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.

Follow Me:  

Share this:  
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!

Best Ever Tweet:

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

Get more real estate investing tips every week by subscribing for our newsletter at BestEverNewsLetter.com

Made Possible Because of Our Best Ever Sponsor:

List and manage your property all from one platform with Rentler. Once listed you can: accept applications, screen tenants, accept payments and receive maintenance tickets all in one place – and all free for landlords. Go to tryrentler.com/bestever to get started today


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.

Follow Me:  

Share this:  
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!

Best Ever Tweet:

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

Made Possible Because of Our Best Ever Sponsors:

Are you an investor who is tired of self-managing? Save time, increase productivity, lower your stress and LET THE LANDLORD HELPER DO THE WORK FOR YOU! Schedule Your FREE TRIAL SESSION with Linda at Secure Pay One THE Landlord Helper today.

Go to mylandlordhelper.com/joe to schedule your free session.


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!


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


Follow Me:  

Share this:  
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


Made Possible Because of Our Best Ever Sponsors:

Are you an investor who is tired of self-managing? Save time, increase productivity, lower your stress and LET THE LANDLORD HELPER DO THE WORK FOR YOU!  Schedule Your FREE TRIAL SESSION with Linda at Secure Pay One THE Landlord Helper today.

Go to mylandlordhelper.com/joe to schedule your free session.


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.


Subscribe in iTunes and Stitcher so you don’t miss an episode! https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Follow Me:  

Share this:  
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

Made Possible Because of Our Best Ever Sponsors:

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

Go to adwordsnerds.com/joe to schedule the appointment.


investment brokerage


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.


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


Follow Me:  

Share this:  
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.

Best Ever Tweet:

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

Click here for a summary of Heather’s Best Ever advice: http://bit.ly/2q8MQXx

Made Possible Because of Our Best Ever Sponsors:

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

Go to adwordsnerds.com/joe to schedule the appointment.


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.



Subscribe in iTunes and Stitcher so you don’t miss an episode!   https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Follow Me:  

Share this:  
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!

Best Ever Tweet:

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

Made Possible Because of Our Best Ever Sponsors:

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

Go to adwordsnerds.com/joe to schedule the appointment.



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!


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


Follow Me:  

Share this:  
best ever real estate pro advice

JF977: Commercial Loans 101!

He wrote a book all about it, so today get your notes ready for commercial loans. From being approved to closing the deal you will understand what lenders are looking for in this niche.

Best Ever Tweet:

Michael Reinhard Real Estate Background:

– Commercial Mortgage Banker at Texas Commercial Mortgage, LLC
– Author of successful book Commercial Mortgages 101: Everything You Need to Know to Create a Winning Loan Request Package
– Masters Degree in Land Economics & Real Estate from Texas A&M
– Based in Houston, Texas
– Say hi to him at www.texascommercialmortgage.com
– Best Ever Book: Hamilton

Click here for a summary of Michael’s Best Ever advice: http://bit.ly/2q0ZciX

Made Possible Because of Our Best Ever Sponsors:

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

Go to adwordsnerds.com/joe to schedule the appointment.



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, Michael Reinhard. How are you doing, Michael?

Michael Reinhard: I’m good, thanks.

Joe Fairless: Nice to have you on the show. A little bit about Michael – he is a commercial mortgage banker at Texas Commercial Mortgage. He is the author of the book Commercial Mortgages 10Joe Fairless: Everything You Need To Know To Create a Winning Loan Request Package.

He’s got his masters degree in land economics and real estate, and he is based in Houston, Texas. With that being said, Michael, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Michael Reinhard: Yes, Joe. As you mentioned, I received my masters degree in 1989, and I immediately began my career working for savings and loans in the REO department. At that time the savings and loans crisis was at its pinnacle, and basically there’s no lending on real estate in Texas for the most part. I kind of cut my teeth on commercial real estate by analyzing the cash flow, the assets of the bank that were basically in the [unintelligible [00:03:34].20]  to get sold. It was the mandate by the Resolution Trust Corporation – the RTC acronym that most people are familiar with that are probably in their 40s and 50s.

That’s where I really learned the analysis of cash flow for all types of properties, so it was a good, well-rounded, quick education in all types of commercial properties. It was from multifamily, to office, to warehouse, industrial, self-storage and even MUD receivables.

Joe Fairless: What are MUD receivables?

Michael Reinhard: MUD is an acronym for Municipal Utility District. For example, if you’re outside a subdivision and a growing community is outside the reach of the main city’s water facilities… It’s almost like a privately-run organization to provide water lines to the community. Usually the taxes are a lot higher. There’s like a board — it’s kind of like a quasi-government agency that’s privately run and provides the utilities to that area because the city hasn’t been able to get out that far.

I don’t know exactly how they were set up or the history of them, but when the developer would develop a subdivision for single-family homes (or even a multifamily property), you’ve gotta go to the MUD board to get a approval for the capacity you’ve got, to determine if there’s enough capacity to build  a 200-unit apartment complex. You’d have to get the board to vote on it. There were some politics involved… But when you do that — and let’s say… Because I mentioned that at the bank, when the savings and loans crisis hit, and the recession, a lot of these subdivisions were abandoned, and there was a lot of money spent on these water utility — I don’t know if they were just water taps, or sometimes water plants or water pumps that were just sitting out there… They had value; the bank owned those, and we were just trying to determine what the value of those was at the time. That was kind of interesting.

With that said, in the early ’90s there were a lot of ex bankers, a lot of ex real estate people in the late ’80s or the ’90s that were working these different failed savings and loans; they were all being propped up by the selfless bailout government financial rescue… So when all the assets were sold, everybody was kind of losing their jobs, worked themselves out of the job, so there’s just a lot of real estate, analyst people in 1993-1994, and then we had another recession in ’94… That’s when I transitioned into working as an analyst on the mortgage banking side, because around ’94, ’95 this new conduit lending – it’s called the CMBS Loan… CMBS is a commercial mortgage-backed security; it’s the same thing as a residential MBS… That was kind of a new vehicle to provide commercial real estate loans to commercial property investors.

I started off as an analyst at a large commercial real estate firm called [unintelligible [00:06:33].15] which is a national firm… That’s where I had to shift a little bit my real estate career from just more of an analyst and selling assets to now getting on the mortgage side.

It was a good move, and I learned the conduit lending along with Fannie Mac and Freddie Mac agency lending… I spent years as an analyst, an underwriter, working for various banks like Bank of America, John Hancock Life, and some other smaller Texas banks… Then I finally decided in 2009 when the great financial crisis hit – of course, so many people got laid off, there just wasn’t any lending – to take all the expertise I had, venture out as an independent commercial mortgage banker. That’s when I wrote the book.

That’s kind of the genesis of my current position as a commercial mortgage banker, because I’ve spent years and years as an analyst, underwriter, and I felt at that point there’s no place to go at the bank. I was never really an executive or a major stockholder of a bank, so I thought there’s really not much more for me to do or contribute at a bank, and I would prefer to be able to help investors with all types of financing.

As a broker, if one bank says no, then I just go to the next bank or the next type of lender… So it’s more exciting, it’s more challenging. Every deal is different, there’s not one commercial real estate loan that’s alike, unless you’re doing the same old cookie-cutter Fannie Mae loan. That’s how I came about working for myself; I’ve got clients in California, in Florida, in Texas, I’m doing some loans in Indianapolis… I can do loans nation-wide.

I normally don’t do anything in California, because there’s just an inordinate number of brokers there, and I don’t really know the market in California. It’s a different market, and there are some licensing requirements. Texas is big enough, there’s plenty of real estate here.

Joe Fairless: Yes, there is, that’s for sure. I have purchased your book right before we got on the call… I bought your book “Commercial Mortgages 101: Everything You Need To Know To Create a Winning Loan Request Package.” I’m very intrigued by this, and I’d like to spend some time talking about the content of your book.

For a Best Ever Listener who has some single-family home properties and maybe a small multifamily property, but now they wanna go a little bit larger, and for the sake of simplicity, let’s say it’s multifamily… They wanna go a little bit larger to, say, a 20-30 unit property. What do they need to know about commercial loans, in particular as it relates to getting a package together for the lender?

Michael Reinhard: The first thing I’d like to emphasize is that a commercial real estate loan is an entirely different industry than a residential loan… A residential loan meaning either a homeowner loan or even a 1-4 family, whether it’s a duplex, triplex or fourplex. Everything you know about and any experience you have with that type of loan – forget about it. Don’t even try to make a comparison. It’s a different industry. So when you’re attempting to buy a 5-unit, or a 10-unit, or a 20-unit, as you’ve suggested, often times you have to deal with a local bank or maybe a national apartment lender.

Credit scores, for example, would be the first place to start. It’s always good to have a good credit score. It’s not all that critical, where residential mortgages it’s almost like it literally hinges on your credit score only, and of course income, but with commercial real estate loans credit score is not the top consideration, it’s not the most important. Then the next thing that a lender would like to see in an investor is net worth and liquidity. Net worth is, obviously, the difference between your assets and liabilities, and they like to see a net worth equal to or greater than the loan amount.

If you’re wanting to buy a $1,250,000 apartment building – I always like to use that number – in an 80% loan, to be a million dollar loan, they would like to see your net worth equal to a million or more. It is not always the rule that you have to have a million dollar net worth; you could have $800,000, $600,000… Because if you have a lot of income, if you have a good income, if you have a high salary or a W2 salary, or you’re self-employed and you make a lot of money, net worth is not all that important. There’s some mitigation for the net worth.

Then the liquidity is really important. Yes, you have to have enough money to put down; in that situation you’d need $250,000 to put down… But if that’s gonna use up all your cash, just to get into that deal, the lenders will look upon that as a little weary, because you have no cash left. They don’t like to see someone use up all their cash after a closing and then not have anything for an emergency such as a $10,000-$20,000 deductible for an insurance claim; let’s say you have a fire immediately after you purchase the apartment building – which has happened to one of my clients; within 3-4 weeks he had  a fire after just closing on a 44-unit apartment complex. He had to make a claim, and the lender wants to know that you have enough cash to make the claim and get the property fixed, and get it re-leased, or re-tenanted and cash-flowing, sufficient enough so it doesn’t put your payments in jeopardy and putting any hardship on you.

Joe Fairless: What type of liquidity do they look for?

Michael Reinhard: It varies between lenders. The general rule is 10%-20% of the loan amount. If you’re wanting to borrow a million dollars, you have to have at least $100,000 after closing; $150,000 or $200,000 is even better. Sometimes they use 6-12 months’ worth of principal and interest payment. If your mortgage payment was, say, $10,000 a month, they’d like to see $120,000 or so in liquidity. Those are the general rules.

Then the next would be ownership experience. Owning a duplex, or three or four single-family rentals, or maybe 10 or 12 (you could even have 30 of them) – that’s even better if you have a large portfolio of single-family rentals. But if you’ve only had one or two, and maybe a couple of duplexes, that’s not the same as a multifamily, because it’s a little bit different animal.

Anywhere between 5 up to maybe 50 units – they pretty much allow you to self-manage the property because there’s not a lot of third-party management companies that would want to take on a management of that size; it’s just too small and they don’t make enough money to do it.

Because the lender knows that it’s difficult to find a third-party management company and they know that the investor will be attempting to manage the properties themselves, they want to see “Hey, what do you know about leasing, and doing the credit checking, verifying employment and background, the criminal background?” and just qualifying tenants and management of the property. They’re gonna wanna know if you have some experience in managing the property. You could have owned properties and had some third-party management – that’s fine, too.

So ownership experience and management experience. Ownership experience is a little bit more important than management because they know not everybody manages their own property and it’s not that important.

So those are the five: net worth, liquidity, ownership experience and management experience, credit score  – that’s six. Income, in terms of whatever you are – a W2 employee or self-employed… They also wanna know if you have a portfolio of properties; they wanna look at your global cash flow, how much cash you earn after debt service… Because any excess cash flow after debt service meaning you’ve got your net operating income, then you have a principal and interest payment to the lender, and the rest is taxable income. That’s pre-cashflow — not necessarily pre-cashflow, but that’s taxable income that you have left over that if you’re experiencing some hardship on one property, you can then move that cash around to keep all your debt service intact.

A lender likes to see your global cash flow, and that would be your income in whatever profession you’re in, or if you’re in real estate full-time, they wanna just see your overall cash flow. There’s really no ratio on that. People ask me about your debt-to-income, what is the residential ratio…? It’s your income-to-debt, or is it debt-to-income…? They don’t really use that in commercial real estate. They just look at the property’s loan-to-value and the debt coverage ratio, meaning how much does the net operating income exceed the monthly principle and interest payment.

And the PITI is not applicable. So when I say debt service, it’s not principal, interest, taxes and insurance. In commercial real estate it’s just PI – principal and interest. Because in multifamily investing, as part of your operating expenses, it includes property taxes and insurance. It’s always an operating expense, it’s not a part of your payment to the lender, because those may be ESCROWs in those 1-4-family… It’s still an operating expense, but they collect them. And it’s not to say that the commercial lender doesn’t ESCROW for taxes and insurance – they do, but when they’re calculating all their ratios, your debt coverage ratio, that’s only principal and interest.

Joe Fairless: What are some immediate disqualifiers that a commercial lender will have?

Michael Reinhard: Generally, the first thing I like to ask is — an extremely low credit score is… I would say below 600 will raise some eyebrows or will require further explanation. When you get into the 500, that’s difficult.

The next would be any bankruptcies, and usually anything older than 10 years is okay. So any bankruptcies less than 10 years may disqualify you. And then foreclosures – any type of foreclosure and any summary judgments, and that could be for any reason. Any summary judgment, which is basically a court order settlement in which somebody has won a claim against you for any reason, any business, lawsuit, any real estate, and which you’ve obviously not been able to settle or pay, and therefore it lines up on your credit report… Because often there’s no real explanation of that on the credit report, there’s not much detail, so you then have to ask the credit applicant “What is this? What was it for?”

And usually, another thing is self-employed people who are living off the cash flow of some real estate investment. If you have one or two or three single-family rentals and that’s all you have, but that income is what’s supporting your family, that doesn’t bode too well for the lender… They see that you’re generating enough income obviously to support your family or your house (even if you’re single), but it doesn’t leave anything to service the debt of another loan or to give you any cushion in the events of some financial hardship. It’s just too tight. They like to see people who don’t have to depend on their commercial real estate investments or even their single-family real estate investments, they don’t have to depend on it to pay their bills.

Now, if you have a huge portfolio and you’re making 200k/year off your real estate, that’s fine. But if you’re just barely getting by and you’re trying to buy your next deal, that’s a little bit of risk to the lender. So self-employed people have to be pretty well established.

Joe Fairless: What type of loan-to-value ratios should we project when we’re initially running numbers on a stabilized multi-family property of about 30 units?

Michael Reinhard: 80% is the standard loan-to-value for a multifamily apartment building. Anything commercial-wise – an office building, a retail center, industrial warehouse, a medical office – is 75%. But there are some exceptions on the 80% for multifamily, and that would be depending on the debt coverage ratio – how much the debt coverage ratio is, how high it is, the income of the borrower and the strength of credit worthiness and financial strength of the borrower.

If you don’t have much net worth and you’re trying to do your first deal or your second deal, they may say “Well, we’re not gonna provide that much leverage. We’d rather limit out exposure to 75% and not 80%.” So if all looks good – good income, decent net worth – you can always pretty much get an 80% loan. But there are extenuating circumstances that may limit to 75%. In each deal, all of the information has to be considered: the borrower information and the property information… And the age – it could be an older property in a rougher neighborhood. It’s really subjective, so it’s up to the chief credit officer, chief lending officer to determine whether they can go that high.

Joe Fairless: Michael, what is your best real estate investing advice ever?

Michael Reinhard: I know this sounds simple, but not to overpay for properties based on when cap rates are trending down. Right now, and what’s gonna happen to my clients that have five-year money with banks – interest rates are gonna go up, and cap rates that are now in the 6%-7%, if they don’t go up with interest rates, a lot of borrowers are gonna be stuck trying to refinance a property five years from now at a much higher interest rate, and I’m talking about 7%, where now the lender is making more money than the investor is.

So it has to do with buying at the right cap rate. Don’t buy into this notion “Where else are you gonna put your money?” 6% is a good return, but you can get burned in real estate using that logic. So no matter how badly you wanna buy a property and how you wanna get into this market and get in the game, patience pays off to make sure you start off with a good at least 7,5%-8% cap rate. Because interest rates are gonna go up, and a lot of people are going to be in shock three and four years from now.

If you don’t have rental rates that are  increasing to increase the value of the property, it’s gonna be a little bit more difficult to refinance. And what’s gonna happen, your return on your equity is going to plummet if you had paid too low of a cap rate in a rising interest rate market.

Joe Fairless: Good cautionary advice, that’s for sure. Thanks for sharing that. Are you ready for the Best Ever Lightning Round?

Michael Reinhard: Absolutely!

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

Break: [00:21:52].16] to [00:22:34].14]

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

Michael Reinhard: Hamilton, I just finished it… Alexander Hamilton.

Joe Fairless: Oh, yeah…

Michael Reinhard: I just finished reading it, and I was like “This guy is a genius!” He’s a financier; this guy was a genius. He created our financial system.

Joe Fairless: There’s a couple books out about him… I’ve got a gigantic one that I’m about 20% of the way through; I’ve been working on it for about six months. [laughs]

Michael Reinhard: Yeah, Alexander Hamilton is the name of the book… Ron Chernow is the actual book that inspired that musical Hamilton.

Joe Fairless: Okay, got it.

Michael Reinhard: It’s 800 pages long. He created our financial system, he created basically our mortgage system… It’s amazing. This guy was [unintelligible [00:23:15].24] He died at the young age of 49. He just wasn’t given the credit that he deserves.

Joe Fairless: Best ever transaction you’ve done?

Michael Reinhard: I placed some preferred equity for a group that was buying a multifamily property in San Antonio. They had the deal under contract for a long time, and the investors were just coming up short — well, they weren’t just coming up short; they were about 3-4 million short of raising their equity, and they had literally three weeks to close. I was able to bring in that preferred equity lender that provided 3.2 million dollars in equity that was able to salvage the deal; earnest money was hard at risk, and I made a handsome fee on 3.2 million dollars.

Joe Fairless: What type of rate would that preferred equity partner charge?

Michael Reinhard: It was 15%, but there was no carried interest, or what they call “No promotion”, meaning that they had a superior position of preferred equity versus the common equity, but it was priced like mezzanine financing, which is like a second loan. That means they’re just saying, “Look, all we want is the 15% annual return. We don’t get any of the upside, we don’t get any of the profit. You sell it, you finance it… We don’t get any more. We’re not going to increase our return”, where a joint venture equity investor would say, “Okay, I’m going to get a 8% preferred return every year, and then I’m going to get 50% of the cash flow when they sell it.”

Well, then if you do an internal rate of return calculation over that three, four, five-year period, you could have wound up making a 20% internal rate of return. Well, it was simple; it’s just a plain, non-compounding 15% return on the investment. If they invested three million, they’re gonna make $450,000, and that’s all they get. After the another three years, they just get their 15% for over three years. They don’t get anything more and nothing less.

Joe Fairless: That was a three-year term…

Michael Reinhard: Yeah, it was to be a three-year term and they had an option to extend, so if they needed more time, they would have given them another year.

Joe Fairless: That’s interesting.

Michael Reinhard: Yeah, so they wouldn’t have made any more or less; they would have gotten their $450,000 for those three years, and no matter how much the sponsor — if they made a two million dollar profit, the preferred equity lender would not get any of that.

Joe Fairless: Did they buy this property all cash?

Michael Reinhard: No, that’s why it was the best deal ever, because there was an existing HUD loan that they were assuming. And there were some complications under any kind of a Fannie Mae, Freddie Mac or even an FHA HUD loan, because they don’t allow hard second liens, they don’t allow a pledge of the partnership interest that mezzanine financing usually involves. This lender is familiar with all of those loan covenants and requirements, so they’re able to structure the partnership agreement, basically amend the partnership agreement to secure their investment right… Because they weren’t taking an ownership interest, but they have certain rights and remedies, and if they didn’t pay back that 15%, then they could essentially take over — really, they actually provided credit enhancement to the transaction, because the company is well capitalized and actually is probably worth more than the investor sponsorship. So those first lien lenders – they’re fine with that.

So time was running out, the approval of that assuming that loan was running out… This group was able to work through the terms of the partnership agreement and within three weeks analyze the transaction and make a decision and fund it in three weeks. It was actually less than that, because the borrower was really becoming a little difficult to deal with because they were making some demands, and I said, “Don’t look [unintelligible [00:27:22].21] I said “This is a good deal, quit pushing back.”

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

Michael Reinhard: Education. I’m always helping people. I do my own tax returns, so I have a lot of people that have nothing to do with real estate, but just sharing information, networking and sharing… I believe that sharing and helping people in areas that you have a specialty and knowledge in — I always find it rewarding to share my experiences and help people. I believe that if I can help you make money or help you achieve your goals, some day you can reciprocate. When someone calls me and asks me for advice, I don’t hurry them off the phone. I’m glad to help someone or refer them to somebody else that could help them… Because I know how frustrating it can be.

I had some accounting questions and tax questions; I was so frustrated with the actual CPAs that I felt like they didn’t know what they were talking about. I actually called the IRS and did all the research and I figured out how to solve this problem of mine. Now, anytime that you spend that much time and effort, then at that point you’ve become an expert, because now you can share that and save somebody else the grief, or getting wrong information. There’s plenty of wrong information out there.

Joe Fairless: That’s a perfect segue into — not the wrong information part, but the reaching out and talking to people… That’s a perfect segue into the last question – where can the Best Ever listeners get in touch with you?

Michael Reinhard: They can reach me at my website at www. texascommercialmortgage.com. I also have a website for my book – www.commercialmortgages101.com. So you can go to my website, texascommercialmortgage.com and I have a link to the book’s website, and I have a phone number on my website. They can call me, or you can send me a message from my website, or give me a call.

The book is available also on Amazon and Barnes & Noble, but I do have a website, and if you order the book from my website, I’ll actually mail you a signed copy. If you order it from Amazon or Barnes & Noble, I’m unable to sign it.

Joe Fairless: Michael, thank you for being on this show, sharing your best advice ever, talking about the differences between commercial and residential loans, as well as the things we need to make sure we have taken care of prior to applying for a loan. One is credit score 600+, two is net worth of equal the amount of the loan, three is liquidity 10%-20% of loan amount after closing, four is experience of the owner (our experience), and five is our global cash flow. Thanks so much for laying that out there so clearly, as well as talking about the things that would dissuade a lender from lending to you… You mentioned a list of those as well. And then the interesting story about the 15% interest equity partner for that three million dollars in a very short amount of time.

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

Michael Reinhard: Thank you, Joe!

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


Follow Me:  

Share this:  
Best Ever Real Estate Show Banner

JF975: Hotels and Multifamily Investing on a PASSIVE LEVEL

He has cash in over 1000 units as of right now and began when he was 22 years old. Hear his story and how he prefers to passively inject his capital into large multifamily syndications and hotels. He makes it seem very simple, in fact it’s not too difficult to grasp… Start investing passively into multi family today!

Best Ever Tweet:

Mark Kenney Real Estate Background:

– Co-founder of Think Multifamily and full time real estate investor
– Purchased first rental property at the age of 22 and now has investments in 1750 units
– Over 20 years experience in real estate investing and educating
– Prior to real estate, Mark was a CPA and IT Consultant that founded Simplifying-IT in 2008
– Based in Allen, Texas
– Say hi to him at http://thinkmultifamily.com/ 
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

Made Possible Because of Our Best Ever Sponsors:

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

Go to adwordsnerds.com/joe to schedule the appointment.


passive hotel investing


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’ve only talked about the best advice ever, we don’t get into any fluff.

With us today, Mark Kenney. How are you doing, Mark?

Mark Kenney: I’m good. How are you, Joe?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Mark – he’s the co-founder of Think Multifamily, and he’s a full-time real estate investor. He purchased his first rental property at the age of 22, and now owns 1,750 units. He’s got over 20 years of experience in real estate investing and education. Prior to real estate, he was a CPA and IT consultant. Based in Allen, Texas. With that being said, Mark, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Mark Kenney: First of all, I appreciate having me on the podcast, Joe, and hello to the Best Ever listeners. The background – I kind of grew up where we didn’t have a lot growing up, and always had a mindset for entrepreneurship. I started buying properties when I was 22, some smaller ones. Then I unfortunately got caught up in the corporate world, making some pretty good money and traveling a lot.

I kind of got in real estate a little bit from a perspective of buying new assets. In 2008 I started my own IT company, did well with that, had some pretty big customers like T-Mobile, Marathon Oil, [unintelligible [00:03:33].17]. That was going well, but I had two kids and a wife, and I didn’t have enough passive income coming in if I was to die, so I figured I’d need to start looking for other avenues to get a higher level of passive income, and that’s when I made the decision about three years ago to start buying larger multi-family assets.

About two years ago is when I stopped doing IT consulting and became a full-time real estate investor.

Joe Fairless: Okay. What was the first purchase two years ago into the multifamily arena?

Mark Kenney: It was a 64-unit in Mesquite, Texas.

Joe Fairless: How did you fund it?

Mark Kenney: We syndicated where we had a group of people that we brought together, and brought money together to purchase it. That’s kind of what we’ve been doing on our subsequent deals. Before it was [unintelligible [00:04:18].27] my brother and myself and my sister buying 1, 2, 3, 4-unit deals, but when we got larger, we actually put money together from other investors and bought larger properties. We pulled down one in January of this year, which was a 400-unit deal in Atlanta.

Joe Fairless: Okay, cool. So you’ve got 1,750 units that your company controls with some ownership in, along with other investors, correct?

Mark Kenney: That’s correct. We’ve syndicated a little over a thousand of those. The other stuff are more passive investments.

Joe Fairless: Okay, so 750 are properties that you own outright, with no other investors?

Mark Kenney: No, sorry… Basically, we passively invest in some deals ourselves, so we’re not [unintelligible [00:05:04].01] and then we syndicated about six deals on our own. But at those deals we’ve syndicated, we have other investors investing with us.

Joe Fairless: Okay, got it. So of the 1,750 units, you are passively investing in 750 of those, so you’re a passive investor in deals, and then about 1,000 of those 1,750 you have syndicated, so you’re an active investor, you’re on the general partnership side, is that right?

Mark Kenney: That’s correct.

Joe Fairless: Okay, cool. Now I understand the lay of the land… This is interesting. Let’s talk about — are you still passively investing in deals?

Mark Kenney: We do. I do a SEP IRA every year, so every year I’ll invest in a deal.

Joe Fairless: And what do you look for when you invest in a deal passively, and is it multi-family that you’re investing in?

Mark Kenney: Primarily multifamily. We’ve invested in two hotels, but we’re probably not gonna be doing that going forward. So mostly multifamily… The first thing I look for really is the operator. Probably before I used to be more concerned with the projected returns and what the sponsor or lead thought they could do. Now I actually have a lot of people that I know quite well that syndicate deals and I have developed some relationships with them. I trust them, so [unintelligible [00:06:24].03] deals secondary. Both are critical, but you can have a very good deal with a bad operator, and the deal can still be bad.

We look at the market, job growth, population growth, easy to evict – kind of your standard type attributes. If the city’s making an investment… So we’re heavily in Atlanta right now; a lot of city investment dollars going in there, and there’s also a lot of development dollars going in there, which is a good combination.

I know you grew up in [unintelligible [00:06:53].22] I was just stopping in Michigan about a week and a half ago, and there was a lot of activity going up there, and I’ve been telling people for years you can probably make a lot of money up in Michigan right now, but I’m not one of the people investing up there. I don’t think the fundamentals are there. You can make money, but there’s no population growth or job growth or things like that. So we’ll look at all the key indicators, but the operator is critical.

Joe Fairless: Why no hotels? What happened on those two deals?

Mark Kenney: One is doing quite well. The other one was actually a good property; it was out of state, but the people operating it, the leads, the sponsors in that deal [unintelligible [00:07:39].05] gone through in a business plan where they were gonna put in a third-party operator, and they didn’t do that, so the deal kind of went South pretty much to the point where it wasn’t recoverable.

So I don’t necessarily have anything against hotels, but my personal perspective is there’s a lot more to running a hotel than there is multifamily properties… So if I’m not gonna be involved in the running of the day-to-day at a hotel, I probably wouldn’t be involved. There’s a lot cash that gets paid and it’s a lot easier, in my opinion, for fraud, theft, things like that, which is something that actually happened at one of our hotels that we were passively invested in.

Joe Fairless: I’m curious, as a passive investor, how did you become aware that people were skimming off the top, or whatever they were doing. Passively I wouldn’t have probably known, but the guy that was working there actually went to jail, so I believe he actually informed us that he actually went to jail for like six months, and then… The story gets better; without getting into too many details, even after that [unintelligible [00:08:43].02] to work the front desk that was convicted of money laundering. [laughter] So yeah, not a great situation… I’m not saying people can’t make a lot of money in hotels, but I’m a little tainted right now.

Joe Fairless: [laughs] Oh, man… I’m not looking for you to call out anyone, but I am looking for the lesson here, so I do need to ask a follow-up question – how did you get in touch with this group? And again, I’m not looking for you to call out a particular group, I’m just wondering the lesson here. How did you initially get introduced to this group?

Mark Kenney: They were part of another multi-family group; they were having an issue finding multifamily, so they went off and got trained by a so-called guru in hotels, and gotten into a deal. The deal itself was good, it’s just that they had done some fairly silly things that resulted in a bad situation for all the investors, unfortunately. That goes back to the point around the operators…

Joe Fairless: Yeah, just tying that scenario up, how do you approach your conversations with operators who have opportunities, knowing what you know now, when you screen operators?

Mark Kenney: One, I wouldn’t invest with anyone — this is really the first hotel deal, and they had a mentor that was supposed to work with them side by side, and that didn’t happen. So I personally would never invest in somebody’s first deal unless they have a strong partner that’s part of the deal and has skin in the game as well, both from a time perspective and a financial perspective. I would make sure that any deal has someone that’s strong, that’s done it before, has been through some issues… Everything is not always hunky-dory, things do happen. Then we will just ask questions more around the prior experiences.

This is just one of the situations where I don’t say we are misled, but someone was probably misled on what reality was versus what was portrayed to be the business plan and the execution of the business plan.

Joe Fairless: Okay, let’s shake that off and let’s move on to some fun stuff for you… A 64-unit was your first syndicated deal; was your most recent that 400+ unit in Atlanta?

Mark Kenney: Yes, it was. Then we had one right before that, a 255-unit in North Dallas.

Joe Fairless: Alright, so 64, 255, 400 — there’s a lot of ways I can go with this, but let’s do this: from a due diligence standpoint with your 64-unit to your 400+, what have you improved on as an operator?

Mark Kenney: A couple things, I guess. One is improved upon this, because we did it on our first one too, but always hire someone that does this professionally, or at least in the physical asset perspective hire someone that does it for a living; make sure they gave you quotes… So we had due diligence done before where they give you a 500-page document and there are not quotes associated with any of the rehab requirements, which is kind of a bad thing, right? You wanna know what’s gonna cost to actually fix things…

We also learned on — we didn’t have this originally, but language in the contract around city inspections and who has to pay for that… That saved us literally about $200,000 in our deal in the Dallas area, where our contract called for that the seller has to pay for any open city violations, and that one had several hundred city violations. It sounds bad, but it actually worked out good for us, because it all got fixed.

Joe Fairless: You said over $200,000, right?

Mark Kenney: They had like 700 city violations on a 250-something unit.

Joe Fairless: Wow… And what was the dollar amount, roughly?

Mark Kenney: I’m just purely guessing about $200,000… That was something the seller had to pay. We have verbiage in our contract for that; we also have verbiage about walking vacant units before closing. We got caught on that before where there was only one vacancy, and then lo and behold, the day we close there are now five vacancies… One of those things.

Joe Fairless: Yup.

Mark Kenney: So the physical asset piece is pretty easy… You’ll hire people to do that. It’s more about making sure the numbers are what they are, and just don’t skimp and don’t hire someone that doesn’t do this on a daily basis to do your due diligence. People learn a lot about the contract [unintelligible [00:12:51].21] and any things of that nature as well.

Joe Fairless: As far as the violations go that the seller had to pay for, you said there were around 700 violations… When did that come up? Are you able to identify those violations prior to going under contract?

Mark Kenney: Fortunately for us, we were. We had an early access agreement which allowed us to get into the property while the contract was being worked with the attorney. We were in there, and we were delayed a few days by that, because of the city inspection. So we had an idea that the city inspections were going on during that time… But even just going in the city, you can see some of those attributes too, but we were kind of first-hand here; we actually had the report sent to us from the seller, and also had a conversation with the city. They weren’t willing to share that much quite frankly, the city, because we weren’t the current owners, but at least we could get an idea about the reputation of that property, with the existing property owner.

Joe Fairless: Okay. That was the evolution or things you’ve improved on or make sure you included throughout the three deals on the due diligence… What about your investor structure, how you structure the limited partnership, your passive investors and the general partnership, you and your team?

Mark Kenney: This is something we’ve changed a fair bit more recently… We kind of stuck with the typical — we’ve been doing the 80/20 split, 75/25 split, where 75%-80% goes to the investors. We haven’t been doing preferred returns that much… Preferred return meaning just that the investor gets the return before the sponsor lead gets their return.

The last couple deals we’ve looked at, we’ve actually looked at each deal individually and uniquely, and now we’re structuring each deal differently. Some may have a pref return, some may not; some may have a percentage we have to hit over a five-year period and we don’t get any returns as sponsors or not. So we’ve kind of done a lot more recently on deals, but prior to that we were pretty much standard, some sort of split, but we really weren’t doing pref returns that much at all.

Joe Fairless: And what are a couple variables that would push a project to have a pref return, versus no pref?

Mark Kenney: The cash flow… We should have confidence in our business plan, but the cash flow is super strong in this deal; we have another deal in Atlanta that we are on a contract with and the cash flow is just killer on it. So we feel very comfortable paying that, and we’re paying a 10% pref return on that, which is pretty high… But we feel comfortable doing that, and then we have a split after that.

So I think it depends on the deal, if it’s a value play, meaning you’re gonna come in and increase the rents and put rehab dollars in, how far into the future do you push that? If it’s a real big value add deal and it’s gonna take you a year to get it rehabbed and you have an 8%-10% pref return but you pay zero in year one, that means in year two you’re gonna pay potentially 16%-20%, right? So if there’s no cash flow, then the pref return becomes harder.

We do have a value add deal on the one in Atlanta; it’s kind of a unique deal… Our partner already owns it, it’s a little bit different situation, but the rehab’s already ongoing, it will be done in twelve months, so that makes us more comfortable paying that pref return. But if there’s no cash flow and it doesn’t make up that pref return, it can be hard, because you have to be able to accrue all that as you go… And things happen. Perfect example – that property had seven months delay on the rehab because it crossed two city lines, and the cities were fighting back and forth which unit each home owned. So if you have a business plan in place and you have to wait seven months to rehab something you plan on doing virtually day one, that’s gonna have an impact on your business model, for sure.

Joe Fairless: How did that get resolved?

Mark Kenney: The cities had to resolve. My partner there, Paul, he was hounding them non-stop on things, but it still took months and months to resolve. He had to go to several Council meetings and things like that… I think him hounding them helped, but ultimately it came down to the two cities fighting over which [unintelligible [00:17:06].06] owned.

Joe Fairless: Let’s talk about the approach that you take with the on-the-ground management… Because you’re in Allen, Texas, but this property is in Atlanta, the largest deal. I believe you said your business partner owned it already… One, how did you buy it, and two, how are you doing the management?

Mark Kenney: Right… So we have a current deal that he owns, but the one we closed down in January, the 454-unit deal, that as an off-market deal. Paul, our partner, has been there in Atlanta for a long time and has been doing multifamily for 28 years; it so happens he has his own third-party management company [unintelligible [00:17:47].27] I don’t have any desire to have my own third-party management company or work day-to-day in operations…

I’ll asset manage, meaning I’ll oversee the investment and making sure that Paul is doing what he should do, but he kind of already had his relationships with the brokers, and that’s kind of where we ran into issues. When we looked for properties in Atlanta, we didn’t have any boots on the ground initially, and we were having a hard time getting traction. But as soon as we hooked up with Paul there, that kind of opened the floodgates and it was kind of a perfect marriage, because he doesn’t really raise money, but he actually has a lot of deals, while we raise money, and he likes the third-party management and we don’t do that… So it’s a good relationship. But that was one through a broker relationship that he had worked, and he had bought other properties from him in the past, and that’s how he got that deal.

Joe Fairless: On your first deal, the 64-unit deal, how much money did you raise?

Mark Kenney: About a million.

Joe Fairless: And how did you come across those investors?

Mark Kenney: Meet-ups… We’ve been involved in different groups, and then I have an IT background – I did IT for about 20 years – and there’s been a lot of people that have money and are looking for places to put it. I would say raising money is not as easy as people think it is just starting out, but once you kind of get in the groove and you get a track record, it becomes a lot easier.

We raised about 6.2 on this last one that we closed on in January. It’s kind of obvious, but it’s not the people getting your brand out there, and building your network… Your brand meaning — we bought properties for a number of years, but it wasn’t until about six months ago that we even started the company Think Multifamily, and using social media and things like that. Things I kind of ignored, quite frankly… I thought some of it was a little silly actually, but it’s not. It works, people use it, and fortunately for me and wife Tammy is all into the marketing aspects of it and things like that.

So whether you’re a passive investor or a lead investor, you still have to have visibility in front of people. If you’re a passive investor and nobody knows who you are, or you’re not attending meet-ups or events, nobody’s gonna send you deals. If you’re a lead on a different deal, you need to have passive investors.

We go to different events, we go to meet-ups; we hold two meet-ups ourselves as well. We started one in Atlanta that we’re gonna be kicking off here in the next month or so as well. But getting yourself visible and being active on social media – it’s probably the two main things that are gonna get you visibility with investors.

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

Mark Kenney: I would say partner with people you trust. It sounds cliché, but partner with people you trust and have the same values as you. Don’t chase money… I don’t care if the deal looks fantastic; if you don’t trust the person or something in your gut tells you something doesn’t seem right about them or the deal, then don’t do it. Be patient, find the right partners and fight the right deal. You’ll get frustrated probably… I get frustrated on a daily basis, because I wanna go faster and faster, but be patient. We see people overbidding a lot on deals right now, you’ve probably seen that as well.

Just making sure you’re having a relationship with people that are gonna be conservative; they will be conservative on the underwriting, and then you trust their values and their integrity and character. While everybody says that, at the end of the day it’s not as common unfortunately as it should be, having integrity in character.

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

Mark Kenney: Yes, sir!

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

Break: [00:21:20].21] to [00:22:02].06]

Joe Fairless: Best ever book you’ve read?

Mark Kenney: Rich Dad, Poor Dad probably, for me… Even though a lot of people would say that, that literally opened my eyes. I’ve always had an entrepreneur background. It wasn’t [unintelligible [00:22:12].09] and it helped me realize that in order to run a business, I don’t wanna be the only person that can run the business; it needs to survive and sustain with me not being there, and that’s kind of been eye-opening for me.

Joe Fairless: Best ever deal you’ve done?

Mark Kenney: The one we closed on September 2016 in North Dallas. We already raised rents twice, already passed our year two projections, and it’s only been since September. That one I think is gonna really be our best deal ever.

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

Mark Kenney: We help educate people. We actually do some events here and there as well, and starting to do more of that. Anything we know, we’ll share; we don’t hold anything back, we don’t have any hidden agendas. And then outside of real estate, we have a big passion for orphanages. My wife and I both support orphanages in Africa [unintelligible [00:23:03].29]. We also had a big passion and support people of sex traffic industry.

Joe Fairless: If you can think about a mistake you’ve made on a deal, what mistake comes to mind?

Mark Kenney: The one we’ve kind of alluded to earlier. It’s really looking at the deal before the operator, maybe trusting the operator a little too much and not having an operator on the hotel example that really was experienced. Looking back on it, I would not have invested in it, the reason being that they didn’t have anyone else that had skin in the game with them. They had a so-called mentor that later we found out really was not a mentor and unfortunately has a lot of litigation against him.

But anyway, having somebody that’s side by side with the operator, with the lead, has done it before, has been there and can help them would probably be the biggest thing. Look for that first and foremost, and then look at the deal and see how it looks.

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

Mark Kenney: My e-mail is mark@thinkmultifamily.com. The website is thinkmultifamily.com, and that’s a good way to get a hold of us.

Joe Fairless: Lessons learned that we can apply if we’re passive investors as well as active investors, from passively speaking, where we should look at the operator and then the deal, and a little bit more granular than that, make sure that there is alignment of interest, as well as an experience level. And then also from an active investor, someone putting the deal together, as far as raising money goes – meet-ups… You hold a couple meet-ups, you’re starting another meet-up; your professional background, so people who are already within your sphere of influence, as well as constant visibility… Although you said – which is interesting and I hadn’t thought of this before – that also applies to passive investors, that constant visibility, so that you can get access to more deals. And then the due diligence evolution or things that you have continued to do over time, like walking vacant units right before closing; having the seller pay for any open city violations saved you about $200,000, and getting quotes for rehab requirements in addition to the inspection report.

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

Mark Kenney: You too, Joe. I appreciate it, thank you.

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


Follow Me:  

Share this:  
Best Ever Real Estate Show Banner

JF954: Former DALLAS MAVERICKS President Develops RE with Foreign Capital and How YOU Can Too

Now off the court, former Dallas Mavericks President, Frank Zaccanelli, has raised over $235 million in just the last three years for real estate development, and he did it with foreign investors through a program called EBI. Hear what projects he’s developing and short-term goals, he definitely knows how to think big!

Best Ever Tweet:

Frank Zaccanelli Real Estate Background:

– Chief Executive Officer and Managing Partner of Fiamma Partners, LLC; an investment & development firm
– Invested over $235 million in residential and mixed-use real estate opportunities across the United States in       the last 3 years.
– Former President, General Manager and Managing Partner of the Dallas Mavericks
– He spearheaded the effort to acquire and redevelop 75 acres of environmentally-contaminated land, which now   houses Mavericks, Dallas Stars (NHL) and concerts.
– Currently working on revitalizing a historic shopping complex in Dallas
– Based in Dallas, Texas
– Say hi to him at www.linkedin.com/in/frankzaccanelli/
– Best Ever Book: Tuesdays with Morrie


Made Possible Because of Our Best Ever Sponsors:

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

Go to adwordsnerds.com/joe to schedule the appointment.


real estate development with foreign capital


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.

We’ve spoken to Barbara Corcoran from Shark Tank, Robert Kiyosaki, the author of Rich Dad, Poor Dad, and a whole bunch of others. With us today, Frank Zaccanelli. How are you doing, Frank?

Frank Zaccanelli: Doing well, thank you.

Joe Fairless: Nice to have you on the show. A little bit about Frank – he is the chief executive officer and managing partner at Fiamma Partners, which is an investment and development firm. He is the former president, general manager and managing partner of the Dallas Mavericks. He has invested over 235 million dollars in residential and mixed-use real estate opportunities across the U.S. And this is really interesting – he spearheaded the effort to acquire and redevelop 75 acres of environmentally contaminated land, which now houses the Mavericks, the Dallas Stars and a whole bunch of concerts. Last thing I’ll mention before we get into it, he is currently working on revitalizing a historic shopping center in Dallas.

Lots of real estate related conversation that we’re gonna be talking about. Based in Texas… With that being said, Frank, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Frank Zaccanelli: It’s good to be with you in the no-fluff zone; I guess this is the no-fluff zone.

Joe Fairless: You betcha!

Frank Zaccanelli: I’m happy to be in the no-fluff zone with you. I started off in real estate as a real estate broker back in 1980, and I went to work for a guy who was a really famous guy in Dallas, and probably around the country, Roger Staubach. He had just gotten out of football, and he knew in his last years in football he was going to make real estate his career. I met him playing basketball. I played basketball in college; he played a lot of basketball in the off-season to stay in shape.

We met and hit it off pretty well. One day he invited me to his house, and we played. He asked me “What do you do for a living?” At that time I was in the consumer product industry, I was a marketing guy; I was young out of school, and I went from there. He said, “Have you ever thought about getting your real estate license?” I said, “I thought about it.” He said, “Well, maybe what you should do is you should go do that and then come back and see me.” Well, he didn’t have to ask twice.

I went to get my license and I went to work for him, and had a wonderful five-year career with him. I was probably the 12th to 14th employee. When he sold his company, I think he had either 2,500 or 3,000 employees. So I was there very early on, and I basically parlayed that into meeting Ross Perot Senior, then Ross Perot Junior, and ultimately went on to a really fun and exciting career with the Perot family for a long period of time before I started all of my own ventures. I’ve had a really lucky and blessed career, and I’ve been around some really good people.

Joe Fairless: You’ve invested over 235 million in residential mixed use real estate across the U.S. Can you elaborate on…

Frank Zaccanelli: That’s just in the last three years. We’ve invested billions through my career. I’ve been lucky enough again to be with some very powerful groups that had done a lot of great things, but the 235 has been invested really over the last three years.

Joe Fairless: Alright, let’s talk about the last three years. What have you been investing in?

Frank Zaccanelli: Well, actually, the EB5 program – I don’t know if you know what that is, but maybe some of your listeners… It’s an immigration program that actually is pay-for-play immigration, where they allow up to 10,000 visas a year through the United States government, the USCIS, and ultimately what happens is is that money has to go into projects that create jobs and economic development in the United States.

This all got started for me in this EB5 program in San Francisco, back in 2010. San Francisco was a real hotbed for the Chinese. The Chinese dominate the EB5 program. They’re probably 90% of the total program. One company is probably 60% of the 90%; that’s the company that basically I linked up with. But we went to China, and like we would do in the Unites States at a public offering, [unintelligible [00:06:32].27] you sit in front of investors, you explain to them what you’re doing in the real estate they’ll be investing in, and ultimately all this has to be approved by the United States government.

So we did that in 2015, and raised the 235 million dollars of EB5 funds, and we placed that money into two land development deals in the suburbs of Dallas. I know you’re from Fort Worth, so you would know where Westlake (Texas) is, and Flower Mound, Texas. And then a historic hotel in downtown Dallas called The Statler, which is ultimately one of the premier properties in Dallas historically. It was Conrad Hilton’s biggest hotel at the time, back in the ’50 when he opened it.

The building has been vacant for a while, and we used these funds and our expertise to be able to redevelop that project. So those three projects kind of make up Fiamma’s playlist now, and the 235 million that you were speaking of.

Joe Fairless: What are some things that we should know about the EB5 program in terms of pros and cons as a real estate developer when you use it?

Frank Zaccanelli: Well, that’s a great question, actually. It’s a very arduous, long process, which I think really connects in with the government’s involvement. Projects take about a year to a year and three months to get approved. If you’re in the middle of a very active development and you need financing right away, the EB5 program probably is not the way to go. But if you can plan out your financing and your capital stack and your capital structure, it’s pretty cheap money, and ultimately if you can get through all of the coordinates that you have to get through, which is ultimately you have to have certain job numbers, you have to have certain economic development numbers, it has to be a certain tax space… These basic things, if you meet the standard on that, and you have the time to be able to really utilize that financing – because it doesn’t happen overnight – it’s a pretty nice way to basically finance your projects.

Many big development companies, especially out of New York, have done EB5 deals on major projects, where they’ve raised on a single project, five, six, seven hundred million dollars. So it’s good financing if you have the time and you meet the criteria.

Joe Fairless: What is your specific role within those three projects?

Frank Zaccanelli: Well, I raise the capital and I’m the developer. I have a long history of building things from my Hillwood and Ross Perot days. So really, the two projects in the suburbs are land development projects where we’re actually going to build 14 buildings, on the land development projects in the suburbs. At the Statler, that’s really brain surgery, because you’re taking an existing historic building and you’re actually having to retrofit it under the laws of the historic tax credit program, which is another great way to raise capital if you meet those standards. Ultimately then, you have to do your engineering and your architectural work in conjunction with the fact that you’re involved in a historic project, and you have to meet all these basic standards. My job is to make sure all that happens.

I’ve spent a lifetime really working with engineers and architects and the like, to be able to really understand all the disciplines that are necessary as you go through these steps.

Joe Fairless: A couple questions on that… On the raising capital front, in the last three years 235 million, and it’s been through the EB5 program that you have done your projects with that capital — this is a broad question, so feel free to take it in whichever direction you like… How do you raise that amount of capital?

Frank Zaccanelli: Well, again, in the EB5 program a lot of it has to do with who you’re involved with. We were involved with the right company that ultimately has 45 officers in China, and does this as the main course of their business. They raise 50-70 million dollars a month of this money. That gives  you some idea of how big this company really is, and the broadness of that. So I think a lot of that has to do with who you’re involved with.

I think ultimately your background has a lot to do with it. I’ll give you a very interesting thing. Something in your life that you never think is going to be a big deal became a big deal with me going to China. In 1997 or 1998, Don Nelson and I (a guy that I brought in as the general manager of the Dallas Mavericks, and then he became the head coach) – Nelly and I worked together to bring the first Chinese-born basketball player into the NBA; his name is Wang Zhizhi, and he is a very famous guy in China. In the United States not so famous, but he was the precursors to Yao Ming coming over, so it became a very big deal. We worked with the Chinese government for over a year to basically make all this happen.

Well, when I went for the first time and I was getting ready to do this road show, someone had recognized my name and recognized me, because over in China when we did this deal, it made major news; this was a huge deal. And so they asked me about it and they asked if we had any photos… Well, by the time that we got to our first couple of meetings, I realized how big of a deal this really was to the Chinese, because it was really, again, the groundbreaker to a lot of Chinese players to come to the United States and play in the NBA.

By far of any place I’ve ever been other than the United States, China is the biggest basketball place where fans just are insane about the NBA, more than any other place in the world that I’ve ever traveled. They’re really up to speed on exactly what’s going on, they watch all the games, they follow all the stats… So that became a very important thing for me on something that really was not a big deal at the time, but it became a huge deal and it gave me some notoriety and some credibility that also helped us.

Joe Fairless: When you have conversations with investors, whether it’s about these particular projects or something else, how do you approach those conversations? As far as preparation in advance, or just knowing what you need to know about the project, or maybe something else? And again, I’m leaving it broad to hear what comes top of mind for you.

Frank Zaccanelli: Well, I’ll just use China and then we’ll bring it back to the United States. In China, it’s really just being very prepared in terms of the numbers, and being prepared in terms of the information. They’re information freaks there, so they wanna know all of the details. In China, it’s really about preparation.
In the United States it’s also about preparation, but then there becomes a scenario where basically you have to make a connection with the people. They have to trust you and they have to believe that you really are knowledgeable, you have the background, they understand that you’ve done this before… It’d be the same thing that anybody who is gonna invest any money in something would want to know; they’d want to know that the people that they’re investing with are competent and capable, and more importantly, they’re honest.

Joe Fairless: And then bringing it back to the U.S. – when did you first go off on your own, outside of working at a real estate company?

Frank Zaccanelli: That was in 2000, when we sold the team to Mark Cuban, who has been all over the news lately. We sold the team and I thought that was a really good time for me to exist Hillwood and the Perot families business. That was the best situation that any real estate person or any business person could ever have. They’re the top of the line, the best all the way around.

I felt that was a good time for me to cash out and to exit, and to start doing my own deals. I always had a drive that I wanted to do my own projects, and in 2000 that was a really good time for me to exit, if you will, the corporate world, even though the Perot family was very entrepreneurial… But the bigger real estate companies [unintelligible [00:15:05].17] boutique companies. I’ve never had 50 employees. We’ve always kept it small and on the investment side, and I only wanna take on two or three deals at a time, because I think you can get yourself overloaded, and when you get yourself overloaded, you have an opportunity not to do as good a job.

Joe Fairless: In 2000 you went out on your own, and you’d take on at most two to three deals at a time. How do you structure those deals with investors?

Frank Zaccanelli: Well, it just depends on what the deal is. Again, if it’s equity, if it’s debt… A lot of times I just put up  my own equity and we went out and raised that. That side of things, quite frankly, is a little bit easier. The banks are looking for collateral, they’re looking for the ability to be able to take a look at what’s the loan-to-value ratios that they’re loaning in. They wanna know that the developer’s competent, they wanna know that the projects are sound… So when it’s on the debt side, it’s easier.

When it’s on the equity side, there has to be some camaraderie. There has to be controlled provisions, there has to be – in the event that there’s a problem between the partners, there has to be buy sells and there has to be all kinds of other mechanisms that come into play, so things become a little bit more complicated if it’s on the equity side. So it just really depends on what the deal is and what kind of capital you’re trying to raise.

Joe Fairless: Thinking of a specific example with the equity side, where you brought in equity partners – can you give a specific example for how you structured the equity side? Just so the Best Ever listeners can hear how you had structured an equity deal in the past.

Frank Zaccanelli: We’ll take a project that was a land development project where the properties were in the — buildings that were gonna be built once the entitlements got done. There was a process that we had to get through on the entitlements side, and that took about two years, to get all the entitlements in place, and get the city’s and the state’s approval on everything that we needed approvals on.

When we brought in equity partners there, it was really based on them being silent money partners, because it was up to us to be able to go in and complete the function with the municipalities and with the government agencies to get everything in place, and then it was a matter of actually starting the infrastructure and starting to build some of the buildings. That was all, again, on us as developers.

I had other deals where the equity that you bring in wants to be part of the development team, and if they wanna be part of the development team, that becomes a little bit trickier, because you can’t have too many cooks in the kitchen. What you have to do is you have to really understand exactly who’s gonna do what, who’s gonna be responsible for what… Because if you have too many cooks in the kitchen, you have the opportunity to start to run into each other and have some conflicts.

It’s better on the equity side if  the money and the equity that you’re bringing in is more silent than not if you’re the master of development.

Joe Fairless: On that first example, the land development project where it took two years to get the city and state approval, the equity partners wanted to be silent money partners, what type of structure – I’m talking about preferred return, equity split… Can you get into those details as far as what type of structure you offer in that scenario?

Frank Zaccanelli: Yeah, sure. A lot of times the money that comes in that’s silent wants to be in a preferred position. Let’s assume that they put in 80%-90% of the capital. If they’re in a preferred position, normally what you’re doing is you’re accruing some interest rate to their capital; let’s just assume that your accrual is 6%-8% on the equity, and that money is not paid in kind; basically, over time it’s accrued until the deal has the money to pay them out.

You as the developer, a lot of times will take a development seat, and you’ll have a current pay on the development seat out of the proceeds that are in the capital stack. Once the entitlements got done and once you start the land development and you actually start selling assets, then normally the way this works is the preferred capital is paid off first, and then there’s some [unintelligible [00:19:36].23] of split. The splits are never 90/10 when there’s preferred capital. Say that then goes after all, the preferred money is paid back, and then any of your money that you put in upfront, then normally the splits are 50/50, and then all proceeds from that point are then basically split on an agreed upon after-capital split. Those after-capital splits are never the pre-capital splits, so ultimately, the developer has an opportunity to promote the silent money, once their preferred return is paid back and their capital is paid back, to get in a better equity position. That’s normally how it works.

Joe Fairless: So give them interest on their money AND their money back, and then perhaps do a 50/50 split, or whatever the project calls for…?

Frank Zaccanelli: Correct. Ultimately, there’s always a promote for the developer once the preferred capital is paid off.

Joe Fairless: And as a developer, how do you know what percentage to charge? What’s typical?

Frank Zaccanelli: Well, it just depends on what interest rates are, what equity returns are in the marketplace, but I would say that 6%-8% in a normal market is probably a pretty good target.

There are a lot of investment companies that want a higher return. Let’s assume that they want in the low teens. Well, then the backend split, if you’re gonna pay them in the low teens, then the backend has to be adjusted so that the developer has the benefit of his bargain.

Let’s assume that I paid in the low teens; that’s something that I don’t really like doing, but let’s assume that was the case. Then we make it 70%-80% of the backend, because the investor got most of their money upfront.

Joe Fairless: Last question on this, and then I wanna talk more high-level… The developer fee that’s paid upfront – is that a percentage of the overall project cost? Or how do you figure that?

Frank Zaccanelli: It’s normally negotiated, but it can be a percentage of the project cost, and ultimately it’s paid out every month, so that the developer can pay their people and can do all the things that they have to do during this period of time where they’re getting the development ready to actually start selling assets.

In the land development world, what you’re normally doing is you’re either selling parcels of land that are now fully developed from a land development standpoint to other developers, or you’re building buildings and then eventually selling those buildings. The developer fee is kind of based on the total dollars that are put into the deal, and you get a percentage of that on a monthly basis that ultimately is part of your compensation as a developer.

Joe Fairless: And then just industry standard, what would be that percentage that would be reasonable? I know it depends on the project, but generally what would be that percentage?

Frank Zaccanelli: In the 2%-3% is probably industry standard. I’ve seen it a little lower, I’ve seen it a little bit higher. Now, this is not to be confused though – because I don’t wanna confuse your listeners – with actually managing money. There are a lot of firms that go out and raise institutional capital and manage money; that is much lower than 2%-3%. We’re talking about project-specific development fees, and normally in the 2%-4% range, that’s right there in terms of what the market would be.

Joe Fairless: You have the connections to invest in, I imagine, any type of real estate: ground-up development, office, retail that currently exists, maybe reposition it… Reposition a warehouse into condos, whatever. The perception that — at least my perception of development is that there’s more risk, but more reward. If that perception is the case – feel free to say “Joe, you’re absolutely wrong” – then why do you choose to do development instead of something that would appear to have your risk mitigated by working on a project that already exists?

Frank Zaccanelli: I think you’ve hit it your first statements on the topic – the returns are much higher if you’re in the development business. I’m not looking for institutional returns of 7%-8%. In the development business we look for 20%+ returns on projects that we invest our money in, and ultimately then build out. 20%, 25%, 30%.

A lot of the Wall-Street firms, quite frankly, are very comfortable in that space of 7%, 8%, 10% returns. “I’m not taking a lot of risk, buying existing cash flow, buying existing assets.” That’s ultimately the buyer for a lot of the properties that I develop, so therefore the real niche that I think that my company has is the ability to understand all of the entitlement-related issues, all of the environmental-related issues, of the engineering, of the architectural… All of the pieces that really are important that ultimately create a development opportunity. Ultimately, that’s really where we find that our expertise lies, better than just buying existing buildings.

Joe Fairless: Clearly, with you being on the development side, you’ve got to stay in tune with the political climate not only locally, but nationwide… And especially if you’re involved in EB5 programs, too. I think that has to continue to be renewed periodically; I’m not too close to it, but I remember reading something about that.

Before we jumped on the call and started recording this, I know that one of the topics that was mentioned to me as something that you have some good insight on is what does Donald Trump in the White House mean for real estate investors, and especially now that we have more context about what you’re doing, it’s clearly very important to you, since you’re on the development side.

In my notes that were sent to me it says that you are an independent, and you’re gonna stay away from saying one or the other, but you’re purely coming at it from an objective real estate investor standpoint… So what are your thoughts on what does it mean to have Donald Trump in the White House for real estate investors?

Frank Zaccanelli: That’s another great question, and I would tell you four, five things about it. Number one – and you mentioned – I don’t come at things in my life or in business from an ideological point of view. I think there’s way too much of that in our system. If you turn on the major cable networks, or you turn on the major news networks, it seems to me that 80%-90% of the commentary is all ideologically based. They’re not really giving viewers the opportunity to get information. That is not where I’m at, and I’ve never been.

I voted for Barack Obama, I voted for Donald Trump, so ultimately I’m all over the board in terms of exactly where I stand with my politics and where I think the country needs to go. Now, I think that Donald Trump – and I like calling him The Donald… He’s The Donald to every real estate guy, right? Ultimately, he’s gonna become the deregulation president. That’s gonna be a major piece of what he does.

In 2008 we had the worst meltdown. I’ve been doing this at a pretty high level for 38 years. In 2008 it was the worst financial and real estate meltdown I ever saw. World markets were melting down, and the whole TARP program that was put into place – I wasn’t a gigantic fan of at the time. Ultimately, TARP came in and really stabilized the marketplace, and I think hindsight being 20/20, which it always is, I think TARP was probably a pretty good idea.

Now, where they individually went in and said, “We’re gonna save one company, not gonna save another” – probably not the greatest idea. But when Barack Obama came in, he put pretty heavy regulations on the banks and Wall-Street in things that they could and could not do. The deregulation president, Donald Trump, is now gonna lift those regulations and open the markets up a little bit more.

What always happens in life and in business  and in politics is that we overcompensate. I believe with the regulations that went into place in 2008, 2009 and 2010, I believe we somewhat overcompensated with the banks. Now, Trump is basically signaling that he’s going to take some of these regulations off, which is gonna open up the money flow from the banks, which I think ultimately is gonna be very important to real estate lending and financing in the United States.

The other point that I’d like to make to you is that when you really take a look at Trump’s policies, they’re all very pro-business. Now again, you can deregulate to a level that doesn’t make sense, so I think we have to really watch now and make sure that we don’t overcompensate the other way, with too much deregulation and not enough coordinating policies that ultimately don’t allow for what happened in 2005, 2006 and 2007 to occur again. So I think it’s a real balancing act.

But if you take a look at the markets and you take a look at the stock market, as long as Donald Trump can get his agenda through Congress, which is still now a question mark – if he can get it through Congress, the markets have taken very kindly to his policies, and ultimately I think the markets will continue to improve if he can get his agenda through Congress.

Joe Fairless: What are you doing in your business right now, knowing what you just said, to either prepare or take advantage of what you see coming?

Frank Zaccanelli: Well, ultimately I think that there’s going to be an increase in interest rates, right? I don’t think that’s a surprise to anyone. We’ve been in this zero interest rate climate for a long time, and inflation has been, for the most part, in check. So ultimately, as interest rates start to go up, which eventually has to happen, inflation will probably go up a little bit, and ultimately if you own some really good hard assets, it’s probably a good time to be an owner of some good, hard assets as inflation may increase the value of those.

I think ultimately anybody who’s been sitting on a lot of cash for the last 10-12 years hasn’t seen very good returns. There really hasn’t been a real marketplace for cash in the non-real estate, non oil and gas, non investing market, just cash in treasury bills or municipal bonds or other things.

I remember in my career buying municipal bonds 20 years ago where the yields were 7%, 8%, 9% tax-free, and ultimately now those yields are 1%-2.5%. So I think that ultimately if the markets continue to grown, and I think there’s some level of inflation – probably not a bad time to own hard assets.

Joe Fairless: I hear that. So with your investments in particular, what are you personally doing?

Frank Zaccanelli: We’re building hard assets to hold and then eventually sell at the right time. Ultimately, this gets back to your question a few minutes ago where you said, “Why are you in the development business?” Well, we’re in the development business because the returns are much better than buying institutional great quality hard assets, because the returns are two to three times if you can buy the ground assets, the land assets properly and you get to write entitlements. The returns are much higher, and ultimately you cash flow them until you decide that you want to sell them.

Joe Fairless: The last thing I’d love to talk to you about, because I’m sure we piqued the Best Ever listeners’ curiosity when I mentioned the redevelopment of 75 acres of environmentally contaminated land that now houses the Mavericks, the Stars and some concerts. Can you tell us a story about that?

Frank Zaccanelli: Yeah, we were looking in 1996… When we bought the Mavericks in May 1996, Ross Perot Jr. and I knew that all of our economics were gonna be tied to our ability to build a new arena. The team had played in Reunion Arena, which was a functional arena that was in downtown Dallas, and they played there since their inception in 1980. But it didn’t have the revenue capabilities of some of the new arenas that were being built, like the United Center in Chicago. That was, in my opinion, the greatest arena that we built at its time in terms of its design, in terms of its maximization of revenues… So we knew that our economics were largely tied into our ability to build an arena.

Well, you wanna talk about a lot of regulation and a lot of politics and a lot of public/private partnership… We went through about a year and a half of that, maybe two years of really identifying how we were gonna do this, what the city’s participation was gonna be… On the West side of downtown along I-35 was probably the least desirable properties, and they had a big power substation; I don’t know if you’ve ever seen one of those, but they’re pretty unsightly. And it was on this piece of property, and it was right along the freeway, and you knew that that was where downtown eventually had to go.

So we went in and we started buying up properties… I think we bought up some 31 different parcels that created the 75 acres of land. We knew that we had an environmental challenge in front of us. If you’re in the development business and you are rushed for time, don’t win environmental awards… Because when you win environmental awards, that means that it’s taken three times longer than anything that you ever thought. But we won every environmental award that there was.

The cleanup, needless to say, was a little bit more significant than what we thought, but ultimately we were able to get through that and we were able to take what I considered to be the worst part of downtown and make it now into what’s called Victory Park. If you went there today and you saw what was built there and what was being built there… People are living there, they’re working there, they’re shopping there, they’re going to games there…

I’m really proud every time that I drive by there that we had the foresight at least to be able to see not what a property was then, but what it could be. That’s the ultimate part of all the development business – what can it be? What can you turn it into? But don’t ever win environmental awards; that means the project’s been delayed.

Joe Fairless: Frank, based on your experience as a real estate investor, what is your best advice ever for other real estate investors.

Frank Zaccanelli: Well, I’ll give you a piece of advice that H. Ross Perot gave me as a really young business guy. I’ll never forget the day I walked into his office, and he looked at me, and he looked at me hard and he said, “Zaccanelli – he always called me by my last name – forget about the return on your capital. Forget about it. I’m more interested in return OF my capital. Once I get my capital back, then we’ll worry about what the return ON my capital is. But I’m worried about the return OF my capital, not return ON my capital.”

I’ll never forget that, because his message really was you need to ultimately be very careful about how you invest your money. Everybody gets so caught up in what their returns are, and his philosophy was “Yes, returns are important. We need to make sure that the returns are there, but we need to make sure that all of our money comes back to us, because we don’t wanna be out there lunging when we’re risking our capital.”

I had another guy tell me another really interesting anecdote. He said, “Always bet the milk from the cow, but don’t bet the cow. Because if you bet the cow, then there’s no more milk. If you lose the cow, you’re out.” I think both of those kind of lend themselves to a philosophy that “Be careful as you take your capital or other people’s capital – be careful about the risk that you take on when you invest.”

Joe Fairless: What is one either underwriting approach, or just your overall… I’m looking for a more granular, tactical thing that you do when you evaluate development deals – or potential deals – where you make sure that your risk is mitigated, so you do have that return OF your capital first and foremost.

Frank Zaccanelli: Well, take all your reports and all the market studies, and everything that everybody does – we do the same thing – and then at the end of the day when it comes down to putting your final numbers together, discount all that about 20-25%. If you can discount those numbers 20-25, even 30% – if you can discount that and the deal still makes sense, then you’ve probably got something that you should do.

So take all your market data, take all the reports that everyone puts out about the office market and the hotel market and the apartment market, and then discount that back, assuming that the market is gonna adjust at some point, and if your numbers still make sense from a return standpoint, then you probably have a good deal.

Joe Fairless: And by “makes sense” does that means it’s safe to assume you’ll get your capital back?

Frank Zaccanelli: Well, capital plus returns. Again, the story that I tell you about Ross Perot – it was nothing more than him telling me that “Look, the most important part in investing is return OF your capital. Once you get your capital back, then your returns are infinite. So get your capital back. Make sure that you’re structuring things…” Because I know a lot of investment companies that structure things and take a lot more risk on for a higher return.

In other words, I could structure certain things that are really 20% deals and make them 30% deals, but my capital takes on a whole [unintelligible [00:38:53].25] of additional risk that is really not necessary.

Ultimately, you invest to make money, and I told you that the targeted returns in the development business are 20%-30%, but ultimately I think the message is structure things so that you make sure that your capital is not greatly at risk. To say your capital is never at risk – it doesn’t work that way. Your capital is always at risk, but take away as much of the risk as you can on the front end.

Joe Fairless: Alright, we’re gonna do a Lightning Round, are you ready for it?

Frank Zaccanelli: Sure.

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

Break: [00:39:32].16] to [00:40:14].09]

Joe Fairless: Alright, Frank, what’s the best ever book you’ve read?

Frank Zaccanelli: The most interesting book that I’ve ever read – and it was probably because of the time that I read it, years and years ago – was Tuesdays With Morrie. That book really hit me… It was done by a guy out of Detroit who was a sports guy – Mitch Albom. Tuesdays With Morrie was a great story about him and his college professor, and life, and business, and relationships.
At the time that I read it, that book really stuck with me. So I would say Tuesdays With Morrie.

Joe Fairless: The best ever personal growth experience and what did you learn from it?

Frank Zaccanelli: Probably the first brokerage deal that I did that didn’t work. Because you learn a hell of a lot more about life when things don’t work. The first deal ever that I thought was going to the title company and was gonna close, all the detail wasn’t done and it wasn’t there, and the deal did not close. So I learned a lot more about that, that went into subsequent deals that did happen… So that was probably the most significant.

Joe Fairless: What’s one specific aspect that you learned, that you then applied to future deals?

Frank Zaccanelli: Expect the unexpected. I think that ultimately the way that you think a deal is gonna go, and the way that you chart it out during your due dilligence process – rarely does it complete itself in that exact matter. So expect the unexpected. Expect the change in the market, expect the problem with your partner, expect a hiccup with the banks… Expect something that ultimately is gonna challenge you as you go through these deals.

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

Frank Zaccanelli: The best ever deal I’ve ever done – probably the deal that we made the most money on over the long haul and the one I’m probably the most proud of is the Alliance Airport. You’re from Fort Worth, Texas…

Joe Fairless: Yup.

Frank Zaccanelli: Alliance Airport is by far the finest industrial airport ever built, not only in the United States, but maybe in the world. We control 22,000 acres of land; you wanna talk about a public/private partnership back in 1986 – George Herbert Walker Bush called it the model for public/private partnership, and ultimately the amount of tax revenue that was generated there, the amount of jobs and all the pieces of that deal I’m probably the proudest of… And I was one of the initial 4-5 guys that really spent 3, 4, 5 years of their life getting that not only approved, but built. So that’s probably the most satisfying deal I’ve ever done.

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

Frank Zaccanelli: Well, I think ultimately you give back every day. You give back by the way that you deal with people… I think ultimately the best way to give back — in order to help somebody else, you have to be doing okay yourself, right? So I think that if you can continue to build your career and you can continue to be successful, you can help more people. So ultimately, I think that’s the gauge… People that unfortunately are struggling in their own careers, in their own life financially probably can’t help as many people as if you were doing much better in your life. I think that’s really the key.

Joe Fairless: What would you say is a mistake you’ve made on a particular deal that you haven’t mentioned already?

Frank Zaccanelli: 20/20 vision is always the best. I think that ultimately the biggest thing that I could tell somebody that’s out there that’s gonna listen to this is that you have to pick your partners wisely. I think the picking of your partners is probably sometimes more important than the picking of your deals. You can have every kind of problem in a partnership, and ultimately I think the mistakes that sometimes are made is that not enough work and due dillligence goes into underwriting your partners and your lenders.

You spend all your time on the deal itself, but I think you need to spend as much time in the underwriting of your partners and your lenders.

Joe Fairless: What are some specific things that you would do during that underwriting or analysis of partners in particular?

Frank Zaccanelli: I just think you have to look into their backgrounds and the stuff that they’ve done, and you have to make sure that your documentation is clear. It gets back to what we talked about 15-20 minutes ago, about “What does a partner really bring to the table?” When a partner decides that they wanna be a co-developer or a co-manager, then you have to make sure that the lines of who’s going to do what are very well defined, because you get yourself in a position that you could butt heads very easily over insignificant things that then can cause even more problems.

I would just say make sure that your documentation is right and make sure that the lines of communication are very clear as you go through these partnership-related issues.

Joe Fairless: And lastly, where can the Best Ever listeners get in touch with you and/or your company?

Frank Zaccanelli: They can go to my website, FiammaPartners.com, and ultimately that’s really where somebody can get a hold of me. Or they can get a hold of me through Berk Communications, which is the company that kind of represents me now in some of the things that I’m doing. Berk Communications is out of New York; they’re a great firm, and I’m working with them to develop some of these other media things that we’re doing.

Joe Fairless: Outstanding. Frank, I’m really grateful that we jumped on a call and had our conversation. We talked about a lot of different stuff, from the EB5 program, raising money overseas, to very granular — I love how you got specific on developer fees, what’s the market do or what’s reasonable, what have you seen, as well as getting into some case studies that you’ve done, from Alliance Airport to the land development projects where the Dallas Mavericks currently play, to the mistakes along the way, and the advice that you received when you were getting started – forget about your return ON your capital, and be more interested in the return OF your capital. I capitalized OF, because I think that’s where the emphasis goes. And the also, always bet the milk from the cow, but never the cow.

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

Frank Zaccanelli: Great to be with you! Thank you for having me.

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


Follow Me:  

Share this:  
Best Ever Real Estate Show Banner

JF952: $50MM In 3 States Using PHYSICIAN’S Money with Thomas Black

He has built a portfolio of multi family complexes funded by physicians on apartment syndications. He even wrote a book on it. I would take extensive notes listening to this interview if you were interested in multi family fundraising and selecting specific properties to purchase.

Best Ever Tweet:

Thomas Black Real Estate Background:

– Co-founder and Managing Partner of Napali Capital; a real estate investment company
– Currently regional director of 8 hospital Emergency Departments and practice clinically few days per month
– Napali Capital, LLC, owns nearly $50 million in multifamily real estate in Texas, Oklahoma and Wisconsin.
– Former Navy veteran, turned physician, turned real estate investor
– Based in Dallas, Texas
– Say hi to him at www.freedomintheblack.com
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

Check out his new podcast at https://soundcloud.com/financialfreedomer


Made Possible Because of Our Best Ever Sponsors:

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

Go to adwordsnerds.com/joe to schedule the appointment.


real estate investing physicians


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. We’ve spoken to Barbara Corcoran from Shark Tank, Robert Kiyosaki (Rich Dad, Poor Dad), and a whole bunch of others.

With us today, Tom Black. How are you doing, Tom?

Tom Black: Great, Joe. How are you doing today?

Joe Fairless: I’m doing well, nice to have you on the show. Tom, first and foremost – he’s a former navy vet turned physician, turned real estate investor, so thank you for your service in the navy, my friend!

Tom Black: Thank you so much! It was great!

Joe Fairless: In addition to the navy, as I mentioned, he is a former physician and a real estate investor. He currently is a regional director of eight hospital emergency departments, and I guess you’re currently a physician too, practicist.

Tom Black: I currently am. I’m practicing maybe one day a week or so, just to keep my finger on the pulse with things, should I say…

Joe Fairless: Sweet! In addition to that, more relevant to our conversation, he is the co-founder and managing partner of Napali Capital, a real estate investment company. His company owns nearly 50 million dollars in multifamily real estate across three states – Texas, Oklahoma and Wisconsin. Based in my hometown, Dallas, Texas. With that being said, Tom, do you wanna give the Best Ever listeners a little bit more about your background?

Tom Black: Sure thing. I got involved in real estate about seven years ago now; I was finishing up my medical training at the wonderful Indiana University, and was really hitting a time where the market, as you know, wasn’t doing so hot around the 2008-2009 period. I decided to rent my house up there instead and we moved down to the Texas area, and just rented out a residence. That really gave me insight to a depreciation, which is something that a lot of physicians don’t know about and/or don’t have, just because of the nature of our business and not having any assets to use.

I got into practice at [unintelligible [00:03:58].16] Texas. I designed and developed and built from the ground up a small apartment complex and did very well on it. I 1031 that into some commercial properties, and just completely got enamored by it and what it could do for physicians and other high net worth individuals, translating from a high income to a high net worth, which has been career-saving for me. The emergency department and other physicians in general tend to have pretty high stress careers, and there’s a longevity to that – you can only do it so long.

So I moved to the Dallas area and started doing some syndications, mainly with physicians and my brother, who is the former chief operating officer of Great Wolf Lodge, which is an indoor waterpark community and hotelier. Since then, it’s just been going off to the races, and I just finished a book, in fact, entitled The Passive Income Physician: Surviving a Career Crisis by Expanding Net Worth. It’s basically about my background from the navy, up into medicine, and then translating that and having a heck of a fun time doing it.

Joe Fairless: You designed and built a small apartment complex – can you elaborate and tell us the details about that?

Tom Black: Sure. In Longview, not a lot of economic pressure as far as big box places; a lot of local economic impact, and I found a three-acre plot that was on foreclosure through a bank, and I decided to jump in. I had read enough about real estate and I had owned numerous single-family homes that we bought as foreclosures and were using them as rentals, so I partnered up with a local custom homebuilder that had been building custom homes for about 20 years.

I started designing and doing the utilities – of course, that goes hand-in-hand with rezoning, which is not something that I would ever wish on my worst enemy, but learned a lot about the process. We took this thing from a pile of dirt up into just under 20 units; it took us about a year and a half, and then I was fortunate to sell it at a time where oil was starting to decline a number of years ago.

Joe Fairless: Okay. How much did you buy the land for and what were your all-in costs, in addition to the land?

Tom Black: The all-in land cost was only $35,000, and I bet somebody will probably out there dropping their jaws, but it is East Texas, for a couple acres, and it actually had a pipeline run through it. East Texas is of course known for a lot of oil, so there’s a lot of issues with engineering that need to go around that, and variances and things. We had to specifically design the apartment complex so that we could get around these pipelines.

All-in cost was just about a million dollars or so, right around there. With fees I think we ended up at about 1.2, and ended up selling for just under 1.9 million 18 months later.

Joe Fairless: That’s great. What type of financing did you get in order to build it?

Tom Black: On this, oddly enough, I didn’t know enough about multi-family, and built the units probably a little larger, looking back, than I should have, and used some really nice interiors of cedar, granite and stainless shell appliances. This was all done as a recourse note, on my back. Of course, now getting to educate physicians, it’s one of the paramount things that I discuss – recourse vs. non-recourse financing. At that time I didn’t really understand what that meant. For those that do know, the non-recourse with larger assets, you’re not limited having any financial liability unless there’s certain clauses that are met. That was all done as a banknote on my cheat.

Joe Fairless: With that exit, you 1031-ed it into what?

Tom Black: Light industrial properties near that area, that are all triple net leased to oilfield service companies. So we’ve managed to do very well on those; they’re anywhere from 5,000 to 20,000 square feet. We ended up building those as well, and have gone very well for the last three years; despite the decline in oil, oilfield service companies still have to operate, and there’s still a certain amount of measuring and calculations and other things that need to be done on existing oilheads.

So we did that, and we used that money then as I broke off and moved to the Dallas-Fort Worth area and fit the existing position I’m at, managing a physician group, and then in turn really focusing a lot on physician wellness and more passive income and professionals and people that may not know the absolute joy it could be to depreciate a large asset, at the same time creating passive income for yourself.

Joe Fairless: So with that 1031 you went into light industrial properties that were triple net lease and you built those from the ground up…?

Tom Black: One was a purchased existing, and what we did was a leasehold improvement on it for several hundred thousand dollars, because the tenant existing wanted some more office space. So we bought that building and that satisfied the 1031 requirement.

The other one we got was essentially a shell. So the land, the building had been developed, we just did not have a tenant in there, so it was kind of a building we built on spec, and luckily, a month after we signed the contract, we had a national oilfield service company out of Utah came in and started leasing that.

Joe Fairless: How did you attract the company that ended up leasing it?

Tom Black: Relationships. That’s the cornerstone of this multifamily and real estate… The gentleman that owned and developed the industrial park actually had relationships with a lot of places all over. He had had some people that already finished their business plan on a couple of these commercial buildings, so he offered them to me. It was just a gentleman in the community, and it’s a very small community, so I was fortunate to have made those relationships early on.

Joe Fairless: And you have a toehold in Longview, Texas, East Texas, and I have some friends who are from there, and I love hearing them talk; they have a different accent from a typical Texas accent… Why not focus on that market, albeit smaller, but you could dominate that market, versus going in larger markets?

Tom Black: At the time I built this area… That’s very possible, it’s just that there’s a decent amount of people that are doing a lot of different land plays and things like that, and of course oil and gas is very big there. The issue – it’s really only a town of 80,000, with traffic counts maybe to 110,000 during the day. So what happened is I had this great idea that I was gonna build something very nice, because there was no existing multi-family there that was available for rentals when I actually moved there. The last property had been built maybe in the early ’90s; still a class A, but really wasn’t up to par. There were consistently 99% waiting list.

What happens, when we started designing this complex, two major companies came in and put in about 800 units, and they grow in part of the community. The first one did very well, and leased out very quickly, as well as the majority of the second, but that pretty much absorbed all of those folks that would have been looking for nice places, which is where we built.

So at this point, there’s just no jobs for that class of folks and people are leaving that area, and it’s really tough to make that work.

Joe Fairless: On the 20-unit that you built from the ground up, why build from the ground up versus buy an existing property?

Tom Black: Well, really at first it was to satisfy my goals of creating housing that was something that I would wanna live in, which was probably my first mistake. The units were anywhere from a 1,000-1,300 square feet, almost like homes inside, so that was really the first thing… And I didn’t see anything out there in the community. It was kind of a private ownership at that time, whereas now I’m focused on my investors, my returns, while at the same time still doing a quality product in private ownership. But at that time I was very fixated on those classes only, and kind of had some blinders at point.

Joe Fairless: Okay, makes sense. And what year are we in when you moved to Dallas and you’re done with the Longview stuff?

Tom Black: I finished the Longview property about 2012, right around there… Actually 2013 we sold, and I moved to the DFW area in July 2014.

Joe Fairless: 2014, and now you have 50 million in multifamily real estate in Texas, Oklahoma and Wisconsin… What’s the largest property in terms of units and where is it?

Tom Black: We have 305 units on the North part of Arlington. We bought that in December 2014, and it has been — as you know, the DFW area is very hot right now, and there’s a lot of infrastructure and a lot of influx of jobs etc., so we’ve done very well on the property. That’s our largest asset right now – 305.

Joe Fairless: And how many total units? Roughly, if you don’t know off the top of your head, just so I get an idea…

Tom Black: Just including multifamily, we’re probably sitting at just over 900.

Joe Fairless: So you’ve got a third of them in that one property in Arlington, but you’re also in Oklahoma and Wisconsin… Why choose to branch out to those two states?

Tom Black: We had, as you know, underwritten a lot of different areas and looking for where we could find value, and we were fortunate to go into the Tulsa market and find two properties that were owned and had fallen in disrepair, and really it came down to a management issue. Since then, we’ve taken over the properties and rehabbed both of them and we’ve done very well.

The Tulsa market, of course, is not as robust as the DFW market, but we’re still seeing great and strong returns. Looking at those other markets – such a strong underwriting, number one, and I think a very long underwriting period, so that we can essentially do a yield play. The loans – of course, they’re Freddie Mac loans, but they are 10-12 years, so we can underwrite for a long period just in case the situation changes.

Joe Fairless: With your Tulsa two properties that were in disrepair and there was a management issue – I think I know the answer… I think you’re gonna say “relationships”, but how did you hear about those two properties?

Tom Black: Exactly that – it was relationships! [laughter] One of them was being managed out of a company in Utah, and they had gone in and they’d done some great things with the property, but they just didn’t finish their business plan.

The other was another syndication of a gentleman in Texas; he didn’t put a dollar into that property, and just did some very one-off things… They hadn’t done a distribution to any of their investors in a number of I think two years, and they had just maybe over-analyzed the property where they couldn’t put back in the cash flow that they needed to to make the property really shine… And that’s where the key is – being able to have enough capital to go in and to do what you can and execute the returns that you need to.

Joe Fairless: As far as how you got in touch with those separate groups – was there a broker, or did you know those two groups personally and you did it off-market?

Tom Black: Yeah, it was one single broker, off-market. Tulsa is a funny market like that, there’s not as much competition brokerages. DFW probably has a lot of different brokers, but only five did the majority – kind of the 80/20 rule – whereas in Tulsa it’s very few times that the property is even listed, so they don’t go to best and finals or have [unintelligible [00:14:11].09]

Joe Fairless: Was it First Commercial?

Tom Black: No, actually it wasn’t. Right now I would love to be giving them a plug, and I cannot see their company name in front of me right now. [laughter]

Joe Fairless: That’s fine… I only know one group in Tulsa, it’s First Commercial. So it was basically a pocket listing where the broker had a relationship with you, and they had these two owners who were looking to sell, and the broker went to you because they knew you would close, and you made it happen. Okay, cool.

And Wisconsin… You’re in Dallas, you went to school in Indiana – Tulsa makes sense, but Wisconsin?

Tom Black: My brother, Tim – Tim and Tom, of course – who was the chief operations officer at Great Wolf… Great Wolf was actually headquartered in Wisconsin. Around that area of the university, he lives probably 20 minutes from there, so we have a couple of multifamily areas around there, too. He heads those up, and I try not to fly anywhere near Wisconsin unless it is July, August…

Joe Fairless: [laughs] How many units do you have in Wisconsin, and what city are they in?

Tom Black: They’re all in Madison, and probably only just less than 30, I believe.

Joe Fairless: Okay, and are they student rentals?

Tom Black: No, actually they’re not. There’s a 16-plex, and I believe a bunch of quadplexes that are nice, and they’re actually not student rentals.

Joe Fairless: How do you manage those 30 units, since they’re so far away?

Tom Black: That would be Tim. We’ve got a professional management company up there also.

Joe Fairless: Okay, just a third-party.

Tom Black: Yeah, right. I let him set his boots on the ground right there, and he’s able to manage all that; I try to not get involved with that as much as possible. They’re good friendvestors.

Joe Fairless: Okay. But it’s a third-party management company that he oversees. So you’ve got the 305 in North Arlington, you bought them in 2014 – what’s your business plan with those? You’ve had it for over three years, what’s the progress on that business plan?

Tom Black: I misspoke, I made a mistake – it was actually 2015. We’re 18 months into the process. Our business plan originally – 3-5 years execution plan on that. We started with the concept that 1) all the rentals were about $50 under for comps in the area, as well as they weren’t doing any kind of utility billback or RUBS. We’ve been able to recapture the grossly month from 170,000 collections, and this month we actually just hit our record of $217,000.

Joe Fairless: Great job!

Tom Black: Thank you. So we’ve taken that property up just in value by [unintelligible [00:16:40].16] approximately 5 million dollars in 18 months. We’ve been very happy with that.

Joe Fairless: Great, so from 170k to 217k in collections. How much did you buy it for?

Tom Black: Right under 13, I think we were at 12.8.

Joe Fairless: Thirteen million…

Tom Black: If you look at [unintelligible [00:16:56].13] using the same cap as we bought, we’re right at 17.1 million.

Joe Fairless: And I’m sure that cap is actually lower than when you bought, at this point…

Tom Black: [unintelligible [00:17:04].00] and I like to try and look at it realistically, and I think we look at about seven and a half. Although in net R, [unintelligible [00:17:11].02] it’s probably not unrealistic you get a seven cap or so.

Joe Fairless: Yeah, I agree. The way that you said you do a 3-5 year business plan – did that mean that you’re planning on exiting in 3-5 years?

Tom Black: Right. As soon as we hit those returns we had estimated – I know the first year we paid out our investors roughly 13.1% cash-on-cash; I think our business plan calls for a little bit more than that this year. When we typically hit around 100% return – which right now we’re in year three of that proforma – then we will try and execute, whether we look at it, go to the investors and say “Hey, we wanna do a supplemental here, that way we can get tax-free money out and then we’ll continue to cash-flow the property… Or do we sell the property outright or do we just continue to use the cash flow?”

At that point, I imagine at the 36 months, if the market is favorable – and certainly in Dallas I think it will be – then we look at it, because I think one of the keys is being able to sell it to somebody else and allow them to create some value there and continue on to improve the property and drive revenue.

Joe Fairless: I should have asked this, because this is a relevant question if you’ve increased value five million – how much did you put into it to increase it that five million?

Tom Black: We put about 600k in CapEx. Not too horrible. We’re still executing some of the smaller little details, but the major items have already been done – a caged soccer field, which for that community has been fantastic. We did a lot of repair, and really where it came down to was management customer service.

Joe Fairless: That is incredible. It’s less than $2,000/unit, and you have increased the value – five million dollars, according to your projections. I suspect you haven’t done interior renovations on unit turns.

Tom Black: Very few. We’ve done a little bit… We normally budget about $2,500/unit, and that’s where we went with this, for the 305. There wasn’t much to get caught up on as far as structural, or any kind of deferred maintenance.  We have some roof issues, but the unique thing about this property was that, like all areas around that Arlington location, all the units had tile already, and they were actually Sarana tile, so that saved a good amount of money. We do go in and when we’re turning the unit put in brushed nickel fixtures; the upstairs tends to get some faux wood vinyl floors, and we get two-inch blinds, and add a more palatable color scheme.

Really there wasn’t a whole lot that needed to be done to the units. We’ve been really fortunate.

Joe Fairless: Based on your experience as an investor who has bought triple net lease buildings and done ground-up development, now focused on multifamily syndication, what is your best real estate investing advice ever?

Tom Black: To no be afraid not to jump in. Fear will hold you back. All those years ago when I bought that land in Longview, I got seriously crazy looks not only from my family, from my wife, from other physicians… Something in me told me it was the right thing to do. Don’t let fear be a detractor from being able to jump in, even if at a small point. It will pay off dividends.

Joe Fairless: When you talk to, let’s say, your wife… And you’re talking about going into real estate more heavily than, say, renting out your residence when you were in Indiana – what are the talking points? And I ask this not because I’m interested in your relationship with your wife and the conversation, but for Best Ever listeners who need to have those crucial conversations with their significant others, how would you recommend it based on your personal experience?

Tom Black: It’s been a total team approach. We have four young children, so a lot of her job is obviously taking care of them… But she’s been super passive during the whole thing, she’s been fantastic. One of the things I did – because I’m a physician, of course, and for those listeners out there that don’t know, there’s certain requirements by the IRS to be considered a real estate professional; you have to spend at least 750 hours involved in that to be able to take those depreciations.

For me, of course, as a physician, I was not gonna qualify for that, so my wife actually went and got her Texas real estate license, which automatically qualifies her as a real estate professional, thus giving us the ability to depreciate a good amount of our taxable income, which has been very favorable. When she gets the ability to do that and she sees the dollar signs, then it’s a win/win, really.

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

Tom Black: Okay, let’s do this!

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

Break: [00:21:27].03] to [00:22:09].27]

Joe Fairless: Best ever book you’ve read?

Tom Black: Best ever book… Robert Kiyosaki, Rich Dad, Poor Dad, I would say. It changed my life.

Joe Fairless: Best ever personal growth experience and what did you learn from it?

Tom Black: It was in the navy. I had an appointment to the naval academy, and did something really stupid as a young, 18-year-old guy, and got that removed. I learned to never give up just because you’re down. There’s a lot of other roads that you can take that are just as profitable – if not better – for you in the long run.

Joe Fairless: Best ever deal you’ve done?

Tom Black: I would say the Arlington deal right now is just smokin’.

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

Tom Black: Volunteering as a physician is a big one. And as Napali Capital grows, we have some plans to contribute around to the community, and that’s something that I cannot wait to do – financially contribute.

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

Tom Black: Don’t ever buy a piece of land and assume you can rezone it. That is a big mistake. Understanding zoning is very good. I bought a piece of land inn Kilgore, Texas one time, and I wanted to rezone a single-family over to a multi-family and build some very nice, small, little condos. The homeowners association that was adjacent to it absolutely went crazy, and I found myself in the newspaper and at town hall meetings being yelled at. I will never rezone any other — needless to say, I lost that battle, after numerous tries.

Joe Fairless: What were they saying in the newspaper?

Tom Black: Oh my god… It was “Evil doctor from next door [unintelligible [00:23:34].21] wants to put in rentals with druggies…” Everything that I was not planning on doing, they accused me of doing. In fact, there was condos or town homes right across the street that were rentals, and as you may know, they have to put out messages to the surrounding area of 200 feet. So they had people that were renters coming to these town hall meetings and accusing me of doing something that they were already doing. [laughter]

It made no sense, and town hall meetings are not something I’ll ever do. That’s why we have attorneys.

Joe Fairless: I don’t think you’re gonna be getting into ground-up development either…

Tom Black: It’s not gonna happen. I will willfully partner and be an equity component to that, but otherwise no. If you’re gonna develop, start on the ABCs of rezoning and knowing what you’re doing.

Joe Fairless: I don’t want any part of development at all, because of that. It’s funny, because you said earlier the type of finishes that you put into the 20-unit – it sounds like you went a little over and above what you should have, with granite… So they were actually way off base, because you were probably gonna put in stainless steel appliances into this…

Tom Black: Oh, it was over the top… These were nicer than a lot of my apartments; I could have said when I was in the navy… Heck no! I lived in some places that are B class. [laughs] Now, yeah… I did that; I probably could have gotten in about 400-500 units and really driven in [unintelligible [00:25:02].12] if I really would have understood that. But I was building that based on what I projected the rents to be, and from a meager percentage of increase as far as what we knew we could sell it for.

I was not sophisticated enough to even know what a cap rate was. Lucky, but that’s the schools of hard knocks. It was a great, great learning experience.

Joe Fairless: Yeah, you wouldn’t be here if you didn’t go through that. We have a lot of multifamily investors who listen to this show… What’s one learning experience or one thing you would do differently when given an opportunity, when it’s presented to you next time on maybe your 305 units, or the Tulsa deals? Just one little operational nugget.

Tom Black: Operational – less so. I would say relationships again. I know we keep harping on that, but make sure that if you’re getting involved with somebody, or you’re doing the investing, just know who you’re getting in bed with, because it’s very, very important. Vet them out thoroughly; sometimes personalities conflict.

Operationally – I would just say have a very strong operations team in place and know your third-party management and really understand what a P&L is and how it operates, so that you can take full advantage of your asset and being able to turn the highest priority in the interest you wanna bare.

Joe Fairless: Do you have a particular program or software that you use to vet people out?

Tom Black: You mean as far as investors?

Joe Fairless: Well, you said “Pick your partners wisely”, so I’m wondering if you have a certain process you use.

Tom Black: No, we’ve honed it after trial and error; we learned some really big lessons and we’ve ended up with a core that’s really important. Because once you develop your team – it’s all about the team. Investing is not just for you to go out there — as a single person it’s very difficult. Make sure you have a team around you to do it properly, because not doing so, having the correct attorney that understands what they’re doing… If you’re doing some syndications or investing with a syndicator, [unintelligible [00:26:54].00] track record, as well as CPAs, things like that.

Joe Fairless: Thinking back to a team member who now today you’re like, “Oh, man… No way, not on my team again”, but they were originally on your team in some capacity, what would you look for now, that you didn’t look for then?

Tom Black: I’d look for somebody who operationally complemented, who had a very good insight maybe into a part that I was weak in if it’s in operations, or maybe if it’s an analytics part – somebody that is able to go in and garner those sides that maybe I didn’t have a strong hold on… And understanding that. Because at the end of the day, when we’re sitting around the table, having a consenting voice is always a very good thing, albeit in the right manner. Now, somebody that’s abrasive, that destroys relationships – that’s not gonna work.

When you’re dealing with brokers, or even investors, you have a very serious obligation to do what’s best for them first. Not the brokers, the investors. [laughter]

Tom Black: Brokers will be fine! They’re looking after their own interest, so… [laughter]

Joe Fairless: They always land on their feet.

Tom Black: Right, they will. They’ll be doing fine.

Joe Fairless: Well, Tom, I really enjoyed our conversation. Where can the Best Ever listeners get in touch with you?

Tom Black: The easiest – I have a blog called FreedomInTheBlack.com, as well as www.napalicap.com. The book actually just came out on 1st March on Amazon. It’s called The Passive Income Physician: Surviving a Career Crisis by Expanding Net Worth. If you just google my name, Thomas Black MD, it will indeed pop up.

Joe Fairless: Outstanding. Congratulations on the recent book launch, and congrats on your transition and multitasking abilities, as well as surviving the ground-up development and doing well on the first one, and learning your lesson on the rezoning stuff in (I think you said) Kilgore… And getting in the newspaper and all that stuff, as well as, most important, the macro level – the properties that your company has: 50 million dollars in assets under management, the 305-unit in Arlington, as well as the other couple large properties in Tulsa.

Interesting stuff, especially the lessons learned along the way – team members, and underwriting, and how you approach relationships. I’m grateful we had a conversation.

I hope you have a best ever day, and we’ll talk to you soon.

Tom Black: Thank you so much, Joe! I appreciate all your time.

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


Follow Me:  

Share this:  
Joe Fairless's real estate podcast

JF930: Recession-Proof? Why You MUST Diversify Your Assets

His father lost much of his net worth during the last crash, so our guest made sure he died versified his real estate portfolio. Hear what he believes to be the best way to invest even when you are starting out!

Best Ever Tweet:

Mark Allen Real Estate Background:

– Broker at SVN Investment Sales Group and real estate investor
– Began real estate in 2009 as a cadet at the United States Military Academy at West Point
– Focuses on Single Family Rental Portfolios around the country and Multifamily (50+ units) in TX/OK
– Served in the US Army as a Field Artillery Officer where he led troops in Operation Enduring Freedom – Afghanistan
– Based in Dallas, Texas
– Say hi to him at http://www.svn-isg.com
– Best Ever Book: Never Eat Alone

Made Possible Because of Our Best Ever Sponsors:

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

Go to adwordsnerds.com/joe to schedule the appointment.

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


Follow Me:  

Share this:  
Joe Fairless's real estate podcast

JF901: SECRETS of Wholesaling/ASSIGNMENTS and a DEAL BREAKDOWN #SkillSetSunday

A breakdown of all you need to know about assignments and wholesaling is the missing piece to your real estate puzzle. Our guest will take you step-by-step on how he gets it done and how you should do it to make it smooth and fair for all parties. This is when you cannot miss!

Assignment Contract: http://bit.ly/2lwrLT6

Best Ever Tweet:

Jimmy Reed Real Estate Background:

– Founder of 1REClub.com
– A DFW Real Estate Club in Fort Worth, Texas
– He started out wholesaling to local Investors in Fort Worth, TX
– 29 years experience in buying and selling real estate
– Based in Fort Worth, Texas
– Say hi to him at: http://www.jimmyreed.net

Made Possible Because of Our Best Ever Sponsors:

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

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

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


Follow Me:  

Share this:  
real estate pro advice

JF884: How He Grabbed a 38 Unit Apartment Complex UNDER CONTRACT!

The due diligence period is on! One of the biggest struggles for our guest is not having comparable financials for this purchase. You know has to rely on the land value, potential rent, and repositioning. He’s doing his best to mitigate his risk right now before he has to close, hear what he’s up to!

Best Ever Tweet:

Chris Gill Real Estate Background:

–  Owner of CGre Ltd. Company
–  Launched #DeconstructingTheHomeShow, an inside look at running a successful real estate development company
–  Been investing for 2.5 years, starting with just $15,000 of capital to a business that owns $500,000 of assets
–  Has an achieved R.O.I. of over 3,000%
–  Based in San Antonio, Texas
–  Say hi to him at www.chrisfgill.com
–  Best Ever Book: Books about Biographies

Made Possible Because of Our Best Ever Sponsors:

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

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

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


Follow Me:  

Share this:  
real estate pro advice

JF882: Real Life MONOPOLY and Leaving 2 Part Time Jobs

He started with the triplex by living in one unit and renting out the other two. He states that he’s turning his little green houses into the big red motels figuratively speaking, and has secured many loans to purchase a total of 26 rental units, this guy’s on fire!

Best Ever Tweet:

Eric Bowlin Real Estate Background:

– Real Estate Investor & Founder of IdealREI.com
– Started investing in multifamily (2-5 unit) in 2009 and has accumulated a total of 26 units since then
– Moved to Dallas in 2015 and quit working at age of 30 in 2016, and now lives off of residual income
– Goal is to transition to larger multifamily (60+ units) in 2017
– Based in Dallas/Fort Worth, Texas
– Say hi to him at https://idealrei.com/
 Best Ever Book: Psychology of Selling by Brian Tracey

Made Possible Because of Our Best Ever Sponsors:

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

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

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


Follow Me:  

Share this:  
real estate pro advice

JF880: How to Create an REI System and LEAVE Your Full-Time Job #SkillSetSunday

He left his full-time job by purchasing rental properties and light fix and flip. He slowly gained the confidence to set up shop all on his own and hiring out many of the pieces that were necessary. Hear how he did it and what he is doing out to grow.

Best Ever Tweet:

Devin Elder Real Estate Background:

– ‎Managing Partner at DJE Texas Management Group LLC
– Multifamily owner and partner in a number of Multifamily projects
– Done over 50 deals since 2012
– Currently purchasing 2-5 single family projects per month to flip, rent, and wholesale
– Based in San Antonio, Texas
– Say hi to him at http://www.devinelder.com/
– Best Ever Book: Think and Grow Rich by Napolean Hill

Made Possible Because of Our Best Ever Sponsors:

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

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

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


Follow Me:  

Share this:  
real estate pro advice

JF863: How to Find $50,000 at the Last Second to Close a Deal

After raising $450,000 our guest was $50,000 shy of a purchase on a property. After having many people committed, he found creative ways to utilize their cash and still make the deal happen, hear how he did it!

Best Ever Tweet:

Nick Yarnall Real Estate Background:

– Principal at Old Three Hundred Capital, LLC; a real estate private equity firm
– Specializes in Multifamily, SFR, Land
– Acquisitions & Development
– Formerly a real estate agent for New York City’s largest residential brokerage
– Graduated with a BA in economics from Rollins College
– Based in Austin, Texas
– Say hi to him at http://www.othcapital.com/
– Best Ever Book: The Big Short

Made Possible Because of Our Best Ever Sponsors:

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

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


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

Follow Me:  

Share this:  
real estate pro advice

JF854: He Increased Rents by ~$700 and Retained the Tenants!

Not a customary purchase, he bought a duplex in North Austin which is an up-and-coming area and decided to charge market rent. Apparently the previous owner didn’t charge market rent, so he evened the playing field yet retained his tenants.

Best Ever Tweet:

Tim Landy Real Estate Background:

– Real Estate Advisor & Investor at Twelve Rivers Realty
– Represents investors from single family, multifamily and development
– Runs an investment company that focuses on rentals and syndication
– Helped raise $150,000 in charitable donations for the LLS
– Graduated Cum Laude from Saint Louis University
– Based in Austin, Texas
– Say hi to him at www.twelveriversrealty.com
– Best Ever Book: Think and Grow Rich by Napolean Hill

Made Possible Because of Our Best Ever Sponsors:

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

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


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

Follow Me:  

Share this:  
real estate pro advice

JF853: Only 4 Criteria Matter to this Lender in Getting You Funded

She had personally funded over $56 MM in 140 loans since she began. She helps people get into rehabs and get the deal closed, hear about her four criteria she is most concerned about before getting the deal done.

Best Ever Tweet:

Kelly Smith Real Estate Background:

– Account Manager for Streamline Funding, a hard money lender
– Provide rehab and new construction financing
– Has funded over 140 loans and over $56.5M since her time with Streamline
– Over 15 years of real estate investment experience
– Based in Austin, Texas
– Say hi to him at http://streamlinefunding.com
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

Made Possible Because of Our Best Ever Sponsors:

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

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


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

Follow Me:  

Share this:  
real estate pro advice

JF848: Wholesaling with NONE of Your Own Money

Wholesaling can be a daunting task, but honestly it all has to do with your eagerness to learn and the network that surrounds you. Today’s guest surrounded himself by people who knew the business and he applied all the principles they taught him. Hear about how he doesn’t use any of his own money wholesaling.

Best Ever Tweet:

Josiah Rosebury Real Estate Background:

– Partner at Walding & Rosebury Holdings, a full service real estate company
– Owner of JKR Investors, LLC which is a wholesale and rehabbing investing company
– Consultant of business development with commercial and residential roofing
– Based in Ft. Worth, Texas
– Say hi to him at www.jkrinvestors.com
– Best Ever Book: Rich Dad, Poor Dad by Robert Kiyosaki

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

Made Possible Because of Our Best Ever Sponsors:

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

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


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

Follow Me: