Archives for October 2021

Wholesaling Property Buyers and Sellers with Lauren Hardy – CRE PN #324

Lauren Hardy 0:00

When all this statistical data that I just labeled year just went through right is really positive and looking really, really good, that’s actually a bad place to wholesale. Because what that means is that there are no like sellers are not distressed, because the sellers like they got the word that actually their markets doing really well and it’s desirable, their real estate that they own is desirable, like they live there, so they know. And wholesalers, we make money by buying properties at a discount and the way you convince a seller to buy a property at a discount is that they have to be in some kind of state of motivation. So if they’re not motivated if there’s not a lot of seller distress in the area, you know, you’re gonna have a hard time wholesaling houses.

Announcer 0:46

Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers, and sellers of commercial real estate coast to coast whether you’re an investor broker, lender, property manager, attorney, or accountant Well, we are here.

J Darrin Gross 1:03

CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly, we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today, my guest is Lauren Hardy. Lauren is a real estate investor with a people-first approach to business, investing in hundreds of properties in our career, Lauren has the unique reputation of being a virtual investor having not lived in many of the states she’s invested in. And in just a minute, we’re going to speak with Lauren about how virtual investing differs from investing in your home market, and how to determine the right market for you.

To learn more Property Insurance for Flipping Houses, go to: https://www.buildinginsurancerisk.com/property-insurance-flipping-houses.html

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With that on Welcome my guest, Lauren. Welcome to CRE PN Radio.

Lauren Hardy 2:25

Hey, thanks for having me.

J Darrin Gross 2:28

All right. Well, I’m looking forward to our conversation today. Before we get started if you could take just a minute and share with listeners a little bit about your background.

Lauren Hardy 2:37

Well, well, again, thank you so much, it’s an honor to have me or had to be here today. So a little bit about my background, I am investing in single-family residential space. I started out as a house flipper about nine years ago. I live in Orange County, California. So it’s a very competitive, high-priced market. At the time of me starting my flipping and investing journey, it did make sense to work in my backyard, I was able to pick up real estate deals that made sense, the profit margins were healthy. But as time grew, and my market became more saturated, and you know, house prices crept up the returns on my deals started to really not make sense and not really fit the buy box. So I was forced with the decision, either, you know, quit this and go get a job, or I need to figure out how to invest out of state. So I’ve built my whole career, my whole business on virtual investing, I everything I do now is out of state and what I really you know, through time realized that you know, once you learn that virtual technique and you learn how to set yourself up in a way where you invest out of state, you’re not dependent on your backyard, it really opens up the entire country to you and it opens up a ton of opportunity. So I know, now fast forward nine years, I’ve got a coaching program where I teach other people that the specific niche of wholesaling and how to wholesale virtually, that’s, you know, one of the big things that I’m into right now, but I still run, you know, a successful wholesaling and real estate investment company on the side along with that, so

J Darrin Gross 4:33

Awesome. Well, I appreciate you taking us back to the beginning and kind of how you got to where you are right now. So if I should right though, you’re flipping was pretty much local to where you are. That was your main focus.

Lauren Hardy 4:49

At first, it was so at first I was just your typical house flipper, you know, very HGTV stuff. But I would say I started the business in two 2012 and by 2016, I was really reading the writing on the wall that deals were drying up. And I mean, I just could not find anything that made sense. It was very, very hard to find my next deal. And I was starting to get really concerned. And when I was making offers on deals to sellers, you know, there was always some other competitor or five, that offered more, and you’re looking at the numbers, you’re going, Oh my gosh, that’s like a 5% return. Like, how, why would anyone even do that? Like, I don’t even understand, you know, how that makes someone money? Or, you know, because if there’s one thing that’s unforeseen, I mean, now they’re not making any money. So I realized, though, my friends that were in different states, like they, weren’t having those issues. I mean, yeah, it’s gotten competitive, you know, everywhere, just, you know, my real estate cycles, how they are, I mean, we’re in at the top of the cycle right now. And everything’s, they’ll say, it’s super hot right now. But in where I was, I mean, it made absolutely no sense. I mean, today, at the time of filming this podcast, like in Southern California, it makes nowhere I at least where I live, ocsla Inland Empire the way price is, if you say you wanted to, you know, buy and hold, for example, if that was your strategy, there really doesn’t it doesn’t make any sense. There’s no way to use leveraged capital and still cash flow. You’ve got a negative cash flow situation. So it’s, you know, I know that that primarily, it sounds like, you know, the audience might be interested more in commercial, probably multifamily. But the same rule applies, you know, that, you know, you’re in an area where your backyard just doesn’t make sense. Well, what do you do? You know, and for a lot of people, it is out of state, and they have to figure out how to make that out-of-state model work.

J Darrin Gross 6:53

Right. So let’s talk a little bit about the out-of-state model and how you arrived. And where you’re investing and how you kind of determine which markets to invest in and kind of get your, your, you know, your projects going I guess we’re finding properties to and let me also be clear, are you still flipping? Are you buying and holding or what’s your current model?

Lauren Hardy 7:18

current model would be fixin flip in wholesaling? Yeah. Okay.

J Darrin Gross 7:24

So for the properties, and actually even back up one more step. You mentioned, kind of the 5% margin that some of the people you’re competing against, were willing to accept, what was kind of a target return you were looking for when you were actively flipping in your neighborhood?

Lauren Hardy 7:41

Well, when used to be 15%, and then it was like, okay, 12 Okay. 10. Okay, now we’re not making money. It was it? Yeah. So at one point, it was 15%. You know, cash on cash return was the goal for house flippers. And then in California, and literally, my competition was just looking for if it was above 5%, they would take that deal. And I go, Oh, my gosh, skinny,

J Darrin Gross 8:08

if you make one gouffre, you don’t care, you know, cover count for something? Or? Or if you have to carry something, the longer yeah, that’s pretty skinny, very skinny. So so let’s talk, then, you’re you make the mindset or you make the decision to look elsewhere. What were some of the criteria? Or? or What were you looking for? And where did you end up?

Lauren Hardy 8:37

Well, you know, that criteria, really, there’s an evolution to that. So when I first got started, you know, in this virtual, you know, concept, I didn’t know anybody that was virtual. So I really didn’t have a blueprint at all. So it was all gut feelings and taking a map and throwing a dart on it and seeing where it land. That was basically how I did it. So my first territory just happened to be Nashville. And it was because Nashville sounded like a cool place to visit. So that was all that I put in. through time. I have absolutely come up with better ways to pick a market. And again, it’s actually, you know, very applicable to the commercial real estate space. So I’d love to get into that. Because it is it would it’s very helpful. I used to use I say there are two approaches, there are gut feelings, and then there’s statistical data. And I do think there’s a place for both. I if you are just using statistical data, you are going to miss something. But if you’re just using gut feelings, well, you know what our gut does to us sometimes, right? So I used to just use gut feelings and that was very amateur of me. But over time, I’ve learned a few things and read some books and listen to some podcasts. So the things that I like Look for right now, our I want to look for let’s talk, first statistical data stuff that you can actually look up and look up hard numbers, I like to look up the population growth. So if you take the last, say, five years, and you take a, let’s start with a metro first, so start with a metro Statistical Area and MSA for short, I want to look at the last five years of population growth. And you look at it year over year, and then you look at a total of five years. So if you look at the total has the population growing, and you might see maybe a 1%, you know, population growth, and you see a, you know, a tiny, tiny percent each of those five years, right, that’s growing up, up and up, it’s also important to look at the last two years to see what’s happened the last two years because that could, there could be something new, that has happened as of lately, that’s, you know, maybe making the population trend way up or, or backwards, maybe you’re getting a negative. So the perfect example is Orange County, California. So we had negative population growth last. Like in 2019 2018, somewhere around there, I don’t on my spreadsheet in front of me. So you want to see, you know, what is the most recent trend, just because your five year trend is positive, does not necessarily mean though, you’re totally in the positive, you can be trending, you know, negative. So population growth is really important, because you want to see, you know, are people moving to this stuff, you know, metro area, and then you can dial it down into the city of interest. So if you have a deal in a particular city, then you know, you can dial it down to there, but I like to focus on metros, because if you just focus on cities, you’re gonna you’re not gonna have enough deals to, you know, underwrite. Um, another thing that’s really important is just looking at unemployment rate. So, course, if you take the last year, you’re, you’re gonna have a very interesting unemployment rate everywhere you go. So I’ve actually dialed that back down to eight years, because if you just do five years COVID really messes stuff up. And so I like to kind of get a broader picture of what the unemployment rate has been in the last eight years and where it’s trending. And, you know, if you see that the unemployment rate is trending upwards, you know, that’s a that’s a not a great thing, you know, that is showing that, you know, there for some reason, there’s not a lot of employment opportunities in that area. And why is that? Right? So you ideally, I’d like to pick an area where the unemployment rate is trending upwards. Now, there are some areas if you want to talk

J Darrin Gross 12:45

Did you say unemployment or the employment?

Lauren Hardy 12:47

Unemployment, unemployment, so I want it Yeah, so I want it downward. Sorry. You get a little dyslexic when you say, the we want a low unemployment rate. So I want unemployment rate to to trend downwards. And if I notice that it’s trending upwards, I want to see why right? What’s going on. So if one really let me give you an example of like, a very interesting territory to me, is Birmingham, Alabama. So Birmingham had a pretty decently high unemployment rate like five years ago. And then you will notice their unemployment like five year trend went their unemployment rate went down almost 50%. Meaning that Okay, there have been some employers Move, move to town and employed everyone, you know, that that’s a great sign, there’s something stimulating Birmingham’s economy. So if you want to look for emerging markets, you know, you might want to look at the unemployment rate, and then it’s you start dialing it, even, you know, start getting even more micro right now, I want to look at job diversity. So, what are, you know, the major employers in the area? Like, is there just one industry in the area? Or is it diverse? You know, that’s important. So if there’s one industry, that is that makes up 25% or more of, you know, the populations jobs, that’s an indication that you know, if there’s something that happens in that industry, I mean, if you believe in the industry, that industries like not going anywhere, like one example would be like Amazon, like an Amazon, you know, location being built all while they’re just coming up everywhere. Well, you know, maybe you believe in it, it’s not a big deal. But, but if it is an industry that could be you know, having some problems you might want to maybe consider another territory or dial it even more micro, and now look at the employer diversity. So look at the major employers in the area and see that there is some kind Have there there’s at least diversity in those employers, there’s not just one employer that employs 50,000 people, and then there’s kind of like everybody else is like, 1000 2000, you know, you want to see that’s a little bit more even like, 10,000 10,000 11,000 12,000, you know, it’s more diverse, right? So, you know, these are all statistical, you know, it’s statistical data that you can easily pull from the census, you know, websites, and the Bureau of Labor Statistics. And it just tells you, you know, the health of a territory, and if you are looking to say, buy, you know, a multi tenant building into territory, you know, why would you buy somewhere, you know, that, you know, when you can easily just move and buy somewhere with with a, with a better economical health. So, I love looking at this type of stuff. And you know, you could really nerd out on it. But I love this statistical data, because it does give you, you know, a lot of information. But then there’s gut feelings. And I kind of classify gut feelings as like, well, I heard this, I heard this and you know, the stuff more of like kind of hearsay, but also like, looking for the proof of concept. So this is a little bit more in if you’re interested in house flipping and wholesaling

Unknown Speaker 16:24

The proof of concept. What I mean by that is, are there other people doing what you’re trying to do successfully there. So in wholesaling what’s really interesting, and I’m not sure how familiar you guys are with wholesaling, or, you know, if your audience is familiar with wholesaling, but essentially, it’s like house flipping, but instead of fixing up the house, you sell it to another investor. And the funny thing about choosing a territory for wholesaling is when all the statistical data that I just labeled year just went through right is really positive and looking really, really good. That’s actually a bad place to wholesale. Because what that means is that there’s no like sellers are not distressed, because the sellers, like they got the word that actually their their markets doing really well. And it’s desirable, their real estate that they own is desirable, like they live there. So they know. And wholesalers, we make money by buying properties at a discount. And the way you convince a seller to buy a property at a discount is that they have to be in some kind of state of motivation. So if they’re not motivated, if there’s not a lot of seller distress in the area, you know, you’re gonna have a hard time wholesaling houses. So when I’m picking an area for wholesaling, I actually want to look for more balanced numbers, like I don’t want to, like my Birmingham example. By now Birmingham is already a little bit too competitive. Because of that 50% like Birmingham, it’s pretty known cats out of the bag, like, you know, they’re the hit that real estate has value there. But there are areas like Pittsburgh, Pennsylvania, where the unemployment rate is actually going up in the recent years. And there’s definitely more distress there’s actually a negative population. And but I’m telling you, I’ve that’s one of my markets, and we’re able to get a lot of houses under contract there because sellers are more motivated. Now, would I buy a commercial? Would I go buy an office building? They’re probably not. Right? Not. So it’s interesting that in the single family space, it’s it’s like opposite. You want to look for some more distressed markets, but you don’t want like, you know, you don’t want to completely depress market either.

J Darrin Gross 18:43

Yeah, like nobody’s home.

Lauren Hardy 18:45

Right.

J Darrin Gross 18:46

So let me ask, you mentioned a couple different cities, and kind of the statistical data that you look at for your kind of a base field for something. MSA Is there a size of a MSA that you stay above? Or how, how would give me a range on the size of the MSA issue?

Lauren Hardy 19:07

You know, so for my students, I have a pretty big coaching program and if i if i told everybody a million population or above everybody would end up like in the same 15 metros, so for the sake of my if you were like a student asking me like I would say well, no, because now you guys would all compete with each other. Right? But for me, personally, I do like to be in that million population. Because then I don’t run out of options as frequently where the the smaller metros or the smaller areas, you know, you you are going to run out of available property, you know, but I’m not saying that that’s a hard standard. I mean, I there’s like my students for wholesaling I tell them at least 150,000 population if you’re wholesaling. But if it was probably commercial, I would probably say I want to be in the larger metros, maybe at least five 100,000 great metros that have you know, 500,000 population. So,

J Darrin Gross 20:05

Yeah I know, I think to anybody, if you’re interested in selling eventually, you’re going to need to have somebody that’s buying, like you, you know, cited all of the other stats about jobs and an inward migration and, and all that kind of supports the demand, do you look at all at median household income? Is that a factor you take into consideration?

Lauren Hardy 20:28

Not at this time? I don’t know, I mean, I’d be interested to hear you know, your perspective on it. And maybe I will, though,

J Darrin Gross 20:36

Well, I think a lot of people I speak with that are multifamily investors, look at basically, you know, rent, rent income ratios. And I think that a, a long held, you know, opinion of that is that you want at least three times the income to the rent. And that gives you just kind of a, you know, even for lending and that kind of stuff. And, but I think things are changing, and we based on prices going up and interest rates coming down. And I mean, there’s, you know, there there are even, you know, a willingness to get closer to two, my personal experience with with properties is that three is a pretty good solid number and that your, your ability to collect rent is greatly improved. When you go below that, you’re probably going to be sending out late notices and having to chase your rental a bit more. So that’s, that’s just kind of the you know, the theory and some my experience with that. What do they ask you on the when you say you, so basically, if you’re sitting here at your computer in the city, pops in your head, and you plug it in, whether it be Birmingham, Alabama, or Pittsburgh, Pennsylvania, and you go to the census, and you pull up your data, and that it’s one thing to have kind of a virtual picture of it. You mentioned like Nashville is a fun place to go, do you ever go to these places? Or how do you vet the locations? And I’m assuming at some point, you’ve got to know somebody or get to know somebody on the ground that has local carnal knowledge of the place and can direct you on that? Well, that’s a good deal. But that’s the wrong side of the tracks or, or something like that.

Lauren Hardy 22:28

Yeah, so if I was investing in commercial, I would say you absolutely want if you’re getting serious and you know about a property, then yeah, I would absolutely go visit since I’m primarily in the single family space, I actually am more comfortable, you know, relying on my boots on ground. So I make a lot of connections, a lot of networking, you definitely want to get on the phone and talk to you know, any investor that will be your friend and share information with you. So I do a lot of that I do all of my business personally virtually but again, I’m doing wholesaling. I’m doing, you know, house flips. This is a you know, if I mess up, it’s not quite as big of a hit is like a, you know, huge, you know, 50 unit apartment building. So if obviously, I think if I was buying, you know, an apartment building or, you know, an office building or anything, I’d absolutely go visit the territory.

J Darrin Gross 23:25

Sure. Well, in wholesaling, I get that. I mean, basically, I’m assuming you’ve got a significant buyer’s list.

Lauren Hardy 23:32

Yeah, I do. So I kind of know something’s gonna move right when I lock it under contract, and I’ll know really quick if it’s not,

J Darrin Gross 23:39

right. And then how do you gauge the condition of the property? Do you have people on the ground? Do you pay? You know, Fiverr or Craigslist? Or somebody go take pictures of it? Or how about your nuts and bolts on how you get the transaction under contract and closed and sold?

Lauren Hardy 23:58

Yeah, so exactly that. So we will have the conversation with the seller over the phone and get an idea of the condition of the home and a lot of that is just asking really good questions. You know, you’re talking to a seller and they’re what how’s the condition of your house? Oh, it’s great. Isn’t livable. Oh, yeah, it’s definitely livable and then you go look at it and the you know, paints peeling on the walls and there’s no flooring and you’re going How is that livable? And so we learned, you know, you got to you got to ask some more detailed questions. You know, when is the last time you remodel your kitchen cabinets? Did you replace the kitchen cabinets or did you just paint over the existing You know, when was the last time you know, the roof was replaced? You know, tell me about the flooring, what you know, get real micro in the details. And then you’ll start being able to picture this house in your head. And then we look for comps that are similar to those houses that we’ve pictured in our head. And we do account for condition. So if it’s, maybe we can’t find any comps that look like this house that we’ve kind of pictured, but we, you know, might say, Okay, well this house to get there would probably take $30,000. So we’ll subtract. So it’s we actually are very, we don’t overthink our offers, when we’re just having a phone conversation, it’s more like, we found that it’s just better to get an offer in front of the seller. And we do, you know, have contingencies in our contract that we need to inspect the property. So when we can get a seller to agree to our price, the next thing we do is within a day, we are at the property, and I do get somebody from Craigslist, I call them runners, and we try to work with the same runner. So we’ll have like runners have worked with us for years. And we just pay them $20 an hour and they go down, they take really good good photos. And then we look at her, you know, once we get the photos and the walkthrough, we do a video walkthrough, then we look at our contract price and say, Okay, do we think based on you know, what we know our buyers buy box, like will be will be Will we be able to move this property? Is it in the condition that the seller you know, said it was in a lot of times, it’s not a lot of times the sellers, they they got rose colored glasses, and they want to you know, they try to sneak things by us. And we have to go back and say, you know, we need to adjust pricing on this, or we need to you know, walk away. In the end, we don’t waste the sellers time very much. It’s a couple days, you know process where we go through that with them. And then by if we’ve gotten to that point, we’ve inspected, we’ve got pricing, you know where we believe it is right, then we show it to our buyer base?

J Darrin Gross 26:46

Is there a formula are kind of a target price that you shoot for if the market is x, and you’ve got a property? That’s, I mean, is there a Is there a? PE, how do you arrive at the offer, I guess what I’m trying to?

Lauren Hardy 27:03

Yeah, so a lot of that is, you know, looking at the purchases in the area that have been purchased by other investors. So a lot of it is just looking at what houses are going for in that area. And we have I use prop stream, I’m able to it’s basically like having the MLS I’m able to zero in on an area, I like to look at the corporate purchases, because those are usually the real players. And I will look at an area and if I don’t see any corporate purchases, like and I’m mainly looking for the landlord buyers, those are the ones that pay the most the flippers don’t pay enough. So I’ll look for the landlord buyers in the area. And if I don’t see a lot of red dots, you know, in the last year to two I have sometimes right now, because of COVID we have to go back two years, which is crazy. But because a lot of areas they have not been recording, they’re not on top of their recording, because it wasn’t essential. That’s a side story. But anyway, I’ll go back, you know, two years, and if I don’t see a lot of red dots, showing me that there’s a lot of purchases, we won’t even offer on the property anymore. If we’re in a really, you know, roll area of you know, 30 miles outside of Pittsburgh or something and there’s no investor purchases, well, we know we’re it’s just not going to work for us, it’s not going to fit our any of our buyers buy box, so it’s not gonna fit ours. So I’ll make sure there’s buyers in the area. And then we start looking at the pricing. And we try to you can see trends, I mean, you usually will, if you look zero in on an area, you’ll see an easy deal where it’s kind of straightforward. it’ll it’ll be like, Oh, 81,000 90,000, you know, like the trend there, there’ll be a trend. So we try to get the property at the lowest comp we could find. And then we use these comps to support our narrative. So we do a lot of that that is in it takes like 60 seconds to come up with an offer price. A lot of novice wholesalers, they’ll take like 35 minutes to come up with an offer price and just overanalyze it and use this ARV times this minus that and, and I just laugh because I’m like, Well, if you don’t have a comp to support that the seller is going to lock you off the planet. So you need to just go straight to the cops, look at the look at all the sales and just start there at least you can then support your narrative and you know that an end buyer will pay that. So yeah, that’s how we do it.

J Darrin Gross 29:33

Want to ask you some of the people that you that are critical to your operation in the market you’re in? You mentioned the runner. Is that pretty much the person you need or is there is there anybody else that you have in your quiver of you know, people help you get the deal done?

Lauren Hardy 29:55

Yeah, I know. I you know, our competition is critical. So we work with Other wholesalers and other house flippers and buyers, you know, to having really good conversations with buyers, and really good conversations with wholesalers and making friends, you know, with your competition so you can collaborate. So we do a lot of I call it joint venture JV deals, where if we have a hard time moving something, we’ll JV with somebody on 510 deals until we figure it out on our own. And they’re usually happy to do it, because, you know, it’s deals they wouldn’t have ran into anyway. So yeah, right, and the runner, of course, to help with the photos and, you know, those the running errands. Yeah.

J Darrin Gross 30:38

And then as far as like, wholesaling, as opposed to like retailing. I know like in retailing, there’s there’s just basically you’ve got a whole laundry list of whether it be you know, brokers and inspectors and appraisers and lenders and all that kind of stuff. When you get into the the wholesaling thing, basically, you’ve got your, your your runner, to kind of go out there and give you an assessment, you’ve done your kind of your homework based on assessing the market trying to understand the price, and what people will pay is a pretty much the seller sells to you you sell to somebody else, and and you collect your fee, and you’re on to the next one is that? I mean, yes.

Lauren Hardy 31:23

It really is. Yeah, and we do everything off market. So we don’t need a realtor. We just need a good title escrow company to you know, process and transaction. And what’s the average turnaround time from?

J Darrin Gross 31:36

You’re having a conversation on a Wednesday with you know, potential seller you be able to assess the price? make an offer, we agree.

Lauren Hardy 31:48

Close that gap go through the process? Yeah, about 90 days.

J Darrin Gross 31:52

Okay. Okay. And so I’m assuming that in that time you get your inspection, overnight, your spectrum, but your your runner to go out there and do that. If there’s work that needs to be done, you can get a contractor’s bid on what it would cost to do? Or do you have a pretty good feel for what it might take to do the renovations? Or if your buyers would even be willing to take on such task?

Lauren Hardy 32:15

Yeah, so well, I say 90 days, and that’s because sellers don’t usually say yes, on the first call, or even the you know, second call. So there’s usually a month of back and forth with the seller, okay, there’s a month of let me talk to my husband, let me talk to my kids, let me think about it. So on average, it’s 90 days, sometimes we get sellers that sign that week, sometimes it’s six months, you know, so and then the average escrow kind of depend now, this depends on the area, but 30 to 45, day escrows. So the so that, you know, to kind of I just wanted to clarify, you know, that when you’re wholesaling, you don’t typically get your own contractor in there. There’s a couple of reasons actually why I would say it’s actually smarter to not do that. You don’t want to put yourself in a position where now you have to disclose a bunch of stuff. And I don’t that sounds bad, but it’s also kind of making you liable, that if like, you know, now I’m liable for like, like, if there’s a buyer can come back to me and say, Well, you didn’t disclose that there was this foundation issue, or my contractor didn’t disclose it to me, and now I’m like in this position of like, you know, it looks like I should have known it and didn’t disclose it. So we just we always say is that you know, and buyer has to do their own inspection. We know nothing about this property other than what the seller has told us and disclosed. And so we will say anything that the sellers disclose to us, we’re careful about that. And then we say bring your contractor and bring your inspector in,

J Darrin Gross 33:56

As is. In as far as funding on these, do you when you close on a property? Is it pretty much a you’re using the buyers money or is there I mean, the wholesaling thing if I understand right, the ideal is like a double close, where you’re you’re basically just collecting a fee after the transaction closes as opposed to having to come up with capital and and buy something and then sell it to somebody else.

Lauren Hardy 34:29

Yeah, that’s the ideal scenario is absolutely avoiding any kind of transactional funding and instead, we are double closing. We know that there’s if you want me to get really into the weeds, I don’t like double closing per se. Double closing is when the escrow companies running two escrows concurrently. Instead, I do it via assignment. So the escrow it’s one escrow it’s just two, it’s two sides of paperwork. So it’s actually a lot of people don’t realize that you don’t have to double close, I think I double closed like a couple times a year, it’s very rare that I have to double close. So instead, I work with escrow companies that are experienced in assignments.

J Darrin Gross 35:17

Gotcha. And basically on the offer you and or your assigns kind of who’s going to buy the property thing, and then allows you to assign your your interest to your her buyer. So, so let me ask you on on, you get 90 days of engagement with the seller, you’ve got time to market it to a buyer. What what’s a target? You know, profit Are you looking for on something like, you know, these these kinds of deals?

Lauren Hardy 35:54

You know, that really depends on the area. So what I’ve noticed as an industry trend is that your typical wholesale fee will be about 10% of what the end buyer paid for it so that that end price you sold it for. So if you’re working, you know, in that $100,000, you know, space, then $10,000 would be, you know, a typical assignment fee. So it’s very different. You know, if you’re working a very low end area, some people would say, $5,000, you know, if you’re working a higher end area, I mean, so my fees have been crazy. I mean, we’ve had a couple $60,000 fees this year. So sometimes we get really like wild ones. But then sometimes you get Yeah, the $5,000 ones, you know, so on average, so I like to just talk in average numbers, you know, I’ve noticed they’re about 10% of the sale price.

J Darrin Gross 36:52

Got it. And I’m assuming this is a numbers game, from a standpoint of not everybody that picks up the phone. And we haven’t talked about how you get your leads, whether we’ve talked about how you get your market, how do you get your leads?

Lauren Hardy 37:06

Everything I do is very direct to seller marketing. So we do more inbound at inbound and outbound, you know, marketing to get these leads. Yeah, so I’m not mail direct mail, what

J Darrin Gross 37:18

Do you do outbound phone calls?

Unknown Speaker 37:20

All that stuff works. So me PR I’ve personally done it, I think it all honestly, I’ve done it all, all the things. What I’m doing, I usually like to juggle two marketing campaigns at a time. If you start doing too many campaigns, it’s just I’m not that big of a company, I you know, you start just it’s like squirrel and shiny object syndrome. Um, you can’t do any one really well. So I like to do what’s, you know, giving me my heart, my best ROI at the time. And it really changes, you know, the certain marketing techniques gets saturated. So for a while it was direct mail and direct mail was the thing and nobody was doing it. And then after a while, it got very saturated. So my favorite right now I’m loving TV ads. So I have a commercial. And yeah, I love it. Because it’s inbound. It’s you know, just I put a commercial out there. It’s very plug and play, and you just got to answer your phone. And then I do mass texting, text message blasting. I don’t know how long that’s going to be around for because you know, it is there’s a lot of TCPA complaints out right now. It might go away. But at least I’ve got you know, two so if it does go away, I’ve got the TV ads, you know, to get into FLOTUS. But I do a lot of text message blasting, I did do cold calling for a bit. And I might after a while our ROI was really low on it, because it just got saturated, and the carriers got very good at blocking those calls. So you know, I dumped that campaign campaign actually, as of recently, but yeah, I think direct mail actually coming back, which is interesting, because it went away for a while. And I think it’s coming back. Because, you know, people stopped doing it because they started cold calling. And so it’s interesting how that works. But yeah,

J Darrin Gross 39:07

Shift with the seasons there. So let me ask you another question. buyer’s list how big of a buyer’s list would I mean, would you encourage people to have they’re gonna get started in wholesaling?

Lauren Hardy 39:21

I mean, the bigger the better, right? The biggest you can get Go for it. But I think a really healthy number would be like 1000 buyers on your list.

J Darrin Gross 39:31

And I guess in that kind of identify their buybox kind of what they’re what they’re looking for kind of thing as you go, or is that does that change? Or how granular Do you get with your, your buyers,

Lauren Hardy 39:44

Sometimes it’s just adding them to our list and not we never even make contact and then you know, I do recommend though having that dialogue with them because it helps you understand, you know what type of properties that you need to market for and you need to avoid locking up You know, so like an example like we have an area in, there’s an area in Pittsburgh, like nobody likes to buy in McKeesport, if they do, it’s got to meet kind of this certain price point, and then you know, whatever. So it’s like good to know ahead of time rather than locking up deals and McKeesport not being able to sell them. So it is good for you, it’s a very good practice to get on the phone with those buyers, if you can.

J Darrin Gross 40:27

Lauren, if we could, I’d like to shift gears here for a second. As I mentioned you before we get started by day, I’m an insurance broker. And I work with my clients to assess risk and determine what to do with the risk. And there’s their three strategies we typically look at, we look to see first we can avoid the risk. If we can’t avoid it, then we look to see if there’s a way to minimize the risk, and when neither avoid or minimize our options. And we look to see what transfer the risk and and that’s what an insurance policy is. So I like to ask my guests, if they can look at their own situation. Could be your clients, investors, tenants, the market interest rates COVID. However, you want to frame the question, to identify what you consider to be the biggest risk. And again, for clarification, while I’m an insurance broker, I’m not necessarily looking for an insurance related answer. But if you’re willing, I’d like to ask you, Lauren Hardy, what is the BIGGEST RISK?

Lauren Hardy 41:31

For wholesaling houses, specifically, the biggest risk, I would say I’ve seen a lot of people do this would be spending too much money on marketing. And by not making any money. I mean, just too much money and overhead expenses, not enough profit, not enough revenue. I see that a lot. There’s a lot of people that will listen to a podcast like this and get real excited. And then they’ll start a TV ad and spend, you know, $5,000 a month on a TV ad, but they’ve never closed a deal before. And they don’t they don’t know how to put a deal together. They don’t know how to comp the house out. They don’t know how to talk to a seller. They you know, they have absolutely, you know, just don’t know what they’re doing. And the next thing you know, is they could they go broke. So I think it’s the overhead expenses. When you’re just starting out. People spend a lot of money trying to get into wholesaling houses, they send out direct mail campaigns, a big one was direct mail campaigns, less people are going straight for TV, but direct mail campaigns, they’ll they’ll hear on YouTube university to send out you know, 5000 postcards a month, and some of these people they don’t have that kind of money to play around with but they’ll do that and they’ll do it for six months straight. And they’ll not realize you know, this isn’t going anywhere and you’re not just going to get that one deal that got you $100,000 at the end of six months, but they keep going thinking that that deal is going to come and then they just end up you know broke. So I think that’s the biggest risk right there.

J Darrin Gross 43:10

No, the the output is greater than the input You got a problem there. So definitely, definitely some words of wisdom there. So I appreciate that. Lauren, where can listeners go if they would like to learn more connect with you?

Lauren Hardy 43:26

Well, I’m very active on Instagram you can find me at this mom flips that’s my handle and then I got a YouTube channel that I post we do drop a video every day. And that if you just search Lauren Hardy, you can find me there. I also have you know I do have a coaching program where I do coach virtual wholesaling at virtual investing mastery comm if you guys are interested in coaching,

J Darrin Gross 43:51

Awesome. Well, hey, Lauren, I can’t say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot, and I look forward to doing it again soon. Awesome. Thank you so much for having me. All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.

Announcer 44:24

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Rental Property Future with Michael Zuber – CRE PN #323

Michael Zuber 0:00

The reason I did that is I wanted a list that was manageable that I could scan every single day. I looked at that same set for three years, and only bought in the Mayfair district for that. Because why? Because I ultimately learned that buy box better than 99% of agents, brokers, anyone. So what happens after another bucket of balls and another bucket of balls, right, another day, another day, you start to go, oh, that one’s different. Oh, that one’s listed, you know, this way. And that way, it’s probably like this. And ultimately, once you know, average, you can do good or great deal. So I believe the trick is to get simple, get tight, get daily with it, and then ultimately find average and once you know average, you can do good or great deals. I think every investor needs to do good or great deals. And if you don’t, don’t if you don’t do the work to learn average, you’re gambling and I don’t like to gamble.

Announcer 0:52

Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant We are here to learn from the experts.

J Darrin Gross 1:12

Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals provide their experience and insight to help you grow your real estate portfolio.

Today, my guest is Michael Zuber. Michael is a former Silicon Valley accounting professional turned full time real estate investor and the author of one rental at a time where he promises if you can get to four doors, it will change your life. Additionally, he he hosts the every day, I want to say the everyday daily YouTube channel, one rental at a time, where he dispenses tons of useful info investor knowledge by discussing current events and their effect have effect on the real estate market. And he also has a panel of real estate experts. He interviews regularly for additional knowledge. And he’s also got an online course. And he’s got a challenge to get to 500 deals of which I have participated in here and grateful member of his audience there and I can’t encourage you enough to check him out. And in just a minute, we’re going to speak with Michael about rentals and rental market.

But first a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do. You can like, share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see how handsome our guests are, be sure to check out our YouTube channel. You can find us on youtube at commercial real estate pro network. And while you’re there, please subscribe. With that I want to welcome my guest, Michael, welcome to CRE PN Radio.

Michael Zuber 3:12

Oh, thanks for the opportunity. And congratulations on being one of the 500 that is awesome.

J Darrin Gross 3:17

I was gonna ask you I hadn’t heard recently and I catch you at various times, where are you your your audience on the account.

Michael Zuber 3:26

So we are about three and a half months in actually exactly three and a half months. And we’re sitting at about 157 so we are we are on a pace to get there. I would clearly like to blow it out because I actually bought 1500 cards hoping that we accelerate into this but right now three and a half months in we’re feeling okay, I think we’re gonna get there.

J Darrin Gross 3:48

And the the end of the goal is is it at the year end? Is it 12/31? Or

Michael Zuber 3:53

No, I had this. I had the crazy idea the last day of May so I didn’t see any reason to to wait. So June 1 of 2021 through May 31 of 2022. So kind of okay, I’m some sort of summer.

J Darrin Gross 4:07

Gotcha, gotcha. Well, I I’m always encouraged when I’m watching and checking out your information there on your platform and and you know love to see that there’s an active investor you know, group listening and participating so it’s got

Michael Zuber 4:26

Its it has been it’s been fun. Yeah. On the daily financial show. I I always start right if people send me like you would have gotten a shout out in the morning, right. Hey, Darren got one. So yeah, this morning, we had two people get a shout out. So two more cards went out today.

J Darrin Gross 4:40

Well sweet. Hey, before we get started here if you could take just a second and share with listeners little bit about your background.

Michael Zuber 4:48

Yeah, so Michael Zuber, as you mentioned, lived in the Silicon Valley my entire life. My real estate journey starts after losing $150,000 in the stock market. It starts right around my 30th birthday. Read Rich Dad, Poor Dad, that purple book that meant so much to many of the Gen Xers out there. And I didn’t know I wasn’t introduced to rentals, nobody my family owned them didn’t know was a thing. But I realized I wasn’t Warren Buffett, I wasn’t going to conquer the stock market. I needed something that I could, I could work off hours, right, I could do it. As you know, today, it’s called a side hustle. It wasn’t called that 20 years ago. But yeah, I built my portfolio. off hours, I worked 70 8090 hours a week, I did a million miles on airplanes. So I had a crazy day life I was raised, you know, was married had raising a daughter. So my life was busy, like a lot of your listeners. And, you know, lo and behold, lose all that money in the stock market have $40,000 to my name. And we ended up buying a property two and a half hours away in Fresno, California, in 2002, and we haven’t looked back. So that’s kind of the start, it ends with financial freedom at 45, you know, four or five years ago, and, you know, kind of a fun ride those 15 years.

J Darrin Gross 6:01

It’s awesome. I love the fact that you’re not only, you know, talking the talk, but you’re walking the walk, kind of thing. And, and I got it, I cannot stress this enough for anybody that has is not familiar with you or your platform, the amount of information you put out, and I’d love to hear about how you do and I’m assuming you read a lot. Because you’re you’re constantly providing daily practical, you know, boots on the ground information that, you know, and how it just kind of your approach. How’s it going to affect an investor? Yeah, kind of thing. I’d love to hear how you go through that.

Michael Zuber 6:42

Yeah. So the beauty of all of this is the only thing I’ve added to my life is I talked to the camera. Because what I’ve been doing for the last 20 or 25 years is I’m a morning person, my wife is evening person. So for the last 20 some odd years, I’m up at six o’clock between 530 and six o’clock, no alarm clock. So what I have done for the last 20 years or so is I read I drink my coffee, I kind of decompress, right, I get ready for the day. But I read for an hour to 90 minutes every day for 20 years, Saturday, Sunday included, it’s just like it’s my habit. Now what I do is I do that I take notes, that’s kind of one different, right? I take notes, and I talk about him. But everything comes from the I have a investor. And more specifically, you know, I have an econ degree from Santa Clara University and MBA as well. So I have that hindsight. And he just said I was an accounting professional, right. So I’m a numbers individual. So I bring that background. I’ve been in the market for 20 some odd years. And I just talked about what’s going on and, and then lo and behold, I’ve have eight multimillionaires that over time have joined me for weekly conversations. Right, Jonathan is on Thursdays on his on Wednesdays, you know, Omar and all these other folks. So the beauty of my channel is it’s just not me talking to a camera. I have eight other multimillionaires that talk to me throughout the week. So really, each of those conversations is three videos. So yeah, I put out five videos a day, a daily financial show, likely three experts. And then I’m still doing this business. Right. I’ll be closing on another duplex this week, or maybe Monday. But yeah, YouTube is just for a way for me to get back. So I don’t get a day job. Right. I when I retired, I almost went back and got a job because I’m still up at 6am I just didn’t have anything to do. I’m like, God, what am I doing? I’m 45 I’m, I’m Taipei, I got to feel like I’m contributing. So I’m convincing myself that this is how I get back by by contributing content every day.

J Darrin Gross 8:33

Well, I count myself as one of your connoisseur, and I appreciate all the info you put out there. So

Michael Zuber 8:41

Thank you.

J Darrin Gross 8:42

And hopefully you keep doing that. So I wanted to, to, you know, start with kind of a conversation about the, what is it? Do you think that most people miss when trying to if their goal is to invest in a property? I know one of the things that that one of the teachings that I’ve heard you comment on you know, and and I subscribe to is identifying a market get to know a market be an expert in a market. And I was kind of curious from from your experience and your you know, talking with others and and just kind of assessing the situation if you could kind of you know, look at and tell me what what do you think that most of the investors or potential investors Miss?

Michael Zuber 9:36

Yeah, I think the biggest one is I believe my opinion is becoming a good or great real estate investor is a skill. And what I mean by that means nobody is born with it. I it means everybody has to go through it. And what do I mean by that? Well, the best analogy I have is a golf swing. You see, I didn’t pick up a golf club until I was almost 20 years old, and I played baseball and you know, naturally athletic. But I gotta tell you the first time I put a golf club in my hand, it was the most unnatural thing I’ve ever done. It just feels weird. Like I pulled muscles I didn’t know I had, it was just I bounced the club on the ground, it was just a horrible experience. But what happens with a golf swing as you go on the driving range, and you get a bucket of balls, and then another bucket of balls and another bucket of balls, your swing just naturally gets better, right the body figures about. And then as you’re doing that, and then if you go get coaching, it takes that raw, you know, feeling even makes it better. So now let’s equate this to real estate investing. I believe all real estate investors need to simplify in the beginning. So what I preach what I talked about is, I get it, you’re excited. I get it. You’re a shooting star, you’ve got you baby, you’ve got capital, and it’s just burning a hole in your pocket, stop. Go look at a market get a buy box. And what do I mean by a buy box? I mean, you need to get super specific, and I’ll use the buy box that I had in 2002. Right. So for example, I live in the Silicon Valley, which is ridiculously expensive. I wasted a year trying to find cash flow here. It didn’t work even in 2002. So ultimately we find Fresno, California, Fresno is a market I’ve never lived in. I drove through it once when I was 13 On the way to Yosemite know nothing about it. It’s a million people roughly now it’s probably 600 to 700,000 then too big for me to figure out. Okay, fine. So I do some basic research I find an area that’s middle of the road. It’s 93703 it’s a it’s a part of town they call the Mayfair district, the main register, Ruffin toughs. 100,000 homes still too big. Right? I go Okay, great. So ultimately, what I have to do is I have to go Mayfair district 93703 single family homes, so not duplexes, not quads, not apartments, not condos, between 12 115 100 square feet. The reason I did that is I wanted to list that was manageable, that I could scan every single day, I looked at that same set for three years, and only bought in the Mayfair district for that. Because why? Because I ultimately learned that buy box better than 99% of agents, brokers at anyone. So what happens after another bucket of balls and another bucket of balls, right, another day, another day, you start to go, oh, that one’s different. Oh, that one’s listed, you know, this way. And that way, it’s probably like this. And ultimately, once you know, average, you can do good or great deal. So I believe the trick is to get simple, get tight, get daily with it, and then ultimately find average. And once you know average, you can do good or great deals, I think every investor needs to do good or great deals. And if you don’t don’t if you don’t do the work to learn average, you’re gambling and I don’t like to gamble.

J Darrin Gross 12:45

That’s, that’s pretty clear. And you know, actionable. You know, I love the the analogy or not the analogy, but you just what you did with kind of just narrowing it down to where you could really, you know, study and become an expert in one thing. single family homes from you know, 12 to 1500 square feet or whatever that that was that area. Yeah, I mean that. That was that was that’s pretty, pretty smart on your your part, as opposed to Oh, wow, look in Denver, you can buy Oh, wow. Over here.

Michael Zuber 13:16

Yeah, don’t do that. Don’t Don’t try to compare Denver with Austin with Miami with Cleveland, you’ll go nowhere.

J Darrin Gross 13:22

Yeah, exactly. And it’s. And I think that, for anybody that’s, that’s excited about real estate, and wanting to get in real estate, it’s really easy to get in a kind of that all over and you’ll you’ll talk to somebody, they go, you know, don’t buy there, you can’t cash flow there. And they’ll send you over to here and they’ll and they’ll give you their reasons, you know, and, and then, but it just it really is just kind of like just, you know, get rid of the noise, pick your spot, and then become that expert in it.

Michael Zuber 13:52

Yeah. Because this is what happens, right? Because once you again, trying to relate it to the golf swing, right? So when you’re on the driving range, and you finally figure it out after 90 days of going every day, ie looking on market every day. Once you do that, you’re like, I know what an average deal in the Mayfair districts for 12 to 1500 square feet. Once you’ve proven that, now you can take that skill and go to any market you ever wanted to go to. It’s just like a golf swing. Once you’re done with the driving range, you can take that golf swing to a pitch and putt to Pebble Beach, to you know all these other fancy courses. It doesn’t matter the course doesn’t matter, just like the other city was it wasn’t matter. You don’t pick a market first. You got to build your skill set first, in my opinion.

J Darrin Gross 14:34

Oh, that’s awesome. Let me ask you about investors, expectations versus reality with respects to like cash flow. You know, I think one of the the upsides you would have with being familiar with a market like Fresno is you would know again when it deals a good deal ripe and it’s gonna cashflow well, versus it’s not. Do you have any kind of a sense of, of or do you? You know, I guess what are your thoughts on that? Because cash flow in some of your larger markets, like you mentioned, in your backyard was not attainable. Yeah. Versus like an appreciation, play where there’s no cash flow. But there’s, you know, if you sell then you’ve got, you’ve got some equity.

Michael Zuber 15:26

Yeah, for me, I learned very early on. And again, this is probably because I suffered that $150,000 stock market loss, I was never going to play the appreciation game, the house that I live in, still in the Bay Area is appreciated wonderfully. And someday, it’ll cash out and be a great day. But I never wanted to bet for that I wanted to produce income that I could easily pay my bills with. That was that’s why we sacrificed your 15 years, is I wanted to enjoy the rest of my life knowing that my monthly bills are paid for. And you can’t do that with appreciation. I’ve lived through the last crash, I knew people that were worth 10 million bucks that went bankrupt inside of 18 months. That’s what happens when you bet on appreciation. The market can go against you. If you’re betting on cash flow in the market goes against you, who cares, right? You don’t usually spend your net worth. And oh, by the way, the last crash rents went up, not down. So I just simply I’d never count on calculate looked at appreciation ever, ever, ever. The only time I do it is when I have to fill out a financial statement for a loan. I don’t even look at net worth, you asked me my net worth i would i wouldn’t even answer. It’s like it’s an irrelevant number. It’smade up.

J Darrin Gross 16:31

Right. Not unless you saw everything today, right?

Michael Zuber 16:34

Yeah. Not doing that.

J Darrin Gross 16:37

Right. No, I I appreciate that. And I’ve learned myself kind of the the slow way. I think I when I first started investing, you know, I thought well, I just, you know, just bleeds a little bit each month, you know, and, and was always happy to be at the front of the line, get my taxes done, because it was enough right off the bat kind of thing. But having had a property that the cash flowed as I Wow, this thing really works. There’s actually money coming in, and then

Michael Zuber 17:11

That’s awesome.

J Darrin Gross 17:12

Well, and just the ability to have a second stream of income, that an unexpected stream of income, where you can actually, you know, create a savings and actually then go invest more. I mean, it’s it, you know, it’s just such a different mindset, as opposed to, you know, living payment to payment or kind of just kind of spending everything you’ve got, which I think is I don’t think it’s unique to a particular demographic or an income earner. I think that more people are in the more they spend. You know, I agree. Yeah, yeah, great boat payments, car payments, vacation, home payments, you know, vacation payments, you know what, whatever it is if you have more than you spend more, spend more than you earn in your, you know, and you’re upside down there, but but couldn’t agree more with the the cash flow thing there.

I wanted to get a little bit of your input on what your thoughts are. And just perspective. You and I we talked one time before here about a year, almost a year and a half ago, right after when when COVID started, I had you on and just kind of some COVID perspective. But I think, you know, where we were talking then was more of like a front end of unexpected. What, you know, what, what can happen. My question to you today is more of now with all of the measures that have been put in place, the the eviction moratoriums, the cash that’s been flooded that flooded the system. The the forgiveness of the the rent, right action says forgiveness, there’s supposed to be money in there that’s supposed to make its way from the government to the agency to the to the landlord. But all of that just the the COVID cash and the COVID mindset based on renters and buyers, if you could kind of summarize what you think that will, how that will play out. Yeah. And then next year to three years in the real estate market.

Michael Zuber 19:20

Yeah. So let’s kind of do two things because I remember that conversation from about, you know, 14, 15 months ago, I think there’s two things that I will admit were unexpected surprises. The first one is rent collection, even acts. Ultimately the government making up you know, the 45 billion that they’ve approved in two different trenches. rent collection proved to be far better than expected. Right when we got the notice that it was shutting down and evictions were put in place. I remember having a Sunday conversation with my property managers going How bad can this be? And we were actually penciling in 50%, right? If 50% happened and we got a lot of stuff Where are we? Right? And how long would our reserves last? Not that. So long story short, we never collected less than 97 and a half it was, I think the average was 98% 98.1. It’s about a half a percent worse than normal. So not fun, but not catastrophic, right. And then ultimately, when the government finally makes up for what has been short will probably be even so read collection First off, proved to be better than expected. Second, man, home appreciation. Was that a shocker? Man, people a didn’t list their homes, which I called expected, right? It’s this thing that was talked about was like, don’t come in my house, you got cooties. So that part I got right. But man, this whole millennials, leaving condos and vertical living leaving the cities of New York and San Francisco, people going to the suburbs, that there are a lot of niche markets that got a got 510 years of people moving to there in a year. And building doesn’t work that way. Demand moves faster than supply in some of these market. I mean, Boise, Idaho is the extreme example. Right? It just the demand, there was a is probably like 15 or 20 years of the demand showed up in a summer. And guess what happens to prices? When that happens? It just explodes. And yeah, so those are the first two things that shocked me. Now as we look forward. I think there’s a couple of things that we can count on. First and foremost, inflation is real. And I actually think it’s under reported specifically, when you look at housing costs, which is something I look at all the time, the housing numbers have just came out and CPI yesterday, today’s Wednesday, so yesterday and PPI the following week, they’re really not reporting any rent equivalent increase, it’s like 1.7%, where everything I’m seeing it’s double digits, this is houses and apartment. So at some point that’s going to come home to roost. And I think rents continue to go up because we’ve been, you know, we’re, you know, 5 million units under produced for the last 12 years, right housing development hasn’t been keeping up with housing formation. And as we exit this, I think we’re gonna see housing formation increase again, because there’s a lot of been people that have retreated, they live with mom and dad, they’ve had roommates or whatnot. And once we start getting out of this, which we got to be right on the cusp of getting out of this, I think housing formations is going to explode again. Right. So demand will again outpace supply. So I think housing is going to be pretty strong going forward. I don’t want to see 20% on top of 20%. That’s not healthy. I invested in Fresno, California for 20 years. And we had two years in a row where we were the top market, you know, year after year, I think, Oh, 30404 or five. And if that becomes a bubble, right, it just right. You know, it’s a problem. I think we should plateau. But man if if money stays cheap. And there’s there’s some things going on now where where money can stay cheap, meaning the 30 year mortgage, it’s a great time to buy. I mean, I did a 50 year chart the other day, going back on what wages, interest rates, payments, all of these things. And there’s some surprising things in there that your audience might want may not realize. First one is in the 1970s, which is actually a period that I think we are emulating right now was a year it was a decade of 8% inflation. That was the average. But what is interesting is interest rates went up 300 basis points. It was the last decade we had where rates were higher at the end than the beginning. The subsequent 40 years rates have been going down for 40 years, I believe that reverses this decade. But why is that important? Well, first and foremost, you would think have rates go up 300 basis points, that housing would get rocked. It simply didn’t. Housing went up 106% in the decade, how did it do that? Because the other thing, wages wages went up 87% I believe there are two things happening in inflation that are not being reported rent I’ve already hit wages is the next one, I believe we are going to see an era of wage inflation, which of course as it happens, feels good in the moment.

But guess what prices go up across the board, right Chipotle raise the wages of their employees, and they had to raise the, you know, cost of my burrito bowl by 4%. It’s just, it’s got to come from somewhere. So I think wages are going to go up a lot in the next couple of years. But then, you know, rents will go up and then assets will go up. It’s It’s It’s if you’re bouncing around the bottom of this, it’s not going to feel good because you’re going to feel it the most inflation is the biggest tax that nobody talks about.

J Darrin Gross 24:36

No doubt. I mean, you put all that money into the system. And you know, it’s financially I mean, the pie, the pie doesn’t necessarily expand, you know, to x, it’s pretty much the same pie just the cost of, of the piece of pies is keeps going up there.

Michael Zuber 24:55

That’s that’s basically the definition of inflation is more money chasing x Good, you just, you just pay more. Yeah, kind of what it is.

J Darrin Gross 25:04

And so, I mean, the borrowing rates? I mean, I, it’s funny, because I feel like, you know, there was a mindset in an earlier in some of my investing, there was a matter of, you know, by when the rates were up refiling or down and, and, you know, things would really cash flow then. And but now, I mean, I’m just kind of curious, you know, the Fed and just the supply of money and just, you know, is, is everything seems like it’s got some traction, do you feel like things are still somewhat fragile, and that if interest rates did go up? You know, the wheels could fall off? Or?

Michael Zuber 25:48

Well, it’s funny. Again, I read every day, right? So again, we’re talking on the 15th of September as an example. So just today, I read about the largest property developer in China $300 billion, not making payments, it kind of feels like a Lehman moment in China. And if there’s a lot of counterparty risk, which China’s economy is very opaque, I know very little about it. But that’s a lot of the property market in China could be a problem. Why, why this goes into your question is, what happens if the largest second economy in the world has another as their version of our great recession? that just needs more dollars from around the world, including euros in Australian dollars? And all the are you going to flood to the the USD, the US dollar?

J Darrin Gross 26:34

Yeah, seek safety,

Michael Zuber 26:35

see, they’re gonna win, the world is scared. They come to the dollar, that’s not going to change probably in my lifetime. And I think we could I think the world is a lot more fragile to your question, then people think I just I naturally think that the rates should be higher. But when I look at the overall world economy, I think the world economy is far shakier than people want to admit. And we could have a Do we have a recession next year? Oh, man, what could happen there? Great stay low rates. And then I think rates stay low, low longer than they naturally should. which hurts savers. So I’m talking about the people who’ve been crushed savers. I mean, you know, I got some money in the bank and earn point. Oh, 5%. I mean, no wonder people are buying real estate. That’s why Wall Street is buying rentals, because you get six or 8% on your money.

J Darrin Gross 27:27

Right. Now you’re getting point five, you’re winning. Yeah, I’m getting .02.. But I, I just have a hard time seeing a way where the rates can increase dramatically. I mean, I could see like, you know, a quarter of point here, a quarter point there. But I think the the bigger concern, and I am and I’m not an economist, but I guess, you know, the idea has always been if you had a little bit of cushion there, and you needed to kind of, you know, goose the economy, you could lower the rates. Well, if you’re already down at, you know, zero kind of thing that you haven’t given yourself much room for, if you need to do something, at least not with just rates. I mean, I know there’s other levers they can pull on. Yeah. And do that.

Michael Zuber 28:16

Well, they certainly have, right, they started what what the new thing, at least for my memory that they did is they started buying junk bonds this time, right? It wasn’t only lowering rates, but they stepped in to be the buyer of last resort during the like real thick of this thing. They still have those levers, right? They could start buying ETFs. And other I mean, I mean, they could get really squirrely, but by then, I mean, I’m not sure what that’s telling us, but it doesn’t feel good if the Fed has to come in and be that buyer.

J Darrin Gross 28:43

Yeah. So and we’re talking a little bit about man for housing, and you mentioned kind of the formation of housing changing. If If, presumably, the we have inflation, which would be associated with like wage increase and price increase, interest rates stay, let’s just say they stay relatively the same. Again, you’re still a payment buyer. I mean, it’s what, you know, buyers, ours is a payment. So if they’re, if they’re making x and the payment is, you know, less than 30% of that for I mean, kind of the the mark for housing, is that. Does that change? Or do you think that? No,

Michael Zuber 29:29

I think, I think I think real estate is much like cars. I think it is really for most people a payment decision. And again, that 50 year chart, I built the payments, at least in 2020. They were the lowest on record they were roughly 16% of your monthly gross income, which is called a front end ratio by mortgage brokers. Now in 2021, July, which was the last numbers I looked at it went up a little bit and went up to 20%. But when you look back historically, I 43 of the 50 years, the payment structure was 29 percent or less, we’re still very affordable today that said there is another wrinkle in all of this and that is the down payment is becoming a problem right in my assumption, I assume 10% which is, which is about this bout, right if you look at the entire market, but when you look at first time buyers, they’re more like 6% but downpayment is going to become the problem, right? Because downpayment is getting up there, right? The average homes now 366 or 369, and you take 10% of that it’s 34 grand, and then you look at the average person, they’ve got $18,000 saving, we are we are, if you can be if you can get the downpayment stuff is more affordable than it’s been most years, but the downpayment is is becoming a problem. And it’s higher than the trend line in the trend lines about 33%. Today, it’s about 36 or 37%. So it’s the downpayment is actually becoming a bigger problem, which is probably why we hear the administration talking about first time buyer programs in this that the other thing, so we’re always a payment buyer, because that’s what you get approved for but the doubt you gotta have a down payment. So that’s becoming a bigger problem.

J Darrin Gross 31:08

Now, it’s interesting, you bring that up, I know, like, even in commercial with just the cap rate compression and, and just the demand for deals. how, you know, the market may be axed, but, you know, the debt cover the debt service, coverage ratios are still at the same percentages. And I’ve seen, some lenders require a greater downpayment, to make the deal work. Again, if you’re doing commercial and you’re, you know, doing syndication, or you’re bringing capital from somewhere else, or other people or joint venture or whatever. But it does seem to make like just a slightly skinnier deal. But again, if the demand stays strong and housing clearly as a, I mean, nationwide, just the demand for housing is, is is there. Then if you add in all the the COVID supply chain, you know, question marks that have that have come up? I don’t see that changing anytime soon. I think it’s just a matter of I mean, I see the demand to be strong.

Michael Zuber 32:15

I yeah. Again, the beauty. The beauty about studying economics and watching it for so long is you realize that there’s some truth that and with with housing, housing demand is instant, nearly instant, where supply takes years, right permitting and zoning and building and you know, all of that, but demand, right? We come out of this crisis, and we have the next version of a baby boom, where couples get together and want to move in instantly get married and start popping out babies. Oh, man. Yeah, man is gonna demand not going away. No, that’s for sure.

J Darrin Gross 32:52

Hey, let me ask you a quick on your you’re a purveyor of all the news and what’s what’s topical? What’s your sense on the 1031 exchanges in taxes with regards to real estate?

Michael Zuber 33:05

I don’t think they’re going away. I think that was a thing put out there as kind of a trial balloon it’s in, in having studied this for a long time. It’s been floated for years. Basically, what would I think what what people now realize is if you got rid of 1031 exchange, which they absolutely could, but what would happen is the commercial market and the market of the largest production of housing affordability, it would slow down to a trickle. So if they got rid of it, they would stop people moving up, and thus creating more housing, which is exactly what they want to need. I think they’ve now come to realize that that would be so detrimental to housing, but in commercial housing, that they’ve got to get rid of that it’s it’s a foolish idea.

J Darrin Gross 33:49

Right? Any any crystal ball on taxes, capital gains, and then

Michael Zuber 33:54

I think I think what’s gonna happen is, again, if I was gonna bet on it, they they scared, they’re playing classic negotiation games, they want to scare you taking it to ordinary income and 39.6. Which for me, in California, when I add in California would take me to 53%. Guess what, I don’t sell anything at a 53% tax, they know that they’re not complete idiots. They’re only partially idiots. So what I expect them to do is to probably come in my guess is somewhere under 30%, you know, 25? I guess 25 30% is where they’re coming, because they got to raise taxes somehow, you can’t spend three and a half trillion dollars and not raise taxes, but they can’t take it the 39 because again, what will happen? Well, I will not sell any assets, I will simply refi them and take a loan which is not taxable. You know, so I think they realize that that’s a non starter to I hope,

J Darrin Gross 34:44

Wait a minute, are you saying trickle down doesn’t work?

Michael Zuber 34:46

Yeah. So yeah, I am saying it’s a sexy message that just doesn’t work.

J Darrin Gross 34:53

I mean, it’s, it is kind of an interesting thing. I mean, if you if you understand policy enough Basically, it’s, it’s a way to encourage behavior. And that’s the whole, this whole thing. And if if you look at the tax code, who rewards investors, and rewards people that that created LLC, or create businesses that go out and invest, and that that’s kind of the underlying current of our economy is you have to have investment if, if basically, I had everything I had, and you had everything you had, and neither one of us exchanged with each other, you don’t have an economy, I’m basically it’s that exchange of, you know, goods and services. That that makes it all work. And, and, you know, that’s, that is what, what has to happen for it all. I mean, we are all connected together, in that totally, you know, so you got to have that. Keep going. It is funny, though, when you think about how the tax, you know, taxes, and I, this whole notion about taxing corporations and stuff, and I keep reminding myself of the lesson, I learned that you can tax that, but reality is all that gets paid out to the shareholders. And I mean, you’re talking about very small piece with respects to or, and again, I’m not an economist, but but that as opposed to at the individual level where the money gets paid out to kind of thing, and I think sometimes it’s it’s a sexy, you know, notion, but I don’t know what it actually accomplishes when you have ways that corporations can, yeah, you know, I manipulate things. Yeah.

Michael Zuber 36:31

So I think there’s a big talk track about raising the tax rate for corporations, you know, 21 to 26, or 27, or whatever they’re going to call it. But unless they change the rules, simply moving the index is marginally effective. Because again, the big thing is Amazon, right? Everybody talks about Amazon, making gazillions of dollars and paying zero taxes, while the tax code says, if they make investments in warehouses to do this, that the other thing, they could take bonus depreciation and wipe it all out, and it’s still zero. So unless you’re going to go change the rules, ie the tax code, it doesn’t matter what the rate is, you can make it 90%. And Amazon still pays zero. Right? So

J Darrin Gross 37:10

Yeah, no, it’s, it’s again, it’s kind of a news bite, or, you know, kind of the, you know, attention getter kind of thing. But it’s, it’s, in reality, I just said, it’s noise. Michael, if we could, I’d like to shift gears here for a second. By day, I’m an insurance broker. And I work with my clients to assess risk and determine what to do with risk. And there’s three strategies we typically consider. The first is we look to see if we can avoid the risk. The second as we look to see if we can minimize the risk. And if we can neither avoid or minimize the risk. And we let’s see if we can transfer the risk. And that’s what an insurance policy is. And as a broker, I like to ask my guests if they can take a look at their own situation could be their clients, investors, the marketplace tenants, however, however, you would like to frame the question. And again, for clarity, I’m not necessarily looking for an insurance related answer. But if you’re willing, I’d like to ask you, Michael Zuber, what is the BIGGEST RISK?

Michael Zuber 38:26

So the biggest risk? And again, I asked myself this all the time, right? Because I look at it, I go, what is my biggest risk? And if I can, if I can survive the downside, right? up through all those things, those that I think about it all the time. So in my portfolio, my biggest risk that I’ve been working on all year is variable interest rate risk. I have commercial loans, I own apartment buildings. And those loans reset 357 10 years, depending on what you have. And over the last year, I have feared that I could see at point of refi, where rates, you know, I had a rate of three and a half. I was like, what happens if this is seven, seven and a half? Right? So what I had been doing actively over the last year or so is taking all of my loans and looking for ways to get 30 year money. One thing you can do because there’s now for the first time, really in the last couple years are these vendors called non qm lenders, non non qm lenders. And I work with a lender who has taken all of my apartment risk and allowed me to get 30 year money at 3.99%. So it’s not a Fannie Freddie loan, it’s a 3.9 non qm lender. So I’ve been I’ve been actively working to get all of my apartment buildings, and I’m even paying prepayment penalties on one of my loans. Because I I’m deathly afraid of interest rates shooting up. And if that happens, of course, apartment buildings, if rates go to seven cap rates, gotta go to what 910 and then the valuation calls and they’re gonna say, hey, you’re now in technical default and you got to cut a big check. That freaked me out for a while. So I’ve been working very hard to Take all of my just double rate mortgages on apartment buildings and go get 30 year money even if I have to, even though my payment goes up slightly now, I’m okay with that. So that was the biggest one for me. Cuz I looked out years ahead and go, wow. Because again, I’ve been through the last crash, what caused the last residential crash? It’s all those adjustable rate mortgages that popped up that and their payments reset. I looked at that going, Oh my God, if that happens to my apartment buildings, and then the cap rate goes up and the value is cut in half. You know, where do I go? So that was a big one for me. So that’s, I’m working on my last one right now.

J Darrin Gross 40:36

Yeah, that’s never a fun. You know, letter to open that. Congratulations. Your loan is resetting and the interest rate is now? You know, yeah. Being nice if it’s going down, but no one is going up there. Yeah.

Michael Zuber 40:49

Yeah. And again, that the biggest thing for the commercial stuff, right is because if that happens in the cap rate goes in and you have a revaluation that your technical default, and they’re like, okay, you want to kind of check for 150 grand?

J Darrin Gross 41:00

Yeah, no, I don’t really know.

Michael Zuber 41:03

So, that was mine.

J Darrin Gross 41:05

No, I appreciate that, you know, interest rate is definitely, I mean, as an investor, the whole market, I mean, it’s pricing and everything sensitive to that. And if if that changes, your model changes. And, you know, if your cash flow is, is based on that, definitely want to pay attention to that. So I appreciate that. Michael, where can listeners go if they would like to learn more connect with you.

Michael Zuber 41:32

You can go to your Google search bar and type in One Rental at a Time, you should see a YouTube channel, a book, a website, Instagram, hopefully easy to find at this point.

J Darrin Gross 41:42

I check it out daily and encourage everybody else to as well. Michael, I can’t say thanks enough for taking the time to talk today. I’ve thoroughly enjoyed it. I’m a big fan. And look forward to doing it again soon.

Michael Zuber 41:56

Anytime. Thanks, buddy.

J Darrin Gross 41:58

All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.

Announcer 42:16

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Multifamily Senior Living Hotels with Vinney Chopra – CRE PN #322

Vinney Chopra 0:00

And we got the deal and we just be a tad higher than what other people were paying with found out and also hard money day one. So those are great deals but they’re very hard to find. And they were fully renovated units the seller had put in and brand new roofs and brand new parking lot everything so we paid a little bit higher, but we have more potential to increase the rents so anybody really looking into this market? They need to you know, underwriter, the right lender, right. But look for the best nugget don’t jump into it. If you don’t have a strong business plan.

Announcer 0:43

J Darrin Gross 1:03

Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today, my guest is a returning guest and a favorite. His name is Vinny Chopra. Vinnie is a multifamily syndicator, Senior Living care facility developer, and also a mentor for investors and an author and a podcast host and on and on and on. And he’s multi talented. And in just a minute we’re gonna speak with Vinny about the opportunities in multifamily and also senior living. But first, a quick reminder, if you like our show, CRE PN Radio, there’s a couple things you can do to help you can always like, share, and subscribe. And also we’d love to hear from you. Leave a comment. Also, if you want to see how handsome our guests are, be sure to check out our YouTube channel. You can find us on youtube at commercial real estate pro network. And while you’re there, please subscribe. With that, I want to welcome my guest, Vinny, welcome back to CRE PN Radio.

Vinney Chopra 2:23

Thank you. Thank you. It’s such a pleasure to be back again, Darrin and we have been together many times on the many times.

J Darrin Gross 2:31

Yeah, there’s there’s a whole list of of interviews we’ve done that are on if you go to the YouTube channel, and you there’s an actual list of of interviews we’ve done there. So and we’ve covered, you know, a spectrum of topics, and I always appreciate the opportunity to talk with you. But it’s been a little while since we’ve talked last I think last time we talked was kind of the front end of COVID. And I know at the time you were shifting from not shifting from but incorporating more you were growing. Instead of just multifamily. You were getting into the senior living and you know, branded that and developing and, and you were as always excited and smiling, happy and things were going well. And so before we jump into it, maybe just a brief kind of a an introduction, if you could tell just to listeners, kind of your your two men and who you are and in your background a little bit.

Vinney Chopra 3:31

Sure sure that, you know, I came from India with $7 a month people know, and I’m a mechanical engineer. I came here to do my MBA in marketing. And that just sales and marketing got me so fired up. I never looked back. So I’ve been in that business for a long time, have been an investor for four years now in two single family homes and about 15 years in multifamily. So that has been the big crust of my career with the real estate, commercial and then 34 syndications complete syndications. And little over 4700 units, and about half a billion in you know, portfolio with a u m, we’re on the single maybe one or two times I had partners, but most of the time I’m the principal and the general partner in the deal, you know, and yeah, that’s a little bit about me. I know I’m very fired up about multifamily like everybody is and millennials as you know, they definitely we need multifamily. We will need even the offices now. With COVID or after COVID in a lot of people are working from home. So two bedroom and office three bedroom in our office, you know, we’ll be probably developers will be building. Second one is the integration which we haven’t Seeing that much influx in the COVID. But that’s another one where the rental units are needed. The third is my most favorite one, which is the tsunami, silver tsunami 10,000. Baby Boomers are turning 65 every night in USA. So they had like 54 point 7,000,065 plus right now, in the next 3035 years, they’ll be 100 million. Oh my gosh. So that’s a big, big number. And they’ll be a huge shortage for the senior living, independent living and all that. And then assisted living and memory care is where we have honed in, in our companies, I found a great partner shade and Ron from Pakistan, who actually have been building these assisted livings. And here I was thinking, How can I get into it? So now we are joined at the hip, you know, so we are building them? Five to seven acre of land with a lot of great luxury, amenities and all that. So that’s a little bit about me. Yeah.

J Darrin Gross 6:13

No, that’s awesome. Well, let’s talk just a little bit. I think the first thing I wanted to congratulate you on is 34 syndications that you’ve gone full cycle on Is that right?

Vinney Chopra 6:23

Well, I have sold 25 of those already. So that’s full cycle on 25. And one more, I’m selling now 26. And then we’ll be left with quite a bit bigger ones like 52 million one, 35 million. We just bought a 35 million one in Austin, Texas, which is a very big for us because we caught it at 113,000 per door. Somehow, last September, and now the vicinity, the neighborhood is going to be at 153 a door.

J Darrin Gross 7:05

Well, you didn’t do anything you haven’t applied your Midas touch or anything.

Vinney Chopra 7:10

I don’t know what happened there. Oh, my gosh, me increased value from 35 to almost 47 million, you know, in just one year, just in one year.

J Darrin Gross 7:21

That’s terrific. That’s terrific.

Vinney Chopra 7:24

Austin is on fire, as you know, you know? Yeah.

J Darrin Gross 7:27

Yeah, no, definitely the Sunbelt states. I mean, you know, Texas and Florida and Arizona. I talked to other people about and I mean, it’s all kind of a tough to lose in those states. I think just based on people are moving there. You cited the millennials, the immigration, United seniors look to the sun sunbelt states for for retirement. So let me ask you so that you’ve been doing this now for 15 years? Yeah, there’s definitely been a little bit of a change in the climate I mean, as far as just the the workplace and just the way we live with COVID and stuff. In fact, I think cameras Last time we talked but I can remember it was just kind of the some of the protocols that were being instituted because it was still kind of a not an interaction kind of thing. But it’s more about how to create barrier and space between people and all that I think we’re we’re now a little bit beyond that. But But you indicated just even in kind of the intro here about millennials looking for you know, a bedroom or a workspace at home. So to end it is you look at your portfolio in what you have had versus what you have or may purchase in the future will that change some of your thoughts or

Vinney Chopra 8:55

Dramatically there and you know, I mean, I have been buying c c plus b minus older properties. Now we are buying more newer properties, which is good and also with the business plan to you know, renovate them to like I just found a day in Tennessee. I flew there 15 bidders were there, and we got the deal. And we just paid tad higher than what other people were paying we found out and also hard money day one. So those are great deals but they are very hard to find. And they were fully renovated units the seller had put in and brand new roofs and brand new parking lot everything so we paid a little bit higher, but we have more potential to increase the rents. So anybody really looking into this market. They need to you know, underwriter, the right lender, right. But look for the best nugget don’t jump into it. If you don’t have a strong business plan. You know, so this property actually, they renovated it. But the rents are seven to $800. Lower. What? Wow, I live it next property over in Tennessee, when I’m buying, it’s like 678 $100 lower rent in this property because the seller is a flipper, so they just want you to renovate and keep the rents low, so that the occupancy goes higher, you know, so we’d be able to either jump in, and we’ll educate, you know, that residents that they have been paying so low. And it’s all bills paid, which we never do. Millennials live there. But they are just not shown that, you know, hey, you have to pay for water, and gas and trash and Internet, and cable. We just kind of jumbled it all together in one price, you know, anyway.

J Darrin Gross 11:00

But that sounds like a home run just based

Vinney Chopra 11:03

on like your home run. Right? excited about it? Yeah.

J Darrin Gross 11:08

Because I think one of the things that I always appreciate in talking with you, and we’ve had the conversation about capital improvements, yes. You know, and like you just mentioned, having a plan, you know, having a business plan and then implementing that so that you can get the higher rents the higher noi and the higher valuation so that you can, whether you actually refinance or whatever, you’ve got that that built in there. On your on the properties that you I mean, this This one sounds like it was fairly well renovated. So it should be I would think, a faster upgrade as far as your your noi, is it gonna be easier way to

Vinney Chopra 11:48

lease Aaron really increase in rents, of course. But we also found there was a duplex on the property, which was not counted in the rent roll. So when we went to tour it, and we found that it could be a big parcel where we could build a townhouse is also somewhat demolish that the duplex and be four Plex and four Plex, eight of them, which will rent for 2200 a month, he found out in the door. Yeah. 22 have more than one.

J Darrin Gross 12:25

Yeah, per door. Wow. That’s your door. Yeah. And the the there was no accounting for those

Vinney Chopra 12:32

units when they had said 109 units. It’s smaller property than what I’m used to purchasing. But it was such a good deal. We had to take it, you know, it was 107. But the two units were not shown on the rent roll. They were like we can break in, but they were duplex. So we are glad that nobody lives there. And we’ll just demolish them. And then we’ll build a brand new, you know, Class A, with the amenities and all townhouses. Yeah,

J Darrin Gross 13:01

No, that’s, that’s great. And now that you’ve done so much developing, I’m guessing that that’s, that is kind of second nature to you is it

Vinney Chopra 13:09

You know it is. And over the years, I have done some really heavy lifting, with some burns units I bought and renovations keep on going, you know, all over the foundation challenges and roofs, lakes, and you name it right, you know, so it’s quite okay for us. And then with the senior assisted living, where our whole game plan is to buy the land, and then go through the ordinance changes, get the permits, and then build on it. So we are the developers, we buy the land and we do all the ordinance changes, and then infrastructure, and then we manage them also. So it’s a whole cycle of two years, two years it takes us but you know, that’s it’s something which is unique because in our assisted living and memory care division, it’s one story only. And there are three to six courtyards are there where our seniors can go out and have exercises and putting green and waterfalls and swimming pools and all but then inside the put spars, salons, billiard rooms, exercise rooms, then library and also the movie theater inside plus the dining halls. So it’s a very nice luxury, you know, community that we build. That’s what the Hampton Manor is of a brand that we are hopefully building we’re building nine locations right now. We have built 23 already.

J Darrin Gross 14:51

So my goodness, you’ve built 23

Vinney Chopra 14:55

Had built 23 already. And now we are building nine locations In just Florida alone,

J Darrin Gross 15:02

Oh, my goodness. I knew I knew that you were busy. But that’s that’s a plateful and then Maura. Great. So the the, I wanted to ask you just a little bit about we talked a little bit about COVID kind of shaping the marketplace in multifamily. Let me ask you just about the senior market. You know, knowing that originally the the senior population was considered to be a higher risk. And now through vaccinations, it appears to be relatively relatively under controllers talk about boosters, net, but I, I have not paid a great deal of attention. But I have I read the news occasionally and see that, you know, by and large, the number of persons that are the people that are most affected by COVID, or any of the variants appear to be the unvaccinated and I’m not trying to make a debate about or whatever, but I’m just, I’m just kind of curious, based on that. Are you seeing any kind of deviation from what you planned for the seniors? Or is it or is that that I mean, just the sheer demand and the numbers you talked about, continue to fuel that and without, without any kind of,

Vinney Chopra 16:16

You know, good point, here, and what we found was like, we locked down pretty fast. If I recall, you know, when we talked last in March or April, and 2020. We locked down, we didn’t have a single debt, you know, and you know, our senior assisted livings, we have 14 of them, we are managing still. So they are like, you know, 75 203 years of age, you know, seniors out there, so nobody, you know, contracted or died or anything. I know nursing homes were more prone to a lot more deaths came from there. But now with double vaccination, the market has opened up opened up quite a bit, actually, we get a lot of calls that request to look into like Punta Gorda, I think we have 17 deposits already. And we are 70% only built. So a lot of people are calling us to bring their mom and dad, when we are done, we open the gates, then we would like to be 50% occupied. It’s a 88 units. I think we beat Ada to 92. No love, no bigger. No two story, no three story never ever really beat that. And the other good part is that we want a quality of life. So five to seven acres of land, minimum so that they can really stretch out, you know, and have all these great immunities there. Yeah. So COVID has not hurt. Well, it did hurt last year. But it’s opening up and speaking some of our new developments won’t be opening until the fall of 2023. So we feel even the effect will be even less, you know, then. Right. Right. And especially because we don’t have the distances, and we don’t have to elevators in our assisted livings and also the space is so hot, you know, SP a pretty large, so distancing is very easy for us right to take care of all that right. Yeah.

J Darrin Gross 18:29

No, that’s, that’s great. I’m glad to hear that. Because, again, you know, I think on the front end of COVID there were a lot of questions. Yeah. What what was going to happen? And how are things going to be affected? And, and glad to hear that, you know, your your outlook is, you know, the minor changes with the multifamily. But as far as the senior living it looks like that’s still full throttle. Yeah, you know, go fast. market their brand. Let me ask you this. So the the, do you see any changes in the marketplace? I mean, you cited, you know, the the millennials and the immigration and the seniors? I mean, those are all expanding populations. Is there anything based on the work from home? I know, in the past, we’ve talked about, you know, do all of the, the, you know, research on basically the demographics and make sure there’s a growing community and that there are jobs coming there. Has Have you seen any of the work from home change that dynamic at all? Are you able to pinpoint anything like that?

Vinney Chopra 19:37

You know, that’s a very good point. What you just mentioned actually, you’re right, we’re finding lot of people are enjoying the lifestyle of coming out of the bigger MSS. As you know, big, big cities and going into suburb, something we live in the Bay Area, you know, is the area I cannot believe how the prices have shot up, you know, in the suburbs. I’m, like 30 miles away from San Francisco, where I live in Danville. But you’re right, a lot of people are also moving to other places where their family is their spouses from and they would like, you know, their kids to grow up there. Right. You know, so a lot more flexibilities there. But at the same token, I feel those jobs which are more remote are tech oriented. Most of the time service you have to be where the services right, so Austin, we are really big Tennessee, we are very big knocks for you. I’m very big on checking the love course. And then Atlanta is just growing like crazy crazy in every direction. Florida be a very big, you know, and Texas. I mean, even Houston. Oh my gosh, so many great opportunities are there in San Antonio Houston, and Fort Worth and Dallas. Austin. So I know I haven’t bought in Arizona that much. But I know we’ve been building senior assisted living has been moving from east coast to the west coast. Got a big claim to have nine more years this decade for building $2 billion worth. I know that’s a big goal. But we are going for it. Yeah,

J Darrin Gross 21:22

That’s great. And I know on the the multifamily is when you syndicate those, you you raise the capital, exercise your business plan, exit distribute the the proceeds. Do most of your investors. Are they signing up for the next one? Or Hi, have you have you had you know more money than you know what to do with or I mean, I know I want to talk to you for a few minutes to raise millions of dollars.

Vinney Chopra 21:50

26 million last year, we raised 26 million. And this year, what I did was actually to be truthful. I designed a fund. So this year, I launched a fund already, it’s a $50 million fund, which I can buy about 200 million or close to that, you know, product. But what I did was in this fund, there are four pronged attack to mitigate the risk. Many time syndicators like me and others have one property, and they do a fun to raise money for that particular property. If the property does well, our investors do good. If it doesn’t do well, then they go down with the same one asset. So in this fund, it’s a 506 C, which is my first one, which is accredited investors only. But we can advertise we can talk about it and everything. But what are the four different ways I invest the money from the fund, one is multifamily, which is B class A B plus. So So that’s number one. Second one is giving the equity from the fund to start the senior assisted living constructions. So when I used to raise that separately, now I raise it in the fund and then do those. Then the third thing is when we build the senior assisted livings, we are buying them. Once they get close to stabilization, then we are purchasing them into the fund also, like we are buying right now 17 million, it’s worth about 22 million easy. Once we take the 45% I think it’s 43% occupancy right now, assisted senior living that we built in Cape corral. We are buying it for 17 million, cashing out the investors brought the money before and then we’re going to keep it for seven to 10 years. So that’s going to be the third prong and the fourth one is hotels. So in the find the money, we can be put into four different plates. So I looked at it as a multifamily. The resident has to pay upfront, right in though, you know, in the counter to go upstairs and sleep one night or four nights or whatever. So it’s almost like a apartment. I consider it as an apartment. But the IRR are very high. you know on the hotel. Yeah.

J Darrin Gross 24:36

On the hotels. Are you buying existing Are you developing those or?

Vinney Chopra 24:41

We are buying existing it we just bought one with my major partners. And we lucked out actually we bought it just before COVID we didn’t even know it. We bought in an auction Hilton Garden Inn in McAllen, Texas. For I think 6 million. We bought it for and All cash, right. But then the medical staff and nurses chose our hotel to live in. What are the chances of that? So however whole 2020 was in black, and Crawford, and the value went to the refinance state during COVID. And it’s worth 1 million now. What?

J Darrin Gross 25:26

Doubled your money? Well, the good news is Oh, I mean, it just follows you. That’s, that’s I mean, it’s, you know, I was wondering about that, just the hotels, just how hard they were hit. Just the whole COVID. Like thing with traveling that I know.

Vinney Chopra 25:47

No, we were ready to pay what key from our own pocket every month, right? When we closed it on December 31. In February, we were 16%. occupied. It was so low, right? But then bam, we got some contracts coming in, and then nurses and doctors and local authority, no, we were average to things. It’s 72%, we average occupancy.

J Darrin Gross 26:16

That’s great. Let me ask you something. You know, I find a lot of people and I think myself tend to think in this way. It’s just kind of stay in a lane. You know, you, you you started off and you started off in single family a long time ago, but you’ve been in multifamily and been very successful in multifamily. And you’re, you know, you were aware of and I’m curious about and researching about the the senior living and found your partner and and, you know, got into that the hotels Now, how do you in your mind reconcile? Or is? Or do you see it all the same? It’s just a different silo? How do you? Do you look at it any differently? Or is it just all a business?

Vinney Chopra 26:59

You know, what you what you said is so right Darrin, and I don’t know ABC about hotel to be truthful. But what happened was, I found some other great partners, but they seek out to me kind of thing. And they are really great at it, how to underwrite it, what to look for. And, you know, one of the partner is also very much hands on, on a weekly basis. And I also get into the meetings now. But we have hated people managing the asset. See, you have to have Marriott is another one we are purchasing, looking into that are lucky into Marriott salon. But with tier one we like to get for the mid tier, but the profit, the cost, segregation is amazing. The tax write offs are amazing. So a lot of high net worth people love to invest in hotels. So that’s how I kind of, you know, again, with law of attraction. These my other partners are very strong in hotels, and I’m also learning and I’ll be able to work with them.

J Darrin Gross 28:06

Yeah, yeah, well, I would think that your success and the other, you know, the multifamily and just the, you know, the networking you’ve done and the ability to raise capital would would automatically present additional opportunities to you based on on on that. And, you know, kudos to you for all your success and your, you know, the, the energy you bring to every interaction. And I wanted to ask you to a little bit about your coaching. You know, the the recently I think last week or two weeks ago, I was having coffee, and one of the guys I was talking with, he’s working with you, and I am talking to anyone out there, I need to reach out to him. So tell me about that. Because I know the you know, you’ve authored a couple of books. And I know that you’ve you’ve done coaching, but it hasn’t been something that you’ve been really, you know, when we’ve talked you really tooted your horn on as much as it was something that you know, you’re doing. Tell me a little bit about your mentors. Yeah,

Vinney Chopra 29:03

I would love to love to Yeah, I started my multifamily. academy.com is my company. And actually I A lot of students were asking me a lot of questions. And I was answering them the same way, again, and again and again. Then we said, why don’t I just keep on recording all my answers. And that’s how it started. And I have, I think 1000 lectures now. He had me, it’s online, people you get to learn everything and everything, what they can do what I’m doing, to go into online for 20 $500 only, because I make my money in buying and selling and syndicating I just want to you know, give myself back, you know, to the community at very low price. I’m even coming out with a new course now for 997 the whole thing and they get everything on a silver platter, all my worksheets, all my PowerPoints, you name it underwriting tools, everything included. And then I do 70 $500 group coaching, I do that. So I have some students in there where I teach myself, I have no other coaches, I teach every Wednesday actually, like, after this call, I’ll be meeting with them at four to 545. Every week, I love that time to do deal analysis and going over their questions and having other students share their successes. And it’s a motivation, every week motivation, you know, moving the needle, I call it, and then I have personal coaching. So I have five students only, and they pay 25 to 35,000. For me to teach them and get them on a very quick path. So that’s my coaching program. Yeah.

J Darrin Gross 30:52

Well, I you know, you’d certainly be one to a mentor. I mean, just the all the conversations we’ve had the experience that I know you have, I mean, you can certainly walk the talk. And that’s, that’s, I would think anybody seeking that help would be in good hands to, to work with you there. So appreciate that. So Vinnie, let me ask you that question. I’ve asked you a couple of times. And it’s one that I like to ask all my guests. And I would ask that in in this time that you kind of look at it from just kind of more of a broader picture based on and I’ll let you frame and I really want to, but just knowing all the experience you’ve had, and kind of as you look forward and stuff, the questions about risk, you know, the biggest risk, and, you know, I, as an insurance broker, always work with my clients to just assess risk, you know, what’s the, can we avoid it? Can we minimize it? If we can’t do either of those? Can we transfer it? And that’s where the insurance comes in. And if if you’re looking at your situation, and kind of the way you see the different silos that you’re operating in, and kind of the economy and the governmental, etc. Vinney, what do you see is the biggest risk?

Vinney Chopra 32:17

Wow, that’s a very good question. You know, they’re not see that, as a businessman, any intrapreneur should always, always always get the insurance, you know, to come back the risk, because we syndicators are using other people’s money, you know, to get into LLCs, and buying these properties and all that, if there is a slip and fall, or if the contractor came on the property, not properly insured. I just believe that we need to have the highest amount of insurance and umbrella insurance at the same time to directors insurance, I’ve had that in the past cyber insurance I’ve had that. I’ve been, you know, before big lawsuits, but I just kind of walked away from them, because I had people like you, you know, who really took care of and they were able to write good policies. Were they settling mediated and settled? You know, with the, with the plaintiffs, I think, right, you know, defendants via the defendants, right, ya know, all those things happen in life. So we should really always be looking around us what can go wrong, right. Even in the due diligence side, when you said, you know, risk involved, a lot of risk is there because we get the key to the property, then it’s our choice. I mean, it’s our baby, no matter what we did. So we need to really mitigate the risk, I call it you know, by taking proper measures about like, I talked about, like sewer lines, running the cameras through, and then, you know, foundation people, termite people to come digging deeper into, you know, if there is some termite and mold and all that stuff. So, no, those risks are there. As business people, we need to, it’s the small amount we pay, it’s an investment. That’s what I say. I mean, one time in my life, I was paying 1.2 million 1.2 million insurance premiums for by so many properties. Yeah, yeah. You know, so that way, it was definitely definitely needed help, you know. So the risk factor is very much there, and especially for us syndicators, and we need to really listen to people like you. Definitely.

J Darrin Gross 34:44

I appreciate you reiterating that and I’m just kind of curious too, is you have expanded your circle, do you feel like any of your risk have, have, have you see any risk that have grown? I mean, do you feel like there’s more risk when you get something new that you’re not as familiar with, like maybe the, the multifamily now that you’ve done 25 deals full cycle, I’m guessing you could pretty well do that in your sleep based on just you know, what you need to do and a lot of things you’ve probably seen, but as you go into, like, now you’re talking about hotels?

Vinney Chopra 35:18

You’re right. You know, I think, again, the biggest thing is like in hotels, again, a lot of people are coming, adhering to the rules and regulations, you know, especially in COVID. And all we had to run proper businesses, because otherwise, one bad COVID a positive right can really spoil the whole thing. So you’re right, the risks are there, even in the assisted living now see, we are dealing with much older population. And they have entrusted their health to us. So we want to make sure that our caregivers are well taken care of, and the nurses and everybody you know, and the chefs who are preparing the food, all those things, right? So you’re right, I mean, these things are something many times we don’t look at it steer, you know, right into it, but we need to look at Okay, in whatever industry we are, what are the different insurances, and then choose pick and choose, you know, which ones we should pay the premium? and have it? I mean, I have always had a 210 million dollar a great loss on every asset. Every single one I got 34 right. So the key thing is you got to be properly insured. You gotta be you got to, you know, hopefully, you’re happy to use it. But But when you need it, like I just settled the case for half a week. You know, somebody shot one of the tenant in the leg kind of thing, right? And these people chased him from hamburger place. Something went wrong over there, but then he came into the apartment complex and all that stuff. So, yeah,

J Darrin Gross 37:08

Yeah, no, it’s it. There are some, you know, sad, crazy times out there if you put too far I mean, between all the the civil unrest and yeah, it’s, it’s I mean, there’s a lot of optimism lie a lot of reasons to be optimistic about what’s called Yes. Certainly some some troubles if you look for him, and well, yeah, no, definitely, definitely. I don’t say so. Yeah. So, Vinney, where can listeners go if they’d like to learn more connect with you?

Vinney Chopra 37:43

Sure. They’re interacting. My website is Vinneychopra.com. v i n n e y c h o p r a dot com. And they can always you know, I’m on Instagram, Twitter, YouTube, also now Vinny chopra.com. And then just Google me You can be there. My two books are there on Amazon. Apartment Syndication Made Easy. Then Positivity Brings Profitability. My third book is coming out, which is on Senior Living Investing Made Easy. So I’m really very bullish on senior housing. I want to give back to the community. I’m a senior myself, I’ll be 70 years next year. So I really feel that you know, I want to do more and more fellow citizens. Yeah.

J Darrin Gross 38:33

Awesome. Very, it’s always a joy to speak with you. I’m so glad we’re able to do this today and catch up. And I wish you continued success and great health.

Vinney Chopra 38:46

Now Same to you there. And it’s such a pleasure to be with you. And God bless you and keep up the great work and we’ll see each other’s their time. Yeah,

J Darrin Gross 38:56

I look forward to thank you. They are in for our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.

Announcer 39:17

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Multifamily Investors Create Generational Wealth with Stephanie Walter – CRE PN #321

Stephanie Walter 0:00

You know, if you’ve ever been a landlord, you know, sometimes you’ll just like let the rents keep coming in at you know, you don’t raise the rents like you should. So we go in we we find places that need the market rents to be adjusted where they should be. But then there’s a whole host of other things we can do to streamline the process. A lot of places do not charge for utilities or if they, they’re, they’re just very consistent with the way that they do that. That’s another way of gathering money. There’s, you know, silly things like pet fees. A lot of landlords don’t charge for that. I even this sounds like weird one, but it’s something we find is is trash, trash, valet services, so any little thing where you can add, you know, a charge for it is going to increase the value of the property.

Announcer 1:04

J Darrin Gross 1:24

Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today, my guests is Stephanie Walter. Stephanie is a capital raiser syndicator and the CEO of Erbe Wealth. She recently retired and sold her insurance agency of 16 years by following the key principles she’s learned from her wealthy investors. And in just a minute, we’re gonna speak with Stephanie, about how to unlearn what we’ve been wired to think about money.

But first, a quick reminder, if you like our show, CRE PN Radio, a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment, we’d love to hear from our listeners. Also, if you’d like to see how attractive our guests are, be sure to check out our YouTube channel. And you can find us on YouTube and commercial real estate pro network. And while you’re there, please subscribe. With that on Welcome my guest, Stephanie, welcome to CRE PN Radio. Thank you so much for having me. I’m looking forward to our conversation. Before we get started, if you could take just a minute and share with the listeners a little bit about your background.

Stephanie Walter 3:02

Yeah, I well, started out of college, I got a job in the insurance industry as a claims adjuster actually. And worked in that world for about eight years and realized that I was got pretty burnt out on getting 2% raises every year and was ready to do something different. So in 2006, I decided to start an insurance agency and did that I really loved it loves being an entrepreneur and building my own business that around that same time I started investing in single family homes here in Denver didn’t really have a lot of education with it at all, just you know, felt like I had some good ideas of where to buy where there would probably be some growth in the future. And so made made those choices along with investing and running the insurance agency and then in 2016, I became I was invited to kind of like a boot camp about showing people how to invest in apartment complexes and I learned about what a syndication was and once I I understood how that worked kind of the the heavens opened up and the light shone showed through to me and I just I love the concept. I loved the concept of having a group of people buy a piece of real estate that you know, no one could do on their own. So just love that concept. So I dove real deep into learning the business got joined a program that gives you basically a master’s in learning Real Estate syndication the ins and outs, I did my first syndication in 2018, by myself realized, I did not like doing that by myself, and I would never do it by myself again. So through my network of people, I met my partner. And we realized we had, you know, we we aligned on on what we wanted it as well as he liked doing things I didn’t like doing. So from there began capital raising, and I loved it. We’re on our seventh deal right now. But what I loved the most was getting to know these wealthy investors and kind of realizing that they handled their money a lot differently than I did. So it took until about 2018, where I started following some of these strategies. And I was able to sell my insurance agency, July of this year, because my passive income has replaced my working income. And so instead of retiring, I do love what I do. And so I that’s why I’m here today to talk about it.

J Darrin Gross 6:18

Got it? Well, I’m probably as much more interested than maybe some of our listeners, just based on your background being an insurance and stuff and, and, like you mentioned, seeing the light and, and the past of income, that, you know, growing out enough to, to where you were able to step out of the insurance and do this full time or actually, and if you even need to work based on you know, you said your passive income and that. But I was kind of curious, you mentioned you’d gone to a boot camp, I’ve I’ve talked with numerous coaching mentors, I was just kind of curious if you care to share the name of that.

Stephanie Walter 6:58

Yeah, absolutely. It’s our a mentor. And they have a fantastic, you know, fantastic program. Really, it is, there’s a lot to learn, and you spend several years just, you know, learning a lot and practicing a lot. Because it’s a little bit different than single family because one, you’re responsible for a bunch of investors money. But two, I think you can kind of more wing it with with single family than you can with, you know, commercial real estate for sure.

J Darrin Gross 7:37

Absolutely. So you you did sound like you were investing on your own. You said you’re like kind of no real rhyme or reason just knew some neighborhoods and kind of picked in we’re investing. I understood what you said. And how many properties Did you get up to? On your own just doing the single family stuff?

Stephanie Walter 8:00

I got about? I think it is about let’s see here. Four properties. One was a commercial, one was a duplex. And then there are two single families in there.

J Darrin Gross 8:15

Gotcha. It’s been a while since I’ve been to Denver, but your timing seems like it was probably spot on as far as just what I’ve come to understand about the appreciation in the marketplace there and, and the growth and any affordability issues that come with that. So I’m assuming that that that treated you well, are you still in any of those.

Stephanie Walter 8:41

Just again, when I was started working with the wealthy, I sort of noticed, you know, that my theory was I was just gonna hold on to these rentals until they were paid off, you know, and then have my retirement in 20 years. What I, one of the things I learned from the wealthy people was that they just don’t let their money sit and not give them cash flow or not give them you know, a good return. And so, when I realized that in 2018, I started selling all my properties, and I just sold my last one just a few months ago.

J Darrin Gross 9:20

Gotcha. Gotcha. So you’re in the is it primarily multifamily? Is that what you’re investing in now? And I thought I heard you say that you you did try syndication solo. Here. You’re doing one solo before you you ended up getting, you know, working with your partner, is that right?

Stephanie Walter 9:42

Correct. Yep, I did one solo project in 2018. Gotcha.

J Darrin Gross 9:49

And what was that project that you did?

Stephanie Walter 9:51

That’s it was up in Fort Collins I still have it was just talking actually to the banker today. It’s a It’s multifamily in the sense that it’s a group of people that live in it. So it’s a fraternity house of all things up in Fort Collins, Colorado. And it’s actually been a really great investment.

J Darrin Gross 10:16

Gotcha. And do you? Do you collect rent from the individual students? Or do you just collect rent from the, like from the fraternity? And then they they weren’t collecting from that?

Stephanie Walter 10:28

They pull it all together, and then they send me a check every month.

J Darrin Gross 10:33

Gotcha, gotcha. Well, that’s, that’s definitely an interesting thing. But I can imagine, depending on, you know, what you where you bought it out, and what the the market rents are, and stuff that that can be a profitable venture there for you. That’s good. So let’s talk a little bit about some of the concepts that you’ve learned. And maybe the way to frame this is kind of back up a step. And just kind of identify what the concepts are, or the beliefs you had about money. Before you you interacted with these wealthy investors. That you, you mentioned?

Stephanie Walter 11:15

Well, I think the biggest, you know, some of this took a while for me to really understand I couldn’t really put my finger on it. But, um, so but I think two, one is a mindset. And the mindset is pretty significant. Most people in our society look at their money and saving for retirement. They think of accumulating their money, that’s, that’s really the model that they have, put it away in their 401k, don’t touch it don’t really, there’s, you know, maybe you could you have a little bit of power of what it’s invested in. But largely, if you ask people, they have no idea what kind of fees that are associated with it. But the most significant thing is that at the end of that investment, we don’t know how much money is there, because we don’t know what the taxes are going to be. And that would be completely, simply not something that a wealthy person would get involved with. And that was, the first thing that I noticed is that most of the wealthy people I worked with did not have 401, K’s. They use a model of using their money, and I’m calling it utilisation. Which just means that they don’t let their money sit, their money is working for them at all times, and working for them in the sense that they are getting cash flow, cash flow is king to them. So and when you start to examine that, and sort of see how that would work in your own life, is just having more cash flow is going to give you a lot more options as to do I want to be working at this job, you know, 40 hours a week, or, you know, the more cash flow you have, the more options you have as far as what you want to do in your life.

J Darrin Gross 13:19

No, definitely. Cash Flow is king. And that’s one of my friends is fond of saying it’s the ace. I mean, it’s the definitely the one you want. Let me ask you. So you kind of mentioned even just earlier about kind of your mindset with the rentals you had was just to basically pay down the balance, you know, and then have this is your retirement then. And I’m kind of curious, so for you to shift from that mindset, and you know, having a job or you know, a business, to getting your money to work for you to where you’re you basically have passive income that, that it allowed you to, you know, sell your business and and, you know, have just enough passive income to live on. Well, can you describe some of the the shifts there? I mean, was it was it? I mean, what, what made you introduce some of these ideas that, you know, don’t let your money to sit? But can you kind of walk us through what what you did, as far as you know, some of the steps you took that made it made it work for you?

Stephanie Walter 14:35

Yeah. Well, I think one of the other concepts that I should probably tie into that is that if you asked a wealthy person, what they felt was most important to them cash flow or net worth. They would tell you cash flow all day long. And so that’s really that was really my shift in my mind because on paper, I had a great net worth as a fan. Casting networks, but I didn’t have cash flow even close to being able to replace my income. So once I that dawned on me, then I sort of kind of examined each property and that I had and how much equity did I have in in the property. And what I saw my future life looking like did I want to be a landlord forever. I’d already been one for 16 years, and I was growing pretty tired of it. But largely, there was an enormous amount of equity sitting in those properties. Now you can either take the money out, you know, refinance it, if that’s possible, and take the money out and invest it. But my decision honestly was, I felt the best place for this money where was in my own syndications that I was doing with my partner because what better place to invest your money. One as syndications are amazing in the sense that you’re getting paid. You know, almost from day one, you’re getting paid seven to 8% interest every month. But our syndications like I said, we’re on our seventh one, have been returning over 20% returns over the whole period of of the property, which is, you know, three to five years, that’s 20% a year. And like, I spoke to one of my wealthy investors, and was just talking to him about what I was thinking of doing. And he was like, well, Stephanie, all I can tell you is that if you’re getting 20% returns, that’s something that, you know, you will get wealthy doing. And and so that is what I decided to do. The second part of the other part of the coin on on that was people think about how they move their money, you know, do they do it in a 1031 exchange, because, you know, tax mitigation is hugely important. What I think is kind of like a little secret in this industry is there are so many ways to mitigate your taxes, a lot of people think the only way they can roll their money over is is is in a 1031, which we can do for some properties. But many times just, you know, what we do is we do a cost segregation study, most people haven’t heard of that. Or if they do, they don’t really understand it to the point of how we use it, we do a cost segregation study on every property we purchase. In order to pass what what that is, is instead of depreciating the property over like 27 years or 39 years, it speeds up the depreciation to where we’re writing all the depreciation off in 157 years. So it’s a it’s amazing strategy for people who have tax liability, or don’t have tax liability. But it’s it’s a tremendous tool to help you save on your taxes, and might have gone on a tangent there. But I think those are two things that wealthy people definitely address. They A lot of people think that they just address what is the investment making for them? That’s definitely, you know, probably half of their concern their other half is what kind of tax benefits are they going to get out of the investment? And I think that’s what most people miss. In our day to day world. We don’t A lot of people don’t think about the tax ramifications.

J Darrin Gross 18:55

No, I think those are all valid, worthy points to make there. I’m kind of curious. So the, the, the path that you were on, you mentioned you had a lot of equity. your net worth was, you know, significant. But the cash flow wasn’t there. When you started doing the, you know, kind of the syndication and stuff, or the syndications. How long did it take you to generate more income than what you were making through your insurance business to whatever rental income you had.

Stephanie Walter 19:35

Once I changed that philosophy, I guess and had had my what I wanted to do, which was to sell my different properties and roll them into different syndications that I had. It was 2018 and is when I started doing that and I retired in 2021 July 2000 You’re 21. So as opposed to maybe 20 years that it would have taken being a landlord and doing all the things I didn’t particularly love doing to get to the point to where you know that cash flow was coming to me.

J Darrin Gross 20:18

I love it. So tell me about some of the syndications you’ve done. You said you, you your Have you? You’ve done seven, you’ve started seven, where are you at in the cycle? How many of you run full cycle?

Stephanie Walter 20:32

At this point, we haven’t we, we only have one that’s run all the way through the cycle. Because we started doing this, let’s see, in 2018. And actually, one, there’s going to be several actually, in the next probably six to 10 months that will will actually finish ahead of schedule. But I can just tell you, what we do is we look to our largely we look in Florida, we do multifamily, we look for properties that you know, how are undervalued? So we look, a lot of people are like Why can’t I you know, just do this on my own? Well, I can tell you that we, you know, have many connections in Florida. That’s where my partner is actually he has 35 years of being a commercial broker there. So he’s established a lot of businesses and our last two syndications were actually off market deals. So deals that never came to market. And the reason that we obviously love those is we really feel strongly that we want to make our money on the buy. We don’t want to buy a property and just say, well, we can do this, this and this to increase the value. We’re extremely conservative with with what we do, but yes, we’re looking for multifamily properties a way that we can build up value. And in Florida right now, that’s not that hard. We’ve we’ve cornered a few markets, we were on our fourth deal in Tallahassee, Florida. We’re on our second deal in Cape Coral, Florida. We have some properties in Broward County. But you know, the Florida if you look at it and you get do any type of research on it, is the there’s just a tremendous amount of growth. I mean, if you listen to any any news, I suppose you pick that up pretty quickly. But there’s a lot of there’s just a tremendous amount of growth in the housing. There’s definitely housing shortages, which are causing the rents to just kind of go through the roof. And we’re taking advantage of that. So the one property that we’re going to be finishing up the cycle on, we’ve only had it for two years, and we’ve already doubled the money of all of our investors. So we’re just gonna go ahead and sell that one and move on to the next.

J Darrin Gross 23:19

Outstanding. In Is there any kind of a sweet spot? Are you guys going after 100 unit properties are you going after tends to, you know, 20s, or tell me a little bit about what your what you’re going after on these different property?

Stephanie Walter 23:36

Well, I we both kind of, again, it’s we’re very aligned on our philosophy, it just kind of happened that way, I’d love to say that I had a master plan to find someone that we aligned so much, but we both really like the idea of being in control of our deals. And you know, you a lot of people come into this space and they go in they buy two and 300 unit complexes in order to close something like that you need to be bringing in money from what are called family offices. They’re just you know, offices where they’re meant managing very wealthy families money. But kind of the deal you make when you work with that these people is they want to really have their hand and what’s going on in the deal. And for my partner and I we just we really wanted to grow our investor base, just very organically. We both are you know, extremely concerned with having our clients love working with us and continue on to love working with us. So we started smaller. We started with like, you know, 23 units, 35 units, then we’re now we’re more in the 50 to 70 units. And so we just have kind of grown organically, which is what we wanted to do, we wanted to be sure that we have a good track record of performance plus, we can see our, you know, our investors are happy, you know, that, which is what we want, they refer more investors to so we’re really concerned with building a base of investors that follow us. And so that we just put under contract 160 unit, and that’ll be our largest 1160160. And so, you know, I feel like what we’re doing is working, because, you know, we have investors that invest again and again, and then they start telling their friends and, you know, on and on, and, and that’s what we wanted. We wanted to, you know, be in charge of our deals at the end of the day. Because having the control is is super important. to both of us.

J Darrin Gross 26:03

Yeah, no, I love that I love the approach the growth, I was gonna ask you were organic. Tell me a little bit about tracking investors, especially at the beginning.

Stephanie Walter 26:17

It’s, you know, I could talk for hours about that, it’s, you know, it’s, you want there to be one magic bullet, unfortunately, there just really isn’t, you know, I just happened to kind of put it out there to a lot of different people that this is what I’m doing, you get in front of people, and some people, most people have never heard of syndication. So it’s really trying to educate people to get their mind around the syndication. I was just thinking of it this morning, our first deal we did happen to be a retail center in Tallahassee, it was the first deal My partner and I worked on together, so we had zero track record. So you had to, you know, really get out and, and sell us as a team and what we wanted to do, and I’m just so you know, very grateful that it works that way. But I’ve tried, you know, different marketing things that it really just honestly comes down to marketing. But for me, it’s the relationships I have, I just really foster those, you know, I’m meeting an investor this afternoon. And, you know, you get to know their families and you know, they they become someone who wants to see you succeed. And the best referral best thing, we ever get our referrals. But definitely, I’m, I’m trying to be more active on LinkedIn, and different things like that. I’ve never bought any accredited investor leads. But I’ve, I’ve done a little bit of everything. I even did a a direct mail campaign and ended up getting an investor that way, which was was pretty cool. But yeah, you just kind of have to use the approach of, you know, just disperse wildly, and hopefully you’ll you’ll catch a few. But yeah,

J Darrin Gross 28:19

So let me ask you what, in that process of tracking investors, how much of it the Do you find your time as educating your prospective investor? As opposed to, you know, gaining their trust and that you’re going to be able to execute?

Stephanie Walter 28:39

Yeah, I think, largely, for me, it’s educating it that that part actually really surprised me. When I went into this business, because I think myself, like so many people that get into syndications people, the people that teach you say, if you find the deal, the money will come. There’s really nothing further from the truth than that. So yeah, it definitely, it’s a little bit of both, but education and creating content, I’ve really made an effort to create a ton of content on my website. And because, you know, it is an education process, but I love it, because I’m, I am really passionate about it, because I just feel like, you know, this is a secret that, you know, the big banks and insurance companies and the wealthy have been taken taken advantage of for years. And I just want people to know that there’s a better way to do things. And so it makes it easier and more. It makes it fun for me to talk about this as opposed to insurance, which I love to but not as much as this.

J Darrin Gross 29:54

I understand. Yeah. So, so let me ask you, so We talked a little bit about the investors, it sounds kind of like, you know, kind of a foreign wide approach. I’m assuming you started with the people closest to you, friends and family, where did you get any? participation?

Stephanie Walter 30:16

My, my, my first deal was my friend was my family, both family and friend of my family member, it was a little funny because my brother in law was really interested in real estate, but he’s, you know, really busy sales guy and brought him this this deal with the fraternity house and he said, you know what stuff that’s the fraternity I was in when I was in college, I definitely want to invest in that. And then he told his friend who liked the ideas. Well, and so the I only needed to bring three investors in on that one. But yeah, so that that, you know, it’s a it’s definitely a mind shift to have to talk to your family and friends about money. But yeah, the My family has been really supportive. But you know, you do have to branch out, you know, and you find that out pretty quickly. So, and I think it probably does get, well it definitely gets easier for us, the more you know, syndications, we have now more of a track record to show it to people.

J Darrin Gross 31:32

Sure. Now, if you’ve if you’ve done it, some of those trust issues would would, I would think be pretty easy to get past. Knowing that you have some sort of performance or or record. I want to ask you a little bit about the value you’ve been creating 20% per annum per year returns are impressive period. What are some of the the strategies or the things that you guys look for? Or what what are some of the ways you’ve been able to create value? Let’s Let’s ask it, though.

Stephanie Walter 32:06

I yeah, I love commercial real estate for that very reason is, is increasing the value of the property by forced appreciation. It’s, it’s super cool. The, you know, most of us have only heard of, you know, natural appreciation, but in these really any type of commercial real estate, but we focus largely on the multifamily. So we found, you know, you find some properties who a lot of people get into this, like, just think of it like going and buying, like a single family home from someone who’s been running it on their own. You can find a lot more ways to be efficient when you go in when you have the experience and the systems and everything like that. So for us, we knew the market market is key, like, above anything else after watching COVID is market is everything. And we have definitely put a lot of time and effort into finding markets, understanding them, the dynamics that’s happening there. So it’s not like we just pick a property and say, Oh, this would be a nice area. No, we do, you know, probably hundreds of hours of research on that economy and what’s happening there. So we want to be sure there’s population growth, there’s going to be, you know, economic growth coming in, that it’s a landlord friendly place to be, you know, just just all of those things, but Tallahassee, I’ll just that one comes straight to mind is what they did years ago is they kind of overbuilt the student housing there. And what ended up happening as a result is there’s a real lack of affordable housing for just regular people wanting to live in apartments. And so we took advantage of that. So when I say take advantage of that we purchased, we purchased properties where we knew the current landlords did not have those rents where they needed to be, you know, if you’ve ever been a landlord Do you know sometimes you’ll just like, let the rents keep coming in at you know, you don’t raise the rents like you should. So we go in we we find places that need the market rents to be adjusted where they should be. But then there’s a whole host of other things we can do to streamline the process. A lot of places do not charge for utilities or if they there, they’re just very consistent with the way that they do that. That’s another way of gathering money. There’s, you know, silly things like pet fee. A lot of landlords don’t charge for that I even the sounds like weird one, but it’s something we find is is trash, trash, valet services. So any little thing where you can add, you know, a charge for it is going to increase the value of the property. And so the more the way that commercial real estate is valued is the income minus the expenses, is that net income, and that determines the value of the property. So if you, you know, are able to streamline the expenses and lower those 10% and increase the, the income, you’ve just increased the value of that property 20%. So that’s, you know, working with a team that’s really has a strategy on how to maximize those things, you know, is, is that’s how we give our clients those 20% plus returns.

J Darrin Gross 36:07

I love that I didn’t hear you say anything about you know, remodeling or renovation, it was more sounds like it’s more operational that typically the the type of property you’ve been able to find is something that’s just not managed as efficiently or

Stephanie Walter 36:22

Management is the number one thing you’d be so surprised that how many people do not run, these are businesses, you know, at the end of the day, and they don’t run them like a business. And that’s probably the number one way that you can add value into a property. But we do on a few of our properties, we do like small micro rent renovations we’re not, we tend to more invest in what are called B properties properties are, you know, broken out into a, b and c properties a properties are, you know, the luxury with the pools and the concierge and all this stuff, B properties are more kind of, you know, the average type of type of not two worlds. And, and those are the ones we really like to get into sees are they need a lot more work. They’re older, they attract a different type of clientele. And what we’ve noticed, because we keep track during recessions is during a recession, bees tend to do very well, because the aid people are moving down into the bees. And that’s, that’s what we’ve seen our rent collection through COVID stayed at 96%. So that, you know, I think is, is pretty remarkable.

J Darrin Gross 37:53

Yeah, from what I understand, I mean, I’ve got clients, insurance clients that I know, that are way behind on some collections, just based on family, the eviction moratorium and the you know, you don’t need to pay rent kind of a mentality.

Stephanie Walter 38:09

And also probably be more like tenants found and see, honestly see type of the bees, they have jobs, you know, probably mostly professional people. So yeah, so there’s lots of different, you know, elements to really think about when investing in properties.

J Darrin Gross 38:33

Currently here so the bottom line on this think different about money is that you view you know, you learn from some of your investors, you basically kind of put your money to work for you more rather than waiting, waiting to use it, kind of thing. And now your your sounds like your cash flow is increased markedly. Is that fair?

Stephanie Walter 38:56

Yeah. Yeah. And I think that, you know, another myth that people think is they think, well, you you became wealthy because you invested in really high risk things, things I would have never wanted to get involved with. And actually nothing could be further from the truth. The wealthy people that invest syndications are what historically one of the best places to have your money in the sense that you get above average market returns with probably one of the lowest amounts of risk that you can have. Another thing that I noticed about the wealthy people, especially this is a little timely is that we’re expecting inflation. And wealthy people tend to want to invest in tangible assets in things that have a value like building a property. They want to invest in businesses. Want to invest in something that has a value to it? And especially when we think of inflation, I had to talk in an event A few weeks ago. And just out of curiosity, I came across this fact, which was from 1980 to 2021, on average, the rents have gone up 8.86%. You know, and that’s probably a number that they, you know, that involves the whole United States. But that’s a heck of a number. And that does show why these, you know, to put your money in a place like multifamily rents is going to be pretty, pretty, not only recession resistant, but definitely a great hedge against inflation.

J Darrin Gross 40:53

Definitely want to ask you is you’re raising capital from investors? What kind of criteria do you have for your investors? Is there a minimum? Or? Or can you speak to that a little bit?

Stephanie Walter 41:06

Yeah, well, we do. You know, solely right now, we’re doing 506 C’s, which means that we work with accredited investors and an accredited investor, it’s pretty simple, you don’t need, you know, to get a license or anything like that. But all it means is that you qualify to invest based either on your income or your net worth. And for us the, or for the accreditation, you need to if you’re single, make over $200,000 a year, if you’re married, you need to make over $300,000 a year, if you don’t qualify, that way, you can also qualify based on your net worth. And that just means that minus your primary residence, you need to have a net worth of a million dollars. And actually, since you said you were in an insurance, there’s actually another way of qualifying. And that’s if you have your series 63. Six, I want to say one more, because I just kind of found out about this. So that’s another way that you can qualify to to be an accredited investor, and we usually for require $100,000 minimum for that investment.

J Darrin Gross 42:29

Now, it’s it’s a, I love the whole syndication model, it makes a lot of sense. And I think the, when you realize that, you know, these larger properties, the effort it takes to take one down, it’s, it’s pretty, you know, pretty big challenge, if you’re going to try and do that by yourself so big, that it’s likely you wouldn’t be able to, but again, like by pooling resources, you can get to a big enough number. And the real key to this whole thing that this is the piece that it’s taking me forever to kind of really cement and understand this is, the bigger the investment you’re in, that appreciation applies to the whole investment. And then when you take that the equity gain you get from where you bought, where you sell, and then you apply that against what your your down payment, or the equity you invested in the property. It’s, it’s like, wow, you know, eye popping, as opposed to, again, my mindset when I first got in, was when I bought, I put my money in, and I’m just gonna watch the balance owed to the bank go down. And that’s going to be my, my equity, and it really is kind of a mind shift, because that’s, that’s just not really investing that’s just kind of waiting. You know, it’s kind of my mindset when I first started investing, but it is a really, you know, a powerful thing, when you realize, the, you know, the the, the idea is to get in as to as big as you can, you know, that you’re comfortable with, but that’s really where the power is, is that because you’re leveraged into that and, and how how much that return on the total is going to improve your investment return on your, you know, the portion you invest itself makes a lot of sense to me. Hey,

Stephanie, if we could, I’d like to shift gears here for a second. As we’ve mentioned, by day, I’m an insurance broker myself. And I work with clients to assess risk and determine what to do with the risk. And there’s three strategies we typically consider. We look to see if first we can avoid the risk. When that’s not an option, we’ll see if we can minimize the risk. And when that’s not an option, then we look to see if we can transfer the risk and that’s an insurance policy. And I like to ask my guests if if they can look at their own situation. Could be clients, investors, tenants, a market government however you want to you know, I guess The question, but but if you can take a look at your situation and consider what you think is the biggest risk. And, again, for clarification, while I’m an insurance broker, I’m not necessarily looking for an insurance related answer. So if you’re willing, I’d like to ask you, Stephanie Walter, what is the biggest risk?

Stephanie Walter 45:29

I think you know what? That’s a good question. I think that the biggest risk, if it comes down to people investing in syndications is I guess, really understanding the team of people that you invest with? Seeing that they have a track record. I actually have, on my website of, I think about 30 questions that I get from almost every investor, and they involve risk and how to mitigate it. And so that’s definitely a good, a good, you know, spot to start. I think the largest risk that I’ve seen personally of you know, people who have invested in syndications and kind of maybe not done so well, the last few years, I think, and knowing your market, or at least, being with people that really understand the market, that they’re working in. That that I think, is huge. Because, you know, we’ve seen dramatic differences, like I said, between say, a B property, how it’s performed through COVID versus a C property. As far as rent collections, we’ve seen differences in the way that you know, that these properties have done in Florida as opposed to say, Indiana You know, there’s just there are definite you know, things about these these different markets that either you need to trust the you know, team that’s bringing you these deals, but these are there are risks, you know, and you’re doing your due diligence is is definitely important.

J Darrin Gross 47:30

No, could not agree more. Hey, Stephanie, where can listeners go if they’d like to learn more connect with you.

Stephanie Walter 47:39

But my best place is my website, which is www dot e r b, e wealth.com. And, yeah, I’ve got some, like I said, I have a lot of content there. Usually, you know, newer investors will download. We have a new report there. That is the five reasons that passive investing might be for you. But then I mentioned that video series that where I talk about, you know, important questions that you as an investor need to ask when you’re betting a deal.

J Darrin Gross 48:17

Awesome. Well, Stephanie, I can’t say thanks enough for taking the time to talk today. I’ve enjoyed it. I’ve learned a lot and I look forward to doing it again soon. That sounds great. Thank you. All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow? That’s all we got this week. Until next time, thanks for listening to commercial real estate pro networks. CRE PN Radio.

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