BiggerPockets Real Estate Podcast - 263: College Dropout to Owning 900+ Units with Bruce Petersen

Episode Date: January 25, 2018

Many people have dreams of owning large multifamily properties—but fail to get beyond small deals. Not today’s guest! Today, we sit down with Bruce Petersen, an investor from the Austin, TX area who started with a 48-unit syndication deal and hasn’t looked back! Bruce has some incredible stories and lessons from his time in the business, so if you ever plan to buy an apartment complex, this is one episode you need to pay close attention to! In This Episode We Cover: Bruce’s background What a syndicator does Why he started out with a 48-unit deal Why it’s easier to handle a property with more units The “deal triangle“ Tips for hosting a meet-up The class system of properties When to upgrade a unit What exactly a preferred return is How syndicating really works How he included his daughters in the deal How he finds deals And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Events Brandon’s Twitter Profile Mindy’s Twitter Profile Loopnet Resman BiggerPockets Webinars Books Mentioned in this Show Rich Dad Poor Dad by Robert T. Kiyosaki Jab, Jab, Jab, Right Hook by Gary V. Fire Round Questions How do I vet a Syndication company? Syndicating CRE and having a real estate license Should I do a syndication? Is it standard practice for sellers of multi-family units to withhold P & L and other financial data until an offer is made? Tweetable Topics: “Don’t ever pay off a piece of real estate ever. Not even your personal residence.” (Tweet This!) “I’ve always syndicated everything.” (Tweet This!) Connect with Bruce Bruce’s BiggerPockets Profile Bruce’s Website Bruce’s Email Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast. Show 263. We're buying a 256 unit apartment and I go into the bank Friday morning, 9 o'clock in the morning, execute my wire transfer for $5.2 million. I drive to the property and I'm kind of hanging out waiting for the phone call to say, okay, it's cleared, we're good to go. Well, 11 o'clock hits, nothing's happened. The previous management company had already come in and taking out all the computers,

all the phones, everything. The staff that we're about to inherit has nothing to do their job with. Remember, I am the management company also. So I thought, we got to go in and set some stuff up for them because the wire will be there any second now. Two o'clock comes. Everybody's screaming at me on the phone. Where's this wire?

Like, I did all the backtracking, and it left my bank and went to the Federal Reserve at like 930. Three o'clock hits. Nobody's seeing it. Four o'clock hits. The seller screaming at me through his attorney to my attorney. my attorney's screaming at me now. Like, what the hell's going on?

So finally, my attorney calls me back and says, look, you got to get out of there. Like, what are you talking about? She goes, you don't own that property. I'm like, oh, crap, you're right. We don't own this property. So we had to leave. Nobody knows where the money is. It's gone.

Nobody can find it at all. 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? My name is Mindy Jensen. I am the guest host of the Bigger Pockets podcast with you as always, Mr. Brandon Turner. What's going on? Brandon, how you doing? Mindy, I am fantastic, actually.

What's new with you? Um, what is new with me? My children are currently on vacation with my husband, visiting his parents and I am stuck at home cleaning the house. You're home alone and you're cleaning the house. I'd be like, I don't know, like on the couch watching Netflix, like enjoying my time. I have like somebody over massaging my feet. Do you know what that like app where you can like choose a masseuse to come to your house? I actually have, I can't get massages. I am so ticklish.

I cannot get massages. I've never heard of anybody having that problem. That's hilarious. Okay. I am only ticklish where I have skin. Okay. Good. Just really like the most ticklish person on the planet.

Yeah, I can't get massages. I can't go to the chiropractor. Wow. That's really funny. Yeah. I feel like this should be like a, like if this was like a morning TV show, we would like totally have a segment called like, I don't know, give Mindy a back rub. And it would just be like the funniest like 10 minutes ever.

All right. Anyway. Okay. So no. We're not going to do. We're not going to do massages. I do want to go back and say I am cleaning the house because I am decluttering. and my children are collectors of everything.

So when they're not home is the best time to declutter. They have so much crap in their rooms. They're not going to miss it. But if they see me taking it out, then they will all of a sudden develop a deep longing for that item that they haven't looked at in six months. That's funny. I actually do that to my wife as well. I go into her closet.

I'm like, she has not wore this shirt in two and a half years. She's like, this is my actual system. And she doesn't listen much to this show. So she probably won't hear this. However, I did want her to listen to this one. Maybe I shouldn't say it. Anyway, I'll take her shirt and I'll take it. I'll throw it up on top of like this huge shelf that she can't reach, but I can because I'm tall.

You're so mean. And then if she doesn't say anything for like six months, then I know I can throw that shirt away later on. Because she has like, she'll buy like a new outfit every week so that our closet just explodes all the time. So I just selectively throw things on top of the closet and then once in a while when she hasn't complained. And if she complains about it, like, where's that green shirt? I'll be like, oh, it's right here on the floor of the closet. I found it, you know? So that's kind of my plan.

Is that weird? Yeah, except I do that exact same thing with my kids. I don't just throw it away. I donate it. If it's usable, I donated to the Goodwill. But I put it in the garage and let it sit there. And if they don't see it in the garage and they don't ask about it, then they don't need it. There you go.

They asked about some baby doll carrier like a year and a half after I tossed it. You didn't need that, sweetie. No, you didn't. All right. Well, let's get to today's show. As much as this is a very funny, weird conversation. and my wife is going to tell me if she hears this. But today's show is fantastic.

It's something that I'm really interested in. It's raising money from large groups of investors to go buy apartment complex. I mean, really, this is like how to buy an apartment complex 101 today or how to syndicate an apartment complex 101. You guys are going to love it, I think, especially make sure you stick around to the very end. Bruce tells a story about like. A heart-breaking story. It's crazy.

Heart attack-inducing story. As he was telling it, My heart like dropped. Oh my God. How do you get out of that? Yeah, it's like, think of $5 million in a wire transfer vanishing. Like, and having no idea what happened. Stay tuned for that.

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Now, before we get to the show, I want to cover today's quick tip and kind of a reverse order. That was good. That was pretty spot on. Yeah, we harmonized really well. We should be in a band together. No, I can't sing. I love to sing, but I cannot sing. You can sing the harmony and I'll sing the melody.

And we'll have a band called the Bigger Pocketteer. I don't know. That sounds like a good name. The Bigger Pocketeers. The Bigger Tears. Ooh, I like that. I'm going to call everybody when I make an announcement on the bigger pockets forums. I call them beep peeps.

That's what I say. Anyway, what? An announcement. Okay, quick tip. On the bigger pockets forums. Yeah, what's your, what's your announcement? That leads me to a quick tip. Quick tip.

The quick tip is we have an events and happenings forum, real estate events and happenings forum at biggerpockets.com slash events. And today's quick tip is attend an event. If you don't have an event in your area, what are you going to do, Brandon? I am going to sit on the couch and watch TV. Well, don't be a loser like Brandon. Start an event if you don't have an event in your area. I guarantee you, unless you live in a town of one, I guarantee you there is a real estate investor or someone who would like to be a real estate investor in your town or the next town over.

They'll drive to you. They will. If you have a real estate meetup in your area, go attend the next one. I'm going to one tonight. I'm going to the smart real estate meetup, which is. South Metro, something real estate, something hosted by Brian O from the local Bigger Pockets Forums. Oh, wow.

We're going to go to Living the Dream Brewery. We sit around and, well, we stand around, talk about real estate and drink delicious beer. That sounds like a lot of fun. So I couldn't be there. Yeah, I'm sorry. You couldn't be here too. You should come visit more often, Brandon.

I haven't seen you in like 100 years. All right. The last time I saw you outside of FinCon, the last time I saw you, the last time you were here, I was out of town. And Brandon's like, oh, I almost called you Brian. It happens. Brandon's like, oh, I'm going to sneak into town when Mindy's not here. That's what I usually do.

So that's okay. I was in New York at another meetup. Oh, I just hop around the globe, go to meetups because there's so much fun. So later on in the show, we talk about going to meetups. Bruce hosts a meetup. And he created one out of thin air when he couldn't find one to go to. Or no, he found some. He went to Rias.

Yeah. And then he made his own. And then he created his own. Conjured it up out of thin air because he's Mr. Magic Man. There you go. And I lost my train of thought again. Well, got to get it. That's okay.

Let's just bring in Bruce because Bruce is awesome. So Bruce is a serial syndicator of large multifamily properties, central Texas, ranging from 120 to 290-some units. He was actually awarded the Austin Apartment Association's Independent Rental Owner of the Year in 2016 and the National Apartment Association's independent rental owner of the year for 2017. So he's a big deal. Have you ever won that award? I have not, you know? He's actually, I mean.

Bruce is even better than Brandon. He is much better than me. He actually went from college dropout to over 900 units, which is pretty crazy story. So you're going to hear all about that today. Without further ado. And I'll say this before I bring him in. If you've not yet left a rating review on the podcast, you should totally do that. Go to iTunes, leave us a rating and or a review.

All right. Let's bring in Bruce. All right. Mr. Bruce Peterson, welcome to the Bigger Pockets podcast. How you doing? Man, I'm doing great. I'm so honored and excited to be on with you guys. This is great. Oh, good. Good. This should be a lot of fun today. So I want to talk about your kind of history. You know, you and I know each other a little bit. You know, we hung out down in Austin back a few months ago and I learned a bit about you. And I remember we were sitting down on this table like before the event, we had a go abundance event before it started.

And like, I don't know, you had a broken leg or something and like, I don't know, everyone was like serving you food. I don't remember. Well, I was told by Mindy does tell the world. that Brandon Turner broke my leg. Oh, okay, good. But hiking in Park City, I broke my foot. So I was in a boot when you saw me, yeah. You were, you were. And so we hit it off.

And anyway, I'm excited for everyone else to kind of hear your story. So why don't we begin at the very beginning, because it's a very good place to start, as our good friend from Santa Music would say, how did you get started with real estate investing? Well, you know, my story is probably similar to a lot of people's, but grew up very, very, very poor, came out of high school, barely squeaked out of high school, thought, okay, I'm supposed to go to

college now. So I went to college. All right, college did not work for this kid, right? I'm a lifelong learner, but I am not a guy that can sit still in a class and really stay focused. So I dropped out of college, became a stock broker because that's what I was going to school for anyways. That worked until it didn't work anymore. 23 years old, we go to war in 91. Can't almost give stock away. I'm a full commission broker. So I started going hungry. So then I find a guy that says, look, I can help you. I can get you out, all that stuff. And he lured me into retail. Yay. Retail what? Retail, uh, actual retail, a big box store, best buy, bedbath and beyond. Were you working there or? Yeah, I started working there. Oh, okay.

After being a stock broker. So I did that for about 18 years and then hit a wall. Work at 100 hour weeks makes you hit a wall pretty quickly. So I just walked away from that. And I sat out of the computer one day and tried to figure out how to learn more about this stuff. And I started reading and learning and teaching myself, real estate investing, a few books, worked with a mentor or two along the way. And they taught me how to do this with a retail background, college dropout. I started in 2011, bought my first property in 2012, 48 unit. I'm a syndicator.

I've syndicated every deal I've ever done. And currently we have closed five deals. We currently own four, almost 900 units. Wow. So you started, sorry, go ahead, Mindy. I was going to ask him to clarify for the people who don't know what a syndicator is. What is a syndicator? And then you can ask your question. All right. So as a syndicator, I pool other people's money together and I go out and I purchase a property, manage your property. Basically, a syndication is any time that a deal, you invest in something with a syndicator with the expectation of your profit or your loss, hopefully never a loss.

but your profit resting on the shoulders of one person and one person only, right? That's a syndicated security is what it is. So you could call me the general partner. I'm actually called a syndicator or a deal sponsor. So I raise money from other investors. We go out and buy a property. I run it. I have my own management company.

And then I send out quarterly distribution checks to the silent partners or basically the limited partners. Okay. Yes. So this is something that I want to get into more and more of as we go forward. I'm actually doing my very first sort of syndication right now. And I mean, I'm a general partner, but I'm a very small general partner in the deal. There's a couple of guys that are actually doing most of the work.

But I wanted the experience. I wanted to get the credibility so I could do future deal. So anyway, so this is why I'm pumped about this. And I think a lot of our listeners, that's where they want to head someday. Now, what's interesting, though, about your story is that you did not do what most of us do. Most of us start with a single family house or maybe we get a little bit risky and do a duplex. you know, like, it's like, ooh, look at me. I'm a dangerous, you know, you're just like to ask you that 48 unit, boom.

Like, can you walk us through that mentally how, why and how you did that? Well, you know, I came into real estate thinking like most people think, two to four single family homes, buy them, pay them off over 20 to 30 years and live off the cash flow. Luckily, I found some people that were doing what I was trying to learn how to do and they said, why aren't you doing that? That makes no sense. First of all, don't ever pay off a piece of real estate, ever. And I agree with that completely.

Not having your personal residence. Don't do it. But secondly, they made me realize that I had the skill set to run one of these deals. I had, you know, this, I hope this doesn't come across as arrogant, but I've got the personality to be able to go out and kind of sell what I've got. So people, I have the ability to get people to like and trust me. I'm very candid. So I decided to go ahead right on, right off the bat, a 48 unit property.

And it's the best thing I ever did. If I ever did single family, I married into a duplex three and a half years ago. My wife had a duplex. She brought into the marriage. That duplex took more of my time than 120 unit property I have down the street from it. So it's just such a no-brainer. Like Cardone said on one of your podcasts, go as big as you can safely go immediately. I like that term safely.

Yeah, I agree. You know, it's smart because like, all right. So most, I actually drew this out the other day and people listening can't say the drawing, and I'm not going to dry it now. But like, basically, real estate investing is often like a exponential curve, right? So it starts kind of slow. You might buy one unit, then one, and then two, then one, then two, and then maybe get a four. And then eventually you get eight, 10, 15, 30, 100,000 units, right? It scales. Now, if you start with the one, you might go 10, like I did. I mean, it took me 12 years to get to 50 units or so. It took me like 10 years now. I've been doing

this to get to 50 units. This year, though, I'm buying 100, like this month. This month, month, I'm buying like 120 units. Like, so like I've like tripled my portfolio in the course of like in fall 2017, here we are, uh, or into winter 2018. I'm tripling my portfolio. Had I started there, then I could go and exponentially grow from that point. Exactly. And that's what.

And that's what we told me that years. Yeah. My last two years alone, we've closed 860 units and four properties. Wow. Because like you said, once you get systems and processes and that's what a lot of you hear, a lot of what you hear on the bigger pocket podcasts, systemized things, create systems and processes, this thing gets easy. It really does because now we're hiring, you know, we've got corporate staff now that they handle a lot of the back office stuff. And then, of course, we have

property staff. They handle the property. I'm basically the CEO with the vision at this point. So we can move really, really quickly now and it's become much easier. So this is another thing I love as I'm looking more and more. And I know I'm hogging all the mic again, Mindy. But I, that's new. What I love about syndication is. that like, you know, in, in larger deals, the infrastructure is built into the deal. I said this recently, I think maybe on a podcast. Like when you're buying a duplex, I'm competing with, let's say, Mindy who's going to buy a duplex, right? So Mindy is going to self-manage it and do all her own work. And so she can afford to pay way more money than I can. So like, we're not on level field,

playing field. It's like when I'm buying my duplex, I don't want to do the work. I don't want to do it. So I'm competing. But when you're buying, I mean, you're buying a 48 unit apartment, you're not doing the work. when you buy 100 unit, 200 unit, 300 unit, you're not doing the work. And nobody is. So you're not competing with other Joe Schmo's who are doing their work, right? Well, yeah, absolutely. But let's take it a step further. You're in a single family rent house, right?

Where most everybody needs to start. That's totally okay. But in a single family rent house, this is basically being spoken to the people that can't get away from single family because they're scared. All right. So let's say you have a property that pays you $2 to $400 a month and free cash flow. Okay. You have a water here. Pop.

That's $800 to $1,000. that's three to five months of profit gone. I don't have that problem. I have a built-in expense pro forma, basically. So I know what my expenses are going to be. And it takes all those blowups into consideration. So I don't get blindsided and lose four to five months of cash flow in multifamily. It's much safer.

Yeah, I like that. Let's rewind a bit. You said you quoted Grant Cardone, go as big as you can safely go. Correct. What do you mean by that? What does that mean exactly? Okay, so you have no experience in real estate, but you just got in your mind. I saw Bruce did a 300 unit property. I'm going to get a 300.

No, that's not safe. That's reckless. And you're usually never going to be able to do that anyways. Your lender will never let you do that. Now, having said that, you could bring a key principle or a guarantor to the table with you that has experience. And you may be able to get that loan now from a lender, but it's still reckless because you You have no idea what you're doing. You know, your first one, even if you're going to go big, don't go probably above 24, 48,

maybe a 60 unit property as you learn the business unless that person you bring along with you as a guarantor is going to be able to do it with you. So that's what I mean by safely. Don't, you know, can I do it? Yes, should I do it? Probably not. Yeah. I think that's smart.

And honestly, that's why, again, like I jumped into this syndication deal. I'm not going to make a whole lot of money. I'm a very small piece of a general partnership. But I am clinging to everything they're doing. I'm involved in every email, every conversation. Essentially, I'm getting mentored by people who have done this before and learning along the way. That's my way of getting into a larger deal safely.

Yeah, I'm not just jumping in. Right. So on that 48 unit property that I bought, it didn't, it come, it were close to paying my bills on a monthly basis. But like you have said before, I'm going to butcher this probably, but your first one does it throw away, right? Yeah. Run it effectively, profitably and efficiently.

But don't expect it to, you know, change. your life like that. Like, oh, now I could just sit on a beach and Cozumel and drink my ties. It's not going to happen, right? So that first one, just get something small, but then as soon as you can sell it. Okay, a 48 unit property is great. It's better than a single rent home. But that 48 unit property with two part-time staffers is tremendously harder to run than the 300 unit I just purchased. So even sell the first 48 or 60, 72 unit property. Get yourself above 100. Now you have qualified. full-time staff and it gets even easier. Well, let's talk about that.

Why is that so much easier to run three? Because that sounds counterintuitive. 300 units versus 40. 40 sounds way easier because there's less people. Right. Okay, so there's less people. But again, it's all about staffing. The bigger you get, the more qualified the staff is and the more staff you've got.

So if you've got a 48 unit part-time staffers, right, I got a part-time maintenance guy. And, you know, you're interviewing. Oh, yeah, yeah, I want to work for you part-time. No, you don't. You can't find full time. So you'll work for me until you find full time. So it's a never-ending carousel of staff.

It sucks. It's really hard. But you get into a 292 unit, which is the one I just closed. Now I've got three bodies inside. I've got specialization. I have a leasing agent, an assistant manager who does all the bill pay, well, most of the rent collection, I should say, in collections themselves. And then I've got the property manager.

And I've got four staff outside. So now specialization. higher quality staff, and again, much, much easier. Yeah, that's awesome. I love that. Okay. So how did you pay for this 48 unit? Again, I'm a syndicator.

Is it the syndication? Right. I'm a syndicator. I bought it in 2012. You syndicated your first deal. Yes. I've always syndicated everything. That's awesome.

So, yeah, so the first one, now remember, this was 2012 in Austin, Texas, right? I bought it for $34,000, $34,000 a door. And I had to raise $575,000 to, bring to the closing table, basically. Of that, I put in 20%, I put in $15,000 of my own money, and then I raised the balance of the money from 14 other investors. So, you know, I've got math teachers that were in that deal. I have a private investigator in that deal. I've got a lot of tech guys in that deal. Again, you just got to find people that like and trust you and that you like and trust. And it's a great business for scaling, definitely. Yeah, that's awesome.

So that scares a lot of people, right? Like, I don't know people. I don't know, like people say that all the time. I don't know rich people. I don't hang around with rich people. So I can't go and syndicate money. I can't go raise money. Even on a small deal,

I can't find a single private lender to help me do my, my flip. What do I do? So I'm going to jump in here at first and say there's a lot of people that you know that have money that just don't sit there and announce it. Yeah, that's true. Right. So let's start with one thing and we'll go into a second part of that. All right.

So you said, I don't know any rich people, right? you're the average of the five people you spend the most time with, right? Level yourself up. Don't walk away from your friends or your family, but in these endeavors, trying to build a business, level yourself up. If you walk into a room and you're the smartest person in that room and the endeavor, get out of that room. You have to find a way.

And I know it's not easy, but you have to find a way to start to run around in the same circles as the rich people you're talking about. What I did, I was lucky. I started in real estate. kind of, I guess you'd call me retired at 43 because I save my money to live way below my means. But still, I came from a retail background, right? They're not a lot of rich people in retail.

Yeah. So what I did is I created a meetup, right? We always talk about that, right? Yeah. I created a meetup. And it started with me and one other person in 2011. To this day, it's still going. Now, I've turned over the mail list to somebody else, a friend of mine, Mike. But that thing has grown to about three to 400 people.

we meet every other Wednesday and we have anywhere from 30 to 40, maybe 50 people that get together any one Wednesday. That's where my people came from. We got to spend quality time with each other, get to know each other. We started going on a boat together. We started barbecuing, going to dinner together. They got to where they felt comfortable with me, even with no experience. They were willing to entrust me with their first. And most of them, it was their first investment as well. That's awesome. Yeah. There's so much there a weekend. I mean, like go into. But I will say this. If you are interested in hosting a meetup, like bigger pockets makes it really, really easy to do that. If people go to BiggerPockets.com slash events, E-V-E-N-T-S, and you can find a local meetup in your area,

a bunch of real estate enthusiasts getting together, or if there's not one in your area, you get to be the Bruce and get to go start one or get to be the hub. You know, like that is such a good place to be when you can be the hub because people are coming to you for answers and a lot of them have money. Right. Yeah. And like Mindy said, a lot of people have money. They just don't talk about it, especially in today's world, right? Like the stock market's crazy high and everything's really excited. you know, but people are nervous. Like, oh, the stock market, how much higher can it go? Do I want to keep my- It's going to crash any day. Yeah, right? And so everyone's pulled in there.

Like, if you can be like, hey, look at this real estate deal secured by real assets. That's real cash flow. It's coming in. Like, there are people out there who want to work money. You know, I talk about this thing called like, lately I've called it the deal triangle, though that's a horrible name for it. Basically it says, like, you need three things to invest in a deal. You need money or you need knowledge or you need hustle. And you only need two. of those. In other words, if you can have the knowledge of how to do this and the hustle, you don't need the money. Other people can bring that part of it. So just pick two, knowledge, hustle, or money. And that's kind of what you did here. I mean, you had a little

bit of money to put into it, but nowhere close to the amount that you would need to buy it. You just brought the hustle. You brought the deal and you made it work, which is awesome. Right, because everybody else that was in the deal, they still had their own lives to lead. They were either grandparents. They wanted to hang out with their grandkids or they're traveling. Most of them still had a job, though. This was a good way for them to pass. invest for that passive income. So hopefully someday, you know, they'll be able to walk away from their job because they now have enough passive income.

And in fact, of those 14 first investors, I believe three of them five, yeah, about five years later, they have walked away from their job because they now have enough passive income to live. That's awesome. It's incredible. That's very cool. Bruce is making people unemployed left and right. In a good way.

I'm costing jobs. All right. So Bruce, do you have any tips for a host of? a meetup. You said you started with one other person. Well, that's what it was. I started with one other person and then people that I would run into because you got to plug yourself into a local scene, if you will, right? So I started going to any and every, I think they're called RIA meetups, you know, real estate investor meetups that I could go to. And anytime we would go on it anywhere, people that were interested in what we were doing, trying to do the same thing. We would

just have a conversation. Oh, and hey, just let you know, we meet every Wednesday at Starbucks. Hey, I'd love to come because what happens to a lot of people, you find a group or you find a specific, like, I guess a cohort that you meet with once a week, once a month, maybe once a quarter. If you don't have a way to consistently stay engaged, you're going to lose your steam because a lot of people around you are going to be giving you all that negative crap. Oh, it's a scam. Oh, my crazy Uncle Vinny did it. And he didn't make any money in real estate. Well, quit talking to that guy, right? do it right. Talk to people that are doing it and doing it effectively. So that's the biggest thing is

you've got to keep yourself together. So I just started dragging people into our little ecosystem and it just mushroomed because everybody wants to connect. That's a great point. Everybody wants to connect. And we have three or four local meetups in the Denver area. And I'm going to one tonight. And every time you go, you come home and you're like, I can't wait to invest in real estate. I want to go find another deal. I want to go analyze more stuff. So yeah, those, the events are really, really, really encouraging. They're really inspirational. They're really, you know, there's such a great networking space. Absolutely. None of this would have happened for me without it. So yeah, it was, you know, to be hyperbolic, it was pretty life-changing. That's awesome. No, that's great.

So what happened to the 48 unit deal? You still own it today or did you sell it? No, we sold it two years and four months in. The plan was to hold it for five to seven years, but that the Austin market happened. to us, right? We were, we operated very well, but then prices just ran away. We sold it two years and four months later. Our total return was over 300%. Again, I saw right away, a 48 unit was much too difficult for me to really, it well, okay, it wasn't too difficult to run, but I knew there was an easier way. I knew if I can go bigger, it's going to get easier and I'll scale faster. So I had to sell the small one. And I had a couple of my partners say, oh, whoa, whoa, we're in this for the cash because we're trying to retire ourselves. Okay, okay, guys, think about this. I can give you a 10%

return for the next five years, or I can sell in three months and give you nine and a half years of cash flow all at once. It's up to you. And they went, oh, okay, I never really thought about it that way. And if you structure your business the right way, for some people, you don't even have to pay the capital gains because we didn't 1031 into the next property. One of my biggest other investors, he paid no, what did I give him? I gave him a $249,000 check at closing on a $100,000 investment. Wow. He paid no taxes on that. So if you, well, because he had enough losses and he was considered a real estate professional because he owned some single families on his own, right? So now he's a real estate professional. So he can take all of these paper losses that you see under K1. Now this is getting

really, really deep, right? But he had real estate losses through depreciation. from a lot of his other investments that he could offset that $149,000 profit that I gave him. So he paid no taxes. That's awesome. Yeah. And you know, this is obviously not the show, but for tax tips, but like just in general, I love to just tell people, like, the government seems to really like us. And so they reward us in a lot of ways.

There are a lot of ways that real estate investors are getting rewarded. They're still working out right now. As we're recording this, they're still working out the coming tax changes. And I heard that some significant thing happened this morning. I don't know. I haven't read the news yet. But yeah, it's, you know, but either way, generally speaking, the government likes us because we're providing housing for the world. So they reward good behavior,

which is right. So think about who your president is right now. He's made his money in real estate. Yep. Most people in Congress have or do own real estate. So it's in their best interest to keep it kind of the way it is. I don't think it's a bad or corrupt system at all, but I don't see them changing these laws anytime soon. Yeah, it was proposed. It was proposed to change some of the 1031 and some of the a homeowner exemption, but I really hope that doesn't go through because that's how I invest. I live in my flips. So although I do participate in these syndications. So let's talk about the next deal after the 48 unit.

Okay. Next deal was again in North Austin, 120 units this time. You know, it's funny. It was a property that two of my friends actually looked at. For whatever reason, they decided it wasn't for them. So I was like, okay, I want to take a shot at it. Because, you know, it's a small industry, basically. you get to know a lot of the players in the market, not all of them, but two of my actual close friends

looked at this. So we don't step on each other's toes. I stayed out of their way. When they decided it wasn't for them, I stepped in, I bought it. And it's been a great investment for us. You know, it's location. That thing is between, it's so densely populated in this area. It is between two elementary schools, one on either property line. There's a church in front of me. There is a big grocery store behind me and there's a bus stop on my fence line. The location couldn't be better. It's in kind of a rougher area. It's a C minus neighborhood. So very working class. But my location allows me to have the highest rent of the neighborhoods stay about 95 to 100 percent full all the time. That's awesome. Can you explain Phillips who don't know what is a what did you mean by when you say

a C minus area? What are the class? Can you talk about the class systems inside of a real estate deal? Right. So you go different versions of A. You got A. A plus, A plus, but then you've got a B, C, and a D. And all of those classifications have a minus and a plus, right? A B plus, a B minus, and a B. It's basically dictated by the age of the property, the rents per square foot, and the amenity package that it has. There's no exact science to this, but a C property is, so A is the best, D is the worst.

I don't want any part of D's because they're usually filled with drug dealers and prostitutes. and you've got Rottweilers running around off leash everywhere, cars on blocks. I don't want any part of that. C class, a lot of people will call it workforce housing. And that's what this is. They're really, really good people. They just are kind of locked into that kind of a neighborhood because of the jobs they have because of the schools that they want their kids to go to.

And then you get into a B. You're getting usually a B is late 80s into the 90s. And I give you prints per square foot, but that's so wildly different by market. So it doesn't make a whole lot of sense to go into that. But now you're getting some better amenities. You've got a pool. You've got clothes, a laundry care facility. You might have a gym, might have a clubhouse.

And then you get into the A's. That's all the new stuff. That's usually five to 10 years old or brand new. And, you know, they've got, you know, the dog valet. They've got dog walkers. They've got massage therapists on staff. So that's what an A is. All right.

That makes sense. So, first of all, I always think it's weird too. They don't have an F. I think they should have. This should be A, B, C, D, F, just like school, you know. What about E? No, why don't they have E in school? Does anybody ever, I have no idea.

I don't remember. I actually, I actually remember getting, having an E in, no, I didn't get an E. I had, I had an E. They used to have E's and now they did they. That's weird. Brandon's like nine. Okay. No, I want to hear that.

I want to put on a call to everyone listen to the show right now. You know, hundreds of thousands of people listening. If you know why they don't have an E, will you let me know. know over on like Twitter or something at Brandon at BP or hit at bigger pockets. I want to know. Or what's your Twitter, Mindy at Mindy at B.P? Mindy at BP. And Bruce, how are you on Twitter? I copied you. Not very actively. So you're not a 13 year old girl. Yeah, Bruce Peterson BB at Twitter. So all right. So I want to know why. But anyway, so so you're buying this one with C minus. Are you fixing this, these and other properties. We'll go through the

rest of them later. But are you fixing them up or are you buying them already like fairly nice? For the most part, they are, well, okay, so I buy them in good condition. I buy fully stabilized assets. Okay. And my part of the country and my part of the state, most of the inventory that was beat up, very, lots of deferred maintenance, not operated very well in 2006, 7,8. All that stuff has hit the market and turned around, put back out of the market. So most of the stuff that I find to buy right now are fully stabilized assets.

But I still usually come into the property and I can still make some improvements. And then with our operational prowess, we can definitely drive value through our operations. But yeah, you know, on that property, I added a huge barbecue pit area, right? I put two campfire style barbecue pits there with two picnic tables because when I got there, I noticed that there were grills everywhere on the property. Of course, it's against fire code, first of all, but also it's going to burn down my name property. So I don't want that.

So I figured I'm going to come in. I'm going to be the new sheriff in town. They're going to be mad. I tell them to get rid of their barbecue grill. So I had to create something for those guys. And it was a huge, huge hit. We replastered the pool. We cleaned up signage and did some landscaping around the entrance, the pool, and the office.

So we didn't have to do a whole lot because it was run pretty well when we got it. Okay. That's cool. And where are you buying all these in Austin? Austin and San Antonio. Basically my back yard. Okay. Cool.

We didn't talk about numbers for this. property this 120 unit C minus property. What did you buy that for either total purchase price or per door? Eighty one two fifty a door I believe it was and the purchase price was nine million seven fifty. So we've held it for a little over two. Well, no, right about two years now. So again, we've done really well with it. We've, you know, raised the rents to $250 a unit since we've had it. So we've done exceptionally well. And of course, I get hounded all the time by people wanting to buy the thing. But I'll tell them, look, I'll sell to you, but you're not. going to want to pay what I want.

Well, don't try me. Give me a two cap. Like, oh, what? Exactly. I don't want to sell it. So that's the way you get people out the phone that are hounding you. Give me a two cap. I'll sell it.

That's funny. Nobody will do that. So why don't you want to sell these? I mean, like we look at the market. Market seems really, really crazy nationwide, especially down in Austin. Like, like, why would you not want to sell? Well, because, again, we're buying stabilized assets that usually when you buy a stabilized asset, you're going to pay retailer very.

close to retail, right? So there's not a huge value add component. So you can sell, but it's not like you're going to make this big profit at the end. So why not just hold it long term and just get more and more and more profitable every year you have it? Now, eventually, yeah, we will sell it. But, you know, I think the time is right. I'll bring it to my partners and we'll discuss it and make the decision we think is right at that time. So what does long term mean? What does hold it? Are you looking for five years? You're looking for 25 years? Or is there no set time? five to 10 years usually at five years a lot of times a lot of your systems your major systems have to be readdressed the roof might need some work you might have to repaint something so there's more capital

projects that you need to invest in about five years in and most of the loans that we're getting now are seven 10 and 12 year loans right so my anticipated whole period is somewhere between seven and 10 years and we'll just look at the market every year to make sure that that thing that this is still in place and we'll just, we'll address it every year. So are you fixing up these properties before you sell them? Are you putting in the, the money and then selling a stabilized property? Or are you, I don't want to say ditching them, but are you like, ditching them? When you plan to sell, yeah, when you plan to sell, yeah. That's not the right way to say that. Well, since they're not value add properties where we're going to double and triple our money in two or three years, you know,

I'm just going to run the property from day one the way I want to run the property when it's time to sell, oh, now let's pretty, no, I don't do that because I do everything I think I need to do on the front end to make it a better place for people to live, right? So, 192 units that I bought right around the corner from this property we're talking about now, I noticed in my neighborhood, there were no properties with covered parking. Okay. I'm not going to wait until it's time to sell. I'm going to go ahead and do it now because I can reap the benefits of the added revenue because I turned 25% of the parking spots into covered spots. And now there's a premium, you know, there's an inherent premium there. So now I charge $40, $45 a unit for these parking spaces. So I'm going to do that

right away anyways. So, you know, we don't wait. The plan is never to wait until it's time to sell. And now let's put a lot of stuff into it and make it look pretty. I want it to look pretty as pretty as it's ever going to look the day I buy it because, you know, I got to have street appeal. I have to have people wanting to live there. So we'll fix it right away. That's smart. I never really thought about it or talk to anybody that does that. But I know like whenever I live in a like a house, you know, my own primary residence, I tend to not fix it up all the way until like the day I move out. You know, like that's the day. It is beautiful. And I'm always kicking myself going, I could have lived with this. You know, why did I wait to put in the granite countertops to the

day I move out? And yeah, you might as well enjoy it. Right. Well, there's another school of thought too. So not just the exterior, but you go into interiors. Everybody's talking about units upgrades and value why because, you know, the current owner saw that 10% of the, the units are running for an extra hundred bucks if you'll spend $3,000 to upgrade that unit. So there's a big thought now that if you are going to institute a unit upgrade policy or program, you probably don't want to do more than 20 to 40, maybe 50% of the property. Because in today's market, that's a big part of the value I'd left for the next guy. Right.

So now you can say, look, I've done 30% of the property, let's say, but there's another 70% of the property. You can come in and keep this upgrade program rolling. and now they feel like there's enough meat on the bone for them to want to take it over and drive some more value out of it. That's smart. I like that a lot. It's giving the next guy a little bit of room.

In fact, I think I even heard Cardone say that one time. Maybe it was on our show or somewhere else. But yeah, giving meat on the bone for the next guy. I think that's very smart. Well, it's easier to sell the property when you're doing that too. Yeah. Very cool. If you own a short-term rental, here's something worth knowing.

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seldom have I ever done an acquisition fee, a disposition fee, a promote fee, a waterfall on the back end. I keep this very, very, very simple because the more and more complicated you make this, the harder it is for a potential investor to see the value and be able to follow how this is all going to work. So again, I don't fee them to death, but because of that, every deal that I've ever done, people have been okay with not getting a preferred return. So I don't give preferred returns. Now, someday, maybe I'll have to. I don't know. But to this point, I've never had to give a preferred return. We share on every distributable dollar that goes out to the partnership. Now, we'll have our portion of it too. But then our premium, that 85, 15, 80, 20, or that 70, 30, we participate in all of it. But on the back end, we don't cap the investors on the back end. You know, we all share the exact same way at the back end. So, again, I try to keep it very simple and very equitable for them because I want them to have if it's a pleasant experience for them, they're going to follow me to the next deal.

Yep. So I've got a question for those that are listening who don't know. What is a preferred return? Okay. So a preferred return says, let's say the preferred return is 8%. I guarantee. I guarantee, it's preferred. So I as the syndicator don't get my premium, my 80, 20 splits on any dollar that gets distributed

until you as an investor get an end. annualized 8% return. Okay. So in that case, let's say the property itself is returning 10% profit. We'll call it right. Your cash on cash return is 10%. I have an 8% preferred return for the investors. So the first 8% I don't get any 80, 20 split of that. It's the 2% on top of the 8% that now we will split the 80, 20 or the 70, 30. So that's what that's dealing with. Okay. Okay. So how do yours, how do yours pay out then if there's no preferred return? You just 80, 20 from the very beginning or whatever the numbers are? Every single dollar. Yeah. And they come out okay. Because again, I'm not going to charge you a 2% acquisition fee, a 2% disposition fee.

You know, I'm buying $20 million assets. That's a $400,000 fee on the front end that I don't charge people. And so because of that, now we're all on the same page, right? We make money together. And the incentive for me is to make money. I can take that 80-20 split or that 70-30 split. And so just a little more depth there. Let's say the property over five years averages a 7% return, and the preferred return is eight. Well, I don't have to pay them the 8% return if the property can't handle it. But when I go sell the property now,

I have to make up that shortfall of an average of 1% per year from sale proceeds. That after I do that, then we take our 80-20 split or 70-30 split. But since you don't do a preferred, it's just, it's always just flat out, you know, you're the split at A20 or 70, 30 or whatever the thing is, which I like the simplicity of that in a lot of ways. Yeah, I do too. What I find fascinating is every single time we talk to somebody who does syndication, I mean, every single person we've had on the show has done it differently. There's never been to the same. Absolutely. Absolutely.

Again, it's so much easier for them to understand. They don't try, especially get into waterfalls like, oh, my God, their eyes glaze over. you start talking about IRR. You know, there are certain terms that a lot of people don't understand. So I try to, again, I try to dumb it down the best I can because most of my investors are still going to work. You know, again, they're math teachers, they're tech guys. You know, if I overcomplicate this thing, they're like, okay, it's probably a good deal for me, but I'm going to walk away. And my average return to a passive investor is going to be 7 to 9% in today's market year one.

So it works out. That's a really great point. If it's so confusing that they're not going to understand it, they're just going to walk away. There's no point in raising all this money and then not being able to collect any money because nobody wants to deal with your weird splits. I don't even know what a waterfall is. Basically for the first X percent of profit, we take 80 percent. No, let's say 20 percent. Then the next portion above that profit, well, we're going to take 30 percent of that.

And then if we exceed a 2x profit, well, then now we're going to take 50 percent of that. it's a waterfall so it's it basically is implemented in stages depending on how profitable you are and again it's very very difficult to follow that yeah yeah no that doesn't make any sense at all when i was putting together you know this past year my goal was to buy a mobile home park and i was going to syndicate it or at least i thought so i was putting together this big complicated waterfall number analysis like i mean i spent because that's what you're supposed to do right you're supposed to do like a lot of the big guys are doing these huge really complicated things and i think it was i called up my buddy who i know you know as well andrew kushman and i was like and you help me with this i don't understand

He's like, just don't worry about it. He's like, just don't do a waterfall. You don't need it. Just go and raise money and, you know, split it with people who, like, and now it, it blew my mind when you said that because I was like, oh, I don't have to get fancy. Like, well, you don't have to get fancy. And use of the people that are getting fancy. It's because, you know, I hate to say this on some level because a lot of my friends do this,

but a lot of times it boils down to greed. It's like, come on, man, a 20, an 80, 20 split isn't enough for you, you know? And don't try to squeeze every dollar out of an investor in nickel and dine them to death with everything to get as much money as you can out of this. Because again, they're going to enjoy the process with you. They're going to appreciate your openness, your ability to follow the money, basically. And they're going to keep investing with you. So now that first 48 unit property turned into the next two properties for me, right? So that would basically spawn three properties.

That's awesome. Most all of my guys followed me into the next deals. because, again, I made this very, very pro investor. Yeah, I love that. And you still made money. We made a ton of money. I mean, you personally, you Bruce Peterson, still made money. Yeah, so I put in 115.

I walked with $289,000 a day we sold. And then we had all the cash flow while we held it too. Right. Yeah. Now, again, yes, I'm brilliant. I'm not going to say I'm not brilliant. That's a joke. These four, thank you.

But look, the Austin market happened. I'm very good at what I do. But look, we just capitalized on a crazy. insane market is what happened there. Yeah. Because we thought we bought a fully stabilized asset that was going to just generate a 10 to 12% return every year and then sell it because we thought we paid retail for it. Sell it, you know, make a little money on the back end. But it goes back to that thing. Hit a bunch of singles and doubles. Don't wait for the home run. They're almost never going to present as a home run. You know, I thought that was a single.

It turned into a grand slam home run. That's awesome. That's really good advice. Yeah. That's very good advice. So are you? you still putting money into all of your deals? Absolutely. Okay. So you have skin in the game. I think that's important in a syndication. I invest in syndications and I want to see the sponsor, you know, having something to do

with it just other than their reputation. I mean, your reputation's great, but I want to see you. Yeah. Right. We have the whole family's in. My sister's involved with us. My niece. Our two girls are in the deals with us.

But now, to be fair, there, some people won't put money in their own deals. And there can be a very, very good reason for that because as a syndicator, I'm the guy putting my name on the loan. I have to have a certain amount of liquidity or I can't get a loan. So sometimes you will see some syndicators not put money into deals because they're trying to hold back and build their cash reserves on their balance sheet because they need it to sign for the next loan. So it's not terribly common, I don't think, but it does happen. And there are legitimate reasons. I agree. I feel more comfortable if you have some of your own skin in the game that you risk losing if you don't do it well.

But I do believe there are some times where it does make sense for a syndicator not to put his money in the deal. But make sure you understand why. Ask them. You know, hey, look, I'm thinking about giving you $10,000, $50,000, $100, a quarter billion dollars of my money. Why are you putting no money in the deal? If they can't answer you or refuse to answer you, just walk away and find another deal. Yeah, I like that. Yeah.

That's really good advice. Okay. So you really quickly, you said that your two girls are in the deal. How old are your girls? Well, okay. So let's let me explain that a little bit. You know, I said I married three and a half years ago, right? I've got her at that time, 15 year old daughter asked me to adopt her. So now I have an adopted daughter. Don't make me cry. Stop. So I adopted her. She's 18 now. And her sister is 22 years old. So they have their own money that they invest. The first investment, We got them involved in about four, maybe five years ago, it was with friends of ours. We invested $16,000 each in this deal. And just like my first deal, that first deal, the day they sold, they got a $50,000 check on a $16,000 investment. So they tripled their money as well.

And then it's just been mushrooming from there. Nice. I love the idea of getting kids involved. I mean, everyone knows. I talk about Rosie all the time. I do too. my kids really don't like real estate right now. They're eight and 10.

Oh, yeah. And I'll be driving them around. I'm like, look at that house. They listed for this. Can you believe that? They're like, mom, we don't care. Yeah, our youngest daughter, my adopted daughter, she works for our management company, actually. So we try to make it as much of a family affair as we can.

So what we're teaching her what it is to own and run and manage a business because, you know, she wants to start her own company, her own business. She wants to design and market her own clothing line. she's learning very, very valuable stuff and contributing to the income she's producing through these assets. So it's a great thing. We really enjoy having her with us. I love that. That's awesome. I am really hoping that I can get my girls into real estate when they get, you know, old enough to be able to sign legal forms. Yeah. They can't do that right now. So Bruce, how are you finding deals today? I mean, what do you? Brokers? Brokers for the most part. It's,

just its relationship building, right? So I've had one slid to me as an off market deal. You know, it was pre-marketing. So they were going to go to market, but they brought it to me first. And I decided, yeah, I want it. So we got it. My first deal was found on loop net. And you always hear people rail on loop net. Oh, that's where good deals go to die or bad deals go to die, I guess. Right. But it's not true. Okay. In large part, it is true. But there are gyms every once in a while. Yeah. That's where I found my 48 unit property. So it's that. thing, you know, but most of them are found just publicly listed stuff, you know, with all the big brokerages and my part of the country, all the big guys operate down here. But what I do to differentiate

myself, it's not just where am I finding the deals. How do I close the deals? Because a lot of times I'm going up against multi-billion dollar corporations. And, you know, I'm just a little dude down here in Austin. How am I getting these deals? I get that question all the time. It's about, you know, it's like we were talking about with your investors. The same thing. Be a good. good buyer. Let the seller think they got over on you. You know, let them think they won the negotiation. You don't have to win. You win the negotiation if you get his dang property, right? So be a good, yeah, I'm very, very easy to get along with. I don't push back. I don't retrain, right? So I don't renegotiate a deal. A lot of people I know, they'll get it under contract for $10 million,

knowing that at the end, they're going to offer nine no matter what they find. It's a way to lock up the property because now I'm the highest bidder. And then, you know, right before my due diligence period is up, I'm going to renegotiate for a million bucks. I've never done that. I hope to never do that because, again, I don't want people to feel bamboozled and, you know, kind of jerked around. So they bring me more and more deals. I've bought deal more than one deal from the same people often. So, you know, be a good, good buyer. I love that, Bruce. And I love you for saying that. I love you too. I'm not hitting on you.

But I love you for saying that because there's a lot of people in the forums, in the Bigger Pockets forums that say, oh, I just get it under contract and then I'll just, you know, I'll renegotiate. They don't say they'll nickel and dime them, but they nickel and dime them. Be honest in your negotiations. Yes, there are $10 million properties that you find a million dollars worth of stuff that you have to renegotiate the price for. But just going in knowing that you're going to renegotiate is your. you're being shady.

Don't be shady. There's enough deals to go around. The last property I bought, 292 units in San Antonio, purchased price of $23.2 million. The guy on the phone, because when you get into these bigger deals, you oftentimes have an interview on the phone with the seller.

Anytime I've gotten to that point, I've never lost a deal. I've won every deal if I can get in front of them, you know, so to speak on the phone. But he's like, okay, Bruce, you're somewhat of a smaller operator. We're a billion dollar company.

Why, you know, why am I going to give it to you? And that's what I told him. I said, look, I'm bringing in enough money to know that if something gets discovered during feasibility, during our due diligence period, I can deal with it. So I thought what needed, what was needed at first look was about $200,000 worth of rehab. I brought in $700,000 worth of rehab because I didn't want to retrade the guy. And I told him that. I said, it has to be egregious. If I see it's a $500,000 roofing job, okay, we're probably going to have to talk about that, Rick. But, you know, short of something that catastrophic, I have enough contingency to make sure I can deal with whatever I find on your property for the

most part. So you have my word, unless it's just, unless the deal just completely falls apart, I am not going to retrain you. He gave me the deal. And he called me afterwards. He said, look, I got to tell you, I was scared of death. You only have a handful of deals. You're a small guy. He said, I'm not trying to be rude, but I am always worried when I give deals to people like you. Are you going to get scared? Are you not going to close? Are you going to nickel and dime me? He said, I'll bring the next one to you too.

Like, oh, my God. See, it works. It works. Nice. Yeah, if you're a standup person, you're going to get rewarded for that. So much more than that million dollars you might have saved. Exactly.

Cool. All right. Well, Bruce, this has been fantastic. But before we go to the fire, I'm wondering, where do you see yourself going in the future? Where's the next five, 10 years look like for you? You know, on my whiteboard here in my home office across the top of it, I have scrawled 100 million.

dollars right that's my that's my that's my net worth goal how am i going to get there i'm not quite sure but i will get i got to have a plan right yeah you're worth a hundred million dollars i want at least five thousand units because i enjoy everything we do we have our own management company so we can just keep pulling them in and it gets easier and easier to add them more and more corporate staff so i would like at least five thousand units and my ultimate goal is not quite gary vaneer chuck goal i don't want to buy the new york jets but i do want to own a double or a AAA baseball team. And this is an avenue to help me get there. Yeah, that's what I'm looking for.

I like that goal. Yeah, that's cool. I don't want to own baseball. I'd own a football team or go Mark Cuban and own a basketball team. Yeah, but then you're only playing in the majors, right? So in baseball, I can buy all, you know, there's all kinds of minor league teams. There might be some of that stuff for football and basketball, but I don't think there is. So you just have to go straight to the NBA or the NFL and pay billions of dollars.

I could buy mine for $20 to $30 million. So a little more attainable. Just 20 or 30 million. Well, I have the size of the properties we're buying right now. I have this goal of winning the lottery. So when I do that, I'll buy a major league team. You're that person, huh? That's how you're going to take care of yourself in your older years, right?

I would win the lottery or I want to sue somebody. Please have a better plan than that. When my husband was working, he was working with this person. And that was their retirement plan. Legitimately, they were just going to win the lottery. Like, really? Like, that's not a joke. You actually, they actually said that?

He's like, they were serious. That was their plan. I've seen the same study done multiple times, probably three or four different times over the years. And they poll people, you know, thousands and thousands of people. How do you plan on taking care of yourself in your golden years? The number one and two answer that I've typically seen on this poll is, number one, I'm going to win the lottery.

And number two, I'm going to sue somebody. That's disgusting. Yep. That is disgusting. Yeah, it is. It's probably not going to happen. And if you say, don't come take my stuff. Go get your own stuff.

You can do it. Everybody can do what I'm doing, what you guys are doing. You just got to go do it. Don't try to take somebody else's crap. Go get your own crap. Exactly. And I'm going to correct you. It's not probably not going to happen.

It is not going to happen. You are not going to win the lottery. I have a friend that actually won a million bucks in the text. This lottery. So I can't exactly say it's not going to happen. It's probably not going to happen. So it's not going to happen to you because you know somebody. Lottery winners don't know each other.

Yeah. I went to high school with Mike Morfoot and his dad won like the most money in the Illinois lottery at the time. I think he won like $26 million. So my shot. No. He took the like long term pay on. I think this was 100 years ago when that 20 years was the only option.

Wow. All right. Well, let's head over to the world famous Fire round. Fire round. It's time for the fire round. All right. This is the fire round. These questions come direct out of the Bigger Pockets forums,

which of course you can get to by going over to BiggerPockets.com slash forums. And if you're there, Mindy is like there like 24-7. Mindy, I don't think you leave. Like, does Josh? I'm there all the time. Does Josh still have the laptop chain to your leg? Is that still like a thing? It's removable.

Okay. Well, that's good. Okay. All right. These are questions from the forums that real life people have been asking. And we're going to ask you, Bruce. Number one, how do I vet a syndicator? Okay.

This is always a funny question because a lot of people will say, oh, you know, go find people that have worked with them in the past. Ask them for a list of, no, don't do that. If you are trying to vet, somebody. And he say, give me a list of the people that have invested with you that I can talk to. Let's say they have 100 investors. 97 of them hate everything about their being. They are actually suing them right now, let's say. But three people are on his payroll and they love him. Well, you're only going to hear from those three people. That's true. I know it's difficult if you're not

investing with somebody kind of in your local area to do this. But I highly suggest find other people just organically, hey, what do you know about Bruce? Oh, I've invested with, well, what do you think? If you go ask Bruce for a list of investors, you're going to get the only three people in the world that like him. So that's my biggest thing is just try to find people that have invested with them and find out, you know, because they can lie about their bio even, you know. How do you know how to check up on their track record, find people that have invested with them? All right. I like that. That's a really good point. And I would like to say that you could ask in the bigger pockets forums. Hey, has anybody ever done business with Bruce Peterson? If a hundred people

say, oh, he's a schmuck, listen to those hundred people. If a hundred people say he's really awesome, and one person says, oh, he's a schmuck, maybe that one person didn't know what they were doing or, you know, had a fight with you at a bar or something. I don't know. Just because somebody answers doesn't mean that they've actually done business with you. But look at the general trend of the question or the answers when you're asking. Right. But then you have to follow. what you just heard too because I've had some people say well everybody seems to not like this guy but my god this deal is incredible don't invest because a terrible person's going to ruin a great deal right so if you don't like and trust the person that you're thinking about investing with no matter

how good the deal looks just go away there are so many deals out there and everybody's scared I'll never find another deal if you stay engaged and plugged in you're going to find other deal. So don't get nervous and don't make reckless decisions. That is so perfect. Yep. Okay. All right. Okay. As a syndicator commercial real estate investments, what would be the benefits or detriments to the syndication business of becoming a licensed commercial real estate agent? How can deals be structured or agent broker arrangements be negotiated to minimize constraints and conflicts of interest with the growing syndication business? That was a long question. Okay. I'll just give it. I'll give you the best answer that I have.

not a real estate broker or an agent, it never will be, have no interest in doing that. This is more rewarding and it's a lot more profitable too. But the one thing I do know, and I've heard this from a few people, your fiduciary responsibility is through the roof now, right? If I'm a realtor, you're held to a completely different standard than me who is not a board member of, you know, the apartment, I mean, not the apartment associate, but the board of realtors or whatever that is. So I think myself, you'll get some learning from being an agent or a broker. But what I think is that most of what you're going to learn is going to be selling retail stuff to other people. It's not going to help you learn how to invest in stuff. I don't think it's really needed.

And oftentimes I think it's maybe even a bad idea to get your real estate or broker's license. And a lot of people think, well, think about that. I'll be a syndicator. I'll get an acquisition fee. and then I'll get a commission. Look, there's enough money to not have to convolut everything. And that almost has like an era of impropriety. You know, it feels weird that you're holding all.

I wouldn't do it. All right. Okay. I think I'd agree with that. That's a great answer. It is. All right. Number third one,

I've read so many good things about syndications and investing with syndicators, but I'm baffled us where to find a syndicator. I'm guessing due to the relationship aspect of the business, it might just come down to who you know. know. Are there a website like syndications are us or something like that that I can find people to put my money with? Well, there are there are websites, realty mogul, realty shares. I'm probably in trouble for plugging somebody. I don't know. But yeah, they, they do exist. But for the most part, if you're just wanting a list of individual syndicators, okay, first of all, it's SEC stuff, right? So I can't as a syndicator just broadcast to you that, oh, hi, my name is Bruce. I'm a syndicator. Let me show you this deal. That's against the law, right? You can't do that. Now, there are ways that you can do it. Depends on how you register with the SEC, but for the most part, you're not a lot

to just go around telling everybody what you do and please give me money. You have to know people. You have to have preexisting relationships with people on most of these deals. So, you know, short of going to one of the websites that actually takes a cut of each deal that gets run through their system, there's really not a better way to do it. All right. Cool, cool. Also, I would just add a lot of people.

you know, meet people like they hear them on the bigger pockets podcast and they, they're a syndicator. They're not advertising and come on our show. They're just talking about the story. But a lot of times you can get a lot of stuff just by listening to not just our podcast, but just podcasts in general. It's a good way to kind of hear people's stories. And I mean, we probably had, I don't know, 100 people who raise money on our show.

So just, you know, listen. Right. And again, we talked about it before, engage. Stay engaged in your local community. Go to meetups. You have to get out. There's not just some special Google search you can do and have this magical button up here. You got to get out there.

It's hard work. But the hard work is go talk to people. Go meet people. It's hard. If you're an introvert, it can be difficult. I understand that. But you got to figure out a way to just get involved. There you go.

You'll find them. And honestly, for introverts, the forums is a really good spot. Like, if you don't want to go in person, engage in a forum. It's a lot easier when you're an introvert. Absolutely. Well, and I was going to say, if you're listening to this show, chances are really good. You're a huge real estate geek. So you like real estate. Other people at the meetups like real estate. Hey, what kind of investing do you do is a great icebreaker?

Let people talk about themselves. They just want to sit there and yammer on. Exhibit A, brand, exhibit B, Brandon. What are you talking about? I don't talk. What? Yeah, okay. So yeah, go to the meetups or the forums are a great place. Ask a question. Answer a question. If you have knowledge somebody else doesn't and they need yours. Right. There you go. So, okay, enough of that. Last question.

I'm thinking about putting my money in with the syndicator, but when looking over his numbers, I feel like he's too low on estimates for the rehab. What should I do to ease my fears? Well, I mean, how, why do you think he's too low? What knowledge do you have that that person doesn't have? You know, there are people that I run into that are giving advice. There was one lady on a forum I saw one day, won't mention what forum it was. But, you know, somebody asked the question.

I forgot what the question was. How do you do this in multifamily? And this person weighed in and said, look, I've never done it, but I've been studying for three years. And this is how you do. It's like, what? Who are you taking advice from? But now on this, where are you getting your knowledge from? The syndicator chances are they do this all day, every day of their lives.

They're very experienced to what they do. So I'm not saying. saying that you're wrong by thinking that they're too low, but you know, you got to start asking questions. Again, you're potentially given to get somebody a lot of your money. Ask questions you need to ask and just hope you can get a good enough answer. But if you don't have the knowledge yourself, I don't know how you're going to know that they're not doing it right. Unless you have some experienced people around you, you can show some of the stuff to them that you're looking at. Yep. Very good. Yeah. And by the way,

so this question was a good friend of mine asked me this question actually. Like, and And he's talking about a syndicator who I know has done probably hundreds of syndications, if not dozens, many dozens, right? And I looked at my friend and I said, I was like, you've never done a rehab in your entire life. This guy's done dozens of these massive apartment complex rehabs. Like, I mean, like, yes, there's a point where you have to trust people and you also need a question about like, like this guy was about as legit as you can get in doing syndications. And again, my buddy has never, ever once done a rehab of anything in his life.

doesn't know how to use a hammer. So anyway, it was an interesting conversation. But he didn't he didn't do it. He did not go in the deal because he was afraid of the number was wrong. See, and that's the thing. There are so many engineering brain people in this industry that are trying to be in this industry anyways. And they feel because of their training as an engineer, that their job has to have a contingency plan for everything. And it has to fit in a box, a spreadsheet. Well, not all that's going to happen. And this industry. Nothing's ever going to be perfect and they get themselves so locked up. Well, what happens if, you know, we have a terrorist. Okay, okay. What if there's, you know,

anthrax shows up on the property. Well, look, that's possible, but it's probably, it's improbable. So people just got to get out of their own way. Yep, I love that. Hey, one more question. This is just my own personal in the fire round. What kind of software do you use to analyze? Well, a couple things. Do you use like a spreadsheet to analyze or do you pay for a software? And the second question is, what do you use, what kind of software do you use in your business to manage just your, your business? I do spreadsheets. I don't like subscribe to any kind of service there. But for the properties we use, we've used multiple, but the best one that we found so far for us has been Resman, R-E-S-M-A-N. Okay. You know, it's very robust. It's not as expensive as some of the bigger ones like Yardie in one

site, which are great programs. I've never had them. But I've talked to people that have, use them. And Bresmond is almost, if not as robust as those. And I usually pay about anywhere from a buck 50 to maybe $2 a unit for the management for the software, depending on what I wanted to do. Now, it can facilitate emails for me, texts for me, credit collections for me. It can do, there's credit builder stuff. There's all kinds of stuff that you can all a card it up to $2, $3 a unit. But it's usually about a buck 50 to $2. All right. Cool. All right. I guess with that, why don't we move over to the famous four? These are the same four questions. We ask every guest every single week. So I know you've heard them before, Bruce, but let's go through them. Number one, what is your favorite real estate related book or a recent favorite? You know, it's the seminal one, right, that everybody talks about rich, dad, poor dad. It just changes mindsets. It helps you understand what you're doing wrong if you want to really get ahead and have a phenomenal life.

What is your favorite business book? This is kind of a cop out in a way, but you know, call me a fanboy if you want. It's okay. Gary Vaynerchuk, dude, anything that guy put out, I'm all over. Crush it. Jab, jab, jab, jab, right hook crushed it. He's just phenomenal. He cuts through the crap and he tells you what you need to hear, not what you want to hear.

So I love everything that guy does. So actually, we're working to get Gary here on the podcast. Oh, wow. I don't know if it's going to happen yet, but we're working on it. So we'll see. Stay tuned in the coming weeks. But I know he's got a book coming out and that's the best time to get people on the show. Yeah.

So absolutely. We'll see. All right. Number three. Do you have any hobbies besides real estate? See, I'm bad about this, right? I'm the one track mind guy. I think about this stuff all day, every day.

But my wife and I, we like to travel. We like to go hiking. And then my nerdy thing, I've been playing fantasy sports for 30 years. So I'm a big fan of C sports guy, baseball and football. I am currently in the last place in our office fantasy football team. Wow. Team loser. That's so fun, right?

And also, you are talking to two people who live in breathe real estate and 150,000 people are listening who also live in breathe real estate. So nobody's looking down on you for having this be year all day, every day. That's my thing too. It's better. Thank you. All right. What do you think sets apart successful?

real estate investors from all those who give up, fail, or never get started? It's conviction and courage, you know, have conviction and trust in you and your own abilities, right? You know, when I got involved, I was a retail guy for 18 years. I'm like, I don't know anything about this. Well, the skills that I developed leading people my whole life conveyed very well into this industry. So most of it, we talked about that engineer brain, that extreme type B personality, Again, you've got to get out of your own way. You have to have conviction and courage. Things aren't going to be perfect.

Every deal I do is a good deal for the most part, but things still happen in these really good deals. I've had a division of Homeland Security take $5 million of my money. Didn't tell me they took it. They just took it. Whoa. Whoa. We had a dead guy in our pool.

I'm sorry. We got to see. Dead guy and $5 million stolen. Yeah, we have to get these two stories. Okay. So first one, you know. A property we closed about six, seven months ago. I got a text and an email one morning.

I'm sitting in my home office. And I looked down at the text. And my lead maintenance guy thinks he's doing me a favor by showing me what he found this morning. It's unfortunately, it's one of our residents. Oh, man. We have him on camera. He jumped the fence at our pool at 4 o'clock in the morning inebriated. You could tell he's just kind of almost falling over the whole time.

He goes swimming and never comes back up. So, you know, we have to deal with that stuff. We had, so again, it's not only going to be perfect, but we get through it. But, you know, that day, then I went and spit the whole day with my staff. We reached out to the, to the family that still lived on property. So, you know, things are going to happen. And it's so unfortunate. But for people that are wondering, do I get, if you don't think you can stomach that stuff, you know, this is Brian R.

Right. For you, find somebody that you could invest your money with. But, okay, so the other one was, we're buying a 250, unit apartment and I go into the bank Friday morning, 9 o'clock in the morning, execute my wire transfer for $5.2 million. I drive to the property and I'm kind of hanging out waiting for the phone call to say, okay, it's cleared, we're good to go. Well, 11 o'clock hits, nothing's happened. The previous management company had already come in and taking out all the computers, all the phones, everything. The staff that we're about to inherit has nothing to do their job with. Remember, I am the

management company also. So I thought, we got to go in and set some stuff. fun for them because the wire will be there any second now. Two o'clock comes. Everybody's screaming at me on the phone. Where's this wire? Like I did all the backtracking and it left my bank and went to the Federal Reserve at like 930. 3 o'clock hits. Nobody's seen it. Four o'clock hits. The seller screaming at me through his attorney to my attorney. My attorney's screaming at me now. Like what the hell's going on? So finally my attorney calls me back and says, look, you got to get out of there. Like, what are you talking about. She goes, you don't own that property. I'm like, oh, crap, you're right. We don't own this property. So we had to leave. Nobody knows where the money is. It's gone. Nobody can find it at all.

So we leave the property of my CPA wife really doesn't know exactly what's going on. She just knows suddenly we don't have a property and you got me out of there and we're driving, we're driving away from the property. So I had to tell her what happened. She starts to hyperventilate. I think you're getting a couple of drinks. It helped. But what ended up happening, anytime you execute a wire transfer, it leaves your bank, it goes to the Federal Reserve. The Federal Reserve gets it and they start looking at it. But then they have other fingers getting that pot. There's a division of, I think it's a division of Homeland Security. It's called O-FAC, O-FAC. And what they do is they look at that wire transfer to make sure it's not coming from or going to a known bad actor. So when they come in and

they look at this, the name of the property was the same name of a known terrorist organization, in Columbia. So, of course, they take my five, no laugh, Francis. We're laughing now, but they just took my 5.2 million bucks, and they don't, there's not some friendly little customer.

Exactly. You're Mr. Peterson. We don't know what's going on. So we have to go home that night. It's Friday evening. Sit down to the computer and tell my investors, hey, guess what?

You aren't owners like we thought. Oh, and it gets better. I don't even know where your money is. That is not a fun thing to have to explain. Luckily, the president at the title company thought, wait a minute, I think I remember this happening 10 years ago. So he started making some phone calls and he figured it out for us.

And when we did actually close that Monday. So again, it can get very white knuckled. If you don't have the stomach for that, don't do this. It's fun. It's rewarding. But my goodness,

does it get stressful sometimes? That's the best story. I think we've ever had told on the podcast. I can't even, like my heart hurts right now hearing that story. I do a lot of wire transfers and I didn't know that it went to the Federal Reserve. I'm not sending it to drug cartel estates or whatever the name of your company is. But wow. The seller's losing his mind.

I'm like, wait, wait, wait, wait. I did not name this property. You changed the name from X to Y and Y is the name of it. I was like, look, it's your fault for calling it what you called it. And I was like, quit get mad at me. But yeah, that was a fun, that was a fun experience. Wow, that's amazing. All right.

Well, with that, final question of the day, Mindy. Oh, my God. Hold on. I just closed my. Where can people? Yes. Where can people find out more about you? At the website, Bruce.

I'm sorry. No, that's my first name. A-P-T-G-Y. basically apartment guy.com. So apartment guy.com, APT-G-G-U-Y-com. Or you can also get me an info at apartment guy.com. You got to get the dash in there.

I won't get it. I will put a link in our show notes. All right. Yep. App dash guy. That's it. All right. Good deal.

Well, with that, you know, man, this has been awesome, Bruce. I learned a ton. And this always just gets me like hyped up and excited to do syndicate. So, thank you. Let me know when you're ready to roll. Let's do something again. I'm ready.

I'm ready. We will do it. So yeah, anyway, keep in touch. And thanks for being part of the show. All right. It was great. Thank you, Bruce. Thank you.

Okay. Bye. All right. And that was our interview with Bruce Peterson. Man, I like that guy a lot. Not as much as you love him, apparently. But, you know, I love him. And that my heart dropped when he told that $5 million wire transfer story.

So that when he first said that the wire transfer story. So that when he first said that the wire. transfer was gone. We have a friend, Shannon Allen lost her wire transfer. It was stolen because somebody broke into her email. And I thought she lost $50,000, which is horrible to lose $50,000. But $50,000 is nothing compared to $5 million. And when Bruce started telling that story, I'm like, oh, my God. That's a horrible story. And then I'm thinking, wow, I do a lot of wire transfers. I don't want them to take my money. Of course, I'm not. That's like quick tip of the day, actually, is always verify your wire transfer number before you ever send one. That is an excellent quick tip.

Bonus quick tip. Call. And I even put that in my new book, How to Sell Your Home. I put that tip in there. Call your title company and verify on the phone that you have the right numbers. Ask them if they're going to change because they're not going to change. Your title company has the same bank account from now until forever. And from the beginning of time on, it's not going to change. They're not going to send you an email at 2 o'clock in the morning that says, oh, hey, sorry, we gave you the wrong number. They didn't. There you go.

Verify why you transferred. Did your friend get the 50 grand back of her? Is they just gone? She actually did. This is like, she got conned by the dumbest con man ever who left the money in the American bank account. Like she was using Chase and he was using Bank of America or something. So he pulled her money or she transferred her money to him and then he just left it sit there. That never happens.

When you are transferring with a scammer, as soon as it hits their account, it is whisked away to some offshore account where it can't get touched. So she actually did in the only instance of this ever happening in the history of the world, she actually got her money back. But it was, it almost would have been better if she would have lost the money altogether. She's had so many problems with that house. Oh, really? Yeah, some flipper did it and then like did everything.

How do I say this? Halfway. Halfway. I was going to say half something else. did everything halfway. And it rains inside when it rains outside. And there's just a lot of issues. So I hope she gets all that sex fix soon.

I'm thinking about you, Shannon. Yeah. Okay. So with that, Brandon, thank you for letting me step into Josh's shoes today and take over for him. I always love to do that. I will see you again soon. All right.

Thank you, Mindy. And thank you, Bigger Pocket's audience. We'll see you guys around. In the meantime, make sure you guys leave us a rating review. And jump into the forums and interact with people, meet people like Bruce or Mindy or me hanging out on the forums. And come to my next live webinar, BiggerPockets.com, says webinar.

I host an online class every week teaching different topics. So who knows? Maybe this will be talking about something that you really want to learn. BiggerPockets.com says webinar. All right. The webinars are really good, Brandon.

You do a great job with those. Thank you, Mindy. I like doing them. I like teaching. Like you know what you're talking about. I might. All right. It's like you've done this before.

Okay. I may have. For Bigger Pockets. This is Mindy Jensen over and out. 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.

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 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

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