BiggerPockets Real Estate Podcast - 227: From Single Family Houses to $130,000,000 in Multifamily with Joe Fairless

Episode Date: May 18, 2017

Scaling: It’s a term often tossed around in business and real estate, but what does it actually look like? Today on the BiggerPockets Podcast, you’ll see firsthand how one investor went from a small handful of single family houses to purchasing over $130,000,000 worth of apartment communities in just the past few years. Our guest, Joe Fairless, has a great story that will show you how you can get started with larger multifamily properties, including several ways to find and finance those big deals. Whether you are looking for your first deal or a 250 unit apartment community, this is one show you can’t afford to miss! In This Episode We Cover: Joe’s background His first property in Texas Tips for those investing out-of-state The benefits and dangers of buying properties virtually Why he no longer does single family properties How to qualify a market Markets that Joe thinks work Tips on finding partners and funding deals What exactly a master lease is How to network and get people in a deal with you How much money he puts in each deal How they find their apartment deals What a stabilized property is And SO much more! Links from the Show BiggerPockets Forums The ONE Thing Podcast CoStar JF 82: House Hacking Tips Revealed (podcast) Tony Robbins Malcolm Gladwell Tim Ferriss Books Mentioned in this Show Set for Life by Scott Trench Real Estate Investing for Dummies by Eric Tyson and Robert S. Griswold Rich Dad Poor Dad by Robert T. Kiyosaki The Driving Force: Six Human Needs by Anthony Robbins Crucial Conversations by Kerry Patterson Tweetable Topics: “I’ve never visited the house before I’ve bought it.” (Tweet This!) “The bigger dollars are in the value-add opportunities.” (Tweet This!) “You want to have customers before you have a product.” (Tweet This!) Connect with Joe Joe’s BiggerPockets Profile Joe’s Personal Website Joe’s Company Website Joe’s Podcast Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 227. So for me, it's not about the money. It's more about when we have a billion dollars worth of properties, then we will have created a billion dollars worth of value. And, you know, as real estate investors, fix and flippers especially, I mean, that's something that really helps the community. 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 hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. 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 up, man?

Welcome to the mainland. Thank you. I'm, you know, I'm back home now. It's raining and cold. But, you know, I come back, and all of a sudden I realize my host has changed to a, I don't know, I don't want to call hobo. Is that a bad word? Maybe just like, you know, you look a little, maybe, I don't know, alcoholic, drugged out. I don't know what the word is. Wow. Are you seeing like a reflection of yourself in the mirror here? Is that what's going on? Are you commenting on my beard? Is that what's up? You've got, is that what you call that? Oh, I thought that was like mascara covered in on your peach Fuzz or something. Yeah, I shaved

this morning. Yeah, I'm sure you did. Yeah, most interesting man in the world, yeah. They're very, very nice. You look very very Portland, you know. Awesome, awesome. Yeah, actually, you got hurt, I heard. You got an injury on your hand

or something, right? So you can't shave anymore. I had surgery last week. Hand surgery. It was relatively involved. And I don't quite feel confident to to shave. So I've decided to allow myself to get hobo chic like yourself there, Brandon, and rock the beard for a couple days. But, uh, hashtag hobo chic. That's going to be hashtag

hobo chic for sure, for sure. But, uh, yeah, man, no, it's, it hurts a lot. They, they did a lot of work, but definitely recovering. I'm sorry, Josh. I'm very sorry. You're, you're actually a sorry person, but I know you are not sorry. So thanks for trying. Well, let's tell a story of how, of how you broke your hand. So, You were at a biker bar, like the typical biker bar, and this guy walks up to you and he's like, hey, aren't you Josh Dorkin from the Bigger Pockets podcast? And then he says, like, how's it feel working with Brandon and knowing that he started bigger pockets? And you just got mad and punched him. Wow.

Wow. Your imagination just runs wild, buddy. Wild and free. Now, you know, years and years of sports and volleyball and things like that. I think I beat it up a little bit. That's a lame story. I like mine better. Yeah, well, you know, whatever.

It's all good, man. Keep going with this fantasy that you've got. I will. Yeah. You're going to a fight with the guy. Bald. He was angry. All right.

So, moving on. Anyway, yes. Hey, man. So welcome back. It is good to have you back. Not, you know, sitting on your porch out in Hawaii as the rest of us suffer here at home. Yeah. Well, you know.

Good trip. Yeah, it was a good trip. It was a good time. So if you guys, you don't want to go out to Hawaii sometime, I encourage it. It's not a bad way to spend a month. Yeah, definitely, definitely cool, man. Well, listen, we have a great show today. It's a fantastic show today.

A higher level show for sure. Yeah, I am convicted. This was a very convicting show of things that I need to do more like Joe. I guess it is Joe. You're convinced maybe? No, I'm convicted of the things I suck at. And I'm like, is that the word? Am I used the right word?

I'm like, yeah, I'm like, man. You have conviction. I've conviction. No, but it's not conviction. It's like I'm convicted by how awesome our guest is and how not awesome. I am. That's what I'm convicted. So anyway, today we'll get to that show in a little bit. But before we do, let's get to today's quick tip.

All right, so today's quick tip actually is something that we mentioned in the show. But I want to stay it here just in case you don't, you know, you'll leave early and you don't stay until the end of the show because it was a little bit later in it. But the tip actually comes from our friend Jeff Woods, who is the host of the One Thing podcast. Check that out. The tip is he says this. He says if when people come up to you and say, hey, how are you doing? And people say that all the time, hey, how you doing? I'm great. Thanks.

Yeah, I'm great. Thanks. Right. We all say that. He's like, you're missing out on a massive opportunity to let people know what you need or what you want or what, like what you're up to. You know, like, so when somebody comes up to me and says, hey, what are you up to? And not much easier. What about you? Right.

That's the standard response. Instead, it's going to be, hey, I'm looking for this type of property. Hey, I'm looking for this kind of deal. I'm looking for this kind of person, you know, whatever. I mean, let people know what you're doing. Otherwise, you're missing out on, I mean, dozens of opportunities a week potentially. to let people know what you need and what you're up to. That's great. I love it. Well done. Well done.

Thank you. It wasn't mine. I'll take it. Yeah, that's great. This is show 227 of the Bigger Pockets podcast. Make sure to check out the show notes of biggerpockets.com slash show 227. Here's the thing about traveling. If you buy food at the airport, burrito, salad, bag of peanuts, you start wondering if you should have opened a savings account for snacks. So wouldn't it be great if you could actually earn money while you're traveling? Well, you can. Airbnb has something called the co-host network. While you're away, you can hire a vetted local co-host with hosting experience to help take care of things, communicating with guests, preparing your space, managing reservations, everything runs smoothly while you're off making memories. Your home might be worth more than you think. Find out how much at Airbnb.com slash host. You've upgraded how to buy properties, but did your insurance get the memo? When investors start scaling, insurance can't be an afterthought. Most policies were designed for a single property, not multiple rental,

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Baselane is a financial technology company and not a bank. Bank. Banking services provided by Threadbank member FDIC. All right, guys. So today's guest is Joe Fairless. Joe started in the residential single-family investing space. And his story about all that is really cool. And ultimately, he progressed to start doing these much, much larger multi-family deals to the point where he's done well over $100 million in multifamily real estate. And it's just fascinating.

sounds like he's been rocking and rolling. He's got some fantastic advice, fantastic tips, lots of great things to get inspired from. So definitely pay attention on this one. And hopefully we get your mind going. And let's bring him in. So Joe,

welcome to the show, man. It's good to have you here. Hey, nice to be here. Brandon and Josh. This is going to be entertaining. I can already tell. This should be a lot of fun.

Josh is kind of boring, but I'll be a lot of fun anyway. We'll have a good time today. Brandon, Brandon tweeted last night, by the way, in response to somebody. And they're like, you know, Brandon, you should write another book or something. And Brandon writes, yeah, the title's going to be Brandon Turner, the legend. No, it was legendary, the life of Brandon Turner.

Whatever. New York Times best selling book right there. Joe, can his head get any bigger? First question. I don't know. I mean, he's filling up the computer screen as it is already. That's how I roll. That's how I roll.

No, that was a tweet in response. So Scott Trench released his book a couple weeks ago set for life. And somebody said, oh, you know, you got to beat Scott Trench now. I'm like, well, how do I beat Scott Trench? I mean, that book is doing amazing. I mean, we sold out. Oh, that book's killing it. Yeah.

I saw that. Yeah, we actually sold out of our entire first printing like whatever, like five, was a 5,000 books, like within like a day or two. It was crazy. And then Amazon went out of print. And anyway, drama in a good way. So let's get to your story. We're not talking about Scott Trench today or the legend,

Brandon Turner. Legend in his own mind. I feel like you're doing something subliminal with the listeners or you're trying to make your name always associated to the legend. Eventually, yeah. Eventually people will hear that word and they'll be like, isn't Brandon the legend? Anyway, and there is a story behind legendary.

Scott Trench actually is the legend. And we talk about him a lot in that connotation. So I'm trying to steal it from him. Anyway, back to your story. Or let's start with your story. Joe, you do a lot of real estate investing. I know you've got some big stuff and both of our listeners know might not know who you are. So can you start the beginning?

Who are you? And how did you get into this real estate investing business? Sure. So I am originally from Texas, went to school at Texas Tech University in 2005, graduated, moved from Lubbock, Texas, Texas, to New York City. So, you know, cows and cotton to the concrete jungle. And I wanted to compete with the best of the best in advertising. So that's why I moved.

My major was advertising. That's why I moved to New York City. Worked on Madison Avenue was making $30,000 as a college graduate. And my rent at the time was $775, I believe. So my check every two weeks was about $750. So half of it went to rent. And the other half went to student loans and living and that sort of thing. So you were broke.

I was broke. Yes. I definitely was broke. And I actually moved to East Flatbush, Brooklyn, which at the time, it was the busiest police precinct in all the five boroughs in New York City. I did not know that at the time. So it was eye-opening. And I climbed the corporate ladder relatively quickly in advertising. I went from a junior project manager making $30,000 to a vice president of a New York City advertising agency before my 30th, birthday and I was making 150,000 plus a bonus. So as I was climbing the corporate ladder, I was beginning to make some money. And I think an important part of my story is while I was making money along the way, I kept my living expenses relatively fixed, which is important, especially if you're living in New York City. So all of my friends made fun of me when I was once I got to vice present level, they're like, dude, you're still living in your same apartment. And by the way,

I had moved to East Village. So I lived in the same apartment for nine years in East Village in Manhattan, which is a nice area. That's great, yeah. But they made fun of me. They said, you know, you have a roommate from Craigslist, and you, which is a whole other story. We don't have time for that. You would end up

with a guy like Brandon if you tried that, which is scary enough. I had a lot of Craigslist roommates. Did you? Yeah. I, I, Sorry for all of them. Oh, yeah. And so I, you know, my apartment consisted of two bedrooms, a hallway and a bathroom, no living room. I had a dorm style refrigerator.

At the time, you know, I was like 31 years old. I'm 34 now. And so, you know, my friends are like, why are you living like college kid? And I said, well, number one, I really don't care. about upgrading my lifestyle to a larger apartment and then having more, more paying more in rent. And number two, with that money that I'm saving, I'm buying, at the time, I was buying single family homes in Texas where I'm from. And they were intrigued by that. But yeah, no one really picked up what I was doing and actually did it along with me. And so I think that's something

that's different from my story is that I was able to save money along the way. And and able to handle a ridicule that I know, you know, that that was coming to me and was able to save money and buy my first house. Nice. Joe. Well, so first of all, like, that's New York for you. You know, sadly, like, I grew up there and New York is literally a place, New York City in particular, where life is about money. It's literally that's, that people live to make more money so that they could show off the money that they have. to other people to feel good about themselves and how much money they have. Now, obviously, I'm speaking in broad generalizations, but like, that's the environment. I grew up in it. It's crazy. And I totally, I totally get it. How did you decide to start buying those homes in Texas? Why did you decide to start buying those homes in Texas? I get the frugality. I get being smart with money. But why say, you know what, I'm going to start buying these houses back home in Texas?

I when I was 26 years old so about three four years after I graduated I was eventually at that point I was probably making 60 thousand or so dollars and I was able to save some money and I remember I had a thousand dollars in my bank account savings account rather that I could invest and I didn't know anything about investing and so I happened to go into my bank and I think I I think it was Bank of America. Yeah, Bank of America. And they had something called a CD, which I hadn't heard of before. So I had to do research on it. And I ended up putting my only $1,000 that I had my savings account into the CD. And they held it hostage for 12 very, very, very long months. And then at the end of it, I got $16.

And then I got taxed on the $16. That's great, man. That's a really good return. What are you talking about? You have a problem? They didn't hold it hostage. They protected that money from spending it somewhere else. Yeah, they helped me be more fiscally responsible.

It's called a forced hostages. Yeah. So then I realized, I mean, there had to be another approach. So I read the book, Investing for Dummies, which was really influential for me. And in that book, they talk about three different ways to invest. One is stocks and bonds. Two is investing in LLC. and three is investing in real estate.

And I just gravitated towards real estate. And then I read and rich that port ad. And then there's kind of just a snowball effect from there. And I recognize that real estate was the way I wanted to go. Nice. Awesome. All right. So let's talk about that first deal.

You're in New York. You decide I'm going to go and buy a single family house. How to go? How to go down? Well, I bought the house for $76,000. It was in 2009. And by the way, I just lucked out that I didn't have. have money until 2009.

If I had had money in 2007, then I probably would, this would be a different type of interview. But I bought in 2009 when prices were very low in Dallas in particular. And I ended up saving $20,000 all in. The down payment is 20% down. So 14,000 plus closing costs. I was all in about 20,000. It is about 15.

It's in Duncanville, Texas for anyone familiar with Dallas Fort Worth, about 15 minutes south of Dallas. The interesting thing about this property and all the homes I've purchased, I don't buy homes anymore, but all the homes I purchased is that I've never actually visited the house before I bought it. Personally, I've never visited the house before I bought it. And that's pretty unique, I believe, for buying your first rental property. And maybe or maybe not, I would recommend it. I don't know. But here's how I got around it. I had a real estate agent take pictures and also do video walkthroughs of the property. And I also recognize that I have maybe a couple special talents and then a lot of things

that I'm not that good at. And one of the things I'm not that good at is construction and identifying, you know, doing a property condition assessment. That's just not a strength of buying. So even if I had visited the property, I don't know how much value I would have added. So my approach for that first single family home was to have my real estate agent, go around, take a video, give me a sense of the property. And then I, because I was from Dallas, I am from Dallas, Fort Worth, I know the area incredibly well. So just by seeing the property address, I know if the school district's a good school district.

So I was familiar with the market. But the house, I figured I'd get it under contract and then have an inspector go through it, pay a couple hundred dollars, and then get an inspection report and see if there's anything. that was a deal breaker or not because on the surface it looked pretty good. And that's how I approached it. Yeah, I think I think I think I think a lot of people get this feeling that you have to invest in your own backyard. And you know, I mean, even here on the podcast and I've recommended it, you should look in your own area. But if you live in New York City or you live in San Francisco, it might just not be possible to do that. Now, we usually recommend, you know, maybe drive a couple hours, find a lower price market. But like you said, you, I don't know, you knew Dallas. You had an

unfair advantage, like we like to say. You had an unfair advantage. there and that you knew the market really, really well. And so I think that's awesome that you did that. I know a number of people. In fact, I just hung out with my buddy David Green last week. And he's the guy who invests, he lives in San Francisco, go invests in Florida and I think in Arizona. He doesn't go look at most of the properties he buys. He has somebody else do the walkthrough and he invests areas where he knows the market really well, where he has an unfair advantage. So I think that's very cool. Do you have any tips for people right now that are listening to the show that want to do that? Like, what would you tell them kind of the first steps to do if they want to start buying a single

family house or two out of state. What should they do? Well, I think you've got to have the right on the ground people who you trust. And the best way to do that is, I mean, one is through bigger pockets because you know, you can simply look people up, see how much they've posted, how many votes they have, because that is a good indication of how much value they're providing to the community. And then you can reach out to them. I mean, that's a simple, very practical thing. to do. Once you reach out to them, first off, know what you're looking for and know what is and isn't a good deal to you. If you don't know that, then perhaps not reach, don't reach out to people yet know how you're going to run your numbers and how you're going to qualify a deal. That way

you're prepared when you do find that individual on the ground to brief them on exactly what you're looking for. And then it's, I mean, it's, it's super, I don't, I don't, I don't, I, I don't want to trivialize how the different things that go into buying a house. But for me, I mean, it was pretty simple. I just found a real estate agent. I had the money. The down payment saved up. I had the lender lined up.

And I looked at a bunch of listings. One thing, and again, I haven't bought a house in about four years. So I'm not super sharp on this stuff. But one thing I remember looking at is I initially, got a bunch of listings from the agent. And he said, well, how do these places look? And I said, I have no clue because I don't know how much they rent for. And I said, in order for me to determine if it's a good purchase or not, in addition to sending me the listings, please send me what you think the places will rent for. That way I can simply run the numbers. And all I was looking for in

my single family homes was something that was making at least $100 a month. I had $10,000 in equity at closing compared to sales comps, and it was less than a thousand dollars move-in-ready. Now, that criteria certainly isn't the most value-add type of opportunity that I could do. And as I've become more experienced and well-versed in real estate, I recognize that the bigger dollars are in the value-ad opportunities. But right out of the gate as a single-family home buyer and a first-time investor, I just, I, I, I, I, I, I was just looking for something that was kind of cookie cutter. And when I told the real estate agent that, he said, okay, great.

And I said, here are some things I'm not looking for. I'm not looking for anything with the pool, not looking for anything with the large backyard. I had a bunch of things. And the reason why no pool is because maintenance stuff and liability, the reason why no large backyard is because I know for tax purposes, if the property takes up the majority of the lot, then I can depreciate the improvement of that house on taxes much more than just a vacant land. So I wanted a house to eat up the majority of the lot and some other things like that. I mentioned it to them. And I just went out and looked at the things that look at the properties virtually.

And so those would be the steps that I'd recommend. Hey, Joe, really quick, the 10K a month, 10K equity of closing, that's, that's, you know, 100 bucks a month. 100, 100 months. Yeah. Yeah. Sorry. 10K a month.

That'd be a great property. Yeah, that'd be awesome. So those are your criteria. And I just want to emphasize for anybody listening who's new, it's really important before you get started to figure out what your criteria are. You really want to know what kind of properties you're going to get in. What are those numbers? And it may be very different for you. There may not be a monthly cash loan number.

There may be only an equity, a closing number. There may be only something else. Nobody can tell you what's right or wrong. You kind of have to figure that out for yourself. but it's important that you actually figure out what are your criteria and stick to those numbers. That's where most people really get it wrong is they get emotionally attached to properties and they fudge their criteria. And they always rue the day.

They always, you know, regret, oh, man, I should have stuck to my numbers. I should have stuck to this. So I just wanted to kind of pass it along. Yeah. And by investing virtually, I wasn't emotionally connected to anyone property because I never visited the property, which is one benefit of doing it virtually. Yeah. So if that's a benefit of doing it virtually, what's the danger in doing it virtually?

You don't have the right team and you buy something that is in a bad area and you don't know the area. Maybe it's maybe you don't look on Google Maps that it's across the street from a cemetery. Maybe there's, the neighbor has a big, big old boat that they always park out front and a big above ground pool in their front yard and that doesn't show up and you can't rent it out because the neighbors are kind of unruly. You might not get a good inspectionary port and you don't know that you didn't because you're like, wait a second, I saw that there literally was no flooring in the kitchen. It was a big hole, but that's not an inspectionary port. You wouldn't know that

if you didn't visit the property. I mean, pros and cons. I mean, just with any approach, we take. The pro, in addition to what I was already mentioned, the pro is also, I wasn't flying from New York City to Dallas any time we looked at a property. I was, you know, it was saving tremendous amount of time. But as with any business, if you start outsourcing stuff, you're going to give up control and you're going to increase the likelihood that mistakes might happen. You just kind of got to optimize the process as you go along the way. Yeah. I love that. So you're no longer, you said you're no doing single family houses. Can you first explain why that is? And then, you know, what came next? What was your next non-single family property? The reason why I'm not doing single family homes is

because I went to a rich dad, poor dad seminar is one of the three-day seminars. And I paid like a couple hundred bucks to go to it. And I went in, my chest sticking out and feeling pretty cocky because I had two single family homes at the time. And I went in and I went in and, I, I sat down and the first thing they said was you're not going to get rich buying single family homes because it takes too long to scale. Now, I don't believe that now because I have interviewed people who have gotten enriches subjective, who have become financially independent. Their income has covered their expenses through single family homes.

So I don't necessarily believe or agree with that now. However, I did at the time and it resonated with me. I was like, wait, you're right. I've got a house, two of them, and they're making me about 250 bucks a month. And then when a tenant moves out or a resident moves out, I then get a $5,000 bill, and that wipes out my profit for basically two years from the rentals. Something is not right because I'm going to have to scale big time. And then I was getting my insurance payments that I was having to do,

I was having to renew every 12, every 12th. months and I was having a mail in the check and I detest mailing things. And it is just, it was just piling up. I was like, there's got to be a different way. So the two things I said, multifamily or mobile home trailer parks. And I just gravitated towards multifamily. So immediately thereafter, I started studying multifamily. And that coincided with me becoming apathetic towards my full-time job.

You know, I'm a huge Tony Robbins fan and he talks about the six human needs. in. I won't go into all six, seven, but the last two lead to fulfillment, that's growth and contribution. So if we don't feel like we're growing and we don't feel like we're contributing in a meaningful way, then we won't be fulfilled. And I just didn't feel like I was growing or contributing in a meaningful way in my advertising job. Therefore, I was going to leave. I decided to leave in December of 2012. So I realized, well, I I won't prove for a mortgage if I leave my job for a house. So the other way to do it, as I've been reading about this apartment stuff,

is that I can go in with other people who do have full-time jobs, and I can buy something together with them, and we can share in the profits, and I'll oversee the thing. And so it was a combination of those factors where I decided, okay, now I'm going to make the jump from single family to multifamily. So how many houses, was it after two houses then that you had jumped? It was four houses. Okay, cool.

So, all right, I'm ready. I'm going to buy, I'm going to get into multifamily. What now? What do you do? How do you get over that hump? It's a fundamental leap in the mindset, I think, for a lot of people to go from houses to multifamily. So I'd love to hear about that shift for you and then love to hear about the first deal.

Yeah. A blissful ignorance is how you go into it. Yeah. You don't know what you're getting into. That's Brandon's motto. Until you get into it. I mean, I, so what I did is I, while I was in my advertising job, I was also teaching a class in person in New York City on how to buy a single family homes remotely.

And the reason why is because what I was mentioning earlier, a bunch of my advertising friends are like, wait, you got a house? I thought you were an advertise. What do you mean? How do you have a house? And it's in Texas. And so I started teaching a class on that. And my oldest brother's friend, after I'd been teaching for about a year, my oldest brother's

friend reached out to me. and he's a gym owner. He owns some gyms in a Dallas, Fort Worth area. And he said, you know, I heard you are investing in real estate. I'd like to, do you have that presentation that you do in the class? And I said, yeah, sure, I'll send it to you. So I sent it to him. And he said, you know, this looks great, but I'm looking to go larger.

So if you ever do something larger, let me know. And I thought, huh, interesting. And I heard that from a couple people. And I thought, wait a second, do I have a, a, clients, do I have customers before I have a product? And that's the best business you can be in. When you have customers before you have a product, then you know you're on to something. And so I knew that I had some people who were interested in partnering with me. And so I started, I read a bunch of books, pretty much, I mean, not every book, but I'd say 80% of the books

that you can think of on apartments I've read, I started shadowing some people who are multifamily investors, and I got incredibly active on Bigger Pockets. You can tell if you saw my posting history in that time frame, I mean, I was posting left or right. I was want to learn as much as possible,

and I use Bigger Pockets as a tool to help me learn the multifamily business and make friends and reach out to people and learn how the heck are they doing it their market. So once I got the foundation of the knowledge, then you go apply it. And so I went to Tulsa, Oklahoma. And I wasn't planning on going to Tulsa. I was like, you know what? I was buying the single family homes just talking to a real estate agent. And he was going, he was finding the property, sending me deals. Then I bought him. Easy. I'm going to do the same thing with multifamily.

Uh-uh. Doesn't work that way. Because again, I thought since I had four single family homes, shoot, they take me serious. I live in New York City. I got four homes. And I'm telling them I want to invest to multifamily. They're just going to show me all their off-market deals.

Didn't work that way. I didn't get any deals from the broker group and brokers that I reached out to in Tulsa, Oklahoma. And I identified Tulsa through various economic indicators. And so I took a trip

to Tulsa, Oklahoma. And when I went there, we made offers on about eight or nine deals, not at the same time, but consecutively, one said no, didn't work, then went to another, didn't get any of them. But at the time, I was also making a friend in Tulsa. He's a real estate developer in Tulsa and other markets. And he connected me to a broker who showed me a deal in Cincinnati. And I'd never been to Cincinnati. Maybe I drove through when I was young, but I'd never actually been there as an adult. So I was like, well, let me, let me qualify

the deal first, which usually I qualify the market first, but let me qualify the deal first, and then I'll go visit the market. And that's how I came across my first opportunity. So I want to ask, how do you qualify a market? You had talked about, you know, various indicators that told you that Tulsa was a good market to be in. What were those indicators? What would somebody look for if they're trying to decide on a market for properties like that? this. I mean, ultimately, when we're qualifying a market, we want to make sure that people will be able to pay rent to us so we can cover our expenses and make the cash flow. That's what it boils down to. That's the end result. So how do we get to that point? We get to that point to make sure,

we make sure that the employment base is strong and it's diverse. And then the third factor, and I'll elaborate a little bit on each of these three, the third factor is supplying demand. because even if the employment base is strong and it's diverse, if there's one million apartments and three renters, then you're going to be in trouble. So you want to look at supply and demand. Those are the main three factors. I mean, it's pretty simple.

I mean, certainly from a sub-market standpoint, so drilling in deeper on the area, what's around, what type of school district is it, what type of community development is there, where's the path of progress. There are other things, but from a very practical level.

So for anyone listening who wants to look for good multifamily markets, you look for unemployment, you see how it's trending. You compare that to the national average. You look at employment diversity. So you want to make sure that no one employer makes up more than 15, 20 percent of all jobs. And no one industry makes up more than 15, 20 percent of all the jobs. You can easily look that up on a Bureau of Labor, in statistics. You could easily look that up on the city's Wikipedia page and then scroll

down to the bottom and you'll be able to click on the resource reference links at the bottom and then find where they're getting their sources and then make sure that those are valid that valid sources. And then supplying demand, that's a little trickier if you don't have access to CoStar or a database like that. So perhaps talk to your real estate agent or property manager who you're working with in that market. And they should have access to absorption rates in that market. So how many people are able to rent versus how many apartments are there and plus how many apartments are there that are coming online.

So existing plus coming online and looking at that compared to how many people are renting. Those are the three factors that I look at. Awesome. Can I ask a question? And again, I don't want you to give away your secrets. here. I'm giving away. It's the big.

There's not a secret some real estate. What I mean is like, are there markets that you would recommend maybe like, or maybe I'm not recommend, but things that you're looking at, things that you see strong right now that, that you've been looking at and saying, hey, that's a pretty decent market. By the way, Brandon has no, no personal interest. No personal interest at all in this question. No, I have no reason to ask this question. Well, I grew up in Fort Worth, Texas.

I'm from Dallas, Fort Worth area. Fort Worth, Texas. was rated number one. Not a lot of people know this, rated number one in population increase from 2000, 2015 by the Census Bureau. And so the population is growing tremendously in Fort Worth, especially North Fort Worth.

North Dallas and North Fort Worth are growing. North Dallas probably isn't groundbreaking news to anyone, but Fort Worth and north of Fort Worth is. and in addition to the population increasing, and by the way, it's projected to continue to increase, I mean, the Fort Worth area, I feel like, is getting the same, isn't getting as much attention as Dallas, but it's getting the same type of job growth

and winning the same amount of new companies being headquartered there as Dallas is. So I'm really big on Fort Worth, Texas. Okay, cool, good to know. I'll start looking. I mean, our people will start looking at it. All right. What I say? Did that come out?

Yeah. So let's skip ahead a little bit and kind of get a big summary of what you're, we're at right now and then we'll backtrack and get their story more. Like how many total deals have you done now? How many units do you have? How much do you, you know, where are you at right now? I've got $130 million worth of apartment communities, my business partner and I with our investors. Okay. I have $130 million worth of apartment communities.

That's based on purchase price. So it's worth more than that. But that's just all this easy, easy way to think about it. And that is a little under 2,000 units. Additionally, we have two properties under contract. We're going to close by the end of June. And at that time, we'll have about 2,400 units. So you're just getting started, I see.

Just getting started. Pretty new week. I go. Yeah, absolutely. What is your goal? I mean, what are you trying to head to? My goal is a billion dollars of apartment communities by time I'm 40. I'm 34. My birthday's in a month. So I'm basically 35. So I'm five years. And it's

important to note that I drive a 2012 Toyota Crolla. So for me, it's not about the money. It is about, I mean, I truly am a minimalist. When my fiance and I buy something, we give away something to get well. So I hate, I hate stuff. I hate collecting stuff. So it's, for me, it's not about the money. It's more about when we're bringing, when we have a billion dollars worth of properties, then we will have created a billion dollars worth of value. And, you know, as real estate investors, fix and flippers, especially, I mean, that's something that really helps the community with the job creation locally

and employing a lot of people that probably the fix and flippers don't even know they have a ripple effect on. And that's the same thought process with the billion dollars of apartment communities in about five, five years in a month. Wow. That's awesome. So, all right. So 130 million, you know, 2,000 units. You're adding 400 units over two more properties. Let's talk about that first property, that first apartment complex.

It sounds like you picked it up in Ohio, yeah? Yep. All right. So give us the numbers. And how did you, how did you put it? all together, right? So it sounds like you had a couple people who had some cash. I'm assuming you were the guy who found the deal. How'd you find it, what it looked like? And then how did it kind of all come together? Yeah. So the, I ended up, I mentioned a couple of people who had

shown interest in partnering with me. And I ended up, it definitely was a character building experience. That's what I like to call it. And when you're raising money for the first time on a deal, I mean, it's very challenging. And I'll tell you the way I did it, and then I'll tell you the way that I do it now, and I recommend others do it, because I don't recommend doing it the way I did it originally. The way I did it originally is I found the deal, and then I look for the money. And that's not the approach to take with large multifamily. Single family or wholesaling, I get it.

You can find a deal, and then the money will come. but when you're raising, in my case, I raised over a million dollars on my first deal. When you're raising that amount of money, you really need to be prepared and have your ducks in a row prior to finding an opportunity. And when I say you need to have the money lined up, I want to be clear. I'm not saying have money from investors transferred to an escrow account prior to finding a deal. I'm not saying that at all. I'm saying verbal interest and investing with you.

and then you've got that verbal interest. So you should have 30% more than what you think you need committed. And when I say committed, they shouldn't be money transferring to an escrow account. It should be simply a verbal interest in your deal or in what you're doing. And then when you do have a deal, you'll be able to reach out to those individuals. And there's going to be some attrition with the individuals who had shown interest in the deal.

So you've got to anticipate that. And that's why you need 30%. percent more than what you think you need. So to answer your question directly now, now that I kind of laid that foundation, how it went out or how it happened was I reached out to a lot of people who I knew and eventually 12 of them invested. I had two of them, or about $200,000 back out a couple weeks before we were supposed to close. And I didn't have a backup plan, but fortunately, one of my investors went larger in the deal and he covered the difference. And it was a creative deal.

It was actually a master lease deal. So what that allowed me to do is not have to get approved for a mortgage or by the lender because I didn't have the net worth or liquidity to get approved for the loan. So one thing when we talk about master leases is if you, you'll hear, that they're really good strategy for buying real estate or taking control, rather, of real estate. And it's true, but it's important to know what the downsides are as well, or the potential pitfalls. Because not a lot of people who do master leases actually give you the full picture. So the full picture is with a master lease, which, by the way, a master lease is basically

you are leasing it from the current owner. and you're taking over all of the income. So you receive all the income, but you also have to pay all of the expenses, including the debt service or the mortgage. So the reason why master leases would be good, then I'll tell you the things to watch out for. The reason why they could be good for you

is because you can identify owners who have, especially now with interest rates relatively low, who have recently refinanced to get into a new lower interest rate opportunity or new lower interest rate alone. But then maybe a life circumstance happens with them. Maybe there's a death in the family. Maybe they just want to abruptly retire, whatever it is. Well, most likely they have a prepayment penalty on that new loan that they just put on the deal. So because there's a repayment penalty, they are not going to be able to exit out of the deal without a large sum of money going to the lender. A way to get around that is a master lease where you're taking over the current loan and you're paying the expenses and you receive income.

Now, here's the thing to watch out for. You'll want to read the loan document that the seller has with their lender because it might say something to the effect of, You can't do a mass release. And if you do a mass release, then you're in default. They might be in default of the loan. They might call the loan due. And that can be a big time problem because if you're, especially if you're raising money and you don't have the money to pay off the loan, should they call a loan, then you'll be in hot water if they call the note due because you're going to have to find, you know, the money to pay off the balance. And so I actually delayed closing two weeks because I needed something in writing from the lender that said they were approving this transaction.

And that's something that I'd say 99% of people who do mass releases don't get is approval from the lender. Yeah. And I think you're playing with fire if you don't do that, especially on a large multifamily deal. Well, how many, how many lenders are okay with that? I mean, is that a thing that lenders are okay with? I don't know. I'm not sure. I know this lender was, and the reason why this lender was is if you, let's look at it from their perspective. They are still keeping the seller as a personal guarantor on the loan. So the seller is still on the loan. They're still responsible for the loan.

And they still have their collateral, which is the property plus the personal, in this case, there's a personal guarantee from the seller. So in addition to that, if the seller is strong enough and they see future business opportunities with the seller, then they're going to do what they need to in order to make sure they're happy so that they do more business with them. Yeah. Joe, how does it work from the seller's perspective? So I own this property. You come to me and say, hey, you want to do this master lease. How do I get paid? what do I get paid?

You're getting all the cash flow and the liability. I'm still on the hook, it sounds like, for everything. So that kind of sucks maybe. But what do I get for it? Well, you get the down payment. Well, the short answer is you get what you negotiate. So here is a couple things that you could get. You could get a down payment.

And in this specific scenario, they got a down payment of a little over a million dollars. So there's incentive. because if they didn't do the master lease, they would have had to sell the property, and then there was a million dollar prepayment penalty on the property. So it hurt the numbers. You could also, and they didn't get this in my scenario, but you could get as a lessee or leasy. I don't know what the terminology is, but the seller could get a monthly stipend for, yeah, royalty for maybe the, just whatever you negotiate.

There's a couple different ways, but primarily it's the down payment. There's another thing where maybe the seller carries back some money. So even though you bought it for a certain amount, you don't pay all of them up front, the money. So you could give them interest on whatever they carried back, but primarily a down payment. So in your case, you acquired the property through this master lease with the seller. You gave them the down payment, the million bucks. They're still on the hook for the property. How do they get off the hook for the property?

It's got to be at a sale, correct? You bet you. Yeah, sale or you assign your rights to purchase to someone else and then they buy the property from them. And that's, that's in our case. That's what we did. We assigned our rights to another entity and then they bought the property and then everyone exits at that point in time. Got it. So if you assigned the deal to somebody else, how did you make money on that besides it? It was just a cash flow in the meantime? Oh, no, you make the difference on what you. So when you enter into a master lease agreement, you say, I'm going to buy this property in three, five years, two years, whatever it is, at this particular amount. And then when you assign your interest to exercise

that option to purchase, say you are going to buy it for $300,000, if you assign it for $350,000, then you will have made the cash full along the way plus that $50,000 spread. Okay, very cool. Got it. So is that, like, can we talk numbers on that first deal? What did you buy it for? What did you end up, you know, like what was the average cash flow? Like, was it a really home run deal or what was that like?

Wait, but before that really quickly, you said, sorry, Brandon, I just think it's really important. You said you put together money from all these people. Like, I can't just say, hey, Brandon, give me 500,000. Joe, give me 600,000. You know, Frank's mom gives me, you know, another 500,000. And I can't just put all that together, put it in a contract and move forward, can I? Or how does all that work? Yeah.

So thank you for mentioning that. That's a good point. A couple things. One is to directly answer your question, you do it through a securities attorney. And you put together a document called a PPM, a private placement memorandum. It also includes an operating agreement. So the PPM basically tells them how they can lose all of their money in the deal. It's a very scary 130 page document.

The operating agreement is a typical operating agreement that most real estate investors are familiar with. It shows who's in the deal. Well, the PPM shows that too, but who gets paid and what the order of priority is and upon sale, upon cash flow, et cetera, voting rights, etc. there's also a subscription agreement so what the investors the investors subscribe or invest into the entity that has the property so that's the third thing the fourth is an investor qualifier form and that if you're taking only accredited investors so people who make 200k a year for the last couple years with the reasonable expectation to make it this year or 300 jointly with their spouse or a million dollars net worth or some other obscure things There are other ways to qualify, them were obscure. Then they fill that out to prove that they are accredited.

So those are the four primary things. The fifth thing that we put in there is how they will receive their monthly distributions, just so we don't have to collect that information later. So you have a securities attorney put that together. Those are the five components, the PPM, the operating agreement, the subscription agreement, the investor qualifier, and how they're going to receive their distributions. Now, practically speaking for someone who has real estate experience and is looking to bring in investors,

the way that I was able to bring in investors is I identified the different networks that I was a part of. So Texas Tech Alumni Advisory Board, I had been on that for five, six years, I still am, my advertising agency friends. I had someone on my flag football team invests with me. He only knew me because he is on my flag football team. And roommates, not the Craigslist. Actually, one Craigslist roommate, plus some roommates in college. So what I recommend doing, here's a practical tip for anyone listening, is identify the different networks that you're a part of.

And then put them in a spreadsheet, put the individual's names in a spreadsheet. And then your goal is to reach out to one person within each of those networks. and have a conversation and see if it's a good fit with them. If so, then talk to other people in that same network and name check that you spoke to so-and-so. Because the number one influencer of purchase intent, I know this for my advertising days, is word of mouth referrals. That's the number one purchaser, one influencer of purchase intent is word of mouth referrals. So if you say, hey, Josh, I know Brandon and I were talking, he was showing. showing interest in this deal, I thought we thought you might be as well. I mean, Josh,

you might say, hell no, not if Brandon's in it. That's probably the case. Right. But other people might say, yeah, I'm interested as well. And then you go about it that way. And I can tell you that specific example worked for me on my deal. And that brought in the largest investor that I had on my deal because he said, oh, and this guy's happened to name Brandon. Oh, well, if Brandon's in the deal, then I know he's physically responsible. possible. So sure, yeah, I'll take a look at it. I love that. I love that. That's great. You know you would invest with me, Josh. Come on.

Yeah, yeah, maybe. Hey, Joe, really quick. One last thing before Brandon throws a bunch of questions at you that are probably meaningless. But what is all that cost? So you pay the securities attorney. I mean, that's a lot of paperwork to generate. So, you know, just the attorney's costs on that first deal or, you know, subsequent deals, I'm sure it's Masumanos in the same purpose. price. What are we talking about here? Fifty thousand. Wow. Wow. 50 grand to put together all this paperwork. Yeah. I mean, and you can, well, you do get it paid at closing after you close the deal. Now, there are other resources that you can use that are less expensive. I mean, you can get a

PPM drafted for eight, probably like six, seven thousand dollars. But I'm talking about the negotiations with that your attorneys are, or the attorneys that are reviewing the contracts in addition to putting together the securities documents and the operating agreement, all in conservatively 50K. I can tell you for that first deal, it was about 10,000,

but I cut corners and I don't recommend cutting corners. If I had to do it on a shoestring budget and not cut corners, I could probably get it done through a different attorney that I use for probably all in 15,000. But we just, we go with one that we're comfortable with and we know has everything buttoned up. And that just, and that, like you said, it comes out of closing. So essentially, if you're raising money for these deals, you're raising a million dollars.

I mean, it adds 50 grand to the million you need. And then the investors are kind of paying that anyway. Or do you pay that out of your pocket? Are you paying that 50 grand? It comes from investors plus Joe and Frank, my business partners, funds. Okay. All right. And so how much money are you usually put into these deals? I mean, are you usually invested in every one? Are you doing no money of your own? Yeah, we invest in every one of our deals. The first deal, I didn't have any money to put in. But then since I partner with my business partner, Frank, and we have Ashcroft capital, we put in at minimum $100,000 in every one of our deals.

Okay. That's awesome. And that also helps, you know, when you're telling investors, hey, I'm putting my money in this. You have to. You have to. It's a no-brainer. Yeah. I mean, just, yeah, you have to have to. alignment of interest. Very, very cool. There are two kinds of real estate investors, those who have reviewed their insurance and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC held properties. These gaps surface only when filing claims. That's why investors work with NREG. They specialize exclusively in real estate investors, understanding portfolios, risk at scale, and cash flow protection. One claim can erase years of returns. If you own a rental property,

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That's bill.com slash bigger pockets. So are you still doing these master lease options on deals today? Are you mostly doing just purchases? Yeah, that was just to get going. And I don't do that. Now, it's not something I'm opposed to, but it just makes more sense to put new debt on the property. So with Ashcroft Capital, our first deal was a 250 unit. And for all of our deals, we put new financing on it.

I haven't done anything really creatively other than get off market deals. What is Ashcroft? Is that you and your partner's entity? Or is that? Yeah, yeah. Yeah. Where'd the name come from? I don't know.

You know, I have a house on Ashcroft. in Texas, but I don't know where they came from. Yeah, funny. Funny. All right. So how, you talked about finding off market deals or is that mean that all your deals off market or how do you find apartment complexes to buy? Well, really an interesting story.

And this is applicable to every single real estate investor who is looking to invest in a hot market and find off market deals. So here's a story. This happens to be the last two apartment communities. we closed on over 500 units in Dallas, Texas about a month and a half ago. And so here's what happened. We saw a 300-plus unit property that was being marketed by a broker. And we liked it, but it kept getting bid up and up and up as they were doing their job.

They were promoting the property and trying to get the highest and best offer for their client, the seller. And so we noticed that we weren't going to be able to buy it unless we had a different variable in play. And so my business partner had the idea to look across the street. And across the street, there was another apartment community. And the one that was being marketed, the 300 plus units, it was 90% one bedrooms. and the one across the street, a 250-plus unit apartment community, had primarily two and three-bedroom units. And so what he did is he reached out to our broker that we use, and that broker happened to have a relationship with that owner across the street.

And so we were able to get both of those deals under contract, the on-market deal and the off-market deal. And together, there are our economies of scale. So we use the same manager. We have a maintenance crew that goes back and forth. And more importantly, or as important, those properties play off of each other because one is primarily one bedroom since the concrete jungle. There's really no green space. And across a street, you got a two and three bedroom, lots of acreage, etc. And we were able to pay market value for the three.

unit because we were packaging it in with the 250 unit that we were paying below market value. So the whole project, we were paying a little bit below market, but we're able to operate it at a level that no other buyer could operate the first property at because they weren't owning both. Wow, that's awesome. That's awesome. Yeah, that's very, very clever. So the takeaway for anyone listening is if you're in a hot market and you see a deal that you like, then also look across the street and see a if you can package those deals together and then go in with a competitive offer for both and use economies of scale with operations.

But there was no advantage to the initial seller. Like the economies of scale didn't necessarily benefit them. They just benefit you because you were able to get that second deal and use the economies of scale to reduce your OPECs, right? I mean, you're not offering anything better to the seller, are you? What am I missing? To the seller of the 300 unit? Yeah.

Yeah. No, we paid basically market price for that property. Yeah. Okay. They got the price they wanted and it worked for you because you got the economy as scale because you got both. Exactly. That makes sense.

It's clever. I like it a lot. Hey, Joe, really quick. I want to jump back and then we'll come forward. Sorry, I hate to do this, but a question popped to my head here, which is you talked about investing 100K minimum on your deal. So let's take this property. I don't know if you're allowed to share it or not, but how are you making money?

You're putting, you personally are putting 100K and presumably your investors are getting paid first. Let's say, let's say you put up, I don't know, 5% of the deal. What's your take? How do you, you know, you find the property you're operating it, presumably. How do you actually get paid? Three primary ways. One is acquisition fee, 2% of the purchase price. two is asset management fee

2% of the collected income every month and then three is we do for most deals we do 8% preferred return and 70-30 split thereafter They get 70% Yeah they get limited partner 70 which I also am a limited partner because I'm investing alongside with them

but general partnership 30% So we put in 100,000 And if the raise is you know, 10 million, then that 100 doesn't equal 30%. So we're able to get that difference between what we put in and the 30%. Okay, so you get 2% of purchase, 2% of collected income, 30% of everything above that. And after what? After the preferred return.

After preferred return. And then the preferred return, what was the rate on that? usually it's been 8%. So we'll just say 8. Cool. So in other words, so to take this into, if people are confused by that,

let's say I'm a private investor and I want to invest with you, Joe, and I say, you know, okay, you know, here's a million dollars. I'm going to give you a million bucks. I get preferred return, correct me if I'm wrong. I get my 8% before you get your 7030,

but you get the 2% acquisition fee and the income for sure. Then we take the rest and make sure that I get my 8%. And if I don't get it, then you don't get your, 70-30, right? That's good definition.

That's correct. Yes, the only clarification point is, and this is a little bit different for us than the industry standard, we don't collect asset management fees so that 2% I mentioned earlier unless we're paying the 8% preferred return. Okay. So we put that behind the investor preferred return. Very cool. Just to have more alignment of interest.

Yeah. And last question I got before. before maybe we move on to the fire round is like, what do you look for in terms of these deals from metrics? Like, are you, if anything just, you know, makes you a certain amount per month, are you looking for a certain overall return for your investors and IRA? How do you look at that? Yeah, at least the 18% internal rate of return on a five year sale. So we have it for five years and then we sell it at year five. We want to, to our limited partners, to our investors, we want to have at least the 18% internal rate of return.

That's fantastic. And so is there a deal where, like, is there an amount that you want to personally make, like, hey, I want a million bucks and profit on a deal? Do you have any kind of numbers like that or no? No, as long as the investors have the 18% and the project does, is projected to do 22, 23%, then we're all going to make money. Okay. Yeah.

Sorry, last question. Are all these value at operations? In other words, is every property you buy, something that you can fix up and increase the rent, lower the expenses? Every single property. What we buy, it's really straightforward. We buy 150 plus unit properties that are B class stabilized, so they're cash flowing, but have value add components that are 1980s or newer. I love that. I love that. I love that that you have that strict criteria. So someone he asks you, you know, hey, what's up? In fact, I had a guy recently, oh, Jeff Woods, you know, from a, he does the one thing podcast, right? He mentioned the other day this. not to me, but to a friend of mine who that mentioned me. Anyway, this idea, when somebody says, hey, you know, how you doing, man? When you respond with, I'm doing great, you're giving up a massive opportunity.

Instead, like, I'm trying to change my mentality now. Someone says, hey, how are you doing? I'm doing pretty good. I'm looking for 100 unit mobile home park. Like that's what I'm, like, right? Every conversation, you're wasting. If all you say is, I'm doing good, what are you doing? Anyway, that's a plug for Jeff Woods in the One Thing podcast.

But anyway, so I like that you have that criteria. Like, hey, I'm looking for 150 unit plus class B 1980s stabilized property. You know anything? Can you explain what stabilized is for people who don't know? Yeah, it's 85% or above economic occupancy. And that's an important distinction. It's not just occupancy. There's a difference between physical occupancy and economic occupancy, physical people

who are living there, economic people who are paying to live there. So at least 85% economic occupancy. Big difference. Yeah, yeah. Awesome. Last question for me, before we go to the fire round, is this. I know you had talked about pulling these two deals together. I don't know that we actually got the answer to the question on how are you finding the deals.

So how did that initial deal actually come to you and the subsequent, the two deals that you're going to be closing on? How did you find those? So how are you actually finding these properties that you're evaluating? It's either on-market deals that we're getting email, just like everyone else who's listening, is getting the email. or off-market deals. And I'd say, you know, we have eight apartment communities. So, and I'm going to include these other two that we're buying. So 10 total.

And I'd say it's 50, 60-40, 60% off-market deals. And I'll explain that in a second. And 40% on-market deals that were publicized to the public. So the off-market deals, the 60% of our deals, they are found through a broker relationship. So we still pay the broker fee, but that broker only shares it with us first. And then because they know we'll close and the incentive. So the question might become, well, I understand why the broker would do it because they do less work. They don't have to create a long offer memorandum.

They don't have to handle 40 different tours at the property. They don't have to field all these questions. but why would the owner agree to do an off-market deal instead of just promoting it publicly? And there's a couple reasons. One is that we're not stealing the deals by any business. We're not paying 20 cents on the dollar. We're paying a competitive price, but we're also paying on the off-market deals below market, but it's very close.

And the benefit to them is that, one, they're getting a close-to market price, but then two, that they can go with a seller in a much shorter amount of time than they would if they had to go through the formal process, which can take a couple months. And it's just less headache. Yeah, that's fantastic. Like, I don't know. I'm, I'm continually challenged by everything you're saying, like, man, I need to do this differently. I need to do this differently. This is good. I love conversations like this because I'm continually reminded of things that I can improve on and change my own business. So very, very cool. I mean, this has been Awesome. But we're not quite done because next.

They're great stuff, Joe. Yeah, we're going to shift gears here and head over to the world famous Fire Round. It's time for the Fire Round. All right, the Fire Round. These are questions come direct out of the BiggerPockets forums. And of course, you can get to the forums by heading over to BiggerPockets.com slash forums, where I know guys like Joe are active in helping to answer questions, which is awesome. So a few questions for you.

First of all, this one starts a little bit, you know, the beginning. of your journey, but I'm looking at $20,000 to $30,000 classy houses. Are they worth the headache for somebody just getting started? The answer is depends on your goals. I think a lot of times we throw out questions and there's not enough context for people to answer them because if this and depends on who you are and what your skill set is. If you have, if you're really good with your hands and you're good at construction and your local and you know the market, then maybe, yeah, maybe it's a great way to get going.

But if you want to be more passive and your goals are something different, then maybe not. So not enough information. Fair enough. Our next question, I've been discussing potential investment opportunities in apartment syndications with my network. The toughest objection I'm coming across is, what if I need to get my money out early? how do I ever come this or what's the answer to that? Well, the answer is that they're not liquid like stocks are.

It's an illiquid investment for the most part. You have to keep your money in within a year, I believe. That's just what the SEC says. A securities attorney would be the best to answer that one. But then after that, when an investor asks or mentions that to me, I tell them that we'll do our best to accommodate and we have accommodated others. but it's treated as though it's an illiquid investment. And I would approach that accordingly.

But you are investing with us and you know who we are as people. So you know we'll do what we can when we're able to do it to accommodate your request. Great. Yeah, I like that. I like that. Number three, what are the downsides to an apartment building with only one bedroom units? Which is interesting. You just actually talked about that.

So what are the downsides of that? Well, when someone wants to have a two-bedroom, you can't sell them on a one. But when someone wants a one-bedroom, you can upgrade them to a two. And I've done this before. I've been at the leasing office, and we've had a lot of two bedrooms available. All our ones were rented. And they said, hey, they wanted a one-bedroom, yeah. and they said, I want a one bedroom.

I said, you know what? I have a one bedroom with a den. And they said, oh, really? Yeah. Yeah. Well, it's two bedroom. But I have a one bedroom with a den. Or I have a one bedroom with an office.

And you can position the two bedrooms for the one bedroom people, but you can't do the opposite. And ultimately, it depends on your market and the economic drivers. If you're next to a camp, I mean, everyone knows it. If you're next to a campus, then you might be more inclined to have a one bedroom heavy apartment community, which, by the way, my 90% one bedroom 300 unit apartment community is walking distance to a college. So first, I would look at what are the, what's the supply and demand for ones and twos? And second, I would try to always have more twos than once because you can be more flexible with the renter. Makes sense.

Awesome. All right. Last question. How do I check to see if an investor group is real and not some slick organization trying to steal my money? I mean, like, oh, Ashcroft Capital. Yeah. How do I know they're not going to just run off with all my cash, right? How does somebody vet somebody like you who's doing these things?

I've had criminal background checks. I've had investors do criminal background checks. I've given them my social security number. And in addition to whatever other information I had to give them, in addition to that, you can, I mean, I would think most of us would know referrals. But the key to referrals is not to just go with the people who they give you as a reference. The key is to then talk to those references and ask those references who they know who invested in the deal and then talk to them. So do about two to three degrees of separation

from who they originally give you as someone to talk to. And then you'll start getting a better picture. I mean, ultimately, you know, you've got to go based on the research that you do, but then you've got to go with just common sense and do some common sense. sense thing. Great. Great advice. Awesome. Awesome. Very cool. All right. Well, before we get out here, let's go and touch on our Famous for. All right. These are the four questions we ask every guest every week. And we're going to throw them at you right now, Joe, and see what you got to say? So number one, besides your own, what is your favorite real estate related book?

Oh, it would be crucial conversations. And it is real estate related because it talks about how to handle conversations when the stakes are high and opinions vary. All right. Cool. Never heard of that one. I think I actually have that on my nightstand upstairs. I think I just bought that one. Nice.

That's great. Nobody cares. Favorite business book, Joe. I like the book, Blink. You can make quick informed decisions in the blink of an eye. A lot of the times I think we get caught up in too much of the details when in reality, in reality, we probably have enough to take that first step and make a quick informed decision. Awesome. Awesome. I mean, what do you do for fun outside of real estate? And by the way,

we had the pleasure of meeting your wife when you guys were in town here and your future wife. And congrats again on your pending nuptials. It really, and thank you. And it really is spending time with her. I mean, the beauty of what I do is, you know, I do it on, you know, for the most part, I create my own schedule. And so like, last Monday, Colleen and I went on a bike ride at 4 p.m. And so how cool is that to do that on a Monday compared to when I was in the advertising world and I was working 9 a.m. to 9 p.m. So as soon as I get done having a conversation with you two, I'm going to Columbus and I'm

going to see Texas Tech play Ohio State in college baseball. So, you know, doing cool stuff like that. That's awesome. Very cool. All right. final question of the day. What do you believe sets apart successful investors from those who give up, fail, or just never get started? I'd say consistency, identifying what is effective and then just doing it over and over and over again. We live in an instant gratification society. Everyone wants fast results,

quick results. The reality is real estate's you play the long game. I mean, I've done a daily podcast, seven days a week for over 1,000 days. Which is crazy. No one else in the world has done that. And the amount that that has helped my business and my relationships and just learning and just growing as a real estate investor has been tremendous. And so just doing something consistently that you know is effective. And building upon that, you're going to get big results.

Yeah. By the way, how do you do that? I mean, do you do like seven shows in a day or you do one each day when you record? I now have, I do 10 interviews one day a week. Wow. And so I do 40 interviews a month. And then the other days of the week, Friday, I don't have anything scheduled. So it's either Monday, Tuesday, Wednesday, or Thursday.

I block off one day. And then the other three days I have like, you know, investor conversations, client calls, stuff like that. Nice. Crazy. Right on. Right on. All right, Joe. since you brought it up, you got the podcast. Where can people find out more about you?

You can go to invest with joe.com if you're interested in passive stuff or you can go to multifamily syndication.com. I've got all sorts of free real estate tools and are on multifamily syndication videos, articles, stuff like that. Awesome. Very cool. What's your podcast called? Best real estate investing advice ever. You've had some really good guess on there, including. Including you. Yes, Brandon. Yes. Wow. Including the legend. That's amazing.

Including the legend. You are incorrigible, dude. It's crazy. Well, I want people to go listen. You know, they're good stuff. Yeah. All right. We'll link in the show notes.

All right, Joe, thanks so much for coming on, man. We really do appreciate it. Hey, enjoyed it. Thanks, you too. Good catching up. Yeah, you too. See, later. All right, guys, that was Joe Fairless.

Big thanks again to Joe. Are you still convicted? Convinced. I'm convicted. Okay, so here's the one thing that, like, There's a lot of things that stood up to me, but here's one thing that I do a bad job of and I do it better. No, there's more than one, buddy.

There's a lot. So, and I'm going to say you probably do a bad job of this as well. And so, you know, in our position and the fact that we network a lot, we go to meetups, I mean, we have this podcast. We meet a lot of investors. You and I both do, right? Like, I don't have a single list of people that have told me, hey, I would love to invest with you someday or, hey, we should do some deals together.

I don't keep track of that very well. I mean, I kind of have like a, I started for a while. Anyway, what, what, would Joe was. he's very intentional about that kind of thing. And that's what I'm very much like, this is going to change in my life. I'm going to start being more intentional. And people tell me that they want to invest with me someday.

I'm going to take that more seriously and say, okay, let's get your information. What do you want to know? What do you want to do? What's your goals? And maybe down the road, it might be five, ten years from now. It could be next year.

At least then I have that organization that I can go back to those people and raise money for deals. I think that's great. I would agree. I also am quite bad at that. So very, very. good advice. And yeah, great show. Great show. Well, listen, man. Nice, nice to chat with you as always. And, you know, I do appreciate all, all the commentary on the new, the new me. Yeah, you know,

the bearded, the bearded midget. I don't know. Is that the wrong word to you? Wow. Really? You just insulted a lot of people. So you may want to take that back. How does that insult people? Because they don't want to look like you? I don't know. You are a very small man. You know, you're like four foot, four foot nine. I mean, aren't you four foot? 5'9, 4 foot 8. You're something like that. What's funny is people, people always tell me when they meet me in person,

wow, you're way taller than I thought. You're way taller than you sound, right? I hear that all the time. Do people tell you all the time why you're way shorter than you sound? No, because they always think I'm the tall guy because obviously I have more of a command of everything and better looking and obviously, you know, better at pretty much anything.

So except BSing and, and, you know, living, you know. Brain inflation. I don't know. Well, what's funny is like,

okay, so Josh is not actually like four, eight, but I say that all the time because I want people to, when they see them, be like, wait,

you're not actually that short. Like, you're a very average, normal, like handsome height. Right? I am. I want people to think you're like

four foot five or something. Right. And you are actually like seven foot three. So I'm actually seven three. Yeah. I played in the NBA for a month. It was great. Yeah.

Yeah. Not good at all. Yeah, man. Well, listen, good show, good, good chat. Of course, you guys, if you like this show, definitely please, well, yeah, leave us a rating, leave us a review, jump on iTunes, SoundCloud, Stitcher, wherever you're listening. Subscribe, hit the subscribe button. Please spread the word. Tell your friends,

your family, your colleagues about the Bigger Pockets podcast. Tell them about the site. If you haven't already done so, please jump on Bigger Pockets, create a profile, create an account today, get active, start meeting guys like Joe, like Brandon, you name it, get out there, make things happen. luck to you. With 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 hype, 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. It's time for it. It's time for it. It's time.

the random five. All right, let's get to today's random five. These five random questions we like to ask guests each week and kind of hide in the show at some point. So number one, Joe, what do you look for to a friend? Not to you. What do you know? Me and Joe are BFFs. Come on.

I'd say authenticity. Just being true to who you are. And that's most important. Nice. Good. All right. Next question. Should there be an age limit for trick-or-treating?

Absolutely not. No, I mean, but if you're young, you should go with your parents. Okay. So you don't think it's weird if like, you know, 30-year-old. Oh, I was a ghost outfit or like a Hello Kitty suit that Brandon has locked in his closet? I think that would be great for social media fodder.

So no, no age limit. All right. Next question. What is your favorite quote? Do you have a favorite quote? Yeah, Secret to Living is Giving. Tony Robbins says it on his TED talk where he gives Al Gore a high five. And that's everything I do.

I have a give back component to it. Very cool. Fair enough. All right. Who are three people aside from Josh? You consider it to be geniuses. Did you just talk about yourself in third person? I got to, you know, I got to build upon this thing,

Brandon's got going on. So I'm going to tell you. I don't really like how it feels, but. I feel like our Skype screens, your heads are both getting larger. And mine's like just shrinking. I'm going to be eventually off the screen by the end of this call. Three people.

I mean, what geniuses? I'd say Tony Robbins would be one. I think he has a special gift. He's able to package things in very easily understood and makes them very easily understood. Yeah, number two would be, I think Malcolm Gladwell is incredibly insightful. Again, he's good at uncovering stuff that we miss as a society and making into practical information that we can use.

So I'd say he's number two. I'm a huge Tim Ferriss fan. I don't know if I consider him a genius, but again, he, he is he's able to help shortcut a lot of things that could take a longer period of time if we think of us to him. Yeah, I totally agree. I think that's awesome. All right.

Last question from me. By the way, all three of those guys, I totally agree. What is your favorite dark chocolate, milk chocolate or white chocolate? Dark for sure, because I'm a huge chocaholic. And if I did milk or white chocolate, then I'd be way overweight. So I'll go with dark. Nice. All right.

With Csalt, please. Oh, fancy. All right, and that was our random five. 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 Calicoe content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to, To sign up for our free newsletter, please visit www.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing.

You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.