JF2748: Success in Multifamily: Tips for Partnerships, Investor Pitches, and Finding Deals ft. Ace Karimi

Ace Karimi, co-founder of Invest Capital, began his real estate journey with his business partner focusing on single family wholesale and flipping. Together, they scaled into multifamily and now are GPs of 238 units. Ace shares how his partnership thrives, the ins and outs of the first multifamily deal he closed, and his tips for pitching to investors and finding deals.

Ace Karimi | Real Estate Background

Click here to know more about our sponsors:

Deal Maker Mentoring





Follow Up Boss



Ash Patel: Hello Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Ace Karimi. Ace is joining us from the DC Metro Area. He is the co-founder of Invest Capital, a multifamily acquisition business. Ace’s portfolio consists of being a GP on 238 units. Ace, thank you for joining us and how are you today?

Ace Karimi: I’m doing great, Ash. Thank you for having me.

Ash Patel: It’s our pleasure, Ace. Before we get started, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Ace Karimi: Absolutely. First off, thank you guys for having me here. My name is Ace Karimi. I’m a 27-year-old real estate investor based out of Washington DC. Our company, Invest Capital, currently manages and owns almost 240 units. I think 238, to give you the precise amount, Ash, and we’re constantly acquiring and growing more. We went full-time into multifamily about two years ago, started out in the single-family space back in 2018. We started initially doing wholesaling and flipping real estate; that’s essentially how you make money in the single-family space – you get it at a good price, you add the value to it, you renovate it, then you sell on a back-end. It’s still an operation I have going on, I love it. That’s an operation I only do here in the DC metro area, just because it’s local, and I have on my contractors and connects out here. It’s good for short-term money; that’s one of the theme series, it’s short-term and long-term money, that I’d love to talk about later on. I think if you want to be a very successful real estate investor, have both; you don’t need to have one or the other. I feel like too many people are all short-term and no long-term, or all long-term and no short-term. I think it’s good to have both, so that you can still live while you’re going to get wealthy over time. So that’s our approach here with Invest Capital. We want to make sure that the people who invest with us, they’re still getting the returns month in, month out, and at the same time, they have massive upside in the appreciation and the principal pay down, and then just the values of the property themselves. So that’s where we’re at now, full-time multifamily investors. We’re looking to grow and we’re here to answer any questions to give more people value in what we’re doing.

Ash Patel: Ace, when you were doing the wholesaling and flipping of single-family houses, was it just you or did you have a team or a partner rather?

Ace Karimi: My partner Akam and I started both businesses together, we’re 50/50 partners. Initially, it was just me and him going out hunting for deals, going on acquisitions appointments, putting properties under contract. Within a few months, after closing a few deals, we were able to create our own office space and hire acquisitions people, we hired dispositions, transactions… We had a team of about 10 people back in 2018.

Ash Patel: Did either of you have real estate experience before you partnered up?

Ace Karimi: No.

Ash Patel: Okay, so the two of you together decided, “Hey, let’s do this thing. Let’s figure it out.”

Ace Karimi: Pretty much.

Ash Patel: Okay. You’ve been partners now for about five years?

Ace Karimi: Exactly.

Ash Patel: Alright. What are the challenges with having a partner?

Ace Karimi: It’s a good question, Ash. You’ve got to make sure you’re on the same page, for one, because it all goes back to making sure you’re both hitting the same goal from both of your angles as possible. For us specifically, because we do have a lot of similarities together, it’s making sure that we’re not doing the exact same things all the time, and  to make sure we have divided responsibilities. I love closing deals and he loves closing deals, which is something we share in common. And I love raising the capital and he loves raising the capital, too. But beyond that, it’s actually the day-to-day, week-in week-out to do stuff that we need to execute on, making sure that we’re both crystal clear and not stepping on each other’s toes, and really simultaneously moving towards the same vision together.

Ash Patel: It sounds like you guys are both visionaries.

Ace Karimi: You could say that.

Ash Patel: Do you have struggles when it comes to execution?

Ace Karimi: Not really.

Ash Patel: You’re not going to admit that you have struggles, but did you have struggles in the beginning? Because you guys seem like you want to interact, and do the high-level deals, do the lunches, the investor meetings, but you don’t appear to be the type of people that love sitting behind a computer, getting into the trenches, doing financials, paying bills, getting quotes, and that kind of stuff.

Ace Karimi: What I was trying to say there, Ash, is with the vision stuff, we don’t. We’re very clear in the big picture stuff and where we’re trying to go. The challenge is definitely the execution, for sure; that’s why I’m making sure that we’re still able to get things done. Because it’s not our strongest suit to do the actual day-to-day activities. Essentially, being an entrepreneur and even a syndicator, you’re able to get other people who are even better at what you lack to help complement your strengths. So essentially, with us and what we’re doing right now is we have a team that’s doing the day-to-day stuff. That’s probably not the things that we’re the most excited about, nor are we the best at, but we understand what needs to get done, and they implement it, and they do the week-in, week-out activities. It definitely is a challenge, I’m not going to lie, but it’s good to have people around you.

Ash Patel: Ace, who was your first hire, what position?

Ace Karimi: Acquisitions.

Ash Patel: Let’s keep going down the line. What was your next hire?

Ace Karimi: It was an assistant; essentially, admin/assistant.

Ash Patel: Is that shared between the two of you?

Ace Karimi: Yeah, pretty much.

Ash Patel: And that’s a game-changer, isn’t it?

Ace Karimi: It helps a lot to take a lot of the menial tasks out of the way, for sure.

Ash Patel: Is this person virtual or in-person?

Ace Karimi: Virtual.

Ash Patel: Okay, what challenges do you have to overcome, versus having somebody that’s in-person next to you?

Ace Karimi: Well, the thing is, you just got to make sure you communicate very clearly with them, because they’re not right next to you. So make sure your instructions are very organized and step by step. That’s one of the things that we really have to pay attention to, is making sure that the instructions you put in the Google doc lines up with the video that you shot, and what you’re giving them on a week-in, week-out basis… Because they’re just going to follow what’s written, usually.

Ash Patel: Awesome. Ace, can you take us through your multifamily acquisitions? When you guys decided from flipping and wholesaling, you’re going to get into multifamily, what was your first property, your first acquisition?

Ace Karimi: We closed on a 72-unit property here in our home state of Virginia in December of 2020. We got that under contract in the summer of 2020, that was our first [unintelligible [00:09:03].04] “Hey, we’re about to get our first multifamily deal”,  which was really exciting. It took about I think five or six months to close. We initially reached out to the owner, actually directly. I somehow got hold of him. I had a good conversation, he knew some of the areas that we grew up in here in Virginia, we were familiar with him… He actually developed the complex which is awesome. A great guy, a much older individual, and he’s owned it since he built it, back in the late ’70s. He said it was probably time for him to move on, take the proceeds, and give it to his kids or something. We put in an offer, we sent over an LOI. The only thing is he didn’t have an email, so we needed to get his attorney information.

There’s a lot of creative problem-solving that goes on… So we went and got his attorney’s information, and we were essentially like, “Hey, look, we’re trying to put an offer on this property, an LOI.” The attorney writes back to us by email and he says, “Yeah, he’s never going to sell. Don’t waste your time.” Then we look at each other and we’re like, “Maybe we should keep moving on.” But then we’re really like, I said, “Dude, who cares?” An offer is an offer; we might as well just put it out, we already put the time into it. So we’re like, “Hey, it doesn’t matter. We spoke with Mr. Waldrip,” which is the name of the individual. “Here’s the offer. We just want to follow through on our word.” He received it, he actually emailed us back a week later, surprisingly, and he countered.

Ash Patel: I thought he doesn’t have an email.

Ace Karimi: His attorney emailed us back, and [unintelligible [00:10:21].16]

Ash Patel: Got it, okay.

Ace Karimi: Because he has a fiduciary responsibility to have to share whatever offers he gets. So we get a counter, and he says, “Hey, Mr. Waldrip wants to do the deal at this higher value.” We put out an offer of 3 million, it was 72 units, which was still a great price… He countered back at 3.75, which to me – it’s a multi-million dollar building and I’m getting it at a discount, so I’m like, “Why not? Let’s do it.” We tried to negotiate a bit, tried to meet him in the middle, he just knew what he wanted… Essentially, we’re just like, “Let’s just do it.” There’s still upside, it’s probably worth five and a half to six million, and we can get some good returns and get our feet wet in the game. So we went through that and we got under contract, we raised the funds on it.

We actually just completed construction. It’s been about 14 to 15 months now, and we just completed all the renovations. There are a few more units to turn, but we added a dog park, we fixed the exteriors, we’ve been restriping and resealing the asphalt on the parking lot… It really looks like a repositioned property, and we raised the rents up from about $600 on average to $1000, which really is a big jump. But it was under-market rents, so now we’re actually entering our first refinance with that property, which is awesome, and it’s way beyond the valuation that we originally thought. So it’s exciting.

Ash Patel: Ace, how did you find that deal?

Ace Karimi: We went direct, because I believe we got this information from the property manager. It was a referral. But we got his number from somebody and then we just called him.

Ash Patel: When you were wholesaling, did you have all your systems in place where you sent out postcards, skip traced people?

Ace Karimi: Yeah. Pretty much, we did.

Ash Patel: And are you doing that for multifamily?

Ace Karimi: No, not yet. We haven’t done a lot of direct marketing, things like that. There’s been some telemarketing, a lot of phone calls… But I noticed even while that may still work, any form of outreach is good. It’s better to align yourself with other professionals, like brokers and managers and existing players to try to refer you to deals. I think that’s the best way to get deals as you elevate higher up in this game.

Ash Patel: Let me play devil’s advocate. What about those owners like the one you purchased from, who really had no intentions of selling until he was given an offer? Why not use all your knowledge, experience, and systems to blanket a larger population of multifamily owners?

Ace Karimi: We’re doing it, we’re slowly rolling it out. The thing is we hired the acquisitions for the multifamily; we’re not talking about single-family here. We hired our acquisitions and we’ve been putting a lot of time into training him, just to be able to get the process down, the evaluation underwriting… Because we ideally want him to just be responding to all the leads and responses coming in. We’re slowly getting to it actually, we are. But the thing is, we don’t want to just hit any in every market, and just blanket the country or an entire region, because in this game, the more you know about specific markets, the better, well prepared you are.

If I’m in DC and I enter Phoenix, Arizona and I don’t really know anything about that market, I may be able to find some owners here and there, but it’s not the best to go into a scattered approach. I think it’s better to start with specific areas and markets that are local to you or your region, and just focus on that… Because there are thousands of properties. So just focusing on that and going deeper as opposed to going wider is our philosophy right now. As we continue to grow, we’ll definitely do more outside of our area.

Break: [00:13:45]- [00:15:41]

Ash Patel: Ace, did you raise capital for that property, the 72-unit?

Ace Karimi: Yeah, it was 1.5 million.

Ash Patel: First time raising capital?

Ace Karimi: First time.

Ash Patel: Alright, take me through that process if you don’t mind.

Ace Karimi: Essentially, you have to know your offering. The good thing is you always want to lean on somebody who has at least got some of the presentation materials that you can use. We have friends, we were in real estate already, we knew people who were in commercial, so we’re just like, “Hey, what do you normally give to them? Do you have an offering sheet, a presentation?” We leaned on a few people to see what’s the best way to present the information. Essentially, all you’re doing to investors is, “Hey, I have an investment opportunity. Here are the returns. Is this something you’d be interested in investing and being a part of?” So I wanted to make sure we came across professionally, first of all. We could do a webinar… There are so many different ways to present a deal.

What we did was we came up with a two-page highlighted investment summary that we always send out, and essentially always do our underwriting first; we look at where the rents are over the next five years or so. For this one, we’re holding long-term, for about seven years. We get our underwriting down, because you want to do your homework before you approach anybody. So you do your homework, you do your underwriting first, you look at what the valuation of the property is going to be, and then you look at the projected returns; you find these spreadsheets online, or I’m sure on the Best Ever underwriting podcast. So you get these spreadsheets, underwrite the deal, look at the value, look at the returns… You’re like, “Okay, is this good enough? Can I get like at least 2X, or something better, maybe an infinite return for my investors?”

Because you want to feel good about the deal and you want to know this is something that I know if somebody invests their money in, they’re going to do well. I don’t like to pitch or sell or share any opportunity that I don’t personally believe in; it just doesn’t make sense. Why would I waste my time and other people’s time and money? We actually already liked the deal from what we saw; where we knew it was a deal, we already knew. We just didn’t have the exact metrics and numbers and returns down, so we went and did our homework, got an experienced apartment investor to look at it, he said, “This is accurate.” We put it into a two-page spreadsheet and we made a whole slide deck about it. Essentially, we knew our deal and what the numbers were.

We said, “Hey, look, here’s our game plan. This property’s $500 under-market rents, believe it or not. Here are the five property comparable in the nearby area that are already achieving $900 to $950 rents, and we’re at 550. The reason is that the owner didn’t raise their rents, they weren’t directly involved with the property anymore.” They’re just like, “You know what? The tenants have been there for 20 years, I don’t really care.” They haven’t really done any upgrades to it. So we knew the story of the property, and we said, “Hey, look… It’s under-market rents, we can go in there, we can add value, and increase the rents. And based on the increase, we can get the valuation to a $6 million valuation, in which, hey, you would be getting a 20% IRR.” That’s what you want to mention, “Hey, you’ll get a 10% cash on cash based on your numbers.”

But for us, we said, “Hey, look, we can refi you out, give you all your cash back in about 24 months, and then you can stay in the deal in perpetuity. You can get your money back cash out free, or you can use it for whatever else, and you can stay in the deal.” That’s essentially how we approached it. We showed people that, “Hey, look. This is an opportunity that you can hold this asset with us for a really long time. Or you can just hold on to it based on whenever you refi; you’ll still get your money back and it’s house money in play at that point.”

Ash Patel: Ace, once you return the initial capital, do they still get 8% pref, or whatever the pref is on the deal?

Ace Karimi: There’s no pref; the pref gets removed. Whatever percentage of ownership that they have in the asset, they’ll get that percentage of the cash flows in perpetuity.

Ash Patel: Got it. Were these investors friends and family, or were they new people that you met?

Ace Karimi: There weren’t really a lot of new people. We actually did meet a few new people, introductions from friends and family… But yeah, surprisingly, the best way is to just look at your existing network of people. Eight out of I think the 11 people that invested in that property with us were already in some sort of relationship with me or one of my partners. And then three of them were friends of friends of that person.

Ash Patel: What’s a hard lesson that you learned on your first multifamily deal?

Ace Karimi: First hard lesson… You’ve got to be patient, I think that’s what it is. You’ve got to be really patient. It’s like, you close on a deal and you enter into it, and you’re like “Okay, great. We’re going to do all these things, we’re just going to switch out units like this, and people who have been there for so long, they’re just going to leave easily, no problems… We’re going to do all these renovations and rehab…” When in reality, it’s a long process in terms of what it takes to actually turn 72 units; or it was like 40 of the units had to be turned, to get a new tenant base in there, to the timeline of construction, to get the asphalt done, to get the playground installed.

Things do take a little bit longer than you expect, and there’s always a little bit more involved even than which you come in for. So always be prepared to do a little bit more, go the extra mile, because there’s no such thing as easy money at the end of the day. Look forward to the project itself, and the time will show up. If it goes away earlier than planned, great. If it goes a little bit later than planned then prepare for that. Be patient.

Ash Patel: Ace, what’s a tough time that you had with your partner and how did you resolve that?

Ace Karimi: You’ll be surprised that we don’t get into it a lot. Here’s our philosophy – it’s not about I’m being right or you’re being right. It’s just like, “Hey, what idea makes the most sense that we can think about logically?” That idea wins. A lot of times, if it’s not mine, I’m actually happy. I’m like, “You know what – that’s going to work better for our results.” Something that Ray Dalio said – I have this book up here, and he says, “It’s an idea meritocracy. It’s an environment where the best ideas win.” So I’m not so attached to always being right and trying to stroke my ego. I want results, not only for me, but for people around me. So we always intellectually work through things. I don’t have too many. I usually like to deal with things at the moment.

There are disagreements, like with one of my partners on one of the deals as to how he wanted to run things, because we did defer to him to run some of the operations, because he’s the asset manager. At first, we’re just like, “We’re not really a fan of some of these methods.” But at the end of the day, I’m like, “You did sign up for that role, so we’ll trust you a little bit more and we’ll back off.” That’s what you’ve got to do sometimes.

Ash Patel: Ace, what is your best real estate investing advice ever?

Ace Karimi: The short-term and long-term approach, I guess that’s what it is. Take yourself a few steps back. Don’t look at apartment investing, wholesaling, flipping… These are all strategies. I like to use all the strategies; I don’t like to identify myself as a wholesaler or flipper, or even just an apartment syndicator. I’m a real estate investor. So being a fully trained real estate professional, what you want to do is you want to have a toolbelt filled with different tools that you can use. If you need to ever wholesale, if you ever need to flip a property or a complex, if you ever need to raise money, be prepared to do all the above.

Sometimes you can make money in the short term on any deal, sometimes you can make money in the long term. With the commercial stuff and the apartments, don’t plan on it to take a year to two years. That’s just going into it with the wrong mentality. Plan for that it might take five years or longer. Five years is usually the average for syndication or an apartment deal, but always plan for it to take longer than you plan when it comes to your long-term goals. At the same time, for your short-term stuff, take the time to do it. Do the flips; the flips are nice, you can make good money flipping and wholesaling single-family homes or even other types of properties, because it’s good short-term income. But instead of just using that and going to spend it, take that money, save it up – you’re going to get hit with capital gains anyway – and park it into the apartment buildings or into long-term assets. In that way, you’re getting the best of both, and you’re able to get the depreciation so that you can write off a lot of your gains on your short-term stuff.

You want to accelerate the time it takes to accomplish your goals and be wealthy and financially free, so it’s good to do both. Maybe not in the beginning, but do a single-family project here and there to make some short-term money, and then go hard with the multifamily if that’s what you really want to do long-term. Work the process to its advantage in both regards.

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

Ace Karimi: Okay, go ahead.

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

Ace Karimi: Ultimate Sales Machine, a great book.

Ash Patel: What was your takeaway?

Ace Karimi: Man, awesome book. This guy worked for Charlie Munger, which is awesome; he did all his sales stuff. One of the things was what I mentioned earlier, which is to go deeper into what you’re doing, and not wider. He talked about how they had Fortune 500 clients and they were trying to reach out to the next 1000 big companies to try to get as clients for their marketing services. Instead, they did their research and they found out, “Hey, these 45 clients are bringing in most of our business. Why don’t we go deeper with them and who they know?” And the business tripled like that.

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

Ace Karimi: I like to do things like this… I try to share my lessons and experiences, things that I’ve had shortcomings on, things I wish I knew sooner and I learned during and after. I love to be able to just help shorten people’s curves to get to where they want to go.

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

Ace Karimi: Follow me on social media. On Instagram, I go by @ace.invest, on Facebook and LinkedIn; just add me as a friend. Reach out to me, message me and say “Hey, I saw you on the podcast. Would love to connect. Appreciate what you gave.” If you have any critical feedback, please let me know. It’s Ace Karimi, just my name, on Facebook.

Ash Patel: Ace, thank you for sharing your time with us today. Telling us your story from starting out in single-family homes in 2018, wholesaling, flipping, graduating the multifamily, and now up to 248 units. Thank you very much for your time.

Ace Karimi: Graduating, I like it. I’ll see you, Ash.

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

Website disclaimer

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

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

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

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

Oral Disclaimer

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

Follow Me:  

Share this:  

JF2742: 3 Advantages of Self-Storage Over Multifamily ft. Paul Moore

Are you tired of fighting for multifamily deals in a competitive market? Return guest Paul Moore suggests looking into self-storage, an asset class he believes is often overlooked despite its many advantages. Paul shares why he transitioned from multifamily to self-storage, how he finds deals, and how he’s grown his portfolio to where it is today.

Paul Moore | Real Estate Background

Click here to know more about our sponsors:

Deal Maker Mentoring





Follow Up Boss



Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed and I’m here with Paul Moore. Paul is joining us from Lynchburg, Virginia. He is the founder and managing director at Wellings Capital. His firm has invested 71.3 million with 11 operators, and has a total of 229 assets across all combined funds. He’s actually a third-time guest; he’s already shared with us in other episodes about creating a fund, building a hotel, and adapting your business model when the deal flow slows down. Paul, can you start us off a little bit more about your background and what you’re currently focused on?

Paul Moore: Absolutely. I sold my company to a public firm at 33 years old, and I thought “I’m a semi-retired investor now.” I was really an idiotic speculator is what I was, because I didn’t know the difference; investing is when your principal –I now know– is generally safe and you’ve got a chance to make a return. Speculating is when your principle is not at all safe, and you’ve got a chance to make a return. So I was a speculator, I lost a lot of money, I made some money along the way, I started investing in flip homes, then I started flipping waterfront lots at Smith Mountain Lake and Virginia, started a couple of websites, and I always wondered how to get involved in commercial real estate. I finally jumped into multifamily in North Dakota during the oil boom there in 2011, later wrote a book on multifamily investing, and since then, we’ve added self-storage and mobile home parks, as well as RV parks, light industrial, and similar assets to our funds. We manage five funds that allow investors to get a portfolio of recession-resistant assets with one investment.

Slocomb Reed: I understand, Paul, you’re more focused on self-storage now?

Paul Moore: Yeah. I did not have the success that Joe had in acquiring multifamily. We just got really frustrated, beating our head up against the wall, trying to find off-market deals and deals that made sense and penciled out. When we finally looked at self-storage after a couple of years of beating our head against the wall, we realized that — my multifamily book is called The Perfect Investment; a humble title, would you agree? I realized it’s not perfect if I have to overpay to get these deals. In self-storage, I found 50% of the owners were mom-and-pop single facility owners, and a lot of them didn’t have the knowledge or the desire or the resources to make upgrades, increase income…

Slocomb Reed: When was this that you were getting into self-storage?

Paul Moore: This was 2018. So I immediately started looking for every book I could get on self-storage. I didn’t find very many great ones out there, some self-published ones, so I decided to write one myself. I waited a couple of years until I knew more about it, but that’s when we jumped into self-storage.

Slocomb Reed: That book is “Storing up profits: Capitalize on America’s obsession with stuff by investing in self-storage.”

Paul Moore: Yes, that’s right. It was published by BiggerPockets in late 2021.

Slocomb Reed: Nice. The reason I asked, Paul, about when you got into self-storage is that it’s a much trendier topic now in 2022 than it was four years ago. Are you feeling that in the deals that you get to underwrite? Are you feeling like there’s a lot more competition now and that competition is driving up prices and compressing cap rates?

Paul Moore: Great question. Cap rates are terribly compressed. They’re just about the same as multifamily. The difference is — I recently wrote an article, “Call me a heretic, but maybe cap rates don’t really matter as much as we thought” on BiggerPockets. The point of it was, well, if the asset is completely mismanaged, like the deal we bought in Grand Junction, Colorado that had 80% delinquency, or the deals that don’t even have websites, or even signage hardly even, basically just completely mismanaged.

Then the cap rate doesn’t matter as much. If you tear down the cap rate and realize that’s the net income divided by the value – well, if the cap rate’s 2%, but the income is only half of what it could be, well, then the cap rate doesn’t matter as much. That’s why we really like these mom-and-pop self-storage and other assets in any asset class. They’re just easier to find in self-storage than some others.

Slocomb Reed: It sounds like you’re talking specifically about the cap rate based on the current performance of the asset when you purchase it, correct?

Paul Moore: Right.

Slocomb Reed: I predominantly concern myself with cap rate for two reasons. If I’m going to sell this, what can I sell it for, and what is my debt going to look like when I go for a refinance? I primarily personally focus on the cap rate at the end. I totally get what you’re saying though about not focusing on it on the front end. I will say though, when you find a self-storage facility that has 80% delinquent rents, and you find those kinds of opportunities, have you found that it is more difficult to secure bank debt for those, based on the current operation?

Paul Moore: When we dove into this, we realized we didn’t have the track record, the team, the technology we needed to do this right, so we decided to partner, as you mentioned earlier, with 11 operators over the last several years. They have such a phenomenal relationship with their banks and their track record is so solid that they have a leg up in that area. But we also give them enough cash so they can go buy these for cash, turn them around, and then refinance them.

An example is they acquired one in Beeville, Texas, 607 units, from five feuding siblings after the parents passed away. They wanted 5.5 million for it, but it was acquired for cash for 2.4 million. After three months (three months!) it got an appraisal of 4.6 million. We put 2 million in debt on that; that was a 43% LTV rather than 83, which it would have been, again, at the original price of 2.4. That asset was later sold for 4.6 million; it was like a 300% return on the investor’s equity. It’s hard to find deals like that. But again, the cap rate’s not that important when you’ve got to deal with that much upside. So investing with cash is definitely an option in those cases, and that was a very good question.

Slocomb Reed: Paul, you may have already answered this question at least partially, but why are you paying cash when you purchase?

Paul Moore: Well, the answer would be we wouldn’t want to pay cash, but in that case, there were these five feuding siblings, they wanted 5.5 million – they wanted a quick out; they wanted to end their misery. It was just easiest with that one to pay cash and turn around and finance it in three months. We started the financing process, I should say, in three months. So again, it wouldn’t be our normal practice.

Slocomb Reed: Gotcha. Were you direct-to-seller on this, or was this deal brokered?

Paul Moore: 93% direct-to-seller through this particular operator.

Slocomb Reed: Gotcha. Okay, so you went cash… Going direct-to-seller, of course, means there’s less competition. Is self-storage, a space where you have seen that being a cash buyer makes you more compelling in competitive offer situations?

Paul Moore: Yeah, absolutely. Actually, you didn’t ask this exact question, but it is interesting… In the mobile home park realm, a whole lot of the owners who are selling, who have been around for, let’s say, 40 years – they assume they’re going to have to owner-finance it to sell it. Because until Sam Zell, America’s most successful real estate investor, led the charge into getting financing for mobile home parks, they were very hard to finance in years past. That’s kind of a fun little fact – if you can go into one of these guys with cash or with your own financing, bank, or agency financing lined up, it can really help a lot.

Slocomb Reed: You’ve started five funds, you’ve said; you’re in a breadth of asset classes. You’ve invested over $70 million, and yeah, now you’re diversifying the asset classes that you’re investing in because it feels crowded, cap rates have compressed… Let me ask – when did you start raising capital to invest in commercial real estate?

Paul Moore: Well, I did my first one in 1999. But as far as raising capital for commercial real estate, I think 2011 or 2012 when we were doing the multifamily quasi hotel in North Dakota.

Slocomb Reed: So investing for over 20 years, raising capital for over 10 years… With your breadth of knowledge and experience, Paul, what’s the most crucial skill that you’ve developed over the years, that informs and empowers are investing today?

Paul Moore: I’ll tell you, it’s more of a mindset than a skill. I was listening to my first podcast ever when I discovered… I had heard “podcast” before, but I discovered that little purple icon on my iPhone, and listened to Richard C. Wilson tell the story about how you want to survive if you live way up North. This may sound silly, but it changed my life. If you live way up north in the wilderness and you want to survive, you want to live on salmon, you can either be a spear fisherman, which would mean you have to learn to shape the spear, you have to learn to throw it straight, you have to learn to retrieve the salmon, and you have to hope that a salmon swims by in that dark water. Hope is not a good business strategy.

The other strategy –this is kind of silly– be a grizzly bear in the waterfall, standing there with your mouth unhinged and waiting for salmon to jump into your mouth. That mindset means I’m creating educational materials. I’m becoming the go-to expert. By writing books, doing podcasts, doing webinars, doing videos, doing videos on BiggerPockets, by speaking at live events, all those types of things create a situation where people are coming to me to ask if they can invest. I think that mindset, more than a skill, has changed everything for us. We went from literally a handful of investors – and I mean literally five – to over 500 now since I flipped that mindset switch.

Break: [00:14:01][00:15:58]

Slocomb Reed: The mindset being that you’ve made yourself the grizzly bear standing at the bottom of the waterfall with the salmon investors coming to you… Because you begin by adding value, being the thought leader, educating, and you attract people to you with that.

Paul Moore: Right. That’s the goal.

Slocomb Reed: In all of your investing right now, are there any asset classes you’re avoiding?

Paul Moore: Oh, yeah. I’m writing a book called Warren Buffett’s Rules for Real Estate Investors, taking his principles and applying them to real estate. One of the things he said is “Successful people say no a lot.” The very most successful say no almost all the time. We have a whole lot more that we would say no to than yes, for a variety of different reasons. One that we like, we just haven’t found the right operator, would be senior living. We really like that space; there are five aspects to that — actually, six different strategies within that, and that’s something we’ll be looking at someday.

Another one that we’re not doing yet because we haven’t found the right operator – if you’re listening call me – we’re looking for great operators in the RV park space. People that have had years of experience, the track record, the team, and the opportunity to buy mom-and-pops and upgrade them for large profits. Hotels, retail in general…

Slocomb Reed: Hotels and retail are things that you’re avoiding right now?

Paul Moore: Yeah, we’re avoiding hotels and retail right now. We’ve got a lot of questions about those, and I think with the online economy we’ve seen, and then, of course, the damage from COVID, even if it was only for a year, the hotels just sort of kept us away from those. We certainly wouldn’t invest in restaurants. I know there are probably lots of other asset types I’m not even thinking of. Office scares me right now. I do know a company that’s doing a great job in office, but again, with a shift in American thinking with office, I think I’m going to hold tight on that.

Slocomb Reed: Hospitality, retail, office, you’re naming all of the stuff that was most impacted by COVID. Is COVID the origin of the reasons why you’re shying away from those spaces, or were you opposed to them prior to COVID?

Paul Moore: You know, I don’t want to sound like we’re some kind of gurus who knew the future, but honestly, we were squarely – and you can go back and look at everything we’ve said since 2017 – we were squarely in the multifamily, then self-storage, then mobile home park arenas for all these years. We weren’t really drawn to those other asset types, and COVID just kind of sealed the deal.

Slocomb Reed: You were avoiding them back before 2020 then?

Paul Moore: We’ve never invested in them, so absolutely, yes. There is a retail strategy I really like, and here’s the summary of it. Buying a strip center and then selling off the outparcels to pay back the equity quickly. That’s a strategy I really like. If there’s 30% equity and you can sell off the restaurant and the bank outparcels, let’s say, for 30% of what you paid for the whole strip center, that’s a pretty compelling strategy. I know people doing that that we would look at.

Slocomb Reed: Gotcha. For those of our Best Ever listeners, Paul, who are not newbies, they wouldn’t consider themselves amateur investors, they have some experience, have not yet succeeded at the level that you have, and they want to get under the waterfall and open their mouths themselves, what is your top tip for getting into thought leadership for someone who thinks it’s time for them to start raising capital or it’s time for them to start attracting partners to themselves?

Paul Moore: Joe Fairless wrote a little blurb for my new book, and I so appreciate it, so I’m going to throw it back at him right now. Joe Fairless gave I think us all the best tip on this, and I’m just going to do my best to quote him. I don’t know if this is exactly what he would say if you asked him, but I know what he told Whitney Sewell. He told Whitney, “Go out and start a daily podcast. While you’re at it, start doing other things, like social media postings, eBooks and books, and all that, but start a daily podcast first.” That’s exactly what Joe told Whitney. Everybody knows that Whitney, one of Joe’s star students, went from zero to hero in about three and a half years doing that. So I guess that’s what I would tell people.

Slocomb Reed: Start a daily podcast.

Paul Moore: Yeah. I think that’s what I would do.

Slocomb Reed: Awesome. Well, Paul, being that you are a repeat guest, you’ve been through the lightning round before, I just want to ask now, what is your Best Ever advice?

Paul Moore: My Best Ever advice is, going back to the beginning of this show, and that would be to say, please think hard about the difference between investing and speculating. By the way, it’s fine to speculate, it’s fine to invest in bitcoin. I believe true wealth is having assets that produce cash flow. Bitcoin doesn’t do that, and the value is very subjective as we’ve seen by Elon’s tweets a couple of times. There’s nothing wrong with that, but I wouldn’t make that my centerpiece for investing. My investing centerpiece would be boring assets. Think about self-storage; my goodness, four pieces of sheet metal, some rivets, a floor, and a door, but the value-add potential in self-storage is stunning. People just don’t realize that even though it’s boring, maybe because it’s boring. So I would focus on investing over speculating.

Slocomb Reed: Are there any asset classes you’re currently investing in outside of real estate?

Paul Moore: I just did a little Bitcoin with my IRA and a little other cash I had on hand about a year ago. It’s actually done okay. Even though Bitcoin itself has kind of really been up and down as it always has, my portfolio is up about 50% because I’ve got a guy managing it; it’s like multiple crypto assets.

Slocomb Reed: Gotcha. Tell us a little bit more about your new book on self-storage.

Paul Moore: Well, self-storage is amazing, because – think about it, if I’m renting you a $1,000 apartment and I raise the rent by 6%, you might leave rather than sign up for $720. That’s 60 bucks a month for a year. In self-storage, if I raise your $100 storage unit by 6%, you’re probably not going to get a U-Haul, get your friends together, pack up all your junk… Excuse me, your treasures, and move them down the street just to save six bucks a month. So you can do multiple increases a year and people will just gripe, but they won’t leave. 53,000 self-storage facilities in the US, that’s about the same as Subway, Starbucks, and McDonald’s combined.

The first third of the book is about that. It’s about the premise for why self-storage works so well. The middle third of the book is four strategies to build a self-storage empire. That would include buying value-add, buying stabilized, reconfiguring an old warehouse, or a Toys’R’Us, or a Sears building, and the fourth would be of course ground-up development.

The last third of the book would be why anybody wanting to get into any area of commercial real estate would probably benefit from, and that is seven different paths to becoming successful in commercial real estate. Whether it’s commercial multifamily, self-storage, mobile, home parks, whatever; it’s seven different paths to get to the top.

Slocomb Reed: Awesome. Well, thank you for sharing with us, Paul. Best Ever listeners, thank you for tuning in. If you’ve gotten value from this episode, please subscribe to our podcast, leave us a five-star review, and please share this episode and this conversation with Paul Moore with a friend so that we can add value to them with our podcast too. Thank you and have a Best Ever day.

Website disclaimer

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

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

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

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

Oral Disclaimer

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

Follow Me:  

Share this:  

JF1948: Submarine Lieutenant Obtains 8 Units In Three Months with Anthony Pinto

Anthony is still in the service, while also building his real estate portfolio. We’ll hear how he was able to get those 8 units so quickly, and of course we’ll get to some of the details of a couple of his deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“There’s so many opportunities to learn, you have to constantly be learning” – Anthony Pinto


Anthony Pinto Real Estate Background:

  • Submarine Lieutenant currently stationed in Norfolk, VA
  • Since acquiring 8 units in three months, Anthony has expanded into apartment building investments
  • Based in Norfolk, VA
  • Say hi to him at pinto.capital@gmail.com
  • Best Ever Book: Miracle Morning


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

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

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


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

Anthony Pinto: I’m great, Joe. How are you doing?

Joe Fairless: I’m glad that you’re glad to be here, and I’m doing well, and looking forward to our conversation. Anthony is a submarine lieutenant, currently stationed in Norfolk, Virginia. Thank you, sir, for keeping us all safe. Since he’s started real estate investing he’s acquired eight units in three months, and has expanded into apartment building investing.

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

Anthony Pinto: Sure. Again, my name is lieutenant Anthony Pinto, submarine officer, stationed in Norfolk. I’ve been here for about three years, and I bought my first house in 2016 as a primary residence, when I first moved here. I used my VA loan.

Then at the end of last year I got off of my [unintelligible [00:02:14].09] again in Norfolk… And I really got thinking about how I didn’t wanna spend the next 20 years of my life going under way, being on a submarine… So I just started looking for other means to generate cash, and to generate wealth… And I looked to real estate investing as a way to do that.

In December I started going to the local meetups, I found a realtor… By the end of January I had a quad that we currently are house-hacking closed, and by the end of the next month, end of February,  we had a triplex closed, that I bought with a joint venture with a couple other Navy partners.

Since then we moved into larger apartment buildings, mainly in the Kansas City and the North Carolina areas. We had a 34-unit under contract about a  month ago, which we unfortunately had to release due to the property condition. It was pretty bad, I’ll just say that…

Since then, we continued to build my local team in the area, in Kansas City, both in terms of boots on the ground and on property management, and actually tomorrow we’re submitting an offer for a call for offers for a set of quads in the Grain Valley area on the Missouri side, which we’re really excited about.

Joe Fairless: Well, we have a lot to talk about. Let’s first talk about how quickly you jumped in… I believe, if I heard you correctly, you started studying real estate and going to real estate meetups in December, and you closed in January. How did you find and close so quickly?

Anthony Pinto: First off, I had an awesome real estate agent. She was a veteran herself, and she focuses a lot on specifically military investors. She’s got a mastermind herself that she does in the area, and there’s probably about 30 of us in that.

So it started off with her, she had a lot of great connections. I like to call her the Great Connector. Every time I have an issue, she can point me in the right direction, whether it’s insurance, or flooring, tree guy – you name it, she’s got somebody on call for that. So having a great real estate agent honestly really helped.

Secondly, looking through the weeds and seeing opportunities on deals that were already on the market. This quad that we’re house-hacking right now was about $60,000 overpriced, and it had been on the market for a few months already. No one had really taken a bite at it because it was so overpriced… So we kind of looked at it and we offered a price we thought was reasonable, and they countered, and we went back and forth for a while. It got to the point where, running my numbers on it, it just didn’t make sense, so we ended up walking away from that.

A week later they came back and said “Hey, we wanna go with your original offer.” We were like “Okay.” So we went through the whole contract and due diligence process, and got to about three days before we were supposed to close and we hadn’t heard anything from the appraiser… We had to delay the closing another week, and finally the appraiser came back at about $25,000 cheaper than the asking price. I don’t know if your listeners are familiar, but with the VA loan, it’s 0% down, 100% loan-to-value, and the VA will pretty much pay up to the appraisal price. Anything higher than that has to come out of pocket.

So here we were, stuck with about $25,000 cheaper than what the asking price was, I was trying to rack my brain about how to figure this issue out… And we came out to the agreement that we would just pay for closing costs.

So for about $7,000 out of pocket we got about $25,000 off the price, and the final price was actually cheaper than what we had originally gone with, which was a pretty awesome deal.

Joe Fairless: Wow. How did you meet the real estate agent?

Anthony Pinto: She was the only real estate agent that I saw that was holding meetups on Bigger Pockets in my area. So I went to a meetup of hers, and I was impressed, and I took her out to coffee the next day, and the rest is history, I guess.

Joe Fairless: What did you end up buying the property for?

Anthony Pinto: We bought it for 287k. Our original offer was 290k, and the listed asking price was 350k.

Joe Fairless: It’s a quad… Do you have it rented out?

Anthony Pinto: We do. We live in one of the units, two of the units are long-term rentals, and then we airbnb the fourth unit.

Joe Fairless: How much do you bring in per month on average for the Airbnb?

Anthony Pinto: We get about $900 to $950, depending on the summer or weekend timeframe… Which is about $100-$150 more than we could get if we just did a long-term rental on it.

Joe Fairless: Okay. Are the other two $750?

Anthony Pinto: The one-bedroom is $800, and the two-bedroom is $1,000.

Joe Fairless: Oh, okay. Great.

Anthony Pinto: Yeah. It more than covers the mortgage, and then some.

Joe Fairless: Yeah, $2,700 in rent… So on the 1% rule it’s a little bit less than 1%, I imagine?

Anthony Pinto: Right. And that’s including the fact that we’re living here as well. So when we move out, you can add probably another $800-$900 on top of that.

Joe Fairless: And then it’s 1.1%, 1.2%. Okay. Great. And that was no money out of pocket?

Anthony Pinto: Except for the closing costs we had to bring at the very end – yeah, 0% down.

Joe Fairless: So how much in total did you have to bring?

Anthony Pinto: I think it came out to around 7k.

Joe Fairless: And what about the triplex that you had partners on?

Anthony Pinto: Actually, I have Redfin alerts/emails to me for multifamily deals in the area, and I would occasionally look through it and I got this deal sent over to me at like 6 o’clock in the morning, when I was getting ready for work… So that morning I kind of looked through and I was like “Wow, this seems like a really great price”, just based off of what I thought we could get for rent. It was going for 215k, and we could rent it for about $2,800 in total.

So that morning, on my way to work, I went to go take a look at it. I was like “Oh, this doesn’t look like a bad property.” Basically, it was a turnkey flip that the owner wanted to get rid of, to reinvest his capital elsewhere. So that afternoon I put an offer in, and my realtor submitted it, and by the next morning we had it under contract.

Joe Fairless: What were they asking and what did you offer?

Anthony Pinto: The asking was 209k, and we put in 215k.

Joe Fairless: That’s right. I’m sorry, you mentioned 215k earlier. Okay, so you offered more than what they were asking.

Anthony Pinto: Right. And my realtor was trying to text… So I can’t have my phone in the shipyard where I am, so  my realtor was texting me, he was like “Hey, we have a deadline at 1. I need an offer.” And I didn’t get that until [1:30]. At this point we had to be competitive, because there were already 2-3 offers in. The only way we could do it is just offer a higher than asking price, especially since the numbers still worked for that.

Joe Fairless: What are the numbers on that one?

Anthony Pinto: We are currently renting it for $2,750, bought it for 215k, mortgage comes out to be about $1,100, about 33% expenses on that… So we’re cash-flowing about $600 total off of that property.

Joe Fairless: You mentioned you had partners… How do you structure that partnership?

Anthony Pinto: Actually, this was a great learning experience for me, because I knew I wanted to bring in outside money, but I really didn’t know how to do that. This was my first time using a commercial loan that I got through a credit union… So after we got that property under contract, I was like “Oh, man… Now I need to figure out how to find this money.” So I started scouring Bigger Pockets and trying to research as much as possible, raising private capital. I stumbled upon a couple books, but I eventually made a list of all the people that I knew – family, friends, people I went to college with, people I work with, and just started calling a whole bunch of people. I probably called 60 or so people, trying to explain what I was doing and see if they would be interested in this great opportunity.

So my first partner I found is an active duty intelligence officer, also in Norfolk. I found him on Bigger Pockets. It turns out we had a ton of similarities. He was two years behind me at the Naval Academy, and we knew a lot of the same people. I had him over for dinner, and we talked and talked, and ended up investing about 12k with me.

So the total raise for this was about 48k, I’ll just start off with that. He brought a quarter of that. And then the second guy I found was also a submarine, senior chief, active duty guy. He had done investing before and he had a lot of money tied up int he stock market, that he wanted to take out. So we got talking and he brought the rest of it, 36k. So in about three weeks after getting it under contract we had the full amount raised, to be able to close on the property.

Joe Fairless: And how do you structure the ownership percentages?

Anthony Pinto: I had a big conversation with my lawyer on how to [unintelligible [00:10:20].04] LLC for this. Basically, what we did is we formed an LLC in the form of a partnership, with a president, vice-president and treasurer. And the three of us sat down and we just talked through the different terms, we talked through how we were gonna do the equity split, how we were gonna do the cashflow splits, who was gonna take what role and responsibility, what  we were gonna do for the long-term business plan, what the different exit strategies were… So we basically got together with our lawyer and we talked through all these different things, and our lawyer drafted up our operating agreement, which was the legal solidification of our partnership.

From there, we closed on the property, and we were operating as an LLC, and we were getting the cashflow and equity and the percentages outlined within the operating agreement itself.

Joe Fairless: And what are some highlights of how that operating agreement reads in terms of cash distribution priority and ownership percentages?

Anthony Pinto: For me, since I was not bringing money to the table, I had to offer something else… It’s pretty similar to a syndication we’re working on right now. Those not bringing capital to the table have to be a little more creative in what they’re actually bringing, and the advantages they’re bringing. So what I brought was obviously finding the deal, and I also personally guaranteed the loan. Since we were able to go through a credit union and do a commercial loan, it was recourse, so I had to personally guarantee that, which I was fine with doing. $215,000 wasn’t a lot of money to really be worried about. So I personally guaranteed the loan. So that, and finding the deal, and securing the financing got me 35% of the equity and of the cashflow.

The partner that brought the most money got 50% of the cashflow and 35% of the equity, and then the last partner got 15% and 15%. So we just kind of worked it out to make sure that the returns that the investors were looking for made sense. Based on that equity split and the cashflow, the larger partner wanted 11% return, and so we were able to get that to him based off of the conservative proforma that we were operating off of.

Joe Fairless: Let’s talk about that 34-unit. Tell us the story about that.

Anthony Pinto: Sure. This property was on LoopNet, that’s how I originally found it. It had been on there for about two years; it had been under contract a year before that with another buyer, and it was not very well maintained. There were a lot of bad tenants in there, there were really high delinquencies, there were evictions left and right… The property just wasn’t being taken care of. And the biggest issue with the previous buyer is that the property was made up of two multifamily buildings and a single-family home on the same lot, which was very unusual collateral. The Fannie and Freddie representative at the bank that the buyer was talking to was like “Yeah, this is unusual. We’re not comfortable with how this is laid out.” So he wasn’t able to secure financing for that based off of that, and just how the property was operating at the time.

So after that release about a year ago, the owner went in and got rid of a whole bunch of bad tenants, put a lot of money into replacing the roofs and renovating the units, and basically trying to turn the property around as much as they could.

So the property almost did like a 180 between summer 2018 to 2019, which is when we were taking a look at it. So I looked at the property and it was being advertised to a local brokerage in the area, and actually the broker for this deal I had met on Bigger Pockets earlier, when I was visiting home in Kansas City over the Christmas break, and we never had had a chance to meet.

Long story short, I looked at this property and I was like “Oh, those numbers work.” We negotiated out the contract for it and came to a price that was a little more than I would have been comfortable with, but the numbers still worked out, even as conservative as they were… So we got under contract at the beginning of July.

It was mainly me taking down this property, so I  got a little ahead of myself on having the right experience and the right people on the team. I had been building my team in that area for a while, but I didn’t have the right players yet as it turned out, going through with this property.

So I set the contract up, got it under contract, started going through the due diligence. A lot of things just didn’t start adding up; there was a lot of confrontation between the seller and us trying to get due diligence documents and trying to get answers for things that were happening/had happened with the property.

So August rolls around, which was about three weeks after we had the property under contract, and I went to visit the property and do the property inspection… And I had had a boots on the ground partner go and take a look at the property initially, and he had just done a walkthrough of the outside and they had seen one of the only vacant units, which had been recently renovated. Based off of those pictures, I kind of had a sense of what I was walking into.

So I started to do the property inspection, started looking at the rest of the units, that hadn’t been renovated, and I was just appalled at the condition that this property had been maintained at, and the condition that people were living in.

I got told that 32 of the 34 units had been renovated, which was definitely not true. There were at least ten of the units that had significant renovations needed to be done. One of them probably needed to be gutted based off of water damage that was ongoing, that current management hadn’t taken care of.

So basically, for the two days we did the inspection, I kind of just realized, got with the partners and we’re like “We’re pretty much buying a lemon right off the bat.” I’ll go back a little bit – so that triplex that we bought, I had a lot of red flags going off in my head, just kind of walking around and talking with my realtor… And a lot of those same red flags were going off in my head with this property. I ignored them on the triplex, and I wasn’t gonna ignore them on this property.

So I got with the partners, we talked through it, and based on the property inspection, which had some pretty significant issues… Significant mold inside units that people were living in, there was ongoing water damage, and a lot of the units had foundation issues. We had, like I said, ongoing leaks, and some of the units should have been gutted. There were electrical breakers that were next to showers and next to sinks, that didn’t have any [unintelligible [00:16:14].02] or any protections like that… Just a lot of things were wrong with this property.

So we got together, and long story short, we ended up releasing from the contract, and was able to get the EMD back on that… But $5,000 for the property inspection was well worth realizing that this property would have been pretty much buying a lemon right off the bat.

Joe Fairless: Did the submarket meet your expectations?

Anthony Pinto: This property – I don’t know if I mentioned… I’m from Kansas City originally, so I knew where this property was, and it was actually about four blocks or so away from where my grandparents used to live… So I was pretty well familiar with the area.

The area was what I expected it to be. The submarket and type of clientele was what I expected it to be… But there’s always extremes of a certain type of clientele. I understand what a class C type of tenant is gonna look like, but there’s always gonna be extremes to that… Just the level of comfortableness that people are able to live in.

So I was a little taken aback by some of the conditions that people were living in in this property, but overall I kind of realized that this area probably needs a little more up and coming before it makes it worthwhile.

Joe Fairless: Okay. And that’s why I asked the question, because a lot of people will say “There’s nothing about a property I can’t fix if I buy it the right way… But if a market or submarket don’t cooperate, then that’s where I can get into some trouble. Because I can throw a lot of dollars at a property, and you could make Taj Mahal in the middle of a D class area.” That wouldn’t make sense to do, but you could… But you can’t make a Manhattan type of environment in an area that’s D class.

So when you got the inspection report back, what did you say to the seller? Did you try to negotiate, or were you just pulling out, you were like “Forget this”? How did that go?

Anthony Pinto: I knew that we were pretty much at the limit for where the seller was willing to go down… So I kind of realized that the level of negotiation that would make us comfortable with purchasing this property was much lower than what the seller was willing to go for. And just based on the amount of issues that were wrong with this property, it probably should have been torn down and built back up. There were so many issues that I kind of realized – this property was 60 years old; so if I’m seeing issues now, what are the issues that I’m not seeing? What are the issues and the repairs that have been done over the years that I’m not seeing, that may or may not have been [unintelligible [00:18:37].02]?

So I kind of realized that we can negotiate this all day, but at the end of the day this is not the type of property that I want to put my name and my investors’ name on. So we didn’t negotiate on it, we just pulled it based off of the property inspection; we basically pulled a contingency for due diligence.

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

Anthony Pinto: I think the best advice is you’ve gotta learn as much as you can. Be the expert in what you’re doing. People will flock to you when they realize that you are the expert in what they are trying to do, and you’re continuously learning… And that’s the other thing, continuously learn. There are so many opportunities to learn, so many podcasts, so many Bigger Pockets articles and forums… There’s so much out there. You have to continuously learn, because this market is constantly changing, whether it’s single-family homes or commercial. So learning and continuously learning.

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

Anthony Pinto: Ready for it.

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

Break: [00:19:40].11] to [00:20:16].03]

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

Anthony Pinto: Best ever book is The Miracle Morning by Hal Elrod.

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

Anthony Pinto: Oh, man… A mistake [unintelligible [00:20:20].17] triplex and not going with my spidey senses about the property. I didn’t really talk about it, but we had a significant amount of issues with this supposedly turnkey property. So I took those same spidey senses and I applied them to this 34-unit and I turned away, and it worked out for the best.

Joe Fairless: What are the issues on the triplex?

Anthony Pinto: Let’s see… When we first bought it, within two weeks it got broken into and all the appliances and air conditioners got stolen. That was a pretty hefty insurance bill. We had A/C problems after that, we’ve had ceilings needing to be replaced because of leaking air handlers. We had significant termite damage that had been covered up with insulation in the crawl space, that we found afterwards. We had pest issues, we’ve had issues with tenants, there’s been some roof issues… Just a lot of different issues.

Joe Fairless: And how do you communicate that back to your two partners?

Anthony Pinto: A lot of the investors I talked to in the area had asked me about this property; the property is on a street called Carver Circle, so they would ask me “What’s up at Carver?” So I would tell them all these issues we’re having, and it kind of dawned on me – I can talk to people individually, or I can write about my experiences. I can talk about my experiences and put it online. So what we started was a blog called Rookie Real Estate, which is basically a testimony to my start from a rookie real estate investor at the end of last year to where we are now.

I talked a lot about how I got started, the mistakes that we’ve made, the different issues that we’ve had, and some lessons learned along the way. It’s geared towards the first-time investor.

For me, starting off, it was almost like a fire hose of information, and it was hard for me to focus on one thing and get started… So I wanted to start this blog as a way for first-time investors to get their bearing and guide them towards all these different resources we have available. And to also give them that things are gonna happen, and that problems exist, and not to have this spiritual view that everything with real estate is gonna work out for the best.

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

Anthony Pinto: Yeah, of course. I am on Facebook, Anthony Pinto. We also have a Facebook for our business, Pinto Capital Investments. We have a website, PintoCapitalInvestments.com, and then you can also find us on Instagram, I have LinkedIn, and then finally, our blog RookieRealEstateBlog.com. There’s also links to our website on there as well.

Joe Fairless: Anthony, thank you for talking about your first couple purchases, as well as the deal that didn’t work out, how you used some lessons from the second purchase to influence you backing out of the third purchase. Much better to learn on the triplex than on ten triplexes combined. And the specific examples of some of the red flags too, so thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Anthony Pinto: Alright, thanks, Joe. It was an honor to be here.

Follow Me:  

Share this:  

JF1848: Don’t Lose 30% Of Your Savings Overnight, Invest In Real Estate with Brian Robbins

Brian is a Chiropractor by trade, while also being an active real estate investor who helps other people safely invest in real estate. He had a client come in and tell him he just retired, put his savings in the stock market, and then it crashed. That client lost 30-40% of his life savings overnight. Brian never wanted that to happen to him so he started learning about real estate and hard assets. We;ll hear what he learned and hear some case studies of his deals, the good and the bad. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Fortunately we found it or it would have been an environmental nightmare, sometimes the best deals are the ones you don’t do” – Brian Robbins


Dr. Brian Robbins Real Estate Background:

  • A successful entrepreneur before entering the multifamily investment arena
  • Owned his own small apartment complex, a 32,000 sq. ft. shopping center and some SFR’s
  • Based in Danville, VA
  • Say hi to him at www.wealthgencap.com
  • Best Ever Book: Ten X Rule


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

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


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

With us today, Dr. Brian Robbins. How are you doing, Brian?

Dr. Brian Robbins: Doing great, thanks Joe.

Joe Fairless: Well, I’m glad to hear it. A little bit more about Brian’s background — and first  off, what type of doctor are you?

Dr. Brian Robbins: I’m a chiropractic physician.

Joe Fairless: Got it. A little more about Brian’s background in real estate – he is a successful entrepreneur before entering the multifamily arena, and in the multifamily arena. He has owned his own small apartment complex, a 32,000 square foot shopping center and some single family rentals. Now focused on helping others reach their financial goals. With that being said, Brian, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dr. Brian Robbins: Sure. As you said, I’m a chiropractic physician by trade, but we have multi-discipline pain management facilities, so that’s primarily what we’ve done –  chiropractors, medical doctors, PTs, all working together and providing that kind of care. Not all that long ago I branched out and saw the benefits of commercial real estate. It’s a long story, but I walked into a room one day and I had a patient sitting on a table, and he was actually in tears… And that was unusual because this guy was a big, rough, kind of gruff guy who worked in a blue-collar job his whole life.

He asked me what he was gonna do, he said “What am I gonna do Dr. Robbins?” and I had no idea what he was talking about. I thought we were talking about his back. He said “I just invested all of my retirement funds in the stock market, because I just got out of the [unintelligible [00:03:40].07] and it crashed two days ago. What am I gonna do?” This was in ’07-’08.

We talked for quite a bit, but unfortunately he had put all his money in the stock market. He didn’t have it in hard assets like apartments and self-storage and those kinds of assets. Unfortunately, he lost about 30%-40% overnight, and that was of his lifetime earnings. I realized I never wanted to be in that position, so that’s what really got the ball rolling on the commercial real estate for me.

Joe Fairless: After you had that moment with the gentleman, what did you do after that?

Dr. Brian Robbins: I began to research. I had dabbled in a few single-family homes, and we just weren’t pushing it down the road much. We were just doing it really slow, and low-key; and again, research, research, research, read, read, read and wanted to become as knowledgeable as I could in this asset class. So that was where I really started, in the research component.

Joe Fairless: Okay. Any particular research sources that were more beneficial than others?

Dr. Brian Robbins: We did Bigger Pockets… I actually eventually went through a mentoring program, kind of like what you guys have. It’s with a company called 37th Parallel.

Joe Fairless: Yup, they’re close by where you live.

Dr. Brian Robbins: Yeah, exactly. It was close, and those guys are pretty sharp, so we did that and it really advanced our learning curve very quickly.

Joe Fairless: And then, once you got the research phase complete, or rather enough to where you felt like you were ready to rock and roll, then what happened?

Dr. Brian Robbins: Another fella that I partnered with – we started Wellings Capital, and we took on a third partner, who was more of a silent guy, but could sign the carve-outs, and we began looking for good-sized apartment deals.

Joe Fairless: Okay. How did you meet these two people and what were their roles, high-level?

Dr. Brian Robbins: High-level – Paul Moore was my primary partner initially, and we were friends from church. We just had an entrepreneurial bond. My other partner, Wade, is a fellow that we had met through some other opportunities. He’s out of Dallas, and Wade is the CEO of 12 different companies and was very much interested in being involved in this, as well, so that’s when we brought him in.

Joe Fairless: And high-level what did each of you do?

Dr. Brian Robbins: I was kind of the physical asset guy. I was out pounding the pavement, looking for assets. Paul was the marketing guy, and he was out looking for investors primarily. And then Wade – he’s got a lot of contacts, but he mostly was a silent partner for the most part, and was there to help make sure that the deal got financed properly.

Joe Fairless: Got it. So balance sheet liquidity?

Dr. Brian Robbins: Yeah, exactly.

Joe Fairless: Okay. What was the first transaction you all did, and how many transactions in total did you all do?

Dr. Brian Robbins: Yes, we haven’t done a ton of transactions. We got started kind of at the wrong time. When I say wrong time – we found out very quickly that over about a three-year period we did (when I say “did”, we evaluated) deal after deal after deal, and it was about four and a half years ago, and the market was very frothy. Everybody had found out about multifamily properties, so as you probably know, it’s difficult to find deals that make sense in this environment. We made it to best and final on probably 20 deals, and just what we like to call “dumb money” outbid us, and whether it was 1031 money that knew they were gonna lose 20% if they had to pay taxes on it, so they didn’t care to overpay, or if it was foreign money that knew if their economy just took a down hit, they would lose the money, so they didn’t mind overpaying… So we lost a lot of deals to that.

Our first deal was in Chattanooga, Tennessee, and — I know you like to hear the goods and the bads… We got all the way through due diligence — and this is both our best and our worst deal.

Joe Fairless: [laughs] Okay…

Dr. Brian Robbins: It was our worst deal because as we were doing due diligence, there were 16 buildings in this property, and we got into the crawl spaces and they were all full of — well, excuse me, 10 out of 16 were full of black mold. And I mean, not just a little here and there; it was up into the walls, it was in the insides of the building… It was  a nightmare. And fortunately, we had about 35 people doing due diligence and they were crawling all over that place… And fortunately, we were able to find that, because if not, it would have been an environmental nightmare, and it would have taken us to the bottom of the ocean on that one.

So even though we had put a hundred hard on that deal, we were able to back out because of this undisclosed environmental nightmare. So it was our worst deal, because we didn’t turn it, and it would have been a bad deal, but sometimes the deal you don’t do is your best deal, and that saved our shirts by not doing that deal.

Joe Fairless: What would have been the process to get rid of that mold, and how much did it cost? I’m sure you all looked at it like “Well, alright, it’s got black mold. Someone’s gotta fix it, so what do we do to remediate it?”

Dr. Brian Robbins: Yeah, the remediation process is very lengthy, very expensive. We actually talked with some of the folks that were working there; they were maintenance staff, and that management/ownership team had already got bids on it… And if I remember correctly – it’s been a couple years, but if I remember correctly, they stopped asking questions when it went over $650,000, so we just decided at that point, because there were so many unknowns, there was no way we were gonna do that deal… Especially since that was our first deal together as a team. So we just decided to step back.

Joe Fairless: What happened with that property?

Dr. Brian Robbins: After we got our money back, we just turned our shoulder and went the other way.

Joe Fairless: Right. Not even curious…

Dr. Brian Robbins: Well, we just decided we didn’t wanna disclose anything; we weren’t trying to hurt them in their process, and we just decided that we’re gonna just take the high road and be gone. I’m not sure, but I have a feeling they went in and finally remediated it.

Joe Fairless: Okay. How many deals did you all close?

Dr. Brian Robbins: After that we closed a 125-unit deal in Lexington, Kentucky, and we still own that one. It’s a townhouse apartment complex, and that’s going very, very well. I just got off a call a few minutes earlier and we’re 100% either pre-leased or leased. So that one is really starting to turn around. It was a little bit older property, 1968 or 1972, I forget now, but had some issues and had some things we wanted to do to it, so we did those things, we had some initiatives for some cap-ex…

Joe Fairless: Like what?

Dr. Brian Robbins: We put in a  grilling area, we put in a pergola, we put in a dog park, we put in all-new exercise equipment, we had some wood fascia type problems on the exterior, so we had those repaired, and then we completely painted the entire property on the exterior.

The interiors had been upgraded approximately three years prior, so the interiors weren’t too bad, but everything else kind of needed some new life, so we went through and did all those things, and now it’s paying off.

Joe Fairless: How much did you buy it for?

Dr. Brian Robbins: It was in the nine range… It was just under nine.

Joe Fairless: And how much are you putting into it?

Dr. Brian Robbins: We put about seven-something, off the top of my head. In that range.

Joe Fairless: Five-year business plan?

Dr. Brian Robbins: Five to seven. We like to do accelerated appreciation schedules. It will kind of use that up in about seven.

Joe Fairless: And what type of financing do you have on it?

Dr. Brian Robbins: A four-year IO.

Joe Fairless: A private lender, bridge loan, or…?

Dr. Brian Robbins: Arcadia.

Joe Fairless: Okay, so private. Got it.  You mentioned 100% leased or pre-leased, so people might be thinking “Well, that’s good, and an opportunity, because your rents could be pushed more.”

Dr. Brian Robbins: Exactly.

Joe Fairless: How do you think about it?

Dr. Brian Robbins: The exact same way. In fact, that was our conversation. We are leased, we have six units that are empty, but they’re pre-leased, so we told them go to full market rent and bump it past that.

Joe Fairless: And see what happens.

Dr. Brian Robbins: Exactly. It’s an  opportunity.

Joe Fairless: So that 125-unit – was that the one property that you all closed on?

Dr. Brian Robbins: That’s the one multifamily, and we turned our attention a little bit after being frustrated on so many of the deals just not making sense, so we’ve raised money for a couple other deals, but they were both self-storage, that closed last year.

Joe Fairless: Okay. What about this 3,200 square-foot shopping center? That piqued my interest.

Dr. Brian Robbins: Yeah, 32,000. That falls under my–

Joe Fairless: 32,000, yeah. A zero is important.

Dr. Brian Robbins: So I wrote a book, and my book is really for professionals, for physicians. As a healthcare provider, I really wanted to do something for them… It’s about multifamily investing, and I [00:11:51].17] my worst deal ever, when I bought this property I was young, I was naive, and I was listening to my accountant. My accountant, it turns out, was in bed with the seller… So I bought this big property because my accountant said “You’ve gotta do something for taxes. You need a place to grow into. Your business is booming, let’s go do this”, and little did I know that he was getting (I believe) paid on the side… It was one of his best friends who was selling it.

I bought this property with the idea that “Oh man, I can put commercial tenants in there and it’ll be great. They’ll pay it off.” That was about the time NAFTA hit this part of Virginia, and we lost manufacturer after manufacturer, so the retail industry — I know that a lot of people are talking about that now, that retail is having a tough time because of the internet, and e-sales, and all that… Well, it hit South-West Virginia long time before that, because all of our manufacturing went to Mexico. So I would say in the 65% range as far as occupancy in the retail space.

I’ll tell you, one of the biggest things that I talk about in my book is that it doesn’t matter if you’re a physician, it doesn’t matter if you’re the president of a company… If you’re gonna invest in an asset class, you’d better take the time to become an expert, and not just listen to the advice of your accountant, your attorney, your buddy, your colleagues at work. You’d better know all of the ins and outs, and you’d better be able to vet it yourself and do your own due diligence, because no one has your best interest at heart other than you. That’s one of the big lessons I pulled from this – you’ve got to do your own due diligence, and you’d better become pretty much an expert in that field. If you’re gonna invest in multifamily, you’d better learn it inside out.

Joe Fairless: You currently have that shopping center…

Dr. Brian Robbins: I do. I’m in the process of actually converting it right now to a mixed use. Part of it is — I’ve got a great tenant in the basement, which is half the building, and it’s a school. In the upper spaces I’ve got a couple medical facilities, and then we’re gonna put in self-storage… So it’s gonna be a mixed-use facility.

Joe Fairless: Okay, office and self-storage?

Dr. Brian Robbins: Correct. So when I say basement… So the back half of the building — it’s on-grade, so the back half is walkout, so they just have to drive around to the other side of the building… But it’s a special needs school. They work with the Down syndrome, they work with Aspbergers, they work with autism… And it’s owned by the hospital. They came in and they pumped $300,000+ in buildout, and they signed a seven-year, with another eight-year option, so we’re good there.

Joe Fairless: What was the purchase price for the property?

Dr. Brian Robbins: For this building? All-in, with buildout and the whole nine years was 2.7.

Joe Fairless: With the 65% occupancy, is it costing you money every month?

Dr. Brian Robbins: Because my medical clinic is here, it’s really kind of right at that breakeven point. So it’s not costing me anything, but it’s also not turning into a great investment; that’s why we’re gonna transition it.

Joe Fairless: What are some things that you’ve tried to do to increase occupancy that haven’t worked?

Dr. Brian Robbins: That have not worked… Well, I’ve worked with some of the local realtors that said they were the best commercial realtors in the area, and they’ve done a very poor job at getting folks in. That’s primarily what we’ve done. We’ve tried ads, we’ve tried a bunch of different things, but it just hasn’t really panned out as what we had hoped originally when our accountant was pumping us up about it.

Joe Fairless: On the flipside, what are some things that helped you get to 65% occupancy, besides your business?

Dr. Brian Robbins: It turned out that the hospital was a lead through another real estate contact I had, and their boys just happen to play basketball together, and traveling with basketball, and he was the president of the hospital, and he found out about our building, so… Having contacts and having a good reputation in the community is kind of what’s brought them in, for sure. So that’s something that obviously I think anytime you could have a great reputation, it’s important.

Joe Fairless: What type of process is involved in converting an office to self-storage?

Dr. Brian Robbins: This is a building — you could consider it very similar to a warehouse, to some extent. It’s got high ceilings, it’s got some openings. It’s got a few firewalls, but primarily you can commend and you can do buildout and you don’t have to touch the structure. Also, the buildouts can be relatively inexpensive. They have a product which is basically sheet metal, and they come in and they measure it, and in a short time, as long as you cut them a check, they come back with all the walls, all the doors, and it’s gonna be all set up for it. So it’s really pretty easy to do a conversion like that.

Joe Fairless: Approximately how much square footage are you converting, and what’s the approximate cost for doing so?

Dr. Brian Robbins: Upstairs we’ve got 16,000 square feet. About 6k of that is utilized, so it’s gonna be about a 10,000 square foot space when we’re building out. You can usually get about 75% of that to be usable, rentable space, not including your hallways and all. It’ll be under 200k to do that, probably a fair amount less. We’re still putting all of the estimates together, but we’re gonna come back with LED lighting, motion sensors, we’re gonna have dehumidifiers in this part of the country; there’s gonna be climate controls, so we’ve gotta make sure that that’s all squared away. A lot of the expenses have already been paid, because we own the building, so that’s why it’s a pretty easy deal to do.

Joe Fairless: You don’t own the building free and clear, do you?

Dr. Brian Robbins: No, not yet.

Joe Fairless: Okay. So when you do the $200,000 in conversion costs, does that come from a new loan?

Dr. Brian Robbins: It could, and we’re still in the process… We may just pull it out of the pocket. We’re talking with a couple banks right this minute. We’re actually talking with a couple of hard money lenders as well, so we’re just kind of looking at our options right this minute.

Joe Fairless: And who’s “we”?

Dr. Brian Robbins: Me and one other person.

Joe Fairless: Okay, so you’re 50/50 on this deal with–

Dr. Brian Robbins: No, I’m 100% owner, but my wife is the other… [laughs]

Joe Fairless: Oh, got it. Fair enough.

Dr. Brian Robbins: I wasn’t trying to be cryptic or mystical.

Joe Fairless: Yeah, yeah… I was just wondering if you had another JV…

Dr. Brian Robbins: No partner on the building, no.

Joe Fairless: Okay, got it. Cool. So that’s what you’ve been focused on, as well as what you’re about to be focused on. Anything else that is coming up for you, that you’re excited about?

Dr. Brian Robbins: Yeah. I was one of the founding partners of Wellings Capital, the company we talked about previously. I’m in the process of being bought out there; my other partner is taking it over 100%. So I’m in the process of creating a new company, and we’re gonna probably just work to be passive investors. Again, my love is professional contacts, so I’m really focusing on the niche of helping medical doctors, physical therapists, chiropractors, dentists, you name it, professionals – really focus on… A lot of us, unless you work for a big healthcare system, you don’t have a predetermined retirement plan, so helping those folks figure out a way to make sure that — they’re highly paid, but wage slaves for their entire life, so helping them create passive income. So our new company, WealthGen Capital, is gonna be focused on that.

We’re probably about a month away from putting a podcast together, and we’re gonna get all the infrastructure in place; it’s gonna be called The Rental Nation, and really focusing on just the whole mindset of renting and how entrepreneurs can take advantage and create wealth for themselves from that mindset of just renting, and not owning.

I’m looking up to people like yourself, who have had these long-standing podcasts. I’m a little bit older guy; I didn’t even know what a podcast was not all that long ago… So I’m in the process; I’ve got a couple of young guys pushing me in that direction, so we’re in the process of creating that. That’s what we’re excited about. It’s a new direction.

I don’t think we want to actually run the assets anymore. We’re in the process of vetting a few syndicators, guys that are out there that do this for a living and they’re professionals, and they have lots and lots of deals in their background, and they’ve handled them well… A lot of physicians don’t even have time to really spend it looking at all these different syndicators they could invest it, so we wanna take that out of it for them, and really work to bring the two together… So that’s kind of what we’re doing – we’re in the process of vetting them and putting all the infrastructure together, so I’m pretty excited.

Joe Fairless: Based on your experience as an entrepreneur, as a real estate investor, what is your best real estate investing advice ever?

Dr. Brian Robbins: My best ever advice – so when I wrote my book, I came across this article… In 2014, it was by Fidelity and it was entitled “Physicians’ savings behaviors and retirement readiness.” And the article discussed how many of the physicians are not really ready for retirement, and because they entered the planning or funding stage of their retirement life later than their contemporaries, they kind of run up against this high level of retirement funding pressure. It’s not real, it’s self-imposed, and it reminded me of the white coat syndrome. It’s a medical condition where people just walking into a doctor’s office, their blood pressure goes up. You can measure it, it’s a real deal… And so I coined the term professional’s white coat syndrome, because of this retirement funding pressure.

So these guys and girls that are very intelligent, they’re at the top of their fields, but they make crazy decisions on investing — in fact, I read a few articles that talk about some of the Wall-Street firms out there… There’s lots of great ones, but some of them would take advantage of this and say “Oh, well, physicians are an easy prey.” So my best advice ever – and I explained this a little bit earlier – was to make sure that you’re not investing because your buddy said to in this deal. “I’ve got this insiders deal and you’ve gotta check it out.”

Joe Fairless: Or  your accountant. [laughs]

Dr. Brian Robbins: Your accountant, or your colleague said he did it… Because a lot of times they didn’t do due diligence either. That’s the key – really doing your due diligence, learning about the asset class, taking the time to become an expert. That way you’ll feel confident and you can go with your gut, and when you come across a good deal, you’ll know.

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

Dr. Brian Robbins: Absolutely.

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

Break: [00:21:40].29] to [00:22:20].13]

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

Dr. Brian Robbins: Best ever book – I’m gonna put three. Obviously, I read the Bible quite frequently, and that’s number one. I like Grant Cardone’s 10X Rule book, and then I’ve just started Tim Grover’s “Relentless: From Good to Great to Unstoppable.”

Joe Fairless: How would you start over if you had little or no capital?

Dr. Brian Robbins: Of course, I am kind of starting over with this other company, but if I was–

Joe Fairless: The money part though, because I don’t imagine you’re starting with low or no capital. You’re reinventing yourself.

Dr. Brian Robbins: Yeah, that’s right. I’d either be a deal finder for other people, and just bring them deals and get paid for that… Or I’m very intrigued by just using arbitrage in the Airbnb space. Or I would maybe work with local real estate investors and just wholesale deals – get them under contract and then wholesale them, and I’d never have to invest myself until I built up a war chest. Or, lastly, I’d just go and be a trout fishing guy.

Joe Fairless: [laughs]

Dr. Brian Robbins: Because you know, trout never live in ugly places. They only live in nice places.

Joe Fairless: Oh… Hey, I have a feeling based on the tone in which you said that that would be the number one option for you if you had to start over financially.

Dr. Brian Robbins: It could be, yeah. You never know.

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

Dr. Brian Robbins: I’ll tell you, the best deal — we spent $31,000 to make $509,000. It was a forced appreciation on this 125-unit asset that we have. They had $35,000 in gas costs per year, that was paid by the previous owner. We invested $31,000 in digital thermostats; we’re now billing back the tenants, because everybody else in the same submarket was billing their tenants for that. If we average a 92% occupancy and we collect 95% of that $35,000, 32k will be added to our NOI, and a 6% cap that creates $509,000 in value.

Joe Fairless: I love cap rates, when you’re selling especially.

Dr. Brian Robbins: Forced appreciation is cool.

Joe Fairless: And forced appreciation, yeah. Even more the forced appreciation. We talked about some challenging deals… What’s a mistake you’ve made on a transaction that you haven’t mentioned already?

Dr. Brian Robbins: Okay, so the worst deal ever — I saw that you were a Texas Tech Red Raider…

Joe Fairless: Yeah.

Dr. Brian Robbins: I was on a college baseball scholarship, but a little school South of there – my worst pitching performance ever was giving up three home runs to the Red Raiders and one inning.

Joe Fairless: Ohhh…

Dr. Brian Robbins: Oh, you meant investing mistake… [laughter] Okay.

Joe Fairless: Where — was that in Lubbock?

Dr. Brian Robbins: That was in Lubbock, yes.

Joe Fairless: Yeah, it’s a home run friendly park, so I’ll throw you a bone.

Dr. Brian Robbins: Okay, I appreciate that. And the wind must have been blowing at like 90 miles an hour.

Joe Fairless: Of course, clearly. Well, there is a lot of wind.

Dr. Brian Robbins: For sure. My worst investment ever – and it will eventually hopefully be one of my best, as I convert this into a self-storage.

Joe Fairless: What is the best ever way you like to give back to the community?

Dr. Brian Robbins: My wife and I adopted eight children. We have a total of ten, but we adopted seven Russian orphans, all at once. At the time we were told it was the largest single adoption in U.S. history. Now, I don’t know if that’s true or not, but that’s what they told us at the Russian Embassy. But raising eight kids that are not our own is a major way we do it. We support a couple kids, and we are really hoping to use commercial real estate [unintelligible [00:25:16].18]

Joe Fairless: What are the age ranges? I won’t ask you to say all their ages, but now what are the age ranges?

Dr. Brian Robbins: Now, 35 to 6.

Joe Fairless: 6 years old to 35 years old.

Dr. Brian Robbins: Yeah.

Joe Fairless: Wow. Best Ever way the listeners can get in touch with you and learn more about what you’re doing?

Dr. Brian Robbins: It would be Brian@wealthgencap.com. It’s probably the easiest way to get a hold of me.

Joe Fairless: Cool. And then we’ll put your website, wealthgencap.com in the show notes, so Best Ever listeners, you can click through and check that out.

Brian, thank you so much for being on the show, talking about lessons learned on your 32,000 sq. ft. shopping center. The lessons that you learned – not the hard way, fortunately – on the Chattanooga property with the black mold, and the thermostat forced appreciation example for the 125-unit in Lexington, Kentucky, and how you’re reinventing yourself as well, or rather evolving your approach to what you’re focused on. And then also getting into the details of the shopping center conversion. Very interesting stuff. So thanks for being on the show. I hope you have a Best Ever day, and we’ll talk to you again soon.

Dr. Brian Robbins: Thanks so much, Joe.

Follow Me:  

Share this:  

JF1789: Ground Up Development, Asset Management, & Litigation Tips with Roni Elias

Roni always loved real estate, he worked in the industry for years before working in his current role. He helps manage a large portfolio for his company, as well as works on the funding side. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Someone has to be the good cop, someone has to be the bad cop” – Roni Elias


Roni Elias Real Estate Background:


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

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


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

Roni Elias: Wonderful. Thank you so much for having me.

Joe Fairless: Well, I’m glad to hear that, and it is my pleasure. A little bit about Roni – he’s the lead asset manager for TownCenter Partners. He has worked in litigation cases reaching over 9.5 billion dollars, managed a portfolio of over 520 million in real estate assets at a previous firm. Based in McLean, Virginia. Did I pronounce that right?

Roni Elias: Yeah, McLean, Virginia.

Joe Fairless: McLean, Virginia. With that being said, Roni, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Roni Elias: Sure thing. Thanks for the introduction. Previously I was very heavily involved in real estate assets, and predominantly we were ground-up developers, going anywhere from purchasing hundreds to thousands of acres, and being the master developer, holding back sometimes portions for multifamily development or retail development, and selling off residential portions, outparcels and so forth.

We grew from a very modest firm. We were backed by very significant private individuals. We grew from probably a five-million-dollar firm, in excess of almost 600 million. As our ownership team started to get a little bit older, we started to liquidate some assets, so they could retire. I was then given the opportunity to do something a little bit outside of real estate when I came and joined TownCenter Partners, where we do probably something very unique – while everyone probably hates the word “lawsuits”, or being involved with a lawsuit, we look at a lawsuit as an asset. A lot of plaintiffs come to us – or plaintiff law firms – saying “Hey, I’ve got this great case. It’s against a Fortune 500, or this massive company. Lawsuits are very expensive, I need assistance.”

We step in, we fund that lawsuit or fund the company that has been essentially hurt by that lawsuit to keep it afloat, and then when they win their lawsuit, we’re repaid what we invested, plus a portion of the winnings. And if the case, for some reason, is not successful, no harm, no foul; we have taken that financial loss and the plaintiff can just go on from there. So we’re definitely assisting folks, and we started to do a dramatic amount of real estate litigations, and a lot of our clients now who have won their lawsuits – we’ve created kind of our asset advisory side, where we’re out there scouring for talented general partners, where we’re created our own fund for clients who have now successfully won their lawsuits and wanna put their financial earnings to work… And seeing who are talented GPs to partner up with. We will just be focusing on the multifamily sector. We think that that’s a great sector to be in, and it can create a great income stability for our clients. We’re just very excited for what the future holds for everyone right now.

Joe Fairless: Well, so many questions to ask… Let’s start with — when you were working with the ground-up development team and you were developing hundreds of thousands of acres, how did you get involved with that, and what was your role?

Roni Elias: I started off initially as an asset manager. We were a very small team, and our ownership group kind of wanted to be in control of the process, the planning, and kind of creating large-scale development projects. I always had a love for real estate; it was always  great that you could take a drawing, where sometimes there was just a big, square box, and just saying “Hey, this corner is going to be apartments. Along this major highway we wanna do a retail shopping center, grocery-anchored.” We really love that.

As we started to do it more and more, I’ll tell  you, it was a lot of probably brain cell damage. We predominantly were developing in Florida and New York…

Joe Fairless: Oh, wow…

Roni Elias: …and we got to see some extreme heights, where you could have bought a property for 2-3 million dollars, and the next day you were getting phone calls saying “Hey, I wanna buy this for 4-5 million dollars.” Appreciation was happening through the roof. And then during the downturn, where things were just so bad, we had some development projects where we had poured millions into it, and a new mayor was elected and there’s now a referendum on any large-scale developments. And now millions of dollars poured in for design plans, engineering, legal fees and all that, and now you’re kind of holding something that “has a diminished value” because the city wants to look at its new scale type of developments.

So it was very exciting, we got to experience some great highs, but we during the Great Recession even a firm of our size, we did have to give back the “keys” to some assets, because they just did not work… And we worked some things out with some banks. We had to restructure some deals with them; and some banks were great to work with, some not so great. Again, when we’re looking for GPs to partner up with our fund for our clients, we don’t look at it as really a  bad thing that folks went through a tough time, or some things happened to them. We’re doing our due diligence and seeing “Hey, did you at least live through a bad fight call, or how did you deal with the situation?” Because life is not perfect. Things happen, and how you react to it is the most important thing, and how you dealt with those situations.

Joe Fairless: When you’re in a tough spot and you’re working with a bank, or you’re attempting to work with a bank, what are some things a bank that isn’t as amenable to you working with them, what are some things that they’re saying to you, versus a bank that is willing to work with you more?

Roni Elias: I’ll give you at least a tactic that I think is the best way. I think there should be always a two-team approach, and the best way to attack it is someone’s got to be the good cop, someone has to be the bad cop. I predominantly took on the position as the bad cop, to kind of drill things down while either another team member of mine would be the good cop, or our legal counsel would try to be the good cop.

Our goal was to always save the assets. Sometimes banks are just very unrealistic. Back in the day when you’d just call them up for “Hey, I’d like to borrow 20 million”, their response was “Why don’t you borrow 30 million?” Now the phone call was “You owe me 25 million. I would like a check for 25 million tomorrow.” And my response would be “Well, let me go and look underneath my bed, and if I have 25 million dollars, it will be there tomorrow.”

I think as we’ve gotten older, especially now that we’ve been through that downturn, we try to always see where that person is coming from. Understanding people might be going through bad days, and if this person is maybe sometimes speaking that aggression out on you, it’s okay; I don’t try to take things personal, which in the back of my mind it was personal, because “Hey, you’re taking this asset that we added so much quality to and put so much money into…”, and things change; and it didn’t just change for us. This was kind of a halving across the board for everyone.

Joe Fairless: When you were being the bad cop, and say your counsel was being the good cop when you’re communicating with the lender, what were some things that you would say or talk about as the bad cop?

Roni Elias: As the bad cop, we’re gonna make this a very long, arduous journey. Today you’re getting some payments. We’re asking for extensions; we’re asking for maybe lowering the payment. If you aren’t happy with getting paid $100,000 a month, I wonder how it’s gonna feel when you’re getting paid zero a month, racking up hundreds of thousands of dollars in legal fees. We made a name for ourselves — I think one thing you have to also make sure is you don’t say something unless you’re actually gonna do it or back it up… Because the worst thing is to put deadlines or say stuff and you just would not follow through.

Our in-house and even our outside counsel understood when we would say something (or when I would say something), that they could pretty much take what I said as going to the bank. So if we were gonna fight this aggressively, or we were closing on this deal on XYZ date, it was going to happen. So I think them just making sure that what you say is actually gonna happen — and some folks might not know this out there. Once the loan goes into default, usually there is some person, a special asset person who’s usually a legal cousin Vinnie, who wants to kind of just scare you and intimidate you into all of these actions to take. “Hey, if you’re not going to get us our money, we’re gonna chase you till the end of time for this”, and all of these things, and kind of scare you.

Those folks – what maybe a lot of people don’t know about them is they have a financial incentive to squeeze as much blood out of you as possible, because they are going to earn either a bonus or some type of commission off of you by squeezing every little penny out of you. Again, nothing wrong with that; everyone has to make a living. But I think knowledge is power coming into discussions with them, and just saying “Hey listen…”, you lay it out there for them, you try to make them understand things…

And sometimes I would say they’ve got a little bit of a sick head; it takes a couple knocks to the skull for things to now start making sense, saying “Oh, jeez, these guys are kind of difficult”, and making them realize for every dollar we’re spending in legal fees, you’re probably spending 5 or 6 dollars. Is that a wise benefit of the bank’s time and money? …while “Hey, maybe we should give these guys some breathing room, so they can refinance, earn some money during this time period, and we all go our separate ways.” Because at that point it was “Okay, do you wanna take the property back? What are you gonna do with it? You’re a bank. You’re not in the business of developing. Or do you wanna start building apartment complexes and doing that? No.” So what were they gonna do? They were gonna take it back, have to fire-sale it… Okay, so we could have refinanced you out higher than that fire-sale, and all it was was time, and you’re still earning a monthly P&I payment.

So it took some convincing. Some did not wanna see it, so finally – “Okay, here’s the key”, and walked away, no recourse against that. And at the end of the day they did what we expected – they fire-sold it, and had to take a substantial loss than the offer we had given them. The market dictates what people are willing to offer, and then when things are in that distressed position, it causes different dynamics. Either has to come all-cash purchase, or there’s a lower LTV or LTC, so the pool of buyers becomes much more limited. Some banks recognize that, some did not.

I would say an unfortunate [unintelligible [00:15:38].11] good learning experience, because now definitely — at least myself and the team, we definitely look at things much more differently. Back then when things were just gung-ho and the phone was always ringing off the hook, “Hey, I wanna buy this asset, boom-boom-boom…” Looking back at it, I wish we said yes to a lot of those phone calls, instead of wanting to hold on… So that’s just given us kind of a much better outlook, especially now going forward, and being extremely good shepherds for our clients, who — we’ve seen them go through very difficult positions with their lawsuits, and now they came to us and said “Listen, I wanna do something that can help my family” or “I wanna have some type of income-generation going forward”, finding those quality general partners for them, so they can have a healthy cashflow and their initial investment is protected as much as possible going forward.

Joe Fairless: Let’s talk about some of the circumstances where there’s litigation and you all fund the company through that process, and then you share on the upside… What are some examples — and obviously, share whatever you can share, but I’m curious of some examples where there’s this level of litigation. What happens where there’s a multi-million – or in this case, when I introduced you and your bio, I mentioned that you’ve worked in litigation cases reaching over 9.5 billion… So what are some things that one company is doing to another that causes this high of dollar values?

Roni Elias: Let’s take an example, and – not to get a letter tomorrow from the Fortune 500 company saying “How dare you use our name?!” Let’s take an example, and let’s try to make it real estate-related… So let’s say the John Doe family in 1960 became joint venture partners with the Mouse company. At that point, the Mouse company was a very small company, and part of their joint venture agreement – that they would continuously grow together, and as new locations were built, they were 50/50 partners.

Let’s say in 2018 John Doe company has now 100 stores with the Mouse company. The Mouse company has now grown to be a publicly-traded Fortune 500 company worth billions of dollars. Someone inside of the Mouse company says “Man, these John Doe’s have really made a ton of money off our back. And you know what? Looking at this agreement, we think they actually are in default of their agreement. And if they’re in default of their agreement, do you know what we can do? We can take those 100 stores from them, liquidate them, give them 10 cents on the dollar, and we’ve now come into so much great cash and great equity. This is a home run for the Mouse company.”

[unintelligible [00:19:06].12] this is all highly unethical. You’re doing this to a partner that has been with you for 50+ years, and this was the deal. Just because the deal went great and you became a multi-billion-dollar company, and John Doe’s family has become wealthy off the deal, which one would say is a win/win situation for all”, someone in grand wisdom says “You know what, we can stick it to John Doe company and call them on a default.”

It’s a lovely Thursday, he’s out there drinking coffee with his family, and goes and checks his mail, and gets a letter from the Mouse company that says “Dear Mr. John Doe, we find you in default. We are hereby terminating our agreements. We are seizing the 100 stores. You will be receiving no more distributions, and we think after we do all the books more than likely these 100 stores have zero value, or you have to write us a check.”

Adding insult to injury, a Fortune 500 company wants to rob you blind and tell you at the end of the day “Hey, you might even owe us some money on top.” So John Doe quickly goes and speaks to their lawyer, has to file a lawsuit, and predominantly if you were to imagine yourself looking at the courtroom, it’s John Doe with his one-person attorney, and on the other side this Fortune 500 company who has five or six representatives there, and probably another five or six attorneys also, and spending thousands of dollars an hour saying how John Doe and his family are such bad people, and they were forced to call them in default, and so forth.

Joe Fairless: Got it.

Roni Elias: So John Doe comes to us and says “Hey listen, I’m up against the Mouse company. They are a multi-billion-dollar company. My attorney has told me it’s going to a million dollars to fund this lawsuit and go forward.”

We’ll review it, we’ll do our own underwriting, and give it a value internally. Then we’ll come up with, let’s say, “Okay, John Doe, we’re gonna fund your lawsuit for half a million or a million dollars.” Or if John Doe says “My attorney is working on a contingency fee. I need half a million or a million dollars to survive during the lawsuit”, we would do that also.

And then there would be a repayment structure where every six months the amount that has to be repaid is increasing… And as I tell everyone, it is increasing at a very high rate. But it’s not a loan, and so forth. It’s a non-recourse advance. Again, like I said, if the lawsuits flop, you never have to pay back that money. We take that loss.

So a year or a year and a half later the Mouse company says “How about we pay you 75 million dollars? We’ll take these 100 stores off your books, and we just separate and go away.” It is up to John Doe and his attorney to decide what’s fair; if the thinks 75 million is fair. He takes the 75 million, refers to our contract and sees what that million dollars has now grown to, pays us, and the rest goes to him, and everyone goes their separate way.

Had we not funded that million dollars, who knows what John Doe would have gotten, if anything. If you look at our tagline, that’s all that we’re doing – we’re here to help folks that are truly hurt, or trying to be taken advantage of by some larger player out there in the market, and just trying to tip the scale in favor of John Doe.

Joe Fairless: Got it. Thank you for that example, and thank goodness that you all are there for the companies that need help and can’t financially weather the storm during the litigation process.

Taking a giant step back, really quick, here’s a question I ask all the guests – what is your best real estate investing advice ever?

Roni Elias: The best real estate advice – listen to your gut and do your homework. If for whatever reason it doesn’t feel right, listen to it. There’s been multiple chances that “Man, I wish I did that deal.” I could have made so much money. And there’s been times where we were like “You know what, thank God we didn’t do it.” We would have been sitting here with a fat zero. So just listen to your gut and do your homework.

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

Roni Elias: Yes, sir!

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

Break: [00:24:17].25] to [00:25:18].15]

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

Roni Elias: The best ever book I’ve recently read… Believe or not, I’ve been reading the BRRRR book by Bigger Pockets. It kind of intrigued me a bit.

Joe Fairless: What is the best ever deal you’ve done? We’ve talked about some already… What’s the best ever?

Roni Elias: By best ever you mean largest profit ever made, or…?

Joe Fairless: However you define it.

Roni Elias: I’d say the best ever deal closed Friday, on a purchase for two million; on Monday we sold it for five.

Joe Fairless: Yes, please. Where was that located?

Roni Elias: This was located out in International Drive in Orlando, Florida. Heavy tour area, next to the Convention Center… A commercial piece of property where we had certain plans for it during the due diligence and closing of the property; a substantial tenant reached out to us, that wanted to purchase the property, and made us a deal that was too good to be true in such a short time period that we said we should be put in an insane asylum if we do not accept these people’s offer. We said “Let’s do it!” We were very hush about it. We did not even tell our lender about it.

They were very perplexed when we closed on Friday, and Saturday I was just saying “Can you just confirm what is the pay-off amount?” and the banker was like “Well, I can tell you what it is, but I’m kind of surprised why you’re asking about this.” I said, “Don’t worry about, we’ll talk on Monday.” On Monday our closing agent reached out to them and said “Hey, I wanna confirm the pay-off. Is it this?” They were like “Yes, it is. Thank you very much, we look forward to receiving the wire.”

That was probably one of our best deals ever.

Joe Fairless: We’ve talked about deals that didn’t go well, so I won’t ask about that again… What’s the best ever way you like to give back to the community?

Roni Elias: Right now at TownCenter — when we were created, 5% of our profits (not our investors’ or anyone else’s) we donate. We have two charities, Hands Along the Nile and Orphans Africa, and we also do a couple scholarship programs for young attorneys who are studying for the Bar. You reap what you sow, so we’re very big believers in that.

Joe Fairless: I completely agree. And how can the Best Ever listeners learn more about your company?

Roni Elias: I invite you to our website, which is yourtcp.com. I’m very accessible via email; if you ever wanna shoot me an email just to discuss whatever, roni@yourtcp.com. It would be a pleasure to help anyone out there that’s going through some type of difficulty, in a lawsuit where they’re the plaintiff. And I definitely wanna wish everyone an exciting 2019, and see how things go here for the rest of the year. It’s gonna be definitely some exciting time periods for everyone.

Joe Fairless: Well, Roni, thank you for being on the show, talking about the challenges that took place during the recession, and some insider knowledge on when you’re working with banks – how to approach it, the team members involved. I loved your “unofficial cousin Vinnie to scare you” analogy  (or reference, I should say), and how to have those conversations if we are in a situation like that… And then also, on the flip side, some deals that you’ve done that have received a tremendous amount of profit.

And then obviously, talking about what you’re focused on now, and representing those who need representation in order to receive the justice that needs to be received… So thanks for being on the show, Roni. I hope you have a best ever day, great catching up with you, and talk to you again soon.

Roni Elias: Thank you so much. Take care.

Follow Me:  

Share this:  
Joe Fairless with Guest Paul Moore Expanding and Growing Your Strategy

JF1594: Expanding & Growing Your Strategy When Deal Flow Slows #SkillSetSunday with Paul Moore

Paul is back with us today to tell us about his pivot into self storage from multifamily. For anyone who wants to get into self storage but don’t have any knowledge this is a great intro to the major points on self storage vs. multifamily. If you do have some knowledge on the subject, it’s never bad to learn more! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Paul Moore Real Estate Background:

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

Sponsored by Stessa – The simple way to track rental property performance. Get dashboard reporting, smarter income and expense tracking and tax-ready financials. Get your free account at stessa.com/bestever


 Theo Hicks:  Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. Today I’m your host, Theo Hicks, and I am speaking with Paul Moore today. Paul, how are you doing?

Paul Moore: I’m doing great, Theo. Thanks for having me on the show again.

 Theo Hicks:  No problem, looking forward to our conversation and learning more about what you’ve been doing since we last had you on, which — if you wanna listen to Paul’s first interview, it was two years ago this month as of the recording; so it might be a little bit over two years when you’re actually listening to this, but that is episode 809, entitled “Creating a 10-million dollar fund, building a hotel and focusing on multifamily.”

Today is Sunday, which means it is Skillset Sunday, so we’re going to be discussing a certain skill that Paul has, and we’re gonna be focusing on value-add self-storage. But first, a little bit of background on Paul – he is the founder and managing director of Wellings Capital. He was the two-time finalist for Michigan Entrepreneur of the Year. He’s based in Lynchburg, VA, and you can say hi to him at WellingsCapital.com.

Before we go into the specific skill in regards to self-storage value-add, can you tell us a little bit about what you’ve been up to since we last had you on the show?

Paul Moore: Absolutely. We have had a hard time — we are apparently not as good at acquisitions as Joe and his team, and admiringly watching Joe over the last 2-3 years and seeing his growth and his spectacular amount of deals he’s done, and the investors… I really admire him. We have not been able to pull that off. We have felt that the deals we have seen, mostly publicly marketed in multifamily, have been overpriced. The market is generally overheated, so it was hard for a guy who wrote a multifamily book called “The Perfect Investment”, which is still selling on Amazon and on our website, it’s hard to say “Hey, guys, we’re gonna expand into self-storage”, but that’s what we’re doing. We’re doing that for a number of reasons. One is the fragmented market.

Now, in multifamily there are only 7% of the 50+ unit apartments in the U.S. are owned by small operators, mom and pops. They’re almost all owned by more sophisticated, larger companies, 70%. But in the self-storage world, between 65% and 75% are owned by mom and pop or independent operators. There’s 53,000 self-storage facilities in the U.S. That’s the same as McDonald’s, Subways and Starbucks combined – I checked it myself – and about 40,000 of those are owned by independent operators and mom and pops, and they’re not maximizing revenue. They don’t need to. A lot of them bought or built these facilities a decade or two ago, and they’re clipping coupons, they’re happy to be 70%-80% occupied, or at the other extreme, they haven’t raised rates in years and they’re maybe 100% occupied and they’re happy. But there is a huge difference between a mediocre self-storage unit facility and a well-run one, and that’s where the opportunity is. This fragmented market is one of the reasons we jumped into this. That’s what we’ve been up to the last year or two.

 Theo Hicks:  Okay. And have you done any self-storage deals yet?

Paul Moore: What we decided is that self-storage is somewhat overheated as well, and we thought “Do we really wanna jump into this and take tens of millions of investor money before we have had experience in this?” So we decided the best way to do this would be for us to partner with operators who are already really good at this, who have gone through several market cycles. We spent the last 8 months actually interviewing and vetting sponsors; we’ve flown all over the country, I was in L.A. last week, Florida this week, I was in Atlanta several times before this, interviewing these self-storage syndicators, and we are actually co-investing with them. We co-invested almost three million dollars with one this summer, and we’re getting ready to do two more deals starting in the next month or so. By the time this is live, we’ll probably have a couple other opportunities available for investors.

 Theo Hicks:  Great. Can you talk about the numbers on the self-storage deals? Because people know how fix and flips work, and smaller rentals, and even larger apartments, but how does the process of analyzing the deal, what types of return metrics do you look at? … things like that, for that specific deal you’ve invested in.

Paul Moore: Absolutely. What we’re looking for in a deal is we’re looking for a property that’s on a major road, with a lot of traffic; it’s visible on that road, it’s not behind another building or down in a valley, and we’re looking to draw a radius around the facility and we’re looking at the population density versus the number of square feet in that radius. We like a 3 mile and a 5 mile radius. So we’ll draw that circle and then we will see where we’re at with that. Our goal is to be under about seven square feet of storage per person in that three or five-mile circle. If we’re under that, we’re likely under the national average, which means we’re likely in an under-supplied market. Now, I say “likely” because it’s not completely scientific. Places like Florida, Texas and California – they use more storage, they have virtually no basements, and they don’t use their attics often for storage, because especially in places like Florida, it’s really hot and it can ruin your stuff. So there’s a higher demand for stuff around Florida, especially around the coast, where there’s more income and more recreational toys.

So we’re looking to be under 7 square feet per person. As far as the metrics, it could be a development deal, and that would be different, but if it’s a regular value-add, cash-flowing deal, we’d be looking for 5% to 9% return to the investors annually, and then look for an appreciation in principal paydown, which brings the total return to about 18%-22% annually. That’s what we’d be generally looking at, and it’s very similar to where multifamily has been, especially in recent years passed.

 Theo Hicks:  Thank you for going over those specifics. Let’s talk about value-add, because you mentioned it a little bit before we went live that you were surprised that there was such a thing as value-add self-storage… Do you wanna talk about your discovery of this asset class, as well as some of the main things that are a value-add on self-storage?

Paul Moore: Well, one of the benefits of self-storage is you don’t have to deal with things like toilets, tenants and trash, but when I looked at self-storage – and I actually looked at it 19 years ago originally, in 1999… When I looked at it, I thought “Wait a minute… It’s just concrete, steel, and rivets. That’s all it is. What are the value-add opportunities?” I didn’t know what that was in 1999, but then in the recent years I did.

Apartments have carpeting, or hardwood flooring, and lighting, and paint, bathrooms and kitchens to upgrade, appliances – all these beautiful things. Self-storage is steel boxes, so where’s the value-add? I was surprised to find that there really is a significant set of value-add opportunities, that an experienced, really good operator can take advantage of. Some of these, by the way – they’re policy and procedure changes that add tremendous income and value.

For example, you can add U-Haul. U-Haul (or Penske) has all these independent distributor agreements with facilities, and they will often [unintelligible [00:09:33].09] will sign a deal with a self-storage facility. I was at one in Florida this week on Tuesday, and they were making $5,000/month in revenue from U-Haul. It took a little bit of extra work, but it wasn’t enough work to hire an additional person; so it didn’t cost much, and they were getting $5,000 in commission income. Well, multiply that by 12 – that’s $60,000/year, divide it by the cap rate, and let’s say that cap rate is 6,5%, that adds almost a million dollars in value to that facility.

Now, if it’s a five million dollar facility and you just added a million dollars, it sounds like  a 20% appreciation, and that’s true at the asset level… But you know what, Theo? That’s not true at the investor level. At the investor level, because of leverage, that 20% appreciation looks more like 60% appreciation in a typical leveraged deal. That’s a pretty amazing thing from just changing a policy and produce and adding U-Haul. But there’s a lot of other stuff you can do. You can add a nicer showroom, more point of sale items like boxes, scissors, locks and tape. You can sell insurance, you can have administration fees, late fees… Typically, mom and pops don’t like to do that.

You can also do a lot better job marketing. 50% as of a year ago – 50% of people who found a self-storage facility reported that they found it by driving by. They might have seen it on their iPhone or on Google maps first, but they drove in and that’s how they found it. Well, that’s a huge opportunity because using the online world, getting digital, having a website, doing Facebook marketing, Google AdWords, other online outreach is an opportunity to get in front of some of those mom and pop operators locally who are doing a terrible job marketing.

We looked at a self-storage facility in Raleigh (Raleigh, of all places), very hip and trendy city, that didn’t have a website. The lady said, “Why would I need a website? I’m 100% full.” Well, that says a lot right there. But anyway… Other things you can do is you can raise rates; that’s obvious, but it’s not necessarily as obvious as you may think. If you have $1,000/month apartment and you raise the rate 6%, somebody’s thinking “I’m gonna be here for years. That’s an extra $60, $720/year… I don’t wanna stay”, and they might move for that $60. But if you have $100 storage facility, they’re probably not gonna take a Saturday, pack up a rental truck, go and hire a few friends to move all their stuff down the road because you raised the rent by $6. So the tenants are inherently sticky.

Another factor with that is most tenants in self-storage think “I’m only gonna be here two or three more months.” You can survey them and they’ll say that, “I’m  just waiting till I can sell this stuff on eBay” or “I’m waiting till I move to that other house” or “I’m gonna put it back in my basement’, but often because it’s hitting their credit card, they don’t care as much, and it’s honestly there for years.

One investor we talked to in self-storage says “I decided to invest. When I was thinking about investing, I realized I had a self-storage unit for seven years I hadn’t even thought of. It’s just been hitting my bank account/credit card, and I hadn’t give it a thought.” That’s when he decided to invest. So there are lots of other things that can be done as well, but those are some of the main value-add drivers.

 Theo Hicks:  Okay. And then how do you actually find these self-storage deals? Are they on LoopNet, is there an MLS for these things, or do you have to be more proactive with your lead generation?

Paul Moore: Yeah, it’s probably somewhat similar to apartments… There’s letter writing campaigns, there’s driving by and stopping in; that sometimes works, but it’s a lot of work though. There are actually brokers just for self-storage facilities, and like in the apartment world right now, those brokers don’t want [unintelligible [00:13:41].00] they’re gonna be going to their friends, they’re gonna be working with people they already know, who will close, people that won’t embarrass them… So this is kind of the “Rich get rich, poorer get poorer.” Kind of what Joe has done with apartments – he’s got an inside track on lots of off-market deals; well, the people who are experienced in self-storage have a great inside track and a great benefit over beginners in this space, because the brokers are gonna call them first.

I just hung up the phone before this podcast with a guy named AJ Osborne. AJ Osborne was on the Bigger Pockets podcast that came out July 4th, 2018, and he talked about how he had 7,5 million dollars invested in a Kmart, and he had converted it to self-storage and he was on the verge of getting an offer (possibly within a day or two) for 25 million for that Kmart that he had retrofitted – while he was in a coma, by the way – and that’s only 40% leased up.

Guys like AJ are going to get deals that most of the rest of us will never see, and that’s one of the reasons we’re partnering with people and we’re raising up a fund to invest in other operators like that that have great experience.

 Theo Hicks:  You kind of touched on this already, but I wanna ask you anyway, so we can get a more detailed, specific answer… What advice would you give to someone who is listening to this podcast and they’re like, “Oh, self-storage sounds interesting to me. I wanna learn more. That might be a future potential investment vehicle”? What would your advice be to them in order to get started?

Paul Moore: Well, there’s actually seven ways to get started in multifamily or self-storage, and I go over this in a lot of detail on other venues. Quickly, they’re being a deal-finder, being a money-finder, just jumping in at a really high level, working your way up from really small to larger, going and getting a job for another operator and learning the business, or finding a mentor. I think that’s all seven.

I would recommend that you pick one of those and go for it. Become a deal-finder, for example, and take those deals to another company and say “Hey look, I’ve found this deal, and I’d love to partner with you and learn the ropes along the way.” Another thing you can do is you can find a mentor. There’s a guy named Scott Meyers in Indianapolis, and he’s got a great mentoring program. He teaches people to do self-storage. Apparently, they’ve had about 75-80 people go through their masters level program, and a lot of those people have become millionaires in a very short time. So those are two of the things I would do…

Oh yeah, the seventh way to invest (I thought I missed one) is to invest passively. That is to learn the ropes by investing, let’s say, 50k or 100k with another syndicator who’s doing the business, and ask them if you can learn from them along the way… Or maybe you just wanna stay passive and keep investing, and that’s a great way to do it, too.

 Theo Hicks:  What is the biggest difference you found between multifamily investing and self-storage investing?

Paul Moore: Well, that’s a hard question… I’m trying to think of a major difference, there’s not a lot. They have a similar Sharpe ratio, which is the return versus the risk ratio, and I talk about that a lot in my book. They have fairly similar value-add opportunities. Some of them start at 5%-10% cash-on-cash return, and then they have a total of, let’s say, 20% return, where multifamily lately seems to be a little bit lower, because it’s overheated somewhat, as we have all seen.

I’d say one difference is there are more ground-up development opportunities in self-storage, which can be great, but it can also be a curse. So if you get in on a ground-up opportunity in self-storage – and you can do that in apartments, too – you might not get your first distribution check for a couple years, but then there’s a really strong windfall on it. And of course, that’s possible in multifamily, but it’s not the kind of multifamily that I think Joe or I do, which is more of a momentum play or a value-add, stabilized class B multifamily.

But like I said, some of the self-storage deals we’ve been looking at and starting to invest in are like that Kmart that AJ has, where there’s no distribution at all for, say, 1,5 to 3 years, but then there’s a very large payoff after that. But there’s more risk with that, as well.

 Theo Hicks:  Is there anything that we haven’t talked about as it relates to entering the value-add self-storage investment industry?

Paul Moore: Yeah, just like multifamily, I think it’s really important not just to jump in. It’s a rough time in late 2018. Interest rates are higher, cap rates are staying low, which means the values are staying very high, and it’s a time for a newbie to get burned. So I would say be really careful. If you’re gonna invest passively, invest with a pro, somebody who’s been through several market cycles, which is, again, what we’re doing… And if you’re gonna do it on your own, be very, very sure that you have really evaluated it carefully and that you are in a situation where you’re not gonna get burned by paying too much.

Don’t let a banker and don’t let a broker tell you how much this is worth. You need to figure it out on your own, and if you’re not qualified yet, then make sure you are partnering with somebody who is.

 Theo Hicks:  Great advice. Paul, I really appreciate you joining us today on this Skillset Sunday. To summarize what we discussed – you explained the reason why you expanded into the self-storage industry, or at least one of the reasons why; it had to do with the fragmented market, and that a very small percentage of multifamilies over 50 units are owned by small operators, whereas a larger percentage  – I think you said 65%-70% – of self-storage are owned by small operators… So it opens up the opportunity for more of those value-add deals… And you mentioned that you got started with a partner who is very experienced, rather than jumping in on your own.

In regards to what you look for in deals, it needs to be visible on a major road, and then you draw a 3 and 5 mile radius around the self-storage facility and you wanna see a population density of under 7 square feet per storage per person…

Paul Moore: There are tools online that do that, that already draw that radius for you.

 Theo Hicks:  And then you mentioned the returns for the value-add plus appreciation plus principal paydown. Then you mentioned that a really good market for self-storage is Florida, which I can agree with, because I live in Florida now and I don’t have a basement, so we kind of just shove things into closets… And once we have kids, I’m sure it’s gonna get more and more difficult.

Paul Moore: Absolutely. And the deal we just invested in, by the way, this summer, is just South of you by a few miles… It’s in Lakewood Ranch area.

 Theo Hicks:  You also explained some of the value-add opportunities [unintelligible [00:20:41].06] You said add a U-Haul, a nicer showroom, more points of sale, like scissors, and tape and boxes, sell insurance, better marketing, and you can raise the rates.

How you find these deals – pretty similar to multifamily: direct mailing campaigns, driving for dollars, and brokers who work specifically with self-storage facilities… But like multifamily, they’re likely gonna go to their friends first, so you have to build rapport with this broker, and we’ve got plenty of episodes and blog posts about how to do that.

Then lastly, you went over the seven ways to get started as a self-storage investor, which was be the deal-finder, the money-finder, jump in at the high level, education-wise, start small and then work your way up, work for another operator, find a mentor or invest passively.

The biggest difference between self-storage and multifamily is that ground-up development – there’s more of that in self-storage, but besides that, the two asset classes are fairly similar. And then lastly, your advice for others who wanna get started is to 1) don’t just jump right in, because we’re at a point in the market where a newbie could definitely get burned… So if you want to become a self-storage investor, make sure you’re working with a pro, and do not rely on the bank or the broker for the valuation of these self-storage facilities. Make sure you figure that out yourself.

Paul, I really appreciate you talking with us today. Have a best ever day, and we’ll talk to you soon.

Paul Moore: Alright. Theo, thanks… It’s been a real honor to be on the show again. I hope you have a great day.

Follow Me:  

Share this:  
Joe Fairless with guest Chad Doty on a Best Ever Show flyer

JF1386: How Do You Remove As Much Risk As Possible In Real Estate Investing? With Chad Doty

If you ask Chad, the answer to the proposed question in the title, is to buy B class multifamily properties built between 1982 – early 2000’s. We’ll hear a better explanation and reasons why he believes this is the best way to invest in real estate with the least amount of risk. We also hear some difficult deals he’s had and how he was able to work through it. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:


Chad Doty Real Estate Background:

  • CEO of 37th Parallel Properties Investment Group
  • 12 years of multifamily real estate investing experience & 10 years of management consulting experience
  • Close to $300 million in real estate transactions
  • Based in Richmond, VA
  • Say hi to him at https://37parallel.com/
  • Best Ever Book: The Goal

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, Chad Doty. How are you doing, Chad?

Chad Doty: I am excellent, how are you?

Joe Fairless: I am excellent as well, nice to have you on the show. A little bit about Chad – he is the CEO of 37th Parallel Properties. He’s got 12 years of multifamily real estate investing experience and 10 years of management consulting experience. They’ve closed on approximately 300 million in real estate transactions.

Based in Richmond, Virginia. You can learn more about their company at their website, which is in the show notes page. With that being said, Chad, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Chad Doty: Yeah, you bet. Background – I didn’t grow up as a real estate investor. I was a business operations guy. I got dropped into companies to make them run better. But as my wife — I got a call when I was mid-thirties when our son was being born and I was four hours away, and I’m like “Ugh, I’m gonna be a road warrior. I’m getting a call about a son arriving and I need to fix this.” So I wanted to find better solutions where I wasn’t trading time for money, so I took that business skillsets and looked for ways to create passive legacy-level income, and that sort of led down the path of “Okay, let’s do commercial real estate, let’s do multifamily, let’s do B-grade multifamily and let’s focus on the best markets for B-grade multifamily.” It kind of all came from there.

We’re about 14 people, we’ve been in business since 2008-2009, and total transaction volume is around 380 million, and currently still running [unintelligible [00:02:34].11]

Joe Fairless: Did you initially have the B-class properties and the other things that you described at the beginning, or has that evolved to what you purchase now?

Chad Doty: It was from the beginning. What we looked at is — we didn’t grow up in it… It was “Okay, we want the characteristics of as recession-proof as possible, as evergreen as possible… Because nothing is ultimately fully evergreen, nothing is ever risk-proof, but how do you take out as many of risks as you can, and multifamily had the best long-term risk-reward profile of any real estate asset class, and was a hard asset, tax-advantaged, evergreen; it’s food and shelter.  So we picked it based on the data, and since we’re sort of business deconstruction and improvement experts, we were able to go through that process and kind of said “Okay, let’s play here and just get good at it.” So it started from the beginning.

Joe Fairless: And how do you define B-class properties and why did you choose B-class?

Chad Doty: You’ll hear B, you’ll hear workforce… It just all depends on the resident profile you wanna get good at serving, and for us that is the blue collar, light-blue collar; they’re making anywhere from median household income, from 45k to 85k/year. Median household income in the U.S. is like 57k, so you’re serving the meat of the bell curve; it’s the largest group of the U.S. population. That is how we define it, and we’re typically buying assets that are built between 1982 and early 2000… So B- to A-.

Joe Fairless: And why that age?

Chad Doty: Basically, the box is already there, meaning that HVAC systems, the plumbing – all that stuff is today normal. There’s nothing really that’s changed materially in that. You walk in, you’ve got a  living room, you’ve got a kitchen, you’ve got bedrooms and bathroom. But you can buy at 30 cents to 50 cents of construction costs, add another 5k-10k/door and get a really good product. So the rental improvement range is far better in B grade multifamily and the resident base is far more insulated from economic shocks than let’s say tip of the spear A, or credit-restricted C.

Joe Fairless: With properties that were built before 1982 – have you purchased any, and if so, what did you notice with those in particular?

Chad Doty: ’82 is sort of a soft number. The hard number is really 1979-1980, because then we’re primarily missing all the lead and all the asbestos risk. That said, there are phenomenal assets that are B+, A- assets, trophy assets on the beach, built in the 1950’s, but they’ve gone through some level of remediation. We don’t buy coast market trophy asset stuff, so it lets us avoid that risk… And generally, you’re gonna have better roof slope structures and better envelopes with some of the stuff built after that timeframe, so that’s kind of why we avoid it.

Joe Fairless: What’s been a challenging property that you worked through and what aspects of it was challenging?

Chad Doty: We bought a deal in Houston that backed up to a [unintelligible [00:05:41].16] and maybe a fifth of the property was [unintelligible [00:05:47].04] and we dealt with some issues on Hurricane Harvey. It was insured, we had business interruption insurance and all that… While it’s actually gonna come out better economically in the long-run, dealing with a 500-year storm is no fun.

It’s one of those things where you think you’re fine, but then just nature happens. We don’t buy stuff on the coast, and this one was insulated, but obviously, stuff happens, and 36 of 104 units got downed by Hurricane Harvey. So that’s been a process… Ultimately, because of the insurance profile, we will end up well, but it’s a lot of brain damage having to go through that process.

Joe Fairless: What part of the brain damage component was most challenging?

Chad Doty: Anyone who has never dealt with commercial corporate insurances – there’s all of the reviews and assessments you have to go through, and the adjuster’s job for the insurance side is to delay and/or minimize payment structures as much as they can to manage the insurance base of the carrier. Dealing with that, and especially with the co-insurance in the back-end – it takes so much longer than it needs to, from the outside looking in… So if you haven’t gone through that before, it can be a little bit of a shock. It just takes time and persistence, and just doggedly going through the process.

Luckily, we’ve got a phenomenal asset manager that had multiple years with equity multifamily that was able to take that, but… It’s something that if you’re not prepared for, it can be interesting.

Joe Fairless: You said it takes longer than it should… Approximately how long does it take?

Chad Doty: We would think it would have been a 60 to 75-day process from analysis to claim, and it took closer to six months. You’ve got business interruption insurance that will recover that lost time and money, but you don’t get it till the end… So every extra delay you get pushed back out when you get to restart distributions for your client.

Joe Fairless: And then with 36 of 104 units being flooded in this case, do you have an operating budget that you dip into to just operate the property in the meantime, or do you do capital calls, or how do you approach that?

Chad Doty: We had a reserve balance to deal with it. Every single deal — and that’s a good part of our philosophy, we are more about minimizing risk, batting percentage versus slugging percentage. Every single deal we carry has a six-month mortgage reserve, and we also look to raise the capital improvement stack for the first five years anyway. So we had the reserve load to deal with it and all of our assets carry it; if you don’t have to, you don’t wanna dip into it so far to not recover it later. But we [unintelligible [00:08:26].05]

Joe Fairless: And then with raising the capital improvement stack for the first five years – that leads me to believe that your deals are projected to be longer than five years? Is that the case?

Chad Doty: Yeah, we’re a long-term holder of cash-producing assets. Our investors are looking for a consistent income stream that’s highly tax-advantaged, with equity growth along the way. So for us, you can actually increase your IRR by deferring capital until you need it, but it’s a hassle factor for the client. Okay, we have a capital call based on the commitments to start renovations, and you’ve gotta then tap people, so you’ve gotta herd cards consistently through the deal. This way we raise it all up front. It lowers our return a little bit, but in the long-run it’s a better product, we believe, for our clients.

Joe Fairless: So approximately how long are the holds projected to be?

Chad Doty: We’ll hold as long as it’s performing. From a portfolio perspective right now we’re holding 250 million, but at one time we’ve had north of that, and we’ll prune either when we get an outsized offer that’s well north of projections, or if we see the market slowing down in ways that we don’t think it’ll keep the NOI growth that we need.

Joe Fairless: What’s something that you’ve done to evolve your business from when you started it to today?

Chad Doty: We’re always fine-tuning our asset management. We try to be very closed-loop about it when we make a choice – how did that end up with the returns? How did that compare to projections? How do we get better next time? We’re constantly going through that Kaizen process, that constant, never-ending improvement. So that’s evolved just step by step with every deal, and as cap rates compress and as interest rates nudge up, some of our biggest evolutions have been in our capital structuring and how we raise, and converting from friends and family 506(b) offerings that can’t advertise to 506(c) accredited only, can advertise, with having a [unintelligible [00:10:22].16] and being able to really push the envelope. We went from buying 25 million in assets three years ago to 50 million, and now this year we’re gonna do 100 million.

Joe Fairless: And with that growth, I’m sure that you get the question – if not frequently, then a good amount – the market is coming up for a correction, so why are you buying right now? What’s your response to that?

Chad Doty: It’s a great question. When you say “the market”, there’s no national real estate market, right? It’s all local. That said, interest rates are national… So part of it is, but not all of it. So it really is “What’s the demographic story of where you’re going to play, and what happens when the economics turn?” And if you look at buying now, you can still get good pricing. It’s compressed, but if you can still create value in those deals, you’re still getting double-digit returns with consistent cashflow in the assets if you know what you’re doing… So why not buy?

Is there less of a spike on the going in price? Sure. But philosophically, everyone’s heard the term that “You’re making money when you buy”, and we think that’s a half-truth, or it’s proven not that way to us. You don’ really make your money when you buy; you establish a baseline profit to market averages. You actually make your money when you operate and you sell. And if you can operate well, you can make money in any market cycle.

Joe Fairless: Yeah, I completely agree. You mentioned earlier you all have made decisions and you’re constantly focused on never-ending improvement, and you look at the cause and effect of what resulted in a profit or loss, or what allowed you to make more or less money… What are some tactical things for some of the best ever listeners who are apartment owners on perhaps a smaller scale? Maybe they’ve got a 100-unit or a 150-unit… What are some tactical things that you’ve seen with your portfolio that they could implement to help their apartments perform better?

Chad Doty: We were slow adapters of revenue management, LRO, and using it to ride with the market, and in every single deal we implemented it on, it improved our revenue pretty much within the first two months… And they’re good enough now where even smaller players can get access to it. So we were slow adapters to that, because you think that the resident doesn’t like not knowing what the pricing is gonna be on a day-to-day basis, but the market is moving there anyway. So get out of your way and look at best practices of companies bigger than you and don’t be afraid to adopt them regardless of your size, because your resident base doesn’t know you’re a small player compared to [unintelligible [00:12:59].24] or Greystar or whoever; they just know they might wanna live there, so understand the experience of other players and model those. You don’t need to reinvent the wheel. This is not a cutting-edge business; it’s primarily a blocking and tackling service business.

Joe Fairless: How much does LRO cost?

Chad Doty: It can vary between $3 and $5 a door per month. But if you get 10 to 20 or north of that, it pays for itself pretty much instantly.

Joe Fairless: It sounds like you do value-add deals… Does it make sense during the first 12 months to have that in place, or is that in place after you do the renovations?

Chad Doty: You absolutely put it in place, because what you’re doing is you’re not improving all the assets at once; what you’re doing is you create a model. There’s a million ways to do this. The way we do it is you first understand what spec you wanna hit in terms of the unit amenities of the asset and where you expect to peg that rent, compared to your comps within 3-5 miles. That’s just math and observation and data collection.

Then when you go to put your model together, that model then will be “Okay, I wanna own this part” and then you’ve gotta test how that model sells with a combination of LRO in the marketplace. Then you’ll start to renovate against that spec and adjust. So you wanna have LRO on while you’re starting your first wave of renovations, to let you understand how you’re doing.

Joe Fairless: You mentioned earlier identifying what the large companies are doing and then doing aspects of what they do or modeling after what they do, and that’s why I’m glad we’re interviewing you right now, so what are some additional things that you all do that could be modeled by an owner who had on a smaller scale properties, but are still apartment investors?

Chad Doty: I think when we started I did a 6-unit building and a 12-unit building, then partnered up with another guy, and then we did 112, and then we’ve been at that level since ’09. When we first started though, we would abdicate – and I say abdicate as a negative term – construction management and renovation management to the property management firm. Most people at this scale will self-manage and it’ll be a job, or they’ll have third-party property management and then you’re asset-managing them… But there’s actually three roles in every deal; there’s asset management, which is controlling strategy, property management (day-to-day blocking and tackling) and construction management, which is what are you doing with the value-add piece, with the bulk renovations, the contracts that manage the asset… And most property managers are not very good at construction and contract management. So find ways to outsource that sooner rather than later, or partner up or take it yourself, because you’ll get more bang for your buck, and you’ll get more of what you want.

Because getting in the day-to-day of how they lease and how they rent – they know that stuff better than you. But the construction management side/renovation side, more times than not they don’t.

Joe Fairless: From a team standpoint, you mentioned you had 14 employees? Is that correct?

Chad Doty: Correct.

Joe Fairless: How do you structure your team?

Chad Doty: We basically have acquisitions and asset management, which is driven by my business partner and co-owner; that’s got three staff. Then we have sales and marketing, which is basically lead gen and education, and then whenever we have a new deal, the raise process with those deals. That’s three people. Then we have basically shared services, which is client communications, office manager, fractional controller, and a few other admin folks.

Joe Fairless: If you were to start another company from scratch, but does the same thing, how would you prioritize the hiring for which comes first?

Chad Doty: It depends… There’s a book called The Goal by Eliyahu Goldratt; it’s about bottleneck management and the best thing you can do is just to optimize throughput as you solve for the weak link. So it all depends on what you don’t have.

When we started — I’m an operations guy; I wasn’t a rainmaker capital development guy… So we sell by being good at what we do. Our weak link early was capital development, but as you start to get a track record and people start calling you, then capital development gets lighter and you’ll need to scale your acquisitions. So I don’t think the answer is one or the other, it’s “What is your gap?” and solve for that gap. Most business ownership is just solving for a weak link.

Joe Fairless: That’s really interesting. Based on your experience as an entrepreneur and real estate investor, what is your best real estate investing advice ever?

Chad Doty: I touched on it briefly, but there’s a fantastic book – an old book, my dad gave it to me; I’m mid-forties – called Winning the Loser’s Game, and it’s about tennis pros. The best tennis pros don’t hit the most aces, they make the fewest mistakes. Same thing with Jack Nicholas – it’s not that he [unintelligible [00:17:49].23] He never really made any errors. Same thing in investing – there are people who might make 300% on a deal, but then they have a deal that does nothing or gives back.

Find a way to minimize your risk in every single action that you take, so that the process you build around that business is wrapped around that risk mitigation. It makes thing so much easier, because then you can be aggressively conservative, meaning that you will aggressively buy every conservative deal you can. That puts success on autopilot, because then you’re not really worrying so much about “What about this, what about that?” You’ve taken care of that in the way you architect deals, and then the rest of it really is how do you then get bigger? What’s the next weak link you have? That has served us really well.

Joe Fairless: From an underwriting standpoint, what do you make sure is in place to have that risk mitigated as much as possible?

Chad Doty: The risk mitigation starts before underwriting. For us, it’s the two things that we need before we even think about the deal – we have to have an MSA submarket neighborhood that we know in our bones we’d put our grandma’s last $100,000 in. So there’s population growth, components of population growth, employment growth, components of employment… There’s easily 25 metrics we go through and say “Okay, is this the kind of market that will serve our client?” Then we find the best property management in that type of client service business, so B-grade operator vs A-grade operator. Then and only then we look at deals. Because if you’ve done that, you’ve taken out the two biggest risk rocks, really.

Then when you go to underwrite, then we’re looking for — a big thing we look at is breakeven occupancy. This is something that Ray Alcorn introduced me to. He lives in Blacksburg, VA, I live in Richmond, and I’m sure it’s been out there before, but he has a fantastic book on it… And it basically is “How vacant can a building be and still make money?” We basically sensitivity-test all of our assets going in, and we’ve gotta be able to buy a deal that can take double market vacancy for a year and still make money. So if market vacancy is seven, double that as 14; we have to have a breakeven occupancy of 86%, meaning the building could be 14% vacant for a year and we still make money.

All the markets we’re in have never hit a double market vacancy event historically, and the largest real estate downturn since the Great Depression was ’08-’09. So it’s a great safety metric that has served us well.

Joe Fairless: As it relates to that breakeven occupancy, if you are in a market that unfortunately does dip significantly to double market vacancy – once in hopefully a lifetime, or hopefully never, but if it happens once in a lifetime, it happens… Would the approach be to lower rents and give concessions to keep the occupancy high, or would you let the vacancy take place and keep the rents for the current units at their rate?

Chad Doty: That’s a great question… It depends. First of all, the LRO – and this is a benefit of doing it – will be sensitive to a concessionary market, it’ll be sensitive to flattening rents, it’ll be sensitive to declining rents, so you’re gonna get some good feedback on that.

We generally believe that just from an underwriting perspective – and I think we’re preferred with Freddie and Fannie; we’ve got 220-odd million dollars of debt with them in our history… They’re gonna get nervous if you dip below 92% occupancy. But if you’ve got rents — still, they wanna have that current flow. So I think your lender community and your investor community — because in your whole period, occupancy is gonna make you more cashflow, but when you’re gonna sell, it’s going to be your average rental rate and market occupancy. Some people think “Hey, I’ve got a 97% occupancy building” – you don’t get valuation on that when you sell it; you get valuation on market occupancy and whatever your lease rate is on your rent roll. So if you’re holding, optimize for occupancy. If you’re looking to move the asset, you’re optimizing for rent rate.

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

Chad Doty: Bring it.

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

Break: [00:22:01].09] to [00:22:43].25]

Joe Fairless: Best ever book you’ve read?

Chad Doty: The Goal, Eliyahu M. Goldratt.

Joe Fairless: Best ever deal you’ve done?

Chad Doty: We bought a deal in Louisville, Kentucky that had a 1031 component from a deal in College Station, that we then bought another deal in Dallas, Texas, and we were able to jump cashflow for the client by 25% on each level. It was a fantastic deal, and a series of deals that we cascaded through.

Joe Fairless: Over what period of time?

Chad Doty: Six years.

Joe Fairless: Do you remember roughly the purchase prices of each of those three, just so we can get a visualization?

Chad Doty: Sure. The first deal was 4.3 million, the second deal was 10.5 million and sold for 14.6 in only 2.5 years, and then the other one was 26 million.

Joe Fairless: And is that a current property, or did you exit out?

Chad Doty: No, it’s a current property, and it’s probably worth high twenties, low thirties right now, and we’ve had it for 2.5 years.

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

Chad Doty: I bought a deal that was a 1978 and had asbestos; we wanted to do washers and dryers in the deal and we couldn’t without a massive renovation budget, because of the remediation costs. It was still profitable, but it dinged our ability to grow rents at a faster pace… So that’s one.

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

Chad Doty: Kid’s causes. We give a lot to the Children’s Hospital here in Richmond, as well as FeedMore, which does a lot for child hunger in Virginia. So we’re very kid/local the way we run it.

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

Chad Doty: 37parallel.com is our website, and then we have a booklet called “Evidence-based investing.” It’s basically how we came to believe this to be a solid space. If you go to 37parallel.com/bestrealestate, people can get their hands on that.

Joe Fairless: Chad, thank you so much for being on the show. Thanks for talking about your approach, why you’re focused on class B properties, pros and cons on that, as well as the type of investment group that you all are and what your philosophy is, some tactical things that can be helpful, like the different LRO that you discussed, as well as scaling the company for any apartment investors who are looking to scale their apartment investing business.

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

Chad Doty: Thanks, Joe.

Follow Me:  

Share this:  
Switching to Wholesaling with Brad Chandler Best Ever Show Flyer

JF1302: Switching To Wholesaling After Flipping Over 2000 Houses with Brad Chandler

Starting in 2003, Brad and his company have flipped over 2100 homes. With so much capital out, he decided to switch to the wholesaling model. Figure out what it takes to flip a high volume of houses, and what it takes to build a wholesaling business that does 200+ deals per year without your assistance. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:


Brad Chandler Real Estate Background:

  • Co-Founder and CEO of Express Homebuyers, one of the largest home buyers in the entire country.
  • Successfully flipped over 2,100 houses since 2003
  • Passionate about real estate investing in 9th grade, he read a book about how to buy a home with no money down
  • He has been able to build a real estate investing empire that does 200+ deals per year without his assistance
  • Based in Fairfax, Virginia  
  • Say hi to him at https://www.bradchandler.com/
  • Best Ever Book: High Performance Habits by Brendon Burchard

Join us and our online investor community: BestEverCommunity.com

Made Possible Because of Our Best Ever Sponsor:

Are you committed to transforming your life through real estate this year?

If so, then go to CoachWithTrevor.com to apply for his coaching program.

Trevor is my real estate, business, and life coach. I’ve been working with him for years. Spots are limited, so be sure to apply 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, Brad Chandler. How are you doing, Brad?

Brad Chandler: I’m doing awesome, thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Brad – he is the co-founder and CEO of Express Homebuyers, one of the largest homebuyers in the entire country. He has successfully flipped over 2,000 houses since 2003. Based in Fairfax, Virginia. With that being said, Brad, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Brad Chandler: Sure. So I could go way back, but we’ll go back to ninth grade – I read a book in the ninth grade on how to buy real estate with no money down. I had some financial challenges as a kid and knew that I wanted something that would generate unlimited income. I had an investor buy my neighbor’s house in 2002, and I went and talked with him. He said, “Yeah, I buy houses at 20%-30% below market, I fix them up and I resell them”, and I go “That’s what I’m gonna do!” I always knew I wanted to do real estate, but I thought you got rich in real estate by putting down 20%, paying off a house with the rent check over 30 years and hopefully it appreciated.

So after eight long months, I bought six houses in July and August of 2003, quit my full-time job in October 2003, and basically rehabbed, fixed and flipped up to last December. Then we said “You know what? We’ve lost so much money renovating houses that I’m gonna switch my model to wholesaling, get rid of renovations.” So this past year we wholesaled just shy of 200 houses, just in the DC market; we had our best financial year ever, and here we are today… I decided to start a coaching company to teach people exactly how we do it. We started that about six months ago.

Joe Fairless: Well, I certainly understand going from fix and flip to wholesaling. I always tell guests when we talk about fix and flipping versus wholesaling, if I was doing one of the two, I would 100% be wholesaling, versus fixing and flipping. Just less risk, better return on time, in my opinion… Unless you really get fulfillment by doing fixing and flipping. Wholesaling to me is a much better approach.

Brad Chandler: You are so right, and it requires so much capital if you’re gonna do rehabbing on a big scale. We had tens of millions of dollars out.

Joe Fairless: Well, with your process, you all wholesaled, as you said, 200 homes last year. Do you also invest into properties for long-term holds for your own portfolio?

Brad Chandler: In 2010 to 2012 we bought approximately 80 single-family houses in the DC Metro area. We found that we were not making the yields that we thought because they were all single-families; it was low, low single digits, and we were borrowing money for the rehabs, so the cost of capital was around 10%-12%, and we’re thinking “Does this make any sense? We’ve got a couple million dollars tied up in rentals that are earning us let’s say 1% or 2%, but yet we’re paying 10%-12%.”

So we actively decided the time is right to sell, so we’re in the process — we’ve sold probably 65 of the 80. Then probably at some point in time — my wife and I are doing some investing on the side, and we’ll likely get back into it. My actual degree in Virginia Tech from an undergrad standpoint was residential property management, so I would love to own apartments, just never have gotten around to doing it… Yet.

Joe Fairless: Yeah, I’m with you, okay. The reason why I ask is wholesaling is a job, whether it’s automated or however you have it set up, it’s still a transaction-based business, so that’s why I was wondering when you do make that money, are you then investing it for more of a long-term play, so that you’re not chasing the transaction?

Brad Chandler: Right now we’re investing it into growth. We’ve launched in six other markets, we’ve done some test launches and we’re gonna see how that works, and if that works, we’re just gonna continue to take our excess cash and fuel it to growth.

Joe Fairless: Got it. So I wanna give you a scenario… I’d like to hear your thoughts on this, because it’s a tactic I’m playing with and I’d just like to hear your opinion. So I buy apartment buildings, and you’re wholesaling primarily 1-4 unit properties?

Brad Chandler: All one-units, really.

Joe Fairless: Okay, all one-units. If I were to come to you and pretend I’m just some random person you never came across, you don’t know me from anyone else, and I met you at a local meetup, and I heard that you’re wholesaling, and you are wholesaling at an amazingly high level, and I said “Hey, I’ve got some apartment buildings and I’d like to buy some more. I know you’re likely doing direct mail – first off, is that assumption correct?

Brad Chandler: It is correct.

Joe Fairless: Okay, so you’re likely doing direct mail… What if the direct mail leads that you’ve got – what if you asked them one extra question, and that question is “Do you own any larger properties?” And if they did, if you sent them my way, then I would give you some sort of referral fee if we close on a transaction. What would you say to that?

Brad Chandler: I would say it’s fine. I hope my acquisition staff is actually asking, because that’s a question I learned long ago – ask everyone you know and come in contact with, “Do you have any other properties you are looking to sell?” So I think it’s a good idea. I’m not sure how — it’s like a needle in the haystack… Of all the people who’d call us, I don’t think there’s gonna be a ton of them that have a multi-unit, but maybe.

Joe Fairless: Cool, so you’d be open to it. I’m testing this tactic out, by the way, so you are my focus group… How would you structure that so that it benefits you, or so that you know that you’re getting compensated? Would you want a percent, or would you want just a flat fee, or how would you structure that?

Brad Chandler: We’ve given a lot of leads out free over the years, and we typically ask for a percentage… A much larger percentage than I would ask for an apartment. So yeah, we’ve asked for a percentage of profit, but this would be much tougher. It would probably be a small percentage of the purchase price. Just something easy, that’s not gonna take a bunch of brain damage to figure out each time.

Joe Fairless: Yeah, fair enough. 200+ wholesale deals last year – how do you get to that volume?

Brad Chandler: Well, processes is really what it is. There’s probably 30 people now on our team, when you include our virtual assistants. I started out in 2003 with a negative $80,000 net worth and bought six houses in two months, and then just scaled it. As we needed more people to do more jobs, we would systematize the position, and then we would go out and hire really great people, and then we would just reinvest profit into marketing.

We were spending like $200 marketing budget per month when I started, and now we’re well over six figures a month in marketing. It’s just a process of scaling, one month at a time.

Joe Fairless: 30 people on the team, including VA’s… Can you tell us what categories of departments they’re in?

Brad Chandler: And we’re growing, by the way. So we’re looking to hire eight different people, not here in Springfield, in Orlando, Tampa, L.A. and Seattle. Departments – so we have accounting, that have two people; we have a marketing department that is two people, looking to put a third person in that… We’ve got acquisition and sales, which is ten people; myself, my partner… What else am I forgetting? I think that’s it.

Joe Fairless: And then VA’s across the board?

Brad Chandler: Yeah, there are like 10 VA’s [unintelligible [00:09:45].10]

Joe Fairless: Right. What are your VA’s doing?

Brad Chandler: They’re doing a lot of nurture. They’re actually screening — we get leads on a nationwide basis now, so they’re actually screening those calls and seeing if there’s a level of motivation, and if there are, they’re handing them over to our acquisition staff.

Joe Fairless: And where are those VA’s located?

Brad Chandler: They’re in the Philippines. However, we’re just about to hire three more people – one in Tampa, one in the Texas area and one in the state of Washington. Those were found through Upwork. Those are obviously US-based folks.

Joe Fairless: Sure. All of them found through Upwork?

Brad Chandler: Those three were found on Upwork.

Joe Fairless: What about the Philippines?

Brad Chandler: Everyone else is through MyOutDesk.

Joe Fairless: MyOutDesk?

Brad Chandler: Yeah, they’re a VA company that specializes in virtual assistance for the real estate industry.

Joe Fairless: Okay, got it. I had not come across them before. Cool. Did you say six figures a month marketing?

Brad Chandler: Yes.

Joe Fairless: So you’re spending over $100,000 on marketing every single month?

Brad Chandler: Yes.

Joe Fairless: How do you allocate that budget?

Brad Chandler: We are spending approximately $50,000-$60,000 on internet, both pay-per-click and organic. We’re likely spending about $60,000 on direct mail, and then we’re spending about $30,000/month on television.

Joe Fairless: Okay. How do you evaluate the effectiveness of television, and what are you doing on television?

Brad Chandler: Ironically, Joe, TV has been our bread and butter for years. I started TV advertising I think in like October/November 2003, so it really was our only marketing source for so many years… So that’s how we evaluated it. Now we do our best with tracking numbers to see what’s coming in, and we also are able to look at the Google Analytics now. We’re setting this stuff up now, where we run a commercial and see if there’s a spike in internet traffic.

Joe Fairless: And with the internet allocation, pay-per-click and organic, how do you know your marketing dollars are being invested effectively?

Brad Chandler: We’re really good at tracking everything. Obviously, pay-per-click is really easy because you actually see the returns. SEO is accounting for about 600 of our out-of-area leads. We track everything with what’s called UTM parameters.

Joe Fairless: What is UTM parameters?

Brad Chandler: Wow, so this is pretty technical… When you go to Google, it’s like Google.com and it has a long string of numbers and letters, each one of those is tracking, so anytime anyone clicks on something and it goes in our database, we can see where it’s coming from.

Joe Fairless: How did you build that team out? Or is that your area of expertise?

Brad Chandler: I would say my expertise is marketing, but I’m more of the high-level “Hey, I know the consumers’ behavior and what makes them buy and purchase…” Things like that that are very technical – we just hire people with that know-how.

Joe Fairless: How do you know you’re hiring the right people?

Brad Chandler: We have a pretty exhaustive interview process, where it’s very, very intense. We run through a [unintelligible [00:12:36].17] analysis, as well as the behavioral test. We ask for lots of references and we go really deep in the reference checks, and then we literally spend about three hours with each candidate. When you spend that long and you do that much testing, you really have an idea. Of course, you wanna look for past success and previous positions and previous accomplishments in their life.

Joe Fairless: What’s the behavioral test?

Brad Chandler: Behavioral test – we had actually used something that helped Keller Williams grow. It’s a small company in [unintelligible [00:13:02].04] it’s called an AVA. It’s a little bit different than a personality test; the report that it gives really tells you your behavior, and what you’re good at and what you’re not good at.

Joe Fairless: Got it.

Brad Chandler: And if anyone is hiring people and not using those tests, you’re really missing out.

Joe Fairless: If I wanna give the test to someone, how do I get access to it?

Brad Chandler: It’s through a small company called Corporate Consulting in [unintelligible [00:13:24].12] Virginia. But there are several products, Joe, as you probably know, on the market, like the Myers-Briggs, and… There’s a number of them.

Joe Fairless: So you are investing over 100k in marketing, and then once you get a lead, what are some things that you have evolved over time? Because you’re getting a high volume in your process.

Brad Chandler: We’re getting ready to recreate everything now to make it simpler and flow smoother, but approximately in 2010, 2011 and 2012 we kind of looked back and said “Gosh, we’ve probably lost millions of dollars not following it properly.” So we implemented Infusion Soft, which is pretty complex, and for the normal homebuyer I would not recommend using it… But we implemented it.

My COO did a deep dive and really learned the ins and outs of it; he got training from one of the ex -founders or one of the first guys at Infusion Soft, and we just have become so good at follow-up. We touch them 15 times in the first four days, and then we never let a lead go. We closed leads last year that were seven years old. In 2017 I think we closed like ten deals just from calling back missed phone calls… So we’re all about follow-up.

Joe Fairless: What are the 15 ways – and obviously, you don’t need to mention all of them, but can you talk more about that? And four days, 15 times…?

Brad Chandler: It’s just simply a combination of voicemails, phone calls, text and e-mails.

Joe Fairless: What part of that is automated?

Brad Chandler: It’s semi-automated. Let’s say a lead came in today; it would trigger saying “Hey, give him a call.” So we automatically give him a call. When we push the button that said “Did not answer”, they would get an e-mail fired off, and then a couple hours later they would get a text fired off. When they came in the next day, it would say “Hey, you’ve gotta call Johnny back”, and the same process would start – call, if you didn’t get him… And we’re soon gonna have a technology where we just — well, we kind of have that now, where we can push a button, it leaves a voicemail, and then an e-mail would go out and then a text would go out.

Joe Fairless: What’s something else from the evolution of your company – not necessarily marketing-specific, just the evolution of your company – that you’ve learned that could help other Best Ever listeners who are wholesaling and looking to build, or even just an investor looking to build their company?

Brad Chandler: I’ve gotta mention the follow-up again. That’s probably the single most important thing.

Joe Fairless: [laughs] Yup.

Brad Chandler: Something I’ve known, but I just didn’t do it – I’ve always known how important people were, but I was never able to pull off a team that just every single person is an A player, and after 13 years of going through a lot of bad candidates and a lot of bad employees, we have got a team now that there’s not one person that I’d say “Oh, if he/she left, I would care…” – we don’t wanna lose anybody. Good people make everything a lot simpler, so make sure — even if people may be listening to this and saying “You know what, I’m getting ready to make my first hire. I don’t spend $150,000/month in marketing, I don’t do 200 deals a year… I just need someone to help me out, so what I’m gonna do is I’m gonna put an ad on Craigslist, I’m gonna put an ad on Monster.com, hopefully I’ll get three candidates and I’ll just pick one.” That’s the worst thing that you could do, because a bad hire can absolutely ruin you.

Whether you’re hiring your first person or your hundredth, make sure that you do a detailed, detailed interview, and make sure that you’re selecting someone who you really, really want to. If red flags come up, really research those or just discount them and move on.

Joe Fairless: Do you do a test period with your potential hires?

Brad Chandler: We’ve done it in the past, but it’s not protocol. Virginia’s an at-will state, so we’ve got really strict KPI’s and we’re looking at people on a monthly and weekly basis – are they performing? And if they’re not performing, they just don’t stick around.

Joe Fairless: What’s an at-will state?

Brad Chandler: At-will means the employer has the ability to fire at any time, without repercussions, without cause.

Joe Fairless: What is your best – and you might have just mentioned it, the follow-up process… But what is your best real estate investing advice ever?

Brad Chandler: We’re marketers, really. Anyone in the homebuying business, they’re a marketing and follow-up company that just happens to buy and sell houses, so I think I’ve just mentioned it – marketing, follow-up and just people.

Joe Fairless: Got it. Okay, cool. Are you ready for the Best Ever Lightning Round?

Brad Chandler: Sure.

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

Break: [00:17:27].01] to [00:18:01].19]

Joe Fairless: Best ever book you’ve read?

Brad Chandler: I think I just may have read it, and that was High Performance Habits by Brendon Burchard.

Joe Fairless: Best ever deal you’ve done?

Brad Chandler: We wholesaled a deal in 2005 where we made $300,000 on it. It was a small building… Actually this was a multifamily, like a three-unit in Adams Morgan in DC.

Joe Fairless: How did you find that deal, do you remember?

Brad Chandler: I bet you it came off of a TV ad.

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

Brad Chandler: In 2005 we bought three development deals in one month, thinking that we were the smartest people in the world and knew everything about real estate, and we ended up losing three million dollars collectively on those three deals.

Joe Fairless: Oh, that’s fun. That’s a good lesson.

Brad Chandler: Oh, great lesson. [laughs]

Joe Fairless: When presented a similar opportunity, how would you approach it now?

Brad Chandler: Well, we have had similar opportunities and we’ve actually turned it around and made great profits. We didn’t know what we didn’t know back then. We should have done our due diligence, we should have had an attorney involved in the process… So just before you go hard on a deposit, make sure that you’ve got all the approvals that you need.

Joe Fairless: Is that what happened – you went hard on a deposit, but didn’t get the right approvals for breaking ground?

Brad Chandler: That was the problem on two of them, and the third one was just a complete debacle in every way, shape and form.

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

Brad Chandler: I am finding it very fulfilling to teach people what I do, and starting to change people’s lives by teaching them how to invest in real estate.

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

Brad Chandler: I’ve got a book titled “Wholesaling Secrets: Discover This One Technique We Use To Close Over 200 Wholesale Deals Every Year Consistently.”

Joe Fairless: That’s a mouthful.

Brad Chandler: Yeah, I know. The next book I’m gonna shorten… Simply text the word “invest” to 855-999-1616, and they can go to BradChandler.com for my coaching programs.

Joe Fairless: Cool. And I’m kidding about the mouthful, because my podcast is The Best Real Estate Investing Advice Ever Show, and I always tell people “It’s tough to say, but great for Google searches.”

Well, thank you for being on the show and talking to us about how you have scaled your wholesaling company, how you are in marketing and you happen to be selling houses, so it is about the follow-up and it is about the people that are on your team… And how you’re allocating your marketing budget – 40% towards internet, 40% towards direct mail, and 20% towards television… And then how you screen potential candidates for your company.

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

Brad Chandler: Thanks so much, Joe.

Follow Me:  

Share this:  
Bobby Montagne and Joe Fairless

JF1222: Pivoting From Development To Private Money Lending with Bobby Montagne

He has over three decades of residential property development, finance, and sales. After 2008 Bobby saw that banks were not able to lend on projects that previously had never been an issue. With capital drying up, he decided to pivot. He created Walnut Street Finance to provide capital to companies doing what he just pivoted from. Now his company is a full fledged private lender that understands the product (construction & development) better than most, which allows them to lend when a lot of others cannot. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:


Bobby Montagne Real Estate Background:

– Three decades of experience in commercial and residential property development, finance, and sales

– Successfully overseen $15 billion in career transactions

– Among an elite class of private real estate lenders and delivered high-quality returns to partners and investors

– Between 2010-’15 was principal owner of WSD Capital, a real estate development firm that renovated and resold 185 classic row houses that generated $150M in revenue

– Based in Fairfax, Virginia

– Say hi to him at: www.walnutstreetfinance.com

– Best Ever Book:Think and Grow Rich


Made Possible Because of Our Best Ever Sponsors:

Are you looking for a way to increase your overall profits by reducing your loan payments to the bank?

Patch of Land offers a fix-and-flip loan program that ONLY charges interest on the funds that have been disbursed, which can result in thousands of dollars in savings.

Before securing financing for your next fix-and-flip project, Best Ever Listeners you must download your free white paper at patchofland.com/joefairless to find out how Patch of Land’s fix and flip program can positively impact your investment strategy and save you money.


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, Bobby Montagne. How are you doing, Bobby?

Bobby Montagne: I’m well, thank you. How are you? Thanks for having me.

Joe Fairless: I am well too, and you’re welcome, my friend. I am very much looking forward to our conversation. Holy cow, I was looking over your bio before, and you’ve got some experience – three decades of experience, in fact, in commercial and residential property development, finance and sales. And in fact, between 2010 and 2015 he was the principal owner of WSD Capital, which is a real estate development firm that renovated and resold 185 classic row homes that generated – get this! – 150 million dollars in revenue.

He is based in Fairfax, Virginia. His company now – Walnut Street Finance. There’s a link to that in the show notes page… With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Bobby Montagne: Sure thing, I’d love to, and again, thanks. The short story is I got out of school in the late ’80s, I worked for other developers and finance companies for ten years. I started my own company, Walnut Street Development in the late ’90s, and then built essentially infill residential properties in and around Washington DC in what we refer to as the Beltway And by infill I mean typically very good locations, where we were tearing something down or just buying a small infill site and building a building.

We built high-end condos, we built single-family detached, and we were essentially the builder and the developer. We would buy the land, zone the land, build the buildings, sell the buildings.

In 2015, after the recession and the Dodd-Frank Law I noticed that capital was no longer available for the typical infill developer, just because banks used to be able to do essentially A to Z. After the recession, the whole front of the alphabet got taken away from them, and capital was no longer available to the typical infill developer. So if I started my company in 2012 or beyond, I probably could have never found capital to build the projects.

So I decided to pivot, and go from the builder/developer to a lender, in the space where traditional banks weren’t lending. I love this space, I understand the space, I understand real estate and the thought process, and we’ve been at it now for a year and a half. We’ve originated about 15 million dollars in 40 different deals in and around Washington.

Joe Fairless: Is that where you’re focused to lend, Washington?

Bobby Montagne: Washington DC, Northern Virginia and pieces of Maryland that, again, touch the Beltway, Southern Maryland. The plan is to do it in that market, this region, for the next year or two, and then begin to think about other markets. But we wanna perfect our model, perfect our underwriting, and just really better understand this private lending space before we move into markets that we’re not familiar with.

Joe Fairless: There are opportunities that I see all the time, but my focus right now is multifamily investing. However, I might think “Man, storage units (which I do) make a lot of sense, and so do mobile home parks.” I believe both of those things. However, I’m not gonna pivot, because I’m focused on what I’m doing.

Now, you said you saw an opportunity, because the capital wasn’t available for infill developers in 2015, and now you wanna be the solution to that, but what were the other reasons why you switched? Because it’s one thing to see an opportunity, it’s another to then switch what you’re currently doing and making money on and do something else.

Bobby Montagne: That’s such a good question. As with every pivot in a business, especially if you’re having success, pivoting is a big deal. We started buying dilapidated row houses in Washington DC in 2010, and we could buy dilapidated row houses in DC in 2010 for a great number. We would do a complete gut renovation and sell the property, and have a cash-on-cash return somewhere in the high twenties. It was a good business.

That high twenty cash-on-cash return continued through 2014. I was flabbergasted at how long it lasted. Typically, when you have those sorts of returns, others discover the space, money comes flooding into it, competition increases. Others can discover the space and get after it in an organized fashion or compete with us in an organized fashion until late ’14, early ’15.

Before late ’14, early ’15, depending on the market, we had a very simple formula – essentially, we would buy a dilapidated row house for $10  (I’m just using that as a ratio point), we’d fix for $5, and we’d sell for $20. If we were in Georgetown, that ratio would be buy dilapidated for a million dollars, renovate for 500k, sell for two million. If we were in Petworth, we’d buy it for 300k, fix it for 150k, sell for 600k. So that buy for ten, fix for five, sell for twenty formula stuck in many neighborhoods, and we did it as efficiently as we could for four years, 180-something-odd units.

In late ’14, early ’15, as others discovered the space, the buy for ten moved to buy for twelve. The fix stayed at five, and the sale stayed at twenty, so the margins got squeezed because there were more players bidding up the price of dilapidated row houses. It got very competitive, and the simple story was in a neighborhood called Petworth we had done 30-something-odd row houses; on a particular street in Petworth (3rd Street), we had done five or six deals. I knew 3rd Street really well. I knew dogs’ names.

A house becomes available on 3rd Street, I’d hear about it at one o’clock; I’d bid 350k, we’ll close as soon as they want to, and I’d get a call later that afternoon the number is 375k. I said “Okay, 375k it is. Ready to close.” I’d get a call after dinner, the number is 400k. It’s the first time Petworth dilapidated traded for something with a 4 in front of it, and that’s when it hit me – I was like, “Holy cow, the others have discovered the space. We’ve gotta think about a pivot.” And that is what led to the original thought of the pivot.

In fact, the moons always line up. I called the guy who won on 3rd Street for 400k – a great guy, a young guy, just getting into the space, quit his 9-to-five, was gonna get into this business big time, educated… But he didn’t have any capital. So I called him, I introduced myself, he said “Yes, I know who you are, I know your company, and I like your product.” I said, “Well, listen, congratulations on the buy. When do you have to close?” He said, “Thirty days.” I said, “What are you gonna do for capital?” He said, “I don’t know, but I’ve got about 25 days to figure it out.

Long story short, I lent him 300k of the 400k to buy it, and I lent him all the construction improvements and he turned into a friend of mine. I did two or three deals with him off of a yellow pad. I hadn’t even considered really getting into this lending space… And after I did a couple deals with him, I began to think, “This really makes sense, because there’s so many folks that are very good builders, and they’re also good deal bird dogs, just like this guy on 3rd Street, but what they don’t have is access to capital”, and they don’t necessarily understand money as well as they should, and I can help in both of those categories. So that was the beginning of the thought process, and it went from there.

Joe Fairless: If you were talking to someone who lives across the country from you so there’s no competition from them, and they said “Can you just tell me what are the benefits from owning a company that does these loans (hard money lending)?”, what would your replies be, from a monetary standpoint? “Well, we mitigate our risk here and then we make our money here…” What would you say?

Bobby Montagne: I would not get into hard money lending or private lending or the space I’m in if I did not understand the product as well as I do. My company really understands construction. We know what a two by four costs; we know how to underwrite, we know how long the construction takes, we know about permits and plans and marketing. We’re so comfortable in that space that I feel like I can take on more risk than most of our competitors in this space who are typically – not across the board, but typically very smart money guys, but they don’t know what a two by four costs.

So to answer your question, with that background [unintelligible [00:11:29].19] real estate, the upside in this space is the security of the investment. We’re lending 75% to 80% loan-to-value in the first lien position on a hard asset – a row house, a single-family detached, a condo in and around Washington DC, the capital of the United States, where the real estate values are pretty strong. So if things go South, we have real collateral backing our investments.

In addition to that – and again, with the caveat that we understand the space and the asset, in addition to that, lending only up to 75% of the loan-to-value, we vet fully not just the real estate, but the borrower also… Not from the standpoint that there’s a big, fat balance sheet – because they never do – but from the standpoint of “Are they capable of doing what they say they’re gonna do?” And then in the completely subjective category, do they have integrity? Are they going to do what they say they’re going to do? You get to know the borrower, and then at some point you put your hand on your heart and you “I believe he’s [unintelligible [00:12:37].22]”

So if somebody on the other side of the country is getting into this space, I would recommend really knowing the product, and I would recommend underwriting not only the hard asset, but also the borrower.

Joe Fairless: As far as how you make money on it, you initially talked about the security of it with the 75% loan-to-value, so you’ve got some leeway there, and then you also have a hard asset… What type of upside is there for you?

Bobby Montagne: Well, what we do is we have a fair amount of my own money in this, but our cost of capital we pay our investors is somewhere in the neighborhood of 8% to 9%. We pay our investors a monthly coupon, so they get a check every month. Then we lend that money to our borrowers, that’s somewhere between 10% and 12% annually, and somewhere between two and four points. The total cost is somewhere between 12% and 15%. So we receive 12% to 15% for the money that we put out, we pay 8% for that money, and we keep the delta.

Let’s say the delta is 5%. If you can build a company where you’re doing 10 million dollars in loans per year, you can count on keeping 5% of that, or 500,000 bucks. The real game is to scale the company to somewhere in the 40 million dollars of origination per year, and we’re on our way to that. We should be there in early 2019. Then when you apply the 5% delta on 40 million, it’s a two million dollar upside. You use that two million dollars to first pay your people, and you don’t need a lot of people in this space; you need a handful of really smart people, and the rest goes to retained earnings. That’s a good business.

Joe Fairless: With the investors you’ve got monthly distributions you’re doing, 8% to 9%… When you are low on projects, are you still having to pay 8%-9% to investors on projects that you’re not lending their money out to earn that higher percent so you have a delta?

Bobby Montagne: That’s a great question, Joe. Typically, in the hard money or private lending space when the money is idle, not in play in a deal, investors aren’t getting paid, so the switch is shut off. When a new deal arrives, the switch gets put back on. I don’t do that. If you invest in my company at 8% or 9%, the switch goes on and it doesn’t go off until you redeem. I’m able to do that because we have a very strong pipeline, and the reason we have a very strong pipeline is because we’ve invested very heavily in in-bound marketing, and our phone rings with viable deals.

So I don’t have the off-switch for my capital, so the next question – or the obvious question – is “Well, what happens when you have a whole bunch of idle capital and you’ve got money just going out and not coming in?” Well, we protect ourselves from that in that we can return capital. If I have idle money and I don’t see a home for it for the next three or four months, we’re gonna return capital. But honestly, where we are in the business, in the growth mode, shame on us if we don’t have a home for capital.

Joe Fairless: You said you invest heavily in inbound marketing – what are you investing in?

Bobby Montagne: We invest heavily in inbound marketing and outbound marketing. On the inbound side we work with HubSpot; we put out content blogs, two and three and four a week, primarily aimed at potential borrowers. On the outbound marketing side we have outreach meetings to talk about hunting for a deal – “What are you looking for? What neighborhoods are promising? Why would you pick that neighborhood over another neighborhood? How does the math work?” “We’ll buy for ten, fix for five, sell for twenty.”

So we’re educating… We’re content marketing, as the term is, but we’re educating. We’re constantly trying to help, not dissimilar to what you do, trying to help those worthy borrowers who are very good builders, who get up early and get after it. We’re trying to help those folks build a business. And we can do that by providing capital, and we can do that by providing help. For example, we did a loan with a guy in a great location (again, in Washington DC), in a neighborhood called Eckington. Gut renovation of a row house; permit should have taken three to four weeks. After three to four weeks, no permit. We give them a call and say “Hey, when are you starting?” He says, “I can’t get my permit.” We said, “Well, what’s going on?” He explained it to us, we provided a resource that he then engaged, hired, and it [unintelligible [00:17:42].02] and off to the races he went.

So we try to help not only with providing capital, but we also do a bit of coaching. “This is a better way to go than the other way”, if folks want to ask. If they don’t wanna ask, that’s fine, too.

Joe Fairless: Based on your experience in the industry as a developer and now on the lending side, what is your best real estate investing advice ever?

Bobby Montagne: Not my best advice, I borrowed it from Warren Buffet – it’s preserve capital. That’s the first and probably only real rule. You can’t afford to lose capital. It happens, it’s happened to me, but you really have to protect your capital. So that’s my advice. As Warren Buffet says, “Rule number one – protect capital. Rule number two – see rule number one.”

Joe Fairless: On the part where you have lost money on a deal, can you tell us a story about that deal?

Bobby Montagne: I can, actually. It wasn’t on the lending side… Like I said earlier, we’ve been in the lending business for about 15 months now. We haven’t had any deals get sideways on us. We will eventually, and we know how to deal with it when it does happen, but in 2000 to 2005, 2006 I built high-end condos in and around Washington. Very big deals. I built a building next to the Vice-President’s mansion in Washington DC off of Wisconsin and [unintelligible [00:19:10].20] a 420-unit deal in Arlington; it had a pool on the tenth floor that looked down the mall… I mean, really high-end condo stuff.

And from 2000 to 2005 you couldn’t build them fast enough. They sold off with paper before we even had the frame up of the building. In 2006 we had three buildings, mostly completely sold out. Between the three there were 15 units all in the 1 million plus range that had not sold, so we were kind of scratching our head in late ’05, early ’06, like “Why haven’t these sold?” The building is done, people moved into it, it’s a great product, but they weren’t selling.

At the same time, I was getting ready to start a building on Mass Ave. in Washington, a ten-story apartment building where we had bought the land, zoned the land, gone through historic review, and getting ready to build the building.

So I went to New York and I got a big construction loan to build this ten-story building in early 2006, and it was so easy to convince the bank in New York that this was a viable project and they should lend literally tens of millions of dollars to get it built… And I left New York on a train on Thursday night and I started thinking to myself, “That was way too easy.” There should have been way more due diligence on the bank side, way more questions, like ‘How fast do they sell? How many days on the market? What are the price points? Why did you decide to do this many one-bedrooms and this many two-bedrooms?’ None of those questions.

So I’m sitting on the train, I’m coming back to Washington from New York, and it occurred to me, “That was really easy money for this ten-story building on Mass Ave. and we have 15 units that we can’t sell in these completed buildings.” So I started thinking, “We can’t sell the last units, easy money… We’re at the top of the market. We need to get out right now.”

I went and I talked to my equity investor at the time, an older gentleman who’d seen it, been there and done that, we kind of talked through what I’ve just said, but in a little more detail, and he agreed. “It’s the top of the market, time to get out.” So we sold everything – we sold those last 15 units, five of them a at a loss, we sold that site on Mass Ave., the ten-story multifamily condo building site on Mass Ave. at a slight loss, and we got on the sidelines in 2006 and stayed there until 2009. And although I lost money and the business obviously didn’t grow, because we weren’t building anything, it was the smartest thing I’ve ever done.

Joe Fairless: Wow. I’ve heard stories where people got out, but I haven’t heard as detailed of a story like you just told us. Thank you for sharing that. Are you seeing anything like that now?

Bobby Montagne: No, I am not, and I really like the way we’re growing now. At least I can speak towards the Greater Washington Metropolitan marketplace. We’re increasing in values, but at a steady, reasonable pace. There’s no crazy spikes. Construction costs are remaining relatively steady, eaking up a little bit, but no spikes.

I remember in 2004 and 2005 we were selling a 420-unit building in Arlington, we would have a conference call every morning with my equity partners and the lead bank to talk about pricing, because we would increase prices almost every day, and we’d still sell it, which is crazytown. And when building buildings we would budget x amount for steel, and then all of a sudden steel costs 2x, and you’re like “Why?” and it’s like, “Well, that’s what it costs. The demand for steel. Supply and demand. Prices went up because everyone wants steel.”

Concrete – same story, and then you always heard, “Well, they’re building everything in China, so concrete prices are up because China is sucking up all the concrete.”

I’m not seeing anything or hearing any stories like that now. It’s just steady, the line is increasing, but not at any spike or exponential rates. I love that kind of market.

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

Bobby Montagne: Sure.

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

Break: [00:23:41].26] to [00:24:39].08]

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

Bobby Montagne: Think and Grow Rich.

Joe Fairless: Best ever deal you’ve done?

Bobby Montagne: Clarington 1021, a condo building in Arlington.

Joe Fairless: And why is that the best ever deal?

Bobby Montagne: Not just for me, but the profit mostly for the equity partners… A profit of 15 million dollars in 18 months.

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

Bobby Montagne: Not doing full due diligence, and I continue to make that mistake. It’s a fight against frankly being lazy. Can’t do it.

Joe Fairless: What’s one area of the due diligence that you’ve honed in on that you need to put more focus on?

Bobby Montagne: Well, we have gotten better at that, but I would say the piece that we constantly need to ask about is document control. Are all the documents right? Do we have the originals? Is everything fine and within the right spot? Did the title report say what we wanted it to? Are we properly ensured? You know, document control.

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

Bobby Montagne: The best ever way I like to give back is actually being involved in the giving back and not just writing checks. For example, we get involved in helping to renovate and build houses for those that wouldn’t be able to do it for themselves, kind of a Christmas in April program. I really like that way of giving back.

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

Bobby Montagne: Our website is WalnutStreetFinance.com. Our phone number that rings in our office on everyone’s desk and gets picked up is 703-273-3500. My cell phone – if you are interested in learning more about this space or our company, you can call me directly. That number is 202-409-4100.

Joe Fairless: Well, thank you for talking about your experience in real estate developing, and then also doing what you’re doing now – lending; why you got into lending, you saw the writing on the wall, the example of what you were looking for with the deals, I love how you simplified it. For me it was helpful, because I have a very simple mind – that “ten dollars you buy, five dollars you fix and you sell it for twenty”, and how you were seeing it bump up to twelve, five, twenty. And the writing on the wall that you saw in 2006, and what you did, and then some deals that you’ve done along the way.

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

Bobby Montagne: Joe, thanks so much. I really appreciate your time.

Follow Me:  

Share this:  
best ever real estate pro advice

JF950: Creating Your Internal Success and External Success and Fulfillment #SkillSetSunday

They’re both necessary, and today you’ll hear how to create both. You’ll understand why there are internal and extra no goals and what the purposes of them are. Be nourished by this episode and start planning your future!

Best Ever Tweet:

Alison Cardy Real Estate Background:

– Founder and CEO of Cardy Career Coaching
– Runs an international career coaching team specializing in guiding people through career changes
– Author of Bestseller, Career Grease: How to Get Unstuck and Pivot Your Career
– Based in Arlington, Virginia
– Say hi to her at www.cardycareercoaching.com/

Click here for a summary of Alison’s Best Ever advice: http://bit.ly/2pmoQv8


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.


success advice from Alison Cardy


Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. 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.

I hope you’re having a best ever weekend. Because it’s Sunday, we’re doing a special segment, like we usually do, called Skillset Sunday, where by the end of the conversation you’re gonna have a specific skill that you either didn’t have before, or you’ll be able to hone a current skill that you have, to make it even sharper.

What we’re gonna be talking about today is, as real estate investor we clearly have our quantifiable goals outlined for what we want to achieve for success, and what a lot of people might not have identified is the internal success, the internal scorecard. So yes, we will achieve our goals, because we are Best Ever listeners and we’re gonna listen and make sure that we implement that advice in action… But what about the internal success, and what about the stuff that matters most?

With us today to talk through how we can accomplish the internal success in addition to the external success that we’re seeking – Alison Cardy. How are you doing, Alison?

Alison Cardy: I’m great, how are you?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Alison – she is the founder and CEO of Cardy Career Coaching. She runs an international career coaching team, specializing, guiding people through their career changes. She’s the author of the best-seller “Career Grease: How to Get Unstuck and Pivot Your Career”. Based in Arlington, Virginia.

Alison, before we get going on the internal success approach, can you give the Best Ever listeners a little bit more background so they have some context about what your focus is?

Alison Cardy: Definitely. As you mentioned, I run a career coaching team, and one kind of interesting back-story on me is I have two core values that are just so fundamental to who I am and I how I operate in the world. I really believe in honesty and I really believe in looking at reality and operating within reality. For the past eight years I’ve been running this career coaching business, with moderate success externally.

In terms of internally, we do a great job for clients, [unintelligible [00:04:34].24] happy, but I have really struggled for a long time with the idea of marketing, because it runs so counter to those core values that I held. I would tell it to people straight, and I would hesitate to put forth some kind of fantasy about how things are gonna be. As a result of that, banging my head against the wall about “Why am I not attracting more people towards my work?” and not hitting that external success right out of the gate (or even in a couple years in), I had to learn how to stay sane in the midst of not having those external successes.

What I really came to – and it kind of matches my personality – was how to have internal success and internal happiness. I’m curious to vet this against you, but I think sometimes the external result can be a little unreliable; we can get it some days, and some days we’re in the game, we’re trying, we’re playing on the card, and we don’t get it. So what I came to was how to find that peace and contentment, independent of the external result. Of course, we still wanna be striving to get those things, but there’s a place where you can be peaceful and happy, no matter what score the game comes down with.

Joe Fairless: Yeah, this is gonna be so helpful… I have seen with how I set goals; sometimes my goals will be in motion, so once I accomplish them, I’m like “Yeah, that’s good, but what’s next?” and then I immediately set up another goal… Which people say you should do, as far as setting up another goal, but I don’t take enough time to celebrate when I do accomplish a goal, and ultimately we’re on the journey to accomplishing goals much longer than we actually sit and take in the glow of accomplishment.

So since we’re on the journey to accomplishing it much longer, boy, this internal success dialogue and being okay with where we’re at is incredibly important, because ultimately that’s like 95% of the time when we need to have that in place, versus the 5% when we actually achieve the external success.

Alison Cardy: I love what you’re saying, Joe. Exactly! It’s kind of like “How can we feel successful all along the journey, before we hit the goal, while we’re en route, when we actually achieve it, when we’re setting the next one…? How can we have that inner contentment that’s not just reliant on that 5% happening, or living that 5% happy and then go back to the 95% of “Yeah, so I’m working for this next thing again, I’m not happy right now.”

Joe Fairless: Absolutely… So how do we do it? That’s the money question.

Alison Cardy: Definitely! Well, one of the strategies – I’ll share a couple – that is really helpful is to think about internal metrics of success. This is really common for sales people where you know “Okay, if knock on a hundred doors, I can’t expect or be certain of how many sales I’ll make, but I can know that if I do what’s in my control (knock on those doors) and I measure that and I track that, man, I can wake up the next day and knock on a hundred doors again, because I feel like I did what I can do.”

So in anything in what you’re working towards, if you can think about not just the external result, goal that you’re looking for, but also the mini process goals along the way that are within your control. It’s sort of like if you were an athlete and you’re training for the big game, you may not know that you’re gonna win the game, but you can work hard and practice, you can show up… That is within your control. So really focusing on what’s in your control, setting metrics against those internal activities, and then when you hit those all along the way, which you will do en route to your goal, give yourself a pat on the back every single time, and know that “Okay, I’m doing what I can do. I’m being a success no matter what happens.”

Joe Fairless: Yeah, those mini process goals – I love how you phrased that, because I recently had someone ask me “How do you measure success on a daily basis?” and it really is identifying your large long-term goal, but then having these, as you said, mini process goals that you know when done tie into the longer term goal.

The beauty of the mini process goals and they key is, I believe, identifying what is effective action for the mini process. Because if you’re doing mini process goals and the mini process goals are not effective, then you’re not gonna reach your long-term goal. But if you know what is effective, then you simply don’t focus on the long-term goal, you just focus on the things that you know are proven to get you to the long-term goal. In that way, you don’t feel let down every day when you don’t get the long-term goal; you actually feel uplifted, because you are doing these mini goals that lead up to the long-term goal.

Alison Cardy: Exactly. And I’ll just build on that with one other concept, which is the difference between commitment and attachment. Commitment to a goal is “I’m gonna work on this and I’m gonna do whatever it takes to get there.” This is more for that bigger long-term goal. Attachment to the goal is “It has to happen this way, at this exact time.” There’s a difference between commitment and attachment, and I think a lot of times where people create unnecessary strife for themselves is when they get so attached to a particular, specific vision – “It has to be this way, it has to be at this time” and it shuts off to other possibilities.

A better philosophy is commitment, which says “Okay, I wanna get to this end result, but I’m open to finding a better mini process goal if this one’s not working” or “I’m open to switching things up to get that final goal, so that I can actually be effective” versus being so attached and grasping to “It has to be my way, or else…”

Joe Fairless: Wow… I can tell you that directly applies towards multi-family syndication. I have clients I work with, and the very first thing that we do is we outline what success looks like for our time together… And I’m gonna start talking about the commitment versus attachment approach, because what I found is when we set a goal, let’s say a thousand units in five years – we wanna control a thousand units in five years, so maybe they wanna do five syndications in five years, 200 units a pop… There are multiple ways to approach it and accomplish that.

For example, they could raise all the money themselves and be the only general partner. If they were attached to that goal, then that’s how and only how they would think. However, if they’re committed, then perhaps there’s other ways to accomplish it, which I’ve seen in what I’ve done with people, and that is they raise money for my deals, and they’re out of the gate much sooner and they’re able to accomplish it much faster… But it’s not what they initially thought the process would look like.

I’m gonna think about that for my own stuff, too… My goal is to control a billion dollars by my 40th birthday, and I’m gonna just let that float, versus be attached to a certain amount of units or any number of ways. So the question I have for you is how do you know what is too vague — because you have to have a vision, so how do you know if you’re too vague with the commitment?

Alison Cardy: I think that the goal is pretty easy… I would imagine for you, Joe, you’ve set goals before, this is how to define it, how to be really clear about it, so I would agree – you need to be clear on what you’re trying to get to. I think the place that can be either so binding for people or freeing is the path to get to it. So if they think they know the way to get to it, or if you think you know the way to get to that goal, then you’re gonna only see certain opportunities; you’re only gonna go in the direction that your brain already is familiar with.

But if you see that goal and you say “Okay, I’m committed to this. I’m gonna work on it, I’m gonna do whatever it takes, I’m gonna get this goal, but I don’t really care how I go about doing it. It doesn’t have to be my way, or a way that I’m familiar with…” All of a sudden, it frees your brain, it opens up your brain to see so many more possibilities that may make the achievement of that goal much easier than if you just kind of have your head down and saying “Okay, this is how to do it.”

Joe Fairless: It makes sense. I think going back to what we were talking about earlier – the mini process – I think that the key with the mini process is knowing that the mini process goals that you are creating are effective. Do you have any tips for how we identify if what our mini process goals are, if they are actually being effective or not?
Alison Cardy: That’s a good question.

Joe Fairless: Or even how to pick the mini process goals, the approach we should take to the mini process that you mentioned…?

Alison Cardy: Yeah, I have two thoughts on it. One is if you can connect with somebody who has done what you’re trying to achieve – obviously, for people who are getting into real estate investing, if they were to connect with you, then that person’s gonna have more of a vision of how that landscape works and what’s gonna be effective.

I think finding somebody further along who can help you to identify the most effective process goal is really valuable, more so than people realize. Because it is tricky to know what’s gonna be effective or not, and somebody who has that experience and perspective can say, “Hey, did you ever think about doing X? That’s gonna get you really slow results, so you should probably think about Y.” So that’s one thing.

Another thing – there’s something to being open to trying and learning, and as I mentioned in the intro, being open to reality. If you’re trying something and you give it a period of time – I’m not sure of the exact timelines for your industry, Joe, but if you think about “Okay, I’ll try this for a certain amount of time” and you look around and say “This isn’t working… What can I do differently?” Sometimes you just need to try things and see, because even with an expert, things are gonna work differently for different people, they’re gonna bring different strengths… So kind of being open to trying and know “Okay, part of the process is figuring out which is gonna be most effective for me.”

Joe Fairless: Makes complete sense. When you looked at the type of psychology shift that you made from — first off, how did you come across this shift in psychology? What was a tipping point for you and how did you come up with the commitment versus attachment and the overall internal success approach?

Alison Cardy: I think I’m just naturally very internally focused. I’m an introvert, and that’s where my brain goes. If you were to look inside my head, it’s very much in order, it’s very calm… I just don’t know where I put my focus. So I came up with it because many times I would get attached to a goal – “It has to happen like this” – and it was so painful to me when I’d have that goal and I wouldn’t hit it. I was like “There’s gotta be a better way”, as opposed to just driving myself crazy with having a fantasy of how the world should work and then being disappointed when it didn’t follow my dictatorship exactly the way that I wanted.

So I think it was some of those experiences, and then also just having that idea that there are certain things that I can control, and there are certain things that I cannot control. Why don’t I put all my intention on what I can control, and really focus on that? Because that’s gonna be a lot more helpful.

Joe Fairless: Easier said than done. I love that philosophy. It’s something that we have to continually and consciously practice, the focus on what we can control versus what we can’t… Because uncertainty is no fun, that’s for sure, unless we embrace it and we get used to it. That’s also what we’re talking about – uncertainty. Because this is a solution to being uncertain – focus on what you can control, yes, but then also more tactically speaking, what you said earlier with the mini process goals. That way, when there is uncertainty about “Am I eventually going to have a profitable real estate business? Am I eventually going to have leaps and bounds growth?” Well, I know that’s uncertain, but I’m going to focus on these mini things that will equal success when I do them.

Is there anything that we haven’t talked about as it relates to the question of “Okay, we’re not getting the noticeable external success. How do we have internal success?” – anything that we haven’t talked about that you wanna talk about?

Alison Cardy: Yeah, well I think there are really five characteristics, and I’m sure at least we’ll evolve a bit over time… But five that really come to mind for me as to how you can be internally happy in the midst of external uncertainty, which – that’s life. [laughs]

Joe Fairless: Yup.

Alison Cardy: Indeed, that’s life… Unfortunately. So I think the five characteristics – and we’ve hit on some of them… One is – and we’ve just talked about it – clarity on your locus of control, and good boundaries. If you get really good at knowing what’s yours to take care of and what’s other people’s, your life will change. So that’s one thing.

Another thing is having your brain be your friend. If you think about the internal dialogue in your head that we all have, we want that internal dialogue to be – and this may sound a little cheesy – unconditionally loving. We want that presence in our head towards ourselves, and then also towards others; that leads to a lot of happiness, when there’s a kind voice in your head.

The third one is a focus for your brain. I think this is what we were just talking about – having a goal and a purpose, something that you’re working towards, focuses your brain. It’s very healthy, very helpful. Of course, as we just mentioned, we wanna focus on that goal without attachment to how exactly it’s gonna happen.

The fourth characteristic is to rely on internal metrics for measurements of success. “Okay, I’m doing what I need to do. If I’m doing that and I pat myself on the back and feel proud of myself, I can get up and have fun tomorrow.” There’s plenty of work to do in the world, there’s plenty of time to do it, so you might as well enjoy it.

The last characteristic of internal happiness is to prioritize your own personal well being. You could have great purpose, you could be clear on what’s yours, and if you ignore your own health, your own relationships, your own need for rest, you’re not gonna be happy. So it’s really important to take care of yourself in the midst of your journey, as well.

Joe Fairless: Number five tends to be neglected, from my personal experience with people I interact with, and myself included. It’s also surprisingly — it can be the most challenging thing to convince entrepreneurs and real estate investors to do, because they’re focused on the business and they’re not necessarily focused as much on taking care of themselves and having some time for themselves. How do you prioritize your well-being as an entrepreneur?

Alison Cardy: In my life it’s definitely way at the top in terms of taking care of health and the people in my life who I care about, and making time for them. I do it with habits – straight up habits. I think too often people think “Oh, I need to have discipline to eat well, to exercise or to make time for loved ones”, and I would say – this is actually something from Gretchen Rubin… She says, “No, you don’t want discipline at all… You just want the habit in place to actually have your life run that way”, because a habit means it’s running on autopilot; it’s like brushing your teeth – you don’t think about how to do it, you don’t think that you have to do it, you just do it, hopefully.

So the one I would recommend for people if you’re having trouble with this, is don’t take the whole “Okay, I wanna be a healthy, zen person” – don’t take it all in at once… This is my favorite thing to do: just try to do find one little tweak, one small area where you could build a better habit. It’s gonna be different for any individual, but honestly, I believe anything in your life will improve if you give attention to it. So take ten minutes and just look at your life and say “What is one way I could take care of myself better?” and have a habit of it, not just a one-off. “What is one little piece of time in my day that I could tweak and put in something that I enjoy, or that takes care of me, or that feeds me?”

Find it, and then focus for a period of time on actually following through on doing it, make it a priority, and eventually it’s just gonna go into autopilot and you won’t have to think about it; then you can add another one. So don’t do all of them at once, but just find one little tweak that would be prioritizing your well being, and make a little time to try to add that in.

Joe Fairless: There is a talk that Oprah does at the Stanford Graduate School Of Business, she’s being interviewed… I recommend Best Ever listeners go look it up; just search “Oprah Winfrey take care of yourself.” She talks about the importance of just that – taking care of yourself. It’s basically like the plain analogy with the mask – you have to put the mask on yourself first, so you can actually allow your kid to survive, because if the kid doesn’t get it on, then you don’t get it on and you both die. So if’s just a matter of taking that approach, and it’s a tough one for people who are maybe psychologically stable; it’s tough initially, but once we think about the importance of “Okay, we take care of ourselves first and then we can add value to the world on a much greater level than if we didn’t take care of ourselves.”

Alison Cardy: Yeah, I’m gonna check that out. I haven’t seen that particular one. But I’d also add a perspective for people – right now, your goals, your dreams, they feel so important and so urgent, and we need to get them… And if you think about it, a thousand years from now it’s not gonna matter that much. Or even if you think till the end of your life – is it gonna be so important that you hit a milestone by one point, versus a little bit later? That’s not the best for your audience, but just if you take a longer-term perspective, we may as well enjoy our life, we may as well be happy and healthy. Why not? It’s life, it’s the only one that we have, we should enjoy it.

Joe Fairless: I love the perspective, it’s true. There’s very few people a thousand years from now who… Let’s just do this – a thousand years ago there were very few people who we still remember, so the odds are we’re not gonna be one of them. Maybe we are… [laughs] But I think that puts things in perspective.

Well, thank you for being on the show, Alison. Where can the Best Ever listeners get in touch with you?
Alison Cardy: Sure. Our career coaching website is CardyCareerCoaching.com. I am so in love with this kind of authentic happiness thing… I work with just a few select clients on figuring this out, so you can always e-mail me at alison@cardycareercoaching.com if you’re intrigued and wanna implement this in your life.

Joe Fairless: Alison, I took away a lot from our conversation, and I’m sure the Best Ever listeners did as well. This is a challenge that we come across regularly, which is “How do we remain sane when not having noticeable external success?” The solution, as you talked about, is the mini process goals or tactics or actions… Mini process actions, where we take action on a daily basis, and by taking that action we feel that we’re successful because we know if we do it over time, then it will lead to the large results… Maybe not in the exact form that we have visualized, but since we will be committed, not attached to that, we’ll be okay with it, because we’re going to go towards the ultimate vision and not necessarily the exact methodical nature that we have thought about… Because things change, and we have to adapt to how they change.

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


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


Follow Me:  

Share this:  
real estate pro advice

JF866: How to Find the BEST Deals with the LEAST Amount of Marketing #skillsetsunday

Arguably the greatest question of all time, how do we get the best deals with the smallest overhead marketing budget? Or how about how do we get the best leads with the least amount of marketing in general? Today you’re going to find out how to find the big dogs in your market, try any market in the US. Next he will take you step-by-step on where the deals reside and how to recognize a deal in that niche market, half the battle is finding the type of buyer that will purchase in that niche. This is an episode you do not want to miss!

Best Ever Tweet:

Alex Joungblood Real Estate Background:

– Co-founder of 1-800-Fairoffer
– Co-host of The Real Estate Investing Mastery Podcast
– He does between 3-5 wholesale deals a month in three different markets
– Based in Hampton Roads, Virginia
Get More Wholesaling Hacks Here

Click here for a summary of Alex’s Best Ever Advice: http://bit.ly/2jYsht7

– Listen to his Best Ever Advice here:


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:  
Best Ever Show Real Estate Advice from experts

JF728: EXIT Strategy Breakdown and How Many Can be Performed

Today’s guest has a handle on creative deals, but more importantly, the exit strategy. Instead of looking how to enter a deal he looks at ways to exit the deal to ensure his ability to purchase. Hear how he does it and the many different ways to exit a deal.

Best Ever Tweet:

Rich Lennon Real Estate Background:

– Founder and owner of RVA Property Solutions
– Creative Transactions Expert
– Based in Richmond, Virginia
– Say hi at www.rvapropertysolutions.com
– Best Ever Book: Traction by Gino Wickman

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 http://www.adwordsnerds.com strategy to schedule the appointment.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:

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

Follow Me:  

Share this:  
Joe Fairless