Posts tagged "business"

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

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

© John Carney 2017

JC 015: Cash flow addiction with Jack Gibson

June 14th, 2017 | no comments

No team equals “no chance” in any business

Real Estate With over $1 Million in sales by the age of 21, earning a “C” in marketing class didn’t make sense to Jack Gibson.

Jack’s been a driven entrepreneur since his freshman year in college. He powered through a tough start in the nutrition supplement industry and established a multimillion-dollar business before he walked at graduation.

When the oil market tanked, Jack decided that it was time to start investing the income from his business in real estate and multiply his passive income. 90 days and 100 hours of podcasts gave him a level of comfort to get started in the real estate game. Jack actively recruited his team and was able to scale his real estate holdings to 70 plus doors in less than two years.

Jack was able to add value to his existing business network by offering opportunities in real estate and founded High Returns Real Estate to help other people become successful in the industry.

Jack’s advice for winning more to keep your word and treat everyone with integrity.

5 Key Points:

  1. Entrepreneurs solve problem and that is why you are paid. The more problems that you solve, the more value you create in the market place.
  2. There are no limitations – the only limitation is your resourcefulness
  3. No team = no chance in any business
  4. All wealthy people have multiple streams of income. Create passive income and cash flow.
  5. Build a network of people who know, like and trust you.

Favorite athlete(s): Michael Jordan & Bernie Kosar

Favorite book(s):

Favorite quote: “85% of joy in life comes from relationships” by Brian Tracy

Favorite Podcasts:

Thank you Jack for taking some time out to share your story and business insights with us.

Connect with Jack by visiting his website, highreturnrealestate.com

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

Twitter: @highreturnre

Listen to all of 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 013: Positive thinking and flipping 100 deals a year with Geremy Heath

May 31st, 2017 | no comments
Systems are the key to a successful house flipping business

Geremy Heath is the owner and director of Texas All Cash Home Buyers. A native Australian, Geremy studied Civil Engineering at the University of New South Wales. After completing his degree, Geremy worked internationally as a management consultant for twelve years. While on assignment in the USA, Geremy met his wife Melanie in San Antonio, Texas and decided to stay and live in America.

Geremy and Melanie founded the company Texas All Cash Home Buyers that specializes in the all cash purchase of single-family homes. Texas All Cash Home Buyers has successfully flipped over 250 properties to date and have the goal of achieving 100 flips this year.

Geremy is a great believer in the power of affirmations and positive thinking and shares his thoughts and beliefs on how to be successful in the real estate business.

Five key points

  • When establishing a flipping business, you need to become an expert in all aspects of the business yourself: from marketing to raising capitals, to project managing and sales.
  • Good systems are essential in home flipping business. Defining what tasks need to be achieved in order of priority and having thorough checklists for each stage will streamline the processes.
  • A good team requires a good coach or mentor to guide you and teach you how to build your skills.
  • It is essential to invest in yourself, particularly when starting out in the real estate business. Finding and investing in an experienced mentor will help accelerate your path to success.
  • Having a morning ritual involving meditation, affirmations, visualizations and exercise is the best way to kick start your day. Long term, this practice will support you in achieving your goals.

 

Favorite athlete: Muhammad Ali

Favorite quote: “Whether you believe you can do it or not, you are right.” Henry Ford.

Favorite books:

  1. The E-Myth Revisited by Michael Gerber
  2. “The Law of Success” by Napoleon Hill
  3. The Miracle Morning” by Hal Elrod

Success tip #1 – Know how to manage these three constrains; Deal Flow, Capacity, Capital. When one constraint impedes progress you must focus on removing that constraint.

Success tip #2 – Develop a morning ritual to begin each day right.

Thank you Geremy for taking some time out to share your insights with us.

Reach out to Geremy and his team on: www.texasallcash.com or email Geremy direct at geremy@texasallcash.com

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

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

The Real Estate Locker Room Show with John Carney

JC 013: Positive thinking and flipping 100 deals a year with Geremy Heath

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 today from Cleveland, Ohio. We are in the post season here, the Cleveland Cavaliers looking to repeat. Joining me from the great state of Texas is Geremy Heath who is the owner and director of Texas All Cash Homebuyers, which he founded with his wife Melanie in 2009. Texas All Cash’s primary focus is the redevelopment of single family homes in the San Antonio area. Since starting his business, Geremy has flipped over 250 properties and currently has a goal with his team to complete more than a hundred rehabs this year. Originally from Sydney, Australia, Geremy moved to the US in 2006. Prior to real estate he worked as a management consultant for twelve years, specializing in process improvement, and earned a bachelor of engineering, civil engineering degree, from the University of New South Wales in Australia. Welcome to the show Geremy, how are you doing today?

 

Geremy Heath: Yea, good. I’m doing good, thanks for having me.

 

John Carney: No worries buddy. Look, this is going to be great. I’m really interested to hear how you capitalize on your process of improvement for flipping and rehabbing a hundred properties this year. That’s a large number and a great goal. But we like to kick this show off with a little question to stretch out and get the conversation going. You’re from Australia. We’ve had a couple of Australia guests.

Is there a favorite athlete that you looked up to when you were growing up, watching sports? And if so, how did this person influence you in your athletic and business career?

 

Geremy Heath: There’s quite a few Aussie cricketers and Aussie rugby players that I looked up to, but if someone was to ask me now, “Who’s your favorite athlete of all time?” I’d probably have to say Muhammad Ali. The thing I love about him is that he was always saying affirmations: I’m the greatest, and I guess he ended up realizing that through believing in that at the beginning, so I’ve always respected that in him.

John Carney: Yea Muhammad Ali—great athlete, great champion, warrior and influencer. So, you didn’t start off your professional career in property. Will you talk to our audience a little bit about how you ended up in the United States and what drew you into real estate?

Geremy Heath: I originally came to the US in 2006 on a work transfer actually, and I’ve been bouncing around to a few different parts of the world doing my management consulting. America was a place that I really haven’t spent a couple of years, and I’d like to go deep there and really understand more about the culture and the psyche. So when I first came here my plan was to be here for a year or two with my job and then head home. But I met my wife, who’s from San Antonio. She was actually working with the same company at the time, and within less than two years we were married. So, by 2008 we were married and we’d bought a house and then I kind of realized, man, it looks like I’m staying here for a while.

John Carney: Right, the wife and the mortgage led you to believe that you might not be going anywhere soon, huh?

Geremy Heath: Yea, so that was almost ten years ago. But, after living in the U.S. for the time that I have, I’ve got nothing but love and respect for this place. I would say to people: there’s nowhere else in the world where you could come and be here such a short time and start a business and have the opportunities that I’ve had. And one thing that I really love about the American culture and the people is that through my whole process of getting started — and a big part of our business is raising capital, getting private funds to fund our deals — I never once had anybody question, like, “you’re Australian, you’re not from America, why should we do business with you?” I was always greeted with open arms and I think Australia and America are similar in a lot of ways. But the one thing where I do think America trumps Australia is probably just in the overall positivity and openness that the people have. It’s a very open place to people from all cultures all around the world.

John Carney: Right. I believe that in the American market, whether you’re in real estate or tech, if you’re in business and you’ve got a good idea and you show that you’re committed to it and you’re going to hustle a little bit and you’re willing to put in the work, the rewards soon follow. And with this show, my intention is to be able to get people who are interested in real estate, or are looking for a way to grow their asset base and cash flow outside of work. Not everybody can quit their job and become a full time real estate investor. But there are great opportunities out there for people to put their money to work for them. Other options are real estate versus shares or investing in a business. So, you have one of these businesses, and I’d love for you to share with our audience what you do and how you’ve been successful in applying systems that you would have had to use and implement in your civil engineering career into turning houses over for a profit.

Geremy Heath: Yea. In my old business career when I was doing management consulting, I studied civil engineering, but I actually specialized in supply chain management and BPO (Business Process Outsourcing) when I was working with my previous employer. So, I had a big system and process focus. Particularly in the second half of my career, in the outsourcing world, it was really about factories. We’d set up the call centers, and things like that, and it was really about having inputs that go into the factories; having the processes which can turn those inputs around and produce the outputs that are needed. So, I kind of thought of flipping houses as exactly the same thing. And I thought for me, my factory is my ability to rehab a house. The inputs or the raw materials that I’m having for that are houses that need repairs. Then my output is going to be a retail property that’s high quality, and that I’m going to be able to sell to a bank or qualified buyer. So, with that kind of mental model in my mind, the next thing that I kind of thought is: well, if that’s my factory, what are the constraints? And I boiled it down to three simple things: you’re either going to have a constraint around the flow of deals that are coming in; you’re going to have a constraint around your capacity in the factory to rehab the deals; or you’re going to have a constraint around the capital that you need to actually fund the deals. And I guess ever since I first started, it’s always been a balancing act, and it still is to this day, between those three constraints and one of them is always the constraint. So, whichever one of those three is constraining you, you need to put your focus into removing that constraint and then the next one of the three will kick in. It’s kind of an evolutionary process.

John Carney: That’s a different way of looking at the same problem all real estate investors eventually face on any level, right? The constraint that popped into my mind, the capacity, and that for me, thinking about it, goes hand in hand with capital. So, I’m a big proponent of the team, especially if you’re just starting out in real estate and you want to be an investor, and the team changes depending on the type of deal and the size of the deal. We’ll talk about that. But can you talk to me a little bit about how you started in a new country, in a new industry? You had a great background in management consulting. How did you go about recruiting your team, what did that look like initially and how has that evolved?

Geremy Heath: Yea, for sure. I think probably one of the things that a lot of people who get into real estate don’t realize is how much of a team sport it is. I know that your book has a title along those lines, and I couldn’t agree more. And one of the areas that a lot of people do get into is flipping homes—the single-family homes, because it seems like it is a little bit more accessible to people. But what they don’t realize when they get into it is that, if you want to set up a flipping business, when you get started you’re wearing all the hats, you have all of the different components of a full business to run and they all have their own complexity. So, you need to be able to be an expert at marketing to get the deals in. You need to be an expert at raising capital to have capital to do the deals. You have to be an expert at project management to be able to find the contractors and manage them. You also need to learn about the realtor side when it comes to selling the houses. And so, there’s really so many aspects to it, and when you’re trying to do it all by yourself, it’s a lot to learn and a lot to take on. But it’s definitely a passage of entry that everyone has to go through. Because before you can step up and start to hire people and build the systems for people to come and do the work, you need to really become an expert of every single one of those areas. If you don’t first master each area, there’s no way you’re going to know who to recruit, what system they need to run, how they’re going to operate and work for you, and then how you hold them accountable to a certain standard.

John Carney: So, it sounds like a familiar story that I’ve heard. You’ve really learned by doing. It’s the only real way to go from flipping that first house to flipping a hundred houses, right?

Geremy Heath: Definitely. And I think a book that, in the beginning — because I love listening to audiobooks and reading books — and one book that really had a big impact on me early, was The E-Myth Revisited. A lot of people are probably familiar with that book. But one of the big things it taught me is that you have to first be the technician in your business, and once you’ve mastered that area, you then need to be able to systemize that area so that you can then hire somebody in and have them run the system for you. And so, sometimes also people hear the word ‘systems’ and they think, “Wow what are systems, what am I going to do?” And for me, systems 90% of the time come down to having a good checklist that really defines the tasks that have to be completed and in what order. And it sounds simple, but the magic is really in those checklists and getting them right for the different parts of business.

John Carney: Right. And so with the challenges in flipping, I would imagine that every house is similar and then slightly different at the same time. What are some of the most recent challenges that have stressed your system, where you’ve had to say, “Maybe we need to rethink this,” and then you tweak it a little bit and it becomes even better? Have you experienced that recently?

Geremy Heath: Yea, I think a common area in single-family homes when you’re flipping them that people have a lot of frustration with is when it comes to the sales side. You’ve done the hard work to do the marketing, get the deal, rehab the deal, and then you’ve got the house for sale and you’re really in the last mile of the race, but sometimes it can feel like the most frustrating. And the reason for that is that the end buyer who is going to get his inspection via a home inspector, and they’re going to give you a 30-page report of all of the deficiencies in the house, when you feel you’ve already put all your money into remodeling it. These home buyers are most of the time first home buyers. So, you’ve got to understand from their perspective that it’s a big decision and when they do get these thirty-page inspection reports it does freak them out. And so, I when I think back from the very beginning to now, we’ve really put a big focus on quality. So, our goal is to really minimize the amount of deficiencies that would come up in a report, and we’ve done that through implementing vigorous inspection processes when we sign off on a rehab. And then once we get a contract on a house, before the property inspector goes out, we have another inspection, we call it a pre-inspection, where we send one of our internal guys out to re-inspect the house before the inspector gets there because we’re trying to drive a real high level of quality. And so, the end result of that is a smaller inspection report, and a happier end buyer. And I think one of the biggest tools that we’ve used over time to continue to improve that, is our signoff checklist that we use at the end of a rehab. For example, there might be electrical issues that keep coming up in our inspection reports. Then if we see it repeating, we would put it in as an inspection item in our signoff checklist. And that checklist keeps growing and growing, but it improves the end quality over time.

John Carney: That sounds like a really good system that you’ve put in place and it makes a lot of sense to me. So, I want to continue on with Texas All Cash Homebuyers. What is your business doing for an investor—for someone who wants to invest with you. You’re buying properties with all cash. We can call them distressed, whether they’re distressed financially or distressed situationally or people just don’t want to live there for whatever reason. Is that correct? And then you’re remaking them, remodeling them, and the end user for the finished product is going to be a permanent home buyer as opposed to an investor. Is that what you see the majority of the time?

Geremy Heath: Yea, that’s 80% of our business. And I guess our value proposition is that we have cash and can close quick, so there’s no inspections and additional financing approvals or anything needed. So, if somebody’s looking to sell a house quickly, we can close in as little as three days. And then we’ll rehab them and put it onto the MLS and sell it the traditional way. But it’s a remodeled home that’s being purchased by a bank qualified buyer.

John Carney: And so your team is really servicing two groups: making your investors happy, which is important, and your end users happy, right? I mean, they go hand-in-hand. So, would you talk a little bit about how you run your team and how you can accomplish that so successfully?

Geremy Heath: Yea, absolutely. I’m down here in San Antonio, so quite often with my team I use the analogy of the San Antonio Spurs. Luckily for me they’re a great team, they’re very well coached and well managed. The thing I love about the Spurs is they’re not necessarily a team of individual superstars. It’s the collective team that makes them great. So that’s kind of why I like sharing that analogy with my team, because I feel that in real estate everybody has a different role to play. And it’s not about having a team of people that are all experts in one area, it’s about having the right skills across all the areas. But the magic only comes together when the team is working well together. And I’ll say to the team, “We need to be passing the ball and moving the ball and communicating and working together as a team.” When you see the Spurs playing at their best, that’s what makes them great—the way they move the ball and the way that they work together. When we can do that in real estate, that’s when we really can exponentially increase the results that we get. And something that I always say to my team is: if you took us all individually and we went off to create our own flipping businesses, the results that we would get combined is nothing compared to what our collective results are as a team, because that’s when the magic comes together, when we can specialize in an area and help each other to reach the end goal.

 

John Carney: Great analogy, that definitely resonates for me and our listeners so thank you for sharing that. What advice would you have for someone who is listening and wants to get into house flipping or wants to scale their house flipping, going from something they’re doing as a side job to a full-time job, which is a scary step. What’s the best advice that you have for taking your business to the next level or just getting into it?

 

Geremy Heath: I think a huge element that’s helped me with my success is to have the right coaches and mentors. Think of it with the sports analogy. Popovich for the Spurs is arguably one of the greatest basketball coaches of all time. They’ve had sustained success over the last fifteen years or more and he’s a huge part of that. And so, when we look at sports, all great sports, whether it’s an individual or a team, there’s always great coaches that are involved with the athletes. So, when it comes to your personal life and your business life, I think I’d put a huge amount of weight on having good coaches and mentors around you to really help guide you in the right direction and help you find where you need to build skills, and maybe also where you’re strong.

 

Real estate can be a lonely game if you’re just out there sitting in your home trying to put a business together. So, get connected with the right coaches. And also, something else that I’ve consistently done is I’ve connected into good mastermind groups where I’m actually with others that are like me. So rather than being like a coach that’s maybe coaching me, it’s more a group of peers, and we end up coaching each other. That’s been a huge thing that’s helped me to accelerate my success.

 

John Carney: Did you actively seek a mentor when you made the decision with your wife that you were going to pursue this as a career? How did that unfold?

 

Geremy Heath: Actually, it started like it does for a lot of people. It just started with a few books, an interest, and a few books in real estate. And then there was one book that I’d read and it talked about the importance of a mentor. The light bulb went off in my head, and I’m like, “Man, I got to go find a mentor to help me with this, somebody that’s already done this before.” And I came across a guy who flipped more than 300 homes and now he was a professional coach. I probably dumped 10 or 12 grand to get started with him, but it was money well spent. And since then I’ve spent tens of thousands, it could even be in the hundreds of thousands now. It actually is, on coaching and mentoring, but it is the best money that I’ve spent, because it’s really the one thing that has helped me to grow quickly. Much quicker than I would have if I’d just been by myself.

 

John Carney: Thank you for sharing that. I agree and think that’s an important message which I’m happy that you’re echoing. We can stress again that you have to invest in yourself, right? That is a capital commitment, but the results speak for themselves, don’t they? You don’t become an overnight success in the real estate game, but if you just keep plugging away, you get there. Awesome stuff.

Well I’ve got a few questions here that we call the fourth quarter questions that I’d like to throw at you. What sports did you love playing when you were growing up, or that you still play today?

 

Geremy Heath: When I was a kid, my brother and I used to love dirt bike riding back in Australia. I now do the milder form of that, now that I’m an adult, and I’m into mountain bike riding. Probably a little safer. Arguably it’s a little safer, but maybe not.

.

John Carney: I don’t know. I mean, I’ve fallen off both. So if you like speed, you’re going to eventually go over the handlebars. Maye that’s just me. We talked about books. I think this is an important message, that we’re coming up with a great book list here by conducting these interviews and producing this show.

What is your all-time favorite business book or sports book that you’d like to share with our audience?

 

Geremy Heath: My all-time favorite book by a long way is a book called “The Law of Success” by Napoleon Hill. And everyone’s familiar, or most people are familiar with his book, “Think and Grow Rich”, but actually not as many people are familiar with the book “The Law of Success” which was the precursor to “Think and Grow Rich.” The specific book that I really love is the original edition. I think it’s from 1925, and that was really the starting point of his philosophy. The way that book is structured is that there’s 15 lessons to go through, or 15 laws. I’ve read that book probably 10 times, and it’s very foundational in a lot of the ways that I think and act.

 

John Carney: Ok. Perfect. We’ll have that linked and listed in the post-game report. Can you tell us about a success habit or a practice? You’re a very analytical and systems oriented businessman. Is there something before you step foot in the office, or after you leave the office for the day that you do to kind of help you along in this journey of being a successful real estate person?

 

Geremy Heath: Absolutely. I would say probably one of the most critical habits that I’ve developed over the years has been my morning ritual. And there’s actually another book that I model a lot of what I do in the morning. It’s called “The Miracle Morning.” And for me, I spend about an hour, at least an hour every morning going through a series of exercises. I start with some meditation and then I’ll do some visualization. I’ll review my goals. I’ll go over some affirmations. I’ll do some reading and then I’ll finish it off with some exercise. Including the exercise, it’s normally at least an hour and a half. But what I’ve learned is that if you make the time, that morning routine really sets up your whole day and sets up your whole life when you compound it. You keep doing it continually. It’s so important that you just have to set the clock as early as you need to make time for it. For me, I like to get up at [4:30]. I don’t always do it, I’ve got to admit, but I like to try to get up by [4:30] so I can knock out that hour or hour and a half before everyone gets up and I start the day off right.

 

John Carney: So, do you have children in the house with you?

 

Geremy Heath: No, that makes it a bit easier maybe.

 

John Carney: Ok, I got you. Because we have a one-and-a-half-year-old, actually her half birthday is today, it is easy to be up. Having kids trained me to get up earlier. And then as a result of that I found myself waking up earlier to get the exercise and the other things in. So, the morning ritual, I would imagine, puts you in a pretty good flow state or zone and prepares you to start your day. Correct?

 

Geremy Heath: Yea, absolutely. And if I ever have times where I get out of that routine, the first person to tell me to get back into it is my wife, because she can definitely see the difference.

 

John Carney: That’s great. You’ve got a business partner who knows you well and can help keep you on track. So, with all this being said, we’re getting ready to wrap this up. Is there a quote that you ever fall back to that keeps you motivated? There’s a lot of motivational quotes out there these days on Instagram, I kind of like the athlete struggle quotes myself, but is there anything that you think about when things aren’t going your way, you’ve got to get something done, there’s a time crunch and all these things that happen when you’re flipping a hundred homes?

 

Geremy Heath: I think probably one by Henry Ford, which is a pretty famous one. “Whether you believe you can do it or not, you are right.”

 

John Carney: That’s a good one. How does that resonate with you?

 

Geremy Heath: I’m huge on mindset, which is a big reason why I invest so much time on that morning ritual, but it’s really something that was taught to me from my first mentor in real estate. He was really big in that area, and I guess what I’ve learned with 100% certainty, I’d even say one million percent certainty, is that your thoughts are your future. And so, when I think back to when I first started in real estate, every milestone that I’ve hit with the growth of my business when it was all started is that it was a thought in my mind. So probably a couple of years into the process of building my business, I’ve started to realize how powerful my thoughts were, and so I started to set bigger goals and try and have bigger thoughts. Because I started to understand if you can believe it and you take the action and you have full faith that it will be realized. Then it’s only a matter of time until that happens. And that’s why I like that quote from Henry Ford, because if you think it’s going to be hard, then it’ll be hard. If you think you can do it and it’ll be easy, well then, it’ll be easy.

 

John Carney. Thank you for diving into that one a little bit deeper for us and thank you for taking your time out to join me in the locker room today. Where can the audience find you to carry on the conversation? Are you on social media? We definitely want them to check out www.texasallcash.com. And where else do you live online where people might be able to reach you directly?

 

Geremy Heath: You could also check out our company Facebook page which is @texasallcashhomebuyers and then my email address is: geremy@texasallcash.com

 

John Carney: Cool. Well there you have it folks. I truly hope that you picked up some actionable advice today from Geremy Heath. He is the director and founder of Texas All Cash Homebuyers. Make sure to check out the Real Estate Locker Room Show on iTunes, Stitcher or Google Play and hit the 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 grateful if you would leave us a five-star review on iTunes, or your preferred podcast platform so that other like-minded real estate investors can find us online wherever they look for their podcasts. 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 are there, feel free to drop your email into the newsletter sign-up form to receive more real estate investing insights, tips, tricks, hacks 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. Thank you one more time from Texas All Cash Home Buyers. Thank you Geremy.

Geremy Heath: Thanks a lot, thanks for having us John.

(Music Out)

End Audio

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

© John Carney 2017

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

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

© John Carney 2017

JC 011: Travel, love and mobile home parks with Bryce Robertson

May 17th, 2017 | 2 comments

 

Meet Your Australian Mobile Home Park Mate

Born in Australia, Bryce Robertson spent six years travelling all over the world. Visiting over 50 countries on six continents, he gained priceless life experience and insight into the both the world of business and personal relationships. The lessons he learned help shape the way he lives his life and handle his business dealings.

While travelling, Bryce met his wife and inspiration Tiffany. They settled in California and set out together on a new adventure in the business of real estate.

With years of experience in construction and real estate Bryce became interested in the business of mobile home park investing and made it his niche.

His company, Property Works, specializes in all aspects of the mobile home park business as well as offering mentorship, advice and educational services to investors.

Five key points

  • Look for the right market when investing in mobile park homes: the median house price should be over $100,000 and the apartment rents in the area should be one and a half times that of the rents in the mobile home community.

 

  • Find yourself an experienced mentor in your field of interest that will show you the ropes.

 

  • Have the confidence to just put yourself out there: take massive action and learn by doing. You will gain experience and insights much quicker by doing than by trying to learn from a book.

 

  • Have integrity: “how you do anything is how you do everything.” Get the small things right, and the big things will be done right as well.

 

  • Take some time in the morning to experience gratitude for your life, set intentions for the day and your long-term goals. Then during the day it’s important to take mini time-outs; to refocus and regain clarity.

 

Favorite athlete – Alfie Langer Australian Rugby League player

Favorite book –  The Unbeatable Mind by Mark Divine

Check out Mark Divine’s podcast here: http://unbeatablemind.com/podcast/

You can get in touch with Bryce by phone +1 (714) 603-1394 or email, Robertson.e.bryce@gmail.com.

Reach out to the Property Works team at http://www.propertyworkzllc.com

Thank you Bryce for taking some time out to share your insights 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 011:  Travel, love and mobile home parks with Bryce Robertson

 

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 today from Cleveland Ohio, and joining me in the locker room out in sunny California is Bryce Robertson, who is your Australian Mobile Home Park mate and the principle of Property Works. Property Works specializes in mobile home park investments: from due diligence to assignments, syndication and property management. They are your mobile home park one stop shop.

Bryce is a real estate investing entrepreneur; an educator; and the large driving force behind the highly-geared Property Works team. A native from Australia, Bryce has 20 years experience in major construction, real estate and business. Bryce has travelled to well over 50 countries on six continents in search of greater wisdom and prosperity, which he will be sharing with us here shortly. He’s owned businesses in five countries on three continents, making him an international entrepreneur as well. He is definitely a well-versed entrepreneur and highly skilled to accommodate your local, national and international mobile home park investing needs. Thank you for joining us today Bryce. Thank you for taking the time to give our audience a little bit of insight on the world of mobile home park investing.

 

Bryce Robertson: Gidday John. I’m so excited to be here today. Real estate and sports, how exciting.

 

John Carney: I know, and we’ve got another Australian on the line; and this podcast is still in its infancy, but you’re guest number two. Your mate Reed Goossens has joined us before.

 

Bryce Robertson: Oh, beautiful.

 

John Carney: And we’re going to explore the intersection of the business of real estate investing and sports. I just personally like to draw the parallel between business and sports. I believe that business, and especially the real estate business, is a team sport, and we want to learn a little bit more about your business and your team.

 

Bryce Robertson: Very exciting.

 

John Carney: Well, to kick things off, let’s have a quick stretching question. Who, growing up, was your favorite professional athlete, and if it’s an Australian, will you please share with the U.S. audience who that person is and why?

 

Bryce Robertson: Yea, I’d say Alfie Langer. I used to watch rugby league and play rugby league in Australia, and he was an inspiration because he was a real team player and a real go-getter. And it didn’t matter what was going on, he would always come out successful. Even if they didn’t win, he always gave 100%, and I just thought that was super inspiring and yea, he was a really good bloke.

 

John Carney: So, competing in sports at a young age, looking back on it, winding the clock back now as a busy real estate professional and an entrepreneur, do you ever think about those lessons you learned from your heroes and from your coaches?

 

Bryce Robertson: Yea, and also just from my team members as well. Like, I played rugby league when I was a kid, and I was always an independent type of kid, and I soon realized when playing rugby league, that if I didn’t pass the ball to anyone else, that no one would pass the ball to me. And so that really let me know that to glide through the game with ease, or now through life with ease, that it requires building and maintaining trust and harmony in relationships.

 

John Carney: Yea, definitely. So, when you are working in your current environment, the mobile home park investing environment: talk to our listeners a little bit about what you do and how your business property works and enables investors to jump into the mobile home park investing environment.

 

Bryce Robertson: Sure. So, when it comes to mobile home parks, we own, operate, syndicate and educate, we basically take poorly managed mobile home park assets and then turn them around into much more profitable businesses that are a clean, safe environment. And our specific niche in mobile home parks is in the affordable housing space. In America and Europe, the economy is booming. Or if it’s taking a dive, there’s always going to be a massive need for affordable housing. And through the process of what we do, we provide a platform for other investors to invest their money in a very recession proof and very popular, now, asset class.

 

John Carney: So, can you just give us a little bit of a backstory on how that’s where you are now, but you started out in the real estate career right out of school, in construction management or on a construction site, like so many other operators.

 

Bryce Robertson: Well, I travelled the world for over six years. I went to about fifty countries and I thought I had it all figured out, because I had a travel pattern. And what I did, was I’d work, save some money, travel, and then run out of money and then repeat the cycle. And then I realized quickly there was a problem with what I was doing. Because at that point, my money, my income, wasn’t sustainable. So, at the end of each travel cycle I’d run out of money and I had to start all over again from scratch.

 

So, in the last six months of my six-year world travel, I met my wife Tiffany in the Caribbean. And she’s from California, so when I came to America and began my life here, we made a promise to each other to create a life that we wanted to live, yet make it sustainable. So we began looking at different ways we could make income. And we explored multi-level marketing and real estate and the stock market. It very soon became very clear that real estate was our destiny, because at that point my wife had a twelve-year background in mortgage and finance, and I had a 20 year background in construction management. So we teamed up.

 

And we began an extensive path of education, not only in real estate, but in all areas of life. And we soon found ourselves caught up in the hype of single-family fix and flips. And before too long, my wife Tiffany said to me she wanted to do something more people orientated instead of crunching numbers and searching through statistics. So, she became a realtor, and I branched off into commercial real estate investing, which I honestly wanted to do from the beginning. And that led me to the massive, passive income producing mobile home parks.

My mother-in-law had a mobile home near to Disneyland. I was over there one time and she told me she’d paid off her mobile home about five years ago, but she was still paying a thousand dollars a month in rent for the land that her home was sitting on. And I was like, “What? You own your home but you still pay a thousand dollars a month to rent the land off someone? Your landlord must be killing it!” So, I ran out front of the home, and I looked at all the homes that were in the community, and I counted about a hundred of them. And then I did the math, that’s over $100,000 a month in revenue. I need to learn more about this. And the next thing you know, I started buying mobile home parks.

 

John Carney: So that was a lightbulb moment for you with your understanding of real estate and having been at your mother-in-law’s. Will you sort of set the picture for some of our Australian audience? This was brought up by my business partner when I was living in Australia and we were running America Property Source, and talking about mobile home parks. He said it doesn’t translate over here. We have caravan parks and it’s just not like America, especially when you break it down that you have class A, B and C assets in a mobile home park community or in a multi-family community. So, would you be able to elaborate a little bit more about the mobile home parks and what opportunity you look for and zero in on in your business?

 

Bryce Robertson: There isn’t really anything comparable in Australia. I suppose there’s caravan parks, which would be equivalent to like an RV park over here, and it’s more really for recreational use, not for permanent or long-term living. But in America, mobile homes are homes that get towed around on the back of a truck, and they get set down and they are semi-permanent. But once you set one down, you don’t really move it, because it costs like five to ten grand to move it to somewhere else, to set it down and get it signed off. So, they’re pretty much sort of permanent type homes, and a mobile home park is a colony of those homes.

What we look for in a good market in a mobile home park is where the comparable two to three bedroom rents of apartments in the same city, in the same area, will be at least one and a half times that of the rents in our mobile home community. And we also look for the median house pricing to be over $100,000. By looking at those two metrics, it creates a big gap in the need for affordable housing and where else are our residents and tenants going to live if they don’t live in a mobile home park? The step is just really huge for them to move into an apartment or buy a house. They just wouldn’t qualify.

And another benefit of our residents living in a mobile home community is they have their own home and they have their own yard and they don’t share walls with people. They don’t have anybody walking above them upstairs, and they get the pride of actually owning their own home. Because in a mobile home park you can own the home and then all you have to do is rent the land off the landlord.

 

John Carney: In your parks, are the utilities paid for by the owner tenants or by the owner operator? Just out of curiosity.

 

Bryce Robertson: We try to lean towards the tenants paying the utilities, but the market will decide what’s going on there. It depends on what the market rents are and what’s acceptable in the market. But we do like to all-encompass everything so that the tenants are paying for the utilities and their rent as well.

 

John Carney: So, in order to start with one park – I would imagine everyone starts with one, when you started looking at the acquisition for your first park, what did your team look like? Can you explain that a little bit?

 

Bryce Robertson: For a team I would say get a mentor, first thing. You don’t even need to figure everything out. Just go there and get a mentor, and then you can have someone to fall back on. But yea, I would definitely say team up with somebody who has expertise and who’s done it before.

 

And you’re going to need a real estate attorney, a CPA, and a lender. You’re best off going out and searching for a lender first, because once you get a deal under contract, it’s crunch time, you’re on the clock and you don’t want to be scrambling around trying to find somebody to get a loan.

 

And then once you have your location where your mobile home park is going to be, then you’re going to build your construction crews for doing any rehabs to the homes. You’re going to have your plumbers, your electricians, your carpenters, and you’re going to find your landscapers, and all the other contractors that will be there to maintain and upkeep the property. And as far as a property manager, we do all the offsite management ourselves, and we also train people who live in the community to be onsite managers as well.

 

John Carney: That’s a great business model, as far as the management, right? Because I believe firmly that it doesn’t matter what asset class in real estate you’re investing in, if people are paying to rent space, the property management is a very critical component. That’s not downplaying any of the other team members.

 

You’ve been to all these countries, you’ve met an American lady, you’ve moved to California, you’ve made a commitment to be here, and you’ve chosen real estate. You’re in commercial on the investing and the brokerage side, correct? And your wife is on the residential side. How did you get to that first deal? Because that’s the entrepreneurial journey that I’m interested in. I would also like you to tie in how all that travel gave you the confidence to just get your hands dirty right away?

 

Bryce Robertson: I think the travel really allowed me to expand who I was and my confidence as a person, to really just go out there. You see, each time I travelled to a new country, there were a few areas through my travel where I set up basecamp. Each time I went to one of those basecamps, I had to start off fresh. I didn’t know anything about the area. Sometimes I didn’t even speak the native language fluently. And I had to start up my life there. I found that it always was the same thing: it just came down to drive and determination, and then learning the local knowledge or the knowledge of what I needed to learn as I was going. But when I was launching in each country, I didn’t have the time to sit back and figure it all out, I would’ve dramatically failed and I would have been living on the streets.

 

So, translate that into real estate and getting my first commercial deals going on. I went out there and got the base fundamentals of the education that I needed to get started, and then it was all about massive action. I was just absolutely obsessed about commercial real estate. I learned everything I possibly could and just threw myself out there in the action, and just started looking at deals and crunching numbers. And after not too long, I started to see the commonality and the patterns in what I was doing. I was learning from mistakes, and I really think, personally, that through action and experience is one of the best ways to learn. And so, I just put myself out there and just committed to it and just held up that tenacity.

 

John Carney: Did you ever have any travel experiences that were just so bad that they gave you a frame of reference, that when things aren’t going right on Monday morning in your mobile home park business, you’re like “Well, it’s not as bad as that one time.”?

 

Bryce Robertson: Well, you see I did have a lot of amazing adventures when I was travelling and I think that all of them were beneficial. Maybe at the time I’d felt that they were scary or something like that. But I think one of the biggest lessons I learnd out of all of that is: every time I look back at somewhere where I went wrong through my travels, it was because I broke one of my basic fundamental travel rules. I had a handful of travel rules that were geared around safety and common sense, and if I’d broken outside of one of those rules, that’s when the madness happened. And so, translating that into real estate, I need to stay grounded on my morals and my integrity in business and making sure that I’m not going outside there. And really, any time I have some sort of temporary failure, I’m usually just on the brink of a massive success. So, I think failures are just as successful as the good things that happen to us in life.

 

John Carney: That’s great advice. Could you elaborate on what are a few of your main drivers and what are a couple of your main rules for investing in real estate or operating your business? You mentioned integrity. Would you elaborate on those principles that you hold yourself accountable to every day?

 

Bryce Robertson: Sure. I always want to create win/win/win situations for people in any deal, whether it’s negotiating with a contractor, hiring a manager, or putting a whole deal together. I really want everybody to walk away feeling that they got something, they got some sort of value out of it. And every player in the deal wants some sort of different metric that’s valuable to them. And I think that comes down to creative deal structuring in whatever we do. So, it’s important to me that I leave every deal with everybody happy and that everything is harmonized.

Number two: Integrity. I think how you do anything is how you do everything. And if I’m getting all the small things right in time, each time, and I’m doing the right things by people, then I’ll be doing the big things right as well.

 

What else? You know, relationships are huge. So I definitely like to keep good relationships at all times, and I really like to listen to my gut. When I’m coming to a decision and I’m tossed up between, “Should I go this way or should I go that way?” I tend to stop, relax, take a deep breath, and just really connect with myself and what I really think the answer is, without any of the carrots dangling in front of me. And usually when I stop and ground myself, I’ll find the answers. But if I’m charging ahead because I’m excited about the outcome, then I’ve found that that’s where sometimes I could make a poor decision.

 

John Carney: So, in a way you pause. There’s no rapid fire emotional decisions, especially when there’s a big decision. Look, I think that’s all great advice, or a seriously good method to follow. Can you elaborate: is there anything you do as a daily practice that helps you prepare for your day, that might tie into all this? Because you sound like over the years you have a lot of experience with business and travel and real estate. Have you come up with that time of day – most people choose the morning – where you get yourself sorted out; then you go out, then you do well at work.

 

Bryce Robertson: Yea, I think the morning’s the best. You know, waking up and just fully experiencing gratitude for everything that I have in my life, and everything I’m surrounded by. And then creating an intention for all of my basic goals to be real, as if I’m already living them. And really take the time to take care of my nutrition and get myself started in the beginning of the day. And if I start the day off on the right foot then that’s perfect.

 

And then periodically through the day I like to take little time-outs, so I can regain clarity. So, things I like to do are yoga, or I might want to go surfing. I’m a big fan of CrossFit, so I love having an intense workout and just smashing any of the stresses out of my life. I feel like I’m shedding skin each time I exercise. And really focusing on other areas in my life that I think are important, like relationships and health and spirituality and fun and recreation. When we all put them together, those five areas of our life really build off each other and help generate even more wealth and success in business.

 

John Carney: So, now you’re still just as much of an athlete; you might not be on the rugby pitch, but you’re at CrossFit, which is highly demanding, and you’re surfing and you’re doing yoga and you’re looking after yourself physically. Do you plan to pick up any team sports?

 

Bryce Robertson: Not necessarily team, most of the stuff I do is individual. It can be done sort of as a team sport. I just completed my first marathon a few months ago. I’ve been doing a few triathlons and obstacle challenge races over the last few years. As far as a team sport, I mean real estate investing is a team sport. But as far as an actual athletic sport, I just like to do my sports, and I like to do them with other people. So, when I’m surfing, I’d much prefer to do that with friends.

 

John Carney: Social wave.

 

Bryce Robertson: Yes, exactly.

 

John Carney: I got it. That’s fantastic. Alright, well, if you’re an investor out in the market, and you’re unsure about where to begin in real estate, how do people find you? And what could you do to help people, through your syndication or your educational program, get in the game and start having some control over their investments and their money and their time.

 

Bryce Robertson: Yea, well, I would first off just say, “Hey, go out there and get a mentor and take massive action.” Because a mentor is really going to be the person who is going to help push you over the finish line. I definitely wouldn’t say wait back and try and figure it all out yourself. If you want to get real deals done, go out there, get those deals done. You’re going to learn ten times quicker than if you’re sitting at home trying to figure it all out.

Property Works, we provide a mentoring program for people who are looking to break into the mobile home park investing space. And if mobile home parks is not the thing that you’re interested in, then I highly recommend going out and teaming up with somebody who is light years ahead of where you want to be. Teaming up with them and leveraging their experience and their contacts, and just going out there and really going for it.

I mean, no one honestly really cares if you know it all or not. Probably the only person who cares is you, in the beginning. But most of the people out there are going to honor you for your courage, and for you just going out there and going for it. And you can piggy-back the experience of your mentor and the knowledge of your mentor. And if anybody else is out there thinking, “Oh well, you’re just a small fry, you’re out of your league,” well, they’re probably just jealous anyway. And they probably wish they had the courage that you had to go out there and take massive action.

So, if you want to get in contact with me, you can reach me at my cellphone which is: 714-603-1394. You can also email me at: robertson.e.bryce@gmail.com

Or you can visit our website which is www.propertyworkzllc.com

And we can basically take good care of things from there.

John Carney: Fantastic, so there you have it. We will definitely list all of your contact information and how to track you down in the show notes which we call the ‘post-game report’ on my website. And just to elaborate a little bit more: for someone who does follow up with you, what can they expect through your program?

Bryce Robertson: They can expect to set goals and to push themselves and to be accountable for goals and to get real life, hands on experience working on deals, and really pushing to get what it is that they’re looking for.

John Carney: You don’t strike me as a fluff kind of guy. You’re going to get right into it: day one, get your hands dirty, lift something heavy, pick up that barbell.

Bryce Robertson: Yea. Absolutely.

John Carney. Ok, perfect. Before we wind this down, we have something I call ‘the two-minute drill’, sometimes it takes a little bit longer. But we have a couple of questions I’m going to throw at you. And let’s go back to what you do to continue your education. Are there any books that you have in your collection that you just can’t put down, that you have to have close by just in case you need to reference them, and that you would recommend our listeners pick up?

Bryce Robertson. Yes. I would recommend “The Unbeatable Mind” by Mark Devine. He’s an ex-navy seal who teaches us how to gain mental clarity, concentration, and awareness and intuition, how to be an authentic leader and to avoid danger and to, like, deepen our warrior spirit. It’s a really cool book, you should just get it. No matter what you do, an amazing book.

John Carney: I will second that, it is probably a top three book that I would recommend everybody. Do you listen to his podcast by any chance?

Bryce Robertson: I have not listened to his podcast. I will be definitely interested to.

John Carney: I would say you’re lucky, only because you have about a hundred episodes you can work your way through, where I have to wait every week for that one hour to be released. But yes, check it out. I’ll throw that in the show notes as well, because I find that its good listening on my commute to work.

Alright, perfect. You’ve talked a lot about your morning ritual and what you do to stay focused and motivated. Are there any other places that you draw on inspiration other than your physical activity?

Bryce Robertson: My wife. Totally. She’s probably the pillar and foundation of my life. I really love just connecting with her and leaning to her for advice and groundedness. My wife is an amazing lady and she really just gives me so much more energy in life.

John Carney: That’s fantastic. Your wife is part of your Property Works business now as well, correct?

Bryce Robertson: She works with Property Works a little bit, and her main business is as a realtor here in Southern California. But she does play a role in property works. Yes.

John Carney: I got you. So, it’s a love story at the end of the day. You met her in the Caribbean and you followed her to America.

Bryce Robertson: Yes, absolutely. We just connect on every level, and what better thing than to have a life partner that’s totally aligned with you.

John Carney: Yes, that’s fantastic and you are very fortunate. That’s a great story. What is your number one ‘come from behind’ sort of victory that you could share with our listeners and inspire them to keep going at the real estate game?

Bryce Robertson: That’s a mentor telling me that I couldn’t do the deal. I had a deal, and my money was tied up, and I had no experience in that asset class, and I had a few days to pull the deal together. And I told this to my first mentor, and he said to me, “You know you’re dreaming kiddo, it’s never going to work.” So, I fired him and turned to my next mentor. Then I had that deal under contract a few days later. And I hustled and bustled throughout escrow and I owned that asset after three months. So, my determination and tenacity was way too big for any challenge I was going to come across.

John Carney: There you go, when one person says no, maybe that just fuels you to get the deal done even more. Well, thank you very much for taking the time to share your story with us today Bryce. You’ve already told us where we can find you and I will put that in the show notes. So, there you have it.

I hope you picked up some actionable advice from Bryce Robertson at Property Works. Make sure to check out the Real Estate Locker Room Show on iTunes, Stitcher or Google Play and hit the 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 grateful if you would leave us a five-star review on iTunes or your preferred podcast platform, so that other like-minded real estate investors will be able to find the show easily. The post-game report, show notes, links and content will be posted on www.johncarneyonline/podcast and while you’re there you can sign up for our monthly newsletter, and that way you’ll get some other investing insights, tips, tricks hacks and other great stuff that comes along from time to time.

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.

Thank you one more time Bryce, for taking the time to share your story with our audience.

Bryce Robertson: Thanks John, it’s been an absolute pleasure. Happy investing.

(Music Out)

End Audio

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

© John Carney 2017

 

 

JC 010: How to Identify the Perfect Insurance Agent with John Mark Tichar

May 10th, 2017 | no comments

You want an insurance agent with real estate investing experience

Insurance is a business expense but not all agents are created equal. Learn what skills and experience you want your real estate insurance agent to contribute to your team and portfolio.

John Mark Tichar joins us in the locker room this week to share his real estate story and pro tips for success in the competitive business of real estate and insurance.

When you shop for insurance are you seeking an agent who has the relevant expertise and knowledge of what it’s like to have skin in the game? Before settling into his roll with the Oswald Companies as a full time commercial real estate insurance agent John Mark worked for a real estate developer, multifamily property manager, single family home fix n flip investor and financial services provider.

“There is no silver bullet for success” John Mark attributes his success to showing up every day and working hard. He distinguishes himself from other insurance agents with his history as a real estate investor, property manager and project manager. John Mark’s experience of getting his “hands dirty” allows him to identify with the emotions and risk of his clients.

John Mark earned the real estate game by being proactive and doing the hard work. Find a mentor, get hand on experience and create your own opportunity.

Real Estate is a Team Sport

The fundamentals of investing are the same at all levels of real estate. The team is the same for 20 properties or 200 properties. The quality of the investment, your team and the experiences is what matters. The volume of property you own is second compared to quality of the investment.

Insurance

You don’t want a generalist insurance agent. You want to have an insurance agent who has invested in real estate at some point in time. Insurance is a line item in your operating budget. However, as an owner you must have a serious approach to mitigating risk.

Favorite athlete – Mike Piazz

Recommended reading –

  • The Millionaire Next Door by Thomas Stanley & Willima Danko
  • Talent is Overrated by Geoff Colvin

5 Key Points:

  1. Be consistent day in and day out
  2. Get up, go to work and learn on the fly
  3. To be successful you have to focus on a niche
  4. It takes time and persistence to be successful
  5. Understand the costs & risks up front

Success tip – “Duplicate your success and learn from your failures “

Thank you for taking the time to sharing your story with us today John Mark.

John Mark works at Oswald Companies in Cleveland, Ohio http://www.oswaldcompanies.com

You can connect with John Mark on LinkedIn or email him direct at john.mark.tichar@gmail.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

The Real Estate Locker Room Show with John Carney

JC 010: How to Identify the Perfect Insurance Agent with John Mark Tichar

[00:00]

(Music Intro)

Announcer: Welcome to the real estate locker room show with John Carney. Did you know that investing in real estate is a team sport? Join John and his guests as they explore the intersection of 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 today from Cleveland, Ohio. Today on the line, we’ve got a great guest, John Mark Tichar. He is the Vice President, Real Estate Sales Leader and shareholder at the Oswald Company’s headquarters in downtown Cleveland, Ohio. So, this is a valuable team member we’re going to be talking to. We’re going to be talking about insurance: John Mark works on the high commercial end, multi-family and commercial projects.

John Mark graduated from John Carrol University in 2005 and began his working career for a real estate developer and contractor called Woodfield Homes, West of Chicago, in a town called Rockford, Illinois. There he managed a construction schedule and subcontractors of five to ten projects every six months, valued between three and five million.

John Mark also provided property management and asset management services to investment property. During his time with Woodfield Homes, John Mark spent his off time looking for his own investment properties and focused on distressed and foreclosed single-family homes in the Rockford area. His first two deals yielded 25K and 20K in equity respectively, while providing cash flow: positive cash flow. It was during his time on construction projects, managing investment property and eventually owning investment property, where John Mark found his passion and true calling for real estate development and real estate investing.

Prior to joining Oswald Companies, John Mark worked in financial services, both in insurance and wealth management, so he has a lot of experience there. And over the last seven years at the Oswald Companies, he’s had the opportunity to apply his real estate background skills to service the unique risk management and insurance needs of his clients, established real estate developers and investors.

Welcome to the show John Mark, and thank you for taking the time out of your day to share your story with our audience and join me. How are you doing today?

John Mark.: I’m doing great John, thanks for your time and thanks for the invitation to be on your show. I’m looking forward to it.

 

John Carney.: Perfect. Well let’s kick this off. I like to ask our guests a question to kind of get the conversation going. This is the Real Estate Locker Room Show, so we’re going to ask you a sports related question and tie that into the business of real estate. Growing up, was there one particular athlete that you admired? A professional athlete or an amateur athlete that you looked up to?

 

John Mark: There was. My first love in sports is baseball. I’ve played basketball and football as well, but baseball my first true love from a sports perspective. And I was a catcher basically my whole entire young career as a baseball player. Mike Piazza from the Los Angeles Badgers was my favorite player. A little-known fact about Mike Piazza is that he wasn’t even drafted into major-league baseball. He was identified outside of the draft by a scout and was invited to try out for a team. So he basically came up through the ranks of baseball to become one of the baseball greats. It’s just a great story of persistence and never giving up on your dreams. Those are some of the characteristics that I liked about Mike Piazza.

 

John Carney.: Looking back at that particular athlete, I remember Mike Piazza’s playing days. He really put catchers on the map, so to speak, especially in the national league. Was that story inspiring to you as a young athlete, looking up to Mike?

 

John Mark.: It was inspiring. He’s a guy that just did a great job. His job day-in and day-out was very consistent, and as I was growing up he was the catcher to emulate. He was just a great role model that I thought would be good for me to portray myself against and emulate to the best of my abilities.

 

John Carney.: We’re going to now jump over to the nuts and bolts in the real estate side. But I like to draw the comparison between the business of real estate and the business of the team aspect, and just go back to what we learned in our younger years competing on teams. Because it’s very much a team-driven industry, and you have insight into how commercial developers and property owners and operators work at a very high level, and you’re a valuable player on their team by offering the insurance solution, would you give us a little bit of the background on how you settled into that niche in the real estate game?

 

John Mark.: Yea, part of the bio that you read discusses my, or shows my early involvement right after college. As a college graduate, I didn’t really know what I wanted to do exactly after college, and I had started to read books in my spare time about business. One of the themes that kept on hitting me, just kind of in my gut, and just a thought that I could never shake, was real estate. At that time, I didn’t know what that meant or what that looked like, but it was just a concept that I thought really resonated with me.

And so, during my years working at Woodfield Homes, I learned a lot on the fly, through just consistent application: getting up out of bed and going to your job, and doing to the best of your abilities, and learning on the fly, and just through that time I really came to enjoy and loved the game of real estate. And after that, when I came to Oswald, in the insurance base, it’s just such a niche driven industry.

 

If you want to be very successful you’ve got to focus in on a niche. Or firm is the fiftieth largest insurance broker in the country, so we have a lot of niches in private equity, construction, manufacturing and whatnot. We didn’t have a big presence in real estate, so I just decided to put to use my experience, both with the job at Woodfield, managing investment property and then eventually owning my own investment property. The foundation I think of any real estate operation in the country really, is what I experienced, and understanding the fundamentals and the foundation of what those operations look like. I feel this has really set me apart against my peers. And basically, I would contribute my success to just getting out of bed every day and hustling for business. There’s no silver lining or silver bullet that I think puts people on the map right away. It takes time and consistent persistence. So it’s just the daily application of using the work ethic that I’ve been blessed with, and going out and developing relationships and being a trusted advisor, and just over time being able to win over clients based upon my attitude and the extra things that I bring to the table that’s different than my competitors.

 

John Carney.: So, showing up and consistency is what is driving your success at the moment. Do you look back at when you made a change? In your down time when you were working in your first job for the construction company, you could have sat around on the weekends and gone to baseball games and hung out with your friends, but you chose to go out and dig up properties, and then put in the time and energy and money, your own time energy and money, those three precious resources, into fixing up these homes and running them as a business. So, do you believe that that experience just helps you identify with your clients better, especially on the insurance side?

 

John Mark.: Absolutely. I think one is: I get respect from my clients, having known my background and the fact that I got my hands dirty and have actually gone through the act of real estate investing versus standing on the sidelines like maybe other advisors and talking about the philosophy of real estate and of investing and how it should look which is a lot different than getting your hands dirty and having done it.

Understanding the ups and downs of real estate investing and the cycles and the challenges that everybody faces on a daily basis is what really sets me apart.

It was really when I started managing my boss’s investment properties. It was a small company, Woodfield Homes, and I worked with the owner on a daily basis. I got the manager’s investment property, and I applied the financials to an Excel spreadsheet and just looked at projected expenses. I applied projected appreciation over a period of time, and the math was just a compounding effect and was just a powerful calculation for me. And it just really gave me a very deep impression, a very good impression of real estate. I think that was the visual that I needed to really have the lightbulb go off and say “I know I like this business, but now I get to see the power of real estate financially and what it can mean from a lifestyle perspective.” That really made me come to just really love the business.

 

John Carney: So, that’s a great experience early on, and it sounds like the principle of Woodfield Homes was there as a sounding board and a mentor, if I’m reading between the lines, is that correct?

 

John Mark.: Correct, yes. I mean, he basically had this investment property and I went out and it was sitting vacant, just because it wasn’t part of his core business. I saw an opportunity to collect an additional six or seven thousand bucks a month in rental income. It was a multi-family property. So in my hours working for him, I would hire his subcontractors, and we would go fix up this property and get it rented and then I would sign leases with the tenants; I would manage the cash flow and the expenses; I would handle tenant issues; any move outs I would get them re-leased, so it was just a very hands-on experience for me. I didn’t read a book about it, I didn’t go to class for it, but it was just an example, or an experience that was the best way for me to learn. That’s the best way for me to learn, is just by doing it on a daily basis. And every day you learn something new and you apply little nuggets of learning experiences, and you apply those going forward and slowly things continue to get better and better, and you get better at your job.

 

Your right, that was spot on. He was a great mentor, it was a great opportunity for me to even get into that, have that experience. So for that I’m grateful for his willingness to let me run with those projects.

 

John Carney: Yes, that’s a unique opportunity that, now that we’ve dug into it a little bit more, sounds like you created your own opportunity: you created the opportunity and ran with it. It wasn’t given, it was created. I love stories like that, it’s very entrepreneurial. What I’m interested in sharing with our listeners right now is that you have that story, and you mentioned it’s kind of a smaller scale investment property. You have the opportunity every week to meet with your clients who own much larger operations on the commercial side. Can you talk a little bit about the parallels you see between an investor starting out with a few small, single family homes or a multi-family, and scaling that into something large? And do you see the team players that the larger operators have as identical, similar, different? Could you give us a little bit of insight into what you’ve learned just by playing at such a high level?

 

John Mark.: Yes, I think you kind of hit it on the head there: the team is the same. The actions are the same and the only difference is the number of zeros after the comma. If it’s six zeros, or nine zeros, or twelve zeros or what have you, that’s the only difference. But the fundamentals of property management: tending to tenant needs; having an attorney draft up a solid lease agreement that promotes tenant flexibility throughout a term of the lease; working with a local banker, or if you’re a more sophisticated operator, working with friends and family and or other sources of equity and debt to achieve the financial results.

 

Having a good team around you: a property management team and contractors that you trust, that you know do quality work, that don’t cut corners and that you understand the costs up front, so that way you’re not looking at a job after the fact and racked up an extra ten thousand dollars in costs or what have you.

 

Working with an insurance advisor to help you understand the multitude of risks that you face on a daily basis. Some of which can be mitigated through daily best practices in your operations. Others tend to be much larger that you want to have financed by an insurance company.

 

And so, whether you’re starting on two properties or two hundred properties, you hear a lot of stories about people getting into it just all of a sudden acquiring 100 hundred over the course of a year, or stories like that, which I think is great. But the number doesn’t really matter, it’s the quality of the investment that matters, and it’s the quality of the team that you have around you. It’s the quality of your experiences that if you have those, that allows you to scale quicker and better. And you get through that learning curve quicker with a better team.

 

If you don’t have a good team around you, you’re going to be struggling with your experiences, wondering why you’re experiencing what you’re experiencing, without a good team.

 

And so, to your point: it’s a team sport, whether you’re just starting out with a trusted banker, like I said before, or trusted attorneys and contractors, or taking those resources and creating an in-house department encompassing all those various needs as a real estate investor. So, in my opinion, the difference is, as I’ve said it in the beginning, the number of zeros.

 

John Carney: And to get to the larger number of zeros, everyone starts somewhere. And the nice thing about this industry that I like, or the business of investing, is that it’s unlimited based on everybody’s personal motivation. Give us a brief summary of the importance of understanding your own risk profile, and then why having the right insurance agent who understands that risk profile is critical. I’ve had experiences where, early on in my investing career, insurance was a business expense, but it’s one that you always look to minimize, right. It’s very important but people always try to minimize that because it’s a business expense, it affects the bottom line. So, give us a little bit of professional advice on the best approach to insuring your real estate portfolio.

 

John Mark.: Yes, I’m certainly happy to do that. Let’s just be honest, insurance is not the most exciting topic to talk about, right? You don’t sit around the cocktail parties talking about your insurance agent or insurance policy. I totally understand that. But you’ve hit it right on, insurance is a line item in your operating budget, right? Just like legal is, and just like your interest rates are on your loans. You can argue the same thing from a lender perspective or your accountant or your attorney. But from the insurance side of things, I think the number one thing for an owner to do is to take the topic seriously, first off, and then secondly, shortly after that, is to really take the time to stop for a moment and think that these risks out there, that they could happen to you.

A lot of people sit back and say, “that’s never going to happen to me, that won’t happen to me.” I think a really true statistical investor will actually take the time to help you understand how that might happen to him or her and what they could do to mitigate that from even happening in the beginning. So, I think the best way to do that is to team up with an advisor who knows real estate.

 

When I started looking at houses in Rockford, Illinois, the first thing I asked my mortgage broker, or banker, as well as real estate agent is, “Have you worked in real estate before?” And the only key members that I chose to work with in those areas are people that have invested in real estate before. Whether they owned real estate at the time was irrelevant, but the fact that they actually took the time and invested their time and their money into real estate told me that I’m dealing with somebody who absolutely understands each step of the process. And so that should be the same thing with your insurance advisor.

 

Whether your insurance advisor invests as a private or silent investor in deals, or has a small portfolio on their own, I think you need to take time to interview them and understand their experience in real estate, because you’ll come across a lot of insurance agents that are generalists. They’ll walk into a manufacturing company and act like they know manufacturing, and they’ll turn around and walk into a non-profit and act like they know the intricacies of a health and human services organization, and then private equity, and so on. You just want to make sure that, while it’s understandable to have a diverse book of business, you want to make sure you’re working with someone who has the majority of their book in real estate. That way they can bring to you the information that is meaningful for you, and making you aware of things that you may not even be thinking of in the first place. Because you don’t know, and that’s the job of advisors, to inform people of what they don’t know, to better educate them on how to manage those risks going forward.

 

So I think, as an investor, capital is very intensive, a capital-intensive business. You’re constantly leveraging your dollars, so the financial risks that you take, and risks that might come about with your lenders, investors, financial loss to the organization, then you have your physical loss from the properties, with acts of god that just – wind and fire and hail and so on.

 

And then you have the operations risk of property management and tenant risk and understanding how the tenants are taking care of the property. And that boils down to your lease that you have with the tenant and ensuring that they’re carrying their own insurance that will indemnify you and protect you based upon their negligence. So, there’s a number of risks that an owner has, and has to manage on a daily basis.

And the insurance advisor just becomes much more valuable than just a broker. Somebody who’s going out into the insurance marketplace. You know, you fill out an application, you get a bunch of quotes, that’s not statistics. That’s not complex. It doesn’t really show any expertise, it just shows that you can go through a process. But then turning that information into business conversation, specific to real estate investing – that’s the piece where I think there’s true value of an insurance advisor.

 

So I would just encourage all the owners out there to work with an insurance advisor that is in the real estate investment business, and take it as seriously as you would your accountant. Because the last thing that you want to happen is a 50, 75, 100 thousand, one million dollar claim situation that is totally unforeseen, that kind of hits you out of nowhere. And you go to your insurance agent, they haven’t talked to you in two years, and you say, “Hey I got a claim.” And they say, “Hey, it’s not covered.” Then you have a bigger problem than you would have originally. So, that’s just my perspective when it comes to insurance and it doesn’t have to be time consuming, you don’t have to spend hours and hours and hours on it. You have to find the right person who can understand and be that advisor.

 

John Carney: John Mark, that’s great. That’s a great summary of why investors need to put some time and effort into sourcing the right insurance provider and advisor for their team. Important stuff. Alright, before we wrap this up, I’ve got a couple more questions for you, we’re kind of getting down to our two-minute drill here at the end. You’re a motivated, hard-charging person, and you manage to get a lot done with the same 24 hours we all have. Are you a big reader? Are there any books on business, or books on sports that you’ve read that you’d refer people to?

 

John Mark.: Yes, I think a couple of books come to mind that I have read in the past. I mean, I think we all know the book ‘Rich Dad Poor Dad’ is a popular book that people mention. But there’s a couple other books.

 

‘The Millionaire Next Door’ is a great book, it just talks about daily application of financial discipline and the notion of cutting up your credit cards; that’s kind of an extreme example, but it’s applying due discipline to your financial situation and ‘The Millionaire Next Door’ is a great example of that.
Another great book that I really like, that really resonated with me (I kind of view myself as an underdog in a way) is a book called ‘Talent is Overrated’, I think Jeffrey Colban is the author. He mentions Tiger Woods in his book. About how, in order to be the best at your game, it takes time in that arena. So, in Tiger Woods’ situation, really quick, he racked up more hours by the time he was ten years old than most golfers racked up by the time they were 23 or 24. And that allowed him to be that much more dominant in the field, because at the age of ten or twelve, he was light years ahead of everybody else. In part because of his dad and then just his personal drive. So there’s a lot of ways to make up for talent and the book called ‘Talent is Overrated’ is I think just a great read.

 

John Carney: Thanks for sharing those, I haven’t read either one of those. I’m an avid reader, and I’m compiling a list, especially through talking to all the guests that I’m very fortunate to interview on this show. So, that will be included on the show notes of my website.

 

John Mark.: Nice.

 

John Carney: Is there anything that you do: a daily habit or a practice that allows you to train to be successful in your business and in your life, that you can share with our audience?

 

John Mark.: Yes, a couple of things. I have to be able to work out at some point during the week, or on a somewhat consistent basis. I think with the pressures of business, and the high-pressure sales environment that I work in, you want to have broad shoulders and you have big goals ahead of you that the company depends on you for. And so you’ve got to be able to de-stress, think through the day, process the day and just get it all out, so that way when you start the day the next morning, you’re kind of starting it somewhat from a fresh perspective.

 

And then I’m actually an introvert. So the way I recover and reenergize is by actually being by myself and just taking a few minutes to sit and process my day. I’m a scotch guy and a bourbon guy, so I’ll have a glass of that and maybe write in a journal of some kind and just reflect. The other tip is just to duplicate my successes, but more importantly, learn from my failures going forward.

 

John Carney: Thank you for sharing that. That’s good, sound advice for everybody who’s working on journaling, or a little bit of quiet time to meditate or reflect on the day. Well thank you for joining me in the Locker Room today John Mark. Where can the audience find you to carry on the conversation? Tell us a little bit of where you live online.

 

John Mark.: Actually I’m not a big Facebook person, although if you go on my profile there’s some pictures that I posted of me and my girlfriend recently. But I don’t spend time commenting on other people’s posts or looking at the feed there. I am active on LinkedIn and my full name is John Mark Tichar. So you can look me up on LinkedIn. You can also shoot me an email at john.mark.tichar@gmail.com. I would be happy to connect with folks and network if anybody is interested.

 

John Carney: Alright, there you have it folks. I truly hope that you picked up some actionable advice regarding insurance for real estate from John Mark Tichar. 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 all the pro-tips from our guests.

The mission here is to help you elevate your real estate game. And if you like what this show is all about, I’d be really grateful if you would leave us a five-star review on iTunes or your preferred podcast platform, wherever you get your podcast every week, so that other like-minded real estate investors just like yourself will be able to find us easily. 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’re there, feel free to drop your email into the newsletter signup form so that you can receive the monthly newsletter and other tips, tricks, hacks and good stuff related to the business of real estate. 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 again for joining us again John Mark.

 

John Mark.: John Carney it was a pleasure thanks for having me.

 

John Carney: Perfect take care, thank you.

(Music Out)

End Audio

[31.54]

 

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

© John Carney 2017

JC 009: Developing real estate and the AirBnB test with Mark Ebner

May 3rd, 2017 | no comments

The AirBnB Game Changer

Mark Ebner - The Real Estate Locker Room ShowMark Ebner is a Cleveland resident with 10 years of experience in the real estate development world. After earning his Master’s degree in Urban Planning Design and Development, Mark began work at a nonprofit organization before setting out on his own as the Principal Developer at True North Living.

Mark followed in his family’s footsteps of working in real estate and began his real estate development career by purchasing, demolishing and rebuilding a home in 2007, purchasing and remodeling his own home in 2011 and building new single family houses surrounding.

Mark and his wife began testing AirBnB with a home that was for sale and immediately realized enough success that they choose to keep a house as a short-term rental.

Five Key Points:

  • It’s important to learn how to teach and deconstruct everything that you do. “You don’t really think about your foot position when you’re skating until you need to describe that to someone else…”
  • Learn how to delegate more, speed the process up and hire the right subcontractors.
  • Real estate development takes a lot of work, a lot of planning, and you also have to make it fit in with the surrounding community.
  • Remind yourself to look at the projects, at what you’ve accomplished and bring yourself back to that when you get frustrated.
  • You must know the numbers. Make sure your margins are good and what they should be.

Favorite book: How Soccer Explains the World by Franklin Foer.

You can learn more about Mark and his city development work at www.TrueNorthLiving.com.

Thank you Mark for taking the time 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 www.johncarneyonline.com

POST GAME REPORT: Episode Transcript

 

PODCAST:            009 – Developing Real Estate and the AirBnB Test with Mark Ebner

Introduction:            Welcome to the Real Estate Locker Room Show with John Carney. Did you know that investing in real estate is a team sport? Join John and his guests as they explore the intersection of 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 ongoing 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, folks. My name is John Carney coming at you today from Cleveland, Ohio, and joining me in the locker room is another Clevelander real estate developer, Mark Ebner, and we’re going to talk about how to become a real estate developer. Mark lives down in Tremont and is the Principal Developer at True North Living. TNL specializes in modern single family homes for the urban environment, with each home being carefully designed to fit in with its surroundings. Mark is especially interested in traveling and the role of tourism in cities. With the first houses he built in Cleveland, he decided to test the AirBNB market for top of the line short term rentals and has been blown away with its success. Mark has a Master’s degree in Urban Planning Design and Development from Cleveland State, and while obtaining his degree he was a manager of research and engagement for CEOs for Cities, which is a civic innovation lab and network for city progress and success, and connects cross-border, cross-sector, cross-generational civic CEOs and change makers to one another as well as to smart ideas and practices. Welcome to the show, Mark. Thank you so much for taking the time out of your busy schedule to join us and our audience.

Mark Ebner:            No problem, thanks for having me.

John Carney:            Cool, well we’re going to talk about real estate development in a little bit, sports as well. So to warm up here and get this interview kicked off, we like to ask a sports question. Who is your favorite athlete of all time and why?

Mark Ebner:            That would have to be Kenny Lofton. He was a big part of my childhood for my older brothers and my family in the 1990’s when he was playing for the Indians. Actually he was traded from Houston to Cleveland at the same time that my family moved from Houston to Cleveland, so he’s kind of been a part of my life. I still remember where I was the day we traded him after the ’95 World Series, and then was happy when we signed him back a year later, and then when we traded for him again in 2007 when we made another magical playoff run. So it would have to be Kenny Lofton.

John Carney:           Great, and you got to see Kenny Lofton throw out the first pitch at game one of the World Series, correct?

Mark Ebner:            Yes I did.

John Carney:           And did you make it to all seven games this year?

Mark Ebner:            I made it to six of the seven. It was game four in Chicago that I didn’t make it.

John Carney:            That’s a pretty strong showing.

Mark Ebner:            It’s a pretty shocking showing. Originally I went to Chicago and I just wanted to be a part of the atmosphere, and I was with a family friend who encouraged me to just go to the game because I had never been to Wrigley Field and it’d be an experience. And then for game five in Wrigley, my brother from Portland had flown in to Chicago to see us. Hopefully a win, but that didn’t happen as you may know, but both of my brothers and I were able to go to that game together and it was a lot of fun.

John Carney:            Fantastic. Alright Mark, so we’re talking about real estate development, and I look at developing real estate as another form of investing because you’ve got to put your money and your reputation on the line. Can you tell us a quick story about how you chose to get involved in the development side of real estate?

Mark Ebner:            So my family has been in some sort of real estate or another my whole life. My dad’s a general contractor who when I was young, when we moved back to Cleveland, bought an apartment building that he began renovating and then subsequently managing, and then also started flipping some houses. In 2007 my parents were fortunate enough to give me a house that we demolished and then had to build a new house on it down in Sandusky, Ohio. So that was my first foray into new construction, it was also my dad’s first house that he bought which was a lifelong dream of his. And then in 2011 I purchased a house that was built in 1890 in Tremont and we remodeled that. The house itself had three vacant lots around it; just the houses had burned down at different times, the previous owners who raised a family of five in the house over the years had just accumulated all the land around them. So after I remodeled that house we began building some new single family houses around it. And in 2012 I quit my job at a nonprofit to really get a hands-on feel for everything. I wanted to see every aspect of the real estate development, especially before my dad needed to quit because he’s now 66 years old. So I thought it was a good time to grab it by the horns.

John Carney:            Great. So you have a mentor and a sounding board with your father, and then were you learning a lot with your degree at Cleveland State- your Master’s degree in Urban Planning? Was that a part of just an all-around interest, or was it also a push in the direction that, ‘this is my career path.’

Mark Ebner:            You know I studied mostly city management and economic development when I was there, I thought I was going to work for a city and help them on a larger scale. But as I was working before a nonprofit and then as I was working for the nonprofit, I began becoming frustrated just talking about what other people were doing, and I was sitting with my land and saying, “You know I can go make a difference. I can go do what I’m talking about telling other people to do,” and I think that was what really motivated me to start it.

John Carney:            Cool so I’m looking at your timeline here and my notes that I’m taking. In 2007 you and your dad build a new construction house from the ground up. No doubt you could write a book about all the lessons you learned doing that. And then you get into a purchase in 2011, so four years later, you got a house to renovate, to rehab, and you own three or four blocks around that. And then when did you start building? Because I guess we’re coming up on 2017, right? So there’s your ten years right there to become an overnight success, but you’ve been slowly chipping away at it and learning- building your team which we want to talk about here in a second. But give me a little bit of a synopsis of those ten years, and how overnight you became a real estate developer.

Mark Ebner:            So in 2007 it was right when I graduated college. I’d studied Political Science with minors in History and Social Justice, so I didn’t really know what I wanted to do when I became an adult. We worked on the house in 2007, that gave me a great opportunity to do something with my hands. I still didn’t quite know what I wanted to do so I actually moved to Vail, Colorado and I was a ski instructor for two years, which was really important for my development [Inaudible [00:08:47] because- bringing this back to sports, it was really what taught me how to teach and really deconstruct everything that you do and be able to communicate that with other people. You play sports your whole life, you’re taught how to skate, but you don’t really think about your foot position as you’re skating until you need to describe that to someone else, and when you really have to describe the most miniscule detail that’s really important, and I carried that through my whole career. But I then worked some office jobs and eventually decided to study the urban planning. And it wasn’t until 2014 that we started building the second new house, and when we started building that house is when I left my job at the nonprofit. And after that we started slowly- we did one house, I did almost all of the construction on it with help of my dad and a few other people working for us. The next house I subcontracted out a lot more, the last house that I built I subcontracted out even more. My happy point on that one is I’m building 35-foot tall houses, I never even stepped foot on the roof of that house. So learning how to delegate more, learning how to speed the process up, and select the right subcontractors.

John Carney:            So from the ground up on new construction on your lots in Tremont, you’re at four completed projects?

Mark Ebner:            That’s correct. Four completed if you include the renovated one.

John Carney:            Right.

Mark Ebner:            And then I have plans to build two more starting next spring, and I have a couple more lots that we’re trying to figure out the best way to build on them. They are in an area that hasn’t seen a ton of development yet, so we’re trying to come up with something a little more affordable, and maybe be able to get a little more density on my lot, and still fit in with the neighborhood characteristics.

John Carney:            So for our audience that’s not Cleveland-based and unfamiliar with the Tremont area, in some respects just becoming familiar with the area and checking out your awesome project when I moved back to the US, you were almost a pioneer there and really everyone built up around you while you were getting your degree. Is that a good way to put it?

Mark Ebner:            Yeah when I bought my house, directly across the street from me, it was a weed forest of just weed trees, and there were two houses that were around 1900 circa, and then since I bought it that forest has been torn down and there are now twelve new units of housing across the street from me.

John Carney:            And for our audience that- there’s a few movies that we can bring it back to this area. It’s the Deer Hunter, the church that they filmed in Deer Hunter, it was just down the street from Mark. And then the Christmas Story house is just around the corner, correct?

Mark Ebner:            Correct. Yeah the first house that we built, there are windows overlooking the St. Theodosius which was the church featured in Deer Hunter quite a bit. So that was- my brother was the architect and he had me getting up on ladders in the yard taking pictures so he could figure out the best way to orient the windows.

John Carney:            Right. So that would lead me into the team. But what’s the bare bones team to someone out there who has a passion for creating something new in their market, or has their eye set on improving an up and coming area in their city but just doesn’t know how to get started? And you had a father who had a lot of the skills, you guys worked together, it’s like a storybook father son project. But what would the bare bones team you’d recommend someone recruit to get started in something like this?

Mark Ebner:            You know I think it’s very important to work with an architect, maybe not so much if you’re building out on farmland where you aren’t limited by your lot restrictions, but my lots are 33 feet by 54 feet. In order to put a 2,000 square foot house on it, it takes a lot of work, a lot of planning, and you also have to make it fit in with the surrounding community so that the neighbors don’t feel like you’re trying to overshadow their house. I can’t put a three story house next to a one and a half story house like my old house, the one that was built in 1890. We actually started stepping that house up when we put an addition on it. We made it two stories, a little bit more modern with the additions so that we knew we could go up to three stories on the next house. So the very first person I would work with would be some kind of architect or some planner that you can map out the property and think about, ‘Well how does this fit in with the character of the neighborhood?’ And then you would need a really strong general contractor, someone that knows the business, knows how to find subcontractors or knows how to do the work, and that role would be my dad. I’m definitely starting to learn more of that role. But then you can start relying on your trades and let them do what they do best.

John Carney:            Like do you see now after having a few projects- I mean for lack of a better term, you’re almost a custom home builder in building your own product, right? But I mean would you say all those critical trades, is there a little bit of a loyalty there, and trust, and a rapport that’s been built up now over four projects?

Mark Ebner:            Yeah definitely. I think one of the most important things for me is being able to communicate easily with them. If I have a problem on the jobsite then I need them to come out and take a look at it, or if I need to schedule them so that I remain on my timeline. I just want to be able to get ahold of them, and if they say they’re going to be out on Tuesday, and they show up on Tuesday. Definitely it’s important to build those relationships.

John Carney:            Alright I got side-tracked here. Alright so we’ve got our team and we are talking about figuring out the best use for a lot, how dense you can make it, what type of architects you can- your creative boundaries so to speak for fitting into a neighborhood character, which is all important. So you’ve got a few of these you’ve sold to new home buyers, and then you’ve kept a couple that you’re having outstanding success in the AirBNB market. Can you talk to us a little bit about that?

Mark Ebner:            Yeah so I’m fortunate that my wife is very flexible because starting in January- which our house was completed in June, so six months after we moved into our house, she’s a nurse who doesn’t work Saturday, Sunday, or Monday ever. She allowed me to experiment with putting our primary residence on AirBNB just for weekends, and we were going to use it- I had been interested in a website called HomeExchange for a number of years where you trade houses with someone and you go to their house, they come to yours. That didn’t quite work out with us, we didn’t have all the flexibility that you might have when you’re retired and you can literally just go for long periods of time. So we decided to put it on AirBNB and we were going to use the money to go travel, and I just really wanted to see if I could build one of these houses and keep it, and do AirBNB rentals on it in say Cleveland. That first house we built in 2007 is down the street from an amusement park so that one’s been rented out on VRBO and HomeAway for as long as the house has existed, and it did tremendously well but we didn’t know how it would do in Cleveland. Cleveland’s not exactly the number one tourist market in the country, but I figured there was going to be enough demand for something cool, modern, and high end. And people when they’re travelling don’t necessarily want to stay in a downtown sterile hotel, they want to be out in the community, and Cleveland is truly a city of neighborhoods, so a blessing there. My house has been rented just about every single weekend all year, it’s getting a little taxing on us now, but in July Cleveland was fortunate to host the Republican National Convention, and that was right after I had finished building the next house. So when we were starting to think about selling it, we decided to furnish it and it was furnished in time to rent that one out for the Republican Convention, and once I did that and we said we already have the furniture, we’ve already paid down enough of our debt that we feel safe if we are able to sell one of the other houses that we just built. So we decided to keep that house and we’re renting it out full time now, and it’s definitely able to cover a mortgage, and it’s been an interesting experience seeing who’s coming to Cleveland, talking to people and getting to know what they’re here for.

John Carney:            So are you going to scale back on moving every weekend with you and your week and just focus on managing the house next door? And can you give the audience- just give us an idea in numbers how many dollars. I mean it wasn’t just the RNC that came to Cleveland, I mean that’s huge and we’re really only talking about from January until November. But you have the RNC, you have the World Series, and then you just have people that want to come downtown during the summer, you had the Cavaliers in their playoff run. What kind of money are we talking about these two houses generating in less than a year?

Mark Ebner:            So my house in this year, if I exclude the Republican Convention, which I view it as an anomaly, we are expecting to ring in $25,000 just from renting it Friday night, Saturday night mostly, and sometimes Sunday night. The other house I’m projecting $50,000 on it if it’s rented every week or rented seven days a week. And I’m assuming that’s going to probably be about 40% occupancy, 50% occupancy, I don’t expect it to be rented much more than one week a month during the week and then most weekends. But I’m starting to see some business travellers coming in, they’re using the house either for meetings, or it’s three co-workers that don’t want to share a hotel room, and they want a little more privacy. So I’m starting to get those weeklong rentals. And I actually have someone coming for two weeks that just got married in London, she’s from Cleveland and she’s coming back to celebrate with her family. So I’m hopeful that we’ll pull in $50,000 or more on it in a year.

John Carney:            So that’s an amazing- would you say that you stumbled upon this? You convinced your wife to test something, right? I’m big on testing and measuring, we talk about it in just about every episode. That’s the only way you really know. And then you’re looking at an extra $75,000 just on- as the Ozzys would say, on a punt, on a bet. And that’s a phenomenal, phenomenal story in and of itself. Do you see yourself as you look at new areas of the city to pioneer and figure out, keeping this model there? Build three houses, keep one. I’ve got another.

Mark Ebner:            Yeah I do see it. I had joked around that it was build one, get one free if I’m able to rent it. But building three, keeping one of them is definitely doable and something that I’m really interested in doing moving forward.

John Carney:            That would be a great- I’d be interested in seeing those numbers on a spreadsheet when you’re trying to nut out exactly how the numbers fall into place.

Mark Ebner:            Exactly.

John Carney:            Alright so we’ve talked a lot about points that we usually cover, but what advice do you have for someone starting out? You mentioned an architect as being one of your key team players in the development side of the business, but you want to become a real estate developer, it’s daunting, you don’t have to start out by building a massive shopping center, right? You can start out by just doing a two lot subdivision like I did. But what’s your advice for the people that have a burning desire to do this?

Mark Ebner:            You’ve got to know the numbers. It’s so important to know what land costs should be, because if you overpay for land you’re shooting yourself in the foot right from the beginning and that’s going to be something that’s going to be hard to overcome. And I see that in some projects around here that land prices are starting to climb, and people are still buying hoping to make some money on it, but everything else is going to be fixed. You’re not going to be able to push the ceiling of the house up too much in the neighborhood because the appraisers need to have comparables to compare it to, and your construction costs are going to cost a certain amount, so you need to make sure your margins are good and know what they should be.

John Carney:            Right. Sound advice. Start learning the market, knowing the cost of- well your time and energy but also the fixed costs that go along with it. Alright cool. So we’re going to get into our two minute drill here and wrap this up. What sport did you love playing as a kid?

Mark Ebner:            Baseball, hockey, and skiing are my favorite sports. I used to joke around that baseball was my favorite sport in the summer and hockey was my favorite sport in the winter just because I can shift.

John Carney:            And then today? Which of those three sports are you still actively participating in or what else have you added to the mix?

Mark Ebner:            You know I still ski, I’ve gotten twenty plus days of skiing my last several years. This is going to be my first time not having a ski pass in a long time because we’re going to try to go travel this winter. So definitely skiing I keep up with the most.

John Carney:            Perfect and one of my favorites as well. Alright so when you’re travelling, when you’re on planes or in the car, waiting around, is there a particular sports or business book that you’ve read recently that really stands out and would be something that you would recommend our audience pick up and read?

Mark Ebner:            One of my favorite books I’ve ever read, and I think it ties into this sports theme and business theme is, ‘How Soccer Explains the World.’ It’s a concept hard for a lot of Americans to understand, but how important soccer is in globalization, and how a lot of it’s tied to a city’s economy, or a country’s economy, and how there’s just so much pride around their team and how that can unify people.

John Carney:            So did I hear ‘explains’ or ‘expands’ the world?

Mark Ebner:            Explains.

John Carney:            ‘How Soccer Explains the World.’ Interesting, I’ve never heard of that one. Is there a motivational quote that kind of you fall back on when you’re at a city planning meeting and they’re not really liking your design, or the contractor who was supposed to show up on Tuesday decides to go on vacation? Is there something that keeps you going that you fall back to?

Mark Ebner:            No I’ve definitely had some problems dealing with other people having their opinions, or not wanting things in their backyard, and it can be a frustrating experience. I just try to remind myself and like look at the projects, and look at what we’ve accomplished, and just try to bring myself back to that when I get frustrated.

John Carney:            Got it. And when you’re playing ice hockey and you’re on a break-away and you get in that zone, it’s a one-on-one scenario, or you’re up on the mountain and it’s an epic powder day and you’re off on your own absolutely killing it on your favorite run, getting to that flow state, is there a way when you- in business that you have found that helps you get into that flow state? To get your work done and be laser focused?

Mark Ebner:            It’s very hard. I come back to that as I said, finances are the most important thing, but they’re also one of the easiest things to overlook when I’m out in the field every day. So I have to set aside time, I go up to my office and basically lock the door and try to take care of all my distractions. So I force myself once a week to go through the checkbook, make sure everything’s right, make sure all the bills are paid, make sure everything’s put into Quickbooks. And I’ve found it’s easiest to do that in the morning when your brain is fresh as opposed to the end of the day when you’ve been working all day and all you want to do is sit down and relax.

John Carney:            That’s interesting. So you’re setting aside a certain amount of time every week to study your numbers and make sure that you’re on track. That’s why you’re able to just like whip out your house one and house number two AirBNB so quickly, right? Because we didn’t prep that, that just came out of the loop, and right there at the tip of your tongue. And for real estate investors out there, that is how it has to be. Alright cool, so I think that just about wraps it up, we’re coming up here on the thirty minute mark, but what is your number one tip for training for success in the real estate game based on all your experience?

Mark Ebner:            Well other than knowing your numbers, I can’t preach that one enough is know your numbers. And also just being able to find the right employees, knowing how to train them, knowing how to work with them, or knowing- just knowing how to trust them. That’s important.

John Carney:            Cool. Alright building your team, knowing your numbers, and scaling up. Well thank you for joining me in the locker room today, Mark. Where can the audience find you if they’re interested on carrying on a conversation with you offline? Do you have a website? Social media? Places like that?

Mark Ebner:            Our website is www.TrueNorthLiving.com and my contact information is on there.

John Carney:            Perfect so look up www.TrueNorthLiving.com and you can connect with Mark directly there if you have any questions for how to get started in the development game. Alright there you have it folks, I truly hope that you’ve picked up some actionable advice from Mark Ebner today. Make sure to check out the Post Game Report on iTunes, and while you’re there please click on the subscribe to the Real Estate Locker Room Show button to make sure you don’t miss out on any of our future interviews and 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 grateful if you would leave a review for us so that other likeminded real estate investors like yourself can find it. It just becomes easier in the iTunes search engine. You can also visit www.JohnCarneyOnline.com for links and additional content associated with today’s show, and while you’re there, drop your email into the newsletter form and you won’t miss out on other real estate investing insight, tips, tricks, hacks, and other great stuff. Remember to stay focused on your goals, have fun, and stay in the game. I’m your host John Carney, until next week, work hard, play hard, and profit hard. Thanks again for joining us today, Mark. It’s been great.

Mark Ebner:            Thank you.

 

[End of Audio [00:30:56]

 

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

© John Carney 2017

JC 008: How to maximize cash flow with Tyler Sheff

April 26th, 2017 | no comments

Want More Mailbox Money?

Real Estate is a Team SportMeet Tyler Sheff who is the founder of CashFlowGuys.com, a licensed real estate agent, problem solver, educator, inventor and syndicator.

Want more mailbox money? Stop paying retail for your investment properties and boost your cash flow. Tyler shares his strategies for deal structure and offers advice on how to adjust your mindset in order to scale your business.

The mission of The Cash Flow Guys is to create successful real estate investors. Tyler teaches investor how to do the math associated with vetting a deal and how to interoperate the results.

Tyler’s the host of the Cash Flow Guys Podcast and a Master Facilitator of Robert Kiyosaki’s Cash Flow 101 Game.

5 Key Points:

  1. Put people on your team who own rental property
  2. You need an education to invest in real estate
  3. Lean how to receive mail box money
  4. Learn how to do the math
  5. There are different ways to structure a deal

 

Favorite book, Equity Happens by Robert Helms and Russell Gray

Favorite quote, “you can be fired from your job but you can’t be fired from you investments”

The Power Hour – Tyler’s parting advice for ongoing success is to tune out and think for an hour every day.

Reach out to Tyler by visiting his website, http://www.Cashflowguys.com

Facebook – https://www.facebook.com/tylersheff

Twitter – https://twitter.com/tyler_sheff

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

PODCAST:                        008 – How to Maximize Cash Flow with Tyler Sheff

Introduction:            Welcome to the Real Estate Locker Room Show with John Carney. Did you know that investing in real estate is a team sport? Join John and his guests as they explore the intersection of 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 ongoing 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 today from Cleveland, Ohio. We’ve got another great guest on the line from the Tampa area down in Florida, and that’s Mr. Tyler Sheff, and we are going to talk about the importance of cash flow. Tyler is the founder the www.CashFlowGuys.com and a licensed real estate problem solver, educator, investor, and syndicator. Tyler has been involved in the real estate game for over sixteen years and now maintains a 100% laser focus on investing for cash flow and helping others do the same. As a master facilitator of Robert Kiyosaki’s Cashflow 101 game, Tyler hosts workshops to teach the busy people how to use what they have to obtain what they need in order to build passive income and escape the rat race. Welcome to the show, Tyler.

 

Tyler Sheff:            Thanks, John.

 

John Carney:            The Real Estate Locker Room is all about having the casual locker room conversation about real estate. I’m really interested in the intersection of sports and the business of real estate. To get kicked off, I like to stretch out a little bit with just a warm-up question about sports. Do you have a favorite athlete that you can share with our audience?

 

Tyler Sheff:            Oh let me think. A favorite athlete? Maybe Wayne Gretzky. There was a time that I watched hockey when I was a kid, and I was a big fan of Wayne Gretzky back at the time.

 

John Carney:            Fantastic. I had number 99 on my bedroom door in the Oilers jersey.

 

Tyler Sheff:            There you go.

 

John Carney:            Coming from up here in Cleveland, he was a guy we loved. So you’re all about cash flow (cash flow is king), but before we talk about some of those strategies that you love and implement, can you let me know how or why real estate ended up as your career path?

 

Tyler Sheff:            It’s interesting. I like to tell people this is my second act in real estate. My first act went good, don’t get me wrong. I got involved, I started flipping houses and of course I got my real estate license, it’s going back to the year 2000. And that was all fine and dandy. I learned how to make money, but I never learned necessarily how to. That’s why I went into real estate initially, to answer your question, for money. I wanted to make lots of money, but what I didn’t take the time to learn is how to keep the money. So it took unfortunately a second act for me to figure out how to actually keep the money and have the money working for me instead of me working for it. That was a big revelation.

 

John Carney:            So if you’re in sales, we’re talking about real estate sales, you’re finding a buyer or a seller and then you’re getting a commission check, and then you’re onto the next one.

 

Tyler Sheff:            Hopefully.

 

John Carney:            Hopefully. If you’re a good agent you’re on to the next one. You have multiple deals cooking. But what you’re saying is we’ve got to get that income producing more income through assets, correct?

 

Tyler Sheff:            I call it mailbox money. I love it when I open the mailbox the last couple days of the month and the first few days of the following month, and I’ve got all these checks rolling in. It’s just beautiful every time that happens. And here’s what’s cool, John. I also get this mailbox money from properties that I’ve never owned, and just serving as an agent. Because what I’ve figured out I learned from one of my mentors, is I can take my real estate commissions as a promissory note instead of taking it as a lump sum at closing. Now by doing that I found myself putting together a lot more deals because the realtor commission no longer became an issue. ,You would think that the buyer would be paying the real estate commission if it’s after closing, right? But what we found is that with rental property it wasn’t really the buyer that was paying the commission, it was the tenants because they’re paying to live there. So once you adjust your mindset a little bit, I was able to carry my commission back as a note, make a decent little bit of interest, and then receive monthly payments of my real estate commission over time so I could take that payday and I could stretch that payday out over three years, five years, ten years, whatever the buyer decides they want.

 

John Carney:            I’m unfamiliar with this strategy, but believe me I will become familiar with this strategy quickly. So you’re getting a principle plus interest type arrangement with the new buyer on the promissory note, right?

 

Tyler Sheff:            Correct. So let’s say for example I sell a house for you and my commission on that house would be $10,000. Now normally in most markets the seller pays the real estate commission. I run across a lot of buyers that are not skilled at negotiating, so what happens is they wind up buying what I call off-the-shelf or they wind up paying retail. Well that’s really not going to help them if they can’t structure deals that make sense based on their investor identity. So instead the service that I offer to buyers in my market and actually across the country because we have buyers from all over the place that buy in my market, is I go in and negotiate for them on their behalf. Yes believe it or not, there’s a real estate agent out there that can negotiate, there are a few of us. And in exchange for me negotiating, the buyer pays my fee. That way in negotiations the seller is not concerned with having to pay a ‘realtor commission’ because it’s not coming out of their proceeds. That allows us to focus on the true negotiation that which the seller, or the buyer, is really going to pay, and what the seller is really going to receive. And now when I do that, I can talk to the seller about what their walk-away money is. I don’t have to talk in hypotheticals, ‘Well if I give you $100,000 for this house, that really means you’re going to net $80,000.’ No if I say we’re going to give you $100,000 for the house, you’re going to net $100,000 and here’s how we’re going to do it.

 

John Carney:            So that is really removing the elephant from the room on both sides in getting down into the negotiations, deal structure, and all the other fun stuff, huh?

 

Tyler Sheff:            Absolutely. Absolutely, I find that most investors are just like realtors. They’re not skilled at negotiating and they don’t enjoy negotiating. So if you’re not skilled at something and you don’t like doing it, well do you really- what’s the chances of being successful while you’re doing it?

 

John Carney:            So for all the listeners out there, when we’re talking about sourcing a real estate agent and how important they are in most markets, and looking for that extra value, now you have another tool, another question you can ask, another way of thinking about generating a better cash flow right from day one. Not only that, by removing the commission you’re also lowering the tax basis of the property.

 

Tyler Sheff:            Yup.

 

John Carney:            I’m not an accountant but I believe that that’s how that works because I’ve asked- in the past I’ve asked for the commission to be separated and paid separately out of escrow so that- this was for a property I bought as a primary residence, and that was basically to lower my tax basis on the public record, which is legal in the state where I did that. So that is a strategy that I’ve not heard of, and I’m going to be looking into. Alright, well cool. When you’re out there working for yourself on your own cash flow investments, you have- you’re representing your partnerships, and your family interest. Talk to me about the team you have and how you went about finding those people.

 

Tyler Sheff:            My team is very diverse, and as is my business. I’ve got several different classes or different legs of the business and I was probably the last person to get on board with the team concept. I thought one of two things depending on what time in my life it was. It was either nobody could do it as good as I do, or I can’t afford to hire somebody because I thought to myself, ‘If I hire an employee, that’s going to cost me $40,000 a year.’ I didn’t sit there and think- my mindset was off, that’s a big problem. If your mindset’s not right then it’s going to keep you from doing things. When you hire somebody for $40,000 a year, you’re not writing them a check for $40,000 a year on the first day they show up to work. What you owe them is $769 for this week, and then if they’re good, next week there will be another $769. So I was stuck in this mindset and one of my mentors, Jay Massey, helped me get unstuck in that regard. It’s like you’re not paying them in advance. I mean they do a job, they do a good job, you keep paying them and they’re valuable. If they don’t do a good job, then you don’t have to pay them anymore. That’s kind of how it works. So that was a game changer for me.

 

John Carney:            Finding the mentors to help you get a business structure that would allow you to help more people and to scale up, right?

 

Tyler Sheff:            Absolutely.

 

John Carney:            So with the Cash Flow Guys, I love the name because cash flow is what real estate investment should be all about, and if it’s ticking along and well-structured in advance, and everything works out, that’s what you should be receiving, mailbox money. Talk to me a little bit about how your business helps people get in that right mindset and get that first deal, or that third deal, or that obstacle deal in the portfolio.

 

Tyler Sheff:            Robert Helms from the Real Estate Guys Podcast, Real Estate Guys Radio, he said do the math and the math will tell you what to do. And I heard that a few years back at one of his seminars, and it really rung true. Like Cash Flow Guys is about educating people on the right way to do the math on the real estate investments, to do the due diligence, to do their homework, to understand what they’re investing in because our mission is to create successful real estate investors. People say, “What do you do?” I say, “I make billionaires,” and essentially that’s what we do. I teach people the steps that they need with no gimmicks, no hype, no extra up-sell to be successful as a real estate investor. And that’s the real crux of the service that we bring to the community. We’re not in it to sell courses, we’re in it to sell real estate. So there’s a big difference there and if I sell somebody one property and they get nuked, do you really think they’re going to buy another property from my team?

 

John Carney:            Succession follows success, and you would want your clients to be successful, that is just Business 101, right?

 

Tyler Sheff:            Absolutely right.

 

John Carney:            But not everybody subscribes to that, but that sounds great and I mean right out of the bat whether you’re a client of the Cash Flow Guys or not, if Tyler or one of his agents is working on a deal with you, it sounds like he’s got a system right out of the gate that helps you maximize your cash on cash return.

 

Tyler Sheff:            Absolutely right. For us, John, it’s not a rush, we’re not in a race. And a lot of investors, they go to some weekend seminar, and that’s great because everybody needs education. I’m not anti-education, I’m actually very pro-education. But they come out and they’re ill-prepared to make buying decisions. What we do, what separates us- and then they get with some regular real estate agent who’s just dying to make a commission. And it really to some degree, you really can’t blame them because they’ve got to eat, right?

 

John Carney:            Absolutely.

 

Tyler Sheff:            And so you’ve got a person that’s overly anxious to get into a property, and then you’ve got somebody who’s overly anxious to sell one because they don’t have a passive income themselves; that creates a potentially volatile and riddled with failure type situation, where I don’t need to sell real estate to make a living because I can do nothing. I can spend my days on my kayak, I am retired at 46, I don’t have to work. So I’m able to take the time to get my clients on board with the right mindset, the right skills and tools to allow them to be successful, because I’m not in this for the money. Money’s nice, yes, but it’s a byproduct of the service that we provide.

 

John Carney:            Correct, you are an entrepreneur at heart solving problems, and the income is just the natural byproduct of having happy clients is what it sounds like to me, Tyler. But along with being an entrepreneur, like real estate investing to me is bare bones entrepreneurship, whether people want to call it investing or being an entrepreneur, I look at them to be somewhat interchangeable because if you want to have multiple properties and scale up so that you can be fishing when you want to be fishing, when the fish are in town so to speak, and running at the right spot, you have to get started and then you have to have sound strategies, cash flow strategies, and it takes the average entrepreneur or small business ten years to be successful. What have you seen? What timelines have you seen, kind of an average from the people you’ve been able to help who said, “I understand real estate, I just don’t have the confidence to do it all by myself. Give me a hand.” How many years are you seeing before people are really able to sit back and say, “You know what? I can double this now.”

 

Tyler Sheff:            You know it depends on the person. We meet lots of different people, and the big part of what we do with coaching is we take the time to interview people and really get to know them and try to get to the bottom line of what they’re trying to accomplish. You’ve got the engineer types that have to know every single bit of information because that’s how they process thought, that’s how they think. Engineers are going to have a more difficult time, in other words their success gap is going to be much larger, it’s going to take them longer to accomplish the same thing as somebody who is a little less conservative so to speak, who is not as analytical to get to where they need to be. The engineer is a very risk averse type person, so it’s just going to take them a heck of a lot longer than it would the average person per say. Now I am very concerned about risk, and I’m cautious when I do things, I’m far more conservative than my wife is. And she’s not careless by any means, I’m just more conservative than she is, and we were able to get our first couple dozen doors within our first year of getting out there and doing it. Now with that process, as far as a timeline, I was in a big rush. I thought there was a badge of honor by the number of units that I had under my belt. I took a financial bath to some degree, or at least a dip in the pond that gave me an invaluable education, so we’ll call that tuition.

 

John Carney:            Okay, I mean that is a great analogy because that’s maybe skipping a valuable step.

 

Tyler Sheff:            Yeah.

 

John Carney:            But you didn’t make the same mistake twice, right?

 

Tyler Sheff:            Well actually I’ve got to say, I actually have made the same mistake more than once. I’m not going to lie, I couldn’t say otherwise. But the best thing I try to tell people whether they listen to my podcast or at any one of our events is that take the time to understand what we’re doing. In America we go out and buy stocks and mutual funds, we don’t understand what we’re investing in, we trust somebody else, a complete stranger on Wall Street to bargain with our retirement fund. It’s kind of illogical if you think about it. I used to play the stock market and now I look at the two, it’s like real estate is not rocket science. You don’t have to have a PhD to invest in real estate. Although I do have a PhD technically, I’ve got a Public Highschool Diploma, PhD, but it’s not hard, it’s not difficult to invest in real estate, but it does take some education and whatnot. And the faster you’re willing to take action, I think the faster you’ll see it.

 

John Carney:            I agree. A big proponent of taking action because results only follow action as opposed to planning I suppose. You’ve got to have that action step in there. Well great, so I mean we are talking about cash flow, and you’ve brought up some great points and some great tips for helping investors get started with cash flow. So before we get into our two minute drill and conclude this, what is your number one piece of advice for a rookie real estate investor who is after the cash flow? I might be repeating myself but know the numbers, is there something other than the math that you find to be a critical piece of the puzzle?

 

Tyler Sheff:            Put people on your team that own rental properties. Whether that be an attorney, especially a tax professional, a real estate agent. Insist that your team members in those roles own rental property because if they own rental property, they should be able to teach you how to maximize your efficiency in that regard.

 

John Carney:            There you go. We could end on that note because that is great advice, but we won’t. We’re going to now tie the sports aspect into this show. So are you ready for the two minute drill?

 

Tyler Sheff:            I’m ready, bring it.

 

John Carney:            Perfect. When you were growing up did you love playing sports or did you participate in any sports that made you realize ‘Wow I learned a few lessons there and I’m applying that to my business’?

 

Tyler Sheff:            I played a lot of sports, and I’ve got to be honest with you, I was terrible in most of them. But I did enjoy baseball and I learned quickly that I enjoy being part of a team. I absolutely enjoy being part of a team.

 

John Carney:            Okay, that’s great. I think that I learned the same thing. And are you still playing softball, or playing any team sports today, or is it fishing and-?

 

Tyler Sheff:            Well I got a little older John, and then I got a little fatter, and things don’t work the way they used to, and I’ve fallen down and gone boom a few times, and now I unfortunately don’t play sports anymore. I am an avid kayaker and fisherman and whatnot. I do some diving and that type of thing, and spear fishing. I’m an outdoorsman, a sportsman.

 

John Carney:            Don’t discount that though, like I think the outdoor solo athlete is just as much of a sportsman as the team guy playing the branded sports.

 

Tyler Sheff:            I agree.

 

John Carney:            And I’ve been fortunate enough to reel in a big game fish, and it wasn’t easy.

 

Tyler Sheff:            That’s for sure.

 

John Carney:            The fish made it easy for me being a rookie, he just swam right up and we pulled him in, but it’s supposed to be harder than that and the people on the boat were blown away. But it’s a tough sport.

 

Tyler Sheff:            Well hey, get a swordfish on the line and then tell me if that’s easy.

 

John Carney:            I doubt it, it was by no means a swordfish and that doesn’t look easy, not at all. Have you caught a few of those?

 

Tyler Sheff:            I have actually, I caught a few out in the Gulf of Mexico, and let me tell you that was an experience.

 

John Carney:            That is, that’s pretty cool. I’d love to see the photo.

 

Tyler Sheff:            Yeah I’ve got them somewhere around here, I’ve got to dig them out.

 

John Carney:            Look I know that a lot of our guests and a lot of our audience are avid readers, or their avid podcast listeners. Is there a favorite book that you have whether it’s related to sports or to business or to just something that supports being better at business that you can recommend?

 

Tyler Sheff:            I’ve got to say, the best book- and I’ll say this before I even give the title, and it’s about- they’re hopefully supposed to be releasing an updated edition. Not that the old edition is necessarily outdated, but these two guys put out so much value when they put out a piece of product that they’re just going to add more value to it. It’s called ‘Equity Happens,’ and it’s been written by The Real Estate Guys which are Robert Helms and Russell Gray. You cannot- it’s no longer in print but it’s still available from time to time on Amazon and I see the price fluctuating between $20 and $150. I love that book, I learned so much from that thing. It’s a big thick read, but I absolutely love it.

 

John Carney:            ‘Equity Happens,’ that’s good. We’ll get that up on the show notes for sure. Alright, is there a quote that keeps you motivated when things aren’t going your way? When the chips aren’t falling your way?

 

Tyler Sheff:            That keeps me motivated? Yeah what keeps me motivated, and sometimes I tend to be a little over-conservative, and it’s actually a quote that I use quite often and people have- I feel people now using it, so I guess I originated this. You can be fired from your job but you cannot be fired from your investments. So I’m having a down day, and I’m thinking, ‘Ah jeez.’ At the end of the day I think to myself- listen I have a stream of income that will remain uninterrupted for a lifetime the way I’ve structured it. So whatever’s bothering me, whatever’s bumming me out, I don’t really have anything to complain about because there’s always someone else that’s worse off than me, and at the end of the day my stream of income is never going to stop. So really I just need to put on my big boy pants, and buck up, and get back to work because I’ll be okay.

 

John Carney:            The gratefulness practice. It could always be worse.

 

Tyler Sheff:            That’s right.

 

John Carney:            Cool. Do you mind sharing one come from behind victory in real estate that you’ve had in the last ten years?

 

Tyler Sheff:            I had some properties under contract when I was first starting out in real estate. I had 22 houses under contract as a lister, or one investor. And apparently there was a riot in the neighborhood where all these houses were located, it was not in a friendly neighborhood. So long story short is on that Friday night, every one of those houses was burned to the ground. There was nothing but literally charred remains. But it turns out that after it was all said and done, the seller kind of thought about trying to figure everything out, and we wound up selling the lots for much more than we wound up getting for- that we had the houses listed for because the houses were in pretty bad condition. So it turned out that the riot actually helped the situation, it made it better because it just cleared all that rubble out of the way and he didn’t have to pay $10,000 a house to have them torn down.

 

John Carney:            That’s a good story. You have to be in it to win it, don’t you?

 

Tyler Sheff:            Amen.

 

John Carney:            Cool. Before I let you go, is there anything you do on a daily basis to train for success or to get into a flow state?

 

Tyler Sheff:            I have my power hour in the morning. I tune out. No Facebook, no email, no cell phone, no nothing. I sit back, I do absolutely nothing. I don’t read, I just sit back and think, and I do that for an hour every morning before anything else happens in the morning, even before my coffee happens in the morning, I just sit back for an hour and I guess some would call it meditating but I just call it thinking. I just sit back and think.

 

John Carney:            That is a great success tip, and it gets you into the flow state, and then you’re ready to tackle the day, right?

 

Tyler Sheff:            Amen.

 

John Carney:            Perfect. Well thank you for joining me in the Locker Room today, Tyler. Where can the audience find you to carry on the conversation if they have any questions or want to get ahold of you through the Cash Flow Guys?

 

Tyler Sheff:            I’m kind of everywhere but I guess the best way to reach out to me is through my website, go to www.CashFlowGuys.com. Of course you’ve got my podcast and all of our content information, my contact information is right on there. So feel free to reach out if you have questions or if there’s anything I can do to help you.

 

John Carney:            Perfect and we’ll have all of that on iTunes and on my website in the show notes. Alright, there you have it folks. Cash flow, cash flow is king. I truly hope that you picked up some actionable advice today from Mr. Tyler Sheff, and we thank him for taking the time to share those gems with us. Make sure to check out the Post Game Report on iTunes. Again we’ll have links to all the great places you can connect and interact with Tyler there. And while you’re there please subscribe to the Real Estate Locker Room Show to ensure that you don’t miss another episode, but also to help other likeminded real estate investors find us when they’re looking for real estate related content. If you like what we’re about, I’d be grateful if you’d tell a couple of your friends so that they can also share in the learning. If you visit www.JohnCarneyOnline.com you will see the additional content and links, and while you’re there you can sign up for our newsletter and keep in touch with me for other real estate investing insights, and tricks, and hacks, and other great stuff. So 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. Thank you Mr. Tyler Sheff.

[End of Audio [00:28:12]

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

© John Carney 2017

JC 006: How to build a major league soccer stadium with David Kaval

April 12th, 2017 | no comments

 

David Kaval developed the innovated $20 million partnership with Avaya and reinvented the fan experience in soccer stadiums. 

In today’s episode, John speaks with Ohio native David Kaval, the president of both the Oakland Athletics and the San Jose Earthquakes. David led the effort in designing, developing and privately financing Avaya Stadium which opened in 2015 as the home field for the San Jose Earthquakes.

David shares the challenges, successes and what it takes to run a professional sports team franchise with the resources you have. He stresses the importance of having a good, solid team to work and collaborate with.

“…having other people to bounce ideas off, to share the frustrations of setbacks, to work together towards a common goal, that was critical…”

David gives us a glimpse into the new stadium with all its features, décor, and layout as we learn about building a venue creatively and smartly while still adding great value to the fans; how turning an old tank factory into a beautiful 18,000 seat stadium is improving the landscape of San Jose, California.

Favorite book, Grinding It Out by Ray Kroc.

Find out what the San Jose Earthquakes are up to at http://www.sjearthquakes.com/

You can connect with David directly on Twitter: @DaveKaval or LinkedIn

Pick up a copy of his book that he co-authored called The Summer that Saved Baseball

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

 

POST GAME REPORT: Episode Transcript

The Real Estate Locker Room Show Podcast

JC 006: How to build a major league stadium with David Kaval

Introduction:            Welcome to the Real Estate Locker Room Show with John Carney. Did you know that investing in real estate is a team sport? Join John and his guests as they explore the intersection of 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 ongoing 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 today from Cleveland, Ohio. We have got a great episode lined up for you today. On the line from California joining me in the locker room is David Kaval and we are going to learn how to build a major league sports stadium today. David is the president of the major league soccer team, the San Jose Earthquakes, and oversees the business and technical side of the franchise and represents the club on the Major League Soccer Board of Governors. Kaval has led the Quakes’ effort to design, develop, and privately finance a new 18,000 seat soccer-specific stadium in San Jose, California. On March 22, 2015 Avaya Stadium opened to a victory over the Chicago- is it the Chicago Fire, David?

David Kaval:            Yep the Chicago Fire, we beat them 2-1 on opening night which was fantastic.

John Carney:            There you go, man. Well David developed the innovated $20 million partnership with Avaya to purchase the naming rights for the new stadium, and they worked together in partnership to create the first cloud-based enabled stadium in the world with lightning fast Wi-Fi that powers the Avaya stadium app. The stadium boasts the only field level suites in professional sports, a 576 field level patio club, HD LED panels throughout, and two party decks, and one of the Guinness Book World Records at the moment I believe as the largest exterior bar in North America. David’s also an author. Back in 1998 he co-authored the book, ‘The Summer That Saved Baseball,’ which highlighted a tour of all thirty major league baseball stadiums. He is a lecturer in management at the Stanford Graduate School of Business where he teaches classes in sports management. A native of my hometown Cleveland, Ohio, David earned a B.A. with honors in International Relations as well as his M.B.A. in Stanford University. He’s a long-time resident of Menlo Park and lives there with his wife and two daughters. David, thank you for joining us today, welcome to the show.

David Kaval:            It’s great to be here, John. I’m really looking forward to spending some time talking about all the exciting stuff we’ve done with the Earthquakes here in San Jose.

John Carney:            Yeah and believe it or not there’s a significant real estate development component to that that I want to jump into in a moment. But usually I kick off these interviews with a sports related question to our guests. Who is your favorite athlete of all time?

David Kaval:            You know I have to tell you I think it’s Kenny Lofton. He played for the Indians and he actually lived pretty close to us growing up in [Inaudible 00:3:46], and he was just such a great guy both on and off the field. Clutch hitter, hard worker, played multiple sports, and so I think he’s my all-time favorite. He was part of those early Cleveland Indians teams in the early nineties that was so successful and was really in some ways the face of the team.

John Carney:            Kenny Lofton, believe it or not, in this show’s young, young history has already come up from another Cleveland-based real estate pro.

David Kaval:            I love it, that’s a good sign.

John Carney:            We’re going to have to get Kenny Lofton on the show.

David Kaval:            100% it’s got to happen.

John Carney:            It’s going to have to happen now. Well great, I mean look for- this show’s about the intersection of sports and the business of real estate, and you’ve got a great story here about obviously one of these jobs where you are right in the mix of owning a professional franchise and running a professional franchise. But you know we all- all sports fans go to their stadium, I don’t know how many times people think about how it’s built, but that’s what you’re here to do, is let us know exactly what does it take to develop a major league sports stadium?

David Kaval:            Well I mean I think the key thing, and I learned this going through a six year process to get the stadium designed, developed, financed, and actually built, is you really need great partners and it really starts with the city, at least in our case because they own the land. The location where we built the stadium, it’s about seventy acres of land that was a former tank factory. They built the M2 Bradley fighting vehicle here for the military, the U.S. Army, and this is an area that really needed to be gentrified and cleaned up. And so we worked with the city to identify a site that had good transit, and transportation, and parking options, and understanding how to work directly with a mayor, a city council, the staff with the city was really instrumental in unlocking a lot of the value. So I think that’s one thing that holds for a lot of these cases, that you have to have those political relationships and the relationships with the right government officials, or you can’t even get out of the starting blocks.

John Carney:            So can we just wind it back to the concept? I’m unfamiliar with- the rise of major league soccer happened while I was living overseas. So you have your franchise, you don’t have a home ground so to speak, and you decided that you needed one. So you approach-

David Kaval:            Yeah so we approached the city and we said, ‘Look we currently rent the facility from Santa Clara University, Buck Shaw Stadium, but that stadium doesn’t have the fan-friendly amenities, premium seats, concessions, video boards, player amenities that could actually create for not only a top tier team, but a top tier experience for fans, and a revenue base that can support the operation of the club.’ So the only way that we could really achieve that was to build a new stadium that we controlled. And this was something that major league soccer teams had been experiencing really from its inception in 1996. The league was born out of the 1994 World Cup which was hosted in the United States, and FIFA which is the international governing body of soccer, said, ‘Hey you guys have to start a domestic league.’ And so they started MLS and all the teams played at big American football stadiums like the Horseshoe in Columbus, or here at Spartan Stadium at San Jose State, or Soldier Field in Chicago, and those experiences frankly were not very good. And so teams were struggling and what started to happen was some of the owners said, ‘Hey if we can identify ways to create stadiums, and actually control them, we can have a viable product that’s successful for many years.’ And so I was tasked with this situation in 2010, I came here, we had our stadium we were renting, and it was not a sustainable business proposition for the team to remain there. We had to find a way to get a new stadium built, and usually when you build a sports stadium there’s kind of one of two ways to do it. You can either one, publicly finance the stadium so basically go to a city or county and say, ‘Hey can you guys float a revenue bond or some sort of financing mechanism, general fund obligation to build the stadium, and then we’ll rent it from you for X period of years.’ In California it’s been exceedingly rare to get cities or municipalities to invest in stadiums in that way to have them built. And so you have to look at the other way to build a stadium which is a privately financed stadium, and the challenge there is that if you’re going to write a big check and build a stadium, is it going to be worth your investment? If you spend $100 million on a stadium, which we did, does it actually get a return on that investment, or is it kind of a sunk cost? And so that’s critical in evaluating whether or not you could finance it, get debt financing, bring other investors into the picture. And so when we were looking at this from a privately financed perspective we said, ‘Hey it’s really a tough hurdle to clear in order to do this in a way that just includes building this stadium with our own capital, and then hoping that the team generates more revenue, and is worth more.’ And so that is why- and this is why it’s so relevant to this conversation, we said, ‘Hey you know what? Maybe there’s a way to work with the city to build an entertainment district around the stadium,’ where we build the stadium, we pay for it, but we also get development rights to build around it, and the profits from some of those development rights can help offset the cost of building the stadium, John.

John Carney:            It immediately sounds like a pretty amazing capital stack. And so I suppose breaking it down in simple real estate math, you needed to have an investor, right? And you went out to the market, and talk to me about how you secured Avaya. I hope I’m saying that correctly.

David Kaval:            Yeah, that’s right. So Avaya, they were critical because they brought $20 million in capital spread out over ten years, $2 million a year, to help finance the stadium. And so they bought the naming rights of the stadium, and so that’s kind of a nontraditional way to get funding to help underwrite the cost of building it. And they not only gave us that money, and put their name on it, and were excited about it, but they invested in some of the infrastructure. Millions of dollars to build a Wi-Fi system, and to build an app for the stadium, and things of that nature that helps the fan experience. And so it’s truly a strategic partnership in every way that helped the stadium be completed, and then enhance the experience in the medium to the long term. And so when you’re looking at these opportunities, finding ways and being creative about connecting the dots to figure out who are potential partners who could add that type of value, understanding what they would get out of it- because if you name a stadium, all the notoriety, all the events we have there; Earthquakes games, women’s national team games, corporate events, it’s always known as Avaya Stadium. Even on the freeway when you drive it says, ‘Avaya Stadium next exit.’ You know? Those types of things are worth a lot to these companies, especially Avaya who’s trying to get the word out on their telecommunications products. And so that ended up being a really important part of the development of the stadium, and one that’s still yielding results to this day.

John Carney:            So yeah the partnership is something we always talk about being critical in any level of real estate, and even when you’re in a major league franchise, critical to get the real estate product that you need as David’s explaining. So I want to just really quickly look at the timeline. So from the decision, your team and the Board of Directors made a decision, ‘Hey we need to have a stadium’ to that coin toss at the Chicago Fire opening game. What’s that timeline look like?

David Kaval:            So I started in 2010, and it was in the fall of 2010, and our initial idea was to get to a point where we could break ground on the stadium by actually 2012, and we actually did achieve that. And so we had our groundbreaking, and actually we set the Guinness record for the largest participatory groundbreaking, John. So we had over 6,000 people turn dirt for two minutes and set the record, it was all over television and stuff, and that was in October of 2012. And so it took us about two years to get the entitlement work, the permitting from the city, and the financing, things like naming rights, things like debt financing, all these different pieces in line where we felt comfortable that we could actually break ground and move forward with the project at that point. And then it opened as you heard in 2015, so it took about two and a half years to build it, and it took a little longer to build than we thought because the site itself required a little more demolition and construction work because it was a former tank factory. So that was kind of unfortunate but it was something that kind of delayed us a little bit.

John Carney:            So I would imagine that you cannot possibly build a stadium of this size without running into a few obstacles.

David Kaval:            Yeah you know there were two main obstacles, John, and I’m glad you brought that up because it’s a great point. One was really construction risk which was the land itself, when we dug into the ground there were vaults and sub-vaults where they had old tank parts, and old munitions. Luckily none of the stuff was explosive even though I got a call one day from my superintendent and he goes, ‘You’ve got to get over here, we’ve got a major issue.’ I’m like, ‘What is it?’ He goes, ‘We’ve got UXOs.’ I said, ‘Al what’s a UXO?’ He goes, ‘Look it up.’ And so I go on Wikipedia, and I’m driving my car, like doing all this stuff at the same time which you’re not supposed to do, and it said, ‘UXOs: Unexploded Ordnance.’ I was like, ‘Uh oh.’ So we get over there and it in fact was old shell casings. Now luckily they weren’t explosive, he didn’t know, but like that’s the type of thing that you can face, especially when you get kind of older underdeveloped land, industrial land, and so you have to be kind of cognisant of that when you build and have contingencies in place because it cost us an extra $400,000 or $500,000 to clean all that up, and time. So that was one area of risk. The other area of risk that we faced on the timeline was the community. It took a lot longer to get the permitting because we had a neighborhood group that was concerned about the noise of the stadium. Now don’t get me wrong here, this location does generate noise, but we are next to an airport, a train track, a freeway, so we didn’t really envision that people would complain about that, but they did. And that happens a lot of times in development, is that you get local opposition, and so we needed to develop a plan which we did with our fans, to pack the city council chambers so when the neighborhood group was like, ‘Hey we don’t want you to build the stadium,’ we could show 600 people in the council chambers who said, ‘Hey soccer is important to San Jose and the Silicon Valley community. We need to have the stadium, it’s a great community asset. This group is privately financing the entire thing, and we want to do everything that we can to support it.’ And we were able to get the council to vote unanimously to certify the project. But that was another delay. And so those things together is why it took from late 2010 all the way to 2015 before we opened the stadium. And so during that period while every moment it seemed like things were going fast, on a bigger picture maybe it seemed to be moving kind of slow, but that’s just what these projects require in order for them to really get off the ground, and also to be built in a successful way, John.

John Carney:            Yeah it’s always- I would imagine it’s always a challenge with a lot of moving pieces like that, and then it’s just a consistent effort that got it to go- come together.

David Kaval:            Yeah and the other thing around those points as well, is that we just had a very good like construction team. So we had Devcon Construction who built the stadium, and Gary Filizetti who’s the owner, and they were a great partner through a lot of those crises. The city was a great partner when we had the neighborhood group, we had our fan base, we had a great legal team that worked on all these provisions. All these different people together- just even my front office staff who were selling tickets and taking deposits. Everyone has to pull together and be capable of putting something of this scale together, and even in these hard times when you have setback, they can’t give up, you just have to kind of dig deeper and try to find a path forward, and we were lucky to do that.

John Carney:            Yeah the team, critical in just about every aspect of business, and especially in the development business. Was this- this was basically your first big development, right? I mean you-

David Kaval:            Oh yeah of this scale 100%. I had done renovations to stadiums when I ran a baseball league, but in the single millions. And maybe $9 million most. This was a $100 million project so the scale was vastly different.

John Carney:            Would you say that the stress was relative to the scale, or not? I mean maybe not.

David Kaval:            I think it was. I mean I look back now and I was managing the whole development process while at the same time running the team, and so the challenge was I was just doing so much, I was pulled so thin. I think in hindsight the only reason it worked is that we had a great team, that I had a lot of great people working with me. I had Keith Wolff who is a member of our board of directors, part of our ownership group, who had a lot of experience doing hotel development, also mostly renovations. It was also his biggest project he’d ever done. But you know having other people to bounce ideas off, to share the frustrations of setbacks, to work together towards a common goal, that was critical and it was something that if I didn’t have I probably wouldn’t have kept my sanity, John, because some of the stuff you deal with is so challenging and can be so detrimental to what you’re trying to accomplish. So that kept the anxiety and up at bay that we were able to get through the process. And I think now because we have this beautiful 18,000 seat stadium, and it’s been sold out every game that we’ve had, and last night we just hosted the women’s national team against Romania, they won 8-1. It’s just so rewarding to see what we’ve built and what it means for our community, and to know that all this was required to get there, it was really worth it.

 

John Carney:            What was the- it sounds great, and I mean I’m dying to see it, and I’m sure one day I will just because I’m reading about it right now, I mean and loving the fact that I know you, and that this is such a task getting something from inception built on a scale like this, that I definitely have to make a trip out there with the kids once they’re old enough to appreciate a major league soccer game. But like in the creative process, which I’ll put on my developer hat right now, I mean one of the reasons that I believe, one of the reasons I like real estate development is because you’re improving something, right? I think the neighbors will look at you and say you’re just a greedy developer maybe, but generally developers that I know with integrity are trying to improve something whether you’re bringing new technology, or modern concept to an old area, but you’re trying to revitalize an area, and that’s what David and the San Jose Earthquakes did with Avaya Stadium. So that unlocks this whole creative process, and the creative people are the architects. I mean how much fun was that for you and your team?

 

David Kaval:            Oh it was great. You know we worked with HOK who designed a grouping of tons of stadiums including like Jacobs Field or Progressive Field in Cleveland, and Brad Schrock was our main designer. Some of the things that I think were the most fun was we challenged a lot of the existing norms on soccer stadium development. The majority of soccer stadiums that had been built in the United States before Avaya Stadium were just kind of the lower bowl of an American football stadium. So they were kind of like a little boring, like low rake of the seats, far away from the action, pretty standard kind of thing. And we said, ‘Wait a second, no. We want to flip this on its head. We want to look at the stadiums in Europe, and we want to think about the ways they’d been built, the different grounds in England, and the Bundesliga in Germany, and we wanted to build a very intimate but elegant stadium that had a very steep rake of the seats, and had a roof, and had the bar space, the largest exterior bar in North America. And actually I think the one big master stroke was to take all the premium inventory; the suites, the club areas, and we put that at the field level instead of way up in the rafters. And so that creates this amazing like front door experience, kind of like court side seats in the NBA. And the process of working with our designer back and forth to challenge the status quo, to try new things, and even some of these things- like for instance putting the thing at the lower level, the premium seats, that probably saved us $25 million because we only needed one concourse, John, instead of two. And so it was thinking more creatively and smart about how to build a venue, and how to do it in a way that was still beneficial to the fans. The fans aren’t getting any less, they get maybe something more, but it costs less and I think that type of give and take with our designers was something that was super fun. And then the other piece was kind of like the materials. You know one thing we were really cognisant of was like the feel of the building. You know we have a lot of wood in the building, it’s reclaimed red wood from Moffett Hangar which is a famous building here in the Bay Area. The wood is over 2,000 years old, it’s on the press box, it’s on the suites, it’s on the bar, the concession stands, and it really softens the kind of steel feeling of the stadium. And that was something that we were really proud of. Or even like I remember picking the Portuguese terrazzo stone, and we have $800,000 of this stuff in the stadium, and making sure it fit, and that and all the other pieces of that, and finish of the building was something that we were really proud of, and it was something- that creative piece. We had a field here, an old tank factory, and now we have a beautiful stadium that people can congregate at. It’s really tremendous. Like you said, that’s one reason that people get the bug to develop something, because you build it, and it’s going to be there, it’s going to last even longer than us so it’s pretty cool.

 

John Carney:            Yeah I mean that’s a fantastic legacy for the development team. Alright, cool. We are going to get into- we’ll wrap this up with what I like to call the two minute drill. Let’s take it back to what sports did you play growing up as a kid, and what lessons did you learn through athletics that you apply in your everyday life? Especially running a major league franchise and developing stadiums.

 

David Kaval:            You know I played basketball, football, and baseball growing up. Basketball was definitely my best sport because I was pretty tall, and I think the number one thing I learned was just the value of everyone’s role on the team. Because I wasn’t the best basketball player, but I was pretty good at shooting the three pointer out of the corner. And maybe I wasn’t the most athletic defender but I could kind of take that position, and I knew my role, and I knew how to be successful in it. And I think when you build a team of people in business or in real estate development, the same thing, knowing what your role is, and as the entrepreneur or developer, making sure you pick the people who have the right types of roles and skillsets so you can meld that together into a team that works, is something that I think is really- it’s almost essential for your success. I think when you have people who are trying to do too much, or do stuff that they don’t know about, it would be like me trying to dunk the ball in basketball, and that didn’t really go over very well. So I think that’s probably the biggest lesson that I learned and it was something that I saw when I was on some of the different teams at university school when we won different games or had successful seasons. And so that’s something that stuck for me for many years.

 

John Carney:            Yeah and that’s really sound advice. I mean I suppose in business and in real estate is knowing what your skillset is and then getting good at building that skillset. You’ll never be good at everything, so focus on your positive attributes, and find the other awesome team players to surround yourself and you will achieve more. David, is there any favorite book on business or sports that you draw lessons from? One of those books- I make notes in books which some people don’t like, but I’ve got a small stack on my desk behind me, or on the shelf behind me that are references just in case I need to look something up. Is there one in particular that you have on your desk that you look at time and again?

 

David Kaval:            You know the book- my favorite business book is a book called ‘Grinding It Out,’ and it’s the story of Ray Kroc who was not the founder of McDonald’s but really was the visionary CEO and owner that built McDonald’s into a real company. And the most amazing part about the story is just how much resilience and perseverance he had because he didn’t really go into that role until he was 55 years old. So to think he had a whole life, he raised a family, until he got to the point where he became this entrepreneur and created this whole McDonald’s empire that we see kind of on every street corner. And so it’s called ‘Grinding It Out,’ it’s a great read, it’s very inspiring, and certainly as an entrepreneur and developer, it’s the type of story that gets you through the harder times. Because you know that you just have to keep pushing wherever you can to get the kind of brace you need to be successful.

 

John Carney:            So following up on that, and I am collecting an amazing book list too by hosting this show, and I’m going to have to find time to read all these gems. But knowing that, that you have to just show up every day, like is there one number one come from behind victory in this stadium development that really sticks out? You talked about a few obstacles earlier, but is there one come from behind victory that really resonates and is a lesson from that?

 

David Kaval:            I think the number one was when we delayed the launch of the stadium. It was originally going to be 2014 to 2015, and it was hard to keep the staff together- the team together, because people were so discouraged. And so I had this meeting where people basically- I told them, I said, ‘Nobody signed up for this, so if you don’t want to be a part of this, feel free to walk out the door.’ And two or three people left right then. But everyone else was bought into what we were doing, and no one could bitch and moan later that said, ‘Hey I didn’t want to be a part of this thing.’ And so I think it taught me one, that you have to be honest with the people who work for you. And I think if there’s any mistake I made there, it was that I was too aggressive with the dates at the beginning, and I wasn’t honest enough with myself, or the community, or staff about when it really could be built, or our ownership group. And I think I’ve learned from that, and you just have to be more open and be willing to hopefully have expectations that are in line with what you can achieve. But if you do get in a situation like that, be truthful, deal with it, face the music and try to move forward, and that’s what we were able to do. Because if I would have lost the team, John, then I wouldn’t have been able to sell the stadium out, or get it built, it may have been a disaster. So that was a huge moment for me.

 

John Carney:            Right, I imagine. Well thank you for sharing that story, and that’s really a leadership story where you’ve got to make tough calls, and they’re not always popular but you got the job done at the end of the day. So the last question before we wrap this up is a lot of people- whether you’re a professional athlete, or you’re an entrepreneur, or working at the pointy end of any business, I find that a lot of people need to get into a flow state or a zone, and they train themselves for success with daily rituals or habits. Do you have a daily habit or ritual that you use to train for success, David?

 

David Kaval:            You know I think one thing I like to do is when I drive into work in the morning, and I have about a 25 minute commute, I like to just not be on the phone, I like to listen to some music, and I just like to think. And you know I think it’s important to put time in the day to think about how to solve the problems you’re facing. Because you get so overloaded, there’s someone in your office all day, you’re on another call, it’s like you don’t have any time to kind of process everything that’s happening. And I think that clarity of thought can actually be a force multiplier in your ability to actually make decisions, build a team, have success. And so that’s been something that I’ve done for most of my career, and it’s something that I’ve realized over time has really served me well.

 

John Carney:            That’s good advice for our listeners, and with that I’d like to thank you for joining me today on The Locker Room, David. Where can our audience find you to carry on the conversation, or learn more about the San Jose Earthquakes and Avaya Stadium?

 

David Kaval:            Well they can go to www.SJEarthquakes.com which is our website, and I’m also very active on Twitter at @QuakesPrez so folks should feel free to reach out to me, and I’m on LinkedIn as well, and I love talking to folks. Actually I host office hours once a week where anyone can call in or come and meet me in person and discuss any issue from the soccer team to my class at Stanford to the Indians, or whatever they want to talk about. So it’s a nice opportunity to kind of change gears and get a fresh perspective from people, and I encourage folks to reach out through any of those mechanisms.

 

John Carney:            Fantastic. So if you have any questions for David, hit him up on Twitter, and of course we’ll post those links in the show notes. So there you have it folks. I truly hope that you picked up some actionable advice today from Mr. David Kaval. Make sure to check out the Post Game Report on iTunes, and while you’re there, if you like what this show is all about, please hit the subscribe button so that other folks can easily find the Real Estate Locker Room Show.

If you like what we’re all about, give us a nice review as well. That helps people who are likeminded real estate investors come across us when they search ‘real estate’ on iTunes. And make sure to visit www.JohnCarneyOnline.com for all of the links and additional content associated with today’s show, and we will remember to stay focused, have fun, and stay in the game. I am your host, John Carney, and until next week, work hard, play hard, and profit hard. Thanks again for taking the time to share your story, David, and what a great story it is. So go Quakes.

David Kaval:            Go Quakes.

John Carney:            Alright buddy, thank you.

David Kaval:            Take care.

 

[End of Audio [00:32:39]

 

 

 

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 005: How to reposition the Sleeping Giant with Nat Mundy

April 5th, 2017 | no comments

Learn how a Rolling Stones concert in London changed Nat Mundy’s life.

The Real Estate Locker Room ShowNat is an international entrepreneur who capitalized on his childhood passion for go-carts. Nat’s business plan received a D in business school but he was undeterred in pursuit of his goal.

Nat leveraged the skills that he learned on Wall Street to build an entertainment brand that started out by repositioning the “Sleeping Giant” – a massive industrial campus that was the perfect fit for his unique vision.

Nat credits his success to leaning strong work ethic from his father and having the right team of people onboard that believed in his vision.

Favorite athlete – Wayne Gretzky, “The Great one” – NHL Hockey player

Nat recommends reading all of Richard Branson’s books.

Must read – Losing My Virginity – How I survived, Had Fun and Made Fortune Doing It

Key Points:

  • Nat draws his inspiration from courage and loyalty
  • Lead by example, be willing to mob the bathroom floor
  • Make sure everybody is healthy and happy

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

You can connect with Nat online at Grand Prix New York, www.gpny.com or http://www.spinsbowl.com

 

POST GAME REPORT: Episode Transcript

The Real Estate Locker Room Show Podcast

JC 005: How to reposition the Sleeping Giant with Nat Mundy

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 up 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 in the

Locker Room, on the line from West Chester County New York, is Nat Mundy. Nat is a

36-year-old entrepreneur and graduate of Hobart College, after a brief stint on Wall Street he decided to pivot and pursue his thesis project which is Grand Prix New York that he subsequently received a “D” on in school. But that was not a deterrent for Nat. He hit the ground running, raised the money and started build out in December 2006 and opened the doors to Grand Prix New York in February 2007. Nat grew the business by adding “Spin Bowl” in 2010 and an arcade in 2011. To grow he and his partners began acquiring bowling alleys and launched the multi-store brand “Spin Bowls” in 2015. How ya doing today Nat? We’re really interested in hearing how this entrepreneurial business turned into a real estate business so welcome to the show.

Nat Mundy: Yeah, thank you very much for having me, I appreciate it.

John Carney: No worries buddy. We’d like to start out with a little bit of

a sports related question here to kinda get the show kicked off and get the creative juices flowing. In all of the professional sports, who is your favorite athlete of all time?

Nat Mundy: I think my favorite athlete of all time, I’m going to go with The Great One, Wayne Gretzky.

John Carney: Nice, nice. Where you a hockey player growing up?

Nat Mundy : Hockey player growing up. Hockey fan my whole life. And just a guy that made a career and became untouchable. And to the point where rookies wouldn’t even touch him. And from what I can tell, decent family guy, attractive daughter, even more attractive family. And never got into any trouble, or did anything stupid, in elevators or night clubs. Ya, can’t hate him.

John Carney: No, not at all. He was a little guy. So, I mean, he had to adapt.

Nat Mundy: Right exactly. Wasn’t there when the 6ft 5in. mile 41 Saskatchewan players. So, when those guys came on the scene, he’d already been in the ice for 15 years, or something. So, he stayed and he ended up becoming “The Great One.” So why not?

John Carney: #99 folks. I had a poster of “The Great One” in his original Oilers uniform on my door when I was a kid growing up.

Nat Mundy: Awesome, great! That’s so good.

John Carney: Well,Nat you have an interesting story I’d like to jump into because you’re an entrepreneur, started a business, you started a business after a professor said it was no good, right? It was a rubbish idea and you had a little bit of a pivot, started a business and that business also became a real estate business. So, could you tell us the story. How did you get started?

Nat Mundy: Yeah. So basically I was at a “Rolling Stones” concert in Wembley Stadium, in the U.K. when I was I’d say, 18, 19 years old. And I went to an indoor go-kart track in London. And there was this very cool Honda powered go-karts, Italian chassis. And they were running in an old abandoned warehouse. I didn’t even look like a warehouse, which was like a Brooklyn New York warehouse. I though that we would have to have this in the states. I’m stupid, I’m sitting there, I’m watching corporate events do their thing there. In stead of playing golf or going to a big dinner, they were going go-karting, you know, why not? So, when I got back to the states, I had realized they had opened one in Boston, called, “F1 Boston.” I reached out to R.J. Valentine, who is a real estate insurance guy, who’s based out of Boston, owns F1 in Boston, and F1 Outdoor which are the two, first indoor-outdoor tracks that were served European inspired circuits in America. He wanted nothing to do with me so I said, “Fine.” I wrote this business plan based on the remaining places, reviewing DMV lists, looking for places where cost of rent would be low or obviously at the time couldn’t even think about buying a building to put on 125,000 sqft business into and that was the plan. And I consequently got a “D-” on it. And he told me that, I guess it wasn’t in line with the assignment as to thinking what he wanted. He wanted to talk more about franchises and he was focused more on. I still see it as a franchise and like I said, with multiple stores in the state thing it’s proven we can build something that’s high-end entertainment based, in multiple locations. But he gave me a “D” on it anyway. I was going to school for architecture and ended up getting a job on Wall Street. At the time they were hiring engineers and architects in the sales trading world. We were spreadsheet guys. Still got that whole thing but put models together. Got dragged into there for about 2 ½ – 3 years. I was doing private placement, straddling the wall to a degree. Everything from Shiriah funds to private placements, by backs of private companies, and just really didn’t like it to tell the truth. But the money was great. It was a fun career, fast paced, challenging, very transactional, I don’t think I was bad at it. I just don’t feel like I was going to love it. My father had been at Citibank for 35 years and went through a heart attack at age 60. And the bank retired him virtually 8 months, 9 months later. I then left the firm I was at. I just wanted to do my own thing and take the risk while I still could. So, I did one more private placement. We raised $6.8 million dollars on our first round, broke escrow signed a lease with Diamond Properties in 2006, September. Started construction, going for town approvals and this is a town that had a sleeping giant 36-acre campus that was the grand union distribution center, based in Westchester County. They were off of a railroad spur that was a slaughterhouse and banana ripening and avocado ripening, you name it. This 600,000 sqft. building on 36 acres, in Mt. Kisco. And we were the first tenant to move in. And Diamond went with us to town to go ahead and get it changed to multi-tenant zoning. And about a year later we opened to the public. And since then, the center has grown, our neighbors on this building are a high-end athletic club with a pool, as well as MMA Center, a training and trampoline park and numerous other, you know, tenants. So, it’s gone from a single tenant use building, to a

multi-use. We have really changed the overall campus provided a bunch of jobs to the area, etc…

In 2008, obviously, a rough year to start any business, especially a pipe dream and we saw some hardship. And with that the landlord Diamond Properties, Jim Diamond came on as a partner in the business. We then pushed to open Spin Bowl, which took part of our track space, for indoor go-kart track and built 18 bowling lanes. And bowling was a great feature, it actually made our restaurant food and beverage business profit. As opposed to lose money. So having this restaurant in a go-kart track indoors didn’t prove itself to be a place if you wanted to come and linger longer and drink beers but with bowling it gave us that sort of product. And then we extended it to all ages, which brought in a 3-track set-up, as opposed to a 2-track set-up when we first opened. So, ages 8 and up, or 40 inches with proper mental faculties could drive a go-kart and then we put the arcade in. So it ended up being this 7 day a week, Monday through Thursday corporate event venue. Friday, Saturday, social event venue and family fun, on Friday afternoon through Sunday night. And so far, so good. In 2015 the Diamonds, our partner bought the real estate that included 3 more bowling centers, one in Carmel New York, one in Poughkeepsie New York, and one in Wappingers Falls New York. And they have censured them as “Spin Centers” in those depending upon the site have assets accessories such as: Laser tag, arcade, and our marina properties will end up having outdoor climbing, indoor climbing, ropes courses, as well as shuffle board, and even a Captain Lawrence Brewery. So, it’s really you know, sort of expanded on it. Again, the only way to make a distinct business successful was to spread the call centers, establish a sales department, and the accounting department and all those things across a number of properties and come up with a hospitality brand as opposed to a stand-alone business. So, it’s one of those kinds of go big or go home situations. And the Diamonds were able to fund a lot of these projects on their own. So Grand Prix, the only one that has a bunch of partners in it because it was a private placement. But, the ones moving forward have just basically been themselves and have been for their real estate portfolio. They are a large company with half a billion-dollars worth of real estate that ranges from warehouses, to offices, to medical. So, they are pretty well diversified as well.

John Carney: Yeah, so that is a great entrepreneurial story. I mean, all of the good ones finally get to a point, a line in the sand where they say, go big or go home. And that’s how it generally works. It sounds like an incredible success that’s just going to be gaining momentum. You know, when you say, “Found a sleeping giant.” You basically re-position a dirty, old, I’m picturing a dirty old slaughter house, off the side of some railroad tracks with a bunch of overgrown, you know literally over grown weeds and the terrible parking lot and you know, signs falling down, and all that stuff?

Nat: Correct and an old water tower. I mean it became economically viable as well because it brought taxes back. Karl owned the property back when he owned TWA and the Diamonds had bought it from whoever bought it from him. And there it just sort of sat. And this was a major repurpose, I mean, we’re talking about a hundred bay loading depot turned into call it 15 mixed-use style tenants. A lot of them entertainment, and club based and membership based. So we can go ahead and get special use permits to do it. I went ahead and took it over. The nice part too is it’s got about 180 parking spots. And has two entrances, two, to three entrances. It has a town park, play field, ball field end of it. We do give back to the community. We all employ at this location alone just surround 120 people depending on the time of year. That’s pretty significant for the area considering the only other large employers in the area are Target and the hospital.

John Carney: So, yeah, I mean, just going back, just taking a step back. Because I’ve got a hundred questions? Now, that we’re into it. I mean, it’s for the listeners out there who are in the industrial space, I mean, have some vision. It’s about looking at these opportunities that people who have a headache and don’t want these industrial properties. That you know, it is, beauty is in the eye of the beholder, right.

Nat: Right.

John: But this is called the sleeping giant. But, you run across people that just say to themselves “Why did I buy this? Take it.” And you guys took it and turned it into something magical. So, that’s a great story.

Nat: Yeah, I looked around for two years for landlord that would let me ruin 3 acres of warehouse. And I couldn’t find one. I looked in Connecticut because I had demographics studies that were more promising and lower taxes per sqft. So, it was a better positioning. But I couldn’t find any in Connecticut people to do it. I saw this property in the New York Times and said let’s try it. And then when I approached them I was actually one of two people that had approached it for a go-kart track. And I had the private placement background and I had written to PPM already. And this gentleman, who I did this with was no longer a partner in it but I was part of it originally. He was still an equity shareholder of some sort but he’s no longer an operating partner. He had sort of the age appropriateness, he was 36 I was 25. So what landlord in there right mind was going to write 30 year, or 20 year lease with a 10 year option for a 120,000 sqft. And I was going to pave 65,000 sqft. of the interior space so you can never really reuse it for anything ever again in the warehouse world. So, it was a big leap for them. And the great part is they became essentially the managing partners of this business. And also the future ones for the expansion, so great timing. Especially because they were in the buying mode during this crisis we were all in. They were acquiring more space, and able to live through it and survive. There’s a lot of firms like that that did not based upon on their portfolios.

 

John Carney: Right, alright. Let’s go back and re-visit growing-up. Did you play team sports? Or what type of competitive athletic sports did you play?

 

Nat Mundy: Well, I grew-up hockey, football, lacrosse. Went to West Minster, I was never a varsity athlete when I went to boarding school. But just had a good time with it. And I really enjoyed it obviously. My closest friends were the ones I had on those teams, the boys that I lived with. And dorms basically age 15 on. And I’ve always been mechanical. I remember going to the dump and getting tube TV’s and old typewriters, and taking them apart and seeing how they worked. I’d say I was, probably 10, or so 11? My hockey coach Mr. Breckwald had gone to a Yankee game and won a Yankee go-kart with the Yankee F1 shell with stickers on it. And obviously he didn’t want a kid’s go-kart. So, I was one of the first people in the locker room that day and he said, you know, if you I want it, he just wanted the shell for his wall. So I could have the actual functioning go-kart portion. And he traded me two cases of Coors. And

Coors Banquet Long neck Bottles as payment. So, when I went out to the locker room and asked my dad after practice he went to Bedford Beverage, picked-up a cold case, a warm case and went to Mr. Brekwald’s house and parked outside a Peugeot station wagon and loaded up the go cart. And the nice part, he was on a cult-a-sac so I was wearing basically a hockey helmet and driving around his cult-a-sac with my go-kart. brand new go-kart while my dad finished probably half the case with Mr. Breckwald, while watching me do this. So everyone had a good time that afternoon. I rapidly modified the thing, had a great time with it. Every time I broke it, I made it better. And even went as far as crashing the go-kart into the back of my parents car while it was parked during brake failure. I broke my wrist and waited about 5 days to tell my parents I broke my wrist so they wouldn’t think it happened on the go-kart and take it away.

John Carney: There ya go, so like a hockey player you didn’t let that injury get in the way of a good time. So, the seed was really planted 8 years before the Rolling Stones concert, right?

Nat Mundy: Yeah, I’d say, that was my real eye-opener, that I could sort of obviously say I always loved watching racing things on TV. And we didn’t live in this part of the area, West Chester Town doesn’t have a go-kart track that kids are competing at. You know, it’s not near Lime Rock is the nearest track back then. And it wasn’t what was going on there either. And I think it got me the bug. And you know, the people like Paul Newman, for example, who he didn’t love acting as much as he loved racing. He spent time acting to pay for racing. And I wanted to find a way to basically break into this sport and enjoy it. But, had to turn it into a business to pay the mortgage, for me, that you could raise a family on. And you know, it took about 10 years for us to really, 8 years of the 10’s so far for us to really figure out how to position it and how to expand how to do it properly. We just opened the Carmel Spin’s Bowl location on Tuesday. And that’s 5 of the 9 that are completely up now and under the new Spins name tag.

John Carney: Congratulations for the new edition. So, it sounds like you’re scaling your business and the real estate, owning the real estate, I imagine is part of, is a segment of that overall operation, am I correct?

Nat Mundy: Yes, so the Diamonds will acquire the real estate and bowling alleys they essentially trade for what the building is worth. They don’t really trade for the business value or anything. These centers need some major rehab. So Jim and Bill will acquire a building that has a bowling alley in it and they will keep it as a bowling center.

And then our hospitality group. “Diamond Hospitality” comes in, post-renovation, some of our guys will be on the ground working on it. The ceiling tile this color, the paint this way, use the old lanes as bar tops, sub-tile here, you know, they really have a great D & A set-up. The centers all look similar because of that. Setting up a proper arcade with a redemption which is huge. The arcade is about 16-20% costs of goods sold, it’s amazing business. And go ahead and work with the new locations to figure out how to fill it 7 days a week. And for them, it’s about getting the four days after they’ve closed on a building, they’ve got a lease signed by their sister company that’s leasing out the space. And we set rent to where we know it can be an affordable thing for the center. And then go for it from there. And all it’s been so far is growth and knock on wood we’ll keep on going. We closed on a bowling center in Independence in Ohio. And then there’s one by Kent State also Ohio, that’s one. Hopefully, we’ll be wrapped up fairly soon, to open as a Spins Center location as well. So, we’re going as far as Ohio now, if you think about it.

John Carney: Wow, I mean, Independence, Kent State, that’s right around the corner from where I am.

Nat Mundy: Well, there ya go.

John Carney: You’re getting in the neighborhood. When you come out for a second inspection. We’ll have to have a…

Nat Mundy: Definitely.

John Carney: A cold beer.

Nat Mundy: I just met the gentleman manager for Independence via email yesterday. And that was our first contact. But, you know, it’s going to take a little bit of training. Get him up to speed. And at that point change their name tags and their shirts and then they become part of our team and we continue going.

John Carney: Right, and I mean, at the end of the day we are talking about real estate and business, they are both team sports. I like to say if you’re scaling up a real estate investment portfolio within any of the niches, that’s a team effort. Or you can be selling a doughnut, that’s a team effort with either one. When you are talking about your team, I mean, there’s obviously people in your team, that you could have, that have stuck with you a number of years now, over a decade. But is there one specifically, a specific advisor that you turn to for advice? Or when you were just starting out? Because this is about helping people start out and scale.

Nat Mundy: You know, I think a couple of great things. I grew up in an area where you know, a lot of people had sort of the last, my parent’s generation was the last of the generation that kept jobs for 35 years in the same place, right? And meanwhile, there was already some sort of movers and shakers in the area. I worked at a deli from the age of 12 and up folding newspapers and stocking shelves. And I actually drive my four-wheeler from my parent’s house to the deli. And that was back in the town, back in the day when no one cared. It wasn’t like it was rural America. This was West Chester County, its Bedford New York. But it was a lot less people then. I learned just sort of, I think from my father overall, you just had to have a work ethic and just go with it. And he was a lot more conservative in his approach to career and work. Whereas for me, this is sort of how I manage my ADHD. This is my self-medication. Where I focus my scatteredness onto a productive platform of opening a businesses and finding really great partners. You know, Jim Diamond, who founded Diamond Properties is a great guy as well. He typically can analyze what I’m showing him as long as it’s a spreadsheet or written down in a constructive manner and give some great points, very entrepreneurial as well. They didn’t start in real estate. They started in the technology world and then transitioned into real estate. So when their technology company, one of many sold and when the business sold, they were left standing with their real estate portfolio. They have partners like Princeton Realty, which was from an Albright family which was in the same office as us and that’s on the brokerage side. They are also partners in other building stuff. Again, they’ve also sort of filtered things into a real estate play. I mean we even have an auto storage, they have self-storage in a bunch of locations, currently three now, they got one out in Connecticut, one in Elmsford, and one in Mount Kisco. But at the Mount Kisco location we took the second floor of an old body shop that’s on this campus and turned it into an auto storage. And you know we’re talking about 6500 square feet of space that’s producing about $100,000 a year in revenue at very little cost. Just taxes and whatever debt service there is, There’s no employees for it. There’s just insurance for it and a very small utility bill. So, you know, that’s the kind of thing they are good about. And when I came to them with that idea they said, “Yeah, do it!” And we took about 3 years to fill it and now that it’s full, it’s full, and it’s an annuity. When they’ve had tenants in the past have any issues they’ve also been able to pull them in and use their, you know, so they have a HVAC company or an electrical supply company. You know, what landlord with you know 3 million square feet does not need one of those, you know, in their back pocket. So, they’ve been able to get through by being like wonderful over all landlords and expanding into other market segments because they own the real estate those market segments comes from. It’s a very dynamic group. I’d say, meeting them, sort of took my cowboy business person nature from Wall Street and really reformed it and shaped it into a more sustainable, entrepreneurial scenario where it’s just backed up by real estate. I mean, if cash is backed up by gold sitting in a box somewhere on this continent, if your business is at the end of the day backed up by a real estate play, I think that a you can have less issues going forward. Me, I’m a very small landlord. One of the hardest things, you know, I have to look at. Is that, if you go ahead and you look at the market, I watch my friend from the hedge fund world and we’ve all had separate jobs since college. I’ve had a friend who’s done everything from a FCC to Bridgewater Capital smaller funds and they have all bounced around and a lot of them spent a lot of money on grad school and business school and they necessarily didn’t need to, if they just sort of found the right partners early on, they sure could have avoided all of the skipping around. And it all goes back to real estate. I think in that we would never rent any space to then go ahead and put a go-kart track and a bowling alley into. The Diamond’s rule is they will buy and own this real estate and then we’ll create entertainment space within it. And that approach has worked for them over 9 centers by this time next year. They are already in the hopper purchased and then the goal will be closer to 20 in year 4 years from now.

John Carney: Yeah, I mean, I just love hearing stories like this. Like about the gritty start about the personalities that come together, about the team, I’m big on team, it’s about the team and the gels. I mean, I would say, the to the listeners out there if you have a fire in you, an entrepreneurial fire in you and you find people that you can partner with, that understand the vision and have the experience. I mean, that sounds like what you did Nat, what you did in the past. It’s a play it forward to, I mean, you get to a position where the young guns are going to come knocking on your door and you’ll get that opportunity. Well, that is truly a great story. You know, on the real estate side, re-positioning the industrial to fit this need and to scale up and move west, is cool. I’m looking forward to checking out your brand once it’s up and running here in Ohio. Let’s get into our “2-minute drill” here. Are there any sports you are still playing today?

Nat Mundy: Ah, yeah I still play pick-up hockey and I’m actually racing most every weekend, in one format or another, whether it be in a go-kart or a car. So, that’s sort of been my activity at this point. My boat has turned into a place to listen to music and drink beer.

John Carney: That’s good stuff. Are you a reader? Is there a favorite book related to an athlete or sports or business that you keep coming back to?

Nat: You know, it’s funny. I frequent, you know, you remember the movie “Cocktail” where Tom Cruise is the bartender? And there’s a success manual behind the bar?

John Carney: I do, I do.

Nat: So, my success manual has been reading and re-reading any of Richard Branson’s stuff.

John Carney: “Losing My Virginity” I would say, that book was an instrumental part in my decision to work for myself.

Nat Mundy: I mean, he’s had the ups and downs. But the specific thing about, he’s kinda stayed classy the entire time. You know where as we see a bunch of entrepreneurs that aren’t as good about their sort of public eye. You know, Richard Branson has worked the entire time for $4.9 billion and I believe every cent of it. You know, versus a lot of other billionaires out there that are supposedly self-made. Anyway, for him it was all about the hustle and I love reading how he changes with, one of his book, I forget which one, but some of the copyright laws and how some of those are changing and how he then figured out a way to make money still, you know, in that space in the music world. And then obviously on the phones, and airlines and you know the “Space X” project. I take it he’s just a very, an entrepreneurial hero. And the cool part is that he was able to do it in London as his kind of home base as opposed to I feel everyone else just runs to New York or L.A. to become an entrepreneur.

John Carney: Yeah, we like Richard. I mean I was living in Australia for 7 years, the Virgin brand is very present there. He’s in town promoting various, whether it’s the airlines, or something else you know, enough that he gets a lot of press outside of America. I agree he’s an entrepreneurial hero.

Is there a quote from someone that keeps you motivated in the morning? Because we all know that you’re running a real estate business or scaling up a franchise in go-karts that there’s too many obstacles that are going to knock you back and is there anything that you like, nope I’ve got to keep going?

Nat Mundy: I don’t think I have so much of an inspiration she won’t quote as much as just sort of. And I went to this summer camp and it was an all-boys camp for three years in the summer and they always talked about courage and loyalty. And that might sound a tad cliché and cheesy. But number one, you have to have the courage to step out and do something. I could have stayed at my firm and probably would have probably still been there today if I had never left Wall Street. Or I would have moved onto something else. I’d probably be a director of some level of this point. Sure, but I also have a lot less hair. I’d be a much bigger stress case I’d also be commuting via train. Have you ever see the zombies get on the train at [5:30] in the morning and come back at [7:30] in the morning. They give up a huge part of their life, their family life for that roll. And that’s why you’ll never hear me complain about a Wall Street executive getting paid millions in bonuses because they basically become, their family basically becomes the firm. Their priorities become their job over their families and they miss a lot. And then you know comes the loyalty. I think family comes first and if you can stay loyal to your family and friends, you have the best part of business for the rest of your life. I mean, money aside, really all businesses are doing is helping to create money. But, if it provides for your family the way you were brought up or better, I think that’s success. So my goal would be to be able to send my kids to good-schools and not have to struggle week to week to make ends meet. Have them with a good life style, to get good educations, and then enter into business one day or expand it for which one is better and newer. It’s not a phrase so much, two-traits; courage and loyalty. Step out, step in the way and keep the people that keep you going as close as possible. Make sure that everyone is healthy and happy.

John Carney: Yep, that’s good advice. And I just want to build on that a little bit. Is there a daily practice, how do you train for success, how do you personally train for success? Different people do it in different ways, they get into a flow state or they get into their own zone. Is there a ritual or habit that you have?

Nat Mundy: Yeah. I can’t live without a calendar in my phone. I mean, part of my learning disability are I need things to be very organized and everything has to be in writing. So I start my day by having to review the calendar the night before for the next day. So when I get up I know what time to set the alarm. So basically it starts at bed time and then when I get up in the morning I make coffee at home, I watch the news. I have an awareness of what’s going on in the world and clearly now a days there’s a myriad of news to watch. I feed my dog, take her outside and do a certain morning ritual of showering and get to work before anyone else. That way I don’t have to have any distractions and any loose ends that came up after I left work the day before I have completely tidied up for start of business officially for the rest of the office. And then because of that I can say to myself that when I leave for 4-5 days at a time because everything is tidied up and there’s overall communication. I have update email that I probably send out 3-4 times a day to keep the ball rolling. That could be anything from a last minute event being booked at one of our centers to a decision on furniture. But it’s a great chain email so all the ideas are in one place and I think the ritual there is to start that chain of creativity every single day and not forget a single day to do it because it keeps people in the know and it gets the cheering section going too.

John Carney: We’re running a little long but I wanted to just ask based on that, getting to the office, turning on the lights. Is the CEO per say, did you find that, that sets the precedent, you set the bar here and your employees coming in notice that and that expectation is set and you’re leading by example.

Nat Mundy: You know, I think what we really done is a great job of weeding out the rift-raft. And getting rid of sort of no department has a, it’s pretty linier company. Okay, so no department has crazy hierarchy, there is clear seniority at places in fact, there’s no feeling of animosity ever or like you’re not equal. I mean we all said the same table to lunch, there’s no crazy separation. But meanwhile, if I walk into the men’s room at one of those centers and it’s dirty, I’m mopping the floor. And you know, I expect them to do the same thing when they walk in. If the track marshal walks into a bathroom or sees like a cup on the ground while walking to get some food they should pick it up. They see me do it. As long as you’re willing to help set-up chairs you get the respect of other people that are there for a little bit.

John Carney: Yeah, that’s, that is powerful leading by example. Hey, look Nat I want to thank you very much for joining me today in the Locker Room. Where can the members of the audience find you if they want to carry on this conversation and learn more about the business.

Nat Mundy: I mean, www.gpny.com is the website for the indoor track at Mount Kisco which is the mother ship. And the rest of the locations are under www.spinsbowl.com.

And the real estate arm is – d-i-a-m-o-n-d-p-r-o-p-e-r-t-y-m-g-m-n-t dot com. And you know if anyone has any questions or wants to invest in centers or is looking for advice I’m always available for phone conversation or a quick email. Not a problem.

John Carney: Alright, perfect. There ya have it folks I truly hoped you picked up some actionable advice today from Nat Mundy. Make sure to check out The 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 and your business. If you like what this show is about I’d be grateful if you would leave us a 5 Star review here on iTunes and that way other like-minded people and investors like yourself will be able to find us when they search for “real estate.” You can visit John Carney online – www.johncarneyonline.com for links and additional content associated with today’s show. So we will post all of those links that Nat just mentioned there for you to click through so you guys can get connected. And while you’re there drop your email in to get your newsletter. This is so you don’t miss out on any insight, tips, tricks, hacks, and other great stuff. So, remember to stay focused on your goals everybody, have fun, and stay in the game, I’m your host-John Carney, until next week, work hard, play hard, and profit hard. Thanks Nat.

Nat Mundy: Thank you, be good bud.

End Audio.

[39:48]

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