BiggerPockets Real Estate Podcast - 632: The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly w/Jake and Gino

Episode Date: July 7, 2022

Multifamily investing is a bit different than other types of residential real estate investing. When the economy begins to shift, and a recession is looming, multifamily real estate tends to drop in price. But, at the same time, more renters need a place to stay, or more importantly, an affordable place to stay, making multifamily apartments their go-to option. If apartment investing has ever interested you before, Jake Stenziano and Gino Barbaro make a strong argument why now may be the perfect time to get into the industry. If you’re feeling deja vu, don’t worry, Jake and Gino have been on the BiggerPockets Podcast multiple times before. Each time they come on they bring new lessons, new deals, and a lot more units under their belt. Only a decade or so ago, Jake and Gino were busting their humps working at jobs and businesses that didn’t fulfill them. It took them a year and a half to buy their first deal, and now, they’re sitting on $175M worth of multifamily. That’s quite a lot of deals in just a decade. Jake and Gino drop some gems in this episode, specifically on why 2022 may be a smart time to start investing, how to develop your “buy right” criteria, and preparing your exit strategies so you can build wealth, not just get rich once. They’ve learned a lot of multifamily investing lessons the hard way, so next time you’re presented with a killer deal, you don’t have to double down on their mistakes. In This Episode We Cover: Why you DON’T need to raise outside money to tackle big multifamily deals How to hire the right people and get employees invested in your properties (literally) The “buy right” framework and three pillars of real estate that every investor must understand Why exit strategies are the most crucial part of investing and how to define yours Managing properties the right way and how good property management can make or break a deal The “conveyor belt” acquisition system that will fly deals your way (even when you’re not working) And So Much More! Links from the Show BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast Get Your Ticket for BPCon 2022 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts David's BiggerPockets Profile Dave's BiggerPockets Profile David's Instagram Dave's Instagram Rob's Youtube Rob's Instagram Rob's TikTok Rob's Twitter Rob's BiggerPockets Profile BiggerPockets Podcast 182 BiggerPockets Podcast 266 Pizza Owner to 1,500 Units Millionaire Couples Books Mentioned in the Show Small Giants by Bo Burlingham Scaling Up by Verne Harnish The 7 Habits of Highly Effective People by Stephen Covey Connect with Jake and Gino: Jake’s BiggerPockets Profile Jake’s LinkedIn Gino’s Linkedin Jake and Gino’s Facebook Page Jake and Gino’s LinkedIn Jake and Gino’s Website Jake and Gino’s Podcast Jake and Gino’s Instagram Click here to check the full show notes: https://www.biggerpockets.com/blog/real-estate-632 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Check out our sponsor page! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show, 632. It's not when you start. The bottom line is you start. I think now is the perfect time to start because you're going to need several months to have broker relationships, to start talking to investors, to start refining your business plan, to get into the market. And by the time you get into it, the cycle's changed again. I mean, it's changed so many times in the last two years that if you're ready to start,

just start today. Make a commitment, figure out what your why is, and start today, whether it's single family homes, whether it's multifamily, whether it's self-storage, whether it's mobile home parks, pick a niche, learn it really well, education times action equals results, and understand why you're doing it. What is going on, everyone? My name is David Green, and I'm your host of the Bigger Pockets Real Estate podcast here today with my super-uber-talented co-host, Rob Abasolo, as we are interviewing Jake and

Gino, multifamily specialist, fun guys, smart guys, and good guys. We had a great time on the show. of your favorite parts? Well, you know, these guys are, they've been on the show a couple of times, actually. I believe they were on show 186 and 266. I didn't have to look that up. I have every single episode memorized, just a fun fact about me. And, you know, they've really had an insane career where I think, you know, I can't remember off the top of my head, but I think the first time they were here is like 300 units, then 600 units. And then this time around, they're coming to us with around 1,800 units. Check my math on that. But yeah, I mean, they really kind of covered,

everything from their three-step framework to things like, you know, certain philosophies that they have, like the conveyor belt theory, which I think we got really into the nitty-gritty of that there for a second, too. Yeah, they had so much perspective on real estate investing in general and multifamily investing in specific because they've been doing it for so long at a really high level. So I would definitely make sure you listen all the way to the end because we get into how to know if syndication is right for you or if you should keep things small, how to understand how market cycles and exit strategies relate to each other. I thought that that was really, really powerful. A lot of people are worried about what market are we in? What should I do in this moment?

And they've sort of found a way to combine exit strategies with where you are in the market to come up with something that will work no matter what the market does. So make sure you listen all the way to the end because we get into some really good stuff there. Before we bring them in, today's quick tip brought to you by Bigger Pockets and Rob Obisolo. Today's quick tip is going to be If you have not picked up your ticket to BPCon 2020, it is going to be super, super exciting. You're going to hear keynotes from me and David. And if you want to pick up your tickets, I think we are so far. I think we just announced it and we're already 25% at capacity for that event.

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All right. One last thing. If you are listening to this on YouTube, please go leave us a comment. Tell us what you think about the show, what you liked, what made you laugh, what you'd like to see more of. We read those and we do shape our shows based on the feedback you give us. So leave a comment on YouTube, not when you're driving. You just realized your business needed to hire someone yesterday.

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We're doing great. How you doing, Dave? Rob. Don't fall for their names and like the mafioso vibe that Jake and Gino kind of bring. These are sweethearts of men who have been incredibly gracious. So I appreciate you guys. So this is what? Is this our third time having you on the show now? Yes. Let me go back and look at the notes. It was BP 186 and BP 266. The first show had 674 units. The second one, we had 900. And here's the third one. Third time's a charm, my friend. You know you're dealing with other podcast professionals when they do your job for you. by providing that background. Thank you very much for that, Gino. So since we last talk to you guys, tell me what's been going on in your world. Yeah. No, I think to the Gino's point, we've continued to grow. We dabbled a little bit in syndication. Didn't really turn out to be the tool in the tool belt we're looking for. Since then, I know, Gino, you said, how many units were we at the last time we did the show? We had 900 at the last time. 900. Yeah, so since we've done up over 1,900 units, multifamily apartments acquired. Currently hold about 175 million. We have 70 full-time team members within our organization, our family of companies, and we're sitting on about 130 acres of land that we're looking to

development, but to develop, excuse me. I'll go back a little bit, though. We did three syndications, and it just wasn't a good alignment of our values in terms of what we're looking to do. Typically, it's been like Gino, myself, maybe his brother's invested, or we've had a couple senior people on our team invest in the deals. And we just, you know, we put a JV together, a partnership. We go out and buy an apartment building. We said, hey, look at the syndication thing seems pretty interesting. A lot of people are doing it. And it just seemed like it was incentivizing us to sell. And these deals are so hard to find, especially the really good ones. And over time, because we've bought deals internally, we've built up this really nice cash flow snowball every month.

And it continues to grow. I mean, the inflation stuff is definitely, you know, spread that, that, that yield curve out a little bit more for us. But that's really what we enjoyed doing. We wanted to continue to build out a vertically integrated team. So we sold two of the syndications off. We still hold one, but everything else is just owned internally. And it's really, you know, what we like to do. You know, we like to get the employees invested in the deals. And now we're looking at doing some build for rent developments in the future because we've kind of, you know, built out our CAPEX team is what I call them. It's kind of our renovations team that goes in and handles a lot of this stuff. And we have a great community behind us, too, that's closed over 45,000 doors and

about $3 billion in multifamily assets. So it's been a really fun ride, to say the least. Okay. So if I hear you right, it sounds like what I heard you saying is that it's getting so difficult to buy that there's certain scenarios where you're looking at selling and then there's others where you're looking at literally building and developing because that makes more sense than buying something. So, no, not necessarily. So we've done, I think six or seven deals in the last four months. And what I really recommend everyone to do is to have multiple tools in their tool belt. And that's why we added syndication. That's why we've done creative financing. What it's done is there's been more competition at the larger deals because there's more private equity coming into

that space. And those deals are getting more competitive. So we've actually downshifted a little bit to three, four, five million dollar deals. So we've been doing more of those. In addition to we've been buying land because we have more resources, more skilled people on the team. We started development company. One of the guys on the team got his general contractor's license so we can reduce the GC fees. And so ultimately, yes, to a certain extent, the bigger deals have become more competitive and they're less attractive to us. But we've sort of just downshifted and pivoted to stuff that we kind of started out with, but it still makes sense for us because we're buying them internally. I actually wanted to touch on something you mentioned earlier because this is

something that I'm like really starting to get into myself. You said that you try to get your employees invested in your deals. Can you talk about what you mean on that specifically? Like, are you paying them via equity or are you actually asking them to invest in the syndications that you're putting together? So we're not putting in, yeah, we're actually not doing syndication. So it's people on our property management team. And similar to, you know, you hear the term like ESOP get thrown around like employee stock ownership program. Essentially, these are people that are participating on the deals on at the property management level. And once you've been with our organization for two years,

we actually open it up after, you know, you kind of peer reviewed at that point, making sure that, you know, everyone on the team is in alignment. And then we'll allow you to actually invest dollar for dollar into the deals that we're putting together. And so those people are, you know, actively participating on those deals.

And it's, it's worked out really well. I mean, we've had, you know, multiple refis with team members, you know, pulling out anywhere from, you know, $50,000 to $70,000. on these deals and then they continue to reinvest the funds into future acquisitions. So it's really, it's something that is a little bit unique to us. I'm sure other folks do it, but it's worked really well because these people now are

seeing the benefits of their work from an ownership perspective. And in a tight labor market, it's done a great job of retaining folks because it's not just a job. Because here's the deal. As an entrepreneur, I don't have a cap. I can make as much bleeping money as I freaking want to and as much money as my creativity and hard work will allow. As a W-2 employee, you cannot realize the same thing that I can because we're playing

different games. And that's just the, you know, say it's not fair or whatever, that's just the world we live in. So if you want to play in that different space, we're trying to find opportunities to open it up for folks. And I think that's worked really well. And we've seen some people make, you know, a good amount of money working with our team and they're continuing to grow. So with the development deals, it's going to be the same sort of thing.

Once it's stabilized and we have it up and running, we'll allow those folks to invest at cost dollar for dollar. Hey, Rob, I'll share a quick story with you. One of our maintenance techs wanted to put $6,000 into a deal. His wife is telling, don't, you can't do it, you're going to risk the money. So he puts it to $6,000. A year later, he gets back $18,000. Goes to his wife.

He's all pumped. The wife says, why didn't you put more money in a deal? I mean, you can't have it either way. And the thing that I like about it more than anything else, you have property managers now going to us and saying, hey, Jake, Gino, we need to raise rents. Whereas before they weren't invested in the deal, they're like, you know, I don't know if we should raise rents. Now it's all by NOI. Let's be honest. They were resistant, you know.

Yes. Yes. Well, and that's what is. Socialism doesn't work from the perspective of owning real estate and when they're part ownership. And it's really the vision that we're trying to create. That's the vision that we want to have in our organization. We sell education and mentorship. So we want our team members to be bought into multifamily and to be bought into that vehicle.

And the best way to do that is to have them allow us to invest side by side with us. There's something powerful about aligning interests in that way. Like I'll just say at a general level, the way most people try to change other people's minds is by shouting at them, condemning them, making a big scene, being really emotional or pounding their point. and it never works. The second that you get somebody who's invested in the thing the same way that you are,

their mind just automatically changes on its own. And I think that's really smart of you guys where you will see property management that is like adamantly opposing. We don't want to raise rents because that means more work for them. They got to go sell the tenants. Maybe some tenants leave. They got to fill the units.

So it's in their best interest. They're looking at it to keep status quo. And then they'll find data to support that. And the second that they got skin in the game all of a sudden it's, oh, they're looking at that P&L saying, hey, we can bump up our ROI by 4% if we just put rates to market level it magically. And I think I've struggled personally in life where I've always looked for the cheapest option

and I've sometimes missed what you guys are describing there, where sometimes paying someone more or aligning the interest with yours not only gets them to do a better job, but your bottom line works out because they're more invested. Is that just like a principle that you two have sort of figured out from all the deals you've done now? Well, David, you've really hit the nail in the head. That's what leaders are supposed to do. We're supposed to have a vision and we're supposed to align our vision and get the right people on the bus and having core values. We could talk about core values, having culture, having that mission statement is what we've worked on since our last bigger pockets. Because listen,

you know, a lot of you on listening haven't bought a deal yet. But I want you all to think of what the end in mind is. What do you want real estate to do for you? For me, I want a real estate to create a lifestyle and for it to be able to create the Jake and Geno community where I can go out there and help other people leave their W-2s. And how do I do that? You have to create the culture. You have to create your core values, your mission statement. It's people first, extreme ownership, unwavering ethics, make it happen, growth mindset. That's our core values. And everything is around that vision.

And we want to hire and fire our employees, our vendors, our Jake and Gino mentorship students that come on board. We want to create that culture. And once you create that culture, the hardest thing of being an entrepreneur is to have that vision. And to do what you said, David, let's hire that out. Let's get rid of those tasks that we're not supposed to do. And let's really go towards that vision. and when you can get people going towards your vision, and not pulling them,

but allowing them to come, allowing them to be part of that vision, it's not only more empowering. Honestly, it's so much more fun because you don't have to go out and tell people what you're doing. They want to follow you. They feel it. All of a sudden, we're changing people's lives,

and they want to be part of that. So I definitely am understanding here, your philosophy, and obviously to scale to the massive portfolio that you had, I think you mentioned somewhere in the neighborhood of 1,800 units or something like that. I have to imagine that you all have developed a certain framework for how you guys can conduct business. Can you tell us a little bit about some of that

framework? Yeah, I'll hit it. I think early on we saw real estate and specifically multifamily investing as a three-legged stool, and we wrote about that in our first book, Wheelbarrow Profits, and it really comes down to buy right, manage right, and finance right. And I think so many new investors struggle with not having what we call buy right criteria. So we're very dialed in on what market we're looking at, what median income we're looking for out of the deal, the vintage, okay, the age of the property. Sometimes we'll even buy a deal because maybe it has more three bedrooms and we know there's not as many three bedrooms in that area. We love townhomes, okay? There's certain things that we look for and we're at a, we have a great advantage

because we have a portfolio to scan. And this is what I challenge everyone out there to do. Number one, so many investors I speak to don't have a draw report. And what do I mean by that? there's a difference between cash accounting and accrual accounting. Okay, you're going to have your software that you use and these systems. This is the first. Okay, this is the first of the month. First thing I did, I went through all of our 30 entities this morning, and I did a draw report with the income statement. We have a baseline. It's usually mortgage, escrow plus 30%. That's what we keep in there. And then the money that's left over, we draw the rest of it, okay? Very important that you manage the cash very tightly because I think people get a little loss.

Austin, okay, this is a cruel accounting versus cash. The other thing is I know the profit per unit of every entity every month, and that's listed on the draw report. So you need to see what type of units are paying you and how much. Give you an example. We have, it's, I'll call it like a quasi build for rent community. It's, it's some of these condo townhomes that we bought upstairs, downstairs with a garage. It was at the time we paid more per unit for these things than we paid for any of other deals. And we're kind of worried about it. After it's been stabilized, now in a profit per unit, a PPU every month, this is one of the best performing assets that we have. Okay. So, you know, you can do your underwriting. You can do this. Once you own a deal,

things change a lot. Okay. So we look to have the buy right criteria. We look to finance long term and take the rate off the rate risk, the interest rate risk off the table. That was like a statement, you know, six months ago. And now everybody's seeing this rise and deals are changing. now. But once you buy it, once you finance it long term, it really just comes down to management. And that's where a lot of people either sink or swim because maybe it's like, oh, I'm getting into multifamily and it's a nice investment. This is a business and you need to treat it like one. That's where a lot of people flounders because they don't realize you're an entrepreneur now. You own a multifamily asset. I don't care if you have a third party property management. You need to lead. You need to have a cadence of

accountability with that group. I would recommend everyone meeting with your property manager a minimum of once per week, okay, and making sure they're executing on what you, the leader, the visionary, the entrepreneur wants to see happen. And let's be honest, in practice, and in many instances, it's not happening. So, Rob, there's another thing that we talk about also. It's called the three pillars of real estate. And I love everyone to write this down. We've trademarked it, but, you know, the concepts are out there. But when you bring them all together, the three pillars are market cycle number one, debt number two, and exit strategy number three. Now, one of the biggest mistakes that Jake and I made early on is we didn't have an exit strategy for our job.

deals. We're going to buy our deals and, you know, hold them for the long term. But most investors, when they get out there, they don't think of what the exit strategy is. If you don't know what your exit strategy is, how are you going to get whatever type of debt you're getting? Are you going to get bridgette? Are you going to get short term debt? Or you get long term debt, whatever that looks like. So figure out what the exit strategy is. And you can also be flexible about it. That's what the important thing. But let's get to the market cycle. You know, in the market cycle, it's really important to understand where you are in the market cycle. It's truly, truly important because in 2013, Jake and I were buying different deals than we are now. In this part of the market cycle, the B and C

properties, they're pretty much the same cap rates. So why are we looking at C properties unless we're buying at really good prices? When you buy in the market cycle, figure out the assets you're buying in this part of the cycle. And Jake had talked about that. When you guys get off of this recording, sit down your buy right criteria. What are you buying? Jake and I in this part of the the market cycle or buying newer assets, 80s and newer. We like brick buildings. We like assets that don't have a lot of capital expenditures. We like to evaluate component on those assets. We also, for some reason, residents love washer, dryer hookups. That's the demandity that we're looking for. And we love townhomes. So we've really dialed in in this part of the market cycle.

We know what kind of exit strategy we have. We like we like to buy these assets. We like to refire assets. We refied over 25 million bucks out of our portfolio. That's what our strategy is. It's not what I'm saying everyone, everyone wants to do, but be clear on that because that exit strategy will allow you to buy the right deals in this part of the market. And I think every savvy real estate investor who knows what they're doing, just like a stock market investor, they make money when the market goes up and they make money when the market goes down. Just utilizing all three of those pillars in conjunction with buy right, manage, right, finance, right, you're trying to mitigate your risk and you're trying to buy these assets in decades. I think investors come on. They're, you know,

real quick, they have a niche. They jump in for a year. It doesn't work. Stick into it. It takes a while. It took Jake and myself 18 months to buy that first deal. And after 18 months, three months later, we got into our second deal. And then six months later, we got into our third deal. But there was a lot of work on the front end. We didn't even know any of these principles. We just got lucky. You know, fortune favors the bold. The harder you work, the lucky you get. But please think about that already. Write that down. Market cycle, debt. And always think about when you're underwriting a deal, looking at a deal, that plane's coming off the ground. You know, that's optional. Landing that plane or getting out of that

deal, that has to happen one way or the other. So figure out what you want to happen at the end of that deal. So let's talk about exit strategy and why of everything you mentioned, I think the majority of investors understand debt and they understand the market cycle. That's all the questions everyone ask, right? They tend to treat real estate like it stocks. Are we up or are we down? Is this a buyer? Is this a sell? But exit strategy is not discussed very often. Why is it you think that this is a underappreciated element of investing in real estate that especially newer investors don't take serious enough. Because it's so hard. It's rich people sell, wealthy people hold. And it's really long-term mindset. We created a hundred-year real estate investor. It's really hard. Our first deal in 2013,

rents were $350 for one bedroom. We still own that property nine years later. Rents are $995 plus rubs. That that's still the same. We've generated so much wealth from that one 25 unit little property. It's amazing. And I think for people to to think about that and we're just so conditioned for transactions, transactions pay the bills, I think, and equity makes you rich. And I think for everyone just to slow down for a second and think what the end in mind is. For me, I love owning these assets long term as far as the tax benefits, as far as the appreciation, as far as the control. And as far as the legacy, being able to hand these down to my kids and to my grandkids, that's what I'm thinking about. But sometimes it can get really hard thinking about the long term.

term, but that's where real estate you get the real huge compounding effect. Go ahead, Yaki. Yeah, I just want to piggyback off what Gino said, because I think that thinking in decades can make you very wealthy and multifamily, even the debt, if you're looking Fannie Freddie debt a lot of time, you have 10-year terms on these deals. And I've seen it time and time again. One of the deals, we've sold very little of our portfolio, very little. One of the deals that still pisses me off and it's silly. So bought a deal. It was a nice 2,000 build, bought it at the time for 40K a door. back in 2015. Just, okay, got really lucky, whatever you want to say.

Ran up, we sold it for 100K a door. Woo-hoo, aren't we badasses, man? We thought we were so damn cool. Today, very easily that deals worth 150K a door, and it pisses me off because we typically don't sell. Could have very easily just taking our money back off it. Because here's how our business works. It's very simple, okay?

We get good long-term debt. We fix the rate. We then add a lot more units to the portfolio every year, you know, whatever we can, 20 to 30% top line, revenue growth. We get a huge swell of cost segregation to depreciate and the party keeps going on and the cash flow builds over time. It's as simple as that. And that's all I want to do is continue to duplicate that strategy in markets that I feel comfortable with. And look, we're, we're in Knoxville,

Tennessee. We have assets in Lexington. We've looked at Nashville a lot, haven't been able to make anything work. We're looking east of us and South, you know, Chattanooga, Johnson City. So we're vertically integrated, have a core management team there and we're growing from our nucleus, from our core, man, let's just add another one on. Just keep duplicating. We've got it figured out. Now it's just finding more. And that's why we wanted to add the development piece in because it's just going to allow us to continue to hit that top line revenue growth. I've always looked at real estate from the perspective of the more options you have, the more ability you have to create wealth. The fear is you got one way in, one way out. If there's any problem with this plan,

you don't have a contingency in place to shift, right? So when you first get started in something, you're always thinking idealistically as a new investor. I'm going to buy this duplex. I'm going to hold it for the rest of my life. I'm going to give it to my kids someday. But those of us that have been doing this for a little bit of time, what we sort of recognize what stops people from getting involved is the fear of change. What am I going to do if something happens? And the way you overcome that is you just have different ways you play the cards that you're dealt. And the better investors have those options. So what I love about what you guys are saying is you're actually going into it from the perspective of how do I account for all of the things that could happen? What I believe

is the longer of a timeline you give yourself, the harder it is for a deal to not work. Would you guys agree with that? Is that part of when you're talking about market cycles and extra strategies? I agree with that. Gino, you got something to say there. Yeah, I agree 100% with that. But sometimes when you're starting out, we don't take enough time to think about what our business plan is going to be. And I don't want anyone to get on here and say, I'm going to change up. It's taken Jake and I several years to come up with these thoughts and these business plans. Just start. Start buying these assets and let time take control. And what I mean by that is you give yourself enough of a runway. These assets will appreciate over time. And the only

two times you worry about the value of your real estate is when you buy your asset or when you sell your asset or you refy the asset. That's really important. That's why buy rate is so crucial. That's what you're focusing on. But for me, when we started out, I never thought I would have owned 1,800 units. I just wanted to start and get out of my restaurant business. And I wasn't thinking about this huge growth. 25 units for me was massive. It was huge.

It was life-changing to me. I just saw, hey, I'm making $3,000 a month in cash flow. And then when I saw the ability to be able to refinance that property, pull that equity out, and repurpose that equity, I'm like, this is how I grow. And then I learned seller financing. That was another strategy that allowed me to scale. And then I learned how to syndicate. That's another strategy.

I think people get on, like you said, the fear of change. There's work on the front end. You need to be able to create value for yourself and for your partner and for your investors out there. Don't worry about the money. If you are really skilled and you know what you're doing, the money will be attracted to you. We talked about thinking in decades and how the debt is set up from a lot of these multifamily deals.

You may see a couple years over a 10-year period where they're not as good. And for us, historically, it's been, you know, a property manager wasn't aligned with our values. And there might have been a six month or 12 month there where we had to, you know, figure it out, remove the person and then fix what was wrong. Okay. That's what we've seen over, you know, periods of time working within our deals. But then you correct it. And then you're like, wow, we figured this out because we underwrote it correctly. We bought, you know, we hit our buy right criteria. So yes, there can be, you know, a year or two in there where something goes wrong or something funny happens in the marketplace. But over that 10 year period, in. In our experience, our deals have worked out really well. And you made the point, David, about thinking about it over a longer period of time. In addition to that, you know, I don't know what the future holds, but it doesn't seem like there's a huge appetite for the government to stop printing money. I know they're talking like that maybe now a little bit.

But if that continues to happen, the dollar continues to devalue over time, therefore the real estate's going to be a hedge, it's going to be an asset that, you know, holds value over time. So you're dealing with a few factors there. You're kind of saying, okay, this is what the government's doing how do I align myself and play the right game. I think multifamily checks that box. I think you want to be in a growth market. If people are moving into that market, that's going to help with appreciation as well. And then if you can fine tune your management skills, there may be rough roads there, but you know,

ultimately you got to fire the person if that needs to be the case and then, you know, improve upon it. And then over that, you know, that 10 year period, I think you're going to be ultimately happy. I've never had a deal that we've, that we continue to hold now. Then I'm like, you know, I wish I wouldn't have held on to that. We had one deal. that the area, we overestimated the quality of the area and the resident base, it didn't work out, you know, so let me say this, it didn't work out the way we wanted it to, but we still, I think, made $3 million in the deal. You know, we were fortunate. It was a growth phase in the market, yada, yada, yada. I think the market saved our ass on that one. It wasn't because we were like

such expert savvy investors. But besides that deal, everything else has, you know, over a longer period of time, worked out really well. So let me ask you guys this question. One of the things that has concerned me with the freaking phenomenon of like real estate influencer syndicators that have come into the game in the last three years and post it all over TikTok and they're raising money and buying properties and they like they don't have any experience managing them at all is the market has supported a lot of, I think, bad decisions. And I don't include you guys in this or I wouldn't be mentioning this. I know you guys have learned the hard way managing these things is freaking hard.

We're not syndicating deals. Right. So the concern for me is the people who are syndicating these deals and they're on a timeline, three years, five year exit, that's the only way we have to give our investors back money. As long as the market keeps going up, you're fine. But the problem with real estate, like you said, is the value matters when you're going to sell it or when you're buying it. And if you have to exit in five years, you don't know where the market's going to be at that

point in the cycle. And if you've got to get out, that creates a problem. Is that one of the reasons that you two sort of never got deep into the syndication model? there are different concerns. David, I think that's one of the big issues for us. We read a book called Small Giants by Bo Burlington. I would recommend everyone to read the book. And Jake and I did not want to be the next Airbnb, the next Facebook. We wanted to have a really nice small portfolio. We want to have a family company. We want to be able to control it. We want to be able to control our destinies. And I think if you're going to be in the syndication model, you're beholden to your investors.

There's nothing wrong with that. I mean, we can start out that way. But after three to five years, a lot of syndicators make money on the back end. How can you, you know, get away from that, put a lot of money yourself on the LP side. Become a limited partner in your own deals, have more capital invested there so you can tell your investors, hey, you know what, we're going to hold on to this deal. Or better yet, look at a deal that you think you don't have to exit within the next five to seven years and talk to your investors and say to the investors, hey, I would like to hold this on a longer time horizon. How do you think about that? If your investor says, you know what, I want my money back in three years, then like values

based decision making, maybe that investor doesn't go into this deal. So I think you can syndicate and hold these deals longer term, especially if there's a refy component to it, or if your investors are on board continuing to coupon clip, as long as you're managing this deal properly, I just think the allure of getting that acquisition fee up front, and then on the back end, you have no money in the deal, and you're getting 50% of the profits. That lends to people wanting to sell.

But I don't think they have to sell this syndication if they position themselves correctly with their investors. And if they're really aligned with their investors, I don't want to kill the golden goose. I've done so much work to find this goose. It's printing me money right now. It's making my investors wealthy. Why want to sell after three to five years?

I've done that two times. It's great. You got a great check. You got capital gains to pay. But I'd rather hold on to that asset. Go ahead, Jake. Yeah, no, I think that the syndication model lends itself to selling. And as the GP, you get compensated when the deal sells.

So where we messed up on the syndications is we're used to owning the deal. And we didn't put enough in to make it like, okay, we can refi this now and it's going to make sense for us. So it literally forced us to sell. and I hate that. I just don't, I want to hold these deals. I enjoy it. Again, I like adding more deals and the cost segregation.

But our syndications have done great. We have one left. It's probably doubled in value since the time we've purchased it. But the thing that scares me about newer syndicators, to your point, is that they're getting in, they're running up these syndications

on bridge debt, okay? So a lot of these folks were buying bridge debt because the numbers weren't supported by Fannie and Freddie. So, okay, now when that bridge debt comes due or you're going to see a rate spike, there's one major risk right there. The second thing that I think happens and I haven't seen the books on these other syndicators,

but that makes me extremely nervous. And I say this is a cautionary tale for folks that are investing with syndicators. Try to find out where the draw payments are coming from every month. What do I mean by that? Did they raise a large CAPEX budget and are they potentially pulling from that CAPEX budget every month to make sure they're hitting their 8% preferred return. That's where I think it gets a little dicey in some of these folks, and I would bet money on it that's happening today where there's Cappex funds that have been raised that are now supplementing a draw payment or an 8% preff that probably

hasn't been really earned. So I would watch out for that and try to, if I'm in a syndication as an LP, make sure that that's not the case because I probably don't want to put money in with that person. again, if they're not able to actually make the deal performed the way they presented it. So I think that's a huge risk. And in addition to that, I don't know that it's super smart to start placing large amounts of money with a new syndicator. Maybe you're going to get some more GP. Maybe there's a benefit to you there. But there's guys that have been doing this for years with a really strong track record.

I would probably, if I was going to invest on the LP side, lean to those folks more than somebody. that may be, you know, just getting started in the last couple of years or doing like, you know, more riskier investments like mobile homes and, and some of these things. I, that would make me a little nervous if I were to be placing my, you know, harder and capital at risk. Gino, did you have a comment there? No, I just, I love what Jake said. Big fan of Brian Burke. He spoke at MM Multifamily Mastery Four at our event. I think he's a fantastic syndicator. Go out there and find the Brian Berks in the world and place your capital of them. They've been through multiple market cycles. They've been through deals that they've bought and sold. They have a really viable, strong business plan.

And I think there are people that do what they say. You look at Brian, he performs. He's going to make you whole if he doesn't. That's just the kind of person that I know that he is. So go out there and find those people if you want to syndicate with others. Yeah. So I guess I want to kind of move the conversation a little bit to sort of specifically hone in on this market cycle and the economy. Is it all over? Are we done for? Is it the gig up? Or how are you guys feeling about how everything is actually happening, like playing out today? Because if you go onto YouTube, which is like where I'm at most of the time, everyone's thumbnails are red, guilty over here. And everyone's, you know, they show the graph declining and then the interest rates are rising. Kind of just your take on like what we're seeing

today. Makes me want to jump in when you're saying it like that. If everyone's getting out, I'm getting in, right? So, no, but seriously, I think that yes, yes, rates, okay, rates have moved, okay, but what does your underwriting tell you? Because I know for a fact that a lot of pricing has moved downward as well. So I think you get, you just got to be a rational human and continue to just dial in that buy rate criteria. So for us, we're still actively looking at deals, you know, in our market. And the thing that that makes me sleep well at night is I know that I'm in a growth market. population growth. There's demand for these rental units. And we have a great data set in front of us every month, which is our portfolio in our market, which has some of the highest demand that we've

ever seen historically. So I think the thing that saves you right now is making sure that you get into a market that has legs to it. Because ultimately, you know, are we going to be in a recession next quarter? By definition, it's two months of negative GDP, or excuse me, two quarters back to back of negative GDP. Do we end up there next quarter? Probably. Is it then quote-unquote a recession? Okay. Yeah. Has the the economy sucked for like the last six months in certain ways? Yes, it has. Am I going to stop being active or am I going to find opportunities? This is the thing I'm trying to stress guys. Have multiple tools in your tool. That's why we learned syndication. It's not necessarily something we actively want to do, but that's why we went out and we've learned it. We've done owner finance deals.

Okay. We've done lease options. We want to have a great exposure. Now we're getting into development. So in any part of the market cycle, we're going to be relevant and active. So am I slowing down or taking my foot off the gas right now? Not at all because I'm clear on what I want and what I'm going after. And I don't believe that multifamily housing, especially in the markets that we're buying and is not going to be relevant because there's a recession. This is the beautiful thing about the business that we're in. People need a place to live.

If there's jobs, if there's population growth, they're going to need you. This is not a commodity that you buy in Amazon. yet. I think that, you know, I'm very comfortable in our position. And, you know, if anybody in Eastern Tennessee wants to sell something, you know, we can look us up and shoot it over. It'll be more than happy to underwrite it, you know, kind of thing. So, Rob, I think real important, let me share a quick story with you. I'm a big fan of Jay Scott, bigger pockets. I've had the privilege to interview him a couple times. His books are fantastic. When did he start flipping homes? He started flipping homes back in 2008. Probably not the best time to start flipping homes,

but he learned the business. It's not when you start. The bottom line is you start. You're only able to start when you're ready to start. He was sick of his corporate life. He wanted to start on. And it's the same thing with Jake and myself. We started looking at assets in 2011.

There was no GDP in 2011. There was no money. There was deals all loop net. But there was no sentiment. And it was a lot of risk. So for us, I was ready. I was fed up with my restaurant job. Jake was fed up as being a pharmaceutical rep.

That's when we started. I think now is the perfect time to start because you're going to need several months to have broker relationships, to start talking to investors, to start refining your business plan, to get into the market. And by the time you get into it,

the cycle's changed again. I mean, it's changed so many times in the last two years that if you're ready to start, just start today, make a commitment, figure out what your why is, and start today,

whether it's single family homes, whether it's multifamily, whether it's self-storage, whether it's mobile home parks, pick a niche, learn it really well, education times action equals results, and understand why you're doing it.

and start. And six months from now, you're going to look back and go, I made a lot of progress. I may not have bought a deal, but I've selected my market. I know a few brokers. I've gone to several meetups. I've gone to the bigger pockets in October. I've done a lot of things I wouldn't have done. I'm starting to position myself. And before 12 months goes by, you're like, I bought the first deal. And then two years goes by and your friend's going to be like, man, you were lucky. You started real estate. Man, lucky. Lucky, no. You took the opportunity to start when the market was, quote, unquote, falling apart. Because we can pick narratives to any part of the cycle that we want to. We've been doing internal boot camps for the last four years with our Jake and Gino community. And for the last four years, all I've been hearing is that the real estate market, the multifamily is at a high. How many out there have heard that? 2018. Was it a high? 2019 high. 20 high. Well, there's a lot of people that have bought and they've gotten quote unquote lucky the last four years. So my whole, I guess, rant here is if you're ready to start, it's all about you. Just start right now. And before you know it, you'll be off to the races.

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Check them out at biggerpockets.com slash dominion. Again, that's biggerpockets.com slash dominion. Yeah, you guys also have a theory I really like where you talk about the conveyor belt theory with real estate. I'm in the middle of a 1031 right now. And so there's urgency. I have to be looking at investment property, right? I'm not a full-time investor. I run a mortgage company.

I run a real estate team. I do other things. So I tend to sort of bounce from business to business depending on like where the line is thinnest that I need to run in for reinforcements. But when I'm buying, what I find is there's this, there's this lie. that tells me I'm just going to go look up properties, find one I like, write a couple offers, get the deal, I'm done. And it never works that way. What happens is I quickly become overwhelmed with realtors asking questions, needing to analyze properties, a lot of stuff I got to go figure out if I'm going to do this, questions I need to answer to even know if this is going to work.

So the way we have to actually work it is we create a spreadsheet and there's a column for properties I'm interested in, offers that we've written, houses that are in escrow, and we just have to start with that list and like systematically go through it, ask what questions need, give assignment, you're going to call the realtor, you're going to look this up on air DNA, and then move through the columns. It's almost creating a process that will, that will end in a result that you can't control. You're not just going to go out there and find the property and buy it, which is how I think a lot of investors assume it's going to work. Can you two speak on the way you've built a system that you are just, you don't know exactly how it's going to work out,

but you just keep turning that little jack in the box thing and eventually it's going to pop? think the most important thing, David, for the beginning investor to understand is their question is, I need deals. I need a deal. I need a deal. Let's take a step back. What is a deal for you? A deal for you is not the same thing as a deal for Jake and Gino. So you have to understand what the deal parameters are for you. When we started out, it was very simple. We didn't want to get into the single family space because we both had full-time jobs. So that's why we chose multifamily. So the first thing is figure out what space or what niche you're going to get into. I think the next thing is, is figure out what market you're going to get into. Those two things are very difficult. It's a lot of

introspection. And then from there, what are your resources? Number three, do you have capital? Do you have a balance sheet? If you don't, well, then you can't look for $15 million deal. So scratch that off. You start out with a duplex or a quad. I think that's really important. And number, I think it's number four, what time commitment do you have? If you're working 80 hours a week as an attorney or as a doctor, you're not going out and doing this thing full time. You may find a Jake or Gino to hit yourself along with because you have a strong balance sheet. So understand what your goals are with this. That's, I think, the most important thing. And then from there, start looking at the deals that you want to look at. Like I said, Jake and I, we were in our first deal, anything from 10 to 50 units, we were able to take down in that first deal.

We chose Knoxville, Tennessee. We knew what our cash flow parameters were, and we knew what time commitments we can make to the deal. And then as we started growing along, that's why you talked about the conveyor belt. That conveyor belt is really just to get deals on this imaginary belt. Year one, you get your first deal. You may not be doing so long that deal on year one, but by year three, hey, David's got a 1031. That deal is going to come off the conveyor belt, whether it's cash flow, it's equity, and you can matriculate it and get into another deal. The goal is to get as many deals as you can on the conveyor belt that start working for you. And then they start coming off that belt and you start buying other deals, whether it's a refi,

whether it's a sale, and you start replacing and repurposing that equity back into other deals. So what you're describing there is why X strategy becomes so important, because that becomes a piece in how you took what you built and turned it into something more. You know, it's actually a beautiful thing when you think about like the tools of real estate, the ways it makes you money, is it turns into this like, I don't know, like this might sound cheesy, but almost like a symphony of music where you're using all the pieces and they're working together to create this result. It's not get in, get cash flow, quit my job, live on the beach. That's how it appears to sound. But you're making money

through equity and loan paydown and tax strategy. And then sometimes that opens up doors to make some money through other businesses. And then you're moving equity from here to here. And when you ran to the top and then you buy in an emerging market with value add, boom, you get a ton of equity, but your cash flow doesn't keep up. So you move it into a cash flow market. Then you're saving cash flow and using that as a down payment on your next maybe value add. And it gets to be fun when you start to get the vision of looking at a property and seeing this is the plan for this one and how does it fit in? To me, it's a lot like a coach of a team where you've got these players and they all have different skills and you're looking at how they would work together. Would you guys agree or am I just being a little

overly romantic about real estate right now? Dude, I love that analogy. We actually call it multifaceted multifamily. You start out with that investment, right? That one 25 unit little crackdown that we bought. All of a sudden we have a couple hundred units. Our first revenue was the investment property. But then Jay created a property management company. So there's your second business. And then from there we create the education company. That's the next layer of business right there. And then we start all of a sudden we start the development company. And we have a hundred year real estate investor that we're doing whole life insurance.

So you have all these multiple businesses spawning off of this one. But what makes it work is that Jake and Gino are working together. He's doing the property management day to day. I'm doing the education day to day. And the great thing about it is it's such a beautiful symbiotic relationship that we're able to cross over and use each other's resources. Our students are going to boot camps that are owned by our company. and we're able to learn and get on podcasts and actually make our property managers much better. So thinking about it that way, that's really a long-term approach.

And I think, you know, we wrote the book, The Honeybeats, all about multifaceted and multifamily. But the way you've described it, David, is exactly what we've stumbled into. You don't know what you don't know until you start. Then you start seeing these things work together. And you get that whole, like you said, that symphony where things start working. It's like, man, this is freaking awesome. I just raised capital from students, right? I never thought I could do that.

Or I just wrote a book and all of a sudden, brokers think I'm credible. And all of a sudden, you get on podcasts and brokers are starting to call back, call you back, and you throw a live event and you have people come through a live event. And all of a sudden, it's just much easier to get deals sent your way. I mean, it works so well together what you've described. I think the key to it, though, is systematizing the acquisition process because you'd never want to turn the beacon or the magnet off. And I think that's the key because you never know when the deals are going to come.

Like earlier this year, we had a swell of deals come through. And traditionally for us, those were smaller deals. mentioned before, three to five million. It was processing all those deals at one time because we're usually, you know, maybe trying to do 150 units at one time. But you have to take what the defense gives you. And I think the key is that if all the deals come in one month, if you want to grow, you've got to take those deals because you may go another six, eight, 12 months until something fits your criteria. And that's okay when you're buying larger deals. So I think making sure that beacon is never turned off and you're always, you're getting your broker calls in. You're maybe, you're maybe

networking with your deal dogs. So we have something we call deal dogs and they're like our direct to seller crew that calls all the owners in the markets that we're in to try to drum up business where we'll buy direct from. So you have these different avenues that you systematize and look, you might be on vacation. You might be at Disney. You got to run into the Grand Floridian and use the little office there where they have the computer areas set up with, you know, faxes and shit because you got to get with title company. That's real life. Okay, that's what happens as a real estate investor. So you just got to find those avenues to work that. But you can't turn that beacon off because to David's point, you may be, okay, well, 1031 comes up.

We've got to go find some. Uh-uh. That ain't. They're working. You got to have it on and turn down all the time and always be looking for it because otherwise you're going to force yourself into a bad deal. And I think that's what you got to really watch out for. That's exactly right. Or you're riding bikes with Gino on the beach and you have to say, hey, Gino, we've got a deal going on.

Let's go back to the wives. We may be arguing a little bit saying, I thought you're on vacation, Jake. Well, you know what? We've got a deal. We've got a 40 to you and we got a close. So let's get back. Let's go to the bar, have a couple beers, and let's get back to the house and do what we got to do. Let's go return our tandem bike.

No, not tandem, not yet. This tandem bike was expensive, dang it. Gino's steering. He's got me pedaling the prick. That's funny. Yeah, that's exactly what you described. He's like, I'm going to educate you. I'll tell you where we're going.

Do all the manage this bike. I need you to handle all the problems that pop up. Like, as soon as Jake, when you mentioned, you handle the management, I'm like, oh, you're the salt to the earth, my brother. like it's just it's the hardest part of real estate and it's also i think the most undervalued like everyone talks about finding a deal getting a deal structuring a deal and then we just stop it's kind of like i want to have a baby then you have the kid like actually dealing with kid like you know you got several of them like it's different right so any last words before we move on jake about just advice for people that maybe are underestimating the work that managing a property is going to take or how to

do it well well it's the classic thing if you if you do well in property management, typically they sell the deal, and if you suck, they fire you. So this is really hard to find that sweet spot for people. But ultimately, gang, once, I said this before, if you're following the framework, once you buy it right, okay, that's done. Once you finance it, that's over. The only lever you have left to pull is good property management. And I can tell you from my experience, good property management can make or break the deal over time. And you can really see a huge spread if you can fix those costs and get those costs, you know, beat down what we see every month. The same thing.

Paint, fluorine in supplies. Paint, flooring in supplies. It's the same over and over again. So if you can dial in your management and find ways to, you know, purchase better or like us, we're putting all 20-year luxury vinyl plank in all of our units. So, you know, in the next three years, everything's going to have 20-year flooring in it. That cost is coming off. So now it's going to be paint and supplies.

Okay. So it's finding ways to really navigate those waters. In addition to, we've created a CAPEX team. So a lot of this stuff that would be traditionally subbed out, we're handling it in-house, getting better efficiencies and economies of scale. So it's a long game. I wouldn't have it any other way. And I think it's really the difference maker in why we've been so successful.

And we don't do third party. Just focus on our stuff. Your own stuff. You're not out there contracting your skills out to other people. You're not a merchant marine. That's right. All right, I'm going to move us on to the next segment of our show. It is the deal deep dive in this segment of the show.

We are going to ask you details about a particular deal that you've done, and we will fire them at you between Rob and I. I'll let you guys decide which of you would like to answer. But the first question is, what kind of property is it? Literally just go off the deal we just closed down. It was a 40-unit mom and pop. you know with garden style built in 2005 in Knoxville meeting income of $80,000. So what I just do right there?

I gave you my buy right criteria, right? That's the buy right criteria on a deal we just closed on, checked all the boxes, loving, loving this deal. And it has storage, little car wash, washer jar, hookups throughout, mostly two bedrooms. Whew, I'm sweating it right now. That sounds sexy to me. Okay, that's what gets me excited. Sorry, guys. Bro, you are sexy, bro. That's why I'm riding the bike up front, you know what I'm saying. Okay, question number two.

How did you find the deal? Yep, and this goes back to what we were talking about before. So we have our team of mercenaries. We have our deal dogs out there howling at the moon, you know, calling, calling, calling. Had this guy in the hook for probably three months, and we kept trying to set up a meeting with him. You know, can we get on site with you? Can we meet you? Right?

Because the deal dogs really just need to get my foot in the door. and then they're sending me in to kind of close it out. And so that's how we found it. And eventually we got our foot in the door with those guys. All right. How much was it? So it was 80,000 per door. I think that comes out to like $3.2 million roughly. And so the guys, you know, they finally got me on site. He met with a guy. It felt kind of like a drug deal. He had this white van, had an HVAC company. And, you know, sometimes you got to take on the role of a sales rep when you're trying to acquire things. I think so many times people look at the broker or the person's selling and think, well, they're trying to sell me. And that's the complete incorrect mentality and the opposite thought

process. So I got on site with a guy. He's kind of complaining, oh, look at these gas prices. And he's like, you know, damn, screw this Biden guy and all this stuff. And like, I'm going apolitical. But when you hear this kind of stuff, what you do is you start to see, okay, this is where this guy's coming from. I'm like, I'm like, just cost me 100 bucks to fill up my truck. So we're building rapport at that point. We're finding like common ground on something, regardless of what it is. Totally apolitical, you know, conversation on my point, but I'm just saying that's the kind of things you find areas where you can sort of align yourself. And I let him talk. And I was like, wow, you did such a good job over here with the brick. It looks so clean. Sidewalks are good.

He had a lot of pride of ownership because he built the complex himself. So, you know, I'm letting him, you know, talk to me about the things that he did. He was really proud of it. And then finally, we got back in the white van and we started hashing it out. Deal dogs had a number in mind that he kind of, you know, talked about. But he was like, I could see he was kind of angling for some more. I said, so what's going on? What's kind of holding you up with this deal? And he's like, the bank. I'm like, well, we'll tell me about that. What's the bank? He said, they're trying to charge me a prepayment penalty of $40,000 or $30,000 or something like that. This is what was, guys, this is what was holding this guy up from selling because it was a

prepayment penalty. Okay. And I'm going to get to the meat of this in a second. So I said, look, don't worry about it. I'm going to give you 50,000. thousand dollars more today i'm going to give you 50,000 dollars more take the rest take your wife on vacation take an extra 50 on top of the 3.2 and we'll call it a deal happy to do it closed you know over 1900 units in the southeast we're the real deal we get it done he's thinking like this is too good to be true he goes back you know we send him the contract literally the next day because that's how we operate because we don't want to lose these things his attorney's asking my attorney what you know what's going on with this you know is this guy the real deal because he literally thought we were like

or something because I offered them the extra $50,000. Guys, when this thing appraised, it was over $4 million, literally a million dollars more than what we got the thing under contract for. And this is the mentality of these mom and pops. They're not always easy to find, find some common ground, maybe you fulfilled their need. We got the deal. Now, we got a great asset, okay?

We're going to absolutely crush it with this thing. And it's a newer vintage. So it's checking all the boxes for us and all we had to do. I probably could have got it for 3.2. but what if I didn't? And, you know, it wasn't worth losing this deal over that 50 grand. So we hashed it out in the back of his van, got the contract over, closed quickly, and the rest is history. And we got a great deal. And he was thrilled because he built it himself and his basis was much lower. So it worked out pretty well for everybody there. Great. So that kind of gives

us an idea of how you negotiated it. But how did you actually fund this deal? Yeah. So just like we fund all our other deals, we take cash out of our own pocket and we put it down and we do a loan to cost typically. So what we did on this deal, we got a couple employees on it like we talked about before. Gino and I kind of brought the rest of the table. And what we like to do, especially a deal this size is we do loan to cost, which I'm sure many of the listeners are familiar with. We'll do 80% loan to cost. So we'll have a renovation budget. We're going in little things here. It's cosmetic. Like we're new countertops. We're painting the walls because they're that old, that beige that, you know, so many people saw in Florida in the 90s, right? So we're kind of getting

that stuff out, modernizing it a little bit, stripe and seal in the park. lot and there's a little bit of like gutter work and stuff like that but very minimal so we'll go in you know knock that stuff out and then we'll send it off to pasture what do i mean by that you know when we feel like it's a good time to strike we got two years i o right now we got the loan to cost five years fixed 25 year am we'll send it out to fanny or freddie probably like this will be like a freddie sbl deal long term and we'll sit there and hold it get our money back off the table so all right that sort of describes what you're doing with it as well so uh what's the outcome been so far. You know, it's, we've been in, you know, we've been in this thing for like a little over a month

now. So, I mean, we've got, we've done a little bit of work. We got it and turned a unit, but, you know, we just kind of, yeah, literally just kind of went, went out the last one. But, you know, I think personally, I valued this thing at, you know, 120 a door. You know, if I'm, you know, put it on like my personal financial statement, rents were, you know, right around 900 by the time we we got it, but we're taking them to 1,200. So, yeah, I think short term, just thrilled because these, look, these things are hard to find. This is, this is a long. term, you know, brick, nice complex for us. And I'm just thrilled. You know, I got excited. I was able to get on site negotiated directly with a guy that's kind of, you know, my highest and best use. And that's why when,

you know, the guys get something on the hook, I go. It's not like, well, you know, can we, look, this is the time you can meet. I'm dropping everything else and I'm going because these deals literally, for the average person, if they went in and bought this deal, could potentially retire them and changed their life forever. So. And Dave, the important thing about this deal, too, was Jake said it was a 2005 build, we can comfortably hold this deal for the next 20 to 30 years and it'll still be pretty brand new. There won't be that much cap X requirements. That's why we like this deal and to hold a long term. Now, if it was an older deal, like, you know, some people would say, you know, it's a 1970s build. I'm going to go in. I'm going to put some, you know, lipstick on a pig and maybe

flip it out. That's not this deal. This deal 10 years from now, the median income is going to continue to grow on that part of the market. Rent's going to continue to rise. And the guy built it so well. He's got concrete in between, you know, the first and second level. He really built it, really well to last for a long time. So it really did check off a lot of the buy-right criteria. PPC on all the decks. Yeah, that's why that's the exit strategy. The exit strategy is to hold this thing, to refinance this thing and hold this thing for the long term because it's going to continue to pay us for the next 15, 20 years. And would you say that there is a particular lesson that you learned from this deal? Yes, don't quibble over 50 grand. Yeah, don't squabble over 50 grand.

I like it. And I think honestly, you know, David said before that he was a real cheapo and I think Jake and I can really raise our hands and say that we're just as cheap as David probably cheaper. But when you're an investor, it's price versus value. Consumers look at price. I think investors look at value. I'm willing to give a 50 grand today knowing that my assets is going to be worth $2 million more three years from now. I mean, if you can do that and delay that gratification, you will become wealthy. But it's just so hard as a consumer. You know, you have that consumer mindset. You're worrying about every penny, every nickel. And I applaud Jake.

He didn't even tell me that. He's like, you know what, dude, I'm going to give this guy for another 50 grand. Once he told me he did that, I'm like, dude, power to you. Five years ago, Jake would not have done that. Jake would have quibbled and fought with the guy and said, I ain't paying nothing. You owe the bank. And we would have lost a deal. But five years later, Jake is actually thinking, you know what, it's 50 grand,

but I'm going to make us a couple million dollars off this transaction. So don't be penny wise and pound foolish, whatever that is. Think long term. Think price versus value. You all listening to this right now are investors. Stop being consumer. start being investors and start thinking about having that long-term mindset. You hear that, right, guys?

He said, I'm actually thinking. It can be done. He was actually thinking, guys. And the other thing on this deal, though, and honestly, it's just you got to, you got to go in hard on the close. I sold our credibility. There was no retrade. I was very clear with him.

We're going to close this thing probably in about 45, 50 days, but give us 60. Okay? There's no retrading going on. We're closing this thing with our own cat. We're going to move quick. We're not going to bust your chops. We had to send our team in with accounting to go through his books that were just God-awful, handwritten chicken scratch.

So, you know, we did everything we could to secure the bag, right? Kind of getting cool, hip there, secure the bag, dog, you know, kind of thing. Anyways, but we got it done. We got it done. We secured it and the rest of history. So it worked out well. But you got to be a closure. You can't kind of, oh, do I want to do the 50?

Do I want to not, do I got to retrade, this, that, and the other thing. You got to go hard on these deals. and it's well worth it when you find the one. As you would say, you got to stick it. Just stick it, man. Just say what you're going to do. And you have to move. And this part of the cycle, you've got to move fast.

This is part of the market cycle where you have a deal. You may not be able to get on site. You need to really move fast in this part of the cycle. It will change, but that's where we are right now. Rob, did you have something you were going to ask? I guess last question here on our deal, deep dive. Who was the hero on the team for this deal? Man, I would have to say it was our accounting folks,

because literally they were going in with handwritten ledgers on the rent rule. They did not have a P&L. And we had to basically take all this stuff and package it for our bank to get, you know, and here's a good thing. We have a great rapport with our community bank. They're pretty much just giving us money when we say, hey, we need money for this deal. But if we didn't have that, you know, having to, you know, create this stuff to get them confident. And the appraisal help too.

But there's a lot of heavy lifts because, look, this was the most mom and podcast. hop you could ever imagine. No financial records basically whatsoever. So my whole thing was, are there human bodies in there? Yes, we inspected them. Okay, they look, you know, like they're clean, they're taking care of the units and these are the rents. We'll kind of manufacture the rest of it. Not in like a deceiving way, but we'll manufacture what, you know, we think this will look like and what we can do with it. Because ultimately, in this part of the market cycle, I joke about this, but many times we're buying boxes, okay? We're going in, we're buying boxes, we're using loan to cost, and we're buying on where we're going to take this

in the next two years. It wasn't always like that. 2015, I'm like, I'm getting cash on cash, actual cash on cash from day one. This is not this deal necessarily. It's still cash flows, but there's many other times we're buying deals that are, you know, this is going to be a one to two year before we see any gratification out of it. And that's okay too, because we're in it for the long haul. Awesome. Well, that was very informational. I love the detail that you guys gave us on this deal as well as how you got to the point you got there. What I was thinking about is what's the ROI on $50,000 turning into a billion? I mean, that's not bad at all because you had the right perspective when you were going. It's so easy to miss the forest for the trees when you get into

real estate, especially when ego and emotion and everything gets involved. So thank you guys for your transparency there. All right, well, that was the deal. Deep dive. Remember, you can do more deals with the help of bigger pockets tools and resources. Now, let's head over to the last segment of the show. world famous famous four. Famous Four. In this segment of the show, we ask every guest the same four questions every single episode. And we're going to do the same with you guys. Question number one, you guys can need to take turns answering here.

What is your favorite real estate book? Oh, you know, I got to go with the systems book here. I'm going to say scaling up. Not necessarily a real estate book, but I think the thing most people need and what they lack is creating a business. And this is through colleges, this is through high school. This is through, you know, general society. You need to operationalize, systematize your business.

And I think that's what most real estate people are lacking. Not necessarily the deal stuff. It's like once they get it, what do I do with the management component? I think scaling up really applies itself well to real estate. And for me, understanding of the numbers when I started out was challenging. That service coverage ratio, cash on cash, cop rates. I was a big fan of Frank Lenneli. He's written several books on all of these different metrics.

And for me starting out, understanding the numbers, I would fall in love with the deal. I ultimately understood that I need to fall in love with the numbers alongside with falling love of the deal. And Frank's books really helped me out by doing that. Awesome. Question number two, favorite business book? I think the small giants book that Gino just mentioned earlier on has been really important to us because I read it earlier this year. and I was like, wow, it's okay not to force yourself to do deals, you know, just to like post it on Instagram or like, oh, we just closed a thousand units this year. Look at we. We're so badass, right?

Because that's what happens. We get, we get out there, we get on the social media and we see what everyone else is doing. And it starts to put us in like a weird headspace. We're going to grow 20 to 30% on our top line this year. And I'm thrilled with that. And that's okay. And then the small Giants book basically talks about companies like Cliff Bar that didn't take the money. And what I mean by that? They didn't take the private equity money. They didn't take money from outside sources. We control everything that happens within our business because it's our funds. We're the majority shareholders. We're driving the ship. And I think the thing that scares me most in this world is just someone telling me what to do. And so that doesn't align with my values. And having those

investors on there, you got to really sit and think like, do you want to create that business? And ultimately for us, it was a no. We did a few of them. it just wasn't a great fit for us. So I think, you know, that small Giants book really resonated with me. And now we have, you know, people on our team getting into deals. They're growing their wealth. And we have this family attacking everything multifamily that they care about. We have, you know, guys in the Cappex team, guys in the maintenance team now that, wow, we're watching costs a little bit closer because it's our dollars in that deal as well. So, you know, that book probably hit me the hardest most recently. I got two books that really affected me. The first one is

T. Harvackers' Secrets of the Millionaire Mind back in 2000. When I read it, I was in victimhood. I was blaming everybody. I was blaming the economy. I was blaming the president. I was blaming the restaurant. I was blaming the industry. And when I figured out that Eckers really talked about responsibility, your fruits are your roots, I didn't have the skill set to earn money. And for me, once I understood that responsibility is about myself, by becoming a better person about learning the skill sets, everything changed for me. My mindset, all of a sudden, I didn't blame anybody else. I blame myself for not learning the skills. So what did I do? I hired coaches, hired mentors, listening to podcasts, doing all that was truly important. And I think the second book, I think everyone should read Stephen Covey's book, Seven Habits. I read it back 15 years ago, didn't have much of an impact.

I read it a couple of years ago. I mean, start with the end in mind. People see the world as they are, not as it is. All of these things that he talks about, it's so revolutionary and so changing. It really, I mean, one of the best for me personal development books ever out there. I love his seven habits and I recommend that to everybody. Awesome. And so when you guys aren't off on nice strolls on your tandem bikes, what are some of your hobbies? This is going to sound so freaking corny. So, I don't know, a couple, I guess it was 2017, we bought this lakehouse that needed, you know, like a lot of renovations, like a mid-90s. So I put a ton of time into that. And I just cleared like three acres. And we've gone just kind of balls to the wall on renovations. And then I added it 17 acres down the road. And I put like a,

a shooting range in like this whole like ATV course and all this stuff and then I just I just closed on a pet house in downtown Knoxville that we're kind of doing some renovations to and adding a rooftop to it. So I enjoy real estate like on the personal side of things as well just to transform it and do fun things and kind of create this, you know, these different opportunities for my family. So, you know, doing that kind of stuff in my free time and then, you know, kind of hitting the gym. Keep it pretty simple around here, you know, for the most part. I'm not sure anyone can say building gun ranges and ATV courses is cheesy. Dude, it's great, though, because I can go out, I can whip out the chainsaw on the weekends,

and, like, you know, it's pretty fun, so we enjoy that, yeah. This is going to sound so cheesy, but just being the most awesome man on the planet. Thank you, man. I love that. That's who I have to contend with. So my hobbies, you know, my hobbies are my hobbies are fishing with my kids. I live in St. Augustine. I go fishing off the shore.

And recently, about a year and a half ago, I started. singing opera because the kids all start singing opera and I'm like well they're going to church on Sunday I'm not singing with them they're going to choir Wednesday nights I'm not going with them so I got into sing an opera that's that's my hobbies so we need to get you to record our intro and song time to say good boy I mean I could sing for you guys right now if you love it I love ripping it so he's like will Farrell from stepbrothers it's beautiful yes exactly right I did notice your voice sounded like a combination of Fergie and Jesus in that brief little again we got. I need to see a video of you two on a tandem bike in St. Augustine riding together with

Gino singing and I'll figure out what Jake could be doing. I probably shouldn't involve anything. He's going to be pumping a dumbbell. Yeah, that's exactly right. Like he's got no hands on the bars he's doing like with the chainsaw, bro, with the chainsaw. That's all I'm saying, yeah. All right. In each of your opinions, what separates successful investors from those who give up, fail, or never get started? To me, we don't lack motivation. We lack clarity. and I was a shiny example of that for years before I got partnered up with Jake. I did a mobile home deal that we did really bad. I did a couple of mixed use deals in New York that went really bad.

Once I became clear about the vehicle that I wanted, which was multifamily, and I started getting educated. I find the mentors. I found Jake and I focused solely on multifamily. It took a little bit of time to get that traction, to get that going. Once I became clear what my goals were and what my end game was, I think that changed everything for me. And then, you know, having an amazing spouse, having an amazing partner that really helped, that accountability piece.

If you're trying to do it by yourself, sometimes it's hard. Sometimes you're all by yourself. You don't have a different perspective. You don't have somebody to bounce ideas off of. I mean, that's what really saved me and Jake. We had that mastermind when we started. We were both really hungry. We both work really hard.

But we were both clear on our goals and we both had our values that were really in alignment. And, you know, 10 years later, we're still doing deals together. We're still partnering up. We still spend a lot of time together. We go on vacations together. and that for us, for me, especially that accountability piece and having somebody to, you know, enjoy the ride with is what has helped me. And I think a lot of people, they lack that. They really think of not having that accountability piece and think of doing it by and by themselves.

It can get challenging sometimes and not having a partner can be challenging. Yeah, I'll piggyback off that a little bit. I think the biggest thing with folks is that they have yet to submit to being 100% responsible for their outcomes. and the only, like the opposite to that is when victimhood creeps in. And, you know, ultimately, if you want to be successful in this space, I think it's very hard when those two things start to blur. You're not a union worker. You're an entrepreneur when you're in the space.

You don't get, you know, the weekends and this, that, when you want it. And so if you're going to feel sorry for yourself because you don't get to watch Netflix for six hours and, you know, you got to do something on the weekends. And, man, like my kitchen table looked, I didn't. nothing to do. I should never touch accounting. But my, my, you know, kitchen table early on, it looked like, you know, some accounting mess because we were trying to figure the out early on. And, you know, I was watching football games and doing all this stuff. So I think that until you realize that everything that comes into your life, you're responsible for it, you're going to

struggle a lot of times with mindset. And look, you know, we were kind of joking about it before. There's, I think there's 40% of the folks that tune in, you know, haven't done a deal yet. And, gang, this is very simple. The biggest difference between the folks out there that have and started getting into this game, the folks that haven't, is going to come down to your mindset. Are you responsible for all your outcomes? Are you doing everything in your power to see it through? And then are you looking in the mirror saying this is my fault when it doesn't work out for me? If you're not, you're going to continue to suffer in life until you figure that out. And it may be like a little rough, a little aggressive, but I think it's as simple as that. And then when you start to let that victim creep in, all you're doing is ultimately hurting yourself because you're giving yourself a pass. So, you know, hopefully that impacts someone in a positive way and they can see through it that I'm not just trying to be a d-but that's, you know, the areas that a lot of us struggle with. And I think if you can get past that and just humble yourself and say, look, you know, if it's meant to be, it's up to me kind of thing. It's going to take you farther in this life than most things.

Very, very great. Very wise. Our very last thing here is, could you tell us where people can find out more about Gino and Jake on the interwebs? Not sure what an interweb is, but yeah, on that www.com, hit us up at jacinjino.com. You can find out about our conference. You know, multifamily mastery five is the only event that we do. It's November 5th and 6 that we open to the general public. Everything else is sort of, you know, Jake and Gino community only.

So can have some amazing people there. Gino's going to be singing opera like Will Ferrell in Stepbrother. So, I mean, that alone, you should probably get a ticket, you know? It's a financial vacation for smart people. David, what about you, man? Where can people find you on the internet? Oh, you can find me at David Green, 24, because there was 23 other David Greens, and I had to get in line. And again, I got to catch Brandon Turner, because even though he's not hosting the podcast, he still has way more followers than me.

And he lets me know it every single time he sees me. So I'll say, I'm not too proud for a pity follow. Please feel free. Rob. You know, just follow me if you want to. I don't want the pity follow. I want you to like my content and be all in. But you can find me on YouTube at Rob Built or on Instagram at Rob Built.

or on TikTok, if you'd like, at Rob Biltow. That's a total flex. Like, I've got so many followers already. I really, I don't need a pity follow. No, that's not true. You have three times the amount of followers as me on Instagram. Jake, Gino, I really appreciate you guys being here. There's very few people that have as much experience as you do.

And when you've walked through the fires of whatever it is that you're going through for us, real estate, you come out with this perspective on the right way to handle things. It's very different than the people that are first getting started. So I want to thank you guys for your time that you've given us. Do you have any last words before we let you get out of here? For me, just want to thank bigger pockets and the community, you know, for the privilege of speaking to them and just for their time because you guys can be doing something else out there. So just thanks for taking, you know, the time out to listen to Jake Gino, Rob and Dave.

Likewise, thank you guys. All right. I'll let you guys go. David, before you ask, I've got no final words, no profound statements. I figured at this point that you, you've already shot your entire shot throughout the episode. You're done. I always ask, I always ask Rob what his last words are right after a guest like drops the mic and gives this amazing thing. I'm like, Rob, you want to follow that?

And he's always like, oh, why do you put me in this position? People will end with tears and like, if you believe in yourself, you can do this. And it's like this very just profound and emotional moment. He's like, what about you, man? I'm like, uh, buy houses. Like this three-legged dog that's made it through life and the inspirational music. All right. Well, thank you guys.

This is David Green for Rob the three-legged dog I was solo, signing off. No, this is my, I brought my camera, I brought my, my, this was my old YouTube. Oh, I just realized I didn't fluff those pillows. Well, regardless, hopefully no one noticed that. Usually I like chop the pillows and I'm like, ah, we're good to go. Yeah, I'm going to do that real fast for the intro. Oh, I wish we could include this. This is so funny.

That was so authentic. All right. Why has thought me well, you? One must fluff the pillows. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer.

The show is produced by Ian K. Copywriting is by Calico content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to, Sign up for our free newsletter. Please visit www. www.com. The content of this podcast is for informational purposes only.

All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.