BiggerPockets Real Estate Podcast - 279: How to Find Overlooked Opportunities in a Hot Market with Andrew Cushman

Episode Date: May 17, 2018

Are you ready to jump into real estate investing, but don’t believe you can find deals in today’s hot market? In this episode, we sit down with multifamily expert Andrew Cushman, who’s actively doing deals in today’s market — and turning big profits. In this show, Andrew explains how he’s finding deals, what metrics he uses to qualify them, where he’s buying today, and what his secret tricks are for finding the “overlooked opportunities” most investors miss — including how he found an amazing deal in the “trash can” for bad deals! You’ll love hearing how Andrew creates millions of dollars in equity and builds relationships with deal-finders so that they bring him the best deals first. Be sure to download this episode and share it with your friends, so you, too, can master the secrets that the pros are using to snag killer deals! In This Episode We Cover: Andrew’s backstory How to make deals rather than find them The ABCD neighborhoods — what are they? What specific properties Andrew is looking for His effective screening criteria for finding properties An in-depth story on one deal Net operating income (NOI) Understanding how properties are valued Challenges Andrew faced over the years Finding great contractors Andrew’s many rental property units And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Money Podcast BiggerPockets Podcast 170: The Journey From Flipping Houses to Owning 1,470 Units with Andrew Cushman City Data Rich Blocks Poor Blocks Trulia USA.com Loopnet BiggerPockets Podcast 052: Buying Apartment Complexes, Raising Millions, and Building a Profitable Business with Ken McElroy BiggerPockets Podcast 226: From “D-Student” to $400,000 in Annual Rental Property Cash Flow with David Osborn Gobundance Books Mentioned in this Show The ABCs of Real Estate Investing by Ken McElroy David Greene’s Long Distance Real Estate Investing Emerging Real Estate Markets by David Lindahl How to Win Friends & Influence People by Fire Round Questions Help! 1 million dollars to invest! What do i do!? 30 yr or 15 yr mortgage? Go Solo OR with a big Multifamily investor Tweetable Topics: “The person who wants it the most, loses.” (Tweet This!) “You can completely destroy an investment with the wrong people managing it.” (Tweet This!) “Don’t wait to buy Real estate. Instead, buy real estate and wait.” (Tweet This!) “The best way to spot a great deal is to look at 99 bad ones.” (Tweet This!) Connect with Andrew Andrew’s BiggerPockets Profile Andrew’s Linkedin Profile Andrew’s Company Website Learn more about your ad choices. Visit megaphone.fm/adchoices

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What is going on, everyone? This is your host today, Brandon Turner, here with my lovely co-host, Mr. David, throw me a line green. Is that what we said earlier? I don't know. Throw me a rope. Throw me a rope, green. Anyway, how you doing? I'm good, man.

I'm actually doing really good. My refinance is days away. I'm about to get some more money. And business is doing really good with my real estate agent business at springtime. And this is when everybody wants to buy and sell their houses. And we have an incredible podcast, one of the funniest and best ones that I think we've done in a very long time with a random six at the end. That I think we'll have a lot of people laughing. Yeah, we do.

Yeah. So listen past the music at the end of today's show. you guys will like it. So, but before we get there, let's get to today's quick tip. So today's quick tip is a little negotiation quick tip for you. So I'm in the middle of a negotiation on a deal right now, one of the more expensive ones I've done. And I'm negotiating back and forth, lost the deal a few times, got it back, lost it got it back, went back and forth a few times. But here's what I've learned, I guess, in this process. And I've known this, but it became so clear to me. The person who wants it the most always loses.

So like I had to like it like I, I just kept losing in negotiations and I felt really stupid all the time until like I was like, you know what? I don't want, I don't need the deal. Whatever. There's another one. And I like, my wife and I were like, we're done. Let's just let's just not do it. And all of a sudden then like this power shifted to us. And like I felt it. And all of a sudden like,

I can kind of get what I want. So anyway, in negotiations, oftentimes he who wants it most or she who wants it most loses. So try to reposition in your head how bad. you really want to deal and make sure you're not getting too emotionally involved with it. You know, it's just a numbers game. And you might find that you actually end up getting something. And I think I might get it. We'll see.

Anyway, I think so, too, man. I got my fingers crossed for you. Thanks. So now, without further ado, we're going to jump right into this interview because it's so good.

It's so powerful. It's all about investing in large deals. But even if you don't care about doing big multifamily deals like our guest today, Andrew Cushman does, you guys in the details in the show. We talk about a lot of things that apply to everybody. No matter if you're looking for your first deal, second deal,

a fifth deal or a 500 unit apartment complex. This stuff applies across the board, talking about how to deal with finding deals, how to get people to do things for you, how to overcome the struggles of contractors and property managers and all of that and rehabs. We cover everything. So you guys are going to love this show. Andrew Cushman's been on the show before back in number 170, and he brought gold back then and he brings even more today.

So you guys are going to love it. Without further ado, let's hear from today's guest, Mr. Andrew Cushman. Mr. Andrew Cushman, welcome back to the Bigger Pockets podcast. it is so good to have you here. It's awesome to be here. I see you upgrade your host to a more handsome guy trying to boost the YouTube ratings, huh? We are trying to boost the YouTube ratings. Yeah, this is a, I don't even know where to go from there.

But David is a handsome fella. I will agree with you there. I won't tell Josh you said that. But let's go into your story, what you've been doing. Maybe actually before we go to what you've been doing the last couple years, let's go to who you are. For those people who didn't listen back on episode, what were you on before? one something. One 70. So those who didn't listen, like, what is that, three years ago, two years ago,

who are you? How'd you get into real estate? Uh, Andrew Cushman used to be a chemical engineer, but since I was a little kid, I knew I wanted to be an entrepreneur. I just didn't know what that meant. So I became a chemical engineer. So I'd have a decent job in the meantime. Got married. And then for, you know, about seven years or so, my wife and I tried various businesses that, you know, made a little money, but didn't seem like they were going to set a, free. And then we discovered real estate and trying to flip houses. And so we said, all right, this is something we can do. And what we picked was trying to buy free foreclosure. So people that were about to lose their house but hadn't lost it yet. And what that meant is that involved making cold calls to

people in, you know, financial trouble, which isn't the best, you know, people usually aren't happy to pick up the phone and have a stranger and be like, hey, let's talk about your financial difficulties, right? And as a chemical engineer, I wasn't exactly good on the phone. So it took me 4,576 phone calls to get my first deal. I remember you saying that. That's crazy. Yeah. That was with the help of a paid coach and my wife coaching me, right?

She'd be listening to the calls and she'd be like, and I'd hang up. She'd like, okay, honey, that was good. But next time you might want to try to say it this way, right? So it took me a while. I wasn't good at it. It wasn't a natural skill. But we got our first deal, sold it. I made as much as I did at my job all year.

and I walked in and said, I'm out of here. And I mean, I was nicer to him than that. I mean, I gave him some time. But I quit my job. She quit two years later. We flipped houses full time for like four and a half years through the crash, which was a great time to be doing it. And then 2010, we said, okay, all these people got to live somewhere.

They can't buy a house. The economy's going to rebound. What's going to benefit from that? We said, well, apartments. So hired a mentor, went and did our first deal, was 92 units in Georgia and went full-time multi-family and since then, I guess it's been six years almost, and we've done just 1,800 units. Wow. Well, all right. So we're going to unpack all that. I want to kind of start from where we ended last time we talked to you. I mean, like you were doing some multifamily, you'd bought some stuff,

you were having some success. But now everyone knows the market is way too competitive today to find deals. So my guess is you've been sitting around on a beach just drinking margaritas for the last three years. Is that right right? Yeah, exactly. That's pretty much it. All right, good, good show. All right, guys. So this was the episode. All right. So what have you been on Tuesday? Today with Andrew Cushman, how to make the perfect margarita. Yeah.

And maitos. Don't forget the maitos. Oh, yes. Okay. So what are you been doing? We've been buying more apartments. You know, it's not easy. But, you know, everyone's heard before if it was easy, then everyone would be doing it.

In this market, you know, in 2010 or 11, you could almost kind of go out and buy almost anything. And if you held it a few years, you were going to work out okay. Deals were pretty easy. The funding was tough. Now funding is easy and deals are tough. So you have to go out and make your own deals and that's what we've been doing. Ooh, let's dig on that.

What do you mean by you have to go out and make your own deals? Because that's something both David and I say all the time. I want to know what do you mean by that? What I mean is the odds of you going out and finding a apartment complex that you can buy 30% off of its current market value is exceptionally, exceptionally low. So what you have to do is find something where you can go. in and buy it and take advantage of overlooked opportunities. And what I mean by overlooked opportunities is, you know, we bought one a year and a half ago where it was self-managed from out of state

and the manager had just had no, I mean, she had good intentions, but she had no idea what she was doing. I mean, everything you can do wrong, she was doing wrong. So we had a huge management opportunity. And then also that property was a like a C plus property. And in that, it's a small market. There are only four other properties in that entire market. All four of them were A. So he had a C property with rent here and A properties with rents way up here and nothing in the middle. So that to us showed that there's a huge opportunity to spend some money improving that property and move it up to a B. And we have zero competition. So that's, those are two, you know, we're very clear opportunity. to create our own value.

And that's, you have to look for that now. The market won't carry you forward from this point. Yeah, I love that. Can you, can you explain what you mean when you say A, B, C, D neighborhood for those who don't know? Yeah, A, or especially A plus is the, you know, built in the last five or ten years. It's the shiny stuff downtown. High rises on the water.

You're going to pay $2,500, $3,000 a month for it. B is more of your kind of your working class, solid jobs, people that maybe could buy a house, but just choose not to. It's got pool. It's got a fitness center. It's a clean property. But, you know, maybe it's 20 years old or 30 years old. C, that's properties that maybe were built in the 70s or 80s or even 60s, lower, more lower to moderate income people who probably can't get a house.

You know, they're, they're renters for life, not necessarily by choice. And then D is, if you go, you better be packing heat. All right. And there is no F, right? Generally not. I mean, some people, we joke about it occasionally, but yeah, D and anything below C, just stay away from. All right. So, Andrew, I know one of the things I love about you is that you just, you have so many details and specifics to share with people.

Like what you just mentioned, that's really, really good advice. The fact that these ones likely have a fitness center, it makes it easier to kind of organize everything in my mind when I'm looking at a property to kind of figure out what I'm looking at, basically. Can you tell us some of the things that you and your team look for specifically when you're looking for like overlooked opportunities that you mentioned? What are some of the red flags that stick out and you go, ooh, I want to dig in deeper. That's a really good sign. Self-manage is a great one. When you go from self-managed, well, and I shouldn't say that because I don't want to discount. There are some professional operators out there that manage their own property.

So when I say self-managed, I mean someone that maybe owns one property or two and they think they can save money by by men. managing it themselves. That rarely works. And we especially love it when it's self-managed from far away. That just doesn't happen or doesn't work well. So that's an opportunity. Another opportunity we look for is deferred maintenance, meaning maybe the property hasn't been kept up. Well, it needs to be painted. I love seeing bad landscaping because that is, you know, aesthetics is huge. I mean, that's people's first impression. And it's something we can easily fix. You just hire a landscaper and say, You got, here's 50 grand and, you know, do all this. I love seeing bad landscaping.

Basically, think of, you know, an opportunity as far as the physical asset is something that you can go in and with a contractor and proper funds fix it, right, and increase your rents. So, you know, if you buy, if you're buying a property that has bad plumbing, that's not really an opportunity because it's going to cost you a ton of money to fix and your residents aren't going to pay you more because you put in new polling, right? So that's the kind of stuff you're looking for. Can I add shutters to these windows just to make the place look prettier? Can I put in vinyl flooring instead of this white ECT stuff left over from the 70s?

That's the kind of opportunities I'm looking for. You know, what I love about that is that what you're describing is very similar to what single family investors look for. What we're basically looking for is like small cosmetic things. When you go driving for dollars, you're looking for an overgrown yard. You're looking for moss growing on the roof because that's a sign that whoever owns it is not paying attention to it. Right. And wherever you find that neglect, that's where you find opportunity. So what you're describing is these are what I look for.

These are very small signs that are easy to fix, but they're indicative of the fact that the owner is not paying attention and is less likely to be savvy, right? They may sell it for less. They may be more motivated to get rid of it. They may not even know what they have and I can go in there and buy this deal and then turn it into a great deal. That's really, really good.

Listening to this podcast, you should go back and you should write some of these things down because if you can find these small little signs, it'll save you a lot of time. You're not going to have to analyze 100 deals. You find out of your 100, the 10 that have these signs and those are what you dig in first. So I think those are some great, like, overlooked opportunities.

That's a really good thing. Maybe we need to trademark that as the Andrew Cushman seal of success. I'm all for trademarks, yeah. Yes. Can you tell us what kind of neighborhoods you're looking to buy in? Like when you get a deal that comes your way and you're analyzing, okay, this is an opportunity here. I think that there's something, there's some meat on the bone. How do you know what the demographics are that you're looking for?

What the numbers are you looking for in that specific neighborhood? Okay. Well, the short version is, is our ideal property. is a C plus in a B neighborhood. But I can go over the specifics of exactly what we screen for. Yeah, that'd be awesome. Want me do that? Okay, so first of all, the first thing I'm looking for,

when I get a broker calls me or emails me or whatever, we're looking for something that is 100 units or better, 1980 or newer, in my geographic area. And I mean, for me, that's the Southeast United States. So for someone else that might be Texas or whatever. And we don't want flat roofs. We absolutely will not buy a property with a chiller system. we don't do mixed use.

We don't do high rises. What's a chiller system? A chiller system, they're most common in Texas. And what that is, is back in the 70s, they decided, with the technology, I guess maybe it was true. But they decided the most efficient way to do air conditioning was to create this giant cooling tower with the ammonia system, make cold water. And they pump that cold water underground to every unit in the property.

And then blow air. And then that's the air conditioning, which is efficient except you can only have cooling. or heating. And if the system goes down and it's August in Texas and it's 100 degrees, every single tenant has no air conditioning. I will not buy one of those properties. And then for the mixed use in high rise, it's not that those are bad opportunities or bad deals. This is that we want to be really good at one thing. And that's garden style, single or two-story apartment complexes. So I'm not saying those are bad things. I'm just saying when you're looking at deals, pick your niche, focus on it, and be better than anyone else at that niche.

Don't get distracted by too many other opportunities. I love that. I think every single person should hit that, like, rewind 30 seconds and listen to that again a couple of times. Like, because that applies to everybody, right?

Like, whether you're just starting your first deal or, like, how many newbies do we know that like we meet at a real estate club or whatever? And they're like, so I really want to flip houses. And I'm thinking wholesaling might be a good idea too. And I love rental properties. I want to buy it as a multifamily too.

And I'll get an apartment. And it's like, yeah, you can get in all that. But like, pick one niche to start with. And no matter where you're out. like to say, hey, I'm going to do this and I'm going to be the best in my market at that one thing, like that one task. And it doesn't mean everything else is bad. Whenever I talk about how I bought a mobile home park last year, people are like, wait, wait,

are mobile home parks the best investment? I'm like, no, they're just one investment that I decided to say, hey, this is what I'm going to be good at. Pick something and go after it. Anyway, I love that you define that like garden style apartments in the southeast. Yeah, southeast. Yeah, you're absolutely right. So, so, I mean, that's something, You know, I can, if I've got, you know, 10, 10 apartments in my inbox in the morning, I can go through and that's just instant, right? 19, 1964, nope, you know, flat roof, nope, nope, nope, nope. So let's say I've got three properties that fit those criteria.

Well, and that's like, okay, now what? So we've created a procedure that we actually, our office manager does this now. And this is something that, you know, a new investor could do themselves. They could have a VA do it. They could have an assistant do it. You know, once you get it set, it's very repeatable. So the first thing we do, you know, is we want to buy in an area where the median income is 35,000 or greater.

And the reason for that is we want our improved rents to be affordable. So generally, we're buying something where maybe the rent is $600 a month or $700. And while the time we get done with it, it's going to be $8,900 or $1,000, right? So if you take $1,000 a month rent, take that over 12 months. That's $12,000 a year, right? generally speaking, if someone is paying a third of their income to cover rent or less, that's affordable. So 12,000 times three is 36,000. So that's where that 35 came from. And basically what we're saying is we want to make sure that at least half of the population will find our new renovated

apartments to be very affordable. So we will always have a good renter pool. That's, that's, and it's absolutely critical. The further you go below 35, the tougher you're going to have getting And tough for time you're going to have getting residents. And the residents you do get are generally going to create more headaches. The further down you go, the higher up the headache factor tends to go. So that's great. That is so logical. It's like beautiful.

I mean, it's just so simple as how you look at that. And you just took all of this like, I don't know. What should the medium income be? Where should I invest? What should they be making? It's like, just turn it into numbers. If this is what your rent is, this is how much they should be making. And I would imagine if the rent.

if the rent dropped, like how much they were bringing in, let's say it was only 700 a month on a thousand, well, then the median income could drop, but you're saying, well, then your headache factor is going to go up, right? Yes. And if the rent goes up, well, then the median income has to go up and your headache factor is going to drop, but it's going to be harder to find people to rent it most likely, right? Or the people that live there are only going to be buying maybe A or B properties, not the C that you're looking for. It's just, it makes so much sense what you're saying and converting this into like a logical decision-making process that removes all the fear out of it. I mean, Brandon, would you agree that that's usually what holds most people back from getting started with investing? Is they're just afraid of that they don't know

how to think or how to put things together? Yeah, definitely. People are like, there's just so much information out there and this guru said this and this guy said this and this person. Yeah. Yeah, I like the logic. So I like that Andrew's sharing not only what their numbers are, but where the logic is behind it so that we can kind of apply that to our own deals. And this is something else that I think makes a ton of sense because I didn't mention this, but Andrew is probably in the entire world of investors, I know the smartest, most respected one that I know in the, like, I say rock stars, no rock stars. Andrew's one of the rock stars. And I'm like just the guy in the back that plays my drum. And like, he's the guy that, you know, wrote the music, basically. He's so smart and so good with this.

And I learned so much from him. And he invest primarily in multifamily. And I invest primarily in single family. But the principles of what we're doing are the same regardless because it's all real estate. So he's taken like information that he and I share back and forth about what we're doing. and then we just learn to apply it to the niche that we're in. It's all the same principles and logic, but it has a different application. And that is why it's so important that you learn your niche and you study it and you get good at it. It doesn't mean that like listening to the guy that does like Brandon buying a mobile home park.

The same principles that work in that will work in multifamily. You supply them in a different way. That's what makes real estate so cool that the three of us that invest in different kinds of properties can all benefit from talking to each other. But I could probably go on and on about that forever. But tell us a little bit more, Andrew, about in the recent, like right now, the last year or two, the kind of deals you've been looking for, where you're finding them, what you're focusing in on. Like, what's kind of like your blueprint for how you're running your business right now. Yeah, but what we're doing now is

you want to finish going through that, the screen criteria first? You want me to get, can I jump over to that? I like to. Okay. It can be, it can be pretty quick. So, and just also be the, for the median income, where we're getting that is city hyphen data.com and rich blocks, poorblocks. dot com. The other thing we look. Yeah, it's 50 bucks, but it's good. We like to compare the two and make sure, because sometimes the data is skewed. Also, we want to make sure that the, and David, that this actually this is getting into

your question. This is how we're figuring out where we're going, what we're doing. We want the poverty level to be, we want less than 15% of the population to be under the poverty level. We want to make sure we are not buying in a flood zone. We just go to the FEMA website, pull up the flood zone maps, find our property, make sure we're not in a flood zone. We also want to check and make sure that we're in a low crime area.

So the easiest way to do that, go to Google Maps, grab the little yellow man, drag them, drop them in the neighborhood and see if he gets robbed, right? If he doesn't get robbed, you're good. No, we go to, we just go to Trulia and they have heat maps, right? And they was red and orange, and now they change it to blue, which I don't know how that makes sense. But maybe, you know, dark blue is high crime. Maybe that means there's more cops there. I don't know. But so we, if it's anything less than low crime, we're just not going to do it.

And again, and that's it, this is a screening procedure. If you're buying a property, you don't rely on Trulia. You go visit the police department and you talk to them. This is the screening. So I should make that clear. Now, and David, back to one of your other questions about opportunities. If we pull up a property on Trulia and just the property itself is dark blue and everything around it's green, that's an opportunity.

Because you can bring a property up to the next. neighborhood, but you can't bring a neighborhood up, right? So that means if we fix the property, then there's an opportunity there. The other thing we look for, and this is real important, it's just from USA.com, and there's tons of other sites, too, but is we want to look, we look at the population growth. You know, if you've got negative population growth, stay the heck away. Generally, we want to see population growth that exceeds the national average. So over the last 10 years, the national average was like 9.7%. If that town that we're in is growing faster than that, that's generally a good sign. So most of the towns we're investing in are growing at,

you know, 25 to, in some cases, 100% population growth in a 10 year period. And if, and so if we have a property that checks off all of those boxes, now I know we've got a good market. We've got a property with opportunity and we're going to go analyze that deal. So, Andrew, at this point, how much of the work you're talking about are you doing? Because all this is like screening stuff that technically like an assistant could just do check off. Like, are you doing this or do you have somebody doing this for you? No, our office manager does 100% of that. Nice.

Nice. And that's just like, because otherwise you just get bogged down and this stuff. And that's something that can apply to real estate, like people doing smaller deals as well. Like I don't look at every deal that comes up in my market. I don't have to even filter through them because, for example, when my agent knows to not send me stuff that doesn't match my criteria, right? He only sends me, for example, multifamily properties in this area because I'm only buying multifamily in this area. So set up systems in your life where you don't get bogged down with data. That'd just be my advice to everybody.

is like find ways to like get either other people or automation or tools or whatever to get like quickly filter through those things so you don't have to spend all your time just filtering. You should be sitting there looking, okay, this one meets all the basic criteria. Now I'm going to dive in deeper. Do you agree? Oh, absolutely. In fact, I have a draft email set up with all of my criteria so that anytime I talk to a new broker and I can copy and paste that and say, yeah, here's my criteria. And usually that comes up. They're like, oh, what are you looking for?

I'm like, oh, I'll talk about it with them on the phone. And they'll say, hey, I'll send you an email so you have it in your system exactly what we're looking for. It saves them time, saves me time. Love it. I think that the most important thing that anyone can take out of this is that it is not your agent or your broker's job to know your criteria and send you stuff that will work. It is your job to communicate to them what you're looking for and why and train them how they can help you. The people that are successful, they do a good job of this. Like I know Andrew is very, very good at communicating with rock star agents and brokers and explaining.

We're going to talk about more like how he does this and what he's done to build up his reputation. But part of it is this is what I want. This is why I want it. This is what to bring me. If you bring it to me and it makes sense, I will buy it. So everyone knows that they're incentivized to work with Andrew. He doesn't just get upset and say, oh, this is crap. Why did you send me this?

It's the wrong color on the heat map, right? Get out of my life, you swine. You're not worthy of me. But I see so many newbies do it the other way, right? They go to the agents and they're like, yeah, there's no good deals. They're not sending me good deals. They're sending me stuff that's blah, blah, blah, blah. But they didn't communicate the way.

what a good deal means to them, right? All of us have different criteria for some, there's some people that want something turnkey. They want it to be great and just be a 1% property. As long as it capsules a little bit, they're happy. There's other people like me who want a lot more meat on the bone and we're a lot pickier about the stuff we get into, but we know how to make it into a deal when it doesn't look like a deal. You've got to learn what your criteria are and communicate that to other people effectively and then screen the people you're working with to make sure that that's someone who's qualified to get it to you. Andrew's done this for so long that he's got this like, you guys watch Game of Thrones.

You know, they talk about like the little birdies, a little network of spies that are out there that bring all the information back, right? He's got like those people everywhere that are like out there looking for deals for him, finding the ones that meet his criteria and bringing him there. So he's not spending eight hours a day filtering through crud that is never going to work and burning himself out. And that's just one of the reasons I love to talk to Andrew because he could spit out little tricks like this all day long.

I'm looking for this. I'm looking for that. He knows just what he's looking for because he values his time and he doesn't waste it on the wrong stuff. So, I mean, I just think this is, this is awesome. Can you give us a recent story or a story of one of your most recent deals? Like how it came across your path, what the process was like is you analyzed it, why you liked it, and then why you bought it and then what you did with it? Yeah, you know what?

We talked about Whiskey Creek, the one that was like 18 months ago. Did I give specifics on that when we talk? I think we talked about that earlier. No, okay, perfect. No, that sounds perfect. Okay. So we bought this deal 18 months ago. It's outside of Augusta, Georgia, 96 unit property.

And it was built in late 80s, early 90s, which is, that's the ideal time frame for, for what we're looking for. It was self-managed by somebody from the Midwest. And this thing is out in Georgia. The manager just kind of out there, you know, flying by the seat of her pants, taking cash payments. Every time something needs to be fixed, well, just go get what's on sale at Home Depot or on Craigslist. So nothing matched anywhere. And because of that, the rents were pretty low. It was full.

It was stable. but the rents were nowhere near where they could be. And they hadn't been putting money back into it. How many units was this? 96. Oh, wow. Yeah.

And, you know, it's funny. We talk about relationships and everything. It's funny. We use this example. This one was actually different. You're not going to guess where I found this deal.

The trash bin. The what? The trash bin of multifamily. It was on loop net. Oh, but here's why. And this is why you, especially in this market,

You have to be like a preschooler out of your hurdle on your toes all the time, right? So looking everywhere you can. And so what happened is, is the owner didn't trust brokers. And so he listed it for sale by owner on loop net. So those criteria that we went over earlier, I have that set up on loop net. So something hits loop net and sends it to me. Number one, I'll see it. The real reason is because I'm like, hey, typically what's going to be is that broker is listing something I like.

I want to go talk to that broker if I don't know him. That's the real reason I use LoopNet. But I saw this thing was listed by owner. I'm like, holy cow. So called the guy. We built up a good rapport. From the time I first called him to being under contract was five days. And so we bought it for $4.05 million.

And it was 96 units. We put, this was 18 months ago, we put $950,000 into it. And based on the current net operating income, today, 18 months later, we're about to do a refinance. We're expecting it to appraise for $8 million. That sounds incredible. Can you go over with us a little bit about what you mean by net operating income and some of the metrics that you're using to know this was a good deal?

Net operating income is it's take all, take your actual revenue and subtract your operating expenses. And operating expenses is just what it sounds like. It's just the cost you incur paying the manager, paying the water bill. evicting people, you know, just the day-to-day operating expenses of a property. It does not include putting on a new roof. That's a capital expense. And so when we're looking at a property like this one and when we bought it, we said,

okay, the net operating income is down here. I think it was like, I don't know, $20,000 or something like that. And we say, okay, if we put this much money into it, bring in professional management and then raise the rents and keep expenses about the same, all of that rent increase increases the net operating income. Because there's two ways to improve net operating income. Increase your revenue and decrease your expenses, right? And so in the last 18 months, on average across all floor plans,

we've increased to rent 41%. So our top line revenue went up 41%. Our expenses stayed about the same. And so now our net operating income is more than double what it was when we bought it. The market has stayed the same, but because apartments are valued based on the net operating income and we doubled the net operating income, all of a sudden our property is also now worth double. And we did put a million dollars into it. So the physical assets nicer and all that. But that's how we do that. And that's how anyone can do that. And not bank on the market carrying you. You can, you know, you can buy in a hot market and still do really well if you find a way to create your own value. So one of the things that I I always tell people is you need to understand how properties are valued because single family properties are valued differently than multifamily properties. When you buy a single family property,

like the banks are assuming that you're buying it to live in, even if it's up to four units, they just assume you're buying it to live in. So how do they know how much it's worth? Well, it depends on what other people would pay for the same property. So they use comparable properties to determine the value. Multifamily property, they're assuming that you're buying this as a business. And so they value it like it's a business. The NOI is kind of like, what's my cash flow or what's my profit before I put a mortgage into it. So because we know, Andrew understands, they look at it differently. He knows that the way he adds value to his property is not just to rehab it for the sake of rehabbing it to make it look like all the other multifamily properties around.

It's to increase the NOI or increase the profitability of it because that's how they value it. So when I'm buying single family homes, what I end up doing is looking for houses that are trash that I can buy and fix it up and make it look like the nice house down the street because then it's worth more. Andrew's doing the same thing, but not from a cosmetic perspective. he's doing it from a business perspective. How can I go in there and improve the profitability of this so that it will be worth more? But see, when Andrew does it right, it's like millions of dollars in equity. When I do it right, it's maybe tens of thousands of dollars if I do a good deal. That's what's so cool about you're in multifamily.

I just love how you break it down and it's very, very simple. Like, it sounds to me like one of the ways that you saw this as an overlooked opportunity is because you saw that the NOI was abnormally low. Is that right? Yes, that and the key thing that we saw, there's two key thing. Well, okay, three. Number one, when we looked, when we looked into this town, we saw a, seriously, a hundred percent population growth in 10 years, right? And then once, when eventually, when we looked into what was driving that and we realized it was going to continue, we're like, wow, this is a good place to be. There's a moratorium on new apartment construction. So there's not going to be any more competition. And there's only, like I said, there's only four other A properties. And so what we do is when we're evaluating the potential to increase revenue, generally the best way to do that is to increase rent, right? So, what we do is we create a scatter chart of rent of our property and all the other properties. And all that is we get all the data from each property in that area.

We put it in Excel. And each little dot represents the square footage of the floor plan and the rent that property is charging. And then we look at where our property sits. And then we tell Excel to draw a median, so a trend line. And then what we do is we say, okay, our property is so far below that. trend line. If we can just get it up to the median, that's a $200 a month increase. Holy cow, there's a ton of upside to this. That's the primary way that we analyze how much potential there is

to increase rent and therefore increase your net operating income. Yeah, that's awesome. And if people want to know, like, there's a book I read a long time ago. I'm sure you've probably read to Andrew. And I don't know if you have, David, it's the ABCs of Real Estate investing by Ken McElroy. This whole concept made a lot of sense when I read that book. Like, it's really like if this is like blow in your mind. You're like, I don't get it. What is NOI? You're still confused about all this that you're saying. Go pick up that book. You can read it in like an afternoon. In fact, that was the book that I read on a Saturday and on Sunday. I told some couple I was going to go by, I wanted to buy apartment complexes and they were like, oh, we have one. We want to sell. Like that was the book

that like, yeah, that was like the perfect. Anyway, if you're at all confused about how this whole thing, the valuation, NOI, increasing this, decreasing that works. It's a fantastic book. I'd recommend checking out. We actually had Ken McElroy in the show back years ago now. But if you want to find that, just go to bigger pockets in the search bar. Just type in Ken McElroy, M-C-E-L-R-O-Y. And you'll find that. Yeah, super cool. So I love that deal.

I love the, like, you didn't pay, like, absurd too much, or you didn't, like, rob the guy of the deal when you bought it. You just bought a good deal. Like, you just bought a solid property for what it was worth. You made it better because you found something undervalued or, like, at least, like, improbable. And then you made it worth more and just rinse and repeat, right? I mean, that's you've been doing all ever since. Yeah, that's basically, that's basically been our business model the whole time.

Yeah, I love that. Maybe can you walk us through like, some of the struggles that you go through, like, in trying to build these apartment complexes, what are you struggling with? You mean in terms of what we currently struggle with now or just as far as a, maybe a new investor or mistakes? I would say you personally, like over the past like three years, two years since we last talked to you, like, what have you had a problem with? Like, you know, like, it's oftentimes, the reason I want. I ask this because a lot of times on the show, like, we hear like everything's so awesome for investors all the time.

But I kind of want to like, is everything always awesome? Or do you get stressed out about anything? Is there anything that you've learned? That's like, oh, that was a lesson. I guess now I know that. Just listen to the theme song from the Lego movie. Everything is awesome. Always, all the time, right?

We can do a whole podcast on challenges and problems. You know, we've already talked about how hard it is to find deals. That is probably, that's the number one challenge right now. another big challenge is good contractors. And it's not that kind of, we kind of tend to rag on contractors a lot. You know, there's not that they're bad people. It's just, number one, there's not a lot of them left. After the recession, a lot of those guys went to different industries.

And so they have more work than they can do. And they, you know, they're pulled in all these different directions. Some of them are, you know, are trying to do jobs that they may not be qualified. So, you know, getting good contractors is it's always been a challenge. It's particularly tough now. and especially in markets like Houston, where you know, you've got an additional demand from recovering from Harvey and things like that. So contractors, that's definitely a challenge. Getting good staff at the property level, finding good property managers and good maintenance guys also very difficult.

In fact, the average amount of money that we budget for wages is up significantly in the last couple of years so that we can attract good staff. Because the wrong staff doesn't matter how good your deal is. if you bring the wrong people in and run it, you can forget it. It's just not going to happen. So, I mean, that's absolutely critical. And then, you know, financing, generally speaking, debt is pretty easy to get right now. But if you choose the, you still have to make sure you choose the right lender for your deal and for what you're trying to do. Because otherwise, they can pull out at the last minute, basically with no recourse to them and you're sitting there holding the bag. So you, you know, you've really, no matter what the market is, you've really got to make sure you've picked the right lender and you're working.

with them and communicating with them. And they can definitely give you some challenges. You know, it's so fascinating about this, Andrew, is that, like, the same struggles that you are going through trying to buy 100, 200 unit properties, the same struggle that I'm going through trying to buy, you know, and David's going through trying to buy. And the newbie who's trying to get their first deal is struggling with, like finding good people, finding good contractors, finding deals. It's all like, and then finding the right lender.

I mean, those things are across the board. And so anyway, I think that's important. I think you made up a really good point as well. where you mentioned, you could buy an amazing deal. You could get a fantastic investment property. You do all the right work setting it up. You do all the work. You know, you stumbled across this fantastic opportunity. And then you put the wrong person in charge of managing it. It was all for nothing. Like, you can completely destroy an investment with the wrong people running it. And so I would encourage everyone. Like, don't just look at the front side. I mean,

that's why my wife and I wrote an entire book on property manager because it's so important, like to manage whether you're going to do it yourself or whether you're going to hire someone. it has to be done and it has to be done well. Can I ask how are you finding, like how do you, when you go into a market, how are you finding contractors at this large scale? I mean, are you just opening up the yellow pages online or whatever? I don't know if they have yellow pages, but, you know, that how are you finding these like property managers and contractors or how do you find these people? And how can our listeners also find people on maybe smaller deals? It's, it's our primary method is referral based. So if I was a newbie going into a new market,

I would do the exact same thing that I do today after being in a market for six years. And that is I'm buying an apartment complex or I'm buying a five unit or a 200 unit doesn't matter. And I'm going to talk to the broker that's selling me the deal. I'm going to talk to the property management company that's going to manage it or is managing it. And I'm going to ask them. And I'm actually going to talk to the lender too. I'm going to ask the lender. I'm going to take those three.

And I'm going to say, hey, I want to do this, this and this on this property. who are the top two or three people that you would recommend to do that job and get that list from each one of those three people. And ideally the same name is going to pop up multiple times. Oh, I love that. Yeah. And then what I'm going to is, I'm going to weed that list down to two or three. I'm going to have them come out and bid the work and then choose from there. And even then, it's not always going to work out perfect, but that's going to put the odds in your favor.

You know, something I was thinking about when you were talking about finding a good manager and how important it is, it's kind of like putting all the work in to do the deal and find the deal and get the deal and then getting sloppy on the end is like these parents who put tons of time and effort into their kids like they feed them organic applesauce and they they put the headphones on the mom's stomach when she's pregnant and have them listen to Beethoven and they get into like the best school and they do all this work and then they hire like a horrible nanny who has them watching like MTV and stuff and not reading any books just these horrible habits that they then develop after you put in all that work like your property manager is your nanny that's who's who you.

watching your property and making sure that it runs well. You did all this work and now you're passing the baton off to someone else and you want to make sure that that person who takes the baton is going to do a really good job with your baby just like like how you would. And that's kind of the way that I like my property managers, you know, and I think that that's a really good point you're making. Can you tell us, Andrew, you've got this amazing system. You've got this mind that finds deals. I always tell Andrew to me he's like, he's like the Navy's hell sniper of real estate. He just hones in on a good deal and he just boom, one shot, one kill and he brings it down. Tell us how you're funding these deals.

Like even the best snipers, no good if they don't have any ammunition. So tell us, like, how are you loading up so that you can go after these deals? Funding is a combination of typically agency debt. And when I mean agency, I mean Fannie Mae, Freddie Mac. We try to stay away from CMBS because let me tell you, BS isn't a name for a reason. It's that, I mean, oh, they're the worst. It's the worst loan process you'll ever go through in your life. So we stick with Fannie Mae, Freddie Mac, or sometimes local or regional banks, especially if you're a newbie and you can form a good relationship with them, local and regional banks can give you some great loans.

Odds are it's going to be recourse, which means, you know, you're personally guaranteeing it. But I had to do that to get started and I was okay with it. You know, now I don't have recourse, but in the beginning I did. It was just part of starting the business. So funding is typically, you know, we're doing light to moderate renovations. So we're usually getting some kind of renovation loan, meaning the lender is going to give us 75% of the purchase price plus 75% of the renovation. And then that remaining 25% comes, we're syndicating it. So we're pooling investors together.

We'll write up a pro forma and put together a package and then we'll send that to our investor list and say, hey, here's the deal. Here's the, here's the performance. Here's the business plan. Here's all the analysis that we just, you know, we just talked about a minute ago. and say if you're interested, let us know and we can discuss further. And so the equity comes from investors. Some of it comes from us as the sponsors. And then we close on the deal and get to work.

Okay. That makes a lot of sense. I can tell everybody I personally have invested with Andrew on three of his different deals. And every single time he under promises and over delivers, it's one of the reasons that I like working with Andrew so much is he's someone who's going to tell you, hey, this is probably what we're going to do. And then he goes out and way, way beats the expectations that he set for himself.

Really, really good. and what he does. Can you share with us really quickly a couple pieces of advice for how we can develop relationships with these lenders and give us deals like this or these brokers that have the deals and we want them bringing them to us first? I know that that's one of your superpowers is you're really, really good at finding people who are going to bring in the deal first. Can you give us some advice for people starting off how they can do the same? You know, one of the things is there's other factors, but if you really want to blow it down, people work with people that they like to work with. So if you want to make the most simplest thing is be.

likable. And that doesn't mean you have to turn yourself into Oprah and give away free cars and all this stuff. You get a car. Just that probably would make you pretty popular with the brokers if you sent them a Tesla every time you got a deal. But that might be a little beyond my budget. I don't know about you guys. So just think about what the people that you like to work with, why is that, right? Well, they smile when they talk to you. When you're talking, they actively listen. They do things like if they say they're going to call you back on Tuesday with a yes or no, they call you back on Tuesday with a yes or no. They don't just disappear on Friday. Oh yeah, sorry. I forgot about

that. They are professional in all in all regards. They are trustworthy with the small things. And then that builds trust and shows that they're trustworthy with the big things. And so, you know, that gets back to like if a broker sends you a deal. And in the beginning, they're just going to send you whatever because they're trying to see if you're real or not, right? And so they send you a deal. And what that means is you analyze it quickly and then immediately call them back. My goal is within 24 hours. My goal is to respond to everybody within 24 hours. And I'll call them back and say, hey, thanks for sending this. I looked at it. Here's why it's not a good fit because of this, this, this, this and this. Who else maybe are you talking to that could be a good fit?

Show that you're responsive, you're reliable, that you have logical reasons for the answers that you're giving. And then, of course, and it's also some of the stuff that, you know, you hear various places about, you know, ask about the kids and form relationships. And that's all true. But most people, especially these days, are really, really busy. And in small talk, just for the sake of small talk, people can generally tell that that's what's going on. So the key is to just be friendly, you know, intelligent, meaning you know the language that you're trying to talk and responsive. If you say you're going to do something, do it. If you said you're going to call on Tuesday and for some reason you absolutely can't,

you text him and say, hey, wait, sorry, I wasn't able to do that. I'll get back to you on Wednesday. At least they know, they heard from you. So those, it's just those little things being being personal. And also just being authentic. Just be yourself. You know, everyone else is taken. So be yourself. And that's all you really can do anyways. And just again, just think about, okay, what, you know, the people that I like, what traits do they have and do that yourself? Is that going to be the name of your first book. Everyone else is taken. So just be yourself. There you all. I'm pretty sure somebody else said that at some point. Yeah, I think it was

Dr. Seuss probably. You know, I read a lot of Dr. Seuss these days. I know. I don't think of Dr. Seuss because everything can be attributed to Abe Lincoln. I'm assuming everything. Clearly. Yeah. All right. So let me ask you a couple questions, Andrew. How many units do you have under management now?

about 1,200 because we sold 600 units. Okay, so you've accumulated a total of 1,800 over your career. You're extremely successful what you do. Obviously, anyone that listens to you can tell you're the real deal. You're not BSing us here. Tell me, in your opinion, was it more important that you learned the numbers and the analysis and the tactical side of real estate? Or was your ability to build relationships more instrumental to your success so far?

I'm going to say the relationships by a. hair because as the head of my business or the head of your business, you are the rainmaker. And without the relationships, the rain is not going to happen. And the reason I hesitate to say it is because good analysis is absolutely critical. You won't survive without that. However, good analysis can be outsourced. You can hire a really good analyst to help you do that part. but you can have 18 fantastic analysts working for you,

but if you can't develop the relationships to get the deal and to have the pipeline of deals coming in and to get good contractors and get good managers and to inspire your property managers to work well, then it just doesn't matter. So I would say the relationships are probably more key. That's what I thought you were going to say. And the reason I asked you is that you are the best analyzer of deals

that I know, far none, right? Like I think I'm good and then you show up and I'm like, oh my gosh, I feel like this puny guy at the gym standing next to Arnold Schwarzenegger and his prime. And even you are admitting that the relationships are more important. In my opinion, analysis matters because you need to know it's a good deal. You need to recognize it's a good deal. But there's people that could tell you that just like what you said. There's people you can pay to analyze deals that will tell you or just friends you could

have, which coincidentally you can build with relationships. But it's more for your own confidence and your own self, like the ease of, okay, I know this is a good deal. I've analyzed it. It doesn't actually build your wealth. Finding the deal is what's going to build your wealth. Building the relationships with people that will bring you the deals of build your wealth. The analyzing is only important so you know should I move forward or not.

And like you said, you can outsource that. If you really want to be wealthy, if you want to be successful, you've got to learn how to build your relationships with people. It's so much more important than just becoming good at understanding real estate. I've had people come to my classes or seminars I'm teaching or real estate meetups. And they know more about real estate than I do. I'm amazed when I listen to some of them talk. Like they've read every single book. They know every single thing that there is to know.

And they're worth like negative money. They just, they're in debt because they don't know how to do anything with that information that they have. Finding the people that can kind of get you started is so much more important. And I just wanted to point that out because you're the guy who knows everything about real estate. And you're still saying that building the relationships has been more important for you. And I just,

I think that's really important for people to understand that is that being likable will actually make you money as crazy as that. You know, like when a broker finds a deal and his first thought is, oh, Andrew's going to love this. I can't wait to call him. You cannot buy that kind of a reaction from someone. You know, that's so, so important to get. Is there anything else you can share, Andrew, with our listeners of like things that you think a newbie should start working on now to put themselves in a position where they can be more successful in their future? You know, some of the things we just talked about, but then don't wait until you have all the pieces together, right?

You just got it. You have to start taking steps. David Osborne, you guys, you know, both you know and I think you've had on the podcast. One of the statements he says I really like is don't wait to buy real estate, buy real estate and wait, right? And so one of the first thing you can do is, number one, you know, decide what are you going to buy? Are you looking for a 10 unit or are you looking for 100 unit, right? Are you looking for the high rise? You're looking for the garden style.

Pick your niche. Figure out what that is. And while you're building your team and team is, you know, your agents, your lender. property management, adding investors, all of those things, while you're doing that, get out and start looking at deals. The best way to spot a great deal is to look at 99 bad ones. And so the minute it pops in, you know, wait, something tells me this is good. I need to drop what I'm doing and look at it. So that's really what I would do. Yeah. Man, I want, like, I want everyone to hear that again. Like, the best way to find a good deal is look at 99 bad ones. Like, that is so good for any, any range,

you're looking at first deal or a hundred unit property. And you know what, Brandon, you asked me before, what are some of the things I struggle with? That's something I struggle with is when I'm looking at bad deal number 95, the little voice in my head going, geez, this is a waste of time. You know, odds are this deal is not going to work out. This is going to be, I'm going to waste an hour doing, looking at this or whatever. And I have to remind myself, no, it isn't. Because if I don't look at deal 95, I might miss deal 96.

That is the good deal. and that bad deal number 95 that I'm looking at, that gives me a reason to call that broker back, have a live discussion, not via email, and continue to build that relationship. So that's how you have to look at. It's something I struggle with. I'm like, geez, I'm looking at 100 deals just to find one, you know? Yeah. Yeah, I would venture to guess that the reason you came up with all these criteria that you have and the things you use

is because looking at all these bad deals and then analyzing, well, what is it that made it a bad deal, helped you to realize what you want in a good deal, right? So you know this information that's now made you successful, and you didn't learn this from the few good deals you did. You learned this from the thousands of bad deals that you looked at that taught you what you want to avoid. And there's value in learning stuff. That's what I'm always telling people.

It's not just buying a deal and making money. Going through it, a hundred bad deals can teach you so much about real estate that that's going to make you millions of dollars in your future. Well said. Well said. All right, let me go ahead and shift gears here and head over to the world famous fire round. Fire round. It's time for the fire round.

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That's why hundreds of property managers rely on bill to streamline their finances. Bill for property management lets you add all your properties, assign permissions, pay bills, and receive payments quickly and efficiently, without the usual bottlenecks. It syncs with platforms like QuickBooks, Zero, NetSuite, and Sage intact, so your accounting stays aligned. You can automate bulk payments across properties and HOAs. Choose flexible payment methods like Same Day ACH, International Wires, Card, or Check, and set custom roles in approval policies.

There's even a dedicated bill inbox for each property to keep everything organized. Ready to simplify your workflow, book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. All right, let's get to the fire round questions. These come direct from the Bigger Pockets forums and we're going to fire them right at you, Andrew. See what you got to say. Number one, well, I like this question. Help. I've got a million dollars to invest. I'm brand new. What do I do? That's a really good problem to have.

How did you get that? Brand new? Yeah, that's great. Yeah, that's a great problem. So, yeah, they must have stumbled across a million bucks or something. What do they do? Well, the first thing is ask yourself, do you want to buy your own property or hand it over to somebody else to invest for you? So are you looking to participate in somebody else's deal or you're looking to go get your own? Either way, I would say, find a market you want to be in, figure out what kind of property do you want to be invested in and go look in those areas. is. So, you know, you also, I would recommend, don't necessarily, especially if you're just getting started, don't take that million bucks and throw it into one deal. You know, maybe break it into a couple of chunks of 50 or 100 and go invest as a silent partner or limited partner with somebody else. Learn the ropes,

see what they're doing and then go and take your $700,000, $800,000 that's left and go buy your own deal. Or, you know, with a million dollars, you might be able to approach somebody who's got a smaller deal and say, look, I'll be money, you be operations, let's do this together. And as general partners, right? So you still have control. You're still participating in the deal. And then you can learn a lot. And then learn from others' mistakes, grow your business much quicker.

And that's assuming you want to be active. If you're just looking to be passive, then split it up into 10 or 15 pieces and invest with good operators. So it depends on what you want to do. What I love about that is every single hypothetical example, you gave involved a way that you could learn faster. It wasn't just how do I make, how do I get the highest ROI in my money possible and I've done?

Because you know that learning is what's going to make them wealthy in the future. So that's an awesome answer. Good job. Next question. I'm just getting started with rental properties. Should I get a 30 year or a 15 year mortgage? I, you know,

my, my simple answer would be get the 30 year and here's why. The reason people like to get the 15 years. is for a slightly lower interest rate and it pays off faster. So if you're doing like what Brandon did and is buying it as basically a college fund, then a 15 year, that totally makes sense. And I agree 100% with that strategy. But in general, I would say go with the 30 year because you always have the option to pay it down

faster if you want to. So you can get a 30 year loan and then calculate your own 15 year amortization table and pay it down 15 years if you want to. but if cash flow gets tight in some time in the future, you're going to want to have the option of that lower 30 year payment versus the mandatory higher 15 year payment. So I would lean towards 30 year. That's why, again, there's exceptions,

but in general, 30 years safer. All right. Next question. Should I go solo or go with a big multifamily investor? Now let me expand before I let you answer. Basically, the guy has got some money, wants to get into real estate. It's kind of like the question we asked a minute.

ago, but he's basically wondering, like, when I look around, because he's got a similar problem that I do. I mean, I analyzed a deal yesterday. This is not my question, but it actually perfectly goes with that. I analyzed this deal yesterday. And at the end of the day, like, if I bought this for like 200 grand less than what they were asking, they're asking a million. I ran the numbers. And even if I got it for 800 grand, it's like a 15% return, which is not bad. Like if I, you know, average annual return is like 15%. But I'm like, I look at some syndicators and I see their IR projections and it's like 15%. And I'm like, should I really throw my money into my own deal just to make 15% when I

could do it with a syndicator? And obviously you are a syndicator. So like, I know you might be biased towards giving to syndicators. But like, how does somebody make up that decision? And like, is there a percentage that they should go with one versus another, a certain profit? How does somebody know that? I would go back to why are you investing in the first place? If you're just looking to create truly passive income, then I'd say,

syndicator is the way to go. If you're looking to learn as, you know, kind of learn from participating and observing, then probably syndicator. If you want to really start your own business and jump in now, then it's take that money and go partner with somebody. Unless you have, have some experience and let's say, you know, you've owned some rentals, maybe a fourplex or whatever. And now you say, okay, I'm going to take my money and I can go to a 10 unit and you're comfortable. And, you know, I shouldn't say comfortable because you want to be a little uncomfortable because if you're not a little uncomfortable, you're not growing. But so if you can, if you can take that money and just go to a 10 unit and you feel like that's the next step, then go do it yourself. And, you know, hire a mentor.

You know, there's other ways to, you don't, you don't always have to partner someone. You can hire a mentor as well. So those are, those are kind of the different options that that I would say are available. That's great nice. Very nice. Okay, this is a two-part question. I just got a 30 unit apartment offer accepted. Now here comes the fun or hard work part.

I have a few questions regarding physical inspections during due diligence that I'd appreciate some input. Number one, should I just walk each unit myself and possibly bring one of the contractors who worked with me before? Or is it worth it to hire professional inspectors to inspect all the units or a selection of units? What's the common practice for a 30 unit complex? And then I'll let you answer that and then I'll ask the second part. All right. So there's a couple of pieces that, number one, absolutely walk every single unit. unit. So, you know, the biggest property we ever purchased was 348 units. And yes, we walked every

single unit because I can guarantee you the five units you don't go into, those are the ones that are the meth lab, the pot house, and the mold infested ones, you know, or the lady that has 53 squirrels in a cage. You know, I mean, it's just, that's the stuff. Those are going to be the units that you don't go into, guarantee you to the one that the property manager conveniently lost the key for. Yeah, it's always that. Oh, you know, there was. There was a, there was. There was. I've still not been through with my Ohio apartment. I have not been in those four because they could not find a key. The person wasn't home and we were closing.

I'll bet you dinner somewhere that one of those is a hoarder unit. Yeah, probably. So, now, I personally walk 348 units. No, I brought in the team and we split into groups and we have a spreadsheet that now that spreadsheet synced across laptops. So as they fill it in and it all loads at the same time. But all you need, you can print out a piece of paper. from Excel, right, in 30 unit, and you can go into teams. Now, if I was doing a 30 unit and it was

my first one, yes, I would personally walk all 30 units because I want to see them, I want to feel them. And when I bought my first 92 unit, I did personally walk it. As far as inspectors versus contractors, I have found that home inspectors tend to get a little lost in the weeds if you put them onto an apartment complex. And I'll get reports that are like, you know, 15 pictures of of outlets that, you know, oh, the plate's crooked or, you know, the little stuff that, yeah, we're going to look at anyway. So what I do is I walk it with three or more sets of contractors. And I mean three, I mean, if I'm concerned about the roofs, I'll have two or three roofers.

If I'm going to upgrade the interiors, I'll have three guys that are going to upgrade the interiors. So I have three contractors looking at it with us. And then they're going to not. So what that's going to do is, number one, I've got three sets of eyes looking for problems that I might miss. and I will miss them. So that's why you get, you know, that's why I bring in other people

that are experts at that thing. And then when I get their proposals in, those all, you can combine two or three sets of proposals, that's going to give you a pretty thorough picture of what you're looking at. And more importantly, not just what's wrong,

but how much it's going to cost you to fix it. You want that data. You want to know that cost before you go hard on your deposit and you can't get it back. So that's how we do it. Love it. Wow.

All right. Well, you kind of answered the next part, which was besides, the general walkthrough of each unit, I think I'll need to bring on specialists to check out the big items like the roof, the AC, and the water heaters, should that actually be done? And your answer was yes. Absolutely. So if we go, you know, we go under contract, let's say we have a 30-day due diligence. I try to be on site with our full team, meaning, you know, lease audit, contractors, everything within five to seven days so that we can get all that information before

we're going hard. It's fantastic. Fantastic. All right. Well, that's the end of the fire around. Now, before we get out of here today, let's get to our world famous. Famous for. All right, but before we get to the famous for questions, let's hear from Mindy Jensen to see what's going on on the Bigger Pockets Money podcast this week. Thanks for asking, Brandon. Tony Gayden grew up in a lower middle class household where money and finances were not discussed. He sought comfort in food, eventually reaching 476 pounds and drowning in debt. Tony shares his weight loss journey and how he parlayed the lessons learned into successful debt reduction and finally starting to invest. Tony currently works at his dream job with no plans to

quit, but uses investments to protect himself should his circumstances change. All right, Brandon, now it's back to the famous four. All right. Thank you, Mindy. Now, the famous four, these are the same four questions we ask every guest every week. And I know we've asked you before, Andrew, because you were on the show before. But let's see if they've changed it all. Do you have a current favorite real estate book? You know what? I do. I actually just wrote my first book on Multifamily. It's about 200 pages. They're all blank. And in the middle, it says, go read David Green's book on long-distance real estate investing and then apply the same principles to apartments because it's basically the same thing. And then once you finish his book, go read Dave Lindahl's emerging markets and multifamily millions. Put those three together and you'll have what you need to get started. Oh, good, good suggestions. I second all of them. That's like the best answer in Bigger Pocket's podcast history to that.

So good. Put that on a plaque and let's have it like immortalized and BP headquarters somewhere. I've got a challenge for everybody listening right now. If you can find the connection between today's guest and my book, because there is one other than what he just said on the podcast, email me, let me know, and I will send a prize to whoever gets it first. That's all I'm going to say. I'm going to let you guys go on the wild goose on. All right. No pressure after this, Andrew, but now you have to do just as good on the second question that you did on Brandon's. What is your favorite business book? How to Win Friends and Influence People? It's an old one. I think it was written in the 30s, but technology changes, culture changes, but human nature does not change. It's been the same for as long as we've been around. And that book, I mean, everything we do, you know, obviously we do analysis, but everything we do. do is relationship related from the seller to the contractor to the manager to the broker everything and

that book is probably you know what's in there is to me the most important thing in business very good and that's very nice one of those books i should reread every year because it's always good to know i do i do yeah nice all right next one all right other than making and selling popcorn in the kitchen with your wife can you tell us some of your other hobbies that you have yeah so i i'm a couple of my hobbies are trying not to get outwitted by my four and six year old boys. And then I do have a very loving and understanding wife who lets me go surfing and backcountry skiing fairly frequently. I'm really just a wannabe athlete trapped in a nerd's body. So I'm not necessarily an expert at those things, but I love doing them and they invigorate me. A lot of people don't know this,

but me and Andrew actually went out surfing together down in, uh, was it San Diego or somewhere north of San Diego? Yeah, San Antonio. We should do that again, although you're going to be adapted to that warm Hawaii water. I know. You got to come out to Hawaii and come do it. Yeah, but me and Andrew went surfing, and I learned very quickly that I was terrible at surfing, and he was very good at surfing. That was my realization there. So, nice question. What do you believe sets apart successful real estate investors from all those who give up, fail, or never get started? Relentless persistence. And I believe that's where I said last time, and then I'm going to persist and say that's still true. You know, the question kind of answers itself, right? It's people who

give up, don't get started or quit. In order to not do those three things, you have to persist and keep going and be relentless, especially in this market. I mean, it is, it is tough to find deals. It can get very discouraging. Unfortunately, as a newbie, it is harder than someone who's been in the business for 10 years. But that doesn't mean it can't be done. That doesn't mean it's not worth doing. So relentless persistence, not letting setbacks, you know, you make it, make you. You make you quit, not letting fear of mistakes make you quit. You're going to make mistakes. It's human nature.

I mean, look at, you know, Chernobyl or the Hindenberg or almost any Nicholas Cage movie. Mistakes happen. The key is do you learn from those mistakes and make systems to not repeat them? That's what, that's the key. So, you know, you make a mistake. What? What? Persist through.

I'm stuck on Nick Cage. keep going. Well, yeah, he may not have learned. But anyway, that, yeah, relentless persistence. I like it. Much like Ben Affleck as Batman. Any mistake can be overcome with the right attitude.

Exactly. All right, Andrew. I knew this was going to be an awesome podcast. You did not let me down. You've done great. Thank you very much. Last question. Where can people find out more about you?

Sure. You know, our bigger pockets, of course. I love being on bigger pockets. needs to be on there more. And of course, LinkedIn, our website, you can just Google Vantage Point Acquisitions, but it's VPACQ.com. If you actually want to start like an email conversation or something like that, probably the best way is to just go ahead and submit it on the website because

then that will come to my email inbox and I will get back to you. But of course, yeah, connect on Bigger Pock's in LinkedIn as well. Super cool. All right, Mr. Andrew Cushman. Thank you so much. This is fantastic. This has been like a year in the making since we were out there on the way of surfing. We talked about doing this.

So I'm glad we finally got to pull it off. So thank you. Like guys. Good talking to you, guys. Thanks, buddy. All right. And that was our show with Andrew Cushman. That was a lot of fun. I haven't laughed that hard into a podcast in a while. Andrew is a fun guy and also very, very smart. I mean, he's like, if you're going to hang out with anyone and talk real estate, I want it to be Andrew. Yeah, Andrew. So David, I, and people have probably heard us talking about this before,

but both David and I are in a club called Go Abundance. I don't know. It's club weird. We're in like a group. of people called Go Abundance. And Andrew is in there as well. And that's work. We get together a couple times a year, hang out. And I learn a lot from Andrew. And I really, really like hanging out with him.

Yeah, every time I spend time with him, I'm like inspired to go do more stuff because he's just crushing it. Even in today's market. Again, we talked about that, right? Everyone's like, oh, there's no good deals. You know, he's making them happen. So can you. But not you, David. Sorry.

I'll just live vicariously through your deals and Andrew's deals. No, you're doing, you're doing well. I'm excited for your refiles to get done. I'm excited for you have a bunch of cash from all those burr refinances so you can go out and repeat the process again. Maybe we get you into some larger multifamilies this time. You ready? That's exactly what I'm thinking.

You're on the same wavelength. All right. Well, good. Maybe we'll turn ourselves into syndicators at some point. We can be like Andrew and we'll start raising big money. And, you know, we'll be the next Andrew Cushman, life goals. Hashtag life goals. Hashtag life goals.

There you go. All right. So thank you guys for listening. Make sure you guys listen after the music here. We're going to, we recorded a quick random six, just random questions from Andrew. I think we might have only done five questions, though. Maybe we did seven. I don't know.

Anyway, it's good. It's funny. Enjoy it. And make sure if you guys are enjoying today's show, make sure you share it with somebody. Go out of your Facebook or whatever, Twitter and share this episode with somebody who might be interested in multifamily properties. Or just put it on your Facebook page because you never know who is friends and family with you.

That's like, oh, that person's into real estate. So who am I? Maybe we can work together. Maybe I can give them money. Maybe I can partner with them, whatever. You never know. until you start sharing real estate related content. So this is a good episode to share it.

You can view the show notes by going to biggerpockets.com slash show 279. So that's a URL you can share on your Facebook. Biggerpockets.com slash show 279. All right, guys, let's get out of here for biggerpockets.com. I'm Brandon here with my co-host, David Throwme Your Rope Green. Signed enough. 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 six. All right. We have not done this in a little while, but we're going to jump in here and do the world famous random six. I don't know. I don't remember. Do we have a sound effect for that? I think we did. Anyway, these are completely unrelated to real estate questions that we're going to ask Andrew here.

Just get to know them a little better. Number one, Andrew, could you survive in the wilderness for an entire month? I believe I could, yeah, actually. All right. I bet you could. I could see that. Let me follow up with that. What one tool would you need to have with you?

Like, other than the clothes on your body, what one tool would you bring with you to survive for a month in the woods? some kind of multi-tool that has a at least that has a flint striker on it so I can get fire started too all right good answer that's such a practical answer all right I got to survive for one come on

what animal best represents your personality is a Liger count no um yeah Redfront skills and what is it yeah I mean you know I like the dolphin because they're, they're intelligent, they're graceful, they're strong, they love the ocean, they're

playful. You know, I don't know if I'm quite theirs, but I guess I could maybe aspire to be a dolphin. Is that how it works? Good answer. I like that. It's funny, you said Liger and Dolphin because last week, Brandon and I were at like an aquatic park and they had these dolphins that were mixed with a false killer whale. It was like this hybrid souped up dolphin that was huge. And it made me think of Ligers, which are actually like humongous and awkward. animals. And you mentioned both of those. Yeah, we talked about this. That's so cool that that's what

she said, giving me major deja vu. All right. What behavior makes you think a person is creepy? Well, I mean, a limp, clammy handshake is never a good start. I think that every time I shake David Green's hand, it's just awkward every time. That's why they call me David the clam green. Well, I'm going to leave that one right where it is. You know, that's never a good start. Shifty eyes. You know, I had a guy come up to me at a gas station in the desert at 11 o'clock at night, wearing a hoodie in sunglasses in a partially concealed backpack and asked me for a ride.

I'm like, I'm not so sure, kind of shady. So there you go. You didn't do it? Or did you're just nice adventure. Come on, Mr. Be in the Woods for a month. You know, I offered to call him a ride. and pay for it. He didn't want that for some reason.

So, you know, I don't know. You don't sound like a playful dolphin with that answer. I was in the desert. That's not my element. No, your niche. Dolphins do not uprated desert. Exactly. Okay.

Which musical artist is greatly overrated? And I have what I'm really hoping you'll say. And Brandon knows it. But I'm not going to say what that is. Ooh, that's asking for enemies. musical artist that well I guess we can go with the easy one and say Kanye that's a good answer

Kanye listens to our show I know he obviously does so he's gonna be upset actually you know I should take that back he's okay he does have musical talent I can say that it's just obviously the personality is a little different yeah I can I can I change it and say who I think is dramatically underrated sure okay yes Weird Al Yankovic that guy is brilliant I love Weird Al the night Santa went crazy

is still one of my favorite songs of all time Yeah Amish Paradise still Yeah that's a good one In high school we made a music video To the night Santa went crazy I should find that And put it on YouTube

It was good You said that interesting Okay if anyone is still listening If anyone is still listening And you want to hear Brandon and I Make a parody music video Like Weird Al Put a comment in the show

the show notes and let us know on the web page that you would like to see that and we will put something together and related to real estate for you. I think that could be funny. I don't think that would be funny at all. All right. Next question, David.

Okay, what's something that can't be found or bought on the internet? Real love. Oh, God, that was so fast too. You're so good, Andrew. That was really good. Let's have you can be just as fast here. I mean, according to my spam folder, other kinds can be purchased very easily, but that's not what we're looking for.

I want to see you respond super fast as one too. Like, don't think about it. What's the weirdest thing that's ever happened to you in a car? Uh, I, I, do you see it happened to me? Uh, let's see. Um, I shift the eye McGee asking you for a ride. Yeah, yeah, yeah, yeah, that one, that one, that one, that one certainly ranks pretty, pretty high. Um, maybe some things I've, I've seen driving through parts of LA, uh, you know, having people throw up in the car.

So, uh, yeah, that's never fun. All right. These are really hard questions. That is a hard question. Yeah, that one I, I, yeah. There's a true story. By myself in the car. This is a true story.

my wife when she was on her a bachelorette party back when we got married, you know, whatever, 10 years ago. She, I don't know, her and her girlfriends were driving around and they were at a stoplight. And all of a sudden, like, a hundred, I don't want to be like insensitive. Like little people. Like, I'm not sure what the correct terminology is, but like little people, right, cross the road, all holding hands skipping and singing in front of her car. Like, I don't know what that, like, is that a convention or do people get together like just. skipping and holding hands running down the street. I don't know, but that, that's, uh, I love that story. I wish I was there. Flash mob. Yeah, Flash mob. Basically, a flash mob of little people.

Anyway, all right. Was that number five or six? I lost count. I think we've got enough. All right. Let's get out of here. Thank you, Andrew. This is fun. All right. Take care, guys. Bye. 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 Calicoke 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.biggerpockets.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, Remember, past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.