Posts tagged "systems"

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

June 21st, 2017 | no comments

Multifamily success begins with a strong team

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

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

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

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

5 Key Points:

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

Favorite athlete: Matthew Dellavedova – Australian born NBA player

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

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

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

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

Website – http://www.marcusmillichap.com 

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

POST GAME REPORT: Episode Transcript

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

Multifamily success begins with a strong team 

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

 

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

 

Dan Burkons: I am, Independence.

 

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

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

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

 

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

 

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

 

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

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

 

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

 

Dan Burkons: Right.

 

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

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

 

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

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

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

 

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

 

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

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

 

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

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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

 

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

 

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

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

 

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

 

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

 

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

 

Dan Burkons: Right.

 

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

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

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

(Music Out)

End Audio

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JC 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

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