s sunny… What can be better?

Theo Hicks: Yeah, it’s a little dark in here, but I do have some sun coming in. So, I feel you. Carla is a repeat guest. She was a guest in our first year, episode 154. So being a repeat guest, we’re going to do a Skillset Sunday episode. But before we get into that, a refresher on who Carla is. She is a licensed real estate professional and author of seven books for real estate professionals. She started investing in single family homes with her husband in the late 70’s, and is also the recipient of the National Association of Realtors Educator of the Year Award, which is going to be important for what we talk about today. She’s based in Seattle, Washington and you could say hi to her at her website, which is carla-cross.com. Carla, before we jump into today’s skillset, could you tell us a little more about your background and what you’re focused on today?

Carla Cross: Sure. I come from a very closely related field to real estate, music. I started playing piano when I was 4, and I played by ear, and then took lessons, and I thought I was going to become a professional musician forever. I have a Bachelors in Piano and a Masters in Music Theory, but I couldn’t really ever figure out what I love to do, and I stumbled into real estate to help my husband when he was between radio DJ jobs. But I found out I love selling real estate, and those of you out there that are selling real estate or investing, you’re doing it first because you love it. Because there’s something about it, because it’s a basic security issue. And don’t we know that right now with COVID there’s nothing more important right now than the people’s security and the security of their homes. So I found I really loved it. The music was wonderful, but nobody ever died for a lack of music, I don’t think.

So I went into real estate and I’ve found I loved it. My husband went back into radio, but I stayed in real estate and became the top sales person, and became a top manager. Then I started teaching classes all over the US and all over the world. And the books that you see at the back of me, I actually wrote because I put them together as help tools for my agents first. So that’s really how it started. I’ve mostly done work with real estate agents, but I did write a book– I don’t know if you see it back there… But it was for buyers, “Buyer Beware: Insider secrets you have to know before you buy a home.” And that was at the time when Buyer Agency was just starting, and there were a whole bunch of misconceptions about it, both from the public and the agents. So, that’s why I wrote the book. But all the rest of them have been for the real estate professionals.

Theo Hicks: Perfect. Thanks for sharing that. So the skillset of today is how to create a course– more specifically how to create a course, a seminar that is online. So take it away. Let us know exactly where we start if we want to create a course. I think the answer is pretty obvious, but how to actually do it might not be so obvious.

Carla Cross: Oh, absolutely. Obviously we have to– as I said, I do a lot of speaking, I do a lot of writing, I help real estate professionals become certified trainers in the State of Washington and all over the US. And of course, all of us have had to go online. Now I just did webinar– by the way, if you want to see the webinar about some tips on taking your classroom online, you can just go to my website and go to Free webinars and more, and you could see it. I’ll say it again at the end. But it’s a good overview of all the things you have to do.

So, what I discovered during that webinar was that about 90% of the classes that real estate professionals and affiliates – and that would be anybody like title people, and all the people that teach the real estate, 90% were live. We just weren’t doing much online, because we didn’t have to. So all of a sudden everything’s online. But you can imagine it’s kind of Fruit Basket Upset. The problem is first of all the classes, most of them aren’t really classes, they’re information dumps. And so for you out there, you can’t create a course online until you’ve created the whole format offline. Does that make sense? Because if you try to go online with it and you try to use all the gewgaw’s on any software, like small groups or polls, you don’t know where to put them. So, you don’t want to just buy some software, or rent it or whatever, course software, and then start in. You start by actually creating the course.

So when you create the course, the first thing you do obviously is write down all the stuff you know and then you organize it. And then you say “How am I going to teach this?” So those of you who are watching, of the Zoom calls or courses, or whatever you’ve watched online in the last 3 months, how many of them have been interesting? How many have been involving? When I ask the people on this webinar – and most of them were real estate trainers – I ask them how long they could focus on a 45 minute webinar, about 50% said only up to 10 minutes. Now these are trainers. These are people who want the information.

So basically, what I’m saying is be really careful not to copy all these people that are doing all these online things are. Because most of them actually are pretty awful. But I don’t have to tell you that. You know that, because you’ve had to watch them, right? So then what you want to do is think, “I’m writing this course…”  And by the way, don’t try to dump the whole load and tell them everything you know. Figure out what you can do – this big rule, 45 minutes only. I think Theo’s doing this interview, it’s about 20 minutes. Right Theo? It’s 20 to 25 minutes?

Theo Hicks: Yup.

Carla Cross: Okay. Because that’s enough. But you can get away with a course, especially if you have time for questions, no more than 45 minutes. You’ll just lose everybody. And you’re going to be exhausted. So, 45-minute segments. That doesn’t mean you have to do a whole course. Just segments.

So what do you do? You think about what do I want to teach? What do I want them to walk away with at the end of 45 minutes? Not “Can I dump everything I know about everything?” But, “what do I want?” So think in segments. In the industry now we call that micro learning, where we’re going deeper into something. Now you can do an overview, but you’re still going to have to involve them.

Let’s take a look at how you might involve them then, because you don’t have them in the classroom. And one of the things that I’ve discovered by teaching a bunch of real estate people and affiliates is this – we’re good talkers. And Theo, you know this from interviewing a lot of us, we’re pretty out there. At least when we’re performing, we’re performers, right? So it’s easy for us to get interaction with a group or crowd. But now let’s go online. Nobody’s really there. And even though I can see Theo, and Theo can see me, I don’t get that physical energy, because we’re not really there.

Now multiply that by the number of people you’ve got in your course, or class, or Zoom call. You don’t have the energy. So what are you going to do to involve them?

Let’s say you’ve got your course, and if you were going to teach it live, you would ask them a question. And they would talk, and that’s called discussion. Well, if you try that and you’ve got 50 people on a Zoom call, that’s going to be really awful. And usually you have to mute everybody anyway, because you know dumb things happen in a way. They go to the bathroom, or their kids come in, and whatever… So you’ve got to mute them, right? So what do you do? Take that question you would ask  – and talking about how to create that course – you could put a provocative question right at the beginning. And that question should give you some information as a spring board for you to go the next thing.

For instance, I talked to you about the question I asked, “What percentage of your classes you’ve taught before COVID were live?” And this was to a whole bunch of real estate trainers. And again, they said 90%. What was that? That was my spring board. So I can go “Yeah! And we can’t do it now. So what in the heck do we do?” Because we can’t just turn on the camera and talk. It’s death.

So, you’re going to ask a provocative question at the beginning of your course. And to get your answers, you’re going to use tools, if you can. If you’re using Zoom, Zoom lets you use polls, I use GoToWebinar for my webinars. But take a look at all those different platforms, use the ones that give you the kind of abilities that you need to teach the way you want to. You’ve got to be more than just talk.

So you’re going to ask a provocative question, then you’re going to take those answers and you’re going to comment. And that’s going to lead you to the next section. What else can you do, besides polls? Don’t beat the dead horse, don’t do too many, don’t do more than 3 or 5 in 45 minutes. They won’t even respond. I had a really good trainer with me– by the way when you’re doing online,  have somebody else there with you if possible… To do comments, to read what’s coming in in the chat, all that kind of stuff. Well I have a really good trainer I work with, so she was keeping track of everything… And we were noting – even though again, these were a bunch of trainers and you would think they’d want to tell us all this stuff… The biggest response we’ve got was 70% of them answered, in other words they answered the poll. Even though I thought those polls were like, “Hey, everybody would want to answer this stuff.” So why didn’t they answer? Oh, they were doing other stuff, they weren’t paying attention. So when you do your polls, know you’re probably not going to get them all, but shoot for a number you want to get, because that’s going to give you your spring board to go forward.

What else can you do? Well, in a live class, hopefully you’re going to divide them into small groups and have them do some work. And by the way, learn how to use different kinds of teaching methods besides lecture and discussion, because you need to have those teaching methods written in your course to translate it to online. It’s going to be a little different, because you can only use the software instead of using yourself inside the class.

So let’s say you want to them to work on something, you can divide them into small groups and have them work on something, and give you their reports back. That’s a really cool thing to do. And one version of Zoom lets you do that. I highly suggest that you do that, because everybody likes to talk. So you want to give them a chance to talk to each other, but not always to you, because you can’t control 50 people talking. Those are just two things that you could do when you’re doing this online course.

So what you always want to do too is as you’re watching these courses – and I watch lots of them to see how they teach. Not necessarily what I learn about everything, but how do they teach. So watch those and ask yourself how can I put that in?

For instance, the other day – this one’s pretty interesting… I saw one where the instructor said to people, “Get out of your chair and go find something in your office or home and come back and tell us what it means to you.” I thought that was pretty clever. Because you know how you sit in the chair and you’re like, “Oh, I’ve got to get out of here.” So she literally had them get up, go find something and tell the significance. Now, how could you use that in your course? Well, for instance if I was teaching how to take my classroom online, because I’d have a bunch of instructors, I could have them go get something, like a great book that they’ve read, that they want to share one thing out of it. And then I could have everybody tell us, or I could put them in small groups and tell each other, and then have them report. I thought that was very brilliant, to be able to get people involved, but in a kind of a surprising way. I’ve only seen that done once, and I’m going to do it in some way. So I suggest that you think of things to get them out of their chair. I’m not watching really the time, so you tell me, Theo, how I’m doing time-wise.

Theo Hicks: You’re doing great. Thanks for sharing all that. I’ve got a few follow up questions. I kind of want to focus more on the first aspect of it. Because you did elaborate in a lot of detail on the second part, which is actually how you teach it. So you’ve mentioned that obviously the first step isn’t to find a software, isn’t to find some technology to use, but to actually create the course first. You said that to write everything down and then organize it. How do I know if I’m ready to teach a course? How do I know if I have enough information in my head to create a course?

Carla Cross: That is a great question. When I said write everything– yeah. I was really kind of making the assumption that we have a lot of information. What’s really interesting is all of us are carrying around a lot more information about anything than we think we are… And when you start writing it down — in fact I can’t really grab it now, but I’m going to write a book on how to train and take those principles into online. Just like we’re talking about today.

So when I did the proposal, I wrote down everything that I can think of about the course. Now, it didn’t all come from me. Where did I go? I went to the notes on the webinars, the notes I’d taken. So when you’re going to do a course– let’s say Theo you want to do a course and you’re going “Wow, I know people need to know this, but I don’t think I know enough.” What do you do? Just like when you write a book, you do research. So you go “This is what I’d like. I don’t have enough information in that aspect.” So you go do some research, get some books, look on the web, all that kind of stuff. You will surprise yourself.

Here’s the big mistake we make when we create courses, whether it’s classroom or online – we make them too big. For instance in real estate, people will want to write a course on everything you need to know about listing property, and I’ve got an hour. No way. What about, instead, how to find people who might want to list their property. That’s one module.

So take those things apart and think about how deeply you want to go in each subject. As I said, you could do either an overview, or you can chunk it down and just do a bit of it and then go to the next one. Does that answer that question about where do you get the info?

Theo Hicks: A hundred percent. One thing, Carla – I know you know this. I know this… Anyone who does podcasts or any sort of content knows this… You can talk about one thing for way longer than you actually think. If you want to do a video on– a perfect example would be the podcast that me and Travis do now, where we’ll do a blog post that you can read in 30 seconds, so we can talk about it for half an hour and get through a third of the blog post. So I think that something else to– it kind of goes along the same lines of you know a lot more than you think, and then obviously if don’t have enough, you can research. So when you say write things down, do you mean sitting at your computer and just start typing it out?

Carla Cross: Oh, yeah. Yeah. I just can’t find my list of all the things that I wrote for this proposal. Because then what I had to do was, after I wrote them all, then I put them in some order.

Theo Hicks: That’s what I wanted to ask you next. So I’ve got my Word document, I’ve got my notebook full of notes. What’s the best way to go about organizing them?

Carla Cross: Well, there are several ways. One easy way is chronologically. For instance, my example of how to list property. Chronologically, the first part would be how do you find people that want to list property. Chronologically is easy, because it’s through time. You can also do it by subject. Here’s subject number 1, here’s subject number 2. What’s challenging is that when you’re teaching somebody to do something, you have to be sure to teach them in the right order. I’m just teaching one of my friends to read music who’s been a singer for many, many years. She’s sung in all these groups all over the world, and she said to me the other day, “I can’t read music.” I couldn’t believe it, that she couldn’t read music and she’d been able to do this.

Well, I bought a book to go through with her, because I do have a Masters in Music Theory, but I thought, “Oh my gosh. I can’t teach her all this unless I organize it and write it all down first. And I don’t want to spend 6 months.” So I bought the book. Guess what? The first thing this book teaches you to read music is the rhythm part. I wouldn’t have started there. But there’s a good reason why he started there. I don’t remember, but he started there. So he started with the very simple principles of reading rhythm. And then he got more complex. Then he goes into reading notes.

So sit down and say to yourself, “If I’m going to teach somebody to do something, what’s the right order?” So how do you find out? You try it. I taught piano and flute for many years. But even teaching instructor development… You’ll learn if you’ve got things out of order, because people will go, “Well, I don’t know that. I can’t get that. I don’t understand.” That means you weren’t clear enough in your instructions, and you didn’t have them actually doing something with it. So that’s a big part of it.

I’d really suggest you to [unintelligible [00:21:42].10] how to teach a course – I do have an online course and you can go to my website and see it if you want to. But that way you get all the principles I’m talking about. And you’re not just guessing at these things. You know, “Oh, I’m starting this chronologically and this is what I’m going to put in it, and this is why I’m going to put it in it, and these are the exercises I want so I don’t bore people to tears.”

Theo Hicks: Perfect. Alright Carla, is there anything else you want to mention as it relates to creating an online course? Or really anything else you want to tell people before we conclude the interview?

Carla Cross: I think no matter what we do today, we’re going to do it online, just like you and I are doing this online. And I know the first one we did was telephone, I believe. But we’re all going to do these things, Facetime kind of thing. So no matter if you don’t want to really create a course, all of these communication skills will help you. For instance, I own a real estate company also, and we’re teaching agents how to do online listing and buyer presentations. Because so much of the agents’ work now is not going to be face to face.

So if you’re an investor and you’re working with an agent– of course, having been licensed for all these years, I suggest obviously always work with a great agent that you interview and that you screen… Don’t just go to somebody because you saw them. But you want them to have great skills presented remotely, because they probably will. So I ask them that question, “Tell me about the skills that you’ve got presenting. Do you have an online presentation? Show me.” Because all hell can break lose, if they don’t know what they’re doing and they’re in your hands — so you learn this stuff to some extent, so that you could pass it on.

The other thing that I’d say doesn’t have to do with courses, but as Theo said, we’ve owned different kinds of rentals for a number of years… So everybody’s in security issues now, so with your tenants – be very kind to them, help them out any way you can; they will never forget you that way. It’s really important right now. I’m finding that in doing a lot of things for tenants, not because I have to, but because I want to… And what I’ve also found is that they really, really are responsive to that. They would really do anything for me and anything to stay there. So that’s kind of my advice to you just as a human being, and as an investor or a landlord.

Theo Hicks: Thanks for sharing both pieces of advice. Carla, thanks for joining us. You’ve told us how to create an online course. You mentioned first to actually create the course, which involves writing everything down and organizing it. You gave us examples of organizing it. Even if you think you don’t have enough information to do a course, first try writing it all out. And even if you don’t know anything, or don’t know enough, you can always go out there and do research, that’s what everyone does, whether they know things they’re not; they’re going to have to do some sort of research to do a course. So don’t feel bad or like an impostor if you’re doing research.

And then the second step is to figure out the best way to teach it, to get the information out there. You gave us a lot of really good tips, but I think the best one you gave was the first two of them. One, don’t do a massive dump; keep it short. And then have no problem doing a 10-part course to keep things concise.

And the second thing was some of the creative ways to get the audience involved when doing an online course. Put provocative questions and then have a poll, divide them up, and have them do different exercises and report back. Have them do things that gets them out of their chair, with the example of finding a book or something in their house to talked about. You mentioned at the beginning that if we go to your website carla-cross.com, she has a free webinar where you can go into more details on this in 45 minutes… So make sure you check that out at her website. Again, thank you for joining us. Best ever listeners, as always, thank you for listening. Have a best every day and we’ll talk to your tomorrow.

Carla Cross: Right. Thank you Theo. It was great.

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JF2180: Sight Unseen Offerings With Gabriel Petersen

Gabriel Petersen is a full-time real estate investor with 5 years of real estate experience. He is also the owner and founder of Great Northwest Home Buyers and Equal Housing Group. He used to be in digital marketing for many years and has implemented digital marketing into his real estate business to help him generate deals. He also shares how he decides what to offer properties when it is a sight unseen deal. 

Gabriel Petersen  Real Estate Background:

  • Full-time real estate investor with 5 years of real estate investing experience
  • Owner and founder of Great Northwest Home Buyers and Equal Housing Group
  • Portfolio consist of 3 flips, 2 wholesale deals, 2 doors under management & contracted a 50 pad mobile home park
  • Based in Seattle, WA
  • Say hi to him at: https://therealestateinvestingclub.buzzsprout.com/
  • Best Ever Book: War and Peace




Click here for more info on PropStream

Best Ever Tweet:

“Paid advertising is like a switch, you turn it on, and you get leads” – Gabriel Petersen


Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, I’ll be speaking with Gabe Petersen. Gabe, how you doing today?

Gabriel Petersen: I’m doing fantastic. How are you, Theo?

Theo Hicks: I’m doing fantastic as well. Thanks for asking and thanks for joining us; looking forward to our conversation. Before we hop into that, a little bit about Gabe – he is a full-time real estate investor with five years of real estate investing experience. He is the owner and founder of Great Northwest Homebuyers and Equal Housing Group; his portfolio consists of two flips, three wholesale deals, and then a duplex, and he’s currently under contract for four mobile home parks. He is based in Seattle, Washington, and you can say hi to him at his podcast, which is called The Real Estate Investing Club With Gabe Petersen. So Gabe, do you mind telling us a little bit more about your background and what you’re focused on today?

Gabriel Petersen: Absolutely. So I actually got into real estate from digital marketing. I started in the corporate world, did that for a very, very long time, and just wasn’t super-thrilled about it. I wanted something different so I started testing out different fields. I got into digital marketing, did an e-commerce store, and as time went by, me and a friend, we decided we wanted to buy a house, and so we went bought a triplex out in Tacoma, Washington, and in doing that, I decided to use my digital marketing skills to start to get leads and I found it it’s pretty easy to do that and I figured I was onto something, so at that point, I focused my attention on to real estate since then. I stayed in corporate for a little bit too long, in my opinion, and then probably about a year ago, I switched gears to full-time. So have been focusing on mobile home parks in Washington State specifically, but also nationally, we market for mobile home parks, and single and multifamily.

Theo Hicks: Perfect. Do you mind telling us some of the skills that you learned in digital marketing and how you apply that to finding leads? You mentioned it was easy, so tell us how we can also easily find leads through digital marketing.

Gabriel Petersen: There’s a caveat there. It took me a long time to figure out how to do it, but once I figured it out, it became easy, but it’s not a secret. I’m sure everybody listening, they’ve watched some show or some guru out there that explains it, but we do PPC, so both Microsoft and Google PPC, and then Facebook ads. Facebook, we mostly do for remarketing, but we’ve also done just standard Facebook ads. And then on top of that, we also do everything else behind the scenes – drip campaigns, email marketing. We’ve tried text marketing, as well as ringless voicemails, so the whole thing together works pretty well, but the thing that really got me started in the beginning was PPC, Google PPC.

Theo Hicks: Sorry, PPC is pay per click, right?

Gabriel Petersen: Yeah. So Google ads, Google search, search ads.

Theo Hicks: Yeah. So it’s pay per click, and then what’s the other one, because I know there’s two versions. Pay per click and what’s the other one?

Gabriel Petersen: Pay per click, and then organic SEO. SEO is a little bit harder. You’ve gotta have a lot more time, in my opinion. Our site’s ranked, but that’s not where we get the majority of our leads. Everybody who’s getting started in digital marketing for their real estate business, I would recommend either hiring somebody to do SEO or just get started with paid advertising, because paid advertising, it’s like a switch. You turn it on and it goes, you start to get leads. But with SEO, you really got to build it up and it takes time and little bit more effort than a lot of people are willing to get going with.

Theo Hicks: So let’s focus on the four mobile home parks because it sounds like this is what you’re transitioning to. So do you find all those through PPC or something else?

Gabriel Petersen: See, I think three of them, we found with PPC and then the last one was cold calling. So sellmymobilehomeparks.com is our landing page. So we run national campaigns, and that’s PPC across the entire USA, and once we start getting leads coming in, we send them an offer, and based on our specific criteria for buying mobile home parks, if it really fits it, then we’ll buy it ourselves. Otherwise, we wholesale it to other people; but that’s how we got three of them. The last one in Washington State, we actually called the owner.

Theo Hicks: You mentioned before we went online, the breakdown of how you plan on approaching these four. Do you mind saying that again? So you said you’re gonna buy some and then wholesale the others.

Gabriel Petersen: Yeah, we’re actually going out there today, George Washington, it’s a little city out in Washington, and that’s the one that we think we’re going to buy. And the reason we’re going to buy that one is because we got killer seller financing terms. It is 80,000 down, and then 3.5% interest. So we think we’re going to go pull the trigger on that one. The other ones don’t quite fit our criteria for MSA, so we’re going to be wholesaling those ones.

Theo Hicks: How do you, just for your business in particular– so you mentioned that you do the national campaigns, and then once the leads come in, you’ll submit an offer, and then I’m assuming that this one you plan on buying, this will be your first time going to see it in person?

Gabriel Petersen: Yep.

Theo Hicks: So how do you come up with an offer price, sight unseen?

Gabriel Petersen: Actually, I do this with single-family too, is we offer sight unseen, and the reason is because when you’re doing digital marketing, when you get a lot of leads coming in, you just don’t have the time to go to all of the properties. So what we do is we create an offer options letter and we look at the demographics of the area, we ask the seller questions for mobile home parks, we’ll ask them, “What’s the pad rent? Are you on city sewer, city, water?” etc, etc. So once we get a picture of what the property is like, be it a single-family or a mobile home, then we’ll go back, we’ll plug it into our formulas, and we’ll pump out and offer options, and that’s really just to make sure that we’re all on the same page. That us as the buyer and the seller are on the same page of where we think we’re going to end up with our actual PSA signed.

If they agree to the range that we send them and they like what we’re talking about, what we think we can offer, then we’ll go out to the property, we’ll actually see it, we’ll walk it and we’ll get it under contract. But this mobile home park that we’re going out to today, we actually got that under contract before we signed it because we love the terms of the seller financing; you don’t get that very often, not many sellers who are willing to do that, especially when it comes to mobile home parks. So we’re giddy about it; we’re excited.

Theo Hicks: So you offer options. What are the factors in that? So obviously there’s a price range, but are there also one that says seller financing and one, you’re buying all cash or other ones, you’re financing it? Is it like all the different offers you’re willing to do on the property and if any of those makes sense to them, then you go out into the property?

Gabriel Petersen: Yeah, exactly. For a single-family, there’s three options. There’s gonna be two seller finance options, one all cash, and when we look at the all-cash, we’re looking at it as a flip, and then for the two seller finance options, one will be interest-only, and then one will be just standard seller finance, and with each one of those numbers, we can pay a different amount based on the rent and the cash flow that we can expect. So we’ll give that to them, they can look over the three options, figure out which one fits best for their specific situation, and then we can go forward with that.

With the mobile home parks, it’s just two options. We do seller-financed and we do all-cash. Seller finance is always going to be higher than all cash, because, well for one, it’s easier. It’s an easier transaction for us to do seller financing, so we’re willing to pay more for the property because there’s probably going to be less down, there’s going to be less of our time involved getting it to the finish line.

Theo Hicks: So when you’re coming up with these numbers, what’s the target return metric that you’re basing it off of?

Gabriel Petersen: That’s tough. I should have a better answer for you there. We should have one metric, 20% IRR; we don’t though. So we look at each one individually.

For single-family, I like to have at least $200 — well, I’ve been going a little bit higher, so at least $300 per door in cash flow. That’s what I’m offering on there. For mobile home parks, we like to get it between a 9 and a 12 cap. It depends. If it’s on septic and well, then we’re going to want a higher cap rate. If there’s other aspects of the property that make it less attractive, we’re going to want a higher cap rate. If it’s in a great area, we’ll go lower, 9% actually. If it’s in a really great area like near us, Tacoma, Seattle, we’ll go down 6%. So I guess we do have metrics that we go for. So cap rate for mobile home parks, cash flow for single-family.

Theo Hicks: What made you decide to transition from or at least add mobile home parks?

Gabriel Petersen: Well, that one was actually my partner. He had been really interested in this for a while and got us excited about it as well, and then once I started looking into it, it just made a lot of sense. I’ve always wanted to do large multifamily properties, but there’s a lot of capital involved with those ones. They’re just really expensive. Mobile home parks, they’re not as expensive. You have the same number of units and you don’t have to deal with a structure. So there’s no leaky pipes, there’s no broken windows. You think about the headache that comes with owning a property and managing a property, that’s usually gone with mobile home parks, because what you’re dealing with is the electrical is the infrastructure; electrical, the water, the sewer, things that don’t normally break and are easy to be maintained.

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

Gabriel Petersen: It’s tough. I asked this on my podcast too and never thought about it myself, but I like the advice “Don’t give up.” I know it’s trite, but it is honestly, in my opinion, really good advice. There’s so many times when I have just been like, I don’t know– leads aren’t coming in as well as we thought they were or the deal didn’t turn out as well as I thought it was going to do, and I just feel like, “Oh, I just want to give up. I’m tired of this”, but if you just keep going, it is gonna work out. You just have to just pedal to the metal and just keep going forward. So don’t give up. That’s the best advice I can give.

Theo Hicks: Perfect. Okay, Gabe, are you ready for the Best Ever lightning round?

Gabriel Petersen: Let’s do it.

Break [00:12:21]:03] to [00:13:25]:05]

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

Gabriel Petersen: That’s tough. So I’m reading War and Peace right now I have this thing about reading the best books critically acclaimed. So I started reading War and Peace; it’s really big. I don’t know if it’s the best book ever recently, but Seneca, On The Shortness of Life is probably the best book that I’ve read in the past year.

Theo Hicks: I think War and Peace is like Crime and Punishment. I had a hard time reading that book, too.

Gabriel Petersen: Yeah, it’s long. There’s like [unintelligible [00:13:50].00] pages.

Theo Hicks: I know. It’s long and super detailed, but I’m gonna check out War and Peace. I like reading older books. Okay. What is the best ever deal you’ve done?

Gabriel Petersen: The best ever deal we’ve done… Actually, probably the wholesale that I did just two months ago. It was a duplex near me here in Washington, and I ran the numbers and I had this number in mind that I was going to buy it for, and then in conversation, we had talked to another real estate investor friend of ours, and he offered to buy the contract from us for $70,000 more than we were going to be in the contract for, and we were like, “Well, that’s a no brainer. Let’s do it. $70,000 – that’s an easy paycheck. Let’s close it right now.”

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

Gabriel Petersen: Oh man, probably just start another business. Corporate – some people like it; it’s not for me. I really like being an entrepreneur, doing my own thing. So I’d probably just start a new one. There’s tons of different ideas out there. I did digital marketing for a bit, I might do that, but I want to stay in real estate. I do really like real estate a lot. So hopefully I can just restart the same thing I’m doing right now.

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

Gabriel Petersen: Probably my time; in my opinion, that’s the biggest, greatest gift you can give somebody is the gift of your time. So if anybody needs advice or just wants me to look over a deal or anything like that, that’s probably the best gift I could give is just my time.

Theo Hicks: On that note, what’s the best ever place to reach you?

Gabriel Petersen: Go to www.therealestateinvestingclub.com, that is the website for my podcast. Or you can reach out on LinkedIn. Just search Gabe Petersen, real estate investor. I’m sure I’ll pop up; my pretty little face with a blue shirt.

Theo Hicks: Perfect. Okay Gabe, thanks for coming on the show today and giving us your advice on digital marketing and mobile home parks. We talked about how you’re able to find most of your deals and that’s through PPC, pay per click. The other one is SEO and so you mentioned SEO is a little bit harder, takes a little bit more time. So your recommendation was when you’re starting out to focus on a paid advertising, and then maybe hire someone else to get the ball rolling on SEO.

We talked about your transition into mobile home parks. Your business partner was interested in it for a while, and you’d always wanted to do multifamily, but multifamily is a little bit more expensive than mobile home parks, plus there’s a lot less structural things that can go wrong with mobile home park compared to multifamily.

Currently, you’ve got four deals under contract. You found three of them through pay per click and national campaigns and one of them was through cold calling, and then you’re going to end up buying one of those, which you’re actually going to see– I think you said today or very soon, because of the really solid seller financing you were able to get.

We talked about how you’re able to submit offers on these properties without seeing them in person because obviously when you’re doing mass marketing, you’re not gonna be able to see every single deal in person. So you mentioned that you create an offer options letter. So you ask the seller a bunch of questions, do some research to get a picture of what’s going on at the property, and you plug all the information into your calculator to get offer options.

You said for single-family homes, you’ve got three options – two seller financing; one of those being interest only, the other one being standard, and then one being all cash. And then for mobile homes, it was two offers – one seller financing, which is gonna be the highest and then other one, all cash.

The metrics that you want to see to come up with these numbers, the offer numbers for single-family homes is about at least $300 per door in cash flow, and for mobile homes, it is a 9% to 12% cap rate depending on the location and a few other factors. And once you get that offer, you send those in and then if they agree to the offer range or one of the offers or they’re interested, then you will go out and actually see the property.

Then lastly, we talked about your best advice which was to not give up and you gave examples of times where you wanted to give up but had major breakthroughs. So again, Gabe, really appreciate you coming on the show. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Gabriel Petersen: Thanks, Theo.

Website disclaimer

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

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

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

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

Oral Disclaimer

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

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JF2112: Verifying Applicants Through Software With Stephen Arifin

TRANStephen is the founder of The Closing Docs, a software company based in Seattle that provides automated income verification for property managers and lenders. He explains how he evolved his software over time to cater towards property managers, he explains how they started inserting certain pieces of data to help provide more clarity and reliability for the lenders and managers.


Stephen Arifin Real Estate Background:

  • Founder of The Closing Docs, a software company based in Seattle that provides automated income verification for property managers and lenders
  • They handle income verification for over 600,000 properties and growing
  • Based in Seattle, WA
  • Say hi to him at https://www.theclosingdocs.com/ 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“We’ve tried a lot of things to find what works and now we see a compliance rate of 97%” – Stephen Arifin


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, Stephen Arifin. How are you doing, Stephen?

Stephen Arifin: Hey, Joe. I’m doing great.

Joe Fairless: I’m glad to hear that, and looking forward to our conversation. Stephen is the founder of The Closing Docs, which is a software company based in Seattle that provides automated income verification for property managers and lenders. They handle income verification for over 600,000 properties, and growing. First, Stephen, do you wanna give the Best Ever listeners a little bit more about your background and your focus, and then we’ll go from there?

Stephen Arifin: Sure. My name is Stephen Arifin, and my focus right now is taking technology to help automate tasks in the real estate industry. I was born  in Texas and lived there for 21 years, and now I live in Seattle. I’ve spent several years at Microsoft as a software engineer, and learned how to build and scale software. Now I’m taking my learnings into the property management industry. Now I’m building The Closing Docs, where we’re focused on automated income verification for property managers during the tenant screening process.

Joe Fairless: What brought you into real estate and property management in particular?

Stephen Arifin: To be honest, I had no background in property management. I was really looking for a business idea and how I can use technology to streamline an outdated industry. I usually look for industries that have a lot of paper and pencil processes, and I know that there is a lot of innovation in those industries. So I knew that it was this upcoming tech where financial data providers and banks are opening up their information to the consumer, with their consumers’ permission, so I figured that there might be an opportunity here in the lending space to help verify income using this new technology.

And while I started in the lending space, there was a lot of regulations that I could really dip my feet into, so I went into property management. I found a partner who is also based in Seattle and owns a property management company. We partnered together and I wrote the software for his property management company to verify income, and he became our first customer. Once we nailed the product down, we started selling it to property managers all across the nation.

Joe Fairless: Ah, good for  you two. That sounds like a very logical progression. When you first created the software, what did it do or not do, compared to its current state today?

Stephen Arifin: Let’s see… That was ways back.

Joe Fairless: How long ago was it?

Stephen Arifin: It was about 2,5 years ago.

Joe Fairless: Oh, come on. That’s nothing. [laughs]

Stephen Arifin: That’s true.

Joe Fairless: Many iterations ago though, right?

Stephen Arifin: Right, right. It took a long time to get the data that property managers wanted to see in a report. So I was new to this industry back then, and I was learning as I went… And I learned what type of data property managers wanted to see when they were verifying an applicant for income. For example, we would just print out the annual net income for an applicant. The annual net income and the monthly net income. But we didn’t really have the data to back it up, or we didn’t show that data in the report. So as we got more feedback, property managers were like “Hey, I see this number, but I don’t really see where is the proof of this number.” So we started adding in all of the transaction  data and the direct deposit data to back up that claim. That was one of the ways that we helped improve the product.

Another way was that the applicants themselves – we were a little bit hesitant, because in order for you to use our service, it’s consumer permission data, so the applicant has to give permission to pull the data from their bank. And we were like “Will any applicant do this? Is it easier for them to get pay stubs, or W-2’s, or the traditional ways of verifying income?” and we found that with the correct messaging and many iterations the applicants actually love it, because it’s super-easy for them. They don’t have to dig around for pay stubs, or W-2’s or bank statements, and it takes them about 30 seconds. So we think we really streamlined the income verification process.

Joe Fairless: I imagine that messaging was pretty tricky, because you’re basically asking “Can we get access to your personal bank account?” Right? That’s basically what you’re asking.

Stephen Arifin: Correct. Just read-only access. We just take a snapshot. But yes, it was tricky.

Joe Fairless: How does that work? Do they have to give you their password?

Stephen Arifin: Yeah, so essentially we’ve partnered with a lot of data providers that handle this, so we actually never see sensitive credentials… But the way they authorize their bank for us to pull data is that they just log in to their bank account. Sort of like Mint. I’m not sure if yo’re familiar with Mint.

Joe Fairless: Yeah, I am. I signed up for Mint more than ten years ago. I don’t use it anymore… But remind me how that works again, with Mint.

Stephen Arifin: So Mint is a financial aggregator and an investment aggregator. You can see all of your investments and your accounts in one place. They’ve fixed the issue for manual data entry by just automatically linking to your bank account. So you can sign into your bank and then they will consistently pull transactions, and Mint will show you an overall snapshot of your finances.

I think that sort of helped our service with the acceptance, because more and more people are starting to realize that this is actually a thing, and they’re more willing to authorize their bank for us to do this.

Joe Fairless: What messaging at the beginning did not work?

Stephen Arifin: I think it would be easier for us to say which messaging did work, because we’ve tried a lot of things…

Joe Fairless: [laughs] A lot of it didn’t work, and then you landed on the right messaging, and now it’s pretty smooth?

Stephen Arifin: Yeah, we’re actually seeing a compliance rate of 97%.

Joe Fairless: Wow…

Stephen Arifin: It’s blowing my mind as well.

Joe Fairless: What did it use to be, in the worst of the days?

Stephen Arifin: We didn’t explain to the applicant really what was going on. We were sort of like “Hey, sign into your bank. Okay?”

Joe Fairless: “Trust us.”

Stephen Arifin: And everyone was like “What the hell?” But now what we do is we help educate the applicant of what’s going on…

Joe Fairless: How do you do that? I understand the wording you said… You train the staff, or do you have a pamphlet, or is it an email, or what?

Stephen Arifin: So during the income screening request, how it works is that the property manager sends a screening request, and what that does is it sends an email or a text to the applicant, and they get directed to our site. And before the actual screening request occurs, we break down this process; it’s a three-step process. The first thing you do is you connect your bank, and you do that by authorizing your bank account by logging in… And then once you connect your bank, we’ll actually show you the income report and the income data to the applicant. They’re not able to change it, but we show it to them, for one, to comply with FCRA, and also number two, it gives them more of a reason to authorize their bank.

So it’s like, “I’m gonna authorize my bank… I’m gonna see my data first, before the property manager sees it, and I’m gonna make sure it’s all correct.” And once the applicant confirms that their data is correct, they produce the report, which gets sent to the property manager, and a copy gets sent to the applicant. And really, just breaking down those three steps in the very beginning has really helped a lot.

Joe Fairless: So let’s talk about income verification and what specific things that you provide. You mentioned that you provide the proof needed to show the annual monthly net income… What if someone does not have a typical salary/direct deposit job? Is there any way that you can verify income through a non-traditional employment?

Stephen Arifin: That’s a great question, Joe, and we get that question a lot. So we have algorithms running, and it can classify which deposit streams are regular deposits… And those are usually the easy  ones. The pay stub every two weeks, like clockwork. But a lot of renters don’t have that steady income, and they could be receiving income by check, they could be cash-based earners, tip-based earners, like waiters and waitresses… And we actually have a classification in our income report called Irregular Deposits. So what that does is it classifies all of the deposit history that don’t come in at a regular time. This can include tax returns, alimony deposits, and check deposits. So we try to classify which deposits are recurring, but we don’t filter any other deposits out… Because I think it helps paint a better picture. Not everyone makes a paycheck every two weeks.

Joe Fairless: What’s a couple other updates that you’ve made recently, if any?

Stephen Arifin: We’ve added the ability for the applicant to add a comment or an explanation to the income report, and that really helps, where they can say “Hey, I’ve been on vacation for the past three months” or “I’ve been paternity leave for the past three months, and that’s why you see a gap in our income between these dates”, which just helps the property manager spend less time… Because the property manager would ask “Hey, I see a gap. What’s with this?” and then they would have to have a whole email correspondence. Instead, the applicant can just put in some comments, and it would appear on their income report. We’re all about trying to have the property manager save time.

And a change that is in the works is that we want to support multiple banks. Many people split up their direct deposits between different financial institutions, and we want to be able to collect the whole holistic picture of their financial snapshot. So that’s coming in the works.

Joe Fairless: When someone works with your company, how much does it cost?

Stephen Arifin: Our retail price is $10/report.

Joe Fairless: And when you say “retail” – I guess there is a bulk order, or how do you structure that?

Stephen Arifin: Yes, we partner with a lot of software companies, and they look at us and say “Hey, everyone’s got credit screening, everyone’s got background screening, but we wanna include your income verification into our products and be able to provide that to our landlords and property managers. So that’s how we grow really fast, and doing wholesale sort of partnerships where they can order our income verification from their software. It’s a really tight integration.

Joe Fairless: Anything that we haven’t talked about that you think we should as it relates to the income verification process that you all provide?

Stephen Arifin: I would say the biggest thing that really made us take off and our customers start to love us is when we started building integrations with other property management software companies, like AppFolio, Buildium, Yardi, RentScreener – all the popular ones. We made it so that property managers can request income screening requests directly from, let’s say, AppFolio. So they no longer have to open a new window, just have some sort of disaggregate workflow. It can be directly from AppFolio’s site, and that makes it really easy to train their staff about this new tool… Because every time you use a new tool, you have to change your process a little bit. And I think what has helped the uptake with our income verification tool is that it’s so simple. It’s really simple, so we wanna keep it that way.

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

Stephen Arifin: They can email me at Stephen [at] theclosingdocs.com, or they could just go on our site, and we have a contact form there, at theclosingdocs.com.

Joe Fairless: I enjoyed learning about this. I always love talking to entrepreneurs. I have a lot of respect for entrepreneurs, and the process in which you came to this point is such a natural evolution, and it makes sense for why you’re offering what you’re offering, and clearly there’s a lot of need for that… As you said, you looked for paper and pencil processes and ways to automate that so it’s not the case, and it saves us all time and money, and actually could make money too on that.

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

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.

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JF2097: Insight in Development Deals With Preston Walls

Preston is the CEO and founder of Walls Property Group, he currently manages a portfolio of 70 buildings valued over $300MM. Preston shares his experience through starting in residential to now development deals. Joe asks Preston to explain some different challenges he has faced in the development world so you can be better prepared if you choose to venture on this path.


Preston Walls  Real Estate Background:

  • Founder & CEO of Walls Property Group
  • Currently manages a portfolio of 70 buildings valued over $300MM
  • 16 years of real estate experience
  • Located in Seattle, Washington
  • Say hi to him at: https://wallspropertygroupre.com/ 



Click here for more info on groundbreaker.co

Best Ever Tweet:

“It was helpful to move forward with something in the face of somebody you respect and trust pointing out the reasons you should not do it.” – Preston Walls


Joe Fairless: Best Ever listeners, how you doing? Welcome to the best ever 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, Preston Walls. How you doing, Preston?

Preston Walls: I’m doing great, Joe. How are you doing?

Joe Fairless: I’m doing well and looking forward to our conversation.

Preston Walls: Hey, likewise.

Joe Fairless: A little bit about Preston – he’s the founder and CEO of Walls Property Group, currently manages a portfolio of 70 buildings valued over $300 million, he’s got 16 years of real estate experience, located in Seattle, Washington. So with that being said, Preston, do you want to get the Best Ever listeners a little bit more about your background and your current focus?

Preston Walls: Yeah, I grew up in a real estate family. My grandfather was a professor and started a student housing business on the side, and my father’s a real estate developer, so I grew up with it in my blood. I went to school on the East Coast and worked in Manhattan for a few years; I thought I’d get away, but they called me back and I’ve been working in industry since 2002; moved back to Seattle, I worked with my dad for six years, we did some ground-up together and some renovations, and the downturn came, and he said it’s time for him to move on, and I’ve been doing it on my own since then.

Joe Fairless: Well, what did you learn from your dad? I know that it’s such a open-ended, broad question, but just some highlights.

Preston Walls: Two things come to mind. One, just the practical skill aspect of being a developer and what it takes to put a new construction development together. That was really valuable, just as a skill set. The other, he’s been a critic of mine as well, and if there’s ever a reason not to do a deal, he’s the first one to point it out. Especially in the early, early years, where you’re trying to get over the hurdle of, “Should I do this? Does it make sense?” Just trying to get the conviction and the confidence to do it, it was helpful to move forward with something in the face of someone that you respect and trust pointing out the reasons you should not do it.

Joe Fairless: It was helpful to move forward in the face — so going against what someone who you trusted said not to do? Did I hear that correct?

Preston Walls: You have to be really committed and feel really strongly about the deal to move forward with it, to purchase it, when someone is pointing out the way that it could go wrong.

Joe Fairless: Someone with more years of experience, someone who is very familiar with you, and you’re familiar with them, and you know likely he has the best intentions for you. So how do you ultimately – and if you have a specific example, even better – come to a realization that “You know what, I know he has the best intentions and he has more experience, and he’s saying I shouldn’t do it, but for XYZ reasons, I’m going to move forward”?

Preston Walls: One deal comes to mind. I was living abroad at the time, but I’d managed to put this building under contract. I had done my due diligence from afar as much as you can do without seeing the property. He was in Seattle and attended the walkthrough inspection, and–

Joe Fairless: What type of property?

Preston Walls: It’s a 26-unit multifamily building in Seattle. And his report was there are five active leaks in the parking garage and it wasn’t raining out. So you’ve got water issues, there’s a lot of deferred maintenance, the tenant quality in some of the units is fairly poor. He said roof needs to be replaced, “You should not buy this building. I would not buy this building.”

Joe Fairless: Very good summary, yup. Okay.

Preston Walls: He got caught up on all of these– maybe multiple plumbing leaks are not cosmetic things, but he got caught up on what I viewed as resolvable, fixable items, and the price that we were under contract at was at discount enough for fixing everything that could possibly be wrong with it. So I moved ahead anyway with that property and I still own it today; it’s been a great investment. What number transaction was that in terms of your transaction history?  It was probably in the 12 to 15. But even the first transaction that we did, this dynamic played out the same, same way.

Joe Fairless: Really?

Preston Walls: I remember it was a triplex in Seattle, and the first deal you do is the hardest one to get over that hump, and I had created so many models of so many properties that were listed, and I had done the architectural work, adding another unit to the building and doing some work in the existing units… I had bids from contractors, I had all of these variables ironed out, and he was still telling me of all the things that could go wrong and the reasons not to do it. And I moved forward with that one as well, and I still own that one today, and ultimately, he was supportive of my decision and congratulatory of how the deal played out, but it was hard getting there.

Joe Fairless: You mentioned number one, that the thing that you learned was the skill set required to put a development deal together. I’ve never put a development deal together. I have a lot of respect for developers, because of all the stuff that they go through, and some of it I’m not even aware of. What are the skill sets or some important skills that are required for being a developer?

Preston Walls: One of the biggest ones or probably the hardest one for me is capacity to take risk, because you’re in markets where entitlements take a long time. The soonest you can acquire the land and deliver the product is probably five years in Seattle. So you’re looking at a really long timeframe between when you start spending money and when you eventually see a return on that investment. So a lot can change over that course of time and you need to be able to withstand financial– your balance sheet needs to be able to withstand that, and you need to have a pretty accurate idea of where things are going to be. And that’s rental market, that’s construction costs market, that’s cost to get there, that’s carrying costs, all of those things that go into it. That’s probably the most challenging one that I face.

Joe Fairless: High level, you said the soonest is five years. What is that timeline and just walk us through high-level steps from day one to year five?

Preston Walls: I’d say, three years for entitlements. So you purchase property, you need to get a master use permit, which is the permit that allows you to apply for a building permit; get your master use permit, then you can apply for the building permit. So roughly three years for that. 18 months for construction, six months for lease-up and financing.

Joe Fairless: Got it. You’ve gone through the entitlement process. What are some things that surprised you when you first went through it?

Preston Walls: Wow. There’s so many unknowns and uncertainties, and you’re continually learning new ones. Environmental risk is big. I’m building a site now that’s on a steep slope. Just to get the variance to build in an environmentally critical area added probably another 18 months to the process. Historic risk is another one that you don’t really know when that’s gonna pop up. So there are historic zones and historically designated buildings, but there can be historic aspects of a building, a facade that the local jurisdiction wants to keep, and that can significantly hamper your project or the scope of what you want to do.

Joe Fairless: Have you come across that?

Preston Walls: I have. I purchased a building in a historic district. The structure itself separate from the district had a historic easement on it, which meant that I couldn’t alter the exterior facade of the building. Didn’t say anything about the interior; the interior is essentially open for redevelopment, whatever you want to do. But ultimately, the combination of those two, having to get approval and sign off in order to get a permit from both of those entities was painful and time-consuming, and ultimately, I moved on to a different deal.

Joe Fairless: Do you currently do ground-up development?

Preston Walls: I do. I’m building a 60,000 ft building right now and I’ve got another project that should break ground later this year.

Joe Fairless: So you love the pain. You’re in it and–

Preston Walls: Well, I feel that ground-up construction is really fun. It’s really challenging, it’s exciting. I love the vision component of seeing a site, seeing what it can become and producing something there, but it’s hard from a risk standpoint, it’s hard from a balance sheet standpoint, it ties up a lot of liquidity and it ties have a lot of risk on your balance sheet. So I use it sparingly and I do the projects relatively infrequently. The value add syndication is my bread and butter, and there’s a lot less risk in taking an existing asset, making it better, repositioning it and turning it around more quickly to stabilize it.

Joe Fairless: So just from an internal assessment standpoint, whenever you’re looking at an opportunity, what must be in place in order for you to do ground-up development, since as you just mentioned, value-add, lower risk and less headaches– you didn’t say that, but I’m assuming that’s the case. So what’s gotta be there?

Preston Walls: There has to be a really good opportunity and a really compelling reason. The reason is usually a vision component that the market hasn’t seen. So the building I’m working on now that’s under construction, I bought it on a cap rate because a previous developer had tried to entitle it and did a half-assed job with it with the city, and the city responded with a public record notice that said, “You cannot build on this site.” So the broker that was selling it was hamstrung by that. He couldn’t market the development opportunity with this knowledge from the city, or with the city’s decision ruling on it. So it worked on a cash flow basis, and I got the development potential as a zero cost option to work on. So that became a side project in parallel to operate in the units that were there. And you go one step down the road and if you’re successful, you go to the next step, and all of a sudden, I had variants from the city to build a building there, and then I could move forward. So I’ve got to have a strong value proposition that gives me a cost advantage over the rest of the market. That helps me feel more comfortable on taking the risk of going into development site.

Joe Fairless: So tell us about the deal that you’ve lost the most amount of money on.

Preston Walls: Probably the worst deal I did was the historic one, and part of the reason I bought it was the purchase price was really low.

Joe Fairless: What was it?

Preston Walls: It was $450,000 for this commercially zoned retail property on a main street in Seattle. So I sold it for 20% more than that, but I lost a year and a half of time, opportunity costs that I could have been doing something else. So that was frustrating.

Joe Fairless: That’s pretty good though, if you haven’t lost money on any deal, and the worst deal is that you made 20% on the purchase price. I understand opportunity cost is in play, but from a dollars and cents standpoint…

Preston Walls: Well, the other factor that goes into it is I’m typically not a seller of buildings. I’ve only sold three or four properties over my career. So my goal is to own properties for long term, not sell them and hang on and realize the cash flow that they produce.

Joe Fairless: What are your thoughts on selling them and then doing a 1031 and going into a larger deal with more cash flow? I know you’ve thought about it.

Preston Walls: Oh, I’ve definitely thought about it. Every time I think about that, every time I’m tempted by it, my mind goes back to Robert Kiyosaki and the question of whether you want to carry buckets or you want to build a pipeline. And it’s tempting to carry some buckets and make some money, hire some bucket carriers, but ultimately, the pipeline business is holding on to assets long-term and getting the cash flow from them.

Joe Fairless: Just help me understand a little bit more, because with the 1031, you are still holding on to the pipeline; you’re just building it out with new parts. So help me understand that.

Preston Walls: Yeah, there’s a leakage from your pipeline every time you transact. So there’s frictional transaction costs. It’s expensive to buy and sell property. There’s overhead on your part as the sponsor to find a new deal. There’s risk of not finding as good a deal as the last one. There’s time involved in creating and reproducing it, all of which is time that you could spend working on another deal, a new deal that’s more [unintelligible [00:17:34].19] to your portfolio.

Joe Fairless: I love it. Thanks for sharing your thought process. It’s good to hear.

Preston Walls: I get a lot of pushback on that one. In my syndications, that’s part of what you’re signing up for with me, is not having an exit timeframe. My LLCs are open-ended and I plan to hang on for a long, long time, and it’s hard to think about assets, real estate that way when the majority of the market is on a five to eight year time hold horizon.

Joe Fairless: What did you do in Manhattan for a few years before you came back to Seattle?

Preston Walls: I was an indentured servant in a couple of different investment banks.

Joe Fairless: Okay. Any takeaways you got from that, that you’ve applied to the real estate business?

Preston Walls: Yes. My breaking point occurred about 7:00 p.m. one evening. My cubicle was across the hall from an office. It was the guy’s office that you want to sit in, it’s where you want to get to, and every night that he was not traveling, he said goodnight to his kids on speakerphone from his office and it tore up my 20 something year old soul that — I hadn’t started thinking about having kids, but I knew that that was not where I wanted to be, a working for someone environment; I wanted the passive income that would allow me the flexibility to work when and as much as I wanted to.

Joe Fairless: How soon thereafter did you quit?

Preston Walls: I think I lasted four or five more months after that. My dad had been working on me for years to come back to Seattle, but I was certain that I was going to work on Wall Street and that’s what I wanted to do.

But ultimately…

Joe Fairless: [unintelligible [00:19:21].26]

Preston Walls: It sure did. [laughter] I moved back and we started renovating apartment buildings together, and I haven’t looked back since.

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

Preston Walls: I would say don’t be afraid to go really deep into a narrow niche. I see a lot of investors that get distracted by the shiny new thing. There are so many different ways to be successful in real estate. Success for me has come from being really narrowly focused and concentrating on a specific niche, which is multifamily in a narrow geography within Seattle.

Joe Fairless: What’s your narrow geography within Seattle?

Preston Walls: There are five zip codes within Seattle that are within a 15-minute drive from my office. That’s my geography.

Joe Fairless: Have you ever bought outside of those five?

Preston Walls: I have not.

Joe Fairless: How many transactions have you done within the five? About.

Preston Walls: 40, 45.

Joe Fairless: So I introduced you “manages a portfolio of 70 buildings” so I’m assuming multiple buildings within one transaction.

Preston Walls: Some of those buildings are buildings that I had managed for my family, and we have a small third-party property management business as well.

Joe Fairless: Got it. What’s the name of that company?

Preston Walls: Walls Property Management.

Joe Fairless: Okay, I understand where the name came from. We’re gonna do a lightning round. Are you ready for the best ever lightning round?

Preston Walls: I sure am.

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

Break: [00:20:58]:06] to [00:21:37]:02]

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

Preston Walls: The Snowball by Alice Schroeder.

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

Preston Walls: Not understanding/respecting historic designations.

Joe Fairless: What about something we haven’t talked about? Maybe on a recent deal where you wished you would have done a little bit different?

Preston Walls: I’d say environmental on an acquisition where a bank was not involved. So a bank did not require– a phase one was paying cash, and that came back to bite me on a subsequent refinance round.

Joe Fairless: Okay, so the takeaway is always get a phase one.

Preston Walls: Yes.

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

Preston Walls: I’d say it was the first triplex that I did. Just being able to have the conviction to buy something with a lot of reasons not to. I still own it. It feels good to still own that asset.

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

Preston Walls: Our website, wallspropertygroupre.com. We’ve got newsletters up there and I’d love to connect with people if you’re ever in Seattle or want to chat. Look me up.

Joe Fairless: Preston, thanks for being on the show. Thanks for talking about your experience, what you learned from your dad who was a real estate developer and you worked with him, the entitlement process, what are the components of that process, and then also why you do not 1031, and why you focus on long term holds and building out, to use your metaphor – pipeline versus having the bucket. So thanks for being on the show. I hope you have a best ever day and talk to you again soon.

Preston Walls: Thank you, Joe.

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JF2005: Real Estate Broker Advantages With Beth Traverso

Beth is a real estate broker and an investor who owns 9 properties. She got into real estate investing in 2002 and later in life married her Husband who also had a few properties of his own. Beth shares some insight on how investors should reach out when looking to work with real estate brokers to find the best deals. She shares how important it is for real estate brokers to pay attention to the inventory and constantly be up to date to find the best deals and instead of always handing them off, take advantage of them.

Beth Traverso Real Estate Background:

  • Real estate investor and broker, owns 9 investment properties in the Seattle area
  • Her team is projected to sell $67,000,000 in volume this year
  • Based in Seattle, WA
  • Say hi to her at http://www.bethtraversogroup.com/ 
  • Best Ever Book: The Compound Effect

Best Ever Tweet:

“The main thing is for people just to believe they can do it, give themselves some credit to being able to handle challenges and be able to learn from others so they can better yet avoid those challenges.” – Beth Traverso


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

Beth Traverso: I am great. Thanks, Theo, for inviting me. Happy to be here.

Theo Hicks: Oh, absolutely. We’re happy to have you here as well. I’m looking forward to our conversation. A little bit about Beth – she is a real estate investor as well as a broker, she owns nine investment properties in the Seattle area, and her team is projected to sell $67 million in volume this year. She is based in Seattle, Washington, and you can say hi to her at bethtraversogroup.com. So Beth, can you tell us a little bit more about your background and what you’re focused on now?

Beth Traverso: Yes. So I have been a real estate investor since about 2002. When I first got it into real estate sales, I was still in my early 20s, and I had a business partner at the time that was a fantastic mentor for real estate investing. He had purchased several investment properties, and we were working together in real estate sales and had our first really good year. His advice to me was like, “I’m not going to let it go, you have to buy a rental house. Don’t buy any dumb stuff, just go out and buy a rental house,” and that was really, really good advice, got the ball rolling. It was tremendously helpful to have somebody to guide me. Back then we didn’t have all these resources we have today, so it was nice to have someone to walk me through what it takes to be a good landlord, what it takes to make a good investment, and just the confidence to know that I could actually do it and I could handle it.

So at that point, as I said, I had two houses in Seattle, and then I met my husband and he also had two houses in a suburb of Seattle. So we basically joined forces and took it from there. Then around 2008, we all know what happened then, the bottom fell out, it was a rough time for a while, and that stopped everything for a while. But then in the last few years, we’ve been able to jump back in and make more investments and focus on growing our portfolio.

Theo Hicks: So would you say that you’re a full-time broker and a part-time investor, or do you split your time?

Beth Traverso: Yeah, the vast majority of my time is spent on real estate sales. However, as time goes on and my career continues to grow and develop, I’m actually looking to shift a little bit more toward the investing, making that more of a primary focus. I’d say right now it’s the secondary one, but it’s really definitely where my interests are turning and where I want to be more in the future.

Theo Hicks: Okay, before we get into any specifics on your sales business and your investing business, what advice do you give to any real estate agents, real estate brokers who are focusing exclusively on just selling deals, but are not investing themselves? What advice would you give to them?

Beth Traverso: Someone told me way back early in my sales career that the money in real estate is in owning it, not in helping people buy and sell. If anything, that’s a vehicle to gain the income to use for investment. But really, where the real money is made, long term is in real estate investing. So my advice to any other brokers who are thinking about getting into investing would be to network with other agents who are doing that or investors who are doing that. We are in a unique position where we see a lot more opportunities than the general public might see. So we have access to better opportunities, and rather than pass those opportunities off to somebody else, why not take some of those opportunities for yourself?

In the real estate business, we don’t have any 401(k) or anything like that; this is my retirement. So starting sooner rather than later– because for me, it’s a long term horizon, and for me, it makes me feel more comfortable about my future being a  sales-based, commission-based paid professional, to have that nest egg sitting there for me with passive income for when the day comes when I want to retire. I know I’ve got that, and that gives me a lot of peace of mind having that. So I would recommend more real estate brokers start focusing on that.

Theo Hicks: You mentioned about passive income. So creating a nest egg, but also having passive income. I’m assuming you’re not actively managing these deals yourselves… What’s your business plan for investing? What type of deals are you buying, and then what’s your ongoing involvement in managing those deals?

Beth Traverso: I have a great advantage in that my husband has a contracting background and he takes care of the management of the properties. So he is there to approve properties when they’re purchased. We look for properties that have upside potential, whether it be like a way to add additional income in some way… Anything we purchase, there’s going to be some opportunity to make improvements to raise rents or add something to the property that would increase the revenue. Because in the Seattle area it is very, very hard to find a contractor, handyman, anybody to do anything; they’re all way too busy, and the prices are really high.

So it’s been really valuable for us to just have him and his experience and resources and knowledge base and skill set to just go in there and handle ongoing stuff, too… Once we get things set up, it’s pretty much set and forget. We haven’t really had to have much need to bring in a property manager. At this point, we’re small fish, I understand, compared to a lot of people that are on the show. We’re not doing massive apartment buildings, at least not at this point, and everything’s here local too, so it’s easier for us to manage. So that is our ace in the hole, is that I’ve got him to help with these properties, and we have a lot of long term tenants too which has been really nice.

Theo Hicks: Of your nine properties, what’s the breakdown? Are those single families, duplexes, 4-plexes?

Beth Traverso: They are almost exclusively single-family, which is something that I’m looking to change as time goes on and going forward. They’re almost all single-family. One is a duplex and then one that we recently just purchased is vacant land, which is not typically something I would consider, but we got a really good price on it, and it was just zoned, so it’s a good development opportunity. So that’s where I’m starting to point my focus a little bit. We’ve purchased three properties in an area that was recently up-zoned. So again, the opportunity of adding value, increasing value – they include that. But yeah, it’s been mostly single-family. I’m just starting to branch into the multifamily or development realm.

Theo Hicks: How did you find the nine properties?

Beth Traverso: Somewhere off market, but almost all of them I found on the good old MLS, they were listed. Sometimes they fly under the radar based on how they’re marketed, and sometimes I find properties and I’ll talk to other investors that are like, “Wow, where’d you find that?”, like “It was right there on the MLS.” I’m just there looking multiple times a day, every day and so when something pops up, I’m fast to jump on it.

Theo Hicks: Interesting. So you said that, obviously, you’ve got the MLS. I know Seattle’s very competitive and you said that you’re identifying deals that when you buy them, other investors are like, “Well, how do you get that deal?” I know you mentioned you start–

Beth Traverso: It’s mind-boggling. I don’t know how I see it and others don’t, but also, I should mention that the most recent purchases I’ve made have been in areas that are outside of Seattle; still commutable to the big employers like Amazon and Microsoft. So it’s still in that really hot zone, but it’s in the outskirts. So in some ways, it’s an underserved marketplace, but still definitely within that. If you can commute to those employers, people are buying and renting in those areas. So it’s within that zone, but it’s on the fringe, in areas where people would not normally really be thinking about. If it’s in the city, Seattle itself, it would be really hard to find something that would fly under the radar because there’s armies of people out there, knocking on doors and doing whatever they can to find deals. So I guess that might be part of the advantage, is that I really understand areas on the fringe that may pose some additional opportunities for us as investors.

I feel like we’re a little bit ahead of the curve on that, but it’s definitely not so far on the fringe that it’s not going to bear fruit, because there’s plenty of opportunity right now. It’s also a very, very low rental inventory. In the Seattle area the cost is different than other parts of the country.

Theo Hicks: Okay. So I know the MLS, and especially since you’re looking at single-family homes, there’s a lot of them. It sounds like you’re buying them for rentals, you’re looking for property outside, but more specifically, and maybe you can use one or a few of the nine properties as an example – when you’re going through the MLS looking at deals, what are you looking at in order to narrow down the properties that you want to dive deeper into?

Beth Traverso: One that we purchased not too long ago was cash-only. It was not financeable to the masses, and the reason being that it also had mixed zoning. It could be commercial, it could be mixed-use, it could be residential, it could be any of those things, because it was in that area where the zoning was changed… And it was a house that have been used commercially for decades. So it didn’t have a kitchen, didn’t have a full bathroom, it was a rack full of junk, but the location was fantastic. It was at a state sale, so I knew that the [unintelligible [00:10:02].22], and we knew that the price point was one that would appeal to first time buyers or that whole segment of the market, but it wouldn’t qualify for financing. So I knew it was going to be a good one for us to purchase cash.

We did the BRRRR thing, the buy, rehab, rent, refinance scenario. We were able to buy it as is. We told them they could leave all the junk there. We disposed off the junk, gutted the place, remodeled it, made it cute, and we remodeled it in a way it could be used commercially or residentially. We actually have found a commercial tenant in there, so we’re getting really good rent on it for us. We’re getting about $1,000 a month positive cashflow, which in our area is a pretty good accomplishment to get that out of the chute, with prices being as high as they are.

When we got financing on it, we were able to get it appraised for $100,000 over what we had purchased it for. So we were able to recoup almost all of our money out of that deal and have the cash flow. So let’s say that it worked exactly according to plan, and now we have a really nice turnkey property that’s just cruising. The check shows up every month, they never call, it’s perfect.

Theo Hicks: Last question before the money question. So I’m not sure if you, as a broker, represent investors, but I think you would answer this question anyways… What advice would you have for an investor who wants to work with one of these investor-friendly agents? So what are some things that they should do when contacting agents in order to have the best chance at having an agent send them deals?

Beth Traverso: I would say that they need to be educated about what they need for it to be a good deal… Because sometimes I’ll be contacted and they say, “Here’s 15 properties. Can you analyze these for me? Let me know if you think they’re a good deal?” To me, that’s not a realistic use of my time. I mean, what are you looking for in a good deal, and what does it need to be to fit your criteria? So that’s the main thing is just to try to be educated and do some legwork on your own… Because I think probably they’ll cycle through agents a lot if they’re just going to be running them around non-stop.

Theo Hicks: I bet.

Beth Traverso: That could be a full-time job for one client, and a good agent’s just not going to have that capacity to do that and still make a living.

Theo Hicks: Solid advice. Alright, Beth, what is your best real estate investing advice ever?

Beth Traverso: I would say, give yourself some credit. You are capable of more than you think you are. Now I talked to a lot of people who are thinking about tossing their hat in the ring and getting started investing, and they’re scared of “What if we get a bad tenant? What if this happens? What if that happens?” and I would say, “You can handle it.” I’ve had almost everything happen over the years, from squatters to mold catastrophes to flooding to – you name it; natural disasters… You get through it, and you just have to be tougher than whatever adversity gets thrown at you and learn from it. Every time it happens, I learned something that I can implement and hopefully make it smoother sailing in the future.

The main thing is for people just to believe that they can do it, give themselves some credit for being able to handle challenges, and be able to learn from others so they can hopefully better yet avoid those challenges.

Theo Hicks: Alright, Beth, are you ready for the Best Ever lightning round?

Beth Traverso: I am.

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

Break: [00:13:14]:02] to [00:14:01]:07]

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

Beth Traverso: So I recently reread a book, The Compound Effect, Darren Hardy, and that book I love because it’s just about making small incremental changes daily, that put us on the right trajectory for success.

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

Beth Traverso: Because I’ve got two revenue streams, if the real estate sales collapsed, I would just jump full-time into investing.

Theo Hicks: What deal did you lose the most money on and how much money did you lose?

Beth Traverso: Well, I purchased some homes in New Orleans, historic homes, and we purchased them right before Hurricane Katrina came, and we lost money on those ones. How much did we lose on those? Thankfully, the buy-in was pretty low, so we lost maybe $50,000. Nothing too significant, but I mean, that’s real money.

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

Beth Traverso: I like to donate to a local charity that helps families with special needs’ kids get physical and occupational therapy.

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

Beth Traverso: The best place to reach me is anyone can email me at beth@bethtraversogroup.com.

Theo Hicks: Alright, Beth. Thank you for coming on the show again and sharing your wisdom on being a broker as well as being an investor. Just a few takeaways that I got – so we’ve talked about advice that you would give to other brokers who are currently not taking advantage of real estate investing, and that is that brokers don’t have the typical retirement packages you’d get from working for a corporate job, and so your real estate portfolio is your retirement nest egg. So a good strategy for agents is to use the money they make from their commissions to buy real estate.

You’ve mentioned that the money in real estate is in owning properties and not in helping people buy and sell. So make sure you’re networking with other brokers who are investors, that are with other investors who are buying to help yourself get started. You also mentioned that, as a broker, you’re going to see a lot more opportunities than others would see. We had plenty of examples of that throughout the conversation. So instead of selling all those, maybe take a few for yourself.

We talked about your business plan. So your husband has contracting experience, so he’s the one that manages the properties that you invest locally, and you’re looking for properties that have upside, and again, we went over examples of that. You’re finding these deals on the MLS, and you gave an example of the fact that you look at properties that aren’t necessarily in the center of the hot zone of Seattle, but you’re focusing more on those fringe areas that the owners or the renters could still commute to the major employers. But since it’s on the fringe, you’re gonna be able to purchase those at a lower price point.

We talked about how you narrow down opportunity on the MLS and you gave an example of that estate sale, cash-only, mixed zoning, really good location. So just really knowing the locations and the area will help you out a lot.

You gave advice for investors who want to work with an agent. Really good advice. Don’t reach out to an agent without knowing what you actually want, so make sure you’ve got your defined investment criteria, provide that to the broker, the agent, so that they can help you in a more time-effective manner for themselves.

Then your best ever advice was just to give yourself some credit, realize that when you’re investing in real estate, those things that you are afraid of happening are most likely going to happen, and that you are capable of handling those. In order to set yourself up for success, make sure you’re educated, make sure you are learning from others to avoid making a common mistakes or making those mistakes that you’re afraid of making.

So again, Beth, I really appreciate you coming on the show and talking with us today. Best Ever listeners, thanks for listening, have a best ever day and we will talk to you tomorrow.

Beth Traverso: Thank you, Theo.

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JF1938: How To Make The Transition Into Retirement As Smooth As Possible with Jason Parker

Jason has helped many people with their retirement planning, a good number of his clients have been real estate investors. Jason helps them evaluate their portfolios and decide if selling or keeping is the better idea for them. He also has his own real estate experience to share with us. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“The most important number that everyone needs to understand is how much you spend” – Jason Parker


Jason Parker Real Estate Background:


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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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, Jason Parker. How are you doing, Jason?

Jason Parker: Hey, Joe. I’m doing great. Thank you for having me as a guest.

Joe Fairless: Yeah, my pleasure, and looking forward to our conversation. A little bit about Jason – he’s the host of Sound Retirement Radio, and he’s the inventor of RetirementBudgetCalculator.com. He’s a financial advisor with a focus on retirement planning. Based in Seattle, WA. He has some real estate experience as well. First, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jason Parker: Oh, yeah. Joe, I just love the work that we do. Our focus is completely on helping people make this transition into retirement, and then keeping them retired once they do retire. That’s what we do professionally. On the personal side of things, I’ve been married to my wife for 23 years; she was my high school sweetheart. We’ve got two amazing kids, and I love playing paintball with my son on the weekends; my daughter is super into dance,  so I love going to those performances… And life is just really good right now.

Joe Fairless: I know earlier before we started recording you mentioned you have real estate experience… Tell us about that.

Jason Parker: Yeah, real estate experience from a lot of different perspectives. First and foremost, I get the opportunity to actually walk life with a lot of people, and a lot of the people we serve have done really good in real estate over the years. Oftentimes, at some point in retirement they’re looking at whether or not they should keep an investment property, or should they sell an investment property.

For example, we had some folks come in recently, they had been investing in real estate for many years, and somebody approached them and offered to buy this piece of real estate that they had. And they came to me and they said “Jason, should we do this?” It’s like I always do it, because one of the things I’ve learned is retirement is all about cashflow. I’m evaluating everything from a cashflow basis. And when we did the analysis for them, what we determined was that based on the asset price, they were recognizing about a 12% cashflow on that asset… Plus, they had the appreciation of the asset continuing to appreciate, plus the income was inflation-adjusted, because they were able to increase their rents every year based on the leases that they had.

So when we looked at all those pieces, they were coming to me and they were saying “Jason, if we sell this building, we need to keep this cashflow going.” I said “Boy, 12% cashflow and keep your assets growing at the same time – that’s gonna be pretty tough to do.” So after having that conversation, they decided that it was better to keep the real estate, not accept the offer, and continue to enjoy that cashflow to help support their retirement lifestyle. So that was one example of working with somebody.

Sometimes when people get up into their late 70s, early 80s – I’ve met with a lot of people that have several rental properties – and sometimes you guys in the real estate business, and I’m sure you’re not this way, Joe, but some people make it sound like it’s not a job, there’s no work associated with it… I’ve found that that’s not the case. Usually, if you’re gonna be an active owner and you’re not gonna be outsourcing the property management, there’s time and there’s energy and there’s cost associated with that.

So for a lot of people, when they get up into those older years, they’re just trying to simplify their life… So even though the retirement is producing a really nice cashflow for them, they just don’t want the headaches of having to deal with the remodels after somebody moves out, or the tenants that stop paying, and some of those little nuances you have to  deal with when you’re actually owning individual properties.

But overall, real estate over a long period of time can be a wonderful investment. I don’t know how old you are, but I’m what they call a Gen X-er, I’m 44 years old, and my experience with real estate – at least on the second primary residence that we bought  – we bought our last house in 2006, right at the top of the real estate market… So I know what it’s like to buy real estate and then watch the value decline and take more than ten years to get back to even. So as long as your time horizon is long enough and you’re okay with a lack of liquidity, I like real estate as a wealth accumulation tool and also as a retirement cashflow tool.

Joe Fairless: I know you have some experience investing in real estate personally. Can you talk about that?

Jason Parker: Yeah, personally I had this decision to make – we recently bought a new house, which sometimes I think maybe we’re at the top of a real estate market again out here in the Seattle area, because prices have just gone bonkers… But I had to make a decision. Do I want to sell this house that I’ve lived in for the last 13 years, or do I want to hold on to it and turn it into a rental property?

So I went through my normal analysis, I said “Okay, how much cashflow am I gonna have? What’s the net cashflow after all of the expenses?” and then I looked at the amount of cash that I would receive from selling the house, and I just said “What rate of return would I need to earn to match that net income?” And I was surprised to see that I only needed to earn about 3% on my money to equal the same amount of net cashflow, so net after taxes and maintenance and all these other things.

Of course, I’ve got a house that’s appreciating, and I’ve got a loan that’s being paid off, and I’ve got inflation-adjusted income, so all of those pieces need to go into the decision matrix. But for me, what it really came down was “Do I really have the capacity to take on another project?” Because if we hire a property manager that’s charging us 10%, that’s gonna eat into the net cashflow, and then the reason I’m holding on to that thing is for capital appreciation and future cashflow, as the mortgage gets paid off.

And owning three different businesses, my wife and I – we just decided that we didn’t have the capacity to really do a good job of taking on another business… Even though some of my friends have made a lot of money in real estate over the years, we just got irons in the fire that I decided for us we would rather just cash it out.

The other thing is – real estate prices, because they have gone up so significantly, you do have to question where the top of the market is. I know the Federal Reserve started slashing interest rates again, which is probably gonna help juice the real estate market a little bit, but… Prices are pretty high again.

The other piece to that, Joe, when buying our next house — I don’t look at your primary residence as an investment, I look at it as a place to live. And like Robert Kiyosaki teaches in his book Rich Dad, Poor Dad, the house you live in, your primary residence, falls on the liability side of your balance sheet, not as an asset.

Joe Fairless: Yup.

Jason Parker: And I totally agree with that. Our kids are getting bigger, our house seemed like it just was shrinking, coming in on us, so we needed to buy a new house just for the sake of lifestyle… I really don’t see it as an investment decision, more just a place to live, for my primary residence.

So that’s a little bit about real estate from a personal standpoint, in terms of “Do we keep a house or do we turn it into a rental property?”

Joe Fairless: Yeah, the thought process that you go through and the analysis is very interesting, because I know there’s a lot of Best Ever listeners out there who have to go through that process — or not have to, they get to go through that process… Because they put themselves in that situation to go through that process, where they have an opportunity where they can sell, make money, or should they hold on to it.

You mentioned that you look at “What rate of return would I need to match the net cashflow?” Can you get into some specifics of the inputs that you have in that calculation, so that if a listener is going through this process on their side right now, they know what to take into account?

Jason Parker: Yeah. So when I’m doing planning, whether it’s retirement cashflow planning, or evaluating real estate or whatever, I always like to say “Let’s hope for the best and plan for the worst.” So I make really conservative assumptions. And part of that, again, is my experience with real estate; we bought our last house in 2006, so while real estate has certainly been a good investment over a long period of time, if you look at the appreciation on my house from 2006 till the time we sold it last week, it has averaged only about 2.5% per year when you take into consideration the Great Recession, and then having to recover from that. So, again, I just don’t see my house as being an investment.

But some of the inputs that I used – first of all, I had to assume that my house value was gonna continue to appreciate, so I just used a 2% annual appreciation rate on the value of the asset. Then I had to look at the cashflow. So I looked at the gross cashflow that we would have coming in, and I looked at the mortgage, and there was a positive. It would give me positive cashflow day one. And to be conservative, I assumed that my cashflow from the rental would only be increasing at 1% per year.

Now, the other piece I had to look at was not just the amount of gross cashflow I was gonna receive, but the amount of net cashflow I was gonna receive after making some adjustments for things like repairs, and people moving out, and potentially having a month or two where the house is sitting empty. So I assumed that my rents would increase by 1%  per year – and this number is probably not high enough; I assumed my taxes and insurance would only increase at 1% per year. And the reality is, in my area in the last year alone I think we saw our taxes adjusted for all the little nuances, and levies, and this and that – they actually increased about 10%. So 1% probably wasn’t high enough.

Then I look at the annual cashflow, and I back out — now, a friend of mine who’s a professional real estate investor, he says “Jason, when you have a rental property, you only need to plan on about $100/month for repairs.” But again, I like to err on the side of just being cautious, and I know that if I go out and buy a new refrigerator today, that could cost me $1,200 right there; or putting a new carpet in the house after somebody moves out – that could be $3,500. So to be conservative, instead of assuming $100/month for what-ifs that come up, I assumed $200/month for maintenance, and those types of costs.

And at the end of the day, I came up with a net cashflow, that was, again, gonna be me about a 3% net cashflow when you factor in all those different components – when I see 3% net cashflow, that’s based on the assumption that if I sold the house, I’d get this lump sum of money… So my question was “What do I have to earn on that money in order to meet the same net cashflow?” And I’ve got the number here; let me tell you what that was… Net cashflow and equity is only 2.39%.  So I only had to earn 2.39% on that lump sum of money that I would receive to match the same net cashflow that I would be receiving from the rental property.

But that doesn’t tell the whole story, because you’ve got a loan that’s being paid down, and you’ve got an asset that’s appreciating. But from just a purely cashflow standpoint, 2.39% return is not hard in today’s environment. Last time I looked at high-yield savings accounts I think they were paying better than 2%.

Joe Fairless: You mentioned at the beginning you help people make the transition into retirement and help them stay into retirement… So I’m taking a step back, by the way, from what we were just talking about. Taking a step back, talking about that, what are some things that you ask people during those initial conversations to learn more about what they’re looking to do?

Jason Parker: Probably the two most important questions I ask them – number one, what’s the purpose of your money? Why do you have it? And then number two, I always ask them “If we could accomplish only one thing by spending a couple of hours together, what’s the most important thing you’d get out of our time together?” And I’ll share with you what I hear most commonly from people.

When I ask them what’s the purpose of their money, most people will say “Jason, we just wanna be able to maintain the same standard of living that we’ve grown accustomed to. We don’t ever wanna become a burden to our family, physically or financially.” They’ll say that they’re much more conservative as they’re making this transition into retirement, so they don’t wanna get wiped out if there’s another Great Recession that occurs.

Joe Fairless: Yup.

Jason Parker: So that’s what I mostly hear. A lot of times people will say “We’re not overly concerned about leaving anything to our kids.” They’ll say “We helped them with college, and buy them cars, and down payments for their first house… If there’s anything left, that’s icing on the cake, but we’re not really trying to make sure that our kids are wealthy when we pass away.” Now, some people do; for some people that’s really important. But most people, I would say, not so much.

Joe Fairless: Okay.

Jason Parker: The second part to that is I ask them the question “If we could accomplish only one thing by spending some time together?”, what I usually hear there is people say “Jason, we just wanna know that we’re gonna be okay.” Or they’ll say “We wanna know if we’ve saved enough. Can we actually make this transition into retirement?” So the biggest financial decision of your entire financial life, a bigger decision than buying a house, which is a big decision for a lot of people… And what most people have is they have investments, they have asset allocation, diversification, low fees in financial products, but I would say 80% of the people we meet with have no actual plan for how all of those things are gonna work together to help them make this transition into retirement, to help them do what they wanna do, which is just have a good life, and be able to travel, and visit the grandkids, and not have to worry based on what’s going on in the world around them.

Joe Fairless: And what’s wrong with having the asset allocation, making cashflow on whatever their investments are, but not having a formalized plan, if that cashflow is achieving their financial goals?

Jason Parker: Well, a lot of people don’t know the answer to that. They don’t know if the cashflow they have is gonna achieve their financial goals. A lot of times when people are retiring, and even people that have really good cashflow, but today a lot of times all they have is social security, maybe a small rental property or two… So it’s vague to them; it’s not clear. And nobody’s ever taken the time to actually construct the plan, to show them how it’s gonna work, year by year, as they’re transitioning into retirement.

So there’s certainly nothing wrong with it, but I would just say — I wrote a book a couple years ago called Sound Retirement Planning, and the tagline to my book is “Clarity, Confidence, and Freedom.” Clarity comes from knowing what’s most important in your life, who’s most important in your life. Confidence comes from being able to crunch some numbers, make some conservative projections, and know that you’re gonna be okay even if things get really ugly in the economy. And ultimately, when you have clarity of purpose and you have confidence that the numbers are gonna work, then what you get to experience is freedom. And I think that’s really what people want – either freedom from something, or freedom to do something. Maybe it’s freedom of time, where they don’t want that alarm clock waking them up at zero dark thirty anymore. Or maybe it’s freedom to spend more time with the grandkids, because they see them growing up, but they don’t wanna be that absent grandparent.

So whatever the priorities are, having a plan is what gives them confidence. So you can do it without a plan, but you may not have the confidence that you’re looking for to know that you’re gonna be okay.

And then some of the little tweaks along the way. Some people know that they’re okay financially, but they have no strategy for how to reduce taxes, either now or in the future. So for some people it’s just making sure that the loose ends are tied up, and that they’re thinking about all of these different pieces.

Joe Fairless: And I don’t know what percentage of the times, but I’m certain that a certain percentage of the times you have to be the bearer of reality, which probably translates into bad news to them about their financial picture, and where they want to be versus where they’re at currently… How do you approach those conversations, if that is a scenario that you’ve come across?

Jason Parker: Delicately… You’re right, those are hard conversations to have, because a lot of times when people come to us they really have this strong desire for whatever the reason — either there was a health event, or something changed at work, or they have a new boss that they just can’t work with anymore… So when I have to sit with them and we evaluate everything and we say “Hey, you’re gonna need to work a couple more years”, they need to hear it, because that’s our job as a fiduciary, is to not tell them what they wanna hear, but tell them what they need to hear.

We just try to encourage them and point them in the right direction, and say “Here are the tweaks/adjustments you can make.” Oftentimes people aren’t too far off. Sometimes it’s having a discussion about maybe retiring from one career that’s very stressful and requires a lot of hours, and having a second, encore career in retirement.

I just met with a woman the other day – she knows she’s gonna need to make some income, and she loves animals, and she found out that she can be a pet sitter and a dog walker, and have an extra $500 to $1,000/month of income coming in. And knowing that she can do something that she loves to do, and it’s gonna produce just that extra little bit of cashflow for her – it really made all the difference.

Or one gentleman I talked to – he’s driving for Uber now in retirement. Not just picking people up, but delivering meals through Uber. So the great thing about the world that we live in today is there’s a lot of opportunities to figure out how to do things different if the traditional path into retirement isn’t gonna work. And for a lot of people out there, unfortunately — a lot of people just haven’t saved enough, so they’re gonna have to look at some of these encore careers.

Joe Fairless: What else that we haven’t talked about do you think we should talk about as it relates to this topic?

Jason Parker: Well, the most important number that everybody needs to understand is how much you spend. It doesn’t matter how much money you’ve accumulated, if you don’t understand the spending piece, it’s impossible to be able to answer the question of “Have we saved enough?” And unfortunately, the people that are most guilty of not understanding their spending are the people that have the highest incomes. So for us, when we meet with people that are doctors, dentists, engineers, pilots, people that are making several hundred thousand dollars a year of income, and because their income has been high, and it’s been high for a long time, they don’t really have to track where every dollar is going. And sometimes they’re shocked and surprised when we sit down to put the numbers together, to recognize that they may not have saved enough.

I met with one gentleman, he had saved more than 10 million dollars, which for most people you’d think “Oh, I could live on 10 million easily”, but when we sat down to understand expenses, his costs were more than 600k/year. And if you’re spending 600k/year and you’re gonna have 35 years of retirement, all of a  sudden you have the same worry that the guy that has saved 500k for retirement has, and he’s trying to figure out if he can spend 30k or 40k out of that retirement account. It’s the same concern, of “Have we saved enough? Are we gonna run out of money?”

So understanding your spending is the most important number, and that’s why I developed some software called the Retirement Budget Calculator, to help people really dial that in before they make this transition.

Joe Fairless: Based on your experience as a financial advisor, as well as someone who advises real estate investors, and you also have some investing experience from a real estate standpoint, what is your best advice ever for real estate investors?

Jason Parker: The best advice ever is to understand the cashflow. And I would also say that the times that I’ve seen people get hurt the worst in real estate is when they get overleveraged in one asset class; that they’re not diversified. Then the other piece to that is — I’ll never forget, I had a gentleman on my podcast who got involved with some real estate investments where he was a partial owner, a very small fractional owner in some deals, and didn’t do his due diligence on those, and they blew up on him… So like every investment, you have to do your due diligence, you have to trust, but verify, and then I would just say make sure that you are properly diversified across both liquid and investments that are less liquid… Real estate being something I consider to be less liquid of an investment.

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

Jason Parker: Let’s do it, brother.

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

Break: [00:21:03].20] to [00:21:38].20]

Joe Fairless: Alright, Jason, what’s the most challenging part of your job?

Jason Parker: You know, I love what I do. Warren Buffet once said “If you do something you love, you’ll never work a  day in your life.” Plus, I tend to be an optimist, so it’s hard for me to find things that are challenging.

Joe Fairless: Liking something is different from being challenged.

Jason Parker: That’s true, and I tend to embrace challenge. I would say — geez, a thing that challenges me the most… Well, when you’re doing retirement planning for people and you’re dealing with something like the stock market, that is irrational, to say the least – that can be challenging. It can be challenging to help people stay on course when we have a good plan and their emotions start to get the best of them; that could be challenging. So… That’s a good question.

Joe Fairless: What’s a mistake you’ve made in business?

Jason Parker: One of my biggest mistakes – when my first book was originally published, I did not research the trademark of the title…

Joe Fairless: [laughs]

Jason Parker: And about a year after my book was on the shelves, I got a letter from a law firm that represented one of the largest investment companies in the country, telling me to cease and desist, and I had to unpublish my book… It was really painful. But it actually turned out really good, so there’s a silver lining. I gave the book a new title, I added 40% new content, we republished it, and it was on the republishing that the book made it to a number one bestseller on Amazon in Personal Finance. And the first edition of the book was — hardly anybody ever read it. So had it not been for that trial that came my way, I don’t know that I ever would have republished the books. So it ended up good, but it sure felt painful at the time.

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

Jason Parker: My church. I think my church is making a significant difference in people’s lives right here locally, and I think that that relationship with Jesus is what really changes hearts and helps us have a better world while we’re here.

Joe Fairless: And how can the Best Ever listeners learn more about you?

Jason Parker: The podcast I do is called Sound Retirement Radio. My book is called Sound Retirement Planning. That’s always a good starting point. The website is SoundRetirementPlanning.com. And like I say, RetirementBudgetCalculator.com is the software as a service that we’ve built. And we do have a special coupon code for your listeners; there’s a price to pay – $54 is the one-time fee right now to buy the retirement budget calculator, but if they use the coupon code “podcast” when signing up, they’ll get 50% off and it’ll only be a one-time fee of $27 to sign up for the calculator.

Joe Fairless: Awesome. Well, Jason, thank you for being on the show. I love talking to professionals who aren’t exclusively focused in real estate, but have some real estate perspective that’s relevant, especially given your consultations with your clients. I think it’s just really interesting to get different perspectives on the show… So thank you for that, just sharing your thoughts, as well as talking through some questions that you ask your clients during the initial meetings. It’s [unintelligible [00:24:30].12] what’s the purpose of your money, I would take a little bit to answer that question if you would have asked me point blank, because I wouldn’t have an immediate answer. So it’s some things to think about too, for any Best Ever listeners who want to really think about why they are doing what they’re doing and what’s the purpose of the money that they’re accumulating.

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

Jason Parker: Thanks so much, Joe. Take care.

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JF1901: From 0 to $1.5 Billion In Assets How To Hustle & Build From The Ground Up with Peter Rex

Peter is an entrepreneur that started a real estate investing company, which now maintains $1.5 Billion in assets. We’ll hear about his story and some tactical tips and strategies he has used throughout his career to scale to the level he’s at now. We’ll also hear about what he’s doing to improve the maintenance side of investing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“As I was running all this stuff, I realized how inefficient maintenance was” – Peter Rex


Peter Rex Real Estate Background:

  • An entrepreneur who hustled and bootstrapped a startup into a billion dollar real estate company
  • His real estate company has purchased 17,000 units and maintains $1.5B + in assets.
  • Based in Seattle, WA
  • Say hi to him at https://rhstrategic.com/
  • Best Ever Book: Julius Caesar


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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JF1882: How To Grow Your Investor Base & Keep Them Happy with Ryan Gibson

Ryan has been on the show in the past (previous episode linked below) he brought great value to the show by discussing his investor relations. Today we’ll stay on the subject, but now discussing how he’s been growing his investor base, while still keeping current investors updated, happy, and willing to re-invest. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Depending on your list, 25% of people will open the email” – Ryan Gibson


Ryan Gibson Real Estate Background:


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


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

Ryan Gibson: Good, Theo. How have you been?

Theo Hicks: I’ve been great, I’m looking forward to our conversation today. This is his second time on the podcast. Make sure you listen to his first episode, episode 1226,  “Why investor relations are paramount, and how to keep investors happy.” We’ll have a link to that in the show notes as well.

Today we’re going to build off of Ryan’s first episode. In the first episode he talked about how your first batch of investors when you’re raising capital are most likely going to be people you already have personal relationships with, so people you know… And we’ve talked about that plenty of times in the podcast before. But what happens when you’ve exhausted all of your personal relationships and you need to start raising money from strangers, other people you don’t know yet? How do you go about doing that?

We’re gonna talk about that, as well as a few other things about investor relations and raising capital… But before that, Ryan’s background, again, is he’s a chief investment officer and co-founder of Spartan Investor Group. He has raised 14 million dollars for self-storage investments. Again, his previous episode is episode 1226. He is based in Seattle, Washington, and you can say hi to him at Spartan-Investors.com.

Ryan, before we get into the meat of the episode, can you give us a little bit more about your background and what you’ve been focused on?

Ryan Gibson: Yeah, sure. Thanks, Theo. We are focused on self-storage acquisitions, development and value-add. I live in Seattle, Washington, but our company is actually headquartered – we have up to 11 employees now – in Golden Colorado, which  is just outside of Denver. That’s where our head office is. We focus on finding self-storage opportunities that come with expansion or operational upside improvement, where we can cash-flow day one and expand onto the facility and build equity while we expand the units. Or we look for ground-up development of self-storage opportunities, so we’ll find a high demand area piece of land, and we’ll take the process through its development.

Our company basically backs all of the aspects of the business, so we do everything from acquisitions, capital raising, property management, asset management, construction management of the process – we oversee that – and then all the way to even handling some of the dispositions side of it as well. So we pretty much do the whole value chain in self-storage.

Theo Hicks: Perfect. Okay, so the two things that I wanna focus on is 1) as I mentioned in the beginning, what happens when these personal relationships end and you’ll continue to raise capital. And then secondly, we’re gonna talk about how your investor relations process has changed now that obviously you’re bringing in people that you don’t necessarily have a deep relationship with, or I guess a long-term relationship with.

First – you can take this any direction you want – what happens after you’ve exhausted all of your personal relationships. What’s the next step in order to find more investors?

Ryan Gibson: Sure. And I think it’s important to say that after you’ve sort of exhausted your network of people that you’ve known for a long time it’s kind of easy, because raising capital under 506(b) – it’s easy to say “Well, I’ve known this person since I was in kindergarten” as far as a preexisting substantive relationship… But when you start meeting new people, you have to establish that relationship, especially if you’re raising capital under 506(b). You’ve got to quantify and qualify that person, and really annotate where they came from.

But I will say, before we jump into the exhausting personal relationships and going in and finding new people, is take care of the people that you have, and a lot of times the people that you have are people that will reinvest. I’ve seen too often where people spend all this time marketing for new investors, but not any time taking care of the people they already have in place… So I think that’s why people have a tendency to want to reinvest – it’s because you keep them updated. You keep them updated with quarterly updates, you make it very clear to them what is going on with the project at any given time… And I think that really takes effort to kind of keep those existing relationships in place.

Transitioning out, I would say that get out into your community… One of the things that I did is I joined our city club, which is a good place where people go work out, and there’s a lot of community activities for higher net worth individuals… And that is a great way to get out there and see what the more high net worth community is doing.

I joined a community called the Washington Athletic Club, and that is really kind of a hub in the city to many other different aspects, of different clubs. For example, at the city club I learned about a new investor forum called Keiretsu Capital, that meets at the club. That really helped us understand the VC and angel investor community that’s in the Seattle, WA area. Lots of leads can come from stuff like that.

The other thing that the club kind of helped us provide is it gives us meeting space. When we throw investor happy hours and things like that, the club will provide us the opportunity to have the venue at a nice setting, that’s a little bit more prestigious than just going to your local community library, or your community center, things like that. So that really kind of helped attract awareness to our business in the community.

The city club is really one of those things that I think is a little bit overlooked. Some clubs have a little bit longer waitlist to get in, some require a little bit more referrals, and things like that… But I really think that that’s one way to branch out to find new investors.

Theo Hicks: You mentioned that when you’re going out there and forming new relationships, and you’re still raising capital under 506(b), you need to put forth that effort so that you can quantify that you have a preexisting relationship with this individual. Can you walk us through what that looks like? Is it a certain amount of time, is it a certain number of conversations? Do you need to know a certain amount of information about them? What specifically are you quantifying for these new investors?

Ryan Gibson: There’s an urban legend out there that it’s two months… And my SEC attorney actually put some collar to that. The two months – the time to pass to make a sophisticated investor an existing relationship, I should say – actually comes from a company that did a no-action letter… And it’s two months, but I think it’s also a very, very extensive application process. Think of the application process that somebody goes through to get a home loan – background checks, credit checks, lengthy application status… Some people say it’s two months, but you have to really take that in the context of what other information did you get from that person? Is it just a handshake, and then you just disappear for two months, and then “Okay, two months is here. Qualified”? No, it doesn’t really quite work that way.

It’s a little bit of an art, but it’s definitely a process. So the first thing that we do is we have an investor consultation with that person. We get them on the phone, and we ask them questions about “What are your investment preferences? Where have you invested previously? What did you enjoy most about your investment experiences from another operator/syndicator or maybe in the stock market?” We ask the person if they have any questions… And it’s usually kind of the types of questions that they’re asking really provide insight as to their level of sophistication.

So some of it is a judgment call, but some of it is “Have you invested in private placements before? Have you had experience with these types of syndications? Tell us more about your process.” So we kind of have specific questions for that.

The next thing that substantiates the relationship is when that call concludes, we send marketing materials on our business, so they can understand more about our process. Sometimes I tell the investor “I’ve really enjoyed talking to you. We think that you need to learn a little bit more about the investment community and syndications, things like that”, and I invite them to go to our YouTube channel, The Spartan Investment Group YouTube channel, and watch our webinars and become more sophisticated… And I sort of put that investor on ice, so to speak, and say “Hey, come back when you’re trained and more experienced with this.” And it’s important that you turn some away in that regard. It doesn’t happen very often, but it does happen from time to time.

So once the call concludes, we send out our marketing materials, but we also send out a purchaser qualification form, which is basically an 11-question form that the investor fills out, on all the experience that they have investing, net worth, liquidity, income, things like that. With those two things checked off, that’s a great way to start the sophistication and onboarding process for an investor.

Theo Hicks: So you said it starts off with that investor consultation, and then it sounds like then these people kind of go into two buckets. One, they are sophisticated enough, and then two, they aren’t sophisticated enough, and then based on that you’ve got a different process that you put each of them through. What kind of system do you have in place that helps you track when to follow up with these people, what you’re gonna follow up with? …just making sure people aren’t falling through the cracks.

Ryan Gibson: We use Podio, and we have a couple of back-end – Zapier, and Globiflow, and things like that, that help us build out our CRM system for that. When the consultation is happening, I have my Podio up and open, and there is lots and lots of information that we fill out on the investor. Where they came from, what their background experience is, notes on the call, what we discussed… And the thing that I always like to make sure we report is the needs, wants and objectives of the investor. That way, if an investment comes up, and maybe they didn’t get the email, or it went to Spam, or something like that, we’re able to circle back to that investor and let them know that “Hey, this is a cashflow deal. I know you really like cashflow deals.” Or “This is development. I know you really like development. I wanted to make sure you had a chance to look at this.”

But the follow-up and those notes – you can assign a task to follow up, and you can make it a time-based task, where we circle back to that investor at a specific date and check in to see how they’re doing. So we reach back out that way.

Theo Hicks: Okay. In my notes it says that you have 1,200 investors with over 15% of the list active. Before I go into how to keep people engaged, what percentage of those investors would you say are repeat? You’ve mentioned something that I really like, which is “Before we go into how to find new investors, make sure you’re taking care of your existing investors first, because they will reinvest.” I’m just curious if you have a ballpark number of how many of those 1,200 have invested one time, and how many have invested multiple times.

Ryan Gibson: Yeah, I would say — I don’t have the exact statistic, but there’s very few that have never reinvested. So I’d probably say it’s in the mid to high 90% have reinvested in our projects.

Theo Hicks: Okay. And then 15% of your list is active. Does that mean that you’re getting a 15% open rate on your emails, or 15% click rate on your emails? Or 15% of those 1,200 investors are actively investing in your deals?

Ryan Gibson: This is really interesting… So when you have a 506(b) offering, you cannot send the offering to all the investors on your list. Because there may be some people on our list that are not engaged; they haven’t gone through our process. It’s really important that you have a system that says “This guy just filled out an investor intake, but we haven’t talked to him, he hasn’t filled out a purchaser qualification form”, and we don’t know anything other than what he’s submitted – first name, last name, email.

So we have a process for reaching out to that person and taking him through our process. However, out of the 1,200 only about 700 of those at this point in time are qualified to actually receive an investment. So you take 1,200, narrow it down to 700, and then out of the 700 that we have, our open rate is about 56% to 60% for projects. So if you take 1,200 investors, really only about 350 of them are gonna get the actual email when you send a deal out.

So it’s important to keep that in mind when you’re adding people to your list – about 25% are gonna see the email, depending on how you qualified them and brought them through.

I know other investors/syndicators do 506(c), so they can blast their deal far and wide to the world, but I think the reason why our list engagement is so strong is because we take the time to contact each investor, understand what they want, and follow up with them and build a relationship with them that’s stronger than just always having a blast far and wide to the world and try to raise money from random people through the 506(c).

Our mission statement is more aligned with getting to know everybody and establishing personal relationships with everybody we do business with. I think that engagement, and understanding the data behind that engagement really helps attract people and keep people engaged in the process.

Theo Hicks: From the last episode to now, how has your investor relations process changed? Specifically — I’m not sure [unintelligible [00:14:50].20] but how has it changed now that you’re focusing on bringing in new investors, as opposed to doing investor relations with people that you or people on your team have known for years?

Ryan Gibson: The legality of the process hasn’t changed. However, the strategy and tactics to getting that person to being a qualified investor for Spartan has changed quite a bit… And it’s more just the attention to detail, and specifically identifying how that person became attracted to your business… Because when you’re raising capital, you’ve gotta make sure that the person that comes into their business –  you have a record of how that person was attracted to the business.

So how has our investor process changed? It’s just gotten better. We have a monthly webinar on how to better improve your passive investing career – a tax, a legal strategist on our webinar every  month… We do that as a way to engage our network, engage our list. Maybe the investor heard about our company, Spartan Investment Group, through a webinar, so we annotate it that way. The detail that we have to go and put into our CRM is intense. We have to make sure that we are tracking everybody that comes in.

Now that we’re adding anywhere between 30 and 100 investors per month, it’s important that every single time somebody comes in, we’re tracking that information more closely. I think that’s probably been the biggest change… Versus just “Oh, I’ve known this guy forever. He’s my friend.” It’s a little bit more casual when it’s like that, but when it’s “Hey, who is this guy?” and it’s “I think I’ve talked to that guy three months ago. Yeah, I’m not really sure what he was all about, or his background…” That’s where now there’s a call, there’s specific notes, there’s specific buttons that we’re pressing, there’s annotations that we’re making in the system, and there’s a purchaser qualification that the investor filled out. So now we have a ton of information in the background on deciding when this person ultimately becomes qualified to receive an offering under 506(b).

Theo Hicks: Do you have a breakdown — because you said you’re adding 30 to 100 investors per month. You’ve mentioned the webinar, you’ve mentioned the Washington Athletic Club, and you host happy hours there, and how each time someone comes in, you have to say “This is how I met them…” Do you have a breakdown of where those 30 to 100 investors are coming from?

Ryan Gibson: Yes, I would probably say that the number one source is between webinars and podcasts. Online, digital, things like what we’re doing today. That’s probably been a big referral. The next in line is probably referrals from people who’ve had good experiences, that referred us to others.

The referral is the strongest thing out there. People get referred to our business. The podcast and the conferences – that’s a great list builder; however, the people that actually pull the trigger and decide to do investments are referrals, because they know it’s the trust bond between the person who is in the deal or somebody that they know referring you to the business. Those are probably the most effective list generators.

The other one is through SEO, online advertising, or just social media. I shouldn’t say online advertising. We don’t really do any paid advertising. Just through online and meetup. That’s probably the three major ways that the 30 to 100 come in per month.

Theo Hicks: So your number one source for people that come to your list is webinar and podcasts. Do you have a specific call to action that you have at the end of your webinars and podcasts, or is it something that happens more naturally, because you’re providing them with information on how to passive invest, and you mention that “You can passively invest with me”, and so they naturally go to your landing page? Is it more of a proactive call to action?

Ryan Gibson: We try to keep it strictly value-add first. If you say “Oh, invest with us” — apparently, my SEC attorney doesn’t really like that too much… So it’s gotta be generic, and not specific. What we do is when somebody comes in and watches a webinar, we will follow up with that person and say — if they’re somebody that we’ve never had any contact with, we’ll reach back out to them and say “Hey, thanks for attending the webinar. Here’s a link to the recording, and here’s the slide deck. We have some deals coming up this quarter, but you’re not qualified to receive them yet. In order to do that, jump on a call with our investor relations department.” Then we take them through the process and get them qualified that way.

That way it gets us time to get some one-on-one with the investor, and then get to know them a little bit more. Then they go on our list as a more engaged investor, versus just a random person on our list that may or may not even know who we are, or forgot how they got on our list in the first place… So that’s probably the number one way to do it.

Theo Hicks: Alright, Ryan… Anything else that we haven’t talked about as it relates to investor relations, finding new investors that you wanna mention before we close it out?

Ryan Gibson: No, I would say just make sure you’re getting out in the community. I always just say that one thing always leads to the next… So like I said, you join one club in your community – it can lead to so many different other things, like Rotary, going into a different investor/angel capital or VC investor capital forum, it makes great connections… So just get out there, and I think that’s really the best way to do it.

Theo Hicks: Alright, Ryan, this has been a very informative episode. I’ve got a lot of notes… Just to quickly summarize what we’ve talked about – again, the main focus was what happens after you’ve exhausted all of your personal relationships and you’re going to go out and find investors that you don’t necessarily know.

First and foremost, I got this bolded — one of the main things I have bolded is take care of the people that you already have, because they will reinvest… And you did mention later on in the episode that referrals have the highest conversion rate of all of your lead sources. So if you’re out there and you’re beginning to branch out to new investors, make sure you’re not doing that — make sure you’re still focusing on your current investors as well.

One of the tips you gave early on was to  get out in your community. More specifically, you gave an example of how you joined an Athletic Club, where people with a high net worth work out, and there’s other activities… That’s kind of like a nexus that allowed you to join other clubs, as well… Plus, it gives you a more sophisticated space to host different events.

You went into specifics on what you do to qualify a new relationship and to convert it into a preexisting relationship, so that you can raise capital from them under 506(b). The first thing you talked about is your investor call consultation, and you went into specifics on that. You talked about how at the end of the calls you’ll send them marketing materials on your business, and went into specifics on that, and then you also said that you will send them an 11-question form that allows you to get some more information on them as well.

We talked about your follow-up system, how you use Podio… We talked about your list breakdown, and how if you’re doing 506(b) you most likely can’t send your deal to every single person on your list. So make sure if you do have every single investor contact on your list, you’ve got some sort of breakdown so that you’re not sending your deals to the wrong people.

You mentioned that your open rate is 60% of the people who are qualified on your list, and your explanation of how you’ve been able to have such a high open rate is that you really know these people a lot, you know what they want, and you follow up constantly; it’s a lot of one-on-one time, it sounds like, which creates a much stronger relationship.

And then lastly, we talked about how your investor process has evolved over the years, now that you’re bringing on these new people, and also mainly it’s just more attention to detail, identifying how they became attracted to the business, making sure you have a record of all that.

Specific examples you gave were hosting a monthly webinar on how to improve your passive investing career; that and the podcast are your number one source for new investors to your list. The number one source for people who actually pull the trigger are referrals; next, SEO and social media, and below that is meetup groups.

Then when you are doing any of these lead generation strategies, you specifically focus on strictly adding value and being more generic when asking people to try to get people to invest in your deals, as opposed to saying “Hey, do you wanna invest in this deal?”

And then your overall advice was to make sure you’re getting out into the community, put yourself in situations where you can meet high net worth individuals, and those situations will lead to more opportunities, and it will basically create a [unintelligible [00:22:55].14] effect.

Ryan, again, very powerful interview. I’m looking forward to actually writing a blog post on this, or multiple blog posts on this for our website.

Ryan Gibson: Oh, great.

Theo Hicks: I’ll make sure I include a link to your website and those blog posts as well. Best Ever listeners, thank you for stopping by. Have a best ever day, and we’ll talk to you tomorrow.

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JF1805: Semi-Retired Physicians Investing In Real Estate with Letizia & Kenji

Today we have a physician couple joining us on the show. These aren’t your typical physicians, they are both semi-retired and working on their real estate portfolio both actively and passively. We’ll hear about their specific investments, how profitable they are, where they found the deals, how they balance work, investing, blogging, and life. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“The best way to invest in real estate is to focus on cash flow” – Letizia Alto


Letizia Alto and Kenji Asakura Real Estate Background:

  • Two physician couple, semi-retired, entrepreneurs, and real estate investors
  • Own 40 units with over $250,000 in cash flow
  • Based in Seattle, WA
  • Say hi to them at https://semiretiredmd.com/


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Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I am Theo Hicks, the host today. Today I’m with two guests. I’m with Letizia Alto and Kenji Asakura. How are you doing today?

Letizia Alto: Great! Thanks, Theo, for having us on.

Kenji Asakura: Yeah, thanks a lot. I really appreciate it.

Theo Hicks: Thanks for coming on, and I’m looking forward to our conversation. A little bit about Letizia and Kenji – they’re both physicians; they’re a couple that’s semi-retired, and they’re entrepreneurs and real estate investors. Currently, they own a portfolio of 40 units, that generates over $250,000/year in cashflow. They’re based in Seattle, Washington, and you can say hi to them at semiretiredmd.com.

Before we get into the meat of the conversation, can you provide us with a little bit more information about your background and what you’re both focused on now?

Kenji Asakura: Yeah. As you mentioned, we’re both physicians, and semi-retired. What that means is that we choose to work clinically when we want to. Right now Letizia is working half-time, and I’m moonlighting, which just means that I pick up shifts whenever I want.

Most of our focus now has been on real estate and growing our own personal portfolio, and then also working on the blog and growing our readership, and also helping other physicians get into real estate investing.

Theo Hicks: Of your 40 units – are those a single-family, multifamily combination?

Letizia Alto: We actually own from single-family to a sixplex, which is our largest right now. Our portfolio is based North and South of Seattle, and then probably about three years ago we realized that it was really hard to find cash-flowing properties, so we spread out to Spokane, and now also Oklahoma City.

Theo Hicks: Do you mind walking us through the numbers on that sixplex? What you bought it for, if you’ve put in any additional capital after acquisition, and then what it’s renting for now?

Kenji Asakura: Sure. We purchased the property for $300,000, and this was part of a 1031 exchange, so we sold the property in Seattle and turned that into two properties; so this is one of our two properties.

So we bought it for 300k, we’ve put in about 40k, and we’re projected to get in rent about 42k/year, maybe up to 45k if we can tap into some hidden value – what we like to call a value-add property. This is a value-add opportunity, so hopefully we can increase that up even more.

Theo Hicks: And how did you find this deal? Was it on market or off market?

Kenji Asakura: This was an off market deal, and we went through one of our investor agents. We have over the last few years built up a network of agents that bring us deals, and so this was through that network.

Theo Hicks: Okay. And the sixplex – is it your most recent acquisition? Did you work your way from single-family homes up to sixplexes? Or you’re kind of just looking at whatever you can find?

Letizia Alto: This is not actually our most recent acquisition. Our newest acquisition is something we’re gonna close on in a couple days, which is a property North of Seattle, called Sedro-Woolley. It’s about an hour-and-a-half North. We’re actually gonna build two duplexes on that. So that’s our newest acquisition, that we’re extremely excited about.

Theo Hicks: So tell us a little bit about that… Why did you decide to transition into that new construction?

Letizia Alto: I think part of it — well, I know part of it is because as part of our blog we really are pushing ourselves to try new things, to help our readers be able to feel confident that they can try some of these things, follow after our footsteps and expand what they’re doing with investment properties as well… So that’s why we really are pushing ourselves to expand beyond our comfort zone. Building is definitely beyond our comfort zone, but we’re really excited.

We bought a property that we’re gonna actually subdivide into four, and sell off a single-family home and then sell of a plot of land that somebody can build a single-family home on, that we’ve lightly developed; we’re gonna put in some plumbing. And then we’ll have two lots in the back of the property that we basically get for free after we’ve sold off those properties. Then we’re gonna build two duplexes, get them appraised, and hopefully end up with a prolonged BRRRR, where we just end up taking all of our money out and getting infinite cash-on-cash.

Theo Hicks: And how do you find these multiple deals?

Kenji Asakura: Yeah, this one was also an off market through one of our investor agents.

Theo Hicks: So both of the deals you’ve talked about so far have been off market and through the investor agents. Do you wanna walk us through — because everyone wants off market deals, and even better, they want off market deals through agents. How did you get to the point where you were seen by that agent as someone who was trustworthy, credible, and that could close on the deals so that they would actually send you those deals and not someone else?

Kenji Asakura: Some of this is — finding an investor agent I think is one of the harder things to do. We’ve really relied on just our network, and also the blog helps as well; it gives us a lot of credibility in terms of identifying investor agents. We also provide those agents new customers as well; we bring investors to them. I think that puts us in a good position to receive some of the better deals.

But also networking, developing relationships with people has been really the key to getting on the top of their list. That’s where you pointed out [unintelligible [00:07:40].05] how do you get on the top of that list – what we try to do is we try to provide value to the agent in whatever way we can. Even if you don’t have a blog, I think just introducing them to other friends or people who are wanting to invest, bring them new customers… I think most agents will be happy to return the favor.

Letizia Alto: Also being decisive. Even before we had the blog – for example we were driving cross-country, or moving cross-country; so we’re in the car and one of our investor agents called us and said “Hey, I have this off market deal. Do you want it?” and we were like “Absolutely!” We just immediately agreed to it and signed the documents while we were on the road.

I think being very decisive, not wishy-washy, knowing what you want and making that very clear for your agents as well, so they know what you’re actually looking for, so they’re not just bringing you a bunch of deals that don’t meet your criteria and you’re saying “No, no, no, no.” Be clear with what you want, and then when they bring what you want, be decisive and follow through… That’s all.

Theo Hicks: That’s solid advice. I followed that advice too, that’s how I closed on my first deal. The second that deal came across your table, you’ve gotta jump at that opportunity, and then figure it out on the back-end… Especially for these smaller types of deals. A little bit different when you’re dealing with the larger stuff, but those usually move a little slower anyways.

So just taking a step back and zooming out… Your website’s name is semiretiredmd.com, so you’re focused — I’m assuming that site is helping others become semi-retired as well. Take this any direction you want, but what advice do you offer others who are maybe in situations that you were in – they’re working a full-time job and they don’t necessarily want to completely quit that job, because they actually like it, but at the same time they do want to supplement their income with real estate. What sort of advice do you offer to your readers that ask that question?

Letizia Alto: We see a lot of physicians who are extremely burned out with their jobs. They’re working really long hours and they don’t have a lot of flexibility, and working where they wanna work, or working the amount that they wanna work… So they’re really missing out with time with their family, and just exhausted. So our big advice to them is just that they need to give themselves options. And how they give themselves options is by learning a skill, which is real estate investing; making sure that they can build up a source of side income… More passive income; we don’t consider direct real estate really as passive income, because it does require some work… And then that allows them to be able to have the freedom to work at (let’s say) a job that’s volunteer, or work the amount that they want to, and they can spend it with their families. Really, it’s about learning the skills required to be able to have that side, passive income.

Kenji Asakura: Yeah. I think for me, just to build on that, there are a lot of docs who are burnt out. They love what they do, but… What I always say is if you buy insurance of any type – and a lot of docs buy disability and life insurance… But that only addresses the two worst outcomes – disability and death, but what about all the hundreds of other things that could go wrong?

So if you buy any type of insurance at all, I can’t think of any better insurance than to have side income coming from real estate or whatever other investment, so that you do have the option to cut back, spend it with  a family member if you have to, help out your parents if you find out that they’re in debt… Whatever it is, there’s a lot of things that can happen, and you just wanna be prepared; just like you buy insurance for various things, you just wanna be prepared for the worst-case.

Theo Hicks: So being a couple — this is kind of changing the subject again… What are some of the benefits and also some of the challenges of going into business with your significant other?

Letizia Alto: I think the benefit and challenge is probably the same thing – you’re both working together all day long. The benefit of that is you can have these unique conversations over coffee, and make decisions just sitting around in your living room… But the downside of that too is it’s really  hard to turn off, and it’s hard to separate yourself from your work.

We love hiking and discussing our businesses, but at the same time sometimes it would be better if we just kind of hung out and talked about something other than business, too.

Kenji Asakura: To build on that, the real positive – and we tell people who are getting into real estate investing the same thing – is that we’re on the same page, we’re going towards the same goal, so it’s much more likely that we’re gonna achieve that goal, because we’re on the same page, rowing the boat in the same direction… As opposed to so many couples that we talk to where one person is gung-ho about real estate and the other one is like “I’m not really interested/I don’t really support what you’re doing, and therefore you can’t spend money for this.” So it’s really hard, I think, for couples like that to be successful with real estate investing, or really any venture.

For us, just being on the same page, and the amount of time we invest in this… And we love it, so I personally don’t mind talking about this on hikes or on free time, because we’re really passionate about this… So I think there’s a lot of benefits to working together.

Letizia Alto: Yeah, two heads are always better than one. Just our decision-making is so much better because we’re both informed, and because we’re interested, and because we’re involved. I can’t imagine trying to do this whole business by myself, and how many mistakes I would have made that Kenji saved me from, and vice-versa.

Theo Hicks: Alright. For the money question, what is your best real estate investing advice ever?

Letizia Alto: Our best advice is focus on cashflow. Before we got together, Kenji was doing some appreciation plays, and land, that obviously didn’t have a building on it and had no backup plan; it was just hoping that the market was gonna increase and the value was gonna increase, and he really got stuck in the 2008 crash.

So we really feel the best way to invest in real estate is to focus on cashflow and make sure that every month you’re getting something, so that you’re never in a situation where you’re just negative month after month and you’re in trouble.

Kenji Asakura: I think for me it would be think of real estate investing as not investing, but as a business. What I mean by that is a lot of people will buy a rental property, it will cash-flow nicely, but then they kind of forget about it. That’s kind of what my parents did – they bought rental properties and just didn’t really pay much attention to it.

The way I like to think about it is once we purchase a property, that’s when we roll up the sleeves and get to work. What that means is, again, building on cashflow, we might buy something for a 10% cash-on-cash return initially, but our goal is to over time increase that cash-on-cash by either increasing revenue, by either tapping into hidden value, raising rents, or decreasing expenses by either eliminating utilities, by billing back to our tenants, or figuring out other ways to eliminate expenses.

We have a couple properties in what’s called supported living, which is providing housing for people with intellectual disabilities… And when you do that, you eliminate actually multiple expense line items at once. You can eliminate property management, you can eliminate utilities, and you can set it up so you have zero vacancy. All of a sudden, your cash-on-cash goes — this one property went from 10% to 40% cash-on-cash.

Theo Hicks: Alright, great advice. Are you ready for the Best Ever Lightning Round?

Kenji Asakura: Yeah, let’s do it!

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

Break: [00:15:07].24] to [00:15:48].26]

Theo Hicks: Okay, best ever book recently read?

Kenji Asakura: We both love The One Thing. The power of focus is so incredible, and we’ve applied it and it’s been huge.

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

Letizia Alto: We talked about this before, and we feel so confident in our knowledge we would just rebuild it. We would build it faster, we would build it better, just because we have the knowledge and skills now to feel confident in our abilities.

Theo Hicks: And if you had to start over with little or no capital, how would you do that?

Kenji Asakura: I think it kind of depends in which direction we wanted to go. If we wanted to start out and rebuild what we have, with the single-families to the small multifamily, we’d probably just do a bunch of BRRRRs, and just be really aggressive about that. Then also maybe even consider house-hacking as well. A combination of those things.

If we were going bigger scale, I think we would just do syndications. With our network and our audience we would be able to be in a good position to fundraise for syndication, so that would be something we’d probably go after.

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

Kenji Asakura: Hah-ha! Letizia alluded to it, but I had a lot of bad deals; I actually wrote an article about it called “The worst real estate investing mistakes.” I bought a bunch of land in Florida before the last recession in 2008. Basically, I was left holding a bunch of vacant land that I actually ended up holding for about 13 years. When I sold them, I sold them for less than half the value that I purchased them.

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

Kenji Asakura: The best place to reach us is our website, semiretiredmd.com. Also, join one of our Facebook groups, “Semi-retired professionals” is the one for non-physicians, and then we have a separate one for physicians, called “Semi-retired physicians.” If you join those groups, those communities are pretty active, and a lot of great discussions focused on building your real estate portfolio… So yeah, please join either of those groups.

Theo Hicks: We will have that semiretiredmd.com link in the show notes of this episode. Well, Letizia and Kenji, I really appreciate you guys coming on the show today and sharing your advice.

To summarize what we’ve talked about – you’ve provided some details on two deals; one of them was that sixplex that you 1031-exchanged; bought for 300k, put about 40k into it, and you’re cash-flowing around 42k-45k per year. Also, you told us about the two duplexes you’re building about an hour-and-a-half North. Both of those were off market, found through investor agents.

We talked about how to get those deals from investor agents, which essentially comes down to networking, which you do via your blog as well. Also, it’s about providing value to those agents; for your case it’s about bringing customers/clients to them, to show your value, and then in return you’ll get some off market deals.

Also, to be clear with your investment criteria – what deals you want – and then once those deals are presented to you, actually being decisive and immediately taking action, and you gave an example of that as well.

We discussed how you help physicians who are either burnt out, or still love what they do but want an additional layer of insurance, and you helped them with your blog by teaching them the skills that are required to create that side income.

We talked about the benefits and some of the challenges of going into business with your significant other. From your guys’ perspective, it sounds like it’s mostly positive. You can make business decisions at any time over coffee, in the living room; you’re both going towards the same goal, you’re both on the same page, and of course, two heads are always gonna be better than one. If one person makes a mistake, the other person can fix it before the problem grows.

The only negative you talked about was it’s hard to turn off for you, and then for other couples you worked with you said that if one person is really gung-ho about real estate and the other person isn’t, that could be an issue.

Then lastly, you’ve both provided your best ever advice. One was to focus on cashflow, and always make sure you’ve got some sort of money coming in every single month, and try to stay away from speculation and appreciation plays. And then also thinking of real estate as a business – don’t just buy a property and then forget about it; instead, buy the property and then actually get to work, increasing that cashflow after the acquisition.

Again, Kenji and Letizia, thank you for speaking with us today. I really appreciate it. Thanks to everyone who listened. Have a best ever day, and we’ll talk to you soon.

Kenji Asakura: Thank you so much.

Letizia Alto: Thank you.

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JF1791: We’re Discussing Insurance For Investors With An Insurance Broker with Jake Stacy

Jake is an insurance broker, as well as an investor himself. He and Joe will discuss insurance for real estate investors and also cover Jake’s best advice from his own real estate investing experience. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“If the crime scores go up, premiums go up” – Jake Stacy


Jake Stacy Real Estate Background:

  • Insurance broker specializing in insurance for multifamily and commercial real estate
  • Over the last 3 years, his team has grown the business at 86%, 96%, and 114% to become an 8 figure insurance agency.
  • Also invests in real estate on the side
  • Based in Seattle, WA
  • Say hi to him at https://www.riceinsurance.com/


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

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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, Jake Stacy. How are you doing, Jake?

Jake Stacy: I’m doing well, Joe. Thanks for having me.

Joe Fairless: Well, my pleasure. Nice to have you on the show. A little bit about Jake – he is he insurance broker specializing in insurance for multifamily and commercial real estate. Over the last three years his team has grown the business 86%, 96% and 114% to become an eight-figure insurance agency. He also invests in real estate on the side. Based in Seattle, Washington. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jake Stacy: Sure thing, thanks Joe. Yeah, you got that right, we are an insurance broker specializing in multifamily, commercial real estate, and we work with everyone from single complex owners, developers, property management companies, large REITs, larger portfolios on a nationwide basis.

We actually started working in this space probably about in October 15 years ago. We built out a very specialized program; it’s pretty unique compared to the traditional way that insurance has typically been handled. At this point we’ve grown it 86%, 96% and 114% over the last three years, which is definitely unique compared to the average growth of an insurance agency covering around between 3% and 5%… And this has all been off the back of our real estate program. And currently, I’d estimate we probably insure maybe 100,000 units nationwide.

We saw the old way that insurance was handled – it’d take three months to get a quote, [unintelligible [00:03:34].10] 20 questions about the properties, about the business in general… So we actually used a program that houses property information that we can access with just the address of the property, which creates a really seamless process for our clients. So we’re able to turn things around really quickly for them, and we’ve actually partnered with a number of carriers as well in order to get the best prices in the market.

So that’s my [unintelligible [00:03:53].17] just working in the multifamily commercial insurance, and then on the side I actually just recently started doing real estate investing on my own. Obviously, a lot of real estate investors are my clients, so just loving that space, I was like “I should do this, too. I see what you guys are doing and I wanna be involved in that, too.”

So I actually started real estate investing on the side, and my wife and I recently bought a three-bedroom house and we’re kind of house-hacking right now. We bought a three-bedroom house with an 1,100 square foot basement, with its own entrance; it’s one of those walk-out [unintelligible [00:04:18].03] So we’re currently finishing that. It was a pretty sweet deal, both from the income potential that it will have and the market that we’re in. There’s less than a 1% vacancy on rental properties… And the rents continue to rise. And there’s also a pretty significant equity potential on the property as well. We’ve got a pretty sweet deal on it.

So yeah, that’s what we’re doing on the side. I’ve actually recently just kind of gone all-in into real estate investing and I’ve actually secured a couple partners that wanna work with me. A couple from a financial standpoint, and then one guy actually recently approached me and was like “Hey, I wanna do all your rehab work. I grew up flipping houses with my dad, and I’ve got a little money set aside, so I wanna partner with you, hopefully invest with you, and then I’d like to just do the work for you.” I think that’ll be a pretty symbiotic relationship as well.

That’s a little bit about myself. [unintelligible [00:05:00].13]

Joe Fairless: You’re a busy man.

Jake Stacy: Indeed. Very busy. I wouldn’t have it any other way. I like being busy.

Joe Fairless: Let’s talk about the specialized program that you have from the insurance brokerage standpoint. Is that essentially just a database that you have, and someone gives you their property address, and your database has the information that you need, so it cuts out a lot of the back and forth?

Jake Stacy: Yeah, exactly. Typically, how it was historically done was the insurance broker would send their client an application, and it’d be anywhere between probably 5-10 pages of asking details about the property specs – year built, square footage, vacancy, rents, everything like that. So actually over the last 15 years we used a program that not only has public property information, but we also buy a lot of information. So yeah, exactly, with just the address I can pull all the underwriting information that I would need. Everything from crime score, construction type, tenants for commercial buildings, average rents for that area, pictures, the recent sales, the entity that owns the property… Everything like that. That really cuts out a lot of back-and-forth, which is really helpful for our clients. I’m sure you’re controlling like 500 million of — I’m sure you’re busy, you probably don’t have time to go back and forth on every single property you own, just to get the insurance done for it.

So that’s one thing that’s really catapulted our growth – taking all the work off our clients’ hands and just putting it on our team. We’ve got a pretty robust team that just mines for the data that we need for the property, and trying to find portfolios that we think would be a good fit for our program. Then we reach out to those portfolios respectively.

Joe Fairless: What aspects of looking at ensuring a property influence the premium that is going to be offered to that property and the property owner?

Jake Stacy: A lot of people think it’s just straightforward on how the premiums are derived, but the factors that go into the premiums are so multi-faceted. It’s everything from construction type, to number of stories, the number of units per building, if there’s a sprinkler system in that building or not… Honestly, just even where the property is located, the neighborhood, what the crime scores are in that neighborhood…

For example, I’ve got a client right now who’s got a property about two miles from the Las Vegas strip. Their renewal has gone up maybe 30% just because the crime scores in that area have increased. Nothing else has changed, we’ve insured the property for years, but just because the crime score goes up, the premium jumps up.

So there’s a lot of factors that go into it, but the number one factors that affect the premium are gonna be the construction type, and just in general where the property is located. Obviously, a property in Texas is gonna be a lot more to insure than a property in California, just based on the exposures in those different states. In Texas you’ve got the wind & hail, you’ve got some hurricane exposure on the coast, but California, especially central California – you don’t have those types of exposure. So it’s very multi-faceted, it’s pretty complex to get into actually what drives the premium, but the number one thing would definitely be where the property is located and then just the property specifics – how big is the property, what’s it made of, how new is it (that’s another big factor).

Joe Fairless: What’s a story of a property that was challenging to get insured? Can you talk to us about an example?

Jake Stacy: Yeah, it seems harder and harder — in general, the market as a whole is getting tighter. Not yet from a pricing standpoint – prices are still pretty soft – but underwriting guidelines are tightening up a lot, so it’s getting increasingly difficult to insure properties that are older than 1980-1990. When you get older than 1980 especially, it’s very difficult to place the insurance for them.

I had a client in Southern California just buy — one was 1953 and one was 1950. It was a small pizzeria, and one small apartment complex… And that was very difficult, because the property didn’t look great from the outside, but it was a well-performing property, and had never had any claims, or anything like that. It was updated fairly well, but just because of the age of the building, it was difficult to [unintelligible [00:08:47].26] We’ve got a pretty close feel on the marketplace as a whole, so we know how to direct those properties to the correct carrier, and typically those carriers – we write so much business with them that they’re able to give us good prices, considering the aspects of those properties.

So that’s one recent example I was going through last week – a client’s 1950’s property; it didn’t look great on the outside, but had good bones, and ended up going through with the purchase, and we had to find a pretty competitive rate for him [unintelligible [00:09:11].10]

Joe Fairless: Older than 1980… A lot of the Best Ever listeners I imagine are thinking “Oh… That’s like 90% of the properties where I live.” Especially in the Midwest… In Texas not so much; a lot of stuff is new. But in the Midwest and the North-East you’ve got properties built in the 1800’s and early 1900’s… Maybe not large multifamily ones, but still, you’ve got a lot of properties that age. So I don’t even know what the question is; that’s just an observation. Any thoughts on that?

Jake Stacy: Yeah, it’s something that becomes very difficult to navigate with our clients, because by and large, most of the properties are older than 1980, probably nationwide on an average basis.

One thing that you have to take into consideration for the Best Ever listeners that are looking to buy those properties is “Has the property been updated?” The big things are if the roof more than 30 years old, an insurance company is not gonna want [unintelligible [00:10:04].27] Has the wiring been updated? Does it have the copper or aluminum wiring, the knob and tube? And the electrical panels that it has – does it have the Federal Pacific ones? Those were faulty from the start. So those are the big things that they’re gonna look at.

If the property has been updated and it’s older than 1980, you’re okay. But you definitely wanna pay attention to the update information that maybe the potential seller has on file, or if it’s gone through a major rehab.

Joe Fairless: Very helpful, thank you for elaborating on that.

Jake Stacy: I will add too, it does depend on if somebody is a single complex owner or if they have a significant portfolio, with more properties that we have, that we’re trying to market for the insurance coverage. If there’s a portfolio that has ten properties versus one, we’re able to get a lot more creative and have a lot more purchasing power in the market. There are carriers that will make exceptions. If we’ve got a portfolio where everything’s newer than 2000, and then there’s one 1975 complex in there, they’ll make an exception for that, and get a good rate for that one complex… So don’t be discouraged about the insurance for an older property; it can be done.

Joe Fairless: When you take a look at the types of costs of insurance – let’s go with 50+ unit properties. I know 50+ could be 6000 or 1,000, so I know that’s a large range, and if you need to define it more, then let me know, but we’ll go with that for now until you say otherwise. 50+ unit properties – when you take a look at the price to insure those types of properties, and look at it geographically (different regions) are there certain regions that are twice as much as other regions? Can you just speak a little bit about that?

Jake Stacy: Yeah, I can. For example, here’s something from my personal experience. One of my largest clients is up here in Seattle, and all they buy is probably  10-15 buildings, 350+ unit properties, and our insurance there is probably half the cost as it would be for the same building in Colorado or Texas, or even the Midwest states, just because of the different weather, especially.

So just looking at from Seattle to Dallas-Fort Worth is gonna be probably double the cost for insurance, per unit basis. And then you also see similar from California to Texas as well. And then one of my colleagues – he actually insures only properties in Florida, and Florida is definitely by and large probably one of the most expensive states, especially because almost everything is on the coast. So that’s another state that’s gonna be twice as much than probably Texas. Again, it’s all about just the exposure that properties have; especially in Texas you’ve got the wind & hail, and in Florida you’ve got the hurricanes. In California at this point prices are going up given the fires that recently happened, so… I’m not sure if that really answers your question, but that’s just one example that I’ve seen – Seattle to Texas is almost double the cost.

Joe Fairless: Wow, that’s really helpful. So Seattle to Texas – double the cost; and then Seattle to Florida is approximately — and I know we’re using rough numbers, but four times the cost.

Jake Stacy: Yeah. It’s almost all weather-driven nearly.

Joe Fairless: Anything that stands out to you about the North-East? We have a lot of North-East investors who listen to this show, as well as a lot of California investors.

Jake Stacy: North-East is relatively straightforward. There we deal with a lot of older properties, but the number one thing that we look for there – at least that we see most often as driving the price – [unintelligible [00:13:16].17] pretty severe freezing that happens, and that can cause a lot of pipes to burst… So carriers often are looking for plumbing updates that have been done to those properties. But by and large, the North-East is gonna be — I wouldn’t say it’s outrageously expensive, but it is gonna be more expensive than a North-West or a West Coast property, just given that and the age. And on average, the crime scores in the North-East are a lot higher as well.

I just recently helped a guy — he had 5,500 in like 16 different states, and they had a lot of stuff in Rhode Island, Connecticut, New York… Not New York City, but out in the rural New York. And up there his per-unit was a lot more expensive than it was for the rest of their portfolio, given — I was able to see all the data on their crime scores. Crime scores are almost double up in those areas, as well as the freezing that happens. So North-East definitely that’s something that’s driving the premiums quite a bit.

Joe Fairless: When you insure your properties, what are some things as an insurance broker you’re gonna make sure you include on your properties?

Jake Stacy: That’s a good question, I like that question. The first thing I wanna look for is you wanna make sure that the replacement cost for your building is actually what it would cost to replace the building in the event of a total loss, and that you don’t have co-insurance on it either. The industry uses just standard — for example, for California we give an estimate of about $150/sq.ft. to replace the building, but there’s some states where $150/sq.ft.  you’re not even gonna be able to build half the building. So that’s one thing to pay attention to – the number one line item typically you see when you’re looking at your policy is the actual building limit. Break that down to a per-square-foot basis, so you can actually see what it would cost… Because that’s what a lot of developers use, too; it’s “How much per square foot is it gonna cost me to rebuild this property?” That’s the number one thing that for sure you should look for.

And then you wanna look at the co-insurance, which is pretty much just gonna be a penalty for under-insuring your property. Typically it’s 80%-90%, or it’s just waived. You always want it to be waived. So those are the two first things that I look for.

I also look for sewer drain and backup, especially on big rental properties. If you have a lot of tenants, there’s a lot of people using the facility, so you wanna make sure that if you do have a sewer backup situation, that you have ample coverage for it, because typically it can cause hundreds or thousands of dollars of damage throughout different units. And some carriers have a benchmark of only $10,000 of coverage; I always will sell $100,000 of coverage on that. So that’s another thing I look for.

Those are probably the big three property aspects that I look for. Then you obviously wanna make sure your deductibles are something you’re comfortable with. We have some pretty risk-averse investors that we work with, that are okay having lower premiums, but higher deductibles, and then we have some people that want the lowest deductible possible and they’re okay paying for it. And especially in states where you have those big weather exposures like wind and hail storms and tornados, you wanna make sure that your wind & hail deductible is something that you’re comfortable with.

Typically, it’s gonna be offered on a percentage basis, and you wanna look for if it’s gonna be a percentage basis per location, per occurrence, if it’s gonna be for every storm, if it’s gonna be for every building… And those are often percentage bases. So you wanna look at the deductible as well, just to make sure it’s something that you’re comfortable with. And even do a calculation; say “Okay, I’ve got a ten million dollar building and I’ve got a 5% deductible. Okay, is that even gonna offer me any coverage if I lose half of my building to one storm?” So that’s something that you wanna look for.

Then on the liability side it’s pretty run-of-the-mill. You wanna just make sure that you have two million aggregate, one million/occurrence. And if you want an umbrella, that’s something that you should definitely look at, too. And again, that’s just something that’s all about your comfort zone, how much you wanna go above and beyond with the excess liability coverage.

So those are probably a few of the main things that I would keep an eye out for.

Joe Fairless: Very helpful. Thank you for that. Based on your experience as an insurance broker, what is your best real estate investing advice ever?

Jake Stacy: Best ever real estate investing advice – like I said, I just got into the real estate investing space and there’s a lot of wantrepreneurs out there; there’s a lot of people that talk about wanting to be a real estate investor, and stuff, but there’s a lot of people that just don’t do anything. And I could have sat here forever, saying “Oh, I wanna invest, I wanna invest…”, but my wife and I decided “Let’s just do it. Let’s just buy something and start working on it.” So that’s how we ended up [unintelligible [00:17:12].02] We just decided to do something. So my piece of advice is just do something.

If you have a property worth buying, take the risk, just do it. It’s gonna be scary, it’s gonna be easy to talk yourself out of it, but just go for it, and even if it crashes and burns, you learn from it.

And then the second thing that I would say is just network. When my wife and I started to actually network and talk to people and actually put words to our ideas and achieving financial success with real estate, we were able to make all these partnerships with people that knew what we wanted and were willing to help us get there. So number one, just do it; number two, you’ve gotta network, you’ve gotta meet people. You’ve just gotta have a close-knit network that you can bounce ideas off of, find people to help you out.

A real life example that happened to me recently – we actually just met someone who wanted to give us 50% off all of our interior drywall, trim work and cabinets, just because I went up to him at a real estate investor meeting that I recently went to, and I told them about what we wanted to do. He was like “I’m actually a dealer for all these different things. Do you want 50% off?” I’m like “Yeah, that sounds great.”

Just the fact that we were able to network and meet someone, we were able to increase the profitability and margins that we can achieve on this one property that we’re doing right now. And then you always wanna make sure that you network with a realtor. Luckily, my twin brother is actually a realtor, so we’re able to see what’s going on on and off the market probably more closely than another person… But just do something and talk to people about it.

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

Jake Stacy: I am ready.

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

Break: [00:18:36].27] to [00:19:37].23]

Joe Fairless: Best ever way you’ve grown your business, outside of just the database that you have access to? Because I believe the database is something that will help you make it easier to convert leads; but if you’re growing your business the way you’ve talked about, it’s more than just about conversion, it’s about getting in front of more people, so… Best ever way you’ve done that?

Jake Stacy: That’s right. Cold calling. Hands down.

Joe Fairless: Best ever transaction you’ve been a part of?

Jake Stacy: I had a client through a syndication deal purchase over 400 units for about 97 million dollars here in Seattle. That was a fun transaction to be a part of.

Joe Fairless: Best ever tips you have for cold calling?

Jake Stacy: Be comfortable, and be very clear and concise the message you wanna get across.

Joe Fairless: What’s a mistake you’ve made on a deal, or maybe on a cold call even?

Jake Stacy: Talking too much.

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

Jake Stacy: I love to volunteer my time, with high school kids especially.

Joe Fairless: So that’s all the questions for the Lightning Round. I do wanna circle back on the cold call thing… So let’s say you call me up; what do you say to me?

Jake Stacy: First of all, I try to keep my calls very short, and I try to have a claim that I can drop pretty instantly… Saying “Hey Joe, Rice Insurance. I wanted to increase the profitability of your assets while offering protection at the same time. Do you have five minutes to hear about a program that we use that I think could be beneficial for you?”

Joe Fairless: And how do you increase the — oh, because it’s lower insurance, so you decrease the expenses?

Jake Stacy: Exactly, yeah. And for some people, that value pitch is “Hey, I can save you time.”

Joe Fairless: Okay. How do you determine which way to go with on the pitch?

Jake Stacy: It’s through a series of questions, like determining what’s valuable to them. Is it the financial impact, or is it the time? A lot of people we work with it’s mostly the time. And honestly, for most people it’s a combination of the both. People aren’t gonna switch insurance for no savings, typically. Those things have to be achieved.

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

Jake Stacy: Check out our website, RiceInsurance.com. And always feel free to send me an email, jakes@riceinsurance.com as well.

Joe Fairless: I learned a lot and enjoyed our conversation. Congrats on the growth, and thank you for talking to us about insurance, and things to keep in mind when we’re insuring a property – make sure your replacement cost is actually what it would cost to replace the property; think about it from a per-square-foot basis. Have no co-insurance;  you want that to be waived. You want to make sure you have sewer drain, and backup coverage; you like to have at least 100k. Make sure you’re comfortable with the deductible, and also from the liability side have 2 million aggregate, 1 million per occurrence. Obviously, those variables might change based on the property and your comfort level as an investor, but generally speaking, that’s what you look for.

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

Jake Stacy: Thank you, Joe.

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JF1414: A Vision For The Future Helped Him Build A Large, Diversified Portfolio with Scott Price

Today’s guest has a phenomenal way of setting goals and doing things everyday to work towards those goals. We’ll hear about that in the beginning of the episode, followed by more details on the actual investing he has done so far. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Scott Price Real Estate Background:

  • Husband/wife team leading Bonvolo Real Estate Investments
  • Recently a full time real estate investor after 14 years investing while working full time jobs
  • Has a self-funded portfolio of multi-family, SFR, office, retail, medical, & land in WA for buy & hold cash flow
  • Got to where they are by creating & following vision board & plan
  • Say hi to him at http://bonvolo.com/
  • Based in Seattle, WA
  • Best Ever Book: 4 Hour Work Week by Tim Ferris

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We profile 1 nonprofit or cause every month that is near and dear to our heart. To help get the word out, submit a cause, or donate, visit bestevercauses.com.


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, Scott Price. How are you doing, Scott?

Scott Price: Doing well, Joe. Thanks for having me on.

Joe Fairless: My pleasure, nice to have you on the show. Scott is part of a husband/wife team leading Bonvolo Real Estate Investments. He recently became a full-time real estate investor after investing for 14 years while working full-time jobs.

He self-funded a portfolio of multifamily, single-family, office, retail, medical and land, and he’s a buy and hold for cashflow investor (he and his wife). They are based just North of Seattle, Washington. With that being said, Scott, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Scott Price: Sure thing. We’ve believed a long time in the power of real estate for income over our long-range plan, so what we did was a long time ago we created a vision board and a plan for what we wanted to do, and real estate was a big part of that. We started accumulating properties on our own.

I actually became a full-time real estate broker for three years, and then I went back into team/program management positions at some companies, but I did that just to immerse myself in real estate. We’ve been gradually expanding, we’ve been opportunistic, and what I mean by that is, as you can see, we’re fairly well-diversified in our asset classes, and it’s not so much a diversification strategy as it is a looking for good deals strategy. When we find something, we know enough about each of those asset classes that we jump in.

Most of our properties are in Washington state right now. We have dabbled out of state, but most of them are in state for us. We own them all ourselves. Our next steps now that I’m full-time and semi-retired, so to speak, is to grow the business more and actually get into syndications, which will be the next phase for our business.

Joe Fairless: You and your wife created a vision board a long time ago, you said… Did that ever evolve, or have you maintained the same vision board the whole time.

Scott Price: It has evolved somewhat, but the overall priorities for us have remained pretty constant. We still have the same vision board from 15 years ago up on the wall of our office, and it’s a bit of a guiding light. We not only look at it and the things that we’ve done and are currently doing are on that vision board. It’s a visual one, so it actually has pictures of things that we wanna do with our lives.

On top of that, we make it more actionable. By each morning, I actually have a form that’s printed out [unintelligible [00:03:40].02] sheet of paper, and it actually has actions related to that vision… So it’s not just general what we wanna have in the future, but it’s “What can I do today to help make that occur in the future?” and that’s important to us… And it’s how we’ve been able to get to the point where we now are doing things that we really enjoy, and real estate is our full-time source of income, and we’re also doing a lot of fun things on our own because of that income.

Joe Fairless: Do you show that vision board to people whenever they come into the office?

Scott Price: I do, and I actually–

Joe Fairless: What’s on it?

Scott Price: I recently gave a presentation at a local investors club and I took a picture of it and put it up in the PowerPoint just to show people what an example looks like. Some people said that that part of my presentation was actually the most important to them, to really put it in a much broader context of why you’re doing the real estate, not just getting bogged down in the details of real estate by itself.

Joe Fairless: What’s on it? What are some things?

Scott Price: It starts with where we wanna live. Three years ago we moved to Whidbey Island. That’s where we wanted to live, and we made it happen, and actually through real estate, because there’s not much of an economy here, so we had to create our own economy, so to speak… And we wanted to build an interesting, cool home on the waterfront, with some eco building features, and we’re two months away from moving into that.

Our main source of income is gonna be real estate – that’s on there… At that point we didn’t yet have a kid, and that was in the center of that; we now have a kid… And around family and friends, and then we have things that are important to us in terms of working with the community, as well as our hobbies.

Joe Fairless: What’s something that has not been achieved that was originally there a long time ago?

Scott Price: I would say it’s more that some of our hobbies changed, so relatively smaller things. For instance, my wife put on there to learn the hammered dulcimer, which is a musical instrument… And we had some dancing lessons on there. Those have kind of fallen by the wayside, but I’d call those pretty minimal kinds of things. We’ve replaced those with other interests, so they just got replaced over time. Smaller things like that…

Joe Fairless: So the large stuff that you had on there, from a business standpoint, was achieved, correct?

Scott Price: Yes.

Joe Fairless: So did you add in, or did you swap it out with new business stuff, so that you’re constantly striving for more?

Scott Price: Yes, so that’s where the more specific actions of what we do each day come into play, because on a vision board it’s really at the high-level of “We want our income, as well as our wealth generation to come through real estate primarily”, and it’s at that broad level; it’s not necessarily directly actionable, but it’s a goal, it’s an objective.

And then in terms of what we do each day – yes, it’s around increasing our income, increasing our portfolio and growing the business and what we can do around that on both the supply line, or the deals coming in, as well as the capital side of the equation.

Joe Fairless: And clearly, this is a critical component to what you do, because of how you have it incorporated in your daily routine… That’s why I asked a couple follow-up questions about it. And the last follow-up question, and then we’ll move onto some of these deals that you’ve got is the print-out that is printed every day – is the only question on it “What can I do today to help make this occur?”

Scott Price: It has four main goals that we’re currently focusing on from that long-range vision, and then below that it has — for each main goal we have, I would say, on average, about four actions. Those are actions that are in the perhaps six-month timeframe in terms of something to be accomplished. Then I have a column on the right-hand side that says “At the end of the day, did I do that? Yes/No/Partially.” So I grade myself every night, basically.

And we don’t work on every goal every day. What I do at the beginning of the day is I actually say which ones I’m going to do and what I’m gonna do specifically for them that day, and then at the end of the day I grade myself on what I actually did.

Joe Fairless: Is it all paper, or do you do electronic?

Scott Price: I’m a very electronic guy, so to speak, meaning I have everything on my laptop and my phone, except for this. I do scan them when I’m done, just so that I have a record of them, but I’ve found that just having a physical piece of paper sitting on my desk with a pen beside it, and I look down it and it keeps me focused on what I need to do, and I check it off, “Yes, I did that” – it’s easier, it’s more tangible, and it’s better than trying to open some app on my computer and look for it in there; it’s always just sitting right there and I just change it out every day.

Joe Fairless: You were a full-time real estate broker for three years, and then you went back to another occupation. Why did you stop?

Scott Price: Mostly because I was getting involved primarily to learn the ins and outs on the legal side, the contract side of becoming a broker. I’m actually still a broker, but I don’t represent clients; I just have it purely for investing purposes.

And the main reason I got out was I was mostly working in residential sales, not so much commercial sales; I did, occasionally. And I really enjoyed working with the good clients that I had, but every once in a while the tire kickers – they would take six months of my time and result in nothing… It just kind of got a little wearing. I just said “I’d rather work on things I know I can have a really good outcome.” It’s a bit of a numbers game business, and you’ve gotta have that approach.

I like the positive numbers, but the negative numbers — it just wasn’t that interesting to me, so I got out of it, but I kept the license going for investing.

Joe Fairless: What type of full-time jobs did you do in addition to the broker thing we already know about?

Scott Price: I was primarily in either team management or program management positions with technology companies. I’ve worked with some startups, I’ve worked with some large companies that you’d definitely recognize their names… A wide range of places, but generally team and program management.

Joe Fairless: What skills did you apply in those positions that you’re applying in your real estate investing?

Scott Price: I would say the two biggest ones are 1) coordinating, managing and leading a team of people, because that’s very important to our business model in terms of the partners that we work with… And by partners, I mean things like property managers and contractors and attorneys and things like that. So that’s one really important element.

Then the other important element I would say is project management in general… In other words, being very organized and on top of things. My earlier background has been in project management and I found that’s helped me quite a bit as well in real estate.

Joe Fairless: You’ve got multifamily, single-family, office retail, medical and land. Is that accurate?

Scott Price: Yes. Just a few examples of each… Again, we’re opportunistic, but yes, I do, and I feel comfortable with each of them. I know some people say “Get rich in a niche” kind of thing, and that’s fine, and I certainly understand that. I understand enough about each of the asset classes and what to look for that when a good deal comes along I have enough buffer in there to be able to invest in all of those.

All of our properties have been successful. We’re choosy. That’s one of the reasons why we’ve been doing it for so long… We’re not buying every month kind of thing, we’re choosy on the ones we’re purchasing.

Joe Fairless: What was the most challenging asset class  to learn underwriting for?

Scott Price: I would say — well, the most challenging one was actually land, just because in our case it was more flips, flipping land, and I don’t generally do flips, to be clear… Everything else is for buy and hold, and the land was to resell. We’re not developers, so we were not buying it to develop, but instead to flip to someone else.

That’s a whole different ball game in terms of learning how you can work with the local municipality to determine what can be done with the land, and that may or not always be true, depending on who you’re talking to, and what is the actual value of this land afterwards… So it’s not the NOI (net operating income) approach of multifamily or even office and retail; it’s a different beast. So that one was probably the hardest of all of them.

Joe Fairless: How did you learn it?

Scott Price: It was a combination of things. Number one was reaching out and talking to people, getting to know people who had already worked in that area, meaning they had already done both land purchases, land sales, and then they’d just done some flipping in general. That was one thing.

Joe Fairless: How did you find them?

Scott Price: Also, wherever I could, I would certainly read books, listen to podcasts, things like that to get other people’s experience. And then some of it I frankly learned on the job, so to speak, especially going into a county office and learning what can be done to a particular piece of property… There’s some that you can learn from others, but you’ve gotta stand there in that line and talk to that planner and learn something on the fly. There’s a little bit of risk to that. That was the riskiest part of our portfolio, by far, just because of all the moving parts on that one.

Joe Fairless: How many times have you invested in raw land?

Scott Price: I would say probably five or six, something like that.

Joe Fairless: What were the results, the lowest and best? What are two examples?

Scott Price: Yeah, I would say — I had two examples where I just made a little bit of money, and in retrospect I wouldn’t have done it, just because the amount of time I invested relative to the amount of time I invested relative to the amount of money I made, the hourly rate, so to speak, wasn’t very good.

Then on the other side I doubled a couple of them without actually even going through all the entitlements and all that kind of stuff… So it’s been a range.

Joe Fairless: For the lowest one where your hourly rate wasn’t worth it, as an education that it gave you, if you were presented that same exact opportunity but in a different disguise in the future, what would you look for that you didn’t look for initially on the other one?

Scott Price: I would do more due diligence up front with the local government, whoever that is – if it’s a city, if it’s a county, whatever it is – and I would do more in advance. In both cases I did some; certainly, I didn’t just buy it and then figure it out kind of thing, but at the same time there were some nuances… The folks in charge, so to speak, at the local government, just didn’t go out of their way to tell me, and I had to kind of find out on my own, so there was that risk… Again, they turned out okay in the end, but that was the biggest learning there.

I don’t do land flips anymore. It’s interesting, but that’s something that’s in my past. I’m more buy and hold for cashflow at this time.

Joe Fairless: I’ll ask you about some of those buy and hold investments. One last follow-up question on the land – what were some of those nuances that you had to learn kind of the hard way, after you got into the process?

Scott Price: For instance, one example – I purchased 72 acres that was near a beach town, and it had the potential to be subdivided, but it had this very unusual overlay on top of it that was related to this resort zoning. And the trick was to essentially get rid of that resort zoning, so that it could be subdivided. Essentially, to boil down a much longer story, I was told wrong information by the people that I initially talked to before I bought it.

So the lesson there was not only to talk to them, but to double check and to actually look at the wording of whatever regulations or zoning is involved, not just always take the word for it… Because they just literally told me wrong information that I went in on.

Joe Fairless: Multifamily, single-family, office, retail and medical – which one is your favorite?

Scott Price: I would say my favorite is multifamily. That is pretty consistent with a lot of people right now, which is the problem… In other words, there’s a good bit of competition in that area… But at the same time, that’s generally my favorite. The reason for that is if you’ve done your due diligence — we always start at a really high level; we never start at the property level, we always start at the overall market level… We look at the local economic drivers, we’re looking at what’s being built in the area, all that kind of stuff, before we get down to the details of what is that property’s NOI or anything like that.

If you get that larger scale aspect covered, meaning the local market and its drivers, then generally speaking, multifamily can withstand some ups and downs in the economy, and there’s generally gonna be demand, and even if things go bad, you might have to reduce your rents, but you’re not gonna have a lot of vacancy, that kind of thing.

When you get into office and retail, I really like the fact that you can get into triple net properties, which for the Best Ever listeners that aren’t familiar with that – it’s basically properties that the tenant takes care of everything, essentially; they take care of property taxes, the insurance, their own maintenance, things like that. So it can be fairly turnkey, hands-off, kind of easy… They also tend to have very long-term leases, so you can get five-year leases, or even more. I just got a ten-year lease, for instance, on one of my properties, and that’s great… But the downside is that sometimes on those properties when it goes vacant, depending upon your market, it might be a year until you get that actually filled again.

We’ve never had one go that long, but we have had one that went six months vacant, and it was just sitting there. We still have to pay the mortgage and pay the expenses. So that’s the main risk a lot of times with office and retail – you’ve always gotta be thinking about who’s the next tenant, and it’s much more involved than who’s the next tenant in a multifamily to think about. You’ve gotta think about “Okay, can this be a restaurant? If it’s a restaurant, what other restaurants are in the area? Might they go there, or might they go somewhere else?” It’s a whole different way of thinking.

Joe Fairless: That triple net lease – was that a retail or office? That example that you’ve just said, the one that went vacant for six months.

Scott Price: Oh, that was actually a medical office.

Joe Fairless: Medical office. Alright, so month five of six months – lets’ take a time machine back… You don’t know, since we’re in month five, that you’re going to get a lease… What are you considering in month five, and what are you doing?

Scott Price: A couple things… One of them is I’ve generally bought with enough flexibility that if I need to reduce rent, I will, but that’s obviously not the first step that I’ll take. I certainly will increase marketing… I generally — even though I am, like I said, a broker myself, I almost always work through other brokers, and I try to work through the best brokers.

So I buy through other brokers, they just treat me as a buyer, and I just have to put a little note in the contract that says “Buyer is a Washington state licensed real estate broker” and that’s it, and then in cases like this, I would market through a commercial leasing broker who ideally knows his/her stuff, and also is actively marketing it.

It boils down to making contacts… A lot of times, when there is a lack of demand, then it can be one-on-one contacts to local similar companies or whatever it is (office or retail) and actually seeing if they’d be interested to move. For instance, in that case we were listed with a commercial broker, but my wife was actually the one who got the tenant, and she literally walked around to local medical offices with a flier and brought them in and told each individual office or whoever she could talk to about our property, and that’s how we got the tenant. We didn’t get it from the internet, we didn’t get it from the broker, we got it through my wife walking around with a flier.

Joe Fairless: In that case, does the broker still get his/her fee?

Scott Price: Yeah, it depends… So officially yes, but in that particular case – we have a really good relationship with that broker; I’ve also purchased other things with him, and he just said “No problem, you got the business. We’ll do other business again in the future.” But officially, by the contract, generally speaking, most contracts would say that they would receive the fee.

Joe Fairless: Do you still have multifamily, single-family, office, retail and medical and raw land in your current portfolio?

Scott Price: Yes.

Joe Fairless: Which one takes up more of your time, relative to others?

Scott Price: Multifamily. Even though we have property managers for all of our multifamily properties – that’s been a really important part of our business model, is wherever possible to include property managers and not to self-manage, especially on multifamily… But nonetheless, there are things that we have to make decisions on, and a water heater breaks, and floods next to our unit… Then we go and check it out and determine the next steps, and things like that.

It tends to be more drama. The difference between a medical office tenant, well-established professional environment, they just pay their bills and take care of everything, versus the drama and the complexities of multi-unit buildings can be significantly different. So multifamily tends to take most of our time.

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

Scott Price: The thing that I’ve found most important is to create an environment; what I mean by that is be sure, as you are going into your real estate investing career or whatever that is, to surround yourself with good ideas, and feed your mind with good information from books, and the people you’re surrounding yourself with, and also to make sure that environment fits into your long-range vision. To me that’s been the driving force for us, and I think that if you get into the nuts and bolts of real estate and you miss that broader picture and you don’t create a positive environment for yourself, you’re missing a big part of it and you actually may not stick with it unless you put that in place.

Joe Fairless: Where did you get all the equity for your deals?

Scott Price: From a number of different sources. We own all of ours at this point, or like most people, us and the bank own all of our properties. So we’ve just been very creative in using funds moving forward. I’ve rolled all of our profits forward, so all of our income and our profits, say from a sale – they don’t go to paying for a car or anything like that; they’re always rolled forward. That’s actually the reason that I’ve had a job that I’ve worked for so long – because I haven’t taken on partners yet, and we’ve just self-funded our portfolio. And having independent income not only made, frankly, getting some loans easier, but our income took care of all our expenses, and then our real estate income just grew, it kind of snowballed over time.

I also would do cash-out refi’s, I’d take loans from my 401K, I even have a solo 401K where I have two properties in that, so it’s kind of like a self-directed IRA, but a little bit different… And just always looking for ways to use our funds and roll it forward into the next deal… And that’s also why we’ve kept our properties fairly small.

The largest property we’ve owned has been 40 units, and other than that — on the multifamily side, they’re usually between the 12 to 20 size, and it’s just because we roll our profits forward until we have enough down to put into that, and bam, we go ahead and buy it, and we keep doing it, we keep rolling [unintelligible [00:23:38].25]

Joe Fairless: Tried and true approach, that’s for sure. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Scott Price: Sure I am.

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

Break: [00:23:51].05] to [00:24:54].26]

Joe Fairless: Best ever book you’ve read?

Scott Price: The 4-Hour Workweek, by Tim Ferriss. Two reasons for that – it really got me thinking about leveraging the expertise in businesses of others to grow my business, and then also really important is the idea of designing the business for my lifestyle, instead of getting into designing the business for itself.

Joe Fairless: Best ever deal you’ve done?

Scott Price: I bought two buildings on the same property, two office buildings, at auction, and I bought it for 295k, and to answer your question about creative financing, this is a good example of it… Basically, a family member had owned a house outright, and I said “Why don’t you get a loan at 4%, I’ll pay you 9%, interest-only loan, you make the spread…” So they put in 200k, I put in 100k, and then bought it — because there was a time after the auction to put in the money… And then I financed it at 75% LTV on the purchase price, so I got 75k back, so I only had 25k in at that point… And even though it was 50% occupancy, at that low of a price it still was generating about 25k a year in net income after all expenses, including the loans and everything… It was still generating about 25k.

After about one year I had no capital in it, because I had the 75k back, and then I got 25k in just cashflow, so basically at that point it was kind of like an infinite return kind of thing… And then after a year it seasoned, so I did a cash-out refi and I got another 450k out of it, and I put that into another property that was generating about 25k a year in cashflow, and then also the cashflow from those two I then within a year rolled into another property that was generating roughly about another 25k/year.

So I rolled all that forward with it being effectively after a year no cash out of pocket, but generating lots of cashflow income. Then after about five years I sold that first property and did a 1031, sold it for 2.5x what I paid for it, and then rolled that into a 17-unit apartment complex.

Joe Fairless: That is incredible, it’s just a snowball going downhill is what it is. What’s a mistake you’ve made on a transaction?

Scott Price: I’d say the biggest one was actually before 14 years ago, when I started really investing, and when I got out of college, I bought a condo for me to live in, and then I soon afterwards bought a house and kept the condo as a rental, and the only books I was reading were ones about “How to be a landlord”, which meant not grow your business or not how to use the expertise of others, but how to do everything yourself and be a jack of all trades.

The first tenant was great, the second tenant sucked, basically; I mean, it was just really a bad situation… And I sold it. I said, “Oh, this real estate thing is terrible.” I actually briefly got into stocks and day-trading, and it just distracted me. The mistake, the learning was that I didn’t even really — at that point, out of college, I didn’t know any investors or anything. I didn’t even really know about property managers.

Then after I did some more research and I was getting distracted, I realized “Okay, well there’s a way to deal with this problem. There are people who professionally deal with bad tenants like that”, and then after that I just always wrote a line item in my deals of having a property manager and got back on the real estate train again.

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

Scott Price: I am on the board of directors of a land trust, and we’re working to preserve basically the scenic and the natural beauty of the island I live on North of Seattle. That’s one thing.

Then the other thing which is fun is I’m actually in the process of self-funding a public community park that will have nature trails on it, and it will integrate sculpture in the forest. I already own the property, and the next stages will be to start building the infrastructure for that.

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

Scott Price: The best way is to go to our website, which is Bonvolo.com. Or you can e-mail me directly at scott@bonvolo.com.

Joe Fairless: Scott, thank you so much for being on the show. The vision of where you wanted to go and now where you are at was put in place a long time ago, and it’s constantly a reminder for you and your wife of what you want to achieve and how specifically you’re gonna do it, because you have a process in place on a daily basis that you fill in and you have accountability for yourself on that day. You said you grade yourself each day on your progress. Really not surprising to me that you’ve accomplished what you’ve accomplished since you’ve been so laser-focused on this for over a decade, a decade and a half.

I loved hearing about the pros and cons of triple net leases – everything’s great when they’re filled; when they’re not, your wife might have to walk around with a flier to office properties and try to get them to move into your property… Which did work, even though you hired a brokerage. This just shows the hustle that you two have. Then also the scenario where you bought the two office buildings for $295,000, and then that turned into a snowball of many, many mounds of cashflow as a result of it.

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

Scott Price: Thank you, Joe.

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David Sweeney on Best Ever Show Flyer Retiring Cop Chooses Real Estate

JF1269: Why A Retiring Cop Chooses Real Estate For A Second Career with David Sweeney

David reached the age of 53, living in Seattle he’s technically able to retire now. When he actually looked at his situation, he realized there was no way he could actually retire. He looked at options and felt that real estate was the answer for him. He set out to get his license, analyzed properties, and found a 24 unit cash flowing apartment building. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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David Sweeney Background:

30 years with the Seattle Police (currently a lieutenant)

-Nearing retirement age, he began to immerse himself in owning multi-family properties

-Got his real estate license this year, and last month closed on first transaction, a 24-Unit cash flowing apartment building

-Currently looking for his next deal

12 years of experience as a professional mediator

-Say hi to him at  davidsweeney.com OR  davidATdavidsweeney.com

-Based in Seattle, Washington

-Best Ever Book: 80/20 Sales and Marketing by Perry Marshall


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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, David Sweeney. How are you doing, David?

David Sweeney: Hey, I’m doing well, Joe. How are you?

Joe Fairless: I am doing well, and nice to have you on the show. Let’s see – David just closed on his first transaction, a 24-unit cash-flowing apartment building. He is also a police officer, he’s a lieutenant with the Seattle Police Department; thank you, sir, for what you do.

David Sweeney: I appreciate it, thank you.

Joe Fairless: 30 years of service with the Seattle Police, and he got his real estate license this year, and as I mentioned just a second ago, he bought a 24-unit apartment building, so we’re gonna talk about that. He’s currently looking for his next deal.

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

David Sweeney: Sure. Thanks for having me on, first off… I turned 53 last December, and in the state of Washington, that’s the minimum retirement age for a police officer. And it was kind of interesting, I can almost see the day in my mind when I realized “Hey, I can retire now!”, except I could retire now; there was no way. I have a lovely wife of 19 years, and three lovely children, ages 11, 13 and 15, and there was no way I could leave the job at that point. I wasn’t prepared financially to do so.

My motivation became — I wanted to provide a better life for my family. I wanted my wife to be able — if she wanted to work, that’s great. But if she didn’t wanna work and she wanted to work on some of her charities or causes, I wanted her to be able to do that. I wanted my three kids to grow up and be able to go to any college they want and not have to worry about the cost of it. I wanted to travel the world with my wife, I wanted to live in a nicer house… Basically, I guess you might say I was kind of — I wasn’t poor by any means, but I was closest to poor dad in Kiyosaki’s book. I had a government job I’d worked at for 30 years, I counted on over-time and raises for extra money, I basically invested all my money in my home… And I had some savings, of course, but when I view my home as my primary asset, I think I really fell into that poor dad mentality, so what I wanted to do was change my life and I wanted to change it for the better, and I decided — I evaluated several different things to do, but I decided real estate was the way to go.

When I get involved in something, when I get dedicated to a cause, when I get energized, I devote massive amounts of tension into learning everything I can about that, so I became a voracious reader of books, blogs, I listen to your podcast on a daily basis, as well as other podcasts… And this seemed to be right up my alley. I wanted to do real estate.

As I listened to more and more people, first I was thinking, “Okay, duplex, triplex, fourplex”, that type of thing. But then I decided that what I really wanted to do was own apartment buildings, and the more people I heard, the more said “You need to go into apartment buildings.” But unfortunately, it’s kind of hard to find brokers out there than really know how to buy and sell apartment buildings, so I said “Okay, I will solve that problem as well” and I decided I will be my own real estate agent. So I studied for the real estate exam for the state of Washington, got my license earlier this year, and I spent probably 4-5 months analyzing properties. I think I analyzed over 400 properties in order to find the one that met what I was looking for.

Again, it was my first investment, so what I had to do was take a refi out of my house; I pulled out $380,000 and I just had that money sitting there in the bank, just ready until the time was right, until I found the property that I was gonna buy. Fast-forward to now, I’m sure you’ll have a few questions about that process, but that’s where I found myself in August and I found my apartment building.

Joe Fairless: You took massive action, in a very short period of time. That all happened in a year. In less than a year, you identified that there was a problem with the financial situation from a long-term standpoint. You then identified real estate was the path to go, then you studied up on how to evaluate and buy apartment buildings; you then got your real estate license and you closed on one and you completed a refi on your primary residence.

David Sweeney: Yes, I did that in — about nine months I think it took, from start to finish.

Joe Fairless: Is there a thought that comes across your mind, or perhaps from your significant other or those around you who say “Oh, you went too fast. You rushed into it.”

David Sweeney: No. In fact, I get surprise from people when I tell them what I did, but I also get “Man, I wish I had done something like that” or “I wish I could do something like that.” Then, of course, hey, that’s a great lead-in, because then I can offer to help them look for their own investment properties. So I’ve started doing that. So it’s a nice conversation starter…

I think people are genuinely surprised, because again, I’m a government employee, a 30-year public servant, and that’s probably not what most police officers do. I remember being envious of an officer I was training one time and he came riding along with me… We were talking about what we were doing this weekend and he said “Oh, I have to go to my rental property and do some work on it.” And I went “Wait, why does this fairly new officer have a rental property? Why don’t I have a rental property?” That conversation stuck with me for many years. I didn’t do anything about it, I wasn’t motivated at that point, but that conversation stuck with me. “He has a rental property. Wow, that’s great!” So it’s nice to tell people that now I have my own rental property. Not just a property, I have an apartment building. I’m an apartment building owner! It’s kind of exciting.

Joe Fairless: You are. It’s incredibly impressive what you’ve done. How many hours do you work as a police officer?

David Sweeney: 40 hours a week.

Joe Fairless: 40 a week. What’s your shift?

David Sweeney: Generally, I’m a lieutenant, so I work daytime hours. My primary job right now is reviewing use of force within one of our five police precincts in Seattle. I’m at the East Precinct and I review use of force… So that’s why do primarily, an 8-to-4 job.

Joe Fairless: 8-to-4. Okay, got it. So you’ve got some reasonable hours, unlike one of my friends who is not a 30-year vet and he works the hours where I’m snoozing away.

David Sweeney: Oh, exactly. I’ve done that before many times.

Joe Fairless: Right, I figured. Okay, so you have a full-time job, and you studied up… How did you get to the point of education where you felt comfortable taking the $380,000 from the cash-out refinance on our primary and plunking it down on an apartment?

David Sweeney: Well, it first off comes from just personal learning – books, podcasts, videos, webcasts, articles, blogs, everything like that. So that form of self-education. But then when you add to that, you have to take — I spent 90 hours of classroom training online in order to get my real estate license… But then I wanted to pass the test the first time. I said, “I’m not going back to take this test the second time.” I’ll bet I invested 120-150 hours just studying for the test. So I’ve met the minimum state requirements, but I wanted to study and pass this thing the first time, so I’m constantly getting more real estate information into my brain.

In about April – that’s when I passed the test, so that’s when I started evaluating properties. Like I said, I probably did 400 of them, and I’ll bet 325 of them were residential, meaning duplex, triplex, fourplex.

Joe Fairless: Oh, okay.

David Sweeney: It wasn’t until I then moved into the mindset — I thought “If I’m gonna reach my financial goals here, if I’m gonna replace my income and then some… I don’t wanna just replace my income, I wanna increase my standard of living, and that of my family”, so in order to do that, I thought “If I’m gonna go duplexes and triplexes, how many of these do I have to buy? Oh, my gosh, this is a huge number. Wait a sec… I can skip all this and just do one apartment building, and then add a second one next year and then a third one the year after that?” That’s my goal right now, add a large apartment each year, and I wanna do like you do and just gradually — in fact, not even gradually; I wanna make a big jump the next time.

Joe Fairless: There’s nothing gradual about what you just did… [laughter]

David Sweeney: Well, I wanna go bigger, that’s my goal for next year. So 150-180 units, something like that, where I actually have to invest in staff to run it. That’s the size of property I want.

Joe Fairless: You have a property management company that is handling your 24-unit, right?

David Sweeney: I do, yes. I interviewed about three different companies, and decided the best fit for me, and the one that was most responsive to me and met my needs. So far I’m really happy. I’ve heard enough horror stories from people that chose poor on their property managers, but it’s nice that the place I located is about 90 miles South of me, so I can easily travel there, check in on my property, check in with my property manager; he’s receptive to me, we text, e-mail, call each other… So I’ve got a very receptive property manager.

He knows about the rents in the area, so that was a big plus for me… And he also knows the best contractors to use, because I don’t live in Centralia – that’s the community I bought the apartment building in. I don’t live there; I like the community a lot, I wouldn’t mind living there, but he knows who to hire and he calls me anytime there’s an expense over $200 and I authorize it.

So far, the bills that have come in looked very reasonable to me as far as the prices being paid for different contracting work and things like that… So I think I’ve chosen wisely with my property manager. I know that doesn’t always happen, but so far, so good.

Joe Fairless: $380,000 home equity line of credit, right? (HELOC) You and your wife, I imagine, had a conversation about that, yes? [laughs] How does that conversation go?

David Sweeney: You know, she was so supportive… It’s really great. She knows me; she knows when I get a certain goal in mind, I’m like a bulldog, I go after it 100%. I went back to school and got my college degree very late in life, but when I did it, I devoted myself to it and got it done. I went into Toastmasters and I said “I wanna be a distinguished toastmaster’, the highest award they give. I went in, set my goal, and did it. Same thing in real estate – I said “I wanna own apartment buildings”, I went in, I worked hard, I worked fast, and I took massive action and I did it.

So she knows when I get a goal in mind, that that provides some of my reason for being. If I don’t have a goal in mind… I’ve gotta admit to you, Joe, I’m lazy. I sit around and I don’t do a whole lot. You know, I go to work, I work hard, I enjoy my job and things like that…

Joe Fairless: You just kind of float, though… You float through things.

David Sweeney: Yeah, I absolutely do, and she knows this about me. We’ve been married almost 19 years. So when she saw this goal, she got excited about it, because she knew that I would devote my time and energy to it. We all get the same 24 hours a day, and it’s what do you do with that time that you’re given; she knew if I had a goal and set that in mind, that that would provide impetus for me to really move forward on this project… And she likes it too, because it’s good for the family. It does mean some extra hours for me, but the way I look at it, would I be better off watching TV at night, or would I be better checking out rental properties and evaluating them, looking at the financial numbers, learning more about real estate? So she’s excited about the project.

That money sat in the bank for about four months, and it just sat there, collecting its — it’s so funny having 380k in the bank… Nothing happens, the interest is so minimal, but then when you take it and you invest it in a property and now you see the returns coming in – we can get into numbers whenever you like – you go “Wow, this is exciting. This is exactly what I wanted.” And now I just need to multiply this in my coming years, and I think I’ll be where I wanna be as far as my life goals.

Joe Fairless: Let’s talk about specifics of the property – can you tell us about it?

David Sweeney: Yeah, absolutely. So it’s a 24-unit apartment building in Centralia, Washington. Centralia is located about halfway between Seattle and Portland, so it’s easily within driving distance; it’s a long drive, but it’s within driving distance for me… And that’s great, because what do I do on the way down and back? I listen to podcasts; I listen to you, Joe.

Joe Fairless: God help you.

David Sweeney: So it’s close enough where I can check in on it and see what’s going on. So the property was listed on the MLS for 1.325 million, and it’s great having your real estate license, at least it is for me. I feel like I’m looking behind the curtain and seeing what’s going on back there. So I can do my own negotiation, and that’s kind of nice, because one of my professional credentials – I’m a conflict resolution mediator at work, so I help people with their conflict resolution skills, and I definitely use that in my negotiation skills when I find a property I wanna buy.

So it was listed at 1.325, we offered 1.1, and I asked them to pay 1% of the closing costs. They came up a little bit, they wanted 1.14 million… And I got the 1% closing costs, I also got my real estate commission, so when the deal closed, I walked out with $40,000 in cash that I could then roll back into the property to do renovations or any property work that I wanted to do… So that’s kind of exciting.

The market rents were not what they needed to be, and my property manager confirmed this. I confirmed it for myself; I use websites and I also go out and look in the community that I’m at, like “Okay, how much are apartments going for here?”

So it has 16 one-bedrooms and 8 studios. Originally, they listed the gross income at $133,000/year, but I found by getting the rent up to market, where it should be, we could increase the gross up to 167k… So right now the NOI is about 100k, and then my mortgage responsibility is 50k of that. Right now I should be walking out with 50k in cash a year. That’s exactly what I wanted to do – find a property that would cashflow right from the beginning.

Joe Fairless: Run those numbers of the gross rent – what was that again?

David Sweeney: 167k/year gross rent.

Joe Fairless: Before David or after David?

David Sweeney: That was after David.

Joe Fairless: Okay. What was before David?

David Sweeney: Before David it was 133k.

Joe Fairless: Oh, okay. And to get 133k to 167k gross rent (and that’s gross potential rent) you just organically turned the units on the lease renewals but you didn’t do any major improvements to them?

David Sweeney: Right, nothing major. The market won’t really support that… It’s an older building, which I fully realize; it’s a 1920 classic brick building. The two-story brick building you see for apartment buildings, so it looks great. The units inside are not the fanciest thing you’ll ever see, but I keep them nicely painted, I get new carpet in there…

Right now, when a unit becomes vacant, then I move in and try to start saving energy. So low flow shower heads, low-flow toilets, sinks and things like that. The tenants pay the electricity, but right now I pay water, sewer, garbage. So if I can lower the expenses even more, then I’ll increase the value of the property. I love that about owning rental properties, I love that about owning apartment buildings – I’m in charge of this building, and I can increase the value of it by getting more net operating income. That’s great.

Joe Fairless: What type of loan do you have on it?

David Sweeney: That was kind of a challenge… I did receive several no’s from commercial banks when I started asking around.

Joe Fairless: Why?

David Sweeney: Because I was a first-time investor. Even though I had my real estate license and I explained that to them… I also explained that in college – and again, that was 30 years ago, but I had been an apartment building manager, so I said I had some experience here; it’s been a while… [laughter] You know, I was honest with them.

Joe Fairless: Well, when you were in college the first or the second time?

David Sweeney: The first time.

Joe Fairless: Okay, yeah. It’s been a while probably.

David Sweeney: Exactly. So I got several no’s, but I kept working at it. I knew to go with a regional or local bank, and I finally found a bank that said “Yes, we’re interested. You can send us properties, if they’re a good deal.” That’s nice to kind of have a second set of eyes looking at the deals… So when I found the Rockstreet apartments (that’s my apartment building), I sent it off to the banker and she said “Yes, this looks good. We’ll write you a letter that we intend to finance.” Of course, it has to go through underwriting and things like that…

So I got a 4.25% rate. It’s a 30-year amortization, but there’s a 10-year balloon due. So that’s kind of nice, it gives me that ten years to work with it. Now, if I pay it off this year, it’s a 5% penalty. Next year it’s 4% etc., down to 1% if I pay it off in year five. So the ideal on this would be to buy and hold it for at least five years, and then in that 5-10 range, that’s when I can start evaluating whether I just like the property and how it cashflows, or do I have something big in mind where I can do a 1031 exchange, sell this property and then move into something larger.

I have several ideas in mind as far as that time, but nothing that I need to do right now. In fact I’m pretty sure, so I can avoid that penalty, I’ll at least own that property for five years.

Joe Fairless: Yeah, I would think so. That’s a pretty good loan, from the surface. Is there any interest-only for the first couple of years, or is it —

David Sweeney: No, it’s not interest-only for the first couple of years. It’s 4.25%, and I had to put 30% down, so what’s your impression that most people are putting down when they get commercial loans? That seemed a little high to me…

Joe Fairless: Yeah, we put down about 25%, but…

David Sweeney: Yeah, I would like to see 25%, but hey, for my first loan, to get a bank to say yes to me, I was fine with 30%.

Joe Fairless: Sure.

David Sweeney: That set my guidelines and set my price parameters on the properties that I would then be looking for in order to find the one that I did.

Joe Fairless: What hasn’t gone right with this deal?

David Sweeney: One of my big challenges was insurance. It’s an older building and it has modern electrical panels, but yet there’s still some knob-and-tube in it, so it was a challenge to get insurance… So I came up with a good idea, I asked the seller “Hey, do you mind if I give your insurance agent a call?” and he said “Sure.” He gave me the name and number, and I called her up and we had a nice conversation. This was in September, and the property was set to close mid-October.

So I’m talking to her and she says “Yes, we know the property. We can probably get you a policy” etc., and I took that for granted… And I shouldn’t have taken it for granted. I should have been more thorough and followed up with her. Because as we get closer to closing date – I think it was set to close October 16th – about a week out my bank said “Okay, we need your insurance binder”, and I went “Great.” So I call her up and I say “Hey, I need that insurance binder.” Well, I leave a message, I leave a message, I leave a message, I send an e-mail, I send an e-mail, and I’m getting nothing. And I thought “Oh no, this is horrible!”

Now I’m left scrambling, so I start calling a variety of different commercial insurers to tell them about my apartment building… And again, same thing with the financing – I got several no’s, “We don’t do older buildings” etc., or I got really high price quotes… And I thought “Man, this is not good at all.” So finally, while I’m doing this and I’m getting several bids, I went back to the original office and I said, “Well, if she won’t return my call, maybe someone else in the office will.” And that worked out. I did find another agent that said, “Hey, yeah, she’s gone this week”, or I don’t know what the excuse was… I was so frustrated about it.

So now to get an insurance binder – now I’ve got like 4-5 days till closing… So anyway, I had to go back to the seller and ask for extension, which I hated to do, because it’s like you’re walking this deal to close every step along the way, and now all of a sudden I have to go out there and say “Hey sorry, I’m not ready to close… Can we extend this by a couple days?” They could have walked at that point, so that was a bit of a risk on my part. So definitely a lesson learned for your Best Ever listeners is just make sure you do your due diligence — I did my due diligence financially on this property, but I’ll be honest, my first property, I had a checklist and insurance was on there, but I didn’t pay close enough attention to what I needed to do to make sure I got that insurance binder, to make sure I was set up with payments, to make sure that everything was done ahead of time.

So closing was delayed, but I did get the binder. It came in more than I was expecting, but at that point I was just happy to get the deal done. Instead of 4k it came out to 6k and some, but I was okay with that. I thought, “I’ll do it. Where do I sign? Send me the documents right now, because I need this binder immediately.” Then I’m calling all the different – escrow, and the other lender, and the lender’s broker and everything to get this all straightened out. Ultimately, it didn’t hurt me, but it could have, and I’ll not make that mistake again.

Joe Fairless: Did you have any earnest money hard by that point?

David Sweeney: Yes, I put down 10%, so I had 11k hard money.

Joe Fairless: Okay. The seller could have said “Eh, sorry about…”–

David Sweeney: 1%.

Joe Fairless: Yeah, yeah. They could have said, “No, thank you. I’ll take your 11k and I’ll go find someone. Or if you’d like, I’ll take your 11k and we can just restart this contract real quick.”

David Sweeney: Yeah, exactly! That would have been horrible!

Joe Fairless: [laughs] And you probably would have done it, right?

David Sweeney: You know, I probably would have. I’d have to sit down and evaluate it, but if it was still a money-maker… Because at that point you’ve invested so much time and energy in it… It’s like you’re just dragging across the finish line and you just wanna close the deal, and anything that gets in the way and delays it, you’re like “Yes, what do I need to do to get that exemption out of the way, or anything I can do, absolutely!”

Joe Fairless: Well, I’m glad that the seller recognized that karma would have come back in a fury and would have recaptured that 11k and then some if they had pulled out on you.

David Sweeney: That’s right, yeah.

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

David Sweeney: My best advice ever would be for your Best Ever listeners who are doing the same thing I did, whether they’re listening to podcasts or whether they’re reading books or educating themselves, when they get started — again, I could do a lot of goal-setting here, but I’m gonna tell them when they get started, concentrate and find out what you do best. If you intend to be a buy and sell holder for let’s say duplexes, triplexes, fourplexes, concentrate and be the best investor you can be in duplexes, triplexes, fourplexes. If you intend to buy notes, be the best note investor that you can be. If you intend to buy apartment buildings, learn all you can and be the best you can at that particular discipline. Same thing if you’re looking for properties – some people do direct mail, some people drive for dollars, some call brokers all the time. Whatever it is, find out the best way that you can get your goals met.

Now, that doesn’t mean that you can never change courses mid-stream, but I hear and I’ve talked to a lot of people that seemed to flip in and out; they try this for a little while, it doesn’t work, and they reevaluate and they move on to something else. Then that doesn’t quite work the way they wanted, and then they move on to something else. So my best advice is pick your strategy and go with it. I guarantee that there’s someone out there that has made a successful living in real estate doing it the way that they were trying to do it. Emulate that person. Find out what it is that makes that strategy work.
Now again, if two years down the road you’re still beating your head against the wall and nothing’s happening for you, maybe it’s time to reevaluate then; get a good mentor or someone that you trust or someone that can give you some advice, and maybe you change strategies, maybe you look in a different direction, but don’t come in and out trying a variety of different things. You won’t get good at any one thing. So pick something that you’re gonna be good at and go after it.

Joe Fairless: I’m smiling and I’m clapping… You can’t hear it because it’s kind of silent, I don’t want the listeners to get annoyed, but I completely agree. I love that. I think it’s a cultural thing, just with the period of time in which we live, because of the internet, social media – we see so many different things that we can be exposed to if we choose to be exposed to… And when something gets a bit challenging, people who don’t listen to this podcast – because I’ve recognized that the Best Ever listeners are a cut above the typical investor… But people who aren’t achieving at a higher level, they move on to something else; it’s the shiny object syndrome. Instead, you just buckle up and focus on one thing and then do it, and I love what you said about if you don’t see results after a certain period of time, then you reassess and you see “How can I optimize the approach, or perhaps do something different completely?”, but it all starts with, as you said, identifying what you do best as it relates to that activity and then doing that.

David Sweeney: Yeah, there’s something that’s gonna get you excited. So go with that shiny object, but make sure that you’re doing all you can in order to retrieve it, before moving on to the next one.

Joe Fairless: I love it. Are you ready for the Best Ever Lightning Round?

David Sweeney: You bet.

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

Break: [00:28:44].02] to [00:29:36].17]

Joe Fairless: Best ever book you’ve read?

David Sweeney: I love the 80/20 Sales and Marketing book, by Perry Marshall. I thought that was so key… And as I look at my professional career both in real estate, both in police work and anything, I find that strategy so often. Let me move out of real estate just for a minute, because this is really applicable in police work. As a lieutenant, sometimes I get involved with sergeants and officers that are working, and you do find that about 20% of them are doing 80% of the work. They’re super hardworking, they love their job and they pursue it, and they help people, and they arrest the bad guys and they write all the reports… And man, if you can make up a team of people of those 20% – wow, you’re gonna have a team of superstars. And if you take that strategy into real estate, “What activities did I do that got me where I’m going?” That 20% – focus on that that gets you the biggest bang for the buck, that gets you the return. That’s my best ever book.

Joe Fairless: What’s another mistake you’ve made on this 24-unit that you haven’t talked about?

David Sweeney: I think probably my biggest mistake… I had a great inspector come out and take a look at the building, and we knew that there was a new roof on it – the roof was installed in 2016 – yet they pointed out based on where the water comes (now, it rains a lot in Washington) off the roof, that there still could be some drainage issues. So I had a 10-day inspection clause (I can inspect the property for 10 days). Unfortunately, I didn’t factor in that there was  a couple weekends involved in that, and I think if I remember right there was Labor Day involved… So to finally get a roofing inspector out, I actually pushed past the 10 days. This was probably a big mistake and I wouldn’t normally advise it. Either 1) write in your contract that you get more days to inspect it – I thought 10 would be enough and it wasn’t enough. And then 2) make sure that you can line up the exact roofing contractor that you need. I called a couple roofing contractors and basically I had people show up with ladders, and they’re used to working on residential roofs, not a large two-story apartment building… So I would have liked to have a better answer as to why water runs off the roof in certain areas and not others.

I know the roof is good, but the drainage isn’t all that it needs to be, and I didn’t have the right people in place for that. So number two, get the right people, and number one, make sure that you have enough time in your contract to get that inspected.

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

David Sweeney: I’m heavily involved in children’s charities and activities, probably because I have three kids (11, 13 and 15), so you’re gonna find me coaching football and soccer and baseball… But I also have a couple charities; I’m on the McKinley Foundation, which is a charity for deserving children that are  [unintelligible [00:32:39].07] area. So we serve and we like to give back; it’s a foundation. So we have an amount of money that we donate to local causes. And I’m also on the board at the Northwest Girlchoir, where my daughter sings. I enjoy giving back to that organization, and all it provides for our community and my daughter.

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

David Sweeney: My website is DavidSweeney.com. They can reach out and get in touch with me. I’d love to help them on any future real estate transactions that they want, particularly multi-family is my specialty, in Western Washington. At some point I wanna model it after your website eventually, when I get to where I’m going… So that’s a good goal I have in mind. But anyway, DavidSweeney.com.

Joe Fairless: Very impressive with what you’ve done in a very short amount of time, over the last 9-12 months, and where you’re headed and the results that you’ve accomplished… Lessons learned, from the insurance snafu to the due diligence story, to then the rewards that are received as a result of the action taken, and that is this apartment community that you have and that you’re gonna be using to leverage to scale into more and more deals.

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

David Sweeney: Thanks so much, I appreciate it.

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JF1258:Epic Evening Ritual To Help Us Succeed At A Higher Level #SkillSetSunday with James Colburn

James is here to tell us about an evening ritual he uses and writes about in his best selling book. He is also a real estate investor and has advice for investors as well. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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James Colburn Background:

-Worked for more than two decades in executive and entrepreneurial roles in marketing, real estate, and consulting.

-Best selling Author of RESUCCEED revealing the 5-Minute Epic Evening Ritual, tips and tricks of top performers

-Speaks on finding fulfillment and success in real estate with the help of James Colburn’s Epic Evening Ritual

-Known for his real estate team building activities and his epic 5 minute rule

-Say hi to him at http://www.jamescolburn.net/   

-Based in Seattle, Washington


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

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday where we’re gonna talk about a five-minute epic evening ritual that will help us succeed at a higher level. Who’s gonna talk to us about that? James Colburn is gonna talk to us about that. How are you doing, James?

James Colburn: Hey there, thanks Joe for having me on, and just great to be here.

Joe Fairless: Well, I’m glad to have you on, my friend. A little bit about James – he has worked for more than two decades in executive and entrepreneurial roles in marketing, real estate and consulting. He is the best-selling author of Resucceed. In that book he reveals the five-minute epic evening ritual which we’re gonna talk about on today’s show. He’s based in Seattle, Washington. His website is JamesColburn.net, you can go check that out; that’s also on the show notes page. With that being said, James, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

James Colburn: Well, it’s kind of a big story that I’ll make short. I came out of college at the University of Oregon, met my wife there, and we both started working for the YMCA right out of college; i don’t know if you even know what that organization is, or have you heard–

Joe Fairless: Of course. Yeah, I went to Teen Camp at the YMCA.

James Colburn: Yeah, there you go. So I did as well; in fact, my wife and I both chose the YMCA because of our childhood experiences, and we felt like it’d be a great place to contribute. Everything was great with the YMCA until we looked at starting a family. When we started a family, the non-profit income thing just doesn’t quite work out for raising a family and affording all that that takes… So I went into real estate back in the ’90s, straight away, and never left since.

So that’s kind of the cliff notes, and then a lot happened obviously in my world as our market crashed and clarity arrived, and here I am today.

Joe Fairless: We’re gonna focus our time on this evening ritual, but I’d be remiss if I didn’t ask about the real estate stuff, since this is a real estate podcast. And all of it ties together – the evening ritual ties together with real estate investing, but specifically on the real estate front, what did you do? Tell us the story about what happened and what was the result of what happened?

James Colburn: Well, actually the real estate thing ties directly into my 5-minute epic evening ritual that I speak about in my book Resucceed, but I’ll take you back real quick to one of my best years in real estate. I had sold 120 houses up in the Seattle area just with an assistant, and I had made a considerable amount of money. I was at our lake house, which we had by design not put a TV out at the lake house, so lots of time to think… It was Christmas Eve 2006, one of the better years in real estate up in Seattle and in most of the country, and I was trying to make my phone ring one more time that year so I could write one more offer. Not because I needed to do another deal that year, but because I simply had forgotten who I was and had kind of assigned all my identity to my success in real estate.

Joe Fairless: And just so I’m clear, you were an agent, right?

James Colburn: I was an agent at that time, yes.

Joe Fairless: Got it. So you wanted your phone to ring one more time to put an offer on behalf of one of your clients.

James Colburn: Yes, good clarification. So I had [unintelligible [00:05:29].06] I wanted to get to work. The phone didn’t ring; selling 120 houses that year, I was used to the phone ringing about every three days… So I went and left the house right then at [8:30] at night, went down to Costco and bought a TV and a DVD, and brought it back to the house. My wife said, “Well, I thought we weren’t gonna have a TV here at the house.” I said, “Well, we weren’t until I needed to get my mind off the fact that I wasn’t writing another offer.”

Well, that was kind of the beginning of a process that I started then and kind of clarified over the next few years until obviously the market quickly crashed thereafter, and there were certainly a lot less deals to do. I had a lot of time on my hands; I ended up going back to grad school, and then when I came out of grad school, instead of writing a thesis, I wrote this book called Resucceed, which was all my experience on assigning my identity to all the wrong things, but also realizing that I can have even more success – or what I call unlimited success – as I get more clarity around who I am and what I bring. So the five-minute epic evening ritual birthed out of that, but the five-minute epic evening ritual is not a ritual for those looking to not have success, but rather to have even more success in their business, in their investments, but also come out of it feeling whole, not wondering on Christmas Eve, for example, where your next deal is gonna come from.

Joe Fairless: Okay, good segue to dive right in… So what is the five-minute epic evening ritual?

James Colburn: Well, what I realized is that really successful, highly achieved individuals over time basically stop asking great questions; instead, all we spend our time doing is trying to come up with answers. We try to engineer answers; we’re the answer king, if you will. And what we do is we ask a lot less great questions. As achievers we ask questions, but typically they’re questions we know how to answer. What I challenge is that our questions about the things that we don’t have the answer to is really where it’s all at. So as we become interestED, if you will, not interestING for a moment, things start to take shape in our lives.

So the five-minute epic evening ritual is all about the value of asking great questions, and then I’ve created a framework for doing that every evening, just five minutes before you go to sleep.

Joe Fairless: Okay. Please, continue.

James Colburn: Well, I hired a coach who was a best-selling author on Amazon – one of the six best-selling authors on Amazon…

Joe Fairless: One of six…

James Colburn: …best-selling authors.

Joe Fairless: On Amazon? There’s only six best-selling authors on Amazon?

James Colburn: At that time he was one of the top six.

Joe Fairless: Okay. In a certain category, or just in all of Amazon books?

James Colburn: It ended up being in all of Amazon’s self-published books. This gentleman was one of the six at the top. So I hired this guy to help me kind of clarify my book. At one point he challenged me, “This is great. Yeah, we end up becoming enamored by our success, we stop asking great questions, but after you’ve explained this whole thing to me I’m kind of wondering what to do about it. There’s no solution.” He said, “Well, the challenge I have for you is to give people a solution for this”, because this is a real epidemic, if you will, especially with highly achieved, highly successful individuals, where you end up assigning your identity to the thing that you get paid really well for, but then there’s a loss of purpose, if you will.

But yet, at one point in our life – for some it’s mid-life crisis, for others it’s a change in their lifestyle or even their income that promotes this whole need for purpose… The challenge is giving something that they can constructively to do lift out of that. He said, “Is there something you do?” Well, there was, and that was that — years ago, my kids would lay in our bed and practice their flashcards for spelling words, and one of my kids left a pile of 3×5 cards on my nightstand. And typically in the evening, up until that point, I would come up to my room and right before bed I would actually go through my to-do list, which at that time ended up being about 80 items at a time (it was a changing list of about 80 items), and I’d kind of go through my to-do list and circle some key things that I wanted to do the next day, and refer to my calendar, and that’s how I would go to sleep.

But my to-do list wasn’t up there that day, but these 3×5 cards were on my nightstand, and I thought “Wouldn’t it be cool if instead of cluttering my mind with all these things that I need to do tomorrow, what if instead on this 3×5 card I just wrote three things to focus on tomorrow?” Then I thought, “Actually, it would be interesting to put myself to bed not by writing three directives down, but instead asking three great questions.”

So all I did is I just took this 3×5 card and on one side I wrote down three questions that I didn’t know the answer to yet, but I was really curious. Things that — and I’ve got examples of these questions, but they’re different for everyone really… Just things that I didn’t have clarity around or areas that I needed to focus on, or opportunities that I had yet to kind of cash in on. Writing those things down and then letting the creative subconscious go to work while I was asleep and also accessed what I call the miraculous. So that is how the five-minute epic ritual started.

Joe Fairless: Yeah, I’m buying what you’re selling on writing down some questions and then thinking about it, and then letting the subconscious just kind of marinate overnight. The challenge – and I’m sure you’ve come across this question often – I have with this is last night, for example, I went to bed around 11, [11:30]; I was still wide awake at 1 AM. Thoughts racing through my head, I was trying to read a book, but after I got done reading the book I still couldn’t fall asleep, and my concern is that if I write down three questions that I don’t have the answer to, that are thought-provoking, as you’ve described, it’s gonna keep me up until the morning.

James Colburn: I think that’s fair, but one of the reasons why you’re staying up – it’s kind of a typical situation –  is that you’re thinking about things that you wanna do or have not yet done, rather than surrendering to the fact that you don’t have the answers. You’re actually staying up because you think you need to make the answers arrive. This is working the “sleep on it” muscle, and the difference between me and perhaps you at this point is that I’m working the “sleep on it” muscle seven days a week.

As that improves and as you don’t have to arrive at the answers, that it’s not all about you coming up with them, then all of a sudden you are resetting how you go to sleep and how you actually are excited to let that creative subconscious and the miraculous show up in those answers, rather than you having to do all the heavy lifting. Because when you’re asleep, you actually access different areas of your brain to start reasoning through things, not by kind of past experience, but rather by very creative, far-reaching, out of the box (if you will) approaches that you would never have thought of when you’re awake.

For me it’s surrendering, I guess, to that possibility while I’m speaking, and I speak a little bit in this book about how initially when I talk about this there’s a little bit of woo-woo, like “Oh yeah, right”, and I totally get that, but if you think about it, everyone you meet (or most people that you meet) that are highly achieved or highly successful are the answer king. If you ask a question, they’ll start answering your question halfway through asking it. You just pride yourself, if you will, on coming up with the answers as quick as you possibly can.

What I challenge is that it’s actually asking the questions that you don’t have the answer to and then waiting expectantly for that answer to arrive. That’s when the genius happens.

Joe Fairless: Can you give us some examples of questions?

James Colburn: Well, I broke it down into three Re’s. The book is called Resucceed, so there’s Reassess questions, Reengage questions, and then Reaffirm questions. I’ll give you one example from each of those sections, but just so you and your listeners know, there’s three Re-questions: reassess, reengage and reaffirm, and in each of those sections there’s five chapters on the different types of questions.

On Reassess… For example, one of the things that I’ve realized is that everyone is constantly – including me with my to-do list an evening before the next day, I would constantly be kicking my butt into working out. And what I realized is what I really want the older I get is more energy, so one of my main questions in the reassess category is “How can I manage my energy better tomorrow?” Specific, actionable question around what would give me more energy, because one of the things is if I’m gonna achieve, I’m gonna be successful or if I’m gonna have the tenacity to stick through a project or the tolerance to deal with certain people, in that certain negotiation, or to kind of have the brainpower if you will to kind of reason through the opportunity, I have to manage my energy. So one of my big questions is “How do I manage my energy?”, which by the way, managing your energy might include working out, but what I realized is instead we write “Workout tomorrow” or “Do 30 minutes cardio tomorrow”, but that’s a statement that’s set up to rebel against… Because especially for those who work for themselves, we think “Hey, this is great, we work for ourselves”, but we just rebel against ourselves just as much as a boss.

What I do is I ask the “managing your energy” question every single day, as I’m going to sleep – “How tomorrow can I manage my energy better to have the stamina to deal with the situation by two o’clock?”

Joe Fairless: Do you have a notebook by your bedstand? Because if I were to ask myself that question right before I went to bed and I came up with an answer before I fell asleep, I’d wanna write it down, and then I could see that keeping me up longer.

James Colburn: I love your questions around this, but this is the point – you’re resisting the desire to answer.

Joe Fairless: Even if you have the answer after you ask the question?

James Colburn: No, because the answer you think of — here’s the thing I talk about in this book… When you ask a question, if you’re a highly achieved, highly successful individual, you are already trying to answer it, and by the way, you’re answering it with kind of the “awake” answer. I’m challenging that your amazing answer will come tomorrow, and as you work that kind of “sleep on it” muscle, you sleep more soundly, you wake up excited, and I — actually, I try to wake up one hour before I need to wake up, so I can actually take a look back at my questions on that 3×5 card and see what answers have arrived. The answers that have arrived are often times way different than I ever imagined.

When I was writing this book, I was trying to figure out when I would have complete and total dead time so that I could finish the book. I kept on asking this question, “When can I find complete and total dead time so that I have all the time necessary to finish this book?” One morning I woke up and I realized I was asking the wrong question. What I should be asking is “How can I be so overwhelmed with the responsibility of writing another chapter because of the business of my life and what that reminds me of?”, you know what I mean? Kind of like my busy life, that I’ve designed, because I’m an extremely busy person, right? Why look for dead time, why not just look for moments of brilliance within my busy time? And all of a sudden it became not looking for dead time, but it became looking for like “Oh my gosh, I feel responsible to sit down and write another chapter based on what arrived in the business of my life.”

So it was like asking a different question. It’s sometimes a lot about languaging, and not always about asking specifically something you don’t know, but instead asking it differently.

On a Reengage question, one of the big things that I realized is that real moments of my life in the last couple of years was just this realization that most of us battle with this desire to be enough… So I have this chapter called “Enoughness”, which is where I kind of unpack this concept that sometimes our success and our achievement is often times to somehow prove or to enter or get the kind of membership card into the club of enoughness. And what I like to do is ask some questions around enoughness that challenges me to realize that I’m already enough, and in that enoughness, how can I be incredibly successful?

It’s kind of turning success on its head, because a lot of people I meet, they’re chasing this whole success thing just to be enough. For example me at Christmas Eve 2006, I just wanted to sell another house because that was the only way I knew how to be enough that night. We kind of set up these rules and responsibilities, so I was in charge of going out and making the money, and she was in charge of kind of keeping the home front going, taking care of the kids, at least at that time. We had these really traditional roles, and I really bought into my role, so I wasn’t enough unless I was writing a deal.

What I realized is as we become enough, even if we’re not making money or doing the thing that we’re heavily rewarded as successful people to do – even when we’re not doing that, we’re still enough, and all of a sudden we start showing up differently.

Joe Fairless: What’s the question that you would ask?

James Colburn: I just said “What do I use to make myself feel enough that’s unnecessary?” Again, everyone has to — I use the word “enough” because it’s meaningful to me. Other people would say “What component of success have I bought into as a requirement that’s not necessary for me to still be successful?”, or whatever it might be. It’s a question around what’s fueling this desire.

And then lastly, Reaffirm. One of the big things on Reaffirm is celebration. I think a lot of highly successful, highly achieved individuals are worried that when they’re jumping for joy, celebrating a success, that the ground beneath will go missing… So when they land, the ground beneath is gone. So there is this fear that I don’t wanna jinx success by celebrating it. So I challenge to ask questions around celebrations, “How in my business plan can I add in celebration to each win throughout next year?”

Joe Fairless: That’s a fun one.

James Colburn: I actually say “we business-plan success”, so we business-plan how to achieve and what the metrics are, but we often times forget to write in what the celebration will look like. So it’s just business-planning celebration as well, or for that matter, gratitude.

Joe Fairless: I love it. That one, out of the three, I think wouldn’t keep me awake. The first two, I need to read your book and learn more about how I can position those in my mind, so that I’m not trying to come up with the answers. But with the celebration, for whatever reason for me personally, that accesses a different part of my mind, and one maybe that doesn’t ever get accessed.

James Colburn: I really like that; I like that that jumps at you, because that would be all the reaffirming stuff. One chapter is called Granular Gratitude, or one chapter is called Moments of Brilliance… What I mean by Moments of Brilliance is we’re all designed for a few, very specific moments of brilliance while we’re here, right? So what have been my moments of brilliance thus far in my career? And just actually asking that question.

On the Granular Gratitude chapter, instead of just Gratitude, I call it Granular Gratitude because what I’ve realized is that we tend to be grateful for big stuff, like housing, food, shelter – that kind of stuff. Instead, what I like to do is find gratitude in the really small things, that made huge changes in our life.

Joe Fairless: Sure.

James Colburn: So the gratitude of how I met my wife, which was just completely random back in college; it ended up just being this off-chance meeting that obviously has completely changed the direction of my life, and these three kids wouldn’t even be here if I hadn’t met her… That kind of thing. So just kind of really running with those, and that’s an interesting thing how that wouldn’t keep you up, but rather instead that would actually put you to bed.

Joe Fairless: This is a conversation that I believe everyone can benefit from participating in and listening to and reading your book, so thank you for being on the show. How can the Best Ever listeners get in touch with you and learn more about what you’ve got going on?

James Colburn: Well, your listeners can certainly go to Amazon and they can get the book, either on Kindle, paperback or audio, or they can go to JamesColburn.net and they can download a PDF of the five-minute epic evening ritual with sample questions and/or three free chapters of the book.

Joe Fairless: Outstanding. James, thank you again for being on the show. The five-minute epic evening ritual – we’ve gotta create an acronym for that… For my own purposes, no one else, just for me. It is a way to start asking thought-provoking, quality questions, because as achievers, what you’ve recognized is that we tend to seek out the answer and sometimes even when the question hasn’t even been fully asked yet. So really just taking a step back, asking three quality questions, sleeping on it… Don’t try and answer it until the morning, just sleep on it, and then wake up in the morning and identify what has come up. Sometimes there’s not even an answer, sometimes it’s simply a better quality question that could be asked.

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

James Colburn: Thank you.

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Joe Fairless with Guest Ryan Gibson Best Ever Show Flyer 1226

JF1226: Why Investor Relations Are Paramount & How To Keep Investors Happy with Ryan Gibson

As co-founder and head of investor relations for Spartan Investment Group, Ryan knows the importance of keeping investors updated. He’s raised over $5 million from their current investors, and he’s in charge of developing more relationships to bring in more capital. If you want to hear how to find capital and keep it coming in, be sure to listen to this episode! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Ryan Gibson Real Estate Background:

Co-founder of SIG, Spartan Investment Group

– Has experience ranging from investing in apartments, to single family homes, managing renovations and

 development projects

– Responsible for SIG’s investor relations, driving the acquisition & financing of projects

– Also is a major airline pilot and flies the Boeing 757/767

– Based in Seattle, Washington

– Say hi to him at: http://spartan-investors.com/

– Best Ever Book: Tax Free Wealth


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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, Ryan Gibson. Hello, Ryan!

Ryan Gibson: Hi, Joe. How are you doing?

Joe Fairless: I am doing well, and holy cow, before we started recording, Ryan gave me this little nugget – he is joining us from Italy, just North of Rome. He is based in Washington DC – is that where you’re based? Or are you based on the West Coast, in the Seattle area?

Ryan Gibson: We’re actually doing business in multiple states, but we do business in both Washingtons – Washington DC and Seattle-Washington area.

Joe Fairless: Where do you live?

Ryan Gibson: I live in Seattle.

Joe Fairless: You live in Seattle, okay. So normally, you’re based in Seattle, your company does business on both coasts… Today you’re joining us from North of Rome, in Italy, and we’re grateful for that, that you wanted to spend some time with us during your vacation. I don’t know if I would have done that, but we’re grateful for it nonetheless, because – here’s a little bit about Ryan and his company. He’s the co-founder of Spartan Investment Group, and he has experience ranging from investing in apartments to single-family homes, managing renovations, development projects… In fact, Spartan Investment Group has completed six projects and they are also focused right now on four projects between the range of 2-8 million dollars.

In 24 months, four of those six projects that they completed totaled 2.5 million dollars with an average ROI of 36%. I know that because we also interviewed the other co-founder of Spartan Investment Group. His name is Scott Lewis, and his episode number is episode 965. You can go check that out.

Today we’re not gonna be repeating the conversation that we had with his co-founder, we’re gonna be focused on investor relations and how Ryan and his team are attracting investors and keeping them updated, because that is Ryan’s responsibility, investor relations with this company. 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 Gibson: Yes, you said something there that I really wanted to stress, and that was team. I think that our organization now has a very strong team, where I’m now able to transition away from doing a little bit of everything, which we all do in our small businesses, but in some more investor relations and attracting capital to our company, to make sure that we can go out and do these awesome projects.

When you kind of go around the room, we have five full-time teammates for Spartan Investment Group. One person is totally in charge of our acquisitions, and that’s Ben Lapidus, and we have Lindsay Lewis, who is responsible for all of our research. She’s actually just developed a system, an app that we have internally that grabs 40 data sources and brings together the best deals to the top commercial properties – we’re focused on self-storage, value-add opportunity – and kind of gets us to only look at the deals that we really wanna look at, that are available on the market.

Scott Lewis, the co-founder and CEO of Spartan Investment Group is not focused totally on operations, so he is responsible for the day-to-day permitting activities, and also our strategy, as you heard about in the previous call. Then Jackie is involved in our marketing, and also supports the operations as well. As a result, I’ve been able to go out with our team and raise just a little bit over five million dollars for our current and previous projects, and that is my day-to-day role. I’m also a full-time pilot. My flight is 7576 for an airline based out in Seattle… So that’s kind of my day-to-day.

Joe Fairless: Five million dollars – how many investors does that make up?

Ryan Gibson: I would say that’s probably 15-17 investors.

Joe Fairless: Okay, you’ve got 15-17 investors… Let’s say 17, that’s 294k — let’s just round it up to 300k. So 300k/investor on average… What are the three main sources for how you originally met these investors who are investing on average about 300k?

Ryan Gibson: Sure. One of our core values as a company is to develop personal relationships with everybody we do business with, and I feel like we have done a great job in developing relationships with folks that we can instill a lot of trust in; that’s previous relationships, it’s friendships, and it’s also kind of doing things such as going to the Best Ever Real Estate Conference…

Joe Fairless: It’s a mouthful, yes… [laughter] My conference, yes.

Ryan Gibson: Your conference, which by the way, Joe, I just wanna say that it was a great conference. I think it was different than a lot of other conferences, in the sense that I felt like the networking was really good and I felt like the relationships and the side conversations and some of those folks that we’ve met we still keep in touch with today and have done business with, so I’m really looking forward to going back next year.

Joe Fairless: February 9th-10th, Denver. BestEverConference.com, I appreciate you mentioned that.

Ryan Gibson: Yeah, no problem. So one of our suggestions is get out and do things that aren’t real estate related. I think a lot of people focus on just going to real estate meetups, going to these conferences and things like that, and that’s really important, but I think a lot of where we develop relationships with people is doing things that we enjoy. I enjoy flying, I used to be a rowing coach in Washington DC, I enjoy joining running clubs in my neighborhood, I like to sail, I like to ski, we like to travel… And a lot of folks that you meet, you talk about what you do and they’re very interested in being part of your organization and doing things like investing in your projects. I think that really helps.

The other thing that I would say isn’t necessarily a source, but just kind of a talking point that helps people is understanding where money comes from. Obviously, there’s self-directing accounts such as self-directed IRAs and Solo401(k)’s, cash accounts, leveraged brokerage accounts, you have life insurance policies you can use to invest, you can do a home equity line of credit, or leveraging an existing property, and I think kind of having an  understanding of a lot of those facets helps people that would normally think that they don’t have money to invest say “Oh, that’s right, I have that old 401k from my previous employer that I have done nothing with, and I have no idea how it’s performing, but when I’m presented with the knowledge that that 401k could be rolled over into something else”, it really helps them say “Oh, wow, that’s great. I can actually own part of a self-storage business and not do any of the work, and put my money with you, someone that I sincerely trust to do the right thing and do a good project.” So we kind of help facilitate a lot of those things with custodians that we have existing relationships with, so that’s something that we’ve done that’s been really helpful for our investors – understanding the best way to utilize their money so they can get the best return on their capital as well.

Joe Fairless: As far as understanding where the money comes from, you mentioned some interesting things like life insurance policies and home equity line of credit… I’ve never actually talked to an investor (or a potential investor) about doing a HELOC or life insurance policies; certainly, self-directed IRAs come up, but that’s it. I’ve been on the receiving end of “Okay, I’d like to invest via this account”, but I haven’t proactively talked to them about those things. I think you can get into tricky territory with a home equity line of credit, where you borrow against the house, so how do you approach your conversations with investors when you’re talking to them about the other types of ways where money comes from?

Ryan Gibson: Well, I think it’s obviously very conversational, and obviously I preface everything with “I’m not a CPA, I’m not an attorney, I’m not your financial advisor, but there’s solutions that allow you to invest that I’ve personally used and been successful with.” I’ve used a HELOC to invest, I’ve used a self-directed IRA, I’ve used a leveraged taxable stock account… I haven’t actually used a life insurance policy yet, but it’s just kind of an idea that’s been floating out there. And kind of explaining that maybe the best places where I’ve found HELOCs or custodians that I’ve really enjoyed working with, just kind of talking through the nuances of how those accounts can work and who they might talk to that, again, someone that I know and trust, that has set them up before, or a lender that gives you a good rate and terms, who can really help them make that informed decision.

Joe Fairless: I’m trying to understand where in the process of the conversation are you talking about home equity lines of credit, or life insurance policies… Because from my experience, what I’ve seen is I talk to a potential investor, and once they’re interested, then they say “Okay, I’d like to invest via my self-directed IRA”, or “I’ve got money I wanna diversify because it’s all in the stock market.” So they already know… So I haven’t thought of the approach of saying, “Well, in addition, here’s this…” or I guess there hasn’t been a natural segue for me to talk about these other ways to invest, so how does that come up?

Ryan Gibson: That’s a tricky question. So it’s not like I say, “Hey, have you thought about this and this and this?” and “This is how it all works…” I think it’s more of just kind of you knowing the dynamics – as basic as it sounds – of how a HELOC might work, so that way when they have a question like “Hey Ryan, I found a lender that will give me prime plus a percentage, or a prime rate, and if I draw this much, they’ll give me a discount. Does that sound like a good rate and terms to you?” And from having that experience and understanding what the market is offering, I can intelligently respond and say “Oh yeah, that sounds good” or “Hey, have you tried this bank? Because they might be able to help you out better”, and just sort of being able to keep up with the dialogue… I think that’s kind of the segue that I’m sort of speaking to–

Joe Fairless: I’m with you, okay.

Ryan Gibson: Yeah, kind of having the backstop of knowledge.

Joe Fairless: 300k on average per investor… Before we do that average — or, heck, I guess I already did that average, but let’s put that average aside for a second, because I have one investor who’s invested over 18 million with us, therefore that skews the average of everyone else if I include him in there, so my question is do you have an investor like that, that’s invested above and beyond the rest?

Ryan Gibson: Yeah, we have had a handful of investors that have invested above the rest. I would probably say the mode or the most invested would probably be in the 150k range.

Joe Fairless: Okay. From the couple that have invested the most, where did you meet him or her?

Ryan Gibson: Like I said earlier, basically conferences have been one, a place that we’ve met investors. I’ve met investors…

Joe Fairless: Not investors, I’m talking specifically those two people who have invested above and beyond what the others – do you remember where you met those two people?

Ryan Gibson: Yes, one investor I met when I was involved in extra-curricular activities in Washington DC, and another investor I met at my place of employment.

Joe Fairless: Cool, alright. Now, what you’ve mentioned earlier – you’re a pilot, then you’re a rowing coach, and running clubs, sailing, skiing, traveling… Those are all rich people activities, and clearly — maybe not running, but flying, rowing, sailing, skiing, and you can make an argument about travel… But those other ones, clearly those are rich people activities. If a Best Ever listener is looking to bring investor money into their deals and they’re currently not part of those rich people activities, do you recommend that they start joining those types of activities in order to rub elbows with rich people, or do you recommend a different approach?

Ryan Gibson: Well, I will say that it wasn’t a calculated decision to do those things. Those are things that I really enjoy doing, and naturally, the folks that have surrounded myself in those hobbies and extra-curriculars are — like you said, they might tend to attract a more wealthy person, but I didn’t say “I think I’m gonna pick up skiing because it’s an avenue for me to raise capital.” But as far as recommending people to do things, I recommend people do things that they’re really passionate about. I was a rowing coach for 5+ years, and it was something that I really enjoyed doing. It was an opportunity for me to really be in a position where I could help people and help high school athletes achieve their goals, and adult athletes as well.

When you’re thinking about “What kinds of things I could get involved in”, think about the things that you’re passionate about and do those things. Sometimes you can’t think of — in this world of real estate we think of “I’ve gotta be so efficient with my time… I’ve gotta get up, I’ve gotta do this, I’ve gotta do that”, but sometimes just letting loose and having some fun and doing things that you really enjoy – you’ll find yourself surrounding yourself with other people who like to enjoy themselves, and maybe they have some discretionary income to invest in your project. I’m sorry to be so philosophical about it, but…

Joe Fairless: No, I love that approach. I completely agree. I just had to call it out, because that’s something that some Best Ever listeners might have been thinking.

Ryan Gibson: Sure.

Joe Fairless: I 100% agree with you… If someone does not have an interest in skiing – like myself – but then attempts to become a member of a ski club because they want to hang out–

Ryan Gibson: That could be disastrous.

Joe Fairless: It could be deadly. [laughter] It could be deadly, number one, but number two – yeah, it could be disastrous because it just wouldn’t be fun, and… I always talk about — when I first became an entrepreneur, someone I worked with, she worked at Junior Achievement in New York City and she said “You should get involved because it aligns with what you’re talking about – finances, learning and helping others.” So I did, and I’m now on the board of Junior Achievement in Cincinnati, and through that, I have developed some good investor relationships, but I had no intention at all of ever developing investor relationships and business friendships. It was purely I was interested in doing something, and then it just evolved from there, and same with being on the alumni advisory board for Texas Tech – that’s evolved into investor relationships, but I had no intention of it happening. So I completely agree – do what you’re passionate about first, and then they’ll fall into place.

Ryan Gibson: I wanna make two points to that as well. Number one, I’ve never asked somebody to invest with us directly. I’m never doing something just to get investors, or whatever. So when you’re thinking “How can I get involved?”, it’s something that you’ve gotta love to do, and rule number one that I have for raising capital is I never ask for money. Now, it doesn’t mean I don’t put myself in very uncomfortable situations to progress my career as a real estate syndicator, and eventually say “Hey, I know that you said you were interested… Are you really interested?”, but the other thing is adding value to somebody’s outlook on a market or real estate I think is really important, too. When somebody is having a dialogue with you in those groups and they know you as kind of the real estate guy, you can add a lot of value to their personal situation.

Maybe you don’t flip single-family homes, or maybe you’re not a real estate agent, but you know enough about that sector that when they ask you a question, you can add value to the discussion by saying, “Oh, I know this is what you should look for in the title work”, or “This is a good lender” etc., so they kind of have a feeling of “Oh wow, this guy is really helpful to me. I would entrust him/her with the capital to invest.”

I think that kind of developing your way of garnering folks to invest — we do a quarterly newsletter, and we like to add a lot of value to folks that read our newsletter that may or may not be interested in investing, but that’s kind of an in… If they say, “Hey Ryan, I’ve been talking to you, I’ve known you for a while… I’m interested in what you’re doing, let me know more about it”, I say “Well, would you mind if we put you on our list of our newsletter?”

When that happens, it’s a good thing because when our newsletter eventually comes out, that person can kind of understand that “Oh, okay, this is what these guys do” and they get really comfortable with our projects. A lot of times folks that I network with may say, “You know, I’ve got a lot of student loan debt, but that’s gonna go away in a while”, or “I’m not in a position right now, but I might be in the future…” No problem, there’s never any pressure or arm-twisting to do any of these things, and I think that kind of goes along with the same philosophy of if you’re gonna do something for fun, really make sure you enjoy it, because if you don’t and you’re kind of skeezy, asking for money all the time, it really works in the opposite, negative way as well.

I also think that a lot of the folks that do these types of activities – you’ve gotta be kind of at that trustworthy level where you’re taking a significant amount of capital and investing it for somebody, that’s an enormous responsibility that you have for that person’s capital, and I think Scott mentioned at the conference last year, $10,000 is about the average saving of $100,000 salary. So if you’re taking $50,000 to invest in a project for somebody, that’s five years of savings potentially. That’s a very serious thing to do.

Joe Fairless: You mentioned that you have a quarterly newsletter – is that mailed out, or is it e-mailed?

Ryan Gibson: E-mail for now.

Joe Fairless: What’s in it?

Ryan Gibson: We write a market update. So if we’re focused on a specific market, we have Lindsay Lewis who does our research; we’ll write a quick blurb on — we’re building a self-storage right now in the Seattle Metro Area, and she focused in on population trends and housing statistics for the Seattle market, just to kind of give folks a flavor of what’s going on in that market right now, which is a lot of good things.

We’ll also feature a teammate. For example, we’ve just brought on Ben Lapidus, who is our director of acquisitions, so we had a little bio of his background and his resources that he brings to the team. We’ll also write an article about a specific topic. Right now I’m focused on self-directed accounts, so my last newsletter included an article on how to do self-directed retirement investing, and what it is and what it isn’t, and how it might work for a particular situation, and I plan to have a continuation of that knowledge base for our investor group, so they can kind of have some opinion on that.

We also kind of let everybody know what our current projects are. We send out a few renderings and kind of give an update on the ins and outs of Spartan. Our goal is to let our readers feel like “You do your job every day, you’re running around, you’re doing all these projects, you’re doing all these things in your world, but do your fans and your investors, do they know what you’re up to?”, so we kind of do like an around the room, so they can kind of have a purview of what all of our projects are and how we’re doing as a company.

Joe Fairless: And I want to just get clarification on the statement you mentioned earlier… You said “I never ask for money.” How do you bring in investors in a specific deal where you’re raising money? What’s that conversation end with, so that they know there’s an opportunity to invest?

Ryan Gibson: Well, I guess I used that term fairly lightly. So I always let them volunteer that they’re interested in investing in our next project. I never seek out somebody, or arm-twist or make them feel obligated, or have it be awkward. People ask what I do, and I have my 30-60 second elevator pitch.

Joe Fairless: What is it?

Ryan Gibson: I knew you were gonna ask, and I was like, “Should I say this…?” [laughter] No, I just say that we run a real estate development company, and we’re in multiple states, and we raise capital, we find projects – so we find the project… I call it the three F’s – we find the project, we fund the project, and we finish the project. We target and identify under-market value properties that either we can improve through forced appreciation or highest invest use (in other words value-add), and then we raise the capital required to either purchase the property outright or using leverage, and then we completely operate the project. So we hire the contractors, we do all the legal work, we do everything that’s required to make that project go from A to Z.

Naturally, that kind of perks interest… “How do you get your money?” We say that we have a network of investors that raise capital, and we provide an annualized return anywhere from 15% to 50%, depending on the project. That usually kind of creates a conversation. “Oh, well how long do your projects take? What do you do? How does this work?”, and we kind of get into how we do it, SEC 506(b) and 506(c) offerings, and how all the projects kind of piece together, and how we can try to beat the market, and we’re conservative in our facts and figures, and things like that. That was more than 30 seconds, but it was kind of a–

Joe Fairless: It’s helpful, thank you for walking us through that.

Ryan Gibson: Yeah, no problem.

Joe Fairless: Alright, what’s your best real estate investing advice ever? Based on investor relations, let’s keep it focused on that.

Ryan Gibson: So three things – keep your investors updated. We do a quarterly investment update where we look backwards and say everything that we’ve done for their investment in the last quarter, and everything that we plan to do in the future.

The other thing that we do is we actually do video updates. If we’re rehabbing a property, we will show in the video what’s happened to the property during the progress.

The other thing that we do is we make sure our corporate formalities are done properly, and we always invite our investors to teleconferences where they can ask and answer questions.

Joe Fairless: Is that number two, or is it still number one, keep investors updated? Is this part of number one still?

Ryan Gibson: It’s kind of a holistic approach, kind of a three-within-one, I guess. I think one of the biggest things that you can do is keep them updated, but the other thing is provide clarity in what they get. I read a ton of offering memorandums, and I get through the 20 pages of the offering memorandum and I get to the end and I can’t understand what I’m getting, how long it’s gonna take, and how I’m connected to the project. I think the feedback we receive from investors is “I really like your offering memorandums because within the first two paragraphs I understand how much I can potentially make on this investment, I understand my timeline, and I understand how I’m connected to the project.” I think that’s a really key thing.

And the last thing is systematize what you do, so you can automate and workflow a lot of the process that’s involved with raising capital and doing all this paperwork that the SEC requires.

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

Ryan Gibson: I am.

Joe Fairless: Let’s do it! You’re like, “Yeah, I’m in Italy. I’m ready to go drink some more red wine… Of course I’m ready!” Alright, first though, a word from our Best Ever partners.

Break: [00:25:50].10] to [00:26:45].00]

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

Ryan Gibson: Tax-Free Wealth.

Joe Fairless: Best ever system you use to help create a process for investor relations?

Ryan Gibson: We’ve created an entire app suite built from scratch in Podio.

Joe Fairless: Best ever deal you’ve been a part of?

Ryan Gibson: It was our first project, actually.

Joe Fairless: And why is it the best ever?

Ryan Gibson: It was the best ever because there was a lot of learning that was involved in it, and a lot of profit.

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

Ryan Gibson: It was a mistake, but the mistake was caught, so that was good. I always encourage people, as a pilot, a very thorough due diligence process checklist. We did all of the paperwork for an SEC raise, we raised all of the money, and it was a fast-moving deal. We had to close in a week of getting the offer presented to us; we raised all the capital, did all the paperwork, did all the hoopla, we got to the closing table and we could not obtain title insurance. Luckily, no money had moved hands because of our due diligence process, so the investors got all their money back, no problem… But it was a mistake in the sense that before the SEC stuff we wanna make sure that we just kind of move that checklist item above “Raise money and do SEC paperwork.”

Joe Fairless: What was the issue?

Ryan Gibson: Are you ready for just a very quick story?

Joe Fairless: Yeah.

Ryan Gibson: Real quick, the owner of the house, when he was living, he had dementia, and he ended up moving home with his family; the house that we were purchasing that we were gonna convert into condos in DC – a guy broke in, changed the locks, forged the title, sold the title as a wholesaler to another investor, fraudulently. The title exchanged hands, money exchanged hands, and the family had no idea. When the gentleman finally passed away, they went to the house, the locks were messed up, they went to sell the property and they realized that it had been sold illegally out from underneath them.

By the time this came to us, the attorney representing the estate didn’t really know that it was that big of an issue. No problem, we got to the closing table and our very awesome title insurance company said “Hey, we can’t ensure you.” We were like, “What do you mean you can’t ensure us?” And we went to a couple other title insurance companies, they said the same thing, and finally I said, “What is going on?”, and they send me this report that all these things happened…

So it’s very, very important to make sure that you have a very squared away due diligence process, which we did, and a lot of people do, but we just wanted to make sure that before money exchanges hands, that you are in possession of a very clean and clear title.

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

Ryan Gibson: I have always been very open to mentoring, and as a coach at heart, I’ve helped a lot of people in real estate with advice, and also I’m a mentor at my other job, helping other pilots progress through their careers. I just really like giving back, because I’ve had a lor of really good teachers and a lot of good mentors in my life.

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

Ryan Gibson: We have a website, it’s spartan-investors.com, or I don’t know if giving out my phone number is appropriate…

Joe Fairless: Whatever you wanna do.

Ryan Gibson: Yeah, my e-mail is Ryan@spartan-investors.com. My phone is 202-696-5112.

Joe Fairless: Ryan, thanks for being on the show, talking to us about your approach to investor relations, how in a very short period of time five million dollars worth of investors capital that you are working with, and your approach for doing so – the long-term approach of developing those relationships, and doing things that you’re passionate about, and then those relationships just naturally gravitate to other things. It’s encouraging, I imagine, for a lot of the Best Ever listeners who are doing things they’re passionate about but haven’t seen some of the fruits of their labor; well, perhaps continue to do that, and as we’ve seen with your career, it has worked out.

The three points that you mentioned – keeping investors updated; you all do quarterly reports, video updates and teleconferences. Two, providing clarity in what investors get – the projected profits, the timeline for the project and how they’re connected to the deal, and then creating a system.

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

Ryan Gibson: Alright, great. Thanks, Joe. Have a good day!

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Best Real Estate Investing Advice Ever Show Podcast

JF1061: Make Enough Money in Real Estate to Quit Your Job!! With Drew Kniffin

He got started with single family investing. Like a lot of other investors, he scaled up from there, and after a while, he was able to quit his job. Hear how he knew it was time to leave his job, and how he scaled from single families to buying a 64 unit property. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Drew Kniffin Real Estate Background:
-Acquisitions Specialist with Blink Equity
-Began investing in 2014 with a single family home
-Since then he’s purchased small (4-10 units) and medium-sized multifamily properties (30-60 units)
-His focus is distressed properties and repositioning them to stable assets
-Based in Seattle, Washington
-Say hi to him at www.blinkequitygroup.com/
-Best Ever Book: Millionaire Real Estate Investor


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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 fluff. With us today, Drew Kniffin. How are you doing, Drew?

Drew Kniffin: Doing great. How are you, Joe?

Joe Fairless: I am doing well, nice to have you on the show. A little bit more about Drew – he is the acquisitions specialist with Blink Equity. He began investing in 2014 with one single-family home, and since then he’s purchased 4-10 units in medium-sized multifamily properties, 30-60 units. His focus is on distressed properties and repositioning them to stable properties. Based in Saint Paul-Minneapolis area. With that being said, Drew, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Drew Kniffin: Sure, absolutely. Thanks, Joe. That story is right – I began single-family investing in 2014, and that was just after a lot of people had gone through the downturn… I had a condo that I lived in myself. I moved out of it but I couldn’t sell it, so I was sort of forced into renting it, and that’s when I stumbled into real estate investing.

I started to understand the economics of it, and then once I had some more money and capital, again, doing single-families, and like a lot of people, scaled up from there into larger properties. So I was joining on the side until 2015, and then I stopped that job and I’m doing real estate full-time now.

Joe Fairless: Wow, let’s talk about this. You began investing in 2014… Was that the condo? You couldn’t sell it and you were forced to rent?

Drew Kniffin: No, in 2014 was the first property that I bought for the purpose of investing. The condo was 2011.

Joe Fairless: Alright, so you bought your first intentional rental property in 2014. Walk us through all the properties that you have purchased from then to now, because I wanna get some specifics on your acquisitions.

Drew Kniffin: Sure. So that first single-family was purchased off HomePath, Fannie Mae’s clearing house for foreclosed on properties. That was kind of a standard 3/2 single-family in a suburb, and that was just kind of wetting my feet into real estate. From there I got a fourplex, and almost all of the rest of the properties was done with a partner. I bought the fourplex with that partner, and then a six with a partner, and then we bought a triplex from a wholesaler, fixed it up, and then financed it, pulled cash out of it and used that cash to buy a 32-unit. That was really my jump into the bigger space. That part of it was 2015.

In 2015 I also moved from the twin cities which you mentioned in the beginning out here to Seattle, which is where I live now. I bought a number of duplexes from a wholesaler – Blink Equity, which you mentioned in the beginning. Next we bought a 64-unit last November – that was, again, with another group of investors.

Right now we’re under contract to sell both our four and our six, and 1031 that into 56 units, which we have under contract right now.

Joe Fairless: That is a lot of transactions in a short amount of time. Congratulations on that! What was your occupation prior to 2015?

Drew Kniffin: Out of grad school I was working in investment banking for a small sell-side company; we helped owners of companies sell their company. I was very comfortable and used to valuing assets, whether they were companies or, ultimately, apartment buildings. When I took that skillset into a Fortune500 company – I was helping them negotiate some of their joint venture agreement, so I was taking that same skillset into the corporate world, and I did that until 2015.

Joe Fairless: Why did you leave?

Drew Kniffin: Well, basically it got too busy to raise a family, work full-time for a W2 job and grow a real estate portfolio, and I was just enjoying less working for someone else, and I had the opportunity to do this full-time, so I did.

Joe Fairless: Is Blink Equity your company?

Drew Kniffin: No, it’s not. Blink Equity is the company of a friend of mine here in Seattle, and I worked with him on the acquisition side for his deals. Then another company that I hold much of the real estate with is with another colleague of mine, a separate colleague of mine. That friend is based in Minnesota. So there’s two organizations I work with – Blink Equity, as well as the LLC that holds many of the properties in Minnesota.

Joe Fairless: Do you have a standard structure with partners? You said the fourplex, the sixplex — basically, all the deals after the single-family HomePath loan in 2014… Do you have a standard structure you use with investors or with business partners?

Drew Kniffin: I guess I would say my standard structure is not to make it too complicated. We use an LLC, and I work with people that I trust immensely. As far as best advice goes, one of the things that I’d say is I see people get paralyzed on moving forward, because they get caught up on how to structure their organization, how to get themselves legally or from an accounting perspective set up, and that brings them to inaction. I would say that’s the biggest inhibitor of people moving forward, getting caught up on these things.

There might be an ideal or perfect structure that I haven’t uncovered yet, but I try not to let perfect be the enemy of the good, so I move forward with people that I trust, doing this kind of split 50/50, or 1/3, 1/3, 1/3 structures, and we haven’t had a problem with that so far.

Joe Fairless: On the split 50/50 example – and perhaps, if you could use a specific property just to add some clarity – what would be your responsibilities, versus your partner’s responsibilities?

Drew Kniffin: Great question. On the sixplex that we’re selling right now, I would say — first of all, he is there near the property in Minnesota and I’m in Seattle, so there’s a location difference. There’s also like a skillset difference; he is extraordinarily good on the details. He is reviewing our property manager’s financials regularly and often uncovers things that might look not correct. So he’s kind of got the operational side covered, and meanwhile, I’m a little bit more on the acquisitions side, looking for more deals, thinking more strategically. Not that he’s not working strategically, but I think that our skillsets are more on the day-to-day side, the oversight of the actual asset, versus sort of looking big picture where we’re going next. That plays to our strengths as far as what our natural tendencies are, and it’s also helped the partnership work well, because we sort of understand “Hey, he does this well, I do that well. I respect him doing that and making decisions for us there, and vice versa.”

Joe Fairless: So just to grossly simplify, because I know you like simple structures… You identify the acquisition; once it’s acquired, then he does the asset management, basically?

Drew Kniffin: I think that’s fair, yeah.

Joe Fairless: Okay. Who brings the money?

Drew Kniffin: We do 50/50 together. We both bring the money to the table.

Joe Fairless: Okay, got it. That makes sense. And are you both on the loans?

Drew Kniffin: Yes, we are. Of course, in the beginning, when you’re doing residential 1-4 units, the financing was based on our personal [unintelligible [00:09:23].07] and once you get to commercial, it looks differently… But our loans are recourse, so they could ultimately come at us personally for the assets. And we’re both signed on the most loans, yeah.

Joe Fairless: What type of lenders do you use?

Drew Kniffin: One of my worst experiences in real estate was trying to get Wells Fargo to finance my four-unit. It was just extraordinarily painful. Since that, we’ve used local bankers that are regional to the twin cities, where we’ve literally gone out for drinks or lunch with our banker, who knows us, who comes and visits the asset, and there’s this extraordinary feeling of partnership. It’s extraordinary how different it was from working, in our experience, with an institutional bank. So we like the regional bank, the one where there’s a relationship, where the guy responds to e-mails quickly… It’s just been a huge difference to work with local banks.

Joe Fairless: And what about your duplexes in Seattle?

Drew Kniffin: That’s another regional bank. That one is a fantastic deal. I bought it wholesale and then I could turnaround to the bank and get an 75%-80% loan to appraised value. And since they’re going off appraised value not purchase value, I was able to get usually all of my cash or more than all of my cash back. But again, that was a regional bank, based right out here in Seattle.

Joe Fairless: Looking at my notes – I was writing notes as you were talking earlier about your timeline of acquisitions… It looks like the triplex from the wholesaler where you fixed it up, financed, did a cash-out refi and then bought a 32-unit – that was the big jump from where you were… So can we talk a little bit about that triplex – what are the numbers and how did you get in contact with the wholesaler in the first place?

Drew Kniffin: Great question… I don’t remember how we got in contact with the wholesaler. I think basically we were just hustling, looking to meet people, looking to get an edge on getting deals upstream of the MLS and where everyone else is getting deals, and we came across this wholesaler; he offered us this deal.

The key thing for that transaction was that we were going in it 1/3, 1/3, 1/3, so there’s three of us, but one of the guys is a full-time property manager; he owns his own property management business, and he gave us the confidence to say “Hey, we can buy this for (I think it was) 88k, put about 25k into it, get it appraised around 170k, put a debt on it, take all our cash out.” Especially at that point in time doing that on my own would have been too scary, but going with someone that I trusted, when you knew the market, enabled us to go forward, and ultimately that transaction gave us basically the cash of the down payment to leap into the larger multifamily of 32 units.

Joe Fairless: Absolutely. And was the 32-unit in the same market as the triplex?

Drew Kniffin: Yeah, the 32 was in Saint Paul and the triplex is in Minneapolis, so they’re in different zip codes, but the same metropolitan area.

Joe Fairless: Okay. And can you tell us the numbers on the 32-unit?

Drew Kniffin: The 32-unit was purchased for 1.6 million, so it’s $50,000/door. There was a lot of distress on it. It was a property that they prior owner milked for cash and didn’t put money back into it… But that was fine; we knew that going into it. We’ve owned it for I would say 15-18 months now, and I’m thinking of not taking a cash distribution out of it, other than we got it refinanced with a new appraisal. We’ve been pouring cash back into it and turning over the units; we have a thankful and appreciative and somewhat loyal tenant base, and I would roughly guess that it’s worth 1.8-1.9 now.

We try to be patient with capital; we’re not looking for flipping a property in and out in 12 months, but that gets to our long-term strategy, which is buying distressed and repositioning to stable, and then being able to really improve NOI, as well as cap rates as we make that transition from distressed to stable.

Joe Fairless: Yeah, let’s stay with this 32-unit. That’s a fascinating story. You bought it for 1.6… I think I heard you say that you haven’t taken cash distributions except when you did a refi with the new appraisal; what did it appraise for?

Drew Kniffin: I should have the numbers in front of me… I think it was 1.8, Joe.

Joe Fairless: Roughly. Got it. No biggie, just curious. So the cash that you got from the refinance on the previous property certainly wasn’t covering the down payment for this 1.6 in the total… So did you all ante up again and do 1/3, 1/3, 1/3?

Drew Kniffin: You’re right… The down payment on the 1.6 million dollar 32-plex – 10% or half of the down payment came from the cash-out refi of the triplex, and the other half of the down payment we split 1/3, 1/3, 1/3.

Joe Fairless: Okay.

Drew Kniffin: Essentially, what that allowed us to do is — let’s see, over 3% of the purchase price (from a cash perspective) I was buying into a 32-unit building.

Joe Fairless: And if it was distressed, then tell us about getting financing for it. I’m sure that was an ordeal.

Drew Kniffin: It was distressed physically, but there wasn’t a lot of vacancy.

Joe Fairless: Oh, okay.

Drew Kniffin: It depends on whether it’s physical or economic distress, but this is more physical distress. And again, us getting financing on this was also due to one of our partners who had a deep, long relationship with a local banker, and that local banker had seen him perform on previous transactions where there was distress, so we were able to basically borrow from his experience and history with the lender, and able to get that financing. I think if we tried to do it on our own, our only history with single-families and a triplex or quad – it would have been difficult to impossible, but with that partner it was a different story.

Joe Fairless: The property management partner in particular is the one you’re referring to?

Drew Kniffin: Yes.

Joe Fairless: Okay.

Drew Kniffin: He brought the history, and he also brought confidence that it was gonna be managed in good hands.

Joe Fairless: Yeah, that’s huge… As the banker proved!

Drew Kniffin: Exactly.

Joe Fairless: I know that we all have roles in our business, and if yours isn’t doing the asset management, then feel free to say “Hey, Joe, let’s shift gears a little bit”, but I do have one more follow-up question on the 32-unit, and that is what specific steps were taken to bring a property from physical distress – the mechanicals and perhaps the landscaping and just the outward appearance was very tired or in disarray – what specific things did you all tackle first and how did you go about it?

Drew Kniffin: As tenants vacated, we would turn a unit and rehab it. We did go from inside out. We went from actual units, to common spaces, to exterior. When units turn, we’d be able to give them a light rehab or a heavy rehab, depending upon how worn out they were. New carpeting in common areas, new paint in common areas, and eventually on the exterior we resurfaced the parking lot, we rehabilitated some of the parking structures, the garages, and then there was gonna be some landscaping on the outside as well. [unintelligible [00:16:31].12] exterior roofing.

I’ve heard people talk about going outside in, because someone sees a property from the outside first… But we did it inside out in this transaction.

Joe Fairless: And you had some mind-reading abilities right there, because that’s exactly what I was gonna ask you… What was the reason why you did inside out versus outside in?

Drew Kniffin: I don’t know whether it was extraordinarily well thought through, and I think I’d have to talk to my [unintelligible [00:16:55].29] whether we do it the other way next time… I think it was merely that we were looking at some units that were quite distressed. At the end of the day, you could have extraordinary landscaping, a beautiful parking lot and a brand new roof, but if the unit’s trashed, people aren’t gonna live in there.

Probably, if you flip that around, people might still live in there. You could argue it both ways. We just had to get these units kind of up to par. Our handyman was there almost full-time for about half a year, rehabbing units and working on the common spaces, and the tenants got to know him by name, and they expressed often their appreciation at the work he was doing to make it a better place to live.

That was validating that what we were doing was increasing the quality of life and probably tenant loyalty and longevity of tenants, which of course, it can be costly too to turn over units, if they’re cycling through every 12 months.

Joe Fairless: Oh, absolutely. If you have some retention and some loyalty with your residents, holy cow, that will affect your bottom line exponentially.

Drew Kniffin: Yeah.

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

Drew Kniffin: To move forward, that’s my advice. I thought a lot about this, but… I’ve seen people e-mail me or ask me questions, or friends that are interested, and you can tell that they’re intrigued, but they don’t take action. They don’t take action because they’re either caught up, as I said before, on some arcane legal rule that their attorney should be solving for them, or they’re caught up on finding financing, and there’s answers to that as far as how to get banks to bring money to the table, or “It’s just not the right time. Maybe in 12 months.” Or they find good deals, but they want unbelievable deals.

What I’ve found is that I get progressively better at analyzing deals and I get more confidence the more that I do one transaction at a time, or as I’m speaking to my property managers every week and I learn more about the property. But if I had waited for the perfect deal to come along, I would never have gotten started. So I would just say “Get going!” The thing about real estate is that the wind is at your back. It’s an industry that is forgiving, as long as you follow general guidelines. So you can go ahead, take that first step, make that first transaction, not know everything, and it should still come out okay.

From there, you’ll build the confidence and you’ll build relationships with property managers, with brokers that will help you make a second deal and third deal easier.

Joe Fairless: What would you say to someone who doesn’t want to partner with people?

Drew Kniffin: Well, the first thing I’d say is reconsider. But if they were insistent upon that and there are good reasons to be cautious about partnering, then still find people — they don’t have to be formal mentors, but people who you trust and you can say “Hey, can I take you out for lunch and show you this thing I’m looking at and you can give me your input on that?” Getting someone who has experience, their input, as long as you trust that they’re being candid and have your best interest at heart, is extraordinarily helpful, and very cheap as far as avoiding you from making bad mistakes.

I guess my advice is real estate is not a lone ranger sport, it’s one where you want people to be bringing you advice, whether it’s legal advice, accounting advice, property management advice. The more people you have on your team, the stronger you are. So whether you’re formally partnering in the ownership of the asset or just getting input from others that provide different disciplines, the more advice you have, the better off you are.

Joe Fairless: I mentioned that obviously because of your background and the partnerships that you’ve participated in and that have gotten you to this place where you’ve grown tremendously in a very short amount of time. What’s one way that you personally qualify potential new partners?

Drew Kniffin: Well, I don’t take anyone just out of an e-mail as a partner. Of all my partnerships, they’ve all been based off knowing someone on a relational basis for a while – I might have met them at a local REA… But for me, all of my partnerships are rooted in deep trust. If someone just e-mailed me and said “Hey, I’ve got a great deal in St. Louis”, I might 100% believe that’s a great deal in St. Louis and I might pay them a wholesaling fee if I wanted to enter it, but I wouldn’t partner with someone that I don’t know deeply. So that’s my sort of threshold or test for partnerships.

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

Drew Kniffin: Let’s go!

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

Break: [00:21:15].07] to [00:22:07].05]

Joe Fairless: Best ever book you’ve read?

Drew Kniffin: Millionaire Real Estate Investor by Gary Keller. That just got me going, got me fired up for the whole industry.

Joe Fairless: Best ever deal you’ve done?

Drew Kniffin: The six-unit we’re about to sell. We bought it distressed, and basically bought it for 250k, selling to for 450k in two years, and with leverage that’s more than a doubling of our money. It’s been fantastic.

Joe Fairless: Wow, congratulations. You bought it for 250k… How much did you put into it?

Drew Kniffin: Not much, maybe 10k-20k. It wasn’t like a huge project, it was more maintenance. Putting money into it came from the operational cash flows of it, so it wasn’t additional money from our pockets.

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

Drew Kniffin: Not staying on top of property managers and making sure that they’re managing the property well. One skillset that you develop in real estate is managing your managers. You can’t go to sleep and let them do all the work for you, you still have to oversee it. I think a healthy regular phone call with them to build trust and understand what’s going on helps them know you and take care of you better, and helps you build confidence with them. Staying asleep and not paying attention would be a big mistake.

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

Drew Kniffin: I hope this sounds sincere, but I love to provide quality housing that looks after my tenants well in my investing. I wouldn’t manage a property that I wouldn’t put my brother or my sister or my friends in. That’s not giving back like serving a soup kitchen, but I truly think that there’s a lot of terrible landlords out there that don’t care about the quality of life of their tenants, and I do take that seriously. So I’ll do things that may not at first blush with economic sense, but I do it because I wanna be proud of the way that we provide housing for people.

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

Drew Kniffin: They can e-mail me. I can provide that e-mail right now, Joe…

Joe Fairless: Yeah, of course.

Drew Kniffin: It’s just first name dot last name @gmail.com – andrew.kniffin@gmail.com. I love talking to people about their real estate journey.

Joe Fairless: And Andrew, do you go by Drew or Andrew?

Drew Kniffin: I’ve gone by both. Mostly by Drew, but the e-mail is Andrew, so…

Joe Fairless: Okay, cool. I apologize for butchering your last name’s pronunciation whenever I introduced you, and thank you for not calling me out.

Drew Kniffin: Are you Joe Seamless, or what’s your name…?

Joe Fairless: [laughs] Yeah, exactly… You’re very patient with me. You may call me whatever you wish.

Well, Drew, thank you for being on the show, thank you for sharing the trajectory that you’ve had with investing, from the single-family HomePath loan to the fourplex, to the sixplex, then the triplex that you fixed up and refinanced, used the proceeds from that plus your own money and two partners’ money to buy a 32-unit, and then bought some duplexes, then a 64-unit (holy cow)…

Drew Kniffin: One last thing, Joe, is the 56-unit that we have under contract – we’re not gonna put a penny into buying that, because it’s just the gains on the 1031s from a four and a six.

Joe Fairless: Bravo!

Drew Kniffin: The business really snowballs once you get going. You’ve just gotta get going.

Joe Fairless: Yeah, and having intelligent choices along the way has served you well. One of them I’ve noticed is partnering, so together you can do more, but two is finding the right partners who complement your skillsets and bring other skillsets to the table, like, as you mentioned a couple times, a property management partner who helped get some good financing and also seed on the ground management in certain cases.

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

Drew Kniffin: Thanks so much, Joe.

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