Reach Your Real Estate Goals – Starting NOW! With Tamar Mar | Real Estate to Freedom Podcast #1

Reach Your Real Estate Goals – Starting NOW! With Tamar Mar | Real Estate to Freedom Podcast #1


About Tamar:

Tamar Mar is a full-time business, a real estate investor, and a superstar at raising money fast. In this episode, we will discuss her journey into real estate investing and her decision to jump from the corporate world into multifamily syndication, shifting her focus to the acquisition of underperforming commercial and multifamily. She will tell us her strategies and how she significantly improved the operating income of a property within months of taking it over. Tamar is based out of Seattle, Washington.

Contact her:

Investing for Life podcast

www.marotagroup.com

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Transcripts (automated)

Hi Tamar. Welcome to the show.

Hello, Agostino, I’m so happy to be here. Thanks for having me.

Thank you for joining. I appreciate it. Appreciate it very much. Well, maybe you can give us a brief introduction before we get going here.

Yeah, you bet. So I’m Tamar Mar and yes, that I’m not stuttering. That’s totally my name. I married somebody with the last name Mar. I am Tamar Mar and I hope that made you laugh. A business and real estate investor. I have been investing in real estate for over 15 years and going back even farther than that. And I purchased my first house when I was 19, believe it or not. We fell into real estate investing because we had bought a house and, I got a promotion that took us across the country. So we decided to rent it out for four years while we were across the country working and going to Grad school. And a little bit later I decided that I really wanted to have my own business. I had been an operations executive for about five years for some startup companies. I have a startup background for 20 years and I just knew that at whatever I could do to help other people succeed in their businesses I could do in my own business and maybe even better.

And so I decided I was going to create a real estate company. Originally we started doing houses on auction site unseen and we would renovate those and turn them into rentals. And then about four years later I realized, you know, this is gonna take a really long time to reach our passive income goals because that’s what we were doing it for, to build up an empire to live off of essentially. And so I started a syndication business surrounding multifamily about a year and a half ago. And I’ve been crushing it, purchasing apartment buildings with, uh, my investor partners ever since.

So that was super exciting because it was something like the month of March where I said, okay, by the end of this year I’m going to have my first deal and I’m going to start looking around September because I think we had needed to refinance one of our single-family houses and pull out some liquidity and whatnot. Well, I got my first property under contract two months later in May. Because I just started taking massive action. I found it on Loopnet, believe it or not. And I ran the numbers. I started underwriting and I thought, holy junk, this actually really works. And I heard that nothing works on Loopnet. So I called my broker friend, had him take a look at it and we both thought, oh my gosh, this is too good to be true. So it was actually my very first offer that I had ever put in on a multifamily property.

I won the bid and I think there was five offers total. And it was 15 units and the rents, it, it was kind of a mom and pop sort of a thing. It was owned by a family and the grandpa had a big, huge key ring and he was there all the time and he did all the maintenance and whatnot and uh, and so they had an affinity for all of their tenants and just didn’t want to take advantage of them, so they had had rents way under market. We’re talking almost $300 a door under market, so there was an opportunity for me to go in and not only have value-add from a rental increase perspective to bring it to market rents but also there’s a lot of deferred maintenance. The units were very dated. It was a c class property in a c class neighborhood. So we didn’t want to make it something, you know, extremely beautiful. But we definitely knew that there was an opportunity to do some cosmetic rehab and get some more rents out of it. So, uh, that’s the first property that I landed. I can tell you as much about that as you want. It was super exciting.

I thought you stopped the project now, right?

I do, yeah. So on that particular one, this is the kind of stuff that I love hearing from other people as they go once you bought it. And so just to give you an idea, we thought that we would go in, raise the rents and at the worst case scenario we would have five tenants leave, right? Because they probably wouldn’t be able to afford the new rent, but we’re talking, we went from about 460 a door to maybe like 675 was the first bump that we did because we wanted to see who would stay if the units were not renovated. So we had five leave for sure, but that was five in the first month. And then the second month came and there were two more that left. And then the third month came and guess how many more left, 3. than we had about 15 units vacant.

And we were not, it’s not like we were prepared for it or anything, but, um, I, I made the decision that we could either at that moment fill those vacant units or we could go ahead and take the additional capital that we had raised and work as hard as we could to renovate those so that we could realize the gains on improved operating revenue after those renovations were done. So we went ahead and spent about five months renovating each one of those 10 units and we got finished up with that about three, four months ago. So now I have a stabilized property there and we improved the operating income by $45,000 on a 15 building within nine months. So we’re getting ready to refinance that one here, right around the one year mark of ownership and cash out hopefully, if not all of the original capital contributions than, than most them.

Very nice. Very nice. I just love hearing about this awesome deals that go right. And it’s great.

That’s great. So well too,

would you say that’s part of the most complex, most, uh, most hairy deal you have so far?

No, not at all. Do you want to hear about a hairy one? So I acquired a couple other under contracts that we decided not go through with for some various reasons. We can dig into that if you want later. But there’s one that I acquired about four or five months ago is a 16 unit. There used to be 20 units, one of the buildings burned to the ground before we purchased it. And so the owners wanted, I think they probably just wanted to take their insurance money and run their old military barracks from the forties and they are not pretty at all. And when I say that I’ve been through a lot of pretty icky stuff because I’ve bought a bunch of houses on auctions. So we’ve seen some pretty horrendous conditions and this was by far probably the worst building that I’ve ever stepped foot in.

So we’re talking some rotting ceilings, holes in the walls, holes in the sink, like sinks that were arrested out black mold like windows that didn’t work to clearly a bunch of heating units that weren’t working and it was just, it was living conditions that I kind of felt like shouldn’t exist in the United States and maybe I’m just spoiled and I have always lived in something that’s clean and doesn’t have mold in it. I don’t know, but I personally think that those shouldn’t exist so I wasn’t scared of it because I can see through that kind of stuff and we just negotiated the price back down a little bit after the contract. We were under contract and got some seller financing on it and I had a contractor lined up so I had kind of a verbal agreement with a contractor when we were looking at purchasing this and so we closed in the middle of December and he said, oh, it’ll be ready on February first to start work.

Okay. Are you sure? February first checked in with them a couple times? Yep. February first. Okay. Well, so we’ve vacated a whole building. The plan was to vacate one building at a time, go in, renovate all the units, lease them up and move on to the next building. So we were going to do that systematically. February first rolled around, the contractor wasn’t available and he said, I’m finishing up another project. Fine, it’ll take a couple of weeks. Long story short, about six weeks later when I had six units that were originally vacant and then other people were getting nervous because they kind of saw what was going on in the community. I had two more people pull out, say at eight out of 16 that are vacant because by what time that he said that he was ready. I talked to him again and you wanted $200,000 more for the rehab projects that originally it was going to be 275,000.

So I was like thank you, but no thank you. We are not going to move forward with that. And there was one of those oh shoot moments that what am I going to do now? Because I have vacant units and I need to pay a mortgage and there’s no way I’m putting tenants in these substandard living conditions, so luckily my property manager came to the rescue and he had done my renovations and one of my other apartment buildings and so it’s taking longer than expected, but I’m happy because I was just over there last week. I flew out there and we have our first unit being rented up right now. I can’t believe the transformation. It’s incredible. I mean it’s. What I think is really cool is when you have a vision and people think that vision is totally insane and then you realize that vision and it just sets fire to the flame of like, I can do this. I know that my vision isn’t immediate, is insane, but I don’t care because I know that I can do it and I know that not only am I doing good for the community and providing better housing conditions, but I’m also in the money in the, in the long term, like make more money doing this and isn’t that a great thing?

It is a hard degree of belief in yourself.

Yes, totally unreasonable and I feel like I’m mostly reasonable, but every once in a while I just feel a little bit out there.

How would you have handled that? A contractor bouncing and what would you think you would have handled it a little differently?

What do you mean? If I would’ve handled it?

Meaning if I’m a, how would you be able to lock him in?

Yep. We didn’t have a written agreement so that, that hadn’t been sealed down. It was just a verbal. So I think I’ve actually given a lot of thought to this so I would have had a couple of people come through with bids and, you know, in this business referrals are really important and I have a really good friend that referred this person to me and I’m so thankful because all referrals that this person has ever sent me, I’ve been phenomenal and I don’t doubt that that contractor does a great job that just didn’t work out. But, um, sometimes, you know, we go based off of trust of the people that we’re working with and that we trust the referrals they send our way. And so, I think it just is a message that even if it comes from a trusted source, you have to do your additional due diligence and make sure you have all your t’s crossed and i’s dotted and get things signed around that it’s in writing.

Well, my last question here is how, how’s your buying actually changed since that, since that last deal? I’m sure it’s changed quite a bit.

The only thing that’s changed is that I don’t want another project like that right now. I’ll do cosmetic rehabs in my sleep. That’s no problem. I’ll go in and put $3,500-4,000 a door into something that’s so easy if you have the right property management company to help you out with. It’s like lipstick. It was some paint, put some vinyl plank flooring in it, put in new appliances, low flow shower heads, maybe resurface the countertops and cabinets or something. But the only way that it’s really changed my purchasing right now is I don’t want 2 of those projects simultaneously. So I’m looking for something that has less, less massive amounts deferred maintenance to take care of.

I’ll totally do it again. I know I will, but I just don’t want to do them at the same time. That can be a little bit stressful because then also you’re like, okay, I do need to pay a mortgage payment. So how’s that going to happen? As first underwriting is concerned, what do you consider? What are your considerations for underwriting? What is your typical exit strategy then? So a couple things there. I always underwrite for a 10 year hold period. And why do I do that? A couple of reasons. Number one is I’m in this for the long term. I’m looking for long-term passive income sources that will support my family for years to come. And number two is because I want to underwrite something and make sure that I’m safe in any sort of real estate cycle that decides to go down and then comes back up again.

So I don’t want to look at necessarily a five-year hold because everybody, I mean I know every market around the country is different, but the general consensus in May 2018 is that there is no way we’re going to be riding this wave for an additional five more years at the top. Right. So I always look at it since the average cycle is what, 12 years or something like that for real estate cycle. Well, if I plan on holding it for 10 years, at least I’ll be on the way back up. If it does go, go down that that’s the hope. So I also look at having longterm money so I will not get three year, five-year money right now. I’m looking at 10 year money to make sure the same thing, like I don’t want a balloon and coming due in five years if the market has gone down and the cap rates have changed and I either cannot sell my property or can’t refinance because it’s not going to appraise the same.

So I’m, I’m looking for longterm money as well. Um, as far as other underwriting principles are concerned, I’m, I try to be as conservative as possible while still writing in some upside. So year one I always use actuals for revenues, so even those beautiful marketing packages that we get from our broker friends, I will not use those figures. I will look at the pictures and think they will create beautiful properties, but I always use current rents and then I increased my expenses on year one because usually the first year or your operating expenses are going to be much higher than they will be in subsequent years as you’re improving the performance of the property. And then in year two, I start putting in pro forma numbers and I actually use this year’s rents like current market rents for year twos, pro forma, so that I’m always trailing a year behind. And then I only do like three percent rent appreciation, three percent property appreciation. And then I have all of my expenses go up, you know, at least according to inflation for each traditionally.

for each. Traditionally in the market you’re in, you’re in Seattle, correct?

Well, I live in the greater Seattle area, but I refuse to invest in Seattle, so I invest currently I’m at least two counties away from Seattle or at least one in secondary or tertiary markets are even farther away. I’ll do stuff in eastern Washington as well, so may be 5 or 6 hours aw

So maybe five or six hours away because I was just thinking about the rent appreciation. I know that out here, out here in Cleveland right now, people are using the average about two and a half, three percent, something like that in that range. And I just don’t know how sustainable that is out here. You know, in a place like New York possibly, but not. Not a place at Cleveland. Anyway.

Yeah. Rent appreciation in Seattle right now is about 15 percent annually. Wow. It’s the third hottest real estate market, second or third in the nation right now. And it has been for about three years. Running our inventory is only point eight months for a single-family housing, which, that is nowhere near a balanced market. And there are a number of factors in Seattle that are going to continue to make it climb and eventually maybe stabilize, I don’t see a downturn coming anytime soon in Seattle because we have so many major employers out here that are all tech-based. Of course, Amazon is one of them. We have almost 3000 people a week moving into the Seattle area right now and we have not enough housing starts to support all of them. So because of those different factors, there is going to continue to be high rent appreciation and low inventory for housing. And so it’s just gonna continue to climb up and even though it’s an appreciation game for a lot of people and they feel comfortable with that, I don’t, I’d rather just go the steady cash flow of my property’s cash flow in and it’s “cashflow-ing” and quite well according to the metrics that I’m looking for.

any appreciations, this extra money, that’s all it is.

Another the thing about underwriting that, of course I’ve picked up all these tips from the hundreds of people that I have learned from either through podcasts or books or seminars or whatever, but you know, doing things like using a higher cap rate for your refinance event or your liquidity event whenever you work those into your underwriting because chances are the cap rates are not going to be the same as you purchase them versus when you sell. So that’s a conservative underwriting factor as well. And then, you know, writing in maybe $250 a door for cap ex expenditures every year. You might not use them, but you at least want to underwrite and set that money aside in case something crazy happens. Um, so those are two other things that I really liked. I like that. Excellent. I actually heard about a deal that you actually walked away from.

Can you describe what happened with that one? Yes. I’ve walked away from a couple of them and I’ll just share briefly about both of them because I think these things are really important to also understand because some people can be scared to walk away from deals because our reputation is really important as investors, right? So when you’re working with commercial brokers, if you’re in the commercial side, multifamily, they want to know that you’re serious. They want to know that you’re not going to retrade, they want to make sure that you’re reliable and you’re going to do what you say you’re going to do. So if I am to walk away from deals, I weigh it very heavily, it sits on my heart because, you know, my, my integrity and my reputation are really, really important to me. So it has to be some things that are significant. Um, so one of them was that I had something under contract and it was in C to C minus area.

The property was fine. It probably had a bunch of work that needed to be done. I didn’t do an inspection on it because I also always do my financial due diligence. And all my contractual due diligence before I outlay cash on an inspection, so I was in the middle of my financial due diligence and I uncovered some additional expenses that couldn’t be recuperated, namely, it was that there was an additional about $25,000 worth of electrical expenses that hadn’t been disclosed previously. And I’ve implemented RUBS or Ratio Utility Bill-back System and some of my properties to help make up for those expenses and improved the NOI. But on this particular property I couldn’t, I called around to like five different property managers. I checked out rents at all of the surrounding communities and nobody was doing RUBS. So the price that was available for the market rents, I could not raise it enough to make up for those additional $25,000 worth of expenses.

So it ended up taking a pretty decent property from a return standpoint to something that was maybe like seven percent returns and nobody’s gonna hop on board with you to do something like that. So that was one of them. The other one was I had a property under contract and we were probably about two weeks out from closing and luckily I still had my financing contingency in place. I don’t always use the financing contingency. It depends on the building, but on this particular one, I did because it was, you know, 1920’s building. So there was, I just wanted some extra protection there and I’m glad that I did because the bank came back to us and said, Hey, tomorrow 8 of these units out of the 37 are nonconforming units and so what that means is the permitting hadn’t been done and they weren’t right. Like they just didn’t adhere to all of the construction standards and so they said they wouldn’t lend on it. They would only lend on basically like 29 units. And I thought okay, do I try to figure this out on my own and go through all the hassle with the city and the county or do I back out? Because then you weigh things like, okay, if you’re doing syndication, and I have to, let’s just say 10 people investing $50,000 with me as an example, $50,000 per person for most average Americans, that’s a fair sum of money, right? Would I lose sleep with when I have a fiduciary responsibility to protect my investors’ money, would I lose sleep if five years down the road we wanted to sell the property and we weren’t able to because of that nonconforming issue, you know? Or if we wanted to refinance, would it, would it make our whole plan blow up? And ultimately I decided that it wasn’t worth it to me to put that much money on the line for something that was unresolved and was really not my fault at all. I mean, nobody, the broker didn’t even know. Apparently, the owner didn’t know. I don’t know. So that’s another reason I walked away and it turns out that the owner after that got it taken care of with the city and the county supposedly the other lawyers step in. And then they came back to me on three separate occasions asking if I’d still love to buy it.

There are so many learning opportunities that can take place, uh, when you’re under contract because every single deal is so different from one another. It depends on the geographic area, like what are the building materials that are being used and what sort of ramifications if you’re building with brick versus a stucco or with wood. What if there’s an elevator in the property? So that particular property, there was an elevator ends, there was a massive amount of expenses related to elevator maintenance that it’s 100 percent mandatory. You can’t get around. Um, what you know, what about if you’re buying a 1920’s building or a 1905 building, how is the electric or the plumbing, what am I going to have to put in for Opex to repair those sorts of things. Versus a 70’s building that has asbestos in it or lead paint. I don’t know. There are all these issues that always come up and then you’re forced to ask the question, what next? What do you do now?

What do you see as some of the biggest mistakes that other investors make?

Well, I’m not inside all of their brains, so I’m not sure about that. I think people overthink things too much and a lot of people are risk averse and that I think that the real money can, can be made the less risk averse you are. Like if you go after deals that people are shying away from because it seems like there’s something in there that could be a little shaky. Well, sometimes we just over-analyze these things. And really all you need to do to solve those problems is finding the resources to help you. And all that means is that you need to talk to people, you need to call people, you need to not be shy and you put yourself out there. Admit you don’t know everything. Like I so don’t know everything. There’s so much that I don’t know, but I love learning and I have a spirit of always wanting to learn. And, I think that it’s easy to say no to something because we don’t have all the answers, but it’s really easy to find the answers, especially in today’s Day and age with the Internet and other entrepreneurs. I think that is a really tight group of people to exchange ideas. So that’s what I discovered anyway. So, yeah, but, uh, you know, your, um, when it comes to raising capital, you know, you touched on that a minute ago. How do you actually, how do you actually find the funding for those multifamily deals?

Oh, I was asking that question really big time about six months ago when I was trying to raise capital for one of my deals and I was struggling with it and it turns out that it was just a really bad time to do it during the middle of Thanksgiving and Christmas and New Year’s like nobody wants a. unfortunately, that was bad timing and I was so exhausted. My answer to that question is it takes time and it takes a lot of relationship building, and it’s not easy. It’s, it’s a longterm play of getting people to trust you and like you as a person and see that you know what you’re doing, right? Nobody’s going to meet you on the first day and say, yeah, I want to invest something $100,000 with you. No, they either need to see that you have credibility or good reputation or a track record or all of those combined things.

But, I think for me at first it started with friends and family and then from there then I always to networking events and just continue talking to people all the time. But then honestly this strategy that’s worked out for me really well that was unintended because I never meant for this to be is that people started asking me to be on their podcast like you, Agostino. So I’ve been interviewed on like, I don’t know, I lost track like 10 or 12 different podcasts and every time there’s something that clicks between me and other people and the people that are interested in talking to me, they call me and I just foster those relationships over time and keep them abreast of what I’m working on. And then I also have a podcast myself too. And so that was part of the building credibility factor and learning and all of this. And so, there’s no one right way to do it, but everybody will tell you that it’s a slow game and that it takes a time and trust in order to be successful at raising capital from others. And I would have to agree with that.

It does take a high degree of trust, a high degree of networking and really demonstrating that you do know what you’re talking about in the multifamily game. So extremely important.

I think hand in hand with that also comes the whole concept of having confidence in oneself and believing in oneself. And I think actually those are two different things. They can seem like they’re the same thing, but if I tell, if I walk into a room and I’m, you know, walking, they’re confident that I say I’m going to do something. That’s actually, I was listening to a podcast yesterday morning. I don’t know which one, I listen to so many. The woman was saying that some people think that confidence is something that’s born into us and innate, in certain people when in fact it’s something that’s a learned skill because you have to teach yourself to try things that you are comfortable in doing and only as we repeatedly do that and we’re successful in our endeavors, it builds that confidence muscle in us.

And so if I were to go talk to somebody and say, oh, well, you know, there’s this thing that I’ve been working on and I don’t know, do you think it’s a good idea? Well, no. Versus if I go into a room and I say, dude, I’m pumped. I’m working on this. I’m so excited. Here’s why I’ve seen this change my family’s financial future. It’s done things for us that we never thought possible and I’ve had successes on these different ones and this is how it’s similar and I show my energy and I believe in myself because I’ve done this. I’ve exercised my confidence muscle. People are going to believe me if I believe in myself, wouldn’t you agree?

One hundred percent to be excited about the deal, excited in your team, and really, of course, demonstrate what the value that investors going to have. It’s huge. It’s huge. Yeah, absolutely. So now tell me about some of the resources you use, like what do you use that makes people just stop and say, oh my God, what did she just say? I got to write that down.

Oh, like how am I supposed to start. I know that happens. That does happen frequently. I’ve been. Okay. So just to give you a background of a little bit more about me, I came out of the womb a hyper-responsible person. I skipped two grades in elementary school, was in gifted and talented education all growing up and did a bunch of college before I graduated from high school. And then when I started my first corporate gig, the very first day that I started college. And then when I went to Grad School my dissertation was on in defensive, gifted and talented education. So I’m in a super avid learner. I’m always trying to soak up information. And so, I think I read more than the average human being. Well, I think the average American maybe read two books a year. that I was going to say that, but I wanted the feel generous so I probably need to read about 56, 60 books a year.

So I do that and most of them are nonfiction and I try to read a lot from people that have done way more than me but that I want to be like, like books have always been my mentors. And so it’s not, it’s often actually not real estate related. Often times it’s biographies of leaders that I want to be like, or business books, business practices. I read a lot about, bettering ourselves and how we can go about doing that mindset set shifts and things like that. And then I also happened to talk to a lot of people. I talked to a lot of people through my podcast and through networking and listening to, I know a lot of, I’ve, I’ve narrowed my focus when it comes to the real estate stuff that I actually do pay attention to versus you know, the business or biographies or whatever. For real estate. I just really zone in on the multifamily aspect now. And because I always, I always hear that those who are really successful usually go really deep in one subject and not wide with a whole bunch of them. So I’m trying to become the best subject matter expert that I can possibly be so that I can make the best decisions in my business.

You did touch on something that’s near and dear to my heart is mindset. That’s where it all begins. It’s more important than just putting up a vision board is actually believing that you can achieve and having that positive mental attitude that, that makes all the difference. The world without that, people are bound to fail in my opinion. That’s, that’s, that’s ultimately what it is. That a positive mental attitude is so important to any type of success, especially in this game as well.

Yeah. In any game. And I just want to share a little story with you if I may. It’s very relevant to this, but not related to real estate. So I set big goals for my life and I’m turning 40 this summer and my dream for the summer was for me to hike the Wonderland Trail, which is the 93-mile trail around the base of Mount Rainier. And I’m just in love with Mount Rainier. It’s in our backyard, not literally, that’d be weird. So in order to do this, you have to apply for a permit and it’s a lottery system and only a certain amount of people get selected for it. The permit applications are on March 15th, so that was when we can turn them in and they don’t start looking at them until April first and they knew, we knew that it could take six weeks before we would receive our information back from the National Park Service.

Well, meanwhile, I’m like out there training, I’m, I tell everybody I’m going to take this thing, it’s my dream. I can’t wait. It’s going to be amazing. And um, last night when I get finally get the email, I’ve just been waiting to get this email from the park service and I gathered the kids around like, okay, kids, you’re going to use the email. And I clicked on it and I essentially said, I didn’t get my permit and I’m not gonna lie. I started crying because I was so it’s so important to me like the mountains and the ocean are so ingrained in my soul. It’s where I’m the most alive and I didn’t get that permit. And I, so I was, I was feeling really down for a little bit. And then I had this moment last night where I was like, okay, I’m super frustrated, why am I frustrated, I’m frustrated, and I was trying to have like, okay, I’m going to be self-aware.

And then he said I could be down or I can start asking how and not how did this happen to me? How did this happen to me? Or why is this happening? Why did I get what I want? No, it was how am I going to make this happen? And I believe that when we ask ourselves the question how, it enables our brain to work in a completely different methodology than it would otherwise do so. So, the quality of the questions that we ask ourselves determines the quality of our life. And so once I started asking myself that question last night when I was feeling so upset, then I started getting fired up. I was like, I’m determined to make this happen. And I was going through all these alternative scenarios like maybe I can do a drop in here and like Duh Duh Duh Duh Duh. So I won’t bore you with all those details, but I woke up this morning and I immediately went to that place of I went out in the woods, I started walking with my dog and I was like, how, how, how, how, and my brain was searching for ways to make it happen what I wanted to make happen. I think we can do that. We can apply that to any area of life. It’s how to make something happen. Mindset is way more important than we even believe it.

Absolutely. And I think that that’s a key. That’s a key indicator right there is that with

when people, people often forget or they just don’t do that. I think people actually get ’em we looked for the easy way or our brains are designed to keep us safe. They’re not really designed to, to have us venture off into the woods to try to figure out how to do, how to do those sorts of things. Uh, but the same thing with when you’re dealing with, with a big project or a big multifamily deal, uh, we are, we are trained to take it easy, play it safe, you know, don’t take more risk and in order to make those big things happened in your life. I’m not saying you have to take an element of gigantic risk, but it has to really think it through it. But then you execute. That’s what it is. You execute and it’s, it’s so important and people don’t do enough of that in my opinion. No, it’s part of what, uh, what I want this podcast to be an I, I do want our listeners to take a hold and really hold on, embrace it in their heart that, that without massive action. So it’s very difficult to make anything positive happen in your life.

Now, what advice would you give to these aspiring

investors? Promoted I’m always a proponent of massive action as well. But, I think that there’s, that book called The Compound Effect by Darren Hardy, I believe, and he talks about how the little things that we do consistently over time define who we are and they build upon one another. So as an example, one day I might decide to just do like three phone calls a day. Well, if I do three more phone calls a day than anybody else, then that’s a lot more and it’s going to build up my network. Or if I decided to write thank you cards to everybody that I meet with or if I evaluate two deals every day or whatever it is. If we do these small things every day that, that turns out to be consistent, massive action because it’s building our knowledge base, it’s building our network, it’s building our confidence in ourselves. And ultimately it’s gonna enable us to do more, more deals. If we are talking about real estate, then, then we wouldn’t be able to do otherwise. And so there are some days where I feel like, how do I fit this into my schedule? Meaning this other thing that I need to do to make the deal happen, because I do own a couple of businesses and I’m a mom of three kids and a wife and all and I homeschool one of my three kids and, and so then I just think what are, what is the next best thing that I can do? And I, if it means that I’m going to make five phone calls, then I make five phone calls and I just try to be consistent with taking at least some action every day.

Excellent. Now, what are you excited about these days?

I’m excited about life.

I can hear in your voice. You know, it’s great. It’s amazing. I love it.

I think life is so fun. It is. Every day I get to live and I’m really grateful for that and, but beyond that, I’m super pumped to go to Ireland with my husband this summer. Just the two of us while our kids are away at summer camp and, I don’t know. I’m in the middle of baseball season. I’m a baseball mom with three kids and I get to see my kids with smiles out there every day on their faces when they’re on the ball fields and we’ve got lots of fun summer plans coming up, camping trips and road trips and just going and being adventurous as a family together. I love spending time with my family more than anything else.

The great thing about real estate really helps afford that. I mean, aside from your other great businesses and real estate, as I imagine it’s one of those key things as well, right?

Yeah. Yeah. It’s fun. I’m super digging this business. I’m having a blast with it, but mostly it’s just because of all the people that I get to meet. I like people. And this is totally a people business. If there are no people, if you take away the people, there’s no business in this business.

Absolutely. Absolutely. Well speaking to people, how can they reach you?

Yeah, you bet. So I have a podcast called the Investing for Life podcast and that’s, and investing for life podcast.com or on iTunes or Stitcher. I’m on Linkedin and I also have my company website, Marotagroup.com, which is marotagroup.com.

Excellent. I’m going to put those in the show notes as well. Well, thank you very much for being on the show are truly appreciate it.

It is my absolute pleasure. Thank you so much.

Closing Deals to Reach Financial Freedom, with Jordan Madewell | Real Estate to Freedom Podcast #5

Closing Deals to Reach Financial Freedom, with Jordan Madewell | Real Estate to Freedom Podcast #5


About Jordan:

Jordan Madewell is an experienced builder that is into not only multifamily, but also commercial retail. He also has aspirations of getting into self-storage and building his portfolio. In this episode, he will tell us how he and his business partner started closing deals in 2016, and how he plans to complete his goal of 100 units. He will also tell us about his other real estate ventures, building vs buying, and offer some good advice for all real estate entrepreneurs.

Contact him:

www.madewellinvestments.com

email

—————

Download this episode!

Transcripts (automated):

Hey, thanks for having me today.

Yeah, great! Maybe you can give us a brief introduction before we get going here.

Well, I am in Lubbock, Texas and I’m a fairly new real estate investor, been doing it for three years. I’m trying to replace my day job income over time and we have done that for single family, duplexes and we have started an investment fund that buys commercial net lease real estate. We have a small 23-unit for a multifamily apartment complex and so we kind of have a couple of different asset classes. And we own a construction company and so we do fix-and-flips and fix-and-holds and my day job also supports the real estate business too. So that’s kind of us in a nutshell.

Nice. So now maybe you could tell, tell us a little bit about how you got started, like what made that decision to actually kick this thing off?

Nice. It’s interesting that you’re working on so many different businesses at the same time. So, how did you get started?

Well, we got started when we moved out of our house that we were currently living in. My wife and I, kept it as a rental and then moved into another one and that kind of got the bug, the itch going, if you will. About six months later, we ended up buying another property and we joke that on the way home from that house that we closed on, the second house, that we thought, man, for all the work and effort and time and energy that went into this little single family, we could be doing much bigger projects for the same effort and so, that’s what started my education and research and talking to different people and learning about multi-family and commercial real estate in general. Within a year we had purchased our 23 unit apartment complex.

Wow. Now would you say that that was a very scary type of scenario or like how did you find it? How did you decide that that was the right deal for you? ——-> OK, so, how was your transition into multifamily, how did you decide that was the right deal for you?

It was in a town that I had grown up in and it’s next to a small university, so I knew the property really well, so I guess it was kind of a little inside track, but I knew the construction, I knew the year, I knew what the rents were, I knew what that market could support, and when we offered on the project, we got it for a pretty good deal. So all that stuff was not overall concerns or news. A little nerve-racking trying to offer and go under contract on a deal before I had raised the money, but I ended up partnering with a couple of guys that have thousands of units under their belt. And they obviously have a lot of credibility, a lot of track record and a lot of, a lot larger investor database. And so they helped us secure that deal.

So did that feel actually need to get any type of renovation or anything else like that or that was just basically a turnkey type of deal? —-> Nice. Tell us what happened after you got that, your first multifamily deal. Did it need any type of renovation or anything else like that or that was just basically a turnkey type of deal?

It was fairly turnkey. There are some minor, just cosmetic things here and there, you know, re-striping the parking lot, cleaning up the landscaping… switching out some lighting. I wouldn’t call it a rehab but we did do a little bit of a what we call just put some lipstick on it.

Nice, good, good, good. Now maybe tell us a little bit about your most complex deal, like something that’s kind of hairy and just a little rough and, and what did you do with that one?

Probably our most difficult deal is the one I’m currently working on and it’s a small development where we bought some land and we’re going through developing the land and bringing utilities to it and really taking all the way from engineering all the way through to construction and more purchase. We’re building a six-unit multifamily townhome on it from the ground up and then we’ll lease it up after that. And so that’s been by far the most tedious and difficult because it’s a lot of cash up front. We have to pay and it’ll be a year before we see any return on that. And a lot of meetings, a lot of city council stuff. So that one’s been difficult but it’ll pay off in the long run. It’s just a lot of heartburn and headache in the meantime.

I can imagine. Now with that money you mentioned, is that your own cash, investor funds or is that a mix of both?

That’s our own cash on that deal. My partner and I probably have over 50 grand in that account or towards that project already and we’ll probably still got some more to go before we actually start breaking ground, so it’s not huge by the scope of project was, but when you’re trying to just do it individually, it’s pretty big.

Oh yeah, absolutely.

So it sounds like that the more complicated components of this project are permitting of the land, the utilities, like mainly just laying out all the construction that goes along with it or actually, I’m sorry, before even lay out to construction, it’s all the mechanicals, everything else, setting all that up, right?

Yeah, if you’re not in the construction business it can be a pretty hairy deal because even though I’m in it, it’s still quite involved. We have to order an environmental study and we have to order what is called a GO report, which basically determines what the soil is made out of and if that will support, a concrete slab, they had to have different kind of engineers, design, electrical, the plumbing, the HPAC. We had to have structural engineers design the concrete poured and set up how to have those guys also designed the framing package that will support a continuous roof and then you have to go in and input our own utilities and tie those into the municipality, their Utility lines. And so you’re basically literally starting from scratch. Even if you’re in construction, it’s still involved a lot. It’s even more difficult.

Wow. Okay. What considerations do you take when you’re building out a deal then? Like how do you decide where to do it and what’s your typical exit strategy then? I know you said you’re not gonna make any money until this thing. Actually, it’s up and running. When do you exit if you do at all? ——–> That’s definitely a lot of work. How did you decide to take on this particular project and what, what is your exit strategy?

So, this deal made a lot of sense because, my partner on it has a small number of complex, about 80 units, just across the street and it stays 100 percent full with a waiting list all year long. And so he knows the market, it’s two blocks away from my neighborhood school. It backs up to a major thoroughfare in that community. It’s in Dallas, Fort Worth, by the way. And so that checked a lot of our boxes, the rents really support in that neighborhood and then the market and so we’ll be over there, whip this up, make some money on it. That said, we’re really well positioned and if somebody wants to come down and the purchase order all the units from us and that’s typically a more traditional route for real estate developer is to basically build it, lease it up, put it up for sale and we intend to do something similar, but if we need to keep it for a couple, three years in the interim, we’ll still enjoy positive cash flow.

Sure, sure, sure. Now I know you’re in, you’re in Texas, so I imagine that mark is going to be unfair for a little while anyway. I would think so easily at some point.

Seems like a lot of jobs are moving to Texas. The market and the economy stays strong here. And then obviously Dallas, Fort Worth is the like epicenter of emerging multifamily investor and multifamily acquisitions.

Yeah, absolutely. And given they have such a tight market out there, I mean, are you finding other multifamily investors are looking to build rather than buy, are they approaching you for that or have you been hearing any mumblings about that? Seeing that you’re in this space?

We’ve had a little bit of inquiry about it. And I would say that’ll probably continue, for me at least on a smaller scale, I would say that’d be 50 units and under. But what I’ve really seen a lot of us guys doing is that they have started to look past the Dallas, Fort Worth market into your secondary, tertiary markets. So like the town I live in, it’s called Lubbock. It’s five hours to the west of Dallas, Fort Worth. It’s still a good market. It’s got over 300,000 people. It’s got a good strong university, Texas Tech University, and so we see guys, especially the bigger guys looking outside of this kind of tier one markets into the smaller communities, trying to find a little bit higher cap rates, or little bit more deals. Need some value added, Something that can come in and boost your rents too. So we’ve just noticed a lot more competition in our hometown and because of that they’ve kind of given up on the big city and kind of moving into ours for to try to find better prices.

Yeah, now, I do recall the opening of the podcast. You had mentioned that you’re, you’re trying to work your way to freedom, so to speak. Tell us a little bit about your plan. So right now you’re currently constructing and you’re buying multifamily. What, what is your goal with business as we go forward here?

I’m trying to build a real estate business on the side to compliment my construction company. And we’ve got kind of a more or less a three to five-year goal to replace our day job income and probably won’t use that money after that I’ll probably just use that as a bigger shovel to continue to build more assets or require more assets. And so that’s kind of our phase one goal is just trying to kind of get to that mark and that way we know if we need the money, great; If we don’t need the money then you know, every six months or so, then we’ll having another good chunk of money to throw in another project. So that’s all about our first goal and then we know if we can hit the first goal then we can get that doubled in about three to five years. It’s more of a snowball created.

Yes. Do you envision staying in that local area, then, since you know the space, or do you think you might be attacking other markets?

Well, We have a commercial investment fund. We have purchased dollar stores, it’s our main target and we’ve purchased in Oklahoma, several markets in Texas and we even have one that we’re offering on and probably going to go on in Louisiana right now, so we’ll continue to move out into probably the states touching Texas and in Texas continuing as long as the deals make sense and we feel good about the real estate and the town too, we’ll consider it.

Interesting. So these are all dollar stores?

Right this minute, all of them. Then we’ve actually closed on a family dollars and we have gone under contract on Family Dollar and they were looking at dollar generals and Dollar Trees, so that lease makes a lot of sense to us. It’s very stable. It has a rent box every once in a while, but we also liked that they pay the insurance, they pay the property taxes, they get us some repair and maintenance allowance, so it’s a very turnkey investment for somebody who just didn’t have a lot of time to put in with it or know a lot about real estate. It’s pretty stable and pretty easy to get into.

[noise] Well, not to mention too, I think that you’re also protected in some regard given that many of these larger items are easily available on say Amazon or Walmart.com or whatever. Whatever e-commerce retailers out there, things typically sold at the dollar store, family dollar are not as accessible I would imagine. Right. So you’re always going to have that customer base there. Right?

It’s very much a convenience deal. They’ve got warranted grocery over the last few years, so they’re going to be longer than a convenient drive to your big box store and so people love does just run in there and get their Milk and Bread and paper plates and soft drinks or whatever, but you know, they typically try to look for locations that are far away from like your Walmart or Publix or whatever. And then they look at markets that can support it but are too small for competition and so they really have insulated themselves well with that and because they’ve built so many in the last several years, they’ve increased their corporate margins with having a bigger distribution channel so it does insulate itself just by the sheer number of dollar stores out there.

Wow. That is quite a revelation. [delete:] I that is A. I mean we’re, we’re focused primarily on multifamily, but from a commercial standpoint that makes for a very compelling case, it sounds like a really good opportunity. Yeah. Excellent.

We just try to buy stores that tend to be newer because you can buy a lot of the older stores and get them really affordably. We want to bond a little bit narrower so it limits our exposure to them not wanting to renew that lease and also limits the potential for repair and maintenance of headaches and there were stores are going to give us a longer life on the lease. So, we have a better strategy for some reason we do decide to get out ourselves, we know that we’ll have a buyer because there are several years left on it. It needs to run out, so we felt like that hedges are risks really well and we’re trying to buy at a seven and a half cap rate or higher, which still allows our limited investors to make really 8 to 10 percent depending on how we purchase it, a year on their money.

Now, is the financing on that the same as with a multifamily or do you find that it’s a little more money because it’s a retail or what?

We’re typically buying between $800,000 and $1.2 million is on typical purchase price on these stores and currently, we’re getting 5 to 10-year contracts with our life-long and 25-year amortizations. So they’re pretty good lines. We do have the opportunity to roll those into Seen Via and get those of course. We haven’t done those yet, but that will be available to us as we kind of build the portfolio a little bit larger. We typically put 25 percent down, typically getting about a five percent give or take on the interest rate.

Wow. Excellent. That’s great.

So we’re trying to kind of create a model that we can kind of rinse and repeat or it’s, you know, the more stores we get in it makes our kind of our investment as a whole, more stable. Because one store does really well and they extend the lease and it’s great. And one store, by the off-chance it doesn’t make it. We’re headed from people lose money, or having a catch-call. So just kind of hedged or we downsize in a good way.

I’m just wondering, are you, are you considering other alternative investments besides our sort of like say storage units or anything along those lines? ——

In this, we are typically looking for a publicly traded corporate guarantee. And so, this fund, specifically catalog with something the future self-storage. Probably a smaller strip center, maybe some lie office, maybe like a medical clinic. Those types of projects I think make a lot of sense and we’ll probably consider those. And this one we tried to kind of keep the investments as live as possible so we’ll kind of continue to buy those here. But going forward, I think as we get more comfortable with different kinds of commercial leases we’ll definitely be looking at different opportunities.

Nice, good. [noise] I think it seems to be a regular progression for many multifamily investors is that after a while they’ll start expanding their sites and some of them do retail. But what I find is most of them are moving into that, the self-storage space from what I’ve understood here is that self-storage typically lags right behind multifamily in terms of growth, you know, so I think that’s part of the reason why that many of these guys gravitate towards that.

[echo] We’ve looked at a lot of self-storage. And then also if you can find people to operate it, mobile home parks, good returns as well. And it’s the same concept. It’s low maintenance. A lot of them are automatically drafted for the payments every month. The upkeep, this is very minimal. Occupancies are typically released. They don’t typically have a lot of fluctuate. If they do, they fill up just as quickly as they turn over. So I think, I think you’re right, I think self-storage is a really good asset class and I think if multifamily continues to heat up, I think people will start looking at that more and more.

What are some of the biggest mistakes you see other entrepreneurs making when it comes to, let’s say multifamily?

I think a lot of people don’t have a good team in place and they just try to do it on their own. I’ll be first to admit, you know, similar support around me instead of partners we have on our deals are a while. We’ve had some pretty good success so far and so I don’t, I just don’t believe in trying to reinvent the wheel yourself. Surrounding yourself with a good team and people who’ve done it before. It’s going to slow your mistakes, it’s going to speed up your learning curve, it’s going to allow you to do more deals.

That’s actually a very good point. So you did mention that before the call, I believe, that you’ve partnered up with someone who currently has well over a thousand units and some other deals. How do you find those sorts of people? How do you find those sorts of mentors and get in front of them and basically sell them on what you’re trying to do?

I think it’s important to be involved in your local real estate clubs. Probably that’s a big way. Several multifamily investing groups across the country and regionally. Obviously, we’re here in Texas, so there’s two or three in the Dallas and Houston markets that are really popular here. Kind of like kind of turnkey. You join their program. They teach you the basics. They give you an education that they provide networking opportunities to put you with those experts and folks that are a little bit more advanced, but they have those all over the country. Real estate guys is kind of one of the big ones that’s nationwide. That’s kinda how I started mine. As I started going to some of these networking events and just meeting people. And once you did that, come across natural opportunities, people you hit it off with, you know, that’s what I would do on that side. And then, you know, finding a good attorney and finding a good insurance, finding a real estate broker, who will help you find the deals or help you send some new stuff.

and good CPA and tax advisors and those types of stuff because I’m a contractor I don’t necessarily need one. Finding a good contractor, or an engineer to help you with these types of projects, making sure you’re not missing something that will cost you a lot of money, that’s important. Then also you just have to start coming up with the database of people that might want to participate if you’re trying to raise money as a syndicator obviously you have to go through the proper SEC compliant channels and fill out all the paperwork. That’s kind of, the team that I try to surround myself with mature, more larger deals and I think it makes it easier for the banks to lend us money when they see it. And we have our act together and organize and have a game plan and we’ve dealt with before, but they offer. That’s kind of why we’ve been able to do as much as we were doing.

Well, you touched on these partnerships and how does it correlate with capital raising. Do you find that many of these partners also help you in terms of actually funding the deals? Are they helping just helping you raise the money you need to close?

We have a belief that we should have some of our own physical dollars and every deal that way, the very least we’re aligned with our investors and we just feel like if you can’t eat your own cooking, why would anybody. If you don’t think the deal is good enough, why don’t you put your money in? The deal is, yeah, when I give advice to guys, I tell them on their first couple of deals, you need to have raised twice the amount of money you need on paper because invariably you’ll have people back out or get cold feet or not be able to do it. And so you want to have enough resources to go get the money when the time comes so you don’t end up having a back end on closing, or lose earnest money or money that some hard stuff you’ve already spent on attorneys and inspections.

But yeah, a lot of those guys will already have databases of people that they can send an email blast out to pick up the following call and you know, the more you do that, the more people will reach out to you and just, hey, the next deal. Yeah, I want to know about it. Okay, well we’ve got to sit down and talk about it and show you what the real opportunity is, what the debt risks are. I mean, you know, it’s not just that kind of drive, you kind of develop a track record after people see you’ve been doing it for a couple of years, especially when you know their friends or their family checks in the mail every quarter or every month or however you set it up. And so you just kind of develop, you know, credibility when they were just done one or two of them. It’s just a kind of altogether. So we’ll put money in the deal personally, some of our friends and family. Then after that, we ended up raising money from other investors.

[noise] Now, what resources are you actually using when you’re talking to people and make them want to stop and just say, Hey, what did you say? I need to write that down. Like what were you finding your resources to really study and keep track of what’s going on in the market?

When I first started learning I listened to as many podcasts as I could find, I watched youtube. Bigger pockets podcast is a big one. I’ve read a book called the ABCs of apartment investing. It’s a rich dad book and it was really good. Another book was called the complete guide to buying and selling apartment complexes by Steve Burgess, that was really good. And then I just took my ignorance as my enemy. I would listen to podcasts. I, for the guy had to say, I would shoot that guy an email and ask for a phone call or I would just pick up the phone or call if they left their phone number and just kind of pick your brain, why don’t you come up with a list of questions based on that Podcast or just quiz them and try to understand why they went to deals the way they did or why I liked this specific deal or whatever.

I just try to learn that way and then we continue to learn about markets. There’s some simple stuff. When we go into a market, we look at, the demographics. We’re looking household incomes in the neighborhood or in the part of town we’re looking at. We tried to pull a crime report when it’s applicable. We try to kind of interview the broker, especially if we’ve done some business with them in the past. They kind of know what we’re looking for. We try to talk to the bank and say, hey, especially if it’s like Fannie Mae and Freddie Mac and said, hey, are you all comfortable in this submarket you’re comfortable lending here. Are there any reservations you would have? Sometimes the different mortgage brokers or real estate brokers and looked at these deals in the past and they’ll, they’ll come and say, hey look, be careful for this or this is a great one. You need to look at this one. So we try to get as much data as we can in addition to the offering memorandum and rent roll that we get and PNL for each apartment complex or lease the deal we’re looking at and try to really feel comfortable with the town we’re investing in, the people we’re renting to with.

I’ve also found is that some of these municipalities, they vary their taxes, I mean, you can literally go one town over and pay 30 percent more in taxes. It’s the sort of things, those little touches that if you don’t watch out for that, it could really hurt a deal tremendously.

We’ve probably missed out on a lot of deals because we’re a little more conservative and we always underwrite our deals with the tax increase is shown in the expenses. We always put a line item for repairs and maintenance. And we always underwrite with depending on the deal a 7 to 12 percent depending on how we feel about the market, so we try to make it work and make the deal make sense with several things not going our way and then if we can have things go our way.

It sounds like you’re also doing this over and above the standard 50 percent expense, you’re taking into account a far greater hit just in case things go south in a hurry. So it sounds like.

That basic 50 percent rule is a good rule of thumb. Like that’s just a rule that kind of lets you decide if you want to take a closer look at a property. I don’t feel like it’s nearly enough information to make a decision on or not.

Yes. Yes, absolutely. Absolutely. You know, maybe you can tell us about your morning ritual, how do you start off the day, because I truly believe that it takes a great deal of discipline to do what we do and it all starts with how you begin your day.

Well, you’re gonna laugh at me. I have four children, six and under, so my day starts a in between one and 6:00 AM. Getting up halfway through the night to now, easily. You know, I get up and get my oldest, she’s a kindergartener, get her ready for school and get her out the door. And then it just depends on the part of the wakes up. Some of my days are very set in stone. Some of our commercial contracts we have to give some reporting. So I have days that I know I’m going to be in the office. So once I dropped my daughter off at school, I usually kind of check our morning, do morning rounds and check jobs that we have going on that are inside my town. once I get to the office and kind of make sure there are no fires put out. Then I usually try to give myself a little bit of time to look at any deals that have come across the email or that I got calls on.

I will tell you I’m a big goal setting guy. And so I wrote, I’ve got a daily planner and I haven’t done really well with this lately, but from probably the last seven or eight months, I wrote the same seven or eight goals down every day or every other day. It was at least three times a week and it was anything from spiritual goals to financial goals, to real estate investing goals, to just making sure I spend quality time with my wife and children, making sure I have enough time to pray and spend time with God, making sure that I’m getting the kind of business. make sure our construction company succeeds. Anyway. I wrote these goals down at least three times a week over and over and over, page after page, after page, after page, and I think that that does something to your subconscious. I think that does something to how you look at things, the Lens you’re looking at, it makes you more focused and I really do believe in it. It’s not what I would call your traditional goal setting, but it keeps it on the forefront of your mind.

Absolutely. No, I’m a big believer in that. I have a daily one. I do the same thing every day, every day at least once a day, and that’s actually something right out of Napoleon Hill and Grant Cardone talks about in his 10x rule.

I have my 10x planner. every day at 10:00 AM. I have a reminder that goes off on my iphone. That Kinda reminds me of my top two or three. And so just top of mind presence, I think is incredibly important.

Yes, absolutely. I think it’s just what you said. It reinforces your subconscious to really keep an eye out for those opportunities. And, it’s through that repetition that really enforces those goals. Yeah. I’m a big believer in that. And this part of that, again, goes back into the whole discipline in, I really need this plan around this, this business.

Well, you, you have to be intentional about your life. Our lives are too busy now too. It’s too easy to just let life happen and go home and watch TV and just relax. Don’t get me wrong, I still do that. But if I don’t become intentional about pushing towards these sayings, I won’t do it. I just, you know, whether I’m a disciplined individual or not, I’m going to inherently do what’s easy. And so I’ve got to put these things in place. So I push towards my goals.

Now, would you say that that is probably the personality trait to be successful in real estate?

I think it’s a big factor. I don’t know if I could give you one overarching personality that makes a difference. But I think goal setting is major. I think the problem you’d asked me about kind of where I get my resources. I think there’s a really big problem in real estate investing and real estate investors is, there’s an inherent thought that you have to keep learning and there’s something else I got to know or something else I don’t know how to do or what is and I think at some point you’re going to know enough, you just need to act and I think a lot of people in our, industry or our circles, they kind of miss that because they get paralysis of analysis or they just are too scared to pull the trigger. And I don’t mean to just be. I’m not saying you should just be flipping careless and reckless and just go for it. You should be smart and how you’re doing your deals are going after them, but at some point, you know enough you need to act on what you’re looking at. And so I think, I think the ability to command and just do it is a, is half the battle because you’re gonna you’re not gonna learn some things unless you go through them.

That leads me to my next question about aspiring. What advice do you have for aspiring investors?

Well, I would say, yeah, find those that have done what you want to do and I do this all in all aspects of my life or I’ve tried to. I mean I’ll try to find spiritual people in my church that I want to be like spiritually and I go quiz them, I go ask, I’ll take them to coffee. I find guys that are doing what I want to do in the construction industry and they’re just ahead of me and I will pick their brain and take them to watch. I found guys in the real estate investing world and they’re killing it and they’re knocking down deals left and right and pick their brains and shoot them emails and text them. I call them and I learn from them. And then once I kind of feel like I’ve gotten what I need to do or we may say that’s it, now go do it. Now It’s back on me. I’ve got to go do it if I’m going to do. And so I think there is definitely a little bit of learning, but then you have to do that. The cool part is, is once you’re done and once you’ve acted, now you can take that back to the all those same people. Okay, this is what I did. And they’ll go, oh, you shouldn’t have done that, or oh, that was great. Now do it this way the next time. And so you have something to learn.

Moral of the story is to take action. It’s study, and then take action. Yeah, absolutely. So, so what’s exciting you right now?

I’m excited about just kind of what we have built with this commercial real estate fund. I think that’s opened a lot of doors. It’s gotten people excited about doing deals and it’s allowed us to kind of make a name for yourself in that space. I’m excited about my construction company as we continue to pivot to doing more fix and flips or buying land and building single family and duplexes on. Overall we’re busy and it’s hectic, but it’s, we’re in a good place and so I think I’m going to continue to try to find. I would really like to find one or two more multifamily deals this year that we’re going to really push to try to at least close on two or three more of our dollar store fund deals this year. So I think just trying to close in on that replace in my day job income I think is a big deal.

And for me it is. That’s one of my kind of overarching goals. So I feel like we’ve spent the last two and a half years laying a foundation and now we’re able to really kind of see some of that. Yes. Excellent. So now, how are people able to reach you? Oh yeah, feel free to reach me. I’ve started to a website that kind of gives you a little bit of Info about me. It’s called www.madewellinvestments.com. They’re more than welcome to email me at jordanmadewell at gmail.com. It’s my first and last name.

 

Building a Multifamily Empire and Rescuing Deals, with Tim Bratz | Real Estate to Freedom Podcast #2

Building a Multifamily Empire and Rescuing Deals, with Tim Bratz | Real Estate to Freedom Podcast #2


About Tim:

Tim Bratz is a real estate investor based out of Cleveland, Ohio. He invested in his first house in 2009 and now currently holds well over 500 rental units in his portfolio. His core focus is on investing in apartment complexes in multiple markets. He started his real estate investing career by flipping and wholesaling single-family residential properties. Now with a team backing him, he is able to buy, renovate, and sell over 100 properties per year. He relies on his mindset to build his success.

Contact him:

bratz@cleturnkey.com

www.cleturnkey.com

www.commercialempire.com

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Transcripts (automated):

Tell us a little bit about yourself and how you got started in this whole multifamily thing.

I’m 32 years old, got interested in real estate when I was going to Miami of Ohio College, so the market was going gangbusters and everybody said, hey, if you want to make money, get involved in real estate. And so motivated me as a 20 something-year-old, 20, 21 years old. Started looking at different real estate positions and opportunities out of college, so who does New York City, my brother was living there at the time, so just kind of shacked up with him and became a commercial leasing it for retail storefronts. You ever been to Manhattan? You know, you walk around the entire ground floor of that entire city as retail space. So I would either find another location to expand to or I would help a landlord market their space to bring a business in. And so I remember brokering a lease on about a 400 square foot commercial space in the village as cool, trendy area, but probably for 400 square feet.

They signed a lease for $10,000 per month. That doesn’t even include like escalations annually. There’s four percent, I think escalations every single year and it was a 12-year lease and so I did the math on it and over the course of 12 years with the escalations and everything, this landlord was making around $2,000,000 from this one, 400 square foot retail space. Not to mention the other seven retail spaces that they had on the ground floor and like 15 stories of apartments above it, and so I sat back and looked at the situation. I was like, I’m on the wrong side of the coin. I need to be owning real estate broker in real estate. And so on a whim, I decided to move down south. Moved down to Charleston, South Carolina and is, 08, 09. Right after the market tanked. Bought my first place. I think it was April.

I did something like that and so it’s been nine years now and bought a duplex down there, fixed it all up, did the work myself, change out the carpet, change out the fixtures, painted the inside, painted the exterior landscaping and didn’t know what I was doing. So it just made up some flyers and some signs that said, hey, I’m going to do an open house. And I handed out to everybody on the street either way and he’ll open house one Sunday and one of the neighbors came by and offered me to buy this thing for about $15,000 more than what I was all into it for. So it was all excited about that. Sold the property and rolled it into another deal, got into wholesaling a lot of wholesaling for a few years and then met some people who had money and realize that I knew what a good deal was.

I wholesale a lot of deals. I just kind of met all the players in town. They realized that I knew what the deal was, but maybe they didn’t have the bandwidth or maybe I met other people who were familiar wanting to invest in real estate but didn’t have the knowledge. And so I partnered up with them and gave up probably 50 to 70 percent of my first 200 plus deals in real estate just because I realized I needed the experience. So I needed to. People weren’t going to invest in some pump 23, 24-year-old kid because I didn’t have the experience. The relationship could be built that long because I’d only been investing for a couple of years, so I had to be very generous and giving up a lot of equity and ideals, giving a great return on investment so investors felt comfortable working with me.

That’s what I did. I give up 50 to 70 percent my first 200 deals, but what that did is allowed me to put enough on my resume and build enough experience. We’re now at your posture up with private money lenders. I’d go posture up with bankers and traditional lenders and so it gave me a lot of opportunities moving forward then.

Nice. Yes. I think now that we talked a bit before we got started, at this point though, you have properties in various states at this point.

I’ve done everything I’ve wholesale. I’ve lived retail houses, low-end retail, high-end retail, some of that hgtv kind of stuff. I’d done a lot of turnkey flips where a business owner or a white-collar professional asset cash, they want to invest in real estate. They just want to be completely passive. I would buy rent and then sell as a turnkey rental package up with management and sell it to a professional buy it from me.

So I’ve done a lot of those, a couple of hundred of those over the past two, three years just kind of on the side, bottom apartment buildings or hooked up with joint venture opportunities where I raised money and maybe sponsored the loan, signed on the loan in order to help make that happen. And then I was partnered up with great operators who did all the work and you’ll find a deal and oversaw the value-add that took care of the ongoing management and had a couple hundred units. I’ll maybe about 300 something units as of uh, like last summer. And I remember sitting back and just reflecting as you do, you know, typically I do it over the holidays. And then usually around summertime, every, every six months I sit back and reflect on the business light. And you know, try to design the type of life that I want versus just let it happen to me and react.

I try to be proactive and all that stuff. And so I remember sitting back last summer and being, I’m literally spending 10 percent of my time on apartment buildings and it’s generated 90 percent of my wealth and if I dedicated all my resources, both my time and my team’s time to only buying apartment buildings that we could buy and hold build longterm, well what would that look like? And so I went into the office the next day and I said, hey, we’re not buying any more single-family houses. We’re not doing any more turnkey flips. We’re not gonna do any more retail flips. We’re not wholesaling anymore, we’re only buying apartment buildings. That’s it. So when I dedicated all my team’s resources over the past 12 months, we’ve gone from four, 300 units, maybe just shy of 400 I think is where I was. And now we’re 1,320 some units in our portfolio.

So we bought a lot of apartment buildings both in Ohio, South Carolina. And Georgia, we got into vacation rentals, so we do some longterm a and b class assets is essentially what we buy in Ab class areas and they’ll produce cash flow and generates longterm wealth for us. So right now we have office buildings, we have residential apartment buildings and we have vacation rentals. I’ve done some stuff with retail as well, but I don’t own any retail right now. So that’s kinda where we’re at. So we’ve grown, picked up by 900 units a little over that in the past. Less than 12 months. You know, it’s funny when you put that out to the universe and how the university responds to that is pretty cool. You know, I just burned the ships, you know, got a decided we’re not doing anything else. You get a little bit fearful, you know, you’re leaving a lot of money on the table.

What if, what if it doesn’t work? I think you don’t really. The universe doesn’t respond to you unless you make that dedication to make that commitment. So we’re able to build a portfolio over the past 12 months. And again, I’ve been buying apart buildings for the past five years now, but really been scaling up in the past 36 months and so we’re over 1300 units now. We’re buying another vacation rental in Florida this week. We’re buying a building in Texas in two weeks and we have some other stuff under contract here in Ohio. We just contracted some land in South Carolina on a water that’s Primo real estate to that we’re going to build probably 75 to potentially get a little bit more land that’s adjoining it up to 300 units, townhouses a water. So we’re pretty pumped about that. The portfolio’s valued at around 85, maybe almost $90. Million dollars right now. We expect to be well over $100 million by the end of the year and probably north of 200, 250 million by the end of next year. So pretty pumped.

That’s amazing. And just like I said, I started with just making a decision. That’s what it was making the decision to get out of single family and go into multifamily at all in. Yeah, that’s what it is. Now when you’re trying to put all this stuff together and you’re building out the business itself, I’m assuming when he made this decision, you had some of the components in place because I know you’re running at turnkey, right? I think that’s what it’s called your company up in Cleveland.

Cleveland. Turnkey real estate is our turnkey business, so you know, we had a guy who handled acquisitions, so my core team is five of us. There’s me as CEO. I have a crew who oversees pretty much all the operations as CEO. I just focused on raising money and I have the final say on deals that we do or don’t do. So as the coo he oversees the entire operation and specifically our management company or management company has about just shy 20 employees, leasing agents, general managers, maintenance staff, bookkeepers, owner liaison. So we manage about 400 units for other people houses that we flipped over the past couple of years and then they manage our own stuff locally here in Cleveland. So he oversees the general managers and the management company. He oversees the investment team as well. My investment team is just outside of me and him is three other people.

We have an acquisitions guy who handles all acquisitions, is underwriting deals all day every day and making offers every single day. Somebody letters of intent and doing all that coordinating dude walkthroughs, inspections, everything. I don’t even see the deals until he scrubs it and then he gives it to my commercial mortgage broker and he scrubs it and then they bring it to me saying, Hey, do the numbers work and a this does work for our buying criteria. Let’s go ahead and contract it and then I’ll say yay or nay, and then once we contracted, he brings in the project manager who brings in a bunch of, you know, of our general contractors and puts the full scope of work together in order to figure out what is going to be needed in order to increase the value of this asset. So we don’t buy anything that’s stabilized.

I’m a real estate investor. I’m not to a retail buyer, you know, I’m always looking to buy wholesale so we won’t overpay for anything. We’re always looking for a deal. We’re always looking at ways on how we could force appreciation and increase the value of the asset. The way that you do those income-producing assets is to increase the net operating income, so you want to increase the income, decrease the expenses, it increases the noi and then from there the building is value that many multiples times that. So it’s very easy to increase the value of apartment buildings pretty significantly and all commercial properties if you can get them really performing well. So we’re pretty good at doing that. And the project manager helps put that full scope of work together. And then once we close on the building, they oversee the value ad plant which could be anywhere from three months to 24 months of improvement.

The building, the exterior, the interior, the units themselves, all the mechanicals, putting that whole plan in place. And then he shifted over to our, such as director of marketing and property management who handles our in-house portfolio. So he’ll work with the management company and the tenants and make sure that the property is performing on an ongoing basis. But yeah, I mean it’s me and the CEO, Coo, director of acquisitions, director of project management and director of property management and so those are the five key people on my team and then we work with a lot of joint venture partners. So like my stuff that’s out of state is all with other investors who maybe understand the residential side of real estate, but they don’t have the balance sheet, the network, the liquidity and the experience at apartment buildings. So they need somebody like me to come in and sponsor the loans.

It’s helped raise the private money. So that’s one of the things that I do is I work with a lot of other investors in Texas and Georgia, South Carolina, Florida, and I’m open to working in another state as long as they have a phenomenal operator, somebody who is boots on the ground who has equity and only gets paid on the deal if the deal is performing. And so those are the kinds of people that I work in with. And so we create joint venture partnerships. I take a piece of the equity negative piece of the equity and depending on who’s doing what we do with that up, so it’s a way that I’ve been able to do more business without actually hiring more staff, kind of what we were talking about. You know, as you get bigger business you become more of a human resources director than anything else and it takes a little bit of fun out of it. So I like, I really liked doing the joint venture partnerships.

Yes, yes, yes. The same way that allows you to scale and grow the business. That in itself is huge right there. Sure. Huge. Absolutely. Now tell us a little bit about that. Dla just got to Georgia as a fairly large deal. I know you ran into some fun times with that recently, but we’re to make it through. It’s a task a little bit about that.

Yeah. I’ll give you guys some backstory on it. So a contracted 730 apartment units in Georgia back in March. First, it was actually listed with a broker. Some other buyer headed under contract, couldn’t close on it, couldn’t get the financing, couldn’t get it to the finish line. It was like running through the mud. The seller was run through the mud for about six months and it came back on the market and we made a bid on it and so we realized that their hot button, really their motivation was to just get this thing sold. It wasn’t really, it was a couple of rich investment bankers or something out of New York and they didn’t care about price as much as long as they knew that somebody could come in and execute and close on the deal and so we went in lower than some of the other offers that were placed.

Actually a couple of million dollars lower. But we took that knowledge that we had at the sellers wanted to get this thing sold to somebody who could perform on it and we partnered up and we put up $300,000 of hard earnest money, nonrefundable earnest money at the time that we made the offer. And because we had so much posture, so much confidence in our ability to close, they went with our offer even though it was millions of dollars less than the highest offer. So we contracted and put all the financing together, realized how much money we’d have to raise for this thing. And I went out and raised $4,000,000 from a single investor buddy of mine who’s done probably $2 million with me in the past 12 months. And he said, yeah, I’m in for the 4 million. And so because we’ve already done so much business together, I didn’t need to question it.

I’ve been sitting on my hands just hanging out and relaxing, waiting for closing dates for the next 90 days. We did all our due diligence. Everything was all queued up, our loan and all that stuff. So the week before closing, exactly one week before we closed it on Monday and he tells me that the Monday prior, I’m like, hey man, just a heads up. We’re ready to close next Monday. Here are the wiring instructions, here’s all the documentation that you need. All that stuff. He hits me back up and he’s like, hey man, I don’t have all the money for closing. I said, what? He goes now, but you know I’m launching is launching a cryptocurrency right now and raising a bunch of money for that, that he was going to parlay into some real estate. He was going to an ICO is like an IPO just with cryptocurrency and so he was going to sell a bunch of stock essentially in this initial coin offering and he’s going to come into a windfall of a bunch of cash and that he wants to roll his own cash into some hard assets like real estate.

So he goes, listen, man, I’m speaking at this crypto convention in Africa on Wednesday. I think it would have raised all the money from that and then we should be good, so don’t worry about it. So Wednesday comes, he’s like eight hours ahead of me. I’m texting them as soon as I wake up Wednesday morning. Hey Dude, how the presentation goes. You raise all the money that I didn’t hear anything. Just crickets, you know. So I’m freaking out a little bit. You know, texting them itself all throughout the day, Wednesday and then on Thursday still nothing. Not until Friday morning he hits me up Friday morning by time, you know, it’s like running evening his time and he tells me that he doesn’t have all the money raised and I said dude, how much can you get? And he’s like, dude, I don’t have anything raised, I have all bunch of commitments but I don’t have any of the cash in my account that cannot get you the money by Monday.

And so this is like Friday, mid-morning, late morning. And I’m like, Holy Shit, like what am I going to do here? And you get all these self-defeating thoughts that run through your brain. Like, oh my God, there’s no way I could raise this. I’m going to lose this deal. You’re fearful and you’re like, you think that the whole sky is falling down on you? You know, I’m, I’m looking at my situation and thinking about like what are my options? And I realize and I was working from home that Friday and I realized like I’m locked watching my three-year-old daughter and my one-year-old son or almost one-year-old son and my wife hanging out and playing and making lunch and run around outside. And I’m like, I’m concerned my biggest problem in life right now is raising. I had to raise $4,000,000 for a deal that was gonna make me between 15 to $20 million dollars.

And I was like, that’s my biggest problem right now. Like my family’s healthy, they’re happy, they’re healthy, they’ve got a great life that a roof over our head, food on the table and clothes on our back and good education. Like all the, all the good things like we don’t have any real problems with. My biggest problem is risk $4,000,000,000 in order to make $20, million dollars. Like that’s an awesome problem to have. And it just put me in this more Saturday and attitude of gratitude and decided I could make this happen. Like everything else is, is good. I can make this work. Let me just get to work on this thing. So I think one of my biggest unique abilities is my resourcefulness. You know, a lot of people say they can’t get involved in real estate. They get involved in apartment buildings because they don’t have the resources.

I don’t have the time, you know, I don’t have the money. I don’t have the uh, the balance sheet. I don’t have the liquidity, I don’t have the experience in buying apartment buildings. And what I think people don’t realize is that if you’re resourceful, you can get any of those things. It’ll. Resourcefulness is the ultimate resource. If you’re a problem solver and you can think critically, you could solve any of those problems. And a lot of people were like, do to, how do you raise money? Like, do you know of any hard money lenders in the area that will lend money on this? I said I don’t know. Did you ever google search hard money lenders, Cleveland, Ohio, hard money lenders? Google it. If you ever even tried. No, I didn’t ever really thought about that. Well, you don’t think about it next time. Like you can google literally any frigging question that you ever had.

So you just have to ask the right questions. If you ask the right questions, you’re going to get the right answers and the better the questions you ask, the better the answers you’re going to get. So I went to work and I, and I looked at my different scenarios I could hold up with lose $300,000 a nonrefundable earnest money and walk away from the deal. You know, I still got my operation. I still owned another six, 700 units personally and with other joint ventures and I’m going to be okay, you know, but I do lose $300,000, which I wasn’t too excited about and I’m just not a quitter. So that was an option. That was not really an option. Then the other thing I can do is I could ask for an extension. The issue with asking for an extension was I kind of lose face with the seller who contracted with me because I postured up and told him that I could buy this building and all of a sudden he’s going to lose a lot of belief in me and my ability to close if I started asking for extensions.

Secondly, this broker that was brokering the deal, you know, it’s a very small world of commercial real estate and real estate general, especially in commercial real estate. And so these commercial brokers, if you don’t execute on a deal, they’re not going to bring you any more deals. So I needed to make sure I save face with him. And then thirdly, my lender, we already had $10,000,000 deal that was going on. This was a $20 million dollar loan that they were going to give us on this project. It wouldn’t be to do more with them, you know, they’re looking at some other projects for us too. And so if all of a sudden it looks like Tim can’t close on this thing, Tim doesn’t have the money that he said he had, then who knows, maybe they bail on multiple projects in mind and then really that tight spot.

So could I make it happen? I guess I could’ve asked for an extension, but I really, really, really did not want to. And so, you know, when I just kind of put my head down with the third option was to put her head down and get to work. And so that’s what I ended up doing. Man. I just made a list of everybody I knew who’s ever done it like loaned me money before. Hard money lenders, private money lenders, friends, family, everybody who I’ve ever done a deal with. Everybody who I knew who had access to capital or capital themselves. And then I, I literally just put my head down and didn’t look left. Look right. I just went to work and I made phone calls. I sent out text messages, I send out personalized emails, I organize all the information on the deal. So that way anybody who was interested had everything at their fingertips in an email with all the due diligence, the appraisals, the underwriting, the financials, everything was right there.

So that way if God willing, somebody who was willing, able and willing to fund this thing, they had everything that they needed. That’s what I did. Like I slept for four hours on Friday night and just work through the night was on the phone all day every day. Almost lost my voice all day Friday, all day Saturday. And then ended up connecting with people, you know, of anybody who’s going to write you those kinds of dollar amount checks. Those are going to be people who have already done deals with you. They know your, your character, you know your integrity. And that’s what I ended up doing. So I had six people who collectively came in for $4,000,000. They loan anywhere from $200,000 up to one point $5 million. Some of it was longer-term money, so it was just short-term money. But at the end of the day, I was able to raise the 4 million bucks all the waters went out on Monday and we, uh, we closed on the deal on Monday night and had roots being torn off for the, for the improvements by Tuesday morning

Awesome. Such a compelling story, you know, it’s like when the chips are down, you perform, do, you got over it?

And it’s just amazing. There’s a couple of takeaways. One is like, you have options first of all. And secondly, if you will just go to work and put in the work, that’s where the real success comes in. A lot of people probably would’ve folded it, probably would have asked for an extension. I was like, screw it. Like, let me just get after it. Let me go to work for it. A lot of people want success. They want, you know, we live in this instant success society. You know, people want instant rice pudding, fast food, you know, instant success, same time. That’s not how this works. There is no such thing as a four hour work week without working your ass off for years, you know, to build a team, to build a system, to build the processes, you have to do all those things before you’re actually, you can be a passive business owner and be a passive investor and so there’s a lot of work that goes into this stuff, but people see the fancy cars and the big houses and that they can not do the work and have that kind of lifestyle.

That’s not the case. It’s not an overnight kind of thing. You know, it took me nine years of shoveling shit in order to get to the point where right now or where Tim’s all of a sudden overnight success, you know, so people forget about all the work that leads up to getting that momentum, building that momentum and then maintaining that momentum long term. So another takeaway, if you’re looking to go out and raise private money, I know you, you talked with a lot of investors and a lot of people who are in the investment raising money, stages of business. You need to realize like I my money and I borrowed money from ideals and they’re like, Tim, why wouldn’t you just invest in your own deals? That way you don’t have to pay private lender because it keeps me sharp between the years and now I know what private lenders are looking for and it doesn’t matter how much money you have.

When you get into commercial real estate, you’re talking about millions of points that needed to be put down on projects. At any given time, you’re eventually going to run out. You’re gonna have to go raise more money anyways, so it’s just one of the things that I do is I lend my money out on different projects and then I borrowed money from my own projects and what I realized that there are things that lenders look when they’re looking to lend money. One is the asset will kind of asset is a or b class c class kind of what’s the value-add play? Is it a heavy lift? Which work does it need, a location? All that kind of stuff. Regarding the asset itself, retail, office, commercial, apartments, residential, duplexes, whatever the asset is important, but it’s probably the least important of the three things. Number two is the return on investment.

Like what are they earning for their risk? Interest rates are dictated essentially based on risk. So is the reward worth the risk of getting involved in this project? Are you making sure that it’s worthwhile for the investor to, uh, put their heart into a deal that they don’t control and put their trust in you? And so the return is a big deal. And then number three, which I think is the most important, which I think is the reason why I was able to raise $4,000,000 in 48 hours, is the character and the integrity of the borrower. Your lenders are asking you, does this person have the fortitude to pay me back my money? That’s only something that you can develop and create through repetition or do it a lot of deals. Making sure people get paid back through your character who always doing what you say you’re going to do and always doing the right thing by lenders.

Know that I have the integrity if shit hits the fan, which it usually does in real estate, 10 will go and work, third shift at Mcdonald’s if he has to make sure that I get my money back and that’s the kind of reputation that I’ve been able to build and the reputation that I’ve created in doing business over time. I made sure that my investors always get paid back. I make sure they always get paid back on time or early and they always get feedback. Well, you know, maybe I’ll throw a little bone in there, set up a gift or something afterwards, but I make sure that that is the case and raising money. So think about those three things whenever you’re going out to raise capital, make sure the asset is quality, make sure the return is substantial enough for them to take that risk.

And three, make sure that you’re conveying that you’re the type of person that will make sure that this investor gets their money back regardless of what happens to the property, to the operation, to the economy, to the housing market, whatever. It doesn’t matter. So those three things know investors are looking at all the time. So ask yourself those questions. What I lend my money on this deal? Would I lend my money to me? Reflect on that. Would you lend your money to somebody who has your reputation helps though?

Absolutely. Without that integrity, there’s nothing. There was nothing and people see it. This spotted right away. It’s in your actions, it’s what you do and what you say for sure that all of these different things going on. And I know that obviously integrity means a lot to you as a person and as an operator, as an investor. So how would you say that you’re different today than you were in you were like say five years ago? What do you think differentiates you between the time of five years ago versus today?

A couple things that I’ve been able to do over the past five years is I found a mentor, first of all, who’s was a good mentor, like I’ve had a lot of mentors in my life and I’ve also plugged into mastermind events, hanging out with other high-level thinkers and entrepreneurs are real estate investors. I’m not talking about like the events are good, but I cherry pick like the top five, 10 people from those real estate investors association events and meet with them and talk high level about what’s going on, what they see in the industry, how you could work together, how you can collaborate together and again, just talk about higher level kind of stuff.

I think the shift for me from an operational or mindset type basis, five years ago I needed to do deals, you know because I didn’t have a reputation. I didn’t have experience. I was just kinda getting started in apartment buildings and I would take any deal, you know, regardless if it looked like it was a deal, I’d go into the hood. I’d go into good areas, bad areas. I would take any deal. I wasn’t picky. I would take anybody’s money even it was the last 500 bucks that they had. I wouldn’t be like, all right, no problem. I’ll make sure you get a good return on it. I don’t need to do deals today. It’s Kinda like going to the bank when you don’t need money. The bank wants to lend you a bunch of money when you need money. Nobody wants to give you this true.

So I don’t need to do more deals and because I don’t need to do deals, people want to joint venture with me because I don’t need to do deal with. People want to lend money to me. He goes, I don’t need to do deals with banks, want to finance my projects. And so it’s interesting because I’ve taken this approach. It’s kind of like accidentally, you know, like you were in high school and the girl that you always chased after wanted nothing to do with you and all the girls that liked to you, you didn’t want anything to do with like. It’s Kinda like that where when you play hard to get and you’re not interested in something, everybody’s more attracted to you. And so it’s interesting how that has changed and shifted for me because a lot of people, you know, they want to partner up, they want to take me to lunch, they want to grab coffee and as much as I want to help other people, if I did that, it would take me away from my business consumed all day, every day with how many requests and stuff that I get so annoyed because of that.

It’s almost like this elusive like you can’t catch it because of it. It’s created this emotion and people’s minds were like, now they even want to do more business with me and they, they want to like joint venture somehow with me because then they can be part of it all. So it’s interesting how that compound effect kind of has, has created over the past four or five years.

Tell me about your morning ritual. I’m assuming that they like to, to work out and, and really take care of yourself.

Right? From what I know about shit. Anyway, you know, it’s not easy, but I think a lot of investors and successful people, they’re successful in all facets of their life. That’s not by accident, it’s by design and you really have to plan your day accordingly and make sure that you protect your time, protect the things that are most important to you.

So I have a three-year-old and a one-year-old and a dog and it’s not easy and building a big business, you know, it’s not easy balancing time and making sure that you have time for all that stuff. So now my typical day looks like wake up, usually like 6:00 AM. I’d say ideally I read for half an hour to an hour and then I get a workout in that’s usually running my dog or maybe lifting in my basement. It doesn’t happen every day, usually probably three days a week, but I need to get it up to five or six days a week. So that’s one of the areas that I’m kind of lacking right now. Want to join a gym just so I can make sure I do that and I’m there with my kids when they wake up, my wife get cleaned up and then usually hang out and I hit into the office usually around like 10, 10:30 ish.

So go into the office and I work until about 4:30 and all my appointments, all my meetings are between 10:30 to 4:30 and then it takes me about a half hour to get home and I time block my evenings so I knock out all the work that I possibly can in that six-hour period. And if I can’t get the work done that it doesn’t get done until the next day or just get rid of it or I delegate it. And then in time block my evenings, like I said, from 5:00 to 10:00 PM just so I can spend time with family when I go home it’s like an appointment, you know, like you would double book an appointment. My appointment is with my family every single evening for five to 10 PM. So I’m hanging out with the kids and giving my kids baths every single night. My phone is nowhere near me.

I make sure that I’m 100 percent present to play with my kids and spend time with my wife, my dog. So my phone is up in my bedroom, but I’m downstairs running around, running around outside or taking the kids for a walk. That’s really, really important to me. You know, you see a lot of people who build big businesses and they neglect their family. A lot of people are like, Oh, you know, I do this because of the family. They’re my why. The issue though is where you spend your time is the greatest indicator of your priorities. A lot of people say that their families are a priority, but the reality is they’re not spending any time at home. They’re not spending any time dating their wife or dating their husband or taking their kids out to get ice cream or play or, you know, push them on the swing or whatever without checking their phone the whole time.

So what I realize is I don’t need to answer phone calls at 7:30 at night. You don’t want to put my kids down for bed. Like why would I need to do that? Even if a building is burning down, I can’t do anything about it at 7:30 at night. I gotta wait until the next day to contact my insurance company anyways. There’s nothing I can do. My idea is like there’s nothing more important than hanging out my kids and watch my kids grow up, so nothing’s going to take priority over that. So I, I time block 5:00 to 10:00 at night. That’s really helped the family life by doing that. So you’ll realize, you know, that a lot of the stuff can wait until tomorrow anyways. Like nothing is that urgent. Nothing is that important. We all have this, this idea in our mind that we’re a lot more important than we really are, be. I have a decent sized ego and confidence level. It was hard for me to swallow that pill. And then I’m like, I’m really not that important.

If Tim gets hit by a bus tomorrow and so I’m like, why do I even need to take time away from my family in order to take these phone calls and it’s really not that important. So that’s a big deal to me is the time block and then I’m usually in bed by 10:00, 10:30 at night and I’m waking up again. I’m trying to wake up earlier. I’m trying to get up at five, 4:30, 5:00, but it’s been hard first couple months for me with all the work and travel and all that stuff really traveled, throws me off. You haven’t had. That’s, that’s a typical day in the life.

Yeah. I think that working hard, like you do sourcing the deals, running the deals, make sure that they work. It takes a lot of energy but so does, of course, being with your family. I mean I think that is the why right? I mean that’s your why. It’s my wife.

Well, and when you apply yourself the way you do to your family, it’s. It means that much more. All the hard work that you do put in. Absolutely. When you have that ability to take kids on a hike in the metro parks on it on a Tuesday morning, you know, and everybody else is like, it makes it worthwhile. What you’ll find is you become so much more productive during those six hours, four, five, six hours during the day that you’re not wasting time checking facebook. You’re not wasting time doing stuff that could be delegated. Isn’t that important? You’re doing those one, two, three activities that really are the revenue generating activities, those big frogs that you have to swallow, your. Making sure that those things get taken care of. Everything else falls into place. If those big activities, the revenue generating activities are given the time they deserve. Yes, absolutely.

Now, how can people get Ahold of you? I know you talked about a lot of different things that you do, and I’m going to cover those in the show notes, but how do people get Ahold of you? Uh, they maybe didn’t want to bounce a building off to you or your team.

I’d say like three big things right now is we’re, we’re always looking for joint venture partners. People who are great operators who can help us find deals but maybe needs some help raising the private money, maybe need some help getting the loan, maybe just need some direction and guidance and mentorship on the value-add and the ongoing management. We can provide a lot of value in that. However much you need me or not need me, I’d love to be involved, but I’m looking to do more deals and my goal is to build a portfolio of a billion dollars over the next five to seven years and we’re well on our way and we’re going to do it regardless of whom we partner with. But I’d love to find good people to partner with. So for joint venture partners come across deals, please send them over my way.

I’m always looking for passive investors too. You know what I mean? We always have great deals, great opportunities where we could pay a fixed return and we give a little bit of equity kicker on the back end as well. Where are passive investors not only get a great return while the money’s invested and they get all their money back, they keep equity forever in the deal and so they could really build some longterm wealth that way. Always looking for private money investors, private investors. And then the third thing is I do coaching. I do some mentoring, not really one on one, but I have a, uh, a program that I’m launching a lot of inquiries, a lot of demand for it and I think it’s a good way to actually raise money from private investors and also partner up with joint venture partners. So I’m doing a coaching program probably quarterly, maybe every couple of months we’ll do an event, likely going to be in Cleveland.

We had our first one coming up August 14th through 16th in Cleveland and it’s a three day where I go over a to z exactly how I do all my deals. If you want a partner, that would be awesome. If not, I’m going to teach you how to do all the deals on your own too. So if you’ve got an interest, you can go to my website which is cleturnkey.com or commercialempire.com. Those are my two websites, one for the investment side, one for the coaching side, and then my email isbrats@cleturnkey.com. Be sure to include those.

Well, you know that Tim, thank you so much for making the time to appreciate it as Greg Internet you and thanks for being on the show.

Hey man, appreciate you putting all this value out there. Thanks for doing what you’re doing.