JF2692: 6 Marketing Tactics to Find Multifamily Deals with Nick Love

There are a plethora of marketing tools you can use to find real estate deals, but which ones work best in the multifamily space? In this episode, marketing expert Nick Love shares how you can source multifamily deals through strategic marketing.

Nick Love | Real Estate Background

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JF2689: Scale from LP to GP with These 3 Tips with Joel Fine

Starting out as a Limited Partner, Joel Fine did everything he could to learn about multifamily syndication: he read books, listened to podcasts, and even asked to be part of a weekly GP meeting on one of his passive deals. In this episode, Joel discusses how he scaled from being a Limited Partner to a General Partner.

Joel Fine | Real Estate Background

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JF2687: How to Find First GP Deal with Melissa Elizondo

Melissa Elizondo wanted to branch out from her marketing firm and looked to add commercial real estate investments to her portfolio. In this episode, Melissa shares her current business strategy and analyzes her methods for closing on her first GP deal.

Melissa Elizondo | Real Estate Background

  • Partner at 1 Vision Capital which is a syndication group focused on converting existing landlords with single family portfolios into LPs on multifamily deals.
  • Portfolio: Limited Partner for 118-unit in Savannah, GA.
  • Full-time career as owner of marketing firm, Heartwood Marketing Solutions.
  • Based in: New Braunfels, Texas
  • Say hi to her at: 1visioncapital.com | Facebook and Instagram: @therealmelissaelizondo
  • Best Ever Book: The Energy of Money by Maria Nemeth Ph.D.

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JF2686: The Key to Direct to Seller Marketing for Self-Storage Deals with TJ Konsen

TJ Konsen got his start in real estate with single-family flips. Now, he’s expanded to rehabs, wholesales, and wholetails, including in the multifamily and self-storage space. In this episode, TJ shares his expertise on direct to seller marketing and how it has helped sourced his self-storage deals. 

TJ Konsen | Real Estate Background

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JF2678: The Key to Funding Your Retirement Through Multifamily Syndication with Elijah Vo

Elijah Vo went from working full-time in the Air Force to becoming a full-time active investor. In this episode, he shares how he got into multifamily syndication and how he finds deals that will fund his retirement income.

Elijah Vo | Real Estate Background

  • Partner at Atlas Multifamily Group, who help investors build generational wealth as a passive investor in multifamily real estate syndication.
  • Portfolio: Operates 700 doors
  • Used to work full-time in the Air Force, but after retirement, he began to do CRE full-time as of October 2021.
  • Based in: DFW, Texas
  • Say hi to him at: https://www.investwithamg.com/
  • Best Ever Book: The Laws of Human Nature by Robert Greene

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

Elijah Vo: I’m doing great. Hey, if I sound kind of strange, I’m coming off a head cold. I feel fine, but I’m just a little bit [unintelligible [00:01:25].11] up. But otherwise, I’m great and happy to be here.

Slocomb Reed: Great. I know the feeling. I just got the COVID booster shot a few days ago and it put me in bed for a while. Eli is a partner at Atlas Multifamily Group. They help investors build generational wealth passively in multifamily real estate syndications. In the current portfolio, they operate 700 doors. Eli used to work full-time in the Air Force, but after retirement, he began to do commercial real estate full-time, and that’s as of October 21. Eli’s based in the Dallas-Fort Worth area. Eli, tell us about yourself. You were in the Air Force; what got you into real estate?

Elijah Vo: Sure. I’ve been in the military for over 20 years so it was always kind of my mentality to work for the government for 20 to 30 years, and then one day I’ll retire happily on a beach somewhere.

Slocomb Reed: Sure.

Elijah Vo: So I think about halfway through my career, that mentality wouldn’t sit right with me, because I really want to [unintelligible [02:26] our government. I was always interested in real estate so, at that time, my wife and I started buying up small family rentals, went through a couple of them, did pretty good with them… But at that point, I looked back at our goals and was like, “Okay, well by time I go to retire, this income won’t replace my current income.” So we had to find a way to scale more efficiently a lot quicker.

I remember driving around town one day over here in Fort Worth and I saw an apartment complex. I was like “Man, who owns those things? Who buys these?” Because it would probably be way more efficient to own one of those rather than 20, 30, 40 houses spread across town. So I started out working, getting educated on how this whole space works. Around 2018, I ended up joining a mentorship group, and that following year, we ended up…

Slocomb Reed: Which group did you join?

Elijah Vo: It was Think Multifamily.

Slocomb Reed: Think Multifamily.

Elijah Vo: There’s a bunch all over, a lot here in DFW. We’ve got Think, and a bunch of other ones.

Slocomb Reed: Nice. So you joined the mastermind, and what’s next?

Elijah Vo: We started hunting around for deals. That first year, we picked up two deals, about 360 units; those were in Atlanta. Then, about two years ago, our two current partners, we opened our firm, Atlas Multifamily Group. Now we own 700, and we actually have another 115 under contract that will close next month.

Slocomb Reed: That’s exciting. So you jumped in in 2018, it sounds, into multifamily syndication.

Elijah Vo: Yeah. Around 2017 or 2018. I started also doing passive investments first. So we did a couple of passives and then I joined Think mastermind in 2018.

Slocomb Reed: Awesome. So you were picking up some rentals on the side of working in the Air Force and then started investing passively, wanting to get in on the GP side of things. Thinking that you were replacing your military income with real estate, what made syndicating the right fit for you?

Elijah Vo: It was interesting, for sure. I enjoy the fact that on the GP side, I like being the front-runner in these things; because you’re not really buying real estate, you’re buying a business. I find it fascinating and very interesting that we’re able to come in and quarterback these deals, and you have a whole team that you build around you. It’s an entire process of all kinds of different people and partners. I think that’s probably what spoke to me the most, aside from the fact that you can invest in something that can return something like that back to you. You build communities too, you’re giving back and you’re building communities for other families, because you’re coming in and in rehabbing these places, like the exteriors and interiors. You’re making everything better. I enjoy the fact that I’m kind of like the main quarterback here, and we’re also at the same time giving back at the same time.

Slocomb Reed: Financially speaking, understanding that there are other routes that you can take to be in real estate investing full time, you did some passive investing… That’s a very popular way to replace an income going into retirement, because it allows you to act retired. Financially speaking, what is it that compelled you to get into syndication as opposed to some other active model of investing? Is it specific to the numbers? What was it about syndicating?

Elijah Vo: I don’t think I really had the income to invest enough to be a full passive investor. If I have $100 million or more than I could put in and get an 8% 10% return annually, that’d be fine. But on an Air Force income, we really didn’t have that. So I had to find more after ways to make income. I think that was part of it. And then the fact that — I do enjoy the mailbox money, that’s great. But I wanted more control, I wanted more involvement in the deal. I want to be able to go out there and find my own deals, build my own empire, build my own income, and then eventually I’ll get to a place where… [unintelligible [00:06:21].10] I’m sure, maybe. I enjoy it now but over time, I’ll get another I can passively invest. But I love it now.

Break: [00:06:29][00:08:08]

Slocomb Reed: I saw that you have a goal of helping investors build generational wealth while investing passively. Are you underwriting for the five-year hold? Are you planning to hold the properties that you syndicate long-term, longer than five years?

Elijah Vo: I would love to do a long-term, like a 20-year hold, that would be awesome. I think right now, the industry, they’re so focused on those five or six-year holds. It’s hard to find investors who want to do a 20 to 30-year hold, plus that you’d be holding on to, I guess — you’d be partnered with people for 20 years. But I would love having generational wealth, I wouldn’t mind it. We are playing with a new, almost a new model. But we’re doing a three-year hold, where we’re returning 70% to 80% return over three years, rather than do 100% return over six years. Our investors can hit about 74% return in three, and then pick up money and do another one, and get it again in another three years. We are kind of going into a shorter model, given that our investors do enjoy a faster turnaround. They want the amount for sure, but they also want a faster velocity return.

Slocomb Reed: Gotcha. So that 174% return, you’re talking about the gross profit on their initial capital after three or five years, correct?

Elijah Vo: Yeah, like their total return. After all their cash flow, then we cash out and pay back their initial, and a little kicker on top of that, equal like that, say it’s like 80% or whatever it is.

Slocomb Reed: Gotcha. So you’re going for the three-year hold. My experience is the shorter your projected hold period, the more aggressive you have to be with your value-add. What kinds of properties are you targeting? What condition are they in when you buy them?

Elijah Vo: This is our first one. Actually, the one that we have under contract right now that we’re going to do, it’s actually a Class A in Wichita. It’s a little bit different in the fact that it was an old historical building, built back in the 1800s. The current owners had bought it, and they used a combination of federal and state funds to totally rehab it. But they really aren’t operators. Their goal is just to own these old buildings all over the United States, then fixing them up and selling them to guys like us.

Slocomb Reed: How big is it?

Elijah Vo: It’s 115 units.

Slocomb Reed: Wow. 115 units, 130 or 140-year-old building.

Elijah Vo: Yeah. But they totally revamped it though. They put 19 million dollars into changing the entire structure, the bones, they reinforced it with steel if they had to, they changed out all the mechanicals, the plumbing… They did a really good job going in and refurbishing it. The only thing that they didn’t do was push it to its market capacity. So they really aren’t operators. They come in and fix them up, but they don’t really have the want or need to really push it up to the market potential. That’s why we’re–

Slocomb Reed: So what’s left to do specifically? Do you need to turn over a bunch of tenants? Are you just raising rents, or what?

Elijah Vo: So there’s enough of the organic income that we can just bump some rents, but we’re going to definitely turn some tenants over and infuse more capital in there. Probably about 1.9 million in there, to do the interiors to push them to class A. It’s a Class B right now. It should be a Class A, because in downtown Wichita; but we’re going to pushh it to a class A.

Slocomb Reed: Nice, that’s awesome. This is a projected three-year hold. What kind of return are you projecting?

Elijah Vo: It’s a three-year hold, we project a 72% return on the money.

Slocomb Reed: Nice. How did you find this deal? Through a broker?

Elijah Vo: Yeah, through a broker. Actually, when we looked at this property, we were looking at another one in Wichita. Then he calls me and he’s like, “Hey, while you’re in town, go ahead and look at this one that’s in the downtown square.” I’m like, “Well, it’s not really our criteria, but sure.” So we walked down there and we’re like, “Oh, this is a really cool project.” We just kind of dug into it and fell in love with it.

Slocomb Reed: What attracted you to Wichita, Kansas?

Elijah Vo: I like the market. It’s a slow, steady cash-flowing market. It has a lot of diversity in, it has tons of business. I would say that it has a lot of good value-adds still, where a lot of properties here in DFW, they’ve been turned over a couple of times. A lot of stuff that we buy in Arkansas, Oklahoma, and Kansas, they didn’t turnover as much, or not at all. So they’ve had owners for 20 years or plus, so they’re true value-adds, to me at least.

Slocomb Reed: Gotcha. So you’re taking down your first deal as a syndicator now. What is it you said? You took down a couple after you joined the Think mastermind in 2018. What deals were those?

Elijah Vo: Everything I’ve done since I’ve been in Think… I’m not in Think now, but when I first joined Think, the first one I did [unintelligible [00:12:40].18] I sponsored those two, so I was a syndicator in those. Then I did 700 in Arkansas, Oklahoma City, with my two current partners at Atlas. And then we’re doing another 115 as well.

Slocomb Reed: Gotcha. Nice. And are all of those on the three-year hold?

Elijah Vo: No. The ones in Arkansas, Oklahoma City are on a five or six-year hold, and then a one in Kansas is on a three-year hold.

Break: [00:13:06][00:16:02]

Slocomb Reed: What is your Best Ever advice?

Elijah Vo: Best Ever advice… I would say even if you’re not the most capitalized, most intelligent, I would say what it takes to make it in this industry is having persistence and grit. Take action now and keep going. I know there are days where you get burned out and things drag on and you get frustrated. But the ones who do the best here are the ones who just keep going day by day, inch by inch. I think the people who come in with stars in their eyes or whatever, they can have tons of money and tons of ambition, but if they don’t have the grit and the wherewithal to keep powering through, they won’t make it. So you don’t need to have everything, but you need to have a couple of key skills for sure.

Slocomb Reed: Great. Eli, are you ready for our Best Ever lightning round?

Elijah Vo: Yeah, sure thing.

Slocomb Reed: Awesome. What is your Best Ever way to give back to the community?

Elijah Vo: I don’t think I give back enough… This has actually been a topic of discussion amongst Atlas. We’ve been looking at different ways to start giving back. I think the guys want to donate some funds, they want to do certain things…

I would like to do one where I can give more of my time. I used to read a lot at my kid’s schools, we’d read books or whatever. But something like that, where I can give a little bit of my time in my week to maybe go build some houses for Habitat for Humanity, read books to kids at schools, or I’d like to do something where I could go visit senior citizens homes, and give my time to them.

Slocomb Reed: Nice. What’s the Best Ever book you’ve recently read?

Elijah Vo: It’s not real estate, but recently I read Robert Greene’s Laws of Human Nature. That’s a fantastic book. It’s a big, thick book and it encompasses a lot of psychology, behavioral theory, psychiatry, and philosophy. I love it. It really deals with how we think and how we interact with other humans.

Slocomb Reed: That seems right up my alley. I’m going to have to look into that one.

Elijah Vo: Yeah. It’s a great book.

Slocomb Reed: What’s the most money you’ve ever lost one deal?

Elijah Vo: I was passively invested in a deal in Atlanta. It was a pretty big one, it was like 300 plus units. A partner ended up stealing money from the company, and then he had passed away. There were in [unintelligible [00:18:12].20] for several months. So we ended up losing most of our investment in that one. It wasn’t a good time. There’s a silver lining though, it did teach me a lot about how syndicators can communicate when there’s a big issue like that… And how to respond to it, how do we communicate the problem and the issue, how many webinars should we be holding, how many calls and emails go out, and all that. It wasn’t my favorite deal, but I did learn a lot about the GP and LP communication gap there.

Slocomb Reed: Hopefully you didn’t have to pay too much for that education. What’s the most money you made on a deal?

Elijah Vo: Probably our biggest deal so far was the one in Oklahoma City. That was a pretty good deal. It was 288 units. We had a good team, we came in and we closed that one at the end of October. That was probably our biggest deal. It’s a Class C that we’re going to push to a B. We did pretty good on that one.

Slocomb Reed: You bought it in October, or you sold it in October?

Elijah Vo: We closed on it in October. I’ll tell you what, probably the deal that we made our most on was the first Atlanta deal. That was the one that we just sold this year in January. It was 110 units that we bought for 42k a door, and we sold it for 90k a door almost.

Slocomb Reed: That’s awesome. How much did you have to put into it?

Elijah Vo: We put in around six or $700,000 into it, with all the rehab and everything. So under a million dollars. But we had rehabbed it, we held it for about two and a half years, and we ended up selling it, returning about 129% return to our investors. That was a whole…

Slocomb Reed: Over what time period, that 129%?

Elijah Vo: Two and a half years.

Slocomb Reed: Wow. That is good. What accounts for that? Is that what you projected, or did it outperform?

Elijah Vo: It outperformed. We had projected like a five-year hold on it.  I think part, for sure, was us. I’m not saying that we did everything. But the other part was also the fact that Atlanta was just growing, and we bought it at the right time. We were able to hold something for two and a half years, do a forced appreciation play on it, and then sell for almost double.

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

Elijah Vo: They can reach me at eli@investwithamg.com.

Slocomb Reed: Eli, thank you very much for being here. It’s been great to learn from your success with your shorter-term holds on your apartment deals. Best Ever listeners, we hope you have a Best Ever day and we’ll see you tomorrow.

Elijah Vo: Awesome, Slocomb. Thank you very much.

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JF2667: 4 Best Self-Storage Growth Tips for 2022 with Ben Lapidus

In the past year, Ben Lapidus’ company grew from 13 self-storage operations to 51, with a portfolio of $100M AUM. Working through COVID-19, and looking to the future, Ben Lapidus provides his insight on the self-storage industry and what his strategy is for tackling the new year.

Ben Lapidus Real Estate Background

  • Chief Financial Officer for Spartan Investment Group LLC
  • Portfolio: 51 operation, $100M AUM 
  • Founder and host of the national Best Ever Real Estate Investing Conference and managing partner of Indigo Ownerships LLC
  • Say hi to him at www.spartan-investors.com

Best Ever Book: Covariant Loop Quantum Gravity: An Elementary Introduction to Quantum Gravity and Spinfoam Theory by Carlo Rovelli

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

Ben Lapidus: Doing well. Thanks for having me.

Slocomb Reed: Great to have you here. Ben is a partner and the chief financial officer for Spartan Investment Group LLC, where he has applied his finance and business development skills to acquire the company’s current portfolio, build the corporate finance backbone for the firm, and organize hundreds of millions of debt capital. Ben is also the founder and host of the National Best Ever Real Estate Investing Conference, and managing partner of Indigo Ownerships, LLC, where he sponsored 40 plus single-family and multifamily real estate transactions. Ben, you were just telling me, you’ve put together a pretty big deal here just last month. Why don’t we start there? What do you have going on right now?

Ben Lapidus: Sure. Spartan is a self-storage development and syndication company. We focus all our energy on self-storage assets. We’ve had a pretty big breakout year, we went from 13 operations to 51 operations this year, we’ve 5X’d our acquisition take-down, we’ve 8X’d our revenue, we’ve 6X’d our employee headcount, and that was kind of capstoned with a $100 million portfolio, 18 properties in Texas. The day before Thanksgiving, we finally closed. A 100-million-dollar total project costs, almost a 60-million-dollar loan.

Slocomb Reed: That’s exciting. That’s a lot of big numbers. You’ve got a lot going on. It sounds like explosive growth for Spartan. Talk me through that. That’s just in the past year, those numbers?

Ben Lapidus: Yeah, that was one deal, the 100-million-dollar deal. But we did 260 million dollars of takedowns this year.

Slocomb Reed: Gotcha. That 260 million – how many deals is that?

Ben Lapidus: 12 transactions.

Slocomb Reed: Gotcha. That’s exciting stuff. Tell me, with this 100-million-dollar portfolio – you said it’s in Texas?

Ben Lapidus: Yup. The 100-million-dollar portfolio is in Texas. It’s all around the Dallas-Fort Worth area, in Tyler, Texas.

Slocomb Reed: Awesome. I assume these deals came from brokers. Have you found that particular broker relationships have been more fruitful for you than others?

Ben Lapidus: For sure. Not all of our deals have come from brokers; some have been direct sellers. But yes. In the storage industry, it’s a little bit different than multifamily. There are more multifamily brokers in Dallas-Fort Worth than there are storage brokers in the US. So you want to build strong relationships with all of them. I mean that very literally, all of them. But yes, there are some that we tend to find that our transaction methods and our values for doing business match their values for doing business more so than others.

Slocomb Reed: That’s awesome. So this 100-million-dollar portfolio – tell me more about what makes it so exciting aside from just the size.

Ben Lapidus: Well, we’re excited about the opportunity to execute Spartan’s business plan, our standard kind of bread-and-butter business plan, which is to identify self-storage assets that have existing cash flow, but extra land, and market conditions that allow us to expand with low risk, so that we can take advantage of the cash flow from our existing structures, build new cash flow on top of the vacant land, and allow the cash flow from the existing supply, the existing structures, to cover the debt service on the expansion, so that we can essentially have the margins of a ground up development, with the risk profile of a cash-flowing asset.

We have, in this 18-property portfolio, five assets that we’re planning on expanding right away, but 11 of them can be expanded. Six of them, we did not believe were quite prime for expansion quite yet, but there’s at least five assets that we can expand on.

Typically also in self-storage we have 30-day lease cycles as opposed to 12- month lease cycles in multifamily, or a three to 10-year lease cycles in office, industrial, and retail. So we’re able to push rents very quickly, and on average, we’ve been pushing 15 to 20% in collections in nine months. So we could take 100,000 of rents and push it to 115 to $120,000 of rents in about nine months. We’re excited about the opportunity to do that.

We’ve also [unintelligible [00:05:13].11] these 18 assets down on top of a preexisting portfolio of about 12 assets that we already had in the area. We’re really excited about the economies of scale and economies of scope that can be achieved by adding these new assets and new team members in the region.

Slocomb Reed: So you’ll have 30 sites in the Dallas-Fort Worth area. Is there a sense that there’s a certain critical mass, a percentage of the market share or something like that, that gives you more control over what self-storage looks like in Dallas-Fort Worth?

Ben Lapidus: Absolutely. There’s more self-storage facilities in the United States than McDonald’s, Burger Kings, Starbucks, all combined, all three of those combined. So there are over 50,000 self-storages knocking on the door, 60,000 self-storage facilities in the US. It’s really difficult to take over markets like DFW. However, in Tyler, Texas with a population of 150,000 people, we’ve just added our fifth facility and we’re looking to have more. So we’re going to be the largest owner operator in Tyler, Texas, and the most sophisticated operator, which is great for search engine results and for competitive landscapes. We anticipate being the highest profitability operator in the region of Tyler, Texas. It’s easier to take over a market like Tyler, Texas, or Chattanooga, Tennessee, or Bentonville, Arkansas, than say a DFW, or Denver, or Seattle. But yes, there is a way to hit critical mass in some of these markets.

Slocomb Reed: Got you. You have a value-added business model. I don’t know if value added is the term that you’re going to use. You said you’re looking for ground up development type deals, but with cash-flowing asset financial structures… Do you see more opportunity in larger metro areas where you have vast competition? Or is it the Tyler, Texases that give you a better opportunity to do that?

Ben Lapidus: Right now, our investment thesis is focused on secondary markets and suburbs of primary markets. We’re not interested as much in competing with REITs. If I’m in Atlanta proper, I’m competing with — 92% of my competition is going to be REITs. Companies like Extra Space, Cubesmart, U-Haul, Public, Prime Storage, StorageMart, the last two being privately owned companies. But these are the top 10 largest operators in the world of self-storage. The majority of them are publicly traded, and they have access to much cheaper capital than us, and we would lose in a price war. And that happens.

During COVID times we owned a mall conversion in Fort Worth Texas proper, like downtown Fort Worth. It was a mall that is still in the process of being revitalized into different utility, the existing purpose. Across the street was an Extra Space, a mile north was an Extra Space, a mile south was an Extra Space, and something like 87% of the square footage in a 15-minute drive radius was REIT managed.

When COVID happened, Extra Space said “We’re cutting all rates nationwide by 50%.” Not the most intelligent play for all of their assets. They had assets that were 99% full, that went to 98.5% occupancy, that they still slashed rates 50% on. It didn’t make any sense, but that was still a policy they did. So across the street, where they had 99.6% occupancy, they slashed their rates 50% for six months. We invested a ton of money into search engine optimization, which is a typical playbook strategy that usually works. In Fort Worth, it wasn’t working, because Extra Space is spending a whole lot more.

So we tend to avoid heavy REIT competition areas and focus more on secondary markets. That’s a fear-based strategy. But the winning strategy that accompanies that is these REITs don’t really have the attention and capacity to take down five-million-dollar assets in a Tyler, Texas. They do, however, have the capacity to take down a billion-dollar portfolio. So we’re seeing a cap rate arbitrage between a 10-million-dollar transaction and a one-billion-dollar transaction, with exactly the same operational structure, the same avatar of ownership.

So you could buy a 10-million-dollar deal at a 5.5 cap and see the exact same billion-dollar portfolio that’s just comprised of a hundred 10-million-dollar assets, trade at a 3.75, or 4.0, or 4.25 cap rate, without changing anything to the operation, doing zero value add, zero rent pushes. So we’re seeing an arbitrage play by portfolio composition of concentrating our assets in secondary markets where we’re the largest operator, because it allows the top 10 ownership groups to get in at scale. So our portfolio thesis is to build a one to two-billion-dollar portfolio concentrated in the secondary markets that are attractive, to allow one of our big brother competitors to enter that market by buying a portfolio, if we choose to let that happen.

Break: [00:10:02][00:11:41]

Slocomb Reed: It sounds like you’ve found maybe not a niche, but you’ve found a property size or an asset size that really works well for you guys. There’s probably a limit where something is too small to make sense for you, but you have an upper limit where you don’t want to be competing with REIT money that can handle those three-caps. And correct me if I’m wrong, Ben – what you guys are doing is amassing portfolios from smaller properties to get them to the size that REIT money becomes interested in them and you’re able to sell them at a severely compressed cap rate?

Ben Lapidus: That’s right. And we’re often repositioning these assets, too. We’ll take over something that looks like a dog from an owner operator that wasn’t interested in investing in deferred maintenance. We’ll refresh it, we’ll push rents 20% in the first year, even if there is no expansion potential on the asset… And just the aesthetic appearance makes the coastal money more attracted to the asset, just by swapping out the first impression on the frontage. Which also improves our ability to increase rents, because tenants show up and they say, “Oh, this looks nice, it looks safe, it looks secure, it looks well managed and taken care of.”

Slocomb Reed: A little easier to do that with self-storage than it is with apartments, isn’t it?

Ben Lapidus: That’s right. Yes, it is.

Slocomb Reed: Gotcha. Do you see this business plan, this skill set that you all have put together in self-storage, do you see it translating to other asset classes?

Ben Lapidus: For sure. We don’t consider ourselves to be self-storage operators, we barely consider ourselves to be real estate investors. We consider ourselves to be students of business operations, and to combine our unique competencies as a team, and deploy them under a strategic thinking planning process that allows us to attack any business challenge. So we just happen to have decided, have landed on self-storage today, because that looks like the best opportunity in front of us… But we can take our business operation and mold it into any other asset class, really any other business model inside of the investing landscape.

Slocomb Reed: Gotcha. Ben, you’re a friend of the show, you’ve been on the podcast a few times now, I believe, and people know you from the Best Ever conference… But I don’t know that you’ve been on the podcast since COVID became a pandemic. How has COVID impacted the demand and possibly the supply of self-storage in America?

Ben Lapidus: Yeah. In the reverse way from what you think, it’s made everything a lot more attractive and a lot more lucrative in self-storage. COVID became the highest performing asset class in commercial real estate outside of data centers. After about a year, it even surpasses data center. So self-storage…

Slocomb Reed: This is self-storage during COVID?

Ben Lapidus: This is self-storage during COVID. I made mention of the first six months, how in primary markets it got really competitive as everybody kind of waited and buckled down for “shit to hit the fan”, but it didn’t. There was more new self-storage built between, I want to say, 2015 and 2020 than the previous 30 years of the industry combined. In that five-year period, a massive amount of new self-storage came to the market, peaking in Q3 of 2018 is when construction completions peaked. Everybody anticipated it was going to take three, four or five years for all this new supply to get incorporated into society. There was even an asset in Denver that was selling for 40 cents on the dollar that nobody purchased. A year later, it went back on the market for two and a half X and they got taken down within a month.

In Denver, it was probably the second most concerning city in terms of oversaturation of new storage supply. But all of the new supply got eaten up; the demand was there to match it in about a year or year and a half, more than twice as fast as the best predictions. Consequently, rents nationwide increased from June of 2020 to June of 2021 by 12%, while occupancy went up by 4.6%. So just massive rent growth over the year.

And new construction has gotten more difficult. Wood skyrocketed, metal tripled in cost, labor went up 20%, all in about a year. So our construction for a flat-graded site in Texas went from about 40 bucks a foot, for climate control, single story buildings, to about 60 bucks a foot, climate control, single story buildings. So a 50% increase in overall costs, which is just nuts. It’s making new construction more difficult; it’s making markets like Tyler, Texas, where the rents are lower than DFW, almost impossible to build new in, unless the rents are increased. That’s what started to happen, because there’s no additional supply and there’s this great migration pattern happening and people moving to Tyler, Texas. Rents are increasing as occupancy increases. It’s making the identification of assets much simpler. Three or four years ago, we used to say Denver is oversaturated, but you can find a good deal. It’s an intersection specific play, it’s a convenience play. So if you find the right intersection in an oversaturated market, you could do very well.

Today, it’s not as necessary. Almost every intersection is either neutral or slightly under supply. As opposed to a couple years ago, we assessed it to be oversupplied. So there’s more opportunity out there; the ride, the wave of self-storage is not over. More than $40 billion of dry powder has entered the space in the last year and a half. Blackstone, KKR, Brookfield have all gotten into the business. Bill Gates and Singapore sovereign wealth funds just funded StorageMart, Prime Storage just launched another three-billion-dollar fund that they just finished raising… There’s just so much dry powder. Public storage sat and waited for about three or four years without buying anything, and it took down two billion and a half dollar portfolios this year. It’s just a massive shift in the last year for storage, and cap rates have compressed despite interest rates going up.

Slocomb Reed: That’s a lot of great information, Ben. A couple of things – you said during COVID, your cost to build went from $40 a foot to $60 a foot. That’s a 50% increase. What is the rent growth during that same period? Is it proportional?

Ben Lapidus: No. 12%.

Slocomb Reed: Okay. And that’s 12% in Tyler, Texas as well as Dallas Fort Worth?

Ben Lapidus: No, it varies entirely. Yardi is the number one data provider of nationwide shifts, macroeconomic shifts in self-storage. I don’t remember the number one city, but I remember the number two city on their top 25 lists, with Atlanta, and it had 24% rent growth. So it’s all over the place, but on average, it’s 12%. In Tyler, Texas — like I said, we’re finding ourselves pushing collections by 15 to 20% in the first nine months of almost every asset that we’re buying, whether it’s Georgia, or Texas, or Colorado, or Wisconsin, or anywhere else that we’re buying. But a lot of those assets that we’re buying have rents that were under market even a year ago. So it’s difficult to tell exactly based off of our own acquisitions. Tyler, Texas is not a metro that Yardi measures, but at least 12% in Tyler, Texas.

Slocomb Reed: So for someone who wants to get into self-storage now, end of 2021, early 2022, you’re describing compressing cap rates, increased construction costs, outpacing rent growth, although the rent growth is solid… Where do you see opportunity for someone who wants to get into the self-storage game now?

Ben Lapidus: It’s fairly difficult.

Slocomb Reed: Let me ask, Ben, is there a property that is too small for you and your team? You guys play underneath the “big money?” Are there people who can get into a space underneath you and still get really good returns?

Ben Lapidus: For sure. We typically look for assets that can generate at least a quarter million dollars a year in revenue. We do own a few – they’re smaller, maybe they do 100k or 150k in revenue, but there’s expansion potential and we know that they can improve there. If you have a 20,000 square foot asset in Harlingen, Texas or in Tea, South Dakota, it’s not really a place that groups like myself or the big REITs are going to identify as an acquisition target. There are some groups our size that do go after assets like that. KO Storage is very good at operating in rural areas with smaller purchase prices. But for the most part, groups like ours don’t attack those.

So yeah, a 20,000 square foot asset that’s generating $100,000 in revenue – there’s just not enough revenue there to support the overhead, the cost to operate it the way that we’d like to operate it from a centralized location in Denver. If you’re right around the corner, you could end up doing very well and have a very lucrative business operation. Just know that it’s not just buying passive real estate, it is a business operation that does require a time investment, and does have a burden of ownership, just like any other real estate. It is more hands on than retail or office, but not as hands on as multifamily or mobile home parks.

Slocomb Reed: To that point, Ben, that it’s not as management intensive as multifamily or mobile home parks – how big does a self-storage facility need to be to justify a full-time employee on site?

Ben Lapidus: It brings up another can of worms conversationally about where the industry is going to a contactless experience, which is more efficient from a cost standpoint. But right now, we typically target 200k to 250k in revenue is our minimum that we’re looking for to support our operational model, which does include somebody on site. That typically is around 35,000 square feet in a market like Florida, or maybe as much as 45,000 feet in Gary, Indiana.

Break: [00:21:09][00:24:05]

Slocomb Reed: Do you think there’s opportunity for people who want to get into self-storage, it sounds like, if they’re willing to owner-operate in a smaller than that space?

Ben Lapidus: Yeah, for sure.

Slocomb Reed: And it sounds like the opportunity you guys are taking advantage of is buying the assets smaller than what the REITs are interested in, in order to do some construction, do some new development and some building a portfolio of assets in an area large enough that the buyers at the lower cap rates will be interested in buying it from you at a multiple of what you’ve got in it.

Ben Lapidus: Yeah. And one clarification there is that we do have some assets that the REITs would love – they’re beautiful assets, 15 to $20 million – but they’re in markets that the REITs aren’t already in, so it’s more of the scale inside that market that’s too small.

Slocomb Reed: Got you. They need scale, so you are bundling scale for them to sell it to them at a multiple of what…

Ben Lapidus: Exactly.

Slocomb Reed: What is your Best Ever advice?

Ben Lapidus: Best Ever advice is to focus on people’s why’s, and then to identify who have why’s that complement your why, but have different competencies to support you. I think everybody focuses too much on the how. There’s a great book, Who, Not How by Dan Sullivan, and there’s a great book Start With Why by Simon Sinek. When you combine those two together, they are magical. Identify people’s why’s, incentivize them, and empower them to achieve their why by making them your who to achieve your mission in your life.

Slocomb Reed: Awesome. Ben, are you ready for a lightning round?

Ben Lapidus: Let’s do it.

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

Ben Lapidus: Right now, I’m 100% concentrated on scaling our business. We’re trying to create a great place to work. Our big, hairy, audacious goal in progress – so it might change, but our big, hairy, audacious goal in progress is to create wealth for every Spartan, and 100,000 active investors at Spartan investment group. The creating wealth for every Spartan component is where I’m most concentrated, creating a great place to work. We’ve grown to 70 employees and we’re targeting 300 in the next year or so. So identifying where we can improve the lives of our people – that’s where I’m currently focused. I’d like to broaden that scope as I age in life. Right now, I want to stay very, very focused on my team.

Slocomb Reed: That’s awesome. What is the Best Ever book you’ve recently read?

Ben Lapidus: Ah, man, I’m going to be a little bit off the beaten path, but Carlo Rovelli is an Italian physicist that specializes in gravitational loop theory. He has made gravitational physics accessible for the layman like me who has never taken a physics course. It’s changed my entire concept about time and space and purpose of life. Physics has become my new religion. I think that everybody should be a student of quantum particle gravitational physics, because it is the most interesting subject matter in the human experience.

Slocomb Reed: Ben, do you see direct correlation between what you’re learning, reading about gravitational loop theory from Carlo Rovelli with what you’re doing with real estate?

Ben Lapidus: Yes. People ask me that all the time. They’re like, “Why are you concentrated on that?” I think that too much of us in the business world focus on business books, self-help books, psychology books… And I’ve done a ton of reading on leadership in the last couple of years as we’ve grown our team. But when you’re a leader, you have to start thinking about different psychology and philosophy of conversations and interactions, so now you start studying things like stoicism, nihilism, and different ways of holding yourself, and interacting with others. Then you kind of think about like, “Why be a stoic? What’s the purpose of life behind that?” Gravitational physics helps give me a grounded sense of reality as I explore different philosophical postures in my interactions and expand my emotional intelligence to be a leader with my people. That’s all helping coagulate our team to drive in a particular mission, in a particular direction. It doesn’t help me be a better investor. I read the Economist, I read the Wall Street Journal, I’m a student of economics, but that’s a different subject matter. But in building a team and leading them, I’m way too introspective and way too cerebral to just say “Do this thing, I expect you to do it.” I have to understand the why behind all of my individuals, what motivates them, I have to understand the why behind myself. How do I optimize my own energy flow throughout the day? How do I not get decision fatigue? So I read Marcus Aurelius, and – I don’t know, I’m blanking on other philosophers, but I read those books…

Slocomb Reed: Lucius Seneca maybe.

Ben Lapidus: Exactly. Thank you.

Slocomb Reed: I have a philosophy nerve too. Back into the lightning round. Ben, what is the most money you’ve ever lost on a deal?

Ben Lapidus: The most money I’ve ever lost on a deal was two flips in the Chicagoland area for about $180,000.

Slocomb Reed: Those are single-family flips?

Ben Lapidus: Single-family flips. Yeah, not a great solo flipper.

Slocomb Reed: Gotcha. What about the most money you’ve made on a deal?

Ben Lapidus: The deals not over yet, but 24 million.

Slocomb Reed: Talk about that. That’s the money you’ll make on a deal you’re doing now?

Ben Lapidus: Yeah. So on a $100 million portfolio, we might generate four million dollars of revenue in our first year, which we did, and anticipate $20 million of upside to our ownership group after hitting all of our return targets and beyond for our investors. The second deal…

Slocomb Reed: What’s the hold period on that?

Ben Lapidus: Five years. A better option – we built a mobile home park in Sequim, Washington. It started in February of last year, we purchased the land, we just got our CFO last year, we’re under contract to sell it in two weeks, we’re more than double our cost basis. We’re generating about $13 million of upside in about a year and a half.

Slocomb Reed: Awesome. What does that return look like for your investors?

Ben Lapidus: Spartan is going to earn a couple of million dollars on that, but our investors are getting 175% return in about 18 months approximately.

Slocomb Reed: That’s awesome. Where can people get in touch with you, Ben?

Ben Lapidus: ben@spartan-investors.com or ben@besteverconference.com.

Slocomb Reed: Yeah, the Best Ever Conference is coming up soon. We are soon going to release an episode exclusively about the experience of the Best Ever Conference. We’ll get into that more here soon. But for today, Best Ever listeners, we hope you have a Best Ever day. Ben Lapidus, thank you again for all the insight you’ve given to us. We will see you again tomorrow.

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JF2663: 3 Ways to Find Deals as an Introverted Investor with Camilla Jeffs

Camilla Jeffs was a burnt out, introverted landlord. When she learned about passive investing, it sounded like the perfect elixir to her fatigue. There was just one problem: commercial real estate is a team sport, and as an introvert, the idea of having to talk and network with groups of people was overwhelming. However, Camilla was able to create a strategy to work with and overcome a lot of the anxiety that surrounded the necessity of networking. In this episode, Camilla shares three great tips that introverted investors can use to overcome their anxiety and seek out amazing deals.

Camilla Jeffs Real Estate Background

  • Founder and CEO at Steady Stream Investments, which helps people achieve an elevated level of financial health through investing passively in cash-flowing real estate that impacts local communities, all without the hassles of being a landlord.
  • Portfolio: 107 multifamily units passive, 600+ multifamily units active, 64-bed assisted living new construction, totaling to $80M AUM.
  • Based in: North Dallas, TX
  • Say hi to her at: www.camillajeffs.com


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

Camilla Jeffs: Fantastic. Thanks for having me on.

Slocomb Reed: Great to have you here. Camilla officially went full-time as a real estate investor about 10 weeks ago. She has 18 years of commercial real estate investing experience as a multifamily syndicator, both active and passive. Her current portfolio includes 107 multifamily units in which she’s invested passively, 600 plus multifamily units where she’s an active investor, and a 64-bed assisted living new construction, totaling at 80 million in AUM. She’s based in North Dallas, Texas, and you can say hi to her at camillajeffs.com. Camilla, tell us about yourself. What got you into real estate?

Camilla Jeffs: Thanks. I want to clarify one point on the bio. You said I have 18 years of commercial real estate experience. That’s not true. 15 of that was actually residential. I spent 15 years in the residential space doing single-family rentals, some small multifamily as well… But what got me into real estate? Well, it really was necessity. My husband and I were living in a garage apartment, had very little money, we were both students in college, trying to make ends meet, working full-time, school full-time… And our landlady came to collect the rent one day, because that was back in the time where you put the rent in an envelope on your door and they would pick it up. I started a conversation with her and just said, “How are you doing in what you’re doing? I know you have multiple rentals. I know you’re a realtor as well. Tell me about this.” As we started talking, she suggested that maybe I should buy a house. I was like, “No, we’re poor. We don’t have any money. There’s no way we can afford a house. We can barely afford this garage apartment that we are renting.”

She said, “Actually, there’s a really cool strategy you could use where you could buy a house that has a basement apartment, and then you could rent it out, and your monthly payment might even be lower than what you’re paying in the garage apartment.” I thought about that for a minute. I thought “That’s really interesting.” That’s exactly what we did. We worked with her and we found a six-bedroom home. It was giant. Well, for us it was giant, because we’re in this little tiny, nasty apartment. And we bought this home as owner-occupants, so we were able to put just 3% down and got the best interest rates… And then it had a basement apartment, it had a kitchen in the basement, three bedrooms in the basement, and we rented those out, and we were able to live there for about $150 a month, is all that we paid for that house. And it had a pool in the backyard. How cool was that?

Slocomb Reed: That’s awesome.

Camilla Jeffs: And it was the only way that we really could get into it — well in our minds, at that time. That’s the only way we thought we could get into it. So today the term is house-hacking, and it’s a fantastic way to start in real estate for anybody. I recommend it for anybody to house-hack. And then that’s when we started thinking, “Okay, there’s something to this real estate thing”, and I started diving in, reading all the books I could find, and figuring it out. Then we just grew our portfolio, one house at a time. We were not the 10Xers, we were not the one out there massively pounding the pavement and getting it; we were just growing our portfolio.

So for 15 years, we grew a nice single-family residential portfolio, and then I hit burnout. I hit this point, because we were literally doing everything ourselves. I was mowing the lawn, we were fixing the toilets, answering the tenant calls, all the things. I was just to the point where like, “I’m tired.” And we had five kids by then, so there was a lot going on. Then I decided to pivot into large multifamily. The first thing we did was sell a bunch of our properties and invest passively. Then second, now I’ve built an active multifamily portfolio by focusing on teaching other people how to invest passively into real estate. That’s where I am today.

Slocomb Reed: Awesome. So you made the transition from single-family and small multifamily into larger deals, primarily to get yourself out of the day-to-day tasks that you were doing when you were self-managing?

Camilla Jeffs: Yeah, I was definitely looking for more time freedom.

Slocomb Reed: That’s awesome. What does your active investing look like now? Are you specifically in the Dallas Metro? What size properties are you looking for?

Camilla Jeffs: We just barely moved to Dallas about a year ago, so I’m still figuring out the Dallas market. I actually don’t have any assets in Dallas yet, but I plan to pick up a couple next year. But my portfolio consists of four assets in Arizona and two assets in Oklahoma. I like both of those markets, for two different reasons. Arizona, that’s where we used to live, so I know that market well and spent a lot of time in that market. It’s growing like crazy high appreciation, it’s booming; so that’s a great appreciation market to take advantage of that. And then Oklahoma is just a fantastic cash flowing market. It just cash flows from day one, really nice returns in terms of cash flow. Those are the two markets that I focus on currently.

Slocomb Reed: Is there a particular part of Oklahoma?

Camilla Jeffs: I have an asset in Oklahoma City and one near Tulsa. Both are great.

Slocomb Reed: You said you sold some of your portfolio, your smaller stuff, to get into passive investing. As a passive investor, what attracted you to particular syndicators or operators? Who is it that got your business, and why?

Camilla Jeffs: To be honest, it wasn’t very scientific for me in the beginning, because I didn’t know what I didn’t know. I’ve been a real estate investor for 15 years, so I thought I had a good experience, I thought I knew about real estate… But actually, investing in commercial real estate is completely different. There are different metrics, they use different numbers, they talk about it in a different way. With my real estate investing, for example, I never thought about equity multiple. And in commercial real estate we talk about equity multiples. Well, that’s because in my single-family portfolio, I didn’t have a set end date. I couldn’t project over five years, for example, which is what we do in commercial. So equity multiple was a very fascinating number for me to fixate on that.

So how did I find the people that I ultimately invested with? Again, living in Arizona, so I knew I wanted to invest in an Arizona asset, so I could drive by it and see it, because I wanted to be able to touch it. That’s what I had done with all my other properties; because I’m still in this DIY mindset. I’m trying to figure out “How can I even partner with other people? How can I trust these people to take care of my money?” It caused a lot of anxiety for me. I knew it was the right thing to do, I knew it was the right way to level up and to get out of being a landlord, but it was still hard to pass my money over and feel 100% confident. I don’t think you ever feel 100% confident in an investment. There are always risks, there’s always things, but you can do some steps.

One of the steps I did was I wanted to meet the people that I was investing with. So I got out of my comfort zone – and I think we’re going to talk about being an introvert a little bit later, in a bit… But I’m an introvert, and I never, never in my 15 years of investing, in the beginning, did I go to a real estate networking event. That was way too scary, I didn’t ever want to do that. So I didn’t really have any other friends who were investing. Well, to invest in commercial, it’s group investing; you can’t do it on your own. So I had to get out of my comfort zone, so I literally googled multifamily meetup in Arizona, and I started going to some of those. Some were very inexperienced people like me, who’d never done anything, that were trying to figure it out how to do something. And then some had more experience, folks that were there. So I just started networking and talking to some of the folks.

After I’d gotten to know a certain guy for a while, he came to me and he’s like, “Hey Camilla, I have a deal.” I was like, “Okay, show me what this deal looks like.” He walked me through the deal, he answered all my questions, and then I was like, “Okay, let me think about it. I’ll get back to you.” Over the next couple of weeks, he just followed up with me; he was just right there like, “Hey, what do you think? Do you have any other questions? How can I help?” He was very responsive to me and I really appreciated that about him, that he didn’t just, “Okay, if she’s interested, she’ll get back to me.” Because honestly, I probably never would have. I never would have gotten back to him, because I just needed someone to kind of push me along and help me to do that.

So really, after looking at what he had, talking to him about his track record, like “What have you done in the past?” And I’ll admit, it was light, it wasn’t even like someone who’d been doing it for 10 or 15 years. He’d been doing it for a couple of years. But I really liked the deal, I liked the concept of group investing, and I wanted to have that experience and have that as part of my portfolio. So I ended up investing $50,000 into that investment. And it’s going really well, it’s awesome. I get checks, I get notifications, and updates on it… And that’s the only thing I do. I don’t have to do anything. It’s amazing.

Slocomb Reed: Very different from taking your own maintenance calls, and cutting your own grass, and showing your own houses, for sure.

Camilla Jeffs: Yeah. 100%.

Slocomb Reed: That’s awesome.

Break: [00:10:32][00:12:12]

Slocomb Reed: Camilla, thinking about yourself around three years ago when you invested passively for the first time, thinking of yourself as an introvert do-it-yourselfer who wants to get more time freedom and get into larger deals, take better advantage of the wealth that you built for yourself through your own active investing – thinking back to yourself three years ago, what advice would you give to other people who find themselves in the same situation? They’ve been shoveling garbage out of their parking lots, and showing apartments, getting stood up, getting paint on clothes they never thought would have paint on them… What advice do you have for those people to get into passive investing?

Camilla Jeffs: Yeah, I ruined a lot of pants. [laughs] That paint, you just like accidentally bump a wall, you’re like “Dang it!” [unintelligible [00:13:07].00] those pants.

Slocomb Reed: Best Ever advice for people who have to do their own manual labor – wear scrubs, what nurses wear. It’s tough, it’s durable, it’s lightweight, it doesn’t matter how hot it is outside… I have so many dirty, bloody, painty scrubs from when I’ve had to do that stuff myself. Sorry Camilla, please continue.

Camilla Jeffs: I love it. I love it. [laughs] Okay, so what advice would I give to a fellow introverted burnt out landlord? Number one is there is a better way; there just is. It’s pretty crazy that the returns that I’m getting on this passive investment beat out some of the returns that I was getting on some of my single-family properties. I literally don’t have to do any of the work. That was mind-blowing to me. So number one, there’s a better way.

Number two – yes, it’s going to take a little bit of getting out of your comfort zone to get started. I think that’s the hardest part. The hardest part is getting out of that comfort zone a little bit to get started. And what I mean by a little bit is you don’t need to meet 50 syndicators; you need to meet a couple. You need to find a couple of people that you feel comfortable with, that you feel like they have the same vision and values as you, that you feel like are going to be very communicative, that you feel comfortable with their experience, their background, and what they bring to the table. Then you can start evaluating their opportunities.

So how do you meet them? Well, you’ve gotta attend some networking events. The whole nature of commercial real estate investing and some of the rules that we have to follow for the SEC are you have to have a personal relationship, a lot of times, to even get in these deals. So what is a personal relationship? It could be as simple as a call that you’ve had, like a Zoom call, face-to-face, or you met up at a real estate conference, or things like that.

You can go to real estate conferences… Go to a real estate conference. I know that’s even scarier than a smaller meetup. So here are my strategies for doing that; here’s my Best Ever advice for introverts, at real estate networking. Number one, when you walk in the room, find someone who’s sitting alone. Chances are that person is also an introvert and is just as uncomfortable as you are. Go sit by that person and strike up a conversation. They will be so grateful that you did. And then you have your one-on-one conversation. No awkward, “Oh, there’s this clump of five people who are talking and laughing, and I’ll try to like waddle up and see if they’ll notice me, or insert myself…” No, that does not work for introverts. We don’t do that, we don’t work like that. So find someone there.

Number two advice is to set a goal for yourself, whether that’s three people or five people – set a small goal for yourself that says, “I cannot leave this conference until I have met five new people.” And then, once you’ve hit that goal, give yourself permission to leave. And if you’re still uncomfortable after meeting five new people, you have full-on permission to leave. You’ve hit your goal, you can pat yourself on the back, “I did it! I met five people. I got five business cards, people I could follow up with and talk to you later. Great. I’m done. I can go home.”

Because one of the challenges that introverts have is that, being in those large groups of people, it drains our energy. It’s not that we don’t like it, it just drains our energy, because we gain energy from being alone, in our thoughts, reading a book, walking in nature, things like that. That’s how we gain energy. Whereas extroverts, they gain energy from being with people, and they really feed on each other. It just drains introverts. But it’s not that we don’t want to be there and we don’t like talking to people; that’s a myth about introverts. But that’s my advice for introverts at networking conferences.

Slocomb Reed: That’s awesome. Find the other introverts; you know how to identify yourselves because they look and feel the way you look and feel, walking into a big room. And set a goal for how many people you know you’ll talk to. Then give yourself permission to be done when you need to be done and the tank is empty. That’s awesome. Camilla, taking the perspective of I know a lot of our listeners were active investors, and taking the perspective of myself if I’m honest, and you now as an active investor, what advice do you have for us when we are looking to attract passive investors to ourselves, particularly introverted passive investors?

Camilla Jeffs: To attract passive investors, you need to be heavily focused on education. I always say that Steady Stream Investments is an education company, because that’s what I do, I really focus on education. So if you think about a passive investor – and I thought really hard about my own experience and what my own experience was like, what I could have used to feel even more comfortable about investing… Because I felt like I was the one that was pulling for the information. But if you can set yourself up as someone who is pushing information to your investors, your investor database – that’s key, you’ve got to start building an investor database, and then nurturing that database in some shape or form.

My favorite thing to do is at first — but first start your database, you need to send out a sample deal… You need to come up with a sample deal, like “Here’s the types of deals I’m looking at.” If you’re in your mind, you’re like, “My next deal, I probably need to raise money from passive investors. I’ve never done it before. What do I do?” Put together a three-page thing on this deal. What is this going to look like? Where’s it going to be? Why do you like this market? What type of deal will it be? What kind of returns would the investor expect to receive? Everybody you know that you have their email, send this information to them and say, “You know, I’ve been an investor, and I’ve been doing this, and this, and I’m really excited about the next steps. My next step would be to start a group investment where I can allow other people to invest with me. So if I had a deal like this, would you be interested?” Everybody who says yes, you put them on a list. Now, this is the start of your investor database.

This is where most people get it wrong… Because they’ll do that, they’ll start, and they’ll get all these people who say they’re interested, and then they think, “Okay, great. Now when I have a deal, I’ll send it to all these interested people and they will invest.” Well, there’s a big difference between someone who is interested and someone who actually invests in a deal. Everybody’s interested in real estate, everybody knows that real estate’s a great investment. But to get them to actually invest, you have to really be strategic in educating them; so you can’t just leave them alone. So you’ve got to be sending out information constantly, and then think really hard about the information you’re sending out. Is it tailored to a passive investor, what a passive investor needs to know, or are you just touting your accomplishments and achievements and “Here are all the things that I’ve done, and here’s what I’m doing”, just to stay top of mind?

Again, a big difference between sending out information that says, “Here’s what I’ve been doing all the time. Here are all the podcasts I’ve been on. Here’s all this stuff” and then you flip that and say, “Hey, you investor, here’s what you need to know to be prepared for the next deal. Here’s how you vet a sponsor. Here’s how you vet a deal. Here’s what you need to understand about equity multiples. Here’s what you need to understand about the average annual return. Here’s what you need to know about IRR.” Hardly anybody understands IRR. That’s a hard calculation to figure out. So think about how you’re educating your investors… And I guarantee, if you flip the script and focus on the education of your investors, by the time you have a deal, they will be ready and they will invest in your deal.

Break: [00:20:59][00:23:56]

Slocomb Reed: A personal question, Camilla… This is coming from me and I hope it is relatable to some of our Best Ever listeners. Let me set the scene for you. I host Cincinnati’s Best Ever Real Estate Investor Mastermind at Joe Fairless’ investor meetup here in Cincy… And I am a large, gregarious man, 6’4″, 300 plus pounds. When I raise my voice to make an announcement, everyone just naturally gets quiet, turns around, listens, and then does whatever I tell them to do. The opposite of the introvert experience at meetups like that. I know there Best Ever listeners here who host local meetups and want to engage everyone who walks through the door. How can I help 2017 Camilla feel welcome at my meetup and how can I help you get connected with the people she showed up to connect with without draining the energy tank too quickly?

Camilla Jeffs: Well, number one — as an introvert, when I walk into a room, I immediately scan the room and try to figure out who is safe for me to talk to, and who’s going to be a safe person. I think as the host of the meetup, I think you need to work really hard on your own safety vibe. What vibe are you giving off? I think the way you approach – so you can’t approach gregariously, or I’m going to be like, “Whoa…! You’re too much. I can’t handle you.” But I think you can definitely approach me and welcome me; that’s really helpful, actually, for an introvert to be welcomed immediately, as soon as we walk in the space. So I think being the greeter at the door would be helpful for you.

Anybody who’s hosting a meetup – greet at the door. Don’t be standing in the front of the room behind your desk, or table, or whatever. I get, you need to set up, but you got to set up well before the time that people started coming, so that 10 minutes before, you can be at the door and greeting people as they come in. And you’ll know immediately who a new person is, because you’re the one running this meetup. It depends on how big your meetup is. I walk in, I’m a new person…

Slocomb Reed: Introverts tend to show up early.

Camilla Jeffs: That’s right, we do. Because we want to sit up front, so we don’t have to be distracted by all the people. So as I walk in the door, you greet me and you’re like, “Hey, welcome. I haven’t met you before. What’s your name?” Immediately, I’m put at ease, because I don’t have to be the one that starts the conversation. I think it’s hard for introverts to start a conversation. If you ask me a question, I’m happy to answer that question. Then ask the second question you alluded to, “What are you looking for? How can I help you?” Then as they answer that question, in your mind, you should be thinking of people that you can introduce them to. The third step is to take them over to Sally over here and be like, “I think you would really like to meet Sally”, introduce them to Sally, and then you leave them on their own, and then you can go back to greeting more people. That would be a perfect scenario for me as an introvert walking into a brand new meetup.

Slocomb Reed: Awesome. Let’s wind down with this… Camilla, give me an example of a passive investor who remains nameless, of course, who you have engaged with to educate them and help them not only learn passive commercial real estate investing, but also invest in your deals – how you engaged with them to give them the confidence to invest with you.

Camilla Jeffs: I do that through multiple avenues. I started out building my email list, and then I do send out newsletters. I also added on webinars, so I hold monthly webinars with my passive investors, and we cover a certain topic. Last month, we did the three biggest risks to investing passively, so they could fully understand their risks. Then I have a one-on-one conversation with every single investor that comes into my database to answer their questions and help them out.

So I have a pool of investors, sometimes they’re in the background and they’re just kind of watching the education and reading it, and it takes them a while. And it doesn’t bother me at all. It doesn’t bother me at all if someone comes into my thing and they don’t invest for two, three, or four years; that’s fine. If you need that time to feel fully educated or feel like you have enough money saved – whatever, totally fine.

I had one who was in my database for almost two years, and finally, they invested. When they decided to invest, once I launched a deal, they put in a commitment. I was so excited to see their name on there, because I’d been working with them for a while… And then we had several conversations about it, because they’re still a little bit nervous and still wanted to fully understand everything. When it’s the first time investing, it’s a lot to take in. When you’re faced with that PPM that’s 100 pages of legalese, in really big letters, and it says risky, risky, risky, risky all the way through… It’s a lot, and I think that’s something that I’ve been able to really develop, kind of my superpower, is really helping the first-time passive investor fully understand the process so that they feel comfortable… 90% comfortable. Again, as I said, you’re never going to be 100% comfortable. But once you’re at 90%, you can invest, and getting them into a deal. And then we celebrate. It’s very exciting for them when it’s your first time investing in a deal, then you start receiving the distributions, you receive the monthly updates, and that’s when you start feeling really good about the choice that you made.

Slocomb Reed: Awesome. That’s good stuff, Camilla. Thank you. And thank you for sharing your personal story and what it is that you’re doing to help investors now. If you are a burnt-out landlord, there is a better way. Re-listen to this episode. Camilla has shared her story to tell you about that better way. Get out of your comfort zone and do networking. Commercial real estate is it team game, it’s a group investment. When you are looking to attract passive investors for your active deals, focus on educating them and be proactive. Be the one who reaches out to the people who are looking to invest, to get their questions answered, their concerns addressed, and get them investing in your deals. Camilla, thank you again. Best Ever listeners, we hope you have a Best Ever day and we’ll see you tomorrow.

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JF2650: How One College Grad Grew His Portfolio to 359 Units in 1.5 Years with Braeden Windham

During his senior year of college, Braeden Windham wasn’t sure what he wanted to do with his career. It wasn’t until he met his future partner at an event that he found direction. Handed a pile of books and a list of podcasts about CREI by his partner, Braeden spent the rest of the semester studying real estate investing and syndication. Fast forward a year and a half, and now Braeden is the Founding Partner of multifamily investment firm Well Capital. In this episode, Braeden talks about how clarity and transparency guided his success over the past year, along with a few lessons learned along the way.

Braeden Windham Real Estate Background

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Ash Patel: Hello Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Braeden Windham. Braeden is joining us from Dallas, Texas. He’s the founding partner of Well Capital which is a multifamily investment firm. He has one and a half years of real estate investing experience. Braeden has 359 units across three apartment complexes. Braeden, thank you for joining us and how are you today?

Braeden Windham: Thank you for having me. I’m doing well. How are you?

Ash Patel: I’m doing very well. It’s our pleasure. Braeden, before we get started, can you give the best of listeners a little bit more about your background and what you’re focused on now?

Braeden Windham: Absolutely. First off, thank you for having me. I’m excited about the conversation today. How I got into real estate… First work experience – I was a ranch hand at 16 or 17 years old. I really learned what it looked like to work really hard for my money, and I never really wanted to do that again. Fast-forward to college, I had an internship with a company that bought other healthcare companies. That was kind of my first, I guess, exposure to purchasing assets and what that could do for you. I guess I didn’t know how it really applied until my senior year of college. I really didn’t have a clue what I wanted to do professionally. I figured I didn’t really want a boss, but I thought maybe being a real estate agent was the closest thing I could get to that. I met my business partner actually at a church event, and he dumped five or six books in my lap and a bunch of podcasts. He was like “You need to go learn about real estate investing and syndication.” I had no idea what that was, but I just went all in, because I didn’t have much else to do. I think I had like two or three classes in my last semester. That’s kind of how I got started.

Since then, he hired me on out in Florida to actually do construction management work, where we were basically taking government grant money and managing on the construction of 500 or so projects. We really learned where our strengths and weaknesses were in our partnership. Since March of this year, I left that to just be syndicating full-time and investing in real estate. That’s a little bit about my background. Now we’re just focused on acquiring and repositioning assets in the southeast and the Midwest. Really anything over 100 units at this point.

Ash Patel: What a story. What the hell were you going to college for?

Braeden Windham: I was actually in finance, with a real estate background. I went into it and I had no idea what I wanted to do. I actually went to my real estate teacher to ask him about syndications, and he had no idea what it was. So I filled my ears with a bunch of podcasts at that time, just to self-motivate and learn about the industry.

Ash Patel: You should go back and teach a class on syndication.

Braeden Windham: They actually do have a syndicator that’s teaching the class now. If I could just go back three or four years, that’d be great.

Break: [00:03:20][00:04:53]

Ash Patel: Alright, so let’s back up a little bit. This person that you met, who was then your partner later on, you guys partnered together immediately and started working on these projects?

Braeden Windham: Yes. He had had a few Airbnb experiences, he had invested in some Airbnb properties, and then also had been exposed to development from a really young age, and his family had been involved in real estate. So he was a little bit ahead of me in that sense, and really knew more about the syndication space. I guess when I jumped in, I was gung-ho about it, and I was like, “Let’s go to the next event, if possible.” Because I was listening to actually Rod Khleif’s podcast, and he was having an event in LA. We flew out within three months of me learning about this stuff and I just invited them out. That was the first time we had ever hung out together, been in the same room together, was at that event. Just since then, we’ve been able to work together for probably close to a year just outside of real estate so we’ve really gotten to learn. He likes to say that he’s the gas and I’m the brakes, and I think that’s a really good metaphor for our partnership.

Ash Patel: Is he still a partner in your syndications?

Braeden Windham: Yeah, we founded Well Capital together. The origin of Well Capital is we were both giving to the same charity just on a personal level, and we woke up one day and we’re like, “Why don’t we make this a company-wide thing?” Because we gave to charity water and, basically, they take funds overseas to give people clean water who have never had it before. So we were just like “Why don’t we rebrand our company as Well Capital and just make it more about that than syndicating apartments?” I think that’s an easier conversation to have with whoever, passive investors or anyone you’re going to talk to. It’s an easy way to make the intro and make it more than about yourself, it’s more about other people.

Ash Patel: Braeden, what was your first syndication?

Braeden Windham: That was a 47-unit in South Texas. It was in Rockport, actually.

Ash Patel: What were the numbers on that deal?

Braeden Windham: We bought that for 2.3, we put about 1.2 million into it, and then right now, we’re going through a refi. A lot of lessons were learned on that first deal. We as a GP probably aren’t going to make much, but it’s a huge learning lesson. I think the appraised value was around 4.4 or 4.6, and that was 18 months ago, which is insane. So it just taught me a lot about what I should be doing, and what I can move forward and do better. I’m super thankful for the first deal.

Ash Patel: Why are you not going to make money? I see over a million dollars…

Braeden Windham: That’s a good question. That’s a loaded one. I think it really just comes down to — for me, it’s a lot of angst. First off, we just had a lot of, I would say inexperience, and we partnered for that inexperience, which is what a lot of people tell you to do. I completely agree. But you have to ask very tough questions up front, if I had any advice on that. So we got into it and just the rehab budget expanded, almost doubled. So we really shot ourselves in the foot when it comes to what we were going to make on that deal. And just not having the people in place to actually know what that rehab was going to cost… So we definitely learned from it.

Ash Patel: What were the hard lessons that you were talking about on this deal?

Braeden Windham: I repeat it all the time, it’s making sure that everything is in an email, everything is agreed upon, that there aren’t any “Oh, I thought you said this, or you were going to do this.” No, everything is in an email, everything’s clear and written out. And just having professionals walk with you on the front end is very important, in my opinion. Because me walking a unit at 21 or 22 years old, and a general contractor that’s done this for 50 plus years, walking in on the front end and telling me there are things behind these walls, or there are structural issues, or there are termites, those are things that I wouldn’t have unknown otherwise. I think just having professionals walk with you and asking the tough questions of those professionals… Whether that be co-GP, whether that be contractors, whether that be whoever that you’re going to have walk with you on a property, just making sure that they know what they’re doing and that their track record speaks for itself.

Ash Patel: With putting things in writing – is that more directed towards investors, contractors, lenders?

Braeden Windham: From my perspective, and where we have gotten I would say misled sometimes is definitely with co-GPS, and just making sure that whatever roles and responsibilities are spelled out, and if you’re going to be boots on the ground, you’re going to be boots on the ground. If you’re going to be doing all the asset management, then that’s going to be in writing. If you’ve got something in writing, then you can basically stick to it. Of course, just having the right documents in place for passive investors and any type of agreement with brokers or that type of thing, of course. But mostly that’s co-GP opportunities.

Ash Patel: In your deals, do GPs put investment capital in as well?

Braeden Windham: Yes. Every deal that we do, we aim to put in 10% of the capital, just to show that we have some type of skin in the game. I think that’s important, just to align interests more than anything.

Ash Patel: And what specific examples have you had with co-GPs when things weren’t in writing?

Braeden Windham: I think capital raise is a big one. I guess, on the front end, knowing who’s bringing what or who has the bandwidth to bring what to the deal, I think that’s important.

Ash Patel: Did you guys just kind of assume, “Hey, we’ve got a great team of GPs. We’ll get this done.”

Braeden Windham: Yeah. You’ll have somebody come in and tell you that they’ve done X amount of properties or X amount of units, and that they can raise the full thing, and take more of the equity for it, but that’s not always the case. So having something in writing definitely, looking back, would have helped to say, “No, no, no, this is what you said on the front end, and you’ve got to stick to it.” That’s definitely the biggest area.

And then just minor roles and responsibilities. Like, on our properties, we always believe that you should have somebody that’s in the area or boots on the ground. So just having what that actually means in a contract, just for that person… If that means going to the property once a week to take pictures of progress, then that’s what that means. And you put it in writing. Or if it’s just quarterly pictures, which for me, I would prefer weekly, especially if it’s a deeper position.

Ash Patel: Weekly pictures of the units?

Braeden Windham: Yeah. If we’re doing a major rehab, I would want to see from boots on the ground, that they’re actually in the area, that they can actually drive there within 10 to 15 minutes and take pictures with progress. If we’re doing construction on 10 units, we want to see updates, because you can’t always trust if a contractor is going to tell you that it’s complete or halfway complete. Their complete and your complete is not the same thing. Rent ready and complete is not the same thing. In my book, at least.

Ash Patel: Braeden, dealing with investors, what are some of the lessons you’ve learned with that?

Braeden Windham: I think the most important thing that I’ve learned is just being completely transparent with them. A lot of people will tell you that there’s a line that you should and shouldn’t say certain things. But I think if you have a good relationship with your investors and you let them know on the front end that “Hey, I’m going to give you the good, the bad, and the ugly”, then I think being transparent is the most important thing, at least for passive investors.

Break: [00:12:18][00:15:11]

Ash Patel: Have you had any issues with investors and you guys not being on the same page?

Braeden Windham: No. I think within Well Capital, our goal, moving forward at least, is to come out with a monthly update for investors, which I think is even better than quarterly, because a lot can happen in a quarter, especially when you’ve first taken over a project. But I think we’ve been pretty clear, I would just like to give them more updates than less. So that’s why we’re kind of going into a monthly more than a quarterly.

Ash Patel: One of the things you could do is — Joe Fairless does this. He gives us a one-pager for each investment, and then there’s a link for people that want to deep-dive into financials. Click on that and there’s a whole bunch of more information behind there. But for people that just want the high level, don’t waste my time, just give me “Are we good? Are we bad?” I like that approach a lot.

Braeden Windham: Is that a monthly or is that…

Ash Patel: He does it monthly.

Braeden Windham: I like that.

Ash Patel: He tells us what the occupancy is, how many units have been renovated, any notable highlights, good or bad, about the property… Then there’s a hyperlink at the bottom, and then there’s a portal where you could get as much information as you want.

Braeden Windham: I think that’s a great idea.

Ash Patel: Not everybody wants to read two-pagers.

Braeden Windham: No. I know some investors that don’t want to know the bad side. So maybe they just… There is a bad side on every property; whether or not you know it, there is. There are things that come up that you didn’t know are going to come up?

Ash Patel: Do you guys have a portal? Or is this just handwritten emails?

Braeden Windham: No, we have a portal now. When we started, we didn’t. But now we use InvestNext for our investor portal. That’s kind of where all of the information goes into.

Ash Patel: What bottlenecks were you experiencing that led you to use a portal?

Braeden Windham: I think it’s just efficiencies of having — for one, I guess every quarter, I’d have to sit down and make a handmade whether it be Canva or PowerPoint, handmade newsletter to go out. It was just kind of inefficient for the time I wanted to spend on it, and having something all on a portal where emails go out and distributions go out – it’s a pretty streamlined process. I think just the time it would take to get it all together, figure out what we wanted to say, and have the right type of documents in there… Just having everything in one place is awesome.

Ash Patel: What is your best real estate investing advice ever?

Braeden Windham: That’s a good one. I think I already said it, but putting it in an email is one of the Best Ever real estate advice that I have. Either put it in an email, or just make sure you’re asking tough questions on the front end of every transaction you do. Because I’d rather have tough questions upfront, than tough lessons on the back end.

Ash Patel: Yeah, and that’s a great example. I’ve got a broker that I’ve been dealing with on a deal. This guy literally doesn’t email at all. Everything’s on the phone. And then they’ll ask the same questions over and over again. It’s like, “Wait a minute. I know I told you, we’re good, move forward.” “No. You never said that.” “Oh my God. Please just use email.”

Braeden Windham: Sometimes it’s not even about not trusting somebody, it’s just a good thing to go back and look at. If roles and responsibilities were carved out in an email, then you can always go back and look at it. That would be the best advice I have for the audience.

Ash Patel: Braeden, are you ready for the Best Ever lightning round?

Braeden Windham: I am. I’m ready.

Ash Patel: Braeden, what’s the Best Ever book you’ve recently read?

Braeden Windham: Free to focus, by Michael Hyatt.

Ash Patel: What was your big takeaway?

Braeden Windham: For me, it was a weekly review, and just time-blocking, and making sure that you are very intentional with the time you’re spending… Because you can just get wrapped up in a ton of calls or something that you didn’t even mean to start working on, and then your day is gone, then your week is gone… Then you’re like, “Whoa, what do I do?” So just kind of keeping control of your time is the biggest takeaway from me.

Ash Patel: Braeden, what’s the Best Ever way you like to give back?

Braeden Windham: The best way I like to give back is through our co-sponsor charity. We give 10% of our gross income to Charity Water, where they take it overseas and give people clean water who’ve never had it before.

Ash Patel: Braeden, how can the Best Ever listeners reach out to you?

Braeden Windham: Two ways. Our website, which is wellcapitalinvest.com, and then we are also hosts on the Wealth and Water podcast; that’s on our LinkedIn. You can tune into that every Thursday.

Ash Patel: Awesome. Braeden, thank you so much for joining us today. From being a senior in college and not really having any direction other than not wanting to work for somebody, being a ranch hand learning how to work hard, to being a very successful real estate investor in a very short amount of time. Thank you for sharing your story.

Braeden Windham: Absolutely. Thank you for having me on. It was definitely a great conversation.

Ash Patel: Best Ever listeners, thank you for joining us and have a Best Ever day.

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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JF2646: Want to Host Your Own Networking Event? Check Out These Clever Tips to Elevate Your Meet-ups with Hayden Harrington

Hayden Harrington was tired of the meet-ups he kept attending. They were usually hosted in crowded, hard-to-hear areas where it was difficult to effectively network with people. That’s when he decided to create his own, unique events. In this episode, Hayden shares how he broke from tradition and created a successful in-person and online networking group.

Hayden Harrington Real Estate Background

  • Real estate entrepreneur focused on large-scale multifamily syndications
  • Currently has $30MM AUM and actively growing the portfolio
  • Managing partner at Momentum Multifamily, a commercial real estate group focused on buying institutional quality assets for their investors
  • Based in Richardson, TX
  • Say hi to him at: www.momentummultifamily.com
  • Best Ever Book: The E-Myth Real Estate Agent by Michael E. Gerber

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Joe Fairless: Best Ever listeners how are you doing? Welcome to the Best Real Estate Investing AdviceEver 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 fluffy stuff. With us today, Hayden Harrington. How are you doing Hayden?

Hayden Harrington: I’m doing well. Thanks for having me on, Joe.

Joe Fairless: I’m glad to hear that and it’s my pleasure. A little bit about Hayden. He’s a real estate entrepreneur focused on multifamily syndications. His company has $30 million of assets under management. He’s a managing partner, speaking of his company, at Momentum Multifamily, based in Richardson, Texas. With that being said, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Hayden Harrington: Sure. Thanks again for having me on. Like you mentioned, based here in Richardson, which is a suburb of North Dallas. I’ve been here for about eight years now. I’m originally from the Woodlands, Texas, down on the North side of Houston. That’s really where I got my start in real estate, doing actually fix and flips and rentals with my dad, growing up through my teenage years. That’s really where I was exposed to it and first got a taste for it. But ultimately, through doing some rehabs and flips with him, it kind of opened my eyes to wanting to go bigger. Obviously multifamily was that next natural step. It took me a while to kind of figure out how the game is played and how it works, but I finally landed that first deal earlier in January 2021. We currently got our second one under contract and are set to close actually next month. So we’re excited.

Joe Fairless: Congratulations on all the above. You said it took you a while to learn how the game is played. How long did it take and what did you learn?

Hayden Harrington: Good question. It really took probably four or five years. I started really setting my sights on the commercial side of things around 2016 or 2017. At first, I wanted to do everything myself, because that’s really all I was exposed to. On the single-family stuff, it was just me and my dad doing all the work ourselves. That’s really all I had ever seen, is just “We’ve got to do it ourselves and make things happen.” So for a long time I had that dream of I want to get into commercial, I’m going to find that one investor, he’s going to write me a million-dollar check, I’m going to go out and buy a commercial property, and I’m going to be off and running. That dream got me nowhere.

It was a lot of trial and error for a while, just understanding the reality of the commercial real estate space and educating myself on the different niches, like where I wanted to start… Because there are so many different places that you can start, whether that be development or buying existing multifamily, buying office, triple net commercial, and so forth. So I spent some time really just exploring and talking to people on each of those areas, and ultimately set my sights on multifamily.

From there, again, you have more challenges that you’re presented with and how to get a seat at the table of a syndication or become a general partner. There’s definitely a learning curve involved with that. For a long time, I knew proximity was power, I knew I just wanted to be around people doing deals… So I’d meet somebody that’s experienced and I’d offer “Hey, I’ll work for free.” I just want to be around the people that are making deals happen, because I knew that was the fastest way to learn. A number of doors actually closed on me, and nobody would accept that offer from me for a while, and I was kind of scratching my head like “Man, I’m smart and capable. What am I doing wrong here?” It wasn’t until I really put myself in their shoes and looked at it from their perspective of what I was actually offering when I had my lightbulb moment.

When I did that, I realized that what I was asking for was not offering them value. It was offering their time and resources and energy to educate me so it really wasn’t a great deal for them. Until I looked at it from that perspective, I really wasn’t making a whole lot of progress and I was just dealing with a lot of frustration.

So I began to look at it from a different angle and a different approach. I said “Okay, in my mind, what are the things that are going to speak to a syndicator or somebody that’s experienced?” The two things that popped up were deals and capital. In my mind, those were the two things that were actual tangible value to get a seat at that table. I knew finding a deal would be extremely difficult, especially when you’re just starting out. It’s hard to even know what a deal is, honestly. And if you’re looking at everything on LoopNet or Crexi, there’s a reason why most of those deals are there. So the good deals really are only sent to those that are experienced. A broker is not going to waste their time on somebody they’ve never heard of. I knew that, and so I really set my sights on the capital side, that’s ultimately how I was able to bring some skills to the table and get a deal done.

Joe Fairless: When you were originally looking for a deal by yourself, what type of deal were you looking for?

Hayden Harrington: Honestly, I was just scouring LoopNet and Crexi, those online sites, just trying to make sense of it. Like I said in the beginning, it was kind of looking at different types of assets but I wasn’t getting anywhere else. I was trying to make some relationships with brokers and so forth, I tried to make my own underwriting model, and a lot of it wasn’t great. So after not making a whole lot of progress, I just kind of discarded that idea. I said “Hey, I need to actually go and fine-tune this strategy, get around people that are actually doing deals so that I can be pointed in the right direction.”

Joe Fairless: Got it. Whatever the property type ended up being by yourself, how were you planning on funding it?

Hayden Harrington: Like I said, hopes and dreams of having some investor believing me enough to write me a big check. But obviously, that didn’t get me anywhere, so that was not a great approach.

Joe Fairless: Fair enough. Alright. You got the first deal in January 2021. What was it?

Hayden Harrington: It was a 228-unit property in North-East Houston. A property built in 2012. It was formerly called [unintelligible [00:06:08].18] Liberty Hills and we rebranded it as the Henry at Liberty Hills. It’s kind of our brand that we wanted to stamp down there in Houston on all the properties we buy down there. We bought it for just shy of about 30 million, 828 a door. We actually got it at a five cap, so looking back, we feel pretty good about that, especially where things are at now. But really kind of interesting, just to wind it back, my partner, Dustin and I, we’ve been teamed up for about three years now.

Joe Fairless: How did you meet Dustin?

Hayden Harrington: Just in my own educational process, and trying to understand how the game was played, I started networking. Like I said, I knew proximity is power, and I want to get around people. That was kind of my approach, to add value. I ended up meeting, Dustin and I threw out an idea. I said, “Hey, what if we start a networking group here and kind of make it a little different to help us stand out?” In that way, I can not only put him in a good light, but also, we can work together to build an investor list, or in other words, a pool of equity that we could potentially pull from when that deal eventually came. So we started working together in early 2019 and did the meetup for a little over a year until COVID shut us down… But we were getting 100 plus people out every month. That’s really how I was able to kind of get my name on the map, and we built a pretty sizable database from it.

Joe Fairless: That’s awesome. Let’s talk more about that. But just so I’m clear on where you met Dustin – you said networking, but what specific networking event did you meet Dustin at?

Hayden Harrington: There was a networking app, it’s called Shapr. We connected there and then I just threw it out. I was like, “Hey, can I take you out to lunch?” The app is kind of similar to LinkedIn, and I saw that he had experience in multifamily. I said, “Hey, I want to take you out to lunch if you have some time.” I just want to ask some questions. I think it was on our second lunch that we did that, because we kind of hit it off and got along right away. That’s when I threw the idea out there. I was like, “Hey, what if we start this networking event together?”

And honestly, that was a challenge for me because growing up, I was very introverted and very shy for a long time. I knew throwing that idea out there. I was like, “Oh, man. If I’m co-hosting a networking event, I’m going to have to speak in for all these people.” Honestly, I went back and forth in my mind whether or not to bring it up. I’m grateful I did, looking back, because so much has come of it. I think that’s a product of what happens when you take those chances, you take those risks, and you kind of believe in yourself. Because if not, a limiting belief that I held within my mind keeps me from achieving my goals. That’s when I was like, “You know what? Screw it. I don’t care how it goes. I’m going to throw this out there and put forth as much effort as I can and see what happens.”

Break: [00:08:45][00:10:18]

Joe Fairless: With that meetup, clearly, it was successful with 100 plus people shortly after you started it. You said you wanted to do something different. Tell us, what did you do?

Hayden Harrington: A couple things. Like I said, I was going around to different events too, just trying to understand how the game is played. I realized that the people that were putting the events on were the ones that were doing deals. That was a big realization for me. But the problem I saw was all these events were done at restaurants, bars, and crowded hard to hear places. They didn’t have a sophisticated way of checking people in, it was kind of a table that you do it yourself. I started to see all these things as opportunity. I was like, “I don’t have the best handwriting. I’m sure a lot of people out there don’t either. One simple thing, when you’re putting in your database, you put one wrong letter in an email address, that’s a lost lead.” So doing stuff like a digital check in where we had a computer or an iPad that would be on the backside of a website that I built for us that would automatically add people to a CRM. Just trying to minimize the room for error, maximize efficiencies, and then also doing automated follow-up emails from the time that they submit that form. Two hours later, when the event is over, and they’re getting home, they’re already getting hit with a follow up thank you email.

Then a big thing was putting them in an environment that will help them network, getting them out of the restaurant, that was my number one criteria. I said, “We’re not doing it at a restaurant, we got to get it out of that.” Because the problem with that is you sit down at a table and you’re locked in that seat. You’re talking to the guy to your right or your left and that’s where you spend the next hour and a half. That’s a major issue when you’re trying to build your network. We said we’re done with restaurants. We started in a title company’s office up here in Dallas actually, Madison title. They were gracious enough to open up their office after hours, they actually catered food for us. It was great. Then to further that too, again, like I said, I was kind of naturally introverted. I wasn’t the best at networking. So I basically just solved the problem for myself, which was, we called it a graceful exit. Trying to get out of conversations can sometimes be very difficult when you’re networking because you don’t want to come across as rude.

We’ve essentially just addressed that problem that everybody’s thinking. Every 10 minutes, we force people to mix it up, we actually would bring a cowbell and that was their signal. Okay, times up, exchange business cards, go meet somebody else. People loved it. The first meetup, I think we had 20 to 25 people, then it was 45, then it was 70, then it was 100 plus. It grew very, very quickly. Essentially, we just wanted to help people network more efficiently. That was really the only problem that we were solving.

Joe Fairless:  That digital check in, is the attendee the one putting their info into the iPad?

Hayden Harrington: Yup, absolutely.

Joe Fairless: Describe the flow of the event will you, from the moment you go in to when you leave. As an attendee, what am I experiencing as far as content and different setups that you have structured?

Hayden Harrington: We eventually moved it to the Westin in Las Colinas here in the mid-city. It was a big conference room in a nice brand-new hotel. We’d have them come in and check in outside the room that we’re holding it in. Then we had somebody writing down their name tags. Everybody’s name tag was all in the same font, it’s clear and legible.

That’s another problem too that we solved, because sometimes it can be just hard to read people’s names and their handwriting. So we had somebody with good handwriting writing down their name tags, they’d be checking in, then they’d go and network for a little bit. We kind of introduce ourselves up on stage and some sponsors that we had. We then let people network for the next hour, rotating every 10 to 15 minutes. We gave them free food so there’s always food and drinks. Then the second hour of the event, we do a speaker. So we’d have the speaker come in, and we had Michael Becker come one time, James Kandasamy, John Montero. We had a bunch of pretty well known, especially around Dallas, people that would come and speak on different topics. You get kind of the best of both worlds. We’re not sitting down for two hours and just giving you a presentation, but we’re allowing you to connect with some people, and then also giving you some education to take home as well.

Joe Fairless: What’s the cost, if any, to attend?

Hayden Harrington: It was always free. We gave people free food and it was free to attend. That’s one thing. We didn’t want to put a price tag on it because honestly, we wanted as many people as we could possibly get out. So we left it free for people and I think they really appreciate that.

Joe Fairless: How would you promote it?

Hayden Harrington: Mainly just through social media, honestly, and Meetup. That was kind of our big avenues to promote it. Not anything special really. Once they’d be signed up, we’d obviously send reminders and stuff like that. I think that’s a big one just because people get busy. We were only doing it once a month so sometimes you put it on your calendar, or you register for something, and you kind of forget about it. So we made sure to send people reminders and make sure that they knew when and where it was.

Joe Fairless: How often would the reminders be?

Hayden Harrington: Normally we do a week before, then morning of, and then kind of like an hour before reminder. We do typically three, maybe four reminders kind of leading up to the events.

Break: [00:15:36][00:18:29]

Joe Fairless: You had a lot of people and then COVID hit. So now what are you doing with that Meetup?

Hayden Harrington: We transitioned to do a lot more online stuff. I think that was a big pivotal moment too because a lot of people, as soon as COVID hit, especially in our space, they just kind of stopped doing stuff. A lot of people had local meetups and they never really made the transition online. We started doing webinars and online networking events. We actually were able to build our list significantly faster than we were before and also expand our reach. We pivoted very quickly and just started doing monthly educational webinars, we do bi-weekly networking events with people all over the country. I think the first few months, we were getting at least double or triple the amount of people added to our list just because we could expand our reach. Especially up front, everybody was excited to hop on different network events. There was some definite Zoom fatigue over the subsequent months. But really, at first, we were getting at least twice if not three times as many more contacts added to our list every single month.

Joe Fairless: Now are you still doing those Zoom networking events?

Hayden Harrington: Absolutely. We just finished up a three-part series. We did kind of lifecycle of a deal. We did one video in the series per month. The first one we did, Dustin and I were on underwriting, then Gary Lipski came on the following month and did asset management webinar to our audience, and then Rob Beardsley of One Star Capital just recently did a case study on a full cycle transaction. Then we still do the every other week virtual networking on Zoom as well.

Joe Fairless: Are you doing this full time?

Hayden Harrington: Yup.

Joe Fairless: What’s been the biggest challenge? Actually, before you answer that, you were learning for four to five years how to approach getting a deal. How are you supporting yourself?

Hayden Harrington: Out of college actually, I started a nutrition company, did that and grew that for a few years. Then when I exited that, that’s really when I went all in on multifamily. I definitely had to make some sacrifices too because I knew in my mind, it’s the coffees, it’s the lunches, it’s those meetings that are spontaneous where all the value is found. If I was tied up too much, I’d miss out those opportunities, and I didn’t want that. So I had to do things like sell my car and just go all in on this bet on multifamily. I think that definitely paid dividends. But it’s very challenging to get off the ground because the barrier to entry is very high, especially for somebody that’s young. I definitely had to make some sacrifices along the way.

Joe Fairless: When you sold your car. How did you get around DFW?

Hayden Harrington: I drove my grandfather’s old Jeep around for a couple years. Thankfully I had that. But that kind of afforded me the ability to go and make that sacrifice. Not everybody has something like that. Thankfully I did and was able to go forward with that.

Joe Fairless: What did do you do with the money when you sold the car? Where did that go?

Hayden Harrington: Straight into savings. I have little savings, plus proceeds from that, did a couple of little jobs, and stuff. But that was all into savings, just try to keep myself afloat and keep the dream alive.

Joe Fairless: Wow, good for you on that nutrition company. What did you sell it for?

Hayden Harrington: I’m not able to disclose that but it was a good venture. We ended up growing it into about 90 different stores across eight different states.

Joe Fairless: A seven figure sale to you.

Hayden Harrington: Not quite, but we didn’t know…

Joe Fairless: Pretty healthy.

Hayden Harrington: Yeah, it was still a good business. I credit that business a lot because it actually taught me a lot. Especially the marketing and branding side because at first, frankly, we were broke. So I had to figure out how to build a website, how to design a product, all that stuff I had to kind of take on myself. A lot of those skills translated to real estate because a business is a business, ultimately your investors are customers and the same principles apply to selling a product as selling an investment.

Joe Fairless: If you speak to someone who says “Yeah, I want to get into multifamily,” but they were where you were years ago. What’s something you would tell them to do less of that you did and what’s something you would tell them to do more of that you did?

Hayden Harrington: I’d say don’t try to do it all yourself. Because for a long time, that’s what I tried to do and it got me nowhere. Be willing to specialize, be willing to focus on where you can add value, and not try to do it all. Multifamily is absolutely a team sport. Focusing on a role that you can be really good at and bring a lot of value to the table, I think that would definitely serve you well in the long run. Just to add to that, just be patient. These are long relationships, not only with the partners that you’re in, but also the properties, the deal itself. It’s not like you’re flipping these in a month, we underwrite to five year holds, so these are long term transactions, they take time to put together. I mean just the closing process could take two or three months, and that’s from getting your offer accepted. That doesn’t even factor in how competitive the space is. Just be patient, be willing to put in an enormous amount of effort and work, and good things will happen

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

Hayden Harrington: I think my best piece of advice really goes back to just believing in why you’re doing this. What’s your why to begin with? I think that’s the most important question to ask yourself is what’s your purpose behind that? Because you’re going to face a lot of closed doors, you’re going to face a lot of hurdles, a lot of objections, and your why’s are what’s going to keep you going. Having that the center of your focus, and having a lot of clarity around what that why is, I think is the best advice I can give.

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

Hayden Harrington: Yeah, let’s do it.

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

Hayden Harrington: That’s a good question. I really liked the E-Myth. I read that one recently. It kind of ties into what we’re talking about here as well.

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

Hayden Harrington: The best way to give back is we’ve actually done some charity events and that’s something we’re really excited about within Momentum Multifamily. It’s continuously giving back to not only our investors and getting them involved, but also the community as well.

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

Hayden Harrington: Check out our website momentummultifamily.com. Feel free to reach out at hayden@momentummultifamily.com as well.

Joe Fairless: Hayden, bravo on what you’ve done. Thank you for sharing your story. I know it will be inspirational and helpful to a lot of Best Ever listeners who are starting out especially in commercial real estate. Thanks for talking about at the Meetup, how you positioned it differently, proved upon the experiences that you had attending other Meetups, and are enjoying the results of those improvements with a lot of people attending. So nice work on that. Thanks for being on show. Hope you have a Best Ever day and 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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JF1748: Making Healthy Decisions With Your Body And Mind That Lead To Better Investing Decisions #SkillSetSunday with Jason Valadao

Jason is a physician that specializes in helping people live a healthier lifestyle. With healthier decisions comes a better overall mood and mindset, leading to making better business and investing decisions. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“If you typically have dinner around six or seven and want to get to bed around 9 or 10, that’s pretty good” – Jason Valadao


Jason Valadao Real Estate Background:


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

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


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.

First off, I hope you’re having a best ever weekend. Because today is Sunday we’ve got a special segment for you called Skillset Sunday. The purpose of this episode is to help you hone a skill, so that you can become a more effective real estate investor… And that skill is making healthy decisions with your body and mind that leads to investing decisions without regrets… And really, we’re gonna focus on daily nutrition, exercise and sleep. With us to do that, Jason Valadao. How are you doing, Jason?

Jason Valadao: I’m doing well, Joe. Thanks for bringing me on, and I’m excited to help out today. You’ve got the best listeners ever on this Best Ever Podcast, and I’m just excited to try and share some of that knowledge with everybody to help them out.

Joe Fairless: That’s right, we do, and you’re gonna take us to another level. A little bit about Jason – Jason is active duty in the Navy; first off, sir, thank you for what you do for our country, you and your colleagues. He’s also a family and sports medicine physician; he has a passion for leadership and personal growth, and is a coach with the John Maxwell team.

He also wrote a book called “Exceptional Every Day: An Empowering Process to Unlock Your Why And Transform Your Life.” With that being said, Jason, do you wanna give the Best Ever listeners  a little bit more about your background? Then we’ll segue right into nutrition, exercise and sleep.

Jason Valadao: Sure, Joe. I’ve been in the Navy for almost 20 years, and for the first half of that I was flying airplanes and also teaching at a major university, doing some coaching, and also personal training, working with clients on nutrition and health changes, before I ever became a physician. I realized right away that trying to maintain a healthy lifestyle was going to be really important to any type of work  that you do, whether you’re a real estate investor, or a physician like myself, a pilot in the navy, or anything out there. That your nutritional, your exercise  and sleep decisions really can make or break how your day is gonna go.

About nine years ago I transitioned into becoming a physician. I also looked into getting more certified in things like nutrition and health, because those things aren’t really always covered in medical school per se, and a lot of doctors lack that kind of information… So I wanted to become more well-rounded, so I could help more people. So I’ve made this big investment in myself, so that I could help a lot of other people from every walk of life just make better, healthy nutrition choices, and that way set them up for their career, whatever it might be… And I think coming on this show today was so important to me because of this chance of people that are investing in real estate really using their best mindset, so they can make the best decisions.

Joe Fairless: Yes, and it’s all connected. As you said, how we approach nutrition, exercise and sleep makes or breaks how the day goes. Should we talk about each of these separately, or should we group them together, and do you have some thoughts on just the grouping of those three?

Jason Valadao: Yeah, we could take a few minutes and go through each one. That way, it might be just easier for all of us to take something from it. I think sometimes when  you just put it all as one, it’s a lot harder to break down, so…

Joe Fairless: Good point.

Jason Valadao: I’ll break down a little bit about proper food, meals, and then throw in some exercise and also the value of sleep, and those kind of habits… It would be great.

Joe Fairless: Let’s talk about proper food and meals, nutrition. What do we need to know?

Jason Valadao: I think especially with the listeners that you have, which are amazing, because these people are all out there, trying to make really good real estate decisions for now and for long-term, is finding a way to balance what they’re eating. It’s so hard to go through the minutiae of “This diet is best for you.” You watch one thing on TV, go to social media and you see something else… There’s things about ketogenic diet, paleo diet, Mediterranean diet, and it’s so confusing. And when people are trying to invest their time in other things like real estate, they don’t have time to decide for this. They want a quick answer.

I think one of the things to make it so easy for everyone is to start thinking about things with food that are really easy to understand. For instance, if something is from the ground, from the Earth, whole, without being processed, it’s probably gonna be a lot healthier for us.

One easy way to put that is — I try to tell people “Hey, think mostly about eating plants.” That could be everything from spinach, broccoli, tomatoes… There’s so many things out there. And then fruits and vegetables, putting them as a whole… Because once you go to that grocery store and every one is in a box, you already know that something’s been done to it to bring down its nutritional value.

If you look at everybody out there that’s putting information, it’s really like “Let’s look at the simple ways.” I try to teach my patients and clients to start to think about those simple things that you know are beautiful to look at. You walk around outside and you’re like “Well, that’s a green plant…”, maybe that’s something healthy to eat; start putting that in your mindset. That’s one way to really look at nutrition from a big worldview.

Joe Fairless: And thinking along those lines, I imagine what nutritional value does this have that I’m consuming right now, because if it has no nutritional value, then you’re not benefitting other than perhaps just short-term, psychologically.

Jason Valadao: And I think one thing I would offer that I think really helps everybody is when you first wake up in the morning — these are the tangible things that I really want your listeners to leave with… I put out a glass of water at night before I go to bed, anywhere from 8 to 16 oz. I actually put it in my bathroom, because I usually go there first thing in the morning; I wake up, go brush my teeth, get ready for the day, but I chug that first glass of water.

I’ve done a lot of research, I’ve talked to a lot of other physicians and people out there that do nutrition… That first glass of water can really make or break your day. None of us is allergic to water. Our bodies are made of 70% water. All of our cells, our bones, our skin… So getting that first glass in can really start a day off well for almost any person out there.

Joe Fairless: Yeah, that’s a great tip. That’s something I’ve done for at least five years, with a liter of water with a scoop of wheatgrass. It’s the first thing I have, I’ve done that for at least five years.

When you are thinking about sweets… I have had a battle with my sweet tooth for as long as I can remember, but recently I did something that fixed it, or at least made me think about it differently. But in terms of sweet stuff, or even salty stuff; maybe someone has a salty palate… What are some tips for overcoming the sweet tooth or wanting a bunch of salty carbs stuff?

Jason Valadao: For sure. I think that is one of the greatest challenges that we run into, because most of the foods that are at our disposal, that are quick to eat, something to give us quick energy – it has a lot of salt or sugar laying within, and we don’t think about the ramifications… Hey, that might give me some quick energy, but then 20 minutes later I’m tanking. So I try to tell people.. There’s always a caveat to everything, because there’s people with all kinds of allergies; especially these days we’re recognizing allergies more often, but… If you don’t have an aversion with fruits, and you don’t have aversions to any kind of nuts, like almonds, walnuts, even peanuts, cashews, pistachios – all kinds of different nuts out there – they’re really satiating. If you get them in their raw form and they haven’t been overly processed…

You can have nuts around, you can have different fruits around, you can have different vegetables, like peppers, and things like jicama, things that people don’t think about, that are crunchy, that can almost give you that substance of eating a candy bar, or something that is gonna just fill you up. Having those around, whether it’s at the workplace, at home in small containers that you would reach for first… I tell a lot of my patients – hey, how about a small bag of almonds in the car with you; keep an apple, or an orange, or a little bit of watermelon, a grape… Even things that are higher in sugar content per se, with some of the fruits that you might wanna be careful with sometimes, it’s okay to have them in small proportions. I think when you can get in the habit of having those other foods with you, it’s even better.

I was talking to a patient yesterday about — they asked me the difference between a sweet potato and a regular potato… Because there’s almost a lot of bad information out there that all potatoes are bad. Well, the reason we’ve gotten in that mindset with a white potato, for instance, is that most of it is processed. Because we usually get a bag of chips [unintelligible [00:08:55].10] having  a nice, fresh, big potato, putting some chives on it, or anything that you want. Maybe a slice of avocado; things that you wouldn’t think about. You can really make those things healthy.

I try to talk to people about all kinds of different foods, and they’re like “I’ve never even heard of that food before.” Like when I brought up jicama. So you wanna find these things that are gonna be satiating, so that you’re not actually reaching for more.

Joe Fairless: Did you say jicama?

Jason Valadao: Oh, it’s amazing, Joe. You’ve gotta try it.

Joe Fairless: I’ve never heard of that either. [laughter] What is jicama?

Jason Valadao: It’s jicama.

Joe Fairless: I’m glad I didn’t try to google it. I wouldn’t have gotten that right.

Jason Valadao: Yeah… I think you and your listeners are gonna be like “Wow!” This is an incredible root vegetable. My wife and I the other day actually chopped it up and we made it look like french fries. A little bit of coconut oil in the oven and we fried it like they were fries. But I actually cut them up and eat them raw… It’s amazing. It’s got a crunch to it, and it’s kind of a different little flavor that you’re like “Wow, this is actually pretty good.” It’s just a white root vegetable. I think you’d be surprised, and everybody would really enjoy it.

Joe Fairless: It’s otherwise known as a Mexican turnip.

Jason Valadao: You’ve got it.

Joe Fairless: Yup, I see that. Okay, cool. Alright, so that’s nutrition… Basically, the takeaway is eat as much plants stuff as you can; and I’m not trivializing what you said, by the way. I’m just summarizing it in my own mind. I’m a simple-minded person.

Jason Valadao: Oh, please.

Joe Fairless: Alright, and now exercise. That can take up a lot of time of your day, right? Or are there ways to shortcut that if you are running low on time?

Jason Valadao: I definitely think so. I think we get so caught up in what other people are doing, and we look at the crazes that are out there, like cross-fit, and high-intensity interval training – it’s all awesome stuff and I love it, but that’s not what the average person is able to do all the time… Especially in this new era, people aren’t working just 8 hours a day. Most people are working 10-12 hours, they’ve got their kids in 20 different extra-curricular activities… Perhaps in this realm of your listeners, they’re all going out to look at multiple properties they’re considering investing in, so they’re driving from one part of town to the other, or they’re flying somewhere for a few days… So how do I fit this in?

What I try to talk to people about is if you can make it a part of your day – and that’s even if it’s 20 minutes; maybe it’s 15 minutes one day – if you can build that in… One easy way – again, like I brought up the water in the morning; sometimes it’s challenging for people to get up early; they go on to sleep in, hit that snooze button… But I think if you can start to think about it a different way, where “Hey, I take a shower every day. I brush my teeth. I eat a couple meals a day. I do this…” – make that just another thing that’s a  priority.

For instance, I tell a lot of people when they’re first starting out, “Why don’t you just find five minutes to exercise?” They’re like “Five minutes? How is that gonna change my body? I’m not gonna lose any weight, it’s not gonna get my heart rate doing better…” I say “No, literally, five minutes.” And I talk to them about basic calisthenics that we all learned back in high school or before. Things like push-ups, jumping jacks, squats with no weight, lunges across your living room floor. Little things like that, for 5-10 minutes if you can fit it in before you start your day. Or perhaps you get off work and you do that right away, before you have dinner or do anything else at home.

Then I get to the point of “Can you go for a 30-minute walk at lunch? Do you have to sit at your desk, do you have to go out to eat every single day?” I get it when there’s  business meetings and those things, but if you can simply step out of your office for 20-30 minutes and go for a nice, moderate intensity walk, you’re gonna be making huge differences and it really counts as exercise. And one thing I emphasize with a lot of people is that — well, everybody’s got different ailments; they may not be able to run, or they may not be able to swim or jump, but most of us can walk. And even if we can’t walk, maybe we’re someone who is wheelchair-bound, but we’ve got a lot of motivation and we wanna be active. There’s lots of other activities that are out there. I just tell people “Start slow. 5-10 minutes here, start building it up”, and keep at just making it part of your daily routine.

There’s a documentary on Netflix (I think Netflix or Amazon) called The Brain That Changes Itself…

Jason Valadao: Yeah…

Joe Fairless: Have you seen it?

Jason Valadao: I have. One of my patients told me about it.

Joe Fairless: Oh, yeah. The physician is who they’re doing the documentary on… As you know, he works with people who might have lost a limb, or just have some traumatic brain injuries. Maybe a stroke, or something else. And he says “Don’t try to get the person to do the perfect movement when they’re doing rehab. Just get them to improve a little bit.” Same concept here – don’t try to get the 30-minute perfect exercise, just get a 5-minute exercise routine in, and then the moment will take you the rest of the way.

Jason Valadao: Right. And I think one of the things to add to what you’re saying, just to build on that, is this idea of look at a way to keep moving in some way. I think in this day and age we’re seeing a lot of people with stand-up desks. I’ve been using one now for a while, I find that it’s great that you can sit down for a little while, maybe stand up, shake your legs out… A lot of us are sitting at computers all day, staring at a screen, and one thing is maybe every 20-30 minutes get up and do a quick 1-2 minute walk, or do a couple calisthenics. Do some flexibility exercises, and then all of that adds up.

There’s been a great amount of research out there that’s shown that you don’t need to do 30, 40, 50 minutes in a row of exercise. You can break that up into 5-10 minute segments. And I think for a lot of your listeners it’s great, because if they know they can do 5 or 10 minutes in the morning, maybe another 5 or 10 minutes in the afternoon and then another 5-10 minutes at night, if you add that all together you’re looking at 15-30 minutes just right there, whereas maybe before you didn’t think of it that way.

Joe Fairless: And now let’s talk about sleep. Sleep is really hard for me [unintelligible [00:14:36].29] amount of sleep consistently, every night. Please educate me and perhaps some other listeners who are sleep-challenged.

Jason Valadao: Yes, so I am one of those, and that’s why I care so much about it, because I think it goes along with the title of my book; it’s trying to become exceptional at sleep, and get better at it. I think it does really affect so many people, and I would say that being a physician these last so many years I have seen so many people tell me about issues with insomnia… And those could be related to anxiety, or they just aren’t getting comfortable, the temperature in their house is just way too hot for them… Lots of things. It’s not the right bed… So I started thinking, how do we really start getting people to improve? And there are so many little tips out there; some work for some and some work for others, and I’ve tried so many, and a lot of them have failed at me. That’s why I care so much.

I’ll give you a few of the insights. We’ve done a lot of research, we’ve looked around at what really gets people to sleep well, and one thing that we’ve found constantly is that a colder type environment really helps. You really wanna keep the temperature of your bedroom (at least) 68 degrees or less. I know that can sound pretty cold to some people, but you start looking at temperature changes in the human body, and anything over 68 degrees in the ambient environment around you can really affect you being able to fall asleep and stay asleep. And it’s really those temperature shifts that do that.

Throughout the night, if your house is getting heated up and you don’t have a ceiling fan or an air conditioner, it can start to get that core temperature within you much higher. So I talked to patients and everyone I know about trying to get their room about 68 degrees or less.

Another thing is – and this is what’s killing most of us – being on a computer, cell phone, tablet, anything that really has what we call blue light; those rays that are emitted. TV screens… All of those things. So one of the things I talk to patients about is do you really need to have a TV in your bedroom? I think that’s one of the first things that I would recommend to people; if you’re looking to get a good night’s sleep, don’t have a TV in your bedroom, and try not to be in front of a TV, computer screen, cell phone (all those things I’ve mentioned) about an hour before you wanna actually go to sleep.

I bring this up, Joe, it’s really important, and it’s the scientific realm, but also just a little thing that all of us can learn from – melatonin is that hormone within our brains that helps us fall asleep, and blue light actually shuts off our body’s ability to make melatonin… So if we’re not making melatonin, our body has a harder time going to sleep. It’s kind of the same thing if you have coffee or other things with caffeine late at night; they can keep you awake for a while.

So looking at things like the temperature of the house, TV screens, computers, those things, turning things off… I also wanted to bring up maybe not having a really heavy meal within about two hours of bedtime. If you typically have dinner around 6 or 7, if you’re on that kind of schedule, and your aim is to go to bed between 9 and 10, that’s pretty good. But having a heavy meal around 8, 8-30 and you wanna fall asleep 30 minutes later could be pretty challenging. The stomach is trying to digest all those nutrients, and it’s difficult.

Again, staying well-hydrated… I’ve seen that exercise really helps people sleep better, but not right before bedtime. If you get a really vigorous workout a few minutes before you try to go to sleep, that’s probably gonna keep you awake, now those endorphins and hormones are all running.

So I give those bits of advice because you’re gonna hear things now, especially coming out more and more, that we all need 8, maybe 9 hours of sleep per night, whereas I’m one of those people to get 5 or 6, and I’m really working on trying to get 6 to 7. I don’t know about you, Joe, but that’s where I suffer right now.

Joe Fairless: With no heavy meals and staying hydrated… What about a glass of red wine or a beer within that hour or two-hour window?

Jason Valadao: Great question, because that’s something that’s getting a lot of attention. It has been shown that alcohol can actually help you – especially in moderation – get ready to go to bed. But the issue is it typically helps a lot of people go to sleep, but it can actually wake them up earlier. So it might get you that midnight arousal, where you wake up — say you go to bed at 9 or 10 at night, or even 11; you might wake up at 1, 2, 3 in the morning, and it just has to do with the way that it shifts cortisol in our body, and the way that it affects all the other hormones.

Cortisol is a stress hormone that when we have high stress, or it gets us going in the morning when we wake up, and it can break our bodies down. So being very careful… But as I tell a lot of people, it’s all about moderation. A glass of wine, one or two beers maybe a couple of nights a week if that’s your thing… It may help you fall asleep, but it’s one of those things where you really don’t wanna become dependent on it, because your body will use it against you.

Joe Fairless: Anything else as it relates to nutrition, exercise and sleep that we haven’t talked about, that we wanna briefly touch on before we wrap up?

Jason Valadao: No, I think it’s really just trying to find those simple balances. Looking at foods that are easy to get to, trying to fit in some daily exercise, whether it’s a few minutes here or there, and then really looking at your sleep patterns. I think one thing that I would say that I didn’t bring up earlier – start with a simple journal. Just go buy a journal for a dollar at a little dollar store somewhere and start keeping track. At least do that for a few weeks to start building those habits. Write down what time you wake up, maybe write down how many glasses of water you’re having a day, write down all of your exercise. “Hey, I did 5 minutes at 8 o’clock in the morning, I did another 5 at 12 o’clock…” and start to see those patterns build. From that, you can really learn a lot. It’s almost like watching the real estate market and deciding “Hey, is this a good time to invest or not?” I think that writing things down makes them happen. So that’d be the other advice I have.

Joe Fairless: Yeah. I just use a Word document.

Jason Valadao: There you go, yeah.

Joe Fairless: I just password-protect a Word document and put the day’s date, then bullet points underneath, and that’s it. It’s so fulfilling and rewarding, and eye-opening… And not necessarily all of those at the same time, depending on what I’m reading, for what I have or haven’t accomplished, or what I was or wasn’t thinking in prior years… So it’s definitely a great tool for personal development.

Well, thank you so much for sharing this very practical and actionable advice, Jason, from nutrition, exercise and sleep. A lot of things that the Best Ever listeners can immediately implement today, should they choose to do so… And I’m grateful for that.

Thank you for being on the show. I really appreciate it. How can the Best Ever listeners learn more about what you’re doing?

Jason Valadao: Yeah, definitely. I’ve got a ton of free resources on my website, that I keep updating. That’s at jasonvaladao.com. And really, I’m not there to sell my book. I started building this website a couple weeks ago when I was doing a once-a-week blog, something that can really help people just make little changes in their priorities to get better, because I think that’s how we’re gonna make the world better – we start to work on ourselves. In the end, that’s what happens, and when I came up with my idea for the book, and little things that I share within the book to help people do that… But really, I’m putting a lot of free resources out there, and I want people to come grab them. There’s free nutrition things that people can print off, PDFs, little Word pictures, things they can post on their refrigerator… I have all kinds of things on exercise, food, sleep habits, physical therapy-type documents if you get injured… They’re all free, all you do is simply download. You don’t have to sign up for anything, my newsletter or anything whatsoever. Everything’s just there for everyone to take.

Joe Fairless: Awesome. Jason, thanks for being on the show. I hope you have a best ever weekend, and we’ll talk to you again soon.

Jason Valadao: Thanks a lot, Joe. I appreciate you bringing me on.

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Joe Fairless episode 1399 banner with guest Mario Ortiz

JF1399: From Single Family To 180 Unit Multifamily with Mario Ortiz

Mario just wanted to escape the “rat race” by buying single family homes. When he got to about 10 houses, Mario was really overwhelmed. He started looking into commercial real estate and funding, and worked his way up to buying a 180 unit that has tripled in value.  If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Mario Ortiz Real Estate Background:

  • Engineer in the oil industry for 28 years
  • Started investing in SFR to get out of the “rat race” but was overwhelmed after 10 homes
  • Moved up to a 17 unit, then a 90 unit, then a 180 unit in 2015 that tripled in value
  • Say hi to him at mortiz9991ATyahoo.com
  • Based in Friendswood, Texas
  • Best Ever Book: Never Split the Difference

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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, Mario Ortiz. How are you doing, Mario?

Mario Ortiz: I’m doing great, Joe. Thank you for having me.

Joe Fairless: I’m glad you’re doing great, and it’s my pleasure. A little bit about Mario – he has been an engineer in the oil industry for 28 years. He started investing in single-family rentals to get out of the rat race, but was overwhelmed after ten homes. Moved up to a 17-unit, then a 90-unit, then a 180-unit in 2015. They have tripled in value since then. Based in Friendswood, Texas, near Houston. With that being said, Mario, will you give the Best Ever listeners a little bit more about your background and your current focus?

Mario Ortiz: Sure. Like you mentioned, I’m a mechanical engineer in the oil industry. I’m 50 years old, I graduated from UT El Paso (shout-out to the miners out there) and decided that the best course at the time was to get into the oil industry. I got into it, and like every other industry, it fluctuates, it goes up and down, and there was a point in my life where I thought I was gonna lose my job, so I decided to find an alternate income source to replace my income, and that’s how I got into real estate.

Joe Fairless: So you first started out investing in single-family homes… How many did you purchase?

Mario Ortiz: I started obviously with the first one, and I didn’t know anything about real estate at the time. I bought a house that was on the MLS, I paid full price, 109k for it. I rented it right away, I didn’t have to do anything to it because it was ready to go. I was scared to death with that first one.

Once I got into it I realized, look, there’s really not a whole lot to this. I bought another one down the street a few months later. As you know, Joe, once you start getting into it, you start finding other opportunities. A gentleman that had three houses out in North [unintelligible [00:02:53].11] offered me three houses that he was trying to get out of, so I bought those three. Then I bought a couple in Texas City, which is another town South of here; I bought one in Dallas, and before I knew it, I had ten houses throughout the Houston area. That’s kind of where I stopped, at ten.

Joe Fairless: At ten, okay. A couple questions on the single-family homes. One, the guy who had three houses that you bought the package from, how did you get connected with him?

Mario Ortiz: [unintelligible [00:03:23].19] I didn’t know anything… I was trying to find out how to get financing for bigger complexes… Bigger being — I found a 10-unit and I was trying to get that. So I got in the Yellow Pages back then (2004-2005, somewhere in that range) and found a banker in the Yellow Pages, I called him up and I had a meeting with him. I went over there with my brand new child and my wife. I sat down across him, told him what I wanted to do, and he says “Look, I’ve got a guy…” So he introduced me to the person that was trying to get rid of the three houses, and he financed it. It was like a [unintelligible [00:03:58].10] So that got me through a few financing issues, as well.

Joe Fairless: You got to ten homes, and a lot of investors continue to do more single-family homes, and there’s a limit with conventional financing – you know this – up to ten homes, but then you can package those into a commercial loan and then you’ll be able to start over, and I got refreshed on that from a recent interview I did… So why did you go into larger stuff and not stick to what had been working?

Mario Ortiz: It had more to do with the logistics of things. All this time I have a full-time job as an engineer/project manager (pretty demanding), and then I had a young family… At the time I had two kids. Then I started where one was vacant out in Kingwood, another one over here in Texas City had a bad toilet, and I was doing all the maintenance… So it became very demanding, running around everywhere. It was more of that. And by then, the oil market started to turn and it was lucrative, things were going good, so I actually started to divest of the houses because of the complexity of trying to manage that many houses, maintain a job and the fatherly duties I had.

So I started to sell some just because I was so busy with all that, and I said “Look, this isn’t for me; it’s just too much work.” My objective was to get 20 or 30 houses and maintain a job, but at 10 the wheels were starting to come off. I just couldn’t handle it, so I stopped at ten.

Joe Fairless: Well, as an engineer – and it sounds like you also do some project management in your role, right?

Mario Ortiz: Yes.

Joe Fairless: Okay. I know you thought of the option of hiring a company to do it, so why didn’t you do that? Because that seems like it would solve the challenge that you had with doing all the maintenance and handling all the logistics?

Mario Ortiz: One of the things that kind of drove me was that I – like everybody, probably – feel like I’m very resourceful, that nobody can do it better than I can (it’s probably a flaw of mine). That kind of attitude really drove me to stay with it, but I think, Joe, what’s important is that more so I just got burnt out. If you combine all those things that I was doing, I really thought that this was not gonna work and I was more interested in just kind of doing something different. The oil industry was doing good, and that’s when I just decided to stop. At that point I was ready to just sell everything, just because of the frustration.

Joe Fairless: So what did you do?

Mario Ortiz: So I started selling them. I sold those three up there and I made a pretty good profit. I got down to about six, and things settled down. There seemed to be a sweet spot, and everything was a lot closer, the six were around here… And then I went a couple of years and I got a little bored. This was around 2008(ish) when the implosion happened, and I started getting the bug again, just kind of hanging around the house, playing golf a little bit here and there… I got a little bored, I’m a little restless, so I started–

Joe Fairless: In 2008 you got bored?

Mario Ortiz: Around there, yeah.

Joe Fairless: Was your job okay at that point?

Mario Ortiz: Yeah, the job was fine. Everything was fine from that perspective. It was more of the daily grind, it was just kind of going through the motions. So I started looking at LoopNet again and I found a 17-unit apartment complex out in Lamar, TX, another town South of here, that was for sale by owner. I had a little bit of money in the bank from the sales that I had done, and the guy was going to owner finance.

When I started to the guy, he was giving me really attractive terms. I went and looked at the property. It was decent; it needed a new roof, it needed some siding, but it was okay… Not the greatest thing in the world. So I started looking, and then when I thought we had a deal, he invited me over to his bank to sign the paperwork. When I showed up, the president of the bank and two other gentlemen were there. I sat down and I said “Look, I’m here to purchase a property. I have a deal with this gentleman”, and apparently, this guy wasn’t being really forthcoming; he had been kind of not telling me that I was gonna be fourth in line.

The bank had financed that to these two gentlemen; those two gentlemen had financed it to this guy, and this guy was gonna finance it to me… So they were pretty upset that this guy was doing this under-handedly… But once I talked to them – you know, I had a little bit of money, they saw my credentials, I was a project manager for an oil company – they really wanted to get rid of this guy… So they came up with a deal where they cut out everybody, and I dealt directly with the bank, and they actually gave me a price cut, with the understanding that I had to invest some money into the roof and do some siding work. So I had to put some earnest money away in an account, so that I could make those repairs.

It wasn’t the greatest deal in the world, but what it did is it introduced me to this banker. To this day I’m still using this guy. We had a great relationship. That started it, and I built a reputation with him of doing things… So that kind of kicked off my multifamily. The attractiveness to me was that it was all in one place, collect rent in one location, all the repairs – I’d go on a Saturday morning with my toolbox… I still was doing it myself. I had an on-site manager, but her job was simply to collect rent and to show units when there were vacancies. But other than that, I did the credit check, I filled out the leases, I kept track of all the maintenance – all that stuff I did, along still with my full-time job. That’s kind of how I got into multifamily.

Joe Fairless: Wow. Did the gentleman who originally was going to give you the seller financing get the same profits that he was anticipating in the revised deal where you worked directly with the bank?

Mario Ortiz: No. As it turned out, this guy was in trouble with the other investors. He hadn’t been paying taxes, so they threatened him with — I don’t know what they did; he had other businesses going… So at the end of the day I never saw that guy again. It’s like they took him out back and did something with him. But I ended up paying less, so my guess is that he got less, because when I saw the taxes that he owed — and I hadn’t seen any of this; I’m new to the game, I didn’t know what I was doing… When I saw what he owed for taxes, and the money that he owed the bank and all that other stuff, I’d have a hard time understanding if he walked away with anything at all.

Joe Fairless: And how did you hear about that 17-unit?

Mario Ortiz: I found it on LoopNet, just looking. This was back when LoopNet was fairly new… I say fairly new, I don’t know how long it had been there, but it was new to me, and it was back in 2008, something in that range.

Joe Fairless: So then you got a 90-unit. How did you go from the 17 to the 90?

Mario Ortiz: So I operated that for a little while, and I did very well. Back in that timeframe there was a hurricane… I believe it was Hurricane Katrina that hit Louisiana, and a lot of the people from Louisiana came to Houston, just this place. With that came very low vacancies, very high rents, and a lot of Section 8 vouchers and a lot of assistance from FEMA. So that really generated a lot of income and I was able to fill it with really good people, and getting really high prices.

At the same time, the bubble had busted and you could still see a lot of people in bankruptcy. This particular one was in receivership, the one in Texas City. It just so happened that it was almost across the street from the bank that I borrowed the money for the other. But at this point I have no money; I’m out of cash, because I put it all in this thing… So I first went to my bank and said, “Look, are you okay if I put this thing on LoopNet and I finance it to somebody else?” They were fine with that, so I did that, and I quickly got a guy to commit to buy this thing.

I didn’t make a whole lot of money. I probably made 75k from the deal, but it released some money, and I also dipped into my 401K to pull money out, and I made an offer (full price) for this 90-unit apartment complex, and using the same bank. They endorsed it. They underwrote it, they said “Yeah, we’re good”, and I’ve made a full price offer, and I got it. Now, when I say a full price offer, in retrospect right now, the prices [unintelligible [00:12:21].22] gave it to me. I think it was like 14k a door for 90 units. That was back in 2011, when things were really depressed.

It took a long time to get it because it was in receivership, and there was a lot of court order and arraignments and all kind of stuff. A big mess. But anyway, at the end of the day I ended up with that thing. At that point, that was when I started hiring people. I hired a manager, but because of my reluctance to pay a lot and my lack of understanding of how apartments work, I ended up getting a person that had no experience in apartment complexes, but she did have experience in storage units, in rental units.

So she came over, and between her and I — I was still at my full-time job, she was there, and the maintenance guy, and then I would go after work every night and we’d stay there, we’d try to figure things out, we’d strategize… We had to get rid of a lot of people, but for some reason it felt like we never lost money. I started making money from day one. She was very successful, she was very persistent, and it turned out to be a very good manager. She was [unintelligible [00:13:32].18] she knew how to save money, and we made that thing work.

About 18 months later, that thing that we bought for 1.2 million, somebody approached me and I got an offer for a million dollars more than I had paid.

Joe Fairless: And what did you tell them?

Mario Ortiz: Well, I’d never had a million dollars, Joe, and it was hard to say no.

Joe Fairless: [laughs]

Mario Ortiz: There’s something about that million dollar figure that really made me chase that thing, so I went ahead and sold it, and I put it in a 1031 exchange. I didn’t know much about it… The lady who was managing that, she was not the greatest at it either. I went and looked, I couldn’t find anything. By then, prices were all elevated. I mean, in retrospect now, they were still great deals, but at the time I was thinking that they were really high… So that drove me to go look in Dallas, Texas and in Fort Worth.

I found a deal out there. It was 180 units for – I believe at the time they wanted $20,000/door, or something crazy like that. I lost that 1031 exchange because I wanted a better deal; I had that mentality that I always wanted to give an offer lower than what they were asking for… And I lost that deal. Somebody paid 3.1, I offered 2.8, and I lost my 1031. I paid the taxes.

The joy of having the million dollars in the bank lasted for about two days. [laughter] I found that operating the complex, the joy of the wheeling and dealing, the challenge of making something better than it was was more valuable to me than having the money in the bank. There was something about that challenge.

But prices were going up and I just couldn’t find anything. Also, I had a little bit of money, more than I had ever had in the bank, so my wife and I traveled a little bit. I think I even bought a Porsche at the time, and played some more golf…

Joe Fairless: A high roller!

Mario Ortiz: A little bit… Yeah, we kind of got into that. And it was fun. But again, after a couple years, I got bored again. I get bored quickly, as you can tell. By then I had three children, the job was doing good, so I started asking around again; Dallas wasn’t what it is today, so I started looking… And in about 2014 I reached out to a broker out there, and he told me that the people who had beat me on the 180-unit complex were trying to sell it. He couldn’t get the listing, but he was trying… He says, “As soon as I get it, I’ll let you know.” I looked on LoopNet, and sure enough, there they were, selling that same complex, but now they wanted 3.6. They’d bought it for 3.1. So I went over there and found that they were financially in trouble…

Joe Fairless: How did you find that out?

Mario Ortiz: I went and talked to them and I could just tell. I flew down there. The car count — you could see that the parking lot’s empty; talking to the manager… Just talking to them, they were trying to sell the place. The problem at that point was that it was very difficult to find money, especially for non-performing assets. I didn’t know anything about syndication, I didn’t know anything about partnerships, I just wanted to do it myself because that’s all I knew to that point.

So I tied it up in a contract and I just couldn’t find the financing and I lost it, and I kept going back and forth trying to find financing. It took me about a year and a half, and then they were also facing some bankruptcy issues; they went to court a couple times trying to fight it off, so I knew they were desperate to get rid of it, I just couldn’t find financing, especially the way it was performing.

I reached out to my banker here and he didn’t want anything to do with anything that was outside of Houston… But finally, after about a year, I finally went to his office, I kidnapped the president, put him on an airplane, flew him over to Dallas, showed him the asset, and once he looked at the asset, he goes “Holy crap, this is worth that, or more”, so he financed it.

Joe Fairless: Where is it in Dallas?

Mario Ortiz: This is in Fort Worth. It’s right outside 820 and I-30.

Joe Fairless: Okay, yeah. North Arlington, east Fort Worth…

Mario Ortiz: East Fort Worth, yeah. It’s not the greatest area in the world… And that was part of the challenges that they were having. It’s a rough area, and they just didn’t know how to manage it. These folks, they owned hotels, so they were trying to treat it as a hotel. If people showed up with money, they took it; no checking, no nothing, and that’s why they got in trouble.

Anyway, so I finally got it. I did a lot of due diligence. I probably overlooked some things that I should have caught…

Joe Fairless: Like what?

Mario Ortiz: They were claiming a certain amount of collections, but what they were doing is they were actually putting their own money into it to make it seem like they were collecting money, but in reality they were just taking money from their bank account and putting it in there to make it seem like they were collecting money.

The telltale was that their deposits were round numbers. I don’t know, maybe I’m doing it wrong when I do my deposits; I probably do them daily in the first five days… I never make a deposit with three zeroes behind it. It’s always some odd number in there. I should have seen that, but I kind of ignored it, and I was in love with the property.

People have asked me, “Would you have still done it if you knew?” I think so… But obviously no, it’s easy to say that, right?

But anyway, so I went ahead… And there were some maintenance issues, and I didn’t understand the amount of – how do I say this…? I’ll just say it – the amount of criminals, if you will, of non-desirables, or whatever you call the people that were there… But we took it over, and this lady that had been working for me in Texas City – obviously, she was out of a job for a couple years… She went into the security and she was doing that. When I called her up and said “Would you be willing to move to Dallas?” she was like “You had me at  hey.” She was ready to go, because she loves the business also. So she moved out to Dallas to become the manager out there.

I was expecting a turnover of about 30%(ish), you know… I was expecting some turnover. I was not expecting 70%, 75%… But we ended up over the course of two years getting rid of about 70% to 80% of the people that were there. It was just brutal. And as you know, when you get into these things — every time somebody leaves, you’ve gotta invest a lot of money to get these units fixed. My restoration cost, or whatever I was gonna put into this property all went into getting rid of people and updating the units they were in just to stay afloat.

It was very challenging. When I first got it, I was probably losing $20,000/month because I was putting so much money back into it. I was actually calculating how long it would take me to run out of money, and asking brokers how long it would take to close on a deal like this, so that I could time it, so that when I ran out of money I would be selling it. It was very, very scary. All my life savings were in that thing. Of course, I had a young family, and I’m thinking “Man, what am I doing?” All my relatives, people that are not in real estate were looking at me and telling me that I was crazy for doing this. All those pressures that other people put on you just don’t help at all.

Since I had a full-time job, I wasn’t around other real estate people. I was involved in the oil industry, around engineers and other people that are career-oriented, so I didn’t have that structure, that support group to tell me “Hey, you’re doing great. Do this, try that.” I didn’t have that, so it was all just consuming the information of the people around me. So from that perspective, they weren’t the right people to be around.

Anyway, we got through that, and slowly we started turning it around. It was very challenging, but we finally got it turned around. We started making money I would say probably in the end of 2016, something like that. That’s when I stopped losing money.

Somewhere along the line I started hearing rumors that people were selling their properties pretty expensive, even the ones across the street. I think I paid 20k/door, and I started hearing that people were selling it for 40k/door. I was like “There’s no way…” I was too busy running the place, I didn’t have time to be looking…

In the process of wondering whether I was gonna lose my shirt on this thing, I called a broker and I said “Hey, how much is my property worth?” He came back and he said “Look, you could probably get six million for it.” I was thinking, “Okay, six million… I paid 3.6, and with what I’ve lost, I could make a couple million. Not bad.” Then I kept saying “No, I don’t wanna list it. I think I can make it”, and then something happened. Close to the end of 2016 I started getting unsolicited calls from people, making me offers. We just pooled offers. I knew I was onto something when somebody called [unintelligible [00:22:08].12] we were driving there. I put it on speaker, and the guy said “Hey, I have an offer from a person that’s willing to pay you eight million dollars.” I just looked at my wife, we looked at each other, and we were like “Wow, this is now life-changing.”

Joe Fairless: [laughs]

Mario Ortiz: Don’t get me wrong, a million dollars is a lot of money, but you can’t retire on a million dollars, especially when you have a young family, you’ve still gotta worry about college and all that… But now you’re talking about five million dollars. That’s gonna be a different story, right?

So I said, “Okay, I’ll get back to you.” I was so excited. I said “Man, we’ve just made five million bucks.” But then I reflected back to the feeling that I got when I’d sold that other property, two days after I had that money in the bank. There was a feeling of emptiness, like “Wow, now what do I do with the money? The money is now in the bank, not doing anything.” So I’m sitting there, and I’m back to my regular job, or whatever that looks like. And Joe, I resisted. I resisted and I said “No, I don’t want it.” And man, the broker was so upset, because he thought he had me. He says “You’re never gonna get anything more than this. You’re already at an 8-cap, and the market can’t [unintelligible [00:23:14].29] You should sell…” Anyway, on and on.

So then another offer came, and another offer. Before I knew it, I had an offer for almost 11 million dollars. Then I said, “Okay, I’m gonna do this. I’m gonna sell. 11 million dollars is a long way from three.” I then started thinking about doing a 1031 exchange. I had to take that money and do something with it, otherwise I’m gonna get killed with taxes.

Well, I went out looking for something, and lo and behold, obviously, everything else went up, so I can’t do anything with the money. I’m gonna go sell this thing, get the money, and then go buy something I don’t want, and end up in a worse situation than I’m at… So I started considering the whole refi situation, and the benefits, and the advantages of refinancing, and I listened to your show a lot; that’s when I discovered you guys… And how people would just never sell. Some people have that philosophy – just keep buying stuff.

So at the end of the day I decided to keep the place and to refi, and to take that avenue instead, and take my time with finding a property and not have the pressure of the 1031 limitations.

Joe Fairless: And how much money did you get in your bank account after the refi?

Mario Ortiz: So I’m not there yet, but I am days away from closing, and I’m gonna end up with four million.

Joe Fairless: Sweet. And then you’re gonna be investing that into a new deal, or are you going to buy another fancy car?

Mario Ortiz: No, no, no… That’d be a hell of a fancy car, wouldn’t it?

Joe Fairless: Yeah, you could buy a couple.

Mario Ortiz: [laughs] Yeah… No, no. I’ve been looking at different asset classes as well, so…

Joe Fairless: What did they value the property at?

Mario Ortiz: Eleven million.

Joe Fairless: Eleven, got it. What is your best real estate investing advice ever?

Mario Ortiz: Well, I suggest that you don’t have to hit a home run, but you’ve just gotta get started. Getting motivated, getting out of the couch and start looking for an investment is probably the best advice I can give.

Joe Fairless: What management company did you use on that 180-unit?

Mario Ortiz: We’re using a company called City Gate.

Joe Fairless: I’m familiar with City Gate. They do our properties, too.

Mario Ortiz: Oh, wonderful.

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

Mario Ortiz: Yes.

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

Break: [00:25:30].21] to [00:26:12].20]

Joe Fairless: Best ever book you’ve read?

Mario Ortiz: I would say Never Split the Difference.

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

Mario Ortiz: That we haven’t talked about… I refinanced that 90-unit right before I sold it, so that was a bunch of money that I spent that wasn’t necessary.

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

Mario Ortiz: I do a lot of mentoring. Now that I’m into this business, people come to me and I jump at every opportunity that I can to help people out to get started; I’ve helped a few people flip houses and get into investing.

Joe Fairless: And how can the Best Ever listeners learn more about what you’re doing or get in touch with you?

Mario Ortiz: If anybody wants to get a hold of me, I’m not selling anything, I don’t have any products, I just have my e-mail: mortiz9991@yahoo.com.

Joe Fairless: Quite an impressive path that you have taken, from your single-family homes – the first, $109,000, retail price, as you say, to then the 17-unit from LoopNet, where you made (I think you said) 75k or so… That’s a lot of money, but not relative to what we’re about to talk about – the 90-unit, and then pocketing the million dollars, and then leveraging that into the 180-unit. Purchase price – what was that, 3.6 or was that 3?

Mario Ortiz: It was 3.65, I believe.

Joe Fairless: Okay, 3.65 purchase price. You could have got it for 3, so shame on you. You totally messed this deal up — no, I’m kidding.

Mario Ortiz: Absolutely.

Joe Fairless: 3.65 purchase price, and… When did you buy that?

Mario Ortiz: I bought that September 14th of 2015.

Joe Fairless: 2015, 3.65 purchase price, and appraised recently for 11 million dollars, and now you’re getting 4 million buckaroos in the bank account from the refinance, and you’re going at it again, looking at different things… So thanks again for being on the show. Inspirational story. I’m really, really grateful you were on the show. I hope you have a best ever day, and we’ll talk to you soon.

Mario Ortiz: Thank you, Joe.

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Best Real Estate Investing Advice Ever Show Podcast

JF1017: A Smart Yet Passive Approach to JV Deals

He is not necessarily in the deal, but his capital is! Today our guest will share how he likes to joint venture with other investors on the single-family residence level, that’s not all he does. Tune in!

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David Phelps Real Estate Background:

– Founder at David Phelps International LLC
– He began his investment in real estate by joint-venturing with his father on their first rental property in 1980
– Nationally recognized speaker on creating freedom, building real businesses and investing in real estate
– Owned general dentist practice for 27 years and Hosts “The Dentist Freedom Blueprint” podcast
– Based in Dallas, Texas
– Say hi to him at www.freedomfounders.com
– Best Ever Book: Bible

Click here for a summary of David’s Best Ever advice: http://bit.ly/2tlL57p

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passive approach to joint ventures


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, David Phelps. David, how are you doing?

David Phelps: Joe, I’m doing great. Thanks for having me on!

Joe Fairless: My pleasure, nice to have you on the show. A little bit about David – he began investing in real estate by joint venturing with his dad on their first rental property in 1980. He is a nationally recognized speaker on creating freedom, building real businesses and investing. He has owned a general dentist practice for 27 years and hosts the popular podcast “The Dentist Freedom Blueprint”. He’s the founder of David Phelps International. Based in (Big D) Dallas, Texas, my hometown. 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 Phelps: Yeah, absolutely, Joe. I started out as a real estate investor back in 1980, as you just stated, with my first joint venture acquisition. I used my dad’s credit and financing and I was the manager. I was in dental school at the time right here in Dallas, at Baylor College of Dentistry, and kept that property for the next three-and-a-half years while I was in school. We sold it and split about a $50,000 capital gain. When I looked at that profit that I made managing that property, which took very little time, I realized that I made more in profit from that than I did all those hours that I spent waiting tables [unintelligible [00:03:39].22] nights and weekends. I found there’s something to this real estate…

So I went in and I got my license. I practiced dentistry, I started a practice, but I never looked back in terms of real estate investing; I was hooked. So I kind of ran both things in tandem. I built my dental practice, but I was also building a portfolio of real estate investing properties. Now, I’ve never been a flipper, a wholesaler… It was always an investment for me.

I went through the years, things in life happened, they changed; I have a daughter who was very ill, very sick. She survived leukemia, epilepsy and had to have a liver transplant when she was 12. She has changed everything for me in terms of my priorities.

Fortunately, I had the real estate, so I made the decision back in 2004 that I was going to get out of the regular practice of dentistry, the owning and doing of the dentistry, and doing something else. I didn’t know what that something else was gonna be, but I knew I had the real estate as a backdrop, so I sold the practice twice, actually… That’s a whole other story which we don’t have the time to go into today. I sold it twice – it’s not something I would recommend, but I learned a lot of lessons there.

I got out of the practice and I could spend time with my daughter, which was the reason I did it. She had a lot of health issues; she’s good today…

Joe Fairless: Thank goodness!

David Phelps: Thank you. She had the recovery from the liver transplant, and I was happy to be able to be the dad that I always wanted to be, but I never [unintelligible [00:04:59].13] because I always thought “Well, someday, when I get everything else just right…” – have you ever heard that before, Joe?

Joe Fairless: Yeah…

David Phelps: On a Sunday, when I’m gonna get all this stuff just right, then I’ll start living my life; then I’ll start doing the things that people talk about when they’re on their deathbed… They talk about all the regrets they have about not doing those things. For me, Joe, it was really a wake-up call, and I’m pleased to say that through all of the issues that I went through – and everybody listening to this great podcast today has either gone through some tough times in life, they are going through some now, or they will, and you have to realize that that’s just part of the test we go through in life… But once you get through them, you’ll learn a lot of great lessons and it will propel you to being a better person, I believe, and think about your life more in terms of impact and not “How can I make enough money to have security?”, because there’s no such thing as that.

So just to go forward a little bit faster on where I am today – I had a lot of colleagues in dentistry and medicine that once I was out of practice they would ask me, “How did you do that?” Because for most people, they end up just kind of treading water, or trading time for dollars all their life; no matter what their per-hour wage or compensation is, they never get free…  And I explained that there was this real estate to my life that I didn’t really expose to that many people, and they wanted to know more. “So how did you do that? Could you help me?”

Little by little, as I just started to help and realized I could help more people if I had a little bit more of a platform, and very organically, what today’s [unintelligible [00:06:20].13] which focused initially on dentists and affiliated professional practice owners, but really today we like anybody who has a like-minded spirit that’s a small business owner and we can help them combine what they’re doing with their business or practice, but also how they can connect to real estate and build wealth outside of that primary business, and have that plan B whenever they need it.

Joe Fairless: First and foremost, thank goodness that your daughter is feeling better – that’s the most important. As far as the real estate stuff goes, I just wanna make sure I’m understanding things… So what’s the primary way that you make money in real estate?

David Phelps: Today it is taking participations with other people… But that’s not how I started. I started boots on the ground, going out and finding opportunities, primarily in single-family at first, that I could take down with existing financing or private financing or seller financing. I was not an institutional financier back in the day, I stayed away from institutions and built my portfolio boots on the ground. But today, and what I teach other busy professionals and busy business owners is it’s all about relationships. Real estate, unlike Wall-Street, is an insider’s game; it’s who you know. Now yes, you can definitely do it boots on the ground, a go-getter, and that’s where most young people start, but at some point I think there’s opportunities to connect dots, and that’s really what I do – I bring capital to deal flow, and with my own capital, I take participations. I lend money, I do equity deals, syndications, and I just really do it through other people that I have built a relationship of know, like and trust, which is critical; it’s a critical factor. I’m not being [unintelligible [00:07:54].07] find somebody to give your money to… It’s a lot more than that, but that to me is the fast-track. That’s really for me true leverage today of my time, and my time is the most important thing that I’ve got, so I’ve gotta look at my time and realize “Where do I wanna spend my time? How can I get the most out of the time that I’ve got and enjoy what I do?”

Joe Fairless: So you are passively investing, whether it is in a syndication or lending your money to fix and flippers, or doing some other type of passive investment, correct?

David Phelps: Yeah, you could say passive… I’d say it’s semi-active. I don’t get down with tenants and management and contractors and actually looking at the properties, but I stay involved with the fewer better people that I have built into my network, and I enjoy that involvement. So it’s not as passive as where you just dump your money into a fund, whether it’s real estate-based or Wall-Street-based, where you just dump it into a fund and you never hear from anybody, you’re just supposed to get checks, dividends or interest payments. That to me would be truly passive, but I like to have a little bit more control over what I’m doing. Just semantics a little bit, I just wanna kind of clarify how I feel about passive versus semi-active.

Joe Fairless: Can you give a specific example of the semi-active scenario?

David Phelps: Yeah, for sure. I’ll just keep it simple and just talk about single-family residential, which I believe is one of the best places for people to start, and actually that’s where the bulk of my portfolio is today. I do a lot of lending, and I can do short-term lending for fix and flip, but also I’ll do longer term lending where I actually take equity participation, or I’ll take option positions on equity on a longer term basis.

So I’ll put my money on a deal and lend the money for the acquisition AND the rehab if it’s someone that I’ve got a track record with. As I said, that can be a short-term deal, which is pretty simple – it’s points in an annual interest rate; I’m pretty standard on short term. But I like the longer term, because I like to keep my money invested where I don’t have it coming in and out. There’s a point where you wanna have velocity when you’re trying to grow your portfolio, but at some point you don’t need to have super-velocity on your entire portfolio…

So I put my money somewhere where it’s gonna be there for 3, 5 or 10 years. But I do have an equity hedge in those deals, and that simple – that’s one deal, one operator (if you will). I want a boots on the ground catalyst in my money in that deal. Of course, you can explodre that and do other things where you are syndicating and build off that model, but that’s pretty much a basic premise.

Joe Fairless: For the acquisition/rehab of a property where you’re lending the money and you’re charging points in the interest rate, what do you charge?

David Phelps: It’s gonna depend, Joe. It depends on the geographic area, it depends on the price point of the property, how much risk I feel is in the deal and evaluating that… It depends on my relationship with that person and how much scale, how much deal flow they can provide me. But just to give you a range, typically today the average is about 12% and two points, that’s an average.

Joe Fairless: Okay. And as far as the long-term play – 3, 5, 7, even 10 years where you said you have an equity hedge, so you have upside in the deal because you have some portion of equity in the deal, what type of returns do you look for in that?

David Phelps: Great question, and that will again depend upon the marketplace. I’ve gotta look at the market and say “Well, is this gonna be an appreciating market?” If we have – which I think we will have – some serious inflation in the next decade or two, is this a marketplace, is this a price point, a geographical market [unintelligible [00:11:09].14] great cashflow market, but not so much for appreciation? That’s one factor.

The second factor is today, when I’m making the investment, what is the equity position today? The borrower – what’s his position? What do I feel like the truly fair market value is on a quick sale, and how much am I loaning in the deal? What’s my loan-to-value? What do I feel is true equity, net after cost of sale? So those two would be determining factors on what percentage of participation I want and based on the number of years.

Sometimes I’ll go in with a flat percentage. It could be anywhere from 20% to as high as 75%. That’s gonna be dependent upon those few considerations I just gave you, plus what’s the carrying cost that the borrower wants to or feels like they can carry? Probably the top level is 8%; that’s probably top-level in a moderate priced range category. If we start getting into a little bit better properties, we’re gonna have to drop that carry for the borrower to 6%, 5%. I’ve gone down to 2%, but that’s where I’ve taken a bigger equity participation in a market where I felt like we had equity going in and I felt like there’d be an equity play on the backside.

Joe Fairless: What’s an example of that type of market?

David Phelps: Well, right now in the Dallas-Fort Worth area. In Dallas particularly, our market is hot right now. Properties that we could easily buy for under 100k, maybe in the ’80s or ’90s all-in 3, 4 years ago and cash-flowing like a big dog… Price points are up now; it’s more competitive. Now we look at properties where the gross rent has gone from 1,150 to 1,200, and now we’re up to 1,300, 1,400, 1,500, 1,600 dollars per month, and property price points there closing in on 170k. So if someone’s borrowing the greater proportion of 170k, maybe they’re borrowing 140k give or take, even at $1,600/month rent, pushing them up at 8% is gonna strain their cashflow.
I wanna make sure my borrowers have plenty of margin. Number one, their deals have to be good, and they’ve gotta be able to negotiate and close good deals. With that being said, I wanna make sure they’ve got a cushion, because a deal only works if it works for both people. If I’m greedy, or try to be greedy and take too much out of the deal, then it hurts that person, and I wanna do deals over and over and over again with a few people.

A deal like that, I’m probably looking at 6% tops on the carrying cost for the borrower, and then again, looking at whatever the equity is going in. If I think we’ve got 25% equity, then I might look at a 50/50 deal on that. I’m just talking in general right now, without penciling numbers in, but that might be a general range.

Joe Fairless: What’s the last deal you invested in?

David Phelps: Oh, gosh. Last deal… I’m doing deals every week, so…

Joe Fairless: Okay, so the one this week.

David Phelps: I do deals with a good friend of mine in Jackson, Mississippi, so it’s a low price point market; he does a lot of seller financing. He’ll do fully amortized seller finance notes to the homeowner borrowers, and they amortize out in less than 10 years. He’ll typically sell of the first 60 payments or so of that note to take care of his acquisition cost; he’ll keep a backend position, and he’ll sell those to me at 12%, so I’ve got maybe like a five-year note, 12%.

Those are easy for me to do. I’ve got my money in for 5 years, I’m very secure, and he’s got a great track record. I do deals like that all the time… Small deals like that, but my money is in play for five years or so.

Joe Fairless: What’s a challenge you have in your business right now?

David Phelps: I have probably too many ideas, honestly… I’m like a lot of entrepreneurs, I always wanna do more, or think “What if I added this or did that?” Fortunately, I have a really good team around me that helps me vet my great ideas – I say that with air quotes, “great ideas.”

It’s easy to get off track, Joe, for all of us. So I’ll think about something, I’ll read about something and I’ll go “I think we’ve gotta go do that” or “I wanna do that”, and I really count on my team to help vet my deals, and… Not that they’ll say my ideas are not good, they’ll just say “Well, maybe not now.” And I appreciate that.

Probably the biggest job for me is being true to myself and not running after every squirrel that appears out the window.

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

David Phelps: Best advice ever? I would say that before anybody starts investing, that I would tell you today to start by being an apprentice. What do I mean by that? It means find somebody in your marketplace, in the space – not geographically… Just find the best person who you know well enough that has a great platform and is doing something that interests you and you believe they have a lifestyle also that reflects what you’re really looking for in the long-term. And tell that person, “Hey, I’ll come work for you for free for a period of time.” Now, most people will pay you something, you can earn your way in, but I think that’s the best advice – invest in yourself first, but you’ve gotta do that by serving others that already have a track record.

Mentorship, apprenticeship – to me that is the fastest track, inclusive of just reading a lot, being around the people, going to conferences, seminars, listening to podcasts like yours… All those are great, but I think actually being able to tag along with somebody who has already created the path and can show you so many things so quickly about life in general, business principles, finance principles, specifically about real estate – you can learn so much faster and kind of skip your own training wheels, which for most of us are wobbly at first… We fall off and scrape our knees and there’s nothing wrong with that, but if there’s a faster track where I don’t have to have patches in my knees and elbows as often and as long, then I’ll take that path every time.

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

David Phelps: I’m ready.

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

Break: [00:16:23].10] to [00:17:25].11]

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

David Phelps: That’s a tough one, Joe. I’m gonna be true to my faith and say I think the best ever book is the Bible. There’s so many great lessons in the Bible that speak to everything in life… And then I’ve just got a whole library of books behind me on business: Jim Collins’ Good To Great, Simon Sinek – Leaders Eat Last… The list goes on and on, but there’s a couple for you.

Joe Fairless: Best ever deal you’ve done?

David Phelps: I’m gonna say it was the first one I did with my dad, because had I not had the chutzpah to ask him to come be an investor with me, I might not have gotten started early on like I did, and who knows where I’d be today.

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

David Phelps: We have a young leaders group [unintelligible [00:18:00].06] mastermind community, and we want to empower the millennial age group (18-30 years old) and give them the opportunity to live their life the way they wanna live it and not feel trapped by society norms or traditions.

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

David Phelps: Trusting but not verifying facts. Not doing enough due diligence. Not that I was lazy, just going too fast. With a little bit more work, I could have saved myself a little bit of pain.

Joe Fairless: What is the best place the Best Ever listeners can get in touch with you?

David Phelps: The best way would probably be my website, FreedomFounders.com. You can check me out on the Dentist Freedom Blueprint Podcast. You don’t have to be a dentist to listen.

Joe Fairless: Well, David, thank you for being on the show. Thanks for talking about how you invest now, your investing strategy, that is semi-active/going towards passive, but I won’t say “passive”, because you said not to… But more semi-active, versus being on the ground and being fully active… And your approach to both short-term financing that you provide, and the long-term play, where you want more of an equity upside component to the deal. Then just your path along the way that got you to this place.

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

David Phelps: Joe, thanks. My privilege!


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Real estate secrets from Emmitt Smith

JF1010: NFL Legend, Emmitt Smith, Shares His Developmental Real Estate Secrets

He built a legacy on the gridiron. Now he’s building properties! Hear Emmitt’s challenges and triumphs in his real estate career and his specific advice about finding opportunities. This is one episode you will want to play on repeat!

Best Ever Tweet:

Emmitt Smith Real Estate Background:

-Owner of E Smith Legacy, a real estate investment and development company Along with his other two enterprise companies, E Smith Realty Partners & E Smith Construction
-Co-owner of The Gents Place; the ultimate men’s grooming and lifestyle club
-Author of, Game On, book that outlines the principles that helped Smith succeed both on and off the field
-NFL Hall of Famer, 3x Super Bowl Champion and 15 year NFL Career Dallas Cowboys
-Based in Dallas, Texas
-Say hi to him at http://www.emmittsmith.com


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developmental real estate and Emmitt Smith



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

With us today, Emmitt Smith. How are you doing, Emmitt?

Emmitt Smith: I’m good, Joe. How are you?

Joe Fairless: I’m doing well, nice to have you on the show. Obviously, Best Ever listeners, you know who Emmitt Smith is, but in case you didn’t know, some things about him… Let me quickly mention a couple things. One, he is the owner of ESmith Legacy, which is a real estate investment and development company. He also has a couple enterprise companies – ESmith Realty Partners and ESmith Construction. He is the co-owner of The Gents Place, which is the ultimate men’s grooming and lifestyle club; we’re gonna be talking about that.

Emmitt Smith: [unintelligible [00:03:05].21] I need to get over there soon. [laughter]

Joe Fairless: I do too, I’m getting a  little rough in the beard area. I need to look smooth.

Emmitt Smith: You just need to shape it up a little bit, that’s all.

Joe Fairless: That’s right. And, well, he’s played a little football along the way, so… Emmitt, what are you up to? What’s your focus right night?

Emmitt Smith: My focus is obviously on a lot of things that you just mentioned; all of them are real estate companies, as well as my construction company. We have a couple things that we’re working on that are pretty significant in the infrastructure space, and so we’re just busy. We just concluded up our Emmitt Smith Invitational Golf Tournament just about three weeks ago, and now we’re planning and getting everything geared up for the Emmitt Smith Gran Fondo, which is happening on 30th September, here in Dallas-Fort Worth. So there’s a lot of other things that are going on from a business as well as from a charitable perspective. Very busy.

I’ve got NFL people around me right now, doing some things, a day in the life of myself… So there’s a lot going on.

Joe Fairless: How do you determine how to prioritize your time?

Emmitt Smith: Well, the way I see it, I have only so many hours in the course of a day to get as much work as possible done, and I try to prioritize how these things absolutely work in terms of either 1) helping every company that I own prosper and grow; 2) assist the brand in terms of more brand awareness for not only myself individually, but also for all my companies that are under my leadership, including our charitable component. I try to prioritize these things; do they all work together, or is it something so far out of the box that it’s gonna take up too much amount of time, and do I really wanna do it?

The only things that I’m doing thus far, I’m extremely, extremely passionate about. Everything I’m doing, I don’t have any pullbacks, because it just flows. It flows within the course of my daily schedule, and I take time for every last piece of it.

Joe Fairless: With the different ventures — I mean, you mentioned the golf tournament, you mentioned real estate, you’re the co-owner of the Gents Place, you’re helping with that… What’s right now taking up the majority of your focus when you look at all the stuff that you’re working on?

Emmitt Smith: Well, the beautiful thing about it is I don’t have to do it all myself, let’s make that very, very clear. The one thing I learned a long time ago, you surround yourself with great teammates. Emmitt Smith did not become the all-time leading rusher because he was out there blocking for himself, handing the football to himself and throwing the football to himself, let alone calling him to plays.

I had a supporting cast, and that supporting cast afforded me the opportunity to do what I do best, and that’s the same thing that I have here within my corporations. I have great leadership executives that push the ball, if you will, down the [unintelligible [00:05:48].15] and we communicate constantly. That part is very helpful.

The one thing I have learned and one of the challenges that we all face in business is not necessarily whether or not the concept or the idea is the right one, it’s whether or not we have the right people to help us make that concept and that dream or that idea become successful. So far I feel like I have surrounded myself with a great group of men and women to help fulfill that dream.

Joe Fairless: I imagine that’s a unique challenge that you face starting out, because a lot of people knew who you were, and with that comes a lot of people who wanna get your money, and not necessarily look out for your best interest.

Emmitt Smith: That is true. Go ahead.

Joe Fairless: Starting out, how did you identify the right people to surround yourself with and how has that evolved, if it has evolved at all?

Emmitt Smith: That has been one of the hardest tasks to try and – I ain’t gonna say “master”, but to get as good as you possibly can with it. Outside of my own intuitions and my own questions that I’m gonna ask every person that I interview with, I use a filtering system that I go through in terms of having the HR department spend time with people, doing background research, interviewing folks before they actually sit in front of me, and then I come with a whole other set of questions that are maybe sports oriented but also give me some insight in terms of who the individual might be, what type of work ethic they actually have. But the most important thing I try to find within people is are people really credible? Can you really do what you say that you can do?

The only way you can really figure that out is through trial and error, therefore I don’t mind giving a 60-day window here to try and figure out whether or not you have the capabilities of picking up something fairly quick, and executing against something. Most of the times it’s just a matter of conversation. Your thought process also is a big indicator of how you think about certain things – do you think about things in a silo? Are you able to be a broad thinker and think outside of a silo and bring it back into context [unintelligible [00:07:58].27] to the situation or the cause at hand? There’s a lot of different techniques that you have to learn.

Joe Fairless: Do you have a favorite interview question, when they finally go through the entire process and finally get to you and have the conversation?

Emmitt Smith: Well, it depends on the resume that’s in front of me, the person that’s sitting in front of, the conversation that we’re actually having, and obviously I like to know what people see themselves. I like to understand “Where do you see yourself in the next five years? Are you just coming here to get a job, or do you have a mission? Do you have a goal, do you have a vision for how you see yourself within this corporation? Do you see that the landscape is open, that we have enough opportunity for you to become what you aspire to be?” If you cannot see yourself being successful in here, then you’re not the right person.

It’s nice to know how people envision themselves working within our platform.

Joe Fairless: We talked earlier about the different types of ventures that you’re involved in, and you said that you’re passionate about each of those ventures. I imagine that you’re presented opportunities that you could be passionate about… You could be like “You know what? That sounds really interesting…”, but perhaps you don’t enter into a partnership or invest or create a company around it. What is the difference between the ventures that you have decided to move forward with that you’re passionate about and the ones that perhaps you could be, but you don’t move forward with?

Emmitt Smith: That’s a great question. When you think about our platform, which you stated at the top of this show, ESmith Legacy, which is a real estate development company, so we build things, we have [unintelligible [00:09:34].04] shopping centers, mixed-use projects in terms of retail office, hospitality, multifamily – all of those things are part of the mixed-use umbrella that we actually have from a development standpoint, and we’re currently venturing off into the MOB space (medical office space).

When we put all of those things together, it creates a nice little dynamic mix there. That’s the development arm. Then we [unintelligible [00:09:58].11] brokerage services arm. We represent clients that wanna be in those types of mixed-uses, whether it’s industrial office, or retail or medical – whatever it may be, from a brokerage tenant rep standpoint, we represent a number of clients that actually want to fill some of that space up. These kind of work hand in hand that way.

Then we [unintelligible [00:10:19].09] construction. Whether it’s any form of development, it’s gonna require some type of construction work, and so our construction company is not only building roads and bridges, parking garages, but is also doing site work, infrastructure work and everything else which is required for any development that ESmith Legacy does. So it all kind of work together in this nice way. Construction may take a lead here one day, development may take the lead another day, brokerage services might take the lead on another day. Everything that we do tests some form of real estate or some form of development that somebody is probably gonna either own or develop themselves.

Joe Fairless: I read an article – I think it was a recent article – where you implied that the construction part of your business is the part — I don’t know if it was that it keeps you up at night, or something, but it was the challenging part because you’re spending dollars and you don’t have a return for 12-24 months. Can you elaborate on that?

Emmitt Smith: Yeah, construction is one of the most — [laughs] when I first got into the business, my CEO said “Are you sure you wanna do this? Because you could probably make more money going and signing autographs than doing this…”, [laughter] which he was absolutely probably correct in terms of the stress level. But construction is an outpouring of cash early, outlay early on; it’s on an accrual basis, so we can be on a job site for almost 90 days, in some cases 120 days, before we actually get our payout. So probably we have outlayed somewhere between 200k to 500k before we get our first paid application. In some cases you spend a lot of time debating and arguing with the person about the work that you’ve done. The work is then placed, you moved on to the next phase, you’ve been cleared to go, and yet you still wanna argue and they’re trying to beat you down some more from a financial standpoint, which is absolutely ludicrous in my opinion, because I come from a world where if you perform your job, you get compensated for it.

It’s kind of a rigged system, because we find ourselves financing the project – which is not cool – to get a small amount of return. But my reasoning for doing it was I got sick and tired of hearing that they cannot find qualified minority (African-American) companies that can do the word. I got sick and tired of hearing it, because it’s a big old myth. The reason why you can’t find it is because some of the general contractors, some of the big boys are constantly doing things to run smaller minority companies out of business, by accelerating the schedule.

Well, if you’re a small minority contractor and they accelerate a 14 million dollar project, they accelerate the schedule on you, you just went from maybe doing $50,000/week to $100,000/week and you’ve gotta wait 90-120 days to take it back. So it’s kind of hard to do. That’s why I say it’s one of those very difficult things, difficult businesses to be in, and it’s one of those things that will keep you up at night.

Joe Fairless: And how do you mitigate the risk as much as possible or navigate that so that it doesn’t keep you up as many nights in a row as perhaps it could?

Emmitt Smith: Well, the first thing we try to do is to find very good relationships with general contractors and owners who have better pay terms, if you will. [unintelligible [00:13:37].03] that’s impossible; establishing that type of relationship in a marketplace is absolutely critical to the success of any small minority business. So that’s one thing.

Risk mitigation comes in the context of “How do we estimate a project and how do we find the woodpile, even in the construction space?” So we try to eliminate problems before we actually get on the job site. Then most importantly, safety [unintelligible [00:14:08].03] Safety is a huge part of everything that we do. I’m making sure that every person that’s on our job site come home the same way they went to work that morning.

Joe Fairless: Yeah, right… Perhaps with a little bit more dirt on their clothing, but otherwise [unintelligible [00:14:22].27]

Emmitt Smith: I could do with dirt on the clothing, that could be washed off, but we want fingers and toes [unintelligible [00:14:27].09] and stuff like that.

Joe Fairless: So the primary audience for my show is real estate investors, so what is your best real estate investing advice ever for them?

Emmitt Smith: One of the simplest forms of investing advices I’ve ever received came from Jerry Jones himself. He told me years ago, he said “Emmitt, have a big front door and a small back door.” A big front door and a small back door. Now, how does that play in the context of real estate? Well, obviously, from a development standpoint, I obviously wanna do big projects. And the more projects that you do that are of quality and size and the more that you are capable of getting done, then you have a big front door. [unintelligible [00:15:09].16] at the back door. In other words, take in as much as you can, and let out little on the back side.

Joe Fairless: How have you applied that in either one business or your overall approach?

Emmitt Smith: Overall approach – I would say… We touched on it a little bit ago when we were talking about the construction business, risk mitigation. How can we set up our contracts where there’s brokerage service or development contracts to the point where we can alleviate as much of the risk as possible and try to be as fair as possible with our contractors as well. So that’s important… Whether we utilize an architecture firm that has VM technology to find collision in the drawings that we may have and mitigate those things before we’re on the job site, which is absolutely huge, because it saves us money on changing orders and everything else. All of that is important.

Those are some of the things that we try to do – contracts for language and risk mitigation in terms of design criteria.

Joe Fairless: We do a lightning round of questions… Usually, they’re the same questions, but prior to our conversation I asked the audience to submit questions, so we’ve got some personalized questions for you. Are you ready for the Lightning Round?

Emmitt Smith: Yeah.

Joe Fairless: Alright, let’s do it.

Emmitt Smith: If I don’t have an answer, I can say “Pass…”

Joe Fairless: We’ll see… Elton from Detroit asks “How do you identify which opportunities to pursue?”, which we kind of touched on, so if you don’t wanna elaborate, you don’t have to. But just from a high level…

Emmitt Smith: Number one, from a real estate development standpoint it’s about an eye for a piece of property… What does this property want to be? No matter if it’s an old redevelopment play, or if it’s a piece of land that’s vacant, but it wants to be something. Then figuring out how to make it happen. Some people see challenges and don’t wanna touch it. Other folks see challenges and they wanna run right to it because it’s those creative minds that pull off something that someone else doesn’t wanna do, which is a lot more riskier, but yields a much larger return. And I’ve gotta be passionate about what it is that I’m trying to get accomplished. But then I extrapolate that from the site standpoint to the demographics and the trade area around it. What’s in that trade area and what’s not in that trade area? And I try to [unintelligible [00:17:24].10] that are in the trade area off the table, and figure out who really needs to be here and how does the demographic stack up with that tenant profile.

Joe Fairless: Theo from Cincinnati asks “What separates the NFL players who leave the NFL and lose all their money with the NFL players who leave the NFL and make more money?”

Emmitt Smith: Well, I think we all run the risk of doing things that we’re not aware of. One thing I’ve learned is it’s better for me to invest in myself than to invest in others, because I’m not gonna cheat myself. What happens when you invest in others, others sometimes (again) claim that they can do XYZ, until  the rubber  meets the road and you find out that they can’t, so you’ve made a significant investment in the person just for them to let you down. Not only that, but then the actual management, who you’re investing in and how you’re investing in these people, also their credibility becomes critical, too.

I just think that often times we are excited about being in business and not really taking the time to understand the business. Everything that I’ve done, I’ve tried to immerse myself in it to understand the business and how the business actually works itself, and asking questions, versus being an absentee owner, being an involved owner from start to finish. So you learn that lesson one time, versus having to learn that lesson three or four times.

Joe Fairless: Makes sense. Bradley from New York City asks “What are you most proud of?”

Emmitt Smith: What I’m most proud of? That’s hard to say, outside of just my kids. I’ve got two kids now that are going off to college; one’s already in college, one just graduated from high-school, and she’s off to college [unintelligible [00:19:12].12] And I’ve got three other kids coming from behind them, and they all are good kids. I think I’m most proud of my children in terms of how they’ve been able to handle not only the success of their parents and who we are, but just how they carry themselves as young men and women.

Joe Fairless: And the last question from the listeners that was selected is from Eric in Cincinnati – “What’s a trait you learned in the NFL that has been applied in business?”

Emmitt Smith: I would say teamwork. [unintelligible [00:19:42].16] ego at the door, and understanding that you do not become successful by yourself. It involves a lot of people in terms of helping you become successful. Like I said before, I did not hand the football to myself, I did not block for myself, I did not call the plays, and the same thing applies in business. I’ve got people that help keep me on time for my schedules, I’ve got folks that are in the marketing side, I’ve got folks on the executive director side, I’ve got CEO’s and everybody else that has a job and a responsibility. Doing your job and doing your responsibility protects everybody else, and in some cases I’ve got people that have the ability to do more, a lot more bandwidth than others, and that’s a beautiful thing. To me that’s a first, second and third running back. Not only is he there to run the ball, but on third down he can go out and catch the ball and he can also block, which is also extremely important for key people and key personnel in any organization. If you’ve got somebody that has the ability to not only be a broker, but also has a law degree too, so that expedites certain things too, that covers your back.

Having engineers that have the capability of not only being a CEO, but also seeing your estimator too, so when it comes down to creating processes and procedures for your organization to run off of and run in the most efficient way, all of that is great knowledge to have. Then you have folks that just handle one piece, but they do that one piece very, very good, and that’s a wonderful thing to have.

Teamwork becomes such an important thing in every aspect of what we do. In my household it’s the same way – teamwork. My wife and I have got to be on the same page in order to raise all five of our kids and keep them all humble, hungry and knowledgeable in terms of their growth. That is an important aspect of who we are as people, to not only have the ability to share knowledge with one another, but to establish that team environment.

Joe Fairless: I’ve read that on your bucket list is to be an NFL owner. Let’s fast-forward, and I’d like to congratulate you – you have your pick of the litter; you can pick whichever NFL team you’d like to be an owner of… Which one is last on your list, and why?

Emmitt Smith: Last on my list… That could be a number of cities, but obviously I would like to work in cities that I love to visit, where the weather is perfect or good in some kind of way.

Joe Fairless: Sorry, Detroit… [laughter]

Emmitt Smith: No offence to Detroit, because it has tremendous opportunities, but I’m not a cold weather person, so I would rather be on the South Side. West Coast – I could deal with the West Coast; Arizona – I could deal with Arizona… Obviously, anything in Texas I’m good with, Louisiana, Georgia, Carolina, Florida – all of those are great areas, but if I could pick one team that I could be the owner of, I would wanna be a part owner of the Dallas Cowboys.

Joe Fairless: Absolutely. And has anyone ever interviewed you while wearing an Emmitt Smith jersey, like I just did?

Emmitt Smith: I can’t think of [unintelligible [00:22:53].25] in recent times. [laughter]

Joe Fairless: Well, Emmitt, thanks for spending some time with us. Thanks for talking about your teamwork approach and how actively involved you are in learning aspects of the process, and the challenge. A lot of people who haven’t walked a mile in your shoes or other people’s shoes, they have a tough time thinking that perhaps everyone has a challenge. Everyone has challenges, and really, one of the things that you mentioned is do you have the right people and how you focus on “Are they credible?” and how you qualify that credibility, whether it’s  a 60-day timeframe for testing them out, or any number of other filters that you use… So thanks for being on the show.

Where should the Best Ever listeners go to perhaps get more involved in what you’re focused on, whether it’s the Gents Place or something else?

Emmitt Smith: Go to EmmittSmith.com.

Joe Fairless: Cool. Emmitt, thanks for being on the show. I hope you have a best ever day, my friend, and we’ll talk to you soon.


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Best Real Estate Investing Advice Ever Show Podcast

JF998: How an Anesthesiologist Built a Brokerage that FOCUSES on Investments

Still an anesthesiologist, he grinds away at real estate focusing on investments although he appears to be a retail professional. He can do it all, commercial and residential, but his niche is investment properties in the bustling Dallas-Fort Worth area.

Best Ever Tweet:

Amir Baluch Real Estate Background:

– Founder and Principal of FundingNest.com
– Provides turnkey investment opportunities to investors and his physician colleagues from around the globe
– Also a licenced realtor, owner of Investment Club Realty, LLC, and holds series 63 and 22 securities license
– His team has closed over $450M in real estate
– Based in Dallas, Texas
– Say hi to him at http://www.baluchbulletin.com/eonfire
– Best Ever Book: How to Win Friends and Influence People

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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 fluffy stuff.

With us today, Amir Baluch. How are you doing, Amir?

Amir Baluch: Pretty good. How’s it going, Joe?

Joe Fairless: It’s going well, my friend, nice to have you on the show. A little bit about Amir – he is the founder and principle of Funding Nest. His team provides turnkey investment opportunities to investors and his position colleagues all around the globe. He’s also a licensed realtor, as well as the owner of Investment Club Realty and holds a series 67 and 22 securities license. His teams closed over 450 million dollars in real estate. Based in Dallas, Texas… With that being said, Amir, do you wanna give the Best Ever listeners a little bit more about your background and what you’re focused on?

Amir Baluch: Sure. My whole goal growing up was actually just to focus on being a doctor, but then I started learning that 80% of the multi-millionaires generated their wealth through real estate, so at the age of 21 I jumped into it head first, with no mentors; we didn’t have access to podcasts like Joe’s here, where you could get information from other people. I was just pounding my head against the wall, but eventually, a few years later I started investing alongside a private reach and multifamily; a few years after that I got my real estate license, I started putting deals together and putting together a team to help grow my real estate investment business, because I knew that this was the key for me. It wasn’t gonna be just going to work at the hospital every day for the rest of my life,

Through that process — as you mentioned, Joe, we have our own brokerage… I believe we’re the only one in the metroplex that focuses solely on investments; we really don’t mess with the retail side of it that much, although we won’t turn down the business, but we don’t focus on that. We do both commercial and residential transactions, developments, fix and flips, and we also coach other people just like you. We like to share our knowledge with other people, because I know what it’s like to not have knowledge. That’s how I got stuck when I was younger, getting into this game, so I love giving back to people, giving as much advice as I can, and that’s kind of where I’m at in my life right now.

Joe Fairless: And are you doing anything with the doctor route?

Amir Baluch: Yes, I still do anesthesia. Usually it’s from 7 AM to about noon, which leaves me most of the day. Some days I take off completely, but I have definitely more than 40-60 hours/week to give to real estate.

Joe Fairless: That’s incredible. 38, you started at 21, and you have some securities license, and you have a brokerage, you are also an anesthesiologist, I guess… Right?

Amir Baluch: Yeah, I just can’t sit still.

Joe Fairless: You can’t sit still, no kidding.

Amir Baluch: I love to learn.

Joe Fairless: Yeah, so let’s talk about how you balance your time. How do you figure out what to focus on?

Amir Baluch: A couple things – I’ve taken a lot of time management courses, and you learn a few tricks here or there, but the number one thing, you have to be very conscious about your time and understand that there’s a certain amount of hours in the day, and prioritize things. There some type of a chart or like a square you could make where you have urgent/not urgent, and then you have important/not as important. You put things into those categories, you figure out what needs to be done now at this given moment based off of that, you prioritize, and eventually the things that don’t really matter that much, you procrastinate on those intentionally, or you can outsource so much with virtual assistants, people in India, the Philippines, bringing people to pick up the phone for you… There’s so much virtual stuff on there, so much technology we have to increase our own free time. I definitely recommend for people to take a look at that. So that’s the key for time management.

Joe Fairless: Do you actually create a chart every day?

Amir Baluch: Not every day, but I have a long list of things to do that has up to 70 things on it. Instead of having those blocks, I actually have it color-coded based on which block it should be into, like what’s urgent, what’s not urgent. A lot of times I don’t have to put too many things in the blocks, because as soon as I see something that’s a time waster but needs to be done, I just immediately outsource it. I don’t even want it to take up space in my brain, I don’t even wanna think about it, so that’s what I do.

Joe Fairless: And who do you outsource it to?

Amir Baluch: For example, I wanna build a call center right now – it might take me a couple hours to actually do the Google research and figure out who’s good at what and what the prices are. I’d have a virtual assistant that for $10 will do all that searching for me and just give it to me in a nice Excel format, and I’ll just call up the best one and that’s it.

Some of the marketing material, too – I used to try to do it all myself… It doesn’t make sense to do that. You have websites like Fiverr.com, or even Upwork, and you can outsource this thing for much less than what your time will be worth if you’re in the real estate investing world. Even content creation sometimes, like a quick blog post or something like that… Although the ones that I publish with my name behind it, I’ve gotta do those myself because it’s too hard to find somebody to put all that stuff together. But just some small things like that you can outsource, and the most important things are things that really will make money or make an impact – those are the ones that I’ll handle myself, such as negotiating the contract, face-to-face meetings with a new partner, visiting a plot of land for development… Those things you can’t outsource. But that’s what I’ll focus my time on – those critical elements of a transaction.

Joe Fairless: What service did you hire your virtual assistant through?

Amir Baluch: I can’t even remember. I use different ones, depending on what I want done. For example, Google searches or keyword searches, things like that, I’ve used so many different ones, and they all have strengths and weaknesses; it just depends. I used some on Fiverr, I used some on Upwork, and they’ve been from all over the world, but it really just kind of depends what I’m looking for. If the English is kind of tricky, I definitely don’t wanna hire somebody from India; I need somebody that’s fluent in that.

If I need something for a medical background, for something like that I’d definitely need to hire somebody with an M.D. or some type of healthcare background, so you’re not gonna find that on Fiverr, most likely. Sometimes I just ask other friends that I know use virtual assistants, they give me some recommendations, too. It’s kind of a conglomerate of all that.

Joe Fairless: What’s the primary way you make money?

Amir Baluch: Right now it’s probably 50/50 anesthesia and real estate.

Joe Fairless: And within real estate specifically, what’s the number one way within real estate that you make money?

Amir Baluch: Right now most of it is coming from our fix and flip transactions. We’ll probably make anywhere from 20k-60k a pop on that net. Number two would come from the retail side; we usually clear about 5-6 million a year in transactions just on small retail deals. Number three would be wholesale.

Joe Fairless: Okay, that makes sense. Fix and flip transactions, retail brokerage, and then wholesaling. What is your focus? You’ve just mentioned the call center – why a call center? What will that do for your business?

Amir Baluch: Well, the game is really just about leads. In any business you need leads. If you get leads, you can be successful in any business and you could build the infrastructure to handle the leads. What I wanna do is get large, commercial leads and investor leads because the limiting factor for me a lot of times is getting the capital to close on these larger developments, which that’s where our next move is gonna be. So if I have a call center, calling people, prequalifying them, see what they’re interested in, if they wanna invest with me passively, we’ve got all that ready to go with Funding Nest, or just one-on-one partnerships, it doesn’t have to be a security… Or if somebody doesn’t wanna partner, some people just like to own things outright, they don’t like any partners – that’s okay, because we can handle the retail side and we can broker them the deal, depending on what they’re looking for.

We need both those lead sources to scale up, and so instead of me making the phone calls all the time, I’m just gonna generate some scripts, form a call center; we’ll just have the person sit in our office here in uptown Dallas, and for maybe 4-5 hours a day just make the phone calls and run through a script and we’ll see how many leads we get, and we’ll keep on tweaking the system until I’m getting so many leads that I won’t be able to handle it.

Joe Fairless: With the leads, what are ways you generate them?

Amir Baluch: Right now a lot of it has just been networking. We do a lot of coaching — or my brother mainly does a lot of the coaching at a group called The Real Alliance in Dallas, so we teach other investors how to do fix and flips, and they can either partner up with us from day one, or a lot of times what happens is they try to do it themselves and then they come to us to bail them out. When we come to bail them out, we really just take over the project and that’s kind of like a lead.

Or somebody will come in and they found a deal but they don’t have the money and they come to us and then we close on that, so we get leads like that, we’ll pay them a wholesale fee. Or somebody doesn’t know what they’re doing – we’ll give them a script and tell them to knock on some doors and find leads like that, and then we’ll pay them 5k-10k once they give us a deal that we approve. The more we give and the more we share, the more leads we get. It’s really interesting how that concept works.

Joe Fairless: What’s the main project that you focus on, besides the call center and scaling the leads? What’s another main project that you’re focusing on right now as it relates to the real estate business?

Amir Baluch: We have two big projects that we’re working on right now. We want to build a subdivision in Fort Worth, which I think you know a lot about Fort Worth – it’s a historic district, it’s just South of 7th Street. We bought 30 plots of land, and it’s just the next progression after fix and flips; it’s actually easier to build a home than it is to tear down a part of a house and then build on top of that. Doing a subdivision is almost like doing 30 fix and flips with less headaches. We should be breaking ground on that in about two weeks. That one project will probably net us more money than we’ve made in the last three or four years with the fix and flips, and it’ll be easier also.

Another deal we’re doing is on the commercial side… I actually have a conference call with the attorney in about an hour after this podcast. There’s 20 acres for a commercial development; we already have 15 acres almost sold off to a group that will build multifamily on it, and they’re buying it at a high enough price where the remaining acres we’ll own free and clear… So within nine months of completing this transaction, we’ll have about three million dollars worth of frontage on a highway on free and clear to do whatever we want. We could flip the land, we could develop it, we could hold it for a while… So that’s another deal we’re working on even right now, in the next hour.

Joe Fairless: That sounds like a lot of fun, both of them, and for different reasons. You have 20 acres… How much will you have left? About 5 acres – what are your plans with that, and do you have investor dollars in that deal?

Amir Baluch: I have a couple people that will put in the money right now, but it just depends on what kind of partnership structure they wanna have, so I’ll definitely be negotiating with both of them, and I would wanna partner with the ones that could bring in the most value outside of just bringing money…

Joe Fairless: For example?

Amir Baluch: For example, let’s say if a commercial developer wants to invest in this deal, with his knowledge and resources, he might have some tenants in his back pocket; I’d rather have him invest, because if we decided to build it and get tenants, while we’re closing on the deal, he might already get some LOIs (letters of intent, for the Best Ever listeners out there). If he gets some letters of intent before we even close on the transaction, we could immediately get the construction loan and start building, so it really can turn a speculative deal into a home run just by having those contacts, whereas somebody who’s just passively investing and can’t bring anything else to the table, well, they’re just bringing in some dollars, but that’s pretty much it. They’re not actually adding value to the deal outside of that.

Joe Fairless: And you’re referring to the five acres, right?

Amir Baluch: Correct.

Joe Fairless: Okay. Did you acquire the 20 acres – the original transaction – with investor dollars, or your company’s own money?

Amir Baluch: Well, actually it’s under contract right now and it’s gonna be assigned to me, so somebody else could have closed on it, and through the grapevine it got into my hands, because they know I like these types of transactions, so I’m kind of negotiating terms with the person who wants to assign it with me, at the same time trying to figure out what my next move is gonna be, whether I wanna sell three-quarters of it to the multifamily developer, or I might even keep that and do residential deals. So even this minute right now, my brother is doing due diligence on the residential side and crunching some numbers to see if that makes more sense for us to do.

Joe Fairless: What is the process for doing the due diligence on the 20 acres? How do you know which option to go with?

Amir Baluch: That’s a good question, because a lot of people can’t answer this. This is why I don’t advise anybody to go out there and just buy land. When you buy land, you definitely have to know what the best use is – is it commercial? Is it residential? If it’s commercial, which asset class? You wanna do multifamily, should it be office, should it be retail? So we put together proformas for each one of those options. A proforma is just lining up all the numbers with costs and income to see what will generate the most amount of money for the money we put into the deal. We kind of already know what retail will do based on current comps. We are figuring out what will happen if we do residential, and if it becomes multifamily, we’re actually just selling the land, and we know what the sale price is of the land, so we know how much money we’re making there.

For example, let’s say if we wanna do residential, my brother is looking at what the sales price would be, the days on market, what our costs are gonna be… This is raw land, we have to know what’s the cost gonna be to actually make it useable; is the city gonna get in the way? Are there any restrictions? What if we’re forced to have some roads in this 15-20 acres – now we can’t build as many houses. Let’s say it was a home run building 100 homes; well, if the city gets in the way, they’re like “No, you can only build 60”, well, there goes 40% of your net income.

Every single step of the way you have to plan it all out as fast as possible, and see which one is the safest, at the same time makes the most amount of money for the dollars you’re investing, and over what period of time.

Joe Fairless: You all haven’t done ground-up development yet, correct? Did I hear that earlier?

Amir Baluch: We’re actually partners with people doing ground-up development, but by ourselves we haven’t done it.

Joe Fairless: On the subdivision in Fort Worth will you be partnering with someone who has, or are you doing this on your own?

Amir Baluch: That one’s gonna be our first project where we’re doing it ourselves.

Joe Fairless: And what allows you to sleep at night knowing that you’re not partnering with someone else and you haven’t done it before?

Amir Baluch: Because building on a lot that has already been developed to put a house on is easier than the fix and flips. Imagine doing a fix and flip but you don’t have to tear anything down. For example, the real numbers would be that each lot is averaging about $15,000. Our all-in costs to build the home is about 75k-85k, and it’ll take about four months. We already have buyers for all the homes in California, or even my friends will buy them as turnkey rentals, and the sales price will be about 140k. So we already have the end buyers, we know what our costs are, the land is already pretty much developed, we’ve just gotta put a house on it. It’s probably the easiest way to get started in residential development.

Joe Fairless: What do you think they rent for?

Amir Baluch: They’re gonna rent for right around 1%, maybe a little bit more. 1% meaning whatever the purchase price is. If we sell it for 140k, you’re probably gonna get about $1,400 of rent a month.

Joe Fairless: Okay. How many homes will be there?

Amir Baluch: 30 homes.

Joe Fairless: So you’re projecting roughly a $30,000 profit per home?

Amir Baluch: Plus or minus… It’s gonna depend how much we end up paying to the investors also. But the total project should net a little over a million dollars when we’re all said and done.

Joe Fairless: It’s exciting stuff, thanks for sharing that. Amir, what is your best real estate investing advice ever?

Amir Baluch: The best advice I have for all the Best Ever listeners our there would be to find ways to partner with people that know more than you and are bringing value to the table. The reason I say this is when I first started getting involved in real estate (this is when I was 21), I couldn’t get anything done. I was going to the courthouse and getting a paper version of a list of foreclosures and running around… It just takes a long time to learn the hard way on your own. It’s better to partner up with somebody that’s been there, done that; it accelerates the process of you being successful, and it decreases the chance of you losing any capital or any sweat equity you have in the deal.

Even if by partnering you make a little bit less, at least you’re making some money, or you’re more likely to make money, and you’re gonna do it in a shorter amount of time. Then as you learn from your partners, then you can become more and more independent. That’s probably the best advice I have. You can apply that to anything, not even just real estate; it could be any type of business, or even if you wanna learn to play the guitar, or really anything that you wanna be good at, partner with somebody that’s better than you and that’s bringing value to the table.

Joe Fairless: I’ve witnessed that first hand in my own business, and I embrace that Best Ever advice, that’s for sure. Are you ready for the Best Ever Lightning Round?

Amir Baluch: Sure.

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

Break: [00:21:11].02] to [00:22:03].23]

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

Amir Baluch: The best book I’ve read is probably gonna be Dale Carnegie’s “How To Win Friends And Influence People.” The reason I say that is the principles in that book last forever; nothing has changed in the decades the book has been out, and it’s especially applicable to real estate because real estate is really a people business. If you can’t work with people, you can’t manage people, if you can’t have a conversation, you can’t get people to remember you, good luck… You’re probably better off just doing something like IT or building apps or something. It’s just not gonna work. All the deal flow you get, building relationships – that’s kind of like the grease behind everything that makes things run smoothly; it’s being able to work with people, and that’s the best book, “How To Win Friends And Influence People.”

Joe Fairless: If no one likes you, then stop listening because you might as well do something else, and go listen to a podcast about building applications on your phone, right?

Amir Baluch: Right, exactly. [laughter]

Joe Fairless: Best ever deal you’ve done?

Amir Baluch: I would like to say closing on these 30 plots of land, because it’s really the next progression of where we’re going – it’s gonna be 30 fix and flips. Our basis in the deal is excellent; we probably bought this land about 60-70 cents on the dollar for what it’s worth, so there’s really no way we can lose on this. We could flip the land anytime. And really, 30 fix and flips, we’ll say if it took us two years to do that, then we could knock this out with very minimal time, so that’s probably my best deal there, closing on that land and building on it, which is gonna happen in about two weeks.

Joe Fairless: How did you get the price to be 60 cents on the dollar?

Amir Baluch: Well, it was some distressed property that was taken back by the city of Fort Worth, and we had an in with somebody in the city, and they were looking for somebody to help turn around the neighborhood a little bit, develop it and bring more people to that area, and they wanted it to be kind of renovated, and not a lot of people wanted to jump into that area, but we were, and they liked us, because my brother and I both have read that Dale Carnegie book, so… [laughter] They decided to sell it to us, and that was it. We beat out a couple other developers that were putting in offers at a higher price than us. We still got it at a lower price, even though offers were 10%-20% higher than our offer.

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

Amir Baluch: I have a couple different ways to give back. One is actually through my book, “Make it, Keep it. New Wealth Strategies For Physicians.” It’s just kind of all the knowledge that I have just on the basics of investing in general, and there’s definitely a lot of good real estate chapters in there. I just roll it all up and just almost give it away for free. You can get it on Kindle for 99 cents. I think that will make my physician friends tens of thousands of dollars in better decisions.

We also give back by training other real estate investors. We never charge for our time, we’re just happy to see other people join along, and as they grow, we might become partners. If they don’t grow, hey, they might be able to feed us deals, and we’re happy for them wherever they go in their career.

On the charity side, I’m the Sapphire sponsor of the Dallas Margarita Society and Dallas Children Charity. Every year we raise just over a million dollars in one night and we distribute it to about 70 children’s charities in the [unintelligible [00:25:37].06]. Joe, you were probably familiar with that when you were living down here.

Joe Fairless: Yeah. I haven’t been personally involved, but I’ve heard of it.

Amir Baluch: Yeah, those are the three biggest ways we like to give back.

Joe Fairless: What’s a mistake you’ve made on a particular deal that stands out?

Amir Baluch: Sometimes working with friends is not always a good idea, because when there’s money involved and things like that… There was a deal where one of my friends wanted to do a fix and flip and he needed a hard money lender, so I lent him the money… I said, “Okay, you’re coming in at a good enough basis, I know I’m not gonna lose”, but I was really hoping for a pretty good return. We start putting some terms in there where he loses all the equity in the deal after working months and months, and you get all your money back plus a little bit. They might not like that that much, although that was the terms that he agreed to… So I try not to really get involved with friends that much as business partners. If they wanna passively invest in my deals, that’s fine, but I kind of think twice about working with really good friends.

Joe Fairless: What happened with that deal?

Amir Baluch: We had to take over the project pretty much and steer it in a different direction, and upgrade it a little bit, get a new broker to sell it, and that’s pretty much it. But we should actually have a buyer in the next two days, so it will be okay.

Joe Fairless: Boy, a lot is happening within two weeks.

Amir Baluch: I know. There always something going on.

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

Amir Baluch: There’s a couple different ways… You can reach out to me at BaluchBulletin.com. I’m also on LinkedIn, if you look up Amir Baluch. A really good way is I’m gonna have a little special gift for all the listeners out there if you go to BaluchBulletin.com/eonfire; I have a special deal that they can download with tons of advice for anybody that’s doing anything real estate related. It will be a really good little addition to whatever knowledge base that your Best Ever listeners have.

Joe Fairless: Sounds like you were on Entrepreneur On Fire and you created that, huh?

Amir Baluch: [laughs] Yeah.

Joe Fairless: Sounds good. Well, Amir, I enjoyed our conversation, and hearing about the different ventures you have from the subdivision, the historic district Fort Worth, Texas where you bought 60 cents on the dollar because you’re just a likable guy and you had an inside connection with a person in the city. You are building, the lots cost 15k/piece, all in to build 85k, so you’re at 100k all in, and the sales price is expected to be about 140k. Then also the commercial deal with the 20 acres that you’re working on and haven’t closed yet, and trying to come up with the best approach for structuring that deal. And then the lessons learned along the way as far as finding ways to partner with people who know more than you and bring value to the table, because you’ll make less money on that particular transaction, but you’re more likely to make money and do it in a shorter amount of time, and then eventually you can branch off and stand on your own two feet.

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

Amir Baluch: Thanks for having me.


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Best Real Estate Investing Advice Ever Show Podcast

JF991: Being a GURU is GOOD and Why You Should Educate Others

Should you teach what you know about real estate? Afraid of being a GURU? So what?!? Our guest preaches why you should give your audience a platform to learn your failures and successes in real estate.

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Heather Havenwood Real Estate Background:

– CEO of Havenwood Worldwide, LLC
– Entrepreneur and is regarded as a top authority on digital marketing, sales coaching, and online publishing
– Named Top 50 Must Follow Women Entrepreneurs for 2017 by Huffington Post
– In 2006 she created an online marketing publishing company that went from 0 to $1 million in sales in less than 12 months – Based in Austin, Texas
– Say hi to her at http://heatherhavenwood.com/
– Best Ever Book: 48 Laws of Power

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real estate guru advice


Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff. With us today, Heather Havenwood. How are you doing, Heather?

Heather Havenwood: I’m good, thank you for having me!

Joe Fairless: Yeah, nice to have you on the show, and looking forward to getting to know you and diving in. A little bit about Heather – she is the CEO of Havenwood Worldwide. She’s an entrepreneur regarded as a top authority on digital marketing sales, coaching and online publishing. She’s named top 50 must-follow women entrepreneurs for 2017 by Huffington Post, and she is also a real estate investor, based in Austin, Texas. With that being said, Heather, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Heather Havenwood: Absolutely. I’ve been in the information market industry and real estate industry since 2001, so I’ve been through a couple cycles, as they call them, in the real estate industry. But mainly, from 2001 to 2007 I traveled the country teaching buying and selling real estate, doing more foreclosures, short sales, and then actually produced over 450 seminar events in the real estate industry. I worked for Robert Allen, Ron LeGrand, all the big names back then, and really learning two pieces: learning real estate investing, and then learning what I call the publishing of real estate information, the educational conversation.

So I’ve been doing that for a long time, and then I got caught up in the boom and bust in 2006-2007, lost all my houses, foreclosure, the whole nine yards… The movie The Short – did you ever see the movie The Short? That was my life. I’ve lived that world, because I was in central Florida… And then here I am in Austin, Texas. I now run four online companies and also invest for myself. I have a podcast as well, and just on and on it goes. I’m a full-time online information publishing author with real estate investing.

Joe Fairless: You said something interesting before we started recording, that every real estate investor should have an education piece they are building, and I’d like for you to talk about that because I mentioned when you said that that this has potential to be a polarizing topic, because there’s a lot of anti-guru people, and you should invest and learn from your mistakes and not pay people or pay for content, and then other people say that you should…

First, the statement of “Every real estate investor should have an education piece they are building” that you said earlier – can you elaborate on that?

Heather Havenwood: Yes. It sounds like you like to go truth, so I’m gonna be a little honest here. It’s like politics, there’s the good part of the politics and there’s the dirty side of politics. Just the same here in what I call the education side of real estate. There’s a lot of good that happens, and there’s the dirty side, and I’ve seen both, and I’ve been around both. There’s definitely a negative conversation out there about the guru side, and some people that only know how to teach and they don’t know how to do… There’s a lot there, and some of it is true and some of it is not, but here’s what I say to anybody who’s done more than 10 or 15 houses themselves; they’ve done something in the real estate market, whatever that is… I think that they all should teach what they have learned through their mistakes. It’s actually through the helping other people, it’s also through the teaching that piece, also sharing their story that 1) they’re gonna get more business, 2) they’re going to help other people, and 3) there’s a cashflow there.

That is why a lot of the real estate investors get into the education conversation – because they wanna buy more property and it’s a great cash maker to create cash to buy more property. Why are you getting mad then about that, right? Because think about it – I’m doing real estate, I wanna buy more real estate, I educate people about what I’m doing, I make money from that and I buy more real estate. I don’t think that’s awkward, I think that’s actually very smart in a capitalist world, which I’m a capitalist.

So if you look at it that way, then you can see how there’s a logic to that. What happens when I go to REA meetings or I meet what I call “old-school” real estate investors – they have this kind of arrogance about “Well, I just sit in the background and no one knows who I am. I just do my thing.” I’m like, “I can see that, I guess that’s respectable, but why wouldn’t you help other people? Why would you not do a small workshop locally, or why don’t you get on a podcast and share your story about how you got started and all the mistakes that you made? Why not help other people through that process?” Because I feel like real estate investing specifically – not realtor – is kind of the secret little society sometimes; even though people are out there constantly teaching it, it’s still this secret little society that people think is hard to get into, or they don’t know how, or it’s confusing. It’s not something you get taught in the university.

So this is why, Joe, I think every real estate investor that’s had some success and some failure should be out there helping the people and teaching and sharing their story.

Joe Fairless: I agree, you made some really great points. When we do share our story, we help other people, we get more business, and if we monetize that – like this podcast, for example, where I have monetized it by bringing advertising sponsors – then there’s potential to make money. And along they way I would imagine that the Best Ever listeners who are listening to this episode, they are getting a lot of value from this platform, which to them is free to consume the content. So I agree… There’s different approaches out there, but I agree with your thoughts and I’m glad you shared it. Point by point, that was really interesting. What type of platform do you have?

Heather Havenwood: I do a lot of podcasting actually, I was gonna share that. A couple of years ago I started a podcast, and it’s what I call “in the graveyard of iTunes.” Feel free to go check it out, it’s called “Sexy Boss” and it’s in what I call the graveyard of iTunes because I did four interviews, I put them all up online the same day. I didn’t know what I was doing… [laughs] And then I was like, “Where is the audience?” I didn’t know what I was doing. So I took on the role of “You know what? I’m gonna first add value. I’m gonna go on other people’s shows and I’m going to add value and share my story.”

Number one, I had to learn to share my story. People don’t wanna hear your resume, they wanna hear your story, it’s very different. Number two, I had to learn “What am I gonna add value to them? How can I add value to your show?” because at the end of the day, Joe, this is your show. This is your audience, and I’m here as a guest. So I had to really look at “How am I gonna add value?” I focused on that for a year and a half, and up until this point when you and I are talking, I’ve been on over 210 shows as a guest. What did I learn from that? I learned a couple things – I learned what it takes to be a really great host, I also learned how to really launch a really great podcast, so back in June I launched my first show, and it’s exploded, and I’m now on three networks, and it’s been amazing, in less than a six months timeframe… Because I learned first how to give value, and then I went and launched it.

It’s the same conversation with real estate investors. I think even if you’ve only had 10 houses or 2 houses or one apartment building, whatever it is, being out there on podcasts – because it’s a “free medium” at this moment – being out there and sharing your story helps other people. Because people don’t wanna hear your “When I was ten I did this, and when I was 20 I did that…” – no one cares. They wanna know how you got to where you are today and where is the success story, and where is the failure. So I talk about my book Sexy Boss because that book is about my biggest failures in life.

The movie The Short that came out, I literally lived that movie. No kidding. I remember watching the movie and going “Oh, I remember that, and I remember that…” I remember being in Florida and all the houses in the entire four, five blocks was completely for sale. I lived that life, so how am I gonna take that failure and make it a success?

I remember, Joe, at a very important time when that happened – it was 2007. This is about six months after I learned this is happening, my houses are going down, my bankruptcy is going down, and I really had to look at that. And a dear friend of mine who was a multi-million dollar investor (very successful guy), we were just having a chat, he was kind of coaching me, and he said to me in a not so loving way, because he’s not that kind of guy, he said “Grab a pen and grab a piece of paper, and I want you to write everything I say.” He told me to write this as he says it: “I, Heather, give myself full permission to fail”, and I couldn’t even write it. I was like, “NO!” I was literally in tears, and he looked at me and he goes “You’re never gonna succeed in life again until you give yourself full permission to fail.”

And the challenge with what I call the real estate gurus out there is they show success after success after success after success, and I know with real estate investors that the real ones are failure-failure-failure-success-failure-failure-failure-success-success-failure. That’s a reality, and I think that that’s the challenge people have with the “guru-ism”, and that’s why I think they should all be out there teaching themselves, so they know what it’s like to share their failures, to share their successes with people. It makes a difference.

Joe Fairless: It does make a difference, and it’s almost an obligation that we all have. It’s less about an opt-in, but it’s more about an obligation if we’re gonna be part of the real estate community – and it is a community; at least the Best Ever listeners have a community within this show… And it is almost an obligation where we need to share not only our success stories to inspire, but also the failures that we have.

I actually have a presentation I make at different conferences when I speak, and it is “Top 10 mistakes I’ve made in multifamily syndication”, and they could be more, but they only give me like 45 minutes to talk, so I condense it in these top 10 things. It’s important, because there’s a lot of ways to learn from the mistakes and the failures, more so sometimes than the success. I’m glad that you mentioned that, and I completely agree with your approach and your mentality.

I do want to ask, with your investments now that you do, knowing that you were in Florida and the sky crashed on you and you went through bankruptcy, what do you do now differently that you weren’t doing…?

Heather Havenwood: Way more conservative.

Joe Fairless: Specifically how?

Heather Havenwood: I don’t play the game of “Oh, it’s been going up 25% every year, year after year, so it’s gonna continue.” I like bread and butter, I like boring homes, and what I mean by that is just a place where the home is 60k, 70, 80k, really basic, and it’s a working class area; people live there and they get settled there and they don’t move.

I also have a philosophy, and this is from a friend of mine who was a major real estate investor in Arizona – he still is today – he said, “You’re not a tree, you can move.” So just because you live in California or just because you live in New York doesn’t mean you have to invest there. Go invest that makes sense for you. I’m also with long-term play; I do wholesaling, and I do holding. I look at it more long-term.

When I was in the real estate industry back then, it was a lot of get-rich-quick; buy these spec houses, hold them for two years, sell them for 50% higher. Or buy a million dollar property. A lot of flash. And the people that did survive without throwing away all their housing — I knew friends of mine who literally had 12 houses in foreclosure. They were just walking to the bank like “Here’s your 12 keys, see you later.” It just happened.

The ones that survived all that were the ones that went slow and methodical, and didn’t try to be flashy. And if you look at our current president today, who is a real estate investor, he did the same thing, believe it or not. Don’t get me wrong, he went big, but he went methodically, and he thought it through, and it was always a long-term play.

Joe Fairless: With your properties, your buy and holds, what type of financing do you do?

Heather Havenwood: If I buy and hold, I’m doing a deed; I buy on the deed. I just take over payments.

Joe Fairless: You just take over payments, okay.

Heather Havenwood: No money down, take over payments.

Joe Fairless: And that’s probably because of the bankruptcy thing, it’s tough to get a loan?

Heather Havenwood: No, I don’t wanna put any money down.

Joe Fairless: Can you tell us the numbers on the last deal you did like that?

Heather Havenwood: The house was worth 60k, they owed 30-35k, I just took over payments, and then I just got a renter in there; it’s not anything more complicated than that. It’s bread and butter, it’s kind of boring. [laughs]

Joe Fairless: House was worth 60k, they owed, say, 35k, and you are taking over the mortgage payments, and then they exit.

Heather Havenwood: Correct.

Joe Fairless: Why would they do that?

Heather Havenwood: Because they are in financial constraint, they can’t afford it anymore. That was what I was told by Ron LeGrand back in 2002. You just take over their payments.

Joe Fairless: How do you find them, and then walk us through that conversation with the person who has $25,000 worth of equity in their house that they just let you take over their payments.

Heather Havenwood: I do bandit signs, they called on it, talked a little bit over the phone, asked a couple questions, see what their situation was, what they needed… They needed a little cash to move out, so I gave them a little cash to move out. They just didn’t wanna wait for putting the house on the market and just waiting. Not every property is gonna end like that. It’s a specific kind of property, a specific kind of person that’s ready to say, “I need to walk away.” They knew that it cost me a little work, so I had to put money in and do a little work, and then rehab it. That’s pretty much the numbers.

Joe Fairless: How much cash did you give them to move out?

Heather Havenwood: $1,000.

Joe Fairless: And how much did it cost to get that work done?

Heather Havenwood: $1,000 paint, little carpet, just kind of spruce it up, clean it up… Nothing major.

Joe Fairless: Your phone rings, it’s this individual who saw your bandit sign… Walk us through that conversation.

Heather Havenwood: One of the things about real estate investors is they forget there’s a human being who has the other side of the fence. Why did they go with me versus others, why do they call me versus others, why did they say yes? Because I cared. I cared about them. I didn’t just go, “Okay, what’s your numbers? What’s your numbers?! You’re just a person, I need your numbers!” I’m like, “What’s going on in your world, what’s happening? Why are you not waiting to get the equity? What do you really need?” They share their life, what’s going on in their world, health issues and all this kind of drama. I just gave them an offer and I was like “Can this help if I give you cash now and take over the payments and move in 30-60 days? What works for you? How can I help you in your life, so that you can get on your own two feet and move forward?” It’s not always about just taking over a property for greed… And I think people can feel that, because I just really cared about them, and they were afraid that they’d started making the payments, that it was gonna go into foreclosure… They didn’t want that on their credit, so now they don’t have that on their credit. They’ll be able to walk away…

You look at it like “Oh, they’re walking away from $20,000 equity! Oh my god, it’s crazy!” Not really when you’re sometimes in the situation where you’re like “I need to be able to be free of this, and I need to be able to take a little cash and start over.” If you look at it from a humanistic/humanity perspective, sometimes it’s just really helping somebody out, versus just taking over a property.

Joe Fairless: Do you go visit the property before you talk numbers with them?

Heather Havenwood: Sometimes I do… I’d like to, I’d prefer, but it doesn’t always work out, because you’ve gotta close the deal. I also know people are out there marketing to them all the time. Now, if they’re not in foreclosure, they’re not getting the marketing, but if they called me, they called other people, so I have to really keep that in mind. It’s like in any kind of sales situation, you don’t wanna let them off the hook, right? You really wanna build that relationship as fast as possible and really connect with them on a heart-to-heart level. I know it sounds like not what they teach you in real estate school, but that’s what really people want to do business with. They wanna actually act like someone cares.

Joe Fairless: What paperwork is involved when you do that transfer?

Heather Havenwood: I don’t really share my paperwork… Just a 2-3 page deal we go through, and it’s a deed. It’s a deed transfer.

Joe Fairless: Just simple stuff.

Heather Havenwood: Yeah, it’s simple stuff. I know it’s not very sexy, but I really think after being at over 450 events – that’s a lot of hours of listening to a ton of real estate investors (some of them are no longer around, some are dead broke), I learned that real estate investing can be extremely sexy, but the winners are just consistent and keep it really simple.

Joe Fairless: You have a skill for marketing and branding… As I mentioned earlier, you were named top 50 must-follow women entrepreneurs in 2017 by Huffington Post. For someone who wants that type of designation, how do you recommend they go about obtaining it?

Heather Havenwood: That’s a weird question, I don’t know how to answer that. I didn’t wake up one day and said, “I wanna be known from Huffington Post.” One day someone told me I was… So I don’t even know how to answer that. I think honestly this industry is not about ego. If you go into it for “I wanna be known for… I wanna be known, I wanna be the best, I want everyone to see me and look at me” – that’s very ego-driven and you’re not gonna go anywhere. Believe me, I’ve seen a lot of people come and go in this industry, and the ones that are ego-centric didn’t last that long. The ones that were value-centric and add value to the marketplace and add value to the people and help people and teach people, they’re still around; they’re the ones [unintelligible [00:19:28].16] that are actually still filling up a room and being on great stages, they’re the ones actually helping people.

But I definitely don’t go out there and go “One day you’re gonna see me.” I just went out and started helping people and focused on supporting people and helping people and adding value as much as I possibly can, and I was acknowledged, I guess, for that.

Joe Fairless: Heather, based on your experience as a real estate investor, what is your best real estate investing advice ever?

Heather Havenwood: It’s a question that was actually given to me, that someone asked me to ask myself, and that question is “Does this feed my confusion, my strength and my clarity?” I think with real estate investment we get attached to the deal, versus actually looking at “Does this deal, does the situation, does this relationship feed my confusion, my strength and my clarity?” and sometimes we get so attached to the deal (we’ve gotta make it work!!) that we’re trying to force it, versus really look at “Does it really add clarity or add confusion to the situation?”

One thing I learned – you can’t be attached to a deal. We get attached to the deal if we get attached to people; it’s not a person, it’s actually just a deal. It works, it doesn’t work, it may work, it might not work… And you focus on winning in life and winning, but you don’t put so much attachment to who you are, your identity to the deal.

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

Heather Havenwood: Sure!

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

Break: [00:20:49].15] to [00:21:38].10]

Joe Fairless: Best ever book you’ve read?

Heather Havenwood: Best ever book I read… Think and Grow Rich by Napoleon Hill and The 48 Laws of Power.

Joe Fairless: Oh, I love The 48 Laws of Power. Best ever deal you’ve done?

Heather Havenwood: My own short sell to my own property back in 2006. [laughs]

Joe Fairless: Why is that the best ever deal?

Heather Havenwood: Because I called three of the banks, and I finally just said “I’m gonna short sell my own deal. Give me the number that I know I need”, and he gave it to me and I pretty much did the whole deal, so it was kind of interesting. It’s not normal you actually do a short sell for your own property that you own, so it was just an interesting deal.

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

Heather Havenwood: Helping other people and sharing my stories and sharing my failures. I this that’s something that’s overlooked in today’s society’ we’re taught at a young age, when you’re in second grade, “If you fail, you don’t go to third grade”, and I think a lot of young people today, they’re all focused on winning, winning, winning only, and it’s only when you give yourself full permission to fail that you give yourself full permission to succeed. And when you share your failures, that’s when you can share your successes.

Joe Fairless: Thinking back on some deals you’ve done – and it’s something that you haven’t mentioned already – what’s a tactical mistake you’ve made on a deal?

Heather Havenwood: I tried to play the market “Oh, look, the market’s going up 25% every single year! I’ll play that game and buy the property, and in one year I’ll just sell it for 25%!” It’s probably the worst game you can ever play in real estate… Hoping that the market’s gonna go up. It’s very much a gamble. It might work, but it’s not the best play. I did that and it didn’t work.

Joe Fairless: At closing, for all future properties, do they cash-flow for you?

Heather Havenwood: No, not all of them, and not always, because things change. Property taxes sometimes change, things change, but I try to make them all cash-flow… That’s why I look at more of a long-term strategy.

Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?

Heather Havenwood: HeatherHavenwood.com.

Joe Fairless: Well, Heather, I enjoyed our conversation. Thank you for being on the show, talking about how in the earlier years things didn’t happen as you planned with the crash, nor did it happen as most people planned for the crash, and how your mentor said for your to write down the phrase “I, Heather Havenwood, give myself permission to fail”, and then how you’ve used that as the way that allows you to give yourself permission to succeed, as you’ve mentioned earlier. And then, if you have done something, you should teach what you have learned and teach the mistakes that you learned along the way. It’s almost an obligation that we all have, and we also benefit from it, because we could make money from that, but more importantly, we’re helping people and we’re helping our business because we’re getting the word out about what we’re doing within a very relevant group of people, and I think that’s really the key, which leads to the business and leads to more cash flow. And then your approach for taking over payments in the case study that we’ve talked about, and being value-centric not ego-centric.

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

Heather Havenwood: Thanks, Joe.



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Best Real Estate Investing Advice Ever Show Podcast

JF986: How and Why You Would Leverage Other People’s IRA and Cash

Strange concept, but once you understand the intricacies of the tax law, and pair that understanding with leveraging other peoples money… you have a powerful tool!

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Quincy Long Real Estate Background:

– President and founder of Quest IRA, Inc., the premier self-directed IRA provider in the country.
– Licensed attorney specializing in real estate and an active investor
– Author of “Real Estate Investment Using Self-Directed IRAs and Other Retirement Plans.”
– One of the most sought after keynote speakers in the nation on the Self-Directed retirement industry
– Based in Houston, Texas
– Say hi to him at www.IRAWebAdvisor.com or www.QuestIRA.com
– Best Ever Book: RIch Dad, Poor Dad

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Quincy Long advice


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 fluffy stuff.

We’re gonna be talking self-directed IRAs today with Quincy Long – how are you doing?

Quincy Long: I’m doing great, glad to be here.

Joe Fairless: Nice to have you on the show, my friend. A little bit about Quincy – he is the president and founder of Quest IRA, he is the author of “Real Estate Investment: Using Self-Directed IRAs And Other Retirement Plans.” Based in Houston, Texas, and you can say hi to him at his company’s websites, which are in the show notes link. With that being said, Quincy, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Quincy Long: Sure. Basically, besides what you said, being president and founder of Quest IRA Inc., which was founded back 2002, I’m also an attorney, an active investor. I’ve been a fee attorney for a title company, so I know a whole lot about real estate also, and I’m a certified IRA services professional, which means I have an expertise in IRAs in general, not just self-directed. Other than that, I can go into all kinds of other details, but I suspect most of the rest of it is not all that interesting to your listeners.

Joe Fairless: [laughs] You’d be surprised. I think we like hearing some stuff that we haven’t heard about before, but we will focus our conversation on  self-directed IRAs. What should we know about them? Let’s start broad and then we’ll get more specific, as real estate investors.

Quincy Long: I think the two key elements that you need to understand about self-directed IRA’s is 1) they are incredibly flexible. There’s just all kinds of things you can do to either defer, or in some cases, eliminate your taxes on your real estate profits. That’s the good side.

The downside of self-directed IRAs – and I guess I should confess that when my mother wanted to really know what happened in my family, she just asked me because she knew I’d tell her the truth, the whole truth, and nothing but the truth, whether it’d help me or not… But there is a downside to being in a self-directed IRA, and that it is self-directed in the self – it’s not us, it’s you. You get to make your own choices, but you have to make your own choices, because in a self-directed IRA you don’t have any investment choices approved or provided by the custodian or the managed trader. So that’s kind of the double-edged sword of the self-directed IRA. It’s an incredible tool, I’ve used it extensively and really enjoyed using it personally, besides having the company, but you’re responsible for your own choices.

Joe Fairless: As far as the type of investments that you’ve seen people make – real-life investments, versus just theory-based, what are some interesting real-life investments that you’ve seen people make?

Quincy Long: Interesting… Boy, I get to fill the hour with just the interesting ones, but the most interesting ones are really not necessarily real estate related… Some of them are probably not proper for airing online, but we’ve certainly had some interesting real estate deals; options are always structured in interesting ways, so I like options… Some of the most creative stuff that I’ve seen is actually in the area of notes secured by real estate, and how those notes are purchased, sold, created – that sort of thing.

Obviously, you can buy a piece of real  estate, and I don’t know that there’s anything particularly creative with that, except for where you buy it and when. We certainly had some home runs that people have made buying real estate in their IRA, and I could tell plenty of stories about that… But as far as the most creative and interesting things, I’ve gotta say it’s probably notes.

Joe Fairless: Why do you categorize those as the most creative and interesting?

Quincy Long: Well, maybe it’s just personal choice, because that’s what I like to do… But you can structure real estate notes, and — well, of course, you can buy performing notes that are existing, sometimes from institutional lenders. You can buy non-performing notes, but you can also buy partials from seller-financed deals. But the most fun that I have with them is actually creating them from the beginning, and structuring them in a way that you can basically get the note done and then sell off the first part of the note to recoup all your money invested in creating the note, and then keep the tail end of the note for yourself as a profit. That’s a really good way to build an IRA. It’s not really sexy, I suppose, but it’s an excellent way to build an IRA slowly and securely. That’s what I like about it.

Joe Fairless: What are some things that when you work with your customers they find surprising about the self-directed IRA process?

Quincy Long: I think the biggest surprise – and I don’t know why it would be a surprise – that people find is that we’re not here to teach them how to be an investor, we’re here to provide the vehicle through which they make their investment choices. In other words, we’re like luxury car dealers – we’re gonna sell you the vehicle, but we’re not gonna teach you how to drive that vehicle, and we’re not going to put your gas in it, which is your money, of course, and driving the vehicles, making your investment selections.

I think some people maintain the illusion that somehow we’re investment advisors, and of course, there’s no way with the structure of the company that that can be done. Again, I don’t know why that would be a surprise to anybody, but they just perhaps don’t understand the product. But having said that, it’s an incredibly powerful and flexible tool, and we do provide a whole lot of free education about the things that people have done and can do with self-directed IRAs; perhaps then people say “Okay, great. Can you set that up for me?” Well, the answer is no, but I can allow you to do it once you get it figured out.

Again, other than that, the biggest other surprise would be how genuinely flexible it is, and all the crazy things that people do and can do with them.

Joe Fairless: Once you have an account set up and you’ve identified an investment opportunity – and I imagine usually you’ve already identified the investment opportunity and that’s why you’re setting it up, usually – what type of paperwork is required to invest in it?

Quincy Long: It’s actually pretty easy. The first thing they’ve gotta understand is that the titling has to be done not obviously in their individual name, but in the name of the IRA. For example, if it was your account, it would be something like you would be making the offer on the real estate or creating the note or whatever you’re doing as Quest IRA Inc. FBO (for the benefit of) Joe Fairless IRA number 12345 or whatever it is. So titling is important, but once you’ve got the titling right, the next task is to read and approve all the documents, because as I said, it is a self-directed IRA, so you have to read and approve everything because you are the decision-maker as the client.

And then the third step in the process, of course, is to submit the direction to invest, and there are different direction to invest forms based on what type of an asset you’re purchasing, whether it’s a note or real estate or a private placement, or something like that. Once those steps are followed, then we actually fund within 24 hours of when you submit all the proper paperwork.

Joe Fairless: When you attend a conference and you’re speaking at the conference, what’s the angle of your presentation that you usually talk about.

Quincy Long: Well, my presentations typically are always educational and never salesy, if you know what I mean, because I’m not very good at that. But what we do is we typically will educate on the types of accounts that are available and the types of investments that clients make with those accounts, and then we typically tell just a few investment stories to give them a better idea of the types of transactions that people can and do in a self-directed IRA or other type of account.

Joe Fairless: Can you tell us a story that you typically tell that usually resonates well with the audience?

Quincy Long: Lots of stories… Let me tell you this one, because it’s a pretty simple one. Joe, one of the things is people are not understanding that it doesn’t take a whole lot of money to invest in real estate, so that surprises a lot of people. But I’ll just give you this one example… I wish it was from my own portfolio, but unfortunately it’s not. We had a client that knew somebody, was kind of around the corner from his office in downtown Houston area, and she was being foreclosed on for delinquent taxes.

She was a little old lady, the house was not worth very much at all — in fact, it was probably worth whatever it took to tear it down, but the real estate was in the pass of development, if you kind of get my meaning on that… And he knew that the real estate development was coming, but wouldn’t get there for a couple of years. And she wanted to stay in the house; she knew she was getting [unintelligible [00:11:44].21] would probably have to move in with relatives or into a care facility within a couple years, but she wanted to stay in her house as long as she could.

So she asked him for help, and he arranged to purchase her house for the delinquent taxes of roughly $10,000. Then he also agreed to allow her to live in the house rent-free for two years, and that would give her time to make her transition. And at the end of two years, she moved on and he sold the property that he paid $10,000 in his Roth IRA for $290,000 to a developer who tore it down and put up a townhouse. That’s a pretty good return on investment, I would say… Wouldn’t you?

Joe Fairless: It’s a win/win for everyone, it sounds like.

Quincy Long: So that was a great deal… You just tell me when to stop, I can tell many stories of different types of investments. If you want real estate specific, one from my portfolio that I thought was pretty good – not a home run, but not a bad deal… Because as I said, you can invest in real estate directly or indirectly, and indirectly – I mean you can invest in things like limited partnerships that purchase property for various things. I do invest in a lot of shopping centers myself, for example, through limited partnerships. But the one deal I did that I thought worked out pretty good – and I like this; the story is important because it demonstrates something called the ERR… Do you know what the ERR is?

Joe Fairless: No, what is that?

Quincy Long: That’s the Effort to Return Ration.

Joe Fairless: Okay.

Quincy Long: And by that, I mean that everybody gets hung up on the dollars, but it’s more important to understand how many hours it took you to make those dollars. In other words, a per-hour return on your investment is the best way to really judge an investment, if you see what I’m saying. So in this particular case, I invested in a limited partnership and we paid $500,000 cash for a triangular piece of property with a small house on it that was located North of Dallas, Texas. And basically, we were gonna hold it for up to 5 years, and the rent from the house would pretty much pay the taxes and whatnot on the property, which it did.

The only thing we did to improve the property was we got the liquor license extended to the city limits, which included now our property. Well, that of course increased dramatically the value of the piece of real estate by doing that, and we ended up three years and nine months after we bought it, selling the property for 2,5 million dollars, because the path of development once again was headed North of Dallas into this little town called Melissa, and that’s where the piece of property was.

I think that’s also a great story, and the great is not because we made a good return – which we did – but in my case, all I did was read the private placement memorandum and evaluated the deal. So I spent a sum total of about 4-5 hours on the deal, and made a pretty good return for my dollars invested, in a very short period of time. I thought that was an interesting case.

Joe Fairless: Yeah… And you invested that via a your self-directed IRA?

Quincy Long: I did, indeed. Yes.

Joe Fairless: Based on your experience, Quincy, as both a real estate investor, because you have invested in real estate, clearly, and then also as an expert in self-directed IRAs, what is your best advice ever for real estate investors?

Quincy Long: Well, the best advice ever I would say is to learn how to use OPM and OPI – other people’s money and other people’s IRAs – to boost your own IRA. I think that’s a talent that not enough people have. Among the note deals that I’m talking about, if you can create a note – I purchased one at a 30% discount (a $30,000 note for $21,000)… And then when I sold the — well, I didn’t sell the property; the investor that was borrowing my money sold the property and created $30,000 worth of notes. Well, I sold off the first lien note of $21,000 and kept a $9,000 second lien. That just created that money for free.

So if you know somebody with money, you can partner your IRA with their IRA, and as long as they’re not disqualified people to your IRA, you can do some very creative and innovative things. I think using other people’s money to create wealth – or creating free money, as I like to call it – is the best thing I can think of to do with a self-directed IRA. That’s what I like to do, that’s what I try to do every day.

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

Quincy Long: Sure.

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

Break: [00:16:51].17] to [00:17:34].28]

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

Quincy Long: Best ever book I’ve read is Rich Dad, Poor Dad, because it gives such an interesting twist on how money is handled and treated.

Joe Fairless: Best ever deal you’ve done? You might have already mentioned it.

Quincy Long: Well, I hope the best deal I’ve ever done is participated in a different real estate transaction, where we bought 196 acres on Maui for $900,000 cash from a bankruptcy estate, which we got a 2,5 million dollar offer before we closed on the property, and turned it down because we think we may be able to sell if for maybe 10 million or more. So that isn’t completed yet, but I believe it’s gonna be one of my biggest investments with the dollar return for effort hour.

Joe Fairless: Wow.

Quincy Long: I hope that’s the best.

Joe Fairless: How long ago did your group buy it for 900k?

Quincy Long: They bought that 3-4 months ago now.

Joe Fairless: Oh, very recent.

Quincy Long: Yes.

Joe Fairless: What’s the hold period?

Quincy Long: Up to five years for that kind of property. We’re gonna market it to the ultra-wealthy. There’s a lot of Chinese and other Asians that visit Hawaii, so that’s the target. There’s some movie stars and what not that have property in the same area, but it’s also a good property for eco-tourism. Just fantastic waterfalls and caves… Probably for the holding period we’ll do some eco-tourism to pay the costs of the property until we can find the correct ultra-wealthy buyer that can write a check between 10-20 million dollars. That’s the plan at this point.

Joe Fairless: Wow. That’s a completely different business model, that’s fascinating. Quick follow-up question on that – how do they approach finding potential buyers?

Quincy Long: Great question, actually… And of course, this is through a limited partnership, so again, I’m not doing any of the work, because I have 4-letter words like W.O.R.K. Some other 4-letter words I’m okay with, but not that one. So basically, we’re at the end of this month or in the month of April sending a professional film crew out to document and film the property, because it’s kind of a rugged piece of property, you can imagine that of course. And then there are sites that are catering to the ultra-wealthy type properties, the trophy properties, if you will. So there’ll be a large internet marketing campaign specifically to target the ultra-wealthy individuals that might be able to afford such a property.

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

Quincy Long: What I do every day… Somebody asked me a question recently – if I was rich enough to retire, what would I do? I said I’d educate people about self-directed IRAs, of course, because I actually enjoy doing that and I think it’s important. I’ve just finished my estimated taxes before I’m going to Europe – tomorrow, actually – for three weeks… And I’ve finished my estimated taxes and looked at the dollar amount that I’m gonna have to pay as an estimate, and I just got sick to my stomach and I thought “I need to do everything I can…” I’m all for paying your taxes that you owe, but no more than that. I don’t want people to be a tax donator, as I call them. When you do a deal that you could do tax-free, you’re a tax donator, and I just have a real problem with that, because I don’t think the government uses the money as wisely as I would if I had that money.

So again, I believe in paying my share of taxes, but not a single dollar more. I believe in that so much in fact, that teaching other people how to avoid paying taxes by using the government’s own rules that they laid out for us is almost like a mission to me. So that’s what I like to do to help people – teach them how to get out of paying taxes using the government’s own rules and following those rules.

Joe Fairless: Do you have a book on that? Or somewhere else that you have that info?

Quincy Long: Yes. Our website does have a whole lot of information and pre-recorded webinars. We do classes every Tuesday at [9:30] in the morning central time, and at [6:30] in the evening central time, and then also on Wednesday evenings we also do another class out of our Dallas office; the other two are in our Houston office. Those are done by Facebook live. Also, we have pre-recorded webinars that we have done that people can access from our website, and we do all the social media stuff. We’re not quite as adept at podcasting as you are yet, but we’ll no doubt get to that at some point this year, we hope. So we use various techniques to spread the word. I am working on a book, but it’s not completed yet.

Joe Fairless: We’re looking forward to that one. And if you think about your real estate investments, what’s a mistake you’ve made on a deal?

Quincy Long: Oh, that’s easy… I’ve made lots of mistakes. And yes, I’ve been very successful, but anybody that tells you that they’ve never made a mistake has either never done a deal or they’re lying. I would have to say, again, because I do a lot of note deals, my biggest mistake was doing a deal where I did plenty of due diligence on the property, but not enough due diligence on the person that was borrowing the money in that case. I always make the strong suggestion that anything you’re doing, you do due diligence on the deal itself, but most importantly you do due diligence on the people.

I failed to do that, frankly… So I had a great and perfectly valid hard money loan out of my account from the perspective of the property, and we ended up foreclosing on it and it’s been a great rental, and we’re getting ready to sell it after a couple of years of renting it. But four days after the buy borrowed my $200,000, he turned around and went to a different title company and borrowed another $215,000 on a property worth about 270k. Then he also sold it at a third title company ten days later for — I don’t remember the number, but he took a $45,000 down payment… And I found out later he had partners at the foreclosure sale where he bought the property for $100,000, so he took like half a million dollars from people on a property that he had a net of $100,000 in. Basically, after all of this broke and I ended up foreclosing on the property and did due diligence on the individual, I found pretty strong evidence that he’s a crook.

Joe Fairless: Yeah, that’s jail time right there.

Quincy Long: Had I known that, of course I would not have made the deal in the first place. I think that’s my biggest mistake and my biggest learn – you have to do due diligence both ways: people involved, as well as the property or the deal itself. And that’s true for real estate, it’s true for notes, it’s true for private types of investments like limited partnerships, stuff like that as well.

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

Quincy Long: There’s several ways, but the best way to get a hold of me is simply to go to our website, which is www.questira.com. They can, of course, call our center here in Houston, Texas at 855 FUN IRAs. If they wanna submit a question, we do answer basic questions on my blog site: www.irawebadvisor.com. There’s some interesting blog posts there of questions that people have asked me that I’ve answered. You can scroll through those and get some information there. Ask a question if you want to, and it will come to my e-mail.

Joe Fairless: Quincy, thank you for being on the show, talking about a whole range of topics, from self-directed IRAs and some interesting investments, and then some success stories as well as some interesting stuff that you’re investing in on a limited partnership side. The land flip – I would have sold at 2.5 million; I buy it for $900,000, got an offer right before we close for 2.5 – done! Write me the check, I’ll give you the [unintelligible [00:26:28].26]

Quincy Long: To be honest with you, I voted to sell, but you know, when you’re in a partnership it doesn’t work that way.

Joe Fairless: Yeah, I’ve realized through all these interviews – I’ve interviewed about 1,000 people – that when you have money on the table like that and you can double your money before you blink an eye, then you need to do it and then maybe put it in something more long-term and take the chips off the table. But who knows? It could work out, and I hope it does, as well as the other opportunities that you mentioned that you’re doing. And doing due diligence on the operator just as much, if not more so than the deal itself. I know a lot of people look at the operator first before they even look at the deal.

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

Quincy Long: Thank you very much. Have a great day!


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