Posts tagged "apartments"

JC 048: Wheelbarrow of Profits with Gino Barbaro

July 25th, 2018 | no comments
There is no such thing as an overnight sensation

Gino Barbaro is an entrepreneur and real estate investor. Gino and his partner Jake Stenziano, co-founded Jake & Gino, LLC, a real estate educational company that provides real estate training and coaching for investors. He has over 15 years experience in the real estate industry, owns and manages 900 units valued over $51 million and is the best-selling author of Wheelbarrow Profits.

Gino spent 25 years running a pizza restaurant prior to pivoting into a successful career as a real estate investor. The pizza shop taught him how to manage a small business and that experience allowed Gino to identify the perfect partner and build a portfolio apartment communities.

In this episode of the Real Estate Locker Room, Gino talks about his life before he became a real estate investor and how the business lessons that he learned running a small pizza restaurant helped him build a multifamily real estate company.

Gino shares how he and his partner Jake met and how they entered the apartment building market. Take notes as Gino discloses all of his trade secrets to successful multi-family investing. You will learn the importance of building rapport and establishing networks in the real estate industry and why there’s no such thing as an overnight sensation.

Five Key Points:

  1. Real estate is a relationship-based business.
  2. Once you know the reason why, start looking for mentors. Follow their roadmap and learn the ins and outs of the multifamily industry.
  3. Nobody is an overnight sensation; they grind, they work, they miss important events to get to where they are.
  4. A mentor is such an important team member because they guide and oversee the business from a wider perspective.
  5. Acting as a sub syndicator allows you to raise money for somebody else’s deal.

Favorite Athletes:

Favorite Sports:

  • Baseball

Favorite book:

Pro tip:

  • Surround yourself with like-minded individuals and join mastermind groups to achieve more success in your industry.

Reach Out to Gino Barbaro:

Thank you Gino for taking the time to share your thoughts on how to successfully build a multifamily real estate business.

Listen to all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at http://www.johncarneyonline.com

Connect with John Carney
Facebook: @JohnCarneyOnline
Twitter: @John_M_Carney
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© John Carney 2018

JC 025: 3 Keys to Real Estate – Scale, Value and Risk with Ike Mutabanna

September 13th, 2017 | no comments

Learn how to penetrate new real estate markets

JC 025: 3 Keys to Real Estate – Scale, Value and Risk with Ike MutabannaIke Mutabanna is a real estate entrepreneur and the president of Dallas, Texas based IHM Business Group. Ike also hosts the successful podcast, “The Side Business Show,” where listeners learn how to grow their wealth through running a wide variety of side businesses.

Over the last 15 years Ike has spent time as co-founder, president and CTO in a variety of startups and turnaround companies. He’s originally from India where he attended the University of Bombay, India and earned his BE degree. Ike also has a MS degree in Engineering from the University of Cincinnati.

Ike is an active commercial real estate investor and multifamily syndicator. In his downtime you will find Ike pursuing his newfound passion for mountain climbing, having recently started training for technical climbs on rock cliffs.

The 3X advantages of syndication versus single-family investment:

1) Risk diversification is much better in a ten-unit apartment building versus three single-family houses.

2) Economies of scale is better in terms of net income. The more net income allows you to hire property managers, allowing you to focus your time and energy on further investments.

3) Value appreciation – you have the ability to force appreciation with creative strategies to increase rent and overall income and push the value of your properties.

Five key points:

  1. When investing instate you have the definite advantages of knowing your local market and the ability to study that market in depth, without needing to rely on other people to relay information. You can easily build networks by attending meetups and creating partnerships.
  2. When investing out of state it is essential to take the time to build a trusted and solid team before proceeding with investments.

 

  1. Take advantage of your opportunities when you are investing instate: visit neighborhoods personally, study the local markets, take detailed notes and photos of different neighborhoods and create a thorough database which you can easily refer to when looking into new investment opportunities.

 

  1. Multifamily syndication provides the opportunity for much larger scale where investors can achieve larger returns on their investment

 

  1. It is important to find an activity outside of your business that inspires you and that will assist in training your mind and help you maintain an energetic and motivated state. You then transfer that energy back into your business.

Favorite athlete: Sunil “Sunny” Gavaskar – Famous Indian cricket player.

Learn about the game of cricket here: https://en.wikipedia.org/wiki/Cricket

Favorite books:

Favorite quote: “When you want something really, really bad and you take the action to achieve it, the universe comes together to help you achieve it.” The Alchemist – Paulo Coelho.

Check out The Side Business Show podcasts and contact Ike here: www.thesidebusinessshow.com

or podcast: thesidebusiness.show

Thank you Ike for taking the time to share your story and business insight with us.

Listen to all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at www.johncarneyonline.com

 

POST GAME REPORT: Episode Transcript

JC 025: 3 Keys to Real Estate; Scale, Value and Risk with Ike Mutabanna

Learn how to penetrate new real estate markets

Announcer: Welcome to the, “Real Estate Locker Room Show” with John Carney. Did you know investing in real estate is a team sport? Join John and his guests as they explore the business of real estate and athletic competition. The goal for this show is to grant you direct access to the real estate pros that are closing profitable deals and growing their businesses. On the “Real Estate Locker Room Show” we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve on-going success. Now it’s time to kick-off and level up with new ways to grow your real estate business.

John Carney: Welcome back to the Real Estate Locker Room Show everybody. I’m your host John Carney, coming at you from my office here on the sunny Westside of Cleveland, Ohio this fantastic Monday afternoon in the month of August. We are going to be talking to a real estate investor and entrepreneur Ikbal Mutabanna, who is on the line and joining us in The Locker Room from Texas. But before we get into that I just want to remind you: the purpose of The Real Estate Locker Room Show is to help you as an investor or a real estate professional who supports the industry in some capacity, or someone who’s looking to break into real estate — we really want you to be able to: number one, recruit the best team of professionals that you can to work with you; to position yourself for success and really elevate your real estate game.

The person who we’re going to be talking with has definitely done that. We met through networking. Here you go, I’m up in Ohio and being connected to Ike and his business partners from Texas and Colorado. So that is just a matter of being in the game and participating in networking events I suppose. But anyways, welcome to the locker room Ike.

Ike Mutabanna: Hey, thank you John. I’m excited to be here.

John Carney: Yea. I’m stoked to have you. So, let me just let the audience know a little bit about you. Ike is his nickname, but Ikbal Mutabanna is the president of IHM Business Group. His previous business ventures include strategic technology services, commercial real estate syndication and multifamily acquisition. Ike is also the host of a podcast called The Side Business Show, where listeners learn how to build wealth through a variety of side businesses, regardless of whether they are full time employees, stay at home mums or students.

Previously, Ike spent 15 years as co-founder, president and CTO in a variety of startups and turnaround companies. He earned his MS degree in engineering from the University of Cincinnati and a BE degree from the University of Bombay in India. Ike enjoys mountain climbing and has recently started training for technical climbs on rock cliffs. He lives in Dallas, Texas with his wife and two beautiful children.

Alright, so let’s get into it Ike. Not only are you an entrepreneur on the technology side and experienced business operator, but you’re also a real estate investor.

Ike Mutabanna: I am.

John Carney: Well, before we get into everything that you’re doing real estate related I like to warm up on the show and just get the conversation going with a few sports related questions. Do you have a favorite athlete that you looked up to as a kid?

Ike Mutabanna: As a kid, that’s a good question. Yes, there was actually. The only caveat that I will say John is that, because I grew up in India, some of the sports played there are different than the sports that we are familiar with in the U.S. So you being — having lived in Australia you’re probably familiar with cricket and field hockey.

John Carney: I am definitely familiar with cricket and my wife is a huge fan, so I’m into the test match cricket.

Ike Mutabanna: Right, right. So as far as cricket is concerned, there was a very famous — so cricket, for those of our listeners who don’t know what that is, it’s a game very similar to baseball, just a slightly different shaped bat and a ball that is made of living material, and a few different rules.

But we have an Indian player when I was growing up by the name of Sunil Gavaskar, also known as Sunny, who scored the highest number of runs in cricket at that time. He was later, of course, his records are broken about 15, 20 years later, but while growing up he was my idol in a sense. Not just for the game but also for his sportsmanship and his gentlemanly conduct in everything he did.

John Carney: You know, for the audience who — I know we have global listeners out there — but for the audience here in the states or North America who’s not familiar with cricket, it is a gentleman’s sport. But don’t take that as — these balls are travelling incredibly fast right at you. And they spin, right?

Ike Mutabanna: Yea they spin. I mean the spin is I think far more than I’ve seen in baseball, just because of the fact that it also bounces before it hits the batter.

John Carney: I just don’t see myself getting padded up and in the nets in front of a fast bowler anytime in my life.

Ike Mutabanna: Yea, I’ve done that, I’ve been hit quite a few times so I like the field now.

John Carney: So, you grew up playing organized cricket when you were living in India?

Ike Mutabanna: Well, it’s interesting, even though cricket was a very prevalent game in India, it still is, in fact, it’s considered to be the second biggest religion in India, after Hinduism. The reality is when I was growing up, India was actually the champion in world field hockey so that’s the game that I played most when I was growing up.

John Carney: Which, now you’re in North America, and it’s really, we’re an ice hockey culture.

Ike Mutabanna: We’re an ice hockey culture, exactly. So I watch ice hockey, it’s similar. Different enough that I don’t necessarily follow it anymore. But yea, that was I think my passion all the way until college and then it fell apart once I left college.

John Carney: Alright, well thank you for sharing that history of growing up in a foreign country with our audience and bringing a new sport to the forefront of the conversations we have here in The Locker Room, and we’ll make sure that we link in plenty of stuff related to Sully and cricket in the show notes.

Alright, so real estate: we were talking when we met here in Cleveland about your past work experience. You lived in Indonesia and worked in technology startups and now you’re here in the United States. You went to school in Ohio and got an advanced degree and real estate is something that you’re pursuing.

So why don’t you give the audience the ten-thousand-foot view of what you do in the real estate game?

Ike Mutabanna: Sure. So I started real estate in a very small fashion about three or four years ago. I used to live in Boston, Massachusetts and, you know, like most people in this industry who first — who are not from real estate backgrounds — their first instinct is to go buy a single-family house that they can rent out. Or a duplex. And that’s pretty much what I did for a couple of years. Never really made that much of a profit from doing that, because generally the financial economics of that doesn’t work out too well. Your vacancy can hit you if you have vacant periods, when there’s turnover of tenants you tend to then get hit by all of the changes and the maintenance things that you have to do in the house. So I never really took it very seriously.

But about a year and a half ago, when I had moved to Dallas by then, I got introduced to our common friend actually, Joe Fairless, who is big in the multifamily apartment building business. And that really intrigued me, because of the economies of scale in that business. So I started studying it, I invested in a couple of those last year, and as I started doing that and studying the markets really well, it became apparent to me that that is really where real estate can achieve the kind of scale and profit and goals that you can strive after, right? Where you’re not going after the small little peanuts that you can get in the single-family world, but you’re really going after something that can build generational wealth. So that’s what intrigued me. I started going after it. And then really entered that full time at the beginning of this year.

So since then I’ve been working on syndication for large apartment complexes in DFW. I’ve got about three that I’ve invested in so far, and around the time that I started looking at expanding that portfolio is when I got introduced by my partner in Colorado to Cleveland. It just so turns out that his family is in Cleveland and we started just hearing this little buzz about Cleveland from a bunch of different sources. So that’s what brought us to Cleveland, that’s when I met you John and since then what I’ve been doing is working on expanding the network of people that we know in Cleveland, and trying to figure out how I can put in place all of the different players I need in order to be successful in the Cleveland market, considering that I’m going to be an out of state investor.

John Carney: Right, and that is — let’s talk about that. You’re in state in Texas. Are you in city? Are you in Dallas or are you looking at markets outside of Dallas?

Ike Mutabanna: Well, so far, I haven’t looked at markets outside of Dallas. The Dallas Fort Worth Metroplex itself is so massive that you can easily consider it to be equivalent to three or four different cities all meshed together. So there’s just such massive opportunities happening here that I’ve not really had the chance to look at other parts of Texas. We did briefly look into Houston, decided not to venture that at this time because, while Houston was attractive say about a few years ago, I think the dip in oil prices hit the economy pretty hard. So that doesn’t mean there are investors who are not in there, in fact there are investors in there who are actually grabbing up properties because they’ve gone done in value. I just don’t play in that particular niche. My goal is to play in the niche of looking at really stable class C plus or B type properties where we can really work on doing some amount of repositioning, but largely focus on the cash flow aspect. So we haven’t really done into Houston.

We looked at San Antonio, the market felt a bit too small but I haven’t ruled it out. In fact, just last week made a really good contact there and there’s a potential that San Antonio might be on the horizon. I did meet another person who started investing in San Antonio from California. So clearly there’s interest in that market as well.

John Carney: Yea, so. I suppose — I didn’t mean to cut you off.

Ike Mutabanna: That’s fine.

John Carney: The question that’s sort of coming to my mind is, not only are you — you’ve moved around in the United States, so you’re establishing a business in multifamily real estate in your home town at the moment, which is Dallas, right? And then you’re also looking to other markets.

So whether they’re in state or out of state, let’s talk about how you went about recruiting your team locally, and then how that translates into how to be time efficient and find the right people in another market. Because this is an important message that I’d like to get across. And I believe that you’ve got the experience to give the pro tips on how to achieve that.

Ike Mutabanna: Sure. So there’s a substantial difference between investing in state and out of state. What happens is, in in state, as I started becoming familiar with the market, really studying the market, the ability for me to be on the ground made it much more of a favorable situation, where I did not necessarily have to depend on others to confirm things for me. If I heard of a particular neighborhood which was on the upswing and there was some good developments happening there, it would be a 15, 20-minute drive for me to get out there, park my car, walk around, really study the neighborhood in detail. And I have a habit of making lots and lots of notes. Every time I go to a neighborhood I’ll sit down and I won’t carry too much, I’ll just carry my phone with me. I enjoy using Google Keep. So I’ll just start making notes, I’ll take a few photographs.

But I’ve built up a huge databank of notes of a lot of the neighborhoods in the Dallas area. And that’s something I can do on an ongoing basis, which is really helpful because that means when I get an opportunity presented, or one that I’m looking at, I don’t necessarily have to depend on a pro-forma or someone else telling me what is the potential of an area or not.

But when you go to out of state, you no longer have that luxury, right? Unless you’re willing to fly down like two or three times a month. You really don’t have the luxury to go and do that on a regular basis.

So the big difference between how I’ve been able to do things in Dallas versus when I’m targeting a place like Cleveland, is that in Dallas I’ve done a lot of the groundwork myself and now I’ve spread the word, I’ve gone and attended meetups, which again, something I can do when I’m in state but I cannot do when I’m out of state. And I’ve made a lot of contacts. I’ve also made — I’ve created partnerships with larger firms, people who are much bigger than me in this industry, and many times, rather than finding my own deals, I go participate in their deals.

Interestingly, one of the companies I partner with, they actually are not in Dallas themselves, even though one of the partners is originally from Dallas. So when they get deals it’s easy enough for me to go validate their underwriting and all of the assumptions they’ve made, to make sure that I’m comfortable with it. Again, something not so simple to do when you’re out of state.

So as far as Cleveland is concerned, we realized early on that the only way we were going to be successful is if we spent the time upfront in building out a solid team before we even took the first step of identifying and trying to evaluate a property. So in fact, to be honest, I haven’t evaluated a single property so far, from an underwriting perspective in Cleveland. All I’ve been working on is just a slow, patient process of talking to people in Cleveland, finding the right set of partners in every different area that I need. So whether it’s property managers, whether it’s brokers, whether it’s lenders, title insurance, CPAs, lawyers. We’ve just been going methodically one by one talking to people.

I did visit Cleveland for about a week, which is when you and I were able to meet up, thankfully. And that was a very instructive week because again, as I said, because of the fact that in state, while you get a really solid lay of the neighborhoods, you can’t depend on a map or someone telling you something to realize what works and what doesn’t.

While I was in Cleveland, as an example — I’m sorry if I’m rambling, do stop me so that I can focus in a particular direction you might want John — but as I was looking at the area near Case Western Reserve University, what we found was, literally after crossing three streets there was dramatic change in the nature of the neighborhood. It went from a neighborhood where I would consider under my strategy a very desirable area to buy a multi-family, to a neighborhood where I would want to stay away. And in fact we encountered police cars, when we went up and talked to them and the police officers told us to stay away from that section. We’re talking about a few streets, we’re not even talking about an entire neighborhood changing. So that’s a big disadvantage that out of state investors are going to face when investing in an area that’s not in their backyard. And it’s very important to do some groundwork but then build a really, really superb team that they can over time depend on.

John Carney: Right, you definitely want your boots on the ground, reading from the same sheet of music as you, and you want their marching orders to be clear. So I’m familiar with the area around Case, and I’ve scouted it out, and literally, you come across the wrong side of the tracks are the wrong side of the tracks.

Now I’ve done similar work to yourself, I invested and built a business around Phoenix, Arizona, based on a solid team and good relationships and limited knowledge of the area, and was successful and loved that market. But you have to have — in our case it was an investor who was also a real estate agent was our go-to guy. And he would be the first one to tell you, “No, that side of the street is no good, this side of the street is great. And I’ve got three houses here on this side of the street. Would never buy something on that side of the street.” So, that’s all sound advice as far as pros and cons for looking at your home town versus out of town. And then talk a little bit about the syndication. How does that look if I want to invest with you? Give the audience a little bit of: I wake up in the morning and work on this so that I can buy a building with this many doors.

Ike Mutabanna: So I think one of the factors about syndication is the economics of it, right? I work on syndication in the DFW area, primarily on really large properties. So mostly which is 100 doors or more. What that brings in is the kind of scale where you can not only achieve much larger returns on your investment, but you can also drive a much better return for your investors.

So one of the goals we try and do is that we try and ensure that we can return a certain amount of cash flow back to investors which we give them as a preferred return, and our goal is to try and beat what they would have got from alternative sources. So when most investors, sophisticated ones, when they talk to us the first thing they’ll say is, “Why can’t I just put this in a hedge fund or put this in an XYZ mutual fund where I can easily get 5, 6 or 7 percent returns?”

The argument that we have to be able to provide them is that not only can we exceed that, but the fact is that this is being backed up by a hard asset. So it’s very important for that to be an asset that is truly valuable.

Now many investors, when they get into syndication, there’s a different strategy that people will follow, right? Because of the fact that we follow a very cash flow driven philosophy, we don’t necessarily look at appreciation from a very wide angle. We don’t go after really large appreciation. So we stay away from properties where there is speculation that there might be five, six, seven times growth. Usually what happens in those cases is that either the market is severely undervalued because of some reason that we don’t necessarily know yet, or it’s in a neighborhood where there is a speculative element telling you that appreciation is going to happen but you have no way of knowing.

On the other hand when you go to a more conservative underwriting technique, where you say that we think we can get 2x or 2.5x multiple on this property, but we can drive 10% cash flow returns, well now that becomes very attractive. Because we’re not promising you that for every 50k you put in you’re going to get 150 or 200k back, but what we are saying that is that on a yearly basis we’re going to be able to return 10% back to you, which in most markets is a fantastic return. You know, you’ll be lucky if in certain places you can get even five or six percent, which usually matches what aggressive investors can get in the stock market or in hedge funds.

So our syndication philosophy is very much driven around finding properties that are larger scale, 100 plus doors, in fact almost every one I’ve done is 200 plus doors. And where we can — our underwriting can be conservative enough that we can promise, not promise, but rather where we can project, very conservatively, that we can return the capital with ten percent returns on a yearly cash basis, as well as potentially reach a 2x multiple.

John Carney: That all makes sense to me. And I’ll sort of come back at you with my summary. My question being, do you bring improving the property and raising the rents, right? You didn’t mention that, but is that part of your overall strategy?

Ike Mutabanna: Absolutely.

John Carney: Okay.

Ike Mutabanna: Absolutely. That’s always part of the strategy John. The extent to which you can achieve that can vary, our goal is always to find properties that are — where the rents are some percentage below what the market can bear. And one of the things that we try to keep in mind is that when we project our financials on the basis of doing the rehab and the renovations for repositioning, that we’re not projecting that we’re going to go try to match the market, we’re just going to try and improve the rents to come close to the market but still stay below. Because that’s what insures that we’re left with some buffer to deal with market fluctuations.

John Carney: So to recap: you’re finding units, your sweet spots, plus or minus 200 doors. You’re not trying to set a record in that area for the highest rent, what you’re trying to do is find undervalued properties that are undervalued by rent and fix those up and improve the multiples so that your investors get a preferred return and then you can scale the business model by replicating it. Would you say that’s accurate?

Ike Mutabanna: That’s a great recap.

John Carney: So we just acquired a large asset. It was a complex capital stack. Having a seat at the table through this entire process from the day we first went and looked at this building, until where we are now, under construction building 29 units out. That’s almost coming up on a year for the work.

But I would throw this back out to you and the listeners: once you have been invited into a multifamily deal that’s a little bit more complicated than your standard single family home transaction, you’ll learn that with the right team in place you can go back out and do it again. Would you second that?

Ike Mutabanna: Absolutely. You do it once. The first time is definitely frightening. It’s also really, really hard. I think a lot of people under — they don’t realize how hard it can be to convince investors when you’re doing it for the first time. But once you’re over that hurdle; you’ve learned the business; you’ve learned how your entire process flows; you’ve learned the language, you’ve learned how you’re able to communicate with investors, what you can and cannot say. It starts becoming a lot more second nature to you the next time around. And you just get better every time. And you keep learning as well.

John Carney: So let’s carry that thought on and — I’m going to pick your brain here for just another couple of minutes before we wind this up — but three tips that you could give a listener or someone who, if you’re approaching an investor, what would be — sorry I’m a little all over the shop.

I’m just going to pick a number out and say $50,000, or maybe I’m too high, maybe $25,000 can get you a seat at the table. Talk about the three advantages of being in real estate through the syndication model. Especially if this is something that you want to pursue as a career. You have to get started and you have to learn somehow. So why not get started now with someone like yourself? So what are the three advantages that you can offer up to the listeners that would say, “Hey, think big, play big and this is why?”

Ike Mutabanna: Sure. So I would say that the first thing is almost self-evident, which is the economies of scale. There is absolutely no chance that in the single-family world you are going to achieve the kind of scale that you can achieve in multifamily. And the scale goes in many different directions, right? It’s not just in terms of the net income that you can derive, but it’s also the risk. When you have three single family houses versus a ten-unit apartment building, your risk is diversified in a far better way than when you have those three houses. So the risk diversification.

There’s better economies of scale in terms of net income, there’s also economy of scale in terms of the cost, right? How you manage the cost. Once you start going into larger size properties in multifamily, you find it easier to be able to afford to have property managers who can manage things for you where you’re just more of in a supervisory role. That makes it easier for you to start than once you’ve done one to go to another, because you’re not managing everything yourself. When your single-family world, unless you amass a really large portfolio of maybe 10, 15, 20 properties, you necessarily may not want to hire a property manager to do it for you because that then cuts into the little income that you’re making anyway on those. So those are the big advantages that I would talk about.

The other interesting advantage that you would see in multifamily is that, unlike single family, where the valuation of a single family, which is dependent on the market comps, in the case of multifamily it actually depends on the rental income that you can drive. Which means you can force appreciation. So if you can come up with creative ways in which you can increase rent, you can increase overall income, you can force appreciation in the valuation of that property, which is something that is phenomenal. What other asset can you think of where you can actually decide how much — and as long as, of course, certain parameters are fulfilled where you can push the values up by actively doing things in that property. So I would say risk mitigation, economies of scale and value appreciation. Three really solid reasons why multi family is a far superior asset.

 

John Carney: I love it. Great advice and thanks for coming up with those quickly on the spot Ike. Well I wrap this up with what I like to call the two-minute drill. And these are just a couple of questions I’m going to throw at you rapid fire.

Are you a reader? And if so do you have a favorite business book or non-fiction book that you’ve read more than once or you made some notes in that you keep on your desk and refer to from time to time?

 

Ike Mutabanna: Yea I’m a reader. A very avid reader. I’ll mention two books. One is non-fiction and one is a fiction but which has a lot of — it’s really influenced me a lot in my business life. The non-fiction is a very old book by Dale Carnegie called “How to Influence People.” Really old book, some of the things in there might sound outdated, but the underlying principles are really solid. And they relate to always having what he calls a “you” attitude. When you’re working with someone how do you do something for them is what you should be thinking about, because when you do that, it all comes around eventually.

The other really awesome book that I’ve kept close to me is called “The Alchemist” by Paulo Coelho. Even though that book is a fiction book, it’s usually coded more in the circles of people who like to read books that sound spiritual in nature. It is spiritual and it has helped me from that perspective. But it has also helped me motivate and inspire myself in what I’m doing. There’s a very interesting sentence in there which I’m going to paraphrase. It says, “when you want something really, really bad and you take the action to achieve it, the universe comes together to help you achieve it.” Which I think is fantastic. It’s a phenomenal way to think about something.

 

John Carney: So I’m going to use that in the show notes as your favorite quote. And I like that. I mean, I don’t know, there’s a lot of good motivational sayings that come from business leaders and athletes alike about overcoming the odds and the obstacles, and I think I’m kind of looking back now, some of the people I follow, on my social media threads are quoting the stoics.

So nothing is outdated because guys like Marcus Aurelius were writing this down a long long time ago and it’s pretty relevant to life and business today, right?

 

Ike Mutabanna: True, very true.

 

John Carney: Okay. Well one last question. How do you train for success? You’ve moved around the world, you’re a successful person, you know how to recruit a team. But how does that look like? How do you achieve that consistently?

 

Ike Mutabanna: I think what I try to do is always take up one activity that is not related to my business which I take up as a passion activity. Something that I put a lot of energy and effort into and that usually helps me train my mind to stay in that super energetic state, which then transfers into my work and business as well. So what I’ve recently started doing is — I mean I’ve always been an avid mountain climber, I’ve never really done any kind of technical climbs, it’s usually just been putting on my hiking boots and going with a bunch of friends and trying climbing whatever peaks are accessible. But about a year ago, I started realizing that if I really wanted to scale some heights here I needed to learn how to do technical climbs. And so then I went ahead and joined this local group that does a lot of technical climbs and they have beginner’s groups as well. So I’ve started doing that, it’s very early stage yet, but my goal is within a year’s time to get to a point where I can go climb at least one intermediate level peak in the U.S. which involves some amount of rock climbing.

 

John Carney: That’s a great goal. That’s a highly — you have to be very highly focused and strong to scale intermediate level fixed rope climbs. So I mean, I wish you the best of luck in learning that, and not that you won’t achieve it, but that’s going to be a practice. It takes mental and physical discipline to build up that stamina to be good at it. I lived in Colorado for a number of years, I was never a fixed rope mountain climbing type person. There’s so many sports and activities available out there that that just wasn’t one that I fell into but when I see photos of the people I know standing on top of these spires, it’s awe-inspiring. So that is great, thank you for sharing that.

Alright, well there you have it folks. I truly hoped that you picked up some actionable advice today from my conversation with Ike. And I want to thank Ike for taking the time out of his busy day to join us in The Locker Room. Where can our audience find you if they are interested in following you online or maybe even connecting with you to talk about syndication opportunities?

 

Ike Mutabanna: Sure. I think the easiest way is to go to my podcast website: it’s called thesidebusiness.show. You could also go to thesidebusinessshow.com and it has both my podcasts and also my contact information on it. I’d love to hear from your listeners.

 

John Carney: Perfect. You’ll be easy to find then. Alright. There we are.

Make sure that you check out the Real Estate Locker Room Show on iTunes, Stitcher or Google Play and hit that subscribe button to ensure that you never miss out on the pro tips from our great guests like Ike.

The mission here once again is to help you elevate your real estate game and be successful. If you like what this show is all about, I’d be grateful if you would leave us a five-star review on iTunes, Stitcher or your preferred podcast platform so that other like-minded real estate professionals and people just like you can find us when they are searching for real estate shows.

The post-game report show notes, links and additional content related to this show, specifically to the wonderful world of cricket, will be available on my website: johncarneyonline.com/podcast, and while you are there feel free to drop your email into the newsletter sign up form and you’ll occasionally receive some real estate investing insights, tips, tricks, hacks and useful tools from me.

Remember to stay focused on your goals, have fun and stay in the game. I’m your host John Carney and until next week, please remember to work hard, play hard and profit hard in your real estate game.

One more time, really thankful for you taking the time out of your busy day Ike to share your story of success.

Ike Mutabanna: My pleasure John. Thanks for inviting me.

(Music Out)

End Audio

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© John Carney 2017

JC 024: High Margins and High Returns with David Herrera

September 6th, 2017 | no comments

Cheap isn’t always good for the velocity of growth

The Real Estate Locker Room Show with John Carney

David Herrera is living his childhood dream as a Chicago real estate developer. He lives and breathes real estate and finance and classifies himself a “financial markets athlete.” All profitable real estate development begins with simple math.

David is a full time estate developer and financier with over 12 years of diverse financial services experience across investment banking, private equity, asset management, real estate development, structured finance and the is principal of The Golden Mean Group Inc. David’s career kicked off in the big league at XL Capital Ltd, a Bermuda based Fortune 500 firm with over 49 billion in assets under management.

Prior to pivoting into a career as a full time real estate developer David furthered his financial markets experience as the Second Vice President of the Northern Trust Corporation’s Structured Finance Group and oversaw financial modeling, structuring, pricing, P&L oversight and transactional execution for the banks $3.5 billion interest-rate derivatives book and hedging product offerings.

David is passionate about developing communities and driving markets. He believes that it isn’t work when you love what you are doing day in and day out.

Opportunity is everywhere – David’s wealth of knowledge and proven track record allows him and his team to secure high margin, high return infill development opportunities for their core investors.

Five key points

  • To become an expert in your field, whether it’s sports or business, you need to live and breathe it every day – that’s what gives you the competitive edge.
  • Surround yourself with information and resources to support your career: read the market news daily, learn about geopolitical issues that may affect interest rates or stock prices – have a passion for what you are doing.
  • Cheap deals aren’t necessarily the best deals. It is necessary to do your homework and quantify the deal before going ahead. Markets where the land is more affordable may have rents that aren’t as strong. Look at the path of growth and the velocity of appreciation in the markets you are considering investing in.
  • Look at location, property zoning and land entitlements. How many stories or square footage can you build in the location, particularly in a core urban infill area?
  • Hiring people with proven experience is important for building a successful team and when you are pitching to a bank. Its an easier sell when you approach a lender with plans, an experienced architect, a proven builder and other competent team members supporting your project.

Favorite athlete: Michael Jordan – NBA All Star.

Real estate roll models: Jerry Reinsdorf and Ted Turner

David’s pro tip: Learn from the successful people around you; what makes them successful? How did they become successful? Learn from other people’s mistakes.

Highly motivated – serving and enhancing the community through development.

Thank you David for taking time out of your busy schedule to share your story and valuable insights with us!

Reach out to David and his team at: www.goldenmeangroup.com

Email direct: david@goldenmean.co

Company Website: Golden Mean Group Inc

Linked-In: David Herrera

Facebook: https://www.facebook.com/davemichaelherrera

Listen to all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at http://www.johncarneyonlie.com

Connect with John Carney
Facebook: www.facebook.com/JohnCarneyOnline
Twitter: @John_M_Carney
Instagram: @johnm_carney

© John Carney 2017

 

JC 020: Having a good reputation matters in real estate with Peter Nintcheff

August 9th, 2017 | no comments

Being fair and honest in business leads to results

Peter Nintcheff is the in-house legal counsel for The Goldberg Companies, a national multifamily real estate developer headquartered in Cleveland, Ohio. GCI specializes in developing, owning and managing high-end apartment projects in Northeast Ohio, the Carolinas, Florida and Texas.

As general counsel, Peter is responsible for handling all legal matters for The Goldberg Companies.  His primary duties are preparing and negotiating all legal documents for the acquisition, development, financing and disposition of real property.  Peter also advises the company on leasing, zoning, tax and litigation matters and works closely with the executive team on all business aspects of property due diligence, financing and management of the company’s real estate assets.

As in house counsel, Peter is involved in every step in the development, construction and management of each project. He’s a transaction attorney who writes fair and neutral contracts to get deals done.

Peter believes that in order to have a highly successful business, you must maintain a good reputation in the market and always be fair and honest in dealing with buyers and sellers.

Operating with integrity allows Peter to build teams in multiple markets to accomplish the mission. Working with a strong team that includes complementary skills sets and different approaches makes accomplishing the job fun.

Five key points:

  1. You don’t have to be the best or strongest, or smartest in your field. You just have to utilize your natural skill set to the best of you ability to excel.
  2. Think of attorneys as guides who are able to help real estate professionals navigate the variety of issues that arise during due diligence and property transactions.
  3. Ensure that your purchase contract allows for an appropriate due diligence period. Give yourself plenty of time to do your due diligence on each property and the option to get your money back if your criteria are not met in that time period.
  4. Include a seller default provision in a purchase contract to ensure that the seller cannot negotiate / search for a better offer from a third party during the due diligence period.
  5. The buyer with the most money is not always the best buyer for a deal. Do your due diligence on buyers and on sellers to ensure that you are dealing with reliable, fair and honest people.

Favorite athletes: John McEnroe and Wayne Gretzky.

Favorite book: Running with the Kenyans by Adharanand Finn

Peter trains for success by planning ahead and being prepared.

Check out The Goldberg Companies online, http://www.goldbergcompanies.com and connect with Peter on LinkedIn or send him and email, pnintcheff@goldbergcompanies.com

Thank you Peter for taking time out of your busy schedule to share your insights with us today.

Listen to all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at http://www.johncarneyonline.com

 

POST GAME REPORT: Episode Transcript

JC 020: Having a good reputation matters in real estate with Peter Nintcheff

Being fair and honest in business leads to results

 Announcer: Welcome to the, “Real Estate Locker Room Show” with John Carney. Did you know investing in real estate is a team sport? Join John and his guests as they explore the business of real estate and athletic competition. The goal for this show is to grant you direct access to the real estate pros that are closing profitable deals and growing their businesses. On the “Real Estate Locker Room Show” we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve on-going success. Now it’s time to kick-off and level up with new ways to grow your real estate business.

 

John Carney: Welcome back to The Real Estate Locker Room Show everybody. I’m your host John Carney, coming at you again today from the sunny west side of Cleveland, Ohio. Joining me in the locker room today to talk about commercial real estate development and multifamily ownership development and operations, is the in-house legal counsel for The Goldberg Companies, and my cousin, Peter Nintcheff. Pete is the general counsel for The Goldberg Companies, which is a national real estate developer headquartered in Beachwood, Ohio, which is an eastside suburb of Cleveland, for those of you who are not from the northeast Ohio area.

GCI is a developer, owner and manager of high-end apartment projects in Northeast Ohio, North and South Carolina, Florida and Texas. GCI also owns and manages approximately 500 square feet of office, retail and flex space.

 

Prior to joining The Goldberg Companies, Peter was in private practice for six years. Now, as general counsel, he is responsible for handling all legal matters of the company. His primary duties are: preparing and negotiating all legal documents for the acquisition, development, financing and disposition of real property. Peter also advises the company on leasing, zoning, tax and litigation matters and works closely with the executive team on all business aspects of property due diligence, financing and management of the company’s real estate assets.

 

In recent years, The Goldberg Company’s focus has been on the development of Class A apartment projects in high-end suburban markets, primarily in the southeast. GCI is the developer, general contractor and manager of all new projects and Peter is involved in every step of the process. The goal is to own the property long term. So GCI pays particular attention to detail in order to produce the highest quality product in their respective markets. Sounds like The Goldberg Companies keep you pretty busy Peter!

 

Peter Nintcheff: Yes, we’ve been very active in the past few years. As you know, multifamily has been a very strong sector. We’ve developed several projects and currently have about 1000 units under construction. So yes, it’s been very busy and it’s been an exciting time.

 

John Carney: Yea cool. Can’t wait to dive into that. But before we kick off your day-to-day expertise and knowledge of what you do for The Goldberg Companies, I like to just get the show rolling with a stretching question, sports related of course. Who is your favorite athlete and what, if anything, have you learned by being a fan of that athlete and applied to your career?

 

Peter Nintcheff: My two favorite athletes of all time are Wayne Gretzky and John McEnroe. I admire them the most, I think, because if you look at both those guys, neither of them were the biggest, strongest, fastest athlete in their respective sport. Wayne Gretzky had a vision like nobody else. but there were people who were bigger, stronger and faster than him. I don’t know what he’d be like in today’s game—today’s hockey is a lot different. But he used his vision and his intelligence and his incredible skill to overcome any speed or strength deficiencies he may have had. And the same with John McEnroe. He was just a wily guy on the court and really knew the game and understood his opponent.

 

Those two guys were at the top of their sport, and again, not given probably the best physical tools. So I think if you step back, what you can learn from them is they had a very strong skill set, and they used that skillset to become the best. Maybe they weren’t the best or had the strongest skillset in everything, but they used their smarts and what they did have to be the best at their respective sport.

 

John Carney: That’s interesting too. Wayne Gretzky, at the end of the day, had a team of people supporting him. He had a great cast in his younger years with Edmonton. And then when you’re playing tennis, that’s a gladiator sport. There can only be one winner. You have your coaches, your trainers and your nutritionists and a whole cast these days. But probably back in John McEnroe’s’ day it was a thinner team. That’s pretty cool and interesting.

 

Peter Nintcheff: Yea, two different sports, like you said. One’s team and one’s individual, and they are actually two sports I played growing up and really enjoyed. So, I think you can learn from sports; both doing a team sport and working with your team mates, and an individual sport and really learning from yourself and relying on yourself out there. Like you said, you’re on an island and you’ve got to be the one.

 

John Carney: So, let’s jump into the exciting world of developing, owning, and operating a multifamily/commercial real estate business and being a critical player. I always stress with people who are starting out in real estate (the seasoned people playing at the high level know this very well) that your accountants and your lawyers, are important team players for any size real estate business. Even if that business only owns one rental property or an Airbnb. Because they’re part of the initial structure and the protection. So, from the legal side of it, can you just talk a little bit about how you use the law to protect your client and to work towards the best outcome?

 

Peter Nintcheff: Sure. So, as an in-house counsel, my role is a little bit different than an outside attorney that somebody would engage. You take a development process and if there’s ten steps, I’m involved in step one through ten. Whereas, if you’re engaging an outside attorney, you may bring them in in step seven, and have them guide you kind of towards the end.

 

So when I say I’m involved in step one with our company, what we do is we try to go out and find land, do our due diligence, purchase the land, then we’re going to obtain a construction loan, build it, own it, manage it. So it’s a long process and I’m involved in every step. So that keeps me involved in the due diligence (i.e. is the zoning in place?) and possibly meeting with municipalities and meeting with even local attorneys to understand the zoning and the due diligence on the property, and going through all those steps.

 

Like you said, I do agree that relying on an attorney is, even in a small transaction or a big transaction, very important. Because there can be certain issues in any real estate transaction that can arise, where they can kind of guide you through the process, whether it be a title or a survey issue, a zoning issue, or a tax issue. I was a real estate attorney before (in private practice). So I view myself as a very good real estate attorney and know the legal aspect well, but I don’t know other things. So I have to go out and rely on outside counsel for tax advice, which plays a very big role in our business. Because we’ve been in business for about 50 years, we have smaller assets that we have sold off in recent years, and we’ve had to go out and 1031 those assets (1031 exchange). And then we use the proceeds from those assets to acquire new assets. Because it’s a very tax-driven method of doing it, I’m going to rely on my outside tax attorney to guide me through that process. So there’s a lot of different issues that could come up, and there are different people and different types of attorneys that can help guide you through those issues.

 

John Carney: Alright, just to further that, you do a lot of contract work. I would imagine reviewing contracts and drafting contracts. What would be, if you’re, say, going to purchase a property, like The Goldberg Company is going to purchase a company, and you’re given a purchase agreement by the seller, what are the things that you look out for or that you could advise our listeners to look out for if they’ve never seen one of these before, or if they’re reviewing it? What are the highlights: good points, bad points, that you might want to look for in a purchase agreement?

 

Peter Nintcheff: Sure. Number one, it depends on what you’re buying. I’d like to say that I’m a transactional attorney. I have form contracts that I start off with that I think are very of neutral. Both the buyer and the seller theoretically want to do the deal. So I want to do something that’s fair, something that’s pretty straight forward. But it really depends on what type of property you’re buying.

 

So right now, we’re doing more land purchases. We’re not going out and buying existing apartment communities. So those are two very different purchase agreements. So for a land purchase agreement, I’ll talk more about concepts. What I’m really looking for is an opportunity to have a due diligence period. I think for our group that’s probably the most important thing. Initially I’m going to ask for about 90 days to do my due diligence and have that be a free look. We’ll put money up in an escrow account, say $50,000 to $100,000. But in that 90 days I get to do my due diligence, and if I’m not satisfied with the property, I want to have the ability to get my money back.

 

And during that due diligence period, we’re going to be doing our soils testing, our environmental, our title, our survey, all of our due diligence, to really get our arms around the property. So that, number one, is one of the first provisions that I’m going to ask for, is a due diligence period.

Other than that, I think what the contract really has to do is just kind of spell out what’s going to happen: who is responsible for payment of the transfer taxes; how real estate taxes are going to be pro-rated; what’s going to happen at closing; when that closing is going to be. Another real big issue for us, is when that closing is going to be. So, I’m going to have a 90-day free look. If the zoning is in place and everything is in place, I’m willing to close within 15 days after that.

 

I’ll give you an example. We’re looking at a property in Michigan which has significant environmental issues, so my due diligence period is longer. And we’re looking to get tax increment financing money, so we’re meeting with the city. All that takes a lot of time, so I’m going to look for a long closing period.

 

Sometimes if my due diligence period expires in 90 days, I may not close on the property for a year after contract execution, because it takes a long time to get through the process to where we’re comfortable with the environmental and getting all the city and state approvals that we’re going to need. So, you really want to build those time periods in from the get go.

 

Because I’m doing my due diligence, I’ll ask the seller for certain representations. But oftentimes they’re not willing to give me too much. They’re going to say, “Hey buyer, you go rely on your own due diligence.” But I’m going to ask them to say, “Hey, yes, they’re not aware of any environmental issues, they have the authority to sell it, they own clear title”, provisions like that. You’re going to ask them if they know if there’s anything wrong with the property. But again, they’re going to try to limit that.

And with land, I’m not too worried about that. In purchase agreements, oftentimes you’ll see a condemnation provision or a damage and destruction provision. Meaning, if something happens to the property, if it catches fire during the contract period or if a municipality initiates a taking during the contract period, that they have the ability to get out. Usually those aren’t big issues, and I’m not going to negotiate those too heavily, but that’s something you’ll see in a contract.

 

And I guess the last thing that has been a hot button for us of late, especially on a deal that’s going to be under contract for a long time, is the seller default provision. Usually we’re in markets where there’s a lot of demand, so there’s a fear that the seller goes and tries to get a better offer, and tries to go to a different buyer. So, usually in a default provision you’ll see a specific performance; meaning that the seller has to perform, and that you can sue them if they haven’t. Or what we really want is: we’re spending a lot of money during our due diligence process, up to $100,000. If they default for some reason, if they don’t step up to the closing table, I want the ability to get out of my agreement and then come after them for the money that I’ve spent on my due diligence.

 

So, those are some of the provisions that I’m looking for in our contracts. And again, like I said, if you’re doing a built project, it’s a little bit different. You’re buying a property where there’s tenant leases in place, and you want to make sure you get to rent rolls. There’s different types of due diligence that you’re doing, and some different things that you’re going to be concerned about because there’s a physical structure in place.

 

John Carney: Right, so that’s all really good advice and a great summary of some of the things you want to be aware of when you’re making any offer. I suppose on a single-family home purchase it would be called an inspection period. But that’s — I’m not going to say it’s interesting — it’s a great explanation on the seller default. I would imagine that is something that you see included, or something that you add in your contract language. Just knowing that you’re trying to protect against something that could potentially happen? I’m sure it’s happened in the past. I’m sure there’s a lot of stories out there; people who have lost a deal because they didn’t have that provision, right?

 

Peter Nintcheff: Well, I think you’ll pretty much see both a seller and buyer default provision in every contract. And with the buyer default provision, you’re going to see that the seller will be entitled to the earnest money they put up. And again, for a piece of land, we’re trying to put up a small earnest money deposit because what’s the seller really losing?

 

In a built project, you’re going to see a much more significant deposit. And, maybe one contract execution and then another one after the inspection period ends (in between closing). So you’ll see both of those in pretty much every contract.

 

In a seller default, usually what you see is, the buyer has the right to either terminate or sue for specific requirements. But like I said, we try to add in a little bit more and just say, “Hey listen seller, you’re also going to reimburse us for our costs.” And we’re trying to hold their feet to the fire to bring them to the closing table.

 

Because if we have a property under contract for a year, not only have we spent a lot of money, but we’re getting ready to get our development team into place and we’re looking at this as a way to increase our capital for our company in a future ownership deal. And obviously, if we’ve invested that much time in it, we’re very excited about it and we want to close. So it’s just a little something extra to make sure the seller performs. But I think you’ll see both the buyer and seller default provision in every contract. We’ve never had an issue, knock on wood, and hopefully that continues, but certainly you want to protect yourself. There are times when a party doesn’t perform.

 

John Carney: Well you haven’t had an issue because The Goldberg Companies has such good in-house counsel, right?

 

Peter Nintcheff: That’s right. I’d like to say that, but we also have a good reputation and a proven closing track record. We’ve sold a few things—we’re usually not sellers of properties. But when we sold some smaller assets we are very selective in our buyers too, and I think that’s important. Sometimes the best offer isn’t really the best offer. If you have a known buyer who has a proven track record of closing, they may be your best buyer, even though they’re not offering the most money.

Sometimes, what we’ve seen is: you get a buyer who offers the most money, you get your due diligence period and they’re going to come back to you and try to re-trade on you and lower their purchase price. They’ll say, “Well, we found this, this, and this wrong with the property. We want the purchase price lowered by x.” So you’re kind of back to where you started. And maybe an offer that was lower initially would have been a better offer because it was a better buyer.

 

So you want to make sure you do your due diligence on your buyer and your due diligence on your seller. So it’s good to know who you’re dealing with. I think we’re known as having a good track record as owners and buyers and sellers. So I think that’s important.

 

John Carney: That’s a great point, and something that I believe in. And if you listen to Warren Buffet or anyone who’s running a highly successful business (Richard Branson) you want to have a good reputation in your business, whether you’re in the real estate business or retail business, right? Because it does matter.

What you’ve just said, I think is worth reiterating: it matters if you have that reputation for being somebody that closes. You’ll probably inevitably do more deals, grow your business, and be more profitable. As opposed to earning the reputation (reputations are earned), o trying to hammer in lower pricing at the end, maybe illegitimate concerns at the end of a due diligence period, or just not being able to get your financing in order and close a deal. Those are good points that you brought up.

 

It matters when you want to play at the highest level, to be entering the arena with a good reputation as a seller who’s fair and honest, and as a buyer that says what they are going to do. Is that a good way to look at it?

 

Peter Nintcheff: Absolutely. I agree, and I thank you; you hit the nail right on the head when you said fair and honest. And I think that’s the approach that I try to take from the get go when I’m negotiating a contract with a buyer or a seller’s attorney, or even just dealing with the buyer or seller themselves. If you’re fair and honest with them and you expect the same from them, I think you’re ultimately going to have a good result. And even when we’re looking at a piece of property where there are some issues, and we’re not sure if we’re going to be able to get through those issues, say from a due diligence standpoint, we always keep our seller informed of what we’re doing, where we’re at, and say “Hey listen, we have some environmental issues, and we really have to get our arms around them, and if we can’t, we can’t purchase the property.” And they’re saying, “Listen, we’re ok, because you’re being honest with us. We understand that there are issues, we understand that you have to get through them.”

 

So I think if you’re fair and honest throughout the process — like I say, we try to keep our sellers informed of what we’re doing and where we’re at — I think that goes a long way. Good communications, and so that there’s no surprises down the road and they know that we’re doing our homework and if we can’t get comfortable with it, they understand. And I think that helps our reputation out.

 

John Carney: Perfect. Well one question I wanted to ask based on, sort of, the John McEnroe conversation from earlier is: when you left private practice and you started out at The Goldberg Companies, which puts a lot of responsibility on your shoulders, was that like that championship tennis match? What was that experience like? And maybe you can talk just a little bit about the team you have around you internally, because we believe it’s a team sport at the end of the day, real estate.

 

Peter Nintcheff: So that’s a good analogy. When I left private practice — because I was at a medium sized law firm, I believe there were about eight real estate lawyers in our department. We had tax attorneys, other business attorneys, litigation attorneys. So if I had any questions — because I don’t know everything and I don’t pretend to know everything — it was easy to go down the hall and ask colleagues questions or for some help. Maybe they changed something that would help me out on something I was working on. And then when I came in-house, I’m still the only attorney here, so I was kind of on an island, so I kind of had to do everything by myself. But I didn’t do everything myself, let’s be honest.

 

So we set up kind of a team, I have a team of outside attorneys that I use. I have tax attorneys, I have local attorneys in the states that we are in that I use for guidance. So it took me a few years to kind of develop that network of people who I really rely on. I have a title company that closes all of our deals in North Carolina and they’re fantastic. I give them business and they pick up the phone anytime there’s an issue. So you build these relationships and you build these networks and you get a group of people that you rely on and trust, and it makes your life and job a lot easier. And it makes these deals that we do go a lot smoother, and that’s really what you’re looking for.

 

And since I’ve been here, we really have developed an in-house team as well. Like I said, I’m the only, I guess, practicing attorney. There are other people here with law degrees, but we have a due diligence team. We have a director of acquisitions who goes out and finds our property. We have an investment officer. We have a construction manager. The four of us meet every week, and we go through deals. We have very different ideas, and we’re looking at deals in very different ways, but we complement each other very well. The development manager, wants to close a deal, and I sometimes have to put the brakes on things and say, “Hey listen, we need to look at these issues.” Our construction manager can read the due diligence reports and understand what kind of soils we’re looking at. Are these right for development? Can we build here? He can read the environmental reports. And the investment officer, obviously, is looking at if will the pro forma work, will it pencil, are we going to be able to get the return that we desire?

 

So when you put the four of us together, we have very different skill sets and different personalities. But I think in a real estate transaction it kind of covers almost everything that you need, at least in house, to get us to analyze these deals well. And then we use our outside folks as well to help us. Whether it be with a zoning issue, or if you’ll use local counsel for that.

 

So when you develop these networks and you develop these teams, it really helps. Especially when you have people who have complementing skillsets and personalities and work together well. It makes the deal a lot smoother and a lot more enjoyable. It makes for good constructive discussion and it makes an exciting process.

 

John Carney: That’s good to hear, because it sounds like you guys are having fun. You’re finding great deals and you’re getting a lot done. We’re kind of at the point where we wind this down with a few final questions, Pete. I’m putting together a pretty extensive reading list now by asking all of our guests a few questions that we call our two-minute drill. Do you have a favorite book that you’ve read recently along the business lines, that you could recommend or a nonfiction book that you think is something that you turn back to once in a while? Maybe it inspired you or taught you something that you apply every day?

 

Peter Nintcheff: I’ll be perfectly honest, I don’t read a lot of books. I spend most of my day reading, and so then when I’m not in the office, I haven’t been reading a whole lot, so I’ll have to get back to you on that one. I don’t have a whole lot of advice. I’ve read a few running books lately, which I’ve enjoyed. There was one, “Running with the Kenyans,” that I thought that was very, very interesting, about an Englishman who lived with Kenyan runners for a period of time to try to figure out why they’re so far superior. That’s the only non-fiction book I’ve read recently. But you get good lessons from those as well. Good life lessons. No business books, sorry.

 

John Carney: Well look, it didn’t have to be a business book. Maybe I didn’t phrase that properly on my own list of questions. It could also be a sports book, so you ticked that off. But I mean, you are a runner, you’ve run multiple marathons, and we know you’re a Spartan.

 

Peter Nintcheff: Now I’m a Spartan. Thanks to you John. I enjoyed that experience as well.

 

John Carney: Alright. You’ve talked extensively about what you do day-to-day. Is there anything that comes to mind, like a come from behind victory where everything falls in line right at the zero hour to get documents signed and wires sent, that you can think of? And maybe an obstacle that you overcame to help bring a deal to the forefront? Or do you get everything ironed out smooth ahead of time.

 

Peter Nintcheff: Well everything has to come together at the last minute, and we’ve had quite a few of those. I guess I try to over-prepare. I try to really, really plan ahead and make sure, if I’m using local counsel, if I’m using a title company out of state, if the seller has attorneys out of state, that everything is going to come together without issue. And to do that, I think you really need to plan ahead. So I’m trying to plan weeks ahead.

 

I’ll just give you a recent example: my parents, my brother, my siblings, we were all in Wyoming a couple weeks ago at a ranch. We had no cell service and there was a dialup internet on the ranch and that was it. And during that time I was closing a transaction in Florida that we had been working on for about a year. So of course, it comes up, well, while you’re gone.

 

So the week before I was gone, I had everything that we could get done, done. And everything, using my team here to send things into escrow, to get all the documents signed that I didn’t have signed. But everything that I did have in my possession was signed. Everything was ready to go, gave detailed instructions, and it all came together on the Thursday that we were on the ranch. I was probably horseback riding or fly fishing at the time, but it’s nice — that felt really good to me, that I had a team here, that I was prepared, and I got our seller’s attorney on board and our seller on board, because they knew I was going to be gone, but we had to close. We had a tax deadline while I was gone, because of a 1031 exchange (your period ends 180 days after you sell, and you have to use your proceeds). And we were right at that period. So we had to get that done and with a lot of preparation, a lot of planning ahead, we got it done while I was without cell service and only had a dialup internet. I did check my emails a couple times on the dial up, which is certainly different than what we’re normally used to, but it was a good feeling.

 

John Carney: That’s a great way to exit this interview, Pete. I mean, always prepare. A good plan is better than a wish and a prayer, I suppose. Well, thank you very much for taking the time out of your busy schedule to join me in the locker room today, Pete. Is there any where the audience can find you if they have any questions? Is there a way to contact you? Is sending people to The Goldberg Company’s website the best place, or do you used LinkedIn or any social media?

 

Peter Nintcheff: I am on LinkedIn. That is really the only social media that I’m on. You can search my name, but it either comes out with me or my Dad, we’re the only Peter Nintcheffs out there.

Go on our website, check out our properties at Goldberg, just do a google search for Goldberg Companies. You’ll see some of the stuff that we’ve done, especially some of the stuff that we’ve done recently. I think is really spectacular.

I don’t think there’s any link to my information on the site, but email is my first initial and my last name @goldbergcompanies.com and I’m happy to shed further light on what I’ve discussed today, or certainly provide any insight that I can to you and your audience. And John, thanks for having me, I appreciate the opportunity to talk a little bit about what I do.

 

John Carney: Yea thanks. It was a great interview, and we will make sure that we have all the appropriate links in the show notes and the post-game report on my website. So there you have it folks. I truly hope that you picked up some actionable advice today from Peter Nintcheff, who is in-house counsel for the Goldberg companies.

Make sure to check out the Real Estate Locker Room Show on iTunes, Stitcher or Google Play, and hit that subscribe button to ensure that you never miss out on the pro tips from our great guests. The mission here is to help you elevate your real estate game by learning from the experiences of the people who are out there doing it every day.

If you like what this show’s all about I’d be grateful if you would leave us a five-star review on iTunes or whatever your preferred podcast platform is so that other like-minded real estate investors just like you are able to find this show online.

The post-game report show notes that I just mentioned, with links to this show and Peter Nintcheff will be available on my website: johncarneyonline.com/podcast and while you’re visiting the website you can look through the catalogue of past shows, or drop your email address into the newsletter sign up form to receive the occasional update from myself.

Remember to stay focused on your goals, have fun and stay in the game. I’m your host John Carney and until next week: work hard play hard and profit hard.

Thanks Pete. Have a great day and look forward to catching up with you and the family soon.

 

(Music Out)

End Audio

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© John Carney 2017

JC 017: Apartments, Banking and Politics with Michael Gibbons

June 28th, 2017 | no comments

All people want to live in a nice property

Michael Gibbons is a highly respected investment banker with decades of experience successfully owning and operating multi family real estate. Mike is the senior managing director, principal and co-founder of Brown Gibbons Lang and Company (BGL) with offices across the USA and Global M&A Partner offices in more than 40 countries across 5 continents, which allows BGL to deliver their clients unparalleled access to corporations, investors, and opportunities globally.

Michael always had an interest in real estate and started out with a few doubles and a 4-plex. He learned how to install toilets and more importantly what it will take to run a real estate ownership organization effectively. The key is to build up the number of units that you are managing so that you don’t have to personally do all of the work.

Michael and his team are dedicated to providing well-managed, quality multifamily homes. Michael owns an interest in over 10,000 units and lives by the philosophy that each unit must be “good enough for mom to live in.” He believes that everyone deserves to be proud of where they live, and the apartment communities that he owns provide a safe, clean, well-maintained and friendly environment that residents are proud to call home.

Michael’s winning formula is to look out for undermanaged and/or poorly maintained properties and apply a high standard to maintenance and management. You must apply social responsibility to your real estate investments and success will follow.

Michael Gibbons is on a mission to save America. He is entering the political arena and running for a seat in the US Senate representing Ohio. He believes that “the government doesn’t create jobs, business creates jobs.” Michael doesn’t want to be a career politician. He wants to apply his business knowledge in Washington to serve the American people and accelerate the growth of the US economy.

Five key points:

  • Everybody has to start somewhere – Michael entered the business of real estate investing where many entrepreneurs start, buying single-family properties and working from the ground up to restore and resell them. The small details that Michael learned during his early days set him up for success in the future.
  • “If the unit isn’t ready for your mother to move into, it’s not ready to rent to someone else.” – people want to be proud of where they live. This applies to all income levels. BGL looks for undermanaged or poorly maintained properties and applies defined management strategies to improve the situation, providing people with a safe, clean, well-maintained place to live, somewhere they can be proud to bring their friends and parents to visit.
  • Find tenants that fulfill their side of their contractual obligations – always pay their rent in full and on time. It is dangerous territory for landlords to get into situations where they allow tenants to stay without paying rent for any period of time. This practice can quickly lead an investor to defaulting on mortgages. Retain high credit standards, source tenants that have pride in themselves and their property and they will in turn take pride and care for your property.
  • Utilize modern technology – install video cameras in your multi family investments. “We have found that with the technology that’s available now, if we put up camera systems, generally people behave properly if they’re always on camera in common areas.”
  • Every person involved in real estate is important – from the person fixing the electrical faults to the person vacuuming the hallways, insure that you have a team with the correct cultural fit and chemistry. Success comes when the work is fun and you’re surrounded by other people that “find it fun” and are also willing to put in the hard

Mike is a three-sport college athlete. These are his top three favorite athletes;

  1. Jean Gibbons – Michael father, world class athlete, wrestler & coach
  2.  Aaron Shea – former NFL player and Mike’s son-in-law
  3.  Tom Brady – NFL quarterback for the New England Patriots and godfather to Mike’s grandson.

Favorite books:

  1. God’s Gold: The Story of Rockefeller and His Times by John T Flynn
  2. The Constitution of Liberty by Friedrich A Hayek

You can reach out to Michael at BLG, http://www.bglco.com

For more information about Michael Gibbons US Senate campaign visit –http://www.gibbonsforohio.com

Thank you Michael for taking some time out to share your story with us.

Listen to all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at http://www.johncarneyonlie.com

POST GAME REPORT: Episode Transcript

JC 017: Apartments, Banking & Politics with Mike Gibbons

Michael Gibbons is on a mission to save America

Announcer: Welcome to the, “Real Estate Locker Room Show” with John Carney. Did you know investing in real estate is a team sport? Join John and his guests as they explore the business of real estate and athletic competition. The goal for this show is to grant you direct access to the real estate pros that are closing profitable deals and growing their businesses. On the “Real Estate Locker Room Show” we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve on-going success. Now it’s time to kick-off and level up with new ways to grow your real estate business.

 

John Carney: Welcome back to the Real Estate Locker Room Show. I’m your host John Carney, coming at you again today from Cleveland, Ohio. The goal for this show is to help the listeners raise the bar in their real estate investment game. Joining me today is a great guest, he is a mover and a shaker in the multi family world of real estate, specifically here in Northeast Ohio and I will let him talk to you about his formula for success in just a moment.

 

But I’d like to welcome Michael Gibbons. He is the senior managing director, principal and founder of Brown Gibbons Lang and Company. Michael provides an active senior role to client engagements and business development opportunities. Now Brown Gibbons Lang and Company, or BGL, is a leading independent investment bank serving the middle market. BGL specializes in merger and acquisitions, advisory services, debt and equity placement, financial restructuring advice and valuations and financial opinions. With global industry teams in business services, consumer, health care, industrial and real estate, BGL has offices in Chicago, here in Cleveland, Ohio, Salt Lake City and global MNA partner offices in more than 40 countries across five continents, which allows them to deliver unparalleled access to corporations, investors and opportunities globally.

So, we’re going to learn a little bit from Mike about when you scale up a business like BGL, and you get into real estate, you can certainly apply those business skills in that competitive environment of high finance to apartments.

Now, immediately prior to BGL, Michael was president and CEO of Underwood Newhouse and Company, a leading regional securities and investment banking firm in Houston, Texas. And prior to that he was senior vice president for McDonald and Company here in Cleveland. And recently, Mr. Gibbons has announced that he will be running for a spot in the US Senate right here, for a seat in northeast Ohio as well.

Welcome to the show Mike, thank you for taking the time out of your very busy schedule to share your experience with our listeners.

 

Mike Gibbons: Well I’m glad to talk to you John. I want to make one correction though, we’re no longer in Salt Lake City; we’re in Irvine, California, San Antonio and Philadelphia. And that was a brief stint in Utah where we were unable to really make it work there. And it’s kind of an organic process that you go through and as you staff various locations with various skills you take advantage of that, and we’re doing that.

 

John Carney: Your resume is extensive. We want to drill into the real estate, and we talk a little bit about sports, we call it The Real Estate Locker Room Show basically because there’s just as fierce a competition out there in the real estate market day in and day out, probably the same in the MNA market day in and day out as you would see in the super bowl, correct?

 

Mike Gibbons: Well, it’s a very competitive business. I was warned many times before I started it that the likelihood of success, particularly out of Cleveland — and that’s where I wanted a family, and really commuted to Houston for four years, in a very tough environment in Houston, and came to Cleveland and said, “You know, I can’t go back to where I was,” just wasn’t the right thing for me to do, and started BGL.

I had an early setback, far greater setback for my partner, as is noted in the name of the company Brown Gibbons Lang — well Kevin Brown was a wealthy entrepreneur and had a bit of wealth from an inheritance. We had become friends and we were going to set out, with his capital support and my deal skills I developed, and form a company. Unfortunately, Kevin was killed a month and a half after we started the firm in an offshore powerboat race. Actually, the Trump race in Atlantic City. I and a number of my friends were there to watch him and he came into the restaurant where we were sitting — and actually we were playing Blackjack. First time I was ever in a casino in my life. — And he said, “Go home guys it’s too choppy.” By the time we got home, sat around for an hour or two with my family, and we got a call from one of my friends and said Kevin had been killed in the race that he wasn’t supposed to run.

And it was an unfortunate occurrence, but it created the true entrepreneurial situation where I was left with basically my capital, which was relatively insignificant at the time, and a telephone. And that’s where we started. So it’s all worked out, and it shows you what you can do in America if you just set your mind to it. I’ve been very fortunate to have the opportunities I had, and we tried to make the best of it.

 

John Carney: So just can you just tell a brief — talk about how you went from investment banking and how you stumbled into real estate and what that looked like?

 

Mike Gibbons: Well it really wasn’t a stumble, John. I was very interested in real estate, literally from the day I got out of graduate school. I remember I read a book called No Money Down. Since I didn’t have any money, that was an important part of where it started from. And I began acquiring with very little down payment money, had a real estate license and used my real estate license. And the commissions I’d receive on the acquisition side helped acquire various things and would buy some double houses and eventually a four-suiter.

None of those were very successful but I learned a lot. Not only did I learn how to install toilets efficiently, but I understood what it would take to really run a real estate ownership organization effectively. And the key is to building the number of units that you’re managing to where you don’t have to do all the work. Because if you try to do all the work, you’re very limited in the scope of what you can know. And I started out that way, sold those off as I was advancing in my career. But again, I always had that interest and attraction to real estate.

I was in capital markets in the financing business, advising businesses, and I was always attracted by the relative certainty of the cash flows versus the various business I was working in. And I never really had any engineering training or I really didn’t understand how manufacturing worked early on. And obviously, I’ve been in probably one of every kind of manufacturer in the nation and got to learn about their processes and how they operated over the many years I’ve been in the business. But during that period I always had an attraction to real estate. And indeed I was part of a partnership in a regional investment bank where they permitted you to make investments outside the normal scope of everyday business. And I got a couple of partners and one of them ran the real estate. And at one point we got up to a relatively significant number of multi family units that we’d owned jointly. I owned a relatively small percentage of them, of the whole enterprise. But again, expanded my knowledge just from being around and looking at properties, buying properties, financing properties.

And then as my career progressed I found myself working with real estate enterprises. And I was always — my early days were public finance, I was using tax exempt debt to do financing for various enterprises. And at that point in time, under the tax laws in the United States where you created an increase to employment you could use tax exempt financing. And the firm I was with, McDonald and Company, was a very significant underwriter of that kind of capital back in that period.

So I just learned more about the financing markets, the mathematics of financing. And ultimately kind of left public finance and moved into more financial institutes in bank, corporate finance type activities; took converted mutuals to stock, in smaller institutions and worked with REITs – a few of them that worked back in those days. And then when I went to Houston, which was supposed to be a two-year stint that turned into a four-year stint, I did it largely because McDonald and Company had gone public. They didn’t have the same cultural fit that I had felt so comfortable in while it was a partnership, and really sought that kind of partnership structure where I could own a piece and help build a company, help build something that I own.

So in doing the thing in Houston I was already — I still had my real estate partners up in northeast Ohio; we were still acquiring and improving and selling multi family during that period of time. And when I came back to Cleveland and formed BGL I was all about MNA for 20 plus years.

And right around when the crash came, actually maybe a little bit previous to that, I had consented to doing a development deal while still at BGL. It was a multi family with an older gentleman that I had established a great friendship with. I did that, saw the deficiencies in the way that they were then managing the properties, and ultimately wanted to create an organization that I could use BGL and investment bank as a platform and create an organization where we had very fine management, and kind of fit my philosophy of investing in multi family. And we’ve done that now for seven or eight years, and we’ve achieved some pretty good milestones in that period.

 

John Carney: So yea, hardly a stumble in. That’s a correction without understanding the whole story, for sure. But so, I suppose the important take away I got from hearing the whole timeline was you started out with single family homes, a few duplexes, probably spent some evenings there applying paint and fixing plumbing without a license–

 

Mike Gibbons: Many, many.

 

John Carney: — so that your tenants could move in the next day. And that is a familiar story with just about every single real estate investor I’ve interviewed to date.

 

Mike Gibbons: You’ve got to start somewhere, you know?

 

John Carney: You have to start somewhere. And then what does that look like today? And where —

 

Mike Gibbons: Well, in a week — I don’t own 100% of very many things, I have a few I own 100% of, as far as real estate dwellings. But generally we’re operating in LLCs, oftentimes it’s the partners in the investment banking business, at times we’ll take in outside investors.

And I didn’t mention this, but early in the days of Brown Gibbons Lang, having been in Cleveland, I knew a lot of the developers in the region, largely stemming from my public finance days as a matter of fact. And I was in a very good position to — down a number of REITs formations, and we took them public while I was in Houston. And the real estate investment trust business changed considerably in the early ‘90s. Prior to that, you needed a separate enterprise to manage those businesses, or to manage the real estate homes that were owned by the trust. It was a very unwieldy, difficult structure to operate in and all that changed in the early ‘90s. And because of my relationship with some of those developers, because I had as much familiarity with REIT structures as anybody probably in the Midwest at the time — I wasn’t an attorney and didn’t work in those areas, I was really an investment banker that had worked with the formation of REITs –I was called on to use some of the expertise I’d developed to advise a number of REITs and their formation, and actually model those enterprises for largely a collection of partnerships; model those pre-excel. I was using Lotus123 back in those days. And created those models and took them to Wall Street, found an underwriting team and we took a number of REITs public where I acted as the advisor, BGL acted as advisor.

Around northeastern Ohio it was Associated States and Developers Diversified, both of those were enterprises that I advised on their formation. I ended up on the board of Associated States after about ten years, became an active board member, shared financial planning and really kind of studied where real estate performance was. Being in the Midwest, it’s very much different than if you’re in the coast or in you’re in the hot growth areas. We have a housing stock here that’s a bit older than most other locations, and I was always tied to Ohio and tied to Cleveland, this is where I love to live. I had spent four years commuting, coming back here every weekend almost. Coached my daughter’s soccer team, I was an assistant coach while I was working in Houston, so I was always connected to northeastern Ohio. So the natural place to invest was northeast Ohio. But the housing stock in a city like Cleveland or around Cleveland is very much different than you’ll see on the coast or in Florida or in Atlanta or in Dallas.

Having been on the border of public multi family REIT, I kind of studied what the differences were and where I thought I could make a difference and also do well for my investors if I had them. And kind of developed a plan. And generally we’ve stuck with working class housing, is what it’s called now. I think we were lucky enough to identify that earlier in the trend, and it’s now become a topic of conferences to talk about work force housing.

And I just have a philosophy about people and about where they want to live and how they feel about living in a certain situation. And I took that philosophy and applied it to my real estate investment. I believe that every single person in the United States wants to be proud of where they live, and they want their friends and family to come over and visit them and not be embarrassed of the maintenance levels of the property that they’re living in. They want to walk through a lobby that looks like they’re prosperous and they’re living in a well maintained, well managed facility. And I think that’s true across all income levels. I don’t think it’s any different, no matter if you’re struggling in a lower wage job to you’re a wealthy person that just doesn’t want to have any duties of home ownership. And I think every level of those you can do more and more, commensurate with the level of rents and the level of profitably.

So what we look for are properties that are undermanaged or poorly maintained, and our effort is to find those, buy those cost effectively and manage them in the way I just talked about. We have a rule with our management operation: if that unit isn’t ready for your mother to move into it’s not ready to rent to somebody else. And I think a lot of businesses say they have a social responsibility too, and I think anybody that’s operating in America in business should have a feeling of social responsibility. And one of those things is I want to make our tenants lives a little better, because we do the things that need to be done when they need to be done and provide with them with a safe, clean, well maintained place to live. And some place they can be proud to bring their parents or their friends and feel comfortable going in and bringing them there into their apartment. And I think that’s a solution that’s worked for us very well.

 

John Carney: So would you say your approach and your philosophy has to be in some respect a point of difference; do you see a dramatic change when you buy a property that’s under managed and in need of repair. And can you just talk about the turnaround that you see with existing tenants. And then how that would compare to someone across the street or next door that just doesn’t have that same attitude about providing an environment that you’d want your own mum to live in.

 

Mike Gibbons: Well, you know, it doesn’t happen immediately. I think you have to convince the tenants that live there that you’re different, and it takes a while to do that, you can’t just come in — we typically don’t come in with a total rehabilitation of the project, because in many cases we just can’t afford to do that.

One of the advantages of investing in workforce housing — and I might add, not everything we have is workforce, we have some higher end properties but we don’t really have the low-income properties. We don’t have any units that would be considered low income. It’s people that work; they may not make professional level salaries, but they certainly are hardworking and they have pride in themselves. And generally you want tenants to have pride in themselves because they are going to have pride in the property that they’re living in, and they’re not going to do damage or dump litter, or they’re going to keep the place clean and not fight the management company.

Oftentimes when you see these undermanaged properties, they’re just not well managed in a number of ways. If you don’t pay your rent, and you have tenants that don’t pay their rent on time — unfortunately we’re not the government where we’re responsible for making sure that everybody has their rent payment every month. So we have very high credit standards and the reality is, is I wish I was in a position to give everybody free rent. If I was in that position it would be a wonderful thing. I try to contribute a significant portion of my income to help those kinds of people, but you can’t do that and have a business. So unfortunately, you’ve got to have people who pay their rent on time. The minute you start allowing people to live there while they aren’t paying rent — I’ve seen a lot of property owners make that mistake; so they’ll try to negotiate with the tenants and they end up defaulting on their mortgage. And you wouldn’t be interviewing me right now if I’d defaulted on a number of mortgages over a period of time. And when a relatively small percentage of your tenants aren’t paying rent you can find yourself in that position.

I’ve never defaulted on a mortgage and I don’t intend to, and the only way to be certain that that isn’t going to happen is to make sure you get cash flow under the contractual arrangement that you have with those tenants. And it’s a win/win situation: we’re going to keep the property up in good condition if they just meet the terms of their contract, which is paying their rent on time.

And oftentimes we’ll move into a turnaround situation, under managed situation, sometimes even over managed situation, where they have a few other different characteristics we can get into. But that undermanaged situation, generally they’re letting people slide by, and you’ll end up with the tenants owing multiple months’ rent, that’s a recipe for disaster. That’s when you talk about the decline of areas and properties, that’s what usually leads to it.

Everybody talks about the terrible slum landlords, well in many cases they are terrible, but oftentimes it starts where they just don’t get their rent payments. And most if not all of these projects are leveraged and they need to make mortgage payments, and if they aren’t collecting their rent they can’t make those mortgage payments. You’ve got to have a discipline about making sure people pay rent on time.

We’ve also had very good luck, where we’ll find a property that’s in disrepair and has been neglected as far as the management, or maybe the right management techniques haven’t been used and they’ll have problem tenants. You’ll have tenants that are selling drugs, or they’ll be having gatherings in front of the building and will harass other tenants as they come out. We have found that with the technology that’s available now, if we put up camera systems, generally people behave properly if they’re always on camera in the common areas. When somebody breaks a window we know who broke it. When somebody steals furniture from the lobby, we know who stole it. When somebody comes in and commits a crime on the property we can generally trace when they come in and when they leave. So we had very good luck of just getting better behaved people living in our properties. Because all people want to live in a nice property that is well maintained, and if you allow people that don’t care about that to move in you’re not going to be able to do that.

So that’s one of our initial steps, is to spend the money on camera systems, spend the money on common areas; just the general condition of the property, the street appeal of the property is very important. People want to see landscaping and green grass and nicely maintained shrubbery and lighting and everything should be well lit. You cannot have a full-time security force, it doesn’t work at the level of rents that we run at. But we’ll have — particularly when we’re turning a building around, we’ll intensify security to a certain level and if somebody is on site that’s causing a problem, generally we can have security there in pretty short order.

 

John Carney: Well, that’s basically a long — for the listeners that are out there that want to be in the multi family game, or anyone who’s struggling managing their own multi family, take note of what advice Mike has given us. Because that’s generally, I would imagine, almost a weekend course in property management and multi family all wrapped into a ten-minute segment, so thank you for that.

 

Mike Gibbons: I’m happy to do it.

 

John Carney: That’s great advice, well we wrap this up with a few questions that we end up posting up on the show notes. But when you were growing up as a kid, you were also a college athlete, what sports were you into? And how did you see that team sport aspect of your childhood translate into success in business?

 

Mike Gibbons: Well, you know, I guess I didn’t appreciate how much participating in team sports — and some individual sports too — how much they helped. But I think it’s just a general attitude of being able to get along and work with people, where you have a particular function, they have a particular function, and when everybody’s doing what they’re supposed to do at the same time, things work a lot better. It’s that simple.

I played high school football and I wrestled. My father was actually a wrestling coach, I never quite achieved the level of capability that he would have wished. And I think he would have been a lot happier with me if I’d found wrestling to be my sport. But he was a great athlete, an all American national champion, and I just was never going to be that. And I also participated in track. And when I went to college, I really decided I wasn’t headed to the NFL, and although I had some looks by division one teams, I thought I was better suited — and again I wanted to stay around Ohio. The only D3 school I looked at transferring into, I waited so long to make my decision they’d already agreed to go to a school out of state. And ended up at a D3 school and was able to compete in three different sports while I was there and still go to class and maintain good grades. It was a great experience for me.

I played lacrosse and football in college. And the four years of football, and trying to compete in Ohio in football in a heavily academic school, where it was tough to get a lot of players to help this into the school. We were able to field a pretty good team. And a lot of those guys are still my friends and in each case they’ve all been successful — or I think all of them, I can’t think of any that haven’t been — but they’ve all been successful in whatever profession they decided to go in, and we often get together. We had an undefeated team in the college I went to, that was an unusual thing to have, it was the only one in the history of the school. And every one of those guys — we talk about how the coaches put us together and got us working together. We were always not as deep as the teams we were playing, as long as we didn’t have a lot of injuries we were going to do pretty well. We had people knew their roles and fulfilled them.

And it’s the same thing in real estate. It’s the same thing in investment banking. You have a job to do and you’ve got to do it as well as everybody else does their job, and it’s particularly important in real estate. You’re relying on the guys that vacuum the hallways as much as you’re relying on the people that are fixing the electrical problems or the plumbing, it’s all got to work together. And that kind of team atmosphere is the best situation you can create. And we have that right now and it’s not always that easy to achieve, you’ve got to have the right chemistry among people. But we’ve done it and it’s worked out very well.

So we’ve grown, and we’re one of the larger property owners in northeastern Ohio, and we intend to continue to grow in that area. I’ve got a couple of sons that seem interested in real estate, all of them are still in school, heading to law school and business school, but I think they’ve seen the fun I’ve had with it and the interest I’ve had in it, and I’m hoping one of those guys decides they want to follow and keep this effort going in the family. Like you’re doing John. Your family’s been in real estate for generations. I’m the first generation in mine.

 

John Carney: Right, and that’s just it though. It is fun. And I think it’s fun because it’s challenging, and it’s hard work and you get to surround yourself by other people that find it fun, challenging and are willing to put in the hard work. Three rapid fire questions before I let you go. We’re compiling a bit of a list. Who’s your favorite athlete – all-time?

 

Mike Gibbons: Well, it’s funny, because I actually know him, and this probably isn’t going to be a popular choice in Ohio. But my son-in-law, married to my daughter, played for Cleveland Browns, and so obviously, he’s probably my favorite athlete along with my father. My father was a world class athlete, just happened to be in wrestling. But my grandson’s godfather is a guy named Tom Brady. I’ve gotten to know Tom a little bit, and I’d consider him one of the — a guy with one of the finest characters — if you’re a Cleveland Browns fan, you only see this guy that comes in and destroys our team when he’s in here. I’ve gotten to know him personally and he’s kind of just a really great person. As is my son in law, as is my father.

So I guess I’ve got three of them. I would say: my dad, Jean Gibbons, and my son-in-law, Aaron Shay, and his big buddy Tom Brady. And I know each of those people pretty well, and it’s great seeing somebody in competition. Aaron’s not playing anymore, my father’s passed away, but I’ve heard the stories many times about how he competed and how good he was at what he did. And we can still watch Tom, usually in the super bowl every year. And for how much the fans of the opposing team seem to hate him, he’s really a great person and he’s a regular guy that just works harder than most everybody else.

 

John Carney: Yea, he works hard and he’s a leader. So I mean, two key ingredients to become a multi super bowl champion. Is there a favorite book that you have? We’re putting together a booklist out of this show.

 

Mike Gibbons: It probably is — I often say that there’s been a lot of books that have kind of shaped my — where I’ve ended up in life. When I was in 8th grade I read a book called God’s Gold about John D Rockefeller. I lived in a family that didn’t have a lot of extra dollars floating around the house, and I kind of set off to try to change my family’s trajectory, and I think I’ve done that to some degree.

But I can tell you what changed my whole attitude about politics. In college I majored in political science and economics, and just as most other college students, I didn’t read everything as carefully as I should have the first time I was asked to read it, but it’s become kind of a hobby for me over the last 20 odd years.

But a book called The Constitution of Liberty by Friedrich von Hayek, changed my world view. My grandfather was a labor union president, my dad, who was not really about in politics, pretended to be a democrat early on. I had a grandfather that was probably even to the left of that, my mother’s father. And I didn’t really form a political view really until after I was in college and got out of college. And I have to tell you, Friedrich von Hayek influenced me. It was a rational argument that really kind of convinced me that free markets and capitalism could change the world. It has, it’s taken more people out of poverty than any other system of economics in world history and that book changed my view.

I don’t read a lot of fiction, I read a lot of non-fiction and as my best friend says, “You read the weirdest stuff I’ve ever seen Mike.” But I think I’m curious, and I read a lot of things that aren’t best sellers. And it’s given me a great base of completely irrelevant and unimportant facts that I can talk about at length, and if you aren’t interested in that sort of thing I’ve got to be pretty boring. But it’s probably the book that changed my life.

 

John Carney: That’s good. And we’ll link that in the show notes on our website. Well we’ve run a little bit over. If you have a couple of minutes would you like to share your thoughts on your decision to enter into a big political campaign?

 

Mike Gibbons: Yea, and it took a long time and it was a decision that was very difficult to make. And I’ve said this many times, but I wish I could have found somebody with similar world experiences than me that would have been willing to run. My last son graduated from college a month ago, not even a month ago. My commitment to my children has changed as they grow up. I’ve got more time. I’ve got a son that graduated from Georgia Tech with honors in aerospace engineering, which if you know anything about Georgia Tech and having a degree in that field, he had great job prospects, and he went down and joined the navy and is in Pensacola now in flight training. And I think the combination of that and kind of having my last child graduate from college — I don’t need to focus on my kids as much as I used to. It got me thinking. And he’s adamant about wanting to help his country and defend his country, and I came to the realization that I’ve never really tried to do anything for my country directly. I’ve created hundreds of jobs over the years, and I’ve taken the risks necessary to create those, but I’ve never really given back to this country the way it’s given to me. And I’ve had — there’s been some opportunities, taken advantage of it that I hope everybody can have that same opportunity.

And I don’t like the direction our country is headed. I don’t like the politicians that we’re electing to office. I think we have too many career politicians who really have no experience and they’re very good at winning elections and raising funds to win elections but they really don’t have any day to day knowledge of what it takes to make this country thrive.

 

The government doesn’t create jobs, business creates jobs. And being a business man who recognizes his own capabilities and is not just out for some kind of an ego trip, that really wants to ensure that our governments can use the principles that made our country as great as it is, and not forego those and pick up on the latest ism that’s out there, the latest cause that somebody comes up with. And really kind of keeps the country directed where it’s — in a direction that’s gotten us where we are right now. And I’m going to try and do that. I promised my wife and my kids I wouldn’t change one iota. I tend to be blunt, and I don’t — I’m not a political soundbite guy. And I want to take that kind of an attitude. I’m going to try to get to Washington and actually tell the truth.

Because this country is in a very serious predicament right now: we’ve got national debt 105% of our GNP. The only time it’s ever been greater than that was after we fought a world war. And the difference is the end of that world war we hit 50% of the industrial capacity of the world. We don’t have that anymore. We have got to grow this country. If we don’t grow 3 or 4 percent over the next many years we’re in serious trouble. We’ve got to address that and there’s ways to address that that our politicians just don’t want to talk about. And they may have the soundbites, they really haven’t developed an argument and understand why we have to do that. Because right now we have enough debt that we’re either going to have to default on it, or we’re going to have to grow the country so that becomes a less significant portion of the GNP, that debt. Or we’re going to have to inflate our way out of it. And the very people that won’t allow this country to grow are the ones — the people that they’re claiming they’re protecting and representing. And they’re going to be the ones that are most hurt in that inflationary environment, if that’s what we end up doing.

 

But we’ve got to grow the country. I think I know how to do that. I think I know how businesses are formed. I think I know what stands in the way of their prospering. And I think our government has to ease off on those businesses. I think we have to lower tax rates for businesses and get people to create jobs and make sure that those lower tax rates are tied to people that are really taking risks of job formation. And if we do that, we can super charge this economy and we won’t head down the path that so many countries have that have tried this kind of foray into socialism. It doesn’t work. It hasn’t worked, ever. And they keep saying, “Oh well if we do it right..” There is no right way to do socialism. And even if you want equality in a country, you’re not going to have freedom. And I think that freedom and the fact that everybody gets a shot at opportunity here is what we need to make sure it continues in the future. I’m going to try and do that. And that’s really why I’m doing it.

I’m not a career politician, never thought about it before. If I could have found somebody better to run, I would have certainly supported them and would rather help them in their quest for office. But I can’t find anybody because they aren’t willing to take the considerable risk that comes along with running for office. And I just said –you know, they can make up stories, or they can come up with something they somehow will twist in my background that will make — try to make me look unacceptable to the voters, but I’m willing to take that shot. I think I’ve never done anything unethical in my business career and I’m proud of that, and I’m willing to take anything they can come up with because it won’t be true. So, long story short, I’m doing it because I can’t find anybody else that has my experiences to run and to support. So I’m going to do it myself. I’m the one that complains, I might as well take a shot. That’s what it comes down to John.

 

John Carney: There you go. That’s the American story. I wish you nothing but luck in your race for the US senate Mike. Alright, well that wraps it up. Thank you for joining me in the locker room today Mike. Where can the audience find more about you if they want to reach out or contact you online?

 

Mike Gibbons: Sure. Well I’ll give you our firm website is: bglco.com and we’ve got a good bit of information on there. We’ve been around for 28 years, just found out that we are among the top five most recognizable names in middle market investment banking in the United States. I’m very proud of that. They said it couldn’t be done in Cleveland; we managed to put it together and do it. And then my website for my campaign is: gibbonsforohio.com

And we’ve only been at this a couple of weeks, so positions aren’t filled out, but there’s a video on there that will pretty much summarize what I’m about. And I hope the listeners watch that because it’s — I want to be that new politician that our founders envisioned and not the career politician that unfortunately we’re forced to vote for now. We really have no choice because those are the only people that are running.

 

John Carney: Get in, get the change going, and then hand it over to the next generation. There you have it folks, I am sure that you picked up some actionable advice today from Mr. Michael Gibbons. Make sure to check out the Real Estate Locker Room Show on iTunes, Stitcher, or Google Play and hit that subscribe button to ensure that you never miss out on the pro tips from our great guests. The post-game report show notes, links and additional content for this episode will be available on my website: johncarneyonline.com/podcast when this episode is live next week. And while you’re visiting the website, feel free to drop your email address into the newsletter sign up form to receive even more real estate investing insights, tips, tricks, hacks and other good stuff. Remember to stay focused on your goals, have fun and stay in the game. I’m your host John Carney and until next week: work hard, play hard, and profit hard.

One more time, thank you very much Mr. Gibbons, for taking the time out of your busy schedule and your campaign to join us. Have a great day.

(Music Out)

End Audio

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JC 016: Lessons from selling 42,000 units with Daniel Burkons

June 21st, 2017 | no comments

Multifamily success begins with a strong team

How do you eat an elephant? One bite at a time. Dan Burkons joins us in the locker room today to share his story of success as multifamily sales agent. Dan’s kicked off his career by listing and selling 14 units in East Cleveland 15 years ago. Today he’s closing $58 Million dollar deals. Everyone starts small and grows bigger by working hard over time.

Dan has worked with clients who started with one small deal, quit their day jobs and scaled to 10,000 doors. He believes that having sold management in place is a critical component of success. Pairing a profitable operating and management system with private equity is required to successfully scale.

Something will always go wrong closing a commercial deal. Find out who is creating the roadblock and what their motivation is. You will overcome the obstacle by drilling down into the problem, identifying the root person raising the objection and getting to the decision maker to find a way to solve the issue.

Ice hockey taught Dan that hard work is fun if you like the people who you are doing it with. He attributes his success in business to working hard with people he enjoys working with.

5 Key Points:

  • Have a management plan first.
  • Bad management will sink a great deal.
  • When entering a new market you have to find the right multifamily agent who is active in the product type you want to purchase.
  • You want a local real estate attorney on your team who’s an expert in your niche in the market.
  • Hard work is fun when you like the people on your team.

Favorite athlete: Matthew Dellavedova – Australian born NBA player

Favorite book: How Wall Street Created a Nation: J.P. Morgan, Teddy Roosevelt, and the Panama Canal by Ovidio Diaz Espino

Favorite quote: “If it were easy, everyone would do it”

Thank you Dan for taking time out of your busy day to share your story with us.

Dan’s office phone is 216 264 2018 or email – Daniel.Burkons@marcusmillichap.com

Website – http://www.marcusmillichap.com 

Listen to all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at http://www.johncarneyonlie.com

POST GAME REPORT: Episode Transcript

JC 016: Lessons from selling 42,000 units with Daniel Burkons

Multifamily success begins with a strong team 

Announcer: Welcome to the, “Real Estate Locker Room Show” with John Carney. Did you know investing in real estate is a team sport? Join John and his guests as they explore the business of real estate and athletic competition. The goal for this show is to grant you direct access to the real estate pros that are closing profitable deals and growing their businesses. On the “Real Estate Locker Room Show” we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve on-going success. Now it’s time to kick-off and level up with new ways to grow your real estate business.

 

John Carney: Welcome back to the Real Estate Locker Room Show. I’m your host John Carney, coming at you again today from Cleveland Ohio. I’m here on the sunny west side and joining me today is mister Dan Burkons, and he is on the south side, correct?

 

Dan Burkons: I am, Independence.

 

John Carney: Alright, perfect. This is going to be a great episode today. We are talking to one of the regions’ premiere experts on multi-family investing. Dan is a broker and he is a senior director of Institutional Property Advisors, or IPA, which is a division of Marcus and Millichap. And he’s one of the three original founders of the Marcus and Millichap Cleveland Office.

His leadership and specialization within the Midwest department market enables him to create substantial value for major private and institutional investors. Dan joined the firm in 2003 and he and his team are approaching 42,000 units sold across 14 states, totaling over 1.8 billion. Impressive stats there. Dan’s expertise is in assessing value and leading national marketing campaigns, selling apartment portfolios ranging from to as many as 25 properties in multiple states, owned by multiple partnerships.

In 2013 Dan received Crane’s Cleveland Business Forty under Forty award and in 2012 he was induced into the Midwest Commercial Real Estate Hall of Fame. No stranger to the media, he’s regularly featured in publications such as: Apartment Finance today; Globe Street; Heartland Real Estate Business; Midwest Real Estate News; Multi Family Executive; Multi Housing News; The Cleveland Plain Dealer; and of course, Crane’s Cleveland calls him for any information they need from an expert regarding the multi family. Alright Dan, welcome to the show. Thank you for taking the time to share your expertise with the audience.

 

Dan Burkons: Well thanks John, thank you for that nice introduction. It’s all flattering but I still think of myself as doing the same thing I’ve been doing for 15 years of selling apartment buildings.

 

John Carney: Right, and you’re good at it. So that’s okay to be good at stuff. 42,000 units sold, everyone starts with one. We’ll get to that in a minute. So, I like to kick off this show with a little bit of a stretching question to get everyone warmed up here, and I generally ask our guests: what sports did you play growing up and who was your favorite athlete?

 

Dan Burkons: Well I would say — so hockey is the sport that I played the most growing up, and I still play. In fact, I skated last night, had some beers and that’s actually — to me, I’m not the world’s greatest hockey player but I like it and got great friends through it, and that’s what I do for exercise more fun than the treadmill.

If you asked my favorite athlete, I actually was just thinking about that as you said — I know you have a lot of Australians followers and I tell you one of my favorite athletes, nothing to do with hockey, is Matthew Dellavedova, Australian guy that came to the Cavs and was a real part of a couple of those runs to the finals. And he’s my favorite athlete because, like me, he doesn’t have the greatest natural talent but I envy his work ethic. The guy shut down Steph Curry, weekend VP in a couple games 2015 and went straight from the basketball court at Quicken Loans arena to Cleveland Clinic because he was almost dead of exhaustion, to get IV fluids to come back the next day. That’s a guy I admire.

 

John Carney: Yea, maybe we should have kept him around to shut them down again this year.

 

Dan Burkons: Right.

 

John Carney: So, I believe that for those of us that like the competitive nature of sports, whether it’s a team sport like ice hockey or an individual sport like golf with your buddies, that business has the same type of competitive nature to it. And so, we draw the comparison between business and sports on this show.

But look, I’ve had clients in the past come to me who want to — when I was living in Australia and working with America Property Source — clients who wanted to get into US multi-family investing. And just like anything, I believe you need to start small and you have to find an expert for your team before you even start small; before you get started you have got to recruit your team. And so finding the right agent with the right experience in the market is critical. Tell us a little bit about your experience over the years, from kind of when you got started to where you are now. You’ve probably seen it all and — share some insight on how do you get started in the multi-family game if you don’t own any apartment buildings or duplexes yet.

 

Dan Burkons: Sure, I’d be happy to, and for myself getting started as a broker it was the same thing; starting really small. My first listing was 14 units in East Cleveland, which for those of you who aren’t familiar with the area is a war zone, it’s the worst of the worst of the worst. That was a $230,000 transaction barely qualifying as commercial real estate. Went from there to — we closed a 58 million dollar deal a couple of weeks ago. So everybody, whether it’s as an owner of a brokerage, starting small — no one is just going to plug you in and you’re not going to be doing 58 million dollar deals. You’ve got to start somewhere, you’ve got to build, you’ve got to build off success.

One of the most rewarding things, and really just the coolest things in my career as a broker is, as I’ve grown from a young adult to — I don’t know what I am now at age 37 — as I’ve grown as a person and I’ve grown in business, I’ve had a sort of symbiotic relationship with several key clients where we’ve grown together. One of them — in fact I mentioned the 58 million dollar deal we just closed — one of them, my second listing at east Cleveland, one was 13 units in another, not much better suburb. And I sold it to this group that was four young guys with full time jobs, and they’ve bought 10 or 20 units. They wanted to buy this thing and they actually ended up — we ended up arranging it with seller financing and I learned a couple of tricks because I didn’t understand what it was at the time. They actually got in with cashback at closing, which isn’t always the best thing but worked for them. And the bank thought they were growing too fast so one of their parents had to cosign for them.

They ended up making a ton of money off that deal, buying another one, buying another one, buying another one, I sold them a lot of it. Then four of the guys that bought that $300,000, no money down transaction in 2013, I’ve actually sold them a 53 million dollar and just recently 58-million-dollar deal. As they grew organically, left their jobs, went into real estate full time, then they hooked up with a private equity shop who gave them the capacity to take down really big deals and portfolios. So it’s an example of somebody who started in commercial real estate part time, built up their management expertise, learnt from some mistakes, took in a little money from local investors and once they’d perfected their craft a little bit, took on little bigger time money and was able to really get into the big deals.

 

John Carney: So when I look at real estate, and you can just pick the asset type, or the class, I mean it really does always boil down to good management: what I believe is the success multiplier. So, could you elaborate on that component, about how these guys were able to grow about over 10 to 15 years, right? They were an overnight success in 15 years, right?

 

Dan Burkons: Right, from zero to ten thousand units. Yea, whether it’s them or anyone else, management really is the key. And I know you have a lot of listeners on here who are earlier on, or some who are just looking to start, or some at obviously more advanced levels, but as far as building that portfolio, management is key. The place where I’ve seen, particularly international or out of state investors come to our markets, and where I’ve seen some fail over the years is not having thought out about a management plan, just looking at the numbers on paper and saying, “Yea, this is a good cap rate, this will work, this meets what I’m looking for.” And a day before closing saying, “Oh, can you recommend a good management company for me?” It sort of should be in the reverse.

You should be — if you’re looking in an area, you should be trying to get comfortable with a management company first, before you really make any serious offers and about to invest your hard-earned money into deals. Because the best deal in the world can get screwed up very, very fast by somebody — whether it’s a dishonest manager or somebody who just doesn’t have the expertise. That is crucial; very small differences in occupancy and rents and expense management can have huge impacts on operating incomes and failures.

 

John Carney: Yea, across the board I suppose, because some management companies make it easy on themselves by keeping the rents low, but there’s all this money being left on the table, right? I’m sure you’ve come across that. That also leaves a big chunk of value for an incoming buyer I suppose.

But, so if you’re coming in from an out of town market — I’m contacted by people often that want to pick my brain about the Cleveland market. The first thing I tell them is that it’s competitive like any market. Can you give us a little bit of the 2017 overview of what Northeast Ohio looks like in multi-family?

 

Dan Burkons: Sure, like any sort of market there’s stratification based on asset class and asset size. And on the larger assets; on the, call it ten million and up, a lot of competition is experienced, national syndication groups. Not so much in northeast Ohio, recent and public companies — it’s for various — are less desired market for that, which actually makes it more profitable for others because those types of public entities often compress cap rates and starve the yield.

So actually it’s more of an opportunistic market, in all sizes from small to big. And in the 500,000 to 5 million range, where we do a lot of business as well, there’s just a mix of local and out of town guys who are coming here — if they’re local, they’re here because they’re already here and they’re looking for the next deal that’s good for them to add to their portfolio. If its someone out of town, they’re usually finding their way to north east Ohio because the cap rates have compressed so much in other parts of the country. Even other parts of the Midwest make Cleveland look like a relative bargain, just because there is — historically there has been a little bit less interest, and quite frankly with the development of Cleveland there should be more, but not everyone has Cleveland on their map, which is good because it leaves the yields a little bit better. You usually get people who are not from the area saying, “Hey, I’m coming to look at properties in Cleveland, Columbus, Cincinnati, Pittsburgh, Indianapolis.” They’re not in love with any one market, they like the idea of getting into the Midwest. A lot of times they’ll come back and say, “Wow, Cleveland, there’s really nice areas and you can buy really stable product, not susceptible to these big swings of up and downs, and look, that’s what I’m coming here for. That’s why I’m not buying in California, I’m buying in the Midwest go get something really stable and those opportunities are here.

 

John Carney: It’s an interesting market. Cleveland has everything that any major city I’ve ever been to globally has, right? We’ve got three brand name sports teams, two stadiums right downtown, you can walk from one to the other and then you’re walking through multiple neighborhoods that have all the foodie and nightlife culture you’d want. Big banks and it’s a pretty homely town.

 

Dan Burkons: And to be honest, I think especially as Cleveland’s downtown has developed — like you and your partners have been an instrumental part of developing Cleveland’s downtown as more of a 24-hour center. as that’s happened more and more young people are saying wow I can really do all the fun 25-year-old stuff in Cleveland that I can do in Chicago or somewhere else and literally pay a third as much and live in a much better place. And as you get older with a family, a lot of my friends have been moving back because jeez I’ve tried to make it in San Francisco and we’re both working and I’ve got no money to pay daycare and this and that. And I go to the pool and there’s 10 billion people. In Cleveland I go anywhere I want, there’s no lines and they have everything. So the quality of life is really good and that’s actually been attracting more and more companies to come back here.

 

John Carney: Yea right so I was gone — I’ve just been back in town for my first year, completed my first year back living on the west side of Cleveland after being away for 19 and last night we took a drive with the kids downtown just for something to do and they had a free concert at Edgewater Park. And traffic on the shore way, which they have converted now into a boulevard and they’ve really spruced up the area and the Metroparks are running the lakefront beach. You know, it was wedged. It was a line of traffic from 25th street to the new Edgewater entrance and then from Lake road and Clifton to the west all the way down. And it was packed. It didn’t look like there was a place to park a car on that whole piece of property. And that’s now kicking off summer with concerts and the beach seems to always be full when I drive by. So they’re really doing a good job there in that Gordon Square and West 25th street neighborhood of utilizing the lake front.

 

Dan Burkons: It’s interesting that some of your audience — I’ll tell you what, we’ve had — that Westside area and Edgewater park west, the higher city area — there are places that even 5 years ago I would have thought of as man that’s kind of rough, sort of being a rundown part of the city. That area on the Westside is just — we’ve had a lot of out of town investors actually buying 10 unit 20 unit, 30 unit type deals there and seeing it as a big opportunity. And because those are some areas that were historically not nice in Cleveland, a lot of local people overlook them and the amount of millennials and highly educated young folks who want to live in those — it’s a little bit more like living in a neighborhood of Chicago or something, a little more edgy area. A lot of the out of towners are getting that faster than the local folks, and buying up stuff that ten years ago would have been worth $15,000 a unit, and they’re buying it for $20,000 a unit, putting $5000 into it and making it worth $40,000 a unit. And there’s opportunities there, and seeing the opportunity and the growth pattern in some of those Westside neighborhoods.

 

John Carney: Yea, I mean it’s fascinating to watch. They grow and continue to flourish. So if you’re coming to Cleveland and you’re looking in multi family, or any market really, obviously the role that you play as a broker agent — talk a little bit about how you work on the buyer’s side for people, and what level of expertise having the right person — there might be someone listening that wants to go to Florida and they don’t know anyone in that market, or they want to go to Texas. What questions should they be asking a guy like you to make sure that they get the right person helping them out?

 

Dan Burkons: I think it’s important that you find somebody who really is active in that specific product type in that area. So there’s a bunch of guys, for instance in Cleveland, who run around saying, “Yea, hey, you want to buy apartment buildings?” They’ve never really done an apartment building, they’ve done one. Our team have sold several hundred in Cleveland. It doesn’t have to be that, but wherever you’re going, Texas, figure out and find out and maybe call around, find out who are the guys who are actually active. If you’re trying to buy 10-30 in a deals in say, San Antonio, before you just grab on to the first guy and spend two years being dragged around by somebody, spend an extra couple of weeks figuring out and maybe interviewing or meeting a couple of people. Say, “I want to see your track record. Not the market, I want you to show me how many deals you’ve done.” It doesn’t have to be a guy who’s sold 400 deals, but a guy who, “Hey look, I’ve closed three deals, I have three on the market, here’s what I know about — I can tell you about.” Somebody who is actually active in that.

Don’t hook up with a guy who sells houses who’s trying to get in — make you his first client to do an apartment deal or a shopping center deal with or whatever it is. You don’t need to be the guinea pig. It’s okay to be with a younger guy, as long as the guy’s focus is actually to be doing some transactions in that niche. Because they’ll understand really quickly the fit. they’ll say, “Hey, you don’t want to waste your time with that deal, the expenses are not underwritten well.” Or “Hey, that’s a really poor rental market you’re not going to get upside.” Somebody who can make a very quick judgement on something.

Look, there’s so much information out there, all of us have limited amount of time to rule out the stuff — there’s a lot of stuff people throw on the market that doesn’t make sense. To someone who can very quickly cut through 50% of them and say, “Throw that in the garbage pile, let’s focus on looking through these other 50% of deals.” You’ll go a long way by hooking up with somebody who is actually plugged into that product type.

 

John Carney: Sound advice. And then, if you’re coming into a new market or just getting started, from your experience –management — let’s circle back to management, how would you go about finding the right group to manage and what advice would you have on how to source someone like that?

 

Dan Burkons: You know, I think if you find that right agent to work with that’s a good place to start. So if someone’s actually doing a lot of transactions in that specific niche, you can ask them, “Hey look, can you recommend three good management companies? What do you think their strengths and weaknesses are? Who might be good for me?” And they may say, “You know what, there’s really only one that’s good for what you’re trying to do.” Or they may say, “Well there’s a few.” That’s a good place to start is to hear from the agent.

You can also — another good thing would be to hook up with a local real estate attorney who is local to that market. Because we have a lot of folks who are from out of state, they are using their out of state attorneys. Every market has its niches and loopholes and laws and the way to do things. You want to find someone who’s experienced, who’s a local real estate attorney to that market, and that guy can, one: help you navigate the intricacies of the purchase agreement and so forth, but also that guy’s also great for a referral service. Both attorneys and brokers are constantly dealing with people who touch every other part of the real estate spectrum, and they say, “Oh no, you know what, I’ve got a few clients that use this guy. He’s a really good manager, he’s local he’s this that. Or stay away from this guy he’s got a great sales pitch on the internet but he actually has no substance.”

 

John Carney: I like what you just said there, because when you look at attorneys, attorneys who fill that niche and are laser focused and have the track record are good people to have on your team. I add an extra layer that you should gel and trust your attorneys on your team, and that’s just a matter of meeting a couple of people. But you know, they have so much insight behind the scenes and they really do connect the dots, don’t they?

 

Dan Burkons: Yea and so again just with like the — it’s important, don’t just find the first guy you find with a picture on a billboard. Try and find out who actually is representing clients, doing real estate deals like yours in that market. Not the guy who is doing $500 divorces and, “No, yea, I do apartments and real estate stuff too.”

 

John Carney: Right, family law and commercial real estate, two things that probably one person can’t do well.

 

Dan Burkons: Right.

 

John Carney: But, I mean, again, when you make a transition, when you’re doing single family homes, you don’t really need a lawyer that much, unless he’s finding you deals through probate or other forms. But so you get this mentality that you don’t want to pay the fees. Absolutely, 100% critical to pay those fees as part of your costs of doing business when you’re on the commercial level, especially in higher dollar value transactions for sure.

Well cool. We’re kind of going to wind down into our two-minute drill here Dan, and so you’re talking about ice hockey, and you grew up playing ice hockey I imagine. What kind of lessons did you learn playing team sports that you bring to the table running your team at your business to help your clients succeed?

 

Dan Burkons: Well, hockey really taught me that hard work can be really fun and can be really motivating if you love the people that you’re with and if you love what you’re doing. So I love to play hockey, even more I love the guys that I met through hockey, lifelong friends at all these different junctures. So hitting the gym or skating or practice or whatever it was, never seemed like work when I was with people I wanted to be with, that I was doing something that I thought was fun. If I wasn’t with people that I wanted to be with, I don’t think I could have ever worked there.

Now the truth is, I’m not the best or have the most god given talent for hockey, probably at the other end of the spectrum. In real estate, it turned out that I do have some of those gifts to build and sell and understand and think quick on the feet and size up buildings. So it turned out I learned from hockey what it’s like to work hard at something you love, and then I found something else that I loved and I actually was good at it too. So that ended up being a good fit for me. And I just learned: hey, hard work is fun if you like who you’re doing it with.

 

John Carney: That’s a good story, thanks for sharing that. And look, do you read? Do you have a favorite book that you keep handy either at your desk or at home? I’m just curious, because we get a lot of — I’m compiling an awesome book list through this show and everyone’s got a different favorite so far.

 

Dan Burkons: I’ll tell you what, I’d love to see the book list when you compile it. Because to be quite honest, it’s been a while since I’ve read a lot of motivating business stuff. I tend to see reading as my escape from business, family, and chill my mind out. And by the way, I don’t read fun stuff like mysteries, I usually read history stuff. So that just takes me to totally different places and I like to decompress, not to think about business. However, I’d like to see some of those business books, because there’s always something new to learn.

 

John Carney: Well look, a lot to learn through history, what’s one of your recent favorites? I’m not going to let you off the hook.

 

Dan Burkons: That’s ok. You know what, I’m almost finished with this book that I found in my father-in-law’s bookshelf the other day. I’ll think of the name in a second. It’s called “How Wall street Created a Nation.” It’s about — it’s kind of a cross of history and business, and it’s about the Panama Canal and Jackie Morgan and a bunch of Wall Street people bought up big shares of the failed Panama Canal. This company from France, and then pushed the US government to more or less instigate a revolution of Panama. And then they got these great concessions from in the Panama Canal, and then all of a sudden, their shares that they bought for like two cents in the dollar were worth $2 a share. And it’s actually a great cross between history and business, and how there are certain actors and players in there who straddled both lines, who had the business connections and then went to meet with Theodore Roosevelt to push things into action to help them in their business.

 

John Carney: That’s very cool. I’m going to look that up. That’ll be online in the show notes. Well, along with books — look, I always have my favorite sport quotes and business quotes. Is there any quote out there that you think is that one motivator? You’re having a bad day, a deal is about to fall apart, you’ve got to figure out how to save it for your client, save it for all your hard work and effort.

 

Dan Burkons: Yea there is. It’s from my Dad who is a source of tremendous quotes, I always go back to what he told me when I started out which is: if it were easy, everyone would do it.

 

John Carney: There you go. That holds true for sure. Cool. What about any recent or, over the course of your career — where you and a client have found the perfect deal but you’ve got some obstacle, and you had a come from behind victory that you’d like to share?

 

Dan Burkons: Man, there’s been a lot, because I feel a lot more often than not, getting a complicated commercial deal, whether it’s apartments or shopping centers or whatever, to the finish line, there’s almost — there’s very few deals that are without major road bumps, bumps in the road or obstacles. I’d think if one comes to mind, but it might not do that on the spot here. But there’s always something — there’s always something wrong, and there’s always some player in the continuum who has a different motivation than you that is getting in your way. And I think the talent of somebody who can put deals together and get them closed is — you see those obstacles, whether it’s, hey the lender backed out, or this issue came up with inspections, or the seller changed his mind, it’s really finding out — it’s getting behind the people — oh well P&C bank is now saying this. Okay, who is the decision maker? Get to the decision maker, whether it’s a buyer, seller, lender, appraiser, an inspector, don’t just let it happen to you. Find out who is the one creating this roadblock, what is their motivation, how can you help them change their mind. whether it has to do with: give me the money or money off the price, or if it’s an inspection issue that came up say, “Alright, I want to meet with you Mr. Engineer, I want you to show me exactly what the problem is and then let’s figure out what the solution is. And by the way, don’t you think there’s a less costly solution to this?” And those sorts of things that’s really drilling down into any problem to get to the root, deal with the root person raising the objection and then finding a way to overcome it.

 

John Carney: That’s fantastic. I’m glad that you shared that because — would you believe that every problem has a solution if you’re willing to work hard enough?

 

Dan Burkons: I believe that — look, there’s a few that are real tough, like Israelis and Palestinians and stuff like that. For the most part, yea. I do believe that every problem has a solution.

 

John Carney: Right. We’ll add a caveat. Asterisk real estate problem. Okay, well great. I think that just carrying on what Dan just said, you know, I learned this one day, and I think I might have heard it on a podcast or read it in a book: if you just wake up and expect when you go to work that you’re going to be putting out problems, and you’re going to do it with a smile on your face, eventually you’re going to have an expectation, and you’ll kind of build up that problem-solving muscle. And you won’t’ be as phased as much; you’ll become a cool operator, people will want to do business with you. Perfect.

Well that’s kind of wrapping up. We’re right on the thirty-minute mark, Dan. So I’d like to thank you for joining me in the locker room today. Where can the audience find you to carry on the conversation? Or if we have any out of state investors or local investors that want to get a hold of you to learn more about the Cleveland apartment market?

 

Dan Burkons: Yea, first of all John, thanks so much for having me, this was great, I love your show. I’m honored to be a part of it. And as far as investors who want to come talk more about Midwest apartments or anything of that nature, getting into deals and so forth. You can reach me at my office is: 216 2642018. Or if you look me up on the web its danburkons@marcusandmillichat. You’ll find my website, you’ll find my link my email address etcetera.

 

John Carney: Perfect. Well we’ll post that on the show notes it will be on my website. So there you have it folks. I truly hope that you picked up some actionable advice today from Mr. Daniel Burkons. Make sure to check out the Real Estate Locker Room Show on iTunes, Stitcher, Google Play and hit that subscribe button to ensure that you never miss out on the pro tips from our guests. The mission here is to help you elevate your real estate game. If you like what this show is all about I’d be really grateful if you would leave us a nice five-star review that other investors like yourself can find this show and join the conversation. The post-game report show notes, links and additional content related to today’s show will be available on my website: johncarneyonline.com/podcast and while you’re there feel free to drop your email address into the opt-in and we can keep in touch through the monthly newsletter where we offer other investing insights, tips, tricks, hacks and other good stuff. Remember to stay focused on your goals, have fun and stay in the game. I’m your host John Carney and until next week: work hard play hard and profit hard.

One more time, thank you very much for taking the time to share your story with us Dan.

(Music Out)

End Audio

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JC 012: Grassroots neighborhood development with Graham Veysey

May 24th, 2017 | no comments

Connecting Neighborhoods and Walkability

EP 012 : The Real Estate Locker Room Show

Urban developer Graham Veysey joins us in the Locker Room today. He’s the visionary who took the “no man’s land” between neighborhoods on Cleveland’s near west side and transformed it into a thriving community and business hub.

Graham Veysey is an entrepreneur, investor and a grassroots neighborhood developer who lives and works in the Hingetown Neighborhood of Ohio City. His first major urban development project was the 6 acres Ohio City Farm – one of the largest urban farms in United States. Graham fell in love with the neighborhood and dug in with the purchase of the old Ohio City Firehouse. He and his wife Marika Clark converted the firehouse into a vibrant mixed-use building and their new home.

They began fixing up their immediate surroundings one building at a time which attracted new businesses and new residents to their pocket of Ohio City. Graham continues to develop the walkable area around the firehouse based on what the neighborhood and community needs. He combines passion, vision and creativity to deliver a unique product that will further the growth and success of his neighborhood.

Key Points

  1. You shouldn’t just put your money in development of vacant space. As Graham says: “The root of development is how do you look at a space and re-imagine it to fit another need or enhancing existing need.”
  2. Make a habit of walking and biking instead of driving
  3. Anybody who is interested in getting into development must have passion and vision.
  4. For a neighborhood developer it is important to emotionally and personally attach to your project.
  5. If someone is critiquing your project, you should take it personal. And that’s a difference between commercial developer and neighborhood developer.

Favorite Athletes: Michael Jordan – NBL Player & Steve Prefontaine – Runner

Favorite quotes:

“Just do it “– Nike’s slogan

“An idea without action is a mere hallucination” – Edison

Favorite book: Walkable City: Downtown Save America by Jeff Speck

Thank you Graham for taking the time to share you story with us today.

You can connect with Graham by visiting his website, http://www.hingetown.com

Twitter – @grahamveysey

Instagram – @gveysey

Tune into all the episodes of The Real Estate Locker Room Show and sign up for my FREE monthly newsletter at www.johncarneyonlie.com

POST GAME REPORT: Episode Transcript

The Real Estate Locker Room Show with John Carney

JC 012:  Grassroots neighborhood development with Graham Veysey

Welcome to the Real Estate Locker Room Show with John Carney.

Did you know that investing in real estate is a team sport? And John and his guest say they explore the intersection of the business of real estate an athletic competition. The goal for the show is to grant you direct access to the real estate pros that are closing profitable deals and grow their businesses. On the Real Estate Locker Room show, we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve ongoing success.

Now, it is time to kick off and level up with new ways to grow your real estate business.

John Carney: Welcome back to another episode of the Real Estate Locker Room Show. I am your host John Carney coming at you today from Cleveland, Ohio. And joining me on the line in the locker room is a real estate developer and entrepreneur who is also from Cleveland. His name is Graham Veysey. Correct, Graham?

Graham: You have got it. It’s good to be with you John. Thanks for having me.

John Carney: All right. Welcome to the Locker Room Graham. Graham is a grass roots neighborhood developer living and working in a Hingetown Neighborhood of Ohio City in Cleveland, Ohio. He began this type of work in 2010 as the project director for the 6-acre Ohio City farm, one of the largest urban farms in the United States. The following year, he bought the vacant Ohio City Firehouse and converted that into a vibrant mixed use building. Since then he spearheaded the redevelopment a Hingetown with his wife, Marika Clark. Their developments are part of this group project that works to connect Cleveland Neighborhoods, which is promoting more walking and biking and less driving.

With that in mind, I am going to welcome Graham to the show, and we are going to kick this off today with a question to kind of stretch out to get the conversation going about sports and real estate.

Graham: This is by the way the best known Locker Room I have ever been in.

John Carney: Perfect. That’s good to know. So growing up did you play sports and have a favorite athlete that you looked up to?

Graham: Well, I was a Chicago Bulls fan during the Michael Jordan hay-day. So, the 6’6” man was the guy that I always look to. I think Jordan at that point was my sports icon.

And then as I got a little bit older, I started running a lot. And you have got to just love Prefontaine. But as a guy who is necessarily the most coordinated with his hands, I was always better on my feet and could run long distances. So I did across country and then ran marathons throughout college and even up until few years ago.

John Carney: All right. Cool. So you are still staying active. So Graham we find that like most people who are real estate professionals, especially when you are getting to the development side, you have a very entrepreneurial and business background. Can you let our audience know how you have got into a real estate from urban farming and how you put your team together to get the firehouse deal done?

Graham: Yeah, I think the biggest component is collaboration, and I think that Ohio City Farm was my first development project, which really came out of necessity. There is a giant 6-acre vacant parcel and a group of us got together and said, “How do we re-imagine this space?” And that is the root of development. How do you look at a space and re-imagine it to fit another need or enhance an existing need. So, we took this 6-acre piece of property and brought together all of these stakeholders from the Refugee Response, Great Lake Brewery Company, Ohio City Inc., which is a neighborhood development corporation, and Councilman Joe Cimperman. These were all people who got behind the vision of creating this vibrant urban farm, and it was different than urban garden because we had an economic development component with it. We negotiated the land lease with CMHA which is Cuyahoga Metropolitan Housing Authority, which is the oldest housing authority in America right here in Cleveland Ohio and Cuyahoga County.

That was 7 years ago. It is awesome to walk by there and see the crops and the farm stand open. The majority was farmed by refugees who found Cleveland as their new home.

So, getting that collaborative group of people (and you have mentioned it is “team”) where one guy might be the marketing guru, one guy might be the number cruncher, one guy might even have the balance sheet. You have always got to be focusing on the collaboration because you can’t do it without that.

John Carney: For the listeners who are outside of Cleveland, could you expand a little bit about Ohio City, which has had a massive transformation there over the last decade. And just to put some context to it, you and I have met before. I grew up in Cleveland but I was away for 19 years. You are now ticking over to 20, and there has been a massive change. I know that neighborhood back from my high school days (my high school was in that neighborhood). But you would be a better person to really give the audience the story about the transformation of this urban demographic and then move into the Hingetown aspect, because that’s a component of Ohio City and it is a really neat story.

Graham: Yeah. I think the coolest part about Ohio City is it actually predates the city of Cleveland. It used to be its own municipality and this goes back to the 1800s. So the whole east and west divides Cleveland. You talk to somebody who is from Cleveland and they talk about east side and west side. It goes back to when you had the city of Cleveland and the city of Ohio.

And you have got the great mix of historic housing stock. You have some beautiful brick structures. We have got the institutions like Saint Ignatius High School, copper rust towers and then you have the oldest public market in the city called the West Side Market which is just for foodies. So you have all these different ingredients that when you have the flight in the 70’s, 80’s and even the 90’s from urban centers, you had a lot of vacancy. You had a lot of that historic housing stock plus historic building to take off. Luckily you had a core of these institutions stay like Saint Ignatius and the West Side Market. You also had CMHA and Lutheran Hospital which is one the Cleveland community hospitals. So you still had these places that were rooting the neighborhood. So when people started looking in the late 1990’s and early 2000’s at viable urban spaces to live and to raise a family (because of Ohio City’s proximity to the downtown business core) you had this revitalization take place.

Now, that’s not saying there weren’t people who stuck with it throughout. There were people who stuck with it through the toughest time. But really over the last 10 years, Ohio City impartially because of the work that was done in the Warehouse District and re-imagining of those spaces, you then had revitalization cross the river and into Ohio City and the main drag which is West 25th. In the last 7 to 10 years you have had businesses moving, like Great Lakes Brewery, which is one of those institutions that in last 25 years were in a rough part town now. You have got people who were total micro brew-heads checking them out in over dozens of states. Lebron actually grabbed a Dortmunder Gold the other day in the play offs and pretended on the sideline to take a drink. So you had all this energy around the West Side Market. When I bought the firehouse, which had been vacant for about 5 years, everybody thought of Ohio City as that intersection of 25h in Lorain so right there by the West Side Market. And my wife and I our goal in serendipitously this great couple from Akron, Fred and Laura Bidwell and announced that they were doing this cool contemporary art space called the Transformer Station which they forced to partnership with Cleveland Museum art which is a 100 year old world class art museum.

So how do we create an identity in this part of Ohio City? You have the market district that’s based around the West Side Market. How do you put a label for when somebody says, “I am going to hangout in Ohio City” And so Hingetown really falls at the intersection of Ohio City’s market district, Gordon Square Art District, and the Warehouse District. All of them within a mile (within a 10 minute walk and within a 5 minute bike ride). And we have been working for, in reality, 5 years attracting businesses, attracting other developments, different building or cells, and we have created a great little node of vibrancy, but we know that the city and success of our work is really going to be judged by those missing teeth as Jeff Speck would call them. So that you have a great walk from Gordon Square to Hingetown and from Hingetown to the Warehouse District. And it feels safe, it feels clean and there is activity.

John Carney: And it is great. And it was really interesting to see because those, especially Gordon Square, were something I didn’t even know about. I grew up on the West Side of Cleveland and I went to high school not far away. So when you went from putting together this initiative in really a large collaboration with many different parts of the government and the community for the farm, somewhere there you decided to buy the Firehouse. Was that pretty much your baptism into real estate and development?

Graham: It was. And for me it was out of necessity. I was renting apartment. I have got a production company. We were growing. So, I was renting the studio and I wanted to live above the shop, if you will, and have a place where I both lived and yet could, in the same building, have a studio space. I was at a Christmas party and a real estate broker saw my license plate which was OHCITY (Ohio City) and said, “I have got a great property in Ohio City for you – the old firehouse.” I said, “That’s too far off the beaten path.”

So I wanted to be right in the hub of the activity. Until that point, the hub was really restricted to just West 25th. So I toured and I fell in love with the building. It was originally constructed in 1854 as the city of the Ohio Volunteer Fire Department. I said, “All right. This is great.” My wife, who was at an architecture school at that time, said she put a wall here and wall here. These could be different offices. This could a couple of different retail spaces. So we moved in, we updated the front of the building because it had been basically fortressed because in this part of the neighborhood being a place where activity wasn’t so great anything could happen.

We started to attract everybody from the first third wave of coffee shops to come to Cleveland to the best floral designer in Urban Orchid, and then office tenants. And when Fred and Laura announced the Transformer Station, which is just a really neat spot that any of your listeners who come to Cleveland should check out, we said, “How do we think beyond the four walls of the Firehouse?” And we bought the Striebinger Block which is catty-corner which was a 1919 original construction. We put in 7 retail spaces and 7 apartments. As we continue to grow, there has been added residential. And if you look at Cleveland, you have got the downtown business core. You have got University Circle which is where Case Western Reserve University and the hospital are but besides those two spots there was no other place with as much concentrated development as Hingetown other than the downtown business core and University Circle.

John Carney: That’s a great a great story about reviving a section of a city. Correct me if I am wrong but to kind of summarize, when you fell in love with Firehouse, you had architectural expertise on your side but regardless you were talking a risk. I am sure, at the time, you felt like you were taking a risk but confident it was going to work out. And then all of sudden you just said, “Hey this isn’t so bad. We should try and own that building there “and plant our flag” so to speak.

Graham: Yes and we approached the owner. The building was in pretty bad shape. Once we started peel away some of the initial grime, we found out that the building was not structurally sound. The guy was behind on his mortgage. But I think this building both because structurally it wasn’t looking great and because it did not the best lender, who was out of state, if went to forclosure, they would have demolished it. So we went in there, and again when we think about the keys to that vibrancy we found folks that had the same sort yearning for urbanity and got an awesome indoor cycling studio with 31 bikes… It literally just packed from [5:30] AM until their last class at 7PM. A guy who is moving back from Chicago, who grow up in Cleveland, so another boomeranger opening up the neighborhood tavern, Jukebox and juice bar, get a juice from the first cold press juice to come into town. And Molly and Joseph have this awesome sandwich called the bravocado that again it is one of those that you put it on culinary checklist when you come or visit Cleveland. And then a great tea shop by another young couple. So you had all these different folks who I call the Poster People of the Cleveland Renaissance opening up their own small businesses taking giant risks.

We didn’t have the requirement that you have to have a balance sheet that will guarantee the lease that you are doing. We never would have been to sign with these folks. And now they are all doing kick ass. They are doing high quality stuff. And that allowed us to continue to grow our portfolio. We just finished up print shop which the 1865 historic conversation. And for us we are neighborhood developers. We are very grass root. So being able to take the Firehouse and bring it into a couple of retail tenants, half a dozen office tenants, to look at Striebinger Block,14 different tenants with a split of residential and retail.

The print shop has one ground floor tenant and 6 apartments. We are now starting to get into a different class and we are right now in the design approval process for 161 units. There are two buildings, actually. It is called Church and State because the historic names for West 29th in Hingetown were called State Street and then Church Avenue is the divide. 161 units, its 20,000 square of retail, and 10,000 square foot public space that we want to be in amenity not just for those 161 units and those retail tenants but for the whole neighborhood.

John Carney: That sounds like you have found a way to stay busy expanding around the Firehouse, so to speak. When you tell the story like that and you bring in the other young entrepreneurs who were taking risks with their ideas and their capital and joining you and so to speak, planting their flags do you see this trend happening around the United States? Have you met other people in the region that were pioneers and revitalizing an area? For people who don’t live in Cleveland but might get the opportunity to listen to the show and checkout Hingetown on the West Side, we will put links in the show notes so that you can find it. It really is, this a great story to go along with it. Can you talk a little bit more about the real estate side when you got the Firehouse. You have some tenants there. And then you have gone through a historic rehab foreclosure type building across the street and then it is a continued expansion build out of improving the neighborhood where you plan on staying with your colleagues. Do you see just more and more opportunity to build up around Hingetown?

Graham: Yeah, and we see it from traditional developers. What’s been great is we are working on these grass roots projects, if you will. You have got more seasoned developers. You are talking a collection of buildings, which is an amazing our story because they stayed in blocks through the great recession. And then you have got 6 story new construction that’s going up. That’s another 7 units. And then you have got a 4 story, 70 residential units going up. So all of the stuff is happening. That’s the density that will then continue to support in the small businesses that are going up. So, it is capturing that momentum.

And as we have looked across the United States to different things that give us inspiration, it is both the grass root and the grass top type of developers. So from Tim in an Oakland – which is one of the coolest retail experiences that my wife has visited to Wynnewood Walls and Panther Coffee. A lot of these examples of developments that really have soles and/or unique places where they have got their personality showing through. You are part of that because of the programmatic approach and you are not just the design and brick and motor, but it is designed in how are you programming industry? How you are making sure that you are being inclusive? How are you making sure that you are being robust in terms of community process? How are you responding to some of the feedback that you are getting? So yes there are passionate folks that are doing amazing projects that we really look at for examples of stuff that we should be doing.

We are seeing different pockets of the city of Cleveland. It is not just limited to outside of Cleveland. You look at what’s happening on St Clair Superior, and Glen Willow with this really cool art project, and Fred Bidwell or Bidwell doing the front project in collaboration with Cleveland Urban Design Collaborative. I think that there is a momentum of urbanity happening right now and people are really collaborative. And I think with that collaborative spirit will help keep the momentum going and will add positive density to our urban areas that we need. It is great for sustainability. And selfishly it is just a great place to live.

So, at the end of the day, my wife and I talk about we are partially selfish in everything that we are doing. We want the amenities around us that we want to be able to support. And we want the bar that we want to be able to go and see friends. And we want the public spaces that you bump into a neighborhood and strike up a conversation and hear about a cool story or movie that we should check out. So there is a livability that is very personal to us and that’s what we are really excited to try and continue to perpetuate.

John Carney: For people that want to be a real estate development, there can be both positive and negative connotations to the general public. Have you found a lot of openness and willingness to help from the city government because of the improvements you are going in and the tangible and the visual impact your developments are having, or do you find the same resistance that any developer may encounter proposing change in the new area?

Graham: I think it is two-fold. Sometimes you have a negative connotation because it is somebody from the outside. I think that there is an inability for people to develop in and around them. And in that instance, they are just your neighbor that’s trying to do something that’s improving the area around them. So, I think putting that name and not the label is a really key component especially with the community development side of it. And then as far as you navigate in the bureaucratic red tape, again it is a bit of a mix bag that you are trying to push, especially with a city like Cleveland that’s got a very dated zoning code. How do you create a project that’s going to raise a bar while making sure that you are doing to the community process? And yet because of certain elements like very rigorous block club approval even though they are an offical body, you sometime get frustrated. I can’t believe how many different hurdles we are trying to jump over to take what’s been a surface parking lot that sat vacant for probably 20 years with the exception of the 4 or 5 cars to park there for the print shop. Why is this so hard?

The other element of it is, as for a city like Cleveland, we are working to catch up to a lot of the urban development that’s been happening. So, one of the two buildings that we are putting on the side is an 11-story building. An 11-story building is not a huge deal when you zoom out and when your city is like Toronto or Portland or Chicago. And for a zip code that shares the same zip code as all of downtown, again that is not a huge deal. Yet people will get really fixed on that number.

And then the other component that I think from a frustration stand point goes back to the day of zoning code is this obsession and it is a very Robert Moses, like the obsession with the automobile. And the first question is “What about the parking?” Again, for a city like Cleveland that hasn’t seen the rapid urban development of some of our competing cities, you shouldn’t really be able, if you are within a mile from the downtown business core, to consistently pull up and have a parking space right in front of your home. And because for the last 3-4 decades, you haven’t had the dense population, they have taken that as a given. And so you need to try to re-tool some of these folks. God love them because they made it through the bad times and yet they see these good times that are coming as a threat to that ease of just pulling up right in front of your driveway or even if you don’t have a driveway right in front of your house.

So those are the balances that I think that anybody who is interested in getting into development should have a passion, needs to have a vision. But there is also give and take. And sometimes it gives really hard because you are not just giving up on certain elements but you are putting yourself out there in a very personal way if you are very passionate about the project that you are doing. And when someone is critiquing the project, they are critiquing you. You are going to take it personal. If you don’t, then maybe you are not personal and emotionally invested enough. But that is the kind of the difference, I would say, between a commercial developer or neighborhood developer. But if you are looking purely at the matrix, yeah you are not going to be as emotionally investment. But for us, when we are looking at all the different strands of the urban fabric, it is a give and take. And the point of a really great urban setting is being cognizant, not just of how many units or how many square feet but really the personality that you are trying to help cultivate.

John Carney: Again, I think it is a great story and you know the whole mission of this podcast is for someone to hear your story and say, “You know I had that idea. I want to transform this area of my city.” And it is inspirational because it wasn’t an overnight success, right? I mean it took a decade and I am assuming that your life’s work is improving this area and being on that neighborhood development side. So thank you for sharing that story about Hingetown.

We are kind of getting ready to wrap this up. We have a question that we would like to close this out with before we say goodbye and sign off. You talked a lot about your motivation and the drive and the passion behind your projects and that obviously keeps you going when you have obstacles and frustrations come up. But is there any one quote that keeps you motivated or is the passion to improve your surroundings for the community?

Graham: Well, there are two really. This is a great because we are in the Locker Room, the wonderful Nike slogan of “Just do it”. If you see something, you got to just do it if you really feel that passion and calling.

The other one is the great Edison quote that “An idea without action is a mere hallucination”. And so if you have got an idea, you have got to take action or you are just going to be stuck. An idea without action is a mere hallucination. So, “Just do it” is great Edison quote.

John Carney: Two great quotes to live by. Is there a favorite book that you keep handy as a reference whether it is business book or biography that you recommend our listeners pick up next time here on Amazon?

Graham: Well, if somebody hasn’t read it and they are doing urban development, you’ve got to order right now Jeff Speck’s “Walkable City”. We are big fans of Jeff Speck. He pulls from some of the greatest urbanists in history but he looks at the behavior of folks on a pedestrian level and on a bikeablity level. He also pulls a ton of great pieces of research from a real data side to what works from walkability and bikeability standpoints. So, Jeff Speck’s Walkable City.

John Carney: Let me ask you this: how often do you and your wife share a car or do you even own a car or need a car?

Graham: I don’t think we need a car. We have got a Prius because it is easy. And then we have got the Hingetown public works truck, which is a 1975 dodge pickup truck. So, we have got both the pickup truck and Prius. We have both ends of the spectrum.

John Carney: When do you think cars in urban environments, like you actually having the own one, addressing the neighbors that are concerned about parking are just going to go away?

Graham: I think it is starting to. When you look at cities like Buffalo they are doing away with the automobile ratio requirements in the zoning code. But I think that as we continue to see the shared economy with Uber or Lyft, you are going to find that it is even less expensive to just take a ride like than pay for a parking space or pay a lease on a car and maintenance. Our orbit is pretty small. And it will be a week that we will go by where we won’t touch our car or our truck. It’s been number of days since we have been in it. But I think that we are moving to that direction and I think that when you see the investment of these ride sharing companies are making in the driver less cars, you are going to have even more ability to just go on your iPhone to click where you are at and cars are going to pull up and to take you where you need if you can’t walk or bike there or take a bus or rap into there. So I think we are getting there. I think it is going to be quicker than we think. And I think that obsession with parking spaces will fall by the way side and it will be more efficient but also more sustainable for the planet.

John Carney: All right Graham, thank you for sharing your story today. And once again, I find it inspirational. I am sure our listeners will as well. Where can our audience find you to carry on the conversation online or on social media?

Graham: They can find Hingetown on either Instagram or Twitter or go to hingetown.com and then my name at Twitter or on Instagram. My name on either Instagram or Twitter I jump into some of these urban conversations online but those are the best spots to find me.

John Carney: Perfect. We will make sure that those are listed in the show notes. All right. There you have it folks. I truly hope that you picked up some actionable advice today from Mr. Graham Veysey. Make sure to check out the Real Estate Locker Room show on iTunes, Stitcher, or Google Play and hit that subscribe button to ensure that you miss out on the pro tips from our guest. The mission here is to help you elevate your real estate game.

If you like what this show is all about, I would grateful if you would leave us a five-star review. Just click right on iTunes or your preferred podcast platform so that other likeminded real estate investors like yourself can find us.

The post-game report show notes links and additional content related to today’s episode will be available on my website johncarneyonline.com/podcast. And while you are there feel free to drop your email into the newsletter sign up form to receive more real estate investing tricks, hacks and other good stuff.

Remember to stay focused on your goals, have fun, and stay in the game. I am your host, John Carney, and until next week work hard, play hard, and profit hard. Thank you for taking the time to share your story with us in the Locker Room Graham.

Graham: Thanks for having me.

(Music Out)

End Audio

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© John Carney 2017

JC 004: Reed Goossens is the Australian dominating the US multifamily market

April 3rd, 2017 | no comments

Meet the Australian real estate investor who’s living the American Dream

In 2012 Reed Goossens packed his bags and left Australia to pursue his dream of living in New York City. He hit the ground in the Big Apple hustling and networking.

Today Reed is living the American Dream and pursuing financial independence as real estate entrepreneur who syndicated multifamily deals across the county.

Learn how horse jumping, rugby and surfing provided the Reed the confidence and discipline to successfully pursue any goal.

Reed attributes his rapid success in the apartment syndication business to having a mentor, a coach and partnering with investors who already had a successful track record.

Now Reed helps investors get started in US multifamily real estate and hosts the podcast, “Investing in the U.S. – An Aussies Guide to U.S. Real Estate”

Favorite quote, “Don’t give up” – Winston Churchill

Reed’s recommended reading list;

  1. How to Win Friends and Influence People by Dale Carnegie
  2. Rich Dad, Poor Dad by Robert Kiyosaki – www.richdad.com
  3. The 4 Hour Work Week by Tim Ferris – http://www.fourhourworkweek.com

Favorite Athletes

  1. Favorite U.S. athlete – Michael Phelps – Swimmer, multiple world record holder
  2. Favorite Australian athlete – Steven Bradbury Speed Skater
  3. Favorite athlete – Usain Bolt – Sprinter

Reed’s #1 tip for success is to get a mentor and surround yourself with successful people.

Thank you Reed for taking the time to share your story with my audience.

Visit Reed’s website www.rsnpropertygroup.com  or email him direct Reed@rmspropertygroup.com

Follow Reed on Facebook and Twitter

 

POST GAME REPORT: Episode Transcript

The Real Estate Locker Room Show Podcast

JC 004: Reed Goossens is the Australian dominating the US multifamily market

Announcer: Welcome to the, “Real Estate Locker Room Show” with John Carney. Did you know investing in real estate is a team sport? Join John and his guests as they explore the business of real estate and athletic competition. The goal for this show is to grant you direct access to the real estate pros that are closing profitable deals and growing their businesses. On the “Real Estate Locker Room Show” we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve on-going success. Now it’s time to kick-off and level up with new ways to grow your real estate business.

John Carney: Welcome to the Real Estate Locker Room Show. I’m your host John Carney and today we have lined up another great episode. We’re talking to international real estate investor Reed Goossens. Reed is an Australian currently living in Los Angeles California. He’s going to tell us his story f
rom going from no American real estate ownership to an interest in over 866 doors. He’s a multi-family investor. He’s the host of the podcasts Investing In The U.S. and An Aussie’s Guide to U.S. Real Estate. and all around good bloke. Reed moved to the U.S. in 2012 to pursue a career in structural engineering. However, he discovered a passion for real estate investing. With limited funds, and zero credit Reed went from purchasing a small duplex to growing his own real estate investing firm, RSN Property Group. Since 2012 Reed has been involved in over $50 million worth of multi-family syndication. That is excellent. Reed lives up to a never say die Aussie attitude when it comes to being a successful entrepreneur. So, Reed you are sitting in the Real Estate Locker Room. Before we get into your awesome story we’re going to offer you up a stretching question. A sports related question of course. Who is your favorite American athlete?

Reed Goossens: Oooohhhh, that’s a good one. My favorite American athlete? I think I would have to go with Michael Phelps. I’m a pretty big swimmer myself, growing up in Australia. You know, as you know mate, we all like swim and get wet in the pool. And yeah, just incredible, what? Won 22 gold medals was it? I can even, I lost count. The last Olympics was pretty incredible to watch and get back in the pool. So, Michael Phelps would be my #1 U.S. athlete.

John Carney: Yep. He’s had an amazing career of ups and downs. He definitely has that never quit mentality that champions have.

Reed Goossens: Exactly, exactly.

John Carney: Just so, you know, I lived in Australia, as you know, for seven years. Just recently moved back to the U.S.A. and when I was over there I was introduced to all of your sports. The one guy that I fell in love with is Steven Brandary, Bradbury.
Only because for listeners out there. I’m going to put in the show notes. A note here to put in the show notes, is a link to who this guy is. But, I mean, he’s an Australian speed skater that is not a popular sport in Australia, by the way.

Reed Goossens: There’s a ton of ice in Australia right?

John Carney: Yeah, right, there’s no ice in Australia. Talk about being put in a position to be successful. It was the winter games back in 2012, if I’m correct? Hopefully. There was a Winter Games in 2012. But anyways, he was in the gold medal final round and I believe there were four other competitors. And the lead skater on the last lap beat it in. And took out the two trailing ones. So, the fourth-place guy, you know, was in it to win it. And he crossed the finish line first, gold medal. It’s an amazing success story. So, any comment on that Reed?

Reed Goossens: Right. He is. I remember watching it. I don’t think it was 2012? I think it was earlier. Because I was a little bit younger. And 2012 was the Olympic Game is London, I think it was? So the funny thing was, he did that, that same thing happened in the heats. If you read into the story like. It wasn’t just in the final, flipped over and he skated across the finish line. Coming dead last and then all of a sudden then coming in first. He did it in one of the heats as well. Which is, it’s incredible. He won the gold and a lot of people were not very happy about it. Well hey, you got to be in it to win it right?

John Carney: Absolutely. With that being said, let’s get into this interview. Let me ask ya, why real estate Reed? And how’d you get started?

Reed Goossens: Sure thing, and you know, I want to say, this is awesome and well done for putting on this show. The Real Estate Locker Room is a really, really, cool concept. And I think you’re going to get a lot of awesome listeners and the name is so catchy. So, well done to you. The reason why I got involved in real estate? Was two fold. One, was I just graduated from the University in 2007 and I’d been backpacking around the world for about 18 months I looked at myself and said, I can’t be sitting in this cubical for the rest of my life. I just can’t be 40 years, 50 years. Get a retirement package, and then retire. I felt like a very small cog, a part of a very big machine, which was corporate Australia at the time. So, I really was felt like I wanted to give, like I had more to give. I was very entrepreneurial. But I didn’t know where to place my energy. I remember attending a Amway pyramid scheme sort of thing and that just wasn’t for me. And it was my dad that said to me, you should try and place some capital in some real estate. You’re in engineering, you’re a civil engineer. You surround yourself with real estate every day. And that right there was the little trigger that got it started. Making me look at things a little differently from that point on. In 2009 I picked up a book, “Rich Dad, Poor Dad.” by Robert Kiyosaki. I’m sure a lot of your listeners will be influenced by that particular gentleman. He has influenced a lot of my guest on my show. And has had some huge success. In that book really, you know, materialized what it meant to be a real estate investor. And I just, you know, took that book with, you know, it was with both arms and went forward leaps and bounds I was attending as much real estate investing networking classes as I could. And it was really understanding the asset that is real estate investing. And for all our listeners out there the reason I love real estate is because there is no other investment across the world anywhere across the world that offers the four ways to make money. And that is, that real estate has cash flow. And amortization, which is the pay down of the principle in a particular property because your tenants are paying down the debt. You have appreciation, and there are five forms of appreciation, I won’t get into those. But, there are five forms. And you have the tax benefits. So comparing that to a stock investment, it just makes so much more sense. I have control over my asset. That really is the power to me and why I love investing in real estate.

John Carney: “Rich Dad, Poor Dad” obviously a book that I read and I keep it close by. Because it’s still has notes in it. I haven’t looked at it for a few years, but I mean, you know, it’s one of my. I’ve got a stack of books in my office sitting behind that I keep as references. They have notes and everything. You just never know when you’re going to have to return to that. Look, I like to draw the comparison between what it takes to be a professional elite athlete because there’s a certain amount of dedication. You touched on that, you were educating yourself, became dedicated to learning how to become a real estate investor. And so, on this show, we’re exploring that crossroads where we have the intersection, sports and real estate. Growing-up did you have an athletic background? Was there anything you learned playing sports as a kid or participating in any sports now as an adult that helps you? That helps you along the way in real estate?

Reed Goossens: Yeah, that’s actually quite a good question? And a lot of people don’t know, this about me, that when I was growing-up, I was hugely into horses. I was riding show jumping actually. My parents, who were actually teachers. I don’t know how they afforded it, but we had a team of horses, we went around the country. Being in show jumping, it’s a very, it takes a lot of dedication and time. Getting up at [5:30]AM every morning. Dealing with horses, mucking out stables, feedings, grooming, all that sort of stuff. And having an animal that is your responsibility to them essentially. If it’s not working at it’s peak you’re not going to be able to jump as best you can. Because the horse is whatever, feeling tired or lethargic. And so that there, for me, a young age it was very much instilled in me to have dedication, to have drive, to have passion, for what you do. And I think that if you put your mind to anything especially particularly real estate. And how does this related to real estate investing? Not everyone is born with ten years worth of credibility in real estate investing. I certainly wasn’t. But I actively was wanting a goal to achieve, and that was the financial freedom. And I wasn’t going to give up until I got there. And I actively pursued educating myself on real estate. In life with my show jumping you know, I was actively trying to become a better horse rider, every single day in and day out. And if you continue to put your mindset to that, and have a goal and you’re laser focused on that goal, that I think it’s very, very, likely that you’re going to achieve that goal. So sporting was definitely a huge part of my growing up. I played Rugby, I swam, I surfed. I went to Nippers. And for all of the Americans, out there who don’t know what Nippers is, it’s just sort of surf like savings for kids. Sports had a huge impact on me growing up and it has shaped me into the adult that I am today. And it has definitely shaped me into the person that is you very driven about what I do. And I thank God for the goals I set and how I achieve them.

John Carney: We have young children now. It’s really, really interesting watching them play and develop. I can’t wait until they fall into. We want to expose them to a lot of sports. Because I believe that, that does instill a certain amount of, discipline that’s required and you kinda carry through school and through life. So can you tell our audience what you’re working on right now that’s getting you out of bed in the morning excited and you are laser focused on. And bring us up to date. You arrived in the United States. You own no property, right. Now, you have an interest in a substantial portfolio. Can you give us a little bit of that story and the time line. You know, we kind of kick this off in 2012. You know, we’re ¾ of the way through 2016 now, close the gap for us.

Reed Goossens: Sure thing. So to rewind a little bit more than that. It was 2009 and I educating myself for a couple of years in Australia. Very, very, close to pulling the trigger in Australia. It was a flip or something in Aussie that I wanted to invest in, maybe split a block and I was very close to pulling the trigger and saved a bit of money. At the time, my girlfriend who was American, was studying in Australia. She had finished up her studies and I really, really, wanted to move to New York City. Because I felt New York City, is in terms of business, in terms of growth, it just had this feel to me when I was backpacking through there in ’08. That I just had to live in this particular city for a period of time. Early in 2012, we packed up all our stuff and we moved across the world. We rocked up in the United States and I didn’t have a job and I was on a tourist visa. And I just pounded the streets, untill I found one. I found one as a structural engineer and up until a year ago, 18 months ago I was a structural engineer. And within the first two weeks of me being boots on the ground in the United States in 2012 I was at my first real estate networking event. And John, I thought Australia had some awesome networking events! By gosh, the United States in the heart of New York City, in Time Square, it was like networking on steroids. I had not experienced anything like this before. And I was just so, you know, invigorated to go out and learn a lot about real estate here in the United States. You know, people don’t realize that in the U.S.A. when I first came to the United States, that the barriers to entry are a lot lower compared with Australia. You know, maybe is Aussie, I can pick-up 150 maybe 200 thousand dollar absolute heap, and try and flip it, and make a little bit of profit. Well, in the United States here, I saw that you can pick-up places for $50, 60 thousand dollars that would cashflow for you know, $200, $300, $400, dollars a month. Which was incredible. And I was just like, hang-on, this is something awesome here. And so, 2012, educating myself. And as I said, I picked up my book in ’09, and so I had been educating myself for a period of time now and I was very, very getting to the point where I was just chomping at the bit like there is only so much to learn, there’s only so much you can read. Actually get your feet wet in a deal. So, I think I had a little deal in Up State New York. It was within driving distance from New York City, Syracuse New York, is about 4 ½ hours. It was a duplex and the cash flow side of it. So, I went and purchased it. And I purchased it all in cash. When I first moved to the United States, I didn’t have any credit. You know, anyone who moves here will understand that credit is king in this country. And I couldn’t borrow. I had to pay for things all with my own cash. So, then I slowly over a period of time. I developed relationships with the local bank and I was able to refinance some money out of that deal and buy a second deal. And through that time when I bought the first deal I rearranged to the property. And we did, I spruced it up, nice new counter tops, and nothing crazy that you and I would approve of and appreciate. But something that was affordable for my tenants. And in doing so, I was able to increase the cash flow of that particular property and it was quite powerful. I increased the rent about $60-$70 bucks on the two individual units. So, it had a Gross over effect of $126.00 a month. Which was really nice, in terms of cash flow. I had done that deal and I did a second deal. I did a separate deal, it was a flip in Philadelphia and I was slowly, slowly building credit and building these little portfolios. Then it came to a point when I ran out of my own money. I just couldn’t do any more real estate. I had 3 or 4 properties. You know, very cheap properties under my belt. It in deed, maybe the portfolio was worth then $200,000 maybe $250,000. What I started to realize was hey, I need to up my game here. I saw the power of multi- family real estate. A buddy came down from Canada at the end of 2013, and we had dinner. Hey guess what I am doing? These duplexes in upstate New York. Look how good I’m Killin’ it! Reed, that’s awesome. I closed on a 70-unit apartment building in Canada. I was like, what?! How did you do that? What does that even mean? And he went on to explain the power of “The cap rate theory.” That if you force the net operating income, you can increase the cash flow for one unit. You can also force the value of the property. That was really, really, powerful for me. Because I started to see that on my smaller duplexes, even if I wasn’t forcing value, I was increasing cash flow. And the key was commercial real estate. You have to get involved in commercial real estate. But, you know, commercial real estate is a lot more expensive. Instead of buying two duplex, you might be buying a hundred units or 50 units, or whatever it might be? But I saw the economy as scale there. That if I could apply what I was doing on the duplexes to the large multi-families then I would be able to build a huge wealth and crate a lot of passive income, a lot of cash flow at the time. So, that was sort of started my journey from 2012 to 2013. In 2014 I started RSN Property Group and I got a coach/mentor, and we definitely were on personal branding. And getting into the day, people will invest in your deal because they invest in you. The deal might not necessarily matter than much. They actually invest in you because they trust you. You have credibility with them. So, how do you build credibility without being born with it? Well, there’s a number of ways. I know John, you’re an expert at it, as well, writing a book. Or being a key person of influence in your sphere. And there are those difficult things that you can do to brand yourself in a certain way that will attract real estate investors. And over a period of the last 18 months I’ve been able to get involved in I think 866 units and I have an equity stake in all those. And I’ve been able to raise a bunch of capital. And I’m slowly building towards something awesome. And you know, my journey is not over, by no means, it’s only just getting started. And I want to continue to grow my portfolio and continue to buy as many multi-family real estate properties as I possibly can. So, that’s caught everyone up to date a little. It’s a bit of a journey, but it’s certainly a lot of fun along the way.

John Carney: Yeah, that’s a great story. And I believe it’s common at least from my experience. In surrounding yourself with the right people, right? I mean, you’re the average of the people you meet and choose to hang out with. And with the common interest you’re with these real estate people now, through networking, right? And you’ve grown into the investor you are today and with the sights on growing more. You know, I talk to a lot of first time investors and help people get started in the game. I always start by recruiting the team when I go to new markets. I want to touch on your team. But, I think it’s an important to note what you just said, starting zero properties. That first rental which you had to drive 8 hours round trip to get to and then you just turn the clock forward a few years, all the blood, sweat, and tears turns into 866 doors. So, I mean, that’s just a great story. You know, that is the American dream isn’t it, Reed?

Reed Goossens: Right,

John Carney: you’re living it.

Reed Goossens: Exactly.

John: Leading by example. So, you know, I’m a big believer in growing into who you are today, it doesn’t happen overnight and if you set your sights, continue to set your sights higher and raise that bar you will continue to grow. So, awesome, thank you for sharing that part of your story. So, you know, I just moved back from Australia to Cleveland. I haven’t lived in Cleveland for 19 years. It’s a completely different city and we won’t go on about how expensive real estate is in Australia. I had to get the lay of the land here and I was able to do it pretty quickly. For the last 120 days I’ve really been figuring it out and running the numbers and doing the math to define where my next acquisition is going to be. But, you know, it also requires putting together the right team.

Reed Goossens: Exactly.

John Carney: So I want you to talk a little bit about how you went about assembling your team that supports you. What it means to you, and you know, aside from you who’s driving this, you’re the quarterback. Who’s the key-player?

Reed Goossens: Yeah, that’s a good question. I think, you know, I had you on my show, a while ago. I was very taken. Very impressed by what your show produced. Enjoying you book about real estate is a team sport. That really resonated with me, that is completely true. The key-players on my team are a couple of other syndicators. I can name, names, I don’t have to name, names, it doesn’t really matter. But, the power of understanding that you not, in real estate you can’t do it by yourself. And on particularly on large multi-family units you can’t go and raise all the capital. You can’t go and find the deal. You can’t do the PPM. You can’t go and do the financing all by yourself. So, splitting it up amongst people who are capable of raising the capital. Capable of getting financing. Capable of finding deals. That’s really, really, important. And you know, if yes, I have an equity stake in 866 units. But, we all do. And so without the team we wouldn’t have gotten to that amount of units so quickly. If it was just me, Reed Goossens doing it by myself, I wouldn’t have been able to scale as quickly. And that’s really important to the listeners out there. Surround yourself with the right credible people, get a mentor, get a coach. Then work on your personal brand and understand that you’re not going to be able to do this by yourself. And it’s okay to use other people and leverage other people’s skills and abilities to help you scale your portfolio. So, I think that is really important, in my investing career, having a coach and getting a mentor is, without them I was, first started leveraging their ability. They had done some deals. And I leveraged their experience to then go and show my investors. To say, “Hey, I’m partnering with these awesome guys. They’ve done “X,Y & Z” or have done a couple of deals and they’re looking to grow like I am And then all of a sudden I’ve got mentees who I mentor. And then they’re leveraging my ability to and they’re raising capital. Because I’ve been involved in 866 units in the 18 to 24 months. So the cycle goes around. I’ve got high hopes on that. I’m helping other people and continue to help other people where I can because the power of your team is very, very important.

John Carney: It definitely is and I suppose you just feel obligated, don’t ya to pay it forward, when someone comes to you. And you see the fire in their eyes and say, “Hey, you know, I’ve learned this, I can help you out.”

Reed Goossens: Sure.

John Carney: And it’s not always, you know, a lot of the times, you know, I’m always opened to directing people to the right advice. So, I mean, I think you’ve touched on it.
If you’re a rookie real estate investor who wants to break out, who wants to go, tapped out with cash and bank loans and wants to elevate their game to another level, you’re advising that they go out and find a mentor or a coach, and has the same vision as they do, and ask for help. Would you say that’s?

Reed Goossens: 100%, John. That is key, and as I touched on before, leverage a mentor or a coach helped me to get where I am today and I was able to leverage their skills and abilities. The number one thing that I like to talk about when you’re presenting a deal to an investor, a potential investor. They’re going to go say, “Well, how much experience do you have?” Well, then you’re not going to have any experience because you might not have done this before. So having a team, showing the investor that you have a team around you and that you have a great team, and a great package, and a great deal. And that goes to the core of, I trust you, I trust your credibility, I trust the team you’ve got established around you that you’re going to invest. And raising that first $100,000.00 or $150,000.00 or whatever it might be in syndication, that’s what I do, can be tough. And once you do that, it’s a little bit of a snowball effect. Like people start referring you to other clients. You start building a track record and things become a little easier. But it does take a little bit of time and effort to get that first deal done and I always like to say, that you don’t get to deal 15 without deal number 1. So, that’s my little motto.

John Carney: Right, loads of action in between. You’ve shared an incredible story. And before we get into the “2 minute drill” here. Think back really, quickly, certainly there’s a recent obstacle that had you banging your head against the locker door, so to speak. Can you share one of those stories with us?

Reed Goossens: Yeah,

John Carney: I always learn and so I’m listening with opened ears because, they are just obstacles in the way when you a real estate investor. I really enjoy learning from how others navigate those obstacles. To find their way to crush it.

Reed Goossens: Sure thing yeah so. I think the biggest one recently. And I’m going to get pretty in depth now. It’s a little bit more advanced. But, I don’t really care. Your listeners will learn a lot from this. On some recent deals that I was involved in I had raised a bunch of money and what had happened was that the deal sponsor, who was the person who comes along and essentially puts their neck on the debt, they sign on the dotted line,
didn’t want to have what was called “sophisticated investors.” And for all those people who are listening understand the FCC rules. Sophisticated investor means they are not accredited, non-credited means, you don’t earn $200,000.00 or more a year. Or you’re not worth a million bucks. So that meant a lot of my investors in the deal were walked off the table to leave a good portion of money. Like, I’m talking $500,000.00 to $600,000.00 off the table. Now, I didn’t know this till like D-Day, so it really frustrated me, that I couldn’t one, perform on what I was going to sell what I was going to do. And two, I, communication wasn’t there to say, okay, we’re only going to take accredited investors. Lesson learned. But, in saying that, I can’t then leave those investors out in the cold because you know there’s other rules in the FCC Laws that you can use on the sophisticated investors in your capital raising abilities it just meant for me as a business owner and RSN Property Group to start finding some smaller deals. I needed to start getting my other non accredited investors involved in some smaller deals and that’s why I went to Kansas City, just recently to check out a 48 unit, a 50 unit. I want to be in a place in my business where I can if someone comes to me and says, “Hey, Reed I really want to invest with you.” I love what you’re doing. I need to be able to put them in a deal and that’s just me as a business owner and to find the right deal to help them navigate the world of multi-family investing in the United States. So that’s definitely one thing that I recently had me banging my head against the wall. Lesson learned. I understood where the deal response was coming from. That meant I had to change my action in my own business and say, “hey” I need to start going out and increase my deal flow on some slightly smaller sized deals to get my sophisticated investors involved. So, that’s definitely one of them recently.

John Carney: Yeah, sounds like it’s one of those cases where you’re insanely frustrated in the moment but then it turns you’ve learned a lesson. You’ve built a system into your business and then almost, you know, the obstacle becomes the way, and you have almost come up with a solution to handle a different investor classes

Reed Goossens: Yeah, it’s definitely lesson learned as I said. I haven’t executed all on a smaller deal with my sophisticated investors yet. But I will be ready to go by the year’s end. I should have 4 or 5 or 6 of them involved in a sale of a smaller deal in the Mid-West somewhere? Just trying to find that deal right now.

John Carney: Right, you’re on a hunt. That’s the part I like.

Reed Goossens: Exactly.

John Carney: Before we wrap up the show here with a “Two-minute drill.” I’ve got ten questions and they are coming at ya starting right, now! What sport did you love playing as a kid, and the lesson, one lesson.

Reed Goossens: It probably would have been Rugby. I think the biggest lesson is that, I like my show jumping and then being in the equestrian world, that was a very individualist sport. I think being on the Rugby field, there’s 14 other guys out there slogging in the trenches. It’s a team sport, you know and that was really powerful.
My dad always said, “You got to be involved in team sports. It helps with leadership. It helps in just understanding the dynamics of other people at work.” And that is really powerful and that was a really good lesson learned over the years coming in now into my adult life.

John Carney: Number 2. What sport are you currently participating in today that you’re enjoying and lessons from that?

Reed Goossens: I still get out in the water for a surf every now and then. I really love surfing. It’s a great way to just, you know, life can be go, go, go, go and it’s just a great way to get out on a Saturday or Sunday, early before…as the sun is rising and just take a great big breath and let all the worries and stresses of the world just drift away. You know catch a few waves and just enjoy the morning. I love getting out and in particular a nice fresh still winter’s morning which is a bit more crisp and just get in the water and getting some nice waves. It always makes me feel good.

John Carney: Yeah, the cold salt water, love it and miss it. Other than Robert Kiyosaki’s “Rich Dad, Poor Dad”, do you have a favorite sports book or business book that you’ve just finished that’s on your list?

Reed Goossens: Yeah, I have one, by Dale Carnegie “How to Influence People” that one? I’ll have to send you to it? “How to talk and Influence People” something along those lines? I’ll have to send you to it? Dale Carnegie, very important book in my career. The other one I love is, “The Four Hour Work Week” by Tim Ferriss. Very, very good book. I really enjoy that book.

John Carney: What a great title.

Reed Goossens: It is, it is.

John Carney: What a way to sell books.

Reed Goossens: The four-hour work week. I mean, what I sign up?

John Carney: I know, I know. I read it. I can’t imagine that there’s an entrepreneur out there that has not read that book unless you’re well established before it was published. But, even then, I mean that is a great book. He does great work. I’m a big fan of Tim Ferris. One quote that keeps you motivated? And this can be something that doesn’t have to be from a person. It can be something that you came up with.

Reed Goossens: Yeah, one quote Winston Churchill says, “Never give up.” And that is just never, ever, give up. It doesn’t matter if the chips are down. Don’t give up, have belief in yourself as I said earlier in the show. If you continue to be laser focused on your goal, whatever that might be. It might be real estate investing or something completely different, then do it and don’t let anyone tell you otherwise until you achieve that goal. And anyone can literally achieve anything you put your mind it. So, I’m a huge believer in mindset. And if you are so motivated in it and dogged it about your approach, you’ll achieve those goals, you’ll get there.

John Carney: Thank you. What is your number one come from behind victory in real state and what did you learn from that?

Reed Goossens: Come from behind victory? I don’t know if I’ve had one yet? I had an issue with a flip in Philadelphia with the contractor. Definitely at one stage I thought the chips were down. I had done a couple of flips in Philly. I’m not going to get into the weeds but, it was some issues with the city and trying to get this thing on line and I was constantly just pouring money into it. And we did, we ended up getting it over the line. It was probably six months later than scheduled but we got it done and we got it sold for a small profit. We got our money back and I definitely thought six months earlier, geez this is going to you know, the explicit excrement is going to hit the fan. So, I definitely go to lesson’s learned on that. Flipping is not my business, it’s not my job, it was hard to manage from out of state and I definitely just needed to focus on my multi-family investments of which I have had lots of success in.

John Carney: Perfect. Alright, now we’re asking who’s your favorite athlete of all time is?

Reed Goossens: Favorite athlete of all time? I think, Usain Bolt, would have to be my favorite athlete of all time. I love his poses that he does that he does. Just the sort of grin as he’s running across the finish line, you know, ten yards in front of the next person. I think he’s a real inspirational guy. He comes from Jamaica, I just love his attitude. I just love the way he leads his life. So, really, really, inspirational for me.

John Carney: Yeah, you watch him run and blow everyone out of the water and it doesn’t even look like he’s breathing hard. I

Reed Goossens: Or he’s even trying hard. It’s like, this guy’s a freak.

John Carney: Yeah, he doesn’t sweat.

Reed Goossens: Yeah, exactly.

John Carney: What gets you into your flow state or if you need to get into the zone and focus on something? Do you have a practice that you can share?

Reed Goossens: Yeah, if I have to really focus on something and I’m sitting at home. I like to get out of my. If I have to really hit something on the head. As I say, eat the green frog” or whatever it is? You know, the first thing you don’t want to do is? First thing in the morning, I like to get up, go for an exercise and then have my breakfast and then get out of the house and go somewhere where you can concentrate. It might be a coffee shop, it might be the library and I get so much more work done when I get out of the house. Because being in the house can distract you a little bit. So, you can’t get work done as much. So, it’s just like turning off your phone, turning off your Internet and doing whatever you need to get done, done. And it’s surprising how quickly it does get done and then you’ve got that thing done and out of the way that you’re sort of regretting to do. So, it’s definitely one of those things that changing up your environment a little bit that way you’re working to be more productive.

John Carney: And would that lead into the next question? Which is, do you train for success?

Reed Goossens: Yeah. definitely, I’m a huge believer of in meditation. I love going and trying to do yoga once a week. Just to try and it’s very much like surfing, it’s therapeutic. Just like to get away from everything for a little bit and I also like to work out a lot as well because it’s another way that I can go and just a great way to start the day. It’s a great way to be energized. But it’s also a great way to keep your mind set focused, keep focused. People, there have been studies shown other people that workout live longer, they’re more healthy, they are more active and have better mindset. Being an entrepreneur you want to have all those things and you want to continue to do what you do, which is the business of real estate investing.

John Carney: Yeah, I agree with you on the working out part. My wife will see if I haven’t been to the gym in a couple of days tell me to go lift something heavy. That’s why I love her so much. All right, finally, what is your number one tip for winning more?

Reed Goossens: The number one tip for winning more? I think it would have to be is taking a page out of your book mate and as you said earlier in the show already you are only as successful as the people you surround yourself with. So, going back to what I the underlining theme of this particular episode was, get a mentor, surround yourself with successful people. That’s all, that’s my number one tip for winning.

John Carney: Awesome, can you tell me how our guest can find you if they want to continue the conversation?

Reed Goossens: Let’s do it. So, you can hit me up at – Reed@rmspropertygroup.com, or you can hit me up at my, I’m also have a Podcast, which is, as John mentioned, Investing in the U.S. Aussie. U.S. Guide to Real Estate. Educating international investors about the awesomeness of the investing in and cash flow property here in the United States. Check it out on iTunes and if you’re ever coming through L.A. please hit me up. I love hanging out for beer, or coffee, or going out for lunch. Whatever it might be, just hit me up at – Reed@rmspropertygroup.com.

John Carney: Awesome. Well there ya have it folks. I truly hope that you picked up some useful tips by tuning into today’s show. Thank you, Reed it was a pleasure having you on the show today. And I’m sure our listeners have some actionable tips that they can implement immediately. You can check out the show notes on iTunes and while you’re there, please subscribe to the podcast and we will continue to deliver awesome guests like Reed, who are crushing it, and hitting home runs here in the real estate game. You can also visit – www.johncarneyonline.com for a more comprehensive review of today’s show, in the show notes. And we look forward to bringing you another episode next week. I’m your host – John Carney and tune in next week, until then, work hard, play hard, and profit hard, thank you Reed.

Reed Goossens: Thanks mate.

John: Alright, have a good one.

[38:37]

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JC 002: Multifamily Syndication, Teams and Giving More with Joe Fairless

March 29th, 2017 | no comments
Meet Joe Fairless; real estate investor, multifamily syndicator, philanthropist, author and host of the world’s longest running daily real estate podcast, The Best Real Estate Investing Advice Ever Show.

 

Joe started his career in advertising on Madison Avenue in New York City. He began researching real estate as a way to achieve financial independence.

In 2009 Joe began investing in single-family homes. Joe wanted to scale his real estate investment business and focused his attention on multifamily buildings and syndications as a strategy to grow bigger, faster. Now Joe controls over $85 Million in multifamily real estate.

Joe competed in baseball and football growing up and played football in college. The lesson that he learned sports that he applies to real estate every day is that when something bad happens, learn form it quickly and move on quickly.

Favorite quote, “the secret to living is giving”

Check out Joe’s book, The Best Real Estate Investing Advice Ever. Volume I

Tune in and subscribe to Joe’s podcast, Best Real Estate Investing Advice Ever Show

You can reach out to Joe directly by email to info@joefairless.com Don’t forget to mention that you heard him on John Carney’s podcast and receive your FREE APARTMENT RESOURCES GUIDE.

Thanks again Joe for taking the time to share your story with us.

POST GAME REPORT: Episode Transcript

The Real Estate Locker Room Podcast

JC 002 Multifamily Syndication, Teams and Giving More with Joe Fairless

 

Announcer:  Welcome to the, “Real Estate Locker Room Show” with John Carney. Did you know investing in real estate is a team sport? Join John and his team as they explore the business of real estate and athletic competition. The goal for this show is to grant you direct access to the real estate pros that are closing profitable deals and growing their businesses. On the “Real Estate Locker Room Show” we are getting in the ring with successful investors, developers, operators, and all of the industry professionals to learn what it takes to achieve on-going success. Now it’s time to kick-off and level off with new place to grow your real estate business.

 

John Carney:  Hello and welcome back to the Real Estate Locker Room Show. I’m your host, John Carney, coming at you from Cleveland Ohio. Joining me today in the locker room, from Cincinnati Ohio, is Joe Fairless. Joe is a real estate investor, a podcast host, a philanthropist, and author. If you’re not familiar with Joe’s show on iTunes, it is the world’s longest running daily podcast for real estate. It’s the Best Real Estate Investing Advice Show. Joe has interviewed Barbara Corcoran, the author we all know so well in the real estate world, Robert Kiyosaki, as well as hundreds of other high profile and influential real estate investors. His podcast has over 4000 daily downloads, and 140,000 each month. And we’re up to episode #771, so check that out. Along with being a Podcast Host, Joe is also the author of, “Best Real Estate Investing Advice – Volume 1.” which we can talk about. I remember seeing that release, it blew-up Amazon. So, check out his book as well. Klout considers Joe the top 5% online influencer. Joe is an active, full-time real estate investor, who controls over $54 million in real estate at the moment. His focus is on multiple family. How are you doing Joe? Thanks for taking the time to share your experience with our audience.  

 

Joe Fairless:  My pleasure. Nice to be on the show. I know that you are a little under the weather. So, I will try to talk as much as I can. That way you don’t have to talk. I am really looking forward to our conversation.

 

John Carney:  An all-around good guy, thanks for that Joe. All right, we’re here to explore the intersection between elite sports and elite real estate investing. I like to stretch out, as with a sports related question? Who is your favorite athlete of all time? And why?

 

Joe Fairless:  Well, I’d say, the first person that comes to mind and it’s a little ridiculous, but Mickey Tettleton. He was baseball player who played for the Detroit Tigers, the Texas Rangers and probably others. He just had a funky batting stance and I just really enjoy how he approached the game a little bit differently. Because he had a batting stance where you know, you typically hold the bat upright, right before the pitcher throws. But, instead he had it just parallel to the ground. And then he would bring it upright, right before the pitch came. And what I liked about that is, it’s different. But, yet he was effective non-the-less. I think applying that in our real estate business is certainly noteworthy. Where we can approach things differently but then be just as effective, or more effective as before anyone else.

 

John Carney: I’m not familiar with this player and his batting stance, but I will look that up here shortly. You transitioned from the advertising world in New York City, to full time real estate investing. I’m interested in that journey, how people make that transition. Do you mind sharing your story about, “why real estate?”

 

Joe Fairless:  Yes. I am from Texas, where I graduated from college in 2005 from Texas Tech. as an advertising major and then went to New York City. I went from, cows and cotton, to concrete and I guess, no sun and lived in New York City for ten years. I worked on Madison Avenue after college, which is very prestigious, but it is also code for, I didn’t make any money at all because I was in a very competitive environment. I climbed the corporate ladder, became the youngest Vice President of a New York City advertisement agency and then, at the tail end of my advertising career, I started investing in real estate. The reason why is because I knew that I had to invest, I had to learn about investing, but I didn’t know quite what to do? So, I ended up reading a bunch of books, went to online forums, talked to people I knew and found real estate investment the choice that I wanted to pursue. Once I did that I started looking at what I wanted to invest in. Initially I bought single family homes and in 2009 I bought my first house. Not because I had a crystal ball, and I knew it was what the right time to buy. But, because I didn’t have any money. So, in 2009, I was very fortunate, I didn’t have any money until 2009. And once I bought in 2009, I bought my first house, $76,000.00 that rented for about $1100.00 or so. Rent is around $1200.00 now. Went for $1100.00 to $1200.00 now. I bought three more houses, and then realized that it just wasn’t happening fast enough. I would make $250.00 a month, on a house. And then a tenant would move out and I would have to pay, meaning me, would have to pay $5000.00 for move-in ready costs, the carpet, painting, and misc. fixes. There would be my profit that was going to be wiped out for a year and a half. I thought, wait a second; this isn’t going to make me financially independent. I’ve got to think of a different approach. I started studying multi-family investing, learned the process, bought a lot of books, started talking to a bunch of people. I ended up leaving my full-time job while I was still studying, multi-family investing. Well, after I left, I left because I just wasn’t digging it anymore and life is too short not to do stuff you enjoy and let it go by. Therefore, I started looking at syndication where I raise money from investors in my apartments and share in the profits. Because I couldn’t get approved for a mortgage for a house. And I couldn’t get approved for a mortgage for an apartment building. Because I didn’t have a W2 income. I was kind of forced to find creative ways to buy apartments, and that’s what I did, I wrote and learned how to raise money from investors. By getting something together, and share in the profits and now, you mentioned $54 million, it has actually increased, to $85 million, since the last buy out. So, now I control $85 million-dollars-worth of real estate. That is, apartment communities, that’s like 99% of it, apartment communities. I still have three homes but most of it is apartment communities and they are in Dallas, Fort Worth, and Houston, Texas.

 

John Carney:  Congratulations. So, you got into the single-family home game. Which is where, I don’t know? I’ve never really made this comparison before. But right now, up in Cleveland we’re in the ALS, so I’m thinking baseball right?

Yes, in order to get to the ALCS, all these guys started in Little League right? So you have to start somewhere. Would you say, the single-family home experience taught you what you needed to know to raise the bar to the next step because that’s part of the progression of being a real estate investor?

 

Joe Fairless:  Yes, I’d say it taught me what I needed to know and to learn more about it. It taught me that real estate is the way to go, for my own purposes. And it taught me that what I was doing at the time wasn’t going to be scalable and wasn’t going to help me become financially independent. I created a spreadsheet for my homes that included a home, I think it was like a home a year, 3 homes a year that I was going to buy. And over ten years it was like, oh, my god, stop the madness. Because I bought four homes, I was having a hard time keeping track of all the paperwork that’s involved with the property management, the insurance, the taxes. I was like, I do not want to scale this at all. And, I want to pause, by saying you can make money doing that approach by the way. People have and they do. I just didn’t want to set myself up with single-family homes. So, it inspired me. And gave me some perspective for what I did want to do.

 

John Carney:  Right. We both know people who have enormous single-family home portfolios. And a big key to that is, a big key to everything is management. You decided that your niche was going to move and we come across that all of the time too. You know, we are talking about sports, what athletic competition were you involved in, when you were growing-up?

 

Joe Fairless:  Well, I primarily played baseball and football. I played a little bit of football in college at a small Division III school. I primarily played baseball and football.

 

John Carney:  To be a collegian athlete, in any division, requires a certain amount of discipline. When you left the competitive sports arena of college did you see that it helped you apply what you learned through the discipline of sports and in your first job, and translate that right into real estate.

 

Joe Fairless:  I think what it taught me the most is that when something bad happens, learn from it quickly and move on quickly. That’s what so many people get caught up in. I’m on a softball team right now and I see people on my softball team and they make an error, or they strike out and when they strike out, they should kick themselves off the team… it’s soft pitch, when they pop-up, or hit a grounder…and they’re pissed off for four innings. It’s like, dude, get over it! Immediately, learn from it and get over it, immediately. Otherwise, you’re going to let that influence the rest of the game and they’re going to be compounding negative consequences. And that’s what I apply in business too. When stuff goes down, which happens weekly. Something goes wrong weekly. Sometimes daily depending on what’s happening but at least once a week. We got to learn from it quickly, and then move on.

 

John Carney:  I agree, it’s a team effort, real estate or business. And whether you’re buying apartments or selling doughnuts you need a whole team of people to help you be successful. .

 

Joe Fairless:  Yes, I read that in a book somewhere too, but I forget which book?

 

John Carney: It’s really the same.

 

Joe Fairless:  I’m kidding, it’s your book.

 

John Carney:  I know. Doughnuts—that’s what got me, I just can’t come up with the doughnuts. I just moved back to the states. Now we have a Dunkin’ Doughnuts around the corner. So, of course I had to try that. But, along the lines of what you just said is something that I learned recently. And maybe it’s something we’ll, it was the way it was phrased? “A bad decision made quickly is better than a good decision that takes a long time to plan.” And this can be applied to when you have to make a decision quickly. If you don’t have all the time in the world, make a decision and if it isn’t the best decision at that time, you still have time to adjust.

 

Joe Fairless:  Yup. I agree with that for the most part. It depends on how high the stakes are? Sometimes it takes a little bit more. But, one of my favorite books, is, “Blink” by Malcom Gladwell. He talks about how he can a split decision, an informed decision in the blink of an eye. That is just as informed as if we’d spent months, years, pondering what we would or should do? Our eyes very much embrace that philosophy for the most part.

 

John Carney:  Malcom Gladwell’s fantastic. I like all his stuff. What are you working on right now? I think you might want to share with us, I guess?

 

Joe Fairless:  I’m working on a couple of things. I mean, the three ways I make money. Because let’s start there, and then we’ll talk about a couple of projects. Three ways I make money –

 

  1. By doing multi-families syndications. Where I raise money from investors and invest and put up a little bit of my own money on the deals. And then we share in the profits. We are under-writing multiple deals. Well, more than multiple. Lots of deals right now. My business partner is in Dallas, as we speak, literally as we speak. He’s in Dallas touring properties that we’re in the final found on. And so, I’m focused on that and getting my investors prepared for the next deal.

 

  1. The second way I make money is through my Podcasts. And really, when I say make money it’s pretty much break even, depending on my staff salaries. But, it is, a way for me to provide thought leadership, to learn by interviewing people like yourself and others who are very experienced, or doing something very interesting. And just keeping my mind sharp. So, working on continuing to optimize the Podcast, and getting the word out there.

 

  1. And then the third way, I make money is through my client consulting program. I have private group of clients that I walk, hand by hand through the multi-family syndication process. It’s a major amount of my time. So, I also am working on new content to continue to keep that program refreshed. My team and I upload a new piece of content each week to the resources site that my clients have access to.

 

Those three revenue streams are what I use to guide my months, my weeks, my days. In terms of what I focus on. Those are some of the projects.

 

John Carney:  Okay. And in each project, or each income stream I would imagine has a unique team allocated to that right? So, I mean, what they’re investing in, in real estate. Where you’re providing a service, like consulting service. Or you have to surround yourself with a group of people, correct? And would you look at those teams, as one big team, or individual teams, or how do you manage that?

 

Joe Fairless:  There’s overlap, for the most part. I have my administrative assistant, Samantha and I have my content creator, who helps me with the content and thought leadership, that’s Theo. He’s a Co-Author of the book with me. And we’re writing another one right now together. He and I and she and I, all three of us, overlap on all three of those revenue streams. As far as other team members go. I have team member who finds interview guests for my podcasts, as well as does the show notes and does the promotional efforts. And I have a team member who does all the editing of the podcasts. So, those are the four team members that are on my payroll every month. And then misc. contractors. Like, someone in India, who does SEO for me through UpWork.com. And some social media company that handles social media and things like that.

 

John Carney:  Got it. And I mean today, in today’s world, stay on track with real estate. You look at it like a business, the business of real estate, and being an investor. And you want to grow and attract money, right. Because everyone runs out of money. As someone put it recently, you have your internal/external team. The external team being your professionals, like, your accountants, and your local lawyers, your internal team being like, partners, mentors, and assistants. So where do you go when you have profile. How do you fit a profile into the mix if you’re starting out as a real estate investor and you want to raise the bar, build your portfolio, in whatever niche you’re in and take it to the next level? Would you recommend that raising your profile in your community is something you ought to look into doing?

 

Joe Fairless:  Yes. Help me understand what you’re asking?

 

John Carney:  You’ve got your team, and you’ve got your businesses up and running, but you’ve also built a great profile in the industry. When it comes to people who are investing in real estate, investors who are new or wanting to scale up. I just wanted you to touch on adding to your profile. You spoke about social media management and some content creation.

 

Joe Firless:  I think the most important thing when you talk about building your profile. Or building your brand, or creating awareness for yourself and your company is to find one platform that comes natural to you, that you enjoy posting on and own that one platform. One of the mistakes people make, is try to be everything to everyone all of the time. That’s huge mistake, because any one of these platforms, Instagram, Twitter, Facebook, a blog community, YouTube, iTunes, Amazon, has millions, upon millions of people to speak to and to connect with. The mistake people make is that they want to be everywhere at once. They water down their message and don’t focus on one thing. Just focus on one thing, on one platform that you enjoy posting on. Provide thought and leadership to your audience once you define them, and you’re going to over time, build a following. That’s going to translate into the direct business results.

 

John Fairless:  That is great business advice. So, I guess that’s what carries us onto the next question that I have. If you’re a rookie real estate investor, or a newbie that might have one deal or two deals under their belt and are just thinking of doing exactly what you did in your career—and that is, they may burn out on the corporate ladder side or just need a change of pace or might be wanting a move from a warm climate to a cold climate, or visa-versa—what advice would you have for them to kick-off and get started?

 

Joe:  For someone starting out? I’d say, make sure that you know the basics of what you’re looking to do. Whether it’s a single family, or multi-family, or storage units, or office retail, industrial parking, or whatever? Learn the basics through books, and online forums. Then, once you know the basics. Identify people in your area who are doing what you want to do, reach out to him or her, or them, attend meetings. Speak to them, and get to know them. Buy them lunch, buy them dinner, buy them whatever, a book, or whatever. Add value, be very grateful and appreciative for their time in meeting them, the time they are spending with you. Be respectful of their time and go with an agenda. Have a focused conversation, make sure, if the meeting is for 30 minutes, you meet for 30 minutes. If they can stay longer, then by all means do it. But, be respectful of their time and say, “I know we scheduled for 30 minutes, are we good? Do we need to wrap this up?” Stay in touch with them. That’s probably the best way to get things going. I think 98% of the people who hear this, won’t do that. Instead they’ll read some books, do some online forums, listen to Podcasts. Then maybe reach out to one or two people at most. And not be respectful of their time, not buy them lunch. Not go in with an agenda. And that’s what happens and how the herd gets thinned. That’s how some people go to the top, some stay in the middle, some kind of float in between, and some sink to the bottom. So, I’d say fortunately you have an audience who is taking the time out of their day, to listen to this Podcast. So, I’m going to take that into consideration. In what I said earlier, I think a majority of the people listening will do that advice. But, in general the real estate investors who hear this advice, or where told this through some other channel, they won’t act on it. And it’s a shame, but it makes everyone who does that stand out, and be more successful.

 

John Carney:  Right and joining a community that’s actually not as large as people think it is. Or would you agree with that? I mean, that is also sound advice for the people that do listen to Podcasts, your Podcast, this show and the other good real estate Podcasts out there. What a great way to be in a conversation with people and learning something during that commute to work, or when you’re jogging. I quit radio probably two years ago when I was first told about Podcasts and started looking them up. The day I listened to my first Podcast I thought this is awesome! There’s more in it, and it just became a habit. So, when I moved back to the states, they were trying to sell me every subscription possible for radio. I told them I don’t listen to the radio and the guy couldn’t believe it. I listen to Podcasts, man and that’s how I continued to educate myself. Well, cool. That’s great advice Joe. Can we get into our two-minute drill here?

 

Joe Fairless:  Let’s do it!  And we’ll get to the rhythm and point of this interview.

 

John Carney:  What is your favorite sport? Or business book? That you’ve read recently?

 

Joe Fairless:  My favorite sport is, well recently, my favorite sport right now is softball.

 

John Carney:  Softball, okay, perfect, that’s a lot of fun. What about like books? Like, that might not have come up? Correct.

 

Joe Fairless:  Okay.

 

John Carney:  What is your favorite book related to either business, or for instance, sports.

 

Joe Fairless:  Okay, favorite book about business, sports, would be, “Crucial Conversations” and the whole point of the book is that they help you create a mutual purpose when the stakes are high, and opinions vary. And that’s the key, create mutual person and build up from there.  

 

John Carney:  Cool, I’m going to check that out. Is there one quote that keeps you motivated when things get tough? Like that one quote?

 

Joe Fairless:  Yeah, “The secret to living, is giving.” Another cousin of that quote is, “Help enough people get everything they want, you’ll get everything you want.”

 

John Carney:  Perfect. So, when the chips are down. Think about what you can do to give a little bit more.

 

Joe Fairless:  Yep.

 

John Carney:  Got it. Awesome. Do you have your #1 come from behind victory in real estate, and what did you learn from that?  

 

Joe Fairless:  The come from behind victory would be when my first syndication deal, it was about 2 and half weeks before we were supposed to close. We had over $200,000 worth of investor dollars go away for various reasons. And it was last minute. But, I got my one of my existing investors to go and bid what he had originally asked. And it ended up closing.

 

John Carney:  Did that translate into a happy investor at the end of the day.

 

Joe Fairless:  Yes, absolutely, certainly.

 

John Carney:  Going big. Is there any training for success? Like, your number one, maybe habit that you do on a daily basis. That would put you in a flow-state, or is it training for success habit?

 

Joe Fairless:  I have a liter of water with a scoop of wheat grass every single morning. I’ve been doing that every single morning for the last 3 years and it helps me stay healthy.

 

John Carney:  Fantastic. And then the #1 tip for winning more?

 

Joe Fairless: Would be, don’t focus on winning the score. Focus on winning the battle within how good you can be. Because the competition is in others. The competition is how good you can be within yourself.

 

John Carney:  Perfect, alright, that’s great! Well, thanks again for joining me today Joe. We want to be able to let our audience know exactly what, where they might be able to find you if they want to hook up on some social media, or carry on a conversation with you, where are you these days online?

 

Joe Fairless:  You can go to the App Store and just put my name – Joe Fairless, and you’ll find my Podcast, “The Best Real Estate Investing Advice Ever.”

 

John Carney:  And I highly recommend that all of you out there put that on your show list. So, when you’re in the car you can listen to great advice and the great guests that Joe has on his Podcast as well.

 

Joe Fairless:  I also say that if you Email me at info@joefairless.com I have a department resource guide that has all the websites and research places I go to when I’m researching markets, as well as books I wrote and recommend. So, email me at info@joefairless.com and mention that you heard me on John’s Podcast, and I’ll be happy to get that to you.

 

John Carney:  All right, perfect. So, there you have it folks. I truly hope that you picked up some actionable advice today, from Mr. Joe Fairless. Make sure to check-out this program – Post Game Report on iTunes. And while you’re there, please subscribe to the – Real Estate Locker Room Show to ensure that you never miss out on the pro tips from our guests. The mission here is to help you elevate your real estate game. If you like what this show is about, I’d be grateful if you would leave us a five star review on iTunes so that other like-minded real estate investors can find us easily. You can also visit John Carney online at www.johncarneyonline.com, for links and additional content associated with today’s show. And while you’re there please drop your Email into the newsletter sign-up form, to receive more real estate investing insight, tips and tricks, and other great stuff. Remember to stay focused on your goals, have fun, and stay in the game. I’m your host John Carney, and until next week, work hard, play hard, and profit hard. That’s a wrap Joe. Thanks again for taking some time out to share your story with us.
Joe Fairless:  Hey, I enjoyed it, thank you.

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