BiggerPockets Real Estate Podcast - 172: Breaking Into Apartment Investing with a 100-Unit First Deal with Jonathan Twombly

Episode Date: April 28, 2016

Have you ever dreamed of owning large apartment complexes? If so, don’t miss this powerful interview with Jonathan Twombly, a real estate investor whose very first deal had over 100 units! You’ll learn why Jonathan skipped the “small deal phase” and jumped right into big deals — and how he’s gone from nothing to over 400 units in the past several years. This show offers an incredibly realistic view of what it actually takes to break into the apartment complex market! In This Episode We Cover: How Jonathan got out of the law industry and into real estate investing The partnership that changed his life How you can always find deals within 100 miles The details of Jonathan’s first deal What to do when someone cancels the deal How financing contingency works How he structures his deals Tips for establishing yourself with brokers The due diligence list to show to brokers The importance of asking your friends for introductions Why you should focus on the relationship aspect of investing The details of Jonathan’s first successful deal Why you should consider buying the “unsexy” properties Tips on looking for deals How he makes money through syndication His strategy on making 400-unit deals How he manages properties What you should know about underwriting a deal Things he would done differently if he started all over again And SO much more! Links from the Show BiggerPockets on Google Play 10 Things To Do Before Doing Your First Deal (blog) Books Mentioned in this Show The Wall Street Journal. Complete Real-Estate Investing Guidebook by David Crook Logistics Clusters by Yossi Sheffi The War of Art by Steven Pressfield The 4-Hour Workweek by Timothy Ferriss Tweetable Topics: “You don’t know what the heck you are doing, but you’ll figure it out when you start somewhere.” (Tweet This!) “If you are a new investor, it’s not about how much money you have but about how many deals you have closed.” (Tweet This!) “Persistence is 90% in business and then the other 10% is not being an idiot.” (Tweet This!) Connect with Jonathan Jonathan’s BiggerPockets Profile Jonathan’s Blog Jonathan’s Company Website Learn more about your ad choices. Visit megaphone.fm/adchoices

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What's going on, everybody? This is Josh Dorkin. House to the Bigger Pockets podcast here with my co-host, Mr. Brandon Turner. What's going on, man? Hey, how are you, Josh? I'm doing really well. How are you? I'm good.

Did you hear about Bodie McBoatface? I heard the reference to Bodie McBoatface. but I don't quite know exactly what it was. This is the best story ever. So the National Environmental Research Council over in the UK decided to have a naming contest for their massive big $300 million research boat. So they're like, we want you to present names. So like they did all these like, a lot of people present nice names like people like with cancer or cured cancer or whatever. You know, like all these like important things.

And somebody suggested the name Boaty Boatface. And as the internet does, that one overwhelmingly. won. So now the UK is, now when this podcast comes out, maybe they would have decided what they're going to do, but they don't know what to do because overwhelmingly everybody said Bodie McBotface. To our listeners,

I'm going to float Booty McBoatface for president of the United States. So I'm going to ask you to write in Booty McBowice. Clearly he's going to be better of a candidate than any of the guys and gals that are currently running. That's actually a funny idea. We make a campaign to write in Booty McBoat. Vote face. Bigger pockets, sabotages, U.S. election.

That would be amazing. What would they do? I don't know. You know, people would get mad at us. Probably. Good job, Turner. We're to screw up America. I know, I try.

Anyway, so besides Bodey McBooth Face, what you've been up to? Snow. You got snow. Yeah, weird spring storms. It's mid-April, and we had like a foot of snow in Denver up in the foothills. In the mountains, they had over four feet in some places. So it's been crazy. But, yeah, things are good, man.

Spring is here. It's beautiful. Things are going great here at bigger pockets. We got lots of cool milestones happening in and around now in the time that the show will come out, which is kind of exciting. 500,000 members. Yeah, huge. Big two million, two million forum posts. It's just, it's crazy.

So things are going really well. And obviously the podcast continues to blow up, which I think we probably, by the time the show comes out, we will have, or we'll be very close to 2,000 reviews on iTunes. iTunes, which is, because we're like 1990 right now or something. So, you know, if you've not yet left to review, please do so. We want to hit 3,000. We're always raising the bar. Oh, yeah. Nice. Nice. Speaking of that, let's get to today's quick tip. All right, today's quick tip is the Bigger Pockets podcast is now available on the Google Play Store. So for those of you who didn't know, Google has decided that they actually need to get into the podcast game. and they realize how much people enjoy and want to consume podcasts.

So they now have a native player as part of the Google Play Store, and the Bigger Pockets podcast is available. So as of the time that we are recording this, if you actually search for Bigger Pockets, you cannot find it. However, we have direct links to it. So if you go to BiggerPockets.com slash podcast, you'll see a link to it to the Google Play Store. Hopefully, by the time this thing goes live,

if you search for Bigger Pockets on the Google Play Store, you'll find the podcast. But if not, again, go to BiggerPockets.com slash podcast and you'll find a link to the Bigger Pockets podcast on the Google Play Store. And for those of you guys who are listening on the Google Play Store, please leave us a rating and review. We are at a grand total of zero.

And so we would love to get your support and we'd love for you to jump in there and leave us one. And that is today's quick tip. Wonderful quick tip. Yeah. Well, cool. Well, cool. Well, I'm going to go out and play in the sun. So we should probably finish up this intro.

Let's do it. We can get to the interview, which today's interview is awesome, by the way. If you guys want to buy large properties someday, if you want to break into that industry, this is the show for you. You guys are going to learn a ton about what it takes to actually get into a large multifamily property. Pretty cool stuff. Perfect. Perfect.

You know what? We sit here. I drink a ton of water every show. I'm always thirsty. I'm always just parts. And I know Brandon is doing. we're always looking for, you know, just something to drink. So if you are somehow connected, we have a request of you, our community. We are looking for a drink sponsor for the Bigger Pockets

podcast. So we can... It's like Red Bull, but like you know how Red Bull sponsors people? Yeah. I mean, Brandon wants, I know that guy wants Starbucks. I want ice tea of some sort or whatever, but like, yeah, if you, if you rep or a part of a one of the drink companies and you're listening, we would love some kind of drink sponsor. We'd love to give shout out to any company that's going to help us from being parched. Preferably not hard liquor, because then we'll be drunk during the podcast. This is Josh Dorgan. Big thanks to our sponsor, John's malt liquor.

All right. Let's get to the show. Let's get today's show. Today's guest is Jonathan Twombly. Jonathan is a real estate investor from the Brooklyn, New York area. And Jonathan has taken a completely unique path to starting in real estate, one that we have we have not spoken to somebody who's done yet. He decided to, let's just say, skip from the minors, straight to the majors from like elementary school. He took a big leap and it's a fascinating story.

And he's done a great job and he's doing really, really well. And it's fascinating and really cool. And we definitely don't recommend it for everybody. But it does work for some folks what he did. And so he really just jumped into large multifamilies from nothing. So it's a fascinating story. listen up and let's get to it right away. All right, Jonathan, welcome to the show. Man, it's good to have you here. Yeah, great to be here. Thank you. Yeah, yeah, this should be fun today talking a little bit advanced stuff.

Again, another one of those episodes where I asked somebody to be on the show or we asked them because I want to learn more about a topic. Now, that's how this thing works is my selfish podcast. You are greedy as hell. We should just nickname this, like the Brandon podcast and then just forget about BP, right, Josh? Good? No. He's just staring at me. All right, Jonathan.

Let's hear your story. This is actually the Jonathan. This is the Bigger Pockets podcast. It's the Jonathan. Oh, he was just fired. So we're going to start with, Hey, Jonathan, what's up, man? No.

All right. I'll take the first question. Jonathan, how did you get started investing in real estate? Well, that's, you said you like stories. This is a pretty long story, actually, how I got involved in this. I love it. So my career was in real, I'm sorry, in law. I was a lawyer for a long, long time, 12 years.

Did we not vet this guy, by the way? Yeah. Well, not anymore. Hey, you can have your lawyer hostility and put that to the side because I'm no longer practicing law. So, yeah, so I was practicing law, you know, big firm law stuff in New York City for many years, trying, you know, repeatedly to get out of it. And unsuccessfully, every time I quit, they would pull me back in. So the last part of my career, I was actually doing real estate related laws. and became more and more interested in real estate itself as a possible way to get out of being a lawyer.

It has always been something sort of on my mind, but I never really thought I could make a career out of it. And naturally, given my kind of bent from working at big firms, I sort of assumed that what I would do if I did go into real estate was work for some institution, you know, doing, you know, buying a billion-dollar properties for somebody else. I was sort of doing a lot of networking, trying to figure out how I could crack into that industry and was sort of running into the same kind of thing as with finance and people saying like, hey, you know, at your age, good luck. Good luck with that. You know. That's agist. Well, you know, your background, whatever. You know, they were like, hey, no 30-year-old manager at one of these places is going to want to hire a 40-year-old guy with kids and then tell him he's got to work late. You know, it's just the way things are. I got.

actually laid off from my law job, I'd been sitting around for a while with nothing to do. And I saw it coming. I just frankly thought it was going to happen a lot sooner than it did. But I thought, you know, what am I going to do now? I was continuing to do my networking with real estate. And one day I met with an older acquaintance of mine, actually someone who was even older than me. Was that possible? It was, well, it's hard to believe. But, you know, who said to me, look, Jonathan, I'm just going to give it to you straight.

Like, there is no way you were ever going to break into real estate in this town, period. So just give it up. He didn't quite say give it up. But what he said was, he said, look, no one's going to hire you at one of these institutions. The only way you're going to break into this field is if you get lucky. And if somebody just takes a liking to you and says, hey, why don't you be my partner? So with that in mind, I was out talking to people that I was meeting and basically trying to talk to everybody I could meet in real estate. And lo and behold, someone said to me, hey, I'm starting a real estate investment firm.

How'd you like to be my partner? So, you know, I was like, I don't really know anything about this. She said, you know, well, look, you're a smart guy. You can figure it out. I think she thought that I could raise money. That was why she wanted to partner up with me. Nice. And she was right because what happened was, you know, not being the kind of person to jump on things very.

quickly. I always want to do my due diligence. I started asking friends whether they thought this was a good idea. And a couple of my friends said, well, let me meet her. If I like her, I'll give you money to invest. So I introduced her to a couple of my friends. They both like this. Can I interrupt you really quickly? Yeah. So these are people who know you, who know that you don't know your head from your, you know what, in real estate. Yeah. Who don't even care about what kind of deals you have. All they want to know is do they like the person that you've put your judgment into and do they trust that person?

Yeah, basically. I mean, they trusted my judgment. Yeah. They knew that I was not the kind of person who was going to jump off the handle, rush, you know, headlong into something. What they wanted to check out was how well they thought she understood real estate and they were both happy with what she said. She had a bunch of experience in it.

She and her husband owned a bunch of property. And she wanted to go out on her own with this, which is why she was talking to me about it. But as it turned out, they both liked her. They both said, well, look, if you want to do this, we have money for you to invest. And I thought, okay, well, maybe I better do this because now I've got an offer of a partnership. I've got an offer of money. And my friend Richard has already told me, like, good luck, buddy. You're never going to break into this business.

So we're going to stick it to Richard right here, right? I have to be really thankful for what Richard said because if he had not said that, I probably would not have taken that offer and who knows what I'd be doing now. I mean, it was a real catalyst for me. So that was playing in the back of my head. So I thought, you know what? The universe is telling me something. I should go for this and just see where this goes.

So I was going to say your first deal, I wanted to ask you about that. And I know you're going to get there. but it was like a $10,000 house in Detroit, right? I mean, it was a real small deal you started with. Yeah, exactly. No, so life is funny, right? Life has a way of like thrusting you into situations, at least my life, you know, you don't know what the heck you're doing.

Yeah. And you got to figure it out. And you start off somewhere and you think, okay, well, that's what this business is all about. So even though one of the people who are partnered with now, we were looking at three plexes, you know, like I said, up in Albany or in Newburgh, New York, you know, kind of $100,000 houses. And we did that. And that's what I always thought I was going to wind up doing.

I thought I'd assemble a portfolio of, you know, these threeplexes and fourplexes and stuff. As it happened when I got into it with my former partner, she and her husband owned, you know, 700 units of multifamily. it was like maybe five or six properties. So they own big things. That was what she was used to buying. And she just kind of launched into like, well, this is what we're going to do. As it happened,

you know, the guys who were offering me money were offering pretty substantial amounts of money to invest so we could afford to go out and buy those kinds of properties. So that's what we started out looking at. That's what I learned how to do. I learned how to underwrite those deals. And I didn't really know any better.

Like I didn't know that that's not the way that most people start out. I just thought, what it is. So here's a, here's a quick tip, I think, for everybody listening. Go find some rich people and just start buying big, big properties. No, just, it doesn't work. So, I mean, you're in a fairly unique situation, which is awesome, which is what we want to talk about really quick before we move forward. You talked about Newburgh and some of these other areas of New York, upstate. Again, this goes to what we talk about all the time on the show. You get a lot of folks who

like, well, I don't know. I live in Manhattan and I want to invest in real estate, but I can't buy Manhattan real estate. I can't afford it. I can't afford Queens or, you know, Westchester County or Nassar County real estate. But, you know, if you go two hours out of your area, if you drive 100 miles, you can find properties for reasonable amounts of money. And so, you know, whether you're in L.A. in New York, San Francisco, anywhere, there's always affordable property within some reasonable drive. Just wanted to kind of point that out to folks because, you know, we do hear that so often. Yeah, absolutely. And even with what we're doing, you know, we invest in the Carolinas. We're not investing in New York. Right on for the same reason. I mean, you know, whatever level you're

looking at, whether it's, you know, a $100,000 house or a $5 million property, if you live in a really high cost place like New York City or San Francisco or, you know, name a market, the chances are you going to have to look outside. And I think, and just, you know, on the New York theme, I know a number of people who have invested in places like Troy, New York, and love it and swear by it and say that, you know, it's a terrific market. And it's not that far from here. It's a two-hour drive from New York.

So you can absolutely get to places where you can afford even from New York. It's another state. It's called upstate New York. Yeah. It's not really real New York. But, all right. So let's get back to this business at hand, which is, you know, you know, you know, You've got all this money.

You got a partner. And you're going to go and do your first deal. So tell us what was that first deal? How did that come together? You said the Carolinas. So, you know, how'd you end up? It's actually a long story before even getting to the Carolina. Not another one.

Another long story. This is just going to be a really, really long, boring stories. Hold on. Let me get my pillow. Yeah. So, yeah. So here's what happened. My old partner, she and her husband already owned.

They owned like one building in the Bronx, but everything else they owned was in Louisiana and Texas. So that's where we started looking. And it's absolutely true what they say that if you were a new investor, it doesn't really matter how much money you have. Because if you haven't closed deals already and you're not known in the marketplace, it's very difficult to break in. So even though we could provide proof of funds for deals, we had a very difficult time trying to get kind of sort of break in. So even though we could provide proof of funds for deals, we had a very difficult time trying to get kind of sort of break into the broker community and get them to show us deals that made sense. I mean, they were perfectly happy to show us all of their junk that they couldn't sell and hope that we were foolish enough to just buy something. You know, we were more disciplined than that, fortunately.

So we spent the better part of a year looking for a deal. and the first deal that we moved on or that we find, I think we made an offer on a couple, the first deal that we finally got under contract was one that we'd actually seen months before at kind of a ridiculous price and the owner finally got sensible and dropped the price to a point where it made sense.

And so we got that deal under contract. And then within a very short period of time thereafter, we got a second deal with the same seller in a different city. And these were both in Louisiana. So one was in a town called Homa, which is outside of New Orleans, and the other was in Lafayette. So, you know, we went from zero to trying to close on 220 units or so pretty quickly. So those were simultaneous, those two deals.

So those were simultaneous. So we were working on them simultaneously. So what happened then was we're trying to close these deals, and we've got our equity lined up. We're speaking with a lender, and lender was all excited to do the deal. We got very close to rate locking on the deal to close the loan. and suddenly the lender sent their underwriter down to look at the deal, which is, you know, as you guys know, probably one of the last things that happens before you close on a loan, came back and said, we're not doing the deal.

Yeah. Why? So, well, that was our question. Why aren't you doing the deal? And they said, well, our underwriter says that this deal is not, doesn't fit the standards for, we were trying to do a Fannie Mae loan. So it doesn't fit the standard for Fannie Mae. And we're like, what are you talking about?

So they sent us the report. It took us a while to get the report. But they said, you know, I said that we thought maybe that there was too much CAPEX in the deal or something. But it was a value-ad deal. I mean, that was why we were buying it. It had a bunch of down units. We priced everything out.

We knew what we were getting into. It was really going to be terrific. They said, well, what about the engineer's report? It doesn't matter. We don't care what the engineer report says. Our underwriters said we're not going to do the deal. So what's in the report? So they send us the report.

The report is full of stuff like the breezeway. are dirty. We found a golf ball had come through the window of a and stuff like the hallway wasn't painted this week. Yeah, seriously. It was like the place didn't look good.

And they, oh, and by the way, there are 10 down units. We're like, well, yeah, that's why we're buying the place. You know, we're getting a huge discount. That's why we wanted. There's a waiting list at this place with 10 down units. You know, we know we can rent them right away. So they said, it doesn't matter. We're not doing the deal.

And they just shut us down. So, we ran around scambled a little bit trying to find another lender, but we weren't able to do it within the time allotted to close the deal. We were also at the time sort of too inexperienced to understand that we could have gotten more time from the seller in that kind of market. It was a buyer's market at the time. This is 2012. Can I ask, did you lose earnest money when those deals flow through? You had to put up earnest money, right? So we put up earnest money.

We were actually, we had a financing contingency in that deal. So we were able to get out under the financing contingency. And for those who don't know what that means, like even people listening, because this applies to residential as well as commercials, what does that mean to have a financing contingency and earnest money? How does that all work? So you don't see this in deals much now anymore because it's a hot market. So sellers have negotiated away, things like this. But a financing contingency basically says if you are unable to arrange the financing that you want for this deal, you know, with best efforts, obviously, then you can get out and get your earnest money back. So it's a contingency. Just as if X doesn't happen,

then you can get out scot-free. So we were able to get the earnest money back, but we were out a lot of out-of-pocket costs, right? We had the loan application fees. We had the legal fees. We had, you know, engineering reports. We had a lot of costs that we were out of pocket. Jonathan, really quick.

What are we talking about on a ballpark on this? Yeah. So we were, let's see, it was probably $25,000 on that deal. So you're in 25K on upfront costs just to try to get the deal. That's, I mean, that's just to make sure that this deal's worth doing, essentially. Yeah. I mean, yes, yeah. It's, you're in.

I mean, you're really in these deals. This is not buying a house and spending, you know, a couple hundred bucks or thousand bucks. I mean, this is considerably different. And can I ask, what scale are we looking at price ranges of these properties? So I think that deal was a $3 million deal. Okay. So it was 102 units, I believe. And so, yeah, the fees are pretty considerable.

Yeah. Especially the lender's fees. That's what really, you know, where you really get whacked is the lender fees. Because for commercial loans, you know, you're paying, you know, anywhere from a $15,000 to a $30,000 deposit that's going to cover all of the costs. of engineering reports and environmental and things like that. So you get that, it comes back in the deal when the loan closes. And the way that we structure the deal, we were supposed to get our money out. But that didn't happen.

So we were out. And then second deal collapsed also. Same reason? So this time it was us getting panicky and getting out ourselves when really we shouldn't have. And what I've learned since then is, you know, if I knew then what I know now, I wouldn't have pulled out of that deal. But we found something that we didn't like, which was that there were water heater serving several units. It wasn't like one water heater per unit. And my partner thought that was a big problem.

You know, now I wouldn't think it's a big problem. But at the time, she thought that was a big issue. Supposedly, you know, this is going to really affect the economics for us in some way that I'm not really sure. So she was the one who decided to pull the trigger, you know, Since I was the money guy, she was the real estate person. I deferred to her judgment on that. But we were now out again, our costs. We got our deposits back, but we were out all of the costs, the deal costs.

So as your finance here, are these guys starting to sweat? I mean, are your money backers starting to get nervous? They're in 40, 50, 30, whatever it is. And you guys are out of two deals already. How does that conversation happen? That's kind of interesting to me. Well, so the way that we structured those deals, we financed all those costs up fronts ourselves. Okay.

So our investors were not affected by that. And that was a great decision to make on our part because those investors stuck with us. Right. So there's lots of different ways of structured deals. The way that we had structured deals, we weren't actually putting any of our own money into the deals themselves. But we did, and sometimes investors don't like that. They want you to have skin in the game. Right.

But our skin in the game was that we were fronting all. these costs. So we took all of the risk of the deal not closing. And those risks came to pass. That's great. That makes sense. I want to rewind really quick and then, you know, we got to get to this first deal already. I know. It takes forever. All right. So you had talked about early on brokers showing junk deals. And I just wanted you to kind of dig in a little bit more on that because I'm not sure that listeners are all familiar with that. You know, what you're saying is that if you're inexperience or if a broker doesn't know you, the odds of you getting to the good deals are pretty low. Pre-market deals, things like that, right? Is that kind of what you're talking about?

Absolutely. It's not like going to a house showing where it's on the market and anybody who wants to look at it can show up at the open house and make a bid. And for those people, for those listeners who are not really familiar with the kind of the gradations of real estate, You know, anything that's five units or more is considered commercial. So if you're looking, you know, if you're going in, if you're in Brooklyn and you're looking at a four unit brownstone, that's considered a residential building and they'll just have an open house and you'll show up and look at it. But, you know, five units and up is commercial. There's no such thing as an open house. Sometimes they have these tours that you can get on. But when you're a new investor and nobody has dealt with you before and you don't have a record of closing deals, then brokers are very aware.

about wasting time with you. I mean, these guys, you know, they, they work on commission. The commissions are big because they're big deals, but the commissions are not that frequent, right? So they don't want to sink a lot of time into an investor who hasn't proven themselves. Plus, their reputation is on the line with the sellers. So they don't want to bring a buyer who they aren't convinced can close because God forbid that they don't close the deal, now these guys have got egg on their face with the seller.

So their reputation suffers. So if you are a new investor, you have to really do a lot of work to establish yourself with brokers. Great info. Any quick tips? Yeah, I was going to ask for somebody. Yeah, some tips that I would,

some real quick tips that I would give people, you absolutely have to show up professionally. Right. So it's tough. to walk in there and just be some guy off the street and get them to take you seriously. If you were really going to jump into the serious commercial deals, then you have to look like someone who can do these deals. So you've got to have a company set up. You've got to have a website. You've got to have business cards. You've got to have a real email address. Like, you know, know your name at

Gmail kind of thing. You've got to look like an entity that can do deals. And then you You need to do some extra stuff like you've got to really know what you're looking for when you come in and be able to speak intelligently about deals. So it's very helpful to put together like an ask sheet that lists exactly what kind of properties you're looking for. Right. And have a due diligence list that you're going to provide to people and say up front, if you walk into a broker you've never met before and you show them a very specific ask like on your letterhead and you say this is. is what we give everybody. This is what we're looking for. And you tell them up front, like, this is the due diligence items that we require. They are going to take you seriously because you've obviously thought through all these issues. You're not just coming in saying, oh, I want to buy a property and I've got, you know, X dollars to spend on it. Yeah. What details might be

on that list? Which list? The due diligence list that you're going to show to the brokers, yeah. You know, I would put on that list, you know, you're going to want to have, say, two or three years of financials for sure. You know, that's a good dealings. You know, that's, you know, That's the biggest one. You always want to have, you know, the year-end financials as far back as you can go, a trailing 12. You want to have a current rent roll. You know, those are really the basics of sort of the absolute minimum that you would require

to even begin to evaluate a deal. Once you go into contract, I mean, there's a whole slew of other things that you'd want to get, but the absolute minimum is going to be those items. So you can start underwriting. Got it. Cool. All right. So let's go to that first deal.

So the first two fell apart. You didn't get that. How did you actually finally get a deal? So after those first two deals fell apart, we decided that we would break up our partnership. We'd had some, not dispute is too strong a word, just some disagreement about philosophy. So how we treat investors and that's kind of, those are the kinds of things. We decided that, you know, after going through this painful brain damage of these deals not working out and kind of banging our heads against the wall for 18 months, we thought, okay, you know, let's, why don't we just break this up? So here I am, you know, a year and a half into this.

I've left my law career behind and I'm trying to figure out what to do. I went out to dinner with one of the guys who is going to invest with me. And I said, hey, you know, I'm really not sure what I'm going to do now. I may have to go back to practicing law. And he said, listen, don't, don't be hasty. Why don't you and I become partners? And I'll back you in a new venture and you can go out and do deals. So that was how two bridges actually got started,

was with that backer. So, you know, obviously I know this is not something that everybody has an opportunity to have, and I'm very fortunate that I, you know, was in that position. This was a very old friend of mine who was able to do this. And the same guy that I was looking at deals with in Newburgh and Albany and places like that before. But I think, you know, he hadn't offered that up front.

And I think that the reason that he was able to offer that to me after a year and a half was that, you know, I spent a year and a half educating myself. on my own nickel about how to do these deals. And whereas a year and a half before that, he knew that I was a guy with integrity and could figure things out. Now I also had an education that I'd paid for

and gone through some hard knocks on my own. And I think he felt comfortable at that point saying, okay, let's go into business together. At that point, so you got the company formed. I did all that stuff I just told your listeners that you ought to do, got all my ducks in a row, made it look like this was a real entity. And I had already been in contact with some guys in Charleston the year before when my old partner and I were thinking about what other markets we might want to go into.

Charleston was a market that always interested me. I went down to Charleston. I knew a couple of people down there and I just asked them, hey, do you know any commercial brokers that you can introduce me to? Because I always like going in with a personal introduction. I think that that is another thing I always recommend to people. Like if you're going to, don't just walk cold into a broker's office and expect to get, you know, star treatment. Ask your friends for introductions. You'll be amazed at who your friends know if you ask them.

You'll never have the opportunity to find out who they know if you don't ask them. But you'll be amazed. Ask your friends. Who do you know who's in real estate? Do you know any brokers? Do you know any commercial brokers specifically? You get that introduction first. And when you walk in, it's a completely different experience.

So that's what happened to me. I asked some friends, who do you know? Charleston's not that big a city. You guys must know somebody. And my friends came through with a few names. So I walked in there with an introduction, and people took me seriously right away. So I'd been talking to a couple guys down there for a while. And developed a really good relationship with one of them, a guy named Tyler Flesh.

And by the time I started two bridges, we'd been talking for a while. So when I started the company, that was one of the first phone calls I made. I called up Tyler and I said, hey, I'm in business for myself now. Let's go. So Tyler and I started looking for deals driving all over the state of South Carolina in his truck. It was a little bit like a scene out of a movie. It's like Tyler's, here's like me, the New Yorker from Brooklyn, you know, riding around with Tyler in his pickup truck. Like, you know, Mr. South Carolina served with got.

Well, he's really from Ohio, but still, he's been down there long enough. and, you know, it was, he's ragging on me the whole time for being, you know, some liberal from New York. And, you know, so I had to endure that. I endure that all the time. Yeah, that three hours of abuse driving from one end of the state to the other. But we got to be real good friends in the process. And, you know, it took us a while, again, to find deals for the same reason. You know, even though Tyler was a very well-known guy in real estate down there, you know, he was representing me, who was an unknown.

And we were getting the, you know, just people were showing us the listings that had been sitting around for a long time. And I'd go and look at those listings, underwrite them and be like, this doesn't really make any sense. So finally, again, using connections, Tyler went through, you know, after six months of just frustration, Tyler went through one of his development partners. He does a lot of development deals himself. asked one of his partners like, hey, can you introduce us to someone happen that that. His partner had a good family friend sort of like called to her as niece, not really niece, but like an old family friend who's need known since she was a kid who was a big broker out in Greenville, South Carolina.

Made the introduction for us. And again, like you get an introduction, you know, that's, that changes the whole game for you. We went into Kay's office with an introduction from her. her father's best friend. So she took us seriously from day one. We walked in there. After doing our introduction, she said,

well, hey, listen, I just got this deal yesterday. Nobody else has seen this deal before. How'd you guys like to go take a look? So we said, absolutely. We drove out there right away. And the minute we saw the deal, we were like, we want this, you know, this is a good deal. So we made an offer.

Kay, convinced the seller to take it without going to market. And we were in business. And that's how it finally happens. So from start to finish to by the time we close that deal in the beginning of 2014, that was almost three years. So two and a half years after I got started in the business before I finally was able to land a deal and get it closed. And this was the longest story ever told on the Bigger Pockets podcast. So both things went forever. Yeah.

I can keep going in more detail. I do want to dive in. We want to dive in on this thing. All right. So you got this deal. I'm just busting your chops, man. Obviously, you're from New York. You can take it.

Yeah, if I can take Tyler's abuse for three hours in the car, driving across the state of South Carolina, I can deal with anything. Before you dig in the numbers, I want to point out something real quick if I could. So you talked a lot about the relationship aspect. I just want to emphasize how important that is and not just for people that are trying to buy a big apartment complexes.

I mean, I'm talking about, like, if you need a real estate, if you're listening to this show and you want to buy a duplex or a single family house and you don't have an agent, if you call it most random agents, they're going to think you're wasting their time. But you get an introduction, and boom, that agent takes you seriously. Same with a lender or broker. I mean, anybody, rather no matter how big you are.

So anyway, I just want to emphasize that point that it's just rock-solid advice there. Oh, yeah. I mean, I talk about that in that thing I give away on my blog. I mean, that's another big aspect of it as the relationships. And not just with brokers, but you've got to build a team, right? You should actually do that before you do anything else. Get your team in place, get your lawyer, your accountant, maybe a mortgage finance guy.

And again, you know, find those people through personal relationships and then use them to introduce you to brokers, right? Those guys know lots of brokers. If your lawyer goes out and says, hey, this guy is my client, he's looking for deals and the broker and the lawyer have a relationship.

I mean, you're going to get a whole different level of treatment than you get just trying to just walking off the street into somebody's office. I love it. Cool, numbers. Let's hear them. What this thing look like? So that first deal was,

102 units. We paid 4.1 million for it. And 1970s, you know, depending who you talk to, beer, C deal, suburban, garden style, multifamily. I think it's 16 buildings, pool, playground. You know, very, very unsexy, unattractive stuff that, you know, I love. That's the kind of stuff I love to buy. Got it. Why do you like to buy those type of things, the unsexy things? Because you can get them cheap. Okay. I mean, you are not competing with institutional money to get those deals.

You're not competing with people who are doing it for vanity. You know, you're only competing with other investors who know where the money is. Yeah. Why not? Is it the price range? The institutional guys that's too small and the mom and pop guys, you know, they see four million. They have no idea what to do, right? Yeah, that's a big part of it.

You're really in a niche. And that was one reason that my old partner had sort of chosen that niche and that made sense to me that you're not. You're too big for the local folks, too small for the institutions. That being said, if you've got, even at a $4 million or $5 million price point for a Class A new bill deal, you'll probably have more people bidding for that. you might get some smaller institutional players coming into that or you know sort of professional family office investors who

won't go for the older stuff but the older stuff really you can buy very attractive price points they often don't need a tremendous amount of capital to you know to fix them up I'm not talking about distress deals I'm just talking about market rate

conventional deals they're just very very attractive deals yeah so this the math works out to about 40,000, give or take, per unit. Yeah. Yeah. What kind of condition was this in? You said it was like a C or D property, but was, you know, I mean, what did the vacancy rate look like? What did you end up doing? So it wasn't a D. It was a kind of C plus deal. Okay. Maybe B. I mean, the brokers would say it's a B. Probably not to be truthful about it. But it, so it was in good condition. I mean, we were buying it from some. somebody who had bought it in a distress situation and turned it around. So that seller had put a bunch of CAPEX into it.

And so basically, like physically, it was in decent shape. It needed a little, you know, it had some things to take care of, but it was not a distress deal in any sense of the word. What we did discover to our chagrin, and again, this was, you know, from inexperience, on that deal I wanted to do the due diligence myself which I think was really good to do it to learn how to do it so I could oversee somebody doing it in the future but what I missed

was really drilling down on the credit of the tenants who were on the site so it was full the place was occupied like 100% but there were a lot of tenant credit files missing from the lease files. You're talking about like credit report, right? Frederick reports. You know, most, when you're doing these deals,

most management companies will run people through a credit check. So you won't necessarily see their credit score, but you'll see like the report that they run that'll tell you, like accept, deny, accept with conditions. And a lot of those were missing. And we later, after we closed, we found out why,

because a lot of these tenants were, you know, that the seller had just tried to fill it with bodies to make it look good. Dirty. Yes. So this is something obviously we watch out for now very closely, but it's something that if you're also getting into the business and you're doing a first deal, you really need to have some very experienced

people doing the due diligence for you or with you to make sure that you don't walk into a situation like this. Well, that's a great tip. I mean, you know, check the files on the tenants. I mean, you know, make sure that somebody's not stuff. your property with unqualified tenants, you know, in order to make it look better, make a, you know, potentially a pig look like a winner, right? Yeah, I mean, and we did that.

I mean, we did a full lease audit. We looked at every single lease file, but even then you got to, you really got to know what you're looking for. So, yeah, definitely. Okay. So let me ask you, why did this deal, was it just the numbers that attracted you? Like, what made you say, this is the deal for us? I'm going to make, you know, stake of my future on this deal.

I mean, did you see a lot of equity growth potential in there? Were you just looking for the cash flow, the return on your investment? What were you looking for? So a couple of things. You know, one, literally when we drove up on the property, it was clean, it looked good, it was attractive. The location was great. It was literally, it's at the intersection of two interstate highways.

And there are, you know, probably 25 factors. within a mile drive of this place. So the location was excellent. The property condition was good. It looks so much better than the deals I've been looking at in Louisiana. So what I was comparing it to when I was looking at like real C deals

in Louisiana, this was just so much better. There were, you know, one tip, if you're looking at deals, if you drive a deal in the middle of the day and all the cars are there, you've got to think twice about whether you want to do that deal. That's a great tip. Because it means nobody's work.

Nobody's working, right? And you also want to look at like, what condition are the cars that are there? Are they new cars? Are they old cars? You know, those kinds of things tell you about the property you're buying. Is there a lot of garbage around? Like, what's the condition of the stuff like the playgrounds? I mean, like that, you can tell a lot about a deal just by looking at it like that.

And also driving the neighborhood is very important when you're first looking at the deal. What's around it? Not just in terms of what the amenities are. What are the other houses around? to look like. Bars on the windows? Yeah, exactly. The bars on the windows or, you know, are they well kept or is it a bunch of, is it cars up

on blocks, you know, like all that stuff will tell you about what a neighborhood is. And if you don't like it, tenants aren't going to like it. But so first thing was, deal looked good. It looked clean, right? Tyler and I drove up. And Tyler, you know, guy had bought like 12,000 units of apartments working for a fund before. So he knew, you know, he knew what these deals look like. And the fund that he worked for was buying these B&C deals.

So he was really, this is kind of in his wheelhouse. So he had the same impression that I did, which is this is a good deal. Then obviously the numbers look good. You know, we bought, we offered it at a price that we were going to be able to make, you know, 8% for our investor in the first year. So that was the primary consideration. If you want to get into kind of like why South Carolina and why, you know, you asked about appreciation on the back end. Yeah, absolutely. I mean, we believed it was there. But it's not, you know, when you're doing commercial deals like this, it's not appreciation in the way that you think about it with a house. Like, you know, all the houses around it go up so it goes up to. It's more the situation. If you've got rent growth, then your profits are rising. And if your profits are rising, then the value's going up. So when we underwrote the deal, we knew, we believe that we were going to have good rent growth over the time that we were going to hold the deal, which we expected to be, you know, five to ten years.

Okay. So you weren't coming into this thing thinking I'm going to, you know, fix this up, sell it next year, make a big profit. You weren't flipping this thing. Not at all. I mean, it was being flipped to us. But yeah, that's not our, that's not our investment style. And lots of people do that. They make a ton of money. And I think it's a great business for people who have the ability to, you know, buy deals for cash and can sit on you're not sit on it, but can go without cash flow for 18 months while they're rehabbing the deal. But there's a lot of risk in that, and that's not, that's on our profile. Okay, so you're buying this thing for good return. Now, what about how do you, as an investor

then make money? Like, you're the syndicator, you're the guy putting, and we can get into how you funded this, but how do you make money in this? So the way that, so we do a very classic syndication model where we find the deal, we tie it down, we use our funds to, to get the deal under contract, and then we take it to friends and family and say who wants into the deal. So we form an LLC that owns the deal, and we are paid a couple of ways. We charge some fees, like an acquisition fee. We charge a small management fee for managing the deal, and then we get a piece of the upside of the deal after paying a preferred return to the investors. So they're guaranteed, depending on the deal, 7%, 8% each year.

And after they've been paid that, then we can participate in the profits. That's how we make money. Okay, cool. So I want to move on because I know we could spend forever on this one deal, but I want to move to the other ones. You've done multiple deals since this, correct? How many total have you done now? So we've done three more since then.

We've got 400 units, just a little over 400 since then, you know, altogether. Okay. And, I mean, were all the other ones the exact same, do you use the same? partner, anything different about the other deals? Well, so each deal has got a different group of investors in it. So, I mean, there's overlap between the deals, but they're all, they all have a different lineup of investors. The structure is exactly the same.

Okay. And they're all in the same area of South Carolina. So they're in the western part of the state, just called the upstate. That's the bit of South Carolina that runs along I-85 between Atlanta and Charlotte. Okay. Jonathan, you said you have a different lineup of investors. but it's you and your partner are finding the deals, putting up all the upfront stuff, doing all the due diligence,

and then you're going out and finding a new unique set potentially of partners, money partners for the syndication, yeah? Yeah, exactly. And for day-to-day, it's actually just me. So my partner is just a silent partner. So I'm the one who's out there looking for deals. And I've got like, you know, Tyler are working with me and people, you know, now we've got a network of brokers to help find properties.

but, you know, my role is putting the deals together, then going out trying to find the money to do the deals. So, you know, once we've got them under contract. Okay. And you're still doing brokers. I'm assuming the same thing. You're getting all these deals through broker relationships. We get them through brokers, but, you know,

so the magic is that once you close a deal with a broker and they perceive that you're able to do more deals, then they start bringing you the off-market stuff. Yeah. So we've done, I mean, I guess you could consider that first deal an off-market deal because we were the only ones ever to see it. After that, I think of the four deals we've done,

one of them was like a real market situation. The rest of them were situations where the brokers brought us the deal and said either you're the only one seeing this or it's you and two other groups that are seeing this. So maybe

there'd be a small bidding process but it wasn't like, you know, we were getting them definitely pre-market or off-market. Got it. Got it. Got it. Hey, quick question that popped into my mind. Since you're the only guy at the firm, whether you're a silent partner, presumably these properties are being managed by in-house management? We do third-party management. Use third-party management.

Yeah. Yeah. So we have local third parties that we use to do the day-to-day. And then, you know, it sounds like at least on the first deal, it didn't really necessarily need a lot of work. You didn't have to do too much turnaround on the units. Do you have the same profile on all the buildings that you're buying? is it all kind of the same, you know, they're pretty much in decent condition or writ ready? Yeah, so our model is to look for deals where we can, where our value add comes in, our management of the properties.

So we don't, we look for deals that don't require a whole lot of CAPEX. We look for deals that are in good shape when we buy them that are stabilized and, you know, fully occupied when we buy them. And the way that we add value to the situation is that we're going to run them more efficiently than the pre-eastern. previous owner because we're buying from mom and pops often who don't have economies of scale. They may have just one property. Or if we're buying them from a flipper, their model is different. They are looking to do it very fast. If they're good at what they're doing, they do a good job betting the tenants.

We'll put them in it slightly below market rents because they want to fill the place up fast. So they're leaving money on the, you know, leaving meat on the bone for you that way. But we also, because we, our model is to. buy properties near other properties that we own. And that way we can manage them together. We can share staff. We can bid out contracts. There's a lot of things that you can do to save cost, which you can't do if you've only got one property in a market. So we actually are able to drive down costs when we buy them. And there's obviously, we also are going to be more aggressive about pushing rents than, you know, mom and pop might be. So you're outsource, I mean, but

you're pretty much outsourcing everything. I'm assuming any. type of work, you've probably got some kind of firm that you use. You don't, you know, obviously don't have in-house contractors that are doing stuff, handi men or anything like that. It's all just well, so, you know, on staff with the management company, when you got big properties like this, do you have to have on-site staff? So we've got people who, you know, full-time maintenance guys who were turning units. A lot of it gets bid out though, you know, or contracted out, painting, carpet cleaning, that sort of thing. We'll get contracted out to another third party. and the management company is overseeing it.

But there is in-house, in-house leasing staff, in-house management, in-house maintenance. Got it. Okay, so they're living at the property and taking care of that stuff. Now, who, I'm curious about, because I've never done anything this big. You know, my largest is 24 units. So how do you deal with, I mean, I'm thinking, let's say a tenant calls and they've got, I don't know, some big problem, water leaking through the ceiling or whatever. You know, do you even hear about that? Does the on-site maintenance hear about it?

Does the manager hear about it? How involved are you on those kind of things? I ideally should never get involved in that sort of thing. That's the management company's job. So, you know, they're on site. They deal with all of the maintenance issues. They come to me when they need to approve a big ticket item. So, you know, in our contract, it talks about, you know,

how much, up to what dollar amount they have the discretion to just go do on their own and what they need to come to me for approval for. But nobody is calling me, you know, except occasionally, and it hasn't happened for a long time, fortunately, but some tenant will get upset at the management company for some reason, and then they'll find out our phone number and call us up and complain about the management company. But that hasn't happened in quite a while.

That's happened a couple times to me where they'll call up and complain about the manager, like they'll find my number somehow somewhere, but then they don't realize that like our management company, is me. I mean, like, we do a pretty good job of differentiating it, so they don't know that I'm in, but they call up the owner of the property. And then, I'm like, okay, you know, like, they don't know that my wife is the one that they're dealing with. Like, we keep it very separate. They do now. They do now if they're listening to this show. Hey, Jonathan, really quickly, what kind of budgetary discretion do you give to the management company where they don't need

to come to you? It's, it's something like $500, you know, under that they can just spend it. And over that, they need to get my approval. Got it. And also, what do you pay for? management on a percentage. Like when you underwrite a deal, I actually have a couple questions about your underwriting. So when you're underwriting a deal, which for those who don't know, it means basically doing the numbers on a large property when you're underwriting it, do you, like, what do you figure for management, total cost? And then what do you typically do for CAPX? The big capital expenditures. So we underwrite 4% of gross for property management. When you start getting bigger properties, you're able to get better rates. But

you know, you're paying directly for payroll yourself. Okay, yeah. So the guys that live on staff are not part of that 4%. Yeah, exactly. So the 4% is going for back office operations like your accounting and stuff like that, and then the management company's profit. But you're paying for the staff salaries. You're paying for everything.

So that 4% is just for accounting and that sort of thing. And oversight, you know, they usually have a layer of management. been over the property manager, you know, that the property manager is reporting to, so, you know, that your 4% is going towards their salaries. If you get even bigger, you can even negotiate this even further down, you know, 3% or lower, you get, you know, big enough. But then in terms of CAPEX, I mean, we don't have any specific, you know, like per door that we spend. It really depends on the deal. So we have ranged from zero that we put in up front for CAPEX to, you know, 150,000 for a property that we thought needed more work.

So it really depends on the specifics of the deal. When we go to look at a property, we try to bring an engineer or a contractor with us for the first look just to get an idea from them as to what they think we're going to need to spend. And then that's part of the formal due diligence process. So when we send in the management company to do their due diligence where they do the lease file, you know, they walk all the apartments, they get up on the roofs, you know, they look at everything, then they come back with a report to us that says, okay, this is, you know, what your

CAPX is. And we always tell them, like, be anal about it, give us the worst case scenario, and then we make a decision as to, you know, what we really think we need to take care of from that list. And on that note, then, what about future, and maybe this is part of what you kind of just said, But future things like, you know, I got, I mean, future cap-ex, maybe appliances. Did you just wrap those all into repairs and you have a certain percentage for that typically? Or, you know, for new roofs, new siding, new plumbing eventually. I mean, just all those like the reserves, essentially.

It's like very big things. I know. Because these are things that I struggle with in trying to buy bigger properties. I'm like, what do I, you know, do I set aside 200 a month per unit for those bigger things? Yeah. So, you know, what we have done, so we finance that out of cash flow, the ongoing sort of routine repair work. The great thing about having your management company go and do the due diligence is that

they will actually go through and kind of give you an estimate on everything in every unit and an idea of how long they think it'll last. So you can get an idea going in like, okay, we're going to have to replace 13 stoves in the next year. It's sort of like reserved for that. But when you get a commercial loan, they require you to set aside reserves. In fact, they usually control the reserves, so they're sitting at the bank. So we kind of use that as our guideline for how much we're probably going to have to spend on CAPEX.

I mean, the banks go through, you know, they send in CBRE or someone like that to do a really thorough engineering report. And that will actually come back with their estimate of how much CAPEX. this property is going to need over the next 10 years and so they make you reserve every month a certain amount that they hold on to. The bitch about it is that they've got

the money and you've got to spend it and you don't get it back until you show them receipts. So you actually have to spend the money first and then get it from them and it takes 30 days to get the money and it's a big creates a liquidity problem sometimes but...

Sure. Interesting. And by the way, just to clarify on that. So do they tell you how much they're going to make you pay in reserves? You don't get to make your own choice on that. No, no, they'll tell you. This one's 300 bucks per unit per year. Okay. Is there an average that you've typically seen or is it around 300? It's always 250 to 350 to 350. Okay, that's always what I've heard to 250 to 350. It's more, I mean, tens recently, the better the deal you do, you know, the better condition it is, the lower obviously. So the deals we've done recently have been lower.

You know, the deals we bought have been in a really good shape. We bought them, so it'll be $2.50. Awesome. Awesome. All right, Jonathan, before we move on to the fire round, we got one last really quick question, which is looking back, what would you do differently? You've got these, you know, four properties. You went through, you know, several years of just trying to figure it out.

Would you change anything or would you go through the whole process the same way? There's a number of things I would do differently. I think, to be honest with the, if I were starting all over again, I would start with smaller deals. They're just easier to take down. You don't need as many partners. I mean, we haven't even gotten into like financing these deals and all of the stuff you have to jump through to get a bank. We're out of time, so we're not going to get them.

You know, so I would definitely start with smaller deals. Like I wish I'd been starting with, you know, 20 unit, 25 unit deals. Exactly. And kind of build up from there slow. I'll leave it at that. No, that's great. It's great. It makes sense.

I mean, biting off 100 unit property on your first go is, I can't even imagine. It's got to be a whole lot to absorb. I mean, I have to say that the amount of work that goes into doing a deal is the same pretty much, no matter how big the deal is. So it's really other considerations like how you finance it, you know, what the bank is going to make you do and just how many partners you have to bring in to finance it. That's where the real work comes in. It's not so much on the due diligence or even negotiating the loan documents or anything like that. So it makes sense. Awesome. Awesome. I love digging out on this stuff because

obviously this is a little higher level show. But, you know, we want like this is where a lot of our listeners are headed these questions. So I think I think it's fantastic. Thank you, Jonathan. Yeah. But before we get out of here, we got two more famous sections of the show. the first one being the fire round. It's time for the fire round. If you own a short-term rental, here's something worth knowing. Not all landlord policies are built for your type of property. And with holiday bookings, chilly weather, and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short-term rentals, covering property damage, liability, lost rental income, and even unexpected issues like bedbugs.

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If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing at NREG.com slash BPOD. That's N-R-E-I-G.com. www. Wouldn't it be great if your houseplants paid rent while you were out of town? I mean, they've got the whole place to themselves, lots of sunlight, zero responsibilities. But no, they just sit there waiting for someone to spray them with some cool mist like a bunch of leafy loafers.

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Plus, you get to share your place with someone traveling to your area while you're off making memories somewhere else. Your home might be worth more than you think. Find out how much at Airbnb.com slash host. Now let's get to this fire round. Number one, by the way, these questions come direct from the Bigger Pockets forums. We're going to fire them at you. Number one, should I just invest my cash in a REIT, like a real estate investment trust for now until my credit's better?

Or should I just buy something anyway and try to make it work? That's a tough question. First, I was going to say absolutely not, but then you threw in the little credit issue twist. You know, that obviously, it depends on how much money you're talking about. I mean, if you've got enough money to buy a small deal for cash and you don't have to worry about the credit, then maybe that's the way to go. People are always asking me all the time, like, oh, why shouldn't I just put my money into a reed? Why should I not give you, why should I give you my money when I could just put it into a read? And I say, well, because if you're buying a reach, you're buying a stock.

You know, the stock market crashes, your reed's going to crash. And it doesn't really matter what the underlying value of the assets are because everybody thinks of it like a stock. So if you want to buy real estate by real estate, that's the market. my advice. Good answer. There you go. Cool. What's the best way to find insurance on a large multifamily?

Is it any more complicated than insuring your house? A little bit, yeah. To find insurance, it's the same, you know, as everything else we've talked about, get some personal introductions to an insurance broker. You don't have one already. You know, you're not going to be able to just go down to your all-state guy in the corner. You've got to talk to, your lender will be a, or your mortgage broker, preferably. would be the someone to talk to. The lenders have very strict requirements as to how much

insurance you need and the quality of the insurance. You're a lot more limited. So it's definitely more difficult. Okay. Yeah. Cool. Number three, and this is a general, not just commercial, but just general real estate. I'm afraid to, quote, pull the trigger. Any tips? Do you want to sit on the sidelines forever or do you want to get into this business? I mean, at some point, have to be willing to take a risk. No deal is perfect. I certainly, when I could tell you about all the stuff that went wrong with my first deal after we closed, you just have to be prepared to roll with the punches.

But if you never pull the trigger, you'll never get into it. So at some point, you just got to do it. Boom. There you go. There you go. Last question. Should I stay away from mixed use for my first deal? So I'll be honest and say I don't really know anything about mixed use.

Okay. Because I only do one thing, which is multifamily. Yep. But that being said, the more stuff you throw into a deal, the more complicated it gets. And why would you want to do a really complicated deal for your first deal? So I would just try to keep it as simple as possible. There's enough moving parts for this business. You've got to underwrite two different kinds of assets with a mixed-use deal.

So just pick one that you like and do that. Cool. I like that answer. I think it's great. Awesome. All right. Let's wrap this thing up with the world famous. These questions are asked every single week to every single guest.

So we're excited to hear what yours are, Jonathan. Number one, what is your favorite real estate related book? So I've got a couple, actually. One of them is going to be real bizarre for you guys just shows. Is that the title? It's called Real Bizarre? That's the book I'm writing right now. Real bizarre.

With Jonathan Twombly. That's right. So for your real basic real estate knowledge stuff, I read a book years ago before I got this business that really opened my eyes as to how these things work. And it's called, I got to get the exact title here. Hold on. I did write this down. It is the Wall Street Journal's complete real estate investing guidebook by David Crook. That was really simple, straightforward and no kind of get rich gimmickery at all. It's just the nuts and bolts you need to know and explains, you know, how buying property for investment is different than buying a house. So that was really helpful.

Now, the geek in me really likes a book called Logistics Clusters. I'm probably the only person who is ever going to buy this book. But that is really, really interesting because it talks about how things like inland ports, you know, or big logistics clusters where you've got goods like going from train to truck or anytime you've got goods going from one mode of transportation to another, plane to truck, plane to boat, whatever it is, just generate crazy jobs. and so if you are looking to figure out what market you should go into

and you see that there's an inland port near the place you're looking, you're on the right track. Nice. I like it. Good advice. The book sounds really fascinating. I can't wait to read it.

It's actually really cool, but that's, yeah, like I said, I'm a dweeb, so. All right. Well, that'll be my second question, which is what do you do for fun. And you could tell us all about magic, the gathering, and dungeons and dragons.

But before we get there, favorite business book. So I really like a book called The War of Art by Stephen. Art. Yeah, the War of Art. I just bought that on Kindle. Did you? Yeah, I haven't read it yet, but it's on my Kindle. It is an awesome book.

I mean, this, you know, for anybody who is an entrepreneur, you know, you don't have a boss standing over you, trying to make you do stuff. And you've got to figure out how to day in, day out, you know, get in there and get your shit done. This is the book about how to do that. It's a great book. I try to read it over and over and over again like several times a year.

That's awesome. I've heard so much good stuff about that book. It's been on my radar for a while now, so I finally picked it up. I'm glad with my employees, Brandon, is reading that book. All about his crappy boss. That's all I read is books on how to, you know,

get around my boss. Four-hour work week, right? Yeah, that was a gem. That's a great. All right, Dave, what do you do for fun for real? I know we were actually geeking out earlier about Star Wars before the show, but what are your hobbies? Yeah, well, so unfortunately, I don't have a whole lot of time for hobbies. I spend a lot of time with my kids.

I've got two young daughters, and they're really my hobby. I just like to hang around Brooklyn with those two. Oh, cool. I never actually did ask you that. So you live still in New York despite living in investing. Is that correct? Oh, yeah. I live in work in Brooklyn, so ride my back to work.

Awesome. So you're in the hicks of the next. Boston Celtics. Oh, damn. Get off my show. Wow. Moving on. Can we finish this up already?

Last question. Here comes. Jonathan, what do you believe sets apart the successful real estate investors out there from those who give up, fail, or never get started? Well, okay.

That's a pretty big question. I think that persistence is the key. It just really comes down to that. Like, are you going to, like I did, I mean, I stuck it out for three years before I finally got that first deal closed, right? And lost a buttload of money along the way. And it was like self-financing out of savings. I mean, it wasn't pleasant, right?

But you just have to stick it out. And you got to make a decision that you're going to do it, pull the trigger, and just do it. And when, you know, when those deals knock you down, you just keep going and figure out the problem, fix it, and then go do another one. That's really all there is to it. I don't want to sound simplistic, but I think persistence is like 90% of success in business. And then 10% is like not being an idiot. That's a quote right there. So, I mean, don't come up with a dumb idea. Do your homework. Don't get into dumb deals. But other than that, it's really just about persisting when life comes at you. I love it. I love it. Well, cool. Well, well,

Awesome. Awesome. Josh, that's great. Okay, cool. Before we let you go, Jonathan, how can people find out more about you? You've got a website. Tell us about that. How else would you like people to reach out?

Yeah. So there are a couple ways that you can get in touch with me. If you would like to follow my blog, that is called The Mortar, as in Brickson Mortar. And the blog itself is the URL is the MortarBlog.com. So go there, sign up. Here's a little bit of a shameless plug. On my website, on my blog, I actually have a first. free giveaway about how to show up for brokers.

So if you want to go to the Mortar blog, they can download that for free. And if you're interested in what we're actually doing on the investment side, then come to Two Bridges Asset Management to our website, which is Two Bridges, spelled out an MGMT for management.com. So Two Bridges Management.com. If you Google it, you'll find us. Fantastic. Awesome.

Awesome. Cool. Well, thank you so much. we really do appreciate it. Obviously, and guys, you can check him out on the show notes at BiggerPockets.com slash show 172. That's Biggerpockets.com slash show 172. Any questions or anything like that that you have for Jonathan can leave there or obviously catch up with him around the other ways. So thanks again so much, Jonathan, and we'll see you around. Yeah, this has been awesome. Thanks for having me on the show. Hey, pleasure. Thank you. Take care.

All right, big thanks to Jonathan. and also a big shout out to Bodie McBoatface. Thank you so much. We do appreciate your support. Do you got nothing on that? Nothing to say? I got nothing. I got nothing on that.

Wow. I'm confused because you've never been rendered like speechless. I was reading something. I was distracted. I didn't even know what you were saying. Oh, so you weren't even paying attention. We're supposed to be professional recording a podcast. I was talking about.

I was reading about Bodie McBoatface. That's what I was talking about. I heard the word, but I don't know what you're... All right. Anyway, that was a cool show, man. That was a cool show. I don't know. I think it takes, I don't know, guts, we'll say, to jump in to, you know, a hundred unit property for your first one.

That said, it just shows it didn't happen overnight either. It wasn't like he read a book on investing in, you know, commercial properties, and tomorrow he bought one. Right. It shows it's a journey that people go down, and rather than going through 10 years of buying Detroit, and he just jumped right into buying 100 unit. Wow, so you're now ripping on Detroit. I'm not ripping on him, I'm just saying. That's twice today.

No. You mentioned it twice today. You know, I was just referring to the city name. You're the one that's making a derogatory statement about that. I said nothing. Would I ever, Josh, would I ever say? You had a tone. I had a tone.

You had a tone. Wow, you are almost a father. You're like, you've transformed. I'm turning into dad right now. You're dad dar. I got hair coming on my ears now. You know what? They make these electronic trimmers from Panasonic.

They're awesome. Nice. Yeah. How do I know? I don't know. Well, you know. Weird, dad. Yeah, strange.

Anyway, did I actually say that out loud? I don't know. For 100,000 people, something like that. Oh, well. Nobody's listened at this point anyway. They're gone. We could say whatever we wanted to. We could just say like swear words right now, just nonstop.

Nobody would ever know. Nice. Nice. All right, guys, listen. Seriously, thank you for listening. Please do not wrote in Voddy. Both days. for your presidential candidate,

I'd prefer you write in me. Josh Dorkin for president. I'm just kidding. I don't want that job. When I was a kid, I always wanted that job. Delighted to? Man,

you know, that's because we were kids with Bill Clinton as president. That was a lot like, that was a good times. You know, it's different now. Yeah,

now it's just dark. They all turn just gray hair and they get, yeah, that's terrible. I don't know. Anyway, all right,

guys, thank you so much for listening. like we said in the Upfront, the Bigger Pocket Show is now on the Google Play Store. So please, if you have not yet already done so, you can check it out there. We'd love ratings and reviews there, love ratings and reviews on iTunes. And otherwise, please spread the word, let people know about the show. The more people that listen, obviously, the more people that can learn. And frankly, you know, people have this selfish mentality.

A lot of people like, oh, well, I don't want to share it because I don't want them to know. And, you know, the more people you share it with, the more potential partners you have. I mean, if you can get like all your buddies to get into real estate investing, think about your network of folks who now know what they're doing, who potentially have access to cash and things like that and resources. It just behooves you if you're a real estate investor to spread the word. So please do that. And lastly, of course, if you're not already a member of Baker Pockets, please do jump in. It's an amazing community with now at the time of you're listening over 500,000 members, which is crazy. It's crazy.

So thanks again. Thank you. Thank you. Congrats. Bigger Pockets. Woohoo. That I'm Josh Dorkin. Signing off.

You're listening to Bigger Pockets Radio. Simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the height, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing. Online. Before we do, let's bring in today's sponsor. All right, today's show is sponsored by Boaty McBoatface.

Thank you all for listening to the Bigger Pockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico content. And editing is by Exodus Media. If you'd like to learn more about real estate investing, or to sign up for our free newsletter, please visit www.w.w.com.

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